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https://www.courtlistener.com/api/rest/v3/opinions/2453514/ | 257 P.3d 1259 (2011)
45 Kan. App. 2d 1113
STATE of Kansas, Appellee,
v.
Ira Wayne FLYNN, Appellant.
No. 103,566.
Court of Appeals of Kansas.
June 24, 2011.
*1261 Carol Longenecker Schmidt and Heather Cessna, of Kansas Appellate Defender Office, for appellant.
Evan C. Watson, county attorney, and Steve Six, attorney general, for appellee.
Before MALONE, P.J., PIERRON and ARNOLD-BURGER, JJ.
ARNOLD-BURGER, J.
Ira Wayne Flynn argues that the jury should have been instructed at his rape trial that he had a reasonable time to cease consensual sexual intercourse once the victim told him to stop. Finding that such an instruction was warranted and had it been given the jury might have acquitted him of rape, we reverse and remand.
FACTS
Flynn and A.S. drove together to a party. While at the party, Flynn and A.S. drank alcohol and played games. Flynn testified that he started to feel sick because he had consumed too much alcohol and OxyContin. He wanted to leave, and A.S. offered to give him a ride home. Flynn wanted to drive and A.S. let him. They ended up at the scene of the alleged rape. Flynn testified that they both exited the vehicle and met at the front of the car. They took each other's clothes off and began to have consensual sex on the hood of the car. Flynn testified A.S. performed consensual oral sex on him. Flynn and A.S. ended up on the ground, and at that point, according to Flynn, A.S. told Flynn to stop and that she did not want to continue on the ground. Flynn did not stop immediately and testified that it took him anywhere from 30 seconds to 2 minutes to stop. A.S. testified that Flynn then forced her to have sex in the backseat of the car. Flynn denied anything happened inside the car. After their final encounter, they both agreed that Flynn put his clothes back on and helped A.S. put her clothes back on.
A.S. testified that the entire encounter between herself and Flynn was nonconsensual and that he raped her three times while she was overcome by force or fear; he forced her to perform oral sex on him; and he took her to the location against her will and forcibly prevented her from leaving once they got there.
After A.S. and Flynn parted company, Flynn continued to drink alcohol. He called A.S. and indicated that he had "`fucked up'" and that he would probably go to jail for 2 years. He later explained at trial that he was on probation for possession of marijuana and he believed his probation would be revoked for drinking and doing drugs. He believed he faced 2 years in jail if his probation was revoked. He explained that he was aware that a rape charge would carry more than 2 years in prison and that he never contemplated that A.S. would claim he raped her. He only feared that it would be discovered he had violated his probation.
Flynn was eventually charged with one count of aggravated kidnapping, one count of kidnapping, three counts of rape, and one count of aggravated criminal sodomy.
At Flynn's trial, after the presentation of State's witnesses, the trial judge and the parties discussed whether any special jury instructions should be submitted and considered. The trial judge and Flynn's counsel discussed a special instruction regarding a *1262 defendant's responsibility to cease intercourse within a reasonable time after the victim withdraws her consent. The trial judge indicated that he did not plan to give a special instruction, but if Flynn's counsel wanted to draft the instruction and request it be given to the jury, then he would consider it again. Almost immediately thereafter, the trial judge stated that he was not going to give the instruction, because Flynn's counsel had not specifically requested that the instruction be given. The trial judge said that he would wait to see if the jury asked a question about it.
That evening, at the close of all the evidence, neither party objected to the jury instructions suggested, nor did the parties request any additional jury instructions.
After a 4-day trial, the jury found Flynn guilty of one count of rape, pertaining to the encounter on the ground in front of the car. He was acquitted of all other charges. He was sentenced to an aggravated sentence of 186 months' imprisonment.
ANALYSIS
The trial court erred by failing to give an instruction regarding the defendant's responsibility when the victim withdraws consent during intercourse.
Flynn asserts that the trial court erred when it failed to give the jury a special instruction, based on State v. Bunyard, 281 Kan. 392, 133 P.3d 14 (2006), that a defendant has a reasonable amount of time to end the intercourse after the victim withdraws her consent. Flynn believes that there is a real possibility that the jury's verdict would have been different if it had been given what has been referred to as the Bunyard instruction.
If there is sufficient evidence to support it, a defendant is entitled to instructions on the law applicable to his or her theory of defense. State v. Hendrix, 289 Kan. 859, 861, 218 P.3d 40 (2009). Evidence of the defendant's theory of defense can be supported solely by the defendant's own testimony. State v. Anderson, 287 Kan. 325, 334, 197 P.3d 409 (2008). However, the testimony must be such that, when viewed in the light most favorable to the defendant, a rational fact finder would be justified in finding in accordance with that theory. 287 Kan. 325, Syl. ¶ 1, 197 P.3d 409.
Because Flynn did not request or proffer an instruction regarding withdrawal of consent and he did not object to its omission, we apply a clearly erroneous standard of review. See K.S.A. 22-3414(3); State v. Martinez, 288 Kan. 443, 451, 204 P.3d 601 (2009). "An instruction is clearly erroneous only if the reviewing court is firmly convinced there is a real possibility the jury would have rendered a different verdict if the trial error had not occurred." 288 Kan. at 451-52, 204 P.3d 601.
In determining whether an instruction was required and, if given, would have made a difference in this case, a brief review of our Supreme Court's ruling in Bunyard is in order.
In Bunyard, there was no dispute that the sexual intercourse between the defendant and the victim was initially consensual, but the victim withdrew her consent after the defendant had already penetrated her. The Kansas Supreme Court held "that the defendant should be entitled to a reasonable time in which to act after consent is withdrawn and communicated to the defendant." 281 Kan. at 414, 133 P.3d 14. Moreover, the Bunyard court ruled that, in response to a jury question, "the trial court had a duty to instruct the jury that post-penetration rape can occur under Kansas law and that the defendant has a `reasonable time' to respond to the withdrawal of consent." 281 Kan. at 415, 133 P.3d 14. Furthermore, our Supreme Court held that "[a] reasonable time depends upon the circumstances of each case and is judged by an objective reasonable person standard to be applied by the trier of fact on a case-by-case basis." 281 Kan. at 416, 133 P.3d 14. Recognizing that it always encourages trial courts to follow the Pattern Instructions for Kansas (PIK) and recognizing that no such instruction existed in PIK for this situation, the Supreme Court outlined with approval responses to jury questions that had been given in other states *1263 under similar circumstances. 281 Kan. at 415-16, 133 P.3d 14.
Shortly after Bunyard, the following paragraph was added to the comments section of PIK Crim.3d 57.01:
"A person may be convicted of rape if consent is withdrawn after the initial consensual penetration but intercourse is continued by the use of force or fear. However, when consent is withdrawn after penetration the defendant is entitled to a reasonable time in which to act after the withdrawn consent is communicated to the defendant. Whether the termination of intercourse occurs within a reasonable time is to be determined by the jury, taking into account the manner in which consent was withdrawn and the particular facts of each case. [Citation omitted.]"
Since Bunyard was decided, this court has recognized that if the facts support a Bunyard instruction one must be given. See State v. Robinson, No. 99,443, 2009 WL 1140256 (Kan.App.2009), rev. denied 290 Kan. 1102 (2010) (unpublished opinion) (finding that the facts did not support the giving of such an instruction).
Turning back to this case, Flynn testified that at the time he and A.S. ended up on the ground, the sexual encounter was consensual. A.S. told Flynn to stop after they were on the ground by saying, "No. Not on the ground." Flynn did not stop immediately and testified that it took him anywhere from 30 seconds to 2 minutes to stop. This was consistent with what he told investigators at the time. A.S. testified that at no point during the encounter was there ever consent. This was consistent with what she told investigators at the time. At the conclusion of the State's case, before Flynn even testified, the trial judge indicated some concern that, based on the evidence, the jury might send out a question regarding withdrawal of consent. Although he indicated he was not familiar with Bunyard, he indicated he would wait and deal with the issue if a jury question arose. Based on the defendant's subsequent testimony, as well as his statement to investigators at the time, and the judge's concern that the jury might be confused, we find that when viewed in the light most favorable to Flynn, a rational fact finder would be justified in finding in accordance with Flynn's theory of defense; therefore, a Bunyard instruction should have been given in this case.
However, that does not end our inquiry. Because Flynn did not request such an instruction, under the "clearly erroneous" standard, we must next decide whether there was a real possibility that the jury would have rendered a different verdict if the instruction had been given.
The jury convicted Flynn of the rape that occurred on the ground in front of A.S.'s vehicle. This was the only sexual encounter during which Flynn admitted A.S. told him to stop, she did not wish to continue having sex. He also admitted that he did not stop immediately, but instead continued for 30 seconds to 2 minutes. Apparently, the jury found Flynn's testimony generally more credible than A.S.'s testimony because it acquitted Flynn of the remaining counts of rape: one on the hood of the car, which he claimed was consensual and she claimed was not, and one in the backseat of the car, which he claimed never occurred at all. Additionally, Flynn was acquitted of both aggravated kidnapping and kidnapping, the jury presumably finding that the State was unable to prove that Flynn confined A.S. by force or threat with the intent to commit a crime. And finally, the jury acquitted Flynn of the aggravated criminal sodomy or oral sex charge. Although the dissent suggests that in convicting Flynn of only one count of rape the jury may have been simply responding to the multiple charges filed from essentially one continuing sexual encounter, we have to assume that the jurors acted according to the instructions given and considered each crime as separate and distinct, deciding each charge separately on the evidence and law applicable to it, uninfluenced by their decision as to any other charges. See State v. Tyler, 251 Kan. 616, 638, 840 P.2d 413 (1992).
Based on the foregoing, there is reason to believe that if the jury had been given the special Bunyard instruction, the jury might have acquitted Flynn of the remaining rape charge. Accordingly, we find that the trial *1264 court erred when it failed to give the special Bunyard instruction.
Given our holding, the remaining issues raised by Flynn are moot. Flynn's rape conviction is reversed, and the case is remanded to the district court for a new trial.
MALONE, J., dissenting.
I respectfully dissent. In my opinion, the trial court's failure to give a jury instruction based on State v. Bunyard, 281 Kan. 392, 133 P.3d 14 (2006), was not clearly erroneous under the facts of this case where the trial court never received a question from the jury regarding withdrawal of consent during intercourse.
I will begin my analysis by mentioning some pertinent facts of the case which are not included in the majority opinion. According to Ira Wayne Flynn's own testimony, A.S. began to cry at the scene of their sexual encounter. He asked her what was wrong, and she declined to answer. Flynn attempted to make conversation with A.S., but she never responded. Flynn drove to Shawn Howell's house, and A.S. remained silent during the drive. Flynn testified that when he came to a stop, A.S. "took out, she left." A.S. immediately reported the rape to her friends, and within a few hours, she reported the rape to law enforcement.
Flynn further testified that he attempted to call A.S. three times that night. In the first phone call to A.S., Flynn left a message indicating that he had "fucked up." In the second phone call to A.S., Flynn left a message indicating that he realized he would have to do about 2 years of jail time. In his third phone call to A.S., Flynn left a message saying that he would call the cops himself so that she would not call the cops and he apologized to A.S. because he thought that she was angry with him. The recorded phone messages were played to the jury.
Flynn also testified that at the time of the alleged rape he was on probation for possession of paraphernalia and possession of marijuana. Flynn presented this testimony to mitigate the fact that one of his phone messages to A.S. indicated that he would be spending some time in jail. In addition, Flynn testified that, as a juvenile, he committed a "smash and grab" at a video store.
Turning to Bunyard, this was a case of first impression in Kansas concerning rape and the withdrawal of consent after penetration. The defendant was charged with three counts of rape stemming from three separate incidents with different women over a 2-year period. The prosecutor combined all three charges into one complaint, and the defendant's motion to sever the charges was denied by the trial court. At trial, the defendant was acquitted of two of the charges but found guilty of one count of rape. On the guilty count, there was no dispute that the sexual intercourse between the defendant and the victim initially was consensual, but the victim withdrew her consent after the defendant had already penetrated her. After 5 or 10 minutes had passed, the defendant stopped having sexual intercourse with the victim.
During deliberations, the jury posed the following question to the court: "`If someone allows penetration, but then says no and he does not stop, does that fit the legal definition of rape? Please elaborate on the law. . . .'" 281 Kan. at 408, 133 P.3d 14. In response to the jury's question, the trial judge referred the jury to the instructions that had already been given and indicated that the court could not elaborate any further.
On appeal, the Kansas Supreme Court held that the trial court did not abuse its discretion in denying the motion to sever the charges. 281 Kan. at 403, 133 P.3d 14. Regarding the issue of withdrawal of consent after penetration, the court determined that K.S.A. 2004 Supp. 21-3502(a)(1)(A) proscribes all nonconsensual sexual intercourse that is accomplished by force or fear, not just the initial penetration. Thus, under the language of the statute, the court concluded that a person may be convicted of rape if consent is withdrawn after the initial penetration but intercourse is continued by the use of force or fear. 281 Kan. at 412, 133 P.3d 14.
In addition, the court went beyond the statutory language and determined that in the case of consensual intercourse and withdrawn consent, a defendant is entitled to a *1265 reasonable time in which to act after the consent is withdrawn. The court concluded that a reasonable time depends upon the circumstances of each case and is judged by an objective standard to be determined by the trier of fact under the circumstances of each individual case. 281 Kan. at 414-15, 133 P.3d 14. Regarding the trial court's response to the question from the jury, the court outlined with approval responses to jury questions that had been given in other states under similar circumstances. The court held that, under the facts of the case, "the trial court's answer to a question posed by the jury was insufficient to properly instruct the jury how to consider this unique case of first impression. The problem with the trial court's response is that it failed to address the question asked by the jury." 281 Kan. at 410, 133 P.3d 14.
After the Supreme Court decided Bunyard, the PIK committee cited the holding of the case in the comment section of PIK Crim.3d 57.01. However, in the 5 years since Bunyard was decided, the PIK committee has not seen fit to draft a new instruction incorporating the Bunyard holding as a jury instruction to be given by trial courts in Kansas prior to the commencement of deliberations.
I dissent from the majority's reliance on the Bunyard decision for two reasons. First, for whatever it may be worth, I agree with Justice Luckert's dissenting and concurring opinion in Bunyard. Justice Luckert agreed with the majority that a defendant has committed rape if, after consent is withdrawn, the act of intercourse continues as the result of force or fear. 281 Kan. at 425, 133 P.3d 14. As Justice Luckert pointed out, this holding is consistent with the elements of rape defined by K.S.A. 2004 Supp. 21-3502(a)(1)(A). However, Justice Luckert stated that the court should not judicially add a defense allowing a reasonable time in which to commit rape. 281 Kan. at 425, 133 P.3d 14. I agree that the Kansas appellate courts should not add a judicially created defense to rape that is not found in the express language of the statute, and I believe the Kansas Supreme Court should reevaluate its holding in Bunyard on this point.
Of course, I recognize that the Court of Appeals is duty bound to follow Kansas Supreme Court precedent, absent some indication the court is departing from its previous position. State v. Merrills, 37 Kan.App.2d 81, 83, 149 P.3d 869, rev. denied 284 Kan. 949 (2007). The main reason for my dissent is because the present case is factually and legally distinguishable from Bunyard. An obvious factual distinction is that in Bunyard, there was no dispute that the sexual intercourse between the defendant and the victim was initially consensual. Here, A.S. testified that the entire encounter between herself and Flynn was nonconsensual and that he raped her. Given the fact that A.S. never agreed that any part of the encounter was consensual, the issue of withdrawal of consent was not squarely before the jury in this case as it was in Bunyard. Thus, the trial court's decision to wait for a question from the jury before addressing the issue seems to have been a prudent approach under the facts of the case.
This leads to the most obvious distinction between Bunyard and the present case. Bunyard involved a request from the jury for specific clarification of the law on withdrawal of consent after penetration. In Bunyard, the jury was obviously struggling with this issue and asked the trial court for guidance on the law. The trial court essentially ignored the jury's request, referred the jury to the original instructions, and indicated the court could not elaborate further. The Bunyard court held that under the facts of the case, the trial court failed to provide the jury with a complete answer to its question concerning the charge of rape. 281 Kan. at 415-16, 133 P.3d 14. The court outlined with approval responses to jury questions that had been given in other states under similar circumstances, but the court did not address the issue beyond this context.
This case would present a much closer issue for me if the defendant had requested a jury instruction at trial. But as the majority notes, Flynn did not request or proffer an instruction regarding withdrawal of consent and he did not object to its omission at trial. Even on appeal, Flynn has not proposed a specific instruction that he believes the trial *1266 court should have provided to the jury. Under these circumstances, an appellate court applies a clearly erroneous standard of review. K.S.A. 22-3414(3); State v. Martinez, 288 Kan. 443, 451, 204 P.3d 601 (2009). "An instruction is clearly erroneous only if the reviewing court is firmly convinced there is a real possibility the jury would have rendered a different verdict if the trial error had not occurred." 288 Kan. at 451-52, 204 P.3d 601.
According to Flynn's own testimony, A.S. began to cry at the scene of their sexual encounter. He asked her what was wrong and she declined to answer. As Flynn drove back to Howell's house, he attempted to make conversation with A.S., but she never responded. When Flynn stopped the car in front of Howell's house, A.S. took off and left her own car behind. A.S. immediately reported the rape to her friends, and within a few hours, she reported the rape to law enforcement.
Also according to Flynn's own testimony, he attempted to call A.S. three times that night. In the first phone call to A.S., Flynn left a message indicating that he had "fucked up." In the second phone call to A.S., Flynn left a message indicating that he realized he would have to do about 2 years of jail time. In his third phone call to A.S., Flynn left a message saying that he would call the cops himself so that she would not call the cops, and he apologized to A.S. because he thought that she was angry with him. The recorded phone messages were played to the jury.
Granted, the jury only convicted Flynn of one count of rape and the jury acquitted Flynn of the other charges. But I think the majority reads too much into this verdict. For all we know, the guilty verdict on only one count of rape may have been the jury's response to the multiple charges filed against Flynn arising from essentially one continuing sexual encounter between the parties. Further, Flynn cannot say that a jury instruction based on Bunyard was necessary to support his theory of defense, because his theory of defense was that his entire sexual encounter with A.S. was consensual.
During deliberations, the jury never inquired about the law concerning withdrawal of consent after penetration, and the jury never gave any indication that the original jury instructions provided by the court were insufficient. Considering the record as a whole, I am not firmly convinced there is a real possibility the jury would have rendered a different verdict had the district court provided a jury instruction based on Bunyard. Accordingly, I conclude the trial court's failure to do so was not clearly erroneous, and Flynn's conviction of one count of rape should be affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453557/ | 259 P.3d 98 (2011)
243 Or. App. 77
STATE of Oregon, Plaintiff-Respondent,
v.
Rita Jean BATY, Defendant-Appellant.
UC7318211; A142350.
Court of Appeals of Oregon.
Argued and Submitted November 16, 2010.
Decided May 25, 2011.
*99 Erin Galli argued the cause for appellant. With her on the briefs was John Henry Hingson III.
Erika L. Hadlock, Senior Assistant Attorney General, argued the cause for respondent. With her on the brief were John R. Kroger, Attorney General, and Jerome Lidz, Solicitor General.
Before SCHUMAN, Presiding Judge, and WOLLHEIM, Judge, and ROSENBLUM, Senior Judge.
SCHUMAN, P.J.
Defendant appeals from a conviction in municipal court for driving under the influence of intoxicants (DUII), ORS 813.010. She first assigns error to the trial court's denial of her motion for a judgment of acquittal. That motion was based on the argument that, if she drove at all, it was only within the confines of a parking space reserved for persons with disabilities; an element of DUII is driving on "premises open to the public"; and a disabled-only parking space is not "open to the public." She also assigns error to the court's refusal to instruct the jury on the elements of "attempted driving under the influence of intoxicants." The state responds that a disabled-only parking space is open to the public for purposes of DUII, that attempted DUII is not a crime, and that, even if it is, there was no evidence to support an instruction on it in this case. We agree with the state that the disabled-only space was open to the public, but we agree with defendant that the court erred in not giving the attempted DUII instruction. We therefore reverse and remand.
The only disputed facts in this case involve whether the evidence supported an "attempted DUII" instruction; we therefore review the facts in the light most favorable to defendant, who requested the instruction.[1]State v. Taylor, 207 Or.App. 649, 666, 142 P.3d 1093 (2006), rev. den., 342 Or. 299, 152 P.3d 902 (2007). At around 3:00 p.m., Beaverton Community Service Officer McNeel was patrolling a local Fred Meyer parking lot for illegal use of disabled-only parking spaces. ORS 811.615. McNeel saw a red Ford Taurus parked in one such space. The car was unoccupied and had an Oregon disability parking permit hanging from the rear-view mirror. McNeel verified that the permit was current and learned that it belonged to a woman born in 1926. As he was acquiring that information, he saw a white Acura without a disability permit pull into the disabled-only space next to the Taurus. The driver of the Acura got out and went to a nearby ATM machine. At that point, McNeel approached *100 the cars and parked his patrol car behind the Acura, completely blocking it and partially blocking the Taurus. He then first saw defendant, who was now standing in front of the Taurus. According to McNeel, defendant did not look old enough to have been born in 1926, and the officer became suspicious that she was unlawfully using some other person's disability parking permit.
After citing the driver of the Acura, McNeel approached defendant, who was by then behind the wheel of the Taurus. Based on her appearance, he developed the suspicion that she was under the influence of intoxicants. He called for back up, and police officers Bowen and Buelt arrived on the scene shortly thereafter. Neither of the officers saw defendant operate the car. Bowen approached defendant and could smell alcohol on her. He administered field sobriety tests, which she failed. Bowen then arrested her and took her to a nearby police station, where a breath test showed a blood alcohol content of .17 percent, .09 above the legal limit.
At trial, the question before the jury was whether defendant actually drove her car while intoxicated. McNeel testified that he saw defendant drive "[p]robably several feet" in reverse, but never saw her drive the car forward. Yet he had written in his report, and also testified, that defendant "attempt[ed] to back up," and he wrote that she was "trying to back up," and when shown photos of the scene, McNeel could not explain why defendant's car was pulled all the way forward in the parking spot when he had seen her back up the car and not pull it forward. During cross-examination, McNeel acknowledged that the phrase "attempting to back up" could refer to a situation in which a person merely prepared to drive in reverse, but where the vehicle did not actually move. Additionally, McNeel testified that he had been trained that his reports should be factual, specific, and contain all relevant informationand he acknowledged that he did not explicitly describe in his report that defendant's vehicle had moved. McNeel also acknowledged that, according to his training, police officers may lose up to 75 percent of their memory of an incident after 48 hours. Defendant did not testify. At the close of the state's case-in-chief, defendant moved for a judgment of acquittal, arguing that defendant could not be found guilty of a DUII because a disabled-only parking space is not a "premise[ ] opened to the public" as a matter of law. The court disagreed and denied defendant's motion.
Defendant then requested that the jury be instructed on the lesser-included offense of attempted DUII. Specifically, defendant argued that the jury
"could conclude that she had, in fact, not moved [the vehicle]. As [McNeel] had, in fact, said on cross-examination, that if a person started their car, put it in gear, put their seatbelt on, put the car into reverse, had their foot on the brake, looked over their shoulder, that that could mean that a person was trying to back up.
"And * * * there is, certainly, evidence on the other side, but the jury could conclude that that is what his meaning was, that that car had not moved. That's a credibility question for this jury, not for the court. And if they conclude that, in fact, she had not moved, she certainly had taken substantial steps toward the commission of this offense. So that gives rise to the attempted driving under the influence instruction."
The state made two arguments in response. First, the state argued that DUII is "an all or nothing kind of proposition" and "you either drive the car or you don't," that is, that there is no such crime as attempted DUII. Alternatively, the state argued that the evidence did not support defendant's requested instruction. The court denied defendant's request, concluding that "there is not evidence of an attempt to drive the vehicle. The evidence given by Officer McNeel was that he saw the defendant back the vehicle within the handicap parking space, move it several feet. So ruled." After a trial to a jury, defendant was convicted of DUII. This appeal followed.
We begin with the denial of defendant's motion for a judgment of acquittal. ORS 813.010(4) provides, in part, that DUII "is a Class A misdemeanor and is applicable upon any premises open to the public." *101 (Emphasis added.) ORS 801.400 defines "premises open to the public" as
"any premises open to the general public for the use of motor vehicles, whether the premises are publicly or privately owned and whether or not a fee is charged for the use of the premises."
On appeal, defendant argues that the trial court should have granted her motion for a judgment of acquittal because there was insufficient evidence that the disabled-only parking space on which the alleged violation occurred was a "premise[ ] open to the general public for the use of motor vehicles." We disagree.
Both McNeel and Buelt testified without contradiction that the parking lot where the arrest occurred was open to the public, and it is undisputed that it was "for the use of motor vehicles." The fact that some portion of this open space was reserved for a subset of motor vehiclesthose driven by disabled persons and showing a valid disability permitdoes not render those spaces unopen to the general public any more than a highway is unopen to the general public because it is reserved for a subset of motor vehicles those operated by validly licensed drivers. Even more fundamentally, a disabled-only parking space is, in fact, open to the general public for the use of motor vehicles in that a nondisabled member of the general public can drive through such a space, see ORS 811.615(1) (prohibiting parking in spaces reserved for persons with disabilities), or momentarily stop in such a space to pick up or drop off a disabled person, ORS 811.615(2)(a). The fact that such a nondisabled member of the general public can drive through such a space but cannot park there does not render the space closed, any more than a highway is rendered closed by a rule that members of the general public can drive on it but cannot park there. The trial court did not err in denying defendant's motion for a judgment of acquittal.
In two assignments of error, defendant contests the court's denial of her request for a jury instruction on attempted DUII. One assignment focuses on the court's refusal to give a general instruction on attempt: "A person attempts to commit a crime when she intentionally engages in conduct that constitutes a substantial step toward the commission of that crime." The other assignment focuses on the court's refusal to give a special instruction on attempted DUII, which stated, among other things, that the crime of DUII "has as a lesser-included offense the crime of attempted driving under the influence of intoxicants" and that one element of that crime was that defendant "attempted to drive a vehicle on premises open to the public" while under the influence of alcohol.
The parties agree that a criminal defendant is entitled to an instruction based on her theory of the case if the instruction correctly states the law and there is evidence to support the theory. State v. Barnes, 329 Or. 327, 334, 986 P.2d 1160 (1999). They also agree that the instruction on attempt correctly restates ORS 161.405(1): "A person is guilty of an attempt to commit a crime when the person intentionally engages in conduct which constitutes a substantial step toward commission of the crime." And they agree that, generally speaking, the attempt to commit a crime is a lesser-included offense of the crime itself. State v. Anderson, 241 Or. 18, 21, 403 P.2d 778 (1965). The parties diverge in their analysis of the relationship between ORS 136.465 and ORS 801.020(7). The former provides,
"In all cases, the defendant may be found guilty of any crime the commission of which is necessarily included in that with which the defendant is charged in the accusatory instrument or of an attempt to commit such crime."
(Emphases added.) Defendant insists that the emphasized language is categorical and plain: all cases means all cases, and any crime means any crime. The state, acknowledging that it has, in the past, agreed with (and argued for) defendant's reading of ORS 136.465, explains that it has recently discovered ORS 801.020(7), a later and more specific statute:
"The vehicle code shall govern the construction of and punishment for any vehicle code offense committed after June 27, 1975, the construction and application of *102 any defense to a prosecution for such an offense and any administrative proceedings authorized or affected by the vehicle code."
According to the state, this statute
"states that the vehicle code governs the construction of DUII and of defenses to that crime. Consequently, ORS 801.020(7) appears to say that whether `attempted DUII' is an offense at all must be determined by reference to the vehicle code. And the vehicle code does not contain a counterpart to ORS 136.465, the source of defendant's argument-and of the state's position in [State v.] Sexton, [145 Or. App. 261, 928 P.2d 365 (1996), rev. den., 324 Or. 560, 931 P.2d 99 (1997)], on which defendant relies. That is, the vehicle code does not contain any specific provision defining attempted DUII as an offense or any general provision stating that a person charged with a vehicle code offense may be convicted of a lesser-included offense or an attempt."
We are not persuaded by the state's argument. With respect to criminal cases like this one, ORS 801.020(7) applies to (1) "construction of" a vehicle code offense, (2) "punishment for" a vehicle code offense, (3) "construction of" a defense to a vehicle code offense, and (4) "application of" a defense to a vehicle code offense. Of those four options, only the first has any relevance here: to declare that attempted DUII exists has nothing to do with punishment for DUII, construction of a defense to DUII, or application of a defense to DUII. Thus, the state's argument, to have any coherence, must be that finding the existence of attempted DUII is a "construction of" DUII. "Construction" could mean the act of construing, that is, interpreting; or it could mean the act of construction, that is, of building or creating. To say that there is such a crime as attempted DUII cannot be seen as an interpretation of the DUII statute. The state's position, thenas confirmed at oral argumentis that finding the crime of attempted DUII amounts to creating a vehicle code offense, and doing so by invoking a statute (ORS 136.465) that is outside of the vehicle code, and that doing so therefore is contrary to ORS 801.020(7). That position, we repeat, depends on the theory that "construction of" an offense means "creation" of an offense, and we are unable to find any other instance of the legislature using the term "construction" in that way. Further, it depends on the theory that newly constructed offenses will somehow identify themselves as "vehicle code offenses," presumably meaning offenses that legislative counsel chooses to codify within ORS chapters 801 through 826 (the Oregon Vehicle Code as defined by ORS 801.010), as opposed to the more likely meaning: an offense that is contained within the vehicle code as of June 27, 1975. Neither of those theories is tenable.
That conclusion raises the following question: What, exactly, does ORS 801.020(7) mean? What limits does it impose on the interpretation of, punishment for, or application of vehicle code offenses? The answer, as indicated by the legislative history, appears to be that the statute is incoherent as a limitation on construction, punishment, or application of vehicle code offenses because it was not drafted for that purpose. It was drafted to state clearly when the new vehicle code was to take effect.
ORS 801.020(7) began as section 5(1) of a revision of the vehicle code drafted under the auspices of the Committee on the Judiciary and enacted in 1975. See Proposed Revision, Oregon Vehicle Code, Committee on Judiciary, § 5(1) (Jan. 1975). The minutes of the committee discussion of section 5(1) were captioned, "Application of New Vehicle Code Provisions to Prior and Subsequent Actions." Id. In the committee's proposed report to the full legislature, section 5 read:
"Section 5. (Application of new vehicle code provisions to prior and subsequent actions.) (1) Sections 2 to 169 of this 1975 Act shall govern the construction of and punishment for any vehicle code offense defined in this 1975 Act and committed after the effective date of this 1975 Act, the construction and application of any defense to a prosecution for such an offense and any administrative proceedings authorized or affected by this 1975 Act.
"(2) Sections 2 to 169 of this 1975 Act shall not apply to or govern the construction of or punishment for any vehicle code *103 offense committed before the effective date of this 1975 Act or the construction and application of any defense to a prosecution for such an offense."
Proposed Revision, Oregon Vehicle Code, Committee on Judiciary, § 5 (Jan. 1975) (boldface in original). The "Commentary" to that section states:
"This section sets forth the rules under which the revised vehicle code will be applied to particular actions and proceedings in order to provide for an orderly transition from the old to the new statutes. The section covers the application of substantive as well as procedural provisions."
Id. at 6 (emphasis added). Although not unambiguous, this language at least indicates that the purpose of the section was to establish when the substantive and procedural provisions of the new vehicle code were to take effect.
Finally, we note that, if ORS 801.020(7) means what the state says it meansthat no vehicle code offense or defense can be "constructed" by application of a statute that lies outside of the vehicle codethen the defendant in a DUII case could not invoke the statute of limitations, ORS 131.105 to 131.125; the speedy trial provisions, ORS 135.747; or the "guilty except for insanity" defense, ORS 161.295. We presume that the legislature would not have intended such an absurd result. State v. Vasquez-Rubio, 323 Or. 275, 282-83, 917 P.2d 494 (1996). In sum, we conclude that ORS 801.020(7) does not prohibit application of the general attempt statute to the offense of DUII.
The state argues that, even if there is such an offense as attempted DUII, the court did not err in refusing to give defendant's instruction to that effect because there was no evidence to support the theory that she had, while intoxicated, merely attempted to drive. There was evidence that she drove and evidence that she did not drive, but there was no evidence that she only attempted to drive.
Again, we disagree. We recognize that defendant is not entitled to a lesser-included offense instruction merely because she can "sift[ ] the state's evidence for facts sufficient to support any inference running contrary to the prosecution's case." State v. Washington, 273 Or. 829, 841, 543 P.2d 1058 (1975). We also recognize that the line between permissible inferences from facts and impermissible speculation is a fine line indeed. Here, defendant presented evidence that McNeel wrote in his report that defendant was "trying" to back up. Although he testified at trial that he saw defendant actually drive the car in reverse, McNeel also testified that, hypothetically, a person could try to move a car in reverse by getting behind the wheel, starting the car, putting on the seatbelt, putting the car in gear, and looking over her right shoulderbut not actually moving. Defendant also attempted to discredit McNeel's memory by confronting him with a photograph of defendant's car at the front of the parking space despite the fact that McNeel had testified that he observed her drive the car away from the front and did not observe her driving it back to the front. From that evidence, viewed in the light most favorable to defendant, a juror could infer that McNeel actually saw defendant take steps preparatory to driving, but did not see her drive. See State v. Bilsborrow, 230 Or. App. 413, 419, 215 P.3d 914 (2009) ("[I]t is well settled that, to be guilty of DUII, a person must `drive' while intoxicated, ORS 813.010(1), and `driving' requires putting a vehicle in motion * * *."). For that reason, the court erred in not giving the proffered instruction on attempted DUII.
Reversed and remanded.
NOTES
[1] The question of whether "attempted DUII" is a crime is purely legal, and the only relevant fact regarding the handicap parking spacethat the events at issue here occurred in such a spaceis undisputed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453560/ | 509 F.Supp.2d 585 (2007)
Angel A. TASSIN,
v.
RYAN'S FAMILY STEAKHOUSE, INC.
Civil Action No. 05-363-FJP-CN.
United States District Court, M.D. Louisiana.
August 28, 2007.
*586 *587 Donna Unkel Grodner, Charlotte McDaniel McGehee, Grodner and Associates, APLC, Baton Rouge, LA, for Angel A. Tassin.
Karleen Joseph Green, Phelps Dunbar, Baton Rouge, LA, James T. Hedgepeth, Nexsen Pruet, LLC, Greenville, SC, for Ryan's Family Steakhouse, Inc.
RULING
POLOZOLA, District Judge.
The sole issue before the Court in this matter is what effect, if any, the Court should give to the Adjudication Panel Decision ("panel decision") filed into the record on February 27, 2007.[1] Plaintiff contends the Court should give no effect to the decision[2] while the defendant argues to the contrary.[3]
Finding the panel decision dispositive of this matter, the Court affirms the decision of the Adjudication Panel ("panel") and dismisses the claims of the plaintiff with prejudice.
I. Facts and Procedural History
In May, 2005, Angela A. Tassin ("Tassin" or "plaintiff") filed this suit against Ryan's Family Steakhouse, Inc. ("Ryan's" or "defendant") asserting various state and federal law claims. The plaintiff alleged she was the victim of sexual harassment and gender discrimination while she was employed by the defendant. In response to plaintiff's suit, the defendant filed a motion to compel arbitration[4] pursuant to an arbitration agreement entered into between the plaintiff and Employment Dispute Services, Inc. ("EDSI") at the on-set of the plaintiff's employment. EDSI served as the defendant's vendor of alternative dispute resolution services. The arbitration agreement ("EDSI agreement") compelled the plaintiff to enter arbitration for "any employment-related dispute" arising from her employment with the defendant.
The plaintiff, arguing that the arbitration clause was invalid, opposed the motion to compel arbitration. In support of her argument that the EDSI agreement was invalid, the plaintiff contended the EDSI agreement was unconscionable and lacked consideration.[5] On August 8, 2005, this Court found the agreement to be binding on the parties under Louisiana and federal law and ordered the parties to submit to arbitration.[6]
The parties proceeded to arbitrate the plaintiff's claim pursuant to the Court's August 8, 2005, order. During the arbitration proceedings, the Fifth Circuit issued an unpublished opinion in Goins v. Ryan's Steakhouse, Inc. ("Goins').[7] In Goins, the *588 Fifth Circuit held the EDSI agreement was invalid under Texas law because the agreement lacked consideration.[8] As a result, the Fifth Circuit affirmed a district court's decision to deny Ryan's motion to compel arbitration based on an EDSI agreement.[9]
After the adjudication panel in this case rendered its decision denying Tassin's claims, the panel decision was filed into the record.[10] Plaintiff then filed a memorandum urging the Court to give no effect to the panel decision.[11] In response to plaintiff s memorandum, the defendant urged the Court to affirm the panel decision.[12] After considering the recqrd in this case and in light of the Goins decision, the Court ordered oral argument[13] and additional briefing[14] on what effect, if any, the Court should give to the panel decision based on the Goins decision. For the reasons set forth below, the Court is compelled to uphold the panel decision and dismiss plaintiff's claims based upon the panel decision.
II. Law and Analysis
The law gives great deference to awards by arbitration panels, as the review of awards is "exceedingly deferential."[15] "A reviewing court examining whether arbitrators exceeded their powers must resolve all doubts in favor of arbitration."[16] A district court's review of an arbitration award is guided by the Federal Arbitration Act ("FAA").[17]
Under the FAA, there exists only four statutory grounds for vacating an arbitration award.[18] In addition to the statutory grounds of the FAA, the Fifth Circuit recognizes vacating an award may be proper under two "narrow" common law exceptions: if the award was "contrary to public policy" or in "manifest disregard for the law."[19]
The plaintiff makes several arguments in support of its request for the Court to set aside the panel decision. First, plaintiff argues the panel members were not neutral but were "inherently biased" because of the manner in which they were selected and because of the composition of the panel.[20] Additionally, the plaintiff contends the defendant was in a position to exert undue influence over the arbitration; therefore, the panel decision was invalid because it was procured by undue means and the panel members allegedly ignored material evidence and refused to allow certain *589 testimony[21] to be presented at the hearing. Thus, plaintiff argues the panel decision was in violation of the FAA[22] and in manifest disregard of the law.
Finally, based largely on the Goins decision, the plaintiff argues the EDSI agreement lacked consideration and the arbitration is a nullity under Louisiana law.[23] If the agreement was a nullity, plaintiff contends it is as if the parties never entered into the agreement and the panel decision would be invalid.
The Court finds that each of these arguments is without merit under the law and facts of this case.
A. There is no evidence of inherent bias of the panel.
Plaintiff argues the Court should vacate the award because of the "inherent bias" of the panel.[24] The plaintiff contends the panel was biased because the method by which the panel members were selected and because two of the panel members either work or worked in restaurants similar to the defendant's.[25] According to the plaintiff, this caused the panel members to be partial or corrupt in violation of the FAA.[26]
"The appearance of impropriety, standing alone, is insufficient" to vacate an award.[27] According to the Fifth Circuit, evident partiality "means more than a mere appearance of bias."[28] Allegations are not enough. In this case, the plaintiff failed to set forth any evidence of partiality or corruption of the panel members. Instead, the plaintiff has alluded to partiality because of the method of selecting the panel members and because some of the panel members selected work in the same industry as the defendant. According to the plaintiff, this makes the panel members more sympathetic towards the defendant's position. Under the Fifth Circuit's jurisprudence, this suggestion of bias, with nothing more, is an insufficient ground to disturb or set aside the panel decision. Because the plaintiff has failed to set forth anything other than a "mere appearance of bias," the Court cannot vacate the panel decision based upon the alleged partiality or corruption of the panel under the facts of this case.
B. The defendant did not exert undue influence over the panel.
The plaintiff also argues that, because of the nature of the EDSI agreement and how the arbitration hearing was conducted, the defendant was in a position to exert undue influence over the panel.[29]*590 Based on these allegations, the plaintiff argues the award was procured by corruption, fraud or undue means in violation of the FAA.[30]
To vacate an award because it was procured by fraud, corruption or undue means, the Fifth Circuit has determined that there must be some nexus between a party's improper conduct and the award.[31] In other words, the party seeking vacatur must show the other party's improper conduct led to the award. In this case, the plaintiff has not even made such an allegation, nor has the Court found any facts to support such an allegation after independently reviewing the record. Plaintiff's claim fails to rise to the standard required by the Fifth Circuit because there is no evidence of a nexus between the defendant's alleged conduct and the panel decision. Plaintiff's conclusory allegations are insufficient to vacate the panel decision on these grounds.
C. The panel decision did not manifestly disregard the law and did not refuse to hear pertinent or material evidence.
Under the FAA, an award may be vacated when an arbitration panel refuses "to hear evidence pertinent and material to the controversy."[32] In addition to the grounds outlined in the FAA, a district court may vacate an award if the award was made with "manifest disregard for the law."[33] Plaintiff argues the panel decision is invalid because the panel ignored evidence and was in manifest disregard of the law, citing both the Goins decision and the plaintiff's contention that the panel ignored evidence.[34]
A panel decision should be vacated when the panel refuses to hear evidence pertinent and material to the controversy.[35] In this matter, the plaintiff does not allege that the panel refused to hear testimony, but instead argues the credibility assessments made by the panel were incorrect.[36] The Court is not in a position to question the credibility assessments made by the panel. In fact, the opposite is true: the Court "must `defer to the arbitrator's decision when possible.'"[37] Plaintiff fails to set forth any evidence to establish that the panel members refused to hear pertinent or material information. Therefore, plaintiff's argument based on this contention is without merit.
Plaintiff also argues the panel decision was without merit because it was in manifest disregard of the law, arguing that the panel decision was "arbitrary and capricious."[38] Under clearly established jurisprudence in the Fifth Circuit, the parties are bound by an award not "in manifest disregard of the law."[39] Manifest disregard "clearly means more than error *591 or misunderstanding with respect to the law."[40] The Fifth Circuit in Brabham v. A.G. Edwards & Sons, Inc., held that the award must manifestly disregard the law; it cannot be simply arbitrary and capricious.[41]
The manifest disregard analysis requires two steps.[42] First, "the error must have been obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator."[43] "The term `disregard' implies that the arbitrator appreciates the existence of a clearly governing principle but decides to ignore or pay no attention to it. For the second step, `before an arbitrator's award can be vacated, the court must find that the award resulted in a significant injustice.'"[44]
Under this standard, even in light of Goins, it is clear to the Court the panel did not manifestly disregard the law.
D. The EDSI agreement did not lack consideration under Louisiana law.
Finally, the plaintiff argues that because the EDSI agreement lacked consideration, the agreement between the parties was a nullity. Since the agreement Was a nullity, plaintiff contends the agreement was not binding on her.[45] This argument is nearly identical to the argument plaintiff presented and the Court rejected when arbitration was initially compelled by the Court.[46] The plaintiff's original argument is again renewed in her post arbitration memorandum and plaintiff claims it is now supported by the Goins decision. As outlined below, the Court finds that the Goins decision is inapplicable under the law and facts of this case and the reasons initially set forth by the Court in its earlier ruling compelling arbitration are still accurate. Therefore, the plaintiff's argument that the arbitration agreement was invalid is without merit and not supported by the evidence in this case.
As noted during oral argument in the matter, the Court is not aware of what legal ground the plaintiff's argument provides for vacating the award. The plaintiff is essentially asking the Court to reconsider its order compelling arbitration, and the Court is unaware of any grounds which would allow the Court to vacate the award under the legal standard set forth by the Fifth Circuit. As outlined above, arbitration awards are only to be vacated on very narrow grounds. None of the plaintiff's arguments provide the Court with statutory or jurisprudential grounds for vacating the award under the facts of this case.
Besides not providing a legal ground for vacatur, the plaintiff's argument that the EDSI agreement lacked consideration is without merit under Louisiana law. The plaintiff relies largely on the Goins decision in arguing the agreement was without consideration. In Goins, a group of plaintiffs *592 sought recovery for sexual harassment and racial discrimination. The Fifth Circuit upheld a district court's determination that the EDSI agreement was invalid under Texas law.[47] The Fifth Circuit reasoned the "triangular" arbitration agreement entered into between the employees and EDSI lacked adequate consideration under Texas law.[48]
The plaintiff's argument that Goins is applicable fails for two reasons.[49] First, the Goins decision was unpublished. As such, pursuant to Fifth Circuit Rule 47.5.4, the case is not precedent except in limited circumstances which are not applicable here. Second, and more important, the Goins decision applied Texas law and this Court does not believe a Louisiana court would reach the same conclusion. In Stadtlander v. Ryan's Family Steakhouses, Inc.,[50] the Louisiana Second Circuit Court of Appeal held the EDSI agreement in question to be valid and enforceable under Louisiana law. For the reasons set forth in Stadtlander and those outlined in the Court's initial ruling compelling arbitration, this Court finds that the agreement between the parties to arbitrate the plaintiff's claims is valid and enforceable under Louisiana law and the facts of this case.
III. Conclusion
For the reasons outlined above, the Adjudication Panel Decision is affirmed. IT IS ORDERED that the plaintiff's claims be dismissed with prejudice.
Judgment shall be entered accordingly.
NOTES
[1] Rec. Doc. No. 10.
[2] Rec. Doc. No. 19.
[3] Rec. Doc. No. 23.
[4] Rec. Doc. No. 4.
[5] Rec. Doc. No. 6.
[6] Rec. Doc. No. 7.
[7] 05-51549 (5th Cir.2006), 181 Fed.Appx. 435 (2006 WL 1440687). As the record will reflect, the Court was and continues to be concerned that counsel for the defendant, whose firm was also counsel of record in the Goins case, did not bring the Goins decision to the attention of the plaintiff and the Court when the decision was entered.
[8] Id.
[9] Id.
[10] Rec. Doc. No. 10.
[11] Rec. Doc. No. 19.
[12] Rec. Doc. No. 23.
[13] Rec. Doc. No. 27.
[14] Rec. Doc. No. 34.
[15] Brabham v. A.G. Edwards & Sons, Inc., 376 F.3d 377, 380 (5th Cir.2004). See also American Laser Vision, P.A. v. The Laser Vision Institute, L.L.C., 487 F.3d 255, 258 (5th Cir. 2007).
[16] Brook v. Peak Int'l, 294 F.3d 668, 672 (5th Cir.2002).
[17] See 9 U.S.C. § 10.
[18] 9 U.S.C. § 10(a).
[19] Apache Bohai Corporation LDC v. Texaco China BV, 480 F.3d 397, 401 (5th Cir.2007).
[20] Memorandum in Support of Plaintiff The Court Should Give No Effect to the Report of Panel Decision Under the Law and Facts ("Plaintiff's Memorandum"), Rec. Doc. No. 19, p. 5.
[21] Id. at p. 13-14.
[22] See 9 U.S.C. § 10(a)(1) & (3).
[23] Post Memorandum in Support of Motion to Vacate Arbitration Agreement ("Plaintiff's Post Argument Memorandum"), Rec. Doc. No. 35, p. 4.
[24] Plaintiff's Memorandum, p. 5.
[25] The third panel member was an attorney and there was no suggestion of his bias. The plaintiff, however, did question his qualifications in brief. Plaintiff's Memorandum, p. 8. Questioning a panel member's qualifications without more is not adequate grounds to vacate an award.
[26] 9 U.S.C. § 10(a)(2).
[27] Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d 278, 283 (5th Cir.2007), citing Bernstein Seawell & Kove v. Bosarge, 813 F.2d 726, 732 (5th Cir.1987).
[28] Id.
[29] Plaintiff's Memorandum, p. 14. As further support for this allegation, plaintiff cites the Goins case as evidence that the other Courts have found the EDSI agreement invalid because of the nature of Ryan's relationship with EDSI. As outlined below, the Goins case does not stand for the proposition that Ryan's exerted influence on the panel members.
[30] 9 U.S.C. § 10(a)(1). The plaintiff does not specifically mention this statute but is apparently arguing for vacatur on this ground. Plaintiff's Memorandum, p. 14.
[31] Forsythe International, S.A. v. Gibbs Oil Co. of Texas, 915 F.2d 1017, 1022 (5th Cir. 1990).
[32] 9 U.S.C. § 10(a)(3).
[33] Apache, 480 F.3d at 401.
[34] Plaintiff's Memorandum, p. 14.
[35] 9 U.S.C. § 10(2)(3).
[36] Plaintiff's Memorandum, pp. 14-17.
[37] American Laser Vision, P.A., 487 F.3d at 258, citing Nauru Phosphate Royalties, Inc. v. Drago Daic Interests, Inc., 138 F.3d 160, 164-65 (5th Cir.1998).
[38] Plaintiff's Memorandum, p. 20.
[39] Apache, 480 F.3d at 405, citing First Options, Inc. v. Kaplan, 514 U.S. 938, 942, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
[40] Id., citing Prestige Ford v. Ford Dealer Computer Servs., Inc., 324 F.3d 391, 395 (5th Cir.2003).
[41] 376 F.3d 377, 380. In Brabham, the Fifth Circuit rejected the arbitrary and capricious standard as grounds for overturning awards. The plaintiff's statement that the "arbitrary and capricious disregard of what constitutes sexual harassment/hostile work environment is an accepted non-statutory grounds for vacatur" is simply incorrect. See Plaintiff's Memorandum at p. 20.
[42] Apache, 480 F.3d at 405.
[43] Id., citing Kergosien v. Ocean Energy, Inc., 390 F.3d 346, 355 (5th Cir.2004).
[44] Id., citing Kergosien, 390 F.3d at 355.
[45] Plaintiff's Post Argument Memorandum, Rec. Doc. No. 35.
[46] See Rec. Doc. No. 7.
[47] 181 Fed.Appx. 435.
[48] Id. The Fifth Circuit determined the contract between the employees and EDSI lacked consideration because the contract between Ryan's and EDSI did not require Ryan's to submit to arbitration. Because EDSI could not guarantee Ryan's would submit to arbitration, EDSI's promise to supply a neutral arbitral forum to the employees was illusory. The contract compelling the employees to arbitrate, therefore, could not be enforced. Id.
[49] In refusing to follow the Goins decision, this Court is aware of and respects its obligation to follow precedent set forth by the Fifth Circuit. However, as noted above, there is a clear distinction between this case and the facts in the Goins case. Since Goins was not a published opinion and because Louisiana law and not Texas law must be applied in this case, Goins is not binding on this Court.
[50] 34,384 (La.App. 2 Cir. 4/4/01), 794 So.2d 881, writ denied, 01-1327 (La.6/22/01), 794 So.2d 790. (Stadtlander is superseded by LSA-C.C.P. art.2083 and on other grounds which pertain to when an appeal of an interlocutory ruling may be taken as stated in Arkel Constructors, Inc. v. Duplantier & Meric, Architects, L.L.C., 965 So.2d 455, 2007 WL 2120226, XXXX-XXXX (La.App. 1 Cir 7/25/07).) In fact, the Court in Arkel ordered arbitration and reversed the trial court. The First Circuit noted:
The positive law of Louisiana favors arbitration, and any doubt concerning the scope of arbitrable issues should be resolved in favor of arbitration. Aguillard [v. Auction Management Corp], 04-2804 at p. 6, 908 So.2d [1] at 7 [(La.2005)]. Such favorable treatment echoes the Federal Arbitration Act (FAA), 9 U.S.C. § 1, et seq., which unquestionably embodies a liberal federal policy favoring arbitration agreements. Id. at p. 7, 908 So.2d at 7-8. One of the basic reasons for the existence of arbitration agreements is to allow the parties to achieve speedy settlement of their differences out of court. This purpose would be thwarted if, before being required to perform under the arbitration agreement, parties were permitted to litigate in order to secure an initial judicial determination (preliminary to arbitration) that procedural formalities of the agreement have been complied with. Bartley, Incorporated v. Jefferson Parish School Board, 302 So.2d 280, 283 (La.1974). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453572/ | 509 F.Supp.2d 152 (2007)
Ada MONTANEZ-BAEZ, et al., Plaintiffs
v.
PUERTO RICO PORTS AUTHORITY, et al., Defendants.
Civil No. 07-1211.
United States District Court, D. Puerto Rico.
September 19, 2007.
*153 Jeannette M. Lopez, Pinto-Lugo, Oliveras & Ortiz, PSC, San Juan, PR, for Plaintiffs.
Francisco Agrait-Oliveras, Agrait Llado Law Office, Diego A. Ramos, Roberto A. Camara-Fuertes, Fiddler, González & Rodriguez, San Juan, PR, for Defendants.
OPINION AND ORDER
SALVADOR E. CASELLAS, Senior District Judge.
Pending before the Court are Co-defendant American Airlines' (hereinafter American) Motion to Strike Plaintiffs' Belated Jury Demand (Docket # 14) and its Motion to Dismiss Claims by Co-plaintiff Marte-Almonte (Docket # 15). Plaintiffs opposed both motions (Dockets ## 20 and 21, respectively) and American replied (Dockets ## 23 and 24, respectively). Upon consideration of the parties' filings and the applicable law, American's Motion to Strike Jury Demand (Docket # 14) and its Motion to Dismiss (Docket # 15) will be GRANTED.
Factual Background
Because we are at the motion to dismiss stage, we set forth the facts relevant to the instant motions, as they are pleaded in the complaint. On November 28, 2005, Plaintiffs Ada Montañez-Báez and her husband Antonio Marte-Almonte traveled from Santo Domingo, Dominican Republic to the Luis Muñoz Maríann Airport in Carolina, Puerto Rico aboard American Flight # 5037. As they went from the American Eagle terminal to the immigration area of the airport, Plaintiffs took an electric escalator. While on such escalator, Co-plaintiff Montañez-Báez suffered a serious fall in the presence of her husband and other travelers. Co-plaintiff Montañez-Báez allegedly suffered and continues to suffer physical and emotional damages as a result of the fall. Co-plaintiff Marte-Almonte allegedly suffers and continues to suffer emotional pain and mental anguish as a result of seeing his wife suffer.
Procedural Background
Plaintiffs originally filed their complaint in the Court of First Instance, Carolina Part, on June 25, 2006. See, Docket # 1 and attachments thereto. After some procedural wrangling, on February 12, 2007, Plaintiffs filed a motion in the Court of First Instance to which they attached copies of ticket stubs of their travel from Santo Domingo to San Juan. See, Docket # 1, ¶¶ 11, 12, and 14 and attachments to Docket # 1. On March 14, 2007, American filed a Notice of Removal (Docket # 1), claiming federal jurisdiction existed under the Warsaw Convention, among other provisions. That same day, American filed with this Court its answer to Plaintiffs complaint (Docket # 3). On April 13, 2007, a new attorney for Plaintiffs filed a Notice of Appearance (Docket # 5). In that Notice, next to the caption of the case, Plaintiffs stated that they requested a trial by jury. Plaintiffs reiterated such request *154 in their Amended Complaint (Docket # 10), which they filed after obtaining leave from the Court to do so (Dockets ## 7, 8). The instant motions to strike jury demand and to dismiss the claims by Co-plaintiff Marte-Almonte followed.
Applicable Law and Analysis
I. Timeliness of Jury Demand
Our ultimate conclusion as to allowing Plaintiffs to maintain their jury demand depends on the interplay between three Federal Rules of Civil Procedure:
(1) Fed.R.Civ.P. 81(c), which states, in relevant part:
These rules apply to civil actions removed to the United States district courts from the state courts and govern procedure after removal. [. . .] If at the time of removal all necessary pleadings have been served, a party entitled to trial by jury under Rule 38 shall be accorded it, if the party's demand therefor is served within 10 days after the petition for removal is filed if the party is the petitioner, or if not the petitioner within 10 days after service on the party of the notice of filing the petition.
(2) Fed.R.Civ.P. 38(b) & (d), which in relevant part provide:
(b) Any party may demand a trial by jury of any issue triable of right by a jury by (1) serving upon the other parties a demand therefor in writing at any time after the commencement of the action and not later than 10 days after the service of the last pleading directed to such issue . . .
(d) The failure of a party to serve and file a demand as required by this rule constitutes a waiver by the party of trial by jury. [. . . ]
(3) Fed.R.Civ.P. 39(b)
Issues not demanded for trial by jury as provided in Rule 38 shall be tried by the court; but, notwithstanding the failure of a party to demand a jury in an action in which such a demand might have been made of right, the court in its discretion upon motion may order a trial by a jury of any or all issues.
At the time American filed its Notice of Removal, it had yet to answer the complaint. As such, not all necessary pleadings had been served. Accordingly, in order to determine the timeliness of Plaintiffs' Jury Demand, we must refer to Fed.R.Civ.P. 38(b). Per such rule, Plaintiffs had to make their jury demand no later than ten days after service of the last pleading directed to the issue to be tried by jury. Thus, Plaintiffs had to file their jury demand within ten days of American's filing of its answer to the complaint; that is, Plaintiffs jury demand should have been filed on or before April 2, 2007.[1]
Plaintiffs' first attempt at requesting a jury trial came via their new attorney's April 13, 2007 "Notice of Appearance". Unfortunately for Plaintiffs, such Notice was filed twenty one working days after American had filed its answer. That time frame exceeds the one provided in Fed. R.Civ.P. 38(b) for making a jury demand.
Plaintiffs seek to excuse their untimely request for a jury trial by pointing to the fact that at the time of removal they were represented by an attorney who is not admitted to practice before the U.S. District Court for the District of Puerto Rico. Relying on that fact, and on their claim that no prejudice would befall American if the Court were to allow their untimely jury demand, Plaintiffs request that the *155 Court exercise its discretion and permit that this action proceed before a jury.
At first glance, Plaintiffs' argument that they were originally represented by a state court practitioner, unfamiliar with the Federal Rules of Civil Procedure garnered some sympathy from the Court. However, upon review of the filings, and as American argued, it appears that Plaintiffs' former attorney and Plaintiffs' current attorney both work for the same law firm. Thus, we are not faced with a solo practitioner who deals exclusively with state court cases, but rather with the member of a firm in which there are attorneys that practice in both fora. At the time of removal, then, Plaintiffs were represented by an attorney that even if unfamiliar with federal litigation had access to other attorneys who were knowledgeable in the procedural rules applicable in the U.S. District Court.
Plaintiffs' excuses for their delay in requesting a jury trial fail to move this Court to order a trial by jury under Fed.R.Civ.P. 39(b). Simply put, Plaintiffs had a time limit for requesting a jury trial and they failed to abide by it. This failure carries with it the consequence that Plaintiffs have waived their right to trial by jury. See, 9 Wright and Miller, Federal Practice and Procedure 2d § 2321 ("The key provision is. Rule 38(d), which states that the failure of a party to serve and file a demand as required by Rule 38(b) constitutes a waiver by the party of trial by jury. [. . .] Waiver by failure to make a timely demand is complete even though it was inadvertent and unintended and regardless of the explanation or excuse.")
II. Dismissal of Co-plaintiff Marte-Almonte's claims
Under Rule 12(b)(6) in assessing whether dismissal for failure to state a claim is appropriate, "the trial court, must accept as true the well-pleaded factual allegations of the complaint, draw all reasonable inferences therefrom in the plaintiffs favor, and determine whether the complaint, so read, limns facts sufficient to justify recovery on any cognizable theory." LaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 508 (1st Cir.1998) (citations omitted).
American argues that Co-plaintiff Marte-Almonte's claims must be dismissed because, taking as true all factual allegations in the complaint, his claims are not cognizable under the Warsaw Convention because he suffered no physical injuries. To finish off the argument, American contends that since the Warsaw Convention pre-empts local law, the fact that Co-plaintiff Marte-Almonte's may not be redressed under the treaty conclusively dooms his quest for relief. Plaintiffs oppose this contention and, instead, posit that the treaty does not impede plaintiffs with viable claims thereunder to also bring supplemental law claims. We agree with American that Co-plaintiff Marte-Almonte's claims must be dismissed.
Plaintiffs do not contest that the Warsaw Convention is applicable to Co-Plaintiff Marte-Almonte's claims, that is, that such co-plaintiff seeks relief for damages suffered as a result of an event that took place in the course of disembarking from an international flight. See, Aévedo-Reinoso v. Iberia Líneas. Aéreas de España S.A., 449 F.3d 7, 13 (1st Cir.2006) ("The Convention's applicability rests on a determination of whether the passenger's injury occurred `on board the aircraft or in the course of any of the operations of embarking or disembarking.'") (citing Art. 17 of the Convention). Having determined that the Convention applies, we must now elucidate whether the facts, as alleged in the complaint, render American liable for Co-plaintiff Marte-Almonte's injuries. See, Id. (explaining that the Court must *156 first address the issue of applicability and then turn to the issue of liability because, if the Convention is not applicable, then it has no preclusive effect). Co-plaintiff Marte-Almonte does not allege that he suffered any physical injury as a result of the events alleged in the complaint; instead, he posits that he has suffered "great emotional pain and mental anguish from seeing his wife suffer." Docket # 10, ¶ 18. The problem with such a claim is that it is not cognizable under Article 17 of the Warsaw Convention, see, Eastern Airlines, Inc. v. Floyd, 499 U.S. 530, 552, 111 S.Ct. 1489, 113 L.Ed.2d 569 (1991) ("an air carrier cannot be held liable under Article 17 when an accident has not caused a passenger to suffer death, physical injury, or physical manifestation of injury"), and that the Convention, when applicable, preempts state law. See, El Al Israel Airlines Ltd. v. Tsui Yuan Tseng, 525 U.S. 155, 119 S.Ct. 662, 142 L.Ed.2d 576 (1999), Acevedo-Reinoso, 449 F.3d at 13 ("If the Convention applies in a particular case, it is preemptive, and the trier of fact must then determine whether the carrier is liable under the Convention.") (citing El-Al Israel, supra).
Conclusion
For the reasons stated above, American's Motion to Strike Jury Demand and its Motion to Dismiss Co-plaintiff Marte-Almonte's Claims are GRANTED. Partial Judgment will be issued accordingly.
SO ORDERED.
NOTES
[1] Although Fed.R.Civ.P. 38(b) refers to ten days, Plaintiffs actually had ten working days plus three additional' days to timely file their request for jury trial. See, Fed.R.Civ.P. 6(a) & (e). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453614/ | 362 F.Supp.2d 949 (2005)
Robert STUBLI, Plaintiff
v.
Anthony PRINCIPI, Sec'y, Defendant
No. 3:04CV7571.
United States District Court, N.D. Ohio, Western Division.
March 10, 2005.
*950 Brian M. Ramsey, Toledo, OH, for Robert D. Stubli, Plaintiff.
Holly Taft Sydlow, Office of the U.S. Attorney, Northern District of Ohio, Toledo, OH, for Department of Veterans Affairs Anthony Principi, Secretary of, Defendant.
ORDER
CARR, Chief Judge.
This is a suit by a disabled veteran against the United States. Plaintiff alleges that the Department of Veterans Affairs (VA) wrongfully complied with a garnishment order issued by a Florida domestic relations court. That court ordered the VA withhold a portion of plaintiff's VA disability compensation, which he receives for a service-related disability in lieu of his retirement pay, which he has waived.
Pending is the government's motion to dismiss, which asserts two grounds for dismissal: 1) lack of subject matter jurisdiction, *951 because the government has not waived sovereign immunity; and 2) failure to state a cause of action.
For the reasons that follow, the government's motion shall be granted.
Discussion
Under the doctrine of sovereign immunity, the United States cannot be sued without its consent. United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 47 L.Ed.2d 114 (1976); Beamon v. Brown, 125 F.3d 965, 967 (6th Cir.1997). A court does not have jurisdiction to adjudicate claims against the government absent a waiver of sovereign immunity as to such claims.
The plaintiff does not point to a specific provision waiving sovereign immunity for suits such as his, which challenges the VA's acquiescence in a garnishment order. To be sure, in some limited circumstances, as provided in the Child Support Enforcement Act 42 U.S.C. §§ 652(a)(8), 660, a federal court may consider a challenge to a state court garnishment order for alimony or child support.
Those circumstances only exist, however, where the Secretary of Health and Human Services has certified the action under 42 U.S.C. § 652(a)(8). Through such certification, the Secretary may permit a state to enforce court orders for support against noncustodial parents in a federal court. But certification by the Secretary is limited to suits by a state agency. Certification may not be granted to a private individual. Hexamer v. Foreness, 981 F.2d 821, 824 (5th Cir.1993). Plaintiff's suit is not within the limited scope of this waiver of sovereign immunity.
Plaintiff argues that the VA waived any immunity it might otherwise enjoy when it submitted to the order issued by the Florida court and withheld a portion of the plaintiff's monthly benefits. This contention overlooks the limited extent to which the Child Support Enforcement Act authorizes submission to state court enforcement orders. Under 42 U.S.C. § 659(a) monies due from the United States to an individual may be garnished in accordance with state law to enforce the individual's support obligations. This provision, to the extent that it can be viewed as a waiver of sovereign immunity, did not waive such immunity to any extent greater than that stated in the statute.
Section 659(a) creates neither a federal right to garnishment nor any federal jurisdiction over garnishment proceedings. The statute simply authorizes federal agencies to honor state court garnishment orders providing for payment of child support and alimony. See Loftin v. Rush, 767 F.2d 800, 809 (11th Cir.1985).
In addition to not waiving sovereign immunity expansively, the Act limits any liability that might otherwise accrue to the government vis-a-vis the individual who would have received the garnished funds but for the agency's compliance with the state court order. Section 659(f)(1) provides that the United States shall not "be liable with respect to any payment made from moneys due or payable from the United States to any individual pursuant to legal process regular on its face, if the payment is made in accordance with this section and the regulations issued to carry out this section."
The plaintiff is not without a remedy, as the state courts retain authority to adjudicate challenges to the lawfulness of an underlying garnishment order, even when federal benefits are involved. See Millard v. United States, 916 F.2d 1, 3 (Fed.Cir.1990) (garnishment is a statutory remedy governed by state law).
Thus, the Child Support Enforcement Act, 42 U.S.C. § 659, represents a limited waiver of sovereign immunity permitting *952 acquiescence instate court garnishment orders. It is not a general waiver that would permit suit on a garnishment matter in a federal court. This court is not the proper forum to contest either the validity of the garnishment order or the VA's action in honoring it.
Plaintiff argues that his position is well-taken in light of the Supreme Court's decision in Mansell v. Mansell, 490 U.S. 581, 109 S.Ct. 2023, 104 L.Ed.2d 675 (1989). That case involved an issue under the Uniformed Services Former Spouses' Protection Act, 10 U.S.C. § 1408, as to whether military retired pay that is waived for veterans' disability benefits should be treated as community property. The issue in this case whether the VA lawfully acquiesced in the garnishment order relating to VA disability compensation is entirely unrelated to the issue in Mansell.
In light of the foregoing, I conclude that this court is without jurisdiction. That being so, it is neither necessary nor appropriate to address the merit's of plaintiff's claim.
It is, therefore,
ORDERED THAT the defendant's motion to dismiss be, and the same hereby is granted. Plaintiff's motion for leave to file amended complaint and leave to file a supplemental response be, and hereby are denied.
So ordered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453638/ | 257 P.3d 351 (2011)
STATE
v.
FLEMING.
Nos. 104477, 104478.
Court of Appeals of Kansas.
August 12, 2011.
Decision Without Published Opinion
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454711/ | 994 S.W.2d 878 (1999)
Robert C. MAGEE, Jr., Appellant,
v.
The STATE of Texas, Appellee.
No. 10-97-065-CR.
Court of Appeals of Texas, Waco.
June 9, 1999.
*881 John H. Hagler, Dallas, for appellant.
John C. Vance, Criminal Dist. Atty., Sue Korioth, Wendy Koster, Asst. Dist. Attys., Dallas, for appellee.
Before Chief Justice DAVIS, Justice VANCE, and Justice GRAY.
OPINION
VANCE, Justice.
A jury convicted Robert C. Magee, Jr. ("Magee") of murdering his wife, Crystal Magee ("Crystal"), by setting her on fire. See TEX. PEN.CODE ANN. § 19.02 (Vernon 1994). The jury sentenced him to life imprisonment and affirmatively found that he had used a deadly weapon, i.e. gasoline, in the commission of the offense. Magee appeals on six issues. He alleges that the evidence is legally and factually insufficient, that the court erred in admitting certain evidence, that Batson error was committed in jury selection, and that the deadly weapon finding should be deleted. Finding a single error that did no harm, we will affirm the judgment.
SUMMARY
Robert and Crystal Magee lived in the Ridgegate Apartments in Dallas with their two small children.[1] On the afternoon of August 28, 1995, Crystal ran out of her apartment and into the apartment next door. She was badly burned with smoke coming from her body. She told several individuals at the scene and later at the hospital that her husband had poured gasoline on her and set her on fire. Crystal, who was severely burned over 95% of her body, died that night. Magee was burned on his hands and face. He testified that he and Crystal were in the process of divorcing, that Crystal had poured gasoline on herself, and that the gasoline had somehow ignited while she was alone in the bathroom.
THE EVIDENCE
Because Magee brings both legal and factual sufficiency issues, we will briefly summarize the testimony:
STATE'S WITNESSES
Robin Turner
Robin Turner, the Magees' next door neighbor, testified that she heard a woman screaming outside her apartment at approximately noon. Her boyfriend went outside and returned, telling Turner to call 9-1-1. Crystal then ran into Turner's apartment. Her hands and body were burned and smoking. Crystal yelled, "I'm burning, I'm burning. I can't believe he did this ... He poured it on me and he set me afire." Crystal further stated, "I didn't believe that he would do it. But he did it. He threw it on me and lit it." *882 Turner asked who had done this, and Crystal said it was her husband.
Turner stated that Crystal was screaming about her children. She told Crystal to lie down on the floor, then went into the breezeway and saw Magee coming out of his apartment. His hands were burned. Magee asked Turner if she had called for an ambulance, and she told him she had.
Carlos Wallace
Carlos Wallace testified that between 12:30 and 1 p.m. he heard someone yelling, "Help me, please help me," and saw a woman running into an apartment. Wallace followed the woman into the apartment. He saw Crystal lying on the floor, yelling about her children. Wallace asked Crystal where the children were and someone responded that they were next door. Wallace ran into the apartment next door where he saw a young boy and girl on the floor. He took one of the children outside. When he reentered to get the other child, he encountered Magee. Wallace asked Magee what was going on, but Magee did not answer. Wallace took the second child outside and reentered to tell Magee to get out. Magee had burns on his face, hands, and arms.
Wallace returned to Turner's apartment and tried to assist Crystal. She said to him, "[H]e poured gas on me ... he tried to hurt me, he tried to kill me." Wallace stated that Crystal did not mention that Magee had actually lit the fire.
Phillip Minchew
Phillip Minchew, a firefighter-paramedic, testified that he was dispatched to the Ridgegate Apartments around 1 p.m. He found Crystal lying in the floor, and she told him, "[M]y husband threw gasoline on me then he lit it.... [H]e ... tried to put me out and said he was sorry." Minchew stated that Crystal's body was so badly burned that he was unable to establish an IV. Crystal was taken by helicopter to Parkland Hospital. Magee was also taken to Parkland.
Dr. Gary Purdue
Dr. Gary Purdue, a surgeon and co-director of the Parkland Hospital burn unit, testified that Crystal was admitted into the emergency room with third-degree burns over 95% of her body.[2] Purdue stated that he was responsible for evaluating Crystal, and he determined that, because they were so deep, "there was no way she could survive these burns." Purdue determined that Crystal's condition was terminal and that the choices were to perform painful medical procedures or to simply do nothing and make her as comfortable as possible. Purdue spoke with Crystal and determined that she was alert and oriented. He told her that "these burns were going to kill her." He discussed the treatment options, and Crystal chose to have enough morphine to be made comfortable. Purdue completed a "do not resuscitate" order.
Purdue then asked Crystal how she had been burned. Crystal told him that "her husband had thrown gasoline on her and ignited it." Purdue stated that the "extreme depth" of the burns were consistent with gasoline burns and that he could smell gasoline in Crystal's hair. Crystal was transferred from the emergency room to the intensive care burn unit and given intravenous morphine. She died around 8 p.m., six to seven hours after she had been admitted.
Purdue testified that he also treated Magee, who had burns on about 20% of his body, including his hands, arms, and face. Magee required a breathing tube and an operation. He was kept in the hospital for approximately 20 days.
Andrew Klein
Andrew Klein, a Dallas police officer, rode with Crystal in the helicopter to the hospital and talked with her in the hospital trauma room. He described Crystal's appearance: *883 "I saw a very charredthe skin was peeling off this person. She was burned so badly, it looked like she had been put in a deep frying pan. Excuse me, it's a little difficult. I've never seen anybody like that before in my life." Klein asked Crystal what had happened, and she responded that "her husband had poured gasoline on her while she was laying down and lit her on fire." She said she did not know why Magee had done it.
David Cawthorne
David Cawthorne, a captain with the Dallas Fire Department investigative division, was called to the Magees' apartment around 1 p.m. He said that the fire was localized on the bed in the master bedroom. Cawthorne found a gas container with a flammable liquid in the bathroom. The liquid had the odor of gasoline, but was not tested. He did not attempt to take fingerprints from the container.
Dr. Jeffrey Barnard
Dr. Jeffrey Barnard, the medical examiner who performed the autopsy on Crystal's body, testified that there were burns on 95% of the body. He stated that the cause of death was "thermal burns" and that the manner of death was homicide. Barnard testified that gasoline, if ignited, is capable of causing serious bodily injury and death.
DEFENSE WITNESSES
Parchilla Herrod
Parchilla Herrod, property manager of the Ridgegate Apartments, testified that she was working in her office when a woman ran in screaming "there's a lady on fire." Herrod called 9-1-1 and went to the Magees' apartment. She then went to Turner's apartment where she saw Crystal lying in the floor. Herrod knelt down and stayed with Crystal until the paramedics arrived. She testified that Crystal did not say anything during that time because she was in too much pain.
Tamika Magee
Tamika Magee, Magee's seventeen-year-old sister, testified that she and her younger brother Richard were living in the Magees' apartment at the time of the fire. She testified that the Magees were an average couple and that she had never seen any violence between them. Tamika stated that a police officer picked her up from school and took her to the hospital where she spoke with Crystal. Crystal did not say what had happened to her, but said that "she loved us and she didn't want us to be mad at her." Tamika testified that Crystal and Magee had spoken of divorce two weeks before the fire, that Crystal loved Magee, and that Crystal did not want the divorce.
Richard Magee
Richard Magee, Magee's thirteen-year-old brother, was taken to the hospital by police. Richard testified that Crystal told him "that she was sorry what she did to my brother ... It all started as a big joke but it went too far." He did not know what she meant by her statement and did not think she was dying. He stated that Crystal "seemed like she was okay. She seemed like she wasn't hurting as bad."
Ola Ann Graves
Ola Ann Graves, Magee's grandmother, testified that she went to the Magees' apartment approximately two weeks after the fire. In the bathroom she saw a "crock pot" and some curling irons still plugged in. Graves also saw a pistol, a shotgun, and assorted shells lying around. Graves testified that Magee and Crystal "got along" well and that she had never seen any physical confrontations between the two.
Robert C. Magee, Jr.
Magee testified that he and Crystal married in June 1992 and that he was discharged from the Navy in December 1993. He and Crystal lived for a short time in Orange, Texas, where Crystal's family lived. They moved to Dallas in *884 August 1994, and he worked as a porter at the Ridgegate Apartments.
Approximately two weeks before the fire, Magee told Crystal that he thought they should separate and get a divorce. He told her that "it would be best for her to go home until we make up our minds and make that final decision that we needed to be apart." Crystal and her children left for a family wedding in Orange. Magee started a new job on the evening of August 27. He returned to the apartment the following morning and found Crystal, her mother, and her aunt asleep in the house. Magee did not speak with Crystal or her relatives. He spoke with Tamika and Richard, and then he left the apartment to go get breakfast.
Magee testified that he returned to the apartment as Richard was leaving for school. He ate breakfast and went into the bedroom where Crystal was sleeping on the bed. He lay down on a foam mattress. Some time later that morning, Crystal woke him and asked how she was going to get to work. Magee testified that they got into a "heated discussion in regards to her being there," and he told her "that she was going to have to leave my household." Crystal "stormed" out of the bedroom, and Magee went back to sleep.
He awoke when Crystal reentered the bedroom carrying a red gas can. He jumped from the bed and tried to grab the can. Magee testified that this "wasn't the first time Crystal had pulled these pranks. Crystal had problems before. I tried to address them with her family." In the process of struggling over the can, he and Crystal got gasoline on themselves. Crystal left with the gas can, going into the bathroom and closing the door. Magee testified that he heard Crystal screaming. He ran to the bathroom where he saw the mid-portion of her dress on fire. He turned on the shower and pushed her into the shower trying to put out the fire. The shower, however, would not stay on and every time he pulled the lever for the shower "it would pop back out." Crystal ran into the bedroom and jumped on the bed, where Magee tried to put out the fire with the bedspread. They both fell on the floor as he tried to smother the fire. Crystal told him to leave her alone, and she ran out of the bedroom.
Magee went into the living room and noticed that neither Crystal nor her family members were there. He said he was dazed due to the burns on his arms and face. He saw a man enter the smoky apartment, grab the children, and take them outside. Magee testified that he did not know how the fire started, but said that a number of appliances in the bathroom were plugged in. He estimated that only a few seconds passed from the time he and Crystal struggled over the gas can to the time she called to him from the bathroom. Magee denied pouring gasoline on Crystal and setting her on fire. When asked why Crystal would have told so many people that he had set her on fire, Magee stated that he and Crystal were on bad terms and he knew she was mad at him.
Magee testified that Crystal had tried to harm herself in 1992 by taking an "abundance" of pain pills. He had found her in the bathroom and "grabbed [her] by the throat and ... snatched the pills out of her mouth." He suggested to Crystal that she get counseling and described her as "overly emotional."
Magee stated that he had received a psychiatric discharge from the military in 1993 after the death of his father. He was diagnosed with a "personality disorder, not otherwise antisocial, and histrionic features" by the evaluating psychiatrist. Magee conceded that the psychiatrist may have also determined that he was a "continuing risk to do harm to [himself] and to others."
Over objection,[3] Magee testified that he was a "rap" musician with the stage name *885 "Demize." His album was titled "Sex, Drugs and Guns, the American Way." The name of the album label was "Killer Instinct."
Ben Taberia
Ben Taberia, a maintenance man for the apartment complex, testified that on the day before the fire, Magee had run out of gas and he had gone with Magee to the store and purchased the gas can. He testified that Magee and Crystal did not have a violent relationship.
STATE'S REBUTTAL WITNESSES
David Cawthorne
Cawthorne was recalled and testified that, in his opinion based on the fire damage to the apartment, the fire had started on the bed and not in the bathroom. He stated that he had not tested the bed for gasoline and could not determine who had started the fire.
John Sabra
John Sabra, a surgeon at Parkland Hospital, testified that he had treated Magee in the emergency room for his injuries. Magee told Sabra that he and Crystal had had an argument and that "there was a can of gasoline nearby which somehow exploded."
LEGAL SUFFICIENCY
Magee's first issue asserts that the evidence is legally insufficient to sustain his conviction. Evidence will sustain a conviction if, viewing it in the light most favorable to the verdict, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Lane v. State, 933 S.W.2d 504, 507 (Tex.Crim.App.1996) (following standard of Jackson v. Virginia, 443 U.S. 307, 318-19, 99 S. Ct. 2781, 2788-89, 61 L. Ed. 2d 560 (1979)).
The court's charge authorized the jury to convict Magee of murder if he (1) "knowingly and intentionally" set her on fire or (2) if, intending to cause serious bodily injury, he committed an act clearly dangerous to human life, i.e., set her on fire, thereby causing her death. Magee argues that the State's case rests on Crystal's out-of-court statements which are inherently unreliable and on which he was unable to cross-examine.[4] He further argues that the State did not adequately rebut his defensive testimony regarding the fire.
In a "no-evidence" review, we look at all the evidence, direct and circumstantial, in the light most favorable to the jury's verdict. Johnson v. State, 967 S.W.2d 410, 411 (Tex.Crim.App.1998). Crystal told Turner, Minchew, Purdue, and Klein that her husband had thrown the gasoline on her and ignited the fire. She told Wallace that Magee had poured gasoline on her and "tried to kill her." The physical evidence, from the testimony of the firemen, paramedics, and doctors, is consistent with the verdict.
Viewing the evidence in the light most favorable to the verdict, we find that any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Id. We overrule issue one.
FACTUAL SUFFICIENCY
Magee's second issue asserts the evidence is factually insufficient to support the verdict. In conducting a factual sufficiency review, we consider the evidence without the prism of "in the light most favorable to the prosecution" and set aside the verdict only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Clewis v. *886 State, 922 S.W.2d 126, 129 (Tex.Crim.App. 1996). In performing a factual sufficiency review, we are required to give deference to the jury verdict and to examine all of the evidence impartially. Cain v. State, 958 S.W.2d 404, 410 (Tex.Crim.App.1997).
Magee argues that the evidence is factually insufficient because Crystal's out-of-court statements were unreliable and not subject to cross-examination,[5] he testified that he did not cause her death, Crystal had previously attempted suicide, and she was upset over the impending divorce.
Magee testified that after he and Crystal struggled with the gas can, she went into the bathroom. Within seconds she began screaming, and he ran to the bathroom to find her on fire. He denied pouring gasoline on her and igniting the fire.
Numerous witnesses testified that Crystal stated that Magee had poured gasoline on her and set her on fire. The medical testimony confirmed that Crystal had suffered third-degree burns over 95% of her body and that these injuries were consistent with gasoline burns. The fire inspector testified that, based on the fire damage to the apartment, the fire had started on the bed and not in the bathroom. Dr. Sabra testified that Magee told him the gas can had "exploded"which conflicts both with the State's version of events and with Magee's own testimony that the two struggled over the can.
The weight to be given to contradictory testimony is within the "sole province of the jury." Id. at 408. After reviewing the evidence, we do not find that the verdict is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Clewis, 922 S.W.2d at 129. We overrule issue two.
HEARSAY
Magee's third issue complains that the court erred in admitting Crystal's statement to Dr. Purdue in the emergency room. The court conducted a hearing outside the jury's presence. Purdue testified that he determined Crystal was going to die from her injuries. After he determined that she was "alert and oriented," Purdue told Crystal that her injuries "were going to kill her." He discussed treatment options with her and then asked how she had been burned. Crystal told him that "her husband had thrown gasoline on her and ignited it."
Magee objected that the statement did not qualify as an excited utterance under Rule of Evidence 803(2).[6] TEX.R. EVID. 803(2). The court overruled the objection and noted that Crystal's statement was also admissible as a dying declaration under Rule 804(b)(2). Id. 804(b)(2). Magee objected to similar statements in the written medical records which were admitted as exhibits. Purdue then testified to the jury.
A ruling on admissibility of an out-of-court statement under a hearsay exception is within the trial court's discretion, subject to review only for abuse. Coffin v. State, 885 S.W.2d 140, 149 (Tex.Crim.App. 1994). Magee concedes that the trial court has discretion in determining the admissibility of an out-of-court statement under the "excited utterance" hearsay exception. See Lawton v. State, 913 S.W.2d 542, 553 (Tex.Crim.App.1995). Magee argues that Crystal's statement was not an excited utterance because she made the statement around 2 p.m. at the hospital, and thus she was not under the stress of the event.
We uphold the trial court's decision "if it was correct under any theory of law applicable to the case, even if the trial court gave an incorrect reason for its decision." *887 Jones v. State, 982 S.W.2d 386, 389 (Tex. Crim.App.1998). Here, the court considered Crystal's statement admissible as both an excited utterance and a dying declaration. A "dying declaration" is "a statement made by declarant while believing that his death was imminent, concerning the cause or circumstances of what he believed to be his impending death." TEX.R. EVID. 804(b)(2). Purdue testified that he told Crystal she was going to die and gave her options for treatment. She chose to be made "comfortable." Purdue then asked how she had been burned, and Crystal answered.
We do not find that the court abused its discretion in determining Crystal's statement was admissible as a dying declaration. See id; Coffin, 885 S.W.2d at 149. We overrule issue three.
"RAP" MUSICIAN EVIDENCE
In his fourth issue, Magee complains that the court erred in admitting testimony that he was a "rap" musician. During his direct examination, Magee testified about his job history. He had been in the military; had worked for Braum's, UPS, and Kraft; and had been working full-time as a porter for the Ridgegate Apartments. When the State asked about his "musical career," Magee asked for a bench conference. Outside the jury's presence, Magee stated that he was a rap musician with the stage name "Demize"; his record label was "Killer Instinct"; he was on an album titled "Sex, Drugs and Guns, The American Way"; and that detractors may refer to the music as "gangsta rap."
Magee objected that the line of questioning was irrelevant and prejudicial. The court stated: "Well, I do believe it's relevant, and I do believe that, you know, in a sense, the door has been opened. We've had a complete history of this man's work history. But I want to take a break at this time...." The court took a break and returned to the bench:
The Court has taken a break. I have reviewed the testimony that the State wishes to introduce and I have weighed the probative value versus the prejudicial value. At this time I'll admit the testimony. I believe not to do so, having in front of this jury laid a complete military and work history, as well as family history, it would leave a false impression in front of the jury to be able to fully develop the personal traits of the Defendant and then leave this part of his personality out, so the Court will admit it.
Magee testified to the jury about his musical career.
Evidence is relevant if it has "any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." TEX.R. EVID. 401. Rule 403 provides in part: "Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, or needless presentation of cumulative evidence." Id. 403; Montgomery v. State, 810 S.W.2d 372, 389 (Tex.Crim.App.1991) (on rehearing). Rule 403 favors admissibility of relevant evidence, and the presumption is that relevant evidence will be more probative than prejudicial. Montgomery, 810 S.W.2d at 389. The court's determination under Rule 403 is reviewed by the abuse-of-discretion standard. Id. We may reverse only when the trial court's decision was outside the zone of reasonable disagreement. Green v. State, 934 S.W.2d 92, 104 (Tex.Crim.App.1996).
In reviewing the court's balancing-test determination, we reverse the trial court's judgment "rarely and only after a clear abuse of discretion." Mozon v. State, 991 S.W.2d 841, 846-47 (Tex.Crim.App. 1999) (citing Montgomery, 810 S.W.2d at 389). We cannot simply conclude, however, that "the trial judge did in fact conduct *888 the required balancing and did not rule arbitrarily or capriciously." Id. Rather, we measure the trial court's ruling against the relevant criteria by which a Rule 403 decision is made. Id. We must look at the proponent's need for the evidence in addition to determining the relevance of the evidence. Id. (citing Montgomery, 810 S.W.2d at 392-93). The relevant criteria in determining whether the prejudicial effect of relevant evidence outweighs its probative value include:
(1) how compellingly the evidence serves to make a fact of consequence more or less probable;
(2) the potential the other evidence has to impress the jury "in some irrational but nevertheless indelible way";
(3) the time the proponent will need to develop the evidence, during which the jury will be distracted from consideration of the indicted offense;
(4) the force of the proponent's need for this evidence to prove a fact of consequence, i.e., does the proponent have other probative evidence available to him to help establish this fact, and is this fact related to an issue in dispute.
See id. at 847 (citing Santellan v. State, 939 S.W.2d 155, 169 (Tex.Crim.App.1997)).[7]
Magee testified that he had been in the military and had worked several different jobs in Dallas. The State sought to question him on another aspect of his work history. The court determined this evidence to be relevant. The court then conducted the necessary balancing test and determined that the probative value of the evidence was not substantially outweighed by the danger of unfair prejudice. See Montgomery, 810 S.W.2d at 389.
We believe the court correctly allowed testimony about Magee's work as a "rap" musician and that some people refer to such music as "gangsta rap." Magee had testified as to part of his work history, and the State was entitled to complete that history. We believe, however, that the court erred in allowing testimony about the "labels" such as "Demize," "Killer Instinct," and "Sex, Drugs and Guns, The American Way." The inflammatory nature of these "labels" does not compellingly serve to make a fact of consequence more or less probable, and it had the potential to impress the jury in an "irrational" way. See Mozon, 991 S.W.2d at 847. Although the State spent a very brief time presenting this evidence, it had little need for the evidence to prove a fact of consequence. Id. We find that the unfair prejudicial effect of testimony about those "labels" substantially outweighed any probative value that such testimony might have had in this murder case. TEX.R. EVID. 403. Thus, we find the court erred in admitting the evidence. Montgomery, 810 S.W.2d at 389.
Having found non-constitutional error, we must disregard it unless it affected a substantial right. TEX.R.APP. P. 44.2(b); Johnson v. State, 967 S.W.2d 410, 416 (Tex.Crim.App.1998) (erroneous admission of hearsay statements reviewed as non-constitutional error). In applying the test for "harmless error" under Rule 44.2(b), our primary question is what effect the error had, or reasonably may have had, upon the jury's decision. Fowler v. State, 958 S.W.2d 853, 865 (Tex.App. Waco 1997), aff'd, 991 S.W.2d 258 (Tex. Crim.App. 1999). We must view the error, not in isolation, but in relation to the entire proceeding. Id. We review the entire record to determine whether the error had more than a slight influence on the verdict. Id. at 866. If we find that it did, we must conclude that the error affected the defendant's rights in such a way as to require a new trial. Id. If we have grave doubts about its effect on the outcome, we should find that the error was such as to require a new trial. Otherwise, we should disregard the error.
*889 Some factors to consider when assessing harm in a Rule 403 error are: whether other evidence of the accused's guilt is substantial or overwhelming; whether and to what extent the State placed emphasis on the error; and whether other extraneous-conduct evidence reflecting poorly on the accused's character was properly admitted or admitted without objection. Horton v. State, 986 S.W.2d 297, 304 (Tex.App.Waco 1999, no pet.).
After a thorough review of the evidence, we cannot say that the outcome of the trial would have been different without the "label" evidence. Fowler, 958 S.W.2d at 866. As summarized under the sufficiency points, the evidence clearly establishes Magee's guilt. Many witnesses testified that Crystal told them Magee had doused her with gasoline and ignited the fire. The physical evidence corroborated this testimony. The State briefly questioned Magee, eliciting testimony of the "labels," but did not later emphasize that testimony in closing argument. We do not find that the limited testimony as to the violent nature of the "labels" had more than a slight influence on the verdict. See id. We overrule issue four.
BATSON CHALLENGE
In his fifth issue, Magee alleges the State impermissibly struck a juror based on race in violation of Batson v. Kentucky, 476 U.S. 79, 106 S. Ct. 1712, 90 L. Ed. 2d 69 (1986). After the parties had made their peremptory strikes, Magee objected that the State had struck Juror No. 7, E.L. Christian, a black male. During a discussion of whether Magee had made a prima facie showing of discrimination, the court noted that Christian had not properly completed his juror information card regarding where he had been born, his employment, or his length of residence. The State responded that it had struck Christian in part because of the incomplete questionnaire. According to the State, Christian was inattentive and "too weak [and] quiet spoken" to be a good State's juror. The court denied the Batson motion.
Because the State offered a racially-neutral explanation and the court ruled on the ultimate issue of intentional discrimination, we need not address whether Magee met his initial burden to make a prima facie showing of discrimination. Malone v. State, 919 S.W.2d 410, 412 (Tex.Crim.App. 1996). The burden shifted to the State to come forward with a racially-neutral explanation for challenging Christian. Chambers v. State, 866 S.W.2d 9, 23 (Tex.Crim. App.1993); see also TEX.CODE CRIM. PROC. ANN. art. 35.261(a) (Vernon 1989). Once the State offered a racially-neutral explanation for the strike, the burden shifted back to Magee to show that the explanation was a sham or pretext. Pondexter v. State, 942 S.W.2d 577, 581 (Tex.Crim.App. 1996). The ultimate burden was on Magee to persuade the court that the allegations of prejudice were true. Earhart v. State, 823 S.W.2d 607, 624 (Tex.Crim.App.1991).
We review the record of the Batson hearing and the voir dire examination in the light most favorable to the trial court's ruling. Adanandus v. State, 866 S.W.2d 210, 223 (Tex.Crim.App.1993). We will not disturb a trial court's ruling on a Batson issue unless it is "clearly erroneous." Id. Although Magee asserted that the strike was motivated by race, the State gave two racially-neutral reasons for its strike: an incomplete juror information card and a "meek" and "quiet spoken" demeanor. Magee did not respond to the State's assertions, and thus did not show that those assertions were a sham or pretext. Pondexter, 942 S.W.2d at 581.[8] We do not find that Magee met the ultimate burden of proving that the State's strike *890 was racially motivated. See Earhart, 823 S.W.2d at 624. We overrule issue five.
DEADLY WEAPON FINDING
In his final issue, Magee argues that the evidence is insufficient to support the jury's deadly weapon finding. The indictment alleged that Magee "used and exhibited a deadly weapon, namely: gasoline and a flammable liquid the exact nature of which is unknown to the grand jurors, during the commission of this offense, a deadly weapon." During the punishment phase, the jury answered a special issue finding that Magee "used a deadly weapon, to wit: gasoline" in the commission of the offense.
A "deadly weapon" means:
(A) a firearm or anything manifestly designed, made, or adapted for the purpose of inflicting death or serious bodily injury; or
(B) anything that in the manner of its use or intended use is capable of causing death or serious bodily injury.
TEX. PEN.CODE ANN. § 1.07(a)(17) (Vernon 1994). Magee argues that gasoline is not a deadly weapon per se and that gasoline is not the type of deadly weapon the Legislature contemplated.
The Court of Criminal Appeals, interpreting what is now section 1.07(a)(17) of the Penal Code, stated that "[A]nything... which is actually used to cause the death of a human being is a deadly weapon.... This is necessarily so because a thing which actually causes death is, by definition, `capable of causing death.'" Tyra v. State, 897 S.W.2d 796, 798 (Tex. Crim.App.1995) (holding a motor vehicle can be a deadly weapon by the manner of its use).
Gasoline may be a deadly weapon in the manner of its use. See Rogers v. State, 908 S.W.2d 239, 242 (Tex.App.El Paso 1995, no pet.); Rice v. State, 771 S.W.2d 599, 600 (Tex.App.Houston [14th Dist.] 1989, no pet.). The evidence shows that Magee poured gasoline on Crystal and ignited her. The medical testimony established that her death was caused by the burns she suffered at Magee's hands.
We find the evidence sufficient to support the jury's finding that Magee used a deadly weapon in the commission of the offense. See Hill v. State, 913 S.W.2d 581, 583 (Tex.Crim.App.1996). We overrule issue six.
CONCLUSION
Having overruled all the issues, we affirm the judgment.
NOTES
[1] The Magees had one daughter, Jasmine. Crystal had a son, Chris, from a prior relationship. Magee testified that he considered both children to be his. Magee's younger sister and brother were also living in the apartment.
[2] Purdue later testified more specifically about the severity of Crystal's burnsdetails so gruesome that we will not set them out in the opinion.
[3] This testimony is considered in Issue 4. For the purposes of sufficiency points, we consider the evidence. Johnson v. State, 967 S.W.2d 410, 412 (Tex.Crim.App.1998).
[4] The court determined that Crystal's declarations were admissible under a variety of exceptions to the hearsay rule. See TEX.R. EVID. 803, 804. Magee does not complain that Crystal's statements were inadmissible under the Rules of Evidence.
[5] As noted in footnote 4 under Issue One, the trial court determined that Crystal's declarations were admissible under a variety of exceptions to the hearsay rule. See TEX.R. EVID. 803, 804.
[6] At the time of trial, the former Rules of Criminal Evidence were in effect.
[7] Because Rule 403 applies to all relevant evidence and not just to evidence of extraneous offenses, we have adopted more general statements of the Santellan factors.
[8] Ways to rebut the State's explanations include establishing disparate treatment of similar jurors and showing that the reasons do not relate to the facts of the case. Cantu v. State, 842 S.W.2d 667, 688 (Tex.Crim.App. 1992); Williams v. State, 804 S.W.2d 95, 105-06 (Tex.Crim.App.1991). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454885/ | 480 S.W.2d 747 (1972)
Hubert HURT, Appellant,
v.
The STATE of Texas, Appellee.
No. 44451.
Court of Criminal Appeals of Texas.
May 31, 1972.
Paul Lyle, Plainview (appointed by the Court), for appellant.
Tom Hamilton, Dist. Atty., Plainview, Jim D. Vollers, State's Atty., and Robert A. Huttash, Asst. State's Atty., Austin, for the State.
*748 OPINION
ROBERTS, Judge.
This is an appeal from a conviction for assault with intent to rape. Trial was before a jury, which assessed punishment at confinement for 45 years.
Appellant raises five grounds of error. In his first ground of error, he contends that the trial court improperly permitted the State to ask a defense witness, Dr. Bublis, a psychiatrist, several "have you heard" questions at the punishment stage of the trial. The record reflects that the State asked the witness if she had heard of thirteen separate acts of misconduct. The witness answered that appellant had told her of certain of the acts, but in answer to most of the questions she answered, "No."
Prior to this series of questions, Dr. Bublis had testified, in summary, that she had examined appellant and that, based upon her examination, she was of the opinion that he was suffering from alcoholism and the effects of drugs. In response to a hypothetical question based on the evidence previously adduced in the case, she testified that, in her opinion, appellant did not know the nature and quality of his acts at the time of the commission of the offense. At no time was she asked, nor did she state her opinion in regard to appellant's reputation.
Prior to the "have you heard" questions, the trial court conducted an examination of the witness out of the presence of the jury, at which the State asked the "have you heard" questions. The court held that the questions were permissible as a test of the witness' opinion. The court ruled that the State could ask the witness if she had heard of the offenses, and if she had not, whether she would have changed her opinion had she known of them. Appellant was granted a continuing objection. Thereafter, the jury returned and the State proceeded to ask the questions. The witness did not testify that she had formed her opinion based upon her knowledge of appellant's prior criminal record. The witness was not asked whether she would have changed her opinion if she had known or heard of the acts. She was merely asked if she had heard of certain acts of misconduct.
We feel that the questions, as asked, were improper. "Have you heard" questions are proper only when propounded to a witness who has testified as to the reputation of the person in question. The questions are permitted only for the purpose of testing the witness' knowledge of the person's reputation. Also, the questions may not be phrased so as to imply that the offense has been committed. A detailed discussion of the rationale of "have you heard" questions appears in the recent case of Brown v. State, 477 S.W.2d 617 (Tex.Cr.App., delivered February 16, 1972). Any further discussion in this opinion would be superfluous.
We now turn to the question of whether the error in permitting this line of questions was of such magnitude as to compel a reversal of this case. After a careful examination of the record, we are of the opinion that the error was harmful to appellant.
The record reflects that defendant testified in his own behalf. On voir dire examination, out of the presence of the jury, appellant testified that he had been previously convicted of crimes on four occasions, and that his probation which had been granted in one prior case had been revoked. The trial court ruled that the State could introduce evidence of three convictions, but that a 1953 conviction and subsequent probation revocation were too remote to be admissible. Thereafter, appellant testified in the presence of the jury that he had been convicted on three occasions, twice in 1961 and once in 1969.
In our opinion, the net effect of the questions propounded to Dr. Bublis was to convey to the jury the impression that appellant had a long criminal record. The *749 tone of the questioning was such that the "have you heard" questions were taken as established fact by the questioner. For example, immediately following the questions, the following transpired between counsel for the State and the witness:
"Q Now, Doctor, I will ask you if in your experience as a psychiatrist, you have had occasion to observe people who consistently run afoul of the laws and the mores and the standards of society?
"A Yes.
"Q I'll ask you also, Doctor, if this record which I have just asked you about here is consistent with a person who has difficulty reforming and who has difficulty complying with the mores and the standards and the laws of society?
"A Certainly sounds consistent with that. Might I add that if he were drinking, this would fit in even more so with the history of alcoholism as we know it.
"Q But irrespective of whether he was drinking or whether he was taking drugs, or whatever it might be, it does show a person who has had difficulty reforming and difficulty of complying with the laws and standards of our society?
"A Yes." (Emphasis supplied)
This line of questions certainly infers that the questions were intended to be considered as established fact by the witness and likewise, by the jury.
Three of the "have you heard" questions were based upon the convictions which appellant had testified that he had received in the past. Two of the questions were based upon 1953 and 1954 conviction and revocation of probation, respectively, which appellant acknowledged on voir dire, but which the trial court had excluded as being too remote. "The law places no limitation by reason of remoteness on prior convictions offered to show the prior criminal record of the defendant." Ingram v. State, 426 S.W.2d 877, 878 (Tex.Cr.App. 1968); accord, Rose v. State, 470 S.W.2d 198 (Tex.Cr.App.1971); see Art. 37.07, Sec. 2(b), Vernon's Ann.C.C.P. Therefore, had the state chosen to offer evidence of the 1953 and 1954 conviction and revocation at the punishment stage of the trial, it would have been admissible. Thus, the net effect of the questions was to place eight additional acts of misconduct before the jury.
In this case it is difficult to state with certainty that the error was either harmful or harmless, nevertheless, considering the number of acts and the general tone of the questioning, we feel that the probability of undue prejudice being formed in the minds of the jury was great enough to warrant a reversal of this conviction.
We do note that appellant, on re-direct examination, asked the following question:
"Q Dr. Bublis, now, after having in your storehouse of information these questions that the District Attorney asked you about what you had heard about the defendant, Hubert Hurt, does this change the opinion that you gave earlier when you told this jury that you had an opinion as to his state of mind at the time of the offense in question, and that your opinion was that he did not know, based upon reasonable medical probability that he did not know the nature and quality of his act, and that he did not know the difference between right and wrong?
"A This information does not change my opinion about his mental status at the time of the act."
This Court stated in Patterson v. State, 458 S.W.2d 658, 660 (Tex.Cr.App.1970):
"There would appear to be a conflict in cases as to whether an accused may complain of admission of testimony *750 where his own counsel adduces the same testimony upon cross-examination. Cf. Ervin v. State, Tex.Cr.App., 367 S.W.2d 680, with Willoughby v. State, 87 Tex. Cr.R. 40, 219 S.W. 468, where this Court said, `We know of no decision of this Court nor rule of criminal law which compels an accused when evidence has been admitted over his objection to refrain from the right of cross-examination as to such evidence, or else be penalized by the loss of his objection and bills of exceptions.'
"The Willoughby case seems to represent the correct rule except in cases where the cross-examination extends so far beyond the scope of the direct examination so that it can be said the cross examiner has legitimately made the witness his own witness."
We do not feel that the above question met this test. Therefore, the objection was not waived.
In light of our disposition of this ground, we need not consider appellant's remaining grounds of error.
The judgment is reversed and the cause is remanded.
MORRISON, Judge (concurring).
I agree with the reversal of this conviction and shall state my reasons.
I believe the train got off the track when the State took the position that the expert witness, Dr. Bublis became a reputation or character witness when she took the stand in mitigation of punishment due to appellant's mental problems. She was not qualified by appellant as either a character or reputation witness. See Brown v. State, supra, and Jones v. State, Tex.Cr. App., 479 S.W.2d 307 (1972). Therefore, she should not have been subjected to "have you heard" type questions which are reserved for character and reputation witnesses under Article 37.07, Sec. 3(a), V.A. C.C.P. This is the converse of the situation presented in Allaben v. State, Tex.Cr. App., 418 S.W.2d 517. I believe the learned trial judge failed to pull the train back on the track by misinterpreting the reason Dr. Bublis was presented as a witness for the appellant.
I concur.
DOUGLAS, Judge (dissenting).
In Tulia, on December 1, 1969, about 11:00 p. m., Jay Washington, who resided within twenty-five or thirty feet from the garage apartment of Tiny Lee Deal, heard a noise like someone was beating on a door, a girl scream and then a gunshot. He called the police.
John Elliff and Jerry Shannon, both of the Tulia Police Department, arrived. While underneath the apartment, they heard bumps and thuds and moans. When they got to the door, Officer Elliff could hear moans and something that sounded to him like somebody "hitting a wet sack on a table." He then shined a light into the darkened apartment and saw Hurt, the appellant, with a blackjack in his hand, on his knees and bending over Miss Deal. Hurt saw the officers and started toward them. On the way he tried to get a pistol out of a front pocket, but the officers subdued him and took a blackjack and a .38 caliber H & R revolver from him. The pistol contained three live and one spent shell.
When the officers entered, Miss Deal was on her back, her panties were pulled down around her ankles. Hurt was bending over her with his trousers unbuttoned or unzipped. Miss Deal stated, "He's going to kill and rape me." According to Officer Shannon the whole apartment was "red with blood." There was blood on the ceiling.
Miss Deal testified that she was twenty-four years of age. On the night in question the telephone rang. She answered, but all she could hear was breathing and the caller would not answer. Later that *751 evening, she heard someone coming up the steps apparently two or three at a time. She attempted to call her landlady and by the time she had dialed two or three numbers Hurt had broken through the locked screen and locked door both. He asked where his wife and baby were and told Miss Deal that she was going with him to find them. She refused. He tried to make her leave, he started fighting and she screamed. He told her to shut up or he would shoot her. She then heard a gun go off and felt a hot burning on the back of her head. The next thing that she remembered she was on the floor and he was beating her. She felt blows on the back of her head and on her hands. She thought he was beating her with a "hoe file."
After part of the beating, he turned her over on her back, pulled up her dress and her panties down to her ankles. He got up, turned off the light, got on top and started choking her until she was almost unconscious. The officers arrived and she remembered being placed on a stretcher and taken to the hospital where she remained for some five days.
She had injuries all over her head and skin graft was required. Two of her fingers were broken and a knuckle of a finger was knocked out of place.
Dr. James J. Scarborough testified that he treated Miss Deal on the night in question. His examination revealed scalp wounds which covered the entire back side of her head. "The scalp was actually cut into ribbons, just, I don't know how many different cuts were there. Many, many, different cuts so that the scalp was kind of like a puzzle. It actually required a lot of time to piece the right pieces together to where it covered and fit properly." She had four fractures on her right hand.
Hurt testified that he was thirty-three years of age and that he and his wife went to the church that Miss Deal attended. His testimony was that he had been drinking on the night in question and had gone to the apartment of Miss Deal in an attempt to locate his wife and he had no intention to rape Miss Deal. He further testified that after she started screaming, he did not know what happened until the officers slapped him and he then came back to his senses. When he went into the apartment Miss Deal was talking over the telephone and "I didn't know whether she was calling the law." At this point he was interrupted by his attorney.
Also on direct examination he testified that he was convicted for passing a forged instrument in 1955[1] in Littlefield on a plea of guilty. He also testified that he had been convicted for forgery in Brownfield.
On cross-examination he admitted that in 1961 he had been convicted in Quanah for passing a worthless check and had paid a fine and that in July of 1961 he was found guilty in Littlefield and assessed two years for forgery. He also admitted that in 1969 he had been convicted for passing a forged instrument in Lamb County and was assessed a term of five years.[2]
He testified that he did not remember shooting the gun and wondered how the blood got on his trousers. He also could not recall other blackout spells, but he may have had them and then testified that he had not had other blackout spells.
On redirect he testified that along with the whiskey and beer that he had drunk he had taken Darvon pills the day in question.
At the penalty stage of the trial, several witnesses testified that appellant's reputation was bad.
*752 Mrs. Mary Bublis, called by the appellant, testified that she was a psychiatrist and that she had examined the appellant twice after the date of the offense and that she had a very comprehensive interview with him. She concluded that he was not mentally ill. She was asked a hypothetical question based upon the answers Hurt had given during the guilt stage of the trial. She answered that, based on the facts that Hurt's counsel had given her (in the question) "plus the history that I know of Mr. Hurt of his earlier experiences with alcohol and drugs, I would say he was out of contact with reality at that time." She testified that she thought he was in a blind rage and was psychotic at the time and had an organic type of amnesia.
She also testified that the mental status exam did not produce the kind of sadistic picture of a person who ordinarily would do such acts without the factors of alcohol and the drug.
On cross-examination, Dr. Bublis was asked, and she answered as follows:
"Q. (District Attorney) Doctor, you mentioned this man's former experience with alcohol and drugs. What is his former experience?
"A. Well, from the history that I obtained from Mr. Hurt, I gathered that he has a long year's of episodic excessive use of alcohol, and at times convinced with various synthetic analgesics in which Darvon is one of them."
With this background, the controlling issue in the case will be discussed. Was reversible error committed when the court permitted the district attorney to ask Dr. Bublis if she had heard about other convictions and charges against the appellant?
Outside the presence of the jury Dr. Bublis testified that Hurt had told her about other blackouts. (Hurt's testimony at the guilt stage of the trial was that he had had no other blackouts.) He also, according to her testimony, was pretty hard on women and hit them when he had been drinking. The district attorney then stated the defendant had put his character in issue and that the State should be entitled to question the doctor as to whether or not she heard or whether or not she had revealed to her at the time the examination was made, some or many of the previous offenses that had been committed by Hurt.
Hurt's counsel countered that she was not a character witness. The questions were permitted to test the basis of the opinion of the witness on what she had heard and to see if after hearing of these offenses she would have changed her opinion.
Her examination in the presence of the jury showed that she had not heard that he had been convicted of the offense of theft and forgery of United States Treasury checks in 1953; she had not heard that he was charged with the offense of burglary in Kerrville in 1954; that he had been picked up for a parole violation for passing a forged United States Treasury check and assessed a term of two years. She had heard he served time in the penitentiary, but had not heard of the worthless check case in Quanah. She had not heard of a charge of forgery in Brownfield nor a conviction for passing a forged instrument in Lamb County. She had not heard that he was indicted in 1959 in Swisher County for removing mortgaged property nor for the offense in 1957 for stealing a credit card.
When asked if she had heard that Hurt had been charged of aggravated assault upon Joy Hurt, she replied that he shared with her some problems involving his wife. He told her about being charged with driving while intoxicated on October 19, 1969. When asked about being charged in October, 1969, for aggravated assault upon Paula Fay Halsey, she answered that he told her about some of his previous experiences but she was not sure she knew the precise names and dates. Dr. Bublis did not believe that he told her about an assault *753 to murder charge upon Roda Whitworth on October 13, 1969, less than two months before the date of the present offense.
Hurt's attorney then asked:
"Q. Dr. Bublis, now, after having in your storehouse of information these questions that the District Attorney asked you about what you had heard about the defendant, Hubert Hurt, does this change the opinion that you gave earlier when you told this jury that you had an opinion as to his state of mind at the time of the offense in question, and that your opinion was that he did not know, based upon reasonable medical probability that he did not know the nature and quality of his act, and that he did not know the difference between right and wrong?"
and Dr. Bublis answered:
"A. This information does not change my opinion about his mental status at the time of the act."
The "have you heard" questions testing a witness's basis for testifying that an accused has a good reputation should not be confused with the question at hand.
Here the expert witness, Dr. Bublis, based her answer that appellant was psychotic at the time of the assault upon Miss Deal. The State probably should not have asked the "have you heard" questions. It would have been proper and perhaps more harmful to the appellant to have asked the doctor if Hurt had told her about being charged with assault to murder a certain woman or if he had told her about being charged with having committed aggravated assault upon his wife and another woman or if he had told her about being charged with the other offenses.
At least three of the prior convictions were shown at the guilt stage of the trial. Evidence of the other prior felony convictions as far back as 1953 could have been admitted before the jury because a continued course of misconduct and convictions had been shown up until the time of the trial. These felonies, as well as the misdemeanor convictions, could have been proved directly at the penalty stage of the trial under Article 37.07, V.A.C.C.P. They were not challenged and defense counsel did not contend or offer to show that the convictions did not occur.
The matters gone into that could not have been proved directly at the guilt stage of the trial were the charges for certain offenses. There were, among other things, assaults upon other women and driving while intoxicated. These made up a part of the history of the appellant and were subjects of inquiry to determine the basis of the opinion of the doctor that the appellant was psychotic at the time of the commission of the present offense.
Opinion testimony of an expert witness as to the sanity or insanity of a person when based upon the personal observations of the witness rather than solely upon evidence adduced at the trial or upon a hypothetical state of facts is received upon the same principle applicable to non-experts. McCormick & Ray, Texas Law of Evidence, Section 1421, note 31, page 252 (1956). The Texas rule on the scope of cross-examination is limited only by relevancy to the issues and is not applied with the same strictness as in direct examination. Evansich v. Gulf, C. & S. F. R. Co., 61 Tex. 24 (1884); State v. Reeh, 434 S.W.2d 416 (Tex.Civ.App. 1968, writ ref'd n. r. e.); City of Dallas v. Riddle, 325 S.W.2d 955 (Tex.Civ.App. 1959, writ ref'd n. r. e.). See generally McCormick & Ray, supra, Section 600, pages 467-468.
In McCormick & Ray, Section 1396, page 224, it is written:
"... If it has been shown that the witness had an opportunity to observe and did observe, and if his testimony in opinion-form is of such value as to be admissible, the facts upon which his *754 opinion is based are matters affecting its weight but seemingly should have nothing to do with admissibility. The grounds of his opinion may be tested by the adverse party on cross-examination."
It should be remembered that the testimony of Dr. Bublis was at the penalty stage of the trial, after the jury had already heard of much of his prior criminal record and after having determined his guilt. The brutal facts in the assault in this case warranted the jury in bringing in a verdict of forty-five years.
If there were error, it is harmless.
I would affirm this conviction.
NOTES
[1] He was asked if he was convicted in 1965, and he answered 1955. He later testified that this was some six years before the trial.
[2] The court did not permit the prosecutor to ask about a 1953 conviction for theft from the mail and forgery where he was placed on probation in El Reno, Oklahoma, and later that probation was revoked in December of 1954. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453643/ | 256 P.3d 1099 (2011)
243 Or. App. 389
STATE
v.
BROWN.
A144408
Court of Appeals of Oregon.
June 8, 2011.
Affirmed without opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453668/ | 259 P.3d 850 (2011)
2011 OK CIV APP 85
The HOWARD FAMILY CHARITABLE FOUNDATION, INC.; Howard Investments, LLC; Robert E. Howard, II, an Individual; Marilyn Patricia Kelly, an Individual; Scott and Carlita Beauvais, Husband and Wife; Greg and Jill Castro, Husband and Wife; Jimmie M. Richardson, an Individual; Dennis Davis, an Individual; Don Koebelin, an Individual; Chris Fleming, an Individual; David Shear, an Individual; Brian Lorentz, an Individual; Gead Investments, LLC; David Hudiburg and Steve Hudiburg, as Trustees of the Paul Hudiburg 1997 Dynasty Trust; Steve Hudiburg, an Individual; Harry Patterson, an Individual; Bobby Masterson, an Individual; Hal Steinke, an Individual; Metropolitan Auto Dealers Association, a Trade Group; Peter and Crystal Hodges, Husband and Wife; Aaron London, an Individual; and Ken Wilkins, an Individual, Plaintiffs/Appellants,
v.
Mark S. TRIMBLE, Individually; Phidippides Capital Management, LLC; MF Global, Inc.; and Archway Technology Partners, L.L.C., Defendants/Appellees.
No. 107,796. Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 1.
Court of Civil Appeals of Oklahoma, Division No. 1.
January 28, 2011.
Rehearing Denied March 4, 2011.
Certiorari Denied June 27, 2011.
*853 Joseph H. Bocock, Spencer F. Smith, Kristin M. Simpsen, McAfee & Taft, Oklahoma City, Oklahoma, and Kurtis J. Ward, Law Offices of Kurtis J. Ward, Oklahoma City, Oklahoma, for Plaintiffs/Appellants.
Jon Epstein, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Oklahoma City, Oklahoma, and Heather L. Cupp, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Tulsa, Oklahoma, and Anthony L. Paccione, Matthew D. Parrott, Katten, Muchin, Rosenman, LLP, New York, New York, for Defendant/Appellee, MF Global, Inc.
Matthew C. Kane, Keith J. Klein, Grant M. Lucky, Ryan, Whaley, Coldiron, Shandy, P.C., Oklahoma City, Oklahoma, for Defendant/Appellee, Archway Technology Partners, LLC.
WM. C. HETHERINGTON, JR., Presiding Judge.
¶ 1 Plaintiffs appeal dismissal of their causes of action in which they claim Archway Technology Partners, L.L.C. (Archway) and MF Global, Inc. (MFG) are liable for damages pursuant to 71 O.S.Supp.2004 § 1-509(G) as aiders and abetters of a fraudulent hedge fund investment scheme perpetrated by Mark S. Trimble (Trimble) and Phidippides Capital Management, L.L.C. (PCM). The trial court concluded defects in Plaintiffs' Second Amended Petition could not be remedied by further pleading and sustained MFG's Motion to Dismiss for Lack of Personal Jurisdiction and Failure to State a Claim Upon Which Relief Can be Granted and Archway's Motion to Dismiss premised upon preemption of jurisdiction by the federal commodities scheme, a failure to state a claim as a matter of law, failure to plead fraud with requisite specificity, improper venue based upon a forum selection clause, *854 and the failure of either specific, or general personal jurisdiction. After the dismissal, Plaintiffs' Motion for New Trial was denied. The trial court made the express findings necessary pursuant to 12 O.S.2001 § 994(A) to allow appellate consideration of this judgment.
¶ 2 We conclude Plaintiffs' causes of action against MFG based upon aiding and abetting fraudulent commodities transactions are pre-empted under federal law and no amendments to the pleadings may cure this defect. However, Plaintiffs' claims against Archway include a period of time when investments were within the scope of the Oklahoma Uniform Securities Act of 2004, 71 O.S.Supp.2004 § 1-101 et seq. (the Act). Plaintiffs' Second Amended Petition raises causes of action cognizable under the Act and raises facts both showing minimum contacts sufficient to allow an exercise of jurisdiction in conformity with due process and averring fraud with sufficient particularity. Consequently, we affirm the trial court's order in part, reverse it in part, and remand for further proceedings.
STANDARD OF REVIEW
¶ 3 Review of a trial court's dismissal for failure to state a claim upon which relief may be granted involves a de novo consideration as to whether the petition is legally sufficient. Indiana National Bank v. State of Oklahoma Department of Human Services, 1994 OK 98, ¶ 2, 880 P.2d 371, 375. When a motion to dismiss includes evidentiary materials outside the pleadings, it is treated as one for summary judgment. 12 O.S.Supp.2004 § 2012(B).
¶ 4 When reviewing a motion to dismiss, the appellate court must take as true all of a challenged pleading's allegations together with all reasonable inferences which may be drawn from them. Hayes v. Eateries, Inc., 1995 OK 108, ¶ 2, 905 P.2d 778, 780. "A pleading must not be dismissed for failure to state a legally cognizable claim unless the allegations indicate beyond any doubt that the litigant can prove no set of facts which would entitle him to relief." Frazier v. Bryan Memorial Hospital Authority, 1989 OK 73, ¶ 13, 775 P.2d 281, 287. (Emphasis in original).
¶ 5 Motions to dismiss are generally viewed with disfavor, and to withstand a motion to dismiss it is not necessary for a plaintiff to either identify a specific theory of recovery or set out the correct remedy or relief which may apply. When the trial court is considering a motion to dismiss, the court "should not ask whether the petition points to an appropriate statute or legal theory, but whether relief is possible under any set of facts that could be established consistent with the allegations." Indiana National Bank v. State Department of Human Services, 1994 OK 98, ¶ 4, 880 P.2d 371, 375-6. (Emphasis in original, citations omitted.)
THE PARTIES
¶ 6 Trimble, a resident of Oklahoma, is the manager of PCM and a member of the Chicago Mercantile Exchange, a designated market for trading commodity futures contracts. PCM is an Oklahoma limited liability company with offices in Oklahoma which allegedly held itself out as an exempt commodities pool operator. PCM is the general partner in Phidippides Capital LP, (PC) a Delaware limited partnership with offices in Oklahoma.
¶ 7 Plaintiffs are investors in a hedge fund begun by Trimble which was originally named Phidippides Fund LP (Fund). After he changed Fund's investment strategy from stocks to futures in December of 2008, Trimble, according to Plaintiffs, "configured a new limited partnership named Phidippides Capital LP."[1]
¶ 8 MFG is a Futures Commission Merchant which acted as a clearing broker for Trimble and PCM. MFG is a Delaware corporation with offices in Illinois and New York and no offices in Oklahoma. MFG provided clearing and execution services for accounts opened with it by Trimble and PCM. MFG *855 also provided Trimble and PCM with software which allowed them to execute trades.
¶ 9 Archway, an Indiana limited liability company formed in 2002, has one office in Indiana and another in New York. It sells a web-based software application named ATWeb which consists of a suite of accounting modules for investment professionals such as fund managers. It also offers outsourcing services during which Archway employees input data obtained from their fund manager customers into a Client Database, operate accounting modules, and perform other services, such as uploading mailing listing information provided by a fund manager so that investor information will appear on web-based statements.
THE FACTS ALLEGED
¶ 10 Plaintiffs' Second Amended Petition states that Trimble and PCM maintained Fund was exempt from registration because its investors were either "accredited investors" or "qualified eligible persons,"[2] and neither Trimble nor PCM were registered as commodity pool operators or commodity trading advisors. Plaintiffs contend Trimble has never held any licenses which would allow him to solicit "sales of any security." Plaintiffs allege MFG, by serving as a Futures Commission Merchant, was bound to follow rules of the National Futures Association, it was obligated not to make trades for a person or entity required to be a licensed member but not so licensed, and it had a duty of due diligence to take reasonable steps to verify the licensing status of those for whom it made trades.
¶ 11 According to MFG, Trimble ran PCM, began the Phidippides hedge fund[3] (Fund) in 2004, and he received consideration for investment advice provided to its investors. In late December of 2004, Trimble opened a personal commodities account with MFG, and in October of 2007 PCM opened a commodities account with MFG.[4]
¶ 12 Plaintiffs' Second Amended Petition alleges that by at least October of 2007, Trimble and PCM began to issue false statements to Fund's investors and paid themselves more than $2,000,000 in fees based on false and inflated profit figures. Plaintiffs allege that Trimble and PCM obtained more than $34,000,000 from approximately sixty investors for investment in Fund.
¶ 13 According to Plaintiffs, in July of 2007, Trimble and PCM claimed a hardware failure necessitated a change in the periodic reports to investors. In April of 2008, Trimble altered the investment strategy of Fund from day trading in stocks to 100% commodities futures. Trimble and PCM moved Fund's accounts from other companies[5] to MFG after April of 2008. Between May of 2007 and January of 2008, i.e., prior to when Fund's accounts were moved to MFG, its investors allegedly sustained losses of $19,101,976.46 via Plaintiffs' purchases of pro rata shares in the Fund from Trimble and PCM.
¶ 14 In early 2007, Trimble contacted Archway about its ATWeb software applications. On October 15, 2007, Archway and PCM entered into a licensing agreement under which Archway provided hosted services consisting of installing and providing access to a PCM Client Database on its ATWeb software application. Archway and PCM entered into an "Operations Outsourcing" agreement on November 15, 2007, under which Archway personnel in its Indianapolis, Indiana office entered PCM monthly transaction data into the PCM Client Database hosted on the ATWeb site. PCM was to provide the data to build the database.
¶ 15 According to Archway, under the outsourcing agreement, the fund manager *856 controls and has the responsibility for: investor's access; what data is provided to investors; reviewing and approving the results; the accuracy of the data; and bookkeeping judgments. Archway claims it does not handle cash or securities trades, does not have contact directly with investors, does not provide the individual investors[6] in funds with services, and supplies technical support to fund managers, not individual investors.
¶ 16 Trimble provided Archway with historical and monthly Fund data for November of 2007 through the fourth quarter of 2008. Trimble's data included faxed MFG account statements which allegedly had been altered by him. Plaintiffs claim Archway could have verified this information like it did with bank statements, and Archway claims it had no way to retrieve MFG's information directly.
¶ 17 In late 2007, Trimble arranged access to the ATWeb online investor portal for Fund's investors. The investors then were able to use a password to login and access individual data reported on the site such as income, expenses, contributions, withdrawals, gains or losses, fees, and balances for their accounts. The investors could view, generate, and print out reports about their individual shares, but could not see overall funding or trading activity. In the fourth quarter of 2008, Trimble changed the data reporting intervals for the Fund investors from monthly to quarterly. Archway terminated all services to PCM and Trimble in January of 2009 after being notified by the F.B.I. that Trimble had provided Archway with false information.[7]
APPELLATE ISSUES
¶ 18 Plaintiffs' causes of action against MFG and Archway are premised upon the statutory grounds stated in § 1-509(G). That statute imposes joint and several liability "to the same extent" as that of those who are liable under 71 O.S.Supp.2004 § 1-509(B) through (F) on anyone who materially aids "in the conduct giving rise to the liability." MFG and Archway both argue they did not materially aid in an unlawful sale of securities or provide investment advice. As a consequence, both allege, they did not meet the requirement that they "materially aid in the conduct giving rise to liability under subsections B through F." Further, they claim, Oklahoma courts do not have and should not exercise jurisdiction due to a lack of minimum contacts.
¶ 19 The questions presented for determination are whether: (1) Plaintiffs have a cause of action under the Act, (2) the Commodities Exchange Act, 7 U.S.C. § 1, et seq., preempts an exercise of jurisdiction, (3) if they have not done so, Plaintiffs may state a cause of action by amendment of their Second Amended Petition, (4) if minimum contacts exist, is an exercise of jurisdiction consistent with due process, and (5) Plaintiffs aver fraud with sufficient particularity?
PREEMPTION
¶ 20 MFG and Archway claim preemption applies to Plaintiffs' causes of action against them. Plaintiffs argue federal preemption does not extend to their private causes of action but only extends to states' statutory measures embodying administrative agency regulatory functions which might conflict with the regulatory role of the CFTC. Plaintiffs argue MFG's processing of trades for Trimble and PCM facilitated their fraudulent scheme, as did Archway's posting on the *857 ATWeb investor portal of information it had failed to verify because they relied upon that information when making further investment decisions.
¶ 21 In order to state a cause of action for aiding and abetting pursuant to § 1-509(G)(5), Plaintiffs must show that Trimble and PCM are liable pursuant to §§ 1-509(B)-(F) of the Act. Section 1-509(B) of the Act imposes liability upon one who "sells a security" in violation of 71 O.S.Supp.2004 § 1-301[8] by means of an untrue statement of or omission to state a material fact. Similarly, 71 O.S.Supp.2004 § 1-509(C) imposes liability upon a buyer who makes an untrue statement of or omits to state a material fact. Liability is imposed pursuant to 71 O.S.Supp. 2004 § 1-509(D) upon "a broker-dealer or agent that sells or buys a security in violation of 71 O.S.Supp.2004 § 1-401(A), 71 O.S.Supp. 2004 § 1-402(A), or 71 O.S.Supp.2004 § 1-506.[9] One will be liable pursuant to 71 O.S.Supp.2004 § 1-509(E) if acting as an investment advisor or investment advisor representative in violation of § 1-506, 71 O.S.Supp.2004 § 1-403 or § 1-404.[10] Section 1-509(F) of the Act imposes liability upon "[a] person that received, directly or indirectly any consideration for providing investment advice to another" who employs a device, scheme, or artifice to defraud or who engages in a course of business which "operates or would operate as a fraud or deceit on another person."
¶ 22 Absent the establishment of prerequisite liability by a primary offender, no liability may attach for aiding and abetting under § 1-509(G). See Nikkel v. Stifel, Nicolaus & Co., Inc., 1975 OK 158, 542 P.2d 1305 (finding aiding and abetting liability would not lie under predecessor statute 71 O.S.1971 § 408 absent such primary liability). We therefore canvas the appellate record to see whether Plaintiffs state or may amend their Second Amended Petition so as to state a cause of action cognizable under the Act.
¶ 23 Plaintiffs need not obtain judgment in their favor against a primary wrongdoer in order to state a cause of action for aiding and abetting, but only must show the primary wrongdoer is "liable," i.e., subject to suit for civil damages. See South Western Oklahoma Development Authority v. Sullivan Engine Works, 1996 OK 9, 910 P.2d 1052 (analyzing aiding and abetting liability set forth in predecessor statute 71 O.S.1991 § 408, finding prior reduction to judgment unnecessary, and holding material participants were jointly and severally liable with primary violator). We must conclude no such showing is possible here as to MFG under Plaintiffs' Second Amended Petition, nor is the defect correctable by further amendment.
¶ 24 Plaintiffs seek to impose on MFG the aider and abettor liability provided for by the Legislature in § 1-509(G)(5). "In determining whether a statute applies to a given set of facts, we focus on legislative intent which controls statutory interpretation." Keating v. Edmondson, 2001 OK 110, ¶ 8, 37 P.3d 882, 886. (Footnotes omitted.) Statutory intent generally is ascertained from the whole act, in light of its general purpose and objective. Independent School Dist. No. I-20 of Muskogee County v. Oklahoma State Department of Education, 2003 OK 18, ¶ 13, 65 P.3d 612, 617. (Footnote omitted.).
¶ 25 An analogous situation was examined in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994), in which the Court noted Congress had the power to impose aiding and abetting liability *858 if it had chosen to do so but it had not done so, and finding no private right of action would be presumed to exist under Securities Exchange Act of 1934 § 10(b), 15 U.S.C. § 78j(b) as it was then-enacted. "The issue is not whether it is good public policy to impose civil liability on aiders and abettors but whether aiding and abetting is covered by the statute." 511 U.S. at 177, 114 S.Ct. at 1448.[11]
¶ 26 The transaction forming the basis for applying § 1-508(G) necessarily must involve a security transaction within the ambit of the Act.[12] As a prerequisite for the liability of an aider or abettor, the one who allegedly is aided or abetted must be liable under one of the specified statutory grounds stated in the Act.
¶ 27 MFG argues it has no liability because Oklahoma's Act derives from the Uniform Securities Act from the National Conference of Commissioners on Uniform State Laws, Comment 11 of which provides: "Under 509(g)(4), the performance by a clearing broker of the clearing broker's contractual functionseven though necessary to the processing of a transactionwithout more would not constitute material aid or result in liability under this section. See also Ross v. Bolton, 904 F.2d 819 (2nd Cir. 1990)."[13] Under our standard of review, we must take as true Plaintiffs' allegations MFG had knowledge of additional facts and circumstances which would render this comment inapplicable. Nevertheless, we must conclude the Act does not apply to Plaintiffs' causes of action against MFG because those claims are based upon commodities transactions which are pre-empted.
¶ 28 At first blush it might appear a cause of action might be pursued in the Oklahoma courts based upon the violation of federal commodities laws, especially given Congress's provision, when defining the jurisdiction of the Commodities Futures Trading Commission, that "[n]othing in this section shall supersede or limit the jurisdiction conferred on courts of the United States or any State," 7 U.S.C. § 2(a)(1)(A)(II), and how, in 7 U.S.C. § 13c(a), Congress provides that one who commits or who willfully aids or abets a violation of the Commodity Exchange Act or who violates any "rules, regulations, or orders issued pursuant to this chapter ... may be held responsible for such violation as a principal." Indeed, after somewhat confusing and conflicting interpretations of prior commodities law finding an implied private right of action,[14] Congress explicitly provided for a private right of action, and included *859 liability for anyone who "wilfully" aids or abets a violation which causes damages to a person with "an interest or participation in a commodity pool"[15] in 7 U.S.C. § 25(a)(1)(C)(iii), which became effective on or after the date of enactment of the Futures Trading Act of 1982, i.e. January 1, 1983. 7 U.S.C. § 25(d).
¶ 29 However, in that same enactment, Congress also explicitly placed "exclusive jurisdiction of actions brought under [that] section" in "[t]he United States district courts." 7 U.S.C. § 25(c). (Emphasis added.) State courts "have inherent authority to adjudicate claims arising under the laws of the United States, unless Congress affirmatively assigns exclusive jurisdiction over a federal claim to the federal courts." Reeds v. Walker, 2006 OK 43, ¶ 11, 157 P.3d 100, 107. (Footnotes omitted, emphasis added.) Congress has spoken. Once Fund's investments were solely in commodities futures, any state court jurisdiction was pre-empted.
¶ 30 For this reason, the implied private right of action recognized in decisions such as W & W Farms, Inc. v. Chartered Systems Corporation of New York, Ltd., 542 F.Supp. 56 (N.D.Ind.1982), Witzel v. Chartered Systems Corporation of New York, Ltd., 490 F.Supp. 343 (D.Minn.1980), and R.J. Hereley & Son Company v. Stotler & Company, 466 F.Supp. 345 (N.D.Ill.1979), which look to § 2(a)(1)(A)(II) and interpret the law under prior legislation,[16] offer no basis for reversal here. Plaintiffs' Second Amended Petition, despite appearing to raise factual issues which would satisfy a cause of action under the federal scheme, may not be pursued in Oklahoma's state courts due to the explicit federal preemption of jurisdiction.
¶ 31 As to Archway, a different conclusion is required as to jurisdiction and possible liability. Plaintiffs' Second Amended Petition recites that Trimble began soliciting funds in 2004 for investments in securities which would be subject to the Act, he began accepting funds on behalf of PCM in 2005, and he and PCM issued false statements in violation of the Act beginning in at least October of 2007. Plaintiffs also allege Trimble was never licensed to sell securities and that he and PCM were selling unregistered securities in violation of the Act. Plaintiffs further allege Trimble operated Fund using the services of Merlin Securities and that stocks, i.e. securities subject to the Act, were the major portion of the investments at that earlier time. Consequently, it appears Plaintiffs state facts consistent with liability on the part of Trimble and PCM under the Act.
¶ 32 Archway argues it merely recorded information provided by Trimble and PCM and made it available. Under § 1-509(G)(5), Archway must meet "the burden of proof that [it] did not know and, in the exercise of reasonable care could not have known, of the existence of the conduct by reason of which liability is alleged to exist." Plaintiffs produced e-mail communications,[17] dated prior to when Fund's investments were restricted to commodities, raising facts about which reasonable minds could differ whether Archway exceeded the highly restricted role it claims to have undertaken when performing accounting services. Further, the question whether aid is "material" presents a *860 factual determination which is dependent upon the development of evidence and which is not amenable to determination in a summary fashion on a motion to dismiss. See Hirata Corporation v. J.B. Oxford and Company, 193 F.R.D. 589 (S.D. Indiana 2000) (addressing whether a petition was subject to dismissal upon a motion and applying an Indiana securities statute regarding the question of material aid by a clearing broker).
¶ 33 Plaintiffs' Second Amended Petition claims they suffered financial losses between May of 2007 and January of 2008 as a result of being induced to invest or re-invest in pro rata shares in the Fund based upon false information provided via the ATWeb site by primary actors Trimble and PCM. According to Plaintiffs, during this time Fund was structured as a limited partnership and its investments involved day trading in a stock portfolio. Consequently and without a need for amendment, Plaintiffs stated claims for secondary liability due to aiding and abetting against Archway based upon securities transactions[18] subject to the Act. Dismissal of Archway based upon federal preemption is reversed.
MINIMUM CONTACTS
¶ 34 Archway argues it is a non-resident without sufficient minimum contacts in Oklahoma and Plaintiffs fail to meet their burden to support an exercise of jurisdiction. Archway claims it merely agreed to provide hosting services which would be performed in Indiana, Trimble was to provide accurate MFG information to be posted, it had no independent ability to secure the MFG information to be posted, it was not directly involved with Fund's investors, and its client was Fund, not the investors. Archway claims it has no licenses, property, employees, offices, bank accounts, agents or telephone numbers in Oklahoma, does not pay taxes there and its employees have not visited its three customers there. Archway argues it had no reasonable expectation of exposure to lawsuits in other places than Indiana. In addition to a lack of general jurisdiction, Archway claims its activities were not purposeful availment so as to invoke specific jurisdiction.
¶ 35 Under Oklahoma's long-arm statute, "[a] court of this state may exercise jurisdiction on any basis consistent with the Constitution of this state and the Constitution of the United States." 12 O.S.Supp.2002 § 2004(F). This jurisdiction may be exercised "to the outer limits permitted by the Oklahoma Constitution and the Due Process Clause of the Fourteenth Amendment to the United States Constitution," which limits "have been established by the United States Supreme Court." Conoco, Inc. v. Agrico Chemical Company, 2004 OK 83, ¶ 17, 115 P.3d 829, 834.
¶ 36 Jurisdiction may be either general or specific. A court is permitted to exercise general jurisdiction over a non-resident defendant if that defendant has engaged in systemic and continuous activities, Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984), which are so substantial and of such a nature as to justify suit on causes of action arising from or related to dealings distinct from those activities. International Shoe Co. v. Washington, 326 U.S. 310, 318, 66 S.Ct. 154, 159, 90 L.Ed. 95 (1945).[19] Specific jurisdiction *861 is exercised when a defendant has certain minimum contacts with a forum; whether such jurisdiction exists presents a question of law. Willbros USA, Inc. v. Certain Underwriters at Lloyds of London, 2009 OK CIV APP 90, 220 P.3d 1166.
¶ 37 As Zippo Manufacturing Company v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D.Pa.1997) suggests, under a minimum contact inquiry for specific jurisdiction, the focus is on the quality of activity over the Internet, and as Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985), teaches, changes in modern commercial life have obviated the need for physical presence within a state to establish minimum contacts for personal jurisdiction. Accord, Barrett v. Catacombs Press, 44 F.Supp.2d 717 (E.D.Pa.1999).
¶ 38 The law when jurisdiction is based upon internet activity is evolving. A sliding scale framework is proposed in Zippo for minimum contacts analysis when internet activity is at issue. At one end of the scale is a passive website on which a defendant has posted information which is accessible by persons in foreign jurisdictions, and at the other end of this scale are defendants who clearly do business through a commercial website. When a user is able to exchange information with a website, the middle of the scale, the exercise of jurisdiction is determined after examining the level of interactivity and commercial nature of the exchange of information.
¶ 39 However, after discussing Zippo's sliding scale analysis, another panel of this Court recognized, in Lively v. IJAM, Inc., 2005 OK CIV APP 29, 114 P.3d 487, that a more traditional jurisdiction analysis also may be applied because any underlying transactions using the internet are the result of actions in the physical world. "What is clear from a review of the case law is that the key to analyzing the personal jurisdiction in internet-related cases is to look at the nature and quality of the defendant's internet activity." Id. ¶ 34, at 496.
¶ 40 As suggested in Lively, we conclude it is also appropriate to analogize to the issue of contacts under a traditional analysis based upon mail or telephone contacts. Here, Plaintiffs allege they own pro rata shares in Fund, and Archway's numerous commercial interactions with Trimble and PCM in their operation of Fund form the basis for Plaintiffs' claims for Archway's secondary liability for aiding and abetting. Unlike purely passive sites with advertisements or information viewable by anyone accessing the internet, the information posted on Archway's ATWeb site was specifically designed to be accessible only through the use of a password system by Fund's investors. Its activities were specifically and purposefully directed at Fund and its investors. Plaintiffs' alleged damages allegedly arise out of or relate to those activities, and it created continuing relationships and obligations. See Burger King Corporation v. Rudzewicz, 471 U.S. 462, 472-473, 105 S.Ct., 2174, 2182-3, 85 L.Ed.2d 528.
¶ 41 We also find instructive Goldstein v. Christiansen, 70 Ohio St.3d 232, 638 N.E.2d 541 (1994), in which Florida accountants contracted to provide financial statements and information to a group whose plurality resided in Ohio, making it not patent and unambiguous that the Ohio court lacked in personam jurisdiction over them. The accountants contended they owed a duty to certain partnerships but not the individual limited partners. The Ohio Court found where a general partner owes a fiduciary duty to the limited partners, a professional relationship with the general partner extended to those in privity with the general partner, i.e., the limited partners.[20] Even though Ohio's long-arm jurisdiction statute did not, as Oklahoma's does, extend to the full limits of due process, the Ohio court concluded it had jurisdiction over the non-resident, Florida accountants.[21]
*862 ¶ 42 We are not persuaded Archway's argument it lacks minimum contacts for an exercise of jurisdiction because of the nature of its contacts with the individual Plaintiffs answers the question of jurisdiction. Plaintiffs' aiding and abetting cause of action against Archway is based upon alleged material aid rendered to Trimble and PCM. Plaintiffs are "investors" with pro rata shares in Fund, Archway's contracts were with Fund, and both Trimble and PCM operated Fund. To require a direct interaction with each individual plaintiff would convert an aider and abettor into a primary actor and render meaningless and surplusage the provisions of § 1-509(G)(5). It is the aiding and abetting of the primary actors which creates liability under § 1-509(G)(5). Minimum contacts looks to the activities of the parties within a forum and whether constitutional due process is satisfied by an exercise of jurisdiction. Archway's activities, including the limited, targeted, password protected access to ATWeb provided to Plaintiffs as Fund's investors, were purposeful and provided minimum contacts with the Fund, its owners, and the primary actors within the forum Oklahoma.
FORUM SELECTION
¶ 43 Archway argues its agreement with Trimble and PCM contains a forum selection clause, Plaintiffs are third-party beneficiaries of the agreement, Plaintiffs' claims arise out of breaches of the agreement, and Plaintiffs' lack of an allegation of breach of contract, despite that "the alleged failure to verify stems from a duty purported to arise in the contract," does not pose a barrier to enforcement of the forum selection clause.
¶ 44 "Ordinarily, absent compelling reasons otherwise, forum selection clauses are enforceable." State ex rel. Fisher v. South Atlantic Dredging Co., Inc., 2000 OK CIV APP 123, ¶ 7, 15 P.3d 523, 525 (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595, 111 S.Ct. 1522, 1528, 113 L.Ed.2d 622 (1991)). However, private individuals may not oust[22] a state of jurisdiction over a controversy which is properly presented and in which forum they have the constitutionally required minimum contacts. Id. A standard of "unfair or unreasonable" may be applied to invalidate forum selection clauses which the parties have not negotiated or discussed such a clause, or there is an absence of meaningful choice. Eads v. Woodmen of the World Life Insurance Society, 1989 OK CIV APP 19, ¶ 13, 785 P.2d 328, 331. The party seeking to avoid such a clause has the burden to show its enforcement is unreasonable under the circumstances. Adams v. Bay, Ltd., 2002 OK CIV APP 117, 60 P.3d 509.
¶ 45 Here, the trial court concluded dismissal was warranted solely because no cause of action could be stated by further amendment of Plaintiffs' Second Amended Petition. We have determined otherwise, and the validity of the forum selection clause under the circumstances of this controversy requires the determination of fact questions.[23] It is not the function of the appellate courts to make first-instance determinations of fact which were properly presented to the trial court but left unresolved. King v. King, 2005 OK 4, 107 P.3d 570. The issue whether the forum selection clause comports with constitutional standards and public policy is one for determination by the trial court upon remand.
*863 FRAUD
¶ 46 Archway argues Plaintiffs have failed to plead fraud with sufficient particularity. We disagree.
¶ 47 The elements of actionable common law fraud are the making of a false material misrepresentation which is made as a positive assertion, is either known to be false or made recklessly without knowledge of the truth, is made with an intention it be acted upon, and which is relied on to the other party's detriment. Bowman v. Presley, 2009 OK 48, ¶ 13, 212 P.3d 1210, 1218. These elements must be pled in accordance with 12 O.S.2001 § 2009(B), that is, the "circumstances constituting fraud ... shall be stated with particularity." As instructed by Gay v. Akin, 1988, OK 150, ¶ 8, 766 P.2d 985, 990:
In construing the Oklahoma Pleading Code's provisions which govern fraud allegations, and in determining the detail necessary to satisfy the "particularity" requirement, we are obliged to look to the Federal Rules of Civil Procedurethe progenitor of our pleading code. Since the text of Federal Rule 9(b) is incorporated verbatim in the Oklahoma pleading code, federal and state jurisprudence is instructive. We note initially that the particularity requirement extends to all averments of fraud, regardless of the theory of legal dutystatutory, tort, contract or fiduciary. To satisfy the requirements of § 2009(B), it is unnecessary to plead each element of fraud in detail if the circumstances constituting fraud are stated with particularity. (Footnotes omitted.)
The specificity required is only so much as will apprise a defendant of the conduct complained of so the opposing party may prepare responsive pleadings and defenses. Id. ¶ 18, at 993; see also First Federal Savings & Loan Association of Pittsburgh v. Oppenheim, Appel, Dixon & Co., 634 F.Supp. 1341 (S.D.N.Y.1986)(analyzing particularity of third-party claim alleging aiding and abetting of securities fraud). However, § 2009(B) also provides "knowledge and other conditions of mind of a person may be averred generally."
¶ 48 Trimble and PCM are alleged to have made false and inflated representations about the Fund's assets and its profitability, both historically and in more recent times, which representations were relied upon to Plaintiffs' detriment, causing them damages of some $19,101,976.46 between May of 2007 and January of 2008. Plaintiffs also allege PCM and Trimble failed to disclose the information about the methods used to make trades and in whose names trades were made, how funds were co-mingled, and how registrations required by law for Trimble and PCM and for certain securities were not obtained. Plaintiffs claim all these actions caused Trimble and PCM to violate the Act, and Archway is alleged to have materially aided this fraud by the provision of fraudulent account information which was intended to and was relied upon by Plaintiffs and by failing to verify information. Plaintiffs allege they received false information every time they logged on to the ATWeb site. The fraud of Trimble and PCM[24] are stated with enough specificity to allow Archway to determine the factual basis for the aiding and abetting claim based upon fraud by Trimble and PCM.
CONCLUSION
¶ 49 Transactions prior to when Fund's investments were solely in commodities futures were within the ambit of the Act. However, Plaintiffs' claims against MFG arise solely from commodities transactions for Fund. As to those transactions, the Act is inapplicable and Congress has placed jurisdiction over private rights of actions claiming violations of the federal commodities regulations, including fraudulent activities, solely within the federal district courts. We must conclude Plaintiffs' causes of action premised on commodities transactions are pre-empted, further amendment of their Second Amended Petition will not cure this jurisdictional defect, and MFG was entitled to dismissal as a matter of law. Plaintiffs' Second Amended Petition sufficiently states a cause of action against Archway premised upon aiding and *864 abetting violations of the Act by Trimble and PCM via allegedly fraudulent activity in the operation of Fund. Dismissal of such claims is reversed and the case is remanded for further proceedings.
¶ 50 What, if any, duties may be owed based upon providing accounting and other services, whether Archway "materially" aided in conduct giving rise to liability, and whether in the exercise of reasonable care it could not have known of conduct giving rise to liability are dependent upon first-instance factual determinations for the trial court's consideration upon remand, not by this Court at this stage of the proceedings. The judgment dismissing Plaintiffs' Second Amended Petition is AFFIRMED IN PART, REVERSED IN PART, AND REMANDED for further proceedings consistent with this opinion.
BELL, C.J., and HANSEN, J., concur.
NOTES
[1] It does not appear that this limited partnership is named as a party in these proceedings. Plaintiffs claim they had no knowledge of this new entity until December of 2008, when Trimble sought their signatures for a Subscription Agreement to it. PCM was its general partner.
[2] These terms are defined at, respectively, 17 C.F.R. § 4.7 (2008) and 17 C.F.R. § 230.501(a)(1)-(3) and 17 C.F.R. § 230.501(a)(8) (2008).
[3] Plaintiffs' Second Amended Petition alleges the Fund originated in 2003 and was first structured as a limited partnership named Phidippides Fund LP.
[4] A third commodities account with MFG was opened by Phidippides Capitol LP in late August of 2008.
[5] According to Plaintiffs, Fund's initial investments were in stocks and made primarily through Merlin Securities. That company is not named as a defendant.
[6] Whether Plaintiffs' merely are "investors" or, due to alleged "pro rata" purchases, they have some other legal status is not raised by any party and is unclear from the appellate record. For convenience only, we use the term "investor" for those with an interest in Fund.
[7] Plaintiffs attached a complaint against Trimble, PCM and Phidippides Capital LP by the Commodities Futures Trading Commission (CFTC) in the United States Court for the Western District of Oklahoma as an exhibit to their opposition to MFG's motion. In that complaint, the CFTC alleges the named defendants, inter alia, issued false profit and loss statements when operating a commodities pool, redeemed pool participant interests based on falsely reported profits, and operated the pool as a Ponzi scheme. According to a February 3, 2009 e-mail to Trimble attached as an exhibit to Plaintiffs' response to Archway's motion to dismiss, Archway informed him it would no longer provide services to "Phidippides" on the advice of counsel and as indicated in a letter provided earlier that day.
[8] Section 1-301 makes it unlawful to offer or sell a security unless it is registered or exempt.
[9] Section 1-401(A) makes it unlawful to transact business in the state as a broker-dealer unless the person is registered or exempt from registration under the Act, § 1-402(A), makes it unlawful to transact business in Oklahoma as an agent unless the person is registered or exempt from registration under the Act, and § 1-506 imposes liability for misrepresentations concerning registration or exemptions for any person or security.
[10] Section 1-403 makes it unlawful for a person to transact business in Oklahoma unless the person is registered or exempt from registration as an investment advisor, and § 1-404 makes it unlawful for an individual to transact business in Oklahoma unless the individual is registered under the Act or exempt from registration.
[11] In the framing of their arguments, Plaintiffs tend to ignore that the Act's stated purpose and scope is the regulation of securities, not an enactment of general aiding and abetting liability. To adopt the broad construction proposed by Plaintiffs would potentially convert a statute targeting securities transactions into one applying to all manner of frauds and misrepresentations which do not involve such transactions. This we will not do.
[12] Comments by the National Conference of Commissioners on Uniform State Laws note that Oklahoma's Uniform Securities Act varies by its addition of subsection (g)(5) to the Uniform Act's version of § 509. Our conclusion only securities, not commodities, are the focus of the Act is buttressed by the Legislature's declaration in 71 O.S.Supp.2004 § 1-509(A), that "[e]nforcement of civil liability under this section is subject to the Securities Litigation Uniform Standards Act of 1998," Pub.L. 105-353, (see 15 U.S.C. § 78a), in which Congress addressed how national standards were necessary because, although state securities regulation continued in importance, since the Private Securities Litigation Reform Act of 1995 a shift in the number of securities class action lawsuits, especially those alleging fraud, from federal to state courts had prevented that act from fully achieving its objectives.
[13] In Ross, the Court dismissed a complaint, finding a clearing agent had no liability as an aider and abettor of a stock scheme because the clearing agent had no fiduciary duty to the investor and, in the absence of that duty, the investor had failed to meet heightened scienter requirements. The clearing agent's actions were deemed simply those of an innocent clearing agent conducting ordinary business.
[14] With the amendments effective January 11, 1983, Congress removed language from § 13c(a) which provided persons violating its provisions "may be held responsible in administrative proceedings under this Act for such violation as a principal." (Emphasis added.) Prior to that amendment, some courts rejected recognition of an implied private judicial right of action for aiding and abetting pursuant to 7 U.S.C. § 13c(a) or under anti-fraud provisions set forth in 7 U.S.C. §§ 4 b and 4o, finding only administrative procedures were available. e.g., Johnson v. Chilcott, 590 F.Supp. 204 (D.Colo. 1984).
[15] A pool is defined as "any investment trust, syndicate or similar form of enterprise operated for the purpose of trading commodity interests." 17 C.F.R. § 4.10(d)(1).
[16] In Merrill, Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 102 S.Ct. 1825, 72 L.Ed.2d 182 (1982), the United States Supreme Court found the 1974 amendments, including the addition by Congress of the savings clause in § 2(a) to the exclusive jurisdiction provisions separating the functions of the Securities and Exchange Commission and the Commodity Futures Trading Commission, indicated an intent to preserve the previously recognized implied private right of action as a remedy under the Commodities Exchange Act. However the later amendments creating an explicit private right of action obviate the need to construe such a implied right of action under § 2(a).
[17] For example, a January, 2008 e-mail stream of communication between Trimble and an employee identified as an executive vice president at Archway notes Trimble's commingling of "personal money" in investors' accounts, how there is a need to "clean this up" under accounting rules, and advises Trimble could move the money into a Miscellaneous Assets account where it could stay "forever," but also warns he "would be short $1,500,000 of `fund' cash to pay out your investors" if Fund were liquidated.
[18] In so determining, we address only the legal sufficiency of Plaintiffs' Second Amended Petition as to the Act, not the merits of Plaintiffs' allegations of aiding and abetting, which are fact dependent.
[19] "[T]o establish general jurisdiction, the defendant must be conducting substantial and continuous local activity within the forum state." Smith v. Basin Park Hotel, Inc., 178 F.Supp.2d 1225 (N.D.Okla.2001). In Smith, the Court applied the 12 factors identified by the Tenth Circuit in Soma Medical International v. Standard Chartered Bank, 196 F.3d 1292 (10th Cir.1999) when analyzing general jurisdiction. Those factors include whether, within that state, the defendant: (1) engages in business; (2) is licensed to do business; (3) owns, leases, or controls real or personal property or assets; (4) maintains employees, offices, agents, or bank accounts; (5) is present in through shareholders residing there; (6) maintains phone or fax listings; (7) advertises or solicits business; (8) has salespersons traveling to it; (9) pays taxes; (10) visits potential customers; (11) recruits employees; and (12) generates a substantial percentage of its national sales through revenue generated from in-state customers. Archway cites several of these factors, but general jurisdiction is not the only potential basis for jurisdiction.
[20] As noted supra, nt. 7, Plaintiffs' legal status due to their purchases of pro rata shares in Fund is unclear from the appellate record.
[21] The Ohio Court ultimately concluded dismissal was appropriate because conflicting statements of fact had been resolved by the trial court and the relief requested, a writ of prohibition, was neither warranted nor a proper remedy.
[22] Courts also possess the discretion to decline, by applying forum non conveniens, to exercise jurisdiction and thereby give effect to the parties' agreement regarding forum selection. Crowson v. Sealaska Corporation, 705 P.2d 905 (Alaska 1985); see also, M/S Bremen v. Zapata Off-Shore Company, 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513.
[23] Nothing in the record adduced to date indicates Plaintiffs were either involved in negotiation or that they were signatories to the Archway-Fund agreement. Their contacts with the ATWeb site appear to be via their receipt of information sent on behalf of Fund (of which Plaintiffs owned pro rata shares), and no prior "fair warning" of the forum selection provisions to Plaintiffs appears in the evidence adduced to date. Whether they consented to the forum selection clause, otherwise possess the constitutionally required minimum contacts with Indiana, or it is fair to apply the forum selection clause in the context of an aiding and abetting cause of action requires first-instance factual determinations for the trial court.
[24] When analyzing whether fraud is stated with sufficient specificity, it is important to remember that Archway's liability is not based on primary liability but instead upon materially aiding and abetting conduct giving rise to secondary liability under subsections B through F of § 1-509. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453674/ | 252 P.3d 772 (2011)
2011-NMCA-037
STATE of New Mexico, Petitioner-Appellee,
v.
Shane R. VEST, Defendant-Appellant.
No. 28,888.
Court of Appeals of New Mexico.
March 8, 2011.
Certiorari Granted, May 3, 2011, No. 32,940.
*775 Gary K. King, Attorney General, Ann M. Harvey, Assistant Attorney General, Santa Fe, NM, for Appellee.
Hugh W. Dangler, Chief Public Defender, Carlos Ruiz de la Torre, Assistant Appellate Defender, Santa Fe, NM, for Appellant.
OPINION
WECHSLER, Judge.
{1} Defendant Shane Vest appeals his conviction, pursuant to a conditional plea agreement, for distribution of marijuana and possession of drug paraphernalia. Defendant appeals specifically from the district court's denial of his motion to suppress. He argues that no probable cause existed to issue a warrant to search his home because the State failed to establish the veracity of its confidential informant. We hold that the informant's participation in two controlled purchases of controlled substances did not sufficiently establish the informant's veracity and that the observations of the affiant law enforcement officer of activity consistent with drug trafficking did not sufficiently corroborate the informant's observations to justify the issuance of the warrant. We therefore reverse.
BACKGROUND
{2} The parties agree to the relevant facts in this case. On January 7, 2008, officers executed a search warrant at Defendant's residence, a green and white camping trailer. The search warrant was signed by a magistrate judge and contained a supporting affidavit with the following information:
Affiant [a Village of Logan Police Officer] knows [Defendant's] previous address was located at 102 Morningside in Logan, New Mexico where he lived in the same green and white camper trailer. Affiant has observed this residence on four occasions for approximately an hour. Affiant witnessed as many as seven vehicles and as few as two vehicles come to the residence and only stay for approximately five minutes. [Defendant] moved his trailer to the Arrowhead RV Park on [11-1-07] and Affiant has observed the same type of traffic.
Within the past 48 hours a Region V Drug Task Force confidential informant was at the residence of [Defendant], 503 Highway 54, Arrowhead RV Park, Slip 33. While there the informant observed [Defendant] handling a large quantity of marijuana. The marijuana was packaged in clear sandwich type bags and stored in a clear zip-lock type bag. The informant described the quantity to be between ¼ pound and ½ pound.
Affiant believes this informant to be credible because the informant has performed at least two supervised controlled purchases of quantities of controlled substances. *776 The informant is familiar with [m]arijuana, its appearance and usage, through life experience and previous usage.
{3} Upon executing the search warrant, officers found currency, guns, ammunition, packaged quantities of marijuana, scales, packaging materials, and drug paraphernalia. Defendant was charged with distribution of marijuana and possession of drug paraphernalia.
{4} Defendant filed a motion to suppress in the district court, arguing that the informant's participation in two controlled buys did not establish his veracity. Defendant asserted that the affidavit lacked the specificity to provide sufficient information for a magistrate to make an independent determination as to the existence of probable cause to support the issuance of a warrant.
{5} The district court denied the motion to suppress. It specifically found that the magistrate could have reasonably concluded that the information was reliable based on: (1) the officer's personal observations of suspicious behavior at Defendant's home; (2) the informant's capacity as an informant for the Region V Drug Task Force; (3) the informant's past illicit activity with controlled substances; (4) the informant's personal relationship with Defendant as demonstrated, and; (5) the informant's participation in controlled buys that are described as "at least two." Defendant then entered a conditional plea, reserving the right to appeal.
STANDARD OF REVIEW AND LEGAL FRAMEWORK
{6} "The Fourth Amendment to the United States Constitution and [A]rticle II, [S]ection 10 of the New Mexico Constitution both require probable cause to believe that a crime is occurring or seizable evidence exists at a particular location before a search warrant may issue." State v. Nyce, 2006-NMSC-026, ¶ 9, 139 N.M. 647, 137 P.3d 587. Probable cause to issue the warrant requires a factual showing "that there is a reasonable probability that evidence of a crime will be found in the place to be searched." State v. Gonzales, 2003-NMCA-008, ¶ 12, 133 N.M. 158, 61 P.3d 867. We note this case involves the search of a dwelling place, an area that is "ordinarily afforded the most stringent [F]ourth [A]mendment protection." State v. Clark, 105 N.M. 10, 12, 727 P.2d 949, 951 (Ct.App.1986).
{7} A search warrant may be issued when "sufficient facts are presented in a sworn affidavit to enable the magistrate to make an informed, deliberate, and independent determination that probable cause exists." Gonzales, 2003-NMCA-008, ¶¶ 11, 133 N.M. 158, 61 P.3d 867; see also Rule 5-211 NMRA (describing issuance, contents, execution, return, and probable cause requirements for search warrants). "The degree of proof necessary to establish probable cause for the issuance of a search warrant is more than a suspicion or possibility but less than a certainty of proof." Gonzales, 2003-NMCA-008, ¶ 12, 133 N.M. 158, 61 P.3d 867 (internal quotation marks and citation omitted). "Thus, the magistrate must have sufficient facts upon which to conclude that there is a reasonable probability that evidence of a crime will be found in the place to be searched." Id. In making this determination, we consider solely the information within the four corners of the affidavit submitted in support of a search warrant. State v. Williamson, 2009-NMSC-039, ¶ 31, 146 N.M. 488, 212 P.3d 376; see State v. Barker, 114 N.M. 589, 590, 844 P.2d 839, 840 (Ct.App. 1992).
{8} With respect to probable cause determinations, our Supreme Court has recently clarified the applicable standard of review.
Our inquiry focuses on the issuing judge's conclusion as to probable cause. In this case, that means we look at the magistrate's conclusions, not the district court's. If we conclude that the magistrate's conclusions as to probable cause were correct, we uphold those conclusions regardless of the decision reached by the district court.
State v. Evans, 2009-NMSC-027, ¶ 12, 146 N.M. 319, 210 P.3d 216.
{9} "[A]n issuing court's determination of probable cause must be upheld if the affidavit provides a substantial basis to support a finding of probable cause." Williamson, 2009-NMSC-039, ¶ 29, 146 N.M. *777 488, 212 P.3d 376 (partially overruling all previous case law to the extent the case applies a de novo rather than substantial basis standard of review).
A reviewing court should not substitute its judgment for that of the issuing court. Rather, . . . the reviewing court must determine whether the affidavit as a whole, and the reasonable inferences that may be drawn therefrom, provide a substantial basis for determining that there is probable cause to believe that a search will uncover evidence of wrongdoing.
Id. The Court has explained that "the substantial basis standard of review is more deferential than the de novo review applied to questions of law, but less deferential than the substantial evidence standard applied to questions of fact." Id. ¶ 30. Accordingly, "if the factual basis for the warrant is sufficiently detailed in the search warrant affidavit and the issuing court has found probable cause, the reviewing courts should not invalidate the warrant by interpreting the affidavit in a hypertechnical, rather than a commonsense, manner." Id. (alteration, internal quotation marks, and citation omitted).
{10} In light of the foregoing considerations, we turn to the specifics of this case.
THE VERACITY PRONG OF THE AGUILAR-SPINELLI TEST
{11} With regard to hearsay statements made by informants, in State v. Cordova, 109 N.M. 211, 217, 784 P.2d 30, 36 (1989), our Supreme Court adopted, as a matter of state constitutional law, the confidential informant test first formulated by the United States Supreme Court in Aguilar v. Texas, 378 U.S. 108, 84 S.Ct. 1509, 12 L.Ed.2d 723 (1964), and Spinelli v. United States, 393 U.S. 410, 89 S.Ct. 584, 21 L.Ed.2d 637 (1969), overruled in part by Illinois v. Gates, 462 U.S. 213, 103 S.Ct. 2317, 76 L.Ed.2d 527 (1983). This test is primarily aimed at confidential informants. See State v. Dietrich, 2009-NMCA-031, ¶¶ 12-13, 145 N.M. 733, 204 P.3d 748 (noting that the identification of an informant by name is a significant factor in determining the reliability of the information because a "named informant has greater incentive to provide truthful information . . . than an unnamed or anonymous individual" and explaining that the strictures of Aguilar-Spinelli are primarily aimed at unnamed police informers (internal quotation marks and citation omitted)).
{12} In adopting the Aguilar-Spinelli test, our Supreme Court specifically rejected the totality of the circumstances test set forth in Gates. See Cordova, 109 N.M. at 217, 784 P.2d at 36. Our appellate courts have explained:
The Aguilar/Spinelli test is designed to ensure that the court, rather than the police, make the determination that probable cause, based on reliable information, is present. Thus, the first prong of the test requires that the affidavit include the factual basis for any conclusions drawn by the informant to enable the court to perform an independent analysis of the facts and conclusions. The second prong requires that facts be presented to the court to show either that the informant is inherently credible or that the information from the informant is reliable on this particular occasion. These requirements are often referred to as the basis of knowledge and veracity (or credibility) tests.
Barker, 114 N.M. at 591, 844 P.2d at 841 (internal quotation marks and citations omitted). Thus, the allegations of an informant cannot provide probable cause to issue a search warrant unless both the basis of the informant's knowledge and the veracity of the informant are demonstrated. See Cordova, 109 N.M. at 214, 784 P.2d at 33.
{13} Defendant does not appear to challenge the basis-of-knowledge prong of the test but rather solely challenges the veracity of the informant. "Under the veracity prong, the affidavit must set forth sufficient facts for the issuing judge to independently determine either the inherent credibility of the informants or the reliability of their information." State v. Steinzig, 1999-NMCA-107, ¶ 18, 127 N.M. 752, 987 P.2d 409. In In re Shon Daniel K., this Court explained that:
Reliability of an informant may be established, among other ways, by showing that: (1) the informant has given reliable information to police officers in the past; (2) the informant is a volunteer citizen-informant; *778 (3) the informant has made statements against his or her penal interest; (4) independent investigation by police corroborates informant's reliability or information given; and (5) facts and circumstances disclosed impute reliability.
1998-NMCA-069, ¶ 12, 125 N.M. 219, 959 P.2d 553 (citations omitted); see State v. Knight, 2000-NMCA-016, ¶ 20, 128 N.M. 591, 995 P.2d 1033 (enumerating ways in which reliability of an informant may generally be established, including past performance and independent corroboration); Steinzig, 1999-NMCA-107, ¶¶ 21-24, 127 N.M. 752, 987 P.2d 409 (stating that the informant's credibility may be corroborated by law enforcement's investigation and observation); State v. Shaulis-Powell, 1999-NMCA-090, ¶ 13, 127 N.M. 667, 986 P.2d 463 (holding that an anonymous tip was adequately corroborated by the officers' visit to the location and observation of plants that appeared, based on the officers' experience, to be marijuana).
{14} Of the In re Shon Daniel K. factors, only the first and the fourth apply in this case. First, the State concedes that the informant was not a volunteer citizen informant. Second, we disagree with the State that the informant's statement was made against penal interest. Although the affidavit indicates "[t]he informant is familiar with [m]arijuana, its appearance and usage, through life experience and previous usage," we agree with Defendant that there is nothing in this statement to suggest that the informant implicated himself in any crime for which he would have had a reasonable fear of prosecution. See, e.g., Barker, 114 N.M. at 592, 844 P.2d at 842 (reiterating that in order for a statement against penal interest to be used to establish the credibility of the informant, there must be a nexus between the informant's statement against his penal interest and the criminal activity for which probable cause to search is being established and explaining that past use by an informant generally will not suffice as the nexus). Third, we see nothing in the affidavit that reasonably imputes credibility or reliability. While the district court partially based its decision on the fact that the informant was designated as a Region V Drug Task Force confidential informant, there is nothing in the record indicating what that designation means or how it is achieved. For example, there was no testimony as to the extent or nature of any screening process for such informants. Nor do we agree that the details about packaging and storage of marijuana provided by the informant establish the overall credibility or reliability of the informant. As the State suggests, those details may be used to help establish the basis-of-knowledge test. Id. at 591, 844 P.2d at 841. They are not, however, sufficient to establish the informant's credibility or reliability.
{15} We are therefore left with establishing the credibility or reliability of the informant through the informant's providing of past reliable information, through independent corroboration, or through some other means. With regard to the informant providing past reliable information, Defendant contends that the affidavit merely contained conclusory assertions, rather than any actual evidence the informant had provided reliable information in the past. To this extent, we agree with Defendant.
{16} By the very nature of the determination of probable cause, the analysis of the issuing judge addresses the probabilities provided by the facts. See Nyce, 2006-NMSC-026, ¶ 10, 139 N.M. 647, 137 P.3d 587 ("When ruling on probable cause, we deal only in the realm of reasonable probabilities, and look to the totality of the circumstances to determine if probable cause is present."). The use of a confidential informant necessarily involves a degree of risk as to the informant's veracity. Cf. Barker, 114 N.M. at 591, 844 P.2d at 841 (stating that the purpose of the Aguilar-Spinelli test is to ensure the reliability of information used to make a probable cause determination). The mere fact that a confidential informant has provided reliable information in the past does not necessarily mean that the informant will do so again. Knight, 2000-NMCA-016, ¶ 20, 128 N.M. 591, 995 P.2d 1033. However, "[w]e accept past performance as indicia of veracity because of the probability that the uncertain present result will be the same as in the past." Id.
*779 {17} As to the past performance in this case, the affidavit states that the informant observed Defendant with a large quantity of marijuana in Defendant's residence. As the basis for relying on this observation, that affidavit states that the "[a]ffiant believes this informant to be credible because the informant has performed at least two supervised controlled purchases of quantities of controlled substances." The difficulty with this statement is that it does not provide information that can assist the magistrate in weighing the probabilities as to whether the informant is reliable. It does not indicate that the informant provided any information in the past, only that the informant cooperated with officers while under supervision to make purchases of controlled substances. That is not to say that the informant did not reliably assist officers in conducting controlled purchases, but the activity the informant performed is not the same as that of providing reliable information that officers then used to purchase controlled substances. Without more information concerning the informant's activity, the affidavit does not directly bear upon the informant's previous reliability in obtaining and relating information about criminal activity.
{18} We are mindful that our substantial basis analysis requires that we give deference to the magistrate's probable cause determination. Moreover, our case law recognizes that minimal details can be sufficient to demonstrate a confidential informant's reliability. For example, in Cordova, our Supreme Court held that the affiant's statement that the confidential informant had provided information in the past that the affiant found to be true and correct from personal knowledge and investigation was sufficient to justify a warrant. Cordova, 109 N.M. at 217-18, 784 P.2d at 36-37. In State v. Montoya, 114 N.M. 221, 225, 836 P.2d 667, 671 (Ct.App. 1992), this Court held that the affiant's statement that the confidential informant had provided reliable information many times in the past was sufficient to establish the credibility of the informant. However, we stress again that this case is different. In Cordova and Montoya, the informants provided information in the past that the affiant was able to determine was credible or reliable. In this case, the affidavit does not state that the informant provided any previous information, but only that the informant participated in controlled purchases.
{19} Nevertheless, even though the affidavit here was not sufficient to establish the informant's credibility or reliability based on the informant's past performance, this deficiency is not fatal to a probable cause determination if the affidavit otherwise demonstrates the credibility or reliability of the informant's information. As stated in the fourth factor of In re Shon Daniel K., independent corroboration of an informant's information can fulfill this need. 1998-NMCA-069, ¶ 12, 125 N.M. 219, 959 P.2d 553.
{20} To justify the issuance of the warrant, the affidavit must demonstrate reasonable grounds to conclude "(1) that the items sought to be seized are evidence of a crime; and (2) that the criminal evidence sought is located at the place to be searched." State v. Whitley, 1999-NMCA-155, ¶ 5, 128 N.M. 403, 993 P.2d 117 (internal quotation marks and citation omitted). The affidavit, dated January 7, 2008, reported observations of the informant within the previous forty-eight hours. The informant's observations indicated that evidence of a crime could be located at Defendant's residence. The affiant, a police officer, stated that he had observed Defendant's residence on several earlier occasions, four times at its previous location and at least once on or after November 1, 2007, at its current location. The affiant witnessed multiple vehicles arriving at the residence and staying only for approximately five minutes. Traffic patterns to and from a defendant's home are relevant to whether a defendant is trafficking controlled substances. See State v. Doe, 103 N.M. 178, 182, 704 P.2d 432, 436 (Ct.App. 1984) (stating that heavy traffic to and from a defendant's home supports an inference that the defendant is trafficking drugs).
{21} The State contends that the affiant's observations corroborate the informant's credibility or reliability. Defendant asserts, to the contrary, that the affiant's information does not corroborate the informant's *780 credibility or reliability because it was stale information in that it did not pertain to ongoing criminal activities. While we agree with Defendant that stale information does not provide probable cause for the issuance of a warrant, we must view the affidavit as a whole in determining its sufficiency. Whitley, 1999-NMCA-155, ¶ 3, 128 N.M. 403, 993 P.2d 117. The affiant's information concerning his own observations of Defendant's residence does not, in itself, provide probable cause for the issuance of the warrant. See Nyce, 2006-NMSC-026, ¶ 14, 139 N.M. 647, 137 P.3d 587 (stating that mere suspicion about ordinary, non-criminal activities does not provide probable cause). However, even though information is not sufficient to provide probable cause does not mean that it cannot serve as corroborative information of an informant's credibility or reliability. Certainly, if the affiant had made his observations in the same time period addressed by the informant, the affiant's information would corroborate the informant's observations and bear upon the informant's credibility or reliability. See State v. Donaldson, 100 N.M. 111, 116, 666 P.2d 1258, 1263 (Ct.App.1983) (holding that an affidavit was sufficiently reliable when law enforcement affiant detailed personal observations and therefore corroborated information from a confidential informant).
{22} But the flaw in the State's position is that there was no timely corroboration of the informant's information. Although the affiant had observed suspicious activity that was consistent with drug trafficking, and his observations were further consistent with the informant's observations, the affiant could not corroborate the reliability of the informant's report that Defendant had present possession of marijuana. This information was essential to the probable cause determination because the "privacy of a home is afforded the highest level of protection by our state and federal constitutions." Nyce, 2006-NMSC-026, ¶ 12, 139 N.M. 647, 137 P.3d 587. If the informant's report were correct, we presume that the affiant could have corroborated it by additional surveillance. However, without it or other present information that corroborated the informant's information, the magistrate did not have a substantial basis to conclude that the informant was reliable.
CONCLUSION
{23} We reverse the district court and hold that the affidavit was insufficient to support a finding of probable cause to issue the warrant.
{24} IT IS SO ORDERED.
WE CONCUR: CELIA FOY CASTILLO, Chief Judge, and JONATHAN B. SUTIN, Judge. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453693/ | 362 F. Supp. 2d 284 (2005)
AMERICAN POSTAL WORKERS UNION, AFL-CIO, Plaintiff,
v.
UNITED STATES POSTAL SERVICE Defendant.
No. CIV.A. 04-00424RCL.
United States District Court, District of Columbia.
March 30, 2005.
*285 *286 Melinda Kim Holmes, Brenda Catherine Zwack, O'Donnell, Schwartz & Anderson, P.C., Washington, DC, for Plaintiff.
Marina Utgoff Braswell, US Attorney's Office for the District of Columbia, Washington, DC, for Defendant.
MEMORANDUM OPINION
LAMBERTH, District Judge.
This matter comes before the Court on defendant's motion for summary judgment and plaintiff's cross-motion for summary judgment. Fed. R. Civ.P. 56(c). Plaintiff's cause of action arises out of an alleged breach of a collective bargaining agreement. Plaintiff asserts a claim pursuant to 39 U.S.C. § 1208(b), the Postal Reorganization Act, which states that "[s]uits for violation of contracts between the Postal Service and a labor organization representing the Postal Service employees, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy." Plaintiff asserts that the arbitrator exceeded her authority in granting a default judgment, did not draw from the essence of the collective bargaining agreement and acted arbitrarily and capriciously. Defendant disputes these claims, arguing that the arbitrator made an authorized, procedural decision within her discretion which drew from the essence of the collective bargaining agreement.
Defendant submitted a motion and memorandum in support of its position. Plaintiff subsequently filed an opposition to plaintiff's motion for summary judgment and a cross-motion for summary judgment. Defendant and plaintiff filed reply briefs, respectively. Upon consideration of the parties' filings, the applicable law, the Federal Rules of Civil Procedure and the facts of this case, the Court finds that the defendants' motion for summary judgment will be GRANTED. Plaintiff's cross-motion for summary judgment will be DENIED.
*287 I. BACKGROUND
The Collective Bargaining Agreement between American Postal Workers Union, AFL-CIO, and U.S. Postal Service ("Agreement") governs the parties' grievance and arbitration procedure. (Compl. at ¶¶ 6,7). The Agreement covers a variety of employment disputes through each of the stages of resolution, including a final and binding arbitration. (Compl. at ¶¶ 6, 7). Article 15 of the Agreement outlines general provisions of an arbitration. (Agreement, at 103). According to Section 15.5.A.6, "[a]ll decisions of arbitrators will be final and binding. All decisions of arbitrators shall be limited to the terms and provisions of this Agreement, and in no event may the terms and provisions of this Agreement be altered, amended, or modified by an arbitrator." (Agreement, at 103). Furthermore, Article 16 on Discipline Procedure states that "[n]o employee may be disciplined or discharged except for just cause...." (Agreement, at 109).
The dispute between the parties began when Denise Flannery underwent surgery for a brain aneurism and requested leave under the Family Medical Leave Act. (Hoffman Dec. at ¶ 3). The Postal Service denied Flannery's request for leave, and on February 1, 2003, issued a Letter of Warning charging Flannery with "Failing to Be Regular in Attendance." (Letter of Warning, at 2). The APWU filed a grievance on Flannery's behalf, claiming that the Letter of Warning was without "just cause." (Compl. at ¶¶ 8, 9). The parties were unable to resolve this dispute through the initial steps of the grievance procedure, so they submitted it to arbitration. (Compl. at ¶¶ 8, 9). The parties agreed that Arbitrator Marjorie H. O'Reilly would be the arbitrator and that the hearing would take place on November 18, 2003. (Compl. at ¶¶ 10, 11).
At the November 18 hearing, Scott Hoffman was the advocate for the APWU and James Ryan was the advocate for the Postal Service. (Hoffman Dec. at ¶ 5). As the arbitration hearing began, Ryan learned that Flannery would not be attending the arbitration and that the APWU did not intend to call her as a witness. (Decl. of Ryan, at ¶ 4). Hoffman asserted that his case was almost entirely procedural and Flannery's testimony was not necessary for his case. (Hoffman Dec. at ¶ 8). Accordingly, Ryan informed Hoffman that if he could not cross-examine Flannery, Ryan intended to call her as a witness. Id. at ¶ 5. The APWU stated that the grievant was presently unable to participate in the arbitration hearing, either in person or by phone, for medical reasons. Id. at ¶ 6. Arbitrator O'Reilly then postponed the hearing, giving the APWU fourteen days to produce medical evidence showing that Flannery was unable to participate in the hearing in person or by telephone. (Award, at 1). She also requested that the APWU provide her with a date by which Flannery would be able to participate in the hearing. (Award, at 1).
The APWU never produced the medical evidence or a potential date when Flannery could participate in the hearing. (Award, at 1). The APWU gave no reason for its failure to do so. Arbitrator O'Reilly then issued a default judgment for the Postal Service, denying the APWU's grievance on the ground that the APWU did not comply with her order. (Compl. at ¶ 14).
II. ANALYSIS
A. Summary Judgment
Summary judgment is appropriate when "there is no genuine issue as to any material fact." Fed. R. Civ.P. 56(c); See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). *288 A fact is material if it will affect the outcome of the case. Id. Moreover, a moving party is entitled to summary judgment as a matter of law when the law supports the moving party's position. See Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590, 594 (11th Cir.1995). Inferences drawn from the facts must be viewed in the light most favorable to the party opposing the motion. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970).
Once the moving party files a proper summary judgment motion, the burden shifts to the non-moving party to produce "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e). The non-moving party cannot establish a genuine issue of material fact exists through "conclusory allegations" or "unsubstantiated assertions." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994). Any factual assertions contained in the declaration in support of a motion will be accepted by the Court as true unless plaintiff submits his own declarations or other documentary evidence contradicting the assertions in the attached declarations. See Neal v. Kelly, 963 F.2d 453, 456 (D.C.Cir.1992).
B. Standard of Review
The standard of review for arbitration decisions is abuse of discretion. Sanders v. Washington Metro. Area Transit Auth., 819 F.2d 1151, 1157 (D.C.Cir.1987). Therefore, "the courts have a very circumscribed role to play." American Postal Workers Union, AFL-CIO v. United States Postal Service, 789 F.2d 1, 4 (D.C.Cir.1986). See also Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509, 121 S. Ct. 1724, 149 L. Ed. 2d 740 (2001); United Steelworkers of America v. American Mfg. Co., 363 U.S. 564, 567, 80 S. Ct. 1343, 4 L. Ed. 2d 1403 (1960); United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 578, 80 S. Ct. 1347, 4 L. Ed. 2d 1409 (1960); United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S. Ct. 1358, 4 L. Ed. 2d 1424 (1960); Hotel Assoc. of Washington, D.C., Inc. v. Hotel & Restaurant Employees Union, 963 F.2d 388, 389 (D.C.Cir.1992); Kanuth v. Prescott, Ball & Turben, Inc., 949 F.2d 1175, 1178 (D.C.Cir.1991).
To abandon this highly deferential standard, "[t]he case must present some egregious deviation from the norm." Office & Prof'l Employees Int'l Union, Local 2, v. Washington Metro. Area Transit Auth., 724 F.2d 133, 137 (D.C.Cir.1983). The rationale for such deference arises from the parties' mutual intent to be bound to the outcome of arbitration through a collective bargaining agreement. Thus, as long as the arbitrator's decision "draw[s] its essence from the collective bargaining agreement," a court is not entitled to review the decision on the merits, even when the arbitrator's decision appears to be "ambiguous." W.R. Grace & Co. v. Local Union 759, International Union of United Rubber Cork, Linoleum and Plastic Workers, 461 U.S. 757, 759, 103 S. Ct. 2177, 76 L. Ed. 2d 298 (1983) (citing United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 598, 80 S. Ct. 1358, 4 L. Ed. 2d 1424 (1960)). Only when an arbitrator "dispense[s] his own brand of industrial justice" may a court find her decision unenforceable. United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S. Ct. 1358, 4 L. Ed. 2d 1424 (1960).
Judicial deference is even greater for procedural decisions. See John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557, 84 S. Ct. 909, 11 L. Ed. 2d 898 (1964). The Supreme Court has stated that "[o]nce it is determined ... that the parties are obligated to submit the subject matter of a *289 dispute to arbitration, `procedural' questions which grow out of the dispute and bear on its final disposition should be left to the arbitrator." Id. at 557, 84 S. Ct. 909. If such procedural deference was not given to arbitrators, "[r]eservation of `procedural' issues for the courts would... not only create the difficult task of separating related issues, but would also produce frequent duplication of effort." Id. at 558, 84 S. Ct. 909.
Procedural questions include "whether grievance procedures have been followed or excused, or whether the unexcused failure to follow them avoids the duty to arbitrate." Id. Procedural question have further been defined by the courts as involving time limitations, waiver, and timeliness of filings. Washington-Baltimore Newspaper Guild, Local 35 v. Washington Post, 959 F.2d 288, 291 (D.C.Cir.1992); McKesson Corp. v. Local 150 IBT, 969 F.2d 831, 834 (9th Cir.1992); Beer, Soft Drink, Water, Fruit Juice, Carbonic Gas, Liquor Sales Drivers et al., Local Union No. 744 v. Metro. Distrib. Inc., 763 F.2d 300, 303 (7th Cir.1985).
C. The Arbitrator Acted within Her Authority under the Collective Bargaining Agreement in Granting a Default Judgment
It is well-established that a highly deferential standard applies to arbitration decisions, unless the arbitrator's action are an "egregious deviation from the norm." Office & Prof'l Employees Int'l Union, Local 2 v. Washington Metro. Area Transit Auth., 724 F.2d 133, 137 (D.C.Cir.1983). Moreover, it is equally well-established that courts are even more deferential regarding procedural decisions. See John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557, 84 S. Ct. 909, 11 L. Ed. 2d 898 (1964). This conclusion is further supported in National Football League Players Assoc. v. Office and Prof. Employees Intern. Union, Local 2, 947 F. Supp. 540, 545 (D.D.C.1996), where this Court held that an arbitrator's refusal to postpone the arbitration was a procedural motion requiring judicial deference. National Football League Players Assoc. v. Office and Prof. Employees Intern. Union, Local 2, 947 F. Supp. 540, 545 (D.D.C.1996). As in National Football League Players Assoc., the Court also defers to the procedural judgment to Arbitrator O'Reilly in this case.
Here, O'Reilly clearly instructed the APWU to provide medical documentation to support their claim that grievant Flannery could not participate in the arbitration hearing either in person or by phone, as well as to supply her with a potential date by which Flannery could participate. (Award, at 1). Arbitrator O'Reilly also provided a clear deadline of fourteen days to provide such information. Id. These instructions are clearly procedural, as no record of fact was yet established through the arbitration process when Arbitrator O'Reilly issued the default award. (Award, at 1). Nothing about the Arbitrator's actions raises a red flag in terms of egregious behavior; in fact, her actions were quite justifiable.
The APWU argues that Arbitrator O'Reilly's decision violated the grievant's right to a "fundamentally fair hearing." International Technologies Integration, Inc. v. Palestine Liberation Organization, 66 F. Supp. 2d 3, 10 (D.D.C.1999). Further, the APWU claims that deference to the arbitrator's award would be condoning a use of "procedural authority to deny the parties due process in the form of a full and fair hearing." (Pl. Opp. and Cr. Motion for S.J., at 8). But the issue here is procedural, not substantive. After Arbitrator O'Reilly's instruction, the APWU did not supply any of the information requested, *290 nor did they provide any reason whatsoever for their omission. (Award, at 1). In fact, the reason why the grievant did not receive a hearing was because neither she nor the APWU ever responded to these preliminary procedural matters. Id. While parties certainly have a right to due process and to a fundamentally fair hearing, this does not give the parties the right to disobey a procedural order of an arbitrator and then claim that they were treated unfairly because a default judgment is issued.
D. The Arbitrator's Procedural Decision Properly Drew from the Essence of the Contract between the Parties
The parties' collective bargaining agreement does not specifically address procedural decisions that can or cannot be made by an arbitrator. The Agreement merely states that an arbitrator's decision is "final and binding, and that "[n]o employee may be disciplined or discharged except for just cause...." " (Agreement, at 103, 109). While the arbitrator is specifically prohibited from altering the Agreement in any way under Article 15.5.A.6, she also maintains considerable discretion to deal with procedural matters. See John Wiley & Sons, Inc., v. Livingston, 376 U.S. 543, 557-558, 84 S. Ct. 909, 11 L. Ed. 2d 898 (1964).
Arbitrator O'Reilly's procedural decision to enter a default judgment did not conflict with the contractual requirement to establish just cause. In this case, the grievant was disciplined for failure to report to work for a span of several days. (Letter of Warning, at 2). These absences initially created "just cause" by the Postal Service to issue the grievance. Under the Agreement, Flannery is entitled to "the grievance-arbitration procedure provided for in this Agreement...." which she received. (Agreement, at 110). There is no question that an arbitration was promptly scheduled, and that the hearing began on November 18, 2003. Yet, because of Flannery's absence, the Arbitrator determined that the arbitration should be postponed so that the Postal Service could have the opportunity to question Flannery during the proceedings. (Award, at 1). The decision not to respond to the Arbitrator's order was entirely that of the APWU. Through non-compliance, the grievant and the APWU effectively halted the arbitration proceeding to which they were entitled. It would be unjust to now re-arbitrate this matter to the benefit of the party who was responsible for ending the initial arbitration through non-compliance with the Arbitrator's order. Therefore, the Arbitrator's decision drew properly from the Agreement between the parties, and her decision to dismiss grievant's complaint is affirmed.
E. The arbitrator did not act arbitrarily and capriciously.
Plaintiff's final assertion that Arbitrator O'Reilly's decision was arbitrary and capricious is without merit. However, plaintiff does not provide authority for this assertion, nor provides any argument on this issue in either of plaintiff's briefs. While 9 U.S.C. § 10(a) outlines cases in which a United States District Court may vacate an arbitration award, the arbitrary and capricious standard is not included in any of the provisions.
III. CONCLUSION
For the foregoing reasons, the defendant's motion for summary judgment is GRANTED. Plaintiff's cross-motion for summary judgment is DENIED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453695/ | 362 F. Supp. 2d 219 (2005)
VIGILANT INSURANCE CO., a/s/o Williams & Connolly, L.L.P, Plaintiff,
v.
EEMAX, INC. and PVI Industries, L.L.C., Defendants.
EEMAX, Inc., Third-Party Plaintiff,
v.
General Electric Company et al., Third-Party Defendants.
No. CIV.A. 02-1825(JMF).
United States District Court, District of Columbia.
March 24, 2005.
Andrew B. Katz, Fox Rothschild LLP, Washington, DC, for Plaintiff.
Carlton D. Wilde, Franklin, Caldwell & Jones, P.C., Steve A. Bryant, Steve A. Bryant & Associates, P.C., Houston, TX, Francis H. Foley, Hartford Staff Counsel's Office, Alexandria, VA, William Joseph *220 Virgulak, Jr., Martell, Donnelly, Grimaldi & Gallagher, P.C., Aurelius K. Wilson, Rhatigan, Ollen, Carleton & Costabile, Fairfax, VA, Matthew Evan Corcoran, Thomas W. Brunner, Wiley Rein & Fielding, LLP, Washington, DC, Michael D. Schissel, Pamela Miller, Arnold & Porter, New York, NY, for Defendants.
MEMORANDUM ORDER
FACCIOLA, United States Magistrate Judge.
This case is before the court upon consent of the parties to trial before a United States Magistrate Judge. On February 4, 2005, I ordered the parties to brief the question of whether this court has jurisdiction over the third-party claims because the primary action has settled and diversity is lacking between the parties that remain in this case.
The primary action involved a suit by plaintiff Vigilant Insurance Company against defendants EEMAX, Inc. ("EEMAX") and PVI Industries, LLC for damages caused by the malfunction of an EEMAX water heater at the Williams & Connelly office building. In the third-party action, brought by third-party plaintiff EEMAX against third-party defendants General Electric Company et al. ("GE"), EEMAX blames GE's plastic resin for the alleged failure of other EEMAX water heaters manufactured between 1988 and 2003.
GE manufactures and sells plastic resin, including the resin at issue in this case, in pellet form. Years ago, GE sold thousands of pounds of pellets to Mohawk Tool & Die Manufacturing Company ("Mohawk"), which converted the pellets into molded parts. EEMAX then purchased the molded resin from Mohawk and incorporated it into its water heaters. According to EEMAX, many of these water heaters have failed to perform properly, and EEMAX alleges that the failures occurred because GE's resin was unsuitable for EEMAX's hot water application.
EEMAX cites two pieces of evidence to support its claims: (1) a letter dated October 25, 1988 from GE sales specialist, Patty O'Beirne ("O'Beirne"), to EEMAX's chief engineer at the time ("O'Beirne Letter"); and (2) two meetings involving EEMAX's current lead engineer, Edward Fabrizio ("Fabrizio"), and GE's customer representative, Frank Becker ("Becker"), that took place in 2000 and 2001. In the O'Beirne Letter, a GE sales specialist represents to EEMAX that GE's Noryl resin is especially noted for its hydrolitic stability, discusses the resin's performance in water and heated environments, and comments that the Noryl resin's low water absorption rate contributes to its dimensional stability. Twelve years after the O'Beirne Letter was sent to EEMAX, after learning that EEMAX's insurance policy was going to be canceled because of an increase in property damage claims, Fabrizio investigated the cause of the malfunctions and concluded that the problems were caused by leaks in the plastic housing bodies of the EEMAX water heaters. In an attempt to correct the leaking problem, Fabrizio met with a molder from Mohawk and GE's customer representative, Becker. EEMAX claims that Becker reassured EEMAX that GE's Noryl resin was appropriate for use in EEMAX's hot water applications and suggested ways-other than replacing the resin-to try to solve the problem. Based on this evidence, EEMAX brings claims against GE for breach of contract, indemnity, contribution, breach of warranty, fraud, misrepresentation, and negligence.
I. DISCUSSION
A. Legal Standards
Under federal statute, a district court may decline to exercise supplemental jurisdiction over a claim if:
*221 (1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has original jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.
28 U.S.C. § 1367(c).[1] The court has considerable discretion in determining whether to retain or decline supplemental jurisdiction. In making this determination, the court must weigh the following factors: (1) judicial economy, (2) convenience, (3) fairness, and (4) comity. Edmondson & Gallagher v. Alban Towers Tenants Ass'n, 48 F.3d 1260, 1266 (D.C.Cir.1995) (citing United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966)).[2] "In the usual case in which all federal-law claims are eliminated before trial, the balance of factors to be considered under the [supplemental] jurisdiction doctrine-judicial economy, convenience, fairness, and comity-will point toward declining to exercise jurisdiction over the remaining state-law claims." Griffin v. Acacia Life Ins. Co., 151 F. Supp. 2d 78, 81 (D.D.C.2001) (quoting Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n. 7, 108 S. Ct. 614, 98 L. Ed. 2d 720 (1988)). See also Gibbs, 383 U.S. at 726, 86 S. Ct. 1130. These guidelines reflect the important underlying principle that federal courts should avoid entertaining decisions of state law when no federal issues remain. Gibbs, 383 U.S. at 726, 86 S. Ct. 1130 ("Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law.").
B. Analysis
The present case implicates two of the three specific bases for declining to exercise supplemental jurisdiction under § 1367(c), and the court finds each of these bases to be independently sufficient. As discussed below, the remaining claims raise complex issues of Connecticut law, and the court will decline the exercise of jurisdiction under both 28 U.S.C. § 1367(c)(1) and 28 U.S.C. § 1367(c)(3).
1. Complex Issues of Connecticut Law
The state law claims that remain in this case are: breach of contract, indemnity, contribution, breach of warranty, fraud, misrepresentation, and negligence. At first glance, these claims seem quite ordinary and straightforward. But, considering the specific facts of this case-such as the relationship between GE, EEMAX, and Mohawk (a company that has never been a party to this action) it is apparent that the legal issues are not so clear-cut. In addition, a review of Connecticut law indicates that there is an absence of controlling authority and a level of complexity here that the parties have not addressed in their briefs.
For example, the deciding court must determine whether the evidence cited by EEMAX a letter in which GE touts the properties of its resin and meetings, conducted twelve years later, in which a GE representative allegedly commented that *222 the resin was a decent selection is sufficient to find an implied contract between the parties. Additionally, in a case such as this one, where GE allegedly entered a contract to select or provide guidance in selecting a resin but sold that resin not to EEMAX but to another company, is that a sale of goods or a contract for services, and does the common law or only the Uniform Commercial Code ("UCC") apply? As one Connecticut court noted, there are two lines of cases and no clear authority regarding how and whether to determine whether a hybrid transaction is a sale of goods or services. Martisek v. Showron, No. CV980354780, 2003 WL 21716577, at *2-3 (Conn.Super.Ct. July 9, 2003). According to one line of cases, the court looks to whether the dominant factor or essence of the transaction is the sale of materials or services. Id. at *2 (citing Myrtle Mills Assocs. v. Bethel Roofing, Inc., 10 Conn. L. Rptr. 49, 50 (Conn.Super.Ct.1993); Epstein v. Giannattasio, 25 Conn.Supp. 109, 197 A.2d 342 (Conn.C.P.1963); Gulash v. Stylarama, 33 Conn.Supp. 108, 111, 364 A.2d 1221 (Conn.C.P.1975)). In another line of cases, however, Connecticut courts have noted "the absence of a decision of the Connecticut Supreme Court limiting the effect of a breach of warranty to the goods themselves as opposed to services directly connected to such goods, and in view of the ever increasing policy towards the imposition of liability upon a manufacturer for any conduct on his part causing damage to another," they have adopted a "more liberal trend" and have found, under certain circumstances, that the sale of a good and the provision of services "should be considered as a unified whole." Id. at *3 (quoting Paint Prods. Co. v. AA-1 Steel Equip. Co., 35 Conn.Supp. 52, 53-54, 393 A.2d 1317 (Conn.Sup.Ct.1977) and citing Brown v. Triangle Pacific Corp., 32 Conn. L. Rptr. 467 (Conn.Sup.Ct.2002)). Thus, there is no one method for determining whether the transaction is one for goods or services or both. In addition, the issue of whether the common law or the UCC applies takes on added significance in light of the following trend in the case law: where a claim for economic damages[3] arises out of the commercial sale of goods governed by the UCC, plaintiff's remedies are limited only to those available under the Code, but where the claim is not governed by the UCC, plaintiffs may also pursue tort claims, such as negligent misrepresentation and fraud. See, e.g., Flagg Energy Dev. Corp. v. Gen. Motors Corp., 244 Conn. 126, 709 A.2d 1075 (Conn.1998); Metcoff v. Nct Group, Inc., No. X04CV040184701S, 2005 WL 288769 (Conn.Sup.Ct. Jan. 10, 2005); Santoro, Inc. v. A.H. Harris & Sons, Inc., 38 Conn. L. Rptr. 4 (Conn.Sup.Ct.2004) (following Flagg).
Another area of complexity stems from the fact that EEMAX never had a privity relationship with GE. A review of the Connecticut case law indicates that, in some situations, courts have decided to dispense with the UCC's privity requirement, especially when no other alternative remedies are available or when plaintiff has brought suit for personal injury. As the district court in the District of Connecticut has stated:
[A]fter reviewing the recent Connecticut cases, this Court is not convinced that these decisions etch the privity requirement in stone. Certain decisions do appear to require privity in a contractual *223 warranty action. Nonetheless, such rulings are uniformly based on the availability of some alternative remedy as to which privity is unnecessary.... Thus, it is arguable that what defendant perceives as a firm commitment to privity in Connecticut is ... nothing more than an application of the doctrine limited to the existence of alternative remedies wherein privity is not required.
Utica Mutual Ins. Co. v. Denwat Corp., 778 F. Supp. 592, 595-96 (D.Conn.1991) (quoting Quadrini v. Sikorsky Aircraft Div., 505 F. Supp. 1049, 1051 (D.Conn.1981)). The Quadrini court also noted: "In none of the recent Connecticut cases would imposing a privity requirement have meant the dismissal of all warranty counts, but only that the plaintiffs would pursue their claims through the available alternative tort routes." Quadrini, 505 F.Supp. at 1052. In a personal injury case, the District Court for the District of Connecticut commented that "giant steps toward the inevitable demise of the privity requirement have been taken in Connecticut. The heights attained in this field by the legislature and judiciary in Connecticut should not now serve as pinnacles from which this Court backslides toward resuscitation of the privity doctrine." Chairaluce v. Stanley Warner Mgmt. Corp., 236 F. Supp. 385, 387 (D.Conn.1964). However, in this case, there is no allegation of personal injury, and it is unclear whether remedies other than those sought under the UCC will be available, especially given the limited evidence on which EEMAX relies to prove its common law breach of contract, negligence, and fraud and misrepresentation claims. Therefore, it is unclear whether, in this case, a Connecticut court would continue this trend toward dispensing with the privity requirement. This is especially true given recent case law emanating from a Connecticut state court in which the court refused to extend the exception to the UCC privity requirement because "policy arguments relating to commercial predictability and limitations of liability encompassed within the legislatively enacted UCC should trump judicially devised concepts intended to create a forum for every conceivable injury or loss." United Technologies Corp. v. Saren Engineering, Inc., 33 Conn. L. Rptr. 127 (Conn.Sup.Ct.2002) (distinguishing cases in which courts dispensed with the privity requirement because plaintiffs sought damages for personal injury, not economic loss). In addition, one lower court ruled that, because the legislature has carved out commercial losses between commercial parties for treatment only under the UCC, plaintiffs who are not in privity with the product sellers cannot maintain warranty actions under the UCC. See Bosek v. Valley Transit Dist., 10 Conn. L. Rptr. 503 (Conn.Sup.Ct.1993). Because the courts have voiced such strong statements both in favor of and against maintaining the privity requirement in UCC warranty actions, and because there is a "dearth of caselaw" regarding this issue, see Pro Con, Inc. v. Coastal Wall, 37 Conn. L. Rptr. 875, 876 (Conn.Super.Ct.2004), this unsettled area of the law should be resolved by courts in Connecticut.[4]
Finally, and perhaps most importantly, resolution of these issues may have serious long-term consequences for commercial transactions in the state of Connecticut. Thus, the proper forum for resolution of these claims is the Connecticut state court system.
*224 2. Fairness, Convenience, and Judicial Economy
As for the other factors that must be considered in determining whether to retain or decline jurisdiction under 28 U.S.C. § 1367(c), some point in favor of retaining jurisdiction, but none can overcome the crucial interest in comity and having state courts decide issues of developing state law. For example, GE argues that fairness points in favor of retaining jurisdiction because EEMAX selected this forum for its third-party claim, but now argues, late in the litigation, that this court should decline jurisdiction. While it is unfortunate that the jurisdictional issue did not come to the court's attention until the summary judgment motion was briefed, the court will not fault either party, nor will it conclude that starting the case anew works more of an unfairness on one party rather than the other. In fact, fairness points in the direction of declining jurisdiction because, given the complex issues involved in this case, both parties deserve to litigate this case in Connecticut, where they will be able to procure "a surer-footed reading of applicable law." Gibbs, 383 U.S. at 726, 86 S. Ct. 1130.
As for convenience, this factor has little impact on the court's analysis because no one jurisdiction is more convenient than any other.[5]
Finally, in terms of judicial economy, it is certainly regrettable that resolution of the case will be delayed and the case will start anew because this court is already familiar with the record and the parties have invested considerable resources in litigating this case in federal court. But, these considerations are trumped by the fact that the complex issues raised by this lawsuit ought to be decided by a Connecticut court, not a federal district court sitting in the District of Columbia.
I must note that other courts have decided to retain jurisdiction when the cases were in a procedural posture similar to the case at bar. However, these courts also determined that the applicable state law was straightforward and that no novel, unsettled, or difficult issues of state law remained in the case. See, e.g., Doddy v. Oxy USA, Inc., 101 F.3d 448, 456 (5th Cir.1996); Timm v. Mead Corp., 32 F.3d 273, 277 (7th Cir.1994); Door Systems, Inc. v. Overhead Door Systems, Inc., 905 F. Supp. 492, 497-98 (N.D.Ill.1995). On the other hand, courts that have dismissed state law claims once the main claims have been dismissed have cited, in support of their decisions, the fact that difficult issues of state law remained. See, e.g., Edmondson, 48 F.3d at 1266; Brown v. Gino Morena Enters., 44 F. Supp. 2d 41, 53 (D.D.C.1999); Kimsey v. Snap-On Tools Corp., 752 F. Supp. 693, 695 (W.D.N.C.1990) (finding that, because the issues remaining after dismissal of the federal claims involved state questions between residents of the same state, the interests of justice would be best served by the matters being remanded to the appropriate state courts). In addition, this Circuit has cautioned against reaching out to decide unsettled issues of state law when all federal claims have been dismissed before trial and has stated that "a federal court should be reluctant to retain pendent jurisdiction over a question for which state jurisprudence gives inadequate guidance." Women Prisoners, 93 F.3d at 922 (quoting Fin. Gen. Bankshares, Inc. v. Metzger, 680 F.2d 768, 776 (D.C.Cir.1982)).
For all of these reasons, this court will decline the exercise of supplemental jurisdiction. Accordingly, it is, hereby, ORDERED *225 that this case is DISMISSED without prejudice.
NOTES
[1] All references to the United States Code are to the electronic versions that appear in Westlaw or Lexis.
[2] Even though Gibbs was decided before the enactment of the statute, this Circuit has held that 28 U.S.C. § 1367 "essentially codifies [Gibbs]." Women Prisoners of District of Columbia Dept. of Corrections v. District of Columbia, 93 F.3d 910, 921 (D.C.Cir.1996) (quoting Edmondson, 48 F.3d at 1266).
[3] EEMAX has alleged the following damages: damages caused by increased overhead costs, damages for cover, attorney's fees, damages caused by warranty claims by EEMAX's customers, damages caused by increased insurance premiums, monies paid in settlement of other claims, lost profits, and injury to reputation. Third Amended Complaint ¶ 23.
[4] In addition, it must be noted that there is an additional wrinkle to the privity issue in this case. Mohawk, the party that was in privity with GE for the sale of the resin, was not only an intermediary; it also modified GE's product (by converting the resin from pellet to molded form) before selling it, in turn, to EEMAX.
[5] Two key witnesses reside in Connecticut, while two reside in Virginia. Counsel, on the other hand, are located in Texas, Virginia, New York, and the District of Columbia. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453701/ | 253 P.3d 286 (2011)
STATE of Arizona, Appellee,
v.
William Charles BARKER, Appellant.
No. 1 CA-CR 09-0700.
Court of Appeals of Arizona, Division 1, Department C.
April 21, 2011.
Thomas C. Horne, Arizona Attorney General By Kent E. Cattani, Chief Counsel, Criminal Appeals/Capital Litigation Section, Katia Mehu, Assistant Attorney General, Phoenix, Attorneys for Appellee.
Law Offices of Paul J. Mattern By Paul J. Mattern, Phoenix, Attorneys for Appellant.
OPINION
DOWNIE, Judge.
¶ 1 William Charles Barker appeals his conviction for resisting arrest. We affirm the conviction and hold that a police officer need not announce that a person is under arrest in order to "effect an arrest" within the meaning of Arizona's resisting arrest statute.
FACTS AND PROCEDURAL HISTORY[1]
¶ 2 Officer Miller came upon Barker and a woman arguing loudly in the roadway. Barker told Officer Miller he got into an argument with the woman and threw a pair of sunglasses at her. Officer Miller detected alcohol on Barker's breath. The officer believed he had probable cause to arrest Barker for disorderly conduct. After Barker refused three times to turn around and be placed in handcuffs, Officer Miller reached out with one hand to get Barker to turn around, but Barker pulled away. Officer Miller then reached out with both hands and again told Barker to turn around so he could handcuff him; Barker broke free.
*287 ¶ 3 Officer Morris arrived on the scene and saw that Barker appeared to be resisting arrest. He executed an "impact push," and all three men ended up on the ground. As Officer Miller tried to gain control of Barker's wrists, Officer Morris announced he was going to use a Taser on Barker. Officer Morris told Barker numerous times to lie down and put his hands behind his back or the Taser would be used. As Barker was walking toward his truck, Officer Morris shot his Taser. Barker turned around and grabbed the Taser wires, broke them, and ran at Officer Morris in a tackling position. When Barker had his arms wrapped around Officer Morris, Officer Miller grabbed Barker's arm, and all three men again fell to the ground. The two officers struggled with Barker until Officer Doughty arrived to help handcuff Barker.
¶ 4 Barker was charged with two counts of aggravated assault, both class 6 felonies, and one count of resisting arrest, a class 6 felony. After a two-day trial, the jury found Barker guilty of resisting arrest. The trial court placed Barker on probation for three years.
¶ 5 Barker filed a timely notice of appeal. We have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") sections 12-120.21(A)(1), 13-4031, and 13-4033(A).
DISCUSSION
¶ 6 A person commits the offense of resisting arrest by "intentionally preventing or attempting to prevent a person reasonably known to him to be a peace officer, acting under color of such peace officer's official authority, from effecting an arrest by . . . [u]sing or threatening to use physical force against the peace officer or another." A.R.S. § 13-2508(A)(1), (2). Barker challenges only the element of "effecting an arrest," arguing he could not have resisted arrest because he was not placed under arrest. A reasonable jury could have concluded otherwise.
¶ 7 An arrest occurs when a person's "freedom of movement is curtailed." State v. Cole, 172 Ariz. 590, 591, 838 P.2d 1351, 1352 (App.1992) (citation omitted). "An arrest is made by an actual restraint of the person to be arrested, or by his submission to the custody of the person making the arrest." A.R.S. § 13-3881(A). Although an arrest may not be complete until a defendant is actually restrained, the resisting arrest statute is violated if a person prevents or attempts to prevent an officer from "effecting an arrest." State v. Mitchell, 204 Ariz. 216, 218, ¶ 12, 62 P.3d 616, 618 (App.2003).
¶ 8 "[E]ffecting an arrest" has been construed to mean "an on-going process toward achieving, producing, making, or bringing about, an arrest." Id. In Mitchell, we stated:
"[E]ffecting an arrest" is a process with a beginning and an end. Often, the process is very brief and the arrest is quickly completed. In some situations, however, the process of "effecting" an arrest will occur over a period of time and may not be limited to an instantaneous event, such as handcuffing.
Id. at ¶ 13 (internal citations omitted); see also State v. Bay, 130 Ohio App. 3d 772, 721 N.E.2d 421, 423 (1998) (An arrest "is `not necessarily an instantaneous event,' but rather is a process beginning with the seizure of a person, which can encompass acts necessary to effect the formal charging of a crime." (internal citations omitted)).
¶ 9 The State presented evidence from which jurors could conclude that officers here were effecting an arrest. Barker emphasizes the failure to state he was under arrest and points out that Officer Miller initially intended only to detain him. The following colloquy occurred between Officer Miller and Barker at trial:[2]
Q. . . . Can you explain why you never told me that I was under arrest?
. . . .
A. At that point in time I was going to detain you, until you started to pull away from me. And during the confrontation as inbecause it all had escalated so fast, you immediately were going to be put under arrest.
¶ 10 Barker has cited no Arizona authority for the proposition that police officers must formally announce a person is "under *288 arrest" before he or she can be convicted of resisting arrest, and we are aware of none. Many jurisdictions have held that a formal declaration of arrest is not necessary to effect an arrest. See United States v. Jones, 129 F.3d 718, 721-22 (2d Cir.1997); State v. Williams, 237 S.C. 252, 116 S.E.2d 858, 860 (1960); State v. Solis, 38 Wash.App. 484, 685 P.2d 672, 674 (1984). We agree and hold that an individual need not be specifically advised he is under arrest in order to be guilty of resisting arrest.
¶ 11 Barker's reliance on State v. Womack, 174 Ariz. 108, 847 P.2d 609 (App.1992), is unavailing. In Womack, the defendant fled on a motorcycle from an officer attempting a traffic stop. 174 Ariz. at 110, 847 P.2d at 611. After a high speed chase over a number of miles, the defendant eventually pulled over and was taken into custody. Id. This Court concluded that defendant's mere flight, unaccompanied by physical contact with officers, did not constitute resisting arrest. Id. at 114, 847 P.2d at 615. In the case at bar, on the other hand, Barker exerted substantial and continuing physical force against officers.
¶ 12 In California v. Hodari D., 499 U.S. 621, 111 S. Ct. 1547, 113 L. Ed. 2d 690 (1991), the Court clarified when encounters between police officers and citizens rise to the level of an arrest. Two officers saw a group of youths gathered around a parked car. Id. at 622-23, 111 S. Ct. 1547. As the officers approached, the group scattered. Id. One individual, Hodari, fled the scene with a police officer giving chase. Id. Just before being tackled and handcuffed, Hodari tossed away a small item that was later determined to be crack cocaine. Id. The Court held that Hodari was seized at the moment he was tackled. Id. at 629, 111 S. Ct. 1547. It defined an arrest as requiring use of physical force or a submission to a show of authority. Id. at 626, 111 S. Ct. 1547. "To constitute an arrest, howeverthe quintessential `seizure of the person' under our Fourth Amendment jurisprudencethe mere grasping or application of physical force with lawful authority, whether or not it succeeded in subduing the arrestee, was sufficient." Id. at 624, 111 S. Ct. 1547.
¶ 13 Officer Miller's initial plan to merely detain Barker for questioning did not preclude him and the other officers from deciding shortly thereafter to effect Barker's arrest. A reasonable jury could have found the officers' actions sufficient to establish the "effecting an arrest" prong of § 13-2508(A). Barker was grabbed, pushed over, wrestled with, and shot with a Taser by uniformed officers trying to handcuff him. Substantial evidence supports Barker's conviction.
CONCLUSION
¶ 14 We affirm Barker's conviction and sentence.
CONCURRING: DANIEL A. BARKER, Presiding Judge and MICHAEL J. BROWN, Judge.
NOTES
[1] We view the facts in the light most favorable to affirming the jury's verdict. State v. Carrasco, 201 Ariz. 220, 221, ¶ 1, 33 P.3d 791, 792 (App. 2001).
[2] Barker represented himself at trial. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453899/ | 327 F.Supp.2d 1049 (2003)
MID-CENTURY INSURANCE COMPANY, Plaintiff,
v.
James MENKING, Defendant and Cross-Claimant, and
Administrative Committee of the Wal-Mart Associates Health and Welfare Plan, Defendant and Cross-Claimant.
Administrative Committee of the Wal-Mart Associates Health and Welfare Plan, Plaintiff,
v.
James Menking and Mid-Century Insurance Company, Defendants.
Nos. 8:02CV267, 8:02CV455.
United States District Court, D. Nebraska.
August 7, 2003.
*1050 Daniel P. Chesire, Lamson, Dugan Law Firm, Omaha, NE, Larry C. Johnson, Johnson, Welch Law Firm, Fremont, NE, for Mid Century Ins.
Christopher R. Hedican and Heidi A. Guttau-Fox, Baird, Holm Law Firm, Omaha, NE, Michael G. Connery, Torriano N. Garland, Kutak, Rock Law Firm, Omaha, NE, for Associates Health and Welfare Plan.
MEMORANDUM, ORDER AND JUDGMENT
SHANAHAN, District Judge.
Before the court are multiple pending motions in two cases, Case Nos. 8:02CV267 and 8:02CV455. The cases involve essentially the same parties and the same dispute, and the parties have stipulated that the court may consolidate the cases for all purposes. Accordingly, pursuant to the stipulation, the court will consolidate Case No. 8:02CV267 and Case No. 8:02CV455 for all purposes, including consideration of the pending motions to dismiss and for summary judgment. For the reasons herein, the court will deny James Menking's motions to dismiss and for summary judgment, and will and grant the motion for summary judgment filed by the Administrative Committee of the Wal-Mart Associates Health and Welfare Plan.
I. BACKGROUND
James Menking ("Menking") and the Wal-Mart Associates Health and Welfare Plan ("Plan") each claim entitlement to $25,000 in proceeds from Menking's underinsured motorist coverage. On July 20, 1997, Menking was injured in an automobile accident. At the time, Menking's mother was an employee of Wal-Mart Stores, Inc., and Menking was a beneficiary under her health insurance coverage. The Plan paid $77,727.19 of Menking's medical expenses.
Beyond coverage under the Plan, Menking also maintained $25,000 of underinsured motorist coverage through Mid-Century Insurance Company ("Mid-Century"). The Plan, a self-funded entity under the Employee Retirement Income Security Act, 29 U.S.C.A. § 1001 et seq. ("ERISA"), notified Mid-Century regarding a right of subrogation in the $25,000 based upon provisions in the agreement between the Plan and Menking's mother. Menking asserted that he, not the Plan, should receive the money.
Wary of being a stakeholder, Mid-Century brought an interpleader action against Menking, Wal-Mart Stores, Inc., and the Plan in state court and sought to deposit the $25,000 with the court. Before deposit could occur, however, the Plan removed the case to federal court. The case was docketed as Case No. 8:02CV267 and aligned Mid-Century as the Plaintiff and Menking and the Plan as Defendants. The Plan then submitted a cross-claim against Menking for payment of the $25,000 under the civil enforcement provision of ERISA, § 502(a)(3).
Menking then moved to remand the case back to state court. Concluding that the issues in the suit were completely preempted by ERISA, United States Magistrate Judge Thomas D. Thalken entered a Report and Recommendation recommending that this court deny the motion to *1051 remand. Menking did not object to the Report and Recommendation. See NELR 72.4; 28 U.S.C. § 636(b)(1)(A).
Perhaps concerned about the availability of removal jurisdiction, the "Administrative Committee" of the Plan instituted a second action in federal court prior to this court's ruling on Magistrate Judge Thalken's Report and Recommendation in Case No. 8:02CV267. See Wal-Mart Stores, Inc. Associates' Health and Welfare Plan v. Wells, 213 F.3d 398, 400 (7th Cir.2000) (the administrative committee is, by statute, the fiduciary); Administrative Committee of Wal-Mart Stores, Inc. v. Varco, 338 F.3d 680, 2003 WL 21741691 (7th Cir. July 29, 2003) (plan instituted second action in federal court). Docketed as Case No. 8:02CV455, the second action aligns the Plan as Plaintiff and Menking and Mid-Century as Defendants. The second action also seeks relief pursuant to § 502(a)(3).
In addition, the Plan filed a motion to consolidate the second-filed case, Case No. 8:02CV455, with the first-filed case, Case No. 8:02CV267. Mid-Century filed a document indicating that it had no objection to consolidation, and Menking never responded. See NELR. 7.1(b)(2) (providing for 10 days to submit a brief opposing a motion). Before the court issued an order on consolidation, however, Menking filed both an answer and a motion to dismiss in Case No. 8:02CV455. The parties then filed cross-motions for summary judgment in Case No. 8:02CV455.
Given the unopposed motion for consolidation and the fact that the parties did not object to the Report and Recommendation pending in Case No. 8:02CV267, this court adopted the Report and Recommendation and denied remand in Case No. 8:02CV267.[1] The court then ordered the parties to submit their planning report under Fed.R.Civ.P. 26(f) in Case No. 8:02CV267. In the planning report, the parties (including Menking) stipulated that Case No. 8:02CV267 may be "consolidated for all purposes" with Case No. 8:02CV455, and that the court may treat the pending motions for summary judgment in Case No. 8:02CV455 as having been filed in both cases. The parties further stipulated that Mid-Century could pay the proceeds of the $25,000 into court and be dismissed from the lawsuit, leaving Menking and the Plan to adjudicate their adverse claims to the proceeds. To date, however, the court has not permitted dismissal of Mid-Century or granted leave to deposit the disputed funds under Fed.R.Civ.P. 67.[2]
*1052 II. ANALYSIS
A. FEDERAL PREEMPTION AND ENFORCEMENT OF ERISA SUBROGATION RIGHTS
The Eighth Circuit has routinely concluded that suits for subrogation by ERISA fiduciaries (like the Plan) are completely preempted by ERISA. See Lyons v. Philip Morris Inc., 225 F.3d 909, 912 (8th Cir.2000); United of Omaha v. Business Men's Assur. Co. of America, 104 F.3d 1034 (8th Cir.1997); Southern Council of Indus. Workers v. Ford, 83 F.3d 966, 969 (8th Cir.1996); Baxter v. Lynn, 886 F.2d 182, 185-86 (8th Cir.1989) (concluding that actions against self-funded plans based on Missouri's common law of subrogation and "any such state law" are preempted by ERISA). Furthermore, on at least two occasions prior to 2002, the Eighth Circuit permitted suits under the exclusive civil enforcement provision of ERISA, § 502(a)(3), where the suits sought "specific performance" of subrogation clauses in plan agreements. See Southern Council, 83 F.3d at 969 (permitting subrogation suit against plan beneficiary); Lyons, 225 F.3d at 912-13 (recognizing the § 502(a)(3) restriction to "equitable relief" but permitting subrogation suit to proceed against a non-beneficiary/participant third-party).
In 2002, however, the United States Supreme Court decided Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002), which altered the relevant remedial landscape. In Great-West, an ERISA plan paid medical expenses to the plan beneficiary and the beneficiary then received a settlement from a third party. The settlement was then distributed to the beneficiary's attorney, a special needs trust for the beneficiary's care, and to other lienholders in amounts approved by a state court. The plan, proceeding under § 502(a)(3), ultimately sued the beneficiary in federal district court to recover a portion of the settlement proceeds.
By its terms, § 502(a)(3) authorizes ERISA fiduciaries (like the Plan) "to obtain ... appropriate equitable relief ... to enforce ... the terms of the plan." 29 U.S.C. § 1132(a)(3)(B)(ii) (emphasis added). Writing for a five-Justice majority, Justice Scalia interpreted this statutory language to mean that § 502(a)(3) authorizes ERISA plans to pursue only that relief which was "typically available" in courts of equity, not in courts of law, in the days of the divided bench.[3]Great-West, 534 U.S. at 210, 122 S.Ct. 708. According to the Court, relief "typically available in equity" includes actions for specific relief, including injunction and certain forms of "equitable restitution" like constructive trust and equitable lien. Id. at 211-14, 122 S.Ct. 708.
*1053 Furthermore, although the plan in Great-West characterized its claim to the settlement proceeds as one for both injunction and "restitution", the Court found that the plan was not seeking relief typically available in equity. On the injunction, the Court concluded that the plan was not seeking equitable relief because it did not seek to enjoin future harm, but merely to enforce payment of sums past due. Id. at 210-11, 122 S.Ct. 708. Likewise, Justice Scalia noted that "for restitution to lie in equity, the action must seek not to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant's possession." Id. at 214, 122 S.Ct. 708 (emphasis added). Applying this definition, he concluded that "equitable restitution" was not possible because the respondents did not have possession of the particular settlement funds to which the plan claimed a right. Id. Accordingly, the Court opined that the plan's claim was, in substance, merely a legal claim "to impose personal liability .... for a contractual obligation to pay money." Id. at 210, 122 S.Ct. 708. Because "[m]oney damages are, of course, the classic form of legal relief," Id., the Court held that the plan's action was not authorized by ERISA § 502(a)(3).
B. THE PENDING MOTIONS FOR DISMISSAL AND SUMMARY JUDGMENT
In the present cases, Section 502(a)(3) is the very section under which the Plan proceeds. (8:02CV267, Filing No. 8 at 5; 8:02CV455, Filing No. 6 at 5). Because Great-West precludes the Plan from seeking "legal" relief under ERISA, the Plan has predictably pled its case as one seeking every form of equitable relief it can name, including "injunction, declaration of rights under the Plan, specific performance, mandamus, constructive trust, and equitable restitution ..." (8:02CV455, Filing No. 6 at 5). In addition, the Plan alleges that under ERISA definitions, Menking is actually a "fiduciary" of the Plan because he controls Plan assets, and further, that Menking has breached that fiduciary duty.[4] The Plan has submitted a motion for summary judgment on its claims, arguing that it properly seeks equitable relief under ERISA and is entitled to a judgment on the merits. Menking has himself submitted both a motion to dismiss under Fed.R.Civ.P. 12(b)(6) (Filing No. 13) and a motion for summary judgment (Filing No. 23). Relying on Great-West, Menking argues that the Plan's requests for "equitable relief" are simply artful pleading, and that the Plan is really seeking to enforce a contractual obligation to pay money which is not authorized by ERISA. Accordingly, Menking argues that the court lacks subject matter jurisdiction over the dispute.[5]
*1054 C. STANDARD OF REVIEW
Pursuant to Federal Rule of Civil Procedure 56, summary judgment is appropriate when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Harder v. ACandS, 179 F.3d 609, 612 (8th Cir.1999). "In making this determination, the function of the court is not to weigh evidence and make credibility determinations, or to attempt to determine the truth of the matter, but is, rather, solely, to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see Hedges v. Poletis, 177 F.3d 1071, 1074 (8th Cir.1999). The court views the evidence in the light most favorable to the nonmoving party, see Get Away Club, Inc. v. Coleman, 969 F.2d 664, 666 (8th Cir.1992), and gives the nonmoving party the benefit of all reasonable inferences to be drawn from the evidence. See Moore v. Webster, 932 F.2d 1229, 1230-31 (8th Cir.1991). The court must "look to the substantive law to determine whether an element is essential to a case, and `[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.'" Dulany v. Carnahan, 132 F.3d 1234, 1237 (8th Cir.1997) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505). The moving party "bears the burden of bringing forward sufficient evidence to establish that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law." Shelter Insurance Companies v. Hildreth, 255 F.3d 921, 924 (8th Cir.2001).
One of the principal purposes of summary judgment is to isolate and dispose of factually unsupported claims or defenses and the rule should be interpreted in a way that allows it to accomplish this purpose. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Wabun-Inini v. Sessions, 900 F.2d 1234, 1238 (8th Cir.1990) (quoting Celotex, 477 U.S at 327, 106 S.Ct. 2548).
D. EQUITY AND THE REQUIREMENTS FOR CONSTRUCTIVE TRUST
Great-West clearly implies that plaintiffs might successfully seek a constructive trust or equitable lien using § 502(a)(3), but the Court noted that the plan had failed to meet the requirements of constructive trust because it had not sued someone in possession of an identified res. Unfortunately, it is unclear whether this was the sole hurdle to the plan's claim in Great-West because the Court expressly disclaimed deciding if suing the persons actually in possession of the settlement funds would have been sufficient: "[n]or do we decide whether petitioners could have obtained equitable relief against respondents' attorney and the trustee of the Special Needs Trust, since petitioners did not appeal the District Court's denial of their motion to amend their complaint to *1055 add these individuals as codefendants." Great-West, 534 U.S. at 220, 122 S.Ct. 708.
This ambiguity has led courts on divergent paths when deciding cases under Great-West. Menking relies on the Circuit that produced Great-West, the Ninth Circuit, which believes that Great-West bars relief even when the plan requests reimbursement from specific and identifiable funds held in escrow on agreement of the parties. See Westaff (USA) Inc. v. Arce, 298 F.3d 1164, 1166-67 (9th Cir.2002). A number of other courts believe that Great-West authorizes suit when the plan deserves reimbursement (even if owed under a provision in the plan agreement) and the other requirements for constructive trust or equitable lien are met. See Administrative Committee of Wal-Mart Stores, Inc. v. Varco, 338 F.3d 680, 685-88 (7th Cir.2003); see also Wellmark, Inc. v. Deguara, 257 F.Supp.2d 1209, 1216 (S.D.Iowa 2003); Lumenite Control Technology, Inc. v. Jarvis, 252 F.Supp.2d 700, 703-04 (N.D.Ill.2003); Forsling v. J.J. Keller & Assocs., Inc., 241 F.Supp.2d 915, 917 (E.D.Wis.2003); IBEW-NECA Southwestern Health & Benefit Fund v. Douthitt, 211 F.Supp.2d 812, 816 (N.D.Tex.2002); Great-West Life & Annuity Ins. Co. v. Brown, 192 F.Supp.2d 1376, 1381 (M.D.Ga.2002).
The Ninth Circuit's position is perhaps plausible because the subrogation rights of plans are ultimately furnished by plan agreements, yet the forms of "equitable restitution" identified in Great-West are mechanisms for remedying unjust enrichment. Dobbs notes that a plaintiff requesting imposition of a constructive trust or equitable lien is not required to demonstrate legal entitlement, but rather, asserts superior equitable or moral entitlement to property because the defendant would be unjustly enriched if allowed to retain it. See 1 D. Dobbs, Law of Remedies § 4.3(2) (2d ed.1993), see also Manker v. Manker, 263 Neb. 944, 644 N.W.2d 522, 533 (2002) (noting "[a] constructive trust is a relationship, with respect to property, subjecting the person who holds title to the property to an equitable duty to convey it to another on the ground that his or her acquisition or retention of the property would constitute unjust enrichment."). Some courts have concluded that "because unjust enrichment is a quasi-contractual remedy, [t]he existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery .... for events arising out of the same subject matter." Page Mill Asset Management v. Credit Suisse First Boston Corp., 2000 WL 335557 at *9 (S.D.N.Y.2000) (citations omitted); Vescom Corp. v. American Heartland Health Administrators, Inc. 251 F.Supp.2d 950, 971 (D.Me.2003) ("Because an unjust enrichment claim asks the court to construct a remedy where no contract exists, it is an inapt remedy for parties who have already voluntarily entered into a written contract governing the very relationship at issue." (citations omitted)).
It is not clear, however, that this view squares cleanly with the holding in Great-West. If the mere involvement of a contract precludes the ability of plans to assert a constructive trust, it likely forecloses suit under ERISA § 502(a)(3) altogether (at least in federal court). Such a result exceeds the holding in Great-West and it is not consistent with the statutory language authorizing appropriate equitable relief to enforce "the terms of the plan." 29 U.S.C. § 1132(a)(3)(B)(ii).
Overall, given the statements made in Great-West, the Ninth Circuit does not provide a particularly reasoned explanation for treating a suit against identified funds held in escrow in the same manner as a suit for personal liability, and the *1056 decision seems directly contrary to the result reached by Judge Posner in Wal-Mart Stores, Inc. Associates' Health and Welfare Plan v. Wells, 213 F.3d 398 (7th Cir.2000), a case Great-West cites with approval. In Wells, decided two years prior to Great-West, Judge Posner concluded that the plan could assert a constructive trust against a portion of the settlement funds held in the escrow account of the beneficiary's attorney. In a preview of Great-West, he noted that other cases "seem inclined to classify all claims of reimbursement by an ERISA plan as equitable, perhaps because of ERISA's very broad preemption clause ... which might disable a plan from enforcing its rights to reimbursement if suits to enforce them were classified as legal." Wells, 213 F.3d at 401. He went on to note, however, that the outer bounds of ERISA's concept of equity need not be considered, "as a suit to impose a constructive trust nestles comfortably within them under any view." Id. The Seventh Circuit subsequently reaffirmed this position in a decision issued last week, see Varco, 338 F.3d 680, 683, and this court believes it provides the preferable reading of Great-West.
According to Justice Scalia, the chancery requirements for constructive trust and equitable lien require: 1) particular money or property which is clearly traceable; 2) held by the defendant; 3) which, in good conscience, belongs to the plaintiff. Great-West, 534 U.S. at 213, 122 S.Ct. 708; see also Thomas, 36 Loy. L.A. L.Rev. at 1073 (concluding that Justice Scalia's concept of equitable restitution is "defined by 1) the request for specific relief rather than money, 2) the historical nature of the attendant cause of action as equitable, and 3) the formalistic conditions restricting the award of such relief."). After review and consideration, the court believes that the Plan's request for a constructive trust is appropriate equitable relief under the circumstances, and furthermore, the court concludes the Plan is entitled to judgment on the merits.
The Plan seeks a specific and traceable fund of $25,000 which is held by a named defendant, Mid-Century. cf. Primax Recoveries, Inc. v. Sevilla, 324 F.3d 544, 548 (7th Cir.2003) (Posner, J.) (concluding that an unendorsed check backed by funds held by the third party's insurer did not permit imposition of a constructive trust because the insurer was not named as a defendant). Mid-Century disclaims any interest in the fund, and absent enforcement of the Plan's subrogation interest, Menking will receive it. Mid-century would itself be unjustly enriched if allowed to retain the fund, and similarly, if Menking were to receive the money, he would receive what appears to be a windfall[6] in obvious derogation of the Plan's subrogation interest. In the court's view, this is the type of appropriate equitable relief contemplated by § 502(a)(3) and Great-West, and because there is no genuine dispute of material fact regarding the requirements for constructive trust, the *1057 Plan is entitled to the $25,000 held by Mid-Century.
III. CONCLUSION
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED:
(1) Filing No. 9, the motion to consolidate cases 8:02CV267 and 8:02CV455 filed by the Administrative Committee of the Wal-Mart Associates Health and Welfare Plan, is granted;
(2) Filing Nos. 13 and 23, the motion to dismiss and motion for summary judgment filed by James Menking, are denied;
(3) Filing No. 19, the motion for summary judgment filed by the Administrative Committee of the Wal-Mart Associates Health and Welfare Plan, is granted; and
(4) Mid-Century Insurance Company shall deliver the $25,000 in proceeds from Underinsured Motorist Policy # XX-XXXXX-XX-XX to the Administrative Committee of the Wal-Mart Associates Health and Welfare Plan.
NOTES
[1] In the Order adopting the Report and Recommendation and denying remand, this court made the erroneous suggestion that removal appeared alternately proper under the Federal Interpleader Statute, 28 U.S.C. § 1335. Although that provision does allow for original federal jurisdiction over interpleader actions, removed interpleader actions are still restricted by 28 U.S.C. § 1441(b), the removal statute. Section 1441(b) does not permit removal of any action not based on a federal question when at least one defendant is a citizen of the state in which the action is brought. In this case, Menking is a citizen of Nebraska, and accordingly, the restriction in section 1441(b) prevents removal under the interpleader statute. See Allstate Life Ins. Co. v. Hanson, 200 F.Supp.2d. 1012 (W.D.Wis.2002).
[2] One court has held that acceptance of money into the court registry makes imposition of a constructive trust inappropriate. See Bauhaus USA v. Copeland, 292 F.3d 439, 446 (5th Cir.2002) (concluding that money in court registry was not in hands of defendant, and therefore, action could not lie). Here, however, Mid-Century has maintained possession of the funds, and the court need not direct payment into the registry given today's holding. Even if the court had ordered payment of the funds into the registry, however, the court believes the dissent in Bauhaus provides the better view: that payment into the court registry does not automatically defeat the lawsuit. See Id. at 451 (Wiener, J., dissenting).
[3] What "typically available in equity" means is a matter of some debate, and Justice Scalia's use of this phrase has generated significant criticism from ERISA scholars. See Tracy A. Thomas, Justice Scalia Reinvents Restitution, 36 Loy. L.A. L.Rev. 1063, 1064 (2003) (noting that, "[h]istorically, equitable restitution was not restricted to three types of formalistic claims seeking only the return of plaintiff's specific funds. To the contrary, equity was a flexible legal alternative that issued a variety of monetary remedies in order to address the failure of the hyper-formalist common law courts to redress wrongs."); John H. Langbein, What ERISA Means by "Equitable": The Supreme Court's Trail of Error in Russell, Mertens, and Great-West, Yale Law & Economics Research Paper No. 269 (2003), available at "http://papers.ssrn.com/sol3/papers.cfm?abstract_ id=371104# Paper Download" (Noting "profound flaws" in Justice Scalia's reasoning). Nevertheless, the court is obligated to try and render a decision faithful to the holding in Great-West.
[4] Actions for restitution premised on breach of fiduciary duty are apparently "appropriate equitable relief" within the meaning of § 502(a)(3). See, e.g., Harris Trust and Sav. Bank v. Salomon Smith Barney Inc., 530 U.S. 238, 253, 120 S.Ct. 2180, 147 L.Ed.2d 187 (2000).
[5] Menking's request for relief is perplexing. Despite arguing lack of subject-matter jurisdiction, Menking suggests the court should grant his motion for summary judgment and award him the $25,000, along with attorney's fees and costs. If the court really lacks subject-matter jurisdiction, however, the best Menking can get is a dismissal without prejudice.
In addition, Menking cites rules 12(b)(6) and 56 of the Federal Rules of Civil Procedure, which typically involve judgment on the merits. He has not cited Rule 12(b)(1), which is the usual course for challenging jurisdiction. If the attack on jurisdiction is factual, Rule 12(b)(1) requires that the plaintiff affirmatively prove jurisdiction; it does not give the plaintiff the pleading benefits of Rule 12(b)(6) or simply the burden of proving a genuine dispute of material fact under Rule 56. That said, it appears that "when an ERISA plan administrator brings a suit seeking non-equitable relief, dismissal is properly on the merits for failure to state a claim, rather than for lack of subject matter jurisdiction." Westaff (USA) Inc. v. Arce, 298 F.3d 1164, 1167 (9th Cir.2002) (citing Cement Masons Health & Welfare Trust Fund for N. Cal. v. Stone, 197 F.3d 1003, 1007-08 (9th Cir.1999)) but see, e.g., Bauhaus USA v. Copeland, 292 F.3d 439, 445 (5th Cir.2002) (lack of subject matter jurisdiction). Whatever the standard, however, the court concludes that the Plan has affirmatively demonstrated subject matter jurisdiction, even under the strictures imposed by Rule 12(b)(1). See Part II, D, infra.
[6] Menking's answer in 8:02CV267 asserts that Menking has incurred "in excess of $90,000 in medical expenses" and that, pursuant to the "antisubrogation rule" or "made whole" doctrine, the Plan cannot enforce its subrogation interest in the $25,000. (Filing No. 14, ¶ 5 of cross-complaint). Similarly, Menking's answer in 8:02CV455 asserts he incurred "in excess of $10,000 in medical bills that were not paid by the plan." (Filing No. 13, ¶ 7). Without passing on the availability of "made whole" defenses, the court notes that Menking has completely failed to substantiate his allegations. On summary judgment, Menking chose to pursue only a jurisdictional argument. He did not submit evidence showing that, as an equitable matter, he should be allowed to keep the $25,000 (or a portion of it) despite the Plan's uncontested loss. In fact, he did not submit any evidence regarding his particular losses. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453809/ | 362 F.Supp.2d 1365 (2005)
USR OPTONIX, INC., Plaintiff,
v.
UNITED STATES, Defendant.
SLIP OP. 05-27, Court No. 98-08-02723.
United States Court of International Trade.
February 18, 2005.
*1366 Neville Peterson LLP (John M. Peterson and Curtis W. Knauss) for plaintiff.
Peter D. Keisler, Assistant Attorney General, Barbara S. Williams, Attorney in Charge, International Trade Field Office, and James A. Curley, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice; Beth C. Brotman, Office of Assistant Chief *1367 Counsel, United States Bureau of Customs and Border Protection, for defendant, of counsel.
OPINION AND ORDER
STANCEU, Judge.
Plaintiff USR Optonix, Inc. ("Optonix") challenges the determinations of tariff classification that the United States Customs Service ("Customs") applied to two products imported during a period beginning in November 1994 and concluding in May 1997.[1] Optonix moves for summary judgment with respect to the classification of both products; defendant United States cross-moves for summary judgment in its favor, also with respect to both products. The court exercises jurisdiction pursuant to 28 U.S.C. § 1581(a) (2000).
The first product at issue, designated as "P22-RE1," is a white powder consisting by weight of at least 99 percent yttrium oxide (Y2O3). The remaining 1 percent or less of the product consists of europium oxide. The product is represented by the formula "Y2O3:Eu" and also is identified as "Yttrium Oxide: Europium Doped." The second product, "P22-HCR2," is a red powder comprised by weight of at least 90 percent yttrium oxygen sulfide (Y2O2S), 10 percent or less europium oxygen sulfide (Eu2O2S), and 1 percent or less ferrous oxide (Fe2O3). Each product is used as a material in the production of phosphorescent coatings that are applied in the manufacturing of cathode ray tubes.
The court awards summary judgment to defendant on the issue of the tariff classification of P22-RE1. The court concludes that there are no genuine issues of fact material to that tariff classification and that the tariff classification determined by Customs was correct, entitling defendant to judgment as a matter of law. The motions of both parties for summary judgment on the tariff classification of P22-HCR2 are denied because of the existence of one or more genuine issues of material fact.
I. BACKGROUND
Upon liquidation, Customs classified the entries of P22-RE1 that were made prior to 1995 in subheading 2846.90.50, Harmonized Tariff Schedule of the United States ("HTSUS"), subject to duty at 3.7 percent ad valorem. The version of the provision that was in effect at the time of the pre-1995 entries of P22-RE1 read as follows:
2846 Compounds, inorganic or organic,
of rare-earth metals, of yttrium
or of scandium, or of mixtures of
these metals:
* * *
2846.90 Other:
* * *
2846.90.50 Other ............. 3.7%.
Customs classified entries of P22-RE1 made in 1995 and thereafter in subheading 2846.90.80, HTSUS, the provision that superceded the former subheading 2846.90.50, HTSUS. The article description for heading 2846 and the duty applicable to the subheading at issue, 3.7 percent ad valorem, remained unchanged.
Upon liquidation, Customs classified entries of P22-HCR2 in subheading 3206.50.00, HTSUS. At the time the entries were made, this tariff provision read, in relevant part, as follows:
3206 ... inorganic products of a kind
used as luminophores, whether or
not chemically defined:
* * *
3206.50.00 Inorganic products of a
kind used as luminophores ....... 10.0%
HTSUS, 1994.[2]
*1368 Plaintiff protested the classification determinations that Customs made upon liquidation. Following denial of the protests, plaintiff commenced this action.
A. Contentions of the Parties on the Classification of P22-RE1
Defendant maintains that Customs was correct in determining upon liquidation to classify P22-RE1 in subheading 2846.90.50, HTSUS, and subsequently in subheading 2846.90.80, HTSUS. In challenging that determination, plaintiff's principal argument is that P22-RE1 is excluded from the scope of heading 2846 because it is a mixture of two compounds (i.e., yttrium oxide and europium oxide) and therefore is not itself a "compound" within the meaning of the article description for the heading ("Compounds, inorganic or organic, of rare-earth metals, of yttrium or of scandium, or of mixtures of these metals"). On the basis of this assertion, plaintiff advocates classification in subheading 3824.90.39, HTSUS, free of duty. That provision pertains to "mixtures of two or more inorganic compounds"; the superior heading (heading 3824, HTSUS) is a "basket" heading that includes, inter alia, "chemical products and preparations of the chemical or allied industries ... not elsewhere specified or included."
Plaintiff claims an alternative classification in subheading 2846.90.20, HTSUS, the article description for which is "[m]ixtures of rare-earth oxides or of rare-earth chlorides." Plaintiff argues that, should the court determine that P22-RE1 falls within the scope of heading 2846, the court should rule that P22-RE1 is classified in subheading 2846.90.20 based on its assertion that both yttrium oxide and europium oxide are rare-earth oxides.
Defendant argues that P22-RE1 is correctly classified in subheading 2846.90.80, HTSUS, (and in the predecessor subheading 2846.90.50, HTSUS, prior to 1995) because heading 2846, in defendant's view, includes mixtures of oxides of yttrium and europium. As confirmation that the scope of the heading includes mixtures as well as compounds, defendant points to the article description for another eight-digit subheading within the heading, subheading 2846.90.20, HTSUS, which, as noted above, reads "[m]ixtures of rare-earth oxides or of rare-earth chlorides." Defendant also directs the court's attention to Explanatory Note 32.06, which contains a reference identifying headings 2843 to 2846 as appropriate for the classification of a mixture of yttrium oxide and europium oxide. Further, defendant points to the first paragraph of Explanatory Note 28.46 in support of its contention that heading 2846 includes mixtures of oxides of the metals mentioned in the article description for the heading; plaintiff relies on this same paragraph to support its argument that mixtures such as P22-RE1 are excluded from heading 2846 because they are not "compounds of mixtures" but instead are mixtures of compounds made intentionally for special purposes.
Concerning plaintiff's alternative classification of subheading 2846.90.20, HTSUS, which pertains to "mixtures of rare-earth oxides," defendant contends that yttrium is not a rare-earth metal for tariff classification purposes and, consequently, that yttrium oxide is not a rare-earth oxide within the meaning of subheading 2846.90.20, HTSUS.
B. Contentions of the Parties on the Classification of P22-HCR2
Plaintiff argues that P22-HCR2 is not classifiable in subheading 3206.50.00, HTSUS, ("Inorganic products of a kind used as luminophores") because it is not a finished product capable of use as a luminophore in the condition in which it is *1369 imported. Plaintiff asserts that the product requires further processing consisting of reduction of particle size and blending with other products to obtain the characteristics desired by the manufacturer of the cathode ray tube. Plaintiff submits that the correct classification is subheading 3824.90.39, HTSUS, which is free of duty. As noted previously, that subheading pertains to "mixtures of two or more inorganic compounds," with the superior heading pertaining to "chemical products and preparations of the chemical or allied industries ... not elsewhere specified or included." At an early point in this litigation, plaintiff argued in the alternative that P22-HCR2 should be classified in subheading 2846.90.20, HTSUS ("mixtures of rare-earth oxides ...").
Defendant responds that P22-HCR2 falls within the definition of "inorganic products of a kind used as luminophores" despite the further processing alleged by plaintiff to be required. In rebuttal of plaintiff's argument for alternative classification in subheading 2846.90.20, HTSUS ("mixtures of rare-earth oxides"), defendant maintains that the product is excluded from that provision because it is not comprised of a mixture of oxides of rare-earth metals.
II. APPLICABLE LEGAL STANDARDS
A. Standard of Review
The court proceeds de novo in actions brought to contest the denial of a protest under section 515 of the Tariff Act of 1930. See 28 U.S.C. § 2640(a)(1). In a classification action, plaintiff has the burden of establishing that the government's classification of the product was incorrect but does not bear a burden of establishing the correct tariff classification; instead, the correct tariff classification is to be determined by the court. See Jarvis Clark Co. v. United States, 733 F.2d 873, 878, reh'g denied, 739 F.2d 628 (Fed.Cir.1984).
Customs classification decisions are entitled to a presumption of correctness by 28 U.S.C. § 2639(a)(1), but the presumption does not apply if the court is presented with a question of law by a proper motion for summary judgment. See Universal Elecs., Inc. v. United States, 112 F.3d 488, 492 (Fed.Cir.1997). The court affords deference to a classification decision by Customs to the extent that the decision has the power to persuade. See United States v. Mead Corp., 533 U.S. 218, 235, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001); Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944).
B. The General Rules of Interpretation and the Explanatory Notes
The General Rules of Interpretation, HTSUS, govern the determination of tariff classification. See N. Am. Processing Co. v. United States, 236 F.3d 695, 698 (Fed.Cir.2001). General Rule of Interpretation ("GRI") 1, HTSUS, requires that tariff classification, in the first instance, "be determined according to the terms of the headings and any relative section or chapter notes." GRI 1, HTSUS. GRIs 2 through 5 apply "provided such headings or notes do not otherwise require." Id.
For guidance as to the scope and meaning of tariff terms, the court may resort to the Explanatory Notes, which, although not part of U.S. law, are "indicative of [the] proper interpretation" of the tariff schedule. Lynteq, Inc. v. United States, 976 F.2d 693, 699 (Fed.Cir.1992), quoting H.R. Conf. Rep. No. 100-576, 100th Cong., 2d Sess. 549 (1988), reprinted in 1988 U.S.C.C.A.N. 1547, 1582.
III. DISCUSSION
A. Absence of a Genuine Issue of Material Fact Concerning the Tariff Classification of P22-RE1
Under USCIT Rule 56, summary judgment is appropriate when the parties' submissions " *1370 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." USCIT Rule 56(c). The parties agree that P22-RE1 consists by weight of at least 99 percent yttrium oxide (Y2O3), a fact corroborated by the Material Safety Data Sheet ("MSDS") prepared by the manufacturer, Kasei Optonix, Ltd. of Tokyo, Japan. As specified by the MSDS and as stated in an affidavit by plaintiff's Technical Director, Mr. Susumu Omatoi, P22-RE1 is represented by the formula "Y2O3:Eu." According to that affidavit, P22-RE1 is identified by the name "Yttrium Oxide: Europium Doped."
In its Rule 56 Statement of Material Facts Not in Dispute, plaintiff asserted that P22-RE1 is a mixture of yttrium oxide and europium oxide, manufactured by separately producing the yttrium oxide and europium oxide components, intentionally blending them in specific quantities, and mixing them by heating in a kiln at high temperatures. See Pl.'s Statement of Material Facts Not in Dispute ¶ 8. In the pleadings, defendant denied this assertion but did not allege facts to the contrary. In its Statement in Response to Plaintiff's Statement of Material Facts, defendant admitted "that P22-RE1 consists of a mixture of yttrium oxide with smaller amounts of europium oxide." Def.'s Resp. to Pl.'s Statement of Material Facts ¶ 7. In the Statement of Material Facts Not in Dispute that it filed in support of its cross-motion for summary judgment, defendant stated that "P22-RE1 consists, by weight, of 99 percent or more yttrium oxide, and 1 percent or less europium oxide." Def.'s Statement of Material Facts Not in Dispute ¶ 1.
Although defendant initially agreed with plaintiff that P22-RE1 is a "mixture of compounds" and not a "compound of mixtures," defendant in its post-argument brief advanced an alternative argument in favor of its classification position; in this alternative argument defendant departed in two respects from its earlier admissions concerning the composition of P22-RE1. In presenting this alternative argument, defendant regarded P22-RE1 as a "compound" instead of a "mixture." Further, defendant asserted that the product consists of yttrium oxide and europium, rather than consisting of yttrium oxide and europium oxide.
Despite defendant's conflicting viewpoints, and the apparent disagreement with plaintiff, on the composition of P22-RE1, the court finds that there is no genuine issue of fact material to the tariff classification of P22-RE1, for two reasons. First, much of the apparent factual disagreement, to the extent it is relevant to the classification issue presented, is resolved by assigning the proper meaning to the term "compounds" as used in the article description for heading 2846. That meaning is a question of law, not of fact. See David W. Shenk & Co. v. United States, 21 CIT 284, 286, 960 F.Supp. 363, 365 (1997). As discussed in the next section, the court concludes that in using the term "compounds" in the heading, Congress did not intend this term and the term "mixtures," which is used in a subheading of the heading, to be read as mutually exclusive. Instead, the term "compounds," as used in the heading, is properly understood to be broader than such terms as "chemical compounds" or "separate chemically defined compounds" and to include some products that also are described by the term "mixtures."[3] Second, the parties agree that P22-RE1 consists *1371 by weight of at least 99 percent yttrium oxide. The remainder, which is one percent or less by weight, either consists of europium oxide, as plaintiff contends and as defendant initially admitted, or, as defendant subsequently asserted based on its interpretation of the MSDS for P22-RE1, consists of europium. This factual distinction is not material to the issue of classification of P22-RE1, because, in either case, the correct classification for P22-RE1 is subheading 2846.90.80, HTSUS (or, for entries prior to 1995, subheading 2846.90.50, HTSUS), for the reasons discussed later in this opinion.
The court notes, in passing, that defendant has not asserted new facts to establish either that P22-RE1 is a "compound," however defined, or that the product contains europium rather than europium oxide. Instead, these two contentions by defendant appear to be based on inferences it draws from information already on the record, specifically, information presented in the MSDS for P22-RE1. Defendant draws these inferences from its submissions of affidavits by Mr. Larry D. Fluty, a Senior Science Officer in the Office of Laboratory and Scientific Services, Bureau of Customs and Border Protection, particularly a statement by Mr. Fluty that products similar to P22-RE1 (but not necessarily P22-RE1 itself) consist of "compounds" in which europium atoms are bound to oxygen atoms, replacing yttrium atoms in a yttrium oxide crystal lattice.
Defendant presented two affidavits of Mr. Fluty that address P22-RE1. In the first affidavit, Mr. Fluty had stated that "[t]his combination of yttrium oxide and europium oxide is a mixture described by the Explanatory Notes to Heading 2846." First Fluty Decl. ¶ 9 (Sep. 11, 2002). In that same affidavit, Mr. Fluty, in referring to the term "compounds... of mixtures of these metals" as used in heading 2846, stated that "it is possible to have mixtures of compounds but not compounds of mixtures." Id. ¶ 6. Citing to that statement by Mr. Fluty, defendant in its brief supporting its cross-motion for summary judgment argued that "[t]he language of heading 2846, `compounds ... of mixtures,' moreover, is meaningless from a technical point of view.... To make sense out of the language, it must be understood, insofar as relevant here, as providing for mixtures that have as ingredients the compounds named in the heading, i.e., compounds of rare earth metals and compounds of yttrium." Def.'s Br. in Opp'n to Pl.'s Mot. for Summ. J., & Cross-Mot. for Summ. J. at 7 n. 2. In short, defendant argued at that time that "compounds of mixtures" is the equivalent, in the context of the heading, of "mixtures of compounds."
In his second affidavit on P22-RE1, Mr. Fluty described products similar to P22-RE1 as products in which a europium atom replaces a yttrium atom in a crystal lattice consisting of the yttrium oxide. Mr. Fluty pointed out that the MSDS for P22-RE1 states as follows: "Classification if single or mixed: Single Product." He further stated in his affidavit his opinion that the chemical formula stated in the MSDS, Y2O3:Eu, "means yttrium oxide containing an indeterminate amount of europium" and that this formula "indicates that the product should be considered a single chemical compound." Second Fluty Decl. ¶ 13 (Mar. 17, 2004). In its post-argument brief, defendant maintained its position that heading 2846 encompasses mixtures within its scope but, on the basis of the second affidavit of Mr. Fluty, contended in the alternative "that if the Court determines that Heading 2846 covers only compounds, and not mixtures of compounds, then P22-RE1 was correctly classified there because it is a single compound consisting of yttrium oxide and europium." *1372 Def.'s Br. in Reply to Pl.'s Post-Argument. Br. at 6.
In stating that the remainder is "europium," defendant has not disputed that the remaining europium may exist in the product in the form of europium oxide and has not offered to prove any facts relevant to this question. Defendant has not attempted to show how europium, which is regarded as having an extremely high affinity for oxygen, could exist in its metallic form, i.e., as a separate element, within a powdered mixture rather than being present in the mixture in the form of europium oxide. Rather, defendant's reference to the remainder being "europium" appears to be related to its argument that "if the Court determines that Heading 2846 covers only compounds, and not mixtures of compounds, then P22-RE1 was correctly classified there because it is a single compound consisting of yttrium oxide and europium." Defendant's contention apparently refers in part to the aforementioned statement, set forth in paragraph 14 of Mr. Fluty's second affidavit on P22-RE1, to the effect that products such as P22-RE1 typically have a "single phase" chemical structure consisting of yttrium oxide and europium bound together in a crystal lattice, in which europium atoms replace yttrium atoms in the crystal lattice. Mr. Fluty's statement, however, appears to avoid making any direct statement that P22-RE1 actually consists of such a crystal lattice.
As discussed infra, the uncontested facts are sufficient to establish that P22-RE1 does not conform with established definitions of the terms "chemical compound" or "separate chemically defined compound" but also are sufficient to establish that P22-RE1 is a "compound" within the scope of the term "compounds" as used in heading 2846. It is immaterial to this conclusion whether the portion of the product not consisting of yttrium oxide consists of europium or europium oxide. Nor does the classification within heading 2846 depend on whether europium atoms are bound to oxygen atoms, replacing an indefinite number of yttrium atoms within a yttrium oxide crystal lattice. Because there is no genuine issue of fact that is material to the classification of P22-RE1, the court concludes that summary judgment is the appropriate disposition of the classification issue plaintiff has raised with respect to this product.
B. P22-RE1 Is Classified under Heading 2846, HTSUS
In the various pleadings, the parties have identified two headings as relevant to the classification issue presented by P22-RE1. They are heading 2846, HTSUS, ("Compounds, inorganic or organic, of rare-earth metals, of yttrium or of scandium, or of mixtures of these metals") and heading 3824, HTSUS ("chemical products and preparations of the chemical and allied industries... not elsewhere specified or included"). The court has considered both of these headings and heading 3206, HTSUS, to which the parties also have referred in this case. The latter heading includes within its scope "inorganic products of a kind used as luminophores, whether or not chemically defined." Neither the court nor the parties have identified any other heading of the HTSUS that merits consideration.
The court concludes that, by application of GRI 1, P22-RE1 is correctly classified under heading 2846, HTSUS. The court reaches this conclusion for the following reasons: (1) Heading 3824 is excluded from consideration if P22-RE1 is elsewhere specified or included or if it answers to descriptions in heading 2843 or 2846; (2) Heading 3206 is excluded from consideration by the terms of that heading, as construed according to guidance in the relevant Explanatory Note; and (3) P22-RE1 *1373 answers to a description in, and is included in, heading 2846, because it is described by a term of that heading, "compounds... of mixtures of these metals," with "these metals" referring to rare-earth metals, yttrium, and scandium. In the discussion below, the court discusses in further detail the reasoning underlying its conclusions concerning the tariff classification of P22-RE1.
1. Heading 3824 Applies Only if P22-RE1 Is Not Elsewhere Specified or Included
Because heading 3824, HTSUS, contains the qualifying term "not elsewhere specified or included," GRI 1 precludes classification of P22-RE1 under heading 3824 if P22-RE1 is described by heading 2846 or heading 3206. The same conclusion emerges from the application of Note 1(b) to Section VI, HTSUS, which provides in relevant part that "goods answering to a description in heading 2843 or 2846 are to be classified in those headings and in no other heading of this section." Headings 3824 and 3206, like heading 2846, are in Section VI of the HTSUS. Accordingly, the issue presented is whether P22-RE1 falls within the scope of either heading 2846 or heading 3206, HTSUS.
2. Heading 3206 Does Not Include Mixtures of Yttrium Oxide and Europium Oxide
The court concludes that P22-RE1 is not properly classified under heading 3206. The Explanatory Notes offer relevant guidance on the intended scope of heading 3206 and its relationship to the intended scope of heading 2846. Explanatory Note 32.06 states that "[t]he heading [i.e., 3206] does not cover products answering to descriptions in headings 28.43 to 28.46 (e.g., a mixture of yttrium oxide and europium oxide), however put up and whatever their intended use." EN 32.06 (emphasis in original). The parenthetical example used to identify the group of products excluded from heading 3206 and falling within headings 2843 to 2846 describes by composition a product identical or highly similar to P22-RE1. Thus, Explanatory Note 32.06 clarifies that a class of products to which P22-RE1 appears to belong, i.e., those products consisting of a mixture of yttrium oxide and europium oxide, should not be classified under heading 3206, regardless whether they are of a kind used as luminophores.
3. P22-RE1 Answers to a Description in Heading 2846 and Is Included Therein
Explanatory Note 32.06 also provides guidance on whether P22-RE1 may be classified under heading 2846. The "mixture of yttrium oxide and europium oxide" chosen as an example by Explanatory Note 32.06 is intended not only to direct the reader away from heading 3206, but also to refer the reader to classification under heading 2846. Implicit in the Note is that a mixture of yttrium oxide and europium oxide answers to a description in the group of headings consisting of headings 2843, 2844, 2845, and 2846. However, headings 2843 through 2845 refer to classes of goods that differ considerably from mixtures of yttrium oxide and europium oxide. Heading 2843 pertains generally to precious metals, heading 2844 addresses radioactive elements and compounds, and heading 2845 is confined to isotopes and compounds thereof. Explanatory Note 32.06, therefore, lends strong support to defendant's position that P22-RE1 is properly classified under heading 2846. However, the terms of that heading, as interpreted according to their plain meaning and according to guidance contained elsewhere in the Explanatory Notes and specifically in Explanatory Note 28.46, raise an additional issue requiring the court to consider the matter further. That issue is whether, as plaintiff *1374 contends, P22-RE1 is excluded from heading 2846 because the heading contains terms that, in pertinent part, confine the scope to "[c]ompounds ... of rare-earth metals, of yttrium..., or of mixtures of these metals." Plaintiff argues, inter alia, that P22-RE1 is not a compound within the meaning of the heading.
The threshold issue presented is the meaning of the term "compounds" as used in heading 2846. The term "separate chemically defined compounds" is used elsewhere in the HTSUS, which in note 1(a) to chapter 28 expresses the general rule that chapter 28 is confined to "separate chemical elements" and "separate chemically defined compounds."[4] Under note 1(a) to chapter 28, HTSUS, this general rule applies "[e]xcept where the context otherwise requires." The General Explanatory Note to Chapter 28 defines the term "separate chemically defined compound" as follows: "A separate chemically defined compound is a substance which consists of one molecular species (e.g., covalent or ionic) whose composition is defined by a constant ratio of elements and can be represented by a definitive structural diagram. In a crystal lattice, the molecular species corresponds to the repeating unit cell." The Note further explains that "[t]he elements of a separate chemically defined compound combine in a specific characteristic proportion determined by the valency and the bonding requirements of the individual atoms. The proportion of each element is constant and specific to each compound and it is therefore said to be stoichiometric."
P22-RE1 does not conform to the Explanatory Note definition of a "separate chemically defined compound." As defendant acknowledges in citing Mr. Fluty's second affidavit, the chemical formula for P22-RE1, Y2O3:Eu, "means yttrium oxide containing an indeterminate amount of europium." As demonstrated by the chemical formula, the europium or europium oxide is not present within P22-RE1 in a specific or characteristic proportion that is determined by the valency and bonding requirements of the individual atoms of yttrium and oxygen that comprise the portion of the product that consists of yttrium oxide, which itself is a separate chemically defined compound. P22-RE1, therefore, is not stoichiometric. The proportion of europium or europium oxide is not chemically defined by molecular structure and instead is described as being present in the overall product only according to a range, i.e., at a level of one percent or less by weight. Even if, as defendant suggests, P22-RE1 is a single-phase product consisting of a yttrium oxide crystal lattice, with an indeterminate but small number of europium atoms replacing yttrium atoms within that lattice, the product still would fall outside the Explanatory Note definition of the term "separate chemically defined compound." In the latter, "the molecular species corresponds to the repeating unit cell." General Explanatory Note to Chapter 28. The HTSUS also uses the term "compounds, whether or not chemically defined." [5] Heading 2846 refers to "compounds" without specifying whether the term is intended to refer to "separate chemically defined compounds" or, alternatively, to "compounds, whether or not chemically defined."
The court concludes that the term "compounds" as used in heading 2846 is intended *1375 to have a broader meaning than the more specific term "separate chemically defined compounds" and is intended to include certain products that also could be described as "mixtures," which term commonly would include within its scope products consisting of two or more separate chemically defined compounds.[6] One indication of this intent is the General Explanatory Note to Chapter 28, which instructs that heading 2846 is one of the specified exceptions to the general rule that Chapter 28 is confined to chemical elements and separate chemically defined compounds.[7] Another indication of this intent is the inclusion within the heading of subheading 2846.90.20, HTSUS, the article description for which is "[m]ixtures of rare-earth oxides or of rare-earth chlorides." A third indication is the first paragraph of Explanatory Note 28.46, which indicates that the heading includes at least some products that can be described as "mixtures of oxides or hydroxides of these elements," with "these elements" referring to yttrium, scandium, and the rare-earth metals. Therefore, the term "compounds" as used in heading 2846 cannot properly be interpreted to mean "separate chemically defined compounds," and it must be read to encompass some products that also may be described as "mixtures."[8]
Plaintiff has pointed to this same provision of the Explanatory Notes, i.e., the first paragraph of Explanatory Note 28.46, in contending that the scope of heading 2846 is too narrow to encompass P22-RE1. Optonix relies on this paragraph and on the term "compounds" in the heading for its argument that "mixtures consisting of two or more compounds, made intentionally for special purposes, are expressly excluded from Heading 2846," and that P22-RE1 is such a mixture. Pl.'s Post-Argument Br. at 3. The paragraph at issue reads as follows:
This heading [i.e., heading 28.46] covers the inorganic or organic compounds of yttrium, of scandium or of the rare-earth metals of heading 28.05 (lanthanum, cerium, praseodymium, neodymium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium). The heading also covers compounds derived directly by chemical treatment from mixtures of the elements. This means that the heading will include mixtures of oxides or hydroxides of these elements or mixtures of salts having the same anion (e.g., rare-earth metal chlorides), but not mixtures of salts having different anions, whether or not the cation is the same. The heading will not therefore, *1376 for example, cover a mixture of europium and samarium nitrates with the oxalates nor a mixture of cerium chloride and cerium sulphate since these examples are not compounds derived directly from mixtures of elements, but are mixtures of compounds which could be conceived as having been made intentionally for special purposes and which, accordingly, fall in heading 38.24.
EN 28.46 (emphasis in original). Under the interpretation of the paragraph advanced by plaintiff, the clause "the heading will include mixtures of oxides ... of these elements" is qualified by the preceding sentence such that the only mixtures of yttrium oxide and europium oxide that fall within the scope of heading 2846 are those that are "derived directly by chemical treatment from mixtures of these elements." Plaintiff construes the latter phrase, when read together with the later reference in the paragraph to "mixtures of compounds which could be conceived as having been made intentionally for special purposes," to mean that a product obtained by intentionally mixing yttrium oxide and europium oxide for a special purpose is excluded from the scope of the heading and is not described by the term in the heading, "compounds ... of mixtures of these metals." Plaintiff's interpretation of Explanatory Note 28.46 is that P22-RE1 is described by the term "mixtures of compounds" as used in the last sentence of the above-quoted paragraph from Explanatory Note 28.46 and thus is to be distinguished from what plaintiff views as the relevant term in heading 2846, which is "compounds ... of mixtures of these metals."
The court does not agree with the meaning plaintiff ascribes to the first paragraph of Explanatory Note 28.46. Under plaintiff's construction of the paragraph, mixtures of oxides of the metals of heading 2805 (which metals include yttrium and the rare-earth metals) would be excluded from heading 2846 if two such oxides were produced separately and blended intentionally for a special purpose. The reference in the second sentence, "compounds derived directly by chemical treatment from mixtures of these elements," may be susceptible to more than one meaning when viewed standing alone, but its meaning, to the extent it is relevant to the issue presented by P22-RE1, is clarified by the following sentence. That third sentence, which is introduced with the words "[t]his means that," directly states that mixtures of oxides of the metals in question fall within heading 2846. Plaintiff's interpretation would require the court to interpret the third sentence to mean that some, but not all, mixtures of oxides of the subject metals are within the heading, an interpretation that appears to be at odds with the plain meaning of that sentence. Moreover, it would be incongruous to ascribe to the word "compounds," as used in the second sentence of the paragraph, a narrow meaning such as "separate chemically defined compounds" and at the same time ascribe to the term "compounds" as used in the heading the broader meaning that is required by the context and is clarified by other provisions of the Explanatory Notes.
Plaintiff's interpretation of the first paragraph of Explanatory Note 28.46 would seek to introduce ambiguity into the third sentence of the paragraph by resort to the last sentence in the paragraph, which contains a reference to "mixtures of compounds which could be conceived as having been made intentionally for special purposes." The context of the last sentence, however, is the issue of which mixtures of salts fall within the heading and which do not; the last sentence, therefore, addresses an issue not relevant to the classification of P22-RE1, which is a mixture of oxides, not a mixture of salts. Even if considered relevant to the issue of classification of P22-RE1, the last sentence would present a problem when viewed against *1377 plaintiff's premise that any mixture of compounds made intentionally for a special purpose is excluded from the heading. That problem is the contradiction that would arise in the instance of a mixture of salts, made intentionally for a special purpose, in which each salt has the same anion but a different cation. The contradiction does not arise when the paragraph is construed to establish a clear dividing line that would place such a mixture within the heading and exclude another mixture of salts, each of which had different anions, whether or not made intentionally for a special purpose.
For these several reasons, plaintiff's interpretation of the first paragraph of Explanatory Note 28.46 creates difficulties and internal conflicts that it is unable to resolve. Plaintiff's interpretation of that paragraph also would appear to create a conflict with the express language of Explanatory Note 32.06, which directs the reader to heading 2846 to ascertain the classification of "a mixture of yttrium oxide and europium oxide" and does so without making an exception for the case of a mixture of yttrium oxide and europium oxide that is made by combining the two oxides intentionally for a special purpose.
Plaintiff's Technical Director, in his affidavit, described P22-RE1 as "Yttrium Oxide: Europium Doped."[9] That the parties have not established whether the europium is bound in the structure of the crystal lattice of the yttrium oxide or is in the form of europium oxide mixed together with yttrium oxide is not a material fact because P22-RE1 would be classified under heading 2846 in either case. As discussed previously, the term "compounds" as used in heading 2846 is not limited to "chemical compounds," "stoichiometric compounds," or "separate chemically defined compounds." Various provisions of the Explanatory Notes, as well as the article description for subheading 2846.90.20 ("Mixtures of rare-earth oxides or of rare-earth chlorides") clarify that the term "compounds" as used in heading 2846 includes some products that also fall within definitions of the term "mixtures." If the europium is bound in the crystal lattice of the yttrium oxide compound, albeit in a non-stoichiometric proportion, P22-RE1 would be considered a "compound" of yttrium under some definitions of "non-stoichiometric compounds."[10]
If P22-RE1 is actually a mixture of two separate chemically-defined compounds, *1378 yttrium oxide and europium oxide (as the parties initially appeared to agree), it nevertheless would fall within the scope of heading 2846, because the proper interpretation of the term "compounds" as used in the heading is sufficiently broad to include this product. Explanatory Note 28.46 states that P22-RE1 is covered by heading 2846 because this "heading also covers compounds derived directly by chemical treatment from mixtures of these elements. This means that the heading will include mixtures of oxides or hydroxides of these elements...." Yttrium oxide and europium oxide in mixture form plainly would be described as "mixtures of oxides ... of these elements." As noted above, Explanatory Note 32.06 also indicates that a mixture of yttrium oxide and europium oxide should be classified under heading 2846.
For these reasons, the court concludes that the terms of heading 2846, considered in the proper context of related provisions of the HTSUS and as informed by the guidance in the Explanatory Notes, encompass P22-RE1. Those terms describe P22-RE1 whether europium exists in the product as atoms of europium metal bound into a crystal lattice formed by yttrium oxide or whether the product contains, within a mixture, the separate chemically defined compound europium oxide.
C. P22-RE1 Is Classified in Subheading 2846.90.80, HTSUS
The court concludes that Customs was correct in classifying P22-RE1 in subheading 2846.90.80, HTSUS (and, prior to 1995, in the predecessor provision, subheading 2846.90.50, HTSUS). Plaintiff's alternative classification of subheading 2846.90.20, HTSUS, which pertains to "mixtures of rare earth oxides ...," is incorrect because yttrium oxide is not a "rare-earth oxide" within the meaning of that term as used in subheading 2846.90.20, HTSUS.
As plaintiff has pointed out, some technical references list yttrium among the rare-earth elements or otherwise indicate that yttrium oxide is a rare-earth oxide. Plaintiff has identified two such authorities, the CRC Handbook of Chemistry and Physics and The Phosphor Handbook.[11] However, the court disagrees with plaintiff's contention that the term "rare-earth oxides" as used in subheading 2846.90.20, HTSUS, includes yttrium oxide.
Various dictionaries and technical references are in general agreement that the oxides of the elements with the atomic numbers 58 (cerium) through 71 (lutetium) comprise the "rare earths" and that the elements themselves are known as the "rare-earth elements" or "rare-earth metals." Many, but not all, of the dictionaries and technical references consulted by the court consider atomic number 57 (lanthanum) to be a rare-earth element. The court has found that there is no general agreement as to whether atomic number 39 (yttrium) and atomic number 21 (scandium) are rare-earth metals. Accordingly, there is no general agreement on whether *1379 the oxide of yttrium is one of the so-called "rare earths" or "rare-earth oxides."
For these reasons, each of the terms "rare-earth metals," "rare earths," and "rare-earth oxides," when considered outside of any context, are ambiguous. The salient point, however, is that the article description for heading 2846, HTSUS, refers to yttrium and scandium in a context indicating that, for purposes of the heading, these two metals are not considered to be among the rare-earth elements. The heading identifies "[c]ompounds, inorganic and organic, of rare-earth metals, of yttrium or of scandium, or of mixtures of these metals." The plain meaning of the words indicates an intent to regard yttrium and scandium as separate from the rare-earth metals. The same intent is apparent from the wording of the article description for the heading in which the rare-earth metals are classified. Heading 2805 provides for "[a]lkali or alkaline-earth metals; rare-earth metals, scandium and yttrium, whether or not intermixed or interalloyed; mercury." Here also, the language indicates an intent to treat yttrium and scandium as separate from the rare-earth metals.
Plaintiff states in its memorandum in support of its summary judgment motion that "[t]he Explanatory Notes to the HTSUS indicate that the definition of `rare earth' metals includes not only those falling within the `Lanthanide Series' of the periodic table of the elements (atomic numbers 58 through 71) but also the rare earth elements Lanthanum (atomic number 57), Yttrium (atomic number 39) and Scandium (atomic number 21)." Mem. of P. & A. in Supp. of Pl.'s R. 56 Mot. for Summ. J. at 21. Plaintiff has misinterpreted the Explanatory Notes. The Explanatory Notes, consistent with the terms of headings 2805 and 2846, instruct that scandium and yttrium are not to be considered rare-earth metals for purposes of the Harmonized System nomenclature. "Rare-earth metals (the term `rare-earth' applies to their oxides) or lanthanons comprise the elements with atomic numbers from 57 to 71 in the periodic system...." EN 28.05(C). "This heading [i.e., heading 28.05] also covers scandium and yttrium which resemble the rare-earth metals quite closely...." Id. (emphasis in original).
Because yttrium oxide is not a rare-earth oxide for purposes of heading 2846, P22-RE1 is not described by the term "mixtures of rare-earth oxides" as used in the article description for subheading 2846.90.20, HTSUS. The high (99 percent or higher) yttrium oxide content excludes P22-RE1 from subheading 2846.90.40, HTSUS ("Other: Yttrium bearing materials and compounds containing by weight more than 19 percent but less than 85 percent yttrium oxide equivalent"), which was in effect beginning in 1995. Therefore, the correct classification for P22-RE1 is subheading 2846.90.80, HTSUS (prior to 1995, subheading 2846.90.50, HTSUS), subject to duty at 3.7 percent ad valorem. Because this is the classification determined by Customs upon liquidation, plaintiff's classification claim, and its alternate classification claim, for P22-RE1 must be dismissed. Plaintiff has not met its burden of establishing that the government's classification of this product is incorrect, and defendant is entitled to summary judgment on the issue of the tariff classification of P22-RE1.
D. Issues of Fact Material to the Tariff Classification of P22-HCR2
The parties agree that P22-HCR2 consists by weight of approximately 90 percent Y2O2S, which is known as yttrium oxygen sulfide or "yttrium oxysulfide," approximately 10 percent Eu2O2S, which is europium oxygen sulfide or "europium oxysulfide," and less than 1 percent Fe2O3, iron ("ferrous") oxide. Also, it is undisputed *1380 that P22-HCR2 is used as a material in the production of phosphorescent coatings that are applied in the manufacturing of cathode ray tubes. The court concludes from the submissions of the parties, however, that at least one issue of fact material to the classification of this product otherwise exists that requires the court to deny the motions of both parties for summary judgment.
In seeking summary judgment, plaintiff's principal claim for classification of P22-HCR2 is subheading 3824.90.39, HTSUS, which pertains to "mixtures of two or more inorganic compounds." Plaintiff presented an alternative claim for classification of P22-HCR2 in subheading 2846.90.20, HTSUS, which provides for "[m]ixtures of rare-earth oxides or of rare-earth chlorides." This alternative claim was not included in the complaint, nor has plaintiff sought to amend its complaint to include this claim.[12] In its brief in support of summary judgment, plaintiff also asserted that "P22-HCR2 is also susceptible to classification under HTSUS subheading 2846.90.40, HTSUS." That subheading applies to "[y]ttrium-bearing materials and compounds containing by weight more than 19 percent but less than 85 percent of yttrium-oxide equivalent." Here also, plaintiff did not seek to amend its complaint to include this claim. [13] In its post-argument brief, plaintiff addressed only its principal claim for classification of P22-HCR2 in subheading 3824.90.39, HTSUS.
With respect to plaintiff's principal classification claim, subheading 3824.90.39, HTSUS, ("Mixtures of two or more inorganic compounds: Other") describes P22-HCR2 by composition; however, the pertinent term of the superior heading is "chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products) not elsewhere specified or included." Heading 3824, HTSUS (emphasis added). By application of GRI 1, heading 3824 is excluded from consideration if P22-HCR2 is specified or included by the terms of another heading.
In its cross-motion for summary judgment, defendant claims that Customs was correct in classifying P22-HCR2 in subheading 3206.50.00, HTSUS, the article description for which is "[i]norganic products of a kind used as luminophores." The pertinent language of the article description for the superior heading, heading 3206, HTSUS, is also "[i]norganic products of a kind used as luminophores."
The phrase "of a kind used as luminophores," as used in heading 3206 and subheading 3206.50, HTSUS, identifies a tariff provision controlled by principal use. See Primal Lite, Inc. v. United States, 182 F.3d 1362, 1363-64 (Fed.Cir.1999) (holding that a heading with the phrase "of a kind used" is a principal use provision). "The purpose of `principal use' provisions in the HTSUS is to classify particular merchandise according to the ordinary use of such merchandise, even though particular imported goods may be put to some atypical use." Id. at 1364 *1381 (citing Clarendon Mktg. v. United States, 144 F.3d 1464, 1467 (Fed.Cir.1998)); see also E.M. Chems. v. United States, 20 CIT 382, 387, 923 F.Supp. 202, 208 (1996) ("the principal use of the class ... is controlling, not the principal use of the specific import"). "Principal use" is defined as the use "which exceeds any other single use." See Minnetonka Brands, Inc. v. United States, 24 CIT 645, 651, 110 F.Supp.2d 1020, 1027 (2000) (citing Conversion of the Tariff Schedules of the United States Annotated Into the Nomenclature Structure of the Harmonized System: Submitting Report at 34-35 (USITC Pub. No. 1400) (June 1983)).
Additional U.S. Rules of Interpretation 1(a), HTSUS, provides that "[i]n the absence of special language or context which otherwise requires a tariff classification controlled by use (other than actual use)[14] is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use."
The Court of Appeals for the Federal Circuit has held that delimiting the class or kind of goods to which the imported goods belong "[c]all[s] for a determination as to the group of goods that are commercially fungible with the imported goods." Primal Lite, 182 F.3d at 1365. Moreover, the taxonomy of the group should be narrowly drawn to encompass only "the particular species of which the [subject] merchandise is a member." Id. at 1364. The court may examine factors such as: (1) the general physical characteristics of the merchandise; (2) the expectation of the ultimate purchasers; (3) the channels of trade in which the merchandise moves; (4) the environment of the sale (e.g., the manner in which the merchandise is advertised and displayed or the accompanying accessories); (5) the usage of the subject merchandise and whether that use corresponds to the use of class-defining merchandise; (6) the economic practicality of using the import in that manner; and (7) the recognition in the trade of this use. See United States v. Carborundum Co., 63 C.C.P.A. 98, 102, 536 F.2d 373, 377 (1976) (citations omitted); see also Lenox Collections v. United States, 20 C.I.T. 194, 196 (1996). "Susceptibility, capability, adequacy, or adaptability of the import to the common use of the class is not controlling." Carborundum, 63 C.C.P.A. at 102, 536 F.2d at 377 (citations omitted).
In moving for summary judgment on the classification of P22-HCR2, Optonix challenges the Customs classification of P22-HCR2 under heading 3206 as a "product of a kind used as a luminophore," contending that "[p]roducts that are commercially fungible with P22-HCR2 are not used as luminophores because of the need to further process these items in order to make them commercially usable." Pl.'s Reply in Opp'n to Def.'s Cross-Mot. for Summ. J. at 15. In an affidavit by Mr. Richard Castello, a sales engineer for Optonix, plaintiff identified additional processing that P22-HCR2 is said to undergo before it is supplied to Optonix's customer for use in manufacturing television picture tubes.
To support its cross-motion for summary judgment, defendant relies, in part, on plaintiff's statement in the protest that P22-HCR2 is used in the manufacture of *1382 phosphors for television screens. Defendant also relies on the second affidavit of Mr. Fluty on P22-RE1, which states that "`P22' is the name from the Electronics Industries Association (EIA) for a family of phosphors used in color cathode ray tubes and elsewhere." Second Fluty Decl. ¶ 14. Some dictionary definitions identify "phosphors" as a subset, along with "fluorophores," of "luminophores." See Oxford English Dictionary, 1105, vol. V (2d ed. 1989) ("Other terms sometimes used synonymously with phosphor are luminophor... or fluorophor.").[15] Also relevant to the "principal use" issues are statements in another affidavit of Mr. Fluty, submitted by defendant, that identify the chemical mixture comprising P22-HCR2 as a "red luminescent phosphor" and a "pigment coated phosphor." These statements were supported by reference to a process patent for producing pigment-coated phosphors, the documentation for which, attached to the affidavit, lists as an assignee Kasai Optonix, Ltd., the manufacturer of P22-HCR2.
The court's examination of the pleadings, admissions, and affidavits reveals at least one issue of fact material to the tariff classification of P22-HCR2. The principal issue of fact to be resolved is whether the class or kind of goods to which P22-HCR2 belongs were, at or immediately prior to the time of importation, principally used in the United States as "luminophores." The relevant Explanatory Note contains the following definition: "Inorganic products of a kind used as luminophores are products which, under the action of visible or invisible radiations (solar rays, ultra-violet rays, cathode rays, X-rays, etc.), produce a luminescent effect (flourescent or phosphorescent)." EN 32.06(B). Based on this guidance, on Additional U.S. Rule of Interpretation 1(a), and on dictionary definitions of "luminophore" and "phosphor," the court concludes that determination of the correct classification of P22-HCR2 requires a factual determination whether the class or kind of goods to which P22-HCR2 belongs were, at or immediately preceding importation, principally used in the United States for their luminescent property. The court's consideration of this issue is confined to the pleadings, admissions and supporting affidavits of the parties, which are not sufficient to resolve the issue. In summary, plaintiff alleges the existence of a class or kind of products not used as luminophores because of the need to further process these items in order to make them commercially usable. Defendant does not directly address the issues raised by the application of Additional U.S. Rule of Interpretation 1(a), HTSUS, but contends that "[t]he fact that the P22-HCR2 undergoes further processing after importation in the form of blending to meet a customer's specification does not prevent it from being a kind of product (i.e., a phosphor) used as a luminophore, as the plaintiff argues." Def.'s Br. in Reply to Pl.'s Post-Argument Br. at 9-10.
In addition, the parties appear to be in disagreement on a physical characteristic of P22-HCR2. Defendant's argument is premised in part on its contention that the product, as imported, is of a kind used as a luminophore, based on its characteristics and its use in the manufacturing of color cathode ray tubes. Plaintiff indicated that P22-HCR2, in the condition in which it is imported, i.e., before the processing plaintiff identifies as necessary to commercial *1383 use, does not luminesce or does so only crudely.
Because the court has identified facts that are material to the proper application of Additional U.S. Rule of Interpretation 1(a), HTSUS, to the determination of the tariff classification of P22-HCR2, and because these facts remain in controversy, the motion and cross-motion for summary judgment of plaintiff and defendant, respectively, must be denied with respect to the classification of P22-HCR2.
IV. CONCLUSION
The court awards to defendant partial summary judgment based on its determination that there is no genuine issue of fact material to the classification of P22-RE1 and its conclusion that Customs was correct in classifying in subheading 2846.90.50, HTSUS, the entries of P22-RE1 made prior to 1995 and in classifying in subheading 2846.90.80, HTSUS, the entries of P22-RE1 made in 1995 and thereafter. The court concludes that summary judgment is not appropriate to resolve the dispute between the parties concerning the classification of P22-HCR2 because of the existence of at least one issue of fact material to the classification of this product. That issue, as discussed above, is whether the class or kind of goods to which P22-HCR2 belongs were, at or immediately preceding the time of importation, principally used in the United States for their luminescent property.
V. ORDER
This action having been duly submitted for decision, and this court, after due deliberation, having rendered a decision herein; now, in conformity with that decision, it is hereby
ORDERED that plaintiff's motion for summary judgment be, and hereby is, denied; and it is further
ORDERED that defendant's cross-motion for summary judgment be, and hereby is, granted with respect to the determination of the tariff classification of plaintiff's entries of P22-RE1 at issue in this case; and it is further
ORDERED that defendant's cross-motion for summary judgment be, and hereby is, denied with respect to the determination of tariff classification of plaintiff's entries of P22-HCR2 at issue in this case; and it is further
ORDERED, pursuant to USCIT R. 56(d), that the following facts material to the tariff classification of P22-HCR2 are specified to exist without substantial controversy: (1) P22-HCR2 consists of a red powder comprised by weight of at least 90 percent yttrium oxygen sulfide (Y2O2S), 10 percent or less europium oxygen sulfide (Eu2O2S), and 1 percent or less ferrous oxide (Fe2O3); and (2) P22-HCR2 is used as a material in the production of phosphorescent coatings that are applied in the manufacturing of cathode ray tubes; and it is further
ORDERED, pursuant to USCIT R. 56(d), that at least one fact material to the tariff classification of P22-HCR2 is specified as remaining in controversy, that fact being whether the class or kind of goods to which P22-HCR2 belongs were, at or immediately preceding the time of importation, principally used in the United States for their luminescent property; and it is further
ORDERED, pursuant to USCIT R. 56(d) and R. 16, that the parties shall consult with the objective of developing for submission to the court an agreed-upon draft scheduling order to govern such further proceedings as are necessary to resolve the factual issue or issues material to the determination of the tariff classification of P22-HCR2 and to govern other proceedings as are necessary in this case, including dates for discovery, if any, the *1384 filing of dispositive motions, if any, and tentative dates for trial; and it is further
ORDERED that the parties shall file with the court on or before March 18, 2005 an agreed-upon draft amended scheduling order, except that, in the event the parties are unable to agree upon a draft amended scheduling order, each party shall file with the court by that date its own proposed draft amended scheduling order.
NOTES
[1] The U.S. Customs Service now is renamed as the Bureau of Customs and Border Protection. See Homeland Security Act of 2002, Pub.L. 107-296, § 1502, 116 Stat. 2135 (2002); Reorg. Plan for the Dep't of Homeland Security, H.R. Doc. No. 108-32 (2003).
[2] During the time plaintiff imported the subject entries, the duty rate was reduced in stages, as follows: 1995, 9.3%; 1996, 8.6%; 1997, 7.9%.
[3] The term "chemical compound" usually refers to "a substance composed chemically of two or more elements in definite proportions (as opposed to a mixture)." Oxford English Dictionary, 629, vol. III (2d ed.1989).
[4] Note 1(a) to ch. 28, HTSUS ("Except where the context otherwise requires, the headings of this chapter apply only to: ... separate chemical elements and separate chemically defined compounds, whether or not containing impurities.").
[5] E.g., Note 6(c) to chapter 28, HTSUS, uses the term "compounds ... whether or not chemically defined" ("Heading 2844 applies only to: ... Compounds, inorganic or organic, of these elements or isotopes, whether or not chemically defined.").
[6] The term "mixture" is defined as "[a]n aggregate composed of two or more distinct chemical components which retain their identities regardless of the degree to which they have become mingled." McGraw-Hill Encyclopedia of Chemistry, 607 (5th ed.1983).
[7] The General Explanatory Note states that "[t]here are certain exceptions to the rule that this Chapter is limited to separate chemical elements and separate chemically defined compounds." The Note then lists specific products falling within the exception, including: "Heading 28.46 Compounds, inorganic or organic, of rare-earth metals, of yttrium or of scandium or of mixtures of these metals."
[8] A broader definition of the word "compounds" is consistent with a common meaning of the term found among dictionary definitions. The Merriam-Webster Collegiate Dictionary, 236 (10th ed.2002), defines "compound" as "something formed by a union of elements or parts." The Oxford English Dictionary, 629, vol. III (2d ed.1989), in the relevant part, defines "compound" as "[a] union, combination, or mixture of elements." In turn, the Oxford English Dictionary includes a definition of "element" as "[a] component part of a complex whole," a definition broader in scope than the chemical definition of the term "element." Id. at 130, vol. V.
[9] The use of the term "Yttrium Oxide: Europium Doped" in the affidavit of plaintiff's Technical Director, Mr. Omatoi, to describe P22-RE1 suggests that the product could be shown to be identified in commerce as a "compound" (broadly defined) of yttrium (in this case, yttrium oxide), such that it would fall squarely within the terms of heading 2846. Under such an argument, regardless of whether the europium is present in the P22-RE1 as europium oxide that is mixed with yttrium oxide, or is present as europium atoms bound to oxygen atoms within the structure of a crystal lattice, that presence in a small quantity by weight would not prevent the product from conforming to a commercial definition of the term "yttrium oxide." See Rohm & Haas Co. v. United States, 5 CIT 218, 225, 568 F.Supp. 751, 756 (1983) ("Congress is presumed to know the language of commerce, and to have framed tariff acts so as to classify commodities according to the general usage and denomination of the trade."). Defendant did not develop this argument or support it with additional evidence of such a commercial designation; therefore, the court does not have before it evidence sufficient to establish that the product is considered to be a form of yttrium oxide for commercial purposes.
[10] P22-RE1, if consisting of a single "crystal lattice" structure as described by defendant, possibly could conform to definitions of "non-stoichiometric compounds" as found in scientific references. For example, McGraw-Hill Encyclopedia of Chemistry defines "nonstoichiometric compounds" as "[c]hemical compounds in which the relative number of atoms is not expressible as the ratio of small whole numbers.... Nonstoichiometry is a property of the solid state and arises because a fraction of the atoms of a given kind may be (1) missing from the regular structure ... (2) present in excess over the requirements of the structure ... or (3) substituted by atoms of another kind...." McGraw-Hill Encyclopedia of Chemistry at 665. The McGraw-Hill Encyclopedia of Chemistry further states that nonstoichiometry "is also well represented in the so-called insertion or intercalation compounds, in which a metallic element or neutral molecule has been inserted in a stoichiometric host."
[11] CRC Handbook of Chemistry and Physics, §§ 4-114, 4-115 (77th ed.1996-97); The Phosphor Handbook at 178, 179 (Shingeo Shinionoya & William M. Yen eds., 1999).
[12] Were plaintiff to do so, the court would find this alternative claim to be meritless. P22-HCR2 differs from the goods of subheading 2846.90.20, HTSUS, in several respects. It contains a compound, yttrium oxysulfide, that is not a rare-earth oxide for tariff classification purposes. It also contains a small amount of iron oxide, which is not a rare-earth oxide.
[13] Plaintiff has not developed its argument for this second alternative claim. The court notes, however, that the presence of iron oxide, which is not a compound of yttrium, scandium or the rare-earth metals, would appear to exclude the product from heading 2846, even if plaintiff could show that the article description for subheading 2846.90.40, HTSUS, describes P22-HCR2.
[14] The court concludes that heading 3206 and specifically, subheading 3206.50, HTSUS, do not establish an "actual use" provision so as to invoke the operation of Additional U.S. Rule of Interpretation 1(b). The language of the provision does not require establishing "the actual use made of the imports in the United States" as would a provision controlled by actual use. See Clarendon Mktg., 144 F.3d at 1468.
[15] A luminophor is defined therein as "[a] luminescent substance.... The generic term luminophor is subclassified into fluorophors ... and phosphors...." Id. at 99, vol. IX. A phosphor is "[a]nything that phosphoresces, or emits light without sensible heat" or in modern use "any substance exhibiting phosphorescence or fluorescence, esp. one that is an artificially prepared solid." Id. at 708, vol. XI. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453904/ | 327 F. Supp. 2d 1087 (2004)
Ervin SCHAAF, Plaintiff,
v.
Charles DAHL, M.D., and Bone and Joint Center, P.C., Defendants.
No. A1-04-59.
United States District Court, D. North Dakota, Northwestern Division.
August 3, 2004.
*1088 Leo F.J. Wilking, Nilles Law Firm, Fargo, ND, for Plaintiff.
Michael Craig Waller, Fleck, Mather & Strutz, Ltd., Bismarck, ND, for Defendants.
ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
HOVLAND, Chief Judge.
Before the Court is the Defendants' Motion For Summary Judgment filed on May 21, 2004. For the reasons set forth below, the motion is denied.
I. BACKGROUND
On February 15, 2001, the plaintiff, Ervin Schaaf, broke his right leg when he slipped and fell on ice while exiting a bus he had been operating in South Dakota. Upon arrival at St. Alexius Medical Center in Bismarck, North Dakota, the defendant, Dr. Charles Dahl, diagnosed the injury as an oblique fracture of the mid-shaft of his right tibia[1] with a comminuted[2] fracture of the fibula[3]. Dr. Dahl performed an *1089 open reduction surgical procedure internal fixation.[4] On February 18, 2001, Schaaf was discharged from St. Alexius Medical Center.
Schaaf returned for monthly examinations by Dr. Dahl. During each of those examinations, Schaaf complained that he felt his injured leg was externally rotated. Dr. Dahl confirmed that while Schaaf's leg did have an external rotation, it was nominal between five and ten degrees. Given this amount of rotation, Dr. Dahl recommended against any corrective surgery.
On September 20, 2001, Schaaf again returned to Dr. Dahl for another examination. This time Schaaf walked and sat with a pronounced outward rotation of his injured right leg. Despite this appearance, Dr. Dahl measured the rotation to be between six and ten degrees. Once again, Dr. Dahl recommended against surgery but offered to refer Schaaf to another orthopedic surgeon. Schaaf followed Dr. Dahl's recommendation and did not proceed with corrective surgery.
On January 25, 2002, Schaaf sought the opinion of Dr. Nygaard at Medcenter One Health Systems. Dr. Nygaard measured a rotation of twenty-five to thirty degrees and recommended corrective surgery. Dr. Nygaard performed that surgery on February 14, 2002.
On February 4, 2003, Schaaf filed suit against Dr. Dahl alleging medical malpractice in the treatment of his broken leg. The Court dismissed the suit without prejudice on December 31, 2003, for failure to file an affidavit of an expert witness to support the allegations of professional negligence in accordance with Section 28-01-46 of the North Dakota Century Code.
Schaaf filed the present lawsuit on May 12, 2004. Dr. Dahl was served on May 13, 2004, and the Bone and Joint Center on May 14, 2004.
The Defendants have moved for summary judgment claiming the date Schaaf discovered his potential malpractice claim was on or before January 25, 2002 the date Schaaf sought a second opinion from Dr. Nygaard. As such, Dr. Dahl contends that the two-year statutory period for filing a claim ended on or before January 25, 2004, and Schaaf's claim is time-barred.
Schaaf contends that a genuine issue of material fact exists because Schaaf did not know of his injury, its cause, and of Dr. Dahl's possible negligence until on or before May 14, 2002. Alternatively, Schaaf asks the Court to adopt the doctrine of equitable tolling.
II. LEGAL DISCUSSION
Summary judgment is appropriate when, viewed in a light most favorable to the non-moving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Armstrong v. U.S., 366 F.3d 622, 625 (8th Cir.2004). A fact is "material" if it might effect the outcome of the case and a factual 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 basic 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 252, 106 S. Ct. 2505.
The moving party has the initial burden of demonstrating to the Court there are no genuine issues of material fact. If the moving party has met this burden, the *1090 non-moving party cannot simply rest on the mere denials or allegations in the pleadings. Instead, the non-moving party must set forth specific facts showing that there are genuine issues for trial. Fed.R.Civ.P. 56(e). A mere trace of evidence supporting the non-movant's position is insufficient. Instead, the facts must generate evidence from which a jury could reasonably find for the non-moving party. Anderson, 477 U.S. 242, 252, 106 S. Ct. 2505, 91 L. Ed. 2d 202.
Here, the date of discovery of a potential claim against Dr. Dahl for alleged malpractice that resulted in up to thirty degrees of external rotation of Schaaf's right leg serves as the gravamen of the complaint. Based on the following discussion, the Court finds that reasonable minds could differ as to the date Schaaf knew or reasonably should have known of a potential claim for the professional negligence by Dr. Dahl in repairing Schaaf's broken leg.
"[U]nder diversity jurisdiction, we must interpret the forum state's law." Ehlis v. Shire Richwood, Inc., 367 F.3d 1013, 1016 (8th Cir.2004) (applying North Dakota law in a product warning defects claim against an out-of-state pharmaceutical company). In North Dakota, "an action for the recovery of damages resulting from malpractice ... must be commenced within two years after the claim for relief has accrued." N.D.C.C. § 28-01-18(3). "The statute is silent on when an action accrues, and consequently the determination of when an action accrues is an issue for the court." Schanilec v. Grand Forks Clinic, Ltd., 599 N.W.2d 253, 255 (N.D.1999).
North Dakota has adopted the discovery rule. See Iverson v. Lancaster, 158 N.W.2d 507, 510 (N.D.1968). "[T]he two-year statute of limitations begins to run when the plaintiff knows, or with reasonable diligence should know, of (1) the injury, (2) its cause, and (3) the defendant's possible negligence." Shanilec, 599 N.W.2d 253, 255-56. Since "[t]he purpose of the discovery rule is to prevent the injustice of barring a claim before the plaintiff could reasonably be aware of its existence," Wall v. Lewis, 393 N.W.2d at 758, 761 (N.D.1986). the focus is upon whether the plaintiff has been apprised of facts which would place a reasonable person on notice that a potential claim exists. It is not necessary that the plaintiff be subjectively convinced that he has been injured and that the injury was caused by the defendant's negligence.
Wheeler v. Schmid Laboratories, Inc., 451 N.W.2d 133, 137 (N.D.1990). "The discovery rule seeks to assure that the statute does not begin to run until a lay person with reasonable diligence becomes aware of a potential claim." Froysland v. Altenburg, 439 N.W.2d 797, 799 (N.D.1989) (stating as a matter of law that the statute of limitations could not be delayed until the injured person consults an attorney without rendering the statute meaningless).
Here, the Plaintiff's injury was the improper alignment of a fracture which prevented him from working, riding a horse, or operating a motor vehicle. The Court finds there are genuine issues of material fact as to the date when Schaaf knew, or with reasonable diligence should have known, of the injury, its cause, and most important, the possible negligence of the defendant, Dr. Dahl. It is unclear whether Schaaf knew or reasonably should have known of his potential malpractice claim on January 25, 2002, after receiving the diagnosis from Dr. Nygaard wherein he determined a much greater external rotation than had Dr. Dahl. Dr. Nygaard then performed corrective surgery on Schaaf on February 14, 2002. The Defendant contends that, "at the very latest," Schaff had notice of a potential claim by *1091 January 25, 2002. However, this conclusory statement lacks support in the record.
Schaaf argues that the final outcome of the corrective surgery (May 2003) should be fixed as the time when his cause of action accrued. Because Schaaf experienced a delayed healing of the fracture, he argues that only upon full recovery could Dr. Dahl's actions be judged negligent. It is clear that reasonable minds could reach different conclusions as to when Schaaf knew of his injury, its cause, and the possible negligence of Dr. Dahl. This is not a case in which reasonable minds could draw but one conclusion as to whether Schaaf was aware of Dr. Dahl's possible negligence prior to May 14, 2002. Reasonable minds could easily determine that it was long after May 14, 2002 that Schaaf knew or reasonably should have known of Dr. Dahl's possible negligence.
Based on the evidence in the record, a jury could reasonably conclude that the cause of action accrued anytime between January 25, 2002 (the date of the initial consult with Dr. Nygaard) and May 2003 (the date Schaaf was released back to work by Dr. O'Regan). Just as a jury could determine Schaaf had notice of a potential malpractice claim by at least February 14, 2002, a jury could also determine that as of May 14, 2002, Schaaf was uncertain as to whether there had been possible negligence on the part of Dr. Dahl. The trial court's function at the summary judgment stage is not to weigh the evidence but simply to determine whether there are any factual issues to be resolved at trial. The Court finds there are critical issues of material fact which need to be resolved at trial by the jury as to the date when the cause of action accrued, i.e., the date by which Schaaf knew or with reasonable diligence should have known of (1) the injury, (2) its cause, and (3) Dr. Dahl's possible negligence.[5]
In light of the Court's ruling that there are genuine issues of material fact which preclude a grant of summary judgment, the Court need not address Schaaf's assertion that the doctrine of equitable tolling applies to the current case.
III. CONCLUSION
The Court has carefully reviewed and considered all of the evidence, exhibits and arguments submitted in support of and opposition to the Defendants' Motion for Summary Judgment. The Court expressly finds there are genuine issues of material fact to be resolved at trial concerning when the cause of action accrued. It is appropriate for the jury to resolve this factual issue at trial rather than the Court. Accordingly, the Court DENIES the Defendants' Motion for Summary Judgment (Docket No. 4). The Plaintiff's request for oral argument is also DENIED (Docket No. 11).
IT IS SO ORDERED.
NOTES
[1] "The shin bone: the inner and larger bone of the leg below the knee." Dorland's Illustrated Medical Dictionary 1722 (27th ed., W.B. Saunders Co., 1988).
[2] "Broken or crushed into small pieces." Id. at 363.
[3] "The outer and smaller of the two bones of the leg, which articulates proximally with the tibia." Id. at 630.
[4] "Stabilization of fracture bony parts by direct fixation to one another with surgical wires, screws, pins, and plates." Dorland's Illustrated Medical Dictionary 637 (27th ed., W.B. Saunders Co., 1988).
[5] The first interrogatory that should be presented to the jury on the special verdict form is whether Schaaf knew, or with reasonable diligence should have known, of the injury, its cause, and Dr. Dahl's possible negligence on or before May 14, 2002. That is clearly a factual issue for the jury to resolve. If the interrogatory is answered in the affirmative, the case is subject to dismissal and is time-barred. If the interrogatory is answered in the negative, the jury will then decide issues of fault, proximate cause, and the recoverable damages, if any, to be awarded. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453922/ | 327 F. Supp. 2d 735 (2004)
William B. JOHNSON, et al Plaintiffs
v.
SERVICE MERCHANDISE COMPANY, et al Defendants
No. 2000-240.
United States District Court, E.D. Kentucky, at Covington.
July 14, 2004.
*736 Beverly R. Storm, Arnzen & Wentz, Covington, KY, Elbert Douglas Baldridge, Jr., Covington, KY, Mark G. Arnzen, Arnzen & Wentz, Covington, KY, Steven R. Zweigart, Royse, Zweigart, Kirk & Brammer, Maysville, KY, for William B. Johnson, Pamela M. Johnson, Plaintiffs.
Craig R. Paulus, Taft, Stettinius & Hollister LLP, Cincinnati, OH, David Brian Sloan, Gary John Sergent, O'Hara, Ruberg, Taylor, Sloan & Sergent, Covington, KY, Gerald J. Rapien, Mary A. DeFalaise, Taft, Stettinius & Hollister, Cincinnati, OH, Robert B. Craig, Taft, Stettinius & Hollister, Covington, KY, for Service Merchandise Co., Inc., defendant.
Christie L. Pattinson, Frost Brown Todd LLC, Cincinnati, OH, David D. Black, Michael G. Adams, Dinsmore & Shohl, Cincinnati, OH, Gregory Allen Belzley, Dinsmore & Shohl, Louisville, KY, Jeffrey Slayton Smith, Frost Brown Todd LLC, Cincinnati, OH, for Coyne International Enterprises Corp., dba Coyne Textile Services, defendant.
ORDER
BERTELSMAN, District Judge.
On July 2, 2003, an oral argument was held on all pending motions. William B. Johnson was represented by Steven Zweigart, Beverly Storm, and Doug Baldridge. Service Merchandise Company, Incorporated was represented by Craig Paulus and Gerald Rapien. Coyne International Enterprises Corporation was represented by Gregory Belzley and David Black. Royal & Sun Alliance Insurance Company was represented by David Strite and Michael Dailey. Official court reporter Joan Averdick recorded the proceedings.
Briefly, the facts of this matter include that William B. Johnson was injured while in Service Merchandise when he tripped on a rubber mat. The mat was supplied and serviced pursuant to a contract between Service Merchandise and Coyne. The contract between Service Merchandise and Coyne included a clause in which Coyne agreed to name Service Merchandise as an additional insured on its liability policy. Coyne was insured by Royal.
Although Coyne did not specifically list Service Merchandise by name as an additional insured, the court finds that Service Merchandise was covered by Coyne's policy with Royal pursuant to the following "General Liability Coverage Enhancement Endorsement":
12. ADDITIONAL INSUREDS-BY CONTRACT, AGREEMENT OR PERMIT
The following is added to SECTION II WHO IS AN INSURED:
5. a. Any person or organization you are required by a written contract, agreement or permit to name as an insured is an insured but only with respect to liability arising out of:
1. "Your work" performed for that insured at the location designated in the contract, agreement or permit; or
2. Premises owned or used by you.
The policy defines "Your work" as:
a. Work or operations performed by you or on your behalf; and
*737 b. Material, parts, or equipment furnished in connection with such work, or operations.
Royal argues that its policy would not cover Service Merchandise's own negligence even if it was an additional insured because the phrase "your work" only applies to Coyne, not Service Merchandise. The court concludes that the doctrine of reasonable expectations applies in this case.[1] The rule of interpretation known as the reasonable expectations doctrine resolves an insurance-policy ambiguity in favor of the insured's reasonable expectations. True v. Raines, 99 S.W.3d 439, 443 (Ky.2003). This doctrine "`is based on the premise that policy language will be construed as laymen would understand it' and applies only to policies with ambiguous terms.... Under the reasonable expectations doctrine, when such an ambiguity exists, the ambiguous terms should be interpreted `in favor of the insured's reasonable expectations.'" Id. (Notes and citations omitted). In other words, "[u]nder the `doctrine of reasonable expectations,' an insured is entitled to all the coverage he may reasonably expect to be provided according to the terms of the policy." Goodman v. Horace Mann Ins. Co., 100 S.W.3d 769, 772 (Ky.App.2003) (citing Woodson v. Manhattan Life Ins. Co., 743 S.W.2d 835, 839 (Ky.1987)).
Under the circumstances of the present case, Coyne paid premiums to Royal based on its reasonable expectation that the policy provided to it by Royal covered Service Merchandise as an additional insured, and Service Merchandise relied on the policy with Royal, reasonably expecting to be covered for liability related to Coyne's mats. The court finds that both Coyne and Service Merchandise had a reasonable expectation that Royal's policy covered Service Merchandise as an additional insured. The principal risk Service Merchandise would be concerned about is that someone would fall on a mat as Mr. Johnson did and sue Service Merchandise as he did. Service Merchandise might not have subscribed to Coyne's mat service but for the promise to be included in Coyne's liability policy. The reasonable expectations included coverage for allegations of negligence against Service Merchandise itself, such as those Johnson made. Accordingly, Coyne fulfilled its contractual obligations to provide insurance for Service Merchandise as an additional insured; therefore, Service Merchandise's alternative motion for summary judgment for breach of contract is hereby denied.
As to the motions regarding summary judgment on Johnson's negligence claims for premises liability, the court finds that, pursuant to Lanier v. Wal-Mart Stores, Inc., 99 S.W.3d 431, 435 (Ky.2003), Service Merchandise now has the burden to show that the wrinkle or bulge in the rubber mat on which Johnson tripped was not present long enough to put it on notice of the dangerous condition. The court concludes there is a genuine issue of material fact regarding this issue.
The parties having been heard and the court being advised,
IT IS ORDERED that:
1. The motion for summary judgment by defendant Service Merchandise (doc. # 58-1) be, and it is, hereby, denied in part as to its breach of contract claim against Coyne; granted in part as to its *738 claims that Coyne's agreement to name it as an additional insured includes insuring Service Merchandise for its own negligence; and granted in part in that Royal's policy with Coyne covers Service Merchandise as an additional insured under the doctrine of reasonable expectations for Service Merchandise's own negligence.
2. The cross-motion by defendant Coyne for summary judgment (doc. # 62-1) be, and it is, hereby granted in part in that it fulfilled its contractual obligations to Service Merchandise regarding insurance coverage; but denied in part in that naming Service Merchandise as an additional insured did not include coverage for Service Merchandise's own negligence.
3. The cross-motion by Royal for summary judgment (doc. # 64-1) be, and it is, hereby denied. Both Coyne and Service Merchandise had reasonable expectations that Coyne's policy with Royal covered Service Merchandise as an additional insured for Service Merchandise's own negligence. Accordingly, the court finds that, as a matter of law, Royal is obligated to provide coverage and a defense to Service Merchandise. Royal's intervening complaint is hereby dismissed and a separate judgment shall be entered concurrently herewith.
4. The motion for summary judgment by defendant Coyne (doc. # 71-1) be, and it is hereby, denied in part as moot in that plaintiff Johnson is not pursuing a products liability action against it. However, the claim that Coyne was negligent is hereby held in abeyance and plaintiff Johnson and Service Merchandise shall have sixty (60) days to have an expert examine the mat at issue to develop any proof that Coyne was negligent and file a response to Coyne's motion on this issue. Coyne may file a supplemental brief or reply within fifteen (15) days thereafter.
5. The motion for summary judgment by Service Merchandise against plaintiff (doc. # 72-1) be, and it is, hereby denied. The court finds that there are genuine issues of material fact surrounding Johnson's fall.
6. The motion by defendant Service Merchandise for leave to file surreply (doc. # 75-1) be, and it is, hereby granted, and the alternative motion to strike Royal's reply (doc. # 75-2) be, and it is, hereby denied.
7. Plaintiff is hereby ordered to make a demand for settlement purposes within fifteen (15) days, and defendants are hereby ordered to respond to plaintiff's demand fifteen (15) days thereafter. The parties shall engage in a good faith attempt to settle this matter.
8. A jury trial is hereby set for Monday, November 3, 2003 at 10:00 a.m. in this matter and a final pretrial conference is hereby set for Friday, October 10, 2003, at 2:00 p.m. at which time the court will take up the issue of whether liability and damages should be tried separately, and the court will set time limits at the conference. A final pretrial conference order is hereby filed concurrently herewith.
NOTES
[1] Royal asserts that Kentucky law applies. New York law would reach the same conclusion. Royal cites the authorities from many states that would interpret "your work" as not including Service Merchandise's negligence. The court does not believe that Kentucky would follow those cases as Kentucky courts have always interpreted ambiguities in insurance polices favorably to the insured. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453952/ | 327 F.Supp.2d 315 (2004)
Marcela HAMBLIN, Plaintiff,
v.
UNITED STATES of America, Defendant.
No. 2:02-CV-4.
United States District Court, D. Vermont.
January 29, 2004.
*316 Devin McLaughlin, Esq., Middlebury, VT, for Plaintiff.
Michael P. Drescher, Esq., Burlington, VT, for Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
SESSIONS, Chief Judge.
Plaintiff Marcela Hamblin of Middlebury, Vermont has sued the United States under the Federal Tort Claims Act, 28 U.S.C.A. §§ 2671-2680 (West 1994 & Supp.2003). The suit arises out of an accident which took place between Hamblin and Sergeant Dennis Armell on July 9, 1999 in Vergennes, Vermont. Hamblin asserts that Armell was negligent and that the United States is liable for Armell's negligence because Armell was an employee of the United States, acting within the scope of his employment when the accident occurred. Hamblin claims that as a direct and proximate result of the accident, she has experienced continuing physical injury to her back and lower extremities leading to loss of wages and physical and mental suffering. She seeks compensatory damages for these injuries. The case was tried to the Court on October 9 and 10, 2003.
I. Findings of Fact
A. Events of July 9, 1999
On the morning of July 9, 1999, Hamblin drove from her home in Middlebury to Vergennes to take her dog to be groomed at the Hair of the Dog pet-grooming salon. Hamblin was 59 years old at the time. She had driven vehicles since she was 21 years old.
At approximately 10:00 A.M., Hamblin pulled her 1995 Mercury Cougar into LeBeau & O'Brien's Mobil gas station at the corner of Route 22A and Water Street in Vergennes to ask for directions. The gas station has twin fuel pumps on an island located on the north side of the station and a single diesel pump located on the east side of the station. Hamblin parked her *317 car approximately three feet behind a car located at the rear pump of the island. She was parked so that her driver's side door was approximately five feet behind a military Humvee driven by Sergeant Dennis Armell of the Vermont Army National Guard.
Armell is the full-time supply sergeant for Battery B, First Battalion, 86th Field Artillery, based in Vergennes. He had driven the Humvee to the gas station that morning in order to fuel the vehicle so that it would be prepared for a trip the following day. Armell had parked the Humvee at the diesel pump. When he first parked the Humvee, there was no vehicle in front of it. Armell intended to depart from the gas station by moving forward, not reversing.
After he paid for the diesel fuel, Armell observed that a car had parked in front of the Humvee, blocking his forward path. Armell walked behind the Humvee to confirm that no objects blocked his path to the rear. He observed no vehicles to the rear of the Humvee. Armell walked to the front of the Humvee and entered the driver's side of the vehicle. He adjusted his seatbelt and arranged himself in the driver's seat. In addition, he turned on the ignition switch that illuminated the vehicle's "wait light." Armell waited approximately 8-12 seconds for the wait light to turn off.
While Armell was arranging himself in the vehicle and waiting for the wait light to turn off, the Humvee's exterior lights were not illuminated. When the wait light turned off, Armell turned on the Humvee's lights, including its tail lights, and started the vehicle. Approximately 30-45 seconds elapsed between when Armell walked behind the Humvee and when he started to reverse. During this time period, Hamblin parked her car behind the Humvee.
Before reversing the Humvee, Armell checked the side rearview mirrors on both the driver's side and passenger's side of the Humvee. He did not observe a vehicle parked behind the Humvee. That morning, Armell had adjusted the side rearview mirrors so that they would take in the rear-corners of the vehicle. The Humvee is 90 inches wide, at its widest, and it is not possible to observe the vehicle's rear bumpers from the side rearview mirrors. The Humvee has no center rearview mirror. Although there is a canvas window in the rear of the Humvee, it is not possible to see through it. As a result, the Humvee has a large blind spot.
Armell was aware of the safety concerns associated with the operation of a military vehicle, including the problems presented by a vehicle's blind spot. He was aware that the Humvee has a large blind spot. Armell had received training on the proper procedure for reversing a military vehicle during the 1970s. That training required using ground guides to reverse a military vehicle while on base. Armell was also familiar with the layout of the gas station, having used the station approximately one-hundred times. Armell was aware that if the twin fuel pumps were occupied, then the next car in line would be parked behind his vehicle.
In order to reverse the Humvee, Armell put the vehicle into gear and released pressure from the brake pedal. Armell did not use ground guides or seek another individual's assistance. While reversing the Humvee, Armell looked in his driver's side rearview mirror. He did not observe Hamblin's car, however. The Humvee traveled in reverse for 5 to 10 seconds before making contact with Hamblin's car.
When Hamblin first observed the reversing Humvee, her driver's side door was open and her left leg was on the ground. As the Humvee approached her car, she sounded her horn but was unable to move her leg out of the way. The *318 Humvee made contact with the driver's side door of Hamblin's car, pinching her lower left leg between the car door and frame of the car. When the Humvee made contact with Hamblin's car, her dog began to bark. Hamblin tried to calm the dog and sound the horn simultaneously. The Humvee made contact with Hamblin's car at least once.[1]
Hamblin's car was damaged. She paid $461.80 for repairs and $63 for a rental car, for a total equaling $524.80.
B. Ms. Hamblin's Medical History Prior to July 9, 1999
Hamblin has a history of chronic lower back pain. In January of 1995, Hamblin was involved in a motor vehicle accident after which she suffered back pain. (Def's Ex. B.) On December 10, 1997, Hamblin reported to her physician that she had recently experienced a worsening of her lower back pain accompanied by "pain radiating from her left buttock into her medial thigh." (Def.'s Ex. C.) On January 14, 1999, Hamblin reported to her physician that she had experienced lower back pain for three days, after having scrubbed tubs and climbed stairs at work. In addition, Hamblin felt numbness in her left lateral foot. (Def.'s Ex. H.)
In her application for Social Security benefits, dated November 6, 2000, Hamblin reported having neck pain that "radiates into both extremities and sometimes causes numbness in my little finger." These symptoms are accompanied by "lots of grinding." Hamblin reported that she has never seen a doctor for this pain. (Def.'s Ex. Fl.)
Hamblin has a history of being overweight. In addition, since at least 1995, Hamblin has suffered from pain in her right knee. She was eventually diagnosed with "progressive degenerative arthritis." Her knee problem required surgery in 1995 and 1998. (Def.'s Ex. I.) Hamblin also has a history of hammertoes and bunions on her feet. In January 2001, she underwent surgery to alleviate the pain caused by her foot condition. (Def.'s Ex. Z.)
C. Ms. Hamblin's Medical History Subsequent to July 9, 1999
After the accident, Hamblin experienced immediate swelling in her left calf accompanied by pain. She proceeded to bring her dog to the grooming appointment. Later, while Sergeant Armell watched her foster children, Hamblin visited Porter Hospital in Middlebury due to the pain in her leg.
In the Porter Hospital Emergency Room, Hamblin was diagnosed with a leg contusion. Mild soft tissue swelling and bruising was noted. X-rays revealed no fractures. Hamblin testified that the bruise on her left calf lasted for some time. She also has a knot and small indentation in her left calf which have persisted.
The parties have stipulated that Hamblin's medical expenses for her calf injury were $2,281.25. These expenses include the cost of her initial physical therapy.
Hamblin's work as an X-ray technologist regularly required her to lift heavy files while climbing step ladders. Her work also regularly required her to lift and move patients. Hamblin missed work on the Saturday and Sunday immediately following *319 the accident. At that time, her hourly wage was $14.75. Assuming she had worked eight hours per day, her lost wages for the two days were $236.
During the first full work week following the accident, Hamblin worked forty-seven hours. (Def.'s Ex. J1.) During the five months following July 9, 1999, Hamblin worked more than six-hundred hours. (Def.'s Ex. K1.) Hamblin continued her work as an X-ray technologist at Porter Hospital for more than a year following the accident. Id.
On July 16, 1999, one week following the accident, Hamblin complained of "bilateral hip" pain to her primary care physician, Dr. Scott Smith. Dr. Smith diagnosed the pain as musculoskeletal. Hamblin did not report that the hip pain was radicular.[2] (Def.'s Ex. K.) Dr. Smith referred Hamblin to physical therapy at Porter Physical Therapy.
The initial physical therapy note describes Hamblin as experiencing pain in both hips and the sacrum. (Pl.'s Ex. 28, Tab C.) According to Hamblin's Daily Flow Sheet from Physical Therapy, Hamblin reported that the pain in her hips and lower back was "100% better" as of August 10, 1999. Id. Despite this improvement, the Flow Sheet records that Hamblin experienced varying degrees of pain in her left leg, buttock, hip and lower back on various days during her physical therapy. Id.
Hamblin again visited Dr. Smith on July 30, 1999. Dr. Smith noted Hamblin's physical therapy and reports that "she has had much significant improvement in her bilateral hip discomfort." In addition, "she has some lower back discomfort which she feels is improving and some left calf discomfort which is also resolving." (Def.'s Ex. L.) On August 31, 1999, Hamblin had another appointment with Dr. Smith. Smith reported that the pains in Hamblin's left calf, lower back and hip "are gradually improving with physical therapy." (Def.'s Ex. M.) Hamblin missed her follow-up appointment on September 27, 1999. Id.
On December 7, 1999, Hamblin reported to Dr. Smith that she was experiencing "some numbness and tingling in her lower extremities which started about five days ago." Dr. Smith ordered an MRI. (Def.'s Ex. N.)
On December 20, 1999, Hamblin underwent an MRI of the lumbosacral spine. It was observed that "[d]egenerative change is present centered about the mid and lower lumbar discs with associated multilevel broad based disc bulge and multifactorial spinal canal narrowing at the L3-4 and L4-5 levels." (Def.'s Ex. O.)
In her follow-up appointment with Dr. Smith, on January 17, 2000, Hamblin complained of "intermittent discomfort in her hips or what she describes as the sacroiliac area." She also reported "persistent numbness and lateral aspect of her right foot and intermittent tingling in her left foot." Dr. Smith's assessment was "[s]pinal stenosis with multivariant factors."[3]*320 (Def.'s Ex. P.) Dr. Smith referred Hamblin to a neurologist for further evaluation. Dr. Smith also referred Hamblin to the Spine Institute of New England. Id.
The neurologist who treated Hamblin is Dr. Andres Roomet. At trial, Roomet provided expert testimony on Hamblin's behalf. Hamblin had her first appointment with Dr. Roomet on February 2, 2000. Dr. Roomet diagnosed Hamblin's condition as "spinal stenosis syndrome with some mild radiculitis right greater than left." (Def.'s Ex. Q.)
On April 10, 2000, Hamblin suffered a slip-and-fall accident on an icy sidewalk which required a trip to the emergency room. According to the emergency room report, she suffered a contusion to the left knee and left palm. (Def.'s Ex. R.)
On April 19, 2000, Hamblin saw Dr. Grzyb, an orthopedist with the Spine Institute of New England. In this appointment, Hamblin reported to Dr. Grzyb that she has suffered from longstanding back pain. She also reported discomfort in her lower extremities, including numbness in her right foot. According to Hamblin, these symptoms "were worsened" after her accident on July 9, 1999. (Def.'s Ex. S.) Dr. Grzyb told Hamblin that in his opinion her symptoms were not severe enough to justify surgical intervention. They discussed the possibility of an "epidural injection." Id.
During her May 10, 2000 appointment with Dr. Smith, Hamblin discussed her decision to have an epidural injection. She also discussed how her chronic pain affects her job. (Def.'s Ex. T.)
In May of 2000, Hamblin was injected with an epidural block. In her June 21, 2000 appointment with Dr. Smith, Hamblin reported that the epidural block resolved her lower back pain, but that she continued to have lower extremity discomfort and cramping. (Def.'s Ex. U.) Hamblin discussed her difficulty working an eight-hour shift as a radiology technician due to her pain. Dr. Smith gave Hamblin a note limiting her to a four-hour work shift. Id.
Hamblin was also referred back to Porter Physical Therapy, which she began in August, 2000. As documented in her physical therapy records, she was experiencing "intermittent complaints of low back pain at left PSIS, lateral sacrum, and left hip." (Pl.'s Ex. 28, Tab C.) In her August 14, 2000 appointment with Dr. Smith, Hamblin explained that her pain was hindering her ability to work and attend physical therapy. It was agreed that Hamblin would discontinue work pending an upcoming appointment with Dr. Grzyb. (Def.'s Ex. V.) Hamblin has not worked since August, 2000 due to persistent pain.
In September, 2000, Hamblin underwent a CT-myelogram. For a few months following the procedure, the pain in her left hip, thigh, and outer leg subsided. In November, 2000, Hamblin applied for Social Security benefits. (Def.'s Ex. F1.)
In May, 2002, Hamblin had her second meeting with Dr. Roomet. She reported hip pain. Dr. Roomet concluded that an orthopedic evaluation was required. (Def.'s Ex. A1.) In August, 2002, Dr. Roomet met with Hamblin a third time after being retained by Hamblin's counsel as an expert witness. (Def.'s Ex. E1.)
D. Expert Testimony of Dr. Roomet
Dr. Roomet is a board-certified neurologist who provided expert testimony on behalf *321 of Ms. Hamblin. Roomet also testified that the pain Hamblin developed in the left hip and sacroiliac region, the left buttock, posterior thigh and lateral calf was radicular in nature. He testified that, to a reasonable degree of medical probability, the symptom complex was the result of aggravation of Hamblin's pre-existing spinal stenosis. Roomet testified that, to a reasonable degree of medical probability, this aggravation was caused by the July 9, 1999 accident.
Roomet's understanding of the events of July 9, 1999 was derived from what Hamblin told him. Roomet understood that during the incident Hamblin twisted and wrenched herself in an effort to free her leg and calm her hysterical dog. Roomet opined that this action was a competent causal mechanism of Hamblin's worsened spinal stenosis.
Roomet primarily based his opinion on the chronological relationship between the accident and the onset of Hamblin's symptoms. According to Roomet, an individual with spinal stenosis can be asymptomatic or moderately symptomatic. Upon the occurrence of a "competent injury" the condition can worsen. Roomet testified that the change in Hamblin's symptom complex-the onset of hip and sacroiliac pain, which occurred within two weeks of the accident-supported his opinion on causation.
E. Expert Testimony of Dr. Cohen
Dr. Cohen is a board-certified neurologist who provided expert testimony on behalf of the United States. Cohen reviewed Hamblin's medical history to determine whether her symptoms were causally related to the July 9, 1999 accident.
Dr. Cohen testified that in his opinion, the July 9, 1999 accident did not cause Hamblin's back pain and radicular symptoms. Dr. Cohen observed that Hamblin did not report radicular symptoms until five months after the accident. According to Dr. Cohen, radicular symptoms typically appear between two weeks and a month after an accident.
Dr. Cohen noted that on two occasions prior to the accident, December 10, 1997 and January 14, 1999, Hamblin reported experiencing radicular symptoms. Dr. Cohen also observed that Hamblin's Social Security application reports radicular symptoms in her neck.
Dr. Cohen pointed to "confounding factors," such as Hamblin's knee arthritis and foot deformities, which "probably altered gait patterns." Dr. Cohen also listed being overweight as a confounding factor. Dr. Cohen testified that lifting heavy objects, like Hamblin did as an X-ray technologist, could initiate or exacerbate back problems. Dr. Cohen testified that slip-and-fall accidents, like the one Hamblin had in April, 2000, often initiate or exacerbate back problems.
According to Dr. Cohen, spinal stenosis usually gets worse. Symptoms include back pain radiating into the legs, numbness in the feet and weakness in the lower extremities.
II. Conclusions of Law
A. Negligence
Hamblin brings this action pursuant to the Federal Tort Claims Act, 28 U.S.C.A. §§ 2671-2680. Hamblin alleges that Sergeant Armell was negligent in backing into her vehicle. She further asserts that the United States is liable for Armell's negligence because Armell was an employee of the United States, acting within the scope of his employment when the accident occurred. The United States contends that it is not liable because of Hamblin's comparatively negligent conduct.
*322 1. Sergeant Armell's Conduct
Under the Federal Tort Claims Act, the United States is liable for the negligence of its employees, acting within the scope of their employment, in the same manner and to the same extent as a private individual under like circumstances. 28 U.S.C.A. §§ 1346(b)(1), 2674 (West 1994 & Supp.2003). It is undisputed that Armell was an employee of the United States acting within the scope of his employment when the accident occurred. Therefore, the United States is liable for his alleged negligence. Vermont law governs both liability and damages in this case. 28 U.S.C.A. § 1346(b)(1).
To establish negligence, Hamblin must prove by a preponderance of the evidence the following elements: (1) Armell owed Hamblin a duty of care; (2) Armell breached this duty; (3) Hamblin suffered injuries; (4) Armell's breach of duty proximately caused Hamblin's injuries. O'Connell v. Killington, Ltd., 164 Vt. 73, 76, 665 A.2d 39, 42 (1995).
Armell owed Hamblin a duty to exercise reasonable care. Reasonable care is that care which a reasonably prudent person would use in conducting his or her own affairs in light of the surrounding circumstances. See, e.g., Garafano v. Neshobe Beach Club, Inc., 126 Vt. 566, 573, 238 A.2d 70, 76 (1967). As the operator of a vehicle, Armell owed Hamblin a duty to "maintain a reasonable and proper lookout for persons and property ... and to use reasonable diligence to avoid inflicting injuries on such persons or property." Beaucage v. Russell, 127 Vt. 58, 62, 238 A.2d 631, 634 (1968). The circumstances of each case dictate what is to be considered a "reasonable and proper lookout." Id.
Sergeant Armell breached his duty to exercise reasonable care while operating his vehicle, although his conduct makes the question particularly close. When he realized he needed to reverse the Humvee, Armell walked to the rear of the vehicle to ensure that nothing blocked his path. Before reversing, he checked both his side rearview mirrors. Armell had earlier adjusted these mirrors to their proper position. In addition, once Armell started the vehicle, he illuminated the exterior lights. There is no evidence that Armell reversed at anything but a reasonable rate of speed. He testified credibly that he continuously looked in his driver's side rearview mirror while reversing.
This is the conduct of a careful driver and officer. Nevertheless, the fact remains that Sergeant Armell reversed the Humvee without being able to see what was directly behind him. As a result, the Humvee made contact with Hamblin's vehicle at least once. Armell should have been aware that the 30-45 second interval between when he walked behind the Humvee and when he began to reverse was ample time for a car to park behind him. As a frequent customer, Sergeant Armell was familiar with the gas station's layout. He was cognizant that a vehicle in line at the pump would likely park behind the Humvee. Therefore, acting as a reasonably prudent person, Armell should have taken into account the possibility of a car pulling in behind him while he arranged himself in the driver's seat and waited for the wait light.
Such a possibility created a substantial risk of accident because of the Humvee's large blind spot. Armell was well aware of the Humvee's large blind spot and the safety problems associated with it. He had been trained in the use of ground guides while reversing military vehicles. The Court need not speculate as to whether ground guides were required in this situation. It is sufficient to state that Armell did not employ any technique to ensure *323 that the area which he could not see was free from obstruction while he reversed the vehicle. Given these circumstances, Armell failed to maintain a reasonable and proper lookout while reversing the Humvee.
2. Comparative Negligence
The United States alleges that Ms. Hamblin was comparatively negligent because she ignored an obvious danger when she parked behind the Humvee. Under a comparative negligence analysis, if the plaintiff's negligence is less than that of the defendant, her award is reduced by a percentage equal to her negligence. Vt. Stat. Ann. Tit. 12 § 1036 (1996). The plaintiff is barred from recovery if her negligence exceeds that of the defendant. Id. The burden is on the defendant to establish the plaintiff's negligence.
The United States has not proved Hamblin was negligent. It is negligent to fail to exercise ordinary care to avoid a patent or obvious danger. E.g., Wall v. A.N. Deringer, Inc., 119 Vt. 36, 38, 117 A.2d 390, 391 (1955) (business invitee who failed to notice a step in front of her and accommodate her stride was contributorily negligent). In this case, however, the Humvee did not present a patent or obvious danger to Hamblin. When Hamblin pulled into the parking lot, Sergeant Armell was arranging himself in his seat and waiting for the wait light to turn off. During this time period, the Humvee's exterior lights were not illuminated and therefore Hamblin had no indication that the vehicle was about to reverse. It was only when Armell started the engine that the vehicle's lights were illuminated. Although the Humvee is a large military vehicle, this fact alone is not sufficient to have posed an obvious danger to Hamblin when she was deciding where to park her car.
Moreover, Hamblin parked in line behind a car at the gas pump. Under the circumstances, it was reasonable for Hamblin to conclude that she could safely park in that spot. "[T]he law does not require an impossibility or a useless precaution." LeFebvre v. Cent. Vt. Ry. Co., 97 Vt. 342, 351, 123 A. 211, 215 (1924). In sum, the evidence does not demonstrate that Hamblin failed to exercise reasonable care while parking her car.
The United States also argues that Hamblin negligently delayed sounding her horn and removing her leg from danger. Under the sudden emergency doctrine, when an individual is confronted with a sudden peril through no fault of her own, she is not bound to exercise the same degree of care as when she has time for reflection. Stevens v. Nurenburg, 117 Vt. 525, 533, 97 A.2d 250, 256-57 (1953). The law recognizes that a reasonable person may fail to use her best judgment, or might not choose the best available method of avoiding danger in an emergency situation. Id. The sudden emergency doctrine simply reiterates the principle that the test of negligence must take into account the surrounding circumstances of a particular case. See Westcom v. Meunier, 164 Vt. 536, 544, 674 A.2d 1267, 1272 (1996) (Morse, J., dissenting).
Hamblin was presented with the reversing Humvee through no fault of her own. Her position was undoubtedly one of peril. She sounded her horn as soon as it was evident that the Humvee was not going to stop, but was unable to move her leg in time. The United States' assertion that Hamblin might have acted differently depends too heavily on the clarifying lens of hindsight. The law requires that Hamblin's conduct be evaluated in accordance with the circumstances that existed at the time of the accident. Under these circumstances, Hamblin did not breach her duty to exercise reasonable care.
*324 B. Proximate Cause
Hamblin must also establish that Armell's negligence proximately caused her injuries. To establish proximate causation, the plaintiff must prove by a preponderance of the evidence that the negligent act was a substantial factor in bringing about the alleged injury. See Tufts v. Wyand, 148 Vt. 528, 530, 536 A.2d 541, 542 (1987); Restatement (Second) of Torts § 431 (1965).
It is undisputed that the July 9, 1999 accident proximately caused the damage to Hamblin's car as well as the leg contusion, swelling and bruising that Hamblin experienced after the accident. Hamblin also alleges that the accident proximately caused injuries to her back and lower extremities, in particular, her left hip, sacrum, buttock, posterior thigh and lateral calf. These symptoms include numbness, tingling and radiating pain. According to Hamblin, these are the symptoms that prevent her from working. Dr. Roomet testified that these radicular symptoms are caused by Hamblin's spinal stenosis. Hamblin does not claim that the July 9, 1999 accident caused her spinal stenosis. Instead, she alleges that the accident aggravated her pre-existing condition.
Hamblin has not proved that the accident aggravated her spinal stenosis and led to the symptoms that prevent her from working. Hamblin relies on Dr. Roomet's opinion that the accident was a competent causal mechanism of her worsened spinal stenosis. A number of factors call into question the accuracy of Dr. Roomet's opinion. Dr. Roomet primarily based his opinion on the temporal proximity between the accident and the onset of Hamblin's symptoms. Yet the chronology between the accident and the onset of Hamblin's symptoms is far from clear. Hamblin reported bilateral hip discomfort a week after the accident. But she did not report the radicular symptoms associated with spinal stenosis until December 7, 1999, five months after the accident. Many factors can intercede during a five-month interval. For example, Hamblin worked over six-hundred hours in the five months between the accident and the onset of her radicular symptoms. Both Dr. Roomet and Dr. Cohen testified that heavy lifting, such as Hamblin performed as an X-ray technologist, can aggravate spinal stenosis. Therefore, the five-month interval between the accident and the onset of Hamblin's radicular symptoms undermines Dr. Roomet's chronological analysis.
In addition, there are a number of factors relevant to proximate cause that Dr. Roomet was unaware of or did not consider when formulating his opinion. (1) Dr. Roomet was unaware that Hamblin had reported radicular pain to her physicians in December, 1997 and January, 1999. He was also unaware of the radicular symptoms in her neck. (2) Dr. Roomet was unaware of Hamblin's foot condition and her knee arthritis. Dr. Roomet acknowledged that both conditions could exacerbate an individual's back problems. (3) Dr. Roomet testified that a slip-and-fall accident could exacerbate spinal stenosis. Yet he was unaware that Hamblin suffered a slip-and-fall accident which required a trip to the emergency room in April, 2000, four months before Hamblin ceased working due to her pain. (4) Dr. Roomet did not consider Hamblin's weight as an exacerbating factor, although he acknowledged that being overweight could also exacerbate back problems. (5) Dr. Roomet failed to consider that Hamblin regularly lifted heavy files and patients at work. He testified that such activity could worsen spinal stenosis.
At trial, Dr. Roomet maintained that none of these factors changed his opinion. Nevertheless, the fact that Dr. Roomet *325 failed to fully consider a number of viable alternative explanations undermines his conclusion about causation. Any of the above factors, acting alone or together with the others, could have exacerbated Hamblin's spinal stenosis and caused her radicular symptoms. Moreover, Dr. Cohen testified that spinal stenosis tends to worsen over time, even in the absence of a causal mechanism.
There may be multiple proximate causes of an injury. Tufts, 148 Vt. at 530, 536 A.2d at 542. Hamblin is not required to establish that the July 9, 1999 accident was the sole cause of her aggravated spinal stenosis. Nevertheless, the burden is on Hamblin to prove that the accident was a substantial factor in bringing about the aggravation of her pre-existing condition. Hamblin has failed to meet this burden.
C. Damages
Hamblin has proved by a preponderance of the evidence that Armell was negligent in reversing his Humvee into her parked car. Hamblin has also proved that Armell's negligence proximately caused damage to her car, her calf injury, and pain and suffering. Therefore, Hamblin is entitled to be compensated for these damages. Because Hamblin has not proved that the accident proximately caused her aggravated back condition, she is not entitled to damages arising from that condition.
The Court finds the United States liable for the following: (1) $524.80 in property damages; (2) $2,281.25 in medical expenses; (3) $236 in lost wages; (4) $15,000 in pain and suffering. The United States' total liability equals $18,042.05.
NOTES
[1] The parties dispute how many times the Humvee made contact with Hamblin's car. Armell claims that he reversed the Humvee once, stopped the vehicle when he heard Hamblin's horn, then drove forward and exited the vehicle. Hamblin contends that Armell reversed, made contact and pulled forward three separate times and was in the process of reversing the fourth time when he finally stopped and exited the Humvee. It is not necessary to resolve this dispute to answer the question of liability.
[2] In relevant part, the Merriam Webster Medical Dictionary defines radicular as "of, relating to, or involving a nerve root." Available at: http://www.intelihealth.com/cgi-bin/dictionary.cgi.
[3] The National Institute of Health describes spinal stenosis as follows:
Spinal stenosis is a narrowing of spaces in the spine (backbone) that results in pressure on the spinal cord and/or nerve roots. This disorder usually involves the narrowing of one or more of three areas of the spine: (1) the canal in the center of the column of bones (vertebral or spinal column) through which the spinal cord and nerve roots run, (2) the canals at the base or roots of nerves branching out from the spinal cord, or (3) the openings between vertebrae (bones of the spine) through which nerves leave the spine and go to other parts of the body. The narrowing may involve a small or large area of the spine. Pressure on the lower part of the spinal cord or on nerve roots branching out from that area may give rise to pain or numbness in the legs. Pressure on the upper part of the spinal cord (that is, the neck area) may produce similar symptoms in the shoulders, or even the legs.
Available at: http://www.niams.nih.gov/hi/topics/spinalstenosis/spinal_ ste.htm# spine_a. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453942/ | 327 F. Supp. 2d 809 (2004)
FIRESTONE FINANCIAL CORPORATION Plaintiff
v.
Shiv SYAL, et al. Defendants
No. 1:03 CV 742.
United States District Court, N.D. Ohio, Eastern Division.
May 4, 2004.
Linda R. Van Tine, Esq., Law Office of Linda R. Van Tine, Sandusky, OH, for Plaintiff.
Michael D. Goldstein, Esq., William M. Goldstein, Esq., Cleveland, OH, for Defendants.
MEMORANDUM OF OPINION AND ORDER REMANDING THIS CASE FOR LACK OF SUBJECT MATTER JURISDICTION
WELLS, District Judge.
The issue before this Court is whether it has subject matter jurisdiction over this case. Plaintiff Firestone Financial Corporation ("Firestone") sued defendant Shiv Syal in Parma Municipal Court raising a *810 single breach of contract claim and seeking damages of $9,600.20, exclusive of costs and interest.[1] (Docket # 1, Ex. B). On 23 April 2003, defendant Shiv Syal filed a notice of removal claiming that this Court had subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332. (Docket # 1, at ¶ 14). Section 1332 gives federal courts jurisdiction over lawsuits between citizens of different states where the amount in controversy exceeds $75,000, exclusive of interest and costs. Because it was unclear whether the amount in controversy was satisfied and justified removal in this case, the Court ordered the parties to show cause why jurisdiction is proper. (Docket # 40). Defendant Shiv Syal was the only party who filed a response. (Docket # 41).
As noted above, for a federal court to exercise diversity jurisdiction, the matter in controversy must exceed "the sum or value of $75,000, exclusive of interest and costs." 28 U.S.C. § 1332(a). In seeking to remove a case based on diversity jurisdiction, the defendant bears the burden of establishing by a preponderance of evidence that the amount in controversy exceeds $75,000. Gafford v. General Elec. Co., 997 F.2d 150, 158-59 (1993). This burden strikes a proper balance between "the competing interests of protecting a defendant's right to remove and limiting diversity jurisdiction." Id. at 158. To meet its burden, the defendant does not need to prove to a legal certainty that plaintiff's damages exceed $75,000; however, it does not satisfy its burden by simply showing that the "amount in controversy `may' meet the federal requirement." Id. at 159.
Mr. Syal does not apparently dispute that plaintiff's complaint, by itself, fails to satisfy the amount in controversy requirement of Section 1332, but suggests instead that this Court has jurisdiction over the case because his counterclaim and third-party complaint involve claims for damages in excess of $75,000. (Docket # 41, at 1). In his counterclaim against Firestone, Mr. Syal raises claims of unconscionability, fraud, and conversion seeking rescission of the contract, a refund of $2,048.80 in payments, as well as other actual, compensatory, and punitive damages. (Docket # 3). Mr. Syal also filed a third-party complaint against Seaga, United Vending Service Group, L.L.C., Bob Grant, and John Doe Agent for fraud, misrepresentation, and violations of the Business Opportunity Plans Act, O.R.C. § 1334.01 et seq., seeking actual and compensatory damages in excess of $10,000, $100,000 in punitive damages, $10,000 in statutory damages, rescission of the contract, and attorneys' fees. (Docket # 3). Before considering whether Mr. Syal's counterclaims and third-party claims more likely than not involve damages exceeding the jurisdictional amount, the Court must first consider whether such claims can ever provide jurisdiction when removal jurisdiction is lacking over plaintiff's original claims.
While district courts have taken different approaches with respect to compulsory counterclaims, the majority of courts have held that a federal court should not consider *811 the value of a defendant's compulsory counterclaim in determining the amount in controversy for removal jurisdiction. See e.g. FLEXcon Co. v. Ramirez Commercial Arts, Inc., 190 F. Supp. 2d 185, 186-87 (D.Mass.2002); Maloan v. Bancorpsouth Bank, Inc., 2002 WL 1397266, at *2 (D.Tenn. March 29, 2002); Kaplan v. Computer Sciences Corp., 148 F. Supp. 2d 318, 320-21 (D.N.Y.2001); Independent Mach. Co. v. International Tray Pads & Packaging, Inc., 991 F. Supp. 687, 691-93 (D.N.J.1998); 14B WRIGHT & MILLER, Federal Practice and Procedure §§ 3706 and 3725.[2] The Court finds the reasoning expressed in those cases, declining to consider compulsory counterclaims in determining the amount in controversy, to be persuasive.
While the Sixth Circuit has not directly addressed this issue, it has referred approvingly to the traditional rule that "`no part of the required jurisdictional amount can be met by considering a defendant's counterclaim' to satisfy the amount in controversy requirement for removal jurisdiction purposes." Sanford v. Gardenour, 2000 WL 1033025, at *3 (6th Cir. July 17, 2000). The Sixth Circuit has also consistently held that the amount in controversy for federal diversity jurisdiction purposes is determined as of the time the action is commenced. Klepper v. First American Bank, 916 F.2d 337, 340 (6th Cir.1990); Sellers v. O'Connell, 701 F.2d 575, 578 (6th Cir.1983); Worthams v. Atlanta Life Ins. Co., 533 F.2d 994, 997 (6th Cir.1976). Moreover, only state court actions that originally could have been filed in federal court may be removed to federal court by the defendant. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S. Ct. 2425, 96 L. Ed. 2d 318 (1987); Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 871 (6th Cir.2000). Taken together these cases suggest that the amount in controversy for purposes of diversity jurisdiction, at least in the context of removal, should be determined solely by considering the plaintiff's complaint. Such a conclusion is also consistent with the U.S. Supreme Court's conclusion that the language and legislative history of Section 1441 reveal a congressional intent to restrict the removal jurisdiction of federal courts and its mandate that Section 1441 should be narrowly construed to ensure "due regard for the rightful independence of state government." Shamrock Oil Corp. v. Sheets, 313 U.S. 100, 107-109, 61 S. Ct. 868, 85 L. Ed. 1214 (1941); Long v. Bando Manufacturing of America, Inc., 201 F.3d 754, 757 (6th Cir.2000) (explaining that because the removal statutes implicate federalism concerns, they are to be narrowly construed against removal); Coyne ex rel. Ohio v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir.1999) (stating that all doubts as to whether removal is proper should be resolved in favor of remand to state court).
Having concluded that Mr. Syal's counterclaim will not be considered in determining *812 the amount in controversy for removal jurisdiction, the Court finds that Mr. Syal's third-party complaint is similarly ineffective in vesting this Court with jurisdiction. The reasons already stated for focusing solely on the plaintiff's complaint for determining the amount in controversy for removal jurisdiction are even more compelling in the context of third-party claims which are by their nature permissive and asserted against non-parties to the original action.[3]
Accordingly, regardless of the amount of damages sought by Mr. Syal in his counterclaim and third-party complaint, this Court does not have removal jurisdiction over this case because plaintiff's claims do not exceed $75,000. Lacking such jurisdiction, this Court must, pursuant to 28 U.S.C. § 1447(c), remand the case to state court.
IT IS SO ORDERED.
ORDER OF REMAND
This Court, having contemporaneously filed its Memorandum of Opinion and Order, hereby remands this case to Parma Municipal Court, the state court from which it was removed.
A certified copy of this order of remand shall be mailed by the Clerk of the United States District Court for the Northern District of Ohio to the Clerk of Parma Municipal Court, Parma, Ohio.
IT IS SO ORDERED.
NOTES
[1] According to the complaint, Mr. Syal, on 15 February 2002, executed a negotiable promissory note and security agreement to purchase vending machines from Seaga Manufacturing, Inc. ("Seaga") for $12,500. (Docket # 1, Ex. B, at ¶ 4). Pursuant to the terms of the contract, Mr. Syal was to make monthly payments of $399.40 for 35 consecutive months. (Docket # 1, Ex. B, at ¶ 5). Subsequently, Seaga assigned its rights, title, and interest in the note and agreement to Firestone. (Docket # 1, Ex. B, at ¶ 6). After making some payments under the note and agreement, Mr. Syal allegedly breached their terms when he ceased making payments to Firestone. (Docket # 1, Ex. B, at ¶ 7).
[2] For the minority view, see Swallow & Associates v. Henry Molded Prods., Inc., 794 F. Supp. 660 (E.D.Mich.1992). In reaching its conclusion, the court in Swallow cites to a Ninth Circuit case, Fenton v. Freedman, which held that the damage amount pled in a compulsory counterclaim is to be included in the calculation of the amount in controversy when seeking to determine if diversity jurisdiction is present. 748 F.2d 1358, 1359 (9th Cir.1984). Fenton, however, involved a case that was originally filed in federal court as opposed to one that was there based on the federal court's removal jurisdiction. Id. As explained by the Third Circuit in Spectacor Management Group v. Brown, this distinction is significant because "removal is governed by considerations inapplicable to cases involving the exercise of original jurisdiction." 131 F.3d 120, 125 (3d Cir.1997). Regardless of the persuasive value of Fenton and Spectacor in other contexts, they provide no support for Mr. Syal's proposition that a case is properly removed if a compulsory counterclaim exceeds the amount in controversy.
[3] Given the permissive nature of third-party claims, it is worth noting that courts have consistently held that removal is not proper solely on the basis of permissive counterclaims exceeding the jurisdictional amount. Independent Machine, 991 F.Supp. at 691; 14B WRIGHT & MILLER, Federal Practice and Procedure § 3706. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453934/ | 327 F. Supp. 2d 1323 (2004)
Richard Lee BEAMS, Plaintiff,
v.
Gale NORTON, Secretary of the Interior, Defendant.
No. 03-4072-JAR.
United States District Court, D. Kansas.
July 30, 2004.
*1324 *1325 Richard Lee Beams, Sunnyside, WA, Plaintiff Pro Se.
Jackie A. Rapstine, Office of United States Attorney, Topeka, KS, for Defendant.
MEMORANDUM ORDER AND OPINION GRANTING MOTION TO DISMISS INDIAN PREFERENCE ACT CLAIM
ROBINSON, District Judge.
This comes before the Court on defendant's motion to dismiss or for summary judgment on plaintiff's Indian Preference Act Claim. (Doc. 41). Because the Indian Preference Act does not confer a private right of action, and because the United States has not waived sovereign immunity, the Court lacks subject matter jurisdiction over this claim. Furthermore, plaintiff fails to state a claim for relief because he has failed to properly assert or plead a claim for non-monetary relief. Thus, this claim is dismissed.
Background
This is an action brought by plaintiff Richard Lee Beams, pro se, under Title VII of the Civil Rights Act of 1964, alleging *1326 employment discrimination (failure to employ and retaliation) on the basis of race or color (American Indian) and sex (male) and further under the Age Discrimination in Employment Act.[1] Plaintiff complains of four discrete employment actions: a reverse sex discrimination claim arising from his resignation as Soil Conservationist in Horton, Kansas (BIA Complaint # 91-031); a retaliation claim arising out of plaintiff's unsuccessful demand that he be placed back in the Soil Conservationist position (BIA Complaint # 94-052); a claim for failure to employ based on race, age and retaliation, concerning plaintiff's 1994 application for another Soil Conservationist position (BIA Complaint # 95-027); and a claim for failure to employ based on race, age and retaliation concerning plaintiff's 1998 application for a Superintendent position. In an order entered February 26, 2004, United States Magistrate Judge K. Gary Sebelius granted in part plaintiff's leave to amend the complaint, ordering that plaintiff's complaint as related to BIA Complaint 95-027, be treated "as including a claim under the Indian Reorganization Act of 1934, also known as the Wheeler-Howard Act, 25 U.S.C. § 461 et seq." Defendant then moved to dismiss or for summary judgment on this discrete claim.[2]
Pro Se Plaintiff
Because plaintiff appears pro se, the court must remain mindful of additional considerations. A pro se litigant's pleadings are to be construed liberally and held to a less stringent standard than pleadings drafted by lawyers.[3] Thus, if a pro se plaintiff's complaint can reasonably be read "to state a valid claim on which the plaintiff could prevail, it [the court] should do so despite the plaintiff's failure to cite proper legal authority, his confusion of various legal theories, his poor syntax and sentence construction, or his unfamiliarity with pleading requirements."[4] However, it is not "the proper function of the district court to assume the role of advocate for the pro se litigant."[5] For that reason, the court should not "construct arguments or theories for the plaintiff in the absence of any discussion of those issues,"[6] nor should it "supply additional factual allegations to round out a plaintiff's complaint or construct a legal theory on plaintiff's behalf."[7]
Discussion
Plaintiff claims that defendant engaged in race and age discrimination, and retaliation in failing to hire him for a Soil Conservationist position he applied for in 1994 (BIA Complaint # 95-027). Plaintiff further asserts that "a non-indian preference applicant was hired which violated the age and Indian Preference requirements." In 1934, Congress passed the Indian Reorganization Act, which is codified at 25 U.S.C. § 461, et seq. The Indian Preference Act ("IPA")[8] is part of the Indian Reorganization Act ("IRA"). Defendant moves to dismiss for lack of subject matter jurisdiction on the premise that the IPA does not *1327 give rise to a private cause of action or private remedy and that defendant has not waived sovereign immunity with respect to any claim for monetary damages. Defendant also moves to dismiss for failure to state a claim.
Dismissal under Rule 12(b)(1) for lack of subject matter jurisdiction
Since federal courts are courts of limited jurisdiction, there is a strong presumption against federal jurisdiction.[9] A court lacking subject matter jurisdiction "must dismiss the case at any stage of the proceeding in which it becomes apparent that such jurisdiction is absent."[10] When a defendant brings a Rule 12(b)(1)[11] motion to dismiss for lack of subject matter jurisdiction, the plaintiff must carry the burden of proving jurisdiction.[12]
Defendant first argues that the Court lacks subject matter jurisdiction, because the IPA does not confer a private right of action, nor a private remedy, to a private individual. Only Congress can create such a private right.[13]
In order to infer Congressional intent to create a private cause of action, a court must employ the four factor test dictated by the Supreme Court in Cort v. Ash:[14] (1) whether plaintiff is part of the class for whose benefit the statute was enacted; (2) whether there is any indication of legislative intent, explicit or implicit, either to create or deny a private right of action; (3) whether it would be consistent with the underlying purpose of the legislative scheme to imply a private right of action; and (4) whether the cause of action is one traditionally relegated to state law, so that it would be inappropriate to infer a cause of action based solely on federal law.[15]
In the years following its decision in Cort, the Supreme Court has emphasized and given most weight to the second factor, congressional intent.[16] Congress did not explicitly express such an intent in the statute itself, which states:
The Secretary of Interior is directed to establish standards of health, age, character, experience, knowledge, and ability for Indians who may be appointed to the various positions maintained, now or hereafter, by the Indian Office, in the administration of functions or services affecting any Indian tribe. Such qualified Indians shall hereafter have the preference to appointment to vacancies in any such positions.[17]
Congress can express its intent either explicitly, or by implication. As the Tenth Circuit recently noted in Boswell v. Skywest Airlines, Inc.,[18] the test for determining if a statute creates a private cause of action has been "effectively condensed into one-whether Congress expressly or by implication, *1328 intended to create a private cause of action."[19] Thus:
The judicial task is to interpret the statute Congress has passed to determine whether it displays an intent to create not just a private right but also a private remedy. Statutory intent on this latter point is determinative. Without it, a cause of action does not exist and courts may not create one, no matter how desirable that might be as a policy matter, or how compatible with the statute.[20]
The Supreme Court has already analyzed the legislative history and Congressional intent associated with implementation of the IPA. In Morton v. Mancari,[21] the Supreme Court reviewed the legislative history of Indian preferences leading up to and culminating in the IPA, 25 U.S.C. § 472, which is also referred to as Section 12 of the Indian Reorganization Act of 1934(IRA), which is also known as the Wheeler-Howard Act, 25 U.S.C. § 461, et seq.[22] In reviewing the legislative history of the IRA, the Supreme Court noted that:
The purpose of these preferences, as variously expressed in the legislative history, has been to give Indians a greater participation in their own self government; to further the Government's trust obligation toward the Indian tribes; and to reduce the negative effect of having non-Indians administer matters that affect Indian tribal life. The preference directly at issue here was enacted as an important part of the sweeping Indian Reorganization Act of 1934. The overriding purpose of that particular Act was to establish machinery whereby Indian tribes would be able to assume a greater degree of self government, both politically and economically. Congress was seeking to modify the then-existing situation whereby the primarily non-Indian-staffed BIA had plenary control, for all practical purposes, over the lives and destinies of the federally recognized Indian tribes.
. . . . .
One of the primary means by which self-government would be fostered and the Bureau made more responsive was to increase the participation of tribal Indians in the BIA operations. In order to achieve this end, it was recognized that some kind of preference and exemption from otherwise prevailing civil service requirements was necessary.
. . . . .
Congress was well aware that the proposed preference would result in employment disadvantages within the BIA for non-Indians. Not only was this displacement unavoidable if room were to be made for Indians, but it was explicitly determined that gradual replacement of non-Indians with Indians within the Bureau was a desirable feature of the entire program for self-government.[23]
While this legislation's purpose was to increase the participation of Indians administering matters affecting Indian tribal life, nothing in its legislative history suggests that its purpose was to benefit individual Indian job applicants. Rather, this legislation's purpose was to advance self-government among Indian tribes. The Bureau of Indian Affairs (BIA), an agency of the United States Department of Interior that had been staffed by primarily non-Indians, *1329 would become an agency run by Indians.[24] To that end, the Secretary of the Interior has implemented regulations pursuant to the IRA that pertain to the BIA.[25] Part 5 of these regulations relate to Indian Preference in employment.[26]
One instructive case, concerning a similar statute, is Solomon v. Interior Regional Housing Authority.[27] In Solomon, the Ninth Circuit, in applying the second Cort factor, found no explicit or implicit Congressional intent to protect Indian job applicants, in employment preference provisions of the Indian Self-Determination and Education Assistance Act (ISDEAA), 25 U.S.C. § 450e(b).[28] In Solomon, the plaintiff was a Native Alaskan seeking monetary damages for a claimed violation of the Indian preference provisions when the Native Alaskan housing authority hired a non-Indian instead of him. The housing authority was federally funded and subject to the provisions of the ISDEAA. The Ninth Circuit found no Congressional intent to provide a private cause of action to a disappointed Indian job applicant. Rather, "Congress intended to allow Indian people and tribes greater freedom in self-governance at the tribal or community level, not to confer individual rights on individual Indians."[29]
There is simply nothing in the legislative history of the IRA and IPA from which a private right of action can be inferred or implied. Not only is there no explicit creation of a private right of action in either the IPA or IRA, there is no explicit or implicit creation of a remedy for an individual claiming a violation of the IPA. Plaintiff is, therefore, precluded from pursuing a claim for violation of the IPA in this case, and that claim must be dismissed.
For other reasons, this claim must be dismissed for lack of subject matter jurisdiction. Plaintiff's IPA claim is an action for monetary damages against the Secretary of Interior in her official capacity, and, as such, the action must be construed as one actually brought against the United States.[30] Instead of naming the United States as a defendant, plaintiff has improperly named the head of an agency as the defendant. The only proper defendant, if any, would be the United States.[31] Thus, plaintiff has failed to assert a claim against the proper party, and his claim against the Secretary of Interior must be dismissed.
Moreover, it is well established that the United States is immune from suit except as it consents to be sued.[32] Any waiver of sovereign immunity must be strictly construed.[33] The terms of consent to be sued in any court define that court's jurisdiction to entertain the suit.[34]
*1330 A court has no subject matter jurisdiction over the United States unless a specific statute waives its sovereign immunity.[35] Such waiver must be "unequivocally expressed."[36] Plaintiff has not shown, nor responded to defendant's showing that the United States has not waived its sovereign immunity in an action brought under the IPA; the IPA does not equivocally or "unequivocally express" a waiver. Furthermore, the bar of sovereign immunity cannot be avoided simply by naming employees of the United States as defendants.[37] Nor do the Age Discrimination in Employment Act or Title VII confer jurisdiction over an independent claim of violation of the IPA. Accordingly, this additional jurisdictional flaw requires dismissal of plaintiff's IPA claim.
Motion to Dismiss under Rule 12(b)(6) for failure to state a claim
Defendant further moves to dismiss for failure to state a claim because plaintiff has failed to properly plead or assert a claim for non-monetary relief under the IPA, and because plaintiff's Complaint actually states a claim for a suitability determination, for which review is vested exclusively in the Merit Systems Protection Board. The Court need not decide these issues, for "[w]hen a defendant seeks dismissal under Rule 12(b)(1) and 12(b)(6) in the alternative, the court must decide first the 12(b)(1) motion for the 12(b)(6) challenge would be moot if the court lacked subject matter jurisdiction."[38] Nevertheless, the Court has determined that these claims are subject to dismissal under Rule 12(b)(6).
A court may dismiss a complaint for "failure to state a claim upon which relief can be granted."[39] Dismissal is appropriate "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations."[40] "The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true."[41] On a Rule 12(b)(6) motion, the court judges the sufficiency of the complaint accepting as true the well-pleaded factual allegations and drawing all reasonable inferences in favor of the plaintiff.[42] The court construes the allegations in the light most favorable to the plaintiff.[43] These deferential rules, however, do not allow the court to assume that a plaintiff "can prove facts that it has not alleged or that the defendants have violated the ... laws in ways that have not been alleged."[44] "[I]f the *1331 facts narrated by the plaintiff `do not at least outline or adumbrate' a viable claim, his complaint cannot pass Rule 12(b)(6) muster."[45]
While the defendant has not waived sovereign immunity with respect to claims for monetary relief under the IPA, the defendant acknowledges that "[i]f there is any right to proceed with an individual claim against an agency of the United States pursuant to the Indian Preference Act, it must proceed as one for nonmonetary relief pursuant to the Administrative Procedures Act...."[46] If the Court had subject matter jurisdiction of plaintiff's claim under the IPA, plaintiff could only proceed with a nonmonetary claim for judicial review of a final agency action. For example, in Mescalero Apache Tribe v. Hickel,[47] plaintiffs involved in a reduction in force, claimed that they were entitled to an employment preference under the IPA. The court found that it had jurisdiction pursuant to 5 U.S.C. § 704, as this was a judicial review of final, nondiscretionary agency action.[48] This basis for jurisdiction does not preserve plaintiff's claim, however, for he does not assert a claim for nonmonetary relief pursuant to the APA. Even under that liberal pleading standard, plaintiff's complaint is fatally defective. Plaintiff's complaint does not hint at a basis for jurisdiction under the APA. Moreover, not only has plaintiff failed to assert and plead jurisdiction under the APA, he has failed to assert or plead that the defendant's failure to hire him was a final nondiscretionary, agency decision, for which he now seeks judicial review. For all of these reasons, the Court grants the defendant's motion to dismiss plaintiff's IPA claim.
IT IS THEREFORE ORDERED BY THE COURT that defendant's Motion to Dismiss or for Summary Judgment on Plaintiff's Indian Preference Act Claim (Doc. 41) is GRANTED.
IT IS SO ORDERED.
NOTES
[1] 29 U.S.C. § 621 et seq.
[2] Defendant has also moved for summary judgment on all claims (Doc. 29), including the claim at issue in this motion. The Court addresses the summary judgment motion in a separate order.
[3] Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.1991) (citing Haines v. Kerner, 404 U.S. 519, 520-21, 92 S. Ct. 594, 30 L. Ed. 2d 652 (1972)).
[4] Id.
[5] Id.
[6] Drake v. City of Fort Collins, 927 F.2d 1156, 1159 (10th Cir.1991) (citations omitted).
[7] Whitney v. State of New Mexico, 113 F.3d 1170, 1173-74 (10th Cir.1997) (citing Hall, 935 F.2d at 1110).
[8] 25 U.S.C. § 472 et seq.
[9] Penteco Corp. Ltd. Partnership 1985A v. Union Gas System, Inc., 929 F.2d 1519, 1521 (10th Cir.1991).
[10] Id. (quoting Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir.1974)).
[11] Fed. R. Civ.P. 12(b)(1).
[12] Mounkes v. Conklin, 922 F. Supp. 1501, 1505 (D.Kan.1996).
[13] Alexander v. Sandoval, 532 U.S. 275, 121 S. Ct. 1511, 149 L. Ed. 2d 517 (2001) (Like substantive federal law itself, private rights of action to enforce federal law must be created by Congress).
[14] 422 U.S. 66, 78, 95 S. Ct. 2080, 45 L. Ed. 2d 26 (1975).
[15] Id. (citations omitted).
[16] See, e.g., Touche Ross & Co. v. Redington, 442 U.S. 560, 578, 99 S. Ct. 2479, 61 L. Ed. 2d 82 (1979).
[17] 25 U.S.C. § 472.
[18] 361 F.3d 1263 (10th Cir.2004).
[19] Id. at 1267 (citations omitted).
[20] Id. (quoting Sandoval, 532 U.S. at 286-87, 121 S. Ct. 1511).
[21] 417 U.S. 535, 94 S. Ct. 2474, 41 L. Ed. 2d 290 (1974).
[22] Id. at 537, 94 S. Ct. 2474.
[23] Id. at 541-44, 94 S. Ct. 2474 (citations omitted).
[24] See Mescalero Apache Tribe v. Hickel, 432 F.2d 956 (10th Cir.1970), cert.denied, 401 U.S. 981, 91 S. Ct. 1195, 28 L. Ed. 2d 333 (1971).
[25] See 5 C.F.R. § 1.2, et seq.
[26] See 5 C.F.R. § 5.1, et seq.
[27] 313 F.3d 1194 (9th Cir.2002).
[28] Id. at 1196-98.
[29] Id. at 1198.
[30] Kentucky v. Graham, 473 U.S. 159, 166, 105 S. Ct. 3099, 87 L. Ed. 2d 114 (1985).
[31] See Denney v. United States Postal Service, 916 F. Supp. 1081, 1083 (D.Kan.1996).
[32] United States v. Orleans, 425 U.S. 807, 96 S. Ct. 1971, 48 L. Ed. 2d 390 (1976).
[33] United States v. Mitchell, 445 U.S. 535, 538, 100 S. Ct. 1349, 63 L. Ed. 2d 607 (1980), reh'g denied, 446 U.S. 992, 100 S. Ct. 2979, 64 L. Ed. 2d 849 (1980).
[34] Id.
[35] Lehman v. Nakshian, 453 U.S. 156, 160, 101 S. Ct. 2698, 69 L. Ed. 2d 548 (1981).
[36] Mitchell, 445 U.S. at 538, 100 S. Ct. 1349.
[37] See Ecclesiastical Order of the Ism of Am, Inc. v. Chasin, 845 F.2d 113, 115 (6th Cir.1988).
[38] Mounkes v. Conklin, 922 F.Supp. at 1506 (citation omitted).
[39] Fed.R.Civ.P. 12(b)(6).
[40] Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229, 81 L. Ed. 2d 59 (1984) (citation omitted).
[41] Mounkes, 922 F.Supp. at 1506 (quotation omitted).
[42] Shaw v. Valdez, 819 F.2d 965, 968 (10th Cir.1987).
[43] Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974); Hall v. Bellmon, 935 F.2d 1106, 1109 (10th Cir.1991).
[44] Associated General Contractors v. California State Council of Carpenters, 459 U.S. 519, 526, 103 S. Ct. 897, 74 L. Ed. 2d 723 (1983) (footnote omitted).
[45] Mounkes v. Conklin, 922 F.Supp. at 1506 (citing Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir.1988) (quotation omitted)).
[46] 5 U.S.C. § 551 et seq.
[47] 432 F.2d 956 (10th Cir.1970). See also McAlpine v. United States, 112 F.3d 1429 (10th Cir.1997) [Department of Interior decision under Indian Reorganization Act is subject to judicial review under the APA and a failure to follow regulations is challengeable under the APA]; Mescalero Apache Tribe v. Rhoades, 755 F. Supp. 1484 (D.N.M.1990) [Jurisdiction under the APA of plaintiff's IPA claims, as a judicial review of a final agency action denying plaintiff's grievance challenging the Indian Health Service's area director's order that plaintiff resign his tribal council seat.] Also see Dionne v. Shalala, 209 F.3d 705, n. 3 (8th Cir.2000) (Eighth Circuit declined to consider Title VII plaintiff's independent IPA claim, in part because plaintiff did not seek administrative review of agency decision).
[48] Id. at 958-59. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453940/ | 327 F. Supp. 2d 34 (2004)
WINTERWOOD FARM, LLC, Plaintiff
v.
JER, INC., Defendant
No. 04-93-P-H.
United States District Court, D. Maine.
July 26, 2004.
Aaron P. Burns, Smith, Elliott, Smith & Garmey, P.A., Saco, ME, Keith Jacques, Smith, Elliott, Smith & Garmey, P.A., Portland, ME, William S. Kany, Smith, Elliott, Smith & Garmey, P.A., Saco, ME, for Winterwood Farm LLC, Plaintiff.
David A. Lourie, Law Office of David Lourie, Cape Elizabeth, ME, for Jer Inc, Defendant.
MEMORANDUM DECISION ON DEFENDANT'S MOTION FOR STAY
DAVID M. COHEN, United States Magistrate Judge.
Defendant JER, Inc. ("JER") moves pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 3, for a stay of the *35 instant action pending arbitration of the claims of plaintiff Winterwood Farm, LLC ("Winterwood"). See Defendant's Motion for Stay Pursuant to 9 U.S.C. § 3, etc. ("Motion") (Docket No. 9); see also Complaint (Injunctive Relief Requested) ("Complaint") (Docket No. 1). For the reasons that follow, I grant the Motion.
I. Applicable Legal Standard
Issuance of a stay in favor of arbitration is governed by 9 U.S.C. § 3, which provides in its entirety:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
II. Factual Context
For purposes of adjudication of the Motion, materials submitted by JER, together with the allegations of the Complaint, establish the following:
JER was set up to market a compost made from shellfish waste generated by Portland Shellfish Co. and others, to be sold under the name "Gardener's Gold." Affidavit of Jeffrey Holden ("Holden Aff."), Attachment # 1 to Motion, ¶ 2. In October 2001 JER and Winterwood entered into the written agreement referred to in the Complaint ("Output Contract"), which had as its stated object JER's exclusive purchase of Winterwood's high-grade compost. Id. ¶ 3; see also Output Contract, Exh. A to Holden Aff., at 1.
Pursuant to the Output Contract, the parties agreed that Winterwood would compost shellfish and seafood in a manner and in accordance with recipes mutually agreed to by both parties. Output Contract ¶ 1.2. Winterwood agreed to deliver its entire output of finished seafood compost to JER upon maturity, with the exception of specified amounts of compost that Winterwood reserved the right to sell directly to four designated customers. Id. ¶ 1.3. JER trucks were to pick up the compost at Winterwood's waste-composting facility. Id. Winterwood could invoice JER "for all compost as soon as it is screened, finished and ready to be bagged," with "[a]ll finished products [to] be stored in a designated area" on Winterwood's property. Id. ¶ 1.4. The Output Contract also provided, inter alia:
3.8 ARBITRATION. All claims, disputes and other matters in question arising out of, or relating to, this Agreement or the breach thereof shall be decided by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association then obtaining unless the parties mutually agree otherwise....
* * * * * *
3.14 EXTENT OF AGREEMENT. This Agreement represent[s] the entire and integrated Agreement between the parties and shall supersede all prior negotiations, representations, or agreements, either written or oral. This agreement may be amended only by written instrument signed by both parties.
* * * * * *
3.16 RELATIONSHIP OF PARTIES. Nothing contained herein shall be construed as creating any form of partnership *36 or joint venture between the parties hereto.
Id. ¶¶ 3.8, 3.14, 3.16.
After execution of the Output Contract, Winterwood repeatedly requested that reference to "Winterwood Farm" appear prominently on compost bags sold by JER. Holden Aff. ¶¶ 3-4. JER's compost bags were redesigned, with input from Winterwood, in the fall and winter of 2002-03. Id. ¶ 5. Reference to Winterwood on bags of compost appears only once, at an inconspicuous location at the bottom of the bag in the section set aside for the "Guarantee" of Gardener's Gold Compost. Id. ¶ 6; see also Exh. B to Holden Aff. This reference is limited to the statement: "Gardener's Gold is produced on Winterwood Farm, a working Maine Farm." Holden Aff. ¶ 7. The inclusion of the reference to Winterwood on the redesigned JER bag was made at Winterwood's insistence shortly before Winterwood filed an application to register its name as a trademark. Id. ¶ 8.
JER ordered 100,000 bags printed containing the reference to Winterwood at JER's sole cost. Id. ¶ 9. Winterwood thereafter terminated the Output Contract improperly in the view of JER President Jeffrey Holden. Id. ¶¶ 1, 10. Winterwood has never sent any demand for arbitration to JER. Id. ¶ 14. JER has not purchased any additional compost since the purported termination of the Output Contract by Winterwood. Id. ¶ 18. Winterwood is now in direct competition with JER in the sale of compost. Id. ¶ 19. Despite the arbitration clause in the Output Contract, Winterwood filed a complaint in Superior Court for breach of the Output Contract, seeking an ex parte attachment. Id. ¶ 20. When the Superior Court denied an ex parte attachment, Winterwood did not pursue the issue of attachment further. Id. ¶ 21. The parties to the Superior Court action have since agreed to notify the Superior Court that the claims asserted in the state court will be submitted to David Plimpton, Esq., for arbitration. Id. ¶ 23.
Winterwood filed the complaint in this action on May 7, 2004, see Docket No. 1, bringing two counts under the Lanham Act, 15 U.S.C. § 1051 et seq., for JER's alleged (i) false designation of origin and (ii) infringement of Winterwood's registered trademark by use without authorization, see Complaint ¶¶ 1-21, and also suing JER for causing likelihood of confusion or misunderstanding as to source, sponsorship or approval of goods in violation of Maine's Uniform Deceptive Trade Practices Act ("DTPA"), 10 M.R.S.A. § 1211 et seq., see id. ¶¶ 22-24.
Winterwood alleged, inter alia:
6. On or about October 11, 2001, Winterwood entered into an agreement with JER by which Winterwood would supply its proprietary Compost blends exclusively to JER for marketing under JER's brand or brands throughout the United States.
7. Beginning from about October 2001, JER did begin packaging and marketing Winterwood's Compost in bags and other containers bearing, in addition to its own brands, a then-true designation of the source and maker of the branded Compost as Winterwood Farm Compost.
8. On or about August 2003, JER became financially and otherwise unable to continue to purchase and move in commerce further quantities of Winterwood's Compost, including 8000 yards of said Compost already produced by Winterwood for JER, which JER then allowed to lay fallow and deteriorate in storage.
9. Winterwood has bec[o]me aware that JER is marketing, selling and supplying both compost made and/or supplied by others and old, deteriorated, *37 and possibly contaminated Compost from storage in bags and other containers now falsely designating the source of the contents to be from Winterwood Farm.
10. On or about October 14, 2003 Winterwood notified JER and demanded that JER remove and no longer use said designation of origin in its marketing and promotional materials.
Id. ¶¶ 6-10. With respect to its Lanham Act cause of action for false designation of origin (Count I), Winterwood further asserted:
11. JER's past, present, and continuing false designation of origin as Winterwood Farm of compost not produced by Winterwood and/or, by age, contamination, and deterioration, no longer meeting the high quality standards of Winterwood, has caused and causes confusion, mistake, and deceit among resellers, consumers, and users of soil amendment products as to the origin, quality, and efficacy of the compost products so sold by JER.
12. As a result of JER's false designation of origin and the confusion, mistake, and deceit following directly therefrom, Winterwood has been and is being severely damaged in that its reputation as a producer of quality soil products, the reputation for high quality of its proprietary Compost, and the value of its proprietary Compost have been and are being diminished and destroyed.
Id. ¶¶ 11-12. With respect to its Lanham Act cause of action for trademark infringement (Count II), Winterwood alleged, inter alia:
15. After the failure of JER to fulfill its contractual obligations to market, sell, and distribute the Winterwood Compost products, Winterwood, having used the trade name Winterwood Farm for years, contemplated the development of the Winterwood Farm brand for soil amendments, and is the owner of the trademark WINTERWOOD FARM for use on soil amendments, including compost.
16. Winterwood filed application for registration of its WINTERWOOD FARM trademark ... in the United States Patent and Trademark Office on the basis of its bona fide intention to use said trademark in interstate commerce.
17. In 1994 Winterwood began advertising its Compost and other related goods in connection with its WINTERWOOD FARM trademark, and on or about March 2, 2004, Winterwood began using its WINTERWOOD FARM trademark on such goods in commerce as defined in the Act....
18. JER's continued use of Winterwood Farm on packaging and in connection with compost and related goods sold in commerce misleads consumers into believing that JER is affiliated with Winterwood, and causes confusion, mistake, and deceit of and among consumers as to the source of the goods so sold by JER[.]
19. JER is infringing on the trademark WINTERWOOD FARM by making use of that term on its packaging materials without authorization from Winterwood.
20. JER's infringement of the WINTERWOOD FARM trademark further causes mistake and leads third parties to believe that Winterwood produces inferior quality compost.
Id. ¶¶ 15-20. With respect to its DTPA cause of action (Count III), Winterwood further contended:
24. JER's action with regard to Winterwood's trade mark and trade name is such that it is causing likelihood of confusion or of misunderstanding as to the source, sponsorship or approval of the *38 goods sold by JER under Winterwood's trade mark and trade name.
Id. ¶ 24.
JER President Holden states, on information and belief, that (i) no contamination or deterioration of compost supplied by Winterwood occurred after it left the Winterwood site, and (ii) JER has purchased no additional compost since the purported termination of the Output Contract by Winterwood. Holden Aff.¶¶ 16-18.
JER has counterclaimed for (i) contamination of compost, (ii) value of bags rendered unusable and (iii) breach of the duty of good-faith dealing. See First Amended Answer With Defenses, and Counterclaims (Docket No. 7) ¶¶ 47-55. JER is not in default of its obligation to submit claims arising out of the Output Contract to arbitration, and is willing to submit the claims and counterclaims asserted in this action to binding arbitration. Holden Aff. ¶ 24.
III. Analysis
Entry of a motion to stay pursuant to the FAA is appropriate to the extent that the court is "satisfied that the issue involved ... is referable to arbitration under [an agreement in writing for such arbitration]" and "the applicant for the stay is not in default in proceeding with such arbitration." 9 U.S.C. § 3. JER introduces uncontroverted evidence that it is not in default in proceeding with arbitration. However, the parties sharply dispute whether the claims raised in the Complaint are referable to arbitration pursuant to the Output Contract.
JER seeks stay of the instant action on the basis that the materials it submits establish that all claims Winterwood asserts "arise out of" the Output Contract. See Motion at 1. Winterwood rejoins that the Output Contract is unrelated to the Complaint inasmuch as (i) the Output Contract did not memorialize any agreement concerning either use of trademarks or potential unfair trade practices, (ii) even assuming arguendo the existence of an informal understanding between the parties regarding use of the Winterwood trademark, the integration clause of the Output Contract (section 3.14) renders any such unwritten agreement invalid and unenforceable, and (iii) inasmuch as the parties proclaimed their intention that the Output Contract not be construed as creating a partnership or joint venture (section 3.16), they would have expressly addressed use of trademarks in that contract if they had intended "such a joint undertaking." See Plaintiff's Opposition to Motion for Stay and To Compel Arbitration ("Opposition") (Docket No. 11) at 1-3.
As a threshold matter, both parties agree that it is appropriate for this court to determine whether the claims in issue are arbitrable. See Opposition at 3-4; Defendant's Reply to Plaintiff's Response to Defendant's Motion for Stay ("Reply") (Docket No. 13) at 2-3; see also, e.g., Graham v. Smith, 292 F. Supp. 2d 153, 156 n. 3 (D.Me.2003) ("When parties disagree about whether they are bound by an arbitration agreement, the court, not the arbitrator, decides the issue, unless there is clear and unmistakable evidence that the parties intended to submit the arbitrability question itself to arbitration.").[1]
The question of arbitrability is one of contract interpretation: "It is bedrock that arbitration is a matter of contract and that a party cannot be required to submit to arbitration any dispute which he has not agreed so to commit." Graham, 292 F.Supp.2d at 156 (citations and internal quotation marks omitted). An arbitration *39 agreement, like other contracts, is construed with reference to "ordinary state-law principles that govern the formation of contracts[,]" id. (citation and internal quotation marks omitted), in this case the law of the State of Maine, see Output Contract § 3.13.
Nonetheless, the task of assessing whether the parties have agreed to arbitrate a given matter is undertaken "with a healthy regard for the federal policy favoring arbitration." Bercovitch v. Baldwin Sch., Inc., 133 F.3d 141, 148 (1st Cir.1998) (citation and internal quotation marks omitted). "Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Restoration Pres. Masonry, Inc. v. Grove Europe Ltd., 325 F.3d 54, 60 (1st Cir.2003) (citation and internal punctuation omitted).
With these precepts in mind, I find all three counts of the Complaint arbitrable. The parties chose broad language in defining the scope of arbitrable matters: "All claims, disputes and other matters in question arising out of, or relating to, this Agreement or the breach thereof [.]" Output Contract § 3.8; see also, e.g., Collins & Aikman Prods. Co. v. Building Sys., Inc., 58 F.3d 16, 20 (2d Cir.1995) ("The clause in this case, submitting to arbitration `any claim or controversy arising out of or relating to the agreement,' is the paradigm of a broad clause.") (citation and internal quotation marks omitted); Newbridge Acquisition I, L.L.C. v. Grupo Corvi, S.A. de D.V., No. 02 Civ. 9839(JSR), 2003 WL 42007, at *3 (S.D.N.Y. Jan. 6, 2003) ("Here, the arbitration clause at issue is very broad, providing that `any and all disputes which may arise out of or in connection with this Agreement shall be finally settled by arbitration in New York.'"); Baychar, Inc. v. Frisby Techs., No. 01-CV-28-B-S, 2001 WL 856626, at *6 (D.Me. July 26, 2001) ("In analyzing contractual language pursuant to general common law principles, the Court first looks to the plain language of the agreement. In this case the arbitration clause [covering "[a]ny controversy or claim under or in relation to this Agreement, or any modification thereof"] is facially broad in scope.").
Although I find no published Maine case construing a phrase substantially similar to "arising out of, or relating to" in the context of an arbitration clause, I find instructive a Maine Superior Court case parsing similar language in an insurance-policy context: "`Arising out of' is ordinarily held to mean originating from, growing out of, flowing from, incident to or having connection with. `In connection with' is ordinarily held to have even a broader meaning than `arising out of' and is defined as related to, linked to or associated with." Acadia Ins. Co. v. Vermont Mut. Ins. Co., No. Civ.A.CV 02-440, 2003 WL 23185875, at *1 (Me.Super.2003) (citation and internal quotation marks omitted).
My research reveals that, in keeping with these basic definitions, courts have broadly construed similar language in the arbitration-clause context. Noncontractual claims have been held "related to" an underlying contract for purposes of arbitrability when those claims have been found to "touch [ ] matters covered by" or to be "interwoven with" the underlying contract i.e., when their adjudication requires reference to that contract. See, e.g., Ford v. NYLCare Health Plans of Gulf Coast Inc., 141 F.3d 243, 250 n. 7 (5th Cir.1998) ("Whether described as `touch[ing] matters covered by' the agreement, or `interwoven with' the agreement, a tort claim is `related to' the agreement [for purposes of an arbitration clause] only *40 if reference to the agreement is required to maintain the action.") (citations omitted); Bangor Hydro-Elec. Co. v. New England Tel. & Tel. Co., 62 F. Supp. 2d 152, 158-59 (D.Me.1999) (quantum-meruit, unjust-enrichment and equitable-contribution counts were "related to" contract, and hence arbitrable, when analysis of those counts required inquiry into reasonableness of plaintiff's expectation that defendant bear some costs of tree-clearance work, and that in turn would be distilled at least in part by reference to provisions of underlying contract governing parties' joint ownership and occupancy of utility poles); McMahon v. RMS Elecs., Inc., 618 F. Supp. 189, 190, 192 (S.D.N.Y.1985) (finding two of three defamation claims to fit definition of "disputes and claims arising in connection with this Agreement" and hence to be arbitrable because they "necessarily turn[ed] on whether [plaintiff] was terminated with or without cause, an issue which involve[d] an interpretation of the contractual relationship between the parties.").
By these lights, one can discern that all three counts of the Complaint "relate to" the Output Contract. Count I of the Complaint alleges false designation of origin in violation of the Lanham Act. See Complaint ¶¶ 1-13. Count II alleges trademark infringement in violation of the Lanham Act, asserting that JER's continued unauthorized use of the mark "misleads consumers into believing that JER is affiliated with Winterwood," id. ¶ 18, "causes confusion, mistake, and deceit of and among consumers as to the source of the goods so sold by JER[,]" id., and "further causes mistake and leads third parties to believe that Winterwood produces inferior quality compost[,]" id. ¶ 20. Count III alleges violation of the DTPA, echoing Counts I and II in contending that JER's usage of the trademark and trade name "is causing likelihood of confusion or of misunderstanding as to the source, sponsorship or approval of the goods sold by JER[.]" Id. ¶ 24. The gravamen of all three counts thus is likelihood of confusion among consumers and others as to the source of goods sold. See, e.g., International Ass'n of Machinists & Aerospace Workers v. Winship Green Nursing Ctr., 103 F.3d 196, 200 (1st Cir.1996) ("Trademark infringement and unfair competition laws exist largely to protect the public from confusion anent the actual source of goods or services. The Lanham Act is cast in this mold. Generally speaking, the Act proscribes the unauthorized use of a service mark when the particular usage causes a likelihood of confusion with respect to the identity of the service provider.") (citations and footnote omitted).
As Winterwood acknowledges in its complaint, for a certain period of time following execution of the Output Contract, JER's designation of Winterwood as the source and maker of the branded compost was "then-true." See Complaint ¶¶ 6-7. Indeed, the Output Contract provided that Winterwood would sell virtually its entire output of finished seafood compost to JER; thus, so long as the parties hewed to the terms of the contract, JER's designation of Winterwood as the source of the compost it purchased from Winterwood presumably would not be false or misleading. Nor, during continuation of the contract, could consumers be misled as to the existence of an affiliation between Winterwood and JER or likely be confused as to whose product was whose. During that period of time, Winterwood and JER (though not partners or joint venturers) were indeed affiliated, and Winterwood essentially promised that it would have no third-party customers for its seafood compost apart from four clients to whom it expressly reserved the right to continue to make direct sales. See Output Contract § 1.3.
*41 It follows that adjudication of all three counts of the Complaint necessarily would entail examination of the parties' relationship as set forth in the Output Contract, including whether that contract effectively was terminated and, if so, when.[2] All claims asserted in the Complaint thus are "related to" the Output Contract for purposes of the parties' arbitration clause. In accordance with 9 U.S.C. § 3, entry of a stay of the instant action pending arbitration is appropriate.[3]
IV. Conclusion
For the foregoing reasons I conclude that the motion of JER to stay the instant action should be, and it hereby is, GRANTED.
NOTES
[1] To the extent that Winterwood suggests that the court should defer this determination, see Opposition at 3-4, I agree with JER that the issue is ripe for decision in connection with the instant motion, see Reply at 2-3.
[2] Winterwood's argument that its claims are unrelated to the Output Contract inasmuch as that contract (i) does not expressly address use of trademarks or potential unfair trade practices and (ii) bars extrinsic evidence of any unwritten agreement, see Opposition at 2-3, is a red herring. In view of the breadth of the parties' chosen arbitration clause, the question presented is not whether the claims arise directly from the Output Contract but rather whether recourse to that contract is essential to adjudicate those noncontractual claims.
[3] I recognize that the Motion, as well, misses the mark in two respects: that JER (i) relied on the "arising under" rather than the broader "related to" portion of the parties' arbitration clause and (ii) cited only one case, B.V.D. Licensing Corp. v. Maro Hosiery Corp., 688 F. Supp. 961 (S.D.N.Y.1988), that is not particularly helpful (in fact, JER concedes in its reply memorandum that Maro is distinguishable). See generally Motion; Reply; see also, e.g., Fairchild v. National Home Ins. Co., 17 Fed.Appx. 631, 632-33 (9th Cir.2001) ("[T]he clause requiring arbitration of `any disputes arising hereunder' [is] narrower than one requiring arbitration of a dispute `arising out of or relating to this agreement.' ... Thus, the phrase `arising hereunder,' without more, covers a much narrower scope of disputes, i.e., only those relating to the interpretation and performance of the contract itself.") (citations and internal punctuation omitted). Nonetheless, JER squarely raises the key question: whether the arbitration clause of the Output Contract can be read to encompass the claims made in the Complaint, rendering a stay pursuant to 9 U.S.C. § 3 appropriate. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2497219/ | 67 So.3d 632 (2011)
Timothy YOUNG
v.
Jane DOE, Lesley Enterprises, LLC d/b/a Gattuso Restaurant, the Charter Oak Insurance Company.
No. 11-CA-49.
Court of Appeal of Louisiana, Fifth Circuit.
May 24, 2011.
James E. Cazalot, Jr., H. Edward Sherman, Attorneys at Law, New Orleans, LA, for Plaintiff/Appellant.
Michael R. Zsembik, Mickey S. Delaup, Stephanie L. Cook, Attorneys at Law, Metairie, LA, Philip A. Gattuso, Attorney at Law, Gretna, LA, for Defendant/Appellee.
Panel composed of Judges MARION F. EDWARDS, WALTER J. ROTHSCHILD, and HILLARY J. CRAIN, Pro Tempore.
WALTER J. ROTHSCHILD, Judge.
Plaintiff appeals from the trial court's judgment rendered on July 28, 2010 granting defendants' motion for summary judgment on the issue of insurance coverage. For the reasons assigned herein, we affirm.
Timothy Young filed the instant petition for damages based on an incident which occurred while he was employed as a cook by Gattuso's Restaurant. In this petition, Mr. Young alleged that on May 16, 2008, a waitress at the restaurant intentionally struck him in the back with a dinner plate, causing injury. Mr. Young named as defendants Jane Doe, a fictitious name for the waitress; Lesley Enterprises, L.L.C., the owner of the restaurant; and The Charter Oak Insurance Company, defendant's workers' compensation insurer. Young supplemented his petition to name as defendant Penn-America Insurance Company as defendant's commercial general liability insurer. Young also supplemented his petition to name the waitress, Brooke Hudson.
*633 After filing responsive pleadings, Penn-America brought a Motion for Summary Judgment on the basis that it did not issue a policy of insurance to Lesley Enterprises, L.L.C., and any policy it issued excluded coverage for plaintiffs injuries. Plaintiff subsequently amended his petition to allege that BG Specialties, L.L.C. was the owner and operator of Gattuso's Restaurant.
In support of its motion, Penn-America submitted a copy of the insurance policy issued to BG Specialties. Penn-America argued BG Specialties was not plaintiffs employer, and further that the policy excluded coverage for claims arising from employment-related acts.
Defendants, Lesley Enterprises, L.L.C, The Charter Oak Fire Insurance Company and Brooke Hudson, also moved for summary judgment on the grounds that plaintiffs claims are limited to workers' compensation. In support of this motion, defendants attached copies of the depositions of plaintiff and Brooke Hudson. Defendants submit that based on this testimony, plaintiff could not prove that his injury was caused by an intentional act sufficient to exclude it from workers' compensation coverage.
These motions were heard by the trial court on July 28, 2010, following which the court rendered summary judgment in favor of Lesley Enterprises, LLC, The Charter Oak Fire Insurance Company, and Brooke Hudson, and dismissed plaintiffs case. By separate judgment, the motion of Penn-America Insurance Company was denied as moot. The trial court also assigned written reasons for judgment.
By this appeal, plaintiff contends that the trial court erred in finding that defendants met their burden on summary judgment of proving an absence of factual support that an intentional act occurred. Plaintiff contends that although his injury occurred at work, issues of fact regarding the amount of force used during the act preclude the trial court from dismissing plaintiffs tort claims as a matter of law.
Summary judgments are reviewed on appeal de novo. An appellate court thus asks the same questions as does the trial court in determining whether summary judgment is appropriate: whether there is a genuine issue of material fact, and whether the mover is entitled to judgment as a matter of law. Smith v. Our Lady of the Lake Hosp., Inc., 93-2512, pp. 26-27 (La.7/5/94), 639 So.2d 730, 750-51; Carr v. Wal-Mart Stores, Inc., 00-896 (La.App. 5 Cir. 10/31/00), 772 So.2d 865, writ denied, 00-3247 (La.1/26/01), 782 So.2d 636.
Summary judgment will be granted if the pleadings, depositions, answers to interrogatories, admissions on file, and any affidavits show that there is no genuine issue as to material fact, and that the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966(B). The party bringing the motion bears the burden of proof; however, where the moving party will not bear the burden of proof at trial, the moving party must only point out that there is an absence of factual support for one or more elements essential to the adverse party's claim. La. C.C.P. art. 966(C)(2). The burden does not shift to the party opposing the summary judgment until the moving party first presents a prima facie case that no genuine issues of material fact exist. Mitchell v. Kenner Regional Medical Center, 06-620, p. 5 (La. App. 5 Cir. 1/30/07), 951 So.2d 1193, 1196. Thereafter, if the adverse party fails to produce factual support sufficient to show that he will be able to meet his evidentiary burden of proof at trial, no issue of material fact exists and the moving party is entitled to summary judgment. Id., Hyman v. East Jefferson General Hosp., 04-1222, *634 pp. 3-4 (La.App. 5 Cir. 03/01/05), 900 So.2d 124, 126.
The Louisiana Worker's Compensation Act provides for compensation if an employee receives personal injury by accident arising out of and in the course of his employment. La. R.S. 23:1031. As a general rule, the rights and remedies granted to an employee therein are exclusive of all rights and remedies against his employer, any officer or principal of the employer, or any co-employee. La. R.S. 23:1032. However, an exception to this rule provides that nothing therein shall affect the liability of an employer, principal, officer, or co-employee resulting from an "intentional act". Id.
In interpreting the statute, the Louisiana Supreme Court has held that compensation shall be an employee's exclusive remedy against his employer for an unintentional injury covered by the act, but that nothing shall prevent an employee from recovering from his employer under general law for an intentional tort. Bazley v. Tortorich, 397 So.2d 475 (La.1981); Caudle v. Betts, 512 So.2d 389, 390 (La. 1987).
Plaintiff contends that an intentional tort occurred in this case when Ms. Hudson struck him with the dinner plate. In support of this argument, plaintiff relies on the Supreme Court's decision in Caudle v. Betts, supra. In that case, the plaintiffs co-employee intentionally shocked him with an automobile condenser, but stated he did not intend the harm which eventually occurred because of the shock. The trial court found no intentional tort occurred and the appellate court affirmed this finding. The Supreme Court reversed the lower courts' decisions that an intentional act had not occurred. The Supreme Court found that even if the act resulted from a practical joke and the actor did not intend the consequences of his actions, he is nevertheless responsible for plaintiffs injuries.
Defendants rely on more recent jurisprudence which cites the seminal decision of Bazley v. Tortorich, 397 So.2d 475 (La. 1981), stating that an intentional act requires the actor to either 1) consciously desire the physical result of his act, whatever the likelihood of that result happening from his conduct; or (2) know that the result is substantially certain to follow from his conduct, whatever his desire may be as to that result. See, Batiste v. Bayou Steel Corp., 10-1561 (La.10/1/10), 45 So.3d 167, 168. In those cases, the Louisiana Supreme Court held that a plaintiff must prove that the actor knew the injury was substantially certain to occur to recover for an intentional tort.
Further, in Chabert v. Mothe Life Insurance Company, 04-590 (La.App. 5th Cir. 11/30/04), 890 So.2d 621, a panel of this Court found that there was insufficient evidence to determine that one employee's "bumping" of another employee, although intentional, was substantially certain to cause the employee to fall or become injured. The Court found that plaintiff's exclusive remedy was in workers' compensation.
After a review of the record in the present case and all applicable law, we find no error in the trial court's ruling granting summary judgment in favor of defendants. In order to prove that damages from his workplace injury claim do not lie exclusively in workers' compensation, plaintiff must prove at trial that Ms. Hudson consciously desired the physical result of her act or that she knew it was substantially certain to follow from her conduct. In Ms. Hudson's deposition, she testified that while she intended to touch Mr. Young with the plate, she did not intend to harm him but rather expected him to laugh. Also, plaintiff testified in his deposition *635 that he did not think Ms. Hudson intended to hurt him. The plate was estimated to weigh approximately one pound, and it did not break during the encounter. Under these circumstances, we find Ms. Hudson's belief that she would not injure Mr. Young with the plate to be reasonable. This case is therefore distinguishable from the factual situation in Caudle v. Betts, when the Supreme Court found that it was not reasonable to believe that administering an electrical shock on a co-worker was not substantially certain to cause injury.
Based on the facts of this case, we conclude that defendants proved an absence of factual support that the injury in this case was a result of an intentional act. Plaintiff failed to meet his burden on summary judgment of submitting evidence sufficient to show he could meet his burden of proof at trial. Accordingly, the trial court correctly determined that defendants were entitled to judgment as a matter of law dismissing plaintiffs tort claims against them. The judgment of the trial court is therefore affirmed.
AFFIRMED | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454267/ | 255 P.3d 1073 (2011)
In re Steven P. THOMAS, and Thomas Properties, Inc., Plaintiffs
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, in its capacity as receiver of New Frontier Bank; The Bridges Country Club, Inc.; The Bridges Golf & Country Club; Clinton Blum, personal representative of Estate of D.L. Day Jr., a/k/a Larry Day, Jr., a/k/a Delbert L. Day; Black Canyon Golf, LLLP; Brown Financial LLC; Weslin, LLC; Keenan's Industries, Inc.; RJ's Painting, LLC; Ridgway Valley Enterprises, LLC; John Prater, as personal representative for the Estate of James L. Lear; ASAP Rental Sales of Leadville, Inc.; United Rentals Northwest; Robert Beisen-Herz; Downey Excavation, Inc.; Patrik Davis Associates, P.C.; Chuck's Glass, Inc.; Buckhorn Geotech, Inc.; The Bridges at Black Canyon, Inc.; Northstar Bridges, LLC; Leslie Buttorff; Judy Pfountz; MPI/DBS Colorado/Texas LLLP, d/b/a Foothills Lighting & Supply; Richard P. Chulick, as receiver in Montrose District Court Case 07CV49; Rosemary Murphy, as the public trustee of Montrose County, Colorado; First City Corp.; and All Unknown Persons who Claim any interest in the Subject Matter of this Action., Defendants.
No. 10SA234.
Supreme Court of Colorado, En Banc.
June 6, 2011.
*1074 Cashen, Cheney & Thomas, Robert J. Thomas, Montrose, Colorado, Attorney for Plaintiffs.
Dufford & Brown, P.C., David W. Furgason, Christian D. Hammond, Denver, Colorado, Attorneys for Defendant Federal Deposit Insurance Corporation.
*1075 No Appearance for Defendants The Bridges Country Club, Inc.; The Bridges Golf & Country Club; Clinton Blum, personal representative of Estate of D.L. Day Jr., a/k/a Larry Day, Jr., a/k/a Delbert L. Day; Black Canyon Golf, LLLP; Brown Financial LLC; Weslin, LLC; Keenan's Industries, Inc.; RJ's Painting, LLC; Ridgway Valley Enterprises, LLC; John Prater, as personal representative for the Estate of James L. Lear; ASAP Rental Sales of Leadville, Inc.; United Rentals Northwest; Robert Beisen-Herz; Downey Excavation, Inc.; Patrik Davis Associates, P.C.; Chuck's Glass, Inc.; Buckhorn Geotech, Inc.; The Bridges at Black Canyon, Inc.; Northstar Bridges, LLC; Leslie Buttorff; Judy Pfountz; MPI/DBS Colorado/Texas LLLP, d/b/a Foothills Lighting & Supply; Richard P. Chulick, as receiver in Montrose District Court Case 07CV49; Rosemary Murphy, as the public trustee of Montrose County, Colorado; First City Corp.; and All Unknown Persons who Claim any interest in the Subject Matter of this Action.
Justice MÁRQUEZ delivered the Opinion of the Court.
In this original proceeding, we address whether a state court retains jurisdiction over claims brought against a bank that later enters receivership, where the claimant fails to exhaust the administrative remedies of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. No. 101-73, 103 Stat. 183 (1989) (codified as amended in scattered sections of 12 U.S.C.).[1]
Plaintiffs Steven P. Thomas and Thomas Properties, Inc. (collectively, "Thomas") brought contract-related claims against New Frontier Bank, which later was placed in receivership. Defendant Federal Deposit Insurance Corporation ("FDIC"), in its capacity as receiver of New Frontier Bank, moved to dismiss Thomas's claims under C.R.C.P. 12(b)(1) for lack of subject matter jurisdiction, citing Thomas's failure to exhaust the administrative claims review process established by Congress under FIRREA. The trial court denied the motion, and the FDIC now seeks review under C.A.R. 21. We issued a rule to show cause to Plaintiffs to review the trial court's order.
We construe the provisions of FIRREA to limit the jurisdiction of courts to review claims involving failed financial institutions that have entered receivership. Under the Act, litigants who have an action pending against a bank that is later placed in receivership must pursue the administrative claims process under FIRREA in order thereafter to continue the action against the receiver. Congress has made clear that if a claimant fails to exhaust the administrative claims process, "no court shall have jurisdiction" over any claim or action seeking a determination of rights against the receiver. 12 U.S.C. § 1821(d)(13)(D).
We therefore hold that where, as here, a claimant has received proper notice of the required administrative claims procedures under FIRREA, yet fails to exhaust those administrative remedies, the Act precludes any court from continuing to exercise jurisdiction over pre-receivership claims filed against the failed bank. Accordingly, we make the rule absolute and remand the matter to the trial court with directions to dismiss Thomas's claims against the FDIC for lack of subject matter jurisdiction.
I. Facts and Procedural History
Thomas purchased a 40-acre tract of land adjacent to a golf course in the City of Montrose, intending to create a residential development on the property. In August 2006, Thomas entered into an agreement with The Bridges Country Club, Inc. to purchase golf memberships and other club privileges at The Bridges Golf & Country Club and associated facilities adjacent to Thomas's property. Under the agreement, Thomas paid $500,000 in exchange for the right to allocate different levels of club memberships to future lot owners on his residential development.
D.L. Day, Jr. signed the agreement on behalf of The Bridges Country Club, Inc. Day operated and served as an officer/board member for several business entities, including *1076 Black Canyon Golf, LLLP, which owned or operated certain club facilities identified in the agreement with Thomas.
Day subsequently passed away, and the operation of the club underwent various changes. Relevant here, New Frontier Bank of Greeley acquired the facilities property owned or operated by Black Canyon Golf, LLLP. Thomas was later unable to obtain performance of the club's obligations under the agreement to issue or honor the memberships. Consequently, in September 2007, Thomas filed suit against Day's estate, Day's business entities, New Frontier Bank, and other defendants, seeking declaratory judgment and specific performance of the agreement. In October 2007, Thomas filed an amended complaint, adding claims for reformation of contract, damages, and unjust enrichment. Among his requests for relief, Thomas sought recoupment of the $500,000 he paid under the agreement, plus allowable interest.[2]
In April 2009, the Colorado State Bank Commissioner, by order of the Colorado State Banking Board, closed New Frontier Bank and appointed the FDIC as receiver. Pursuant to FIRREA, 12 U.S.C. § 1821(d)(2), the FDIC assumed "all rights, titles, powers, and privileges" of the failed bank. In May 2009, the FDIC was substituted for New Frontier Bank in this case.[3]
As required by FIRREA, 12 U.S.C. § 1821(d)(3)(B), the FDIC published notices in local newspapers on three separate dates. These notices advised that all creditors having claims against the former New Frontier Bank, together with supporting proof, had to be filed with the FDIC by July 15, 2009. These notices further advised that:
Under federal law, with certain limited exceptions, failure to file such claims by the Bar Date [July 15, 2009] will result in disallowance by the Receiver, the disallowance will be final, and further rights or remedies with regard to the claims will be barred. 12 U.S.C. Section 1821(d)(5)(C), (d)(6).
In addition, on July 17, 2009, the FDIC sent Thomas a "Notice to Discovered Creditor" pursuant to section 1821(d)(3)(C). This individual notice provided Thomas an additional ninety days (to October 15, 2009) to file a proof of claim with the FDIC together with an explanation of why a claim had not been filed by the Bar Date. Despite these notices, Thomas did not file any proof of claim with the FDIC, before or after the Bar Date or the October deadline.
In February 2010, after settlement efforts were unsuccessful, the FDIC moved to dismiss Thomas's claims against it for lack of subject matter jurisdiction under C.R.C.P. 12(b)(1), citing Thomas's failure to exhaust the administrative claims process under FIRREA. The trial court denied the motion, reasoning that FIRREA does not divest courts of subject matter jurisdiction over claims filed prior to receivership. The FDIC then petitioned this court for relief under C.A.R. 21, contending that the trial court was proceeding without jurisdiction. We issued a rule to show cause and now make the rule absolute.
II. Analysis
The issue in this case is whether a litigant who has an action pending against a bank that is later placed in receivership (a pre-receivership claim) must pursue FIRREA's administrative claims process in order to continue the action in state court. At base, this *1077 case presents a conflict between (1) the general principle that once subject matter jurisdiction is established at the time of filing, it is not lost by subsequent actions or omissions of the parties, and (2) a federal statute that precludes jurisdiction over claims against receivers except as otherwise provided in that statute.
The mere appointment of a receiver does not divest a state court of jurisdiction over pre-receivership claims against a failed bank. Rather, a state court action may be stayed pending the exhaustion of FIRREA's administrative claims process. Thereafter, if the receiver denies the administrative claim, or the 180-day period to process the claim otherwise expires, a claimant may continue a previously filed state court action.
However, we conclude that FIRREA withdraws jurisdiction over pre-receivership claims where a claimant fails to exhaust the administrative claims process. Congress has made clear that "no court" shall have jurisdiction over any claim or action against the assets of a failed bank that has been placed in receivership "except as otherwise provided" in section 1821(d), which sets forth the administrative claims process. 12 U.S.C. § 1821(d)(13)(D). To permit a claimant to maintain a pre-receivership claim in state court despite the claimant's failure to exhaust a properly noticed administrative claims process would frustrate Congress's objectives in enacting FIRREA. Here, because Thomas failed to pursue or exhaust the administrative claims process under FIRREA despite proper notice, the trial court should have dismissed Thomas's claims against the FDIC for lack of subject matter jurisdiction.
A. Standard of Review
When a trial court's ruling on a C.R.C.P. 12(b)(1) motion hinges on determinations of fact, we review it for clear error. See Corsentino v. Cordova, 4 P.3d 1082, 1087 (Colo.2000). In this case, however, the motion presents pure questions of law; therefore, our review is de novo. See id.
In construing a statute, our purpose is to "give effect to the intent of the legislature and adopt the statutory construction that best effectuates the purposes of [the] legislative scheme." Spahmer v. Gullette, 113 P.3d 158, 162 (Colo.2005). We determine and effectuate the legislature's intent by looking first to the language of the statute. Sky Fun 1 v. Schuttloffel, 27 P.3d 361, 367 (Colo.2001) (interpreting the Airline Pilot Hiring & Safety Act, 49 U.S.C. § 44936).
B. Administrative Exhaustion Principles
The doctrine of administrative exhaustion requires a party to pursue available statutory administrative remedies before obtaining judicial review of a claim. Where a party fails to exhaust these remedies, a trial court is without jurisdiction to hear the action. State v. Golden's Concrete Co., 962 P.2d 919, 923 (Colo.1998). The doctrine promotes important policy interests, including the efficient use and conservation of judicial resources, by ensuring that courts intervene only if the administrative process fails to provide adequate remedies. City & Cnty. of Denver v. United Air Lines, Inc., 8 P.3d 1206, 1212-13 (Colo.2000). The doctrine enables an agency to make initial determinations on matters within its expertise, identify and correct its own errors, and develop a factual record that will benefit the court if satisfactory resolution cannot be reached through the administrative process. See Golden's Concrete Co., 962 P.2d at 923.
The doctrine is subject to limited exceptions where its application would not further these underlying policy interests. For example, if the controversy involves questions of law that are not within the agency's expertise or capacity to determine, or where it is "clear beyond a reasonable doubt" that pursuit of relief from the agency would be "futile," a court will entertain a party's claim despite its failure to exhaust available administrative processes. United Air Lines, Inc., 8 P.3d at 1213. However, where no exception applies, a trial court is without jurisdiction to entertain a claim by a party that has not satisfied the exhaustion requirement. Golden's Concrete Co., 962 P.2d at 923-24.
*1078 C. FIRREA Requires Administrative Exhaustion
The trial court concluded that FIRREA does not require exhaustion of its administrative claims procedures in order for the court to maintain jurisdiction over Thomas's pre-receivership action. We disagree.
1. Background of FIRREA
Congress enacted FIRREA in 1989 in response to the crisis in the savings and loan industry at that time. "[T]he purpose of FIRREA was to revamp the deposit insurance fund system in order to strengthen the country's financial system.'" Fed. Deposit Ins. Corp. v. Am. Cas. Co. of Reading, Pa., 843 P.2d 1285, 1291 (Colo.1992) (quoting Fed. Deposit Ins. Corp. v. Am. Cas. Co. of Reading, Pa., 975 F.2d 677, 681 (10th Cir.1992)).
Among other things, FIRREA established the Resolution Trust Corporation ("RTC"), which took over the functions of the Federal Savings and Loan Insurance Corporation ("FSLIC") with respect to handling failed savings and loan institutions. See 12 U.S.C. § 1441a(b)(3); Rosa v. Resolution Trust Corp., 938 F.2d 383, 388 (3d Cir.1991).[4] Congress also "enhanced the regulatory and enforcement powers of the FDIC" with respect to failed banks. Am. Cas. Co., 843 P.2d at 1291 (quoting Am. Cas. Co., 975 F.2d at 681). As a receiver, the FDIC succeeds to "all rights, titles, powers, and privileges" of the failed bank. 12 U.S.C. § 1821(d)(2)(A)(i). The FDIC must preserve and conserve the failed bank's assets and property, liquidate those assets where appropriate, and pay all valid obligations of the failed bank in accordance with statutory directives. Id. §§ 1821(d)(2)(B)(iv),-(2)(E),-(2)(H). Relevant here, Congress empowered the FDIC to "administer a streamlined claims procedure designed to dispose of the bulk of claims against failed financial institutions expeditiously and fairly." Fed. Deposit Ins. Corp. v. Updike Bros., Inc., 814 F. Supp. 1035, 1038 (D.Wyo.1993).
Several courts have marveled at the complexity of FIRREA. See, e.g., Marquis v. Fed. Deposit Ins. Corp., 965 F.2d 1148, 1151 (1st Cir.1992) (FIRREA's text is "a veritable jungle of linguistic fronds and brambles."); Guidry v. Resolution Trust Corp., 790 F. Supp. 651, 653 (E.D.La.1992) ("[T]he statute makes the Internal Revenue Code look like a first grade primer."); Armstrong v. Resolution Trust Corp., 157 Ill. 2d 49, 191 Ill. Dec. 46, 623 N.E.2d 291, 295 (1993) (FIRREA is "a veritable Escher print set to words, complete with waterfalls that flow backwards."). However, complexity is not ambiguity. As discussed below, our analysis of the statute's language and structure satisfies us that the administrative claims process is mandatory even for pre-receivership claims, and that a claimant's failure to pursue or exhaust FIRREA's administrative remedies divests a court of continuing jurisdiction over pre-receivership claims.
2. Statutory Analysis
To effectuate its goals of managing claims expeditiously through an administrative process under FIRREA, Congress placed limits on judicial review of matters involving failed depository institutions. See Brady Dev. Co. v. Resolution Trust Corp., 14 F.3d 998, 1003 (4th Cir. 1994). Specifically, section 1821(d)(13)(D) provides:
Except as otherwise provided in this subsection, no court shall have jurisdiction over
(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or
*1079 (ii) any claim relating to any act or omission of such institution or the Corporation as receiver.
(Emphasis added.) In short, Congress provided in FIRREA that "no court" shall have jurisdiction over any claim or any action concerning the assets of a failed bank in receivership "except as otherwise provided in [subsection (d)]."
Subsection (d) establishes an administrative process to review and resolve claims against insolvent depository institutions that have entered receivership. 12 U.S.C. §§ 1821(d)(3)-(d)(13). Once the FDIC is appointed as a receiver, it must publish notice to the failed bank's creditors informing them that they must present proof of their claims by a certain date not less than 90 days from the date of publication. Id. § 1821(d)(3)(B)(i). This notice must be republished approximately one month and two months after the initial publication. Id. § 1821(d)(3)(B)(ii). In addition, the receiver must mail individual notice to any creditor shown on the institution's books and to any claimant later discovered. Id. § 1821(d)(3)(C).
If a creditor submits a claim by the date specified in the notice, the receiver has 180 days to allow or disallow the claim and notify the claimant of the determination. Id. § 1821(d)(5)(A)(i). Where the receiver disallows the claim or fails to make a determination within the 180-day period, the claimant has 60 days to seek further administrative review, file suit on such claim in federal court, or continue an action commenced before the appointment of the receiver. Id. § 1821(d)(6)(A). If the claimant fails within that time to seek further administrative review or judicial relief, the claim shall be deemed permanently disallowed. Id. § 1821(d)(6)(B).
Thus, subsection (d)(6) establishes a 60-day window in which a party may file suit on a disallowed claim or continue an action commenced before the appointment of the receiver. However, this 60-day window to seek judicial relief is triggered only after the administrative claims process has concluded;[5] namely, upon the occurrence of one of two possible events: notice of disallowance of a claim (in whole or in part), or expiration of the 180 days to process a claim. Indeed, if the creditor fails to file a claim with the receiver within the applicable time period noticed, such claim "shall be disallowed and such disallowance shall be final." Id. § 1821(d)(5)(C)(i); Brady Dev. Co., 14 F.3d at 1003 (failure of a creditor to file an administrative claim by the date specified in the notice renders the claim permanently disallowed).
These provisions, construed collectively, establish that jurisdiction exists to consider any claim or action seeking a determination of rights with respect to the assets of a failed bank that has entered receivership only when the claim has been timely filed with the receiver and the administrative process has been exhausted. 12 U.S.C. §§ 1821(d)(5)(C)(i),-(d)(6),-(d)(13)(D).
In concluding otherwise, the trial court overlooked subsection (d)(6) and instead erroneously relied on subsection (d)(5)(F)(ii), which provides that "the filing of a claim with the receiver shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver." The trial court interpreted this provision to mean that any administrative determination by the FDIC "would have no legal effect upon a pre-receivership claim." Given this interpretation, the trial court decided it would be "unreasonable to conclude that Congress would divest a court of jurisdiction over a preexisting claim by requiring a claimant to utilize a meaningless administrative process" that has no "binding legal effect."
Section 1821(d)(5)(F)(ii) does not change our analysis. By its very language, section 1821(d)(5)(F)(ii) applies where a claimant has filed a claim with the receiver; that is, it presumes the administrative claims process was followed. Although it states that an existing action shall not be prejudiced by *1080 filing an administrative claim, this provision does not address a claimant's failure to file a claim or imply that the administrative process need not be followed. Rather, the provision is consistent with subsection (d)(6), which permits a claimant to file suit or continue an action after exhausting the administrative claims process. Congress plainly intended the administrative claims process "to provide a streamlined method for resolving most claims against failed institutions in a prompt and orderly fashion, without lengthy litigation." Marquis, 965 F.2d at 1152. That FIRREA permits a claimant to seek judicial relief after exhausting administrative remedies does not render the administrative process meaningless. To the contrary, it ensures that a court becomes involved or continues involvement in a related claim only if the administrative process fails to reach an adequate resolution.
We do not suggest that the mere appointment of a receiver divests a state court of jurisdiction over a claim against a failed bank. FIRREA expressly allows for preexisting actions to be stayed and contemplates that such actions may be "continue[d]" following completion of the administrative claims process. 12 U.S.C. § 1821(d)(12) (providing for stays of pending suits); id. §§ 1821(d)(5)(F)(ii),-(d)(6)(A)(ii) (permitting a claimant to continue a previously filed action). Thus, FIRREA creates a scheme under which the trial court retains jurisdiction over a pre-receivership claimsuspending, rather than dismissing, the suits, "subject to a stay of proceedings as may be appropriate to permit exhaustion of the administrative review process as it pertains to the underlying claims." Marquis, 965 F.2d at 1154; see also Carney v. Resolution Trust Corp., 19 F.3d 950, 956 (5th Cir.1994).
The question in this case, however, is whether a trial court retains jurisdiction over a pre-receivership claim where the litigant fails to exhaust FIRREA's administrative claims process. We conclude it does not.
D. Failure to Exhaust FIRREA's Administrative Process Divests a Court of Jurisdiction over Pre-Receivership Claims
As discussed above, under the doctrine of administrative exhaustion, a party's failure to exhaust available administrative remedies generally deprives a court of subject matter jurisdiction over the action. Here, the text of FIRREA creates just such a jurisdictional prerequisite by expressly providing that "no court shall have jurisdiction" over claims against the receiver outside the administrative claims process set forth in section 1821(d). 12 U.S.C. § 1821(d)(13)(D).
This does not end our inquiry, however, because this case involves a pre-receivership claim: Thomas filed his action against New Frontier Bank in state court before the FDIC was appointed receiver and substituted for the failed bank as a party.
A majority of federal courts have held that FIRREA's exhaustion requirements apply with equal force to pre-receivership claims. See, e.g., Intercontinental Travel Mktg., Inc. v. Fed. Deposit Ins. Corp., 45 F.3d 1278, 1282-84 (9th Cir.1994) (holding FIRREA's exhaustion requirement is mandatory for both pre- and post-receivership claims); Carney, 19 F.3d at 955 (same); Brady Dev. Co., 14 F.3d at 1005-06 (same); Bueford v. Resolution Trust Corp., 991 F.2d 481, 485 (8th Cir.1993) (same); Marquis, 965 F.2d at 1151 (same); Resolution Trust Corp. v. Mustang Partners, 946 F.2d 103, 106 (10th Cir.1991) (same).
These courts reason that FIRREA does not create a separate scheme for cases pending at the time the FDIC is appointed receiver. Rather, section 1821(d)(6)(A) allows a dissatisfied claimant to "continue an action commenced before the appointment of the receiver," after the administrative process has been completed. Brady Dev. Co., 14 F.3d at 1003. This language reflects that Congress intended the statutory provisions to apply to claims filed before the receiver was appointed. Mustang Partners, 946 F.2d at 106 ("[A] thorough reading of the applicable provisions in FIRREA fails to produce any language which could be construed to support [the] argument that the claim procedures can be dispensed with in cases where suit was filed prior to the appointment of the receiver.").
*1081 Similarly, several state courts have expressly acknowledged that continuing state court jurisdiction over pre-receivership claims is premised upon the claimant having first exhausted FIRREA's administrative remedies. See Resolution Trust Corp. v. Binford, 114 N.M. 560, 844 P.2d 810, 816 (1992) (concluding state court jurisdiction continues "after the administrative claims procedure has been exhausted"); Ungar v. Ensign Bank, 196 A.D.2d 204, 608 N.Y.S.2d 405, 409 (1994) (stating "a claimant must comply with the claims process before seeking judicial relief" on a pre-receivership claim against the institution); Fed. Deposit Ins. Corp. v. Warmann, 859 S.W.2d 948, 950 (Mo. Ct.App.1993) (holding that "pre-receivership claims, which are suspended during the administrative process, may be continued after that process is complete"); Resolution Trust Corp. v. Foust, 177 Ariz. 507, 869 P.2d 183, 192 (Ariz.Ct.App.1993) (reasoning state courts are not divested of jurisdiction over pre-receivership actions "if the claimant complies with the administrative claims procedures"); cf. McLaughlin v. Fed. Deposit Ins. Corp., 415 Mass. 235, 612 N.E.2d 671, 672 (1993) (concluding that a plaintiff's failure to timely participate in FIRREA's administrative process was fatal to her appeal).
In this case, the claimant did not exhaust FIRREA's administrative claims process. Thus, the question here is whether state court jurisdiction, previously established when the complaint was filed, is subsequently lost for failure to exhaust FIRREA's administrative remedies.
District courts in Colorado are courts of general jurisdiction. Colo. Const. art. VI, § 9(1). A court's acquisition of subject matter jurisdiction depends on the facts existing at the time jurisdiction is invoked, and a court ordinarily does not lose jurisdiction by the occurrence of subsequent events, even if those events would have prevented acquiring jurisdiction in the first place. Secrest v. Simonet, 708 P.2d 803, 807 (Colo. 1985). While jurisdiction may be limited by the legislature, any such limitation on the power of the courts must be explicit. In re A.W., 637 P.2d 366, 374 (Colo.1981).
Because this case concerns a pre-receivership claim, tension arises between the principle, on the one hand, that once subject matter jurisdiction is established at the time of filing, it is not lost by the occurrence of subsequent events, and FIRREA's express mandate, on the other hand, that "no court" shall have jurisdiction over "any claim" or "any action seeking a determination of rights" if the administrative procedures of the Act have not been exhausted.
Under the Supremacy Clause, U.S. Const. art. VI, cl. 2, state law must yield to federal law when application of the two conflict. See Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 478, 101 S. Ct. 2870, 69 L. Ed. 2d 784 (1981) (federal law preempts state jurisdiction where Congress so provides "by an explicit statutory directive, by unmistakable implication from legislative history, or by a clear incompatibility between state-court jurisdiction and federal interests"); see also Middleton v. Hartman, 45 P.3d 721, 731 (Colo.2002); Greenwood Trust Co. v. Conley, 938 P.2d 1141, 1147 (Colo.1997).
As discussed above, in enacting FIRREA, Congress intended to create an orderly and efficient process "enabling the FDIC to dispose of the bulk of claims against failed financial institutions expeditiously and fairly... without unduly burdening the ... [c]ourts." Tri-State Hotels, Inc. v. Fed. Deposit Ins. Corp., 79 F.3d 707, 712 (8th Cir. 1996) (internal quotations omitted). This objective mirrors many of the policy considerations for requiring administrative exhaustion in the first instance. See Brady Dev. Co., 14 F.3d at 1006 ("Exhaustion of administrative remedies is a requirement for efficiently administering the massive volume of claims."). To permit a pre-receivership claim to be maintained in state court when the claimant has not complied with FIRREA's administrative requirements is contrary to Congress's declaration that "no court" shall have jurisdiction over such claims, and would improperly "permit creditors to evade the comprehensive administrative claims procedures envisioned by the statute." Id.; see also Tillman v. Resolution Trust Corp., 37 F.3d 1032, 1036 (4th Cir.1994). As a result, state court general jurisdiction directly conflicts *1082 with an explicit statutory directive and is incompatible with the accomplishment of Congress's full objectives; therefore, under such circumstances, continuing state court jurisdiction is preempted. See Middleton, 45 P.3d at 734.
Accordingly, where a claimant fails to exhaust FIRREA's administrative remedies, the state court no longer may exercise jurisdiction over a pre-receivership claim.[6] To the extent other state courts have reached a contrary conclusion, we disagree with the reasoning of those decisions. See Herbst v. Resolution Trust Corp., 66 Ohio St. 3d 8, 607 N.E.2d 440, 446 (1993) (finding that state court action should not be dismissed for failure to file an administrative claim with RTC); Berke v. Resolution Trust Corp., 483 N.W.2d 712, 716 (Minn.App.1992) (concluding that state courts are not automatically deprived of jurisdiction based on a subsequent failure to exhaust RTC's administrative remedies).
Thomas relies on contrary federal authority in Whatley v. Resolution Trust Corp., 32 F.3d 905 (5th Cir.1994) and In re Lewis, 398 F.3d 735 (6th Cir.2005). These cases, which conclude that FIRREA's administrative claims process does not apply to pre-receivership claims, express the minority view. For the reasons explained above, we disagree and instead follow the weight of authority holding that FIRREA's administrative exhaustion requirements apply to pre-receivership claims as well.[7]
III. Application
It is undisputed that the FDIC provided proper notice of its administrative claims process through newspaper publication and individually to Thomas as a "Discovered Creditor."[8] The published notices identified the deadline for filing an administrative claim and included a statement that failure to file a claim by the specified date would result in its permanent disallowance. Thomas's individual notice provided him an additional 90 days to file a proof of claim together with an explanation of why a claim had not been filed by the deadline. It is also undisputed that Thomas did not file an administrative claim with the receiver. Because Thomas failed to timely exhaust FIRREA's administrative claims process despite proper notice, the trial court no longer had jurisdiction to consider his pre-receivership claims against the FDIC.
On appeal, Thomas contends for the first time that FIRREA's requirements do not apply to him because his principal claim is not for money damages and therefore he is not a "creditor." We reject this contention. Thomas's First Amended Complaint asserts a claim for damages and requests recoupment of the $500,000 paid for the golf memberships. Thus, his pleadings reflect that he does seek money damages, and as receiver, the FDIC steps into the shoes of the failed New Frontier Bank, which had assumed control of the entity that owned and operated the club facilities identified in the agreement with Thomas.
In any event, section 1821(d)(13)(D) applies to "any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of" a failed bank. *1083 Thomas's claims for declaratory judgment, reformation of contract, specific performance, and unjust enrichment also fit this definition. See Freeman v. Fed. Deposit Ins. Corp., 56 F.3d 1394, 1402 (D.C.Cir.1995) (section 1821(d) jurisdictional bar is not limited to claims by "creditors" but extends to all claims and actions against, and actions seeking a determination of rights with respect to, the assets of a failed financial institution for which the FDIC serves as receiver); Updike Bros., Inc., 814 F.Supp. at 1039 (rejecting "hypertechnical reliance on the use of the word creditor'"; language of section 1821(d)(13)(D) is quite broad).
Finally, to the extent Thomas asks us to remand the case for a hearing to determine the existence of a possible exception to the exhaustion requirement, we deny his request. Thomas neither specifies which exception he would claim nor argues that the trial court wrongfully failed to schedule a hearing. In any event, a hearing would serve no purpose here because Thomas cannot establish an exception to the administrative exhaustion requirement. As such, we have no basis to rule in his favor on this point.
IV. Conclusion
A claimant who commences an action against a bank in state court before it is placed in receivership and who subsequently exhausts FIRREA's administrative remedies may thereafter continue the action in the court in which it was pending. We hold, however, that where a claimant has received proper notice of the required administrative claims procedures under FIRREA, yet fails to exhaust those administrative remedies, the Act precludes any court from continuing to exercise jurisdiction over pre-receivership claims filed against a failed bank. Accordingly, we make the rule absolute and remand to the trial court with directions to dismiss Thomas's claims against the FDIC for lack of subject matter jurisdiction.
NOTES
[1] The sections of the Act relevant to our discussion here are codified at 12 U.S.C. § 1821(d).
[2] In a separate receivership action, Case No. 2007CV49 (Montrose Dist. Ct.), Brown Financial, LLC, one of the secured creditors of the golf course and club property, requested appointment of a receiver to manage and operate the golf course. Rick Chulick was appointed receiver in that action in March 2007. New Frontier later succeeded to the interests of Brown Financial in the deeds of trust relating to the golf course and related lots, and the court dismissed Brown Financial from the receivership action in July 2007. In February 2008, Thomas moved to intervene in 2007CV49, raising claims for declaratory relief and specific performance of the agreement. According to the parties, that case has been stayed pending the resolution of this petition.
[3] This original proceeding addresses only those claims against defendant FDIC, in its capacity as receiver of New Frontier Bank. We do not consider or address any claim in the underlying action asserted by Thomas against other named defendants.
[4] The legislative history of FIRREA indicates that its administrative claims procedures were intended to address problems with the prior FSLIC claims process identified by the U.S. Supreme Court in Coit Independence Joint Venture v. Federal Savings & Loan Insurance Corp., 489 U.S. 561, 586, 109 S. Ct. 1361, 103 L. Ed. 2d 602 (1989) (concluding that then-existing Bank Board regulations exceeded the Board's statutory authority by purporting to confer adjudicatory authority on FSLIC without de novo judicial review, and failing to place a clear and reasonable time limit on FSLIC's consideration of whether to pay, settle, or disallow claims). See H.R.Rep. No. 101-54, pt. 1, at 418-19 (1989), reprinted in 1989 U.S.C.C.A.N. 86, 214-15.
[5] Although a dissatisfied claimant may request a second tier of administrative claim review under section 1821(d)(7), such review is "in lieu of filing or continuing any [judicial] action," and therefore is not a required step in the administrative claims process in order to establish or maintain jurisdiction in an appropriate court. See id.
[6] We presume for purposes of this opinion (and the parties have not argued otherwise) that included within Congress's power to regulate claims against the FDIC is the corollary power to preempt jurisdiction over such related state law claims. See, e.g., Resolution Trust Corp. v. Binford, 114 N.M. 560, 844 P.2d 810, 813 (1992) (assuming for purposes of that opinion that Congress can divest state courts of subject-matter jurisdiction over state-law claims by same standards as those for divesting state courts of presumed jurisdiction over federal causes of action).
[7] In any event, both Whatley and Lewis are factually distinguishable from the circumstances of this case, making the reasoning of those decisions particularly inapplicable here. In those cases, the receiver either failed to follow notice requirements and communicate in good faith with plaintiffs who had pending claims known to the receiver, Whatley, 32 F.3d at 906-08 (noting the "odious dimension" of such circumstances and describing the receiver as "[lying] in ambush"), or invoked FIRREA's administrative exhaustion requirement only after protracted litigation in the trial and appellate courts, Lewis, 398 F.3d at 746 (describing facts as "egregious"). This case involves no comparable circumstances.
[8] Thomas does not contend that he did not receive notice or that such notice provided by the FDIC was legally defective. Rather, he claims he was not required to exhaust FIRREA's administrative remedies. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454271/ | 258 P.3d 20 (2011)
172 Wash. 2d 299
Kevin DOLAN and a class of similarly situated individuals, Respondents,
v.
KING COUNTY, a political subdivision of the State of Washington, Petitioner.
No. 82842-3.
Supreme Court of Washington, En Banc.
Argued October 28, 2011.
Decided August 18, 2011.
*22 Michael Reiss, Roger Ashley Leishman, Amy H. Pannoni, Gillian Murphy, Davis Wright Tremaine, LLP, Seattle, WA, Philip Albert Talmadge, Emmelyn Hart, Talmadge/Fitzpatrick, Tukwila, WA, for Petitioner.
David Frank Stobaugh, Stephen Kolden Strong, Lynn S. Prunhuber, Stephen Kirk Festor, Bendich Stobaugh & Strong, PC, William Robert Hickman, Reed McClure, Seattle, WA, for Respondents.
James Kendrick Pharris, Office of the Attorney General, Olympia, WA, amicus counsel for Office of the Attorney General.
CHAMBERS, J.
¶ 1 In Gideon v. Wainwright, 372 U.S. 335, 83 S. Ct. 792, 9 L. Ed. 2d 799 (1963), the United States Supreme Court guaranteed to indigents the right of legal representation at public expense. King County, like other local governments in this state, sought ways to provide the required defense services to indigent criminal defendants. After investigating several different models, the county settled on a unique system using nonprofit corporations to provide services funded through and monitored by the county's Office of the Public Defender (OPD) (formerly the Office of Public Defense). It is, in many ways, a model system providing quality representation to the poor. Over time, the county has taken steps to improve and make these nonprofit organizations more accountable to the county. In so doing, it has asserted more control over the groups that provide defender services. Kevin Dolan contends that the defender organizations are now no different than any other agency of King County and that the employees of these defender organizations are now, and for some time have been, entitled to be enrolled in the government's Public Employees Retirement System (PERS). After a trial on the record, the trial court agreed with the class. Applying the pertinent statutes and common law principles, we hold that the employees of the defender entities are "employees" under RCW 41.40.010(12) and are entitled to be enrolled in the PERS. We affirm the trial court and remand to that court for further proceedings regarding remedies.
FACTS AND PROCEDURAL HISTORY
¶ 2 Resolution of the issues presented requires a detailed review of the relationship between King County and its public defender organizations. In 1969, the first King County nonprofit public defender entity, The Defender Association (TDA), was created as a joint venture with the city of Seattle and the federal Model Cities Program. The independent *23 nature of TDA was a primary reason for the county's adoption of this model. The county thought public defense "must be divorced as far as possible from the control of the entity which is placing the recipients' liberty in jeopardy, that is, from King County." Clerks Papers (CP) at 1314 (Report of King County Council Operations and Judiciary Committee).
¶ 3 Over the years, the system evolved into its present form, with four public defense organizations providing almost all indigent defense services for the county. The Associated Counsel for the Accused (ACA) was created in 1973. The Society of Counsel for the Representation of Accused Persons (SCRAP) was formed at the request of the county in 1976. The Northwest Defenders Association (NDA) was established in 1987 in response to the county's desire for an organization with a larger number of minority management and board members. Another public defense organization, the Eastside Defender Association, was formed in 1978 and then discontinued in 1984.
¶ 4 A few years after its formation, TDA had several King County representatives on its board of directors. At the time, local government participation seemed "necessary to assure the visibility and longevity of the program." CP at 1336 (Letter from King County Executive). However, by 1979, all the nonprofit public defender groups had independent boards and substantial autonomy over operations. See id. at 1336-37; see also CP at 1340-42 (1979 TDA Contract). Each defender organization negotiated a contract with the county for the services the organization would perform for a fee. The county managed its public defense program through the OPD, a division of King County's Department of Community and Human Services and ultimately part of the county's executive branch. The OPD was and is responsible for screening eligible defendants, assigning cases, negotiating and administering the contracts with the four defender groups, and managing the funds provided by the county. The OPD and the public defender organizations negotiate new contracts annually.
¶ 5 Over the course of several decades the county began to exert more and more control over the defender organizations. This evolution of greater county control was in response to several events and the county's desire for efficient budgeting, high quality of defender services, and parity in pay among deputy prosecutors and public defenders doing similar work. An event in 1984 seems critical to the evolution of the relationship between the county and defender organizations. An audit of the Eastside Defender Association revealed that the director was engaged in some self-dealing, including renting space from his daughters and paying his wife for financial advice, and that the organization's board consisted of himself, his wife, and his mechanic.[1] These revelations caused the county to cancel its contract with Eastside Defender Association, which immediately then ceased to exist. It also caused the county to carefully scrutinize expenditures and to require a reorganization of its relationship with all the defender organizations.
¶ 6 The defender organizations were required to provide the county with a detailed budget of the costs of providing anticipated defender services, and those estimated costs became part of the contract amount between the county and the organization. CP at 1270-71 (Boruchowitz Decl.). By 1990, the county went to a cost pass-through budget system, also referred to as a zero-based budget system.[2]Id. at 1273, 1275. Expenses of each defender organization became a line item in the county's budget. CP at 628-29 (Chapman Decl.). The contract budgets were based on the defender organizations' actual costs and the county's projection of the case load, which in turn determined the number of defense lawyers needed and the ratios of staff to lawyers. Id. at 629, 634. Later the defender organizations were advised by the county that equipment purchased for $1,000 or more belonged to the county. CP at 1279 (Boruchowitz Decl.). *24 Through this process, the county had effective right of control and approval over all leases and other defender organizations' expenditures. E.g. CP at 2891-92 (Daly Dep.).
¶ 7 Also during the 1980s, the defender organizations argued that defender lawyers should receive the same pay as prosecutors because they did similar work and, unlike prosecutors, defenders were constitutionally mandated. In 1989, the county commissioned the Kenny Group to study prosecutors and public defenders, classify their positions, and address the issue of pay parity for public defenders. The Kenny Group created and classified five levels of deputy prosecuting attorneys, three levels of senior deputy prosecuting attorneys, four levels of public defense attorneys, and three levels of senior public defense attorneys. CP at 627 (Chapman Decl.). The Kenny classifications became known as the Kenny Scale. Id. at 626. The county provided by ordinance that salary parity would be phased in over two years.[3] The record before us is less than crystal clear on parity. It appears that while the county made an effort toward parity, the defender organizations never felt parity was achieved. According to the defender organizations, the county failed to provide funding for senior defender positions and therefore the organizations had to classify defenders in lower classifications than prosecutors with similar experience.[4] CP at 1282 (Boruchowitz Decl.). The county also took the position that parity only applied to base pay and not benefits. Id. at 1277. The county did provide funding for mandatory employer taxes such as the Federal Insurance Contribution Act tax and unemployment insurance. Id. at 1278. The county also provided sufficient funding for medical benefits; however, the county did not provide sufficient funding for the defender organizations to make meaningful retirement contributions. CP at 662 (Chapman Decl.). Apparently the defender organizations had goals of providing retirement benefits of up to four percent but funding only permitted a contribution of one percent, two percent, or nothing depending on the budget. Id.; CP at 1278 (Boruchowitz Decl.).
¶ 8 In 2002, NDA sought to rent some office space in downtown Seattle that carried a higher rent than customary for defender groups. In August 2002, the county audited NDA and found what it considered several irregularities. NDA, perhaps believing it could legitimately do so as an independent organization contracting with the county, was branching out into civil and for-profit work and rented office space for these purposes. The county perceived NDA's actions as using some of the county's funding for improper purposes. Further, the county believed NDA did not have a properly constituted board of directors and had leased a space unapproved by the county. The county's Department of Community and Human Services brought a receivership action against NDA. On September 27, 2002, the trial court granted the county's motion to have a receiver appointed for NDA. The receiver was given "exclusive possession and control over all assets [of NDA], with the power and authority to preserve, protect, and liquidate them for the benefit of plaintiff [King County]."[5] CP at 2335.
¶ 9 In the process of reorganizing NDA, the county required changes in the composition of the board of directors, bylaws, corporate articles, employee policies, financial practices, and contract with the county for all of its public defender organizations. CP at 3120 (Robinson Dep. at 27-29); CP at 2236-37 (Farley Decl.). All defender groups were made subject to a new contract that gave King County the authority to terminate the contract without cause upon 45-days notice, to review client files, to unilaterally determine whether funds were properly expended, and which also restricted the organizations' *25 ability to turn down individual cases.[6],[7]Id. at 2238; CP at 1279 (Boruchowitz Decl.); CP at 646 (Chapman Decl.); CP at 2393-2413, 2394, 2395, 2397, 2411 (2003 NDA Contract).
¶ 10 The record reflects that many defender board members had serious misgivings about the new order of things and were very concerned about the new limits on the defender organizations' ability to limit assignments and thereby run the risk of ethical dilemmas. One board member said the county was transforming a supposedly independent nonprofit into a "`vassal agency.'" CP at 4331 (TDA Board Minutes). But, because the county was the source of the vast majority of revenue, to refuse to agree to the contract meant that the organizations, like the Eastside Defender Association, would cease to exist.[8]
¶ 11 According to evidence in the record, these board members agreed to the new arrangement primarily out of concern for what would happen to the organizations' employees and because of concern for the organizations' client base. See CP at 646-47 (Chapman Decl.); CP at 1281 (Boruchowitz Decl.). Ultimately all defender groups signed the contract despite serious misgivings.
¶ 12 In 2005, the county developed a new and complex "public defense payment model." CP at 648-52 (Chapman Decl.). The budgets of all of the defender organizations were blended together for presentation to the county, and the county calculated an average percentage to be allocated to each organization on the basis of projected caseloads, the Kenny Scale, attorney to staff ratios, and past data on the overhead expenses and administrative costs for each organization. The new model effectively treats the four defender organizations as one for budgeting purposes. CP at 652 (Chapman Decl.).
¶ 13 There is no dispute the defender organizations have autonomy to make day-to-day decisions on the representation of indigent clients. Because, of course, the county is bringing the charges against the defendants represented by the defender organizations, the county has made an effort not to interfere with attorney/client relationships or trial strategies.
¶ 14 On January 24, 2006, Dolan filed a class action in the Pierce County Superior Court on behalf of the employees of the four King County defender organizations seeking enrollment in PERS. The trial court certified the class of "[a]ll W-2 employees of the King County public defender agencies and any former or predecessor King County public defender agencies who work or have worked for one of the King County public defender agencies within three years of filing this lawsuit." CP at 7087 (Findings of Fact and Conclusions of Law at 1). The parties agreed to separate the trial into two distinct phases: liability first, then remedies. The parties further agreed that, if the court denied summary judgment, the judge should *26 decide the issues on the basis of the written record alone. The trial court denied both parties' motions for summary judgment and commenced a bench trial on the written record to determine liability.
¶ 15 The class presented evidence that the county treated the defender organizations exactly like the county treated any other agency of the county. For example, defender groups participate in the county budgeting process exactly like any other agency. See CP at 2684 (Cruz Decl.); CP at 2646-47 (Thoenig Decl.). Each item of expense such as rent, payroll, lease payments on equipment, and other costs, becomes a separate line item in the budget.[9] It is the budget process that determines the amount the defender group receives. In the event of a budget crisis where there is a countywide reduction in budget, the defender groups must reduce their budgets in the same percentage as other agencies.[10] CP at 628 (Chapman Decl.). Once the budget is approved, the total budget amount becomes the contract amount. Id. at 625. According to evidence presented by the class, there is no real negotiation of the contract, and signing the contract is a formality, which sometimes occurs after the contract period has expired. Id. at 625, 631, 638-39. The county has maintained that the defender organizations may not retain for their own purposes any profits or any funds that may be left over from the budget. CP at 2233 (Farley Decl.); see also CP at 1237-38 (Daly Decl.). Nor are they held liable for any budget shortages. See CP at 7176 (Resp'ts' WAC Factor Chart). The class also points out that, like the defender organizations, county agencies have authority to exercise discretion in day-to-day activities including the hiring and firing of employees. CP at 268-82 (Cruz Decl.).
¶ 16 The county points out that the defender organizations have historically been independent, with their own articles and bylaws, control over day-to-day operations, and independent boards of directors. Moreover, the organizations file Form 990 with the Internal Revenue Service (IRS), which confirms their status as private nonprofits. See, e.g., CP at 6146 (TDA tax exemption form). The county also asserts that the organizations have complete control over their funds, stating that the budgetary formula "generated a sum of money that each corporation could spend any way it wanted."[11] Br. of Pet'r at 43.
¶ 17 The county has made an admirable effort to establish parity among the lawyers who work for the prosecutor's office and the defender organizations. All receive the same cost-of-living increases. All employees of the defender organizations must comply with the county's "`Employee Code of Ethics.'" CP at 1747 (Daly Decl.).
¶ 18 The trial court found the class was eligible for PERS enrollment on the separate but overlapping ground that the defender organizations were arms and agencies of the county, and the county was an employer of the organizations' employees. The court granted an injunction ordering enrollment, but left the enrollment date open pending further motions by the parties. The trial court did not reach the issue of remedies. The county moved for certification for immediate discretionary review under RAP 2.3(b)(4) and a stay of proceedings pending appeal. The trial court granted both motions, and we accepted review. Thus, the question before this court is the eligibility of the class for enrollment in PERS. Since we have never interpreted or applied the PERS statutes and regulations at issue here, it is a question of first impression.
ANALYSIS
1. STANDARD OF REVIEW
¶ 19 Where the record at trial consists entirely of written documents and the *27 trial court therefore was not required to "`assess the credibility or competency of witnesses, and to weigh the evidence, nor reconcile conflicting evidence,'" the appellate court reviews de novo. Progressive Animal Welfare Soc'y v. Univ. of Wash., 125 Wash.2d 243, 252, 884 P.2d 592 (1994) (quoting Smith v. Skagit County, 75 Wash.2d 715, 718, 453 P.2d 832 (1969)). However, where competing documentary evidence must be weighed and issues of credibility resolved, the substantial evidence standard is appropriate. In re Marriage of Rideout, 150 Wash.2d 337, 351, 77 P.3d 1174 (2003). The county argues that de novo review is proper here.
¶ 20 Dolan responds that the substantial evidence standard is more appropriate in this case. Dolan points out that the trial court was required to weigh over 6,000 pages of testimony and exhibits, resolve conflicts, and issue formal findings of fact as required by CR 52(a)(1). In essence, Dolan argues that the complexity and size of the record, and the careful weighing of that record for over three months by the trial court, make the substantial evidence standard preferable to de novo review despite the lack of any specific issues of credibility.
¶ 21 Appellate courts give deference to trial courts on a sliding scale based on how much assessment of credibility is required; the less the outcome depends on credibility, the less deference is given to the trial court. Washington has thus applied a de novo standard in the context of a purely written record where the trial court made no determination of witness credibility. See Smith, 75 Wash.2d at 719, 453 P.2d 832. However, substantial evidence is more appropriate, even if the credibility of witnesses is not specifically at issue, in cases such as this where the trial court reviewed an enormous amount of documentary evidence, weighed that evidence, resolved inevitable evidentiary conflicts and discrepancies, and issued statutorily mandated written findings. See Rideout, 150 Wash.2d at 352, 77 P.3d 1174; Anderson v. City of Bessemer City, 470 U.S. 564, 574-75, 105 S. Ct. 1504, 84 L. Ed. 2d 518 (1985) (deference rationale not limited to credibility determinations but also grounded in fact-finding expertise and conservation of judicial resources). We apply the substantial evidence standard in this case because of the size and complexity of the record and the need to resolve conflicting assertions. Having examined the record carefully, however, we would reach the same result if we applied a de novo standard of review.
2. PERS ELIGIBILITY
a. Arms and Agencies
¶ 22 A PERS eligible employee must work for a PERS employer. See RCW 41.40.010(12) (former RCW 41.40.010(22) (1997)); RCW 41.40.010(13) (former RCW 41.40.010(4) (1993)). A PERS "employer" is defined in relevant part as "every branch, department, agency, commission, board, and office of the state." RCW 41.40.010(13)(a), (b). Counties are "but arms or agencies of the state." State ex. rel. Taylor v. Superior Court, 2 Wash.2d 575, 579, 98 P.2d 985 (1940). Thus, if we conclude, as Dolan contends, that the defender organizations are in fact arms or agencies of the county, then the defender organizations' employees are employees as defined by RCW 41.40.010(12).
¶ 23 Dolan asserts that under common law standards the county has such a right of control over the organizations that the organizations are arms and agencies of the county, and thus the State, and therefore employees of the organizations are PERS eligible. Dolan argues the county has general control over the organizations through its budget process and the fact that the organizations would not exist without county funding.[12]*28 Dolan asserts the county has used that control to "rewrite articles of incorporation, bylaws, and contracts, renegotiate leases, and change employee policies and procedures." Resp'ts' Br. at 23-24. Dolan points out the defense organizations are thoroughly integrated into the county budgeting process and administrative procedures to the extent that the only difference between the King County nonprofit entities and the Pierce County Department of Assigned Counsel, an official county department, is formal, not functional. Resp'ts' Br. at 20-21, 30 (citing CP at 662-62 (Chapman Decl.); CP at 2648 (Thoenig Decl.)). Dolan also contends the many limitations imposed on the defender groups are further evidence of control, including prohibitions on other sources of revenue, affiliation with other entities, leasing of office space, competition with other defender organizations for market share, and spending budgeted funds from the county. Resp'ts' Br. at 24-25, 34-36 (citing, e.g., CP at 660-61 (Chapman Decl.); CP at 1738, 1749 (Daly Decl.); CP at 2237, 2239 (Farley Decl.)).
¶ 24 King County calls Dolan's claim a "de facto agency" argument and contends de facto agencies are disfavored under Washington law. The county maintains that, even if there is such a thing as a de facto agency in Washington, the defender organizations are independent both historically and in their day-to-day operations, as their private nonprofit status in contracts, corporate documents, and tax forms indicates. Br. of Pet'r at 54-55 (citing, e.g., CP at 6183-6299 (Organizations' Articles of Incorporation); CP at 5903-6168 (Organizations' IRS Filings)). The county asserts contrary to Dolan's claims that a defender organization could spend the lump sum budgeted to it "any way it wanted." Pet'r's Br. at 43 (emphasis removed). It also disputes that the organizations are required to have an exclusive relationship with the county. Pet'r's Br. at 17 n. 3 (citing, e.g., CP at 2843-44 (Chapman Dep. at 113-14)). As discussed above, the county argues that it is undisputed the defender organizations have autonomy to hire and fire and promote employees. The defenders respond that their limited authority to decide how to spend funds and to hire and fire is no different than the authority enjoyed by other county agencies.
¶ 25 Dolan relies largely on two sources of authority for the proposition that the control the county has over the defender organizations can render them arms and agencies of the State. In 1956, the Washington Attorney General issued an opinion that stated that the Associated Students of the University of Washington (ASUW), a nonprofit corporation that is the primary student organization at the university, was an "arm and agency" of the universityand thus the Statebecause the university had the right of final approval of all actions taken by the ASUW. 1956 Op. Att'y Gen. No. 267, at 2-3. Thus, employees of ASUW were entitled to be included as members of the state retirement system. Id. at 6.
¶ 26 Similarly, the Oregon Court of Appeals held a private nonprofit formed by the city of Portland to manage its energy policy was an instrumentality of the city for the purposes of Oregon's PERS. State ex rel. Pub. Emps.' Ret. Bd. v. City of Portland, 69 Or.App. 117, 684 P.2d 609 (1984). Specifically, the court found that control over day-to-day operations was not necessary for its ruling because under the articles of incorporation the city council could dissolve the corporation at any time, and the directors served at the council's pleasure. Id. at 121-22, 684 P.2d 609. The fact that the city never exercised that authority did not matterjust having it was enough to make the nonprofit corporation an instrumentality of Portland. Id. at 122, 684 P.2d 609.
¶ 27 These sources support Dolan's position that, analytically, the issue is the nature of the relationship between the county and the defender organizations. There is a substantial body of law distinguishing between the employment relationship and the independent contractor relationship. The bedrock principle upon which relationships are analyzed under the common law is the right of control. Hollingbery v. Dunn, 68 Wash.2d 75, 80-81, 411 P.2d 431 (1966). The focus is on substance and not on corporate *29 forms, titles, labels, or paperwork. See WAC 415-02-110(2)(c) (noting that for purposes of PERS eligibility, "whether the parties regard the worker as being an independent contractor is not controlling" and "disclaimers ... are not binding on the department for the purpose of determining employer-employee status").
¶ 28 Dolan's argument is further supported by the statutory definition of "employee." In 1997, the legislature amended the PERS statutes. LAWS OF 1997, ch. 254. The definition of "employee" in former RCW 41.40.010(22), recodified as RCW 41.40.010(12), was amended with instructions to the Department of Retirement Systems (DRS) to "adopt rules and interpret [the] subsection consistent with common law." LAWS OF 1997, ch. 254, § 10(22). The legislature made clear that the amendments were meant to be "consistent with long-standing common law of the state of Washington and long-standing department of retirement systems' interpretations of the appropriate standard to be used in determining employee status." Id., § 1(2). Therefore, if the "arm and agency" theory asserted by Dolan is part of Washington common law or relied on by DRS, the county's control over the organizations may be determinative of whether the organizations' employees are employees as defined by RCW 41.40.010(12).
¶ 29 The attorney general opinion relied on by Dolan is both a part of Washington common law and used by DRS in determining employee status. In that opinion, as described above, the attorney general found that ASUW was an "arm and agency" of the State because the university had the power to control its actions, and thus its employees were PERS eligible. 1956 Op. Att'y Gen. No. 267, at 2-3. First, this court, albeit in a different context, adopted and applied the reasoning of the attorney general opinion over 30 years ago, and explained that, although the university had never exercised its power, failure to exercise it did not mean the power did not exist. Good v. Associated Students of Univ. of Wash., 86 Wash.2d 94, 97-99, 542 P.2d 762 (1975). The court therefore rejected the contention of three students that ASUW was an independent organization and not an "arm and agency" of the university. Id. at 99, 542 P.2d 762.
¶ 30 Second, the same attorney general opinion has been relied on by DRS in the context of PERS eligibility. According to the record, following a newspaper exposé claiming that the Washington State University (WSU) bookstore was operating for profit, "it was questioned whether the bookstore's employees should be covered under [PERS]." CP at 6608 (DRS Mem.). Further investigation revealed that the "State Auditor ... did not consider this entity either as part of WSU or as another state agency or political subdivision." Id. The bookstore's payroll officer likewise asserted that "the bookstore is considered a separate operation and not part of the University." Id. The DRS audit team requested review from the DRS Legal Affairs Unit. Id. at 6610. In answering the question of whether the bookstore was a valid PERS employer, and thus whether its employees were validly enrolled in PERS, the DRS response stated that under the 1956 attorney general opinion it did not matter whether the bookstore was considered a separate PERS employer or simply part of the university. CP at 6606 (DRS Letter Ruling, Dec. 31, 1990). The letter explained that "the Bookstore is an arm and agency of WSU (AGO 55-57 No. 267), as the entire capital stock of the Bookstore is under the control of the WSU Board of Regents." Id. Thus there was no question that the employees were PERS eligible; the only question was the administrative one of whether the bookstore should have reported as a separate entity or under the umbrella of WSU. Id. at 6607. The letter did not to answer that question. Id.
¶ 31 According to the attorney general opinion adopted by this court and DRS, the State may have such control over an entity that it is an arm and agency of the State, and its employees therefore eligible for PERS as "employees" under RCW 41.40.010(12).[13] We *30 thus can consider whether, under the common law as incorporated into former RCW 41.40.010(22), the employees of the defender organizations are state employees.
b. County Control Over Defender Organizations
¶ 32 We would like to emphasize that no single factor controls. Hollingbery, 68 Wash.2d at 81, 411 P.2d 431. An independent contractor, whether for profit or nonprofit, does not lose its independence simply because it is providing a public service at the request of the government. Further, government can and should exact high standards of performance from its independent contractors. Prudent financial controls and careful oversight of contract compliance does not render a contractor an agency of the government.[14] "`The retention of the right to inspect and supervise to insure the proper completion of the contract does not vitiate the independent contractor relationship.'" Hennig v. Crosby Group, Inc., 116 Wash.2d 131, 134, 802 P.2d 790 (1991) (quoting Epperly v. City of Seattle, 65 Wash.2d 777, 785, 399 P.2d 591 (1965)). However, government cannot create an agency to perform a government function, incorporate it into its yearly budget process and control it like any other government agency, and claim it is an independent contractor simply because of the form of name or title.
¶ 33 The county argues that "[t]he proper focus ... is the County's control over the manner in which the corporations' attorneys and staff perform their work." Reply Br. of Pet'r at 4. The county argues that the defenders are free to defend clients without interference and may hire and fire without interference, and that the county does not interfere with the defender groups' day-to-day activities. Thus the county reasons that it merely seeks a result as a principle and does not control the manner in which the independent contractors perform. Id. at 21 (citing Hollingbery, 68 Wash.2d at 80-81, 411 P.2d 431; Restatement (Second) of Agency § 220 (1958)). Under its reasoning, the county could turn its sheriff's department into a nonprofit corporation and because the sheriff generally has authority to hire and fire and carry out police work, the sheriff's department would become an independent contractor. The county is wrong.[15]
*31 ¶ 34 A review of the record reveals that the county, perhaps for very legitimate reasons, has gradually extended its right of control over the defender organizations until they indeed have become vassal agencies of the county. The following examples of the county's right of control over the defender organizations support our conclusion that, under common law principles, the defender organizations are in fact agencies of the county. The defender organizations were created specifically to carry out a constitutionally mandated function of the county. Generally, independent contractors determine their own formal structure, such as the composition of their boards, articles, and bylaws; but the county has imposed stringent control over the defender organizations' formal structure. Generally, independent contractors may have many clients, but the defender organizations are true captives of the county in the sense that they cannot have other clients without the county's consent and the county provides virtually all of the organizations' funding.[16] Independent contractors can usually bid for or negotiate contracts; the contracts of the defender organizations are merely a pass-through of the county's budgeting process.[17] Independent contractors may generally lease space or acquire property without approval; the defender organizations may not lease or acquire property without the county's approval and the county has asserted that property owned by the organizations belongs to the county.[18]
¶ 35 Further, independent contractors would generally realize profits or losses and nonprofit entities would be entitled to set aside money for future growth and expansion. Independent contractors generally do not have customers establish a pay scale for *32 their employees or require the independent contractors to give their employees the same cost-of-living increases that the customer's employees receive.[19] While no single factor or combination of factors is controlling, we hold that the county has exerted such a right of control over the defender organizations as to make them agencies of the county.[20] We hold that under Washington common law as adopted in RCW 41.40.010(12), the employees of the defender organizations are employees of the county for purposes of PERS.
3. KING COUNTY'S AFFIRMATIVE DEFENSES
a. Collateral Estoppel
¶ 36 The county argues collateral estoppel bars Dolan's claim on the basis of an unpublished summary judgment order in White v. Northwest Defenders Ass'n that found an NDA employee was not an employee of the King County OPD for the purposes of a wrongful termination claim. Order Granting Summ. J., White v. NDA, No. 94-2-09128-0 (King County Super. Ct., Wash. Dec. 2, 1994). Collateral estoppel requires, at a minimum, that the identical issue was decided in the prior action. Hanson v. City of Snohomish, 121 Wash.2d 552, 561, 852 P.2d 295 (1993). In White, the issue was whether the OPD was vicariously liable for employment discrimination, and the court issued a three-page summary judgment order determining that it was not. Here the issue is whether Dolan and the class he represents are PERS eligible. The cases are not comparable. Moreover, collateral estoppel requires identical parties or privity with the original parties. Id. Ted White was fired from NDA in 1994, and the class includes persons who have worked for one of the four defender organizations between 2003 and 2009. Thus he is not, as the county asserts, a "member of the class," and there is no privity. Br. of Pet'r at 60. We reject the county's collateral estoppel argument.
b. Equitable Estoppel
¶ 37 The county asserts that because the organizations filed nonprofit corporate forms with the IRS, and because the employees participated in certain benefits programs available only to private employees, and organized in labor unions with representatives certified by the National Labor Relations Board, Dolan is equitably estopped from claiming PERS benefits. Equitable estoppel requires (1) an admission, act, or statement inconsistent with a later claim; (2) another party's reasonable reliance on the admission, act, or statement; and (3) injury to the other party that would result if the first party is allowed to contradict or repudiate the earlier admission, act, or statement. Lybbert v. Grant County, 141 Wash.2d 29, 35, 1 P.3d 1124 (2000) (quoting Bd. of Regents v. City of Seattle, 108 Wash.2d 545, 551, 741 P.2d 11 (1987)). Perhaps because King County required the defender organizations to give the appearance of being private, the county is arguing the employees cannot now claim to be public employees. But it is difficult to understand how the county relied on their private status, or what else the employees should have done. Moreover, accepting the county's argument would elevate form over substance. That is clearly contrary to the scheme laid out by the legislature and DRS. See RCW 41.40.010(12); WAC 415-02-110. The county's equitable estoppel argument is not convincing, and we reject it as well.[21]
*33 CONCLUSION
¶ 38 We affirm the trial court's determination that employees of the agencies are also county employees for the purposes of PERS. We hold that King County has such a right of control over the defender organizations that they are arms and agencies of the county. We remand to the trial court for further proceedings consistent with this opinion.
WE CONCUR: SUSAN OWENS and MARY E. FAIRHURST, Justices and J. ROBERT LEACH, and RICHARD B. SANDERS, Justices Pro Tem.
C. JOHNSON, J. (dissenting).
¶ 39 The majority effectively rewrites two separate contracts and concludes that Kevin Dolan is an employee of King County (County), without ever examining or mentioning the contracts and, more troubling, explaining why the contracts need judicial rewriting. The easy answer in this case is that a contract exists to provide indigent criminal defense for the County under which employees do not qualify for enrollment in the Public Employees Retirement System (PERS) and are not state "employees" under RCW 41.40.010(12). In this case, Dolan was not hired by the County, does not get paid by the County, does not receive assignments from the County, cannot be disciplined by the County, and is not terminable by the County; still the majority concludes that Dolan is an employee of the County. The majority's result is implausible, if not exactly backward.
¶ 40 The issue before the court centers on whether the County's contracts with four private nonprofit public defender corporations exert such control over the methods and means of the indigent legal defense work being performed as to make the County the employer of workers of these four corporations. Since the contracts with the County provide the only measure of control the County has over the corporations, these contracts should begin, and largely end, our inquiry. But rather than explaining specifically which provisions in the contracts make the corporations subject to the County's control, the majority earnestly avoids analyzing the extent of control the County is capable of exerting on the legal services provided by these corporations. By doing so, the majority dislodges well-established common law rules regarding employer-employee relationships and muddles the factors that merit consideration in determining whether a worker contracted by the government is an employee or an independent contractor.
¶ 41 No question is really presented that the fundamental common law distinction between employees and independent contractors is that an employee works under an employer who has the right to control the details of work performance, while an independent contractor is one who undertakes a project but is left free to do the assigned work and to choose the method of accomplishing it. Hollingbery v. Dunn, 68 Wash.2d 75, 79-80, 411 P.2d 431 (1966). The statute governing PERS eligibility also defines an "employee" in terms of the common law test concerning control over the performance of the work. RCW 41.40.010(12) (An "employee" is "a person who is providing services for compensation to an employer, unless the person is free from the employer's direction and control over the performance of work."). The Department of Retirement Systems (DRS) employs this "right to control" test as a threshold rule when administering PERS eligibility. WAC 415-02-110(2)(b). While the DRS also looks to additional non-determinative factors to focus its inquiry, see WAC 415-02-110(2)(d)(i)-(xix), these factors are utilized because they tend to establish day-to-day control over the work being performed. Hollingbery, 68 Wash.2d at 80-81, 411 P.2d 431. But as our common law establishes, control over the manner and means of the work being performed remains the "crucial factor" in determining whether a worker is an employee or independent contractor. Hollingbery, 68 Wash.2d at 81, 411 P.2d 431.
¶ 42 In the contracts, the County provides express representations of the terms and conditions forming the essence of the County's relationship with the indigent public defense corporations. The corporations are "nonprofit law firm[s] ... organized and operated exclusively for the purpose of providing court-appointed legal services to indigent *34 persons." Clerk's Papers (CP) at 5690 (2007 Associated Counsel for the Accused (ACA) Contract).[1] Both the County and the corporations "agree that these legal services are provided by an independent contractor nonprofit corporation." CP at 5690 (2007 ACA Contract). Additionally, both parties "agree that any and all funds provided pursuant to this Contract are provided for the sole purpose of provision of legal services to indigent persons." CP at 5690 (2007 ACA Contract). Both parties also agree to indemnify the County for the corporation's acts because "the Agency is an independent contractor, and neither it nor any of its officers, directors, employees, subcontractors, agents, or representatives are employees of the County for any purpose." CP at 5696 (2007 ACA Contract). The contracts do not bind the parties to an extended relationship because the contracts expire after one year and, consequently, must be re-negotiated annually. CP at 5691 (2007 ACA Contract). Importantly, either party may terminate the contract before the full term if the other party's conduct constitutes a material breach of the contractual terms. CP at 5694-95 (2007 ACA Contract). These provisions indicate that the parties structured their contracts to create an independent contractor relationship primarily because that is what the contracts say.
¶ 43 Even examining the contracts closely, it becomes readily apparent that the County neither exercises nor possesses control over how individuals within these corporations accomplish their public defense work. Each corporation is governed by an independent board of directors and the County has no influence over the selection of board members. CP at 5705 (2007 ACA Contract). Each corporation has a managing director selected by this independent board. CP at 5706 (2007 ACA Contract).[2] Each corporation hires its own employees without seeking approval from the County. CP at 3088-91 (Mikkelsen Decl.). Each corporation sets the level of pay of its employees. Each corporation conducts performance evaluations of its employees. CP at 2854 (Chapman Decl.). Each corporation disciplines its own staff. CP at 2854 (Chapman Decl.). Each corporation determines which benefitshealth, disability, retirement, etc.it will offer its employees and in what amount. CP at 2829 (Chapman Decl.). Each corporation, without County involvement, decides whether to terminate an employee. CP at 3105-06 (Mikkelsen Decl.). In short, the indigent public defense corporation, in hiring employees, controls when they will work, where they will work, and which cases they are assigned. If an employee fails to perform, the corporation that hired the employee can then fire him or her. The County has no influence over the means and manner in which the employee's work is performed, or even whether the employee will continue to be employed. Put simply, the contracts empower the County to tell the corporations what must be done, but the corporations control how Dolan must then do it. In most all cases concerning whether a worker is an employee or an independent contractor, we would end our inquiry there.[3]
¶ 44 But the majority seemingly disregards these aspects governing the day-to-day control of the work being performed and purports to find the County's right to control the performance of work in other aspects of the relationship between the corporations and the County. Without telling us precisely which contracts control its decision or revealing how far back our inquiry must extend (the corporations' contracts are renegotiated and change annually), the majority points to some aspects of the relationship between the corporations and the County to substantiate its result. The majority relies on such things as: the corporations must receive County approval prior to working with other clients; *35 the corporations cannot enter into leases or acquire valuable assets without County approval; and the County provides the bulk of these corporations' revenue.[4] Majority at 31-32.
¶ 45 But none of these aspects of the relationship show how the County controls the method and manner of the indigent defense work performed by the corporations, only that the County legitimately included terms into its contracts to ensure adequate performance of the services provided. Since the corporations are "operated exclusively for the purpose of providing court-appointed legal services to indigent persons," the County has a valid interest to include contractual terms ensuring that these corporations expend public money solely on functions related to indigent public defense. CP at 5690 (2007 ACA Contract). The County is not subsidizing a private law firm. It is expending public money for public defense purposes. But the contractual provisions the majority hinges its decision on only exemplify how the County provides genuine oversight over the expenditure of public money, not how the County exerts control over indigent defense work performed. With this, the majority decision effectively undercuts the distinction between watchful caution and control; a fundamental principle well rooted in our employer-employee common law. Kamla v. Space Needle Corp., 147 Wash.2d 114, 120-21, 52 P.3d 472 (2002) ("`"The retention of the right to inspect and supervise to insure the proper completion of the contract does not vitiate the independent contractor relationship."'" (quoting Hennig v. Crosby Grp., Inc., 116 Wash.2d 131, 134, 802 P.2d 790 (1991) (quoting Epperly v. City of Seattle, 65 Wash.2d 777, 785, 399 P.2d 591 (1965)))); see also Fardig v. Reynolds, 55 Wash.2d 540, 545, 348 P.2d 661 (1960) (no "control" when only interaction between parties was "supervisory" to determine "whether or not [the work was] being done in accordance with the contract").[5] The majority dismissively avoids applying our prior employer-employee common law rules, but troublingly, the majority does not provide this court any new rule to apply going forward.
¶ 46 The majority decision also ignores the plain contractual declarations indicating the intentions of the contracting parties. While the majority is correct in stating that contractual language does not conclusively determine the status of the corporations' workers, this court's precedent has long held that the instrument itself may show which type of relationship the parties intended. Hollingsworth v. Robe Lumber Co., 182 Wash. 74, 79, 45 P.2d 614 (1935). In this case, the contracts expressly state that, "the County and the Agency agree that these legal services are provided by an independent contractor non-profit corporation." CP at 5690 (2007 ACA Contract.). While the majority reasons that we should ignore the express contractual language stating that the indigent defense corporations are independent contractors, the majority offers no explanation why we should ignore the fact that members of the class have beneficially relied on this same language when asserting their rights as a private employer, namely in unionizing and privately negotiating collective bargaining agreements. CP at 2997 (Farley Decl.), 3094-95 (Mikkelsen Decl.), 5183-225 (Ex. 145). The corporations have also tacitly endorsed other declarations and terms in their contracts. For example, the corporations declare themselves in their contracts as "nonprofit law firm[s]" and file annual tax returns accordingly. CP at 5690 (2007 ACA Contract); see, e.g., 6146 (The Defender Association tax exemption form). The majority's decision effectively allows these corporations to pick and choose which contract provisions they wish to follow depending on the circumstances; they can realize the benefits of being both a private employer and an agency of the County. If a reason exists for allowing the corporations to rely on their contractual declarations but not the County, the majority never reveals it.
*36 ¶ 47 The majority's decision judicially overwrites the intended contractual terms between the County and the indigent defense corporations and sidesteps our common law principles regarding independent contractor relationships. The effect of the majority's decision is to ghostwrite financial terms for pension funding into the parties' contracts, even though the corporations could negotiate with the County on their own accord to accomplish the same result, either now or during their annual contract renewal. Furthermore, if an employee desired to increase his retirement package, he or she could have done so by negotiating with the corporation that employee works for. But these employees are not asking this court to rewrite their employment contract with the indigent defense corporation that hired them; these employees ask this court to rewrite their employer's contract with the County for their benefit, which the majority does. But even as the majority scribbles its own language into the contracts, the majority fails to tell us how the County should have structured its contracts to avoid inadvertently creating an employer-employee relationship with these corporations; a relationship that, from the contractual terms, the County certainly wished to avoid. Since the majority does not provide a clear rule for when an employer-employee relationship develops, perhaps the County will figure its only recourse now is to not renew its existing contracts and explore alternative avenues of providing its constitutionally mandated indigent public defense.
¶ 48 The majority appears to rest its decision on contractual provisions permitting the County to supervise the end-level quality of the product it bargained for.[6] But the existence of an employer-employee relationship should not be inferred from contractual provisions reserving the power to monitor performance when such provisions do not deprive the person doing the work the power to command how the work is done. Rather than adhering to settled common law principles and looking to which party controls the worker's day-to-day job performance, the majority judicially rewrites these public indigent defense contracts while providing no clear guidance or rule applicable to future cases involving government contracts with third-party corporations.
¶ 49 Since the County's contracts with these indigent defense corporations do not provide for control over the means and manner of the legal services provided, I would hold that the trial court erred in determining that the class members were PERS-eligible "employees."
¶ 50 I dissent.
WE CONCUR: JAMES M. JOHNSON, GERRY L. ALEXANDER and DEBRA L. STEPHENS, Justices.
NOTES
[1] Despite the irregularities, there did not appear to be any violations of the law or the contract between the Eastside Defender Association and the county. CP at 1345.
[2] The county used the same budget system for its own agencies and departments. CP at 628 (Chapman Decl.).
[3] King County Ordinance 9221 (Nov. 22, 1989) (CP at 715-20).
[4] The defender organizations sought funding for 17 new "senior" positions based on the Kenny Scale classifications, but the county rejected the request. CP at 1282 (Boruchowitz Decl.).
[5] The order was amended on November 15, 2002, upon request for clarification by the receiver, to read "for the benefit of Northwest Defenders Association." CP at 2341.
[6] In subsequent years, the contract language was softened, including the termination clause. CP at 5690-5710 (2007 Contract). Rather than at will by the county, contracts after 2004 could be terminated "for convenience by either party" upon 60-days notice. Id. at 5695.
[7] As part of its budgeting matrix, the county also required each defender organization to maintain a reserve fund that would provide sufficient funds to complete services to clients assigned to the organization in case of contract termination. CP at 643-44 (Chapman Decl.).
[8] In 2004, the city of Seattle ended its 20-year arrangement with King County to provide defense services through its defender organizations. It contracted directly with ACA, and ACA now receives approximately $3 million a year from the city, about one quarter of the total operating budget. However, ACA could not continue its public defense operations without the $9 to $10 million provided by county funding. CP at 660 (Chapman Decl.). TDA receives approximately 90 percent of its funding from King County, with some additional grants from the county and the State for racial disparity and sexually violent predator programs, and other funding sources for public defense related work, such as a contract with Seattle Municipal Courts, making up the balance. CP at 1285 (Boruchowitz Decl.). TDA could not continue in its present form without county funding. Id. SCRAP receives 98 percent of its annual $10 million budget from King County, with the remainder made up of two small grants from the county and the State for public defense related projects. CP at 1733 (Daly Decl.). The county was the sole source of funds for NDA in 2003. CP at 2238 (Farley Decl.). It appears that was still the case until at least 2008. See id. at 2243.
[9] It is not clear whether this remains the case after the new 2005 budget process came into effect.
[10] After oral argument, Dolan submitted supplemental evidence regarding furloughs. The county responded with a motion to strike the supplemental evidence and impose sanctions. We grant the motion to strike but decline to impose sanctions. In addition, King County submitted an answer to an amicus brief filed by the Washington Attorney General, and Dolan responded with an objection, which we are treating as a motion to strike. The motion is denied.
[11] In fact, the portion of the record cited for the proposition states that the organizations can "allocate the total contractual sum in a variety of ways." CP at 5465 (emphasis added).
[12] For example, as mentioned above, the contract price is not a negotiated term, but is determined the previous year by the county's budget process. CP at 625, 631, 638-39 (Chapman Decl.). The contracts appear to be considered mere details; the constitutionally mandated services of the defender organizations are often performed without any contract for the corresponding period having been signed. Id.; CP at 1734 (Daly Decl.). The contract is presented in a "take it or leave it" form, where "leaving it" means the organizations would cease to exist. In essence, Dolan argues that the county creates its own public defense budget each year, then uses the organizations as a "pass-through of County funds to pay salaries of its lawyers and staff." CP at 2243 (Farley Decl.). According to the record, the budget "is the main way that the County Council exercises its authority over County operations." CP at 2684 (Cruz Decl.).
[13] The county is correct that both this court's opinion in Good and the DRS interpretation addressed above are distinguishable because the right to control was explicit in the corporate articles or bylaws of the organizations at issue, but that fact should not end the inquiry. As in Hollingbery and the common law, we must look beyond formalities to the actual nature of the relationship. Hollingbery, 68 Wash.2d at 80, 411 P.2d 431 ("Whether in a given situation, one is an employee or an independent contractor depends to a large degree upon the facts and circumstances of the transaction and the context in which they must be considered."). The county makes two arguments disputing this proposition. First, the county asserts that the definition of a public employer for PERS purposes does not include private nonprofit corporations. See RCW 41.40.010(13)(a), (b) (former RCW 41.40.010(4)(a), (b)). The county argues that because the statute defines a PERS employer in relevant part as "every branch, department, agency, commission, board, and office of the state" the defender organizations cannot be PERS employers. See id. It asserts that because the county did not enact ordinances designating the organizations as official county departments, they cannot be PERS employers under the statute. The county's argument is high formalism, and entirely overlooks the fact that the "arms and agencies" determination rests on the amount of control the county has, not the method by which the county creates its departments. We reject such a limited view of what constitutes a government agency. Second, the county argues that "de facto" agencies are disfavored under Washington law. Br. of Pet'r at 55. It bases this argument on "the well-understood concept that while there can be a de facto officer, there can be no officer de facto without an office de jure." Id. The county also cites some case law that has little discernable relevance to the case at hand. See Higgins v. Salewsky, 17 Wash.App. 207, 562 P.2d 655 (1977). This argument is at best obscure and at worst nonsensical.
[14] The dissent incorrectly asserts that our decision rests "on contractual provisions permitting the County to supervise the end-level quality of the product it bargained for." Dissent at 36. Despite the dissent's characterization, the problem does not lie with any particular contractual provisions. The defender organizations can no longer be considered independent contractors not because the county has inserted supervisory provisions in the contract, but because the county has in actual practice expanded its control far beyond the supervision of end-level quality.
[15] The dissent argues, like the county, that lack of control over the day-to-day job performance of the organizations' employees precludes a finding that the employees are entitled to PERS benefits. The dissent is correct that control over the details of the work is generally the fundamental inquiry in determining employment relationships. However, that test is unhelpful in this case for several reasons. First, "a public defender is not amenable to administrative direction in the same sense as other employees of the State." Polk County v. Dodson, 454 U.S. 312, 321, 102 S. Ct. 445, 70 L. Ed. 2d 509 (1981). Because "a public defender works under canons of professional responsibility that mandate his exercise of independent judgment on behalf of the client," and "it is the constitutional obligation of the State to respect the professional independence of the public defenders whom it engages," insistence on the traditional test of control over the details of the employee's day-to-day job performance is unworkable in this context. Id. at 321-22, 102 S. Ct. 445. Second, the DRS itself has, for similar reasons, determined that an employee relationship existed under similar circumstances despite lack of control over details. Resp'ts' Br. at 40. The DRS held that a judge who contracted with the City of Kent was an employee for PERS purposes despite an explicit disclaimer in the contract, and despite the fact that the city had no control over the details of his work. CP at 2183-96 (In re the Petition of Robert McSeveney (9/16/2003)). Many of the factors applied to the judge by the DRS are strikingly similar to the factors as applied to the agency employees. Compare CP at 2193-94 (DRS WAC Factor Chart), with CP at 7171-81 (Respondents' WAC Factor Chart). Finally, the dissent's limitation of the common law control test to individual employees entirely ignores the fact that an organization may be an arm and agency of the State. That determination, as we have described, turns on the nature of the relationship between organizations, not individual employees within the organizations.
[16] The county counters that like an independent contractor, some of the organizations can and do contract separately with municipalities other than King County. Br. of Pet'r at 17 n. 3 (citing, e.g., CP at 2843-44 (Chapman Dep. at 113-14)). Presumably the county means the city of Seattle, since that is the only other municipality with which the record shows the organizations contracted. E.g., id. at 659-60. Other than cities and other government entities, the county strictly limits with whom the organizations may contract. The county code states that the county "may enter into agreements with nonprofit corporations formed for the specific purpose of rendering legal services in behalf of indigents to provide legal services to persons eligible for representation through the public defense program." King County Code 2.60.040. The county has interpreted this to mean the organizations, unlike a true independent contractor, may never "engage[] in providing [] any other form of legal representationwhether for profit or pro bono." CP at 2232 (Farley Decl.).
[17] The dissent chooses to ignore this fact completely when it states that "the corporations could negotiate with the County on their own accord" to receive pension funding. Dissent at 36. The lack of any real negotiating power on the part of the public defender organizations is evidenced by the numerous unilateral decisions made by the county over the years. In the context of the facts of this case, it is remarkable to suggest that the organizations could have negotiated pensions if they wanted them.
[18] The county appears to have changed its rent approval requirements upon being made aware of the employees' claims in this lawsuit. CP at 2834-35 (Chapman Dep.).
[19] Also unlike a true independent contractor, as noted above, the county inserted a "termination at will" clause in 2003, which effectively gave the county the power to terminate the existence of any or all of the organizations at its slightest displeasure. This clause was replaced by a "termination for convenience" clause in the following years, which is not easily distinguished in actual effect.
[20] The dissent suggests our holding "places numerous government contracts with independent contractors at risk of being misconstrued as creating employer-employee relationships." Dissent at 36 n. 6. The dissent cites no examples of contractors whose circumstances even remotely resemble those of the public defenders here.
[21] The dissent makes a similar argument, claiming that the organizations can "realize the benefits of being both a private employer and an agency of the County." Dissent at 35. We make no such holding. There may well be collateral consequences for the public defender organizations resulting from their status as arms and agencies of the State. But those consequences are not now before us.
[1] The contracts for each of the four public defense corporations are substantially similar. Given that the contracts generally mirror one other, citation to each individual contract is unnecessary.
[2] Despite this, the majority curiously finds that the County exerts "stringent control" over the organizational structure of these corporations. Majority at 31.
[3] Presumably the majority's reasoning extends to all the public defense corporations' employees, including paralegals, investigators, support staff, and others.
[4] The majority cites to no legal authority in this state that a service provider that has primary financial dependence on one contract is thereby intrinsically under the control of its primary client.
[5] A number of the County's supervisory requirements are mandated by statute. Therefore, the County was required to include such provisions. See RCW 10.101.060.
[6] It is reasonable to presume that contractual provisions providing for quality assurance and for contract compliance exist in every government contract. Under the majority's reasoning, this places numerous government contracts with independent contractors at risk of being misconstrued as creating employer-employee relationships. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454825/ | 480 S.W.2d 845 (1972)
STATE of Missouri, Respondent,
v.
L. C. ROBERTSON, Appellant.
No. 55602.
Supreme Court of Missouri, Division No. 2.
June 12, 1972.
*846 John C. Danforth, Atty. Gen., Richard S. Paden, Asst. Atty. Gen., Jefferson City, for respondent.
Frank Anzalone, Brent J. Williams, Clayton, for appellant.
STOCKARD, Commissioner.
L. C. Robertson was found guilty by a jury of manslaughter and sentenced to imprisonment for a term of ten years. We affirm.
The sufficiency of the evidence to sustain the conviction is not challenged. A jury reasonably could find that on December 7, 1969, appellant inflicted fatal wounds upon his wife by use of a butcher knife.
Appellant's first point is that the trial court erred in permitting the testimony of Demmetrist Perryman, the son of the deceased, because "there was no showing on voir dire that [he] understood the nature of the oath administered in courts of law and the true nature of the results of not telling the truth under oath."
At a hearing out of the presence and hearing of the jury, Demmetrist testified that he was nine years of age and in the fourth grade at school. He stated that he remembered what occurred when his mother was killed, that he would tell the truth, and when one did not tell the truth it would be a lie. He also testified that if one told a lie he would "get put in jail," that he believed in God, and that if he told a lie God would punish him.
The determination of the competency of a witness is a matter within the sound discretion of the trial court, State v. Jones, 360 Mo. 723, 230 S.W.2d 678; State v. Hastings, Mo., 477 S.W.2d 108, and in reviewing the determination of the trial court on the issue of an abuse of discretion an appellate court may look to the preliminary examination of the child and also to his testimony at the trial. State v. Hastings, supra. In the determination of the competency of a witness when challenged because of age, "the fundamental elements are (1) present understanding of or intelligence to understand, on instruction, an obligation to speak the truth; (2) mental capacity at the time of the occurrence in question truly to observe and to register *847 such occurrence; (3) memory sufficient to retain an independent recollection of the observations made, and (4) capacity truly to translate into words the memory of such observation."
We have read the testimony of Demmetrist given at the preliminary hearing and at trial. It was straightforward and the answers were responsive. In view of our review of his testimony and the answers given by Demmetrist as to his belief in God and the punishment to be expected for telling a lie, we conclude that the trial court did not err to the prejudice of appellant in permitting him to be sworn and testify as a witness for the State.
Appellant's second and last point is that the trial court erred in denying his motion for a new trial because "Demmetrist Perryman * * * was being `coached' during his testimony."
At a hearing on the motion for new trial, Irma Jean Robertson, appellant's daughter, testified that "Demmetrist was asked if he ever saw his mother with a knife after his daddy and [his grandmother] shook her head this way, and Demmetrist said no." She also stated the grandmother shook her head several times, but on cross-examination she stated that the above question was the only one she remembered where the grandmother shook her head. The trial judge commented that he was "always watching the people" in the courtroom, and that "some people subconsciously move their heads one way or another as to which way they want a question answered or not." He further commented that he remembered the grandmother and where she was sitting, and that he "did not observe any of this going on." Neither the grandmother nor Demmetrist testified at the hearing on the motion for new trial.
Appellant relies primarily on State v. Barker, 43 Wash. 69, 86 P. 387, but that case is distinguishable. There it was admitted that a communication system existed between counsel and the witness. In this case the testimony of "coaching" is not convincing; at least it was not to the trial court, and Irma Jean did not report it at the time to her father's counsel or to the court, and made no mention of it until after the trial had been completed.
The granting of a mistrial because of the conduct of a witness or spectator during the course of a trial is within the sound discretion of the trial court, State v. Anderson, Mo., 386 S.W.2d 225, and such discretion would also apply to a situation such as we have here, assuming that the trial court gave some credence to the testimony of Irma Jean. Also, there was no attempt to show that the answer of Demmetrist was incorrect, and if the answer given by Demmetrist was truthful no prejudice to appellant could have resulted. It cannot be ruled as a matter of law that the trial court abused its discretion in overruling the motion for new trial.
The judgment is affirmed.
HOUSER, C., not sitting.
PER CURIAM:
The foregoing opinion by STOCKARD, C., is adopted as the opinion of the Court.
All of the Judges concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2634542/ | 100 P.3d 905 (2004)
Kim W. DUNN, Appellant,
v.
MUNICIPALITY OF ANCHORAGE, Appellee.
No. A-8677.
Court of Appeals of Alaska.
November 5, 2004.
*906 John Marston Richard, Gorton & Logue, Anchorage, for Appellant.
John E. McConnaughy III, Assistant Municipal Prosecutor, and Frederick H. Boness, Municipal Attorney, Anchorage, for Appellee.
Before: COATS, Chief Judge, and MANNHEIMER and STEWART, Judges.
OPINION
COATS, Chief Judge.
Kim W. Dunn pleaded no contest to driving under the influence and was sentenced to 140 days to serve. (His mandatory minimum sentence was 120 days.) Dunn argues that his rights to due process and equal protection were violated because AS 28.35.030(b) and (r)(4), which define the penalties for misdemeanor driving while under the influence, required the district court to consider all his previous convictions, not just convictions obtained during the past ten years, in calculating his mandatory minimum sentence for that offense.
For the reasons discussed below, we affirm Dunn's sentence.
Facts and proceedings
On April 13, 2002, Dunn was arrested for driving under the influence after his pick-up truck hit two parked cars in the parking lot of the Chilkoot Charlie's bar in Anchorage. Dunn took a breath test, which revealed a breath alcohol level of .152 percent. Dunn was charged under the Anchorage Municipal Code with driving under the influence.[1] He ultimately pleaded no contest to that charge. Because he had three previous convictions for drunk driving offenses two in 1990 and one in 1993 he faced a mandatory minimum sentence of 120 days to serve.[2]
Dunn filed a motion to preclude the district court from counting his 1990 convictions in determining his mandatory minimum sentence. Dunn challenged the constitutional validity of those prior convictions, arguing that his right to an independent chemical test had not been fully honored in those earlier cases. But Dunn's primary challenge was to a 2001 amendment to the municipality's drunk driving law. Before that amendment, a motorist convicted of driving while intoxicated (DWI) faced increasingly severe mandatory minimum sentences based on the number of drunk driving offenses the motorist had committed within the previous ten *907 years.[3] In 2001, the Anchorage Assembly, mirroring changes in state law, eliminated this ten-year "look-back" and required sentencing courts to count all a motorist's prior DWI convictions in calculating the motorist's mandatory minimum sentence including convictions more than ten years old.[4] Dunn argued that eliminating this ten-year look-back limitation violated his rights to due process and equal protection of the laws, and that the district court was thus required to disregard his two 1990 convictions in calculating his minimum sentence.
On appeal, Dunn challenges the state's drunk driving law. As Dunn acknowledged in his briefing below, he was not convicted or sentenced under state law. Rather, he was convicted of violating the parallel municipal ordinance, Anchorage Municipal Code 9.28.020. However, we have addressed Dunn's claims because for relevant purposes the state and municipal law appear to be the same.[5]
District Court Judge Gregory J. Motyka denied Dunn's challenge to his prior drunk driving convictions (together with similar claims raised in eighteen other cases). Judge Motyka ruled that Dunn and the other defendants could not collaterally attack the constitutionality of their prior convictions in their current cases. Although Judge Motyka noted that the defendants had also raised due process and equal protection challenges to the current driving while intoxicated statute, he did not resolve those constitutional claims.
The defendants filed a joint motion for reconsideration, asking Judge Motyka to reconsider his decision that they were barred from collaterally attacking their prior convictions at or before sentencing in their current cases. But the defendants did not press Judge Motyka for a ruling on their constitutional challenges to the legislature's or assembly's decision to eliminate the ten-year look-back.
Judge Motyka denied the motion for reconsideration. Following that decision, Dunn pleaded no contest to driving under the influence.
Dunn appeals his sentence.
Discussion
Dunn's constitutional claims were not preserved
On appeal, Dunn claims that AS 28.35.030(r)(4) violates due process by directing courts to consider convictions more than ten years old in calculating the minimum sentence for a drunk driving offense. Dunn argues that the legislature did not have a "compelling interest" to eliminate the ten-year look-back limitation because tougher penalties for drunk driving over the past several decades had not succeeded in reducing traffic fatalities. He also argues that the current drunk driving statute violates equal protection because it treats offenders with prior convictions that are more than ten years old the same as offenders with more recent convictions.
These are not the same arguments Dunn advanced in the district court. Although Dunn claimed below that a life-long look-back violated due process, he did not argue that eliminating the ten-year look-back failed to advance the state's interest in reducing traffic fatalities; nor did he present evidence on the rate of traffic fatalities in Alaska. Instead, Dunn argued that the life-long look-back violated due process because it did not give courts discretion "to find `manifest injustice' and step outside the so-called `mandatory minimums.'"
Dunn's equal protection claim has also changed on appeal. In district court, he did not argue that the legislature needed a "compelling interest" to justify eliminating the ten-year look-back for prior drunk driving convictions. Rather, he argued that there was no "rational basis" for classifying persons with convictions more than ten years old *908 the same as those with more recent convictions.
Furthermore, it appears that Dunn never obtained a ruling from the district court on these constitutional challenges. But even assuming that Dunn preserved the claims he raises on appeal, we conclude that he has not shown that the legislature violated the constitution by eliminating the ten-year limitation in former AS 28.35.030(o)(4).
Why we conclude that Dunn's constitutional claims fail
Dunn argues that the legislature infringed on his fundamental right to liberty by eliminating the ten-year look-back limitation, and that this amendment to the state's drunk driving law violated due process because it lacked a "close and substantial relationship" to the legislature's stated goal of reducing traffic fatalities.
As Dunn implicitly conceded in his briefing below, this is the wrong test. "[A] person who stands to be sentenced upon conviction of a crime has no fundamental right to liberty. In such cases, `the individual interest affected ... is the relatively narrow interest of a convicted offender in minimizing the punishment for an offense.'"[6] When a legislative enactment does not infringe on a fundamental right, the enactment violates substantive due process only if it has "no reasonable relationship to a legitimate government purpose."[7] As the Alaska Supreme Court has explained:
It is not a court's role to decide whether a particular statute or ordinance is a wise one; the choice between competing notions of public policy is to be made by elected representatives of the people. The constitutional guarantee of substantive due process assures only that a legislative body's decision is not arbitrary but instead based upon some rational policy.
A court's inquiry into arbitrariness begins with the presumption that the action of the legislature is proper. The party claiming a denial of substantive due process has the burden of demonstrating that no rational basis for the challenged legislation exists. This burden is a heavy one, for if any conceivable legitimate public policy for the enactment is apparent on its face or is offered by those defending the enactment, the opponents of the measure must disprove the factual basis for such a justification.[[8]]
Dunn asserts that the state's goal in eliminating the ten-year look-back limitation was reducing traffic fatalities. As the Municipality points out, Dunn bases this assertion on findings and intent that were not adopted until several months after his offense.[9] But even if we assume that these findings accurately reflect the legislature's earlier intent, Dunn has not shown that the legislature's action had no reasonable basis. Dunn cites statistics showing no appreciable decrease over the past several decades in the total number of alcohol-related traffic fatalities in Alaska, despite increasingly severe penalties for drunk driving during that period. But, as the Municipality points out, these statistics prove little. Dunn has not taken into account increases in population or vehicle miles traveled in the state; the Municipality points to National Highway Traffic Safety Administration statistics showing a 51 percent drop (measured in terms of vehicle miles traveled) in alcohol-related traffic fatalities in Alaska between 1982 and 2001. Furthermore, the findings and intent relied on by Dunn indicate that the legislature's goal was reducing alcohol-related traffic accidents and alcohol-related fatalities. Dunn provided no statistics on alcohol-related traffic accidents.
A number of rational inferences can be made linking a driver's higher number of lifetime drunk driving convictions with the *909 driver's increased risk of causing traffic accidents and fatalities. A motorist who has disregarded the law and driven while intoxicated in the past might be more likely to do so in the future. In addition, the legislature could have concluded that offenders with repeated convictions, including those whose convictions reach over more than a decade, might be particularly resistant to rehabilitative and deterrent efforts, such that public safety is best served by isolating those offenders for a substantial period of time. Because Dunn has not refuted these rational bases for eliminating the ten-year look-back, we reject his due process claim.
Dunn also argues that classifying an offender with convictions that are more than ten years old the same as an offender with convictions that are less than ten years old violates the equal protection clauses of the federal and state constitutions.[10] Dunn appears to be arguing that this classification is over-inclusive that is, that offenders with convictions more than ten years old are not similarly situated with (and thus must be sentenced more leniently than) offenders with more recent convictions.[11]
But Dunn was sentenced more leniently based on the age of his convictions. If two of Dunn's three prior convictions had been obtained after 1996, he would have been guilty of a felony and subject to a mandatory minimum sentence of 240 days to serve.[12] Because his convictions were earlier than that two in 1990 and one in 1993 he was guilty of a misdemeanor and subject to a minimum sentence of only 120 days to serve.[13] Only a motorist with one previous DWI conviction faces the same minimum sentence 20 days to serve regardless of the date of that prior conviction.[14] Dunn has not addressed this means of classifying groups for sentencing purposes, much less shown that this classification has no "fair and substantial relation" to the legitimate governmental objective of reducing traffic accidents and fatalities.[15]
To the extent that Dunn is arguing that his equal protection rights were violated because he was not treated more leniently than other misdemeanor defendants with more recent prior convictions, his claim has no merit. Under Alaska's three-part, sliding scale equal protection analysis, there are three factors this court must balance in resolving Dunn's claim: "the significance of the individual right purportedly infringed, the importance of the regulatory interest asserted by the state, and the closeness of the fit between the challenged statute and the state's asserted regulatory interest."[16]
As we have previously noted, the interest affected here "is the relatively narrow interest of a convicted offender in minimizing the punishment for an offense."[17] The government, by contrast, "has a strong and direct interest in establishing penalties for criminal offenders and in determining how those penalties should be applied to various classes of convicted felons."[18] Dunn asserts that the legislature is constitutionally bound to treat drunk driving offenders with convictions more than ten years old more leniently than offenders with more recent convictions. *910 But we are not convinced that the constitution requires this distinction. This is a question of sentencing policy, and "the legislature, not this court, is primarily responsible for adopting sentencing policies."[19] We therefore reject Dunn's equal protection claim.[20]
Conclusion
Dunn's sentence is AFFIRMED.
NOTES
[1] Anchorage Municipal Code (AMC) 9.28.020(A).
[2] AMC 9.28.020(C)(1)(d).
[3] See Anchorage Ordinance 2001-51 (eff. Feb. 27, 2001).
[4] See Anchorage Ordinance 2001-150 (eff. Aug. 28, 2001).
[5] See generally AS 28.01.010 (barring municipalities from enacting traffic laws that are inconsistent with state law); Simpson v. Anchorage, 635 P.2d 1197 (Alaska App.1981) (discussing what constitutes "inconsistent with state law" for purposes of AS 28.01.010).
[6] Monroe v. State, 847 P.2d 84, 89 (Alaska App.1993) (quoting Maeckle v. State, 792 P.2d 686, 689 (Alaska App.1990)).
[7] State v. Niedermeyer, 14 P.3d 264, 267 (Alaska 2000) (quoting Concerned Citizens of S. Kenai Peninsula v. Kenai Peninsula Borough, 527 P.2d 447, 452 (Alaska 1974)).
[8] Concerned Citizens of S. Kenai Peninsula, 527 P.2d at 452.
[9] See Ch. 60, §§ 1, 58, SLA 2002.
[10] U.S. Const., amend. XIV, § 1, cl. 2; Alaska Const., art. 1, § 1.
[11] See generally Laurence H. Tribe, American Constitutional Law § 16-2, at 1438 (2d ed.1988) (noting that "equality can be denied when government fails to classify, with the result that its rules or programs do not distinguish between persons who, for equal protection purposes, should be regarded as differently situated") (emphasis in original).
[12] AS 28.35.030(n) provides in relevant part: "A person is guilty of a class C felony if the person is convicted under (a) of this section and has been previously convicted two or more times since January 1, 1996, and within the 10 years preceding the date of the present offense."
[13] AS 28.35.030(b)(1)(D).
[14] AS 28.35.030(n); AS 28.35.030(b)(1)(B).
[15] See Svedlund v. Anchorage, 671 P.2d 378, 383 (Alaska App.1983).
[16] Anderson v. State, 904 P.2d 433, 436 (Alaska App.1995).
[17] Maeckle, 792 P.2d at 689.
[18] Anderson, 904 P.2d at 436.
[19] Id.
[20] See Stanek v. Kenai Peninsula Borough, 81 P.3d 268, 272 (Alaska 2003) ("Since analysis of equal protection claims under the federal constitution is, if anything, more forgiving than the approach we use under the Equal Rights Clause of the Alaska Constitution, it follows from our conclusion that the state Equal Rights Clause is not violated, that the federal Equal Protection Clause is also not violated."). | 01-03-2023 | 11-01-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2634543/ | 100 P.3d 168 (2004)
Charles HORNE, in His Individual Capacity, Appellant,
v.
The CITY OF MESQUITE, Nevada, Respondent.
No. 41705.
Supreme Court of Nevada.
November 10, 2004.
Patricia D. Cafferata, Reno; Callister & Reynolds and Matthew Q. Callister, Las Vegas; Johnson & Kleven, LLC, and Robert D. Johnson and Dale K. Kleven, Las Vegas, for Appellant.
Terrance P. Marren, City Attorney, Mesquite, for Respondent.
Before the Court En Banc.[1]
OPINION
PER CURIAM.
This is an appeal from a district court declaratory judgment regarding the validity of two initiative ordinances approved by the City of Mesquite voters. Mesquite Question *169 1(MQ1) governs public land sales, requiring the City to conduct all public land sales by a public auction or a public sealed bid process. Mesquite Question 3(MQ3) governs candidacy eligibility, requiring an elected official or public employee to file his resignation from office/employment before seeking election as mayor or city council member.
The district court determined that MQ1 is invalid inasmuch as it conflicts with NRS 266.267(1), NRS 268.050, and NRS 277.050, but determined that the severability clause of MQ1 saved it from being wholly invalid. As to MQ3, the district court determined that it directly conflicts with and is totally repugnant to NRS 266.405(1) and, thus, is wholly invalid. We agree with the district court for the most part. We conclude that MQ1 is wholly, not partially, invalid because it is repugnant to NRS 266.267(1). Also, we conclude that MQ3 is wholly invalid because it is repugnant to NRS 266.405(1). Accordingly, we affirm the district court's judgment in part and reverse in part.
FACTS
The City of Mesquite voters approved two initiative ordinances MQ1 and MQ3 at the November 5, 2002, general election.
MQ1 states:
An Ordinance amending the Mesquites [sic] Municipal Code; mandating that all public land sales by the City of Mesquite be conducted through a properly noticed public auction or open bid process.
Section 1: Amendment of the Mesquite Municipal Code. The Mesquite Municipal Code is hereby amended to add a new section regarding the sale of public lands to read as follows: "All public land sales by the City of Mesquite must be conducted through a properly noticed public auction or open to the public sealed bid process. The City must set a minimum acceptable bid, in the notice for sale."
Section 2: Severability. If any section of this Ordinance or portion thereof is for any reason held invalid or unconstitutional by any court of competent jurisdiction, such holding shall not invalidate the remaining provisions of this Ordinance.
Section 3: Effective Date. This Ordinance shall be effective immediately upon passage by a majority of the voters of the City of Mesquite.
MQ3 states:[2]
AN ORDINANCE, AMENDING MESQUITE MUNICIPAL CODE, 1-6-2 TO READ AS FOLLOWS:
A. No person shall be eligible for the office of Council member or Mayor unless he is a qualified elector of Mesquite Nevada, at least eighteen (18) years of age, must not be a debtor to the City, and has been a resident of the City for at least one year immediately prior to the election in which he is a candidate. He shall hold no other elective public office, but he may hold a commission as a notary public or be a member of the armed forces reserve. [No employee of the City or officer thereof, excluding City Council members, receiving compensation under the provisions of this code or any City ordinance, shall be a candidate for or eligible for the office of Council member or Mayor without first resigning from employment or City office.] No officer whose term of office would continue through the upcoming election or employee of the city, receiving compensation under the provisions of this code or any City ordinance, shall be a candidate for or eligible for the office of Council member or Mayor, without first filing a "Declaration of Resignation" from office or employment with the Mesquite City Clerk, which shall become effective at the time of the swearing in of newly elected City Officers. This "Declaration of Resignation" must be filed at least 10 calendar days preceding the opening of filing for a Declaration of Candidacy for the office he seeks and shall be published as soon as possible within the afore mentioned 10 calendar days by the City Clerk. This publication shall include all local print media *170 as well as postings at all regular legal notice posting sites.
EFFECTIVE DATE: This Ordinance shall become effective immediately upon passage by a majority of the voters of the City of Mesquite Nevada.
CONTINGENCIES: If a change in the district boundaries removes a council member from his district, his right to continue in office representing the district to which he was elected shall not be affected.
SEVERABILITY: If any section of this Ordinance or portion thereof is for any reason held invalid by any court of competent jurisdiction, such holding shall not invalidate the remaining provisions of this Ordinance.
Following the passage of MQ1 and MQ3, the City of Mesquite petitioned the district court for judicial confirmation or, in the alternative, for declaratory judgment regarding the legal validity of the initiative ordinances. The City argued that the initiative ordinances are legally invalid because they are repugnant to several NRS provisions. Specifically, the City argued that MQ1 is invalid because its requirement that all public land sales be conducted by the city council through public auction or sealed bid process deprives the city council of its statutory discretion to sell public property by other means and at a lower price. Additionally, the City argued that MQ3 is in direct conflict with NRS 266.405(1), which provides certain elected city officers with a four-year term.
In response, City of Mesquite Mayor Charles Horne submitted an answer and opposition to the City's petition. Horne argued that the Nevada Constitution reserves to the citizens of Mesquite the right to legislate by ballot initiative and that the citizens' initiative powers are not limited by NRS 266.105(1), which states that all ordinance resolutions passed by the city council must not be repugnant to the United States or Nevada Constitutions or any provision of NRS Chapter 266. Alternatively, Horne argued that even if the citizens' initiative powers were construed to be subject to NRS 266.105(1), the initiative ordinances at issue in this instance are not repugnant to any NRS provisions.
After hearing argument on the petition, the district court concluded that MQ1 is invalid because it directly conflicts with NRS 266.267(1), NRS 268.050, and NRS 277.050 inasmuch as it limits the city council's discretion in conducting public land sales. However, the district court reasoned that because MQ1 has a severability clause, it could be confirmed in part. Thus, the district court ruled that MQ1 could be implemented, provided that the word "all" is omitted and the statutory discretion given to the City pursuant to NRS 266.267, NRS 268.050, and NRS 277.050 is inserted before the words "public land sales."
The district court next determined that MQ3's requirement that elected city officers who wish to run for mayor or city council member during their current term file a "Declaration of Resignation" ten days before the opening of filing for the office they seek is in direct conflict with and totally repugnant to NRS 266.405(1), which provides a four-year term for certain elected officers. The district court reasoned that MQ3 impermissibly shortens an elected officer's term, and that an initiative ordinance cannot nullify a specific NRS provision in this manner.
Thereafter, Horne filed a notice of appeal. On appeal, Horne argues that the Mesquite voters have a fundamental right to enact legislation when public officials are not responsive to public concerns, as in this case. Also, Horne argues that the constitutional reservation to the people of the ballot-initiative power is not subject to the limitations of NRS Chapter 266. And, according to Horne, even if the citizens' initiative powers are construed to be subject to the provisions of NRS Chapter 266, neither MQ1 nor MQ3 is repugnant to any NRS provisions.
DISCUSSION
Mesquite is a general law city established and operated under the provisions of NRS Chapter 266, and Mesquite has not adopted a charter form of government.[3] Consequently, Mesquite remains controlled by the provisions *171 of NRS Chapter 266. Particularly relevant to this appeal is NRS 266.105, which states:
1. The city council may make and pass all ordinances, resolutions and orders, not repugnant to the Constitutions of the United States or of the State of Nevada or to the provisions of this chapter, necessary for the municipal government and the management of the city affairs, for the execution of all powers vested in the city, and for making effective the provisions of this chapter.
Horne argues that only the city council, not the Mesquite voters, is subject to NRS 266.105(1). Horne insists that in Garvin v. District Court, this court clearly made a distinction between ordinances passed by the governing body and those passed by the voters by stating that "the electorate is not bound by the statutory requirements that the local legislative bodies must follow."[4] This statement, however, must be read in context.
In Garvin, we were attempting to give the citizens' initiative and referendum powers the authority they deserve by concluding that citizens could pass ordinances related to zoning issues.[5] Thus, we stated that "if a county board of commissioners or city council can enact zoning legislation, the county and city voters can do the same by initiative."[6] We never declared that the citizens' initiative power is limitless or that citizens are never bound by statutory requirements. Indeed, citizens of a locality have only those legislative powers that the local governing body possesses.[7] Hence, in this instance, Mesquite's citizens, like the city council, can only pass ordinances that comply with NRS 266.105(1). Consequently, MQ1 and MQ3 are not permissible if repugnant to the United States or Nevada Constitutions or to any provision of NRS Chapter 266.[8]
MQ1
NRS 266.267 provides the requirements for the sale, lease, or exchange of real property owned by a city and states, in part:
1. A city council shall not ... enter into a contract for the sale or exchange of real property until after the property has been appraised by one disinterested appraiser employed by the city. Except as otherwise provided in this section and paragraph (a) of subsection 1 of NRS 268.050, a lease, sale or exchange must be made at or above the current appraised value of the real property as determined by the appraiser unless the city council, in a public hearing held before the adoption of the resolution to lease, sell or exchange the property, determines by affirmative vote of not fewer than two-thirds of the entire city council based upon specified findings of fact that a lesser value would be in the best interest of the public....
2. The city council may sell, lease or exchange real property for less than its appraised value to any person who maintains or intends to maintain a business within the boundaries of the city which is eligible pursuant to NRS 374.357 for an abatement from the sales and use taxes imposed pursuant to chapter 374 of NRS.[9]
The power given to general law cities, pursuant to NRS 266.267(1), is vital to the economic success of cities like Mesquite given its remote, rural location. Because it can be difficult to persuade new businesses to open in the City, restricting the City's ability to reduce the price of public land in appropriate *172 instances would make it even more challenging for the City to compete for new business. Yet MQ1 essentially eliminates the portion of NRS 266.267(1) that allows the city council to lease, sell, or exchange land at a price lower than the appraised price if it is in the best interest of the public. By making the City conduct all land sales by public auction or bid process, the City cannot ensure that a particular entity is able to purchase a specific piece of property because the entity could just as easily be outbid by another for the land. Consequently, MQ1 would likely prevent the city council from ever exercising its discretion to sell land at less than its appraised value, even when in the City's best interest.[10] As a result, MQ1 is repugnant to NRS 266.267(1) and, thus, invalid.
Although the district court resolved that MQ1 could be enforced if the word "all" is omitted and replaced with language concerning the statutory discretion given to the City pursuant to NRS 266.267(1), NRS 268.050, and NRS 277.050, we do not consider this construction to be practicable. Accordingly, we reverse the district court's judgment inasmuch as it confirmed MQ1 in part.
MQ3
NRS 266.405(1) provides that elected city officers "shall hold their respective offices for 4 years and until their successors are elected and qualified."[11]
MQ3 is in direct conflict with NRS 266.405(1) in that it potentially shortens an elected officer's term if he or she decides to run for city council member or mayor mid-term. MQ3 requires an elected officer who wishes to run for city council member or mayor mid-term to file a "Declaration of Resignation" at least ten days prior to the opening of the filing period for city elective offices. The resignation is effective upon the swearing in of the newly elected officers, regardless of whether the officer who filed the "Declaration of Resignation" wins the election. Thus, MQ3 effectively requires these officers to relinquish their positions prior to the conclusion of their statutorily mandated term of office. Consequently, MQ3 is repugnant to NRS 266.405(1).
Since we hold that the two initiative ordinances, MQ1 and MQ3, are in conflict with Nevada law, we need not address the claim that both ordinances violate the Nevada and United States Constitutions.[12]
CONCLUSION
MQ1 and MQ3 are impermissibly repugnant to provisions of NRS Chapter 266 and, thus, unenforceable. Accordingly, we affirm the portion of the district court's judgment concluding that MQ1 and MQ3 are invalid, but we reverse that part of the district court's judgment determining MQ1 to be saved by its severability clause.
NOTES
[1] The Honorable Michael L. Douglas, Justice, did not participate in the decision of this matter.
[2] The initiative petition repeals the bracketed language and adds the language that is emphasized.
[3] See NRS ch. 266 reviser's notes.
[4] 118 Nev. 749, 764, 59 P.3d 1180, 1190 (2002).
[5] Id. at 763, 59 P.3d at 1189.
[6] Id. at 764, 59 P.3d at 1190.
[7] See NRS 295.220(1) ("If a majority of the registered voters voting on a proposed initiative ordinance vote in its favor, it shall be considered adopted upon certification of the election results and shall be treated in all respects in the same manner as ordinances of the same kind adopted by the council.").
[8] NRS 266.105(1).
[9] NRS 266.267(1) references NRS 268.050(1)(a), which provides that the governing body of any incorporated city may reconvey the right, title, and interest of the city in and to any land donated, dedicated, or purchased under the threat of an eminent domain proceeding for a number of specific public purposes, or land held in trust for the public for any public use, to the person by whom the land was donated or dedicated or to his heirs, assigns, or successors.
[10] For example, a not-for-profit enterprise such as a hospital might never be able to locate in a rural community via an inexpensive purchase of public property because a for-profit entity could preempt acquisition through the MQ1 bidding process.
[11] NRS 266.405(1) requires that a general law city have, in addition to the mayor and city council, a city clerk, city treasurer, a municipal judge, and a city attorney. The statute states that "[t]he offices of city clerk, city treasurer, municipal judge and city attorney may be either elective or appointive offices, as provided by city ordinance."
[12] See, e.g., Brewery Arts Ctr. v. State Bd. Examiners, 108 Nev. 1050, 1055, 843 P.2d 369, 373 (1992) (noting that this court will not rule on a constitutional issue unless the ruling is necessary to the disposition of the case). | 01-03-2023 | 11-01-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454189/ | 679 S.W.2d 889 (1984)
Joseph L. WELLS, et al., Plaintiffs-Appellants,
v.
Beverly NOLDON, et al., Defendants-Respondents.
No. 47391.
Missouri Court of Appeals, Eastern District, Division Four.
October 16, 1984.
*890 James M. Asher, Clayton, for plaintiffs-appellants.
Kenneth M. Romines, Clayton, for defendants-respondents.
FRANK CONLEY, Special Judge.
This appeal arises from the City of Kinloch municipal election on April 5, 1983. On April 6, 1983, plaintiffs-appellants, the Mayor of Kinloch and four city alderpersons, filed a verified petition to contest the election. The St. Louis County Board of Election Commissioners and five named individuals (respondents) were named defendants. The petition included as exhibits, in support of averments made, a notice of eight affidavits alleging the irregularity of voting of certain absentee ballots. The individually named respondents answered basically denying the averments. The Respondent Board of Election Commissioners (the Board) filed a Motion to Dismiss on the grounds that: (1) appellants failed to state a cause of action; (2) the court was without subject matter jurisdiction; and (3) the court was without personal jurisdiction over the Board.
On April 19, 1983, the Circuit Court granted appellants leave to file an amended petition within ten days. The order stated that the failure to file an amended petition would result in sustaining the Board's motion, but if filed within the prescribed time, the Board's motion would be deemed overruled.
On April 25, 1983, appellants filed a "First Amended Petition to Contest an Election." This petition deviated from the original in that: (1) there was no verification clause; (2) certain voting figures had been changed; and (3) the original eight affidavits were incorporated by reference.
On May 2, 1983, the Board filed its answer to appellant's first amended petition raising, inter alia, failure to state a cause of action.
On May 10, 1983, the Circuit Court dismissed appellant's petition on the grounds that: (1) a verified petition had not been filed as required by § 115.577, RSMo 1978; (2) appellants failed to produce sufficient evidence as to the invalidity of a sufficient number of absentee votes to place the election in doubt. This appeal followed. We affirm on other grounds.
On appeal, the parties address several issues raised by the May 10 Order of Dismissal. These issues need not be decided. Because the original petition was prematurely filed, the court lacked subject matter jurisdiction. The only power the court had was to dismiss the petition and all subsequent proceedings are void. Section 115.577, RSMo 1978 provides in pertinent part that a verified petition may be filed to contest an election "[n]ot later than thirty days after the official announcement of the election result." (emphasis added). At the time of the April 6 filing, the Board had not yet certified the election result as is required by § 115.497, RSMo 1978.
The right to contest an election did not exist at common law. Thus, the statutes governing election contests are a code unto themselves and one seeking relief under such provisions must come strictly within their terms. State ex rel. Wilson *891 v. Hart, 583 S.W.2d 550, 551 (Mo.App. 1979); State ex rel Bushmeyer v. Cahill, 575 S.W.2d 229, 232 (Mo.App.1978); Barks v. Turnbeau, 573 S.W.2d 677, 680 (Mo.App. 1978); State v. Consolidated School Dist. No. 4 of Iron County, 417 S.W.2d 657, 659 (Mo.1967). The jurisdiction of the Circuit Court is defined by the statutory provisions and the letter of the law is the limit of its power. State ex rel. Wilson v. Hart, supra; State ex rel. Bonzon v. Weinstein, 514 S.W.2d 357, 362 (Mo.App.1974).
Section 115.577 RSMo 1978 requires, as a condition precedent to filing a petition, that the election authority have made the official announcement of the election result. Section 115.497, RSMo 1978 requires that "[a]s soon as practicable after each election, the election authority shall convene a verification board to verify the count and certify the results of the election." (emphasis added) Section 115.507 provides that the verification board "shall issue a Statement announcing the results...and shall certify the returns..." (Emphasis added) In Noonan v. Walsh, 273 S.W.2d 195, 364 Mo. 1169 (1954), though dealing with an earlier statute, see § 124.250, RSMo 1949, the Supreme Court held the provision's requirement that votes be officially counted before an election could be contested meant that the election result in question was determined and declared, including the official count of the vote, on the day the Board of Election Commissioners certified the results. 273 S.W.2d at 198. In the case at bar, the original petition was filed prior to the certification of the election results. Consequently, appellants failed to comply with the statutory condition precedent of filing their petition after the official announcement of the results.
This condition precedent for contesting an election is analogous to the minimum residency required to confer subject matter jurisdiction on a court under the marital dissolution statutes. Residency for the prescribed time is jurisdictional. Scotton v. Scotton, 359 S.W.2d 501, 507 (Mo. App.1962); Gomez v. Gomez, 336 S.W.2d 656, 658 (Mo.1960); Grant v. Grant, 324 S.W.2d 382, 386 (Mo.App.1959); State ex rel Stoffey v. LaDriere, 273 S.W.2d 776, 781 (Mo.App.1954); Barth v. Barth, 189 S.W.2d 451, 454 (Mo.App.1945). Failure to meet the residency requirement confers no jurisdiction on the court. Any petition filed must be dismissed and any judgment rendered must be reversed. Phelps v. Phelps, 241 Mo.App. 1202, 246 S.W.2d 838, 841-2 (1952); Gooding v. Gooding, 239 Mo.App. 1000, 197 S.W.2d 984, 986 (1946); Barth v. Barth, supra, at 455.
The Circuit Court was without jurisdiction to hear this case. Lack of subject matter may be raised at any time during the proceedings. Rule 55.27(g)(3); State Tax Commission v. Administrative Hearing Commission, 641 S.W.2d 69, 72 (Mo. banc 1982); Parmer v. Bean, 636 S.W.2d 691, 695 (Mo.App.1982); Randles v. Schaffner, 485 S.W.2d 1, 2 (Mo.1972). The only power a court without subject matter jurisdiction possesses is the power to dismiss the action. Rule 55.27(g)(3); Gaslight Real Estate Corp. v. Labor and Industrial Relations Commission, 604 S.W.2d 818, 820 (Mo.App.1980). Any actions or proceedings of a court without subject matter jurisdiction are null and void. Parmer v. Bean, supra, at 694; State v. Armstrong, 605 S.W.2d 526, 529 (Mo.App.1980); Gaslight Real Estate Corp. v. Labor and Industrial Relations Commission, supra; State ex rel. Chemical Dynamics, Inc. v. Luten, 581 S.W.2d 921, 923 (Mo.App.1979); Randles v. Schaffner, supra; State ex rel Callahan v. Hess, 153 S.W.2d 713, 715, 348 Mo. 388 (Mo.1941).
As a result of the Circuit Court's lack of jurisdiction, the order granting leave to file an amended petition and all subsequent proceedings are void. The order of May 10 is affirmed for the reasons stated herein.
GAERTNER, P.J., and SMITH, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454177/ | 679 S.W.2d 836 (1984)
Bettye BROWN, Appellant,
v.
PHYSICIANS MUTUAL INSURANCE COMPANY and Physicians Life Insurance Company, Appellees.
PHYSICIANS MUTUAL INSURANCE COMPANY and Physicians Life Insurance Company, Cross-Appellants,
v.
Bettye BROWN, Cross-Appellee.
Court of Appeals of Kentucky.
October 12, 1984.
*837 Michael C. Davis, Louisville, for appellant, cross-appellee.
Charles Landrum, Jr., Larry C. Deener, Landrum & Patterson, Lexington, for appellees, cross-appellants.
Before HAYES, Chief Judge, WHITE and COMBS, Judges.
*838 COMBS, Judge.
Bettye Brown appeals from the entry of summary judgment, and Physicians Mutual cross-appeals from dismissal of its counterclaim.
Ms. Brown was employed as a secretary with Physicians Mutual. She claims that shortly after she started working, she began to notice procedural irregularities and improper conduct on the part of salesmen. She reported her misgivings to her supervisor. Her attempts to contact the Insurance Commission were futile until she was fired.
Shortly before she was fired her supervisor was replaced. The new supervisor fired her. The internal correspondence of Physicians Mutual would indicate that Ms. Brown was fired for misconduct.
Ms. Brown commenced this action for wrongful discharge. In response to a motion for summary judgment, the trial court held that Ms. Brown stated a cause of action in her complaint, but entered a summary judgment because her ". . . allegations are not supported by any evidence. . . ."
Although she was a terminable-at-will employee, Ms. Brown's claim for relief is based on the tort of wrongful discharge. The tort of wrongful discharge has been recently examined by the Supreme Court in Firestone Textile Co. Div. v. Meadows, Ky., 666 S.W.2d 730 (1984). An employee has a cause of action for wrongful discharge when his employment is terminated in violation of a legislature's express or implied expression of public policy. Whether the reason for discharge is unlawful because of a right implicit in a statute is a question of law.
We agree with the trial court that Ms. Brown has stated a cause of action. The General Assembly has expressed great interest in insurance. KRS Chap. 304. Employees of insurance companies are required to cooperate with investigations by the Department of Insurance. KRS Chap. 304.2230(4). The General Assembly has established a public policy that employees report violations of the Insurance Code to the Insurance Department. An employee who asserts that he was fired contrary to this policy has stated a cause of action.
We now turn to the issue of whether there exists a genuine issue of material fact.
Ms. Brown testified by deposition and denied the alleged acts of misconduct as stated in her supervisor's three separate letters, all dated November 17, 1980. Physicians Mutual argues and the lower court seemed to be impressed by the fact that Ms. Brown had not complained to the home office in Wisconsin, nor actually made contact with the Department of Insurance. She did complain to her former supervisor, Mr. Nasser.
Obviously, Mr. Nasser was the senior agent at the Lexington office at the time and was acting in that capacity when Ms. Brown voiced her complaints to him. It is well settled that the principal is chargeable with, and bound by, the knowledge of or notice to his agent received while the agent is acting as such within the scope of his authority and in reference to a matter over which his authority extends. 3 Am.Jur.2d Agency § 273. See also United Fuel Gas Company v. Jude, Ky., 355 S.W.2d 664, 666 (1962). Therefore, the home office is chargeable with having the knowledge related to Mr. Nasser. It is also significant to note Mr. Nasser's successor fired Brown in less than two weeks after being promoted to the position of manager.
Whether Ms. Brown was properly discharged as contended by Physicians Mutual, or wrongfully discharged as contended by her, is a factual issue to be decided during a trial. The trial court, rather than deciding whether there were genuine issues of fact, erroneously proceeded to decide the factual issue. It is conceivable that a jury might arrive at a different *839 result upon the same evidence. Proctor v. Cranfill, Ky., 280 S.W.2d 494 (1955). It is not necessary that there be a multitude of genuine issues of fact in order to defeat a motion for summary judgment. Green v. Bourbon County Joint Planning Commission, Ky., 637 S.W.2d 626 (1982).
In support of its position, Physicians Mutual relies upon the Wisconsin case of Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561, 335 N.W.2d 834 (1983), and Pugh v. See's Candies, Inc., 116 Cal. App. 3d 311, 171 Cal. Rptr. 917 (1981). In both of these cases, the employee had what the trial court denied Ms. Brown, and that is a trial.
Physicians Mutual also claims that Ms. Brown's cause of action was barred by the one-year statute of limitations as is provided by KRS 413.140(1), whereas, it contends that it is governed by KRS 413.120(7). In support of its position, Physicians Mutual relied upon the case of Craft v. Rice, Ky.App., 30 K.L.S. 6, 2 (1983), wherein this court held that a tort of outrageous conduct was governed by the one-year limitation and not the five-year one. The Supreme Court reversed the decision of the Court of Appeals. Craft v. Rice, Ky., 671 S.W.2d 247 (1984). In reversing, the court held that "the five-year statute of limitations applies when the gist of the tort is the claimed interference with the plaintiff's rights causing emotional distress generating a cause of action regardless of whether the plaintiff suffers any bodily harm resulting from the emotional distress."
In her complaint, Ms. Brown sought damages for an interference with her rights resulting in a loss of past and future earnings, as well as mental anguish.
Physicians Mutual seeks to reverse the ruling of the lower court dismissing its counterclaim. The gravamen of its counterclaim is that Brown's suit constituted malicious prosecution or, alternatively, malicious interference with a contractual right. One may not commence an action for malicious prosecution until the underlying litigation has been terminated. Massengale v. Lester, Ky., 403 S.W.2d 697 (1966); First National Bank of Mayfield v. Gardner, Ky., 376 S.W.2d 311 (1964). The trial court was correct in dismissing the counterclaim.
For the above reasons, the judgment of the Fayette Circuit Court sustaining Physicians Mutual's motion for summary judgment is reversed and remanded for proceedings consistent with this opinion and its judgment sustaining Brown's motion to dismiss the counterclaim is affirmed.
WHITE, J., concurs.
HAYES, C.J., concurs by separate opinion.
HAYES, Chief Judge, concurring.
I concur even though I have reservation about whether the appellant had stated a claim in her complaint upon which relief could be granted. However, the trial court so found, therefore, because of conflicting evidence, summary judgment is or was inappropriate. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454192/ | 679 S.W.2d 683 (1984)
BOB ROBERTSON, INC., Appellant,
v.
John A. WEBSTER, Appellee.
No. 01-83-00212-CV.
Court of Appeals of Texas, Houston (1st Dist.).
September 27, 1984.
*685 Lyle Sinell, Byron G. Lee Armogida & Coats, Houston, for appellant.
Edward L. Noah, Houston, for appellee.
Before DUGGAN, JACK SMITH and BULLOCK, JJ.
OPINION
DUGGAN, Justice.
This is an appeal from a judgment entered on a jury verdict awarding damages in a suit wherein the appellee alleged actions for deceptive trade practices and breach of contract. A jury found the appellant automotive dealer liable for damages resulting from false representations that it would deliver a pickup truck ordered by appellee within ten weeks. Ten points of error are presented.
Appellant, Bob Robertson, Inc., contracted on December 27, 1978, to sell appellee, John A. Webster, a 1979 model half-ton Chevrolet pickup truck, to be delivered within ten weeks. Webster paid $200 by check at that time, with the balance of $7,900 to be paid when the truck arrived from the manufacturer. In the middle of January, 1979, Webster sold his old truck and borrowed a car from a friend. He returned the borrowed car about a month later and rented one thereafter until June 5. He made numerous inquiries to the dealership by phone and in person, before and after the expiration of the ten-week period, to determine when delivery could be expected. According to Webster, he was told at one point that the auxiliary tank option he ordered was holding up the delivery. Finally, he had an attorney send a certified letter on May 21, 1979, demanding *686 rescission of the contract, return of his deposit, costs of the car rental, and attorney's fees.
Webster filed suit on June 28, 1979, alleging breach of contract and violation of the Deceptive Trade Practices-Consumer Protection Act, Tex.Bus. & Com.Code Ann. sec. 17.41 et seq. (Vernon Supp.1982-83) ("DTPA"). He also sought rescission of the contract and restitution of his deposit. In July of 1979, over six months after the order was placed, the appellant dealership notified him that his truck had arrived. Webster went to see the truck, found it unsatisfactory because it was a fleetside rather than a stepside model, and did not take delivery.
Following a jury trial, the court entered a judgment based upon the following answers to special issues:
Special Issue # 1: That appellant and Webster entered into Plaintiff's Exhibit No. 1 on or about December 27, 1978, for the sale of a 1979 Chevrolet Pickup Truck to Webster;
Special Issue # 2: That appellant represented to Webster the truck would be delivered within ten weeks;
Special Issue # 3: That Webster paid $200 down under the agreement;
Special Issue # 5: That appellant's representation of delivery within ten weeks was false;
Special Issue # 5a: That the making of the false representation was not an unconscionable action or course of action;
Special Issue # 6: That Webster relied on the representation of ten-week delivery;
Special Issue # 7: That the appellant's false representation was a producing cause of damages to Webster;
Special Issue # 8: That appellant failed to perform under Plaintiff's Exhibit No. 1;
Special Issue # 8a: That such failure to perform was not due to any cause beyond the control of appellant or without the fault or negligence of appellant;
Special Issue # 9: That appellant's failure to perform was a producing cause of damages to Webster;
Special Issue # 10(a): That 30 or more days prior to filing suit Webster did not make written demand upon appellant to perform under Plaintiff's Exhibit No. 1;
Special Issue # 10(b): That 30 or more days prior to filing suit Webster did make written demand upon appellant for damages he sustained;
Special Issue # 11: That Webster sustained actual damages of $200 for loss of his down payment and $800 for the cost of car rentals as a direct result of appellant's false representation;
Special Issue # 12: That reasonable fees for Webster's attorneys for services rendered in preparation for trial are $3,600; that $2,500 is a reasonable fee if the case is appealed to the court of appeals; that $750 is reasonable if application is made for writ of error to the Supreme Court and another $750 if the writ is granted;
Special Issue # 13: That Webster's action under the DTPA was not brought in bad faith or for the purposes of harassment.
The trial court entered judgment in favor of appellee Webster for $3,100 in damages plus attorney's fees. While the judgment recites that the jury verdict was for the appellee, it does not indicate upon which appellee has prevailed. Since the judgment awards appellee three times the amount of actual damages found by the jury, the trial court apparently concluded that appellant was liable under the DTPA. This would be consistent with appellee's pleading allegations of a violation of sec. 17.46(b)(12) which declares unlawful per se the act of
representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law.
Appellee had pleaded that appellant's salesman had represented to him that
said truck would be delivered ... in accordance with its [the buy-sell agreement's] *687 terms but ... the said agreement does not confer ... that right to ... receive delivery ..., which Defendant's agent or servant represented to Plaintiff.
This appeal followed the trial court's denial of appellant's motion for a new trial.
Appellant's first point of error asserts that the court erred in denying its motion for a new trial on the ground there was a fatal and irreconcilable conflict in the jury's findings on Special Issue Nos. 1 and 2, as shown above. Special Issue No. 2 was conditioned on an affirmative answer to Special Issue No. 1. Both issues were answered in the affirmative.
Plaintiff's Exhibit No. 1 is a dated but unsigned copy of the order form used by the appellant dealership, upon which is written the truck model number, specifications, optional features, and price of the vehicle ordered by appellee. Appellant contends that the front and back of that form comprised the entire agreement and that any statements as to time of delivery were merely representations of opinion and were not binding upon appellant. Appellant argues that if the jury's responses to both Special Issues No. 1 and No. 2 are considered separately and taken as true, they compel the rendition of different judgments, i.e., judgment for appellant follows from the jury's response to issue one, because the merger clause on the reverse side of the order form indicates there was no other agreement than that shown in writing on the instrument, and because no delivery date was incorporated into the written agreement; judgment for appellee follows from the answer to issue two, if it is taken as true and in light of the other findings, compelling rendition of a different judgment.
We do not agree. It is unnecessary to reach the question whether the jury's answers to the two issues are irreconcilable because there is no conflict. In reviewing jury findings for conflict, the threshold question is whether the findings are about the same material fact. Bender v. Southern Pacific Transportation Co., 600 S.W.2d 257, 260 (Tex.1980). Special Issue No. 2, inquiring as to the delivery date of the truck, is simply a means of discovering a term of the contract not contained in Plaintiff's Exhibit No. 1, i.e., time of delivery. While the Exhibit 1 order form contains a provision excusing dealer liability for failure or delay in delivery due to causes beyond the dealer's control (sec. 7), that fact relates to the dealer's excuse, not its promise.
Appellant is also incorrect in claiming a different judgment would result if Special Issue No. 1 were considered separately and taken as true. Delivery under a contract, where no time has been agreed upon, must be within a reasonable time. Tex.Bus. & Com.Code Ann. sec. 2.309 (Vernon 1968). In view of testimony by appellant's sales manager that the usual time of delivery of a special order was from four to seven weeks, appellant would have been liable for failure to deliver after the passage of six months.
The parol evidence rule, Tex.Com. & Bus. Code Ann. sec. 2.202, would be of use in resolving conflict between the terms of the order form and representations of the dealer's agent, if there were any; however, it has nothing to do with the question of whether a conflict exists. Finding no conflict, we overrule point of error one.
Appellant's second point of error asserts that the trial court erred in overruling its objection to Special Issue No. 5, which inquired:
Do you find from a preponderance of the evidence that such representation, if any found by you in answer to Special Issue No. 2, was false?
Appellant urges in his appellate brief that the award of treble damages under the DTPA, supra, was founded upon the jury's affirmative answer; that the use of the word "false," by itself, taken out of the term "false, misleading or deceptive acts or practices," mischaracterizes the type of conduct the Act was designed to protect against, and that "appellant specifically objected to this change and requested the full *688 term, `false, misleading, or deceptive acts or practices' be submitted."
Contrary to appellant's argument, the objection it made at trial differs from that asserted on appeal. When the court's charge, worded as set out above, was submitted to the attorneys for their inspection, appellant's counsel objected as follows:
Bob Robertson also would object to the Court's Charge in that in Special Issue No. 5 the term "false" is used, and would tender to the Court a definition of "false, misleading or deceptive act or practice" which is the term used in the Deceptive Trade Practices Act, and I would object, number one, to Special Issue no. 5 in that the term "false" is used rather than "false, misleading or deceptive act or practice," and I would also submit a definition to the Court of "false, misleading or deceptive act."
Appellant's objection to Special Issue No. 5 was overruled by the court.
Rule 274, Tex.R.Civ.P., requires that a party objecting to a charge must "point out distinctly the matter to which he objects and the grounds of the objection." (Emphasis added). While appellant's attorney stated his objection to use of the term "false," he did not state grounds for the objection as required by Rule 274, but offered a definition of "false, misleading or deceptive acts or practice," which does not appear in the record. A requested definition that does not appear in the record cannot be considered on appeal. Joiner v. Federal Deposit Insurance Corp., 488 S.W.2d 953, 954 (Tex.Civ.App. Amarillo 1973, no writ). The stated objection lacked the specificity to apprise the court of the defect asserted. Brantley v. Sprague, 636 S.W.2d 224, 225 (Tex.App. Texarkana 1982, writ ref'd n.r.e.). Further, appellant's request for a definition was not made separate and apart from its objection to the charge, as required by Rule 273, Tex.R. Civ.P., Templeton v. Unigard Security Insur. Co., 550 S.W.2d 267, 269 (Tex.1976), and is therefore waived. Appellant's second point of error is overruled.
Appellant's points of error 3 and 4 attack the legal and factual sufficiency of the evidence to support the jury's findings of false representation. By its answer to Special Issue 5, the jury found that appellant's agreement to deliver the truck to Webster within ten weeks (found in Special Issue 2) was false.
Appellant's argument is essentially a restatement of his contentions in points of error one and two, i.e., that the agreement shown by Plaintiff's Exhibit No. 1 was an integrated contract with no delivery time set out; that the instrument could not be altered by parol testimony; and that the only evidence showing the delivery agreement was the mere opinion statements of its salesman, barred by the parol evidence rule. Appellee responds that the terms of the written agreement placed in evidence were in no way varied or contradicted by the oral agreement to deliver within ten weeks, but were merely completed.
The parol evidence rule applicable to sales of goods, Tex.Bus. & Com.Code Ann. sec. 2.202, prohibits use of evidence of any prior or contemporaneous oral agreement which contradicts the terms of a written contract intended as a final expression of the parties' agreement. However, section 2.202 does not impose any assumption that, because a writing has been worked out which is final on some matters, it is to be taken as including all the matters agreed upon. Sec. 2.202 comment 1 (Vernon 1968). See generally 50 Tex.Jur.2d Sales sections 116-120 (1969). In the case of an incomplete instrument, an exception to the parol evidence rule applies, even though fraud, accident, or mistake is not shown. Allstate Insurance v. Furr, 449 S.W.2d 295, 301 (Tex.Civ.App. Amarillo 1969, writ ref'd n.r.e.).
The sales order form contains the following statement:
THE FRONT AND BACK HEREOF COMPRISE THE ENTIRE AGREEMENT AFFECTING THIS ORDER AND NO OTHER AGREEMENT OR UNDERSTANDING OF ANY NATURE *689 CONCERNING SAME HAS BEEN MADE OR ENTERED INTO.
However, this merger clause is contradicted by the instrument itself, which refers to delivery numerous times and yet contains no delivery date. It cannot be said that an oral agreement regarding time of delivery is inconsistent with the terms of the integrated agreement, and appellant's cited authorities are unpersuasive.
Appellee Webster's testimony showed clearly that appellant did not have a truck for him until July of 1979, substantially more than ten weeks after the December, 1978 order date; that he contacted the dealership numerous times and was told that the truck would arrive in a week or two; that the sales manager told him that he did not know when the truck would come in but would find out and advise Webster; and that the sales manager never did. Appellant's sales manager, Dennis Nesselhauf, agreed that it was seven months after appellee's order before one was offered to him, and that four to seven weeks was the normal delivery time for this type truck.
The evidence was sufficient to support the jury's finding that appellant's representation of ten-week delivery was false. Appellant's third and fourth points of error are overruled.
By points of error five, six, nine, and ten, appellant challenges the legal and factual sufficiency of the evidence to support the findings of Special Issues 8 and 8a that appellant failed to perform under Plaintiff's Exhibit No. 1 and that such failure to perform was not excused by any cause beyond the control of appellant or by any fault or negligence of appellee.
As stated above, appellee ordered a pickup truck from appellant on December 27, 1978, and was told by appellant's salesman he could expect delivery within ten weeks. He wanted a model with stepside fenders but was informed at the time that Chevrolet was no longer making that model. The order form called for delivery of a fleetside model. Appellant placed the order with General Motors on December 29, 1978. An auxiliary tank option appellee requested later was added to the dealer's copy of the order and was to be installed by the dealer. The order form contains a provision excusing the dealer from liability for failure to deliver or delay in delivering where the delay is due, in whole or in part, to any cause beyond its control.
Appellee testified he made frequent calls and visits to the showroom to inquire about the delay in delivery. Appellant's sales manager, Nesselhauf, testified the normal delivery time for the type of truck appellee ordered was four to seven weeks, and he agreed that seven to ten weeks was an unreasonable delivery period if General Motors had all the parts to fill the order. The sales manager's testimony also shows that appellant took orders for options without verifying their availability with GM. He testified that he called Chevrolet's Houston office during at least two visits by appellee, and, according to his testimony, passed on to appellee the explanation that the locking differential rear end appellee ordered was not available at the plant. He also stated that, when a part was delaying delivery, they would call the customer to inquire whether the customer would care to delete that option. Appellee testified, to the contrary, that the locking differential was never mentioned but that, about a month before he was notified that his truck had arrived, he was informed the auxiliary tank option was holding up the order.
In July 1979, appellee was informed that his truck had arrived, more than six months after he had placed the order and after he had filed the present suit. He refused to accept it and told the sales manager he had ordered a stepside model. He did not remember whether the truck tendered differed in any other way from the one he ordered.
The evidence is ample to show that appellant breached the contract by failing to make timely delivery. The conflicting evidence as to GM's part in the delay was decided by the jury in appellee's favor, and we cannot say that the verdict was so *690 against the great weight and preponderance of the evidence as to be manifestly unjust. In re King's Estate, 150 Tex. 662, 244 S.W.2d 660 (Tex.1951). See Alamo Automobile Co. v. Schmidt, 211 S.W. 804 (Tex.Civ.App. San Antonio 1919, writ ref'd). Points of error five, six, nine, and ten are overruled.
Points of error seven and eight contend there was no evidence and insufficient evidence to support the jury's finding of car rentals as damages. The record shows that appellee rented a car from Freeway Rent-A-Car from February 27, 1979, until June 5, 1979. The rental agreement forms showing the weekly charges and appellee's charge card receipts showing payment were admitted into evidence. The total cost to appellee for car rental was $1,190.52. Appellee testified he would not have rented a car had he known that he would not be getting delivery of the truck.
The jury found, in the two parts to Special Issue No. 11 that appellee suffered loss of $200 for the down payment on the truck (11a), and $800 for the cost of car rentals (11b) as actual damages caused by appellant's false representation found in Special Issue No. 5. Appellant does not argue the damages found were excessive, but that the cost of car rental was not an appropriate item to be considered.
Appellee was entitled to damages for the pecuniary loss he suffered by reason of appellant's failure to deliver the truck as agreed. See L.L. Adams d/b/a Adams Motor Company v. Eastex Finance Company, 379 S.W.2d 355, 359 (Tex. Civ.App. Tyler 1964, no writ). He could recover not only the down payment on the truck but also his damages, if any, resulting from the non-delivery. Tex.Bus. & Com.Code Ann. sections 2.711; 2.713; 2.715 (Vernon 1968).
Damages recoverable under the DTPA are the same as those recoverable at common law. Brown v. American Transfer & Storage, 601 S.W.2d 931, 939 (Tex.), cert. denied, 449 U.S. 1015, 101 S. Ct. 575, 66 L. Ed. 2d 474 (1980). United Postage Corp. v. Kammeyer, 581 S.W.2d 716 (Tex. Civ.App. Dallas 1979, no writ). Car rental expenses are includable as actual damages if proved to be a part of a plaintiff's "actual pecuniary loss including related reasonable and necessary expenses." Hyder-Ingram Chevrolet, Inc. v. Kutach, 612 S.W.2d 687, 689 (Tex.Civ.App. Houston [14th Dist.] 1981, no writ).
Appellant urges the "general rule" that recovery cannot be had for the loss of use of a vehicle during the time required for its replacement. Pickett v. J.J. Willis Trucking Company, 624 S.W.2d 664 (Tex.App. Houston [14th Dist.] 1981, writ ref'd n.r.e.), cited by appellant as authority, is distinguishable on its facts. In Pickett, the court denied recovery of replacement rentals for loss of a vehicle's use in addition to recovery for the vehicle's destruction.
Appellant argues that Webster produced no evidence that the cost of car rental as damages was in the contemplation of the parties at the time they entered in the sales agreement. This argument assumes, contrary to the jury's special issue finding, that there was no delivery period agreed to in the contract. Where delivery within an agreed period is a term of a vehicle sales contract, rental expense for transportation in the event of a breach of the delivery term is reasonably within the parties' contemplation at the time of agreement since transportation is the primary purpose of a motor vehicle. Appellant's seventh and eighth points of error are overruled.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454160/ | 679 S.W.2d 450 (1984)
J.G. ROGERS and Maurine Rogers, Plaintiffs-Appellees,
v.
James M. SAIN, Bobby Sain, Charles H. Sain, Joe A. Sain, Howard Sain, William O. Sain and Mrs. William (Marie) Moss, Defendants-Appellants.
Court of Appeals of Tennessee, Middle Section at Nashville.
June 26, 1984.
Rehearing Denied July 19, 1984.
Permission to Appeal Denied October 29, 1984.
*451 Robert L. Huskey, Robert C. Lequire, Manchester, for defendants-appellants.
Thomas W. Graham of Cameron, Leiderman & Graham P.C., Jasper, for plaintiffs-appellees.
Permission to Appeal Denied by Supreme Court October 29, 1984.
OPINION
FRANKS, Judge.
Defendants appeal from the circuit court judgment which states:
The Oris Sain Road also known as Grundy County Road Number Seven (7) is a public road.
The Plaintiffs, J.G. Rogers and Maurine Rogers, being abutting land owners to portions of said road are entitled to open and free ingress and egress to their property aforesaid over and across said Oris Sain Road.
The road in dispute was constructed by the late Oris Sain at the boundary between plaintiffs' and defendants' properties. The road has a graveled surface and extends six-tenths of a mile to the Sain homeplace. When Oris Sain died, defendants inherited his land and entered into negotiations with Rogers to purchase a tract of Rogers' land most easily accessible by the Oris Sain Road. Negotiations failed to result in a sale and plaintiffs leased the tract to a third party for farming purposes. Subsequently, defendants notified Rogers and the tenant that the road was closed to them. This action resulted, seeking a declaration that the road is a public road.
The trial judge filed an opinion finding facts which formed the basis for his conclusions. He stated:
It appears by clear and convincing evidence that the road in question, hereafter referred to as the "Oris Sain Road", has been open, and unobstructed and a well-known road to the former home of Oris Sain, now deceased, for more than forty (40) years. This road lies wholly on the defendants' property, formerly Oris Sain property, and lies adjacent to plaintiffs' land for a long distance.[1] The exact *452 length of this contiguous relationship is not material to the question here in issue, but appears to be 62 poles in length and is the common boundary between the lands of plaintiffs and defendants. There was substantial proof of occasional use by plaintiffs of the subject road but not of such continued or uninterrupted use for so long as to constitute a private prescriptive easement... . This road was used by the United States Post Office Department since 1960 as a public road for the delivery of mail. On more than one occasion, Oris Sain, now deceased, openly declared this road to be a public road... .
The clear preponderance of the evidence indicate that Grundy County began some type of maintenance on this road in the 1930's and its activities increased thereafter especially during the 1960's. The defendants who were old enough to be aware of the activity of the Grundy County Highway Department have all frankly admitted that the County Highway Department did expend an undetermined amount of money on the maintenance of this road but stated that this was not an intention on their part to dedicate this land as a public road. They admitted sometimes requesting this service and received it because the county maintained many private roads in the county.[2] The Court finds that the road had been substantially improved and maintained by the County Highway Department for more than twenty (20) years with the express request of defendants or their predecessors in title and to some extent for more than 40 years... .
The Court further finds that the west fence maintained by Plaintiffs to be the common boundary between the real estate owned by the plaintiffs and the defendants and that some portion of this boundary line is adjacent to the road in question, sometimes known as the "Oris Sain Road."
We agree with the trial court's assessment of the evidence and adopt the foregoing as our factual determinations.
Defendants argue plaintiffs have no standing to have the roadway declared a public road since only the county and abutting landowners have standing to maintain the action under the authority of Knierim v. Leatherwood, 542 S.W.2d 806 (Tenn. 1976). We do not read Knierim so restrictively. In that case, the Supreme Court said to have standing, a complaining party must have special, pecuniary or proprietary interest in the alleged public road which may be established by demonstrating some special injury or damage. Knierim established no absolute requirement that the complaining party be an abutting landowner, but recognizes the significance of abutting ownership when the road is abandoned by the public, in which case, such landowner may retain a private easement. However, it is unnecessary for us to detail the Rogers' special, pecuniary or proprietary interest in the road since the evidence establishes, as the chancellor determined, the Rogers are abutting landowners. (Rogers' surveyor testified Rogers' property line actually extends a few feet in the roadway.)
Defendants' principal argument is the evidence does not establish an implied dedication of the road to public use. It has long been established that private land can be implicitly dedicated to use as a public road. McCord v. Hays, 202 Tenn. 46, 302 *453 S.W.2d 331 (1957); Scott v. State, 33 Tenn. 629 (1854). When an implied dedication is claimed, the focus of the inquiry is whether the landowner intended to dedicate the land to a public use. McCord, supra; Johnson City v. Wolfe, 103 Tenn. 277, 52 S.W. 991 (1899); Nicely v. Nicely, 33 Tenn. App. 589, 232 S.W.2d 421 (1949). The proof on the issue of intent to dedicate must be unequivocal, Cole v. Dych, 535 S.W.2d 315 (Tenn. 1976), but intent may be inferred from surrounding facts and circumstances, Cole, supra, including the overt acts of the owner. Wolfe, supra.
The significance of the conduct of the landowner is assessed in Wolfe, where the court said:
"The public, as well as individuals, have a right to rely on the conduct of the owner as indicative of his intent. If the acts are such as would fairly and reasonably lead an ordinarily prudent man to infer an intent to dedicate [the court will find that the road has been so dedicated]."
Wolfe, 103 Tenn. at 282, quoting from Elliott on Roads and Streets, § 92.
Among the factors which indicate an intent to dedicate are: the landowner opens a road to public travel; Wolfe, supra; Burkitt v. Battle, 59 S.W. 429 (Tenn. Ch.App. 1900); acquiescence in the use of the road as a public road, Nicely and Burkitt, supra; and the fact the public has used the road for an extended period of time, McCord, supra; Scott, supra. While dedication is not dependent on duration of the use, extended use is a circumstance tending to show an intent to dedicate. Cole, supra. Finally, an intent to dedicate is inferrable when the roadway is repaired and maintained by the public. Burkitt, supra, citing Sharp v. Mynatt, 69 Tenn. 375 (1878).
The foregoing authorities support the trial judge's conclusion, derived from the facts, that the road was dedicated by implication as a public road. We affirm the judgment of the trial court and remand at appellants' cost.
LEWIS and CANTRELL, JJ., concur.
NOTES
[1] On the issue of standing, defendants argue, relying on Black's Law Dictionary, that "adjacent" does not necessarily mean the properties abut; however, one of the commonly accepted definitions of "adjacent" is "adjoining". Moreover, if "adjacent" in the text of the memorandum could be said to be ambiguous, the judgment removes such ambiguity by describing the properties' relationship as "abutting" landowners and the judgment, rather than the memorandum opinion, is the authoritative and effective action of a trial court. Palmer v. Palmer, 562 S.W.2d 833 (Tenn. App. 1977).
[2] Defendants argue that the judge's fact finding is somehow tainted because he stated in his memorandum that a determination the road was a private road would cast the highway commissioners "who have expended money on this road ... in direct and absolute violation of T.C.A., § 54-4-101, et seq." This observation is nothing more than recognition of the familiar rule that public officials are presumed to have properly discharged their public duties and responsibilities. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454596/ | 994 S.W.2d 422 (1999)
In re Agustin Escalera SALAS.
No. 10-99-167-CR.
Court of Appeals of Texas, Waco.
June 30, 1999.
Kenneth G. Wincorn, Dallas, for Relator.
John H. Jackson, Corsicana, for Respondent.
Before Chief Justice DAVIS, Justice VANCE and Justice GRAY.
OPINION
REX D. DAVIS, Chief Justice.
Relator Agustin Escalera Salas seeks a writ of prohibition ordering Respondent, the Honorable John H. Jackson, Judge of the 13th Judicial District Court, not to issue a certain order nunc pro tunc. Because we conclude that we do not have jurisdiction to grant the relief requested, we will deny Relator's petition.
On April 28, 1994, Respondent's predecessor in office accepted Relator's guilty plea, deferred an adjudication of guilt, and placed him on unadjudicated community supervision for a period of ten years. After Relator had successfully completed more than one-third of his term, he filed a motion asking Respondent to allow him to withdraw his guilty plea and discharge him from community supervision. Respondent signed an order on April 13, 1998 stating in pertinent part:
The Court, after hearing all of the evidence presented, hereby Orders that Defendant's Original Plea is hereby withdrawn, the indictment be dismissed and Defendant's Motion for Release From Probation be GRANTED.
On May 10, 1999, Respondent sent a letter to an attorney with the Dallas office of the Immigration and Naturalization Service with a carbon copy to the district attorney informing them in pertinent part:
The order releasing the defendant from probation recites that the original plea is withdrawn and the indictment is dismissed. This order does not reflect the intent of the Court and is a departure from the language generally required by the Court in early releases from probation. The Court's intent was to simply release the defendant from probation as provided by law after service of the requisite time on Community Supervision;
The Court will enter a correcting Nunc Pro Tunc Order upon the application of any proper party which reflects the intent of the Court in this case.
Relator asks this Court to prohibit Respondent from carrying out this stated intention.
Under article V, section 6 of the Texas Constitution, this Court has: (1) jurisdiction *423 over "all cases of which the District Courts or County Courts have original or appellate jurisdiction, under such restrictions and regulations as may be prescribed by law"; and (2) "such other jurisdiction, original and appellate, as may be prescribed by law." TEX. CONST. art. V, § 6.
Section 22.221(a) of the Government Code sets the limits of our jurisdiction to issue writs. See TEX. GOV'T CODE ANN. § 22.221(a) (Vernon 1988). That statute provides, "Each court of appeals or a justice of a court of appeals may issue a writ of mandamus and all other writs necessary to enforce the jurisdiction of the court." Id. This Court has construed section 22.221(a) to mean that our authority to issue a writ of prohibition "is limited to cases in which this Court has actual jurisdiction of a pending proceeding." Faherty v. Knize, 764 S.W.2d 922, 923 (Tex.App. Waco 1989, orig. proceeding).
The limited writ jurisdiction of this Court should be contrasted with the broader writ authority granted the Court of Criminal Appeals. Article V, section 5 of the Texas Constitution and article 4.04 of the Code of Criminal Procedure grant that Court jurisdiction to issue "the writs of mandamus, procedendo, prohibition, and certiorari" "in criminal law matters." TEX. CONST. art. V, § 5; TEX.CODE CRIM. PROC. ANN. art. 4.04, § 1 (Vernon Supp.1999).
In Relator's case, we have no pending proceeding before us for which the issuance of a writ of prohibition would be necessary to enforce our jurisdiction. Accordingly, we do not have jurisdiction to issue the requested writ. Relator's petition for writ of prohibition is denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454609/ | 994 S.W.2d 506 (1999)
67 Ark.App. 202
Malika L. GRAY, Appellant,
v.
Winfred T. GRAY, Appellee.
No. CA 98-483.
Court of Appeals of Arkansas, Divisions I and II.
July 7, 1999.
*507 Ogles Law Firm, P.A., by: John Ogles, Jacksonville, for appellant.
Price Law Firm, by: Robert J. Price, Little Rock, for appellees.
MARGARET MEADS, Judge.
This is a second appeal disputing the amount the chancellor set for child support. The parties were divorced in 1991, and appellant was awarded custody of the parties' three children, with appellee paying monthly child support in the amount of $1,075. On December 1, 1994, appellant petitioned for an increase in child support. After a hearing, appellee's child-support obligation was increased to $3,054.46 per month. Appellee filed a motion to reconsider, and after a February 13, 1996, hearing the chancellor reduced child support to $2,418.56 per month. Appellant filed another motion to reconsider, which was deemed denied; she then appealed the issue of child support, among other things, to this court.
In Stepp v. Gray, 58 Ark.App. 229, 947 S.W.2d 798 (1997), appellant argued that the chancellor erred in calculating child support because he excluded from appellee's income the full amount of depreciation on rental properties which appellee claimed on his federal income tax return. We agreed and remanded the case to the chancellor for further consideration of the depreciation-deduction issue, stating "we leave it to the discretion of the chancellor to determine whether further evidence is needed to arrive at the amount of the depreciation deduction to be considered as income to Gray." Id. at 237, 947 S.W.2d 798.
On remand, the chancellor conducted hearings on September 17, 1997, and October 9, 1997. Relying upon appellee's testimony that twenty percent of his depreciable rental property was in fact appreciating in value, the chancellor found that twenty percent of reported depreciation should be included in computing appellee's income for child support purposes. In addition, the chancellor determined that for the period preceding October 1, 1997, appellee's monthly child-support obligation would be thirty-two percent of his monthly income; thereafter, due to new child support guidelines effective October 1, 1997, appellee's monthly child-support obligation would be twenty-five percent of his monthly income, with the appropriate allowances for medical, dental, tax payments, and two-week support abatement, as well as a credit against child support for any capital-gains tax. Appellant now argues two points on appeal, contending the chancellor erred (1) in calculating appellee's child-support obligation, and (2) in using the Supreme Court per curiam order of 1997 to set child support and finding that any applicable capital gains tax would be credited against child support. Appellee cross-appeals, *508 contending that none of the depreciation should be includable in his income for purposes of computing child support. Chancery cases are reviewed de novo on the record, and the chancellor's findings are not reversed unless they are clearly against the preponderance of the evidence or are clearly erroneous, Heflin v. Bell, 52 Ark.App. 201, 916 S.W.2d 769 (1996); the review can be based upon a complete and independent review of the record. Rockefeller v. Rockefeller, 335 Ark. 145, 980 S.W.2d 255 (1998). The amount of child support lies within the sound discretion of the chancellor and will not be disturbed on appeal absent a showing of abuse of discretion. Halter v. Halter, 60 Ark.App. 189, 959 S.W.2d 761 (1998).
For her first point, appellant argues that all of the depreciation deduction which appellee claimed on his income-tax returns should be added back to his income for purposes of computing child support, and that the chancellor erred in including only twenty percent of the deduction. She further contends that Administrative Order No. 10 provides that child support shall be calculated on last year's federal and state income tax returns, quarterly estimates, and the net worth approach, and "does not mention static, depreciating and appreciating property to determine income." She also points out that the court could not determine from the evidence presented which properties were "staying static," which were depreciating, and which were appreciating.
During the hearings on remand, the chancellor expressed his understanding that Stepp v. Gray, supra, required him to review the depreciation deduction which appellee claimed on his tax returns and to determine the amount to be considered as income for child support purposes. However, the chancellor also expressed some confusion as to deducting the principal payments on appellee's rental properties from overall depreciation; this confusion appears to be based upon the following sentence in Stepp v. Gray: "It also appears from the evidence presented concerning [appellee's] mortgage payments that he would have approximately $20,000 in disposable income remaining from the depreciation deduction even if he is credited with the amount of principal paid on the rental properties." Id. at 237, 947 S.W.2d 798. The chancellor further stated his understanding that, pursuant to Stepp v. Gray, a portion of the depreciation deduction had to be added back to appellee's income to arrive at his actual income. Accordingly, the chancellor found that $34,861 in depreciation was an allowable deduction from appellee's income, but that twenty per cent of that figure represented the amount of appellee's rental property that was appreciating in value. Therefore, the chancellor concluded that twenty percent of $34,861 should be added back to appellee's income for the purpose of computing child support.
The chancellor based his findings on the unrebutted testimony of appellee and his accountant with regard to the rental properties, the essence of which was that two duplexes and two other properties were appreciating in value and that the others were either static or depreciating in value. From our review of the record, we cannot say that the chancellor's decision to include twenty percent of the depreciation deduction in appellee's income for purposes of determining child support was an abuse of discretion.
Under this point, appellant also argues that evidence introduced at a hearing on November 20, 1997,[1] specifically appellee's personal financial statements, reflect that appellee's testimony at the September 17 hearing regarding the value of his rental property was not truthful. The short answer *509 to this argument is that this evidence was not before the chancellor when he announced his ruling on the depreciation issue. The evidence which was before the chancellor when he made his ruling supports his decision to include only twenty percent of the depreciation deduction in appellee's income for purposes of child support. See Wing v. Wing, 12 Ark.App. 84, 671 S.W.2d 204 (1984).
In his cross-appeal on this point, appellee argues that none of the depreciation deduction should be included in the income figure used to compute his child-support obligation, and he cites several cases from other states in which straight-line depreciation, which he used, was not considered in determining child support. While appellee's argument is well-taken, we are not convinced, nor does appellee argue, that it is necessary to adopt a bright-line rule that support payors who utilize the straight-line method of depreciation will never have depreciation considered as a component when setting child support. Each case must be examined on its own set of facts. In the present case, in determining child support, the chancellor added back to appellee's income the depreciation on those properties that appellee testified were appreciating in value, but not on the properties which appellee testified were staying static or depreciating. Based upon the testimony, we cannot say the chancellor abused his discretion in reaching this decision.
In order to eliminate any confusion resulting from Stepp v. Gray, supra, we take this opportunity to clarify our court's position on the depreciation-deduction issue. We note that Administrative Order 10: Arkansas Child Support Guidelines, 331 Ark. 581, includes the following provision:
For self-employed payors, support shall be calculated based on last year's federal and state income tax returns and the quarterly estimates for the current year. Also the court shall consider the amount the payor is capable of earning or a net worth approach based on property, life-style, etc.
The guidelines do not mandate that the court include or exclude a payor's depreciation deduction, nor do we make that requirement. Rather, we believe that depreciation is a factor that should be considered, just as property and life-style are considered, on a case-by-case basis.
For her second point, appellant argues that the chancellor erred in using Administrative Order No. 10 to set child support and in finding that any applicable capital gains tax would be credited against child support. We disagree. In Heflin v. Bell, supra, we held that a statute or per curiam order of the Arkansas Supreme Court that is in effect at the time of the hearing on a request for modification of child support is the applicable law pertaining to the modification. Id. at 204, 916 S.W.2d 769. At the time of the final hearing in this matter, Administrative Order 10: Arkansas Child Support Guidelines, supra, had been adopted, effective October 1, 1997. Therefore, the chancellor was correct in applying Administrative Order No. 10 for the amount of child support to be paid after October 1, 1997, and in applying the previous guidelines (In re Guidelines for Child Support, 314 Ark. 644, 863 S.W.2d 291 (1993)) for child support owed for the period prior to October 1, 1997. The 1993 guidelines provide that when the payor's income exceeds the chart, a payor with three dependents will pay thirty-two percent of his income for child support; Administrative Order No. 10 reduced that percentage to twenty-five percent. The chancellor's application of the proper law was not in error.
Nor do we find that the chancellor erred in allowing appellee credit for any applicable capital gains tax. For purposes of determining appellee's rental income, both the 1993 Guidelines and Administrative Order No. 10 allow self-employed payors to calculate child support based upon the previous year's federal and state income tax returns, and to allow deductions *510 for state and federal income tax. Tax on capital gains is a component of both federal and state income tax returns, and appellee's 1994 federal tax return indicates that he paid $26,478 in capital gains tax. Moreover, the abstract does not indicate that appellant's counsel objected to proof of the capital gains tax paid by appellee, either at the time it was introduced or when the issue was discussed at the October 9 hearing. As appellee points out, Ark. R. Civ. P. 15(b) allows amendment of the pleadings to conform to the evidence when issues not raised in the pleadings are tried by express or implied consent. With no objection from appellant, the chancellor could properly consider this evidence.
Affirmed.
STROUD, and HART, JJ., agree.
GRIFFEN, ROGERS, and BIRD, JJ., concur.
SAM BIRD, Judge, concurring.
I concur in the result reached by the majority because this case is controlled by the law of the case.[2] I believe, however, that this court's earlier decision in Stepp v. Gray, 58 Ark.App. 229, 947 S.W.2d 798 (1997), and the majority opinion in the case at bar are incorrect insofar as they instruct the chancellor to consider appellee's depreciation deduction as income for child-support purposes.
Under Section II of Administrative Order No. 10: Arkansas Child Support Guidelines, 331 Ark. 581, income is defined as "any form of payment, periodic or otherwise, due to an individual, regardless of source, including wages, salaries, commissions, bonuses, worker's compensation, disability, payments pursuant to a disability or retirement program, and interest, less proper deductions for: 1. Federal and state income tax...." (Emphasis added.) In the first place, even applying a most liberal interpretation, I am unable to construe a depreciation deduction to be a "form of payment" within the meaning of the foregoing definition. Secondly, the foregoing definition of income expressly excludes "proper deductions" for federal and state income taxes. If the supreme court had intended for the chancellors to disregard the Internal Revenue Code and determine that legally permissible depreciation deductions under that Code may not be considered in determining the amount of income taxes that can be properly deducted for the purpose of determining income, I believe it would have said so in its administrative order. In my view, the allowance of a depreciation deduction on one's income-tax return merely reduces the taxpayer's income-tax liability, and is not income as that term is defined in Administrative Order No. 10.
As the majority notes, Section III of Administrative Order No. 10, dealing with the calculation of support for nonsalaried payors, provides:
For self-employed payors, support shall be based on last year's federal and state income tax returns and the quarterly estimates for the current year. Also the court shall consider the amount the payor is capable of earning or a net worth approach based on property, life-style, etc.
To me, this section sets forth clearly that in calculating the amount of the child-support obligation of a self-employed person, the court is required to determine the amount of the payor's income by referring *511 to the payor's federal and state income-tax returns, (and to consider the amount the payor is capable of earning or use a net-worth approach). Both the federal and state income-tax codes allow taxpayers to exclude (i.e., deduct) from taxable income the amount by which certain property depreciates over its useful life.[3] Also, since quarterly estimates of income taxes are based on a percentage of the taxpayer's income-tax liability for the preceding year, they necessarily reflect the taxpayer's tax liability after the deductions allowed by federal and state tax codes.[4] I am unable to interpret Section III to mean that all or part of a taxpayer's depreciation deduction on his tax returns is to be considered as income for purposes of calculating child support.
Depreciation is the presumptive amount of the decline in the value of certain types of property over the passage of time as a result of exhaustion, wear, tear, and obsolescence.[5] Whether the presumed amount of the property's decline in value is valid cannot be determined until the property is sold. When the sale occurs, if the price received for the property is equal to or less than its depreciated value, the taxpayer has received no income from the sale. On the other hand, if the sale price exceeds the depreciated value of the property, at that point the taxpayer will have received income, and that amount of income should be considered in calculating any child-support obligation he or she may have at that time.[6] By including the depreciation deduction as income for the purpose of calculating child support, the child-support obligor will be required to pay support on income that may never be received, and the child-support recipient will be receiving the benefit of a profit on the obligor's investment before it can be determined that there will be any profit.
I am not aware of any authority by which an obligation to pay child support in the present is to be calculated based on income that a child-support obligor may realize in the future from investments. Is the child-support recipient going to be required to refund all or part of the money he or she received if it is ultimately determined that the price received for the property when it is sold does not exceed its depreciated value?
I have one other concern with the majority opinion. Although it recognizes that our opinion in Stepp v. Gray, supra, caused confusion to the chancellor when he was required, on remand, to consider whether and how much of appellant's depreciation deduction to include in income, the majority opinion in the case at bar provides no guidance that will eliminate that confusion in other cases involving the same issue. Much like the opinion in Stepp, the majority in the case at bar simply informs the chancellors that "depreciation is a factor that should be considered, just as property and lifestyle are considered, on a case-by-case basis."[7]*512 The majority provides no hint as to what criteria the chancellor is to consider in making the determination of whether all or some portion of the depreciation deduction should be considered as income. If only part of the deduction is to be included, there is no guidance offered as to how chancellors should determine what portion to include. I find it ironic that chancellors are mandated by Administrative Order No. 10 to set child support according to the sums specified in the Family Support Chart, unless a variance from the chart is justified by specific written findings, yet in cases involving a depreciation deduction, the amount of income derived by the chancellor to begin with, from which the presumptive amount of support set forth in the chart is determined, can be fixed by the chancellor without any guidance from the administrative order or the appellate court as to what factors should be considered in determining whether and how much of the depreciation deduction should be deemed income.
I also disagree with parts of Judge Rogers's concurring opinion. In it, Judge Rogers expresses her concern "about depreciation being manipulated by the noncustodial parent," even though there was no suggestion by either of the accountants who testified in this case, nor a contention by the appellant, that appellee had "manipulated" any information on his tax returns to create an inaccurate picture of his income.[8] Obviously, if a child-support payor's income-tax returns were shown to be fraudulent or erroneous, the court could look to the correct information and make the necessary calculations to determine the appropriate amount of child support. But, in the absence of fraud or error in the tax returns or quarterly estimates, it seems to me that the amount of child support to be paid by the self-employed should be calculated based on the income shown on tax returns and quarterly estimates, as required by Administrative Order No. 10.
I am also puzzled by Judge Rogers's suggestion in her concurring opinion that one's child-support obligation can be reduced in instances of real-estate transactions where one has no investment in the property but can receive cash flow. If this is a suggestion that the depreciation deduction should be included as income in calculating child support where the asset was purchased with borrowed money, but should not be included as income where the obligor has fully paid for an investment asset with his or her own money, I see no validity to that distinction. Appellee is obligated to pay these debts whether or not he ever makes any money on his investment. Furthermore, there is no suggestion by the evidence in this case that appellee had no investment in the property or was receiving the benefit of a significant positive cash flow. To the contrary, although we can not tell from the abstract the total amount appellee paid for the rental properties that are the subject of his depreciation deduction, we can tell that as of December 31, 1994, he owed a balance of $605,000 on promissory notes that were secured by real-estate mortgages on his rental property, and that in 1994, alone, he reduced that indebtedness by more than $32,000 while realizing rental income of only $15,731. Under these circumstances, I cannot agree that appellee has no investment in the property, or that he benefitted from a significant cash flow. In fact, these figures would indicate that, for 1994, a negative cash flow resulted.
As I stated at the outset, unfortunately this case must be affirmed because of the requirement that we apply the doctrine of the law of the case. However, I hope that when future cases are considered that involve the issue of whether a depreciation deduction should be treated as income for *513 purposes of calculating child support, our mistake will be corrected. I commend and join with the majority judges in their concern that the children of our state be appropriately and adequately supported by their noncustodial parents. However, I am also concerned that the effect of this court's decisions in the Stepp case and the case at bar is to assess child support against income that has not yet been realized, and, therefore, to impose an inequitable assessment of child support against the investor, as compared to the noncustodial parent who chooses not to invest.
GRIFFEN, J., joins in this concurring opinion.
JUDITH ROGERS, Judge, concurring.
I concur because I believe that the law of the case is determinative of our decision. I do agree that depreciation is a factor to be considered in computing income for child-support purposes. I write separately to note my concerns about depreciation being manipulated by the noncustodial parent, and to emphasize that there are many problems involved in employing reasonable and appropriate depreciation.
The reduction of income by depreciation is often inappropriate when considering child support, as this reduces the amount paid for child support without regard to cash income available to the payor from rental or income-producing property. Essentially, it is an issue of the appropriate income to be used in determining the obligation of child support. The Arkansas statute tracks the Internal Revenue Code for purposes of taxable income. However, in real estate transactions a person can have no investment in the property and can receive significant cash flow, which is usually the determining factor from a financial viewpoint in the property value and income.
In the instant case, it would not be proper to deduct the total amount of depreciation from appellee's income because the depreciation relates to a long-term reserve for replacement that may take thirty years, which is well beyond the minority of the child. Some consideration should be given for reasonable depreciation to the extent that it reflects mortgage amortization or financing under the circumstances. In addition, it should be noted that appellee does not have any cash investment of his own in the real estate and therefore, even though for tax purposes he is entitled to a deduction for depreciation, he has no real outof-pocket expenses in that regard. Therefore, there are funds available to appellee that should be utilized in the calculation of his child-support obligation.
I also want to reiterate that the support guidelines are just thatguidelinesand that flexibility is delegated to the trial judge who, in utilizing his or her considerable discretion in these cases, can and should consider the economic impact and funds actually available to the payor.
NOTES
[1] A hearing was apparently conducted in this case on November 20, 1997, on appellee's motion to reduce child support. The court's ruling on that motion is not at issue in this appeal.
[2] The doctrine of the law of the case prevents an issue raised in a prior appeal from being raised in a subsequent appeal. Vandiver v. Banks, 331 Ark. 386, 962 S.W.2d 349 (1998). The doctrine provides that a decision of an appellate court establishes the law of the case for the trial upon remand and for the appellate court itself upon subsequent review. Kemp v. State, 335 Ark. 139, 983 S.W.2d 383 (1998). On the second appeal, the decision of the first appeal becomes the law of the case, and is conclusive of every question of law or fact decided in the former appeal, and also of those which might have been, but were not, presented. Griffin v. First Nat'l Bank, 318 Ark. 848, 888 S.W.2d 306 (1994); Mercantile First Nat'l Bank v. Lee, 31 Ark.App. 169, 790 S.W.2d 916 (1990).
[3] Under the federal tax code, a depreciation deduction is allowed for "the exhaustion, wear and tear (including a reasonable allowance for obsolescence) ... of property held for production of income." 26 U.S.C. § 167 (1994). The terms of the Internal Revenue Code regarding depreciation have been adopted by reference in the Arkansas Income Tax Act for the purpose of computing Arkansas income-tax liability. Ark.Code Ann. § 26-51-428 (Repl.1997).
[4] See generally 26 U.S.C. § 6654(d) (1994).
[5] 26 U.S.C. § 167.
[6] Of course, any "profit" from the sale, for purposes of calculating child support, would have to be reduced by the amount of the income taxes that the federal and state taxing authorities will "recapture" as a result of the sale of residential rental property for a sum that is greater than its depreciated basis. 26 U.S.C. § 1250 (1994); Ark.Code Ann. § 26-51-411 (Repl.1997).
[7] It should be noted that "property and lifestyle" are specifically mentioned in Administrative Order No. 10 as factors that may be properly considered in determining the support obligation of self-employed payors on a net worth approach, whereas, there is no mention that consideration should be given to the payor's depreciation deduction.
[8] According to appellant, he was utilizing a "straight-line" depreciation schedule, approved by Internal Revenue Code (26 U.S.C. 167), over a period of "twenty-seven and a half or twenty-eight and a half years." Under 26 U.S.C. § 168(d) (1994), the minimum term of depreciation for "section 1250 property" (residential rental property) is 27.5 years. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454581/ | 901 S.W.2d 640 (1995)
Leonel Jasso MENCHACA, Appellant,
v.
The STATE of Texas, Appellee.
No. 08-93-00217-CR.
Court of Appeals of Texas, El Paso.
April 27, 1995.
*644 M. Clara Hernandez, El Paso County Public Defender, El Paso, for appellant.
Jaime E. Esparza, Dist. Atty., El Paso, for State/appellee.
Before BARAJAS, C.J., and LARSEN and McCOLLUM, JJ.
OPINION
BARAJAS, Chief Justice.
Leonel Jasso Menchaca appeals his conviction for the offense of possession of more than five but less than fifty pounds of marihuana. Trial was by jury before the Honorable Virgil E. Mulanex, judge, sitting on assignment. Upon a finding of guilty, the trial court assessed punishment at incarceration in the Institutional Division of the Texas Department of Criminal Justice for a period of ten years, probated for a like term. We affirm the judgment of the trial court.
I. SUMMARY OF THE EVIDENCE
At 5:20 on the morning of November 28, 1992, Appellant presented himself for customs inspection at the Paso del Norte Bridge, an international port of entry connecting El Paso, Texas, with adjacent Ciudad Juarez, Chihuahua, Mexico. Alone in a 1982 Pontiac station wagon, Appellant declared that he was a United States citizen and that he was bringing nothing into the country. The customs inspector observed that the car bore temporary (paper) Texas license plates, the key that operated it was the only one on the key chain to which it was attached, and that Appellant appeared nervous in that his hands were shaking and he avoided making eye contact. When questioned, Appellant stated that he had only borrowed the car from a friend and was taking it to Deming, New Mexico. His suspicion aroused, the customs inspector asked Appellant to open the vehicle's trunk. While Appellant complied, the inspector opened the passenger side door and observed a small cylindrical object wrapped in gray duct tape underneath the right front fender. The inspector then fetched Appellant from behind the car, escorted him to a nearby building for questioning, and drove the vehicle to a secondary inspection area. With the aid of a trained canine, inspectors found other objects, similarly packaged and secreted, containing 49.5 pounds of marihuana.
During questioning, Appellant claimed the car belonged to Ramon Huerta, from whom he obtained the vehicle in a Juarez bar at 4:00 that morning. Appellant told inspectors that Huerta had remained in Juarez a short while to bid farewell to "a lady friend." Appellant planned to cross into the United States, wait for Huerta at the first street into El Paso, and drive with him to Deming or Hatch, New Mexico, to pick chiles. Documents found in the glove compartment indicated Ramon Huerta had recently purchased the vehicle and that it was registered in his name.
Later investigation revealed that Appellant, contrary to his earlier assertions, was not a United States citizen. A search of his wallet produced a stub from a paycheck issued by a New Mexico farm, which indicated Appellant had been paid by the bucket, presumably for picking chiles.
II. DISCUSSION
Appellant attacks his conviction in eight points of error. In his first point of error, Appellant claims the trial court erred by curtailing his voir dire examination of the 45-person venire after some 32 minutes of questioning. The trial court allowed each party 30 minutes in which to question the venire as a whole. The trial court informed Appellant's counsel when two minutes remained in her allotted time and, after those two minutes elapsed, informed her that her time had expired, which precipitated a bench conference outside the jury's hearing. During the bench conference, the trial court admitted into evidence eight pages of hand-written questions counsel was planning to ask of the venire. The trial court determined that only the subjects of immigration status and the right not to testify had not been reached, and allowed counsel two additional minutes to examine the venire about these subjects. During the additional time, counsel questioned the venire as a whole, and three venirepersons individually, about the right not to testify and the manner in which it might apply to Appellant. The trial court then *645 informed counsel that her time had once again expired, which precipitated yet another bench conference during which the trial court offered to itself question the venire about immigration status on counsel's behalf[1]. With counsel's consent, the trial court asked if immigration status would affect a venireperson's service, to which question one venireperson responded affirmatively.
A defendant's constitutionally guaranteed right to counsel encompasses the right to question prospective jurors in order to intelligently and effectively exercise peremptory challenges and challenges for cause. Ex parte McKay, 819 S.W.2d 478, 482 (Tex. Crim.App.1990); Mata v. State, 867 S.W.2d 798 (Tex.App.El Paso 1993, no pet.). Both the State and the defendant must be allowed to explore any attitudes of venirepersons that might render them challengeable for cause or otherwise subjectively undesirable as jurors. Draughon v. State, 831 S.W.2d 331, 334 (Tex. Crim.App.1992), cert. denied, ___ U.S. ___, 113 S. Ct. 3045, 125 L. Ed. 2d 730 (1993). The parties' rights coexist with the trial court's right to control voir dire examination, which is entrusted to its sound discretion and which extends to imposing reasonable limitations on the time for which counsel may question the venire. Caldwell v. State, 818 S.W.2d 790, 793 (Tex.Crim.App.1991), cert. denied, 503 U.S. 990, 112 S. Ct. 1684, 118 L. Ed. 2d 399 (1992); Allridge v. State, 762 S.W.2d 146 (Tex.Crim.App.1988), cert. denied, 489 U.S. 1040, 109 S. Ct. 1176, 103 L. Ed. 2d 238 (1989). The benefits realized from measures employed to control the voir dire process must not, however, be attained at the risk of denying to a party a substantial right. Smith v. State, 703 S.W.2d 641, 645 (Tex.Crim.App. 1985).
When a party challenges a trial court's limitation on the voir dire process, the reviewing court must analyze the claim under an abuse of discretion standard, the focus of which is whether the appellant proffered a proper question concerning a proper area of inquiry. Caldwell v. State, 818 S.W.2d at 793; Cockrum v. State, 758 S.W.2d 577, 584 (Tex.Crim.App.1988), cert. denied, 489 U.S. 1072, 109 S. Ct. 1358, 103 L. Ed. 2d 825 (1989). If a proper question is disallowed, harm is presumed because the party has been denied the ability to intelligently exercise his peremptory strikes. Smith v. State, 703 S.W.2d at 643; Allridge v. State, 762 S.W.2d at 163. Thus, in order to decide if the trial court erred by disallowing a party's voir dire request, the reviewing court must first determine if he proffered a proper question. A proper question is one that seeks to discover a venireperson's views on an issue applicable to the case. Caldwell v. State, 818 S.W.2d at 794; Guerra v. State, 771 S.W.2d 453, 468 (Tex.Crim.App.1988), cert. denied, 492 U.S. 925, 109 S. Ct. 3260, 106 L. Ed. 2d 606 (1989).
We do not undertake a systematic analysis of the extent to which Appellant complied with the foregoing requirements because, assuming he did, we find Appellant's first point of error controlled by Cantu v. State, 842 S.W.2d 667 (Tex.Crim.App.1992), cert. denied, ___ U.S. ___, 113 S. Ct. 3046, 125 L. Ed. 2d 731 (1993), which involved the denial *646 of an explicit request for additional time to question a particular venireperson about the effect of the defendant's voluntary intoxication. The Court applied the foregoing principles and determined that such a denial did not amount to an abuse of discretion. The Court found significant the trial court's decision to grant additional time after the defendant's originally allotted 30 minutes had expired, and the trial court's questioning of the venireperson about his general ability to follow the law and instructions given him by the court, which questioning came after the trial court's interruption and served as a sort of surrogate screening process.
Like Cantu, the instant case involves the denial of additional time to question venirepersons about a given subject[2]. In both cases, the trial court granted one extension of time to conduct further questioning. Both cases also involve questioning by the trial court after it put an end to a party's voir dire examination. Further, the instant case features a mitigating factor not present in Cantu: the opportunity to individually question particular venirepersons without interruption at the bench. The record reflects that Appellant's counsel so questioned at least ten venirepersons after her general examination of the venire had ceased, without apparent interruption or limitation by the trial court. Given the significance that Cantu attributes to the trial court's beneficence in granting one extension of time and its surrogate questioning of a venireperson, the latter of which we find equally applicable to the trial court's questioning of the venire as a whole, and Appellant's additional opportunity to question individually venirepersons at the bench, we find the trial court did not abuse its discretion in denying Appellant's implicit request[3]. Accordingly, Appellant's first point of error is overruled[4].
*647 In his third through seventh points of error, Appellant claims the trial court erred in admitting into evidence a hand-written letter found in the glove compartment of the car he was driving[5]. When inspectors presented it to Appellant, he denied knowledge of it. Significantly, when one inspector read the letter out loud, Appellant helped him decipher several words he had difficulty reading. The inspector testified that Appellant seemed to anticipate the letter's wording, completing words when the inspector had only pronounced part of them.
We generally review a trial court's evidentiary rulings for an abuse of discretion. Montgomery v. State, 810 S.W.2d 372, 378-380 (Tex.Crim.App.1990); Brown v. State, 880 S.W.2d 249, 254 (Tex.App.El Paso 1994, no pet.). Because this standard has been much defined by Texas civil courts, we cite their various formulations of it. Cf. Montgomery v. State, 810 S.W.2d at 380 (quoting Texas Supreme Court's formulation of standard in Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985), cert. denied, 476 U.S. 1159, 106 S. Ct. 2279, 90 L. Ed. 2d 721 (1986)). "A [party] who attacks the ruling of a trial court as an abuse of discretion labors under a heavy burden." Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1985) (orig. proceeding). The test for abuse of discretion is not whether, in the opinion of this Court, the facts present an appropriate case for the trial court's actions. Rather, it is a question of whether the court acted without reference to any guiding rules and principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d at 241-242; Amador v. Tan, 855 S.W.2d 131, 133 (Tex.App.El Paso 1993, writ denied). Another way of stating the test is whether the act was arbitrary or unreasonable. Downer, 701 S.W.2d at 242, (citing Smithson v. Cessna Aircraft Co., 665 S.W.2d 439, 443 (Tex.1984)); Amador, 855 S.W.2d at 133. The mere fact that a trial court may decide a matter within its discretionary authority in a different manner than an appellate judge in a similar circumstance does not demonstrate that an abuse of discretion has occurred. Downer, 701 S.W.2d at 242, (citing Southwestern Bell Telephone Co. v. Johnson, 389 S.W.2d 645, 648 (Tex.1965)). A mere error of judgment is not an abuse of discretion. Loftin v. Martin, 776 S.W.2d 145, 146 (Tex. 1989); Hallmark v. Hand, 885 S.W.2d 471 (Tex.App.El Paso 1994, writ denied).
In his third point of error, Appellant claims the letter was irrelevant. Relevant evidence is generally admissible, while *648 irrelevant evidence is generally inadmissible. Tex.R.Crim.Evid. 402. Evidence is relevant if it logically serves to make an elemental fact more or less probable, if it serves to make an evidentiary fact that inferentially leads to an elemental fact more or less probable, or if it serves to make likely defensive evidence that undermines an elemental fact more or less probable. Beasley v. State, 838 S.W.2d 695 (Tex.Crim.App.Dallas 1992, pet. ref'd), cert. denied, ___ U.S. ___, 114 S. Ct. 451, 126 L. Ed. 2d 384 (1993).
The primary dispute in the instant case is whether Appellant knowingly or intentionally possessed the contraband. Appellant claims the letter bears no relation to this issue. He cites the lack of evidence of the letter's author, the date it was written, to whom it was written, precisely the matter it concerned, or that he was part of any scheme it might be interpreted to describe. His conclusion depends, however, largely on the veracity of his explanations of how he came into possession of the vehicle and that he was unaware the vehicle was laden with marihuana. Neither the jury nor the trial court were bound to believe these explanations.
Appellant in his brief goes on to describe several diverse scenarios that might be consistent with the existence, contents, and location of the document. In examining whether the trial court abused its discretion in deeming the letter relevant, which was an implicit predicate to the trial court's admission of it into evidence, we find it necessary to affirm the existence of only one theory establishing its relevance, although there certainly exist other theories that would support the trial court's decision. Appellant conceded he was acquainted with Ramon Huerta, and claimed to be on his way to meet him when he was apprehended. The letter indicates "Ramon" will wait with the author for the addressee's arrival. The letter goes on to specify the meeting place as the "first street which goes into El Paso." Appellant told customs inspectors he was planning to cross the bridge into El Paso and meet Huerta at the first street thereafter. The trial court could have connected this evidence to the issue of Appellant's intent by theorizing that, if Appellant were merely the unknowing pigeon he claimed to be, his victimizers would not have placed him alone in a vehicle laden with valuable cargo and left a letter describing the details of the transaction in a place to which only Appellant had access. Whether or not this theory is true or even likely, it at least establishes that the letter meets the threshold relevance requirement. Significantly, the trial court could have concluded that Appellant was actually aware of the letter and its contents because of one inspector's testimony that Appellant seemed to anticipate the letter's wording and corrected his reading of it.[6] Because only one theory of the letter's relevance is needed to establish that the trial court did not abuse its discretion in deeming it relevant, and because the foregoing fills this role, we overrule Appellant's third point of error.
In his fourth and fifth points of error, Appellant claims that the trial court erred by admitting the letter because its probative value was outweighed by its prejudicial effect and by failing altogether to balance these two attributes. We first examine whether the trial court performed the required balancing test.
When a party lodges an objection under Texas Rule of Criminal Evidence 403, which provides that relevant evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, a trial court "has no discretion to refuse to conduct a ... balancing of probativeness versus prejudice...." Montgomery v. State, 810 S.W.2d at 390. A trial court is not, however, required to conduct a separate hearing on the matter or even to announce on the record that it is mentally balancing the two factors. See Montgomery v. State, 810 S.W.2d at 393 n. 4 (noting federal Fifth Circuit requires trial courts to articulate on the record their considerations in conducting balancing test). One court of appeals, interpreting Montgomery, has put the matter well:
*649 The Court of Criminal Appeals does not require the trial court to conduct the balancing test during a formal hearing held for that purpose or that it announce for the record that it has, in fact, conducted and completed the balancing test in its own mind. Although not requiring the procedure, the Montgomery court merely recognize[d] that appellate review would be made easier if the trial court would list reasons for its decision in the record.
Houston v. State, 832 S.W.2d 180, 184 (Tex. App.Waco 1992), pet. dism'd, improvidently granted, 846 S.W.2d 848 (Tex.Crim.App. 1993). The record reflects Appellant lodged a Rule 403 objection, which was overruled. The trial court did not refuse to consider the objection or to conduct the requisite balancing test. Because the law does not require affirmative record evidence that the trial court conducted a Rule 403 balancing test, and because the record does not indicate the trial court refused to conduct such a test, we cannot conclude the trial court abused its discretion by failing to balance the letter's probative value against its unfairly prejudicial effect. Accordingly, Appellant's fourth point of error is overruled.
In his fifth point of error, Appellant claims the letter should not have been admitted because its probative value was substantially outweighed by its prejudicial effect. The Court of Appeals has counseled especially deferential appellate review of a trial court's Rule 403 analysis.
If judicial restraint is ever desirable, it is when a Rule 403 analysis of a trial court is reviewed by an appellate tribunal....
In view of ... the use of "may" in [the rule], it is manifest that the draftsman intended that the trial judge be given a very substantial discretion in balancing probative value on the one hand and unfair prejudice on the other, and that he should not be reversed simply because an appellate court believes that it would have decided the matter otherwise because of a differing view of the highly subjective factors of (a) the probative value, or (b) the prejudice presented by the evidence. This inference is strengthened by the fact that the Rule does not establish a mere imbalance as the standard, but rather requires that the evidence "may" be barred only if its probative value is "substantially" outweighed by [unfair] prejudice.
Montgomery v. State, 810 S.W.2d at 379 (emphasis added) (internal quotations omitted) (quoting United States v. Long, 574 F.2d 761 (3rd Cir.1978)). The letter contemplates a "matter" and a personal meeting, which together could be fairly interpreted as a reference to a discrete transaction. The letter then provides details of the meeting, at least some of which Appellant admitted he planned to fulfill by his actions. Appellant appeared to be familiar with the contents of the letter. While certainly not a smoking gun, the letter provides some reason to think Appellant intentionally or knowingly possessed the contraband found in the vehicle he was driving. In this light, the letter is certainly prejudicial. But we do not find it unfairly prejudicial. The letter contains no evidence of extraneous offenses that might involve Appellant. Indeed, the letter does not even implicate him directly. It is merely some evidence of his intent on which the jury might have permissibly relied. Given the particularly deferential standards we here employ, we conclude Appellant has not carried his heavy burden of showing the trial court abused its discretion in admitting the letter over his Rule 403 objection. Accordingly, we overrule his fifth point of error.
In his sixth and seventh points of error, Appellant claims the letter constitutes hearsay and its admission violated his Sixth Amendment right to confront witnesses against him. In three pages of argument on these points, Appellant scarcely nods to the Sixth Amendment and Texas Rule of Criminal Evidence 801, mentioning each only once. He cites no case law. He cites no treatises or law review articles. He provides absolutely no authority concerning what constitutes a witness, what suffices as confrontation, when the right to confrontation applies, or to show the letter contains statements, that those statements were offered for their truth, and that no hearsay exceptions apply. A party asserting error on appeal must provide citation of authority and argument, or nothing is presented for review. Failure to do so *650 waives the claimed error. Tex.R.App.P. 74(d) & 74(f); State v. Gonzalez, 855 S.W.2d 692, 697 (Tex.Crim.App.1993); McWherter v. State, 607 S.W.2d 531, 536 (Tex.Crim.App. 1980); Texaco v. Pennzoil, 729 S.W.2d 768, 810 (Tex.App.Houston [1st Dist.] 1987, writ ref'd n.r.e.), cert. dism'd, 485 U.S. 994, 108 S. Ct. 1305, 99 L. Ed. 2d 686 (1988). By failing to adequately brief his sixth and seventh points of error, Appellant has waived the error he alleges in them.
Assuming, arguendo, Appellant has properly presented his seventh point of error for review, we find the letter contains no statements that were offered for their truth[7]. Among other definitional elements, hearsay must consist of a statement that is offered for its truth. Tex.R.Crim.Evid. 801(d) (definition of hearsay). The letter's contents are significant for their existence, independent of their veracity. They served to corroborate Appellant's statements about who he planned to meet and where, and therefore call into question his purpose in doing so. One plausible reason he planned to do so was to consummate a drug transaction. The letter does not identify Appellant or expressly refer to a drug transaction. Thus, it contains no damning statements whose truth would directly implicate Appellant. The letter merely indicates the author would wait with "Ramon" at the same place Appellant planned to meet Ramon Huerta, the owner of the vehicle. Whether or not the author's statements were truthful, their very existence elucidates Appellant's state of mind, and therefore the closely related issue of whether he knowingly or intentionally possessed the contraband, because independent evidence, the ultimate source of which was Appellant's mouth, showed he planned to go to the very place the letter's author said he would wait. Although the fact that Appellant's intended destination coincided with the location specified in the letter might lend an air of veracity to the letter's statements, it doesn't render them any more important, and does not require the conclusion that they were offered for their truth.[8] The letter does not constitute hearsay because its contents were not offered for their truth. We therefore overrule Appellant's seventh point of error.
In his eighth and final point of error, Appellant complains of the sufficiency of the evidence that he knowingly or intentionally possessed the marihuana. In reviewing the sufficiency of the evidence, we are constrained to view the evidence in the light most favorable to the judgment to determine whether any rational trier of fact could find the essential elements of the offense, as alleged in the application paragraph of the charge to the jury, beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979); Geesa v. State, 820 S.W.2d 154, 159 (Tex. Crim.App.1991); Butler v. State, 769 S.W.2d 234, 239 (Tex.Crim.App.1989); Humason v. State, 728 S.W.2d 363, 366 (Tex.Crim.App. *651 1987). Our role is not to ascertain whether the evidence establishes guilt beyond a reasonable doubt. Stoker v. State, 788 S.W.2d 1, 6 (Tex.Crim.App.1989), cert. denied, 498 U.S. 951, 111 S. Ct. 371, 112 L. Ed. 2d 333 (1990); Dwyer v. State, 836 S.W.2d 700, 702 (Tex. App.El Paso 1992, pet. ref'd). We do not resolve any conflict in fact, weigh any evidence or evaluate the credibility of any witnesses, and thus, the fact-finding results of a criminal jury trial are given great deference. See Adelman v. State, 828 S.W.2d 418, 421 (Tex.Crim.App.1992); Matson v. State, 819 S.W.2d 839, 843 (Tex.Crim.App.1991); Leyva v. State, 840 S.W.2d 757, 759 (Tex.App.El Paso 1992, pet. ref'd); Bennett v. State, 831 S.W.2d 20, 22 (Tex.App.El Paso 1992, no pet.). Instead, our only duty is to determine if both the explicit and implicit findings of the trier of fact are rational by viewing all the evidence admitted at trial in the light most favorable to the verdict. Adelman, 828 S.W.2d at 421-22. In so doing, we resolve any inconsistencies in the evidence in favor of the verdict. Matson, 819 S.W.2d at 843 (quoting Moreno v. State, 755 S.W.2d 866, 867 (Tex.Crim.App.1988)).
To prove unlawful possession of a controlled substance, the State must prove the accused (1) exercised care, control and management over the contraband, and that (2) the accused knew the substance he possessed was contraband. Martin v. State, 753 S.W.2d 384, 387 (Tex.Crim.App.1988); Nunn v. State, 640 S.W.2d 304, 305 (Tex.Crim.App. 1982); Musick v. State, 862 S.W.2d 794 (Tex. App.El Paso 1993, pet. ref'd). The evidence must affirmatively link the accused to the contraband by a showing which indicates the accused's knowledge and control of the contraband. Waldon v. State, 579 S.W.2d 499, 501 (Tex.Crim.App.1979); see also Wiersing v. State, 571 S.W.2d 188, 190 (Tex. Crim.App.1978). The burden of showing the affirmative link or links rests upon the State. Damron v. State, 570 S.W.2d 933, 935 (Tex. Crim.App.1978). Possession means more than being where the action is; it involves the exercise of dominion and control over the thing allegedly possessed. McGoldrick v. State, 682 S.W.2d 573, 578 (Tex.Crim.App. 1985); Oaks v. State, 642 S.W.2d 174, 177 (Tex.Crim.App.1982). Mere presence of the defendant at the scene of the offense is not enough. Where the accused is not in exclusive possession of the place where the substance is found, it cannot be concluded that the accused had knowledge of and control over the contraband unless there are additional independent facts and circumstances which affirmatively connect or link the appellant to the contraband by sole or joint possession.
Affirmative and relevant facts linking an accused to the contraband are identified in several opinions. See, e.g., Martin v. State, 753 S.W.2d 384, 387-388 (Tex.Crim.App. 1988); Guiton v. State, 742 S.W.2d 5, 8-10 (Tex.Crim.App.1987); Chavez v. State, 769 S.W.2d 284, 288-89 (Tex.App.Houston [1st Dist.] 1989, pet. ref'd). Any list of affirmative links can only aspire to exhaustiveness. The phrase "affirmative link" in connection with narcotic drug cases apparently appeared for the first time in Texas in Haynes v. State, 475 S.W.2d 739, 742 (Tex.Crim.App.1971). Castellano v. State, 810 S.W.2d 800, 805 (Tex. App.Austin 1991, no pet.) (opinion by John F. Onion, Jr., Presiding Judge (retired), Court of Criminal Appeals). Haynes was followed by Payne v. State, 480 S.W.2d 732, 734 (Tex.Crim.App.1972), and a legion of other narcotic cases using the term and requiring an affirmative link. Castellano v. State, 810 S.W.2d at 805. Castellano finds that this requirement was an outgrowth of the Court of Criminal Appeals's approach to sufficiency review in circumstantial evidence cases, which reasoned that unless the defendant is "affirmatively" linked to the drugs or narcotics, there will be an outstanding reasonable hypothesis that the defendant did not possess the contraband at all, or at least did not know the item he possessed was of a forbidden nature. Id. In Human v. State, 749 S.W.2d 832, 834 (Tex.Crim.App.1988), the Court explained:
Where the State's case is based upon circumstantial evidence, the "exclusion of an outstanding reasonable hypothesis" test may be used as one means of making the determination whether the evidence is sufficient.
*652 Id. (emphasis added)[9].
Appellant cites a lack of direct proof that he knowingly or intentionally possessed the marihuana. Proof of a culpable mental state generally exists in circumstantial evidence. Gardner v. State, 736 S.W.2d 179, 182 (Tex.App.Dallas 1987), aff'd, 780 S.W.2d 259 (Tex.Crim.App.1989). Thus, proof of knowledge is an inference drawn by the trier of fact from all the circumstances. Dillon v. State, 574 S.W.2d 92, 94 (Tex.Crim. App.1978); Trejo v. State, 766 S.W.2d 381, 385-386 (Tex.App.Austin 1989, no pet.). Knowledge can be inferred from the conduct of and remarks by the accused and from circumstances surrounding the acts engaged in by the accused. Lewis v. State, 638 S.W.2d 148 (Tex.App.El Paso 1982, pet. ref'd); Sharpe v. State, 881 S.W.2d 487 (Tex. App.El Paso 1994, no pet.).
That Appellant was alone in the vehicle he was driving serves as evidence he exercised dominion or control over the vehicle in which the contraband was concealed, and he may therefore be deemed to have possessed the contraband. Castellano v. State, 810 S.W.2d at 806; see United States v. Olivier-Becerril, 861 F.2d 424, 426 (5th Cir.1988). Knowledge of the presence of contraband may be inferred from control over the vehicle in which the contraband is concealed, particularly where the amount of the contraband is large enough to indicate that the accused knew of its presence. Castellano v. State, 810 S.W.2d at 806 (citing United States v. Richardson, 848 F.2d 509, 513 (5th Cir.1988); comparing Pollan v. State, 612 S.W.2d 594, 596 (Tex.Crim.App. 1981); Carvajal v. State, 529 S.W.2d 517, 520-21 (Tex.Crim.App.1975), cert. denied, 424 U.S. 926, 96 S. Ct. 1139, 47 L. Ed. 2d 336 (1976)). Courts have cautioned, however, that when the contraband is found in hidden compartments in a vehicle, reliance should not be placed solely upon control of the vehicle to show knowledge. Id. (citing Olivier-Becerril, 861 F.2d at 426-27; United States v. Del Aguila-Reyes, 722 F.2d 155, 157 (5th Cir.1983)). Thus, we must look to additional factors indicating knowledge such as circumstances indicating a consciousness of guilt on the part of the defendant.
The jury was well aware that the cargo with which Appellant had been entrusted was valuable. It was a rational inference that Appellant would not have been entrusted in taking the valuable cargo across an international border if he were a mere innocent, ignorant of all the details surrounding his responsibility and the importance of the cargo in his care. See Castellano v. State, 810 S.W.2d at 806 (finding similar inference rational, and citing Del Aguila-Reyes, 722 F.2d at 157). In addition, Appellant appeared nervous when stopped at the bridge, actually having difficulty opening the trunk when asked to do so because his hands were shaking. The jury may have rationally inferred from this evidence that Appellant's knowledge of the contraband was the cause of his nervousness. The jury also had before it the much disputed letter found in the vehicle. It indicates the author would wait with "Ramon" for "Humberto" and others to discuss their "matter." Appellant independently told inspectors he planned to meet Ramon Huerta at the very place the letter indicates the author would be waiting with "Ramon." The jury may have rationally inferred from this that Appellant was planning to meet Huerta at the designated location to consummate a drug deal, which in turn would have permitted the jury to conclude Appellant knew the vehicle he was driving was laden with marihuana.
In viewing the evidence in the light most favorable to the jury's verdict, we conclude that the jury could have rationally found beyond a reasonable doubt all of the essential elements of the offense charged, including care, control, and management of the marihuana, and that Appellant intentionally or knowingly possessed the contraband. Accordingly, Appellant's eighth point of error is overruled.
*653 Having overruled Appellant's salient points of error, we affirm the judgment of the trial court.
McCOLLUM, J., not participating.
NOTES
[1] The proceedings of the second bench conference follow:
COUNSEL: Anothernote our objection for the record, your honor.
THE COURT: I gave you two minutes to cover two subjects. You only covered one of them. I assume you did not want to cover the other one with the panel as a whole.
COUNSEL: I wanted to cover both of them with a number of panelists, not every one of them, of course.
THE COURT: I wanted to cover both of them with a number of panelists, not every one of them, of course.
THE COURT: If you wish, at this time I will direct the question to the panel if immigration status would make any difference to them.
COUNSEL: Yes, please.
THE COURT: Are you asking that be directed to them?
COUNSEL: Yes, your honor. I think that's very important to us.
....
THE COURT: Members of the panel, I do have one additional question that I will direct to you at this time, and that's regarding the immigration status of the defendant, which at this time I'm not sure exactly what the evidence may be. But if it did show that for some reason the defendant was not legally in the States at this time, would that in any way affect your service as a member of this jury?
One venireperson responded to the trial court's query in the affirmative. Counsel thereafter conducted no further examination of the venire as a whole.
[2] The reasonableness of the time limits imposed by the trial court presents an issue separate from the denial of additional time to further question the venire or individual venirepersons. See Caldwell v. State, 818 S.W.2d at 793 (so distinguishing). In his perhaps intentionally cryptic argument related to his first point of error, Appellant does not make clear which issue he wishes to raise. We note that Appellant never objected to the thirty minute time limit imposed by the trial court, and we do not perceive his first point of error, which complains of the "curtailing" of his voir dire examination, to encompass the propriety of this limit. Further, Appellant did not object to the length of additional time he was granted to examine the venire about his immigration status and his right not to testify, and we do not perceive his first point of error to be directed at this limit. His first objection came at the beginning of the second bench conference, and did not clearly identify its object. Appellant never expressly requested additional time to conduct further voir dire examination. Thus, we find that Appellant does not raise the separate issue of the propriety of the general or additional time limits imposed by the trial court. Indeed, we are not convinced that Appellant has properly preserved any error whatever. We do not resolve the preservation issue, however, because of our disposition of Appellant's substantive claims, at least those we can discern from his brief.
In identifying those claims, we find significant that Appellant failed to object before being twice informed his time had expired, and that he failed to explicitly request additional time to question the venire. Because of these failures, we examine only whether the trial court erred by refusing to grant Appellant yet more time to question the venire and individual venirepersons about his immigration status and to individually question more venirepersons about his right not to testify. We emphasize that Appellant did not actually make such a request and in his brief makes little attempt to define the issue he wishes to raise. Although the substance of the second bench conference and of his brief may not be sufficient to even implicitly raise the issue with adequate specificity, this issue is raised more clearly than any other. In the interest of justice and out of fairness to Appellant, we therefore address it.
[3] In the alternative, we note the record lacks evidence of the ultimate composition of the jury. Absent such evidence, we cannot conclude Appellant was denied the opportunity to question any venireperson who eventually served on the jury. In a succinct opinion, the Court of Criminal Appeals held that such a lack of evidence prevents a defendant from showing he has been harmed by the trial court's action and disposes of the issue. Whitaker v. State, 653 S.W.2d 781 (Tex.Crim.App.1983). Although Whitaker apparently involved a challenge to the global limit set on a defendant's voir dire, which we earlier distinguished as a separate issue not raised by Appellant, we find Whitaker's rationale equally applicable to the instant case and find it an independently sufficient basis to overrule Appellant's first point of error.
[4] In his conditional second point of error, Appellant complains of the exclusion from the record of the eight pages of questions the trial court admitted into evidence during the second bench conference. The record contains an eight page document hand-marked as "Def # 1 Voir Dire." Although we granted Appellant's pre-submission motion to supplement the record with a similar document, it is not clear whether Def. # 1 Voir Dire appears in the record by supplementation or was already in the record when the motion was filed. It matters little because the State concedes the document in the record is the one admitted during the second bench conference. We therefore do not address Appellant's second point of error.
[5] The letter was discovered during a search of the car conducted after it was driven to a secondary inspection area. A copy of the original, hand-written in Spanish, appears as an exhibit in the record. It was translated at trial by the court interpreter, who read it into the record as follows:
Humberto, if possible, follow Nacho, who will cross him on over here, because as you know, I'm not able to go over there. His brother was going to deliver this letter. And in it, I tell you that I wish to speak directly with you about our matter, so that there will be no misunderstandings between us. The person who's going along with your brother is the person who's going to help us cross the car over. Please follow them. Please follow it untilto the place where he will show his papers and that the car will arrive, or get to the check point in order to verify or ascertain that in reality the car will cross. We, or ratheror in other words, Ramon and myself are going to be waiting for it right after the first street which goes into El Paso. After that, try totry as hard as you can to come, all three of you, over to here, to the apartment. Or if it is possible for me, I will wait for you at tho place that Nacho already knows about where I waited for you last time. I will wait for you in order to bring you. And if it is notit does not turn out like that, Nacho and his brother already have the beeper number where they can call or can talk, and then we will go back for you. And finally, I charge you with the responsibility ofand finally, I ask you very much to follow the car untilas far as it is possible, and do not let it out of your sight until you see it cross. You can come on foot up until the pointyou can come on foot until just before the place where passports are checked. Nacho also knows this. Nothing more at the present. Your friend, Meny.
[6] This evidence was first adduced during an offer of proof. Thus, the trial court had the benefit of it when it ruled on the admissibility of the letter.
[7] We think a mere nod to the rule that proscribes hearsay evidence might, under exceedingly generous standards, be sufficient to adequately present the issue because of the well known principles it involves and the relatively simple analysis required to address it. Perhaps obviously, we do not find the same to be true of the issue of Appellant's Sixth Amendment right to confront witnesses against him. We are generally cognizant of the difficulty courts at all levels have encountered when a defendant claims that the admission of hearsay evidence against him deprives him of his Sixth Amendment right to confront witnesses against him or of his Fifth and Fourteenth Amendment rights to due process. We think the confrontation issue sufficiently complex to render the citation of authority at least prudent. Moreover, we think that the jurisprudence surrounding the issue is so vast as to require the citation of at least some authority to properly present it for appellate review.
[8] Texas Rule of Criminal Evidence 801(c) defines "matter asserted" to include any "matter implied by a statement, if the probative value of the statement as offered flows from declarant's belief as to the matter." We recognize the letter's probative value is in part attributable to the fact that Appellant may have known about it and believed its contents to be true. This merely establishes that the letter asserts particular matters. Our analysis focuses on whether those assertions were offered for their truth. Thus, although the letter may implicate Rule 801(c) because the probative value of its assertions in part flows from Appellant's possible belief in them, the letter still fails to meet the definitional requirements of Rule 801(d) because the statements containing those assertions were not offered for their truth.
[9] The parties engage in much argument over whether the affirmative link requirement survived the changes in sufficiency review wrought by Geesa v. State, 820 S.W.2d 154 (Tex.Crim.App. 1991). We think it unnecessary to address this issue because we find the evidence sufficient to establish an affirmative link. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454584/ | 901 S.W.2d 1 (1995)
321 Ark. 7
Henry HODGES, Appellant,
v.
Alice S. GRAY, Chancellor, Pulaski Chancery Court (First Division), Appellee.
No. 94-1191.
Supreme Court of Arkansas.
June 12, 1995.
*2 Jeff Rosenzweig, Little Rock, for appellant.
Tim Humphries, Deputy Atty. Gen., Little Rock, for appellee.
DUDLEY, Justice.
Appellant Henry Hodges, an attorney, appeals from being four times held in contempt of court by Chancellor Alice Gray for contumacious statements made during the argument of a child custody case. Appellant Hodges represented Pamela Skokos, the former wife of Theodore Skokos, also a member of the bar, in an extended divorce and child custody case. The record clearly reflects a contest of wills between counsel and the chancellor. At one point, Ms. Skokos petitioned this court for a writ of certiorari to disqualify Chancellor Gray from hearing the case because of her bias and prejudice. Skokos v. Gray, 318 Ark. 571, 886 S.W.2d 618 (1994).
I.
Chancellor Gray moves for this court to dismiss this appeal because of the doctrines of either res judicata or law of the case. In support of the argument, she states that in our earlier denial of certiorari we wrote:
Our consideration of Ms. Skokos's allegations in response to her petition for certiorari will preclude us from considering them again, should there be a later appeal. Henderson Methodist Church v. Sewer Improvement Dist. No. 142, 294 Ark. 188, 741 S.W.2d 272 (1987); Bertig Bros. v. Independent Gin Co., 147 Ark. 581, 228 S.W. 392 (1921); Note, 17 Ark. L. Rev. 193 (1963).
Id. at 573, 886 S.W.2d at 621.
Our statement about the consequences of seeking certiorari is a correct statement of the law, but it is not applicable to this appeal by appellant Hodges. The issue decided in Skokos v. Gray was whether, because of bias and prejudice, a writ of certiorari should direct the chancellor to refrain from hearing the divorce and custody case involving the Skokoses. Appellant Hodges has never asked chancellor to refrain from holding him in contempt of court because of bias or prejudice against him. Because both the parties and the issues are different, neither doctrine applies, and we decline to dismiss this appeal.
II.
Appellant Hodges's first assignment is that the trial court erred in summarily holding him in criminal contempt on each of the four occasions because the evidence was insufficient. We affirm the holdings of contempt on the first two occasions and reverse and dismiss the second two holdings.
*3 A.
Summary punishment for contempt committed in the "presence or hearing" of the court is an inherent power and is specifically reserved to the courts by the constitution. Yarbrough v. Yarbrough, 295 Ark. 211, 748 S.W.2d 123 (1988). This case involves criminal contempt, as fines were imposed and the punishment could not be avoided by performing an affirmative act. See Fitzhugh v. State, 296 Ark. 137, 752 S.W.2d 275 (1988). The standard of review of a case of criminal contempt is settled. An appellate court views the record in light most favorable to the trial judge's decision and will sustain the decision if supported by substantial evidence and reasonable inferences therefrom. Yarbrough, 295 Ark. at 212, 748 S.W.2d at 123.
B.
The facts leading up to each of the four holdings of contempt are set out in sequence in order to address appellant Hodges's argument that "the contempt findings against [him] are legally insufficient." Different parts of the divorce case had been tried over a period of fifteen months. All of the evidence on child custody had been presented, but even after that long period of time, custody had not been finally determined. During the fifteen months of proceedings, Ms. Skokos's attorneys, appellant Hodges and co-counsel Robert L. Robinson, twice filed petitions asking Chancellor Gray to disqualify because of an alleged bias and prejudice against Ms. Skokos. They aggressively pursued the petitions, but the chancellor refused to disqualify. Subsequently, the chancellor set August 25 as the date for final arguments on the child custody issue. Each side was allotted ten minutes to argue the custody issue.
On August 24, 1994, the day before the arguments on custody were scheduled to be heard, appellant Hodges filed a complaint against Chancellor Gray with the Arkansas Judicial Discipline and Disability Commission. The complaint alleged that in an unrelated case Chancellor Gray ordered her law clerk, who was not qualified to serve as a special judge, to grant a divorce for another of Hodges's clients. On that same day, appellant filed a third motion on behalf of Ms. Skokos requesting Chancellor Gray to disqualify, this time because of the complaint before the discipline commission.
On the 25th, when the arguments were scheduled to begin, Robert Robinson, Hodges's co-counsel, asked the chancellor to hear the third motion to recuse. She declined and ordered the attorneys to argue the custody matter. Robinson insisted on making a record, but the chancellor repeatedly told him that each side was allowed only ten minutes to argue the custody matter and that he would be removed from the courtroom if he continued to try to argue the disqualification matter. Robinson stated that at prior hearings involving the other motions to disqualify, the chancellor had declined to rule on substantive motions until she had decided on the motions to recuse. The chancellor replied that this hearing was for final arguments on custody, no new evidence was to be presented, and there was no need to decide the recusal question before hearing closing arguments.
Perlesta A. Hollingsworth, one of the attorneys for Mr. Skokos, moved to withdraw his motion for an immediate ruling on permanent custody and asked instead to argue only the issue of temporary custody. Appellant Hodges responded that there had been no notice of a hearing on temporary custody, and if the chancellor "[got] into that issue [she would] need to get into these other issues, as well." The chancellor instructed appellant Hodges to let Mr. Hollingsworth finish his statement, but appellant continued to respond to the motion. During Mr. Hodges's response, he first stated that there had been no notice of a temporary hearing and then renewed his argument that the chancellor should hear the motion to disqualify. The chancellor ruled that the hearing would proceed with the final arguments as originally scheduled and that appellant Hodges would not be allowed to present the motion to disqualify at that time. Mr. Hodges then asked if the hearing could be recessed until the chancellor heard the motion to dismiss. The chancellor denied the motion.
Mr. Hollingsworth again asked for a hearing on temporary custody. Appellant Hodges *4 stated, "Now, is Mr. Hollingsworth now changing the Court's view as to whether we are going to have final arguments and close this custody case period?" The chancellor asked for appellant Hodges's response to Hollingsworth's request, and he replied that he wished to proceed with closing arguments, but again objected to her refusal to first hear the disqualification motion because it was a departure from her policy in the past.
Finally, appellant's argument on custody began as follows:
May it please the court, Judge, this has been a long case and you are now hearing final arguments, as I understand it, on the custody issue.
I thought to myself, how can I convince you coming over here that Mrs. Skokos, a wife of 27 years, ought not to be parted from her 13 year old daughter and I am convinced that I can't convince you because you made up your mind previously.
I think you made up your mind when you removed this lady and her 12 year old daughter at the time from her marital home on Edgehill.
The chancellor instructed Mr. Hodges that this was not the time to criticize the court's decisions, but to summarize the evidence in closing argument.
Mr. Hodges's reply was:
I am entitled, Your Honor, respectfully suggest to you that I am entitled to make my closing arguments.
You have given meafter 15 months in this case on custody you have given me ten minutes to summarize it and I think I am entitled to use those minutes however I so choose. Now, that is exactly what I think and I am going to continue. (Emphasis added.)
At this point, Chancellor Gray held appellant in summary contempt and amerced a $200.00 fine. The chancellor additionally noted the presence of the newspaper reporter and television camera, and said, "You have the media waiting and you can also appeal. You have other remedies but your ten minutes here is not going to be allocated for that." Appellant Hodges asked, "Is what you just said counted against my ten minutes?"
1.
Appellant Hodges argues that the foregoing facts are legally insufficient to support the holding of summary contempt. A subsequent written order provides that the holding of contempt was made because appellant "refused to follow the Court's directions."
An act is contemptuous if it interferes with the order of the court's business or proceedings, or reflects upon the court's integrity. Carle v. Burnett, 311 Ark. 477, 845 S.W.2d 7 (1993); see also Edwards v. Jameson, 284 Ark. 60, 679 S.W.2d 195 (1984). The inherent power to punish for contempt should never be exercised except where the necessity is plain and unavoidable if the authority of the court is to continue. Edwards, 284 Ark. at 63, 679 S.W.2d at 197 (citing Freeman v. State, 188 Ark. 1058, 69 S.W.2d 267 (1934)). The court's contempt proceedings are to preserve the power and dignity of the court, to punish for disobedience of orders, and to preserve and enforce the rights of the parties. Id. An attorney should not engage in conduct which offends the dignity of the court. Davis v. Goodson, 276 Ark. 337, 635 S.W.2d 226 (1982). An attorney may make a proper objection to a ruling of the court, but then should abide by the ruling so long as it remains in effect. Id. at 339, 635 S.W.2d at 227.
Here, the chancellor clearly and repeatedly instructed the attorneys that she was not going to hear a third motion to disqualify at that time and that the hearing was limited to argument on the custody issue. Counsel should have followed the court's ruling and limited comments to the custody issue. Instead, appellant repeatedly brought up the motion to recuse in clear defiance of the court's order. Finally, appellant stated that he was going to use his time for closing argument however he chose. Viewing the record in the light most favorable to the trial judge, as we must do, Yarbrough, 295 Ark. at 212, 748 S.W.2d at 123, there is sufficient evidence to support the holding of contempt.
*5 2.
Appellant proceeded with final argument and stated: "In spite of what this Court has ruled in the past I think the real issues are very, very clear," adding that "there is no worse case scenario than for fifteen months what this court has allowed...." Next he began to address factors a chancellor ought to consider in determining child custody. The argument, which immediately precedes the second holding of contempt, was as follows:
And the last thing is love and affection. Let's talk about the first point. Mr. Skokos's moral fitness. Now, where does that begin? That begins when he had sexual relations in their marital homenot in their marital home but in their marital bed.
Now, Judge, are you going to listen to me or are you going to
THE COURT: That is Fifty Dollars, Mr. Hodges.
The subsequent written order notes that the remark was made when the court "summoned the bailiff." Appellant Hodges later described it as the court "visiting" with the bailiff. The transcript provides no additional information. An audio tape included in the record only adds the fact that this occurrence took place very quickly. Viewing the evidence and all reasonable inferences as we must, the remark, when taken in context of the entire argument, constitutes substantial evidence to support the holding of contempt. Appellant Hodges's argument, with all reasonable inferences, was that the chancellor was biased and had already made her mind up about the case, that she had allowed a worst case scenario to take place, and now, because she summoned the bailiff or visited with the bailiff, she would not even listen to him. The statement was disrespectful and tended to impair the respect due the court's authority. Thus, it was contumacious. See Ark. Code Ann. § 16-10-108(a) (Repl.1994).
3.
Immediately after the chancellor summarily fined appellant for the foregoing comment, appellant responded, "Well, I would like the record to show that you are visiting with Billy the bailiff." Chancellor Gray then held appellant in summary contempt and fined him for the third time.
Appellant Hodges's argument is well taken that the statement, even when taken in context of all the other statements, did not constitute a disrespectful or derogatory remark and did not constitute a violation of an instruction by the court. Rather, it shows that appellant was attempting to have the record accurately reflect, for the purpose of this appeal, that the chancellor said something to the bailiff. That was entirely proper. Further, there is nothing to indicate that the reference to "Billy the bailiff" was anything other than an attempt to identify the person to whom the chancellor spoke.
4.
The chancellor had previously fined one of Mr. Skokos attorneys for using the word "bullshit" during an argument and had ordered the attorneys not to use inappropriate language. In his argument on custody, appellant Hodges stated that the minor child's attorney ad litem had a conflict of interest, but still the chancellor refused to disqualify the attorney ad litem. Appellant Hodges argued to the court that this refusal placed Ms. Skokos in an impossible position because she was criticized by the attorney ad litem if she did not give Mr. Skokos visitation, but when she allowed Mr. Skokos to visit the child, he refused to return the child to her and claimed he had full custody. Appellant concluded that, as a result, Ms. Skokos was "damned if she does and damned if she doesn't." At that point, the chancellor, for the fourth time in the hearing, held appellant in summary contempt for using "that language."
The subsequent written order states that the court had warned appellant not to use inappropriate language "such as hell and damned." Again, appellant Hodges's argument is well taken that there is no substantial evidence to support a holding of contempt. Rosenzweig v. Lofton, 295 Ark. 573, 585, 751 S.W.2d 729, 734 (1988). It is clear from the statement that the words were not used as expletives.
*6 Before a person may be held in contempt for violating a court order, the order must be in definite terms as to the duties imposed on him, and the command must be express rather than implied. Lilly v. Earl, 299 Ark. 103, 771 S.W.2d 277 (1989). When, under the circumstances and the legal issues involved, a party does all that is expressly required of him, it is error to hold him in contempt. See Wood v. Goodson, 253 Ark. 196, 204, 485 S.W.2d 213 (1972). When there is nothing in a court order to indicate a party's specific duty to do something, then this court has refused to find that the party is in contempt. See Lilly, 299 Ark. at 111, 771 S.W.2d at 281.
The earlier order of the chancellor did not constitute notice that a word that is sometimes used as an expletive could not be used in another context. The United States Supreme Court has held that even the use of street language or vernacular cannot constitutionally support a conviction of criminal contempt when it was not directed at the judge or any court officer and did not constitute an imminent threat to the administration of justice. See Eaton v. Tulsa, 415 U.S. 697, 94 S. Ct. 1228, 39 L. Ed. 2d 693 (1974) (holding that the accused's use of the word "chicken shit" to describe his assailant during cross-examination did not constitute a threat to the court).
In summary, we hold that there was substantial evidence to support the first two holdings of contempt, but there was no basis for the second two. Accordingly, at this point, we reverse and dismiss the second two holdings of contempt.
III.
Appellant next argues that, even if there was substantial evidence of contempt on the first two occurrences, he had a right to criticize the judge, who is a public official, under the First Amendment. In support of the argument he cites New York Times v. Sullivan, 376 U.S. 254, 84 S. Ct. 710, 11 L. Ed. 2d 686 (1964). The argument is without merit because even protected speech is not equally permissible in all places at all times. Cornelius v. NAACP Legal Defense Fund, Inc., 473 U.S. 788, 799, 105 S. Ct. 3439, 3447, 87 L. Ed. 2d 567 (1985). In general it may be said that the State may place reasonable time, place, and manner restrictions on speech that takes place in a public forum. Ronald D. Rotunda and John E. Nowak, Treatise on Constitutional Law § 20.47 at 296 (2d ed. 1992).
The history and development of contempt proceedings do not suggest such a restrictive interpretation of contempt powers that courts would be rendered powerless to enforce orderly sanctions for misconduct by members of the bar and would be rendered powerless to insure that justice and fairness took place. Rather, the powers of contempt are reasonable as applied to time, place, and manner restrictions on freedom of speech. Cornelius, 473 U.S. at 806, 105 S. Ct. at 3451; see also Spencer v. Dixon, 290 F. Supp. 531 (1968).
IV.
Appellant next contends that even though the evidence is sufficient on the first two holdings of contempt, reversal is mandated because of lack of notice and opportunity to defend and because the determination should be made by another judge. However, neither argument was made in the trial court, either during the custody hearing or in a later motion. This court does not address arguments raised for the first time on appeal. Even constitutional arguments are waived on appeal if they are not raised at trial. Stewart v. Winfrey, 308 Ark. 277, 824 S.W.2d 373 (1992); Powell v. Burnett, 304 Ark. 698, 805 S.W.2d 50 (1991). Thus, we do not address that point of appeal.
Affirmed in part; reversed and dismissed in part.
BROWN and ROAF, JJ., not participating.
CORBIN, J. and BLAIR ARNOLD, Special Justice, dissent.
BLAIR ARNOLD, Special Justice, dissenting.
I respectfully dissent from the majority's affirmance of the first and second contempt findings in this case. I believe these findings of contempt reflect an overly sensitive reaction *7 by the Chancellor to reasonable efforts of appellant to try his case under very difficult circumstances.
BACKGROUND
To properly analyze this case, I believe a thorough scrutiny of the background is critical. As stated by Special Justice Kathleen V. Compton in her dissent in Skokos v. Gray, 318 Ark. 571, 886 S.W.2d 618 (1994):
The transcript and briefs in this case indicate very clearly that there is acrimony between Chancellor Gray and the attorneys for Ms. Skokos. In fact, Chancellor Gray has made comments on the evidence which indicate her displeasure with Ms. Skokos as well. She challenged Ms. Skokos' credibility and she advised Ms. Skokos that she felt Mr. Skokos was "more conciliatory." She commented that it appeared that Ms. Skokos "wanted everything" specifically, custody of the parties' minor child, possession of the marital home, and money. It is not mentioned by the Court that Mr. Skokos also wants those same things. In fact, in the majority of divorce cases, these are the common bones of contention and the reasons for litigation. They hardly were revolutionary requests. Chancellor Gray has a duty to be "fair and impartial" to all litigants in her Court, and her commentary is unnecessary....
The Chancellor on more than one occasion refused to allow attorneys for Ms. Skokos to make a record. She interrupted during their questions and their arguments. She routinely reminded them of the time constraints being imposed by the Court. She engaged in a running commentary about their demeanor. She also testified from the bench during a recusal hearing.
Id. at 578, 886 S.W.2d at 622.
Additionally, the record reflects a number of rulings and decisions by the Chancellor which were questionable at best. I feel it is helpful to list some of these. First, the Chancellor refused to consider certain motions. Second, the Chancellor moved Ms. Skokos and her twelve-year-old daughter out of the marital home despite the admitted adulteries of Mr. Skokos, some of which occurred in the home, because of her "policy" of always removing the complaining party in a divorce from the home. Third, the Chancellor falsely accused appellant's co-counsel of misconduct in preparing a precedent when the record reflects that his precedent either accurately reflected her rulings or at least was an honest interpretation of those rulings. Fourth, the Chancellor refused to set an amount of spousal support on the basis that there was no proof as to Mr. Skokos' income despite the fact that the parties' 1992 Income Tax Return was produced and Mr. Skokos' 1993 income was stipulated. Fifth, the Chancellor ruled that Mr. Skokos did not need to provide support directly to Ms. Skokos because she was financially irresponsible. This ruling was based upon Ms. Skokos making a late payment of a water bill. Sixth, the Chancellor allowed the attorney-ad-litem for the minor child of the parties to serve both as a witness and an advocate or attorney. See Model Rules of Professional Conduct 3.7. Seventh, the Chancellor refused to disqualify the attorney-ad-litem and one of Mr. Skokos' counsel despite the fact that the attorney-ad-litem was an associate or employee of one of this counsel's law partners. See Model Rules of Professional Conduct 1.10; Cinema 5 Ltd. v. Cinerama, 528 F.2d 1384 (2nd Cir.1976); United States v. Cheshire, 707 F. Supp. 235 (M.D.La.1989); First American Carriers v. Kroger, 302 Ark. 86, 787 S.W.2d 669 (1990).
The events of the August 25, 1994 hearing occurring prior to the alleged contemptuous statements are significant also. First, not only did the Chancellor refuse to hear the third motion to recuse, she even refused to allow a record to be made on her refusal and threatened to remove appellant's co-counsel from the courtroom for asking to make a record. Those rulings were based upon the time constraints of the Court.
Second, although the hearing was for final arguments on custody, the Chancellor then allowed counsel for Mr. Skokos to have a rather lengthy hearing on his request to argue a change in temporary custody, despite these time constraints.
Third, the Chancellor implicitly denied having received a copy of the complaint filed against her. When questioned by appellant *8 to the effect that he had sent a copy to her by runner, she then admitted receiving something that was termed a complaint, but said it was not from the Judicial Ethics Commission and therefore she did not know whether a complaint had been filed or not. This seems to be disingenuous at best.
Fourth, the Chancellor then allowed Mr. Skokos' counsel to have another rather lengthy hearing on his request to argue a change in temporary custody. Presumably these time constraints still applied.
It was at this point that the closing argument began which led to the first two findings of contempt. Although the Majority has quoted portions of the argument concerning these two findings, I believe it is helpful to state the whole discussion.
MR. HODGES: May it please the Court, Judge, this has been a long case and you are now hearing final arguments, as I understand it, on the custody issue.
I thought to myself, how can I convince you coming over here that Mrs. Skokos, a wife of 27 years, ought not to be parted from her 13 year old daughter and I am convinced that I can't convince you because you have made up your mind previously.
I think you made up your mind when you removed this lady and that 12 year old daughter at the time from her marital
THE COURT: Sir, now, if you
MR. HODGES: home on Edgehill
THE COURT: want to direct comments toward the Court's action in this case you need to do it somewhere else.
MR. HODGES: Well, Your Honor, I am making my closing argument
THE COURT: And if you want to summarize
MR. HODGES: and I think
THE COURT: If you want to summarize
MR. HODGES: I am entitled to do that.
THE COURT: If you want to summarize your case then you may do so. Otherwise, you are going to have to stop or we are going to move on to another side.
MR. HODGES: I am entitled to make
THE COURT: This is not your forum
MR. HODGES: my closing argument.
THE COURT: to complain about how this Court has handled rulings. Now, if you want to summarize your evidence and present your final argument then you can present it. Otherwise, you are going to have to stop and we will move on to another party.
MR. HODGES: I am entitled, Your Honor, respectfully suggest to you that I am entitled to make my closing arguments.
You have given meafter 15 months in this case on custody you have given me ten minutes to summarize it and I think I am entitled to use those minutes however I so choose. Now, that is exactly what I think and I am going to continue.
Now, I
THE COURT: You are in contempt, Mr. Hodges, and you are being assessed a $200.00 fine.
MR. HODGES: Your Honor, I am going to continue and
THE COURT: and it is due by 9:00 a.m.
MR. HODGES: you just have to
THE COURT: I knowMr.
MR. HODGES: you have to just find me in contempt.
THE COURT: First of all, Mr. Hodges, the Court is aware that you have a reporter who follows you apparently every day and who is here now and there is a camera.
The Court is aware that you are attempting to have this Court remove you so that you can cause some big media blitz. Now, if that is what you are asking for that is what the Court is about to do but you are going to have to be respectful when you are in here.
MR. HODGES: Your Honor, I am trying to be
THE COURT: The Court has just assessed
MR. HODGES: respectful
THE COURT: The Court has assessed a $200.00 fine. It is due by 9:00 o'clock in *9 the morning. It has to be paid down in the Clerk's office.
Now, if you haveif you want to summarize your evidenceyou don't get to use your time for closing arguments to criticize this Court's rulings, Mr. Hodges. You can appeal and do that. That is not what the Court set aside the time for.
I know how you feel about the Court's rulings and this Court does not have the time right now to sit and listen to every complaint that you have, Mr. Hodges.
If you want to summarize the evidence, you can do that. You can present any closing argument as to why this Court should award custody to your client.
If you want to complain about the Court's actions then you said you filed the Complaint. You have the media waiting and you can also appeal. You have other remedies but your ten minutes here is not going to be allocated for that.
MR. HODGES: Is what you just said counted against my ten minutes?
THE COURT: You may proceed.
MR. HODGES: Is it counted against my ten
THE COURT: You may proceed, Mr. Hodges.
MR. HODGES: minutes?
In spite of what this Court has ruled in the past I think the real issues in this case are very, very clear.
Judge Dudley wrote an article in 1980 were he established four crucial points about child custody that I think still apply today, Judge Dudley, then Chancellor Dudley, now Supreme Court Justice Dudley and he talked about four issues....
And the last thing is love and affection. Let's talk about the first point. Mr. Skokos' moral fitness. Now, where does that begin? That begins when he had sexual relations in their marital homenot in their martial home but in their marital bed.
Now, Judge, are you going to listen to me or are you going to
THE COURT: That is $50.00, Mr. Hodges, and that is also due in the morning by 9:00 o'clock.
MR. HODGES: Well, I would like for the record to show that
THE COURT: A $50.00 fine.
MR. HODGES: you are visiting with Billy the Bailiff.
THE COURT: That is another $50.00 fine so that is a total of $300.00 due at 9:00 o'clock in the morning.
You may proceed. (Emphasis added.)
LEGAL DISCUSSION
The Majority Opinion contains an excellent and very thorough discussion of the law of contempt in Arkansas. However, I believe it fails to recognize other principles and standards which should apply in reviewing a contempt finding. Contempt is an extraordinary power of the Court which should not be exercised except in cases where the necessity is plain and unavoidable. Freeman v. State, 188 Ark. 1058, 69 S.W.2d 267 (1934). An action taken which does not affect the administration of justice is not contemptuous. Norton v. Taylor, 299 Ark. 218, 772 S.W.2d 316 (1989).
The United States Supreme Court in the case of In re Little, 404 U.S. 553, 92 S. Ct. 659, 30 L. Ed. 2d 708 (1972), stated, inter alia, as follows:
[T]he law of contempt is not made for the protection of judges who may be sensitive for the winds of public opinion. Judges are supposed to be men of fortitude, able to thrive in a hardy climate.... Trial Courts ... must be on guard against confusing offensives to their sensibilities with obstruction to the administration of justice....
Id. at 555, 92 S. Ct. at 660 (citations omitted).
Significantly, the court in Clark v. State, 291 Ark. 405, 725 S.W.2d 550 (1987), stated as follows:
[The contempt power] must never be used to place judges above the law. The vital public respect for and faith in judicial institutions will, we believe, be enhanced by the extent to which we are able to solve *10 our problems with patience as opposed to pique, holding our power in reserve.
Id. 291 Ark. at 409-10, 725 S.W.2d at 553.
An attorney is not guilty of contempt because of making appropriate objections or exceptions. An attorney is not guilty of contempt by pressing a legitimate argument even though inadequacies in the actions taken by the Court are pointed out. An attorney is not guilty of contempt for attempting to clear up doubts or questions as to the Court's ruling. 17 C.J.S. Contempt § 25(b) (1963).
Where a statement is susceptible to more than one construction, and might have been given an innocent construction, any contempt is purged by a disavowal as to contemptuous intent. Freeman v. State, supra.
Misunderstandings between the Court and counsel are not an appropriate basis for a finding of contempt. McCullough v. Lessenberry, 300 Ark. 426, 780 S.W.2d 9 (1989); Lessenberry v. Adkisson, 255 Ark. 285, 499 S.W.2d 835 (1973).
I.
The first finding of contempt is evidently based in part on the Chancellor's opinion that the beginning of Mr. Hodges' closing statement is a criticism of her prior rulings rather than summarization of evidence and in part upon the Chancellor's feelings that he intended to continue criticizing her rulings.
These opening remarks made before the Chancellor first interrupted Mr. Hodges, are merely prefatory remarks outlining the progress of the case up to that day. Suffice it to say that opening remarks in many cases follow the same format.
Appellant seems to be requesting the Chancellor to step back and think about this issue with an open mind. Looking at her past rulings, this was certainly not an unreasonable request. However, we will never know for sure where counsel was headed with these prefatory remarks as he was cut off too quickly. In any event the remarks up to this point are by no means contemptuous. They are legitimate arguments even if they point out alleged inadequacies.
The issue then becomes what appellant meant when he kept telling the Court he intended to continue. The Chancellor obviously felt that appellant meant that he was going to continue to criticize her previous rulings.
There is nothing in the record to support this. Given the time constraints placed upon him in making this argument, appellant just as likely might have meant that he wanted to continue on with his closing argument, not that he intended to criticize the Chancellor's previous rulings. We will never know for sure as the Court cut him off and did not inquire of his specific intent.
I do not believe this constitutes contempt. Appellant's statements during this process are susceptible to two interpretations and are ambiguous. This is particularly true where counsel on at least two occasions during this discussion told the Court he was in fact trying to be respectful. Freeman v. State, supra. Furthermore, this appears to be a clear misunderstanding between counsel and the Court which will not support a finding of contempt. McCullough v. Lessenberry, supra; Lessenberry v. Adkisson, supra.
Third, it seems clear that counsel was trying to make an argument on the content and scope of closing arguments, but was repeatedly cut off by the Court before he could finish. The record is replete with incidents where the Chancellor refused to allow objections or allow Ms. Skokos' counsel to make a record. This is one more. Counsel had a legal right to address the question of the propriety of his argument and make a record thereon.
Fourth, there is nothing in the record which reflects that any untoward interference with the administration of justice occurred.
Even though this was a closed hearing and no reporters or "laymen" were present, the Chancellor's continued remarks (about media being in the hallway and suggestions that appellant had them there to criticize her) seem to indicate that the real problem was the Chancellor's sensitivities to real or perceived criticism rather than appellant's actions and statements in the Courtroom.
*11 This sensitivity is underscored by her later finding that appellant was in contempt by making a statement as innocuous as his client was damned if she did and damned if she didn't and also by the Chancellor's continued assertions throughout the entire course of these proceedings that both counsel for Ms. Skokos were trying to goad her.
For all of these reasons, this is not contempt.
II.
Shortly into appellant's argument, the Chancellor summoned a bailiff and evidently began talking to him. When appellant observed this, he asked the Chancellor if she were going to listen to him. Such a question could not possibly be contemptuous in and of itself. Moreover, it was necessary to make a record as to what was occurring. Had counsel not made this statement, the record would have been silent as to the fact that the Chancellor was discussing something with the bailiff. Counsel might very well have wanted to get this in the record as a potential ground for appeal. This seems to be noncontemptuous, not only because of the reasons stated in the Majority Opinion as to right of counsel to make a record, but also because it is noncontemptuous in and of itself.
CONCLUSION
An attorney has no right to be contemptuous to the Court because he is receiving incorrect, ill advised, or unfair rulings or scheduling. An attorney has no right to be contemptuous to the Court because the Court makes unfounded statements about himself or his client. An attorney has no right to be contemptuous merely because a hearing is closed and nonjudicial personnel are not present.
Nevertheless, a court must recognize the difference between forceful advocacy under difficult circumstances and contemptuous behavior. A court must recognize that making a record necessitates questioning a decision, and that is not contemptuous argument. A court must rise above its own sensibilities and not act out of personal pique or anger. A court should give some leeway to what is said in the heat of battle. A court should not make findings of contempt unless there is an interference with the administration of justice.
When looking at the record as a whole and in examining appellant's comments in the context of the entire case, I feel that all of the findings of contempt should be reversed and dismissed.
CORBIN, J., joins in this dissent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454599/ | 258 P.3d 172 (2011)
Elizabeth WALSH, surviving wife of Jerome Walsh, deceased; and Annette Forrester, Scott Walsh, Steven Walsh, and Lisa Cline, surviving children of Jerome Walsh, deceased, Plaintiffs/Appellants,
v.
ADVANCED CARDIAC SPECIALISTS CHARTERED, Defendant/Appellee.
No. 1 CA-CV 09-0751.
Court of Appeals of Arizona, Division 1, Department A.
May 26, 2011.
*173 Law Office of Scott E. Boehm, P.C. By Scott E. Boehm, Phoenix, Co-Counsel for Plaintiffs/Appellants.
Copple & Copple, P.C. By Steven D. Copple, S. Christopher Copple, Phoenix, Co-Counsel for Plaintiffs/Appellants.
Jennings, Strouss & Salmon, P.L.C. By John J. Egbert, Phoenix, Co-Counsel for Defendant/Appellee.
Jardine, Baker, Hickman & Houston, P.L.L.C. By Neil C. Alden, Curtis M. Bergen, Phoenix, Co-Counsel for Defendant/Appellee.
OPINION
BARKER, Judge.
¶ 1 Plaintiffs Annette Forrester, Scott Walsh, Steven Walsh, and Lisa Cline ("the children") appeal from the superior court's award of zero dollars in damages for the wrongful death of their father. They claim that this award is insufficient under Rule 59(a)(5) of the Arizona Rules of Civil Procedure. The trial court considered the issue to have been waived. We uphold the jury's right to award zero damages and remand for the court to rule on the Rule 59(a)(5) motion *174 for new trial consistent with the principles that follow.
Facts and Procedural History
¶ 2 This appeal arises out of a claim for the wrongful death of Jerome Walsh brought by his wife, Elizabeth Walsh, and his surviving adult children. The liability facts are uncontested on this appeal.
¶ 3 Jerome and Elizabeth Walsh were lifetime residents of Minnesota. In December, 2003, Jerome and Elizabeth were in Arizona when Jerome became ill. Jerome's primary care physician referred him to Defendant Warren Zeitlin.[1] Jerome was treated by Dr. Zeitlin and various other doctors who were all employed by Defendant Advanced Cardiac Specialists. The Walshes returned to Minnesota, and their son Scott Walsh arranged to have Jerome seen at the Mayo Clinic located there. Jerome entered the Mayo Clinic on March 17, 2009. He died the following day of endocarditis, a form of heart infection. Jerome's wife and the children claimed that Advanced Cardiac Specialists' employees failed to diagnose and cure Jerome's heart infection, thus causing his death.
¶ 4 At trial, Elizabeth Walsh and the children testified extensively as to their relationship with Jerome. This testimony was not contested by Defendants; their counsel did not cross-examine the witnesses on this issue.
¶ 5 On May 26, 2009, the jury in the superior court found in favor of Plaintiffs on their wrongful death claim against Advanced Cardiac Specialists and its employees. It awarded damages of $1,000,000 to wife Elizabeth Walsh and made a finding of zero damages for each of the children. The jury handwrote "0" on the verdict form in the space for damages by each child's name.
¶ 6 After the jury was discharged, the children filed a motion for a new trial under Rule 59(a)(5) of the Arizona Rules of Civil Procedure stating that our decisions in White v. Greater Arizona Bicycling Ass'n, 216 Ariz. 133, 163 P.3d 1083 (App.2007), and Sedillo v. City of Flagstaff, 153 Ariz. 478, 737 P.2d 1377 (App.1987), mandated an award of at least nominal damages. Defendants argued that the children's motion should have been brought under Rule 49(c) before the jury was discharged. Accordingly, Defendants asserted that the children's claim was untimely and waived. The court agreed with Defendants and dismissed the children's motion. The children timely appealed the trial court's ruling. We have jurisdiction under Arizona Revised Statutes ("A.R.S.") section 12-2101(B) (2003).
Discussion
1. Whether a Jury May Return a Verdict of Zero Damages on a Wrongful Death Claim
¶ 7 On appeal, the children argue that the trial court erred in holding that their motion was waived under Rule 49(c) of the Arizona Rules of Civil Procedure. They further assert that our previous holdings in White, 216 Ariz. 133, 163 P.3d 1083, and Sedillo, 153 Ariz. 478, 737 P.2d 1377, require us to reverse and remand for a new trial on damages. The trial court's ruling on waiver is premised on the required application (by the trial court) of our holdings in White and Sedillo. In short, the trial court determined that White and Sedillo require at least some damages, and because the verdict form was returned without any damages, the verdict was inconsistent under the holdings of those two cases. Because that objection was not made with the jury present, the trial court found the issue waived.
¶ 8 Both White and Sedillo were split-panel decisions from this court. As set forth below, we agree with each dissent's proposed outcome; namely, that White and Sedillo were wrongly decided and a jury's verdict of zero damages in a statutory wrongful death case can be a permissible verdict. As such, Rule 49(c) is not implicated, and the waiver issue is moot.
a. The Difference Between a Wrongful Death Claim and a Traditional Negligence Claim
¶ 9 The critical aspect of our analysis is the difference between a statutory *175 wrongful death claim and a negligence claim. In a traditional negligence claim, damages must be proved for a claim to exist. Glaze v. Larsen, 207 Ariz. 26, 29, ¶ 15, 83 P.3d 26, 29 (2004). The four traditional elements for a negligence claim are duty, breach of that duty, causation, and damages. Gipson v. Kasey, 214 Ariz. 141, 143, ¶ 9, 150 P.3d 228, 230 (2007) ("To establish a claim for negligence, a plaintiff must prove four elements: (1) a duty requiring the defendant to conform to a certain standard of care; (2) a breach by the defendant of that standard; (3) a causal connection between the defendant's conduct and the resulting injury; and (4) actual damages."). Where there are no damages in a negligence case, there is simply no cause of action upon which a plaintiff can recover. Glaze, 207 Ariz. at 29, ¶ 15, 83 P.3d at 29. Thus, were a jury to find in favor of a plaintiff on a negligence matter and award zero damages, the verdict would be defective as a matter of law.
¶ 10 A wrongful death claim, however, is essentially a creature of statutenot the common law. In re Lister's Estate, 22 Ariz. 185, 187, 195 P. 1113, 1113 (1921) ("Under the common law there was no right of action for damages for wrongful death. The right is statutory and was originally provided for in England by what is known as Lord Campbell's Act.").[2] The statutory framework for a wrongful death claim differs substantially from a common law negligence claim. Our statutory scheme provides that "[w]hen death of a person is caused by wrongful act, neglect or default, ... the person who ... would have been liable if death had not ensued shall be liable to an action for damages." A.R.S. § 12-611.[3] The statutory scheme then directs that
the jury shall give such damages as it deems fair and just with reference to the injury resulting from the death to the surviving parties who may be entitled to recover, and also having regard to the mitigating or aggravating circumstances attending the wrongful act, neglect or default.
A.R.S. § 12-613. Thus, unlike a negligence claim, damages is not an essential element of a wrongful death claim. Rather, a person who, absent the death, "would have been liable" for the act that caused the death, now becomes "liable to an action for damages" to those whom the statute specifies. A.R.S. § 12-611. In that action, the jury is to "give such damages as it deems fair and just." A.R.S. § 12-613. The statutory language does not preclude an award of zero damages if that is the amount the fact finder determines to be "fair and just." Id.
¶ 11 In construing statutes, we follow the legislature's pronouncements. "We first consider the statute's language `because we expect *176 it to be the best and most reliable index of a statute's meaning.'" Zamora v. Reinstein, 185 Ariz. 272, 275, 915 P.2d 1227, 1230 (1996) (quoting State v. Williams, 175 Ariz. 98, 100, 854 P.2d 131, 133 (1993)). When statutory language "is plain and unambiguous, courts generally must follow the text as written." Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., 177 Ariz. 526, 529, 869 P.2d 500, 503 (1994). This applies with particular force here because a wrongful death claim is statutory in nature. Bowslaugh v. Bowslaugh, 126 Ariz. 517, 519, 617 P.2d 25, 27 (1979) ("A cause of action for wrongful death is purely statutory in origin and we must adhere to the plain language of the statute, leaving any deficiencies or inequities to be corrected by the legislature."); see also In re Estate of Winn, 225 Ariz. 275, 277, ¶ 12, 237 P.3d 628, 630 (App.2010) ("It is for the legislature to make policy decisions about the scope of recoverable damages in a statutory cause of action."). Thus, under a plain language reading of the statute, there is no necessary flaw in the jury's award of zero damages in a wrongful death claim. Such a result is permitted.
¶ 12 Our construction of the statute, permitting a zero damages award, is also consistent with other previous holdings. For instance, in Quinonez v. Andersen, 144 Ariz. 193, 198, 696 P.2d 1342, 1347 (App.1984), we construed the "fair and just" provision of § 12-613 to permit an award of zero damages. There, we held that a jury could consistently find in favor of the plaintiff on a wrongful death claim but decline to award damages. Id. In Quinonez, the beneficiary making the damages claim was the decedent's husband. Id. Due to the abusive relationship between the husband and the decedent-wife, we determined that "the jury may have concluded that ... a just and fair award for this loss was zero." Id. Thus, Quinonez illustrates the principle that in a wrongful death case damages is not an essential element of the claim itself and the jury may return a verdict of zero damages even after a liability verdict.[4]
¶ 13 Related cases dealing with the nature of damages recoverable in a wrongful death action are also helpful in understanding why, unlike a negligence claim, a jury can permissibly return a verdict of zero damages. In Mullen v. Posada Del Sol Health Care Center, 169 Ariz. 399, 400, 819 P.2d 985, 986 (App.1991), a mother sought wrongful death damages based on how her son was treated prior to his death in a nursing home. We turned to the language of § 12-613 limiting damages to "the injury resulting from the death." Id. We noted that "[w]ithin the meaning of the statute, the death is the source of the injury, not the negligent act." Id. (quotations omitted) (emphasis added). Thus, the key distinction between a negligence claim and a wrongful death claim is that damages in a wrongful death claim are not tied to the liability-causing event (the negligent act). Rather, damages are based on the injuries that come from the result of the negligent act (the death).
¶ 14 Similarly, Girouard v. Skyline Steel, Inc., 215 Ariz. 126, 127-28, ¶¶ 3-7, 158 P.3d 255, 256-57 (App.2007), espouses this principle. There, the decedent was pinned in a car and burned to death as a result of the defendant's acts. Id. We clarified Mullen to ensure that the manner of death, which the statutory beneficiaries claimed increased their own injury "resulting from the death," may be considered. Id. at 129-33, ¶¶ 10-23, 158 P.3d at 258-62. We made it plain, however, that a statutory beneficiary could not recover for pain and suffering experienced by the decedent:
While evidence of the manner of death is relevant to mental anguish suffered by the survivor, we reiterate that compensation in a wrongful death action is limited to "injury resulting from the death." Accordingly,... a survivor may not recover for mental anguish resulting from the negligent acts of the defendant prior to the decedent's *177 death, and such evidence is not relevant to the issue of damages. Nor may a survivor recover for mental anguish resulting from actual or perceived pain and suffering experienced by the decedent during the time leading up to death because such period of time precedes the death of the decedent.
Id. at 131, ¶ 19, 158 P.3d at 261 (internal citations omitted). As both Mullen and Girouard hold, "the issues of liability and damages in a wrongful death action are generally distinct because recoverable damages are not based on the negligent act but, rather, on the survivors' injuries `resulting from the [decedent's] death.'" Englert v. Carondelet Health Network, 199 Ariz. 21, 27, ¶ 16, 13 P.3d 763, 769 (App.2000) (quoting A.R.S. § 12-613).
¶ 15 Thus, the statutory scheme in a wrongful death action does not preclude a jury from returning a verdict of zero damages. Our case law, with the exception of White and Sedillo, to which we will now turn, supports this conclusion.
b. White and Sedillo
¶ 16 As noted, the children rely on White and Sedillo to assert their position that a finding of zero damages requires a new trial.
¶ 17 In Sedillo, the plaintiffs brought a wrongful death action against the City of Flagstaff after the decedent died from an auto accident caused by ice on the roadway. 153 Ariz. at 480, 737 P.2d at 1379. At trial, the decedent's wife, daughter, three sons from a prior marriage, and mother, all statutory beneficiaries under the wrongful death statute, testified as to their close family relationship with the decedent. Id. at 480, 482, 737 P.2d at 1379, 1381. This testimony was not impeached, contradicted, or refuted by the City. Id. at 481, 737 P.2d at 1380. The jury, however, awarded zero damages to three of the beneficiaries: two of the decedent's adult children and the decedent's mother. Id. The majority of the Sedillo court held that an award of zero damages was insufficient because unrefuted evidence as to damages was presented at trial. Id. at 482, 737 P.2d at 1381. The court distinguished Quinonez because in that case there was contested evidence such that the jury could have come to the conclusion that an award of zero damages was appropriate. Id. The majority contrasted Quinonez with the circumstance in Sedillo where "the unimpeached evidence ... demonstrates that the Sedillos all enjoyed close family relationships with decedent, and all suffered substantial emotional, and possibly financial, injuries due to his death." Id.
¶ 18 In dissent, Judge Jacobsen focused on the statutory language in A.R.S. § 12-613 which requires the jury to give "such damages as it deems fair and just with reference to the injury resulting from the death." Id. at 485, 737 P.2d at 1384 (Jacobsen, J., dissenting) (quoting A.R.S. § 12-613). The dissent focused on the lack of pecuniary loss to certain defendants.
The law, I thought, was clear that the amount of damages which a jury can award for such non-monetary items as loss of affection, love, companionship, consortium, personal anguish and suffering, is entirely within the providence [sic] of the jury.
Id. (citing S. Pac. Transp. Co. v. Lueck, 111 Ariz. 560, 535 P.2d 599 (1975)). The dissent cited Begay v. City of Tucson, 148 Ariz. 505, 508, 715 P.2d 758, 761 (1986), for the proposition that
the proportion of damages which each statutory beneficiary is entitled to recover is not based on an equal division among the statutory beneficiaries. It is based on their individual pecuniary loss suffered by reason of the wrongful death.
Id. Judge Jacobsen reasoned, relying on Quinonez, "[i]t necessarily follows that if no pecuniary loss is suffered, no recovery is warranted." Id.
¶ 19 In White, the wife and adult children of the decedent bicyclist brought a wrongful death action against a bicycling event organizer over the organizer's negligence regarding a cattle guard in the bike path. 216 Ariz. at 135, ¶¶ 2-3, 163 P.3d at 1085. The wife and children gave uncontradicted testimony as to their relationship with the decedent, but the jury did not award damages to the children. Id. at ¶ 5. The majority reversed, affirming the rule presented in Sedillo that *178 an award of zero damages was impermissible when nothing in the record contradicted the testimony establishing the beneficiaries' relationships with the decedent. Id. at 141-42, ¶¶ 29-30, 163 P.3d at 1091-92.
¶ 20 The majority in White agreed that damages were not an element of a wrongful death claim: "[U]nlike in a traditional negligence case, damage to the plaintiff is not an element of liability in a wrongful death action." Id. at 138, ¶ 16, 163 P.3d at 1088. As we have set forth above, the White majority appropriately differentiated between a negligence claim and a wrongful death claim by stating: "Instead, once a jury determines the defendant is liable for a wrongful death, it then, pursuant to § 12-613, determines `fair and just' damages `to the surviving parties' as defined by § 12-612." Id. The White majority then went on to hold, however, that "there must be support in the record, however slight, for a jury's decision to disregard a witness's testimony." Id. at 140, ¶ 22, 163 P.3d at 1090. Like Sedillo, the majority distinguished Quinonez because there was clearly contradictory evidence in Quinonez from which a jury could find that an award of zero damages was appropriate. Id. at 141, ¶ 27, 163 P.3d at 1091.
¶ 21 The dissent authored by Judge Espinosa in White asserted, accurately from our perspective, that "[t]he majority today fashions a new, unprecedented rule of appellate review that says: `There must be support in the record, however slight, for a jury's decision to disregard a witness's testimony.'" Id. at 144, ¶ 36, 163 P.3d at 1094 (Espinosa, J., dissenting). The dissent pointed out:
That pronouncement, however, ignores the reality that some things may readily evade the record, things like attitude, such as hostility or insincerity; tone of voice and inflection; manner of speaking, such as hesitation or glibness; facial expression, such as excessive blinking or eye rolling; body language, such as shrugging, squirming, or perspiring; and other subtle indicators not expressed in words. This is a bedrock principle underlying appellate deference to the fact-finder, be it jury or judge.
Id. (Espinosa, J., dissenting). Judge Espinosa's dissent was premised on the view that the majority in White "significantly distort[ed] our standard of review." Id. at ¶ 37.
¶ 22 Turning now to our analysis of White and Sedillo, we emphasize that we do not disrupt existing precedent absent clear error or "cogent reasons" to do so. Scappaticci v. Sw. Sav. & Loan Ass'n, 135 Ariz. 456, 461, 662 P.2d 131, 136 (1983) ("[W]e consider decisions of coordinate courts as highly persuasive and binding, unless we are convinced that the prior decisions are based upon clearly erroneous principles, or conditions have changed so as to render these prior decisions inapplicable.") (quoting Castillo v. Indus. Comm'n, 21 Ariz.App. 465, 471, 520 P.2d 1142, 1148 (1974)); see also State v. Patterson, 222 Ariz. 574, 580, ¶ 19, 218 P.3d 1031, 1037 (App.2009) (collecting citations for the principle that "[w]hen we disagree with a prior decision of our Court ... we should do so only upon the most cogent of reasons being presented"). In this case such cogent reasons exist. Specifically, and as we discuss in more detail below, we conclude the rule announced in White and Sedillo that "[t]here must be support in the record, however slight, for a jury's decision to disregard a witness's testimony," White, 216 Ariz. at 140, ¶ 22, 163 P.3d at 1090, is wrong. This is particularly so in a setting where the plaintiff bears the burden of proof. Stated differently, to require an award of damages to a plaintiff in a wrongful death case absent contradictory evidence is legally flawed because (1) the burden is on a plaintiff to prove damages, (2) that burden does not shift, and (3) a jury is free to disregard the evidence that a plaintiff produces. To adopt the rule that White and Sedillo promulgate does away with these foundational principles.
¶ 23 Every day in Arizona courtrooms juries are instructed as follows:
In deciding the facts of this case, you should consider what testimony to accept, and what to reject. You may accept everything a witness says, or part of it, or none of it.
Rev. Ariz. Jury Instr. ("RAJI") (Civil), at 5 (4th ed. 2005) (emphasis added). We have frequently referred to this as our "standard *179 instruction regarding the credibility of witnesses." Smethers v. Campion, 210 Ariz. 167, 171, ¶ 19, 108 P.3d 946, 950 (App.2005)[5]; Callender v. Transpacific Hotel Corp., 179 Ariz. 557, 562, 880 P.2d 1103, 1108 (App.1983) (A jury "may accept everything a witness says or part of it or none of it."); see also Am. Family Mut. Ins. Co. v. Grant, 222 Ariz. 507, 511-12, ¶ 13, 217 P.3d 1212, 1216-17 (App.2009) (indicating that "[t]rial courts regularly instruct juries to assess witnesses' credibility" and then referencing an instruction permitting a jury to "accept everything a witness says, or part of it, or none of it"). Our supreme court has held that the jury is not bound to accept the testimony of a witness, especially that of an interested witness, even if that testimony is uncontradicted. Estate of Reinen v. N. Ariz. Orthopedics, Ltd., 198 Ariz. 283, 287, ¶ 12, 9 P.3d 314, 318 (2000). Consistent with our standard jury instructions, we have held that "a trial court is not bound to accept even the uncontradicted evidence of a disinterested party." Premier Fin. Servs. v. Citibank, 185 Ariz. 80, 86, 912 P.2d 1309, 1315 (App.1995) (emphasis added). "The rule is that the judge or jury, being the sole judges of the facts and the credibility of the witnesses, may or may not believe an interested party." City of Tucson v. Apache Motors, 74 Ariz. 98, 107-08, 245 P.2d 255, 261 (1952). This does not mean that a jury is authorized to return a verdict that has no evidence to support it. Id. That, however, is not the circumstance here. The burden of proof was on the children. The jury was free to evaluate their testimony and "accept everything they sa[id], or part of it, or none of it." Smethers, 210 Ariz. at 172, ¶ 19, 108 P.3d at 951.
¶ 24 The reason for this rule is the jury has the critical role in evaluating and weighing the testimony of witnesses and the evidence, and we defer to the jury's determination in these areas. The fact finder "sees the witnesses, hears the testimony, and has a special perspective of the relationship between the evidence and the verdict which cannot be recreated by a reviewing court from the printed record." Hutcherson v. City of Phoenix, 192 Ariz. 51, 53, ¶ 12, 961 P.2d 449, 451 (1998) (quoting Reeves v. Markle, 119 Ariz. 159, 163, 579 P.2d 1382, 1386 (1978)). As an appellate court, "[w]e must not `take the case away from the jury' by combing the record for evidence supporting a conclusion or inference different from that reached" by the finder of fact. Id. at 56, ¶ 27, 961 P.2d at 454 (quoting Tennant v. Peoria & Pekin Union Ry. Co., 321 U.S. 29, 35, 64 S. Ct. 409, 88 L. Ed. 520 (1944)). The jury's role in evaluating testimony is of particular importance in the realm of intangible loss where the court system grants monetary compensation for something typically unquantifiable. Hernandez v. State, 128 Ariz. 30, 32, 623 P.2d 819, 821 (App.1980). As we have said, "[t]ranslation into dollars of the loss of companionship, affection, and society, and the anguish ... experienced as a result of ... death is peculiarly the jury's function." Id.
¶ 25 The practical effects of forbidding an award of zero damages are also anomalous. The White majority noted that, although an award of zero damages would be impermissible, "nothing ... prohibits a jury from awarding nominal damages." White, 216 Ariz. at 142 n. 7, ¶ 29, 163 P.3d at 1092 n. 7. We repeat, damages are not an essential element of a statutory wrongful death claim. Thus, we fail to see how an award of $1 would be "sufficient" as a matter of law, but an award of zero damages would not. See id. *180 at 143, ¶ 34, 163 P.3d at 1093 (Espinosa, J., dissenting) ("[T]he majority's nominal damages position merely begs the question why, absent some statutory guidance, an award of $1 would be an adequate, if demeaning, award but not zero."); Roberts v. City of Phoenix, 225 Ariz. 112, 122 n. 5, ¶ 38, 235 P.3d 265, 275 n. 5 (App.2010) (stating that nominal damages are awarded to vindicate rights).
¶ 26 Critically, to require an award of some damages based simply on the absence of any affirmative evidence in the record that the statutory beneficiaries should not recover fundamentally alters the burden of proof. Each plaintiff in a wrongful death case bears the burden of proof to show a compensable loss. See Patania v. Silverstone, 3 Ariz.App. 424, 429, 415 P.2d 139, 144 (1966) ("[P]laintiff has the burden of proof in establishing damages ...."); see also Wilmot v. Wilmot, 203 Ariz. 565, 571, ¶ 22, 58 P.3d 507, 513 (2002) ("The judge should instruct the jury to `find the amount of damages sustained by each beneficiary.'" (quoting Nunez v. Nunez, 25 Ariz.App. 558, 562, 545 P.2d 69, 73 (1976))). Requiring the defendant to come forth with evidence that the plaintiff did not sustain the damages asserted shifts this burden of proof. While such a burden-shifting scheme may be present in other areas of law, see, e.g., McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973) (holding that in Title VII employment discrimination cases, the burden of proof shifts to defendant after the plaintiff shows a prima facie case of racial discrimination), this structure is not supported by the language of our wrongful death statutes. Plaintiffs in wrongful death cases begin and end with the burden of proving their damages.
¶ 27 To the extent that the children rely upon, and the White majority cites, authority supporting the proposition that the jury may not "arbitrarily disregard" the uncontradicted testimony of a fact witness, the cases are nearly all Industrial Commission cases.[6] 216 Ariz. at 138-39, ¶ 17, 163 P.3d at 1088-89 (citing Ratley v. Indus. Comm'n, 74 Ariz. 347, 349-50, 248 P.2d 997, 998 (1952); Hunter v. Indus. Comm'n, 130 Ariz. 59, 61, 633 P.2d 1052, 1054 (App.1981); Carabetta v. Indus. Comm'n, 12 Ariz.App. 239, 242, 469 P.2d 473, 476 (1970)). As the White dissent also noted, workers' compensation law "is designed to be interpreted liberally to protect injured claimants." 216 Ariz. at 144 n. 13, ¶ 36, 163 P.3d at 1094 n. 13 (Espinosa, J., dissenting) (citing Hypl v. Indus. Comm'n, 210 Ariz. 381, 387, ¶ 18, 111 P.3d 423, 429 (App.2005); Self v. Indus. Comm'n, 192 Ariz. 399, 401, ¶ 6, 966 P.2d 1003, 1005 (App.1998)). We can think of no reason why the wrongful death statutory scheme should be similarly interpreted, see White, 216 Ariz. at 144 n. 13, ¶ 36, 163 P.3d at 1094 n. 13 (Espinosa, J., dissenting), particularly in light of our well-established principle that juries are entitled to not accept the testimony of witnesses, especially when offered to establish a party's burden of proof.
¶ 28 As we set forth earlier, nothing in the statutory scheme mandates an award of damages, even when liability is found. The majorities in White and Sedillo interpreted A.R.S. § 12-613 to place the jury under obligation to affirmatively award damages to the statutory beneficiaries. This was based on the portion of the statute that states the "jury shall give such damages as it deems fair and just." White, 216 Ariz. at 141, ¶ 28, 163 P.3d at 1091 (emphasis added) (quoting A.R.S. § 12-613); see also Sedillo, 153 Ariz. at 481, 737 P.2d at 1380. "Shall," however, is not an imperative requiring the jury to award damages in a particular amount. Rather it is an imperative to do what is "fair and just." As Judge Espinosa phrased it, *181 "[T]he word `shall' ... authorized but did not mandate ... a jury to award such damages." White, 216 Ariz. at 143, ¶ 33, 163 P.3d at 1093 (Espinosa, J., dissenting) (quoting State v. Sanchez, 119 Ariz. 64, 68, 579 P.2d 568, 572 (App.1978)).
¶ 29 Finally, we note that "[i]n reviewing a jury verdict, we view the evidence in a light most favorable to sustaining the verdict." Styles v. Ceranski, 185 Ariz. 448, 450, 916 P.2d 1164, 1166 (App.1996). Viewed in a light most favorable to sustaining the verdict, the evidence (or lack of evidence) supporting the jury's award of zero damages is two-fold: (1) the burden is on the children to prove damages, and (2) the jury is free to disregard the evidence that the children produced, and the jury apparently did so here.
¶ 30 For these reasons, we hold that a jury finding of zero damages in a wrongful death caseeven without contradictory evidence on damagesmay be upheld.
2. Retroactivity
¶ 31 The children argue that any overruling of White and Sedillo should apply only prospectively. Arizona appellate opinions in civil cases generally operate both retroactively and prospectively. Law v. Superior Court, 157 Ariz. 147, 160, 755 P.2d 1135, 1148 (1988) (supplemental opinion). This rule favoring retroactivity may be overcome if three conditions are satisfied:
1. The opinion establishes a new legal principle by overruling clear and reliable precedent or by deciding an issue whose resolution was not foreshadowed;
2. Retroactive application would adversely affect the purpose behind the new rule; and
3. Retroactive application would produce substantially inequitable results.
Id. To decide whether to apply a rule prospectively, we must balance these three factors. Id. at 161, 755 P.2d at 1149.
¶ 32 As to the first factor, our opinion establishes a contrary precedent to the prior holdings in White and Sedillo. Each of those cases, however, had strong dissents. Under Law we are to consider whether the earlier precedent is "clear and reliable." Id. While White and Sedillo are "clear," the force of logic embodied in the dissents, and our own reasoning above, weigh in the balance as to the reliability factor. Additionally, deference to the fact finder has been a time-honored and well-established principle, and this underlying law drives our decision today.
¶ 33 As to the second factor, retroactive application does not adversely affect the purpose behind the new rule. The purpose behind the "new rule" is simply to re-enthrone the language in A.R.S. § 12-613. That statute permits the jury to return an award that is "fair and just," which can include an award of zero. The statute emphasizes the role of the fact finder when awarding damages in an intangible-loss case. This purpose is better served through retroactive application.
¶ 34 As to the third factor, retroactive application would not produce substantially inequitable results. Had we followed White and Sedillo, the children would have automatically been granted a new trial on their award of zero damages, but the grant would not have been automatic had they been awarded $1 in damages. Declining to automatically grant a new trial based on an award of zero damages, when a new trial would not be automatic for damages of $1, is not "substantially inequitable." Further, and importantly, by remanding this matter to the trial court to consider the Rule 59(a)(5) motion, the children have the same rights any party in the future would have: the trial judge may consider, but is not required to grant, a motion for new trial. Weighing these three factors, we determine that retroactive application under Law is appropriate.
Conclusion
¶ 35 For the reasons stated above, we remand this matter to the trial court for proceedings in accordance with this opinion.
CONCURRING: DONN KESSLER, Presiding Judge, and JON W. THOMPSON, Judge.
NOTES
[1] Dr. Zeitlin is not a party to this appeal.
[2] The Arizona Supreme Court has engaged in an extended discussion of the history of the statutory right and its relation to common law. Summerfield v. Superior Court, 144 Ariz. 467, 470-74, 698 P.2d 712, 715-19 (1985). The court began its discussion by stating that "[t]his court has followed many others in stating that recovery for wrongful death is purely a creature of statute, there being no recovery at common law." Id. at 470, 698 P.2d at 715. As part of its conclusion, the court summarized: "This excursion into common law history and principle does not necessarily lead us to the conclusion that a wrongful death action is recognized at common law, nor that such an action should be allowed irrespective of legislative intention or pronouncement. We need not solve that problem." Id. at 473, 698 P.2d at 718. Summerfield's conclusion as to how we should construe a wrongful death statute is identical to what we apply here, regardless of whether Summerfield opened the door as to whether a wrongful death statute has common law origins. That conclusion is as follows: "[T]he solution [to the problem of statutory interpretation] must be found in a study of the statute, the best method to further the general goal of the legislature in adopting such a statute, and common law principles governing its application." Id. at 475, 698 P.2d at 720.
[3] The full text of A.R.S. § 12-611 (2003) provides as follows:
Liability
When death of a person is caused by wrongful act, neglect or default, and the act, neglect or default is such as would, if death had not ensued, have entitled the party injured to maintain an action to recover damages in respect thereof, then, and in every such case, the person who or the corporation which would have been liable if death had not ensued shall be liable to an action for damages, notwithstanding the death of the person injured, and although the death was caused under such circumstances as amount in law to murder in the first or second degree or manslaughter.
A.R.S. § 12-611.
[4] We do not suggest that there are no differences between our case and Quinonez. There are differences. In Quinonez there was evidence to rebut the plaintiff's assertion that he was entitled to damages. Here, no contradictory evidence was submitted. We address that issue subsequently. The principle for which we cite Quinonez here is that damages is not an essential element of a wrongful death claim.
[5] As stated in Smethers, the standard instruction regarding the credibility of witnesses is as follows:
In deciding the facts of this case, you should consider what testimony to accept, and what to reject. You may accept everything a witness says, or part of it, or none of it.
In evaluating testimony, you should use the tests for truthfulness that people use in determining matters of importance in everyday life, including such factors as: the witness's ability to see or hear or know the things the witness testified to; the quality of the witness's memory; the witness's manner while testifying; whether the witness had any motive, bias, or prejudice; whether the witness was contradicted by anything the witness said or wrote before trial, or by other evidence; and the reasonableness of the witness's testimony when considered in the light of the other evidence.
Consider all of the evidence in the light of reason, common sense, and experience.
Smethers, 210 Ariz. at 172, ¶ 19, 108 P.3d at 951 (quoting RAJI (Civil), at 21 (3d ed. 1997)).
[6] The single non-Industrial Commission case, Boswell v. Phoenix Newspapers, Inc., cited only a single Industrial Commission case in support of the proposition that a reasonable jury cannot reject unimpeached testimony. 152 Ariz. 1, 3, 730 P.2d 178, 180 (App. 1985). Additionally, the uncontradicted testimony in that case was from a disinterested individual who was not a party to the lawsuit. Id. at 2-3, 730 P.2d at 179-80. That is not the situation presented here because the children's testimony is from interested parties to the lawsuit. Moreover, ten years later we stated that "a trial court is not bound to accept even the uncontradicted evidence of a disinterested party," thus correcting the proposition stated in Boswell. Premier Fin., 185 Ariz. at 86, 912 P.2d at 1315. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455236/ | 640 F. Supp. 2d 1247 (2009)
Edward H. BELL, Jr., Plaintiff,
v.
Michael J. ASTRUE, Commissioner of Social Security, Defendant.
No. CIV S-07-2532 DAD.
United States District Court, E.D. California.
July 17, 2009.
*1249 Bess M. Brewer, Bess M. Brewer and Associates, Sacramento, CA, for Plaintiff.
Bobbie J. Montoya, SS, United States Attorney's Office, Sacramento, CA, Sarah Lynn Ryan, Social Security Administration Office of the General Counsel, San Francisco, CA, for Defendant.
ORDER
DALE A. DROZD, United States Magistrate Judge.
This social security action was submitted to the court, without oral argument, for ruling on plaintiff's motion for summary judgment and remand, and defendant's cross-motion for summary judgment. For the reasons explained below, plaintiff's motion for summary judgment and remand is granted, defendant's cross-motion for summary judgment is denied, the decision of the Commissioner of Social Security (Commissioner) is reversed, and this matter is remanded for further proceedings consistent with this order.
PROCEDURAL BACKGROUND
On July 16, 2004, plaintiff filed an application for Supplemental Security Income (SSI) disability benefits under Title XVI of the Social Security Act (Act).[1] (Transcript (Tr.) at 67-69.) The application was denied initially on December 15, 2004, and upon reconsideration on July 29, 2005. (Tr. at 50-53, 56-61.) On August 24, 2005, plaintiff submitted a timely request for a hearing on the denials. (Tr. at 49.) The scheduled administrative hearing was continued initially to provide plaintiff additional time to seek representation and was continued a second time to give plaintiff time to obtain new counsel after he relocated to the Sacramento area. (Tr. at 347-57, 358-62.) At the administrative hearing held on May 21, 2007, plaintiff was represented and testified. (Tr. at 363-91.) In a decision issued on June 13, 2007, the ALJ determined that plaintiff had not been under a disability since June 22, 2004, the date his application for SSI was protectively filed. (Tr. at 11-21.) The ALJ entered the following findings:
1. The claimant has not engaged in substantial gainful activity since July 10, 1988, the alleged onset date (20 CFR 416.920(b) and 416.971 et seq) (Exhibit 1D/2).
2. The claimant has the following severe impairments: Obesity, diabetes, and illiteracy (20 CFR 416.920(c)).
3. The claimant does not have an impairment or combination of impairments that meets or medically equals one of the listed impairments in 20 CFR Part 404, Subpart P, Appendix 1 (20 CFR 416.920(d), 416.925 and 416.926).
*1250 4. After careful consideration of the entire record, the undersigned finds that the claimant has the residual functional capacity to perform sedentary work activity. He is not limited in sitting during an 8-hour workday. He can stand/walk for up to two hours during an 8-hour workday. He is unlimited in his ability to lift and carry. He is limited in climbing, stooping, kneeling, and crouching because of his obesity and shortness of breath. He has no manipulative, visual, communicative, or environmental workplace limitations (Exhibit 4F/7).
4.[2] The claimant is unable to perform any past relevant work (20 CFR § 416.965).
5. The claimant was born on May 28, 1973 and was 31 years old, which is defined as a younger individual age 18-44, on June 22, 2004, the date the SSI application was filed (20 CFR 416.963).
6. The claimant has a limited education (8th grade) and is able to communicate in English (20 CFR 416.964).
7. Transferability of job skills is not material to the determination of disability because applying the Medical-Vocational Rules directly supports a finding of "not disabled," whether or not the claimant has transferable job skills (See SSR 82-41 and 20 CFR Part 404, Subpart P, Appendix 2).
8. Considering the claimant's age, education, work experience, and residual functional capacity, there are jobs that exist in significant numbers in the national economy that the claimant can perform (20 CFR 416.960(c) and 416.966).
(Tr. at 14-21.)
On September 28, 2007, the Appeals Council denied plaintiff's request for review of the ALJ's decision. (Tr. at 3-7.) On November 26, 2007, plaintiff sought judicial review pursuant to 42 U.S.C. § 405(g) by filing the complaint in this action.
LEGAL STANDARD
The Commissioner's decision that a claimant is not disabled will be upheld if the findings of fact are supported by substantial evidence and the proper legal standards were applied. Schneider v. Comm'r of the Soc. Sec. Admin., 223 F.3d 968, 973 (9th Cir.2000); Morgan v. Comm'r of the Soc. Sec. Admin., 169 F.3d 595, 599 (9th Cir.1999). The findings of the Commissioner as to any fact, if supported by substantial evidence, are conclusive. See Miller v. Heckler, 770 F.2d 845, 847 (9th Cir. 1985). Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Morgan, 169 F.3d at 599; Jones v. Heckler, 760 F.2d 993, 995 (9th Cir.1985) (citing Richardson v. Perales, 402 U.S. 389, 401, 91 S. Ct. 1420, 28 L. Ed. 2d 842 (1971)).
A reviewing court must consider the record as a whole, weighing both the evidence that supports and the evidence that detracts from the ALJ's conclusion. See Jones, 760 F.2d at 995. The court may not affirm the ALJ's decision simply by isolating a specific quantum of supporting evidence. Id.; see also Hammock v. Bowen, 879 F.2d 498, 501 (9th Cir.1989). If substantial evidence supports the administrative findings, or if there is conflicting evidence supporting a finding of either disability or nondisability, the finding of the *1251 ALJ is conclusive, see Sprague v. Bowen, 812 F.2d 1226, 1229-30 (9th Cir.1987), and may be set aside only if an improper legal standard was applied in weighing the evidence, see Burkhart v. Bowen, 856 F.2d 1335, 1338 (9th Cir.1988).
In determining whether or not a claimant is disabled, the ALJ should apply the five-step sequential evaluation process established under the Social Security regulations. Title 20 of the Code of Federal Regulations, Section 404.1520, sets forth the test used to assess disability. See Bowen v. Yuckert, 482 U.S. 137, 140-42, 107 S. Ct. 2287, 96 L. Ed. 2d 119 (1987). The five-step process can be summarized as follows:
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., Pt. 404, Subpt. P, App. 1? If so, the claimant is conclusively presumed 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.
Lester v. Chater, 81 F.3d 821, 828 n. 5 (9th Cir.1995).
The claimant bears the burden of proof in the first four steps of the sequential evaluation process. Yuckert, 482 U.S. at 146 n. 5, 107 S. Ct. 2287. The Commissioner bears the burden if the sequential evaluation process proceeds to step five. Id.; Tackett v. Apfel, 180 F.3d 1094, 1098 (9th Cir.1999).
APPLICATION
Plaintiff advances the following two arguments in support of his motion for summary judgment and remand: (1) the ALJ rejected the opinion of the consultative examiner with respect to plaintiff's ability to stand and/or walk in an 8-hour workday, without a legitimate basis for doing so; and (2) the ALJ erred in utilizing the Medical-Vocational Guidelines despite the presence of extensive non-exertional limitations. Plaintiff seeks an order reversing the decision of the Commissioner and remanding the case for further administrative proceedings that will cure these defects. Plaintiff's arguments are addressed below.
I. Evaluation of Medical Opinions
The weight to be given to medical opinions in Social Security disability cases depends in part on whether the opinions are proffered by treating, examining, or nonexamining health professionals.[3]Lester, 81 F.3d at 830. "As a general rule, more weight should be given to the opinion of a treating source than to the opinion of doctors who do not treat the claimant." Lester, 81 F.3d at 830. This is so because a treating doctor is employed to cure and has a greater opportunity to know and observe the patient as an individual. Smolen v. Chater, 80 F.3d 1273, 1285 (9th *1252 Cir.1996); Bates v. Sullivan, 894 F.2d 1059, 1063 (9th Cir.1990).
"At least where the treating doctor's opinion is not contradicted by another doctor, it may be rejected only for `clear and convincing' reasons." Lester, 81 F.3d at 830 (quoting Baxter v. Sullivan, 923 F.2d 1391, 1396 (9th Cir.1991)). "Even if the treating doctor's opinion is contradicted by another doctor, the Commissioner may not reject this opinion without providing `specific and legitimate reasons' supported by substantial evidence in the record for so doing." Id. (quoting Murray v. Heckler, 722 F.2d 499, 502 (9th Cir.1983)).
"The opinion of an examining physician is, in turn, entitled to greater weight than the opinion of a nonexamining physician." Id. at 830. An examining physician's uncontradicted opinion, like a treating physician's uncontradicted opinion, may be rejected only for clear and convincing reasons, and when an examining physician's opinion is contradicted by another doctor, the examining physician's opinion may be rejected only for specific and legitimate reasons supported by substantial evidence in the record. Id. at 830-31.
"The opinion of a nonexamining physician cannot by itself constitute substantial evidence that justifies the rejection of the opinion of either an examining physician or a treating physician." Id. at 831 (emphasis in original). Compare Lester, 81 F.3d at 831-32 (holding that the ALJ's rejection of the opinions of a treating physician and an examining psychologist was not warranted where the rejection was based on a nontreating, nonexamining doctor's opinion supplemented only by unsupported and unwarranted speculation that the treating and examining doctors were misrepresenting the claimant's condition or were not qualified to evaluate it), Pitzer v. Sullivan, 908 F.2d 502, 506 (9th Cir. 1990) (holding that the nonexamining doctor's opinion "with nothing more" did not constitute substantial evidence for rejecting the opinions of treating or examining physicians), and Gallant v. Heckler, 753 F.2d 1450, 1456 (9th Cir.1984) (holding that the report of the nontreating, nonexamining doctor, even when combined with the ALJ's own observation of the claimant at the hearing, did not constitute substantial evidence and did not support the ALJ's decision to reject the examining physician's opinion that the claimant was disabled) with Andrews v. Shalala, 53 F.3d 1035, 1042-43 (9th Cir.1995) (upholding the ALJ's decision to reject the opinion of an examining psychologist who was not an expert in the area of the claimant's alleged disability, whose psychological testing was suspect due to the claimant's drug use, and whose opinion conflicted with medical reports in the record, the claimant's own testimony, and the opinions of five nonexamining mental health professionals, including one who was an expert in the relevant area), and Magallanes v. Bowen, 881 F.2d 747, 751-55 (9th Cir.1989) (upholding the ALJ's decision to reject the opinion of a treating physician where the decision was not based solely on the nonexamining physician's opinion but also on laboratory test results, contrary reports from examining physicians, and testimony from the claimant that conflicted with the treating physician's opinion).
The opinion at issue in this case is that of Sanford Selcon, M.D., a physician who performed a complete internal medicine evaluation of plaintiff at the request of the state agency. (Tr. at 267-73.) Dr. Selcon reviewed available medical records and conducted a physical examination. His findings were based on formal testing and on observation of plaintiff's spontaneous action. (Tr. at 269.) Dr. Selcon found plaintiff, who is 6'2" tall and weighed 380 pounds on the day of the examination, to *1253 be a profoundly obese 31-year old male who was obviously short of breath even at rest while sitting during the interview. (Id.) In recording the history of plaintiff's complaints, Dr. Selcon noted that plaintiff had experienced chronic low back pain for several years, beginning in 1989 and worsening over time as he became more obese. (Tr. at 267.) Plaintiff reported that he has difficulty standing for prolonged periods of time and walking for any distance because of his obesity and because of shortness of breath caused by his obesity and asthma. (Tr. at 267-68.) Dr. Selcon observed that plaintiff "has obvious trouble getting down to a sitting position and up from a seated position because of his weight." (Tr. at 268.) The range of motion in plaintiff's back was abnormal, with inability to flex beyond 50 degrees. (Tr. at 270.) Plaintiff's gait was normal. (Tr. at 271.) Dr. Selcon rendered the following functional assessment:
The number of hours that the claimant could sit in an 8-hour work period is without limitations. The number of hours that the claimant could stand/walk in an 8-hour work period would be less than 2 hours. The amount of weight that the claimant could lift/carry is without limitations. There are postural limitations of climbing, stooping, kneeling, and crouching because of his obesity and shortness of breath. There is no limitation to manipulation. There are no visual, communicative, or workplace environmental limitations.
(Tr. at 271.)
The ALJ interpreted Dr. Selcon's report as indicating that plaintiff "had no difficulty walking," and he found that "[t]he only abnormality Dr. Selcon noted throughout the entire examination was that [plaintiff] was not able to flex his back beyond 50 degrees." (Tr. at 15.) The ALJ reached the following conclusion:
After careful review of Dr. Selcon's report, I am not persuaded the claimant as [sic] limited to less than two hours of standing/walking. As noted by the State Agency Dr. Selcon's limitiation [sic] on standing/walking is not supported by his objective findings. I credit the State Agency determination.
(Tr. at 15, citing Exhibit 6F [tr. at 281-88]). Thus, the ALJ rejected Dr. Selcon's opinion regarding plaintiff's capacity to stand and/or walk, and determined that plaintiff had the residual functional capacity to stand and/or walk for up to two hours during an 8-hour workday. (Tr. at 17.) The ALJ emphasized that he
accord[ed] some weight to the report of Dr. Selcom [sic], however his restriction on standing/walking less than 2 hours is not supported by his findings. The State Agency determination that the claimant can perform a full range of sedentary work is credited.
(Id.) The ALJ noted plaintiff's testimony that "[h]e can stand for about 30 minutes and must sit for 40 minutes to rest" afterward (tr. at 18[4]) as well as the Social Security interviewer's note that plaintiff "did not appear to be in any great pain while sitting, standing up, or walking" (tr. at 19[5]). The ALJ concluded his RFC analysis with the following statement:
The finding that the claimant can perform sedentary level work on a sustained basis is supported by the objective clinical findings, and the claimant's activities and treatment regimen. By his own admission he can stand 30 minutes at one time and in the past he has stated he can walk for up to 30 minutes. I find this capability would allow the claimant to perform sedentary work. *1254 This finding is essentially consistent with the findings of the State Agency.
(Tr. at 20.)
The ALJ did not find that Dr. Selcon's opinion was contradicted by the opinion of any treating or examining physician. Because the opinion of a nontreating, nonexamining state agency physician cannot by itself constitute substantial evidence that would justify rejection of an examining physician's opinion, the court has reviewed the state agency physician's opinion and considered it in conjunction with the other evidence relied upon by the ALJ.
On a Physical Residual Functional Capacity Assessment form dated November 3, 2004, approximately two weeks after Dr. Selcon's report was issued, Janice Thornberg, M.D., marked the box indicating that plaintiff can stand and/or walk, with normal breaks, for a total of "at least 2 hours in an 8-hour workday." (Tr. at 282.) In the space provided for an explanation of the conclusions reached about the claimant's exertional limitations, Dr. Thornberg noted that (1) plaintiff is a 31 year old male with a history of massive, life-long obesity and hospitalization for diabetic mellitus ketoacidosis in October 2004; (2) the internal consultative examination reflected that plaintiff is massively obese and his medications include insulin, Tylenol, Diltiazem, aspirin, and Atacand; (3) plaintiff was short of breath at rest; (4) plaintiff had decreased range of motion in his lower spine. (Tr. at 282-83.) Dr. Thornberg then opined that the medical source statement's indication of a residual functional capacity of less than sedentary "is not supported by obj[ective] findings" and that plaintiff has the residual functional capacity for sedentary work. (Tr. at 283.)
Dr. Thornberg did not explain her assertion that Dr. Selcon's opinion of plaintiff's residual functional capacity was not supported by his objective findings. Nor did she cite any medical evidence that contradicted Dr. Selcon's opinion. Without more, Dr. Thornberg's conclusory opinion does not constitute substantial evidence that warrants rejection of the opinion of the examining physician, Dr. Selcon.
To the extent that the ALJ rejected a portion of Dr. Selcon's opinion based solely on the conclusory opinion of a nontreating, nonexamining physician, the court finds that the ALJ committed legal error because the opinion of a nontreating, nonexamining physician cannot, without more, provide the substantial evidence required to reject the uncontradicted opinion of an examining physician.
To the extent that the ALJ rejected a portion of Dr. Selcon's opinion because the ALJ himself determined independently that Dr. Selcon's opinion was unsupported by objective findings, the court finds that the ALJ committed legal error by failing to explain how he reached such a conclusion. Based on formal testing and observation of plaintiff's spontaneous action, Dr. Selcon found that the profoundly obese plaintiff was obviously short of breath even at rest while sitting during the interview, had a history of chronic low back pain that had worsened over time as he became more obese, reported difficulty standing for prolonged periods of time and walking for any distance because of his obesity and because of shortness of breath caused by his obesity and asthma, had "obvious trouble getting down to a sitting position and up from a seated position because of his weight," and had a reduced range of motion in his back. Dr. Selcon's assessment of plaintiff's residual functional capacity was supported by these objective findings and was not contradicted by any medical evidence in the record.
Although the ALJ also relied on the observation of the Social Security interviewer and on plaintiff's testimony, neither the interviewer's observation nor plaintiff's *1255 own testimony provided any substantial evidence that plaintiff can walk and/or stand for two hours during an 8-hour workday. Plaintiff testified that if he walks about a block he has to sit down for about 30 minutes, and if he stands for as long as 30 minutes, such as while standing in line, he has to sit down for about 40 minutes. (Tr. at 381-83.) Plaintiff was not asked whether he could walk for 30 minutes more than one time during an 8-hour workday or stand for 30 minutes more than once during an 8-hour workday.
The court finds that the ALJ did not provide clear and convincing reasons for rejecting the uncontradicted opinion of the examining physician. Plaintiff is entitled to summary judgment on this claim.
II. Use of the Medical-Vocational Guidelines
After determining that plaintiff was unable to perform any past relevant work, the ALJ proceeded to the fifth step of the sequential evaluation process. At this step, the Commissioner may satisfy his burden of showing that the claimant can perform other types of work in the national economy, given his age, education, and work experience, by applying the Medical-Vocational Guidelines, if appropriate, or by taking the testimony of a vocational expert. Burkhart, 856 F.2d at 1340; Polny v. Bowen, 864 F.2d 661, 663 (9th Cir.1988).
"The grids are an administrative tool the Secretary may rely on when considering claimants with substantially uniform levels of impairment." Burkhart, 856 F.2d at 1340. The grids reflect "major functional and vocational patterns" and incorporate the analysis of critical vocational factors, i.e., age, education, and work experience, in combination with the individual's residual functional capacity. 20 C.F.R. Pt. 404, Subpt. P, App. 2, § 200.00(a). The grids may be utilized when they "`accurately and completely describe the claimant's abilities and limitations.'" Burkhart, 856 F.2d at 1340 (quoting Jones, 760 F.2d at 998). "When a claimant's nonexertional limitations are `sufficiently severe' so as to significantly limit the range of work permitted by the claimant's exertional limitations, the grids are inapplicable.... In such instances, the Secretary must take the testimony of a vocational expert and identify specific jobs within the claimant's capabilities." Burkhart, 856 F.2d at 1340 (quoting Desrosiers v. Sec'y of Health & Human Svcs., 846 F.2d 573, 577 (9th Cir. 1988)). See also Aukland v. Massanari, 257 F.3d 1033, 1035 (9th Cir.2001) (holding that "an ALJ may rely solely on the Medical-Vocational Guidelines (the `grids') only when a claimant can perform the full range of applicable work" and the ALJ erred in failing to obtain the testimony of a vocational expert).
Here, the ALJ determined that plaintiff had the residual functional capacity to perform sedentary work activity. (Tr. at 17.) The ALJ applied Medical-Vocational Rule 201.23 and found plaintiff not disabled. (Tr. at 21.) Rule 201 encompasses a table of rules that apply to claimants whose maximum sustained work capability is limited to sedentary work. 20 C.F.R. Pt. 404, Subpt. P, App. 2, § 201. The rule itself recognizes that sedentary work represents a significantly restricted range of work. Id., § 201.00(a). That range of work includes approximately 200 separate unskilled sedentary occupations, each representing numerous jobs in the national economy, although 85 percent of the jobs are in the machine trades and benchwork occupational categories. Id.
Rule 201.23 directs a decision of "not disabled" for a claimant who is a younger individual (age 18 through 49), who is illiterate, and who has either no previous work experience or only unskilled work experience. Id., § 201.23. However, "a decision *1256 of `disabled' may be appropriate for some individuals under age 45 ... who do not have the ability to perform a full range of sedentary work." Id., § 201.00(h)(3).
Here, the ALJ's erroneous rejection of Dr. Selcon's opinion regarding the limitations on plaintiff's ability to stand and/or walk led to an also erroneous conclusion that plaintiff has the ability to perform a full range of sedentary work. Under the Commissioner's regulations, the physical exertion requirements for sedentary work are as follows:
Sedentary work involves lifting no more than 10 pounds at a time and occasionally lifting or carrying articles like docket files, ledgers, and small tools. Although a sedentary job is defined as one which involves sitting, a certain amount of walking and standing is often necessary in carrying out job duties. Jobs are sedentary if walking and standing are required occasionally and other sedentary criteria are met.
20 C.F.R. § 416.967(a). "`Occasionally' means occurring from very little up to one-third of the time." SSR 83-10, 1983 WL 31251, at *5 (Nov. 30, 1982). For purposes of sedentary work, "periods of standing or walking should generally total no more than about 2 hours of an 8-hour workday, and sitting would generally total approximately 6 hours of an 8-hour workday." Id.
Dr. Selcon's opinion that "[t]he number of hours that the claimant could stand/walk in an 8-hour work period would be less than 2 hours," i.e., less than one-quarter of a workday, required the assistance of a vocational expert in deciding whether there are a significant number of jobs in the national economy that plaintiff can do. A vocational expert must testify regarding the impact of plaintiff's limitation to less than two hours of standing and/or walking, together with plaintiff's illiteracy and postural limitations, on the number of sedentary, unskilled occupations or the total number of jobs that exist in the national economy that plaintiff can perform. See Aukland, 257 F.3d at 1035-37 (reversing ALJ's determination that claimant could perform full range of sedentary work and ALJ's use of grids where ALJ failed to set forth specific and legitimate reasons for rejecting treating physician's opinion that claimant had difficulty standing or sitting); Tackett, 180 F.3d at 1102-04 (reversing ALJ's determination that claimant could perform full range of sedentary jobs and ALJ's use of grids where ALJ disregarded medical evidence of non-exertional limitations).
For these reasons, the court finds that plaintiff is also entitled to summary judgment on his claim that the ALJ failed to properly assess his residual functional capacity and erred in using the grids instead of obtaining the testimony of a vocational expert.
CONCLUSION
Plaintiff seeks an order of remand for further administrative proceedings which address the defects of the Commissioner's final decision. The court will remand the matter for further administrative proceedings consistent with this order. See Widmark v. Barnhart, 454 F.3d 1063, 1065 (9th Cir.2006) (reversing and remanding for proceedings consistent with the court's decision that the ALJ improperly rejected the examining physician's opinion, which in turn made the ALJ's use of the Medical-Vocational Guidelines in his final disability determination improper).
The case is remanded with directions to credit the uncontradicted opinion of Dr. Selcon, to include in the assessment of plaintiff's residual functional capacity the limitation that plaintiff is able to stand and/or walk for less than 2 hours during an 8-hour workday, and to obtain the testimony *1257 of a vocational expert in order to determine at step five of the sequential evaluation process whether there are jobs that exist in significant numbers in the national economy that plaintiff can perform.
Accordingly, IT IS HEREBY ORDERED that:
1. Plaintiff's August 29, 2008 motion for summary judgment and remand (Doc. No. 19) is granted;
2. Defendant's September 30, 2008 cross-motion for summary judgment (Doc. No. 20) is denied;
3. The decision of the Commissioner of Social Security is reversed; and
4. This case is remanded for further proceedings consistent with the analysis set forth herein. See 42 U.S.C. § 405(g), Sentence Four.
NOTES
[1] Plaintiff previously applied for SSI disability benefits but did not pursue an appeal after the claim was denied through the reconsideration level on February 21, 1996. (Tr. at 11.)
[2] Two of the ALJ's findings are numbered "4."
[3] Medical opinions are "statements from physicians and psychologists or other acceptable medical sources that reflect judgments about the nature and severity of your impairment(s), including your symptoms, diagnosis and prognosis, what you can still do despite impairment(s), and your physical or mental restrictions." 20 C.F.R. § 416.927(a)(2).
[4] See tr. at 383.
[5] See tr. at 92. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454902/ | 252 P.3d 582 (2011)
Melissa Ann DELONG, Appellant,
v.
KANSAS DEPARTMENT OF REVENUE, Appellee.
No. 104,270.
Court of Appeals of Kansas.
February 25, 2011.
*583 Michael S. Holland II, of Holland and Holland, of Russell, for appellant.
James G. Keller, of Kansas Department of Revenue, for appellee.
Before McANANY, P.J., LEBEN and ATCHESON, JJ.
*584 ATCHESON, J.
Plaintiff Melissa DeLong claims a due process violation as the result of paperwork Defendant Kansas Department of Revenue issued to her between the administrative hearing approving the suspension of her driver's license because she failed a blood-alcohol test and her request for review of that decision in the Barton County District Court. The district court rejected her motion to dismiss the proceedings based on the purported denial of her due process rights and upheld the suspension. DeLong has appealed that ruling. We find her constitutional claim to be factually insupportable and legally vacuous.
Counsel for DeLong has made this same argument for other clients in at least half a dozen other cases that have reached this court. In each case, the panel has rejected the due process claim in an unpublished opinion. Horn v. Kansas Dept. of Revenue, No. 103,719, filed November 5, 2010, slip op. at 2, 2010 WL 4668354; Flora v. Kansas Dept. of Revenue, No. 101,930, filed June 4, 2010, slip op. at 2, 2010 WL 2348693; McQuade v. Kansas Dept. of Revenue, No. 102,045, filed June 11, 2010, slip op. at 2, 2010 WL 2545663; Miller v. Kansas Dept. of Revenue, No. 102,044, filed June 18, 2010, slip op. at 2, 2010 WL 2502998; Helvey v. Kansas Dept. of Revenue, No. 102,204, filed June 18, 2010, slip op. at 2, 2010 WL 2503001; and Zimmerman v. Kansas Dept. of Revenue, No. 102,073, filed June 18, 2010, slip op. at 2, 2010 WL 2502999. We publish this decision not because it breaks new ground or comes to some different result. It doesn't. Instead, we take this opportunity to declare the argument DeLong advances to be wholly and unequivocally meritless in a decision that, unlike the earlier unpublished rulings, carries the full force of precedent. See Rule 7.04(f) (2010 Kan. Ct. R. Annot. 55).
We briefly state the pertinent facts. DeLong was arrested for driving under the influence in mid-2007. During that process, she took a test showing her blood-alcohol level to be .247, far over the legal limit of.080 set in K.S.A. 8-1567. Apart from any prosecution for driving under the influence, a person failing a blood-alcohol test faces administrative suspension of his or her driving privileges. K.S.A. 8-1014(b). In this case, we are concerned with that administrative penalty. The arresting officer provided DeLong with written notice of the failure and of her right to request an administrative hearing before the Department of Revenue suspended her driving privileges. K.S.A. 8-1002. DeLong does not dispute receiving the required notification or its legal sufficiency. She requested an administrative hearing. The hearing took place on November 13, 2007, and the hearing officer found adequate grounds to support the suspension. In the administrative order issued November 21, the hearing officer informed DeLong the suspension would begin 30 days later unless she sought judicial review of that order as provided in K.S.A. 8-1014.
On November 29, 2007, DeLong filed a request for district court review, thereby staying any suspension until the conclusion of the judicial processsomething that has yet to happen. Meanwhile, the Department of Revenue mailed a standard notice to DeLong on December 3, 2007, informing her that her driving privileges would be suspended as of December 21, 2007. After processing DeLong's request for a court hearing, the Department of Revenue mailed out a follow-up notice on December 5, 2007, informing her that her request for judicial review had been received and that her driving privileges would continue until a final court ruling. Again, DeLong does not dispute she received all of that paperwork.
Under K.S.A. 8-1020, a person is entitled to a de novo trial in the district court on the legal sufficiency of the proposed administrative suspension of his or her driving privileges. Rather than proceed with a full-blown trial, DeLong filed a motion to dismiss the proceedings in her favor because the December 3 notification from the Department of Revenue of the impending suspension purportedly violated her constitutional right to due process. After receiving briefs and hearing argument on the motion, the district court denied DeLong's due process claim and otherwise found her suspension to be proper. She has appealed that decision to us. As a result, the judicial process has not yet finally *585 disposed of DeLong's requested review, and she continues to enjoy driving privileges more than 3 years after her arrest.
The facts are undisputed. The due process argument presents a question of law. Our review, therefore, is plenary. Hemphill v. Kansas Dept. of Revenue, 270 Kan. 83, 89, 11 P.3d 1165 (2000).
The Due Process Clause of the Fourteenth Amendment to the United States Constitution requires that a person be afforded a right to be heard in a meaningful way before being deprived of "life, liberty, or property." U.S. Const. amend. XIV, § 1; Mathews v. Eldridge, 424 U.S. 319, 333, 96 S. Ct. 893, 47 L. Ed. 2d 18 (1976) ("The fundamental requirement of due process is the opportunity to be heard `at a meaningful time and in a meaningful manner.'" [Citation omitted.]); Mullane v. Central Hanover Bank & Tr. Co., 339 U.S. 306, 313, 70 S. Ct. 652, 94 L. Ed. 865 (1950) (The Due Process Clause "at a minimum" requires that "deprivation of life, liberty, or property by adjudication be preceded by notice and opportunity for hearing appropriate to the nature of the case."). The Kansas courts similarly define due process rights. State v. King, 288 Kan. 333, 354, 204 P.3d 585 (2009); Kempke v. Kansas Dept. of Revenue, 281 Kan. 770, 776, 133 P.3d 104 (2006).
The Kansas Supreme Court has recognized that a driver's license entails a sufficiently substantial interest to require some measure of due processa forum in which to be heard by a detached official before a person suffers a loss or material impairment of that interest. 281 Kan. 770, Syl. ¶ 2, 133 P.3d 104. The Kempke decision also recognizes that the combination of the administrative hearing with de novo judicial review provides sufficient constitutional due process in the context of suspension of driving privileges. 281 Kan. at 795-97, 133 P.3d 104. DeLong does not argue otherwise. To the contrary, she devotes most of her brief to an extended historical aside discussing the evolution of due process rights pertaining to driver's licenses culminating in the Kempke decision. And while that excursion may be in some abstract way interesting, it is entirely impertinent to the argument DeLong attempts to advance. In short, DeLong embraces the current hearing process as fully consistent with constitutional due process requirements.
The cornerstone of a due process claim is a state-sanctioned loss of a constitutionally protected property or liberty interest. Hogue v. Bruce, 279 Kan. 848, 850-51, 113 P.3d 234 (2005) ("The first inquiry is whether the State has deprived [the plaintiff] of life, liberty, or property."); Williams v. DesLauriers, 38 Kan. App. 2d 629, 636-37, 172 P.3d 42 (2007); Boutwell v. Keating, 399 F.3d 1203, 1211 (10th Cir.2005) ("In order to establish a due process violation, Mr. Boutwell must first demonstrate that he has been deprived of a constitutionally-protected liberty or property interest."). DeLong's argument runs aground in trying to satisfy that obligation. She identifies no deprivation or loss occasioned by the Department of Revenue's notice informing her of the prospective suspension of her driving privileges. The notice simply states that the privileges would be suspended on a date certain about 3 weeks later. That entails no loss or impairment. Moreover, the Department of Revenue sent another notice 2 days later acknowledging DeLong's request for judicial review and noting her driving privileges would remain in effect throughout that process. At no point has DeLong been deprived of a valid driver's license.
In her briefing, DeLong (actually, of course, her lawyer) fails to describe or define any sort of interest that had been impaired or diminished in any way by the Department of Revenue's notices. As we have said, it could not have been DeLong's driver's license or driving privileges generally, since those remained intact. But the briefing points to no other tangible interest. DeLong asserts the December 3 notice caused her some consternation because she had understood her driving privileges would not be suspended during the judicial review she had requested. As we have noted, however, the notice described a prospective suspension period, not an immediate loss of driving privileges. The Department of Revenue, of course, almost immediately sent out a supplemental *586 notice confirming DeLong's driving privileges would be maintained during the requested judicial review. Accordingly, DeLong's discombobulation should have been short-lived. And discombobulation, whatever its duration, does not support a constitutional due process claim. (We suppose, too, that DeLong's lawyer could have explained the actual effect of the paperwork to his client, thereby quelling her unease.)
From a legal standpoint, DeLong has failed to present so much as a semblance of a fully articulated due process argument, let alone one that might be considered colorable. She has made no effort to describe a deprivation that resembles anything even remotely rising to the level of a constitutionally protectable interest in property or liberty. Ultimately, the argument looks less like the defense of a legitimate constitutional right than a tool for delay.
We note in passing that the Kansas courts have been somewhat circumspect in defining the nature of the interest a driver has in his or her license for due process purposes. See Kempke, 281 Kan. 770, Syl. ¶ 2, 133 P.3d 104 (A driver's license confers an "important interest" subject to procedural due process protections before the state may suspend that authorization to operate a motor vehicle.). The interest likely is one resting in the realm of property, rather than liberty. The United States Supreme Court has looked at driving privileges that way in weighing appropriate due process protections. Bell v. Burson, 402 U.S. 535, 539, 91 S. Ct. 1586, 29 L. Ed. 2d 90 (1971) (recognizing due process rights attach to driver's licenses and likening the protected interest to wages seized through garnishment proceedings, Sniadach v. Family Finance Corp., 395 U.S. 337, 341-42, 89 S. Ct. 1820, 23 L. Ed. 2d 349 [1969] [property interest], and termination of welfare benefits, Goldberg v. Kelly, 397 U.S. 254, 262 n. 8, 90 S. Ct. 1011, 25 L. Ed. 2d 287 [1970] [property interest]). Liberty interests typically implicate some government restraint of an individual. Hamdi v. Rumsfeld, 542 U.S. 507, 529-30, 124 S. Ct. 2633, 159 L. Ed. 2d 578 (2004) (cases cited). Whether a protected interest may be characterized as one based in property or in liberty may affect the amount of process constitutionally due. Bell, 402 U.S. at 540, 91 S. Ct. 1586 ("[P]rocedures adequate to determine a welfare claim may not suffice to try a felony charge.").
The distinction between liberty and property interests is immaterial here, since DeLong identifies no diminution or loss of any protectable interest. We affirm the trial court's denial of DeLong's motion claiming a due process violation and uphold the suspension of her driving privileges. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454682/ | 994 S.W.2d 166 (1999)
Kenneth Ray CLARK, Appellant,
v.
The STATE of Texas.
No. 72991.
Court of Criminal Appeals of Texas.
June 2, 1999.
Robert Ford, Fort Worth, for appellant.
Charles M. Mallin, Asst. DA, Fort Worth, Matthew Paul, State's Atty., Austin, for State.
OPINION
KELLER, J., delivered the unanimous opinion of the Court.
Appellant was convicted of capital murder. Tex. Penal Code Ann. § 19.03(a). Pursuant to the jury's answers to the special issues set forth in Texas Code of Criminal Procedure art. 37.071 §§ 2(b) and 2(e), *167 he was sentenced to death. Article 37.071 § 2(g).[1] The case was automatically appealed to this Court, Article 37.071 § 2(h). Because of error proscribed by Wainwright v. Witt, 469 U.S. 412, 105 S. Ct. 844, 83 L. Ed. 2d 841 (1985), we reversed and remanded the case for a hearing on punishment only. Clark v. State, 929 S.W.2d 5 (Tex.Crim.App.1996); see also Article 44.29(c). At the retrial on punishment, the jury again answered the special issues in the State's favor, and appellant was sentenced to death. Appellant raises six points of error. We will affirm.
All six of appellant's points of error center on the claim that this Court improperly restricted the remand to a hearing on punishment only instead of remanding for a new trial.[2] Article 44.29(c) conferred upon this Court the power to remand a death penalty case for a hearing on punishment only.[3] Appellant's contention is that the Legislature made Article 44.29(c) applicable only to offenses committed on or after the effective date of the statute. In support of his claim, appellant points to Chapter 838 of the Session Laws for the 72nd Legislature:
(a) The effective date of this Act is September 1, 1991, and the change in law made by this Act applies only to an offense that is committed on or after September 1, 1991. For purposes of this Act, an offense is committed before September 1, 1991, if every element of that offense occurs before that date.
(b) An offense before the effective date of this Act is covered by the law in effect when the offense was committed, and the former law is continued in effect for that purpose.
Session laws, 72nd Legislature, Regular Session, Chapter 838, § 5 (1991). Section 2 of Chapter 838 contains the legislation altering Article 44.29(c) to permit remand for a hearing on punishment only. Appellant's offense was committed in May of 1991, before the effective date of the Act.
The State contends that this legislation was superseded by later legislation making Article 44.29(c) applicable to offenses regardless of when they occurredwhether they were committed before, on, or after the effective date. The State points to Chapter 781 of the Session Laws for the 73rd Legislature:
*168 SECTION 5. Notwithstanding Section 5, Chapter 838, Acts of the 72nd Legislature, Regular Session, 1991, the changes in law made by Section 2 of Chapter 838 to Subsections (b) and (c) of Article 44.29, Code of Criminal Procedure, and by Section 3 of Chapter 838 to Article 44.251, Code of Criminal Procedure, apply to an offense whether the offense is committed before, on, or after September 1, 1991.
SECTION 6. The change in law made by this Act applies to an offense whether committed on, before, or after the effective date of this Act.
Session laws, 73rd Legislature, Regular Session, Chapter 781, §§ 5 & 6 (1993). Chapter 781 became effective on August 30, 1993. Session Laws, Chapter 781, notes at the end, last sentence.
The State's contention is correct. When the language of a statute is unambiguous, we give effect to the plain meaning of the words unless doing so would lead to absurd results. Boykin v. State, 818 S.W.2d 782, 785-786 & 786 n. 4 (Tex. Crim.App.1991). After examining the statute, we find that Chapter 781, §§ 5 & 6 are unambiguous: the clear intent of the Legislature was to supersede the language appellant points to in Chapter 838 and make Article 44.29(c) applicable to offenses regardless of when they occurred.
In support of his points of error, appellant contends that we recognized in Bradford v. State, 873 S.W.2d 15, 23 n. 4 (Tex. Crim.App.1993), cert. denied, 513 U.S. 925, 115 S. Ct. 311, 130 L. Ed. 2d 274 (1994), that Article 44.29(c) applied only to offenses committed on or after September 1, 1991. Appellant's interpretation of Bradford is correct. Bradford, 873 S.W.2d at 23 n. 4. However, Bradford was decided on June 9, 1993, before Chapter 781 became effective. See, Bradford, 873 S.W.2d at 15. Bradford was correct at the time it was decided, but the statutory basis for Bradford's, holding no longer exists. Our previous opinion in the present case was delivered on May 22, 1996, long after Chapter 781 became effective. Clark, 929 S.W.2d at 5.
Appellant also relies upon Janecka v. State, 937 S.W.2d 456, 461 (Tex.Crim.App. 1996), cert. denied, ___ U.S. ___, 118 S. Ct. 86, 139 L. Ed. 2d 43 (1997), and Bouie v. City of Columbia, 378 U.S. 347, 84 S. Ct. 1697, 12 L. Ed. 2d 894 (1964), for the proposition that this Court's remand for a hearing on punishment only constituted a retroactive and unforeseeable judicial construction of Article 44.29(c) under the Due Process Clause of the Fourteenth Amendment. However, retroactive construction of Article 44.29(c) was imposed by the Legislature, not by this Court. Appellant raises no challenge to the validity of Chapter 781. And while our remand in this case was at variance from our holding in Bradford, the difference was due to an intervening statutory change. In this case, we relied upon an applicability statute that superseded that relied upon in Bradford. So, contrary to appellant's claims, we did not "overrule a consistent line of procedural decisions."
Because the law required us to remand the case for a hearing on punishment only, appellant's contentions are without merit. Points of error one through six are overruled.[4] The judgment of the trial court is affirmed.
JOHNSON, J., filed a concurring opinion, in which MEYERS and MANSFIELD, JJ., joined.
I join the opinion of the Court. I write separately to address the issue of procedural default.
*169 In 1992, appellant was convicted of capital murder and sentenced to death. On direct appeal, we vacated the judgment of the trial court and remanded the cause for a new punishment proceeding. Clark v. State, 929 S.W.2d 5 (Tex.Crim.App.1996), cert. denied, 520 U.S. 1116, 117 S. Ct. 1246, 137 L. Ed. 2d 328 (1997). Appellant was again sentenced to death, and on direct appeal he now claims that he is entitled to reversal on the basis that, in his prior appeal, we improperly restricted the remand to a hearing on punishment only when he was entitled to a new trial.
Although the majority properly disposes of appellant's claims on the merits, I believe that it does not adequately explain why it does not first reach the issue of procedural default which was raised by the state. Ante, at 168 n. 4. It would appear that the majority has it exactly backwards. Traditionally, we initially decide whether an appellant has procedurally forfeited the an error claimed on appeal. Only if we find that there has been no procedural default do we go on to decide the merits of the claim. See Posey v. State, 966 S.W.2d 57, 62 (Tex.Crim.App.1998) (under the general rules of procedural default, when an appellate court holds that a defendant has procedurally defaulted a particular claim by not timely raising it in the trial court, the appellate court is saying is that it will not address the merits of the claim raised for the first time on appeal). Such an approach is consistent with the concept of judicial self-restraint.
Typically, issues of procedural default arise when it is claimed that the trial court erred, but the error was not brought to the trial court's attention and was brought up for the first time on appeal. See, e.g., State v. Mercado, 972 S.W.2d 75 (Tex. Crim.App.1998) (per curiam) (basic principle of appellate jurisprudence is that points not argued at trial are deemed waived). In the instant case, appellant asserts that this Court erred in its prior opinion. Rather than complaining about this error in a motion for rehearing, see TEX.R.APP. P. 79.1, appellant allowed our order to become final and the new punishment hearing to conclude before making such a complaint. Thus, it would appear that he has procedurally defaulted his claims. See Rector v. State, 738 S.W.2d 235, 247 (Tex.Crim.App.1986) (on direct appeal, court would not address appellant's contention that Court erred in prior denial of motion for extension of time within which to file Out-of-Time Motion for New Trial, as appellant's contention was in nature of motion for rehearing on court's original order), cert. denied, 484 U.S. 872, 108 S. Ct. 202, 98 L. Ed. 2d 153 (1987).
In one of his points of error, appellant asserts that the trial court lacked jurisdiction over the punishment hearing it conducted after remand from this Court. All of appellant's points of error are based on a challenge to the authority of this Court to remand for a punishment hearing only, and are thus intertwined with one another. Ante, at 167 & n. 2. Because jurisdictional errors cannot be waived or procedurally defaulted,[1] we would need to address this point of error even if appellant's other points of error were procedurally defaulted. Therefore, in the interest of judicial efficiency, it is appropriate, in these circumstances, for this Court to assume, without deciding, that appellant has not procedurally defaulted on the points of error which do not involve jurisdiction. It then becomes appropriate to address the merits of all of appellant's points of error. With these comments, I join the opinion of the Court.
NOTES
[1] Unless otherwise indicated all future references to Articles refer to Code of Criminal Procedure.
[2] In point of error one, appellant contends that our remand for a hearing on punishment only violated the Separation of Powers Clause of the Texas Constitution because we disregarded a statute passed by the Legislature. In point of error two, appellant contends that the trial court's action is void because it lacked subject matter jurisdiction over the proceeding. He contends that the trial court lacked jurisdiction because: "The statute applicable to the appellant gave the trial court subject matter jurisdiction over a trial on the merits and punishment." After that sentence, appellant refers to his brief's Appendix A, containing a copy of the text of Chapter 838. In point of error three, appellant contends that the trial court improperly allowed a waiver of jury trial in a capital case. But appellant received a jury trial at the punishment hearing on remand. He contends that he was denied a right to a jury trial, because the case was not retried on the issue of guilt. In point of error four, appellant contends that the trial court violated his Fourteenth Amendment right to equal protection "by depriving him of a full retrial mandated by the Texas Legislature." In point of error five, appellant contends that this Court has violated his Fourteenth Amendment right to Due Process by retroactively applying an unforeseen judicial construction of a statute by applying Article 44.29(c) retroactively. Finally, in point of error six, appellant contends that counsel on retrial rendered ineffective assistance by failing to make proper objections concerning the applicability of Article 44.29(c) to his prosecution.
[3] Art. 44.29(c) provides in relevant part: "If any court sets aside or invalidates the sentence of a defendant convicted of an offense under Section 19.03, Penal Code, and sentenced to death on the basis of any error affecting punishment only, the court shall not set the conviction aside but rather shall commence a new punishment hearing under Article 37.071 or Article 37.0711 of this code, as appropriate, as if a finding of guilt had been returned."
[4] The State argues in its brief that appellant has procedurally defaulted many of his points of error because the logical time for challenging the propriety of remanding for punishment only would have been in a motion for rehearing from the earlier opinion. However, one of the points of error advanced by appellantjurisdictionis a type of claim that has traditionally been held immune to procedural default. Stine v. State, 908 S.W.2d 429, 431 (Tex.Crim.App.1995); Marin v. State, 851 S.W.2d 275, 279 (Tex.Crim.App. 1993). Given our resolution of the case, we do not address the procedural default questions posed by the State.
[1] See, e.g., Stine v. State, 908 S.W.2d 429, 431 (Tex.Crim.App.1995) (lack of jurisdiction is fundamental error, and is appealable at any time, even if raised for the first time on appeal); Marin v. State, 851 S.W.2d 275, 279 (Tex.Crim.App.1993) ("The clearest cases of nonwaivable, nonforfeitable systemic requirements are laws affecting the jurisdiction of the courts"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454684/ | 994 S.W.2d 80 (1999)
Angela M. MOTHERSHEAD, personal representative of the Estate of Jedidiah C. Mothershead, and Angela M. Mothershead, individually, Appellant,
v.
GREENBRIAR COUNTRY CLUB, INC., Kay-Bee Toy and Hobby Shops, Inc., and Intex Recreation Corporation, Respondents.
No. 74270.
Missouri Court of Appeals, Eastern District, Division Three.
June 22, 1999.
*82 Ronald E. Jenkins, Paula Colman, Jenkins & Kling, P.C., St. Louis, for appellant.
John A. Michener, Evans & Dixon, L.L.C., Peter B. Hoffman, Peter W. Gullborg, Kortenhof & Ely, P.C., St. Louis, for respondent.
PAUL J. SIMON, Presiding Judge
Angela M. Mothershead (plaintiff), mother of Jedidiah C. Mothershead (decedent), appeals from the trial court's granting of summary judgment in favor of defendants, Greenbriar Hills Country Club, Inc. (Greenbriar), and Intex Recreation Corporation (Intex) in an action for wrongful death of her sixteen year old son resulting from a snow sledding accident.
On appeal, plaintiff contends that the trial court erred in (1) granting Greenbriar's motion for summary judgment because it (a) disregarded pleadings setting forth undisputed facts that Greenbriar had knowledge that persons regularly entered the premises to ride sleds in a particular area; (b) disregarded Missouri law holding that, by virtue of Greenbriar's knowledge, decedent was either an invitee or a trespasser to whom Greenbriar owed a duty; and (c) disregarded pleadings setting forth disputed facts that Greenbriar breached its duty to decedent as an invitee or a trespasser, that a dangerous condition existed at the twelfth hole, that Greenbriar had knowledge of this condition, that the condition was not open and obvious to decedent, that Greenbriar knew or should have known it was not open and obvious, and that Greenbriar failed to use ordinary care to remove, remedy, or warn of the dangerous condition at the twelfth hole; (2) granting summary judgment in favor of *83 Intex because, as a matter of law, it was for a jury and not a judge to determine whether the Sno-tube was in a defective condition and unreasonably dangerous when put to its anticipated use and whether the defective design of the Sno-tube was the proximate cause of decedent's death; and (3) that the undisputed facts set forth in the pleadings demonstrate that, as a matter of law, Intex failed to provide an adequate warning of the Sno-tube's dangerous characteristics; moreover, jury questions remained concerning whether an alternative warning would have changed the decedent's behavior and whether the lack of an adequate warning was the proximate cause of the decedent's demise. We affirm.
Plaintiff's motion to strike Greenbriar's and Intex's points relied on as being in violation of Rule 84.04(d) was ordered taken with the case. Although we find that the points do not comply with Rule 84.04(d), we are able to glean from the points and argument sections of the brief the issues being raised by plaintiff. However, we do not condone the failure to comply with Rule 84.04(d) but, in the interest of resolving the case on its merits, we deny the motion.
Our standard of review of a grant of summary judgment is to review the record in the light most favorable to the party against whom judgment was rendered. ITT Commercial Finance v. Mid-America Marine, 854 S.W.2d 371, 376 (Mo.banc 1993). Our review is essentially de novo. Id.
Greenbriar, a country club located on the border of the cities of Kirkwood and Des Peres, contains an eighteen-hole golf course on which there are numerous hills. In the late afternoon of January 19, 1994, the decedent and two friends, Steve Tellez and Brian Cizek, went to Greenbriar to ride their sleds. The depositions of Tellez and Cizek establish that upon entering Greenbriar's property they noticed that the hill where they first wanted to ride their sleds was blocked by orange snow fencing. They left the property and re-entered elsewhere by knowingly walking through other private property. They proceeded to a hill at the twelfth hole of the golf course. Intex does not dispute that the decedent was riding down the hill on a Sno-tube it had distributed.
The affidavit of Craig Leinauer, an employee of plaintiff's counsel, establishes that there are two trees at the foot of the hill at the twelfth hole which stand approximately thirty-two feet eight inches apart. Leinauer's affidavit further states that there lies a long speed-bump-like protrusion in the otherwise flat area just in front of the two trees which is approximately one and one-half feet high. In his deposition, Brian Cizek, who witnessed the accident, states that on his fatal run, decedent sat cross-legged on the Sno-tube and began accelerating down the hill. Cizek goes on to say that when decedent hit the bump, he went airborne, his legs became uncrossed, his torso flattened out, and the tube began to spin. Cizek further states that seconds after hitting the bump, decedent's head struck one of the trees at the bottom of the hill. Plaintiff's amended petition states that the decedent remained in a comatose state until he died on January 28, 1994 as a result of injuries sustained in the accident on January 19, 1994.
Plaintiff filed her action against defendants on May 5, 1995 individually and on behalf of decedent as next friend pursuant to section 537.080 RSMo 1994. After the trial court dismissed her first petition, she filed an amended petition, as personal representative and individually, with leave. The amended petition contained five counts, the first of which was against Greenbriar for negligence. The next three counts for strict liability, negligent design, and failure to warn were directed to Intex. The final count was directed to Kay-Bee Toy and Hobby Shops for breach of warranty. The negligent design claim against Intex was only mentioned in a footnote to plaintiff's second point relied on. Since this was not properly contained in a point *84 relied on, it has not been preserved for review. State ex rel. Hwy. & Tr. Com'n v. Pracht, 801 S.W.2d 90, 92 (Mo.App. E.D. 1990), Rule 84.04(d). Further, because the claim against Kay-Bee was not set forth in a point relied on, it is deemed abandoned. Id.
Following numerous continuances and a venue dispute resulting in a voluntary change of venue by plaintiff, Greenbriar and Intex did not file answers to the amended petition. On September 11, 1997, Greenbriar filed its motion for summary judgment, specifically alleging that it was entitled to judgment as a matter of law because it owed no duty to decedent in that he was a trespasser, and the alleged dangerous condition was open and obvious. Greenbriar's motion was supported by (1) plaintiff's amended petition; (2) the affidavit of Greenbriar general manager, John Wright; and (3) an excerpt from plaintiff's answers to Greenbriar's interrogatories. Greenbriar also filed a memorandum in support of its motion. Later, Greenbriar filed an additional supplement containing references to (1) the deposition of decedent's friend who was present on the day of the accident and witnessed the accident, Brian Cizek; (2) the deposition of decedent's friend who was present on the day of the accident and the day before, Steve Tellez; (3) the deposition of Angela Mothershead; and (4) various photographs of the site of the accident.
Plaintiff filed her response to Greenbriar's motion supported by: (1) the deposition of Tellez; (2) the deposition of Wright; (3) the deposition of Greenbriar treasurer Edward J. Goedeker; (4) a Post-Dispatch article published after the accident reporting another accident which took place on the same hill prior to decedent's accident; (5) a Webster-Kirkwood Times article reporting decedent's death; and (6) the affidavit of Cizek. The response was supplemented by a memorandum of law. Later, with leave of the court, plaintiff filed a supplement to her initial response to Greenbriar's motion, which she identified as a memorandum of law, setting forth legal arguments and attached the following exhibits: (1) the deposition of Tellez; (2) photocopies of the box in which the Sno-tube was sold; (3) the deposition of Cizek; (3) the deposition of Wright; (4) various photographs of Greenbriar's property; (5) a copy of the Post-Dispatch article attached to plaintiff's initial response; (6) the affidavit of Wright; and (7) the affidavit of Leinauer, with exhibits.
In its motion for summary judgment, supplement and supporting memorandum of law, Greenbriar contended that it owed no duty to warn decedent of dangerous conditions on the property because he was a trespasser. This contention was supported by the deposition testimony of Cizek and Tellez, who stated that, on the day of the accident, they parked on property adjacent to the golf course which they knew to be private and proceeded to walk onto the golf course. Their testimony goes on to show that these individuals knew that they were not invited onto the property and were there for their own amusement. Greenbriar further argued that the dangerous condition was open and obvious as a matter of law, in that the mere existence of the snow-covered hill and the trees at the bottom of it was an open and obvious danger to someone speeding down the hill on a tube.
Responding, plaintiff contends that Greenbriar knew or should have known of the presence of the sledders on the hill at the twelfth hole; thus, decedent became at least a licensee. In the alternative, plaintiff argued that liability existed on the part of Greenbriar even if decedent was a trespasser, contending that the bump at the bottom of the hill was the real cause of the decedent's death and that this dangerous condition was not open and obvious as it was not discernable to the naked eye. The trial court granted Greenbriar's motion for summary judgment.
Later, Intex filed its motion for summary judgment, attaching as exhibits (1) plaintiff's amended petition; (2) plaintiff's *85 answers and objections to the interrogatories directed to her by Intex; (3) various photographs of the scene of the accident; (4) a copy of the trial court's order granting Greenbriar's motion for summary judgment; (5) the deposition of Tellez; (6) photocopies of the several sides of the box in which the Sno-tube was sold; and (7) the deposition of Cizek. Intex also filed a memorandum in support of its motion.
In its motion for summary judgment and memorandum in support thereof, Intex argued that appellant failed to make a prima facie showing that the alleged inability of the Sno-tube to be steered, controlled, or safely exited was the proximate cause of decedent's injury. Intex relied on the testimony of Tellez who stated that, on the day before the accident, decedent had successfully made such efforts to steer, control, and safely abandon the Sno-tube on the same hill. Further, Intex relied on the testimony of Cizek who stated that he did not see decedent make any effort to brake or steer the Sno-tube before his impact with the tree. Plaintiff responded to Intex's motion by incorporating her memoranda of law in response to Greenbriar's motion. The trial court granted Intex's motion for summary judgment.
We initially note that plaintiff's response to Intex's motion for summary judgment was defective because it consisted only of an incorporation of her memoranda of law responding to Greenbriar's motion. The incorporated memoranda of law are not structured, nor do they dispute the substantive facts in a manner necessary to satisfy the requirements of Rule 74.04(c)(2). The memoranda lay out facts applicable almost exclusively to plaintiff's case against Greenbriar and legal arguments in support thereof. These memoranda do not answer the factual allegations set forth in Intex's motion for summary judgment as required by the rule. In Trotter's Corp. v. Ringleader Restaurants, Inc., 929 S.W.2d 935, 940 (Mo.App. E.D. 1996), we held that the incorporation by reference of a memorandum of law does not satisfy the requirement of a properly drafted response to a motion for summary judgment. The factual allegations in Intex's motion for summary judgment not having been denied by plaintiff in her response, are treated as admitted. See ITT, 854 S.W.2d at 376. Therefore, there is no dispute of the material facts as alleged by Intex. See Id.
Despite the defectiveness of her response, plaintiff argues that the standard of review requires that we look at all of the information before the trial court at any time from the filing of the initial petition. However, the rules of civil procedure dictate otherwise. The trial court grants or denies motions for summary judgment on the basis of what is contained in the motions for summary judgment and the responses thereto. See Rule 74.04(c)(3). As an appellate court, we are confined to considering the same information that the trial court considered in rendering its decision on the motion for summary judgment. See ITT, 854 S.W.2d at 376.
Plaintiff cites Rule 74.04(c)(1) to bolster her contention that we should review the entire record. The rule does not grant the trial court such an extensive scope of review. The rule in pertinent part states that motions for, and responses to, summary judgment must set out material facts, "with specific references to the pleadings, discovery or affidavits", in asserting either a lack of a genuine issue of fact or an existence thereof. Rule 74.04(c). If the trial court is limited in its review to the documents set out with specificity in the motion for summary judgment and the response thereto, then so is this court. See ITT, 854 S.W.2d at 376; E.O. Dorsch Electric Co. v. Plaza Construction Co., 413 S.W.2d 167, 169 (Mo.1967).
In her first point on appeal, plaintiff contends that the trial court erred in granting summary judgment to Greenbriar because the pled facts established decedent as either an invitee on Greenbriar's property, or a trespasser to whom *86 Greenbriar owed a duty. She argues that, prior to the January 19, 1994 incident, Greenbriar never stopped or even discouraged anyone from riding sleds on its property. She further states in her second memorandum of law in support of her response to Greenbriar's motion for summary judgment that there were worn footpaths and other indications that people regularly used Greenbriar's property for personal amusement. She contends that Greenbriar knew or should have known of the sledders' presence and acquiesced thereto, allowing the decedent's status as a trespasser to be upgraded to licensee.
Responding, Greenbriar argues that it had no knowledge of any persons sledding on the hill in question. Greenbriar contends that it did have knowledge of sled riding on other parts of its property and took measures to stop it, as evidenced by Cizek's undisputed testimony establishing that orange fencing had been erected on the hill down which the three boys initially wished to sled.
In Missouri, the status of the entrant on the land of another determines the duty of care owed by the possessor of land. An entrant's status is either that of; (1) a trespasser, who enters without consent or privilege; (2) a licensee, who is on the property with consent, but for his or her own purposes; or, (3) an invitee, who is on the property with consent and to the benefit of the possessor. Seward v. Terminal R.R. Ass'n., 854 S.W.2d 426, 428 (Mo.banc 1993). Generally, a possessor of land is not liable for harm caused to a trespasser by failure to put land in a reasonably safe condition. McVicar v. W.R. Arthur & Co., 312 S.W.2d 805, 812 (Mo. 1958). This rule is not based on the wrongful nature of the trespasser's conduct, but on the possessor's inability to foresee trespasser's presence and guard against injury. Id.
We initially note that, although plaintiff's first point asserts that decedent was either an invitee or trespasser to whom Greenbriar owed a duty, she argues that he was either a licensee or a trespasser to whom Greenbriar owed a duty. Thus, her argument is directed only to decedent as a licensee or trespasser, not an invitee. In the interest of a resolution on the merits, we will review in accordance with the argument and not the point.
In her brief, Plaintiff argues that decedent's status on Greenbriar's property was that of licensee, and therefore, Greenbriar should be held to the duty of care owed a licensee. Greenbriar argues in its motion for summary judgment and its brief that decedent was a trespasser, but even if he were a licensee, that the open and obvious danger presented by the hill and trees absolved it of any duty to protect decedent from injury. In response to Greenbriar's assertion that the dangerous condition was open and obvious, plaintiff relies on our holding in Hellmann v. Droege's Supermarket, Inc., 943 S.W.2d 655, 659 (Mo.App. E.D.1997) to assert that the question of open and obviousness is one for the jury. See section 343A of the Restatement (Second) of Torts, (1965). There, we held that if a risk of harm remains even if the plaintiff exercises due care, the case must be submitted to a jury. Id. Hellmann, as well as Restatement section 343A, is limited to entrants upon land with the status of invitee. Since plaintiff concedes in her argument that decedent's status is no higher than that of a licensee, principles of law applicable to an invitee are not helpful.
Although plaintiff failed to argue decedent's status as an invitee, the question remains whether Greenbriar owed him a duty as a licensee or trespasser. Plaintiff contends that decedent was a licensee under Seward and that uninvited entrants on land need not have express permission to be on the land in question to be categorized as licensees if the possessor thereof has knowledge of and acquiesces to repeated entrance to limited areas of land. Seward, 854 S.W.2d at 428.
The undisputed testimony of Tellez and Cizek establishes that they did not have *87 the express permission of anyone at Greenbriar to be on its property, but plaintiff argues that Greenbriar did know of the presence of sled riders, and subsequently acquiesced to it. In her supplement, plaintiff cites evidence, noted in Greenbriar's response to plaintiff's interrogatories, of worn paths and beverage containers contained on Greenbriar's property to show that Greenbriar knew that trespassers were there. Additionally, Plaintiff relies on the affidavit and deposition of Wright to show that Greenbriar knew of the trespassers and acquiesced to their presence. Wright admits in his deposition that he rode sleds on the course prior to becoming an employee of the club or a member, but he says that he did not sled on the hill at the twelfth hole.
Greenbriar contends through citation to the affidavit of Wright that it had various "no trespassing" signs posted on fencing surrounding its property on the date of the accident. Plaintiff refutes this contention citing the deposition and affidavit of Cizek and the deposition of Tellez in which they state they observed no such signs. However, Cizek's undisputed testimony states that on the day of the accident he, Tellez and the decedent saw the orange storm fencing on the most frequently sledded hill, where they initially wished to sled. This indicates an attempt by Greenbriar to halt sledding on certain parts of its property.
Viewed in the light most favorable to the plaintiff, the evidence set forth above fails to show that Greenbriar knew or should have known of the presence of trespassers at the hill at the twelfth hole, and therefore prevents plaintiff from meeting the acquiescence requirement of Seward. See Seward, 854 S.W.2d at 428. This requirement not having been met, decedent's status may not be elevated to that of a licensee and, accordingly, Greenbriar owed no duty to decedent as a licensee. Id. Since the facts fail to establish that decedent was entitled to the protection owed a licensee, his status is that of a trespasser. Thus, only an exception to the general rule of land possessor liability set forth in McVicar would effectuate a duty owed to decedent by Greenbriar. See McVicar, 312 S.W.2d at 812.
Plaintiff contends that an exception to the general rule as to trespassers applies. She alleges that, even if decedent was trespasser, Greenbriar still owed him a duty as defined by section 335 of the Restatement (Second) of Torts, (1965):
A possessor of land who knows, or from facts within his knowledge should know, that trespassers constantly intrude upon a limited area of land, is subject to liability for bodily harm caused to them by an artificial condition on the land, if
(a) the condition
(i) is one which the possessor has created or maintains and
(ii) is, to his knowledge, likely to cause death or serious bodily harm to such trespassers and
(iii) is of such a nature that he has reason to believe that such trespassers will not discover it, and
(b) the possessor has failed to exercise reasonable care to warn such trespassers of the condition and the risk involved.
This section of the Restatement has been considered on numerous occasions and the respective fact pattern failed to fulfill all of the requirements of the section. See Seward, 854 S.W.2d at 429; Politte v. Union Elec. Co., 899 S.W.2d 590, 593 (Mo.App. E.D.1995); Cochran v. Burger King Corp., 937 S.W.2d 358, 364 (Mo. App. W.D.1996). The facts here similarly fail to fit the requirements of this section of the Restatement because plaintiff fails to establish requirement (a)(iii). A "defending party" may establish a right to summary judgment by showing facts that negate any one of the claimant's elements. ITT Commercial Fin., 854 S.W.2d at 381.
*88 Greenbriar defends against the possible application of this Restatement provision in its brief by claiming that the trees and the hill together amounted to an open and obvious dangerous condition. According to Greenbriar, this fact pattern fails to meet requirement (a)(iii) of the Restatement in that Greenbriar would not have reason to believe that the danger was of such a nature that trespassers would not discover it. In the supplement to its motion for summary judgment, Greenbriar relies on the depositions of Tellez and Cizek who both testify that the presence of the trees at the bottom of the hill was obvious. Tellez goes on to testify that it was obvious that striking one of these trees at any speed could result in serious injury.
Plaintiff admits in her response to Greenbriar's motion for summary judgment "that the hill upon which the decedent was sledding, and a tree at its base were a dangerous condition against which defendant Greenbriar should have warned or protected." Later, in the supplement to her response to Greenbriar's motion for summary judgment, filed on the day prior to the entry of summary judgment, plaintiff alleged that the dangerous condition which caused decedent's accident was the berm at the base of the hill at the twelfth hole. The trial court, relying on plaintiff's admission in her initial response as to the hill and tree, sustained the motion on the basis that the "hill and trees are an open and obvious condition."
The testimony of Tellez and Cizek concerning the obviousness of the presence of the trees is undisputed. Tellez's further testimony that it was obvious that striking one of the trees at any speed would result in serious injury is also undisputed. Because the presence and danger of plaintiff's alleged dangerous condition of the hill and the tree is obvious, it is not of such a nature that Greenbriar had reason to believe that trespassers would not discover it. Therefore, plaintiff has not satisfied requirement (a)(iii) of section 335 of the Restatement. Accordingly, Greenbriar owed no duty to decedent to remove, remedy or warn of the obvious dangerous condition at the twelfth hole. The trial court's grant of summary judgment as to point one was not erroneous.
In her second point on appeal, plaintiff asserts that the trial court erred in granting Intex's motion for summary judgment on plaintiff's claim for defective design. The defect alleged by plaintiff in her amended petition and again in her brief is the Sno-tube's inability to be steered, controlled or safely exited.
Our Supreme Court in Keener v. Dayton Elec. Mfg. Co., 445 S.W.2d 362, 364 (Mo. 1969) adopted strict liability for defective design as stated in Section 402A of Restatement (Second) of Torts, (1965). The elements of this principle are:
(1) One who sells any product in a defective condition reasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.
(2) The rule stated in Subsection (1) applies although
(a) the seller has exercised all possible care in the preparation and sale of his product, and
(b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.
In order for the trial court's entry of summary judgment to be proper, defendant need only present facts to defeat one of the law's requirements. Waggoner v. Mercedes Benz of North America, Inc., 879 S.W.2d 692 (Mo.App. E.D.1994)
*89 Intex does not dispute that it sold the Sno-tube in the course of business and does not contend that the sled was not being used in a reasonably anticipated manner. However, Intex does assert that the Sno-tube was not in a defective condition, as required by the first section of the restatement. This assertion is supported by testimony given by Tellez and Cizek. Tellez stated that decedent was able to steer, control and abandon the Sno-tube without injury on the day prior to the accident. Further, Cizek testified that he saw decedent make no effort to steer or brake the Sno-tube at any time during decedent's fatal run. This undisputed testimony establishes that on the day before the accident, decedent did what the alleged defect allegedly should have prevented him from doing, and made no effort to do so again on his fatal run. Thus, the Sno-tube was not in the defective condition alleged by the plaintiff.
Plaintiff asserts that it is for a jury to decide whether the Sno-tube was in a defective condition. Plaintiff cites our holding in Rauscher v. General Motors Corp., 905 S.W.2d 158, 160 (Mo.App. E.D. 1995) for the proposition that juries have been given "broad authority" to make a determination as to whether a product was in a defective condition. However, Rauscher does not stand for the proposition that all cases involving defective design are for a jury. Summary judgment is proper where reasonable minds could not differ as to the interpretation of the evidence. Chancellor Development Co. v. Brand, 896 S.W.2d 672, 677 (Mo.App. E.D. 1995). Because the facts here are established by plaintiff's failure to respond, reasonable minds could not differ in inferring from Tellez's and Cizek's undisputed testimony that the alleged defect did not cause decedent's injury. The defect in design alleged by plaintiff was refuted by Tellez's undisputed testimony that decedent was able to do all of the things that the alleged defect should have prevented him from doing, i.e., decedent was able to steer, control and safely exit the Sno-tube on the day prior to the accident. The alleged defect was further refuted by Cizek's undisputed testimony that decedent made no effort to steer, control or exit the Sno-tube during his fatal run. Therefore, summary judgment was proper because plaintiff failed to demonstrate that the defective condition of the Sno-tube when sold was the proximate cause of the decedent's injuries.
In her third and final point on appeal, plaintiff contends that the trial court incorrectly granted Intex's motion for summary judgment on the theory of failure to warn.
Initially, we note that Intex questions whether plaintiff initially pled negligent failure to warn (MAI 25.09) or strict liability for failure to warn (MAI 25.05). Causation is a required element of failure to warn in a product liability case, and Missouri law applies the same two-pronged causation test in all cases involving failure to warn. Arnold v. Ingersoll-Rand Company, 834 S.W.2d 192, 194 (Mo.banc 1992). Because the issue of failure to warn may be decided on the two-pronged test, we find it unnecessary to determine under which theory plaintiff initially pled for relief.
The first prong of the causation test requires proof of a proximate causal link between decedent's injury and the product allegedly lacking a warning or having an inadequate warning. Id. The second prong requires that the plaintiff show that a warning would have altered the behavior of those involved in the accident. Id. If one of the causation elements is lacking, summary judgment was correctly entered by the trial court. Tune v. Synergy Gas Corp., 883 S.W.2d 10, 14 (Mo.banc 1994).
The first prong of this test requires the plaintiff to show that the product for which there was no warning caused the injuries. Plaintiff contended in her amended petition and brief that the Sno-tube's inherent *90 inability to be steered, controlled or abandoned was the cause of decedent's accident. Due to our disposition of the second point, we find no causal relation between the Sno-tube's alleged inability to be steered, controlled or abandoned, and decedent's fatal injury. Therefore, plaintiff fails to meet the requirement of the first prong of the test set forth in Arnold because the product allegedly lacking a warning did not cause decedent's injuries.
Judgment affirmed.
KATHIANNE KNAUP CRANE, J. and LAWRENCE E. MOONEY, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454687/ | 994 S.W.2d 684 (1998)
MAGNOLIA GAS COMPANY & MKP Production Company, Appellants,
v.
KNIGHT EQUIPMENT & MANUFACTURING CORPORATION, Appellee.
No. 04-98-00156-CV.
Court of Appeals of Texas, San Antonio.
September 23, 1998.
*687 Daniel D. Chapman, Cline H. White, Miller, Sission, Chapman & Nash, P.C., San Antonio, Brian L. Peterson, Elias, Books, Brown, Peterson & Massad, Oklahoma City, OK, for Appellant.
Jeffrey I Kavy, Tyler Scheuerman, Clemens & Spencer, P.C., San Antonio, Charles F. Wetherbee, Law Offices of Steinle & Wetherbee, Jourdanton, for Appellee.
Before HARDBERGER, C.J., and GREEN and DUNCAN, JJ.
OPINION
GREEN, Justice.
This accelerated appeal arises from the trial court's denial of the special appearances of Magnolia Gas Company and MKP Production Company. See TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(a)(7) (Vernon Supp.1998). Because we hold the trial court lacked jurisdiction over Magnolia and MKP, we reverse its order and dismiss the case against them.
FACTUAL AND PROCEDURAL BACKGROUND
Knight Equipment & Manufacturing Corporation (KEMCO) sued Magnolia and MKP in Atascosa County for breach of contract, in quantum meruit, on sworn account, and for civil conspiracy and fraud. KEMCO is a Texas corporation with its principal office in Jourdanton, Texas. Both Magnolia and MKP are nonresidents of Texas.
KEMCO owned a cryogenic gas processing plant in Kellyville, Oklahoma. In February 1996, KEMCO contracted with M & M Gathering, LLC to dismantle that plant and to refurbish, transport, and install it at M & M Gathering's plant in McKamie, Arkansas.[1] M & M Gathering subsequently assigned its rights and obligations under this contract to Magnolia and MKP in September 1996.[2] The assignment was negotiated in Oklahoma, where it was ultimately executed. The contract is entitled "Agreement for Movement, Refurbishment and Installation of Cryogenic Gas Plant Facility" and is simple in concept:
WHEREAS, [Magnolia's and MKP's assignor] desires to have installed at its McKamie Plant location in Lafayette County, Arkansas, a Cryogenic Gas Plant and related treating facilities to allow recovery of gas liquids and removal of inerts; and
WHEREAS, [KEMCO] has in its inventory the Cryogenic Gas Plant known as [the] Kellyville plant near Kellyville, Oklahoma, and desires to engineer, refurbish, and install said plant and related treating facilities at the McKamie location for [Magnolia's and MKP's assignor];
NOW, THEREFORE, IT IS MUTUALLY AGREED, AS FOLLOWS:
ARTICLE 1 SCOPE OF WORK
[KEMCO] shall furnish materials and supplies, and shall design, fabricate, recondition, *688 modify, transport and assist in start-up of a Cryogenic Gas Plant and related treating facilities at [Magnolia's and MKP's assignor's] McKamie, Arkansas location, in accordance with the Exhibits which are attached hereto and made a part hereof....
The heart of the jurisdictional dispute in this case arises out of a brief description under the first of twelve items listed to be performed by KEMCO, the contractor, under the "project scope" exhibit attached to the contract, which says KEMCO agreed to "dismantle, remove, and transport all Kellyville equipment to contractor's yard...." KEMCO says it informed Magnolia and MKP that its yard was in Jourdanton, Texas, and therefore Magnolia and MKP knew at least a portion of the contract would be performed in Texas. The affidavit of Deral Knight, chief executive officer of KEMCO, states that the Jourdanton plant performs the refurbishing work under its contracts, and that Magnolia and MKP knew this because they were given copies of the KEMCO brochure which includes this information. KEMCO further asserts that Magnolia and MKP, exercising due diligence prior to the contract's assignment, acquired knowledge that a portion of the contract was to be performed in Texas. KEMCO estimates its performance in Texas comprised eighty percent of the engineering and refurbishment called for by the contract"the majority of the work contemplated by any party." Magnolia and MKP contend neither they, nor the contract assigned to them, required performance in Texas. George N. Keeney, III, vice president of Okland Oil Company, the managing member of MKP, admitted in his deposition, however, that he knew some of the work under the contract would be performed in Texas and that some of the materials for the Arkansas plant would also originate there.
The remaining record evidence of activities undertaken by Magnolia and MKP in Texas involves the parties' course of dealing after the contract assignment. First, Magnolia and MKP remitted payment to KEMCO's bank account in Texas. Second, James Moore, an engineer for the Arkansas plant and Magnolia and MKP's designated representative for the project, lived in Texarkana, Texas during the plant's installation. By affidavit, Moore stated that M & M Gas moved its principal place of business to Texarkana, Texas in March 1997, and that Magnolia and MKP reimbursed him for his expenses while residing in Texarkana. Magnolia and MKP assert they did not direct Moore to live in Texas and hypothesize that either Moore chose to live there or did so at M & M Gas' direction. Finally, Magnolia and MKP hired an engineering consultant from Richardson, Texas to evaluate the Arkansas project.
Additional activity taking place in Texas transpired once performance under the agreement was questioned. For example, Magnolia and MKP attended a meeting at the Jourdanton plant to discuss conflict over the second set of change orders. Magnolia and MKP contend that KEMCO insisted they travel to Texas for the meeting. Furthermore, the parties met in the Dallas office of Energy Income Fund, the project's lender, to review performance under the agreement. Although the lender's principal office was in Massachusetts, the meeting was held in Dallas at its request.
According to George Keeney's affidavit, disputes between the parties arose in spring 1997. Complaints about KEMCO's performance included inferior quality and workmanship; untimeliness; the propriety, approval, and amount of KEMCO's change orders;[3] failure to pay third-party vendors, suppliers, and laborers; failure to keep the plant free of encumbrances; a stated intent to cease work; and failure to *689 address other deficiencies identified by Magnolia. On September 26, 1997, Magnolia and MKP filed a declaratory judgment action against KEMCO in an Arkansas federal court. The parties dispute whether KEMCO received notice of the filing. On September 30, 1997, KEMCO filed the suit in Atascosa County from which this appeal arises.
On November 26, 1997, Liberty Supply, Inc. filed suit in Arkansas state court against KEMCO to recover for materials and supplies it provided to KEMCO for use in KEMCO's contract with Magnolia and MKP. On January 26, 1998, the same day the Atascosa court held its hearing on the special appearances at issue in this appeal, KEMCO filed an amended original answer and a third-party claim against Magnolia and MKP, alleging Magnolia and MKP breached the contract underlying this appeal.[4]
STANDARD AND SCOPE OF REVIEW
In a special appearance, the nonresident defendant bears the burden of negating all bases of personal jurisdiction. Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex.1985). The parties to this appeal maintain we review the evidence for factual sufficiency while we review legal conclusions de novo. See Nikolai v. Strate, 922 S.W.2d 229, 236 (Tex. App.Fort Worth 1996, writ denied). Although we agree that we review the lower court's legal conclusions de novo, we disagree that we review the record of an interlocutory appeal for factual sufficiency of the evidence.
Trial court decisions derived from both factual determinations and legal conclusions are generally reviewed for an abuse of discretion. Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 820 (Tex.App.San Antonio 1996, no writ). Personal jurisdiction involves questions of law and fact. See Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 230-31 (Texas 1991). Thus, the abuse of discretion standard is more appropriate than factual sufficiency review, at least in the interlocutory setting.[5]
Under the abuse of discretion standard, we may not substitute our judgment for that of the trial court regarding its resolution of factual issues, and we cannot disturb its decision absent a showing of arbitrariness or unreasonableness. See Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex.1992). Magnolia and MKP must therefore establish that the trial court could reasonably have reached only one conclusion. See id. Where controlling legal principles are concerned, we exercise less deference and examine whether the trial court analyzed and applied the law correctly. Id. The trial court abuses its discretion when it misapplies the law. See Landon v. Jean-Paul Budinger, Inc., 724 S.W.2d 931, 935 (Tex.App.Austin 1987, no writ). If legally correct, its ruling is immune from appellate revision. Id. at 936.
*690 Although Magnolia and MKP requested findings of fact and conclusions of law, the trial court entered none. Therefore, all questions of fact are presumed to support the judgment. See Zac Smith & Co. v. Otis Elevator Co., 734 S.W.2d 662, 666 (Tex.1987); Hawsey v. Louisiana Dep't of Soc. Svcs., 934 S.W.2d 723, 725 (Tex.App.Houston [1st Dist.] 1996, writ denied). Because the appellate record contains a reporter's record, however, these findings of fact are inconclusive. See Zac Smith, 734 S.W.2d at 666.
JURISDICTION
A nonresident defendant need not defend itself in a Texas court unless the exercise of jurisdiction over that party comports with both (1) the Texas long-arm statute, and (2) state and federal constitutional guarantees of due process. Guardian Royal Exch., 815 S.W.2d at 226. The Texas long-arm statute permits the exercise of jurisdiction over nonresidents "doing business" in Texas. TEX. CIV. PRAC. & REM.CODE ANN. § 17.042 (Vernon 1997). Although the statute enumerates certain acts which constitute "doing business," it contemplates that a nonresident's "other acts" may satisfy the "doing business" requirement. See Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990).
The Texas Supreme Court has interpreted the statute's language broadly: jurisdiction over nonresident defendants is limited only by the federal constitutional requirements of due process. See Guardian Royal Exch., 815 S.W.2d at 226; Schlobohm, 784 S.W.2d at 357. Accordingly, we must determine whether the trial court's exercise of jurisdiction over Magnolia and MKP survives a federal due process challenge, which involves a two-fold inquiry: (1) the defendants must have purposely established minimum contacts with the forum state; and (2) the exercise of jurisdiction must comport with "fair play and substantial justice." See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985).
1. Minimum Contacts
Under the first part of the due process analysis, we consider whether the defendants purposefully availed themselves of the privilege of conducting activities within the forum state, thus enjoying the benefits and protections of its laws. Burger King, 471 U.S. at 474-75, 105 S. Ct. 2174 Our focus is on the defendants' intentional activities and expectations. In sum, for a Texas court to assert personal jurisdiction over them, the defendants' activities "must justify a conclusion that the defendant[s] should reasonably anticipate being called into court" here. Id.; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980).
Personal jurisdiction is divided into two categories: specific and general. See Schlobohm, 784 S.W.2d at 357. KEMCO argues that Magnolia and MKP had sufficient minimum contacts with Texas, without attributing those contacts to either general or specific jurisdiction. Therefore, we consider both.
a. General Jurisdiction
General jurisdiction is appropriate where continuous and systematic contacts tie the defendants to the forum state. Guardian Royal Exch., 815 S.W.2d at 230. In deciding questions of general jurisdiction, we require a demonstration of substantial activities in the forum state. Schlobohm, 784 S.W.2d at 357.
KEMCO may not command the presence of Magnolia and MKP on the basis of general jurisdiction. Both Magnolia and MKP conduct the majority of their business within the state of Arkansas. They claim never to have sent goods into Texas, nor performed services in Texas. They further point out they have never owned any property in Texas, have never employed any people in Texas, nor sent any of their employees to Texas while working for them.
*691 KEMCO presents little evidence to the contrary. In support of its position that Magnolia and MKP maintained ongoing, systematic contacts with Texas, KEMCO relies on the alleged partial performance of the contract in Texas, the residence of the representative in Texas that was reimbursed by Magnolia and MKP, the relocation of M & M Gas' principal place of business to Texarkana, the wiring of payments into Texas, and the two meetings that transpired in Texas.
The acts of Magnolia and MKP cited by KEMCO do not amount to ongoing and systematic contacts. Rather, Magnolia and MKP's connection to Texas implicates a single, albeit extended, business transaction. Accordingly, a ruling that Magnolia and MKP had sufficient minimum contacts to trigger general jurisdiction would be an abuse of discretion.
b. Specific Jurisdiction
We now consider whether the exercise of specific jurisdiction over Magnolia and MKP would be proper. Specific jurisdiction pertains to causes of action arising out of or relating to the defendants' contacts with Texas. Guardian Royal Exch., 815 S.W.2d at 230. We therefore focus on the relationship among the defendants, the forum, and the litigation. Schlobohm, 784 S.W.2d at 357. Magnolia and MKP emphasize that specific jurisdiction arises only when the plaintiff's cause of action emanates from the nonresident's contactrather than a third party's unilateral actswith the forum state. In support, they cite KEMCO's alleged unilateral decision to refurbish components in Texas as well as the meetings attended in Texas necessitated by KEMCO's alleged failure to meet contract specifications. They maintain that neither entering into a contract with a Texas corporation nor sending payment to Texas make them susceptible to suit here. Magnolia and MKP further emphasize that as assignees, they did not engage in any activities related to Texas that may have transpired during contract negotiation. Finally, MKP and Magnolia reason that because they already paid KEMCO for the work it performed at the Jourdanton yard, KEMCO's suit against them could not possibly implicate the work done in Texas. Responding, KEMCO relies on the alleged partial performance of the contract in Texas, reimbursement by Magnolia and MKP of the living expenses of the designated representative who lived in Texas, the relocation of M & M Gas's principal place of business to Texarkana, the wiring of payments into Texas, and the two meetings that transpired in Texas.
Magnolia and MKP's emphasis on their own conduct is correct. See Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 417, 104 S. Ct. 1868, 80 L. Ed. 2d 404 (1984); Guardian Royal Exch., 815 S.W.2d at 227. Merely contracting with a Texas corporation does not satisfy the minimum contacts requirement. See Burger King, 471 U.S. at 478, 105 S. Ct. 2174; Temperature Sys., Inc. v. Bill Pepper, Inc., 854 S.W.2d 669, 675 (Tex. App.Dallas 1993, writ dis'd agr.). Furthermore, payments sent to the forum state are not determinative. See Temperature Sys., 854 S.W.2d at 675; cf. Bissbort v. Wright Printing & Publ'g Co., 801 S.W.2d 588, 589 (Tex.App.Fort Worth 1991, no writ) (holding payments made in Texas satisfied minimum contacts where contract required it and litigation was about nonpayment). Similarly, minimum contacts may not be satisfied by merely engaging in communications with a Texas corporation during performance of the contract. See Gundle Lining Constr. Corp. v. Adams County Asphalt, Inc., 85 F.3d 201, 205-08 (5th Cir.1996).[6]
*692 Because these actions alone are not enough to compel Magnolia and MKP's appearance in a Texas court, KEMCO's partial performance of the contract in Texas is significant. See Memorial Hosp. Sys. v. Fisher Ins. Agency, Inc., 835 S.W.2d 645, 650 (Tex.App.Houston [14th Dist.] 1992, no writ) (recognizing the focus is on quality and nature, not quantity, of contacts). In particular, we focus on the refurbishment work because merely supplying materials from the Jourdanton plant would be a unilateral act on KEMCO's part.
Magnolia and MKP neither required nor bargained for the refurbishing work to be completed in Texas. Cf. Fish v. Tandy, 948 S.W.2d 886, 894 (Tex.App.Fort Worth 1997, writ denied) (finding minimum contacts where defendant negotiated and contracted with Texas corporation through three personal trips, phone calls, and faxes to Texas); Bissbort, 801 S.W.2d at 589 (finding minimum contacts where defendant contacted Texas customer, contract required performance payment in Texas, and dispute involved nonpayment). Instead, as the contract assignees, Magnolia and MKP simply agreed to pay KEMCO to refurbish and relocate KEMCO's cryogenic gas plant to Arkansas and KEMCO agreed to do whatever was necessary to carry out the contract.
Indisputably, KEMCO is a Texas corporation with a refurbishing facility in Texas; Magnolia's and MKP's assignor, Magnolia, and MKP are all Oklahoma entities whose principal offices are located in Oklahoma; and the plant was to be constructed in Arkansas. As a result of this geographic diversity, it is certainly not beyond contemplation either that some part of KEMCO's performance (e.g., refurbishing) and some part of Magnolia's and MKP's performance (e.g., payment) might take place in Texas, or that the contracting parties were aware of this possibility at the time they entered the contract. For purposes of our review, we assume the trial court found this fact in support of its order that is, at the time the contract was entered, both parties contemplated that some part of each party's performance would occur in Texas. This conclusion is inherent in the abuse of discretion standard of review.
But partial performance of a contract in Texas is not the sine qua non of personal jurisdiction. Rather, the dispositive question is one of law: are the defendant's contacts of a sufficient nature and quality that the exercise of personal jurisdiction comports with "fair play and substantial justice?" Burger King, 471 U.S. at 475-76, 105 S. Ct. 2174; cf. Ornelas v. United States, 517 U.S. 690, 698-99, 116 S. Ct. 1657, 134 L. Ed. 2d 911 (1996) (explaining that appellate courts review a trial court's resolution of legal questions de novo, including its applying the law to the facts, but review a trial court's fact findings deferentially). We review conclusions of law de novo. E.g. Walker v. Packer, 827 S.W.2d at 840.
We conclude that Magnolia and MKP did not purposefully avail themselves of the benefits and protections of Texas law when they assumed the contract with KEMCO. The Texas contacts were entirely incidental and immaterial to the purpose of the contract and were not instigated by Magnolia and MKP, or their assignor. Thus, in the absence of facts amounting to minimum contacts, we hold the trial court abused its discretion by concluding it had personal jurisdiction over Magnolia and MKP.
2. Fair Play and Substantial Justice
We also hold that the assertion of personal jurisdiction over Magnolia and *693 MKP would offend traditional notions of fair play and substantial justice. To avoid being haled into a foreign court, the defendants must present "a compelling case that the presence of some consideration would render jurisdiction unreasonable." See Burger King, 471 U.S. at 477, 105 S. Ct. 2174. In this inquiry, we consider the following factors, where appropriate: (1) the burden on the defendants; (2) the interests of the forum state in adjudicating the dispute; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several states in furthering fundamental social policies. Id.; Guardian Royal Exch., 815 S.W.2d at 231. When the defendant has established minimum contacts with the forum state, the exercise of jurisdiction rarely fails the test of fair play and substantial justice. See Guardian Royal Exch., 815 S.W.2d at 231.
Magnolia and MKP's burden of litigating in Texas appears considerable. Their gas processing facilities and offices, as well as the majority of related documents and witnesses, are located in Arkansas. Liens filed against the plant were filed in Arkansas, and the suppliers of plant materials, who have not been paid by KEMCO, are located in Arkansas. KEMCO contends that litigation in Arkansas would be burdensome to Magnolia and MKP given they are entities formed and located in Oklahoma. In light of the fact that Magnolia and MKP have already engaged in operations in Arkansas, litigating there would be less burdensome than in Atascosa County, Texas.
Texas' interest in being the forum state is tenuous. As a general proposition, Texas has an interest in providing its citizens with a forum for convenient and effective relief from breached contracts, fraudulent conduct, and conspiracies. However, KEMCO's ability to obtain convenient relief in its home state is weakened by the lawsuits, involving the same contract at issue here, that KEMCO must defend in Arkansas. At the time KEMCO filed suit, Magnolia and MKP had already paid approximately $3.7 million to KEMCO on a $3.9 million contract. The costs to KEMCO of litigating in both Texas and Arkansas could potentially outweigh its expectation under the contract.
Accordingly, KEMCO's interest in litigating in Texas does not weigh heavy in the balance. Although, in the abstract, it would be convenient for KEMCO to sue Magnolia and MKP in Texas, under this set of facts, it makes little sense. Since KEMCO filed suit in Texas, it has also been sued in Arkansas state court by at least one of the suppliers from whom it purchased materials; KEMCO then brought Magnolia and MKP in as third party defendants in that lawsuit. Furthermore, KEMCO should expect to defend itself in a foreign court because it regularly conducts business out of state.[7]
Finally, it appears that the interstate judicial system's interest, as well as the shared interest of the several states, would best be served by the suit proceeding in Arkansas. After all, that is where the bulk of the contract work appears to have taken place and where the plant will operate. In the interest of judicial economy, the disputes among all parties involved, whether they be the parties to the contract or the suppliers engaged during construction, would be best resolved in one proceeding.
Conclusion
The trial court abused its discretion in ruling that Magnolia and MKP had minimum contacts with Texas and that requiring them to defend in Texas comported with fair play and substantial justice. We therefore reverse the trial court's order *694 and dismiss the case against Magnolia and MKP.
HARDBERGER, Chief Justice, dissenting.
I believe it was within the trial court's discretion to deny the special appearances of Magnolia and MKP. I, therefore, respectfully dissent.
In determining whether a trial court abused its discretion, an appellate court must be deferential to the court's fact findings, reversing those findings only if the trial court could reasonably have reached only one decision. Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex.1992). On legal questions, a reviewing court may be less deferential and may reverse a trial court if that court clearly failed to correctly analyze and apply the law. Id. at 840. As the majority points out, where no findings of fact are filed by the trial court, all facts are presumed to support the judgment. Zac Smith & Co., Inc. v. Otis Elevator Co., 734 S.W.2d 662, 666 (Tex.1987), cert. denied, 484 U.S. 1063, 108 S. Ct. 1022, 98 L. Ed. 2d 986 (1988). While it is true that if a reporter's record is contained in the appellate record, those facts are not conclusive, id., I do not take this to mean that the appellate court may, under an abuse of discretion standard, resolve factual disputes reflected by the record. See id. (presuming, in absence of findings but where reporter's record is included in record, that sole disputed fact supports trial court's finding); Walker, 827 S.W.2d at 839-40 (findings of fact may be reversed only if trial court could reasonably have reached one decision). The presumption that the facts support the judgment should only be overcome by an absence of supporting facts in the record. See Otis Elevator, 734 S.W.2d at 666. Otherwise, the deference given trial courts in their factfinding roles would be meaningless. The majority finds an absence of facts in the record amounting to minimum contacts and that the assertion of personal jurisdiction over Magnolia and MKP would offend traditional notions of fair play and substantial justice. I disagree. This record presents nothing more than a factual dispute. The trial court acted within its discretion in resolving that dispute.
In order to find that it has specific personal jurisdiction over a defendant, a court must determine whether the cause pleaded "arose out of the contacts" the defendant had with the state. See Beechem v. Pippin, 686 S.W.2d 356, 361 (Tex.App.Austin 1985, no writ). It is necessary to establish whether the defendants purposely availed themselves of the privilege of conducting activities within the forum state. Id. The record contains evidence that MKP and Magnolia did so when entering the contract with KEMCO.
The crux of this dispute is what the parties contracted for. According to Magnolia and MKP, the contract was for the installation of a gas plant in Arkansas. They argue that all other matters are incidental to that agreement. In what state KEMCO "chose" to do the refurbishing contemplated by the agreement and necessary for performance was of no concern to Magnolia and MKP.
KEMCO, on the other hand, argues that the contract specifically contemplated that much of the refurbishing work would be done at its plant in Jourdanton, Texas. KEMCO points to a work order attached to the contract in dispute, which states that KEMCO is to "dismantle, remove and transport all Kellyville equipment items listed in Exhibit `D' to Contractor's [KEMCO's] yard." Since that yard is in Texas, Magnolia and MKP would thus benefit from the work of Texas employees, whose work was governed by Texas laws. Under this argument, Magnolia and MKP did purposely avail themselves of the privilege of conducting activities within Texas. According to KEMCO, the work done at its plant amounted to eighty percent of the work contemplated by the agreement.[1]
*695 The majority is correct in observing that jurisdiction may not be supported by the unilateral acts of the plaintiff. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985). It has been held that the purchasing of products that were constructed in Texas cannot, without more, be sufficient to support jurisdiction. See Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026, 1029 (5th Cir.1983), cert. denied, 466 U.S. 962, 104 S. Ct. 2180, 80 L. Ed. 2d 561 (1984). Nor is mere payment on a contract in Texas by itself sufficient. See U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760, 763 (Tex.1977), cert. denied, 434 U.S. 1063, 98 S. Ct. 1235, 55 L. Ed. 2d 763 (1978). However, in this case, both parties performed part of their contractual duties in this state. MKP and Magnolia wired payments to accounts in this state, and KEMCO did refurbishing work here.
The contract at issue is not for the mere purchase of a product that was, incidentally, manufactured in Texas. Instead, the contract contemplates that parts be refurbished and transferred. This work is an integral part of the agreement. M & M, and then Magnolia and MKP, did not desire merely to purchase a plant or even to have one constructed for them in Arkansas. They sought the refurbishment of parts and the transfer of those parts to Arkansas and the construction there of a plant. KEMCO's yard is located in Texas. It is clear that the parties contemplated and purposely availed themselves of the privilege of conducting activities in Texas. The evidence presented to the trial court supports such a finding.
KEMCO officials testified that Magnolia and MKP understood where the work was to be done. George Keeney, a vice president of Okland Oil Company, the managing member of Magnolia, stated that he knew before the contract was executed that some of the work would be done in Texas. The companies had a brochure that identified the location of KEMCO's yard and the nature of KEMCO's business. According to the affidavit of Deral Knight, chief executive officer of KEMCO, the brochure clearly states that KEMCO does its refurbishing work at its Jourdanton yard.[2] The contract itself specifies that the work will be done at the "Contractor's yard." No one has claimed that this language is ambiguous. The record does not reflect that KEMCO, the contractor, had any yard but the one in Jourdanton at the time this contract was entered into. The trial court could have determined that partial performance in Texas was accomplished with Magnolia's and MKP's consent. See Castle v. Berg, 415 S.W.2d 523, 525 (Tex. Civ.App.Dallas 1967, no writ) (noting that although agreement didn't specify place for performance, such performance was accomplished in Texas, with appellant's consent, and this was sufficient to establish minimum contacts).
"Narrow factual distinctions will often suffice to swing the due process pendulum" in jurisdiction cases. U-Anchor Advertising, Inc., 553 S.W.2d at 764. A review of the disposition of such cases in Texas suggests that this trial judge operated well within the parameters of established law in denying Magnolia's and MKP's special appearance. See Ross F. Meriwether & Assoc., Inc. v. Aulbach, 686 S.W.2d 730, 731 (Tex.App.San Antonio 1985, no writ) (nonresident is subject to suit if the cause of action arises from transaction consummated in Texas and jurisdiction comports with fair play and substantial justice); Beechem, 686 S.W.2d at 362 (upholding jurisdiction where party sought contract in Texas by telephone and made payments in Texas); Wright Waterproofing Co. v. Applied Polymers of Am., 602 S.W.2d 67, 71 (Tex.Civ.App.Dallas 1980), writ ref'd n.r.e., 608 S.W.2d 164 *696 (corporation availed itself of Texas law by coming to state to negotiate sale of its product); Pizza Inn, Inc. v. Lumar, 513 S.W.2d 251, 254 (Tex.Civ.App.Eastland 1974, writ ref'd n.r.e.) (defendant was "doing business" in Texas when it entered into contract by mail with Texas corporation and contract was to be performed, in part, in Texas); Berg, 415 S.W.2d at 525 (finding personal jurisdiction where contract was made in Texas and, with appellant's consent, partly performed there). That other courts have found no jurisdiction in similar cases simply illustrates what it means to leave a matter to a trial judge's discretion.
The majority acknowledges that it must assume the trial court found that both parties contemplated some part of each party's performance would occur in Texas. Despite this acknowledgment that the trial court could reasonably have reached this finding from the evidence presented, the majority concludes that Magnolia and MKP did not purposefully avail themselves of the benefits and protections of Texas law because the Texas contacts were incidental and immaterial. I find nothing incidental or immaterial in the fact that the parties contemplated that KEMCO was to perform the refurbishing work, that was an integral component of the scope of the work to be performed under the contract, in Texas. The majority substitutes its opinion regarding the nature of the work the parties contemplated being performed in Texas for that of the trial court's. That is not the proper role for this court in conducting an abuse of discretion review.
The record supports the trial court's finding that Magnolia's and MKP's contacts with Texas were sufficient to give rise to specific personal jurisdiction. The question of whether exercising such jurisdiction comports with notions of fair play and substantial justice is fairly easy. See Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 231 (Tex.1991) (where defendant has established minimum contacts, exercise of jurisdiction is only rarely unfair or unjust). Determining whether something is "fair" or "just" is to some degree a subjective inquiry. A trial judge's determination in this area should be given great deference. The trial judge acted within his discretion in determining that jurisdiction was fair, and evidence in the record supports his conclusion.
I concede that litigation in Arkansas would be more convenient and perhaps less burdensome to the defendants. However, convenience is not the only factor to consider and should not be determinative. See Beechem, 686 S.W.2d at 360 (discussing problems inherent in this consideration, such as new mobility of society). If convenience to the defendant were to be dispositive, few, if any, non-resident defendants would be sued in Texas.
I disagree with the majority's contention that Texas's interest in being the forum state is "tenuous." Texas, as the majority acknowledges, has an interest in protecting its citizens from breached contracts, fraudulent conduct, and conspiracies. See Lujan v. Sun Exploration & Prod. Co. 798 S.W.2d 828, 833 (Tex.App.Dallas 1990, writ denied). Those from out of state who contract with Texas corporations should not be able to avoid those protections under the pretext that they "didn't know" the contract would be performed in this state. I do not find the fact that KEMCO has been sued in Arkansas relevant to this consideration at all. Texas, of course, has no interest in providing its citizens the protections and benefits of suit in Arkansas. Texas's interest is in providing a convenient forum for suit in Texas.
Finally, I am not persuaded in this case that the interstate judicial system's interest should weigh as heavily in the balance as the majority seems to suggest. The record is unclear about the status of the suits brought in Arkansas. KEMCO asserts in its brief that the Arkansas litigation fails to include all the parties named in the Texas litigation and that the Arkansas litigation has slowed to a standstill.
*697 The trial court was not required by law to consider the Arkansas litigation as dispositive to this case. See Quiroz v. McNamara, 585 S.W.2d 859, 864 (Tex.Civ.App. Tyler 1979, no writ) (pendency of action in another state does not preclude assumption of jurisdiction by Texas court). It was within the trial court's discretion to weigh the factors and evidence before it. It did so, and the evidence supports the decision reached.
CONCLUSION
The majority correctly articulates the standard of review, but disregards that standard in reaching its decision. The trial court was within its discretion in resolving the factual dispute before it. I would affirm the judgment.
NOTES
[1] M & M Gathering is also a defendant in the underlying litigation, although it has not joined in this appeal. The managing member of M & M Gathering is M & M Gas Processing, an Oklahoma corporation that was originally a member of Magnolia and MKP.
[2] Magnolia, an Oklahoma limited liability corporation, was formed to own and operate the Arkansas plant. MKP, also an Oklahoma limited liability corporation, was formed to own and operate an oil and gas field in Arkansas.
[3] According to the contract at issue, change orders are either (1) the client's requests for work done outside the original scope of the contract, or (2) the contractor's developments in design and scope approved by the client.
[4] At oral argument, KEMCO asked this Court to take judicial notice of the dismissal of the federal lawsuit. Magnolia and MKP added that two lawsuits, in addition to the suit filed by Liberty Supply, have been filed in Arkansas state court by KEMCO's suppliers.
[5] We express no opinion about the propriety of factual sufficiency review in post-trial appeals of special appearances. Compare NCNB Texas Nat'l Bank v. Anderson, 812 S.W.2d 441, 442-43 (Tex.App.San Antonio 1991, no writ) (applying factual sufficiency standard), with Thorpe v. Volkert, 882 S.W.2d 592, 596-97 (Tex.App.Houston [1st Dist.] 1994, no writ) (applying abuse of discretion standard). We note, however, that although the courts of appeals label their review as one of factual sufficiency, in practice, they largely defer to the trial court's factual determinations while ruling de novo its legal conclusions. See, e.g., MacMorran v. Wood, 960 S.W.2d 891, 894-99 (Tex.App.El Paso 1997, pet. denied); Nikolai, 922 S.W.2d at 238-40; Hotel Partners v. KPMG Peat Marwick, 847 S.W.2d 630, 632 (Tex.App.Dallas 1993, writ denied).
[6] Magnolia and MKP rely heavily on U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760 (Tex.1977), in arguing minimum contacts may not be satisfied by a party making payments in the forum state for a contract partially performed in the forum state. In U-Anchor, a Texas business, U-Anchor, constructed highway signs in Texas and then installed them in Oklahoma. The Oklahoma customer remitted monthly payments to U-Anchor's office in Texas. The Texas Supreme Court held the only activity the Oklahoma customer engaged in was the mailing of payments into Texas, which was not enough to satisfy the due process minimum contacts requirement. This case, however, pre-dates the bifurcated analysis of general versus specific jurisdiction. Accordingly, we cannot assign U-Anchor the weight afforded it by Magnolia and MKP.
[7] According to its brochure, KEMCO engages in projects not only in the locations involved in this suit, but also in places as distant as Indonesia.
[1] The record neither supports nor undermines this assertion. It is clear, however, that some of the work was performed in Jourdanton.
[2] The brochure states, "KEMCO has the capability to completely assemble and test entire plants at its facility in Jourdanton, Texas." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/6363782/ | Opinion by
President Judge Bowman,
This is an appeal from an order of the Board of Finance and Revenue (Board) refusing the petition for review of Atlantic & Gulf Stevedores, Inc. (appellant) with respect to the resettlement by the Department of Revenue (Department) of appellant’s 1964 Corporate Income Tax (CIT) return.1 The facts have been stipulated and are essentially as follows.
Appellant is a Pennsylvania corporation organized and chartered in 1933 for the purpose of conducting a general stevedoring business. Appellant owns no real property in Pennsylvania or elsewhere but leases two piers and office space in Philadelphia and occupies an office in New York, New York. Appellant’s tangible personal property in Pennsylvania consists of office furniture and equipment, four trucks and certain stevedoring gear. Appellant employs approximately fifteen office personnel in Philadelphia, including a port manager, and approximately five mechanics. Ship *515bosses and longesboremen are hired on a day-to-day basis according to need. Appellant does not have any employees working in the New York office other than its officers, although it does pay a proportionate part of the salaries of personnel in departments of its parent corporation who spend part of their time on appellant’s work.
During 1964, appellant was engaged in a general stevedoring business which consists of loading and unloading ships carrying waterborne cargo in foreign and interstate commerce exclusively.2 Appellant is not engaged in any intrastate commerce in Pennsylvania. All contracts are negotiated and executed, and all executive functions are performed in New York. The Philadelphia office bills for services and monies are received at both the New York and Philadelphia offices. The stipulation recites that appellant is not subject to and does not pay any corporate taxes in any state other than Pennsylvania.
For the year 1964, appellant timely filed a CIT return reporting net income of $351,476.67 and tax due of “none”, being of the view that it was not subject to CIT. The Department settled tax against the appellant in the amount of $21,088.60 (6% of $351,-476.67). Appellant’s petition for resettlement and petition for review were refused; however, appellant agrees that if it is subject to the tax, the amount settled by the Department is correct.
Appellant advances a number of arguments in support of its view that it is not subject to CIT. First relying on language in Commonwealth v. Eastern Motor Express, Inc., 398 Pa. 279, 287-88, 157 A.2d *51679, 84 (1959), appellant argues that only foreign corporations engaged exclusively in interstate and foreign commerce are subject to CIT and that it, being a domestic corporation so engaged, cannot be taxed thereunder. Further, it argues that subjecting it to CIT while domestic corporations generally (those not engaged exclusively in interstate and foreign commerce) pay the Corporate Net Income Tax (CNIT)3 instead, violates the uniformity provisions of the Pennsylvania Constitution.4
We note first that, by its terms, the CIT clearly applies to the appellant. Section 3 of the CIT imposes what is characterized as a property tax on “[ejvery corporation carrying on activities in this Commonwealth or owning property in this Commonwealth . . . on net income derived from sources within this Commonwealth . . . .” Section 2 then defines “Corporation” as “[a] corporation . . . either organised under the laws of this Commonwealth, the United States, or any other state ...” and defines “Sources within this Commonwealth” as including “any activities carried on in this Commonwealth, regardless of whether carried on in intrastate, interstate or foreign commerce.” (Emphasis added.) Moreover, appellant’s reliance on Eastern Motor Express, supra, is based on language taken out of context in that case. Precisely the same argument based on the same language was specifically rejected in Commonwealth v. Baltimore and Cumberland Valley Railroad Extension Co., 435 Pa. 378, 380-81, 257 A.2d 249, 250 (1969), a *517case which upheld the application of CIT to a domestic corporation. Appellant’s attempt to distinguish Baltimore and Cumberland Valley, supra, on the ground that the taxpayer there was engaged solely in intrastate commerce, even if true,5 must fail in view of the clear provision of Section 2 of the CIT, cited above, which specifically subjects to taxation activities in interstate or foreign as well as intrastate commerce. In addition, the fact that Baltimore and Cumberland Valley, supra, upheld the application of CIT to a domestic corporation clearly not engaged in interstate and foreign commerce, illustrates the error in appellant’s premise that it, among domestic corporations, has been singled out to pay CIT because it is so 'engaged.
Thus, while the CIT, by its terms, applies to both domestic and foreign corporations and purports, at least, to tax business activities whether related to interstate and foreign or intrastate commerce, it appears that, in reality, corporations, both domestic and foreign, which engage exclusively in interstate and foreign commerce are the major class of corporations subject to CIT. This is so for two reasons. First, Section 3 of the CIT contains the following proviso, which greatly restricts its application:
Provided, however, That such net income [derived from sources within this Commonwealth] shall not include income for any period for which the corporation is subject to taxation under the Corporate Net Income Tax Act ....
Second, the Commonwealth is, and apparently has been for some time, of the opinion'that corporations, both foreign and domestic, which are engaged exclusively *518in interstate and foreign commerce are not “doing business in this Commonwealth” within the meaning of Section 2 of the CNIT and are, therefore, not taxable thereunder; consequently, it is the Commonwealth’s view that such corporations are, if taxable at all, subject to CIT.
While we have serious doubts about the validity of the Commonwealth’s construction of “doing business” and, under these facts, see no reason why this appellant, a domestic corporation, was not doing precisely that,6 we need not explore this here. For such *519a discussion would only be relevant to a determination of whether or not the appellant should have been subject to CNIT rather than CIT, an issue which the appellant has raised only tangentially and in a way which can be answered quite simply. In this regard, appellant has merely alleged that it is “possibly” amenable to taxation under the CNIT, unless its income derived from foreign and interstate commerce is excluded, and that it cannot be subject to an additional tax under the CIT. The obvious answer to this is that Section 3 of the CIT precludes, as the Commonwealth readily admits, the application of both taxes to any one corporation. Further, if appellant felt that it should have been subject to CNIT despite the Commonwealth’s view to the contrary, it should have filed a CNIT return. Having failed to do so, it cannot now claim exemption from CIT on the basis that it was “subject to taxation under the Corporate Net Income Tax Act” within the meaning of Section 3 of the CIT. Conversely, if, as appellant seems to *520suggest, income derived from interstate and foreign commerce is not taxable under the CNIT, then such income would, of necessity, fall within the scope of the CIT, which clearly does tax income from such a source. The whole point of this is that rather than press its “right” to pay the CNIT and thus escape the CIT, appellant has chosen instead to attack the CIT on its own terms, no doubt hoping to escape paying either; it is on the basis of appellant’s direct attack, and not the collateral issue of its possible subjectivity to CNIT, that we will decide this case.
Turning back then to appellant’s argument that the imposition of CIT violates the Uniformity Clause of the Pennsylvania Constitution, we have already seen that while foreign and domestic corporations engaged exclusively in interstate commerce are the major class subject to CIT, although not for the reason suggested by the Commonwealth, other domestic corporations have also been taxed thereunder; see Baltimore and Cumberland Valley, supra, and the cases cited therein. This essentially refutes the premise upon which the uniformity argument is based—that is, that appellant has been singled out among domestic corporations generally to pay CIT. Moreover, appellant has not alleged that it is being treated any differently than other domestic corporations engaged exclusively in interstate and foreign commerce nor has it shown that such classification is arbitrary or unreasonable. The fact is that the Commonwealth has two alternative statutory schemes for taxing corporate income. The major tax is the CNIT imposed (under Section 2) on corporations “doing business in this Commonwealth, or having capital or property employed or used in this Commonwealth.” The alternative or “catchall” tax is the CIT, imposed (under Section 3) on corporations “carrying on activities ... or owning property in this Commonwealth” and which are not, *521for whatever reason, already subject to CNIT. See Commonwealth v. Eastern Motor Express, Inc., supra. This appellant, in the Commonwealth’s view and apparently in its own view, was not subject to CNIT and was, therefore, clearly within the application of the CIT. Although the CNIT purports to be an “excise tax” while the CIT purports to be a “property tax,”7 they are imposed at the identical rate (6% in 1964) on “net income,” the definition and apportionment of which, under both Acts, is substantially the same. Eastern Motor Express, supra at 299, 157 A.2d at 90. Under these circumstances, we cannot say that appellant, because it is subject to CIT while most other domestic corporations are subject to CNIT, has demonstrated any “substantial inequality” in the operation or effect of the tax or in the tax burden that it bears, so as to support a violation of the Uniformity Clause. See Amidon v. Kane, 444 Pa. 38, 279 A.2d 53 (1971), and the cases cited therein.
Appellant next argues that the CIT, as applied to it, is an excise or franchise tax on the privilege of *522doing business in the Commonwealth and that its imposition on a corporation engaged exclusively in interstate and foreign commerce violates the Commerce Clause of the United States Constitution.8 Fortunately, we may dispose of this argument without inquiring as to whether the CIT is, as applied to appellant, such a tax or instead is, as it purports to be, a property tax on net income.9 For even assuming that the CIT is an excise tax on the privilege of doing business, appellant’s argument is foreclosed by the recent case of Complete Auto Transit, Inc. v. Brady, 45 U.S.L.W. 4259 (U.S. March 7, 1977). See also Commonwealth v. Universal Carloading and Distributing Co., Inc.,
Pa. Commonwealth Ct. , 372 A.2d 41 (1977). In Complete Auto Transit, the United States Supreme Court, reversing Spector Motor Service, Inc. v. O’Connor, supra note 6, held that a state tax on the privilege of doing business does not violate the Commerce Clause when applied to an exclusively interstate activity with a substantial nexus with the taxing state, where such tax is fairly apportioned, does not .discriminate against interstate commerce and is fairly related to services provided by the state. Under the facts as stipulated, appellant, a domestic corporation which owes its very existence to the Commonwealth and which carries on virtually all its activities (ex*523cept for executive functions) in Pennsylvania, cannot possibly argue that it or its activities lack sufficient nexus with the Commonwealth. Similarly, it cannot be argued that the tax discriminates against interstate commerce or that it is unrelated to services provided by the state. Finally, while appellant does purport to attack the apportionment formula set forth in Section 2 of the CIT, its argument on this point is without merit and, in our view, is not even related to the issue of apportionment. As we understand it, appellant does not, as it must to qualify for apportionment, argue that it is carrying on activities both “within and without this Commonwealth” under Section 2, even though it could possibly do so in view of its executive presence in New York. See Commonwealth v. Hellertown Manufacturing Co., 438 Pa. 134, 264 A.2d 382 (1970). Instead, appellant argues that the nature of its business, by definition, takes it out of the constitutionally permissible scope of the tax altogether. As such, this argument is indistinguishable from that of the appellant in Commonwealth v. Northern Metal Co., 416 Pa. 75, 204 A.2d 467 (1964), which the Supreme Court summarized as follows:
Appellant’s argument is that while it is proper for a state to impose a tax on the net income of a corporation, such a tax must be properly apportioned so as fairly to impose tax only upon the corporation’s ‘local activities’; that stevedoring is not a ‘local activity’ but an integral part of foreign commerce; and, therefore, that receipts from stevedoring cannot be taxed by a state since such activities are beyond the jurisdiction of the state.
416 Pa. at 82, 204 A.2d at 471.10
*524The Court rejected this argument, reasoning that:
[Tjhere is no constitutional restriction upon a state’s imposing a tax on or measured by the net income of a corporation engaged in all forms of commerce within the state as long as the state provides an apportionment formula permitting a reduction of tax where out-of-state factors exist. ‘Out-of-state factors’ is not a phrase, however, which is synonymous with foreign or interstate commerce itself; it refers, rather, to factors which indicate the presence of a corporation in another state or country.
416 Pa. at 84, 204 A.2d at 472.
This appellant, like that in Northern Metal, is attempting, in effect, to exclude income from tax on an apportionment theory on the basis that it is derived from interstate and foreign commerce rather than on the basis that the corporation is carrying on activities both within and without this Commonwealth. There is simply no legal foundation for such a theory. The fact that appellant’s activities are in furtherance of interstate and foreign commerce in no way takes them out of the scope of taxable activities under the CIT; quite to the contrary, Section 2 specifically defines “Sources within this Commonwealth” as including “any activities carried on in this Commonwealth, regardless of whether carried on in intrastate, interstate or foreign commerce.” (Emphasis added.) See also West Publishing Co. v. McColgan, 27 Cal. 2d 705, 166 P.2d 861, aff’d per curiam, 328 U.S. 823 (1946). Appellant’s attempt to distinguish Northern Metal, supra, as involving a corporation engaged in both intrastate as well as interstate commerce is of no avail. It is true that there is a long-established distinction drawn in Commerce Clause cases whereby states could constitutionally impose privilege taxes measured by net income derived from all activities (including inter*525state and foreign commerce) on foreign corporations which, engaged in some (even if minimal) intrastate activity bnt conld not do so as to such corporations engaged exclusively in interstate and foreign commerce. See, e.g., Memphis Natural Gas Go. v. Beeler, 315 U.S. 649 (1942). However, even if that distinction was, in the past, applicable to a domestic corporation, it has been obliterated, in our view, by Complete Auto Transit, supra. Consequently, for all the reasons discussed above, we find that the imposition of CIT on this appellant involves no violation of the Commerce Clause.
Appellant’s final and related argument, which we find equally without merit, is that the imposition of CIT violates the Import-Export Clause of the United States Constitution.11 This argument was raised and rejected in the context of stevedoring activities in Northern Metal, supra. Although that case involved the CNIT, the reasoning is equally appropriate here. Moreover, in the recent case of Michelin Tire Corp. v. Wages, 423 U.S. 276, 287 (1976), the U. S. Supreme Court stated:
The Import-Export Clause clearly prohibits state taxation based on the foreign origin of the imported goods, but it cannot be read to accord imported goods preferential treatment that permits escape from uniform taxes imposed without regard to foreign origin for services which the state supplies.
It is obvious that the CIT imposes a uniform tax on the net income of corporations carrying on activities in the Commonwealth and that it is not, by any stretch of the imagination, based on the foreign origin of goods. The mere fact that appellant derives its income from loading and unloading foreign goods provides no basis for exemption from this tax.
*526The order of the Board of Finance and Revenue is affirmed.
Order
Now, Jnne 13, 1977, the decision of the Board of Finance and Revenue in refusing appellant’s petition for review is hereby affirmed. Unless exceptions are filed within thirty (30) days hereof, the Chief Clerk is hereby directed to enter judgment in favor of the Commonwealth and against the appellant in the amount of $21,088.60 plus appropriate penalty and interest.
This tax was imposed by the Corporation Income Tax Law, Act of August 24, 1951, P.L. 1417, as amended, formerly at 72 P.S. §3420n-l et seq., repealed by Section 505 of the Act of March 4, 1971, P.L. 88, 72 P.S. §7505. The tax is now imposed by Section 502 of the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6, as amended, 72 P.S. §7502.
While the appellant itself is not directly engaged in interstate and foreign commerce, stevedoring has been held to be substantially a continuation of interstate and foreign transportation. Joseph v. Carter & Weekes Stevedoring Co., 330 U.S. 422 (1947); Puget Sound Stevedoring Co. v. State Tax Commission, 302 U.S. 90 (1937),
This tax was imposed by the Corporate Net Income Tax Act, Act of May 16, 1935, P.L. 208, as amended, formerly at 72 P.S. §3420a et seep, repealed by Section 411 of the Act of March 4, 1971, P.L. 86, 72 P.S. §7411. The tax is now imposed by Section 402 of the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6, as amended, 72 P.S. §7402.
Pa. Const, art. VIII, §1.
Actually, tlie taxpayer in that case was not engaged in any activity at all; tlie tax was based on its ownership of property in the Commonwealth.
Although Eastern Motor Empress, supra, does hold that foreign corporations engaged exclusively in interstate and foreign commerce are subject to CIT, and Commonwealth v. Camax Co., 83 Dauph. 56, 38 Pa. D. & C. 2d 224 (1964), can possibly be construed to indicate the same as to domestic corporations so engaged, neither case, contrary to the Commonwealth’s brief, supports the Commonwealth’s proposition that such activity does not constitute “doing business.” While “doing business” is an elusive term which is not defined in the CNIT and has no clearly established meaning under case law, to the extent it has been defined it has been equated with an exercise of the corporate power within the state for the purposes for which the corporation was chartered or with the employment or use of property for such purposes. See Commonwealth v. South Philadelphia Terminal, Inc., 75 Dauph. 233 (1960), aff’d, 404 Pa. 293, 171 A.2d 758 (1961); Commonwealth v. Budd Realty Corp., 54 Dauph. 387 (1943); Commonwealth v. Reading and Southwestern St. Ry. Co., 54 Dauph. 277, 50 Pa. D. & C. 208 (1943); Commonwealth v. Delaware River R.R. and Bridge Co., 48 Dauph. 18, 37 Pa. D. & C. 449 (1939). Cf. Commonwealth v. Am. Bell Tel. Co., 129 Pa. 217, 18 A. 122 (1889). Applying this concept to the present case, we do not see why the appellant, which was chartered in Pennsylvania for the purpose of stevedoring and which is doing precisely that in Philadelphia is not “doing business” in the Commonwealth, albeit “business” in interstate and foreign commerce. The source of the confusion in this area, we believe, is that the CNIT is an excise or franchise tax on the privilege of doing business in the Commonwealth and such taxes could not, at least in the past, be imposed on foreign corporations engaged exclusively in interstate commerce because of the Commerce Clause under the holding *519in Spector Motor Service, Inc. v. O’Connor, 340 U.S. 602 (1951), a case recently overruled by Complete Auto Transit, Inc. v. Brady, 45 U.S.L.W. 4259 (U.S. March 7, 1977). It may be that the Commonwealth, while recognizing that such foreign corporations are (or were) not subject to CNIT, has somehow come to believe that the reason for this is that engaging in interstate and foreign commerce is not “doing business” rather than because of the Commerce Clause and the rule in Spector, supra. This notion of of what is not “doing business” was then apparently applied to domestic corporations. Whether domestic corporations enjoy protection under the Commerce Clause which is coextensive with that of foreign corporations is a complex question not answered in Spector or any of the other leading cases in this field, virtually all of which, perhaps significantly, involve foreign corporations. Thus, while this appellant may or may not have been subject to CNIT in 1964, an issue not directly raised and one which we need not decide, any immunity from CNIT would, as with foreign corporations, have to be based on the Commerce Clause rather than on the Commonwealth's notion of “doing business.”
The CNIT, although most frequently held to be an excise tax on the privilege of doing business, Commonwealth v. Minnesota Mining and Mfg. Co., 402 Pa. 612, 168 A.2d 560 (1961), has, on occasion been declared a “property tax”; see, e.g., National Biscuit Co. v. Philadelphia, 374 Pa. 604, 98 A.2d 182 (1953). Similarly, the CIT, although generally acknowledged to be a property tax, has, at least as to certain taxpayers been held to be an excise tax. See Commonwealth v. Eastman Kodak Co., 385 Pa. 607, 615, 124 A.2d 100, 103 (1956). This only serves to indicate the truth of Justice (later Chief Justice) Bell’s comment:
The distinction between a property tax and a privilege or excise tax is sometimes so fine or so nebulous and the legislative Acts are sometimes so broadly or confusingly or overlappingly drawn, that the decisions throughout the entire Country on this vexing subject are at times vacillating, confusing and irreconcilable. . . . Eastern Motor Empress, supra at 298, 157 A.2d at 89n. 7. (Citations omitted.)
U.S. Const, art. I, §8, cl. 3.
The CIT has, in at least two cases, been held to be an excise tax on the privilege of doing business when applied to foreign corporations which had only minimal contacts with the Commonwealth; Commonwealth v. Eastman Kodak Co., supra note 7; Roy Stone Transfer Corp. v. Messner, 377 Pa. 234, 103 A.2d 700 (1954). The facts in this case are readily distinguishable from those in Kodak and Roy Stone. On the other hand, if the CIT is, in fact, a property tax on net income, such taxes have long been held valid under the Commerce Clause, even when applied to corporations engaged exclusively in interstate commerce. See Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450 (1959).
Although Northern Metal involved the ONIT, the principle of apportionment and the formula employed are substantially the same under the CIT.
U. S. Const, art. 1, §10, cl. 2. | 01-03-2023 | 06-24-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/2454871/ | 480 S.W.2d 692 (1972)
Ex parte Joseph TAYLOR.
No. 45267.
Court of Criminal Appeals of Texas.
April 19, 1972.
Rehearing Denied June 14, 1972.
Melvyn Carson Bruder, Dallas, for appellant.
Jim D. Vollers, State's Atty., Robert A. Huttash, Asst. State's Atty., Austin, for the State.
OPINION
ROBERTS, Judge.
This is a post conviction application for writ of habeas corpus in which the petitioner, an inmate of the Texas Department of Corrections, seeks to set aside his judgment of conviction.
An evidentiary hearing was held on the merits of this application, and the Honorable John Mead, presiding judge of Criminal District Court #4, Dallas County, certified findings of fact and conclusions of law to this Court pursuant to provisions of Article 11.07, Vernon's Ann.C.C.P. See also Ex parte Young, 418 S.W.2d 824 (Tex.Cr.App.1967).
*693 The record before this Court indicates that the petitioner was convicted, on a plea of guilty, of the offense of murder with malice in the Criminal District Court of Dallas on June 26, 1964.[1] This plea of guilty was taken by the court, before a jury, and that jury assessed punishment at life imprisonment. Petitioner did not appeal this conviction.
Petitioner's application for writ of habeas corpus alleged, inter alia, that there was insufficient evidence to support his plea of guilty, in violation of the provisions of Article 1.15, V.A.C.C.P.[2] Petitioner contends that since no testimonial evidence was taken in this trial, and since there were no written stipulations of evidence entered of record, that the oral stipulations given were insufficient to support this conviction.[3]
We reject this contention without reaching the merits thereof.
Even if this petitioner had challenged the sufficiency of the evidence on a direct appeal, this ground of error would have been without merit for two reasons. First, a plea of guilty admits all the elements of the offense. Second, it has long been the holding of this Court that the provisions of Art. 1.15, are inapplicable when a plea of guilty is taken before a jury. See Burks v. State, 145 Tex. Crim. 15, 165 S.W.2d 460 (Tex.Cr.App.1942); Williams v. State, 422 S.W.2d 450 (Tex. Cr.App.1968); Walters v. State, 471 S.W.2d 796 (Tex.Cr.App.1971). Also, it should be pointed out that at the time of this petitioner's trial, June 26, 1964, the statutes in effect did not require that written stipulations of evidence be admitted to corroborate the plea. See Vernon's Annotated C. C.P., 1925, Art. 12, Acts 1959, 56th Leg., 3rd C.S., p. 377, ch. 2.
It must be realized that this petitioner is attempting to attack collaterally, via habeas corpus, the sufficiency of evidence to support his conviction after entering a guilty plea.[4] Many such collateral attacks have been presented to this Court over the years. See Ex parte Banspach, 130 Tex. Cr.R. 3, 91 S.W.2d 365 (Tex.Cr.App.1936); Ex parte Pruitt, 141 S.W.2d 333 (Tex.Cr. App.1940); Ex parte Meadows, 149 Tex. Cr.App. 86, 191 S.W.2d 731 (1946); Ex parte Wingfield, 162 Tex. Crim. 112, 282 S.W.2d 219 (Tex.Cr.App.1955), certiorari denied, 350 U.S. 1002, 76 S. Ct. 553, 100 L. Ed. 866; Ex parte Slaughter, 163 Tex. Crim. 322, 290 S.W.2d 904 (Tex.Cr.App.1956); Ex parte Bruinsma, 164 Tex. Crim. 358, 298 S.W.2d 838 (Tex.Cr.App.1956); Ex parte Clark, 164 Tex. Crim. 385, 299 S.W.2d 128 (Tex.Cr.App.1957); Ex parte Keener, 166 Tex. Crim. 326, 314 S.W.2d 93 (Tex.Cr. App.1958); Ex parte Oliver, 374 S.W.2d 894 (Tex.Cr.App.1964); Ex parte Nelson, 403 S.W.2d 806 (Tex.Cr.App.1966); Ex parte Sanders, 169 Tex. Crim. 107, 332 S.W.2d 332 (Tex.Cr.App.1960); Ex parte Lyles, 168 Tex. Crim. 145, 323 S.W.2d 950 (Tex.Cr.App.1959).
It has been the uniform rule in this State that the quantum of the evidence necessary to sustain a jury's verdict is not subject to collateral attack after the conviction becomes final. See Ex parte Wingfield, supra; Ex parte Sanders, supra. Cf. Thompson v. City of Louisville, 362 U.S. 199, 80 S. Ct. 624, 4 L. Ed. 2d 654; Akins v. Texas, 325 U.S. 398, 65 S.Ct. *694 1276, 89 L. Ed. 1692; Moore v. Dempsey, 261 U.S. 86, 43 S. Ct. 265, 67 L. Ed. 543.
Therefore, we hold that a collateral attack can never be maintained to question the sufficiency of the evidence where voluntary plea of guilty is entered, with the defendant being represented by counsel, after the conviction becomes final.
In this regard, we shall expressly reaffirm our previous holding of Ex parte Lyles, 168 Tex. Crim. 145, 323 S.W.2d 950 (Tex.Cr.App.1959), and rule that the petitioner in this case is estopped from questioning the sufficiency of the evidence. See also Doughty v. Beto, 396 F.2d 128 (5th Cir. 1968); Hendrick v. Beto, (S.D. Tex.), 253 F. Supp. 994, affirmed, 360 F.2d 618 (5th Cir., 1966).
The application for writ of habeas corpus is without merit, and is hereby denied.
NOTES
[1] The State did not seek the death penalty in this case.
[2] Petitioner urges this Court to apply the provisions of Art. 1.15, as amended, Acts 1965, 59th Leg., vol. 2, p. 317, ch. 722, eff. January 1, 1966.
[3] Art. 1.15, supra, has been amended to permit oral stipulations in lieu of the written stipulations which were previously required in non jury trials. See Acts 1971, 62nd Leg., p. 3028, ch. 996, § 1, eff. June 15, 1971.
[4] It is worthwhile to note that a substantial percentage of the pro se applications for writ of habeas corpus filed with this Court raise the issue of "insufficiency of evidence." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454879/ | 480 S.W.2d 169 (1972)
John SPIRKO, Appellant,
v.
COMMONWEALTH of Kentucky, Appellee.
Court of Appeals of Kentucky.
March 31, 1972.
Rehearing Denied June 9, 1972.
*170 Larry C. West, Ware, Bryson, Nolan & West, Kevin E. Quill, Covington, for appellant.
John B. Breckinridge, Atty. Gen., Jackson D. Guerrant, Asst. Atty. Gen., Frankfort, for appellee.
REED, Judge.
The appellant, John Spirko, was convicted of willful murder. His punishment was fixed at confinement in the penitentiary for life. KRS 435.010. As the result of an application for post-conviction relief under RCR 11.42, the trial judge granted Spirko a belated appeal. We have afforded him full appellate review of the proceedings in which a jury convicted him and fixed his punishment. His court-appointed counsel have ably and strenuously presented every conceivable error that could have reasonably been asserted. Their performance is in the highest tradition of the legal profession. After careful review we have concluded that we must affirm the judgment.
Spirko and his girl friend, Shirley Caughhorn, a high school student, arrived in Covington, Kentucky, from Toledo, Ohio, in early July 1969. They made application for a marriage license and had a blood test. They were without funds and pawned a watch to obtain the money to pay for the blood test. Later they rented a one-room apartment. Shirley Caughhorn testified that Spirko told her they could obtain funds by robbing a few places.
While walking about the neighborhood of Madison Avenue in Covington, they noticed a house on which a "for-sale" sign had been tacked. Spriko told Mrs. Myra Ashcraft, who owned this property, that he was interested in buying the house. Mrs. Ashcraft told Spriko and his female companion to come back the next day and she would show them the house. The evidence conclusively demonstrated that Spirko and his girl friend were only interested in obtaining entrance to the house in order to come back and rob it. Spirko discussed his intentions to rob Mrs. Ashcraft with others.
Pursuant to Mrs. Ashcraft's instructions, Spirko and Shirley Caughhorn returned to the Madison Avenue house and were admitted to view it about 1 o'clock in the afternoon. They were shown the upstairs portion and then went to the basement. While they were in the basement, Mrs. Ashcraft and Shirley engaged in a conversation. Spirko slipped up behind Mrs. Ashcraft and threw his right arm across her neck and began to choke her. According to the testimony he held her in this position for five minutes, at which time she made a moaning sound. Her face visibly flushed, then she fainted or otherwise lost consciousness. Spirko tied her hands behind her back and took her up the basement stairs and threw her on a bed. Her feet and legs apparently struck the steps as she was carried up. Shirley Caughhorn testified that at the time they placed Mrs. *171 Ashcraft on the bed she was in an unconscious state. There was some testimony that indicated they had put a pillow over her head. Shirley Caughhorn also testified that when they placed Mrs. Ashcraft's body on the bed she was cold to the touch, but she still may have been breathing. Spirko and Shirley Caughhorn took a radio and a tablecloth from the house, and some other things which they put in a bag.
Spirko was arrested early in the morning of July 9, 1969, by the Flint, Michigan, police department. Sergeant Stump of the Flint police testified that he was not on Spirko's case at all but had been told by another officer that Spirko was sitting in his office and wanted to talk to a detective. Stump stated: "As I walked in and introduced myself, Mr. Spirko told me that he had killed a woman in Covington, Kentucky,. . ." Stump later gave Spirko the Miranda warnings and took a typewritten statement from him which he freely signed. In an in-chambers hearing Spirko acknowledged the confession. No custodial interrogation preceded Spirko's spontaneous and volunteered statement.
The first assertion of error is that the trial judge should have granted a change of venue. Complaint is made that wide publicity was given to the case by the news media and particularly by a local newspaper with wide circulation. Affidavits were filed, some of which contained opinions that Spirko could not receive a fair trial in Covington, Kenton County, Kentucky, and, in others, the representation was affirmatively made that he could receive a fair trial in that locality. Particularly emphasizing the pretrial publicity, appellant directs our attention to Sheppard v. Maxwell, 384 U.S. 333, 86 S. Ct. 1507, 16 L. Ed. 2d 600 (1966).
The question of whether venue should be changed addresses itself to the sound discretion of the trial court. Spirko asserts that the trial judge abused his discretion. No complaint is made that an impartial jury was not impaneled. Although there was wide press coverage at the time of the commission of the crime, we find no Roman circus atmosphere during the subsequent trial proceedings. Upon the total evidence presented concerning the issue, we are unable to discern any indication that the trial judge abused his discretion in refusing to grant the change of venue. See Hurley v. Commonwealth, Ky., 451 S.W.2d 838 (1970), Garr v. Commonwealth, Ky., 463 S.W.2d 109 (1971), in which the Sheppard opinion is considered, and Ohio River Sand Company v. Commonwealth, Ky., 467 S.W.2d 347 (1971).
Spirko's next claim of error concerns the admission of evidence. During the trial, a police detective was asked by the prosecutor whether he knew Spirko by any other name. Over timely objection, the detective answered: "Yes, Sir, from his record and through his associates, by the name of Butch." At another point the same detective, in answer to the same question by the prosecutor, stated: "By his associates and through records, by the name of Butch, and also Mike Lambert." The cases cited by appellant hold that evidence of unconnected crimes committed by the accused is inadmissible. The statements of the detective do not, in the abstract, impute the commission of unconnected crimes to the appellant. In view of the preponderant evidence of guilt, we do not regard the instance of the detective's testimony as prejudicial. The statement by the prosecutor in his final arguments that Spirko was a nefarious character and a criminal element, in the context of the admissible evidence, was within the latitude allowed in final arguments. If the argument possessed a shade of error because of possible inferences from the testimony of the detective, which we have discussed, it was harmless error beyond reasonable doubt in view of the conclusive proof of guilt amply demonstrated by this record.
Spirko's claim that the fruits of an illegal search were admitted into evidence to his prejudice is entirely without merit. *172 Shortly prior to his arrest, either Spirko or his mother had rented a room in a house owned and occupied by a man named Sperry. Sperry permitted a search of the house but nothing was found. The officers returned to Sperry's home and on this occasion the owner of the premises volunteered to the officers that a suitcase that belonged to Spirko was in the garage. Sperry took the officers to his garage where the suitcase was found. Although a man may be protected in his home, apartment, place of business, or hotel room which he temporarily occupies, the evidence in this case established that the garage was not part of the premises under the control of Spirko or in which he claimed any right to occupancy whatever. Whatever possible remedy may exist, Spirko did not have the right to suppress introduction of the suitcase under claim of an unreasonable search prohibited by either the Constitution of the United States or the Constitution of this State. No question of the relevancy or admissibility of the evidence is argued except the claim of an unlawful search. The fruits of the search, represented by the contents of the suitcase were merely incidentally confirmatory of the overwhelming evidence of guilt. The admission of the contents, if error, was harmless beyond doubt.
Spirko's next assertion is that the confession he spontaneously volunteered to the police officers in Flint should not have been admitted under Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694. The assertion is made that Spirko requested an attorney and was denied one. If this be true, then the Miranda rule would interdict any subsequent custodial interrogation. According to Spirko's own testimony, however, he spontaneously and voluntarily confessed to the murder of Mrs. Ashcraft not in response to any interrogation whatever. It is Spirko's contention that his mind was befogged because of excessive drinking. We know of no requirement in Miranda that the police conduct a hearing to determine whether a defendant who voluntarily and spontaneously confesses to a crime has sufficient capacity to understand the consequences of his action. Spirko admitted that the police fully advised him of his Miranda rights prior to the time he signed a written confession based upon his voluntary statement. The weight and credibility of the evidence of confession were for the jury. The confession itself was fully corroborated by the independent testimony of an eyewitness to his crime, when his girl friend by her testimony validated the confession in every detail. We perceive no error in the admission of the confession.
The final complaint is directed at the instructions given to the jury. In substance, this contention is that the trial court's instruction incorporating the common law felony-murder doctrine was erroneous. The instruction the trial court gave substantially followed Stanley's Instructions to Juries, Vol. 3, Sec. 870. The giving of it has been approved. See for example, Maxey v. Commonwealth, 255 Ky. 330, 74 S.W.2d 336.
Spirko argues that when the legislature enacted KRS 435.022 in 1962, it repealed the felony-murder doctrine. The felony-murder doctrine is a rule of the common law. Our murder statute, KRS 435.010, provides only that: "Any person who commits willful murder shall be punished by confinement in the penitentiary for life, or by death." The common law to which we must turn in defining the term "willful murder," as used in the statute, created three distinct categories of murder: (1) intentional murder, (2) negligent murder, and (3) felony-murder. It is apparent by the enactment of KRS 435.022, the category of negligent murder was statutorily defined in terms of involuntary manslaughter, but the separate category, felony-murder, was unaffected.
The intention to abrogate the common law will not be presumed and the intention to repeal it by statute must be clearly apparent. Repeal by implication has never been looked upon favorably by *173 the courts. See Ohio River Sand Company v. Commonwealth, Ky., 467 S.W.2d 347 (1971).
Roberson states: "It follows therefore, that all homicide committed or caused by one engaged in the perpetration of or attempt to perpetrate rape, arson, burglary or robbery, or other felony, is murder; and this is the case with the person killed or the one upon whom or whose property the attempt is made, or another interfering to prevent its success." Roberson, New Kentucky Criminal Law and Procedure, p. 482, Sect. 357, Second Edition.
The new Kentucky Penal Code, which has recently been enacted by the General Assembly and does not become effective until 1974, has reconsidered the problem and a discussion of the issue is contained in the commentary to section 810 of this code. It is interesting to note that proposed section 810 does not preclude regarding as murder the type of conduct of which Spirko is guilty.
The felony-murder doctrine has been seriously criticized. This criticism, however, has been mainly directed to its effect when persons other than the intended victim were killed and also to its effect where a coconspirator committed the killing or where a coconspirator was killed by a third party during the commission of the felony. In limited application, this common-law doctrine has met with general approval. For an excellent discussion see Commonwealth v. Balliro, 349 Mass. 505, 209 N.E.2d 308, 14 A.L.R. 3d 640. We conclude with the Massachusetts court that, at least at the time of trial of this case, the common law felony-murder doctrine was still a part of our criminal law, particularly in the limited sense in which it was applied here. It is tacitly conceded that if the doctrine was applicable the instruction given was correct and no instruction on manslaughter was required.
The judgment is affirmed.
All concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454881/ | 480 S.W.2d 774 (1972)
CITY OF HOUSTON et al., Appellants,
v.
JOHNNY FRANK'S AUTO PARTS COMPANY et al., Appellees.
No. 601.
Court of Civil Appeals of Texas, Houston (14th Dist.).
May 10, 1972.
Rehearing Denied May 31, 1972.
*775 William A. Olson, City Atty., F. William Colburn, Sr., Brian L. Reade, Asst. City Attys., Houston, for appellants.
Seymour Lieberman, Lieberman & Komiss, Houston, for appellees.
TUNKS, Chief Justice.
On May 4, 1971, the City Council of the City of Houston passed an ordinance, designated as number 71-825, regulating the operation of automotive wrecking and salvage yards within the City. Johnny Frank's Auto Parts Company and several other owners of such automotive wrecking yards filed suit against the City of Houston for declaratory judgment that such ordinance was void and for injunction against its enforcement. After a non-jury trial the trial court rendered judgment adjudicating the ordinance void and permanently enjoining the City from enforcing it. The City appealed.
Ordinance number 71-825 provides that all oil, gasoline, and other flammable liquids shall be drained from wrecked automobiles placed on wrecking yards within the city limits. It provides that wrecking yards must be surrounded by a solid fence or wall. The fence on any side of the yard running generally parallel to and within 100 feet of a street right-of-way shall be at least eight feet high, and on other sides at least six feet high. It prohibits the display of or working on wrecked vehicles or parts outside the required walls.
The trial court filed findings of fact and conclusions of law. As findings of fact it was recited that the plaintiffs' businesses do not adversely affect the value of surrounding property, the health of the people of the City, the safety of such people, the comfort of the people or the welfare of the people. The conclusions of law were:
"1. The Court concludes that the enforcement of City of Houston Ordinance 71-815 will deprive these Plaintiffs of property rights without due process of law and will result in an irreparable injury thereto with no adequate remedy at law.
2. As to these Plaintiffs, the Court concludes that the enactment of Section 2 of Ordinance 71-815 dealing with flammable liquids has no substantial relationship to the public health, safety, morals or welfare of the people of the City of Houston, and, therefore, does not come within the police power vested in the City of Houston.
*776 3. As to these Plaintiffs, the Court concludes that the enactment of Section 3 of Ordinance 71-815 dealing with fencing has no substantial relationship to the public health, safety, morals or welfare of the people of the City of Houston, and, therefore, does not come within the police power vested in the City of Houston.
4. The Court concludes that to compel these Plaintiffs to comply with City of Houston Ordinance 71-815 would be an unreasonable exercise of Defendants' police power and would constitute a taking of property in violation of the Texas Constitution. V.A.C.S., Article 1, Sections 3, 19."
(The reference to the ordinance in question as 71-815, instead of 71-825, is admittedly a typographical error.)
The principal authority upon which the appellees rely as support for their contention that the ordinance is unconstitutional is Spann v. City of Dallas, 111 Tex. 350, 235 S.W. 513 (1921). In that case a zoning ordinance enacted by the City of Dallas was held unconstitutional. The ordinance was held not to be a constitutional exercise of the city's police power. It prohibited the construction of any business house within what it defined as a residential district except with consent of three-fourths of the owners of property within the district. Even with the required consent of property owners the ordinance required that the design of the proposed building be approved by the building inspector. It did not prescribe standards to control the inspector's approval or disapproval of such design.
In the Spann case the land owner who challenged the constitutionality of the ordinance had been denied a permit to build, within a residential district, store houses of brick, one-story in height, of artistic design, set back at least ten feet from the property line and at a cost of $6500.00. The Supreme Court, in holding the ordinance unconstitutional, said:
"Since the right of the citizen to use his property as he chooses so long as he harms nobody, is an inherent and constitutional right, the police power cannot be invoked for the abridgment of a particular use of private property, unless such use reasonably endangers or threatens the public health, the public safety, the public comfort or welfare. A law which assumes to be a police regulation but deprives the citizen of the use of his property under the pretense of preserving the public health, safety, comfort or welfare, when it is manifest that such is not the real object and purpose of the regulation, will be set aside as a clear and direct invasion of the right of property without any compensating advantages. Cooley, Const.Lim. 248.
* * * * * *
The ordinance is clearly not a regulation for the protection of the public health or the public safety. It is idle to talk about the lawful business of an ordinary retail store threatening the public health or endangering the public safety. It is equally idle in our opinion to speak of its impairing the public comfort or as being injurious to the public welfare of a community. Retail stores are places of trade, it is true, but as ordinarily conducted they are not places of noise or confusion. This is particularly true of small stores, such as it appears the plaintiff contemplated erecting. The ordinary trading that goes on within them is reputable and honorable, and can hurt nobody. According to common experience it is done in an orderly manner. It could disturb or impair the comfort of only highly sensitive persons. But laws are not made to suit the acute sensibilities of such persons. It is with common humanitythe average of the people, that police laws must deal. A lawful and ordinary use of property is not to be prohibited because repugnant to the sentiments of a particular class. The ordinance visits upon ordinary retail stores, engaged in a useful business, conducted in an orderly *777 manner, frequented and availed of by respectable people, and doubtless serving as a convenience to many, all the prescription visited upon common nuisances.
* * * * * *
Like municipal regulations interfering with private property rights and founded upon purely aesthetic considerations, are universally held invalid."
The Court also noted that the ordinance, in giving the building inspector discretion to deny a permit without providing any rule or standard to guide the exercise of that discretion, was invalid.
The history, since the date of the Spann case, of cities' exercise of their police powers in the enactment of zoning ordinances is significant. An opinion which gave impetus to the increase in the enactment of zoning ordinances by cities was Village of Euclid, Ohio, v. Ambler Realty Co., 272 U.S. 365, 47 S. Ct. 114, 71 L. Ed. 303 (1926). There the Court said, at pages 386-388, 47 S.Ct. at page 118:
"Building zone laws are of modern origin. They began in this country about 25 years ago. Until recent years, urban life was comparatively simple; but, with the great increase and concentration of population, problems have developed, and constantly are developing, which require, and will continue to require, additional restrictions in respect of the use and occupation of private lands in urban communities. Regulations, the wisdom, necessity, and validity of which, as applied to existing conditions, are so apparent that they are now uniformly sustained, a century ago, or even half a century ago, probably would have been rejected as arbitrary and oppressive. Such regulations are sustained, under the complex conditions of our day, for reasons analogous to those which justify traffic regulations, which before advent of automobiles and rapid transit street railways would have been condemned as fatally arbitrary and unreasonable. And in this there is no inconsistency, for, while the meaning of constitutional guaranties never varies, the scope of their application must expand or contract to meet the new and different conditions which are constantly coming within the field of their operation. In a changing world it is impossible that it should be otherwise. But although a degree of elasticity is thus imparted, not to the meaning, but to the application of constitutional principles, statutes and ordinances, which, after giving due weight to the new conditions, are found clearly not to conform to the Constitution, of course, must fall.
The ordinance now under review, and all similar laws and regulations, must find their justification in some aspects of the police power, asserted for the publice welfare. The line which in this field separates the legitimate from the illegitimate assumption of power is not capable of precise delimitation. It varies with circumstances and conditions. A regulatory zoning ordinance, which would be clearly valid as applied to the great cities, might be clearly invalid as applied to rural communities. In solving doubts, the maxim `sic utere tuo ut alienum non laedas,' which lies at the foundation of so much of the common low of nuisances, ordinarily will furnish a fairly helpful clew. And the law of nuisances, likewise, may be consulted, not for the purpose of controlling, but for the helpful aid of its analogies in the process of ascertaining the scope of, the power. Thus the question whether the power exists to forbid the erection of a building of a particular kind or for a particular use, like the question whether a particular thing is a nuisance, is to be determined, not by an abstract consideration of the building or of the thing considered apart, but by considering it in connection with the circumstances and the locality. Sturgis v. Bridgeman, L.R. 11 Ch. 852, 865. A nuisance may be merely a right thing in the wrong place, like a pig in the parlor instead of the barnyard. If the validity of the legislative classification for zoning purposes be fairly debatable, the legislative *778 judgment must be allowed to control.
In 1927 the Texas Legislature enacted statutes, Tex.Rev.Civ.Stat.Ann. arts. 1011a et seq., giving cities the power to pass zoning ordinances. In City of Dallas v. Meserole, 155 S.W.2d 1019 (Tex.Civ.App.-Dallas 1941, writ ref'd w. o. m.) it was held that these statutes gave cities the power to pass zoning ordinances as a valid exercise of their police power.
The ordinance with which this case is concerned is not a zoning ordinance. It does not establish a comprehensive plan by which the city is divided into districts wherein property is limited to specified uses and it was not passed in accordance with the procedures specified for the passage of zoning ordinances. This ordinance does not prohibit any particular use of any property, but merely regulates the use of property in the operation of an automobile wrecking or salvage yard. It is, however, somewhat akin to a zoning ordinance in that it is an exercise of the city's police power. The zoning ordinance cases, such as those cited above, furnish a guide for testing the validity of this exercise of the City's police power.
The preamble to this ordinance recites conclusions by the City Council of the City of Houston to the effect that the existing practices in the operation of wrecking yards are a detriment to health, safety and welfare. It was recited that they constitute fire hazards, traffic hazards, invitations to theft and burglary, and dangerous attractions to children, and that they depreciate the value of other property. The trial court made findings of fact contrary to those made by the City Council.
It is the legislative body of the City of Houston, its City Council, that has the authority and responsibility to determine factually whether the practices followed in the operation of automotive wrecking and salvage yards so adversely affect the health, safety and welfare of the inhabitants of the city as to call for the exercise of the police power in regulating them. Neither the trial court nor this Court may substitute its factual finding in that respect, for that of the City Council. The Council's finding that a condition exists, the control of which is a proper exercise of the police power, must be accepted by the courts as a basis for accepting the validity of the objective of an ordinance if there is any legally sufficient evidence to support such finding. Smith v. Davis, 426 S.W.2d 827 (Tex.Sup. 1968); City of Waxahachie v. Watkins, 154 Tex. 206, 275 S.W.2d 477 (1955).
There was testimony in the trial court as to facts which sustained the City Council's conclusions which are listed above. There was also testimony that would have, standing alone, sustained a factual conclusion on the part of the City Council that no such conditions exist. We must presume also that the City Council considered matters of common knowledge whether they were the subjects of testimony in the trial court or not. It doesn't require testimony to know that leaving flammable materials in a collection of junked cars increases the possibility of fire. Wrecked cars have jagged edges of metal that are dangerous to playing children who have access to them. Leaving vehicles in a large unenclosed area facilitates theft. Because of these facts and because of the unsightliness of such operations wrecking yards must inevitably have a depreciating effect on the value of other property in their vicinities. Tex.Penal Code Ann. art. 1436-3, sec. 9 (1971) recites:
"Junked vehicles which are located in any place where they are visible from a public place or public right-of-way are detrimental to the safety and welfare of the general public, tending to reduce the value of private property, to invite vandalism, to create fire hazards, to constitute an attractive nuisance creating a hazard to the health and safety of minors, and are detrimental to the economic welfare of the State, by producing urban blight which is adverse to the maintenance *779 and continuing development of the municipalities in the State of Texas, and such vehicles are therefore, declared to be a public nuisance."
We hold that the enactment of an ordinance to regulate the operation of automotive wrecking and salvage yards is a constitutional exercise by a city of its police powers.
The question remains whether the ordinance here involved was such an unreasonable exercise of police power as to be invalid. Even though an ordinance is passed to accomplish a purpose properly within the scope of a city's police power, it must not be wholly unreasonable nor unduly oppressive in its operation upon those affected by it. It must be reasonably necessary for the preservation of health, safety and welfare. 40 Tex.Jur.2d Municipal Corporations, sec. 327 (1962). However, when the validity of an ordinance is attacked on this basis there is a presumption of validity and the attacker, to prevail, must clearly show that it is arbitrary, unreasonable and an abuse of the police power. City of Weslaco v. Melton, 158 Tex. 61, 308 S.W.2d 18 (1957). The question of its reasonableness is a question of law, not of fact. City of Coleman v. Rhone, 222 S.W.2d 646 (Tex. Civ.App.Eastland 1949, writ ref'd). In City of Waxahachie v. Watkins, supra, 275 S.W.2d at page 480, the Court said:
"The courts cannot interfere unless it appears that the ordinance represents a clear abuse of municipal discretion. And the `extraordinary burden' rests on one attacking the ordinance `to show that no conclusive, or even controversial or issuable, facts or conditions existed which would authorize the governing board of the municipality to exercise the discretion confided to it.'"
One basis upon which the plaintiffs contended that the ordinance was unreasonable and unduly burdensome on them was in the expense to which they would be put in complying with it. There was testimony to the effect that it would cost as much as $12,500.00 to fence one of the yards with a wood fence and $18,500.00 with a chain link fence with slats. One of the plaintiffs testified that his yard was on leased property and that the cost of complying with the ordinance would force him out of business. There was also testimony that their business would suffer if they could not leave their wares visible to the passing public.
The fact that the enforcement of this ordinance will cause pecuniary loss to those affected by it does not require that it be held invalid. See State v. Spartan's Industries, Inc., 447 S.W.2d 407 (Tex.Sup. 1969) and State v. Richards, 157 Tex. 166, 301 S.W.2d 597 (Tex.Sup. 1957).
The ordinance does not result in a taking of property nor even a prohibition of a use of the property. It only regulates the operation of a particular type of business. In Caruthers v. Board of Adjustment, 290 S.W.2d 340, 346 (Tex.Civ.App.-Galveston 1956, no writ) the Court said:
"It is also our belief that, under the authorities, short of actual taking for public use, legislation regulatory of the use of property pursuant to the police power is to be sustained regardless of even severe hardship in particular cases whenever the public health, safety, morals or general welfare outweigh the equities of the individual property owner."
In Auto Transit Co. v. City of Ft. Worth, 182 S.W. 685, 692 (Tex.Civ.App.-Fort Worth 1916, writ ref'd) the Court said, "Nor does the fact that plaintiffs will suffer a pecuniary injury by reason of the enforcement of said ordinance even tend to establish the truth of the contention that the ordinance is invalid."
The pecuniary loss that these plaintiffs will suffer from the enforcement of the ordinance is not so out of proportion to the benefit that the public will receive as to render it invalid.
*780 The plaintiffs also argue that the ordinance is invalid for the reason that it requires fences made of wood, masonry, corrugated sheet metal or chain link fences with strips of wood or metal run through all links. They contend that the only purpose for this requirement is to achieve an aesthetic result and that such purpose is not within the scope of the city's police power. Their principal authority for such contention is Spann v. City of Dallas, cited and quoted above. In that case the Court held that "purely" aesthetic considerations were not a proper basis for the exercise of the police power. In this case the City Council recited, as one basis for the enactment of this ordinance:
"The present visibility and accessibility of wrecked automotive vehicles and the parts therefrom upon and about the premises of many automotive wrecking and salvage yards in the City of Houston is a hazard to the safety of children who are naturally attracted by such conditions;...".
Such recitation demonstrates that this ordinance is not based upon "purely" aesthetic considerations.
Another recitation in the preamble to the ordinance is:
"The open and obvious use of land in the City of Houston for the wrecking, storage or display of wrecked or junked automotive vehicles or the parts therefrom has caused a relative decline in the market value of property, the use and enjoyment of property, the enjoyment of life, and the general welfare of those inhabitants of the City of Houston who live near such business locations. The present visibility and accessibility of wrecked automotive vehicles and the parts therefrom upon and about the premises of many automotive wrecking and salvage yards in the City of Houston is a hazard to the safety of children who are naturally attracted by such conditions;...".
If the removal of an eyesore be considered an aesthetic achievement, it is apparent from this recitation that it was not the sole purpose of the City to please the senses, or, more accurately, to remove an offense to them, in requiring that the fences be solid. It was the expressed purpose to remove a condition that, because of its unsightliness, impaired the value of surrounding property. The propriety of such purpose as a basis for the exercise of police power is suggested by the language in Connor v. City of University Park, 142 S.W.2d 706, 712 (Tex.Civ.App.-Dallas 1940, writ ref'd) wherein the Court said:
"Furthermore, in zoning, the aesthetic consideration is not to be ignored. Harmonious appearance, appropriateness, good taste and beauty displayed in a neighborhood not only tend to conserve the value of property, but foster contentment and happiness among homeowners."
See also Thompson v. City of Carrollton, 211 S.W.2d 970 (Tex.Civ.App.-Texarkana 1948, no writ).
The appellees also cite the case of City of Corpus Christi v. Allen, 152 Tex. 137, 254 S.W.2d 759 (1953) as support for their contention that their operations are not nuisances. The case is not in point here. In the first place, it is not necessary that a business constitute a nuisance to be subject to regulation under the police power. The case cited so indicates. That case held that giving retroactive effect to a zoning ordinance to prohibit the operation of a wrecking yard was unreasonable and invalid. This ordinance doesn't prohibit the operation of wrecking yardsit regulates their operation. Of further significance is the fact that since the date of that case the Legislature has enacted Tex.Penal Code Ann. art. 1436-3 (1971) wherein it declared junked vehicles visible to the public to be *781 a public nuisance. See State v. Spartan's Industries, Inc., supra.
The judgment of the trial court is reversed. The trial court's injunction against the enforcement of City of Houston Ordinance No. 71-825 is dissolved and judgment is hereby rendered declaring such Ordinance to be valid and enforceable. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454893/ | 480 S.W.2d 254 (1972)
Wayne A. JOHNSON, Appellant,
v.
DOWNING AND WOOTEN CONSTRUCTION COMPANY et al., Appellees.
No. 553.
Court of Civil Appeals of Texas, Houston (14th Dist.).
April 19, 1972.
*255 Arthur E. Moers, Jr., Houston, for appellant.
Edmond L. Cogburn, Dow, Cogburn & Friedman, Houston, for appellees.
BARRON, Justice.
This is a breach of contract case in which plaintiff-appellant, Wayne A. Johnson, seeks the equitable remedy of specific performance. On February 3, 1969, Johnson and defendant-appellee, Downing and Wooten Construction Company, entered into *256 an earnest money contract whereby Johnson was to purchase from appellee several lots in the Spring Branch Estates Addition. His purpose was to construct a garden-type apartment complex thereon. The price was $83,853.00, payable $20,000.00 at closing and the balance to be represented by a vendor's lien note bearing 7% interest per annum. Defendants named were C. Foster Wooten, Lloyd S. Downing, Downing and Wooten Construction Company and its successor, Downing and Wooten Enterprises, Inc.
Purchaser, Johnson, was to have 60 days to obtain the necessary financing to construct such apartment units. By addendum, dated March 31, 1969, this closing date was extended an additional 30 days. Thereafter, appellee failed to comply with the terms of the contract and attempted return of the earnest money, alleging that Johnson was unable to obtain the necessary financing. This tender was refused, and after futilely attempting to perform under the contract, Johnson filed suit for specific performance and loss of rental value and in the alternative for damages. He later elected to proceed to judgment on the former alternative.
Special issues were submitted to the jury and answered in favor of appellant Johnson. The jury found that Johnson did obtain the "necessary financing"; that Wooten did intentionally relinquish this requirement of "necessary financing", and that $16,700.00 was a fair rental value of the property from April 30, 1969, to date of trial. The judgment, reciting that both appellant's motion for judgment and appellees' motion for judgment non obstante veredicto were sustained in part and denied in part, ordered specific performance of the contract and after allowing an $11,700.00 offset, granted "damages" of $5,000.00 to appellant. Appellant filed a limited appeal urging three points of error in the trial court's allowing this offset or balance.
We are met at the outset with a motion by appellant Johnson to strike appellees' ten cross-points of error. Judgment granting specific performance and "damages" for reasonable rental value of $16,700.00 in favor of appellant to be offset by $11,700.00 (7% per annum interest from April 30, 1969, to date of trial) was entered in this cause on June 7, 1971. Pursuant to Tex. R.Civ.P. 353(c), appellant limited his appeal "... from, and only from, that portion of Judgment of said Court granting/awarding Defendants an offset for interest on the unpaid purchase price against the reasonable rental value of the property...", and filed such notice on June 11, 1971. At the bottom of this notice attorney for appellant certified that a copy had been forwarded, by certified mail, return receipt requested, to appellees' attorney, contemporaneously with this filing.
Paragraph (c) of Rule 353, added in 1962, prohibits limitation by appellant of the scope of appeal unless such limitation is designated in a separate notice served upon the adverse party and filed within 15 days after judgment or order overruling a motion for new trial. The general commentary to Rule 353, Tex.R.Civ.P. states that the purpose of such change "... is to insure that the appellee will have notice of the appellant's intention to limit the scope of his appeal, so that the appellee, if dissatisfied with some other severable portion of the judgment, may also perfect an appeal and avoid the situation in which the appellee was left in Connell Const. Co. v. Phil Dor Plaza Corp., 158 Tex. 262, 310 S.W.2d 311 (1958)." (Emphasis added.)
As pointed out in the Connell case, supra, before the addition of paragraph (c), Rule 353(a) provided and now provides two methods of giving notice of appealone in open court noted on the docket or embodied in the judgment or order overruling the motion for new trial or other minutes of the court, and the other by filing notice with the clerk within 10 days after the judgment or order overruling the motion for new trial is rendered. The judgment recites that plaintiff, Johnson, *257 excepted to the judgment and gave notice of appeal. By giving notice of appeal in this manner, appellant has met his first burden (a motion for new trial being unnecessary since that portion of the judgment appealed from was based upon the overruling of a motion for judgment on the verdict in part and the granting in part of a motion for judgment non obstante veredicto. Rule 324, Tex.R.Civ.P.). To effectively limit his appeal, appellant must give notice of such limitation to his adversaries under Rule 353(c) within 15 days. Four days after judgment rendition, appellant filed what he refers to as a "Notice of Appeal In Writing", whereby the appeal was limited, and he certified that a separate copy of same had been sent to appellees. This comports with Rule 353(c), and the purpose of the rule is substantially accomplished.
To go one step further, while the commentary states that "The requirement of a separate notice apparently negatives the practice of incorporating such limitation within the notice of appeal itself or in the appeal bond", this practice is not condemned. As shown in Connell, supra, before the addition in paragraph (c), if one desired to limit his appeal and failed to give notice of such in open court, he must then give such notice by filing it with the clerk. There were no other requirements as now imposed by paragraph (c) which require the bringing of this fact to the attention of appellees. It is now incumbent upon appellant to do so by separate notice. Savage v. Murphy, 466 S.W.2d 335 (Tex.Civ. App.-Dallas 1971, writ ref'd n. r. e); Humble Oil and Refining Co. v. City of Georgetown, 428 S.W.2d 405 (Tex.Civ.App. Austin 1968, no writ); Gerst v. Guardian Savings and Loan Association, 425 S.W.2d 382 (Tex.Civ.App.Austin 1968), Aff'd in part and reversed on other grounds, 434 S.W.2d 113 (Tex.Sup.1968); Harms Marine Service, Inc. v. Swiere, 411 S.W.2d 602 (Tex.Civ.App.-Beaumont 1966, writ ref'd n. r. e.). There is no indication as to what kind of separate notice is required, only that it be a separate notice to meet the purpose of such paragraph, i. e., to apprise the adversaries of the scope of the appeal. Appellant has accomplished this by timely delivering a copy of his "Notice of Appeal In Writing" to appellees. Appellant's motion to strike is granted and appellees' cross-points are stricken with the possible exception of cross-points 1, 2 and 3 dealing with no evidence, insufficient evidence and overwhelming weight points in regard to the jury's findings of reasonable rental value.
Appellees further contend that their ten cross-points of error must be considered when there is an appeal from a judgment upon a motion for judgment non obstante veredicto under Rule 324, Tex.R.Civ.P. While we believe that the court, in effect, was simply balancing equities in this equitable proceeding of specific performance, the only cross-points in any way related to this limited appeal are the first three mentioned above. We will not permit consideration of other cross-points which obviously have no relevance or relation to the appeal as limited. See Connell Construction Co. v. Phil Dor Plaza Corp., supra, 310 S.W.2d at pp. 314-315. We do not believe that Rule 324 under these circumstances provides for or anticipates any such right, nor do we believe that any of the cross-points of appellees have any merit or present reversible error. The first three cross-points will, in any event, be discussed briefly below. Appellees failed to post a cost bond and failed otherwise to perfect an appeal. Compare Security Lumber Co. v. Weighard Construction Co., 413 S.W.2d 745, 747-748 (Tex.Civ.App.Texarkana 1967), Aff'd 423 S.W.2d 287 (Tex.Sup.1967).
Appellant Johnson's appeal lists three points of error, all of which point out the alleged error of the trial court in allowing an $11,700.00 interest offset against the reasonable rental loss of $16,700.00. The court in enforcing the contract was not specifically awarding damages. It was attempting to balance equities and to equalize *258 any losses occasioned by the delay by offsetting them with money payments in an equitable proceeding of specific performance. "The true rationale of decision in respect of compensation for delay is that the contract is being enforced retrospectively and the equities adjusted accordingly.... `equity looks upon things agreed to be done as actually performed.'" 7 A.L.R. 2d 1204, 1207, AnnotationSpecific PerformanceDelay (1949).
As such, it is necessary to discuss the $16,700.00 awarded appellant and the offset of $11,700.00 awarded appellees in order to do equity. The interest above was proven as a matter of law. Consideration of this matter is necessary because of appellant's urging of error in the granting of the offset, not because such was raised by possible improper cross-points. The equities of both parties must be protected in this type of action. Holley v. Hooper, 205 S.W.2d 120 (Tex.Civ.App.Austin 1947, writ ref'd n. r. e.); Stevens v. Palmour, 269 S.W. 1057, 1061 (Tex.Civ.App. Waco 1925, no writ); Crossland v. Hart, 234 S.W. 558, 561 (Tex.Civ.App.Beaumont 1921, no writ). And see Copeland v. Bennett, 243 S.W.2d 264, 271 (Tex.Civ.App. El Paso 1951, no writ); 52 Tex.Jur. 2d Specific Performance Sec. 154 (1964). Appellant was awarded the equivalent of exclusive possession of the property, as determined by the jury, from April 30, 1969, to date of trial.
The jury determined that reasonable compensation to Johnson for lost rental value was $16,700.00. There is evidence to support the jury's finding. Witnesses Weston and DeLorenzo, who qualified as experts, testified the reasonable rental value to be in the area of $16,000.00 to $17,000.00 per year. The jury determined that $16,700.00 was the fair amount for the period of time involved considering the testimony and its weight. A jury's answer to a special issue may be disregarded only when it has no support in the evidence or when the issue is immaterial. C. & R. Transport, Inc. v. Campbell, 406 S.W.2d 191 (Tex.Sup.1966). The finding is proper and is sustained. Further, this disposes of appellees' cross-points numbers 1, 2 and 3 if such were proper.
Appellant contends error in allowing the offset on grounds that the offset or balancing was the subject of an unfiled compulsory counterclaim, that there were no pleadings to support such an offset, and that error was committed in refusing to grant appellant's entire motion for judgment. The trial court sustained in part and overruled in part the motion for judgment on the verdict. The trial court used the jury's $16,700.00 figure as the reasonable rental value lost as a result of appellees' delay in performing the contract. Appellees could not and were not allowed to recover an amount greater than appellant's recovery, since the jury determined the delay to be the fault of appellees. But in doing equity the court subtracted from the rental loss the interest lost on the money by appellees due to the delay. Equity requires such offset on the authorities cited above with Holley v. Hooper, supra, 205 S.W.2d at p. 123. As such, it is not a compulsory counterclaim nor need it be pleaded, and the trial court's action was proper as an equitable measure. See Burleson v. Burleson, 15 Tex. 423, 429 (Tex.Sup.1855); Crossland v. Hart, supra, 234 S.W. at p. 561.
All points of error are overruled. The judgment of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454903/ | 480 S.W.2d 337 (1972)
Wayne MASSEY et al., Appellants,
v.
Mrs. Floyce PRICE, Appellee.
No. 5-5916.
Supreme Court of Arkansas.
May 22, 1972.
*338 Spencer & Spencer, El Dorado, for appellants.
Nolan, Alderson & Jones, El Dorado, for appellee.
BROWN, Justice.
This is a dispute over the location of a boundary line between the Masseys, appellants, and Mrs. Floyce Price, appellee (plaintiff below). In addition, appellee contends that she has acquired an easement for ingress and egress to her property over a circular drive, the southern tip of which is on appellants' property. The trial court held for appellee on her two points, both on the theory of adverse possession. Appellants attack the sufficiency of the evidence.
Eight witnesses testified for appellee and nine for appellants. As is usually the situation in this type of case the evidence was in substantial conflict. As to the boundary dispute it is concerned with a tract of land some seventeen feet in width across the south side of appellee's property and the north side of appellants' property. We summarize the highlights of appellee's proffered evidence. In 1946 the Price family repaired the south fence on their property, believing that the fence was on the property line. They followed a line on which an old fence was recognizable; they farmed the area up to the old fence beginning in the late nineteen forties; they ran livestock up to the old south fence line; a logging contractor cut timber for both parties up to the old line fence on both sides; appellee built a small enclosure for a pony and tied into the south line fence; and they made a garden for ten years up to and including the disputed area. Appellee testified that it was not until 1970 when the Masseys, after a survey, first indicated that the fence was not on the true forty line. Events immediately following that revelation culminated in the filing of suit by appellee.
Appellants' evidence strongly disputed that of appellee. They said the disputed strip was used as a lane by the predecessors in title of the present owners; that the north fence which helped form the lane was at approximately the true boundary line; that in 1932, by mutual agreement, the Price fence was torn down and D. C. Price (appellee's predecessor in title) joined the Masseys' fence on the south; and that it was agreed that the location of the two fences would not affect the true boundary line.
*339 It would be of no service to the bench and bar generally to summarize the testimony of the seventeen witnesses, all of which we have carefully scrutinized from the abstract of the evidence. Suffice it to say that we conclude that the finding of the chancellor was not contrary to a clear preponderance of the evidence. In order for adverse possession to ripen into title it is axiomatic that the possession must be open, actual, notorious, continuous, hostile, and exclusive under a claim of right. Montgomery v. Wallace, 216 Ark. 525, 226 S.W.2d 551 (1950). The chancellor determined that appellee had met those requirements and we cannot say he was in error. It is true that appellee bore the burden of establishing title by adverse possession by a greater weight of the evidence. Of course "greater weight" does not mean the greater number of witnesses; just as important is the credibility of the witness and the chancellor is in better position to evaluate credibility than is this court. Loftin v. Goza, 244 Ark. 373, 425 S.W.2d 291 (1968).
This brings us to the claimed easement for a driveway. Appellee's home is situated in proximity to the road on the west leading to Strong, Arkansas. In 1959 appellee and her husband constructed a driveway roughly in the shape of a half moon. The driveway begins on the north side of appellee's property and exits some 300 feet on the south side. The extreme south end of the driveway indisputably encroaches on the Massey property. The stated reason for the encroachment was that it was necessary to avoid a ditch alongside the highway. Appellee candidly stated that she was aware that she was going onto the Massey property and "I suppose I just assumed he was my neighbor and didn't object and assumed I was doing it with his permission, which I suppose I was." For use by permissiveness to ever ripen into title, the claimant must put the owner on notice that the way is being used under claim of right. Stone v. Halliburton, 244 Ark. 392, 425 S.W.2d 325 (1968). We think the evidence in this case falls short of establishing a claim of right by appellee and we accordingly reverse the chancellor in his holding with respect to the easement.
Affirmed in part, reversed in part. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454957/ | 640 F. Supp. 2d 901 (2009)
Virginia HAUF and Stephen Barrow, Plaintiffs,
v.
LIFE EXTENSION FOUNDATION and William Faloon, Defendants.
No. 1:06-cv-627.
United States District Court, W.D. Michigan, Southern Division.
June 22, 2009.
*902 E. Thomas McCarthy, Matthew Lindsey Wikander, William W. Jack, Jr., Smith Haughey Rice & Roegge PC, Grand Rapids, MI, R. Jay Hardin, Smith Haughey Rice & Roegge PC, Traverse City, MI, for Plaintiffs.
Richard A. Gaffin, Miller Canfield Paddock & Stone PLC, Grand Rapids, MI, Atleen Kaur, Miller Canfield Paddock & Stone PLC, Ann Arbor, MI, Clifford Alan Wolff, The Wolff Law Firm, Fort Lauderdale, FL, for Defendants.
OPINION
JANET T. NEFF, District Judge.
Pending before the Court are the parties' competing motions for summary judgment pursuant to FED. R. CIV. P. 56. Having reviewed the written submissions and accompanying exhibits, the Court finds *903 that the relevant facts and arguments are adequately presented in these materials and that oral argument would not aid the decisional process. See W.D. Mich. LCivR 7.2(d). For the reasons that follow, the Court grants Defendants' Motion for Summary Judgment on All Remaining Counts in Plaintiffs' Second Amended Complaint (Dkt. 163). Consequently, the Court denies Plaintiffs' Motion for Partial Summary Judgment Pursuant to FED. R. CIV. P. 56 Against Defendant Life Extension Foundation (LEF) (Dkt. 156) and denies Defendant William Faloon's Motion for Summary Judgment Based on Lack of Any Personal Involvement (Dkt. 159).
I
A. Factual Background
Plaintiff Virginia Hauf (formerly known as Virginia Gorka) and plaintiff Stephen Barrow are mother and son. In 1993, Hauf contacted LEF to purchase shark cartilage supplements for Barrow, who was suffering from brain cancer (Statement of Material Facts [SMF] ¶ 10). In 2001, following prior publications of their testimonial about Barrow's recovery in LEF's magazine, Hauf contacted the co-founder of LEF, asking that he contact her (Df. Exh. 7; SMF ¶ 17). Specifically, she wrote: "I would like to get with you [sic] on the life extension foundation. I feel your products are wonderful. If you could please give me a call . . . I would like to work out something with you in regards to recommending your products" (id.).
Plaintiff Hauf does not dispute that she thereafter updated her testimonial and signed the following release:
STANDARD RELEASE OF TESTIMONIALS & PHOTOS
I, __________________, do hereby give LIFE EXTENSION FOUNDATION AND ALL ITS BUSINESS AFFILIATES, its assigns, licensees, and legal representatives the irrevocable right to use my name (or any fictional name), picture, portrait, digital image, or photograph in all forms and media and in all manners, including composite or distorted representations, for advertising, trade or any other legal purposes, and I waive any right to inspect or approve the finished product, including written copy, that may be created in connection therewith.
I am over eighteen (18) years of age and have read the above authorization and release prior to its execution.
7/9/01 /s/ Virginia A. Gorka
Date Name
[Df. Exh. 8; SMF ¶¶ 19-21]
At Hauf's request, LEF ceased publication of her testimonial in 2005 (SMF ¶ 38).
B. Procedural Posture
On September 1, 2006, plaintiffs filed the instant action, alleging seven counts arising from the publication of the testimonial about Barrow's cancer recovery story in the membership drive campaign materials LEF disseminated in 2005. Plaintiffs amended their complaint two times, and defendants moved for dismissal of certain counts. This Court denied defendants' motions to dismiss on March 4, 2008, 547 F. Supp. 2d 771 (W.D.Mich.2008) (Dkts. 37-38).
At this juncture, four counts remain of plaintiffs' Second Amended Complaint: a Lanham Act claim brought on behalf of both plaintiffs alleging that defendants engaged in false endorsement/association under 15 U.S.C. § 1125(a)(1)(A) (Count I); a Lanham Act claim brought on behalf of only plaintiff Hauf alleging that defendants engaged in false advertising/association under 15 U.S.C. § 1125(a)(1)(B) (Count II); a common law right-to-privacy claim alleging that defendants misappropriated *904 plaintiffs' names and likenesses for commercial benefit (Count III); and a claim against LEF alleging that its aforementioned conduct violates the Michigan Consumer Protection Act, MICH. COMP. LAWS § 445.903(1) (Count VIII).
In their collective motion for summary judgment, defendants first argue that all four of plaintiffs' remaining claims should be summarily decided in their favor in light of plaintiff Hauf's 2001 release.[1] Defendants also proffer alternative arguments for summary judgment in their favor on each of the four counts. In the event this Court determines that LEF did not have plaintiffs' permission to publish the testimonial, defendant Faloon has also filed a separate motion for summary judgment in which he argues that he had no personal involvement in the publications and cannot be held personally liable. Plaintiffs have filed a separate motion for summary judgment, arguing they are entitled to judgment as a matter of law on their counts against LEF.
II
A. Motion Standard
A moving party is entitled to a grant of its motion for summary judgment "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The court must consider the evidence and all reasonable inferences in favor of the nonmoving party. Slusher v. Carson, 540 F.3d 449, 453 (6th Cir.2008); Hamilton v. Starcom Mediavest Group, Inc., 522 F.3d 623, 627 (6th Cir.2008).
The party moving for summary judgment has the initial burden of showing that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Slusher, 540 F.3d at 453. "Once the moving party supports its motion for summary judgment, the opposing party must go beyond the contents of its pleadings to set forth specific facts that indicate the existence of an issue to be litigated." Slusher, 540 F.3d at 453 (citing FED. R. CIV. P. 56(e)). The ultimate inquiry is "whether the state of the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.
B. Discussion
As the legal effect of plaintiff Hauf's 2001 release may be outcome determinative, this Court first turns to examination and consideration of this issue, which is the first issue presented in Defendants' Motion for Summary Judgment on All Remaining Counts in Plaintiffs' Second Amended Complaint. Mot. 9-11. Defendants argue that the release bars all four claims remaining in this case, not only Hauf's claims but also Barrow's because Barrow admitted that his mother had his permission to use his name.[2] Mot. 11 n. 6. Plaintiffs do not contradict that Hauf had Barrow's permission, arguing instead that the document Hauf signed is, at best, "an authorization." Resp. 6, 8. According to *905 plaintiffs, defendants have distorted the facts and the law surrounding the release issue.
Under well-established Michigan law,[3] courts construe releases consistent with general state law contract principles, with the intent of the parties controlling the scope of the release. Barden Detroit Casino, L.L.C. v. City of Detroit, 59 F. Supp. 2d 641, 659 (E.D.Mich.1999) (citing Taggart v. United States, 880 F.2d 867, 870 (6th Cir.1989) (interpreting Michigan contract law); Wyrembelski v. City of St. Clair Shores, 218 Mich.App. 125, 553 N.W.2d 651, 652 (1996); Gortney v. Norfolk & Western Ry. Co., 216 Mich.App. 535, 549 N.W.2d 612, 614 (1996)), aff'd 230 F.3d 848 (6th Cir.2000).
In determining the intent of the parties, the Court must look to the language of the release itself. Taggart, 880 F.2d at 869. "If the language is unambiguous, the meaning of the language is a question of law, and the intent of the parties must be discerned from the words used in the instrument. However, if the scope of a release agreement is ambiguous, the question thus becomes one of determining the intention of the parties." Id. at 870 (internal citations omitted).
The language of the "Standard Release of Testimonials & Photos" in this case is clear and unambiguous. In signing the document, Hauf provided a right to not only LEF but also LEF's business affiliates, assigns, licensees, and legal representatives, language that would encompass LEF co-founder and director Faloon. Hauf granted this group an "irrevocable right" to use her name or any fictional name, picture, portrait, digital image, or photograph "in all forms" and media and "in all manners," including composite or distorted representations for advertising, trade or any other legal purposes. "[T]here is no broader classification than the word `all.'" Skotak v. Vic Tanny Int'l, Inc., 203 Mich.App. 616, 513 N.W.2d 428, 430 (1994). "In its ordinary and natural meaning, the word `all' leaves no room for exceptions." Id. Indeed, Hauf waived "any right to inspect or approve the finished product, including written copy."
Plaintiffs nonetheless assert that the language in the "Standard Release of Testimonials & Photos" is ambiguous. According to plaintiffs, Hauf only intended for the testimonial to be placed once in LEF's magazine, as had occurred with the prior publications, and that she did not ever intend for the testimonial about her son's recovery to be used for monetary gain. Resp. 6, 10. Plaintiffs emphasize that because no other LEF representative disputes Hauf's version of events as to the circumstances surrounding her updated testimonial and "release," her testimony is undisputed. Plaintiffs also point out that her version of events is supported by contemporaneous facsimile transmissions in the record as well as the testimony from LEF's marketing directors that their practice was to have any changes to a testimonial reviewed by the person giving the testimony (Searles Dep. [Pl. Exh. B] 96-97; Stahl Dep. [Pl. Exh. G] 26). Resp. 10.
Defendants point out that the release does not contain an explicit merger or integration clause. Mot. 10. Defendants assert that because Hauf admitted that she read the release before signing it and that she voluntarily signed it, there is no reason *906 to look beyond the language of the release. Id., 10-11.
Drawing all reasonable inferences in plaintiffs' favor, see Slusher, supra, the Court agrees with defendants that the considerations plaintiffs present do not render ambiguous the language in the release. "The fact that the parties dispute the meaning of a release does not, in itself, establish an ambiguity. A contract is ambiguous only if its language is reasonably susceptible to more than one interpretation. If the terms of the release are unambiguous, contradictory inferences become subjective and irrelevant, and the legal effect of the language is a question of law." Gortney, 549 N.W.2d at 614-15 (internal citations and quotations omitted).
Plaintiffs also argue that the release does not grant defendants any right to use the testimonial. According to plaintiffs, the document merely provides LEF with "the opportunity to use names, photographs and other images in its publications without prior approval from plaintiffs." Resp. 10-11. Plaintiffs' argument is belied by the bold-font, capitalized title of the document: "STANDARD RELEASE OF TESTIMONIALS & PHOTOS." Plaintiffs' argument is also belied by the language of the release, which references not only the "use" of the signatory's name but also "written copy" created in connection with the use of the name and picture. "The law presumes that the parties understood the import of their contract and that they had the intention which its terms manifest." Michigan Chandelier Co. v. Morse, 297 Mich. 41, 297 N.W. 64, 67 (1941) (quoted with approval in Taggart, 880 F.2d at 870). "This court does not have the right to make a different contract for the parties . . . when the words used by them are clear and unambiguous." Id. Last, plaintiffs unconvincingly argue that the release is not necessarily a release of legal claims because no legal claims are specified in the document. Resp. 8, 10. Their argument misses the import of the release Hauf signed. Although the release does not specify any legal claims, the language of the release is unambiguous and broad enough to bar the remaining claims plaintiffs have in this suit.
Specifically, in light of the release, defendants cannot be held liable to plaintiffs on Count I under the Lanham Act for purported false endorsement/association. "False endorsement occurs when a celebrity's identity is connected with a product or service in such a way that consumers are likely to be misled about the celebrity's sponsorship or approval of the product or service." ETW Corp. v. Jireh Pub., Inc., 332 F.3d 915, 925-26 (6th Cir.2003). Plaintiffs were not falsely associated with LEF; rather, plaintiff Hauf expressly authorized defendants' use of the testimonial. Similarly, defendants cannot be held liable to plaintiff Hauf on Count II under the Lanham Act for purported false advertising/association where Hauf gave LEF the right to use her name and picture "for advertising" and waived "any right to inspect or approve the finished product, including written copy."
The release also operates to negate plaintiffs' misappropriation claim in Count III. To prevail on this claim, plaintiffs must prove (1) a pecuniary interest in their identities, and (2) that their identities have been commercially exploited by defendants. See Parks v. LaFace Records, 329 F.3d 437, 460 (6th Cir.2003); Landham v. Lewis Galoob Toys, Inc., 227 F.3d 619, 624 (6th Cir.2000). A reasonable jury could not find that LEF commercially exploited plaintiffs' identities where plaintiff Hauf expressly consented to LEF's use of the testimonial and likeness.
Last, the release operates to negate plaintiffs' state law claim in Count VIII against LEF. According to plaintiffs, *907 LEF's publication of the testimonial violated the MCPA inasmuch as the testimonial caused confusion about the sponsorship or approval of LEF goods, membership and services and misrepresented the benefits of LEF goods, membership and services. However, where LEF was proceeding with Hauf's permission, even her permission to issue a version of the testimonial she did not inspect or approve, a reasonable jury could not find that LEF's conduct violated the MPCA.
In summary, in considering this threshold issue, this Court agrees with defendants that the lawsuit is ripe for summary judgment in their favor. The state of the evidence is such that a reasonable jury could not return a verdict for plaintiffs.
III
Defendants are granted summary judgment of all counts remaining in this case. Consequently, plaintiffs' motion for summary judgment of their claims against LEF and defendant Faloon's individual motion for summary judgment are both denied.
A Judgment will be entered consistent with this Opinion.
JUDGMENT
In accordance with the Opinion entered this date:
IT IS HEREBY ORDERED that Defendants' Motion for Summary Judgment on All Remaining Counts in Plaintiffs' Second Amended Complaint (Dkt. 163) is GRANTED.
IT IS FURTHER ORDERED that Defendant William Faloon's Motion for Summary Judgment Based on Lack of Any Personal Involvement (Dkt. 159) is DENIED.
IT IS FURTHER ORDERED that Plaintiffs' Motion for Partial Summary Judgment Pursuant to FED. R. CIV. P. 56 Against Defendant Life Extension Foundation (Dkt. 156) is DENIED.
NOTES
[1] In their affirmative defenses to plaintiffs' Second Amended Complaint, defendants asserted that "plaintiffs' claims are barred, in whole or in part, because plaintiffs consented to the use of their story by defendants and released any and all claims and damages that might be asserted before or after the execution of the release." 2/13/2008 Aff. Def. 15 (Dkt. 35).
[2] Barrow testified, "[M]y mom has permission to use the stories that she, you know, the '94-'95 publications that went out, even in the 2001 publications that went out" (Barrow Dep. [Df. Ex. 14] 115:8-24).
[3] The parties did not address (and their choice of legal authorities does not indicate) whether federal or state law should be used to guide the contract interpretation in this case, which plaintiffs brought under both diversity and federal question jurisdiction. This Court has determined to apply Michigan law in ascertaining whether a contract exists. See Cleveland-Cliffs Iron Co. v. Chicago & North Western Transp. Co., 581 F. Supp. 1144, 1149-50 (W.D.Mich. 1984). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2465504/ | (2008)
John S. LUNA, Plaintiff,
v.
KEMIRA SPECIALTY, INC., a New Jersey corporation, formerly known as Tri-K Industries, Inc.; and Does 1 through 10, inclusive, Defendants.
Case No. CV 08-04908 MMM (JCx).
United States District Court, C.D. California.
September 11, 2008.
ORDER DENYING PLAINTIFF'S MOTION TO REMAND; GRANTING DEFENDANT'S MOTION TO DISMISS
MARGARET M. MORROW, District Judge.
On June 11, 2008, John S. Luna commenced an action in Los Angeles Superior Court against Kemira Speciality, Inc. ("Kemira"), formerly known as Tri-K Industries, Inc., and certain fictitious defendants. On July 25, 2008, Kemira removed the action to federal court, invoking diversity jurisdiction under 28 U.S.C. § 1332. It filed a motion to stay the case pursuant to 9 U.S.C. § 3, or alternatively, to dismiss, or transfer venue pursuant to 28 U.S.C. § 1404 on August 1. On August 6, 2008, plaintiff filed a motion to remand to state court. This order addresses both of the pending motions.
I. FACTUAL & PROCEDURAL BACKGROUND
A. Plaintiffs Complaint
John S. Luna filed this action in Los Angeles Superior Court on June 11, 2008.[1] Luna is a California resident living in Palmdale, California.[2] Kemira Speciality, Inc., formerly known as Tri-K Industries, Inc., is incorporated in and has its principal place of business in New Jersey.[3] Kemira manufactures and distributes chemicals and other ingredients used to make cosmetics.[4] Luna was employed by Kemira for 26 years as a commissioned sales representative; his last position with the company was Vice President of West Coast Sales.[5]
The parties' dispute arises out of Luna's employment agreement with Kemira. On March 18, 2005, Tri-K Industries, Inc. entered into a third amended employment agreement with Luna that contained nonsolicitation and non-competition clauses.[6] The non-competition clause limits Luna's ability to compete with Kemira in order to protect the company's confidential information, trade secrets, customer relations, and overall business prospects.[7] The contract also contains an arbitration clause, which mandates arbitration of all employment-related disputes "before a single arbitrator in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association."[8] The agreement states that the site of any arbitration shall be within Bergen or Essex counties in the state of New Jersey.[9]
On May 27, 2008, Luna resigned from his employment with Kemira.[10] Kemira's representative advised Luna that the company would enforce the one-year noncompetition agreement upon Luna's termination.[11] Luna filed this action soon after, asserting that the clause violated California Business and Profession Code § 16600 and constituted an unfair business practice.[12] Luna's complaint seeks an injunction under California Business and Profession Code § 17203(1) preventing enforcement of the covenant not to compete; (2) preventing Kemira from placing similar covenants not to compete in future employment agreements with California employees or persons doing business in California; and (3) prohibiting Kemira and its successors from taking legal action or compelling arbitration against Luna or any other California employee concerning provisions of the employment agreement that prohibit the employees from engaging in competitive activities in California.[13]
B. The Notice of Removal
On July 25, 2008, Kemira removed the action to this court, contending that it fell within the court's diversity jurisdiction under 28 U.S.C. § 1332.[14] Although Luna seeks only injunctive relief, and has not stated a claim for monetary damages, Kemira asserted that the $75,000 amount in controversy requirement was satisfied because "the test for determining the amount in controversy is the pecuniary result to either party which the judgment would directly produce."[15] See In re Ford Motor Co./Citibank (South Dakota), 264 F.3d 952, 958 (9th Cir.2001) (citing Ridder Bros. Inc. v. Blethen, 142 F.2d 395, 399 (9th Cir.1944) (holding that for purposes of calculating amount in controversy, "[t]he value of the thing sought to be accomplished by the action may relate to either or any party to the action")); see also Mangini v. R.J. Reynolds Tobacco Co., 793 F. Supp. 925, 928 (N.D.Cal.1992) ("[I]n non-class action cases, the amount in controversy may be measured either by the value of the relief sought by the plaintiff or the cost to the defendant if the relief is granted" (citations omitted)).
C. Pending Motions and Related Litigation
On August 1, 2008, Kemira filed a motion to stay under 9 U.S.C. § 3. Alternatively, it sought dismissal of the action under Rule 12(b)(6), or transfer of venue pursuant to 28 U.S.C. § 1404(a). Kemira represents that, in response to Luna's complaint, on June 30, 2008, it filed a petition in the United States District Court for the District of New Jersey to compel arbitration in accordance with the arbitration clause in the employment agreement.[16] On August 13, 2008, the district court in New Jersey issued an order compelling arbitration of "all claims asserted by the parties arising out of the non-compete and confidentiality provisions of John S. Luna's employment contract with Tri-K Industries, Inc., and/or Kemira Specialty, Inc."[17]
Approximately a week earlier, on August 6, Luna moved to remand this action to state court, arguing that Kemira has failed to show that the amount in controversy exceeds $75,000.
II. DISCUSSION
A. Plaintiff's Motion to Remand
1. Standard Governing Removal to Federal Court Based on Diversity Jurisdiction
Unless expressly excepted by some other federal statute, "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). District courts have original diversity jurisdiction over civil actions between citizens of different states where the matter in controversy exceeds $75,000. Id., § 1332(a). Remand is mandatory "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." Id., § 1447(c).
The Ninth Circuit "strictly construe[s] the removal statute against removal jurisdiction." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992) (citing Boggs v. Lewis, 863 F.2d 662, 663 (9th Cir.1988), and Takeda v. Northwestern Nat'l Life Ins. Co., 765 F.2d 815, 818 (9th Cir.1985)). "The `strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Id. (citing Nishimoto v. Federman-Bachrach & Assocs., 903 F.2d 709, 712 n. 3 (9th Cir.1990), and Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir.1988)); Befitel v. Global Horizons, Inc., 461 F. Supp. 2d 1218, 1221 (D.Haw.2006) ("In diversity cases, the burden of proving all jurisdictional facts rests on the party seeking jurisdiction," citing Kanter v. Warner-Lambert Co., 265 F.3d 853, 857-58 (9th Cir.2001)). Where the complaint does not identify the amount of damages sought, the removing defendant has the burden of proving that the amount in controversy requirement is met. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir.1996) ("[W]e hold that in cases where a plaintiffs state court complaint does not specify a particular amount of damages, the removing defendant bears the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeds [the jurisdictional amount]"). If there is any doubt regarding the existence of federal jurisdiction, the court must resolve those doubts in favor of remanding the action to state court. Gaus, 980 F.2d at 566 ("[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance," citing Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir.1979)); Befitel, 461 F.Supp.2d at 1221 ("Diversity jurisdiction is to be strictly construed and any doubts are to be resolved in favor of remand to the state court" (citations omitted)).
2. Whether Defendant Has Satisfied the Amount in Controversy Requirement
Where a lawsuit seeks declaratory or injunctive relief, "it is well established that the amount in controversy is measured by the value of the object of the litigation." Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 347, 97 S. Ct. 2434, 53 L. Ed. 2d 383 (1977); International Padi, Inc. v. Diverlink, No. 03-56478, ___ Fed.Appx. ___, ___, 2005 WL 1635347, *1 (9th Cir. July 13, 2005) (Unpub. Disp.) ("[I]n determining the amount in controversy, we may also include the value of the requested injunctive relief to either party" (citation omitted)); In re Ford Motor Co./Citibank (South Dakota), 264 F.3d at 958 ("In Sanchez, we observed en banc that `Ridder . . . rejected the "plaintiff-viewpoint" rule, which states that courts attempting to determine the value of a claim for purposes of the amount in controversy requirement should look only to the benefit to the plaintiff, rather than to the potential loss to the defendant,'" quoting Sanchez, 102 F.3d at 405 n. 6).
"The value of an injunction may not be capable of precise determination, but precision is not required." Mailwaukee Mailing, Shipment and Equipment, Inc. v. Neopost, Inc., 259 F. Supp. 2d 769, 772 (E.D.Wis.2003) (citing Hedberg v. State Farm Mut. Auto. Ins. Co., 350 F.2d 924, 929 (8th Cir.1965) ("[A]lthough injury in an injunction suit may not be capable of exact valuation in money, this fact of itself does not negative federal jurisdiction"); 14B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, FEDERAL PRACTICE AND PROCEDURE § 3708 (3d ed. 1998); and Miller-Bradford & Risberg, Inc. v. FMC Corp., 414 F. Supp. 1147, 1149 (E.D.Wis. 1976)).
Where a plaintiff seeks an injunction preventing the enforcement of a noncompetition clause, "courts `usually will look to the profits earned by the employer on business generated by the employee during the period immediately preceding his termination'" to determine the amount in controversy. Mahoney v. Depuy Orthopaedics, Inc., CIV F 07-1321 AWI SMS, 2007 WL 3341389, *4 (E.D.Cal. Nov. 8, 2007) (citing Mailwaukee Mailing, Shipment & Equipment, Inc., 259 F.Supp.2d at 773; Basicomputer Corp. v. Scott, 791 F. Supp. 1280, 1286 (N.D.Ohio 1991); Zimmer-Hatfield, Inc. v. Wolf, 843 F. Supp. 1089, 1091 (S.D.W.Va.1994); and Wright, Miller & Cooper, supra, § 3708). "Courts have also examined the revenues generated by an employee and the revenues lost by the employer in determining whether the jurisdictional minimum has been met." Id. (citing Basicomputer Corp. v. Scott, 973 F.2d 507, 510 (6th Cir.1992); Premier Industrial Corp. v. Texas Industrial Fastener Co., 450 F.2d 444, 446-47 (5th Cir. 1971); Robert Half Int'l, Inc. v. Van Steenis, 784 F. Supp. 1263, 1265-66 (E.D.Mich.1991); Basicomputer, 791 F.Supp. at 1286; and USAchem, Inc. v. Goldstein, 512 F.2d 163, 170 (2d Cir.1975) (relying on "volume of sales involved")).
Like Luna, the plaintiff in Mahoney v. Depuy Orthopaedics, Inc. sought an injunction prohibiting enforcement of a covenant not to compete in an employment contract. Mahoney, 2007 WL 3341389 at *1-2. In support of its opposition to Mahoney's motion to remand, defendant submitted declarations stating that plaintiff had generated revenues and net profits well in excess of $75,000 per year. Id. at *2-3. Although defendant did not specify the exact amount of net profits generated by Mahoney, it asserted that he was responsible for more than $6 million in sales during an approximately eighteen-month period. Id. at *5. The court held defendant had satisfied the jurisdictional requirement, inferring that Mahoney's sales must have led generated more than $75,000 in net profits for defendant. Id.
Similarly, in Davis v. Advanced Care Technologies, Inc., CIV S 06-02449 DFL DAD, 2007 WL 1302736 (E.D.Cal. May 2, 2007), plaintiff signed a confidentiality and non-competition agreement that prohibited him from revealing defendants' trade secrets or working for a competing company for two years after leaving defendants' employ. Id. at *1. Plaintiff sought a declaration that the noncompetition provisions of the contract were unenforceable under California law. Id. Upon removal of the action to federal court, plaintiff argued that the amount in controversy requirement had not been met; although conceding that defendants' trade secrets were worth more than $75,000, he asserted that the nondisclosure provision did not implicate the noncompetition provision that was the subject of the action. Id. at *1-2. The court disagreed, determining that the nondisclosure and noncompetition provisions "work[ed] in concert to protect [defendant's] trade secretsthe nondisclosure provisions punitively, by creating a cause of action after a disclosure; the noncompetition provisions prophylactically, by creating a cause of action for conduct likely to lead to disclosure." Id. at *2. "Given the undisputed nature and scale of defendants' business," the court found, "the value of the trade secrets and other confidential information known to [plaintiff] surely exceeds $75,000."
Kemira has submitted the declaration of its president, Reno Del Dotto, who states that the value of Luna's employment to the company was greater than the $75,000 jurisdictional threshold. In 2007, Luna's sales for Kemira exceeded $6,000,000.[18] The total gross profit margin on the sales was $2,569,516, and the net profit margin, less overhead costs, was $1,944,688.[19] The overhead costs included Luna's compensation, comprised of a base salary of $324,000, commissions of $226,412, and expenses of $74,416, for a total of $624,828.[20] On January 21-23, 2008, Luna attended a sales meeting in New Jersey and gave a presentation setting forth his sales goals for 2008.[21] Luna projected that he would achieve $8,000,000 in sales this year, representing a $2,000,000 increase over what his total for 2007.[22]
As further evidence of Luna's value to the company, Del Dotto notes that on May 26, 2008, Luna sent a series of emails to different suppliers and customers, announcing that he was terminating his employment with Kemira.[23] As a result of these emails, one supplier, a Paris-based company, has given notice that it will be cancelling its contract with Kemira.[24] Another supplier located on the West Coast indicated that it would cancel its contract effective December 31, 2008.[25] It has since taken a "wait-and-see" approach to continuing business with Kemira at the end of the year.[26] If Luna were to solicit this supplier's business during the one-year non-competition period, Kemira represents that it would lose approximately $900,000 in sales, representing at least 25% in net profits to the company.[27] As Kemira notes, these figures demonstrate that, at least from its perspective, the amount in controversy exceeds $75,000.[28]
Luna does not dispute Kemira's arguments regarding the value of his services, but attempts instead to distinguish his case from Mahoney.[29] Luna notes that in Mahoney, plaintiff was actively competing with his former employer at the time the action was filed, in contravention of the covenant not to compete.[30] See Mahoney, 2007 WL 3341389 at *1 ("Mahoney wishes to explore other opportunities within his profession, and apparently is now employed or represents a competitor of De-Puy. However, DePuy continues to insist that the Agreement's non-compete provisions are valid and remain in effect for one year after the Agreement's termination"). Luna, maintains that he, by contrast, is not presently pursuing business activities out of concern that he may "inadvertently violate" the terms of the employment agreement's non-competition clause.[31] He argues that because he is not presently competing against it, Kemira's claims regarding the amount of harm that will result from his prayer for injunctive relief i.e., the amount in controversyis purely speculative.[32]
Luna's arguments are unpersuasive. The Mahoney court did not deny the motion to remand based on evidence of actual damage resulting from plaintiffs alleged violation of the non-competition clause. Rather, it based its holding on plaintiffs prior sales and compensation. See Mahoney, 2007 WL 3341389 at *5-6 ("The Coffaro and Rems declarations show that Mahoney generated over $6 million in sales revenues from January 2006 to August 2007, and that Mahoney generated profits in excess of $75,000 per year for DePuy in 2006 and 2007. This evidence sufficiently shows that it is more likely than not that the amount in controversy exceeds $75,000"); cf. also Davis Tune, Inc. v. Precision Franchising, LLC, CV 05-97 RV, 2005 WL 1204618, *2 (N.D.Fla. May 20, 2005) ("The Plaintiff is seeking equitable relief which, if granted, would bar Precision Franchising from enforcing certain covenants not to compete against Davis Tune. These covenants restrict Davis Tune from operating an automotive center in competition with Precision Franchising for the remaining three years of the agreement and for two years thereafter within a given distance of franchise locations. Since Davis Tune has reported annual sales of $440,000 from its automotive center, the practical gain by Davis Tune from winning a declaratory judgment in this case could be about $2,000,000 dollars. Even a small fraction of this would alone be sufficient to meet the $75,000 amount in controversy requirement").
Furthermore, it is clear from the text of the complaint that Luna seeks to enjoin enforcement of the non-competition clause so that he may compete with Kemira in the near future. The complaint alleges that "[a]s a result of the threat of Defendant stating that it will seek to enforce and [that it] intends to enforce the terms of the Employment Agreement concerning the covenant not to compete clause, Plaintiff upon his resignation will be harmed by being required to comply with the covenant not to compete clause and not pursue business opportunities that he would otherwise pursue due to concerns that it would subject him to being sued."[33] In his declaration, Luna states that he wants to sell "ingredients and products which Kemira does not currently handle" in the next twelve months.[34] The fact that the products he will offer for sale may be different from Kemira's does not demonstrate that they will not be competitive.[35]
Because Kemira has shown that Luna's sales activities resulted in more than $75,000 in net profits to the company during the year prior to his resignation, and because Luna indicated in a presentation that he would generate $8,000,000 in sales for 2008, the court concludes that Kemira has satisfied the amount in controversy requirement for diversity jurisdiction. Accordingly, the court denies Luna's motion to remand.
B. Defendant's Motion to Stay, Dismiss, or Transfer
1. Legal Standard Governing Motions to Dismiss Under Rule 12(b)(6)
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. Under Rule 12(b)(6), a "complaint should not be dismissed unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir.2002) (citing Rabang v. INS, 35 F.3d 1449, 1451 (9th Cir.1994)). See also Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001); Love v. United States, 915 F.2d 1242, 1245 (9th Cir.1989).
In deciding whether a Rule 12(b)(6) motion meets this standard, the court generally looks only to the face of the complaint and documents attached thereto. Van Buskirk, 284 F.3d at 980; Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1990). "[W]here a plaintiff attaches documents and relies upon the documents to form the basis for a claim or part of a claim, dismissal is appropriate if the document negates the claim." Thompson v. Illinois Dep't of Professional Regulation, 300 F.3d 750, 754 (7th Cir.2002) (applying the "`well-settled rule that when a written instrument contradicts allegations in a complaint to which it is attached, the exhibit trumps the allegations,'" citing Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 454 (7th Cir.1998) (emphasis deleted)); Woods v. Asset Resources, CV 06-398 SMS, 2006 WL 3782704, *2 (E.D.Cal. Dec. 21, 2006) ("When a written instrument or subject of judicial notice contradicts allegations in a complaint to which it is attached, the Court need not accept the allegations of the complaint as true," citing Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.1987)); Saunders v. Knight, CV 04-5924 REC LJO, 2006 WL 224426, *3 (E.D.Cal. Jan. 25, 2006) (citing Thompson).
The court must accept all factual allegations pleaded in the complaint as true, and construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir. 1995). It need not, however, accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. See Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007) ("While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the `grounds' of his `entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)" (citations omitted)).
Where a complaint and the attached exhibits demonstrate that all of plaintiffs claims are subject to arbitration, a court may dismiss the complaint under Rule 12(b)(6). Thinket Ink Information Resources, Inc. v. Sun Microsystems, Inc., 368 F.3d 1053, 1060 (9th Cir.2004); Chappel v. Laboratory Corp. of America, 232 F.3d 719, 725 (9th Cir.2000). Indeed, even where a party moves to stay litigation pending arbitration under the Federal Arbitration Act, 9 U.S.C. § 3, the district court has discretion to dismiss the complaint if it finds all of the claims before it are arbitrable. See Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir. 1988).
2. Whether Plaintiff's Claims are Subject to Arbitration
Section 2 of the Federal Arbitration Act ("FAA") provides that a written agreement to arbitrate in a contract involving interstate commerce "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. "Employment contracts, except for those covering workers engaged in transportation, are covered by the FAA." E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 289, 122 S. Ct. 754, 151 L. Ed. 2d 755 (2002) (citing Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S. Ct. 1302, 149 L. Ed. 2d 234 (2001)). Whether an arbitration provision, as opposed to the underlying contract, is enforceable is a question for the court. Ticknor v. Choice Hotels Intern., Inc., 265 F.3d 931, 937 (9th Cir. 2001); Teledyne, Inc. v. Kone Corp., 892 F.2d 1404, 1410 (9th Cir.1989).
Arbitration is a matter of contract, and a party cannot be required to submit any dispute to arbitration that he has not agreed to submit. AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 648, 106 S. Ct. 1415, 89 L. Ed. 2d 648 (1986). In determining whether an arbitration clause is valid, the court "should apply ordinary state-law principles that govern the formation of contracts." Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th Cir.2002) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S. Ct. 1920, 131 L. Ed. 2d 985 (1995)). Once an arbitration clause is determined to be valid, the FAA requires that "any doubts concerning the scope of arbitrable issues ... be resolved in favor of arbitration." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983); see also Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1131 (9th Cir.2000).
In enacting the FAA, Congress "declared a national policy favoring arbitration" intended to reverse centuries of judicial hostility to arbitration agreements. Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S. Ct. 852, 79 L. Ed. 2d 1 (1984). Accordingly, although courts follow common law rules of contract interpretation in construing arbitration agreements, see Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62, 115 S. Ct. 1212, 131 L. Ed. 2d 76 (1995), "questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration," Moses H. Cone Memorial Hosp., 460 U.S. at 24, 103 S. Ct. 927, and the courts must "rigorously enforce agreements to arbitrate." Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221, 105 S. Ct. 1238, 84 L. Ed. 2d 158 (1985).
Here, the contractual agreement between the parties provides that
"[t]he parties ... unmistakably and voluntarily agree that all employment-related disputes ... are to be submitted to arbitration before a single arbitrator in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association." [36]
As noted, the district court for the District of New Jersey has ordered that "all claims asserted by the parties arising out of the non-compete and confidentiality provisions of John S. Luna's employment contract with Tri-K Industries, Inc., and/or Kemira Specialty, Inc., shall be pursued exclusively in the arbitration commenced by [Kemira] before a single arbitrator in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association."[37]
Luna contends that he believed his action was properly brought in a California court instead of before an arbitrator because he sought not only to enjoin enforcement of the non-competition clause, but also, on behalf of current and future Kemira employees in California, to prohibit the company from engaging in unfair business practices.[38] Luna acknowledges, however, that the New Jersey court "compel[led] the California action into arbitration."[39] He therefore does not appear to dispute that all claims regarding the validity and enforceability of the non-competition clause are subject to arbitration.[40]
3. Whether the Court Should Dismiss or Stay the Action
Luna argues that the court should stay rather than dismiss the action so that any potential arbitration award can be confirmed by a court located in California.[41] He acknowledges that "the court [has] discretion to dismiss or transfer," but argues that it should not exercise that discretion since any arbitration award entered will concern California and should be confirmed by a California court. Specifically, he asserts that "[i]f the arbitrator grants an injunction concerning Kemira's use of unfair competition clauses within California, the most appropriate court to issue injunctive relief is the present court."[42]
Section 3 of the Federal Arbitration Act provides that, "upon being satisfied that the issue involved in [a] suit ... is referable to arbitration ..., [a court] shall on application of one of the parties stay the trial of the action until such arbitration has been had ..., providing the applicant for the stay is not in default in proceeding with such arbitration." 9 U.S.C. § 3. The Ninth Circuit has held, however, that § 3 does not impose a mandatory duty to stay on district courts. Thus, even where a party seeks a stay under § 3, the court has discretion to dismiss under Rule 12(b)(6) if it finds that all of the claims before it are arbitrable. See Sparling, 864 F.2d at 638; see also Thinket Ink Information Resources, 368 F.3d at 1060 (affirming dismissal under Rule 12(b)(6) of claims that were subject to arbitration); Chappel, 232 F.3d at 725 (where "judicial review ... is barred by the [contract's] valid and enforceable arbitration clause[,] [t]he district court properly dismissed his complaint under Federal Rules of Civil Procedure 12(b)(6) for failure to state a claim"); Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 726 (9th Cir. 1999) (affirming dismissal under Rule 12(b)(6) of claims that were subject to an arbitration clause); Martin Marietta Aluminum, Inc. v. General Electric Co., 586 F.2d 143, 148 (9th Cir.1978) (holding that a judge has discretion to grant summary judgment where all of plaintiffs claims are barred by an arbitration clause); cf. Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir.1992) (noting that although 9 U.S.C. § 3 provides for a stay pending completion of arbitration, "[t]his rule ... was not intended to limit dismissal of a case in the proper circumstances. The weight of authority clearly supports dismissal of the case when all of the issues raised in the district court must be submitted to arbitration.... [The court does] not believe the proper course of action is to stay the action pending arbitration. Given [the court's] ruling that all issues raised in this action are arbitrable and must be submitted to arbitration, retaining jurisdiction and staying the action will serve no purpose").
Here, the New Jersey court has determined that all claims arising out of the non-competition clause are arbitrable, and ordered them to be resolved exclusively in arbitration. Luna concedes that the claims are arbitrable.[43] In light of the fact that Luna's claims regarding the enforceability of the covenant not to compete are proceeding in arbitration in New Jersey, the court sees no utility in retaining jurisdiction for the sole purpose of confirming an arbitration award in the event Luna obtains the relief he seeks. This is particularly true since the district court in New Jersey has retained jurisdiction over the case "including, without limitation, for the purpose of: (i) entering any application [Kemira] may file for a temporary restraining order or preliminary injunction; (ii) entertaining any motion to confirm the award of the arbitration panel; and (iii) granting such other and further relief as the Court may deem proper."[44] Because the New Jersey court is prepared to confirm any arbitration award entered on Luna's behalf, the court declines to stay the matter pending arbitration. It therefore exercises its discretion to dismiss the complaint without prejudice under Rule 12(b)(6).
III. CONCLUSION
For the reasons stated, the court denies Luna's motion to remand. Given that the parties are already pursuing their respective claims in arbitration in New Jersey, the court grants Kemira's motion to dismiss plaintiff's complaint under Rule 12(b)(6).
NOTES
[1] Complaint at 1.
[2] Id., ¶ 1.
[3] Id., ¶ 2; Notice of Removal, ¶ 5.
[4] Declaration of Peter J. Pizzi ("Pizzi Decl."), Exh. 1 (New Jersey Complaint, ¶ 1).
[5] New Jersey Complaint, ¶¶ 10-11.
[6] Complaint, ¶ 5, Exh. 1.
[7] Id., Exh. 1.
[8] Id.
[9] Id.
[10] Id., ¶ 6.
[11] Id.
[12] Id., ¶ 8. Section 16600 states that "[e]xcept as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." CAL. BUS. & PROF.CODE § 16600.
[13] Complaint, Prayer for Relief, ¶¶ 1-5.
[14] Notice of Removal, ¶ 3.
[15] Id., ¶ 8.
[16] Notice of Motion and Memorandum of Defendant Kemira Specialty, Inc. in Support of its Motion for a Stay Pursuant to 9 U.S.C. § 3, to Dismiss, or to Transfer Venue Pursuant to 28 U.S.C. § 1404 ("Def.'s Mot. to Stay") at 2.
[17] Plaintiff's Opposition to Motion for Stay, Dismissal or Transfer of Venue ("Pl.'s Stay Opp."), Exh. 1.
[18] Second Supplemental Declaration of Reno Del Dotto ("Supp. Del Dotto Decl."), ¶ 2.
[19] Id.
[20] Id.
[21] Id. ¶ 3.
[22] Id., ¶ 3, Exh. V.
[23] Id., ¶ 7, Exh. X.
[24] Id., ¶ 8.
[25] Id., ¶ 10.
[26] Id.
[27] Id., ¶ 11.
[28] Defendant's Memorandum of Points and Authorities in Opposition to Motion to Remand ("Def.'s Opp. to Remand") at 11.
[29] Plaintiff's Notice and Motion to Remand ("Pl.'s Remand Mot.") at 3-5.
[30] Id. at 4.
[31] Declaration of John Luna ("Luna Decl."), ¶¶ 6-7.
[32] Pl.'s Remand Mot. at 4-10.
[33] Complaint, ¶ 8 (emphasis added).
[34] Luna Decl., ¶ 6.
[35] See Def.'s Opp. to Remand at 18.
[36] Complaint, Exh. 1.
[37] Pl.'s Stay Opp., Exh. 1.
[38] Id. at 2.
[39] Id.
[40] See id.
[41] Id. at 2-3.
[42] Id. at 3.
[43] Pl.'s Stay Opp. at 2, Exh. 1. In construing the scope of an arbitration clause, the court "must ascertain and implement the reasonable expectations of the parties. . . ." Spear, Leeds & Kellogg v. Central Life Assurance Co., 85 F.3d 21, 28 (2d Cir.1996). "Despite the presumption of arbitrability, the strong federal policy favoring arbitration may not extend the reach of arbitration beyond the intended scope of the clause providing for it." Id. "[C]ontracting parties control their own fate when it comes to deciding which disputes to consign to arbitration. On the one hand, they may delineate precisely those claims that are subject to arbitration or, on the other, they may employ generaleven vague language in their arbitration provisions." Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress Int'l, Ltd., 1 F.3d 639, 643 (7th Cir. 1993). Here, the arbitration clause to which the parties agreed is broad; it applies to any and all "employment-related disagreements and problems, which are those that concern a right, privilege, or interest recognized by applicable law." (Complaint, Exh. 1.) Such employment-related disputes include claims, demands or actions arising under various federal and state statutes including Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Mecial Leave Act, and the New Jersey Prevailing Wage Act. (Id.) The arbitration clause also applies to "any other federal, state, or local statute, regulation, or common law doctrine regarding employment discrimination, conditions of employment, or termination of employment." (Id.) The clause states "[t]he parties . . . understand that the remedies available to the Employee and the Corporation during the arbitration proceeding shall b[e] the same as the remedies available under the statute(s) upon which any claim(s) is based, and that could be awarded by any court or administrative agency." (Id.)
Consistent with the strong federal policy in favor of arbitration, Collins & Aikman Products Co. v. Building Systems, Inc., 58 F.3d 16, 19 (2d Cir.1995), the existence of a broad agreement to arbitrate creates a presumption of arbitrability, which is overcome only if "`it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.'" WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 74 (2d Cir.1997) (quoting Associated Brick Mason Contractors of Greater New York, Inc. v. Harrington, 820 F.2d 31, 35 (2d Cir. 1987)). That is not the case here.
One of Luna's claims against Kemira is contractual, in that he seeks an injunction preventing Kemira from enforcing the non-competition clause in his employment agreement. The other is "employment-related," as Luna sues on behalf of other California employees of Kemira to prevent the company from including non-competition clauses in their contracts. He also seeks to enjoin the company's enforcement of non-competition clauses against any California employee. (Id., Prayer for Relief, ¶¶ 1-5.) The fact that he seeks such relief on his own behalf as well as on behalf of similarly situated employees demonstrates that the claim is "employmentrelated." Indeed, under current California law, Luna cannot assert such a claim unless he "has suffered injury in fact and has lost money or property as a result of unfair competition." CAL. Bus. & PROF.CODE § 17204; see also Californians For Disability Rights v. Mervyn's, LLC, 39 Cal. 4th 223, 228, 46 Cal. Rptr. 3d 57, 138 P.3d 207 (2006).
[44] Id., Exh. 1. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2454919/ | 480 S.W.2d 864 (1972)
Donald R. WOOLBRIGHT, Plaintiff-Appellant,
v.
SUN COMMUNICATIONS, INC., a Corporation, d/b/a Daily Banner-News, and Donald R. Stimble, an Individual, d/b/a Daily Banner-News, Defendants-Respondents.
No. 56106.
Supreme Court of Missouri, Division No. 1.
June 12, 1972.
*865 Lawrence O. Willbrand, St. Louis, for plaintiff-appellant.
Evans & Hoemeke, Robert D. Evans, Robert B. Hoemeke, Michael P. Casey, St. Louis, for respondents.
LAURANCE M. HYDE, Special Commissioner.
Action for $27,500 damages for libel. Defendants' motion for summary judgment was sustained and judgment entered for defendants. Plaintiff appeals from this judgment. We have jurisdiction because notice of appeal was filed in the trial court prior to September 11, 1970, the effective date of the act (H.B. 34, Third Extra Session 1970) increasing the jurisdiction of the Court of Appeals to $30,000. We affirm the judgment.
The article plaintiff claims was false, defamatory and libelous was as follows:
"Prosecutor Issues Warning
"Andrew H. McColloch, St. Charles County prosecuting attorney, today issued a warning to citizens who attended a public auction on Saturday, June 28 in St. Peters that their names and bank account numbers may be used on stolen forged checks soon.
"McColloch said that six persons who bought items at the auction have already been victims of the forger. Checks stolen from the Tower Grove Bank & Trust Co. were used.
"The auction was run by D. R. Woolbright of St. Louis, who apparently is using the names and bank account numbers of purchasers to forge checks.
"The six checks cashed so far have each been for $360. They have been cashed throughout the country at banks other than where the accounts are held.
"McColloch explained that Woolbright, a known check forger, is able to cash the checks because he has legitimate names and bank account numbers. When he goes to a bank to cash one of the checks, the bank will call the bank where the account is held, and since the name and account number is correct, the check will be cashed.
"McColloch urged anyone who purchased merchandise at the sale to immediately change their bank account number. He said that his office has the names of seven other purchasers, but he believes there are probably still many more purchasers who are unaware of the forgeries.
"McColloch said that it was `through the diligent efforts of the office of Robert A. Koester, sheriff of St. Charles County, that it was determined that the payees named in the stolen checks were purchasers at the auction.' The Sheriff's Office said that alertness of employes of the Bank of O'Fallon helped to determine how the correct bank account numbers were obtained.
"McColloch said that it has not been determined yet if the merchandise at the sale was stolen or not. Woolbright acquired the great number of checks by requiring that all purchasers pay by personal check."
*866 Defendant claims the article was constitutionally privileged because it was a publication of a public warning made by the prosecuting attorney about a matter of legitimate public interest and concern, relying on New York Times Co. v. Sullivan, 376 U.S. 254, 84 S. Ct. 710, 11 L. Ed. 2d 686, and subsequent cases hereinafter cited. Plaintiff makes no claim that the article was not about a privileged matter but relies on Moritz v. Kansas City Star Co., Mo.Sup. en banc, 364 Mo. 32, 258 S.W.2d 583, holding that if the publisher summarizes or abridges or undertakes to state additional facts based on its own investigation the publication of such additional facts is not privileged. Plaintiff say the article did this by stating in paragraph three that he "apparently is using the names and bank account numbers of purchasers to forge checks"; and by stating in paragraph five that plaintiff was "a known check forger." Plaintiff says the article did not indicate to whom the use of names and account numbers was apparent and this should be construed as a conclusion of the publisher. Plaintiff also says the statement that he was "a known check forger" was not attributable to the prosecuting attorney.
Defendants say a fair reading of the article shows all the charges are those of the prosecutor and that the article did not summarize or make additions to the prosecutor's statement. The affidavit of the reporter, who wrote the article, filed with the motion for summary judgment was that all the facts stated in the article concerning the method used to forge and cash checks and plaintiff being "a known check forger" came from the prosecuting attorney; and that the prosecuting attorney exhibited several forged checks and asked that the matter be published so purchasers at the sale could protect themselves. Affidavits of the publisher of the paper and the reporter who wrote the article also were that they had no malice toward plaintiff and did not know him. The reporter's affidavit was that all statements in the article were made by the prosecuting attorney except the statement of the sheriff concerning discovery of the method used. The court found "these affidavits are not controverted"; that "the news article in question is a fair and impartial report of a statement and warning issued by the prosecuting attorney of St. Charles County to the citizens of that county and published at the request of the Prosecuting Attorney"; and that "there is no factual issue concerning malice."
Moritz v. Kansas City Star Co., supra, relied on by plaintiff was decided prior to New York Times Co. v. Sullivan, supra, which somewhat weakens its authority since it and the cases following it seem to have expanded the area of public interest. However, Moritz was based on the principle that in publishing what he is privileged to report "the publisher need not publish the entire proceedings, but whatever summary or abridgment he chooses to make, must be a fair statement, and when he undertakes to state additional facts, * * * gleaned from his own investigation, he does so at his peril, if they are false, exactly the same as he would in connection with an unprivileged matter." 258 S.W.2d, l. c. 586. In Moritz, two articles were written about a streetcar collision, after which the police arrested Moritz. The collision was near Moritz's home and he said he was assisting an injured neighbor. The article stated the police claimed Moritz, a lawyer, was interfering with their rescue work and thought he was trying to have injured passengers agree to let him represent them. There was a police report made about this. "The first article, however, was not written or based upon the written police report." 258 S.W.2d, l. c. 587. The second article concerned the charge of interfering with police against Moritz being set for trial in the municipal court. Both articles contained statements about Moritz seeking the names of those injured to represent them in damage claims. The jury found *867 for Moritz so we said: "[W]e must accept his version of the matter and his proof that in so far as the articles concern his conduct in soliciting law business the articles are a misstatement of fact and untrue." 258 S.W.2d, l. c. 588. Judgment for Moritz, set aside by the trial court, was ordered reinstated.
In Moritz, the information found to be false did not, as here, report a statement issued by a public officer but was considered to have been made by the reporter on the basis of his own investigation. New York Times v. Sullivan, supra, stated the principle that in matters of public concern, public men and candidates for office, publication is privileged whether false or not unless done with actual malice. (84 S. Ct. 710, 726-727.) As therein stated "actual malice" means "with knowledge that it was false or with reckless disregard of whether it was false or not." In this case, the court, on uncontroverted affidavits, found there was no issue of malice. Time, Inc. v. Hill, 385 U.S. 374, 87 S. Ct. 534, 17 L. Ed. 2d 456, applied the New York Times principle to a report in Life magazine of a play in a theatre which was based on the experience of the Hill family being held in their home by escaped convicts. The play and the article about it and pictures with it showed violence to and humiliation of the family which was false and untrue. The Supreme Court reversed a state court judgment for plaintiff saying because of "the failure of the trial judge to instruct the jury that a verdict of liability could be predicated only on a finding of knowing or reckless falsity in the publication of the Life article." 87 S.Ct., l. c. 547. The court in determining that the rule of New York Times Co. v. Sullivan applied said: "The guarantees for speech and press are not the preserve of political expression or comment upon public affairs, essential as those are to healthy government * * * We have no doubt that the subject of the Life article, the opening of a new play linked to an actual incident, is a matter of public interest."
More recently, and especially applicable here, in Time, Inc. v. Pape, 401 U.S. 279, 91 S. Ct. 633, 28 L. Ed. 2d 45, the court applied the New York Times Co. v. Sullivan rule to an article based on a report of the U.S. Commission on Civil Rights of allegations concerning the treatment of a Negro family by a Chicago Deputy Chief of Detectives and other officers with him. The Time article did not state these charges were allegations made to the Commission but reported them as charges made by the Commission. The Court of Appeals considered this to be a falsification of the report and that intent to inflict harm through falsehood could reasonably be inferred making the issue of malice a jury issue. 91 S.Ct., l. c. 637. The Supreme Court said: "Time's omission of the word `alleged' amounted to the adoption of one of a number of possible rational interpretations of a document that bristled with ambiguities. The deliberate choice of such an interpretation, though arguably reflecting a misconception, was not enough to create a jury issue of `malice' under New York Times." 91 S.Ct., l. c. 639. The court, however, cautioned that it was not "to be understood as making the word `alleged' a superfluity in published reports of information damaging to reputation." 91 S.Ct., l. c. 640. For a review of many applicable cases see Estes v. Lawton-Byrne-Bruner Insurance Agency Co., Mo.App., 437 S.W.2d 685; and Rowden v. Amick, Mo.App., 446 S.W.2d 849. See also Diener v. Star-Chronicle Pub. Co., 230 Mo. 613, 132 S.W. 1143; Tilles v. Pulitzer Pub. Co., 241 Mo. 609, 145 S.W. 1143.
Certainly defendants' publication of the public warning of the prosecuting attorney was privileged and plaintiff does not contend otherwise. Furthermore, we consider that all of it must reasonably be construed as the statement of the prosecuting attorney, especially in view of the uncontroverted affidavits. The article commences by saying the prosecuting attorney has "issued a warning" about the matter of *868 forged checks. The prosecuting attorney's name appears in this rather short article six times as the source of the information contained in it saying he "said" (three times), "explained," "urged." The very sentence which plaintiff claims to be a comment of defendants says: "McColloch explained that Woolbright, a known forger, is able to cash the checks." (Emphasis ours.) The other sentence saying plaintiff "apparently is using the names and bank account numbers of purchasers" immediately follows the two sentences saying the prosecuting attorney is warning about this method of forgery and that six purchasers at plaintiff's auction have been victims. Nothing in the article indicates any view or opinion of defendants or any source of information except the prosecuting attorney. There is no basis for finding actual malice or that the reporter or publisher had any reason to believe it was not true. As we said in Brown v. Kitterman, Mo.Sup., 443 S.W.2d 146, 155: "There are no facts alleged in the petition from which it could be found that the alleged falsehoods were published with malice, that is, with knowledge of their falsity or with reckless disregard of whether they were true or false." See also Spradlin's Market, Inc. v. Springfield Newspapers, Inc., Mo.Sup., 398 S.W.2d 859; Walker v. Pulitzer Publishing Co., U.S.C.A. 8th, 394 F.2d 800. We hold entry of summary judgment was proper.
The judgment is affirmed.
PER CURIAM:
The foregoing opinion by LAURANCE M. HYDE, Special Commissioner, is adopted as the opinion of the court.
HOLMAN, P. J., SEILER, J., and CAVE, Special Judge, concur.
BARDGETT, J., not sitting. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455122/ | 640 F. Supp. 2d 603 (2009)
DELAWARE VALLEY FINANCIAL GROUP, INC., Delaware Valley Financial Group, LLC, DVFG Advisors, LLC., Michael Feinman, Howard Soloway, David Bleznak, and John does 1 through 20 similarly situated
v.
PRINCIPAL LIFE INSURANCE COMPANY and Princor Financial Services Corporation.
Civil Action No. 08-CV-2590.
United States District Court, E.D. Pennsylvania.
June 1, 2009.
*607 Fred Warren Jacoby, Camille M. Miller, Chad Evin Kurtz, Julie Beth Negovan, Cozen & O'Connor, P.C. Philadelphia, PA, for Delaware Valley Financial Group, Inc.
Andrew J. Soven, Marc A. Goldich, Reed Smith, LLP, Thomas J. McGarrigle, Philadelphia, PA, for Principal Life Insurance Company.
DECISION
JOYNER, District Judge.
This case has been brought before the Court on Motion of the Plaintiffs for Preliminary Injunction.[1] Following two full *608 days of hearings in this matter on December 15 and 16, 2008 and numerous submissions by the parties, we find this matter now properly postured for adjudication and we thus make the following:
FINDINGS OF FACT
1. Plaintiff Delaware Valley Financial Group, Inc., ("DVFG, Inc.") is a Pennsylvania corporation which was formed in 1978 and is in the business of acting as an insurance brokerage firm. As of September 24, 2008, DVFG had a registered office address at 3200 Horizon Drive, King of Prussia, Pennsylvania, 19406. (Exhibit P-6; N.T. 12/15/08, 17; Verified Seconded Amended Complaint and Answer thereto, ¶ 2).
2. Plaintiff Delaware Valley Financial Group, LLC ("DVFG, LLC"), is a Pennsylvania Limited Liability Company formed in 2007 with registered office address as of September 24, 2008 at 3200 Horizon Drive, King of Prussia, Pennsylvania, 19406. DVFG, LLC is in the business of marketing and selling property and casualty insurance. (Exhibit P-7; N.T. 12/15/08, 17, 124; Verified Second Amended Complaint, ¶ 3).
3. Plaintiff DVFG Advisors LLC is a Pennsylvania limited liability company which is in the business of acting as a marketing and sales vehicle for use by individual agents/producers[2] in selling financial services and insurance products offered by insurers and/or financial service companies. (Verified Second Amended Complaint and Answer thereto, ¶ 4).
4. Plaintiffs Michael Feinman, Howard Soloway and David Bleznak are individual producers residing in Newtown Square and Maple Glen, Pennsylvania who are and have been affiliated with one or more of the DVFG entities and since 2002, were registered representatives for Defendant Princor in connection with the marketing and sale of Princor's securities products and services. Since that same time, Messrs. Bleznak, Feinman and Soloway have also been authorized agents for Defendant Principal Life Insurance Company in connection with the sale of life insurance policies underwritten and sold by Principal. In addition to selling Principal and Princor's insurance and financial products, Plaintiffs Feinman, Soloway and Bleznak also sold insurance and financial products of other companies. (Verified Second Amended Complaint and Answer thereto, ¶ s 5, 6 and 7).
5. In 2007, the DVFG entities moved their principal place of business from King of Prussia, Pennsylvania to Conshohocken, Pennsylvania. (N.T. 12/16/08, 45).
6. Defendant Principal Life Insurance Company ("Principal") is an Iowa corporation with its primary offices at 711 High Street, Des Moines, Iowa, 50392. Principal is in the business of underwriting and *609 issuing life insurance policies for marketing and sale by its authorized agents and brokers. (Verified Second Amended Complaint and Answer thereto, ¶ 8).
7. Defendant Princor Financial Services Corporation ("Princor") is an Iowa corporation with its principal offices at 711 High Street, Des Moines, Iowa, 50392. Princor is a subsidiary of Principal Services Trust Company, which also has its principal offices at 711 High Street, Des Moines, Iowa, 50392. (Verified Second Amended Complaint and Answer thereto, ¶ 9).
8. Prior to 1983, the Philadelphia area agency affiliated with Provident Mutual Life Insurance Company was run by Leo Riley and Rudy Meyers and was known as Riley-Meyers Brokerage Services, Inc. In 1986, they formally changed the name of the agency to Delaware Valley Financial Group, Inc. and also began doing business for other companies in addition to Provident Mutual. (Cronin Dep. 71-72; Exhibit P-4). In 1984, DVFG, Inc. registered as a foreign corporation to do business in New Jersey. (N.T. 12/16/08, 41; Exhibit P-5).
9. In 1992, Thomas Schirmer purchased Delaware Valley Financial Group, Inc. from Rudy Meyers for $25,000. At that time, DVFG, Inc. had three offices in Philadelphia and Wayne, Pennsylvania and in Cherry Hill, New Jersey. Although it was then affiliated with Provident Mutual, it also sold insurance and financial products for some 15 to 18 other major companies, including annuities, life and disability insurance and represented a broker-dealer in selling registered products such as mutual funds. (N.T. 12/15/08, 17-21; Cronin Dep., 73-74).
10. When Thomas Schirmer purchased DVFG in 1992, there were 28 employees, 20 of whom were agents. Previously, the agency had as many as 80 agents. Because the agency was saddled with an expensive, long-term lease on office space in Center City Philadelphia where parking and the city wage tax were problematic, Schirmer arranged to move it out of the city and out into the suburbs as soon as possible. Once he was able to move from the city, Schirmer was able to recruit more agents and make the agency successful again. (Cronin Dep., 84-86).
11. In 1996, Provident Mutual approached Schirmer about taking over their office in Wilmington, Delaware, as it was not meeting their production requirements. After conducting an evaluation of that office, which was then known as the Wilmington Financial Group, Schirmer and Delaware Valley Financial Group, Inc. acquired it and agreed to assume the responsibility for operating that agency. (N.T. 12/15/08, 21-22; Exhibit P-106).
12. "DBA" stands for "doing business as" and in the financial services industry, it is common for independent agents/producers to use a DBA as a means of marketing themselves to clients and/or prospective clients and, while some producers elect to use an individual DBA, others prefer to use one that shows that they are part of a group. (N.T. 12/16/08, 111, 208-210). Given how complex the financial services industry has grown with the proliferation of such products as load and no-load mutual and exchange-traded funds, index annuities and life insurance, it is beneficial for a producer to be affiliated with a group such as DVFG if for no other reason than the back-up and support which it provides. (N.T. 12/15/08, 117-118). Prior to using a chosen DBA, the agent must first obtain written approval from both the broker-dealer with whom he or she is affiliated and from FINRA, the Financial Industry Regulatory Authority, which is the largest independent regulator for all securities firms in the United States. (N.T. 12/15/08, 32, 42; www.finra.org).
*610 13. Prior to also using letterhead, business cards and other advertising materials, an agent and/or agency must first obtain written approval of those materials from the broker-dealer with whom they are affiliated and from FINRA. (N.T. 12/15/08, 28).
14. Although immediately after the merger, the producers in the Wilmington office continued to use the "Wilmington Financial Group" as their DBA, approximately six months later, they changed their DBA and began using the name, "Delaware Valley Financial Group" as their DBA as well. (N.T. 12/15/08, 23-24). At the time he acquired the Wilmington Financial Group, Thomas Schirmer also purchased the Wilmington Financial Group DBA for some $10,000. Included with that was the logo, which included the tree that is now part of DVFG's current logo. (Cronin Dep., 94-95).
15. Beginning in late 2001, DVFG began looking for another life insurance and broker-dealer company to affiliate with, having encountered difficulties with Provident Mutual Life Insurance Company after Provident was merged with Nationwide Insurance Company. In or about January, 2002, Messrs. Duncan and Cecere, acting on behalf of Principal, began "courting" Schirmer and DVFG with the result that in October, 2002, DVFG ceased its affiliation with Provident and became affiliated with Principal. (N.T. 12/15/08, 33).
16. Principal assisted DVFG in its efforts to dis-associate with Provident by building out new office space, acquiring files and getting all of its letters, documents and stationary approved before they moved. (N.T. 12/15/08, 34).
17. When the agents that were affiliated with DVFG left Provident and moved to Principal, they brought all of their clients with them. Provident only took issue with them taking the insurance policy customers of the agency that had been with Provident prior to DVFG's departure. (N.T. 12/15/08, 34).
18. In addition to owning its DBA, DVFG also owned its own domain, dvfg. com, and had its own website at www.dvfg. com beginning in or around 1997. (N.T. 12/15/08, 35-36). Because its producers sold products of other companies and because it had some independent agents associated with it, DVFG needed its own DBA. (N.T. 12/15/08, 76).
19. Although Principal and its legal department wanted DVFG to use the Principal name to market all their products in their offices, it was very important to Plaintiffs and their producers that they be permitted to continue to use their DVFG DBA and their dvfg.com domain for their website and their e-mail because they had worked very hard at branding their company and they believed they had gained significant name recognition in the Delaware Valley area using that name. This was the subject of numerous discussions and negotiations and had Principal not agreed to let them continue to use the DBA and the domain, Plaintiffs would not have agreed to affiliate with Principal. (N.T. 12/15/08, 37-38; Exhibit P-38).
20. At the time that DVFG joined with Principal, Principal had associations with over 30 other agencies. DVFG was the only agency that Principal permitted to use its own DBA and domain and its own signage. (N.T. 12/15/08, 38-42, 50; Exhibits P-30, P-93). Throughout its relationship with Principal, the prominent signage in the DVFG offices were large initials that said "DVFG" with small diamond periods between the letters on the fourth floor of the highest part of the building, and a large DVFG sign with the tree logo on the front door to the offices. In keeping with FINRA requirements, Princor signs also appeared in the offices, as it was the broker-dealer. (N.T. 12/15/08, 41).
*611 21. DVFG negotiated additional concessions when it entered into its affiliation with Principal. For one, the Principal-Princor payout grid was generally capped at 80% of gross dealer concession but because DVFG had an 85% payout with its former broker-dealer, Principal/Princor agreed to change its payout grid from 80% to 85%. Principal also amended its agent contract in such a fashion as to immediately vest DVFG's producers in their contracts so that should they elect to leave, they would be entitled to their renewals on the business which they brought with them to Principal. (N.T. 12/15/08, 43-44).
22. At the time that DVFG affiliated with Principal, its producers had more than 25,000 clients. (N.T. 12/15/08, 44). Not all of its producers were affiliated with an insurance company and not all of its producers had contracts with Principal. (N.T. 12/15/08, 76-77).
23. At the time that DVFG affiliated with Principal, Principal had offices in Pittsburgh, Mechanicsburg and Radnor, Pennsylvania and Bethesda, Maryland. In addition, it had some agents who had their own offices in the greater Philadelphia area. (N.T. 12/16/08, 120-121; 239-240). Throughout the period that DVFG was affiliated with Principal, Principal referred to the three DVFG offices in the greater Philadelphia regionKing of Prussia/Conshohocken, PA, Wilmington, DE and Marlton, NJ, as the "Delaware Valley Business Center." (N.T. 12/16/08, 123).
24. Subsequent to their affiliation with Principal/Princor, Schirmer, Smith and DVFG were also given responsibility for management of Principal and Princor's agencies in Bethesda, Maryland and Pittsburgh, Pennsylvania. (N.T. 12/15/08, 48, 141). The producers in the Bethesda and Pittsburgh offices never wanted to and never did use any of the DVFG entity names as a DBA. They only wanted to use the Principal name. (N.T. 12/15/08, 142-144).
25. In the nearly six years that DVFG was affiliated with Principal, it was one of Principal's largest revenue generating firms. In 2007, DVFG had between 120 and 130 producers with between $5 and $6 billion in assets under management generating over $30 million in commissions. (N.T. 12/15/08, 33, 75-76).
26. Shortly after purchasing the Delaware Valley Financial Group in 1992, Thomas Schirmer became actively involved in a number of community groups and charitable organizations such as the Committee to Benefit Children, dedicated to raising funds to help children with cancer, the Leukemia Society of New Jersey, Meals on Wheels and Make a Wish Foundation, among others. In support of these organizations, DVFG would buy advertising and provide financial support at benefit golf tournaments and other similar fundraising events. In so doing, DVFG was building its name recognition and good will and supporting its individual producers. (N.T. 12/15/08, 77-79).
27. In addition to promoting itself and its producers through charitable support, DVFG also did much of its own advertising while it was affiliated with both Provident and Principal, primarily in the form of radio spot ads, business cards, brochures, fliers, letter mailings and client appreciation events. It also employed a Director of Marketing, whose primary function was to help producers develop marketing plans to penetrate the markets, at a cost of some $140,000 per year. (N.T. 12/15/08, 81-82, 90, 12/16/08, 220-221; Exhibits P-11, P-12, P-18, P-19A, P-20, P21A, P-29C and P-29D).
28. The DVFG entities additionally marketed themselves to prospective new producers through brochures, letters and other mailings and by, inter alia, participating *612 in area job fairs and Chamber of Commerce events, visiting colleges, giving seminars, and advertising in publications of the Society of Professional Advisors and the Estate Planning Council. (N.T. 12/15/08, 84-86; Exhibits P-19B, P-43, P-44).
29. On or about August 28, 2007[3], the plaintiffs filed an application (Serial # 77265731) with the United States Patent and Trademark Office ("USPTO") seeking to register the "Delaware Valley Financial Group, LLC" as a trademark for use in commerce in connection with financing services. In the application, the mark was described as "... consist[ing] of standard characters, without claim to any particular font, style, size or color." (Plaintiff's Exhibit 3; N.T. 12/15/08, 161-162, 164).
30. The trademark registration application was initially rejected by the USPTO on December 6, 2007 "because the proposed mark is primarily geographically descriptive of the origin of applicant's goods and/or services." It was noted, however, that "[i]f applicant amends the application to seek registration on the Principal Register under Section 2(f) or on the Supplemental Register, applicant must disclaim `FINANCIAL GROUP, LLC,' because such wording appears to be generic in the context of applicant's goods and/or services." (Plaintiffs' Exhibit 3. TM 1087-TM 1088; N.T. 12/15/08, 164-165).
31. Thereafter, on June 2, 2008, Plaintiffs responded to the PTO action by disclaiming the right to exclusively use "Financial Group, LLC" apart from the mark as shown, i.e., apart from the words "Delaware Valley," and by asserting that the proposed mark had become distinctive of the goods and services offered by Plaintiffs inasmuch as "Delaware Valley Financial Group" had been continuously and exclusively used in commerce since 1978. (Exhibit P-3, TM 1084, TM 1089; N.T. 12/15/08, 166).
32. On June 18, 2008, the USPTO issued its NOTICE OF PUBLICATION UNDER 12(a), noting that as modified, the proposed mark "appears to be entitled to registration," that it would be published in the Official Gazette on July 8, 2008, and that if no opposition was filed within the time specified by Section 13(a) of the statute, a certificate of registration would issue. (Exhibit P-3. TM 1122). It is unclear from the record whether there has been any opposition to the plaintiffs' registration.[4]
33. Some of DVFG's advertising was done jointly with Principal/Princor or through "co-oping." "Co-oping" is one method by which an agent or agency is compensated by its insurer or broker/dealer for advertising. The agency either receives a marketing allowance out of which it may pay advertising expenses or through "co-op" advertising whereby the agency pays a portion of the advertising expense and the broker/dealer or insurance company pays the other portion. (N.T. 12/15/08, 86-87; Exhibit P-43).
*613 34. At the time of the separation of the DVFG entities from Principal, there were some 100 producers working out of the five DVFG-affiliated offices (Bethesda, Pittsburgh, Conshohocken, Wilmington and Marlton, NJ) along with some 20-25 administrative staff. The producers were paid commissions directly from the companies that they sold business to through Principal. A certain amount of staff was paid for through the "unit cost report" account that Principal had set up pursuant to the financial package which it had negotiated at the outset with DVFG and which was tied to DVFG's productivity and volume of business activity. Approximately 4 staff members were employed directly by the DVFG companies themselves, including a tax attorney, and two individuals who did the financial packaging of complex proposals. (N.T. 12/15/08, 106-109, 127-128).
35. Since their separation from Principal, the DVFG entities continue to provide their producers with the services of the marketing director, tax attorney, compliance officer and sales support for disability and long term care insurance and business continuity planning. (N.T. 12/15/08, 110).
36. Thomas Schirmer retired from the Principal as a Regional Managing Director on December 31, 2007 but continued on as a registered representative for Princor. Because he was dissatisfied with the manner in which his retirement was being handled and the manner in which Principal was treating one of his associates, he resigned from Princor in May, 2008. (N.T. 12/15/08, 121).
37. After Mr. Schirmer retired at the end of December 2007, Marc Smith was elevated by Principal to the Regional Managing Director position. However, following the development of what he perceived to be ethical differences and other disagreements and conflicts, Mr. Smith also resigned from the Principal on May 28, 2008. (N.T. 12/15/08, 121-122; N.T. 12/16/08, 107, 128-129).
38. Immediately following Mr. Smith's resignation, a large number of the producers who had been affiliated with and/or identified themselves as being part of the DVFG entities also resigned their associations with Principal. As a result, there was a great deal of turmoil in the Conshohocken, Marlton and Wilmington offices, with numerous staff employees also resigning and/or not reporting for work and a lot of personnel moving offices as, for example, in the Conshohocken office prior to the resignations, there had been producers located on three different floors. (N.T. 12/16/08, 129-131).
39. A few days later in early June, 2008, John Ashenbrenner, Principal's President and its Vice-President of Marketing, Nick Cecere, among other officers from Principal's corporate headquarters in Des Moines, IA, arrived and had several meetings with the remaining producers and staff to assess the situation and address their concerns. Among the topics under discussion was how the Principal offices and the producers who remained would identify themselves going forward. (N.T. 12/16/08, 50-51, 129-131).
40. When a producer changes affiliations with a broker-dealer, it is imperative that he or she have his existing clients execute new agreements with the new broker-dealer authorizing the transfer of their accounts from the old broker-dealer to the new. Otherwise, the producer is unable to continue to service those brokerage clients. Typically, this process can take anywhere from a few weeks to a few months to complete. (N.T. 12/16/08, 118-120).
41. Although Principal had long "hosted" the dvfg.com domain and e-mail on its server, unbeknownst to Mr. Schirmer, after the DVFG entities affiliated with Principal, Principal had changed the registration *614 on the domain name to reflect that it was the registrant. Mr. Schirmer learned of this change in or around June 2008, although it apparently occurred sometime in 2007. (N.T. 12/15/08, 50-51, 55; 12/16/08, 137; Exhibits P-25, P-27, P-31, P-61).
42. After the DVFG entities discontinued their affiliation with Principal, Principal did not return the domain name and it copied over and later shut down the DVFG website, deleting all references to DVFG and the producers who departed from Principal with it. These actions were taken without Thomas Schirmer's knowledge or approval. The website that the remaining Principal advisors used in the months immediately following the departure of the DVFG producers closely resembled the DVFG website before June, 2008. (N.T. 12/15/08, 56-57; N.T. 12/16/08, 244-248).
43. On or about May 29, 2008, Principal shut down the e-mail accounts of Marc Smith, Thomas Schirmer and the DVFG producers who had elected to terminate their affiliations with Principal on both the dvfg.com and principal.com domains. (N.T. 12/15/08, 65-66; Exhibit P-61). On or about that same day, Principal also decided to "secure" the offices which it had shared with the DVFG entities and producers by posting a security guard to restrict access to the offices to certain limited hours. (N.T. 12/16/08, 224). As a result, Schirmer, Smith and the producers who decided to remain with DVFG, were unable to access their client files and were unable to send, receive or otherwise communicate with their clients via e-mail. (N.T. 6/10/08 3-6; N.T. 12/15/08, 59-61; N.T. 12/16/08, 134-138).
44. Despite the departure of the DVFG groups and many of their producers, the Principal group and the producers who remained with Principal/Princor continued to answer the phones using the DVFG name or just "Delaware Valley." If the caller asked to speak with one of the producers who had left with DVFG, they were told only that producer had left the office. No further information regarding the producer's whereabouts or how the caller could reach that producer was given. (N.T. 12/15/08, 58-60; N.T. 12/16/08, 13-15, 54-55).
45. For at least one month after the DVFG group left the offices which they had occupied while associated with Principal, several of the producers and staff who remained with Principal continued to identify and market themselves as the "Delaware Valley Financial Group," just as they had before May 29, 2008. No one from Principal ever told them that they should stop marketing themselves using the Delaware Valley Financial Group name. (N.T. 12/16/08, 48-49).
46. Within a few weeks of the departure of the Delaware Valley Financial Group and those producers who elected to leave with it, the Principal and the remaining producers began discussing new names with which to identify and market themselves. On or about June 11, 2008, they adopted the name "Financial Advisors of the Delaware Valley" and they began using it shortly thereafter and on business cards, brochures, letterhead and other marketing materials. (N.T. 12/15/08, 100-101; N.T. 12/16/08, 50-53, 142-144, 186).
47. The Principal and the group of producers who remained with it continued to operate out of the same offices using the same telephone numbers. Although Principal changed the auto attendant (answering machine) function on incoming calls in mid-June, 2008, and endeavored to change the outgoing caller ID function at or around the same time, the caller ID function on outgoing phone calls from those offices continued to read "DVFG" until late September, 2008. (N.T. 12/15/08, 67-70; *615 N.T. 12/16/08, 83-89, 92-97, 102-103; Exhibit D-8).
48. In addition to the new DBA, the Principal group and its producers developed a new website, which began operation in November, 2008 at www.faodv.com. (N.T. 12/16/08, 144-148, 270; Exhibit P-72).
49. In the first several months following the split between the DVFG producer group from Principal/Princor, there was some confusion among the clientele of both groups as to where their individual advisors were and how to contact them as well as difficulty on the part of the producers in accessing files and contacting their clients. By the end of Summer, 2008, however, the parties had exchanged files, returned/exchanged mis-directed e-mails and attachments thereto, mail, express mail, calendar entries, and other data contained on the file server in the local office(s) and otherwise exchanged information related to whereabouts of personal property, and the dvfg domain and website contained at the dvfg.com address had been returned. The parties had further agreed to not solicit the replacement of Principal Life Insurance and Princor Financial products and one another's clients as well by that time. (N.T. 12/15/08, 59-61; N.T. 12/16/08, 13-15, 54-58, 164-167, 241, 259, 280-281, 294-295; Order of August 18, 2008).
50. Despite the initial confusion and largely because the nature of the relationships between the producers and their clients is personal, there is no evidence that any of either the DVFG or the Principal producers lost any clients as a result of DVFG and its producers' decision to terminate their affiliation with Principal and/or Princor. (N.T. 12/15/08, 186; N.T. 12/16/08, 68-69, 171-172).
51. In addition to the Delaware Valley Financial Group entities and the Financial Advisors of the Delaware Valley, there is at least one other group offering financial planning services and selling insurances, annuities, securities and other financial products and planning services using the words "Delaware Valley" in its name located in the greater Philadelphia metropolitan or Delaware Valley area. That groupDelaware Valley Advisors, LLC, which is affiliated with the Securian Financial Network, also has several offices located throughout the area in Southeastern Pennsylvania and Southern New Jersey. Thomas Schirmer has not taken any legal or other action to preclude Delaware Valley Advisors LLC from infringing on DVFG's name or marks. (N.T. 12/15/08, 211-214; N.T. 12/16/08, 58-59, 286-289).
52. There are a number of other business entities in the greater Philadelphia metropolitan area which use the words "Delaware Valley," "Financial," "Advisors," "Insurance" and "Associates" in their names. Among these are Delaware Valley Financial Mortgage, LLC, Delaware Valley Realty Advisors, Inc., Delaware Valley Investment Associates, L.P., Delaware Valley Investors, Inc., Delaware Valley Insurance Agency, Delaware Valley Financial Services, LLC and Delaware Valley Financial Services, Inc. Purportedly unaware of any of those entities, Mr. Schirmer likewise took no legal or other action to preclude them from infringing on DVFG's name or marks. (N.T. 12/15/08, 215-228; Exhibits D-19-D-36).
53. Presently, Thomas Schirmer has a 50% ownership interest in DVFG, Inc., a 50% ownership interest in DVFG Advisors, LLC, and a 30% ownership interest in DVFG, LLC. Marc Smith now owns 50% of DVFG, Inc. (N.T. 12/15/08, 17-18, 29). Today, Delaware Valley Financial Group, Inc., Delaware Valley Financial Group, LLC and DVFG Advisors, LLC have their principal place of business at 125 East Elm Street in Conshohocken, PA, with additional offices at 3000 Atrium Way in Marlton, *616 NJ and 1011 Centre Road in Wilmington, Delaware. Financial Advisors of the Delaware Valley maintain offices at 100 West Elm Street, Conshohocken, PA, 400 Lippincott Drive, Marlton, NJ, and 1013 Centre Road, Wilmington, DE with affiliate offices of the Principal Financial Group, 600 Grant Street, Pittsburgh, PA and 6550 Rock Spring Drive, Bethesda, MD.
DISCUSSION
In their Verified Second Amended Complaint, Plaintiffs assert a common law claim for unjust enrichment and claims under the Lanham and Copyright Acts, 15 U.S.C. § 1051, et. seq. and 17 U.S.C. §§ 102 and 103 for, inter alia, Defendants' seizure of the dvfg.com domain and infringement of the Delaware Valley Financial Group, Inc., Delaware Valley Financial Group, LLC, and DVFG Advisors, LLC marks. The Second Amended Complaint further seeks both injunctive relief and declaratory judgment of Plaintiffs' ownership of the domain name, marks, office equipment and other property and agent files. Plaintiffs' Motion for Temporary Restraining Order and Preliminary Injunction likewise asserts that by locking them out of their offices, seizing their client files, e-mail accounts and domain names, the defendants caused them irreparable harm entitling them to immediate injunctive relief.
The primary purpose of a preliminary injunction is the maintenance of the status quo until a decision on the merits of a case is rendered. Status quo is defined as the last, peaceable, noncontested status of the parties. Kos Pharmaceuticals, Inc. v. Andrx Corporation, 369 F.3d 700, 708 (3d Cir.2004). To prevail on a motion for preliminary injunctive relief, the moving party must demonstrate that each of the following factors favors the requested relief:
(1) the likelihood that the moving party will succeed on the merits;
(2) the extent to which the moving party will suffer irreparable harm without injunctive relief;
(3) the extent to which the nonmoving party will suffer irreparable harm if the injunction is issued; and
(4) the public interest.
McNeil Nutritionals, LLC v. Heartland Sweeteners, 511 F.3d 350, 356-357 (3d Cir. 2007). The decision whether to enter a preliminary injunction is committed to the sound discretion of the trial court and will be reversed only if the court abused its discretion, committed an obvious error in applying the law, or made a serious mistake in considering the proof. Shire U.S. Inc. v. Barr Laboratories, Inc., 329 F.3d 348, 352 (3d Cir.2003). Preliminary injunctive relief "is an extraordinary remedy" and "should be granted only in limited circumstances." Kos Pharmaceuticals, supra.; Nutrasweet Company v. Vit-Mar Enterprises, Inc., 176 F.3d 151, 153 (3d Cir.1999). The burden lies with the plaintiff to establish every element in its favor or the grant of a preliminary injunction is inappropriate. P.C. Yonkers, Inc. v. Celebrations, the Party and Seasonal Superstore, LLC., 428 F.3d 504, 508 (3d Cir. 2005). If either or both of the fundamental requirementslikelihood of success on the merits and probability of irreparable harm if relief is not granted are absent, an injunction cannot issue. McKeesport Hospital v. Accreditation Council for Graduate Medical Education, 24 F.3d 519, 523 (3d Cir.1994).
As noted, the plaintiffs have invoked Sections 43(a) and (d) of the Lanham Act, as well as Sections 501, 502, 504 and 505 of the Copyright Act as the bases for their request for, inter alia, injunctive relief. The Lanham Act was enacted to make "actionable the deceptive and misleading *617 use of marks" and to "protect against unfair competition." Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 767-768, 112 S. Ct. 2753, 2757, 120 L. Ed. 2d 615 (1992), quoting § 45, 15 U.S.C. § 1127. "Section 43(a) `prohibits a broader range of practices than does § 32,' which applies to registered marks[5], but it is common ground that § 43(a) protects qualifying unregistered trademarks[6] and that the general principles qualifying a mark for registration under § 2 of the Lanham Act are for the most part applicable in determining whether an unregistered mark is entitled to protection under § 43(a)." Id., quoting Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 858, 102 S. Ct. 2182, 2190-2191, 72 L. Ed. 2d 606 (1982).
Specifically, Section 43, 15 U.S.C. § 1125 provides the following, in relevant part:
(a) Civil action
(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
.......
(d) Cyberpiracy prevention
(1) (A) A person shall be liable in a civil action by the owner of a mark, including a personal name which is protected as a mark under this section, if, without regard to the goods or services of the parties, that person
*618 (i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and
(ii) registers, traffics in, or uses a domain name that
(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark;
(II) in the case of a famous mark that is famous at the time of registration of the domain name, is identical or confusingly similar to or dilutive of that mark; or
(III) is a trademark, word, or name protected by reason of section 706 of Title 18 or section 220506 of Title 36.
.....
(C) In any civil action involving the registration, trafficking, or use of a domain name under this paragraph, a court may order the forfeiture or cancellation of the domain name or the transfer of the domain name to the owner of the mark.
.....
"The Lanham Act defines trademark infringement as use of a mark so similar to that of a prior user as to be likely to cause confusion, or to cause mistake, or to deceive.'" Kos Pharmaceuticals, 369 F.3d at 711. It should be noted that § 43(a) of the Lanham Act provides protection for trade names as well as registered and unregistered marks; a trade name is the name used by an organization to identify its business, a trademark distinguishes its goods and a service mark distinguishes its services. Blumenfeld Development Corp. v. Carnival Cruise Lines, Inc., 669 F. Supp. 1297, 1317 (E.D.Pa.1987). Although a trade name as such is not registrable under the Lanham Act, it is nevertheless protected under the Act. Id.
"Terms asserted as trademarks may fall in four categories: (1) arbitrary (or fanciful) terms, which bear no logical or suggestive relation to the actual characteristics of the goods; (2) suggestive terms, which suggest rather than describe the characteristics of the goods; (3) descriptive terms, which describe a characteristic or ingredient of the article to which it refers; and (4) generic terms, which function as the common descriptive name of a product class." E.T. Browne Drug Co. v. Cococare Products, Inc., 538 F.3d 185, 191 (3d Cir.2008), quoting A.J. Canfield Co. v. Honickman, 808 F.2d 291, 296 (3d Cir. 1986). The Lanham Act protects only some of these categories of termsit provides no protection for generic terms because a first-user of a term "cannot deprive competing manufacturers of the product of the right to call an article by its name." Id., quoting Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir.1976). A "merely descriptive" mark describes the qualities or characteristics of a good or service and may be registered only if the registrant shows that it has acquired secondary meaning, i.e., it has become distinctive of the applicant's goods or services in commerce. Park `N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 194, 105 S. Ct. 658, 661, 83 L. Ed. 2d 582 (1985). Thus the general rule regarding distinctiveness is clear: an identifying mark is distinctive and capable of being protected if it either (1) is inherently distinctive or (2) has acquired distinctiveness through secondary meaning. Two Pesos, 505 U.S. at 769, 112 S. Ct. at 2758. Finally, trademark law protects suggestive and arbitrary or fanciful terms without any showing of secondary meaning. E.T. Browne, supra., citing Berner International Corp. v. Mars Sales Co., 987 F.2d 975, 979 (3d Cir.1993). As a general rule, geographical marks are primarily descriptive and no one is entitled to exclusively use a common geographic term. American International *619 Group, Inc. v. American International Airways, Inc., 726 F. Supp. 1470, 1477, n. 3 (E.D.Pa.1989), citing, inter alia, National Conference of Bar Examiners v. Multistate Legal Studies, 692 F.2d 478, 488 (7th Cir.1982), cert. denied, 464 U.S. 814, 104 S. Ct. 69, 78 L. Ed. 2d 83 (1983).
Likelihood of confusion under the Lanham Act is not limited to confusion of products, as in mis-dispensing; confusion as to source is also actionable. Id. Thus, "the law of trademark protects trademark owners in the exclusive use of their marks when use by another would be likely to cause confusion." Freedom Card, Inc. v. JP Morgan Chase & Co., 432 F.3d 463, 469 (3d Cir.2005). A cause of action for trademark infringement under both §§ 32(1) and 43(a) (which also encompasses unfair competition) of the Lanham Act, 15 U.S.C. §§ 1114(1) and 1125(a), requires that a plaintiff prove: (1) the mark is valid and legally protectable; (2) it owns the mark; and (3) the defendant's use of the mark is likely to create confusion concerning the origin of goods or services. Urban Outfitters, Inc. v. BCBG Max Azria Group, Inc., 318 Fed.Appx. 146, 148 (3d Cir.2009); E.T. Browne, supra.; A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 166 F.3d 197, 202 (3d Cir. 1999). To prevail in cases where a mark is unregistered, a plaintiff must also show (1) that he was the first to adopt the mark in commerce; (2) he has used the mark continuously in commerce since its adoption; and (3) his mark is inherently distinctive or has acquired secondary meaning. Douglas v. Osteen, 317 Fed.Appx. 97, 99 (3d Cir.2009); A & H Sportswear, 237 F.3d at 210-211; Ford Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277, 292 (3d Cir.1991).
A "likelihood of confusion" exists when "consumers viewing the mark would probably assume that the product or service it represents is associated with the source of a different product or service identified by a similar mark." Everett Laboratories, Inc. v. Vertical Pharmaceuticals, Inc., 227 Fed.Appx. 124, 127 (3d Cir.2007), quoting A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 211 (3d Cir.2000). There are two types of "likelihood of confusion" claims "direct confusion" claims and "reverse confusion" claims. Freedom Card, 432 F.3d at 470. The essence of a direct confusion claim is that a junior user of a mark attempts to free-ride on the reputation and goodwill of the senior user by adopting a similar or identical mark. Id. Reverse confusion occurs when a larger, more powerful company uses the trademark of a small, less powerful senior owner and thereby causes likely confusion as to the source of the senior user's goods or services. Citizens Financial Group v. Citizens National Bank, 383 F.3d 110, 119 (3d Cir.2004). Thus, the "junior" user is junior in time but senior in market dominance or size. Freedom Card, 432 F.3d at 471.
In deciding whether similar marks create a likelihood of confusion, the Third Circuit has adopted a non-exhaustive test using 10 factors for determining the likelihood of confusion between two marks where direct confusion is alleged. Freedom Card, 432 F.3d at 470, citing Interpace Corp. v. Lapp, Inc., 721 F.2d 460 (3d Cir.1983). Those factors are:
(1) the degree of similarity between the owner's mark and the alleged infringing mark;
(2) the strength of the owner's mark;
(3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase;
(4) the length of time the defendant has used the mark without evidence of actual confusion arising;
(5) the intent of the defendant in adopting the mark;
*620 (6) the evidence of actual confusion;
(7) whether the goods, though not competing, are marketed through the same channels of trade and advertised through the same media;
(8) the extent to which the targets of the parties' sales efforts are the same;
(9) the relationship of the goods in the minds of consumers because of the similarity of function;
(10) other factors suggesting that the consuming public might expect the prior owner to manufacture a product in the defendant's market, or that he is likely to expand into that market.
The Lapp test is a qualitative inquiry; and not all factors will be relevant in all cases; further the different factors may properly be accorded different weights depending on the particular factual setting. Basketball Marketing Co. v. FX Digital Media, Inc., 257 Fed.Appx. 492, 494 (3d Cir.2007). A district court should utilize the factors that seem appropriate to a given situation but, in so doing, it is incumbent upon the district courts to explain the choice of Lapp factors relied upon. Basketball Marketing, 257 Fed.Appx. at 494, fn. 3 (3d Cir.2007); Freedom Card, 432 F.3d at 471.
Copyright infringement is somewhat similar. To show copyright infringement, a plaintiff must establish (1) the ownership of a valid copyright, and (2) copying of constituent elements of the work that are original. Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 361, 111 S. Ct. 1282, 1296, 113 L. Ed. 2d 358 (1991); Douglas v. Osteen, 317 Fed.Appx. 97, 99 (3d Cir.2009). The law does not require an express or written license. In appropriate circumstances, a non-exclusive license may be implied by conduct. Lowe v. Loud Records, 126 Fed. Appx. 545, 547 (3d Cir.2005).
However, since a non-exclusive or implied license does not transfer ownership, there may still be a claim of copyright infringement if the licensed use goes beyond the scope of the license. Feist, supra. It is fundamental, however, that no author may copyright his ideas or the facts he narrates, although factual compilations may possess the requisite originality to merit copyright protection. See, Feist, 499 U.S. at 344-345, 348, 111 S. Ct. at 1287, 1289; Kay Berry, Inc. v. Taylor Gifts, Inc., 421 F.3d 199, 203 (3d Cir.2005). Indeed, to qualify for copyright protection, a work must be original to the author, meaning only that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity. Id.; Kay Berry, 421 F.3d at 207.
It is further axiomatic that, in accordance with 17 U.S.C. § 411(a), "no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title ..." See, Kay Berry, 421 F.3d at 203. Plaintiff's possession of a copyright registration certificate creates a rebuttal presumption that the work is copyrightable and that Plaintiff has a valid interest. F.A. Davis Co. v. Wolters Kluwer Health, Inc., 413 F. Supp. 2d 507, 510 (E.D.Pa.2005). "Copying is a shorthand reference to the act of infringing any of the copyright owner's exclusive rights set forth at 17 U.S.C. § 106." Dun & Bradstreet Software Services v. Grace Consulting, Inc., 307 F.3d 197, 206 (3d Cir.2002), quoting Ford Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277, 291 (3d Cir.1991).[7] Not all copying *621 is copyright infringement and courts have recognized that there is rarely direct evidence of copying. F.A. Davis Co. v. Wolters Kluwer Health, Inc., 413 F. Supp. 2d 507, 511 (E.D.Pa.2005). Instead, copying is proven by showing not only that the defendant had access to a copyrighted work but also that there are substantial similarities between the two works. Feist Publications, 499 U.S. at 361, 111 S. Ct. at 1282; Dam Things from Denmark v. Russ Berrie & Co., 290 F.3d 548, 561-562 (3d Cir.2002). In other words, "it must be shown that copying went so far as to constitute improper appropriation, the test being the response of the ordinary lay person." Kay Berry, 421 F.3d at 208, quoting Universal Athletic Sales Co. v. Salkeld, 511 F.2d 904, 907 (3d Cir.1975). And, [e]ven if actual copying is proven, "the fact-finder must decide without the aid of expert testimony, but with the perspective of the `lay observer,' whether the copying was `illicit' or `an unlawful appropriation' of the copyrighted work." Id., quoting Whelan Associates, Inc. v. Jaslow Dental Lab., Inc., 797 F.2d 1222, 1232 (3d Cir.1986).
Finally, the common-law tort of unfair competition was developed to protect "against the wrongful exploitation of trade names and common law trademarks that were not otherwise entitled to legal protection." Centrix HR, LLC v. On-Site Staff Management, Inc., 2008 WL 783558, at *19, 2008 U.S. Dist. LEXIS 23280 at *51 (E.D.Pa. March 25, 2008), quoting Granite State Insurance Co. v. Aamco Transmissions, 57 F.3d 316, 319 (3d Cir.1995). See Also, Pennsylvania State University v. University Orthopedics, Ltd., 706 A.2d 863, 867 (Pa.Super.1998) ("claim of unfair competition encompasses trademark infringement but also includes a broader range of unfair practices, which may generally be described as a misappropriation of the skill, expenditures and labor of another.") Unfair competition has otherwise been defined as "the passing off by a defendant of his goods or services as those of plaintiff by virtue of substantial similarity between the two leading to confusion on the part of potential customers." Prudential Insurance Co. of America v. Stella, 994 F. Supp. 318, 322 (E.D.Pa.1998). To succeed on these claims, a plaintiff must show that defendant uses a designation in connection with goods, which is likely to cause confusion, mistake or deception as to the origin, sponsorship or approval of defendant's goods and that plaintiff has been or is likely to be damaged by these acts. Id., citing First Keystone Bank v. First Keystone Mortgage, Inc., 923 F. Supp. 693, 707 (E.D.Pa.1996). See Also, Morgan's Home Equipment Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838, 848 (1957) ("trading on another's business reputation by use of deceptive selling practices or other means is enjoinable on the grounds of unfair competition").
*622 In applying the preceding legal principles to the case at hand, it appears that while the plaintiffs did endeavor to register the "Delaware Valley Financial Group, LLC" mark, we cannot determine whether any opposition has yet been filed to that proposed registration.[8] As a result, we cannot conclude with certainty that the mark is in fact registered or "incontestable" within the meaning of the statute, 15 U.S.C. § 1115, or that the plaintiffs are entitled to exclusively use the mark in commerce.[9] Regardless, the plaintiffs seek relief under § 43(a) of the Lanham Act, which also affords protection to unregistered marks and trade names and, as noted by the Supreme Court in Two Pesos, supra, the same general principles qualifying a mark for registration are for the most part applicable in determining whether an unregistered mark is entitled to protection under § 43(a).
In considering those principles, we do find that the plaintiffs have sufficiently established through, inter alia, the testimony provided by Thomas Schirmer and Charles Cronin, that they were the first user of the name/mark Delaware Valley Financial Group, that Mr. Schirmer owns the tree logo which accompanies the name and/or the initials "DVFG," and that it has been continuously used in commerce in conjunction with Plaintiffs' business since its adoption. In light of the USPTO's statement following disclaimer of the right to use the words "financial group" separate and/or apart from "Delaware Valley" that the mark appears entitled to registration barring objection, we find the requirement of validity to have been satisfied in this case.
However, it is also incumbent upon the plaintiffs to show that the mark/ name has acquired distinctiveness through secondary meaning. See, e.g., Two Pesos, 505 U.S. at 769, 112 S. Ct. at 2758. A mark is descriptive with a secondary meaning when the mark is interpreted by the consuming public to be not only an identification of the product or services, but also a representation of those products or services. Checkpoint Systems, Inc. v. Check Point Software Technologies, Inc., 269 F.3d 270, 283, n. 10 (3d Cir.2001). Secondary meaning exists when consumers seeking a trademark assume that the product it labels came from a particular source; if in fact the product did not come from that source, there has been buyer confusion. Lapp, 721 F.2d at 462. It is for this reason that it has been recognized that "secondary meaning and likelihood of buyer confusion, though two separate legal issues, will be difficult to distinguish in viewing the evidence." Id., quoting 1 J.T. McCarthy, Trademarks and Unfair Competition § 15:3 (1973). Secondary meaning is generally established through extensive advertising which creates in the minds of consumers an association between different products bearing the same mark; this association suggests that the products originate from a single source. Scott Paper Co. v. Scott's Liquid Gold, Inc., 589 F.2d 1225, 1228 (3d Cir.1978). A non-exclusive list of factors which may be considered in ascertaining whether a mark has achieved secondary meaning includes the extent of sales and advertising leading to buyer association, length of use, exclusivity of use, the fact of copying, customer surveys, customer testimony, the use of *623 the mark in trade journals, the size of the company, the number of sales, the number of customers and actual confusion. Ford Motor, 930 F.2d at 292.
Instantly, while there is evidence that the Delaware Valley Financial Group did do some advertising on radio and through brochures, business cards, fliers, letter mailings, promotional items and through client appreciation and charity events, at times these advertisements were solely in its own name and at others these advertisements were done jointly with Principal and/or Princor. It does not appear that DVFG itself ever did any advertising in newspapers, on billboards or on television.
The record also demonstrates that, within a few weeks of the separation of Marc Smith and most of the producers who elected to continue using the "Delaware Valley Financial Group" moniker from the Principal group, those producers who chose to continue their affiliation with Principal had chosen the name "Financial Advisors of the Delaware Valley," and began using it on their business cards, stationary, brochures, signage and eventually, their website. According to Raymond Ianni, whose testimony on this point is unrebutted, the intent of these producers in selecting this name was to describe their general geographic location while at the same time indicating that they had individual practices. There is no evidence of any intention to select a name that would be confused with Delaware Valley Financial Group and there is no evidence that the Financial Advisors of the Delaware Valley use a tree or other, similar logo that in any way resembles that utilized by the DVFG entities. What's more, in the immediate, tri-state area, there is at least one other company offering financial planning services, insurance, securities and other types of financial products using "Delaware Valley" in its name. That group, Delaware Valley Advisors, is affiliated with the Securian Financial Network and has offices in Huntington Valley and Newtown Square, Pennsylvania and Mount Ephraim, Cherry Hill and Woodbury, New Jersey.
Additionally, while there is no doubt that the services being marketed by both the DVFG and the FAODV producers are identical and their advertising/marketing/ promotional efforts are similar, DVFG and FAODV are essentially consortiums of independent producers who maintain their own individual books of business and who receive new business primarily through client referrals. None of the clients serviced by either DVFG's producers or those producers who are now using Financial Advisors of the Delaware Valley as their DBA are customers of DVFG or FAODV themselvesthey are the customers/clients of the individual producers. Hence the likelihood that either existing or potential customers will be confused by the Financial Advisors of the Delaware Valley name is very slim indeed.
Finally, as evidenced by the testimony of Thomas Swider and Robert Holland, and by various documentary exhibits[10], it appears that although there initially was some confusion on the part of clients who called the three former offices in or around the Summer of 2008 as to the whereabouts and/or affiliations of their individual advisors and some delay in updating the business profiles for several of the producers who elected to stay with the Principal group, most, if not all, of that confusion was resolved by the late Fall of 2008. Accordingly, we cannot find that either of the elements of secondary meaning or likelihood of buyer confusion have been shown here and thus Plaintiffs have failed to demonstrate that they are likely to succeed on the merits of their Lanham Act claim.[11]
*624 Given that the analysis under the Lanham Act and the common law of unfair competition is the same, we reach the same result with regard to that claim, contained in Count III, as well. See generally, Freedom Card, 432 F.3d at 470; A & H Sportswear(III), 166 F.3d at 202; Tillery v. Leonard & Sciolla, LLP, 437 F. Supp. 2d 312, 328 (E.D.Pa.2006).[12] Thus, inasmuch as we cannot find that the requisite showing of a likelihood of consumer confusion has been made, we are constrained to also deny plaintiffs' request for ongoing injunctive relief on the basis of unfair competition.
Finally, although it is likewise unclear from the plaintiffs' proposed factual findings and legal conclusions whether they are continuing to pursue their claim of copyright infringement, we nevertheless shall last consider the likelihood that Plaintiffs will prevail on the merits of this claim at a full trial. In so doing, we can discern from the record no evidence whatsoever that the website which defendants are alleged to have copied over was ever copyrighted by the plaintiffs. Furthermore, while there is indeed "smoking gun" evidence that Defendants "ha[d] Advisor Square, the website host, working on copying over the DVFG site," and that they intended to "keep the template, then delete all reference to DVFG and the departed advisors...," our "layman's view" of the FAODV website in comparison to those of the various DVFG entities and Delaware Valley Advisors is that it most closely approximates the website of Delaware Valley Advisors, the Securian affiliate. In light of this observation and in the absence of any evidence that the DVFG website was an original, independently created work, we are unable to find that there also exists a likelihood that the plaintiffs *625 would prevail at trial on the merits of their copyright claim. (See, Exhibit P-69).
Turning to the next requisite element that of the threat of immediate, irreparable harm, we note that while the evidence clearly showed that the plaintiffs needed a temporary restraining order and injunctive relief commencing in late Mayearly June, 2008 to compel the defendants to return their client files, office furniture, personal property, domain name and e-mail accounts, it is apparent from the evidence produced at the hearings on December 15 and 16, 2008 that this need was alleviated by that time. Accordingly, we are likewise unable to find that the plaintiffs remain in danger of suffering immediate, irreparable harm without the issuance of an injunction. What's more, those producers who opted to retain their affiliation with Principal and Princor are just as entitled to use a DBA as are those who elected to discontinue their associations. As we do not find it likely that consumers or clients would mistakenly confuse an FAODV advisor with a DVFG advisor, we believe that more harm could conceivably be suffered by those producers using the Financial Advisors of the Delaware Valley/FAODV DBA were we to now enjoin them from continuing to use that chosen name than would be suffered by DVFG and its producers if we did not grant the requested injunction. For all of these reasons, we now enter the following order and:
CONCLUSIONS OF LAW
1. This Court has jurisdiction over the parties and subject matter of this litigation pursuant to 28 U.S.C. § 1331 and § 1332.
2. Plaintiffs have failed to prove that consumers, prospective and existing customers and clients and/or the public at large are likely to be confused or misled by the Financial Advisors of the Delaware Valley name and/or mark or to mistakenly believe that FAODV and the Delaware Valley Financial Group of companies (a/k/a "DVFG") are the same entity or represent the same producers.
3. By failing to show that the likelihood of confusion exists, the plaintiffs have failed to demonstrate that they are likely to succeed on the merits of their unfair competition or Lanham Act claims.
4. Plaintiffs have failed to demonstrate copyright infringement on the part of the defendants and have thus also failed to establish that they are likely to succeed on the merits of their copyright infringement claim at trial.
5. The defendants have, since the entry of the temporary restraining order on or about August 18, 2008 and since the December 15 and 16, 2008 hearings in this matter, returned the disputed domain name, e-mail accounts, telephone numbers, client files, office furniture and personal property to the plaintiffs.
6. Solely as a consequence of the defendants' having complied with the terms and conditions of the temporary restraining order in this matter, the plaintiffs are no longer in danger of suffering immediate, irreparable harm to the conduct of their business.
7. Plaintiffs have failed to prove that they are likely to suffer immediate, irreparable harm if the Defendants are not enjoined from using the DBA of "Financial Advisors of the Delaware Valley," going forward.
8. Defendants are more likely to suffer irreparable injury if they are enjoined from using the DBA of "Financial Advisors of the Delaware Valley," "FAODV" or the domain name of faodv.com.
9. An award of preliminary injunctive relief to Plaintiffs is not warranted based on the evidence presented.
An appropriate order follows.
*626 ORDER
AND NOW, this 1st day of June, 2009, upon consideration of Plaintiffs' Motion for Preliminary Injunction (Docket No. 15) and the evidence and arguments presented, it is hereby ORDERED that the Motion is DENIED.
NOTES
[1] Originally, both Plaintiffs and Defendants sought a temporary restraining order in addition to requesting preliminary injunctive relief. Following a hearing before the undersigned on June 10, 2008, the parties were able to reach an agreement which was ultimately reduced to a Consent Order dated August 18, 2008 and which effectively obviated the defendants' need for a TRO and/or preliminary injunction. The hearings in December therefore addressed only the plaintiffs' motion and hence this decision shall address the plaintiffs' request for injunctive relief only.
[2] A "producer" is a career insurance/sales agent or broker. They are independent contractors who are authorized by a number of insurance and/or brokerage companies to sell insurance and/or financial products and it is not uncommon for them to gather together to share office overhead and other expenses. (N.T. 12/15/08, 75-76; N.T. 12/16/08, 111, 208). It is the nature of a producer's business that he or she has their own clients who constitute their book of business. (N.T. 12/16/08, 56-58). DVFG described itself as an independent firm/producer group with a primary company (i.e. first Provident and later Principal). (N.T. 12/15/08, 77).
[3] Previously, in 2003, Thomas Schirmer had apparently endeavored to place "Delaware Valley Financial Group" on the Principal Register by the filing of an application with the USPTO under Serial No. 78/164257. That application was rejected by the examining attorney as being primarily geographically descriptive of the applicant's services. Apparently, neither Mr. Schirmer nor anyone acting on his behalf responded to the Office Action notice from the USPTO and the application was deemed to have been abandoned. (N.T. 12/15/08, 166-172; Exhibit D-53).
[4] At page 2 of their Post Hearing Proposed Conclusions of Law on Plaintiffs' Trademark Infringement Claims, Defendants assert that Principal has contested the plaintiffs' amended application and, although Plaintiffs appear to concede that point, we can find no evidence to support that averment.
[5] Section 32, 15 U.S.C. § 1114 provides, in pertinent part,
Any person who shall, without the consent of the registrantuse in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive ... shall be liable in a civil action by the registrant ...
15 U.S.C. § 1114(1)(a).
[6] Under Section 45, 15 U.S.C. § 1127, "trademark" is defined as including:
"any word, name, symbol, or device, or any combination thereof
(1) used by a person, or
(2) which a person has a bona fide intention to use in commerce and applies to register on the principal register established by this chapter,
to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown.
The term `service mark' means any word, name, symbol, or device, or any combination thereof
(1) used by a person, or
(2) which a person has a bona fide intention to use in commerce and applies to register on the principal register established by this chapter,
to identify and distinguish the services of one person, including a unique service, from the services of others and to indicate the source of the services, even if that source is unknown. Titles, character names, and other distinctive features of radio or television programs may be registered as service marks notwithstanding that they, or the programs, may advertise the goods of the sponsor."
[7] Section 106 reads as follows:
Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
[8] Indeed, neither party adduced any testimony whatsoever on this point at any of the hearings held in this matter on June 10, December 15 or December 16, 2008.
[9] If the mark in question was federally registered and had become incontestable, validity, legal protectibility and ownership are proved. See, e.g., Opticians Association of America v. Independent Opticians of America, 920 F.2d 187, 194 (3d Cir.1990).
[10] See, e.g., Exhibits P-85, P-86, P-87, P-88.
[11] Given that no mention is made of it in their post-hearing submissions, it appears as though the plaintiffs have abandoned their claim under 15 U.S.C. § 1125(d)(1)(A), otherwise known as the Anticybersquatting Consumer Protection Act. "Cybersquatting" has "come to mean the bad faith, abusive registration and use of the distinctive trademarks of others as Internet domain names, with the intent to profit from the goodwill associated with those trademarks." Shields v. Zuccarini, 254 F.3d 476, 481 (3d Cir.2001). In essence, it forces "the rightful owners of the marks `to pay for the right to engage in electronic commerce under their own brand name.'" Vista India v. Raaga, LLC, 501 F. Supp. 2d 605, 620 (D.N.J.2007), quoting Virtual Works, Inc. v. Volkswagen of America, Inc., 238 F.3d 264, 267 (4th Cir.2001). See Also, Green v. Fornario, 486 F.3d 100, 105 (3d Cir.2007) ("§ 1125(d)(1)(A) prohibits registering domain name that is confusingly similar to distinctive mark or dilutive of famous mark with bad faith intent to profit from it"). As interpreted by the Third Circuit, the statute requires plaintiff to prove the following elements in order to succeed in a claim under the ACPA: (a) the mark is distinctive or famous so that it is entitled to protection; (b) defendant's domain names are identical or confusingly similar to plaintiffs' mark; and (c) defendant registered the domain name with the bad faith intent to profit from it. Pennsylvania Business Bank v. Biz Bank Corp., 330 F. Supp. 2d 511, 524 (E.D.Pa.2004), citing Shields, 254 F.3d at 482.
The gravamen of Count II of Plaintiffs' Second Amended Complaint appears to be the co-opting of the dvfg.com domain by the defendants shortly after the resignation of Marc Smith. Since it appears from the various Principal internal e-mails that there was at best the mistaken belief that Principal in fact owned the dvfg.com domain as it had long been hosted on their server and at worst confusion over ownership, it would be difficult to find that the element of bad faith intent has been demonstrated here. In any event, following the entry of the temporary restraining order in August, 2008, the defendants in fact returned the dvfg.com domain to the plaintiffs and there is no evidence that they have used it since.
[12] Indeed, it has been said that the essence of an unfair competition claim under the common law, as under the federal law, is the likelihood of confusion. Strick Corp. v. Strickland, 162 F. Supp. 2d 372, 375 (E.D.Pa.2001). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455075/ | 429 S.W.2d 479 (1968)
Walter Von BURLESON, Appellant,
v.
The STATE of Texas, Appellee.
No. 41273.
Court of Criminal Appeals of Texas.
May 29, 1968.
Rehearing Denied July 24, 1968.
Vincent W. Perini, Dallas, for appellant.
Henry Wade, Dist. Atty., Jim Ramsey, Arch Pardue, Ronald W. Chapman and Kerry P. FitzGerald, Asst. Dist. Attys., Dallas, and Leon B. Douglas, State's Atty., Austin, for the State.
OPINION
BELCHER, Judge.
The conviction is for perjury; the punishment, five years.
The appellant challenges the validity of the indictment on the ground that it does not charge an offense.
The perjury assigned is appellant's testimony given at Hill's trial that he and not Hill had stolen the automobile.
Omitting the formal parts of the indictment, the pertinent portions are as follows:
THE ISSUE: "whereupon it then and there became and was a material inquiry *480 before the Said Judge and jury in the trial of said judicial proceeding, whether the defendant Jackie Carver Hill charged by indictment in said cause or the defendant in this cause, Walter Von Burleson, had stolen the automobile involved in the Theft Over case;"
THE ALLEGED FALSE STATEMENTS: (The appellant did) "willfully and deliberately state and testify on questioning by Mr. Bud Jones, the attorney for the defendant Jackie Carver Hill, that on the 24th day of February, 1967, he had gone to a parking lot and stolen a 1964 Chrysler, color blue, and the next morning had picked up the Defendant Jackie Carver Hill in said car and that he and not Jackie Carver Hill had stolen said automobile, and which said statement was material to the issue in said cause;"
THE TRAVERSING AVERMENTS OF FALSITY: "whereas, in truth and in fact, the Defendant (appellant) cannot drive an automobile and testified on May 29, 1967, in Judge J. Frank Wilson's Criminal District Court that he had lied in the proceeding on April 17, 1967, in Judge A. D. Jim Bowie's Criminal District Court No. 5 and his said statement in the proceeding in Judge Bowie's Criminal District Court No. 5 which was so made by the defendant Walter Von Burleson was willfully and deliberately false and the said Walter Von Burleson knew the same to be false when he made it."
To sufficiently traverse an alleged statement assigning perjury, the following is essential:
45 Tex.Jur.2d 69, Sec. 29, reads as follows:
"In charging perjury or false swearing the state must expressly negative the truth of the alleged false statement by setting forth the true facts by way of antithesis. A mere general averment that the statement was false is not sufficient. The indictment must designate particularly wherein and to what extent the matter sworn to is false, * * *."
2 Branch 2d 302, Sec. 846, reads:
"The facts constituting the offense must be averred directly and with certainty, and not by way of inference and argument. Powell v. State [State v. Powell], 28 Tex. [627] 630; Smith v. State, 1 Ohio App. 620; Bell v. State, 75 Crim. 401, 171 S.W. 239; Scott v. State, 75 Crim. 396, 171 S.W. 243.
"Intendment and inference will not be called in to aid an indictment for perjury. Juaraqui v. State, 28 Tex. 625; Powell v. State [State v. Powell], 28 Tex. 627; Oppenheimer v. State [State v. Oppenheimer], 41 Tex. [82] 83; Smith v. State, 1 Ohio App. 620; Bell v. State, 75 Crim. 401, 171 S.W. [239] 241; Scott v. State, 75 Crim. 396, 171 S.W. 243."
2 Branch 2d 306, Sec. 852, reads:
"An indictment for perjury must set out the truth as to the alleged false statement. Rohrer v. State, 13 App. [163] 168; Gabrielsky v. State, 13 Ohio App. 438; Turner v. State, 30 Ohio App. 691, 18 S.W. 792; Crow v. State, 49 Crim. 103, 90 S.W. 650; Higgins v. State, 50 Crim. [433] 434, 97 S.W. 1054; Jones v. State, 118 Crim. [106] 108, 38 S.W.2d 587.
"The accused is entitled to know wherein and to what extent the statements alleged to have been made by him were false. Gabrielsky v. State, 13 App. [438] 439; Crow v. State, 49 Crim. 103, 90 S.W. 650; Waddle v. State, 69 Crim. 334, 153 S.W. 882.
"An allegation that the statement or affidavit made was false is not an assignment of perjury. Rohrer v. State, 13 App. [163] 167; Gabrielsky v. State, 13 Ohio App. 437 [438]; Turner v. State, 30 Ohio App. 691, 18 S.W. 792."
*481 In Jones v. State, 118 Tex. Crim. 106, 38 S.W.2d 587, this court said:
"In this state, an indictment for perjury to be sufficient, must set out the particulars in which the statement was false, and show the truth in relation thereto. Branch's Annotated Texas Penal Code, § 842; Rohrer v. State, 13 White & W. 163; Turner v. State, 30 Tex. App. 691, 18 S.W. 792; Waddle v. State, 69 Tex. Crim. 334, 153 S.W. 882. The reason for the rule is that the accused is entitled to know wherein and to what extent the statements alleged to have been made by him were false. Crow v. State, 49 Tex. Crim. 103, 90 S.W. 650. We think it is obvious that the same rule is applicable to the present indictment.
"Under our statute all that is essential to constitute the offense must be sufficiently charged and cannot be aided by intendment. The facts constituting the offense must be set forth so that the conclusions of law may be arrived at from the facts so stated."
Art. 21.03 (397) V.A.C.C.P., provides that:
"Everything should be stated in an indictment which is necessary to be proved."
The facts constituting the offense must be averred directly and with certainty, and not by way of argument, inference, or conclusion, and they cannot be aided by intendment.
The allegation that the appellant could not drive an automobile is not a traversal of the false statement alleged, that is, that he did not pick up Hill in the car, or, that he did not pick him up while "acting together" with another person, but is only evidence on the issue that he did not pick him up.
The general averment that the appellant had lied is not sufficient. The indictment must designate the particular facts in the testimony which were false, and then it must negative the truth of the alleged false testimony by setting forth the true facts by way of traversal. The allegation that the testimony given by the appellant on the trial of Hill was a lie is not a traversal of the false statement alleged, that is, that he did not steal the automobile and pick up Hill in the car the next morning. The allegation that he lied does not expressly negative, with certainty, the falsity of any particular fact given in the testimony of the appellant, and is nothing more than a conclusion. Whatever is sought to be charged as false should be met by distinctly traversing the false averments.
The indictment fails to charge an offense. The judgment is reversed and the cause is ordered dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455079/ | 640 F. Supp. 2d 1124 (2009)
Christopher JONES, Plaintiff,
v.
GENERAL MOTORS CORP., a Delaware Corporation; Greater Glendale Automotive LLC, dba J.D. Byrider, and Arizona Limited Liability Company; Greater Glendale Finance LLC, dba Car Now Acceptance Company; Does 1-100, inclusive, Defendants.
No. CV-08-02099-PHX-GMS.
United States District Court, D. Arizona.
August 7, 2009.
*1127 Harry Norman Stone, Shawn Louis Stone, The Stone Law Firm PLC, Phoenix, AZ, for Plaintiff.
Leslie Kay Harrach, Negatu Molla, Bowman & Brooke LLP, Barry Harris Uhrman, Jay P. Rosenthal, Jones Skelton & Hochuli PLC, Phoenix, AZ, for Defendants.
ORDER
G. MURRAY SNOW, District Judge.
Pending before the Court is the Motion to Dismiss and to Enforce Arbitration *1128 Agreement and Compel Arbitration of Defendant Greater Glendale Automotive LLC, dba J.D. Byrider ("Byrider"). (Dkt. # 33.) Defendant Greater Glendale Finance LLC ("the Creditor") has joined the motion. (Dkt. # 43.) Defendant General Motors Corporation ("General Motors") has not. For the following reasons, the Court grants Byrider's motion.[1]
BACKGROUND
On March 7, 2008, Plaintiff purchased a truck from Byrider, an automobile dealer. Upon purchasing the truck, Plaintiff executed several documents, one of which included an agreement that the parties would submit all disputes between them to binding arbitration. (Dkt. # 11 Ex. A at 8-9.) After purchasing the truck, Plaintiff alleges that certain defects for which Defendants are responsible caused the engine to fail, catch fire, and destroy the truck.
Plaintiff brought suit in this Court on November 13, 2008. (Dkt. # 1.) Plaintiff's Third Amended Complaint advances five claims: count one, violation of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1605 et seq.; count two, breach of express warranties; count three, breach of the implied warranty of merchantability; count four, breach of the implied warranty of fitness for a particular purpose; and count five, negligent repair. (Dkt. # 36.) Counts two, three, and four are predicated on both Arizona law and the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2301 et seq., and count five is a pendent claim based on Arizona common law. Defendant Byrider now brings a motion to dismiss this case and order arbitration proceedings pursuant to Federal Rule of Civil Procedure 12(b)(1), or in the alternative to stay these proceedings pending the outcome of arbitration. (Dkt. # 33.)
DISCUSSION
I. Legal Standard
The defense of lack of subject matter jurisdiction may be raised by the parties, Fed.R.Civ.P. 12(b)(1), or by the Court, Fed.R.Civ.P. 12(h)(3). In resolving a motion to dismiss for lack of subject matter jurisdiction, the Court is not limited to considering the allegations in the pleadings if the "jurisdictional issue is separable from the merits of [the] case." Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.1987). The Court is "free to hear evidence regarding jurisdiction and to rule on that issue prior to trial, resolving factual disputes where necessary." Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir.1983).
The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., "mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218, 105 S. Ct. 1238, 84 L. Ed. 2d 158 (1985). "The court's role under the Act is therefore limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (citing 9 U.S.C. § 4). If a district court decides that an arbitration agreement is valid and enforceable, then it *1129 should either stay or dismiss the claims subject to arbitration. Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1276-77 (9th Cir.2006).
II. Analysis
In this case, Byrider argues that Plaintiff's claims against it are subject to binding arbitration. (Dkt. # 33.) There is no dispute that Plaintiff and Byrider entered into a binding arbitration agreement and that the claims now advanced fall within the scope of that agreement.[2] (See Dkt. # 11 Ex. A.) Plaintiff argues, however, that the Court should not enforce the agreement for five reasons: (A) the arbitration agreement is unconscionable; (B) Plaintiff's MMWA claims are not arbitrable; (C) Plaintiff's TILA claims are not arbitrable; (D) the arbitration clause does not cover Plaintiff's claims against General Motors; and (E) Plaintiff has not refused to arbitrate. Plaintiff also argues (F) that he is entitled to a jury trial on the issue of arbitrability. The Court will address each of these six arguments in turn.
A. Unconscionability
Plaintiff first argues that the arbitration agreement is unconscionable. (Dkt. # 38 at 2-13.) The FAA "provides that arbitration agreements `shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'" Chalk v. T-Mobile USA, Inc., 560 F.3d 1087, 1092 (9th Cir.2009) (quoting 9 U.S.C. § 2). Although "the FAA clearly enunciates a congressional intention to favor arbitration, general contract defenses such as unconscionability, grounded in state contract law, may operate to invalidate arbitration agreements." Kam-Ko Bio-Pharm Trading Co. Ltd.-Australasia v. Mayne Pharma (USA) Inc., 560 F.3d 935, 940 (9th Cir.2009) (internal citations, ellipsis, and quotations omitted).
"[U]nconscionability is governed by state law," Chalk, 560 F.3d at 1092, and in this case the parties agree that Arizona law controls (Dkt. # 33 at 9-12; Dkt. # 38 at 2-3). Thus, the Court's task is to determine whether the Arizona courts would consider this arbitration agreement unconscionable. See In re First Alliance Mortgage Co., 471 F.3d 977, 993 (9th Cir.2006) ("[W]hen interpreting state law a federal court must predict how the highest state court would decide the issue and ... where there is no convincing evidence that the state supreme court would decide differently, a federal court is obligated to follow the decisions of the state's intermediate appellate courts[.]") (internal quotations and ellipsis omitted).
Arizona recognizes that both procedural and substantive unconscionability can play a role in determining whether an agreement is enforceable. Maxwell v. Fid. Fin. Servs., Inc., 184 Ariz. 82, 90, 907 P.2d 51, 59 (1995). The Arizona Supreme Court has held that substantive unconscionability alone can be enough to render an agreement unenforceable, but it has declined to take a position on whether procedural unconscionability alone can be inherently sufficient. See id. This Court *1130 need not resolve that question, however, because none of Plaintiff's arguments about either type of unconscionability, alone or in concert, are sufficient to render the arbitration agreement unenforceable.
1. Procedural Unconscionability
"Procedural or process unconscionability is concerned with unfair surprise, fine print clauses, mistakes or ignorance of important facts or other things that mean bargaining did not proceed as it should." Id. at 88-89, 907 P.2d at 57-58. Plaintiff argues that the arbitration agreement here is procedurally unconscionable because: (a) it appears in a contract of adhesion; (b) it does not recite the rules of the arbitration organizations; and (c) it was "hidden in a lengthy form contract." (Dkt. # 38 at 3-6.) The Court disagrees that the arbitration agreement is unenforceable under any of these arguments.
a. Adhesion
Plaintiff argues that the arbitration agreement is unenforceable because it appears in a contract of adhesion (i.e., a form contract containing terms over which Plaintiff could not negotiate). (Id. at 4.) This is an issue the Court cannot consider. Nagrampa, 469 F.3d at 1267 ("On a motion to compel arbitration, a court cannot consider whether the contract as a whole is unconscionable. Instead, a court is limited to considering whether the arbitration clause in the agreement is unconscionable.") (citation omitted). This argument must therefore be presented to the arbitrator. Id. at 1277 (holding that if "the district court concludes that the challenge is not to the arbitration provision itself but, rather, to the validity of the entire contract, then the issue of the contract's validity should be considered by an arbitrator in the first instance").
Alternatively, the Court notes that the "conclusion that the contract was one of adhesion is not, of itself, determinative of its enforceability." Broemmer v. Abortion Servs. of Phoenix, Ltd., 173 Ariz. 148, 151, 840 P.2d 1013, 1016 (1992). Rather, a court that determines that an agreement constitutes a contract of adhesion would then conduct independent reasonable expectations and unconscionability analyses. See id. As Plaintiff advances no reasonable expectations arguments, the unconscionability analysis below would therefore be the dispositive inquiry.
b. Rules of the Arbitration Organizations
Plaintiff next argues that the arbitration agreement is unenforceable because it "did not disclose the relevant rules of procedure that would apply to the arbitration process." (Dkt. # 38 at 5-6.) Plaintiff cites California law for this proposition, Lucas v. Gund, Inc., 450 F. Supp. 2d 1125, 1131 (C.D.Cal.2006), but California law does not govern this case.
Even under the California standard, however, Plaintiff's argument would still fail. The Lucas court explained that, in the California cases utilizing this rule, "the problem wasn't just that the rules were not attached, but that it was done to hide the fact that the weaker party was giving up significant rights," for instance through the limitation of remedies or by conflicting with other provisions in the arbitration agreement. Id. Where, as in Lucas, there was no indication that the failure to attach rules was meant to hide the surrender of significant rights, that failure did not affect the enforceability of the arbitration agreement. Id. In the same way, Plaintiff has not shown that the failure to attach rules was to hide the surrender of significant rights. Thus, even under Lucas, the enforceability of the arbitration agreement is not implicated.
*1131 Regardless, the arbitration clause clearly explains how the relevant rules can be obtained, stating that the rules of the American Arbitration Association ("AAA") and the National Arbitration Forum ("NAF") "may be obtained by mail" from physical addresses, which are then provided, "or on the internet" at the organizations' websites, which are also provided. (See Dkt. # 11 Ex. A at 9.) Thus, while Plaintiff may not have had the rules, Plaintiff had easy access to them. Plaintiff's argument that "Defendants did not provide [him] with an internet accessible computer in order to view this information" is disingenuous. The arbitration agreement specifically provides that Plaintiff could "contact the American Arbitration Association... or the National Arbitration Forum... before signing this contract." (Id. (emphasis added).) Plaintiff thus had both the ability and the opportunity to access the rules before signing the contract.
c. "Hidden in a Lengthy Form Contract"
Plaintiff's last argument about procedural unconscionability is that the arbitration provision was designed to be a trap for the unwary. (See Dkt. # 38 at 6.) Plaintiff provides no legal authority in this section; rather, he simply makes a series of arguments about the nature of the contract to suggest that no reasonable person would have located the arbitration provision within it.
Plaintiff's description, however, does not withstand scrutiny. Plaintiff describes the Retail Installment Contract and Security Agreement as "lengthy." It is, in fact, six pages long. (See Dkt. # 11 Ex. A at 5-10.) Plaintiff describes the document as "single-spaced" and "fine-print." Although the document is single-spaced in some places, the print is entirely readable, and the presentation of the text does not affect the legibility or comprehensibility of the document. (See id.) Moreover, the heading "Arbitration Agreement" is set off from the text, centered, bolded, and presented in all capital letters. (See id. at 8.) It was certainly not, as Plaintiff puts it, "hidden" in the contract. Finally, Plaintiff's argument that "Defendants required no initials or signature anywhere adjacent to the arbitration clause" is untrue. The arbitration clause spanned two pages, both of which Plaintiff initialed. (See id. at 8, 9.) In fact, Plaintiff's initials appear within, quite literally, one inch of the following clause:
THE TERMS OF THIS ARBITRATION AGREEMENT AFFECT YOUR LEGAL RIGHTS. IF YOU DO NOT UNDERSTAND ANY TERMS OF THIS PROVISION OR THE COST, ADVANTAGES OR DISADVANTAGES OF ARBITRATION, SEEK INDEPENDENT ADVICE AND/OR CONTACT THE AMERICAN ARBITRATION ASSOCIATION AT [phone number] OR THE NATIONAL ARBITRATION FORUM AT [phone number] BEFORE SIGNING THIS CONTRACT.
(Id. at 9.) This clause appears in all capital letters and in bold font. (Id.) Thus, Plaintiff has not established the "unfair surprise, fine print clauses, mistakes or ignorance of important facts or other things" necessary to yield procedural unconscionability. See Maxwell, 184 Ariz. at 88-89, 907 P.2d at 57-58.
2. Substantive Unconscionability
"Substantive unconscionability concerns the actual terms of the contract and examines the relative fairness of the obligations assumed." Id. at 89, 907 P.2d at 58. "Indicative of substantive unconscionability are contract terms so one-sided as to oppress or unfairly surprise an innocent party, an overall imbalance in the obligations and rights imposed by the bargain, *1132 and significant cost-price disparity." Id. Plaintiff argues that the arbitration agreement is substantively unconscionable because: (a) Plaintiff may have to pay more in arbitration than in court; (b) the arbitration clause contains no provision for waiver of arbitration fees for parties that are unable to pay; (c) Plaintiff may have to pay arbitration costs if he loses; (d) the arbitration agreement permits Byrider to pursue self-help remedies; and (e) the arbitration agreement purports to allow the arbitrator to resolve disputes over the scope of the arbitration clause. (Dkt. # 38 at 7-12.) The Court concludes that the arbitration agreement is not substantively unconscionable under any of these theories.
a. Arbitration Costs
Plaintiff argues that the arbitration agreement is unconscionable because he might be forced to pay expenses that he might not have to pay in a judicial forum. (Dkt. # 38 at 7-9.) The case on which Plaintiff relies, Ting v. AT & T, 319 F.3d 1126, 1151 (9th Cir.2003), applies California law and is therefore not controlling. The proper Arizona authority is Harrington v. Pulte Home Corp., 211 Ariz. 241, 252-53, 119 P.3d 1044, 1055-56 (Ct.App. 2005). In Harrington, the Arizona Court of Appeals rejected the argument that an arbitration clause was substantively unconscionable because the party seeking to avoid arbitration had failed to present "individualized evidence to establish that the costs of arbitration [were] prohibitive." Id. at 252, 119 P.3d at 1055. The court so held even though several of the parties seeking to avoid arbitration had submitted affidavits providing that they could not afford the costs of arbitration, reasoning that "the allegation that the arbitration clause is substantively unconscionable on this record is speculative at best." Id. at 253, 119 P.3d at 1056.
The Harrington court relied on three facts in finding that the arbitration clause was not substantively unconscionable. First, the costs of arbitrating the claim ($11,750, plus arbitrator compensation and room rental) were small relative to the actual damage amount claimed (between $500,000 and $1,000,000), and the costs were likewise not disproportionate to the litigation expenses, including attorneys' fees, that might otherwise be incurred. Id. Second, the affidavits purporting to show that arbitration would be prohibitively costly contained only "conclusory statements," and offered "no specific facts," "no showing of assets," and no showing of "why arbitration costs would be a hardship, let alone a prohibitive hardship." Id. Third, the applicable arbitration rules provided for the deferral or reduction of fees in appropriate cases. Id. On these bases, the court determined that arbitration costs were not prohibitive so as to render the agreement unenforceable.
The same factors apply with equal force in this case. First, Plaintiff's claim is for over $1,000,000, with arbitration fees that could run between $12,000 and $15,000 (Dkt. # 38 Pt. 3 at 2), amounts that are virtually identical to the Harrington case. Thus, the costs of arbitration are not, of themselves, sufficiently disproportionate to suggest substantive unconscionability. Second, like Harrington, Plaintiff's affidavit offers only conclusory statements regarding his inability to pay. (See id.) Finally, the rules of the organizations listed in the arbitration agreement provide for deferral or reduction of fees for indigent parties, just as they did in Harrington. See American Arbitration Association, Commercial Arbitration Rules and Mediation Procedures Rule 49 (2007) ("AAA Rules") ("The AAA may, in the event of extreme hardship on the part of any party, defer or reduce the administrative fees."); National Arbitration Forum, Code of Procedure *1133 Rule 45 (2008) ("NAF Rules") ("An indigent Consumer Party may Request a waiver of Common Claim filing fees, Request Fees, Hearing Fees, or security for any arbitration, by filing with the Forum a Written Request for a waiver at the time payment is due."). Therefore, as in Harrington, "the allegation that the arbitration clause is substantively unconscionable on this record is speculative at best." 211 Ariz. at 253, 119 P.3d at 1056. Plaintiff has not met his burden of proving that arbitration will be prohibitively expensive. Thus, the Court will not find substantive unconscionability on this basis.
b. Provision for Waiver of Arbitration Fees
Plaintiff next argues that the arbitration agreement is unconscionable because it makes no provision for deferral or waiver of fees for indigent parties. (Dkt. # 38 at 9.) Plaintiff again cites authority decided under California law, Circuit City Stores, Inc. v. Mantor, 335 F.3d 1101, 1108 (9th Cir.2003), which is not applicable here. Regardless, the arbitration agreement incorporates the rules of the AAA and the NAF (see Dkt. # 11 Ex. A at 9), both of which provide for the reduction or deferral of fees for indigent parties, see AAA Rule 49; NAF Rule 45. Thus, the agreement is not substantively unconscionable under this reasoning.
c. Potential to Pay Arbitration Costs
Plaintiff argues that the potential that he might have to pay for arbitration costs if he does not prevail renders the arbitration agreement substantively unconscionable. (Dkt. # 38 at 9-10.) Plaintiff again cites to a case decided under California law, Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1177-78 (9th Cir. 2003), which does not apply here. The Fifth Circuit, citing Ingle as an example of the uniqueness of California's view on the unconscionability of arbitration agreements, has refused to rely on California law in determining whether an arbitration agreement is unconscionable under Texas law. See Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 301 n. 5 (5th Cir.2004). The Carter court reasoned that "California law and Texas law differ significantly, with the former being more hostile to the enforcement of arbitration agreements than the latter." Id. Like Texas (and the federal government), Arizona has a strong policy of favoring arbitration agreements. See Harrington, 211 Ariz. at 252-53, 119 P.3d at 1055-56 (discussing the "liberal federal policy favoring arbitration" and providing that Arizona has the same policy favoring arbitration"). Thus, Ingle is not intrinsically persuasive authority for determining how the Arizona courts would rule in this regard, and Plaintiff has not even attempted to explain why the Arizona Supreme Court would take a view similar to the Ingle court on this matter. Indeed, under Arizona law, Plaintiff could also be held liable for fees and costs if he were to pursue his claims in court and thereafter failed to prevail on those claims. See Ariz. Rev.Stat. §§ 12-341 (governing the award of costs to the successful party in a civil action), 12-341.01 (governing the award of attorneys' fees for actions arising out of a contract). Thus, it does not appear that Plaintiff is in any way disadvantaged by this clause in the arbitration agreement.
Moreover, Ingle deals with employment claims, not consumer claims, see 328 F.3d at 1177-78, and Plaintiff makes no effort to explain why a rule the Ingle court explicitly applied only to employment actions would apply outside that context. See id. at 1178 ("By itself, the fact than an employee could be held liable for Circuit City's share of the arbitration costs should she fail to vindicate employment-related claims renders this provision substantively unconscionable.") (emphases added). For this additional reason, Plaintiff has failed *1134 to meet his burden of establishing unconscionability under this argument.
Finally, even if the Ingle rule were applicable, the arbitration agreement here is distinguishable from the arbitration clause in Ingle. In Ingle, the arbitration clause provided that "the Arbitrator may require the [employee] to pay [the employer's] share of the costs of arbitration and incidental costs." Id. at 1177-78. "Costs of arbitration" included filing and administrative fees, as well as arbitrator compensation, transcription services, and room rentals. Id. at 1178 n. 16, "Incidental costs" included miscellaneous expenses like photocopying and witness production. Id. Thus, the arbitration clause in Ingle permitted the arbitrator to shift virtually the entire cost of litigation onto the plaintiff, including the initial filing fees, essentially on a whim.
In this case, by contrast, the arbitration agreement does not permit the shifting of all fees, including up-front filing fees, and it does not permit the arbitrator to assign fees to Plaintiff with impunity. The agreement provides that, if Plaintiff files for arbitration, he will pay no more than $125 (or the applicable court filing fee, whichever is less) toward arbitration filing fees or case management fees. (Dkt. # 11 Ex. A at 9.) If Byrider were to file for arbitration, on the other hand, it would enjoy no such advantage, but rather would be responsible for the entirety of the filing or case management fees up to $3,500. (Id.) The provision to which Plaintiff objects is only that "[t]he arbitrator shall decide who shall pay any additional costs and fees." (Id.) Thus, Plaintiff will not, as he argues, be responsible for bearing the entire cost of the arbitration if he loses; he could only be responsible for additional fees not otherwise provided for in the agreement. Moreover, those fees cannot be assigned on a whim, as they apparently could be in Ingle, but rather must be assigned "according to the applicable rules." (Id.) Both the AAA and the NAF have rules for the imposition of such fees and expenses, see AAA Rule 50; NAF Rule 44, and both the AAA and the NAF have procedures for deferring or reducing fees, see AAA Rule 49; NAF Rule 45. The arbitration agreement is therefore not "so one-sided as to oppress or unfairly surprise an innocent party," nor does it present an "overall imbalance in the obligations and rights imposed by the bargain." Maxwell, 184 Ariz. at 89, 907 P.2d at 58.
Under these circumstances, and given Arizona's "policy favoring arbitration," Harrington, 211 Ariz. at 253, 119 P.3d at 1056, this fee provision is not substantively unconscionable.
d. Self-Help Remedies
Plaintiff, again citing Ingle, argues that the arbitration agreement is unconscionable because the parties retained the right to pursue self-help remedies. (Dkt. # 38 at 10-11.) The arbitration agreement provides:
Notwithstanding this arbitration agreement, the Parties retain the right to exercise self-help remedies and to seek provisional remedies from a court, pending final determination of the Dispute by the arbitrator. No Party waives the right to elect arbitration of a Dispute by exercising self-help remedies, filing suit, or seeking or obtaining provisional remedies from a court.
(Dkt. # 11 Ex. A at 9.) Plaintiff's argument is that self-help remedies (specifically repossession) are practically available only to Byrider, and thus the arbitration agreement is unfairly one-sided. (See Dkt. # 38 at 10-11.)
For the same reasons discussed above, the Court is reluctant to rely on Ingle in the absence of any argument as to why it applies to Arizona law. Regardless, even if the Court were to rely on Ingle and *1135 California law, the Eastern District of California has rejected Plaintiff's argument as applied to the very same language in an arbitration agreement. See Hartung v. J.D. Byrider, Inc., No. 1:08-CV-00960, 2008 WL 4615044, at *6-7 (E.D.Cal. Oct. 17, 2008) (applying California law and finding that the language at issue was not substantively unconscionable because "the arbitration agreement at issue does not require one party but not the other to arbitrate its claims"). This Court agrees with Hartung that the retention of mutual self-help remedies is not "so one-sided as to oppress," Maxwell, 184 Ariz. at 89, 907 P.2d at 58, and thus it is not unconscionable.[3]
e. Determination of the Arbitration Clause's Scope
Plaintiff's last unconscionability argument is that the arbitration agreement is substantively unconscionable because it "purports to allow the arbitrator to resolve any dispute concerning the scope of the arbitration clause and to decide whether any particular claim should be arbitrated or not." (Dkt. # 38 at 11-12.) The provision in question states that either party may elect to arbitrate "any Dispute over the interpretation, scope or validity of this Contract, the arbitration agreement or the arbitrability of any issue." (Dkt. # 11 Ex. A at 8.) Plaintiff's argument is entirely academic because neither Byrider nor Plaintiff has moved to submit the issue of the scope of arbitrability to the arbitrator. (See Dkt. # 33 at 5.) This is also not an issue before the Court because there is no dispute that Plaintiff's claims fall within the scope of the agreement. Thus, Plaintiff cannot evade arbitration under this argument.
For these reasons, Plaintiff has not established any form of unconscionability.
B. MMWA Claims
Plaintiff next argues that his MMWA claims are not subject to arbitration. (Dkt. # 38 at 13-15.) Plaintiff makes two arguments in this regard: (1) that all MMWA claims are exempt from the scope of the FAA; and (2) that Plaintiff cannot be compelled to arbitrate his MMWA claims because the arbitration clause appears in the Retail Installment Contract and Security Agreement, and not in the warranty itself. The Court accepts neither argument.
1. The Arbitrability of MMWA Claims
Plaintiff first argues that MMWA claims are not subject to binding arbitration agreements. (Dkt. # 38 at 13-14.) There is a "liberal federal policy favoring arbitration," and "questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983). Any doubts about the scope of arbitrable issues are to be resolved in favor of arbitration, Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985), and the party seeking to avoid arbitration has the burden of establishing that Congress intended to preclude arbitration, Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 91-92, 121 S. Ct. 513, 148 L. Ed. 2d 373 (2000).
Neither the United States Supreme Court nor the Ninth Circuit has specifically discussed the arbitrability of MMWA claims. The only federal appellate *1136 courts to have done so, the Fifth and Eleventh Circuits, have rejected Plaintiff's argument and held that the MMWA does not preclude binding arbitration. Walton v. Rose Mobile Homes LLC, 298 F.3d 470, 478 (5th Cir.2002); Davis v. S. Energy Homes, Inc., 305 F.3d 1268, 1280 (11th Cir.2002). Many federal district courts and state courts agree. See, e.g., Dombrowski v. Gen. Motors Corp., 318 F. Supp. 2d 850, 850-51 (D.Ariz.2004); Pack v. Damon Corp., 320 F. Supp. 2d 545, 557-58 (E.D.Mich.2004), reversed in part on other grounds by 434 F.3d 810 (6th Cir. 2006); S. Energy Homes, Inc. v. Ard, 772 So. 2d 1131, 1135 (Ala.2000); Results Oriented, Inc. v. Crawford, 245 Ga.App. 432, 538 S.E.2d 73, 81 (2000); Borowiec v. Gateway 2000, Inc., 209 Ill. 2d 376, 283 Ill. Dec. 669, 808 N.E.2d 957, 970 (2004); Walker v. DaimlerChrysler Corp., 856 N.E.2d 90, 93 (Ind.Ct.App.2006); Hemphill v. Ford Motor Co., 41 Kan. App. 2d 726, 206 P.3d 1, 12 (2009); Howell v. Cappaert Manufactured Housing, Inc., 819 So. 2d 461, 464 (La.Ct.App.2002); Abela v. Gen. Motors Corp., 469 Mich. 603, 677 N.W.2d 325, 327 (2004); McDaniel v. Gateway Computer Corp., No. 04CA12, 2004 WL 2260497, at *3 (Ohio Ct.App. Sept. 24, 2004); In re Am. Homestar of Lancaster, Inc., 50 S.W.3d 480, 492 (Tex.2001). These cases tend to focus on the test laid out in Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 227, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987). Under the McMahon test, the party seeking to avoid arbitration must demonstrate a Congressional intention, "discernable from the text, history, or purposes of the statute," to exempt particular statutory claims from the scope of the FAA. Id.
However, the Federal Trade Commission ("FTC") takes a different view. The FTC notes that the MMWA authorizes mandatory use of "informal dispute settlement procedures," 15 U.S.C. § 2310(a)(3), and in promulgating regulations for such procedures, the FTC has taken the position that informal dispute settlement procedures "shall not be legally binding on any person," 16 C.F.R. § 703.5(j). From that, the FTC concludes that "reference within the written warranty to any binding, non-judicial remedy is prohibited by the Rule and the Act." 40 Fed.Reg. 60168, 60211 (Dec. 31, 1975).[4]
Based principally on the FTC's position, some courts have disagreed with the Fifth and Eleventh Circuits, holding that MMWA claims cannot be made subject to binding arbitration. See, e.g., Breniser v. W. Recreational Vehicles, Inc., No. CV-07-1418-HU, 2008 WL 5234528, at *5-6 (D.Or. Dec. 12, 2008); Rickard v. Teynor's Homes, Inc., 279 F. Supp. 2d 910, 921 (N.D.Ohio 2003); Browne v. Kline Tysons Imp., Inc., 190 F. Supp. 2d 827, 830-31 (E.D.Va.2002); Pitchford v. Oakwood Mobile Homes, Inc., 124 F. Supp. 2d 958, 962-65 (W.D.Va.2000); Koons Ford of Baltimore v. Lobach, 398 Md. 38, 919 A.2d 722, 737 (2007); Parkerson v. Smith, 817 So. 2d 529, 532-35 (Miss.2002); Philyaw v. Platinum Enters., Inc., No. CL00-236, 2001 WL 112107, at *2 (Va.Cir.Ct. Jan. 9, 2001). These cases have tended to focus on the test for agency deference laid out in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). Under the Chevron test, a court must defer to a federal agency's interpretation of a statute it administers if "Congress has not directly *1137 addressed the precise question at issue" and "the agency's answer is based on a permissible construction of the statute." Id.
Thus, to rule on Plaintiff's argument the Court must apply both the McMahon and Chevron tests to determine: (a) whether there is any indication that Congress intended MMWA claims to be exempt from the FAA, and (b) whether the FTC's conclusion that it did is based on a permissible construction of the statute. The Court concludes that there is no indication of Congressional intent that MMWA claims not be made subject to binding arbitration agreements, and the Court likewise concludes that the FTC's contrary reading of the statute is impermissible. The essence of the Court's reasoning is the same under both tests: a statute that delegates to an administrative agency the authority to prescribe rules governing "informal dispute settlement procedures" does not imbue that agency with authority to prohibit the use of arbitration as a forum in which the merits of a dispute may be finally, formally, and legally resolved.
a. The McMahon Test
Nothing in the text, history, or purposes of the MMWA suggests Congressional intent to preclude binding arbitration of its claims.
1) Text
The MMWA provides rules governing the content of warranties, the designation of written warranties, and the minimum standards for warranties, and it provides for remedies in consumer disputes over warranties. See 15 U.S.C. § 2301 et seq. However, the text of the MMWA makes no suggestion that an MMWA claim may not be resolved through binding arbitration. See id. Thus, the text of the statute does not indicate that Congress intended to exempt MMWA claims from the FAA.
2) History
The legislative history of the MMWA likewise provides no indication that Congress intended to preclude resolution of its claims through binding arbitration. In fact, it suggests precisely the opposite. The Senate Conference Report, S.Rep. No. 93-1408 (1974) (Conf.Rep.), reprinted in 1974 U.S.C.C.A.N. 7755, states that parties may look to both courts and arbiters to resolve "actions" and to be the "ultimate" means of resolving an MMWA claim. The Senate Conference Report explains 15 U.S.C. § 2304(a)(4)which provides that the FTC can promulgate rules regarding what constitutes a "reasonable number of attempts" for a warrantor to remedy a product defect or malfunction before providing a refund or replacementby stating that "if the [FTC] does not determine by rule what constitutes a reasonable number of attempts in a given situation, then the parties or, ultimately, a third party (arbiter or judge) would decide." S.Rep. No. 93-1408, reprinted in 1974 U.S.C.C.A.N. at 7757 (emphases added). The Senate Conference Report's explanation of 15 U.S.C. § 2304(b)(1)[5] likewise demonstrates that binding arbitration is a permissible means of resolving MMWA disputes. The Senate Conference Report explains that if no FTC rule governs the reasonableness of a warrantor-imposed duty:
*1138 the consumer could challenge the reasonableness of such requirement by bringing an action for breach of warranty and arguing that the warrantor had breached his full warranty obligation. The burden would then be upon the warrantor to establish before an arbiter or in a court that the requirement... was reasonable....
S.Rep. No. 93-1408, reprinted in 1974 U.S.C.C.A.N. at 7757 (emphases added). Thus, the history of the MMWA suggests that arbitration is an acceptable alternative forum in which to finally and formally resolve MMWA claims.
3) Purposes
"We must assume that if Congress intended the substantive protection afforded by a given statute to include protection against waiver of the right to a judicial forum, that intention will be deducible from text or legislative history." Mitsubishi Motors, 473 U.S. at 628, 105 S. Ct. 3346. Regardless, the purposes of the MMWA provide no indication that the FAA should not apply to its claims.
The MMWA was enacted in 1975 "[i]n order to improve the adequacy of information available to consumers, prevent deception, and improve competition in the marketing of consumer products." 15 U.S.C. § 2302(a). The Senate Conference Report provides that the purposes of the MMWA are "to provide disclosure standards for written consumer product warranties against defect or malfunction [and] to define Federal content standards for such warranties." S.Rep. No. 93-1408, reprinted in 1974 U.S.C.C.A.N. at 7755. The House Report provides that "[t]he purpose of this legislation is ... to make warranties on consumer products more readily understood and enforceable [and] to provide the [FTC] with means of better protecting consumers." H.R.Rep. No. 93-1107 (1974), reprinted in 1974 U.S.C.C.A.N. 7702, 7702.[6]
None of these purposes suggests the unsuitability of arbitration for MMWA claims. If anything, the concern for consumers evident in these purposes actually favors the general cost-effectiveness of arbitration, as fewer of the consumer's resources are devoted to potential or actual litigation. See Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 280, 115 S. Ct. 834, 130 L. Ed. 2d 753 (1995) ("[A]rbitration's advantages often would seem helpful to individuals, say, complaining about a product, who need a less expensive alternative to arbitration."). Indeed, arbitration is a Congressionally-favored forum precisely because it is easier, cheaper, and more comprehensible than in-court litigation. Cf. H.R.Rep. No. 97-542, at 13 (1982) ("The advantages of arbitration are many: it is usually cheaper and faster than litigation; it can have simpler procedural and evidentiary rules; it normally minimizes hostility and is less disruptive of ongoing and future business dealings among the parties; [and] it is often more flexible in regard to scheduling ...."), quoted in Allied-Bruce Terminix, 513 U.S. at 280, 115 S. Ct. 834.
The notion that the pro-consumer policy of the MMWA is inconsistent with the liberal federal policy favoring arbitration is unconvincing. Those cases that make such a conclusion do so based on scant authority, preferring to baldly suggest that binding arbitration agreements "deprive the plaintiff ... of meaningful opportunity for redress." See, e.g., Rickard, 279 F.Supp.2d at 921. But that is not the case. An arbitration agreement *1139 is not inherently pro-business or anti-consumer. Allied-Bruce Terminix, 513 U.S. at 280, 115 S. Ct. 834 ("Congress, when enacting the [FAA], had the needs of consumers... in mind."); see also Mitsubishi Motors, 473 U.S. at 634, 105 S. Ct. 3346 ("We decline to indulge the presumption that the parties and arbitral body conducting a proceeding will be unable or unwilling to retain competent, conscientious and impartial arbitrators."). Rather, an agreement to arbitrate before a specified tribunal is little more than "a specialized kind of forum-selection clause." Scherk v. Alberto-Culver Co., 417 U.S. 506, 519, 94 S. Ct. 2449, 41 L. Ed. 2d 270 (1974). As the Supreme Court has emphasized: "we are well past the time when judicial suspicion of the desirability of arbitration and of the competence of arbitral tribunals should inhibit enforcement of the [FAA] in controversies based on statutes." McMahon, 482 U.S. at 226, 107 S. Ct. 2332 (internal quotations omitted). Therefore, there is nothing inherent in the signing of an arbitration agreement that interferes with the pro-consumer policy of the MMWA.
In sum, the text, history, and purposes of the MMWA provide no indication that Congress intended for the FAA to be inapplicable to its claims. Thus, Plaintiff has failed to carry his burden under the McMahon test.
b. The Chevron Test
The Chevron test likewise provides Plaintiff no refuge. The absence of any explicit mention of arbitration in the MMWA yields the conclusion that "Congress has not directly addressed the precise question at issue." Chevron, 467 U.S. at 843, 104 S. Ct. 2778. Thus, the only remaining question under the Chevron test is whether the FTC's conclusion that the MMWA prohibits binding arbitration of its claims "is based on a permissible construction of the statute." Id. For a number of reasons, no deference is due the FTC's conclusion that it has the power to prohibit the formal resolution of claims through binding arbitration by virtue of its authority to regulate "informal settlement" procedures.
The FTC's position that "reference within the written warranty to any binding, non-judicial remedy is prohibited by the Rule and the Act," 40 Fed.Reg. at 60211, is based entirely on the view that all binding non-judicial remedies constitute "informal dispute settlement procedures" and thus fall under the regulatory power delegated to the FTC by the MMWA to define acceptable "informal dispute settlement procedures." That inference, however, is unreasonable and finds no basis in any permissible construction of the MMWA.
The term "informal dispute settlement procedure" is not defined in the MMWA, and thus the term must be given its plain, ordinary meaning. Perrin v. United States, 444 U.S. 37, 42, 100 S. Ct. 311, 62 L. Ed. 2d 199 (1979) ("A fundamental canon of statutory construction is that, unless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning."). The key elements of this term are the words "informal" and "settlement," and the key question is whether the use of those terms in the MMWA could permissibly be read to cover binding arbitration. "Informal" and "informality" were defined by dictionaries contemporary to the MMWA as "deficient in legal form" and as a "want of legal form." Black's Law Dictionary 918 (4th ed. rev. 1968). "Settlement" was defined as "an adjustment between persons concerning their dealings or difficulties" and "an agreement by which parties having disputed matters between them reach or ascertain what is coming from one to the other." Id. at 1538-39. "Arbitration," on the other hand, was merely "the substitution of [a private decision-maker's] award *1140 or decision for judgment of a court." Id. at 134.
Under the plain meaning of these terms, binding arbitration is not an "informal settlement." Binding arbitration formally and finally resolves a legal claim; it does not involve the voluntary surrender of the right to pursue a claim. See Mitsubishi Motors, 473 U.S. at 628, 105 S. Ct. 3346 ("By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum."). Unlike a procedure in which a third party resolves a case on the merits, an "informal settlement" is a voluntary agreement by the parties themselves, not imposed by a third party, to forego any legal claims they may have in exchange for compensation. Thus, the term "informal dispute settlement procedure" can only be plausibly interpreted as a mechanism distinct from binding arbitration.
Indeed, the Senate Conference Report's discussion of "informal dispute settlement procedures" makes clear that these procedures were envisioned to operate as a prerequisite to the filing of an action, akin to the exhaustion of an administrative remedy, and were not meant to govern arbitration as a substitute means of resolving a formal claim. In making the point that informal dispute settlement procedures must meet certain guidelines, the Senate Conference Report provides that deficient informal dispute settlement procedures "need not be exhausted" and that "the initial burden of showing that the procedure complies with this legislation and [any] FTC rules would be on any [party] seeking to require exhaustion of such procedure." S.Rep. No. 93-1408, reprinted in 1974 U.S.C.C.A.N. at 7759 (emphases added). This conceptualization of informal dispute settlement procedures as being "exhaustion" requirements to which consumers may be required to resort "first," "before initiating a suit," id. at 7758, is incompatible with the view that informal dispute settlement procedures are meant to cover binding arbitration that would formally and finally resolve a claim.
The language of the MMWA itself suggests this conclusion. The section that describes the required characteristics of an informal dispute settlement procedure provides that if a given procedure meets those requirements, then "the consumer may not commence a civil action ... unless he initially resorts to such procedure." 15 U.S.C. § 2310(a)(3) (emphasis added). Thus, instead of referring to such procedures as a means of finally resolving a dispute, an informal dispute settlement procedure is meant to operate before the filing of a claim as a prerequisite that a warrantor may require a consumer to exhaust. The MMWA's use of the term "informal dispute settlement procedure" therefore does not govern how formal claims, once brought, may be adjudicated.
Even the FTC's regulations governing informal dispute settlement procedures seem to recognize that such procedures are intended to operate merely as a pre-claim mechanism for dispute resolution, and are not intended to regulate the forum in which an action can be pursued once it is brought as a formal claim. The regulations provide that warrantors must disclose on the face of the warranty "any requirement that the consumer resort to the [informal dispute settlement procedure] before exercising rights or seeking remedies created by [the MMWA]." 16 C.F.R. § 703.2(b)(3) (emphasis added). If informal dispute settlement procedures operate before rights are exercised and remedies sought, then informal dispute settlement procedures plainly cannot refer to proceedings in which such rights are exercised and remedies sought.
*1141 The various reasons offered by the FTC for concluding otherwise are not persuasive. In 16 C.F.R. § 700.8, the FTC reasons that warrantors may not designate third parties to finally resolve disputes because "section 110(d) of the Act gives state and federal courts jurisdiction over suits for breach of warranty and service contract." However, the mere grant of jurisdiction to courts does not suggest an intent to prohibit resolution of disputes in an arbitral forum. The Supreme Court has rejected a similar notion in the context of language that is significantly more indicative of an intent to confine redress to the court system. See McMahon, 482 U.S. at 227, 107 S. Ct. 2332 (finding that claims under the Securities Exchange Act may be made subject to arbitration even though the statute provides that "the district courts of the United States ... shall have exclusive jurisdiction of violations of this title") (emphasis added). Under Supreme Court precedent, then, the FTC's reading of the MMWA's jurisdictional grant is untenably overbroad.
In the original promulgation of rules on the Federal Register, the FTC offered two other reasons for prohibiting binding arbitration of MMWA claims. The first reason was that "Congressional intent was that decisions of Section 110 Mechanisms[[7]] not be legally binding." 40 Fed.Reg. at 60210. The Court does not quarrel with the FTC's conclusion that informal dispute settlement procedures should not be bindingbut that conclusion simply demonstrates that binding arbitration is not an "informal dispute settlement procedure," and thus that the FTC has no authority to preclude its application to MMWA claims, especially in light of the FAA.
Indeed, the FTC has explicitly recognized the possibility that parties could agree to binding arbitration after informal dispute settlement procedures had concluded. 40 Fed.Reg. at 60211 ("The warrantor, the Mechanism, or any other group can offer a binding arbitration option to consumers who are dissatisfied with Mechanism decisions or warrantor intentions."). There is simply no reason why the mere timing of when the parties entered into a binding arbitration agreement would affect whether Congress intended for the parties to be able to resolve MMWA disputes in an arbitral rather than a judicial forum. The FTC's recognition that such an outcome is permissible strongly undercuts its reasoning that warranties may not include binding arbitration agreements.
The FTC's second proffered reason for concluding that binding arbitration agreements were precluded was that "the Commission is not prepared, at this point in time, to develop guidelines for a system in which consumers would commit themselves, at the time of product purchase, to resolve any difficulties in a binding, but non-judicial, proceeding." 40 Fed.Reg. at 60210. As an initial matter, the FTC does not explain how the MMWA gives the FTC the authority to develop guidelines for binding arbitration if binding arbitration cannot be an "informal dispute settlement procedure." Nor does an agency's reticence to develop guidelines in any way inform the question of what Congress intended the MMWA to permit or exclude. To the extent that this reason demonstrates the FTC's skepticism that arbitration sufficiently protects the interests of consumers in the absence of an FTC-implemented system, the existence of the FAA demonstrates that Congress does not share that reticence. The Supreme Court has been quite clear that such innate suspicion *1142 of arbitration is not sufficient to render arbitration agreements unenforceable. See McMahon, 482 U.S. at 226, 107 S. Ct. 2332 ("[W]e are well past the time when judicial suspicion of the desirability of arbitration and of the competence of arbitral tribunals should inhibit enforcement of the [FAA] in controversies based on statutes.") (internal quotations omitted). However this second reason offered by the FTC is construed, it does not provide a legitimate basis for reading a ban on all arbitration agreements into the MMWA.
In its 1999 regulatory review statement, the FTC offered yet another rationale. The FTC first reaffirmed its view that binding arbitration agreements are impermissible. 64 Fed.Reg. 19700, 19708-09 (Apr. 22, 1999) ("The Commission believes that this interpretation continues to be correct.... Rule 703 will continue to prohibit warrantors from including binding arbitration clauses in their contracts with consumers that would require consumers to submit warranty disputes to binding arbitration."). Stating that it "based this decision on its analysis of the plain language of the Warranty Act," the FTC then reasoned that the MMWA "clearly implies that a mechanism's decision cannot be legally binding, because if it were, it would bar later court action." Id. at 19708. This reasoning again continues the FTC's unwarranted conflation of informal dispute settlement procedures with formal arbitration proceedings. The FTC's conclusion that informal dispute settlement procedures cannot be binding may in fact be reasonablebut the MMWA does not extend any authority to the FTC to regulate processes, like binding arbitration, that are not informal dispute settlement procedures.
The best advocacy for the FTC's position is actually the dissent in Walton, which looks at three statements in the MMWA's legislative history that ostensibly support the FTC's interpretation. See 298 F.3d at 490-92 (King, C.J., dissenting). However, none of the dissent's points are ultimately persuasive. First, the dissent reasoned that the Senate Commerce Committee Report's reference to "legal remedies in a court of competent jurisdiction" as one of the "other avenues of redress" beyond informal dispute settlement procedures indicated that "litigation, not arbitration, is the `other avenue[] of redress' available to the consumer." Id. at 491 (quoting S.Rep. No. 93-151, at 2-3 (1973)). The dissent's reading of this section, however, is plainly incorrect even according to the FTC, which acknowledges that parties can agree to binding arbitration after informal dispute settlement procedures have concluded. See 40 Fed.Reg. at 60211 ("The warrantor, the Mechanism, or any other group can offer a binding arbitration option to consumers who are dissatisfied with Mechanism decisions or warrantor intentions."). Second, the dissent pointed to the report's use of the term "litigation" in reference to "formal adversary proceedings" as evidence that "litigation (not arbitration) is the `formal adversary proceeding' contemplated by the Act." Walton, 298 F.3d at 491 (King, C.J., dissenting) (quoting S.Rep. No. 93-151, at 22-23). But to "litigate" was defined simply as "to dispute or contend in form of law; to carry on a suit," Black's Law Dictionary 1082 (4th ed. rev. 1968), and the term carried no innate suggestion that it excluded arbitration. Finally, the Walton dissent looked to the Senate Conference Report's reference to "internal or other private dispute settlement procedures" as an indication that the term "informal dispute settlement procedure" was meant "to be read broadly." Walton, 298 F.3d at 491 (King, C.J., dissenting) (quoting S.Rep. No. 93-1408, reprinted in 1974 U.S.C.C.A.N. at 7758). While Congress may have intended the term "informal dispute settlement procedure" to be read broadly, the term nevertheless *1143 cannot extend beyond those procedures that are both "informal" and that constitute a "settlement." As explained above, binding arbitration is not "informal," and it is not a "settlement." Rather, it is a method by which a legal claim is formally and finally resolved by a third party. Thus, none of the statements identified by the Walton dissent provides a legitimate basis on which the FTC could rely in prohibiting binding arbitration of MMWA claims.
In sum, the text, history, and purposes of the MMWA provide no indication that Congress intended to exempt its claims from the requirements of the FAA. The FTC, in reasoning that it has the power to ban binding arbitration because it may set standards for "informal dispute settlement procedures," has impermissibly construed the statute and assumed authority that it does not have. Plaintiff therefore cannot establish under either McMahon or Chevron that his MMWA claims against Byrider are not arbitrable.
2. Effectiveness of an Arbitration Agreement Outside the Warranty
Plaintiff further argues that he cannot be compelled to arbitrate his MMWA warranty claims unless the arbitration clause appears in the warranty itself, rather than in the Retail Installment Contract and Security Agreement. (Dkt. # 38 at 14-15.) For that proposition, Plaintiff cites only Cunningham v. Fleetwood Homes of Georgia, Inc., 253 F.3d 611, 621 (11th Cir.2001). Plaintiff's argument fails for two reasons.
First, Cunningham predicated its holding on the conclusion that binding arbitration is an informal dispute settlement mechanism and therefore must be disclosed in a warranty under the MMWA's "single document" disclosure rule. See id. at 624 ("Because we conclude that [the manufacturer's] failure to disclose in the warranty a term or clause requiring [the purchaser] to utilize an informal dispute resolution mechanism runs afoul of the disclosure requirements of the [MMWA], we affirm the district court's order declining to compel arbitration of the written or express warranty claims."). The Eleventh Circuit, however, has since reversed course and directly rejected the notion that binding arbitration is an informal dispute resolution mechanism under the MMWA. Davis, 305 F.3d at 1276. Thus, the reasoning on which the Cunningham court's holding is based has been retracted. See Patriot Mfg., Inc. v. Dixon, 399 F. Supp. 2d 1298, 1304 (S.D.Ala.2005) (explaining how Davis undermines Cunningham and stating that "while the single document rule enjoys continued vitality, arbitration agreements lie beyond the scope of the disclosures required pursuant to that rule").
Second, Cunningham explicitly limited its holding to cases in which a third-party beneficiary (in that case, the manufacturer) seeks to compel binding arbitration using an agreement executed between two other parties (in that case, the purchaser and the dealer). 253 F.3d at 624 ("The only issue we are presented with here, and thus decide, is whether [the manufacturer] can utilize its third-party beneficiary status under the [dealer-purchaser] arbitration agreement to compel binding arbitration of the [purchaser's] breach of written or express warranty claims against [the manufacturer] when there is no reference to binding arbitration in the warranty."). Cunningham was clear that "the unique nature of the contractual arrangement at issue" rendered it unnecessary to decide the question Plaintiff now presents as its holding. See id. Because the arbitration agreement in this case is not being asserted by a third-party beneficiary, but rather by the party who actually entered the agreement with Plaintiff, Cunningham is not on point. Because Plaintiff makes no broader argument that the principle announced *1144 in Cunningham should be applied to the circumstances presented here, the Court would not have occasion to reach that issue in any event.
Plaintiff has offered no reason why his MMWA claims are not subject to the arbitration agreement he signed. He therefore must arbitrate those claims.
C. TILA Claims
Plaintiff further argues that his TILA claims are not subject to binding arbitration. (Dkt. # 38 at 15-17.) Plaintiff advances two theories under this argument. First, relying on Green Tree, 531 U.S. 79, 121 S. Ct. 513, Plaintiff asserts that the arbitration agreement imposes "exorbitant fees and costs" inconsistent with TILA's grant of federal statutory rights. In Green Tree, the Supreme Court stated that "[i]t may well be that the existence of large arbitration costs could preclude a litigant ... from effectively vindicating her federal statutory rights in the arbitral forum." Id. at 90, 121 S. Ct. 513. However, the Supreme Court held that the party seeking to avoid arbitration had not established that she was likely to bear such prohibitive costs in arbitration because all she had done was to assert that arbitration costs were high and that she did not have the resources to arbitrate. Id. at 91 n. 6, 121 S. Ct. 513. The Court reasoned that on such a record, "[t]he `risk' that [she] will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement." Id. at 91, 121 S. Ct. 513.
In this case, likewise, Plaintiff has alleged an estimate of the costs of arbitration and has offered the general statement that he has "limited financial resources" and "would not be able to proceed with this case if forced to pay the costs of arbitration." (Dkt. # 38 Pt. 3 at 2.) Plaintiff has offered nothing specific to demonstrate that the arbitration costs in this case are either inordinately or prohibitively high, especially in relation to the amount of damages claimed (over one million dollars). The Court will therefore enforce the arbitration agreement. See, e.g., In re Cotton Yarn Antitrust Litig., 505 F.3d 274, 285 (4th Cir.2007) ("This kind of uninformed speculation about cost falls far short of satisfying the plaintiffs' burden of proving that the costs of proceeding individually against the defendants would be prohibitive and thus would prevent them from effectively vindicating their statutory rights.").
Second, Plaintiff argues that the arbitration agreement prevents vindication of his TILA rights because the agreement permits any prevailing party to recover attorneys' fees, whereas TILA provides that the prevailing consumer may recover attorneys' fees. See 15 U.S.C. § 1640(a)(3) (providing that "in the case of any successful action to enforce the [Act's] liability," "any creditor who fails to comply with any requirement imposed under [the Act] ... with respect to any person is liable to such person" for "the costs of the action, together with a reasonable attorney's fee as determined by the court").[8] Plaintiff does *1145 not cite any argument or authority supporting the notion that this section is meant to foreclose a creditor from all other avenues of recovering attorneys' fees on a TILA claim. The only authority Plaintiff cites stands for the general proposition that an arbitration clause is invalid if it interferes with the vindication of a statutory cause of action. (See Dkt. # 38 at 16.) In the absence of proper argument and authority, Plaintiff cannot prevail on this argument. See Indep. Towers, 350 F.3d at 929-30.
Alternatively, the Court may sever any aspect of the arbitration agreement that would impede vindication of Plaintiff's TILA rights. Anders v. Hometown Mortgage Servs., Inc., 346 F.3d 1024, 1032 (11th Cir.2003). To the extent the arbitration agreement improperly provides for the recovery of attorneys' fees related to the TILA claim, these provisions would be severed and the remainder of the agreement would be enforced.
D. Claims Against General Motors
Plaintiff also argues that his claims against General Motors are not subject to the arbitration agreement and that those claims cannot be severed from his claims against Byrider. (Dkt. # 38 at 17-18.) Plaintiff offers no authority, however, for the proposition that the Court may decline to refer Plaintiff's dispute with Byrider to arbitration on this basis. To the contrary, "the Arbitration Act requires district courts to compel arbitration of pendent arbitrable claims when one of the parties files a motion to compel, even where the result would be the possibly inefficient maintenance of separate proceedings in different forums." Dean Witter, 470 U.S. at 217, 105 S. Ct. 1238. The Court therefore need not decide whether the arbitration agreement requires Plaintiff to arbitrate his claims against General Motors. Even assuming that those claims are not subject to arbitration, the Court would still be required to compel arbitration of the claims against Byrider.
E. Refusal to Arbitrate
Finally, Plaintiff argues that he has not actually refused to arbitrate this dispute, and therefore the right to have the Court compel arbitration has not yet accrued. (Dkt. # 38 at 18.) However, the right to compel arbitration accrues once one of the parties takes "an unequivocal position that it will not arbitrate," because "unless the respondent has resisted arbitration, the petitioner has not been `aggrieved' by anything." PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1067 (3d Cir. 1995) (quoting 9 U.S.C. § 4). Here, Plaintiff has opposed Byrider's motion to enforce arbitration on numerous grounds. Plaintiff has thereby resisted arbitration and unambiguously manifested an intention not to arbitrate the subject matter of this dispute. The right to compel arbitration has therefore accrued. See id.
Alternatively, the very commencing of litigation can itself be interpreted as a refusal to arbitrate. See Downing v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 725 F.2d 192, 195 (2d Cir.1984) ("Unless Merrill Lynch commences litigation or is ordered to arbitrate this dispute by the Exchange and fails to do so, it is not in default of any arbitration agreement it may have with Downing.") (emphasis added). Here, Plaintiff has commenced litigation, and thus he can be fairly said to have refused to arbitrate. See id. For these reasons, the Court has no basis on which to deny Byrider's motion to compel arbitration.
F. Jury Trial
Plaintiff also demands a jury trial on the issue of arbitrability pursuant to 9 U.S.C. § 4. (Dkt. # 38 at 19.) However, "[a] party to an arbitration agreement cannot *1146 obtain a jury trial merely by demanding one." Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5th Cir.1992). To be entitled to a jury trial, the party resisting arbitration must "show the existence of a genuine issue of fact to be tried before a jury." Id. at 1155; see also Doctor's Assocs. Inc. v. Distajo, 107 F.3d 126, 129-30 (2d Cir.1997) (affirming the district court's denial of a request for a jury trial under 9 U.S.C. § 4 on various defenses because the party opposing arbitration had failed to show "that material facts are in dispute"); Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191, 1196 (7th Cir.1987) ("It is not true that by merely demanding a jury trial a party to an arbitration agreement can get one. He can get one only if there is a triable issue concerning the existence or scope of the agreement.").
Here, the facts are not in dispute, and Plaintiff merely argues that the arbitration agreement should not be enforced as a matter of law. Thus, there is no issue for a jury to decide. See Dillard, 961 F.2d at 1154 (rejecting a plaintiff's argument that he was entitled to a jury trial under the FAA on the validity of an arbitration clause because the plaintiff's arguments that the clause was unconscionable did not put sufficient facts in issue to merit a jury determination). The jury trial demand is therefore denied.
III. Remedy
Because there is nothing to prevent enforcement of the arbitration agreement, the Court must determine what action to take regarding Plaintiff's claims against Byrider. Defendant requests that the claims be dismissed, and in the alternative it requests that the claims be stayed pending arbitration. The Ninth Circuit appears to favor the latter course of action. See Bushley v. Credit Suisse First Boston, 360 F.3d 1149, 1153 n. 1 (9th Cir.2004) (explaining that the dismissal of a claim so that arbitration can proceed is an appealable order, while entering a stay is not, and noting that "[u]nnecessary delay of the arbitral process through appellate review is disfavored"). The Court will therefore grant Byrider's alternative request for a stay of Plaintiff's claims pursuant to 9 U.S.C. § 3.
CONCLUSION
There is an enforceable arbitration agreement between Plaintiff and Byrider, and the claims brought by Plaintiff against Byrider fall within the scope of that agreement. In these circumstances, a stay of those claims is appropriate while arbitration proceeds.
IT IS THEREFORE ORDERED that Byrider's Motion to Dismiss and to Enforce Arbitration Agreement and Compel Arbitration (Dkt. # 33) is GRANTED. Plaintiff is ordered to submit to arbitration consistent with the terms of the arbitration agreement, the Federal Arbitration Act, and this Order. Plaintiff's claims against Byrider are STAYED pending resolution of that arbitration.
IT IS FURTHER ORDERED that Plaintiff and Byrider shall file a joint status report informing the Court of the progress of arbitration by February 14, 2010, and every six months thereafter.
NOTES
[1] Before briefing was complete, Defendant Byrider moved the Court to set oral argument in this case. (Dkt. # 13.) The Court denied the motion as premature, noting that the Court would set oral argument if it believed that oral argument would be helpful. (Dkt. # 14.) Having considered the issue further, the Court has decided not to set oral argument because the parties have thoroughly discussed the law and the evidence, and oral argument will not aid the Court's decision. See Lake at Las Vegas Investors Group, Inc. v. Pac. Malibu Dev., 933 F.2d 724, 729 (9th Cir. 1991).
[2] The Creditor, in joining Byrider's motion, states that the claims brought against it in this action should be dismissed or referred to arbitration "[f]or the same reasons set forth in the Motion to Dismiss." (Dkt. # 43 at 1.) The motion to dismiss, however, argues that claims against Byrider should be dismissed or referred to arbitration because there is a binding arbitration agreement between Plaintiff and Byrider. (See Dkt. # 33.) The motion does not argue that the arbitration agreement extends to cover claims against the Creditor (see id.), and the only signatories to the agreement are Plaintiff and Byrider (see Dkt. # 11 Ex. A). Thus, the Court will not dismiss or refer to arbitration any claims brought against the Creditor.
[3] Plaintiff also suggests that the agreement's retention of the right to sue for deficiency judgments renders it unconscionable, but he offers no reasoning or authority different from that discussed regarding self-help remedies. (See Dkt. # 38 at 10-11.) To the extent Plaintiff has properly raised such an argument, it is rejected for the same reasons discussed above.
[4] The FTC is the agency tasked with promulgating regulations to implement the MMWA. See 15 U.S.C. § 2312(c). The FTC is specifically authorized to prescribe rules setting forth minimum requirements for any "informal dispute settlement procedure" incorporated into the terms of a written warranty. 15 U.S.C. § 2310(a)(2).
[5] That section provides that, in fulfilling its obligations under the MMWA, a warrantor "shall not impose any duty other than notification" on a consumer as a condition of obtaining a remedy for a product defect, "unless the warrantor has demonstrated ... that such a duty is reasonable." 15 U.S.C. § 2304(b)(1). It further provides that a warrantor can demonstrate that such a duty is reasonable "in a rulemaking proceeding ... in an administrative or judicial enforcement proceeding (including private enforcement), or in an informal dispute settlement proceeding." Id.
[6] The House Report also provides that the MMWA's purposes include authorizing appropriations for FTC operations from 1975-77, see H.R.Rep. No. 93-1107, reprinted in 1974 U.S.C.C.A.N. at 7702, but this purpose does not bear on the question at issue.
[7] "Mechanism" is simply "an informal dispute settlement procedure which is incorporated into the terms of a written warranty to which any provision of Title I of the Act applies, as provided in Section 110 of the Act." 16 C.F.R. § 703.1(e).
[8] Plaintiff also argues that "[j]ust as the arbitration clause limits Plaintiff's remedies respecting fees, it also would eliminate Plaintiff's non-waivable statutory right to statutory damages, and arguably limit the statute of limitations to a term less than that afforded under TILA." (Dkt. # 38 at 16.) Plaintiff supports this statement with no argument or analysis (or even, in the latter clause, any definitive position on the matter), and thus the Court will not consider this statement. See Indep. Towers of Wash. v. Washington, 350 F.3d 925, 929-30 (9th Cir.2003) (pointing out that "[o]ur circuit has repeatedly admonished that we cannot manufacture arguments [for a party]," that "we review only issues which are argued specifically and distinctly," and that "[w]e require contentions to be accompanied by reasons"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455095/ | 429 S.W.2d 842 (1968)
O. P. LINK HANDLE COMPANY, Appellant,
v.
C. M. WRIGHT, Sr., et al., Appellees.
Court of Appeals of Kentucky.
June 28, 1968.
*843 T. E. Mahan, Williamsburg, for appellant.
J. B. Johnson, Sr., Johnson & Johnson, Williamsburg, for appellees.
PALMORE, Judge.
The appellant O. P. Link Handle Company (hereinafter Link), through its managing agent, Elbert Pike, contracted to buy some standing hickory timber from the appellees, C. M. Wright and wife, Dortha Wright. Shortly thereafter Pike learned that another company had a contract to remove the merchantable timber from the same property, and Link brought this suit in the Whitley Circuit Court to rescind its contract and recover $2000 paid the Wrights at the time of its execution. This court has sustained Link's motion for an appeal from a judgment dismissing its complaint. KRS 21.080; RCA 1.180.
On April 22, 1960, the Wrights entered into a contract by which they sold to W. E. Partin Lumber Company and Marshall Lumber Company[1] "all merchantable timber owned by the sellers * * * however, not to cover any timber 8 inches or less in diameter, 12 inches above the ground" standing on some 1200 to 1400 acres of land described as "a large boundary of land in Whitley County, Kentucky, a short distance from Rockhold, said lands being known as the Criscillis and Lay Land, the Boyd, Delaney and White lands, and usually thought of as being in three localities covering a mountain area back of the home of C. M. Wright, on Kentucky Highway 26, and extending across on the Corn Creek side of said Mountain and in an easterly direction by the way of Kernel Hollow over to the Rollins property on the Meadow Creek Section and being all the timber land owned by the Wrights in said section of Whitley County, title to which was acquired by them March 6, 1957, by deed recorded in Deed Book 192, Pages 136-139, in the office of the County Court Clerk of Whitley County, Kentucky."
The contract gave the purchasers the right "to freely move upon and about all of said premises of wooded lands" and "remain in peaceful possession for the purpose of manufacturing this timber for a period of not to exceed five (5) years. The Purchasers agree to use due diligence in cutting this timber and not to re-cut territory previously gone over during this period."
On May 24, 1961, Partin gave the Wrights a partial release in which it was recited that whereas the purchasers "have cut all merchantable timber that they care to cut from the Lay and Criscillis portion of the land, to top of the mountain only, * * * they now release to this portion [sic] their right, title and interest in and to that portion of the land and the timber thereon."
On May 2, 1962, the Wrights entered into the contract with Link which is the subject of this controversy. The Partin contract was not of record, but Pike and Wright spent two days going over the territory and Pike observed that some of it had been cut over.[2] The contract *844 was prepared by Link's attorney, omitting the description. On the day it was signed Pike and Wright took it to a notary public, who inserted the description provided by Wright, as follows: "Description as shown on deed recorded in Deed Book #192 at Pages Nos. 136-139 inclusive (deed from Justin Potter and Edgar Rogers, and Dora [sic] F. Wright, wife of C. M. Wright, Sr.)."[3]
By the terms of this contract the Wrights sold Link "the sum of 250,000 feet of merchantable hickory timber which is useable [sic] in the buyer's business operation"[4] on the described lands and gave the buyer "full license and authority to enter upon the premises * * * and do all acts and things necessary to cut and remove the said trees and timber therefrom" for a period of five years. It was further provided that the buyer was to have "the exclusive right and option to cut and remove the balance of any portion thereof * * * remaining upon the within described lands after the removal of the initial 250,000 feet sold hereby, and "in the event additional hickory timber is cut and removed by the buyer, the same shall be paid for at the rate of $8 per thousand feet with measurement made by handle measurement as aforesaid. In the event that there is not sufficient merchantable hickory timber useable [sic] in the seller's business to fulfill the said 250,000 feet of timber sold and conveyed herein, then in that event reimbursement shall be made by the seller to the buyer at the rate of $8 per thousand feet for all shortage of timber under the said 250,000 feet conveyed hereby."
Although the contract did not warrant the existence of 250,000 feet of hickory on the described property, and provided specifically for a refund of $8 per thousand in the event of a shortage, it contained no reference to the Partin contract and placed no condition or qualification on Link's "full license and authority" to enter upon the premises (all the premises) and do all things necessary to cut and remove the hickory timber, or upon Link's "exclusive right and option" to cut and remove whatever remained after removal of the initial 250,000 feet. Yet at the time it was signed Partin had three more years in which to remove all of the merchantable timber, including hickory, standing on that portion of the territory not theretofore cut over.
Pike began to work on the cut-over area and removed one load of timber. On the next day his timber cutter discovered from a man he sought to hire as a logger that "you ain't got no timber up there, son, to cut," because it had been sold to Partin. Pike went to see Partin, saw his contract, and immediately contacted Wright. Wright took the position that the contract entitled Link to get only such hickory timber as was standing after Partin had cut over the area. In other words, he contended that Link was to follow after Partin and take whatever usable hickory Partin saw fit to leave. The Wrights' defense to Link's complaint is, in substance, that regardless of what the contract says, that was the real agreement and it has not been breached. Link denies that this was the understanding and relies on the parol evidence rule, under which the terms of an unambiguous contract cannot be varied by extrinsic evidence. Cf. Gibson v. Sellars, Ky., 252 S.W.2d 911, 913, 37 A.L.R. 2d 1435 (1952).
Link's complaint pleaded the two contracts as exhibits. It alleged also that Link was unaware of the Partin contract and that the Wrights had fraudulently concealed its existence. Though we are of the opinion that the complaint stated a cause of action without regard to the fraud allegation, and that Link's recovery does not depend on fraud, it is necessary to discuss the subject because the Wrights *845 treat it as a major issue in their brief. They say that Link's motion for appeal in this court contains the statement, "No fraud is claimed in the case now under consideration," and that this statement amounts to a judicial admission which destroys the keystone of Link's case. The statement is taken out of context. It follows quotation of a headnote from Gibson v. Dupin, Ky., 377 S.W.2d 585 (1964), reading, "Party is bound by his contract and ignorance of its import is no defense in absence of fraud." The obvious meaning of the remark, "No fraud is claimed," is that the Wrights, both of whom said they read and understood the contract before they signed it, were not claiming that they had been defrauded.
Although the contract between Link and the Wrights specified 250,000 feet of hickory, for which Link paid $2,000, the provisions for adjustment at the rate of $8 per thousand in the event of an overage or shortage make it clear that the figure of 250,000 feet was merely an estimate. The vital feature of the contract was not how much hickory was there, but the fact that whatever was there was sold to Link, with five years to get it out. Unfortunately, most of it already belonged to Partin, so the essential ground for relief presented by the complaint is failure of consideration, regardless of whether it was attended or compounded by fraud.
W. E. Partin testified that by the time the Link contract was made he had cut over about 200 or 300 acres. Others estimated the cut-over area at 300 to 400 acres. Under any view of the evidence the territory left yet to be gone over by Partin, and the quantity of hickory in it, was substantial. A substantial failure of consideration ordinarily justifies rescission. 17 Am.Jur.2d 978 (Contracts, § 502).
The evidence conflicts on the question of whether Pike, Link's agent, knew or should have been aware that the timber on the territory not already cut over at the time he inspected it had been sold to a prior purchaser. Again, however, we come to the parol evidence rule. The only possible effect of such information would be to alter the terms of the written contract, by showing that the parties understood Link's rights thereunder to be subject to something not mentioned in it. In short, Link's notice of Partin's contract could be relevant only if it were permissible to show that the contract was different from what it said, by proving an exception which the parties neglected to insert in the written instrument. As we understand the parol evidence rule, that is the precise maneuver it is designed to prevent.
Among the authorities cited by the Wrights is Hogg v. Frazier, 24 Ky.Law Rep. 930, 70 S.W. 291 (Ky.1902), in which it was held that one who buys standing trees with notice of a prior sale is not an innocent purchaser for value. That, however, was a suit by the first buyer against the second, not an action by the second buyer against the seller. Likewise, Turner v. McIntosh, Ky., 379 S.W.2d 470 (1964), was an action between a buyer with an unrecorded deed and a subsequent buyer with notice of the prior conveyance. Carter v. Quillen, 239 Ky. 583, 39 S.W.2d 1012 (1913), is distinguishable in that the description itself contained words of reference to a prior instrument in which certain exceptions and reservations had been made, and which therefore became a part of the description of what was being sold and conveyed to the complaining purchaser. We have no such reference in this contract. Haag v. Dixon, 151 Ky. 768, 152 S.W. 930 (1913), tends more to support Link than it does the Wrights, because it was there held that a party who took an option to buy land with knowledge that an infant owned an interest in it was "not in a position to demand that the court * * * modify the option" by requiring the optionors to convey the property with a provision to protect him against the outstanding claim of the infant, or by requiring them to accept less than the contract price. The optionee's suit was for *846 specific performance, and the court held that he could elect to pay the contract price and take what the optionors owned, but the court could not make a new contract with a different price from the one provided in the option agreement. Applying that principle to this case, and assuming this were a case in which the remedy of specific performance would be authorized, if Link wanted specific performance it would have to take what hickory timber was left by Partin. But that, of course, is not the remedy sought, and the Haag case has no relevance here except insofar as it holds that the court will not make a new contract for parties who have made a bad contract with their eyes open.
And so on. Perhaps the best way to summarize our position on this phase of the argument is to illustrate. If A does not own what he purports to sell to B and accepts B's money for it he is unjustly enriched, and to the extent of such enrichment is liable in an action for restitution. Cf. Corbin on Contracts § 1108 (Vol. 5, p. 579). The enrichment is none the less unjust by reason of what A and B knew or should have known about the condition of A's title. The plain fact is that A has received something for nothing at the expense of B, who may have been naive but certainly did not intend it as a gift. In this particular instance it makes little difference whether the action be labelled restitution or rescission. It comes out the same either way.
Another proposition argued by the Wrights is that since the law allows extrinsic proof to show the real consideration as distinguished from that which is recited in the contract, it should follow that other variations from the terms of the agreement may be proved. In support of that proposition they cite McNeill's Adm'x v. Riley, 256 Ky. 170, 75 S.W.2d 1068 (1934), and analogous cases. That decision, however, points out that the principle allowing the true consideration to be shown is an exception to the parol evidence rule, expressly provided or recognized by statute. Cf. KRS 371.030.
"It is true that a contemporary oral agreement inconsistent with a written contract, cannot be relied on in the absence of an allegation of fraud or mistake * * and that evidence of a verbal agreement is not admissible to vary or contradict the terms of a note containing an unconditional promise to pay * * * but the rule does not apply to the consideration stated in a written contract. On the contrary, we have a statute providing that the consideration of any writing * * * may be impeached or denied * * * and we have uniformly ruled that under this section the true consideration of a deed, without an allegation of fraud or mistake, may be shown by parol, although it contradicts the written instrument." McNeill's Adm'x v. Riley, 256 Ky. 170, 75 S.W.2d 1068, 1070 (1934).
In closing, it might be well to add that both Pike and Wright were experienced men. We quote, for example, from Wright's testimony under cross-examination:
Q "You don't know much about timber, do you?"
A "I know enough to know what I'm doing."
Q "And you knew what you were doing when you signed the contract?"
A "Yes."
Q "You said you read it and understood it?"
A "Yes."
Q "You felt there was no restrictions at all when you signed and swore to that contract you had read it and you have heretofore testified that you understood every word in it?"
A "I sold him what I owned."
* * * * * *
*847 Q "I'm asking you now, Mr. Wright, and I am insisting that you answer my question did you or not read this contract and understand it at the time you signed it?"
A "Yes."
In their answer the Wrights alleged, among other things, "that a mistake as to the intent of the parties was made in the execution of the contract, and that same was not drafted in accordance with the prior negotiations between the parties, and that said contract should be modified by this court to express the intent of the parties." They did not, however, plead a counterclaim. And again, it seems to us that the claim of mistake, if allowed to defeat Link's cause of action, would defeat the parol evidence rule as well. If that rule is to have any real meaning, it must apply to this case.
The so-called parol evidence rule has numerous exceptions, or perhaps it should be said that there are many situations to which it might seem to be applicable but is not. Indeed, from a reading of Corbin (Ch. 26, Corbin on Contracts), it would appear that in other jurisdictions the rule itself has been shot to pieces and scattered to the four points of the compass. But we like it. We concede that there are some kinds of mistake to which it ought not be held applicable. But when two intelligent parties have read the contract before signing it, and one thereafter says it meant something different, or was subject to some unexpressed condition, reservation, limitation, proviso, or understanding, but the other says it meant just what it said, no more and no less, it is our opinion that stability and a salutary confidence in the written word requires the instrument itself to prevail.
"Under the guise of interpretation, courts are repeatedly importuned to give a meaning to the writing under consideration which is not to be found in the instrument itself, but which is based entirely on direct evidence of intention. And just as steadfastly, the courts [this court, at least] reiterate the well-established principle that it is not the function of the judiciary to change the obligations of a contract which the parties have seen fit to make." Williston on Contracts, Third Edition, § 610A (Vol. 4, p. 513).
The chancellor's basic factual finding was "that the plaintiff had knowledge and actually saw that the area had been cut over," and his judgment against Link was drawn from legal conclusions that may apply in true cases of fraud and deceit but which we hold inapplicable to this case.
The cause is reversed with directions that a judgment be entered in favor of the appellant.
All concur.
NOTES
[1] Partin later purchased Marshall's interest in the contract.
[2] Pike says he asked about this and Wright told him "that Mr. Partin had cut some of that for mine timbers or something like that that he needed a few trees." At the time Pike had never heard of Partin.
[3] It is conceded that this description, as written, covers the same property as the Partin contract.
[4] Pike testified that Link could not use anything smaller than the 8-inch timber covered by the Partin contract. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455104/ | 429 S.W.2d 854 (1968)
D. & J. LEASING, INCORPORATED, Appellant,
v.
HERCULES GALION PRODUCTS, INC., Appellee.
Court of Appeals of Kentucky.
June 28, 1968.
*855 Herbert S. Melton, Jr., Paducah, F. L. Pearl, Pearl & Trevathan, Louisville, for appellant.
O. Grant Bruton, Middleton, Seelbach, Wolford, Wills & Cochran, Louisville, for appellee.
MILLIKEN, Judge.
The questions here are whether the appellant, which filed its original action in the wrong venue where the statute of limitations ran against it, is entitled to the benefit of the ninety day saving-period afforded by KRS 413.270 or the six months saving-period of KRS 355.2-725 of the Uniform Commercial Code to file it in the court of proper venue in such circumstances, and whether the peculiar phraseology of the latter statute precludes it from having the benefit of either or both savings-periods.
The appellant, D. & J. Leasing, Incorporated (plaintiff below), of Paducah, was engaged in the owning and leasing for hire of various types of transportation equipment, and bought and paid for four coke trailers specifically designed and manufactured for that purpose by the Kingham Trailer Company, Incorporated, by which name the appellee, Hercules Galion Products, Incorporated, was known at that time. The negotiations culminating in the sale in late 1960 occurred both in Paducah and in Louisville where Hercules' engineering and designing department was located, but apparently, as the litigation for breach of warranty progressed, both litigants became convinced that the action should have been filed in the Jefferson Circuit Court at Louisville rather than in the McCracken Circuit Court at Paducah where the original action was filed. But, alas, the statute of limitations had run in the meantime.
D. & J. filed its original action in the McCracken Circuit Court at Paducah, on August 2, 1962, and on August 23, 1962, Hercules moved to dismiss the action for improper venue, and did so again on December 19, 1962, after D. & J. had filed an amended complaint. No action was taken on Hercules' motions to dismiss, but D. & J. came around to that viewpoint and on June 7, 1965, moved the court to dismiss without prejudice its complaint for lack of jurisdiction of the subject matter, and the court dismissed it by an order of that date which said:
"The motion of the plaintiff to dismiss the above-styled action without prejudice on the grounds that this court does not have jurisdiction of the subject matter having come on regularly to be heard, and the court being sufficiently advised,
IT IS HEREBY CONSIDERED AND ORDERED that the above-styled action be dismissed without prejudice to the plaintiff and the cost herein be assessed to the plaintiff."
Three days later, on June 10, 1965, the plaintiff, D. & J., filed the present action in the Jefferson Circuit Court at Louisville and that court rendered summary judgment for Hercules on August 9, 1966, on the ground that the statute of limitations had run against D. & J.'s claim.
*856 Involved in this appeal is the effect, if any, of the peculiar phraseology of the Uniform Commercial Code (KRS 355.2-725) on the application of KRS 413.270. The pertinent statutory provisions are:
355.2-725 (3) "Where an action commenced within the time limited by subsection (1) is so terminated as to leave available a remedy by another action for the same breach such other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute."
355.2-725 (4) "This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this chapter becomes effective."
KRS 413.270. Effect of judgment of no jurisdiction.
(1) "If an action is commenced in due time and in good faith in any court of this state and the defendants or any of them make defense, and it is adjudged that the court has no jurisdiction of the action, the plaintiff or his representative may, within ninety days from the time of that judgment, commence a new action in the proper court. The time between the commencement of the first and last action shall not be counted in applying any statute of limitation."
The pivotal point is the legal effect of the termination of this case in the McCracken Circuit Court on motion of the plaintiff, D. & J. The Jefferson Circuit Court adopted the view that sub-section three(3) of KRS 355.2-725 barred the action in the Jefferson Circuit Court. It was its opinion that D. & J. had voluntarily withdrawn from the McCracken Circuit Court and had not done so under force of a judgment by that court, and that consequently KRS 413.270 could not be employed as a saving statute in this type of situation. The Jefferson Circuit Court held that the savings-period was intended to aid only those who might find themselves to be involuntarily dismissed from court for improper venue and, since D. & J. voluntarily withdrew from the McCracken Circuit Court and did not do so under force of a judgment, KRS 413.270 did not apply and the benefit of the savings-periods of both statutes must be denied D. & J.
Although the ruling of the McCracken Court dismissing the action there was denominated an "order", it nevertheless was a judgment in its effect.
The fact that the McCracken Circuit Court did not rule on Hercules' prior motions for dismissal, but based its ruling on D. & J.'s later motion to the same effect does not appeal to us as the controlling factor to consider in determining whether D. & J. is entitled to the benefit of the savings-period of either statute. The intention of both statutes is to enable a litigant in such a situation to obtain a trial on the merits and not to penalize it for filing its original action in a court of the wrong venue. We think that the phraseology of the Uniform Commercial Code (KRS 355.2-725) denying the benefit of its savings-period when the termination of the first action "resulted from voluntary discontinuance or from failure or neglect to prosecute" the action is intended to cover situations where the litigant signifies that it does not intend to go on with its case where it "drops" its case in the sense that it fails "or neglects to prosecute it", and not situations like the one at bar where the plaintiff moved to dismiss its action so that it could file it in a court with jurisdiction of the subject matter or parties. Any other construction of the statute would deprive an earnest litigant of the very benefit the savings-period was intended to bestow the opportunity to file its action in the proper forum. (For a detailed criticism of the imprecisions in the Uniform Commercial Code, see "The Language of the Uniform Commercial Code", 77 Y.L.J. 185 et. seq., December 1967; see Uniform Commercial *857 Code Annotated (U.L.A.) where it is shown that North Carolina has deleted the phrase "* * * unless the termination resulted from voluntary dismissal, * * *", and Tennessee has redrafted the subsection altogether.)
In the truest sense, D. & J.'s dismissal of its action in the McCracken Circuit Court was anything but voluntary; it had to get out of that court in order to get into the right one, and promptly did so thereafter. We do not find it necessary to decide whether the six months saving-period of the Code or the ninety-day period of KRS 413.270 governs, because D. & J.'s filing in the Jefferson Circuit Court was in time under either.
The judgment is reversed.
WILLIAMS, C. J., and HILL, STEINFELD, PALMORE and OSBORNE, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455110/ | 429 S.W.2d 798 (1968)
Odell EPPS, Plaintiff-Respondent,
v.
Lloyd RAGSDALE, Defendant-Appellant.
No. 33035.
St. Louis Court of Appeals, Missouri.
June 14, 1968.
*799 Hugh E. Gibbons, Justin C. Cordonnier, Hocker, Goodwin & MacGreevy, St. Louis, for appellant.
Gregg William Keegan, St. Louis, for respondent.
CLEMENS, Commissioner.
The plaintiff, Mrs. Odell Epps, got a $2,000 verdict and judgment. This, on her res ipsa loquitur submission for damages resulting from scalp burns and loss of hair after she got a permanent wave in defendant Lloyd Ragsdale's beauty shop. He appeals.
The primary issue is whether plaintiff's evidencethat the defendant selected and controlled the compounds and instruments used in treating her hair, and that her scalp was blistered and her hair fell out after the treatmententitled her to go to the jury on a res ipsa loquitur submission. For reasons to be given, we hold that theory was proper but find there was prejudicial error in the form of plaintiff's submission.
The verdict-consistent evidence (disproving the theory that blondes have more fun): Mrs. Epps responded to Mr. Ragsdale's handbill advertising "guaranteed" permanent waves. At his shop she was received by one of his licensed beauty operators, Miss Suzie Vaughn. They talked about the condition of Mrs. Epps' hair, which had recently been bleached from brown to blonde. In permanent waving, bleached hair requires special attention and a milder permanent wave compound than unbleached hair. Mrs. Epps told Miss Vaughn, "If you think a permanent would damage my hair in any way, I don't want one." After shampooing Mrs. Epps' hair Miss Vaughn said that her hair "would take a beautiful permanent." Miss Vaughn wrapped Mrs. Epps' hair on permanent wave rods (curlers) and selected and applied a permanent wave compound. Miss Vaughn, testifying for the defendant, said there are several kinds of this compound, some more caustic than others, but she did not recall the kind she used on Mrs. Epps; that the compound can destroy hair and cause scalp burns. After leaving this caustic compound on Mrs. Epps' hair for awhile Miss Vaughn rinsed it off and put on a neutralizer. She rinsed her hair again, set it on brush-rollers, and put her under an electric dryer. According to Miss Vaughn, when testifying for the defendant, she controlled the time and temperature of the drying process and she left Mrs. Epps under the dryer for half an hour. Mrs. Epps said that after sitting *800 under the dryer about forty minutes she complained that her scalp was burning; that Miss Vaughn looked at her hair, said it was still wet, and kept her under the dryer for another half hour. Miss Vaughn then tried to remove the brush-rollers but they were so enmeshed in her hair that she had to cut them out with a scissors. Miss Vaughn saw that Mrs. Epps' hair had become unusually stiff and brittle, so she trimmed off the ends, where the damage was most severe. While combing and trimming Mrs. Epps' hair, much of it broke off. Miss Vaughn applied a lanolin conditioner (softening agent) and gave Mrs. Epps a supply of it to use at home. When Mrs. Epps left the shop her scalp was still burning.
The next morning when Mrs. Epps brushed her hair it all came out, leaving a mere quarter-inch stubble. Her scalp was red and blistered. She became nervous and distraught, and embarrassed in public and at work. She bought a wig but it was uncomfortable to wear on her burned scalp. A month later Mrs. Epps got one medical treatment for scalp burns and another for nervousness. Hypothetical medical opinion was that the permanent wave treatment had caused both these conditions and the loss of hair.
We hold that this evidence warranted a res ipsa loquitur submission. The elements of that doctrine are laid down in McCloskey v. Koplar, 329 Mo. 527, 46 S.W.2d 557[1], 92 A.L.R. 641: the instrumentalities involved must be under the defendant's management and control, the defendant must have superior knowledge or means of information about the cause of the occurrence, and the occurrence resulting in injury must be one that does not ordinarily happen when those in charge use due care.
Plaintiff's evidence was abundant on the first two elements: The defendant's beautician, Miss Vaughn, selected the type of permanent wave compound and neutralizer and controlled the means and time of applying them; she controlled the intensity and time of heat applied in drying plaintiff's hair. Mrs. Epps was but a passive supplicant. So, the instrumentalities were under the defendant's control. Further, Miss Vaughn's training and experience as a beautician, and the fact that Mrs. Epps could have little knowledge of what Miss Vaughn was doing, supplied the element of the defendant's superior knowledge of the cause of the occurrence.
The defendant's challenge is not leveled against these two elements but against the basic res ipsa element: whether injuries like plaintiff's ordinarily happen when due care is used. This is a question of law since it is a judicial function to determine whether a certain set of circumstances does, as a matter of law, permit a certain inference. Parlow v. Dan Hamm Drayage Co., Mo., 391 S.W.2d 315[10, 11]. The question is answered when the court can take judicial notice, based on common knowledge and experience, that such an injury probably would not have occurred but for negligence in some form. Thus, a court judicially knows that an automobile does not ordinarily run off the highway unless its driver was negligent in some way. The basis of such an allowable inference is the "doctrine of probabilities." Harke v. Haase, 335 Mo. 1104, 75 S.W.2d 1001[1, 2]; Frazier v. Ford Motor Co., 365 Mo. 62, (banc), 276 S.W.2d 95[2]; and Russell v. St. Louis & S.F. Ry. Co., Mo.App., 245 S.W. 590[3].
Courts have said, on different but similar facts, that permanent waves do not ordinarily cause scalp burns and hair loss when carefully applied by a beautician. See Glossip v. Kelly, 228 Mo.App. 392, 67 S.W.2d 513, and Givens v. Spalding Cloak Co., 228 Mo.App. 169, 63 S.W.2d 819. In those cases the plaintiffs, injured by permanent wave treatments, properly submitted on res ipsa loquitur. Logic compels the same result here. It is common knowledge that many women have permanent wave treatments without damage to their *801 scalps or hair; it is also commonly known that human hair and scalps are sensitive to caustic compounds and to heat. These two commonly known facts lead to a third: permanent wave treatments do not ordinarily cause scalp burns and hair loss of the severity shown here if carefully performed by a beautician. This fact, plus the defendant's exclusive control and superior knowledge, satisfies the "doctrine of probabilities" to the extent that the trial court did not err by permitting the jury, if it was so persuaded, to infer negligence from the facts of the occurrence.
In arguing against applying the res ipsa loquitur doctrine here the defendant stresses Hasemeier v. Smith, Mo. (banc), 361 S.W.2d 697[3, 4]. There the doctrine was denied in a malpractice case charging negligent diagnosis by the defendant physician whose patient died under anesthesia during Caesarean childbirth. The court held that common knowledge did not extend to the intricate subjects of medical negligence in diagnosis, childbirth and anesthetics. That conclusion does not control the simpler facts in our case.
Having determined that plaintiff did make a submissible res ipsa case, we look to defendant's several charges that the trial court erred in giving plaintiff's verdictdirecting and definition instructions. The instructions, with our emphasis added:
Instruction No. 3
"Your verdict must be for plaintiff if you believe:
"First, defendant was the owner of a beauty shop and did advertise himself as a cosmetologist or hairdresser and did employ operators licensed by State Law qualified in hair waving.
"Second, that plaintiff did present herself for a permanent wave to defendant and defendant did undertake to give said permanent waving by an operator and that the control of said permanent waving and the manner of giving was within the control of the defendant wholly and exclusively and that plaintiff was burned about the scalp and hair and did lose large amounts of hair,
"Third, such burning of the scalp and hair was the direct result of defendant's negligence, and
"Fourth, as a direct result of such negligence the plaintiff sustained damage."
Instruction No. 2
"The term `ordinary care' as used in these instructions means that degree of care that an ordinarily careful and prudent person would use under the same or similar circumstances."
The inconsistency is flagrant. The verdict director's "Third" and "Fourth" paragraphs hypothesized negligence. But instead of defining negligence the plaintiff's definition instruction did just the oppositeit defined ordinary care, a term used nowhere in the instructions. MAI 11.02(1) defines negligence and was the applicable instruction. Civil Rule 70.01(b)(c), V.A. M.R. declares that when there is an applicable MAI it is error to give any other instruction. See Brown v. Bryan, Mo., 419 S.W.2d 62[4].
Such an error is presumptively prejudicial, and on appeal the proponent of an erroneous instruction has the burden of establishing its nonprejudice. Murphy v. Land, Mo., 420 S.W.2d 505[4]; Brown v. St. Louis Public Service Co., Mo. (banc), 421 S.W.2d 255[3]. Plaintiff has not shown nonprejudice and could hardly do so in view of the confusion created by omiting an applicable definition and defining its inappropriate counterpart. For this error we must grant a new trial.
The defendant levels a further charge at plaintiff's verdict director. It was an obvious modification of MAI 26.02 (1), Verdict DirectingRes Ipsa Loquitur, although it was not so marked in the trial *802 court. (Civil Rule 70.01[d].) We overlook plaintiff's failure to mark and consider defendant's charge that the modification failed to comply with Civil Rule 70.01(e). That rule declares that when an MAI must be modified to fairly submit the issues and modification was necessary herethe modified instruction shall be simple, brief, impartial, free from argument, and shall not submit detailed, evidentiary facts. Furthermore, it is unnecessary to hypothesize conceded facts (MAI p. xxxi); doing so in an MAI robs the instruction of its required brevity and simplicity. Paragraphs "First" and "Second" of plaintiff's verdict director are too wordy to comply with the modification rule. Under MAI the acid test of an instruction is whether it follows the substantive law in hypothesizing the ultimate disputed facts, cut to the bare essentials; it should be all muscle and no fat.
In view of defendant's admission that his operator did give plaintiff the permanent wave, it would suffice to hypothesize: that defendant's operator had management and control of the materials and equipment used in giving plaintiff her permanent wave, that in doing so plaintiff's hair and scalp were injured, that such injuries were the direct result of the operator's negligence, and that as a direct result of such negligence the plaintiff sustained damage.[*] On retrial plaintiff should consider defendant's criticisms when drafting her verdict director.
We reject defendant's further complaint that plaintiff should have added her definition instruction as another paragraph of the verdict director rather than putting it in a separate instruction. Such incorporation is proper only when the defined term appears in just one instruction. Here the defendant's converse instruction also used the term "negligence". So the definition should be in a separate instruction. See "Notes on Use", MAI 11.02; and the illustrations at MAI 31.00.
The defendant also raises four points about closing argument. He contends plaintiff's counsel went outside the record in arguing: the history of the res ipsa loquitur doctrine, what he had read about the chemical content of caustic permanent wave compounds, the historical practice of head shaving as punishment of women, and the sympathy evoked among plaintiff's fellow employees by her baldness. In view of our remand on other grounds we need not analyze the prejudicial effect of these arguments. But if the case is retried, plaintiff's counsel should consider defendant's criticisms and the prejudicial effect of argument unsupported by evidence. Brown v. Hannibal & St. Joseph R.R. Co., 66 Mo. 588, 1.c. 599; Zoeller v. Terminal Railroad Ass'n of St. Louis, Mo.App., 407 S.W.2d 73 [5, 6].
The judgment must be reversed and the cause remanded for a new trial.
PER CURIAM:
The foregoing opinion of CLEMENS, C., is adopted as the opinion of this court. Accordingly, the judgment is reversed and the cause is remanded for a new trial.
ANDERSON, P. J., and RUDDY and WOLFE, JJ., concur.
NOTES
[*] The element of defendant's superior knowledge is implicit in the admitted fact of the operator's training and the required finding of management and control. Compare Brown v. Bryan, Mo., 419 S.W.2d 62, 67. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455126/ | 429 S.W.2d 447 (1967)
Charles GALBREATH, Complainant,
v.
Frank NOLAN et al., Defendant.
Court of Appeals of Tennessee, Middle Section.
October 27, 1967.
Rehearing Denied January 5, 1968.
Certiorari Denied June 17, 1968.
*448 C. Allen High and Leroy J. Ellis, III, Nashville, for complainant.
Wilson Sims and E. Warner Bass, Nashville, for defendants.
Certiorari Denied by Supreme Court June 17, 1968.
OPINION
TODD, Judge.
This is an appeal by the members of the Davidson County Democratic Primary Election Board, hereafter referred to as defendants, from a decree of the chancellor invalidating certain alleged actions of the Board and awarding to the complainant, Charles Galbreath, a judgment for refund of $933.33 paid to defendants in connection with his candidacy in a Democratic Primary Election.
George McCanless, Attorney General of Tennessee, was named as defendant and filed an answer denying that he was a proper party. No further action or decree for or against him appears in the record, from which we infer that the suit has been abandoned insofar as he is concerned.
Beverly Briley, Mayor, Metropolitan Nashville and Davidson County, Tennessee, was likewise named defendant, but failed to answer and an order pro-confesso was entered against him. No further proceedings or decrees for or against him appear in the record, from which we infer that the suit has been abandoned insofar as he is concerned.
The original bill of complainant was filed on February 7, 1964. The answer of defendants was filed February 28, 1964. The primary election which was the subject of the controversy was to be held on March 19, 1964. The depositions of Charles Galbreath and Hazel Underwood were taken on July 9, 1964 and filed on July 13, 1964. The captions of these two depositions state that they were taken "for purposes of discovery pursuant to the provisions of Section 24-1201 et seq., Tennessee Code Annotated." Each caption states that "C. Allen High, Esq. appeared as counsel for and on behalf of the plaintiff," and each deposition discloses that the only interrogation was conducted by Mr. High. We, therefore, conclude that both depositions were taken at the instance of and on behalf of complainant.
No other evidence appears in the record.
On September 9, 1966, the defendants filed written objections to the competency of the discovery deposition of Charles Galbreath on the ground that the witness was a party, and his discovery deposition was admissible only at the instance of his adversary.
By the same instrument defendants objected to the competency of the discovery deposition of Hazel Underwood on the ground that no ground had been shown for use of the discovery deposition in evidence as required by statute.
Section 24-1208, T.C.A., referring to discovery depositions states in part:
"(b) The deposition of a party * * * may be used by an adverse party for any purpose. (c) The deposition of a witness, whether or not a party, may be used by any party if the court finds: (Here are listed 5 circumstances, none of which appear in the record of this case.)"
*449 No other statutory authority has been found for use of a discovery deposition in evidence.
The memorandum opinion of the chancellor dated September 30, 1967 contains the following:
Since the pleadings in this cause clearly and concisely present the issue, the objection to depositions are really immaterial and there is no need to rule on the objection.
From the foregoing, we are compelled to conclude that the cause was determined by the chancellor without consideration of the depositions. The objections to the consideration of depositions were well taken. (24-1208, T.C.A.). It would not have been proper for the chancellor to consider the depositions. Neither shall we.
Without the depositions, or any other evidence, the only facts which might have been properly considered by the chancellor, or by us on appeal, are those stated in the bill and admitted in the answer and such, if any, as are judicially known to the chancellor and this court.
Complainant's original bill alleged,
"(1) That the defendants had announced a Primary Election in Davidson County to be held on March 19, 1964,
(2) That defendants had announced that only candidates able and willing to pay large sums of money for various public offices would be privileged to participate,
(3) That complainant had been required to pay and had paid to defendants under protest the sum of $2,800.00 in order to qualify as a candidate in said primary,
(4) That said primary was to be held subject to applicable private acts and the general election laws of Tennessee neither of which authorize expenses of elections to be charged to candidates,
(5) That if any act or law authorizes the conduct complained of, it is unconstitutional,
(6) That the actions of the Primary Board constitute unconstitutional discrimination, and
(7) That nomination of the Democratic Primary in Davidson County is tantamount to election."
The answer of defendants made the following responses to the allegations of complainant's bill:
In response to complainant's allegation (1), the proposed primary election was admitted.
In response to complainant's allegation (2), defendant's answer admitted that "the Democratic Executive Committee" (not otherwise identified in the answer) determined that "those candidates who stand to benefit from being nominated by the party should share the expenses of holding the primary." The answer made no admission that the defendant Primary Board had made any decision, announcement or demand of a compulsory deposit as prerequisite to qualification for the primary. The answer concluded with the customary general denial of all matters not specifically denied, hence the substance of allegation (2) stands as denied and at issue in the pleadings.
In response to allegation (3) of complainant's bill, the answer admits: "in accordance with the rules established by the County Democratic Party that he has paid his share of the anticipated expense of the County Primary," and "therefore the complainant's share is $933.33 and the balance of the $2,800.00 qualifying fee will be returned to complainant immediately after the election." The answer alleges, "he has voluntarily paid his qualifying fee. * * *" Thus the defendants admit the payment of $2,800.00 but deny that it was paid under protest.
In response to complainant's allegations (4, 5 and 6), the answer averred that,
* * * the action of the defendants in holding the County Primary is provided by law, and particularly Section 549 of *450 the Private Acts of 1923 and Section 422 of the Private Acts of 1907. * * *"
and denied that said acts or any activities of the defendants are violative of the state or federal constitution.
In response to complainant's allegation (5), the answer specifically denied that the Democratic nomination is tantamount to election and demanded strict proof thereof.
The foregoing is sufficient to establish that the pleadings raised issues of fact to be determined before the trial court, or this court, would be in position to decide the issues of law in relation to the facts as they existed. The absence of any admission or proof that defendants did demand payment of the sum paid as a prerequisite to participation, that payment was made "under protest," or that nomination is tantamount to election, renders moot the questions of law which have been so diligently briefed and earnestly argued upon appeal.
Several maxims of equity are applicable to the record as made in this case:
1. Affirmanti non neganti incumbit probatis. (The burden of proof rests upon him who affirms, not upon him who denies.) Gibson's Suits in Chancery. Fifth Edition, § 451.
2. Quod non apparet non est. (What does not appear [in the record] does not exist [so far as the suit is concerned].) Ibid., § 71(1).
3. Non refert quid notum sit judici, si notum non sit in forma judicii. (It matters not what is known to the judge personally if it be not known to him in his official capacity.) Ibid., § 71(1), 459.
4. Judicis est judicare secundum allegata et probata. (It is the duty of a judge to decide according to the pleadings and the proofs.) Ibid., § 71; 73(22); 597; 1210.
We recognize real and debatable issues of law in relation to the charges made in the complainant's bill, which might be determined in a proper case. It is regrettable that the record before us is not in such form as to authorize such a determination.
It is true that the original bill makes a general attack upon such laws, ordinances, or regulations as may appear to authorize the acts complained of, and that the answer states that holding the primary is provided by laws which authorize and direct that expenses of primaries be defrayed in such manner as is determined by the Primary Board. The complainant does not complain of the holding of the primary, and his allegation as to the particular acts of the defendant are denied and unproven.
As stated in West v. Carr, 212 Tenn. 367, 370 S.W.2d 469 (1962):
In these circumstances, it is plain that complainant's bill fails to state a cause under our Declaratory Judgments Act. That act deals only with present rights that have accrued under presently existing facts. It gives the court no power to determine future rights or possible controversies in anticipation of events that may not occur. (Citing cases) 212 Tenn. p. 380, 370 S.W.2d p. 475.
It does not enable courts to give advisory opinions upon what the law would be upon a theoretical or hypothetical state of facts. (Citing cases).
We will not pass on the constitutionality of a statute, or any part of one, unless it is absolutely necessary for the determination of the case and of the present rights of the parties to the litigation (Citing cases)." 212 Tenn. p. 381, 370 S.W.2d p. 475.
It is to be hoped that the apparent legal issues of this case may be presented to the courts if necessary at such time, under such circumstances, and in such manner that they may be promptly resolved without subjecting parties who have acted in good faith to the peril of subsequent judicial determination. *451 Such was the procedure followed in the case of Ledgerwood v. Pitts, 122 Tenn. 570, 125 S.W. 1036, cited in briefs of both appellants and appellees.
The decree of the chancellor is reversed and the complainant's bill is dismissed, at his cost.
Reversed and dismissed.
SHRIVER, P. J., and PURYEAR, J., concur.
ON PETITION FOR REHEARING
The complainant has filed a petition to rehear which contains a detailed analysis of the opinion of this Court filed on October 27, 1967, together with brief of authorities and argument. Defendants have replied with authorities and argument.
The petition concedes the prerogative of this Court to base its decision upon grounds not argued by counsel. The authorities and argument submitted in the petition and answer thereto have been given full study and consideration, so that this further determination of the matter does follow opportunity of counsel to be heard on the points involved.
One of the grounds of the petition is that the case should be decided upon the pleadings alone. The pleadings were analyzed and discussed in our former opinion which requires no supplement in this regard. The petition does point out that the Supreme Court remanded the cause to this court for a finding of fact, which does not indicate that the pleadings were sufficient basis for a decision in that court.
Complainant insists that the inadvertent wording of the captions of the discovery depositions is a triviality which should be disregarded by this Court. For most purposes, this insistence is sound, but where the inadvertence is such as to mislead adversary into offering no evidence for the defendant, then the inadvertence, if such it be, is not trivial. The supposed inadvertence could have been readily corrected where pointed out by exceptions filed, and defendants could have been given opportunity to contravene evidence with evidence, but this was not done. Complainant went to trial with no competent evidence, and defendants were justified in going to trial with no evidence.
The petition urges that this matter be remanded for a new trial. This possibility was considered and rejected in preparing the original opinion.
As stated in Lyon v. Crabtree, 16 Tenn. App. 42, 64 S.W.2d 24 (1932) in respect to a similar request:
"In view of the multitude of cases in which our Supreme Court has affirmed judgments of trial courts because the evidence was not properly preserved by bill of exceptions, and in not one of which (so far as we can learn) has there been a remand under the authority of the Code section above quoted, we are constrained to hold without discussion, that said Code section has no application to such a case." 16 Tenn. App. at 46, 64 S.W.2d at 26.
And, in Reeve v. Harris (Tenn.App. 1897) 50 S.W. 658, it is said:
"There must be an end of litigation, after the parties have had a full and fair opportunity to have their rights adjudicated. To allow repeated trial, on the theory that the losing litigant might be more successful next time, would be unwise from the standpoint of public policy, and unjust to the opposing litigant." 50 S.W. at 661.
As suggested in our former opinion, there are better times and ways to attempt to reform election procedure than to implead a committee of citizens who propose to hold a primary election, to deposit "under protest" a contribution to the expenses of the election, to urge that the committee proceed with the election with its necessary expenses, and then to demand refund of the contribution which must necessarily *452 have been expended in part at least by conducting the election as urged by complainant.
The petition to rehear is respectfully denied.
SHRIVER, P. J., and PURYEAR, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455135/ | 429 S.W.2d 351 (1968)
STATE of Missouri, Plaintiff-Respondent,
v.
Alex RICHARDS, Defendant-Appellant.
No. 24890.
Kansas City Court of Appeals, Missouri.
June 3, 1968.
*352 Ronald P. Zolotor, Blumer & Wright, Kansas City, for defendant-appellant.
Stephen V. Crain, North Kansas City, for plaintiff-respondent.
SPERRY, Commissioner.
Defendant was charged in magistrate court by uniform traffic ticket (which was signed by the Prosecuting Attorney as an information) with careless and imprudent driving, by failing to yield the right of way on the public streets and highways. He was convicted and a fine of ten ($10.-00) dollars was assessed. He appealed to the circuit court where a jury found him guilty and assessed a fine of one hundred ($100.00) dollars. He perfected his appeal to this court.
His chief contention is that the information upon which he was tried is fatally defective in that a valid charge of violation of a statute is not stated therein. He also contends that certain instructions given in the case are prejudicially erroneous. He does not contend that the evidence failed to prove a submissible case.
The facts necessary to a decision of this case are few and simple. On behalf of the state the testimony came from Mr. Osmon, operator of an automobile which was in collision with defendant's truck, and Mr. Stockdell, a state highway patrolman who arrived at the scene a few minutes after the collision occurred. Testimony on behalf of defendant was by defendant and his wife, who was riding in the seat beside defendant when the collision occurred. No material variation or conflicts are presented.
The scene of the collision was on route 69, Clay County, which is a two lane north-south hard top road. The travelled portion is twenty feet wide. This highway was intersected at this point by an eastwest gravel road, twenty feet wide. There is a "stop" sign located on the gravel road about twenty feet east of the hard top. This gravel road continues west of 69. There is a salvage yard located on the southwest corner of this intersection. Defendant operated his four gear pickup truck westward on the north side of the gravel road and stopped with the middle of his truck south of the stop sign. Defendant stated that he looked to the north and to the south on 69; that there were three automobiles coming from the south, two of which proceeded past the intersection and one was showing its left turn signal; that no traffic was in sight from the north; *353 that he proceeded to cross 69 in low gear at five miles per hour; that he did not accelerate the speed from the time he started forward until the collision occurred; that the front end of the truck was leaving the pavement of 69 when the truck was struck on its side, at about the middle, by the front end of Mr. Osmon's car which was proceeding southward on 69; that the truck was knocked into the salvage yard. The evidence was that defendant did not see the Osmon vehicle and was unaware of its approach until his wife warned him; that there was a clear view, from the gravel road north on 69, for a distance of eight hundred to one thousand feet; that Mr. Osmon was proceeding at a speed of sixty-five miles per hour when he observed the truck as it started forward to enter 69; that he was alarmed and took precautionary measures; that, when the truck entered into 69, he applied his brakes fully and swerved to the right. There were skid marks on 69 leading northward from the point of impact a distance of seventy-eight feet. Defendant told the patrolman that he did not see the Osmon vehicle.
Section 304.010, RSMo 1959, par. 1, V. A.M.S., provides as follows:
"304.010. 1. Every person operating a motor vehicle on the highways of this state shall drive the same in a careful and prudent manner, and shall exercise the highest degree of care, and at a rate of speed so as not to endanger the property of another or the life or limb of any person. * * *."
Section 304.021, RSMo 1959, par. 4, V. A.M.S., provides as follows:
"* * *
"4. The driver of any vehicle shall stop as required by this section at the entrance to a through highway and shall yield the right of way to other vehicles which have entered the intersection on the through highway or which are approaching so closely on the through highway as to constitute an immediate hazard. The state highway commission may erect stop signs at the entrance of any public road into a through highway. * * *."
In the charge upon which defendant was tried in circuit court it was stated, in essence that:
In Clay County, Missouri, at 5:00 P.M., October 27th, 1966, at Rte 69, 1.5 (Miles) north of 92, defendant operated a G.M.C. 3/4 ton truck in a careless and imprudent manner by failing to yield the right of way on the public streets and highways, at a rural location, when cross traffic was present on a two lane road at a right angle.
Defendant urges that the information (1) did not properly advise him of the "nature and cause" of the accusation against him, or (2) fully inform him of the offense of which he was charged, or (3) contain a plain, concise, and definite written statement of the essential facts constituting the offense charged.
Supreme Court rule 24.01, V.A.M.R. (Criminal Procedure) provides in part, as follows:
"The indictment or the information shall be a plain, concise and definite written statement of the essential facts constituting the offense charged. * * *."
As to No. 1 and No. 2 defendant was advised of the nature of the charge, to-wit: "Careless and Imprudent driving", that is, his failure to operate a motor vehicle on the highways in a careful and prudent manner and in the exercise of the highest degree of care, as required by Section 304.010, par. 1, supra. It was stated that he operated his vehicle without care. He was further informed that the charge of failure to operate his motor vehicle in a careful and prudent manner was due to his failure to yield the right of way to other vehicles in cross traffic on the highway at the point mentioned in the information, as provided in Section 304.021, par. 4, supra.
Defendant complains that the specific section of the statutes with which he was charged of having violated was not stated or spelled out in the information. Rule *354 24.11 of Rules for Criminal Procedure provides that no information shall be deemed to be invalid by reason of failure to charge any offense to have been contrary to a statute or statutes notwithstanding such offense may have been created or the punishment declared by a statute.
Regarding No. 3, the time and place at which the offense is charged to have occurred are stated. The specific fact that defendant failed to yield the right of way to cross traffic on a two lane highway 69 is stated. It is difficult to believe that any reasonably intelligent person could read this information and not be fully informed of the nature of the violation charged.
Defendant relies on State v. Bartlett, Mo.App., 394 S.W.2d 434. The information in that case charged that "George Wayne Bartlett operated his 1962 Mercury at a speed in excess of the state limits, to-wit: upwards to 85 miles per hour".
The information failed to charge the commission of any crime in that it did not charge that the mercury was, at the time stated, being operated on a highway. The court stated that the speeding could have occurred on private property, or anywhere. That decision correctly states the law in that case, but is not persuasive here. Defendant also cites State v. McCloud, Mo. App., 313 S.W.2d 177, where it was held that the information was couched in such vague terms as to completely fail to advise of the offense charged, so that defendant might intelligently prepare his defense, and so as to preclude a future prosecution based on the same offense. It is unlike the information here considered. Defendant also cites City of Raytown v. Roach, Mo. App., 360 S.W.2d 741. We properly ruled that the complaint there filed failed to state a cause of action with sufficient certainty and was fatally defective. That decision does not rule this case. Kansas City v. Franklin, Mo.App., 401 S.W.2d 949, is not persuasive here.
Defendant also says that he was not properly charged with the offense of which he was convicted. We have commented on the information. He was charged with careless and imprudent driving in that he failed to yield the right of way at a place where, by statute, he was required to do so. Failure to yield the right of way is specifically denounced as an offense, but may be included, as in this case, as descriptive of what happened and in what manner defendant drove imprudently. For a discussion of a somewhat analogous situation see State v. Travis, Mo.App., 340 S.W.2d 415, 419 and the following pages. Section 556.230, RSMo 1959, V.A.M.S., provides that a defendant may be acquitted of an offense as charged, and convicted of one which is necessarily included in that charged against him. This contention of defendant is disallowed. State v. Hamill, 127 Mo.App. 661, 106 S.W. 1103.
Defendant criticises instruction No. 1, because therein conviction for failure to yield right of way was submitted. What we have said requires that we rule adversely to defendant's contention. He also criticises it on the ground that it is not supported by the evidence. He contends that the jury is thereby required to find defendant's act to have been willful when there is no evidence to that effect. Assuming that this is true, the error, if any, resulted in placing a greater burden on the state than it was required to carry. Defendant did not suffer prejudice. He contends that the instruction is confusing and misleading. It generally follows the language of the statute and contains sufficient facts so that it is not subject to this criticism.
The judgment is affirmed.
MAUGHMER, C., concurs.
PER CURIAM:
The foregoing opinion of SPERRY, C., is adopted as the opinion of the Court. All concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455154/ | 255 P.3d 1287 (2011)
Pedro T. GALLEGOS, Individually and as Assignee of David Gonzalez; and David Gonzalez, Individually and as Assignor, Appellants,
v.
MALCO ENTERPRISES OF NEVADA, INC., d/b/a Budget Rent A Car Las Vegas; Knight Management Insurance Services, LLC; and First American Property and Casualty Insurance Company, Respondents.
No. 55633.
Supreme Court of Nevada.
August 4, 2011.
*1288 Lewis & Roca LLP and Daniel F. Polsenberg and Joel D. Henriod, Las Vegas; Porter & Terry, LLC, and Richard T. Terry, Las Vegas, for Appellants.
Snell & Wilmer, LLP, and Justin L. Carley, Las Vegas, for Respondents.
BEFORE SAITTA, HARDESTY and PARRAGUIRRE, JJ.
OPINION
By the Court, PARRAGUIRRE, J.:
In this opinion, we clarify that rights of action held by a judgment debtor are subject to execution toward satisfaction of a judgment under NRS 21.080, and may be judicially assigned pursuant to NRS 21.320. Because, in this case, appellant Pedro Gallegos properly asserted a right of action assigned to him by another district court, we conclude that the district court in the instant action erred in determining that he lacked standing to bring the claim and in granting summary judgment to respondents on that basis. Accordingly, we reverse the district court's summary judgment and remand this matter for further proceedings.
FACTS AND PROCEDURAL HISTORY
Gallegos was injured by appellant David Gonzalez in a hit-and-run car accident. At the time of the accident, Gonzalez was driving a car rented from respondent Malco Enterprises of Nevada, Inc., d.b.a. Budget Rent A Car of Las Vegas. When renting the car, Gonzalez purportedly purchased a supplemental renter's liability insurance (RLI) policy from Budget. This policy was issued by respondent First American Property and Casualty Insurance Company, and was managed by respondent Knight Management Insurance Services, LLC.
Gallegos sued Gonzalez for injuries resulting from the accident and ultimately obtained a default judgment against him for over $400,000. Gonzalez failed to appear at scheduled judgment debtor exams, however, and Gallegos was unable to collect on the judgment. Accordingly, Gallegos sought a judicial assignment of Gonzalez's unasserted claims against respondents, which was granted. Specifically, the earlier district court assigned Gonzalez's unasserted claims for "Breach of Contract, Breach of Fiduciary Duties, [and] Breach of Duty of Good Faith and Fair Dealing." The assigned claims related to Gonzalez's insurance policy with respondents.
Gallegos then brought the assigned claims against respondents in a separate district court action.[1] Respondents moved for summary judgment on the basis that the previous district court could not assign the right of action in a proceeding supplementary to the execution of the judgment and, thus, Gallegos lacked standing to bring Gonzalez's claims against respondents, among other things. The district court in the underlying action concluded that the previous district court's assignment order was invalid and thus granted respondents' motion for summary judgment, vacating the earlier assignment order. This appeal followed.
DISCUSSION
On appeal, appellants argue that the district court erred in granting summary judgment because Gonzalez's right of action was judicially assigned to Gallegos in the proceedings supplementary to the execution of his judgment against Gonzalez.[2] We review this issue de novo. See State, Div. of Insurance v. State Farm, 116 Nev. 290, 293, 995 *1289 P.2d 482, 484 (2000) (reviewing questions of law de novo); Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005) (reviewing a district court's grant of summary judgment de novo).
To resolve this appeal, we must determine whether a right of action held by a judgment debtor is property that can be judicially assigned in a proceeding supplementary to the execution of a judgment. Nevada's statutory scheme regarding enforcement of judgments is laid out in NRS Chapter 21.[3] NRS 21.320 provides that a district court "may order any property of the judgment debtor not exempt from execution ... to be applied toward the satisfaction of the judgment." Accordingly, so long as a right of action is "property ... not exempt from execution," it may be judicially assigned in satisfaction of a judgment. NRS 21.320.
To help us determine whether a right of action is "property ... not exempt from execution," we turn to NRS 21.080(1). That statute provides that: "[a]ll goods, chattels, money and other property, real and personal, of the judgment debtor, or any interest therein of the judgment debtor not exempt by law, and all property and rights of property seized and held under attachment in the action, are liable to execution." NRS 21.080(1). NRS 10.045 further defines "[p]ersonal property" as including "money, goods, chattels, things in action and evidences of debt." (Emphasis added.) See also NRS 10.010 (providing that the definition used in NRS 10.045 applies to the entire statutory title, including NRS 21.080). A "thing in action," alternatively referred to as a "chose in action," is defined as a "right to bring an action to recover a debt, money, or thing." Black's Law Dictionary 1617, 275 (9th ed. 2009).
Based on the above statutory authority, we conclude that rights of action held by a judgment debtor are personal property subject to execution in satisfaction of a judgment.
This conclusion finds support in caselaw. First, interpreting a right of action as personal property subject to execution accords with this state's general policy that statutes specifying the kinds of property that are subject to execution "must be liberally construed" for the judgment creditor's benefit. Sportsco Enter. v. Morris, 112 Nev. 625, 630, 917 P.2d 934, 937 (1996). Second, our decision finds considerable support in the California Court of Appeal's holding in Denham v. Farmers Insurance Co., 213 Cal. App. 3d 1061, 262 Cal. Rptr. 146 (1989). In Denham, the court analyzed whether Nevada law permitted "a judgment creditor [to] execute upon a judgment debtor's cause of action against its insurer," and concluded that "Nevada law permits execution upon a cause of action." 262 Cal. Rptr. at 149, 152. We approve of the Denham court's reasoning and conclusion. Finally, several federal cases applying Nevada law provide additional support for our holding. See Kelly v. CSE Safeguard Ins. Co., No. 208-CV-00088-KJD-RJJ, 2010 WL 3843777, at *2 (D.Nev. Sept. 28, 2010) (recognizing that "Nevada permits a judgment creditor to execute upon a judgment debtor's cause of action" and permitting the judgment creditor assignee to pursue a bad-faith claim against the judgment debtor's insurer (citing Denham, 262 Cal.Rptr. at 151-52)); cf. Wilson v. Bristol West Ins. Group, No. 2:09-CV-00006-KJD-GWF, 2009 WL 3105602, at *2 (D.Nev. Sept. 21, 2009) ("Nevada does not recognize a right of action by a third-party claimant against an insurance company for bad faith without a proper assignment of rights.").
In light of our conclusion that a district court may assign a judgment debtor's right of action to a judgment creditor in execution of a judgment, we reverse the district court's *1290 summary judgment and remand this matter for further proceedings.[4]
We concur: SAITTA and HARDESTY, JJ.
NOTES
[1] Gonzalez was also named as a plaintiff, although the reason for this is unclear from the record.
[2] Because we conclude that the district court erred in granting summary judgment based upon its determination that Gonzalez's right of action was invalidly assigned, we do not address appellants' argument that the district court lacked jurisdiction to vacate the assignment order.
[3] As a preliminary matter, the district court erroneously focused its analysis on NRS 21.330. NRS 21.330 allows for execution against property held by a third party that allegedly belongs to a judgment debtor and does not apply when a creditor seeks to execute against property held by the judgment debtor.
In this case, the property at issue is Gonzalez's right of action against respondents. While a cause of action will inevitably be asserted against some third party, the right of action itself is the property of the judgment debtor. Thus, the relevant inquiry is whether a judgment creditor may execute upon rights of action held by a judgment debtor pursuant to NRS 21.080.
[4] We note that although Gallegos signed a written release of any personal claims against respondents, that release did not encompass the first-party claims that were later assigned to him in execution of his judgment against Gonzalez. Similarly, the district court's order in a third related action dismissed only Gallegos' third-party claims against respondents and did not resolve Gonzalez's first-party claims. Because it is the assigned first-party claims that form the basis for the instant appeal, we conclude that neither the release nor the district court order in the third action support the district court's grant of summary judgment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455159/ | 429 S.W.2d 815 (1968)
Abbott WIDDICOMBE et al., Appellants,
v.
I. W. McGUIRE, Jr., Individually and doing business as McGuire Construction Company, Appellee.
Supreme Court of Tennessee.
March 5, 1968.
Heiskell, Donelson, Adams, Williams & Wall, Memphis, for appellants.
Evans, Petree, Cobb & Edwards, Memphis, for appellee.
OPINION
WILLIAM J. HARBISON, Special Justice.
This suit originated in the Chancery Court of Shelby County, and was a bill brought by the complainants, Abbott Widdicombe and F. Allan Brown, to enjoin a Circuit Court suit which had been brought by I.W. McGuire, Jr., against them on a *816 promissory note on which there was a balance due in the amount of $120,000.00, with accrued interest.
For convenience, the parties will be referred to herein as they appeared in the trial court.
The chancellor issued a temporary injunction against the proceedings in the Circuit Court, but upon motion of the defendant the injunction was dissolved. Thereafter, the injunction was reinstated pending disposition of the present appeal, upon the execution by complainants of an additional bond.
In their suit to enjoin the Circuit Court action, complainants admitted liability upon the note which was the subject of that action. It was their contention, however, that further prosecution of McGuire's suit in the Circuit Court should be enjoined until a previous suit pending in the Chancery Court against McGuire and others had been determined. The present suit for an injunction was filed on March 15, 1966.
On November 5, 1963, Central Towers Apartments, Inc., a Tennessee corporation, had filed a suit in the Chancery Court of Shelby County, Tennessee, against McGuire and others, seeking damages for alleged breach of a building contract for the construction of a large apartment building in Memphis, Tennessee. Joined as defendants in the 1963 action were McGuire, who was the general contractor for the building of the apartments, the surety on his construction bond, the architect on the project, and several of the major subcontractors. The bill alleged that the owner of the apartments, Central Towers Apartments, Inc., was entitled to damages by reason of various defects in the construction of the apartments, and several different items of damages were sought from the respective defendants. In an answer and cross-bill filed by McGuire in that action, it was contended that McGuire had remedied many of the defects complained of in the bill. It was further alleged that McGuire was entitled to indemnification from several of the subcontractors involved, in the event it should be determined that the owner of the apartments was entitled to damages by reason of defective equipment or workmanship. In addition, McGuire plead as an offset or recoupment to the Central Towers suit a note of some $20,000.00, which had been issued to him by the corporation for amounts due him under the construction contract.
This litigation has been pending in the Chancery Court since November, 1963, and has not been tried to date, insofar as the record before us discloses.
The Circuit Court action by McGuire against Brown and Widdicombe resulted from a promissory note executed by them to McGuire under date of December 15, 1962. This note was payable in annual installments of $30,000.00 each, commencing in January, 1964. There is no dispute between the parties but that the first installment on this note was paid when due in January, 1964. The installments for 1965 and 1966 were not paid, however, and on January 15, 1966, McGuire's solicitor demanded payment on the installments then due. This demand was not met. In late January, 1966, complainant Brown sought leave to file an amended and supplemental bill in the Central Towers litigation, alleging that he had become sole owner of all of the stock of Central Towers Apartments, Inc., had dissolved the corporation, and was the only person beneficially interested therein. He further alleged that he had agreed to indemnify Widdicombe on the December, 1962 note payable to McGuire, and sought to enjoin McGuire from filing an independent action on the note and to compel McGuire to plead the note as recoupment or set-off in the Central Towers litigation. This application to file an amended and supplemental bill, and to enjoin McGuire was denied on March 4, 1966. Immediately thereafter, McGuire filed his suit in the Circuit Court on the note, as above described. On March 15, 1966, complainants filed this action in the Chancery Court to enjoin the Circuit Court proceedings as aforesaid. A temporary injunction issued. Defendant McGuire *817 filed a motion to dissolve this injunction; and after taking the matter under advisement and considering briefs and argument, the chancellor dissolved the temporary injunction and dismissed the bill.
After a careful consideration of this record, we are of the opinion that the chancellor did not abuse his discretion in this disposition of the case.
It is clear from the record before us that the note given by Brown and Widdicombe to McGuire arose out of their purchase of McGuire's right to acquire stock in the Central Towers Apartments, Inc. This was a personal undertaking and obligation of Brown and Widdicombe. On the other hand, the original suit brought in the Chancery Court in 1963 was brought by and on behalf of the corporation, in its corporate capacity, to recover damages for breach of the building contract. It does appear that thereafter the corporation was dissolved and that Brown became sole owner of its assets. We do not regard this fact, however, as constituting any special equity in Brown's favor which would make it mandatory for the Chancery Court to enjoin the Circuit Court action on the personal note given in December, 1962.
There is no claim or suggestion of insolvency of any party in the case, so as to make applicable considerations of equitable set-off by reason by insolvency. It is too well settled to require extended discussion that a court of equity generally will not enjoin a suit at law unless there be some special ground for equitable relief. See Robinson v. Easter, 208 Tenn. 147, 334 S.W.2d 365 (1961), and cases cited therein. Further, Tennessee does not have any compulsory counterclaim statute, comparable to Rule 13(a) of the Federal Rules of Civil Procedure. The Tennessee statutes dealing with set-off, recoupment and cross-actions are permissive rather than compulsory. T.C.A. § 20-1001 et seq.; Colella v. Whitt, 202 Tenn. 551, 308 S.W.2d 369 (1957); Holland v. Forcum-James Cooperage & Lumber Co., 154 Tenn. 174, 285 S.W. 569 (1926). Even under Rule 13, however, a counterclaim is compulsory and must be asserted as such only if it arises out of the same "transaction or occurrence" as that involved in the original suit. Otherwise it is merely permissive and may be asserted in an independent action. See Rules 13(a) and (b), Federal Rules of Civil Procedure. We have real doubt that McGuire's claim on this note could fairly be said to have arisen out of the building contract on which he had been sued by Central Towers Apartments, Inc.
At the time Central Towers Apartments, Inc., commenced its suit against him, it seems clear that McGuire could not have plead by way of set-off or recoupment in that litigation the personal note of Brown and Widdicombe to him. The owners of this apartment complex saw fit to do business in corporate form for several years. Brown later acquired all of the stock and then saw fit to dissolve the corporation and operate the enterprise as an individual proprietorship. In our opinion this fact does not entitle him to compel McGuire to plead the personal note of Brown and Widdicombe as a defense to the chancery suit which was originally begun as a corporate action. It is stated in the briefs that Brown "did business" in the corporate form of Central Towers Apartments, Inc., for some years, but this statement is inaccurate in legal theory. The corporation had a separate legal existence apart from Brown. There is shown no basis upon which we would be justified in saying that throughout all of the multiple transactions reflected in this record the corporation was a mere shell or sham, whose existence should be disregarded. We think that the following statement by the United States Supreme Court is appropriate:
While corporate entities may be disregarded where they are made the implement for avoiding a clear legislative purpose, they will not be disregarded where *818 those in control have deliberately adopted the corporate form in order to secure its advantages and where no violence to the legislative purpose is done by treating the corporate entity as a separate legal person. Schenley Distillers Corporation v. United States, 326 U.S. 432, 437, 66 S. Ct. 247, 249, 90 L. Ed. 181, 184 (1946).
See also Maley v. Carroll, 381 F.2d 147 (5th Cir.1967).
It results that we are of the opinion that the chancellor properly denied the permanent injunction sought in the original bill filed in this cause and properly dissolved the temporary injunction.
The chancellor, however, in addition to denying a permanent injunction, awarded judgment in favor of the defendant McGuire against the complainants and the surety on their injunction bond in the amount of $4,233.25, stating that this amount represents six per cent interest on the amount sued for in the Circuit Court, which suit the defendant had been enjoined temporarily from prosecuting. We are of the opinion that inasmuch as the defendant is now free to sue on the note in the Circuit Court with all accrued interest thereon according to the terms of the note, additional damages should not be awarded. There is no proof in the record before us of any damages actually sustained by McGuire. Accordingly we modify the decree of the chancellor by disallowing the aforesaid item of damages. All costs of the cause shall be paid by the complainants and the balance of the sum secured by the appeal bond filed in this cause shall be paid to the defendant, first to be credited on accrued interest on the note, and the balance, if any, to be applied to the principal balance on said note, all as provided in the terms of said bond.
As modified, the judgment of the trial court is affirmed.
BURNETT, C. J., and DYER, CHATTIN and CRESON, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455162/ | 429 S.W.2d 925 (1968)
Clayton BLAKEWAY et al., Appellants,
v.
GENERAL ELECTRIC CREDIT CORPORATION, Appellee.
No. 11613.
Court of Civil Appeals of Texas, Austin.
June 5, 1968.
Rehearing Denied June 26, 1968.
*926 McGinnis, Lochridge, Kilgore, Byfield, Hunter & Wilson, Donald F. Nobles, Austin, for appellants.
Pearce & Smith, Maloney, Black & Hearne, Thomas Black, Austin, for appellee.
PHILLIPS, Chief Justice.
This case involves a breach of a lease agreement to purchase 120 television sets, among other property, and an action for damages.
In December of 1962 an agreement for the lease of 120 television receivers, 120 television bases, an antenna distribution system and certain related equipment was entered into between General Electric Credit Corporation as lessor and Ramada Inn Motel of Midland, Texas, as lessee. At the time of the execution of the lease agreement this Ramada Inn was owned by a partnership comprised of Clayton Blakeway and Donald McGregor. Subsequent to the execution of the lease agreement McGregor sold and transferred his interest in the partnership to appellant Ben W. Greig, Jr. Appellee had the lessor's interest in the agreement assigned to it subsequent to the execution thereof.
*927 Appellants made 43 of the 60 payments provided for in the agreement, then made no payments after September, 1966.
In December of 1966, the Republic National Bank of Dallas foreclosed its deed of trust lien on the real estate and improvements in which the leased equipment was located. Since appellants had been dispossessed of the property where the leased equipment was located, they relinquished physical possession and control of the leased equipment to the Bank, who purchased the realty at the foreclosure sale.
During the early part of January, 1967, appellee requested the Bank to assume appellants' obligations under the lease agreement; however, the Bank repudiated the lease agreement. Appellee also tried to renegotiate a lease agreement with the Bank, however this was also unfruitful.
On January 19, 1967, appellee notified appellants that it intended to hold a public sale of the leased television receivers on February 1, 1967. Appellee then published a notice of this proposed sale in a Midland newspaper on each day from January 23, 1967 through January 27, 1967. On February 1, 1967, appellee entertained bids to purchase the leased television equipment from a number of people; however, on its own bid, appellee was successful in purchasing this equipment for $2,400, which amount was credited to appellants.
Thereafter, appellee sold the equipment to the Republic National Bank of Dallas.
Appellees filed this suit in April, 1967. After trial on the merits, the court entered a take nothing judgment; however, the court, on proper motion, and in December of 1967 after a second trial, entered judgment awarding appellees $6,103.06 in damages. Hence this appeal.
We affirm.
Appellants are before us on eleven points of error, the first three, briefed together, being the error of the trial court in his conclusion of law No. 1 that the lease was and is a valid and enforceable obligation and in failing to hold, as a matter of law and under the terms of the lease contract, that such lease contract was terminated by the parties; that in conclusion of law No. 6 appellee did not accept surrender of the lease and in failing to hold, as a matter of law, that appellee accepted surrender of the lease; in conclusion of law No. 4 that appellee was entitled under the lease and under the law to sell the leased equipment and recover its damages and in failing to hold, as a matter of law, that appellants were relieved of liability by reason of surrender of lease equipment by appellants and acceptance by appellee.
We overrule these points.
Appellants cite a number of cases[1] to the effect that where the lessor has taken possession of leased property before the expiration of the term of the lease or done any act inconsistent with the continuation of the "lessor-lessee" relationship, there is a termination of the lease as a matter of law.
It is conceded that appellants defaulted in the payments due after October, 1966. The court found, without objection, that in November, 1966, appellee unsuccessfully wrote appellants and requested immediate payment *928 of the delinquent rentals and continued performance of the lease contract. It is further conceded that in January, 1967, appellants allowed ad valorem taxes on the equipment to become delinquent and cancelled the insurance required by the lease. It is also conceded that in December of 1966, the Ramada Inn was conveyed through foreclosure to the Bank and appellants left the premises where the leased equipment was located and installed and relinquished all possession and control of the equipment to the Bank.
It was stipulated and found by the court that after appellants vacated the premises the Bank was called upon to honor the lease agreement; however, the Bank repudiated the lease and refused to make the delinquent payments current or to make any further payments thereon or to perform any of the duties or obligations of the lease. It was also found by the court that appellee attempted to renegotiate the lease with the Bank but was unsuccessful in this effort.
We hold that the trial court was correct in finding that appellants abandoned the leased property. Under the breach of the contract before us, appellees had either of two remedies: (1) sue for payments of the rents provided for in the contract, or (2) take possession of the property and sue for their damage which would be the difference between the rent contracted for and that received by appellees for the use of the property.[2] Stewart v. Basey, 241 S.W.2d 353 (Tex.Civ.App.Austin 1951), aff'd. 150 Tex. 666, 245 S.W.2d 484; Marathon Oil Co. v. Edwards, 96 S.W.2d 551 (Tex.Civ. App.Amarillo 1936, writ dis'm); Evons v. Winkler, 388 S.W.2d 265 (Tex.Civ.App. Corpus Christi 1965, writ ref'd n. r. e.).
The cases cited by appellants are not in point as they all involve situations where there was a surrender as a matter of law. The principle is well stated in Barret v. Heartfield, 140 S.W.2d 942 (Tex.Civ.App. Beaumont 1940, writ ref'd) wherein the Court stated:
When the tenant abandons the leased premises, it is the settled law of this state that the landlord may relet the premises by taking proper precaution not to create a surrender by operation of law. Early v. Isaacson, Tex.Civ.App., 31 S.W.2d 515; see criticism of this case 9 Texas Law Review 578. So, the mere renting of the filling station by appellant to third parties after appellees' default in the payment of their rent notes and after they and their sublessee vacated the premises in violation of their contract did not terminate the rent contract and did not release appellees from the payment of the notes in controversy. Marathon Oil Co. v. Rone, Tex.Civ.App., 83 S.W.2d 1028."
The facts here amply support the finding of the trial court that the lease was abandoned.
Appellants' points four through seven, briefed together, are the error of the trial court in finding that there was no mutual agreement for appellee to accept surrender of the lease, since there was no evidence to support such findings; such finding is against the great weight and preponderance of the evidence; that appellee never intended to accept surrender of the lease since there was no evidence to support such finding; that such finding is against the great weight and preponderance of the evidence.
We overrule these points.
A landlord's acceptance of a lessee's surrender of a lease by abandonment occurs only by mutual agreement. There must be a showing of an intention on the part of the lessor to abrogate the contract. 36 Tex.Jur.2d "Landlord and Tenant," Secs. 360, 361. In this case the undisputed facts disclose that appellee continued to attempt *929 enforcement of the lease long after it was abandoned by appellants, even to the point of negotiating with the Bank to which appellants relinquished possession of the sets. When the sets were finally sold, they were sold with full notice to appellants and the proceeds were applied to appellants' credit.
Appellants' eighth and ninth points, briefed together, are the error of the court in its conclusion of law No. 1 that the lease was and is a valid and enforceable obligation and in failing to hold, as a matter of law, that appellee in attempting to accelerate payments under the lease contract, which constitutes an attempt to impose a penalty on appellants and is, therefore, unenforceable; the error of the court in its conclusion of law No. 5 that appellee was damaged in the amount of $6,002.16, since there was no pleading or proof of appellee's actual damage.
We overrule these points.
The figure of $6,103.06 awarded to appellee by the District Court's judgment represents the following accounting:
Accrued unpaid rentals at time of sale - - - - - - - - - - - - - $2,500.00
Future rentals due under terms of lease contract - - - - - - - - 6,002.16
_________
Total unpaid rentals - - - - - - - - - - - - - - - - - - $8,503.06
Proceeds of sale - - - - - - - - - - - - - - - - - - - - - - - - 2,400.00
Balance due - - - - - - - - - - - - - - - - - - - - - - $6.103.06
=========
As a general rule, damages for breach of contract seek to allow "the injured party to have the value to him of the contract's performance." Texas Pacific Coal & Oil Co. v. Barker, 117 Tex. 418, 6 S.W.2d 1031, 1037, 60 A.L.R. 936 (1928); or as stated differently by the Supreme Court in Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952), "The universal rule for measuring damages for the breach of a contract is just compensation for the loss or damage actually sustained."
Specifically, this general rule was applied in Stewart v. Basey in the exact manner that damages were computed in the present case. Stewart v. Basey involved a lease beginning January 1, 1949, and ending December 31, 1954, with a monthly rental of $325.00. The lessee paid the rentals through November, 1949, and then vacated the premises, returned the keys to the landlord and repudiated the contract. The lessors took possession of the premises, relet them to the exclusion of the lessee, and sued lessee for its damages.
One issue in Stewart v. Basey concerned a liquidated damages provision at $150.00 per month, and the Court found that this constituted a penalty. This issue is of no importance here because the liquidated damage provision did not give credit for rental received through reletting and was in no way related to "just compensation."
What is important here is that this Court remanded the case so as to assess damages at the rate of rental the lessor would have received under the lease through December 31, 1954, less the amount of rentals contemplated by the reletting contract. The measure of damages used by this Court is expressly stated as "the difference between the rent contracted for and that received." (241 S.W.2d at 357) This was explicitly approved by the Supreme Court. (245 S.W.2d at 487).
These monetary facts were pleaded, for the most part, as set out above. Thus the pleadings were adequate to substantiate appellee's loss under the contract.
Consequently, we overrule appellants' points ten and eleven which complain of the error of the trial court in finding of fact No. 7 that $6,002.16 represents the value to *930 appellee of full performance of the lease, since there was no evidence to support such finding and since such finding is against the great weight and preponderance of the evidence.
The judgment of the trial court is affirmed.
Affirmed.
NOTES
[1] "Rohrt v. Kelley Manufacturing Company, 162 Tex. 534, 349 S.W.2d 95 (1961); Dearborn Stove Co. v. Caples, 149 Tex. 563, 236 S.W.2d 486 (1951); Walter E. Heller & Company v. Allen, 412 S.W.2d 712 (Tex.Civ.App. Corpus Christi 1967, writ ref'd n. r. e.); Wheeler v. Thomas, 328 S.W.2d 891 (Tex.Civ. App. Beaumont 1959, no writ); Nutt v. Berry, 323 S.W.2d 500 (Tex.Civ.App. El Paso 1959, no writ); Flack v. Sarnosa Oil Corp., 293 S.W.2d 688 (Tex.Civ.App. San Antonio 1956, writ ref'd n. r. e.); Whitman v. Cearley, 251 S.W.2d 960 (Tex.Civ.App. Galveston 1952, writ ref'd n. r. e.); Barret v. Heartfield, 140 S.W.2d 942 (Tex.Civ.App. Beaumont 1940, writ ref'd); Cannon v. Freyermuth, 4 S.W.2d 84 (Tex.Civ.App. Dallas 1928, no writ); Collier v. Wages, 246 S.W. 743 (Tex.Civ.App. Fort Worth 1922, no writ); South Falls Corporation v. Kalkstein, 349 F.2d 378 (Fifth Cir. 1965)."
[2] We see no disadvantage to appellant that appellee, being unable to lease the property, sold the property and thereby received a fair price for the use of the property for its life rather than a fair price for the use of the property for a limited time, presumably a lesser sum, if this had been possible. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455163/ | 429 S.W.2d 949 (1968)
BRAZOS RIVER AUTHORITY, Appellant,
v.
J. W. GILLIAM et al., Appellees.
No. 16934.
Court of Civil Appeals of Texas, Fort Worth.
June 7, 1968.
Rehearing Denied June 28, 1968.
*951 Beard & Kultgen, and David B. Kultgen, Waco, for appellant.
C. O. McMillan, Stephenville, for appellees J. W. Gilliam et al.
Touchstone, Bernays & Johnston, and Charles Beresford, Dallas, for appellee Gifford-Hill & Co., Inc.
OPINION
MASSEY, Chief Justice.
The case before us grew out of a condemnation proceeding under Vernon's Ann.Tex.Civ.St., Title 128, "Water", Chapter 3A, "Water Control and Improvement Districts", Art. 7880-126, "Eminent domain". There is no question involving procedure.
The appeal by the condemnor, the Brazos River Authority, is in complaint that amounts awarded certain condemnees were improper and/or excessive.
Predicate for some of the points of error brought forward on the appeal from the judgment of the District Court was founded upon the premise that in a trial before the court the complaining party could contend that the judgment was founded upon findings of fact and conclusions of law apparently made by the courtother than upon such appearing in the record within the contemplation of Texas Rules of Civil Procedure, rule 296, "Conclusions of Fact and Law". The appealing Authority refers to a letter written by the trial judge (made a part of the transcript) wherein it claims conclusions of law were obviously predicated upon findings of fact which were not in the evidence proper to be considered by the court as the fact finder. There was no request for and no Findings of Fact and Conclusions of Law filed in the case.
The appellees contend that the case must be viewed as one wherein there were no specific fact findings made apparent for consideration by an appellate court, the letter of the trial court not having force and effect to supply predicate for a contention that error existed in consideration of evidence therein referred to. We agree with appellees. In Ramirez v. Milton Provision Co., 231 S.W.2d 547 (San Antonio Civ.App., 1950, no writ hist.) it was said: "This case was tried to the court without a jury. There appears in the transcript an opinion written by the trial judge giving his reasons for holding against the appellant. No request for findings of fact or conclusions of law was made, and we do not construe the opinion referred to as constituting findings and conclusions under Rule 296, Texas Rules of Civil Procedure. Although we have found the opinion helpful in giving the trial judge's view of the controversy, we are governed by the well recognized rule that in the absence of findings of fact and conclusions of law the appellate court will presume that all fact issues having support in the evidence were found in support of the judgment."
In view of our holding in accord with Ramirez, the contention of the appealing Authority upon the premise that there was no evidence to support the judgment of the trial court fails, there being evidence in the record admittedly proper of consideration which is of sufficient probative force and effect to support the judgment. Furthermore, the evidence proper to be considered upon the value of the property of Mr. and Mrs. Mark M. Malone, not only supports the judgment in their behalf but the value found by the court is not against the great weight and preponderance of the whole evidence.
Remainder of the points of error relate to the findings of the trial court relative to value of property which Mr. and Mrs. J. W. Gilliam either own in the entirety or as to which they own all but the sand and gravel rights which Gifford-Hill and Company, Inc. claim under lease. The value finding was in the total amount of $86,295.25, apportioned $67,194.44 to the Gilliams, as landowners and $19,064.81 to Gifford-Hill, as leaseholder. Between the *952 landowners and the leaseholder there is no dispute and the former is willing that the leaseholder should haveof the total judgment awardthe amount of $19,064.81.
Citing County of McLennan v. Shinault, 302 S.W.2d 728 (Waco Civ.App., 1957, no writ hist.), the Authority contends that the condemnation award to Gifford-Hill was improper. The holding in Shinault is without application. The Gilliams, as primary condemnee-beneficiaries, are entitled to the entire $86,295.25. If any part thereof is awarded to any third party only they would be entitled to complain, not the condemnor who must pay the value of what it received in any event. The Gilliams do not complain. The complaint of the Authority is overruled.
Other points of error are (1) that the Gilliam tract was valued as gravel land and should not have been so valued; and (2) assuming that it was proper to so value itthat the trial court erred in multiplying the number of cubic yards of gravel in place by an assumed value per cubic yard; (3) that it was error to treat the Durham, Burks and Whitehead sales as constituting comparable sales; (4) that error resulted because the trial court failed to consider differences in the value of gravel in the Gilliam tract and the value of the gravel in the Durham, Burks and Whitehead tracts; and (5) that the trial court erred in applying the wrong discount to the Durham, Burks and Whitehead sales.
Though it was conceded in the evidence that at least 916,000 cubic yards of gravel and sand underlay approximately 34 acres of the Gilliam tract no gravel operation had ever been conducted to extract it prior to condemnation. By reason thereof and the fact that there was no evidence that such would be conducted within the immediate future or within a reasonable time the Authority advanced the contention that principles of law announced in City of Austin v. Cannizzo, 153 Tex. 324, 267 S.W.2d 808 (1954) inhibited the evaluation of such tract as gravel land. We hold that Cannizzo is without application and overrule the contention. To mine a tract of land for sand and/or gravel is not such a "use" as was contemplated in the cited case. Plans to so mine the property or not within any particular period would have no effect upon the general rules applicable to condemnation cases. Sand and gravel underlaying condemned land partakes of the nature of realty. Mineral deposits, when taken as part of the whole property condemned are proper to be taken into consideration in a determination of the whole value. Brazos River Conservation and Reclam. Dist. v. Costello, 169 S.W.2d 977, 988 (Eastland Civ.App., 1943, writ ref. w.o.m.). It is proper that evidence be heard and considered in eminent domain cases of the value of sand and/or gravel as it lies in its natural state in the ground. Reilly v. State, 382 S.W.2d 116 (San Antonio Civ. App., 1964, writ ref., n.r.e.).
In the letter of the trial judge, heretofore mentioned, it was indicated that the trial court assumed a value per cubic yard for the gravel in place and multiplied it by the number of cubic yards shown existent in the land of the Gilliam tract. But, as indicated, the remarks in the letter do not qualify as formal Findings of Fact and Conclusions of Law upon which points of error might be predicated. There was other evidence in the record from which the ultimate amounts awarded by the judgment were supported. Because thereof the point of complaint must be overruled. In part such evidence was bolstered by calculations of the nature of that complained of by witnesses upon the matter of value, but for an expert witness to do so and to be examined and cross-examined upon such calculations as an element in opinion evidence as to value of the realty upon which such had consequential effect is in our opinion procedurally proper.
In the testimony given by witnesses upon the matter of value of the Gilliam tract it was shown that there were three sales of sand and gravel in place in *953 the vicinity of the Gilliam tract in recent times. The sale of sand and gravel in place on the Burks and Whitehead tracts occurred in 1966, and the sale of such on the Durham at an earlier date. The price paid therefor was exclusive of the surface of the realty under which the sand and gravel was located. Additional evidence showed the relation of values and effect upon total value of realty having an underlying deposit of gravel. Such sales, as having the characteristics of comparable sales to be taken into consideration in evaluating the whole of the Gilliam tract (though sales were not of the whole of the Durham, Burks and Whitehead properties) were of course proper to be considered by an expert witness in arriving at an appraised value of the whole of the Gilliam tract. Being proper for the witness they would be proper for the fact finder's consideration as well.
In Bruner v. State, 391 S.W.2d 149, 155 (Fort Worth Civ.App., 1965, writ ref., n.r.e.) (certiorari denied 383 U.S. 945, 86 S. Ct. 1200, 16 L. Ed. 2d 207), we said: "A discretion is lodged in the trial court relative to whether evidence tendered purporting to show sales of comparable property to that condemned shall or shall not be admitted. Chaney v. Coleman, 77 Tex. 100, 13 S.W. 850 (1890); City of Austin v. Cannizzo, 153 Tex. 324, 267 S.W.2d 808, 816 (1954); McCormick & Ray, Texas Law of Evidence, 2d Ed., p. 371, `Similar Acts and Transactions', § 1524, `Sales of Similar Property to Evidence Value', (1st Ed., p. 908, § 699); 118 A.L.R. 869 and 174 A.L.R. 386, Annotation: `Admissibility on issue of value of real property of evidence of sale price of other real property'. In other words there is an area in which such character of evidence constitutes such that the judge presiding over the trial court has the final decision upon the question of whether the subject matter of the sale or sales does or does not qualify as similar property to that condemned. Within such area it is the trial court's exclusive discretion to rule upon whether the evidence tendered shall or shall not be admitted where an appellate court should not disturb the decision the trial court rendered regardless of whether the appellate judges believe it would have been proper to have ruled in a manner other than the trial court did rule. * * *" See 22 Tex. Jur.2d, p. 422, "Eminent Domain", § 300, " Comparison with sales of other land in vicinity"; and Rayburn, Tex. Law of Condemnation, p. 382, Sec. 117, "Market Sales, Comparative Market Values". We believe that the same rule would have application to the situation in the instant case and that the evidence of which the Authority complains should be considered to have been properly admitted. Being properly before the trial court as fact finder it would of course be proper for the court to consider a mathematical formula to determine the value of the gravel in place on the Gilliam tract and to take such value into consideration along with the value of the land in other respects, the depreciation, if any, in the value of the surface occasioned pursuant to mining operations, etc., to arrive at an ultimate conclusion of correct value. Though related to personal injury damages, what we stated in the case of Continental Bus System, Inc. v. Toombs, 325 S.W.2d 153, 164 (Fort Worth Civ.App., 1959, writ ref., n.r.e.), would have application. We believe that action upon evidence of such character would be more likely to result in a just and proper allowance for property taken under proceedings in eminent domain than would be the case were a contrary rule adopted.
Relative to the contention that error resulted in that the trial court failed to consider differences in the value of gravel in the Gilliam tract and the value of the gravel in the Durham, Burks and Whitehead tracts,and that the trial court erred in applying the wrong discount to the Durham, Burks and Whitehead sales, it is apparent that the Authority relies upon something stated in respect to one and something unstated in respect to the other in the text of the letter of the trial judge. The trial *954 judge may or may not, as of the time the judgment was signed, have considered matters theretofore mentioned to counsel in the case as reason for entry of judgment in contemplation. The text of the earlier letter would not have legal competence to so prove. So far as we know the same argument as made to this court on appeal could have been made to the trial judge in an effort to dissuade him from entry of the judgment upon his previously stated reasons. If the argument was made to him and if he was persuaded thereby he nevertheless rendered the court's final judgment for the same amounts indicated in his letter upon evidence other than that complained of. The judgment found support in any event upon a test made of the whole of the admissible evidence.
Judgment is affirmed.
LANGDON, J., not participating. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455165/ | 429 S.W.2d 391 (1968)
A. B. LONG MUSIC COMPANY et al., Appellants,
v.
COMMONWEALTH of Kentucky, Appellee.
R. BRINDLEY et al., Appellants,
v.
COMMONWEALTH of Kentucky, Appellee.
Court of Appeals of Kentucky.
June 21, 1968.
*392 William E. Scent, Reed & Scent, Paducah, for appellants.
Robert Matthews, Atty. Gen., Frankfort, Paul R. Huddleston, Sp. Asst. Atty. Gen., Bowling Green, for appellee.
MONTGOMERY, Judge.
Eighteen pinball machines were adjudged to be condemned and forfeited to the Commonwealth of Kentucky pursuant to KRS 436.280. The judgment was based on a jury verdict finding that the machines "were intended to be used for the purpose of gambling." The separate appeals of A. B. Long Music Company et al. and R. Brindley et al. have been consolidated. The primary question is whether the machines seized "were intended to be used for the purpose of gambling" and, therefore, were subject to condemnation under the statute.
The testimony shows that the machines possess the same basic characteristics and are similar to the machines forfeited in United States v. Two Coin-Operated Pinball Machines, W.D.Ky., 241 F. Supp. 57 (1965), decided about a month before these machines were seized. One machine is described as being typical of all of the machines. *393 It is described as the bingo-type amusement machine with a multiple coin device, meaning that more than one coin can be played into it on any given game. It has a multiple free-game device, in that more than one free game can be scored in playing. It has a five-ball device for playing with "the three balls which may be obtained by playing additional money or free games back into the machine."
The playboard has twenty-five holes, numbered one through twenty-five, and one ball-return bowl at the base of the board. The holes are arranged in a series of lines, with a seven-hole line at the top and each succeeding line having one less hole. The ball-return bowl is in the center of the board below the middle of the last line. There are a number of pegs on the playboard, each capped with a rubber bumper which causes the ball to bounce on striking and to follow a diverted path down the playboard. Around the edges of the playboard are a number of springs which serve to keep the ball bounced back into the playing area.
The machine is played by ejecting a ball onto the playing area. There are no movable flippers, bats, or obstructions by which the player may attempt to influence or control the descent of the ball. The machine has a tilt mechanism which stops the play when the machine is tilted by being nudged or pushed.
On the face of the machine there is an upright screen which has twenty-five numbers corresponding to the twenty-five numbered holes on the playboard. The object of the play is to shoot the balls into the playboard holes in such a manner that a winning combination is achieved by the lining up of the balls in holes in either a red, yellow, or green line corresponding to the same number on the card on the upright screen. The card corresponds generally to the well-known bingo card. Additional chances are presented by certain colored sections of the screen and may become available by play of a sufficient amount of money. On the front of the board are three lighted sections, red, yellow, and green, which indicate the number of free replays which are given, depending upon the number of balls dropped into one of the colored lines. By this means, the odds are determined which may be advanced by using an additional coin.
The testimony concerning the description and operation of the machines was given in detail by a special agent of the Federal Bureau of Investigation who had been assigned as a specialist to the Bureau's laboratory to "examine electrical and mechanical evidence of various types." He had been with the Bureau eighteen years, the last eight of which he was with the laboratory. Among other qualifications, the witness had a Bachelor of Science degree in engineering.
The witness stated that it was his opinion the player of the machine has no control over the descent of the ball after it enters the playboard and that the "player control is limited to the extent that he can juggle the machine" without activating the tilt mechanism. It was demonstrated that there are various "features" by which the opportunities to score lessen or become greater over which the player has no control and may not have any knowledge. The coin box could hold $275 in nickels.
A state trooper was permitted to testify over objection that he had had twelve years of experience in playing bingo machines similar to the ones forfeited here; that he had played all of the machines here involved; that he had played similar machines in Texas, Georgia, the Philippines, and in five counties in Kentucky; that it was customary to make cash pay-offs for the free games won; and that he had never been refused a cash-pay-off. Objection was made to his testimony because he had not played the machines in McCracken County, where these machines were seized.
The trial court admitted the testimony with an admonition, the pertinent part of which follows:
"* * * I * * * admonish the jury that the testimony of this witness that he *394 has played other machines and has been awarded * * * money for the games * * * he * * * won on other machines * * * (is) not evidence that you can consider in determining whether these machines * * * were used for gambling purposes * * * You may consider the evidence as * * tending to prove, if it does do so, that the machines were designed * * * or intended to be used for gambling purposes."
The trial court properly permitted such testimony as showing that the machines were intended for gambling purposes. 14 Console Type Slot Machines v. Commonwealth, Ky., 273 S.W.2d 582.
The machines were seized without warrants and pursuant to oral instruction from the chief of police of Paducah and the sheriff of McCracken County. The seizures were made shortly after the Internal Revenue Service released for publication a list of locations in McCracken County holding federal licenses issued under 26 U. S.C.A. Section 4461(a) et seq., for coin-operated gaming devices. All of the machines were in private places of business open to the general public, such as liquor stores, pool rooms, taverns, restaurants, and one gasoline service station. Each machine had a federal gaming stamp. No forcible entry was made to effect the seizure and no objection was made to any seizure at the time.
Lotteries, gift enterprises, and all similar schemes are forbidden. Kentucky Constitution, Section 226; KRS 436.360. See Commonwealth v. Douglass, 100 Ky. 116, 24 S.W. 233, 15 Ky.Law Rep. 581, affirmed 168 U.S. 488, 18 S. Ct. 199, 42 L. Ed. 553.
The word "lottery" is derived from the Italian word "lotto," meaning lot or chance. Lotto was a form of political election originating in Genoa about 1530. Webster's New International Dictionary, Second Edition; Encyclopedia Britannica, Volume 14, page 405. The elements of "lottery" are a prize, an award thereof by chance, and a consideration. Minges v. City of Birmingham, 251 Ala. 65, 36 So. 2d 93. The word "lottery" is a generic term and embraces all schemes for distribution of prizes by chance for consideration, including bingo. Nadlin v. Starick, Ohio Com.Pl., 194 N.E.2d 81. Bingo, beano, keno, and lotto are all names for "lottery." Society of Good Neighbors v. Van Antwerp, 324 Mich. 22, 36 N.W.2d 308; Bender v. Arundel Arena, Inc., 248 Md. 181, 236 A.2d 7; People v. Kiefer, 173 Misc. 300, 16 N.Y.S.2d 858. The "numbers game" has been held to be a lottery. Gilley v. Commonwealth, 312 Ky. 584, 229 S.W.2d 60, 19 A.L.R. 2d 1224. The above definition of a "lottery" has been approved. Commonwealth v. Malco-Memphis Theatres, Inc., 293 Ky. 531, 169 S.W.2d 596. As so defined, there can be no doubt that the machines involved here are lotteries by whatever name or names they may be called, and as such are gambling devices and are so intended. See Three One-Ball Pinball Machines v. Commonwealth, Ky., 249 S.W.2d 144, upholding the confiscation of similar machines. Cf. City of Owensboro v. Smith, Ky., 383 S.W.2d 902, wherein it was noted that "pinball machines may be operated in various ways and * * * they can easily be adapted or converted to gambling purposes."
KRS 436.230 specifically forbids the "setting up, keeping, managing, operating or conducting a keno bank, faro bank or other machine or contrivance used in betting" and fixes severe punishment for violation of the statute. KRS 436.230(3) provides: "The change of the name of any of the games, banks, tables, machines or contrivances * * * shall not prevent" a conviction. The conclusion is inescapable that the Legislature intended to condemn all forms of lottery, however named, in obedience to the constitutional mandate. No contention is made, nor doubtless could meritoriously have been made, that the *395 machine in question falls in the category of a game of skill. See KRS 436.230 (5).
KRS 436.280, under which these machines were seized, authorizes the seizure without a warrant of "Any bank, table, contrivance, machine or article used for carrying on a game prohibited by KRS 436.230." The officers were authorized to enter such public places of business. A federal gambling license was displayed in each place. Inasmuch as these machines were seized in places frequented by the public and were in open view, readily observable by an officer, no merit is recognized in the contention that the seizures were illegal. Clark v. Commonwealth, Ky., 388 S.W.2d 622; Commonwealth v. Johnson, Ky., 420 S.W.2d 103; Ker v. State of California, 374 U.S. 23, 83 S. Ct. 1623, 10 L. Ed. 2d 726. Nor is there any merit in the argument that the officers acted on "hearsay." The hearsay, if any, and the circumstances here furnish a substantial basis of probable cause sufficient to sustain the search. Aguilar v. State of Texas, 378 U.S. 108, 84 S. Ct. 1509, 12 L. Ed. 2d 723; United States v. Ventresca, 380 U.S. 102, 85 S. Ct. 741, 13 L. Ed. 2d 684.
Six of the owners of the business establishments from which the machines were seized testified concerning seven of the machines. Each testified that the machine, or machines, in his possession had not been used for gambling and that he had no such intention. It is contended in their behalf that no one contradicts this testimony; therefore, their motion for a directed verdict should have been sustained. When the other testimony is considered, the jury was justified in finding that the machines were intended for gambling and in disbelieving appellants' testimony. Hickerson v. Commonwealth, 283 Ky. 81, 140 S.W.2d 841.
Judgment affirmed.
WILLIAMS, C. J., and EDWARD P. HILL, MILLIKEN and PALMORE, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455267/ | 640 F. Supp. 2d 524 (2009)
The AMERICAN LEGACY FOUNDATION, Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, Defendant.
Civ. No. 07-248-SLR.
United States District Court, D. Delaware.
July 9, 2009.
*526 Laura Davis Jones, Esquire, and Timothy P. Cairns, Esquire of Pachulski, Stang, Ziehl & Jones, LLP, Wilmington, DE, for Plaintiff.
Chad Michael Shandler, Esquire, and Todd Anthony Coomes, Esquire of Richard, Layton & Finger, PA, Wilmington, DE, for Defendant.
MEMORANDUM OPINION
SUE L. ROBINSON, District Judge.
I. INTRODUCTION
This is an insurance coverage action brought by plaintiff The American Legacy Foundation ("ALF" or "plaintiff") for damages resulting from alleged breaches of contract by National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union" or "defendant") and Travelers Indemnity Insurance Company of America ("Travelers"). (D.I. 1) Plaintiff filed its complaint on May 4, 2007. (D.I. 1) ALF voluntarily dismissed its claims against Travelers on February 8, 2008. (D.I. 24) Currently before the court are cross motions for summary judgment. (D.I. 77; 79) The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a). Venue is proper in this court pursuant to 28 U.S.C. § 1391(a). For the reasons set forth below, defendant's motion (D.I. 79) is granted and plaintiffs motion (D.I. 77) is denied.
II. BACKGROUND
A. The Parties and Relevant Policies
Plaintiff is a non-profit Delaware corporation with its principal place of business in the District of Columbia. (D.I. 1 at ¶ 2) Defendant is a Pennsylvania corporation with its principal place of business in the State of New York. Defendant is also a licensed insurer in the State of Delaware and conducts business within Delaware. (D.I. 72 at ¶ 6) Plaintiff was insured by defendant under two "commercial umbrella liability polic[ies]" (the "National Union Umbrella Policies") and a "not-for-profit individual and organization insurance policy" (the "I & O Policy"[1]).
*527 B. Plaintiffs Litigation with Lorillard
In the 1990s, tobacco companies faced lawsuits from a multitude of states concerning the health effects and associated costs of tobacco products. (Id. at ¶ 8) On November 23, 1998, forty-six states, including Delaware, reached an agreement with several tobacco companies, including Lorillard Tobacco Company ("Lorillard"). See American Legacy Foundation v. Lorillard Tobacco Co. ("Lorillard I"), Civ. No. 19406, 2002 WL 927383, at *1 (Del.Ch. Apr. 29, 2002) (unpublished). This agreement became known as the Master Settlement Agreement ("MSA"). Id. As part of the MSA, plaintiff was established to educate American youth about "the addictiveness, health effects, and social costs related to the use of tobacco products." Id. (quoting the MSA and § 12.2 of Article XII of plaintiffs bylaws). Plaintiff was funded through the creation of a National Public Education Fund ("NPEF"). The settling states allocated over $1 billion to the NPEF under the MSA. (D.I. 1 at ¶ 10)
Plaintiffs bylaws, at section 12.2, provide that money allocated to plaintiff through the NPEF to fund the youth education campaign "shall not be used for any personal attack on, or vilification of, any person (whether by name or business affiliation), company, or government agency, whether individually or collectively."[2]Id. Section VI(h) of the MSA, titled "Foundation Activities," states, in relevant part, as follows:
The Foundation shall not engage in, nor shall any of the Foundation's money be used to engage in, any political activities of lobbying, including, but not limited to, support of or opposition to candidates, ballot initiatives, referenda or other similar activities. The National Public Education Fund shall be used only for public education and advertising regarding the addictiveness, health effects, and social costs related to the use of tobacco products and shall not be used for any personal attack on, or vilification of, any person (whether by name or business affiliation), company, or governmental agency, whether individually or collectively.[[3]]
Plaintiffs primary advertising campaign is entitled "the truth®." Plaintiff claims that a "key component" of its mission is to "build a world where young people reject tobacco and anyone can quit." (D.I. 80 at ¶ 3) Plaintiff describes "the truth®" campaign's broadcast spots as "blunt, hard-edged, fast-paced, and sometimes humorous, designed to capture and hold the attention of the target teen audience." (Id.)
In 2001, plaintiff launched a radio ad entitled "Dog Walker." In the ad, an actor hired by the producers of the ad and claiming to be a dog walker, calls two Lorriland employees who were unaware they were speaking with an actor. See Lorillard I, 2002 WL 927383 at *1. The *528 actor tries to sell dog urine he has collected to "you tobacco people" because "dog pee is full of urea and that's one of the chemicals in cigarettes." (D.I. 83, ex. N at A759)[4] Lorillard believed this ad contained "false and misleading" information and ran afoul of Massachusetts law, which prohibits the taping of a telephone conversation without consent. See Lorillard I, 2002 WL 927383 at *2. Lorillard sent a letter to plaintiff in July of 2001 threatening legal action and also threatening to file a complaint with the Federal Communication Commission ("FCC") on the basis that its employees had no knowledge that the call was being recorded. Id. Lorillard and plaintiff thereafter exchanged several letters regarding the content of the ad.
On November 13, 2001, an attorney representing Lorillard sent a letter to plaintiff containing a draft complaint alleging slander per se, slander per quod, libel per se, secondary libel, libel per quod, and unfair or deceptive acts or practices under North Carolina law. (D.I. 85, ex. H at N293) The letter indicated that Lorillard was willing to settle the matter informally if plaintiff retracted the ad, acknowledged that claims in the ad stating or suggesting Lorillard added urea or a derivative of dog urine to its cigarette products were false, and agreed to cease recording and transcribing parts of calls to employees at Lorillard. (Id.) Lorillard's letter did not seek any monetary compensation. No claims under the MSA were presented in the draft complaint, however, Lorillard indicated in its letter that, if the matter were not settled, other claims may be pursued "including claims for breach of the [MSA's] `vilification' provision." (Id.)
Lorillard did not file suit immediately after its November letter to plaintiff. Instead, Lorillard sent a letter to plaintiff on January 18, 2002 entitled "Notice of Intent to Initiate Enforcement Proceeding under [the] MSA."[5] (D.I. 80, ex. B at A10) Lorillard indicated that it believed plaintiff had improperly used funds from the NPEF and had failed to "meet its obligation under the MSA." (Id.) According to Lorillard, "it has become abundantly clear that [plaintiffs] `truth campaign' is not about conveying the truth about tobacco products to the American public, so much as vilifying and personally attacking tobacco companies and their employees." (Id.) Lorillard stated that, against the backdrop of its failed overtures to plaintiff in the fall and winter of 2001, it "believes it is now left with no alternative but to pursue enforcement under Section VII(c) of the MSA." (Id.) No draft complaint or other details were provided.
On February 13, 2002, plaintiff filed an action in Delaware Chancery Court seeking a declaratory judgment that Lorillard lacked standing to file any claim against plaintiff to enforce the MSA, to which plaintiff is not a signatory, or to establish a violation of plaintiffs bylaws (the "Delaware Action").[6] (D.I. 80, ex. C at A30 ¶¶ 53-60) Two days after the expiration of *529 the thirty-day period prescribed by the MSA, Lorillard filed its breach of contract suit against plaintiff in North Carolina. Lorillard I, 2002 WL 927383 at *3; Lorillard Tobacco Co. v. American Legacy Foundation, Civ. No. 02-02170 (Wake Co.Super. Ct. Feb. 19, 2002) (the "North Carolina Action") (D.I. 80, ex. D). As described by the Chancery Court,
[t]hat complaint allege[d] both that [plaintiff] is in breach of the anti-vilification provisions of the MSA [ ] through [its] adoption in plaintiff's bylaws, and that harassing and vulgar e-mails from [plaintiff] to Lorillard's employees violate North Carolina's Cyberstalking Act. Lorillard [sought] relief for [plaintiffs] alleged breach of the MSA [ ] through a Declaratory Order defining [plaintiffs] obligations under the MSA [ ] and an award of $1. It also [sought] damages in the amount of $1 for [plaintiffs] alleged breach of the duty and covenant of good faith and fair dealing. Finally, Lorillard [sought] preliminary and permanent injunctions requiring [plaintiff] to comply with its alleged obligations under the MSA, prohibiting it from sending and assisting others to send harassing e-mails to Lorillard employees, and defining [plaintiffs] obligations under the MSA.
Lorillard I, 2002 WL 927383 at *3.
Lorillard filed a motion to stay or dismiss the Delaware Action in favor of the North Carolina action, which motion was denied in April 2002. Id. at *5. In September 2002, Lorillard filed its answer in the Delaware Action along with seven counterclaims, containing similar allegations to those it had made in the North Carolina Action.[7] (D.I. 80, ex. E at A75-88) Specifically, the seven counterclaims were for: (1) breach of the MSA; (2) breach of the duty and covenant of good faith and fair dealing; (3) breach of contract; (4) violations of plaintiffs bylaws and certificate of incorporation; (5) claim for declaratory judgment that plaintiff is not eligible to operate the NPEF and receive disbursements under the MSA; (6) declaratory judgment that the settling states can pursue enforcement of the MSA and plaintiffs bylaws against plaintiff; and (7) trespass to chattel. (D.I. 80, ex. E at A75-88)
Plaintiff filed a motion for summary judgment at the outset of the Delaware Action asserting that Lorillard lacked standing to enforce the MSA. A cross-motion was filed. On January 31, 2003, the Delaware Chancery Court granted Lorilland's motion and denied plaintiffs summary judgment motion on the basis that Lorillard had standing to enforce the MSA against plaintiff. Lorillard II, 831 A.2d at 351. Specifically, the Chancery Court found that the "MSA contemplates ALF's adoption, and [ ] ALF in fact adopted it, thus becoming bound by its provisions and amenable to suit for its breach."[8]Id.
The Delaware Action proceeded on Lorillard's counterclaims. A total of 20 ads, including the "dog walker" ad, were selected by the parties and subject to discovery relevant to the determination of whether plaintiff violated Section VI(h) of the MSA. See American Legacy Foundation v. Lorillard Tobacco Co. ("Lorillard III"), 886 A.2d 1, 11 (Del.Ch.2005). On cross-motions for summary judgment, the Chancery Court held (on August 22, 2005) that none of the challenged ads violated the anti-vilification clause of the MSA.[9]Id. at *530 33. The Delaware Supreme Court affirmed on July 17, 2006. See Lorillard Tobacco Co. v. American Legacy Foundation, 903 A.2d 728 (Del.2006).
The complaint in the case at bar was filed May 4, 2007. Plaintiff claims that, during the over four years of litigation with Lorillard in North Carolina and Delaware, it spent approximately $17 million in its defense. (D.I. 1 at ¶ 25)
C. Plaintiffs Insurance Policies
During the time plaintiff was airing the ads at issue in the state court litigation, plaintiff held several policies of insurance: (1) three "Commercial General Liability Policies]" from Travelers, effective consecutively for policy periods between July 22, 1999 and July 22, 2002 (the "Travelers Primary Policies");[10] (2) umbrella policies issued by Travelers for that same period (the "Travelers Umbrella Policies");[11] (3) a "Commercial General Liability Policy,"[12] issued by Scottsdale Insurance Company ("Scottsdale") for the policy period of May 4, 2000 to May 4, 2001 (the "Scottsdale Policy"); (4) the National Union I & O Policy,[13] providing coverage for the policy period from August 26, 2001 through August 26, 2002; and (5) the National Union Umbrella Policies,[14] which provided coverage for consecutive annual policy periods from April 24, 2001 through April 24, 2003. The coverages of the policies at issue in the present motion are as follows.
1. Travelers Primary Policies
The Travelers Primary Policies provided coverage for "personal injury," "advertising injury," and "web site injury." (D.I. 83, ex. M at A687[15]) Coverage applied to "personal injury" "caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for [the insureds]." (Id.) Coverage for "advertising injury" included injury "caused by an offense committed in the course of advertising your goods, products or services." (Id.) Coverage for "web site injury" included injury "caused by an offense committed in the course of the visual or audio presentation of material on `[the insureds'] web site' or in the numerical expression of computer code used to enable `[the insureds'] web site'." (Id.) All three types of injury were specifically defined as including "[o]ral, written or electronic publication of material that slanders or libels a person or organization *531 or disparages a person's or organization's goods, products or services," as well as "[o]ral, written or electronic publication of material that violates a person's right to privacy." (Id. at A688-89)
Amongst the exclusions in the Travelers Primary Policies was any "advertising injury" arising out of a breach of contract[16] or out of "[a]n offense committed by an insured whose business is advertising, broadcasting, publishing or telecasting." (Id. at A688) Finally, a "trade association exclusion" provided that the insurance did not apply to "bodily injury," "property injury," "personal injury" or "advertising injury" arising out of "any service by [the insureds] or on [the insureds'] behalf in connection with . . . [t]he rendering or failure to render any service in connection with the preparation, approval, furnishing, printing, publishing of any education or instructional programs, designs, specification, manuals, instructions or any other materials." (Id. at A718)
2. The Travelers Umbrella Policies
The Travelers' Umbrella Policies provided that Travelers was responsible for "sums in excess of the amount payable under the terms of any personal, advertising and web site injury liability insurance included in the `underlying insurance,' that the insured becomes legally obligated to pay as damages because of [such injuries]. . . provided that the personal, advertising and web site injury liability insurance applies or would apply except for the exhaustion of its [limits]." (D.I. 83, ex. P at A779-80[17])
3. The National Union Umbrella Policies
Travelers was identified as an "underlying insurance provider" in plaintiffs application for umbrella insurance with National Union, dated March 21, 2001. (D.I. 83, ex. O at A772) ("Currently insured through Travelers for all but Directors and Officers pol[icy].") The National Union Umbrella Policies provided two types of coverage. Coverage A covered damages and claims in excess of the limits of "scheduled underlying insurance" but in no case for "broader coverage than that provided by scheduled underlying insurance." (D.I. 85, ex. F at NAT204[18]) No specific "underlying insurance" company or policy number is provided. Coverage B covered damages and claims that were not covered by "scheduled underlying insurance" but were covered within the scope of the bodily injury, property damage, personal injury of advertising injury coverage provided in Coverage B. (Id.) The policies defined "personal injury" as "injury arising out of your business, other than bodily injury or advertising injury, caused by one or more of the following offenses . . . (4)[o]ral, written or electronic publication of material that slanders or libels a person or organization, or disparages a person's or organization's goods, products, or services." (Id. at NAT210) An "advertising injury" was an "injury, other than bodily or personal injury, arising solely out of your advertisement[[19]] as a result of one or more of the following offenses: (1) [s]lander or libel of *532 a person or organization, or disparagement of a person's or organization's goods, products, or services in your advertisement.. . ." (Id. at NAT207) Defendant assumed a duty to defend its insureds in suits under Coverage A (when scheduled underlying insurance has been exhausted by payment of "loss"[20]) and Coverage B (when damages sought would not be covered by scheduled underlying insurance). (Id. at NAT205)
4. The I & O Policy
Coverage C of the I & O Policy provided coverage for "claims" arising out of "wrongful acts" by plaintiff.[21] (Id., ex. E) Coverage C and the Policy's "defense provisions" require National Union to "advance defense costs"[22] of a "claim first made against the organization during the policy period or the discovery period (if applicable) and reported to the insurer pursuant to the terms of this policy for any actual or alleged wrongful act of the organization." (D.I. 85, ex. E at LF2668) As it is pertinent to this matter, a claim was defined as "(1) a written demand for monetary relief; or (2) a civil, criminal, regulatory or administrative proceeding for monetary or non-monetary relief which is commenced by: (i) service of a complaint or similar pleading. . . ." (Id. at LF2669) A "wrongful act," as it related to the organization, included "any breach of duty, neglect, error, misstatement, misleading statement, omission or act by or on behalf of the organization," specifically including "libel, slander, defamation or publication or utterance in violation of an individual's right to privacy." (Id. at LF2673) Exclusion (k) of the I & O Policy provides that
[t]he Insurer shall not be liable to make any payment for loss in connection with a claim made against an insured . . . (k) alleging, arising out of, based upon or attributable to any actual or alleged contractual liability of an insured under any express contract or agreement; provided, however, that this exclusion shall not apply to liability which would have attached in the absence of such express contract or agreement.
(Id. at LF2674)
5. The Scottsdale Policy
The Scottsdale Policy was a "commercial general liability" coverage policy under which plaintiff was insured for "bodily injury" and "property damage" as defined therein. (D.I. 83, ex. Q) Coverage was provided for "personal and advertising injury," or injury arising out of "[o]ral or written publication of material that slanders or libels a person or organization or disparages a person's or organizations' goods, products, and services," so long as the underlying act was not done with the knowledge that such injury would result. (Id. at A790, 797) The Scottsdale Policy also contains a duty to defend plaintiff. (Id. at A786)
Plaintiff's application for the Scottsdale Policy states:
The new venture this insured is entering involving an intern program has been declined by the current carrier. It is an intern program whereby a chaperone, a permanent salaried employee of [plaintiff] will be assigned two 14-17 year old students to work at [plaintiff]. These students will be chosen from high *533 schools across the country and will be the responsibility of [plaintiff] for 24 hours a day from the time they arrive until they leave. A thorough background check will be made on all chaperones and carefully screened.
(Id. at A817-18) The Scottsdale Policy does not state that its coverage is limited to injuries arising out of the intern program.
D. Plaintiffs Attempts to Invoke Insurers' Duties to Defend
Plaintiff obtained its insurance policies through the brokerage firm of Armfield Harrison & Thomas ("AHT"). Following receipt of Lorillard's November 13, 2001 letter and draft complaint threatening suit for libel and slander, Wilmer, Cutler & Pickering ("WCP"), a law firm representing plaintiff in the litigation with Lorillard, contacted AHT and requested that AHT immediately notify all applicable insurance policy holders and demand defense and indemnity on behalf of plaintiff. (D.I. 98, ex. T at B3) Once again, following Lorillard's January 18, 2002 letter threatening suit, WCP requested AHT to notify applicable insurance policy holders.[23] (Id., ex. U at B5) After Lorillard filed suit against plaintiff in North Carolina, a third letter requesting that applicable policy holders be notified was sent from WCP to AHT on February 25, 2002. (Id., ex. V)
On April 16, 2002, AIG Technical Services Inc., the claims administrator for defendant, sent out a letter acknowledging receipt of three separate correspondences regarding the North Carolina Action and other potential claims deriving from Lorillard's letters.[24] (Id., ex. X) By letter dated April 25, 2002, Travelers informed WCP that coverage under the Travelers Primary Policies for the North Carolina Action had been denied.[25] (D.I. 86, ex. V) Travelers, despite having received notice of the Delaware Action, never issued a coverage position letter with respect to the Delaware Action, as the claims specialist assigned to the matter was promoted and presumably the claim was not properly reassigned. (D.I. 86, ex. R at 49-56)
A coverage position letter was issued on behalf of defendant with respect to the I & O Policy on December 6, 2002. (D.I. 80, ex. F) Defendant declined coverage on the following bases: (1) Lorillard's letters did not constitute a "claim" under the policy because no monetary relief was demanded; (2) plaintiffs declaratory judgment action (the Delaware Action) is not pursuit of a "defense" under the policy,[26] and the North Carolina Action had been stayed; and (3) several exclusions, such as that for *534 contractual liability, appeared to apply. (Id.) A second letter denying coverage under the I & O Policy was issued on August 13, 2003. (D.I. 86, ex. T) In this letter, defendant acknowledged the counterclaims in the Delaware Action, considering those counterclaims and the affirmative claims in the North Carolina Action as "one interrelated claim." (Id.)
On April 10, 2003, a coverage position letter was issued on behalf of defendant regarding the National Union Umbrella Policies. (Id., ex. U) Defendant indicated that it had no current obligations with respect to Coverages A or B because it had "no information regarding the scheduled underlying insurance." (Id.) Plaintiff, through AHT and its counsel, provided defendant with several status updates regarding both the Delaware and North Carolina Actions between 2003 and 2006. (D.I. 86, exs. W, X)
On February 7, 2007, after all litigation with Lorillard had concluded (with the Delaware Supreme Court's affirmance in July 2006), plaintiff notified Scottsdale of the Delaware Action. (Id., ex. Z) Without addressing the scope of the coverage provided by its policy, Scottsdale denied coverage on the grounds that plaintiff had failed to provide timely notice of the counterclaims filed against it in the Delaware Action. (Id., ex. AA at 7)
III. STANDARD OF REVIEW
A court shall grant summary judgment only 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.P. 56(c). The moving party bears the burden of proving that no genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 n. 10, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). "Facts that could alter the outcome are `material,' and disputes are `genuine' if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct." Horowitz v. Fed. Kemper Life Assurance Co., 57 F.3d 300, 302 n. 1 (3d Cir.1995) (internal citations omitted). If the moving party has demonstrated an absence of material fact, the nonmoving party then "must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita, 475 U.S. at 587, 106 S. Ct. 1348 (quoting Fed.R.Civ.P. 56(e)). The court will "view the underlying facts and all reasonable inferences therefrom in the light most favorable to the party opposing the motion." Pa. Coal Ass'n v. Babbitt, 63 F.3d 231, 236 (3d Cir.1995). The mere existence of some evidence in support of the nonmoving party, however, will not be sufficient for denial of a motion for summary judgment; there must be enough evidence to enable a jury reasonably to find for the nonmoving party on that issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). If the nonmoving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof, the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
IV. DISCUSSION
A. Legal Standard[27]
"The proper construction of any contract, including an insurance contract, *535 is a question of law." Rhone-Poulenc Basic Chemicals Co. v. American Motorists Ins. Co., 616 A.2d 1192, 1195 (Del.1992). Interpretation of an insurance policy is properly subject to disposition on summary judgment where the terms of the policy and coverage are not ambiguous. Alstrin v. St. Paul Mercury Ins. Co., 179 F. Supp. 2d 376, 388 (D.Del.2002); Travelers Indemn. Co. of Illinois v. United Food & Commercial Workers Intern'l Union, 770 A.2d 978, 985 (D.C.2001). When no ambiguity exists within an insurance contract, the court shall interpret the plain meaning of the terms to which the parties have agreed. Hallowell v. State Farm Mutual Auto. Ins. Co., 443 A.2d 925, 926 (Del.1982); Travelers Indemn. Co. of Illinois, 770 A.2d at 986. A contract is ambiguous only when the provisions in controversy are reasonably or fairly susceptible to different interpretations or may have two or more different meanings. Hallowell, 443 A.2d at 926; Kass v. William Norwitz Co., 509 F. Supp. 618, 623-24 (D.D.C.1980). Where ambiguity exists, the court should construe the language of the contract in favor of coverage and against the insurance company which has drafted it. New Castle County Del. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 174 F.3d 338, 344 (3d Cir. 1999) ("due to the insurer's dominant position, when an ambiguity is found in insurance policy language, we must construe the language against the insurer as a matter of Delaware law"). A contract, however, is not rendered ambiguous merely because the parties do not agree upon its proper construction. Hallowell, 443 A.2d at 926; Travelers Indemn. Co. of Illinois, 770 A.2d at 986. Ambiguity also does not exist where the court can determine the meaning of a contract "without any other guide than a knowledge of the simple facts on which, from the nature of the language in general, its meaning depends." Holland v. Hannan, 456 A.2d 807, 815 (D.C.1983) (quoting Burbridge v. Howard Univ., 305 A.2d 245, 247 (D.C. 1973)). The true test in construing a contract is to determine what a reasonable person in the position of the parties would have thought the language of the policy meant. Steigler v. Insurance Co. of North America, 384 A.2d 398, 401 (Del. Supr.1978); Travelers Indemn. Co. of Illinois, 770 A.2d at 986.
Where a dispute over coverage arises, the insured bears the initial burden of proving that the claim is covered by the insurance policy. New Castle County v. Hartford Accident and Indemn. Co., 933 F.2d 1162, 1181 (3d Cir.1991); Group Hospitalization, Inc. v. Foley, 255 A.2d 499, 501 (D.C.1969). If this burden is met, the burden then shifts to the insurer to prove that the claims fall under an applicable policy exclusion. State Farm Fire and Cas. Co. v. Hackendorn, 605 A.2d 3, 7 (Del.Super.1991); Washington Sports and Entm't, Inc. v. United Costal Ins. Co., 7 F. Supp. 2d 1, 7 (D.D.C.1998).
The duty to defend is broader than the duty to indemnify. See Steadfast Ins. Co. v. EON Labs Mfg., Inc., Civ. No. 98-01-058, 1998 WL 961791, *1 (Del.Super. Sept. 18, 1998).[28] Delaware courts "typically look[ ] to the allegations of the *536 complaint to decide whether the third party's action against the insured states a claim covered by the policy, thereby triggering the duty to defend."[29]American Ins. Group v. Risk Enterprise Mgmt, Ltd., 761 A.2d 826, 829 (Del.Supr.2000) (citation omitted).
The test is whether the underlying complaint, read as a whole, alleges a risk within the coverage of the policy. Determining whether an insurer is bound to defend an action against its insured requires adherence to the following principles: (1) where there is some doubt as to whether the complaint against the insured alleges a risk insured against, that doubt should be resolved in favor of the insured; (2) any ambiguity in the pleadings should be resolved against the carrier; and (3) if even one count or theory alleged in the complaint lies within the policy coverage, the duty to defend arises.
Pacific Ins. Co. v. Liberty Mut. Ins. Co., 956 A.2d 1246, 1255 (Del.2008) (emphasis added).[30]
B. Count III: The I & O Policy
1. Coverage
The court first examines whether the I & O Policy covered Lorillard's claims. As noted previously, the I & O Policy defines a "wrongful act" as "any breach of duty, neglect, error, misstatement, misleading statement, omission or act by or on behalf of the organization." (Id. at LF2672) "[L]ibel, slander, defamation or publication or utterance in violation of an individual's right to privacy" are specifically included within this definition. (Id. at LF2673)
As noted previously, Lorillard's counterclaims in the Delaware Action were for: (1) breach of the MSA; (2) breach of the duty and covenant of good faith and fair dealing; (3) breach of contract; (4) violations of plaintiffs bylaws and certificate of incorporation; (5) claim for declaratory judgment that plaintiff is not eligible to operate the NPEF and receive disbursements under the MSA; (6) declaratory judgment that the settling states can pursue enforcement of the MSA and plaintiffs bylaws against plaintiff; and (7) trespass to chattel.[31] (D.I. 80, ex. E at A75-88) As originally filed, the counterclaims provided that plaintiffs public statements that Lorillard was "trying to stop the truth® campaign" with its litigation were "false statements. . . consistent with ALF's pattern of attacks upon, and vilification of, Lorillard." (D.I. 80, ex. E at A66 ¶ 7) The counterclaims were later amended and these statements were removed. (D.I. 101 at 5, n. 2)
*537 Plaintiff asserts that Lorilland's counterclaims "sound in tort" and alleged "wrongful acts" as unambiguously defined by the I & O Policy. (D.I. 97 at 29) Specifically: (1) "Lorillard alleged a variety of acts, including the airing of the various challenged truth® spots and `personal attacks' on and `vilification' of Lorillard"; (2) Lorrillard's allegations that plaintiff breached duties of the MSA, plaintiffs bylaws and certificate of incorporation are "tantamount to allegations of defamation, slander, and libel"; and (3) notwithstanding, the I & O Policy "explicitly contemplates providing coverage for breaches of contract" because certain breaches of "implied contract[s]" (such as in the employment context) are included within the definition of "wrongful act." (Id. at 26-29)
Defendant argues that the I & O Policy does not cover the counterclaims claims Lorillard prosecuted in the Delaware Action because: (1) with the exception of trespass to chattel, a count relating to facilitating the sending of email to defendants by consumers, the counterclaims sought to impose "exclusively contractual liability" under the MSA, plaintiffs bylaws, and plaintiffs certificate of incorporation, falling outside of the definition of "wrongful act"; (2) notwithstanding, exclusion (k) of the I & O Policy excludes loss arising out of contractual liability; and (3) the "escape clause" of exclusion (k) is inapplicable. (D.I. 82 at 11-21)
"Wrongful act" is broadly defined by the I & O Policy as "any breach of duty . . . on behalf of the organization." (D.I. 80, ex. E at LF2672) (emphasis added) However, exclusion (k) specifically limits this clause by providing that the insurer is not liable for losses relating to claims "alleging, arising out of, based upon or attributable to any actual or alleged contractual liability of an insured under any express contract or agreement; provided, however, that this exclusion shall not apply to liability which would have attached in the absence of such express contract or agreement." (Id. at LF2674)
In determining whether these conditions exist, the court has reviewed the claims put forward by Lorillard in both the North Carolina and Delaware Actions, as well as the rulings by the Chancery Court and the Delaware Supreme Court. While Lorillard initially expressed an intent to file claims of libel and slander, Lorillard ultimately changed its strategy and opted to pursue strictly contractual claims. Lorillard III, 886 A.2d at 9. Within the Delaware Action, in a "procedural maneuver," Lorillard specifically decided not to contest the truthfulness of plaintiffs ads.[32]Id. at 28. Lorillard and plaintiff agreed, therefore, "that the matter presented [was] a straightforward contractual issue that turns on the legal interpretation of the words of the settlement agreement," specifically, section VI(h) of the MSA. Id. at 8. Although an inquiry into plaintiff's underlying conduct was a necessary prerequisite to determining breach of that sectiona lengthy exercise undertaken by the Chancery Court in Lorillard IIIthat (tortious) conduct was never the subject of a direct counterclaim by Lorillard. On appeal, the Delaware Supreme Court addressed the dispute between the parties as a contractual matter. Lorillard IV, 903 A.2d at 731 ("The primary question on appeal is whether any of ALF's advertisements *538 in their `truth ®' campaign violated the contractual language of the MSA prohibiting `vilification' or `personal attacks.'").
Exclusion (k) is applicable if the MSA was an "express contract or agreement." Plaintiff was not a signatory to the MSA, as plaintiff had not been created at the time the MSA was drafted and signed. (D.I. 97 at 18-19; D.I. 82 at 3) However, a party may adopt and be bound to a contract to which it was not originally a signatory. Lorillard II, 831 A.2d at 344 (citing Mehul's Inv. Corp. v. ABC Advisors, Inc., 130 F. Supp. 2d 700, 707-08 (D.Md.2001)). For a party to adopt an already existing contract, the existing contract must permit the third party to adopt it. Id. (citing White v. Nat'l Football League, 92 F. Supp. 2d 918, 920 (D.Minn.2000)).
The Chancery Court concluded that "the MSA should be viewed, as a matter of law, as expressly contemplating ALF's adoption." Id. at 346. In reaching this conclusion, the Chancery Court cited the fact that the MSA "provides for ALF's creation and funding, it requires ALF's board to be comprised of a predetermined group of people, and it places significant restrictions on ALF's activities." Id. at 345. Plaintiff was obligated by the MSA to adopt the language of the MSA into its bylaws and certificate of incorporation. Id. But for the MSA, plaintiff would not have been created. Ultimately, the Chancery Court found that "ALF's bylaw provisions and public statements of ALF's officers and directors, both to the effect that ALF is bound by or must comply with the MSA, reflect ALF's explicit intent and consent to be bound by the MSA." Id. at 349 (emphasis added); see also id. at 351 ("ALF's promoters entered into the MSA on ALF's behalf and for its benefit, and after its formation ALF expressly adopted the M.S.A. through corporate acts and explicit statements."). The court concurs with the judgment of the Chancery Court in finding that plaintiff had an explicit relationship to the MSA.[33]
The court also notes that plaintiffs bylaws and certificate of incorporation are contracts under settled law. See, e.g., Benihana of Tokyo, Inc. v. Benihana, Inc., 906 A.2d 114, 120 (Del.2006) ("[C]ertificates of incorporation are contracts, subject to the general rules of contract and statutory construction") (citation omitted); Jana Master Fund, Ltd. v. CNET Networks, Inc., 954 A.2d 335, 338 (Del.Ch. 2008) (bylaws are contracts).[34] Lorillard's claims made against plaintiff to enforce its own bylaws and certificate of incorporation also fall under exclusion (k) of the I & O Policy.
Having found exclusion (k) applicable, the court briefly addresses the "escape clause," which provides that the "exclusion shall not apply to liability which would have attached in the absence of such express contract or agreement." (D.I. 80, ex. E at LF2672) The court disagrees with plaintiffs assertion that Lorillard's claims, if not based in contract, would have been considered libel or slander claims.[35] Plaintiff *539 points to a phrase in defendant's "summary of claims" that plaintiff made "false statements . . . consistent with ALF's pattern of attacks upon, and vilification of, Lorillard." (D.I. 80, ex. E at A66 ¶ 7) This statement is general background and, absent more, is insufficient to form a factual basis upon which claims of libel and slander could reasonably be based. Additionally, this statement was later removed through amendment.[36] (D.I. 101 at 5, n. 2) Ultimately, Lorillard had ample opportunity to assert a claim for libel, slander, or defamation and opted not to pursue those avenues of litigation. The court declines to find that such claims would have existed but for the contractual claims against plaintiff.
2. Conclusion
In conclusion, Lorillard sought relief for breaches of the MSA, plaintiffs bylaws, and plaintiffs certificate of incorporationnot the conduct underlying such a breach. Although the definition of "wrongful act" appears broad enough to encompass allegations of tortious conduct underlying a breach of contract claim, such conduct was never asserted by Lorillard in a legal proceeding, and exclusion (k) of the I & O Policy specifically excludes coverage for the contractual claims asserted by Lorillard. Put another way, no count or theory alleged by Lorillard invoked defendant's duty to defend.[37]Pacific Ins. Co., 956 A.2d at 1255. Summary judgment is granted for defendant on the I & O Policy ("Count III").
C. The National Union Umbrella Policies
To determine whether Lorillard's claims fall under Coverage A or Coverage B of the National Union Umbrella Policies, it must first be determined whether the claims were covered by any "scheduled underlying insurance." If "scheduled underlying insurance" covered the claims and was exhausted, Coverage A applies. If the *540 claims fell outside of the "scheduled underlying insurance" policies, then a determination as to whether Coverage B applies must be made.
Coverage B applies only to damages for liability due to bodily injury, property damage, personal injury or advertising injury caused by an "occurrence" which was not covered by scheduled underlying insurance. (D.I. 85, ex. F at NAT204) An "occurrence" is defined as "an offense arising out of your business that causes personal injury or advertising injury"; "[a]ll damages that arise from the same or related injurious material or act shall be deemed to arise out of one occurrence[.]" (Id. at NAT209) The parties debate whether any of the following three policies constitutes "scheduled underlying insurance": the Travelers Primary Policies and the Scottsdale Policy.
1. "Scheduled underlying insurance"
a. The Travelers Primary Policies
The Travelers Primary Policies provided coverage for "personal injury," "advertising injury," and "web site injury." (D.I. 83, ex. M at A687) The parties disagree on whether Lorillard's counterclaims in the Delaware Action qualify as "personal injury" or "advertising injury." As noted previously, "personal injury" is defined as conduct that "slanders, libels [or] disparages" an entity; the court has held that Lorillard's claims did not sound in tort. Additionally, the definition of "personal injury" in the Travelers Primary Policy excluded offenses arising out of advertising; "advertising injury" is characterized as "an offense committed in the course of advertising your goods, products or services." (Id.) As discussed infra, the court finds that plaintiff does provide a "service," however, this determination is ultimately inconsequential insofar as the Travelers Primary Policies specifically exclude coverage for "advertising injury" resulting from "breach of contract." (Id. at A688) As discussed previously, the court has construed Lorillard's allegations as contractual claims; therefore, the Travelers Primary Policies were not "scheduled underlying insurance."
b. The Scottsdale Policy
Plaintiff argues that the Scottsdale policy cannot be "scheduled underlying insurance" because: (1) it intended the policy to cover only its intern program; and (2) there is only an eight-day coverage overlap between the Umbrella Policies (April 24, 2001 to April 24, 2002) and the Scottsdale Policy (May 4, 2000 to May 4, 2001). (D.I. 78 at 20-21) As an initial matter, plaintiff itself recognizes the basic tenet of insurance policy construction that it is the plain language of the policy that controls. Plaintiff is not an unsophisticated party and, regardless of its intent in obtaining the contract of insurance, was capable of recognizing that the Scottsdale Policy it procured was not, by its terms, limited to plaintiffs intern program.
The fact that the policies have only an eight-day overlap in coverage is more compelling. A "Schedule of Underlying Insurance" is referenced by the Umbrella Policies but there is no dispute between the parties that the National Union Umbrella Policies do not name a primary insurer, policy number, or policy period for primary insurance. Defendant, like plaintiff, is a sophisticated party. In view of the court's general obligation to construe any ambiguities against the insurer, New Castle County Del., 174 F.3d at 344, and the mere eight-day overlap in coverage, the court finds that the Scottsdale Policy was not "scheduled underlying insurance."[38] The fact that defendant, in prior pleadings, characterized Travelers (and not Scottsdale) *541 as plaintiffs "primary carrier" is also indicative of the soundness of this determination. (D.I. 37 at ¶ 14)
2. Coverage B applicability
Having determined that no "scheduled underlying insurance" covered the conduct alleged, the court must analyze whether Coverage B of the National Union Umbrella Policies is applicable. An "advertising injury" as per Coverage B of the Umbrella Policies arises "solely out of your advertisement as a result of . . . slander or libel of a person or organization, or disparagement of a person's or organizations' goods, products or services in your advertisement[.]" (Id. at NAT207) This definition, like that for "personal injury," contemplates injury caused by the torts of slander, libel, or disparagement. Exclusion (O) of the Umbrella Policies further provides, inter alia, that Coverage B insurance does not apply to "advertising injury" that "aris[es] out of a breach of contract, except an implied contract to use another's advertising idea" or is "committed by an [i]nsured whose business is advertising, broadcasting, publishing or telecasting." (D.I. 85, ex. F at NAT218)
If plaintiffs truth® campaign is not an "advertisement," plaintiff cannot have suffered an "advertising injury" for which there may be coverage, i.e., Coverage B cannot apply. If the truth® campaign constitutes an "advertisement,"[39] the record demonstrates that Lorillard did not assert claims sounding in tort, i.e., any advertising injury allegedly sustained by Lorillard (as asserted in the Delaware and North Carolina Actions) was not slander or libel or disparagement. The above conclusions are buttressed by the exclusionary language found in Coverage B, to wit, that coverage is not provided for an insured whose business is "advertising, broadcasting, publishing or telecasting" or whose alleged "advertising injury" arises out of a breach of contract (exclusion (O)).
3. Conclusion
In view of the foregoing, the court finds that Lorillard did not allege an "advertising injury" as defined in the National Union Umbrella Policies; defendant was not obligated, therefore, to defend plaintiff against Lorillard's claims.[40] Summary *542 judgment is granted in favor of defendant with respect to the National Union Umbrella Policies.
V. CONCLUSION
For the reasons stated above, defendant's motion for summary judgment (D.I. 79) is granted and plaintiffs motion for summary judgment (D.I. 77) is denied. An appropriate order shall issue.
ORDER
At Wilmington this 9th day of July, 2009, consistent with the memorandum opinion issued this same date:
IT IS ORDERED that:
1. Plaintiffs motion for summary judgment (D.I. 77) is denied.
2. Defendant's motion for summary judgment (D.I. 79) is granted.
3. The Clerk of Court is directed to enter judgment in favor of defendant and against plaintiff.
NOTES
[1] The parties refer to this policy as the "D & O policy"; the court adopts an acronym more consistent with the policy title.
[2] Plaintiff also incorporated other items of the MSA into its bylaws. Article XIII of plaintiffs bylaws prohibits any amendment to the bylaws or to plaintiff's Certificate of Incorporation that would render either document inconsistent with the terms of the MSA. In addition, section 5.7 of plaintiff's bylaws expressly recognizes the binding nature of the MSA. Section VI(e) of the MSA required plaintiff to affiliate itself formally with an educational or medical institution. "Section 5.7 of plaintiff's bylaws satisfies this requirement, providing that `the programs of [plaintiff] may be affiliated with one or more educational institutions selected by the Board of Directors from time to time as required by the [MSA] attached hereto as Exhibit A.'" American Legacy Foundation v. Lorillard Tobacco Co., 831 A.2d 335, 340-41 (Del.Ch.2003) ("Lorillard II").
[3] It is unclear whether the MSA is of record; the parties do not dispute the relevant language.
[4] In Lorillard I, the court relied on an affidavit stating that urea is "one of the chemicals you guys put in cigarettes." 2002 WL 927383 at *1 & n. 3. The court cites in this case the transcript of the "dog walker" ad provided in connection with the parties' summary judgment briefing.
[5] Section VII(c)(2) of the MSA requires that any participating manufacturer has to provide thirty days notice of its intent to initiate proceedings to enforce the MSA.
[6] Lorillard did not brings claims of libel, slander or defamation in the North Carolina action, instead, Lorillard's only accusation was that plaintiff made false or misleading statements in connection with a press conference plaintiff held following Lorillard's January 18, 2002 letter. The North Carolina Action was stayed pending resolution of plaintiff's declaratory judgment claims against Lorillard in Delaware.
[7] Plaintiff states that the facts as alleged in the Delaware and North Carolina Actions are "in material respects the same." (D.I. 78 at 6, n. 4)
[8] The Chancery Court did not decide, therefore, whether Lorilland also has standing to bring an action based on plaintiff's breach of its bylaws.
[9] The Chancery Court also found that plaintiff was responsible for emails generated by the public on its "thetruth.com" website (to tobacco company executives), and that these emails violated the "personal attack" prohibition of Section VI(h) of the MSA; the violation was deemed "de minimis," however, and no damages were awarded. Lorillard III, 886 A.2d at 44.
[10] Nos. W-680-479H825-3-TIA-99, W-680-479H825-3-TIA-00, and W-680-479H825-3-TIA-01. (D.I. 81, ex. M)
[11] Travelers' policy no. ISF-CUP-479 H 8462-IND-1 covered the policy period of July 22, 2001 to July 22, 2002. (D.I. 83, ex. P at A777) The details regarding the subsequent renewal(s) are unclear.
[12] No. CLS684101. (D.I. 83, ex. Q)
[13] The I & O Policy named plaintiff as the insured for policy no. 873-99-71. (D.I. 85, ex. E) The policy of record indicates that it is a renewal of a policy no. 473-29-11; the parties do not address this or other prior I & O Policies in their papers. (Id.)
[14] Policy nos. BE 7402566 and BE 8716521, respectively. (D.I. 85, ex. F & G) The named insured on the National Union Umbrella Policies is "Health and Education Liability Program, Inc." ("HELP"); endorsements to the policies reflect that plaintiff subscribed to the HELP between April 24, 2001 and April 24, 2003 and was, therefore, an "insured" under the policies. (Id., Ex. F at NAT261)
[15] Insofar as the parties do not call out any differences between the Travelers Primary Policies, the court cites the record for the policy effective July 2001 through 2002.
[16] A "breach of contract" exclusion was also placed on coverage for web site injury. (D.I. 81, ex. M at A688)
[17] There is no indication that the terms of the policy changed between renewals. Because the parties have not cited to the actual policies, the court cites Travelers' coverage letter (dated April 25, 2002) for the relevant policy language.
[18] The court cites the August 2000 to 2001 policy; the terms are identical in the 2001 to 2002 renewal. (D.I. 85, ex. G)
[19] "[A] paid broadcast, publication or telecast to the general public or specific market segments about your goods, products, or services for the purpose of attracting customers or supporters." (D.I. 85, ex. F at NAT207) (emphasis added)
[20] "Those sums actually paid as judgments and settlements and, under Coverage A if provided by scheduled underlying insurance, expenses incurred to defend any suit or investigate any claim." (D.I. 81, ex. K at A264)
[21] Separate coverages were provided for individuals (employees) and organizational indemnification from acts of such employees.
[22] Subject to the $15 million limit of the policy.
[23] In this second request letter to plaintiff's insurance broker, plaintiff's counsel described the January 18, 2002 letter as "a new claim asserted (and lawsuit threatened)" and as "what appears to be a different legal proceeding" than that threatened in November. (D.I. 98, ex. U at B5)
[24] Within this letter, it is requested that plaintiff produce coverage position letters regarding this matter from other insurance providers with whom plaintiff may have policies. In part the letter states:
We understand that this matter may also have been tendered to certain other insurance carriers. If you have received any acknowledgment or coverage position letters from these carriers, please forward them to us at your earliest convenience. Also, if you have the name, address, and telephone number for the claim handlers at these other carriers, please provide this information.
(D.I. 98, ex. X at B10)
[25] The record indicates that this coverage position letter was forwarded to defendant on July 30, 2003.
[26] At the time this coverage position letter was issued, defendant had not received or had not processed receipt of any correspondence indicating that Lorillard had filed counterclaims against plaintiff in the Delaware Action. (D.I. 80, ex. F at A95)
[27] As noted by the Chancery Court in Lorillard III, the parties have apparently never argued about which state's law applies to the MSA. Lorillard III, 886 A.2d at *9 n. 5. The parties do not address the issue in connection with the motions at bar. Plaintiff is a Delaware entity operating in the District of Colombia. Like the Chancery Court, this court will apply the law of Delaware to the MSA, and notes that District of Colombia law would produce the same result. See Williams v. Stone, 109 F.3d 890, 893 (3d Cir. 1997) ("[W]here the laws of two jurisdictions would produce the same result on the particular issue[s] presented, there is a `false conflict' and the court should avoid the choice of law question.").
[28] See also Essex Ins. Co. v. Night & Day Mgmt., LLC, 536 F. Supp. 2d 53, 57 (D.D.C. 2008).
[29] Similarly, in the District of Colombia, "an insurer's duty to defend is determined by comparing the complaint . . . with the policy. If the facts alleged in the complaint . . . would give rise to liability under the policy if proven, the insurer must defend the insured." See Stevens v. United General Title Ins. Co., 801 A.2d 61, 66 n. 4 (D.C.2002) (citations omitted). As explained by the Stevens court, the majority of jurisdictions follow this "eight corners rule" (a comparison of the "four corners" of the complaint with the "four corners" of the policy). Id.
[30] Compare Am. Cont'l Ins. Co. v. Pooya, 666 A.2d 1193, 1197 (D.C.1995) ("It is appropriate to examine the complaint for all plausible claims encompassed within the complaint and to ascertain whether the allegations of the complaint state a cause of action within the policy coverage and give fair notice to the insurer that the insured is being sued upon an occurrence which gives rise to a duty to defend under the terms of the policy.") (emphasis added).
[31] It is undisputed that Lorillard's trespass to chattel allegations were dismissed by the Chancery Court for want of prosecution "and did not account for any significant amount of the defense costs" incurred by plaintiff. (D.I. 97 at 36-37) Plaintiff, therefore, does not seek a determination that the assertion of this tort claim invoked defendant's duty to defend.
[32] It was Lorillard's argument that the ads themselves, regardless of the falsity of them, violated the terms of the MSA and that the ads did not need to be false or libelist to personally attack or vilify Lorillard. Lorillard III, 886 A.2d at *10-11. The only instance of falsity alleged by Lorillard came in connection with a press conference plaintiff held after Lorillard had threatened suit. This allegation had little, if any, relationship to the claims made by, or the avenues of relief sought by, Lorillard.
[33] In the alternative, as a result of plaintiff's actions, statements, and the benefits it received as a direct result of the MSA, the MSA can be held to be an implied in fact contract as it relates to plaintiff. An implied in fact contract has the legal equivalency of an express contract. See In re Phillips Petroleum Sec. Litig., 697 F. Supp. 1344, 1356 (D.Del. 1988) (reversed on other grounds); Chase Manhattan Bank v. Iridium Africa Corp., 239 F. Supp. 2d 402, 408-09 (D.Del.2002).
[34] The law of the District of Colombia is consistent with that of Delaware on these points. See, e.g., Meshel v. Ohev Sholom Talmud Torah, 869 A.2d 343, 361 (D.C.2005).
[35] Lorillard's November 13, 2001 letter and draft complaint threatening suit for libel and slander is insufficient to invoke the potential for "liability" under the escape clause.
[36] The date is unclear; presumably, the amendments to pleadings occurred early in the litigation, thereby removing any possible suspicion that Lorillard would pursue libel and slander claims. Plaintiff states that the cited language was not amended out of the North Carolina Action; that action, however, was stayed pending resolution of the Delaware Action.
[37] Having found no liability on the part of defendant, the court need not determine whether public policy would prohibit the enforcement of the I & O Policy. The court notes that defendant cites two cases (from outside this jurisdiction) in which the courts found that primary organizational insurance policies should not cover contractual liability for public policy reasons, namely, to disallow insureds to deliberately back out of obligations and pass along the cost to their insurance carriers. (D.I. 82 at 12, citing American Cas. Co. of Reading, Pa. v. Hotel & Restaurant Employees & Bartenders Intern'l Union Welfare Fund, 113 Nev. 764, 942 P.2d 172, 176-77 (1997) and August Entm't, Inc. v. Philadelphia Indemn. Ins. Co., 146 Cal. App. 4th 565, 52 Cal. Rptr. 3d 908, 911-20 (2007)) The court has been unable to find an instance where the public policy positions advanced in these cases have been adopted by a Delaware court (or in the District of Columbia). Absent a clear indication that the Delaware legislature seeks to void contractual liability arising under organizational insurance contracts, the court declines to adopt defendant's argument in this regard. See Whalen v. On-Deck, Inc., 514 A.2d 1072, 1074 (Del. 1986) (stating that the Court would "not partially void what might otherwise be a valid insurance contract as contrary to public policy in the absence of clear indicia that such a [public] policy actually exists"). Moreover, at least one federal court has distinguished the holding of American Cas. Co. of Reading on the basis that that case involved a default on a contract where the insured was obligated to pay for services received. See Napoli, Kaiser, & Bern, LLP v. Westport Ins. Corp., 295 F. Supp. 2d 335, 342 (S.D.N.Y.2003). This case involved no agreement by plaintiff to pay for a service, and the onerous implications of insured parties knowingly passing contract costs onto insurance companies would not potentially arise here.
[38] Even had the court determined otherwise, however, a Coverage B determination would be necessitated by the fact that coverage would only apply for eight days.
[39] The parties' arguments in this regard focus on whether plaintiff's truth® campaign was an "advertisement," or a "paid broadcast . . . about your goods, products or services for the purpose of attracting customers or supporters." (D.I. 85, ex. F at NAT207) More specifically, the parties debate whether plaintiff provides a "service" as contemplated by the policies. On this point, it is the court's view that plaintiff provides a "service" (plaintiff's reason for existence is to educate the public about the ills of smoking) in order to attract "supporters" (smoking converts, supporters of "the truth ®" campaign, thetruth.com website participants, and/or donors) as those terms are used in the policies. This view is consistent with the standard definition of "service" as cited by defendant (D.I. 78 at 22), implicit in the depictions of similar not-for-profit ads as "public service announcements." Plaintiff has not pointed to case law that precludes such "educational spots" as "the truth ®" ads as being classified as an "advertisement" as defined by the National Union Umbrella Policies.
[40] In view of this holding, the court need not ultimately reach defendant's argument that plaintiff never took the required steps to inform defendant of its purported duty to defend. (D.I. 82 at 26) The court notes, however, that defendant does not deny receiving a forwarded copy of correspondence from plaintiff's counsel (dated February 26, 2003) requesting that plaintiffs broker notify all insurers of Lorillard's counterclaims in the Delaware Action, nor does it deny having received six status reports regarding the litigation between July 30, 2003 and March 10, 2006. Defendant's argument that more than notice of a lawsuit is required to be provided to an umbrella policy insurer ("affirmative steps to notify the umbrella insurer that it desires [its] assistance"), as compared to any other insurer, strains credibility in view of the fact that defendant had actual and prompt notice of Lorillard's claims. Put most simply, plaintiff undoubtably did not keep defendant abreast of the litigation for no reason. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455292/ | 640 F. Supp. 2d 1267 (2009)
U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Robert LaRocca, and William Lacy, Plaintiffs,
v.
REPUBLIC SERVICES, INC. and Republic Silver State Disposal, Inc., Defendants.
Robert LaRocca and William Lacy, Plaintiffs,
v.
Republic Services, a Delaware corporation, Republic Silver State Disposal, a Nevada corporation, and Does 1 through 25, Defendants.
Nos. CV-S-04-1352 DAE(LRL), CV-S-04-1479-DAE(LRL).
United States District Court, D. Nevada.
February 16, 2009.
*1275 Anna Park, Sue J. Noh, Thomas S. Lepak, Karen E. Nutter, U.S. Equal Employment Opportunity Commission, Los Angeles, CA, Connie Liem, U.S. Equal Employment Opportunity Commission, San Diego, CA, Angela D. Morrison, Nevada Immigrant Resource Project, Scott B. Olifant, Law Office of Scott B. Olifant, Las Vegas, NV, for Plaintiffs.
Bruce C. Young, Patrick H. Hicks, Matthew G. Laflin, Roger L. Grandgenett. Wesley C. Shejton, Littler Mendelson, PC, Las Vegas, NV, for Defendants.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT REPUBLIC SILVER STATE DISPOSAL, INC. AND REPUBLIC SERVICES, INC.'S MOTION FOR SUMMARY JUDGMENT OR SUMMARY ADJUDICATION OF ISSUES; ORDER DENYING DEFENDANTS' MOTION TO STRIKE NEW PORTIONS OF PLAINTIFFS LACY'S AND LAROCCA'S OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND DECLARATION OF GERALD BENFORD
DAVID ALAN EZRA, District Judge.
On December 5, 2008, the Court heard Defendants' Motion for Summary Judgment or Summary Adjudication of Issues. (Doc. # 208.) Scott B. Olifant, Esq., appeared at the hearing on behalf of Plaintiffs William Lacy and Robert LaRocca; Sue J. Noh, Senior Trial Attorney, appeared at the hearing on behalf of Plaintiff EEOC; Bruce C. Young, Esq., and Roger L. Grandgenett, Esq., appeared at the hearing on behalf of Defendants. After reviewing the motion and the supporting and opposing memoranda, the Court GRANTS IN PART AND DENIES IN PART Defendants' motion for summary judgment.
The Court GRANTS the summary judgment motion with respect to the disparate treatment claims of the following individuals: Randy Johnson; Daron Barnes-Reid; Eddie Wilson; Roderick Jones; Curtis Howard; Jesus Chanez; Lorrance Wilder, Jr.; Carlos Rasool as to the driver position; Albert Vassar; Dock Hines; Jimmy Hilton; James Cornell; Timothy Gittus; Jon Krieger; Elmo Walker; Laura Lucido; William Adams; Louis "Buster" Thomas; and Michael Barnes.[1]
*1276 The Court DENIES the motion with respect to the disparate treatment claims of the following individuals: Jeffrey Banks; Ron Thompson, Sr.; Vincent Marrazzo; Manual Encinas; Carlos Rasool as to the mechanic position; Billy Taylor; David Suazo; Keith Brown; Mid Jackson; Nico Kelley; Eddie Williams; William Lacy; Robert LaRocca; Clayton Hickman; Kevin Stockton; Sharon Derengowski; Bernard Lucido; Michael Miller; and Jessie Williams.
This Court GRANTS the motion with respect to the EEOC's pattern and practice claim.
Pursuant to Nevada Local Rule Part II, 78-2, the Court finds the motion to strike suitable for disposition without a hearing. After reviewing the motion, and the supporting and opposing memoranda, the Court DENIES Defendants' Motion to Strike New Portions of Plaintiffs Lacy's and LaRocca's Opposition to Defendants' Motion for Summary Judgment and Declaration of Gerald Benford. (Doc. # 225.)
BACKGROUND
The Equal Employment Opportunity Commission ("EEOC") has brought suit pursuant to the Age Discrimination in Employment Act ("ADEA") against Defendants Republic Services, Inc. ("RSI") and Republic Silver State Disposal, Inc. ("RSSD") (collectively "Defendants") on behalf of a class of 36 individuals who were terminated from employment allegedly based on their age of 40 years or older. Plaintiffs Lacy and LaRocca have also brought ADEA claims. The EEOC's case was consolidated with the lawsuit brought by the individual Plaintiffs William Lacy and Robert LaRocca.
Defendants collect trash in the Las Vegas area. RSI is the parent company of RSSD. Defendants have various facilities in Nevada including: the Cheyenne Transfer Station; the Sloan Transfer Station; the Henderson Transfer Station; and the Las Vegas administrative office. The claimants fall into three groups: foremen, administrative support, and trash-collection.
On July 18, 2008, Defendants filed the instant motion for summary judgment seeking dismissal of all claims by all individuals in both cases. (Doc. # 208.) Plaintiffs Lacy and LaRocca filed an opposition on July 29, 2008. The EEOC filed an opposition on August 5, 2008. Defendants filed a reply to Lacy and LaRocca's opposition on August 12, 2008. Defendants filed a reply to the EEOC's opposition to their summary judgment motion on September 4, 2008.
Defendants also filed on August 12, 2008, a Motion to Strike New Portions of Plaintiffs Lacy's and LaRocca's Opposition to Defendants' Motion for Summary Judgment and Declaration of Gerald Benford. (Doc. # 225.) Plaintiffs Lacy and LaRocca filed an opposition on August 15, 2008. Defendants filed a reply on August 29, 2008.
On November 26, 2008, this Court granted Defendants' Motion to Strike EEOC's declaration of Marla Stern and portions of the EEOC's opposition and exhibits relating to Marla Stern's declaration and purported statistical analysis. (Doc. # 243.) This Court denied the EEOC's motion for reconsideration of that order on February 13, 2009.
Because the factual background is lengthy, this Court will discuss the facts in the discussion section as they pertain to each particular claimant.
STANDARD OF REVIEW
Rule 56 requires summary judgment to be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, *1277 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." Fed.R.Civ.P. 56(c); see also Porter v. Cal. Dep't of Corrections, 419 F.3d 885, 891 (9th Cir.2005); Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir.2000). A main purpose of summary judgment is to dispose of factually unsupported claims and defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
Summary judgment must be granted against a party that fails to demonstrate facts to establish what will be an essential element at trial. See id. at 323, 106 S. Ct. 2548. A moving party without the ultimate burden of persuasion at trialusually, but not always, the defendanthas both the initial burden of production and the ultimate burden of persuasion on a motion for summary judgment. Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir.2000). The burden initially falls upon the moving party to identify for the court those "portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987) (citing Celotex Corp., 477 U.S. at 323, 106 S. Ct. 2548).
Once the moving party has carried its burden under Rule 56, the nonmoving party "must set forth specific facts showing that there is a genuine issue for trial" and may not rely on the mere allegations in the pleadings. Porter, 419 F.3d at 891 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)). In setting forth "specific facts," the nonmoving party may not meet its burden on a summary judgment motion by making general references to evidence without page or line numbers. S. Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir.2003); Local Rule 56.1(f) ("When resolving motions for summary judgment, the court shall have no independent duty to search and consider any part of the court record not otherwise referenced in the separate concise statements of the parties."). "[A]t least some `significant probative evidence'" must be produced. T.W. Elec. Serv., 809 F.2d at 630 (quoting First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 290, 88 S. Ct. 1575, 20 L. Ed. 2d 569 (1968)). "A scintilla of evidence or evidence that is merely colorable or not significantly probative does not present a genuine issue of material fact." Addisu, 198 F.3d at 1134.
When "direct evidence" produced by the moving party conflicts with "direct evidence" produced by the party opposing summary judgment, "the judge must assume the truth of the evidence set forth by the nonmoving party with respect to that fact." T.W. Elec. Serv., 809 F.2d at 631. In other words, evidence and inferences must be construed in the light most favorable to the nonmoving party. Porter, 419 F.3d at 891. The court does not make credibility determinations or weigh conflicting evidence at the summary judgment stage. Id. However, inferences may be drawn from underlying facts not in dispute, as well as from disputed facts that the judge is required to resolve in favor of the nonmoving party. T.W. Elec. Serv., 809 F.2d at 631.
DISCUSSION
The ADEA makes it unlawful "to discharge any individual ... because of such individual's age." 29 U.S.C. § 623(a)(1). Plaintiffs have brought claims against Defendants for age discrimination under both a theory that specific individuals were subjected to disparate treatment based upon their age, and a theory that Defendants engaged in a pattern and practice of intentional age discrimination. The EEOC argues *1278 that Defendants implemented a reduction-in-force in name only, but later advertised for the very jobs that they eliminated. The EEOC also asserts that it has direct evidence of age bias because Defendants' top executives allegedly made age-biased comments in connection with the reduction-in-force and fostered a corporate culture of open hostility to older workers.
This Court will first address the disparate treatment cause of action as it pertains to each individual employee and then this Court will discuss the pattern and practice cause of action. The various individuals in this lawsuit worked in different positions, at different locations, and some were covered by a collective bargaining agreement, while others were not. This Court also notes that Defendants made a motion to strike Gerald Benford's declaration used by Plaintiffs Lacy and LaRocca. (Doc. # 225.) That motion is discussed separately herein.
I. Disparate Treatment Cause of Action
In order to establish a disparate treatment claim, the plaintiff must produce evidence that gives rise to an inference of unlawful discrimination, either through direct evidence of discriminatory intent or through the burden shifting framework set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973). See Vasquez v. County of Los Angeles, 349 F.3d 634, 640 (9th Cir.2003); Diaz v. Eagle Produce Ltd. P'ship, 521 F.3d 1201, 1207 (9th Cir.2008).
Direct evidence is "evidence which, if believed, proves the fact [of discriminatory animus] without inference or presumption." Godwin v. Hunt Wesson, Inc., 150 F.3d 1217, 1221 (9th Cir.1998) (internal quotation marks omitted) (alteration in original). In the context of an ADEA claim, direct evidence "is defined as evidence of conduct or statements by persons involved in the decision-making process that may be viewed as directly reflecting the alleged discriminatory attitude sufficient to permit the fact finder to infer that that attitude was more likely than not a motivating factor in the employer's decision." Enlow v. Salem-Keizer Yellow Cab Co., Inc., 389 F.3d 802, 812 (9th Cir. 2004) (citation, internal quotation marks, and ellipses omitted). "When a plaintiff has established a prima facie inference of disparate treatment through direct or circumstantial evidence, he will necessarily have raised a genuine issue of material fact with respect to the legitimacy or bona fides of the employer's articulated reason for its employment decision[.]" Id. (citation and brackets omitted).
Where no direct evidence exists, the plaintiff must proceed under the McDonnell Douglas framework. Under that framework, the plaintiff must first establish a prima facie case of discrimination. Chuang v. Univ. of Cal. Davis, Bd. of Trs., 225 F.3d 1115, 1123-24 (9th Cir. 2000). To prove a prima facie case of an ADEA violation, the plaintiff must show he or she was: "(1) at least forty years old, (2) performing his job satisfactorily, (3) discharged, and (4) either replaced by substantially younger employees with equal or inferior qualifications or discharged under circumstances otherwise `giving rise to an inference of age discrimination.'" Diaz, 521 F.3d at 1207 (citation omitted).
As noted by the Ninth Circuit in Diaz,
[g]enerally, an employee can satisfy the last element of the prima facie case only by providing evidence that he or she was replaced by a substantially younger employee with equal or inferior qualifications. The test for the prima facie case changes somewhat, however, where a discharge occurs in the context of a general reduction in the employer's workforce. In this context, circumstantial *1279 evidence other than evidence concerning the identity of a replacement employee may also warrant an inference of discrimination. The reason for this difference is that in most reduction-in-force cases no replacements will have been hired.
Id. at 1209 n. 3. The fourth prong may be met by "showing the employer had a continuing need for [the employees'] skills and services in that their various duties were still being performed ... or by showing that others not in their protected class were treated more favorably." Id. at 1207-08 (citations and internal quotation marks omitted).
If the plaintiff meets the prima facie burden, he or she is entitled to a presumption of discrimination. Id. at 1207. "[T]he burden of production, but not persuasion, then shifts to the employer to articulate some legitimate, nondiscriminatory, reason for the challenged action." Chuang, 225 F.3d at 1123-24 (internal quotation marks and citation omitted). If the employer provides a legitimate non-discriminatory reason, the McDonnell Douglas presumption drops out of the picture.
"The final stage of the McDonnell Douglas analysis requires [the plaintiff] to raise a genuine issue of fact concerning whether the facially legitimate reasons proffered by [the employer] are pretextual." Diaz, 521 F.3d at 1212. Pretext can be established "either directly by persuading the court that a discriminatory reason more likely motivated the employer or indirectly by showing that the employer's proffered explanation is unworthy of credence." Chuang, 225 F.3d at 1123-24 (internal quotation marks and citation omitted).
"A showing that the [employer] treated similarly situated employees outside [the plaintiff's] protected class more favorably would be probative of pretext." Vasquez, 349 F.3d at 641. Individuals must be similarly situated "in all material respects." Moran v. Selig, 447 F.3d 748, 755 (9th Cir.2006). "[I]ndividuals are similarly situated when they have similar jobs and display similar conduct." Vasquez, 349 F.3d at 641. The misconduct engaged in by the employees must be "of comparable seriousness." McDonnell Douglas, 411 U.S. at 804, 93 S. Ct. 1817.
The "ultimate burden of persuading the trier of fact that the defendant intentionally discriminated against the plaintiff remains at all times with the plaintiff." Aragon v. Republic Silver State Disposal Inc., 292 F.3d 654, 659 (9th Cir. 2002). "As a general matter, [however,] the plaintiff in an employment discrimination action need produce very little evidence in order to overcome an employer's motion for summary judgment." Diaz, 521 F.3d at 1207 (citation and internal quotation marks omitted).
A. Employees Allegedly Terminated for Attendance Issues
The Collective Bargaining Agreement ("CBA") between the Employer and the Teamsters Union Local 631 covers certain former employees at issue in this suit. The attendance provision of the CBA provides that employees may be terminated if, beginning on June 11 of each year, they have more than ten unexcused absences in one year. In addition, an employee may be terminated where they have more than five no-call/no-show incidents in a six-month period. Finally, an employee may be terminated for three consecutive no-call/no shows.
A doctor's note will allow multiple days off due to a medical reason to be counted as only one incident for purposes of the attendance policy. However, the first day of missed work, even if excused by a doctor, counts as an incident. If an employee returns to work after an excused illness *1280 and then goes out again with another doctor's note, the subsequent absence will be counted as another incident day. (Defs.' Ex. 42 at 12.)
With respect to the following individuals, the EEOC argues that the attendance policies were not consistently enforced between younger and older workers.
1. Jeffrey Banks
Jeffrey Banks, born 1962, was hired by Silver State Disposal. In June 2003, Banks worked as a Commercial Front-Loader Driver at the Cheyenne Transfer Station. The attendance records indicate that on February 26, March 7, May 13, June 7, and June 20, 2003, Banks either failed to call in to report an absence or was late to work. The attendance records also indicate that Banks failed to appear for work without providing notice on June 21, 2003. Defendants considered this failure to be Banks's sixth no-call/no-show incident in a 180-day period. Defendants, therefore, terminated Banks in June 2003, pursuant to the CBA provision which states that employees may be terminated after six no-call/no-show incidents.
Because the EEOC has not presented direct evidence of age bias with respect to Banks, the EEOC must proceed through the McDonnell Douglas framework by proving a prima facie case and presenting evidence of pretext. The EEOC argues that it can establish the second prong of Banks' prima facie case because he had only three or four no-call/no-shows in the 180-day period, not six no-call/no-shows. First, the EEOC states that Banks returned to work on June 19, 2003, but was told by his supervisor Chris Hannah to get another note from his doctor since Banks was still injured. Banks believed that he was on medical leave on June 20, 2003, and that his supervisor Chris Hannah was aware of this. The EEOC, therefore, argues that the June 20 and June 21, 2003 absences should not have been counted as no-call/no-show incidents. In addition, on June 24, Banks provided a doctor's note dated June 19, 2003, which covered his absences from June 19 to 24, 2003, and he also had a doctor's note covering the period of June 12 through June 19, 2003. The EEOC argues that this entire period should be counted as one absence because the doctor's note covers this period.
Banks did not report to work on June 26, 2003. Banks states that he was terminated on June 23 or 24, days before June 26, 2003. Defendants claim they accepted his late doctor's note and voided the earlier termination and instructed Banks to show-up for work on June 26. When Banks did not call or show up for work on the June 26, 2003, his employment was terminated.
Banks argues that even if June 26 were counted as a no-call/no-show, it was not his sixth incident and could only be counted as his fifth incident because the June 20 and June 21 alleged no-call/no show incidents were voided by the provision of his doctor's note.
Because some of the possible no-call/no-shows were excused, there is a question of fact as to whether Banks actually violated the attendance policy and/or whether it was reasonable for Defendants to believe he violated the policy. Taking the evidence in the light most favorable to the EEOC, it is sufficient to prove the second prong of the prima facie case that Banks was satisfactorily performing his duties.
The EEOC next argues that it can prove the fourth prong of its prima facie case and pretext because younger employees were retained despite violating the attendance policy. For example, Michael Jones, age 18 at the time, violated the attendance policy seven times during his four months of employment as a casual employee. In addition, casual employee Geraldine Lacy, *1281 born 1968, had eight no-call/no-show and tardies between April 11 and 19, 2003, but was not terminated until after the ninth incident. Donavin Morgan, age 22, had six no-call/no-shows in less than two months, yet continued to work for Defendants until August 2005, when he was terminated for insubordination.
Defendants counter that casual employees are not held to the same attendance standards as regular employees and that each of the younger comparators listed by the EEOC were casual employees, whereas Banks was a regular employee. In addition, there is no evidence that casual employees had the same supervisor as Banks. Thus, Defendants argue that the comparators are not similarly situated to Banks.
Defendants further state that during a seven-year period, 32 regular employees at the Cheyenne Transfer Station were terminated for their sixth no-call/no-show attendance violation. Of those 32 employees, only seven were over the age of 40.
Defendants' arguments are unpersuasive as a matter of law because although Defendants claim that casual employees are not subject to the same attendance standards as regular employees, Defendants also stated that they often hold casual employees to the same standard as regular employees. In addition, although only seven of 32 persons terminated were over 40, evidence was not presented as to how many persons over 40 were employed such that the court could make a percentage comparison. Therefore, given that there is a question of fact as to whether Banks actually violated the attendance policy and whether it was reasonable for Defendants to believe that the policy had been violated, taking the facts in the light most favorable to the EEOC as the non-moving party, there is a question of fact as to whether an inference of age discrimination has been raised. Although the EEOC's evidence is not particularly strong, it is sufficient to raise a question of an inference of age discrimination. For these reasons, the motion with respect to Banks is DENIED.
2. Ron Thompson, Sr.
Ron Thompson, Sr., born 1964, was hired on June 20, 2002, as a casual pitcher at the Cheyenne Transfer Station Commercial Rear-Loader business line. Thompson became a regular employee on March 4, 2003, and states that he understood the proper procedure for reporting an anticipated absence.
Thompson was listed as a no-call/no-show on February 3, March 28, April 2, April 9, and June 7, 2004. Thompson received an Employee Corrective Notice on June 8, 2004, which he signed, warning him that he had reached his fifth attendance violation in the past six months and that further violations would result in termination. On July 30, 2004, Thompson called in to notify his supervisor that he would be late for his shift. Defendants noted that his call was received at 8:01 p.m. Defendants terminated his employment for the sixth violation of the attendance policy, as set forth in the CBA. In his termination notice, Thompson stated that he called in at 7:58 p.m. and that he assumes that the discrepancy in time was because it took a few minutes for the tape to run out.
The EEOC asserts that Thompson's termination was pretext for age discrimination because younger employees with more attendance violations were not terminated. For example, the EEOC refers to the following three employees who were discussed with respect to Banks: casual employee Michael Jones, age 18 at the time, violated the attendance policy seven times during his four months of employment as a casual employee, casual employee Geraldine Lacy, born 1968, had eight no-call/no-show *1282 and tardies between April 11 and 19, 2003, but was not terminated until after the ninth incident. Casual employee Donavin Morgan, age 22, had six no-call/no-shows in less than two months, yet continued to work for Defendants until August 2005, when he was terminated for insubordination. In addition to the employees set forth under Banks, Maurice Calcote, born 1969, was a no-call/no-show six times in a six-month period but was not terminated. Despite these excessive absences, Mr. Paul Labruzzo allowed him to voluntarily resign.
Defendants respond that regrettably, a mistake was made in counting the no-call/ no-shows for Calcote. Defendants also state that Calcote was allowed to voluntarily resign because a resignation would allow him to more easily get another job after his incarceration. Defendants also counter that these four comparators are insufficient to create a genuine issue of fact, especially in light of the fact that the EEOC located only one clerical counting error out of the more than 900 employee files produced, and that of the 40 regular employees at the Cheyenne Transfer Station who were terminated for their sixth attendance violation, only ten were over the age of 40. This Court disagrees with Defendants.
Although Thompson does not dispute that the call was not registered until 8:01 p.m. or that it was his sixth violation in six months, given that Defendants treated younger casual employees better by allowing them more violations of the attendance policy, and taking the evidence in the light most favorable to the EEOC, Thompson has provided enough evidence to show that he was satisfactorily performing his duties.
In addition, three of the comparators were casual employees as was Thompson. Given that Defendants should enforce the attendance provisions of the CBA evenly across transfer stations and given that there is no explanation as to why these three younger employees were allowed more violations, Thompson has created a genuine issue of fact regarding pretext. Although the EEOC's evidence is weak, it is enough to survive summary judgment. Summary judgment is therefore DENIED with respect to Thompson's claims.
3. Randy M. Johnson
Randy Johnson, born 1954, was hired by RSSD on August 2, 2004, to work at the Henderson Transfer Station. It is disputed as to whether he was hired as a casual diver/pitcher or to work in the roll-off department. Johnson was required to report to work every morning to see what this specific job assignment would be. Johnson reported to work for seven or eight days, but was not selected to work. He, therefore, chose to stop coming to work.
Johnson states that he stopped reporting for work because he was the only trained roll-off driver among the casual employees waiting for work and he could no longer afford to go without pay. Johnson questioned why he had not been selected for work and was told that the person who was selecting employees was getting to it and did not forget him. Johnson, who was hired by the personnel office, asked his trainer "Sarge" why he was not being selected for work, and Sarge replied "the old guys ain't got a chance" and that the new supervisor did not want anybody that old. (EEOC Ex. 28 at 74-75.) Johnson also testified that the person in charge of selecting causal employees for assignment to roll-off trucks never made any age-related comments to him, about him, or about any other employee. Likewise, the supervisor, Brown, never made any age-related comments to him. Johnson did not complain to human resources that he felt he was not being selected for work because of his age.
*1283 After not being selected for work for seven or eight days, Johnson decided not to report to work anymore. Defendants considered Johnson to be a no-call/no-show for three consecutive days of scheduled work on August 27, 30, and 31, 2004. The line supervisor terminated Johnson pursuant to the attendance policy.
The EEOC points to the three comparators discussed above under Banks, (e.g.-Morgan, Lacy, and Jones) as younger employees who were not terminated although they violated the attendance policy. The EEOC also points to a younger employee, James Linton, who was a no-call/no-show for two months. The EEOC states that although Linton was incarcerated, it appeared that he had not requested a leave of absence until after he was a no-call/no-show for months.
Between January 2001 and May 2006, 41 casual pitcher/drivers at the Henderson Transfer Station were terminated for violating the three-day no-call/no-show attendance policy. Of those 41 employees, only ten were over the age of 40. In addition, Pablo Beauchamp, born 1951, was hired as a casual employee in June 2004. Beauchamp is older than Johnson and he remained employed by Defendants.
It is undisputed that Johnson decided not to report to work and was a no-call/no-show for three consecutive days. The only question is whether Johnson can prove a constructive discharge claim. This Court finds that Johnson does not meet that high standard.
Where an employee quits or retires they must prove that they were constructively discharged. "Constructive discharge occurs when the working conditions deteriorate, as a result of discrimination, to the point that they become sufficiently extraordinary and egregious to overcome the normal motivation of a competent, diligent, and reasonable employee to remain on the job to earn a livelihood and to serve his or her employer." Brooks v. City of San Mateo, 229 F.3d 917, 930 (9th Cir.2000). To prove a constructive discharge claim, "a plaintiff must show there are triable issues of fact as to whether a reasonable person in his position would have felt that he was forced to quit because of intolerable and discriminatory working conditions." Hardage v. CBS Broad., Inc., 427 F.3d 1177, 1184 (9th Cir. 2005), as amended by, 433 F.3d 672 (9th Cir.2006); see also Watson v. Nationwide Ins., Co., 823 F.2d 360, 361 (9th Cir.1987) (a plaintiff must show that their working environment was "so intolerable and discriminatory" that a reasonable employee would be compelled to quit). The plaintiff must show that "the abusive working environment became so intolerable that [his] resignation qualified as a fitting response." Pennsylvania State Police v. Suders, 542 U.S. 129, 134, 124 S. Ct. 2342, 159 L. Ed. 2d 204 (2004).
The standard to prove a constructive discharge claim is higher than that required to prove a hostile work environment claim. Brooks, 229 F.3d at 930 ("[w]here a plaintiff fails to demonstrate the severe or pervasive harassment necessary to support a hostile work environment claim, it will be impossible for her to meet the higher standard of constructive discharge: conditions so intolerable that a reasonable person would leave the job."). A plaintiff must at least show some aggravating factors that compelled him or her to quit, such as a continuous pattern of discriminatory treatment. Schnidrig v. Columbia Machine, Inc., 80 F.3d 1406, 1412 (9th Cir.1996).
Here, the EEOC has not provided sufficient evidence to create a genuine issue of fact regarding constructive discharge for Johnson. One comment made by a trainer, and not being assigned to work for seven days is insufficient to create *1284 a factual issue of whether there was a pattern of discriminatory conduct or working conditions so intolerable based upon discrimination that a reasonable person would have quit.
Moreover, an inference of discrimination is not raised by the alleged comparator evidence because the three younger persons referred to by the EEOC worked at a different transfer station and were being dispatched by different supervisors. Even if they were to be compared with Johnson, the attendance record for one of the younger employees, Jones, shows that he reported but was not selected for work for ten days in a row, more days than Johnson. Finally, Linton was a no-call/no-show because he was incarcerated.
For these reasons, summary judgment is GRANTED in favor of Defendants on Johnson's claim.
4. Daron BarnesReid
Daron BarnesReid, born 1961, was 43 years old when he was hired by RSSD at the Cheyenne Transfer Station on September 13, 2004. He became a regular employee effective May 12, 2005. On October 17, 2005, BarnesReid received a corrective notice warning him that he had reached his limit of ten incidents of absences as set forth in the CBA for missing work on June 13 and 17, July 1, 15, and 19, August 4 and 12, September 11 and 19, and October 14, 2005. BarnesReid was terminated on October 30, 2005, for failing to report for work that day, which according to Defendants, resulted in eleven incidents of absences in one year.[2]
BarnesReid disputes that there were ten incidents of absences. BarnesReid states that he did not improperly miss work on the following five days, June 13 and 17, July 1, 15, and 19, 2005. BarnesReid has provided evidence that on each of those days he was manually clocked in. He argues that the reverse-seniority system should apply to those dates. Foreman Freddie Stampley testified that manually-clocking in and be replaced was known as reverse-seniority and was allowed between 1995 and 2006 on days when the company had enough drivers and the most senior drivers either with the company or the union were allowed to go home without the day counting as an absence.
BarnesReid testified that the reverse-seniority system should apply to the five days in question because he had recently had a surgery and was on medication for the pain and Stampley was aware of that. BarnesReid testified that he told his union representative about that and his union representative stated that Stampley should have allowed the reverse-seniority system to apply to him given that he was sick.[3]
In addition to the dates above, Defendants state that BarnesReid was a no-call/no-show on the following five days: May 12, 30, and 31, and October 2, 24, and 28, 2005. BarnesReid disputes that he was a no-call/no-show on four of the days. Defendants' attendance records show that BarnesReid was manually clocked in on May 30 and 31. BarnesReid states that he should have been replaced on these days under the reverse-seniority policy discussed above. In addition, Barnes *1285 Reid had a doctor's note for October 24th, and May 12 was his regularly scheduled day off. Thus, BarnesReid states that only two of the dates listed above should count as a no-call/no-show absence, not six.
BarnesReid testified that he believed older employees were assigned the outlying routes because those routes were less desirable and assignment of such routes was viewed as punishment.
Of the 21 regular employees at the Cheyenne Station who were terminated for excessive absences, only seven were over 40 years old.
Defendants assert that BarnesReid cannot establish that the reverse-seniority policy should have applied to him for the days in question. This Court agrees. All BarnesReid has shown was that there was a reverse-seniority practice in place and that the attendance records show that BarnesReid was manually clocked in. There is no evidence, even from BarnesReid himself, that BarnesReid showed up for work on the dates in question and asked that the reverse-seniority system apply to him, that he was eligible for the system based upon seniority, or that anyone had told him that those days would not count against him because of the system. Moreover, Stampley had no recollection of BarnesReid requesting reverse seniority.
Finally, even if May 12 and October 24 did not count as absences based upon the regularly scheduled day off and the doctor's note, BarnesReid still exceeded the allotted ten absences when he failed to report to work on October 30, 2005. Accordingly, the EEOC has not shown that BarnesReid was satisfactorily performing his duties or that the attendance policy was misapplied to him.
Moreover, even if one or two of the dates were mistakenly counted as absences and BarnesReid did not incur the maximum number of absences, the EEOC has not presented any evidence showing pretext. BarnesReid's testimony pertaining to alleged age-bias relates to assigning allegedly undesirable routes to older employees. It did not pertain to the application of the attendance policy. Moreover, BarnesReid did not identify any specific younger comparators.
Accordingly, summary judgment is GRANTED in favor of Defendants with respect to BarnesReid's claim.
5. Eddie Wilson
Eddie Wilson, born 1951, was hired by Silver State Disposal in December 1996 as a casual pitcher. Wilson was 45 years old at the time. Wilson left after a few weeks and was re-hired in 1997 as a transfer truck driver. In June 2003, Wilson worked as a Roll-Off Driver at the Cheyenne Transfer Station.
On June 17, 2003, Wilson called into the hotline to report he would be out sick. Wilson spoke to his supervisor Gene Harris on June 18, 2003, and June 21, 2003, and informed him that he could not work due to illness. Wilson admittedly did not call in on June 19, 20, 22, 23, or 24. Wilson was terminated on June 23, 2003, for failing to call in or otherwise report to work for three consecutive days, as required by the CBA. A termination letter was mailed to him, but was returned undelivered. On June 25, 2003, Wilson submitted notes from his doctor for his absence. Wilson filed a grievance with his Union over his termination, but his Union did not pursue it because he did not have a case.
During the time frame in question, 42 union employees were terminated from the Cheyenne Transfer Station for the violating the three-day no-call/no-show attendance rule. Of those 42 persons, only nine were over the age of 40.
At sometime prior to his termination, foreman Harris allegedly made a few comments to Wilson, referring to Wilson as "old man."
*1286 The EEOC argues that the above evidence proves pretext. This Court will first address the remarks of "old man." In general, "`stray' remarks are insufficient to establish discrimination." Merrick v. Farmers Ins. Group, 892 F.2d 1434, 1438 (9th Cir.1990) (citations omitted). In Merrick, the Ninth Circuit held that a comment by the decision-maker that he chose a certain employee because he was a bright young man was insufficient to raise a triable issue of fact of whether the decision-maker refused to promote the plaintiff based upon the plaintiff's age. It was held to be a stray remark that did not show that the decision not to promote was based on age. Id. at 1438-39; Nesbit v. Pepsico, Inc., 994 F.2d 703, 705 (9th Cir.1993) (supervisor's use of the phrase we "don't necessarily like grey hair" was uttered in an ambivalent manner and was not tied directly to the employee's termination, thus, "it is at best weak circumstantial evidence of discriminatory animus"); Rose v. Wells Fargo & Co., 902 F.2d 1417, 1420-21 (9th Cir.1990) (use of the phrase "old-boy network" did not support inference of discriminatory motive). Here, the use of the term "old man" a few times has not been connected to Wilson's termination either in conduct or in closeness of time. They are therefore nothing more than stray remarks, which are insufficient to constitute direct evidence of age discrimination.
Therefore, the EEOC must prove a prima face case of discrimination through the burden shifting framework set forth in McDonnell Douglas. The EEOC cannot meet this burden. The EEOC argues that the termination reason was pretextual because Wilson called in and submitted a doctor's note for the period from June 17, 2003 to August 7, 2003. In addition, the EEOC cites to one younger employee, Jacob Mines, who allegedly violated a different part of the attendance policy by having more than 12 absences in less than six months but was not fired. Even if this could establish pretext, however, which it does not, the EEOC has not provided sufficient evidence of a prima facie case of discrimination. The EEOC has not shown, as it argues, that Wilson did not violate the no-call/no-show rule. Even if a termination date of June 23rd was premature because Wilson called his supervisor on June 21, Wilson admitted that he did not call and did not show up for work on June 22, 23, or 24, 2003. Accordingly, Wilson violated the no-call/no-show rule on these three dates. Indeed, Wilson's union did not believe that Defendants violated the CBA with respect to terminating his employment for violating the three consecutive day no-call/no-show rule. Therefore, the EEOC cannot establish that Wilson was satisfactorily performing his duties.
Accordingly, summary judgment is GRANTED in favor of Defendants on Eddie Wilson's claim.
6. Roderick Jones
Roderick Jones, born April 18, 1959, was 44 years old[4] when he was hired as a casual pitcher/driver by RSSD on December 24, 2003. Jones worked 5.5 hours on December 29, 2003. Jones testified that he was assigned to work with a younger man who asked him "you up for this old man?" The younger co-worker threw a trash can, which accidently hit Jones in the mouth. Jones went home early that day.[5]
*1287 Jones was not selected to work on December 30 and 31, 2003, January 1 and 2, 2004. Defendants attendance records show that Jones did not report for work or call in on January 3, 5, 6, and 7, 2004. Jones testified that he reported for work, but was not selected, for a period of three weeks. Jones testified that after these three weeks, he decided to stop reporting for work. Pursuant to the terms of the CBA, due to the failure to report to work for three consecutive days, Jones was terminated.[6]
Jones testified that while he and two other guys, whom he believed were his age, were sitting on a bench waiting for assignments, supervisors pointed to them and said that they were "out of their minds" if they believed they would be selected for work because the job would "f___ them up." (EEOC Ex. 29 at 36-37.) Jones believed this statement was made because of his age. Jones also testified that people in their twenties were being selected for work.
Ten individuals were hired on the same day as Jones in the residential line of business at the Cheyenne Transfer Station, five of whom were over the age of 40. Of those five individuals, Jones was the only one who stopped reporting for work. The other four individuals remained employed by Defendants as of May 2006, two-and-a-half years later. In addition, the oldest person hired on the same day as Jones, Sherdell Mardis, was almost nine years older than Jones and remains employed by Defendants. Only the following two employees, who were hired on the same date as Jones have been terminated: Javon Howard, born 1979, and Roger Hughes, born 1983. Hughes was the youngest person hired on the same date as Jones.
During 2003, 165 residential drivers were hired at the Cheyenne Transfer Station, 31 of whom were over the age of 40 and 134 of whom were under the age of 40. As of July 2006, 11 of the 31 employees over the age of 40 remained employed, representing 35.5%. Of the 134 employees who were under 40 when hired, 41 remained employed as of July 2006, representing 30.6%.
The EEOC argues that Jones was constructively discharged by Defendants' refusal to select him for work. As discussed above with respect to Randy Johnson, a constructive discharge claim has a high standard. Jones cannot meet this standard. At most, Jones has presented evidence that he was not selected for work for a period of three weeks, and one comment was made from which he personally inferred age bias, and he witnessed younger employees being selected for work. This is insufficient to create a genuine issue of fact as to whether Jones's employment was so discriminatory that a reasonable person would have quit. There is no showing of a continuous pattern of discriminatory treatment. Indeed, courts have found that work environments that were filled with many more instances of discriminatory conduct and more severe conduct were not sufficient to create hostile work environment that would cause a reasonable *1288 person to quit. See Morgan v. City and County of San Francisco, No. C-96-3573-VRW, 1998 WL 30013, at *8 (N.D.Cal. Jan.13, 1998) (finding that being subjected to insensitive coworker remarks such as "You don't fit in," poor performance evaluations, inaccurate reporting of sick leave and having to tell the receptionist when she left her work station did not rise to the level of a hostile work environment. "Occasional hurtful remarks by a coworker or supervisor do not reach the appropriate level of severity."); Meritor Savings Bank v. Vinson, 477 U.S. 57, 67, 106 S. Ct. 2399, 91 L. Ed. 2d 49 (1986) (mere utterance of epithet which engenders offensive feelings would not affect conditions of employment to sufficiently significant degree necessary for violation of Title VII).
Moreover, although the statistics presented by Defendants as to the number of persons hired and their age may possibly be skewed or incomplete as they do not address how often employees were selected for work, the EEOC has not disputed the evidence presented. Instead, the EEOC only argues that it is irrelevant. This Court finds that the evidence is relevant because it demonstrated that older workers remained employed, from which one could infer that they were being selected for work. In addition, the EEOC has not presented any contrary evidence from which an inference of age discrimination could be made.
For these reasons, summary judgment with respect to Jones's claim is GRANTED.
7. Curtis Howard
Curtis Howard, born 1961, was hired in June 2004 as a casual pitcher/driver at the Sloan Transfer Station. There is a dispute as to whether Howard was hired into the Roll-Off Driver department or as a pitcher in the Front Loader line of business. Attendance records indicate that Howard worked in the roll-off department at the higher driver pay rate for a few days in late June, and Howard testified that it was his understanding that he was hired as a driver. In addition, Howard possessed a Class A license, which is a higher class license than needed to drive most of the trucks.
On June 28, 2004, Howard was assigned to work as a pitcher, which has a lower rate of pay by five dollars per hour. There is also a dispute as to whether Howard again worked as a driver on July 1 and 2, 2004. Defendants state that attendance records indicate he was paid the driver rate of pay for those days, but Howard testified that he did not drive and he only worked as a pitcher/assistant.
There is a dispute as to whether Howard worked on July 3 or whether he received an excused absence for that day. On July 6, 2004, Howard spoke with Hope Graham and Romeo Vellutini of Human Resources to complain about not being assigned to work as a driver, when he had moved from California for the position. Howard testified that he was told there was no work as a driver, and that he should continue to report to work as pitcher. Howard did not report back to work. Howard was terminated on July 7, 2004, for failing to call in or report back to work for three consecutive days.
Although Howard does not dispute that he did not return to work after July 3, 2004, he states he did not do so because there was no work in the driver position for which he was hired, and for which he moved from California to accept. Howard also states that he was not supposed to report to work on July 5, 2004, because in accordance with the CBA that was the day that the Fourth of July holiday was observed, since it fell on a Sunday. Therefore, Howard argues that it could not count as a no-call/no-show. Howard further *1289 testified that on his third day of work, the roll-off supervisor asked to see his driver's license and then told him there was no work as a driver. The EEOC asserts that because the supervisor must have known there was no work as a driver, the only reason to check Howard's license was to find out his age. Howard testified that despite what the supervisor said, he had seen postings for roll-off drivers and thus he believed there were driver positions needed.
Howard testified that he was not subjected to any age-related comments, nor did he observe that he was treated differently than younger employees.
The EEOC argues that Howard was constructively discharged because he was told there were no driving positions and he was not given a chance to drive. The EEOC has not met its burden to create a genuine issue of fact regarding a constructive discharge claim. At most, Howard reported to work several times and worked and/or got paid as a pitcher, rather than a driver, and his supervisor viewed his licence, which contains his birthdate. These allegations are insufficient to show that Howard was subjected to a pattern of discriminatory conduct that would cause a reasonable person to quit.
For these reasons, summary judgment is GRANTED in favor of Defendants on Curtis Howard's claim.
B. Employees Allegedly Terminated for Performance/Safety Issues
1. Vincent Marrazzo
Vincent Marrazzo, born 1943, worked at the Cheyenne Transfer Station as a pitcher/driver since approximately 1997. He was 53 years old at the time he was hired. Over the course of his employment, Marrazzo was written up for approximately 15 incidents of causing damage to property or failing to report damage. In 2003, Marrazzo was involved in an accident where his truck rolled over onto its side. Marrazzo was terminated based upon the seriousness of the rollover accident. Marrazzo filed a grievance with his Union, and after an arbitration, was returned to work in November 2004.
On April 21, 2005, Marrazzo was suspended from work because he was involved in an accident which damaged private property while backing up his truck. After an investigation, Marrazzo was prohibited from operating a truck for three months. He worked as a pitcher during that time and he accepted a Letter of Commitment. The Letter of Commitment stated that "I understand that if I do not correct my unsatisfactory performance problem, I will be terminated without further warning." (Defs.' Young Decl. Ex. 46 at Ex. 12.)
Not long after returning to work as a driver, Marrazzo was involved in another accident where he damaged a privately owned vehicle while backing up his truck. Marrazzo was terminated from employment based upon this most recent accident and based upon the Letter of Commitment. Marrazzo grieved his termination with his Union. An arbitrator upheld the termination.
The EEOC attempts to establish pretext by citing to the comparators for Manuel Encinas (discussed below), stating that younger drivers with worse accidents were retained. In addition, the EEOC refers to several other younger drivers who were involved in accidents, but were not terminated. For example, Adan Cano, 40 years younger than Marrazzo, was involved in eight accidents in 15 months of employment. In addition, Phillip Shamburger, who is 23 years younger, injured two different co-workers by backing into or running over them with his truck, but he was not fired until after he injured the second co-worker. Tutankhamun Johnson, who is *1290 35 years younger, was involved in three accidents but received no more than a warning. Jesse Flanagan, born 1972, was involved in several accidents involving property damage, but was not terminated. Nolan Burke, born 1983, hit two privately owned vehicles ("POV") in a seventh-month period, but was not terminated. Jahati Bell, who is about 34 years younger than Marrazzo, was involved in many accidents and was given a Letter of Commitment on August 2001. In October 2002, he backed into a POV. In May 2003, he received another Letter of Commitment because his truck rolled into another packed vehicle. He was promoted to a regular driver position to an AM lead man position. Yusuf Shahid, born 1969, was involved in numerous accidents, but was not terminated.
Defendants counter that none of these employees are proper comparators because they did not work as Commercial front loader drivers at the Henderson Transfer Station at the same time as Marrazzo and were not disciplined by the same supervisors. In addition, Defendants state that because the comparator drivers operate in different lines of business, such as residential and R/O, they have different types of accidents and property damage.
Defendants cite to four other employees, R. Wayne Haag, Zachary Marapo, Larry Catron, and Freddie Starkey, all of whom were over 40 years old and received discipline similar to Cano and Shamburger, and were not terminated.
Marrazzo testified that he believed he was terminated based upon his age because his direct supervisor Dennis Bennett said that Marrazzo was getting too old for the job more than once a week for a few months prior to his termination.
Given that Marrazzo's direct supervisor told him that he was getting too old to do the job close in time to his termination and the comments related to his ability to do the job, the comments are sufficient to create a genuine issue of fact regarding pretext. For these reasons, summary judgment on Marrazzo's claim is DENIED.
2. Jesus Chanez
Jesus Chanez was born in 1958 and was 45 years old when he was hired as a casual employee on March 16, 2004. He later was assigned to work as a Roll-Off Driver out of the Cheyenne Transfer Station, where he was supervised by Eugene Harris, who is less than two years younger than Chanez. On April 25, 2004, Chanez received a Corrective Notice based upon backing up a truck into a gate at the Treasure Island Hotel and Casino, and the gate was damaged.
On May 25, 2004, Harris signed a performance evaluation for Chanez, stating that Chanez was not performing well and did not recommend him for continued employment. Defendants sent a letter to the Union informing it that Chanez, as a casual employee, was being sent back to the Union hall, effective May 21, 2004.
Chanez testified that Harris told him that he was taking too long to complete his routes. Chanez felt that it was age-related because he was safety conscious and therefore took longer, whereas the younger employees drove without taking all the necessary safety precautions. Chanez also testified that younger employees would get lost on their routes, and therefore become slow, but that Harris did not criticize those employees. The EEOC also refers to the fact that Harris made comments to claimant Eddie Wilson such as "let's get to work, old man."
Defendants assert that Chanez cannot prove his prima facie case since he cannot establish that he was satisfactorily performing his duties. This Court agrees. Indeed, Chanez acknowledged that he was *1291 taking too long to complete his routes. In addition, as set forth below the EEOC cannot prove an inference of discrimination or pretext because the younger comparators are not similarly situated to Chanez.
Specifically, the EEOC provided the following evidence of younger casual employees who were involved in multiple accidents or more severe accidents with damage and yet were not fired after only once incident: Jensen Calavan, born 1984, backed into a wall at a residence on May 18, 2006, while working as a casual employee. On July 23, 2006, Calavan was promoted to a regular employee. In October 2006, Calavan received a warning for failing to pull more than one load for the entire shift. In February 2007, Calavan failed to set his brake, causing damage to a parked car. In September 2007, Calavan received another written warning for failing to stop properly.
Lannie Bolden, born 1984, was hired as a casual in December 2005. Bolden damaged a customer's roof on March 12, 3006. Bolden was written up for failing to strap down his roll-off container to his truck on April 20, 2006. Bolden did not strap down his roll-off container again on May 19, 2006. Bolden damaged a curb at the Paris Hotel on July 20, 2006. Bolden damaged company property on August 10, 2006. After these five incidents of damage, Bolden became a regular employee on August 18, 2006.
Johnie Martin, Jr., born 1979, was hired in June 2005. While working as a casual employee, Martin damaged another vehicle while backing up his truck. Martin thereafter became a regular employee on February 27, 2006. On March 17, 2006, Martin received a Letter of Commitment. Martin damaged a customer's gate on June 16, 2006. On December 5, 2006, Martin received a warning for receiving a speeding ticket. Martin received another warning on July 24, 2006 for failing to clean his truck.
Mark Nieto, born 1976, was hired in November 2005. He received a write up for running over carpet. On April 18, 2006, he damaged a parked vehicle. Nieto was promoted to regular employee status on July 21, 2006.
John Lee, III, born 1973, was hired on June 16, 2006. He damaged a gate while driving the truck on July 28, 2006. Lee cased damage to private property on August 3, 2006. On November 17, 2006, Lee failed to report damages to steps. Lee backed into a fence on January 18, 2007.
Marcus Whitfield, born 1964, was hired in May 2005. He damaged a chain link fence on November 2, 2005. On November 10, 2005, he refused to service a route that had been assigned to him and he was terminated.
Defendants assert that these employees are not appropriate comparators because they were all hired more than a year after Chanez was terminated, none of them worked as Roll-Off Drivers at the Cheyenne Transfer Station, and none of them were supervised by Harris.
Instead, Defendants point out that 87 casual employees who worked at the Cheyenne Transfer Station were terminated between January 2001 to May 2006 based upon performance issues not related to attendance, accidents or specific policy violations. Of those 87 employees, 36 were over the age of 40 and 51 were under the age of 40 at the time of termination.
The EEOC has not proven that these comparators are similarly situated to Chanez. The EEOC did not produce evidence establishing that other than being a driver, the comparators were similarly situated in all material aspects. For example, there is no evidence that the comparators worked in the same line of business as Chanez, *1292 drove the same type of vehicles or routes, were supervised by the same person, or that they worked as the same transfer station. There is nothing in the record indicating what type of license or training is needed to drive the various vehicles or what the job duties entail. Neither is there information comparing the types of vehicles.[7] In addition, each of these comparators were hired more than one year after Chanez was terminated. Merely being a driver at some point in time does not establish that these younger individuals were similarly situated to Chanez in all material respects. See EEOC v. Kohler Co., 335 F.3d 766, 776 (8th Cir.2003) ("the individuals used for comparison must have dealt with the same supervisor, have been subject to the same standards, and engaged in the same conduct without any mitigating or distinguishing circumstances"); Visco v. Community Health Plan, 957 F. Supp. 381, 389 (N.D.N.Y.1997) ("in order to be similarly situated, other employees must have reported to the same supervisor as the plaintiff, must have been subject to the same standards governing performance evaluation and discipline, and must have engaged in conduct similar to the plaintiff's, without such differentiating or mitigating circumstances that would distinguish their conduct or the appropriate discipline for it").
Finally, the one age-related comment is insufficient to create a genuine issue of fact with respect to pretext because it was made to another employee and was not tied in anyway to Chanez himself, his termination, or his ability to the job.
For these reasons, summary judgment is GRANTED with respect to Chanez's claim.
3. Lorrance Wilder, Jr.
Lorrance Wilder, Jr., born 1957, was hired as a casual pitcher/driver at the Cheyenne Transfer Station in May 2005. Wilder was terminated in December 2005 for inadequate work performance and sent back to the union hall.
Wilder was never subjected to any age-related comments. Of the 87 casual employees at the Cheyenne Transfer Station that were terminated between January 2001 and May 2006 for performance issues unrelated to attendance, accidents, or specific policy violations, 36 were over 40 years old, and 51 were under 40 years of age at the time of termination.
The EEOC argues that because no one could recall the specific performance problem that Wilder had, the reason for his termination was pretext for age discrimination. In addition, Wilder believes he was discriminated against based upon his age because he noticed that younger casual employees with less seniority would be assigned work but that he was not assigned work and was sent home.
The EEOC's argument shifts the burden of its prima facie case to Defendants. The EEOC has to prove that Wilder was adequately performing his duties. The EEOC has not done so. Accordingly, the EEOC has not met its prima facie burden that Wilder was adequately performing his duties.
Moreover, Wilder was hired and fired within seven months of time. Although there is no evidence as to whether the same person hired and fired Wilder, the fact that Wilder was the same age at his hiring as he was at firing counsels against an inference of age discrimination, especially where there is no evidence of a *1293 pattern of firing older workers after they were hired by the human resources office. See Coghlan v. Am. Seafoods Co. LLC, 413 F.3d 1090, 1096 (9th Cir.2005) ("an employer's initial willingness to hire the employee-plaintiff is strong evidence that the employer is not biased against the protected class to which the employee belongs"); Diaz, 521 F.3d at 1209 (if the employer was "biased against older workers, it presumably would not have hired Plaintiffs in the first place. The temporal proximity between each Plaintiff's hiring and layoff also makes it unlikely that age later developed as the reason for the discharges"). In addition, the EEOC has not presented evidence that Wilder was replaced by a younger employee or presented other evidence that could raise an inference of age discrimination.
For these reasons summary judgment is GRANTED in favor of Defendants on Wilder's claims.
4. Manuel Encinas
Manuel Encinas, born in 1958, was hired on December 17, 2001, and became a regular employee effective August 17, 2002. Encinas worked as a residential driver at the Henderson Transfer Station. On December 31, 2003, Encinas was issued a warning for causing damage to the transmission of a truck. On January 7, 2004, Encinas was involved in an accident while driving on the wrong side of the road in which the driver of the other vehicle was injured and the vehicle was damaged. Encinas received a citation from the police for driving on the wrong side of the road.
Defendants conducted an investigation and determined that the accident could have been prevented. Encinas reported that the driver of the other car failed to stop at a stop sign and hit the back of his truck. Encinas was terminated from employment based upon his involvement in the accident.
Encinas filed a grievance with his union. An arbitrator found that the termination did not violate the CBA. Encinas admits that none of his supervisors ever made age-related comments.
Between January 2001 and May 2006 only 21 drivers who worked at the Henderson Transfer Station were terminated for being involved in accidents or causing damage to property. Ten employees of the 21 terminated were over the age of 40 at the time of termination and 11 employees were under the age of 40.
The EEOC claims that younger drivers who were involved in worse accidents were not fired. Specifically, the EEOC refers to Cano and Shamburger, discussed above. Shamburger, who is eight years younger than Encinas, was involved in four accidents, including one involving personal injury to a pitcher. Cano is approximately 24 years younger than Encinas. He was involved in nine accidents in two years, including one where the police found him at fault. Despite three accidents, Cano became a regular employee on October 21, 2005. In addition, Marvin Penniston-John, born 1969 and ten years younger than Encinas, hit another car twice. Then in May 2002, Penniston-John damaged the rear tire of his truck and received a written warning. He damaged a sidewalk, and axel and a right tire on May 6, 2002. On January 28, 2003, he backed into another truck. Penniston-John rear-ended another vehicle and received a Letter of Commitment. On January 1, 2004, Penniston-John caused the drive line to be damaged, and on August 25, 2005, he hit a parked car.
Odell Henry, born 1975 and 17 years younger than Encinas, received a Letter of Commitment for rear-ending another vehicle in 2006. Courtney Hunt, born 1974, also received a Letter of Commitment. *1294 He was also involved in an accident with another car, but did not get terminated.
Defendants ague that Encinas cannot establish that he satisfactorily performed his job duties, and that there is no evidence of pretext. Defendants assert that these younger drivers are not similarly situated to Encinas. Specifically, Shamburger and Cano were commercial front loader drivers at the Sloan Transfer Station and supervised by Mark Howski. Hunt and Henry were roll-off drivers at the Cheyenne Transfer Station.
Only Penniston-John was a residential driver at the Henderson Transfer Station. Defendants argue that Encinas's accident was more severe because he was ticketed for backing up on the wrong side of a residential street, which is illegal and resulted in a collision with a private vehicle and injured a person. Defendants further contend that the EEOC cannot establish pretext because none of Encinas's supervisors made age-related comments.
This Court finds that Penniston-John is an appropriate comparator. Although none of his accidents involved illegal conduct, he had numerous accidents involving property damage. This is sufficient to create a genuine issue of fact of whether Encinas was satisfactorily performing his duties and whether similarly situated younger employees were treated more favorably.
Therefore, Defendants' motion is DENIED with respect to Encinas's claim.
5. Carlos Rasool
Carlos Rasool, born 1939, applied for a mechanic position in 2004. During his interview, the senior foreman stated to him "you're retired, weren't you 65." (EEOC Ex. 46.) Defendants did not directly address Rasool's claim based upon his interview for the mechanic position in their briefs.
Carlos Rasool was later hired, on March 8, 2004, as a driver. He was terminated on April 9, 2004, because he allegedly failed the driving test by getting lost and because he lacked proficiency in shifting gears. Rasool acknowledges that he had trouble shifting gears, but claims he eventually got used to the truck, and he was told that someone would call him. One other employee, Elmer Cruz, born 1968, was terminated for failing to pass the driving test. Cruz was 36 years old at the time.
The EEOC attempts to prove discrimination based upon evidence that Tony Struck, born 1960, may have failed his driving test, but was hired anyway.
Taking the evidence in the light most favorable to the EEOC there is a genuine issue of fact regarding the basis for the non-hire decision with respect to the mechanic position. However, the EEOC has not presented enough evidence to create a genuine issue of fact regarding the basis for termination from the driver position. There is no showing that the person who evaluated Rasool's driving techniques made an inaccurate assessment or had any age bias. Moreover, there is no evidence that Rasool satisfactorily performed his job or evidence of pretext. For these reasons, Defendants' motion is DENIED with respect to the mechanic position and GRANTED with respect to the driver position.
6. Billy Taylor
Billy Taylor, born 1948, initially interviewed for a job at the Henderson Transfer Station. During that interview, the interviewer said "I'm in my 50's. I don't know if I could go out there and handle this job like that." (EEOC Ex. 52.) Taylor responded that he was accustomed to working in the heat. Taylor was not hired for that position.
Taylor then interviewed for a job at the Sloan Transfer Station. He was 53 years *1295 old at the time. In that interview, Operations Manager Danny Ficklin allegedly stated that Taylor was "kind of old" and "up in age" and asked him if he could handle this type of job.
In June 2002, Ficklin hired Taylor as a casual pitcher/driver at the Sloan Transfer Station on a trial basis. Mr. Taylor first worked as a casual pitcher in the residential department, and then transferred to the commercial front loader department on July 16, 2002. Taylor's supervisor noted in his reviews that Taylor's work performance and job knowledge improved. Ficklin completed the last performance review, dated December 13, 2002, and recommended Taylor for continued employment.
On January 2, 2003, Ficklin terminated Taylor because he allegedly failed to meet performance standards during his probationary period, which was over the past seven months. Ficklin stated that Taylor was unable to service an entire commercial route successfully, e.g. complete the usual number of loads in a given time frame, despite having been trained and given opportunities to do so. The EEOC presented evidence that Taylor had only been allowed to work as a driver on the commercial routes on four occasions.
Although Ficklin was the person who both hired and fired Taylor within a seven-month period, taking the evidence in the light most favorable to the EEOC, given the age related comments made by Ficklin, the plan to use Taylor on a trial basis, and the fact that he seemed to be performing well prior to his termination, the EEOC has presented enough evidence to create a genuine issue of material fact of whether Taylor was terminated based upon his age. Accordingly, Defendants' motion is DENIED with respect to Taylor's claim.
7. Albert Lee Vassar
Albert Vassar, born 1951, was hired as a mechanic by Silver State Disposal on December 5, 1986. Vassar began working at the Henderson Transfer Station when the facility opened in 2000.
On September 3, 2003, Vassar received a Letter of Commitment noting that he had failed to follow several safety rules and company procedures. The Letter of Commitment gave Vassar a choice to sign the letter or be terminated immediately. Vassar signed the discipline, but did so under protest because there was no union counsel present, and although he admitted to being late in putting on wheel chocks, he disputed that he failed to follow each rule Defendants claimed he violated.
Vassar received a verbal warning on September 30, 2003, for poor workmanship. Vassar signed the verbal warning under protest because he did not have a union representative present. Vassar received a written warning on November 26, 2003, for poor work performance for allegedly failing to properly diagnose and complete an assignment and working unnecessary overtime to do so on March 1, 2004. Vassar contests the poor work performance written warning stating that he had failed to note in his work log that he repaired a light in addition to repairing the brakes and that is why it took him more time to complete the job.
Vassar was terminated from employment the next day. Vassar and his union filed a grievance over his termination and the arbitrator upheld the termination. Vassar recalls that manager Joe Knoblock made a statement that Vassar attributed to age bias. Vassar cannot remember the words Knoblock used.
The EEOC has failed to prove its prima facie case with respect to Vassar. First, the EEOC has not established that Vassar was performing his job in a satisfactory manner. Although the EEOC contests the issuance of the disciplinary actions, some of those objections were based merely on *1296 the fact that Vassar did not have union counsel present at the time of the discipline. The objections are not based upon whether or not Vassar actually violated the rule at issue. Moreover, although he had possibly reasonable explanations for his poor work performance, Vassar admitted to making mistakes. Finally, an arbitrator upheld Vassar's termination, thereby finding that the disciplinary actions taken against Vassar comported with the requirements of CBA and that Vassar was terminated for just cause. The EEOC has alleged only that the arbitrator may not have been neutral. Even if true, however, this cannot establish that Vassar was satisfactorily performing his duties, or that the arbitrator was somehow complicit in the alleged age bias.
Second, the EEOC has not presented evidence that Vassar was replaced by a younger employee. The EEOC cites only to the hiring of a younger mechanic September 2005, and another younger mechanic on October 27, 2005. These two mechanics were hired over a year and a half after Vassar was terminated. A year-and-a-half time lapse does not establish that Vassar was replaced by a younger employee.
For these reasons, summary judgment is GRANTED in favor of Defendants with respect to Vassar's claims.
8. David Suazo
David Suazo, born 1954, was hired as a driver on April 7, 2003, to work at the Sloan Transfer Station. He was 49 years old at the time. Soon thereafter, Suazo was involved in two accidents resulting in damage to company property while driving a Roll-Off Truck. Suazo admitted that the first accident on June 6, 2003, was caused by his own negligence in failing to set the parking brake. The second accident occurred on June 9, 2003, when the truck flipped over while Suazo was making a left turn. The traffic accident report indicated that excessive speed, blown right front tire, and possible load shift were contributing factors. RSSD safety department investigated the accident and determined that Suazo made an improper left turn causing the truck to roll over, doing major damage to the truck. Suazo was terminated.
Defendants counter that of the 24 casual driver/pitchers at the Sloan Transfer Station that were terminated for accidents causing damage, only seven were over the age of 40 and 17 were under 40 years of age.
The EEOC asserts that Defendants discriminated against Suazo based upon his age because other younger drivers were not fired despite the fact that they caused more damage than Suazo, and by denying Suazo light duty after the accident but offering it to younger employees. The EEOC refers to employee Jensen Calavan, born 1984, who was involved in an accident where he failed to set a brake and damaged a parked car when the truck rolled as an appropriate comparator. As argued by Defendants, however, Calavan is not a valid comparator because this accident is more akin to Suazo's first accident where he failed to set a parking brake and the truck rolled into a pole. Calavan was not involved in a moving violation accident where a truck rolled over onto its side. Thus, Calavan's misconduct was not of the same level of seriousness.
The EEOC also points to the comparators listed under Jesus Chanez. Defendants do not directly address these comparators under Suazo. However, based on Defendants' response under Chanez, each of the following employees worked as a Roll-Off driver at the Sloan Transfer Station. The comparators are as follows.
Lannie Bolden, born 1984, was hired as a casual in December 2005. Bolden damaged *1297 a customer's roof on March 12, 3006. Bolden was written up for failing to strap down his roll-off container to his truck on April 20, 2006. Bolden did not strap down his roll-off container again on May 19, 2006. Bolden damaged a curb at the Paris Hotel on July 20, 2006. Bolden damaged company property on August 10, 2006. After five incidents of damage, Bolden became a regular employee on August 18, 2006.
Johnie Martin, Jr., born 1979, was hired in June 2005. While working as a casual employee, Martin damaged another vehicle while backing up his truck. Martin thereafter became a regular employee on February 27, 2006. On March 17, 2006, Martin received a Letter of Commitment. Martin damaged a customer's gate on June 16, 2006. On December 5, 2006, Martin received a warning for receiving a speeding ticket. Martin received another warning on July 24, 2006 for failing to clean his truck.
Mark Nieto, born 1976, was hired in November 2005. He received a write up for running over carpet. On April 18, 2006, he damaged a parked vehicle. Nieto was promoted to regular employee status on July 21, 2006.
John Lee, III, born 1973, was hired on June 16, 2006. He damaged a gate while driving the truck on July 28, 2006. Lee caused damage to private property on August 3, 2006. On November 17, 2006, Lee failed to report damages to steps. Lee backed into a fence on January 18, 2007.
Marcus Whitfield, born 1964, was hired in May 2005. He damaged a chain link fence on November 2, 2005. On November 10, 2005, he refused to service a route that had been assigned to him and he was terminated.
Although all of these employees were hired after Suazo was terminated, they were all Roll-Off drivers at the Sloan Transfer Station. In addition, although some of the above comparators were not involved in as serious an accident as Suazo, Bolden and Martin were involved in several accidents and yet were not terminated. Although not particularly strong evidence, this is sufficient to create a genuine issue of fact regarding pretext.
With respect to the offer of light duty, the EEOC has not presented credible evidence that younger employees involved in similarly severe accidents were offered light duty.
For these reasons, Defendants' motion with respect to Suazo's claim is DENIED.
9. Keith Brown
Keith Brown, born in 1961, was 41 years old when he was hired for the recycling line of business as a Hotel Sorter at one of the hotel/casinos on February 6, 2003. Because Brown was a new employee, he could be terminated for one incident of a no-call/no-show absence. Defendants state that Brown was a no-call/no-show on March 9, 2003, and therefore, was terminated on March 10, 2003. Brown states that he reported to work on March 9, 2003, but was sent home and was told that he was no longer needed by his supervisor, John Moore.
Brown also testified that John Moore used the term "OG," which Brown understood to mean Old Dude, in addition to meaning Original Gangster. Brown further testified that John Moore made a comment once about Brown moving slowly, and that he should use Ben-Gay for his hand. Brown testified that a supervisor named Nell said "they should have somebody younger. The older dudes move too damn slow." (EEOC Ex. 10 at 35.)
Defendants argue that "OG" is not correlated to age. This Court disagrees. There is a question of fact as to what "OG" means. The term "original" means belonging *1298 or pertaining to the origin or beginning of something. Thus, it is possible that it could be used in street slang to mean the oldest. In addition, www.urban dictionary.com defines "OG" as "someone who has been around, old school gangster." See http://www.urbandictionary.com/define. php?term=og.
Defendants next argue that even if Moore's comments directly referenced age, they are nothing more than stray remarks. This Court disagrees. The EEOC has presented enough evidence to prove a prima facie case that Brown was satisfactorily performing his duties. Taking the facts in the light most favorable to the EEOC, it has also presented enough evidence to create a genuine issue of fact as to whether Brown was terminated for legitimate reasons or as a pretext for age discrimination. Thus, Defendants' motion is DENIED.
10. Dock Willie Hines
Dock Hines, born 1943, was hired in 1979. In 2003, Hines was employed as a Supervisor over the Sludge drivers at the Apex facility. Hines was terminated by Alan Gaddy, General Manger of the Apex facility, on August 15, 2003.
Defendants state that Hines was terminated for performance reasons because he allowed Sludge drivers to stop working and go home after completing only three or four loads, instead of requiring them to work their entire ten-hour shift. In addition, Defendants believed that Hines was not properly monitoring the drivers and he allowed them to report non-existent problems with their trucks as excuses for not making additional loads. The work logs for the last week of July and the first two weeks in August 2003 show that not one driver completed more than four loads in a ten-hour shift.
The EEOC asserts that this reason is pretext because Hines, who was 60 years old at the time he was terminated, was replaced by younger persons who were already employed, Dave Fink, age 46, and Tom Gardner, age 39, and those younger persons did not perform better than Hines. For example, although Fink testified that drivers usually pulled five loads in one shift, the logs for September 2003, the month after Hines' termination, show that drivers continued to pull an average of only 4.07 loads per shift. Specifically, the logs show that only 36% of employees pulled more than four loads during their shift, whereas 64% pulled fewer than five loads. In addition, Fink testified that drivers worked overtime fairly frequently.
Hines testified that he was not subjected to age-related comments by Gaddy or any other employee. Hines testified that the only reason he believed he was discriminated against based upon his age was because his duties were temporarily assumed by Dave Fink and Tom Gardner, younger employees.
Defendants counter that in March 2005, Ben Canto was promoted to the sludge supervisor position, and he was 53 years old at the time.
Defendants argue that the EEOC cannot prove its prima facie case with respect to Hines. This Court agrees. The EEOC has not established that Hines was satisfactorily performing his job. First, the logs clearly show that there was a significant increase in the number of drivers pulling more than four loads. Specifically, for the three weeks prior to Hines' termination, not one driver pulled more than four loads. However, in the month following Hines' termination, 36% of the drivers pulled more than four loads. Second, it is undisputed that Hines let drivers leave prior to the end of their shift and allowed them to report non-existent problems with their vehicles.
*1299 Moreover, even if the EEOC could establish a prima facie case, there is no evidence of pretext.
For these reasons, summary judgment is GRANTED with respect Hines's claim.
11. Mid Jackson
Mid Jackson, born 1943, was hired in 1977 and became a regular employee in 1980. Jackson worked as a Residential Route Supervisor at the Sloan Transfer Station when that station was opened in approximately 2000.
Bruce San Fillipo, Sloan General Manager born 1951, testified that Jackson would allow drivers that finished their routes before the end of their shift to meet in a central place and hide out, rather than assigning them to help a driver that was going to incur overtime. San Fillipo stated that he told Jackson several times to stop that practice, but that Jackson ignored his direct order. San Fillipo, therefore, decided to terminate Jackson's employment allegedly based upon his inability to conform to San Fillipo's directions. Jackson was terminated on February 14, 2003, and he was provided with six-months severance pay. He was 59 years old at the time.
Jackson testified that he was not written up or given verbal reprimands for job performance problems. The last written reprimand in his personnel file was dated 1998. In addition, the EEOC presented evidence showing that prior to San Fillipo's deposition, Defendants listed the reason for Jackson's termination as a reduction in staff. Gerald Benford testified that Jackson was a very tough supervisor, and that San Fillipo had told him that he had been trying to work with Jackson to smooth out his rough edges.
Jackson testified that he does not recall San Fillipo making comments that he believed were derogatory based on his age. However, when he was terminated, San Fillipo allegedly told Jackson that the company wanted "to go in another direction" and that Jackson did not fit in. (EEOC Ex. 26 at 39.) Jackson was replaced by Donny Redmond, born 1971, age 32 at the time.
Defendants argue that the EEOC has not established that Jackson was satisfactorily performing his job duties. Given the direct contradictory evidence produced by the EEOC which this Court must assume is the truth, and construing the evidence in the light most favorable to the EEOC, this Court finds that the EEOC has presented enough evidence to establish its prima facie case that Jackson was satisfactorily performing his job because Jackson denies being given verbal warnings and there is no evidence of the warnings other than the contradictory testimony of San Fillipo, which was given much later in time.
The EEOC first attempts to establish pretext by arguing that Jackson was adequately performing his job and did not allow drivers to hide out. For example, they discuss the number of trucks he was supervising, that there was no "sit-down" regarding exceeding budgeted overtime, that some drivers did not radio in when they finished their routes, that Jackson took measures to reduce overtime, and that he did not leave work until the last truck had returned. The EEOC also asserts that pretext is established based upon the evidence that foreman Cedric Jones, age 39 at the time, knew that some of his drivers finished early and went home without calling him, and Jones was not disciplined. In addition, in 2000, LaBruzzo stated he did not want drivers picking up other drivers' routes. All of this evidence, however, goes to the prima facie case of whether Jackson was satisfactorily performing his job and does not *1300 establish that the true reason for termination was Jackson's age.
To the extent the EEOC is arguing that Jones is a similarly situated employee who was treated more favorably than Jackson, the EEOC has not established that he was similarly situated. At most, the EEOC has shown that Jones knew that some drivers finished early and went home without calling him. There is no evidence that Jones allowed drivers to corral and hide out. Therefore, Jones is not an appropriate comparator.
Next, the EEOC argues pretext based on the fact that San Fillipo did not fire anyone else for failing to cover routes. This argument does not establish pretext because the EEOC did not show that there was another supervisor who failed to cover routes that could have been terminated but was not.
Finally, the EEOC contends that pretext is established because Defendants stated Jackson was laid-off in their discovery responses, but later claimed he was terminated for performance reasons. In addition, when he was terminated, Jackson was told that the company wanted to go in another direction and that he did not fit in, and he was given severance pay.
Although an offer of a severance agreement does not itself raise an inference of pretext, see Mundy v. Household Fin. Corp., 885 F.2d 542, 547 (9th Cir. 1989), "fundamentally different justifications for an employer's action would give rise to a genuine issue of fact with respect to pretext since they suggest the possibility that neither of the official reasons was the true reason." Payne v. Norwest Corp. 113 F.3d 1079, 1080 (9th Cir.1997) (citing Washington v. Garrett, 10 F.3d 1421, 1434 (9th Cir.1993)); cf. Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1063 (9th Cir.2002) (shifting reasons for discharge do not create an issue of fact regarding pretext where those reasons are not incompatible). This is because varying reasons may show that the stated reason was pretextual "for one who tells the truth need not recite different versions of the supposedly same event." Id. While the employer's shifting explanations may be "acceptable when viewed in the context of other surrounding events .... such weighing of the evidence is for a jury, not a judge." Id.
Certainly, being laid off because the company wants to go in another direction is fundamentally different from being terminated based upon poor performance or insubordination. Moreover, Defendants have never alleged that there was a reduction in force and the reason they chose Jackson was based upon performance issues. Instead, Defendants told Jackson the company wanted to go in another direction, offered him severance, responded in discovery that he was laid off, but later in deposition testimony stated he was terminated for performance reasons. Accordingly, the EEOC has produced enough evidence to create a genuine issue of fact regarding pretext.
For these reasons summary judgment is DENIED with respect to Jackson's claims.
12. Jimmy Hilton
Jimmy Hilton, born 1947, was hired in 1975. In 2000, Hilton was employed as the Routing Manager. Defendants claim that his position was eliminated in 2000, and he was terminated by Paul LaBruzzo. President Steve Kalish testified that Hilton was terminated because the company went from a custom routing department to a software routing system, which eliminated Hilton's role in the company. The EEOC disputes that Hilton's position was eliminated because Defendants continued to have Routing Department and they did not offer Hilton training on the software. Kenny Feinberg, born *1301 1955 and age 46 at the time, testified that he replaced Hilton and became the manager of the Routing Department.[8]
Hilton was re-hired by LaBruzzo as a Relief Route Supervisor in 2001, at the age of 54. On March 25, 2001, Hilton was given a warning regarding his performance because the company had received complaints from customers. Hilton was terminated in June 2001. LaBruzzo testified that Hilton was terminated because he did not get to work on time, and he did not check his trucks while they were on route.
Defendants argue that the EEOC cannot prove that Hilton was satisfactorily performing his duties as a Relief Route Supervisor. This Court agrees. Hilton did not contest that customer complaints were received or that he did not get to work on time or that he checked his trucks while they were on route. Indeed, the EEOC did not even attempt to establish this point and only argued pretext in its opposition. Accordingly, there is no evidence that Hilton was satisfactorily performing his duties.
Even if the EEOC could establish its prima facie case, its arguments regarding pretext do not create a genuine issue of fact. First, LaBruzzo re-hired Hilton at the age of 54, and fired Hilton months later. The Ninth Circuit has long held that "where the same actor is responsible for both the hiring and the firing of a discrimination plaintiff, and both actions occur within a short period of time, a strong inference arises that there was no discriminatory motive." Bradley v. Harcourt, Brace & Co., 104 F.3d 267, 270-71 (9th Cir.1996); see Diaz, 521 F.3d at 1209 (an inference of discrimination is not warranted where the company laid off many employees "only shortly after hiring them at what were already relatively advanced ages ... If [the employer] was biased against older workers, it presumably would not have hired [the][p]laintiffs in the first place"). However, "[t]he same-actor inference is neither a mandatory presumption (on the one hand) nor a mere possible conclusion for the jury to draw (on the other). Rather, it is a `strong inference' that a court must take into account on a summary judgment motion." Coghlan v. Am. Seafoods Co., 413 F.3d 1090, 1096 (9th Cir. 2005).
The EEOC attempts to rebut this strong inference by arguing that Hilton was set up to fail. The EEOC, however, presented only Hilton's testimony that the relief supervisor position was difficult because Hilton did not know each area well enough so that he could easily replace workers who were absent. This in no way establishes that Hilton was set up to fail.
The EEOC next argues that it appears that LaBruzzo's initials appear to have been fabricated on a memo regarding scorecards that Hilton allegedly failed to submit. Even if it were true that the initials were fabricated, the EEOC has not shown that the failure to fill out scorecards was the basis for Hilton's termination or that such alleged conduct by Hilton played any role in his termination.
The EEOC next argues pretext based upon a list of employees and the reasons for termination that was provided in discovery *1302 which states that Hilton was terminated on June 30, 2001 as part of a reduction in staff, rather than for poor performance. This, however, without more as was the case with Mid Jackson, does not establish pretext, especially where it is undisputed that Hilton was not satisfactorily performing his duties.
The EEOC has not offered sufficiently probative evidence that would allow a reasonable fact finder to conclude either that the alleged reason for Hilton's discharge was false, or that the true reason for his discharge was a discriminatory one.
Accordingly, Defendants' motion is GRANTED with respect to Hilton's claims.
13. Nico Kelley
Nico Kelley, born 1955, was 50 years old when he was hired by RSSD in May 2005 as a casual pitcher/driver in the residential line of business at the Sloan Transfer Station. In June 2005, Kelley worked as a Roll-Off Driver. On June 28, 2005, Route Supervisor Ray Lindsey terminated Kelley and sent him back to the Union hall because after two and a half weeks of training, Kelley was not progressing and not performing up to standards.
Between January 1, 2001 through June 2006, 34 casual employees at Sloan were terminated for poor work performance and failure to pass the probationary period. Of those 34, only 12 were over the age of 40.
Kelley testified that on the day he was terminated Lindsey told him that he was not going fast enough and that there were younger employees who went faster than him. Lindsey also allegedly said "I already got an old white guy doing what you do."
Kelley's testimony of age-related comments made by the decision-maker at the time Kelley was terminated raise a genuine issue of fact of whether Kelley was terminated based upon his age. Accordingly, Defendants' motion with respect to Kelley's claim is DENIED.
C. Employees Allegedly Terminated for Position Eliminations and Consolidations
1. Eddie Williams, Robert LaRocca & William Lacy
William Lacy was initially hired a casual pitcher by Silver State Disposal in 1973. He became a regular driver in 1974, and was later rehired in 1983. Robert LaRocca was hired as a casual pitcher by Silver State Disposal in December 1976. Eddie Williams was hired as a casual pitcher by Defendant Silver State Disposal on January 3, 2003.
In January 2003, Williams was working as the Route Supervisor for the morning AM Commercial Front Loader shift at the Cheyenne Transfer Station and his salary was $78,000 a year. LaRocca was the Route Supervisor for the evening shift and his salary was also $78,000 a year. Lacy was the Relief Route Supervisor for Williams and LaRocca, and Lacy's salary was $59,000 a year. Collectively, Williams, LaRocca, and Lacy are referred to herein as the "Route Supervisors."
In January 2003, Defendants consolidated the AM and PM Commercial Front Loader shifts into one shift starting at approximately 6:00 a.m. at both the Sloan and Cheyenne Transfer Stations. Williams, LaRocca, and Lacy were terminated from employment on January 3, 2003. Williams was 55 years old at the time, LaRocca was 56, and Lacy was 57. At the time of their termination, Lacy and LaRocca were presented with a Separation Agreement and Release of Claims (the "Separation Agreement"). The Separation Agreement included waivers of tort and statutory liability, including age discrimination *1303 claims, in exchange for severance pay.
After their termination, Chris Hannah and Cedric Deas assumed the supervisory duties of the Commercial Front Loader line of business at Cheyenne Transfer Station. Chris Hannah's date of birth is March 16, 1967, and at the time of the assumption of duties, Hannah was working as the Operations Manager for Cheyenne. Chris Deas's date of birth is December 15, 1967, and at the time of the assumption of duties had been working as a Route Supervisor for the Recycle Department.
Deas testified that he thought one of the Route Supervisors should have trained him prior to being let go. He also testified that at the time he was earning approximately $52,000 a year as Commercial Front Loader. When all of the trucks were moved to the AM shift, Hannah took over the responsibility of running the single A.M. Commercial Front Loader shift at Cheyenne, using Union member "Lead Men" to assist him after Deas elected to return to driving a truck.
Paul LaBruzzo made the decision to eliminate the three Cheyenne Front Loader Supervisor positions. Neither LaRocca, Williams, nor Lacy ever heard LaBruzzo make derogatory comments based on age.
Two days after terminating the three Route Supervisors, on January 5, 2003, Defendants ran an advertisement in the Las Vegas Review Journal, the local daily newspaper, for the Route Supervisor positions. Defendants ran additional advertisements in the newspaper for the positions on January 6, 19, and 22, 2003.
Lacy and LaRocca state that they would have considered a salary reduction rather than losing their jobs. LaRocca had, prior to 2000, previously accepted a salary reduction at Defendants' request.
Defendants state that they decided to eliminate the positions of the three Cheyenne Front Loader Supervisors, and to use only one or two supervisors and Union member "Lead Men" as part of the consolidation of the A.M. and P.M. shifts and to reduce costs.
Plaintiffs Lacy and LaRocca filed an opposition to the instant summary judgment motion on July 29, 2008. (Doc. #213.) In their opposition, Plaintiffs Lacy and LaRocca included a declaration from Gerald Benford, among other exhibits. Benford was previously employed by Defendants as the general manager of labor relations and human resources, and was responsible for responding to the EEOC regarding the facts of this case. Benford states that "salary considerations or payroll limits never were expressed or implied in any of the discussions pertaining to the terminations of the route supervisors. [His] entire understanding of reasons for the shift consolidation ostensibly related to reducing liability as a result of curtailing night driving." (Benford Decl. ¶ 7.)
On August 12, 2008, Defendants filed a Motion to Strike New Portions of Plaintiffs Lacy's and LaRocca's Opposition to Defendants' Motion for Summary Judgment and Declaration of Gerald Benford. (Doc. # 225.) Lacy and LaRocca filed an opposition to the motion to strike on August 15, 2008. Defendants filed a reply on August 29, 2008. Defendants point out that in their initial motion for summary judgment filed September 10, 2007, they stated as follows "The decision to use only one or two supervisors (Chris Hannah and Cedric Deas) and Union member `Lead Men' to oversee the consolidated Commercial Front Loader shift was essentially a financial decision to reduce costs." Lacy and LaRocca responded in their original statement of Undisputed Facts that this statement was undisputed. Defendants argue that Benford's declaration should be *1304 stricken because this Court allowed refiling of oppositions to the summary judgment motion only for purposes of addressing the revised dates of birth. Defendants state that this Court did not give Lacy and LaRocca free reign to significantly alter their previous statement of facts.
Lacy and LaRocca argue that this Court should consider the declaration in order to make a reasoned decision on the merits of the summary judgment motion. Lacy and LaRocca further argue that Defendants have not claimed that they have been prejudiced by a failure to provide responsive evidence.
This Court denies Defendants' motion to strike because Plaintiffs Lacy and LaRocca have not changed the substance of their argument by including the Benford Declaration. Specifically, the wording of the previous undisputed factual statement stated that the decision to eliminate the positions was "essentially a financial decision to reduce costs." The use of the word "essentially" implies that there were other reasons for the elimination of the positions. Accordingly, not disputing that financial considerations may have been involved, does not mean that it is undisputed that age was not a motivating factor in the decision or that financial considerations was a pretext for age discrimination. Moreover, Benford states only that reducing costs was not a part of the discussions he was involved in. Accordingly, Defendants' motion to strike is denied and this Court will consider the Benford Declaration.
Here, it is undisputed that Williams, Lacy, and LaRocca meet the factors of their prima facie case of age discrimination since they are members of a protected class, were performing their jobs in a satisfactory manner, were discharged, and Defendants had a continuing need for their skills and services in that their various duties were still being performed by Hannah and Deas, and they ran advertisements for Route Supervisor positions.
Defendants state that they have presented a legitimate reason for the elimination of the three Route Supervisor positions: a financial decision to reduce costs. Defendants claim that there is no disputing that the P.M. shift, which LaRocca previously supervised, was eliminated and that Lacy's Relief Route Supervisor position was eliminated. Defendants also claim that Plaintiffs have not shown that the advertisements were for the Route Supervisor positions in the Commercial Front Loader line of business, rather than the Recycle or Residential line of business.
The problem with Defendants' argument is although no employee currently holds the title of Route Supervisor for the Commercial Front Loader line of business, Plaintiffs have presented enough evidence to create a genuine issue of fact as to whether the alleged legitimate reason was a pretext for age discrimination. Specifically, all A.M. Route Supervisor duties are being performed by one or two much younger employees. Defendants have not shown why Lacy, LaRocca, and Williams were selected for layoff, rather than reconfiguring job duties and offering them, rather than Hannah and Deas, the newly defined position at a lower salary. Moreover, even if it is true that Hannah and Deas combined earn less than Williams, Lacy, and LaRocca combined, Defendants have not addressed the extra overtime pay paid to the Union Lead Men, who assist Hannah and Deas. Accordingly, it is unclear whether Defendants' costs have actually been reduced or they could have believed would have been reduced at the time the decision was made.
Finally, Defendants are in the best position to know what job position was intended to be filled through the advertisements. On their face, the advertisements are not *1305 clear as to which line of business. Moreover, even if the advertisements were run to fill Route Supervisor positions in a line of business other than Commercial Front Loader line, Defendants have admitted that Deas was already the Route Supervisor for Recycle when he was asked to assume the Commercial Front Loader Route Supervisor duties. Defendants have not provided a reason why Deas's position was not eliminated and Lacy, LaRocca, or Williams asked to assume Deas's duties. See Davis v. Team Elec. Co., 520 F.3d 1080, 1094 (9th Cir.2008) ("[w]here a reduction in force is involved, the employer must not only explain the reasons for the reduction in force, but must also explain why each particular plaintiff was selected to be laid off").
For these reasons, Plaintiffs Williams, Lacy, and LaRocca have created a genuine issue of fact of whether they were terminated on the basis of their age. Defendants' motion is DENIED with respect to Lacy, LaRocca, and Williams' claims.
2. Clayton Hickman
Clay Hickman, born 1947, was hired in April 1992, and was later promoted to the position of office manager. His duties included preparing work schedules for office staff, reviewing truck tonnage reports, ordering office supplies, customer service, and payroll. Defendants allege that in the end of 2002, after evaluating the administrative work force at the Cheyenne Transfer Station, General Manger of that station, Paul LaBruzzo, determined that Hickman did not have a full days worth of work to do. LaBruzzo stated he set out to consolidate positions because he did not want two positions, each having only a half of a days work. Hickman was terminated in January 2003. Hickman was 55 years old at the time of his termination.
Defendants state that Hickman's position was consolidated with LaBruzzo's executive assistant, Rhonda Walters', duties and she assumed Hickman's former duties.
The EEOC contests the determination that Hickman did not have a full days of work to do, because after taking over Hickman's job, LaBruzzo let Walters work overtime so that she could learn the officer manager position. In addition Walters had no prior experience working as a supervisor or experience with payroll and the timekeeping system. Walters testified that it took her several months to one year to learn all of her duties well. The EEOC also disputes that Walters performed Hickman's job in addition to her regular duties. Instead, Walters, who was 37 years old at the time, was promoted to the office manager position. In addition, Walters testified that two years after Hickman was terminated, she performed only some of her former secretarial duties and other duties were given to other departments.
The EEOC states that Hickman asked if he could be demoted, and LaBruzzo responded no. Hickman asked if the officer managers at the other transfer stations were being terminated and LaBruzzo told him they were, even though they were not.
Before Hickman was terminated he was teaching Joe LaBruzzo, Paul's brother, some of the office manager duties and Joe LaBruzzo was acting as co-manager at the Cheyenne Transfer Station. Joe LaBruzzo, born 1958, and 11 years younger than Hickman, was later transferred to the officer manager position at the Sloan Transfer Station. Latondia Coleman, born 1968, was 21 years younger and worked as the Henderson Transfer Station manager. Neither of these employees were terminated.
Hickman admitted that LaBruzzo never directed age-related comments to him or other employees and at the time of his *1306 termination and he did not believe that he was terminated because of his age.
Defendants argue that Hickman cannot establish that he was replaced by a younger employee, since his duties were assumed by others. The EEOC, however, has provided enough evidence to show that Defendants had a continuing need for Hickman's skills and services in that his duties were still being performed by a younger employee, Walters. See Nidds v. Schindler Elevator Corp., 113 F.3d 912, 917 (9th Cir.1996) (employee did not have to show that he was directly replaced by a younger employee "it is enough that [his] duties were substantially transferred" to a younger employee). Thus, the EEOC has met the prima facie case.
Defendants argue that the consolidation of duties to achieve efficiency and save costs is a legitimate non-discriminatory reason for termination. See Wallis v. J.R. Simplot Co., 26 F.3d 885, 892 (9th Cir. 1994) (the decision to decentralize the human resources function and have duties assumed by others is a legitimate, nondiscriminatory reason for a termination). Defendants, however, have no evidence to support their allegation that they consolidated positions to reduce payroll.
Defendants argue that the EEOC's position that Walters should have been terminated rather than Hickman is a simple disagreement with respect to the decision and does not show that Hickman was terminated based upon his age. This Court disagrees because Defendants provide no reason why when deciding to consolidate positions, they did not terminate Walters' position, rather than incurring months of overtime training her to be promoted to Hickman's position. In other words, Defendants have not explained why Hickman was selected for termination.
"As workers age, their marginal productivity may fall and the costs of retaining them may rise, whether through higher benefits costs or the higher salaries they've earned. As a result, employers might think that younger workers can do the same work as older workers at a lower price, whether measured in time or money. Giving effect to these assumptions by swapping the older with the younger worker would be an act of age discrimination." Filar v. Bd. of Educ. of City of Chicago, 526 F.3d 1054, 1065 (7th Cir.2008) (citing Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 586-87, 124 S. Ct. 1236, 157 L. Ed. 2d 1094 (2004) and Hazen Paper Co. v. Biggins, 507 U.S. 604, 610, 113 S. Ct. 1701, 123 L. Ed. 2d 338 (1993)).
As Defendants have failed to provide a legitimate reason for selecting Hickman in particular over Walters when consolidating the two positions, this Court need not engage in an analysis of pretext. For these reasons, Hickman's claims survive summary judgment and Defendants' motion is DENIED.
3. James Cornell
James Cornell, born 1944, was hired in 1980 as a public relations representative and he worked in the administrative offices. In 1981, he became the building manager and he was responsible for ordering office supplies, janitorial services, general building maintenance, and sorting and distributing company mail. Cornell's employment was terminated on January 3, 2003, and he was told it was due to company downsizing. President Steve Kalish testified that Cornell's only responsibilities at the time were to take care of the mail, but the company changed its mail system and therefore Cornell's position was eliminated. Cornell was 58 years old at the time.
Cornell's duties were reassigned to Ron Mauro, born 1942, and Greg Caldwell, born 1953. Mauro had previously performed Cornell's duties when Cornell was *1307 ill or on vacation. No one was hired to replace Cornell.
Cornell testified that he knew President Steve Kalish since he started working there in 1980, but that in the last five years of his employment, Kalish referred to him several times as "old man." Specifically, Kalish would say "Hi, Old Man," or if he needed something right away he would say, "Come on, Old Man, get it done."
As discussed elsewhere in this order, the use of the term "old man" while in passing and unrelated to the elimination of the position is a stray remark, insufficient to prove discrimination by direct evidence. Accordingly, the EEOC must proceed through the burden shifting framework.
The EEOC, however, cannot establish that Cornell was replaced by a younger employee. The person who assumed the majority of his duties was two years older than him.
The EEOC next argues that it can establish an inference of discrimination and pretext based on alleged shifting reasons for Cornell's termination. The EEOC states that Kalish testified that Cornell's position was terminated because of the change in the mail system, yet Kalish did not know who made the decision to change the mail system. In addition, the HR Director Benford testified that the building manager position was eliminated. The EEOC's argument lacks merit because the reasons given by Defendants for Cornell's termination are not inconsistent. See Nidds, 113 F.3d 912, 918 (9th Cir.1996) (where the reasons given are not incompatible they do not raise an issue of fact with respect to pretext). Both Kalish and Benford consistently testified that Cornell's position was eliminated. Moreover the EEOC has not disputed that sorting the mail was a primary duty for Cornell, that it took up a lot of his time, and that the mail system was changed.
In addition, the EEOC has not shown that Kalish's calling Cornell an old man were tied directly to the elimination of prior mail system or to Cornell's termination. The use of the term old man in passing, with no indication as to when they were made, does not establish that Cornell's position was not eliminated, or that the reason provided is not worthy of credence. For these reasons, Defendants' motion with respect to Cornell's claim is GRANTED.
4. Sharon Derengowski; Timothy Gittus, Kevin Stockton and Bernard Lucido
In 1997 when Republic Industries purchased Silver State Disposal, the Data Processing department consisted of Manager Bernie Lucido, born in 1952, Timothy Gittus, born in 1956, Kevin Stockton, born 1960, Sharon Derengowski, born 1950, and three other people. Derengowski was Lucido's administrative assistant. At that time, RSSD had custom software programs for billing, payroll, accounting and other functions, which were written, maintained and modified by the programmers and run off a local UNISYS server.
The department became known as the Information Technology ("IT") department. Over time RSSD replaced at least some of the custom software programs, which Lucido, Gittus, and Stockton worked on and maintained, with standardized programs that were used by all other RSI subsidiaries.
On January 3, 2003, IT positions were eliminated and Gittus, Stockton, and Derengowski were terminated. Tim Gittus was 46 years old at the time he was terminated, Kevin Stockton was 42, and Sharon Derengowski was 52 years old. Lucido was terminated in June 2003. He was 50 years old at the time. Employees remaining in the department were Eric Stewart, *1308 age 33 at the time, Frank Billotti, age 41 at the time, and Randy Larson, age 48 at the time.
Defendants state that the positions were eliminated because the custom software and local server were replaced in favor of outside services or standardized software run off a server in Florida, and administered by employees in Florida. No new persons were hired to fill the eliminated positions.
Gittus testified that 100% of his responsibilities involved payroll, and that before his position was eliminated RSSD outsourced its payroll function to ADP, which had the effect of transferring approximately 40% of his duties to ADP. Lucido testified that the switch to ADP was done in 1999 or 2000. In addition, Gittus testified that RSSD started using a different software program for billing and he no longer supported that system, and Randy Larson supported the new software. Lucido testified that the switch occurred in September 2002, and there was no longer a need to write code or maintain any custom billing software run off the UNISYS system.
It is clear from the record that all of Gittus's duties were outsourced to ADP or subsumed by the standardized software and he was not replaced. Thus, the EEOC has failed to prove its prima facie case with respect to Gittus. The EEOC has failed to provide any evidence that could create a genuine issue of fact that the reason Gittus's position was eliminated was a pretext for age discrimination.
Derengowski was responsible for installing terminals, PCs, printers, inventory, and assisting employees on their PCs. In 2002, she became the Sofpak administrator. Defendants customized Sofpak and renamed it RSI. Derengowski was trained in RSI a few months prior to her termination. The EEOC asserts that after Derengowski was terminated, her duties were assumed by Billotti, who was 11 years younger than her, and Larson, who was four years younger than her.
The evidence does not support the EEOC's assertion that Derengowski's duties were assumed by Billotti. Stewart testified only to Billotti's current functions as of the time of his deposition and that Billotti's duties remained the same as they were before Derengowski's termination.
With respect to Larson, Derengowski testified that he told her that his job was changed from programmer to RSI administrator and he received training for that job. The EEOC presented evidence that Larson made $34 an hour, whereas Derengowski made only $18.70 and hour. Defendants assert that the higher salary reflects Larson's skills as a computer programmer, which he could use to adapt RSI applications, and that Derengowski did not have such skills. The EEOC presented evidence that Larson was told to pass more of his work to Lynn. In 2003, there was no employee named Lynn in the IT department.
Defendants argue that even if Larson took over Derengowski's duties, the age difference between them is only four years, which is insufficient to create an inference of age discrimination. Regardless, the EEOC has presented sufficient evidence to create a genuine issue of fact of whether Derengowski's skills and position was still necessary, whether she was replaced by Larson and Lynn, and whether Lynn is younger than Derengowski.
With respect to Lucido, the EEOC presented evidence that approximately one year after Lucido was terminated, Eric Stewart became IT manager. Defendants argue that although it is true that Stewart became a manager, it was not the same position held by Lucido because Lucido had six people who reported to him, whereas by the time Stewart became manager, *1309 there were only two people reporting to him, and Lucido's efforts focused on writing custom programs.
The EEOC has presented enough evidence to create a genuine issue of fact as to whether Defendants' reasons for termination of Lucido were pretext since Defendants have not explained why Stewart was better suited for the managerial position than Lucido, or why Lucido was selected for lay off rather than Steward.
With respect to Stockton, the EEOC presented evidence that Stewart used Stockton as an independent contractor several times over the next three years, each time for several months, to complete or fix problems with the custom software and programs that he had created and to create other custom programs. In addition, there is conflicting testimony as to when the UNISYS server stopped being used, whether that occurred two weeks before the January 2003 terminations, or sometime after June 2003.
The EEOC has presented enough evidence to create a genuine issue of fact as to whether Defendants' reasons for termination of Stockton were pretext since Defendants have not presented evidence to support their assertion that employees in Florida performed the IT services or that they used outside services to perform the services that Stockton performed. Defendants' statement that the customized software was completely replaced with standardized software is belied by the fact that Stockton was hired as an independent contractor to complete and fix customized programs he had created. In addition, Defendants have not provided a reason for selecting Stockton in particular for lay off.
For these reasons, the summary judgment motion is GRANTED with respect to Gittus, and DENIED with respect to Derengowski, Stockton and Lucido.
5. Jon Krieger
Jon Krieger, born 1940, was hired by RSSD on November 6, 1985. In 2004, Krieger worked as a Paint Shop foreman at the Cheyenne Transfer Station. In approximately June 2004, Cheyenne General Manager Paul LaBruzzo decided that the duties of the Paint Shop supervisor, the Container Shop supervisor, and Compactor Shop supervisor could be condensed into one or two supervisory positions covering all three shops. The other two shop supervisors at the time were Container Shop supervisor Armando Teijeiro, born in 1967, and Compactor Shop supervisor Craig Milburn, born in 1963.
In deciding which position(s) to eliminate, LaBruzzo considered the salaries of the three individuals, and who had the better managerial and people skills, and fewer complaints in their departments. During this period it was decided that Teijeiro would go back to being a welder in the Container Shop.[9]
LaBruzzo testified that he believed that Craig Milburn had the better qualities in terms of being a manager and Teijeiro was a far second. LaBruzzo also testified that the decision was ultimately made based upon who had the higher salary. LaBruzzo testified that the plan was to terminate Krieger and his duties would be absorbed by Milburn.
Krieger was not given an opportunity to transfer to a different position. Krieger was 64 years old when his position was eliminated.[10] Teijeiro was 37 years old *1310 and Milburn was 41 years old at the time the decisions were made.
The EEOC argues that it can establish pretext because Milburn in fact had the highest salary of the three supervisors. The EEOC calculated Milburn's salary to be $1,465.35 per week, whereas Krieger earned $1,118 per week, and Teijeiro earned $1,120 per week. However, according to the details from EEOC's own calculations set forth in their brief, the annual salary for Krieger was $58,136, $58,240 for Teijeiro, and $58,614 for Milburn. Therefore, the EEOC has not presented evidence that Milburn in fact earned a significantly higher salary than Krieger. Instead, it appears to be a difference of approximately $500 annually. Moreover, the EEOC has not challenged LaBruzzo's determination that Milburn had the fewest complaints.
The EEOC also presented evidence of age-related comments. Those comments, however, were made by a former supervisor, who was older than Krieger and who was not involved in the decision to eliminate Krieger's position. Thus, the EEOC has not connected this evidence to Krieger's termination.
Accordingly, the EEOC has not presented enough evidence to create a genuine issue of fact regarding pretext. Therefore, the summary judgment motion is GRANTED with respect to Krieger.
6. Michael Miller
Michael Miller, born 1938, was hired as a field agent in 1984. He was supervised by Steve Kalish until 2000. Miller was terminated on January 3, 2003. He was 65 years old at the time. Miller believes his termination was based upon his age because others in their 30s and 40s who performed the same job were not fired.
Defendants assert in their motion that Miller was terminated due to downsizing when RSSD reduced its number of field representatives and transferred many of the duties to the customer service department. Miller testified that he was told the reason for eliminating his position was that the company was downsizing at the direction of the parent company in Florida, RSI. Defendants have not submitted evidence of the reason for termination.[11]
Two months prior to Miller's termination, on November 2, 2002, Defendants hired Ms. Richards, born 1970. Two months after Miller was terminated, on March 18, 2003, Defendants hired Philip Tremblay, born 1980.
Benford testified that Miller's then supervisor, Cheryl Martello, made the decision to eliminate Miller's position. However, Benford also testified that Kalish made the decision.
Miller testified that President Kalish often called to him and referred to him as "old man," or "grey-haired old fart," but that "old man" was Kalish's favorite term. (EEOC Ex. 45 at 35.)
Taking the evidence in the light most favorable to the EEOC, the EEOC has established a genuine issue of fact regarding whether the alleged legitimate reason for terminating Miller's position was a pretext for age discrimination. Indeed, Defendants have not provided a reason why Miller was selected for termination rather than any of the other younger employees who held his same position. Accordingly, Defendants' summary judgment motion is DENIED with respect to Miller's claims.
*1311 D. Employees who Allegedly Resigned or Were Terminated for Other Reasons
1. Elmo Walker
Elmo Walker, born 1941, was hired as a pitcher/driver in 1970. In 2000 or 2001 Walker worked as the Commercial Front Loader PM Route Supervisor at the Sloan Transfer Station, until RSSD consolidated the AM and PM shifts, and Walker became the supervisor of the consolidated day shift.
In 2003, Walker told Director of Labor Relations Gerald Benford that he was going to retire. Walker told others he was leaving. Walker was approximately 62 years old. Walker believes that he was set up to fail because combining the AM and PM shifts required him to work 2 to 3 hours extra each day, increased his responsibilities, and caused a tenfold increase in customer complaints. Sean White, who covered for Walker when Walker was on vacation, believed that Walker was pushed out.
Defendant threw Walker a retirement party and Kalish gave him a special note commemorating his time with the company. After Walker left the company, White, age 35, and Marvin McCullah, age 38, performed as leadmen and Danny Ficklin, age 41, assisted them by taking care of budgeting and employee discipline. The EEOC asserts that this shows that three younger people performed Walker's duties. The EEOC also asserts that forcing Walker out was not a sound financial decision because the three younger employees who were allegedly performing Walker's duties combined, earned more than Walker, yet were less experienced.
Walker testified that Steve Kalish, President of all operations in southern Nevada, sometimes joked with him about his age, and also said "[w]hen are you going to get your old ass out of here." (EEOC Ex. 58.)
Here, the EEOC has not provided sufficient evidence to create a genuine issue of fact regarding constructive discharge. The evidence provided does not show that additional responsibilities taken on by Walker were a result of discrimination or that the AM and PM shift were consolidated to set Walker up for failure based upon his age. The evidence submitted is insufficient to create a question as to whether the working environment was so intolerable that Walker's resignation was a fitting response, neither does it show a pattern of discrimination. See Pickens v. Astrue, No. 06-35325, 2007 WL 3225465, at *2 (9th Cir.2007) ("None of the acts upon which Pickens relies left early retirement as the only reasonable alternative.").
At most, the EEOC established that the consolidation of the AM and PM shift resulted in more responsibilities and longer working hours for Walker. There is no evidence connecting this business decision to Walker's age or establishing that it was so intolerable and discriminatory that a reasonable person would have retired. For these reasons, summary judgment is GRANTED in favor of Defendant with respect to Walker.
2. Jessie Williams
Jessie Williams, born 1946, was hired by Silver State Disposal in 1974 as a pitcher/driver and he soon thereafter became a driver. After ten years he was promoted to a Route Supervisor. In 2000, Williams became the Residential Route Supervisor at the new Henderson Transfer Station. In 2002, General Manager Joe Knoblock informed Williams that the company would become more computerized. Knoblock was concerned because he knew Williams could not read and write. Knoblock offered to send Williams to school and Williams was receptive at the time.
*1312 Williams was separated from employment on January 3, 2003. He was 56 years old at the time. Knoblock states that several weeks after the conversation he had with Williams about going to school, Williams told him he wanted to retire. Williams testified that approximately six months before he was terminated, President Kalish said at a foreman's meeting that "old Uncle Toms' like Haywood" would not be working for the company anymore. (EEOC Ex. 62 at 58.) Williams also testified that prior to the termination meeting with Knoblock, Knoblock stated that the company needed to hire younger people with fresh and new ideas and that the people from RSI in Florida would be "cleaning house." (Id. at 41.) Knoblock presented Williams with a Severance Agreement, and stated he should accept the severance pay, keep his pride, and tell everyone that he retired. Knoblock also allegedly told Williams that if he signed the Severance Agreement, he could work seven or eight more months, but after signing the agreement Knoblock told Williams that there was no use in coming in the next day. Williams testified that he was surprised he was being terminated. Williams believes that he was terminated from employment and that his relative lack of education was not a problem as he was able to perform the job for close to 30 years and Knoblock had chosen Williams to go to the Henderson Transfer Station.
Although Defendants may have had a legitimate reason for terminating Williams' employment based upon its modernization and Williams' inability to read, given the age-related comments made by Knoblock close in time to Williams' termination, summary judgment in favor of Defendant is inappropriate. The EEOC has provided enough evidence to raise a question of fact of an inference of age discrimination. See Merrick v. Farmers Ins. Group, 892 F.2d 1434, 1438 (9th Cir.1990) ("Comments suggesting that the employer may have considered impermissible factors are clearly relevant to a disparate treatment claim.") (citations omitted). Accordingly, Defendants' motion is DENIED with respect to Jessie Williams.
3. William Adams
William Adams was 57 years old when he began working in December 2002 for RSSD as a casual pitcher out of the Henderson Transfer Station. In April 2003, Adams began working as a sludge driver out the Apex location.[12] On August 24, 2003, Adams became a regular employee. Adams received several write-ups over the next ten months, for what the EEOC claims were insignificant issues.
On or about December 4, 2004, Adams received corrective notices for failure to tighten the locks on this tailgate, which allowed the tailgate to open and led to a spill of sludge, failing to report a load spill that allegedly occurred on Las Vegas Boulevard to his supervisor, and failing to report damage to the right side of trailer. Adams denied that he spilled the sludge, and denied that there was any damage to be reported. Adams objected to the discipline, and when he asked to the see the spill or damage he was told that the spill had already been cleaned up and the damage had been repaired.
Adams signed a "Letter of Commitment," which was dated December 9, 2004. Adams was compelled to sign the letter if he wished to continue his employment for the company. If he did not sign the letter, he would have been terminated at that time. The letter acknowledged the December 4, 2004 corrective notices set forth above, and included Adams' failure to document *1313 the reasons for not completing five loads within his ten-hour shift. Adams asserts that five loads could not be completed in a ten-hour shift because he was told to keep overtime to a minimum, and General Manager Alan Gaddy testified that at the time Adams was terminated, employees generally completed four loads during their regular hours and those who completed five loads were generally paid overtime.
On December 13, 2004, Adams submitted a resignation letter to his supervisor David Fink, making his resignation effective December 25, 2004.
Adams testified that prior to receiving the write-ups, Fink had told him that a new management program was in effect and that they were "getting rid of a lot of the older people who were making $70,000 and did not even have a GED." (EEOC Ex. 2 at 75.) In addition, a man named Curtis who worked on front end loaders also told Adams that he believed the company was trying to get rid of older workers with high salaries and little education. Finally, Adams testified that when he worked at Henderson and was assigned to work with younger people, Calvin Francis, the Operations Manager, told one of the younger workers to "break him off." According to Adams, this phrase meant to work the older workers hard or give them jobs they were unable to do.
The EEOC argues that Adams was constructively discharged based upon being written up for insignificant issues, which seemed excessive in comparison to younger drivers who caused significant accidents and damage, the Letter of Commitment was questionable, and based upon the comments made to him. Defendants argue that Adams cannot establish his constructive discharge claim based upon the alleged age-related comments because Adams was neither a higher paid employee or a management employee.
This Court finds that Adams cannot meet the high burden required to survive summary judgment on a constructive discharge claim. First, Adams was hired at an advanced age of 57 years old. Second, Adams has not shown that his discipline was unwarranted or unfair compared to others. Indeed, Adams does not even name specific comparators who were treated better, or who were not disciplined for engaging in the same alleged insignificant misconduct. Instead, he merely vaguely references younger drivers. Moreover, Adams has not denied that he actually engaged in the misconduct that led to the discipline for the alleged insignificant issues.
Adams has only contested the sludge spill and his ability to complete five loads and keep overtime to a minimum. With respect to the sludge spill, however, Adams has not produced any evidence that the sludge spill did not occur, that it was unreasonable for Defendants to believe that the sludge spill occurred, or that it was unfair to require him to enter into a Letter of Commitment based upon the sludge spill accident. Courts have consistently held that they should not second guess an employer's exercise of its business judgment in making personnel decisions, as long as they are not discriminatory. Therefore, an employer's belief that the employee's performance was unsatisfactory, even if mistaken, is not grounds for inferring discrimination. See Russell v. Placeware, Inc., No. Civ. 03-836-MO, 2004 WL 2359971, at *10 (D.Or. Oct.15, 2004) ("the Ninth Circuit has warned courts to be careful not to punish employers for making valid business decisions") (citation omitted); Anderson v. Baxter Healthcare Corp., 13 F.3d 1120, 1125 (7th Cir.1994) ("The mere submission of materials from a co-worker or supervisor indicating that an employee's performance is *1314 satisfactory, or more specifically that an employee's performance is satisfactory because he was not entirely responsible for several admitted mishaps, does not create a material issue of fact."); McKnight v. Kimberly Clark Corp., 149 F.3d 1125, 1129 (10th Cir.1998) (where there was no evidence of a basis for doubting sincerity at the time of an articulated motivating reason for an employment action, the reason was not converted into pretext merely because, with the benefit of hindsight, it turned out to be poor business judgment); Furr v. Seagate Tech., Inc., 82 F.3d 980, 986 (10th Cir.1996) (employment laws not violated by erroneous or illogical business judgment); Dister v. Continental Group, Inc., 859 F.2d 1108, 1116 (2d Cir.1988) ("Evidence that an employer made a poor business judgment in discharging an employee generally is insufficient to establish a genuine issue of fact as to the credibility of the employer's reasons."); Mesnick v. Gen. Elec. Co., 950 F.2d 816, 825 (1st Cir.1991) ("Courts may not sit as super personnel departments, assessing the merits-or even the rationality-of employers' nondiscriminatory business decisions."); Nix v. WLCY Radio/Rahall Communications, 738 F.2d 1181, 1187 (11th Cir.1984) ("The employer may fire an employee for a good reason, a bad reason, a reason based on erroneous facts, or for no reason at all, as long as its action is not for a discriminatory reason.").
Because there is no evidence showing that it was unreasonable for Defendants to believe the sludge spill occurred and to discipline Adams for that act, Adams has not established that the Letter of Commitment was unwarranted and therefore a part of a pattern of discrimination.
Finally, the one comment by the supervisor which did not pertain to Adams in particular could not reasonably create a work environment so hostile that a person would feel compelled to quit. Therefore, this Court GRANTS Defendants' summary judgment motion with respect to Adams' claims.
4. Louis "Buster" Thomas
Louis Thomas, born 1947, was hired in 1987. In 2005, he was working as a Commercial Front Loader driver at the Cheyenne Transfer Station. Thomas injured his left shoulder and lower back while working on January 17, 2005. He filed a worker's compensation claim. Thomas had surgery on his left shoulder on February 16, 2005. Thomas worked in a modified duty position for a few months. During that time, General Manager Joseph Knoblock asked Thomas to pick up paper. Thomas believed that picking up paper would break the light duty restrictions that his doctor had placed upon him and that Knoblock made this request as a means to get rid of older employees.
Thomas testified that Chris Hannah told him and others that all the old guys would be replaced with younger employees at the direction of higher management. The EEOC also points to a comment made by Knoblock two years earlier that the company needed to hire younger people with fresh and new ideas.
In late April 2005, Thomas took a Functional Capacity Evaluation. The evaluator concluded that Thomas could only perform sedentary work. The evaluator stated that she was unable to complete testing due to Thomas's heart rate and blood pressure. The evaluator found that Thomas "does not meet his pre-injury occupation as a Driver ... as this falls into the heavy physical demand level which he is not safe to perform at this time." (Defs.' Young Decl. Ex. 54 at Ex. 3.) It is undisputed that Thomas has been unable to work as a driver due to his shoulder injury.
Defendants' Personnel Action Form indicates that Thomas was separated from *1315 employment on May 20, 2005, and he was referred to vocational rehabilitation. On July 15, 2005, Thomas accepted a lump sum payment of $15,000 in lieu of vocational rehabilitation. Thomas agreed that he did not wish to return to any employment with Defendants and that he agreed to voluntarily resign his employment, effective the date he received the lump sum payment.
Between January 2001 and May 2006, 99 employees ended their employment by accepting vocational rehabilitation services or choosing a buyout. Of the 99 employees, 38 were over the age of 40 and 61 were less than 40 years of age.
Thomas alleges that he was being pushed out of employment through the workers' compensation scheme, like Michael Barnes, who is discussed below. The EEOC, however, has failed to create a genuine issue of fact regarding age discrimination. First, the EEOC asserts that Thomas was discriminated against based upon his age because Defendants hired younger employees with blood pressure problems, and gave them an opportunity to re-take the physical exam after resting for a period of time. It is undisputed, however, that each of these younger individuals had a slower heart rate than Thomas. Furthermore, even if Thomas had passed the blood pressure and heart rate conditions, it is undisputed that Thomas's shoulder injury prevented him from working as a driver. Thomas did not show that any of these younger employees have injuries that prevent them from working as a driver.
Moreover, although Thomas believed that Knoblock tried to make him break his light duty restrictions, Thomas has not shown that being asked to pick up paper was a violation of his light duty restriction. Finally, the EEOC has not provided evidence of an available job that Thomas could have performed. For these reasons, summary judgment is GRANTED with respect to Thomas's claims.
5. Michael Barnes
Michael Barnes, born in 1963, was hired in 1995. He was employed as a driver/pitcher for the Commercial Rear Loader line of business at the Cheyenne Transfer Station when he injured his shoulder, back and right knee on June 3, 2004, while lifting a trash can. Barnes was 41 years old at the time. Barnes went off of work the next day.
Barnes was evaluated by Dr. Robert Braden. Dr. Braden found that Barnes had severe to marked hip osteoarthritis and due to extreme loss of motion in the hip joint area, his lower spine was placed in a significant compensatory state. Dr. Braden told Barnes that his deteriorating hips would progress rapidly due to the nature of his job as a pitcher/driver and he would need a hip replacement at an early age. Dr. Braden recommended that Barnes engage in another type of job because he was in serious jeopardy of further injury to his spine. On June 14, 2004, Dr. Braden released Barnes for work on restricted/modified duty.
Barnes' termination date was noted as June 14, 2004, and he did not return to work. Instead, Romeo Vellutini, the workers' compensation administrator, called Barnes and told him that he was being fired and placed on vocational rehabilitation. Barnes was represented by counsel for the workers' compensation claim, and she asked to be provided with a reason for his termination. None was provided.
On August 23, 2004, Dr. Firooz Mashhood confirmed that Barnes had degenerative joint disease of the hips and knee. Dr. Mashhood noted that Barnes indicated he believed he could return to his previous job. Dr. Mashhood agreed that Barnes could return to work full duty capacity, but *1316 requested an MRI of the hip. Dr. Mashhood provided a progress report stating that Barnes should be returned to work full duty no restrictions on August 24, 2004. Barnes' attorney asked that he be returned to work based upon Dr. Mashhood's recommendation.
On September 26, 2004, Dr. James Dettling agreed with the diagnoses and prognosis by Dr. Braden and stated that Barnes should strongly consider a different position.
Notes from the third-party workers' compensation administrator dated October 2004, state that the employer does not want Barnes back at work and requests vocational rehabilitation.
Based on an evaluation by Dr. Braden and other doctors, Defendants believed that due to various impairments, in conjunction with his job duties, Barnes was at risk of further injury to his spine and hips.
Barnes testified that he believed that he was discriminated against because he knew of younger employees who were allowed to return to work after an injury. In addition, he observed supervisors Tony Levy and Charles Holloway assigning older workers to younger workers to break off older workers. Barnes described "break him off" to mean wearing out older slower workers by making them run after trucks to catch up, and eventually they would quit.
The workers' compensation insurer found that Barnes was unable to continue working in his Driver/Pitcher position. Barnes settled his claim in January 2005. Barnes received a lump sum payment for vocational rehabilitation of $15,000 and a lump sum payment for a permanent partial disability rating for his hip and spine of $39,452.58. Barnes claims that he was forced to accept the vocational rehabilitation over his request to return to work.
Barnes states that because Dr. Mashhood released him to go back to work on full duty on August 23, 2004, his termination from employment was unjustified. The EEOC argues that Barnes should not have been forced to accept the workers' compensation settlement, and instead he should have been put back in his old job or returned to a non-driving supervisory position.
Defendants argue that as with Thomas, there is no evidence that could support an inference of age discrimination with respect to the offer of vocational rehabilitation. This Court agrees.
Here, the fact that one doctor released him for work with no restrictions, does not create an issue of fact regarding Defendants' decision to rely on the workers' compensation insurer's, an independent party, finding that in turn was based upon two other medical opinions, that Barnes may severely injure himself or others if he maintained employment in the physically demanding job of a pitcher/driver. See Metzler v. Fed. Home Loan Bank of Topeka, 464 F.3d 1164, 1178-79 (10th Cir.2006) (an assertion that an employer's time estimates were unreasonable and thus a basis for a retaliatory motive for later termination may have shown a mistake but did not raise a genuine issue of material fact where undisputed evidence in the record revealed that the estimates had been reviewed for reasonableness and approved by others).
Moreover, Barnes has presented no evidence that could link the offer of settling the workers' compensation claim to his age. The EEOC presented no evidence that Barnes was forced to settle his claim. Even if Barnes felt he had no choice, the EEOC has not presented evidence that Barnes was forced out because of his age.
Finally, although Barnes was aware of the alleged "break him off" plan, he has *1317 never claimed that he was injured as a result of this plan. Therefore, the EEOC has not presented any evidence that Barnes was offered vocational rehabilitation and a settlement of his injury based upon his age.
For these reasons, this Court GRANTS Defendants' summary judgment motion with respect to Barnes' claims.
6. Laura Lucido
Laura Lucido, born 1952, was hired as a data entry specialist in approximately 1983. In 2002, the employees in Lucido's department were moved to the second floor of the building and they began reporting to Laura's husband, Bernie Lucido. Prior to the move, Lucido reported to Sheryl Martello. People in the company were concerned about Lucido reporting to her husband and there were discussions of moving her elsewhere. Martello stated she would take her back and a few weeks prior to her termination offered Ms. Lucido a position in customer service. Martello states that Ms. Lucido turned down the offer because she wanted something in management and did not want to answer phones. Lucido testified that in 2002 Martello told her that they would be opening up a collection department and they wanted her to run it. The collection department, however, did not open until August 2004.
Ms. Lucido was terminated from employment on January 2, 2003. She was 50 years old at the time she was terminated. Steve Kalish and Martello made the decision to terminate her employment. Karen Van Der Linda, born 1964, assumed Lucido's job duties. Van Der Linda is 12 years younger than Lucido. Van Der Linda's duties were redistributed to other employees. Defendants assert that Lucido was terminated because she could not continue to report to her husband and no replacement position within the company had been accepted. Ms. Lucido testified that she was not subjected to any age-related remarks by any management at RSSD.
The EEOC has not provided any evidence from which it could create a genuine issue of material fact that Defendants' legitimate reason for terminating Ms. Lucido was pretext for age discrimination. Accordingly, summary judgment is GRANTED with respect to Ms. Laura Lucido.
II. Pattern and Practice
The EEOC attempted to rely on statistics to prove a pattern and practice of age discrimination with respect to the drivers employed by Defendants. The EEOC attached to its opposition a declaration by Marla Stern. Marla Stern is a Lead Systemic Investigator for the EEOC and she primarily investigates pattern and practice cases, performs statistical analysis using the Avail computer program, and trains others on conducting statistical analysis. The Avail program calculates the statistical significance of disparities in an employment selection process to help determine if the employer is employing a protected class at an expected rate. Ms. Stern used the Avail program to compare workforce data of Defendants with 2000 Census information. After applying the Fischer Exact Test, Ms. Stern states that "there is a statistical significance, in that the employer is under employing protected age group drivers when utilizing Clark County driver Census data.... The Avail results also shows that the Defendants employed 258.34 fewer [protected age group] drivers than would have been expected when compared with the 2000 Census." (Stern Decl. ¶ 11.)
Defendants brought a motion to strike Stern's declaration, arguing that she was an expert witness who was not properly or timely disclosed. This Court agreed and *1318 granted the motion to strike on November 26, 2008. (Doc. # 243.) This Court found that Stern's testimony regarding a statistical analysis was unquestionably expert testimony and the EEOC failed to name her as an expert on or before the deadline. The EEOC sought reconsideration of that order, and specifically asked that this Court consider portions of Stern's declaration. This Court denied the motion for reconsideration, stating that an expert was needed to explain whether the two groups that Stern sought to compare were in reality comparable and whether the difference between the two groups was statistically significant. Accordingly, the EEOC has no statistical evidence with respect to any category of employee.
Relying solely on the circumstances of the individuals in this case discussed above, the EEOC argues that Defendants, who employ approximately 1,700 individuals, engaged in a pattern and practice of age discrimination.
In order to establish liability for a pattern and practice claim of age discrimination, a plaintiff bears the initial burden of proving disparate treatment based upon age. Int'l Bhd. of Teamsters v. United States, 431 U.S. 324, 336, 97 S. Ct. 1843, 52 L. Ed. 2d 396 (1977). A pattern and practice claim must be based upon "more than the mere occurrence of isolated or `accidental' or sporadic discriminatory acts. It [must be] establish[ed] by a preponderance of the evidence that [age] discrimination was the company's standard operating procedure the regular rather than the unusual practice." Id. The plaintiff must show "a prima facie case of systematic and purposeful employment discrimination." Id. at 342, 97 S. Ct. 1843.
Statistical and "anecdotal evidence of past discrimination can be used to establish a general discriminatory pattern in an employer's hiring or promotion practices." Obrey v. Johnson, 400 F.3d 691, 698 (9th Cir.2005). Statistics are relevant to determining a pattern and practice claim because they "can be used to establish a general discriminatory pattern in an employer's ... practices. Such a discriminatory pattern is probative of motive and can therefore create an inference of discriminatory intent with respect to the individual employment decision at issue." Obrey, 400 F.3d at 694. "[S]tatistical analyses have served and will continue to serve an important role in cases in which the existence of discrimination is a disputed issue." Teamsters, 431 U.S. at 339-40, 97 S. Ct. 1843 (citations and internal quotation marks omitted).
The EEOC did not provide any statistical analysis of Defendants' hiring and termination practices and a comparison of ages of persons employed with those in the community.[13] The EEOC cites Teamsters as support for its argument that the above instances are sufficient, without more, to create a genuine issue of fact of whether Defendants engaged in a pattern and practice of age discrimination. The EEOC's reliance is misplaced, however, because in Teamsters, the Supreme Court found that the Government carried its burden of proof because it provided statistical evidence that was bolstered by "the testimony of individuals who recounted over 40 specific instances of discrimination." Teamsters, 431 U.S. at 338, 97 S. Ct. 1843 (emphasis added).
The EEOC's reliance on Dukes v. Wal-Mart, Inc., 509 F.3d 1168 (9th Cir.2007) is similarly misplaced. Like the Supreme *1319 Court in Teamsters, the Ninth Circuit considered the anecdotal and circumstantial evidence set forth in 120 declarations, in addition to the statistical evidence presented by the plaintiffs. Indeed, the Ninth Circuit stated that "[c]ircumstantial and anecdotal evidence of discrimination is commonly used in Title VII `pattern and practice' cases to bolster statistical proof by bringing `the cold numbers convincingly to life.'" Id. at 1182 (emphasis added). Neither of these cases represented a situation where no statistical evidence was presented and the anecdotal evidence alone was sufficient to withstand summary judgment.
As this Court has granted Defendants' motion to strike Marla Stern's Declaration, there is no statistical evidence currently before this Court from which this Court could make a comparison of percentages of those employed who are older or younger than 40 to the percentages of those terminated in the two age groups, or compare the ages of those hired to the ages of those in the community and determine if there was a statistically significant difference. The issue before this Court is whether the evidence of alleged disparate treatment discussed above is sufficient by itself to create a genuine issue of fact of whether age discrimination was Defendants' regular, rather than the unusual practice. This Court finds that is does not.
At most, in a company of 1,700, the EEOC created a genuine issue of fact as to whether individuals were terminated because of their age. With a such a large company with numerous supervisors and lines of business, possible instances of age discrimination do not create an issue of fact as to whether it was Defendants' usual practice to discriminate based on age. Instead, these instances are sporadic. Moreover, Defendants provided termination data for different transfer stations, types of jobs, and reasons for termination, as set forth above. None of that data created an inference of a pattern of age discrimination. Instead, the data created an inference that Defendants' policies were evenly enforced, regardless of age.
Accordingly, absent some statistical evidence, the EEOC's pattern and practice claim does not survive summary judgment. Defendants' motion with respect to this claim is GRANTED.
CONCLUSION
For the reasons articulated above, the Court GRANTS IN PART AND DENIES IN PART Defendants' Motion for summary judgment.
The Court GRANTS the summary judgment motion with respect to the disparate treatment claims of the following individuals: Randy Johnson; Daron BarnesReid; Eddie Wilson; Roderick Jones; Curtis Howard; Jesus Chanez; Lorrance Wilder, Jr.; Carlos Rasool as to the driver position; Albert Vassar; Dock Hines; Jimmy Hilton; James Cornell; Timothy Gittus; Jon Krieger; Elmo Walker; Laura Lucido; William Adams; Louis "Buster" Thomas; and Michael Barnes.
The Court DENIES the motion with respect to the disparate treatment claims of the following individuals: Jeffrey Banks; Ron Thompson, Sr.; Vincent Marrazzo; Manual Encinas; Carlos Rasool as to the mechanic position; Billy Taylor; David Suazo; Keith Brown; Mid Jackson; Nico Kelley; Eddie Williams; William Lacy; Robert LaRocca; Clayton Hickman; Kevin Stockton; Sharon Derengowski; Bernard Lucido; Michael Miller; and Jessie Williams.
This Court GRANTS the motion with respect to the EEOC's pattern and practice claim.
The Court DENIES Defendants' Motion to Strike New Portions of Plaintiffs Lacy's *1320 and LaRocca's Opposition to Defendants' Motion for Summary Judgment and Declaration of Gerald Benford.
IT IS SO ORDERED.
NOTES
[1] This Court notes that EEOC has voluntarily dismissed claims brought by Debra Cote, Billy Bradley, Donald Whittle, and William Anstett. Accordingly, this Court GRANTS summary judgment in favor of Defendants with respect to those claims.
[2] BarnesReid discussed his termination with the union and the union did not pursue any grievance through arbitration. Defendants argue therefore that they did not violate the attendance policy. It is unclear, however, as to why the union did not pursue the grievance.
[3] Defendants assert that the reverse-seniority system could not have applied to BarnesReid because he became a regular employee only on May 12, 2005, and he therefore would have been one of the least senior roll-off drivers. This argument however, does not address whether BarnesReid had seniority with the union.
[4] Although Jones was the same age when he was hired and terminated, he was hired and terminated by different people.
[5] The EEOC argues that the younger co-workers' comment and accident might be a manifestation of the "break him off" technique where younger workers tried to mistreat older workers to make them quit, with the tacit understanding of the foreman. As acknowledged by the EEOC, however, this is only argument, not evidence. The EEOC has no evidence that this younger employee was trying to break off Jones, or that whoever was the supervisor had condoned that conduct.
[6] The EEOC asserts that although Defendants stated that Jones abandoned his job as of January 7, 2004, because one of Defendants' exhibits possibly shows that Jones received a pay raise on June 12, 2005, there is a an issue of fact as to Jones' termination date. This date discrepancy is irrelevant because Jones testified that he showed up for work for a period of three weeks before deciding to stop coming to work. Accordingly, at the latest, Jones was separated from employment in the last week of January 2004.
[7] This Court is not implying that all of these factors need to be present to find the employees similarly situated. This Court is merely noting that lack of evidence of being similarly situated.
[8] Although the EEOC provided evidence regarding Hilton's termination in 2000, its only argument with respect to this position is that there were numerous reasons given for the termination in 2000. This Court does not find that numerous reasons were given. Although Hilton may have been told that the Routing Department was closing, which it was not, there is no evidence that Hilton's position of custom routing was still available or that the Routing Department still performed those duties. The EEOC does not argue pretext with respect to this position. Accordingly, this Court assumes that Hilton's claims are based only upon his 2001 termination.
[9] It is disputed whether or not Teijeiro requested to be moved back to a welder position.
[10] Defendants assert that Krieger had led others to believe that he was ready to retire. These allegations, however, were not connected to the reason for eliminating his position. In other words, Defendants have not claimed that the reason he was terminated was because he was going to retire soon anyway.
[11] In their brief, Defendants state that Benford testified that the position was eliminated. Benford, however, did not provide the explanation stated in the brief in the portion of his deposition cited by Defendants.
[12] Adams worked for a short period in August or September 2003 as a roll-off driver.
[13] The EEOC attempted to provide statistics relating to drivers, however, this Court struck that evidence, as noted above. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455255/ | 775 S.W.2d 861 (1989)
Richard M. PLATO, Appellant,
v.
ALVIN STATE BANK, Appellee.
No. 01-88-00436-CV.
Court of Appeals of Texas, Houston (1st Dist.).
August 24, 1989.
Arno Schwamkrug, Houston, for appellant.
Thomas A. Hunter, Rolston & Hausler, Houston, for appellee.
Before EVANS, C.J., and DUGGAN and O'CONNOR, JJ.
O'CONNOR, Justice.
Alvin State Bank filed suit against Richard M. Plato to recover $197,750, the amount owed on two notes, plus interest and other damages. The trial court granted the Bank summary judgment, from which Plato appeals.
On August 7, 1985, Plato executed two promissory notes, one for $190,000 and another for $7,750. Plato also executed two security agreements, by which he pledged 330,267 shares of South Fork Oil and Gas Company stock as collateral. When South Fork Oil and Gas Company later changed its name to Tejas Oil and Gas Company, Plato delivered new stock certificates to the Bank. Both notes matured on February 3, 1986. At that time, Plato was to pay the entire amount of principal and interest due. Plato made no payment.
The Bank claims that on November 20, 1987, it tried to sell the Tejas stock at public sale. Because no one offered to buy the stock, the Bank deemed the collateral to be worthless. On December 7, 1987, the Bank filed its suit for judgment on the notes.
The trial court granted the Bank's motion for summary judgment and entered a judgment against Plato on the two notes. On the first note, the trial court awarded the Bank $190,000 principal, and over $77,000 in interest. On the second note, the trial court awarded the Bank $7,750 principal, and over $3,000 in interest. The trial court also granted the Bank attorney's fees of $10,000 and court costs.
In the beginning of March 1988, the Bank returned the Tejas stock certificates to Plato. After the stock was returned, the trial court entered judgment for the Bank. The Bank had the stocks in its possession for about 25 months after Plato defaulted on the note.
Plato raises three points of error. Because the second point disposes of the case, *862 we will not address the other points. In his second point of error, Plato claims the Bank did not meet the standard a secured party must meet in conducting a public or private sale of collateral. Plato contends the Bank did not conduct the sale in a commercially reasonable manner, according to section 9.504 of the Business and Commerce Code. Tex.Bus. & Com.Code Ann. sec. 9.504 (Vernon Supp.1989).
Commercial reasonableness of the sale was an element of the Bank's cause of action, as plaintiff. Tanenbaum v. Economics Laboratory, Inc., 628 S.W.2d 769, 771 (Tex.1982); Carroll v. General Elec. Credit Corp., 734 S.W.2d 153 (Tex.App.- Houston [1st Dist.] 1987, no writ). As the movant, the Bank had to establish there was no genuine issue about any material fact, and it was entitled to a summary judgment as a matter of law. Tex.R.Civ.P. 166a(c). Included in the Bank's burden was the requirement that it conducted the foreclosure sale in a commercially reasonable manner and gave proper notice of the sale. Tanenbaum, 628 S.W.2d at 771; Sunjet, Inc. v. Ford Motor Credit Co., 703 S.W.2d 285 (Tex.App.-Dallas 1985, no writ).
In his response to the motion for summary judgment, Plato swore he had personal knowledge that during the months of October through December, 1987, Tejas stock was traded in open market at a buy-sell value of $0.04 to $0.10 per share. The Bank did not respond to that allegation with any summary judgment proof. The question for us is whether Plato's statement about the market for Tejas stock raised a fact issue to preclude summary judgment.
The Bank claims that it did not sell the stock; it just decided the stock was worthless. We agree that the Bank did not sell the stock, in the sense of transferring ownership of the stock in exchange for money. The Bank did determine, however, that the stock was worthless, and it retained the stock certificates until just before the trial court entered judgment. If there was a market for the stock, as Plato claims, the Bank could have sold the stock for $0.04 a share, and realized about $13,000 to offset against the deficit of the note.
Section 9.207 defines the rights and duties of a secured party who has possession of the collateral. Subsection (a) states the general rule:
A secured party must use reasonable care in the custody and preservation of collateral in his possession. In the case of an instrument or chattel paper reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.
Tex.Bus. & Com.Code Ann. sec. 9.207 (Vernon Supp.1989). The Code does not define "reasonable care in the custody and preservation of collateral." Comment, Duty of a Pledgee under Section 9-207, 10 B.C. Indus. & Com. L.Rev. 301 (1966). Most courts applying section 9.207 have interpreted "reasonable care" to encompass a duty to preserve value. Comment, Pledged SecuritiesThe Pledgee's Duty to Preserve Value Under the Uniform Commercial Code, 62 Marquette L.Rev. 391, 394 (1979).
On this record, Plato raised a fact issue about the Bank's handling of the stock. If, at the time the Bank "attempted" to sell the stock and found no buyers, there was a market for the purchase of the stock at $0.04 per share, it was not reasonable for the Bank to deem the stock worthless. On this record, the Bank was not entitled to a summary judgment.
We sustain the second point of error, reverse the judgment, and remand the cause to the trial court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455256/ | 775 S.W.2d 735 (1989)
Victoria Pargas MORENO, Appellant,
v.
Rodolfo Flores ALEJANDRO, Jr., Appellee.
No. 04-88-00575-CV.
Court of Appeals of Texas, San Antonio.
July 12, 1989.
Rehearing Denied August 30, 1989.
*736 Eugene M. Chavez, Law Office of Eugene M. Chavez, San Antonio, for appellant.
Jo Chris G. Lopez, Shaddox, Compere, Gorham & Good, San Antonio, for appellee.
Before BUTTS, CHAPA and BIERY, JJ.
OPINION
BUTTS, Justice.
This is an appeal from a summary judgment. Appellant, who is the former wife of appellee, sued him for partition of the proceeds from a lawsuit against H.E. Butt Company and Century Security, wherein the husband was one of several recovering plaintiffs. Appellant maintains the proceeds are community property which were not divided in the divorce judgment. At the time appellant obtained the default divorce judgment in 1985 the lawsuit was pending. Subsequently the suit was settled, and appellee's recovery consisted of $478,000.00. The default divorce judgment contains these words which refer to that lawsuit:
IT IS DECREED that the property of the parties be and is hereby awarded to the party having possession of such property including an undivided one-half (½) interest in and to the Petitioner and Respondent's Cause of Action against H.E.B. currently pending in the District Court of Zavala County, Texas in which Respondent is one of multiple plaintiffs. (Cause no. 6904 Marcos Rangel, et al v. H.E. Butt Grocery Co. & Century Security).
*737 The history of this case reveals that appellant first sued to enforce the provision set out above. However, the trial court refused to enforce it, finding the provision to be unenforceable. Appellant's attempted appeal from that order was aborted and the appeal dismissed when she failed to file a transcript. Appellant thereafter filed the present suit for partition of the proceeds. The trial court granted summary judgment in favor of appellee.
Appellee based his motion for summary judgment on two grounds: 1) The divorce decree purported to divide the asset, and any attempt to re-litigate the division of the asset is an impermissible collateral attack upon the judgment which is res judicata. 2) Appellee's recovery of proceeds consists only of damages which must be considered his separate property; therefore, appellant would not be entitled to a portion in any event.
A defendant who moves for summary judgment has the burden to show as a matter of law that no material issue of fact exists as to the plaintiff's cause of action and movant is entitled to judgment as a matter of law. Griffin v. Rowden, 654 S.W.2d 435, 435-36 (Tex.1983); See Bradley v. Quality Service Tank Lines, 659 S.W.2d 33, 34 (Tex.1983); Wilcox v. St. Mary's University of San Antonio, Inc., 531 S.W.2d 589, 592-93 (Tex.1975). The question on appeal is not whether the summary judgment proof raises a fact issue, but whether the summary judgment proof establishes as a matter of law that there is no genuine fact issue as to one or more of the essential elements of the plaintiff's cause of action. Gibbs v. General Motors Corporation, 450 S.W.2d 827, 828 (Tex. 1970); See Rosas v. Buddies Food Store, 518 S.W.2d 534, 537 (Tex.1975). TEX.R. CIV.P. 166a(c) provides that the motion for summary judgment shall state the specific grounds therefor. Further, "[t]he judgment sought shall be rendered forthwith... and the moving party is entitled to judgment as a matter of law on the issues as expressly set out in the motion or in an answer or any other response." City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 677 (1979). Both the reasons for summary judgment and the objections to it must be in writing and before the trial judge at the hearing. Id.
The summary judgment does not specify the basis for the ruling. We will consider first the claim that all the award is appellee's separate property. The petition in the lawsuit filed by appellee and other plaintiffs asserted the following damages:
Plaintiffs have suffered separate and distinct damages proximately caused by defendants' acts and omissions. These damages to plaintiffs include impairment to their character, reputation and standing in the community in the past and in all reasonable probability plaintiffs will continue to suffer said impairment to their character, reputation and standing in the community in the future. Plaintiffs have suffered mental anguish and suffering in the past and in all probability will continue to suffer mental anguish and suffering in the future. Plaintiffs have suffered personal humiliation in the past and in all probability will continue to suffer personal humiliation in the future. Plaintiffs have suffered psychological impairment in the past and in all probability will continue to suffer psychological impairment in the future. Plaintiffs have suffered emotional distress in the past and will in reasonable probability suffer emotional distress in the future. Plaintiffs incurred reasonable and necessary medical expenses in the past and in reasonable probability will incur medical expenses in the future. All of these damages to plaintiffs are in an amount in excess of the minimal jurisdictional limits of this court.
The damages as asserted are, in the main, personal injury damages. Recovery for personal injuries sustained during marriage is separate property. Perez v. Perez, 587 S.W.2d 671, 673 (Tex.1979). Damages for mental pain and anguish are separate property. Johnson v. Holly Farms of Texas, Inc., 731 S.W.2d 641, 646 (Tex.App.- Amarillo 1987, no writ). But recovery for medical expenses incurred during marriage is community property. Graham v. Franco, *738 488 S.W.2d 390, 396 (Tex.1972). Recovery for loss of earning capacity during marriage is community property. Id; See Perez v. Perez, 587 S.W.2d at 673. The judgment in the H.E.B. lawsuit provided in pertinent part:
It is further ADJUDGED that this judgment forecloses any and all claims, demands and causes of action and claims for damages of whatsoever nature which were asserted in this cause or which could have been asserted in this cause, whether in contract or in tort or arising under or by virtue of any statute or regulation or arising under the common law including but not limited to all causes of action for reinstatement, emotional distress, damage to reputation, damages due to defamation, attorney's fees, costs, or other sums or relief, whether legal or equitable, whether under any federal, state or local law or statute, regulation, rule or order, specifically including but not limited to Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq.; 42 U.S.C. §§ 1981, 1983, 1985; Texas Commission on Human Rights Act, Vernon Ann.Civ.Stat. art. 52221k et seq.; or any other law, statute or common law claim pertaining to employment discrimination, retaliation, or redress for injuries incurred or damages suffered during the plaintiffs' or cross-plaintiff's course of employment with or subsequent termination by defendant, H.E. BUTT GROCERY COMPANY.
Thus appellee's own summary judgment evidence discloses that some portion of the damages recovered is community property. That fact issue which is raised by the evidence would place on appellee the burden at trial to demonstrate what portion of the proceeds awarded to him represent his separate property. See Lindsey v. Lindsey, 564 S.W.2d 143, 146 (Tex.Civ.App. Austin 1978, no writ); Carnes v. Meador, 533 S.W.2d 365, 369 (Tex.Civ.App.-Dallas 1975, writ ref'd n.r.e.).
The next question is whether appellant is precluded by the doctrine of res judicata from pursuing a division of any community property at trial. In other words, was res judicata established as a matter of law thereby entitling appellee to a summary judgment which would preclude the suit for partition.
In actions for post-divorce partition of assets, it has been held that a judgment finalizing a divorce and dividing the property is res judicata of any attempt to re-litigate the division of property in a subsequent partition suit. Day v. Day, 603 S.W.2d 213, 215 (Tex.1980) (citations omitted). However, "a divorce decree which does not settle the rights of the parties to community property may not preclude a subsequent suit by the wife to establish her rights to it." Pearce v. Commissioner of Int. Rev., 315 U.S. 543, 548, 62 S. Ct. 754, 757, 86 L. Ed. 1016 (1942), citing Gray v. Thomas, 83 Tex. 246, 18 S.W. 721 (1892). When a decree purporting to effect a division of community property fails to provide for or make a disposition of certain properties, the former spouses both remain owners of the property as tenants in common. Ex parte Williams, 160 Tex. 314, 330 S.W.2d 605, 606 (1960); Yeo v. Yeo, 581 S.W.2d 734, 736 (Tex.Civ.App.-San Antonio 1979, writ ref'd n.r.e.). Each of the co-tenants then has a right to demand partition of the property. Busby v. Busby, 457 S.W.2d 551, 554-55 (Tex.1970); see Forsman v. Forsman, 694 S.W.2d 112, 114 (Tex.App.-San Antonio 1984, writ ref'd n.r.e.).[1]
The summary judgment evidence in the present case, including the divorce decree together with the position taken and representations made by Moreno herself, shows that the default divorce decree purported to adjudicate the asset. On the other hand, the evidence also shows that an intervening final order renders the divorce decree unenforceable; therefore, the divorce decree is *739 incapable of effecting a disposition of any community portion of the asset. It is undisputed that there has been no actual distribution of any community portion of the asset to Moreno under the decree.
A number of cases involving post-divorce partition actions have held that res judicata does not apply where the divorce decree does not "consider," or "purport to dispose of" the asset. See Isenberg v. Isenberg, 510 S.W.2d 364 (Tex.Civ.App.-San Antonio 1974, no writ); Thompson v. Thompson, 500 S.W.2d 203 (Tex.Civ.App.-Dallas 1973, no writ); Howle v. Howle, 422 S.W.2d 252 (Tex.Civ.App.-Tyler 1967, no writ). Appellee argues that if the divorce decree does consider or purport to dispose of the asset, then res judicata applies.
Several cases use language which assumes or implies that a divorce decree must be effective in accomplishing a disposition in order for res judicata to apply. See Pearce v. Commission of Int. Rev., 315 U.S. at 548, 62 S. Ct. at 757 ("decree which does not settle the rights"), Yeo v. Yeo, 581 S.W.2d at 736 ("property not affected by the decree"); Thompson v. Thompson, 500 S.W.2d at 207 ("fails to accomplish disposition").
Appellee Alejandro maintains that the divorce decree is res judicata as to this subsequent partition action, while at the same time he submits evidence that the decree is ineffective to dispose of the asset. We find that in the peculiar circumstances of this case a proper balance must be struck between the policies underlying res judicata and the common law design that community assets either be divided upon divorce, or be the subject of a tenancy in common. We hold in this case, in order for res judicata to apply, the divorce decree would have determined the community rights of the parties as to the award and effected a disposition. However, the decree failed to dispose of the community portion of the asset. We hold that where the asset could not in fact be divided according to the divorce decree, res judicata does not apply to bar a post-divorce partition. Appellee has not fulfilled his burden to demonstrate that res judicata bars this partition action.
We reverse the judgment and remand the case for trial.
NOTES
[1] Because this divorce occurred in 1985, the 1987 Family Code amendments do not apply. We note, however, that the present provisions of TEX.FAM.CODE ANN. §§ 3.90-3.93 (Vernon Supp.1989) evince a strong legislative policy favoring division of community assets which survive the divorce decree undivided. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455305/ | 640 F. Supp. 2d 1203 (2009)
Terry Darnell WILLIAMS, Petitioner,
v.
D. RUNNELS, Warden, Respondent.
No. CV-01-3301-SVW (JWJ).
United States District Court, C.D. California, Western Division.
July 30, 2009.
*1207 Michael Tanaka, Federal Public Defenders Office, Los Angeles, CA, for Petitioner.
David A. Voet, Stephanie A. Miyoshi, CAAGOffice of Attorney General of California, Los Angeles, CA, for Respondent.
ORDER ADOPTING THIRD SUPERSEDING REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
STEPHEN V. WILSON, District Judge.
Pursuant to 28 U.S.C. Section 636(b)(1)(C), the Court has reviewed the instant First Amended Petition along with the attached Third Superseding Report and Recommendation of the United States Magistrate Judge, and has made a de novo determination of the Third Superseding Report and Recommendation.
IT IS ORDERED that Judgment be entered granting Petitioner a conditional writ of habeas corpus and discharging Petitioner from custody and all adverse consequences of his conviction in Los Angeles County Superior Court Case No. TA048776, unless Petitioner is brought to retrial within ninety (90) days of the date this Judgment becomes final, plus any additional delay authorized under State law.
IT IS FURTHER ORDERED that the Clerk shall serve forthwith a copy of this Order and the Judgment of this date on counsel for Petitioner and Respondent.
THIRD SUPERSEDING REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
JEFFREY W. JOHNSON, United States Magistrate Judge.
This Third Superseding Report and Recommendation is submitted to the Honorable Stephen V. Wilson, United States District Judge, pursuant to 28 U.S.C. § 636 and General Order 05-07 of the United States District Court for the Central District of California.
The undersigned previously recommended, on August 11, 2003, that the District Court grant a conditional writ of habeas corpus to Petitioner based on his first claim for relief. On March 2, 2004, the District Court declined to adopt the recommendation and instead issued an order denying habeas relief. On January 5, 2006, the Ninth Circuit Court of Appeals vacated the order denying habeas relief and remanded to the court for further proceedings.
For the reasons discussed below, the undersigned continues to recommend that a conditional writ of habeas corpus be granted to Petitioner.
I.
PROCEDURAL HISTORY
On March 16, 1998, petitioner Terry Darnell Williams was convicted in Los Angeles County Superior Court of second degree robbery while armed with a firearm (Cal.Penal Code §§ 211, 12022(a)(1)) and was sentenced to thirty-four years to life in state prison. (Clerk's Transcript ("CT") 107, 139-40, 160-62). On February 7, 2000, the California Court of Appeal affirmed Petitioner's conviction. (Lodgment *1208 No. 4). The California Supreme Court denied Petitioner's petition for review on April 19, 2000. (Lodgment No. 8). Petitioner also filed in the California Court of Appeal a petition for writ of habeas corpus which the court denied on February 7, 2000. (Lodgment Nos. 5, 6).
On April 11, 2001, Petitioner filed the Petition for Writ of Habeas Corpus by a Person in State Custody initiating the instant action. On April 18, 2001, the Magistrate Judge recommended that the Petition be dismissed as unexhausted. On May 8, 2001, Petitioner filed a properly exhausted First Amended Petition. Respondent filed an Answer to the First Amended Petition on October 9, 2001.
On August 12, 2002, the Magistrate Judge appointed counsel to represent Petitioner and ordered an evidentiary hearing to determine the facts underlying Petitioner's first ground for relief. Respondent moved to vacate the hearing. The Magistrate Judge denied Respondent's motion. Respondent renewed the motion and the Magistrate Judge granted it based on Respondent's assertion that no relevant evidence could be adduced at the hearing.
The Magistrate Judge reviewed the merits of the First Amended Petition and the evidence before the court and, based on Petitioner's first ground for relief, on August 11, 2003, recommended granting conditional habeas relief. The District Court disagreed with the Magistrate Judge's recommendation and denied relief in an order issued March 2, 2004. Williams v. Runnels, 312 F. Supp. 2d 1266 (C.D.Cal.2004). The District Court also granted a certificate of appealability.
On January 5, 2006, the Ninth Circuit vacated the District Court's order and remanded to the court. Williams v. Runnels, 432 F.3d 1102 (9th Cir.2006). The Ninth Circuit instructed the court to consider the Supreme Court's intervening authority on the application of the equal protection clause to jury selection.
The matter was referred to this court on February 15, 2006. The Magistrate Judge again recommended granting Petitioner's habeas in a July 2006 Second Superseding Report and Recommendation. Respondent did not object to the Second Superseding Report and Recommendation. On September 13, 2006, the Magistrate Judge withdrew the Second Superseding Report and Recommendation in order to consider new authority from the Ninth Circuit Court of Appeal. Now, in this Third Superseding Report and Recommendation, the Magistrate Judge continues to recommend that Petitioner be granted relief.
II.
STANDARD OF REVIEW
The Anti-Terrorism and Effective Death Penalty Act ("AEDPA") provides in relevant part:
(d) 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.
28 U.S.C. § 2254. Under the AEDPA, a federal court shall presume that a determination of factual issues made by a state court is correct and Petitioner has the burden of rebutting that presumption by clear and convincing evidence. 28 U.S.C. § 2254(e)(1).
*1209 In reviewing a habeas petition, the court will examine an explicated California Court of Appeal opinion under the AEDPA where the California Supreme Court opinion denies the same claims without discussion because "where there has been one reasoned state court judgment rejecting a federal claim, [federal habeas courts should presume that] later unexplained orders upholding that judgment or rejecting the same claim rest upon the same ground." Ylst v. Nunnemaker, 501 U.S. 797, 803, 111 S. Ct. 2590, 115 L. Ed. 2d 706 (1991); see also Shackleford v. Hubbard, 234 F.3d 1072, 1079 n. 2 (9th Cir. 2000).
III.
GROUNDS FOR RELIEF
Petitioner presents two grounds for relief in his First Amended Petition:
(1) "The trial court violated appellant's state and federal constitutional rights to a fair trial when it denied his motion to dismiss the jury panel after the prosecutor improperly used peremptory challenges to eliminate African American members of the jury panel."
(2) "The trial court violated appellant's state and federal constitutional rights to a fair trial when it denied his motion for mistrial after the jurors witness[ed] an altercation involving a key defense witness outside the courtroom."
(First Amended Petition, at 5). Each claim is discussed below.
IV.
CLAIM ONE: BATSON V. KENTUCKY
Petitioner contends that the prosecutor used his peremptory challenges to remove all but one African-American from the jury panel in violation of Petitioner's federal constitutional right to a fair trial. (First Amended Petition, at 5). This court is bound to construe liberally Petitioner's pro se pleading. Brown v. Vasquez, 952 F.2d 1164, 1166 n. 7 (9th Cir.1991); Johnson v. Meltzer, 134 F.3d 1393, 1397 (9th Cir.1998). As such, the court considers this claim to be the same claim of an equal protection violation Petitioner raised in state court.[1] (See Lodgment No. 7, at 8-13). On remand from the Ninth Circuit, this court continues to recommend granting relief on this claim.
A prosecutor violates a defendant's equal protection rights if he excludes members of the jury venire based on their race. Batson v. Kentucky, 476 U.S. 79, 106 S. Ct. 1712, 90 L. Ed. 2d 69 (1986); Williams, 432 F.3d at 1105-06. The United States Supreme Court reiterated the standard for analyzing a claim of discrimination under Batson, which the court noted "should by now be familiar":
First, the defendant must make out a prima facie case by showing that the totality of the relevant facts gives rise to an inference of discriminatory purpose. Second, once the defendant has made out a prima facie case, the burden shifts to the State to explain adequately the racial exclusion by offering plausible race-neutral justifications for the strikes. Third, if a race-neutral explanation is tendered, the trial court must then decide ... whether the opponent of the strike has proved purposeful racial discrimination.
Johnson v. California, 545 U.S. 162, 168, 125 S. Ct. 2410, 162 L. Ed. 2d 129 (2005) (internal quotations omitted); Miller-El v. Dretke ("Miller-El II"), 545 U.S. 231, 239, *1210 125 S. Ct. 2317, 162 L. Ed. 2d 196 (2005). Any constitutional error in jury selection is structural and is not subject to harmless error review. Windham v. Merkle, 163 F.3d 1092, 1096 (9th Cir.1998); Turner v. Marshall ("Turner II"), 121 F.3d 1248, 1254 n. 3 (9th Cir.1997).
As noted by the Ninth Circuit, in Petitioner's case during voir dire the prosecutor used three of his first four challenges to remove three of the four African-American jurors (juror numbers 7013 and 8963 and juror Barnett) in the jury panel.[2] (Reporter's Transcript ("RT") 236-40); Williams, 432 F.3d at 1103-05. After the third African-American juror was removed, Petitioner's counsel made a Wheeler motion.[3] (RT 238). The trial court found that Petitioner had not made a prima facie showing of discrimination under Wheeler and denied the motion. (RT 239). When the prosecutor started to articulate a reason for removing at least one of the jurors, the trial judge stopped the prosecutor from doing so because the judge had found no prima facie case of discrimination. (RT 239-40). The trial judge also noted that if the prosecutor challenged another African-American juror, defense counsel could renew the Wheeler motion. (Id.).
Prior to using any peremptory challenges in the multi-defendant case, the prosecutor had accepted the jury six times. (RT 234-36). Juror number 7013 was seated in the jury box each of the six times the prosecutor accepted the jury and juror number 8963 was seated in the box four of these times. (See id.). The prosecutor never accepted a jury with juror Barnett. (RT 236-38). By the close of voir dire, the prosecutor had used only five peremptory challenges, and three of those had been exercised on the Black jurors at issue. (RT 234-41, 291-96).
The California Court of Appeal denied Petitioner's claim for the same reason advanced by the trial court: it found no prima facie case of discrimination. (Lodgment No. 4, at 6-8). The appellate court reviewed the voir dire transcript and stated its satisfaction that "reasonable grounds" existed for removing the jurors at issue such that Petitioner had not shown a "strong likelihood" of discrimination sufficient to make a prima facie case under Wheeler. (Lodgment No. 4, at 6-8.) Thus, the California Court of Appeal did not undertake either the second or third steps of the Batson analysis. The California Supreme Court issued a denial without explanation of this same equal protection claim. (Lodgment No. 8.)
A. Prima Facie Case of Discrimination
As held by the Ninth Circuit, this court's review of Petitioner's Batson claimeven under the AEDPAis de novo because the California courts applied an incorrect standard in analyzing the claim.[4]Williams, 432 F.3d at 1105; accord Johnson, 545 U.S. at 173, 125 S. Ct. 2410; see also Paulino v. Castro, 371 F.3d 1083, 1090 (9th Cir.2004); Fernandez v. Roe, 286 F.3d 1073, 1077 (9th Cir.2002).
The United States Supreme Court and the Ninth Circuit have consistently applied Batson's prima facie standard:
*1211 To establish [a prima facie] case, the defendant first must show that he is a member of a cognizable racial group, and that the prosecutor has exercised peremptory challenges to remove [members of a cognizable group] from the venire.... Second, the defendant is entitled to rely on the fact, as to which there can be no dispute, that peremptory challenges constitute a jury selection practice that permits "those to discriminate who are of a mind to discriminate." Finally, the defendant must show that these facts and any other relevant circumstances raise an inference that the prosecutor used that practice to exclude the veniremen from the petit jury on account of their race.
Johnson, 545 U.S. at 169, 125 S. Ct. 2410 (quoting Batson, 476 U.S. at 96, 106 S. Ct. 1712). As the Supreme Court held in Johnson, "a prima facie case of discrimination can be made out by offering a wide variety of evidence, so long as the sum of the proffered facts gives `rise to an inference of discriminatory purpose.'" Johnson, 545 U.S. at 169, 125 S. Ct. 2410 (quoting Batson, 476 U.S. at 94, 106 S. Ct. 1712); Miller-El II, 545 U.S. at 239, 125 S. Ct. 2317.
Here, the Ninth Circuit found that the order denying the petition "failed to appreciate the import of [Petitioner's] showing of statistical disparity" in the prosecutor's use of peremptory challenges. Williams, 432 F.3d at 1103-07; see also Paulino, 371 F.3d at 1091 ("[A] defendant can make a prima facie showing based on statistical disparities alone."). According to the Ninth Circuit, Petitioner demonstrated a statistical disparity in the use of peremptory challenges when he showed that the prosecutor removed three out of the four African-Americans and used three of his first four challenges to remove the African-Americans.[5]Williams, 432 F.3d at 1107. This is the same conclusion reached by this court in its August 2003 recommendation:
At the time of Petitioner's Wheeler motion, the prosecutor had used four peremptory challenges. (RT 236-38.) Three of these challenges were used to remove African-American jurors. (Id.) By the close of voir dire, the prosecutor had used only five challenges. (RT 234-41, 291-96.) In making the Wheeler motion, Petitioner's counsel noted without objection that only one African-American remained in the jury panel. (RT 239; First Amended Petition, at 5.) Thus, defense counsel alerted the trial court to the raw number of peremptory challenges as well as the percentage of strikes used against African-American jurors and the percentage of African-American jurors removed by the prosecutor.[6]
*1212 Respondent argues that this court has made an unwarranted assumption that only four out of 49 veniremembers were African-American.[7] (See Objections to Report and Recommendation.) Respondent argues that when counsel stated that only one African-American was left "sitting on the panel," he was referring only to the jurors remaining in the 12 person jury box, not to the entire venire. (Id.) Therefore, Respondent argues, the court has no information regarding the race of 33 of the 49 jurors.
In his First Amended Petition, signed under penalty of perjury, Petitioner alleges that once the prosecutor removed the three African-American jurors at issue, only one African-American remained to be selected. (First Amended Petition, at 5, 7.) When the Wheeler motion was denied, there were 24 potential jurors remaining to be selected (22 who had not yet been questioned and two who had been questioned) beyond those 12 already seated in the jury box. (See RT 232-41.) Petitioner's allegation is, therefore, that only one remaining potential juror out of 36 was African-American, and correspondingly, that only four out of 49 potential jurors were African-American.
Although Respondent generally denied "each and every allegation of the Petition" (see Answer, at 2), he has offered no facts to contest this allegation specifically. In fact, the record supports Petitioner's allegation; once the Wheeler motion was made, defense counsel noted, without argument, that only one African-American was "sitting on the panel now." (RT 238-39.) Counsel's statement, while it could be interpreted in a different manner, also can be read to support Petitioner's allegation that only one African-American was left to be chosen for the jury. No contradictory evidence appears in the record.
Respondent argues that the court can not know whether any of the jurors beyond the 12 actually seated in the jury box were African-American without relying on "conjecture, not the record." (See Objections to Report and Recommendation, at 1.) In fact, the court ordered an evidentiary hearing in part to determine the racial composition of the venire, but Respondent moved to vacate that hearing two times. Counsel for Respondent stated that he "made inquiries" with the trial attorneys who were unable to offer information about the racial make-up of the jury and that, in his review of the District Attorney's file, he "did not discover any evidence regarding racial composition ... [and] [u]nder these circumstances, [he was] unable to provide any new evidence regarding racial composition." (Motion to Vacate Order for Evidentiary Hearing, at 6, Exh. C, at 127-28; see also Renewed Motion to Vacate Order for Evidentiary Hearing.)
On the other hand, Petitioner alleged under penalty of perjury that only one African-American remained to be selected after the prosecutor removed the other *1213 African-American potential jurors and the record supports this allegation. In denying Respondent's original motion to vacate the hearing, the court pointed out to Respondent that without a hearing, the court would consider Petitioner's evidence, already in the record, "without benefit of any counter-evidence from the State." Nevertheless, Respondent again moved to vacate the hearing.
This court has made no assumption about the racial make-up of the jury venireit has relied on Petitioner's allegation, supported by the trial record and made under penalty of perjury, that only one African-American remained to be chosen for the jury after the prosecutor exercised his peremptory challenges.[8]... Petitioner placed evidence before this court which supports his claim while Respondent chose to present no evidence and to avoid a hearing, in the course of which he, obviously, at the very least, could have questioned Petitioner under oath.
* * *
In Petitioner's case, the statistics are striking. The prosecutor removed 75% of the Black jurors, compared to 57% in Fernandez and 56% in Turner v. Marshall ("Turner I"), 63 F.3d 807, 812 (9th Cir.1995), overruled on other grounds by Tolbert v. Page, 182 F.3d 677 (9th Cir.1999) (en banc). Moreover, in Petitioner's case, African-Americans constituted as little as 8% of the venire (4 out of 49), yet the prosecutor used 60% of his total strikes to remove Black jurors, or, at the time of Petitioner's Wheeler motion, 75% of his strikes to remove Black jurors.[9]See Fernandez, 286 F.3d at 1078 (analyzing percentages at close of voir dire and at time Wheeler motion made; prosecutor used 21% of strikes against Hispanics compared to overall percentage of 12% Hispanic jurors); Turner I, 63 F.3d at 813 (assuming 30% of venire African-American but 56% of prosecutor's strikes used against African-Americans).
*1214 ... These are not raw numbers, these are numbers showing a pattern of strikes used almost exclusively to remove Black jurors. This prosecutor struck very few jurors; those he did choose to remove, however, were, in overwhelming disproportion, African-American; in fact, he removed all but one of the African-Americans in the jury panel. This raised an inference of discrimination. Fernandez, 286 F.3d at 1078; Turner I, 63 F.3d at 812-13; see also Jones v. Ryan, 987 F.2d 960, 971 (3d Cir.1993) (prima facie case found where prosecutor removed three of four Black jurors and used three of his four peremptory challenges to do so); United States v. Alvarado, 923 F.2d 253, 255-56 (2d Cir.1991) (prima facie case found where prosecutor struck four of seven minority jurors because "a challenge rate nearly twice the likely minority percentage of the venire strongly supports a prima facie case under Batson.").
(Superseding Report and Recommendation, 10-18) (footnotes in original, some footnotes omitted.) This court continues to find a prima facie case based on this same analysis. See also Paulino, 371 F.3d at 1091 (where prosecutor used five of six peremptory challenges to remove five of six African-American jurors, prima face case of discrimination established even where court is able to review only a "mere sliver" of the jury selection record provided by the state).
The question posed by the Ninth Circuit is whether the inference of discrimination raised by this statistical disparity had been dispelled by "other relevant circumstances." Williams, 432 F.3d at 1108. The Ninth Circuit concluded here that the existing record "failed to disclose a refutation of the inference of bias raised by the statistical disparity." Id., 432 F.3d at 1109. Further, according to the Ninth Circuit, Petitioner was entitled to an evidentiary hearing on his claim, as this court previously found. See id., 432 F.3d at 1110. In fact, the Ninth Circuit held that "it appears that if there are other relevant circumstances that might dispel the inference [of discrimination], it was the state's responsibility to create a record that dispels the inference." Id. (emphasis added).
Previously, this court ordered an evidentiary hearing, and vacated it only at Respondent's repeated request and then only because Respondent represented that no further evidence was available regarding the racial make-up of the potential jury or regarding the prosecutor's actual reasons for his challenges. (See Motion to Vacate Evidentiary Hearing, at 11-12.) Respondent did not suggest that any other relevant evidence might be adduced at a hearing. Given these circumstances, this court need not offer Respondent what would now be a third opportunity for an evidentiary hearing. See also Williams, 432 F.3d at 1110.
The court now is left with its original finding and recommendation that, on the existing record, Petitioner raised an inference of discrimination. See also id., 432 F.3d at 1109 (finding same). The Ninth Circuit explained that none of the following facts, already known to this court, dispelled the inference of discrimination: the prosecutor's acceptance of the jury with African-American members prior to exercising his challenges; the fact that the prosecutor did not use any further challenges against African-Americans after Petitioner's objection; and the fact that there may have been potential non-race based reasons for striking the jurors in question. See id., 432 F.3d at 1109-10. On the other hand, the timing of the prosecutor's challenges strengthens the inference: African-Americans were removed with three of the prosecutor's first four challenges. See id., 432 F.3d at 1108 n. 9 (noting that the timing of the prosecutor's *1215 strikes could affect inference of discrimination). Thus, at the time of Petitioner's objection, 75% of the prosecutor's challenges had been used to remove African-American jurors. There is no suggestion that the proportion of African-Americans available for selection was anywhere near this high.
Moreover, if the court is to compare the African-American jurors removed by the prosecutor with jurors not removed by the prosecutor, the inference of discrimination is even stronger. See Boyd v. Newland, 467 F.3d 1139, 1149-50 (9th Cir.2006) (holding that reviewing courts should conduct comparative juror analysis at Batson steps one and three), cert. denied, 550 U.S. 933, 127 S. Ct. 2249, 167 L. Ed. 2d 1089 (2007). In denying Petitioner's claim, the California Court of Appeal relied on what it considered to be "obvious" reasons why the prosecutor might have wanted to remove the jurors at issue. (Lodgment No. 4, at 6-8.) Review of these potential reasons for striking the three jurors actually bolsters Petitioner's Batson claim.
Specifically, the record demonstrates that the prosecutor failed to remove non-Black jurors who shared with excused Black jurors the specific characteristics described as the purportedly "obvious" reasons for the strikes. Miller-El II, 545 U.S. at 241, 125 S. Ct. 2317; see also Kesser v. Cambra, 465 F.3d 351, 360-68 (9th Cir.2006) (reviewing voir dire transcript to compare jurors' characteristics). Each of the three challenged African-American jurors is considered below:
Juror No. 7013: The California Court of Appeal found, and Respondent has argued here, that the prosecutor clearly would have wanted to remove juror number 7013 because her son had been convicted of grand theft and incarcerated (Petitioner was convicted of second degree robbery). (Lodgment No. 4, at 6-7; Answer, at 11; RT 190-91.) In fact, the record suggests that the prosecutor may have been about to offer this reason for removing the juror when the trial judge cut him off.[10] (RT 240.) Having had a family member charged with a crime similar to that with which the defendant is charged could constitute a legitimate reason why a prosecutor would want to remove a juror; however, in this case, this factor does not illustrate a non-discriminatory basis for the prosecutor's peremptory strike because the prosecutor did not also remove juror number 3236, whose son had been arrested for robbery and had a drug problem. (See RT 191-92.) Since the prosecutor did not remove this other juror, whose child's alleged crimes matched Petitioner's even more closely, this so-called "obvious" reason for removing juror number 7013 does not dispel an inference that the prosecutor acted with racial motivation.[11], [12]
*1216 Moreover, when the trial judge asked jurors whether they or a family member had been convicted of a crime, he also questioned how they felt the system had treated the individual convicted. Juror number 7013, the Black juror removed by the prosecutor, stated that she believed the system had treated her son fairly. (RT 191.) In contrast, two other jurors not removed by the prosecutor asserted that the justice system had not treated them fairly in their own respective arrests. Juror number 3134 felt that he had been "set up" when he was arrested for DUI and juror number 3601 indicated that his arrest for possessing weapons was unjustified.[13] (RT 192-95.)
Juror No. 8963: The California Court of Appeal found, and Respondent has suggested to this court, that the prosecution clearly would have wanted to remove juror number 8963 because she was unemployed, lived a solitary life (in that she was single and formerly a truck driver), and had no prior jury experience. (Lodgment No. 4, at 7; Answer, at 11-12; RT 158-59.) However, by comparison, juror number 3601 also was unemployed, was separated from his wife, had no jury experience, and had been, unfairly he thought, arrested for a crime; yet juror number 3601 was not removed by the prosecutor. (See RT 171-72, 194-95.) Additionally, juror number 2914 was a truck driver with no jury experience; he was not removed by the prosecutor.[14] (RT 146-47.)
Furthermore, the California Court of Appeal's statement that "at the time the prosecutor exercised his peremptory challenge to excuse prospective juror [number 8963], the vast number of individuals on the panel had prior jury experience" (See Lodgment No. 4, at 7), is not supported by the record. When juror number 8963 was removed, 14 of 33 prospective jurors who had already been questioned, that is, 42%, had no jury experience; correspondingly, 19 of 33, 58%, did have experience.[15] (See RT 142-76.) While the California Court of Appeal was correct that more jurors had jury experience than did not, it was hardly a "vast number" of the 33 who had jury experience. More important and revealing, the prosecutor used only one other peremptory challenge to remove a juror with no jury experience. (See RT 244, 291.)
Juror Barnett: The California Court of Appeal found, and Respondent has argued here, that juror Barnett undoubtedly was dismissed because of his answer to a question from counsel for Petitioner's co-defendant. (Lodgment No. 4, at 7-8; Answer, at 12.) On the basis of juror Barnett's previous answers that he had many friends and family in law enforcement, co-defendant's *1217 counsel asked juror Barnett the following question:
Counsel: And do you have abecause you have friends or even colleagues that you, I presume, respect these people, they are in law enforcement, do you feel that that makes you feel that police are generallygenerally honest, generally no more than the rest of us or certain kinds of law enforcement officers generally tell the truth?
Juror 24: No. I feel they don't.
Counsel: You feel you could be a fair and impartial juror?
Juror 24: Yes.
(RT 223.)
Both the California Court of Appeal and Respondent construe this question and answer as demonstrating a clear anti-police bias. (Lodgment No. 4, at 7-8; Answer, at 12.) This is an objectively unreasonable interpretation of this colloquy. It is far more reasonable to read this exchange as an attempt by a defense attorney to question whether a juror with close ties to law enforcement thought police were more honest or more likely to tell the truth, and the juror's answer as an indication that he believed police were not more honest, especially given that juror Barnett did not answer affirmatively when the trial judge earlier asked the jurors if any of them believed that police were either more or less honest than anyone else. (RT 186.) It is worth noting also that the prosecutor asked no follow-up questions of this juror after this exchange. It stands to reason that if the prosecutor had understood Juror Barnett to be saying that he believed police officers to be less honest, the prosecutor either would have challenged Juror Barnett for cause or asked Juror Barnett additional questions to support a later challenge for cause. The prosecutor did neither.
Thus the "obvious" reasons relied on by the state courts to justify the removal of these three jurors do not illustrate a non-discriminatory motive for the prosecutor's challenges. To the contrary, the record indicates that these reasons were nonsensical or applied inconsistently in a manner that disproportionately impacted African-American jurors. Other non-Black jurors who shared the same "obvious" qualities or possessed qualities even less desirable to the prosecution were not removed by the prosecutor. If having relatives with criminal histories or lacking jury experience or being a loner were reasons enough to remove the Black jurors, then presumably these factors would have been reason enough to require removal of the non-Blacks. That the prosecutor did not exercise his peremptory challenges as to these similarly situated non-Black jurors further suggests that something elseracial discrimination was at work. Wade v. Terhune, 202 F.3d 1190, 1198 (9th Cir.2000); Miller-El II, 545 U.S. at 241, 125 S. Ct. 2317.
For all these reasons, the entirety of the record raises an inference of discrimination that has not been dispelled. Williams, 432 F.3d 1102; see also Paulino, 371 F.3d at 1091-92 (holding that where the state did not provide details of racial make-up of jury, available data raised inference of discrimination based on statistical disparity); Johnson, 545 U.S. at 170, 125 S. Ct. 2410 ("[A] defendant satisfies the requirements of Batson's first step by producing evidence sufficient to permit the trial judge to draw an inference that discrimination has occurred.").
B. Race-neutral Reason for Challenges
"[O]nce the defendant has made out a prima facie case, the `burden shifts to the State to explain adequately the racial exclusion' by offering permissible race-neutral justifications for the strikes." Johnson, 545 U.S. at 168, 125 *1218 S.Ct. 2410; Miller-El II, 545 U.S. at 239, 125 S. Ct. 2317. "A neutral explanation in the context of our analysis here means an explanation based on something other than the race of the juror." Hernandez v. New York, 500 U.S. 352, 360, 111 S. Ct. 1859, 114 L. Ed. 2d 395 (1991) (plurality opinion). While the state may satisfy its burden through the use of circumstantial evidence, it must nonetheless articulate the actual reason jurors were removed; mere conjecture cannot satisfy the state's burden. Johnson, 545 U.S. at 172, 125 S. Ct. 2410 ("Batson framework is designed to produce actual answers to suspicions and inferences [of] discrimination" and this analysis "counsels against engaging in needless and imperfect speculation"); Batson, 476 U.S. at 97-98, 106 S. Ct. 1712; Paulino, 371 F.3d at 1090 ("[I]t does not matter that the prosecutor might have had good reasons ... [w]hat matters is the real reason they were stricken.").
As noted above, the court twice ordered an evidentiary hearing to evaluate any reasons the prosecutor might offer for exercising peremptory strikes against the three African-American jurors. Respondent moved to vacate the hearing and submitted a declaration from the prosecutor stating he had no recollection of the voir dire, had no files or notes regarding the voir dire, and could not supply any information at a hearing in this court. (Motion to Vacate, Exh. D.) Respondent also submitted a declaration from a current employee in the District Attorney's office who stated that Petitioner's case file did not contain any information that would be helpful in discerning the prosecutor's reasons for exercising these challenges. (Motion to Vacate, Exh. E.) Thus, Respondent has failed to supply this court with any of the actual reasons behind the prosecutor's peremptory challenges.[16]
At step two, the State has the burden to offer the actual reasons for the challenges, not to suggest speculative reasons why the prosecutor might have exercised his peremptory challenges. Batson, 476 U.S. at 97-98, 106 S. Ct. 1712; Johnson, 545 U.S. at 172, 125 S. Ct. 2410; Paulino, 371 F.3d at 1090. Thus, the State here has failed entirely to meet its step two burden under Batson. Prior to the Supreme court's ruling in Johnson, relevant authority suggested that this failure would have ended the Batson analysis and required granting relief to the defendant/petitioner.[17] The Ninth Circuit now clearly has rejected this analysis, however, at least in part based on the Supreme Court's opinion in Johnson.
In Johnson, the Court wrote:
The first two Batson steps govern the production of evidence that allows the trial court to determine the persuasiveness of the defendant's constitutional claim. It is not until the third step that the persuasiveness of the justification becomes relevantthe step in which the trial court determines whether the opponent of the strike has carried his burden of proving purposeful discrimination.
Johnson, 545 U.S. at 171, 125 S. Ct. 2410 (quotation omitted) (emphasis in original). Further, the opponent of the strike "ultimately carries the burden of persuasion to prove the existence of purposeful discrimination and ... this burden of persuasion rests with, and never shifts from, the opponent of the strike." Id. (quotation omitted). Most relevant here, the Court explained,
*1219 [i]n the unlikely hypothetical in which the prosecutor declines to respond to a trial judge's inquiry regarding his justification for making a strike, the evidence before the judge would consist not only of the original facts from which the prima facie case was established, but also the prosecutor's refusal to justify his strike in light of the court's request.
Johnson, 545 U.S. at 171 n. 6, 125 S. Ct. 2410. Thus, it appears the Supreme Court in Johnson contemplated a requisite analysis at Batson's third step regardless of whether the State proffered any evidence at step two.
In Yee v. Duncan, 463 F.3d 893 (9th Cir.2006), the Ninth Circuit made this requirement explicit: regardless of the prosecution's failure to articulate a race-neutral reason at step two of the Batson analysis, i.e., its failure to meet its burden under the by now familiar three-step Batson analysis, a reviewing court must continue on to step three. Yee, 463 F.3d at 898-900. As the Ninth Circuit explained, the "ultimate burden of persuasion regarding [discriminatory] motivation rests with, and never shifts from, the opponent of the strike." Id., at 897 (quoting Purkett v. Elem, 514 U.S. 765, 768, 115 S. Ct. 1769, 131 L. Ed. 2d 834 (1995)). Therefore, the State's failure here to articulate the prosecutor's actual race-neutral reasons for the peremptory challenges does not relieve Petitioner of the ultimate burden of proving that discrimination was the motivation behind the prosecutor's strikes.[18]Yee, 463 F.3d at 899 ("[S]tep two is an opportunity for the prosecution to explain the real reason for her actions. A failure to satisfy this burden to produce for whatever reasonbecomes evidence that is added to the inference of discrimination raised by the prima facie showing, but it does not end the inquiry.").[19]
C. Petitioner's Ultimate Burden of Showing Discrimination
Here, then, under Yee, although Respondent has failed to meet its step two burden to produce the actual race-neutral *1220 reasons for the challenges, the court must move on to the third step of the Batson analysis. At step three, this court has "the duty to determine if the defendant has established purposeful discrimination." Batson, 476 U.S. at 98, 106 S. Ct. 1712; Miller-El II, 545 U.S. at 239, 125 S. Ct. 2317. In making this determination, this court must consider "all relevant circumstances." Batson, 476 U.S. at 96-97, 106 S. Ct. 1712; Miller-El II, 545 U.S. at 240, 125 S. Ct. 2317.
Petitioner's prima facie case was strong. As discussed above, during voir dire, the prosecutor used three of his five total peremptory challenges to remove three of the four available African-American prospective jurors. See Williams, 432 F.3d at 1107. Ultimately, the prosecutor excluded 75% of the possible African-Americans; at the time of the objection, the prosecutor had exercised 75% (3 of 4) of his peremptory challenges against African-American jurors. In comparison, African-Americans made up only a small percentage of the first 49 jurors. Id. Even if the seated jury contained one Black juror, the statistics of this case remain overwhelming. Of course, this is in combination with the prosecutor's failure to present any actual reasons for striking the jurors in question, which the court may consider as evidence supporting the inference of discrimination. Yee, 463 F.3d at 899 (failure to provide actual reasons for the challengesfor any reasonis added to inference of discrimination). Without any compelling evidence to "influence[] the starkness of these disparities," Paulino, 371 F.3d at 1091, this court is left with no option but to find a Batson violation.[20]
As explained in detail in sub-section A above, this conclusion does not change when the court considers, at Respondent's earlier urging, the speculative reasons for dismissing these jurors as outlined by the California Court of Appeal. See Miller-El II, 545 U.S. at 241, 125 S. Ct. 2317 (conducting comparative juror analysis); but cf. Johnson, 545 U.S. at 172, 125 S. Ct. 2410 (noting the importance of ascertaining the prosecutor's actual reasons for exercising peremptory strikes). At this step, the court would consider the "persuasiveness" of the proffered reasons, see Purkett, 514 U.S. at 768, 115 S. Ct. 1769, and "undertake `a sensitive inquiry into such circumstantial and direct evidence of intent as may be available.'" Batson, 476 U.S. at 93, 106 S. Ct. 1712 (quoting Arlington Heights v. Metro. Hous. Dev. Corp., 429 U.S. 252, 266, 97 S. Ct. 555, 50 L. Ed. 2d 450 (1977)). "If a prosecutor's proffered reason for striking a black panelist applies just as well to an otherwise-similar nonblack who is permitted to serve, that is evidence tending to prove purposeful discrimination to be considered at Batson's third step." Miller-El II, 545 U.S. at 241, 125 S. Ct. 2317; Lewis v. Lewis, 321 F.3d 824, 830 (9th Cir.2003) ("[I]f a review of the record undermines the prosecutor's *1221 stated reasons, or many of the proffered reasons, the reasons may be deemed a pretext for racial discrimination."); see also Boyd, 467 F.3d at 1150 ("[U]nder the clearly established Supreme Court authority of Batson, comparative juror analysis is an important tool that courts should utilize on appeal when assessing a defendant's plausible Batson claim.").
As explained above, the speculative and supposedly "obvious" reasons for striking the Black jurors in question either were nonsensical or applied to other non-Black jurors not removed from the jury by the prosecutor. Therefore, this court's comparative juror analysis supports Petitioner's claim that it was discrimination behind the removal of the majority of the Black jurors. Wade, 202 F.3d at 1198; Miller-El II, 545 U.S. at 241, 125 S. Ct. 2317.
Other circumstances also support Petitioner's case. First, the prosecutor did not engage any of the three Black jurors in questioning before striking them, even though in at least one case the "obvious" reason for striking a juror was a confused answer regarding his ties to police. Fernandez, 286 F.3d at 1079. ("Under Batson, [a reviewing court] must consider `all relevant circumstances' surrounding the challenges."; and recognizing that the prosecutor's failure "to engage in meaningful questioning of any of the minority jurors" was one such relevant circumstance.) Second, Petitioner shares a racial identity with the three challenged jurors. Powers v. Ohio, 499 U.S. 400, 416, 111 S. Ct. 1364, 113 L. Ed. 2d 411 (1991). Third, the trial judge explicitly told the prosecutor that if he struck another Black juror, defense counsel could renew his Wheeler motion, after which the prosecutor did not remove another Black juror. (RT 239-40); cf. Fernandez, 286 F.3d at 1079 (noting that the fact that prosecutor removes no more minority jurors after trial court's admonition that additional strikes would result in finding a prima facie case is relevant in determining whether a prima facie case was established).[21] In addition, the timing of the strikesthe use of three of the first four strikes to remove African-Americanssuggests an improper motive behind the challenges.
In sum, these factors plus the strength of the statistical disparity, the failure of the prosecutor to offer any rationale for the strikes, and the unpersuasiveness of the suggested non-racial rationales for the strikes under a comparative juror analysis demonstrate an improper motive for the peremptory challenges at issue. For all of the foregoing reasons, the court finds that Petitioner has carried his ultimate burden of proving purposeful discrimination in the prosecutor's use of peremptory challenges. Johnson, 545 U.S. at 171, 125 S. Ct. 2410; Kesser, 465 F.3d at 359-60; McClain v. Prunty, 217 F.3d 1209, 1220-24 (9th Cir. 2000).
D. Application of Teague v. Lane
Respondent has argued here, in cursory fashion, that both of the claims in the First Amended Petition are barred by Teague v. Lane, 489 U.S. 288, 109 S. Ct. 1060, 103 L. Ed. 2d 334 (1989). (See Answer, at 2, 13, 16.) The Teague doctrine is a "nonretroactivity principle" that "prevents a federal court from granting habeas *1222 corpus relief to a state prisoner based on a rule announced after his conviction and sentence became final." Caspari v. Bohlen, 510 U.S. 383, 389, 114 S. Ct. 948, 127 L. Ed. 2d 236 (1994). The Supreme Court has stated that, if the Teague doctrine is "properly raised by the state," it is a threshold analysis that must be conducted before consideration of the merits of the relevant claims. Horn v. Banks, 536 U.S. 266, 272, 122 S. Ct. 2147, 153 L. Ed. 2d 301 (2002) (per curiam); Caspari, 510 U.S. at 389, 114 S. Ct. 948. Respondent, however, has not identified any Supreme Court holding that would constitute a "new rule" within the meaning of Teague (certainly the rule of Batson, announced in 1986, was not a "new rule" in 1998), but rather has simply inserted boilerplate sentences to the effect that the doctrine is implicated in some unidentified fashion. (Answer, at 13, 16.) Under such circumstances, the court finds not only that Respondent has not "properly raised" the Teague doctrine, but that Respondent's Teague argument is patently frivolous. Smith v. Roe, 232 F. Supp. 2d 1073, 1082 n. 2 (C.D.Cal.2002); and see also Boyd, 467 F.3d at 1146 (finding Teague did not bar petitioner's Batson claim based on Supreme Court's decisions in Johnson and Miller-El).
V.
CLAIM TWO: ALTERCATION INVOLVING DEFENSE WITNESS[22]
Petitioner's second claim is that the trial court violated his constitutional right to a fair trial when it declined to declare a mistrial after jurors witnessed an altercation involving key defense witness Meredith Mauldin.[23] (First Amended Petition, at 5.) The California Court of Appeal found that Petitioner was not prejudiced by the incident and therefore denied the claim. (Lodgment No. 4, at 8-11.)
Unlike the state court finding underlying Petitioner's first claim, the Court of Appeal's analysis of this claim is entitled to deference under the AEDPA because the state court applied the correct federal legal standard in denying the claim.[24] 28 U.S.C. § 2254(d). The Supreme Court has explained the deferential standard of review under the AEDPA as follows:
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 [the Supreme Court] on a question of law or if the state court decides a case differently than [the Supreme 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 [the Supreme Court's] decisions but unreasonably applies that principle to the facts of the prisoner's case.
Williams v. Taylor, 529 U.S. 362, 412-13, 120 S. Ct. 1495, 146 L. Ed. 2d 389 (2000). A state court's decision is an "unreasonable *1223 application" of Supreme Court precedent if it is "objectively unreasonable" which "requires the State court decision to be more than incorrect or erroneous." Lockyer v. Andrade, 538 U.S. 63, 75, 123 S. Ct. 1166, 155 L. Ed. 2d 144 (2003); Ortiz-Sandoval v. Clarke, 323 F.3d 1165, 1169-70 (9th Cir. 2003). Thus, "an unreasonable application is different from an incorrect one." Bell v. Cone, 535 U.S. 685, 694, 122 S. Ct. 1843, 152 L. Ed. 2d 914 (2002); accord Price v. Vincent, 538 U.S. 634, 643, 123 S. Ct. 1848, 155 L. Ed. 2d 877 (2003) (even where reviewing court might find that error occurred, habeas relief is not warranted where state court denial of claim is "at least reasonable").
Under the AEDPA, circuit law may be "persuasive authority for purposes of determining whether a particular state court decision is an `unreasonable application' of Supreme Court law." Davis v. Woodford, 333 F.3d 982, 990-91 (9th Cir. 2003). However, only the Supreme Court's holdings need be reasonably applied by the state courts under the AEDPA. Andrade, 538 U.S. at 71-72, 123 S. Ct. 1166.
As found by the California Court of Appeal, most of the jurors either saw or heard a verbal and/or physical confrontation between defense alibi witness Mauldin and an unidentified male and/or female in the hallway outside the courtroom before Mauldin's testimony. (Lodgment No. 4, at 8; RT 611-45.) The jurors described the use of angry, profane language but most did not hear the substance of the conversation. (Lodgment No. 4, at 10; RT 611-45.)
The trial court immediately questioned the jurors individually as to what they had heard and whether the incident would affect their ability to remain impartial. (Lodgment No. 4, at 9; RT 611-45.) All but two jurors stated without hesitation that the events would not affect their impartiality. (Lodgment No. 4, at 9-11; RT 611-45.) One of the two remaining jurors initially stated that the confrontation would not affect his or her opinion of Mauldin's credibility but when asked again stated that (s)he was unable at that time to answer that question. (Lodgment No 4, at 10 n. 4; RT 626-28.) The other of the two jurors stated that he or she might see Mauldin as "impulsive or violent" but that it would not affect his or her ultimate determination of Mauldin's credibility because "we all have our boiling points." (Lodgment No. 4, at 10-11 n. 4; RT 638-42.) Ultimately all of the jurors, including these two, agreed that they would rely solely on the evidence presented to judge the witnesses' credibility. (Lodgment No. 4, at 10-11; RT 652-54.)
After questioning the jury and hearing argument from counsel, the trial court denied Petitioner's mistrial motion and recalled the jury into the courtroom. (Lodgment No. 4, at 9; RT 645-54.) The trial court then carefully instructed the jurors that they were not to consider anything they had heard in the hallway and that they must decide questions of credibility solely on the evidence presented. (Id.) The trial judge accepted the jurors' uniform assurances that they could follow the court's instructions. (Id.)
A defendant's federal constitutional rights may be violated where the jury considers extraneous information in convicting him. Mancuso v. Olivarez, 292 F.3d 939, 949 (9th Cir.2002). This type of constitutional violation, where it occurs, is a trial error that is subject to harmless error analysis on habeas review. Id., 292 F.3d at 949-50. "There is no bright line test for determining whether a defendant has suffered prejudice" when the jury considers extrinsic evidence; therefore, the court should consider all of the circumstances of Petitioner's trial to determine *1224 whether he suffered prejudice. Sassounian v. Roe, 230 F.3d 1097, 1109 (9th Cir. 2000) (internal quotation omitted). The court must consider "whether there is a direct and rational conclusion between the extrinsic material and a prejudicial jury conclusion" as opposed to a connection that arises only by irrational reasoning. Mancuso, 292 F.3d at 953.
The California Court of Appeal reasonably determined that Petitioner was not prejudiced by the jury's observing the confrontation. As that court noted, the jurors either heard nothing substantive or heard statements which had nothing to do with Petitioner's case. Id. (no prejudice if no logical connection between extrinsic evidence and petitioner's trial). The events were immediately brought to the court's attention and the court determined that the jurors could remain impartial, even given the initial misgivings of two of the jurors. Id. (noting the importance of trial court's determination that no prejudice occurred). The trial court then carefully instructed the jurors that they must not consider the altercation but must judge Mauldin only from the evidence presented in court. Id., 292 F.3d at 952 (jury is presumed to follow court's admonition).
In addition, the evidence against Petitioner was strong; the victim immediately and emphatically identified Petitioner as the man who robbed him. Compare Sassounian, 230 F.3d at 1111 (prejudice found where other evidence of guilt is not overwhelming). Finally, it is much more plausible that the reason that the jury discredited Mauldin and Petitioner's fiancee's alibi testimony was that the two waited until trial had already beguneight months after Petitioner's arrestbefore they ever told police, Petitioner's attorney, or anyone else that Petitioner was with them on the night in question and therefore could not have committed the robbery. (See Lodgment No. 4, at 12; RT 901, 907.) The California courts reasonably applied controlling Supreme Court precedent in denying this claim. 28 U.S.C. § 2254(d); Smith v. Phillips, 455 U.S. 209, 217, 102 S. Ct. 940, 71 L. Ed. 2d 78 (1982) ("Due process means a jury capable and willing to decide the case solely on the evidence before it, and a trial judge ever watchful to prevent prejudicial occurrences and to determine the effect of such occurrences when they happen."). Petitioner is not entitled to relief on this claim. 28 U.S.C. § 2254.
VI.
RECOMMENDATION
For all of the foregoing reasons, IT IS RECOMMENDED that the District Court issue an Order: (1) approving and adopting this Third Superseding Report and Recommendation and (2) directing that a conditional writ of habeas corpus be granted.
DATED: January 18, 2008
NOTES
[1] To the extent Petitioner is claiming the state courts violated his rights under the California constitution, his claim fails. Federal habeas relief is not available to remedy alleged errors of state law. 28 U.S.C. § 2254; Estelle v. McGuire, 502 U.S. 62, 67-68, 112 S. Ct. 475, 116 L. Ed. 2d 385 (1991).
[2] As explained below, the court will presume that the fourth African-American was actually seated as a trial juror. The racial composition of the jury venire is discussed in detail below.
[3] People v. Wheeler, 22 Cal. 3d 258, 148 Cal. Rptr. 890, 583 P.2d 748 (1978) (California state case paralleling the anti-discrimination objectives of Batson).
[4] The California Court of Appeal applied Wheeler's "strong likelihood" test in denying Petitioner's claim. (See Lodgment No. 4, at 6 ("Third, from all the circumstances of the case he must show a strong likelihood that such persons are being challenged because of their group association rather than because of any specific bias.") (emphasis in original).)
[5] The District Court took issue with this court's definition of the jury pool and racial make-up. Williams, 312 F. Supp. 2d 1266. However, the Ninth Circuit stated that "it appears that only four of the first forty-nine potential jurors were African-American." Williams, 432 F.3d at 1107.
[6] Respondent contends that defense counsel did not create an record in making the Wheeler motion and therefore that Petitioner is not now entitled to habeas relief on this claim. (Answer, at 10; Objections to Report and Recommendation.) While a defendant does have a duty to alert the trial court to the circumstances raising an inference of discrimination, Johnson v. Campbell, 92 F.3d 951, 953 (9th Cir.1996), Petitioner's trial counsel did so here. At trial, counsel noted that the prosecutor had exercised only four strikes and that three were used to remove Black jurors and that only one Black juror was left on the jury panel. Specifically, counsel stated:
At this time, I would make a motion under Wheeler, Your Honor. People have exercised four peremptories after passing, I believe, five or six times. Three of the four peremptories that have been exercised, the last three have all been African Americans. The first one was a woman, last two have been men.... Ms. Boyd [juror number 7013] was originally onethe other ones getting on, they have all been excused. We only have one African American sitting on the panel now.
(RT 238-39.) Thus, in making this motion, counsel alerted the court to the high rate of strikes used to remove Black jurors and the high rate of Black potential jurors removed.
[7] Originally there were 55 potential jurors, but the trial court removed six jurors for cause or because of hardship. (See RT 232.)
[8] In his Objections to the Report and Recommendation, Respondent cites Williams v. Woodford, 306 F.3d 665, 682 (9th Cir.2002), as support for his position that habeas relief is not warranted because the racial composition of the jury venire is unknown. Respondent paraphrases Williams v. Woodford's holding as follows: "a prima facie case not established when the record did not show how many African-Americans were on the venire." (Objections to Report and Recommendation, at 7.) In fact, the relevant passage in Williams v. Woodford supports the court's reliance on Petitioner's factual allegation in conjunction with the trial record. Specifically, the Ninth Circuit stated: "However, because Williams failed to allege, and the record does not disclose, facts like how many African-Americans (apparently men, if any) sat on the jury, how many African-Americans were in the venire, and how large the venire was, it is impossible to say whether any statistical disparity existed that might support an inference of discrimination." Williams v. Woodford, 306 F.3d at 682 (emphasis added).
[9] Although five jurors may be a relatively small sample from which to draw conclusions, the Ninth Circuit in Fernandez and Turner I considered groups of jurors not significantly larger than that under consideration here. The court in Wade noted the problem of a small sample size where only one of three strikes was used against a Black juror. Wade, 202 F.3d at 1198; cf. United States v. Vaccaro, 816 F.2d 443, 457 (9th Cir.1987) (striking only two Black jurors does not by itself raise an inference of discrimination), overruled on other grounds by Huddleston v. United States, 485 U.S. 681, 108 S. Ct. 1496, 99 L. Ed. 2d 771 (1988); but cf. Turner I, 63 F.3d at 813 n. 3 (distinguishing Vaccaro and finding that while two jurors may not be sufficiently large sample, five jurors is sufficient); see also Fernandez, 286 F.3d at 1078-79 (where the court noted the problem of a small sample size only with respect to its examination of a group of two jurors but even there found a prima facie case of discrimination when all relevant circumstances were considered).
[10] When the trial court found that no prima facie case was made, the following colloquy occurred:
[Prosecutor]: So the record is clear on this issue, Ms. Joyce Boyd, juror number one, indicated she had a son who
The Court: You don't need to give an explanation because I'm not finding a prima facie.
(RT 240).
[11] The prosecutor also removed another juror whose mother-in-law was jailed on drug charges and whose brother-in-law was jailed on murder charges and who believed in the innocence of his brother-in-law. (RT 266-68, 291.) No Wheeler motion was made with respect to this juror.
[12] Although there is a distinction between the robbery arrest of juror number 3236's son and the conviction of juror number 7013's son, that distinction is less important given the fact that juror number 3236's son also had a drug problem and the fact that juror number 7013 felt that her son had been treated fairly by authorities.
[13] In the order denying habeas relief, the District Court stated that juror number 3134 was removed by the court for cause prior to the prosecutor's use of any peremptory challenges. See Williams, 312 F.Supp.2d at 1274. In fact, juror number 3134 was removed by the defense soon after the first of the prosecutor's peremptory challenges. (See RT 117, 232-237.) It appears the District Court may have been referring either to juror number 2604 or juror number 2670, given the transcript pages cited by the court. Thus, a comparative analysis with juror number 3134, who was not removed by the prosecutor, is appropriate.
[14] As the District Court noted, juror number 2914 was removed by a defense peremptory challenge, Williams, 312 F.Supp.2d at 1274 n. 6, but that challenge came only after the prosecutor had passed on the jury containing juror number 2914 four times. (See RT 115, 232-35.)
[15] These percentages remained constant throughout voir dire. By the close of voir dire, 23 of 55 jurors (42%) had no jury experience and 32 of 55(58%) had experience. (RT 142-259.)
[16] Although the prosecutor began to state a reason for one of the strikes, the whole of his truncated answer will not be assumed by the court and cannot suffice as an articulated reason under the Batson step two analysis.
[17] This was the court's analysis in its August 2003 recommendation, issued before the Supreme Court's Johnson decision.
[18] The Ninth Circuit's September 2006 decision in Yee superseded its first opinion in the case, which was issued in March 2006 and subsequently withdrawn. Yee v. Duncan, 441 F.3d 851 (9th Cir.2006), opinion withdrawn and superseded. In the now withdrawn opinion, the court had held that it was "an unreasonable application of clearly established federal law as determined by the Supreme Court [for a court] to uphold the peremptory challenge when the prosecutor failed to provide any explanation for striking" the juror. Yee, 441 F.3d at 854. Although the prosecutor in Yee could remember her reasons for removing seven of eight jurors, she was unable to remember why she had removed the eighth. Id. The Ninth Circuit affirmed the district court's grant of habeas relief because the prosecutor's failure to refute the inference of discrimination raised by the use of the single challenge resulted in a violation of the petitioner's equal protection rights. Id., 441 F.3d at 859-61. This court had relied on the now-withdrawn Yee decision to recommend granting habeas relief in its Second Superseding Report and Recommendation. When Yee was withdrawn and superseded, this court necessarily withdrew its Second Superseding Report and Recommendation.
[19] This is so even though, as has been long recognized, the burden shifting mechanism described in Batson is derived from that developed in Title VII jurisprudence. Batson, 476 U.S. at 94 n. 18, 98 n. 21, 106 S. Ct. 1712; Overton v. Newton, 295 F.3d 270, 279 n. 10 (2d Cir.2002); Evans v. Smith, 220 F.3d 306, 312 (4th Cir.2000); see also St. Mary's Honor Center v. Hicks, 509 U.S. 502, 509, 113 S. Ct. 2742, 125 L. Ed. 2d 407 (1993) (describing burden-shifting mechanism), and compare United States v. Alcantar, 897 F.2d 436, 438-39 (9th Cir.1990) (reversing defendant's conviction where he made a prima facie showing of discrimination and the prosecutor's rationale could not be adequately tested in a hearing two years after the original trial because of faded memories).
[20] Probably the most compelling circumstantial evidence of benign intent is the prosecutor's earlier acceptance of the jury with one or two African-Americans. It cannot be disregarded though that Petitioner was tried with a co-defendant and both defendants would be exercising peremptory challenges. Therefore, a prosecutor so inclined reasonably could have assumed that he could safely accept objectionable jurors in the first few rounds of peremptory challenges as the two defendants would be unlikely to both quickly accept the jury. Of course here, the prosecutor ultimately removed both of these jurors and never accepted the jury with juror Barnett. Importantly, the discriminatory exercise of even one peremptory challenge violates the Equal Protection clause. Paulino, 371 F.3d at 1092. Since the prosecutor ultimately removed these three jurors (and just two non-Black jurors), the earlier passes on these two jurors, when both Petitioner and his co-defendant still had all or most of their peremptory challenges to use, is not compelling evidence of benign intent. Fernandez, 286 F.3d at 1079.
[21] This court might also have considered the State's refusal to clarify the record as to the racial make-up of the jury as support for Petitioner's claim. Cf. Johnson, 545 U.S. at 171 n. 6, 125 S. Ct. 2410 (noting that a prosecutor's refusal to offer reasons for his strikes would support a showing of discrimination). Respondent has represented to this court that no evidence concerning the racial make-up is available. However, because this court cannot know whether the State truly is without any capacity to gather this data, this court has not held this inability or refusal against Respondent here.
[22] This court continues to recommend denial of this claim. No substantive changes have been made to this court's earlier recommendation in this section.
[23] As with Petitioner's first claim, this claim fails to the extent it alleges that the state courts violated Petitioner's rights under the California constitution. 28 U.S.C. § 2254; Estelle, 502 U.S. at 67-68, 112 S. Ct. 475.
[24] The Court of Appeal relied on People v. Nesler, 16 Cal. 4th 561, 578-79, 66 Cal. Rptr. 2d 454, 941 P.2d 87 (1997) in denying Petitioner's claim. In Nesler, the California Supreme Court applied Supreme Court and Ninth Circuit precedent to determine whether a defendant was prejudiced by the jury's receipt of extraneous information. Id. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455375/ | 393 F. Supp. 2d 1240 (2005)
DAYS INNS WORLDWIDE, f/k/a Days Inns of America, Inc., Plaintiff,
v.
MANDIR, INC., Jayesh N. Patel, Kamlesh N. Patel, Dipak Patel, and Ramesh Patel, Defendants.
No. CIV-02-1679-M.
United States District Court, W.D. Oklahoma.
July 18, 2005.
*1241 *1242 *1243 *1244 Deborah S. Coldwell, Jenkens & Gilchrist-Dallas, Dallas, TX, William B. Federman, Stuart W. Emmons, Susan B. Pinkerton, Federman & Sherwood, Oklahoma City, OK, Clay M. Steely, Jenkens & Gilchrist-Houston, Houston, TX, for Plaintiff.
Tom E. Mullen, J Mark McAlester, Fenton Fenton Smith Reneau & Moon, John W. Swinford, Jr, Calvert Law Firm, James P. Kelley, Kelley Kelley & Gregory, Oklahoma City, OK, for Defendants.
ORDER
MILES-LAGRANGE, District Judge.
Pending before the Court is Plaintiff Days Inns Worldwide's ("DIW") Motion for Summary Judgment. The only remaining Defendant, Jayesh N. Patel, has not filed a response.[1] For the reasons set forth below, the Court finds that DIW's Motion should be granted in part and denied in part.
I. Background
The following facts are undisputed. See Reed v. Bennett, 312 F.3d 1190, 1195 (10th Cir.2002) (holding that in the case of a party who fails to respond to a motion for summary judgment, "[t]he court should accept as true all material facts asserted and properly supported in the summary judgment motion"). DIW is one of the largest "guest lodging" franchisors in the United States. The company markets and sells the "Days Inn System" to franchisees who, in exchange for their investment, enjoy the benefits of DIW's centralized reservation system, its training services, and its advertising. Franchisees also benefit, of course, by their mere affiliation with DIW, a company that has "invested substantial effort over a long period of time... to develop goodwill in its trade names and service marks to cause consumers throughout the United States to recognize the Days Marks as distinctly designating DIW guest lodging services as originating with DIW." Pl.'s Mot. for Summ. J., Statement of Undisputed Material Facts, ¶ 9.
On June 4, 1993, DIW (as licensor/franchisor) and Mandir (as licensee/franchisee) entered into a fifteen-year license agreement (the "Agreement") for the operation of a 140-room[2] "guest lodging facility" in *1245 Elk City, Oklahoma. See Ex. A to Pl.'s Mot. for Summ. J. at 1. To induce DIW to enter into the Agreement with Mandir, Kamlesh Patel, Dipak Patel, Ramesh Patel, and Jayesh Patel executed a Guaranty, through which they agreed to assume all of Mandir's financial obligations in the event of default. See Ex. B to Pl.'s Mot. for Summ. J. On April 13, 2000, DIW executed an Amendment to License Agreement in which it recognizes that Jayesh Patel has assumed sole ownership of Mandir. See Ex. C to Pl.'s Mot. for Summ. J. Contemporaneously with the execution of the Amendment to License Agreement, Jayesh Patel, by himself, executed an amended Guaranty. The amended Guaranty is substantially similar in form to the original. See Ex. D to Pl.'s Mot. for Summ. J.
Several provisions of the Agreement are involved in the parties' dispute. Under Section 5, for example, Mandir agrees to comply with all DIW "System Standards," and to submit to up to four unannounced compliance inspections per year. Section 8 requires that Mandir pay DIW "recurring fees" on a monthly basis (such fees to include a royalty of 6.5% of gross room revenues, reservation system user fees, taxes, and interest). Under Section 9(b), Mandir is obligated to submit monthly reports to DIW (such reports to contain various financial information, average daily room rates, and occupancy rates). DIW is entitled, pursuant to Section 19, to terminate the Agreement for any number of enumerated reasons, including Mandir's failure to submit monthly reports, its failure to pay any amounts due under the Agreement, and its breach of any of the terms of the Agreement. Finally, Mandir is required under Section 20 to pay liquidated damages to DIW upon termination of the Agreement, provided that the termination is occasioned by Mandir's acts or omissions; the term "liquidated damages" is defined as "an amount equal to the sum of accrued Recurring Fees during the immediately preceding 24 full calendar months ... [but not] less than the product of $2,000.00 multiplied by the number of guest rooms in the Facility." Ex. A to Pl.'s Mot. for Summ. J. at 17.
Also relevant to this dispute is the Guaranty. In that document, Jayesh Patel "guarantee[s] that [Mandir's] obligations under the Agreement, including any amendments, will be punctually paid and performed." Ex. D to Pl.'s Mot. for Summ. J. Additionally, Jayesh Patel agrees that upon Mandir's default, he will "immediately make each payment and perform or cause [Mandir] to perform, each unpaid or unperformed obligation of [Mandir] under the Agreement." Id.
The sequence of events that culminated in the filing of this action began in the summer of 2000. On August 1 of that year, DIW advised Mandir by letter that Mandir was in default of the Agreement for failure to pay $6,542.60 in outstanding recurring fees and for failure to submit monthly reports. Ex. E to Pl.'s Mot. for Summ. J. Mandir was given ten days to cure the defaults, and was warned that if they were not cured the Agreement could be terminated. Id. Mandir did not cure the defaults.
Instead of terminating the Agreement, DIW conducted a "quality assurance" inspection on November 6, 2000. In a letter dated November 9, 2000, DIW advised Mandir that its facility received a failing score, and that Mandir was therefore in default of the Agreement. Ex. F to Pl.'s Mot. for Summ. J. DIW told Mandir that to cure the default it must achieve a passing score on the next quality assurance inspection, which DIW predicted would occur in approximately thirty days. Mandir was again warned that if the default was not cured the Agreement could be terminated. Id.
*1246 DIW waited until March 7, 2001 to conduct the second quality assurance inspection. In a letter dated March 15, 2001, DIW advised Mandir that the facility received a second failing score, and that Mandir was therefore in continuing default of its obligations under the Agreement. Ex. G to Pl.'s Mot. for Summ. J. Mandir was warned, for the third time, that the Agreement was subject to termination. Id.
In a letter dated May 11, 2001, DIW advised Mandir, for a second time, that Mandir was in default of the Agreement for failure to submit monthly reports and for failure to pay outstanding recurring fees, which by that time had grown to $32,616.95. Ex. H to Pl.'s Mot. for Summ. J. Mandir was directed to contact DIW as soon as possible regarding its intentions, and was informed that if the defaults were not cured the Agreement was subject to termination without further notice. Id.
DIW conducted a third quality assurance inspection on June 14, 2001. It advised Mandir, by letter dated June 25, 2001, that the facility received yet another failing score, that Mandir was therefore in default of the Agreement, and that the Agreement was subject to immediate termination. Ex. I to Pl.'s Mot. for Summ. J.
In a letter dated August 15, 2001, DIW informed Mandir that the Agreement was terminated effective that same date. Ex. J to Pl.'s Mot. for Summ. J. Mandir was directed to immediately refrain from using all DIW service marks, trade names, and other intellectual property, to pay DIW liquidated damages in the amount of $200,000.00, and to pay DIW all past-due recurring fees. Id. DIW requested payment for all sums within thirty days from the date of the letter. Id.
Mandir neglected to make any payments or to refrain from using DIW's intellectual property, prompting DIW to mail three additional demand letters to Mandir on September 4, 2001, Ex. L to Pl.'s Mot. for Summ. J., October 15, 2001, Ex. M to Pl.'s Mot. for Summ. J., and January 25, 2002, Ex. N to Pl.'s Mot. for Summ. J. Each of these letters essentially reiterates the demands of the first. All went unheeded.
Based on the foregoing, DIW instituted this action against all Defendants alleging breach of contract, unjust enrichment, and violations of the Lanham Act. As stated above, however, Mandir, Kamlesh Patel, Dipak Patel, and Ramesh Patel have been dismissed. Because Jayesh Patel is the only remaining Defendant, the Court need only consider DIW's claims for breach of contract and unjust enrichment.[3] Through these claims, DIW seeks to recover past-due recurring fees in the amount of $55,208.29, plus prejudgment interest at the contract rate of 1.5% per month, beginning July 31, 2003 until the date of final judgment, and liquidated damages in the amount of $200,000.00, plus prejudgment interest at the contract rate of 1.5% per month, beginning September 15, 2001 until the date of final judgment. DIW also seeks postjudgment interest, attorneys' fees, and costs.
II. Summary Judgment Standard
Under Fed.R.Civ.P. 56(c), summary judgment is appropriate if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." The summary judgment standard contemplates two distinct burdens of proof. See Reed, 312 F.3d at 1194; Simms v. Oklahoma ex rel. *1247 Dep't of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th Cir.1999). First, "the moving party must meet its `initial responsibility' of demonstrating that no genuine issue of material fact exists and that it is entitled to summary judgment as a matter of law." Reed, 312 F.3d at 1194. If the moving party fails to produce sufficient evidentiary support to satisfy this "initial responsibility," summary judgment is inappropriate "even if no opposing evidentiary matter is presented." Id. (citations omitted) (emphasis in original). If, on the other hand, the moving party satisfies its "initial responsibility," the non-moving party "`must bring forward specific facts showing a genuine issue for trial as to those dispositive matters for which [it] carries the burden of proof.'" Simms, 165 F.3d at 1326 (quoting Jenkins v. Wood, 81 F.3d 988, 990 (10th Cir.1996)).
By failing to respond,
the non-moving party waives the right to respond or to controvert the facts asserted in the summary judgment motion. The court should accept as true all material facts asserted and properly supported in the summary judgment motion. But only if those facts entitle the moving party to judgment as a matter of law should the court grant summary judgment.
Reed, 312 F.3d at 1195.
The determination as to whether facts are material must be made by reference to the substantive law applicable to the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id. In application of the foregoing standard, the court examines "the record and reasonable inferences drawn therefrom in the light most favorable to the non-moving party." 19 Solid Waste Dep't Mechanics v. City of Albuquerque, 156 F.3d 1068, 1071 (10th Cir.1998).
III. Discussion
A. Breach of Contract Claim
DIW contends Mandir breached the Agreement by, inter alia, failing to comply with DIW's quality assurance standards, failing to timely submit monthly reports, failing to timely make recurring fee payments, and failing to pay liquidated damages upon termination of the Agreement. In relief, DIW requests liquidated damages, past-due recurring fees, and prejudgment and postjudgment interest on both.
1. Choice of Law
Before addressing the merits of DIW's state-law breach of contract claim, the Court must determine which state's law governs. It is well settled that a federal court sitting in diversity "looks to the substantive law of the forum state, including its choice of law principles, to determine the applicable substantive law." Boyd Rosene and Assoc., Inc. v. Kansas Mun. Gas Agency, 174 F.3d 1115, 1118 (10th Cir.1999). To determine the applicable substantive law in the instant action, this Court must of course look to Oklahoma choice of law principles.
Under Oklahoma law, "a contract will be governed by the laws of the state where the contract was entered into unless otherwise agreed and unless contrary to the law or public policy of the state where enforcement of the contract is sought." Williams v. Shearson Lehman Bros., 917 P.2d 998, 1002 (Okla.App.1995) (emphasis added). The contract at issue in this case was executed in Oklahoma, but provides (in Section 27) that "[t]his Agreement will be construed in accordance with the laws of the State of New York...." Ex. A to *1248 Pl.'s Mot. for Summ. J. at 21. The Court finds nothing about the Agreement's choice of law provision that may arguably be considered contrary to the law or public policy of the State of Oklahoma. The Court finds, therefore, that the provision should be given effect and that New York law governs DIW's breach of contract claim.
2. Contractual Interpretation
"Under New York law, a written contract is to be interpreted so as to give effect to the intention of the parties as expressed in the unequivocal language they have employed." British Int'l Ins. Co. v. Seguros La Republica, S.A., 342 F.3d 78, 82 (2d Cir.2003) (quoting Cruden v. Bank of N.Y., 957 F.2d 961, 976 (2d Cir.1992)). "Where ... the contract is clear and unambiguous on its face, the intent of the parties must be gleaned from within the four corners of the instrument, and not from extrinsic evidence." Id. (quoting Rainbow v. Swisher, 72 N.Y.2d 106, 531 N.Y.S.2d 775, 527 N.E.2d 258, 259 (1988)). The determination as to whether an ambiguity exists is a question of law for the court. Id. (citing Walk-In Med. Ctrs., Inc. v. Breuer Capital Corp., 818 F.2d 260, 263 (2d Cir.1987)).
After carefully reviewing the relevant provisions of the Agreement, the Court is convinced that the parties' intentions are clearly and unambiguously expressed in the contractual language. Thus, the Court finds that Mandir agreed, inter alia, to comply with DIW's "System Standards" under Section 5 of the Agreement, to pay recurring fees to DIW pursuant to Section 8 of the Agreement, to submit monthly reports to DIW pursuant to Section 9(b) of the Agreement, and to pay liquidated damages to DIW in the event the Agreement terminated by action of Mandir pursuant to Section 20 of the Agreement.
3. Breach
"The essential elements of an action for breach of contract under New York law are (1) formation of a contract between the parties, (2) plaintiff's performance, (3) defendant's failure to perform, and (4) resulting damages to plaintiff." Carruthers v. Flaum, 365 F. Supp. 2d 448, 472 (S.D.N.Y.2005). In the instant action, the evidence and undisputed factual allegations before the Court establish that DIW and Mandir entered into a contract (the Agreement) on June 4, 1993, and amended the contract on April 13, 2000. The evidence and undisputed factual allegations further establish that DIW performed its obligations under the Agreement, providing Mandir access to DIW's centralized reservation system, training services, and advertising, and permitting Mandir to affiliate itself with DIW. The evidence and undisputed factual allegations establish that Mandir failed to perform all of its obligations under the Agreement to the extent that it failed three quality assurance inspections, failed to timely submit monthly reports to DIW, failed to timely pay all recurring fees owed to DIW, and failed to pay liquidated damages to DIW upon termination of the Agreement. Finally, the evidence and undisputed factual allegations establish that DIW was financially injured as a result of Mandir's failure to perform under the Agreement: at the very least, DIW has not been paid the recurring fees or liquidated damages to which it is entitled under the Agreement. Based upon the aforementioned evidence and undisputed factual allegations, as well as the clear and unambiguous language of the Agreement, the Court finds that DIW has satisfied its "initial responsibility" of demonstrating that there exists no genuine issue of material fact with respect to Mandir's breach of the Agreement, and that DIW is therefore entitled to summary *1249 judgment on its breach of contract claim as a matter of law.
4. Liquidated Damages
Having determined that DIW is entitled to summary judgment on its breach of contract claim, the Court turns to the issue of damages, and begins with DIW's request for liquidated damages. The enforceability of a liquidated damages provision presents a question of law for the court. X.L.O. Concrete Corp. v. John T. Brady and Co., 104 A.D.2d 181, 482 N.Y.S.2d 476, 479 (N.Y.App.Div.1984), aff'd, 66 N.Y.2d 970, 498 N.Y.S.2d 799, 489 N.E.2d 768 (1985). The general rule is that liquidated damages provisions will be deemed valid and enforceable unless they are unconscionable or contrary to public policy. Id. at 478. In the absence of statutory authority that provides otherwise, penalties are per se contrary to public policy under New York law. Id. A liquidated damages provision will be considered a penalty, and therefore unenforceable, if the amount provided for in the provision is "manifestly disproportionate" to the amount of actual damages suffered. Id.
Thus, the rule has evolved that when the damages flowing from the breach of a contract are easily ascertainable, or the damages fixed are plainly disproportionate to the injury, the stipulated sum will be treated as a penalty ..., but, where they are uncertain, or difficult, if not incapable, of ascertainment, then a provision liquidating them in advance of loss will be enforced, if the amount liquidated bears a reasonable proportion to the probable loss.
Id. at 478-79 (citation omitted). Finally, the determination as to whether a liquidated damages provision is enforceable must be based on the parties' expectations as of the date the contract was executed, not the date of the breach. Id. at 479.
The Agreement sets forth two methods for calculating liquidated damages. The first method involves adding all recurring fees incurred during the immediately preceding twenty-four months. The second method involves multiplying the total number of guest rooms in the facility by $2,000.00. The Agreement provides that liquidated damages shall not be less than the amount arrived at through the second method. Therefore, the first method applies only if it would produce a liquidated damages amount that exceeds the amount arrived at through the second method.
The second method applies here because the amount of liquidated damages available under the second method exceeds the amount available under the first method. Under the first method, the amount of liquidated damages would be $66,162.72. Aff. of James D. Darby, Ex. 1 to Pl.'s Mot. for Summ. J. at ¶ 35. Under the second method, the amount of liquidated damages would be $200,000.00, which is the product of 100 (guest rooms) multiplied by $2,000.00. Id.
Having determined that the Agreement allows for $200,000.00 in liquidated damages, the Court must now undertake a two-part inquiry. See Brecher v. Laikin, 430 F. Supp. 103, 106 (S.D.N.Y.1977). First, the Court must decide, as of the date the Agreement was executed, whether the actual damages that would have arisen from a breach were "incapable of, or very difficult of, accurate estimation." Id. Second, the Court must determine whether the amount of liquidated damages available under the Agreement is unreasonably disproportionate to the amount of damages "reasonably anticipated for the breach as of the time the contract was made." Id.
Regarding the first factor, the Court finds that the actual damages that would have arisen from a breach were *1250 difficult or incapable of accurate estimation at the time the Agreement was executed. As indicated above, the recurring fees that Mandir owed to DIW included a 6.5% royalty on gross room revenues. The amount of recurring fees that Mandir owed in any given month therefore depended upon, among other things, national and local market conditions, the entry or withdrawal of competitors from the market, vacationers' travel patterns, and the condition of the facility. See Aff. of James D. Darby, Ex. 1 to Pl.'s Mot. for Summ. J. at ¶ 34. These variables, and the impact that the variables may have on occupancy rates and, hence, recurring fees, are inherently unpredictable. As a consequence, the Court finds that DIW and Mandir were, at the time the Agreement was executed, incapable of accurately estimating the amount of damages that would have resulted from a future breach. See Shree Ganesh, Inc. v. Days Inns Worldwide, Inc., 192 F. Supp. 2d 774, 786 (N.D.Ohio 2002) (considering a liquidated damages provision essentially identical to the provision at issue in this case and finding that actual damages "are not easily assessable, particularly in light of the many variables that must be considered in the hotel industry"); Days Inns of Am., Inc. v. P & N Enters., 164 F. Supp. 2d 255, 262-63 (D.Conn.2001) (same); Days Inn of Am., Inc. v. Patel, 88 F. Supp. 2d 928, 935 (C.D.Ill.2000) (same).
The Court next considers whether the liquidated damages amount provided for in the Agreement is unreasonably disproportionate to the amount of damages that could have been reasonably anticipated when the Agreement was executed. At first glance, the applicable liquidated damages amount ($200,000.000) may appear excessive simply because it is three times higher than the amount arrived at through the Agreement's alternative method for calculating liquidated damages. Initial appearances, however, can be deceiving. It must be emphasized that the amount of recurring fees that would have been owing in the absence of a breach could have been significantly higher (or lower) than $200,000.00 depending upon the combined impact of the various unpredictable variables discussed above. Thus, $66,172.72, the amount produced by the Agreement's first method for calculating liquidated damages, cannot be considered a reasonable estimation of future recurring fees at the time the Agreement was executed. It must also be remembered that liquidated damages are intended to compensate the non-breaching party for all of its losses upon the occurrence of a breach. Here, DIW's losses extend well beyond a twenty-four-month period, as the Agreement was intended to run through June 3, 2008, nearly seven years after the Agreement was terminated. See Ex. A to Pl.'s Mot. for Summ. J. at Preamble and § 6.
Having carefully considered the evidence presented by DIW, the Court concludes that the $200,000.00 minimum liquidated damages amount provided for in the Agreement is not unreasonably disproportionate to the amount of damages reasonably anticipated by DIW and Mandir at the time the Agreement was executed to result from early termination of the Agreement. In support of this conclusion, the Court notes that several unpredictable factors significantly impact the amount of recurring fees owed to DIW throughout the life of the Agreement, and that the convergence of these factors could have easily resulted in a recurring fees figure that far exceeded $200,000.00 over the course of the months and years that the Agreement would have remained in effect absent early termination. Given the uncertainties with respect to the monthly recurring fee amount and the parties' inability to forecast when the Agreement would terminate, the Court concludes that the Agreement's minimum estimate of DIW's anticipatory damages is reasonable, and that the liquidated *1251 damages provision should be enforced. See P & N Enters., 164 F.Supp.2d at 262 (concluding that amount of liquidated damages provided for in liquidated damages provision essentially identical to the provision at issue in this case is a "reasonable estimate of just compensation"); Patel, 88 F.Supp.2d at 935-36 (same). But see Shree Ganesh, 192 F.Supp.2d at 786-87 (holding unenforceable liquidated damages provision essentially identical to the provision at issue in this case because "the amount of damages as calculated based on the number of rooms is approximately five times the amount that would have resulted if the calculation were based on Recurring Fees").
5. Recurring Fees
In addition to liquidated damages, the Court finds that DIW is also entitled to recover its past-due recurring fees. Liquidated damages are "prospective" in nature. John T. Brady & Co. v. Form-Eze Sys., Inc., 623 F.2d 261, 263 (2d Cir.1980) (interpreting New York law). In other words, liquidated damages only compensate the non-breaching party for those damages arising after the breach occurred. Here, the liquidated damages award will compensate DIW for the nearly seven years of recurring fees that Mandir would have been required to pay under the fifteen-year term of the Agreement. DIW's entitlement to prospective liquidated damages, however, does not preclude its entitlement to compensatory damages for Mandir's past-due recurring fee payments.
The Court finds that DIW is entitled to a recurring fee award of $47,910.75. The Court arrives at this figure by starting with the total amount of unpaid recurring fees requested by DIW ($55,208.29) and deducting all finance charges (which the Court interprets to be interest charges) included in that figure after September 15, 2001, the date by which Mandir was required to make all payments due to DIW following termination of the Agreement. See Ex. K to Pl.'s Mot. for Summ. J. As explained below, the Court finds that DIW is entitled to prejudgment interest as of September 15, 2001, but only at the interest rate set forth in the applicable New York statute.
6. Prejudgment Interest
DIW seeks prejudgment interest on its past-due recurring fees award at the rate of 1.5% per month, beginning July 31, 2003 until the date of final judgment, and prejudgment interest on its liquidated damages award at the same rate of 1.5% per month, beginning September 15, 2001 until the date of final judgment. "Since federal jurisdiction in this case is premised on diversity and the right to interest on a cause of action qualifies as a substantive right, [this Court] must look to New York law [to determine whether and to what extent DIW is entitled to prejudgment interest]." Adams v. Lindblad Travel, Inc., 730 F.2d 89, 93 (2d Cir.1984).
"Under New York law, `prejudgment interest is normally recoverable as a matter of right in an action at law for breach of contract.'" Graham v. James, 144 F.3d 229, 239 (2d Cir.1998) (quoting Adams, 730 F.2d at 93); see N.Y. C.P.L.R. § 5001 (McKinney 1992). However, in such cases, prejudgment interest must be calculated at New York's statutory interest rate of 9% per annum. N.Y. C.P.L.R. § 5004 (McKinney 1992); see Marfia v. T.C. Ziraat Bankasi, 147 F.3d 83, 90 (2d Cir.1998); Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir.1991). Regarding the date from which interest is computed, New York law provides that
[i]nterest shall be computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred. *1252 Where such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date.
N.Y. C.P.L.R. § 5001(b) (McKinney 1992).
In this case, DIW requests prejudgment interest on its award of unpaid recurring fees beginning July 31, 2003, the day before it filed its Motion for Summary Judgment. The Court finds that "the earliest possible date the cause of action existed" in this case is September 15, 2001, which is the date by which Mandir was required to pay all amounts due to DIW following termination of the Agreement. The Court further finds, therefore, that DIW is entitled to prejudgment interest on its award of unpaid recurring fees at New York's statutory interest rate of 9% per annum since that date, but excluding the period of the bankruptcy stay.[4]See Bursch v. Beardsley & Piper, 971 F.2d 108, 113 (8th Cir.1992) (affirming district court order denying request for prejudgment interest during period of bankruptcy stay). Thus, the Court finds that DIW is entitled to $11,929.49 in prejudgment interest on its award of unpaid recurring fees, which results in a total unpaid recurring fees award of $59,840.24.
DIW requests prejudgment interest on its award of liquidated damages beginning September 15, 2001. As the Court has already determined that September 15, 2001 represents "the earliest possible date the cause of action existed," the Court finds that DIW is entitled to prejudgment interest on its liquidated damages award at New York's statutory interest rate of 9% per annum since that date, again excluding the period of the bankruptcy stay. Therefore, the Court finds that DIW is entitled to $49,798.81 in prejudgment interest on its award of liquidated damages, which results in a total liquidated damages award of $249,798.81.
7. Postjudgment Interest
Under 28 U.S.C. § 1961(a), DIW is entitled to postjudgment interest "at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding... the date of the judgment." 28 U.S.C. § 1961(a). Here, the relevant interest rate is 3.59% per diem from the date of judgment.
8. Guaranty
While it is clear that DIW is entitled to judgment as a matter of law on its breach of contract claim, the Court has yet to determine who is liable. It is indisputable that Mandir, as licensee/franchisee, is primarily liable for all damages arising from its breach of the Agreement. Also at issue in this case, however, is Jayesh Patel's Guaranty.
Under New York law, "[t]he construction of a contract of guaranty is governed by the same rules as any other contract." Leyenson v. Lindenbaum, 94 Misc. 309, 158 N.Y.S. 355, 356 (1916). Thus, the Guaranty should be "interpreted so as to give effect to the intention of the parties as expressed in the unequivocal language they have employed." British Int'l Ins. Co., 342 F.3d at 82 (quoting Cruden, 957 F.2d at 976). The liability of the guarantor is "measured by that of the principal," Cross v. Rosenbaum, 7 Misc. 2d 309, 161 N.Y.S.2d 337, 338-39 (1957), and *1253 is "to be narrowly construed and cannot be extended by construction beyond the plain and explicit language of the contract...." Key Bank of Long Island v. Burns, 162 A.D.2d 501, 556 N.Y.S.2d 829, 830 (N.Y.App.Div.1990) (citation omitted).
Here, Jayesh Patel signed a Guaranty providing that upon Mandir's default, he will "immediately make each payment and perform or cause [Mandir] to perform, each unpaid or unperformed obligation of [Mandir] under the Agreement." Ex. D to Pl.'s Mot. for Summ. J. The Court finds that this language is clear and unequivocal, and that it obligates Jayesh Patel to discharge any unsatisfied financial obligation that arises under the Agreement. The liquidated damages and past-due recurring fees awards to which DIW is entitled constitute unsatisfied financial obligations arising under the Agreement. As a result, Jayesh Patel is liable for those damages under the Guaranty to the same extent that Mandir is liable for them under the Agreement. Accordingly, the Court finds that DIW is entitled to summary judgment against Jayesh Patel on its breach of contract claim in the amount of $309,639.05, plus postjudgment interest at the rate of 3.59% per diem from the date of judgment.
B. Unjust Enrichment
In light of the Court's ruling on DIW's breach of contract claim, the Court need not reach DIW's alternative claim for unjust enrichment. The Court finds that DIW has obtained complete relief with respect to all amounts sought through this claim, and is entitled to nothing more. See Adams, 730 F.2d at 94 (rejecting argument that district court erred in failing to instruct jury on quantum meruit claim where the plaintiff obtained complete relief on his breach of contract claim).
C. Attorneys' Fees and Costs
DIW requests attorneys' fees based solely on its Lanham Act claims. As those claims are no longer at issue, and indeed were never at issue as against Jayesh Patel, the Court finds that DIW's attorneys' fee request should be denied. See 10 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2675, at 314 (3d ed. 1998) ("In the United States, contrary to the practice in England, it has been the custom to require litigants to assume the burden of paying for their own litigation connected legal services in the absence of a rule or statute to the contrary."). Finally, the Court declines to rule on DIW's request for costs, as such a request must be pursued through the Court Clerk's Office in accordance with LCvR54.1.
IV. Conclusion
For all of the foregoing reasons, the Court hereby GRANTS IN PART and DENIES IN PART DIW's Motion for Summary Judgment [docket no. 33] as follows:
(1) The Court enters summary judgment in favor of DIW and against Jayesh Patel on DIW's breach of contract claim; in relief, the Court awards DIW $59,840.24 in unpaid recurring fees and $249,798.81 in liquidated damages, for a total damages award of $309,639.05, plus postjudgment interest, which shall accrue at the rate of 3.59% per diem from the date of judgment;
(2) The Court declines to enter summary judgment in favor of DIW on its unjust enrichment claim;
(3) The Court declines to enter summary judgment in favor of DIW on its Lanham Act claims;
(4) The Court denies DIW's request for attorneys' fees; and
(5) The Court declines to award DIW's requested costs at this time pursuant to LCvR54.1.
*1254 Finally, the Court DENIES DIW's Motion to Compel [docket no. 28] as moot. This order effectively terminates this action.
IT IS SO ORDERED.
NOTES
[1] Defendants Kamlesh N. Patel, Dipak Patel, and Ramesh Patel were dismissed from this action by way of a Stipulation and Order of Dismissal With Prejudice issued on July 30, 2003. Defendant Mandir, Inc. ("Mandir") was dismissed from this action by order dated July 13, 2005.
[2] In November of 1999, DIW and Mandir mutually agreed to reduce the room count to 100. See Pl.'s Mot. for Summ. J., Statement of Undisputed Material Facts, ¶ 12.
[3] The Court finds that DIW's Lanham Act claims do not implicate Jayesh Patel, whose potential liability to DIW derives exclusively from the amended Guaranty. Clearly, Jayesh Patel's potential liability is tied to Mandir's contractual obligations under the Agreement; it is not coextensive with that of Mandir with respect to alleged statutory violations.
[4] Mandir filed its Voluntary Petition under Chapter 11 on December 2, 2003. The bankruptcy litigation concluded on March 3, 2005. Hence, the Court excludes from its calculation of prejudgment interest a total of fifteen months. The Court's prejudgment interest calculation, therefore, is based on a total accrual period of thirty-one months. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1789133/ | 820 So. 2d 980 (2002)
D. CHILDREN, Appellant,
v.
DEPARTMENT OF CHILDREN AND FAMILY SERVICES, Appellee.
No. 4D01-1644.
District Court of Appeal of Florida, Fourth District.
June 5, 2002.
Rehearing Denied July 24, 2002.
Kathleen K. Peña of the Law Offices of Seiler & Sautter, Fort Lauderdale, for appellant.
*981 Robert A. Butterworth, Attorney General, Tallahassee, and Laurel R. Wiley, Assistant Attorney General, Fort Lauderdale, for appellee.
KLEIN, J.
We affirm an order declaring three children dependent. The children were ages three, two, and nine months, all at home, prior to the mother bringing the nine-month-old girl to the emergency room where the examining pediatrician found anal trauma, indicative of penetration.
The police investigated, have not been able to identify who caused the injury, and the criminal investigation remains open. The department filed a petition to terminate parental rights, but amended it at the hearing to seek an adjudication of dependency.
The mother told the pediatrician she had left her daughter naked on the floor while she went to get a clean diaper, and when she returned, the baby was having a bloody bowel movement. She told a nurse that she had observed the family Dachshund walking away from the child and thought the dog caused the injury.
There was medical testimony to the effect that there had been blunt trauma to the anus and bruising, which could not have been caused by constipation or any other natural process, or a fall. There were fissures consistent with penetration. None of the experts believed the injury could have been caused by the dog. No one, other than the parents, thought that this was a plausible possibility, and the mother's explanations as to her observations regarding the dog were inconsistent. Moreover, neither parent removed the dog from the household. The court found that neither parent was credible and that the father had not cooperated in the effort to determine the cause of the injury.
The day before this incident, the mother had taken the same child to the emergency room explaining that she had fallen down some steps. The mother had given different versions of how the child had fallen to different people who had interviewed her, and the doctors had found no injury.
We affirm without further discussion the finding of dependency as to the mother in regard to the one child based on the nature of the injury and the fact that it occurred while the child was in her care and presence.
The father argues that there was no evidence to support dependency as to him because he was not at home when the injury occurred. The mother testified that she called him at work as soon as she saw the injury and he immediately came home. As we noted earlier, however, the trial court found neither parent to be credible. We do not, in contrast to the dissent, accept as a given that the father was not in the home at the time the injury occurred. Assuming the father was not home, however, we would still affirm dependency as to him.
In In re B.J., 737 So. 2d 1227, 1228-29 (Fla. 2d DCA 1999) a six-month-old infant died from injuries caused either by blunt trauma or shaking which were inflicted between two and five hours prior to his arrival at the hospital. During that period of time the infant was at home with both of his parents. The mother appealed the order terminating her parental rights, but the court affirmed, explaining:
The Mother argues that the trial court could not find that she engaged in egregious conduct by causing infant M.W.'s death because the evidence applies with equal force to her husband. However, where there is evidence that a child suffered abuse by one or both of the parents present, there is clear and convincing *982 evidence of egregious abuse to support termination of parental rights of both parents. See In re: M.T.T., 613 So. 2d 575, 577 (Fla. 1st DCA 1993)(affirming termination of parental rights of both parents where the evidence showed that the child was administered an overdose of drugs while in the care of both parents, but it was not clear which parent administered the drugs).
In this case, the DCFS presented evidence that infant M.W. died from abuse inflicted while in the care of both parents. During the time period in which the injuries were most likely inflicted, only the Mother, her husband, their eighteen-month-old child T.W., and infant M.W. were in the residence. There was no testimony that any adult other than the Mother and her husband had access to the infant between two and five hours prior to his arrival at the hospital.
The court found in B.J. that termination was supported by clear and convincing evidence and affirmed. The present case, unlike B.J., is a dependency case, not a termination case, and the burden was preponderance of evidence, not clear and convincing evidence. § 39.507(1)(b), Fla. Stat. (2001). The purpose of a dependency proceeding is "the protection of the child and not the punishment of the person creating the condition of dependency." § 39.501(2), Fla. Stat.
The court's discretion is "very broad with respect to proceedings involving child welfare." D.H., 769 So.2d at 426. Considering that: (1) there was ample evidence to support dependency as to the mother, (2) the perpetrator of the abuse has not been identified, and (3) this is an intact family, we find no abuse of discretion in the court finding dependency as to both parents rather than solely as to the mother. All three of the above factors are, however, essential to our affirmance as to the father.
Appellants also argue that the two siblings, who were home when this occurred, should not have been declared dependent, citing In re M.F., 770 So. 2d 1189 (Fla.2000). In that case the Florida Supreme Court held that a trial court cannot declare one child dependent solely because a parent committed a sex act on a different child. Rather, the court should focus on all of the circumstances. See also D.H. v. Dep't of Children and Families, 769 So. 2d 424 (Fla. 4th DCA 2000). In the present case, however, the trial court was not relying only on the injury to the baby in finding the other two children dependent.
One of the caseworkers, whom the court considered to be an expert on risk assessment, testified that in light of the lack of explanation for this injury "the needs of the parties could not be assessed to ensure the safety of the children." In addition to finding that witness credible, the trial court also found, based on the injury, that the parents "engaged in egregious conduct or had the opportunity and capability to prevent and knowingly failed to prevent the egregious conduct that threatened the life, safety and physical health of the child" and that all three children were "at substantial risk of abuse or neglect if returned to the home."
Considering how close these children were in age, the unlikelihood of this injury occurring naturally or by accident, and the lack of the parents' credibility, we conclude that the trial court had the discretion, even though this is a close question, to find dependency as to all three children. We defer to the trial judge, who heard and observed the witnesses, and resolved the conflicts and doubts in favor of protecting all three of the children, not just the one who was abused. Because these children were all very young, and because of the *983 nature of this abuse, we do not agree with the dissent that the fact that the abused child was a girl and the siblings are boys is significant.
Affirmed.
MAY, J., concurs.
WARNER, J., concurs in part and dissents in part.
WARNER, J., concurring in part and dissenting in part.
I concur in the majority's affirmance of the court's decision to adjudicate the infant minor child dependent as to the mother. There was evidence of an injury to the infant's anus, in the form of a bruise and anal fissures. The penetration that is mentioned in the majority opinion would at most be "penetration" of the outer area of the anus, as the examining physician (as well as the other physicians giving opinions in this case) testified that there were no internal injuries and no penetration of the rectum. Moreover, they testified that fissures of this nature could occur with constipation and are common in infants but that constipation could not cause bruising. Bruising could occur by any object pushed against the anus. A rape examination was completed, and DNA analysis was done. They revealed nothing. Nevertheless, the injury to the anus itself would constitute harm within the meaning of section 39.01(30)(b), Florida Statutes (2000).
Although the medical director of the Child Protection Team testified that there was a low risk of further abuse of this child, the social worker who did a risk assessment testified that there was a high risk of further abuse based upon the fact that the Department could not determine who or what caused the injury.[1] Therefore, as noted in the majority opinion, "the needs of the parties could not be assessed to ensure the safety of the children." I do not follow the logic of the Department in concluding that the risk of future abuse is high where the cause of injury is undetermined. However, there was some evidence, as the trial court apparently found, that the injury was caused or occurred while the mother was in charge of the child. The court could therefore conclude that the mother must have injured her child or neglected her. Services to assure that this type of abuse does not reoccur would be prudent.[2]
With respect to the father, I cannot conclude that there was any evidence to support a finding that he abused his daughter or that his daughter was abused while in his custody or control. The mother testified that the father was not home when this incident occurred, and there is no evidence in the record that he was home. The detective who investigated the *984 event testified that his investigation "would indicate that [the father] was most likely at work at the time of the incident." However, despite the lack of probable cause to arrest either parent, they both remained suspects. The evidence was insufficient to keep the father as a suspect, especially when he was not home at the time of the incident.
The trial court cited to In the Interest of B.J., 737 So. 2d 1227, 1228 (Fla. 2d DCA 1999), for the proposition that "where there is evidence that a child suffered abuse by one or both of the parents present, there is clear and convincing evidence of egregious abuse to support termination of parental rights of both parents." B.J. is distinguishable from the present set of facts. The children in B.J. had been declared dependent as a result of an earlier incident, the mother completed a case plan, and the children were returned to her. At that point, the mother had given birth to another child, M.W., who was six months old. The mother found the infant barely breathing in his crib one morning and rushed him to the hospital, where he died. The doctors testified that the child had serious spinal cord injuries caused by blunt trauma or shaking. They testified that those injuries occurred two to five hours prior to the child's admission to the hospital, at a time when the infant was at home with both of his parents. The trial court terminated the mother's parental rights as to the remaining children based upon the abuse of M.W.[3] The mother argued that she could not be found to have committed egregious conduct toward her child because the evidence applied with equal force to her husband. The second district disagreed, concluding that the evidence would support termination of the parental rights of either parent. See id. at 1229. The court specifically noted that during the time period when the abuse occurred only the mother and father, as well as the other small children, were in the residence. In addition, the mother made several statements which would indicate that she did cause the injuries inflicted.
In the case before us, there was no evidence that the father was present when the abuse occurred. The medical evidence did not suggest that the injuries occurred at a time when the father was home, as they did in B.J. In B.J., the court found it permissible to terminate based upon the death of an infant by "one or both of the parents present." Id. at 1228 (emphasis added). It did not authorize termination where one parent was not present at the time the injuries to the child occurred.
The majority opinion says that it does not "accept as a given, that the father was not in the home at the time the injury occurred." But there must be some evidence to support a finding that he could have had the opportunity to commit this abuse on his child. If the majority is saying that because the mother called the father at work to come home when she noticed the injury, and that when the father came home he was present at a time when the injury could have occurred, that is preposterous on the facts of this record. Before the mother called the father, she called her pediatrician to relate what had happened to the child.
There is no evidence, direct or circumstantial, in this record which would support a finding that the father was present when this injury occurred. That the father was termed by the investigating Department personnel and investigators as *985 being uncooperative does not give rise to an inference that he committed the abuse.[4]
The trial court also found that the father "had the opportunity and capability to prevent and knowingly failed to prevent egregious conduct" to the infant. However, there was no evidence presented that he knew of the incident or somehow failed to prevent it.
The trial court disbelieved the father's testimony, but if one discards the father's testimony as not credible, the only evidence left is the detective's testimony that the father was at work. Evidence that the father was at home and "present" when the abuse occurred is simply absent from the record. As such, the court's findings as to the father are not supported by any evidence, and the dependency determination as to him should be reversed.
Court decisions are to be based upon evidence, reason, and logic. It seems as though those guiding principles have been lost in this case, and instead we are working on innuendo and suspicion. The majority has not identified the substantial, competent evidence which supports its affirmance as to the father.
I also would reverse the decision finding the other two minor boys dependent as to both parents. In order to find them dependent, evidence must show that the dependent child is found "[t]o be at substantial risk of imminent abuse, abandonment, or neglect by the parent or parents or legal custodians." § 39.01(14)(f), Fla. Stat. (2000). There is no evidence in the record that the two boys were at substantial risk of imminent abuse by the parents. All of the children were healthy, happy, and very well cared for. Their pediatrician testified to the excellent care they received from their parents. The two boys were examined by a member of the Child Protection Team and showed no evidence of any abuse, nor any signs which would be associated with abuse. There was absolutely no evidence of any problems with the boys at any time either before or after the incident with their sister.
Nevertheless, based solely on the testimony of the social worker, the trial court determined that the two boys were dependent. The social worker, who never interviewed the boys or the parents, testified that she found the same risk for the boys as for the infant girl.[5] She believed that where there is no identified perpetrator in the home where the incident occurred, services cannot be provided unless an identified perpetrator is willing to accept services.[6] She said, as to the two boys, "[w]ell, there's always a risk to other children. There can be a target child in cases of abuse; however, that does not mean that there is not a safety factor or risk to the other children as future victims also." She did not testify that the parents posed a substantial risk of imminent abuse.
I find that the social worker's testimony simply stated what was found impermissible in In the Interest of M.F., 770 So. 2d 1189, 1194 (Fla.2000), which held:
A simple showing by DCF that a parent committed a sex act on one child does *986 not by itself constitute proof that the parent poses a substantial risk of imminent abuse or neglect to the child's sibling, as required by the statute. See § 39.01(11), Fla. Stat (1997). While the commission of such an act may be highly relevant, it is not automatically dispositive of the issue of dependency. A court instead should focus on all the circumstances surrounding the petition in each case.
M.F. endorsed the approach taken by the fifth district in cases such as Denson v. Department of Health & Rehabilitative Services, 661 So. 2d 934 (Fla. 5th DCA 1995). There, the trial court found that Denson, the father, had sexually abused his daughter T.D. The court adjudicated his other minor child S.D. dependent as to both Denson and Barnes, the mother, as well as adjudicating Barnes' other children A.B. and P.B. dependent. In reversing these adjudications, the fifth district explained:
In the present case, the trial court found that the risk of prospective abuse was great simply because Denson had abused T.D. However, there was no evidence or expert testimony regarding Denson's mental or emotional condition, or the likelihood that he would abuse the other children. Further, there was no competent evidence that Barnes knew about Denson's abuse of T.D. (not her child), thus allowing a finding that she failed to take steps to protect her own three children. There was evidence that both Denson and Barnes were convicted drug users and that there was domestic violence in the home. However, the trial court made no findings, on these matters and adjudicated the children dependent based solely on the sexual abuse of T.D. Since we conclude that this evidence is insufficient to support an adjudication of dependency of the three children involved in this case, we are constrained to reverse.
... A child may be declared dependent or parental rights terminated based on the sexual abuse of other children but only where there is some reasonable basis in the evidence that the child is likewise at risk.
Id. at 936 (footnote omitted). Like the Denson court, I would conclude that the evidence is insufficient to support an adjudication of dependency as to the two boys in this case. There is no evidence of any mental or emotional condition of the parents that would likely lead them to abuse the two minor children. The social worker who testified to the risk of abuse did not interview the parents, so she did not give an opinion on this. Two psychologists testified, but neither opined that either parent was likely to abuse any of the children. There was no evidence of any other factors in the home which would show a risk of abuse. The predicate for the social worker's opinion as to the risk to the boys is only the abuse to the infant. That is insufficient according to M.F.
Deference to the trial court is necessary where evidence conflicts and the trial court is in the best position to judge the credibility of the witnesses in making findings of fact. Where there is no evidence to support the trial court's ruling, or where the facts as found by the trial court do not as a matter of law support the relief granted, no deference should be given. Indeed, if appellate courts cannot reverse a trial court's ruling where it is not supported by any evidence, or it conflicts with existing law, then what is the purpose for appellate review?
There is no reasonable basis in the evidence that the two minor boys are likewise at risk for abuse. I would therefore reverse *987 the finding of dependency of the two minor boys.
NOTES
[1] Although the parents did not object to the testimony of this social worker, the social worker's risk assessment would not be acceptable under section 39.301(6), Florida Statutes (2000), concerning child protective investigations, which states: "An assessment of risk and the perceived needs for the child and family shall be conducted in a manner that is sensitive to the social, economic, and cultural environment of the family. This assessment must include a face-to-face interview with the child, other siblings, parents, and other adults in the household and an onsite assessment of the child's residence." (Emphasis added). See also § 39.301(9), Fla. Stat. (2000) (detailing the necessary determinations arising from the onsite assessment and face-to-face interviews). The social worker did none of this.
[2] I would also point out that while the court made a finding that the injury caused "significant impairment of the child's physical health," this finding is refuted by all of the facts in the record. All of the medical experts testified that the injury was superficial, external, and not life-threatening. However, as stated above, it did constitute harm within the statutory definitions.
[3] A termination of parental rights to other siblings is permitted when the parent murders another child. See § 39.806(1)(h), Fla. Stat. (1999).
[4] I think it is a quite human reaction for the father to be uncooperative with someone who is making accusations that he abused his child.
[5] As stated in footnote one, this "risk assessment" did not satisfy statutory requirements.
[6] I am concerned that the social worker expects the parent to admit his or her acts of abuse. Such a requirement would be impermissible according to section 39.601(1), regarding case plans, which states "[a] parent of a child may not be required nor coerced through threat of loss of custody or parental rights to admit in the case plan to abusing, neglecting, or abandoning a child." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2456249/ | 644 S.W.2d 150 (1982)
Mark Houston KOLBERT, Appellant,
v.
The STATE of Texas, Appellee.
Nos. 05-81-00837-CR, 05-81-01014-CR.
Court of Appeals of Texas, Dallas.
December 14, 1982.
*151 Robert Rose, Dallas, for appellant.
Henry Wade, Dist. Atty., Karen C. Beverly, Asst. Dist. Atty., Dallas, for appellee.
Before ROBERTSON, FISH and ALLEN, JJ.
PER CURIAM.
Appellant pled guilty to two charges of aggravated robbery and was sentenced to 15 years confinement for each offense. By his first ground of error, appellant claims that the trial court improperly admitted evidence obtained from an unlawful search. Specifically, appellant urges that the evidence was seized incident to an arrest under two warrants issued without probable cause. By his second ground of error, appellant argues that the trial court erred by admitting evidence in the form of pill bottles containing controlled substances. He argues that neither the bottles nor the narcotics contained within them were shown to have been stolen in either of the two robberies for which he was being tried. For the reasons set out below, we affirm.
During the later afternoon hours of December 10, 1980, the appellant entered the Willow Creek Pharmacy in Dallas, Texas. Present in the store at the time were Beth Jacobs (the pharmacist) and her assistant. The appellant asked Ms. Jacobs where the toothpaste was to be found and she pointed it out to him. When the appellant went to the counter to pay for the toothpaste, he reached into his pocket and pulled out a gun. He ordered Ms. Jacobs to get him narcotics and then went around to the back of the counter and took approximately $95 from the cash register drawer. After Ms. Jacobs and her assistant gathered the narcotics and gave them to the appellant, he fled the pharmacy.
A short time after the robbery at the Willow Creek Pharmacy, appellant entered Penders Pharmacy on Greenville Avenue in Dallas, Texas. He made a purchase from the pharmacist, J.S. Byerly, and then, as Mr. Byerly started to return to work, the appellant wheeled back around with a pistol and ordered Mr. Byerly to go behind the counter and give him narcotics. Mr. Byerly gathered the narcotics and gave them to the appellant. The appellant then took $60 from the cash register drawer and left the store.
An arrest warrant was issued for each of these robberies. The affiant on the underlying *152 affidavit on each of the warrants was an officer with the Dallas Police Department, L.L. Huckaby. The affidavit states that the information regarding the Willow Creek robbery was obtained from an investigator with the Dallas Police Department, Charles F. Royal. The affidavit reveals that Officer Royal participated in the investigation of the alleged offense and that:
Mark Kolbert entered the Willow Creek Pharmacy and brought the tube of toothpaste to the counter. Mark Kolbert then produced an automatic pistol and forced Beth Jacobs to give him the narcotic drugs and $95 in US Currency from the cash register. On 12-16-80 Beth Jacobs and Kenneth Teel positively identified Mark Kolbert from a six picture photographic lineup at their respective residences.
The arrest warrant for the Penders Pharmacy robbery was identical except that Officer Huckaby's information in this instance was gleaned from T.J. Barnes, an investigator with the Dallas Police Department.
Our determination of the validity of an affidavit supporting an arrest warrant is limited to consideration of the four corners of the affidavit. Oubre v. State, 542 S.W.2d 875, 877 (Tex.Cr.App.1976). An affidavit supporting an arrest warrant must be interpreted in a common sense realistic manner, United States v. Ventresca, 380 U.S. 102, 85 S. Ct. 741, 13 L. Ed. 2d 684 (1965); Winkles v. State, 634 S.W.2d 289, 298-99 (Tex.Cr.App.1982) (en banc) (on State's motion for rehearing), and the magistrate reviewing the affidavit is entitled to draw inferences from the facts contained within the warrant. Jones v. State, 568 S.W.2d 847, 855 (Tex.Cr.App.1978) (en banc). The magistrate's information may be supplied by either direct personal observations of the affiant, or upon hearsay information. Aguilar v. Texas, 378 U.S. 108, 114, 84 S. Ct. 1509, 1514, 12 L. Ed. 2d 723 (1964). When hearsay information is supplied to an affiant by an informant, the affidavit will support a warrant only if it satisfies the two prong test set out by the United States Supreme Court in Aguilar. First, the affidavit must recite some of the underlying circumstances from which the informant concluded that a crime had been committed. Second, the affidavit must inform the magistrate of some of the underlying circumstances from which the officer concluded that the informant was reliable. Id.; see Jones v. State, 568 S.W.2d 847, 855 (Tex.Cr.App.1978). With these rules in mind, we turn next to a consideration of the warrants in the case before us.
Appellant argues that the arrest warrant for the Willow Creek robbery reveals no circumstances from which the magistrate could conclude that this information was obtained from a reliable source. Specifically, the appellant complains that the warrant does not reveal the extent of Officer Royal's participation in the investigation and whether he personally observed the photographic lineup mentioned in the affidavit. He also urges that the warrant is defective because it fails to state how Officer Royal obtained his information or how the affiant came to learn that Beth Jacobs and Kenneth Teel had positively identified Mark Houston Kolbert in the photographic lineup.
Appellant complains that the Penders Pharmacy affidavit is insufficient because it fails to reveal whether or not the unnamed informant was in fact reliable, fails to reveal who conducted the photographic lineup, and fails to reflect that it was sworn to by the affiant before a magistrate as required by the Texas Code of Criminal Procedure art. 15.03(a)(2). We do not reach the question of whether this warrant was valid, however, because we conclude that the appellant was arrested under a valid arrest warrant issued as a result of the Willow Creek Pharmacy robbery.
It is undisputed that the information supplied to Charles F. Royal, Dallas Police Department Investigator, was supplied by those with personal knowledge of the robbery, namely Beth Jacobs, the pharmacist, and her assistant, Kenneth Teel. If Charles F. Royal had been the affiant, the affidavit would clearly have satisfied the requirements of Aguilar. Jones, 568 S.W.2d at *153 855.[1] For this reason, we focus our consideration of the affidavit upon the information link between Officer L.L. Huckaby and Officer Charles F. Royal in order to determine whether or not the information supplied by Officer Royal to Officer Huckaby satisfies the two prong test of Aguilar.
It is clear that Officer Huckaby's affidavit is based upon hearsay information supplied to him by Officer Royal. See Jones, 568 S.W.2d at 854. Read in a common sense manner, the affidavit reveals that Officer Royal's information sufficiently specified such underlying circumstances from which it could be reasonably determined by a detached magistrate that a crime had been committed. Therefore, the issue is whether the affidavit reveals that Officer Royal was a credible person.
This case does not fall squarely within the pattern of Aguilar for the reason that the affiant, Officer Huckaby, did not obtain his information from an informant. Rather, the source of information was Officer Royal, a fellow peace officer.
It is common knowledge that the affidavits supporting arrest warrants are often made by peace officers. We have found no case which attacks the validity of a warrant on the grounds that the affidavit fails to reflect that the peace officer/affiant was a credible person. Indeed, while this may appear to be a logical question, every case which we have reviewed implicitly assumes that a police officer/affiant is worthy of belief by the magistrate. See, e.g. Whiteley v. Warden of Wyoming Penitentiary, 401 U.S. 560, 566-67, 91 S. Ct. 1031, 1035-36, 28 L. Ed. 2d 306 (1971); Aguilar v. Texas, 378 U.S. 108, 113-14, 114 n. 4, 84 S. Ct. 1509, 1513-14 n. 4, 12 L. Ed. 2d 723 (1964); Lowery v. State, 499 S.W.2d 160, 163 (Tex.Cr.App. 1973).
As noted above, we perceive that the underlying affidavit could have supported the warrant had Officer Royal been the affiant. Jones, 568 S.W.2d at 855. We conceive of no reason to impose an artificial requirement that the warrant reflect Officer Royal's credibility by circumstances other than the fact that he was a peace officer. For this reason, we hold that the affidavit supporting the warrant for the Willow Creek Pharmacy supported a finding of probable cause.
The officer who arrested the appellant was in possession of both arrest warrants. Insofar as the Willow Creek arrest warrant was valid, it is clear that the appellant was lawfully arrested and anything recovered as a result of a valid search conducted pursuant to that arrest was admissible against the appellant. Appellant's first ground of error is overruled.
Appellant next argues that the admission of pill bottles and narcotics, recovered from him at the time of his arrest, constituted error insofar as this evidence constituted proof of an extraneous offense. The Court of Criminal Appeals of Texas was faced with an almost identical contention in Archer v. State, 607 S.W.2d 539 (Tex.Cr.App.1980). In Archer, the court noted that "where an offense is one continuous transaction, or another offense is part of the case on trial or blended or closely interwoven, proof of all such facts is proper." Id. at 542. The court goes on to state that "such an extraneous offense is admissible to show the context in which the criminal act occurred; this has been termed the `res gestae,' under the reasoning that events do not occur in a vacuum and the jury has a right to hear what occurred immediately prior to and subsequent to the commission of the act so that they may realistically evaluate the evidence." Id. Accordingly, appellant's second ground of error is overruled and the judgment of the trial court is affirmed.
Opinion written by ROBERTSON, J., before appointment to the Supreme Court of Texas.
NOTES
[1] In the words of the Court of Criminal Appeals:
[An affidavit] which is obviously based upon the statements of the victim of an offense to the affiant, as well as the affiant's personal knowledge of that offense as an investigating officer thereof, [is] sufficient to have afforded the magistrate with a basis for an independent determination of probable cause.
Jones, 568 S.W.2d at 855. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2456267/ | 644 S.W.2d 828 (1982)
William C. KINDRED and Wife, Fay E. Kindred and Ernest J. Kurtz and Wife, Karen S. Kurtz, Appellants,
v.
CON/CHEM, INC., Appellee.
No. 1984cv.
Court of Appeals of Texas, Corpus Christi.
September 23, 1982.
Rehearing Denied October 21, 1982.
*829 Michael B. Smithers, Cornelius, Powell, Perkins & Smithers, New Braunfels, for appellants.
R.D. Cullen, Cullen, Carsner, Seerden & Williams, Victoria, for appellee.
Before NYE, C.J., and BISSETT and YOUNG, JJ.
OPINION
YOUNG, Justice.
Appellants, William C. Kindred and Ernest J. Kurtz brought a products liability action against Con/Chem, Inc., the manufacturer of Cono Prime X, alleging that they had sustained personal injuries from the use of that product. Their petition alleged two defects: failure to adequately warn of the dangers of using the product and unreasonably dangerous design. The trial court submitted special issues on the failure to warn theory which the jury answered in the negative. Whereupon the trial court rendered a take nothing judgment. The refusal of the trial court to submit issues on the design defect theory is the basis for this appeal. We affirm.
The record shows that on April 28, 1977, the appellants were employees of the Spoetzl Brewery, who were performing maintenance work on beer storage tanks. They had completed the process of removing the old paint from the inside surface of a tank and had been applying Cono Prime X, a paint primer, to the inner walls of the tank for approximately twenty minutes, when a fire started. Because the tank is completely closed with the exception of a manhole at the bottom, the men had to pass through the fire to exit. They sustained injuries to their arms, legs, hands and faces, for which hospitalization was required.
The parties stipulated that Cono Prime X consists of 5% Ethanol, 90% isopropyl alcohol and 5% Silane. The appellants' expert, Dr. Morris Key, testified that the alcohol portion was merely the vehicle in which the effective ingredient Silane was carried. He reported his finding of a 53° Fahrenheit flash point for the substance and explained that in the presence of oxygen and a spark, the material would burn when warmed to approximately 53 degrees. The flash point is only one factor and Dr. Key said that a variety of other factors could have caused a fire at a higher or lower temperature and that his measurements were accurate within two or three degrees. Dr. Key stated that materials such as Xylol or even water *830 could have been used as solvents and would have rendered the mixture less flammable but more expensive. He testified that within an enclosed space such as a storage tank, Cono Prime X would be a very dangerous, very flammable mixture because inadequate ventilation would allow the vapors to concentrate. Instructing that the three factors necessary for a fire are air, fuel and an ignition source, Dr. Key stated that he could not identify the exact ignition source, nor could either of the appellants. The evidence showed that the temperature in the room which contained the tanks was about 48°F and that the temperature inside the tanks was a little warmer, perhaps 50°F.
Rule 279, T.R.C.P., provides that when a trial court submits a case upon special issues, the court shall submit the controlling issues made by the written pleadings and the evidence, when requested to do so in substantially correct form. The issues tendered by appellants for defective design were nearly identical to those approved by the Supreme Court in Turner v. General Motors Corp., 584 S.W.2d 844 (Tex. 1979)[1] except for an omission of a definition of "unreasonably dangerous." In a case where "unreasonably dangerous" was not defined but the issue of defective design was submitted to the jury, the court held that a definition was not necessary to enable the jury to properly consider and answer the special issue. Metal Structures Corp. v. Plains Textiles, Inc., 470 S.W.2d 93, 102 (Tex.Civ.App.Amarillo 1971, writ ref'd n.r.e.). Thus, we believe that the issues were tendered in substantially correct form.
The appellants' petition contained an allegation of defective design; therefore, the only remaining requirement of Rule 279, which the appellants had to meet was to present evidence in support of the issues. If there is evidence to support the special issues, refusal by the trial court to submit such issues constitutes reversible error. Southwestern Bell v. Thomas, 554 S.W.2d 672, 674 (Tex.1977). The trial court may decline to submit an issue, only if there is no evidence to support it. Garza v. Alviar, 395 S.W.2d 821, 824 (Tex.1965). If the evidence offered amounts to more than a mere scintilla, the trial court must submit the issue. Daniels v. Southwestern Transportation, 621 S.W.2d 188, 191 (Tex.Civ.App. Texarkana 1981, no writ); Everman Corp. v. Haws & Garrett, 578 S.W.2d 539, 544 (Tex.Civ.App.Fort Worth 1979, no writ); Trevino v. Trevino, 555 S.W.2d 792, 801 (Tex.Civ.App.Corpus Christi 1977, no writ).
As established in Turner, supra, the predicate for recovery in a defective design case is a showing that the product was defective, that the defect made the product unreasonably dangerous and that the defect was a producing cause of injuries. The appellants in this case presented expert testimony that Cono Prime X could have been made safer by the substitution of different solvents in its manufacture. The expert also referred to the product as dangerous.
To prove that there is a defect in design which is unreasonably dangerous, a plaintiff must show that the likelihood and gravity of injury from its use exceeds its utility. Boatland of Houston, Inc. v. Bailey, 609 S.W.2d 743, 746 (Tex.1980). In making their decision, the jury may consider evidence of the economic and scientific feasibility of alternative designs, the usefulness and desirability of the product, the ability *831 to eliminate the risk without seriously increasing the product's usefulness or cost. Id. While it was not necessary to introduce evidence on each of these factors, evidence must be presented on some of them to enable the jury to make an intelligent determination. The appellants failed to present any evidence on any of the criteria of defective design except for the bare statement of Dr. Key that a safer design was possible. Without evidence of the feasibility of such alternatives, this information is of little value. Thus, the proof offered in support of the design defect issues does not amount to more than a scintilla. Further, there is no evidence in the record on the issue of producing cause. The appellants' point of error is overruled.
The judgment of the trial court is affirmed.
NOTES
[1] The special issue on defective design in Turner was as follows:
"Special Issue No. 1
Do you find from a preponderance of the evidence that at the time the automobile in question was manufactured by General Motors the roof structure was defectively designed?
By the term `defectively designed' as used in this issue is meant a design that is unreasonably dangerous.
`Unreasonably dangerous' means dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics."
A separate issue inquired as to whether the defect was the producing cause of the injuries. Turner, supra at 846. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2456250/ | 644 S.W.2d 282 (1983)
278 Ark. 194
Darrell Wayne HILL, Petitioner,
v.
STATE of Arkansas, Respondent.
No. CR 81-18.
Supreme Court of Arkansas.
January 17, 1983.
*283 Ray Hartenstein, Little Rock, for appellant.
Steve Clark, Atty. Gen. by Leslie Powell, Asst. Atty. Gen., Little Rock, for appellee.
PER CURIAM.
The petitioner Darrell Wayne Hill was convicted of the capital murder of Donald Lee Teague and the attempted capital murder *284 of E.L. Ward. He was sentenced respectively to death and life imprisonment for the two crimes. He was also found guilty of kidnapping and aggravated robbery in connection with the offense against Teague and kidnapping and aggravated robbery in connection with the offense against Ward. On appeal we affirmed the convictions for the offenses against Ward and the capital murder of Teague. We set aside the conviction for the lesser included offenses of kidnapping and aggravated robbery committed against Teague. Hill v. State, 275 Ark. 71, 628 S.W.2d 284 (1982). The United States Supreme Court denied petitioner's petition for writ of certiorari on October 4, 1982. Petitioner has filed a petition and an amended petition for postconviction relief under A.R.Cr.P. Rule 37.
I
Petitioner alleges that the Arkansas death penalty statute impermissibly penalizes petitioner's exercise of his constitutional right to plead not guilty and to have a jury trial because only the jury may impose the death penalty, thus creating a situation whereby a defendant can be assured of escaping execution only by waiving his right to trial by jury. When this same argument was advanced in another capital case, we held that Ark.Stat.Ann. §§ 41-1301-1304 (Repl.1977), which set forth the procedures governing jury trials for persons charged with capital murder, do not place an impermissible burden on the exercise of the constitutional right to trial by jury. Ruiz and Denton v. State, 275 Ark. 410, 630 S.W.2d 44 (1982), cert. denied, ___ U.S. ___, 103 S. Ct. 181, 74 L. Ed. 2d 148 (1982). § 41-1302 provides that the jury shall impose a sentence of death if it returns certain written findings, but the trial judge is not required to impose the death penalty in every case in which the jury verdict prescribes it. Ruiz and Denton, supra, citing Collins v. State, 261 Ark. 195, 548 S.W.2d 106 (1977), cert. denied, 434 U.S. 977, 98 S. Ct. 540, 54 L. Ed. 2d 471 (1977). The death penalty under Arkansas statutes has been consistently held constitutional. Hulsey v. State, 261 Ark. 449, 549 S.W.2d 73 (1977); Neal v. State, 261 Ark. 336, 548 S.W.2d 135 (1977); Collins, supra.
II
Petitioner asserts that the exclusion for cause of the veniremen with conscientious objections to the death penalty without a determination that their objections would preclude their finding petitioner guilty denied him his right to an impartial jury and to a jury that was representative of the community. The "death qualified" jury was approved by the United States Supreme Court in Witherspoon v. Illinois, 391 U.S. 510, 88 S. Ct. 1770, 20 L. Ed. 2d 776 (1968). Since Witherspoon, we have approved the procedure. Ford v. State, 276 Ark. 98, 633 S.W.2d 3 (1982); Ruiz and Denton v. State, 265 Ark. 875, 582 S.W.2d 915 (1979); Collins, supra; Westbrook v. State, 265 Ark. 736, 580 S.W.2d 702 (1979). Petitioner presents no new challenges to it.
III
On appeal, petitioner's convictions for the kidnapping and aggravated robbery of Teague were set aside because they were lesser included offenses to the crime of capital murder. This was done despite the fact that no objection to the sentences was raised in the trial court because we will consider in a death case such errors argued for the first time on appeal. We declined to disturb the convictions for the lesser included offenses against Ward because petitioner was not sentenced to death for those crimes. He now asks that those sentences be set aside also, citing as precedent our decisions in Rowe v. State, 275 Ark. 37, 627 S.W.2d 16 (1982) and Wilson v. State, 277 Ark. 219, 640 S.W.2d 440 (1982).
This Court has held that when a criminal offense by definition includes a lesser offense, a conviction cannot be had for both offenses under Ark.Stat.Ann. § 41-105(1)(a) (Repl.1977), Wilson, supra; Rowe, supra; Singleton v. State, 274 Ark. 126, 623 S.W.2d 180 (1981); Simpson v. State, 274 Ark. 188, 623 S.W.2d 200 (1981); Swaite v. State, 272 Ark. 128, 612 S.W.2d 307 (1981). The statute provides:
*285 (1) When the same conduct of a defendant may establish the commission of more than one offense, the defendant may be prosecuted for each such offense. He may not, however, be convicted of more than one offense, if:
(a) One offense is included in the other as defined in subsection (2);
(2) A defendant may be convicted of one offense included in another offense with which he is charged. An offense is so included if:
(a) it is established by proof of the same or less than all the elements required to establish the commission of the offense charged; or
(b) it consists of an attempt to commit the offense charged or to commit an offense otherwise included within it; or
(c) it differs from the offense charged only in the respect that a less serious risk of injury to the same person, property, or public interest or a lesser kind of culpable mental state suffices to establish its commission.
In petitioner's case, it was necessary to prove the elements of aggravated robbery and kidnapping to prove the elements of attempted capital murder. In light of our holdings in regard to Ark.Stat.Ann. § 41-105(1)(a) in Rowe, Wilson, Singleton, Simpson, and Swaite, we find that the conviction and sentence imposed on petitioner for aggravated robbery and kidnapping should be set aside. The conviction and sentence for attempted capital murder are not disturbed.
IV
Petitioner states that over his objection the trial court admitted evidence of at least five prior convictions for the purposes of enhancement of his sentence, when the amended information only alleged four prior convictions. He does not give a transcript reference to where the objection can be found in the record, and the state contends that no such objection was made. This Court will not search the record page-by-page to determine the accuracy or inaccuracy of petitioner's assertion. Counsel for petitioners seeking postconviction relief are cautioned to provide the Court with transcript references in support of allegations that require specific verification in the record. In any event, the issue was not raised on appeal. In this Court, issues which were not raised in accordance with controlling rules of procedure must be considered waived. Ruiz and Denton, supra. See also Moore v. Illinois, 408 U.S. 786, 92 S. Ct. 2562, 33 L. Ed. 2d 706 (1972); Stembridge v. Georgia, 343 U.S. 541, 72 S. Ct. 834, 96 L. Ed. 1130 (1952); Hulsey, supra; Williams v. Edmondson, 257 Ark. 837, 520 S.W.2d 260 (1975); Orman v. Bishop, 245 Ark. 887, 435 S.W.2d 440 (1968).
V
In the penalty phase of the trial, the jury was presented with proof of an aggravating circumstance that petitioner had been convicted of first degree robbery and robbery with a firearm in Missouri and Oklahoma. Petitioner now argues that since no details of the crimes were provided, the jury could only speculate that the crimes involved a threat or risk of violence and thus were proof of an aggravating circumstance as required by Ark.Stat.Ann. § 41-1303 (Repl.1977). The statute provides in part:
Aggravating circumstances. Aggravating circumstances shall be limited to the following:
. . . . .
(3) the person previously committed another felony an element of which was the use or threat of violence to another person or creating a substantial risk of death or serious physical injury to another person;...
There is no requirement that the State try the prior felony convictions a second time or that it present evidence that an out-of-state conviction for robbery had as an element the use or threat of violence. Furthermore, inherent in the definition of "robbery" is a threat of violence. Also, the issue was not raised on appeal and was therefore waived.
*286 VI
Petitioner alleges that the trial court unconstitutionally commented on the evidence when it instructed the jury that it could consider only the two prior robbery convictions as aggravating circumstances. Petitioner argues that this amounted to instructing the jury to accept the convictions as an aggravating circumstance. We find that the record does not support the allegation. The record shows that the court in accordance with AMCI instructed the jury that it could consider the convictions and that the jury was responsible for determining if the State had met its burden of proving beyond a reasonable doubt that one or more of the aggravating circumstances existed.
VII
Petitioner states that a motion was filed to sever offenses, but he does not tell us where it appears in the record and the issue was not raised on appeal.
A.R.Cr.P. Rule 22.2 provides:
(a) Whenever two (2) or more offenses have been joined for trial solely on the ground that they are of the same or similar character and they are not part of a single scheme or plan, the defendant shall have a right to a severance of the offenses.
Petitioner contends that the denial of the motion was denial of his right to due process of law because (1) the State was allowed to obtain convictions for four lesser included offenses in violation of Ark.Stat.Ann. § 41-105(1)(a), (2)(a) (Repl.1977); (2) the State was allowed to seek enhancement of punishment on five prior convictions when only the two prior robbery convictions were admissible as an aggravating circumstance; and (3) the State improperly argued petitioner's criminal record as a basis for the death sentence.
As this Court found on direct appeal, the trial court instructed the jury that it was to consider only the two robbery convictions as an aggravating circumstance. The other three convictions were to be considered only for enhancement purposes on the non-capital crimes. Hill, supra at 87-88, 628 S.W.2d 285. Petitioner concedes that the trial judge also explained this to the jury. The jury was properly instructed on its consideration of petitioner's prior crimes. The mere fact that the jury entered a finding of guilt on the lesser included offenses and was aware of five prior convictions does not in itself demonstrate prejudice. We also find no grounds for relief in petitioner's allegation that the State improperly raised his criminal record. There was no objection to the State's negating the mitigating circumstance that petitioner had no significant history of prior criminal activity. When an issue is not raised on direct appeal, as the issue of severance was not, the issue cannot be raised under Rule 37 unless the question is so fundamental as to render the judgment void and open to collateral attack. Neal, supra. Even questions of constitutional dimension are waived if not raised in accordance with the controlling rules of procedure. Collins, supra; Hulsey, supra. We find nothing in this petition that would render the judgment in petitioner's case void.
VIII
Petitioner next asserts that the Arkansas death penalty statute is unconstitutional because capital felony murder and first degree murder are not distinguishable. This Court has rejected the argument raised by petitioner in several cases. Ford, supra; Wilson, supra; Cromwell v. State, 269 Ark. 104, 598 S.W.2d 733 (1980).
IX
Petitioner alleges ineffective assistance of counsel in the penalty phase of trial. He contends that counsel failed to secure available mitigating evidence. He alleges that petitioner's records from the Vinita State Hospital in Oklahoma would have shown that antipsychotic medication had recently been prescribed for him and that the Oklahoma hospital's diagnosis conflicted with the Arkansas State Hospital's diagnosis. *287 He also contends that Herbert Callison and Edna Staudinger would have testified if called to mitigating factors such as petitioner's work with juvenile delinquents. He further asserts that counsel cut short his examination of witness Nixon without inquiring into petitioner's history of drug abuse and his unhappy childhood. Petitioner contends that petitioner could also have testified to these things but counsel inexplicably failed to call him.
A psychologist, who testified at length for the defense, mentioned that the results of his testing of petitioner were consistent with the conclusions of the Oklahoma hospital. It appears therefore that the Oklahoma records were used by the defense. Moreover, petitioner has not shown that his psychologist was not allowed to testify to any pertinent information.
There is a presumption of effective assistance of counsel. To overcome that presumption, a petitioner must show by clear and convincing evidence that the prejudice which resulted from the representation of trial counsel was such that he did not receive a fair trial. Blackmon v. State, 274 Ark. 202, 623 S.W.2d 184 (1981). Petitioner has not shown that he was denied a fair trial by counsel's failure to call any particular witness, including him, or his failure to question Nixon further. The calling of witnesses in a criminal trial is a matter which is normally within the realm of judgment of counsel. Swindler v. State, 272 Ark. 340, 617 S.W.2d 1 (1981), citing Leasure v. State, 254 Ark. 961, 497 S.W.2d 1 (1973). Likewise, questioning witnesses is ordinarily a matter of trial strategy about which advocates could disagree. Trial tactics, even if they prove unsuccessful, are not grounds for postconviction relief. Leasure, supra.
X
The aggravating circumstance that the murder was committed to avoid arrest or to effect escape from custody was submitted to the jury. Petitioner contends that the circumstance is vague and overbroad. We do not accept petitioner's argument. Under the facts of the case the jury was justified in finding that petitioner shot Teague and Ward to increase his chances of avoiding arrest after he had robbed Ward's service station. This same attack on the aggravating circumstance as being overbroad has also been rejected by the United States District Court. Pickens v. Lockhart, 542 F. Supp. 585 (1982).
XI
Petitioner alleges that the jury arbitrarily and capriciously failed to consider mitigating evidence of petitioner's mental disturbance and diminished capacity. Petitioner offers no support for the conclusory allegation, and we will not assume from the fact that petitioner was sentenced to death that the jury failed to consider all the evidence.
XII
In its closing argument the State sought to negate the mitigating circumstance, Ark. Stat.Ann. § 41-1304(6) (Repl.1977), that the defendant had no significant history of prior criminal activity by calling attention to petitioner's extensive criminal record. Petitioner alleges that a criminal record is not a statutory aggravating circumstance and should not have been mentioned. This allegation was also raised in Point VII and found meritless. The jury was properly instructed as to aggravating and mitigating circumstances. No objection was made at trial and petitioner has not shown how he was prejudiced.
XIII
Petitioner contends that Ark.Stat. Ann. § 41-1302 (Repl.1977), which sets out the findings required for a death sentence, is unconstitutional. There is no ambiguity in our statute. The statute clearly states that the aggravating circumstances must outweigh all mitigating circumstances beyond a reasonable doubt; and that after such consideration, the jury must find that the aggravating circumstances justify a sentence of death beyond a reasonable *288 doubt. Even then, the trial judge is not required to impose the death penalty. The statute was not challenged at trial and petitioner cites no persuasive authority for his contention.
XIV
On appeal from a sentence of death, it is the practice of this Court to compare the sentence with sentences in other cases in which the death penalty was imposed. Collins, supra. Petitioner argues that in his case no comparative review was required or afforded by this Court, apparently because the opinion does not specifically state that it was.
While there is no absolute requirement under federal law that this Court make a comparative review of a death sentence, we have consistently afforded such a review since Collins, although our opinions do not so state in all cases.
XV
Finally, petitioner again challenges the constitutionality of the death penalty as it is imposed in Arkansas. The assertion is conclusory and does not warrant further discussion. Bosnick v. State, 275 Ark. 52, 627 S.W.2d 23 (1982); Smith v. State, 264 Ark. 329, 571 S.W.2d 591 (1978); Stone v. State, 254 Ark. 566, 494 S.W.2d 715 (1973); Cooper v. State, 249 Ark. 812, 461 S.W.2d 933 (1971).
XVI
In a thorough review of petitioner's allegations, we find no constitutional error that would render the judgment void or evidence of ineffective assistance of counsel. Petitioner has fallen far short of making a showing that his trial was not fair or that the sentence was not properly imposed.
Petition denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455386/ | 775 S.W.2d 419 (1989)
Marvin Keath CAMPBELL, Appellant,
v.
The STATE of Texas, Appellee.
No. C14-88-903-CR.
Court of Appeals of Texas, Houston (14th Dist.).
July 13, 1989.
Discretionary Review Refused November 8, 1989.
*420 J.C. Castillo, Houston, for appellant.
Winston E. Cochran, Jr., Houston, for appellee.
Before BROWN, C.J., and PAUL PRESSLER and ELLIS, JJ.
OPINION
PAUL PRESSLER, Justice.
A jury found appellant guilty of possession of at least 400 grams of a controlled substance, namely cocaine, with intent to deliver. The court assessed punishment at life in prison and a $100 fine. We affirm.
On May 4, 1988, Officer Joe Harris, a detective with the Harris County Sheriff's Office, received a telephone call from a confidential informant. This informant had given information regarding narcotics in the past and had been proven reliable. Officer Harris was advised that a black man driving a 1986 or 1987 white Toyota pickup was, "on his way" to deliver cocaine at an apartment complex. Pursuant to this information, Officer Harris and two other undercover officers drove to the apartment complex. The officers circled but did not see the vehicle. They set up surveillance and waited for the suspect. At approximately noon, appellant, driving a white Toyota pickup, parked in the apartment complex. The appellant left the car carrying a brown paper bag as is frequently observed in narcotics transactions. The officers left their car and identified themselves. The appellant dropped the bag and ran into the courtyard of the apartment complex. The bag was found to contain a substance resembling cocaine. The appellant was apprehended and placed under arrest. Incident to the appellant's arrest, the officers searched the truck. The officers discovered another bag containing a substance that resembled cocaine and over $6,000 in cash. The bag discarded by the appellant was found to contain 440 grams, or approximately one pound, of cocaine.
In points of error one and two, the appellant claims that no probable cause existed for his arrest and, therefore, the trial court erred in overruling his motion to suppress both the cocaine in the bag dropped and the contents of the truck. In Eisenhauer v. State, 754 S.W.2d 159 (Tex. Crim.App.1988), the court addressed probable cause as follows:
The fact that the arrest in the instant case was made without a warrant is irrelevant to the probable cause analysis. The totality of the circumstances approach applies to warrantless as well as warrant seizures of persons and property. United States v. Mendoza, et al, 722 F.2d 96 (5th Cir.1983); Angulo v. State, 727 S.W.2d 276 (Tex.Crim.App.1987); Whaley v. State, 686 S.W.2d 950 (Tex. Crim.App.1985); Eisenhauer v. State, 678 S.W.2d 947 (Tex.Crim.App.1984).
The officers had accurate information from an informant who had a past record of reliability. Time was of the essence because the informant advised the officers that the courier was on his way. The appellant was carrying a type of bag commonly used in drug transactions. Probable cause exists when an apparent state of facts is found to exist which would induce a reasonably intelligent and prudent person to believe that the accused had committed the crime charged. Black's-Law Dictionary, 5th Ed. (1979). An officer may make an arrest if there is probable cause to believe a person has committed or is about to commit a felony. U.S. v. Watson, 423 U.S. 411, 96 S. Ct. 820, 46 L. Ed. 2d 598 (1976). The officers here properly believed an offense was occurring and acted upon this belief.
In Angulo v. State, 727 S.W.2d 276 (Tex. Crim.App.1987) the court addressed similar facts. In Angulo, the facts were as follows:
The record reflects that Officer F.L. Shafer received an anonymous telephone tip on June 23, 1983, which revealed the following information: Shafer was instructed that a red American Motors Pacer *421 automobile license plate identification RUV 662 contained narcotics; the informant told Shafer that the automobile would contain two Cuban males, one of whom would be appellant. In addition, the informant explained that the Pacer's gasoline cap was missing and that a red rag was being used in its place. The destination of the automobile would be 7201 Spencer Highway, Casa Maria Apartments, No 54. The informant also told Shafer that time was of the essence as the car was already enroute. The informant did not reveal the source of his information.
After reviewing this information from Shafer, Lieutenant William McBeth drove to the Casa Maria Apartments and observed the above-mentioned automobile occupied by two males parked in a space directly in front of Apt. No. 54. McBeth also noted the red rag hanging from the gasoline intake. McBeth observed the two men get out of the car as they were approached by others. When an additional automobile drove into the lot and parked directly behind the Pacer, McBeth, based on his experience in narcotics investigation, initiated an investigatory stop and ascertained that one of the original occupants of the automobile was appellant, the party named by the informant.
When Shafer arrived on the scene he talked briefly with appellant and then searched the vehicle. The search produced 2,000 methaqualone pills located in paper sacks inside the spare tire compartment. Angulo, 727 S.W.2d at 277.
The court upheld the search of the vehicle. Probable cause existed not only because of the informant's tip but also from the independent corroboration by the police. The court analyzed the corroboration here with the corroboration in Illinois v. Gates, 462 U.S. 213, 103 S. Ct. 2317, 76 L. Ed. 2d 527 (1983). Here, the independent police investigation corroborated the informant's tip by finding:
(1) A late model white Toyota pickup.
(2) Appellant was a black male driving the truck.
(3) The destination of the vehicle was the same apartment complex.
(4) The event happened within a short time of the tip.
(5) Appellant was carrying a brown paper bag known to be used in drug transactions.
In Angulo the court addressed corroboration as follows:
The independent police corroboration in the instant case was surely not any less extensive than in Gates, supra, simply because the officers had less time. The amount of time the officers have for investigation does not control the issue of probable cause, but rather, the amount of effective cooperation the officers make in the time allowed. In the instant case the independent investigation of the police confirmed aspect of the informant's tip save whether or not the vehicle actually contained the contraband. In the instant case the police even had reasonable belief the appellant was carrying the contraband.
Therefore, more probable cause existed here than in Angulo. In addition, the tip in Angulo was from an unknown informant. Here, the informant was known to be reliable.
Similarly, the action by the police was less intrusive. In Angulo, the police searched a car in which an expectation of privacy existed. Here, the police, after corroboration, viewed the appellant carrying a bag believed to contain narcotics. Regardless of whether the detention was an investigatory stop or an arrest, the police had corroboration on what was believed to be a narcotics transaction. It was reasonable for the police to believe that the appellant was in the course of committing a felony. Therefore, probable cause existed.
The seizure of the contents of the pickup truck was the result of an inventory search incident to the arrest of appellant. Probable cause existed for the arrest. Therefore, the search of the truck was also valid. Appellant's first and second points of error are overruled.
*422 In his third point of error, the appellant complains of the jury strikes. Relying on Batson v. Kentucky, 476 U.S. 79, 106 S. Ct. 1712, 90 L. Ed. 2d 69 (1986), the appellant contends that the prosecutor systematically excluded persons of the black race from serving on the jury. The appellant failed to make a prima facie showing of systematic exclusion. The prosecutor struck the three blacks and Rozina Noormohamed, a white Arabic who was born in Kenya. Three blacks served as jurors. Therefore, fifty percent of the blacks in the venire pool actually served on the jury.
Even if the appellant had made a prima facie showing, the strikes were accompanied by racially neutral explanations. The strikes complained of were as follows:
(1) Juror No. 3, an Arabic female, not black.
(2) Juror No. 10, a black female, had problems believing police officers.
(3) Juror No. 7, a black male, young, close to defendant's age, and inattentive.
(4) Juror 15, a black male from Haiti, in Harris County only five years.
It appears that appellant is claiming that since Juror 3 was born in Kenya, which he describes as black African nation, she is the legal equivalent of a black. Juror No. 3 was not black and, therefore, no explanation was required.
Juror No. 10 was questioned extensively about problems in believing police officers. The juror stated that she would believe a member of the public over a police officer. The prosecutor struck Juror 10 because of her disbelief in the honesty of police officers. This is a valid neutral explanation for the strike.
Juror 11 was thirty-one years of age and the prosecutor had the impression that, "he just wanted to get out of here." The appellant was twenty-seven years of age and thus close in age to Juror No. 11. The prosecutor struck Juror 11 because of his age and his disinterest in the proceedings. The appellant claims that there were others who showed disinterest. Juror 18, a white male, was falling asleep, but he was forty-seven years of age. Juror No. 2, a thirty-two year old white male, who was not struck was an M.P. in the Texas State Guard. It is easy to understand why the prosecutor would not strike a police officer.
Juror No. 15 was from Haiti. The prosecutor stated that he was concerned about his attitude toward drugs since Haiti is known to be a transition point for Columbian cocaine.
All of the prosecutor's explanations were valid neutral explanations. The appellant failed to establish a prima facie showing of purposeful discrimination. No "Pattern" of strikes against black jurors was shown. The appellant complained of only four of the state's seven strikes. Three blacks actually served on the jury. Appellant's third point of error is overruled.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455400/ | 775 S.W.2d 798 (1989)
Christie DURBIN, John Durbin, and Christie Durbin as Next Friend of Adam Durbin, Appellants,
v.
Anthony HARDIN and Manuela Hardin, Appellees.
No. 05-89-00073-CV.
Court of Appeals of Texas, Dallas.
August 3, 1989.
Rehearing Denied September 11, 1989.
*799 Bruce A. Pauley, Rowlett, for appellants.
Kevin J. Cook, James K. Campbell, Dallas, for appellees.
Before WHITHAM, LAGARDE and KINKEADE, JJ.
LAGARDE, Justice.
Christie Durbin, John Durbin, and Christie Durbin as next friend of Adam Durbin (the "Durbins") appeal an order of dismissal which was entered after the trial court granted Manuela and Anthony Hardin's (the "Hardins") special appearance. In three points of error, the Durbins contend that: (1) the trial court erred in excluding as hearsay the testimony of a police officer as to statements against the interest of Manuela which she made to the officer through an interpreter; (2) the trial court erred in granting the Hardins' special appearance since the testimony of the investigating officer, had it been admitted, raised a fact issue as to whether or not the Hardins knowingly entrusted their automobile to Francisco Rodriguez, who caused the accident; and (3) this Court should decline to follow, or should overrule, Gulf, C. & S.F. Ry. Co. v. Giun, et al., 131 Tex. 548, 116 S.W.2d 693 (Tex.Comm'n App.1938, opinion adopted). For reasons that follow, we overrule all three points of error and affirm.
Christie was injured on July 22, 1986, when Rodriguez, while driving the Hardins' 1980 Chevrolet, ran a stop sign and collided with Christie's vehicle. Christie was several months pregnant at the time, and she later delivered Adam, who was born with significant and serious birth defects which the Durbins believe to be a direct result of the accident.
The accident was investigated by Officer Kevin Lindsay of the Balch Springs Police Department. Because Rodriguez spoke only Spanish and Lindsay spoke only English, Officer Pete Lopez was called to the scene to translate. Rodriguez made a brief statement and then refused to speak any more when Manuela came upon the scene. Manuela and Officer Lindsay then had a conversation, through Officer Lopez, regarding the Hardins' vehicle. Although she apparently speaks fluent English, as her attorney admitted, Manuela chose to speak in Spanish. According to Officer Lindsay, Manuela stated, through Officer Lopez, that Rodriguez had permission to take the Hardins' automobile to wash it. Manuela denies ever saying this.
The Durbins brought this lawsuit against Rodriguez for negligence and against the Hardins for negligent entrustment. Rodriguez was never served and was subsequently nonsuited. At the time that the Hardins were served with citation, they were living in Chicago, Illinois. The Hardins filed a special appearance, stating that they no longer lived in Texas and objecting to the jurisdiction of the Texas courts because they were not amenable to the process issued by Texas courts. They also alleged that they did not commit a tort in Texas because Rodriguez was driving their automobile on July 22, 1986, without their authority, permission, or knowledge.
A hearing was held on the Hardins' special appearance on September 23, 1988. The only evidence offered at the hearing was excerpts from the Hardins' depositions, offered on their behalf, and the deposition testimony of investigating Officer Lindsay, offered on behalf of the Durbins. Manuela testified that Rodriguez did not have permission to drive the vehicle.[1] Anthony *800 concurred and also stated that he filed a stolen vehicle report.
Officer Lindsay was a traffic supervisor for the Balch Springs Police Department who "worked" the accident of June 22, 1986, and completed the accident report. He talked to Manuela on the day of the accident. Officer Lindsay was allowed to testify that on the day of the accident he had no reason to believe that Rodriguez did not have permission to drive the Hardins' vehicle; however, because he spoke with Manuela through an interpreter, much of Officer Lindsay's testimony was excluded as hearsay.
Subsequently, the Durbins presented and filed a bill of exceptions which set forth Officer Lindsay's testimony regarding Manuela's statements to him. Had Officer Lindsay's testimony been allowed at the special appearance hearing, he would have testified that: Manuela did not tell him that Rodriguez was operating the vehicle without permission; when a vehicle owner tells him at an accident scene that the driver did not have permission to drive the vehicle, his normal procedure is to immediately arrest the driver; he had no reason to believe that Rodriguez was driving the vehicle without permission; based on his conversation with Manuela, all indications were that Rodriguez had permission to drive the vehicle on the day of the accident; and that Manuela never complained to Officer Lindsay that Rodriguez was driving the vehicle without permission or that Rodriguez had stolen the vehicle.
The Durbins' original petition alleged sufficient facts to subject the Hardins to the jurisdiction of the Texas courts. Having met the threshold requirement, the burden then shifted to the Hardins to prove that the Texas courts did not have jurisdiction. See Carbonit Houston, Inc. v. Exchange Bank, 628 S.W.2d 826, 829 (Tex. App.-Houston [14th Dist.] 1982, writ ref'd n.r.e.). The only basis of jurisdiction alleged by the Durbins in their petition was the commission of the tort of negligent entrustment by the Hardins. The tort of negligent entrustment requires evidence that the defendant entrusted the vehicle to the negligent driver. See Schneider v. Esperanza Transmission Co., 744 S.W.2d 595, 596 (Tex.1987).
At the special appearance hearing, the Hardins demonstrated that they did not entrust the vehicle to Rodriguez, because they never gave Rodriguez permission to drive their vehicle; as a result, they did not commit a tort in the State of Texas; and being non-residents, the court lacked personal jurisdiction over them. Before this Court, the Durbins argue that the trial court erroneously excluded Officer Lindsay's testimony; thus, erroneously granted the special appearance.
The Durbins argue that, although Giun is facially opposed to their contention, that case is distinguishable or, alternatively, should be overruled. Giun involved a lawsuit filed against a railroad company by the deceased's wife. The widow attempted to testify as to what the engineer (who operated the train on the date that the deceased was hit by the train) told her through an interpreter. The trial court refused to permit the widow to testify concerning what an engineer stated in a conversation with her through an interpreter at the scene of the accident shortly after it occurred. The Commission of Appeals determined that the trial court properly excluded the testimony as hearsay. The court noted:
"A person conversing with a third person through an interpreter is not qualified to testify to the other person's statements, because he knows them only through the hearsay of the interpreter. Ordinarily, therefore, the third person's words cannot be proved by anyone except the interpreter himself."
Giun, 116 S.W.2d at 696.
The Durbins contend that the language of Giun implies that, had the engineer provided the interpreter or adopted the interpreter as his agent, then the widow Guin's testimony of what the engineer told her through the interpreter would have been admissible. The court stated:
It appears from the record that Melisio [the interpreter] accompanied Maria [the widow] to the scene of the accident and was asked by her, and by her alone, to *801 talk for her as interpreter. There is no evidence that the engineer agreed to accept the services of an interpreter or took recognition of Melisio in any way. If Maria was not qualified in the state of the record to testify of her own knowledge what the engineer said, her proferred statement of what Melisio said he said, was not competent and was correctly excluded, regardless of the correctness of the objection urged to its admission. Such testimony would have been nothing more than Maria's statement of what Melisio said.
Giun, 116 S.W.2d at 696.
The Durbins assert that, here, Manuela adopted Officer Lopez as her agent in conversing with Officer Lindsay. The Durbins maintain it is uncontested that Manuela speaks fluent English; however, she chose to speak Spanish on July 22, 1986, at the accident scene. The Durbins submit that in choosing to speak to Officer Lindsay in Spanish and, thus, through an interpreter, rather than to speak directly to him in English, Manuela adopted the interpreter as her agent. The Durbins further contend that Officer Lindsay's testimony should be allowed and that to hold otherwise would be contrary to public policy and would "allow bi- or multi-lingual individuals to hide behind the cloak of the hearsay rule." We disagree.
In support of Giun, the commentators likewise conclude that testimony regarding an interpreter's translation which is made to a third person is inadmissible hearsay:
If a declarant makes a statement in a foreign tongue and A translates the statement to B who does not understand the language in which it was originally spoken, the original declaration may be admissible if proper proof of it is made, as an admission of a party. Is B's evidence as to A's report to him of the declaration admissible? It is clear that it is violative of the hearsay rule and inadmissible. It is necessary to produce the interpreter himself as a witness and have him testify to the terms of the declaration.
1A R. Ray, TEXAS LAW OF EVIDENCE CIVIL AND CRIMINAL § 789 (Texas Practice 3d ed. 1980) (footnote omitted). The Durbins failed to call the interpreter as a witness. As a result, the testimony the Durbins offered regarding Manuela's statements at the accident scene was inadmissible hearsay. The Durbins ask this Court to rule that Manuela adopted the interpreter as her agent; however, there is nothing in the record to support an adoption by Manuela of the interpreter as her agent. Moreover, Manuela testified that the interpreter spoke Spanish poorly, and there is no evidence that Manuela asked that an interpreter be brought to the scene. Thus, we conclude that the trial court properly excluded Officer Lindsay's testimony insofar as he attempted to testify as to the interpreter's translation.
In the alternative, the Durbins urge this Court to overrule Giun. Citing State v. Letterman, 47 Or.App. 1145, 616 P.2d 505, aff'd, 627 P.2d 484 (1980), in support of this proposition, they argue that other jurisdictions that have allowed individuals to testify as to what was said to them through an interpreter have done so in reliance upon the two requirements common to most hearsay exceptions: (1) necessity for use of the out-of-court statement and (2) circumstantial guarantees of trustworthiness. We decline their invitation to overrule Giun.
On appeal, it is the duty of this Court to review all of the evidence before the trial court on the question of jurisdiction. Carbonit, 628 S.W.2d at 829. Where there is sufficient evidence to support a court's ruling sustaining a special appearance, it should be affirmed. Based on the Hardins' testimony that Rodriguez was not given permission to drive the vehicle, we conclude that the evidence is sufficient to support the ruling of the trial court. Moreover, there was no admissible evidence to negate this evidence. As previously stated, Officer Lindsay's testimony regarding the interpreter's translation is inadmissible as hearsay. In addition, Officer Lindsay's testimony that he had no reason to believe that Rodriguez was driving the vehicle *802 without permission is of no moment. This evidence is mere speculation and is, therefore, irrelevant and immaterial.
We overrule the Durbins' three points of error and affirm the trial court's judgment.
NOTES
[1] Manuela gave her deposition testimony in English. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455404/ | 775 S.W.2d 276 (1989)
STATE of Missouri, ex rel., William L. WEBSTER, Attorney General, Plaintiff/Appellant Cross-Respondent,
v.
Bradley EISENBEIS, Defendant/Respondent, and
Rogue Creek Valley, Inc., and Stuart McCaleb, Defendants, and
James Higgins, Defendant Cross-Appellant.
No. 54416.
Missouri Court of Appeals, Eastern District, Division Four.
June 27, 1989.
Rehearing Denied August 1, 1989.
Peter Lumaghi, St. Louis, for State ex rel. Webster.
William J. Fletcher, Kirkwood, for James Higgins.
Dana A. Hockensmith and Carol Kennedy Bader, St. Louis, for Rogue Creek Valley, Inc.
SATZ, Judge.
In this action, the state charged defendants with violating our Merchandising Practices Act, Chapter 407, RSMo 1978, in their development and marketing of lots in a recreational area. Defendants are Rogue *277 Creek Valley, Inc.; its president and sole shareholder, Bradley Eisenbeis; its vicepresident and secretary, Stuart McCaleb; and its chairman, James Higgins.[1] In the jury waived trial below, the trial court granted a "motion for directed verdict" made jointly by defendants Eisenbeis and McCaleb and entered a default judgment against defendant Higgins. A "consent" judgment was entered against the corporate defendant Rogue Creek Valley, Inc. The state appeals the judgment in favor of defendant Eisenbeis, and defendant Higgins appeals the default judgment. The appeals have been consolidated. We affirm.
The Merchandising Practices Act supplements the definition of common law fraud in an attempt to preserve fundamental honesty and fair dealing in public transactions. State ex rel. Danforth v. Independence Dodge, Inc., 494 S.W.2d 362, 368[9] (Mo. App.1973). To prevent easy evasions, the Act purposely does not expressly define the deceptive or unfair conduct made unlawful but simply declares deceptive and unfair conduct to be unlawful and leaves it to the courts to decide whether fair dealing has been violated. Id. at 368. Thus, the Act declares as an unlawful practice:
The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, or the concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise...
§ 407.020.1, RSMo 1978.[2]
In its petition against the defendants, the state made three basic charges. First, the defendants misrepresented to potential buyers the completion date of various aspects of the development. Second, various facilities and utilities were not provided by defendants as promised, because money generated by the sale of the lots was diverted by defendants to other business interests without corresponding benefit to the development. Third, misrepresentations were made that "no liens or encumbrances existed on [the] lots at the time of their sale, when, in fact, liens and encumbrances existed on the lots prior to their sale." Based upon these allegations, the state requested various kinds of injunctive relief as well as civil penalties "of not more than one thousand dollars for each violation" of the Act. At the close of the state's case, defendants Eisenbeis and McCaleb moved for a directed verdict on the grounds there was neither sufficient evidence to "tie them individually" to any of the alleged violations or "to show any false or deceptive practices." Their motions were granted. The state's appeal of the judgment in favor of Eisenbeis followed.
We review the grant of a directed verdict in a court tried case as a submission on the merits. Wyrozynski v. Nichols, 752 S.W.2d 433, 436-37[3,4] (Mo.App.1988). Therefore, we view the evidence and permissible inferences in the light most favorable to the judgment. St. Charles County v. McPeak, 730 S.W.2d 611, 612[1] (Mo.App. 1987).
In the early 1970's, William J. Rummel (Rummel), president of the Oak-Land Development Corporation (Oak-Land), began developing a resort development in Washington County. He called the development Somethin' Green. By 1982, he had completed two lakes and begun a third. He had also completed some roads and provided for utilities to most of the lots in the area around the first two lakes. Rummell sold 170 lots in the development.
In June, 1982, Oak-Land sold the development to Rogue Creek Valley, Inc. Eisenbeis was the incorporator and may have been the "sole owner" of the latter corporation. After the sale, the name of the development *278 was changed to Rogue Creek Valley.
As payment for the development, Eisenbeis, as president of Rogue Creek Valley, Inc., gave Oak-Land a promissory note in the amount of $780,000. Monthly payments were to be made on the note. The amount of each payment was a function of the amount of principal and interest received during the previous month by Rogue Creek Valley, Inc. from sales contracts, notes and deeds of trust generated by the sale of lots. Incorporated into the note was the purchase agreement which provided that, as part of its security, Oak-Land would take back a deed of trust on some of the unplatted property. After the note was signed, Rummel, as president of Oak-Land, assigned the note to himself and his wife. The sale of lots in the area encumbered under the terms of the purchase agreement is integral to this case.
The Rogue Creek Valley development was managed on a daily basis by Kelly Winfield (Winfield). Winfield was also the first sales manager at Rogue Creek Valley. In that capacity, he conducted the meetings of the sales staff. At the end of 1983, Winfield left. The record does not show that his replacement made any changes in the operation of the development or in the sale of lots.
From the time Rogue Creek Valley, Inc. took over sales until its sales office closed in June 1984, the Rogue Creek Valley sales force sold approximately 455 lots. When a lot was sold in the development, the purchaser would receive a sales contract signed by the salesperson and an Intrastate Exemption Statement signed by Eisenbeis.[3] The general warranty deeds received by the purchasers were signed by Eisenbeis as grantor. In showing the lots, salespeople made various statements concerning the completion dates for the third lake, the utilities, the roads, and for the various facilities and amenities.
Of the lots sold by Rogue Creek Valley, Inc., approximately ninety were in the area covered by the deed of trust. The purchasers of these lots, however, were not informed of the lien, and, in fact, the Intrastate Exemption Statements explicitly stated there were no liens on the property. In 1984, Rummel was made aware of the sale of lots in the area covered by the deed of trust. He contacted an attorney who in June of that year sent letters to those purchasers informing them of Rummel's lien on the property. Rogue Creek Valley, Inc., then sued Rummel to release the deed of trust as to those lots. A settlement was reached, and Rummel executed a partial deed of release on August 21, 1984. Ten days later, on August 31, 1984, the state was granted a temporary restraining order against Rogue Creek Valley, Inc. All sales and work was enjoined at the development. Thereafter, Rogue Creek Valley, Inc., filed for Chapter 11 bankruptcy on March 20, 1985, and, in May of 1985, Rummel foreclosed on the deed of trust.
State's Burden of Proof
To prove a violation of the Merchandising Practices Act of 1978, the state does not need to prove the elements of common law fraud. State ex rel. Webster v. Areaco Inv. Co., 756 S.W.2d 633, 635[3] (Mo.App. 1988). The state only needs to prove the defendant's conduct constituted unfair practices. State ex rel. Webster v. Cornelius, 729 S.W.2d 60, 64[2] (Mo.App.1987); State ex rel. Ashcroft v. Marketing Unlimited of America, Inc., 613 S.W.2d 440, 445[1] (Mo.App.1981). It is the defendant's *279 conduct, not his intent, that constitutes unfair practices. Id.
The state acknowledges it must accept the determinations of credibility implicitly made by the trial court, view the evidence and permissible inferences most favorably to the judgment and disregard all contrary evidence and inferences. See, e.g., Snowden v. Gaynor, 710 S.W.2d 481, 483 (Mo.App.1986). The state, however, does not follow these principles in its attempt to show it met its burden under the Act. Rather, the state disregards the implicit determinations of credibility made by the trial court, culls the 735 pages of transcript and the 100 plus exhibits for the evidence most favorable to it and, from this evidence, makes inferences favorable to it. We have carefully read the transcript and examined the exhibits, and, within the scope of our review, we find the record sufficient to affirm the court's entry of judgment in favor of defendant Eisenbeis.
Diversion of Funds
The state, by testimony of its investigator and by exhibits, established the deposits made into and checks written on the bank accounts of Rogue Creek Valley, Inc. Each check was signed by one of the three individual defendants and was made out to several different business entities. The investigator, however, admitted she did not know the source of the deposits to the Rogue Creek Valley, Inc. accounts, she did not investigate the bank records of these other business entities, and she did not know for what reason the checks were written. Moreover, defendant McCaleb testified, as far as he knew, none of the entities receiving money failed to reimburse Rogue Creek Valley, Inc., or failed to use the money to pay debts incurred by that corporation.
Quite simply, the trial court did not accept the state's inference that these checks represented improper diversion of funds.
Representations About Facilities And Utilities
The state contends false representations were made by the salespeople of Rogue Creek Valley, Inc. or by Eisenbeis himself about the actual provisions for and the completion dates of facilities such as horseback riding, miniature golf, archery, roads, lakes, and utilities such as electricity, water and sewers. The state characterizes these false representations as unlawful merchandising practices. The evidence, however, does not show any false representations.
Sixteen persons who purchased lots from Rogue Creek Valley, Inc. testified. They all said the salesperson they dealt with made statements regarding the availability of these facilities, utilities and amenities. They also testified these dates were often in conflict with the completion dates in the Intrastate Exemption Statements and the work was not completed as of June 1984, when the Rogue Creek Valley sales office closed, nor was it completed as of May 1985, when Rummel foreclosed. However, McCaleb testified that it was weather, ground conditions and employee illness which prevented work from being completed on the dates promised.
Viewed most favorably to the state, this evidence shows legitimate factors caused the delays of the stated completion dates. Therefore, it is sensible to infer the sales staff's statements about completion dates were promises made implicitly conditioned on legitimate factors and were not statements of fact known to be false or, even, not known to be true. Thus, no unfair practices occurred. See State ex rel. Danforth v. Independence Dodge, Inc., supra, 494 S.W.2d at 368[11].
More important, perhaps, the state fails to show the basis for holding Eisenbeis legally responsible for the statements made by these salespeople. The state could have shown Eisenbeis was responsible for such statements in either of two ways. First, by showing Eisenbeis himself made statements similar to the statements made by the sales staff. Second, by demonstrating a principal and agent relationship between Eisenbeis and the sales staff. The state does not expressly address either one of these principles and, thus, does not marshal the evidence to make the requisite showing *280 that Eisenbeis must be held personally liable.
First, we consider Eisenbeis' personal conduct. Barbara Trueblood, a secretary employed by Rogue Creek Valley, Inc. did testify that Eisenbeis received all completed sales contracts, that Eisenbeis would be called by Winfield when the sales manager was unsure if "he could let a certain deal go through on a lot," and that Eisenbeis attended sales meetings several times a month where he would give "pep talks." At these meetings, however, Eisenbeis, never gave direct answers about any completion dates. Moreover, when Rummel was asked about Eisenbeis's "participation" in sales promotion dinners for prospective purchasers, he said Eisenbeis "participated in the meetings", but he went on to say, "I don't believe [Eisenbeis] gave any presentations." Rummel also said Eisenbeis talked "to lot buyers that were invited to the meeting." However, not one of the sixteen "consumers" who testified said he or she had any conversations with Eisenbeis. This evidence is simply insufficient to show Eisenbeis personally was unfair in his dealings with the "consumers."
Second, the state has marshaled no evidence to support Eisenbeis's responsibility based upon a principal/agent relationship. We are prevented from picking up the cudgels on the state's behalf and attempting to find Eisenbeis was a principal personally responsible for the statements of the sales staff, as statements of his agents. More important, perhaps, we are precluded from presuming this principal/agent relationship existed. See, e.g. Dudley v. Dumont, 526 S.W.2d 839, 843-44[3] (Mo.App.1975). Furthermore, the present record shows the sales staff was employed by Rogue Creek Valley, Inc. To show Eisenbeis was personally responsible for the sales staff's statements, the state, at least, would either have to show Eisenbeis was the corporate officer who must be held responsible for the statements of the corporation's sales staff, or the state would have to pierce the "corporate veil". The state made no attempt to do so. See, e.g. Terre Du Lac Ass'n. v. Terre Du Lac, Inc., 737 S.W.2d 206, 218[28] (Mo.App.1987); Liberty Financial Management Corp. v. Beneficial Data Processing Corp., 670 S.W.2d 40, 52[13] (Mo.App.1984).
Liens on the Lots Sold
The state also contends the purchasers of some 90 lots were not told there was a lien on the property in the area where they were purchasing. This failure to inform the purchasers of the lien, the state argues, was compounded by the statement in the Intrastate Exemption Statement given to these purchasers that there were "no liens upon the property for sale in Rogue Creek Valley." These statements were all signed by Eisenbeis.
Eisenbeis negotiated and signed the agreement for the purchase of the development by Rogue Creek Valley, Inc. from Oak-Land. The agreement provides for a promissory note from that corporation to Oak-Land secured by a deed of trust on some of the unplatted land. This portion of the development continued to be subject to the deed of trust. The agreement, however, also provides for release of the lien "by substituting as collateral [ ] sales contracts and/or notes and Deeds of Trust on sale of the developed lots...."
As with the statements regarding completion dates, the state again fails to marshal evidence which shows Eisenbeis's personal responsibility for any statement made by a salesperson which led a purchaser to believe no lien or encumbrance existed on his or her lot. Viewed most favorably to Eisenbeis, the evidence simply shows that Eisenbeis himself probably learned of the continuing existence of the lien around June 15, 1985, the date of the letter Rummel's attorney mailed to Eisenbeis informing Eisenbeis of the existence of this lien. This lien was released after Rogue Creek Valley, Inc. filed suit against Rummel to obtain a release as to the lots which were sold.
Certainly an erroneous statement about the existence of these liens can be construed as a misrepresentation. And, it is conduct not intent that must be considered in enforcing the Act. State ex rel. Ashcroft *281 v. Marketing Unlimited of America, Inc., supra, 613 S.W.2d at 447. However, there is simply no showing Eisenbeis knew lots in the area subject to the deed of trust were being sold without having the lien released; nor is there any showing of the grounds upon which this knowledge legally can be imputed to Eisenbeis.
Summary
In summary, within the limits of the scope of our review, the state simply showed us the development and marketing of Rogue Creek Valley was not a model operation. For all the variations between promises and actuality perceived by the state, the state either has not shown any unfair merchandising practices, or, if these practices were shown, the state failed to show Eisenbeis personally engaged in these practices or must be held legally responsible for them. The Act is liberally interpreted but, even with a liberal interpretation, Eisenbeis still must be properly tied to the alleged improper acts. See e.g. State ex rel. Webster v. Areaco Inv. Co., supra; State ex rel. Webster v. Cornelius, supra; State ex rel. Ashcroft v. Marketing Unlimited of America, Inc., supra. Understandably, judgment was entered against Rogue Creek Valley, Inc. alone.
Defendant Higgins' Appeal of the Default Judgment Against Him
After granting the motion for directed verdict filed by defendants Eisenbeis and McCaleb, the court granted the state's motion for a default judgment against defendant Higgins. The court found Higgins had violated the Act as pleaded by the state, enjoined him from engaging in those violations, ordered him to pay the state $300,000 "as restitution and for the benefit of the lot owners" in the development and ordered him to pay $30,000 to the "Merchandising Practices Revolving Fund."
In his initial brief, Higgins argues the default judgment against him was not supported by substantial evidence. Higgins is in default because he failed to file an answer to the state's petition within the allowed time. He, therefore, is held to have admitted the allegations in the state's petition. O'Connor v. Quiktrip Corp., 671 S.W.2d 17, 19[1] (Mo.App.1984). Hence, his argument has no merit.
In his reply brief, Higgins, for the first time, raises a procedural due process argument. We are not required to address an issue raised for the first time in a reply brief. Wilner v. O'Donnell, 637 S.W.2d 757, 764[11] (Mo.App.1982). We do so, however, ex gratia.
Higgins was properly served with summons on September 24, 1987. On October 26, 1987, he appeared pro se and was granted a continuance until November 24, 1987 "to file motions and/or pleadings." On November 30, 1987, Higgins filed pro se motions to dismiss the state's petition for failure to state a claim, or, in the alternative, to require the state to make its allegations more definite and certain. These motions were well drafted. Correct legal terminology was used. The motions were denied on December 15, 1987. Higgins' answer was thus due "within ten days after notice of the court's action." Rule 55.25(c).
Higgins, however, contends he was not given notice of the trial court's denial of his motions and, therefore, he argues, "he was under no duty to file a responsive pleading until such time as he had the ten days' notice" of the denial of his motions. Since he had no duty to file a responsive pleading, he reasons, the judgment entered against him for failure to file an answer is invalid because it deprives him of property without due process. Higgins' argument is misdirected and, thus, misses the mark.
As noted, on December 15, 1987, Higgins' pro se motions were denied by the trial court. The record before us does not show Higgins was given formal notice of this denial, but the minute entry reflecting the denial does state: "counsel ask for Higgins to pass motion but did not enter." No further record was ever made before the trial court to explain the correct meaning of this unclear and ambiguous entry. On appeal, counsel for Higgins runs through the various meanings he perceives this entry to have, none of which, he argues, *282 should bind Higgins with notice of the court's denial of the motions. We need not address these interpretations of the minute entry.
On December 15, 1987, when the denial of the motions was entered, Rule 74.78 required the clerk of the court to serve notice by mail on every party affected by the denial "who [was] not in default for failure to appear and who was not present in court in person or by attorney at the time of the entry" of the order. If this Rule did apply to Higgins, he had the right to have the order "set aside for good cause shown upon written notice filed within 6 months from the entry of the order." Rule 74.78. Higgins, however, did not choose to attempt to set the denial aside. He chose to live with it.
There is no question he made a conscious choice to live with the denial because there is no question he had actual knowledge of the denial within six months of the order denying his motions. On February 18, 1988, within two months of the order, he filed a pro se Notice of Appeal from the default judgment which was based upon the denial of his motions and his failure to file an answer. He not only attached a copy of the trial court's judgment to his Notice of Appeal (See Appendix A), he demonstrated his correct understanding of the judgment by setting out the following required "Brief Description of the Case":
State sued Appellant [Higgins] and others as alleged developers of a recreational land development for relief under Missouri Merchandising Practices Act. The trial court sustained the motions of certain defendants for "directed verdict" at the close of Plaintiff's case. Judgment was entered against Appellant [Higgins] for injunctive relief, "restitution," and for a deposit to to Revolving Fund and costs.
In addition, one of the issues anticipated by him on appeal, set out in his Statement of Anticipated Issues required by our local Rule A.01, was:
Whether [his] ... Constitutional rights of due process were violated by the Court's order overruling [his motions] without first having given notice to [him] and [sic] opportunity to be heard.
Simply stated, Higgins chose to forgo his procedural right to test in the trial court the propriety and validity of that court's denial of his motions.
More important, the default judgment against Higgins was entered on January 2, 1988. Rule 74.03, effective January 1, 1988, parallels former Rule 74.78 which it replaces, by requiring the clerk of the court to give written notice of a judgment to "each party who is not in default for failure to appear and who was not present in court in person or by attorney at the time of entry" of the judgment. If this provision applied to Higgins and he did not receive notice of the entry of the default judgment, he had the right to have the judgment "set aside for good cause shown upon written notice filed within six months from the entry" of the judgment. Rule 74.03. Higgins chose not to follow this procedure. He, like the defaulting parties in Vonsmith v. Vonsmith, 666 S.W.2d 424 (Mo. banc 1984) and Barney v. Suggs, 688 S.W.2d 356 (Mo. banc 1985), never afforded the trial court the opportunity to take corrective action, if such action were needed, even though he has been provided with the procedural vehicle to afford that court this opportunity. Rule 74.03. Without an appropriate record made below, we have no authority to set aside the default judgment, and, had we this authority, we would decline to exercise it given the record now before us.
By definition, a default judgment is entered without the defendant having his day in court. Therefore, the procedural defects upon which the default judgment rest must be examined with care to determine whether the defendant was afforded the process he was due, particularly where, as here, the state obtains a money judgment against one of its citizens for the benefit of a state fund and, as a vicarious avenger, for the benefit of certain specified citizens. We have examined the present record. Higgins was afforded the procedural process he was due.
Judgment affirmed.
SMITH, P.J., and STEPHAN, J., concur.
*283
NOTES
[1] In its petition, the state refers to Higgins as the "individual who held the position of chairman of Defendant rogue [sic] Creek ...". This allegation was not denied.
[2] Subsection 407.020.1 was revised in 1985. In that revision the sentence, "Any act ... declared unlawful by this subsection violates this subsection whether committed before, during or after the sale, advertisement or solicitation" was added at the end of the paragraph.
[3] Chapter 42 of the United States Code regulates interstate land sales. 15 U.S.C. § 1701 et seq. The purpose of the Interstate Land Sales Full Disclosure Act is "to prohibit and punish fraud in ... land development enterprises ..." McCown v. Heidler, 527 F.2d 204, 207[2] (10th Cir.1975). The act provides for exemptions, among which is an exemption for "a developer who is engaged in a sales operation which is intrastate in nature." 15 U.S.C. § 1702(b)(7)(A). To utilize this intrastate exemption, the lot must be "free and clear of all liens, encumberances, adverse claims," 15 U.S.C. § 1702(b)(7)(A)(i); and the and developer must provide the purchaser with "a clear and specific statement describing a good faith estimate of the year of completion of, and the party responsible for, providing and maintaining the roads, water facilities, sewer facilities and any existing or promised amenities" 15 U.S.C. § 1702(b)(7)(A) (iii)(I). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455410/ | 775 S.W.2d 39 (1989)
In re ESTATE OF Roscoe Manville TOURING, Deceased, Relator.
No. A14-88-592-CV.
Court of Appeals of Texas, Houston (14th Dist.).
July 20, 1989.
*40 Thomas H. Cantrill, Claudia B. Sangster, R.J. Watts, II, Dallas, for appellant.
C. Boone Schwartzel, Houston, for appellee.
Before J. CURTISS BROWN, C.J., and JUNELL and DRAUGHN, JJ.
OPINION
DRAUGHN, Justice.
This case involves questions of law concerning the constitutionality and implementation of the so-called Substitute Fiduciary Act ("the Act"), Tex.Rev.Civ.Stat.Ann. art. 548h (Vernon Supp.1989). Appellant *41 MTrust Corp, N.A. applied for revised letters testamentary for the Estate of Roscoe Manville Touring, Deceased, after having been substituted as the estate's co-executor under the Substitute Fiduciary Act. The judge of Harris County Probate Court No. 1 denied appellant's application for letters testamentary, holding that the Substitute Fiduciary Act was unconstitutional and self-effectuating and that appellant had failed to comply with provisions of the Probate Code for the appointment of successor executors. In five points of error, appellant asserts that the probate court erred in denying its application for letters testamentary. We find that the Substitute Fiduciary Act is constitutional and reverse the judgment of the probate court.
The facts giving rise to this constitutional dispute reflect that Roscoe Manville Touring died on September 24, 1987, leaving a will naming his wife and Bank of the Southwest National Association, Houston, as independent co-executors of his estate. Bank of the Southwest National Association, Houston was succeeded by MBank Houston, N.A., thus qualifying MBank Houston, N.A. to be an independent co-executor with the deceased's wife. The deceased's last will and first codicil were admitted to probate, and letters testamentary were authorized by the probate court and issued by the clerk to the surviving wife and MBank Houston, N.A.
MBank Houston, N.A. and appellant MTrust Corp, N.A. are both subsidiaries of MCorp which owns, either directly or indirectly, more than fifty percent of the voting stock of both. MBank Houston, N.A. and appellant agreed to substitute appellant for MBank Houston, N.A. as independent co-executor of the Touring estate, effective January 1, 1988. They entered into a written substitution agreement pursuant to the Substitute Fiduciary Act. The substitution agreement provided that appellant was to be substituted for MBank Houston, N.A. in all its existing and prospective fiduciary appointments causing the powers, duties, and obligations of MBank Houston, N.A. as independent co-executor to be conferred upon appellant. After the effective date of the substitution agreement, appellant sought to transfer various interests of the estate held by various third parties into its name as co-executor. The third parties required that appellant furnish letters testamentary to evidence its authority to act as co-executor.
Appellant filed an Application for Grant and Issuance of Letters Testamentary Under Section 88(e) of the Texas Probate Code and filed an Amended Application for Probate of Will and Issuance of Letters Testamentary. The probate court denied the application on the grounds that:
1. The Substitute Fiduciary Act violates the principles of substantive due process because no social necessity exists which is sufficient to justify the restrictions the Act places upon the rights and liberties of testators, beneficiaries and the court;
2. The Act violates procedural due process since it permits substitution of a fiduciary without the requirement of any notice other than the filing of the agreement with the Texas Banking Commissioner which does not constitute sufficient notice;
3. The Act violates Article II, Section 1, of the Texas Constitution since it permits substitution without the approval of a court, thereby constituting a legislative invasion of a judicial function;
4. If the Act is constitutional, it and the substitution agreement in this case are self-effectuating, thereby automatically substituting appellant for MBank Houston, N.A. as independent co-executor without the necessity of any further judicial action, including the issuance of revised letters testamentary; and
5. Appellant has failed to comply with § 88(e), § 145, and § 154A of the Probate Code providing for the appointment of a successor independent executor.
Appellant appeals the probate court's denial of its application for letters testamentary in five points of error which challenge each of the court's holdings.
*42 In its first point of error, appellant asserts that the probate court erred in not directing the issuance of letters testamentary because the Act does not violate substantive due process. The same standards for substantive due process are applied under Article I, Sec. 19 of the Texas Constitution and the Fourteenth Amendment of the U.S. Constitution. Mellinger v. City of Houston, 3 S.W. 249, 253 (Tex.1887); Massachusetts Indemnity and Life Insurance Company v. Texas State Board of Insurance, 685 S.W.2d 104, 113 (Tex.App.-Austin 1985, no writ). Therefore, we must determine whether the Act arbitrarily deprives someone of life, liberty, or property privileges or immunities without due process of law. To determine whether such a deprivation exists requires a two-step analysis: first, the asserted individual interest must be encompassed within the constitutional protection of life, liberty, or property; and second, if it is encompassed, the procedures thus employed must afford due process of law. Sullivan v. University Interscholastic League, 599 S.W.2d 860, 863 (Tex.Civ.App.-Austin 1980), aff'd in part and rev'd in part on other grounds, 616 S.W.2d 170 (Tex.1981), citing Ingraham v. Wright, 430 U.S. 651, 672, 97 S. Ct. 1401, 1413, 51 L. Ed. 2d 711 (1977). There is a presumption of constitutionality in favor of an act of the Legislature. Spring Branch I.S.D. v. Stamos, 695 S.W.2d 556, 558 (Tex.1985).
When a statute is subjected to this two-step analysis, but no fundamental right is involved, the substantive due process inquiry determines whether any rational relationship can reasonably be conceived between the Act's purpose and its means. Retail Merchants Association of Houston, Inc. v. Handy Dan Hardware, Inc., 696 S.W.2d 44, 54 (Tex.App.-Houston [1st Dist.] 1985, no writ). Fundamental rights are those guaranteed by the Bill of Rights of the United States Constitution, are in some way traceable to the constitution, or are those that the courts feel are preservative of other basic political and civil rights. Retail Merchants Association of Houston, Inc., 696 S.W.2d at 51, citing Shapiro v. Thompson, 394 U.S. 618, 89 S. Ct. 1322, 22 L. Ed. 2d 600 (1969). Although the right of a testator to name an executor in a will indirectly affects the ultimate disposition of property, this right is a statutorily created right and is not absolute. See Huffman v. Huffman, 329 S.W.2d 139, 142 (Tex.Civ.App.-Fort Worth 1959), aff'd, 161 Tex. 267, 339 S.W.2d 885 (1960). This is evident as the Probate Code has express provisions for disqualifying certain administrators named in a will. Tex. Probate Code Ann. § 78 (Vernon 1980). The Substitute Fiduciary Act encroaches only upon the testator's right to name an executor and does not burden an inherently suspect class. See Spring Branch I.S.D., 695 S.W.2d at 560. Because this right is outside the ambit of fundamental rights, we must review all the evidence to determine whether the Act excludes the possibility that there is any rational relationship between the Act's purpose and its effect, and whether the evidence excludes the possibility that the Act bears any rational relationship to an actual or articulated interest. Retail Merchants Association of Houston, Inc. 696 S.W.2d at 51.
The purpose of the Act is to promote efficient and cost-effective delivery of fiduciary services by allowing the placement of these services within a single corporate entity which maintains offices throughout the State of Texas. Benefits which result are: (1) availability of a broader range of fiduciary services and products in smaller communities that might not be financially justified or available otherwise; (2) higher quality investment services; (3) enhanced control and supervision of fiduciary personnel; and (4) cost savings through the elimination of unnecessary duplication of personnel and equipment. Nine other states, including New York and Florida, have enacted similar substitution legislation. Ariz. Rev.Stat.Ann. 6-385 (1987); Fla.Stat.Ann. § 660.46 (West 1984); Minn.Stat.Ann § 48.846 (West 1987); N.Y. Banking Law § 154 (McKinney 1987); Ohio Rev.Code Ann.§ 1109.021 (Anderson 1986); S.D. Codified Laws Ann. § 51-19A-15, 51-19A-16, 51-19A-17 (1980); Tenn.Code Ann. § 45.2-1008 *43 (1980); Va.Code Ann. § 6.1-32.9 (1987); Wis.Stat.Ann. § 223.07 (West 1982).
It is also argued that the Legislature has gone too far in passing an act which enables financial entities, for their own alleged selfish reasons, to encroach unconstitutionally upon testators' intent. The Act, however, provides that the creator of the fiduciary account may ensure that the account is not eligible for substitution through appropriate language in the document creating the account. Article 548h, Sec. 2(d) (Vernon Supp.1989). Thus, the Act can be avoided entirely.
In the present will, the testator appointed his wife and Bank of the Southwest National Association, Houston, as independent executors and trustees of his estate. He provided for Bank of the Southwest to act alone if his wife was unable for any reason to act. He further gave any trustee or substitute or successor trustee the right to appoint a successor trustee, thereby expressing the intent to allow substitution of the originally named successor trustees which were his wife and Bank of the Southwest.
The testator provided for flexible appointments of successor trustees by authorizing the appointment of successor trustees from time to time prior to the date the succession becomes effective. The testator also gave the remaining trustee the power to appoint another trustee to act in the former trustee's place, thereby superceding the original appointments made in the will. A successor trustee may be any individual, bank, or trust company domiciled anywhere so long as the appointment is made by written instrument filed with the records of the trust estates.
These will provisions indicate that the testator contemplated total corporate management as well as provided for a liberal appointment scheme for successor trustees. He further contemplated management by someone other than those expressly named in the will. In fact, Bank of the Southwest National Association which was named in the will as original executor was succeeded by MBank Houston, N.A. pursuant to a corporate succession. Therefore, substitution under the Act did not thwart the testator's intent.
It is argued that the reasons behind the adoption of the act is to benefit financial institutions to the detriment of the individual testators and beneficiaries. However, the Act does not give holding companies and financial institutions the power to administer an estate through a separate entity which may be undercapitalized or sold to a foreign company. The Act requires the owning bank holding company to file with the banking commissioner an irrevocable undertaking to be fully responsible for the existing and future fiduciary acts and omissions of its subsidiary trust company. Article 548h, Section 7 (Vernon Supp.1989). Further, for purposes of qualification as successor fiduciary under any document creating the fiduciary account or any statute relating to fiduciary accounts, the subsidiary trust company is valued to have capital and surplus equal to its own capital and surplus plus that of its owning bank holding company. Article 548h, Section 8 (Vernon Supp.1989). Thus, the threat of undercapitalization has been neutralized.
The Act also provides a mechanism to challenge a transfer of the fiduciary account. Under Section 2(e), an objection can be filed with the affiliated bank which will halt the substitution so long as all parties entitled to notice under the Act file a written objection to the proposed substitution. Any party is entitled to object via a written petition to a court of competent jurisdiction and to seek to have the substitution denied. Thus, if all parties object, the objection need only go to the bank to avoid court proceedings and the substitution. If only one or a few parties object, a judicial proceeding must be held to determine whether the substitution will be granted. Moreover, the Act specifies the standard applied in any judicial proceedings based upon whether the substitution will effect a change in the situs of administration. Article 548h, Section 3 (Vernon Supp.1989). Thus, the trial court is guided by standards provided by the Act in its determination of whether substitution should be allowed. Further, the Act provides that the judicial *44 proceedings governed by the Act for denial of substitution are cumulative to any other statute or any applicable provision for removal of a fiduciary or appointment of a successor fiduciary. Article 548h, Section 3(d) (Vernon Supp.1989).
The Act also provides costs and reasonable, necessary attorney's fees to be awarded as the court finds equitable and just, so that an individual beneficiary can challenge a large corporate fiduciary. Tex. Rev.Civ.Stat.Ann. art 548h, Sec. 3(e) (Vernon Supp.1989).
It is evident that the Act's purpose is rationally related to its means. The legitimate state interest in ensuring maximal investment opportunities for estates out weighs its minimal effect on a testator's personal and property rights. Therefore, the Act is neither arbitrary nor unreasonable and does not violate substantive due process. We sustain appellant's first point of error.
In its second point of error, appellant asserts that the probate court erred in not directing the issuance of letters testamentary because the Act does not violate procedural due process. The probate court found the Act deficient because, other than the filing of the agreement with the Texas Banking Commissioner, there was not sufficient notice of the substitution. We find that sufficient notice is provided by the Act so that it meets the requirements of procedural due process.
The Act affords significant notice protection. Section 2(b)(1) of the Act requires written notice not later than 90 days before the effective date of a substitution. If the substitution does not effect a change in the situs of administration of the fiduciary account, notice must be sent to:
(A) each person who is readily ascertainable as a beneficiary of the account because of the receipt of statements of account by the person, or in the case of a minor beneficiary, by a parent, conservator, or guardian of the minor beneficiary;
(B) each co-fiduciary;
(C) each surviving settlor of a trust;
(D) each issuer of a security for which the affiliated bank administers a fiduciary account;
(E) the plan sponsor of each employee benefit plan;
(F) the principal of each agency account; and
(G) the guardian of the person of each ward under guardianship.
If the substitution effects a change in the situs of administration, written notice must be sent to each adult beneficiary, each representative of beneficiaries entitled to receive current distribution of income or principal from the account, each co-fiduciary, each surviving settlor of a trust, each person who alone or with others has the power to remove the fiduciary being substituted, and the other persons entitled to notice listed above. Tex.Rev.Civ.Stat.Ann. art. 548h, section 2(b)(2) (Vernon Supp. 1989).
Additional notice was provided in this case. The present estate's fiduciary account came into existence after the execution of the substitution agreement between appellant and MBank Houston, N.A. on October 1, 1987 but before the filing of the application for probate and issuance of letters testamentary and before the effective date of the agreement on January 1, 1988. The probate application identified the status and interest of appellant as a candidate for substitution and notice of the application was posted. The agreement was on file with the Texas Banking Commissioner on or about December 22, 1987. This created a prospective fiduciary account within the meaning of the Act with notice being governed by Section 33(f)(2) of the Probate Code which provides for posted notice. Statutory notice of the application for probate by posting has been held to meet the requirements of procedural due process. Estate of Ross, 672 S.W.2d 315, 318 (Tex. App.-Eastland 1984, writ ref'd n.r.e.), cert. denied, 470 U.S. 1084, 105 S. Ct. 1844, 85 L. Ed. 2d 143 (1985), citing Ladehoff v. Ladehoff, 436 S.W.2d 334 (Tex.1968).
Appellant asserts that the Act is analogous to Article 342-308 ("MergerTrust Powers") of the Texas Banking Code of *45 1943 with respect to the question of notice as implicating procedural due process. That Article provides that if an existing bank is acting as a trustee, guardian, executor, administrator, or in any fiduciary capacity at the time of a merger, its fiduciary responsibilities will be taken over by the post-merger entity without the necessity of any judicial action or action by the creator of such trust. There are no notice requirements at all under this article. Tex.Rev. Civ.Stat.Ann. art. 342-308 (Vernon Supp. 1989).
While the analogy is subject to attack because a merger is a hybrid continuation of the fiduciary entity while appellant is a separate entity under the same holding company as that of MBank Houston, N.A., the analogy is sufficient to show that notice is not critical.
It is argued that the testator does not have notice of the contents of his probate records, thus posting does not satisfy all procedural concerns. The perceived threat under this argument is that the testator does not have notice that an unknown third party corporate fiduciary can be substituted for the named fiduciary. Yet Section 2(d) of the Act expressly accommodates a testator who wishes to avoid a possible substitution by authorizing specific language in the document disallowing substitution. The testator is thus on notice that his will can be affected, or not, by the Substitute Fiduciary Act. With the notice safeguards provided for in the Act, procedural due process is not violated. We sustain appellant's second point of error.
In its third point of error, appellant asserts that the probate court erred in not directing the issuance of letters testamentary because the Act does not violate Article II, Section 1 of the Texas Constitution as an invasion of the judicial branch by the Legislature. We find that the Act does not violate the separation of powers doctrine.
The regulation and appointment of testamentary representatives has always been a creature of statute. See Huffman, 329 S.W.2d at 142. The functions of probate, trust and guardianship proceedings are not constitutionally committed to the control of the judiciary. These powers are granted to the probate court by the Legislature. Tex. Probate Code Ann. §§ 2, 4, 5, 88, 114, 119, 123, 130B, 130M, 178, 181, 220, 223 (Vernon 1980). Particularly this is so as to a probate court's authority to direct the issuance of letters or to appoint an initial, as well as a successor, personal representative, guardian or trustee. Tex.Probate Code Ann. §§ 77, 88, 145, 154, 178, 220 (Vernon 1980). The probate courts are not the exclusive constitutional power source for all probate laws. For example, the court must look to the Code to determine who is disqualified to serve as executor or administrator. § 78, Tex.Prob.Code Ann. (Vernon 1980). Further, the probate court does not control the appointment of independent executors. Rather, the court is under a mandatory duty to order the probate of the will so long as the named executors are not disqualified. No other discretionary judicial act of the court is involved in their appointment. Higginbotham v. Alexander Trust Estate, 129 S.W.2d 352, 357 (Tex.Civ. App.-Eastland 1939, writ ref'd).
The Substitute Fiduciary Act is the functional equivalent of other sections of the Probate Code promulgated by the Legislature. The Legislature has the power to pass statutes separate from the probate court that affect probate matters as well as the power to amend the Probate Code itself. See, e.g., Tex.Prop.Code Ann. § 113.083 (Vernon 1984). To hold otherwise would have the opposite effect, it would give to the probate courts power over legislative prerogatives unsupported by the Constitution.
In its fourth point of error, appellant asserts that probate court erred in not directing the issuance of letters testamentary under § 88(e) of the probate code because the Substitute Fiduciary Act and the substitution agreement are not self-effectuating and the requirements of § 88(e) have been satisfied. Under Section 2(g) of the Act, the subsidiary trust company is automatically substituted without the necessity of any instrument of transfer or conveyance, without the necessity of any judicial action, and without the necessity of any *46 action by the creator of the fiduciary account. The probate court maintained that this self-effectuating provision automatically substituted appellant for MBank Houston, N.A. without the necessity of any further judicial action including any order directing the issuance of revised letters testamentary to appellant.
Although substitution is automatic under the Act, the Act does not provide that the subsidiary trust company is entitled to the issuance of letters testamentary evidencing its authority without the necessity of judicial action. Letters testamentary are not issued until the court's clerk issues them according to the court's order. See Tex. Prob.Code Ann. §§ 88(e), 182 (Vernon 1980). The probate court must take judicial action in ordering the letters testamentary to evidence appellant's authority to act for the estate. This is because the Act does not negate the necessity of a show of authority to third parties.
Section 2(g) of the Act provides that the subsidiary trust company shall become the fiduciary and perform all duties and obligations and exercise all powers and authority connected with or incidental to the fiduciary capacity as if originally named as fiduciary without the necessity of any judicial action. Under the Probate Code, third parties dealing with an estate's personal representative may rely upon letters testamentary as sufficient evidence of the appointment and qualification of the representative and of the date of qualification. § 186, Tex.Prob.Code Ann. (Vernon 1980). The Probate Code also provides that the clerk shall issue any number of letters as and when requested by the representative. § 187, Tex.Prob.Code Ann. (Vernon 1980). The requirement that the clerk shall issue any number of letters upon request anticipates third party interaction with an estate's representative and the show of authority which necessarily precedes any third party dealings. Without the written evidence of appellant's substitution as independent co-executor in the form of letters testamentary, appellant cannot effectively perform all the duties and obligations and exercise all the powers and authorities conferred upon it as a consequence of the substitution.
The letters testamentary granted to MBank Houston, N.A., the written substitution agreement, and the Substitute Fiduciary Act do not constitute an effective written proof of the appellant's authorization to act as independent co-executor of the estate. The Probate Code does not contemplate that third parties must be trained in legal matters to determine whether the agreement is in conformity with the Act and on file with the Texas Banking Commissioner, to determine whether the original letters testamentary have been revoked, cancelled or modified, and whether these documents fall within the ambit of the Act. Instead, third parties acquainted with estate transactions will logically seek letters testamentary inhering appellant with authority to act for the estate.
Although the Act creates an automatic substitution without the necessity of any discretionary judicial action, it does not ease appellant's burden of proving authority to third parties. The issuance of an order granting letters testamentary to appellant gives appellant no additional rights to those already granted under the Act; yet these letters testamentary allow appellant to effectively deal with third parties efficiently, unequivocally, and customarily.
Appellant established that it was entitled to letters testamentary. Letters testamentary had previously been issued to the testator's wife and to MBank Houston, N.A. as independent co-executor of the estate. Through the operation of the Substitute Fiduciary Act, appellant and MBank Houston, N.A. entered into a substitution agreement causing appellant to be substituted automatically for MBank Houston, N.A. Posted notice was provided and the agreement was filed with the Banking Commissioner. Appellant was not disqualified to serve as independent co-executor. Thus, appellant showed the probate court that it was entitled to letters testamentary by law, i.e., the Substitute Fiduciary Act, and was not disqualified to serve. Tex.Prob.Code Ann. §§ 78, 88(e) (Vernon 1980). Once this *47 showing has been made, the probate court has no discretionary power to refuse to issue letters. See Alford v. Alford, 601 S.W.2d 408, 410 (Tex.Civ.App.-Houston [14th Dist.] 1980, no writ). We sustain appellant's fourth point of error.
In its fifth point of error, appellant asserts the probate court erred in not directing the issuance of letters testamentary because the requirements of § 88(e) had been met. The probate court held that appellant failed to comply with §§ 88(e), 145, and 154A of the Probate Code governing the appointment of a successor independent executor. We find that §§ 145 and 154A are not applicable to the present substitution as it is governed by the Substitute Fiduciary Act. The substitution was automatic upon the completion of the Act's requirements and did not involve a "successor" independent executor. The Act is functionally equivalent to other sections of the Probate, Property, and Banking Codes which interface with each other, promulgated by the Legislature to provide guideposts to both testators and the judiciary in the disposal of property by will and the proper administration of the estate.
We sustain appellant's fifth point of error.
We reverse the probate court's judgment and remand with instructions that the probate court issue letters testamentary in accordance with this opinion.
J. CURTISS BROWN, Justice, dissenting.
The majority holds that a non-named successor executor to a will can be substituted without the approval of the testator, beneficiaries or any court. I cannot agree with this holding and must record my dissent. I believe the findings by the trial court holding the Substitute Fiduciary Act "the Act", Tex.Rev.Civ.Stat.Ann. art. 548h (Vernon Supp.1989), unconstitutional is correct and should be affirmed.
I agree with the trial judge that the Act violates the principles of substantive due process. There has been no showing of any social necessity that exists which is sufficient to justify the restrictions the Act places upon the rights and liberties of testators, beneficiaries and the court. The only necessity that I see for this statute is the possibility of being an economic tent to benefit the bank while taking away the right of the testator to select the one to administer his estate. I believe the evidence in the record supports the trial court's findings and I believe the Act deprives a person of his proper interest in selecting one to administer his estate after he is deceased. Thus, since no social necessity has been sufficiently shown, I find the Act reaches the level of arbitrary or unreasonable causing a violation of appellee's due process rights. In Interest of B. M. N. , 570 S.W.2d 493, 510 (Tex.Civ.App. Texarkana 1978, no writ).
I would also hold the Act unconstitutional as violating a person's right to contract found in Tex.Const. art. I § 16 which states:
§ 16. Bills of attainder; ex post facto or retroactive laws; impairing obligation of contracts
Sec. 16. No bill of attainder, ex post facto law, retroactive law, or any law impairing the obligation of contracts, shall be made.
Although a will is usually not treated in the same context as a contract, I believe the testator's conveyance of property and the selection of one to administer the estate should be given the right that Texas Citizens have in entering into contracts with one another without State interference.
I do not agree with the majority that section 2(d) of Article 548h allows the testator to avoid the application of the Act. First, the section is too vague and ambiguous to be construed as allowing the testator to avoid this act. Section 2(d) states:
(d) Except as provided by this subsection, the prospective designation in a will or other instrument of the affiliated bank as fiduciary is considered designation of the subsidiary trust company, and any grant in the will or other instrument of any discretionary power is considered conferred on the subsidiary trust company. However, *48 the affiliated bank and subsidiary trust company may agree in writing to have the designation of the affiliated bank as fiduciary be binding, or the creator of the fiduciary account may, by appropriate language in the document creating the fiduciary account, provide that the fiduciary account is not eligible for substitution under this Act.
From my reading of this provision, I do not find the specificity needed to place this onerous burden on the testator. The language does not indicate what the term "creator of the fiduciary account" means, nor does it state in what document the testator can avail themselves of this harsh and unconstitutional act.
Finally, I believe the ability of an executor transferring administrators without the permission of the testator or the beneficiaries offends the long standing case law which states that a person of sound mind has the legal right to dispose of his own property as he sees fit and to prescribe the terms upon which his bounty should be enjoyed. State v. Rubion, 158 Tex. 43, 308 S.W.2d 4, 8 (1958). I find the Act violates this principle and should be struck as unconstitutional. Therefore, I would affirm the judgment of the trial court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455413/ | 775 S.W.2d 826 (1989)
Ruth G. McGILL, M.D., et al., Appellants,
v.
J. Willis JOHNSON, III, Appellee.
No. 3-88-209-CV.
Court of Appeals of Texas, Austin.
August 9, 1989.
Rehearing Denied September 20, 1989.
*827 Mary J. Clariday, Thompson & Knight, Dallas, Stanley M. Johanson, Vinson & Elkins, Austin, for appellants.
Jack W. Lawter, Jr., Fulbright & Jaworski, Houston, for appellee.
Before SHANNON, C.J., and CARROLL and ABOUSSIE, JJ.
CARROLL, Justice.
The trial court concluded that certain contested language in a 1944 will created only a contingent remainder and that the open mine doctrine applied to oil and gas leases executed by the testamentary trustee as well as to leases signed by the testator. We agree and will affirm the trial court's summary judgment.[1]
BACKGROUND
J. Willis Johnson, Jr. (Testator), died in 1955, leaving a substantial estate. He was survived by his two sisters, his second wife, and his son, J. Willis Johnson, III (Johnson).
In his will,[2] the Testator created a trust for his son, authorized the trustee to execute oil and gas leases, and provided for the outright bequest of the "Junction Ranch" to his son upon his thirtieth birthday. The will does not contain a residuary clause.
The seventh section of the will provides for the termination of the trust upon the son's thirty-fifth birthday. If at that time the son had a "living child ... born in lawful wedlock," he would take all of the trust property outright. The testator next provided for the disposition of his property in the event his son did not have a child upon his thirty-fifth birthday or if he died without a surviving child.
It is this portion of the will that is in dispute. The third paragraph of the seventh section consists of one 350-word sentence:
If my son J. Willis Johnson, III lives to reach the age of thirty-five years and if at the time he reaches the age of thirty-five years he does not then have living a child, direct issue of his body born in *828 lawful wedlock, then under those conditions and at that time there shall vest in my said son the full and complete title to all the personal property then constituting any part of the trust estate held by the Trustee under this will and there shall vest in him for the term of his natural life a life estate in all the real estate (the Junction Ranch is disposed of otherwise above and is not included here) then held by the Trustee as any part of the trust estate under this will, with the remainder over in said real estate at the death of my said son (subject to the proviso contained in the latter part of this sentence) passing share and share alike unto my sisters, Ruth J. Gordon and Mary B. Hall, and in case either of said sisters then be deceased such remainder here passing to such deceased sister shall pass per stirpes to her then living direct lineal descendants share and share alike, provided however that if my said son after said life estate has vested in him upon his reaching the age of thirty-five years does have a child, direct issue of his body born alive in lawful wedlock, then at such time as such child may be born the remainder in said lands herein left to my two said sisters and their direct lineal descendants shall fail, and at that time said remainder shall vest in my said son J. Willis Johnson, III and the full fee simple title to all said lands thereby at that time shall become vested in him with no character of remainder in anyone else whomsoever.
One sister, Ruth Gordon, died in 1982, survived by a daughter, Ruth G. McGill. Ruth Gordon devised her property to her grandchildren, Ruth G. McGill, M.D., and John Gordon McGill (the McGills), the appellants. The other sister, Mary B. Hall, died in 1984 without any surviving children. Under her will, she divided her property into two trusts, one for the benefit of Ruth G. McGill, for life and one for the benefit of Johnson for life, and on the death of either, to their children, or if none, to the other trust. However, Ruth G. McGill disclaimed all of her interest in the Mary B. Hall estate.
Johnson filed identical petitions in the District and County Courts of Tom Green County. Johnson sought a declaratory judgment that Mary B. Hall's remainder under Testator's will lapsed upon her death and passed to him by intestacy. The McGills contested Johnson's interpretation of the will and counterclaimed for damages due to waste by Johnson under oil and gas leases.
The parties signed an agreed order setting up separate but simultaneous district and county court proceedings presided over by one judge. The judge entered identical partial summary judgments in Johnson's favor. He interpreted the disputed language in section seven of Testator's will to have created a contingent remainder in favor of his sisters and concluded that Mary B. Hall's share lapsed upon her death and passed by intestacy to Johnson. The judge also held that the open mine doctrine applied to proceeds from the leases and that no waste occurred. He then entered final judgments which severed the construction issues and waste claims from any other issues. (This appeal concerns only the district court judgment. This Court dismissed the McGills' appeal of the county court at law judgment for procedural failures.)
CONTENTIONS ON APPEAL
The McGills bring thirteen points of error. We have grouped their complaints into four areas: our court's jurisdiction of the appeal; the trial court's interpretation of the will as devising a contingent remainder which lapsed upon Mary B. Hall's death; the trial court's conclusion that the open mine doctrine applied to leases executed by the Testator and trustee, and the trial court's apportionment of royalties at the expiration of the trust.
JURISDICTION
In their first point the McGills challenge our jurisdiction in this cause. They claim that the trial court's order of severance and final judgment was not final because the clerk did not set up a separate cause, but rather, entered the judgment in the original cause. We disagree. The order *829 of severance and final judgment states that the contingent remainder interest issues and waste issues concerning leases executed by the Testator and trustee are severed from other causes of action, and that "[t]he clerks shall docket the severed matters determined in this Final Judgment separately from all other causes of action, claims and defenses asserted in these cases and shall take such other action as is appropriate to effectuate this severance." The order of severance and final judgment was filed under the cause number of the original suit. Although the appellate record does not show that the clerk severed the matters and docketed them under a separate cause number, this omission is immaterial to this appeal.
Texas R.Civ.P.Ann. 301 (Supp.1989) provides that "[o]nly one final judgment shall be rendered in any cause except where it is otherwise specially provided by law." The familiar rule concerning summary judgments is that a summary judgment which does not dispose of all parties and issues in the pending suit is interlocutory and not appealable unless the trial court orders a severance of that phrase. Pan American Petroleum Corp. v. Texas Pacific Coal & Oil Co., 159 Tex 550, 324 S.W.2d 200, 200-201 (1959). The judgment here disposed of all parties and issues, and ordered a severance. It was thus a final, appealable judgment. We overrule the McGills' first point of error.
(In their thirteenth point the McGills argue that the county court's summary judgment is void for lack of subject matter jurisdiction. Because we have dismissed the appeal of the county court judgment, we need not address this point.)
WILL INTERPRETATION
The McGills and Johnson urge diametrically opposed interpretations of section seven of the will. First, the McGills say the Testator created a vested remainder subject to divestment, and, alternatively, that the Testator created a class gift to his sisters and their lineal descendants. Johnson, on the other hand, argues that the Testator created only a contingent remainder, and that Mary B. Hall's remainder lapsed upon her death. He also disagrees that the Testator created a class gift.
Determining the testator's intent is the primary objective in interpreting a will. Powers v. First National Bank of Corsicana, 138 Tex. 604, 161 S.W.2d 273, 281 (1942). In order to determine the testator's intent, the will must be construed as a whole. Republic National Bank of Dallas v. Fredericks, 155 Tex. 79, 283 S.W.2d 39, 43 (1955). When the testator executes a codicil, the will and codicil must be construed together. Unitarian Universalist Service v. Lebrecht, 670 S.W.2d 402, 404 (Tex.App.1984, writ. ref'd n.r.e.). If the will is ambiguous, evidence of the circumstances surrounding the execution may be considered to determine the testator's intent. Guilliams v. Koonsman, 154 Tex. 401, 279 S.W.2d 579, 581 (1955).
Considering the will and codicils as a whole, we believe the Testator intended to devise specific giftsnot a class giftto Mary B. Hall and Ruth Gordon. The will unambiguously states: "with the remainder... passing share and share alike unto my sisters, Ruth J. Gordon and Mary B. Hall...." Courts have consistently held that "`where legatees are named as individuals and are also described as a class, the gift by name ordinarily constitutes a gift to individuals, the class description being added merely by way of identification.'" Benson v. Greenville Nat. Exchange Bank, 253 S.W.2d 918 (Tex.Civ. App.1952, writ ref'd n.r.e.).
This will can be distinguished from Perry v. Hinshaw, 633 S.W.2d 503, 505 (Tex. 1982), because it does not contain words of survivorship modifying the specific gifts. See also White v. Moore, 760 S.W.2d 242, 243 (Tex.1988). In Perry, the will stated that on the death of the life tenant, certain real property "be divided among the surviving sisters and brothers of myself and my beloved husband in the following manner: to my sister [naming her] one-half (½); and the remaining half to be divided equally, share and share alike, among the surviving brothers and sisters of my beloved husband [naming them]" (emphasis added). *830 633 S.W.2d at 504. The language in this will is materially different from Perry; as in Benson, the Testator unambiguously made specific gifts to Mary B. Hall and Ruth Gordon.
We next consider whether the Testator intended to create a contingent remainder or a vested remainder subject to divestment. In making this determination, we recognize that "the distinctions drawn between conditions precedent and conditions subsequent become quite tricky." Dukeminier & Johanson, Family Wealth Transactions: Wills, Trusts, Future Interests & Estate Planning, Ch. 11 § C at 700 (1972). Nonetheless, we must attempt to apply the accepted rules of construction to the language at hand:
The rule for determining whether a remainder is vested or contingent is thus stated by Gray in his work on The Rule Against Perpetuities: "If the conditional element is incorporated into the description of, or into the gift to the remainder-man, then the remainder is contingent; but if, after words giving a vested interest, a clause is added divesting it, the remainder is vested."
Guilliams v. Koonsman, 154 Tex. 401, 279 S.W.2d 579, 582 (1955).
The original will and first codicil contain language pertaining to the remainder. The critical language is the parenthetical phrase and the two conditions found in the latter part of section seven:
with the remainder over in said real estate at the death of my said son (subject to the provision contained in the latter part of this sentence) passing share and share alike unto my sisters, Ruth J. Gordon and Mary B. Hall, and in case either of said sisters then be deceased such remainder here passing to such deceased sister shall pass per stirpes to her then living direct lineal descendants share and share alike, provided however that if my said son after said life estate has vested in him upon his reaching the age of thirty-five years does have a child, direct issue of his body born alive in lawful wedlock, then at such time as such child may be born the remainder in said lands herein left to my two said sisters and their direct lineal descendants shall fail, and at that time said remainder shall vest in my said son J. Willis Johnson, III and the full fee simple title to all said lands thereby at that time shall become vested in him with no character of remainder in anyone else whomsoever. (Emphasis added.)
In his first codicil, the Testator provided:
In subdivision or paragraph numbered 7 of my last will I provide that under the contingency therein set forth my sisters Ruth J. Gordon and Mary B. Hall or their direct lineal descendants shall receive the remainder in real estate upon the termination of the life estate therein provided for, and I provide that under the contingency therein named they shall receive the trust property then held by the Trustee. I amend those provisions referring to my two sisters and their direct lineal descendants so as to provide that in the event more than one of my own children take under my will and codicil and any of such children die under any of the conditions specified in my last will for the taking by my sisters or their descendants upon the death of J. Willis Johnson, III, then my surviving children or their descendants first shall take, subject to all the terms and provisions of my will and this codicil, the interest of my child so dying, with my sisters and their direct lineal descendants taking only upon the death of the last survivor of my own children, in the event such survivor dies under the same conditions as my will provides that they shall take upon the death of J. Willis Johnson, III (Emphasis added.)
Johnson and the McGills urge completely different interpretations. The McGills argue that the sisters' remainder is subject to two conditions subsequent and is thus a vested remainder subject to divestment. The two conditions subsequent are that Johnson not have children and that each sister or her lineal descendants survive. The McGills argue that the Testator did not create a contingent remainder because the granting clause contains no conditions. Instead, *831 the conditions follow the granting clause.
Johnson points out that the McGills' argument ignores the parenthetical phrase, "subject to the proviso contained in the latter part of this sentence." Johnson argues that the parenthetical phrase makes the remainder subject to the condition precedent that he not have any children. He bolsters this interpretation by the references to "contingency" in the first codicil, and by the references to "vesting" in the original will. The will states that Johnson's life estate vests at the termination of the trust, and if he has children, "said remainder shall vest in my said son." But the will does not describe the sisters' remainder as vested.
Construing the will and codicils as a whole, we agree with Johnson that as a matter of law the Testator intended to create a contingent remainder. In reaching our conclusion, we have determined that the will in this case is unlike the one in Lowrance v. Whitfield, 752 S.W.2d 129 (Tex.App.1988, writ. denied). As in this will, the testator in Lowrance created a life estate and remainder interest. Paragraph V of the will in Lowrance provided: "Subject to the life estate [to my wife] ..., and subject to the hereinafter provided condition, it is my will and desire that all of the real estate ... shall pass to and vest in fee simple in my three (3) children...." (Emphasis added.) Paragraph VII provided:
As a condition hereof in vesting the fee simple title to real estate herein bequeathed and dismissed [sic] to my said children, or their children, as the case may be, Testator hereby expressly provides that in the event any child should sell, or attempt to sell ... any interest bequeathed and dismissed [sic] to any child or children during the lifetime of my wife ..., then, in such event, the part of portion of my said estate so bequeathen and dismissed [sic] to said child or children shall divest of and from said child and children and thereupon pass to and become the property of my said wife.... In such event, said interest or interests shall divest of and from said child or children and thereupon become vested in my said wife.... (Emphasis added.)
The placement of the conditional phrase in Lowrance is similar to that here. As in our case, the remaindermen in Lowrance urged that the testator's will created a vested remainder, whereas the life tenant urged that the testator created a contingent remainder. The court held that the will was ambiguous because "[t]he phraseology used in paragraphs V and VII appear to conflict and leave in doubt the true intention of the testator." 752 S.W.2d at 133. Although the conditional phrase in paragraph V suggested an intent to create a contingent remainder, the divestment language in paragraph VII suggested an intent to create a vested remainder.
Unlike Lowrance, the will here does not contain any conflicting phraseology. The parenthetical phrase in section seven creates a contingent remainder. This interpretation is bolstered by the first codicil which refers to the "contingency." We hold that the Testator unambiguously created a contingent remainder. The contingent remainder is subject to two conditions precedent: (1) the parenthetical phrase incorporates the condition that Johnson not have children, as discussed above; (2) the other condition of survivorship, as discussed below.
LAPSE
The trial court concluded that the contingent remainder interest to Mary B. Hall and her lineal descendants lapsed upon her death and passed by intestacy to Johnson. The pertinent language in section seven of the will is as follows:
with the remainder over in said real estate at the death of my said son ... passing share and share alike unto my sisters, Ruth J. Gordon and Mary B. Hall, and in case either of said sisters then be deceased such remainder here passing to such deceased sister shall pass per stirpes to her then living direct lineal descendants share and share alike....
*832 The parties' arguments on this point turn on their interpretation of the phrase "then be deceased." The McGills say "then be deceased" refers to the date the trust terminates while Johnson urges "then be deceased" refers to the date of his own death. The McGills argue that Mary B. Hall's remainder did not lapse because her remainder could be defeated only if she died without surviving descendants prior to the date the trust terminated. Johnson argues that the remainder did lapse because the survival of Mary B. Hall or her lineal descendants was a condition precedent, and thus her contingent remainder failed.
We agree with Johnson that the will establishes survival as a condition precedent. Construing the language used within the four corners of the will, Frost National Bank of San Antonio v. Newton, 554 S.W.2d 149, 153 (Tex.1977), we believe "then be deceased" clearly refers to "the death of my said son." The quoted portion of the will conditions the passing of the remainder interest upon survival, and we do not have to wait until Johnson's death to know that the contingency will not occur, because Mary B. Hall died in 1984 survived by no direct lineal descendants. Compare Pickering v. Miles, 477 S.W.2d 267 (Tex. 1972); Guilliams v. Koonsman, 154 Tex. 401, 279 S.W.2d 579 (1955).
Because Testator created a contingent remainder, and Mary B. Hall's remainder lapsed, we overrule the McGills' second through seventh points of error.
OPEN MINE DOCTRINE
The Testator executed ten oil, gas, and mineral leases before his death. The trustee executed two leases during the trust. Production from these leases continued until the termination of the trust and vesting of Johnson's life estate in 1970. When the trust ended, Johnson received the bonuses and royalties from the leases, and deposited them into his personal bank account, for his personal use. The provisions of the will and codicil relating to the leases are: (1) section five of the will which sets up the discretionary trust, directing the trustee "out of the income and earnings of the property held in trust by it [to] defray all expenses incident to the support, maintenance and education"; section five empowers the trustee to execute oil, gas and mineral leases; (2) section three of the first codicil, which further instructs that the trustee "at least as often as semi-annually, shall pay over to [Johnson] all net revenues from the trust property held by it"; (3) section seven of the will provides for termination of the trust, at which time Johnson takes fee simple title to all the trust property if he has a child, but if not, takes all the personal property outright, and only a life estate in the real property.
The McGills counterclaimed in the original suit in part for waste. The trial court held, however, that the open mine doctrine applied to the leases executed by the Testator and to those executed by the trustee, and that the McGills had no claim against Johnson for proceeds under those leases. The court severed the waste issues concerning leases executed after the trust ended.
The McGills assert that the open mine doctrine does not apply to leases executed by the Testator or by the trustee because the Testator's intent was to restrict Johnson's enjoyment of the proceeds. As evidence of his intent, the McGills point to the existence of the trust, which intervened before Johnson's life estate. Johnson, on the other hand, argues that the open mine doctrine applies to the leases executed by the Testator and trustee, because the leases were "open mines" when his life estate vested. Johnson argues the Testator clearly intended that he should enjoy the benefits, because the Testator authorized the trustee to execute leases and pay the revenues to Johnson, and because the Testator provided that at the termination of the lease Johnson would acquire all the personal property, which includes royalties.
We will first consider whether the open mine doctrine applies to the ten leases executed by the Testator. As a general rule, a life tenant who dissipates the corpus of the estate is liable to the remaindermen for waste. Royalties and bonuses are part *833 of the corpus, and a life tenant is only entitled to interest from these. The open mine doctrine is an exception to the general rule. "When the settlor of a trust or a testator had opened the mine, and he gave no directions as to the impounding or expenditure of the proceeds from the mine, the law presumed an intent that the life tenant could expend or dispose of them as the settlor or testator could." Clyde v. Hamilton, 414 S.W.2d 434, 439 (Tex.1967). The open mine doctrine does not apply, however, when the testator expresses a contrary intent. Mitchell v. Mitchell, 157 Tex. 346, 303 S.W.2d 352, 355 (1957).
Because the Testator did not express a contrary intent, the open mine doctrine clearly applies to the ten leases which he executed. What is not so clear is whether the open mine doctrine applies to the two leases executed by the trustee. This question has not been decided in Texas.[3] However, other jurisdictions apply the open mine doctrine to leases executed by the trustee when the settlor has given the trustee explicit power to execute leases. See Annot. 18 A.L.R. 2d 98, 166. We believe the open mine doctrine should apply in such instances and we so hold. We overrule the McGills' eighth and ninth points.
APPORTIONMENT OF ROYALTIES
The McGills also assert that when the trust ended, Johnson was not entitled to all royalties received during the term of the trust. They claim that the open mine doctrine does not apply to the royalties accrued during the trust, and that since the Testator did not provide for the distribution of the proceeds, the Texas Trust Code applies. Johnson claims that under the terms of the will, when the trust terminated, he inherited a fee simple estate in all the personal property, which would include the royalties as cash on hand held by the trust.
Section 113.107 of the Texas Trust Code (1974) provides for apportionment of bonuses and royalties between corpus and income when the trust fails to do so. Under § 113.107(d), 27½% of the proceeds are applied to principal, and 72½% are applied to income. The Trust Code provisions do not apply here, however.
We are not concerned with apportionment of income and principal during the trust, but rather with Johnson's right to personal property after the trust expired. Under the terms of the will, when the trust ended Johnson was entitled to a fee simple estate in the personal property comprising the trust. Royalties are considered personalty when they accrue and the oil and gas has been severed from the land. Lone Star Gas Co. v. Murchison, 353 S.W.2d 870, 879 (Tex.Civ.App.1962, writ ref'd n.r.e.). In any event, once the accrued royalties had been received by the trust and deposited in the trust accounts, there can be little argument that these cash deposits were personal property held by the trust which were left outright to Johnson when the trust terminated.
We overrule the McGills' tenth point of error. Since we have followed the trial court in applying the open mine doctrine, we need not address on the McGills' eleventh and twelfth points complaining of the trial court's failure to grant their partial summary judgment and failure to order their requested discovery concerning segregated remaindermen funds.
CONCLUSION
We overrule each of the McGills' points and affirm the judgment of the trial court.
NOTES
[1] The rules for appellate review of a trial court's grant of summary judgment are well known. We first determine whether a disputed material fact issue exists. We accept as true the non-movant's version of the facts shown by the record and the admissible summary judgment proof. Every reasonable inference is indulged in favor of the non-movant and any doubt resolved in his favor. The movant has the burden of showing that there is no genuine issue of material fact on any essential element of the non-movant's case and that he is entitled to judgment as a matter of law. Nixon v. Mr. Property Management Co., 690 S.W.2d 546 (Tex. 1985); Bayouth v. Lion Oil Co., 671 S.W.2d 867 (Tex.1984). See generally, Hittner, Summary Judgments in Texas, 22 Houston L.Rev. 1109 (1985).
[2] Johnson also left three codicils to his will, but only the first codicil is of interest to this appeal.
[3] The only Texas case tangentially relevant is Avis v. First Nat. Bank of Wichita Falls, 141 Tex. 489, 174 S.W.2d 255 (1943). In Avis the "sole question ... [was] whether under the terms of the will, [the trustee] has the power to execute mineral leases...." 174 S.W.2d at 258. The will in Avis gave the trustee explicit power to sell, but not to lease the land. The Court held the trustee was also authorized to execute leases. The Court stated in dicta that "[a]n oil and gas lease executed by the trustee under the terms of this will would not be one executed in the interest of the life tenant." 174 S.W.2d at 258. The McGills argue that Avis stands for the proposition that the Open Mine Doctrine does not apply to leases executed by the trustee. We disagree. Avis did not decide the effects of a trustee's lease, but whether a trustee had the power to lease. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455417/ | 775 S.W.2d 395 (1989)
Lester Goodson PONTIAC, Appellant,
v.
Rhea ELLIOTT, Appellee.
No. 01-88-00689-CV.
Court of Appeals of Texas, Houston (1st Dist.).
June 15, 1989.
Rehearing Denied August 3, 1989.
*397 Candace Sturdivant and David A. Gibson, P.C., Houston, for appellant.
L.T. Bradt, Houston, for appellee.
Before WARREN, DUNN and HUGHES, JJ.
OPINION
WARREN, Justice.
This is an appeal from an award in a deceptive trade practices act case. Trial was to the court, which awarded appellee $17,320 in actual damages, $5,000 in mental anguish damages, $2,000 in damages under the DTPA provision for automatic doubling of the first $1,000 in actual damages, plus attorney's fees of $7,000, costs, and interest.
Appellee sued appellant for damages under the Texas Deceptive Trade Practices Act, Tex.Bus. & Com.Code Ann. sec. 17.41 et seq. (Vernon 1987) (DTPA), and common law fraud, based on its sale of a GMC Suburban vehicle to appellee.
Appellee alleged that appellant: engaged in false, misleading, or deceptive acts or practices; engaged in unconscionable actions or course of action; committed fraud; breached the implied warranty of merchantability; breached the implied and express warranties of fitness for use; and breached the express warranty that the vehicle purchased was new.
In three points of error, appellant: (1) challenges the sufficiency of the evidence to support the award of $17,320 in actual damages; (2) contends that the trial court erred in awarding damages for mental anguish; and, (3) contends that the trial court erred in entering judgment under the DTPA because there was no finding that appellant's action was the producing cause of damages to appellee. Appellee brings two cross-points contending that: (1) the trial court erred in allowing appellant's expert witness to testify at trial; and (2) the trial court erred in not awarding the amount of attorney's fees requested by appellee's counsel at trial. Because appellant challenges the sufficiency of the evidence, a detailed review of the facts is required.
On May 10, 1985, appellee purchased a 1985 GMC Suburban from appellant for a total price of $17,320. At the time of purchase, appellee and her husband test drove the vehicle and noted that there were about 50 miles registered on the vehicle's odometer. The odometer statement, prepared by appellant and signed by appellee, indicated there were 10 miles on the odometer. Both parties knew that the odometer statement was not accurate. Appellee received a copy of a non-negotiable title to the vehicle, which described it as a new vehicle.
Previously, on April 18, 1985, appellant sold a 1985 GMC Suburban to Cathy Lamb. Mrs. Lamb drove the vehicle to her home that evening and returned it to the dealership the next day complaining of noises in the engine. Appellant allowed her to return the vehicle and sold her a different one. A repair order, contained in appellee's exhibits, shows that appellant performed adjustments on the engine. The vehicle identification number on the repair order shows that this was the same vehicle later sold to appellee. Appellant did not disclose to appellees that the vehicle had been sold to Lamb, nor did it tell them of the engine repairs.
*398 Appellee testified that she would not have purchased the vehicle had she known of either the prior delivery and attempted sale, or the engine repairs. Appellee testified that the vehicle was worth nothing to her in the condition it was in at the time of the sale because it was defective, unsafe, and because of the prior ownership and damage. She testified that the vehicle was worth approximately $6,000 in the condition in which it existed at the time of trial. Appellee is still driving the vehicle, and has driven it over 61,500 miles since the sale. Appellee's husband, an attorney, was qualified by the court as an expert on mechanical work. He testified that, as an owner, the vehicle was worth nothing to him when purchased. He further testified that he had taken the vehicle to a dealership that sold Suburbans, told them about its problems, and the dealership told him the vehicle was worth $7,000 at the time of trial.
Dottie Allred, appellee's expert witness concerning the value of the vehicle, testified that she has been in the car business for a number of years. In her opinion, the market value of the vehicle at delivery would have been either, $2,500 or 25% less than its original sticker price, because the prior delivery made it a used vehicle. She testified that this vehicle would have been worth no more than $15,777 when purchased by appellee.
John Gilbert, appellant's expert and agent, testified that the market value of the vehicle at the time of purchase was the same as its purchase price. He further stated that a vehicle does not decline in value by a fixed amount when it is classified as used. He could not state how much this vehicle declined in value after the attempted sale to Lamb.
In its Findings of Fact and Conclusions of Law, the trial court found that: (1) the total consideration paid by appellee was $17,320; (2) appellant did not disclose the delivery of the vehicle to Lamb nor did it disclose the prior repairs to the engine; (3) appellee would not have purchased the vehicle had the prior delivery or engine repairs been disclosed; (4) appellant concealed and misrepresented facts in order to induce appellee into the sale; (5) appellant committed fraud in selling the vehicle to appellee as new; and (6) the vehicle had no value at the time it was delivered to appellee. The trial court also found that appellant did not present any evidence of the vehicle's value at the time of the sale.
In its first point of error, appellant complains that there is no evidence, or insufficient evidence, to support the trial court's finding that the vehicle had no value at the time of purchase. It specifically argues that the appellee's testimony as to value was non-probative as a matter of law, and that the only evidence of a difference in the market value of the vehicle "as represented" and "as sold" was Allred's testimony that the difference was approximately $1,543.
Appellant's argument raises both no evidence and factual insufficiency points of error. When both "no evidence" and "insufficient evidence" points are raised, the court should rule upon the "no evidence" point first. Mercer v. Bludworth, 715 S.W.2d 693, 697 (Tex.App.-Houston [1st Dist.] 1986, writ ref'd n.r.e.). If there is probative evidence, more than a scintilla, in support of the finding, the point will be overruled and the judgment will be affirmed, unless a factual insufficiency point has also been raised and the court sustains it on the basis of a full review of the evidence. Mercer v. Bludworth, 715 S.W.2d at 697.
In deciding a "no evidence" point, we will consider only the evidence and inferences that, viewed in their most favorable light, tend to support the finding, and we must disregard all evidence and inferences to the contrary. Glover v. Texas Gen. Indem. Co., 619 S.W.2d 400, 401 (Tex. 1981). In deciding a "factual insufficiency" point, we are required to review all the evidence, including any evidence contrary to the finding of the court, and decide whether the judgment is so against the great weight and preponderance of the evidence as to be unjust. Mercer v. Bludworth, 715 S.W.2d at 697.
*399 Findings of fact are not conclusive on appeal when, as in this case, a statement of facts appears in the record. Rather, the findings of fact are binding on the appellate court only if supported by evidence of probative force. Stephenson v. Perlitz, 537 S.W.2d 287, 289 (Tex.Civ.App.-Beaumont 1976, writ ref'd n.r.e.). Further, because a statement of facts is before us, we will review the legal conclusions drawn from the facts found, to determine their correctness. Mercer v. Bludworth, 715 S.W.2d at 697.
The court found that appellant had committed fraud and violated the DTPA, which finding is supported by the record. Thus, appellee is entitled to actual damages. In W.O. Bankston Nissan, Inc. v. Walters, 754 S.W.2d 127, 128 (Tex.1988), a DTPA case arising out of the purchase of a pickup truck, the Texas Supreme Court held:
This court has defined actual damages as those recoverable at common law. Under common law, there are two measures of damages for misrepresentation: (1) the "out of pocket" measure, which is the "difference between the value of that which was parted with and the value of that which was received"; and (2) the "benefit of the bargain" measure, which is the difference between the value as represented and the value actually received. The DTPA permits a plaintiff to recover either the "out of pocket" or the "benefit of the bargain" damages, whichever is greater.
754 S.W.2d at 128 (citations omitted).
Appellee's burden of proof was to show either the difference between the fair market value of the vehicle as delivered and as represented, or the difference in value between that with which she parted and that which she received. W.O. Bankston Nissan, Inc. v. Walters, 754 S.W.2d at 128 (suit under DTPA); Woodyard v. Hunt, 695 S.W.2d 730, 732 (Tex.App.- Houston [1st Dist.] 1985, no writ) (suit for fraud). The evidence offered to support the judgment, which awarded the full purchase price of the vehicle as her actual damages, includes appellee's testimony that her assessment of the value of the car at delivery "is zero in light of the fact that [there was] prior ownership and prior damage to the vehicle. And the repairs, had I known that, no, I would not have bought the vehicle. It would not be worth a cent to me." In addition, appellee's husband testified that, "[a]s owner of the vehicle I would believe it has no value."
Appellant contends that the testimony of appellee and her husband was not probative, as a matter of law, because it concerned the intrinsic value of the vehicle to them, rather than its market value. The Texas Supreme Court, in Porras v. Craig, 675 S.W.2d 503, 505 (Tex.1984), held that for a property owner to testify about the value of his or her property, the "testimony must show that it refers to market, rather than intrinsic or other value of property." We have previously held in Superior Trucks, Inc. v. Allen, 664 S.W.2d 136, 146-47 (Tex.App.-Houston [1st Dist.] 1983, writ ref'd n.r.e.) (quoting Bavarian Autohaus, Inc. v. Holland, 570 S.W.2d 110, 115 (Tex.Civ.App.-Houston [1st Dist] 1978, no writ)), that:
When the owner of goods seeks to testify to their value, as distinguished from their value to him, the Texas rule is that he must show that he is qualified to do so; he is prima facie qualified to state it if he declares he knows the market value. (Citations omitted.)
There is nothing in the record to indicate that appellee or her husband were familiar with the actual market value of the vehicle in its defective condition or that their valuation referred to anything other than the intrinsic value of the automobile to them. Neither was there any showing that the vehicle was of such a unique nature as to constitute a basis for a recovery of damages according to its intrinsic value. Thus, appellee failed to show that the difference between the fair market value of the vehicle as delivered and as represented, was zero. The evidence in this case is similar to that presented in Vista Chevrolet, Inc. v. Lewis, 704 S.W.2d 363, 371 (Tex.App.-Corpus Christi 1985), aff'd in part, rev'd in part, 709 S.W.2d 176 (Tex.1986). In Vista, *400 the appellee testified that the value of the vehicle in question was "nothing." The appellant argued that "it is inconceivable... how the vehicle could be totally worthless ("0") when the undisputed evidence showed that the vehicle had been driven some forty thousand (40,000) miles at the time of trial ... If the vehicle was being used it had some value even if it was for simple salvage." Vista Chevrolet, Inc., 704 S.W.2d at 371. After reviewing the record, the Corpus Christi Court of Appeals held that there was no evidence regarding the actual market value of the automobile as received in its defective condition to support the submission of, and the jury's finding in response to, the DTPA damages issue.
In our case, though there is no evidence to support a finding that the vehicle was worthless, there is some competent evidence to show there was a difference in the market values of the truck as represented, and as delivered. Appellee's expert, Allred, testified that the vehicle's delivery to the Lambs rendered it a used vehicle. She further testified that this vehicle depreciated by at least 25% off the original window sticker price of $18,277, and had been worth no more than $15,777 when delivered to appellee. Since the measure of damages in this case is the difference in market value of the vehicle as represented and as delivered, and the only evidence produced by appellee was her expert's testimony that the difference was about $1,543, we find that the evidence at trial would support a finding only that appellee suffered actual damages of $1,543. We therefore overrule appellant's "no evidence" point, but sustain its "insufficiency" point, and hold that the evidence is factually insufficient to support the court's finding of $17,320 in actual damages.
In its second point of error, appellant contends that the court erred in awarding $5,000 in mental anguish damages because there was no evidence, or insufficient evidence, that any mental anguish resulted from the alleged acts and/or omissions of appellant made the basis of this suit.
In December of 1985, appellee, her family, and a niece were vacationing in Colorado. While they were driving up a mountain pass, a wheel on the truck came off, and the vehicle came to rest just short of a steep cliff overlooking a stream below. Appellee testified about the mental anguish that the incident caused. Appellee specifically pled the facts of the incident and asked for mental anguish damages, and the court's finding confined appellee's mental anguish award to the wheel loss.
In Luna v. North Star Dodge Sales, Inc., 667 S.W.2d 115 (Tex.1984), the Texas Supreme Court held that a plaintiff in a DTPA case is entitled to recover damages for mental anguish if the jury finds that the complained of acts were committed "knowingly," and that such acts proximately caused plaintiff's mental anguish. In our case, the court found that appellant acted "knowingly in all of its conduct involved in the sale of the vehicle to appellee," but made no finding as to whether appellant knew of the wheel's propensity to come off the vehicle. There is evidence to support a finding that appellee suffered mental anguish as a result of the sale, but there is no evidence to support a finding that appellant knew of the wheel's propensity to come off the vehicle, and concealed this fact from appellee, as specifically pled by appellee. Appellee's pleadings and the court's findings confine the mental anguish damages to the Colorado incident. This amounts to a finding of mental anguish proximately caused by a product defect rather than from the appellant's selling appellee a used car rather than a new one. However, other testimony, some of which was admitted without objection, evidenced mental anguish, and it could be urged that the issue of mental anguish arising from events other than the wheel loss was tried by consent. But, appellant could argue just as logically that the other evidence of mental anguish was not tried by consent because of appellee's limitation of mental anguish in her pleading to the Colorado incident. We hold that the finding of mental anguish caused by the wheel's loss, and appellant's concealing the fact that the wheel had a propensity to come off, was *401 legally insufficient because there was no evidence that appellant knew of such a propensity; or that it concealed such a fact. We sustain appellant's "no evidence" point of error, but in the interest of justice, remand the mental anguish issue along with the other damage issues, for determination of whether appellant is entitled to damages for mental anguish and if so, the amount of damages to which appellee is entitled. Tex.R.App.P. 81(b)(1); U.S. Fire Ins. Co. v. Carter, 473 S.W.2d 2 (Tex.1971).
In its third point of error, appellant contends that the trial court erred in entering judgment under the DTPA because there was no finding that the occurrence in question was a producing cause of damages to appellee.
Sec. 17.50(a) of the DTPA provides that a consumer may recover in an action under the DTPA when the acts and/or omissions of the defendant, which were violative of the Act, constitute a producing cause of actual damages. The trial court found that appellant had misrepresented the vehicle as new and that in fact, it was used. As discussed under appellant's first point of error, appellee suffered damages in the amount of the difference in the value of the vehicle as represented, and the value of the vehicle in the condition in which it was actually sold.
Appellant's third point of error is overruled.
In appellee's first cross-point, she complains that the trial court erred in allowing John Gilbert, appellant's expert witness, to testify about the value of the vehicle and asks that we strike any testimony not given in his capacity as corporate representative of appellant. Because we did not consider Gilbert's testimony in deciding the point of error challenging the sufficiency of the evidence to support the actual damages awarded by the trial court, we need not address appellee's request that said testimony be stricken.
Appellee's first cross-point is overruled.
In appellee's second cross-point, she contends that the court erred in not awarding her $10,000 in attorney's fees, which is the amount that her trial counsel testified was reasonable. We disagree. The amount of attorney's fees awarded is within the sound discretion of the trial court and should not be disturbed on appeal unless there is an abuse of discretion. Brazos County Water Control & Improvement Dist. No. 1 v. Salvaggio, 698 S.W.2d 173, 177 (Tex.App.-Houston [1st Dist.] 1985, writ ref'd n.r.e.). We do not find an abuse of discretion in this case.
The trial court has great latitude in fixing attorney's fees. The court must consider several elements, including the amount involved, the actual services performed, the time required for trial, the situation of the parties, and the results obtained. Id. at 178. In support of the request for $10,000 in fees, appellee's counsel testified as an expert witness. He testified regarding his qualifications. Further he testified that his associate prepared a demand letter and that he himself researched and drafted the amended petition; attended, then reviewed, one deposition; contacted his three experts about two weeks before trial; contacted the Lambs through a private investigator two days before trial; responded to interrogatories and requests for production; reviewed various documents; and attended trial. On cross-examination he admitted that he did not keep time records of his work on this case. He testified that he had been paid $500 by appellee's husband and that his agreement with appellee provides that he will receive all attorney's fees awarded and up to one-third of the punitive damages awarded. We do not find that the trial court's award was an abuse of discretion.
Appellant's second cross-point is overruled.
Because we are unable to remand the cause for a retrial on damages only, we reverse and remand for a retrial on all issues. Tex.R.App.P. 81(b)(1); Thomas v. Morrison, 537 S.W.2d 274 (Tex.Civ.App.- El Paso 1976, writ ref'd n.r.e.); Cantile v. Vanity Fair Properties, 505 S.W.2d 654 (Tex.Civ.App.-San Antonio 1973, writ ref'd n.r.e.).
*402 DUNN, Justice, dissenting.
I concur with the majority as to all points of error, with one exception. As to point of error one, I respectfully dissent.
The appellant complains, in its first point of error, that there is no evidence, or insufficient evidence, to support the court's finding that the vehicle had no value at the time of purchase. The majority excerpts testimony of the appellee and her husband, pertaining to the intrinsic value (value to her) of the vehicle in question, ignoring her previous testimony that supports the Court's finding that the value of the vehicle at the time of purchase was "0."
The following is the testimony excerpted by the majority in their attempt to support their conclusion that "... there is no evidence to support a finding that the vehicle was worthless, ..." but placed in context. On cross-examination the appellee was asked the date she met with the General Motors representative:
Q. I just want to know if you can tell us when you learned of itwhen you learned of the repair work that you say you would not have bought the vehicle had you known about it....
* * * * * *
A. You ask me would I have bought thator the value of the vehicle was. And my assessment is zero in light of the fact that prior ownership and prior damage to the vehicle. And the repairs, had I known that, no, I would not have bought the vehicle. It would not have been worth a cent to me.
(The portion quoted by the majority is underlined.)
Further, the appellee's husband's testimony, quoted by the majority, was in answer to a question about the value of the vehicle in its present state. Her husband answered as follows:
Q. Okay. As the owner of the vehicle, more especially as an attorney, do you have an opinion as to what the value of that vehicle is in its present state having to disclose all of the known defects?
A. Mr. Bradt, as the owner of that vehicle, I would believe it has no value.
(Emphasis added.)
The majority ignores testimony of the appellee in support of the court's finding pertaining to the value of the vehicle, considering its mechanical condition, at the time it was sold, which is as follows:
Q. As the owner of the vehicle, do you have an opinion as to what that vehicle was worth at the time that it was sold to you in the condition that it was sold to you?
A. It wouldn't have been worth anything.
Q. Okay. Why not?
A. Because it was a defective vehicle. An unsafe vehicle.
On cross examination, Rhea Elliott testified:
Q. Okay. As I understood your testimony earlier, the car was worthless in your opinion because of the condition at the time that you were sold it. Is that right?
A. That is correct.
Q. Zero was the value?
A. That's correct.
In addition to the above testimony, the appellee testified that she paid $17,320.00 for the automobile. I would find that there is sufficient probative evidence to support the court's finding and the test for the measure of damages, i.e. "(1) The out of pocket measure, which is the difference between the value of that which was parted with (i.e. $17,320.00) and the value of that which was received (i.e. "0")".
Under Tex.R.Evid. 701, a lay witness is qualified to render an opinion so long as it is "rationally based" on her perception, and is "helpful" to a clear understanding of a fact in issue.
An owner of property can prove market value by her opinion testimony, even though she may not be qualified to testify about the value of like property belonging to another. Porras, 675 S.W.2d at 504. She is prima facie qualified to state her opinion if she declares she knows the market value. Bavarian Autohaus, Inc. v. *403 Holland, 570 S.W.2d 110, 115 (Tex.Civ.App. Houston [1st Dist.] 1978, no writ). However, if, as in this case, the owner is not asked specifically if she knows the market value, we look to her testimony to determine if the opinion expressed by the owner as to value refers to market value, as distinguished from its intrinsic value or its personal value to her. Powell-Buick-Pontiac GMC, Inc. v. Bowers, 718 S.W.2d 12, 15 (Tex.App.-Tyler 1986, writ ref'd n.r.e.). If the owner's articulated basis for her opinion does not affirmatively demonstrate that the value is personal to her, she has prima facie established her qualification to testify about market value. Porras, 675 S.W.2d at 505; see also Bowers, 718 S.W.2d at 15.
The only testimony tending to establish the market value of the vehicle sold to the appellee, based on its actual condition at the time it was delivered, came from the appellee. Although she testified to the value of the vehicle to her, this testimony is unnecessary to the determination of the issue and can be ignored by the court. There is no testimony in this record that questions, or diminishes, her testimony of market value of the vehicle in its condition at the time of delivery. Neither Dottie Allred, nor John Gilbert testified concerning the value of this vehicle in its defective condition, at the time of its delivery. The majority indicates that they testified as to "this vehicle." Their testimony referred to the value of any vehicle of this type, the only criteria being that it was a used vehicle without giving any consideration to the mechanical condition of the car involved herein.
Appellee's attorney, in posing the question to the appellee, used the term "worth" in attempting to establish the market value of the vehicle at the time of purchase. There was no personal application of the term "worth" to the appellee herself. The appellee's answer established the basis of her opinion, i.e., the defective and unsafe condition of the vehicle. There were no "personal" reasons given, as in Porras and Vista, quoted by the majority, and she did not engage in speculation, or equivocation, about the vehicle's value as in Walters. I would find that her testimony sufficiently refers to market value and not personal value. Therefore, she made a prima facie demonstration of her qualification to state her opinion. It was left for the appellant to impeach her testimony through cross-examination, or to rebut it through the testimony of witnesses. Hillin v. Hagler, 286 S.W.2d 661, 662 (Tex.Civ.App.-Fort Worth 1956, no writ).
Further, there was no objection by the appellant to the appellee's testimony as there was in Vista and Porras. She was not taken on voir dire examination by the appellant as to her competency. In the absence of such a request, the competence of the witness is established. Cortez v. Mascarro, 412 S.W.2d 342 (Tex.Civ.App.- San Antonio 1967, no writ). The strength or weakness of the qualifications of the witness is merely a factor to be considered by the court in weighing the testimony. Johnson v. Egert, 233 S.W.2d 958 (Tex.Civ. App.-Galveston 1950, writ ref'd n.r.e.).
Considering the foregoing, I would overrule the appellant's no evidence and insufficiency points of error, and hold that the evidence is factually sufficient to support the court's finding of $17,320.00 in actual damages. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455557/ | 393 F. Supp. 2d 756 (2005)
Joetta DRAKE, as legal guardian for Adrian V. COTTON, an incapacitated person, and the Minnesota Department of Human Services, Plaintiffs,
v.
Francis D. KOSS, individually and in his official capacity; Dennis Johnson, individually and in his official capacity; Bonnie E. Case, individually and in her official capacity; Jane Lilienthal, individually and in her official capacity; Edward Springman, individually and in his official capacity; Katherine Jones, individually and in her official capacity; Leon Koentopf, individually and in his official capacity; Carol Kirchoff, individually and in her official capacity; and McLeod County. Defendants.
No. Civ.03-2964 JNE/JSM.
United States District Court, D. Minnesota.
January 3, 2005.
*757 *758 *759 William J. Maddix, and Chris A. Messerly, Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, MN, for Plaintiffs Joetta Drake and the Minnesota Department of Human Services.
Jon K. Iverson, and Jason J. Kuboushek, Iverson Reuvers, LLC, Bloomington, MN, for Defendants Dennis Johnson, Bonnie E. Case, Jane Lilienthal, Edward Springman, Katherine Jones, Leon Koentopf, Carol Kirchoff, and McLeod County.
ORDER
ERICKSEN, District Judge.
This is an action by Joetta Drake, as legal guardian for Adrian V. Cotton, an incapacitated person, and the Minnesota Department of Human Services (collectively, Plaintiffs) against several individuals[1] in their individual and official capacities and against McLeod County (County) after Cotton attempted to commit suicide while he was an inmate in McLeod County jail. Plaintiffs assert claims under 42 U.S.C. § 1983 (2000) for violations of the Eighth and Fourteenth Amendments and under Minnesota law for negligence. The matter is before the Court on the Individual Defendants and County's Joint Motion for Summary Judgment. For the reasons set forth below, the Court grants the motion.
*760 I. BACKGROUND
On November 13, 2000, Cotton was arrested in Hutchinson, Minnesota on suspicion of assault, and he was booked into the McLeod County jail. Two days later, he was taken to the hospital after Koentopf, a correctional officer, noticed that Cotton had written "I love Adrian" on his cell and Jones, another correctional officer, talked to Cotton and learned that he had stabbed himself with a pencil and drank some cleaning solution. Jones documented Cotton's actions in a "Suicide Attempt Report." Later, Cotton was transferred to Willmar Regional Treatment Center for evaluation by Dr. Koss. Dr. Koss released Cotton on November 16, 2000, after he concluded that Cotton was not suicidal and was "psychiatrically stable for discharge to jail."
On December 3, 2000, Cotton again stabbed himself with a pencil and drank cleaning solution. He was taken to the Willmar Regional Treatment Center, and Dr. Koss examined him. Cotton was not placed on a suicide watch because he denied being suicidal. The next day after examining Cotton, Dr. Koss released him to the jail and recommended that Cotton be kept away from "cleaning solutions and sharps," and he prescribed an anti-anxiety medication[2] to be taken twice a day. Case, the County Jail Administrator, received a call in the evening of December 4, 2000, informing her that Cotton was being released. She was unable to speak with Dr. Koss, and she sent Lilienthal, a correctional officer, to pick up Cotton at the hospital. When she arrived at the hospital, Lilienthal learned that Cotton's prescription had not been filled. Because the nearest pharmacy was closed and because the road conditions were bad, Lilienthal decided not to get the prescription filled that night. The prescription was also not filled the next day.
While waiting for Cotton's return, Case decided that Cotton should be placed overnight in a "lockdown" cell that had bed sheets and that the jail officials would revisit his cell placement the next morning. Officers Kirchoff and Koentopf worked the night shift on December 4, 2000, and they performed 30- minute well-being checks on Cotton throughout the night. They did not notice anything unusual with him during that time. Officers Jones and Springman worked the morning shift on December 5, 2000. When Springman attempted to pass Cotton breakfast, Cotton spilled its contents on the floor. Later, Lilienthal informed Cotton that he would be "written up" for the breakfast incident; in response, Cotton yelled at her. The officers conducted well-being checks throughout the morning, although there is a dispute as to how often the checks were performed. Plaintiffs asset there was a 72-minute gap of time between Cotton's last check before his attempted suicide and when Cotton was found. The Individual Defendants and County maintain that there was a 30-minute interval between the last time Cotton was checked and when he was found.
On December 5, 2000 at approximately 10:00 a.m., Springman found Cotton hanging from a bed sheet attached to a vent in his cell. Although he was revived, Cotton now suffers from severe, permanent injuries, *761 and he requires 24-hour care. On April 28, 2003, Plaintiffs commenced this action, alleging § 1983 and state-law negligence claims. The Individual Defendants and County filed a joint Answer, and Dr. Koss filed a separate Answer. In his Answer, Dr. Koss asserted a cross-claim for contribution and indemnity against the Individual Defendants and the County. Later, pursuant to a Stipulation of Dismissal With Prejudice and by Order dated January 31, 2003, the Court dismissed Plaintiffs' claims against Dr. Koss with prejudice.[3]
II. DISCUSSION
Summary judgment is proper "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." Fed.R.Civ.P. 56(c). In determining whether summary judgment is appropriate, a court must look at the record and any inferences to be drawn from it in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The moving party "bears the initial responsibility of informing the district court of the basis for its motion," and must identify "those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). If the moving party satisfies its burden, Rule 56(e) requires the nonmoving party to respond by submitting evidentiary materials that designate "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986).
A. Section 1983
Plaintiffs' § 1983 claim alleges violations of the Eighth and Fourteenth Amendments and is based on the Individual Defendants and County's alleged failure to ascertain that Cotton posed a suicide risk and on their alleged failure to take reasonable and necessary measures to protect Cotton. Section 1983 provides:
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured....
The Eighth Amendment, applicable to the states under the Fourteenth Amendment, prohibits the cruel and unusual punishment of prisoners, thereby entitling them to medical attention for serious health needs.[4]See U.S. Const. amend. VII; Estelle *762 v. Gamble, 429 U.S. 97, 104, 97 S. Ct. 285, 50 L. Ed. 2d 251 (1976). The Court will consider Plaintiffs' claims with respect to the Individual Defendants and the County separately.
1. Individual Defendants[5]
With respect to the § 1983 claim against the Individual Defendants in their individual capacities, they assert the defense of qualified immunity. See Johnson, 172 F.3d at 535 (explaining that the defense of qualified immunity is only available to government employees sued in their individual capacity). Qualified immunity is a question of law to be decided by the district court. Littrell v. Franklin, 388 F.3d 578, 585 (8th Cir.2004). "In the prison-suicide setting, qualified immunity protects jailers acting in their official capacity from bearing the expenses of judgment and the burdens of trial where an inmate or his survivors has failed to show, or cannot show as a matter of law, that his jailers have acted in deliberate indifference to the risk of suicide." Rellergert v. Cape Girardeau County, Mo., 924 F.2d 794, 796 (8th Cir.1991). When faced with an assertion of qualified immunity in a suit against an officer for an alleged violation of a constitutional right, a court must first consider whether the facts, taken in the light most favorable to the party asserting the injury, show the officer's conduct violated a constitutional right. Saucier v. Katz, 533 U.S. 194, 200-01, 121 S. Ct. 2151, 150 L. Ed. 2d 272 (2001). If a constitutional violation can be established, a court then considers whether the right was clearly established. Id. "The relevant, dispositive inquiry in determining whether a right is clearly established is whether it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted." Id. at 202, 121 S. Ct. 2151.
In general, to establish a violation of the Eighth Amendment for a claim under § 1983, a plaintiff must demonstrate deliberate indifference on the part of municipal officials to the prisoner's serious illness or injury. Estelle, 429 U.S. at 104, 97 S. Ct. 285. Section 1983 claims arising out of inmate suicide cases are "analyzed in terms of prison officials' failure to provide appropriate medical care, so deliberate indifference has become the barometer by which these claims are tested." Olson v. Bloomberg, 339 F.3d 730, 735 (8th Cir.2003) (internal quotations omitted). The United States Supreme Court has likened deliberate indifference to a criminal recklessness standard, which traditionally has contained a subjective component. Farmer v. Brennan, 511 U.S. 825, 837-840, 114 S. Ct. 1970, 128 L. Ed. 2d 811 (1994). To establish a constitutional violation in this instance, Plaintiffs must establish deliberate indifference by demonstrating that: (1) the Individual Defendants knew Cotton presented a substantial suicide risk and (2) the Individual Defendants failed to respond reasonably to that risk. Olson, 339 F.3d at 735.
Plaintiffs maintain that genuine issues of material fact exist as to whether the Individual Defendants were deliberately indifferent *763 in failing to recognize and respond to the risk that Cotton was suicidal. They concede that "Defendants knew only what was contained in the Discharge Summaries of November 15 and December 4th, and those summaries warned defendants that Mr. Cotton remained at risk for harming himself and recommended that he be kept under close observation." See Plfs.' Mem. at 28-29 (emphasis added); see also id. at 8, 11. Further, they contend that Dr. Koss's discharge of Cotton on December 4, 2000, does not, by itself, mean that Cotton was not at substantial risk.
At this stage, the Court must view the evidence in the light most favorable to Plaintiffs and resolve any factual disputes in their favor. See Anderson, 477 U.S. at 255, 106 S. Ct. 2505. Thus, the Court will assume that there was a 72-minute gap between the last time Cotton was checked and when he was found. The Court has reviewed Dr. Koss's discharge reports and concludes that the Defendants did not know that Cotton presented a substantial risk of suicide. The discharge reports describe Cotton's depression only as "mild" or "situational." Moreover, they note that Cotton consistently denied being suicidal and instead appeared to be manipulating the situation to get out of jail. Thus, this case is different than those relied on by Plaintiffs in that there is no report by the inmate or the inmate's relative that he or she was suicidal. See e.g., Viero v. Bufano, 925 F. Supp. 1374, 1377 (N.D.Ill.1996) (inmate's mother informed officials that her son was suicidal). With respect to the medication, while it is true that it was unavailable to Cotton during the relevant time frame, there is nothing in the discharge summaries to suggest that the anti-anxiety medication would have helped prevent Cotton's depression and attempted suicide. Indeed, Dr. Koss purposely did not prescribe anti-depressants. After reviewing the facts in the light most favorable to Plaintiffs, the Court finds, based on the information available to the Individual Defendants, that they were not deliberately indifferent to Cotton's needs because they did not act with "apathy or unconcern." See Rellergert, 924 F.2d at 797. Rather, with the information that they had, their actions demonstrate that they acted to protect Cotton by keeping sharps and cleaning solutions away from him and by performing well-being checks at frequent intervals.
Assuming that Cotton did present a substantial suicide risk, the Court further concludes that there is no genuine issue of material fact that the Individual Defendants responded reasonably to Cotton's suicidal tendencies. Plaintiffs rely heavily on the County's suicide prevention policy, which requires "well-being checks" every one-half hour for inmates in holding or segregation cells and every fifteen minutes for inmates "who are violent, suicidal, mentally disordered or who demonstrate unusual or bizarre behavior." Plaintiffs contend that the Individual Defendants did not act reasonably because there was a 76- minute gap between the last time Cotton was checked and when he was found hanging. The Court finds Plaintiffs' argument unpersuasive. The Eighth Circuit has concluded that failure to check an inmate's vital signs for over seven hours after instructions to do so every four-to-six hours did not constitute deliberate indifference. Williams, 201 F.3d at 1063. As discussed above, the Individual Defendants did not know Cotton was suicidal; therefore, they acted reasonably when they did not check Cotton every fifteen minutes.
Because Plaintiffs have failed to establish a constitutional violation because they cannot establish that the Individual Defendants acted with deliberate indifference, the Court does not reach the issue of whether the right was clearly established. *764 See Saucier, 533 U.S. at 200-01, 121 S. Ct. 2151. Accordingly, the Court grants the Individual Defendants' motion for summary judgment with respect to Plaintiffs' § 1983 claims.
2. The County
A § 1983 suit against a governmental entity employer is considered a Monell claim. In Monell v. Department of Social Services, 436 U.S. 658, 98 S. Ct. 2018, 56 L. Ed. 2d 611 (1978), the United States Supreme Court held that municipalities and other local governmental entities could be sued under § 1983 only for the entity's unconstitutional or illegal policies. Monell, 436 U.S. at 694, 98 S. Ct. 2018. For a municipality to be liable, a plaintiff must prove that a municipal policy or custom was the "moving force [behind] the constitutional violation." Id.
In this case, Plaintiffs allege that the County "had a policy and custom of overcrowding and understaffing its jail," which "played a direct and substantial role in Mr. Cotton's hanging." They point out that the Department of Corrections advised the County that it should operate at 70% capacity, meaning that only 25 out of the 35 beds should be in use at one time to ensure that there were enough officers to tend to the inmates' needs and to ensure that there were unoccupied beds available for inmates with special needs. However, in 1999, Plaintiffs note that the County operated its jail at 77% capacity, and in the first six months of 2000, the County operated its jail at 85% capacity. Moreover, on the night before Cotton attempted to commit suicide, 32 of the beds were in use when he arrived from the hospital. Also at that time, Plaintiffs explain that the County had only two sets of "suicide prevention clothing," and those sets were in use when Cotton arrived. Consequently, Cotton was placed in lockdown status in a minimum-security jail cell without the suicide prevention clothing. In response, the County asserts that there is no evidence of a policy or custom that actually caused any of the claims made by Plaintiffs.
The Eighth Circuit does not use the terms "policy" and "custom" interchangeably when conducting a Monell analysis. Mettler v. Whitledge, 165 F.3d 1197, 1204 (8th Cir.1999). Rather, a policy is "an official policy, a deliberate choice of a guiding principle or procedure made by the municipal official who has final authority regarding such matters." Id. Although Plaintiffs use the term "policy" in their opposition memorandum and there is reference made to the County's suicide prevention policy, there is nothing in the record to support a finding that the County had any official policy that arguably played a role in Cotton's attempted suicide. Accordingly, Plaintiffs' argument with respect to this issue is without merit.
To establish a custom, Plaintiffs must establish three factors: (1) the existence of a continuing, widespread, persistent pattern of unconstitutional misconduct by the County's employees; (2) deliberate indifference to or tacit authorization of such conduct by the County's policymaking officials after notice to the officials of that misconduct; and (3) Cotton's injury was caused by acts pursuant to the County's custom, i.e., proof that the custom was the moving force behind the constitutional violation. Id. Viewing the evidence in the light most favorable to Plaintiffs, Plaintiffs have failed to create a genuine issue of material fact regarding the existence of a municipal custom. Without more, they have failed to establish how the County's failure to operate at times at 70% capacity equates to widespread, persistent, unconstitutional misconduct. Moreover, they have failed to create a genuine factual issue with respect to whether the County's *765 operational capacity was the moving force behind Cotton's suicide. Accordingly, the Court grants the County's summary judgment motion with respect to the § 1983 claims.
B. State-Law Negligence Claims
In addition to the § 1983 claims, Plaintiffs also assert claims of negligence under Minnesota state law based on the Individual Defendants and County's alleged failure to prevent Cotton's attempted suicide.[6] The basis for the Court's jurisdiction over these claims is 28 U.S.C. § 1367(a) (2000), which permits a district court to exercise supplemental jurisdiction over claims that are part of the same case or controversy as the claims that fall within the district court's original jurisdiction. In general, to establish a negligence claim under Minnesota law, a party must prove (1) duty; (2) breach; (3) causation; and (4) damages. Woehrle v. City of Mankato, 647 N.W.2d 549, 551 (Minn.App.2002). In Minnesota, a jailer has a duty to prevent inmate suicide. Sandborg, 615 N.W.2d at 64.
The Individual Defendants assert that they are entitled to official immunity under Minnesota law with respect to the negligence claims. Whether official immunity applies is a question of law. Kari v. City of Maplewood, 582 N.W.2d 921, 923 (Minn.1998). Official immunity protects public officials from the fear of personal liability that might deter independent action. Janklow v. Minn. Bd. of Examiners for Nursing Home Adm'rs, 552 N.W.2d 711, 715 (Minn.1996) (quotation omitted). Official immunity applies when the official's conduct involves the exercise of judgment or discretion, but it does not protect ministerial acts or malicious conduct. Kari, 582 N.W.2d at 923. Therefore, "[w]hether official immunity is available depends on whether the alleged acts were (1) discretionary or ministerial, and (2) malicious or willful." Fedke v. City of Chaska, 685 N.W.2d 725, 729 (Minn.App.2004).
A discretionary act requires the exercise of individual judgment in carrying out the official's duties. Id. More specifically, "a discretionary act involves individual professional judgment, reflecting the professional goal and factors of a situation." Huttner v. State, 637 N.W.2d 278, 284 (Minn.App.2001). An official's duty has been described as ministerial when it is "absolute, certain, and imperative, involving merely the execution of a specific duty arising from fixed and designated facts." Johnson v. State, 553 N.W.2d 40, 46 (Minn.1996).
In this case, the Individual Defendants assert that they are entitled to official immunity because their decisions regarding *766 when to fill Cotton's prescription, whether to issue bed sheets to him, and where to place him when he returned from the hospital were discretionary decisions. In response, Plaintiffs contend that the Individual Defendants are "frivolous" for attempting to invoke the defense of official immunity. Because the Individual Defendants admitted that they were required to follow mandatory jail policies in dealing with suicidal inmates, Plaintiffs maintain that the Individual Defendants' actions were ministerial because it is established County policy not to issue bed sheets to suicidal inmates and to check such inmates every fifteen to thirty minutes.
The Court disagrees with Plaintiffs. Plaintiffs' argument assumes Cotton's attempted suicide is conclusive proof that the Individual Defendants should have performed the ministerial act of following the jail's suicide prevention policy because Cotton was indeed suicidal. Such an assumption cannot be made in these circumstances; instead, the circumstances surrounding Cotton's release from the hospital need to be considered in order to determine if the alleged acts were discretionary. Cf. Papenhausen v. Schoen, 268 N.W.2d 565, 572 (Minn.1978) (discussing how facts surrounding a parole board's decision to release an inmate shows that such a decision is discretionary).
Here, viewing the evidence in the light most favorable to Plaintiffs, the evidence reveals that the Individual Defendants' alleged acts were discretionary. When Cotton was released, the Individual Defendants received the discharge form, which stated that Cotton denied any suicidal intent and that he could be attempting to manipulate "the system in order to get out of jail in the future." To ensure Cotton's safety, the discharge form recommended "close monitoring" and "no sharps to patient in jail and to make cleaning solutions unavailable to incarcerated individual." Dr. Koss also prescribed an anti-anxiety medication to be administered twice a day. After receiving these instructions, the Individual Defendants exercised their judgment and discretion in determining how to best care for Cotton in accordance with Dr. Koss's orders and with his conclusion that Cotton could be manipulating the system. For instance, Lilienthal used her judgment in determining that she could wait to fill Cotton's prescription, Springman used his judgment in deciding Cotton's punishment for spilling his breakfast tray, and Case used her judgment in determining to place Cotton in lockdown, away from sharps and cleaning solution. Thus, the Individual Defendants acted with discretion with respect to their placement and treatment of Cotton.
The question of malice is an "objective inquiry into the legal reasonableness of an official's actions." State by Beaulieu v. City of Mounds View, 518 N.W.2d 567, 571 (Minn.1994). In determining whether an official has committed a malicious wrong, a court must consider whether the official has intentionally committed an act that he or she had reason to believe is prohibited. Rico v. State, 472 N.W.2d 100, 107 (Minn.1991).
The Individual Defendants assert that there is nothing in the record to suggest that they acted maliciously. Viewing the evidence in the light most favorable to Plaintiffs, the record does not support a conclusion that the Individual Defendants acted with any malice intent; instead, they promptly took Cotton to the hospital each time they discovered he had harmed himself, they promptly found emergency help after Cotton was found on December 5, 2000, they attempted to comply with Dr. Koss's orders by placing him in a cell without sharps and cleaning solution, and they checked on him frequently. Given *767 this and because the Individual Defendants' alleged acts were discretionary, the Court finds that the Individual Defendants are entitled to official immunity. See Fedke, 685 N.W.2d at 729.
When employees are entitled to official immunity, "vicarious official immunity protects the government entity from suit based on the official immunity of its employees." Wiederholt v. City of Minneapolis, 581 N.W.2d 312, 316 (Minn.1998). Therefore, because the Individual Defendants are entitled to official immunity, the County is entitled to vicarious official immunity. Because the Court determines that the Individual Defendants and the County are entitled to official immunity, it does not reach their remaining arguments. Accordingly, the Court grants the Individual Defendants and the County's joint motion for summary judgment with respect to Plaintiffs' negligence claims.
III. CONCLUSION
Based on the files, records, and proceedings herein, and for the reasons stated above, IT IS ORDERED THAT:
1. Plaintiffs' claims against Dennis Johnson are DISMISSED WITH PREJUDICE.
2. The Individual Defendants and County's Joint Motion for Summary Judgment [Docket No. 27] is GRANTED.
3. Plaintiffs' Complaint [Docket No. 1] is hereby DISMISSED WITH PREJUDICE.
4. The parties shall forward a copy of this Order to Dr. Koss and his counsel, and together they shall contact the Court in writing within ten (10) days from the date of this Order to inform it as to the status of Dr. Koss's cross-claim. Assuming Dr. Koss's cross-claim is moot, after receiving the parties' written submission, the Court will dismiss with prejudice Dr. Koss's Cross-Claim [Docket No. 7] and direct the Clerk of Court to enter judgment in this matter.
NOTES
[1] For convenience, the Court will refer to Bonnie E. Case, Jane Lilienthal, Edward Springman, Katherine Jones, Leon Koentopf, and Carol Kirchoff collectively as the Individual Defendants. Plaintiffs' claims against Dr. Koss have been dismissed with prejudice, and Plaintiffs have agreed to dismiss the claims against Dennis Johnson because he was on vacation during Cotton's attempted suicide.
[2] Dr. Koss specifically did not prescribe an anti-depressant to Cotton. See December 4, 2004 Discharge Form ("Over the course of hospitalization, patient did ask for anti-depressant. I related to patient adjustment disorder with mild, depressed mood that anti-depressant will not help him in regards to the situational depressed mood.") Instead, Dr. Koss prescribed Atarax, which Plaintiffs describe to be "a fast-acting, anti-anxiety medication that could have provided immediate relief to Mr. Cotton." See Supplemental Affidavit of Robert Sevenich, M.D. at ¶ 46.
[3] Dr. Koss's dismissal, together with the granting of the Individual Defendant and County's Joint Motion for Summary Judgment and the corresponding dismissal of Plaintiffs' Complaint, appears to render Dr. Koss's cross-claim moot.
[4] Cotton's status as a pre-trial detainee technically places him outside the protections of the Eighth Amendment proscription against cruel and unusual punishment, which applies only to convicted prisoners. Hott v. Hennepin County, 260 F.3d 901, 905 (8th Cir.2001). However, the Fourteenth Amendment guarantees pre-trial detainees at least as many protections as does the Eighth Amendment, and it extends pre-trial detainees protection from deprivations that are intended to punish. Id. Therefore, the governing standard for jail suicides involving detainess is the same regardless of whether it is analyzed under indirect application of the Eighth Amendment via the Fourteenth Amendment or under direct application of the due process clause of the Fourteenth Amendment. Bell v. Stigers, 937 F.2d 1340, 1343 n. 4 (1991).
[5] Plaintiffs sued the Individual Defendants in both their official and individual capacities to ensure that the Individual Defendants received notice of their potential personal liability. See Nix v. Norman, 879 F.2d 429, 431 (8th Cir.1989). A § 1983 suit against an employee in his or her official capacity is deemed to be a suit against the employer only, which in this case is the County. Johnson v. Outboard Marine Corp., 172 F.3d 531, 535 (8th Cir.1999). The Court will addresses the merits of the Plaintiffs' § 1983 claim against the County in section A(2).
[6] Specifically, Plaintiffs allege that Defendants failed to (1) maintain proper staffing levels at the jail; (2) properly train and supervise correctional officers; (3) prevent overcrowded situations at the jail by accepting inmates in excess of recommended capacity; (4) failure to properly classify, treat, and supervise Cotton as an inmate at risk for suicide and/or self-injurious behavior; (5) remove sheet and other items that Cotton could use to harm himself; (6) place Cotton in a cell that did not have any protrusions or anchoring devices; (7) place a suicide gown on Cotton; (8) follow Dr. Koss' recommendation that Cotton be monitored closely; (9) fill Cotton's prescription for anti-anxiety medication. As an initial matter, the Court notes that Minnesota does not recognize a cause of action for negligent training. McKenzie v. Lunds, Inc., 63 F. Supp. 2d 986, 1007 (D.Minn.1999). However, the essence of Plaintiffs' claims are that the Individual Defendants and the County failed to take appropriate steps to prevent Cotton from attempting suicide. As such, these types of claims are recognized under Minnesota law. Sandborg v. Blue Earth County, 615 N.W.2d 61, 64 (Minn.2000). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455558/ | 798 S.W.2d 315 (1990)
The STATE of Texas
v.
Robert E. MULLER.
No. 01-89-00306-CR.
Court of Appeals of Texas, Houston (1st Dist.).
August 23, 1990.
Rehearing Denied September 20, 1990.
*316 Mike DeGeurin, J. Gary Trichter, Houston, for appellant.
John B. Holmes, Jr., Harris Co. Dist. Atty., Winston E. Cochran, Jr., Asst. Dist. Atty., for appellee.
Before SAM BASS, HUGHES and O'CONNOR, JJ.
ON MOTION FOR REHEARING
SAM BASS, Justice.
On motion for rehearing, we grant the motion, withdraw our previous opinion, and substitute the following in its place. The State appeals from an order striking a paragraph in an information. We reverse the judgment of the trial court declaring the statute and regulations unconstitutional; we order the information reinstated; and we remand the cause to the trial court.
By information, the State charged Robert Muller with operating a motor vehicle in a public place while intoxicated. Muller filed a motion to strike the paragraph of the information that alleged a .10 alcohol concentration and to suppress all intoxilyzer evidence. Muller contested the constitutionality of TEX.REV.CIV.STAT.ANN. art. 6701l-5, § 3(a) and (b) (Vernon Supp.1990) (the statute) and the Texas Department of Public Safety's (DPS) Breath Alcohol Testing Regulations (the regulations).
Muller signed a stipulation of evidence in which he acknowledged: He was arrested on suspicion of driving while intoxicated; he was given the intoxilyzer test; and the police administered the test according to the regulations.
The trial court granted Muller's motion, struck the paragraph, and held that the regulations and the statute were unconstitutional.
Muller claims the State did not give proper notice of appeal because an assistant prosecutor signed the notice, contending that we have no jurisdiction of the State's appeal.
The State's notice of appeal, filed within the proper period, stated:
*317 Now comes the State of Texas, by and through its District Attorney, John B. Holmes, Jr., pursuant to Tex.Code Crim. Proc. art. 44.01(a)(1) and (a)(5) ...
John B. Holmes Jr. by [undecipherable].
The State acknowledges that the signature on the original notice of appeal was that of the first assistant to the district attorney, because Holmes was out of town when the notice was to be filed.
After oral argument, the State filed a motion to file an amended notice of appeal, which we granted. The State filed an amended notice of appeal, signed by John B. Holmes. Muller contends that the amendment did not cure the jurisdictional error. Once the State filed a notice of appeal without the signature of the prosecuting attorney and the time to file a notice of appeal expired, Muller argues it was too late to file an amended notice.
We find nothing in the Code of Criminal Procedure or the Rules of Appellate Procedure that require the prosecuting attorney to put his own signature on the notice of appeal. Article 44.01 of the Texas Code of Criminal Procedure controls appeals by the State. Subsections (d) and (i) provide:
The prosecuting attorney may not make an appeal under subsection (a) or (b) of this article later than the 15th day after the date on which the order, ruling, or sentence to be appealed is entered by the court.
In this article, "prosecuting attorney" means the county attorney, district attorney, or criminal district attorney who has the primary responsibility of prosecuting cases in the court hearing the case and does not include an assistant prosecuting attorney.
TEX.CODE CRIM.P.ANN. art. 44.01(d), (i) (Vernon Supp.1990) (emphasis added). Nothing in article 44.01 requires the prosecuting attorney to sign the State's notice of appeal.
Rule 40(b) of the Texas Rules of Appellate Procedure governs the perfection of an appeal in criminal cases. Rule 40(b) requires a party to file a written notice of appeal. Nothing in rule 40(b) states that the notice of appeal must be signed. Rule 4 of the Texas Rules of Appellate Procedure states that each document filed shall be signed by at least one attorney. A party who is not represented by an attorney must sign his own documents. The combined effect of rules 4 and 40(b), is that an attorney or a party must file the notice of appeal.
The notice of appeal was made in name of the prosecuting attorney, John Holmes. His name was signed for him by an assistant district attorney at the bottom of the notice. The only problem with the notice of appeal is that John Holmes did not personally sign it. Article 44.01, however, does not require that the prosecuting attorney personally sign the notice of appeal.
We recognize that our sister court has held that a defendant's oral notice of appeal made in open court, reduced to writing by the clerk but not signed by defendant or his counsel, was not a notice of appeal in writing. Corbett v. State, 745 S.W.2d 933, 934 (Tex.App.Houston [14th Dist.] 1988, pet. ref'd). The distinction between Corbett and the case before us, is that in Corbett no one signed the notice, while in this case, the State's notice of appeal was signed.
The courts have held it is permissible to use a stamp to produce a facsimile of an original signature. See Paulus v. State, 633 S.W.2d 827, 849 (Tex.Crim.App.1981) (op. on reh'g); Stigers v. State, 702 S.W.2d 301, 302 (Tex.App.Houston [1st Dist.] 1985, no pet.) (indictments containing stamp with facsimile signature of grand jury foreman were valid). If a stamp facsimile of an original signature is acceptable, we believe the facsimile signature by an authorized representative is acceptable.
This Court has held that when a notice of appeal does not strictly follow the requirements of a notice, if the notice puts the interested party on notice that appellant intends to appeal, the interested party is not misled or harmed. Campbell v. State, 747 S.W.2d 65, 67 (Tex.App.Houston [1st Dist.] 1988, no pet.) (substantial compliance with TEX.R.APP.P. 40(b)(1)); cf. Berger v. State, 780 S.W.2d 321, 323 (Tex.App.Austin 1989, no pet.).
*318 The State's appeal is governed by the Texas Rules of Appellate Procedure. TEX.R.APP.P. 1; see State v. Demaret, 764 S.W.2d 857 (Tex.App.Austin 1989, no pet.). Rule 83 of the Texas Rules of Appellate Procedure prohibits us from dismissing an appeal for defects or irregularities, in form or substance, without permitting the party a reasonable time to correct or amend the defects; therefore, when the State filed an amended notice of appeal, it cured any defect in the original notice.
We find it improbable that the legislature intended that the State may only appeal if, but only if, the district attorney personally signs the notice of appeal. There are many occasions when the district attorney may be compelled to be "out of state," or "at other places," and is not physically present to sign the notice of appeal. It is, therefore, logical that some other "prosecuting attorney" would be authorized to sign the name of the district attorney, or that an amendment of that notice of appeal could be filed with the court to "show" the district attorney's intent and consent, as occurred in this cause.
We find that the notice of appeal was proper as amended and we assume jurisdiction.
In point of error three, the State argues that the trial court erred in declaring the statute and regulations unconstitutional.
Muller challenged two subsections in article 67011-5, § (3), that govern the use of intoxilyzer evidence. The challenged sections provide in part:
(a) [In a DWI case], evidence of the alcohol concentration ... as shown by analysis of a specimen of the person's breath ... or any bodily substances taken at the request or order of a peace officer, shall be admissible.
(b) Analysis of a specimen of the person's breath, to be considered valid ... must be performed according to rules of [DPS] and by an individual possessing a valid certificate issued by [DPS] for this purpose. [DPS] is authorized to establish rules approving satisfactory techniques or methods, to ascertain the qualifications and competence of individuals to conduct such analysis, and to issue certificates certifying such fact. These certificates shall be subject to termination or revocation, for cause, at the discretion of [DPS].
(Emphasis added).
In his motion, Muller argued that the statute and regulations were unconstitutional because:
I. [they] violate Article II § 1 of the Texas Constitution in that they breach the Separation of Powers Doctrine;
II. [they] violate due process/due course of law because they fail to give reasonable notice as to their terms, are vague, and allow unbridled discretion by the scientific director;
III. [they] violate due process/due course of law as they fail to ensure either the accuracy or reliability of an Intoxilyzer evidence (the result) on human defendants;
IV. [they] violate due process/due course of law by failing to require multiple breath tests immediately at and/or after the time of driving in that the present Regulations only provide for a single, post driving, Intoxilyzer result, which is insufficient evidence, as a matter of law, to sustain a conviction under article 67011-1(a)(2)(B), TEX.REV.CIV.ST. ANN., because said singular post driving test creates automatic confusion and inherently misleads a fact finder, e.g., R. 403, Tex.R.Cr.Evid.; and,
V. [they] violate due process/due course of law under both the federal and state constitutional as they do not require preservation of the Defendant's breath specimen.
The trial judge declared the statute and regulations unconstitutional.
In reviewing the constitutionality of a statute, we presume the statute is valid, and that the legislature was not unreasonable or arbitrary when it enacted it. Ex parte Granviel, 561 S.W.2d 503, 511 (Tex. Crim.App.). The party who attacks the validity of a statute carries the burden of proving that the act is unconstitutional. *319 Id. If a statute is susceptible to more than one construction, we will interpret it to secure the benefit intended by the legislature, and find it constitutional. Alobaidi v. State, 433 S.W.2d 440, 442 (Tex.Crim.App. 1968). The Court of Criminal Appeals has stated:
Every reasonable intendment and presumption will be made in favor of the constitutionality and validity of a statute, until the contrary is clearly shown. The legislature is presumed to have regarded constitutional limitations or requirements in enacting laws, as assiduously as the courts do in construing and applying them. And before a legislative act will be set aside, it must clearly appear that its validity cannot be supported by any reasonable intendment or allowable presumption.
Granviel, 561 S.W.2d at 511. The burden on appeal is Muller's. He must convince us that the statute and the regulations are unconstitutional.
The first ground on which the trial court declared the statute and regulations unconstitutional is that they violate the separation of powers doctrine under article II, section 1 of the Texas Constitution. Muller contends article 6701l-5, § 3(a) and (b) is a legislative grant of power from the judicial branch to the executive branch (the DPS), to establish, change, or alter the rules of evidence.
Muller assumes that the courts promulgate the rules of evidence as part of the power of the judicial branch. That is not the case. The legislature granted the judiciary the power to adopt formal rules of criminal evidence. Until the legislature passed TEX.REV.CIV.STAT.ANN. art. 1811f, § 9 (Vernon Supp.1990), the judiciary had no authority to promulgate rules of evidence. See Wellborn, Article I of the Texas Rules of Evidence and Articles I and XI of the Texas Rules of Criminal Evidence; Applicability of the Rules, Procedural Matters and Preserving Error, 18 ST.MARY'S L.J. 1165, 1169-70 (1987). The power to adopt or amend rules of evidence belongs to the legislature.
Muller concedes that the Court of Criminal Appeals has upheld the right of the legislature to delegate rule-making authority to DPS. See Langford v. State, 532 S.W.2d 91, 95 (Tex.Crim.App.1976). The legislature has the power to delegate the authority to an administrative agency to issue rules designed to carry out the mandate of the statute. Id. at 94. The only authority that the legislature delegated to the DPS in article 6701l-5, was to prescribe the rules for certification of breath testing equipment and individuals operating the equipment. The legislature did not delegate any authority to DPS, nor has DPS assumed any, to promulgate rules of evidence.
The trial court erred in holding the statute and regulations were unconstitutional under this ground.
The second ground on which the trial court declared the statute and regulations unconstitutional was that they violate due process because they do not give reasonable notice about their terms, they are vague, and they give the scientific director unbridled discretion. Muller argues that the statute is unconstitutionally vague because it does not define "analysis," it does not provide adequate notice of what "techniques or methods" will be used in the analysis, and it permits the use of unbridled discretion by the scientific director.
To satisfy the due process requirement of specificity, a criminal statute must give the citizens adequate notice of the behavior the State prohibits. Reeves v. State, 566 S.W.2d 630, 632 (Tex.Crim.App. [Panel Op.] 1978). The constitution does not impose impossible standards; all it requires is that a criminal statute convey sufficient warning about the proscribed conduct when measured by common understanding and practices. Id.
Muller was charged with the offense stated under TEX.REV.CIV.STAT.ANN. art. 6701l-1(b) (Vernon Supp.1990). This statute prohibits driving while intoxicated. Ex parte Ross, 522 S.W.2d 214, 217 (Tex. Crim.App.1975), cert. denied, 423 U.S. 1018, 96 S. Ct. 454, 46 L. Ed. 2d 390 (1975); see also Schultz v. State, 725 S.W.2d 411, *320 413 (Tex.App.Houston [1st Dist.] 1987), aff'd, 771 S.W.2d 549 (Tex.Crim.App.1989). The Court of Criminal Appeals has held that terms such as "drunk," "intoxicated," or "under the influence of intoxicating liquors," are nontechnical terms which can be understood in their ordinary sense. Galan v. State, 164 Tex. Crim. 521, 301 S.W.2d 141, 143 (1957); Randolph v. State, 145 Tex. Crim. 526, 169 S.W.2d 178, 180 (1943). Muller had sufficient notice of what conduct is prohibited.
Muller is challenging the constitutionality of article 6701l-5, the statute that delegates authority to DPS to issue rules governing the procedures in breath analysis. He argues that the statute and regulations do not provide adequate notice of the certification requirements for breath testing equipment or for the operators of that equipment.
Article 6701l-5, unlike penal statutes, does not define an offense. As such, it was not necessary for the legislature to draft it so that it includes fair notice of proscribed behavior, as penal statutes require. See Langford, 532 S.W.2d at 94. Instead, the statute's purpose is to prescribe appropriate methods to determine intoxication. Id.
Muller asserts that the statute and regulations give unbridled discretion upon the scientific director of the DPS. The only authority the statute delegates to the DPS is to prescribe the appropriate rules for breath analysis, certification of the equipment, and those operating it. Epperson v. State, 578 S.W.2d 398, 399 (Tex. Crim.App. [Panel Op.] 1979); TEX.REV.CIV. STAT.ANN. art. 6701l-5, § 3(b). In Ex parte Granviel, the Court of Criminal Appeals held that it was not an unconstitutional delegation of authority to the director of the Texas Department of Corrections to prescribe the appropriate chemical to be used when giving lethal injections. 561 S.W.2d at 513. The court rejected the argument that the delegation of authority was unconstitutional just because the director could choose an arbitrary means of enforcement. Id. The courts will not presume that the scientific director of the DPS will act in an arbitrary manner without evidence. Id.
The trial court erred in holding the statute and regulations were unconstitutional under this ground.
The third ground, that the trial court relied on to make a ruling on the constitutionality issue, was that the statute and regulations violate due process because they do not insure that the intoxilizer is scientifically appropriate (i.e. accurate and reliable) for breath testing.
The Texas Administrative Code provides: (b) In order to be certified each brand and/or model of breath testing instrument must meet the following criteria.
. . . .
(4) The specificity of the procedure shall be adequate and appropriate for the analyses of breath specimens for the determination of alcohol concentration in traffic law enforcement.
(5) Any other tests deemed necessary by the scientific director to correctly and adequately evaluate the instrument to give correct results in routine breath alcohol testing and be practical and reliable for traffic law enforcement purposes.
Tex.Dep't of Public Safety, 37 TEX.ADMIN. CODE § 19.1(b)(4) & (5) (West 1989) (Breath Testing) (emphasis added). Because the regulations provide that the methods to be used must insure that the test is accurate and appropriate for analyzing human breath, the statute and regulations do not violate due process of law.
The trial court erred in holding the statute and regulations were unconstitutional under this ground.
The fourth ground stated in the trial court's ruling was that the statute and regulations violate due process because they do not require multiple breath tests immediately at or after the time of driving. The court said that one post-driving test result that indicated intoxication, without more, was not sufficient evidence of intoxication as a matter of law. The court also stated that a single post-driving test misleads the fact finder.
*321 In support of this proposition, Muller's motion cited several factors which can affect the reliability of the test: delay; faulty machinery; higher alcohol concentration at the time of the test than while driving; and differing metabolisms resulting in skewed readings.
The proper standard in determining the sufficiency of the evidence is whether, viewing the evidence in the light most favorable to the verdict, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Butler v. State, 769 S.W.2d 234, 239 (Tex.Crim.App.1989); Barron v. State, 773 S.W.2d 44, 46 (Tex.App.Houston [1st Dist.] 1989, pet. ref'd).
The trial court seemed to base its ruling on the sufficiency of the evidence. Yet, neither trial nor appellate courts can rule on the sufficiency of the evidence until all facts have been presented at trial. See Dean v. State, 749 S.W.2d 80, 82 (Tex. Crim.App.1988). During the trial on the merits, Muller will have ample opportunity to challenge the factual basis for admission of intoxilyzer evidence. His challenges will go to the weight and sufficiency of the evidence. Slagle v. State, 570 S.W.2d 916, 919 (Tex.Crim.App. [Panel Op.] 1978). The time to raise these issues is at trial. The trial court erred in holding the statute and regulations were unconstitutional under this ground.
In the fifth ground for declaring the statute and regulations unconstitutional, the trial court held that they violated due process because they do not require the preservation of Muller's breath specimen. The Court of Criminal Appeals has held that failing to preserve breath samples does not violate the state or federal constitutions. Turpin v. State, 606 S.W.2d 907, 917-18 (Tex.Crim.App.1980). The trial court erred in declaring article 6701l-5, § 3(a) and (b) unconstitutional.
In point of error one, the State asserts that the trial court erred in dismissing the second paragraph of the information. The State argues that the trial court erred in dismissing part of the information. The State argues that nothing in the Texas Code of Criminal Procedure permits a judge to dismiss all or part of an information simply because the statute is unconstitutional.
If a statute is unconstitutional, the trial court has the authority to dismiss a paragraph in the information that alleges an offense under that statute. The Texas Code of Criminal Procedure provides:
There is no exception to the substance of an indictment or information except:
. . . .
3. That it contains matter which is a legal defense or bar to the prosecution....
TEX.CODE CRIM.P.ANN. § 27.08 (Vernon 1989). If a court finds that a statute is unconstitutional, such a finding would obviously bar prosecution under that statute.
Here, the paragraph the court struck from the indictment was not based on the statute that the trial court found unconstitutional. The trial court struck the paragraph in reliance on its ruling that article 6701l-5, § 3(a) and (b) was unconstitutional. Muller, however, was charged with an offense under article 6701l-1(b). To state an offense under article 6701l-1(b), it was not necessary that article 6701l-5, § 3(a) and (b) be constitutional. The State may prove intoxication not only by showing that the accused had an alcohol concentration of 0.10 or more, but also, by showing that the accused did not have the normal use of his physical or mental faculties by reason of the introduction of alcohol into the body. TEX.REV.CIV.STAT.ANN. art. 6701l-1(a)(2)(A) & (B).
As we said before, Muller did not challenge, and the trial court did not rule, on the constitutionality of article 6701l-1(b).
In point of error two, the State asserts the trial court erred in granting the motion to suppress the evidence of the intoxilizer test because neither the statute nor the regulations are unconstitutional. The State argues that, even if it had drafted the information without a paragraph defining intoxication in terms of alcohol concentration, the State could still use the intoxilyzer results as evidence. The State maintains *322 that because the other paragraph in the information alleged that defendant was "impaired" by alcohol and/or diazepam, any evidence would be probative of guilt.
Muller contends the trial judge could have sustained the motion to suppress on other grounds than the constitutionality of the statute. Muller urges us to uphold the trial court's ruling suppressing the evidence on any other theory except the unconstitutionality of the statute.
In Muller's motion to suppress, the only ground Muller urged was the constitutionality of the statute and regulations. After the trial court ruled the statute and regulations unconstitutional, Muller asked the court to suppress the evidence. The trial court seemed reluctant, but finally gave in, stating:
I don't want it to get up there [to the court of appeals] and they say I have the right to suppress and not even rule on the constitutional issue, so I am not going to rule on that. Well, maybe I have to for you to be able to appeal. All right. I will suppress the intoxilyzer result. I assume the allegation paragraph can be proven. However, because of the methods in this situation that I happen to know as the result of the intoxilyzer use, I will suppress the results of the intoxilyzer, which is the same thing.
We agree that the trial court suppressed the evidence solely on constitutional grounds. Muller, however, argues that the trial court also based its decision to suppress the evidence on statutory grounds.
After the trial court made its ruling, defense counsel asked the court whether it was granting Muller's motion as to all the bases stated in the motion. The court responded that it was. In Muller's motion, he says in the prayer:
Said dismissal and suppression is also requested under article 38.23, Tex.C.Cr. Pro.
We must, therefore, address the issue of whether the evidence could also be suppressed under TEX.CODE CRIM.P.ANN. art. 38.23 (Vernon Supp.1990). Article 38.23 states that no evidence shall be admitted if it was obtained in violation of Texas laws.
Muller argues the test record slip is invalid because it did not state the date the test was given, in violation of the DPS regulations. Muller argues that suppression was proper under article 38.23. The record prevents this Court from accepting Muller's proposal. The stipulation of evidence, signed by Muller states:
I agree that the test was performed according to the regulations for breath testing as promulgated by the Department of Public Safety (D.P.S.) and the test was also done according to the rules as set out in the D.P.S. breath test program operator manual which is to be attached as Exhibit # 2.
Muller stipulated to evidence introduced at the suppression hearing. The evidence included: (1) the State's intoxilyzer test record slip on Muller; (2) the DPS breath testing regulations; and (3) the stipulation of evidence, signed by both Muller and defense counsel.
After Muller stipulated that the intoxilyzer test was "done according to the [DPS regulations and rules]," we cannot say that the evidence was suppressed because it was obtained in violation of Texas laws and regulations. The trial court had this stipulation before it when it ruled on suppression of the evidence. We find, therefore, that the trial court erred if it suppressed the evidence pursuant to article 38.23.
In point of error four, the State argues that the trial court should have awarded reasonable attorney's fees to the State.
At both the hearing on Muller's motion and in the State's brief, the State alleges that it is entitled to reasonable attorney's fees under TEX.CIV.PRAC. & REM. CODE ANN. § 37.009 (Vernon 1986). This article allows attorney's fees only in declaratory judgment cases. This is not a declaratory judgment case. It is a criminal case, ruling on the constitutionality of a statute. The trial court did not commit error when it refused to allow attorney's fees based on the above civil statute.
We reverse; order the information reinstated; and remand for trial.
O'CONNOR, J., dissenting and concurring.
*323 O'CONNOR, Justice, dissenting and concurring.
On motion for rehearing, Robert A. Muller, appellee, takes us to task for permitting the State of Texas to file an amended notice of appeal eight months after the judgment. After reconsidering the issue, I agree and withdraw the earlier opinion, of which I was the author. I dissent from the new majority opinion on the issue of the notice of appeal and concur in the finding that the statute is constitutional.
The State charged Robert Muller, appellee here and defendant below, with operating a motor vehicle in a public place while intoxicated. Muller filed a motion to strike the paragraph of the information that alleged a .10 alcohol concentration, and to suppress all intoxilyzer evidence. In the motion, Muller contested the constitutionality of TEX.REV.CIV.STAT.ANN. art. 6701l-5, § 3(a) and (b) (Vernon Supp.1990) and the Texas Department of Public Safety's (DPS) Breath Alcohol Testing Regulations (the regulations).
The trial court granted Muller's motion, struck the paragraph, ruled that the regulations and article 67011-5, § 3(a) and (b) were unconstitutional, and suppressed the evidence. The State filed a notice of appeal to appeal that order on February 17, 1989. The notice said:
Now comes the State of Texas, by and through its District Attorney, John B. Holmes, Jr., pursuant to Tex.Code Crim. Proc. art. 44.01(a)(1) and (a)(5)....
I certify to this Court that this appeal is not taken for the purpose of delay and that the evidence suppressed in this cause is of substantial importance.
/s/ John B. Holmes, Jr. by [undecipherable].
At oral argument, the State identified the signature on the notice as that of the first assistant to the district attorney. After argument, the State filed a motion for leave to file an amended notice of appeal, which we granted. The State filed an amended notice of appeal, signed by John B. Holmes, on October 30, 1989. The critical parts of that notice are:
2. The original notice of appeal in this cause was executed by the First Assistant District Attorney on a date that the undersigned John B. Holmes, Jr., the Harris County District Attorney, was out of town. The First Assistant is fully authorized to exercise the functions of the District Attorney in the District Attorney's absence.
3. Counsel for the appellee, Robert A. Muller, recently filed a brief in this Court, challenging for the first time the validity of the notice of appeal in this cause ... The undersigned submits that the First Assistant's signature was adequate and that the appellee should be estopped from challenging the validity of the appeal at this late date but submits this amended notice of appeal out of an abundance of caution.
4. Accordingly, on this the 30th day of October, 1989, the Harris County District Attorney hereby submits amended notice of appeal in this cause, incorporating by reference the content of the original notice of appeal in this cause. This amended notice shall be filed with this Court because this Court presently has jurisdiction, and a duplicate original is being filed in the trial court.
In his original brief and in his motion for rehearing, Muller claims the State did not give proper notice of appeal because an assistant prosecutor signed the notice. Muller contends we have no jurisdiction to consider the State's appeal because the prosecuting attorney did not certify to the trial court that (1) the appeal was not taken for the purpose of delay, and (2) the evidence was of substantial importance in the case.[1]
Muller contends the amendment did not cure the jurisdictional error. Once the State filed a notice of appeal without the signature of the prosecuting attorney, and the time to file a notice of appeal expired, *324 Muller argues it was too late to file an amended notice.
The majority deletes the requirement for the prosecuting attorney's signature by finding it "improbable" that the legislature meant what it said. By such finding, the majority dispenses with the need for legal analysis. As an intermediate appellate court, we have no authority to interpret legislation contrary to its express language or re-write it to make it more "probable." Dickens v. Court of Appeals for Second Supreme Judicial Dist. of Tex., 727 S.W.2d 542, 546 (Tex.Cr.App.1987).
I. The State's notice to appeal
Article 44.01, TEX.CODE CRIM.P.ANN. (Vernon Supp.1990), controls appeals by the State. Relevant subsections are:
(a) The state is entitled to appeal an order of a court in a criminal case if the order:
(1) dismisses an indictment, information, or complaint or any portion of an indictment, information, or complaint;
* * * * * *
(5) grants a motion to suppress evidence, a confession, or an admission, if jeopardy has not attached in the case and if the prosecuting attorney certifies to the trial court that the appeal is not taken for the purpose of delay and that the evidence, confession, or admission is of substantial importance in the case.
* * * * * *
(d) The prosecuting attorney may not make an appeal under Subsection (a) or (b) of this article later than the 15th day after the date on which the order, ruling, or sentence to be appealed is entered by the court.
* * * * * *
(h) The Texas Rules of Appellate Procedure apply to a petition by the state to the Court of Criminal Appeals for review of a decision of a court of appeals in a criminal case.
* * * * * *
(i) In this article, "prosecuting attorney" means the county attorney, district attorney, or criminal district attorney who has the primary responsibility of prosecuting cases in the court hearing the case and does not include an assistant prosecuting attorney.
TEX.CODE CRIM.P.ANN. art. 44.01(a), (d), (h) & (i) (Vernon Supp.1990) (emphasis added).
A. Notice to appeal the dismissal of the information
Under article 44.01(a)(1), the State can appeal the striking of a paragraph of the indictment. The only requirements for appealing the striking of the paragraph of the information is that the State file a notice of appeal signed by the prosecuting attorney within 15 days of the judgment. TEX.CODE CRIM.P.ANN. art. 44.01(a)(1) & (d) (Vernon Supp.1990). In State v. Barker, 780 S.W.2d 927, 928 (Tex.App.Austin 1989, pet. ref'd), the court held that a notice of appeal, signed by the assistant prosecutor and amended by the prosecuting attorney, was sufficient to comply with the requirements of article 44.01(i) for an appeal under article 44.01(a)(1).
Although I have serious reservations about the propriety of the amended notice of appeal given under article 44.01(a)(1), I do not address that issue in this dissent.
B. Notice to appeal the motion to suppress
Under article 44.01(a)(5), the State can appeal an order suppressing the evidence. Article 44.01(a)(5), like article 44.01(a)(1), requires the State to file a notice of appeal signed by the prosecuting attorney (not the assistant prosecuting attorney) within 15 days of the judgment.
The only difference between the requirements of 44.01(a)(1) and article 44.01(a)(5) is that the legislature created a condition precedent to appeal an order suppressing the evidence: Under article 44.01(a)(5), the State can appeal an order suppressing evidence only if the prosecuting attorney (not the assistant prosecuting attorney), certifies to the trial court that (1) the appeal was not taken for the purpose of delay, and (2) the evidence was of substantial importance in the case.
*325 We said in our original opinion that the State's appeal was governed by the Texas Rules of Appellate Procedure, citing rule 1, TEX.R.APP.P., and State v. Demaret, 764 S.W.2d 857 (Tex.App.Austin 1989, no pet.). In our analysis, however, we overlooked the rule 2, TEX.R.APP.P., which limits the application of the Rules of Appellate Procedure in criminal cases:
(a) These rules shall not be construed to extend or limit the jurisdiction of the courts of appeals [or] the Court of Criminal Appeals....
(b) [N]othing in this rule shall be construed to allow any court to suspend requirements or provisions of the Code of Criminal Procedure.
We noted in our original opinion that under rule 46(f), TEX.R.APP.P., which applies to the appeal bond in civil cases, we may allow a party to amend the bond to cure a problem with the bond. We admitted there is no comparable rule that permits the amendment of a notice of appeal in a criminal case. We held, under rule 83, TEX.R.APP.P., we had the authority to permit the State to amend the notice of appeal.
In Jiles v. State, 751 S.W.2d 620, 621 (Tex.App.Houston [1st Dist.] 1988, pet. ref'd), this Court said we have other options, besides dismissal, when a party fails to file a proper notice of appeal. I beg to differ with this Court on that point. When a court holds there is no jurisdiction, by necessity, there is no other remedy.
In Jiles, we also said rule 2, TEX.R. APP.P., gives us the authority to suspend any rule in an appropriate case. Under rule 83, TEX.R.APP.P., we said we could cure any irregularity in appellate procedure, "either of form or substance." Again I disagree with Jiles. I do not believe an intermediate appellate court can suspend any rule of procedure. Even if we could, we are not dealing with a rule of procedure. We are dealing with an article of a code enacted by the legislature. The legislature said the State could only appeal a motion to suppress if the prosecuting attorney certified two facts to the trial court, within 15 days of the judgment. "Certify" is defined as "to guarantee as certain; to declare or attest by a formal or legal certificate." THE OXFORD ENGLISH DICTIONARY VOL. II, 1054 (2d ed. 1989). We are not confronted with a mere irregularity in form or substance; we are dealing with jurisdiction, that is, the power to entertain the appeal.
I do not think that the certification required by article 44.01(a)(5), can be made by an assistant prosecuting attorney. When the legislature said the certification must be made by the prosecuting attorney, I think the legislature wanted the prosecuting attorney to guarantee to the trial court in a formal, legal certificate, that (1) the appeal was not taken for the purpose of delay, and (2) the evidence was of substantial importance in the case.
After considering the impact of rules 1 and 2 on rule 83, I would hold that we had no authority to permit the State to amend its notice of appeal eight months after the deadline. Rule 83, a general rule of procedure, cannot suspend a specific statute to the contrary. To permit rule 83 to extend the jurisdiction of the courts of appeals to hear appeals where the prosecuting attorney did not file notice under article 44.01(a)(5), would violate rule 2, TEX.R.APP.P.
II. Inconsistency in opinions
The majority acknowledges that the Fourteenth Court of Appeals has held a defendant's oral notice of appeal, made in open court, was not an effective notice of appeal. Corbett v. State, 745 S.W.2d 933, 934 (Tex.App.Houston [14th Dist.] 1988, pet.ref'd). The majority attempts to distinguish Corbett from this case by noting that in Corbett, no one signed the notice, and here the notice was signed by the assistant prosecutor. At 319. That distinction is not a valid one in light of this Court's holding in Jiles, where this Court held, in a case exactly like Corbett, to the contrary: an oral, unsigned notice of appeal was an effective notice of appeal. Jiles, 751 S.W.2d at 621. If Jiles is any indication, the majority would also hold that an unsigned notice of appeal by the State was effective to invoke jurisdiction.
*326 In Shute v. State, 744 S.W.2d 96, 97 (Tex.Crim.App.1988), the Court of Criminal Appeals held that an oral notice of appeal, which was acknowledged in the clerk's records, did not invoke jurisdiction. In spite of this, the Court of Criminal Appeals refused petition in Jiles, indicating, if not approval, at least an acceptance of the result of the case. Both Shute and Jiles cannot be correct: The facts of the two cases are almost exactly alike; only their holdings are different.
Shute Jiles
Notice of appeal: oral oral
unsigned unsigned
noted by clerk noted by clerk
Jurisdiction: no yes
In Shute, the Court of Criminal Appeals affirmed the unpublished opinion by the Fourteenth Court of Appeals. The opinions in Shute and Jiles, thus, represent the conflicting views on the requirements for the notice of appeal between the Fourteenth and First Courts of Appeals. These two courts review cases from the same 14 county district. Presently, with this conflict unresolved, the Court of Criminal Appeals has left the courts, the prosecutors, and the defendants in this district without guidance on the jurisdictional requirements for the notice of appeal.
The confusion continues unabated. In Mullins v. State, 767 S.W.2d 166, 167-68 (Tex.App.Houston [1st Dist.] 1988, no pet.), this Court again held that an oral notice of appeal, acknowledged in the judgment, invoked jurisdiction. In Jones v. State, 752 S.W.2d 150, 151 (Tex.App.Dallas 1988, pet.ref'd), the Dallas Court of Appeals held a written but unsigned notice of appeal, invoked jurisdiction. I agree with the dissenters in Jones, that Shute cannot be distinguished from Jones. As stated by Justice McClung in his dissent in Jones, to be effective as a notice of appeal, the notice must be, (1) timely filed, (2) in writing, and (3) signed. 752 S.W.2d at 154.
For the State to appeal an order suppressing evidence under article 44.01(a)(5) & (d), there are four requirements for an effective notice of appeal. The State's notice must be:
(1) timely filed;
(2) in writing;
(3) and signed by the prosecuting attorney (not the assistant prosecuting attorney),
(4) who shall certify to the trial court that:
(a) the appeal was not taken for the purpose of delay; and
(b) the evidence was of substantial importance in the case (emphasis added).
Because the State's notice of appeal was not signed by the prosecuting attorney, and because the prosecuting attorney did not make the article 44.01(a)(5) certification to the trial court until nine months after the judgment, I would hold, under the guidance of Shute, the State did not perfect its appeal of the motion to suppress.
NOTES
[1] Article 44.01(a)(5), (d) & (i) TEX.CODE CRIM.PROC. ANN. (Vernon Supp.1990) require the prosecuting attorney, and not an assistant, to certify that (1) the appeal is not take for the purpose of delay; and (2) the evidence is of substantial importance in the case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455561/ | 393 F. Supp. 2d 199 (2005)
UNITED MAGAZINE COMPANY, et al., Plaintiffs,
v.
MURDOCH MAGAZINES DISTRIBUTION, INC., et al., Defendants.
No. 00 Civ. 3367(PKC).
United States District Court, S.D. New York.
September 22, 2005.
*200 *201 Carl E. Person, New York City, Gus H. Small, Cohen, Pollock, Merlin, Axelrod & Small, PC, Atlanta, GA, Robert E. Burton, Dublin, OH, for United Magazine Company, Inc.
Philip G. Barber, Constantine & Partners, PC, New York City, Yang Chen, Constantine Cannon PC, New York City, Daniel C. Malone, George G. Gordon, Paul H. Friedman, Terri L. Bowman, Dechert, LLP, New York City, Irvig Scher, Weil, Gotschal & Manges LLP(NYC), New York City, Isaac M. Bayda, Jacobs, Persinger & Parker, New York City, Lawrence I. Fox, McDermott, Will & Emery, LLP(NY), New YOrk City, for Defendants.
MEMORANDUM AND ORDER
CASTEL, District Judge.
This is a Robinson-Patman Act claim brought by wholesalers of magazines against "distributors" of magazines. Familiarity is assumed with the prior decisions in this case, which set forth the plaintiffs' legal theories and the factual and procedural background of this case. United Magazine Co. v. Murdoch Magazines Distribution, Inc., 146 F. Supp. 2d 385 (S.D.N.Y.2001) ("Unimag I"), United Magazine Co. v. Murdoch Magazines Distribution, Inc., 2001 WL 1607039 (S.D.N.Y.Dec.17, 2001) ("Unimag II") and United Magazines Co. v. Murdoch Magazines Distribution, Inc., 353 F. Supp. 2d 433 (S.D.N.Y.2004) ("Unimag III"). A brief summary of the relationship of the parties and the nature of the claims is in order.
The plaintiffs are United Magazine Company, The Stoll Companies, Michiana News Service, Inc., Geo. R. Klein News Co. and Central News Company (collectively, "Plaintiffs" or "Unimag") who are the wholesalers. The magazines at issue are "distributed" by defendants Kable News Company, Inc. ("Kable"), Murdoch Magazines Distribution, Inc. ("Murdoch Distribution"), TV Guide Distribution, Inc. ("TGD"), Curtis Circulation Company ("Curtis"), Comag Marketing Group, LLC ("Comag"), Hearst Distribution Group, Inc. ("HDG"), Time Distribution Services, Inc. ("TDS") and Warner Publisher Services, Inc. ("WPS") (collectively, "defendants" or "distributors"). Plaintiffs allege that, from May 1996 through May 2000, defendants violated the Robinson-Patman Act, 15 U.S.C. § 13(a), by providing "secret discounts, rebates, other payments, services of value and other benefits" to certain competitors of plaintiffs. The facts describing the general relationship between the parties, including an overview of the magazine distribution system, are set forth in Unimag III, in which this court disposed of certain defendants' prior motions for partial summary judgment. In the main, and with the limitations and exceptions noted in Unimag III, the publishers of the magazines in question, and not the distributors, set the terms and conditions of sale. Plaintiffs have not elected to sue the publishers.
Following nearly two years of discovery, defendants sought to file motions for summary judgment as to plaintiffs' remaining claims. After a premotion conference at which the parties outlined on the record their claims and defenses, defendants proceeded with motions directed solely to the *202 issue of whether section 2(a) of the Robinson-Patman Act applies to the transactions at issue in this case, reserving their right to move on other grounds at a later date if necessary. On December 29, 2004, I granted partial summary judgment in favor of defendants. In Unimag III, I concluded that there was no triable issue as to whether the moving defendants, other than Curtis, controlled the price and other terms of sale to plaintiffs.[1] With respect to any claim based on defendants' return policies, I ruled that the moving defendants had not met their initial burden of demonstrating that their return policies cannot support a price discrimination claim against them under section 2(a). Specifically, I ruled: "As to [the moving] defendants other than Curtis, plaintiffs' section 2(a) claims may proceed solely upon a claim that defendants' `return policies' resulted in a discriminatory price or term of sale." Unimag III, 353 F.Supp.2d at 448. Subsequent to Unimag III, plaintiffs have endeavored to recharacterize the "return policies" claim as an "allotment" discrimination claim.
All defendants now move for summary judgment dismissing the remainder of plaintiffs' claim on several alternative grounds. First, all defendants move for summary judgment on the ground that any alleged "allotment" discrimination asserted by plaintiffs is not actionable under the Robinson-Patman Act, and is, in any event, unsupported by evidence. Second, Curtis, Kable and TDS (with respect to Time Inc. titles) the only defendants against whom any claim based on price discrimination not arising from allegedly discriminatory return policies or allotments remains move for summary judgment on the ground that no plaintiff can establish two essential elements: causal antitrust injury and net price discrimination. Third, defendant TDS moves on the ground that there is no proof that it discriminated in price with respect to Time Inc. titles. Finally, defendants HDG and Comag move on the grounds that it is undisputed that HDG distributed magazines to plaintiffs during only a portion of the relevant time period, and Comag never distributed any magazine to any plaintiff at any time. For the reasons set forth below, defendants' motions for summary judgment are granted, and plaintiffs' second amended complaint is dismissed.
Magazine Wholesaler Industry
Prior to 1996, magazine wholesalers such as plaintiffs operated in defined geographic territories, and, as a result, faced little competition from other wholesalers. The lack of competition meant that wholesalers' margins were relatively high. The lack of competition was not advantageous to retailers of magazines, however, and in 1995, retailers began to demand a change in the industry. Large chain retailers shifted from purchasing magazines from many local wholesalers to purchasing from a limited number of wholesalers capable of servicing multiple, or even all, retail locations. The resulting consolidation of business led to direct competition between wholesalers for the first time. Chain retailers began inviting multiple wholesalers to bid for their business. The wholesalers did not generally know which other wholesalers were bidding for a retail account, or the prices or terms being offered by the *203 other wholesalers. With the resulting competition came demands from large retail chains for larger discounts, as well as "signing bonuses" in exchange for signing multiyear contracts with a single wholesaler. (Unimag 1996 SEC Form 10-K (Bowman Ex. 12); Scherer Dep. at 44-45, 52-53, 57, 60-61; Declaration of Carol Kloster dated Feb. 8, 2004; Declaration of David B. Thompson dated June 14, 2005) In its Form 10-K for the year 1996, filed with the Securities and Exchange Commission, Unimag noted the significant "reduction in revenue from existing chain customers ... where new discounts, rebates and amortization of signing bonuses caused an approximate 5% reduction in revenue without a corresponding reduction in the related cost of the products...." Unimag noted that "[t]his trend was not unique to Unimag ... as it was representative of changes throughout the entire industry in 1996." Unimag attributed its decline in gross margin "almost totally to the discounting and rebating changes during 1996." (Bowman Ex. 12 at 19) Unimag anticipated that it would be able to offset the decreasing margins and "greater pricing pressures" by reducing its fixed and variable costs, and noted that "successful wholesalers have concentrated on cost cutting measures in order to remain competitive." (Id. at 13, 15)
In the face of the dramatic changes and increased competition in the magazine wholesaling industry, many small wholesalers ceased conducting business, leaving only four major wholesalers and some 20 minor wholesalers. (Thompson Dep. at 92-93; Second Amended Complaint ("2AC") ¶ 45) The increased competition led to declining profitability for even the remaining wholesalers, including Unimag, who in some cases had to bid for business at unprofitable rates just to keep a retail account and keep market share. (Scherer Dep. at 667) At least one competing wholesaler, Charles Levy Circulating Company ("Levy"), stated that its strategy was to obtain and retain retail accounts regardless of profitability, meaning that the prices it paid for the magazines did not control the amount of its bids to sell the magazines. (Kloster Decl. ¶ 9)
I. DEFENDANTS' MOTION TO STRIKE
Defendants move to strike the Declaration of David B. Thompson in its entirety, along with certain exhibits to the Thompson Declaration. Defendants also seek strike those portions of plaintiffs' Rule 56.1 statement that are identical to the Thompson Declaration or that rely on the exhibits sought to be stricken.
Defendants move to strike the Thompson Declaration as violating the requirements of Rule 56(e), Fed.R.Civ.P., that an affidavit in opposition to summary judgment must be made on personal knowledge and "set forth such facts as would be admissible in evidence" and that a party may not rest on "mere allegations or denials." Defendants argue that the Thompson Declaration depends almost entirely on conclusory statements and inadmissible hearsay or evidence not in the record. They also seek to strike the Declaration as contradicting the prior sworn testimony of Mr. Thompson and other Rule 30(b)(6) designees and contemporaneous documents, including filings with the SEC. Generously resolving all doubts in favor of the non-movant, I conclude that the deficiencies in the text of Thompson Declaration do not go to its admissibility and, therefore, I will not strike the Declaration in its entirety.
However, the exhibits to the Thompson Declaration stand on a different footing. Defendants seek to strike Exhibit GG to the Thompson Declaration on the ground *204 that its submission is precluded by prior order of this Court. In my December 12, 2003 Order, I ruled that the expert report submitted by plaintiffs on December 1, 2003, including the exhibits thereto, "be treated as a nullity." Plaintiffs now attempt to submit the very same exhibits in opposition to summary judgment as Exhibit GG. Plaintiffs argue that "the documents upon which the Exhibit GG compilations were based... were not stricken merely because a compilation was made of them and attached as an Exhibit to the stricken report." Pl. Strike Mem. at 4. While it is true that I did not strike the underlying information contained in the exhibits (providing it had been produced prior to October 28, 2003), my December 12 Order was clear: "For the same reasons that the new expert report is treated as a nullity, any exhibits to the December 1, 2003 submission that were not produced by October 28, 2003 are stricken." Order of Dec. 12, 2003 at 7 n. 3 (emphasis added); see also Pl. Strike Mem. at 3-4 (quoting note 3). Plaintiffs chose not to submit the "underlying documents" upon which Exhibit GG is based in opposition to summary judgment; they chose to submit the compilations that comprise Exhibit GG. Those compilations are the very exhibits that I ruled were stricken in my December 12 Order. Defendants' motion to strike Exhibit GG is granted.
Defendants also seek to strike a number of other exhibits to the Thompson Declaration, including Exhibits B, D, F, G, H, I, N (pages 1-2), P, Q (pages 1-4), S, T and V (pages 4, 7, 10-11), primarily as inadmissible hearsay. They argue that plaintiffs have "provided no affidavits or witnesses to attest to the truthfulness or accuracy of these documents as required by the Federal Rules of Evidence." Def. Strike Mem. at 9. They also move to strike Exhibit S on the ground that it was not produced to defendants during discovery.[2]
Plaintiffs argue that many of the documents in question (D, F, G, H, I, N (pgs.1-2), Q (pgs.1-4), T and V (pgs.7, 10-11)) are Levy documents produced to defendants and admissible under the "business records" exception to the hearsay rule. Plaintiffs, however, offer no testimony or affidavit from a person with knowledge of Levy's business operations to lay a foundation that the documents are in fact business records. With respect to Exhibit P, plaintiffs describe the document as an "index to ... Defendants' documents" that was "created by Plaintiffs summarizing data and documents obtained by Plaintiffs from Levy," and was produced in their October 28, 2003 submission to defendants. (Pl. Strike Mem. at 11) Plaintiffs contend that it is, or would be, admissible under Rule 1006, Fed.R.Evid., which provides that "[t]he contents of voluminous writings... which cannot conveniently be examined in court may be presented in the form of a chart, summary or calculation." While I am doubtful that Exhibit P would qualify as a summary or compilation under Rule 1006, I have nevertheless considered the document for whatever evidentiary value it may have, recognizing that it was created by plaintiffs and is merely an index with their characterization of documents that were, in large part, not submitted to the Court for consideration as part *205 of the record. Plaintiffs provide absolutely no basis for concluding that page 4 of Exhibit V is admissible; plaintiffs describe it as "a note by Plaintiffs calling attention to the last page" of a deposition exhibit (Pl. Strike Mem. at 11). Although the admissibility of the exhibits that are the subject of defendants' motion to strike is doubtful, the Court has reviewed and considered all the exhibits in opposition to defendants' motion for summary judgment, and I decline to strike any exhibits other than Exhibit GG.
II. SUMMARY JUDGMENT STANDARD
Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c). In considering a summary judgment motion, the Court must "view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor, and may grant summary judgment only when no reasonable trier of fact could find in favor of the nonmoving party." Allen v. Coughlin, 64 F.3d 77, 79 (2d Cir.1995) (citation and quotation marks omitted); accord Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). However, when the moving party has asserted facts to demonstrate that the non-moving party's claim cannot be sustained, the opposing party must "set forth specific facts showing that there is a genuine issue for trial," and cannot rest on "mere allegations or denials" of the facts asserted by the movant. Rule 56(e).
It is the initial burden of a movant on a summary judgment motion to come forward with evidence on each material element of its claim or defense, demonstrating that it is entitled to relief. The evidence on each material element, if unrebutted, must be sufficient to entitle the movant to relief in its favor, as a matter of law. Vermont Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir.2004). When the moving party has met this initial burden and has asserted facts to demonstrate that the non-moving party's claim cannot be sustained, the opposing party must "set forth specific facts showing that there is a genuine issue for trial" as to a material fact. A fact is material if it "might affect the outcome of the suit under the governing law...." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202, (1986). An issue of fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. Thus, in order to survive summary judgment, plaintiffs must come forth with more than a mere scintilla of evidence in support of their position; they must come forward with evidence "on which the jury could reasonably find for the plaintiff." Id. at 252, 106 S. Ct. 2505. "The non-moving party may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence showing that its version of the events is not wholly fanciful." D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.), cert. denied, 524 U.S. 911, 118 S. Ct. 2075, 141 L. Ed. 2d 151 (1998). In reviewing a motion for summary judgment, the court must scrutinize the record, and grant or deny summary judgment as the record warrants. See Fed.R.Civ.P. 56(c). In the absence of any genuine dispute over a material fact, summary judgment is appropriate.
*206 III. PLAINTIFFS HAVE FAILED TO CREATE A TRIABLE ISSUE AS TO SO-CALLED "ALLOCATION DISCRIMINATION"
In opposing defendants' initial motion for summary judgment, plaintiffs proffered an argument that the defendants controlled the "return policies" pursuant to which unsold magazines were returned to the publishers for a credit. Plaintiffs argued: "The return policies were an important component of the prices paid by United Magazine.... To the extent that a distributor did not allow a credit for any returned magazines, United Magazine's price per magazine increased." (Alfonsi Declaration ¶ 14)
At the time of my decision in Unimag III, plaintiffs' return policy claim had not been well defined by plaintiffs. Viewing the matter generously perhaps over generously to the non-movant, I concluded, on the record and argument that I then had before me, that defendants had failed to meet their initial summary judgment burden with respect to the returns issue. I stated:
If plaintiffs can demonstrate through admissible evidence that the [return] policies were applied in a discriminatory fashion, that those policies affected the price paid by plaintiffs for magazines, that the price differences caused competitive injury, and that plaintiffs have suffered antitrust injury caused by any discrimination, then plaintiffs will have established an actionable violation.
Unimag III, 353 F.Supp.2d at 448. I concluded that "[a]s to defendants other than Curtis [and non-movant Kable], plaintiffs' section 2(a) claims may proceed solely upon a claim that defendants' `return policies' resulted in a discriminatory price or term of sale." Id.
On February 23, 2005, in connection with an upcoming premotion conference, plaintiffs wrote to the Court and represented that their "returns" claim now involved "a handling policy favoring competitor Levy, in which Levy was allotted fewer magazines and had lower returns and reduced costs of operation as a result." At a conference held on March 3, 2005, the Court asked plaintiffs to articulate the theory for their "returns" claim. Counsel for plaintiffs responded that "the theory is that we were allocated more magazines to sell knowing how many were going to be sold so that we were getting a higher percentage of magazines that we had to return through our system, which means returns." (March 3, 2005 Tr. at 24) When asked by the Court how that would lead to any injury if, for example, plaintiff was allocated 200 magazines and received $1 back for every magazine returned, and Levy received only 100 magazines but also received $1 back for every magazine returned, counsel for plaintiff articulated the following theory of recovery: "They didn't pay us to distribute them. They didn't give us a penny for the magazines that were returned. So we had to eat the total cost of laying the magazine out and returning it without having a sale." (Id. at 25) Plaintiffs asserted that this theory was actionable under section 2(a).
Defendants assert that they are entitled to judgment as a matter of law with respect to plaintiffs'"return policy" claim now described as an "allocation" claim. Defendants argue that discrimination in the quantity of products sold to a customer is not actionable under section 2(a) of the Robinson-Patman Act. In addition, defendants have come forward with admissible evidence demonstrating that even if plaintiffs' claim were actionable, no defendant discriminated in allocating products to plaintiffs and their competitors.
Each defendant has submitted an affidavit or declaration from a knowledgeable *207 employee attesting to the fact that the defendant did not discriminate in the allocation of copies of the titles distributed to plaintiffs and Levy, and/or that the fact that wholesalers may have different "sell through" rates that is, the proportion of magazines received by wholesalers that are in fact sold to retail customers would not be attributable to differing allocations of product. See Aff't of Richard Jacobsen, 4/21/05 (TDS and WPS); Decl. of Klaus Gunn, 4/22/05 (Murdoch Distribution and TGD); Decl. of Robert A. Castardi, 4/21/05 (Curtis); Aff't of John E. DiFrisco, 4/21/05 (Comag and HDG); Decl. of William Zechman, 4/20/05 (Kable). In addition, the Murdoch Distribution/TGD and Curtis declarants have sworn that the respective publishers and not these defendants determined the quantity of magazines allocated to wholesalers. See Gunn Decl. ¶ 5; Castardi Decl. ¶ 5.
In response, plaintiffs do not attempt to refute defendants' showing that defendants did not discriminate in allocating copies of magazines to plaintiffs, or in the case of Murdoch Distribution and Curtis, that they were not responsible for such allocations. In the five sentences offered in opposition to this part of defendants' motion, plaintiffs assert (without citation to any evidence) that "the evidence shows that the favored buyer Levy was given assistance so that its labor would be less by handling fewer magazines on a percentage basis which resulted in substantial savings over what Plaintiffs were required to spend thereby increasing Plaintiffs' costs for the same magazine titles." (Pl. Opp. at 25-26) Plaintiffs' latest attempt to recast their claims fails to meet the standard set forth in Unimag III, which made clear that plaintiffs only remaining claim (as to most defendants) was one based on a theory that "defendants' `return policies' resulted in a discriminatory price or term of sale to plaintiffs". I also note that plaintiffs' new theory shifts ground from the allotment theory articulated at the March 3, 2005 conference.
Section 2(a) of the Robinson-Patman Act makes it unlawful for "any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce ... and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them." 15 U.S.C. § 13(a).
Plaintiffs' allotment and return policy theories, as more fully developed on this motion, simply do not state a viable claim under section 2(a). It is price discrimination to which section 2(a) is addressed. As the Tenth Circuit has succinctly noted:
Section 2(a) is directed to price discrimination and nothing more. Price is to be determined by reference to the invoice submitted to the buyer, and any discounts, offsets, or allowances not reflected in the invoice price .... a violation of section 2(a) only arises when "discriminations in the terms of sale... permit the favored customers to purchase at a lower price than other customers, so that their only practical effect [is] to establish discriminations in price, precisely the evil at which the statute was aimed."
Black Gold, Ltd. v. Rockwool Industries, Inc., 729 F.2d 676, 682 (10th Cir.), cert. denied, 469 U.S. 854, 105 S. Ct. 178, 83 L. Ed. 2d 113 (1984) (quoting Corn Prods. *208 Ref. Co. v. FTC, 324 U.S. 726, 740, 65 S. Ct. 961, 89 L. Ed. 1320 (1945); additional citation and internal quotations omitted). Courts have defined "price" under the Act as the" `net price received by the seller from the two buyers in question.'" Amsterdam Tobacco Inc. v. Philip Morris Inc., 107 F. Supp. 2d 210, 220-21 (S.D.N.Y.2000) (quoting Conoco, Inc. v. Inman Oil Co., 774 F.2d 895, 902 (8th Cir.1985)). The fact that a purchaser may incur expenses not incurred by a competitor may increase the purchaser's costs, or reduce their profits, but it does not change the net price paid by either the purchaser or the competitor to the seller. Nor is plaintiffs' claim sustainable under any theory of "indirect" price discrimination. As the Court noted in Amsterdam Tobacco, "It is well established that the forms of `indirect' price discrimination encompassed by the Robinson-Patman Act are limited to rebates, discounts, free goods, promotional payments, or similar forms of compensation that are given by the seller to the buyer and that, effectively, lower the price charged by the seller to the buyer (in comparison to other buyers)." 107 F. Supp. 2d at 221 (emphasis added) (citing Conoco, 774 F.2d at 901-02; Black Gold, 729 F.2d at 682). Here, the purported "assistance" given to Levy on which plaintiffs offer no evidence does not appear to be in the form of compensation; indeed, because plaintiffs have made no evidentiary proffer, it is impossible to know the form that this purported "assistance" took.
Even if plaintiffs had articulated a legally cognizable theory, they have failed to come forward with any evidence as opposed to conclusory statements in support of their new theory. Nowhere in plaintiffs' papers is there a citation to any evidence of labor assistance given to Levy to reduce its handling costs. In response to defendants' summary judgment motion, plaintiffs have failed to come forward with admissible evidence to support their dubious legal theory, and as such, plaintiffs have failed to demonstrate the existence of a material fact in dispute sufficient to defeat summary judgment. All defendants are entitled to summary judgment on any claim of alleged "allotment" discrimination or "return policy" discrimination.
Because plaintiffs have failed to create a genuine issue of material fact with respect to any claim based on a purported "allotment" discrimination or "return policy" discrimination, the claims against defendants Murdoch Distribution, TGD, Comag, HDG and WPS are now dismissed in their entirety.
IV. PLAINTIFFS HAVE FAILED TO CREATE A TRIABLE ISSUE AS TO CAUSAL ANTITRUST INJURY
The Robinson-Patman Act does not provide a private cause of action. Blue Tree Hotels Inv. (Canada) Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 218 (2d Cir.2004). Rather, plaintiffs' cause of action arises under section 4 of the Clayton Act, 15 U.S.C. § 15(a), which permits "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws" to bring suit in federal district court. 15 U.S.C. § 15(a). To bring suit under the Clayton Act, a private litigant seeking treble damages must show antitrust injury. Blue Tree Hotels, 369 F.3d at 220.
The Supreme Court has made clear that the Robinson-Patman Act provides no "automatic damages." Rather, a plaintiff must prove more than a violation of the Act, and "must make some showing of actual injury." J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 562, *209 101 S. Ct. 1923, 68 L. Ed. 2d 442 (1981). Demonstrating that a plaintiff has suffered actual antitrust injury sufficient to invoke the Clayton Act is distinct from a showing of injury to competition in the relevant industry as a whole. "While competitive injury concerns the potential effect certain conduct may have on competition generally or on the business opportunities of a defined class of competitors, the focus of `antitrust injury' is on whether the challenged conduct has actually caused harm to the plaintiff." Blue Tree Hotels, 369 F.3d at 220 (citations and internal quotations omitted); see also Maddaloni Jewelers, Inc. v. Rolex Watch U.S.A. Inc., 354 F. Supp. 2d 293, 306 (S.D.N.Y.2004); Intimate Bookshop, Inc. v. Barnes & Noble, Inc., 2003 WL 22251312, at *3 (S.D.N.Y.2003); Indus. Burner Sys., Inc. v. Maxon Corp., 275 F. Supp. 2d 878, 889 (E.D.Mich.2003) (plaintiff "must, if it is going to have standing to recover damages as a private plaintiff, demonstrate that it suffered actual injury to its business as a result of the price discrimination the antitrust injury requirement").
To establish an antitrust injury, a plaintiff must show (1) an injury in fact, (2) that was caused by the violation, and (3) that it is the type of injury contemplated by the statute. J. Truett Payne, 451 U.S. at 562, 101 S. Ct. 1923. It is plaintiffs' burden "to show a causal connection between the price discrimination in violation of the Act and the injury suffered." Perkins v. Standard Oil Co., 395 U.S. 642, 648, 89 S. Ct. 1871, 23 L. Ed. 2d 599 (1969). In doing so, plaintiffs must show "some direct evidence" illustrating a causal link between discrimination and injury. Stelwagon Mfg. Co. v. Tarmac Roofing Sys., Inc., 63 F.3d 1267, 1273-74 (3d Cir.1995) (emphasis in original), cert. denied, 516 U.S. 1172, 116 S. Ct. 1264, 134 L. Ed. 2d 212 (1996); Mathias v. Daily News, L.P., 152 F. Supp. 2d 465, 478 (S.D.N.Y.2001) (to establish antitrust injury, "the harm must result from a competition-reducing aspect or effect of defendant's behavior, and it must flow from conduct that the antitrust laws clearly condemn.") (citations omitted). Plaintiffs must show that the alleged discrimination and not other factors was the cause of the injury they allegedly suffered. See United States Football League v. Nat'l Football League, 842 F.2d 1335, 1377-79 (2d Cir.1988) (plaintiffs must demonstrate that defendants' unlawful acts, and not other factors, substantially contributed to their injuries); Intimate Bookshop, 2003 WL 22251312, at *4-7 (granting summary judgment where plaintiff "provided no evidence, in any form, that defendants' alleged violation of the Act, as opposed to other intervening market factors, was a material cause of its lost sales and profits"); see also Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1057 (8th Cir.), cert. denied, 531 U.S. 979, 121 S. Ct. 428, 148 L. Ed. 2d 436 (2000) (expert opinion insufficient to sustain damages claim where it did not distinguish lawful from unlawful conduct).
In moving for summary judgment, defendants contend that plaintiffs have no evidence of any causal link between the alleged discriminatory pricing and any alleged injury. They assert that there is no evidence or expert opinion supporting plaintiffs'"price erosion" theory of causation. Defendants point to testimony from plaintiffs' expert that he could not identify an instance in which Levy the allegedly preferred wholesaler and one of the plaintiffs were the only two bidders for a particular account. (See Einhorn Dep. at 211) Defendants also submitted testimony from plaintiffs' expert that, in order to show that plaintiffs' alleged "price erosion" was caused by Levy's allegedly favorable pricing, plaintiffs would need to show that *210 plaintiffs won a bid for which Levy was the next lowest bidder, and that he was not provided with sufficient information to determine whether such a situation ever occurred. (Einhorn Dep. at 211-12, 222-23) I conclude that defendants have met their initial burden on this motion for summary judgment. If plaintiffs "fail [ ] to introduce substantial evidence showing that they were actually injured," summary judgment in favor of defendants is appropriate. Interstate Cigar Co. v. Sterling Drug Inc., 655 F.2d 29, 31 (2d Cir.1981).
Although plaintiffs may not be required to set forth "`the kind of concrete, detailed proof of injury which is available in [non-antitrust] contexts,'" Hygrade Milk & Cream Co. v. Tropicana Prods., Inc., 1996 WL 257581, at *16 (S.D.N.Y.1996) (quoting J. Truett Payne, 451 U.S. at 565, 101 S. Ct. 1923) (alteration in original), they nevertheless must come forth with some evidence of actual injury, as opposed to evidence of an underlying violation. George Haug Co. v. Rolls Royce Motor Cars Inc., 148 F.3d 136, 145 (2d Cir.1998). It is not enough for plaintiffs to demonstrate that they paid more for magazines than did their competitor, Levy. See World of Sleep, Inc. v. La-Z-Boy Chair Co., 756 F.2d 1467, 1480 (10th Cir.), cert. denied, 474 U.S. 823, 106 S. Ct. 77 (1985). They must come forward with evidence that the alleged price discrimination by Curtis and Kable, and by TDS with respect to Time Inc. titles, had a detrimental effect on plaintiffs' business. Id. ("In view of the complete absence of record evidence that the alleged Robinson-Patman discrimination had any detrimental effect on World of Sleep's ability to do business, its damage claim for this violation should not have gone to the jury.") The mere perception of injury will not suffice, and abstract conclusions not adequately grounded in the facts of the case cannot create a triable issue of fact as to antitrust injury. See Maddaloni, 354 F.Supp.2d at 307-08.
On the record before me, plaintiffs have not raised a triable issue of fact as to whether they suffered antitrust injury. Although antitrust injury as opposed to the underlying discriminatory conduct may be established through evidence of lost sales or profits, those lost sales or profits must be demonstrated to be a result of the alleged discrimination, in this case, alleged differences in pricing offered to plaintiffs and Levy. See, e.g., Maddaloni, 354 F.Supp.2d at 306-07; Intimate Bookshop, 2003 WL 22251312, at *3 ("[A] plaintiff who has proved a violation under Section 2(a) or 2(f) must still establish `antitrust injury' through some evidence of actual injury, usually in the form of lost sales or profits, and a causal connection between the price discrimination and the actual damage suffered to support an award of damages.") (citation and internal quotation omitted). While a showing of causation "may be made by proof that the illegal discrimination permitted a favored purchaser to lower its prices and thereby reduce a plaintiff's sales or profits," where a plaintiff presents "no evidence that the allowance enabled favored competitors to lower their prices and divert sales, or that it had to lower its prices to an unprofitable level in response to such low prices," no antitrust injury is established. World of Sleep, 756 F.2d at 1480.
Here, plaintiffs assert that they suffered antitrust injury because defendants' discriminatory pricing policy caused "price erosion," defined by plaintiffs as "decline of Plaintiffs' margins." (Pl. 56.1 Resp. ¶ 25) Plaintiffs specifically disavow any claim for damages based on having lost accounts to Levy prior to September 1999. (Id.; Bowman Decl Ex. 25) According to plaintiffs, the amount of their reduction in profit margin for the years 1996 through September *211 17, 1999 is "approximately equal to the amount of the discrimination which we calculated between the Defendants' price to Levy and the Defendants' price to Plaintiffs for the same magazines." Thompson Decl., 6/14/05, ¶ 7F. Plaintiffs' sole evidence in support of their price erosion theory consists of statements in the declaration of David Thompson, former Vice Chairman, Treasurer and CFO of United Magazine:
Plaintiffs knew that Levy, its [sic] nearest competitor, had a presence in the market and was making an effort to sell its magazine wholesale services to some of plaintiffs' customers. In most instances plaintiffs' customers would not tell plaintiffs the names of the other magazine wholesalers competing for the retailer's business, which meant that plaintiffs had to assume Levy was an actual or prospective competitor, requiring plaintiffs to meet what plaintiffs believed was Levy's price. Levy's presence in the marketplace could not be disregarded by plaintiffs, especially since bidding was ordinarily done without knowing who else was bidding for the same customer. (Thompson Decl. ¶ 5)
Plaintiffs lowered their profit margins on all of their bids starting on January, 1996[sic], approximately, to offset the market presence of Levy and Plaintiffs' estimate of the amount of Levy's discriminatory price advantage. (Id. ¶ 7F)
Because Levy was Unimag's nearest competitor, Unimag had to bid as if Levy was bidding or would become a bidder, to ensure that customers were not lost to Levy by failure to meet Levy's price. Thus, Unimag's profit margins were not lower when Levy was a bidder; they were lower for all or most customers because of the realistic possibility that Levy would get the customer if Unimag did not meet Levy's actual or threatened bid. (Id. ¶ 22)
Despite Mr. Thompson's attempt to create an ex post facto connection between Unimag's bidding practices and margins and Levy's alleged price advantage, plaintiffs' effort to demonstrate antitrust injury fails for a number of reasons.
First, the statements in the Thompson Declaration as to what plaintiffs knew with respect to the competitive bidding environment during the relevant time period are completely unsupported by any citation to any evidence compiled during the almost two years of discovery in this case. As the Supreme Court has held, a self-serving affidavit that merely reiterates conclusory allegations in affidavit form is insufficient to preclude summary judgment, and "it will not do to `presume' the missing facts because without them the affidavits would not establish the injury that they generally allege." Lujan v. Nat'l Wildlife Federation, 497 U.S. 871, 888-90, 110 S. Ct. 3177, 111 L. Ed. 2d 695 (1990) ("The object of [Rule 56(e)] is not to replace conclusory allegations of the complaint or answer with conclusory allegations of an affidavit."); see also Hayes v. New York City Dep't of Corr., 84 F.3d 614, 619 (2d Cir.1996) ("[F]actual issues created solely by an affidavit crafted to oppose a summary judgment motion are not `genuine' issues for trial.") (citing Perma Research & Dev. Co. v. Singer Co., 410 F.2d 572, 578 (2d Cir.1969)). The Supreme Court in Lujan further made clear that in the context of a summary judgment motion, unlike on a motion to dismiss under Rule 12(b), there is no presumption "that general allegations embrace those specific facts that are necessary to support the claim." 497 U.S. at 890, 110 S. Ct. 3177 (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957)). Plaintiffs have submitted no evidence from *212 which a reasonable jury could conclude that plaintiffs were bidding and reducing their profit margins in response to Levy's presence in the market.
Second, and most significantly, the factual assertion in Mr. Thompson's declaration is contradicted not only by statements in plaintiffs' SEC Form 10-K for 1996, but by a Supplemental Declaration submitted by Mr. Thompson in opposition to defendants' motion to strike. In that Supplemental Declaration, dated August 4, 2005, Mr. Thompson states that in 1997:
Plaintiffs' management believed that other wholesalers could not compete against Plaintiffs in Plaintiffs' territories because it would be unprofitable for them to do so unless the competitors had a lower price. Plaintiffs did not know [in 1997] that Levy had a lower price and Plaintiffs' management felt that companies such as Levy could not profitably compete in Plaintiffs' territories because they did not have a better price. Plaintiffs learned during discovery that Levy had a better price and calculated the extent of it. Thompson Supp. Decl. ¶ 6. (emphasis added)
It is axiomatic that a party cannot defeat summary judgment by submitting an affidavit that contradicts prior sworn deposition testimony. See, e.g., Buttry v. Gen. Signal Corp., 68 F.3d 1488, 1493 (2d Cir.1995) ("`[I]t is well settled in this circuit that a party's affidavit which contradicts his own prior deposition testimony should be disregarded on a motion for summary judgment.'") (quoting Mack v. United States, 814 F.2d 120, 124 (2d Cir.1987); additional citation omitted). It should be equally clear that a party cannot defeat summary judgment by submitting flatly contradictory affidavits. Plaintiffs cannot assert both that "Plaintiffs lowered their profit margins on all of their bids starting on January, 1996... to offset ... Plaintiffs' estimate of the amount of Levy's discriminatory price advantage" (Thompson Decl. ¶ 7F) and that "Plaintiffs did not know [until 2003] that Levy had a lower price" (Thompson Supp. Decl. ¶ 6). Similarly, plaintiffs cannot assert that their injury was caused by having to meet the prices that, during the relevant time period, it believed its "nearest competitor" was bidding or would be bidding, and at the same time claim that, during the relevant time period, they believed that companies such as Levy could not and were not competing in the market. If Thompson's Supplemental Declaration and plaintiffs' Form 10-K for the year ending 1996 are true insofar as they assert that plaintiffs did not and could not face serious competition in their markets during the relevant time period, it cannot also be true that they lowered their margins and profits in response to that competition.
Third, defendants came forward with evidence demonstrating that the price erosion relied upon by plaintiffs was attributable to substantial unrelated factors that contributed to declining margins in the magazine wholesaling industry. (See Unimag 10K, Bowman Ex. 12 at 19; Decl. of Carol Kloster, dated February 8, 2004) Plaintiffs' own expert conceded the necessity of accounting for unrelated "relevant factors [leading to declining margins] on every account" in order to properly assess the affects of any alleged price discrimination. (Einhorn Dep. at 221-23) But plaintiffs have failed to account for these other causes of price erosion. Plaintiffs' attempt in paragraph 7F of the Thompson Declaration to attribute all of their reduced margins to the alleged discriminatory pricing contradicts the Supplemental Thompson Declaration and common sense: given Thompson's acknowledgement that plaintiffs' profit margins were declining even in the absence of any knowledge that Levy was competing in their markets or receiving *213 favorable pricing from any defendant, common sense dictates that any "price erosion" must have been the result of factors other than Levy's alleged price advantage. There is no inference that could be drawn from the evidence that would permit a reasonable jury to conclude otherwise. Cf. MCI Communications v. Am. Tel. & Tel. Co., 708 F.2d 1081, 1162 (7th Cir.), cert. denied, 464 U.S. 891, 104 S. Ct. 234 (1983) ("When a plaintiff improperly attributes all losses to a defendant's illegal acts, despite the presence of significant other factors, the evidence does not permit a jury to make a reasonable and principled estimate of the amount of damage. This is precisely the type of speculation or guesswork not permitted for antitrust jury verdicts.") (citation and internal quotations omitted).
Plaintiffs have failed to raise a triable issue of fact as to the existence of antitrust injury caused by a violation of section 2(a). The remaining claims against defendants Curtis, Kable and TDS therefore are dismissed. I also adopt this basis as an alternative ground for granting summary judgment to defendants Murdoch Distribution, TGD, Comag, HDG and WPS. I do not reach the other bases for summary judgment set forth in defendants' motions.
VI. CONCLUSION
For the reasons set forth herein:
1. Defendants' motions to strike are GRANTED in part and DENIED in part.
2. The motions of all defendants for summary judgment dismissing plaintiffs' Second Amended Complaint are GRANTED.
3. The Clerk is directed to enter judgment in favor of defendants.
SO ORDERED.
NOTES
[1] Defendant TDS sought summary judgment only with respect to magazines published by companies other than its parent company, Time Inc. By the terms of its contract with Time Inc., TDS is the purchaser and reseller of those titles published by Time Inc. My decision on the initial motion disposed of all claims against TDS other than those based on TDS's distribution of Time Inc. titles or TDS's allegedly discriminatory returns policy. Kable was not a moving defendant.
[2] With regard to Exhibit S, plaintiffs apparently claim that the fact that it was not produced to defendants during discovery is excused because it was not called for by any of defendants' document requests. (Pl. Strike Mem. at 14) Defendants contend they made "repeated requests" for the document. (Def. Strike Mem. at 7) As with the remainder of the documents as to which plaintiffs invoke the "business records" exception to the hearsay rule, discussed below, I decline to strike Exhibit S, and have reviewed it and considered it in opposition to defendants' motion, despite serious doubts as to its admissibility. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455569/ | 393 F. Supp. 2d 390 (2005)
Johnny M. JONES, Plaintiff,
v.
C.J. MAHAN CONSTRUCTION COMPANY, a foreign corporation, Defendant.
No. Civ.A. 3:05-0014.
United States District Court, S.D. West Virginia, Huntington Division.
May 16, 2005.
*391 Jeffrey V. Mehalic, Law Offices of Jeffrey V. Mehalic, Charleston, WV, for Plaintiff.
Matthew S. Criswell, Stephen A. Weber, Kay Casto & Chaney, Charleston, WV, for Defendant.
MEMORANDUM OPINION AND ORDER
CHAMBERS, District Judge.
Pending before the Court is Plaintiff's motion to remand this case. For the reasons set forth below, the motion is GRANTED.
I. Introduction
Plaintiff Johnny M. Jones ("Jones") brought this suit against Defendant C.J. Mahan Construction Company ("Mahan") alleging that his termination by Mahan constituted discrimination pursuant to the West Virginia Workers' Compensation Act, discrimination pursuant to the West Virginia Human Rights Act, denial of employee benefits pursuant to the Human Rights Act, retaliatory discharge, violation of ERISA, outrage and intentional infliction of emotional distress. Jones brought this suit against Mahan on January 6, 2005, in the Circuit Court of Wayne County, West Virginia. On February 6, 2005, Mahan removed this action to this Court and also moved to dismiss the complaint on the grounds that Jones' causes of action for discriminatory practices in violation of the Workers' Compensation Act and for age discrimination fail to state claims upon which relief may be granted. This Court denied Mahan's motion to dismiss, finding that the action stated a claim arising under the West Virginia Workers' Compensation Commission.
*392 II. Analysis
Removal statutes must be construed strictly against removal, and the burden of establishing the propriety of removal falls upon the removing party. Mulcahey v. Columbia Organic Chem. Co., 29 F.3d 148, 151 (4th Cir.1994). If federal jurisdiction is doubtful, a remand is necessary. Id.
Mahan's argument against remand relies heavily on its contention that Jones failed to state a claim under the West Virginia Workers' Compensation Act. The court rejected Mahan's argument with regard to the three criteria set out by Powell v. Wyoming Cablevision, Inc., 184 W.Va. 700, 403 S.E.2d 717 (1991). In order to make a prima facie case of discrimination under West Virginia Code § 23-5A-1, an employee must prove (1) that on-the-job injury was sustained; (2) that proceedings were instituted under the Workers' Compensation Act; and (3) that the filing of the workers' compensation claim was a significant factor in the employer's decision to discharge or otherwise discriminate against the employee. Since the Court denied Mahan's motion to dismiss the workers compensation discrimination claim, this action must be remanded to the Circuit Court, according to 28 U.S.C. § 1445(c), which states that "a civil action in any State court arising under the workmen's compensation laws of such State may not be removed to any district court of the United States." This Court addressed a factually similar situation in Husk v. E.I. Du Pont De Nemours and Co., 842 F. Supp. 895 (S.D.W.Va.1994), in which the Court confirmed its earlier ruling in Thomas v. Kroger Co., 583 F. Supp. 1031 (S.D.W.Va.1984) that "a claim for retaliatory discharge made pursuant to W.Va.Code § 23-5A-1, is one that arises under the workers' compensation laws of West Virginia and is thus barred from removal to a federal court by 28 U.S.C. § 1445(c)." Id. at 896.
Mahan asserts that Jones' other state law tort, age discrimination and ERISA claims are separate and independent from his retaliatory discharge claim and that the Court has the discretion to keep or remove the entire case under 28 U.S.C.A. § 1441(c), which states:
(c) Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, in its discretion, may remand all matters in which State law predominates.
28 U.S.C.A. § 1441(c)(2005). The Court finds that Jones did raise federal questions in his complaint by his inclusion of the express ERISA claim in Count VI and one of age discrimination claims, Count VIII, which is completely preempted by ERISA.[1] Jones states that all of these claims arise from a single wrong, the discharge, and must also be remanded. Husk stated that "even where federal questions are raised in an action raising a retaliatory discharge claim based upon state workers' compensation laws, it has been held that the case may not be removed to federal court if all of the plaintiff's claims arise from a single wrong." Id. at 898 n. 5. The Court agrees with Jones. Jones has a claim for age discrimination and for other torts each of which arise from his discharge, a "single wrong." *393 The Husk footnote is therefore applicable to this case.
The Court finds that the entire case should be remanded to the Circuit Court. Congress clearly intended for worker's compensation cases to be heard in State Court, as evidenced by 28 U.S.C. § 1445(c).[2] Given this congressional intent, the Court declines to exercise supplemental jurisdiction over this claim. The Court also believes that, in the interest of judicial efficiency, it does not make sense to divide this case and retain jurisdiction over some claims, while remanding the retaliatory discharge claim to Circuit Court. The Court has also given weight to Plaintiff's choice of forum in deciding whether to remand this case. Considering these three factors together, the Court believes that it is proper to remand this entire action to the Circuit Court of Wayne County, West Virginia.
III. Conclusion
For the reasons stated herein, Plaintiff's motion to remand is GRANTED and the case is remanded to the Circuit Court of Wayne County. The Court DIRECTS the Clerk to send a copy of this written opinion to counsel of record and any unrepresented parties.
NOTES
[1] Count VIII states that his discharge was due to his age and to the Defendant's desire to avoid paying pension and employee welfare benefits, a claim which triggers complete preemption under ERISA. See Hoops v. Elk Run Coal Co., 57 F. Supp. 2d 357 (S.D.W.Va.1999)
[2] While the Court may have supplemental jurisdiction over Plaintiff's nonfederal claims under 28 U.S.C. § 1367(a), the Court believes the express prohibition of the removal of workmen's compensation cases is controlling. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455581/ | 798 S.W.2d 210 (1990)
STATE of Missouri, Respondent,
v.
Nadaire Kim DEY, Appellant.
No. WD 41854.
Missouri Court of Appeals, Western District.
October 30, 1990.
*211 Bob Tyler, Columbia, for appellant.
Robert R. Sterner, Columbia, for respondent.
Before GAITAN, P.J., and TURNAGE and KENNEDY, JJ.
GAITAN, Judge.
This is an appeal from a conviction of driving while intoxicated in violation of § 577.010 RSMo 1986. Appellant contends that there was insufficient evidence to establish that he operated a motor vehicle while intoxicated.
The judgment is affirmed.
In reviewing the sufficiency of the evidence in this case, we view all the evidence and the reasonable inferences to be drawn therefrom in the light most favorable to the state, and we disregard all contrary evidence and inferences. State v. Nickerson, 763 S.W.2d 716, 717 (Mo.App.1989). An appellate court will not weigh the evidence, but will determine only whether there was sufficient evidence from which reasonable persons could have found appellant guilty as charged. State v. Porter, 640 S.W.2d 125, 126 (Mo.1982). Applying these principles to the case at bar, we note that the following evidence was adduced at trial.
At approximately 2:40 a.m. on April 14, 1988, police officer Jack Pestle was dispatched to the parking lot of the Eastgate IGA Center in Columbia, Missouri. There, he found appellant asleep behind the steering wheel of a parked pickup truck. According to Officer Pestle, the key was in the ignition and the engine was running.
Officer Pestle testified that he removed the keys from the ignition and asked appellant to get out of the truck. Appellant walked unsteadily after stepping out of the truck and Officer Pestle noticed that appellant's eyes were bloodshot and glassy, his speech was slurred, and a strong odor of intoxicants was on appellant's breath. Officer Pestle conducted several field sobriety tests and determined that appellant was intoxicated. Officer Pestle arrested appellant for driving while intoxicated and took him to the police station where appellant refused to submit to a blood alcohol test.
At trial, appellant stated that he did not drive his truck on the night of his arrest. Appellant testified that from about 6:00 p.m. until 10:30 or 11:00 p.m. he drank beer with his brother in his brother's truck. His brother then dropped him off at his own *212 truck parked in the IGA parking lot. At that time, appellant concluded that he was too intoxicated to drive home, so he decided to sleep in his truck. Appellant also testified that, before falling asleep, he turned on the engine to stay warm, and then removed the key from the ignition while the engine was still running.
At the end of the trial, appellant was found guilty of driving while intoxicated and was sentenced to six months imprisonment. Execution of sentence was suspended and he was placed on two years probation.
As his sole point on appeal, appellant claims that there was insufficient evidence to establish that he operated a motor vehicle while intoxicated. Appellant argues that he did not driveand had no intention of drivinghis truck on the night in question. Instead, he asserts, his sole intention in returning to his truck was to sleep there until he was sober. Therefore, he concludes the trial court erred in finding that he had "operated" a motor vehicle for the purposes of § 577.010, RSMo 1986.
Section 577.010.1 states that a person commits the crime of driving while intoxicated if he "operates" a motor vehicle while in an intoxicated or drugged condition. And, according to the statutory definitions contained in § 577.001, RSMo 1986, a person "operates" a motor vehicle when he is "physically driving or operating or being in actual physical control of a motor vehicle."
"Actual physical control" is construed as existing or present bodily restraint, directing influence, domination or regulation of a vehicle, and it exists even where the vehicle is motionless as long as the person is keeping the vehicle in restraint or is in a position to regulate its movements and the automobile is running. Taylor v. McNeill, 714 S.W.2d 947, 948 (Mo.App.1986). Furthermore, a finding of actual physical control is not defeated by the fact that the driver is asleep. Id.
In Kansas City v. Troutner, 544 S.W.2d 295 (Mo.App.1976), a defendant was found to be in "actual physical control" of a vehicle under circumstances that are virtually identical to those in the case at bar. In Troutner, the defendant was found asleep behind the wheel of his camper-truck parked with its engine running in a private parking lot. The defendant had been drinking in a nearby tavern and sensing that he was too tired to drive, fell asleep in the cab of the truck. We affirmed the defendant's conviction under Kansas City Municipal Ordinance § 34.116, which is functionally equivalent to § 577.010.
However, appellant argues that Troutner is distinguishable from the case at bar. Specifically, appellant points to that part of the Troutner decision which explains why a drunk driving ordinance can be applied to a vehicle parked on private property:
A motor vehicle is regarded as a source of danger when operated carelessly or by one whose responsiveness is diminished by intoxication. Physical control is a necessary prelude to the operation of a motor vehicle upon the public streets. It is a rational surmise that one in the physical control of a motor vehicle paused temporarily on a private parking area which enters upon and immediately adjoins a public street intends to resume public travel.
544 S.W.2d at 299.
According to appellant, the quoted language means that, in order to show that a person is in "actual physical control" of a vehicle for the purposes of § 577.010, it is incumbent on the State to show, by direct or circumstantial proof, that the person intended to drive the vehicle.
However, no such showing was required in Troutner. On the contrary, the Troutner court affirmed the defendant's conviction despite the fact that there was no evidence that the defendant intended to drive his vehicle. Thus, Troutner is in line with Taylor v. McNeill, which holds that "actual physical control" of a vehicle simply means to be in a position to regulate the movements of a vehicle which has its engine running. 714 S.W.2d at 948.
*213 While it may be preferable, as appellant argues, for an intoxicated individual to seek refuge in his car as opposed to driving it, the legislature has made driving while intoxicated and being in actual physical control while intoxicated equally culpable. Accordingly, the judgment of the trial court is affirmed.
All concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455665/ | 255 P.3d 628 (2011)
242 Or. App. 474
Karen M. ROBERTS, Plaintiff-Appellant,
v.
OREGON MUTUAL INSURANCE COMPANY, an Oregon corporation, Defendant-Respondent.
CV080255; A142739.
Court of Appeals of Oregon.
Argued and Submitted December 6, 2010.
Decided April 27, 2011.
*629 Bart A. Brush, Portland, argued the cause and filed the briefs for appellant.
Amy R. Alpern argued the cause for respondent. With her on the brief were Janice H. Kim and Littler Mendelson, P.C.
Before BREWER, Chief Judge, and EDMONDS, Senior Judge.
EDMONDS, S.J.
Plaintiff, a former employee of defendant, brought claims against defendant for common-law wrongful discharge and for unlawful employment discrimination under ORS 659A.230(1). She appeals after the trial court granted defendant summary judgment under ORCP 47. We affirm.
For purposes of summary judgment, we review the facts in the light most favorable to plaintiff to determine if there exist genuine issues of fact which, as a matter of law, preclude summary judgment in defendant's favor. Plaintiff was employed by defendant beginning in May 2000. Her employment was terminated by defendant in December 2006. There are five events that form the gravamen of plaintiff's claims. In March and April of 2006, plaintiff complained to her supervisor about coworkers skipping meal and break periods, thereby permitting them to leave work earlier. In plaintiff's view, the practices by her coworkers increased her personal workload because her coworkers were unable to complete their work due to their shortened workdays. Plaintiff's supervisor was not receptive to plaintiff's complaints. On May 25, plaintiff's supervisor revised plaintiff's work schedule. Under the new schedule, plaintiff was required to work until 6:00 p.m. rather than until 3:00 p.m. On that same day, plaintiff contacted defendant's human resource manager. Prior to that meeting, plaintiff noted that she wanted to be allowed to schedule her work day as her workers were. During the meeting, plaintiff told the manager about the practices of her coworkers. Plaintiff, who was unaware that the practices were in violation of Oregon labor law, was told by the manager that the practice was not legal and that defendant was required to enforce rest and meal break requirements. In June, plaintiff sent an e-mail to defendant's chief executive officer contending that her supervisor had retaliated against her by changing her work schedule because she had contacted the human resources manager. Plaintiff was referred by the chief executive officer to a vice president, with whom plaintiff later met.
*630 In the discussion with the vice president, plaintiff expressed her hope to have her schedule changed back as it had been originally. She testified that she also told him about the practices of her coworkers regarding rest and meal breaks. According to plaintiff,
"I explained to him what was going on, and essentially just told him the events that were leading up to it, and that I was I felt that I was being singled out and retaliated against. And [plaintiff's supervisor] was extremely hostile, and that I didn't understand it because I had just received an outstanding, glowing review from her, and my work never changed."
Plaintiff testified that the vice president responded to her explanation by stating, "That's what you get for going to HR and complaining." Plaintiff understood the vice president to be referring to the change in her schedule. Eventually, plaintiff was discharged from her employment in December 2006 after defendant claimed that she had been insubordinate to her supervisor.
In June 2008, plaintiff filed this action for civil damages against defendant. In her complaint, she alleges claims for common-law wrongful discharge and unlawful employment discrimination under ORS 659A.230. In her claim for wrongful discharge, she alleges, in part:
"4.
"On several occasions during March, April, and May, 2006, Plaintiff informed her supervisor, that certain employees were not taking rest breaks as required by Oregon law.
"5.
"After reporting the wage-and-hour violations to her supervisor, her supervisor became more hostile toward Plaintiff, but took no steps to correct the violations.
"6.
"On or about May 25, 2006, Plaintiff reported the violations to Defendant's Human Resources Department.
"7.
"Shortly after Plaintiff reported the violations to Human Resources, Plaintiff's supervisor, in retaliation for Plaintiff having reported the violations, changed Plaintiff's work schedule in a manner that the supervisor knew to be detrimental to Plaintiff.
"8.
"During the ensuing months Plaintiff's supervisor, also in retaliation for Plaintiff having reported the violations, began to subject Plaintiff to a higher level of scrutiny than other employees, began to micromanage Plaintiff's work, and became increasingly hostile toward Plaintiff.
"9.
"On or about December 12, 2006, Defendant discharged Plaintiff from her employment.
"10.
"During plaintiff's employment, plaintiff pursued her legal right to report wage-and-hour law violations, which was directly related to her role as an employee, and of important public interest as indicated by ORS 659A.230, ORS 653.261 and OAR 839-020-0050, and ORS 653.991. Plaintiff resisted or opposed defendant's unlawful wage-and-hour practices.
"11.
"Defendant through its officers, agents, or employees wrongfully discharged plaintiff because plaintiff exercised her right to report wage-and-hour law violations, and because plaintiff resisted or opposed defendant's unlawful wage-and-hour practices."
Incorporating the above allegations into her second claim, plaintiff further alleges that defendant violated ORS 659A.230 by terminating her employment under the foregoing circumstances.
The trial court granted summary judgment for defendant on both claims. With respect to the common-law wrongful discharge claim, the court observed that an at-will employee can be discharged for any reason unless a remedy is necessary to implement an important public policy. It concluded that no such public policy interest was at stake in this case because
"plaintiff was not herself denied any wage or hour provisions designed to protect her rights as an employee. None of the wage and hour statutes referenced by *631 plaintiff require an employee to report other employees' or employers' wage and hour violations."
As to the claim made under ORS 659A.230(1), the trial court concluded that plaintiff's reports did not involve a report of criminal activity protected under the statute because plaintiff made only an internal report and did not report defendant's policies to an outside enforcement agency.
On appeal, plaintiff argues that she was terminated because she pursued an employment-related right of important public interest. Accordingly, in her view, the common-law tort of wrongful discharge is available to her as a remedy for the termination of her employment.[1] She also argues that the trial court erred in granting summary judgment on her claim under ORS 659A.230 because the statute does not require that an employee report the criminal activity to an outside enforcement agency. Defendant counters that plaintiff was neither pursuing her own employment-related right or an important public or societal obligation, and that ORS 659A.230 protects only persons who report criminal activity to outside agencies. In addition, defendant contends that plaintiff was not reporting criminal activity because she did not believe the activity to be criminal and, instead, wanted "to do the same thing as her coworkers."
After the trial court decided this case, the Supreme Court decided Lamson v. Crater Lake Motors, Inc., 346 Or. 628, 216 P.3d 852 (2009). In Lamson, the plaintiff brought an action for wrongful discharge, alleging that he had been discharged from his employment for reporting unethical and unlawful trade practices to his employer. The jury ultimately found for the plaintiff, and the defendant appealed. This court reversed the judgment for the plaintiff, reasoning that the conduct for which the plaintiff had been purportedly discharged did not involve interests of sufficient public importance to support a claim for wrongful discharge as a matter of law. Lamson v. Crater Lake Motors, Inc., 216 Or.App. 366, 383, 173 P.3d 1242 (2007). On review, the Supreme Court, relying on Babick v. Oregon Arena Corp., 333 Or. 401, 40 P.3d 1059 (2002), held that no source of law established a public duty relating to the plaintiff's conduct. Lamson, 346 Or. at 637-41, 216 P.3d 852. According to the court, to establish such a duty, statutes cannot merely express a general public policy; rather, they must encourage specific acts or "otherwise demonstrate[] that such acts enjoy high social value." Babick, 333 Or. at 409, 40 P.3d 1059. Here, the same principle is applicable; none of the statutes upon which plaintiff relies speaks specifically to the reporting of an employer's wage and hour violations, nor do they place a duty on a person in plaintiff's circumstances to report such violations to the proper authorities.
In Lamson, the plaintiff alleged that he was wrongfully discharged for complaining to management about conduct he believed to constitute illegal and unethical sales tactics. Accordingly, the court examined whether the plaintiff's internal complaints to management about unlawful and unethical sales practices "served a public duty or interest that is sufficiently important to warrant a departure from the ordinary rules of law respecting discharge from at-will employment." 346 Or. at 639, 216 P.3d 852. It concluded that the plaintiff's actions were not protected at common law by actions for wrongful discharge, reasoning:
"In this case, [plaintiff] did not report to defendant's management that he had been required to engage in unlawful trade practices or, in the exercise of his job responsibilities, that defendant corporation was itself engaged in such practices. Instead, plaintiff reported to defendant's management that an outside sales firm with which defendant had contractedRPMhad engaged in unlawful practices and that plaintiff did not think defendant corporation should be associated with an outside firm of that ilk. Certainly, that was a defensible *632 point of view, but, in light of the scope of authority that RPM had over the sales event, it was misdirected. At that juncture, the Attorney General and the various district attorneys were the ones who had authority to act immediately. See ORS 646.632(1) (authorizing enforcement action by `prosecuting attorney'); ORS 646.605(5) (defining `prosecuting attorney' to include Attorney General, district attorney)."
Id. at 640, 216 P.3d 852.
Similarly, there is no infringement on a public duty or interest that is sufficiently important to warrant a departure from the ordinary rules of law respecting discharge from at-will employment. As in Lamson, plaintiff did not pursue a right related to her role as an employee such as making a report of an alleged statutory or rule violation to any entity or person with authority to take action to enforce the statutory duties that plaintiff contends were violated. See Handam v. Wilsonville Holiday Partners, LLC, 225 Or.App. 442, 201 P.3d 920 (2009), vac'd and rem'd for recons., 347 Or. 533, 225 P.3d 43, adh'd to on recons., 235 Or.App. 688, 234 P.3d 133, rev. den., 349 Or. 171, 243 P.3d 69 (2010) (holding internal report by hotel employee of alleged violations of liquor commission rules by coworkers did not involve an important societal obligation sufficient to support a claim for common-law wrongful discharge); see also ORS 651.060 (vesting the Bureau of Labor and Industries with the authority to conduct investigations of violations of ORS chapters 652 and 653). It follows under Lamson that the trial court did not err in granting summary judgment to defendant on plaintiff's wrongful discharge claim.
We turn now to the trial court's grant of summary judgment on plaintiff's claim under ORS 659A.230. That statute provides:
"(1) It is an unlawful employment practice for an employer to discharge, demote, suspend or in any manner discriminate or retaliate against an employee with regard to promotion, compensation or other terms, conditions or privileges of employment for the reason that the employee has in good faith reported criminal activity by any person, has in good faith caused a complainant's information or complaint to be filed against any person, has in good faith cooperated with any law enforcement agency conducting a criminal investigation, has in good faith brought a civil proceeding against an employer or has testified in good faith at a civil proceeding or criminal trial.
"(2) For the purposes of this section, `complainant's information' and `complaint' have the same meanings given those terms in ORS 131.005.
"(3) The remedies provided by this chapter are in addition to any common law remedy or other remedy that may be available to an employee for the conduct constituting a violation of this section."
The trial court's ruling and the parties' arguments regarding the meaning of the statute present a question of statutory interpretation regarding the intent of the legislature that is of first impression insofar as we can ascertain.[2] Generally, the intent of the legislature is ascertained by examining the text and context of the statute as well as any helpful legislative history offered by the parties. State v. Gaines, 346 Or. 160, 172-72, 206 P.3d 1042 (2009).
We examine more particularly the text of ORS 659A.230(1). The phrase to be interpreted provides that an unlawful employment practice occurs when an employer discriminates or retaliates against an employee "for the reason that the employee has in good faith reported criminal activity by any person[.]" (Emphasis added.) The ordinary meaning of the verb "reported" means "to *633 give an account of: NARRATE, RELATE, TELL." Webster's Third New Int'l Dictionary 1925 (unabridged ed. 2002). However, the context in which the word is used adds additional meaning to the definition. State v. Depeche, 242 Or.App. 147, 152, 252 P.3d 861 (2011). For example, one use of the word "report" is to "make a charge of misconduct against [another]," while another potentially applicable use is "to make known to the proper authorities: give notification of." Webster's at 1925.
ORS 659A.230(1) provides for four circumstances in which an unlawful employment practice could arise; they are when an employee is discriminated against in his or her employment because (1) "the employee has in good faith reported criminal activity by any person"; (2) the employee has in good faith caused a complainant's information or complaint to be filed against any person; (3) the employee has in good faith cooperated with any law enforcement agency conducting a criminal investigation; or (4) the employee has in good faith brought a civil proceeding against an employer or has testified in good faith at a civil proceeding or criminal trial. Only the circumstancewhen the employee "has in good faith reported criminal activity by any person"is potentially applicable, because the other statutory circumstances require conduct that the parties agree did not occur in this case.
Also, part of the context of ORS 659A.230 is ORS 131.005, which is referenced in subsection (2) of the statute. ORS 131.005 is part of the Oregon Criminal Code. Thus, the import of subsection (2) is that subsection (1) refers to conduct that is part of or results in a criminal investigation or process. That implication is further buttressed by the references in the other phrases of subsection (1) that refer to "cooperat[ion] with any law enforcement agency conducting a criminal investigation" and testifying in a "criminal trial."
In addition to the wording of the statute, the trial court was persuaded, in part, by legislative history accompanying the enactment of what would become ORS 659A.230. On appeal, plaintiff argues that "[t]he legislative history is of little, if any, value in determining the legislature's intent." (Underscoring and boldface omitted.) The legislative history at issue consists of a statement by Representative Heidi Rijkin in a hearing before the Senate Committee on Labor in 1991 regarding what was then House Bill 3435 and later became ORS 659A.230. In her testimony, Rijkin stated:
"HB 3435 is defined to help victims of crimes, and those who are witnesses to crime to protect their jobs. HB 3435 will increase the chance for law enforcement officials to gather strong information from witnesses, assuring that those witnesses' jobs won't be threatened by their cooperation."
Tape Recording, Senate Committee on Labor, HB 3435, June 5, 1991, Tape 132, Side A (statement of Rep Heidi Rijkin). According to plaintiff, the above testimony should be given little weight because, in plaintiff's view, the quote is "cherry-picked" from legislative history that reveals that at no time did any legislator discuss the issue of to whom an employee must report criminal activity. Although we agree with plaintiff that the above testimony does not reveal that the legislature considered the precise issue before us, the testimony is at least helpful in the sense that it indicates that the general policy of the statute is to aid employees in their employment-related relationships who report criminal activity.
The trial court concluded, in light of the text, context, and legislative history underlying the statute, that plaintiff's reports did not involve a report of criminal activity protected under ORS 659A.230(1). We agree with the trial court for the following reason. A report to be protected by the statute must constitute a report of "criminal activity." In the context of the protection provided for by the statute, a "report of criminal activity" necessarily implies that the person making the report believes that he or she is reporting criminal conduct at the time that the report is made. In this case, plaintiff testified that she was unaware that the practices that she complained about to her supervisor were in violation of Oregon labor law until after the manager informed her of that fact. Until that point in time, plaintiff testified *634 that she believed that defendant's practices were "okay." In fact, she desired the benefit of the employer's unlawful practices. Consequently, plaintiff is unable to demonstrate the gravamen of a claim under ORS 695.230(1), and her claim necessarily fails as a result. It follows that the trial court correctly granted summary judgment to defendant.
Affirmed.
NOTES
[1] The Bureau of Labor and Industries "has authority to seek criminal prosecution of employers who violate rest break requirements." Gafur v. Legacy Good Samaritan Hospital, 344 Or. 525, 537, 185 P.3d 446 (2008); see ORS 653.991 ("Violation of any provision of this section or ORS 653.010 to 653.545 or of any rule adopted by the Wage and Hour Commission under ORS 653.307 shall be punishable as a misdemeanor.").
[2] In Lamson, the court acknowledged, with reference to ORS 659A.230(1), that "[t]here are instances in which employees may be protected when they report unlawful actions of others by means of civil or criminal channels recognized by law[,]" and it pointed out that "that is not what happened in this case." 346 Or. at 640, 216 P.3d 852. However, we do not understand the Lamson court to have decided the issue of whether a civil action could be maintained under ORS 659A.230(1) when the report of criminal activity is made internally. The only claim before the court in Lamson was a wrongful discharge claim. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455612/ | 798 S.W.2d 440 (1990)
32 Ark.App. 164
STATE FARM FIRE AND CASUALTY COMPANY, Appellant,
v.
Betty AMOS, Appellee.
No. CA 90-60.
Court of Appeals of Arkansas, Division II.
November 7, 1990.
*441 Clark S. Brewster, Bryant, for appellant.
Charles Karr, Fort Smith, for appellee.
COOPER, Judge.
On August 24, 1986, the appellee, Betty Amos, was a passenger in a pickup truck driven by her son, Leslie Amos. Leslie had borrowed the truck from his boss, Earl Scyrkels. Gary Dale Shadwick, who was legally drunk and uninsured, ran a stop sign and crashed into Scyrkels' truck, injuring the appellee. Because Shadwick had no insurance, Scyrkels' insurance company paid Ms. Amos the $50,000.00 bodily injury limits of its policy on the truck. Ms. Amos filed this suit against the appellant, State Farm Fire and Casualty Company, seeking to stack damages pursuant to a policy on Leslie Amos' Toyota, which had bodily injury limits for uninsured motorist coverage of $25,000.00.
The appellant moved for summary judgment prior to trial and also moved for a directed verdict at the close of the appellee's case. Both motions were denied, and the case was submitted to the jury, which was instructed that the first $50,000.00 of any verdict it might award had already been paid to the appellee, so that its verdict would affect the appellant only in an amount exceeding that sum by up to $25,000.00. The jury returned a verdict of $2,700.00 for the appellee. The appellee later moved for a new trial on the basis that the award was insufficient, and the trial judge granted the motion. From that decision, comes this appeal.
For reversal, the appellant contends that the trial judge erred in denying its motions for summary judgment and directed verdict. We note that the denial of a motion for summary judgment is ordinarily not reviewable on appeal even after final judgment is entered, see Henslee v. Kennedy, 262 Ark. 198, 555 S.W.2d 937 (1977), and we therefore address only the appellant's contention that the trial court erred in refusing to direct a verdict in its favor.
The crucial issue in the case at bar is whether the State Farm insurance policy provided the appellee benefits in addition to the primary coverage provided by Mr. Scyrkel's policy. In its motion for a directed verdict, the appellant contended that it did not, based on the following language in the State Farm policy:
If the insured sustains bodily injury while occupying a vehicle not owned by you, your spouse, or any relative, this coverage applies:
(a) As excess to any uninsured motorist vehicle coverage which applies to the vehicle as primary coverage, but
(b) only in the amount by which it exceeds the primary coverage.
In its motion, the appellant argued that there was no contractual liability because the $25,000.00 State Farm coverage did not exceed the $50,000.00 primary coverage. The appellee argued that the above-quoted language was ambiguous and that the ambiguity should be resolved in favor of the insured by allowing the uninsured motorist provisions in the two policies to be "stacked," i.e., allowing the appellee to recover the full amount of the State Farm coverage in addition to the full amount of the primary coverage. The trial court specifically found that no extrinsic evidence was required to interpret the policy and concluded that the above-quoted anti-stacking provision was ambiguous. The appellant's directed verdict motion was denied, and the trial court allowed the case to proceed to the jury.
In cases such as the case at bar, where the meaning of the language of a written contract does not depend on disputed extrinsic evidence, the construction and legal effect of the contract are questions of law. Duvall v. Massachusetts Indemnity and Life Ins. Co., 295 Ark. 412, 748 S.W.2d 650 (1988). In order to be ambiguous, a term in an insurance policy must be susceptible to more than one *442 equally reasonable construction. Watts v. Life Ins. Co., 30 Ark.App. 39, 782 S.W.2d 47 (1990). We hold that the language of the State Farm policy unambiguously precluded any contractual liability to the appellee under the circumstances of the case at bar, and that the trial court erred in denying the appellant's motion for a directed verdict.
The anti-stacking provision in the State Farm policy provided that, under the circumstances presented here, the uninsured motorist insurance coverage would apply as excess to any primary coverage, but only in the amount by which it exceeds the primary coverage. The clarity of the language employed compares favorably with the "other insurance" clause at issue in Pinkus v. Southern Farm Bureau Casualty Insurance Co., 292 F. Supp. 141 (1968), which provided:
PARAGRAPH 5. OTHER INSURANCE. With respect to bodily injury to an Insured while occupying an automobile not owned by a Named Insured under this endorsement, the insurance hereunder shall apply only as excess insurance over any other similar insurance available to each occupant, and this insurance shall apply only in the amount by which the applicable limit of liability of this endorsement exceeds the sum of the applicable limits of liability of all such other insurance.
The Pinkus court addressed a dispute quite similar to that which is before us here. There, the plaintiffs sought coverage from the defendant as the secondary insurer on three "Uninsured Motorist Coverage" policies on three vehicles owned by plaintiffs. The policies provided uninsured motorist protection within limits of liability of $10,000.00 for each person and $20,000.00 for each accident. The plaintiffs were involved in an accident while passengers in a vehicle owned by a third party, and insured by Travelers Insurance Company, which provided primary coverage including an uninsured motorist endorsement, with identical limits to those provided by the defendant. Travelers paid the policy limits, and plaintiffs sought to stack the coverage provided by defendant. The court found the policy language to be unambiguous and concluded that the provision did not allow stacking under the circumstances of that case because the defendant insurer's policies contained limits of liability which did not exceed the limits of liability in the Traveler's policy.
The same logic applies here. The only reasonable construction which can be given to the language of the State Farm policy is that the coverage applies only to the extent that it exceeds the primary coverage. The State Farm coverage of $25,000.00 does not exceed the primary coverage of $50,000.00 in any amount. Therefore, the trial court erred in denying the appellant's motion for a directed verdict. Accordingly, we reverse the trial court's order granting a new trial, and the case is dismissed.
Reversed and dismissed.
MAYFIELD and ROGERS, JJ., agree. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455614/ | 798 S.W.2d 719 (1990)
FEDERATED MORTGAGE AND INVESTMENT COMPANY, Appellant,
v.
Stephen JONES and Sharon K. Jones, Defendants, and
Eugene D. Brown Company, Realtors, Respondent.
No. 72694.
Supreme Court of Missouri, En Banc.
November 20, 1990.
*720 Richard J. Koury II, Independence, for appellant.
Terence M. O'Brien, Kansas City, for respondent.
COVINGTON, Judge.
Federated Mortgage and Investment Company appeals from the circuit court's dismissal of a garnishment action. The circuit court found that it was without jurisdiction to proceed in a garnishment action because the underlying judgment was void for failure to comply with the verification by affidavit requirement of § 535.020, RSMo 1986, a procedure for dispossession of a tenant for nonpayment of rent. The Missouri Court of Appeals, Western District, affirmed, but transferred the case to this Court for the purpose of re-examining the existing law. The judgment is reversed and the cause remanded.
In 1983 Federated Mortgage filed a petition for rent and possession in an associate circuit judge's division of the Jackson County Circuit Court against Stephen Jones and Sharon K. Jones. Richard J. Koury, II, attorney for Federated Mortgage, signed the petition in that capacity. Following the signature of Mr. Koury is typed a statement averring that "Richard J. Koury, II, attorney for Plaintiff, makes oath and states that to the best of my knowledge and belief the facts and allegations contained in the Petition are true." Mr. Koury also signed this statement. The statement signed by Mr. Koury, however, lacked a notary's jurat. On August 10, 1983, after evidence was adduced on behalf of the plaintiff, the associate circuit judge entered a judgment by default for rent and for possession of the premises.
In April of 1988, at the request of Federated Mortgage, the court issued a summons of garnishment to Eugene D. Brown Company, Sharon Jones' employer. Sharon Jones subsequently filed an affidavit of exemption claiming entitlement to a ninety percent exemption on the garnishment. The court, acting on Sharon Jones' request, directed the garnishee to pay Jones ninety percent of the compensation owed her and to hold ten percent to pay on the garnishment when so directed by the court. Apparently in an effort to dispute the exemption, Federated Mortgage moved for judgment against the garnishee. The question was whether real estate commissions owing by Brown to judgment-debtor Sharon Jones were subject to the ninety percent exemption provided for by § 525.030.2, RSMo 1986. The associate circuit judge entered judgment against the garnishee after which the garnishee applied for trial de novo.
In the circuit division, the judge discovered through examination of the file that *721 plaintiff's original petition was not verified as required by § 535.020, which provides:
Whenever any rent has become due and payable, and payment has been demanded by the landlord or his agent from the lessee or person occupying the premises, and payment thereof has not been made, the landlord or his agent may file a statement, verified by affidavit, with any associate circuit judge in the county in which the property is situated, setting forth the terms on which said property was rented, and the amount of rent actually due to such landlord; that the same has been demanded from the tenant, lessee or person occupying the premises, and that payment has not been made, and substantially describing the property rented or leased....
Noting her jurisdiction to be derivative, the trial court found, sua sponte, a lack of jurisdiction to proceed with the garnishment proceeding. Federated Mortgage appealed.
Initially this Court observes that the associate circuit judge's division had jurisdiction over the persons. There is no allegation of lack of notice of the litigation. The pleading states a cause of action to support a judgment according to the requirements of the statute but for the missing jurat of the notary. The plaintiff adduced evidence before entry of judgment.
The purpose of a verification is to secure good faith in the averments of a party. See Drury Displays v. Board of Adjustment, 760 S.W.2d 112, 114 (Mo. banc 1988). As a general rule the verification requirement is not so strict as to make an unverified petition "unsalvageable." Id. The reason for this must be that when a pleading otherwise states a cause of action to support a judgment, the verification does not constitute a part of the pleading itself but, rather, goes to the form of the pleading.
Under the holding of Drury Displays, the associate circuit judge in this case would have been within his discretion to permit amendment to verify the pleading while the judgment was still within his control. Drury Displays, 760 S.W.2d at 114-15. After a matter has gone to judgment, however, the question becomes one of whether the defect can be corrected after judgment. The legislature, at least implicitly expressing cognizance of the principles of finality of judgments, has afforded relief under certain circumstances. Section 511.260(14), RSMo 1986, provides that a judgment:
... shall not be ... impaired or in any way affected by reason of the following imperfections, omissions, defects, matters or things, or any of them, namely:
. . . . .
(14) For any other default or negligence of any clerk or officer of the court or of the parties, or of their attorneys, by which neither party shall have been prejudiced.
The parties in this case make no claim of prejudice, and there is no basis for such a claim. The defendants, although duly served with process, raised no objection to the lack of jurat. The pleading states a cause of action. The record reflects that the plaintiff adduced evidence, sworn testimony, prior to the associate circuit judge's entry of judgment. The sole dispute, raised in an action by the judgment-creditor against the garnishee, is whether the real estate commissions owing by the garnishee to the judgment-debtor are subject to the ninety percent exemption. There is clear absence of prejudice. Application of § 511.260(14) in this case serves the principles of finality of judgments without undermining the validity of the underlying judgment.
The circuit court has authority to proceed.
The judgment is reversed and the cause remanded and ordered reinstated for further proceedings.
BLACKMAR, C.J., and ROBERTSON, RENDLEN and HOLSTEIN, JJ., concur.
SEILER, Senior Judge, dissents in separate opinion filed.
*722 HIGGINS, J., dissents and concurs in dissenting opinion of SEILER, Senior Judge.
BILLINGS, J., not sitting.
ROBERT E. SEILER, Senior Judge, dissenting.
For the following reasons, I believe the judgment should be affirmed and therefore respectfully dissent.
In order to prevail in this garnishment proceeding, plaintiff must have been entitled to its judgment in the underlying rent and possession action. The statutory action of a landlord for rent and possession (now section 525.020, RSMo) is over 100 years old.[1] It has always required certain averments in the statement or petition. One is that the petition be verified by affidavit.
The action is a summary one. Only 5 days need elapse between service of summons and return date. If the landlord prevails, the court must issue execution to put the landlord in immediate possession, which the sheriff must do within 5 days of receiving the execution as well as satisfying the rent due from the goods and chattels of the defendant. All of this can be done on the petition alone if there is no response. People can be put out on the street and their furniture seized in less than 10 days.
Perhaps it is because the remedy can be so swift and drastic that the legislature has always required that the petition be verified, a requirement which may have been thought to "assure the truth of the pleading," American Industrial Resources, Inc., v. T.S.E. Supply Co., 708 S.W.2d 806, 808 (Mo.App.1986), and Drury Displays v. Board of Adjustment, 760 S.W.2d 112, 114 (Mo. banc 1988). In Emert v. Waldman, 186 S.W.2d 42 (Mo.App.1945), the statement in a landlord's action for rent and possession was not verified, either by the landlord or his agent. The court held that "[t]he record herein conclusively shows that the action was not instituted in accordance with the requirements of the statute... compliance with which is necessary to give the court jurisdiction." Id. at 46.
While it is true the associate circuit judge's division of the circuit court has jurisdiction to hear and decide a landlord's action for rent and possession, that general proposition does not meet the issue here. Unless the statement filed meets the statutory requirements there is nothing for the general jurisdiction to act on. It is as though one were trying to use a pay telephone without first inserting the necessary coin. The telephone is there, ready to go, but without the coin (as with the proper statement in the rent and possession case), it cannot operate.
We enforce strictly our requirement that the movant in a motion for relief following conviction after trial (Rule 29.15(d)) verify the motion. Failure to do so requires dismissal. Vinson v. State, 800 S.W.2d 444 at 447-48 (Mo. banc 1990); Malone v. State, 798 S.W.2d 149, 150-51 (Mo. banc 1990); Kilgore v. State, 791 S.W.2d 393, 395 (Mo. banc 1990). The rule says "shall verify," which is no stronger than the mandatory language "verified by affidavit" found in section 535.020, supra.
It may be that failure of the movant to verify his motion actually does not prejudice anyone, yet such failure is not saved by section 511.260(14), RSMo 1986. I do not believe that statute applies to the summary procedure before us and have been unable to find any cases where it has been so applied. I see no reason not to require that all the i's be dotted, all the t's crossedin other words, that the statute creating the remedy for rent and possession be complied with. That was not done here.
HIGGINS, J., concurs.
NOTES
[1] The statute has been substantially the same since 1877, L. 1877, p. 284. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455616/ | 798 S.W.2d 459 (1990)
Larry LEWIS, Appellant,
v.
BLEDSOE SURFACE MINING COMPANY, Appellee.
No. 90-SC-199-DG.
Supreme Court of Kentucky.
November 8, 1990.
*460 Phillip Lewis, Hyden, for appellant.
Debra H. Dawahare, Wyatt, Tarrant & Combs, Lexington, for appellee.
LAMBERT, Justice.
This Court granted discretionary review of the decision of the Court of Appeals which reversed a jury verdict as to damages. Although not identified as such by the Court of Appeals or the parties, the issue appears to be whether appellant (plaintiff at trial) presented sufficient evidence at trial of his diligence in seeking other employment to support the verdict of the jury as to damages. Said otherwise, should appellee (defendant at trial) have been granted a directed verdict for any damages in excess of nominal damages? As will be explained, significant issues which might have been presented are not before the Court.
As determined by the jury and affirmed by the Court of Appeals, appellant was wrongfully discharged by appellee for bringing a workers' compensation claim. Appellee did not file a cross-motion for discretionary review in this Court, and the liability question was resolved against it by the Court of Appeals. Therefore, we are not at liberty to review the sufficiency of the evidence on this issue. CR 76.21. Accordingly, the parties' extensive discussions of the facts giving rise to the claim of wrongful discharge are largely irrelevant to our inquiry.
At the close of all the evidence, appellee tendered instructions with which appellant agreed. These instructions, submitted in the form of special interrogatories, required the jury to find, inter alia, the amount appellant would have earned from appellee but for the wrongful discharge, the amount he actually earned from other employment, and whether he exercised reasonable diligence to secure other employment during the relevant period. Manifestly, the instructions sound in contract and may be at odds with this Court's decision in Firestone v. Meadows, Ky., 666 S.W.2d 730, 732 (1984), in which we characterized a cause of action for wrongful discharge as "perfectly consistent with the law of torts." However, in view of the absence of any objection by either party to the instructions given, there is no issue in this case as to whether the instructions properly defined the allowable recovery and this Court's resolution of the issue as presented should not be interpreted as approval or disapproval of the manner in which the jury was instructed. O'Leary v. Commonwealth, Ky., 441 S.W.2d 150 (1969).
Despite its affirmance of the trial court on the issue of wrongful discharge, the Court of Appeals determined that appellant's evidence was insufficient to justify the damages awarded. It appears to have been the view of the Court of Appeals that appellant failed to prove that he exercised reasonable diligence to secure other work during the period for which damages were recovered. Conceding that appellant presented sufficient evidence to support a finding that he suffered loss of wages beyond the date appellee ceased doing business, the Court of Appeals said:
"We can only conclude that it [appellant's proof] fell far short of furnishing an evidentiary basis for believing that appellee had exercised reasonable diligence to secure other employment throughout the entire time from his discharge to the date of trial."
Nevertheless and curiously, the case was remanded to the trial court "for a new trial on the issue of damages only." As with *461 the issue of liability for wrongful discharge, appellee did not move for leave to cross-appeal from the order remanding for a new trial on damages and we must therefore conclude that it was also satisfied with that portion of decision of the Court of Appeals. CR 76.21.
From the foregoing and as earlier stated, our only inquiry is whether appellant presented sufficient evidence that he exercised reasonable diligence to secure other work during the period for which damages were awarded. Upon examination of the evidence, we discover appellant's testimony that after his discharge, he sought employment at a number of coal companies, a sawmill and employment as a truck driver. He identified the persons and companies whom he had contacted seeking employment. Conceding that he had not applied for work every week from the time of his discharge until the date of trial, appellant insisted that he had been diligent. There was also unchallenged evidence that appellant had commenced a used car business which proved to be unsuccessful and that he had driven a truck occasionally during the relevant period.
Appellee characterized the evidence as "a vague list of eight or nine employers, but [he] could testify as to no times, dates or reasons for not being hired." Appellee's latter assertion is incorrect as appellant testified that a principal reason for his inability to obtain employment was the refusal of employers to hire him upon learning that he had been fired by appellee. While appellant's evidence may have been lacking in precision, upon all of such testimony, he and other witnesses were sharply cross-examined and confronted with the contention that he had no desire to obtain other employment and was perfectly willing to await the result of his lawsuit. We are of the opinion that such evidence created a classic jury question, the resolution of which is a matter reserved exclusively to the trier of fact.
Appellee and the Court of Appeals rely upon this Court's decision in Newport Dairy v. Shackelford, 261 Ky. 754, 88 S.W.2d 940 (1935), a case in which an employee was allowed recovery in the trial court for breach of an employment contract. On appeal, the decisive issue was whether there was evidence of reasonable diligence by the employee to obtain other employment. After quoting a portion of the testimony, the Court said:
"It should be observed that his answers disclose no facts, but merely his opinion. He names no person, time, or place, of whom, when, or where, he even sought employment. Whilst he did not sell brushes, he merely stated, `I tried to.' Whether he did so for only a portion of a day, the record is silent." 88 S.W.2d at 942.
The judgment was reversed.
Our examination of the testimony quoted in Shackelford and the evidence presented herein reveals sufficient dissimilarity to require submission of this case under the standard relied upon by appellee and the Court of Appeals.
As stated at the outset, we perceive the issue to be whether there was sufficient evidence at trial of appellant's diligence in seeking other employment to support the verdict of the jury as to damages; or whether the trial court erred in failing to grant appellee's motion for a directed verdict for any sum in excess of nominal damages. Upon review of the evidence supporting a judgment entered upon a jury verdict, the role of an appellate court is limited to determining whether the trial court erred in failing to grant the motion for directed verdict. All evidence which favors the prevailing party must be taken as true and the reviewing court is not at liberty to determine credibility or the weight which should be given to the evidence, these being functions reserved to the trier of fact. Kentucky & Indiana Terminal R. Co. v. Cantrell, 298 Ky., 743, 184 S.W.2d 111 (1944), and Cochran v. Downing, Ky., 247 S.W.2d 228 (1952). The prevailing party is entitled to all reasonable inferences which may be drawn from the evidence. Upon completion of such an evidentiary review, the appellate court must determine whether the verdict rendered is "`palpably or flagrantly' against the evidence *462 so as "to indicate that it was reached as a result of passion or prejudice.'" NCAA v. Hornung, Ky., 754 S.W.2d 855, 860 (1988). If the reviewing court concludes that such is the case, it is at liberty to reverse the judgment on the grounds that the trial court erred in failing to sustain the motion for directed verdict. Otherwise, the judgment must be affirmed.
Upon our review of the evidence, we are of the opinion that the Court of Appeals exceeded the scope of its review. Finding no error in the trial court's ruling on the motion for directed verdict, we reverse the decision of the Court of Appeals and reinstate the judgment of the trial court.
STEPHENS, C.J., and COMBS, GANT and LEIBSON, JJ., concur.
WINTERSHEIMER, J., concurs in result only.
VANCE, J., dissents. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455632/ | 798 S.W.2d 145 (1990)
Kent P. HOLLINGSWORTH, Appellant,
v.
Betty B. HOLLINGSWORTH and Linda W. Covington, Appellees.
No. 89-CA-001815-MR.
Court of Appeals of Kentucky.
November 2, 1990.
Richard M. Compton, Georgetown, for appellant.
Linda Covington Christian, Lexington, for appellees.
Before CLAYTON, MILLER and STUMBO, JJ.
STUMBO, Judge:
This case involves a dissolution of marriage between Kent P. Hollingsworth, the appellant, and Betty B. Hollingsworth, the appellee. The appellee was granted maintenance and attorney fees by the Scott Circuit Court. Linda W. Covington, the appellee's attorney, was added as a necessary party. The appellant contends the trial court erred in granting attorney fees *146 and in the amount of maintenance awarded. We disagree with appellant and affirm.
The parties had been married thirty (30) years. They had five (5) children during the marriage, all now past the age of eighteen (18). The parties were divorced on August 20, 1981. A separation agreement was incorporated into the decree of dissolution which called for the disposition of all property, child support, and maintenance. For purposes of this case, the pertinent portion of the agreement dealing with maintenance is as follows:
That it is further agreed by and between the parties hereto that Second Party shall pay to the First Party the total sum of One Thousand Five Hundred Dollars ($1,500.00) per month as maintenance and as support for said infant child. The first of said maintenance and support payment shall be due and payable on the first day of the month subsequent to the entry of a Decree of Dissolution between First and Second Parties, and continue to be due and payable on the first day of every month thereafter until the infant child of the parties reaches majority or is emancipated at which time said payment shall be reduced to One Thousand Two Hundred Dollars ($1,200.00) per month as maintenance. Prior to the infant child reaching majority or becoming emancipated the Court may increase or decrease said Fifteen Hundred Dollars ($1500.00) a month payment only to the extent that it is applicable to the needs of said child and not as it applies to the needs of the First Party. Provided however, that in the event Second Party's gross income is at any time less than Seventy Thousand Dollars ($70,000.00) a year then for every ten (10%) percent reduction in the gross income of Second Party there shall be a ten (10%) percent reduction in maintenance for payments to be made by Second Party to First Party. In the event First Party is employed at a gross salary of more than Twelve Thousand Five Hundred Dollars ($12,500.00) per year then there shall be a fifty (50%) percent reduction in said maintenance payments due first Party for each dollar that First Party earns in excess of Twelve Thousand Five Hundred Dollars ($12,500.00). For example, if First Party's salary is Fourteen Thousand five Hundred Dollars ($14,500.00) then the Eighteen Thousand Dollars ($18,000.00) maintenance and child support payment ($14.400.00 maintenance payment) shall be reduced by One Thousand Dollars ($1,000.00).
Appellant worked as a publisher making $115,000 annually until he quit his job in December 1986. In January 1987, he began working for another publication where he made $200,000 annually. He was fired from that job in March 1987. He subsequently ceased maintenance payments to the appellee. The appellee did not work during the marriage. After the divorce, she worked as a secretary making $130 weekly and received maintenance from the appellant.
The appellant had not retained employment by March 1988 when the Commissioner's report on appellant's motion to be relieved of child support and maintenance was entered. Since the appellant had not found employment due to his own choice, the Commissioner recommended that an interim formula be used to determine the amount of maintenance until the appellant's salary returned to the threshold amount dictated in the separation agreement. That formula in its entirety is as follows:
G. There seems to be some confusion as to how maintenance is to be paid.
1. Equity does not countenance the wife's waiting without maintenance for an entire year only to determine at the end of the year what husband's income was. Accordingly, Commissioner recommends that husband's 1987 gross income be determined and maintenance set according to settlement agreement scale. For 1988, wife shall receive monthly maintenance during 1988 on the basis of husband's 1987 gross income.
a. The foregoing paragraph is predicated upon husband's not having had a regular salary during 1987. Yet, husband at hearing indicated that he would *147 be reinstated by the bar association sometime during 1988 and that he had been offered a job with a law firm upon his reinstatement.
b. This paragraph countenances husband's receiving a regular salary during 1988 or 1989. Accordingly, husband shall provide verified quarterly reports, within 30 days after the conclusion of each calendar quarter, to wife during 1988 as to the status of his salaried income. At such time as husband receives a regular salary, then that regular salary shall be added to his previous year's gross income and his monthly maintenance during 1988 increased accordingly until it reaches the sum provided for in parties' agreement.
2. At the end of 1988, husband's gross income shall be determined, maintenance set according to agreement scale and wife shall receive as monthly maintenance in 1989 according to husband's 1988 gross income, but no more than that sum provided in parties' agreement.
3. At such time as husband's regular salary income produces that level of monthly maintenance provided for in parties' settlement agreement, then the foregoing provisions may be omitted.
The final order upholding the Commissioner's recommendation was entered on June 7, 1988. The order did remand on issues concerning the appellant's gross income. No appeal was taken. On remand, the Commissioner determined appellant's gross income for 1987 was $40,358; therefore appellant's maintenance obligation was $720 per month. The Commissioner's determination was approved by court order on September 1, 1988. Again no appeal was filed. On January 3, 1989, the Commissioner issued a report recommending that the appellant continue to pay $720 monthly maintenance and $1,546.36 in appellee's attorney fees. Appellant filed exceptions to the order on January 13, 1989. Later in 1989, the appellant's salary and annuity income combined pushed his gross income past the threshold level stated in the separation agreement. On July 7, 1989, the Commissioner thereupon recommended the appellant return to paying the full $1,200 per month maintenance pursuant to the March 2, 1988 report and the separation agreement; the appellant made exceptions on July 11, 1989. Appellant's exceptions to the January 3 report were overruled by court order on July 28, 1989. The appellant, on August 10, 1989, filed exceptions to the July 28 order. The circuit court, on August 17, 1989, overruled all exceptions to the July 7 report of the Commissioner. Appellant thereafter, on August 25, 1989, brought this appeal asserting errors in the July 28 and August 17 orders.
Prior to considering the merits of each issue, this Court contemplated whether the appellant's failure to comply with CR 76.12(4)(c)(iv) in its original brief would prohibit our consideration of the issues as suggested by the appellees. The first sentence of CR 76.12 begins, "[u]nless otherwise directed by the appellate court ..."; this phraseology gives this Court great discretionary power in determining whether to consider an argument. CR 76.12 also allows the appellant to file a reply brief. Although CR 76.12(4)(c)(iv) states that an argument in the appellant's brief must contain reference to the record showing where the issue was properly preserved for review, the purpose of this subsection is to save the appellate court the time and trouble of having to search the entire record to ensure the appeal was indeed properly preserved. Even though the appellant omitted the reference in his original brief, he did insert the necessary references in his reply brief to correct the omission. This serves the very purpose for which CR 76.12(4)(c)(iv) was enacted; therefore, a reply brief may be used to both supplement an appellant's original brief and to correct a procedural defect related to CR 76.12(4)(c)(iv). This Court, in its discretion, thinks it proper to now consider the merits of the case.
The first issue is that of attorney fees. Appellant complains that the trial court did not consider the financial resources of both parties as dictated by KRS 403.220 and Poe v. Poe, Ky.App., 711 S.W.2d 849 (1986). It is a well-known concept *148 that the trial court has great discretionary power in its determination to award or deny attorney fees. Although the court does not mention the financial resources of the appellee in its orders awarding the appellee attorney fees, there is no requirement that it do so. Nowhere does it state a trial court must make specific findings on the parties' financial resources. The obligation of the trial court is to "[c]onsider the financial resources of the parties in ordering a party to pay a reasonable amount in attorney's fees." Poe, supra, at 852, (emphasis added). The trial court need only "consider" the parties' financial situation. The record is replete with circumstances in which the trial court was made aware of each party's financial situation. Based on the record before this Court, it appears that the trial court's award of attorney fees was reasonable and will not be disturbed.
The second argument of appellant dealt with maintenance. The Commissioner articulated the formula previously given in our facts to ascertain the amount of maintenance to be paid while appellant's gross income was below the threshold level stated in the separation agreement. Under this formula, the appellant was required to pay $720 per month during part of 1987 and all of 1988. When the appellant obtained employment with a law firm in 1989, his salary returned to an amount above the threshold level of the separation agreement. Therefore, the Commissioner ordered the appellant to resume total monthly payments of $1,200 in 1989.
The appellant argues the court must wait until the end of the calendar year 1989 to determine the amount of maintenance to be paid. We do not agree. The separation agreement called for maintenance to be paid on a monthly basis, beginning on the month following the entry of the decree of dissolution and continuing each month thereafter. Nowhere does the agreement state that the parties must wait until the end of each year to determine the husband's salary which is the basis for the amount of maintenance. This occurred in 1987 and 1988 solely due to the interim formula used by the Commissioner while the appellant's salary was reduced. Subsection 3 of the formula applied by the Commissioner specifically allowed for a return to $1,200 monthly when the appellant's salary returned above the threshold level. That has now occurred, and accordingly, the maintenance was to be resumed at the $1,200 monthly amount.
Appellant also contends that the court refused to consider his losses for the year in determining his maintenance payments. What the trial court did was remand this issue for findings on how the appellant's gross income was determined prior to the reduction in maintenance payments. There was no indication that losses had ever been considered before. Not only this, but gross income by its very definition generally does not include losses. Losses are usually accounted for when determining adjusted gross income. Again, we see no clearly erroneous error on the part of the trial court.
The final error asserted by the appellant deals with an alleged modification by the court of the separation agreement. The modification in question was the use of the formula used to determine the amount of maintenance while the appellant experienced a reduction in income. Although the agreement did state the proportion of any reductions (i.e., 10%), the agreement was ambiguous in that it failed to state the method to be utilized in determining the amount of monthly maintenance. After careful review of the entire record before us, we believe the use of the maintenance formula by the Commissioner and the trial court to be a reasonable interpretation of the separation agreement.
In accordance with the reasoning and findings above, we affirm the decision of the circuit court on all issues.
All concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1804614/ | 997 So.2d 411 (2008)
D.B.L.
v.
STATE.
No. 2D08-674.
District Court of Appeal of Florida, Second District.
December 12, 2008.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2455648/ | 393 F. Supp. 2d 1012 (2005)
James D STRONG, Jr., M.D., Plaintiff,
v.
UNUMPROVIDENT CORPORATION, a Delaware corporation, Unum Life Insurance Company of America, a Maine corporation, and Provident Life And Accident Insurance Company, a Tennessee corporation, Defendant.
No. Civ.03-528-S-EJL.
United States District Court, D. Idaho.
May 13, 2005.
*1013 *1014 *1015 *1016 Richard H. Greener, Jon T. Simmons, Matthew Richard Bohn, Robert W. Talboy, Boise, ID, for Plaintiff.
Samuel A. Diddle, Boise, ID, for Defendant.
ORDER
LODGE, District Judge.
Plaintiff, James D. Strong, Jr., M.D., brings this action against Defendants, UnumProvident *1017 Corporation ("UnumProvident"), Unum Life Insurance Company of American ("Unum"), and Provident Life and Accident Insurance Company ("Provident"), alleging breach of contract and bad faith. Defendants have moved for summary judgment on all of Dr. Strong's claims. Additionally, UnumProvident and Unum seek their dismissal from this lawsuit. Dr. Strong, in turn, requests by way of a motion for partial summary judgment that the Court rule in his favor on certain legal issues. Dr. Strong also asks for leave to amend his complaint to allege a claim for punitive damages. The motions are now ripe. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the brief and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this matter shall be decided on the record before this court without a hearing.
I. BACKGROUND
Dr. Strong is a medical doctor who at one time maintained a full gynecological practice in Dallas, Texas. Effective May 1, 1980, Dr. Strong became insured under a policy of disability insurance issued by Provident. The policy originated from Provident's Dallas, Texas branch office, and provided for monthly payments up until Dr. Strong's 65th birthday if he became totally disabled due to sickness or for monthly payments for life if total disability was the result of injuries. The policy defines "injuries" as "accidental bodily injuries occurring while this policy is in force," and "sickness" as "sickness or disease which is first manifested while this policy is in force." Effective April 1, 1987, Dr. Strong obtained an additional policy of disability insurance from Provident. This application for insurance was completed in Texas and the policy also issued from Provident's Dallas, Texas branch office. Similar to the first policy, the additional policy provides benefits for life for total disability caused by injuries or to age 65 for total disability caused by sickness. Dr. Strong suffers from a condition known as strabismus, or a misalignment of the eyes. On May 24, 1996, Dr. Strong underwent the first of three surgical procedures performed by Dr. David R. Strager and Dr. Marshall Parks. The goal of these procedures was to correct the misalignment of Dr. Strong's eyes and to improve his stereoscopic vision.
On July 8, 1996, Dr. Strong submitted his initial application for disability benefits. Shortly thereafter, Defendants began to make benefit payments to Dr. Strong, apparently under the sickness provision of the insurance policies. The record indicates that on September 18, 1998, Dr. Strong left a phone message with Provident stating that he wanted to change his claim from a sickness to an accidental claim and that he would be submitting documentation for review.
On July 19, 2000, Dr. Strong left a phone message with UnumProvident stating his eyes were "accidentally" worse. On September 19, 2000, a representative of UnumProvident sent a letter to Dr. Strong responding to his July 19, 2000 request to have his disability changed from a sickness to an accident. This letter noted that Dr. Strong had been advised to submit documentation supporting his request to have his disability changed from sickness to accident, and that he had not done so and as a result, and after a complete evaluation of his file, his disability, that of strabismus, was "considered to be that of a sickness."
On September 27, 2000, Dr. Strong appealed in writing the decision outlined in the September 19, 2000 letter. Dr. Strong maintained his disability was definitely due *1018 to injury or accident secondary to his three surgical procedures. On October 13, 2000, a lead appeals specialist of Unum acknowledged receipt of Dr. Strong's September 27, 2000 letter and indicated his appeal was being reviewed. During this time period, Dr. Strong also submitted documentation regarding his claim request.
On January 24, 2001, Unum sent a letter to Dr. Strong stating that after a complete evaluation of his file it concluded that Dr. Strong's disabling condition had been appropriately classified as a sickness as opposed to an accident. Unum stated that the payment of Dr. Strong's claim as a sickness was appropriate and that it was upholding the prior claims decisions.
On July 12, 2002, Dr. Strong, through counsel, requested that Unum reconsider its position. In response, a Provident medical reviewer reexamined the entire medical and claims file, and concluded that Dr. Strong's disabling condition was the result of a sickness. Based upon this review, UnumProvident advised Dr. Strong on September 23, 2002 that it was upholding its prior determinations that his disabling condition was caused by a sickness as opposed to an accident or injury.
On January 21, 2003, this lawsuit was filed by Dr. Strong claiming that the Defendants had breached the terms of the insurance contracts and that Dr. Strong and Defendants had a relationship or insured/insurer/adjuster and that this relationship imposed a duty to act in good faith and that denial of long-term disability payments to Dr. Strong constituted bad faith on behalf of Defendants. The parties subsequently filed the motions currently pending before the Court.
II. STANDARDS OF REVIEW
Summary judgment is appropriate if, viewing the evidence in the light most favorable to the nonmoving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Adams v. Synthes Spine Co., 298 F.3d 1114, 1116-17 (9th Cir.2002).
In this diversity action, the Court must apply substantive state law as interpreted by the state's highest court. Muldoon v. Tropitone Furniture Co., 1 F.3d 964, 966 (9th Cir.1993). "[W]here the state's highest court has not decided an issue, the task of the federal courts is to predict how the state high court would resolve it." Air-Sea Forwarders, Inc. v. Air Asia Co., 880 F.2d 176, 186 (9th Cir.1989), cert. denied, 493 U.S. 1058, 110 S. Ct. 868, 107 L. Ed. 2d 952 (1990). In this regard, the federal court must follow an intermediate state court decision unless other persuasive authority convinces the federal court that the state supreme court would decide otherwise. Richardson v. United States, 841 F.2d 993, 996 (9th Cir.1988).
Where, as here, there is a question as to which state's law is controlling the federal court "must look to the forum state's choice of law rules to determine the controlling substantive law." Patton v. Cox, 276 F.3d 493, 495 (9th Cir.2002). Because this case was filed in the District of Idaho, the Court will look to Idaho's conflict of law rules. See id.
III. ANALYSIS
A. Breach of Contract Claim
1. Statute of Limitations Defense
The Court must first determine if Defendants may properly raise a statute of limitations defense and, if so, which state's statute of limitations applies, Texas or Idaho. It matters because Idaho law allows a statutory limitation on a contract claim of five years while Texas law allows a statutory limitation on a contract claim of only *1019 four years. Therefore, whether Dr. Strong's claim has been properly filed within the statute of limitations may turn on which state's limitations period applies to Plaintiff's claim. Of course the applicable state's law also will determine when the injury accrued and govern the legal standards that define the cause of action.
Plaintiff initially argues that Defendants have waived any statute of limitations defense. By reference to Idaho law, Plaintiff contends that Defendants were required to cite in the Answer the particular state statute that supported their statute of limitations defense, and because they failed to do so, they have waived any such defense. Plaintiff is correct in arguing that Idaho's statute of limitation is "substantive" in the sense that this federal court, exercising diversity jurisdiction, must afford it respect. See Muldoon, 1 F.3d at 966. This does not mean, however, that this federal court is required to honor the state's method for asserting a statute of limitations defense. On the contrary, the manner by which a defense is pled is strictly procedural in nature and therefore is a matter of federal law, not state law.[1] Accordingly, "[w]hether waiver occurred is a question of federal law under the Federal Rules of Civil Procedure." Taylor v. United States, 821 F.2d 1428, 1433 (9th Cir.1987). And because the Federal Rules do not require the technical formality in pleading that Plaintiff seeks to impose on Defendants' statute of limitations defense, there has been no waiver. See, e.g. Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency, 216 F.3d 764, 788 (9th Cir.2000); Taylor, 821 F.2d at 1433.
2. Conflicts of Law
The Idaho Supreme Court applies the most significant relationship test in conflict of law resolution and has opted in favor of applying the test set forth in the Restatement (Second) of Conflicts of Laws. Barber v. State Farm Mutual Automobile Insurance Company, 129 Idaho 677, 931 P.2d 1195, 1199 (1997). This test has been used by the Idaho Supreme Court on more than one occasion to specifically make the conflict of law choice with regard to a statute of limitations issue.[2]See, e.g., Dillon v. Dillon, 126 Idaho 472, 886 P.2d 777, 777-78 (1994) (applying in choice of law context the most significant relationship test to statute of limitations question). The goal of this test is to identify the state most significantly related to a particular issue and to apply its law to resolve that issue. In doing so, the court first identifies various factual contacts between *1020 the transaction or parties and the interested states. It then evaluates these contacts in light of certain broad policy concerns. However, the relevant factual contacts and the importance of particular policy concerns vary depending upon the nature of the substantive issues implicated by the underlying dispute. Seubert Excavators Inc., v. Anderson Logging Company, 126 Idaho 648, 889 P.2d 82, 85 (1995).
With regard to an issue in contract, a set of factual contacts are considered in determining which state has the most significant relationship to the dispute: (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties. Id.
In applying this analysis to the present case, the Court concludes as a matter of law that Texas has the most significant relationship to the breach of contract claim. The place of contracting, the place of negotiating the contract, the place of performance and location of the subject matter of the contract, and the Defendants' place of business are all in Texas. Therefore, Texas law governs the effect of the statute of limitations as to the contract claim and controls when the injury accrued on the breach of contract claim.
3. Statute of Limitations Analysis
Defendants move for summary judgment on Dr. Strong's contract claim on the basis that it is barred by the applicable statute of limitations. Defendants bear the burden to prove their affirmative defense by conclusively establishing the applicability of the statute of limitations, including the date on which the limitations commenced. Provident Life and Accident Insurance Company v. Knott, 128 S.W.3d 211, 220 (Tex.2003).
Pursuant to Texas law, an action for a breach of contract is governed by a four year statute of limitations. Tex. Ins.Code Ann. art. 21.21 § 16(d) (Vernon 2005). A breach of contract claim accrues when the contract at issue is breached. Stine v. Stewart, 80 S.W.3d 586, 592 (Tex.2002). Under Texas law it is clear that the injury accrues when the insured is denied coverage. Knott, 128 S.W.3d at 221.
The parties disagree on the date that coverage was denied. Dr. Strong argues that Defendants did not provide him with an outright denial of his claims for injury disability benefits until the September 19, 2000 letter, or in the alternative, that the accrual date is a question of fact. Defendants argue that the limitations began to run as of 1996 when Defendants determined that Dr. Strong's disability was due to sickness, not an accident or injury. However there is no evidence that Dr. Strong was ever notified in 1996 as to this decision.
It is undisputed the disability payments began to be paid to Dr. Strong in 1996 after Dr. Strong filed his claim in July 1996. While Defendants maintain Dr. Strong was notified the payments were being denied under the "injuries" provision, there is no record of this notification to the insured. The fact that in 1998 Dr. Strong telephoned Provident and wanted to change his coverage to the accident provision is not evidence of an outright notification that his claim under the accidental bodily injury provision had been denied. Without an insurance company letter or an admission by Dr. Strong that he was made aware that his claim under the injuries provision had been denied sometime prior to his 1998 message, the phone message is insufficient to establish notification for purposes of a statute of limitations defense.
*1021 It is also undisputed that Dr. Strong called the insurance company requesting a change from sickness coverage to injury coverage in the summer of 2000. This telephone conversation was followed up with a letter dated September 19, 2000 from the insurance company indicating that Dr. Stong's request for coverage under the injuries provision was being denied. While it seems unusual for a party to request a change in coverage if such person had not previously been advised coverage was denied, the record before the Court lacks competent evidence to show that the insured received written or oral notification of the denial of coverage under the injury provision before the September 19, 2000 letter. The letter denying coverage would be the earliest date the breach of contract claim arose as that is the date Plaintiff was notified the coverage under the injury provision was formally denied. Since the complaint was filed on January 21, 2003, the breach of contract claim is clearly within the four-year statute of limitations and the affirmative defense as to this claim is denied.
4. Genuine Issue of Material Fact Analysis
Here summary judgment is precluded because of the contractual factual contentions as to whether Dr. Strong's condition is a "sickness" or an "injury."
Defendants claim that there is no genuine issue of material fact as to Dr. Strong's disability. They claim that Dr. Strong's strabismus was a pre-existing condition and while the surgeries did not make his congenital condition any better they certainly did not make his eyesight worse and his deteriorating condition was not a result of an injury or accident. In support of this argument, Defendants note the opinions of Dr. Strong's treating physicians Dr. Strager and Dr. Parks who reviewed Dr. Strong's medical records as well as examined him and concluded that his eyesight was no worse or better after the surgeries. The doctors who treated Dr. Strong as well as Defendants' medical examiners believe that Dr. Strong's disability was caused by his congenital disease, not by an accident or injury. Accordingly, the Defendants believe that Dr. Strong is not entitled to continued disability benefits after his 65th birthday pursuant to the terms of the insurance policies. The Defendants claim that there has been no breach of contract.
Dr. Strong claims that his deteriorating eye sight, which has left him totally disabled under the definition of "total disability," was caused by the three surgeries that were performed by Dr. Strager and Dr. Parks. Plaintiff's alleged "injury" is supported by Dr. Richard Olson's expert opinion. Dr. Richard Olson states in his deposition that there is medical evidence to show that the 1996 surgeries caused Dr. Strong's disability and that this result was neither intended nor expected. Dr. Richard Olson states that "based on my examination, I strongly feel that his double vision and depth perception problems, which required him to cease surgery and finally cease practice in his area of medicine, was brought on, or at least significantly hastened by his strabismus surgery."[3]
Based on the contrary contentions of the parties' experts, the Court is precluded from granting summary judgment on the *1022 breach of contract claim and this claim will proceed to trial.
B. Bad Faith Claim
1. Conflicts of Law
Plaintiff also asserts a tort claim against Defendants alleging bad faith. Idaho law appears to allows a statutory limitation on a bad faith tort claim of four years. Idaho Code § 5-224 (Michie 2004). Texas law allows a statutory limitation on a bad faith tort claim of two years. Tex. Ins.Code art. 21.21 § 16(d) (Vernon 2005). Therefore, whether Dr. Strong's bad faith claim may be within the statute of limitations turns on which state's law governs the effect of that agreement. As discussed earlier, Idaho applies the most significant relation test as set forth in the Restatement (Second) of Conflict of Laws § 145 in determining the applicable law. In a tort case the following considerations must be taken into account: (a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any between the parties is centered. Grover v. Dr. W.E. Isom, 137 Idaho 770, 53 P.3d 821, 823-24 (2002).
Defendants ceased making benefit payments to Dr. Strong on this 65th birthday, in June of 2002. Dr. Strong moved to Idaho late in 1998. The place where the alleged injury occurred therefore would arguably be Idaho. The place of the offending conduct denying payments of benefits to Dr. Strong under the "injury" provision of the insurance contract occurred in Texas. The domicile and residence of Dr. Strong from 1998 to present is Idaho. While none of the Defendants are incorporated in Texas, they do have places of business in Texas. The place where the relationship between the parties was centered was in Texas.
In the present case there are various factual contacts with both states. The alleged injury occurred in Idaho, but the place where the relationship between the parties is centered is in Texas. Under Idaho law, once the tort factors are considered, they are evaluated in light of the following policy concerns: (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interest of those states in the determination of the particular issues, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability, and uniformity of result, and (g) the ease in determination and application of the law to be applied. Grover, 53 P.3d at 824.
These policy considerations as well as the tort factors support the application of Texas law. Dr. Strong resided in Texas, he practiced medicine in Texas, he sought out and purchased an insurance policy in Texas, he paid his premiums and earned income that was to be insured in Texas, he also suffered total disability and applied for benefits under his insurance policy in Texas. Texas is the state in which the insurance policy was purchased and issued. In addition, the conduct causing the alleged injury occurred in Texas when Defendants refused benefits payment to Dr. Strong under the "injuries" provision. Texas has the most significant interest in the resolution of this manner. The only relationship that Dr. Strong had with Idaho was that he retired to Idaho in 1998. The Defendants in this case would justifiably expect to be governed by Texas law since they conducted their business in Texas. Therefore, the Court concludes Texas law governs the effect of the statute of limitations as to the tort claim and also *1023 controls when the injury accrued on the bad faith claim.
2. Statute of Limitations
Pursuant to Texas law, an action for bad faith is governed by a two year statute of limitations. Tex. Ins.Code Ann. art. 21.21 § 16(d) (Vernon 2005). A bad faith tort claim does not accrue until there is a legal injury to the insured. Knott, 128 S.W.3d at 221 (explaining that "a cause of action accrues when a wrongful act causes a legal injury"). Under the somewhat unique facts of this case, Dr. Strong suffered no actionable injury as a result of any bad faith tort until his benefit payments ceased in June of 2002. See Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex.1990) (explaining that "the insured's bad faith `cause of action accrues the moment an insurer should pay a claim but fails to do so. At that moment, the insurer's wrongful conduct first causes harm to the insured."). Dr. Strong's bad faith claim was filed on January 21, 2003 and therefore is not barred by the Texas two-year statute of limitations.[4]
3. Genuine Issue of Material Fact Analysis
a. Bad faith analysis under Texas Law
To demonstrate bad faith under Texas law, the insured must prove: (1) the absence of a reasonable basis for denying or delaying payment of policy benefits; and (2) the insurer knew or should have known there was no reasonable basis for denying or delaying payment. Darby v. Jefferson Life Insurance Co., 998 S.W.2d 622, 626 (Tex.App. Hous. (1 Dist.) 1995).
The issue is whether there is evidence to deny the claim not whether the insurer correctly evaluated the evidence. Id. at 627. If a reasonable basis exists for questioning the insurance claim, the insurer may deny it and litigate the matter without also facing a bad faith claim. The standard is whether the insurer had no reasonable basis to delay or deny payment of the claim and whether it knew or should have known it had no reasonable basis for its action. Id. "Whether there is a reasonable basis for denial is judged by the facts before the insurer at the time the claim was denied." Id.
Under Texas law, Dr. Strong fails to come forward with any evidence to create a genuine issue of material fact on the bad faith elements. The ophthalmology records of Dr. David Strager and Dr. Marshal Parks, the attending physicians who performed Dr. Strong's eye surgeries, were reviewed. The letter written by Dr. Olson, who Dr. Strong obtained medical proof in direct conflict with the two treating physicians that performed the surgeries, was reviewed. The ophthalmology records of Dr. Meltzer were reviewed. The physician review by Dr. DiStefano was reviewed. Based upon a through review of the documentation in the file, both in favor of and against Dr. Strong, Defendants determined Dr. Strong's disabling condition had been appropriately classified as a "sickness" as opposed to an "accident."
There was no absence of a reasonable basis to classify Dr. Strong's disabling condition as a "sickness": as opposed to an "accident." Defendants, with the documentation and evidence before them, had a reasonable basis for denying Dr. Strong's claim under the "injury" provision. Texas law clearly states that, "the issue is whether *1024 there was evidence to deny the claim not whether the insurer correctly evaluated the evidence." In this case, Defendants had evidence to deny the claim and although the insurance companies determination is different than Dr. Olson's opinion, there is a reasonable basis to deny coverage.
Because the Plaintiff has failed to establish the first element of a bad faith claim under Texas law, summary judgment in favor of Defendants on this claim is appropriate as the mere unhappiness of a claimant with the coverage determination does not give rise to a cause of action for bad faith on the part of the insurance company. Moreover, Plaintiff has failed to submit evidence on the second element that the insurer knew there was no reasonable basis to deny the claim.
The record indicates Defendants reviewed the claim when it was filed. The attending physicians records were evaluated to determine whether Dr. Strong was totally disabled and these records support a decision for benefits under the sickness provision. When Dr. Strong appealed the decision in 2000, the claim was reviewed again. When Dr. Strong re-appealed in 2001 another medical review was completed. For those reasons, summary judgment should be granted in Defendants favor on this claim under Texas law.
b. Bad faith analysis under Idaho Law.
In the alternative, if Idaho law should apply to this claim, the Court finds that summary judgment would be appropriate in that instance also. Under Idaho Law, the elements of bad faith are even stricter. To demonstrate bad faith under Idaho law, the insured must show: (1) the insurer intentionally and unreasonably denied payment of the claims; (2) the claim was not fairly debatable; (3) the insurer's denial was not the result of a good faith mistake; and (4) the resulting harm was not fully compensable by contract damages. Simper v. Farm Bureau Mutual Insurance Company of Idaho, 132 Idaho 471, 974 P.2d 1100, 1103 (1999).
Likewise under Idaho law, the Court finds the elements to establish bad faith were not met by Dr. Strong in this case. There is no evidence before the Court that Defendants intentionally or unreasonably denied Dr. Strong his benefits. As stated above, Dr. Strong's entire file was reviewed a number of times. Defendants allowed Dr. Strong to appeal their initial decision that informed Dr. Strong that his disability was a "sickness" and not an "injury." After another review of Dr. Strong's file and again informing him that they had found his disability to be a "sickness" and not an "injury" they allowed him a re-appeal. Dr. Strong was given ample opportunity to submit evidence and documentation to show that his disability was in fact an injury and each time Defendants reviewed that information. However, based upon thorough review of Dr. Strong's file, Defendants determined that an appropriate classification of Dr. Strong's disability as a result of a "sickness" had been made.
Dr. Strong fails to submit any evidence to create a genuine issue of material fact on the second element of the bad faith claim. Dr. Strong's claim that his disability was not due to strabismus but rather to an accident or injury is clearly debatable. The medical records of Dr. Strong's treating physicians support Defendant's decision that the disability was caused by a sickness. Dr. Strong obtained a medical opinion through Dr. Olson that his condition was caused by an accident or injury suffered from the surgeries performed to correct his strabismus. This claim was fairly debatable and both sides were adequately presented and timely considered by the insurance company.
*1025 Therefore, the bad faith claim will be dismissed as a matter of law on the motion for summary judgment as the Court finds no material issues of genuine fact exists on this claim under either Texas or Idaho standards.
C. Motion to Amend to Allege Punitive Damages
Dr. Strong has moved for leave to amend his Complaint to allege a claim for punitive damages. Rule 15(a) of the Federal Rules of Civil Procedure provides that leave to amend "shall be freely given when justice so requires." But in this diversity action there is the additional consideration involving the application of state law. The question of whether to permit a claim for punitive damages is substantive in nature and accordingly is controlled by relevant Idaho case law. See, e.g., Doe v. Cutter Biological, 844 F. Supp. 602, 610 (D.Idaho 1994).
Under Idaho Code § 6-1604(2), a plaintiff cannot make a claim for punitive damages in the original complaint; instead the claim must be made by a pretrial motion to amend. The Idaho statute directs a court to grant such a motion if "the court concludes that, the moving party has established at [a] hearing a reasonable likelihood of proving facts at trial sufficient to support an award of punitive damages."[5] I.C. § 6-1604(2). Relevant here, "an award of punitive damages [is] permissible only where the claimant had proven `by a preponderance of the evidence, oppressive, fraudulent, wanton, malicious, or outrageous conduct.'" Kuntz v. Lamar Corp., 385 F.3d 1177, 1187 (9th Cir.2004) (quoting applicable version of Idaho Code § 6-1604(1)). Punitive damages are not favored by Idaho law and will be awarded in only the most unusual and compelling circumstances. Manning v. Twin Falls Clinic & Hosp., 122 Idaho 47, 830 P.2d 1185, 1190 (1992). The "justification for punitive damages must be that the defendant acted with an extremely harmful state of mind, whether that state be termed `malice, oppression, fraud or gross negligence'; `malice, oppression, wantonness'; or simply `deliberate or willful.'" Id. Taken together, for Dr. Strong to succeed on his motion he must show a reasonable likelihood that he could prove by a preponderance of the evidence "that the defendant[s] acted in a manner that was an extreme deviation from reasonable standards of conduct, that the act was performed with an understanding of or disregard for its likely consequences, and that the defendant[s] acted with an extremely harmful state of mind." Kuntz., 385 F.3d at 1187; see also Vendelin v. Costco Wholesale Corp., 140 Idaho 416, 95 P.3d 34, 41-42 (2004).
For many of the same reasons that the Court granted summary judgment on the Dr. Strong's bad faith claim the Court finds that Dr. Strong has failed to make the requisite showing to allege a claim for punitive damages.[6] There is no *1026 competent evidence in the record that indicates Defendants engaged in an extreme deviation from reasonable standards and acted with a harmful state of mind when denying Dr. Strong's request to re-characterized his total disability as an injury or accident rather than a sickness.
In an effort to demonstrate that Defendants' claim review was unreasonable, Dr. Strong makes much of the fact that Defendants did not initiate an immediate review of his claim following his phone message of September 18, 1998. But as Defendants point out, in the same message Dr. Strong indicated he would be submitting documentation in support of his request. It was not unreasonable, then, for Defendants to wait for the submission of the promised documentation prior to review of the claim.[7]
Dr. Strong also relies on the expert opinion of Stephen D. Prater to show the inadequateness of the Defendants' review process. In the very limited reference to the actual facts of this case, Mr. Prater opines that Defendants' claims review was unreasonable because the reviewer did not consult with legal or medical experts and/or did not reference the proper legal standards. In the same vein, Dr. Strong maintains that Defendants applied an "unintended means tests" and failed to contact or consult with outside, independent sources when making its claim determination. There is no requirement, however, that an insurance company collect all possible medical opinions or consult with legal experts to make a claim review reasonable. See, e.g., Cardiner v. Provident Life & Accident Ins. Co., 158 F. Supp. 2d 1088, 1104-05 (C.D.Cal.2001). Instead, the claim review must timely consider the relevant medical evidence and reach a decision that is adequately supported by that evidence and consistent with the terms of the insurance contract. Id. As explained in the Court's assessment of Dr. Strong's bad faith cause of action, Defendants did that here. Indeed the cause of Dr. Strong's disability is reasonably disputed and there is substantial medical evidence that supports a conclusion that Dr. Strong suffers from a sickness. Accordingly, Dr. Strong has not established a reasonable likelihood of proving by a preponderance of the evidence the requisite "extremely harmful state of mind" and "extreme deviation from reasonable standards" to go forward on a claim for punitive damages. Kuntz., 385 F.3d at 1187. Dr. Strong's motion to amend will be denied.
D. Unum and UnumProvident's Motion
In summary, the Court will not allow Dr. Strong to allege a claim for punitive damages and will dismiss Dr. Strong's bad faith claim, but denies summary judgment on Dr. Strong's breach of contract claim. Because Dr. Strong's breach of contract claim will proceed to trial, the Court must now address the Motion for Summary Judgment filed by Unum and UnumProvident. Those two Defendants have asked the Court to dismiss them from the breach of contract claim because, unlike Provident, they were not signatories to the insurance contracts. In response, Dr. Strong argues that Unum and UnumProvident, together with Provident, were members of a joint venture and therefore all Defendants may be held liable for breach of contract. As evidence of their membership in the joint venture, Dr. Strong points *1027 to Unum and UnumProvident's involvement in the denial of Dr. Strong's claims for insurance benefits. While not denying their involvement in the claims process, Unum and UnumProvident contend that the inference that should be drawn from this involvement is that the Defendants engaged in a "principal/agent relationship or employer/employee relationship" and not a joint venture. (Defs.' Reply in Supp of Their Mot. for Summ. J. at 6).
Under Texas law, which the Court has determined applies to the contract claim, "[i]f a joint venture exists ... one joint venturer has the authority to bind other joint venturers by contracts made in furtherance of the joint enterprise." Misco-United Supply, Inc., v. Petroleum Corp., 462 F.2d 75, 79 (5th Cir.1972) (applying Texas law). Accordingly, if a joint venture is established, Unum and UnumProvident could be held liable, the same as Provident, for any breach of contract. Significant to Unum and UnumProvident's current motion, the joint venture determination is deemed a "question of a fact, to be resolved by the jury" where, as here, "opposing inferences" can be drawn from the evidence "as to the intentions of the parties regarding the creation of a joint venture." Id. at 80. Therefore, at this time the Court cannot dismiss Unum and UnumProvident from the lawsuit because the evidence permits the inference that the Defendants participated in a joint venture with respect to the processing of the insurance contracts at issue in this case.
E. Other Pending Motions
The parties have filed numerous motions to strike and/or to supplement the record. The Court has reviewed all the disputed items and none of these materials make any substantive difference to the outcome described above. Therefore, to avoid any further delay and to facilitate the timely issuance of this decision so the parties may have adequate notice of the Court's position prior to trial, and the associated pre-trial filing deadlines, the Court will make all of the contested materials part of the record.
ORDER
Based on the foregoing, and the Court being fully advised in the premises, it is HEREBY ORDERED that
1. The referral of non-dispositive pretrial matters to the United States Magistrate Judge is WITHDRAWN;
2. Defendants' Motion to Strike (docket no. 46) is DENIED;
3. Defendants' Motion to Supplement Record (docket no. 67) is GRANTED;
4. Defendants' Motion to Strike (docket no. 71) is DENIED;
5. Plaintiff's Motion to Supplement (docket no. 72) is GRANTED;
6. Plaintiff's Motion for Leave to File an Amended Complaint to Add a Claim for Punitive Damages (docket no. 26) is DENIED;
7. Plaintiff's Motion for Partial Summary Judgment (docket no. 18) is DENIED;
8. Defendants UnumProvident and Unum's Motion for Summary Judgment (docket no. 16) is DENIED; and
9. Defendants' Motion for Summary Judgment (docket no. 15) is GRANTED in part and DENIED in part as follows: summary judgment is granted on Plaintiff's bad faith claim and it is dismissed, and summary judgment is denied on Plaintiff's breach of contract claim and it will proceed to trial as scheduled.
NOTES
[1] Significantly, Plaintiff does not cite one case that disputes this concept.
[2] Given Idaho's reliance on the most significant relationship test to resolve these matters, the parties reasonably argue the merits of this test in regards to the present statute of limitations dispute. However Idaho has a "borrowing statute" that also applies to this issue. "Traditionally, states applied their own statutes of limitations even if the offending conduct happened elsewhere." Flowers v. Carville, 310 F.3d 1118, 1123 (9th Cir.2002). To avoid forum shop "many states have passed `borrowing statutes' that instruct their courts to apply foreign statutes of limitations in certain cases." Id. Idaho's borrowing statute, Idaho Code § 5-239, provides that when a cause of action has arisen in another state and is barred by that state's statute of limitation, that state's statute of limitations shall control, "except in favor of one who has been a citizen of this state and who has held the cause of action from the time it accrued." The exception clause has been interpreted as requiring "that the plaintiff be a citizen [of Idaho] at the time his claim accrued." Id. at 1124 (citing Miller v. Stauffer Chem. Co., 99 Idaho 299, 581 P.2d 345, 346-47 (1978)). Analysis of the statute of limitations issues in this case under Idaho's borrowing statute would not result in a different outcome. See, e.g., Miller, 581 P.2d at 346-47; Attorney General of Canada v. Tysowski, 118 Idaho 737, 800 P.2d 133, 135 (1990).
[3] Plaintiff spends a considerable amount of time discussing an "unintended means test." On this point, the Court must agree with Defendants: that the relevant question in regards to the pending motions is whether there is record evidence that raises a genuine issue of material fact on the cause of Dr. Strong's condition. The quoted statement of Dr. Olson is such evidence.
[4] In the alternative, analysis of this issue under Idaho's borrowing statute, Idaho Code § 5-239, would result in a conclusion that the exception clause of that statute applies here and that therefore Dr. Strong's tort claim is not time barred. See Miller v. Stauffer Chem. Co., 99 Idaho 299, 581 P.2d 345, 346-47 (1978).
[5] The provision in the Idaho statute for a "hearing" has been interpreted as referring to oral argument. See Doe v. Cutter Biological, 844 F. Supp. 602, 604, 610 (D.Idaho 1994) (granting motion to amend complaint to allow claim of punitive damages after reviewing record evidence and hearing oral argument). Here, the parties have not formally moved for oral argument and because the Court finds that the facts and legal arguments are adequately presented in the briefs and record, it concludes that the decisional process would not be significantly aided by a hearing.
[6] That is not to say that the punitive damages claim is denied simply because the bad faith claim will be dismissed. Under Idaho law, a Plaintiff can still go forward with punitive damages even if after losing on a bad faith claim. Myers v. Workmen's Auto Ins. Co., 140 Idaho 495, 95 P.3d 977, 985 (2004). But in this case, Plaintiff has not made the necessary showing required by either claim.
[7] Similarly, Dr. Strong initially alleged it was significant that his claim was assigned to the "Accident Department" but was deemed a "sickness." But as Defendants note, the "Accident Department" is the alternative to the "Life Department" which processes life insurance claims. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1319551/ | 133 Ariz. 118 (1982)
649 P.2d 997
In re the Marriage of Bertha O. LEE, Petitioner-Appellee,
v.
C. Loran LEE, Respondent-Appellant.
No. 1 CA-CIV 4737.
Court of Appeals of Arizona, Division 1, Department A.
August 10, 1982.
*119 Mitchell, Jensen & Timbanard, P.C. by Sheldon Mitchell, Phoenix, for petitioner-appellee.
Thomas F. Dasse, Phoenix, on brief, Marvin Johnson, P.C. by John P. Otto, Phoenix, on argument, for respondent-appellant.
*120 OPINION
JAMES MOELLER, Judge.
This appeal is brought by respondent-appellant C. Loran Lee from a judgment and decree in dissolution of marriage granted to petitioner-appellee Bertha O. Lee. Appellant's counsel on appeal (different than trial counsel) contests several aspects of the trial court's division of community property, certain attorney's fee awards, and the disposition of one alleged community debt. In reviewing the evidence, we are constrained to resolve all doubts and inconsistencies in favor of supporting the trial court's actions. Wayt v. Wayt, 123 Ariz. 444, 600 P.2d 748 (1979); Nelson v. Nelson, 114 Ariz. 369, 560 P.2d 1276 (1977).
Viewed in this manner, the facts material to a resolution of this case are as follows. The parties were married in 1960, at which time appellant owned certain property located on Southern Avenue in Mesa, Arizona. In 1966 appellant deeded an undivided one-half interest in that tract to his wife. In 1968 the parties borrowed $10,000.00 from appellee's mother, Mrs. Craig, giving in return a note, mortgage and deed covering the Southern Avenue property. Although Mrs. Craig executed a satisfaction of the mortgage and returned the deed in 1974, both she and appellee assert that the debt itself was never forgiven. On the other hand, appellant testified the satisfaction was evidence that the obligation had been excused. In 1974 the parties purchased the assets and name of then bankrupt Blair College, relocating the medical/dental assistant training school to the Southern Avenue property in Mesa. During 1978, the parties acquired, as joint tenants, another parcel of land along Baseline Road in Mesa.
After extended proceedings, the trial court rendered a comprehensive judgment of dissolution which, among other things, made complete disposition of the community assets and liabilities. The Southern Avenue property was ordered sold for not less than $400,000.00, the net proceeds to be divided equally between the parties. Blair College was assigned a valuation of $60,000.00 and was awarded to the appellant, while the Baseline Road property, valued at $46,500.00, was awarded to appellee. The court also ordered that Mrs. Craig be paid $7,186.00 directly from the proceeds of the Southern Avenue property sale in satisfaction of the disputed debt to her. After denial of appellant's motion for a new trial, he appealed.
To resolve one of the issues presented in this appeal, it is necessary to describe certain proceedings which occurred after the trial court's ruling on the community property. The record shows that appellant attempted, in several ways, to cloud title to the Southern Avenue property so that it could not be sold as had been ordered. Appellee was forced to request the trial court to hold appellant in contempt of its order to sell the property. As part of his efforts to frustrate the court's order, appellant also brought a separate action claiming that appellee had agreed, several years before, to convey the Southern Avenue property to him in the event the parties divorced or separated. This claim by appellant was a new one and was completely contrary to his position throughout the dissolution proceedings. Upon appellee's motion, the trial court found Mr. Lee's actions to be in violation of the court's order to sell the property, quashed the lis pendens filed by him, ordered him to dismiss the separate action within forty-eight hours, and awarded appellee $1,000.00 in attorney's fees resulting from his actions. Appellant did not comply with the order to dismiss the separate action at that time. Instead, he brought a special action in the Arizona Supreme Court, requesting a stay of the trial court's order. When the special action failed, he dismissed the separate action. The trial court again found appellant in contempt of court and awarded appellee an additional $3,000.00 in attorney's fees incurred by her as a result of appellant's actions. Both awards of attorney's fees occurred after appellant filed his notice of appeal from the dissolution decree which is now before us. Although the issue of these orders for attorney's fees therefore could not have been *121 and was not raised in his notice of appeal, appellant has presented arguments contesting the awards in his brief and in oral argument.
THE SOUTHERN AVENUE PROPERTY
Appellant initially argues that the trial court lacked "jurisdiction" to order a sale of the Southern Avenue property because the land was capable of partition in kind. This issue was never litigated below and is raised for the first time on appeal. Indeed, appellant's argument on appeal is somewhat inconsistent with his position at trial, when he himself urged the trial court to order the sale of the property and division of the proceeds in the event the court declined his primary request to partition the property.
However, it is not inappropriate for this court to consider jurisdictional questions not raised at trial. See Gage v. Gage, 11 Ariz. App. 76, 462 P.2d 93 (1969). Appellant contends that a trial court is duty bound to order community property partitioned in kind if at all possible, with the sale of such property and division of proceeds being a second alternative available only where partition is impossible. In support of this theory he cites Davis v. Davis, 82 Idaho 351, 353 P.2d 1079 (1960), and Hailey v. Hailey, 160 Tex. 372, 331 S.W.2d 299 (1960). In both of these cases, the trial courts were statutorily bound to divide the community property only as they saw "just" or "right." Each case does appear to suggest, under such a standard, that the first appropriate course of action is partition in kind where possible. However, due to the express language of the governing Arizona statute, we feel the rule is otherwise in Arizona.
The operative portion of our statute provides that the trial court "shall also divide the community, joint tenancy and other property held in common equitably, though not necessarily in kind, without regard to marital misconduct." A.R.S. § 25-318(A) (emphasis added). Unlike the statutes involved in Davis and Hailey, our statute specifically provides that the distribution does not have to be "in kind." In Arizona, the apportionment of community property in a dissolution proceeding rests within the sound discretion of the trial court. Neal v. Neal, 116 Ariz. 590, 570 P.2d 758 (1977); Hatch v. Hatch, 113 Ariz. 130, 547 P.2d 1044 (1976). The trial court's broad discretionary powers include the power to order a sale of community property when it will facilitate the equitable division of the property. Even under an earlier version of our present § 25-318, which authorized the court to divide community property as "seems just and right", the power to order a sale of community property was employed. See Hanner v. Hanner, 95 Ariz. 191, 388 P.2d 239 (1964); Hayne v. Hayne, 9 Ariz. App. 99, 449 P.2d 633 (1969). The only inherent limitation on the power of the trial court to apportion community property is that the division, in the final analysis, must result in a substantially equal distribution which neither rewards nor punishes either party. Hatch v. Hatch, supra.
It being clear that the trial court had authority to order a sale of the Southern Avenue property, we now turn to appellant's alternative contention that, in this particular case, the order constituted an abuse of discretion. As noted, trial courts have very broad discretion in allocating and dividing community assets. R. Veldon Naylor, an appraiser called by appellee, testified that the Southern Avenue property could be partitioned equally in kind. He also testified, however, that should the property be sold it would be most profitable to sell it as a single parcel. Conversely, Robert Temple, another appraiser called by appellee, testified that the property would be most profitably disposed of by selling it in five or six lots. In light of the conflicting testimony as to the possible dispositions of the Southern Avenue property, we see no abuse of discretion by the trial court in deciding to order its sale as a single parcel for not less than $400,000.00, with the net proceeds to be divided equally.
BLAIR COLLEGE
Appellant's alternative contention that the order for sale of the Southern *122 Avenue property resulted in an inequitable distribution of community assets is similarly unpersuasive. The inequity which springs from the sale, appellant claims, is the forced relocation of Blair College and a concomitant drastic diminution in its value, as opposed to the valuation actually given Blair College by the trial court. In short, because the college must be moved, appellant claims it is not worth nearly the value assigned to it when it was awarded to him by the trial court.
We first note that the record does not necessarily support appellant's assumption that a sale of the Southern Avenue property necessarily compelled a relocation of Blair College. As appellee points out, appellant could have purchased the property at the court-ordered sale, thus negating any relocation of the school. If, as appellant claims, he lacked the funds necessary to make this purchase, he still might have negotiated a lease for Blair College from a new buyer of the property. Appellant's present argument that any new purchaser would want to develop the property commercially, rather than receive rent from Blair College, is sheer speculation unsupported by the record. Thus, it does not necessarily follow that a sale of the Southern Avenue property automatically compelled a relocation of Blair College.
Even assuming a need to relocate the college, however, appellant has failed to demonstrate that the trial court erred in assigning a $60,000.00 value to the college. The expert witness who testified on this issue was Walter Pocock. He had difficulty coming up with a definitive appraisal of Blair College for several reasons. Foremost among these reasons was the unusual manner in which Mr. Lee conducted the business of the college, the inadequacy and inaccuracy of the records maintained by him both before and after the institution of this suit, and his repeated frustration of the discovery procedures instituted by Mrs. Lee and her counsel. However, after employing an accountant to develop reconstructed statements for the business, Pocock estimated the value of the college, as a going business, at $144,000.00. While this valuation appears to have been based primarily upon the assumption that the business would remain on the Southern Avenue property, Pocock also concluded that the business was easier than most to move. It had been moved to the Southern Avenue property itself in 1974. While no formal appraisal of the college was prepared on the assumption that the business would be relocated, there was evidence before the trial court which, when taken with the totality of evidence before the court, indicates that the college had a value of at least $60,000.00, even assuming the necessity of a relocation. When the trial court ultimately awarded the college to appellant, this minimum valuation of $60,000.00 was assigned to it.
In the final analysis, appellant's claim that the $60,000.00 valuation of the college was error resolves itself into a claim that the trial court was required to accept Mr. Lee's stated opinion that the value of the college would be totally destroyed by a relocation. There being conflicting evidence in the record on the issue of valuation, we hold that appellant has failed to demonstrate any error or inequity by the trial court's assignment of a value of $60,000.00.
THE BASELINE PROPERTY
Appellant next challenges the trial court's valuation of the Baseline Road property. It was awarded to appellee at an assigned valuation of $46,500.00. This valuation was arrived at by the formal appraisal of R. Veldon Naylor, who, at appellant's request, prepared an appraisal of the property several months prior to trial. Shortly before trial Naylor reexamined the Baseline property, again at appellant's request. Although he prepared no revised formal written appraisal, Naylor did offer his oral opinion at trial that the property had appreciated somewhat since his earlier appraisal. The source and validity of this later opinion were vigorously explored on cross-examination.
Viewing the evidence most favorably to upholding the trial court's judgment, as we *123 must, we believe it was clearly within the province of the trial court to base its valuation on the formal appraisal which was in evidence. The determination of issues of credibility and the resolution of conflicting evidence, including evidence from the same witness, are properly functions of the trial court. See Day v. Day, 20 Ariz. App. 472, 513 P.2d 1355 (1973). There being substantial competent evidence to support the trial court's valuation of the Baseline property, we will not disturb it on appeal.
THE CRAIG DEBT
Appellant's next argument, which contests the validity of the court-ordered payment of the Craig debt, presents a question which we believe is one of first impression in Arizona. The court's judgment provided that Mrs. Craig (Mrs. Lee's mother) be paid $7,186.00 directly out of the proceeds of the Southern Avenue property sale. As previously noted, the parties to this litigation did not agree on the validity of this debt. Mr. Lee contended that the indebtedness had been forgiven and that this was evidenced by the satisfaction of mortgage that had admittedly been executed and delivered by Mrs. Craig. While Mrs. Craig was not a party to these proceedings, she testified that the satisfaction had been executed and delivered only because Mr. Lee told her it would immunize her against large street assessments, and that the debt remained unsatisfied.
It is clear that the trial court not only determined the Craig debt to be valid, but ordered the direct transfer of community assets to Mrs. Craig in full payment of the alleged balance due. However, as noted, Mrs. Craig did not intervene in the action below, nor was she ordered joined as a party by the trial court pursuant to its authority under A.R.S. § 25-314(D). Appellant maintains that the trial court lacked jurisdiction to order a direct payment of the contested debt, at least in the absence of Mrs. Craig's participation as a party in the trial. We agree.
The trial court is invested with authority to equitably divide the community assets in a proceeding for dissolution of marriage. A.R.S. § 25-318(A). Pursuant to this authority, a court may properly allocate community liabilities between the parties in effecting an equitable division of all community property. Spector v. Spector, 17 Ariz. App. 221, 496 P.2d 864 (1972). Appellant contends that a trial court may not directly transfer community assets to a stranger to the litigation in payment of a contested debt. Conversely, appellee argues that the ordered payment was no more than a permissible allocation of a community liability by the court. Both parties cite Srock v. Srock, 11 Ariz. App. 483, 466 P.2d 34 (1970), as supportive authority.
In Srock, the court allocated a particular community debt to the husband for payment. The wife paid the debt first, however, and then filed a petition to show cause why the husband should not be forced to reimburse her. The court entered judgment for the wife and the husband appealed. In affirming the propriety of granting a separate money judgment to the ex-spouse in order to compel the payment of an already allocated debt, Division Two of this court held:
We particularly are compelled to affirm the trial court's discretion to allocate community liabilities because to do otherwise would nullify divorce effectiveness. If the debts already owed by the community, as distinct from the wife's attorneys fees, cannot be allocated between the parties then an essential item of divorce dispute remains unresolved. We do not mean to say that allocating community liabilities to one party can bind that party to a creditor for a certain amount, or that the creditor, not being a party to the action, is bound to a certain amount. All the decree does effectively is put the responsibility for community debts on one party, whatever that liability might be. Ultimately, the responsibility to so pay cannot be enforced by contempt, as is alimony, but can only be enforced as any other action in debt....
11 Ariz. App. at 484-85, 466 P.2d at 35-36 (emphasis added). In our view, Srock is not *124 authority for the proposition that a court may order direct payment of contested community debts from community assets in a dissolution proceeding. Srock merely says that a court may allocate existing community debts between the parties, and that one ex-spouse may then seek payment of the obligation through a separate equitable proceeding or an action on the debt. The court expressly recognized that it could not order debt payment to a third party and compel such payment through contempt in a dissolution decree. In the present case we do not have an attempt, as in Srock, by one ex-spouse to enforce a court-ordered allocation of a mutually incurred debt. Rather, the court below sought to extinguish a contested debt to a third party by paying it directly out of community funds. This it was not empowered to do.
Srock suggests, and we agree, that the proper procedure in a case such as this, involving a non-intervening and non-joined creditor, is for the trial court to clearly allocate responsibility for the community obligations between each of the parties. Such an allocation is not to be considered a determination of validity or invalidity of the alleged debts insofar as a non-party creditor is concerned. Similarly, the court may not effectively validate and discharge a contested debt by ordering the direct transfer of community assets to a non-party creditor, or by ordering one party to pay the debt directly under pain of contempt. The allocation of community liabilities determines the rights and obligations of parties before the court only with respect to each other.
We believe the foregoing rule to be consistent with Srock as well as with the due process rights both of parties to a dissolution proceeding and non-party creditors. Additionally, we believe it is sound policy to adopt a rule which will not require creditors to intervene in contested dissolution actions in order to litigate their claims. To do otherwise would be to turn a dissolution action into a creditor's proceeding.
Furthermore, we note that the court-ordered payment of one contested community debt to a non-party could have serious adverse effects upon other non-party creditors. If the net community assets are insufficient to pay all valid debts, the compelled payment of one could operate as a preference. In a dissolution case invalidating a court-ordered sale of land and distribution of proceeds to creditors, the Washington Supreme Court has stated:
Nothing can be found in the divorce act authorizing the court to deprive the spouses of their rights to prefer creditors, claim exemptions and/or homesteads, compromise claims, take bankruptcy, invoke statutes of limitation, make contracts, and enjoy their property rights.
Arneson v. Arneson, 38 Wash.2d 99, 101, 227 P.2d 1016, 1017-18 (1951). Similarly, there is nothing in the Arizona dissolution statutes which grants such power to a trial court. We therefore conclude that the trial court acted in excess of its jurisdiction when it went beyond the mere allocation of a contested debt and ordered direct payment to a non-party creditor from the proceeds of the sale of community property.
ATTORNEY'S FEES
Lastly, appellant contests the trial court's award of approximately $4,000.00 in attorney's fees to appellee. As previously noted, both challenged awards were made after appellant filed his notice of appeal.
The court of appeals acquires no jurisdiction to review matters not contained in the notice of appeal. China Doll Restaurant, Inc. v. Schweiger, 119 Ariz. 315, 580 P.2d 776 (App. 1978); Rexing v. Rexing, 11 Ariz. App. 285, 464 P.2d 356 (1970). In the absence of a timely notice of appeal following entry of the order sought to be appealed, we are without jurisdiction to determine the propriety of the order sought to be appealed.
Appellant asserts, however, that since the trial court lacked subject matter jurisdiction to make the fee awards, he may raise the issue at any time. His argument is that the disputed awards were, in reality, for fees incurred in separate proceedings. *125 However, those proceedings were found to be in contempt of court orders in this case, and the fees were awarded in this case. The subject matter jurisdiction of a court is its "`"power to deal with the general abstract question"'" presented. Arizona Public Service Co. v. Southern Union Gas Co., 76 Ariz. 373, 381, 265 P.2d 435, 441 (1954). "`"Jurisdiction over the subject matter" is the right of the court to exercise judicial power over that class of cases; .... By "jurisdiction over the subject matter" is meant the nature of the cause of action and, of the relief sought; and this is conferred by the sovereign authority which organizes the court....'" Tube City Mining and Milling Co. v. Otterson, 16 Ariz. 305, 312-13, 146 P. 203, 206 (1914). Simply put, appellant seeks to appeal the propriety of an award of attorney's fees in a dissolution proceeding. A trial court obviously has jurisdiction to order attorney's fees in dissolution cases. A.R.S. §§ 25-311(A); 25-324. Therefore, his argument that this court should consider the issue notwithstanding his failure to appeal therefrom must fail.
CONCLUSION
The trial court had jurisdiction to order the sale of the Southern Avenue property and the order was not an abuse of discretion. The trial court's valuations of Blair College and the Baseline property were supported by the evidence, were not abuses of discretion, and did not result in an inequitable distribution of community assets. We have no jurisdiction to review the propriety of attorney's fees awarded after the filing of the notice of appeal herein.
Due to our conclusion that the trial court lacked authority to order direct payment of the contested Craig debt from community assets, we must remand this case. Since we do not know what has in fact transpired relative to the contested Craig debt, we remand this case for further proceedings consistent with this opinion.
Affirmed in part; reversed and remanded in part.
CONTRERAS and OGG, JJ., concurring.
NOTE: The Honorable JAMES MOELLER, Maricopa County Superior Court Judge, was authorized to participate by the Chief Justice of the Arizona Supreme Court pursuant to Arizona Const. art. VI, § 3. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2456157/ | 493 S.W.2d 271 (1973)
A. A. LANDER, Appellant,
v.
Walter Michael WEDELL, Appellee.
No. 18050.
Court of Civil Appeals of Texas, Dallas.
March 29, 1973.
Rehearing Denied April 19, 1973.
*272 Roy L. Cole, Burford, Ryburn & Ford, Dallas, for appellant.
Paul H. Stanford, Akin, Stanford & Gilliland, Paul W. Wisdom, Jr., Dallas, for appellee.
CLAUDE WILLIAMS, Chief Justice.
This action, in the nature of trespass to try title, declaratory judgment, specific performance, to quiet title, and for damages was brought by Walter Michael Wedell, one of the lessees under a lease from A. A. Lander, as lessor. The principal question presented is whether the lessee's option to renew the primary term of the lease was properly exercised and, if it was, what damages, if any, lessee was entitled to for the period from the expiration of the primary lease term until possession under the extended option period was restored to lessee. The case was tried before the court and a jury and after the evidence was concluded the trial court ruled that as a matter of law the option had been properly exercised. The court thereupon submitted to the jury the single question of fair rental value for the leased premises. Based upon the jury's answer to this issue the court rendered judgment that Wedell was entitled to possession of the premises until the end of the option period, and was also entitled to receive the sum of $41,850, plus interest, representing rents received by Lander from a sublessee since the expiration of the primary term of the lease.
Lander appeals and contends primarily that the trial court erred in failing to render judgment to the effect that, as a matter of law, lessee's option to renew or extend the lease in question was not validly exercised and that therefore Wedell had no interest in the property or in rents therefrom after October 30, 1969.
The facts are practically without dispute. On October 25, 1961 appellant Lander, as lessor, leased certain premises located in Dallas, Texas to Wedell and Kenneth P. Goodson, both designated in the written lease as "Lessee". Paragraph 11 of the lease agreement authorized assignments of the leasehold interest by the lessee subject to certain restrictions and limitations. Paragraph 19 of the lease and subdivision (a) thereof provided:
"Lessee may at its option extend this Lease for a period beginning with the end of the primary term hereof to the last day of May, 1980, upon the terms and conditions of this Lease and at a monthly rental of $2,000.00."
Subdivisions (b) and (c) contained alternative option provisions not here pertinent. In subdivision (d) it was provided that in the event lessee elects to exercise any of the foregoing renewal options "it shall give written notice thereof to Lessor not later than three months prior to the beginning of such renewal period."
Paragraph 21 of the lease provided:
"The terms `Lessor' and `Lessee' as used herein include the named Lessor and Lessee, and their respective heirs, executors, administrators, personal representatives *273 and assigns, as well as any persons, entities, or corporations deriving any right, claim, title or interest in this lease or the properties covered hereby, by, through or under the named Lessor and Lessee, respectively."
On December 15, 1964 Wedell and Goodson, the original lessees, assigned a portion of their leasehold interest to Don E. Miller by authority of paragraph 11 so that each owned an undivided one-third interest in the leasehold estate.
On January 30, 1967, Goodson assigned his interest in the lease to Ralph D. Baker, trustee for benefit of Goodson's creditors. In October, 1968 Goodson died and in November, 1968 Miller died. Miller died intestate, and no administration was applied for on his estate until August 4, 1969, which was after the date for notifying lessor of intent to exercise the option to renew the lease.
On March 31, 1969 Wedell wrote a letter, by certified mail, addressed to Lander in which he stated:
"In accordance with Section 19, Renewal Option, and subparagraph (a) of such section of that certain Commercial Lease entered into on or about October 25, 1961, between you, as Lessor, and the undersigned, as a Lessee, notice is hereby given that the undersigned hereby exercises his option to extend such Lease (including and extending that certain Lease dated December 12, 1961, between you as Lessor and the undersigned as a Lessee, wherein was leased certain real property adjoining the property leased under the aforesaid Commercial Lease dated October 25, 1961) for a period beginning with the end of the primary term thereof to the last day of May, 1980, upon the terms and conditions of such Lease and at a monthly rental of $2,000."
It is agreed that the primary term of the original lease expired October 31, 1969. Accordingly, the letter dated March 31, 1969 from Wedell to Lander was within the proper time to give the notice.
There is no evidence that Baker made any effort to exercise the option on behalf of the Goodson interest prior to the deadline for taking such action. Several months after the option deadline had expired Baker died. Since November 1, 1969 the premises have been occupied by a tenant under a short term lease from Lander.
The question is thus squarely presented: Was the action on the part of Wedell, one of the joint tenants, in attempting to exercise the option to renew the lease effective to accomplish the renewal in the absence of express action on the part of the other two tenants? Appellant Lander contends that under the undisputed facts before the court only one of the three co-tenants of the leasehold actually exercised his option to renew the lease in accordance with the terms thereof. Lander points to the unambiguous language contained in the letter written by Wedell in which he expressly states that he hereby exercises "his option" and refers to himself as "the undersigned, as a Lessee."[*] Taking the position that only Wedell, the owner of a one-third interest in the leasehold, exercised the option to renew the lease appellant relies upon the rule of law that one tenant in common cannot bind his co-tenants or their interests in the estate by his sole contract unless specifically authorized to do so. 51C C.J.S. Landlord and Tenant § 58(1), p. 180; 20 Am.Jur.2d 190-191; Zimmerman v. Texaco, Inc., 409 S.W.2d 607 (Tex.Civ.App., El Paso 1966); Myers v. Crenshaw, 116 S.W.2d 1125 (Tex.Civ.App., Texarkana 1938, affirmed Tex.Comm.App., 137 S.W.2d 7); and Willson v. Superior Oil Co., 274 S.W.2d 947 (Tex.Civ.App., Texarkana 1954).
The court in Myers v. Crenshaw, supra, pointed out that unlike the ordinary copartnership wherein each partner is the *274 agent of all the others to transact the business, each owner in a co-tenancy acts for himself and no one is the agent of another or has any authority to bind him merely because of the relationship.
Authorities from other jurisdictions support this rule of law. In Gurunian v. Grossman, 331 Mich. 412, 49 N.W.2d 354 (1951), an option to renew a lease was vested in two co-tenants. Only one of the co-tenants attempted to exercise the option and the court held that such did not constitute a sufficient exercise of the option agreement to renew the lease. See also Kaimann v. Spivak, 17 S.W.2d 599 (Mo. App.1929); and Kleros Building Corp. v. Battaglia, 348 Ill.App. 445, 109 N.E.2d 221 (1952).
There is no evidence in this record to support the contention that Wedell was acting as agent or personal representative for either of his co-tenants. Certainly there is no claim by Wedell that he intended by his letter of March 31, 1969 to exercise the option to renew on behalf of the Miller interest.
Appellee argues that under the provisions of paragraph 21 of the lease agreement, copied above, Wedell had the right and power to exercise the option not only for himself but on behalf of the other cotenants. He contends that the provisions of the lease contract are clear that the parties did not intend to limit the right to give notice to only the original "named Lessee" to sign the lease. We cannot agree with appellee's construction of the wording of the lease agreement. Paragraph 21 expressly designates the four categories of persons or entities who may give the notices required by the lease: (1) the named lessee; (2) the named lessee's heirs, executors, administrators, personal representatives; (3) the named lessee's assigns; and (4) any persons, entities, or corporations deriving any right, claim, title or interest in the lease or the properties covered thereby, by, through or under the named lessee. In this case Wedell, in his letter to Lander, expressly stated that as "a Lessee" he exercised "his" option to renew. He does not assert any authority as an agent or does he state that he is taking the action as a person deriving a right or claim by or through the named lessee.
Appellee relies upon the cases of Burke v. Shafer, 189 S.W.2d 444 (Tex.Civ.App., Austin 1945) and Law v. Lubbock National Bank et al., 21 S.W.2d 92 (Tex.Civ.App. Amarillo 1929). A reading of these cases demonstrates facts which are clearly distinguishable from those in the instant case.
We hold, as a matter of law, that the undisputed record in this case reveals a failure on the part of the co-tenants, as lessees, to properly and effectively renew the option contained in the original lease. The attempted exercise of the one-third portion of the option to renew was a nullity since lessor could not be legally forced to accept a renewal of a part of the leasehold interest only. To adopt the contention of Wedell would be equivalent to our making a new and different agreement for the parties. This we cannot do.
Since there was a failure to exercise the option to renew the lease the trial court should have sustained appellant's motion for instructed verdict and rendered judgment that appellee take nothing by his action.
In view of our action in sustaining appellant's first point of error we find it unnecessary to consider or pass upon the other two points of error advanced.
The judgment of the trial court is reversed and judgment is here rendered that any and all relief prayed for by Walter Michael Wedell be and the same is expressly denied.
Reversed and rendered.
NOTES
[*] Emphasis throughout this opinion, unless otherwise indicated, is supplied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2456211/ | 644 S.W.2d 719 (1982)
John Hall JEFCOAT, Appellant,
v.
The STATE of Texas, Appellee.
No. 59944.
Court of Criminal Appeals of Texas, Panel No. 3.
March 10, 1982.
Rehearing Denied February 2, 1983.
*721 G. Bert Smith, Jr., Andrews, for appellant.
Glen Williamson, Dist. Atty., Kermit, Robert Huttash, State's Atty. and Alfred Walker, Asst. State's Atty., Austin, for the State.
Before TOM G. DAVIS, McCORMICK and TEAGUE, JJ.
OPINION
TEAGUE, Judge.
This is an appeal from a conviction for committing the offense of voluntary manslaughter on an indictment charging murder. Punishment was assessed by the jury at 11 years' confinement in the Texas Department of Corrections.
The trial court, based upon the evidence, and without any objections, and commencing with the offense of murder, charged the jury in descending order on the offenses of voluntary manslaughter, criminally negligent homicide, and aggravated assault. Defensive issues of accident and self-defense were also submitted to the jury. The jury returned a verdict finding appellant guilty of the offense of voluntary manslaughter.
The facts of this cause show it to be a classic example of the offense of voluntary manslaughter. Appellant was convicted of killing his estranged wife, who he married in 1968. The marriage was not meant to be as it was plagued by constant arguments, harassment, threats to kill, and accusations of infidelity by the appellant, and inferentially by the deceased. The marriage finally culminated in separation in March, 1976, with appellant filing a divorce suit against his wife, who was described as a "stout" woman, being in size 5'9" tall and weighing during the marriage approximately 185 pounds, although at the time of her death she weighed only 135 pounds. Appellant was 6' tall and weighed 190 pounds. By the record, after the parties separated, the deceased became involved with several different men. She would torment the appellant with their presence at his place of employment and residence. She also unsuccessfully attempted to get her male friends to engage appellant in fisticuffs with them. This activity finally caused the appellant to go to the authorities where he filed "harassment" charges in the municipal court against the deceased and one of her male friends. The judge of the municipal court issued some sort of injunction against the deceased and her male friend. The deceased, who was known to maintain a baseball *722 bat in her motor vehicle, was not without witnesses at appellant's trial as there was testimony that appellant had previously and openly threatened to kill her. However, the overwhelming evidence shows that appellant was simply, in the colloquial, a "hard working old boy," who attempted to ignore his wife's questionable activities. It was also evident that when appellant's wife would parade her male friends before appellant in an ostentatious manner this caused appellant great emotional distress. On the day in question, which was the day before the divorce was to be heard, the deceased arrived where the appellant was living and commenced accusing appellant of being in some sort of conspiracy with his attorney in order to delay the divorce proceedings, which would have altered her future plans, which plans are not shown by the evidence. While appellant was attempting to pacify his wife, one of her male friends arrived on the scene. Appellant told that person to leave, which statement upset the wife as she did not countenance appellant telling her male friend to leave, even though the person was actually present where appellant was then staying while separated from his wife. However, the male friend did thereafter leave. Appellant tried to get his wife to leave but she refused, even after appellant got a gun from a drawer and attempted to frighten her into leaving. Finally, during a scuffle in which appellant was holding the gun, the wife grabbed for the gun whereby the gun was fired only once by appellant. The bullet struck the right side of the wife's face, with the wound ultimately causing her death.
The testimony of appellant and that of the police officers who first arrived at the scene of the killing conflicted as to what appellant said to them at that time. The police officers testified that appellant told them that he pointed the gun at his wife to scare her and the hammer on the gun was cocked at that time. Appellant denied that the gun was cocked, or that he pointed the gun at the deceased. The testimony, however, was undisputed that appellant completely cooperated at all times with the police. All of the events in question were quite traumatic for appellant. Previously, after he and his wife separated, he had joined a local church. Appellant suffered a nervous breakdown after his release from jail, which resulted in him being hospitalized for two months.
V.T.C.A. Penal Code, Sec. 19.02, the offense of murder, provides:
(a) A person commits an offense if he:
(1) intentionally or knowingly causes the death of an individual;
(2) intends to cause serious bodily injury and commits an act clearly dangerous to human life that causes the death of an individual; or
(3) commits or attempts to commit a felony, other than voluntary or involuntary manslaughter, and in the course of and in furtherance of the commission or attempt, or in immediate flight from the commission or attempt, he commits or attempts to commit an act clearly dangerous to human life that causes the death of an individual.
* * * * * *
V.T.C.A. Penal Code, Sec. 19.04, the offense of voluntary manslaughter, provides:
(a) A person commits an offense if he causes the death of an individual under circumstances that would constitute murder under Section 19.02 of this code, except that he caused the death under the immediate influence of sudden passion arising from an adequate cause.
(b) `Sudden passion' means passion directly caused by and arising out of provocation by the individual killed or another acting with the person killed which passion arises at the time of the offense and is not solely the result of former provocation.
(c) `Adequate cause' means cause that would commonly produce a degree of anger, rage, resentment, or terror in a person of ordinary temper, sufficient to render the mind incapable of cool reflection.
* * * * * *
*723 The indictment in this cause alleged in pertinent part that appellant did "... intentionally and knowingly cause the death of an individual, Mary Riley Jefcoat, by shooting her with a gun." This, of course, alleged the offense of murder, see Sec. 19.02(a)(1), supra.
In the court's charge to the jury on the lesser included offense of voluntary manslaughter, and in applying the law to the facts, the court charged as follows:
Now, if you find from the evidence beyond a reasonable doubt that on or about the 28th day of July, A.D. 1976, in Andrews County, Texas, the Defendant, John Hall Jefcoat, did then and there intentionally cause the death of an individual, Mary Jefcoat, by shooting her with a gun, or that the Defendant did then and there intend to cause serious bodily injury to the said Mary Jefcoat, and with said intent to cause such injury did commit an act clearly dangerous to human life, to-wit: shooting the said Mary Jefcoat with a gun and causing the death of the said Mary Jefcoat, and you further find and believe from all the facts and circumstances in evidence in this case, the Defendant, in killing the deceased, if he did, acted under the immediate influence of sudden passion arising from an adequate cause, as those terms have been defined, then you will find the Defendant guilty of voluntary manslaughter.
Unless you so find beyond a reasonable doubt, or if you have a reasonable doubt thereof, you will acquit the Defendant of the offense of voluntary manslaughter and consider whether he is guilty of the lesser offense of criminally negligent homicide.
What we said in Young v. State, 605 S.W.2d 550 (Tex.Cr.App.1980), is dispositive of this appeal,[1] as the charge given in this cause was fundamentally defective. The conviction must therefore be reversed and remanded for a new trial. In Young, a majority of this Court held:
This charge authorized a conviction under theories of voluntary manslaughter pursuant to V.T.C.A., Penal Code Sec. 19.04(a) coupled with both Sec. 19.02(a)(1) and Sec. 19.02(a)(2), whereas the indictment was drafted under Sec. 19.02(a)(1) only. Thus the jury was authorized to convict appellant under a theory not included in the indictment. Under this Court's holdings in Garcia v. State, Tex. Cr.App., 574 S.W.2d 133, and Fella v. State, Tex.Cr.App. 573 S.W.2d 548, reversal is required. (Footnote omitted.) Id. at 551.
See also Colbert v. State, 615 S.W.2d 754 (Tex.Cr.App.1981); Deitch v. State, 617 S.W.2d 695 (Tex.Cr.App.1981); Garcia v. State, 574 S.W.2d 133 (Tex.Cr.App.1978); and Fella v. State, 573 S.W.2d 548 (Tex.Cr. App.1978).
Appellant also challenges the sufficiency of the evidence, complaining, inter alia, that he was entitled to an acquittal because the State introduced in evidence oral exculpatory statements he made to the police. He relies upon Medina v. State, 164 Tex. Crim. 16, 296 S.W.2d 273 (1956); Yarbrough v. State, 125 Tex. Crim. 304, 67 S.W.2d 612 (1934); and Robidoux v. State, 116 Tex. Cr.R. 432, 34 S.W.2d 863 (1931). Even though the case must be reversed for a fundamentally defective jury charge, it is nevertheless necessary for this Court to review this contention as this ground of error, if sustained, would bar a retrial. See Burks v. United States, 437 U.S. 1, 98 S. Ct. 2141, 57 L. Ed. 2d 1 (1978); Greene v. Massey, 437 U.S. 19, 98 S. Ct. 2151, 57 L. Ed. 2d 15 (1978).
The appellant's reliance on the above cited cases is misplaced for several reasons. First, as stated in Robidoux, supra, "... the right of the accused in such instance should be stated to the jury in plain and unmistakable language, so that [the jury] may know that the defendant is entitled to an acquittal if such exculpatory statements be not disproved or shown to be false by other testimony." (Emphasis added.) Id. *724 34 S.W.2d at 865. A charge, albeit a deficient one, was given the jury in Robidoux. Yarbrough, supra, is actually not in point to appellant's contention, for there we reiterated the above rule regarding exculpatory statements, see Robidoux, supra, but also stated:
... However, the rule is not applicable in all cases.... For example, the rule has been relaxed in cases where the accused on trial testifies before the jury and his testimony is in accord with the exculpatory features of his confession or declarations, and his defensive theory arising from his testimony and coinciding with his exculpatory theory advanced in the confession or declarations is fairly submitted to the jury in the charge of the court.... Again, it has been held that the rule is not applicable where the state does not rely for a conviction wholly upon the statement of the accused.... It is not deemed necessary to mention other instances in which the rule has been relaxed.... Id. 67 S.W.2d at 613-14.
If appellant is contending that as a matter of law the only evidence presented by the State was of an exculpatory nature he is mistaken, Cf. Medina, supra, for the record demonstrates otherwise.
We reject appellant's contention because (1) he did testify in his own behalf and the trial court charged the jury on the two defensive theories he raised, and (2) appellant neither objected to the final charge nor requested a special charge on the law of exculpatory statements. Failure to object to the trial court's final charge because of an omission therein, or failure to submit a correct requested charge to fill the claimed void, waives all but fundamental error. Duffy v. State, 567 S.W.2d 197 (Tex. Cr.App.1978). See also Rogers v. State, 598 S.W.2d 258 (Tex.Cr.App.1980); Richards v. State, 511 S.W.2d 5 (Tex.Cr.App.1974). Failure of the trial court to charge on the law of exculpatory evidence was not fundamental error. Duffy v. State, supra.
It be appellant's contention that the evidence was insufficient to sustain the verdict of the jury finding him guilty of voluntary manslaughter, we find that the decision of Braudrick v. State, 572 S.W.2d 709 (Tex.Cr. App.1978), and its progeny are dispositive of this contention. Braudrick, Id. was decided after this case was tried. There, this Court stated:
We therefore hold that causing death `under the immediate influence of sudden passion arising from an adequate cause' is in the nature of a defense to murder that reduces that offense to the lesser included offense of voluntary manslaughter, and that the State need not prove such influence beyond a reasonable doubt to establish voluntary manslaughter, but that if raised by the evidence it must prove the absence of such influence beyond a reasonable doubt to establish murder.
With this clear understanding of the nature of the `immediate influence' element, appellant's grounds of error actually are tantamount to a claim that there is no evidence to support submission of the lesser included offense of voluntary manslaughter. The jury in returning a verdict of guilty of voluntary manslaughter found all of the statutory elements of murder were proven beyond a reasonable doubt, and further found a reasonable doubt on the defensive issue. We find the evidence was sufficient to support such reasonable doubt. (Footnote omitted.) Id. at 711.
The jury's verdict finding appellant guilty of voluntary manslaughter necessarily means that they found appellant guilty of murder. See Paige v. State, 573 S.W.2d 16 (Tex.Cr.App.1978).
Where an indictment or information charges a defendant with the offense of murder it is incumbent upon the State, in order to sustain a verdict of guilty, to prove beyond a reasonable doubt the elements of the alleged offense of murder. If, during the trial, the issue of voluntary manslaughter is raised it is also incumbent upon the State to prove beyond a reasonable doubt the absence of immediate influence in order to sustain a murder conviction. Braudrick, *725 supra.[2] The question of what constitutes an adequate cause is an issue of fact for the jury. Roberts v. State, 590 S.W.2d 498 (Tex.Cr.App.1979).
Thus, on appeal, if the issue of sufficiency is raised and a jury has found a defendant guilty of the offense of murder, as alleged by the charging instrument, and the issue of adequate cause was raised but rejected by the jury, this Court will make two determinations: (1) whether the evidence was sufficient to establish the offense of murder and (2) whether the evidence was sufficient to disprove the issue of adequate cause.
However, where a jury, as here, has found a defendant guilty of the lesser included offense of voluntary manslaughter it is only necessary for this Court to make the determination of whether or not the evidence was sufficient to establish the offense of murder. If that determination is made, and it is unfavorable to the defendant, the defendant is in no position to complain because the finding of the jury that the defendant was guilty of voluntary manslaughter, though error from the standpoint of a reviewing court, was error favorable to the defendant, of which he cannot complain on appeal.
The jury, as the trier of the facts, could have accepted appellant's testimony that the killing was either an accident or was done in self-defense. However, it chose not to do so. Nevertheless, it found appellant not guilty of murder but, based upon its version of the facts, found appellant guilty of the lesser included offense of voluntary manslaughter.
After reviewing the evidence we find that the evidence would support a finding of murder.
In addition to the other evidence presented, that was unfavorable to appellant, appellant himself testified that after his wife refused to leave the premises, after he told her male friend to leave and that person did leave, they argued. Appellant went and got a gun out of a drawer and told her: "Do you see this?" "Now, go on." During the ensuing struggle between the two of them appellant shot the deceased, which shot caused her death. Based upon the facts, we find that a reasonable jury would have been warranted, as the trier of the facts, in rejecting any exculpatory testimony and accepting only the incriminatory fact that the appellant intentionally caused the death of his wife. See V.T.C.A. Penal Code, Sec. 6.03(a). Further, when a deadly weapon is used, and death results, as occurred here, a presumption arises that the accused intended to kill his victim. Nelson v. State, 573 S.W.2d 9, 12 (Tex.Cr.App.1978). We, therefore, reject appellant's contention and hold that the evidence was sufficient to sustain the verdict of the jury finding appellant guilty of voluntary manslaughter.
Finding the charge of the court fundamentally defective, the judgment is ordered reversed and the cause remanded for a new trial.
TOM G. DAVIS, J., concurs in result only.
Before the court en banc.
*726 OPINION ON STATE'S MOTION FOR REHEARING
PER CURIAM.
The original opinion in this cause found that Young v. State, 605 S.W.2d 550 (Tex. Cr.App.1980) was dispositive of this appeal and ordered the judgment reversed and the cause remanded for a new trial.
We granted the State leave to file a Motion for Rehearing in order to reconsider our holding in Young, supra, and, having done so, we adhere to that holding.
Accordingly, the State's Motion for Rehearing is denied.
NOTES
[1] Young, Id., was not decided until July 18, 1979. The trial of this cause commenced on January 11, 1978. Because of this it is understandable why the trial court erred as it did.
[2] Braudrick comports with what the Supreme Court said in Mullaney v. Wilbur, 421 U.S. 684, 95 S. Ct. 1881, 44 L. Ed. 2d 508 (1975) (to satisfy due process the prosecution must prove beyond a reasonable doubt the absence of the heat of passion on sudden provocation when the issue is properly presented in a homicide case).
Compare, however, Isaac v. Engle, 28 Cr.L. Rep. 2391, where a plurality of the Sixth Circuit Court ruled that the prosecutor must prove beyond a reasonable doubt whatever the State has defined as an element of the crime, but by the same token the prosecution must also meet whatever burden it has assumed with regard to the absence of affirmative defenses. Petition for Certiorari has been granted by the Supreme Court, see Engle v. Isaac, 29 Cr.L.Rep. 4021, and oral arguments have been heard, 30 Cr.L. Rep. 4145. See, however, Luck v. State, 588 S.W.2d 371 (Tex.Cr.App.1979), where this Court held that a charge that instructed the jury that the burden of proof beyond a reasonable doubt was on the State to disprove the justification defense of self-defense, see V.T. C.A. Penal Code, 9.31, Cf. 2.04(d) was sufficient over the objection that it did not inform the jury that the State had to disprove beyond a reasonable doubt the issue of self-defense. E.g., Bell v. State, (Tex.App.Ct.Dallas 1982) (No. 05-81-00132-CR, Jan. 20, 1982). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2456216/ | 644 S.W.2d 23 (1982)
Richard MILES, Appellant,
v.
The STATE of Texas, Appellee.
No. 08-81-00233-CR.
Court of Appeals of Texas, El Paso.
August 4, 1982.
Rehearing Denied November 10, 1982.
Allen C. Isbell, Houston, for appellant.
John B. Holmes, Jr., Dist. Atty., Houston, for appellee.
Before STEPHEN F. PRESLAR, C.J., and WARD and OSBORN, JJ.
OPINION
OSBORN, Justice.
Richard Miles and Donald Ray Dixon were tried together and both convicted of attempted murder, and their punishment was assessed at fifteen years and one day confinement. Richard Miles appeals solely on grounds that he was deprived of reasonably effective assistance of counsel. We direct the district court to conduct a hearing concerning the basic issues raised by the Appellant, and we delay our final determination of the appeal pending the receipt of the record of that hearing.
Although his court appointed counsel may have made some tactical errors, he did present Appellant's defense of alibi to the jury and the issue of failure to raise a viable defense, such as existed in Ex parte Duffy, 607 S.W.2d 507 (Tex.Cr.App.1980), does not exist in this case. Instead, the appeal revolves around tactical errors in the trial, presentment of the defense which was raised, and the punishment stage of the trial following the jury verdict of guilty.
*24 The first point asserts error because Appellant's trial counsel did not ask the jury a single question on voir dire. The examination of the panel by the Assistant District Attorney consists of seventy-two pages in the record of this case. He gave the prospective jurors a general explanation of the trial, the charge being prosecuted, the burden of proof, the range of punishment, and inquired of the panel and of particular individuals about following the law and giving both the State and the defendants a fair trial. In several instances, the court gave some necessary explanation to members of the panel to whom particular questions were directed. Two jurors were excused because of bias. Counsel for Mr. Dixon and then counsel for Appellant made short statements to the jury. The jury was advised of the presumption of innocence, that the burden of proof was on the State, and that a verdict of not guilty should be returned. Certainly, counsel for Miles, who later in the trial qualified his client for probation, should have inquired of the prospective jurors concerning their ability to consider the full range of punishment, including probation, in an attempted murder case. See: Henriksen v. State, 500 S.W.2d 491 (Tex.Cr.App.1973).
Normally, you would expect counsel for the accused to determine if any prospective juror either knew or was related to the prosecutor or any of the State's witnesses. Also, counsel should inquire about the willingness of the jurors to apply the presumption of innocence and their willingness to require the State to meet its burden of proof. Merely telling the panel of these provisions of the law without inquiring about the panel giving them full effect does not normally meet expected standards of one who diligently represents his clients.
Can one who asks not a single question meet the standard of providing "reasonably effective assistance?" While it is possible that counsel who ask only the basic questions as noted above may provide a reasonably effective assistance at this beginning stage of the trial, one who asks no questions has really provided no assistance. Certainly, there are tactical issues involved in qualifying a jury panel, but we know of no tactical advantage to stand mute.[1] Neither can it be asserted that counsel for Mr. Miles was "riding on the coattails" of the counsel for the other defendant, because he did not ask any questions either.
The State relies upon the holding in Jackson v. State, 491 S.W.2d 155 (Tex.Cr.App. 1973), where the court in commenting upon a short "ten minute" examination of the jury panel concluded that the length of the examination could have been dictated by trial strategy. At times, a short examination may be a good strategy; it may even be very adequate. But, we know of no strategy which permits counsel to waive all questions to a jury panel. As between "trial strategy" and "ineffective assistance of counsel," we are inclined to conclude on the facts in this case that it was the latter.
The barest of research reflects that voir dire is an important and sometimes "critical stage" in the trial of a criminal case. Eason v. State, 563 S.W.2d 945 (Tex.Cr.App. 1978); United States v. Dellinger, 472 F.2d 340 at 366 (7th Cir., 1972), cert. denied, 410 U.S. 970, 93 S. Ct. 1443, 35 L. Ed. 2d 706 (1973); Teague & Helft, 3 Texas Criminal Practice Guide, Chapter 72, (1980); Rothblatt, Successful Techniques for Criminal *25 Trials, Chapter 3, Section C (1971); Campbell, The Multiple Functions of the Criminal Defense Voir Dire in Texas, 1 American Journal of Criminal Law 255 (1972); and Teitelbaum, Voir Dire: Another View, 1 American Journal of Criminal Law 274 (1972).
Total lack of voir dire examination is not the only problem area in this case. While the defendant was testifying at the punishment stage and qualifying for probation, counsel asked him if he had ever been in any trouble before this particular time. He said he had not. On cross-examination, the State's attorney then asked him about his having been picked up in 1967 for felony theft, in 1968 for theft of an automobile, in 1968 for robbery by theft, and in 1978 for robbery by assault. He testified that he was never convicted on any of these charges, but by then the harm had been done. In Ex parte Ewing, 570 S.W.2d 941 (Tex.Cr.App.1978), the court in its opinion which was written more than a year before the case before us began, pointed out to these same attorneys the need to make an independent investigation of the facts surrounding the allegations against one's client and to determine the existence of a police record. There was a total failure to follow that warning in this case.
The next complaint is that counsel made no argument at the punishment stage of the trial. The waiver of such argument came after the defendant was badly "wounded" by the cross-examination as to his arrest record and when he needed some rehabilitation before the jury. The defendant's wife had testified that he was the sole support for her and three children, and the evidence reflected that he was eligible for probation. Certainly, there was an argument that could be made in his behalf. The advantage of waiving argument as opposed to making a plea for leniency for a family man with no prior convictions is difficult to recognize as a valid trial strategy. See: Ransonette v. State, 550 S.W.2d 36 (Tex.Cr. App.1976), which concluded that waiver of argument at the punishment stage of the trial was trial strategy. Also see: Clinton and Wice, Assistance of Counsel in Texas, 12 St. Marys L.J. 1 at 34 (1980). In this case, the State waived opening argument and if defense counsel could prevent a closing argument of the State's attorney by waiving argument for the defendant, then a valid strategy would be obvious, but since the State may waive its opening argument and still have an absolute right to close (a basically unfair privilege), no real strategy is involved by waiving what could be a legitimate argument for the defendant.
The last contention is that Appellant was denied effective assistance of counsel because of the failure to file a motion for severance. Since the other defendant had prior felony convictions, Mr. Miles had an absolute right to a severance. Article 36.09, Code Crim.Pro. Again, there could be trial strategy in trying someone with a clean record in a case with a person with prior convictions in hopes of receiving a lighter sentence. But, that strategy was lost when counsel opened the door to the prosecutor to prove the Appellant's arrest record. Also, if counsel did not take time to even learn that his own client had a record of several arrests, it is difficult to believe he ever inquired about the criminal record of the other defendant.
As we review the four basic complaints about (1) voir dire, (2) opening the door for the arrest record, (3) waiving argument at the punishment stage of the trial, and (4) failing to seek a severance, we do not have a record such as can be developed in a habeas corpus hearing in which testimony can be obtained as to particular trial strategies. But, applying the standards enunciated in Ewing v. State, 549 S.W.2d 392 (Tex. Cr.App.1977), and restated in Ex parte Ewing, 570 S.W.2d 941 (Tex.Cr.App.1978), we are inclined to conclude that the totality of the representation affirmatively demonstrates counsel's ineffectiveness. At the same time, we recognize the seriousness of determining that counsel failed to meet the minimum standards required to provide reasonably effective assistance to his client. Therefore, with the issues involved being clearly delineated, we direct the judge of the 180th District Court to hold a hearing *26 within forty-five days from the date of this opinion, and within thirty days thereafter deliver to the Clerk of our Court the evidence developed along with his findings and conclusions on the four areas involved in the Appellant's contentions as to ineffective assistance of counsel.
We direct that the record include, if available, the respective parties' jury cut list, the names of the jurors selected, and any jury information sheets used by counsel in selecting the jury in this case. If the jury information sheets are not available, we request that the record include a sample jury information sheet such as would have been furnished to the counsel in this case.
The appeal is abated pending the receipt of such additional record.
OPINION
AFTER REMAND
The trial court has entered an order in this case reciting that a factual development on the issues raised in our earlier opinion is impossible due to the death of Titus Edwards and the unavailability of Mary B. Edwards, who has been suspended from the practice of law for one year.
We do now have available a sample "juror information form" and the jury strike list used by counsel for the State and counsel for this defendant in the trial court. The "juror information form" provided basic information about a prospective juror's age, employment, family, religious preference and prior jury service. It would not help counsel in knowing how a prospective juror felt about applying the law to the facts of the case. The strike list reflects double cuts on two prospective jurors, but we do not find this to be necessarily significant.
For the reasons set forth in our original opinion, we conclude that the overall conduct of the defense reflects that the Appellant did not receive reasonably effective assistance of counsel in the trial of his case. We sustain the four points of error and remand the case for a new trial.
The judgment of the trial court is reversed, and the case is remanded for a new trial.
NOTES
[1] Mr. Titus Edwards, who was assisted in the defense by his wife, Mary, made the following statement to the jury at the conclusion of the State's voir dire examination:
May it please the Court, ladies and gentlemen, as Mr. Jenkins has pointed out, my name is Titus Edwards and I am being assisted by my wife, Attorney Mary Edwards.
If I sound as though I have something in my mouth, I have a slight speech impediment because I am just up from major surgery recently. I don't have anything to say to you. I just want you to look at me here. I think Mr. Jenkins has thoroughly examined you and I don't think there's any need for me to add anything to what he has said.
However, we do feel that those of you who will be selected, the twelve of you who will be selected, will listen to all the facts and render a true verdict. We are asking those who will be selected to bring us back a verdict of not guilty. That's all we have to say. Thank you very much. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2456173/ | 700 F. Supp. 2d 1055 (2010)
GIRL SCOUTS OF MANITOU COUNCIL INC., Plaintiff,
v.
GIRL SCOUTS OF the UNITED STATES OF AMERICA INC., Defendant.
Case No. 08-CV-184.
United States District Court, E.D. Wisconsin.
March 31, 2010.
*1057 Gary W. Leydig, Riordan Fulkerson Hupert & Coleman, Chicago, IL, Tomislav Z. Kuzmanovic, Russell A. Klingaman, Hinshaw & Culbertson LLP, Milwaukee, WI, for Plaintiff.
David J. Harth, David E. Jones, Lissa R. Koop, Michelle M. Umberger, Perkins Coie LLP, Madison, WI, Gina Parlovecchio, Kenneth Kirschner, Lyndon M. Tretter, Hogan & Hartson LLP, New York, NY, for Defendant.
*1058 ORDER
J.P. STADTMUELLER, District Judge.
The Girl Scout Law is a pledge ritualistically recited and "shared by every member" of the Girl Scouts of the United States of America ("Girl Scouts" or "GSUSA"), the defendant in this action. See Girl Scouts of the United States of America, Girl Scout Promise and Law, http: //www.girlscouts.org/program/gs_central/ promise_law/(last visited March 31, 2010). The Girl Scout Law, described by the GSUSA as the "credo of girl scouting," entails the ten tenets each scout must strive to fulfill in their daily lives. Id. In relevant part, the Girl Scout Law requires that every member must do their "best to be honest and fair." Id. The plaintiff, Girl Scouts of Manitou Council, Inc. ("Manitou"), an organization that provides Girl Scouting to seven counties in eastern Wisconsin, contends that the national organization of the Girl Scouts has not been loyal to the terms of its own Law, in that the GSUSA has not been "honest and fair" in its dealings with the Manitou Council. Specifically, Manitou argues that GSUSA, acting pursuant to a national strategy that would eventually merge the council into a larger regional council, has violated the Wisconsin Fair Dealership Law ("WFDL"), Wis. Stat. § 135.01, breached the terms of the charter that created the council, and committed several related torts. (Docket # 120). After extensive discovery, on August 31, 2009, GSUSA, asserting that there were no genuine issues of material fact necessitating a trial in this case, moved pursuant to Fed.R.Civ.P. 56 for a summary judgment in its favor on all counts of Manitou's Second Amended Complaint ("complaint"). (Docket # 134). On that same day, Manitou moved for summary judgment in its favor on the breach of contract claim and the WFDL claim. (Docket # 141). After reviewing the voluminous record, consisting of hundreds of pages submitted by each party, and consulting the relevant law, the court is now prepared to make a ruling on the parties' cross-motions for summary judgment.
BACKGROUND
The court begins with an admittedly detailed, but necessary recounting of the undisputed facts animating the current litigation.[1]
A. The Girl Scouts of the United States of America
Juliette Gordon Low founded the Girl Scouts on March 12, 1912, in Savannah, Georgia. From humble beginnings as a troop of eighteen girls, the Girl Scout movement has expanded rapidly, such that today hundreds of thousands of adult volunteers are helping nearly three million girl members participate in the organization throughout the United States and in more than ninety countries around the world. The organization has influenced the lives of more than forty million women since its inception and boasts alumni from all facets of American life, including, among other notables, Sandra Day O'Connor, Hilary Clinton, Lucille Ball, and Katie *1059 Couric. Currently headquartered in New York City, GSUSA reported in Fiscal Year 2008 revenues exceeding seventy million dollars derived from membership dues, donations, and the sales of Girl Scout merchandise.[2]
In 1950, Congress incorporated the organization as the "Girl Scouts of the United States of America" in order to promote the qualities of "truth, loyalty, helpfulness, friendliness, courtesy, purity, kindness, obedience, cheerfulness, thriftiness, and kindred virtues among girls." 36 U.S.C. § 80302. The self-espoused purpose of the Girl Scout movement is to "inspir[e] girls with the highest ideals of character, conduct, patriotism, and service that they may become happy and resourceful citizens." See Girl Scout Constitution, Preamble. Of particular note for this case, GSUSA has espoused as a central tenet of the organization that Girl Scout membership be "reflective of the pluralistic nature" of the populace and that membership should be "extended to all girls in all population segments and geographic areas." See GSUSA, Blue Book of Basic Documents 2006, at 21.
According to the GSUSA's congressional charter, the organization is headed by a National Council of Girl Scouts ("National Council"), which includes delegates from every local Girl Scout council and is empowered to adopt and amend a constitution, create bylaws, and elect a board of directors for the organization. 36 U.S.C. § 80303. Accordingly, the National Council created a constitution ("Girl Scout Constitution") for the organization in November of 1957. The National Council has since amended the Girl Scout Constitution ten times.
The current manifestation of the Girl Scout Constitution outlines the basic means by which Girl Scouting is provided throughout the country. Specifically, Article VII of the Girl Scout Constitution states that "local Girl Scout councils shall be organized to further the development of the Girl Scout Movement in the United States; to establish local responsibility for leadership, administration, and supervision of the program; and to develop, manage, and maintain Girl Scouting in accordance with the terms of their charters." The Girl Scout Constitution further authorizes the National Council to establish requirements that an organization must comply with in order to become an official Girl Scout council.[3] GSUSA Const. art. VIII, § 2. In turn, the National Board of Directors ("National Board"), a body authorized by Article X of the Girl Scout Constitution to "manage the affairs" of the GSUSA,[4] is broadly empowered to issue credentials to a given council and revoke such credentials when "the terms and conditions [of the credentials] or requirements... are being violated or when the best interests of Girl Scouting are not *1060 being furthered." GSUSA Const. art. VIII, § 3.
The net result is that the GSUSA, much like other charities and businesses, operates as a federation, carrying out its goals through individual councils, separate legal entities who are empowered to act through a "charter" granted by the national organization for a nominal fee.[5] The charter outlines each council's rights, duties, and obligations, which are derived, in part, from the GSUSA's official bylaws, policies, and other guidelines as contained in the Blue Book of Basic Documents ("Blue Book").[6] In relevant part, the credentials section of the Blue Book outlines both the requirements that a potential Girl Scout council must comply with to receive and retain a charter and the obligations a Girl Scout council assumes in accepting a charter. See GSUSA, Blue Book of Basic Documents 2006, at 25-26. Specifically, the Blue Book commits a Girl Scout council to act "in accordance with and to be limited by the policies so identified, published, and distributed to councils by [the GSUSA]." Id. at 26. Moreover, the Blue Book states that the charter of a Girl Scout council can be "revoked or terminated" by the GSUSA per the terms of the Girl Scout Constitution, extinguishing the ability of the council to exercise any rights conferred by the grant of a charter, including the right to use the Girl Scout program, be identified with the Girl Scout movement, or use the Girl Scout name or trademark. Id. at 25. The Blue Book further details the procedures for revoking a council's charter and for changing a Girl Scout council's jurisdiction.[7]Id. at 26-28. Each council, per its charter, is assigned to a specific, non-overlapping territory or "jurisdiction," in which it operates. A given council survives financially through donor solicitations, sales of Girl Scout cookies, sales of other Girl Scout branded products and services, and from fees charged for use of council-owned facilities. By 2005, approximately 315 Girl Scout councils existed in the United States, each with their own board of directors, officers, and professional staff.
To ensure that individual councils are successful in achieving the organization's central goals, every council's charter has a term of four years. Eighteen months prior to the expiration of a council's charter, a council will send to the GSUSA an "Application for a Girl Scout Council Charter." Id. at 26. In addition to an application, the individual council will conduct a performance assessment and submit a final report to the GSUSA in the year before its charter expires. Id. The GSUSA, in turn, will review the results of the council's performance assessment, compare the results to national standards for what constitutes an effective Girl Scout council, assess the council's performance and progress, and then make relevant recommendations to a council. Id. The council, in turn, acts on those recommendations and submits its own recommendations to the National Board of Directors, who makes a final determination on whether to renew the council's charter. Id. at 27. If a council is not "developing, managing, and maintaining *1061 Girl Scouting" in its jurisdiction, "fully meeting charter requirements," or "is seriously deficient in one or more critical priorities," the council will either receive a charter with qualifications, be subject to a Charter Compliance Audit by the National Board of Directors, or will have the charter revoked. Id. at 26-28.
B. The Manitou Council
The plaintiff, Girl Scouts of Manitou Council, is the Girl Scout council charged with carrying out the Girl Scout mission in seven counties in Eastern Wisconsin. Specifically, Manitou's jurisdiction stretches from the affluent northern Milwaukee suburbs of Mequon and Thiensville north to the cities of Sheboygan and Manitowoc and west toward the city of Fond du Lac, covering a primarily rural area. The council has been serving the area in some capacity since the early 1950s. Manitou has sixteen employees and is governed by an independent board of directors. Currently, the council boasts having approximately 7,500 girl and adult Girl Scout members, with girl membership increasing by 370 members between 2004 and 2008. In addition, Manitou possesses several pieces of property, including Camp Evelyn, a 240-acre facility near Plymouth, Wisconsin, and Camp Manitou, a 140-acre facility located near Shoto, Wisconsin, used for resident camping and other activities. Neither side disputes that Manitou Council was a "high performing" council, in that it met or exceeded several goals of the GSUSA, including having high recruitment and membership retention.
C. Girl Scouts Realignment Strategy
While Manitou Council may have been successful in creating a growing and vibrant environment for Girl Scouting in eastern Wisconsin, Manitou, at least from the perspective of the national organization, was not a microcosm of the national health of Girl Scouting in the early 2000s. In 2004, after several independent studies, the GSUSA concluded that a host of problems confronted the organization. First, the Girl Scouts' efforts to provide programs to unserved or underserved communities, such as inner-city youths, presented severe challenges to the GSUSA as to how to subsidize such programs and what the best delivery systems were to implement the different programs. Moreover, the GSUSA commissioned studies indicated that, while financial pressures and new program goals made fund-raising more important than ever, raising money for the organization in challenging economic times so that GSUSA could fulfill its mission was becoming increasingly difficult. The studies also showed that the Girl Scout movement, with its 315 councils, tended to be unfocused regarding what the organization's central goals were. Perhaps most troubling for the organization was its belief that the Girl Scouts, while being the largest organization for girls in the world, was shrinking, despite steady increases in the general American population of girls between the ages of 5 and 17.[8]
In 2005, the GSUSA invited staff, council executives, and National Board members to participate in "Gap Teams," small groups that studied the GSUSA's challenges and attempted to find a means to *1062 "close the gaps between the current state and the desired state of the Girl Scout movement." (DPFF ¶ 56). One Gap Team ("Governance Gap Team"), focused on the organization's "governance and organizational structure gap," ultimately attributed many of the Girl Scouts' woes to the sheer number of councils that encompassed the Girl Scout organization. The Governance Gap Team noted that the organization's market share was significantly less in their smaller councils when compared to the largest councils, and that Girl Scout membership thrived in periods where the number of Girl Scout councils decreased. Moreover, the Governance Gap Team found that the cost per girl was less in the larger councils than in smaller councils. Additionally, the Governance Gap Team reasoned that fund-raising was far more difficult with smaller councils, as it encouraged different councils to compete against each other for donations from the same general population base. The Governance Gap Team also found that having numerous councils implementing the organization's goals tended to dilute and confuse the overall message that the organization was sending. Finally, the Governance Gap Team study concluded that having too many councils prevented the organization from "leveraging and aligning" its resources effectively, serving as a "barrier to future growth and sustainability." (DPFF ¶ 49).
After months of consultation with various parties, the GSUSA's Governance Gap Team recommended that mergers or "strategic restructuring" of the smaller councils occur, such that the "optimal" Girl Scout council, dubbed "High Capacity Councils," would serve approximately 10,000 girls. For GSUSA, the larger councils would no longer compete for donations and would have the means to hire the best possible staff members, taking advantage of economies of scale. The Governance Gap Team crafted a new "master map" of the various Girl Scout councils, proposing consolidations where councils were in trouble or where it appeared that the need for consolidations were "obvious," making new corporate entities out of the old councils. (DPFF ¶ 65). In July 2005, the GSUSA informed executives of its various councils of the initial findings and recommendations of the Governance Gap Team.[9] A July 2005 memorandum stated that "council boundaries and jurisdiction and chartering would be defined anew using a set of capacity-based criteria." Presentations to the council executives followed that August. On September 11, 2005, the National Board approved the Governance Gap Team's recommendation that GSUSA develop and implement a process for "nationwide council realignment," such that old councils' territory, property, and employees would be merged into larger councils.[10]
*1063 D. Manitou and the Initial Steps Toward Realignment
On that same day, the National Board of Directors renewed Manitou's charter ("2005 Charter" or "Charter"). The Charter itself is a fairly simple document, certifying that Manitou is authorized to "operate as a Girl Scout council within the area of jurisdiction agreed upon with [the GSUSA], with the duties, rights, powers, and privileges of a local Girl Scout council as defined by [the GSUSA]." The Charter, which is effective from "January 1, 2006, for up to four years," incorporates by reference the "terms and conditions" contained in Manitou's April 13, 2005 Application for a Girl Scout Council Charter ("Charter Application"). The Charter was signed by Liesl Rice ("Rice"), Manitou's President, Patricia Diaz Dennis ("Dennis"), the chair of the National Board of Directors, and Kathy Cloninger ("Cloninger"), GSUSA's Chief Executive Officer. The Charter Application itself mirrors language found in the Blue Book outlining the requirements to apply to be a council and the rights, duties, and obligations involved in becoming a council.
On September 30, 2005, Linda Foreman, the GSUSA's National Secretary, wrote to Ms. Rice and Denise Schemenauer ("Schemenauer"), the Chief Executive Officer of Manitou, to inform the council that its charter had been renewed for up to four years without qualifications. Moreover, the September 30, 2005 letter reminded Manitou that the GSUSA and the Girl Scout councils were "engaged in a Core Business Strategy process to transform the Girl Scout Movement," including developing and implementing "a process for nationwide council realignment." The letter further noted that, because the alignment process would occur over the next several years, council charters would only be issued on a period of "up to" four years.
In the fall and winter of 2005, a series of regional and national level meetings occurred in which representatives of various Girl Scout councils, including Manitou, conferred with the GSUSA regarding the nationwide realignment plan. In late October, GSUSA sent a memo to Council CEOs and Board Chairs asking for their input for criteria to be used to determine what a "high capacity council" entailed and suggestions regarding specific boundaries for the new councils. The minutes of a fall 2005 meeting of all of the Wisconsin Girl Scout councils led by Manitou's Schemenauer indicate that there was consensus regarding the need for realignment and consolidation of the Wisconsin councils. Ms. Schemenauer concedes that initially she was "very interested" at the time in "exploring a statewide council" for realignment.[11] (Schemenauer Dep. 184). In fact, in December of 2005, Ms. Schemenauer submitted, on behalf of the Wisconsin Alliance of Girl Scout councils, their final realignment input to GSUSA, which recommended that every realigned council serve a minimum of 10,000 girls and that Wisconsin should only have one to six councils after realignment efforts finished.[12]
After reviewing the recommendations of the various councils, GSUSA, together with representatives from every council, including Manitou, met in late February of 2006 in Orlando, Florida, to discuss the final criteria for determining the makeup of the new councils and to display an initial *1064 resource map indicating a proposed national realignment plan. The resource map suggested realigning the three hundred plus local councils into 104 councils, with each council having a population base of approximately 100,000 girls.[13] The resource map merged the thirteen councils that then-existed in Wisconsin into three councils, with the majority of the territory encompassing Manitou's jurisdiction being merged into a council covering northern Wisconsin and a small portion of the upper peninsula of Michigan. Councils were informed at the meeting that, while realignment in some form would occur inevitably, councils could submit formal mapping proposals to GSUSA after appropriate discussions with neighboring councils. Manitou met with other councils at the Orlando meeting and actively discussed merging their council with those in northern Wisconsin and in the upper peninsula of Michigan.
After the Orlando meeting, Manitou seemed to support the realignment plans as envisioned by GSUSA. In a late March 2006 meeting of Manitou's Board of Directors, the board agreed that the optimal course of action would consist of a merger of most of Manitou with the councils to the north while allowing Ozaukee County, the county directly north of the city of Milwaukee, to be merged with a southeastern Wisconsin council. While other Girl Scout councils petitioned the GSUSA for changes to the proposed realignment during the spring of 2006, Manitou did nothing, assuming that the national organization would "work with [Manitou]" if the council later found the realignment plans to be dissatisfactory. (Schemenauer Dep. 323). In April of 2006, seven councils from Wisconsin and Michigan, including Manitou, the future "Northwestern Great Lakes Council,"[14] met to further discuss a mapping configuration to propose to GSUSA.[15] As a result of the April meeting, Ms. Schemenauer, as the coordinator of the Wisconsin and Michigan realignment group, submitted a memorandum on May 31, 2006, that indicated the group's willingness to "negotiate the terms of a potential council realignment."[16] Moreover, the realignment group noted that they wanted to use GSUSA's "National Resource Map as the general basis" upon which realignment would occur, with the exception that the entirety of the upper peninsula of Michigan be added to the new council's jurisdiction.[17]
*1065 The Girl Scouts treated the memorandum of the Wisconsin and Michigan realignment group as a formal proposal for changes to the councils' jurisdictions, responding favorably to the tentative proposal.[18] On June 28, 2006, Ms. Schemenauer was informed that the GSUSA's Mapping Task Force, a subcommittee overseeing the realignment project, had approved the proposed changes to the resource map, sending Schemenauer's group's proposal to the National Board Realignment Task Force for approval before the recommendation was sent to the National Board of Directors for final approval. Less than a month later, the National Board Realignment Task Force approved the May 31, 2006 proposal, and, on August 26, 2006, the National Board approved about three-hundred "Applications for Change in Council Jurisdiction," including the Wisconsin and Michigan realignment group's proposal, seemingly settling the borders for the new council. The applications approved by the National Board would have divided Manitou, such that sixty percent of the current council's jurisdiction would go to the northern council, thirty five percent of the council would be given to a council encompassing southeastern Wisconsin, with the remainder being handed to a western Wisconsin council.
E. Manitou's Resistance to Realignment
Problems began to emerge with Manitou's cooperation regarding the realignment in the fall of 2006. In early September, the Wisconsin and Michigan councils that were to encompass the Northwestern Great Lakes council met again to discuss the next steps to progress toward realigning the councils, including drafting guiding philosophies for the new council, creating a plan for collaboration between the different staffs of the various councils, discussing employed staff retention, and exploring avenues for realignment funding. The meeting was somewhat hostile, as the executives of the various councils expressed frustrations, including Ms. Schemenauer, who was upset that two Girl Scout executives had hired a consultant for the group without first checking with Ms. Schemenauer and other executives. Exasperated from the meeting, Ms. Schemenauer and Ms. Rice sent an email to the board of directors for Manitou Council, writing that "after the alliance meeting it became clear that we did need to talk to you as a group and gain your direction." Discussions within the Manitou Council manifested severe differences in philosophy and approaches to council administration with the other councils with whom Manitou was merging. At a November 28, 2006 meeting of Manitou's Board of the Directors, the board approved the creation of a task group[19] to review the national realignment *1066 plan, with the goal of making recommendations to GSUSA's Board of Directors regarding realignment issues and creating a position paper explaining Manitou's thoughts regarding realignment.
GSUSA, made aware of Manitou's growing concerns, tried to ameliorate the situation in early 2007. In January 2007, Linda Foreman ("Foreman"), a member of GSUSA's National Board and the chair of the National Board's task group on realignment, and Vicki Wright ("Wright"), GSUSA's Project Director of Council Realignment, after a lengthy invitation from Ms. Schemenauer to give a presentation on realignment, met with Manitou's Board of Directors via a teleconference. GSUSA's representatives were not able to give a full presentation because the members of the Manitou board posed to GSUSA's agents numerous questions, which Ms. Wright and Ms. Foreman attempted to answer. In March, GSUSA provided a "realignment update" bulletin to all of the councils, including Manitou, providing findings and data regarding the realignment efforts and relaying the overall progress of the project in an attempt to assuage developing anxieties over realignment.
Nonetheless, on March 27, 2007, in Manitou's "position paper" to the National Board, the council stated that they were now "opposed to [GSUSA's] current nationwide mandated merger plan." Moreover, Manitou stated in their position paper that they wanted: (1) to be exempt from the merger mandate; (2) an agreement that would protect the council for a period of ten years; and (3) the GSUSA to acknowledge that its nationwide realignment plan was "flawed." The position paper concluded by setting out Manitou's "case for opposition to GSUSA's national merger mandate," which was a product of Ms. Schemenauer's "take" on the nationwide data and the independent studies commissioned by the GSUSA. On that same day, at the suggestion of the task group, the Manitou Board of Directors approved a resolution that Manitou would not merge with any other councils, would keep the current jurisdiction of Manitou intact, and would discontinue all efforts toward realignment pending the resolution of all realignment negotiations with the GSUSA. The decision of Manitou's Board was inspired at least in part from Manitou's inability to come to a common understanding with the councils with whom it was going to merge.[20] The Manitou Board of Directors also sent a letter to the councils that were to make up the Northwestern Great Lakes council to inform those councils of Manitou's new stance.
In mid-April 2007,[21] four representatives of Manitou: Schemenauer, Rice, Dekker, and Krause-Stetson, met with GSUSA's Cloninger and Foreman at the GSUSA's headquarters in New York City. The Manitou representatives expressed their concerns regarding nationwide realignment and demanded to speak with the demographers who crafted the initial resource map that was introduced at the Orlando meeting more than a year earlier. Heeding Manitou's request, GSUSA arranged a conference call between Manitou's representatives and the demographers on May 1, 2007. Manitou's notes from the meeting *1067 indicate that the exchange was less than satisfactory for the council.[22]
On May 9, 2007, Manitou submitted a proposal to the GSUSA whereby Manitou would be realigned with the council to be formed in the southwestern region of Wisconsin, as opposed to merging Manitou with councils in northern Wisconsin and the upper peninsula of Michigan. Manitou's proposal met with resistance. The GSUSA consulted with its experts regarding the newest proposal, but the demographers remained unpersuaded by Manitou's proposal, finding that Manitou and the northern councils' proximity, similar cultures, and economic commonalities required adhering to the May 31, 2006 proposal, which would merge the majority of Manitou's jurisdiction with the northern councils. On May 17, 2007, the leadership of the six councils of northern Wisconsin and the upper peninsula of Michigan who would have merged with Manitou, wrote to the GSUSA to express their unanimous and "strong" opposition to Manitou's latest proposal. The GSUSA denied Manitou's proposal on May 21, 2007.[23]
In the wake of GSUSA's rejection of Manitou's proposal, the Manitou Board of Directors met on May 22, 2007. The Manitou Board "regretfully" and "with great concern" approved a motion that Manitou "proceed with the realignment as mandated by the [GSUSA] which requires Manitou Council [to] merge with the Northern councils." Nonetheless, on August 9, 2007, in a letter signed by Ms. Rice, Ms. Dekker, Ms. Krause-Stetson, and Ms. Schemenauer, the representatives of the Manitou Council wrote to Ms. Dennis, the President of the National Board of Directors of the GSUSA, requesting a "private, face-to-face meeting" with her and her legal counsel in order to "share significant information" about the organization's realignment plans, including information that "calls into question the ultimate decisions reached by the full Board." The letter was ominous, stating that the information the Manitou representatives were going to share had the "potential to be embarrassing to certain individuals, as well as to the organization." Manitou's letter to Ms. Dennis set a deadline of August 24, 2007, in which the President of the Board of Directors of the Girl Scouts could respond or else Manitou would "move ahead in a different direction."
On August 29, 2007, Ms. Dennis traveled to Milwaukee, Wisconsin, and met with four Manitou representatives, Schemenauer, Rice, Dekker, and Krause-Stetson, to further discuss Manitou's concerns. The Manitou representatives revealed the "embarrassing information" the four representatives had learned was that a large donor from a neighboring council[24] had been a member of the Girl Scouts National Board, which had been voting on the realignment plans. However, the majority of the four hour meeting was devoted to persuading Ms. Dennis to support Manitou's *1068 plan to merge its council with the southwestern Wisconsin councils, the same plan that had been rejected by the board in May. The President of the GSUSA Board listened to the Manitou representatives' concerns and promised to discuss Manitou's issues with the GSUSA leadership.
Manitou's latest attempts to persuade the GSUSA to abandon their plans for realignment did not succeed. On September 21, 2007, Ms. Dennis informed the Manitou representatives via teleconference that their second request to merge with the southwestern Wisconsin councils had not been accepted. Linda Foreman and Kathy Cloninger sent a letter to Liesl Rice on October 3, 2007, confirming the decision of the GSUSA, stating that the organization would "not again reconsider the jurisdictional boundaries, as approved by the National Board on August 24, 2006." The letter further directed Manitou to "engage with the three council realignment groups to which [Manitou was] assigned" and to "secure [Manitou's] board's approval of and authorization for" the Northwestern Great Lakes Good Faith Agreement ("Good Faith Agreement"), an agreement by which Manitou would agree to engage in good faith negotiations regarding the realignment plans, by "no later than October 15." Finally, the letter warned the council that if Manitou failed to meet the GSUSA's directives in their entirety, that the National Board would "take all necessary and further action in accordance with the Blue Book of Basic Documents 2006."
Accordingly, on October 10, 2007, Manitou signed the Good Faith Agreement in which Manitou Council "committ[ed] itself for a period of twelve ... months to good faith negotiations toward a potential merger with" the six councils of northern Wisconsin and the upper peninsula of Michigan. Moreover, in the Good Faith Agreement, Manitou agreed that it would not make any "material changes" affecting the merged council, such as depleting the liquid resources of the council or entering into contracts that obligates the new council for more than two fiscal years. The agreement also stated that Schemenauer and Rice would be the members of Manitou's delegation to the Council Realignment Committee, with the goal that the Council Realignment Committee would provide a recommendation which would be approved by the full Manitou board.
The Manitou Council Board of Directors met on November 27, 2007, to, in part, discuss the realignment process. Part of the meeting was devoted to discussions regarding whether the other northern councils had breached the terms of the Good Faith Agreement. The Manitou Board directed Ms. Schemenauer and Ms. Rice to do "further investigation" into the "legal options" Manitou had in order to determine the consequences of the council further opposing the realignment efforts. Less than a month later, the Manitou Board voted by margin of twelve to two votes to pursue litigation with the GSUSA and to discontinue participation in the GSUSA's realignment plan. On January 9, 2008, the council notified the GSUSA of the vote of the Manitou Board of Directors, stating that a "merger with the other Councils ... is not in the best interest of Manitou and its members." Moreover, the letter informed the GSUSA that Manitou had retained legal counsel and instructed the national organization to channel communication through Manitou's lawyer. In the weeks that followed, Manitou informed its members and donors that the council would pursue litigation against GSUSA to prevent any merger. The council also informed the remaining councils in Wisconsin of its decision.[25] Manitou *1069 had made its decision to aggressively[26] fight the merger via litigation.
F. The "National Team," Manitou's Health, and the Current Litigation
Pursuant to the guidelines in the 2006 version[27] of the Blue Book for when councils cannot agree to "combine" or "transfer" jurisdiction, in early 2008, the GSUSA established a "national team," which was charged with the task of collecting and analyzing information from the councils that were to form the Northwestern Great Lakes council, including Manitou, to determine "how the requested change will impact the delivery of [the] Girl Scout program."[28]See GSUSA, Blue Book of Basic Documents 2006, at 29. Joan Wagnon ("Wagnon"), a member of the National Board, led the national team investigating the Manitou merger with the six northern Wisconsin and Michigan councils.[29] According to the regulations in the 2006 version of the Blue Book, the national team must: (1) use the information they collect to "develop a recommendation for jurisdictional boundaries and forward it to the affected councils"; and (2) complete an "Application for Change in Girl Scout Council Jurisdiction" pursuant to the recommendations. Id. The application then must be forwarded to the Chief Executive Officer of the GSUSA, who then, after reviewing the application, recommends action to the National Board. Id. Accordingly, the National Board must take action on the application, which is considered "final," and the GSUSA officially records the change in jurisdiction in the "official records" of the GSUSA. Id.
On January 24, 2008, Ms. Wagnon notified the affected councils, including Manitou, that, because of a failure to reach agreement between the councils regarding the merger, the GSUSA had created a national team composed of members of the National Board, "National Staff," and a "national Operational Volunteer" to investigate how "Manitou's action not to merge will impact delivery of [the] Girl Scout program." The letter further detailed the process the national team would take going forward. Wagnon invited all affected councils to provide information to the national team by March 31, 2008.
On February 29, 2008, the same day Manitou filed a diversity action against GSUSA (Docket # 1) and a motion for a preliminary injunction to enjoin the defendant *1070 from "going forward with the jurisdictional change proceedings" outlined in Wagnon's January 24, 2008 letter or changing the current jurisdiction or territory controlled by Manitou (Docket #3), the national team met for the first time. Wagnon, writing on behalf of the national team, wrote a March 3, 2008 letter to the seven relevant councils stating the initial thoughts garnered by the team at their first meeting. First, Ms. Wagnon reiterated that March 31, 2008, would be the deadline by which the councils had to submit information regarding "how the delivery of the Girl Scout program to all girls will be enhanced or retarded by the possible configuration." Second, Ms. Wagnon proposed an April 12, 2008 meeting of all the councils to provide the local groups an "opportunity to speak in person to representatives of the national team." Ten days later, Ms. Schemenauer, writing on behalf of Manitou, wrote a lengthy letter to Ms. Wagnon to inform her that Manitou "would not be able to participate in the current process" and stated that she felt that the "underlying dispute can only be resolved by a court." Undeterred, Ms. Wagnon wrote to Ms. Schemenauer on March 27, 2008, stating that the "national team intends to proceed with its deliberations" as had been explained "in prior letters."
The national team's efforts to gather additional information related to the merger proved difficult, however. No council submitted any new information to the national team. Moreover, Ms. Wagnon's proposed April 12, 2008 meeting never came to fruition, as none of the councils indicated a desire to participate in the public forum. The national team pressed forward, however, using the information the GSUSA provided to the team, an amalgam of data previous provided by the national organization and the affected councils. In the meanwhile, on May 1, 2008, the merger of the five Wisconsin councils and the one upper peninsula council occurred, and the Girl Scouts of Northwestern Great Lakes council was officially formed without the participation of Manitou.
On May 16, 2008, the national team met in Seattle, Washington, to discuss the realignment dispute, review the information it did have, and formulate its recommendation to the National Board. A week and a half later, Wagnon wrote to the chairpersons of the board of directors of the individual councils, including Manitou's Rice, providing the chairs with the data that the national team had collected and was going to be used to "develop a recommendation regarding [the] jurisdictional boundaries." The information enclosed with Wagnon's letter to the council chairs was diverse and from a variety of sources.[30] Ultimately, on June 5, 2008, the national team issued its report and recommended that Manitou's jurisdiction needed to be divided up pursuant to the May 31, 2006 proposal. The national team also submitted an "Application *1071 for Change in Girl Scout Council Jurisdiction" to resolve the merger dispute.[31]
Two weeks later, on June 15, 2008, GSUSA's Chief Executive Officer, Ms. Cloninger, advised the National Board that the recommendations of the national team be adopted and that the application the national team submitted be approved. In turn, the National Board followed Cloninger's recommendations. The following day, GSUSA notified Manitou and the newly formed Northwestern Great Lakes council that a portion of Manitou's territory would be transferred to the new council effective September 15, 2008. In the months that followed, both Manitou and GSUSA prepared for the impending merger. It remains unclear what steps (and the nature of those steps), if any, GSUSA would have taken had the transferring of part of Manitou's jurisdiction to the Northwestern Great Lakes council occurred.
However, the results of the litigation altered the parties' plans. On June 5, 2008, this court denied Manitou's motion for a preliminary injunction. (Docket # 58). Three months later, the Court of Appeals for the Seventh Circuit reversed this court's decision to deny Manitou's motion and "enjoined GSUSA from making any changes to, or interfering with, the current council jurisdiction of" Manitou "pending final resolution on the merits in the district court." See Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States of America, Inc., 549 F.3d 1079 (7th Cir. 2008). As a result, GSUSA postponed meetings that would have begun the transition process of transferring the counties served by Manitou into the Northwestern Great Lakes council.
Given that Manitou's current charter was set to expire on January 1, 2010, Ms. Schemenauer wrote to GSUSA in late 2008 inquiring about how to renew the council's charter given the on-going litigation. On December 30, 2008, GSUSA responded to Ms. Schemenauer's inquiry, informing the council's Chief Executive Officer that the application process has been "suspended during realignment" and that GSUSA has "not asked councils to file an application fee for the last two years." However, a month later, on January 28, 2009, GSUSA emailed council board chairs and chief executives detailing the interim chartering process during the realignment. In the January 28, 2009 email, the National Board explained that during the realignment the Girl Scouts would be using the "Council Performance Indicator" process to evaluate whether a council's charter should be renewed, a method that takes two to three weeks as opposed to the formerly used twelve to eighteen month "Council Performance Assessment" process. In letters sent in February of 2009, counsel for the defendant informed Manitou's counsel that the National Board expects to renew Manitou's charter for a minimum of one year. Accordingly, on May 11, 2009, the National Board contacted Manitou's Board Chairperson, Ms. Rice, to provide her with information regarding the Council Performance Indicator process such that Manitou's charter could be renewed. On July 29, 2009, Manitou submitted its charter application to GSUSA, *1072 requiring that Manitou complete the "Council Performance Indicator" to ensure that the charter was renewed.[32] The parties have not provided this court with any update as to whether the charter process was completed and whether Manitou is currently chartered as an official Girl Scout council.[33]
The evidence presented to the court indicates that Manitou's girl membership has increased in the time since GSUSA's realignment efforts began. While Manitou has had some difficulties[34] in fund-raising over the past several years, with less money flowing to the organization from sources such as the United Way, the parties dispute the reason for the monetary difficulties. The plaintiff broadly contends that GSUSA's realignment efforts have made fund-raising more difficult for Manitou,[35] while the defendant argues that decreases in donations to Manitou are attributable to outside forces, such as the state of the economy.[36] Manitou's Chief Operations Officer concedes however, that realignment did not: (1) cause major corporate donors, such as the United Way or Community Chest, or individual donors to cease or reduce their funding to Manitou; or (2) have an effect on the amount of "in-kind and miscellaneous donations," such as donations bequeathed to Manitou. (Cline Dep. 189-90; 200-01). Indeed, some of Manitou's funding may have increased due to donor's sympathy with Manitou's cause.[37]
On February 3, 2009, in the wake of the Seventh Circuit's decision, this court issued a scheduling order that set out the deadlines by which the parties could conduct discovery in the case and by which dispositive motions would be submitted to the court. Accordingly, the parties submitted cross-motions for summary judgment on August 31, 2009. (Docket # 134; # 141). Given the facts, the court now *1073 proceeds to address the merits of the parties' cross-motions for summary judgment.
DISCUSSION
Summary judgment is appropriate where the evidence "shows 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); Wis. Alumni Research Found. v. Xenon Pharms., Inc., 591 F.3d 876, 882 (7th Cir. 2010). A genuine issue of material fact exists when a reasonable jury could find in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). On review of cross-motions for summary judgment, a court must view all facts and inferences in the light most favorable to the nonmoving party on each motion. Wis. Alumni Research Found., 591 F.3d at 882; see also Foskett v. Great Wolf Resorts, Inc., 518 F.3d 518, 522 (7th Cir.2008) (holding that a court deciding cross-motions for summary judgment must "construe all facts and inferences therefrom in favor of the party against whom the motion under consideration is made.") The court keeps these standards in mind throughout this order in reviewing the different claims brought by Manitou.
Manitou's complaint claims thirteen separate bases for relief: (1) Violations of the Wisconsin Fair Dealership Law (WFDL); (2) Breaches of Contract; (3) Tortious Interference with Prospective Economic Advantage; (4) Economic Coercion; (5) Tortious Interference with Fiduciary Duties; (6) Conspiracy to Violate the WFDL; (7) Conspiracy to Tortiously Interfere with Prospective Economic Advantage; (8) Conspiracy to Economically Coerce; (9) Conspiracy to Tortiously Interfere with Fiduciary Duties; (10) Injury to Business and Restraint of Will; (11) Breaches of Charter Renewal Procedures; (12) Breaches of Jurisdictional Change Procedures; and (13) Breach of Fiduciary Duty. (Docket # 130). GSUSA has moved this court for "an order granting summary judgment in its favor with respect to all causes of action asserted against it in plaintiff's second amended complaint." (Docket # 134) (emphasis added). Manitou, on the other hand, has only moved for "partial summary judgment, on liability only, at Counts I ... [and] Count 2," the WFDL and breach of contract claim. (Docket # 141). Given the motions before the court, the court will discuss the respective claims in order, determining whether either party has met their respective burdens in showing they are entitled to judgment as a matter of law.[38]
A. Wisconsin Fair Dealership Law Claim
In 1974, the Wisconsin legislature enacted the WFDL in order "to protect dealers against unfair treatment by grantors." Eisencorp, Inc. v. Rocky Mountain Radar, Inc., 398 F.3d 962, 965 (7th Cir.2005). In relevant part, the WFDL states that "no grantor, directly or through any officer, agent or employee, may terminate, cancel, fail to renew or substantially change the competitive circumstances of a dealership agreement without good cause." Wis. Stat. § 135.03. The plaintiff contends that GSUSA's attempt to eliminate sixty percent of Manitou's jurisdiction, prevented only by the preliminary injunction, would have "terminated, canceled, failed to renew, *1074 or substantially changed the competitive circumstances" of the dealership agreement between the two parties and that GSUSA did not have good cause for its actions.[39] (Pl's Br. 13). The defendant, noting the Seventh Circuit's earlier opinion in this case, Manitou, 549 F.3d at 1094 ("Manitou is a "dealer" with the meaning of the term as defined by the WFDL"), has elected to not reargue the issue of whether the WFDL is relevant to the facts of this case. Instead, GSUSA, provides two reasons for why the defendant's actions with respect to their realignment efforts with Manitou did not run afoul of Wis. Stat. § 135.03's command.
1. Super Valu Stores Argument
With respect to the WFDL claim, GSUSA first argues, relying on a line of cases stemming from Super Valu Stores, Inc. v. D-Mart Food Stores, Inc., 146 Wis. 2d 568, 577, 431 N.W.2d 721 (Ct.App.1988), that the parties' "dealership agreement permits GSUSA to adjust Manitou's jurisdiction."[40] (Def.'s Br. 25). A brief discussion of Super Valu Stores is warranted.[41]
In Super Valu Stores, the defendant owned a grocery store in Wisconsin Rapids, Wisconsin, under a nonexclusive "retail sales agreement with the plaintiff, Super Valu Stores, a nationwide grocery wholesaler." Super Valu Stores, 146 Wis.2d at 570, 431 N.W.2d 721. The plaintiff sued the owner of the grocery store for failing to pay for merchandise and services supplied to the store under the agreement. Id. The defendant counterclaimed, arguing, in part, that Super Valu, by planning to open another store in Wisconsin Rapids, "substantially changed the competitive circumstances of the dealership agreement" between the two parties, violating Wis. Stat. § 135.03 of the WFDL. Id. at 575, 431 N.W.2d 721. The Wisconsin appellate court disagreed, finding that the plaintiff awarding a dealership to a third party in Wisconsin Rapids did not amount to a "substantial change of the competitive circumstances of a dealership agreement."[42]*1075 Id. at 574, 431 N.W.2d 721. The Super Valu Stores court gave two primary reasons for finding that the grantor had not committed a violation of § 135.03. First, the court noted that the actions taken by Super Valu were not so serious as to amount to a "de facto termination of the agreement," as the grantor continued to treat the grocery store as a "dealer in all respects until [the plaintiff] closed the store." Id. at 576, 431 N.W.2d 721 ("Super Valu did not change the credit or any other terms of its agreement ... nor did it withdraw any product lines or take any other action amounting to a de facto termination of the agreement.") The court gave as its second and "more important" reason for its decision the fact that "the retail sales agreement was nonexclusive."[43]Id. For the court of appeals, Super Valu Stores was true to what it stated in its agreement with the dealerthat it was authorized to "franchise other stores whenever and wherever it wish[ed]." Id. In cryptic language, the Super Valu Stores court concluded that "compliance with the express terms of the dealership agreement cannot, under the circumstances of this case, give rise to a violation of sec. 135.03." Id. at 577, 431 N.W.2d 721.
It is the latter statement from Super Valu Stores that GSUSA uses to argue that whenever a dealer takes action that is permitted by the dealership agreement, the dealer is not substantially changing the competitive circumstance of the agreement and is not violating § 135.03. To a limited extent, the logic of the principle espoused by GSUSA is textually consistent with the language of the WFDL: § 135.03 prohibits *1076 a grantor from substantially changing "the competitive circumstances of a dealership agreement without good cause." (emphasis added). The inclusion of the phrase "dealership agreement" in the statute implies that a mere substantial change in the competitive circumstances in which the dealership exists effectuated by the grantor is not enough to violate the WFDL; instead a grantor must substantially change the competitive circumstances as envisioned by the dealership agreement. Therefore, if the dealership agreement contemplates that the grantor can, for example, raise the prices the grantor charges the dealer for the grantor's products, or alter the credit line provided to the dealer, the dealer cannot complain that the grantor has substantially changed the competitive circumstances of the dealership agreement when and if the grantor takes actions envisioned by that agreement. See Michael A. Bowen and Brian E. Butler, The Wisconsin Fair Dealership Law § 7.14 (3rd ed. 2003). GSUSA expands on this logic, arguing that the grantor does not violate Wis. Stat. § 135.03's "substantial change" clause as long as the grantor is exercising a right that either: (1) the dealer had the foresight to explicitly[44] place in the dealership agreement; or (2) was implicit[45] based on documents incorporated by reference into the agreement, written and oral statements of the parties at the time of execution, or the parties' course of performance. Ultimately, the defendant argues that the dealership agreement between the Girl Scouts and Manitou both explicitly and implicitly allowed the defendant to transfer part of the jurisdiction of the plaintiff to another council.
However, carried to its logical conclusion, GSUSA's principle has far reaching and potentially worrisome implications. If the plaintiff's assertion of the holding of Super Valu Stores is correct, there is seemingly nothing to prevent grantors from effectively gutting the substantial change provision of Wis. Stat. § 135.03 by reserving to themselves, either explicitly or implicitly, the right to alter any term of the dealership agreement. See Bowen and Butler, The Wisconsin Fair Dealership Law § 7.14. Such an interpretation of Super Valu Stores is particularly troubling given the WFDL's espoused purpose, codified in § 135.025(2)(b), "[t]o protect dealers against unfair treatment by grantors, who inherently have superior economic power and superior bargaining power in the negotiation of dealerships." Given the "superior bargaining power" of dealers in negotiating the terms of a dealership agreement, if Super Valu Stores truly held that whenever the dealer takes an action explicitly or implicitly allowed by the dealership agreement there can never be a violation of the WFDL, the WFDL's substantial change clause is left in shambles. As such, GSUSA's interpretation of Super Valu Stores and Wis. Stat. § 135.03 is not one that this court is eager to endorse.[46]*1077 Wenke v. Gehl Co., 2004 WI 103, ¶ 32, 274 Wis. 2d 220, 682 N.W.2d 405 (2004) ("A cardinal rule in interpreting statutes is to favor a construction that will fulfill the purpose of the statute.") Moreover, the court notes that the WFDL prohibits the terms of the statute from being "varied by contract or agreement," and that "any contract or agreement purporting to do so is void." Wis. Stat. § 135.025(3). The plain language of the statute hints at discouraging this court from applying a broad reading to the holding of Super Valu Stores.[47]
The court is mindful, however, that, as a federal tribunal exercising diversity jurisdiction, this court must look to courts of the state of Wisconsin for guidance in determining the meaning of Wis. Stat. § 135.03, including the decisions of Wisconsin's intermediate courts when the state supreme court has not ruled on an issue. Clarin Corp. v. Massachusetts Gen. Life Ins. Co., 44 F.3d 471, 474 (7th Cir. 1994). In this case, the last "on point" Wisconsin case regarding the contours of the "substantial change" provision of § 135.03 was Super Valu Stores and this court is obliged to follow the holding of that case.[48] If GSUSA's interpretation of Super Valu Stores is the only possible interpretation of that case, the court will apply GSUSA's view on the law. Having said that, the court is unpersuaded that GSUSA's interpretation of the scope of Super Valu Stores is correct. GSUSA's proposed principle of law, while true under the facts of Super Valu Stores or perhaps when the dealer makes other changes contemplated by the dealership contract, must have a logical stopping point or else the protections afforded by the substantial change provision of the WFDL would be devoid of meaning. Indeed, the Super Valu Stores decision does provide the logical *1078 stopping point to the "whatever is in the dealership agreement is not a substantial change" rule. Compliance with the express terms of the dealership agreement cannot give rise to a violation of § 135.03 unless the dealer has "taken action amounting to a de facto termination of the agreement."[49]Super Valu Stores, 146 Wis.2d at 576, 431 N.W.2d 721 (holding that a violation of the WFDL did not occur, because, in part, Super Valu Stores did not take action, such as changing the credit or "any other terms of its agreement" with the dealer). Such a reading of Super Valu Stores comports with the Seventh Circuit's interpretation of the "substantial change" clause in § 135.03: "the Wisconsin Fair Dealership Law makes ... explicit" through the "provision about not `substantially chang[ing] the competitive circumstances of the dealership [agreement]'" that the dealer cannot "constructively terminate" the dealership. Remus v. Amoco Oil Co., 794 F.2d 1238, 1240 (7th Cir.1986); see also East Bay Running Store, Inc. v. NIKE, Inc., 890 F.2d 996, 1000 n. 6 (7th Cir.1989). Ultimately, the "grantor may not make changes so extensive and onerous that they amount to a de facto termination of the dealership."[50] Bowen and Butler, The Wisconsin Fair Dealership Law § 7.14; see also Van v. Mobil Oil Corp., 515 F. Supp. 487, 490 (E.D.Wis.1981) ("At the outset, the Court rejects defendant's contention that, as a matter of law, the change in credit terms did not constitute a change in plaintiff's competitive circumstances ... [a]lthough the change may have amounted to nothing more than the adoption of a prudent business practice to defendant, to plaintiff it constituted a barrier which had to be overcome before he could continue operating his franchise"); JPM, Inc. v. John Deere Indus. Equip. Co., 934 F. Supp. 1043, 1045 (W.D.Wis.1995) ("Wisconsin courts acknowledge that the protections of Wis. Stat. § 135.03 extend to "constructive" or "de facto" termination, where a formal dealership contract continues in force although the relationship has effectively ended in practice.")
GSUSA argues that Super Valu Stores "is clear that the WFDL's language requires deference to the parties' dealership agreement." (Def's Br. 33). However, Super Valu Stores contemplated a limit on the principle GSUSA espouses, namely that when an action, even one contemplated by the dealership agreement, becomes so egregious as to amount to "constructive termination" of the dealership that § 135.03 is violated. Super Valu Stores, 146 Wis.2d at 576, 431 N.W.2d 721. The court's interpretation is in line with the espoused purpose of the WFDL, § 135.025(2)(b), and the WFDL's instruction to "liberally construe" and apply its terms to promote its underlying remedial purposes and policies. § 135.025(1). The court's interpretation of § 135.03 does not *1079 "completely rewrite," (Def.'s Br. 33), the statute; instead it preserves its essential meaning and provides for a balanced and moderate approach toward interpreting the WFDL's "substantial cause" language.
Given the state of the law, the court need not inquire into whether the dealership agreement between GSUSA and Manitou allowed the defendant to eliminate part of Manitou's jurisdiction because of the realignment plan, at least for the purposes of the WFDL claim. Even if[51] the dealership agreement explicitly allowed GSUSA to take away much of Manitou's territory, if the court can conclude that the undisputed facts show that the defendant's actions amounted to a "constructive termination" of the dealership agreement with Manitou, putting to the side the "good cause" standard, the terms of § 135.03 have been violated as a matter of law.[52] "Constructive termination" of a dealership agreement can occur when the grantor takes actions that amount to an "effective end to the commercially meaningful aspects of the [dealership] relationship," regardless of whether the formal contractual relationship between the parties continues in force. Techmaster, Inc. v. Compact Automation Prods., LLC, 462 F. Supp. 2d 932, 940 (W.D.Wis.2006) (internal citations omitted); see also Remus, 794 F.2d. at 1241 (holding that a constructive termination of a dealership agreement occurs when a grantor makes the dealer's "competitive circumstances so desperate that a dealer `voluntarily' gives up the franchise."). Moreover, courts have found that a de facto termination can occur even when a grantor takes actions that merely have a "serious effect on a dealer's ability to continue" in its current market. Wis. Compressed Air Corp. v. Gardner Denver, Inc., 571 F. Supp. 2d 992, 1002 (W.D.Wis. 2008).
Here, the undisputed facts demonstrate that a "constructive termination" of the dealership agreement would have occurred in this case but for the injunction imposed by the Seventh Circuit. The mandate by the GSUSA for Manitou to transfer its northern territories to the Northwestern Great Lakes Council would have had a devastating impact on the dealer. The merger would have reduced three-quarters of Manitou's girl membership, and, with that, presumably a significant portion of Manitou's revenues. The merger would have also reduced the number of volunteers in Manitou's territory by more than seventy percent. The merger would have limited the amount of revenues Manitou took in from donations, as the merger would have left Manitou as a shell of its former self. In sum, the undisputed facts indicate that GSUSA's actions would have resulted in a "substantial change in the competitive circumstances of the dealership agreement" between the parties but for the injunction. GSUSA's Super Valu Stores argument is not a reason to either grant the defendant's summary judgment or deny the plaintiff's motion for summary judgment on the WFDL claim.
2. Good Cause
GSUSA argues, in the alternative, that it is entitled to summary judgment on Manitou's WFDL claims "because [GSUSA] had `good cause' for the transfer [of Manitou's jurisdiction] in order to implement its national realignment strategy." (Def's Br. 36). Under the WFDL, a grantor or licensor may "substantially change the competitive circumstances of a dealership *1080 agreement" for "good cause." Wis. Stat. § 135.03. The grantor bears the burden of proving good cause. Id. Under the statute, the term "good cause" has a specific meaning: a dealer's failure to comply with "essential and reasonable requirements imposed upon the dealer by the grantor" or "bad faith by the dealer in carrying out the terms of the dealership." Wis. Stat. § 135.02. In this case, neither party contends that Manitou took actions providing GSUSA with "good cause" within the meaning of the statutory definition of "good cause." However, "good cause" is not limited to the statutory definition of the term. In Ziegler Co. v. Rexnord, Inc., 147 Wis. 2d 308, 314, 433 N.W.2d 8 (1988) ("Ziegler II"), the Wisconsin Supreme Court held that a grantor's own circumstances could constitute good cause for reasonable, essential, and nondiscriminatory changes in the way it did business with dealers.[53] GSUSA makes two arguments with regard to the good cause standard articulated in Ziegler II. First, the defendant argues that, as a matter of law, the circumstances motivating GSUSA's realignment, including the reduction of Manitou's territory, constitute "good cause" within the meaning articulated by the Ziegler II court. Second, GSUSA contends that in Ziegler II good cause does not exist as a matter of law, that applying the WFDL to the actions GSUSA took in this case would violate GSUSA's First Amendment rights to freedom of expressive association. The court will address each of GSUSA's arguments accordingly.
a. The Statutory Question
Interpreting Ziegler II, the Seventh Circuit held in Morley-Murphy Co. v. Zenith Electronics Corp., 142 F.3d 373, 377 (7th Cir.1998), that to show good cause for making a substantial change in the competitive circumstances of a dealership agreement, the grantor must demonstrate: "(1) an objectively ascertainable need for change, (2) a proportionate response to that need, and (3) a nondiscriminatory action." Id. at 378. Manitou only contests the first and second prongs of the Morley-Murphy test, arguing that GSUSA has not demonstrated a need for reducing Manitou's jurisdiction and that GSUSA did not take a proportionate response even if the organization had a need for change.
Courts have narrowly interpreted what constitutes an "objectively ascertainable need for change," finding that the "grantor must prove that it was demonstrably losing substantial amounts of money under the relationship." Praefke Auto Elec. & Battery Co. v. Tecumseh Prods. Co., 110 F. Supp. 2d 899, 906 (E.D.Wis.2000) (rev'd on other grounds); see also Ziegler II, 147 Wis.2d at 316, 433 N.W.2d 8 ("If the grantor is demonstrably losing substantial amounts of money under the relationship, it may constitute good cause for changes in the contract"); Morley-Murphy, 142 F.3d at 378 (finding that a grantor who had *1081 been operating in losses for nine out of ten years with hundreds of millions of dollars in losses had demonstrated an objectively ascertainable need for change); Wisconsin Music Network, Inc. v. Muzak Ltd. Partnership, 822 F. Supp. 1332, 1337 (E.D.Wis. 1992) (finding the grantor's actions were "essential and reasonable" when the grantor was "having its brains beaten out in the national account marketplace" by its competitors).
Here, GSUSA has proffered several reasons to indicate that the organization had an "objectively ascertainable need" to substantially reduce Manitou's territory. For the defendant, its realignment efforts, a product of several independent studies and years of internal planning, were aimed to solidify the organization's message and boost the effectiveness of the Girl Scouts' programs, given the espoused goals of the defendant. Specifically, the national organization reasoned that consolidating the individual councils would help solidify the Girl Scouts' message because with fewer councils, the communications conveyed by each council would be more consistent. Moreover, GSUSA concluded that realignment would make the organization more effective in a number of ways, including: (1) reducing the frequency in which councils would compete over neighboring areas for fund-raising and personnel; (2) allowing legacy councils to pool resources to attract the best candidates for administrative positions in the new councils; (3) allowing councils to create more specialized administrative posts; (4) having more diverse population bases with fewer economic disparities between the councils; and (5) having the financial resources to effectively deliver Girl Scout services to girls who are not serviced by a troop.
While perhaps the reasons proffered by the GSUSA for why it opted to substantially change the competitive circumstances of Manitou's dealership agreement were good ideas, nothing in the text of the WFDL, or in the case law interpreting the "good cause" standard, indicate that GSUSA has demonstrated an "objectively ascertainable need" for attempting to reduce Manitou's territory. This court agrees with the conclusion of the Seventh Circuit's earlier decision in this case that "fading brand image and waning program effectiveness ... without a tangible effect on the bottom line" do not meet the standard of "good cause" under the WFDL. Manitou, 549 F.3d at 1099.
GSUSA urges the court to adopt a liberal interpretation of what constitutes "an objectively ascertainable need for change." Specifically, GSUSA argues that in the case where a grantor is a "charity or educational enterprise" that an "objectively ascertainable need for change" can include "non-economic factors," such as the need for the organization to "further its charitable or educational mission." (Def.'s Br. 37). The court refuses to adopt such an interpretation of the WFDL. This court is mindful that the Ziegler II court "strain[ed] to interpret the WFDL" to include grantor-based good cause, given that the statute only contemplates dealer-based good cause. Morley-Murphy, 142 F.3d at 377 ("We agree with the district court that one must strain to interpret the WFDL as permitting dealer termination as one form of grantor restructuring ... [T]hat strain does not arise because of the difference between complete termination and a lesser change in the parties' legal relationship... Instead, it is a natural consequence of the Wisconsin Supreme Court's interpretation of `good cause' in Ziegler."); see also Ziegler II, 147 Wis.2d at 325, 433 N.W.2d 8 (Abrahamson, J., concurring) ("[T]he majority's interpretation of the good cause requirement focuses on the grantor and therefore contravenes the plain language of sec. 135.02(4), Stats. which focuses entirely on the conduct of the dealer.") The interpretation of the statute espoused by *1082 GSUSA pushes the boundaries of the meaning of good cause far beyond what the Ziegler II court envisioned. Morley-Murphy, 142 F.3d at 377 ("The Wisconsin Supreme Court was careful to limit this kind of grantor-based good cause, so that grantors would not be able to terminate merely upon a showing that they believed they could make more money without the particular dealer.") As the Seventh Circuit noted in its earlier decision in this case, the WFDL makes no distinction between "for-profit" and "not-for-profit" entities, Manitou, 549 F.3d at 1092, and, as such, the court cannot judicially craft a lower threshold for when not-for-profit organizations wish to substantially change the competitive circumstances of a dealership agreement. Simply put, there is nothing in the text of the statute, in the Ziegler II decision, or in any subsequent cases to provide a basis for an expansive definition of what an "objectively ascertainable need for change" entails in the case of a not-for-profit grantor.[54] To the extent the Girl Scouts wish the WFDL to contain a limit on the term "good cause" for non-economic reasons, the appropriate forum for the defendant to address its concerns is the Wisconsin legislature, not a federal district court.[55]
GSUSA further contends that the court must "tailor the good cause analysis to avoid constitutional conflict" and create a new standard for "good cause" as it pertains to the case of the WFDL applying to a not-for-profit organization. (Def.'s Br. 41). The court disagrees. The constitutional avoidance canon of statutory construction only informs the choice between plausible readings of a statute's text or case law interpreting the statute. Spector v. Norwegian Cruise Line Ltd., 545 U.S. 119, 140, 125 S. Ct. 2169, 162 L. Ed. 2d 97 (2005). As such, the canon only "comes into play when, after the application of ordinary textual analysis, the statute is found to be susceptible of more than one construction; and the canon functions as a means of choosing between them." Clark v. Martinez, 543 U.S. 371, 381, 125 S. Ct. 716, 160 L. Ed. 2d 734 (2005) (emphasis added). Here, nothing in the text of the statute or subsequent judicial interpretations of the WFDL support a reading of good cause that includes a not-for-profit organization's efforts to further its "charitable or educational mission," (Def's Br. 37).[56] The *1083 court must conclude that GSUSA has not met its burden in proving that it had "an objectively ascertainable need for change" when the defendant attempted to substantially change the competitive circumstances of the dealership agreement with Manitou, and, accordingly, grantor-based good cause does not exist in this case.[57] There is no dispute as to the facts as they pertain to the WFDL claim.[58] Manitou has met its burden in proving, as a matter of law, that GSUSA violated Wis. Stat. § 135.03 when it took efforts to substantially reduce Manitou's jurisdiction. The court is left to resolve whether applying the WFDL to prevent GSUSA from removing Manitou's jurisdiction would violate the defendant's First Amendment rights.[59]
b. The Constitutional Question
The Supreme Court has noted that the First Amendment's[60] guarantees of "freedom to speak, to worship, and to petition the government for the redress of grievances could not be vigorously protected from interference by the State unless a correlative freedom to engage in group effort toward those ends were not also guaranteed." Roberts v. Jaycees, 468 U.S. 609, 622, 104 S. Ct. 3244, 82 L. Ed. 2d 462 (1984). As such, the court has recognized that implicit in the rights protected by the First Amendment is a "right to associate with others in pursuit of a wide variety of political, social, economic, educational, religious and cultural ends." Id. In Boy Scouts of America v. Dale, 530 U.S. 640, *1084 648, 120 S. Ct. 2446, 147 L. Ed. 2d 554 (2000), the Supreme Court provided a three-step process to analyze whether the application of a state law would violate a group's right to freedom of association. The court must first consider whether the group making the claim engaged in expressive association. Id. If the group is engaged in expressive association, the court will then determine whether the state action at issue "significantly affects" the group's ability to advocate its viewpoints. Id. at 650, 120 S. Ct. 2446. If the court finds that the state action at issue significantly burdens the group's ability to advocate its viewpoints, the application of the state law will be allowed only if the state regulations adopted serve compelling state interests, unrelated to the suppression of ideas, that cannot be achieved through means significantly less restrictive of associational freedoms. Id. at 656, 120 S. Ct. 2446; see also Roberts, 468 U.S. at 623, 104 S. Ct. 3244.
The first question posed by the Dale test is a relatively easy question for the court to answer: GSUSA is a group engaged in expressive activity. The Dale court noted that the First Amendment's protection of expressive association is not exclusively reserved for "advocacy groups." Dale, 530 U.S. at 648, 120 S. Ct. 2446. However, to have a protectible right of expressive association, "a group must engage in some form of expression, whether it be public or private." Id. Here, the record indicates that GSUSA is actively engaged in a form of expressive activity. When Congress chartered the GSUSA in 1950, it was done such that the organization could promote virtues, such as truth, loyalty, and helpfulness, among girls. 36 U.S.C. § 80302. The Girl Scout Constitution states that the mission of the organization was to promote the "highest ideals" in girls so that members could become "happy and resourceful citizens." See GSUSA Const., Preamble. Moreover, one of the central goals of the organization was to ensure that the Girl Scout message was conveyed to all girl populations, such that the organization promoted pluralism and diversity. See GSUSA, Blue Book of Basic Documents 2006, at 21. Just as the Supreme Court concluded in Dale with regard to the Boy Scouts, "an association that seeks to transmit such a system of values engages in expressive activity." Dale, 530 U.S. at 650, 120 S. Ct. 2446; see also Roberts, 468 U.S. at 636, 104 S. Ct. 3244 (O'Connor, J., concurring) (citing the Girl Scouts for the proposition that "[e]ven the training of outdoor survival skills or participation in community service might become expressive when the activity is intended to develop good morals, reverence, patriotism, and a desire for self-improvement").
The far more difficult question for this court to answer is whether applying the WFDL to prevent the GSUSA from substantially reducing Manitou's jurisdiction "significantly affects"[61] the Girl Scout's ability to advocate its viewpoints. "Government action may impermissibly burden the freedom to associate in a variety of ways," including "imposing penalties or withholding benefits from individuals because of their membership in a disfavored group" and "interfering with the internal organization or affairs of the group." *1085 Christian Legal Soc'y v. Walker, 453 F.3d 853, 861 (7th Cir.2006) (citing to Roberts, 468 U.S. at 623, 104 S. Ct. 3244). At issue in this case is whether the application of the WFDL to prevent the GSUSA's realignment efforts from fully taking effect in Wisconsin would "interfere with the internal organization or affairs" of the GSUSA so much so that the organization's ability to advocate its viewpoints is "significantly affected."
Before delving into that issue, however, the court needs to discuss the applicability of the Dale case to the present controversy. While GSUSA relies heavily on Dale in making its argument, the case is of limited relevance, in that it speaks broadly about the right to expressive association. In Dale, the Court held that applying New Jersey's public accommodations law to require the "forced inclusion" in the Boy Scouts of an "avowed homosexual and gay rights activist" as an assistant scoutmaster unconstitutionally infringed on the group's expressive association rights. Dale, 530 U.S. at 648, 120 S. Ct. 2446. Dale ultimately stands for the proposition that "forced inclusion of an unwanted person in a group infringes on the group's freedom of expressive association if the presence of that person affects in a significant way the group's ability to advocate public or private viewpoints." Dale, 530 U.S. at 649, 120 S. Ct. 2446. Here, the present case does not involve forcing a group to accept a specific person it does not desire.[62]See, e.g., Boy Scouts of Am. v. Wyman, 335 F.3d 80, 91 (2nd Cir.2003) (finding Dale inapplicable because the conditioned exclusion of an organization from a forum did not rise to the level of compulsive membership).
However, even though the facts of Dale do not mirror the facts of this case, this does not mean that GSUSA's argument regarding its right to expressive association is completely without merit.[63] GSUSA's burden is to prove that the application of the WFDL to prevent GSUSA's realignment efforts in Wisconsin would "interfere with the internal organization or affairs" of the Girl Scouts, such that the application of the state law would "significantly affect" the Girl Scout's ability to advocate its viewpoints. In Dale, the court found that "there can be no clearer example of an intrusion into the internal structure or affairs of an association than a regulation that forces the group to accept members it does not desire." Dale, 530 U.S. at 648, 120 S. Ct. 2446 (quoting Roberts, 468 U.S. at 623, 104 S. Ct. 3244). However, forced inclusion is not the only way the application of a state law could intrude into the "internal structure or affairs of an association," and, accordingly, the court must examine whether at the summary judgment stage the undisputed facts indicate that the application of the WFDL to GSUSA's actions would impose a serious burden on the defendant's right to expressive association.
In Roberts, the Supreme Court first formally recognized the principle cited in Dale that government regulation that "interferes with the internal organization or affairs of the group" has the potential to *1086 infringe on the group's freedom of expressive association. Id. at 623, 104 S. Ct. 3244. Like Dale, Roberts is not directly on point because that case was another classic "forced inclusion" case, with the Minnesota Human Rights Act being used to compel the Jaycees to accept women as regular members.[64]Id. However, the Roberts decision cited the case of Cousins v. Wigoda, 419 U.S. 477, 95 S. Ct. 541, 42 L. Ed. 2d 595 (1975), as an example of a case in which a government regulation may impermissibly interfere with the internal organization or affairs of an expressive group. Roberts, 468 U.S. at 623, 104 S. Ct. 3244.
In Cousins, the Supreme Court held that a state court violated the Democratic Party's associational rights by enjoining the party's decision to seat one group of delegates in the 1972 Democratic National Convention instead of another group who had been elected in conformity with the Illinois Election Code but in violation of a Democratic Party rule. Cousins, 419 U.S. at 490-91, 95 S. Ct. 541. The Cousins court judged the interference imposed by Illinois law on the party's associational rights in the aggregate, hypothesizing what would occur if each state regulated the party's affairs as Illinois did. Id. The Court concluded that the intrusion imposed by Illinois law was significant because "if the qualifications and eligibility of delegates to National Political Party Conventions were left to state law `each of the fifty states could establish the qualifications of its delegates to the various party conventions without regard to party policy,' ultimately creating an `intolerable result' where the national party would be `seriously undercut or indeed destroy the effectiveness of the National Party Convention.'" Id. at 490, 95 S. Ct. 541 (quoting, in part, the language of the lower court's opinion).
The principle of Cousins was reaffirmed in La Follette, where the Supreme Court, in reversing a court order "unequivocally obligat[ing] the National [Democratic] Party to accept [a] delegation to the National Convention chosen in accord with Wisconsin law, despite contrary National Party rules." Democratic Party of the U.S. v. Wisconsin ex rel. La Follette, 450 U.S. 107, 123, 101 S. Ct. 1010, 67 L. Ed. 2d 82 (1981). The La Follette court held an expressive association's choice for determining its makeup was protected by the Constitution, citing to the broad principles espoused in Cousins and in an analogous case decided by the D.C. Circuit Court of Appeals. Id. (citing to Ripon Society, Inc. v. National Republican Party, 525 F.2d 567, 585) ("[A] party's choice, as among various ways of governing itself, of the one which seems best calculated to strengthen the party and advance its interests, deserves the protection of the Constitution") (emphasis in original). Beyond Cousins and La Follette, at least in the context of political expressive associations, the Supreme Court has "continuously stressed that when states regulate parties' internal processes they must act within limits imposed by the Constitution." See California Democratic Party v. Jones, 530 U.S. 567, 573, 120 S. Ct. 2402, 147 L. Ed. 2d 502 (2000) (holding that California's "blanket" primary system violated the Democratic Party's First Amendment right of association by preventing the party from prohibiting persons who were not members of the party from voting in the party's primary election); see also Tashjian v. Republican Party of Conn., 479 U.S. 208, 107 S. Ct. 544, 93 L. Ed. 2d 514 (1986) (striking down *1087 a law forbidding political parties from allowing non-members to vote in party primaries); Eu v. San Francisco County Democratic Cent. Comm., 489 U.S. 214, 217, 109 S. Ct. 1013, 103 L. Ed. 2d 271 (1989) (striking down on First Amendment grounds provisions of California's election law barring political parties from endorsing, supporting, or opposing "any candidate for nomination by that party for partisan office in the direct primary election"); cf. Wash. State Grange v. Wash. State Republican Party, 552 U.S. 442, 453, 128 S. Ct. 1184, 170 L. Ed. 2d 151 (2008) (upholding a Washington law allowing the two top vote-getters for each office to advance to the general election regardless of a party's preference against a facial challenge when the law did not, by its terms, choose the makeup of the parties' nominees). Nonetheless, the court has required that the burden that a state law imposes on how an expressive association organizes itself must be "severe" in nature and not merely "ordinary and widespread" before a court reviews the regulation in question under a strict scrutiny standard. Clingman v. Beaver, 544 U.S. 581, 587, 125 S. Ct. 2029, 161 L. Ed. 2d 920 (2005) ("Instead, as our cases since Tashjian have clarified, strict scrutiny is appropriate only if the burden is severe.")
There is no reason to believe that the principles espoused by the Cousins line of cases is only applicable to formal organizations engaging in political expression, such as a political party. While "the First Amendment `has its fullest and most urgent application' to speech uttered during a campaign for political office," Eu, 489 U.S. at 223, 109 S. Ct. 1013 (internal citations omitted), the Dale court explained that "the First Amendment's protection of expressive association is not reserved for advocacy groups."[65]Dale, 530 U.S. at 648, 120 S. Ct. 2446. In fact, a private organization engaged in expressive association enjoys more robust rights than that of a political party, as the Supreme Court has recognized that a political party's right to freedom of expressive association is circumscribed "when the State gives the party a role in the election process," making the political party a state actor. N.Y. State Bd. of Elections v. Lopez Torres, 552 U.S. 196, 203, 128 S. Ct. 791, 169 L. Ed. 2d 665 (2008); see also Jones, 530 U.S. at 594, 120 S. Ct. 2402 (Stevens, J., dissenting) ("The protections that the First Amendment affords to the "internal processes" of a political party ... do not encompass a right to exclude nonmembers from voting in a state-required, state-financed primary election.") Nor can the political party cases be limited by the principle that those cases involved state interference with who *1088 can be a member in a given association. The Supreme Court has recognized the state can infringe upon a group's right to expressive association beyond when the state forces the inclusion of members into a particular group. See, e.g., Healy v. James, 408 U.S. 169, 92 S. Ct. 2338, 33 L. Ed. 2d 266 (1972) (invalidating efforts by a state college to prevent a chapter of Students for a Democratic Society from holding meetings or organizing on campus); NAACP v. Alabama ex rel. Patterson, 357 U.S. 449, 78 S. Ct. 1163, 2 L. Ed. 2d 1488 (1958) (holding that a state's demand that the NAACP reveal the names and address of all its Alabama members and agents violated the group's rights to expressive association). In sum, the First Amendment provides expressive associations the right to "organize and direct them[selves] in the way that will make them most effective," Ripon Society, 525 F.2d at 585, protecting such groups against a substantial "intrusion into the internal structure or affairs of an association."[66]Dale, 530 U.S. at 648, 120 S. Ct. 2446; see generally Michigan State AFL-CIO v. Employment Rels. Comm'n, 453 Mich. 362, 399, 551 N.W.2d 165 (1996) (Mallet, J., concurring) ("[A]ny governmental intrusion on the internal structure and organization of a group may pose questions of constitutional significance.")
Applying those principles to the case at hand, the court concludes that application of the WFDL to prevent GSUSA from implementing their realignment plan fully constitutes a burden on the organization's ability to advocate its viewpoints. Beginning in the early part of last decade, the defendants, aided by several independent studies, concluded that the achievement of the central goals of the organization to promote the Girl Scout movement throughout the United Stateswas threatened by a host of problems including an unfocused message, difficulties in fund-raising and recruiting executives, inabilities to effectively provide Girl Scouting to underprivileged populations, and, as their studies indicated, a decreased market share for the Girl Scouts in the United States. After years of consulting with executives within the organization and the leadership of the individual councils, the GSUSA concluded that realignment was the most effective means for organizing and providing the message of Girl Scouting and the best way to ensure that the Girl Scout message was not diluted. The record indicates that the executives of Manitou, who initially agreed with the defendant's broad plans for consolidating the Girl Scout councils, changed their minds about the defendant's realignment plans once the plaintiff realized the difficulties of working with executives from neighboring councils and of having to share the council's resources with their neighbors. Manitou, while voicing general allegiance to the goals of the Girl Scouting, now openly opposes the efforts of the Girl Scouts to realign the Wisconsin councils. Manitou, through the WFDL, asks for a permanent injunction preventing the GSUSA's attempts to realign its councils, (Compl. "Count I"), the means by which the organization has decided is the best way to convey the message of Girl Scouting, including to ethnic and economic groups that have, until this time, been underserved by the organization. This court can only conclude that the application of the WFDL in this case is a direct affront to the Girl Scouts' reasoned efforts to organize and direct itself in a means that it judges most effective in proclaiming its expressive message. Ripon Society, 525 F.2d at 585. Moreover, *1089 as the record indicates, the sheer number of councils within the Girl Scout organization tended to dilute the national organization's message and, having Manitou maintain the entirety of its jurisdiction against the wishes of the GSUSA, would similarly affect the message of the expressive association. In addition, the natural result of summary judgment for Manitou on the WFDL claim would allow Manitou and its executives, a group who has an ideological conflict with the national organization over the long term goals of Girl Scouting, administering the expressive message for the organization in seven counties in Wisconsin.[67]Roberts, 468 U.S. at 633, 104 S. Ct. 3244 (O'Connor, J., concurring) ("[A]n association engaged exclusively in protected expression enjoys First Amendment protection of both the content of its message and the choice of its members.") In short, application of the WFDL in these circumstances will adversely affect GSUSA's expressive message.
Moreover, this court views the intrusion into GSUSA's internal efforts to organize itself through the application of the WFDL to be substantial. The present case is substantively indistinguishable from Cousins.[68] just as if every state imposed their will in deciding the qualifications of the delegates for a national political party's convention would "seriously undercut or indeed destroy the effectiveness" of the association, Cousins, 419 U.S. at 490, 95 S. Ct. 541, so too would the effectiveness of an expressive association be eroded if every state's fair dealership law were used to override a given association's well-vetted choice for how it should organize itself nationally in providing its expressive message.[69] Such a burden, when viewed in the *1090 aggregate nationally is far from an "ordinary and widespread" burden incidentally affecting the organization's expressive message, Clingman, 544 U.S. at 593, 125 S. Ct. 2029, but rather is a substantial burden preventing the Girl Scouts from taking actions that, from the organization's perspective, will better disseminate the Girl Scout message, particularly to underprivileged populations.[70]Cf. Roberts, 468 U.S. at 627, 104 S. Ct. 3244 ("The Act requires no change in the Jaycees' creed of promoting the interests of young men, and it imposes no restrictions on the organization's ability to exclude individuals with ideologies or philosophies different from those of its existing members.") Moreover, just as the forced inclusion of a solitary homosexual member of the Boy Scouts would significantly affect that organization's efforts to not promote homosexual conduct as a legitimate form of behavior, Dale, 530 U.S. at 665-66, 120 S. Ct. 2446, so too would having Manitou continue permanently carrying on the mission of the Girl Scouts in Eastern Wisconsin significantly affect the GSUSA's ability to effectively disseminate a cohesive message to a broader and more robust population base.[71]
Manitou argues repeatedly in their submissions to the court that GSUSA's realignment plan is a poor means to achieve the Girl Scout's broad goals and that the empirical data does not support GSUSA's need to realign, contending ultimately that applying the WFDL would have, at best, a minor burden on the organization's ability to advocate its viewpoints. Of course, the defendant disagrees. However, "it is not for the courts to mediate the merits of [the] dispute," as the court must afford deference to the expressive organization's determination as to the best way to organize itself. La Follette, 450 U.S. at 123-24, 101 S. Ct. 1010 ("[A]s is true of all expressions of First Amendment freedoms, the courts may not interfere on the ground that they view a particular expression as unwise or irrational.") The court will not, through the use of the state law at question, begin to second guess the decisions of the national organization on what the Girl Scout's message should be, who the message should be disseminated to, or how the Girl Scouts should organize itself. It is for the organization"and not the Wisconsin legislature or any court"to determine the means best calculated to strengthen the organization and advance its interests.[72]Id. at 124 n. 27, 101 S. Ct. 1010. The arguments that Manitou proffers should be addressed to the national organization, not to the judiciary.[73]Id.
*1091 Manitou further argues, puzzlingly, that "even if" the application of the WFDL stands at odds with GSUSA's "constitutionally protected point of view," that there is "nothing in the WFDL that prevents GSUSA from taking corrective action" because the dealership law enables a grantor to terminate, cancel, or not renew a dealership for good cause. Here, it is Manitou that is speaking "out of both sides of its mouth." Manitou, 549 F.3d at 1094. As stated earlier in this order, Manitou has argued forcefully and persuasively that the "good cause" standard under the WFDL is quite narrow, and it is the narrow nature of the meaning of "good cause" in the WFDL that prevents GSUSA from fully implementing its realignment efforts in Wisconsin. Moreover, contrary to Manitou's argument in its brief to the court, it is not Manitou's refusal to implement programs that promotes pluralism and diversity of membership within its jurisdiction that is infringing on GSUSA's First Amendment rights. (Pl's Resp. Br. 23). It is, rather, Manitou's use of the WFDL to prevent GSUSA from organizing itself in the means the Girl Scouts have found, after much deliberation, to be most effective is what is constitutionally questionable.
Manitou next argues that GSUSA's First Amendment argument is "disingenuous," given that GSUSA initially claimed that it was only removing sixty percent of Manitou's jurisdiction, leaving Manitou intact to "interfere with GSUSA's constitutionally protected point of view." (Pl's Resp. Br. 23). However, GSUSA's sincerity regarding how its realignment efforts were an attempt to revitalize and expand the audience of the Girl Scouts' message is amply demonstrated in the record. Moreover, Manitou's assessment of GSUSA's initial averments to the court is not entirely accurate. The quote Manitou takes from GSUSA's declaration to the court must be read in context. GSUSA did not claim that it would only remove sixty percent of the council, leaving the remainder of Manitou intact in perpetuity. GSUSA merely claimed in its declaration to the court that the "jurisdictional review," as propagated by its National Team, would only result in the reduction of sixty percent of Manitou's territory. See Wright Decl. (Docket # 19) at ¶ 75 ("GSUSA's jurisdictional review will not terminate, cancel or fail to renew Manitou's Charter. At most, GSUSA may transfer 60% of Manitou's territory to the North") (emphasis added). The fact that GSUSA stated at the time of the preliminary injunction motion that the organization's initial "jurisdictional review" would not, in and of itself, merge the entirety of Manitou council with other Wisconsin councils, does not mean that GSUSA's ultimate efforts were anything but to fully implement its realignment plans.[74] Ultimately, GSUSA's rights to expressive association are not any less genuine or any less threatened by the application of the WFDL to this action because of their initial statements to the court.
Manitou, without citing any authority for its proposition, further argues that GSUSA chose to operate as a franchise system, so "having voluntarily chosen this business structure, GSUSA cannot now ... duck its contractual and statutory obligations." (Pl's Resp. Br. 24). The court is unclear as to what Manitou's exact argument is. If Manitou is arguing that GSUSA waived its constitutional right to organize how it *1092 provides its expressive message by opting for a federated structure and to be bound by the WFDL, such an argument would fail, given that a waiver of a constitutional right must be "knowing, intelligent, and voluntary." Johnson v. Zerbst, 304 U.S. 458, 464, 58 S. Ct. 1019, 82 L. Ed. 1461 (1938) ("A waiver is ordinarily an intentional relinquishment or abandonment of a known right or privilege.") Here, given the unclear state of the law as to whether WFDL even applied to the Girl Scouts and its individual councils at the beginning of the litigation, it would be difficult to conclude that GSUSA knowingly and intelligently waived its rights to freedom of expressive association when the organization opted to act as a federation within Wisconsin. More broadly, choosing how to structure the organization in its efforts to effectively disseminate its message is inherent in the right to expressive association. See Ripon Society, 525 F.2d at 585. A statutory obligation cannot trump GSUSA's constitutional rights.
Finally, Manitou contends that protecting GSUSA's specific choice as to how to govern and organize itselfi.e., the national organization's realignment plans means that "anything a charitable or educational association does," such as "leasing a photocopy machine," is in furtherance of and impacts the "mission" of the association, potentially implicating constitutional rights, and creating a shield to statutory obligations for the given association. Manitou misunderstands the constitutional principle. The rule is not that whenever the state regulates the internal processes of an expressive association that the state's action is constitutionally suspect. Clingman v. Beaver, 544 U.S. at 587, 125 S. Ct. 2029 (finding that "ordinary and widespread" burdens on the right to expressive association are not severe in nature). The rule is that only when the state takes an action that "significantly affects" an expressive association's ability to advocate its viewpoints is the action subject to heightened constitutional scrutiny. Dale, 530 U.S. at 650, 120 S. Ct. 2446. Here, the GSUSA did not undertake its realignment efforts on a whim, but rather after years of study, concluding ultimately that the most effective way to disseminate the Girl Scout message was through merging its various councils. For the reasons discussed above, applying the WFDL to the GSUSA's action would, in this court's view, constitute a substantial burden on the Girl Scouts' ability to freely express itself.[75]
Given that the court finds that the application of the WFDL in this case would significantly burden the defendant's ability to advocate its viewpoints, such "infringements on expressive association are subject to strict scrutiny." Christian Legal Soc'y, 453 F.3d at 861. Accordingly, the *1093 "right to expressive association `may be overridden by regulations adopted to serve compelling state interests, unrelated to the suppression of ideas that cannot be achieved through means significantly less restrictive of associational freedoms.'" Id. at 861-62 (quoting Dale, 530 U.S. at 648, 120 S. Ct. 2446). The court, therefore, must examine the interest of the state in applying the WFDL to GSUSA's actions. Wisconsin's dealership law was a product of oil embargos resulting from the 1973 Yom Kippur War that induced "oil refineries and gasoline suppliers" to "rationalize their distribution networks" by terminating arrangements with retail gas stations. See Bowen and Butler, The Wisconsin Fair Dealership Law § 1.3. As stated earlier in this opinion, the Wisconsin legislature enacted the WFDL to promote "fair business relations between dealers and grantors," "protect dealers against unfair treatment by grantors," and to "provide dealers with rights and remedies in addition to those existing by contract or common law." Wis. Stat. § 135.025. Nothing in the purposes of the law articulates the specific interest the state has in regulating how an expressive association organizes itself and its local affiliates in order to fulfill the organization's mission.[76] Nor has the state of Wisconsin or Manitou provided an argument as to what the compelling reason is for applying the law in this case beyond the generic economic concerns addressed in the statutory articulation of the WFDL's purposes.[77] While the economic concerns for Manitou may be weighty, it is difficult for this court to conclude that the state's interests in play in this case are anywhere comparable to those in Roberts, where the Supreme Court found that a compelling reason for applying the Minnesota Human Rights Act to force the Jaycees to accept women namely, to combat the "unique evils" that occur as a result of invidious discrimination in the distribution of publicly available goods and services. Roberts, 468 U.S. at 629, 104 S. Ct. 3244. This court cannot find that a similar evil exists in denying the full weight of the WFDL to organizations that serve as dealers to an expressive association.[78] Moreover, the application of the state law in question is used directly to substitute the GSUSA's judgment for that of Manitou with the help of the WFDL, acting as a means to suppress GSUSA's message. As the Supreme Court made clear in Eu, a state cannot substitute its judgment for that of an expressive association as to the desirability of a particular "structure" for the group, any more than it can tell an association that its proposed communication to its members is unwise.[79]See Eu, 489 U.S. at 232-33, 109 S. Ct. 1013. *1094 Finally, the court does not find that keeping Manitou as the Girl Scouts' conduit to provide its message in eastern Wisconsin in perpetuity constitutes the "least restrictive means" to fulfill the state's interests in protecting dealers who serve grantors that are expressive associations. Manitou has not met its burden in proving that the application of the WFDL to the facts of this case would survive strict scrutiny. The court cannot constitutionally rule for Manitou on its fair dealership claims, and, accordingly must rule for the defendant as a matter of law on the WFDL claims.
B. Breach of Contract Claims
It is undisputed that, through Manitou's Charter and its Charter Application which is incorporated by reference into the Charter, a contract existed between the parties. However, Manitou contends that GSUSA breached both explicit provisions contained in the Blue Book and implicit terms of good faith and fair dealing when the national organization attempted to realign the Girl Scout councils in Wisconsin.[80] GSUSA, in turn, argues that the organization complied with the regulations provided in the Blue Book and has not breached the implied covenant of good faith. Accordingly, both parties have moved for summary judgment on the breach of contract claims.[81] The court will address Manitou's argument for summary judgment first.
Manitou argues that it is entitled to judgment as a matter of law on its breach of contract claim for one specific breach: GSUSA's use of regulations provided in the section of the Blue Book entitled "Procedures for Changing a Girl Scout Council Jurisdiction" as a means to shrink Manitou as a Girl Scout Council with the eventual goals of eradicating Manitou. Manitou contends that the use of the jurisdictional change procedures to reduce the council's jurisdiction ignores the typical means outlined in the Blue Book for rescinding a council's charter and breaches the implied covenant of good faith that exists in all contracts.
The Seventh Circuit noted in its earlier decision that it is "unclear what exactly constitutes the agreement in this case," leaving it to this court to determine what the actual agreement was. Manitou, 549 F.3d at 1096 n. 9. To determine what constituted the actual contract, the court must first look to what made the parties' arrangement contractual in nature. It is a matter of hornbook law that a contract *1095 consists of an offer, an acceptance, and consideration. McLellan v. Charly, 313 Wis. 2d 623, 645-46, 758 N.W.2d 94 (Ct. App.2008). An offer is a communication by a party of what it will give or do in return for some act by another. Carroll v. Stryker Corp., 670 F. Supp. 2d 891 (W.D.Wis.2009) (citing In re Lube's Estate, 225 Wis. 365, 368, 274 N.W. 276, 278 (Wis. 1937)). Acceptance of an offer necessitates a "meeting of the minds." Household Utilities, Inc. v. Andrews Co., 71 Wis. 2d 17, 29, 236 N.W.2d 663 (1976). Finally, consideration consists of a benefit to a promisor or a detriment to the promisee. First Wis. Nat'l Bank v. Oby, 52 Wis. 2d 1, 5, 188 N.W.2d 454 (1971).
Here, an offer was provided via the Charter Application, in which the Girl Scouts stated in broad terms what a council agrees to do if its application for a charter is accepted and what rights are conferred when the charter is issued. The acceptance of GSUSA's offer is exemplified by the signatures of the agents for each of the parties on the charter document. Finally, consideration existed because of the various benefits and detriments imposed on the parties within the Charter Application. Specifically, in return for certain rights, such as being able to use the Girl Scout name and the right to "develop, manage, and maintain Girl Scouting throughout the area of the jurisdiction of the Council," Manitou agreed, among several requirements, to "adhere to the policies and be guided by the standards" of the GSUSA and to be limited by those prescriptions provided in the "Girl Scout Constitution, Bylaws, and policies" of the GSUSA.
Given what the contractual relationship consisted of, the court must examine the Charter and the Charter Application, the initial evidence creating a contract, and determine what the Charter and Charter Application exactly bound the parties to do, keeping in mind that if those documents were not intended to be a "complete integration" of the contractual relationship, the court can look to outside evidence to determine the full extent of the obligations created by the contract. Scarne's Challenge, Inc. v. M.D. Orum Co., 267 Wis. 134, 140-141, 64 N.W.2d 836 (1954) ("Where a written contract is incomplete on its face, the only general rule which would bar parol evidence is that such evidence may not be received in order to contradict or negate the writing... [i]f the pleadings and affidavits before the court tend to show that the parol evidence is to be introduced ... it has been held that it may be admitted to show the full intention of the parties, provided that such evidence is not in conflict with the terms of the writing.") Keeping in mind that the "lodestar of contract interpretation" is the intent of the parties, Huml v. Vlazny, 2006 WI 87, ¶ 52, 293 Wis. 2d 169, 716 N.W.2d 807 (2006), the court will look at the four corners of the agreement of the parties and provide the contract terms with their plain or ordinary meaning. Id. However, if ambiguity is found when interpreting the words of the contract, extrinsic evidence "may be resorted to in order to ferret out the intent of the parties." Moran v. Shern, 60 Wis. 2d 39, 48, 208 N.W.2d 348 (1973).
Here, the plain language of the contract states that, in providing Girl Scouting in the area of its jurisdiction, Manitou subjects itself to those rules provided in the Girl Scout Constitution, Bylaws, and "policies" of the GSUSA, an implicit recognition that GSUSA is also binding itself to comport with its own rules, regulations, and policies.[82] The parties *1096 both agree that the word "policies" refers, at least in part, to the regulations and procedures contained in the Blue Book, and, accordingly, the court must look to that document to evaluate whether, as Manitou alleges, GSUSA committed a material breach of its obligations under the parties' contract by using the jurisdictional change procedures to eliminate part of the plaintiff's council.[83]
Initially, the court finds that GSUSA retained broad authority to revoke Girl Scout council charters under the parties' contract. The Charter Application subjects both parties to the terms of the Girl Scout Constitution, which in relevant part states that the National Board of Directors, in its "sole discretion," has the power to revoke any charter when "the best interests of Girl Scouting are not being furthered." GSUSA Const. art. VIII, § 3. On the face of the agreement, GSUSA had discretion to revoke Manitou's charter if the defendant viewed the continuation of the charter to not be in the "best interests of Girl Scouting."[84]
However, given the very general scope of the power created under the Girl Scout Constitution for GSUSA to revoke a council's charter and given that Manitou invokes a fairly specific term within the Blue Book for its breach claim, the court must look closely at Manitou's argument to see if the more specific contract term negates the broader term. See Thomsen-Abbott Constr. Co. v. City of Wausau, 9 Wis. 2d 225, 234, 100 N.W.2d 921 (1960) ("Where there is an inconsistency between a specific provision and a general provision, the specific provision controls.") The "Procedures for Changing a Girl Scout Council Jurisdiction" contains a preamble and four separate sections. The preamble states that "in all matters concerning jurisdictional lines, the National Board of Directors has the authority to make the final decision, either during the term of a charter or upon issuance of a new charter." See GSUSA, Blue Book of Basic Documents 2006, at 28. The first section of the jurisdictional change section was added to the 2006 version of the Blue Book, providing the procedures for how, "after two or more councils agree ... to participate in a realignment process," realigning the councils occurs successfully such that the jurisdictional areas are properly transferred or combined. Id. The second and third sections of the jurisdictional change procedures in the Blue Book carry over from older versions of the Blue Book and state how a Girl Scout council's jurisdiction can be successfully changed through "combining" or "transferring" jurisdictions. Id. at 28-29. Neither of the first three sections on the "Procedures for Changing a Girl Scout Council Jurisdiction" dictate what occurs if there is a "snag" in the process, *1097 such as if two or more councils cannot reach an agreement after initially deciding to change a council's jurisdiction. Instead, the procedures that occur "when agreement cannot be reached between the boards of directors of the Girl Scout councils to combine or transfer jurisdiction" is provided in Section IV. Id. at 29.
Here, Manitou concedes, at least for the purposes of its motion for summary judgment, that GSUSA followed the provisions in Section IV for when councils cannot reach an agreement when combining or transferring jurisdictions. Instead, Manitou argues that it is irrelevant that GSUSA followed the procedures in Section IV because the plaintiff contends that that section is irrelevant for when councils agree to realign. Specifically, Manitou contends that because: (1) sections II and III of the jurisdictional change procedures refer to "combin[ing]" and "transfer[ring]" and section I refers to "realign[ing]," and (2) section IV only refers to "combin[ing]" and "transfer[ring]" that, therefore, (3) Section IV must not apply to realignment.
However, this court fails to see how Manitou's syllogism requires the conclusion that is reached. There is no indication that the words "combine" or "transfer" in Section IV are used as specific terms of art. In fact, there is nothing in Section IV, the only provisions in the jurisdictional change provisions in the Blue Book relating to when Girl Scout councils disagree regarding a change in jurisdiction, specifically excludes Section I. This court cannot arbitrarily limit Section IV to only apply to combinations or transfers of a Girl Scout council jurisdiction outside of the realignment plan. Vidmar v. American Family Mut. Ins. Co., 104 Wis. 2d 360, 366, 312 N.W.2d 129 (1981) (overruled on other grounds) (holding that a provision in a contract "should be construed, if fairly possible, to give full effect to all words and provisions of both.") Moreover, the purpose of Section I of the jurisdictional change procedures, as evidenced by the addition of the section to the 2006 version of the Blue Book, was to guide councils in the onerous process of realignment through the use of a more streamlined means to combine councils.[85] To interpret Section I as creating an absolute veto on realignment by councils who initially agreed to proceed with the jurisdictional changes, would belie Section I's apparent purpose.[86]Farmers Ins. Exch. v. Sorenson, 99 F. Supp. 2d 1000, 1006 n. 6 (E.D.Wis.2000) (holding that a contract's *1098 meaning derives, in part, from its purpose). Moreover, interpreting that councils who initially agreed to realign but could not agree to the specifics of a jurisdictional change would forever retain its jurisdiction and would not be subject to Section IV's procedures would make the preamble to the jurisdictional change provisions meaningless, as it would deprive the National Board of the authority to make the final decision "during the term of a charter" regarding a council's jurisdictional lines. 1325 N. Van Buren, LLC v. T-3 Group, Ltd., 2006 WI 94, ¶ 56, 293 Wis. 2d 410, 716 N.W.2d 822 (2006) ("[A] contract is to be construed so as to give a reasonable meaning to each provision of the contract, and that courts must avoid a construction which renders portions of a contract meaningless, inexplicable or mere surplusage."). Perhaps most importantly, as the plain text of Section I indicates, the term "realignment" is merely one way of "combining" or "transferring" jurisdictions. See GSUSA, Blue Book of Basic Documents 2006, at 28 ("The councils create a Council Realignment Committee (CRC), which includes the board chairs and CEOs of the councils that are combining jurisdictions") (emphasis added). As such, Section IV governs situations when "agreement cannot be reached between the boards of directors of the Girl Scout councils to combine or transfer jurisdiction," such as during a realignment.
Accordingly, given Manitou's concession that it initially agreed to participate in the realignment process, but could not come to a final agreement regarding the jurisdictional changes, Section IV of the jurisdictional change procedures in the Blue Book is unambiguous in its meaning and appropriately governed the dispute between the parties.[87] Manitou has no issue with whether GSUSA followed the specific procedures in Section IV, at least for the purposes of its summary judgment motion, and the court is unable to find as a matter of law that the defendant breached the terms of its contract with Manitou by using the Blue Book's jurisdictional change provisions to effectuate the realignment.
Manitou makes much of the fact that the Blue Book also contains provisions for punishing a deficient council by not issuing a charter, revoking a charter, or issuing a charter with qualifications. The plaintiff asserts that because the Blue Book provides these measures as one way of ending the Girl Scouts' association with a given council that that is the only way of terminating a council's charter. However, as discussed above, the plain language of the jurisdictional change procedures of the Blue Book provide another scenario by which GSUSA may reduce the jurisdiction of a councilcombining or transferring the territory of one Girl Scout council into another council's jurisdiction. The fact that Manitou did not explicitly violate any of the policies or requirements of the GSUSA is of no consequence. Manitou agreed to participate in the realignment process.[88] When the plaintiff decided that *1099 it could not agree to work with the councils it was merging with, Section IV of the jurisdictional change provisions of the Blue Book governed, allowing GSUSA to take action to resolve the problem. Moreover, the overarching statement contained in the preamble to Section IV that the National Board has the authority to make the final decisions on all changes to jurisdictional lines, coupled with the broad language of Article VIII, § 3 of the Girl Scout Constitution regarding when the GSUSA has the authority to revoke a charter, makes explicit that GSUSA retains the authority to change Manitou's jurisdictional lines.[89]
Manitou further contends that GSUSA breached the covenants of fair dealing and good faith that were implicit in the parties' contract. Under Wisconsin law, "every contract implies good faith and fair dealing between the parties to it, and a duty of cooperation on the part of the parties." First Bank & Trust v. Firstar Info. Servs., Corp., 276 F.3d 317, 325 n. 10 (7th Cir.2001) (quoting Wis. Natural Gas Co. v. Gabe's Constr. Co., 220 Wis. 2d 14, 582 N.W.2d 118, 121 (App.Ct.1998)). However, the duty of good faith is a "relatively limited obligation" and is "not a basis for creating rights not expressly included in the contract." Northgate Motors, Inc. v. GMC, 111 F. Supp. 2d 1071, 1082 (E.D.Wis. 2000). Ultimately, good faith "is a compact reference to an implied undertaking not to take opportunistic advantage in a way that could not have been contemplated at the time of drafting, and which therefore was not resolved explicitly by the parties." Market Street Assocs. Ltd. Partnership v. Frey, 941 F.2d 588, 595 (7th Cir.1991) (interpreting Wisconsin law). Accordingly, "a party seeking to recover under this theory must show something that can support a conclusion that the party accused of bad faith has actually denied the benefit of the bargain originally intended by the parties." Zenith Ins. Co. v. Employers Ins., 141 F.3d 300, 308 (7th Cir.1998).
Here, GSUSA has not breached the implied duties of good faith and fair dealing. As discussed above, the language in the Blue Book was clear that, if the councils could not agree upon how their jurisdictions would be changed, Article IV of the jurisdictional change provisions would apply. "[T]here can be no breach of good faith and fair dealing `where the contracting party complains of acts of the other party that are specifically authorized in their agreement.'" Wis. Compressed Air Corp., 571 F.Supp.2d at 999. Moreover, GSUSA's conduct did not deny Manitou the benefit of the bargain as Manitou has always had expectations that realignment would occur and that the council's charter and jurisdiction would eventually cease as a result of realignment. The record amply indicates that Manitou was fully aware at the time of contract of the provisions in the Blue Book allowing GSUSA to step in if an agreement could not be reached regarding realigning the councils. Moreover, Manitou knew in July of 2005, well before its charter was renewed, that "council boundaries and jurisdiction and chartering would be defined anew" by the GSUSA. Manitou's expectations are further exemplified by its continued acquiescence to GSUSA's efforts to complete the realignment plan in Wisconsin up until Manitou hired its legal counsel and discovered that the council might have an avenue for relief through the WFDL.[90] Moreover, *1100 GSUSA did not act in "bad faith," as it provided Manitou with countless opportunities to voice its concerns regarding realignment, including hearing Manitou's complaints several times well after the period to provide suggestions regarding realignment ended. In short, Manitou knew when its charter was renewed that realignment was looming, and GSUSA treated Manitou fairly in effectuating the realignment plan. The court will deny Manitou's motion for summary judgment on the breach of contract claims relating to the jurisdictional change and charter revocation procedures contained in the Blue Book. As a result of the lack of any factual disputes, the court will likewise grant GSUSA summary judgment on the breach of contract claims relating to its use of the jurisdictional change provisions as a means to effectuate the combining of Manitou's jurisdiction with the northern councils. The court proceeds to evaluate whether there are any other allegations of breach of contract from Manitou's complaint that can survive summary judgment.
In its latest complaint, Manitou alleges broadly that GSUSA has failed to provide the council with a charter renewal application and that GSUSA has failed to perform in accordance with the charter renewal review and assessment procedures in deciding whether to renew Manitou's charter for 2010, constituting a breach of the parties' agreement. (Compl.¶¶ 202-14). GSUSA contends, in its briefs to the court, that the organization has followed the National Board's policies for the interim chartering process for councils affected by realignment in deciding whether to renew Manitou's charter, including the use of "Council Performance Indicators" to evaluate whether the council's charter should be renewed. Manitou opted to not brief the court on whether summary judgment on the breach of the charter renewal policies was appropriate or to update the court regarding the facts about its claim, instead focusing its briefs on the breaches related to the jurisdictional change procedures. The facts, as provided to the court, show that Manitou did send a charter renewal application to GSUSA. Moreover, nothing in the record indicates that GSUSA departed from its stated policies when it evaluated whether Manitou's charter should be renewed. Manitou has not explained specifically how GSUSA has breached the charter renewal procedures, and the court will not speculate as to the precise nature of plaintiff's claim from the broad statements made in the complaint.[91] In fact, the defendant has stated in its brief to the court that "the charter will remain effective ... until December 31, 2010." (Def's Br. 36). GSUSA is renewing or has already renewed Manitou's charter for 2010, no harm seems to be befalling Manitou related to this claim, and, accordingly, GSUSA is entitled to summary judgment on the breach of contract claims related to the charter renewal procedures.
Manitou's last claim for breach of contract relates to GSUSA's adherence to the provisions of Section IV of the jurisdictional change procedures in the Blue Book. Section IV states that, if agreement cannot be reached between councils regarding combining or transferring jurisdiction, a national team is created who will develop a recommendation for changing jurisdictional boundaries. See GSUSA, Blue Book of Basic Documents 2006, at 29. Subsection three of Section IV states that the national team must base their recommendation from "data provided from the council and *1101 community sources." Id. Manitou alleges in its complaint that the national team did not base its decision on data provided from any of the councils or any community sources. (Compl. ¶ 217). GSUSA argues that the national team based its recommendation on all of the available documents that the national organization provided, which included, in part, documents submitted by Manitou and other councils. To the extent that the national team did not receive any additional information from Manitou, GSUSA casts blame on Manitou for opting to not participate in the national team's review. Manitou's sole response to GSUSA's argument lies in two solitary and baffling comments in a footnote in the plaintiff's response brief: "If the court were to [evaluate GSUSA's compliance with Section IV], the evidence establishes that GSUSA did not even follow its own procedures ... See [FINDINGS RE: SAME]."[92] (Pl's Resp. Br. 38 n. 13).
The court will not try to decipher Manitou's argument. Inadequately developed arguments are deemed waived. Kraimer v. City of Schofield, 342 F. Supp. 2d 807, 826 (W.D.Wis.2004) (citing Central States, Southeast and Southwest Areas Pension Fund v. Midwest Motor Express, 181 F.3d 799, 808 (7th Cir.1999)). GSUSA complied with the terms of Section IV: the national team used information provided, in part, from Manitou and other councils, to make its recommendation to the National Board. To the extent the national team failed to evaluate enough information in making its recommendation, this is largely due to Manitou opting to not submit any information to the national team. GSUSA is entitled to summary judgment on the remaining breach of contract claim.
C. Tortious Interference Claims
In its complaint, Manitou contends that GSUSA tortiously interfered with: (1) Manitou's economic interests, such as donations that were to be made to the council; and (2) Manitou's board of director's fiduciary duties to the council. GSUSA argues that Wisconsin does not recognize a cause of action for the latter claim, tortious interference with fiduciary duties. Manitou does not respond to this argument in its brief, and the court was unable to find any basis in Wisconsin law for the fifth count of Manitou's complaint and, accordingly, will grant summary judgment for GSUSA on that claim.
However, Wisconsin does recognize suits for tortious interference with expected economic advantages, including gifts or inheritances. Gustafson v. zum-Brunnen, 546 F.3d 398, 401 (7th Cir.2008) (citing to the Restatement (Second) of Torts § 774(B) (1979) ("[O]ne who by fraud, duress or other tortious means intentionally prevents another from receiving from a third person an inheritance or gift that he would otherwise have received is subject to liability to the other for loss of the inheritance or gift.")). Under Wisconsin law, in order to prevail on a tortious interference claim, a plaintiff must satisfy five elements: (1) an actual or prospective economic advantage provided to the plaintiff from a third party; (2) the defendant interfered with that economic advantage; (3) the interference was intentional; (4) the interference caused the plaintiff to sustain damages; and (5) the defendant was not justified or privileged to interfere. Metso Minerals Indus. v. FLSmidth-Excel LLC, No. 07-CV-0926, 2010 WL 55845, at *2, 2010 U.S. Dist. LEXIS 483, at *7 (E.D.Wis. Jan. 5, 2010); see also Anderson v. Regents of University of California, 203 Wis. 2d 469, 490, 554 N.W.2d 509 (Ct.App. 1996).
*1102 Here, even if the court assumes that Manitou can satisfy the first four elements of the tort claim, Manitou's claim ultimately fails on the fifth element proving tortious interference. Under Wisconsin law, "interference alone" does not establish tortious interference; the interference must be improper. Mackenzie v. Miller Brewing Co., 2000 WI App 48, ¶ 63, 234 Wis. 2d 1, 608 N.W.2d 331 (Ct.App.2000). To determine whether conduct is justified or privileged, the court must look to "the nature, type, duration and timing of the conduct, whether the interference is driven by an improper motive or self-interest, and whether the conduct, even though intentional, was fair and reasonable under the circumstances." Briesemeister v. Lehner, 2006 WI App 140, ¶ 51, 295 Wis. 2d 429, 720 N.W.2d 531 (Ct. App.2006). The court has already determined that GSUSA followed the procedures outlined in the Blue Book when it attempted to combine Manitou's jurisdiction with the northern councils. As such, any interference was fair and reasonable. Moreover, even if GSUSA was acting in breach of the terms outlined in the Blue Book, the defendant, as discussed above, was acting in good faith and under the honest belief that the actions it was taking were within the confines of its agreement with Manitou. Id. at ¶ 53, 720 N.W.2d 531 (holding that interference is not improper if the action, "even if misguided," was "reasonable and espoused in good faith"). Accordingly, the court will grant GSUSA summary judgment on the tortious interference with economic advantage claim.
D. Economic Coercion Claim
The fourth count of Manitou's complaint alleges that GSUSA's realignment efforts constituted economic duress or coercion. (Compl. ¶¶ 159-67). However, economic duress "cannot serve as the basis for an independent claim," but rather exists as a defense to liability, such as when a party claims that a contract was invalid because it was formed under duress. Colortyme, Inc. v. Are Not, Inc., No. 03-CV-0404, 2004 WL 848192, at *1, 2004 U.S. Dist. LEXIS 6822, at *2 (W.D.Wis. Apr. 13, 2004). The only case Manitou cites as a basis for asserting that economic duress can "stand on its own as an independent claim," (Pl's Resp. Br. 44), is JPM, Inc. v. John Deere Indus. Equip. Co., 94 F.3d 270 (7th Cir.1996). However, that case merely stands for the proposition that "economic duress may serve as the basis for a claim of constructive termination" under the WFDL. Id. at 272. Given that the court cannot constitutionally apply the WFDL claim against the defendant, the economic coercion claim cannot stand on its own. Moreover, as Manitou concedes in its brief, given the court's conclusion that GSUSA acted within the terms of its contract with Manitou, GSUSA did not take actions that amounted to placing Manitou under economic duress. T.F. Pagel Lumber Co. v. Webster, 231 Wis. 222, 225, 285 N.W. 739 (1939) ("Threats to do what the threatening person has a legal right to do, do not constitute duress.") Therefore, the court must grant summary judgment for GSUSA on the economic duress claim.
E. Civil Conspiracy Claims
In its complaint, Manitou further alleges that GSUSA is liable for a host of civil conspiracy claims: conspiracy to violate the WFDL; conspiracy to tortiously interfere with prospective economic advantage; conspiracy to economically coerce; conspiracy to tortiously interfere with fiduciary duties; and conspiracy to injure the plaintiff's reputation, trade, business or profession in violation of Wis. Stat. § 134.01. In Wisconsin, a civil conspiracy is defined as "a combination of two or more persons by some concerted action to accomplish some unlawful purpose or to accomplish *1103 by unlawful means some purpose not in itself unlawful." Radue v. Dill, 74 Wis. 2d 239, 241, 246 N.W.2d 507 (1976). However, as the plaintiff concedes, "if Manitou is not successful on its principal claims against GSUSA, the conspiracy claims will fail." (Pl's Resp. Br. 45). GSUSA did not act in concert either unlawfully or to accomplish an unlawful end. Accordingly, the court will grant summary judgment for GSUSA on the civil conspiracy claims.
F. Breach of Fiduciary Duty Claim
Manitou's final cause of action alleges that GSUSA has breached its fiduciary duties toward the plaintiff by "requir[ing] Manitou to adopt articles of incorporation that require its property and assets to revert to GSUSA if Manitou ceases to be a Girl Scout council and is dissolved" and by "causing [Manitou's] dissolution." (Pl's Resp. Br. 46). To recover on its breach of fiduciary duty claim against the defendant, Manitou must establish: (1) the existence of a fiduciary duty; (2) the breach thereof; and (3) injury caused thereby. Select Creations v. Paliafito Am., 911 F. Supp. 1130, 1150 (E.D.Wis.1995). However, even assuming a fiduciary relationship existed between GSUSA and Manitou, the court cannot conclude that the defendant breached the fiduciary duties it owed to the plaintiff. A breach of a fiduciary duty does not occur simply because a fiduciary does something adverse to the principal; rather a breach of a fiduciary duty requires a specific state of mind of "disloyalty or infidelity." Zastrow v. Journal Communs., Inc., 2006 WI 72, ¶ 30, 291 Wis. 2d 426, 718 N.W.2d 51 (2006) ("At its core, a fiduciary's duty of loyalty involves a state of mind, so that a claimed breach of that duty goes beyond simple negligence.") Nothing in the evidence Manitou has provided indicates GSUSA undertook its realignment efforts with its personal interest in mind, such as initiating realignment as a means to seize Manitou's assets. In fact, Manitou's Rice and Schemenauer concede that GSUSA had no financial interest in attempting to join Manitou's jurisdiction with the northern councils. Moreover, nothing in the record allows for the possible conclusion that GSUSA was disloyal or unfaithful to Manitou. As discussed earlier in this order, the defendant acted with the utmost good faith toward Manitou. As a result, GSUSA is entitled to summary judgment on the fiduciary duty claim, the last remaining count from Manitou's complaint.
Accordingly,
IT IS ORDERED that defendant's motion for summary judgment on "all causes of action asserted against it in Plaintiff's Second Amended Complaint" (Docket # 134) be and the same is hereby GRANTED;
IT IS FURTHER ORDERED that plaintiff's motion for partial summary judgment, on liability only at Counts I and II of its Second Amended Complaint (Docket # 141) be and the same is hereby DENIED; and
IT IS FURTHER ORDERED that this action be and the same is hereby DISMISSED with prejudice.
The Clerk of the Court is directed to enter judgment accordingly.
NOTES
[1] The court notes that a significant portion of the briefing by both sides in this case was entirely orthogonal to the issue at hand. The question of whether the GSUSA's realignment plan was a wise decision as a matter of policy is completely divorced from the question of whether the GSUSA's actions complied with the law. Moreover, the court notes that much of the briefing consists of name-calling by the parties. See, e.g. Pl's Reply Br. 3 ("GSUSA's representations to the Court are not minor or inadvertant ... [t]hey are knowing misrepresentations of fact.") The Seventh Circuit has recently scolded parties for submitting briefs that are "replete with argumentative posturing." Mason v. SmithKline Beecham Corp., 596 F.3d 387, 389 (7th Cir.2010). This court echoes the Seventh Circuit's concerns here.
[2] The national organization's revenue does not stem from the sales of Girl Scout cookies, as the sales revenue from the cookies accrues to the local councils that conduct the sales.
[3] The National Board of Directors may also supplement the National Council's requirements for a local council and establish its own standards for issuing charters to and maintaining the charters for the local councils, so long as those requirements are consistent with those set forth by the National Council. GSUSA Const. art. VII, § 2.
[4] Specifically, Article X, Section 2 of the Girl Scout Constitution states that the National Board shall consist of the President, the Vice Presidents, the Secretary, the Treasurer, and thirty-five "at-large" members. The Chief Executive Officer of the GSUSA and the Chief Financial Officer of the GSUSA are authorized to sit as "ex officio members" of the board, without having the power to vote. The Girl Scout Constitution further commands that the National Board "be representative of the various geographical areas of the country." GSUSA Const. art. X, § 2.
[5] Each council is an independent, non-profit corporation, having its own independent board of directors, its own property, and its own staff. In addition, each Girl Scout council is responsible for the members, troops and volunteers within its exclusive jurisdiction.
[6] The court cites from the 2006 version of the Blue Book, as that is the version both parties agree is most relevant.
[7] The Blue Book's "Procedures for Changing a Girl Scout Council Jurisdiction" state in a footnote that "all actions taken must be consistent with state law." See GSUSA, Blue Book of Basic Documents 2006, at 28 n. 13.
[8] Manitou disputes that the Girl Scout's market share was actually decreasing. The court does not voice an opinion on this, but merely notes that it is undisputed that GSUSA thought that its market share was decreasing. Moreover, GSUSA has never stated that financial interests propelled its current realignment efforts. However, the decline in membership of the GSUSA has had fiscal implications for the organization, as GSUSA's membership revenues declined by $1.9 million dollars between 2003 and 2004 and by more than $500,000 between 2005 and 2006.
[9] Both parties agree that July 2005 was the first time Manitou and other councils were officially informed of GSUSA's realignment plans.
[10] The initial plans of the GSUSA did not require that the executives and employees of the current councils would have the same positions or similar positions in the newly formed councils. For every realigned council, a Council Realignment Committee comprised of the Board Chairs and CEOs of the councils in the proposed new jurisdiction would be created to help form the new council, including developing a service delivery plan, preliminary budget, and funding plan. It was expected that the staff and volunteers of the legacy councils would participate in the transition toward the new, realigned councils. Moreover, the legacy councils had the possibility of serving as "service centers" or "satellite offices" in the new council. Finally, employees from the old council were allowed to fill the new staff positions of the larger council.
[11] Ms. Schemenauer stated at a September 2005 meeting of the Wisconsin Alliance of councils that "everyone needs to face the fact that we are going to be realigned whether or not we like it." (Schemenauer Dep. 144).
[12] Such a recommendation was necessarily a recommendation to consolidate Manitou into another council, as Manitou had approximately 5,300 girl members at the time of the Wisconsin Alliance's recommendation.
[13] The hope was for each council to assume a 10 percent market share from the girl population, yielding 10,000 members per council. The final resource map eventually consisted of 109 realigned councils.
[14] The councils were: Girl Scouts of Birch Trails Council, Girl Scouts of Fox River Area, Girl Scouts of Indian Waters Council, Girl Scouts of Lac-Baie Council, Girl Scouts of Manitou Council, Girl Scouts of Peninsula Waters Council, and Girl Scouts of Woodland Council.
[15] Communications between the various executives of the councils in the spring of 2006 indicate that the relationship between the councils was anything but cordial, as the personalities of the executives began to clash with respect to even the most trivial happenings. For example, in a April 3, 2006 email to Rice, Schemenauer refers to the members of the Fox River Area Council as "weasely little shits" for inviting a GSUSA executive to dinner without first consulting Manitou's executives. The emails between Rice and Schemenauer reveal their frustrations with working with the members of the future Northwestern Great Lakes Council. Nonetheless, the various councils did come to some consensus regarding a proposal for realignment.
[16] The proposal, much like all the official documents regarding the consolidation of the Girl Scout councils, did not use the word "merger" to describe the restructuring of the councils, but rather used the word "realignment."
[17] The group also expressed the "wish to make some minor zip code changes to the county-based national resource map to better conform with school district boundaries."
[18] The parties seem to dispute the nature of what Ms. Schemenauer's group submitted on May 31, 2006. GSUSA treats the memorandum as a formal application for change in the council's jurisdiction. Manitou treats the May 31, 2006 memorandum as a mere invitation to discuss the realignment plans. The court takes no formal stance on what the May 31, 2006 memorandum constituted at this stage of the order, but instead notes that if the memorandum was a proposal, that GSUSA responded favorably to the Wisconsin and Michigan groups' requests. Moreover, the court notes that if Schemenauer's group's intention was to merely continue discussions and negotiations with GSUSA regarding realignment, their dissatisfaction with the realignment process was not clearly voiced by the May 31, 2006 memorandum. Neither Schemenauer nor any other member of the Wisconsin and Michigan council group corrected the GSUSA's assumption that the May 31, 2006 memorandum was merely a proposal to the GSUSA regarding their realignment efforts, despite several communications between the parties.
[19] The task group consisted of Rice, and board members Diane Krause-Stetson ("Krause-Stetson"), Mary Jo McBrearty ("McBrearty"), and Pam Dekker ("Dekker"). Both parties concede that Ms. Schemenauer played an "active role in the group" and was the person who submitted the group's position paper to the GSUSA.
[20] Minutes from the March 27, 2007 meeting indicate that Manitou and the other councils did not have a "shared vision of what a successful council would or could look like" and that the "councils in the north are unaccepting of Manitou's success measures" and "prefer expediency over due care."
[21] At some point in April 2007, GSUSA supplied Manitou and the six northern councils with a "letter of intent" to merge.
[22] After a few notes jotted down on a piece of paper noting the statistics used to determine the initial resource map, the word "LIARS" is prominently written in all capital letters at the bottom of the page.
[23] Manitou was informed by GSUSA on May 21, 2007, that Manitou's new proposal would not be adopted. However, it was not until August 3, 2007, that Linda Foreman wrote to Liesl Rice explaining the reasons for GSUSA's rejection of Manitou's proposal.
[24] The donor was from the Fox River Area Girl Scout Council, one of the Girl Scout councils that the Manitou executives were having difficulties getting along with and would have merged with under the GSUSA's plan. The assumption by the Manitou representatives was that having a member who donated to a council that was going to be realigned created some sort of "conflict of interest."
[25] On January 21, 2008, the "Realignment Communications Chair" of the Girl Scouts of the Northwestern Great Lakes wrote the GSUSA stating that they thought it was in the "best interests of our girls" to continue working toward the merger date of May 1, 2008.
[26] The word "aggressively" may undersell the level of emotions at play within Manitou at this point of the litigation. For example, Ms. Schemenauer, commenting on the author, a member of the Fox Lakes Council, of an editorial piece which opposed Manitou's litigation strategy written in a Fond Du Lac paper, stated in a April 29, 2008 email to Terri Lillesand, a member of the Manitou Board, that "Revenge is best served cold" and that "We will get her."
[27] The 2003 version of the Blue Book does not specify that a "national team" must be created to resolve conflicts when the board of directors of the Girl Scout councils cannot agree upon the transfer of a part of one council jurisdiction to another council. Rather, the 2003 version of the Blue Book charges a "National Board Liaison" and "designated staff members" to develop a recommendation similar to the role of the "national team" under the 2006 version of the Blue Book.
[28] Pursuant to the 2006 Blue Book's regulations, a national team must "invite all affected councils to provide information on how the requested change will impact the delivery of [the] Girl Scout program." GSUSA, Blue Book of Basic Documents 2006, at 29.
[29] Wagnon's team was not charged with investigating the merger of the remainder of Manitou's council with the other Wisconsin Girl Scout councils to the west and the south. GSUSA never took action to merge the remainder of Manitou's jurisdiction.
[30] While the parties needlessly battle in their proposed findings of fact over whether information reviewed by the national team came from Manitou, the court's review of the information the national team possessed indicate that the information included: (1) a series of the GSUSA's presentation slides that were used at the various meetings by the national organization; (2) several emails and letters between Manitou and other councils and the GSUSA; (3) notes from the meetings of the relevant Wisconsin and Michigan councils; (4) Manitou's analysis of the realignment plan; (5) memoranda between various executives at the GSUSA regarding the Wisconsin merger; (6) studies performed by outside groups regarding the realignment efforts in Wisconsin and Michigan; and (7) the letters written by the parties and their legal representatives in the wake of the litigation. Both sides concede that none of the information came directly from Manitou, as the council refused to participate in the process.
[31] The "Application for Change in Council Jurisdiction" submitted by the national team proposed dropping Sheboygan and Manitowoc counties and a majority of Fond du Lac and Calumet counties from Manitou's jurisdiction. The national team, whose focus was only on the dispute between Manitou and the northern councils, did not resolve the issue of the remaining Manitou jurisdiction in Ozaukee county. The portion of Manitou's jurisdiction that was to be removed by the approval of the application would have been the overwhelming majority of Manitou's present jurisdiction. Moreover, the proposed change would have severely reduced Manitou's access to donations and volunteers.
[32] In its application, Manitou noted explicitly that by submitting the application the council was not waiving its rights under the WFDL.
[33] The court proceeds assuming the status quo has been maintained since the imposition of the preliminary injunction.
[34] Schemenauer, in her deposition testimony, agreed that there was a "dip" in Manitou's fund-raising in 2007, while the fund-raising that occurred in 2008 was "almost" at historical levels. (Schemnauer Dep. 515). Manitou's Chief Operations Officer, Diane Cline ("Cline"), in her sworn deposition stated that the council had difficulties in their 2008 Family Partnership campaign, which she attributes to the GSUSA's realignment efforts. (Cline Dep. 103-104). Manitou's financial data from 2003-2008 indicates that the amount of donations the council received in that period has fluctuated greatly, with "total public support" averaging around $210,000. Manitou's lowest years for public support were 2003 ($167,249), 2005 ($207,238), 2007 ($186,922). Manitou's best years for public support included 2004 ($260,787), 2006 ($223,380), and 2008 ($220,232).
[35] For example, Cline explained in her deposition that Manitou did not hold "ASK [fund-raising] events" in 2007 because the people Cline "was trying to recruit [for the event] that year couldn't see doing [the event] and asking their friends and family for money when they didn't know what was happening to Manitou." (Cline Dep. 77). Cline also speculates that Manitou lost thousands of dollars in donations in a Family Partnership donation campaign in September 2008 because of confusion over whether Manitou would continue to offer Girl Scouting. (Cline Dep. 103-04; 113-14).
[36] Cline stated in her deposition testimony that "because of the economy, we're down." (Cline Dep. 176). GSUSA also hypothesizes that some donors, repulsed by Manitou's litigation (and the use of council funds to pay for the litigation), may have stopped giving to the council.
[37] Cline cites the funding received from United Way's Fond du Lac office as an example of Manitou's increased funding because of the current litigation. (Cline Dep. 134).
[38] The court notes that the law that will be applied in this case on all of the claims is Wisconsin law. In federal court, the choice of law is determined by the choice of law rules of the forum state. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941). When the parties do not dispute what law should be applied, the court should apply forum law. FutureSource L.L.C. v. Reuters Ltd., 312 F.3d 281 (7th Cir.2002).
[39] As discussed in later footnotes, ripeness concerns prevent the court from speculating regarding what GSUSA would have done and how it would have taken such actions if the injunction was not imposed and the national organization successfully transferred Manitou's jurisdiction to the northern councils.
[40] The Seventh Circuit contemplated a twist on the Super Valu Stores argument in its earlier opinion. See Manitou, 549 F.3d at 1097. The Seventh Circuit declined to decide whether Super Valu Stores stands for the proposition that "any action taken by a grantor that is specifically contemplated by the terms of the relevant agreement cannot be a substantial change in competitive circumstances." Id. (emphasis added). The Seventh Circuit merely stated that the terms of the charter and charter application did not provide GSUSA the right to amend Manitou's jurisdiction during the term of the charter. Id. at 1098. Notably, the circuit court, quite candidly, stated that it was "unclear what exactly constitutes the agreement in this case," reserving the question as to the extent of the agreement between the parties for this court to determine. Id. at 1098, n 9. Here, GSUSA argues that documents incorporated by reference and extrinsic evidence indicate that the agreement allowed GSUSA to adjust Manitou's jurisdiction.
[41] Manitou insinuates in its briefs that the issue of Super Valu Stores was definitively decided by the Seventh Circuit's opinion and this court should not second guess the appellate court's decision. The Seventh Circuit's comments about Super Valu Stores was entirely dicta, id. at 1097 ("[A]mbiguities surrounding the relevant provision in the charter application make it unnecessary for us to decide the scope of Super Valu Stores decision today"), leaving it for this court to opine on the scope of the decision.
[42] The court notes that Super Valu Stores is only applicable to the "substantial change" clause of § 135.03 and has no applicability with regards to the "termination" or "non-renewal" clause. The facts of the case before the court, and when the Seventh Circuit imposed its injunction, indicate that while GSUSA wished to fully merge Manitou's jurisdiction with other Girl Scout councils in the area, the only concrete actions that GSUSA took up until the injunction was imposed was to remove a sizable portion of Manitou's jurisdiction. Because the court cannot guess at what GSUSA would have done but for the injunction being imposed, see Texas v. United States, 523 U.S. 296, 299, 118 S. Ct. 1257, 140 L. Ed. 2d 406 (1998) ("A claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated or indeed may not occur at all"), the court will view the harm in this case as relating to GSUSA's actual and concrete attempts to remove a majority of Manitou's jurisdiction. Indeed, Manitou did not even respond to GSUSA's ripeness arguments. In addition, even if the court viewed the harm as GSUSA attempting to completely merge Manitou with the other councils, if Manitou was merged into the new councils, Manitou would still exist as a satellite office, and while not a completely separate corporate entity, it is unclear as to whether such a change would be a complete termination as opposed to a "substantial change in the competitive circumstance of the dealership agreement." See Meyer v. Kero-Sun, Inc., 570 F. Supp. 402, 406 (W.D.Wis.1983) (holding that a termination or cancellation means the act of the grantor which brings an end to the relationship). As a result, this case is a "substantial change" case.
[43] The court notes that the Seventh Circuit analyzed the Super Valu Stores issue, in part, under the rubric of whether the parties' dealership agreement was "non-exclusive," finding that if the agreement was exclusive Super Valu Stores did not apply. Manitou, 549 F.3d at 1097. The parties continue to hint at this argument in their briefs. Given that the central issue is whether the statute's prohibition applies to the grantor "substantially chang[ing] the competitive circumstances in the dealership agreement," this court is at a loss as to why "nonexclusivity" is even an issue in this case or why it would be dispositive of the question of whether the statutory language was violated. Manitou is not contending that the harm effectuated by GSUSA resulted from the defendant's introducing a competitor into Manitou's territory; Manitou is contending the harm has resulted from GSUSA transferring part of Manitou's jurisdiction. Just because "exclusivity" animated the facts of Super Valu Stores, does not mean it animates the facts of every WFDL case or that exclusivity is the imprimatur by which a violation of the WFDL is gauged. As such, the court finds it is irrelevant as to whether the parties' dealership agreement was exclusive or not.
[44] See Super Valu Stores, 146 Wis.2d at 576, 431 N.W.2d 721 (holding that the grantor, by expressly retaining the right to choose and select its retailers and enter into retail agreements with other parties at its sole choice and discretion, did not violate Wis. Stat. § 135.03's prohibition against making substantial changes to the competitive circumstances of the dealership agreement).
[45] See Brauman Paper Co. v. Congoleum Corp., 563 F. Supp. 1, 3 (E.D.Wis.1981) (holding that the dealership agreement between the parties implied that the agreement was non-exclusive in nature because of the parties' course of performance).
[46] In dicta, in Jungbluth v. Hometown, Inc., 201 Wis. 2d 320, 332, 548 N.W.2d 519 (1996), the Wisconsin Supreme Court implicitly rejected GSUSA's argument. Noting the concern of the dealer that the broad reading of Super Valu Stores would provide a grantor with a "virtual blueprint to terminate a dealership at any time," the Wisconsin high court noted that "it would be unreasonable to assume that the legislature intended the dealership agreement to garner such protection at the expense of the dealer" and that "the result as depicted here would be absurd in light of the remedial purpose of the WFDL." Id. at 332, 548 N.W.2d 519, n 7.
[47] GSUSA argues that § 135.025(3) is inapplicable to the holding of Super Valu Stores, as Wisconsin courts have construed that provision of the WFDL to mean "that parties to a dealership agreement cannot agree to apply another state's less protective dealership law." (Def's Br. 33). While § 135.025(3) is often quoted as a reason to deny effect to a contract's choice of law provision, the defendant cites to no authority, nor can this court find any authority, that § 135.025(3) should only be applied when construing choice of law provisions in a contract. § 135.025(3) seems equally applicable in the case where a dealer attempts to use the agreement to skirt the basic protections of the WFDL.
[48] The court notes that having to rely on case law from over twenty years ago gives the court great pause. The Wisconsin Fair Dealership Law is a statute that will often pair Wisconsin dealers against grantors, who are often national in their business focus and citizens of another state, in litigation over hundreds of thousands, if not millions, of dollars. As a result, WFDL litigation tends to occur in federal court. Indeed, the overwhelming majority of "hits" for case law on the WFDL has been from federal courts. The Wisconsin Supreme Court needs an opportunity to expound upon the holding of Super Valu Stores and the limits of § 135.03. However, Wisconsin law implicitly prohibits the Wisconsin Supreme Court from answering questions certified by federal district courts. See Wis. Stat. § 821.01 ("The supreme court may answer questions of law certified to it by the supreme court of the United States, a court of appeals of the United States or the highest appellate court of any other state when requested by the certifying court if there are involved in any proceeding before it questions of law of this state which may be determinative of the cause then pending in the certifying court and as to which it appears to the certifying court there is no controlling precedent in the decisions of the supreme court and the court of appeals of this state.") As such, this court will interpret the question of law begged by the issue in this case as best as it can. However, if a higher court has the opportunity, certification may be the best route to resolve all of the WFDL issues in this case.
[49] The court notes that there is nothing explicit in Super Valu Stores to surmise that a rule that "whenever a grantor's acts comply with the dealership agreement, § 135.03 has been complied with" exists. Super Valu Stores, 146 Wis.2d at 577, 431 N.W.2d 721 ("Compliance with the express terms of the dealership agreement cannot, under the circumstances of this case, give rise to a violation of sec. 135.03") (emphasis added).
[50] In addition, only the court's reading of Super Valu Stores is consistent with the text of § 135.03. The text of the statute states that "no grantor may ... substantially change the competitive circumstances of a dealership agreement without good cause." An action taken that amounts to a constructive termination of the dealership agreement, even if theoretically contemplated by the agreement, would be against the entire reason the dealer entered into the business arrangement and would substantially change the competitive circumstances of the contract.
[51] The court does not make a formal ruling at this stage of the order on whether the agreement authorized GSUSA to reapportion Manitou's jurisdiction.
[52] "Constructive termination" is used as a term of art whose meaning is explained in the WFDL case law. It is not meant to have any meaning beyond the WFDL claim.
[53] Manitou argues that Ziegler II is only applicable in cases where the grantor is attempting to "change its method of doing business with its dealers," not in a case, such as this, where the grantor is "switching out" one dealer for another. The court rejects Manitou's argument. As stated earlier, the question of whether GSUSA is actually "switching out" one dealer for another is not yet ripe for discussion and is not clear on the facts. More importantly, even assuming that GSUSA is "swapping out" Manitou for another council, the limit that Manitou is trying to ascribe to Ziegler II's holding has been foreclosed by Morley-Murphy Co. v. Zenith Elecs. Corp., 142 F.3d 373, 375 (7th Cir.1998) in which the Seventh Circuit held that Ziegler II's form of good cause applied in a case where a grantor, a television manufacturer, ended its relationship with its distributor dealer, substituting the distributor dealer for retail level dealers. Ziegler II is plainly relevant to this casethe question that remains is whether GSUSA has made out a case of grantor based "good cause."
[54] The court acknowledges that this is likely a product of the fact that the Wisconsin legislature never contemplated that the WFDL would be applied to an entity like the GSUSA. In fact, the plaintiff's own counsel boasts on his website that the Seventh Circuit's case "is the first appellate decision in the nation to apply a state franchise or dealership statute to non-profits." See "Gary W. Leydig: Chicago Trial & Appellate Lawyer," http://www. leydiglaw.com/ (last visited March 31, 2010). However, given the Seventh Circuit's decision in this case, the court cannot find a principled basis for adopting the interpretation of good cause that GSUSA articulates.
[55] GSUSA cites to a myriad of cases interpreting other states' dealership laws to make the argument that good cause "may be based on a grantor's legitimate `business' needs and such needs encompass more than simply avoiding losing money." (Def's Resp. Br. 24). The court is bound by the meaning of grantor based good cause as discussed by the Wisconsin Supreme Court in Ziegler II and by the Seventh Circuit extrapolation on the Ziegler II decision in Morley-Murphy. Both cases provide a far higher standard for what "good cause" entails under the WFDL relative to dealership laws in other states.
[56] Wis. Stat. § 135.025(2)(d) does state that one of the underlying purposes and policies of the WFDL was to "govern all dealerships, including any renewals or amendments, to the full extent consistent with the constitutions of this state and the United States." Moreover, courts have been willing to interpret the WFDL, such that the law does not conflict with the commerce clause of the United State Constitution. See, e.g., Lee Beverage Co. v. I.S.C. Wines of California, Inc., 623 F. Supp. 867 (E.D.Wis.1985). However, the constitutional questions the Wisconsin legislature appeared to have in mind with regard to Wis. Stat. § 135.025(2)(d) were questions regarding the statutes' potential to violate the commerce clause of article I, section 9 of the United States Constitution and the takings clause of the Fifth Amendment of the Constitution, as applied to the states via the Fourteenth Amendment of the Constitution. See Bowen and Butler, The Wisconsin Fair Dealership Law § 6.42. Unlike the Lee Beverage court, this court is at a loss at how the statute can be interpreted in keeping with the purpose of the WFDL while avoiding the constitutional question regarding the First Amendment. There is no construction of the statute that would find that GSUSA complied with the terms of Wis. Stat. § 135.03 in its dealings with Manitou.
[57] Given the court's conclusion on the "objectively ascertainably need" prong of the grantor-based good cause test, the court need not opine on whether GSUSA's proposed action to substantially reduce Manitou's jurisdiction was a proportionate response to its need. See Daniels v. Liberty Mut. Ins. Co., 484 F.3d 884, 888 (7th Cir.2007) (holding that a federal court should not discuss legal issues that would not change the court's ultimate conclusion, as such a discussion would be advisory in nature).
[58] The parties squabble all but endlessly in their briefs to the court over whether the Girl Scout's overall membership or market share has declined. This is immaterial. Even if the court assumes that GSUSA's statistics regarding Girl Scout membership numbers are true, GSUSA needed to prove that the organization was in a far more "dire economic straits" to fit within the meaning of "objectively ascertainable need" to prove grantor-based good cause. Manitou, 549 F.3d at 1079.
[59] GSUSA hints in its response brief to the plaintiff's motion for summary judgment that the WFDL may violate the commerce clause of the United State Constitution. Given that Manitou is not seeking to apply the WFDL extra-territorially, the court will not evaluate any other potential constitutional infirmities to the application of the WFDL. See Morley-Murphy, 142 F.3d at 379.
[60] The First Amendment's text reads that "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances." U.S. Const. amend. I. The First Amendment has been incorporated against the states through the due process clause of the Fourteenth Amendment, Gitlow v. New York, 268 U.S. 652, 45 S. Ct. 625, 69 L. Ed. 1138 (1925), and is, therefore, applicable to the facts of this case.
[61] "Significantly affects" is how the Supreme Court posed the second prong of the Dale test in that case. However, the Court has used several variations on the phrase when discussing the right to expressive association. See Dale, 530 U.S. at 683, 120 S. Ct. 2446 (Stevens, J., dissenting) ("The relevant question is whether the mere inclusion of the person at issue would `impose any serious burden,' `affect in any significant way,' or be `a substantial restraint upon' the organization's `shared goals,' `basic goals,' or `collective effort to foster beliefs.'")
[62] However, the court does acknowledge that summary judgment for Manitou on the WFDL claim would require GSUSA to retain Manitou as a council against the national organization's wishes. The court is merely stating that the case is different than the classic forced inclusion cases, such as Dale, where a state law is forcing a group to accept a particular person into the group's ranks.
[63] Manitou argues that the "constitutional analysis under Dale only arises" under the specific facts of that case. (Pl's Resp. Br 22). However, Dale speaks broadly about the proper framework to analyze a claim of infringement on associational rights, and the court will apply Dale accordingly.
[64] The Roberts court ultimately came to the opposite conclusion of the Dale court, holding that the application of the Minnesota Act did not abridge the Jaycees freedom of intimate association or their freedom of expressive association. Id. at 617, 104 S. Ct. 3244.
[65] There are limits, of course, on how far the right to expressive association extends. Justice O'Connor explored the limits of the doctrine in Roberts, contending that courts should provide "complete protection for purely expressive associations, even while it readily permits state regulation of commercial affairs." Roberts, 468 U.S. at 635, 104 S. Ct. 3244 (O'Connor, J., concurring) ("The Constitution does not guarantee a right to choose employees, customers, suppliers, or those with whom one engages in simple commercial transactions, without restraint from the State. A shopkeeper has no constitutional right to deal only with persons of one sex."); see generally R. Rotunda & J. Nowak, Treatise on Constitutional Law § 20.41(c) (4d ed. 2007). As discussed in the body of this order, because the Girl Scouts are predominantly engaged in protected expression, heightened scrutiny of the application of the WFDL is appropriate. Moreover, the court is guided by Justice O'Connor's comments that "no association is likely ever to be exclusively engaged in expressive activities" because it will likely take actions like "collecting dues from its members" and the mere fact that an association engages in some commercial transactions does not remove the association from the full extent of First Amendment's protections. Roberts, 468 U.S. at 635, 104 S. Ct. 3244 (O'Connor, J., concurring).
[66] The court's conclusion on the state of the law is in part a product of the utter failure of Manitou to provide any case law that would cast doubt on the nature of the right of expressive association.
[67] Manitou contends that "GSUSA does not identify a single expression or point of view extolled by Manitou that is in conflict with GSUSA." (Pl's Resp. Br. 22). This argument misses a major point: as discussed in the body of this order, forced inclusion is not the only means by which the state can infringe upon the freedom of expressive association. However, even if the court views this case through the lens of the forced inclusion scenario, there is a clear ideological conflict between the two parties in this case, in part, over how the Girl Scout message is conveyed and to whom the message is effectively disseminated. The court adopts a statement made by GSUSA in their reply brief: "Manitou resisted realignment because the traditional troop system had worked well for its small suburban population and it did not want to share resources with the other councils to the north whom Manitou regarded as culturally incompatible with and organizationally inferior to it." (Def's Reply Br. 11).
[68] Indeed, Manitou does not even attempt to distinguish Cousins or any of the other cases discussing a state impermissibly interfering with the internal organization or affairs of an expressive group in the hundreds of pages it submitted to the court. This is of particular note given that Cousins is the case cited in Roberts as the example of where a state impermissibly "interfere[s] with the internal organization or affairs of an expressive group." Roberts, 468 U.S. at 613, 104 S. Ct. 3244. Given the central relevance of the constitutional issue to the claim at hand, the court is surprised that Manitou did not address the First Amendment issue in their reply brief to the court and did not even attempt to supplement its briefs to the court to try to distinguish the political party cases. Manitou's silence on the issue is telling.
[69] It is of no consequence that the WFDL only applies in Wisconsin, that Manitou does not ask that the law be applied extraterritorially, or that nearly every Girl Scout council has agreed to merge. Cousins instructs this court to view the impact of the challenged law in the aggregate, hypothesizing if every state had a law akin to that whose Constitutionality is being challenged. Cousins, 419 U.S. at 490-91, 95 S. Ct. 541. Moreover, the Supreme Court in Dale found that application of the New Jersey public accommodations law to mandate that an expressive association accept one person whose beliefs were in contrast with the organization infringed on the Boy Scouts' right to expressive association. Dale, 530 U.S. at 640, 120 S. Ct. 2446. Likewise, the application of the WFDL in this instance to stop GSUSA's realignment efforts in Wisconsin can have a significant burden on the organization.
[70] It is the substantial nature of the intrusion on the defendant's expressive rights, coupled with the fact that GSUSA's realignment was the result of years of study that distinguishes the application of the WFDL to GSUSA's actions in this case from other more mundane intrusions into the affairs of expressive associations.
[71] This is not to say that Manitou is opposed to promoting pluralism and diversity in the Girl Scouts. Rather, Manitou's opposition to GSUSA's realignment plans, in the view of the expressive organization, make it far more difficult for the organization to effectively promote the organization's goals.
[72] One might argue that there were other ways for the Girl Scouts to promote pluralism and diversity in the organization. However, such an argument is exactly what is constitutionally invidious here. The courts cannot sit second guessing the decision of an organization who, after years of studies and consultation with outside experts, concluded that national realignment was the best means to achieve its goals.
[73] In fact, Manitou did, perhaps belatedly, address their arguments to the national organization. The record demonstrates that the national organization readily listened to Manitou's arguments, but ultimately decided to go a different route. While Manitou might be disappointed that GSUSA did not adopt the plaintiff's view on how realignment should occur, the judiciary remains an improper forum to rehash such arguments.
[74] From the record before the court, how GSUSA would fully implement its realignment plans with regard to Manitou remains unclear, however.
[75] Manitou cites the First Circuit case of Gun Owners' Action League v. Swift, 284 F.3d 198, 215 (1st Cir.2002) in support of its argument. Gun Owners' Action League, the only case outside of Dale that Manitou cites responding to GSUSA's First Amendment argument, is easily distinguishable from the case at hand. In the First Circuit case, the plaintiff challenged on First Amendment grounds a Massachusetts law requiring gun clubs that wanted to use "large capacity weapons" to have at least one shareholder licensed. Gun Owners' Action League, 284 F.3d at 215. The court rejected the challenge for a number of reasons. First, the license requirement did not pose a significant burden on associational rights, as "the statute neither require[d] or even suggest[ed] any forced association of gun owners with anyone of differing views." Id. The statute merely placed a restriction on using a type of firearm, an ordinary burden. Moreover, the court noted that the plaintiffs were not engaged in protected expressive associative activity. Id. (citing City of Dallas v. Stanglin, 490 U.S. 19, 24, 109 S. Ct. 1591, 104 L. Ed. 2d 18 (1989)). Here, the defendant is an expressive association and the burden on the association's constitutional right in applying the WFDL is significant.
[76] The history of the statute does not indicate such a concern. In fact, the Seventh Circuit's decision in this case was the first court to resolve the question of whether the WFDL could be applied to a not-for-profit association. Manitou, 549 F.3d at 1094. However, with such a reading of the law, the "potential for conflict" between the state dealership law and the First Amendment rights of expressive organizations has increased. Dale, 530 U.S. at 657, 120 S. Ct. 2446.
[77] In fact, Manitou did not brief the court on the strict scrutiny issue.
[78] Propelling the court's conclusion is that few other councils in the entire nation or even in Wisconsin have fought the realignment efforts, indicating that preventing one Girl Scout council from merging into a larger council is not a "compelling" interest. Swanner v. Anchorage Equal Rights Comm'n, 513 U.S. 979, 982, 115 S. Ct. 460, 130 L. Ed. 2d 368 (Thomas, J., dissenting) (finding that a compelling interest is one that is a "paramount interest ... [an] interest of the highest order.")
[79] To conclude otherwise would allow a "majority (or a powerful or vocal minority)" who value the economic interest of dealers to "force its views" on how an expressive association chooses to disseminate its viewpoint. Christian Legal Soc'y, 453 F.3d at 861.
[80] Again, ripeness concerns prevent the court from speculating as to the next steps GSUSA was going to take and how the organization was going to take such actions with regard to the jurisdiction of Manitou. The court cannot guess or hypothesize that the "termination of Manitou as a Girl Scout council" would have occurred "prior to the end of its term" but for the injunction. (Pl's Resp. Br. 32). The court can only view the breach of contract claim through the factual lens of whether taking away sixty percent of Manitou's jurisdiction as the first steps for realignment constituted a material breach of the organization's agreement with the plaintiff. See Lehn v. Holmes, 364 F.3d 862, 867 (7th Cir.2004) ("Cases are unripe when the parties point only to hypothetical, speculative, or illusory disputes as opposed to actual, concrete conflicts.")
[81] No party contends that the First Amendment arguments apply to the breach of contract claims. If the language of the contractual arrangement between Manitou and the Girl Scouts indicates that the Girl Scouts limited their ability to organize themselves in a means they found to be best for disseminating their message, such a contract is legitimate as long as the "party foregoing its rights has done so of its own volition, with full understanding of the consequences of its waiver." Forbes v. Milwaukee County, No. 05-CV-0591, 2007 WL 41950, at *10, 2007 U.S. Dist. LEXIS 1282, at *26 (E.D.Wis. Jan. 4, 2007) (internal citations omitted). The result of how the court interprets the contract in question will necessarily dictate whether GSUSA contracted away its Constitutional rights.
[82] Nothing in the Charter or the Charter Application itself explicitly states that GSUSA binds itself in its dealings with Manitou to follow its own general rules. However, reading the agreement to bind GSUSA to obey its rules follows naturally from the expectations of the parties, the purpose of the agreement, and other terms in the agreement, such as Manitou being given the "right to receive services from" GSUSA. State Farm Mut. Auto. Ins. Co. v. Langridge, 2004 WI 113, ¶ 43, 275 Wis. 2d 35, 683 N.W.2d 75 (2004) ("The court will also adopt a construction that will result in a reasonable, fair and just contract as opposed to one that is unusual or extraordinary... Often the court will look to the purpose of the contract and the circumstances surrounding its execution to determine the intent.")
[83] If a term is incorporated by reference within a contract and that term is "clearly identifiable," the parties agree to abide by those terms just as they agree to the other terms in the contract. Matthews v. Wis. Energy Corp., 534 F.3d 547, 554 (7th Cir.2008)
[84] The court finds that the greater power to revoke the charter in total includes the lesser power to revoke part of the jurisdiction of a council. Moreover, Article VIII, Section 3 of the Constitution, as it is a term of the contract, is subject to the implied terms of good faith and fair dealing, which will be discussed later in the opinion.
[85] Section I has the board initially approve the jurisdictional change, and then much of the heavy lifting is done by the Council Realignment Committee. Section II, the old means by which councils could combine jurisdiction, required board approval by all councils and then had each individual council vote on the plan of merger, consolidation, or reorganization before submitting the application for change to the GSUSA.
[86] Moreover, it all but seems that Section I of the jurisdictional change procedures of the Blue Book were fully met, indicating that Manitou effectively merged with the northern councils based on GSUSA policies. On May 22, 2007, at the latest, Manitou's board approved the change and agreed to proceed with realignment. On May 31, 2006, the seven councils, via a Council Realignment Committee, developed a plan and a timeline for carrying out the proposed change. Additionally, GSUSA approved Manitou's application on August 26, 2006. Indeed, GSUSA may have been generous in allowing a national team, pursuant to Section IV, arbitrate the belated complaints made by the plaintiff. However, the court need not delve into whether GSUSA followed the exact requirements of Section I of the jurisdictional change procedures, because Section IV of those provisions of the Blue Book plainly apply to realignment disputes. Finally, the court notes, that even if Section IV does not govern realignment, Section I most certainly does not contradict the general term of the contract provided by Article VIII, Section 3 of the Girl Scout Constitution providing the GSUSA with the power to remove jurisdiction from a council if such an action is in the "best interests of Girl Scouting," and, therefore, the latter term still governs. See Thomsen-Abbott Constr. Co., 9 Wis.2d at 234, 100 N.W.2d 921.
[87] Even if the court were to determine that an ambiguity exists regarding the meaning of the words "combine" or "transfer" in Section IV, GSUSA has proffered ample and undisputed evidence to indicate that the parties recognized that GSUSA's actions were loyal to the intent of the parties at the time of contracting. Moreover, the court need not delve into what else encompassed the parties' agreement, as GSUSA did not breach the terms of the contract that Manitou alleges.
[88] The record shows that Manitou's executives made positive recommendations regarding realignment during the project's initial stages, continually voiced approval for the realignment process during the spring and summer of 2006, opted to not petition GSUSA during the designated time to offer suggestions to the national organization regarding realignment, and approved the use of the GSUSA resource map for the realignment of the Wisconsin councils.
[89] The court remains puzzled as to Manitou's unsupported assertion that a combination, transfer, or change in jurisdictional lines cannot encompass a total merger of a Girl Scout council, such that one council ceases to exist as a separate, independent entity.
[90] Perhaps the best example of this is the May 22, 2007 resolution by the Board of Directors of Manitou agreeing to "proceed with the realignment as mandated by the [GSUSA] which requires Manitou Council [to] merge with the Northern councils."
[91] For example, nothing in the record indicates that GSUSA permanently suspended the charter application process. This claim seems to have been put in the complaint to prevent GSUSA from merely letting the current charter of Manitou expire.
[92] The court suspects that this was a typographical error. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2456222/ | 644 S.W.2d 400 (1982)
BROWNING-FERRIS INDUSTRIES OF TENNESSEE, INC., Plaintiff-Appellee,
v.
CITY OF OAK RIDGE and Tennessee Industrial Disposal, Inc., Defendants-Appellants.
Court of Appeals of Tennessee, Eastern Section.
September 17, 1982.
Rehearing Denied October 1, 1982.
Permission to Appeal Denied January 17, 1983.
*401 Stephen A. Irving of Lawson and Irving, P.A., Oak Ridge, for defendant-appellant Tenn. Industrial Disposal, Inc.
John H. Harris, Jr., of Harris, Shelton, Dunlap & Cobb, Memphis, Eugene L. Joyce and Thomas N. Depersio of Joyce, Anderson & Meredith, Oak Ridge, for plaintiff-appellee.
Permission to Appeal Denied by Supreme Court January 17, 1983.
OPINION
FRANKS, Judge.
The principal issue on appeal is whether an extension of a contract for refuse services entered between the defendant city and co-defendant Tennessee Industrial Disposal, Incorporated (Tidi), violated the competitive requirements of the city's charter and ordinances.[1]
The chancellor at the instance of the plaintiff, Browning-Ferris Industries of Tennessee, Inc., (BFI) entered summary judgment invalidating the contract and awarding BFI the sum of $1,910.00 for its reasonable expenses for preparing and presenting its bid, which was the low bid rejected by the city.
In 1976, the city, pursuant to its competitive bidding ordinance, entered a contract for refuse services with Tidi for a period of 5 years and, in August, 1980, the city issued invitations to submit bids on a new 5-year contract.
In response to the invitation, three bids were submitted, including bids by BFI and Tidi. At the bid opening, BFI was the low bidder and subsequently the city council decided to reject all bids and executed an extension of the 1976 contract with Tidi. In executing the extension, the city acted pursuant to a provision of the 1976 contract which provides:
Article XXXIV Negotiation. Upon the expiration of this Contract or such earlier time as the parties may desire, the City and the Contractor shall be authorized to negotiate for:
a. An extension of this Contract for one, two or more years.
This suit resulted, wherein BFI insisted the city's action in executing the extension with Tidi was a violation of the competitive bidding ordinance and sought to recover the amount of its expenses in bid preparation.
The threshold issue raised by the defendants in trial court is the issue of plaintiff's standing to sue.
While there is a split of authority[2] on whether a low bidder has standing to sue the governmental authority for its failure *402 to comply with competitive bidding requirements, the better reasoned view in our opinion is the low bidder has standing to raise the issue. Owen of Georgia, Inc. v. Shelby County, 648 F.2d 1084 (6th Cir.1981); Kinnett Dairies, Inc. v. J.C. Farrow, 580 F.2d 1260 (5th Cir.1978); Funderburg Builders, Inc. v. Abbeville County Memorial Hospital, 467 F. Supp. 821 (D.S.C. 1979); Quincy Ornamental Iron Works, Inc. v. Findlen, 353 Mass. 85, 228 N.E.2d 453 (1967).
In Owen of Georgia, Inc., the Sixth Circuit, relying on analogous Tennessee decisions, determined that an unsuccessful low bidder for a steel contract for a county criminal justice building had standing to challenge the county's award of the contract to another bidder. 648 F.2d, at 1090. Our courts have extended standing to private citizens in actions against public officials where the citizen can show special interest or injury not common to the general public. Bennett v. Stutts, 521 S.W.2d 575 (Tenn. 1975); Patton v. Chattanooga, 108 Tenn. 197, 65 S.W. 414 (1901). Extending standing to a low bidder on a public works contract is consistent with this concept.
In Village of Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 97 S. Ct. 555, 50 L. Ed. 2d 450 (1977), the United States Supreme Court articulated the standing test as:
The essence of the standing question, in its constitutional dimension is "whether the plaintiff has `alleged such a personal stake in the outcome of the controversy' [as] to warrant his invocation of federal-court jurisdiction and to justify exercise of the court's remedial powers on his behalf." [Emphasis original.] [Citation omitted.] The plaintiff must show that he himself is injured by the challenged action of the defendant. The injury may be indirect [citations omitted] but the complaint must indicate that the injury is indeed fairly traceable to the defendant's acts or omissions.
Id., at 260-1, 97 S. Ct. at 561.
In the instant case, BFI has shown an economic injury which is traceable to the conduct of the City of Oak Ridge and therefore meets the requirements for standing.
Finally, on this issue, Tidi argues according standing to BFI is an unwarranted and wrongful extension of the Rules of Civil Procedure. However, the doctrine of standing is not governed by the rules but is a judicially created doctrine. Knierim v. Leatherwood, 542 S.W.2d 806 (Tenn. 1976).
On the principal issue, Tidi argues the city exercised a right to extend the contract under a provision in the original contract which authorized negotiations for an extension. Courts have, however, drawn a distinction between a provision in a public contract giving the governmental entity a right to extend the duration of a contract under identical terms and a provision which merely authorizes further negotiations. The latter is inoperable where the contract is subject to competitive bidding. This distinction is contrasted in two cases decided by the Washington Supreme Court. In Miller v. State, 73 Wash.2d 790, 440 P.2d 840 (1968), the state purchasing office had obtained by competitive bidding a contract for supply of light bulbs. Thereafter the state renewed the contract by negotiation and the court held that the state must use competitive bidding and the subsequent contract by negotiation violated the statute and was void. Id., 440 P.2d at 842.
The court reached a different result in Savage v. State, 75 Wash.2d 618, 453 P.2d 613 (1969). Savage also involved a state purchase contract; however, the contract contained an option provision whereby the state could extend the duration of the purchase agreement for successive one-year periods to a maximum of three additional years. The court, in distinguishing Miller, held the contract in Savage was for one, two, three or four years at the sole option of the state and did not violate bidding statutes because new, successive contracts were not created; instead, the duration of the single contract extended at the option of the state with all terms remaining the same; moreover, the court emphasized the renewal provision must clearly be an option *403 clause rather than a negotiation provision. Accord: City of Lakeland v. Union Oil Co. of California, 352 F. Supp. 758 (M.D.Fla. 1973).
Competitive bidding requirements are strictly construed against the governing authority, Consentino v. City of Omaha, 186 Neb. 407, 183 N.W.2d 475 (1971), and in the instant case the contractual provision is clearly not an option. Neither party could compel the other to extend the duration of the 1976 contract under the same terms. The provision is simply an agreement to negotiate; precisely the type of provision which, under the Miller analysis, violates the competitive bidding statute.
Accordingly, the negotiations of the 1981 contract between the city and Tidi amounted to private negotiations between a bidder and the city. While post-bid negotiations with the lowest competitor bidder are not inconsistent with the policies underlying the bidding statutes, private negotiations with any other bidder directly contravene the purpose of the ordinance. Fischbach & Moore, Inc. v. New York City Transit Authority, 79 A.D.2d 14, 435 N.Y.S.2d 984 (1981). Accord: Platt Electric Supply, Inc. v. City of Seattle, 16 Wash. App. 265, 555 P.2d 421 (1976).
Finally, Tidi argues the city had a right to reject all bids and under these circumstances a summary judgment was improperly granted. While the city reserved the right to reject all bids, the rejection of all bids followed by rebidding is proper; however, rejection followed by private negotiations with one other than the low bidder is inconsistent with the city's ordinance.
A contract entered in violation of bidding statutes or ordinances is void and it is not necessary to show that the governmental authority acted in bad faith or fraud was involved. Johnson City v. Realty Co., 166 Tenn. 655, 64 S.W.2d 507 (1933). The validity of the extension of the contract in light of the bidding ordinance is a question of law; we, therefore, conclude a summary judgment was appropriate and we affirm the chancellor.
The cause is remanded, with costs incident to the appeal assessed against the appellant Tidi.
SANDERS and GODDARD, JJ., concur.
NOTES
[1] The requirements for competitive bidding procedures are set out in the city's charter which provides:
Competitive prices for all purchases and public improvements shall be obtained whenever practicable and in accordance with regulations established by ordinance, and the purchases made from or the contract awarded to the lowest responsible bidder.
And its ordinance provides:
Competitive bids on all supplies, materials, equipment, and services, except those specified elsewhere in this article, and contracts for public improvements shall be obtained, whenever practicable, and the purchase or contract awarded to the lowest responsible bidder.
[2] Courts denying standing to the low bidder hold the competitive bidding statutes are for the benefit of the public and confer no rights on individual bidders. See e.g., Estey Corporation v. Matzke, 431 F. Supp. 468 (N.D.Ill. 1976); Pioneer Co. v. Hutchinson, 220 S.E.2d 894 (W. Va. 1975). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2456223/ | 644 S.W.2d 229 (1982)
277 Ark. 494
CITY OF LITTLE ROCK, Arkansas, Appellant and Cross-Appellee,
v.
Ann CASH, T. Smith, C.S. Robinson, Wilson Webber, Charles Watson and G. Johnson, Appellees and Cross-Appellants.
No. 82-143.
Supreme Court of Arkansas.
December 6, 1982.
Rehearing Denied January 17, 1983.
*230 R. Jack Magruder, III, City Atty., and Wright, Lindsey & Jennings by Patrick J. Goss, Little Rock, for appellant and cross-appellee.
David Henry, Henry & Duckett, Little Rock, for appellees and cross-appellants.
DUDLEY, Justice.
This interesting case presents many questions about illegal exactions and an attorney's conflict of interests.
Ark.Stat.Ann. § 19-4201 through 19-4218 (Repl.1980) authorized cities to purchase or construct waterworks systems. In 1937 Ark.Stat.Ann. § 19-4219 (Repl.1980) was enacted which authorized first and second class cities to create commissions to operate and manage their waterworks systems. That same year the City of Little Rock by ordinance created the Little Rock Waterworks Commission which operates and manages the system. The Board of Directors of the City, pursuant to § 19-4208, retained the authority to sell and encumber *231 the property as well as to set rates. The same statute, § 19-4208, provides that the operating authority can pay surplus funds over to the city only after taking into account the cost of operations and maintenance, allowing for replacement costs and depreciation, providing for interest redemption and purchasing all outstanding bonds.
In 1965, the General Assembly, by Act 50, gave to the operating authority of any waterworks system the discretion to make voluntary contributions to the general fund of the municipality in lieu of taxes in return for police, fire and health protection. Ark. Stat.Ann. §§ 19-4273 through 19-4276 (Repl.1980). The municipality cannot force payments to be made to it pursuant to this statute as the payments in lieu of taxes are discretionary with the operating authority.
In October, 1969, the City of Little Rock, by ordinance, levied a privilege tax on the waterworks commission. The tax was in the amount of $10,417 for the period of December 1, 1969 through December 31, 1969, and $125,000 for the year 1970. The ordinance contains the following provisions:
SECTION 3. The taxes hereby levied shall be paid in addition to any sums paid by the Little Rock Municipal Water Works under the provisions of Act 50 of 1965.
SECTION 4. The Little Rock Municipal Water Works is hereby authorized to pass on said taxes by levying an additional charge of twenty-five (25cents) a month per meter upon resident consumers. The Water Works may terminate the services of any consumer who fails to pay such charge when due.
An identical ordinance was passed for the years 1971, 1972 and 1973. Beginning in 1973, the ordinances authorized the waterworks to levy a charge in the amount necessary to collect the amount of the tax, which was $167,652 in 1974; $144,000 in 1975; $145,000 in 1976; $146,500 in 1977; $148,500 in 1978; $156,822 in 1979; $322,500 in 1980; $339,066 in 1981 and $340,000 in 1982. The taxes have been paid to the city on a monthly basis at the rate of 1/12th of the yearly levy.
On August 25, 1981, six residents of the city who were water users filed suit in the chancery court against the City of Little Rock alleging that the privilege tax was an illegal exaction prohibited by Article 16, § 13 of the Arkansas Constitution. The six taxpayers were represented by David Henry, a former assistant city attorney, who, at the time he filed this suit against the city, also was defending the city in another case for a fee. The city filed a motion asking that David Henry be disqualified because of his conflict of interests. The trial court refused to disqualify the attorney, found an illegal exaction, gave judgment against the city in the amount of $1,264,761.30 through March, 1982, plus interest at the rate of ten percent per annum until paid, and awarded David Henry an attorney's fee in the amount of $316,190.00. We affirm the holding that the privilege tax is an illegal exaction, modify the amount of the judgment and disallow the attorney's fee.
The illegal exaction. Municipalities have only those powers that have been delegated to them by statutes or by the Constitution, and any substantial doubt about the existence of a power in a municipal corporation must be resolved against it. Town of Dyess v. Williams, 247 Ark. 155, 444 S.W.2d 701 (1969), citing City of Little Rock v. Raines, 241 Ark. 1071,411 S.W.2d 486 (1967) and Yancey v. City of Searcy, 213 Ark. 673, 212 S.W.2d 546 (1948). A city tax which is not authorized by a delegated power of taxation is an illegal exaction. Schuman v. Ouachita County, 218 Ark. 46, 234 S.W.2d 42 (1950), citing Waters Pierce Oil Co. v. Little Rock, 39 Ark. 412 (1882).
Appellant city tacitly concedes that there is no constitutional or statutory authority delegating to it the authority to levy this privilege tax. However, it argues that, although its ordinance labeled the assessment a privilege tax, it is not really a tax. It contends that the terms franchise fee, franchise tax, rate, assessments, charges, privilege tax and privilege fee are interchangeable, and the use of one term instead of another does not necessarily invalidate a legislative enactment. See Eaton v. *232 McCuen, 273 Ark. 154, 617 S.W.2d 341 (1981); Holman v. City of Dierks, 217 Ark. 677, 233 S.W.2d 392 (1950). The city then inductively reasons that the assessment or charge or rate imposed by the ordinances should be treated as a part of the rate for water validly set by the municipality pursuant to § 19-4208.
The appellant's argument fails for a number of reasons. First, the assessment obviously is not a charge for services rendered to the waterworks. Those services are paid for in lieu of taxes pursuant to statutes, §§ 19-4274 and 19-4275, and are discretionary with the operating authority. Conversely, the tax before us is mandatory, in a set amount, and the ordinances provide that "the taxes hereby levied shall be paid in addition to any sums paid by the Little Rock Municipal Waterworks under the provisions of Act 50 of 1965." Second, all other payments by the waterworks to the municipality which come from water rates must come from surplus accumulated in the operation fund only after taking into account the cost of operations and maintenance, allowing for replacement costs and depreciation, providing for interest redemption and the purchasing of all outstanding bonds. § 19-4208. Here the tax, originally at 25 cents per meter, was levied on the waterworks and passed on to the customer and then paid by the customer and passed directly back to the city without regard to the cost of operations, maintenance, depreciation and debt as set out above. Thus, it was not a part of the water rate. Third, the assessment was designated a privilege tax by the ordinances. It was clearly a tax, an unauthorized tax, and therefore an illegal exaction. We affirm the chancellor in so holding.
Contrary to appellant's argument, Section 9 of Act 23 of the 1981 Extraordinary Session of the General Assembly does not authorize the imposition of the privilege tax challenged in this case. We affirm the chancellor's granting of injunctive relief.
The amount of the illegal exaction to be recovered. The appellees argue, on cross-appeal, that no statute of limitations should have been applied and that they should be allowed to recover all money illegally exacted, over $2,000,000. The appellant contends the following in the alternative: that no refund is due, that the three year statute of limitations applies, or that the five year limitation should be applied and the recovery should be limited accordingly.
We do not find it necessary to decide the issues concerning statutes of limitation because we have always followed the common law rule prohibiting the recovery of voluntarily paid taxes. See, e.g., Searcy County v. Stephenson, 244 Ark. 54, 424 S.W.2d 369 (1968); Thompson, Comm'r. v. Continental Southern Lines, Inc., 222 Ark. 108, 257 S.W.2d 375 (1953).
In Thompson, supra, this Court stated the general rule as follows:
Appellee seeks to recover voluntary payments made of taxes. This can not be done. Cooley in The Law of Taxation, Ch. 20, § 1282, gives this rule: "It is well settled that if the payment of a tax is a voluntary payment, it cannot be recovered back, except where a recovery is authorized by the provisions of a governing statute regardless of whether the payment is voluntary or compulsory" (Vol. 3 at p. 2561); and further: "Where voluntary payments are not recoverable, it is immaterial that the tax or assessment has been illegally laid, or even that the law under which it was laid was unconstitutional. The principle is an ancient one in the common law, and is of general application. Every man is supposed to know the law, and if he voluntarily makes a payment which the law would not compel him to make, he cannot afterwards assign his ignorance of the law as a reason why the State should furnish him with legal remedies to recover it back. Ignorance or mistake of law by one who voluntarily pays a tax illegally assessed furnishes no ground of recovery." (Vol. 3 at page 2564).
This Court, one paragraph later, noted that Arkansas had no statute on the subject and that we follow the common law rule:
*233 In Brunson v. Board of Directors of Crawford County Levee Dist., 107 Ark. 24, 153 S.W. 828, 829, 44 L.R.A., N.S., 293, Mr. Justice Hart, speaking for the Court, said: "In some of the states the right to recover illegal taxes paid under protest is given by statute. In this state, however, there is no statute regulating the matter, and if any recovery is had it must be under the rules of the common law. The common-law rule governing cases of this kind is laid down in the following cases: Lamborn v. County Commissioners, 97 U.S. 181, 24 L. Ed. 926; Union Pacific R.R. Co. v. Dodge County, 98 U.S. 541, 25 L. Ed. 196. These cases lay down the following rule: `Where a party pays an illegal demand, with full knowledge of all the facts which render such demand illegal, without an immediate and urgent necessity therefor, or unless to release (not to avoid) his person or property from detention, or to prevent an immediate seizure of his person or property, such payment must be deemed voluntary, and cannot be recovered back. And the fact that the party, at the time of making the payment, files a written protest, does not make the payment involuntary.'"
Id. at 115, 257 S.W.2d at 379.
Appellees contend that the common law rule prohibiting the recovery of voluntarily paid taxes has never been applied to an illegal exaction. While no case has specifically stated that the common law rule is applicable to recoveries pursuant to Article 16, § 13, the language quoted above clearly encompasses an illegal exaction under the constitutional provision. In addition, several of our cases have applied the common law rule to unconstitutional and illegal taxes rather than just to taxes illegally assessed or collected. See, e.g., Gates v. Bank of Commerce & Trust Co., 185 Ark. 502, 47 S.W.2d 806 (1931). Thus, the common law rule prohibiting the recovery of voluntarily paid taxes is applicable to illegal exactions which violate Article 16, § 13 of the Arkansas Constitution.
The trial judge was aware of this common law rule but held that the payments made under the challenged ordinances were not voluntary because the ordinances provided that the waterworks could discontinue the water service of any customer who failed to pay the tax. For example, the 1970 ordinance provided:
The Little Rock Municipal Water Works is hereby authorized to pass on said taxes by levying an additional charge of twenty-five (25¢) a month per meter upon resident consumers. The Water Works may terminate the services of any consumer who fails to pay such charge when due.
The case of Chapman & Dewey Land Co. v. Board of Directors St. Frances Levee District, 172 Ark. 414, 288 S.W. 910 (1926) is dispositive on the voluntariness issue. A part of that opinion is as follows:
Under these decisions, the coercion which will render a payment of taxes involuntary must consist of some actual or threatened exercise of power possessed by the party exacting or receiving payment over the person or property, from which the latter has no reasonable means of immediate relief, except by making payment.
But it is insisted by counsel for the plaintiff that the taxes alleged in the complaint takes the case at bar out of the operation of the principle decided in these cases, and brings it within the rule announced in Dickinson v. Housley, 130 Ark. 259, 197 S.W. 25. We do not think so. In that case the collector refused to accept any sum less than the full amount demanded, and had the power to have sold the lands of the taxpayer in payment of the illegal tax. This would have constituted a cloud upon the title, and it became necessary for the owner to pay the illegal demand in order to prevent the sale. No such power existed in the board in the case at bar. If the plaintiff had refused to pay the taxes, the board of directors would have been compelled to institute proceedings against the landowner in the chancery court to collect the taxes, and the plaintiff could have presented the same matters as are set up in this case to defeat the collection of the *234 taxes. In short, it could have defended a suit to collect the taxes upon the same ground that it bases its right to recover the taxes which it voluntarily paid.
Id. at 416, 288 S.W. at 911.
Likewise, the City of Little Rock, the party receiving payment, had no power to have the services of any consumer terminated. That discretionary power was given to the Little Rock Municipal Waterworks and, in turn, it never adopted any policy to terminate service to a customer who refused to pay the tax. Significantly, not one person testified that he or she in fact paid the tax because of coercion. Thus, we hold that the chancellor erred in failing to apply the common law rule prohibiting the recovery of voluntarily paid taxes. The taxes were involuntarily paid only after the date this suit was filed, August 25, 1981. All taxpayers, not just the six named plaintiffs, will be deemed to have paid their taxes involuntarily from the date of the complaint because all taxpayers, not just the named plaintiffs, are the real parties in this action. McCarroll v. Farrar, 199 Ark. 320, 134 S.W.2d 561 (1939).
The chancellor enjoined the appellant from assessing and collecting the privilege taxes before us, but then stayed the decree. As a result, the collection of these taxes has continued during the pendency of this appeal. We hold that all privilege taxes collected pursuant to the unconstitutional ordinances from the date of the filing of the complaint must be refunded, less reasonable costs of administration.
The attorney's conflict of interests. Appellant contends that the trial court erred in refusing to disqualify appellees' attorney. We agree, but reversal is not the proper remedy in this case.
In its motion to disqualify appellees' attorney the appellant pleaded as follows:
Plaintiffs' Counsel, David P. Henry, has filed this cause challenging a series of ordinances enacted by the City of Little Rock in 1969 and each year thereafter.
Said Counsel was employed by the City of Little Rock as an Assistant City Attorney, beginning on or about September 6, 1971, with said employment continuing until August 11, 1978. Further, said Counsel has represented the City of Little Rock since that time on other matters and remains the attorney of record for the City in the case of Phillips v. Weeks before Judge Eisele.
The appellant proved that appellees' attorney had adverse interests as he was representing the city at the same time he was suing the city. The pertinent testimony, taken prior to trial on the appellant's motion to have appellees' attorney disqualified, is as follows:
Q. [Mr. Magruder, City Attorney] Do you deny that you are currently the attorney of record in the Phillips v. Weeks lawsuit?
A. [Mr. Henry, Appellees' Attorney] No.
Q. Do you deny that the lawsuit is still pending, even though it's been submitted back to the Court?
A. It's not pending from the standpoint of anything to be done by the attorneys of record.
Q. That's my point. It is, nevertheless, still pending, is it not?
A. Well, I have trouble with such a narrow
Q. (Interposing) Let me see if I can confine that a little bit more for you. Would you identify this as Defendant's Exhibit Number Two?
Q. (Witness continuing) I can respond to your question, but I can't do it with a yes or a no.
Q. Let me show you what has been identified as Defendant's Exhibit Two and purports to be a certified copy from the United States District Clerk stating that the case is pending and you are the attorney of record. Would you disagree with that?
Q. I don't know what the U.S. District Clerk knows about the case or what his certification has to do with it. In my opinion, most or ninety-nine percent of the issues in that case has been resolved, and there is one unresolved issue pertaining to the police department *235 practice of holding people under investigation.
Q. That issue is unresolved?
A. That one issue. To me, the case of Phillips v. Weeks is a dead horse. Now, I wouldn't call that pending.
Mr. Magruder. Your Honor, I would offer at this point for Defendant's Exhibit Two the certified copy from the U.S. District Court Clerk.
The Court. It'll go in without objection.
* * * * * *
Q. (Mr. Magruder cont.) Let me show you what has been identified as Defendant's Exhibit Four which purports to be a series of statements or bills sent by the firm of Henry and Duckett to the City of Little Rock on the Phillips v. Weeks, and I ask if you recognize those.
A. I recognize them, but one doesn't have anything to do with Phillips v. Weeks. Two of them don't.
* * * * * *
Mr. Magruder. To make the record clear, Your Honor, I'd like to offer Defendant's Ten, which is a copy of the Resolution by the City Board directing my office to pursue the disqualification of Mr. Henry.
Though we do not question the good faith of the attorney, both the conflict of interest and the appearance of it are too strong to ignore. The representation of conflicting or adverse interests will most often constitute professional misconduct. A lawyer is charged with a high degree of loyalty to his client. Suing and defending the same client at the same time is, at the very best, unseemly in that regard. The law holds an attorney to a high standard of professional conduct which includes the obligation to avoid even the appearance of impropriety. Code of Professional Responsibility Canon 9. Certainly, the attorney has not succeeded in avoiding such an appearance in the instant case.
Mr. Henry testified that the city attorney had assured him that the case of Phillips v. Weeks would never serve as the basis for a motion to disqualify. However, the City, by formal resolution of its Board of Directors on September 1, 1981, authorized the city attorney to move for disqualification. Even though the city attorney may have assured appellees' attorney that conflicting representation would not be a basis for disqualification, it was a vain and useless act. The Supreme Court of New Jersey aptly and adroitly addressed the issue as follows:
Dual representation is particularly troublesome where one of the clients is a governmental body. So, an attorney may not represent both a governmental body and a private client merely because disclosure was made and they are agreeable that he represent both interests. As Mr. Justice Hall said in Ahto v. Weaver, 39 N.J. 418, 431, 189 A.2d 27, 34 (1963), "Where the public interest is involved, he may not represent conflicting interests even with consent of all concerned. Drinker, Legal Ethics, 120 (1953); American Bar Association, Opinions of the Committee on Professional Ethics and Grievances 89, 183 (1957)." Mr. Chief Justice Weintraub in a "Notice to the Bar," 86 N.J.L.J. 713 (1963), stated:
"Because of some matters called to its attention, the Supreme Court wishes to publicize its view of the responsibility of a member of the Bar when he is attorney for a municipality or other public agency and also represents private clients whose interests come before or are affected by it. In such circumstances the Supreme Court considers that the attorney has the affirmative ethical responsibility immediately and fully to disclose his conflict of interest, to withdraw completely from representing both the municipality or agency and the private client with respect to such matter, and to recommend to the municipality or agency that it retain independent counsel. Where the public interest is involved, disclosure alone is not sufficient since the attorney may not represent conflicting interests even with the consent of all concerned. (Emphasis added.) *236 Re A. and B., 44 N.J. 331, 209 A.2d 101, 102-03, 17 A.L.R. 3d 827 (1965).
The trial court was clearly in error in refusing to disqualify appellees' attorney, but we do not consider reversal to be the proper remedy in this particular case. However, we cannot allow the attorney to profit from the impropriety. Accordingly, we refuse to approve an attorney's fee, although an award of attorney's fees in tax refund cases is authorized by Ark.Stat.Ann. § 84-4601 (Repl.1980).
Other issues. Appellant city asserts a number of other points and asks reversal on each of them. While we agree that the trial court committed other errors, they are not prejudicial errors and do not require reversal.
The appellees contend that the trial court erred in refusing to require appellees to comply with ARCP Rule 23, the class action rule. We agree. Appellants were not seeking just the return of their property which had been illegally exacted, but instead in their complaint asked for over $2,000,000, attorney's fees and a permanent injunction against the tax. Rule 23 does not conflict with the constitutional provision: it serves as a rule of procedure in a class action case of this nature. As stated by Garner, Sloan and Haley in Taxpayers Suits to Prevent Illegal Exactions in Arkansas, 8 Ark.L.Rev. 129 (1954) at 135:
Unlike certain other provisions in the Arkansas Constitution, Article XVI, Section 13 is self-executing. But even though no legislative declaration is required for its efficacy, there is authority to the effect that the legislature may regulate the procedure so long as the Constitutional guarantee is not abridged. Certainly it is agreed that the statute of limitations applies to actions under this provision, just as in any other litigious circumstance. But equally certainly any statute that conflicts with, or restricts the scope of, this provision is void .... [footnotes omitted.]
The trial judge should have made the appellees comply with Rule 23, but there is no prejudice. Our common law makes the type of action a class action and requires a complete adjudication of a fully adversary case. In McCarroll v. Farrar, 199 Ark. 320, 134 S.W.2d 561 (1939), this Court quoted from Rigsby v. Ruraldale Consolidated School District No. 64, 180 Ark. 122, 20 S.W.2d 624 (1929) as follows:
Where a citizen and taxpayer brings an action in behalf of himself and other taxpayers against a municipality every citizen is regarded as a party to the proceedings, and bound by the judgment entered therein. In such cases the people are regarded as the real parties. For example the judgment in a suit brought by taxpayers of a town against the town and a railroad company, to enjoin the issue by the town of bonds to the company, by which it is adjudged that such bonds should issue, is binding on all the other taxpayers of the town, though not parties to the suit, and the questions involved therein are res judicata in a second suit by another taxpayer to restrain the payment of interest on the bonds. In all such cases, however, the first judgment must be bona fide.
Here there was a final adjudication of a fully developed adversary case. As a matter of law this was a class action. Thus no prejudice has been suffered by appellant as a result of the ruling.
The chancellor also erred in not requiring that the Attorney General be served with notice of the proceeding and be given an opportunity to be heard as required by Ark.Stat.Ann. § 34-2510. See, e.g., Roberts, County Judge v. Watts, County Clerk, 263 Ark. 822, 568 S.W.2d 1 (1978). Appellees argue that § 34-2510 is not applicable to this case because this is not a declaratory judgment action but rather is simply a suit pursuant to a self-executing constitutional provision to recover illegally exacted money. That argument overlooks the fact that this is a class action seeking to declare thirteen past and present ordinances invalid and seeking a permanent injunction against future collections of the privilege tax. Since the statute requires service on the Attorney General but does not require him *237 to appear or to be made a party, the requirement of service is not jurisdictional. Therefore, even though noncompliance with the notice requirement is generally reversible error, reversal is not mandated by the statute. The purpose of the notice requirement is to prevent an ordinance or statute from being declared unconstitutional in a proceeding which might not be a fully adversary and complete adjudication. Frequently, the Attorney General chooses not to appear in cases of this nature. In this particular case the attorneys for the City of Little Rock prepared exhaustive briefs in both the trial and appellate courts and our own research fails to disclose any points not argued. Thus we find no prejudice to appellant as a result of this error. This holding is limited to the facts of this particular case.
The appellant similarly contends that the trial court erred procedurally in not requiring that the operating authority and its commissioners be made parties pursuant to Ark.Stat.Ann. § 34-2510. The ordinances levied the tax against the waterworks and technically it is a necessary party. However, the same ordinance passed on the tax to the consumer and thus the waterworks was merely a conduit for the City of Little Rock. As a result, the matter is one of form and not substance. Hence, there is no prejudice to any of the parties and we do not reverse on this point.
This case comes to us on appeal from chancery court. On appeal we hear equity cases de novo on the record made below and will generally attempt to resolve all issues and dispose of them. Ferguson v. Green, 266 Ark. 556, 587 S.W.2d 18 (1979). The appellate court may always enter such judgment as the chancery court should have entered upon the undisputed facts in the record. Larey, Comm'r. v. Continental Southern Lines, 243 Ark. 278, 419 S.W.2d 610 (1967). The illegal taxes are still being collected and that ought to be stopped. In addition, we are satisfied that, as a practical matter, it would be a waste of judicial resources to reverse and remand on the basis of the errors discussed above. This case has been extensively litigated and, because rectifying these procedural matters would not affect the outcome on the merits, no purpose would be served by a reversal.
Appellant contends that no refund may be had because Article 16, § 13 of the Arkansas Constitution provides only for injunctive relief. The constitutional provision has not been so narrowly construed. As correctly and concisely stated in 8 Ark.L. Rev. 129 at 133, supra:
Injunctive relief is by far the most frequent remedy sought by complainants when suing under authority of Article XVI, Section 13; but it is not the only remedy. Suits have been brought, and allowed, to cancel a deed; to recover sums of money; to have an ordinance declared void; to set aside a default judgment; to appeal a quorum court action; to have an accounting of taxes collected but not accounted for; and so forth. Also it has been held that mandamus lies at the instance of a taxpayer to compel officers to comply with an initiated act fixing their salaries and compensation. [Footnotes omitted.]
Appellant also contends that the chancellor erred in awarding post-judgment interest. We find no error. The award of post-judgment interest was correct. Ark. Stat.Ann. § 29-124 (Repl.1979) provides that judgments shall bear interest at the rate of 10 percent per annum. In applying this statute, this Court in Shofner, Administrator v. Jones, 201 Ark. 540, 145 S.W.2d 350 (1940), stated:
The legislative intent seems to have been that all judgments should bear interest except those expressly excluded; and since claims against estates when converted into judgments are not excepted, the rule inclusio unius est exlusio alterius applies....
Since judgments against municipalities are not excluded in Ark.Stat.Ann. § 29-124, the holding requires that the judgment entered bear interest until paid at the rate of 10 percent per annum.
*238 The appellant is correct in its contention that the full amount of the refund should not be awarded personally to appellees. As we stated in Laman v. Moore, 193 Ark. 446, 100 S.W.2d 971 (1937): "Neither the original plaintiff nor the intervenor could recover a personal judgment against any of the appellees except for the benefit of all taxpayers of the City." The appellees are appearing as representatives of a class. Accordingly, the judgment must be modified to reflect that the refund is for the benefit of all taxpayers.
Numerous other points are raised but we do not consider it necessary to decide them because of the disposition of the case.
The appellant did not designate as a point of appeal the system of refunding which was ordered by the trial court.
The case is affirmed in part, modified in part and remanded to the trial court for refund proceedings which shall be consistent with this opinion.
ADKISSON, C.J., and PURTLE, J., dissent.
HAYS, J., not participating.
PURTLE, Justice, dissenting in part; concurring in part.
The majority opinion sets out sufficient facts for a clear understanding of this case with the exception of that portion of the record relating to the relationship of the appellees' attorney and the appellant in this case. I feel the majority should have quoted that part of the record where the attorney for the appellees in the present case offered to give the Phillips v. Weeks file back to the city attorney because he feared it might become the subject of a motion to disqualify. Part of Mr. Henry's testimony was:
Mr. Magruder told us he didn't want the Phillips v. Weeks file back and that if we would keep it, it would never serve as a basis for any motion to disqualify.
It should be pointed out that all of the ordinances which the appellant claims were enacted with the approval of attorney Henry were nothing more than the same ordinances being reenacted several times. Every year when the city decided to levy this illegal tax they upped the ante and required a larger payment by the Water Works Commission, which is a tool in the hands of the City Directors of the City of Little Rock, Arkansas. Also, it should be kept in mind that the ultimate parties responsible for the payment of this illegal tax were the customers of the City of Little Rock and other areas served by the Little Rock Water Works Commission.
The attorney for the appellant engaged in the private practice of law with the full knowledge and consent of the Board of Directors for the City of Little Rock. He later instituted a suit to force the city to refund monies they had illegally collected from the public. They contend it is unfair because he gained such knowledge while he was an assistant city attorney which now constitutes an adverse interest. Nonsense! The ordinances are public records and are actually published in the newspapers in order that the public might become aware of them.
I have no doubt that the present attorney for the appellant feels that he has misled attorney Henry because he has been forced by the board of directors to back down on his word that the Phillips v. Weeks case would never be used to disqualify him.
The truth of the matter is that it is none of the board's business as to whether David Henry receives $5 or $500,000 in this case. It is not coming from the pockets of the city. The city is only responsible for the refund they have been ordered to make. Therefore, they have no standing to argue this point. The fee allowed by the chancellor is a part of the recovery made by the efforts of Mr. Henry and his associates. So far as I am concerned, attorney David Henry has acted with the utmost honesty and frankness in the entire matter. Certainly, it cannot be said of him that he backed down on his word. If those who recover the funds are satisfied with the amount of attorney's fee allowed, then it should be allowed. Certainly, the city attempted to defeat the rights of these same people from collecting anything whatsoever. Now it looks to me like a case of sour grapes.
*239 I would reduce the attorney's fee in the same proportion that the amount of the recovery is reduced and allow him the 25% authorized by the trial court, provided his clients do not object.
ADKISSON, Chief Justice, dissenting.
I dissent from denial of the attorney fee. The sanction applied in this case far exceeds the impropriety. No consideration is given to the public service performed by this attorney in stopping the illegal exaction.
ON REHEARING
PURTLE, Justice, dissenting.
I would grant the petition for rehearing in the matter of the appellant's attorney fee. The attorney had absolutely no conflict of interest. The City of Little Rock obviously broke its word of honor. The City further persuaded a majority of this court to deny the attorney any compensation whatsoever for his work, which action by the City smacks of pure spite and retaliation. If it were the intent of the majority to chill and discourage attorneys from undertaking class actions against a governmental unit then the opinion is eminently successful. We should right the wrong which we committed in the initial opinion. I would grant the rehearing. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2456496/ | 796 S.W.2d 332 (1990)
303 Ark. 270
Jesse James TERRY, Appellant,
v.
STATE of Arkansas, Appellee.
No. CR 90-97.
Supreme Court of Arkansas.
October 1, 1990.
*333 Henry C. Morris, De Queen, for appellant.
Kelly K. Hill, Asst. Atty. Gen., for appellee. Rock, for appellee.
DUDLEY, Justice.
Appellant, Jesse James Terry, was found guilty of aggravated robbery and, because he was an habitual offender, was sentenced to life in prison. We need not state the facts of the robbery since appellant does not question the sufficiency of the evidence. His primary point of appeal is that the trial court erred in its ruling after he acted in a contumacious manner. The argument is without merit.
On the day of trial, appellant sought a continuance which was denied by the trial court. Appellant became upset, stated, "there ain't gonna be no court today then," and walked into the spectator area. The court asked appellant at least six times to return to the table and sit down so the trial could proceed. At one point the court warned, "I would sit down before I have them sit you in the chair." Appellant did not heed the warning, and the court finally instructed the bailiffs to "do whatever you need to do ... [i]f you need to cuff him, cuff him." The transcript notes that a struggle ensued which lasted several minutes, requiring six officers to handcuff appellant. The entire episode took place in front of the prospective jurors. The court immediately admonished the jury to disregard the incident instructing them that it had nothing to do with appellant's guilt or innocence. Appellant was returned to his jail cell. The judge, attorneys, and court reporter followed him there. The judge informed appellant that he could return to the court room at any time as long as he *334 did so with civility, but that the trial was going to proceed either with or without him. Appellant did not return at that immediate time, and voir dire of the jurors started without him. Shortly thereafter, while voir dire was still proceeding, he returned to the courtroom in handcuffs.
Appellant's argument involves two distinct constitutional rights: the right of confrontation and the right to a fair trial. His removal from the courtroom raises issues concerning his right of confrontation. His being handcuffed, and the jury's observation of the melee, raise issues concerning the right to a fair trial, more particularly, his right to a jury that will presume his innocence.
Right of Confrontation
In Illinois v. Allen, 397 U.S. 337, 338, 90 S. Ct. 1057, 1058, 25 L. Ed. 2d 353 (1970), the United States Supreme Court was faced with the issue of "whether an accused can claim the benefit of this constitutional right to remain in the courtroom while at the same time he engages in speech and conduct which is so noisy, disorderly, and disruptive that it is exceedingly difficult or wholly impossible to carry on the trial." The Court concluded that a defendant can lose his right to be present at trial if, after being warned that he will be removed from the courtroom, he nevertheless conducts himself in such a manner that his trial cannot proceed. The Court further held that the right to be present at trial could be reclaimed as soon as the defendant is willing to conduct himself in a manner that is consistent "with the decorum and respect inherent in the concept of courts and judicial proceedings." Id. at 343, 90 S. Ct. at 1061.
Appellant's right of confrontation under the sixth amendment to the Constitution of the United States was not violated. He became disruptive, and ignored the court's warnings to return to his seat. Although the court did not specifically warn appellant that he might be removed from the courtroom before he was actually removed, the court immediately suspended the trial and, along with other essential persons, went to appellant's cell to try to convince him to return to the courtroom without being opprobrious, warned appellant that the trial would proceed with or without him, and informed him that he could return at any time as long as he did so without contumacy. Appellant clearly relinquished his right to be present at his trial because of his own actions. He subsequently reclaimed the right by conducting himself in a manner consistent with the decorum that is essential in judicial proceedings.
Presumption of Innocence
The presumption of innocence is not articulated in the Constitution of the United States; however, it is a basic component of a fair trial and the right to a fair trial is a fundamental liberty secured by the fourteenth amendment. Estelle v. Williams, 425 U.S. 501, 503, 96 S. Ct. 1691, 1692, 48 L. Ed. 2d 126 (1976). Consequently, courts must be vigilant in guarding against dilution of the presumption of innocence so that guilt will be established beyond a reasonable doubt by probative evidence. Deleterious effects on fundamental rights call for close judicial scrutiny. Id. at 504, 96 S. Ct. at 1693. Factors which might affect a juror's judgment, however, cannot always be avoided. Id. at 505, 96 S. Ct. at 1693.
In Illinois v. Allen, 397 U.S. 337, 344, 90 S. Ct. 1057, 1061, 25 L. Ed. 2d 353 (1970), the Court listed three constitutionally permissible ways for a trial judge to handle an obstreperous defendant: "(1) bind and gag him, thereby keeping him present; (2) cite him for contempt; (3) take him out of the courtroom until he promises to conduct himself properly." The Court recognized that shackles and gags should only be used as a last resort, not only because of the effect they might have on a jury's feelings about the defendant, but also because such measures themselves are an affront to the dignity of the court. The Court in Williams, supra, reaffirmed the substantial need to impose physical restraints upon contumacious defendants and noted that, "[t]he contumacious defendant brings his plight upon himself and presents the court *335 with a limited range of alternatives. Obviously, a defendant cannot be allowed to abort a trial and frustrate the process of justice by his own acts." Williams, 425 U.S. at 505, 96 S. Ct. at 1693. In short, trial judges confronted with disruptive defendants must be given sufficient discretion to handle different situations which may arise in their courtrooms. Illinois v. Allen, 397 U.S. at 343, 90 S. Ct. at 1060.
A.R.Cr.P. Rule 33.1 comports with the United States Supreme Court cases on this matter:
Defendants and witnesses shall not be subjected to physical restraint while in court unless the trial judge has found such restraint reasonably necessary to maintain order. If the trial judge orders such restraint, he shall enter into the record of the case the reasons therefor. Whenever physical restraint of a defendant or witness occurs in the presence of jurors trying the case, the judge shall upon request of the defendant or his attorney instruct the jury that such restraint is not to be considered in assessing the proof and determining guilt.
It is clear from the nature of appellant's outbursts and the fact that it took six officers to restrain him that the handcuffs were reasonably necessary to maintain order, both at the time of his ouster from the courtroom and continuing after his return. Further, the recorded events speak for themselves concerning the reasons for the restraint. No further reasons were required to be set forth. Finally, the trial court instructed the jury several times that they must disregard the melee in assessing the proof and determining guilt.
In summary, appellant's own conduct brought about the need for restraint. He was not denied his right to a fair trial.
Appellant's second point requires little discussion. He argues that the record is silent regarding his legal representation, or waiver thereof, on the two prior convictions used to enhance his punishment. Appellant is mistaken. The record contains two exhibits which establish that appellant was represented by counsel with respect to both of the convictions.
Pursuant to Rule 11(f) of the Rules of the Supreme Court and the Court of Appeals, an examination has been made of all motions and objections decided adversely to appellant, and we find no errors prejudicial to the rights of appellant.
Affirmed. | 01-03-2023 | 10-30-2013 |
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