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https://www.courtlistener.com/api/rest/v3/opinions/8491959/ | MEMORANDUM OPINION
THOMAS M. TWARDOWSKI, Bankruptcy Judge.
Before the court is a complaint objecting to the dischargeability of a debt allegedly1 owed by defendant to plaintiffs under 11 U.S.C. § 523(a)(2)(A). This alleged debt arose from plaintiffs’ purchase of a part-time podiatry practice from defendant. Specifically, plaintiffs claim they sustained approximately $30,000.00 in damages as a result of misrepresentations made by defendant during the parties’ negotiations concerning the number of patients defendant treated in his part-time practice and the income generated by his part-time practice. Plaintiffs further maintain that the damages they allegedly sustained should be found nondischargeable under § 523(a)(2)(A) because they resulted from actions they took in reliance upon these misrepresentations. Because we have determined that plaintiffs have not met their burden of proof, we find the alleged debt dis-chargeable and enter judgment in favor of defendant. We begin our analysis with a summary of the relevant facts.
Defendant is a podiatrist who sold his part-time podiatry practice in Lansdowne, Maryland (“Lansdowne”) to plaintiffs in December of 1987. At the time he opened his part-time practice in Lansdowne in March of 1986, and during the time he operated his part-time Lansdowne practice, defendant was also employed part-time by United Footcare Centers (“United Footcare”). United Footcare had two offices located in the Baltimore area. Specifically, United Footcare had an office in Randallstown, Maryland, which was approximately fifteen to twenty miles from Lans-downe, and an office in Parkville, Maryland, which was approximately forty miles from Lansdowne. Defendant had been employed by United Footcare from the summer of 1983 until approximately July of 1987, at which time he decided to end his relationship with United Footcare and sell his part-time practice in Lansdowne to relocate. To facilitate *484the sale of his practice, defendant placed advertisements in various podiatry journals. Plaintiffs learned about the sale of defendant’s practice through one of these advertisements. Plaintiffs then contacted defendant in November of 1987 to discuss the possibility of purchasing defendant’s part-time practice.
Only one of the plaintiffs, Dr. Bernhard, met with defendant during the first meeting which was held at defendant’s office in Lans-downe. During this meeting, defendant showed Dr. Bernhard all of the records which were in his office at that time. These included patient ledger cards, day sheets and an appointment book. Defendant also showed Dr. Bernhard a financial statement which reflected that defendant’s gross revenue from his part-time Lansdowne practice from January of 1987 through September of 1987 was approximately $47,000.00. Dr. Bernhard testified that defendant advised him that he saw between sixty and seventy patients a month at the Lansdowne office and that approximately one-half of these patients were new patients. Dr. Bernhard further testified that he was aware that defendant was affiliated with another podiatry practice at the time defendant operated his part-time practice in the Lansdowne office. Defendant testified that the parties did not discuss many of the details during the first meeting and that Dr. Bernhard seemed eager to purchase the Lansdowne practice.
Shortly thereafter, defendant met with plaintiff, Dr. Spier, at the Lansdowne office to discuss the potential purchase. During this meeting, Dr. Spier reviewed the records which were maintained by defendant, including the patient ledger cards, patient charts, day sheets and the appointment book defendant maintained for his Lansdowne practice. Dr. Spier also examined the equipment which was in the Lansdowne office. Dr. Spier testified that he discussed the “logistics” of the practice with defendant, i.e., what defendant spent on rent, phone bills and the equipment lease. Dr. Spier further testified that defendant advised him that he saw between sixty and seventy patients a month at the Lans-downe office, with fifteen to twenty of these patients being new patients, and that all of the income reflected on the day sheets and ledger cards was generated at the Lans-downe office. Finally, Dr. Spier testified that during the parties’ negotiations, he was aware that defendant was affiliated with another podiatry practice at the time defendant operated his part-time practice in Lans-downe. Defendant testified that neither plaintiff requested additional information from him and that both plaintiffs seemed convinced that they wanted to purchase the Lansdowne practice.
Thereafter, in December of 1987,.plaintiffs and defendant executed an agreement under which plaintiffs agreed to purchase defendant’s part-time Lansdowne practice (and the equipment in the Lansdowne office) for $10,-000.00. In addition, plaintiffs agreed to assume defendant’s liability under an equipment lease. Plaintiffs then opened a part-time podiatry practice in the Lansdowne office. However, plaintiffs were disappointed with the income they were generating from the operation of their Lansdowne office. Specifically, plaintiffs testified that despite extensive advertising, they averaged only between five and eight appointments a week. Accordingly, plaintiffs closed their Lans-downe office in May of 1988, after operating their practice for only approximately five months. Thereafter, plaintiffs received notice of defendant’s bankruptcy filing, and they then filed this complaint objecting, under § 523(a)(2)(A), to the dischargeability of the debt they believe defendant owes them. We now turn to an analysis of § 523(a)(2)(A).
We begin by noting that exceptions to discharge are narrowly construed against the creditor and in favor of the debtor. Lipka v. Donley (In re Donley), 115 B.R. 502, 503 (Bankr.E.D.Pa.1990); Koltman v. Hammill (In re Hammill), 61 B.R. 555, 556 (Bankr.E.D.Pa.1986); Seiders v. Fenninger (In re Fenninger), 49 B.R. 307, 310 (Bankr.E.D.Pa.1985). This is in keeping with the fresh start concept underlying the Bankruptcy Code. In addition, the burden of proof in a dischargeability dispute is on the party objecting to the dischargeability of the debt who must prove his case by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
*485Turning to the specific discharge-ability exception relied upon by plaintiffs in this case, we note that in order for a debt to be found nondisehargeable under 11 U.S.C. § 523(a)(2)(A), the plaintiff must prove each of the following elements by a preponderance of the evidence: (1) that the defendant made a materially false representation; (2) knowing that it was false; (3) with the intent and purpose of deceiving the plaintiff; (k) that the plaintiff reasonably relied upon the representation; and (5) sustained damage as a proximate result of the representation having been made. Donley, 115 B.R. at 503; Hammill, 61 B.R. at 556; Volk of Philadelphia, Inc. v. Gelfand (In re Gelfand), 47 B.R. 876, 879 (Bankr.E.D.Pa.1985). Having analyzed the facts presented in the case before us in conjunction with the legal standard which must be met by plaintiffs in order for them to prevail on their complaint objecting to the dischargeability of this alleged debt, we conclude that plaintiffs have not met their burden of proving any of the § 523(a)(2)(A) elements. We first address the requirement that plaintiffs prove that defendant made a materially false representation with intent to deceive plaintiffs.
Plaintiffs assert that defendant misrepresented the number of patients he saw at the Lansdowne office and that he included income he received from United Footcare patients in his estimate of the gross revenue he earned from the Lansdowne practice. While plaintiffs introduced some evidence that defendant included earnings he received from making housecalls to patients in the Randallstown and Parkville areas in his estimate of the gross revenue generated by his Lansdowne practice, the amount of income generated from these housecalls is disputed and appears to us to be insignificant. Plaintiffs also complain that a review of the records maintained by defendant reveals that defendant reported receiving income from some procedures allegedly performed in the Lansdowne office which could not have been performed there because the equipment necessary to perform these procedures was not present in the Lansdowne office. Once again, however, plaintiffs failed to establish the amount of income which is attributable to these procedures. Hence, it is difficult to determine whether the representation concerning these procedures was material. Furthermore, defendant introduced into evidence a list of his patients’ zip codes. A review of this list reveals that a substantial number of defendant’s patients resided in the Lans-downe area. Hence, after reviewing the evidence presented, we are not satisfied that plaintiffs established by a preponderance of the evidence that defendant made a material misrepresentation concerning the number of patients he treated at the Lansdowne office and the amount of income he generated from the operation of his Lansdowne practice.
In addition, we find that the evidence presented by plaintiffs does not establish that defendant made any of the representations with intent to deceive plaintiffs. To the contrary, the evidence established that defendant met with plaintiffs on several occasions before the purchase agreement was finalized, that defendant permitted plaintiffs to inspect all of the records which he maintained for his Lansdowne office and that defendant fully cooperated with plaintiffs’ attempts to gather information concerning defendant’s Lans-downe practice. Moreover, defendant testified that the majority of his patients were young people who came to see him for procedures which did not necessitate additional appointments. Additionally, defendant saw many of his patients during evening hours in his Lansdowne office, while plaintiffs’ maintained mostly morning and some afternoon hours at their Lansdowne office. Hence, the facts that defendant’s patient base was composed of mostly young people who did not require follow up appointments and that defendant saw many of his Lansdowne patients in the evening, while plaintiffs maintained mostly morning and some afternoon- hours when they operated their Lansdowne practice, could explain why plaintiffs were not able to generate the amount of income that they expected to generate from the operation of their part-time Lansdowne practice.
Even if we were to conclude that defendant made some misrepresentations concerning his Lansdowne practice, we find that these misrepresentations would not result in the debt being found nondisehargeable under § 523(a)(2)(A) because plaintiffs failed to es*486tablish that they reasonably relied upon the representations made by defendant. As stated earlier, plaintiffs met with defendant on several occasions in the Lansdowne office and had full access to defendant’s records and office equipment. Plaintiffs also were given ample opportunity to inspect these records and the equipment in the office before they decided to purchase defendant’s part-time practice. Defendant testified that plaintiffs were anxious to purchase his part-time practice and did not ask him many questions about the details of his practice. Hence, the possibility remains that a more thorough review of defendant’s records and a more thorough examination of defendant concerning the details of his Lansdowne practice would have revealed that many of defendant’s patients were young people who were being treated for problems which did not require follow up appointments. This coupled with the fact that plaintiffs did not maintain the same office hours which defendant maintained leads us to conclude that plaintiffs’ expectation that a majority of defendant’s patients would become part of their practice was unreasonable, especially since plaintiffs were aware that the area was already heavily saturated with podiatrists and that defendant was affiliated with United Footcare during the time that defendant operated his part-time Lansdowne practice. Given these facts, we conclude that plaintiffs should have more closely examined defendant’s records and office equipment and should have more thoroughly examined defendant about the nature of his part-time practice before making their decision to purchase the practice from defendant. Accordingly, we find that plaintiffs’ reliance upon defendant’s representations without a more thorough examination of the records, office equipment and the details of defendant’s practice was not reasonable.
Finally, we note that our review of the evidence presented leads us to question whether the harm which plaintiffs suffered was caused by their reliance upon representations made by defendant during the parties’ negotiations. To the contrary, we believe that plaintiffs’ loss could more readily be attributable to the fact that a substantial portion of what they were purchasing was patient goodwill, an item which can not be guaranteed to transfer from the practice of one doctor to that of another, especially when many of the patients seen by the doctor who is selling the practice do not require follow up treatment and the two practices do not maintain similar office hours. For all of these reasons, we find that plaintiffs have not met their burden of proving the elements necessary to find this alleged debt nondis-chargeable under § 523(a)(2)(A).
An order entering judgment in favor of defendant and finding the alleged debt in issue dischargeable follows.
ORDER
AND NOW, this 28th day of September, 1994, it is ORDERED that JUDGMENT on the complaint is ENTERED in favor of DEFENDANT and the debt alleged to be owed by defendant to plaintiffs is dischargeable.
. We describe the underlying debt as alleged because defendant denies the existence of the debt and neither the existence nor the amount of the debt has ever been determined by a court. As the matter before us is a complaint objecting to the dischargeability of the alleged debt under 11 U.S.C. § 523(a)(2)(A), the only issue presently before us is whether the alleged debt is nondis-chargeable under this section. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491960/ | MEMORANDUM OPINION AND DECISION
RICHARD L. SPEER, Bankruptcy Judge.
This cause comes before the Court upon Debtor’s Objection to the Amended Proof of Claim filed by the Internal Revenue Service (hereafter “IRS”); the United States’ Opposition to Debtors’ Objection to Proof of Claim; and the supplemental memoranda filed by both parties. This Court has reviewed the arguments of Counsel, exhibits, relevant statutory and case law, as well as the entire record of the case. Based upon that review and for the following reasons, this Court finds that Debtor’s Objection to IRS’s claim shall be Overruled.
FACTS
The issues presented in the present Chapter 13 case concern a related Chapter 7 case in the Southern District of Ohio, In re Simka, Inc., Case No. 2-89-06107. Simka involved a corporation for which the Debtors in the present Chapter 13 case have concurrent federal tax liabilities. The debtor corporation, Simka, Inc., had incurred non-dis-chargeable debts called “trust fund liabilities” when it failed to hold in trust for the IRS federal taxes withheld from employees’ *538payroll earnings. The Debtors in the present case are also individually liable for the trust fund liabilities. When Simka, Inc. filed for Chapter 7 relief, the IRS entered a claim for Twenty Eight Thousand Ninety Five and 03/100 Dollars ($28,095.03) which reflected both trust fund liabilities and non-trust fund liabilities owed. On April 19, 1993 the Court in Simka approved a non-designated payment to the IRS totaling ($14,102.76). Of this payment, the IRS designated Four Thousand Four Hundred Thirteen and 75/100 Dollars ($4,413.75) toward trust fund liabilities, pursuant to IRS regulations. The remainder was designated toward non-trust fund liabilities also owed by Simka, Inc., but not owed by the Debtors in the present case.
The relative application of the funds applied between trust fund and non-trust fund accounts is the source of dispute in this Chapter 13 case. The Debtors originally filed a Chapter 13 petition on March 6, 1991, before the liquidation proceeding of Simka, Inc. On May 10, 1991 this Court approved a plan in which priority tax liabilities were to be paid in full and unsecured creditors would recover approximately thirty-three percent (33%) of their claims. On July 24, 1991, the IRS filed a proof of claim in the Chapter 13 case for federal priority tax liabilities of Twenty Nine Thousand Nine Hundred Thirty Two Dollar’s and 66/100 Dollars ($29,-932.66), notwithstanding the anticipated Sim-ka liquidation. This amount includes the trust fund liabilities not paid under the Sim-ka liquidation for which the Debtors have a continued responsibility to pay. It is undisputed that unpaid trust funds liabilities of Simka, Inc. are also priority tax liabilities for Debtors. Debtors did object to the amount of the claim, however, asserting that it needed to be amended to reflect the receipt of the Chapter 7 payment made by Simka, Inc.
The original IRS proof of claim did not reflect a Four Thousand Four Hundred Thirteen Dollars and 75/100 ($4,413.75) allocation the IRS claims to have since designated toward the concurrent tax liability of the Debtors. However, the IRS did reduce its proof of claim on or about April 26, 1994, reducing the original claim of Twenty Nine Thousand Nine Hundred Thirty Two and 66/100 Dollars ($29,932.66) by Eleven Thousand Seven Hundred Thirty and 39/100 ($11,730.39), for a claim totaling Eighteen Thousand Two Hundred Two and 27/100 Dollars ($18,202.27). The IRS states in its memorandum that part of the reduction was a credit for the Four Thousand Four Hundred Thirteen Dollars and 75/100 ($4,413.75) designation to the outstanding trust fund liability.
The Debtors’ Objection to the IRS’s amended proof of claim requests that the full Fourteen Thousand One Hundred Two and 76/100 Dollars ($14,102.76) Chapter 7 payment be credited against the Chapter 13 claim, thus reducing the claim to Four Thousand Eight Hundred Ninety Nine and 51/100 Dollars ($4,899.51). The Debtors, however, erred in computing the amount requested. Eighteen Thousand Two Hundred Two and 27/100 Dollars ($18,202.27) subtracted from Fourteen Thousand One Hundred Two and 76/100 Dollars ($14,102.76) equals to Four Thousand Ninety Nine and 51/100 Dollars ($4,099.51).
The United States opposes the Debtors’ objection to the proof of claim, asserting that the payments were made involuntarily, and therefore were not subject to designation by the taxpayer. Thus, the IRS asserts, the Debtors in the present case could not claim to have a larger portion of the corporate Chapter 7 distribution designated as payment on the trust fund liability also owed by the Debtors.
A hearing was held in which the United States contended that the Court lacked jurisdiction because the Debtors failed to properly serve the United States. The Court ordered the Debtors to serve the Attorney General of the United States with a copy of his objection. Also, the Court ordered both parties to file supplemental memoranda.
LAW
11 U.S.C. § 1123(b)(5) Contents of Plan
(b) Subject to subsection (a) of this section, a plan may—
(5) include any other appropriate provision not inconsistent with the applicable provisions of this statute.
*53911 U.S.C. § 105(a) Power of Court
(a) The court may issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent abuse of process.
DISCUSSION
The issue presented in this case is whether the Supreme Court’s holding in United States v. Energy Resources Co., 495 U.S. 545, 110 S.Ct. 2139, 109 L.Ed.2d 580 (1990), should be extended to the present ease where the Chapter 13 Debtors seek to have tax payments made in a related Chapter 7 case reallocated for the benefit of the Chapter 13 reorganization. The allowance or dis-allowance of claims against the estate and determinations as to the dischargeability of particular debts are core proceedings. 28 U.S.C. § 157. For the reasons set forth below, this Court declines to extend Energy Resources to the issues in this case.
Energy Resources concerned a Chapter 11 plan, wherein the Bankruptcy Court reallocated the Internal Revenue Service’s (hereafter “IRS”) designation of payments between “trust fund” liabilities and “non-trust fund” liabilities. “Trust fund” liabilities are funds employers withhold from their employees paychecks representing employees’ personal income taxes and Social Security taxes. 26 U.S.C. §§ 3102(a). Federal law requires employers to hold these funds in trust for the United States. 26 U.S.C. § 7501(a). Should employers fail to pay trust fund taxes, the government may collect an equivalent sum from the officers or employees responsible for collecting the tax. 26 U.S.C. § 6672. The Chapter 11 plan in Energy Resources included a provision that payments made to the IRS would be first applied to trust fund liabilities, then to non-trust fund liabilities. Energy Resources at 547. The Bankruptcy Court approved the plan over the IRS’s objection, holding that the reallocation was necessary to the Chapter 11 reorganization. Id. The IRS was obviously concerned that if the Chapter 11 plan failed in the future, and upon liquidation the corporation could not pay the remainder of the tax liabilities, the only debts remaining would be non-trust fund liabilities for which there were no other parties liable with which to seek payment. Id. at 551.
The IRS argued that payments made under the Chapter 11 plan are “involuntary payments,” and therefore not subject to designation by the taxpayer. Id. at 548. Thus, the payments should be allocated under the IRS’s regulations, where a portion of the payments would be designated to non-trust fund liabilities. The Supreme Court held that the Bankruptcy Court does indeed have the authority under § 105 of the Bankruptcy Code to order the IRS to apply the payments to trust funds liabilities, “if the bankruptcy court determines that this designation is necessary to the success of a reorganization plan.” Id. at 549.
The present case differs from that of Energy Resources in a number of ways. First, Energy Resources was a Chapter 11 case. The case herein is a Chapter 13. Second, in Energy Resources, the IRS would receive payment in full of both trust fund and non-trust fund liabilities under the plan in that case. Id. at 549. In the present case, the corporation which was primarily liable for the trust fund liabilities has already gone through a Chapter 7 liquidation, rendering unpaid debts against it uncollectible. Third, in Energy Resources, the payments to be designated were payments made in that same case. In the present case, the payments to be reallocated by the Court are payments made in a related Chapter 7 case.
This Court has no reason to believe that the holding in Energy Resources would not apply in some Chapter 13 cases. Indeed, such a holding was made in In re Klaska, 152 B.R. 248 (Bankr.C.D.Ill.1993), where the Court allowed a Chapter 13 plan where the debtor would first pay the entire income tax obligation, then start making payments on employee taxes. Id. at 250. This would result in the debtor’s former partner paying a larger portion of the tax obligation. Id. *540The Klaska Court emphasized, however, that though the debtors were hoping to decrease the amount they would pay to the IRS, they were not seeking to reduce the amount that would be paid to the IRS. Id. at 251. The IRS would receive 100% under the plan, and indeed everyone to be paid under the plan would get 100% sooner. Id. at 250.
The IRS would not fare so well in the case at bar, where the IRS would not receive any payment for the non-trust fund liabilities which would be rendered unpaid by the proposed re-allocation. This Court is unable to locate any case following Energy Resources in which the IRS would not receive payment in full under the reorganization plan to be made possible by the Court’s reallocation. Indeed, this was a chief concern of the Court in U.S. v. Pepperman, 976 F.2d 123 (3rd Cir.1992), where the Court refused to apply the Energy Resources holding to the Chapter 7 liquidation. As the Court explained:
[Although trust fund taxes technically are non-dischargeable in bankruptcy, see 11 U.S.C. § 523(a)(1)(A), corporate dissolution has the practical effect of discharging the corporate debtor from unpaid tax liabilities, [U.S. v.] Sotelo, 436 U.S. [268] at 278, 98 S.Ct. [1795] at 1801 [56 L.Ed.2d 275 (1978) ]. Thus, unlike the situation presented in Energy Resources, permitting the IRS to allocate such payment to non-trust fund liability first cannot be characterized as an added assurance that its tax claim will be satisfied. There is far less assurance in a Chapter 7 proceeding that the corporate debtor will satisfy its debt in full. Id. at 130. (Emphasis in original).
A similar concern was expressed by the District Court in In re Suburban Motor Freight, Inc., 161 B.R. 640 (S.D.Ohio 1993), where the Court refused to reallocate the IRS’s designation of Chapter 7 payments for the benefit of the sole owner of the corporation debtor. Id. at 643. The Suburban Court also noted that corporate dissolution has the practical effect of discharging taxes technically not dischargeable in bankruptcy, and that IRS discretion may be one of the few protections the government possesses. Id. at 644.
This Court is also reluctant to apply Energy Resources to the situation were the payments to be reallocated are from a separate bankruptcy case where such reallocation is not necessary for reorganization. In In re Brooks, 129 B.R. 484 (Bankr.N.D.Ohio 1991), the Court was faced with a similar situation to the case herein. Chapter 13 debtors moved for a determination that their tax liability payment in a previous Chapter 7 case be designated as trust fund payments as allegedly provided in the Chapter 7 order. The Court simply held that reorganization was not at issue in the related Chapter 7 case, thus there was no counterweight to the IRS’s policy, and no reason to interfere with the IRS’s allocation. Id. at 487.
The decision in Brooks was followed by the Court in In re Gregory Engine and Mach. Services, Inc., 135 B.R. 807 (Bankr.E.D.Tex. 1992). As the Gi’egory Court explained, “The implicit holding of the [Brooks ] court is clearly that the benefit to be realized by Chapter 13 debtors in another proceeding is not a significant enough concern to justify an expansion of Energy Resources.” Id. at 810. In Gregoi-y, the sole owners of a Chapter 7 debtor corporation moved for a reallocation of payments to the IRS. Id. at 808. The owners would thus receive a dollar for dollar reduction in their personal liability. Id. This is again similar to the case herein, where the Chapter 13 debtors would receive a dollar for dollar benefit with the proposed reallocation. The Court explained:
This Court is convinced that [the Energy Resources ] holding can not be expanded to take into consideration reorganization needs in other cases and in other contexts. That type of expansion would unfairly encroach on the authority of the Internal Revenue Service to apply payments in accordance with its rules and procedures in the discharge of its statutory duty to administer the tax laws of the nation. The Court can find no language in the preceding cases which would indicate otherwise. Id. at 810.
This Court is likewise convinced in the case at bar that the reallocation of the related Chapter 7 case for the benefit of the present *541case would be an undue expansion of Energy Resources.
Finally, even if it could be presumed that this Court has the authority to reallocate the payments as the Debtors request, this Court would in its discretion refuse to do so in this case as a matter of public policy. Allowing a reallocation where the corporate debtor has or will become insolvent would in effect give operators of distressed corporations the ability to gamble with the employees wage with-holdings in hopes of improving cash flow. When the gamble does not pay off, the person responsible for the funds to be held in trust could then escape liability by simply showing that they could not reorganize under a Chapter 13 unless the trust fund liabilities were paid first by the corporate debtor. Such a showing would not be difficult, as trust fund liabilities could be quite large for an individual debtor. This would be especially disconcerting were, in the most likely situation, the official responsible is also the owner of the corporation, who has much to gain personally if the gamble pays off.
This judicially approved gamble would clearly be in contrast to the public policy protecting wage withholding trust funds forcefully put in place by Congress in the Internal Revenue Code. Such a holding would also be contrary to the priority scheme contemplated in the Bankruptcy Code. As the Court in Pepperman noted, “Were that effected, the general rule that government is entitled to priority over general creditors for the payment of [trust fund] liabilities would be weakened.” Pepperman at 130-131. Accordingly, the objection of the debtors to the IRS claim will be overruled.
Another issue presented in this case was whether service was or should be obtained upon the Attorney General of the United States. Debtors’ memoranda is ambiguous as to whether such service was effected as ordered by this Court. Because the Court is overruling the objection of the Debtor on other grounds, the Court finds this issue moot.
In reaching the conclusion found herein, the Court has considered all of the evidence, exhibits and arguments of counsel, regardless of whether or not they are specifically referred to in this opinion.
Accordingly, it is
ORDERED that the Objection to Claim by Debtors bé, and is hereby, OVERRULED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484112/ | Court of Appeals
Sixth Appellate District of Texas
JUDGMENT
Casey Austin Holloway, Appellant Appeal from the 196th District Court of
Hunt County, Texas (Tr. Ct. No. 33536CR).
No. 06-22-00076-CR v. Memorandum Opinion delivered by Chief
Justice Morriss, Justice Stevens and Justice
The State of Texas, Appellee van Cleef participating.
As stated in the Court’s opinion of this date, we find that the appeal should be dismissed
for want of jurisdiction. Therefore, we dismiss the appeal.
We note that the appellant, Casey Austin Holloway, has adequately indicated his inability
to pay costs of appeal. Therefore, we waive payment of costs.
RENDERED NOVEMBER 14, 2022
BY ORDER OF THE COURT
JOSH R. MORRISS, III
CHIEF JUSTICE
ATTEST:
Debra K. Autrey, Clerk | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484116/ | Court of Appeals
Sixth Appellate District of Texas
JUDGMENT
Walter Murphy, Appellant Appeal from the 5th District Court of
Bowie County, Texas (Tr. Ct. No.
No. 06-22-00116-CR v. 19F1148-005). Memorandum Opinion
delivered by Chief Justice Morriss, Justice
The State of Texas, Appellee Stevens and Justice van Cleef participating.
As stated in the Court’s opinion of this date, we find that the appeal should be dismissed
for want of jurisdiction. Therefore, we dismiss the appeal.
We note that the appellant, Walter Murphy, has adequately indicated his inability to pay
costs of appeal. Therefore, we waive payment of costs.
RENDERED NOVEMBER 10, 2022
BY ORDER OF THE COURT
JOSH R. MORRISS, III
CHIEF JUSTICE
ATTEST:
Debra K. Autrey, Clerk | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484109/ | In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
No. 06-22-00071-CV
JOHN TRAYLOR D/B/A JOHN TRAYLOR INSURANCE, Appellant
V.
RAMONA LANE, Appellee
On Appeal from the 76th District Court
Morris County, Texas
Trial Court No. 26,113
Before Morriss, C.J., Stevens and van Cleef, JJ.
Memorandum Opinion by Justice Stevens
MEMORANDUM OPINION
John Traylor d/b/a/ John Traylor Insurance has attempted to appeal the trial court’s
August 22, 2022, order granting, in part, and denying, in part, Traylor’s plea to the jurisdiction.
The issue before this Court is whether we have jurisdiction to hear the appeal. We conclude that
we do not and dismiss the appeal for want of jurisdiction.
Generally, appellate courts review only final judgments and interlocutory orders
specifically made appealable by statute. Lehmann v. Har-Con Corp., 39 S.W.3d 191, 195 (Tex.
2001); Schoolcraft v. Dep’t of Fam. & Protective Servs., No. 06-05-00076-CV, 2005 WL
3487849, at *1 (Tex. App.—Texarkana Dec. 22, 2005, no pet.) (mem. op.); see TEX. CIV. PRAC.
& REM. CODE ANN. § 51.014 (Supp.).
The order at issue is not a final judgment as it does not dispose of all claims. Further, the
August 22 order is not the type of interlocutory order from which the Texas Legislature has
authorized an appeal.1 See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014 (Supp.).
By letter dated October 27, 2022, we notified Traylor of this potential defect in our
jurisdiction and afforded him the opportunity to show this Court how it had jurisdiction over the
appeal notwithstanding the noted defect. We further informed Traylor that the failure to respond
by November 7, 2022, would result in dismissal of the appeal for want of jurisdiction. See TEX.
R. APP. P. 42.3(a). Although Traylor responded to our letter, his response failed to demonstrate
proper grounds for our retention of this appeal.
1
Traylor did not obtain the trial court’s permission to appeal. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(d).
2
We find that the trial court’s August 22, 2022, order was not a final order and was not an
appealable interlocutory order. Consequently, we are without jurisdiction over this appeal.
We dismiss this appeal for want of jurisdiction.
Scott E. Stevens
Justice
Date Submitted: November 14, 2022
Date Decided: November 15, 2022
3 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484117/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
TYLER DAVID POOL, No. 85571
Petitioner,
vs. FILED
THE SIXTH JUDICIAL DISTRICT
COURT OF THE STATE OF NEVADA,
IN AND FOR THE COUNTY OF NOV 5 20li
HUMBOLDT; AND THE HONORABLE .TH EVR.01.q.11
CL 'UP 'ME:: COURT
MICHAEL MONTERO, DISTRICT
13
JUDGE,
Respondents,
and
THE STATE OF NEVADA,
Real Party in Interest.
ORDER DENYING PETITION
This original petition for a writ of mandamus or, in the
alternative, prohibition challenges the district court's jurisdiction to enter
a scheduling order following the State's filing of a notice of appeal in both
the justice court and the district court.
A writ of mandamus is available to compel the performance of
an act that the law requires .. . or to control an arbitrary or capricious
exercise of discretion." Intl Game Tech., Inc. v. Second Judicial Dist. Court,
124 Nev. 193, 197, 179 P.3d 556, 558 (2008); see NRS 34.160.
A writ of prohibition "arrests the proceedings of any tribunal,
corporation, board or person exercising judicial functions, when such
proceedings are without or in excess of the jurisdiction of such tribunal,
corporation, board or person." NRS 34.320.
SUPREME COURT
OF
NEVADA
10) 1,47A ..14DP 55-9 Z3
A writ is an extraordinary remedy, and whether a petition for
extraordinary relief will be considered is solely within this court's
discretion. Smith v. Eighth Judicial Dist. Court, 107 Nev. 674, 677, 679,
818 P.2d 849, 851, 853 (1991). Petitioner bears the burden to show that
extraordinary relief is warranted. See Pan v. Eighth Judicial Dist, Court,
120 Nev. 222, 228, 88 P.3d 840, 844 (2004).
Having considered the petition and documents submitted in
support thereof, we are not persuaded that our extraordinary intervention
is warranted. Petitioner has not demonstrated that the district court failed
to perform an act the law requires or arbitrarily or capriciously abused its
discretion, Int'l Game Tech., 124 Nev. at 197, 179 P.3d at 558, nor has he
demonstrated that the district court acted in excess of its jurisdiction, NRS
34.320.
The State appropriately filed a notice of appeal in the justice
court challenging that court's granting of petitioner's motion to suppress.
See generally NRS 189.020 ("The party intending to appeal must file with
the justice . . . a notice entitled in the action, setting forth the character of
the judgment, and the intention of the party to appeal therefrom to the
district court.").
SUPREME COURT
OF
NEVADA
2
( I./47A •::Wu.,
Petitioner points to no case law or statute that supports the
argument that the State filing an additional and superfluous notice of
appeal in the district court to appeal a justice court's suppression decision
would deprive the district court of its appellate jurisdiction. NRS 189.120(1)
("The State rnay appeal to the district court from an order of a justice court
granting the motion of a defendant to suppress evidence."). Accordingly, we
ORDER the petition DENIED.
, C.J.
J.
Hardesty
, J.
Stiglich
cc: Hon. Michael Montero, District Judge
Humboldt County Public Defender
Attorney General/Carson City
Humboldt County District Attorney
Humboldt County Clerk
SUPREME COURT
OF
NEVADA
3
( 01 I947A • | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484119/ | Case: 21-60452 Document: 00516546669 Page: 1 Date Filed: 11/16/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
No. 21-60452 FILED
Summary Calendar November 16, 2022
Lyle W. Cayce
Clerk
Jesus Alberto Delgadillo-De Avila,
Petitioner,
versus
Merrick Garland, U.S. Attorney General,
Respondent.
Petition for Review of an Order of the
Board of Immigration Appeals
Agency No. A209 270 551
Before Higginbotham, Graves, and Ho, Circuit Judges.
Per Curiam:*
Jesus Alberto Delgadillo-De Avila, a native and citizen of Mexico,
seeks review of the decision of the Board of Immigration Appeals (BIA)
dismissing his appeal from a final removal order by an Immigration Judge (IJ).
We review factual findings under the substantial evidence standard and legal
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 21-60452 Document: 00516546669 Page: 2 Date Filed: 11/16/2022
No. 21-60452
questions de novo. Orellana-Monson v. Holder, 685 F.3d 511, 517-18 (5th Cir.
2012).
Proceeding pro se, Delgadillo-De Avila challenges the determination
that he was removable under 8 U.S.C. § 1227(a)(2)(B)(i) as an alien who was
convicted of a controlled substance offense. We need not reach this issue,
however, because the removal order also rested on the finding that
Delgadillo-De Avila was removable under 8 U.S.C. § 1227(a)(1)(B) for
overstaying his visa. See Capital Concepts Props. 85-1 v. Mut. First, Inc., 35
F.3d 170, 176 (5th Cir. 1994). Delgadillo-De Avila conceded removability for
the visa overstay, and he does not challenge that basis for removability now,
thereby waiving the issue. See Soadjede v. Ashcroft, 324 F.3d 830, 833 (5th
Cir. 2003).
Delgadillo-De Avila’s remaining arguments lack merit. Substantial
evidence supports the determination that he did not satisfy his burden to
demonstrate eligibility for asylum, withholding of removal, or relief under the
Convention Against Torture (CAT). See Orellana-Monson, 685 F.3d at 518.
The record likewise does not support Delgadillo-De Avila’s argument that
he was prevented or prohibited from presenting his case before the IJ.
Finally, to the extent that Delgadillo-De Avila asserts that his removal would
result in extreme hardship to his United States citizen children or that he
qualifies for voluntary departure, he failed to raise either argument before the
IJ or the BIA, and we lack jurisdiction to consider them for the first time on
appeal. See Omari v. Holder, 562 F.3d 314, 319 (5th Cir. 2009).
Accordingly, the petition for review is DENIED in part, see Orellana-
Monson, 685 F.3d at 517-18, and DISMISSED in part, see Omari, 562 F.3d
at 319.
2 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484123/ | Case: 20-2262 Document: 77 Page: 1 Filed: 11/16/2022
United States Court of Appeals
for the Federal Circuit
______________________
CUPP COMPUTING AS,
Appellant
v.
TREND MICRO INC.,
Appellee
KATHERINE K. VIDAL, UNDER SECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY
AND DIRECTOR OF THE UNITED STATES PA-
TENT AND TRADEMARK OFFICE,
Intervenor
______________________
2020-2262, 2020-2263, 2020-2264
______________________
Appeals from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in Nos. IPR2019-
00764, IPR2019-00765, IPR2019-00767.
______________________
Decided: November 16, 2022
______________________
PAUL J. ANDRE, Kramer Levin Naftalis & Frankel LLP,
Redwood Shores, CA, argued for appellant. Also repre-
sented by JAMES R. HANNAH; CRISTINA MARTINEZ, JEF-
FREY PRICE, New York, NY.
ROBERT BUERGI, DLA Piper LLP (US), East Palo Alto,
Case: 20-2262 Document: 77 Page: 2 Filed: 11/16/2022
2 CUPP COMPUTING AS v. TREND MICRO INC.
CA, argued for appellee. Also represented by MARK D.
FOWLER; STANLEY JOSEPH PANIKOWSKI, III, San Diego, CA.
MICHAEL S. FORMAN, Office of the Solicitor, United
States Patent and Trademark Office, Alexandria, VA, ar-
gued for intervenor. Also represented by SARAH E. CRAVEN,
THOMAS W. KRAUSE, FARHEENA YASMEEN RASHEED.
______________________
Before DYK, TARANTO, and STARK, Circuit Judges.
Dyk, Circuit Judge.
CUPP Computing AS (“CUPP”) appeals three inter
partes review (“IPR”) decisions of the Patent Trial and Ap-
peal Board (“Board”) concluding that petitioner Trend Mi-
cro Inc. had shown challenged claims in CUPP’s U.S.
Patents Nos. 8,631,488 (“’488 patent”), 9,106,683 (“’683 pa-
tent”), and 9,843,595 (“’595 patent”) unpatentable as obvi-
ous over two prior art references: U.S. Patent No. 7,818,803
(“Gordon”) and U.S. Patent App. Pub. No. 2010/0218012 A1
(“Joseph”). We affirm.
BACKGROUND
The three patents at issue, which share a common
name and priority date, address the problem of malicious
attacks aimed at mobile devices. See J.A. 362, 400, 438.
They generally concern systems and methods for waking a
mobile device from a power-saving mode and then perform-
ing security operations on the device, “such as scanning a
storage medium for malware, or updating security applica-
tions.” J.A. 53.
There are two issues on appeal. First, an issue of claim
construction that applies to each of the three patents. And
second, an issue unique to the ’595 patent: whether sub-
stantial evidence supports the Board’s finding that either
Joseph or Gordon renders obvious a claimed “security
Case: 20-2262 Document: 77 Page: 3 Filed: 11/16/2022
CUPP COMPUTING AS v. TREND MICRO INC. 3
agent” on a mobile device, which “perform[s] security ser-
vices.” ’595 patent, col. 31, ll. 38–40 & col. 32, ll. 41–43.
The contested claim construction involves the limita-
tion concerning a “security system processor,” which ap-
pears in every independent claim in the patents. See ’488
patent, col. 30, ll. 37–40 & col. 31, ll. 10–13 & col. 32, ll. 18–
20; see also ’595 patent, col. 31, ll. 25–26 & col. 32, ll. 44–
46; ’683 patent, col. 30, ll. 37–40 & col. 31, ll. 5–7 & col. 32,
ll. 15–18. Claim 10 of the ’488 patent is illustrative:
10. A mobile security system, comprising:
a mobile security system processor;
a connection mechanism for connecting to a
data port of a mobile device and for communi-
cating with the mobile device;
security instructions; and
a security engine configured to:
detect using the mobile security system
processor a wake event;
provide a wake signal to the mobile device,
the mobile device having a mobile device
processor different than the mobile secu-
rity system processor, the wake signal be-
ing in response to the wake event and
adapted to wake at least a portion of the
mobile device from a power management
mode; and
after providing the wake signal to the mo-
bile device, executing the security instruc-
tions using the mobile security system
processor to manage security services con-
figured to protect the mobile device.
Case: 20-2262 Document: 77 Page: 4 Filed: 11/16/2022
4 CUPP COMPUTING AS v. TREND MICRO INC.
’488 patent, col. 31, ll. 1–19 (security system processor lim-
itation emphasized); see also ’595 patent, col. 31, ll. 14–51;
’683 patent, col. 30, ll. 35–46.1
In March 2019, Trend Micro petitioned the Board for
inter partes review of several claims in the ’488, ’683, and
’595 patents, arguing that the claims were unpatentable as
obvious. As relevant here, Trend Micro relied on Gordon
and Joseph individually to show that all challenged claims
would have been obvious, including the claims’ security
system processor limitation. CUPP responded that the se-
curity system processor limitation required that the secu-
rity system processor be “remote” from the mobile device
processor, and that neither Gordon nor Joseph disclosed
this limitation because both taught a security processor
bundled within a mobile device. CUPP further contended
that the ’595 patent claims’ “security agent” located on the
mobile device, which “perform[s] security services,” was not
disclosed in the prior art. ’595 patent, col. 31, ll. 14–51 &
col. 32, ll. 29–63.
The Board instituted review and, in three final written
decisions, found all the challenged claims obvious over the
prior art. “[C]onstruing the claim[s] in accordance with
the[ir] ordinary and customary meaning . . . as understood
by one of ordinary skill in the art,” 37 C.F.R. § 42.100(b),
the Board held that the challenged claims did not require
that the security system processor be remote from the mo-
bile device processor. The Board was also persuaded that
the ’595 patent’s “security agent” element was obvious over
either Gordon or Joseph. CUPP appealed.
1 The ’595 patent omits the word “mobile” as a mod-
ifier to “security system processor.” ’595 patent, col. 31, ll.
25–26 & col. 32, ll. 44–46. This omission has no signifi-
cance for present purposes. We generally refer to this com-
ponent as the security system processor.
Case: 20-2262 Document: 77 Page: 5 Filed: 11/16/2022
CUPP COMPUTING AS v. TREND MICRO INC. 5
Following the Supreme Court’s decision in United
States v. Arthrex, Inc., 141 S. Ct. 1970 (2021), we remanded
the case to give CUPP an opportunity to request rehearing
of the final written decisions from the Director of the
United States Patent and Trademark Office, while retain-
ing jurisdiction over the appeal. CUPP took that oppor-
tunity, and the Acting Director denied the requests. CUPP
renewed its appeal. We have jurisdiction under 28 U.S.C.
§ 1295(a)(4)(A).
DISCUSSION
“A patent may not be obtained . . . if the differences be-
tween the subject matter sought to be patented and the
prior art are such that the subject matter as a whole would
have been obvious at the time the invention was made to a
person having ordinary skill in the art . . . .” 35 U.S.C.
§ 103(a) (2008). 2 “In reviewing the Board’s determination
on the question of obviousness, we review the Board’s legal
conclusions de novo and its factual findings for substantial
evidence.” Becton, Dickinson & Co. v. Baxter Corp. Eng-
lewood, 998 F.3d 1337, 1339 (Fed. Cir. 2021) (internal quo-
tation marks, citation, and alterations omitted).
In IPR proceedings the Board now applies the Phillips
claim construction standard governing federal courts. See
37 C.F.R. § 42.100(b); Phillips v. AWH Corp., 415 F.3d 1303
(Fed. Cir. 2005) (en banc); Polaris Innovations Ltd. v.
Brent, 48 F.4th 1365, 1372 n.3 (Fed. Cir. 2022).
2 Though Congress amended § 103 in the Leahy-
Smith America Invents Act (“AIA”), Pub. L. No. 112-29,
sec. 3(c), § 103, 125 Stat. 284, 287 (2011), all claims at issue
here have an effective filing date before March 16, 2013,
and so are evaluated under the pre-AIA version of § 103.
See Becton, Dickinson & Co. v. Baxter Corp. Englewood,
998 F.3d 1337, 1339 n.2 (Fed. Cir. 2021).
Case: 20-2262 Document: 77 Page: 6 Filed: 11/16/2022
6 CUPP COMPUTING AS v. TREND MICRO INC.
I
We begin with the security system processor limita-
tion. 3 CUPP argues that the claims require that the secu-
rity system processor be separate and remote from the
mobile device. It relies on the language of the claims, the
specification, and disclaimers made during the original ex-
amination and IPR proceedings.
A
The security system processor limitation requires that
“the mobile device hav[e] a mobile device processor differ-
ent than the mobile security system processor.” ’488 pa-
tent, col. 31, ll. 10–12; see also ’683 patent, col. 31, ll. 6–8
(same); ’595 patent, col. 31, ll. 25–26 (“a security system
processor being different than the mobile device proces-
sor”).
As the Board properly concluded, the fact that the se-
curity system processor is “different” than the mobile de-
vice processor does not suggest that the two processors are
remote from one another. In ordinary usage, “different”
simply means “dissimilar,” see J.A. 12 (quoting general-
purpose dictionaries), and CUPP has given us no reason to
apply a more specialized meaning to the word here. See
also Webster’s Third New International Dictionary 630
(2002) (defining “different” to mean “partly or totally una-
like in nature, form, or quality . . . having at least one prop-
erty not possessed by another”); Phillips, 415 F.3d at 1314
(when “the ordinary meaning of claim language as under-
stood by a person of skill in the art may be readily apparent
3 Because the Board’s reasoning was identical in this
respect in all three final written decisions, and CUPP does
not suggest the existence of material differences among
those decisions, we here cite only to the final written deci-
sion concerning the ’488 patent, Trend Micro Inc. v. CUPP
Computing AS, IPR2019-00764 (P.T.A.B. Aug. 25, 2020).
Case: 20-2262 Document: 77 Page: 7 Filed: 11/16/2022
CUPP COMPUTING AS v. TREND MICRO INC. 7
even to lay judges . . . general purpose dictionaries may be
helpful”). A feature need not be remote from another fea-
ture to be “different.” So two processors may be different
from one another and yet both be embedded in a single de-
vice.
The specification explicitly recognizes as much. In one
“preferred embodiment[]” of the invention, ’488 patent, col.
30, ll. 9–10, “the mobile security system . . . may be incor-
porated within the mobile device.” Id., col. 8, ll. 16–17 (em-
phasis added); see also ’595 patent, col. 30, ll. 55–56 & col.
8, ll. 38–39 (same); ’683 patent, col. 30, ll. 9–10 & col. 8, ll.
17–18 (same). We require “highly persuasive” evidence to
read claims as excluding a preferred embodiment of the in-
vention. Vitronics Corp. v. Conceptronic, Inc., 90 F.3d
1576, 1583–84 (Fed. Cir. 1996). Indeed, “a claim interpre-
tation that excludes a preferred embodiment from the
scope of the claim is rarely, if ever, correct.” Accent Pack-
aging, Inc. v. Leggett & Platt, Inc., 707 F.3d 1318, 1326
(Fed. Cir. 2013) (citation omitted). As we have said, “[t]he
only meaning that matters in claim construction is the
meaning in the context of the patent.” Trustees of Colum-
bia Univ. v. Symantec Corp., 811 F.3d 1359, 1363 (Fed. Cir.
2016). Here, the specification strongly suggests that “dif-
ferent” does not mean “remote,” and nothing in the claims
requires otherwise.
CUPP responds that, because at least independent
claims in the ’488 and ’595 patents require the security sys-
tem to send a wake signal “to” the mobile device, and “com-
municate with” the mobile device, the system (and its
processor) must be remote from the mobile device proces-
sor. ’595 patent, col. 31, ll. 14–51; ’488 patent, col. 31, ll. 2–
15 (teaching that the security system can “communicat[e]
with the mobile device”). That conclusion is reinforced,
CUPP says, because in some claims the security system
communicates “with the mobile device” via a “data port.”
’488 patent, col. 31, ll. 2–5; see also ’683 patent, col. 31, ll.
3–5 (same); ’595 patent, col. 31, ll. 16–18 (disclosing that
Case: 20-2262 Document: 77 Page: 8 Filed: 11/16/2022
8 CUPP COMPUTING AS v. TREND MICRO INC.
the security system’s “communication interface [is] config-
ured to communicate with a mobile device”). CUPP relies
in addition on language in the ’595 patent that there be a
“communication interface” as suggesting that the mobile
device must be in communication with an external device.
’595 patent, col. 31, ll. 16–18.
We are not persuaded. The Board properly construed
the security system processor limitation in line with the
specification. Just as a person can send an email to him-
or herself, and an employee can communicate with the en-
tity that employs that person, a unit of a mobile device can
send a signal “to,” or “communicate with,” the device of
which it is a part. Nor does the fact that some claims men-
tion a “data port” suggest otherwise. The dependent claims
in the ’595 patent teach that the security system’s “commu-
nication interface” can communicate with the mobile device
via “an external port” or “an internal port.” ’595 patent,
col. 31, ll. 55–60. And extrinsic evidence does not overcome
the intrinsic evidence. To the contrary, the record includes
extrinsic evidence further supporting the conclusion that a
person of skill in the art around the time of the patents’
effective filing date would read “port” to include internal
ports. J.A. 2183, 2184, 2193, 2214. The claims’ reference
to the security system’s communication with the mobile de-
vice thus does not exclude communication via an internal
port.
Case: 20-2262 Document: 77 Page: 9 Filed: 11/16/2022
CUPP COMPUTING AS v. TREND MICRO INC. 9
B
1
CUPP argues that, because it disclaimed a non-remote
security system processor during the initial examination of
one of the patents at issue, the Board’s construction is er-
roneous. The Board properly rejected that argument.
During prosecution of the ’683 patent, the Patent Office
examiner found all claims in the application obvious in
light of the prior art, relying on U.S. Patent App. Pub. No.
2010/0195833 Al (“Priestley”) to show that the security sys-
tem processor limitation was disclosed in the prior art. The
examiner found that Priestley taught a mobile security sys-
tem, called a Trusted Platform Module (“TPM”), different
than a mobile device processor. According to the examiner,
the TPM in Priestley is usually “implemented as an addi-
tional stand-alone chip attached to a PC motherboard” and
“may be implemented in hardware or software.” Trend Mi-
cro Inc. v. CUPP Computing AS, IPR2019-00764, Ex. 2001
at 127. As such, the “use of separate security processors
would be an obvious interchangeable variation of the un-
derlying hardware.” Id. CUPP’s response to the examiner
could be read to say, inter alia, that if the TPM “were im-
plemented as a stand-alone chip attached to a PC mother-
board,” it would be “part of the motherboard of the mobile
devices” rather than being a separate processor. J.A. 3578.
The TPM would therefore not constitute “a mobile security
system processor different from a mobile system proces-
sor.” Id. The examiner allowed the claims.
“The doctrine of prosecution disclaimer precludes pa-
tentees from recapturing through claim interpretation spe-
cific meanings disclaimed during prosecution.” Mass. Inst.
of Tech. v. Shire Pharms., Inc., 839 F.3d 1111, 1119 (Fed.
Cir. 2016) (ellipsis, alterations, and citation omitted).
However, a patentee will only be bound to a “disavowal
[that was] both clear and unmistakable.” Id. (citation omit-
ted). Thus, where “the alleged disavowal is ambiguous, or
Case: 20-2262 Document: 77 Page: 10 Filed: 11/16/2022
10 CUPP COMPUTING AS v. TREND MICRO INC.
even amenable to multiple reasonable interpretations, we
have declined to find prosecution disclaimer.” Avid Tech.,
Inc. v. Harmonic, Inc., 812 F.3d 1040, 1045 (Fed. Cir. 2016)
(internal quotation marks and citation omitted).
CUPP’s purported disclaimer did not unmistakably re-
nounce security system processors embedded in a mobile
device. CUPP asserted that, because the TPM could be
part of the mobile device’s motherboard, Priestley did not
disclose a security system processor different than a mobile
device processor. Under one plausible reading, CUPP’s
point was that Priestley failed to teach different processors
because the TPM lacks a distinct processor. Under this in-
terpretation, if the TPM were “a stand-alone chip attached
to a . . . motherboard,” it would rely on the motherboard’s
processor, and not have its own different processor. J.A.
3578. CUPP’s comment to the examiner is therefore con-
sistent with it retaining claims to security system proces-
sors embedded in a mobile device with a separate
processor. As the Board properly held, this reading is a
“reasonable interpretation[]” that defeats CUPP’s asser-
tion of prosecutorial disclaimer. Avid Tech., Inc., 812 F.3d
at 1045 (citation omitted); see also J.A. 20–22.
2
CUPP finally contends that the Board erred by reject-
ing CUPP’s disclaimer in the IPRs themselves, disavowing
a security system processor embedded in a mobile device.
For support, CUPP cites our decision in Aylus Networks,
Inc. v. Apple Inc., 856 F.3d 1353 (Fed. Cir. 2017), for the
proposition that patentee disclaimers during IPRs effec-
tively narrow claim scope. The Board concluded that it
could ignore this disavowal in construing the claims. We
agree.
Aylus is of no help to CUPP. Aylus says only that a
patentee’s disclaimer during an IPR can bind the patentee
to a narrower claim interpretation in a subsequent pro-
ceeding, in that case a district court infringement
Case: 20-2262 Document: 77 Page: 11 Filed: 11/16/2022
CUPP COMPUTING AS v. TREND MICRO INC. 11
proceeding. See Aylus, 856 F.3d at 1355, 1361. The rule in
Aylus “ensure[s] that claims are not argued” by the pa-
tentee “one way in order to maintain [the claims’] patenta-
bility and in a different way against accused infringers.”
Id. at 1360. The case says nothing about whether a pa-
tentee’s disavowal is binding in the very proceeding in
which it is made.
We now make precedential the straightforward conclu-
sion we drew in an earlier nonprecedential opinion: “[T]he
Board is not required to accept a patent owner’s arguments
as disclaimer when deciding the merits of those argu-
ments.” VirnetX Inc. v. Mangrove Partners Master Fund,
Ltd., 778 F. App’x 897, 910 (Fed. Cir. 2019). A rule permit-
ting a patentee to tailor its claims in an IPR through argu-
ment alone would substantially undermine the IPR
process. Congress designed inter partes review to “giv[e]
the Patent Office significant power to revisit and revise
earlier patent grants,” thus “protect[ing] the public’s para-
mount interest in seeing that patent monopolies are kept
within their legitimate scope.” Cuozzo Speed Techs., LLC
v. Lee, 579 U.S. 261, 272, 279–80 (2016) (internal quotation
marks, citation, ellipses, and alterations omitted). If pa-
tentees could shapeshift their claims through argument in
an IPR, they would frustrate the Patent Office’s power to
“revisit” the claims it granted, and require focus on claims
the patentee now wishes it had secured. See also Oil States
Energy Servs., LLC v. Greene’s Energy Grp., LLC, 138 S.
Ct. 1365, 1373 (2018) (emphasis altered) (“[T]he decision to
grant a patent is a matter involving . . . the grant of a pub-
lic franchise. Inter partes review is simply a reconsidera-
tion of that grant.”).
To be clear, a disclaimer in an IPR proceeding is bind-
ing in later proceedings, whether before the PTO or in
court. See Aylus, 856 F.3d at 1361. We hold only that a
disclaimer is not binding on the PTO in the very IPR pro-
ceeding in which it is made, just as a disclaimer in a district
court proceeding would not bind the district court in that
Case: 20-2262 Document: 77 Page: 12 Filed: 11/16/2022
12 CUPP COMPUTING AS v. TREND MICRO INC.
proceeding. This follows from the adjudicatory nature of
IPR proceedings as contrasted with initial examination.
See SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1353 (2018)
(contrasting the “inquisitorial process between patent
owner and examiner [in] the initial Patent Office examina-
tion” from the IPR process, which “looks a good deal more
like civil litigation”).
Moreover, Congress created a specialized process for
patentees to amend their claims in an IPR. CUPP’s pro-
posed rule would render that process unnecessary because
the same outcome could be achieved by disclaimer. See 35
U.S.C. § 316(d).
Nullifying Congress’s amendment process would be
particularly perverse because Congress protected the pub-
lic in ways that CUPP’s disclaimer rule would not. Con-
gress gave accused infringers “intervening rights”
protection for substantively amended claims, ensuring that
such claims have only prospective effect. See id. §§ 318(c),
252. CUPP nowhere suggests that such intervening rights
protections apply to claims effectively modified by dis-
claimer. See Marine Polymer Techs., Inc. v. HemCon, Inc.,
672 F.3d 1350, 1362–63 (Fed. Cir. 2012) (en banc). Allow-
ing patentees to modify their claims by disclaimer would
thus effectively allow retrospective amendment in the IPR
process. And because IPR petitioners can challenge exist-
ing claims only for non-compliance with §§ 102 or 103 of
the Patent Act, see 35 U.S.C. § 311(b), under CUPP’s pro-
posal a patentee could modify a claim free of scrutiny for
compliance with other patentability requirements, such as
§ 101. The amendment process carries no such risk. See
Uniloc 2017 LLC v. Hulu, LLC, 966 F.3d 1295, 1303–04
(Fed. Cir. 2020) (the Board “is permitted to review and
deny proposed substitute claims during IPR proceedings
for patent ineligibility pursuant to § 101”). In brief, if pa-
tent owners could freely modify their claims by argument
in an IPR, they could avoid the public-protecting amend-
ment process that Congress prescribed. That cannot be.
Case: 20-2262 Document: 77 Page: 13 Filed: 11/16/2022
CUPP COMPUTING AS v. TREND MICRO INC. 13
Disclaimers in an IPR proceeding are not binding in the
proceeding in which they are made.
II
CUPP contends that the Board lacked substantial evi-
dence to find the challenged claims in the ’595 patent obvi-
ous. We disagree.
Unlike the ’488 or ’683 patents, the ’595 patent claims
a “security agent” on the mobile device. ’595 patent, col.
31, ll. 38–40 & col. 32, ll. 41–43. The security agent can
“receive [a] wake signal” from the security system proces-
sor and then “perform security services.” Id. at col. 31, ll.
34–40. The parties refer to this limitation as the “security
agent limitation.” Before the Board, CUPP argued that the
security agent limitation was not obvious because neither
Gordon nor Joseph disclosed a corresponding component.
The Board held that CUPP had not made this argument in
its papers, and so had waived, i.e., forfeited it. And it found
that, in any event, the limitation was obvious over either
piece of prior art.
Because the Board’s merits finding as to Gordon was
supported by substantial evidence, we need not decide
whether its forfeiture determination was an abuse of dis-
cretion, nor consider CUPP’s argument regarding Joseph.
The Board found that Gordon disclosed components
corresponding to the ’595 patent’s security agent and secu-
rity system processor. Gordon describes a “host agent” on
a mobile device that can undertake tasks such as “ini-
tiat[ing] a data delete process, a program update or an en-
cryption key change.” Gordon, col. 15, ll. 52–53, J.A. 1915.
The host agent can act “in coordination with” another unit
known as the “security module” which contains a “firmware
agent.” Id. at col. 3, ll. 36–64, J.A. 1909; see also id. at Fig.
1, J.A. 1903. In one embodiment, the firmware agent can
“wake-up the host so that a data protection measure can be
invoked.” Id. at col. 4, ll. 61–64, J.A. 1909. The Board
Case: 20-2262 Document: 77 Page: 14 Filed: 11/16/2022
14 CUPP COMPUTING AS v. TREND MICRO INC.
concluded that Gordon disclosed a security system proces-
sor (the processor running the firmware agent) that can
wake up a security agent (the host agent) to perform secu-
rity services, rendering the security agent limitation obvi-
ous.
That conclusion was supported by substantial evi-
dence. As the Board found, Gordon’s host agent performs
security services. The host agent can be instructed to “ini-
tiate a data delete process, a program update or an encryp-
tion key change.” Gordon, col. 15, ll. 52–53, J.A. 1915.
Trend Micro’s expert confirmed that several of these proce-
dures are security services. See Jakobsson Declaration
¶ 152, J.A. 5748–49. And like the security agent in the ’595
patent, the host agent appears to perform such services af-
ter receiving a wake-up call from another entity. See Gor-
don, col. 4, ll. 61–64, J.A. 1909 (“[T]he firmware agent [can]
wake-up the host so that a data protection measure can be
invoked.”).
CUPP also argues that the Board’s conclusion in the
’595 final written decision conflicts with its decisions re-
garding the ’488 and ’683 patents. The Board adequately
explained why its findings are consistent. In the ’488 and
’683 patents, the security system processor “manage[s]” se-
curity services. ’488 patent, col. 30, ll. 34–47 (emphasis
added); ’683 patent, col. 31, ll. 2–15 (same). The Board
found that Gordon’s security module and its firmware
agent taught this function. See J.A. 41–44, 139–141. In
the ’488 and ’683 patents, the feature that performs secu-
rity services is not identified. See ’488 patent, col. 30, ll.
34–47; ’683 patent, col. 31, ll. 2–15. In the ’595 patent, the
security agent “perform[s]” security services. ’595 patent,
col. 31, ll. 38–39 (emphasis added). So too, the Board
found, does the host agent in Gordon. See J.A. 90–91.
There is no contradiction between saying that elements in
Gordon (the security module and its firmware agent) man-
age security services and another element (the host agent)
performs them.
Case: 20-2262 Document: 77 Page: 15 Filed: 11/16/2022
CUPP COMPUTING AS v. TREND MICRO INC. 15
CONCLUSION
The Board properly construed the challenged claims,
and its decisions were supported by substantial evidence.
We affirm. 4
AFFIRMED
4 In its briefing, CUPP argues that the Acting Direc-
tor’s denial of the company’s rehearing requests was inva-
lid because he assertedly was not a principal officer under
the Constitution. Our decision in Arthrex, Inc. v. Smith &
Nephew, Inc., 35 F.4th 1328, 1335–40 (Fed. Cir. 2022), fore-
closes this argument, as CUPP conceded at oral argument.
See Oral Arg. at 11:47–12:00. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484138/ | Argued: November 3, 2022
IN THE COURT OF APPEALS
OF MARYLAND
Misc. No. 3
September Term, 2022
IN THE MATTER OF THE APPLICATION
OF WILLIAM WALLACE MONTIER FOR
ADMISSION TO THE BAR OF MARYLAND
Fader, C.J.
Watts
Hotten
Booth
Biran
Gould
Eaves
JJ.
ORDER
Pursuant to Maryland Uniform Electronic Legal
Materials Act
(§§ 10-1601 et seq. of the State Government Article) this document is authentic.
Filed: November 7, 2022
2022-11-07 14:57-05:00
Suzanne C. Johnson, Clerk
IN THE MATTER OF THE APPLICATION * IN THE
OF WILLIAM WALLACE MONTIER * COURT OF APPEALS
FOR ADMISSION TO THE * OF MARYLAND
BAR OF MARYLAND * Misc. No. 3
* September Term, 2022
ORDER
The Court having considered the adverse recommendation of the Character
Committee for the Third Appellate Judicial Circuit and the favorable recommendation of
the State Board of Law Examiners concerning the application of William Wallace Montier
for admission to the Bar of Maryland, it is this 7th day of November, 2022
ORDERED, by the Court of Appeals of Maryland, a majority of the Court
concurring, that the favorable recommendation of the State Board of Law Examiners is
accepted, and it is further
ORDERED, that the applicant, upon taking the oath prescribed by statute,
be admitted to the practice of law in this State.
/s/ Matthew J. Fader
Chief Judge | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484149/ | Court of Appeals
Sixth Appellate District of Texas
JUDGMENT
Karen Sue Pool, Appellant Appeal from the County Court at Law of
Lamar County, Texas (Tr. Ct. No. 91124).
No. 06-22-00041-CV v. Memorandum Opinion delivered by Justice
van Cleef, Chief Justice Morriss and Justice
Marcus Ray Pool, Appellee Stevens participating.
As stated in the Court’s opinion of this date, we find that the appeal should be dismissed
for want of prosecution. Therefore, we dismiss the appeal.
We note that the appellant, Karen Sue Pool, has adequately indicated her inability to pay
costs of appeal. Therefore, we waive payment of costs.
RENDERED NOVEMBER 16, 2022
BY ORDER OF THE COURT
JOSH R. MORRISS, III
CHIEF JUSTICE
ATTEST:
Debra K. Autrey, Clerk | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484147/ | 11/16/2022
IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
September 13, 2022 Session
FARM CREDIT LEASING SERVICES CORP. v. JEFFREY DANIELS
Appeal from the Chancery Court for Lauderdale County
No. 15860 William C. Cole, Chancellor
___________________________________
No. W2020-01576-COA-R3-CV
___________________________________
Lessee disputes the trial court’s denial of his emergency motion to continue leasing
company’s summary judgment hearing. Lessee also appeals the trial court’s grant of
summary judgment for leasing company, despite not responding to discovery requests or
submitting evidence in opposition to summary judgment. Discerning no reversible error,
we affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
and Remanded
J. STEVEN STAFFORD, P. J., W.S. delivered the opinion of the court, in which W. NEAL
MCBRAYER and KENNY ARMSTRONG, JJ., joined.
Daniel Lofton, Memphis, Tennessee, for the appellant, Jeffrey Daniels.
Henry C. Shelton, III, Memphis, Tennessee, and Andrew J. Scavotto, St. Louis, Missouri,
pro hac vice, for the appellee, Farm Credit Leasing Services Corporation.
OPINION
I. FACTUAL AND PROCEDURAL HISTORY
This case stems from the leasing of farm equipment between Plaintiff/Appellee
Farm Credit Leasing Services (“FCL”) and Defendant/Appellant Jeffrey Daniels
(“Appellant”). FCL filed its complaint with the Chancery Court of Lauderdale County (“the
trial court”) on January 22, 2019, alleging breach of contract and, alternatively, unjust
enrichment. Noting that Appellant did not appear to dispute FCL’s request for expedited
relief under Tennessee Code Annotated section 29-30-106, the trial court granted FCL a
writ of possession.
Appellant filed his answer on May 17, 2019. Therein, Appellant raised the
affirmative defenses that “[t]he underlying contract was procured through criminal fraud,
fraud in the inducement and fraud in the factum and [is] void and/or voidable,”1 and “[t]he
underlying contract is void as the consideration for the same does not exist. [I]n other
words, the goods were never delivered and no money is owed on an unperformed contract.”
Appellant went on to admit that he “[did] possess the equipment and [was] ready[,]
willing[,] and able to return the same,” and that the documents spoke for themselves. After
posting a bond, FCL took possession of the equipment in June 2019.
On April 7, 2020, FCL filed a motion for summary judgment, a memorandum of
law, and a statement of undisputed material facts. FCL alleged that it had established the
elements of its claims beyond dispute and that Appellant’s affirmative defenses were
insufficient to avoid summary judgment. Specifically, FCL alleged as follows in its
statement of undisputed material facts:
The Master Lease
3. On or about March 27, 2017, [Appellant] entered into a master equipment
lease agreement with FCL as evidenced by that certain Lease Agreement
dated March 27, 2017, executed and delivered by [Appellant] in favor of FCL
(the “Master Lease”), for the purpose of leasing certain equipment[.]
4. The Master Lease provides that [Appellant] shall be in default if he fails
to make agreed-upon payments, among other actions or omissions.
5. Paragraph 19 of the Master Lease further provides that upon a default, FCL
shall have the right, in its sole discretion to exercise its remedies, which
include declaring the entire amount of rental and other charges due for the
entire Lease Term immediately due and payable; taking immediate
possession of any and all Equipment without notice; selling or leasing any
Equipment or otherwise disposing, holding, or using such Equipment at
FCL’s sole discretion; among other rights and remedies.
The Sprayer Schedule
6. On or about March 27, 2017, [Appellant] entered into a lease schedule
with FCL in connection with the Master Lease, as evidenced by that certain
1
Appellant indicated in his answer that he would be attaching a plea agreement from the federal
fraud case involving Charles Schindler, an equipment broker with whom Appellant met with in relation to
the equipment at issue, but no such document is in the record before us.
-2-
Schedule A identified as contract 001-0085042-000 dated on March 27,
2017, executed and delivered by [Appellant] in favor of FCL (the “Sprayer
Schedule”), for the purpose of leasing a 2017 HARDI Sprayer with a 120’
boom, model Saritor 5000, serial number 0314104240 (the “Sprayer”)[.]
7. Pursuant to the Sprayer Schedule, [Appellant] agreed to make one payment
of $82,484.64 in April 2017, followed by five consecutive annual payments
of $37,484.64 commencing in April 2018.
...
10. [Appellant] failed to adhere to his payment obligations under the Sprayer
Schedule and is in default.
11. Accordingly, and pursuant to the terms and conditions set forth in the
Master Lease, FCL is entitled to recover the amounts due under the terms of
the Sprayer Schedule, as of March 4, 2020, of not less than $327,015.36, in
addition to prejudgment interest, costs, legal expenses and reasonable
attorneys’ fees incurred.
Delivery and Acceptance
...
17. In connection with the Lease, [Appellant] signed a Delivery and
Acceptance Certification on April 11, 2017, certifying to FCL that the
Equipment had been delivered and accepted (the “Certification).
18. In the Certification, [Appellant] verified that he had fully inspected the
Equipment to his “complete satisfaction.”
19. [Appellant] verified that he accepted “full responsibility for the Property
‘AS IS’ and ‘WHERE IS,’ including (without limitation) the acceptance of
full responsibility for any necessary delivery and/or installation thereof.”
...
[Appellant’s] Defaults
22. As a consequence of [Appellant’s] defaults, [FCL] issued a Notice of
default to [Appellant] on August 23, 2018.
23. [Appellant] ignored [FCL’s] correspondence and failed to cure the
-3-
defaults.
24. FCL accelerated the remaining amounts due pursuant to the terms and
conditions set forth in the Leases.
25. On June 30, 2019, FCL repossessed the Equipment and sold it at auction
on February 19, 2020 for a net profit of $36,103.78.
...
29. After accounting for the sale, the total amounts due under the Lease, as
of March 4, 2019, is $327,015.36, plus prejudgment interest, costs, legal
expenses and reasonable attorneys’ fees incurred.
(Citations omitted). FCL also described its filing of a UCC-1 Financing Statement
regarding the lease with the Tennessee Secretary of State on April 13, 2017, the damaged
condition of the equipment upon repossession, and the reasonableness of its sale of the
equipment. FCL further stated that it had served discovery requests, including requests for
admission, on Appellant in March 2019. Because Appellant did not respond to the requests,
FCL argued that, pursuant to Tennessee Rule of Civil Procedure 36.01, the requests should
be deemed admitted. FCL cited to both the requests and an affidavit from Barrett Kranz, a
senior special assets officer with FCL, to provide support for the allegations within the
statement of undisputed material facts, with the referenced documents attached as exhibits.
Appellant did not file a response to FCL’s motion for summary judgment nor contest
the statement of undisputed material facts. A hearing on FCL’s motion for summary
judgment was first scheduled for June 2, 2020. Pursuant to Appellant’s request, the hearing
was rescheduled for August 4, 2020. Then, at 12:17 AM on the day of the rescheduled
hearing, Appellant’s counsel emailed the court clerk an emergency motion to continue,
which was formally filed at 9:18 AM that morning. In the motion, Appellant’s counsel
requested a two-week continuance “to allow additional time to prepare a response” based
on the “extraordinary measures” being taken after his law partner’s July 20, 2020 COVID-
19 diagnosis, “including: quarantining from the physical office, and managing additional
casework[.]”
The trial court proceeded with the scheduled hearing and Appellant’s counsel failed
to appear. After hearing from FCL, the trial court orally denied Appellant’s emergency
motion and granted summary judgment for FCL. Before a written order could be entered,
however, Appellant filed a motion “to Set Aside Judgment or Alternatively to Alter or
Amend Judgment Pursuant to T.R.C.P. 62.02 and T.R.C.P. 59.01” on September 17, 2020.2
2
Appellant’s motion indicated that FCL had circulated a draft order in which Appellant’s
emergency motion for a continuance was denied and summary judgment was granted to FCL.
-4-
Appellant pointed to the federal judgment against Charles Schindler and a restitution order
granted in favor of FCL, which Appellant asserted constituted the money allegedly owed
by Appellant. Appellant argued that “[t]here is no joint and several liability alleged in
[FCL’s] complaint nor is that possible in this case. The restitution judgment predates and
supersedes the instant judgment such that it is not possible for it to have prospective
application[.]” Appellant therefore argued that “Rule 62.02(4) allows a set aside” of the
trial court’s order. Appellant also cited to “the catch-all provisions of T.R.C.P. 62.02(5)”
in requesting the trial court to “reconsider its ruling and set aside the judgment.”3 Finally,
Appellant asked the trial court to make a finding of fact pursuant to Rule 59.04, in order to
“explain—with judicial notice of the Schindler crimes, and with judicial notice of the
conviction[—how it] can nevertheless assert that no genuine issue of material fact exists
as to the transaction in question.” In response, FCL argued that Appellant had raised no
law or material fact sufficient to justify altering or amending the judgment.
On September 30, 2020, the trial court entered its written order denying Appellant’s
emergency motion for a continuance and granting FCL’s motion for summary judgment.
Therein, the trial court noted that Appellant had previously been granted a continuance but
had never responded to FCL’s motion for summary judgment or requests for admission.
As a result, the trial court found that FCL’s motion was well-taken and that FCL was
entitled to a total judgment of $342,044.10, “consisting of the amounts due and owing
under the Lease Agreement at issue, and [FCL’s] attorneys’ fees and costs.”
Appellant’s motion to set aside was called for hearing on October 20, 2020.
Appellant failed to appear.4 In its November 20, 2020 order denying the motion, the trial
court outlined Appellant’s failure to (1) respond to FCL’s motion for summary judgment;
(2) attend the summary judgment hearing; (3) attend the hearing on Appellant’s motion to
alter or amend; and (4) inform either the trial court or FCL of his intention to not appear.
The trial court denied Appellant’s motion. Appellant appealed.
II. ISSUES PRESENTED
As stated in his brief, Appellant raises the following issues for our review:
3
Rule 62.02 of the Tennessee Rules of Civil Procedure governs execution on judgments when
certain specified motions are filed. It appears that Appellant was attempting to cite Rule 60.02 of the
Tennessee Rules of Civil Procedure, which governs motions to set aside final judgments, i.e., judgments
for which the time has passed to appeal. Of course, Rule 60.02 was the not the correct rule either, as no
final judgment had yet been entered. Appellant’s motion would have more correctly been filed under either
Rule 59.04 (governing motions to alter or amend) or even Rule 54.04 (governing revision of non-final
judgments), given that no written order had been entered when Appellant filed his motion. Appellant has
not appealed the denial of this motion, so the question of the proper rule governing it need not be decided
in this appeal.
4
No explanation was ever provided for this failure.
-5-
1. Whether the Trial Court erred in granting summary judgment in favor of [FCL]
as it neither rendered any factual determination nor made any legal analysis on
[Appellant’s] properly asserted affirmative defenses.
2. Whether the Trial Court erred in denying [Appellant’s] properly filed
Emergency Motion to Continue Hearing on [FCL’s] Motion for Summary
Judgment as it neither rendered any factual determination nor made any legal
analysis under T.R.C.P. 6.02.
In addition to refuting Appellant’s assignments of error, FCL raises a separate issue
concerning its entitlement to attorney’s fees in defending against a frivolous appeal.5
III. ARGUMENT
A.
We begin with Appellant’s second issue because its outcome largely determines the
success of Appellant’s first argument. As an initial matter, we note that Appellant frames
this issue as one involving a motion to continue the hearing. Indeed, Appellant’s August 4,
2020 motion is captioned as an emergency motion to continue. In his appellate brief,
however, Appellant frames his motion not merely as a motion to continue the hearing but
also as a motion seeking an enlargement of time in which to file a response to FCL’s motion
for summary judgment under Rule 6.02 of the Tennessee Rules of Civil Procedure.
Appellant’s choice to frame his argument in this matter is no doubt strategic, as a short
continuance of the hearing may not have been sufficient to enable Appellant to file a
response to the motion for summary judgment. And as detailed infra, Appellant had little
hope of avoiding summary judgment in the absence of a response. Specifically, Appellant
takes issue with the trial court’s failure to “make any analysis under [] Rule [] 6.02.”
Rule 6.02 provides disparate rules regarding how a party may obtain an enlargement
of time to meet a deadline set by a rule, statute, or court order depending on when the
request is made. If the request is made before the expiration of the subject deadline, the
trial court may grant the request “with or without motion or notice[.]” Tenn. R. Civ. P.
6.02. If, however, a party is seeking an enlargement of time to meet a deadline “after the
expiration of the specified period” in which the act was to be performed, the trial court
may, in its discretion, grant the request only “upon motion . . . where the failure to act was
the result of excusable neglect.” Tenn. R. Civ. P. 6.02. There is no dispute that to the extent
this issue was properly raised at all, only the latter, more limited situation is at issue in this
appeal. See also Tenn. R. Civ. P. 56.04 (giving non-moving parties until five days in
5
Although the lease agreement between the parties contains an attorney’s fees provision, FCL only
requests its appellate fees based on frivolous appeal pursuant to Tennessee Code Annotated
section 27-1-122.
-6-
advance of a scheduled hearing to respond to a motion for summary judgment).
In asserting that the trial court failed to make an analysis under Rule 6.02, we
assume that Appellant is referring to the following factors, which generally govern the
question of whether excusable neglect has been shown: “(1) the risk of prejudice to parties
opposing the late filing, (2) the delay and its potential impact on proceedings, (3) the
reasons why the filings were late and whether the reasons were within the filer’s reasonable
control, and (4) the good or bad faith of the filer.” Williams v. Baptist Mem’l Hosp., 193
S.W.3d 545, 551 (Tenn. 2006) (citing Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd.
P’ship, 507 U.S. 380, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993)). A trial court’s decision
to grant or deny a motion under Rule 6.02 is reviewed for an abuse of discretion. Id. This
standard does not permit an appellate court to substitute its judgment for that of the trial
court. Milan Supply Chain Sols., Inc. v. Navistar, Inc., 627 S.W.3d 125 (Tenn. 2021)
(citations omitted). Instead, “[a]n abuse of discretion occurs when a trial court ‘applies an
incorrect legal standard, or reaches a decision which is against logic or reasoning that
causes an injustice to the party complaining.’” Id. (citing Borne v. Celadon Trucking
Servs., Inc., 532 S.W.3d 274, 294 (Tenn. 2017)).
It is axiomatic, however, that arguments may not be raised for the first time on
appeal. Powell v. Cmty. Health Sys., Inc., 312 S.W.3d 496, 511 (Tenn. 2010) (citations
omitted). Moreover, this Court merely corrects errors committed by trial courts.
McCormick v. McCormick, No. W2019-00647-COA-R3-CV, 2020 WL 1042500, at *4
(Tenn. Ct. App. Mar. 4, 2020) (citing Mosley v. State, 475 S.W.3d 767, 774 (Tenn. Ct.
App. 2015)). Respectfully, Appellant’s vague and confusing trial court motion does not
cite Rule 6.02 or mention excusable neglect. Instead, Appellant’s motion only makes a
perfunctory reference to the need for a continuance to “prepare a response[,]” presumably
to the summary judgment motion, and argues that FCL will not be prejudiced by the delay.6
The trial court cannot commit an error by failing to undergo an analysis that it is not asked
to perform. Id. (finding that “the trial court was under no duty [to] ‘fill in the gaps’ of
[w]ife’s argument by construing her actual request to modify alimony as in fact a request
to interpret the obligation as an allocation of marital debt.” (citation omitted)); cf. State v.
Vance, 596 S.W.3d 229, 253 (Tenn. 2020) (“A trial court cannot evaluate an objection that
is not made.”). As a result, we have serious doubts that the question of excusable neglect
was properly raised before the trial court. Cf. In re Adoption of E.N.R., 42 S.W.3d 26, 32
(Tenn. 2001) (noting that an argument may be waived when it is, inter alia, “minimally
addressed”).
We need not decide, however, whether Appellant’s motion was sufficient to put the
trial court on notice that he was seeking an enlargement of time under Rule 6.02 because
we nevertheless conclude that, even if properly raised, the trial court did not abuse its
6
Appellant’s motion to set aside, alter, or amend the judgment also does not reference excusable
neglect.
-7-
discretion in denying Appellant’s request.7 Indeed, in addition to Appellant’s failure to
raise his request in a well-defined manner, the motion, if construed as a request for an
enlargement of time to respond to FCL’s summary judgment motion, suffers from multiple
additional infirmities. 8
First, we note that while the motion to continue only sought a short continuance, the
overall delay in this case was lengthy and pervasive.9 FCL filed its complaint in January
2019, and Appellant did not file an answer until May 2019. FCL propounded discovery
requests on Appellant in March 2019, and Appellant offered no response. FCL’s motion
for summary judgment was filed in April 2020, and Appellant did not file a response in the
two months prior to the initial hearing date of June 2, 2020. The hearing was then continued
to August 4, 2020, at Appellant’s request. This provided Appellant with an additional
month in which to file a response to FCL’s motion, and still no response was filed prior to
the rescheduled hearing. Neither did Appellant respond to discovery during this period or
propound any discovery on FCL.
Thus, by the time that Appellant’s counsel’s law partner was diagnosed with
COVID-19, nearly three and one-half months had elapsed in which Appellant could have
responded to the motion for summary judgment and more than a year since this relatively
simple breach of contract case had been initiated. No explanation was provided for the
failure to prepare a response in this period prior to the “extraordinary measures” taken by
7
The practice of proceeding to address the merits of an issue that is arguably waived has significant
support in this State. See, e.g., Lafarge North America v. Warren Mills et al., No. W2020-00959-COA-
R3-CV, 2022 WL 704279, at *3 (Tenn. Ct. App. Mar. 9, 2022), perm. app. denied (Tenn. Aug. 4, 2022)
(noting that an issue may have been waived, but assuming arguendo that the issue was not waived to hold
that the issue still lacked merit); Starr v. State, No. C.C.A. 89-154-III, 1990 WL 51759, at *1 (Tenn. Crim.
App. Apr. 27, 1990) (“Moreover, assuming arguendo the inapplicability of the waiver rule, the appellant’s
issue would be meritless.”). We note, however, that the Tennessee Supreme Court has recently cautioned
against the intermediate appellate courts addressing issues unless they “were both preserved in the trial
court and presented on appeal.” State v. Bristol, No. M2019-00531-SC-R11-CD, 2022 WL 5295777, at *3
(Tenn. Oct. 7, 2022). When this court considers an unpreserved issue, it must ensure that the parties are
afforded “notice and an opportunity to be heard on the matter.” Id. at *7. The basis of this ruling was that
it was unfair to reverse a judgment against a party who had “no inkling that the issue was in play and
therefore no reason to develop a record on the issue, research it, or address it in its briefs.” Id. at *6. In this
case, the issue of excusable neglect was briefed by Appellant and FCL was given an opportunity to respond.
Moreover, we have ultimately concluded that excusable neglect is not a basis for reversal of the trial court.
As such, we conclude that our consideration of this issue does not run afoul of Bristol.
8
We reiterate that at no time did Appellant explicitly ask for an enlargement of time in which to
file a response to FCL’s motion for summary judgment and cite as the basis for that request excusable
neglect. It is undoubtedly the better practice for parties to explicitly ask for the relief they desire. We stress
that future litigants should not construe our decision to read Appellant’s motion in the best possible light
and thus address its merits as an indication that we will be as forgiving of similar deficiencies in the future.
9
Because Appellant chooses to frame his issue as involving a request for an enlargement of time
to respond to the motion for summary judgement, we consider all of the delays in the case and their
explanations, rather than merely the need for a continuance of the summary judgment hearing due to the
COVID-19 diagnosis.
-8-
Appellant’s counsel in response to his partner’s COVID-19 diagnosis.
Although “[p]rejudice will not ordinarily be presumed merely from the passage of
time,” Douglas v. Est. of Robertson, 876 S.W.2d 95, 97 (Tenn. 1994), these circumstances
indicate that FCL would indeed be prejudiced by the delay the last-minute enlargement of
time would create. Specifically, FCL had been waiting months not just for Appellant to
respond to the summary judgment motion, but also for Appellant to meaningfully
participate in this case at all. Indeed, Appellant’s bare and oblique motion provides no
indication of how a two-week continuance would allow Appellant to formulate a response
rather than continue to prolong the case. See F & M Bank v. Fleming, No. M2020-01086-
COA-R3-CV, 2021 WL 4438550 (Tenn. Ct. App. Sept. 28, 2021), perm. app. denied
(Tenn. Jan. 12, 2022) (affirming denial of additional time for discovery when the motion
for summary judgment was not heard for nearly three months, during which time the
appellant conducted no discovery).
The lack of explanation for the overall delays in the case or for how the enlargement
of time would actually result in meaningful action by Appellant is especially important in
this case because in addition to Rule 6.02, Appellant’s motion must also comply with Rule
56.07 of the Tennessee Rules of Civil Procedure. In particular, Rule 56.07 provides as
follows:
Should it appear from the affidavits of a party opposing the motion that such
party cannot for reasons stated present by affidavit facts essential to justify
the opposition, the court may refuse the application for judgment or may
order a continuance to permit affidavits to be obtained or depositions to be
taken or discovery to be had or may make such other order as is just.
Thus, the trial court may grant a party opposing summary judgment more time to marshal
evidence when it is shown to be necessary “from the affidavits” filed by the non-moving
party. Id. A motion for additional time to respond to a summary judgment motion therefore
does not comply with Rule 56.07 when it is not accompanied by an affidavit and does not
indicate why the evidence needed to oppose the motion had not yet been obtained. See In
re Rhyder C., No. E2021-01051-COA-R3-PT, 2022 WL 2837923, at *5 (Tenn. Ct. App.
July 21, 2022) (“Mother did not present any affidavits to support her contention that she
could not present the facts necessary to justify opposing the motion. Further, her motion
failed to explain why the affidavits she needed to oppose the motion could not be obtained.
In sum, Mother’s motion did not comply with Rule 56.07.”).
Appellant’s motion, however, was not accompanied by an affidavit or proof of any
kind in support of the allegations contained therein. Moreover, neither Appellant’s motion
to continue nor his motion to alter or amend ever detailed what more Appellant required to
be able to properly respond to FCL’s motion or why such evidence had not been obtained
in the three months that the motion was pending. Cf. Cardiac Anesthesia Servs., PLLC v.
-9-
Jones, 385 S.W.3d 530, 538 (Tenn. Ct. App. 2012) (holding that a trial court only errs in
denying a motion for more time to marshal evidence to respond to a summary judgment
motion when “the non-moving party can show that ‘the requested discovery would have
assisted [the non-moving party] in responding to [the moving party’s] motion for summary
judgment’” (quoting Regions Fin. Corp. v. Marsh USA, Inc., 310 S.W.3d 382, 401 (Tenn.
Ct. App. 2009))). Appellant’s course of conduct in refusing to respond to essentially
anything and rarely appearing for scheduled hearings suggests that no matter how much
time Appellant was given, it was not likely that a sufficient response would ever be
forthcoming.10 Therefore, even if we were to assume that Appellant was acting in good
faith in filing his motion, the prejudice to FCL, the delay, and the failure to explain either
the overall delay or how the additional time would be used to obtain evidence all weigh in
favor of denying Appellant’s August 4, 2020 motion.
In sum, Appellant has not shown that the trial court’s decision to deny him an
eleventh-hour continuance was an abuse of discretion. Instead, this case has been plagued
by a lack of diligence by Appellant. Moreover, because Appellant failed to explain how
the continuance would allow him to finally respond to the motion for summary judgment
in light of his failure to engage in any form of discovery, we have little choice but to
conclude that Appellant would be left in the same predicament and the outcome of FCL’s
motion for summary judgment would not have been altered regardless of any additional
time Appellant received. The law, however, does not require the taking of a fruitless act.
Raht v. Union Consol. Min. Co. of Tennessee, 73 Tenn. 1, 58–59 (1880) (“The law never
requires a useless and fruitless thing to be done, or an unnecessary and meaningless
ceremony to be performed.”); Williams v. Home Fire & Marine Ins. Co. of Cal., 25 Tenn.
App. 351, 157 S.W.2d 845, 847 (1941) (“[T]he law will not require the doing of a vain
or useless thing.”). Under these circumstances, Appellant’s request to continue the
summary judgment hearing in order to be allowed more time to respond to FCL’s motion
for summary judgment was properly denied. Thus, regardless of whether we treat
Appellant’s emergency motion as one for enlargement of time or for a continuance, the
trial court did not abuse its discretion in denying Appellant’s motion. See Howell v.
Ryerkerk, 372 S.W.3d 576, 580 (Tenn. Ct. App. 2012) (noting that the analysis and
standard of review for determining whether to grant a continuance is similar to the question
of whether to grant an enlargement of time).
B.
We turn next to the trial court’s decision to grant FCL’s motion for summary
judgment. The grant or denial of a motion for summary judgment is a matter of law;
therefore, our review is de novo with no presumption of correctness. See Rye v. Women’s
Care Ctr. Of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015). As such, this Court
10
As a reminder, Appellant could not even be bothered to appear for a hearing he scheduled on his
motion to set aside the grant of summary judgment.
- 10 -
must “make a fresh determination of whether the requirements of Rule 56 of the Tennessee
Rules of Civil Procedure have been satisfied.” Id.
“Summary judgment is appropriate when ‘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.’” Id. (quoting Tenn. R. Civ. P. 56.04). A party bearing the burden of
proof at trial who moves for summary judgment may attach a supporting affidavit to its
motion but must include “a separate concise statement of the material facts as to which the
moving party contends there is no genuine issue for trial.” Tenn. R. Civ. P. 56.03. “[T]o
survive summary judgment, the nonmoving party ‘may not rest upon the mere allegations
or denials of [its] pleading,’ but must respond, and, by affidavits or one of the other means
provided in Tennessee Rule 56, ‘set forth specific facts’ at the summary judgment stage
‘showing that there is a genuine issue for trial.’” Rye, 477 S.W.3d at 265 (emphasis
omitted) (quoting Tenn. R. Civ. P. 56.06). After the parties have received adequate time
for discovery, “summary judgment should be granted if the nonmoving party’s evidence at
the summary judgment stage is insufficient to establish the existence of a genuine issue of
material fact for trial.” Id. (emphasis omitted) (citing Tenn. R. Civ. P. 56.04, 56.06).
Here, FCL bore the burden of proof at trial. In its motion for summary judgment,
FCL alleged that the undisputed facts established a prima facie breach of contract claim.
“The essential elements of any breach of contract claim include (1) the existence of an
enforceable contract, (2) nonperformance amounting to a breach of the contract, and (3)
damages caused by the breach of the contract.” Leedy v. Hickory Ridge, LLC, No. E2022-
00035-COA-R3-CV, 2022 WL 9691763, at *9 (Tenn. Ct. App. Oct. 17, 2022) (quoting
ARC Lifemed, Inc. v. AMC-Tennessee, Inc., 183 S.W.3d 1, 26 (Tenn. Ct. App. 2005)).
To establish these elements, FCL relied on its statement of undisputed material
facts. The statement of undisputed material facts in turn relied on various contractual
documents, an affidavit from Mr. Kranz, and Appellant’s unanswered requests for
admission. At oral argument, FCL conceded that the trial court did not specifically rule that
the requests were admitted, but maintained that the requests were properly relied upon. In
the alternative, FCL suggested that there was sufficient support for its alleged material facts
without reference to the requests for admission. It is true that requests for admission that
are not denied are generally deemed admitted. Tenn. R. Civ. P. 36.01 (“The matter is
admitted unless, . . . the party to whom the request is directed serves upon the party
requesting the admission a written answer or objection addressed to the matter[.]”). In a
typical case, however, the trial court specifically rules that requests are admitted. Yet, the
trial court did not explicitly deem the requests admitted. Regardless, we agree with FCL
that the documents and affidavit submitted in support of its motion are sufficient to
establish the material facts without reference to the requests. Specifically, these documents
established (1) that there had been an equipment lease between the parties; (2) that
Appellant failed to make payments required under the lease; and (3) that there remained a
- 11 -
deficiency after the reasonable sale of the equipment. These facts, if undisputed, establish
a breach of contract by Appellant.
Because FCL met its burden at the summary judgment stage, the burden shifted to
Appellant to show “a genuine issue for trial.” Rye, 477 S.W.3d at 265. Courts have
consistently stressed that a party opposing summary judgment may not simply rest on its
pleadings, but must affirmatively oppose the motion. See, e.g., id.; Holland v. City of
Memphis, 125 S.W.3d 425, 428 (Tenn. Ct. App. 2003); Akers v. Heritage Med. Associates,
P.C., No. M2017-02470-COA-R3-CV, 2019 WL 104130 (Tenn. Ct. App. Jan. 4, 2019).
Indeed, Rule 56.03 requires that a party opposing a motion for summary judgment serve
and file a response to the motion. See Tenn. R. Civ. P. 56.03 (“Any party opposing the
motion for summary judgment must, not later than five days before the hearing, serve and
file a response to each fact set forth by the movant[.]”) (emphasis added). The record
contains no response filed by Appellant in opposition to the motion.
As Appellant did not challenge FCL’s statement of undisputed material facts, the
trial court properly determined that these facts were undisputed. See Holland, 125 S.W.3d
425, 428 (“Thus the material facts set forth in the statement of the moving party may be
deemed admitted in the absence of a statement controverting them by the opposing party.”);
Brennan v. Goble, No. E2020-00671-COA-R3-CV, 2021 WL 2156443, *6 (Tenn. Ct.
App. May 27, 2021) (“[A] trial court may consider statements of fact as admitted when a
non-moving party fails to respond to the moving party’s statement of material facts.”). As
a result, the undisputed material facts showed that Appellant owed an outstanding balance
of $327,015.36, plus interest and attorney’s fees based on the terms of the equipment lease.
On appeal, Appellant relies on his affirmative defenses to establish that FCL is not
entitled to judgment as a matter of law. If, however, Appellant intended to use his
affirmative defenses—that the contract was void and/or voidable as being procured through
fraud, or otherwise void for lack of consideration—to defeat summary judgment, more
needed to be done than merely reciting the defenses in his answer. Rye, 477 S.W.3d at 265
(“The nonmoving party ‘must do more than simply show that there is some metaphysical
doubt as to the material facts.’ The nonmoving party must demonstrate the existence of
specific facts in the record which could lead a rational trier of fact to find in favor of the
nonmoving party.” (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 586, 106 S. Ct. 1348, 89 L.Ed.2d 538 (1986))). At no point in the trial court
proceedings did Appellant address how the workings of the federal fraud case, involving
the equipment dealer from whom he initially leased the equipment, impacted his alleged
breach of contract with FCL. Nor did Appellant explain how “the goods were never
delivered,” making the contract void for lack of consideration, but still FCL was able to
retrieve the equipment from his possession. And he certainly did not present evidence of
any kind to support these arguments or his affirmative defenses in general.11 Rather,
11
Despite Appellant’s failure to meet his burden and adequately establish his affirmative defenses,
- 12 -
Appellant did exactly what our supreme court prohibited in Rye—he rested solely upon the
allegations in his pleadings without submitting proof to show that there was a genuine issue
for trial. See Rye, 477 S.W.3d at 265; see also Tennessee Farmers Mut. Ins. Co. v. Farrar,
337 S.W.3d 829, 837 (Tenn. Ct. App. 2009) (“[T]he burden of proving an affirmative
defense is on the party asserting it.”). Therefore, Appellant’s failure to respond to the
motion for summary judgment or oppose the statement of undisputed material facts,
unfortunately, “prove[d] fatal in the trial court and upon appeal.” Holland, 125 S.W.3d at
428–29 (citing Mark VII Transp. Co. v. Belasco, No. W2002-00450-COA-R3-CV, 2002
WL 31895714, at * 4–5 (Tenn. Ct. App. Dec. 30, 2002)). The trial court’s decision to grant
summary judgment to FCL is therefore affirmed.
C.
FCL also asks for damages incurred in responding to a frivolous appeal under
Tennessee Code Annotated section 27-1-122, which provides as follows:
When it appears to any reviewing court that the appeal from any court of
record was frivolous or taken solely for delay, the court may, either upon
motion of a party or of its own motion, award just damages against the
appellant, which may include, but need not be limited to, costs, interest on
the judgment, and expenses incurred by the appellee as a result of the appeal.
“An appeal is frivolous when it ‘has no reasonable chance of success’ or is ‘so
utterly devoid of merit as to justify the imposition of a penalty.’” Stokes v. Stokes, No.
M2018-00174-COA-R3-CV, 2019 WL 1077263, at *10 (Tenn. Ct. App. Mar. 7, 2019)
(quoting Chiozza v. Chiozza, 315 S.W.3d 482, 493 (Tenn. Ct. App. 2009)). In that vein, a
“a party’s failure to point to any evidence or rule of law entitling him or her to relief may
be a basis for a court to conclude an appeal is frivolous.” Id. (citing Jackson v. Aldridge,
6 S.W.3d 501, 504 (Tenn. Ct. App. 1999)). An award of appellate attorney’s fees is within
this Court’s sole discretion, though the statute is meant to be applied sparingly “to avoid
discouraging legitimate appeals.” Id. (citing Chiozza, 315 S.W.3d at 493).
Still, here there is no dispute that Appellant failed to provide evidence to support
his emergency motion to continue, failed to respond to FCL’s motion for summary
judgment, failed to properly argue his affirmative defenses, failed to appear for the
summary judgment hearing, and then failed to appear for a hearing set on his own motion
to alter or amend the judgment. No new law or fact was presented in the motion to set aside
the trial court’s judgment or in this appeal. “Any objective review of these factors would
cause a reasonable person to conclude that [Appellant’s] appeal had ‘no reasonable chance
FCL defended against its understanding of Appellant’s argument. Based on the efforts of FCL in developing
the defenses and then refuting them, the trial court specifically found that Appellant’s affirmative defenses
were “insufficient to avoid summary judgment.”
- 13 -
of success.’” Williams v. Williams, 286 S.W.3d 290, 298 (Tenn. Ct. App. 2008) (quoting
Lovelace v. Owens-Illinois, Inc., 632 S.W.2d 553, 555 (Tenn. 1982)). It therefore appears
that this appeal is frivolous or taken merely for delay. As a result, we exercise our discretion
to conclude that this is an appropriate case in which to award FCL damages incurred as a
result of defending against this clearly frivolous appeal.
IV. CONCLUSION
The judgment of the Chancery Court of Lauderdale County is affirmed, and this
cause is remanded to the trial court for a determination of the reasonable costs FCL incurred
in defending against this appeal and all further proceedings necessary and consistent with
this Opinion. Costs of this appeal are taxed to Appellant Jeffrey Daniels, for which
execution may issue if necessary.
S/ J. Steven Stafford
J. STEVEN STAFFORD, JUDGE
- 14 - | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484162/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-1256
Lower Tribunal No. F17-6755
________________
Torrence Ross,
Appellant,
vs.
The State of Florida,
Appellee.
An Appeal under Florida Rule of Appellate Procedure 9.141(b)(2) from
the Circuit Court for Miami-Dade County, Joseph Perkins, Judge.
Torrence Ross, in proper person.
Ashley Moody, Attorney General, and Richard L. Polin, Assistant
Attorney General, for appellee.
Before EMAS, LINDSEY, and GORDO, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484166/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D21-2198
Lower Tribunal No. 20-12768
________________
Sara Rodriguez,
Appellant,
vs.
Citizens Property Insurance Corporation,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Gina
Beovides and Jennifer D. Bailey, Judges.
Law Offices of Geoffrey B. Marks, and Geoffrey B. Marks, for appellant.
Williams, Leininger & Cosby, P.A., and Carri S. Leininger and Maureen
Martinez (North Palm Beach), for appellee.
Before FERNANDEZ, C.J., and LINDSEY, and LOBREE, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484146/ | IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Commonwealth of Pennsylvania :
:
v. :
:
John M. DeMaske, : No. 770 C.D. 2019
Appellant : Submitted: August 19, 2022
BEFORE: HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE STACY WALLACE, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE FIZZANO CANNON FILED: November 16, 2022
John M. DeMaske (Appellant) appeals from the judgment of sentence
entered in the Court of Common Pleas of Greene County (trial court) following his
jury trial convictions for six (6) counts of unlawful killing or taking of big game, in
violation of the Game and Wildlife Code,1 34 Pa.C.S. § 2321(a)(2). This Court
previously remanded the matter to the trial court to allow Appellant to file, nunc pro
tunc, a concise statement of errors complained of on appeal pursuant to Pennsylvania
Rule of Appellate Procedure 1925(b) and for the trial court to thereafter issue an
opinion pursuant to Pennsylvania Rule of Appellate Procedure 1925(a). See Com.
v. DeMaske (Pa. Cmwlth., No. 770 C.D. 2019, filed Jan. 4, 2022) (DeMaske I). Both
Appellant and the trial court complied with these directives on remand, and the
1
34 Pa.C.S. §§ 101-2965.
matter now returns to this Court for determination. After careful review, we affirm
the judgment of sentence.
I. Background and Procedural Posture
In our previous decision, this Court outlined the salient facts and
relevant procedural posture underlying this appeal as follows. See DeMaske I, slip
op. at 2-5.
On November 15, 2015, Appellant presented at the home
of Lonnie Starcher.2 See Notes of Testimony, May 31,
2018 (N.T. 5/31/2018) at 51, 75-76, 186. Appellant had
eight deer antler racks in his truck, which he removed and
placed in a storage shed on the property owned and used
by the DeMaske family.3 See id. at 76.
2
Starcher rents a house on property owned by
Appellant’s father, Marko DeMaske, with whom
Starcher has a good relationship. See Notes of
Testimony, May 31, 2018 (N.T. 5/31/2018), at 65,
75, 77 & 80.
3
Starcher explained that he stores some
Christmas things and a lawn mower in the shed,
but that otherwise the DeMaske family owns the
storage shed and accesses it to store things therein
at their convenience. See N.T. 5/31/2018 at 80.
On November 20, 2015, the Pennsylvania Game
Commission received an anonymous report regarding deer
antlers being stored at Starcher’s residence. See N.T.
5/31/2018 at 50-51. As a result, multiple game wardens
arrived at the residence on the evening of November 20,
2015, and discovered eight racks of antlers in the storage
shed, seven of which appeared fairly fresh with blood and
brain matter still attached.4 See id. at 51-52, 65, 72-73.
The game wardens photographed and seized the antlers.
See id. at 52.
2
4
The eighth antler rack appeared to the game
wardens to be an old rack. See N.T. 5/31/2018 at
52, 69.
On November 21, 2015, multiple game wardens
visited Appellant’s home, where they encountered
Appellant. See N.T. 5/31/2018 at 68, 89, 94-95, 99.
Appellant gave a statement to the wardens regarding the
deer antlers while seated in the passenger’s seat of the
wardens’ vehicle. See id. During the interview, Appellant
admitted to the game wardens that he had delivered the
antlers to the shed at Starcher’s. See N.T. 5/31/2018 at 89-
90. He further admitted that he killed three deer with a
crossbow during the hunting season, although he was only
supposed to kill one. See N.T. 5/31/2018 at 90, 98-99,
178. At trial, Appellant testified that he did not
intentionally kill three deer in violation of the rules. See
N.T. 5/31/2018 at 178. Instead, Appellant explained that
he had shot the first deer and tried to track it, without
success. See N.T. 5/31/2018 at 90-91, 99, 178. Appellant
explained that he thereafter shot and killed a second deer,
then found the carcass of the first deer before shooting and
killing a third deer with the aid of his father, Marko
DeMaske.5 See N.T. 5/31/2018 at 90-91, 99-100, 179.
Appellant also explained that three of the deer antlers in
the shed came from roadkill and another was killed by
Kevin Jenkins, another renter.6 See N.T. 5/31/2018 at 90.
Appellant also voluntarily showed the game wardens
pictures of the deer that were on his phone, which the
wardens confiscated. See N.T. 5/31/2018 at 93, 103. The
game wardens also confiscated Appellant’s two crossbows
during the interview. See N.T. 5/31/2018 at 93-94, 98-99,
110, 177.
5
Game wardens also charged Marko DeMaske
with multiple counts of unlawful killing or taking
of big game, but later dropped those charges. See
N.T. 5/31/2018 at 71, 101.
3
6
This version comes from the game wardens’ –
Officers Steve King, Michael Lubic, and Brandon
Bo[n]in – testimony as to what Appellant told the
authorities. See N.T. 5/31/2018 at 49-73, 88-111
& 138-172. On direct examination, Appellant
provided a slightly different version of how the
seven fresh sets of antlers came to be in the shed:
one was his, one was his father’s, two were the
ones he had injured and that Starcher had
retrieved, two were roadkill, and the final one was
that of the second renter, Kevin Jenkins. See N.T.
5/31/2018 at 183-84.
Regarding licensing, Appellant possessed only one
tag to harvest an antlered deer in Pennsylvania during the
2015 hunting season. See 5/31/2018 at 141, 148.
Appellant did not have a hunting license from West
Virginia or Ohio for 2015, and he did not report any
harvest in 2015 to the Pennsylvania Game Commission.
See 5/31/2018 at 141, 153-55.
Following a two-day trial, a jury convicted
Appellant of seven counts of unlawful killing or taking of
big game.7 On August 1, 2018, the trial court sentenced
Appellant to an aggregate sentence of 5 days to 8 months
of incarceration followed by 60 days of probation, together
with fines and restitution totaling $3,000 and $4,000,
respectively. See Trial Court Sentencing Order dated
August 1, 2018 at 2-5 (pagination supplied).
7
Despite the jury’s conviction on seven counts
of unlawful killing or taking of big game, the
verdict was recorded as six counts because
Appellant had one antlered deer tag for 2015,
although Appellant failed to report any deer
harvest to the Pennsylvania Game Commission in
2015.
Appellant filed a timely Notice of Appeal on August
24, 2018.8 See Notice of Appeal filed Aug. 24, 2018. On
4
August 30, 2018, the trial court directed Appellant to file
a Pennsylvania Rule of Appellate Procedure 1925(b)
concise statement of errors complained of on appeal
within 21 days. See Trial Court Order dated Aug. 30, 2018
(Rule 1925(b) Order). On September 10, 2018, in
response to Appellant’s Motion for Extension to File a
Concise Statement filed the same day, the trial court
extended Appellant’s deadline to file his Rule 1925(b)
statement to October 10, 2018.9 See Trial Court Order
dated Sept. 10, 2018 (Rule 1925(b) Extension Order); see
also Motion for Extension to File a Concise Statement
filed Sept. 10, 2018 (First Extension Request).
8
Appellant originally filed this appeal in the
Superior Court of Pennsylvania. See Notice of
Appeal; Superior Court Docket No. 1221 WDA
2018 at 4. The Superior Court transferred the
matter to this Court on April 29, 2019, pursuant to
Section 762(a)(2)(ii) of the Judicial Code, 42
Pa.C.S. § 762(a)(2)(ii), which confers upon this
Court appellate jurisdiction over criminal
proceedings for violations of regulatory statutes
administered by Commonwealth agencies. See
Dickerson v. Commonwealth, 87 A.2d 379, 381
(Pa. Cmwlth. 1991).
9
In his proposed order for the trial court’s
signature, Appellant requested that the trial court
extend the Rule 1925(b) statement filing deadline
to “within twenty-one (21) days after the transcript
is filed[.]” See Rule 1925(b) Extension Order.
The trial court, however, struck this suggested
temporal language from the order and replaced it
with a handwritten notation indicating the Rule
1925(b) statement was due “30 days from this
date[,]” which made the deadline for filing a Rule
1925(b) Statement October 10, 2018. Id.
On November 1, 2018, after Appellant failed to file
a Rule 1925(b) statement by the October 10, 2018
deadline, the trial court issued an order directing that the
5
record of the matter be transferred to the appellate court
for review without a Rule 1925(b) statement. See Trial
Court Order dated Nov. 1, 2018 (Transmittal Order).
Thereafter, on November 13, 2018, Appellant filed a Rule
1925(b) statement and his “Motion to Permit Late Filing
of Defendant’s Concise Statement of Errors Complained
of On Appeal” with the trial court. See Motion to Permit
Late Filing of Defendant’s Concise Statement of Errors
Complained of On Appeal filed Nov. 13, 2018 (Second
Extension Request); see also Concise Statement of Errors
Complained of On Appeal filed Nov. 13, 2018. In an order
dated November 16, 2018, the trial court acknowledged
these filings only to the extent that it directed the Greene
County Clerk of Courts to forward copies of the filed Rule
1925(b) statement and the November 16, 2018 order to the
appellate court for its consideration. See Trial Court Order
filed Nov. 16, 2018 (Second Transmittal Order).
DeMaske I, slip op. at 2-5.
On appeal, this Court determined that Appellant waived all his issues
on appeal by failing to timely file an ordered Rule 1925(b) statement. See DeMaske
I, slip op. at 9-10. Because this failure represented per se ineffectiveness of counsel,
however, on January 4, 2022, we remanded the matter to the trial court to allow the
nunc pro tunc filing of a Rule 1925(b) statement by Appellant and the preparation
of a Rule 1925(a) opinion by the trial court. See id. Appellant filed his Rule 1925(b)
statement on January 18, 2022, and the trial court accepted the filing and issued a
“Statement Pursuant to Pa. R.A.P. 1925” (Trial Court Opinion) thereafter. The
matter is now ripe for determination on the merits.
II. Issues
Appellant raises the following issues for our review:
1. Did the [trial c]ourt permit Deputy Game Warden Bonin
and Deputy Game Warden King to give expert testimony
6
without these witnesses being qualified as an expert [sic]
or being required to provide expert reports to the defense?
2. Did the [trial c]ourt err in treating each set of deer
antlers which [Appellant] transported to [] Starcher’s
residence as a separate criminal offense?
3. Was [Appellant] unduly prejudiced by the prosecution
e-mailing discovery to defense counsel months after it was
due and days before the trial?
4. Did the [trial c]ourt err in failing to [grant] a Motion to
Dismiss all but three [c]ounts of unlawfully possessing or
killing deer at the conclusion of the Commonwealth’s case
in chief? Did the Commonwealth fail to establish a prima
facie case?
5. Did the [trial c]ourt err in not entering a directed verdict
for [Appellant] at the conclusion of all the evidence as the
Commonwealth proved only that [Appellant] killed three
deer and he had a lawful tag for one deer?
6. Did the Commonwealth’s evidence fail to prove that
[Appellant] knew that all seven sets of deer antlers in his
possession were illegally obtained or killed by other
people?
7. Did the Commonwealth fail to provide notes taken by
Deputy Game Warden Lubic which were transcribed at the
time [Appellant] was being questioned by police?
Appellant’s Br. at 3-4.2
2
We note that, in response to this Court’s August 4, 2022 order regarding supplemental
briefing following remand, Appellant’s counsel informed the Court that Appellant intended to rely
on his previously filed brief and thus would submit no further briefing in this matter. See
Commonwealth Court Order dated Aug. 4, 2022; see also Letter of Neil J. Marcus dated Aug. 9,
2022.
7
III. Discussion
A. The testimony of the Deputy Game Wardens
First, Appellant claims that the trial court erred by letting the game
wardens testify as to their observations about the deer antlers confiscated. See
Appellant’s Br. at 10-11. Appellant alleges that this testimony amounted to
improper expert testimony. See id. He is incorrect.
Initially, we observe that “[t]he admission of evidence is solely within
the discretion of the trial court, and a trial court’s evidentiary rulings will be reversed
on appeal only upon an abuse of that discretion.” Com. v. Woodard, 129 A.3d 480,
494 (Pa. 2015) (quoting Com. v. Reid, 99 A.3d 470, 493 (Pa. 2014)). Further, a trial
court may accept the opinion of an expert where “the expert’s scientific, technical,
or other specialized knowledge is beyond that possessed by the average layperson;”
or where “the expert’s scientific, technical, or other specialized knowledge will help
the trier of fact to understand the evidence or to determine a fact in issue.” Pa.R.E.
702. “[E]xpert testimony must be based on more than mere personal belief, and
must be supported by reference to facts, testimony or empirical data.” Nobles v.
Staples, Inc., 150 A.3d 110, 114 (Pa. Super. 2016) (quoting Snizavich v. Rohm &
Haas Co., 83 A.3d 191, 195 (Pa. Super. 2013)) (internal quotation marks omitted).
Otherwise stated, “expert testimony reflects the application of expertise and does not
stray into matters of common knowledge.” Com. v. Manivannan, 186 A.3d 472, 485
(Pa. Super. 2018) (internal quotation marks and brackets omitted).
In the instant matter, Deputy Game Warden King and Deputy Game
Warden Bonin testified simply to their own personal observations regarding the
antler racks seized from the storage shed. See N.T. 5/31/2018 at 52, 69, 72-73.
8
Deputy Game Warden King testified that seven of the antler racks “seemed to be
really fresh, they still had brain matter in them and blood on them.” N.T. 5/31/2018
at 52. He further observed that “[o]ne of them was an old one.” Id. These are not
specialized observations beyond the ken of the average layperson, but instead are
simple personal observations and descriptions of things within the witnesses’ sight.
As such, this is not testimony that requires qualification as an expert. See Nobles.
Further, the same is true of the Deputy Game Wardens’ testimony regarding the
photographs of the deer antlers. See N.T. 5/31/2018 at 53, 58-59, 120, 141-44. We
find no error or abuse of discretion in the trial court allowing this testimony into
evidence.
B. Individual antler racks as separate criminal counts
Second, Appellant argues that the trial court erred by treating each set
of deer antlers transported to and confiscated from Starcher’s residence as a separate
criminal offense. See Appellant’s Br. at 11-12. Appellant is not entitled to relief on
this claim.
The Game and Wildlife Code grades counts of unlawful killing or
taking of big game as follows:
(2)(i) A violation of subsection (a)(1) or (2) where the
species is a single white-tailed deer or a single wild turkey
is a summary offense of the first degree and may result in
forfeiture of the privilege to hunt or take wildlife anywhere
within this Commonwealth for a period of three years. A
second violation of subsection (a)(1) or (2) where the
species is a single white-tailed deer or a single wild turkey
within a seven-year period is a misdemeanor and may
result in forfeiture of the privilege to hunt or take wildlife
anywhere within this Commonwealth for a period of five
years. A third offense within a seven-year period where
the species is a single white-tailed deer or a single wild
9
turkey is a misdemeanor of the first degree and may result
in the forfeiture of the privilege to hunt or take wildlife
anywhere within this Commonwealth for a period of ten
years.
(ii)(A) A second violation of subsection (a)(1) or (2)
during the same criminal episode where the species taken,
injured, killed, possessed or transported is white-tailed
deer or wild turkey is a misdemeanor and may result in
forfeiture of the privilege to hunt or take wildlife anywhere
within this Commonwealth for a period of five years.
(B) A third or fourth violation of subsection (a)(1) or (2)
during the same criminal episode where the species is
white-tailed deer or wild turkey is a misdemeanor of the
first degree and may result in forfeiture of the privilege to
hunt or take wildlife anywhere within this Commonwealth
for a period of ten years.
(C) A fifth or subsequent violation of subsection (a)(1) or
(2) during the same criminal episode where the species is
white-tailed deer or wild turkey is a felony of the third
degree and may result in forfeiture of the privilege to hunt
or take wildlife anywhere within this Commonwealth for
a period of 15 years.
34 Pa.C.S. § 2321(d)(2). Pursuant to this offense grading scheme, the six (6) counts
for which Appellant was found guilty included one summary offense, one ungraded
misdemeanor, two misdemeanors of the first degree, and two felonies of the third
degree. See Trial Court Docket CP-30-CR-0000274-2017 at 4.
The testimony of multiple witnesses in this matter, Appellant included,
revealed that Appellant stored eight sets of antlers – seven fairly fresh sets and one
old set – in the storage shed. Each antler rack – the fresh ones with the brain matter
and blood still on them, at least – represented the killing and/or taking of a separate
deer. It was within the Commonwealth’s purview to treat each as a separate offense
10
under the Game and Wildlife Code and prosecute Appellant for each as an individual
charge, which the Commonwealth accordingly did. See 34 Pa.C.S. § 2321(d)(2); see
also Com. v. Brown, 708 A.2d 81, 84 (Pa. 1998) (noting that the Commonwealth
retains general and widely recognized discretion regarding the prosecution of
criminal matters).
To the extent Appellant criticizes the Commonwealth’s decision to
prosecute him “for seven counts of violating the Big Game law for the short time
deer antlers were in his possession” as “draconian,” this argument affords him no
relief. Appellant’s Br. at 11. The fact that Appellant possessed the antlers only
during the time it took to transport and store them at the storage shed in no way
lessens his possession thereof – the Game and Wildlife Code contains no minimum
temporal requirement for unlawful possession of big game remains before an
individual may be guilty of unlawful killing or taking of such game. See 34 Pa.C.S.
§ 2321(a)(2). Further, Appellant’s rhetorical observation that the authorities did not
charge Starcher with unlawful killing or taking of big game despite the deer antlers
being recovered in Starcher’s possession is likewise immaterial to whether Appellant
himself was properly charged with seven counts of unlawful killing or taking of big
game. See Appellant’s Br. at 11-12; see also Brown. Appellant is not entitled to
relief on his second claim.
C. Pre-trial discovery production
Next, Appellant asserts that the trial court erred in admitting evidence
where the Commonwealth did not respond to Appellant’s discovery requests within
30 days of the service of the motion for discovery. See Appellant’s Br. at 12. In this
cursory argument, Appellant fails to identify with any specificity the discovery at
issue and/or the pertinent evidence admitted at trial. See id. Instead, he merely states
11
that “[t]he prosecution dumped numerous emails and information upon [Appellant]
in the two (2) weeks before the case was called for trial.” Id. Without further
specificity or development of any kind, Appellant concludes “[t]his was unduly
prejudicial to [him],” and therefore “[e]vidence which the prosecution wished to
present should have been barred by the [trial c]ourt.” Id. Because he failed to
meaningfully develop this issue in his brief, Appellant has waived this argument.3
Com. v. Spotz, 18 A.3d 244 (Pa. 2011) (claim unreviewable and waived for lack of
development where appellant did not develop the claim factually or legally and did
not support it with citations, and the court could not discern what error allegedly
occurred).
D. Motion to dismiss
Appellant next claims that the trial court erred by failing to grant a
motion to dismiss on all but three counts of unlawful killing or taking of big game
because the evidence established only that Appellant had killed three deer. See
Appellant’s Br. at 12-13. This claim is effectively a sufficiency of the evidence
claim that entitles Appellant to no relief.
When examining a challenge to the sufficiency of evidence of a
criminal conviction, an appellate Court’s standard of review is as follows:
The standard we apply in reviewing the sufficiency of the
evidence is whether viewing all the evidence admitted at
trial in the light most favorable to the verdict winner, there
is sufficient evidence to enable the fact-finder to find every
element of the crime beyond a reasonable doubt. In
applying [the above] test, we may not weigh the evidence
3
Even in the absence of a response within 30 days to a discovery request, we do not agree
with Appellant’s conclusory statement that “[t]he defense had the right to assume the
Commonwealth could not or would not seek to prove that the deer antlers came from deer
harvested in Pennsylvania.” Appellant’s Br. at 12.
12
and substitute our judgment for the fact-finder. In
addition, we note that the facts and circumstances
established by the Commonwealth need not preclude
every possibility of innocence. Any doubts regarding a
defendant’s guilt may be resolved by the fact-finder unless
the evidence is so weak and inconclusive that as a matter
of law no probability of fact may be drawn from the
combined circumstances. The Commonwealth may
sustain its burden of proving every element of the crime
beyond a reasonable doubt by means of wholly
circumstantial evidence. Moreover, in applying the above
test, the entire record must be evaluated and all evidence
actually received must be considered. Finally, the [trier]
of fact while passing upon the credibility of witnesses and
the weight of the evidence produced, is free to believe all,
part or none of the evidence.
Com. v. Smith, 97 A.3d 782, 790 (Pa. Super. 2014).
Here, the Commonwealth’s evidence that Appellant possessed seven
deer included photographs and testimony regarding seven “fairly fresh” deer racks
still with blood and brain matter on them that Appellant transported to and placed
inside the storage shed at Starcher’s property. The evidence further illustrated that
Appellant had but one antlered deer tag for the 2015 season and that none of the
other individuals to whom Appellant attributed the deer racks had reported an
antlered deer harvest in 2015. Finally, Appellant admitted taking a photograph
recovered on his phone that depicted seven deer heads in a field. See N.T. 5/31/2018
at 183. This evidence constituted prima facie proof of seven counts of unlawful
killing or taking of big game sufficient to send the charges to the jury and deny any
motion to dismiss or for directed verdict at the conclusion of the Commonwealth’s
case in chief. Accordingly, Appellant is not entitled to relief on his fourth claim.
13
E. Motion for a directed verdict
In his fifth claim, Appellant alleges the trial court erred by failing to
enter a directed verdict in his favor. See Appellant’s Br. at 13-14. A directed verdict
should be granted if “the prosecution’s evidence, and all inferences arising
therefrom, considered in the light most favorable to the prosecution, are insufficient
to prove beyond a reasonable doubt that the accused is guilty of the crimes charged.”
Com. v. Potts, 460 A.2d 1127, 1138 (Pa. Super. 1983). This claim fails for the
reasons articulated above in reference to the motion to dismiss.
F. Sufficiency of the evidence regarding Appellant’s knowledge
that the deer racks were illegally harvested
In his sixth claim, Appellant claims the Commonwealth failed to
adduce evidence sufficient to prove that Appellant knew that the seven racks of deer
antlers were illegally harvested. See Appellant’s Br. at 14-15. As with the previous
two claims, this is a sufficiency of the evidence claim. It likewise fails.
Like all elements of crimes, “intent can be proven by direct or
circumstantial evidence; it may be inferred from acts or conduct or from the
attendant circumstances.” Com. v. Franklin, 69 A.3d 719, 723 (Pa. Super. 2013).
Further,
[w]e note that credibility determinations are within the
sole province of the jury. A jury is entitled to believe all,
part, or none of the evidence presented [and] can believe
any part of a witness’ testimony that they choose, and may
disregard any portion of the testimony that they
disbelieve. Our court will not award a new trial if there is
evidence supporting the jury’s finding.
Tucker v. Bensalem Twp. Sch. Dist., 987 A.2d 198, 205 (Pa. Cmwlth. 2009) (internal
citations, quotation marks, and brackets omitted).
14
In this matter, the evidence clearly showed that Appellant had seven
sets of antlers in his possession. As the trial court noted, “[w]hether [Appellant] had
actual knowledge that all seven deer antlers in his possession were illegally obtained
or killed by other people was a question for the jury[.]” Trial Court Opinion at 6-7.
The jury heard Appellant’s testimony that he did not intentionally kill deer in
violation of the rules; that he had been unable to track certain deer he shot that were
later located and that the remaining deer were either killed by another individual or
were roadkill. The jury in its capacity as finder of fact disregarded this testimony
and convicted Appellant as discussed above. As discussed, supra, our review of the
record confirms that the Commonwealth put forth evidence from which a jury could,
and did, attribute to Appellant knowledge of the illegal harvesting of the deer antlers
he possessed. Appellant is accordingly not entitled to relief on this claim. See
Tucker.
G. Deputy Game Warden Lubic’s notes
In his final issue, Appellant alleges he was prejudiced by a discovery
violation because Deputy Game Warden Lubic made reference on direct
examination to notes made during his November 21, 2015 interview with Appellant
that had not been produced in discovery. See Appellant’s Br. at 15-16. Appellant
alleges that had such notes been turned over, his counsel could have more effectively
cross-examined the witness and prepared Appellant for his own direct testimony.
See id. at 17. While not previously produced, the notebook in question was produced
during Deputy Game Warden Lubic’s cross-examination and Lubic explained that it
contained a summary of the events of November 20-21, 2015. See N.T. 5/31/2015
at 96-97. The notebook did not contain notes on Appellant’s statement regarding
where he shot the deer; in fact, the only information regarding the notebook revealed
15
at trial was (a) the notebook’s existence, and (b) the fact that the notebook did not
contain information or notes about what Appellant said during the interview on
November 21, 2015. As such, Appellant cannot prove prejudice from the failure of
the Commonwealth to have previously produced this notebook, and Appellant is not
entitled to relief on his final claim. Com. v. Johnson, 727 A.2d 1089, 1097 (Pa.
1999) (“a defendant seeking relief from a discovery violation must demonstrate
prejudice”).
IV. Conclusion
For the reasons stated herein, we affirm the judgment of sentence.
__________________________________
CHRISTINE FIZZANO CANNON, Judge
16
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Commonwealth of Pennsylvania :
:
v. :
:
John M. DeMaske, : No. 770 C.D. 2019
Appellant :
ORDER
AND NOW, this 16th day of November, 2022, the judgment of
sentence entered by the Court of Common Pleas of Greene County is AFFIRMED.
__________________________________
CHRISTINE FIZZANO CANNON, Judge | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484167/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D21-1584
Lower Tribunal No. 07-45267
________________
Philip Morris USA Inc.,
Appellant,
vs.
Odaima Garcia, etc.,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Reemberto
Diaz, Judge.
Arnold & Porter Kaye Scholer LLP, and Geoffrey J. Michael
(Washington, DC); Shook, Hardy & Bacon LLP, and Scott A. Chesin (New
York, NY), Frank Cruz-Alvarez and Michael G. Polatsek, for appellant.
Parafinczuk Wolf, and Austin Carr (Pembroke Pines); Menendez Trial
Lawyers, and Jose M. Menendez; Burlington & Rockenbach, P.A., and Bard
D. Rockenbach and Jeffrey V. Mansell (West Palm Beach), for appellee.
Before EMAS, SCALES and HENDON, JJ.
EMAS, J.
Following a trial in this Engle 1-progeny tobacco case, the jury returned
a verdict in favor of Odaima Garcia (personal representative of the Estate of
Juan Rodriguez and plaintiff below) and against Philip Morris USA Inc.
(defendant below). Plaintiff had sued Philip Morris for negligence, strict
liability, conspiracy and fraud, together with a claim for punitive damages.
At the conclusion of trial, the jury found in favor of plaintiff on the strict
liability and negligence counts (the jury found in favor of Philip Morris on the
conspiracy and fraud claims) and awarded $10,000 in economic damages
and $5.5 million in compensatory damages.2 The jury apportioned 40% fault
to Mr. Rodriguez and 60% to Philip Morris. 3 The jury also found entitlement
to punitive damages against Philip Morris.
Following this phase one verdict, the jury then heard testimony on the
issue of the amount of punitive damages to be awarded, after which the trial
court delivered additional jury instructions. However, the jury could not reach
a unanimous verdict on the amount of punitive damages to be awarded
against Philip Morris, resulting in a mistrial on that issue.
1
Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006).
2
In closing argument, plaintiff’s counsel suggested the jury award $10 million
in compensatory damages.
3
In closing argument, plaintiff’s counsel suggested the jury apportion 25%
fault to Mr. Rodriguez and 75% fault to Philip Morris.
2
Thereafter, post-verdict motions were filed, including Philip Morris’
motion for new trial, based on allegedly improper and inflammatory
comments made by plaintiff’s counsel during closing arguments and by
plaintiff during her testimony which, Philip Morris contended, resulted in the
denial of a fair trial. The trial court denied the motion for a new trial on liability
and compensatory damages. 4
Following our review of the record in this three-week trial, we affirm the
denial of Philip Morris’ motion for new trial on liability and compensatory
damages, finding no abuse of discretion in the trial court’s denial of the
motion for new trial, which was based on its determination that the conduct
complained of, if improper, was not “so highly prejudicial and inflammatory
that it denied the opposing party its right to a fair trial.” Philip Morris USA,
Inc. v. Ledoux, 230 So. 3d 530, 538 (Fla. 3d DCA 2017) (citation omitted);
Philip Morris USA, Inc. v. Cuculino, 165 So. 3d 36, 39 (Fla. 3d DCA 2015)
(considering certain aspects of the jury’s verdict in assessing whether the
trial court abused its discretion in denying a motion for new trial based on
4
In addition to seeking a new trial on liability and compensatory damages,
Philip Morris sought a retrial on both entitlement to, and amount of, punitive
damages, asserting the issues were inextricably intertwined and should be
determined by a single jury. The trial court granted this relief, which the
plaintiff cross-appealed in this case. However, the cross-appeal was later
voluntarily dismissed, mooting the question of whether the trial court properly
granted a new trial on both entitlement to, and amount of, punitive damages.
3
improper closing arguments which defendant contended were so highly
prejudicial as to deny defendant a fair trial; affirming the trial court’s denial of
the motion for new trial and observing, inter alia, that the jury did not find
completely in favor of plaintiff, but found in favor of defendant on the
intentional tort claims, and further found plaintiff was 60% at fault,
substantially reducing the $12.5 million verdict to an award of only $5
million); R.J. Reynolds Tobacco Co. v. Schleider, 273 So. 3d 63, 71 (Fla. 3d
DCA 2018) (affirming the trial court’s denial of the motion for new trial and
noting that the jury “found in favor of R.J. Reynolds on the question of
punitive damages and concealment; awarded less than the compensatory
amount requested for the daughter; and attributed a higher percentage of
comparative negligence to Mr. Schleider than what Plaintiffs' counsel argued
for in closing. These actions by the jury strongly indicate the jury was not
inflamed, prejudiced, or improperly mislead by closing arguments.”)
Affirmed.
4 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491961/ | MEMORANDUM OPINION AND DECISION
RICHARD L. SPEER, Bankruptcy Judge.
This cause originally came before the Court upon the Motion For Order of Dismissal of this Chapter 12 case by creditor Grower Service Corporation (hereafter “Grower”), and upon Debtor’s Response. Memoranda were filed on the Motion, and a Hearing was held. At the Hearing, the Court instructed the parties to file additional memoranda. Debtor filed a Motion For Conversion to Chapter 11 Instead of Dismissal, and Grower filed a Motion Opposing Conversion. Grower has also filed a Renewed Motion For Dismissal on the basis that Debtor has failed to file a plan as required by the Bankruptcy Code, and Debtor filed a Response. For the following reasons, Debtor’s Motion for Conversion to Chapter 11 will be Granted.
FACTS
Debtor operates a farm and due to financial difficulties filed for Chapter 12 relief. These difficulties are related in large part to another business owned by the Debtor, Oak Ridge Ag Supply, Inc. (hereafter “Oak Ridge”). Oak Ridge was a corporation in the retail business of selling agricultural and non-agricultural goods and supplies, as well as petroleum products. Grower and other creditors sold goods to Oak Ridge on an open account basis. These goods were then sold by Oak Ridge in its retail operation. Debt- or’s obligations to Grower arises out of personal guarantees of the open accounts.
Oak Ridge’s creditors subsequently obtained judgments against Debtor, and Debtor contends to have given consensual liens covering his farming assets to Grower and other creditors. When Grower filed its motion to dismiss, Debtor originally asserted in his response that he was eligible for Chapter 12 relief on the basis that these non-farming debts became debts which “arise out of a farming operation” pursuant to 11 U.S.C. 101(18)(A) when the liens attached to debt- or’s farming assets. Debtor has apparently abandoned this position, and now seeks to have his case converted to a Chapter 11 reorganization. Grower has also filed a Renewed Motion to Dismiss on the basis that Debtor has failed to timely comply with the provisions of Chapter 12.
LAW
11 USC § 101. Definitions
(18) “family farmer” means—
(A) individual or individual and spouse engaged in a farming operation whose aggregate debts do not exceed $1,500,000.00 and not less than 80 percent of whose aggregate noncontingent, liquidated debts (excluding a debt for the principal residence of such individual or such individual and spouse unless such debt arises out of a farming operation), on the date the case is filed, arise out of a farming operation owned or operated by such individual or such individual and spouse receive from such farming operation more than 50 percent of such individual’s or such individual and spouse’s gross income for the taxable year preceding the taxable year in which the case was filed.
(19) “family farmer with regular annual income” means family farmer whose annual income is sufficiently stable and regular to enable such family farmer to make payments under a chapter 12 of this title.
11 USC § 105. Power of the court
(a) The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court *553orders or rules, or to prevent an abuse of process.
11 USC § 109. Who may be a debtor
(f) Only a family farmer with regular annual income may be a debtor under chapter 12 of this title.
(g) Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if—
(1) the case was dismissed by the court for willful failure of the debtor to abide by the orders of the court in proper prosecution of the case; or
(2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from automatic stay provided by section 362 of this title.
11 USC § 349. Effect of dismissal
(a) Unless the court, for cause, orders otherwise, the dismissal of a case under this title does not bar the discharge, in a later case under this title, of debts that were dischargeable in the case dismissed; nor does the dismissal of a case under this title prejudice the debtor with regard to the filing of a subsequent petition under this title, except as provided in section 109(f)[ (g) ] if this title.
11 USC § 1208. Conversion or dismissal
(a) The debtor may convert a case under this chapter to a case under chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable.
(b) On request of the debtor at any time, if the case has not been converted under section 706 or 1112 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable. * sH * ❖ # *
(e) Notwithstanding any other provision of this section, a case may not be converted to a case under another chapter of this title unless the debtor may be a debtor under such chapter.
11 USC § 1221. Filing the plan
The debtor shall file a plan not later than 90 days after the order for relief under this chapter, except that the court may extend such period if the need for an extension is attributable to circumstances for which the debtor should not justly be accountable.
11 USC § 1224. Confirmation hearing
After expedited notice, the court shall hold a hearing on confirmation of the plan. A party in interest, the trustee, or the United States trustee may object to the confirmation of the plan. Except for cause, the hearing shall be concluded not later than 45 days after the filing of the plan.
DISCUSSION
The issue presented in this ease is whether a debtor may, with the Court’s permission, convert a Chapter 12 case to a Chapter 11 under the Bankruptcy Code. As this ease arises under Title 11, it is a core proceeding. 28 U.S.C. § 157.
A little more than a handful of cases have addressed this issue, but there is nonetheless a split of authority. The majority of cases, including those from the Sixth Circuit, support the proposition that conversion from Chapter 12 to another chapter other than Chapter 7 should be allowed where the debt- or has filed in good faith, there is no prejudice to the creditors, and such conversion would be equitable. In re Lawless, 79 B.R. 850 (W.D.Mo.1987); In re Orr, 71 B.R. 639 (Bankr.E.D.N.C.1987); In re Johnson, 73 B.R. 107 (Bankr.S.D.Ohio 1987); In re Bird, 80 B.R. 861 (Bankr.W.D.Mich.1987); In re Vaughan, 100 B.R. 423 (Bankr.S.D.Ill.1989). The opposite line of cases holds that because a provision for such conversion was specifically deleted from the Chapter 12 Senate bill, the omission conclusively shows that it was the intent of Congress not to allow conversion. In re Christy, 80 B.R. 361 (Bankr. E.D.Va.1987); Matter of Roeder Land & Cattle Co., 82 B.R. 536 (Bankr.D.Neb.1988).
*554The leading case cited by the majority appears to be In re Orr, 71 B.R. 639, 642 (Bankr.E.D.N.C.1987). In Orr, as in the present case, a creditor moved to have a debtor’s Chapter 12 case dismissed on the basis that the debtor did not qualify as a “family farmer,” as defined in what is now § 101(18)(A), and therefore the debtor did not qualify for Chapter 12 relief under 11 U.S.C. § 109. Id. at 640. The debtor then moved to convert the case to a Chapter 11. The Court noted that though debtors may convert a Chapter 11 case to a Chapter 12 if such conversion would be equitable, there is no similar code section which addresses whether a Chapter 12 debtor’s request to convert to a Chapter 11 is allowable. Id. at 641. The Court explained that Congress had originally drafted a provision that would have allowed such a conversion, but had deleted the provision to eliminate delays which could result in manipulative conversions by the debtor. Id. The Court’s analysis aptly explains the concern of Congress and the reasons for its holding:
It would be entirely unfair to creditors to permit a debtor who was unsuccessful in chapter 12 to start anew in chapter 11 or chapter 13 after exhausting the chapter 12 process. Chapter 12 is designed to make confirmation of plans easier than confirmation of plans under chapter 11 and, in most cases, it would make no sense to begin again in chapter 11 where confirmation is more difficult.
There may, however, be situations when conversion from chapter 12 to chapter 11 or chapter 13 would not be unfair' to creditors and the denial of conversion would be inequitable to the debtor. The case now before the court falls into that category. It is apparent that [debtors] filed them petition under chapter 12 in good faith believing their aggregate debts did not exceed [the chapter 12 debt limit] and that they met the definition of “family farmer” under [11 U.S.C. § 101(18)(A)] and the definition of “family farmer with regular annual income” under [11 U.S.C. § 101(19)]. # í¡! # # Sfc 5j«
S. 2249, the Senate version of chapter 12, contained a provision which would have specifically addressed [the debtors situation]. S. 2249, § 1210(b), would have permitted a person filing a chapter 12 petition in good faith to convert to chapter 7,11, or 13 if the person was determined ’by the court to be a “family farmer.” Chapter 12 has no such provision, but conversion from chapter 12 to chapter 11 in these circumstances should not be denied.
An alternate solution would be to dismiss the debtor’s case and permit a refiling under chapter 11. The dismissal of a case does not “prejudice” the debtor with regard to filing a subsequent petition under the title, except as provided in section [109(g)]. 11 U.S.C. § 349(a).
Section 109(g) would not bar refiling in this case because the dismissal was not requested by the debtors and dismissal was not based on the ‘willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case.’ * * * ❖ * *
The debtors could refile after dismissal, but what would be accomplished? There is no evidence that creditors would be prejudiced by allowing conversion to chapter 11 and there appears to be no good reason to require the formality of refiling. Id. at 642. (Footnotes omitted.)
There are also other concerns beyond the inconvenience of the unnecessary formality of refiling under a different chapter. The Court in In re Vaughan, 100 B.R. 423 (Bankr.S.D.Ill.1989) noticed that, “[T]he change in the petition date which would occur upon refiling would be potentially detrimental to creditors because of the change of the date used in computing the preference period.” Id. at 426. This Court also notes that creditors could be prejudiced by the possible additional of new debts incurred post-petition. Further, new creditors which dealt with the debtor post-petition and relied upon the debtor’s inability to seek discharge under the present bankruptcy could likewise *555be surprised to find themselves listed on the new Chapter 11 schedules.
The leading case holding that conversion from Chapter 12 to Chapter 11 is not allowed under the Bankruptcy Code is In re Christy, 80 B.R. 361 (Bankr.E.D.Va.1987). In Christy, the Court noted that § 1208 provides for the conversion of a Chapter 12 case to a Chapter 7, but is silent as to conversion to any other chapter. Id. at 362. By contrast, the Court noted, the conversion sections of other sections specifically allow for extensive conversion. Id. Thus, the court held:
Given this statutory scheme for conversion of cases, the omission of code language allowing conversion of a chapter 12 case to a case under chapter 11 under any circumstances is conspicuous. Moreover, the legislative history for chapter 12 indicates that the omission of this authority from section 1208 was intentional and that Congress opted to deny a chapter 12 debtor the ability to convert a chapter 12 case to a case under chapter 11 or chapter 13. Id.
The Court also expressed its dissatisfaction with the holding it felt it was obligated to make. The Court stated that:
[E]ven though the Court finds the debtors in this case acted in good faith and have not attempted the type of manipulation that was the concern of Congress, this Court is reluctant to supply the legislative omission from section 1208 by allowing the debtors to convert to a chapter not specifically authorized by the code.
The bankruptcy court, being a court of limited jurisdiction and power, possesses only those powers authorized by Congress. Accordingly, this Court should not exercise its equitable powers in a manner inconsistent with the provision of the Bankruptcy Code. Johnson v. First Nat’l Bank of Montevideo, Minnessota, 719 F.2d 270, 273 (8th Cir.1983), cert. denied 465 U.S. 1012, 104 S.Ct. 1015, 79 L.Ed.2d 245 (1984). Id. at 363.
This Court does not share the Christy court’s limited view of the powers of the Bankruptcy Court. Even the Court in Johnson v. First Nat’l Bank of Montevideo, the case cited in Christy, notes the “broad powers” granted to the Bankruptcy Court under § 105(a). Johnson at 273. Further, the Johnson Court explained that § 105 stems from Section 2(a)(15) of the Bankruptcy Act, which allowed a Bankruptcy Court to, “issue such orders as might be necessary to prevent the defeat or impairment of its jurisdiction and to protect the integrity of the bankruptcy estate.” Id.
This Court is of the belief that the issue in this ease is indeed one which could impair the Bankruptcy Court’s jurisdiction, and could certainly harm the integrity of the bankruptcy estate. It appears clear to this Court that dismissing a Chapter 12 debtor only to have him refile and thereby causing a change in the petition date as relied upon by both pre-petition and post-petition creditors, and thereby also effectively shortening the preference period, would certainly cause harm to the integrity of the bankruptcy estate.
Further, this Court does not believe that the outcome reached in Christy truly reflects the intent of Congress. Indeed, as noted by the court in In re Johnson, 73 B.R. 107, 109 (Bankr.S.D.Ohio 1987), Judge A. Thomas Small, the author of In re Orr, was specifically recognized in the Congressional Record by Senator Charles Grassley, Chapter 12’s primary Senate sponsor, for his contributions in drafting the Chapter 12 legislation. Judge Small noted that, “The omission may not have been entirely unintentional,” and apparently felt that such an omission was intended by Congress to leave the decision to the courts. Orr at 641. This Court agrees. If Congress had a clear intent to not allow conversion to other chapters, they could have said so. This Court believes that the holding that conversion to Chapter 11 should be allowed when the debtor filed for Chapter 12 relief in good faith, the creditors are not prejudiced, and when the facts of the case resolve the Congressional concern that such a conversion could be used to manipulate the bankruptcy system.
Further still, this Court notes that the intent of Congress to leave this issue to the Judiciary is also reflected in § 1208(e). Under that subsection, the case may not be *556converted to “another chapter” unless the debtor qualifies as a debtor under the chapter to which conversion is sought. This Court fails to see the purpose of this broad language if the only conversion allowed under § 1208 is to Chapter 7. This Court believes this section was intended to apply in the event the Judiciary decided to allow conversion to other chapters.
This Court, having decided to follow the Orr line of eases in holding that conversion from Chapter 12 to another chapter can be allowed at the Court’s discretion when there is no evidence of bad faith, creditors are not prejudiced, and such conversion is in the interests of equity, must now apply this rule to the facts of this case. The Debtors herein claim to have erred by listing all debts incurred by Oak Ridge as disputed instead of the correct listing as contingent, and as a result it appears the amount of debt exceeds the allowable amount for the Debtor to be eligible for Chapter 12 relief. Also, the Debtor, in its motion in opposition to the motion to dismiss, also seems to have relied upon the legal premise that once the non-farming debt liens attached to the farming assets, the debt would qualify as farming debts. However, as stated before, the Debt- or apparently has abandoned this position.
This Court can find two cases similar to the case herein where the Court followed the Orr line of cases and denied a debtor’s motion to convert due to a lack of good faith. In In re Johnson, 73 B.R. 107 (Bankr.S.D.Ohio 1987), bad faith was found where the debtor/spouses improperly filed separate Chapter 12 petitions to try to get under the Chapter 12 debt ceiling. In In re Lawless, 79 B.R. 850 (Bankr.W.D.Mo.1987), the District Court found bad faith where debtors waited until 10 days after them reorganization plan was due to file the motion to covert.
The Court finds no bad faith in the instant case. Though not addressed in this case, the Court is not unmindful that the Debtor’s original position regarding its qualification as a “family farmer” under 11 U.S.C. § 101(18)(A) appears to show a legal judgment concerning a rather obvious legal issue. Even so, the Court does not find that the error was purposeful. As the Court noted in In re Bird, 80 B.R. 861, 864 (Bankr.W.D.Mich.1987), “The Court feels it is inappropriate to now penalize the Debtors as a result of their attorney’s neglect.” Thus, the Court will grant Debtor’s Motion to Convert to Chapter 11.
Grower has also filed a Renewed Motion to Dismiss on the basis that Debtor has failed to timely file a plan under § 1221, and that there has been no timely confirmation hearing pursuant to § 1224. The Court finds it unreasonable to have expected the Debtor to incur unnecessary administrative expenses to pursue a plan under Chapter 12 when the only alternatives pending this Court’s decision were a dismissal or granting debtor’s conversion to Chapter 11. However, this Court agrees with Grower to the extent that it would like to see a speedy resolution to this matter, and that the Debtor should not be rewarded for his error. This Court will thus deny Grower’s Renewed Motion to Dismiss, but set a deadline for the proposed Chapter 11 plan and disclosure statement from the Debtor of forty (40) days after the date of this Order.
In reaching the conclusions found herein, the Court has considered all of the evidence, exhibits and arguments of counsel, regardless of whether or not they are specifically referred to in this opinion.
Accordingly, it is
ORDERED that the Motion for Conversion to Chapter 11 be, and is hereby, GRANTED.
It is further ORDERED that the Motion to Dismiss of Grower Service Corporation be, and is hereby, DENIED.
It is further ORDERED that the Renewed Motion to Dismiss of Grower Service Corporation be, and is hereby, DENIED.
It is further ORDERED that Debtor file a Chapter 11 plan and disclosure statement within forty (40) days of the filing of this Order. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491963/ | *668
ORDER GRANTING, IN PART, AND DENYING, IN PART, CROSS-MOTIONS FOR SUMMARY JUDGMENT, and SETTING TRIAL DATE
DONALD MacDONALD IV, Bankruptcy Judge.
Pending before the court are the cross-motions for summary judgment with regard to the sixth cause of action in the Camacho’s adversary complaint. The Camachos contend the defendant (referred to herein as “the IRS”) violated the automatic stay when it received Mr. Camacho’s permanent fund dividend, post-petition, as a result of a pre-petition levy. There are three issues before the court:
1. Whether the IRS’s levy on the permanent fund dividend was valid;
2. Whether the permanent fund dividend is property of the bankruptcy estate, subject to turnover, pursuant to 11 U.S.C. §§ 541 and 542; and
3. Whether the IRS has violated the automatic stay, entitling the Camachos to recover their costs, attorney’s fees and punitive damages.
I find for the plaintiffs on the second issue. A genuine issue of material fact exists which precludes summary judgment on the first issue, which will be set for trial. I also reserve judgment on the third issue pending determination of the validity of the IRS levy.
Factual Background.
The undisputed facts surrounding this dispute are as follows. The IRS served a notice of intent to levy on the Camachos with respect to their 1984 1040 taxes on September 1, 1992. On September 23, 1992, the IRS served a notice of levy upon the State of Alaska Department of Revenue, Permanent Fund Division. This notice of levy was for in excess of $13 million, and was directed against the 1992 permanent fund dividends of various taxpayers, including John Camacho. On September 30, 1992, the Camachos filed their Chapter 11 petition. The Camacho’s attorney notified the IRS on October 1, 1992, that the bankruptcy had been filed. On November 17, 1992, in response to the notice of levy, the State of Alaska sent the IRS a check for $1,455,367.22, which sum included John Camacho’s 1992 permanent fund dividend.
Analysis.
The Camachos contend the IRS levy on the permanent fund dividend is invalid because the levy occurred less than 30 days after they were served with a notice of intent to levy, in violation of 26 U.S.C. § 6331(d), which provides:
(d) Requirement of notice before levy.—
(1) In general. — Levy may be made under subsection (a) upon the salary or wages or other property of any person with respect to any unpaid tax only after the Secretary has notified such person in writing of his intention to make such levy.
(2) 30-day requirement. — The notice required under paragraph (1) shall be—
(A) given in person,
(B) left at the dwelling or usual place of business of such person, or
(C) sent by certified or registered mail to such person’s last known address no less than 30 days before the day of the levy.
The IRS concedes that if the levy on the permanent fund dividend had been premature, it would be invalid. However, the IRS contends its levy was valid because it served an earlier notice of intent to levy on the Camachos in 1990. In support of this contention, the IRS provides a copy of a Certificate of Assessments and Payments regarding the Camacho’s federal tax liability for tax years 1980 through 1986. The declaration of Doris Brown, submitted by the IRS, states that the certificate of assessments shows the IRS “sent the Camachos a ‘Fourth Delinquency Notice’ on October 22, 1990 with regard to their 1984 liability.” Ms. Brown’s declaration also states that this Fourth Delinquency Notice “refers to the IRS notice of intention to levy.”
I find the IRS has failed to establish that an earlier notice of levy was properly served on the Camachos. If a notice of intent to levy is served by mail, it must be sent by certified or registered mail. 26 U.S.C. § 6331(d)(2)(C). Neither Ms. Brown’s declaration nor the copy of the Certificate of *669Assessments and Payments establishes that the Fourth Delinquency Notice of October 22, 1990 was sent in this manner. Accordingly, a factual issue exists regarding the validity of the IRS’s levy on the permanent fund dividend. See United States v. Arford, 71 A.F.T.R.2d 93-718, 1993 WL 120365 (D.Idaho 1993); United States v. Wright, 658 F.Supp. 1 (D.Alaska 1986). I feel the Camachos have also shown that a factual issue exists as to whether the assessments referenced in the October 22, 1990 notice were subsequently abated. Unless the IRS can show it provided the Camachos with a notice conforming with § 6332(d), its levy on the permanent fund dividend is invalid. The issue of the validity of the IRS levy on the permanent fund dividend will be set for trial.
Even assuming the IRS levy is valid, however’, the permanent fund dividend is property of the bankruptcy estate, subject to turnover by the IRS. I find that the holding of the Supreme Court in United States v. Whiting Pools, 462 U.S. 198, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983) is controlling. In that case, the Court stated:
We conclude that the reorganization estate includes property of the debtor that has been seized by a creditor prior to the filing of a petition for reorganization.
We see no reason why a different result should obtain when the IRS is the creditor. The Service is bound by § 542 to the same extent as any other secured creditor.... Nothing in the Bankruptcy Code or its legislative history indicates that Congress intended a special exception for the tax collector in the form of an exclusion from the estate of property seized to satisfy a tax lien.
Id., 462 U.S. at 209, 103 S.Ct. at 2315.
The IRS contends Whiting Pools does not control the instant case because it has levied on an intangible, rather than tangible, asset of the Camachos. The Eleventh Circuit has found that this distinction is without merit.
The government’s attempt to distinguish this case from Whiting Pools is based on a distinction between tangible property and cash equivalent property.... This distinction, however, does not require a departure from Whiting Pools (property essential to the running of the business included in the reorganization estate through § 542(a)). The government relies on the reasoning of Cross Electric Co. v. United States, 664 F.2d 1218 (4th Cir.1981). The property right seized by the IRS in that case was the debtor’s right to collect an account receivable.
However, the direct conflict between Cross Electric and [United States w.] Whiting Pools, 674 F.2d 144 (2nd Cir.1982), was the basis for granting certiorari to review Whiting Pools. 462 U.S. at 202, 103 S.Ct. at 2312. Had the Supreme Court intended to restrict its holding to situations involving tangible saleable property, it either would not have recognized a conflict between Cross Electric and Whiting Pools I and refused to grant certiorari, or it would have, at the very least, indicated that no conflict existed between the two decisions in view of the different types of property involved.
In re Challenge Air, 952 F.2d 384, 386-87 (11th Cir.1992). I adopt the Eleventh Circuit’s analysis.
The IRS contends the levy stripped John Camacho of his interest in the permanent fund dividend and placed it in the constructive possession of the IRS. I disagree. A permanent fund dividend is an “economic interest” consisting of an annual lump sum payment. State v. Anthony, 810 P.2d 155, 158 (Alaska 1991). Dividend recipients have no control over the amount of the payment, Id., AS 43.23.025, or its timing. Although 45 percent of the dividend is exempt from most levies, the entire dividend may be levied upon to satisfy certain obligations other than delinquent federal taxes, including child support, court ordered restitution or fines, and defaulted state student loans. AS 43.23.065. Until the IRS actually received the permanent fund dividend from the State of Alaska, its interest in this asset was no greater than that of any other levying creditor. In Whiting Pools, the Court described the IRS’s interest in seized property as follows:
The Service’s interest in seized property is its lien on that property. The Internal Revenue Code’s levy and seizure provi*670sions, 26 U.S.C. §§ 6331 and 6332, are special procedural devices available to the IRS to protect and satisfy its liens, and are analogous to the remedies available to private secured creditors. They are provisional remedies that do not determine the Service’s rights to the seized property, but merely bring the property into the Service’s legal custody.
Id. at 462 U.S. at 210-11, 103 S.Ct. at 2316 (emphasis added, citations omitted).
If the IRS levy is valid, the IRS holds a perfected lien against John Camacho’s 1992 permanent fund dividend, entitling it to adequate protection under 11 U.S.C. § 363. However, the IRS is not exempt from the provisions of 11 U.S.C. § 542(a), and must surrender the permanent fund dividend to the Camachos. The Camachos have indicated that they will place the dividend funds into a segregated, interest bearing account pending determination of the issue of adequate protection.
Finally, the Camachos assert the IRS’s retention of the permanent fund dividend, post-petition, constitutes a willful violation of the automatic stay, entitling them to actual damages, including attorney’s fees and costs, as well as punitive damages. On the facts before me, I do not find a willful violation of the stay occurred. I may reconsider this issue after trial, if it appears that the IRS levy was invalid. The Camacho’s motion for summary judgment, as to this issue, will be denied without prejudice. Therefore,
IT IS ORDERED:
1. The United States’ motion for summary judgment on the sixth cause of action, filed July 29, 1994, is denied.
2. With reference to the Camacho’s cross motion for summaiy judgment on the sixth cause of action, filed September 15, 1994:
A) Summary judgment is granted on the issue of whether the permanent fund dividend is property of the bankruptcy estate, subject to turnover, pursuant to 11 U.S.C. §§ 541 and 542. The Internal Revenue Service shall deliver the 1992 permanent fund dividend to the Camachos, who shall place the dividend into a segregated, interest bearing account until further order of this court.
B) Summary judgment is denied, without prejudice, on the issue of whether the IRS has violated the automatic stay, entitling the Camachos to recover their costs, attorney’s fees and punitive damages.
3. A final order and judgment shall not be entered in this case until the conclusion of trial. This order is interlocutory and not subject to appeal.
4. With reference to the issue of the validity of the IRS’s levy on the permanent fund dividend, the following dates are set:
a. TRIAL is scheduled for the trial period beginning FEBRUARY 13, 1995, at 9:00 A.M. through FEBRUARY 17, 1995, in Courtroom 2, 605 West Fourth Avenue, Anchorage, Alaska. The court has set more than one trial at the same time. The court will monitor the calendar as the trial date approaches so that parties can be advised of the exact time when they can expect to go to trial. This trial, however, may trail other matters set at the same time.
b. WITNESS LISTS shall be filed by JANUARY 31, 1995, giving the name and address of each witness which the party intends to call on direct or rebuttal (if known).
c. DISCOVERY closes on JANUARY 20, 1995. All discovery shall be served so that timely responses will be due no later than this date.
d. EXHIBITS will be marked, listed, and exchanged seven days (including weekends and holidays) before trial. An Exhibit List (but, not the exhibits themselves) shall be filed with the court by each party. Plaintiffs exhibits shall be identified numerically and defendant’s shall be identified alphabetically. The in-court recorders can advise about marking if there are multiple parties. Sufficient copies of the exhibits will be available (unless impracticable) for the court, the witness and the parties.
All exhibits shall be tabbed and placed in binders which contain a listing of the exhibits. Exhibits which do not fit in the binders may be offered separately.
*671Any party objecting to the admission of any exhibit exchanged under the preceding paragraph must file a list of those exhibits objected to and the grounds for objection two business days before the trial. If no objection, the court will consider the exhibit as admitted unless the court decides not to automatically admit the exhibit at the trial.
e. PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW shall be filed no later than one week before trial by each party.
f. Failure to abide by this order may constitute a default. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491964/ | ORDER GRANTING MOTION TO ALLOW VETERINARIAN TESTIMONY
JULIE A. ROBINSON, Bankruptcy Judge.
This matter comes before the Court pursuant to the Motion to Allow Veterinarian Testimony filed by Peoples State Bank and Trust Co. (“plaintiff’) on September 16,1994. A hearing was held on October 24, 1994, and the Court took the matter under advisement upon the subsequent filing of briefs by the parties. Plaintiff appeared by and through its attorney, Susan R. Sehrag. Harry D. Krug (“defendant”) appeared by and through his attorney, Michelle Roberts.
Defendant objects to plaintiffs Motion to Allow Veterinarian Testimony on the basis *712that the subject of the veterinarian’s testimony is privileged information. Plaintiff wants Dr. G. John Thouvenelle to testify and disclose information he obtained in his capacity as the veterinarian of cattle owned by defendant. Dr. Thouvenelle was the treating veterinarian of defendant’s cattle for some period of time while the cattle were in defendant’s possession. Prior to the bankruptcy, plaintiff repossessed some of defendant’s cattle. After plaintiff took possession of the cattle, Dr. Thouvenelle examined and treated them. Plaintiff has also designated Dr. Thouvenelle as an expert witness on the proper care and treatment of cattle.
Defendant has asserted, as a counterclaim and affirmative defense in this adversary proceeding, that plaintiff has lender liability arising out of its negligence in connection with the cattle. Defendant has also objected to plaintiffs proof of claim on the basis that it should be reduced by the diminution in the cattle’s value caused by plaintiffs negligent care and treatment. In so doing, the defendant has placed in issue the condition of the cattle and their care and treatment before, during, and perhaps after plaintiff possessed the cattle. Plaintiff intends to present evidence comparing defendant’s own practice in caring for the cattle, including the husbandly practices followed in breeding the herd, with the care and treatment afforded the cattle while plaintiff possessed them.
Kansas is one of a few states that recognizes a veterinarian-client privilege.1 K.S.A. 47-839 provides as follows:
Veterinarian not required to disclose certain information; exceptions; veterinarian releasing information in accordance with section not liable, (a) Except as otherwise provided under K.S.A. 47-622 and 47-624, and amendments thereto, no veterinarian licensed under the Kansas veterinary practice act shall be required to disclose any information concerning the veterinarian’s care of an animal except on written authorization or other waiver by the veterinarian’s client or on appropriate court order or subpoena. Any veterinarian’s releasing information under written authorization or other waiver by the client or under court order or subpoena shall not be liable to the client or any other person. The privilege provided by this section shall be waived to the extent that the veterinarian’s client or the owner of the animal places the veterinarian’s care and treatment of the animal or the nature and extent of injuries to the animal at issue in any civil or criminal proceeding.
Defendant argues that the information plaintiff wants to elicit through Dr. Thouve-nelle’s testimony is privileged information and that defendant is the owner or holder of the privilege and has not waived the privilege. Plaintiff contends that the veterinarian is the owner or holder of the privilege, but if the defendant owns the privilege, he has waived it by placing the condition, care and treatment of the cattle in issue in this bankruptcy proceeding.
There are no Kansas cases construing this statute and no Georgia cases construing the statute upon which the Kansas statute was modeled. However, it is apparent from the language in this statute that the animal’s owner and/or the veterinarian’s client is the owner of the privilege. In reciting how the privilege can be waived, the statute focuses on the conduct of the owner of the animal or the veterinarian’s client, not on the conduct of the veterinarian. The privilege can be waived “on written authorization or other waiver by the veterinarian’s client,” such as placing the condition of the animal in issue in a civil or criminal proceeding. Absent this type of waiver, the statute prohibits the veterinarian from disclosing privileged information unless he or she is directed to do so by a court order or subpoena, or unless it is the type of information addressed in K.S.A. 47-622 and 47-624, which place a duty on veterinarians to report certain diseases to the state’s livestock commissioner.
In this case, the defendant owns the privilege, as the owner of the animals. He has placed the condition, care and treatment *713of the cattle in issue in this proceeding, and thus, has waived the privilege.
IT IS THEREFORE ORDERED BY THE COURT that the Motion to Allow Veterinarian Testimony shall be GRANTED. Dr. Thouvenelle will be permitted to testify about the care, treatment and condition of the defendant’s cattle during the time period in which Dr. Thouvenelle treated and examined the cattle on the defendant’s behalf. In rendering this decision, the Court is only addressing the issue of the applicability of the privilege to the proffered areas of testimony and is in no way ruling that the evidence is admissible under all other rules of the Federal Rules of Evidence.
IT IS SO ORDERED.
. The provisions of the Kansas statute are patterned after the veterinarian-client privilege in the state of Georgia, codified at Ga.Code Ann. § 24-9-29. See also III.Ann.Stat ch. 225, para. 115/25.17; Mo Ann.Stat. § 340.286; Tex.Rev. Civ.Stat.Ann. art. 8890, sec. 18E. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491965/ | ORDER
JOYCE BIHARY, Bankruptcy Judge.
On January 13,1995, plaintiff filed a pleading in this matter entitled, “Motion to Proceed In Forma Pauperis” (“Motion”), stating that it is brought pursuant to 28 U.S.C. § 1915 and Fed.R.Bankr.P. 4(e)(2). Plaintiffs Motion and attached affidavit are sufficient under 28 U.S.C. § 1915(a) to demonstrate that plaintiff is indigent.
There is no filing fee for this adversary proceeding. In accordance with the Judicial Conference Schedule of Fees, prescribed pursuant to 28 U.S.C. § 1930(b), filing fees in adversary proceedings are waived for all debtor-plaintiffs.
The only apparent request in the motion is for the Court to direct the United States marshal to effect proper service of the summons and complaint in this adversary proceeding without any cost to the plaintiff. Service of a summons and complaint by the United States marshal occurs only upon an order of the Court. Although the Court has discretion to issue such an Order, it declines to do so here for the following reasons.
First, contrary to plaintiffs citation, there is no Fed.R.Bankr.P. 4(c)(2). There is a federal rule of civil procedure, Fed.R.Civ.P. 4(c)(2), which deals with service of the summons and complaint by a United States marshal when plaintiff is authorized to proceed in forma pauperis pursuant to 28 U.S.C. § 1915. This rule is not applicable here.
An adversary proceeding filed in Bankruptcy Court is governed by the rules of Part VII of the Federal Rules of Bankruptcy Procedure. See, Fed.R.Bankr.P. 7001 (1995). Fed.R.Bankr.P. 7004 applies to service of process in adversary proceedings. Fed. R.Bankr.P. 7004 incorporates certain specified subdivisions of the Federal Rule of Civil Procedure relating to service of process, Rule 4, which were in effect on January 1, 1990. See, Fed.R.Bankr.P. 7004(g) (1995) (stating, “The subdivisions of Rule 4 F.R.Civ.P. made applicable by these rules shall be the subdivisions of Rule 4 F.R.Civ.P. in effect on January 1, 1990, notwithstanding any amendment to Rule 4 F.R.Civ.P. subsequent thereto.”) Fed.R.Bankr.P. 7004(a) specifically incorporates subdivisions (a), (b), (c)(2)(C)(i), (d), (e) and (g)-(j) of Fed.R.Civ.P. 4 (1990). Plaintiffs reference to Fed. R.Civ.P. 4(c)(2) appears to be a citation to *749the current version of Rule 4 as amended in 1993. Rule 4(c)(2) (1995) states:
Service may be effected by any person who is not a party and who is at least 18 years of age. At the request of the plaintiff, however, the court may direct that service be effected by a United States marshal, deputy United States marshal, or other person or officer specially appointed by the court for that purpose. Such an appointment must be made when the plaintiff is authorized to proceed in forma pauperis pursuant to 28 U.S.C. § 1915 or is authorized to proceed as a seaman under 28 U.S.C. § 1916.
Fed.R.Civ.P. 4(c)(2) (1995).
A similar provision existed in the 1990 version of Fed.R.Civ.P. 4, but it was found in Rule 4(c)(2)(B). Fed.R.Bankr.P. 7004(a) does not incorporate Fed.R.Civ.P. 4(c)(2)(B) (1990) or Fed.R.Civ.P. 4(c)(2) (1995). Fed. R.Bankr.P. 7004(b) specifically sets forth the methods by which proper service may be executed in an adversary proceeding. The rule includes nationwide service of process by regular or certified first class mail. Fed. R.Bankr.P. 7004 does not incorporate any part of Fed.R.Civ.P. 4 relating to service by a United States marshal and does not itself provide for any method of service by a United States marshal. Thus, the provisions on service of summonses and complaints by a United States marshal apply to civil actions filed in District Court, not to adversary proceedings filed in Bankruptcy Court.
Second, civil process can be more easily and less expensively effected by someone other than the United States Marshal Service personnel. As stated above, service of process in adversary proceedings may be effected by first class mail. Even in civil litigation brought in district courts where Fed.R.Civ.P. 4(e)(2) applies, the United States marshal may not be required to prepare and send the summons and request for waiver forms, along with the complaint, to the defendant. These functions can be completed by the plaintiff proceeding under 28 U.S.C. § 1915.
The Court recognizes that plaintiff may not have the means to afford postage. Accordingly, the Clerk is directed to pay for the cost of first class postage for mailing the summonses and complaints in this adversary proceeding submitted by plaintiff in accordance with the procedure set forth below.1 Prior to mailing by the Clerk’s Office, plaintiff shall:
1. Obtain a summons pursuant to Fed. R.Bankr.P. 7004(f) for each defendant;
2. Prepare each summons in accordance with Fed.R.Bankr.P. 7004;
3. Place each summons and a copy of the complaint in a properly addressed envelope;
4. Submit the addressed envelope(s), as well as a proper certificate of service, to Michael W. Dobbins, or his desig-nee, Clerk’s Office, United States Bankruptcy Court, Northern District of Georgia, Room 1340, 75 Spring Street, S.W., Atlanta, GA 30303, for mailing.
The Clerk’s Office’s responsibility will only be for postage and mailing, and the Clerk will not be responsible in any way for the accuracy of the names and addresses of the parties to be served.
The Court notes that this complaint is one of four complaints filed by debtor on January 13 and January 18, 1995, alleging violations of the automatic stay.2 These four eom-*750plaints are virtually identical to a previous adversary proceeding, No. 94-6476, which was dismissed on December 8, 1994 for failure to properly effectuate service as required under specific orders entered on August 8 and August 17, 1994.3 The Court had advised plaintiff how to perfect service under Bankruptcy Rule 7004. There was and is no reason that service by mail cannot be perfected by plaintiff under the simple procedures contained in Bankruptcy Rule 7004. Accordingly, the time within which service must be made is hereby shortened, and plaintiff has sixty (60) days from the entry of this Order to effectuate proper service in accordance with Fed.R.Bankr.P. 7004 and the procedures set forth above or else this adversary proceeding will be dismissed.
In accordance with the above reasoning, plaintiffs Motion is hereby GRANTED in part and DENIED in part.
IT IS SO ORDERED.
. The Court recognizes that there is an issue as to whether bankruptcy courts have the authority to rule on in forma pauperis motions. Judge Mahoney recently addressed this issue in Huff v. Brooks, 175 B.R. 409 (Bankr.S.D.Ala.1994) and concluded that bankruptcy courts, as “units of the district court” have authority to deal with in forma pauperis motions. The Court finds the reasoning in Huff v. Brooks to be persuasive. If, however, the district court should find that this Court does not have the authority to enter in forma pauperis orders in bankruptcy matters, this opinion constitutes proposed findings of facts and conclusions of law submitted to the district court pursuant to Fed.R.Bankr.P. 9033 for its review and use in entry of a final order.
. The other three adversary proceedings are styled Edward C. Lindsey v. United States Dept. of Treasury (IRS), Adversary Proceeding No. 95-6026; Edward C. Lindsey v. Enterprise Rent-a-Car, Enterprise Leasing Company, Adversary Proceeding No. 95-6028; and Edward C. Lindsey v. Mobile Comm & A BellSouth Company, Adversary Proceeding No. 95-6041.
. By directing the Clerk to pay the postage necessary for service, the Court makes no determination whatsoever as to the merits of plaintiff's claim in this matter and the other adversary proceedings referenced in footnote 2. At a hearing in Adversary Proceeding No. 94-6476 on December 7, 1994, the Court advised plaintiff that the claims made against the defendants were of questionable validity. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492285/ | ORDER ON MOTION FOR SUMMARY JUDGMENT REGARDING EXEMPTION LITIGATION
C. TIMOTHY CORCORAN, III, Bankruptcy Judge.
This case came on for consideration on the Chapter 7 trustee’s motion for summary judgment (Document No. 145) with respect to his amended objection to debtor’s claim of exemption.
I. Procedural status.
The motion arises in the following way:
The debtor filed an amended Schedule C in which he claimed certain of his personal property as exempt. (Document No. 119). The trustee filed an objection to the debtor’s amended claim of exemption (Document No. 132) and later filed an amended objection. (Document No. 140). The trustee then filed a motion for summary judgment and a memorandum of law with Rule 56 supporting materials. (Documents Nos. 145 and 146). The debtor filed a response with Rule 56 opposing materials. (Document No. 152). The trustee filed a reply brief. (Document No. 155). The issues are therefore ripe and ready for decision on the papers pursuant to the court’s earlier ease management and Mil-bum order. (Document No. 142).
*931II. Factual background.
The summary judgment record made by the parties reveals the following undisputed facts:
On March 16, 1994, the debtor filed a voluntary petition under Chapter 7 of the U.S. Bankruptcy Code. The debtor filed his schedules and statement of financial affairs on April 29, 1994. On May 2, 1994, the debtor filed a motion to convert the case to a case under Chapter 11 of the Bankruptcy Code. (Document No. 39). On May 18, 1994, Enterprise National Bank of Sarasota, a major creditor, filed an objection to that motion and alternatively sought reconversion to Chapter 7, the appointment of a Chapter 11 trustee, or dismissal. (Document No. 45). On July 22, 1994, the court conducted an evidentiary hearing.
On August 19, 1994, the court denied the debtor’s motion to convert and retained the case as a case under Chapter 7. (Document No. 79). The court’s order was based on specific findings of fact and conclusions of law that the court entered simultaneously. (Document No. 80). In those findings and conclusions, the court found, among other things, that “[t]he testimony presented by numerous witnesses and documentary evidence clearly established a pattern of undisclosed and fraudulent transfers of assets [by the debtor], both during the one year immediately preceding his Chapter 7 filing and continuing thereafter.” (Id. at 6). The court found that the debtor had used an assumed name to rent storage facilities to secret and transfer assets and made extensive efforts to conceal, secret, and transfer his assets, including extensive collections of antique clocks and furnishings. (Id. at 7). In addition, the court found that “[d]eposition testimony of Bijan Nassi on July 15, 1994, further evidences that debtor, Alexander Charles Wallace, failed to disclose or to turnover the proceeds from the sale of such remaining consignment antiques, with the proceeds of said sale being post-petition assets of debtor totaling in excess of $10,000.00 in cash.” (Id. at 8). The court also found that the testimony of Gregory Barca established that Gregory Barca had not authorized the debtor to utilize his name for the purpose of purchasing automobiles (id. at 6) and that the testimony of Donald Winter and Rodney Dessberg evidenced that the debtor had held himself out as Gregory Barca for the purposes of selling and transferring a 1967 four-door Jaguar during March 1994. (Id. at 7).
On August 15,1994, the original Chapter 7 trustee, Traci Strickland, filed an objection to the debtor’s claim of exemptions alleging, among other things, a lack of specificity. (Document No. 77). On August 26,1994, the debtor filed his response to the trustee’s objection alleging that the debtor would have specified the items he intended to claim but the assets had been seized by the trustee and the debtor did not have a list of the seized assets. (Document No. 81).
On September 29, 1994, the court entered an order sustaining the trustee’s objection. (Document No. 85). The court disallowed the claimed exemptions as found within Schedule C and required the debtor to file an amended Schedule C. The court wrote:
1. The Objection to Claimed Exemptions filed by Traci Strickland be, and is hereby, sustained and the Debtor’s claim of exemptions as found within Schedule C filed by the Debtor in the above Chapter 7 case be, and are hereby, disallowed.
2. The Debtor shall have thirty (30) days from the date of this Order within which to file an Amended Schedule C setting forth that property lawfully and properly claimed to be exempt. Upon the filing of such Amended Schedule C, Counsel for the Debtor shall serve a copy of the same upon all creditors and parties-in-interest as listed on the official Court'matrix.
3. In the event the Debtor fails to file an Amended Schedule C within thirty (30) days from the date of this Order th[e]n all claim of exemptions by the Debtor shall be considered disallowed with prejudice without further order of the court.
On August 18, 1995, the debtor filed his amended Schedule C.1 (Document No. 119). *932In the amended schedule, the debtor made few claims of exemption. The debtor claimed only “household furnishings and all books” held by Robert Bonnell in Brooks-ville, Florida (which he valued at $800); “household furnishings” held by Robert Bon-nell in Sarasota, Florida (which he valued at $200); “[a]ll professional portfolio items; Drawings, photographs, designs, publicity materials and all intellectual property” held by Robert Bonnell in Sarasota, Florida (which he said had no cash value); and the 1981 Cadillac Eldorado (which he valued at $400). The debtor did not claim any real property as exempt. The debtor also did not claim any exemption with respect to the personal property located at 1721 8th Street, Sarasota, Florida; the 1978 Ford van; the 1973 Mercedes Benz 450 SE automobile; or the 1968 Lincoln automobile. In his original Schedule C, the debtor claimed many of these items as well as several parcels of real property. (Document No. 31).
Traci Strickland resigned as trustee on August 31, 1995, and the acting United States Trustee, Donald F. Walton, became the trustee. Mr. Walton objected to the debtor’s amended claim of exemptions on September 15, 1995, and amended his objection on October 4, 1995. (Documents Nos. 132 and 140). On October 12,1995, the court considered Donald F. Walton’s objection on a preliminary basis. At that hearing, counsel for the debtor stated that the amended Schedule C was intended to supplement the original Schedule C and not to replace it or supersede it. The court has scheduled the contested matter for a final evidentiary hearing on January 30,1996.
III. Discussion.
In the motion for summary judgment, the trustee urges that, with respect to the exemption litigation, the debtor is collaterally estopped from relitigating the matters established in the findings of fact and conclusions of law regarding conversion to Chapter 11 entered on August 19, 1994 (Document No. 80), to the effect that the debtor transferred, removed, and concealed property of the estate. The trustee further urges that, because the debtor transferred, removed, and concealed property of the estate, that property may be charged against the debtor’s exemptions. Thus, the trustee argues, the debtor should be denied his exemptions.
A. Collateral Estoppel.
Halpern v. First Georgia Bank (In re Halpern), 810 F.2d 1061, 1064 (11th Cir.1987), sets forth the applicable elements for applying collateral estoppel. Those elements are:
1. The issue at stake must be identical to the one involved in the prior litigation;
2. The issue must have been actually litigated in the prior litigation; and
3. The determination of the issue in the prior litigation must have been a critical and necessary part of the judgment in that earlier action.
The factual determinations concerning “undisclosed and fraudulent transfers of assets” as set forth in the August 19, 1994, findings meet this three-part test.
Two matters were at issue at the July 22, 1994, evidentiary hearing that led to the August 19, 1994, orders. Those issues were:
1. Whether the debtor had a reasonable likelihood of rehabilitation and had the ability to effectuate a Chapter 11 plan; and
2. Whether there had been fraud and dishonesty by the debtor.
The issues as to undisclosed assets and transfers of assets present in this litigation are identical to the issues litigated in the conversion litigation. The issue of fraud and dishonesty that was actually and fully litigated and determined at the July 22, 1994, hearing was that involving the transfer, sale, and concealment of personal property and automobiles that is a issue now in the context of the exemption litigation. Indeed, there was substantial testimony and evidence adduced at that hearing as to these transfers, sales, and concealments. Although the debt- or was not present at the July 22, 1994, hearing in the conversion litigation, he was fully, completely and ably represented by counsel who actively participated at the hearing. The court’s determination of these issues was a critical and necessary part of the *933decision in the conversion litigation. The issue of whether the debtor had engaged in fraudulent and dishonest conduct was a material factor in the conversion litigation because conversion to Chapter 11 would have put the debtor in possession and control of the estate as a fiduciary. The final order denying the debtor’s motion to convert that was based upon the court’s findings and conclusions was entered on August 19, 1994. It is final and unappealed.
This court has previously considered the collateral estoppel effect of the August 19, 1994, findings on another occasion in this case. In Adversary Proceeding No. 94-374, involving the debtor’s right to a discharge, the court entered an order on March 21, 1995, entitled order on plaintiffs motion for summary judgment and scheduling preliminary pretrial and discovery conference. (A.P.Doeument No. 12). In that order, the court wrote:
The court concludes, therefore, that Mr. Wallace is collaterally estopped in this discharge litigation from relitigating the factual determinations previously made by the court to the effect that he transferred, removed, and concealed his property within one year before the filing of the petition and property of the estate after the date of the filing of the petition. The plaintiffs are entitled to summary judgment on this point.
(Id. at 8-9). Although the court went on to hold in that order that the issue of the debt- or’s intent to defraud creditors neither had been in issue nor determined in the conversion litigation so that the intent issue would be tried in the discharge litigation, the court nevertheless applied collateral estoppel effect to the transfers and concealments that were determined in the conversion litigation. (Id.).
The trustee is likewise entitled to rely in this exemption litigation on this court’s prior factual determinations concerning “undisclosed and fraudulent transfers of assets” made in the conversion litigation.
B. Charging concealed property against the personal property and automobile exemptions.
“It is the settled law in Florida that the debtor’s exemptions may be charged with property that he concealed or withholds from his creditors at the time of the levy; the concealment of it, or his failure to surrender it, is treated as a selection pro tanto by the debtor of his property exemptions.” Libby v. Beverly, 263 F. 63, 64-65 (5th Cir.1920), citing Florida Loan & Trust Co. v. Crabb, 45 Fla. 306, 33 So. 523 (1903). Similarly, where a debtor fails to turn over property to the trustee or fails to account adequately for property of the estate, the court may charge against the personal property exemptions allowed under Florida law. Libby at 65.
In the Libby case, the debtor failed to account for between $600 and $700 received shortly before filing the bankruptcy case. The court of appeals upheld the district court in its determination that, under Florida law, the monies for which the debtor could not account could be applied against the $1,000 personal property exemption. Id.
Unlike the situation in discharge litigation where the debtor’s specific intent to defraud creditors is an issue, under these authorities no specific finding of fraudulent or corrupt intent on the part of the debtor is necessary to charge against personal property and automobile exemptions that are otherwise allowed under Florida law. In Libby, it was the mere failure to surrender or account for the property at issue that permitted the court to charge the unaccounted for assets against the debtor’s personal property exemption. The motivation is not to punish the debtor for committing fraud; the purpose is merely to restore to the estate the property that should have been available to the estate on the date of the filing. Id. A specific finding of intent is unnecessary. Intent is inferred as a matter of law from the conduct itself.
In the instant case, the facts found on August 19, 1994, in the conversion litigation establish that the debtor concealed, secreted, and transferred substantial amounts of personal property, including extensive collections of antique clocks and furnishings. The court found that the proceeds from one sale of antiques in New York alone represented over $10,000. The court also found the pro*934ceeds from the sale of one Jaguar automobile alone represented $3,000. On this summary judgment record, the debtor has offered nothing sufficient to account for those proceeds.2 It is therefore appropriate that at least $10,000 should be applied against the personal property exemption and at least $3,000 should be applied against the automobile exemption that would otherwise be allowed the debtor under Florida law. This charge exhausts these allowable exemptions.3
As a consequence, the court concludes that there are no disputed issues of material fact and that the trustee is entitled to judgment as a matter of law as to his objection to the debtor’s claim of personal property and automobile exemptions. Based upon the facts established in the August 19, 1994, findings and the summary judgment record made by the parties, the authorities described here compel the court to conclude that the debtor is not entitled to any personal property or automobile exemptions. All of the debtor’s personal property and automobiles are therefore property of the estate subject to administration by the trustee.
C. Real property.
The trustee also urges that the debtor be denied his homestead exemption in the residential real property located at 1721 8th Street, Sarasota, Florida, under two theories: first, the debtor’s concealed personal property and automobiles should be charged against the homestead exemption as well as the personal property and automobile exemptions; and, second, the debtor has failed to claim the residential property as exempt by not including it in the amended Schedule C.
On the first point, the Crabb and Libby cases cannot be read to preclude the debtor from claiming the homestead exemption with respect to real property he disclosed, when it is automobiles and personal property that he has failed to turn over and has transferred, removed, and concealed. Crabb, 45 Fla. at 310, 33 So. at 524, specifically makes this point.
As to the trustee’s second contention, the record is insufficient for the court to decide, on a summary judgment basis, that the debtor’s amended Schedule C filed on August 18, 1995, waived the homestead exemption that the debtor previously claimed. Given the debtor’s argument that the amended schedule was intended to supplement and *935not replace the original schedule, the court will need further evidentiary development at trial before being able to rule on this point. If the court concludes that the debtor has preserved the claim of homestead exemption, the court will also need to take testimony and evidence at trial with respect to the merits of the debtor’s claim of homestead exemption.
D. Conclusion and Direction for Entry of Judgment.
For the foregoing reasons, the trustee’s motion for summary judgment with respect to his amended objection to the debtor’s claim of exemption is granted in part and denied in part. It is granted with respect to the debtor’s claimed personal property and automobile exemptions, and the debtor will be denied any exemption for personal property or automobiles. The trustee’s motion for summary judgment is denied with respect to the debtor’s claim of homestead exemption for the residential property. The trial of the objection to the claim of exemptions scheduled for January 30, 1996, will therefore be limited to the waiver and homestead issues.
F.R.B.P. 9021 applies F.R.Civ.P. 58 to this contested matter; F.R.B.P. 9014 and 7054(a) apply F.R.Civ.P. 54(b) to this contested matter. Although the decision of the court that this order represents does not determine the issues as to the debtor’s claim of homestead exemption, it does fully determine all issues as to the debtor’s claim of personal property and automobile exemptions. Because a number of hearings have been held in this ease, the court is aware that the trustee has possession of many items of personal property and that the estate is incurring monthly charges for storing this property. The entry of a final judgment as to the debtor’s claim of personal property and automobiles will be beneficial in facilitating the sale of this property and the elimination of the storage charges — all to the benefit of creditors and the estate.
Pursuant to the provisions of F.R.Civ.P. 54(b), therefore, the court expressly determines that there is no just reason for delay in the entry of a final judgment as to the debtor’s claim of personal property and automobile exemptions. The court expressly directs the entry of judgment as to those claims. Accordingly, the court is contemporaneously entering judgment as to those claims consistent with the decision represented by this order.
E. Jurisdiction.
The court has jurisdiction of the parties and the subject matter pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq., 28 U.S.C. § 1334, 28 U.S.C. § 157(a), and the standing general order of reference entered by the district court. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(B).
DONE and ORDERED.
. The court had entered several orders extending the time originally set for the debtor to file the amended Schedule C. (Documents Nos. 96, 104, and 111).
. In his Rule 56 opposing materials, the debtor has offered an affidavit of Vaughn R. Aitken, Jr. (Document No. 152, Ex. C). In this affidavit, Mr. Aitken says that Mr. Wallace consigned Mr. Ait-ken's antique furnishings for sale at "Christy’s East” and "Bijan Royal, Inc. Antiques” in New York and that Mr. Aitken received the sales proceeds of $10,025. If this affidavit is offered to explain or account for the proceeds of the Christie’s East and Bijan Royal Antiques sales described by the court at pages 7-8 of the August 19, 1994, findings and conclusions in the conversion litigation, the debtor is collaterally estopped from relitigating the facts determined by the court in those findings. One of the facts so determined was that those sales involved the debtor's antiques. The affidavit therefore cannot create a dispute of material fact in this summary judgment record on that point. Even if it did, however, so that the Christie's East and Bijan Royal Antiques sales were excluded from the court's consideration in connection with the motion for summary judgment, the evidence adduced at the July 22, 1994, hearing and the findings and conclusions made by the court on August 19, 1994, in the conversion litigation describe an overwhelming pattern of concealing, secreting, and transferring personal property the value of which greatly exceeds the $1,000 personal property exemption allowed by law. See n. 3, infra. The same result would therefore obtain. Finally, even if this were not the case, the $3,000 in unaccounted for proceeds from the sale of the Jaguar automobile alone would exhaust both the $1,000 automobile exemption and the $1,000 personal property exemption. Id.
. Florida exemptions, of course, control in this case. 11 U.S.C. § 522(b)(1); Fla.Stat. § 222.20. Florida permits a debtor to claim as exempt personal property the value of which does not exceed $1,000. Art. X, § 4(a)(2), Fla. Const. Florida also permits a debtor to claim as exempt the "debtor's interest, not to exceed $1,000 in value, in a single motor vehicle." Fla.Stat. § 222.25(1). The debtor has failed to account for personal property and automobiles well in excess of these permissible exemption amounts. When the unaccounted for proceeds are charged against the exemptions, the charge exhausts the permissible exempt amounts. The debtor is therefore entitled to no personal property or automobile exemptions. This conclusion makes moot the issue of whether the debtor's amended Schedule C supplements or replaces the original Schedule C as to personal property and automobiles. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492286/ | MEMORANDUM OPINION
MARK W. VAUGHN, Bankruptcy Judge.
The Court has before it a contested matter in which the debtor-movant, Stafford’s in the Fields, Inc. (“Debtor”), objects to a proof of claim, as amended, filed by Respondents, William E. and Carol C. Beggs (“Beggs”). The Beggs’ proof of claim incorporates by reference certain allegations included in a *31writ of summons filed in the Carroll County Superior Court seeking damages for breach of contract, negligent misrepresentation and intentional misrepresentation in the amount of $234,172.12. The Court, in a procedural order dated April 12,1995, ordered that Part VII of the Federal Rules of Bankruptcy Procedure apply to this contested matter and that trial would proceed on the issue of liability on the breach of contract claim. By order dated May 3,1995, the Court indicated that the tort claim be tried on the issue of liability alone. A full-day trial was held on June 8, 1995, and oral arguments were heard on June 22, 1995, at which time the Court took the matter under advisement.
This Court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 157(a) and the “Standing Order of Referral of Title 11 Proceedings to the United States Bankruptcy Court for the District of New Hampshire,” dated January 18, 1994 (DiClerico, C.J.). This is a core proceeding in accordance with 28 U.S.C. § 157(b).
Facts
The Debtor is the owner-operator of a country inn located in Chocorua, New Hampshire. Fred and Ramona Stafford are the current owners of all of the outstanding shares of the Debtor and are the current officers and directors. They have operated the inn for over thirty years. Mr. Stafford testified that the Debtor had been in default of its mortgage obligation with Fleet Bank since 1990, and first received a notice of intent to accelerate and foreclose on September 14,1993. Since that time, they had been trying to sell the inn and also negotiate with Fleet Bank. In January 1994, the Debtor and the Staffords entered into a listing agreement with New England Hotel Realty Advisors to list the inn for sale at the price of $450,000. The principal broker for the transaction was Mr. Earl B. Wason (‘Wason”). On June 20, 1994, the Staffords signed a purchase and sale agreement with Mr. Beggs for the sale of the inn at a purchase price of $440,000. Paragraph 1 of that agreement identified the parties to the agreement as follows: Stafford’s in the Field, Inc. — Seller; William Beggs — Buyer; and Fred and Ramona Stafford — Staffords. On the signature lines, Fred and Ramona Stafford each signed as sellers. There was no specific signature line identifying Stafford’s in the Field, Inc. Neither of the Staffords indicated any corporate office next to their signatures.
The three paragraphs of the agreement that are relevant to the matter before the Court are hereinafter reproduced:
7. The closing shall take place and the instruments of conveyance shall be delivered at 1:00 p.m. on August 12, 1994, at Carroll County Registry of Deeds, Ossi-pee, NH or on such later date as the parties may mutually agree; provided, however, that the closing shall not take place between Aug. 13, 1994 and Aug. 24,1994, inclusive.
20. This AGREEMENT is subject to the BUYER obtaining a written S.B.A. 504 mortgage commitment from a lending institution in the amount of $535,000 at the prevailing rate and term. The BUYER hereby agrees to execute promptly the instruments necessary to obtain such written mortgage commitment. A copy of said written mortgage commitment is to be given to the SELLER’S agent, NEW ENGLAND HOTEL REALTY or its representative. BUYER hereby grants to the lending institution permission to have a copy of said written mortgage commitment forwarded to NEW ENGLAND HOTEL REALTY. If said written mortgage commitment cannot be obtained after diligent efforts on or before August 1, 1994, all payments hereunder by the BUYER including interest earned thereon shall be forthwith refunded less any legal, appraisal, credit or engineering fees incurred on BUYER’S behalf and all other obligations of all parties hereto shall cease and this AGREEMENT shall be void and without recourse to the parties hereto; provided that the BUYER notified the SELLER or the SELLER’S agent in writing of their inability to obtain said financing on or before said date.
*3220a. BUYER shall give the STAF-FORDS a mortgage for $85,000 in a subordinated position to the S.B.A. 504 loans and be secured by the real estate and personal property. Said mortgage shall be divided into two notes as follows:
Note 1. $55,000 for a term of twenty years. The interest rate for the first five years of the term shall be fixed at 8.75%. No payments shall be made for the first five years of the term and interest shall be capitalized and added to the principle [sic]. Beginning sixty months following the date of the note, the remaining balance of the principle [sic] and capitalized interest shall be amortized for the remaining fifteen years of the term at a rate of interest equal to the greater of two points over the posted New York prime rate or 8.75% and adjusted annually. The interest rate shall not exceed 12.75% over the life of the loan.
Note 2. $30,000 for a term of twenty years. The interest rate for the first five years of the term shall be fixed 8.75%. Interest only shall be payable monthly for the first five years of the term with payments of $218.75. The principle [sic] balance of $30,000 shall be amortized over the remaining fifteen years of the term at a rate of interest equal to the greater of two points over the posted New York prime rate or 8.75% and adjusted annually. The interest rate shall not exceed 12.75% over the life of the loan.
BUYER shall, at the end of the expiration of sixty months following the date of each of the above described notes, apply to the S.B.A. in writing for consent to pay off the outstanding balance of the notes. In the event of consent to same BUYER shall within ninety days pay off said balance. In the event that the S.B.A. shall fail to consent, BUYER shall every twelve months thereafter resubmit in writing said request. BUYER shall diligently pursue such request on each occasion and shall provide to seller evidence of each such application to the S.B.A.
These two notes are to be secured by a real estate mortgage and security agreement on all business assets, and to be personally guaranteed by William and Carol Beggs. BUYER shall provide STAFFORDS with copies of all requests for disbursement of funds from the construction and remodeling account with the PRIMARY LENDER and evidence of payment.
(Debtor’s Exhibit No. 6 at 3 & 4.)
The agreement utilized by the parties was one of the broker’s prepared agreements modified to fit the transaction. The testimony was that it was basically prepared by Wason and Attorney Battles, who represented the Debtor and the Staffords in this transaction. Mr. Beggs was not represented by counsel during the formation of the contract.
At the time of entering into the agreement, the foreclosure originally scheduled for July 12, 1994, had been postponed until August 17, 1994, largely due to the existence of the purchase and sale agreement.
On July 31,1994, Mr. Beggs sent Wason a letter couched in terms of a telephone conversation he had with Wason stating the following:
1. While he had a financing commitment from Farmington National Bank, it was conditional on the approval of the SBA under its 7a program. The letter continued and stated, “[i]t will be necessary for the commitment date to be extended until August 8,1994 to obtain this approval.” (Debtor’s Exhibit No. 8.);
2. Paragraph 20 shall be changed to reflect the SBA’s 7a program rather than the 504 program and the amount of the commitment would be a $399,500 first mortgage and a $50,000 line of credit; and
3. Paragraph 20a would be modified to increase the mortgage given to the Staffords to $112,000. Note 1 would be increased to $82,000.
As a result of this letter, Attorney Battles testified that it was his opinion that the contract terminated and that the letter constituted a counteroffer. While there is some *33confusion in the record as to when and to whom he rendered this opinion, Mr. Stafford testified that after August 1, 1994, he believed that the contract was terminated. Both Mr. Stafford and Attorney Battles testified that neither informed Mr. Beggs of this position since they were still afraid of the Fleet foreclosure and wanted to keep all of their options open. In fact, during this period, certain health, insurance and environmental inspections took place on the premises. On August 5, 1994, Farmington National Bank issued a commitment letter in the amount of $349,000 and a $25,000 line of credit. This was apparently received by Attorney Battles on August 8, 1994, and forwarded to Fleet’s attorney on the same day. On August 9,1994, Attorney Battles forwarded a package of closing documents to Attorney Jones, who represented the Farmington National Bank.
On August 9, 1994, serious negotiations commenced between the Debtor and Poopsy Investments, Inc., an investment company owned by customers of the Debtor. On August 11, 1994, the Debtor consummated a financing agreement of $150,000 with Poopsy and paid off the Fleet mortgage, thus ending the immediate threat of foreclosure. On August 11, 1994, Wason informed Mr. Beggs that the Debtor had obtained alternative financing and that the deal was off. Mr. Beggs and the bank elected to appear at the previously scheduled closing on August 12, 1994, at which time, Mr. Beggs testified, the deal was proposed to close with the original amount of seller financing. Neither the seller nor any representative of the seller attended the August 12, 1994, meeting. By letter dated August 12, 1994, counsel for Mr. Beggs informed the seller that the closing was rescheduled for August 17, 1994, and also threatened a lawsuit. On August 12, 1994, counsellor the Debtor instructed Wa-son to return the deposit to Mr. Beggs pursuant to paragraph 20 of the purchase and sale agreement. By letter dated August 17, 1994, counsel for the Debtor informed counsel for Mr. Beggs of the Staffords’ position that the seller would not attend the proposed August 17,1994, closing.
On or about September 6, 1994, Beggs brought suit in the Carroll County Superior Court and obtained an attachment on the Debtor’s property. On December 2, 1994, the Debtor filed its petition under Chapter 11 of Title 11 of the United States Code.
Discussion
The objection to the proof of claim raises several issues which will be treated separately hereunder. They are:
1. The Debtor never formally signed the purchase and sale agreement, and the statute of frauds prevents its enforcement against the Debtor.
2. If there were a valid purchase and sale agreement, it would have terminated on August 1,1994, when the buyer did not have his financing commitment pursuant to Article 20 of the purchase and sale agreement.
3. The Debtor denies that there was any negligent misrepresentation for which tort liability can be imposed.
4. The Debtor denies that there was any intentional misrepresentation for which tort liability can be imposed.
Burden of Proof
Case law is clear that a proof of claim is prima facie evidence of a debt and creates a presumption of validity that must be objected to and rebutted by some showing of evidence. See, e.g., Burger v. Level End Dairy Investors (In re Burger), 125 B.R. 894, 902 (Bankr.D.Del.1991); In re Beverages Int’l Ltd., 50 B.R. 273, 280 (Bankr.D.Mass.1985). However, once the presumption is overcome, the burden shifts back to the claimant who bears the ultimate burden of persuasion to establish by a preponderance of the evidence that the claim is valid. Burger, 125 B.R. at 902. The Court finds that the Debtor has submitted sufficient evidence on all counts to rebut the presumption of validity and that the ultimate burden of persuasion lies with the Beggs.
Issue 1 — Party to the Agreement
The Debtor argues that it never formally signed the purchase and sale agreement and, therefore, it is not a party to the *34agreement. The Beggs argue that since each of the Staffords signed above the line designated “Seller,” the Debtor is a party to the agreement. Where the identity of the parties to a contract is ambiguous, the Court looks to all of the facts and circumstances surrounding the transaction. It is a matter of fact for the trial court to determine. DeFillipo v. Testa, 117 N.H. 704, 708, 378 A.2d 738 (1977).
In the instant case, Mr. Stafford testified that at the time of the transaction in question, he and his -wife were the only officers, except for a corporate secretary, the only directors and the majority shareholders. Mr. Stafford further testified that they ran the day-to-day operations of the debtor. (Transcript at 33.) More importantly, Mr. Stafford testified that, although he did not sign as “President,” at the time he signed, he had the intent of conveying the corporate property. (Transcript at 46.) Attorney Battles testified that with respect to this transaction, he represented both the corporation and the individuals. Wason testified it was his understanding that he was acting on behalf of the Debtor.
The Debtor’s only argument in support of its position that the corporation is not a party to the purchase and sale agreement is that Mr. Stafford was told to sign the document the way he signed it and that when he usually signs corporate documents, he indicates his title as a corporate officer.
These facts and circumstances indicate that the Staffords intended to bind the corporation when they signed the agreement. Therefore, the Court finds that the Debtor is a party to the purchase and sale agreement.
Issue 2 — Validity of Contract
Having found that the Debtor is a party to the purchase and sale agreement, the Court must next decide whether the contract became void as of August 1, 1994, or whether the Debtor breached the contract by not closing.
The Debtor argues that Mr. Beggs did not have the financing commitment discussed in paragraph 20 of the purchase and sale agreement on August 1,1994, and that the July 31, 1994, letter to Wason constituted the notice of inability to obtain financing required by the last sentence of paragraph 20. Consequently, the Debtor argues that the purchase and sale agreement was void as of August 1, 1994, and thereafter no contract existed between the Debtor and Mr. Beggs.
Mr. Beggs argues that the provision in paragraph 20 was for his benefit, the July 31, 1994, letter waived this protection and the purchase and sale agreement continued after August 1, 1994. Mr. Beggs further argues that on the appointed date of closing, he was ready, willing and able to perform under the original contract and that the Debtor, by not appearing at the closing and conveying the property, breached the contract entitling Mr. Beggs to damages. Mr. Beggs did not seek specific performance, either at the state court level or in this Court.
Paragraph 20 required the buyer to obtain a “written S.B.A. mortgage commitment from a lending institution in the amount of $535,000 at the prevailing rate and term.” (Debtor’s Exhibit No. 6 at 4.) If the buyer notified the seller of his inability to obtain the commitment on or before August 1,1994, the contract would be void and the buyer would be entitled to a return of his deposit.
The letter of July 31, 1994, informed the seller that he had conditional commitment subject to SBA approval and that the deadline had to be extended. This commitment was for $399,000 and a $50,000 line of credit under an SBA 7a program and not the 504 program. The letter also indicated that the seller had to increase the seller financing to $112,000 from $85,000 and Note 1 would be increased to $82,000 from $55,000. This was an increase of $27,000.
Thus, the letter requested an extension of the financing commitment deadline, changed the amount of institutional financing and the SBA program and increased the amount of seller financing, placing the increase on the first note under which no payments were made for five years. The Court does not consider the change in the SBA program to be a material change and the testimony of Mr. Stafford that he did not care which program provided financing supports that conclusion. While the letter request did not *35modify the purchase price, the Court finds that the requested modification of the amount of institutional financing and seller financing were material terms of the contract.
First, with respect to the institutional financing, Mr. Stafford testified that he relied on the original amount of $535,000 in financing to provide for significant capital improvements to the premises should Mr. Beggs default and the property go to foreclosure. While Mr. Beggs argues that less institutional financing put the Debtor in a better position, Mr. Stafford’s testimony is credible that this is what he believed.
Second, the proposed change to the seller financing is a major modification to the Debt- or. The Debtor, facing an imminent foreclosure, entered into a purchase and sale agreement marginally acceptable to it. The July 31, 1994, letter had the effect of providing less cash at closing and more debt on a note that was unperforming for five years.
Finally and most importantly, the Court finds that the July 31, 1994, letter was a notice from the buyer to the Debtor that it did not have financing and, thus, the contract by its terms became null and void on August 1, 1994. The letter included the language “this commitment is conditional” and “[i]t will be necessary for the commitment date to be extended until August 8, 1994 to obtain this approval.” (Debtor’s Exhibit No. 8.) Mr. Beggs argues that the letter constituted waiver of the financing condition. “A finding of waiver must be based upon an intention expressed in explicit language to forego a right, or upon conduct under the circumstances justifying an inference of a relinquishment of it.” Renovest v. Hodges Dev. Corp., 135 N.H. 72, 79, 600 A.2d 448 (1991) (citations omitted). This request to extend the commitment date is inconsistent with a waiver of the financing contingency. If Mr. Beggs intended to waive the commitment contingency, no letter was necessary. The contract provided for notice only if the contingency had not been met. Mr. Beggs was attempting to protect his $25,000 deposit.
Further, the Court finds it appropriate under the circumstances of this case to adopt a rule of strict compliance with the terms of the contract. “If the occurrence of a condition is required by the agreement of the parties, rather than as a matter of law, a rule of strict compliance traditionally applies.” 2 E. Allan Farnsworth, Farnsworth on Contracts § 8.3 at 353 (1990). “The reasoning behind this rule is that when the parties expressly condition their performance upon the occurrence or nonoccurrence of an event, rather than simply including the event as one of the general terms of the contract, the parties’ bargained-for expectation of strict compliance should be given effect.” Renovest, 135 N.H. at 78-79, 600 A.2d 448. The July 31, 1994, letter notified the Debtor that the condition had not been met. The contract, by its terms, became void. The contract having become void, the Debtor, faced with an imminent foreclosure, became free to seek alternatives.
Beggs cites Ross v. Eichman, 129 N.H. 477, 529 A.2d 941 (1987), for the position that the financing clause is for the benefit of the purchaser and not enforceable against the purchaser by the seller. Ross can be distinguished in several ways. First, the court in Ross found that the buyer had waived the financing contingency. This Court has found expressly to the contrary. Second, in the instant case, the contract contains the specific language suggested by the New Hampshire Supreme Court to protect the seller. “If the sellers had wanted to protect themselves, they merely had to make this clear by adding a provision to the contract requiring that an institutional lender be committed to the buyers by a date certain.” Id. at 480, 529 A.2d 941. Finally, Beggs cites Ross for the proposition that the purpose of the financing clause is “to protect the buyer from involuntary breach.” This is exactly what this Court has found. There was no breach, the contract became void and the buyer was entitled to a return of his deposit.
In case there is any question as to whether the July 31, 1994, letter constituted a counteroffer, the Court will deal summarily with that issue. In short, whether it is described as a counteroffer or a modification, the record is clear that the terms were never accepted by the Debtor. That being the *36case, no contract existed after August 1, 1994.
Issue 3 — Negligent Misrepresentation
It would appear from the pleadings and the evidence presented by Beggs that the gravamen of this count is that the Debtor either had an obligation to notify Mr. Beggs of its position that the contract was void after August 1, 1994, and/or respond to the proposed changes to the contract. The Court has held the contract void as of August 1, 1994, and that no subsequent contract was entered into by the parties. The New Hampshire Supreme Court has spoken clearly in Daley v. Blood, 121 N.H. 256, 428 A.2d 900 (1981), that the statute of fraud bars an action in negligence arising out of a matter that would otherwise be barred by the statute of frauds. “Certainly, to bar recovery in contract but to allow it generally in negligence would subvert the policy of the Statute of Frauds and open the door to the evils the statute is designed to avoid. If we were to allow this negligence action to be maintained in the face of the Statute of Frauds, the practical effect would be to render that statute almost meaningless.” Daley, 121 N.H. at 257-58, 428 A.2d 900 (citation omitted).
Because the original contract terminated by its terms on August 1, 1994, any new agreement for the purchase and sale of the real property would be required to be in writing by the statute of frauds. No such writing exists. This is exactly the situation anticipated by Daley. The count of negligent misrepresentation cannot stand.
Issue 4 — Intentional Misrepresentation
The one remaining issue for the Court to decide is the Beggs’ allegation of intentional misrepresentation. Unlike negligent misrepresentation, the New Hampshire Supreme Court has held for policy reasons that intentional misrepresentation is not barred by the statute of frauds. Munson v. Randoms, 118 N.H. 474, 478, 387 A.2d 1174 (1978).
“In order to prevail in a deceit action, the plaintiff must prove that there was a misrepresentation of fact.... If the speaker makes a promise and at the same time intends not to perform, this operates as a misrepresentation of the speaker’s state of mind and a proper basis for an action in deceit.” Id. at 477, 387 A.2d 1174. “Intentional misrepresentation or fraud must be proved by showing that the representation was made with knowledge of its falsity or with conscious indifference to its truth and with the intention of causing another person to rely on the representation.” University System of New Hampshire v. United States Gypsum Co., 756 F.Supp. 640, 650 (D.N.H.1991).
In deciding this issue, the Court is somewhat hampered because neither Count C of the state court writ incorporated by reference, nor the Beggs’ memorandum of law states with specificity the misrepresentations or representations upon which Mr. Beggs relies. While not pled with specificity, it appears from the evidence at trial that Beggs’ theory is that the Debtor had a duty to respond to his July 31,1994, letter and its failure to respond is the misrepresentation relied on by him. This Court disagrees.
In the case of University System of New Hampshire v. United States Gypsum, that court stated, “[t]he court agrees with defendants that absent evidence of a communicated representation there can be no misrepresentation.” University System of New Hampshire, 756 F.Supp. at 651. That quote went on to say that “[i]ntentional concealment of a material fact may constitute fraud. For a failure to disclose to rise to the level of actionable fraud, however, there must be a duty to disclose.” Id. at 651 (citations omitted). That was a case of a concealed defect. This case is not.
The evidence is clear. Mr. Beggs sent the July 31,1994, letter which not only requested an extension of the date of the financing contingency, but also requested material changes to the purchase and sale agreement. The Debtor did not respond. In fact, there was no specific communication from the Debtor to Mr. Beggs with respect to that letter until after the Debtor had obtained alternative financing. The Debtor did allow certain inspections to take place on the premises, and the Debtor’s counsel did prepare *37certain closing documents which were forwarded to the bank’s counsel. Mr.: Stafford testified that while he believed that the contract was no longer binding after the July 31, 1994, letter, he proceeded to attempt to keep his options open since the foreclosure was still imminent. Further, upon obtaining alternative financing, the Debtor immediately informed Mr. Beggs of its position that the deal was off. :
The evidence is also clear that once Mr. Beggs sent the July 31, 1994, letter, even though he was dealing with material modifications to a contract for the purchase and sale of real property, he took no action to follow up and make sure that the terms of his letter had been affirmatively agreed to by the Debtor. By sending the letter, Mr. Beggs, like the Staffords, was keeping his options open. Most importantly, Mr. Beggs never informed the Debtor that he would be able to close with the original seller financing terms intact until after he was notified that the deal was off. By that time, it was too late. :
Based on all of the above, the Court finds that the Debtor made no specific representation to Mr. Beggs knowing at the time that the representation was false or with conscious indifference to its truth. The Court further finds that the Debtor had no duty to respond and, having no duty to respond, that its failure to do so was not intentional misrepresentation. While not necessary to this decision, the Court would further find that Mr. Beggs’ failure to follow up on his letter of July 31, 1994, would abrogate any claim of justified reliance on the Debtor’s inaction.
CONCLUSION
For the reasons cited herein, the Debtor’s objection to Beggs’ proof of claim is sustained, the proof of claim is disallowed in full and the attachment securing said claim against the Debtor recorded in the Carroll County Registry of Deeds on September 7, 1994, is declared null and void.
This opinion constitutes the Court’s findings of facts and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492287/ | MEMORANDUM OPINION
H. CLYDE PEARSON, Bankruptcy Judge.
Upon confirmation hearing of the within Chapter 13 case, the Court, having consid*139ered the Plan and the objections filed thereto, stated from the bench the reasons therefor and directed Trustee to prepare and submit to the Court a confirmation order, which confirmed the Plan subject to the resolution of the Internal Revenue Service’s (“IRS”) Objection and a resolution of the tax claim of IRS which the Debtors challenge.
This Memorandum Opinion supplements the decision of the Court from the bench.
The Debtors filed their petition herein and set forth as a portion of their property their residence valued at $50,000, with a prior deed of trust of $23,000 as the only encumbrance to the said real estate; and that the Internal Revenue Service has filed a tax claim, claiming secured portion of $16,062.25 and a priority unsecured $100.00 claim. The Debtors challenge the tax claim on the basis that a portion of the tax claim is an estimate as determined by the IRS and which the Debtors contest as to the amount of said claim.
Assuming the claim is allowed in the full amount as claimed herein and the equity in the real estate is in the amount of the difference between a $50,000.00 value and a $23,-000.00 encumbrance by a deed of trust, there is overwhelming equity in support of the tax claim. The Plan provides for the monthly payment of the mortgage debt, which apparently is the prior lien to the tax claim, and each payment thereon under the confirmed Plan will increase the equity supporting the tax claim to the extent that the same is hereafter determined to be secured. The Court directed Debtors’ counsel to promptly file objections to the claim so that the matter can be promptly heard and determined.
It was the conclusion of the Court that the delay in confirmation of the Plan was unnecessary because the amount of the tax liability as secured or unsecured could be determined promptly and that the matter could be dealt with under § 1329 providing for modification of a Plan at any time following a confirmation order and that the delay of confirmation of the Plan herein should not be deferred pending a resolution of the claims of IRS or the State Department of Taxation. The necessary delay in determining an objection and adjudication of that claim could be appealed to the District Court and, indeed, to the Court of Appeals for the Fourth Circuit, in which event there would be no confirmation of the Chapter 13 Debtors’ Plan for perhaps two or three years. The result would be that the rights of all other creditors would be jeopardized. The Congress contemplated this situation by enacting § 1329, providing that plans could be confirmed and that the plan could be modified thereafter to meet the contingencies that results from hearings, and so forth, on claims, as well as many other contingencies.
For the reasons herein stated, it is the Court’s view that the Plan should be confirmed subject to resolution of the tax liability of the IRS and the Commonwealth of Virginia upon returns which the Debtors were directed to file; and the Court will enter the Order as submitted by the Trustee, which provides that each secured creditor, such as the IRS here, shall retain a lien on its collateral until paid as provided above; and upon receipt of final payment under the Plan shall surrender title documents to the Debtors and release the lien, and so forth. This portion of the confirmation order makes ample provision for the protection of the IRS claim and the equity which is increasing upon payment of each mortgage payment by the Debtors, as herein provided, and is not prejudicial to the IRS pending resolution of its claim.
This Memorandum shall be filed as a supplement to the Court’s ruling from the bench.
Service of a copy of this Memorandum Opinion shall be made by mail to the Debtors; counsel for Debtors; Trustee; S. Randall Ramseyer, Esq., Asst. U.S. Attorney; Becky Miner Grigsby, Esq., counsel for Virginia Department of Taxation; and U.S. Trustee. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492288/ | *194ORDER DISMISSING PETITION FOR WRIT OF HABEAS CORPUS
C.N. CLEVERT, Chief Judge.
Dennis L. Farr has petitioned this court for a writ of habeas corpus, seeking release from the custody of the Dane County Wisconsin Sheriff for an appearance before this court or a United States District Court on or before 9:00 a.m. July 12, 1995. The request is denied and the petition is dismissed.
As a preliminary matter, Farr has filed his petition in the wrong place. 28 U.S.C. § 2241(d) provides that when a state has two or more judicial districts, the district court for the district within which the petitioner was convicted and sentenced, and the district court for the district within which the petitioner is incarcerated have concurrent jurisdiction to entertain an application for a writ of habeas corpus. Farr is incarcerated in Dane County Wisconsin, which is in the Western District of Wisconsin. Furthermore, it is dubious whether Farr’s petition could be referred to this court under 28 U.S.C. § 157(a). Consequently, this court concludes it is without jurisdiction to entertain Farr’s petition.1 Ahrens v. Clark, 335 U.S. 188, 68 S.Ct. 1443, 92 L.Ed. 1898 (1948) (citing U.S. v. Griffin, 303 U.S. 226, 229, 58 S.Ct. 601, 602-03, 82 L.Ed. 764 (1938)); United States ex rel. Jimenez v. Conboy, 310 F.Supp. 801, 802-803 and n. 6 (S.D.N.Y.1970). Cf. Braden v. 30th Judicial Circuit of Kentucky, 410 U.S. 484, 93 S.Ct. 1123, 35 L.Ed.2d 443 (1973).
Assuming, however, that this court does have jurisdiction, and construing the petition liberally, Haines v. Kerner, 404 U.S. 519, 520-21, 92 S.Ct. 594, 595-96, 30 L.Ed.2d 652 (1972); Price v. Johnston, 334 U.S. 266, 68 S.Ct. 1049, 92 L.Ed. 1356 (1948), the petition is facially defective as there is no allegation that Farr’s current incarceration violates the United States Constitution or Laws or Treaties of the United States, as required by 28 U.S.C. § 2254(a). Moreover, Farr has not complied with the Rules Governing Section 2254 Cases in the United States District Courts (as amended to February 1, 1995) (“Habeas Rules”), which, among other things, require the payment of a waiva-ble filing fee, and that the state officer having custody of the petitioner, in this case the Sheriff of Dane County Wisconsin, be named as a respondent in the petition. See Habeas Rule 2(a). Also, Farr has not complied with Local District Court Rule 12.01, which requires petitions for writs of habeas corpus to be on forms supplied by the court.
It is unclear whether or not Farr exhausted his state remedies prior to filing this application. However, as it plainly appears from the face of the petition that Farr is not entitled to the requested writ, see Habeas Rule 4, the question need not be reached.
Now, therefore
IT IS ORDERED that the request for a writ of habeas corpus is denied.
IT IS FURTHER ORDERED that the Emergency Petition for A Writ of Habeas Corpus is dismissed.
. Farr's petition suggests that there is personal jurisdiction over Sheriff Raemisch because he is a defendant in Adversary Proceeding No. 95-2147, Dennis L. Farr v. James E. Welker, Madison Gas & Electric Co., Brian Mrochak, Hans Seelig, Richard C. Phelps, C. William Foust, Richard Raemisch, Judith Coleman, James Grann, Paul R. Soglin, City of Madison, County of Dane and State of Wisconsin. However, the underlying Dane County action, Case No. 95-CV-0865, was remanded and the adversary proceeding dismissed by order of this court dated July 10, 1995. Hence, the adversary proceeding does not provide any basis for Farr to claim this court has jurisdiction over Sheriff Raemisch. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484134/ | Cite as 2022 Ark. App. 470
ARKANSAS COURT OF APPEALS
DIVISIONS I, III & IV
No. CV-21-573
Opinion Delivered November 16, 2022
CASSEY BASSETT
APPELLANT APPEAL FROM THE GREENE
COUNTY CIRCUIT COURT
V. [NO. 28DR-21-70]
HONORABLE TONYA M.
JEREMY EMERY; KENDRA EMERY; AND ALEXANDER, JUDGE
DUSTY EMERY
APPELLEES REVERSED AND REMANDED
LARRY D. VAUGHT, Judge
Cassey Bassett appeals the decision of the Greene County Circuit Court denying her
motion to modify custody and visitation of her three-year-old child, herein referred to as Minor
Child 1. On appeal, Cassey has abandoned any claim regarding custody; she appeals only the
court’s denial of her petition to establish visitation. Cassey argues that, in analyzing her request
for visitation, the circuit court improperly considered the petition to adopt Minor Child 1,
which appellees Kendra and Jeremy Emery1 filed in a separate court. She contends that the
circuit court erroneously applied the legal standards relevant to adoption rather than the law
governing visitation. We reverse and remand.
1DustyEmery is Minor Child 1’s biological father. Jeremy is Dusty’s brother. Jeremy and
Kendra are married and have had custody of Minor Child 1 since 2018.
In October 2017, the Arkansas Department of Human Services (DHS) removed Minor
Child 1 from Cassey’s custody due to inadequate supervision and Cassey’s drug use.2 Minor
Child 1 was then adjudicated dependent-neglected. A year later, a permanent-custody and
closure order was entered awarding custody of Minor Child 1 to Jeremy and Kendra. The order
was silent regarding visitation.
In the years following the entry of the permanent-custody order, Cassey worked to
remedy the problems that caused her to lose custody of her children. At the time of the custody
hearing that gave rise to this appeal, Cassey had stable employment, a clean and appropriate
home, and safe and reliable transportation. She volunteered regularly with a faith-based
women’s-recovery program, and she had started taking community-college courses to further her
education. She had also regained custody of three of her other children, and she had no pending
criminal charges.
The evidence at the hearing revealed that, starting in 2020, Cassey began sending money
to the Emerys for Minor Child 1’s support. Cassey testified that she tried, on numerous
occasions, to ask the Emerys for an opportunity to visit with Minor Child 1, but they ignored
her messages and calls. Cassey then filed a petition for modification of custody on February 26,
2021. She sought full custody of Minor Child 1 or, alternatively, requested that a visitation
schedule be set by the court.
At the hearing, there was conflicting testimony regarding the last time Cassey had seen
Minor Child 1, but the parties appear to agree that it was at least two years before Cassey filed
2Cassey also lost custody of four other children. Three of those children have been
returned to her custody, and she exercises visitation with one child. None of Cassey’s other
children are a party to this appeal.
2
the motion to change custody. The Emerys acknowledged that they had “decided that it was
best” for Minor Child 1 not to have any contact with Cassey. Minor Child 1 calls the Emerys
“mom and dad,” and the Emerys thought that visitation with Cassey would only confuse the
child. Jeremy stated that Cassey hadn’t tried contacting them about seeing Minor Child 1 “unless
it was a special day, a birthday or a holiday; that was it.”
A month after Cassey filed her petition for modification, the Emerys filed, in a different
court, a petition to adopt Minor Child 1. The cases were not consolidated, and a hearing was
held on Cassey’s petition to modify custody or establish visitation on July 19, 2021. At the
hearing, the Emerys relied heavily on their pending adoption petition as a reason to deny
Cassey’s requests for custody and visitation. They argued that it would be confusing to the child
to establish a new relationship and routine only to drastically change the child’s life again with
the adoption, which they argued was likely to be granted. The Emerys urged the court to find
that, because there was a likelihood that the adoption would be granted, it would not be in
Minor Child 1’s best interest to change custody or establish a visitation schedule.
The circuit court agreed and, as a result, cited the legal standards governing petitions to
adopt a child without the consent of the biological parent in its analysis of Cassey’s petition to
change custody or establish visitation.3 Following the hearing, the court denied the petition for
3Arkansas Code Annotated section 9-9-207 (Repl. 2020) discusses when consent to an
adoption by a biological parent is unnecessary. Pursuant to section 9-9-207(a)(2), a parent’s
consent to adoption is not required of a parent of a child in the custody of another if the parent
for a period of at least one year has failed significantly without justifiable cause to communicate
with the child or to provide for the care and support of the child as required by law or judicial
decree. Even when parental consent is unnecessary, the court must still determine if granting the
adoption is in the best interest of the child. Racine v. Nelson, 2011 Ark. 50, at 16, 378 S.W.3d 93,
102.
3
custody, stating that Minor Child 1’s need for stability supports the finding that it is in the
child’s best interest to remain in the Emery’s custody. The court noted that Arkansas law does
not require a biological parent’s consent to the adoption of his or her child if more than a year
has passed without the parent having meaningful contact with the child or providing meaningful
support. Regarding visitation, the court stated that it was “following the law, considering the
evidence presented, and considering the impressions of the court based on the testimony
presented.” In the order, the court’s denial of Cassey’s request for visitation includes specific
findings that directly relate to the elements necessary to grant an adoption in Arkansas without
the consent of the biological parent, such as its finding that there had been periods of a year or
more in which Cassey did not have meaningful contact with Minor Child 1 and did not provide
meaningful support.
Cassey now appeals the court’s denial of her request to establish visitation. On appeal,
she argues that the circuit court improperly decided the visitation issue on the basis of an
erroneous application of the legal standards applicable to adoption, not visitation. Cassey’s
request for relief in her appellate brief does not seek reversal of the denial of her petition for
custody; it only asks that we reverse the court’s order and remand the case to establish at least
some minimal visitation. Because we hold that the court erroneously applied the wrong legal
standard in this case, we reverse and remand for the court to decide the visitation issue using
Arkansas law governing a biological parent’s right to visitation.
Child-visitation cases are reviewed de novo on the record and will not be overturned
unless clearly erroneous. Phillips v. Phillips, 2014 Ark. App. 486, at 2, 442 S.W.3d 901, 902. The
4
permanent-custody and closure order, which was in place prior to Cassey’s petition, was silent
as to visitation. Arkansas Code Annotated section 9-13-101(b)(1)(A)(vii) provides that:
(a) A parent who is not granted sole, primary, or joint custody of his or her child is
entitled to reasonable parenting time with the child unless the court finds after a hearing
that parenting time between the parent and the child would seriously endanger the
physical, mental, or emotional health of the child.
(b) At the request of a party, a court shall issue a written order that:
(1) Is specific as to the frequency, timing, duration, condition, and method of
scheduling parenting time with a parent who is not granted sole, primary, or joint custody
of his or her child; and
(2) Takes into consideration the developmental age of the child.
Ark. Code Ann. § 9-13-101(b)(1)(A)(vii) (Supp. 2021). Here, Cassey was not given statutory
visitation rights, and the court never made a finding that visitation would endanger Minor Child
1. While Cassey did not argue, either below or on appeal, that the circuit court’s order violates
section 9-13-101, she did preserve the inverse argument: that the circuit court erroneously
applied the wrong standard when it cited Arkansas law governing nonconsensual adoption. We
cite section 9-13-101, therefore, to illustrate Cassey’s point that Arkansas law contains legal
standards governing visitation but that the circuit court in this case erroneously applied the
adoption-law elements instead.
We recognize that fixing visitation rights is a matter that lies within the sound discretion
of the circuit court, and the main consideration in making judicial determinations concerning
visitation is the best interest of the child. Hudson v. Kyle, 365 Ark. 341, 344, 229 S.W.3d 890,
892–93 (2006). The Emerys argue—and the dissenting opinions would hold—that the circuit
court properly considered the pending adoption petition as part of its best-interest analysis. We
5
do not doubt that the circuit court was attempting to act in the child’s best interest. We note,
however, that the United States Supreme Court has recognized that parents have a fundamental
liberty interest in the care, control, and custody of their own children, Troxel v. Granville, 530
U.S. 57, 66 (2000), and Arkansas has developed both statutory and case law governing the
circumstances under which a biological parent can be denied visitation. Ark. Code Ann. § 9-13-
101(b)(1)(A)(vii); Buckley v. Buckley, 73 Ark. App. 410, 415–16, 43 S.W.3d 212, 215 (2001);
Hawn v. Hawn, 8 Ark. App. 69, 73, 648 S.W.2d 819, 821 (1983); Lumpkin v. Gregory, 262 Ark.
561, 564, 559 S.W.2d 151, 153 (1977). In Hawn, we explained that,
[u]ndoubtedly, there are cases in which circumstances warrant the termination of a
parent’s visitation rights. However, such action is a drastic one which our trial courts
have cautiously employed and which our appellate courts have critically reviewed.
8 Ark. App. at 73, 648 S.W.2d at 821. By statute, Arkansas lawmakers have determined the
threshold necessary for denying a biological parent the right to visit his or her own child: a
finding by the circuit court that visitation between the parent and child “would seriously
endanger the physical, mental, or emotional health of the child.” Ark. Code Ann. § 9-13-
101(b)(1)(A)(vii)(a).
In this case, the circuit court failed to apply that framework when evaluating Cassey’s
request for visitation. Instead, under the broad umbrella “best interest,” it attempted to predict
the outcome of the Emerys’ pending petition to adopt Minor Child 1. We reverse the circuit
court’s denial of Cassey’s petition to establish visitation with Minor Child 1, and we remand the
case for the circuit court to decide the visitation issue using the appropriate legal standards.
Reversed and remanded.
VIRDEN, GLADWIN, BARRETT, and WHITEAKER, JJ., agree.
6
KLAPPENBACH, GRUBER, MURPHY, and BROWN, JJ., dissent.
MIKE MURPHY, Judge, dissenting. I disagree with the majority that this case should be
reversed and remanded. The majority declines to answer Cassey’s specific arguments as they are
presented on appeal, and instead crafts a remedy for her, in derogation of the circuit court’s
supported best-interest finding. I would affirm.
The majority cites the visitation statute, Ark. Code Ann. § 9-13-101(b)(1)(A)(vii),
reasoning that the circuit court erred by not considering it in its denial of visitation. Cassey never
once cited this statute to this court or to the court below. She is bound by the scope and nature
of the arguments made at trial, Rudder v. Hurst, 2009 Ark. App. 577, at 13, 337 S.W.3d 565,
574, and to say the court erred for failure to make a finding that visitation “would seriously
endanger the physical, mental, or emotional health of the child” would be to make an argument
for the appellant that she did not make for herself. We do not research or develop arguments
for an appellant. Davis v. Davis, 2013 Ark. App. 180, at 6.
Furthermore, failure to make an explicit finding in this instance is not fatal, because
unless the contrary can be shown, we presume that the circuit court acted properly and made
such findings of fact as were necessary to support its judgment. Wyatt v. Wyatt, 2018 Ark. App.
177, at 7, 545 S.W.3d 796, 802. So, while the circuit court never cited the visitation statute in
its order, it also never cited the adoption statute. Instead, it discussed some elements from both
in support of its determination—a determination that gets the benefit of the doctrine of implied
presumption. The fixing of visitation rights is a matter that lies within the sound discretion of
the trial court. Hudson v. Kyle, 365 Ark. 341, 344, 229 S.W.3d 890, 892–93 (2006). The main
consideration in making judicial determinations concerning visitation is the best interest of the
7
child. Id. On a de novo review, I would hold that the circuit court did not clearly err by
considering elements of the contested adoption statute as part of its analysis in denying
visitation.
Cassey made two arguments to this court. First, that the circuit court improperly
considered the upcoming adoption and factors pertaining to adoptions wherein parental
consent is unnecessary in denying her petition for visitation. And second, that even if it were
appropriate for the court to consider the adoption, the evidence demonstrates that her failure
to communicate with or provide support for the child for more than a year would not be a
significant failure without justifiable cause.
Cassey never once objected below to evidence of, or arguments concerning, the adoption
proceedings. Nor did she once argue below that the court may not consider the upcoming
adoption in its visitation analysis. We will not review a matter on which the trial court has not
ruled, and the burden of obtaining a ruling is on the movant; matters left unresolved are waived
and may not be raised on appeal. Stell v. Stell, 2021 Ark. App. 478, at 2, 638 S.W.3d 855, 857.
A circuit court is allowed to consider everything properly before it. This record supports the
circuit court’s findings that some of the elements of an adoption under Arkansas Code
Annotated section 9-9-207 are present. It was within the circuit court’s province to determine
what weight to give that evidence, regardless of mitigating factors. Ford v. Ford, 347 Ark. 485, 65
S.W.3d 432 (2002).1
1To be abundantly clear,the adoption case will be its own proceeding with its own evidence
to be weighed by another court. For whatever this dissent is worth, it should absolutely not be
read to support any particular outcome.
8
To reverse and remand here would be to ignore the circuit court’s concerns for the minor
child’s well-being. The circuit court explained why it did not want to grant visitation at this time:
[T]he Court doesn’t want to . . . start something when this child’s almost four years old.
So [Cassey] will still be allowed to appear and defend in the adoption proceeding. But as
for now, the Court will not be allowing visitation given the fact that the amount of time
that has transpired[.]
The polestar in matters concerning children is what is in the best interest of the child.
This record established that there were some elements that could support an adoption: the child
was young, granting visitation would be confusing to the child, and the child had absolutely no
relationship with her biological mother (regardless of fault). The court concluded that it would
be in the best interest of the young child to maintain the status quo at least until a determination
on the adoption petition could be considered. I would not say this was clear error, especially
considering that Cassey made no argument that she was entitled to reasonable parenting time
as a matter of right absent the specific findings set forth in Arkansas Code Annotated section 9-
13-101(a).
I would affirm.
Klappenbach, Gruber, and Brown, JJ., join.
Scott Emerson, P.A., by: Scott Emerson, for appellant.
Benson Law Firm, P.A., by: S. King Benson; and Brett D. Watson, Attorney at Law, PLLC, by:
Brett D. Watson, for appellee.
9 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484156/ | 20-1844
Martinez Fajardo v. Garland
BIA
Christensen, IJ
A209 218 784/785
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION
TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED
AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS
COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT
FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX
OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A
PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY
NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals
2 for the Second Circuit, held at the Thurgood Marshall
3 United States Courthouse, 40 Foley Square, in the City of
4 New York, on the 16th day of November, two thousand twenty-
5 two.
6
7 PRESENT:
8 DENNIS JACOBS,
9 PIERRE N. LEVAL,
10 RAYMOND J. LOHIER, JR.,
11 Circuit Judges.
12 _____________________________________
13
14 ADA CLARIBEL MARTINEZ FAJARDO,
15 OSCAR OSMIN POLANCO-AGUILAR,
16 Petitioners,
17
18 v. 20-1844
19 NAC
20 MERRICK B. GARLAND, UNITED
21 STATES ATTORNEY GENERAL,
22 Respondent.
23 _____________________________________
24
25
26 FOR PETITIONERS: Gisela Chavez-Garcia, Esq., New
27 York, NY.
28
1 FOR RESPONDENT: Brian Boynton, Acting Assistant
2 Attorney General; Claire L.
3 Workman, Senior Litigation
4 Counsel; John B. Holt, Trial
5 Attorney, Office of Immigration
6 Litigation, United States
7 Department of Justice, Washington,
8 DC.
9 UPON DUE CONSIDERATION of this petition for review of a
10 Board of Immigration Appeals (“BIA”) decision, it is hereby
11 ORDERED, ADJUDGED, AND DECREED that the petition for review
12 is DENIED.
13 Petitioners Ada Claribel Martinez Fajardo and Oscar Osmin
14 Polanco-Aguilar, natives and citizens of El Salvador, seek
15 review of a May 19, 2020 decision of the BIA affirming a July
16 11, 2018 decision of an Immigration Judge (“IJ”) denying their
17 applications for asylum, withholding of removal, and relief
18 under the Convention Against Torture (“CAT”). In re Ada
19 Claribel Martinez Fajardo, Oscar Osmin Polanco-Aguilar, No.
20 A 209 218 784/785 (B.I.A. May 19, 2020), aff’g No. A 209 218
21 784/785 (Immig. Ct. N.Y. City July 11, 2018). We assume the
22 parties’ familiarity with the underlying facts and procedural
23 history.
24 We have reviewed both the IJ’s and the BIA’s opinions
25 “for the sake of completeness.” Wangchuck v. Dep’t of
26 Homeland Sec., 448 F.3d 524, 528 (2d Cir. 2006). We review
2
1 adverse credibility determinations for substantial evidence,
2 see Hong Fei Gao v. Sessions, 891 F.3d 67, 76 (2d Cir. 2018),
3 and treat the agency’s findings of fact as “conclusive unless
4 any reasonable adjudicator would be compelled to conclude to
5 the contrary,” 8 U.S.C. § 1252(b)(4)(B).
6 “Considering the totality of the circumstances, and all
7 relevant factors, a trier of fact may base a credibility
8 determination on . . . the consistency between the
9 applicant’s or witness’s written and oral statements
10 (whenever made and whether or not under oath, and considering
11 the circumstances under which the statements were
12 made), . . . the consistency of such statements with other
13 evidence of record . . . , and any inaccuracies or falsehoods
14 in such statements, without regard to whether an
15 inconsistency, inaccuracy, or falsehood goes to the heart of
16 the applicant’s claim, or any other relevant factor.” 8
17 U.S.C. § 1158(b)(1)(B)(iii). “We defer . . . to an IJ’s
18 credibility determination unless, from the totality of the
19 circumstances, it is plain that no reasonable fact-finder
20 could make such an adverse credibility ruling.” Xiu Xia Lin
21 v. Mukasey, 534 F.3d 162, 167 (2d Cir. 2008).
22 Here, substantial evidence supports the agency’s adverse
3
1 credibility determination. First, the agency reasonably
2 relied on inconsistencies between Petitioners’ testimony and
3 Martinez Fajardo’s credible fear interview. See
4 § 1158(b)(1)(B)(iii). Petitioners alleged that Martinez
5 Fajardo witnessed a gang murder and that, as a result, the
6 gang members threatened them, sexually assaulted Martinez
7 Fajardo, and beat Polanco-Aguilar. But Martinez Fajardo made
8 inconsistent statements as to whether she saw or only heard
9 the shooting, whether the gang members shot or both shot and
10 stabbed the victims, and where she was when she witnessed the
11 murders. The agency did not err in relying on inconsistent
12 statements from her credible fear interview because the
13 interview record bears the necessary “hallmarks of
14 reliability”: the interview was conducted through a Spanish
15 interpreter, Martinez Fajardo did not indicate that she had
16 difficulty understanding the interpreter, she told the
17 interviewing officer why she was afraid to go to El Salvador,
18 and the interview was memorialized in a typewritten document
19 that listed the questions and responses. See Ming Zhang v.
20 Holder, 585 F.3d 715, 725 (2d Cir. 2009). The agency was not
21 required to credit her explanation that she forgot to mention
22 some details at the hearing. See Majidi v. Gonzales, 430
4
1 F.3d 77, 80 (2d Cir. 2005).
2 Second, the IJ reasonably relied on a discrepancy between
3 Petitioners’ testimony and applications. Although they
4 testified that the gang members assaulted Polanco-Aguilar at
5 work, they did not mention that assault in their applications
6 or written statements. The agency was not compelled to
7 credit Petitioners’ explanation that Polanco-Aguilar was
8 nervous and reluctant to think about the beating because he
9 prepared the written statement well after his arrival and the
10 beating was the only harm he suffered personally. Id.; see
11 also Hong Fei Gao, 891 F.3d at 78–79 (“[I]n assessing the
12 probative value of the omission of certain facts, an IJ should
13 consider whether those facts are ones that a credible
14 petitioner would reasonably have been expected to disclose
15 under the relevant circumstances.”).
16 Third, the agency reasonably relied on multiple minor
17 discrepancies about where Martinez Fajardo was when the
18 murders took place, what Petitioners did with their car when
19 they left El Salvador, and who found a threatening note. See
20 Xiu Xia Lin, 534 F.3d at 167 (“[E]ven where an IJ relies on
21 discrepancies or lacunae that, if taken separately, concern
22 matters collateral or ancillary to the claim, the cumulative
5
1 effect may nevertheless be deemed consequential by the fact-
2 finder.”) (quotation marks omitted).
3 Given the multiple inconsistencies and the omissions of
4 Polanco-Aguilar’s only alleged harm, substantial evidence
5 supports the agency’s adverse credibility determination. See
6 § 1158(b)(1)(B)(iii); Xiu Xia Lin, 534 F.3d at 167; see also
7 Likai Gao v. Barr, 968 F.3d 137, 145 n.8 (2d Cir. 2020)
8 (“[E]ven a single inconsistency might preclude an alien from
9 showing that an IJ was compelled to find him credible.
10 Multiple inconsistencies would so preclude even more
11 forcefully.”). The adverse credibility determination is
12 dispositive of asylum, withholding of removal, and CAT relief
13 because all three claims were based on the same factual
14 predicate. See Paul v. Gonzales, 444 F.3d 148, 156–57 (2d
15 Cir. 2006).
16 For the foregoing reasons, the petition for review is
17 DENIED. All pending motions and applications are DENIED and
18 stays VACATED.
19 FOR THE COURT:
20 Catherine O’Hagan Wolfe, Clerk
6 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484152/ | 21-837-cr
United States v. Carpenter
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals for the Second Circuit, held at the
2 Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
3 16th day of November, two thousand twenty-two.
4
5 PRESENT:
6 PIERRE N. LEVAL
7 DENNY CHIN
8 EUNICE C. LEE,
9 Circuit Judges.
10 _____________________________________
11
12 UNITED STATES OF AMERICA,
13
14 Appellee,
15
16 v. No. 21-837-cr
17
18 LARRY CARPENTER,
19
20 Defendant-Appellant.
21 _____________________________________
22
23 For Defendant-Appellant: JOSEPH FERRANTE, Keahon, Fleischer &
24 Ferrante, Hauppauge, New York.
25
26
27 For Appellee: ADAM R. TOPOROVSKY (Jo Ann M. Navickas,
28 on the brief) for Breon Peace, United States
29 Attorney for the Eastern District of New
30 York, Brooklyn, New York.
31
32 Appeal from a judgment of the United States District Court for the Eastern District of New
33 York (Brown, J.).
1 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
2 DECREED that the judgment of the district court is AFFIRMED.
3 Following a June 24, 2018 arrest for selling drugs during a “buy-and-bust” operation,
4 Defendant-Appellant Larry Carpenter was indicted for two controlled substance distribution
5 charges and two firearm charges. He pleaded guilty to the two controlled substance distribution
6 charges. On December 12, 2018, a grand jury returned a second superseding indictment, which
7 added new counts that charged Carpenter with conspiracy to distribute 280 grams or more of
8 cocaine base and conspiracy to distribute heroin in violation of 21 U.S.C §§ 841(a)(1) and 846
9 (“Count One”); unlawful use of a firearm during and in relation to a drug offense in violation of
10 18 U.S.C. §§ 924(c)(1)(A)(i) and 3551 (“Count Two”); and felon in possession of a firearm in
11 violation of 18 U.S.C. §§ 922(g)(1), 924(a)(2), and 3551 (“Count Three”). Carpenter pleaded
12 not guilty to the second superseding indictment.
13 At trial, which was bifurcated so that the jury would consider Counts One and Two before
14 hearing about Carpenter’s prior felony conviction in connection with Count Three, the government
15 sought to prove the existence of coconspirators and Carpenter’s unlawful use of a firearm through,
16 among other things, testimony from Carpenter’s customers; Carpenter’s rap lyrics and rap music
17 videos; and testimony from various law enforcement officers. Carpenter sought to bar admission
18 of his rap lyrics and videos but was overruled. Carpenter also sought to exclude certain law
19 enforcement expert testimony, which resulted in a ruling limiting the extent of the expert testimony
20 that would be allowed.
21 Three of Carpenter’s former drug customers testified: Jerold Rubin, Scott Allen, and
22 Donna Salter. All three testified that they had each individually purchased crack from Carpenter
2
1 anywhere from 50 to 800 times in increments of about $100 per gram. Additionally, each
2 testified that Carpenter conducted his business in conjunction with a woman. For example, Rubin
3 said a woman was often in the car with Carpenter during drug deals, would often answer
4 Carpenter’s phone to take drug orders, and often would drive herself to Rubin to deliver the drugs
5 he had ordered from Carpenter. Allen’s testimony was similar. Additionally, both Rubin and
6 Salter testified that Carpenter had made reference to his having a gun on him when they got into
7 disputes with him over drug prices.
8 During a DEA agent’s testimony, the jury heard excerpts of communications from two cell
9 phones that had been seized when Carpenter was arrested. Carpenter exchanged several text
10 messages with a contact listed in his phone as “Drugby” that appeared to be about supplying and
11 selling drugs on Long Island, including a message to which Carpenter attached a photograph of “a
12 scale with a white powdery substance in a bag.” Joint App’x at 733. Carpenter’s phone also
13 showed communications between him and a woman named LaToya Mitchell, which included
14 communications about giving her debit-like cards he received from a drug customer and about
15 losing his ‘trap phone.’” Id. at 735. On June 27, 2018, in a phone call that was recorded,
16 Carpenter told Mitchell to “clear the drawers out, clear everything out, in the kitchen, everything,”
17 to which Mitchell replied, “I did that already. Why do you think I went there yesterday?” Id. at
18 1279. That same day, Carpenter asked Mitchell, via email, “to take down that might not make it
19 home [music] video ASAP.” Id. at 757.
20 Some of Carpenter’s rap lyrics and rap music videos were presented at trial, including a
21 music video that had been uploaded to YouTube called “might not make it home.” Id. The video
22 showed Carpenter posing with a gun, and the government argued, based on enhanced photography
3
1 showing identifying marks, that this was the same gun as one that had been seized at the time of
2 Carpenter’s arrest. Carpenter’s lyrics, which were presented as part of a DEA agent’s testimony,
3 spoke about drug-dealing, with phrases including “I trap coke and dope the same time” and “we
4 was selling dope it was trap houses cooking coke.” Id. at 771. Carpenter’s lyrics also included
5 “Drugby, he stacking and flipping,” id., and they spoke in the first person about Carpenter’s
6 working in conjunction with a woman to sell drugs, including that this woman sometimes drove
7 his car in the course of selling drugs. Further, Carpenter’s lyrics mentioned guns, including
8 multiple references to “this 38 revolver” and a “rusty 38.” Id.
9 In addition, DEA Task Force Officer Robert Stueber testified, over defense objection, as
10 an expert witness. The district court allowed the testimony, limited to explaining drug
11 terminology like “hard,” “soft,” and “dog food”; “how drugs are prepared”; and that drugs are
12 “manufactured outside New York.” Joint App’x at 528. Stueber was also permitted to testify to
13 how cocaine is cooked into crack and that “trap” often refers to “selling drugs.” Id. at 889–91,
14 925–33. Stueber further testified that cocaine is often cooked into crack in a kitchen.
15 During a charging conference, the defense asked the district court to give the jury a
16 “multiple conspiracies” instruction explaining that it would be impermissible to convict Carpenter
17 on Count One by considering multiple small conspiracies and adding them together. After the
18 government asserted that it was advancing the theory of a single conspiracy—one of spoke-and-
19 wheel with Carpenter at the center—the district court rejected the multiple conspiracies instruction
20 as too confusing. The district court ultimately instructed the jury on a “buyer-seller” defense:
21 “the mere purchase and sale of drugs does not, without more, amount to a conspiracy to distribute
22 narcotics. However, you may find conspiracy where there is additional evidence showing an
4
1 agreement to join together to accomplish an unlawful objective beyond the sale transaction.”
2 Joint App’x at 1023.
3 On March 28, 2019, the jury convicted Carpenter on Count One and Count Two.
4 Carpenter was then tried on Count Three, and the jury convicted him on that count as well.
5 Carpenter timely appealed.
6 * * *
7 Carpenter raises four arguments. First, Carpenter argues that the evidence was
8 insufficient to show conspiracy because it at most showed multiple buyer-seller relationships with
9 Carpenter’s customers, and because the various references to an unidentified woman could not
10 show that Carpenter conspired with her. This argument must be rejected. On this appeal, we
11 cannot reweigh the evidence presented at trial; instead, we must afford a “high degree of
12 deference” to the jury’s “conviction of conspiracy.” United States v. Landesman, 17 F.4th 298,
13 320 (2d Cir. 2021) (internal quotation marks omitted). The jury may infer elements of the
14 conspiracy, including the conspiracy’s existence, from circumstantial evidence. See id.
15 Furthermore, a conspiracy charge may stand even where coconspirators are unknown, as long as
16 “[t]he evidence . . . support[s] the existence of the unknown people with whom the defendant
17 allegedly conspired.” United States v. Harris, 8 F.3d 943, 946 (2d Cir. 1993). As such, it would
18 have been reasonable for the jury to have inferred that Carpenter conspired with the unidentified
19 woman to distribute narcotics in amounts sufficient to prove Count One, especially given that
20 Carpenter’s own rap lyrics corroborated his customers’ testimony about having seen a woman with
21 him who helped him to deal drugs out of the green Honda in which he was arrested. See, e.g.,
22 Joint App’x at 771 (“[B]ut she gone hold the drugs while she drive, and I gotta weapon . . . I got
5
1 fire in my trunk and it’s just me and my baby. I been strapping out this Honda . . . She been
2 driving all night.”), 772 (“I’m riding round strapped trapping phones, get to bugging, always keep
3 a hood bitch with me. She ain’t with nothing. She know how to cut the dope.”).
4 Second, Carpenter argues that his rap lyrics and his music video were improperly admitted
5 at trial in violation of Federal Rule of Evidence (“FRE”) 403, as well as that the First Amendment
6 protects his rap lyrics as a form of artistic expression. This is unavailing. “Rap lyrics . . . are
7 properly admitted . . . where they are relevant and their probative value is not substantially
8 outweighed by the danger of unfair prejudice.” United States v. Pierce, 785 F.3d 832, 841 (2d
9 Cir. 2015). A district court can thus admit them after conducting a FRE 403 balancing. See, e.g.,
10 United States v. Herron, 762 Fed. App’x 25, 30 (2d Cir. 2019). The First Amendment is no bar
11 to the evidentiary admission of rap lyrics where, as here, the artistic expression “is not ‘itself the
12 proscribed conduct.’” Pierce, 785 F.3d at 841 (quoting United States v. Caronia, 703 F.3d 149,
13 161 (2d Cir. 2012)). Evidence that does “not involve conduct more inflammatory than the
14 charged crime” generally will not “violate Rule 404(b) or 403” when it is “relevant to an issue at
15 trial other than the defendant’s character, and if its probative value is not substantially outweighed
16 by the risk of unfair prejudice.” United States v. Livoti, 196 F.3d 322, 326 (2d Cir. 1999). Here,
17 Carpenter’s rap lyrics and rap music videos speak with specificity to the precise conduct with
18 which he was charged. The district court thus did not err in allowing it to be presented to the jury.
19 Third, Carpenter argues that Stueber’s expert testimony was improperly presented because
20 the jury did not need an expert to understand the drug terminology at issue, and because the
21 testimony was only offered by the government as a form of impermissible bolstering. “Given the
22 attempts of drug dealers to disguise the content of their discussions as legitimate subject matters,
6
1 courts may allow witnesses to ‘decipher’ the codes drug dealers use and testify to the true meaning
2 of the conversations. Testimony about the meaning of alleged code is admissible as lay opinion
3 testimony under Fed. R. Evid. 701, or as expert testimony under Fed. R. Evid. 702.” United States
4 v. Garcia, 291 F.3d 127, 139 (2d Cir. 2002). However, “the operations in question must have
5 esoteric aspects reasonably perceived as beyond the ken of the jury,” and any “expert testimony
6 cannot be used solely to bolster the credibility of the government’s fact-witnesses by mirroring
7 their version of events.” United States v. Cruz, 981 F.2d 659, 664 (2d Cir. 1992).
8 Here, beyond discussing drug terminology, Stueber’s expert testimony also explained that
9 crack is often cooked in a kitchen, which had independent probative value given the government’s
10 position that Carpenter’s directing Mitchell to clear out the kitchen was evidence that Carpenter
11 had been cooking the crack he sold in the kitchen. This information is sufficiently esoteric such
12 that it was proper for the district court to have admitted testimony on the topic. Furthermore, even
13 if Stueber’s testimony on drug terminology was erroneously admitted, it is not clear how this could
14 have harmed Carpenter. That is because Carpenter conceded to the jury in summation that he was
15 a drug dealer, with his defense being that he was only a “small-time” dealer, not someone engaged
16 in a narcotics conspiracy. See, e.g., Joint App’x at 1012; see also United States v. McGinn, 787
17 F.3d 116, 127 (2d Cir. 2015) (“The error was harmless if it is not likely that it contributed to the
18 verdict.”).
19 Fourth, Carpenter argues that the government did not provide evidence sufficient to prove
20 Count Two because it did not show a nexus between the gun found during Carpenter’s arrest and
21 any of the drug-dealing conduct charged. To prove a count under 18 U.S.C. § 924(c), “the
22 government must establish the existence of a specific ‘nexus’ between the charged firearm and the
7
1 federal drug trafficking crime,” which is a “fact-intensive . . . inquiry” turning on “whether the
2 firearm afforded some advantage (actual or potential, real or contingent) relevant to the
3 vicissitudes of drug trafficking.” United States v. Alston, 899 F.3d 135, 146 (2d Cir. 2018)
4 (alteration marks and internal quotation marks omitted). Here, both Rubin and Salter testified
5 that Carpenter referred to his gun while selling drugs to them in a manner that caused them to feel
6 they could not argue with Carpenter about the drugs they were buying. This is enough to meet
7 the nexus requirement. Cf. id. at 146 (“[J]ury could reasonably find” the required nexus where
8 testimony suggested that the armed defendant’s presence “served to embolden [the defendant’s
9 coconspirator] to resolve [a] dispute” during drug deal).
10 * * *
11 We have considered Carpenter’s remaining arguments and find them to be without merit.
12 Accordingly, we AFFIRM the judgment of the district court.
13 FOR THE COURT:
14 Catherine O’Hagan Wolfe, Clerk of Court
15
8 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484153/ | 22-1048-cr
United States v. Ash
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals for the Second Circuit, held at the
2 Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
3 16th day of November, two thousand twenty-two.
4
5 PRESENT:
6 PIERRE N. LEVAL
7 DENNY CHIN
8 EUNICE C. LEE,
9 Circuit Judges.
10 _____________________________________
11
12 UNITED STATES OF AMERICA,
13
14 Appellee,
15
16 v. No. 22-1048-cr
17
18 SYLVIA ASH, AKA SEALED DEFENDANT 1,
19
20 Defendant-Appellant.
21 _____________________________________
22
23 For Defendant-Appellant: JUSTINE HARRIS (Noam Biale & Maya
24 Brodziak, on the brief), Sher Tremonte LLP,
25 New York, New York.
26
27 For Appellee: ELI J. MARK, Assistant United States
28 Attorney (Daniel C. Richenthal, Jonathan E.
29 Rebold, & Danielle R. Sassoon, Assistant
30 United States Attorneys, on the brief), for
31 Damian Williams, United States Attorney for
32 the Southern District of New York, New
33 York, New York.
34
35 Appeal from a judgment of the United States District Court for the Southern District of
36 New York (Kaplan, J.).
1 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
2 DECREED that the judgment of the district court is AFFIRMED.
3 Defendant-Appellant Sylvia Ash appeals from her criminal conviction on charges of
4 conspiracy to obstruct justice, obstruction of justice, and making false statements to federal
5 officers. Ash was a judge in the courts of New York State since 2005 and also served as member
6 of the Board of Directors (the “Board”) of Municipal Credit Union (“MCU”), a nonprofit credit
7 union, from May 2008 until August 2016, when she resigned. During her last year on the Board,
8 Ash was Board Chair. In 2015, Ash inquired about whether she could serve as Board Chair, and
9 the New York State Advisory Committee on Judicial Ethics told her she should resign from her
10 Board position entirely. Ash kept her Board position for another year, only resigning after the
11 New York State Commission on Judicial Conduct filed a complaint against her in 2016.
12 Although Board positions are unpaid, Ash received tens of thousands of dollars in benefits
13 in connection with her position, including sporting event box seats for her private use, travel,
14 personal expenses including “cable internet reimbursement,” and Apple electronic devices.
15 App’x 638. She did not disclose these benefits on state financial disclosure forms she had to file
16 annually due to her position as a judge. Many of the benefits Ash received were controlled by
17 MCU’s then-CEO and President, Kam Wong.
18 On January 18, 2018, federal investigators interviewed Wong about millions of dollars in
19 checks MCU had issued to him. Wong told them that these payments were proper due to a term
20 in his employment contract and that the Board had approved the payments. The next day, Wong
21 met with Ash in MCU’s offices, gave her an iPhone X as a “belated birthday/Christmas gift,” and
22 presented her with a memo to sign. App’x 564, 570–71. According to the memo, Ash agreed
2
1 that MCU properly owed Wong approximately $3.7 million after taxes due to a condition of
2 Wong’s employment with MCU. Ash signed the memo. Wong turned over a copy of the signed
3 memo to federal investigators on January 25, 2018.
4 On March 1, 2018, Ash voluntarily met with investigators in the United States Attorney’s
5 Office for the Southern District of New York (the “USAO”). Confronted with the memo she had
6 signed at Wong’s behest, Ash told investigators that the memo was not accurate and that she did
7 not agree with the amount of money listed in the document. Ash then gave false statements to
8 the investigators about how MCU’s general counsel told her it would be “legal but not advisable”
9 to pay Wong as stated in the memo. App’x 495.
10 In May of 2018, in part due to Wong’s embezzlement, the New York Department of
11 Financial Services took over managing MCU. On or about May 7, 2018, Wong was arrested and
12 charged with embezzlement in the Southern District of New York. MCU issued a
13 contemporaneous press release about Wong’s arrest, stating that MCU was cooperating with the
14 USAO and was conducting its own internal investigation. 1
15 First in mid-March of 2018, and then again in June of 2018, Ash received subpoenas for
16 documents and communications relating to Wong and MCU’s payments to him. Ash responded
17 to the first subpoena by saying she had no responsive documents. She responded to the second
18 subpoena, through counsel, with a production that later was shown to have been materially
19 incomplete.
1
Wong was eventually convicted and sentenced to five and a half years in prison. Judgment in a Criminal
Case, United States v. Wong, Case No. 1:18-cr-00737-JGK (S.D.N.Y. June 13, 2019).
3
1 In May 2018, Ash received an email from MCU requesting the return of any of its
2 electronic devices she had in her possession, “per MCU protocol.” App’x 619. MCU then
3 clarified that Ash did not need to return any devices she had possessed for more than three years
4 and instructed her to “disregard” the initial request.” Id. In June 2018, Ash received a further
5 written request from MCU, again demanding the return of any electronic devices, including those
6 given to her by Wong. Id. at 896. MCU cautioned Ash not to “wipe, delete, factory restore,
7 image or copy any of MCU’s electronic devices.” Id.
8 Through counsel, Ash returned the iPhone X and an Apple Watch. However, before she
9 returned them, Ash took the iPhone X to an Apple Store and had it factory reset, which caused
10 data to be deleted from it. She also deleted text messages and emails that were responsive to the
11 government’s subpoenas. MCU handed the iPhone over to the government and consented to its
12 being used in a search. Upon seeing that the iPhone had been reset, the government obtained
13 warrants for stored communications, including communications in Ash’s Gmail account, relying
14 in part on the fact that the iPhone had been wiped.
15 On July 9, 2018, Ash had another interview with federal investigators, this time
16 accompanied by her own counsel, during which she made various false statements, including about
17 MCU’s payments to Wong and about not possessing certain documents.
18 Ash was arrested on October 11, 2019. The operative superseding indictment charged
19 her with conspiring to obstruct justice between January of 2018 and July of 2018 in violation of
20 18 U.S.C. §§ 1519 and 1512(c) (“Count One”); with obstructing justice by falsifying or creating a
21 false document in violation of § 1519 (“Count Two”); with obstructing justice by corruptly
22 concealing and deleting texts and emails or making false statements in violation of § 1512(c)
4
1 (“Count Three”); and with making false statements in violation of § 1001(a) (“Count Four”). Ash
2 was convicted on Counts One, Three, and Four, and acquitted on Count Two. We assume the
3 parties’ familiarity with the underlying facts, the procedural history of the case, and the issues on
4 appeal.
5 Ash raises four arguments on appeal.
6 First, she argues that the district court erred in not granting her motion to suppress the
7 iPhone X or any information obtained from the search warrant based on the seizure of the iPhone
8 X. Ash contends that she was effectively compelled to give MCU the iPhone. In the alternative,
9 she argues that she should have been granted a pre-trial hearing into the extent to which the
10 government was involved with MCU’s internal investigation, including its efforts to get the iPhone
11 X from Ash. To the extent Ash argues that the iPhone was obtained in violation of her Fifth
12 Amendment right against self-incrimination, that argument fails. To prevail, Ash would need to
13 “demonstrate the existence of three elements: 1) compulsion, 2) a testimonial communication, and
14 3) the incriminating nature of that communication.”
15 In re Grand Jury Subpoena, 826 F.2d 1166, 1168 (2d Cir. 1987). But Ash did not show
16 compulsion, as she does not articulate “circumstances that overb[ore] the defendant’s will.”
17 United States v. Anderson, 929 F.2d 96, 99 (2d Cir. 1991). Here, Ash only argues that MCU’s
18 communications demanding the return of the iPhone X “raised the specter” of “legal action” and
19 thus “implicit[ly] threat[ened]” Ash. Appellant’s Br. 25. Even assuming that MCU’s
20 communications are wholly attributable to the government, these arguments are not enough to
21 show that the communications overcame Ash’s will. To the contrary, the communications told
5
1 Ash not to delete data off the iPhone X, but she did so anyway, demonstrating that Ash did not
2 feel compelled to comply exactly as MCU told her.
3 To the extent Ash argues that the iPhone X should have been suppressed because the
4 government violated her due process rights in using the MCU internal investigation to gather
5 evidence, Appellant’s Br. 26, that argument is forfeited because she did not make it below. See
6 Greene v. United States, 13 F.3d 577, 586 (2d Cir. 1994). Her argument for suppression before
7 the district court was premised solely on the notion that MCU compelled Ash to return the iPhone
8 in violation of her Fifth Amendment right against self-incrimination, not on any other ground.
9 Second, Ash contends that the district court erred in overruling her objections to evidence
10 of valuable benefits she received for being on the Board and her failure to disclose those benefits
11 on her obligatory financial disclosure forms. This evidence was admissible as it tended to show
12 motive and consciousness of guilt. See United States v. Mercado, 573 F.3d 138, 141 (2d Cir.
13 2009). The district court furthermore properly instructed the jurors that they were only to consider
14 it to assess “defendant’s motive, knowledge, and intent with respect to what she has been charged
15 with in the indictment,” and not for anything that may suggest Ash had a “propensity” to commit
16 the crimes charged. App’x 843–44. See Mercado, 573 F.3d at 141 (rejecting challenge to
17 admission of “prior bad acts evidence” where “[t]he evidence was also accompanied by a careful
18 and thorough instruction limiting the evidence to relevant [FRE] 404 grounds”).
19 Third, Ash argues that the district court erred in instructing the jury on Count Three. This
20 contention is subject to plain error review because she did not object at trial. “On plain error
21 review, the burden rests on the appellant to establish that there is ‘(1) error, (2) that is plain, and
22 (3) that affects substantial rights. If all three conditions are met, an appellate court may then
6
1 exercise its discretion to notice a forfeited error, but only if (4) the error seriously affects the
2 fairness, integrity, or public reputation of judicial proceedings.’” United States v. Jenkins, 43
3 F.4th 300, 302 (2d Cir. 2022) (quoting United States v. Solano, 966 F.3d 184, 193 (2d Cir. 2020)).
4 In reviewing jury instructions for error, we “determine whether considered as a whole, the
5 instructions adequately communicated the essential ideas to the jury,” not whether there was error
6 “on the basis of excerpts taken out of context.” United States v. Sabhnani, 599 F.3d 215, 237 (2d
7 Cir. 2010) (internal quotation marks and citations omitted).
8 Here, Ash objects to the district court’s explanation to the jury of what it means to have
9 acted “corruptly” in the context of obstructing justice under Count Three. Among other things,
10 she contends that the district court’s instruction allowed the jury to convict her of obstructing an
11 official proceeding if it found that she had any “bad purpose,” rather than one specifically
12 connected with impeding an official proceeding, as required by the statute. See Appellant’s Br.
13 41. We disagree. Viewed as a whole, the district court’s instructions told the jury that it could
14 only convict Ash on Count Three if it found that Ash acted corruptly in taking actions meant to
15 impair an official proceeding, and in particular, that Ash must have known these corruptly taken
16 actions were likely to interfere with the proceeding. Further, even if we found error in the
17 instruction, the error would not be plain. The district court provided a definition of the word
18 “corruptly” that has been affirmed in Circuit precedent. See United States v. Ng Lap Seng, 934
19 F.3d 110, 142 (2d Cir. 2019) (“When a statute uses the word ‘corruptly,’ the government must
20 prove more than the general intent necessary for most crimes. It must prove that a defendant acted
21 ‘with the bad purpose of accomplishing either an unlawful end or result, or a lawful end or result
7
1 by some unlawful method or means.’” (quoting United States v. McElroy, 910 F.2d 1016, 1021–
2 22 (2d Cir. 1990)).
3 Fourth, Ash argues that the district court erred by premising its sentence on conduct of
4 which Ash was acquitted in Count Two. “A district court may treat acquitted conduct as relevant
5 conduct at sentencing, provided that it finds by a preponderance of the evidence that the defendant
6 committed the conduct.” United States v. Pica, 692 F.3d 79, 88 (2d Cir. 2012). However,
7 “[w]here we identify procedural error in a sentence, but the record indicates clearly that the district
8 court would have imposed the same sentence in any event, the error may be deemed harmless,
9 avoiding the need to vacate the sentence and to remand the case for resentencing.”
10 United States v. Jass, 569 F.3d 47, 68 (2d Cir. 2009) (internal quotation marks omitted).
11 Here, it is clear to us that any error in the use of acquitted conduct did not affect Ash’s
12 sentence. The district court sentenced Ash to “a term of imprisonment of 15 months.” App’x
13 1232. Whereas the presentence report calculated her sentencing guidelines range as one
14 providing for a 46- to 57-month custodial sentence, Ash argued to the district court that, absent
15 acquitted conduct, her guidelines “range instead should be 30 to 37 months’ imprisonment.”
16 Sentencing Mem. on Behalf of Sylvia Ash at 2, United States v. Ash, Case No. 1:19-cr-780-LAK
17 (S.D.N.Y. Apr. 8, 2022), ECF No. 173. During sentencing, the district court overruled Ash’s
18 objections but told the parties that “the sentence that will be imposed will make that ruling
19 immaterial,” and that its “sentence w[ould] be the same under either [party’s proffered] guideline
20 range.” App’x 1200. Thus, not only did the district court make clear that Ash would have
21 received the same sentence regardless, but the sentence she did receive was significantly less than
22 what even she argued the guidelines called for.
8
1 * * *
2 We have considered Ash’s remaining arguments and find them to be without merit.
3 Accordingly, we AFFIRM the judgment of the district court.
4 FOR THE COURT:
5 Catherine O’Hagan Wolfe, Clerk of Court
9 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484158/ | Case: 22-1290 Document: 41 Page: 1 Filed: 11/16/2022
NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
HUDSON FURNITURE, INC., BARLAS BAYLAR,
Plaintiffs-Appellees
v.
ALAN MIZRAHI, DBA ALAN MIZRAHI LIGHTING,
LIGHTING DESIGN WHOLESALERS INC.,
Defendants-Appellants
______________________
2022-1290
______________________
Appeal from the United States District Court for the
Southern District of New York in No. 1:20-cv-04891-PAC-
RWL, Senior Judge Paul A. Crotty.
______________________
Decided: November 16, 2022
______________________
PATRICK HINES, Hodgson Russ LLP, Buffalo, NY, for
plaintiffs-appellees. Also represented by NEIL BRYAN
FRIEDMAN, New York, NY.
ROBERT L. GREENER, Law Office of Robert L. Greener,
New York, NY, for defendants-appellants.
______________________
Case: 22-1290 Document: 41 Page: 2 Filed: 11/16/2022
2 HUDSON FURNITURE, INC. v. MIZRAHI
Before MOORE, Chief Judge, PROST and TARANTO, Circuit
Judges.
MOORE, Chief Judge.
Alan Mizrahi, dba Alan Mizrahi Lighting and Lighting
Design Wholesalers, Inc., appeals a Southern District of
New York decision denying Mizrahi’s motion for reconsid-
eration of a decision granting Hudson Furniture, Inc. and
Barlas Baylar’s (collectively, Hudson) motion for alterna-
tive service, denying Mizrahi’s motion to dismiss for lack of
personal jurisdiction, and granting Hudson’s motion for a
preliminary injunction. For the following reasons, we af-
firm.
BACKGROUND
Barlas Baylar is the CEO and Creative Director of
Hudson Furniture, which is a manufacturer, designer, and
retailer of high-end lighting designs and furniture. J.A.
170–71. Hudson owns multiple design patents and trade-
marks relating to its lighting designs and promotes its
products with copyrighted pictures of its designs. J.A. 2–
3. Mizrahi, who was last known to reside in Austria, is a
web-based lighting and furniture designer and wholesaler
who advertises and sells his products on several websites.
J.A. 350–51; 494–95.
Mizrahi does not dispute that his websites contain nu-
merous infringing photos of Hudson’s products and list
lighting products that use Hudson’s trademarks. Appel-
lant’s Opening Br. at 29. He alleges, however, that his use
of the photos and trademarks is lawful because he gives
credit to Hudson by noting on his website that certain prod-
ucts were designed by Hudson. J.A. 350–51. And if a cus-
tomer purchases a Hudson product from one of his
websites, Mizrahi then purchases the piece directly from
Hudson as a wholesaler. J.A. 351.
After discovering Mizrahi’s websites and that Mizrahi
sold an unauthorized replica of one of its lighting fixtures
Case: 22-1290 Document: 41 Page: 3 Filed: 11/16/2022
HUDSON FURNITURE, INC. v. MIZRAHI 3
to a third party, Hudson sued Mizrahi for, inter alia, copy-
right, trademark, and patent infringement. J.A. 42–43.
Immediately thereafter, Hudson filed a motion for a pre-
liminary injunction to enjoin Mizrahi’s use of its copy-
righted photographs and prevent him from selling the
infringing fixtures.
Because Hudson did not know Mizrahi’s whereabouts,
Hudson determined alternative service was the best means
to serve its complaint. Prior to seeking leave for alterna-
tive service, Hudson contacted Robert Greener, Mizrahi’s
United States counsel, to determine if he would accept ser-
vice on Mizrahi’s behalf. J.A. 305. After speaking with
Mizrahi, Greener informed Hudson he was not authorized
to accept service on Mizrahi’s behalf. J.A. 304–05. Hudson
then filed an ex parte motion for leave to serve Mizrahi, be-
lieved to reside in Austria, by alternative service under
Federal Rule of Civil Procedure (FRCP) 4(f)(3). Specifi-
cally, Hudson requested to serve Mizrahi via RPost email
to a list of email addresses known to be used by Mizrahi
and by mail to Greener. Hudson notified Greener of the
motion, J.A. 463–64; 516–17, and Greener did not oppose.
The court granted leave to serve process by alternative
means, and Hudson served the papers on Greener by mail
and used RPost to send the papers to 14 email addresses
associated with Mizrahi.
Mizrahi sought reconsideration of the order granting
alternative service and sought to dismiss the claims for
lack of personal jurisdiction under FRCP 12(b)(2) for im-
proper service. Mizrahi also opposed the motion for a pre-
liminary injunction. The district court did not reconsider
the motion for alternative service, denied the motion to dis-
miss, and granted the motion for a preliminary injunction
as to Hudson’s trademarks and copyrights. J.A. 1–19. Miz-
rahi appealed to the Second Circuit. The Second Circuit
transferred the case to us as it involves an underlying pa-
tent dispute. We have jurisdiction under 28 U.S.C.
§ 1292(c)(1).
Case: 22-1290 Document: 41 Page: 4 Filed: 11/16/2022
4 HUDSON FURNITURE, INC. v. MIZRAHI
DISCUSSION
Mizrahi first argues the district court erred in not re-
considering the motion for alternative service because it
presented new information and case law not considered in
the district court’s original decision. Next, Mizrahi argues
the court erred in not dismissing the claims for lack of per-
sonal jurisdiction because alternative service was im-
proper. Finally, Mizrahi argues the district court should
not have granted a preliminary injunction because Hudson
did not establish it would suffer irreparable harm. We do
not agree.
I
For non-patent issues, we apply the law of the regional
circuit. Fujifilm Corp. v. Benun, 605 F.3d 1366, 1370 (Fed.
Cir. 2010). Here, Second Circuit law applies. The Second
Circuit reviews a district court’s decision on a motion for
reconsideration de novo. Kolel Beth Yechiel Mechil of
Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99, 103
(2d Cir. 2013). The standard for granting a motion for re-
consideration is high, “and reconsideration will generally
be denied unless the moving party can point to controlling
decisions or data that the court overlooked—matters, in
other words, that might reasonably be expected to alter the
conclusion reached by the court.” Shrader v. CSX Transp.,
Inc., 70 F.3d 255, 257 (2d Cir. 1995).
Mizrahi argues the district court should have granted
reconsideration because Mizrahi presented new infor-
mation and cited substantial case law from other jurisdic-
tions regarding alternative service in Austria. However,
nothing submitted by Mizrahi could reasonably be ex-
pected to change the court’s conclusion. The information
submitted by Mizrahi was not in any sense new. Mizrahi
merely filed an affidavit challenging the implications of the
evidence submitted by Hudson. J.A. 418–20; 344–50. Fur-
ther, Mizrahi did not cite any controlling decisions the
court overlooked. Mizrahi’s arguments should have been
Case: 22-1290 Document: 41 Page: 5 Filed: 11/16/2022
HUDSON FURNITURE, INC. v. MIZRAHI 5
filed in an opposition to the motion, which Mizrahi opted
not to file. Thus, Mizrahi failed to meet the high standard
necessary for reconsideration. The court did not err in de-
clining to reconsider the motion.
II
The Second Circuit reviews a district court’s decision
on dismissal for lack of personal jurisdiction de novo. Licci
ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50,
59 (2d Cir. 2012). However, we are not aware of any deci-
sion in which the Second Circuit has determined the stand-
ard of review applicable to the district court’s grant of
alternative service under FRCP 4(f). We therefore proceed
based on how the Second Circuit would likely review this
issue. The Second Circuit has aligned itself with other cir-
cuits by adopting an abuse of discretion standard when re-
viewing other issues arising under FRCP 4. See Thompson
v. Maldonado, 309 F.3d 107, 110 (2d Cir. 2002) (“Although
we have not previously determined the standard of review
applicable to [FRCP] 4(m) dismissals for failure to serve
process, we join our sister circuits in reviewing such dis-
missals for abuse of discretion.”). Other circuits have sim-
ilarly adopted an abuse of discretion standard when
reviewing district court decisions on alternative service un-
der FRCP 4(f)(3). See Freedom Watch, Inc. v. OPEC, 766
F.3d 74, 78 (D.C. Cir. 2014); Prewitt Enterprises, Inc. v.
OPEC, 353 F.3d 916, 921 (11th Cir. 2003); Rio Props., Inc.
v. Rio Int’l Interlink, 284 F.3d 1007, 1014 (9th Cir. 2002).
Thus, we conclude the Second Circuit would review
whether the grant of alternative service was proper under
an abuse of discretion standard.
The decision to allow alternative service on a foreign
defendant under FRCP 4(f)(3) “is committed to the sound
discretion of the district court.” Madu, Edozie & Madu,
P.C. v. SocketWorks Ltd. Nigeria, 265 F.R.D. 106, 115
(S.D.N.Y. 2010) (quoting RSM Prod. Corp. v. Fridman, No.
06 Civ. 11512, 2007 WL 1515068, at *1 (S.D.N.Y. May 24,
Case: 22-1290 Document: 41 Page: 6 Filed: 11/16/2022
6 HUDSON FURNITURE, INC. v. MIZRAHI
2007)). Mizrahi argues that a plaintiff must show it has
attempted service by conventional means before alterna-
tive service is permitted. We do not agree. While some
courts have required such a showing, others have not.
Compare Baliga ex rel. Link Motion Inc. v. Link Motion
Inc., 385 F. Supp. 3d 212, 220 (S.D.N.Y. 2019) (“whether to
exercise discretion and grant alternative service requires
courts to evaluate . . . a showing that the plaintiff has rea-
sonably attempted to effectuate service on the defendant”),
with In re BRF S.A. Sec. Litig., 2019 WL 257971, at *2
(S.D.N.Y. Jan. 18, 2019) (“In deciding whether to . . . per-
mit alternative service under Rule 4(f)(3), some courts have
looked to whether . . . the plaintiff has reasonably at-
tempted to effectuate service on the defendant” (quoting
Devi v. Rajapaska, No. 11 Civ. 6634, 2012 WL 309605, at
*1 (S.D.N.Y. Jan. 31, 2012))); see also In re GLG Life Tech.
Corp. Sec. Litig., 287 F.R.D. 262, 266 (S.D.N.Y. 2012) (“In-
asmuch as Rule 4(f)(3) calls upon a court to exercise its dis-
cretion . . . each case must be judged on its facts.”). We
conclude no such blanket requirement exists. The district
court properly considered the evidence submitted by Hud-
son and determined that Hudson showed sufficient cause
for alternative service.
While granting alternative service is within the discre-
tion of the district court, alternative service must not vio-
late an international treaty or constitutional due process.
Rio Props., Inc., 284 F.3d at 1014–15. Here, the district
court’s grant of alternative service does neither. At the
time the district court granted alternative service, there
was no relevant international treaty in place with Austria,
where Mizrahi was believed to be residing. Mizrahi argues
that alternative service violated the Hague Convention,
but Austria did not ratify the Hague Convention until after
the time of service. J.A. 8. While Mizrahi also argues that
service by email was improper because it violated Austrian
law, alternative service under FRCP 4(f)(3) “may be
Case: 22-1290 Document: 41 Page: 7 Filed: 11/16/2022
HUDSON FURNITURE, INC. v. MIZRAHI 7
accomplished in contravention of the laws of the foreign
country.” Rio Props., Inc., 284 F.3d at 1014.
The means of alternative service also provided Mizrahi
adequate constitutional notice. To meet this requirement,
service must be “reasonably calculated, under all the cir-
cumstances, to apprise interested parties of the pendency
of the action and afford them an opportunity to present
their objections.” Mullane v. Cent. Hanover Bank & Trust
Co., 339 U.S. 306, 314 (1950). Hudson showed that
Greener represented Mizrahi in a similar litigation before
the same court and was presently in contact with Mizrahi.
J.A. 298–306. Hudson also provided an affidavit from Miz-
rahi that he personally used two of the emails used for ser-
vice. J.A. 292. RPost confirmed that 12 of the email
addresses opened the communications, including the two
Mizrahi admitted to using, and three of the addresses
downloaded the papers. J.A. 498–514. Further, after ser-
vice, Mizrahi appeared and challenged the grant of alter-
native service and the motion for a preliminary injunction,
showing actual notice of the litigation.
We conclude that the district court did not abuse its
discretion in granting alternative service and did not err in
denying Mizrahi’s motion to dismiss for lack of personal ju-
risdiction.
III
We now turn to the district court’s grant of a prelimi-
nary injunction against Mizrahi’s use of Hudson’s copy-
rights and trademarks. The Second Circuit reviews the
grant of a preliminary injunction for abuse of discretion.
WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 278 (2d Cir. 2012).
Under an abuse of discretion standard, factual findings are
reviewed for clear error and legal conclusions are reviewed
de novo. Oneida Nation of N.Y. v. Cuomo, 645 F.3d 154,
164 (2d Cir. 2011). A district court may grant a prelimi-
nary injunction when a plaintiff demonstrates: (1) a likeli-
hood of success on the merits; (2) irreparable harm in the
Case: 22-1290 Document: 41 Page: 8 Filed: 11/16/2022
8 HUDSON FURNITURE, INC. v. MIZRAHI
absence of an injunction; (3) the balance of hardships tips
in its favor; and (4) issuance of the injunction serves the
public interest. Id. Mizrahi challenges the district court’s
decision only as to the second factor: whether Hudson es-
tablished irreparable harm.
The district court found that Hudson would suffer ir-
reparable harm without an injunction because the ongoing
sale of unauthorized replicas causes harm to its brand, rep-
utation for craftsmanship, and consumer goodwill. J.A. 15.
Customers seeking to purchase Hudson lights will be mis-
led into purchasing counterfeit products, which may be of-
fered at lower prices on Mizrahi’s website. Id. And
consumers will not know they are purchasing unauthorized
products because Mizrahi is using Hudson’s copyrighted
images and marks to deceive customers. Id. Mizrahi ar-
gues that Hudson failed to establish irreparable harm be-
cause it did not show any proof of actual consumer
confusion or loss of customers. Mizrahi also attempts to
discredit Hudson’s evidence that Mizrahi sold a chandelier
purporting to be Hudson’s product because it came from a
third-party who did not submit an affidavit. We see no
clear error in the district court’s finding that, based on Miz-
rahi’s sale of an allegedly counterfeit Hudson chandelier,
Hudson would suffer irreparable harm without a prelimi-
nary injunction. Thus, the district court did not abuse its
discretion when granting the preliminary injunction.
CONCLUSION
Because the district court did not err in denying Miz-
rahi’s motion for reconsideration and motion to dismiss and
the court did not abuse its discretion in granting a prelim-
inary injunction, we affirm.
AFFIRMED
COSTS
Costs to Hudson. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484157/ | Appellate Case: 21-2072 Document: 010110769745 Date Filed: 11/16/2022 Page: 1
FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT November 16, 2022
_________________________________
Christopher M. Wolpert
Clerk of Court
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v. No. 21-2072
(D.C. No. 1:20-CR-01220-KWR-1)
ERICH DEOLAX RIKER, (D.N.M.)
Defendant - Appellant.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before MORITZ, BRISCOE, and CARSON, Circuit Judges.
_________________________________
Defendant pleaded guilty to one count of failing to register as a sex offender.
Finding by a preponderance of the evidence that Defendant committed a sex offense
against a minor while in failure-to-register status, the district court increased Defendant’s
sentencing-guidelines base offense level by eight points and sentenced Defendant to
eighty-seven months’ imprisonment. Defendant argues that the district court’s factual
finding violated the Fifth and Sixth Amendments to the United States Constitution. But
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Appellate Case: 21-2072 Document: 010110769745 Date Filed: 11/16/2022 Page: 2
as Defendant concedes, our precedent forecloses this argument. Thus, we exercise
jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a) and affirm.
I.
Defendant has three prior convictions for criminal sexual misconduct against
minors, and the Sex Offender Registration and Notification Act requires him to register
as a sex offender for life. 34 U.S.C. § 20913. After receiving a conviction for failure
to register as a sex offender in Oregon, Defendant moved to New Mexico and again
failed to register. Rather than register, he told his girlfriend he was “on the run” and
went by a different name. With his identity as a sex offender concealed, he babysat
an eight-year-old girl, who later accused him of sexually abusing her after showing
her pornographic videos. The State of New Mexico criminally charged Defendant
but has yet to try him for this alleged conduct.
The United States charged Defendant with failure to register as a sex offender,
and Defendant pleaded guilty. At sentencing, the district court considered evidence
of the alleged sexual offense against a minor underlying Defendant’s pending state
charges. Finding by a preponderance of the evidence that Defendant committed the
offense, the court applied United States Sentencing Guideline § 2A3.5(b)(1)(C),
which provides for an eight-level increase to a defendant’s base offense level when
the defendant committed a sex offense against a minor while in failure-to-register
status. As a result, Defendant’s offense level was 21, which combined with a
category V criminal history provided a guideline imprisonment range of seventy to
eighty-seven months’ imprisonment.
2
Appellate Case: 21-2072 Document: 010110769745 Date Filed: 11/16/2022 Page: 3
Defendant objected to the district court’s application of U.S.S.G.
§ 2A3.5(b)(1)(C), arguing that it amounted to impermissible judicial fact-finding in
violation of the Fifth and Sixth Amendments. The district court overruled the
objection and sentenced Defendant to eighty-seven months’ imprisonment.
Defendant appeals.
II.
We review constitutional challenges to the sentencing guidelines de novo.
United States v. McKneely, 69 F.3d 1067, 1078 (10th Cir. 1995). When a court
sentences within a properly calculated guidelines range, we presume the sentence is
reasonable. See United States v. Chavez, 723 F.3d 1226, 1233 (10th Cir. 2013).
Sometimes the guidelines call for sentence enhancements based on facts a jury did
not find and the defendant did not admit. See United States v. Magallanez, 408 F.3d
672, 684–85 (10th Cir. 2005). A sentencing court applies a preponderance-of-the-
evidence standard when evaluating such facts to determine whether a sentence
enhancement applies. See id. A court may even consider conduct underlying an
acquitted charge so long as the government proves the conduct by the preponderance
of the evidence. Id. No heightened standard of proof exists at sentencing for
contested facts. See United States v. Robertson, 946 F.3d 1168, 1171 (10th Cir.
2020).
III.
Defendant asserts that the district court violated the Fifth and Sixth
Amendments by applying U.S.S.G. § 2A3.5(b)(1)(C) based on the court’s
3
Appellate Case: 21-2072 Document: 010110769745 Date Filed: 11/16/2022 Page: 4
preponderance-of-the-evidence finding that Defendant committed a sex offense
against a minor although the government has yet to try him. Defendant relies on
views expressed by individual Supreme Court justices in separate opinions to support
the argument that when a sentence is substantively reasonable only because of a
specific factual finding, a jury must find that fact beyond a reasonable doubt. See
Jones v. United States, 574 U.S. 948, 948 (2014) (Scalia, J., dissenting); see also Rita
v. United States, 551 U.S. 338, 372 (2007) (Scalia, J., concurring); see also United
States v. Bell, 808 F.3d 926, 928 (D.C. Cir. 2015) (Kavanaugh, J., concurring). In
other words, Defendant argues that without the district court’s finding that he
committed a sexual offense against a minor while in failure-to-register status, his
eighty-seven-month sentence would be substantively unreasonable. Thus, Defendant
argues that the Fifth and Sixth Amendments require that the government prove that
conduct to a jury beyond a reasonable doubt before a sentencing court can consider
it.
As Defendant concedes, our precedent forecloses his argument. We have held
that the Constitution does not prohibit a district court from applying the sentencing
guidelines based on facts the court finds by a preponderance of the evidence—even if
the sentence would be substantively unreasonable without the finding. See United
States v. Stein, 985 F.3d 1254, 1266 (10th Cir.); See also Magallanez, 408 F.3d at 684–
85. The sentencing court properly applied a preponderance-of-the-evidence standard
when evaluating the evidence of Defendant’s alleged sex offense against a minor.
Section 2A3.5(b)(1)(C) advises courts to add eight points to a defendant’s base
4
Appellate Case: 21-2072 Document: 010110769745 Date Filed: 11/16/2022 Page: 5
offense level when they find that a defendant sex offender “committed” a sex offense
against a minor while unregistered. The court found that the child’s allegations were
corroborated, reliable, and credible, meeting the preponderance of the evidence
standard, and properly applied the eight-level increase. The district court then
appropriately sentenced Defendant within the corresponding guideline range.
AFFIRMED.
Entered for the Court
Joel M. Carson III
Circuit Judge
5 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484165/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-1296
Lower Tribunal No. 21-67 AP, Resolution No. Z-34-21
________________
Save Calusa, Inc., et al.,
Petitioners,
vs.
Miami-Dade County, et al.,
Respondents.
A Writ of Certiorari to the Circuit Court of Miami-Dade County,
Appellate Division, Daryl E. Trawick, Maria de Jesus Santovenia, and
Marlene Fernandez-Karavetsos, Judges.
David J. Winker, P.A., and David J. Winker, for petitioners.
Geraldine Bonzon-Keenan, Miami-Dade County Attorney, Dennis A.
Kerbel, Lauren E. Morse, and Cristina Rabionet, Assistant County Attorneys;
Bilzin Sumberg Baena Price & Axelrod LLP, Eileen Ball Mehta, Brian S.
Adler, and Liana M. Kozlowski, for respondents.
Before HENDON, MILLER, and LOBREE, JJ.
MILLER, J.
Petitioner, Amanda Prieto, seeks second-tier certiorari review of an
appellate decision by the circuit court of the Eleventh Judicial Circuit of
Miami-Dade County denying relief from a zoning resolution. 1 In 2020, the
Miami-Dade Board of County Commissioners lifted a recorded restriction
limiting the use of the site of the now-shuttered Calusa Country Golf Club to
a golf course, club house, and certain ancillary uses. The following year, the
Commission adopted the challenged resolution, rezoning the property to
allow for the development of 550 single-family residences on the situs.
Prieto sought first-tier certiorari review seeking to void the resolution on the
basis that the County failed to publish notice of the public hearing. The circuit
court determined Prieto lacked standing and, regardless, notice was
adequate. Concluding the circuit court departed from the essential
requirements of law by failing to apply the correct regulatory framework and
established law, we grant the petition.
BACKGROUND
This dispute traces its origins to the 1960s. In 1967, North Kendall
Investment, Ltd. obtained a zoning resolution authorizing the development
1
Save Calusa, Inc. also petitions for relief. Because the public hearing was
not properly noticed and Prieto has standing, we need not address the
secondary issue of whether the circuit court departed from the essential
requirements of law in concluding Save Calusa, Inc. lacked standing.
2
of the golf course. The resolution contained a ninety-nine-year restrictive
covenant preventing any other use of the property absent the approval of
seventy-five percent of affected property owners and the County
Commission.
Several years later, a successor developer sought to rezone the golf
course to facilitate the construction of additional homes. Community
residents and the County consistently resisted further development efforts,
and protracted litigation ensued. See, e.g., Calusa Golf, Inc. v. Dade County,
426 So. 2d 1165 (Fla. 3d DCA 1983).
After this court reaffirmed the viability of the restrictive covenant, see
Save Calusa Tr. v. St. Andrews Holdings, Ltd., 193 So. 3d 910, 911 (Fla. 3d
DCA 2016), respondent, Kendall Associates I, LLLP, an affiliate of GL
Homes, acquired the property. More than seventy-five percent of affected
property owners subsequently agreed to eliminate the restrictive covenant,
and the Commission released the land from the restriction. Kendall
Associates then filed an application to rezone the property to allow for the
development of 550 single-family units on the land.
A public hearing was properly noticed. On the eve of the slated
hearing, however, the Commission expressed concerns regarding the ability
3
to satisfy a quorum. 2 The hearing was canceled and reset. Notice of the
rescheduled hearing was mailed to residents within one-half mile of the
subject property, posted at the hearing site and property, and electronically
transmitted to self-subscribed users of the electronic notification service.
Twelve days before the public hearing was due to convene, counsel
for petitioners objected and alerted the County to the fact that the notice
reflected the wrong applicant and had yet to be published in a newspaper of
general circulation, as required by section 33-310 of the Miami-Dade County
Code. Despite this objection, the hearing proceeded.
At the hearing, Prieto was allocated one minute to present her
objection. She testified that she resides a few hundred feet from the site of
the now-defunct golf course. Relying upon a staff analysis report, Prieto
argued that the school her children currently attend, Calusa Elementary, is
at capacity. The addition of hundreds of homes would displace students and
necessitate busing to neighboring schools. She further testified she had
submitted extensive documentation as to adverse environmental impacts,
including potential effects on fish and wildlife.
2
Section 166.041(4), Florida Statutes (2021), provides, in pertinent part: “A
majority of the members of the governing body shall constitute a quorum. An
affirmative vote of a majority of a quorum present is necessary to enact any
ordinance or adopt any resolution.”
4
The Commission adopted the resolution, and Prieto sought first-tier
certiorari review. The circuit court denied relief. In doing so, it concluded
Prieto lacked standing because she raised only generalized concerns
regarding increased traffic and diminished property values, and,
alternatively, because the County satisfied the regulatory notice
requirements for the originally scheduled hearing, it was not required to
publish any further notice. The instant petition ensued.
STANDARD OF REVIEW
In a second-tier certiorari proceeding concerning the quasi-judicial
decision of a local governmental entity, “[o]ur ‘inquiry is limited to whether
the circuit court afforded procedural due process and whether the circuit
court applied the correct law, or, as otherwise stated, departed from the
essential requirements of law.’” Fla. Int’l Univ. v. Ramos, 335 So. 3d 1221,
1224 (Fla. 3d DCA 2021) (quotation marks omitted) (quoting Custer Med.
Ctr. v. United Auto Ins. Co., 62 So. 3d 1086, 1092 (Fla. 2010)). “Clearly
established law can be derived not only from case law dealing with the same
issue of law, but also from ‘an interpretation or application of a statute, a
procedural rule, or a constitution[al] provision.’” State, Dep’t of Highway
Safety & Motor Vehicles v. Edenfield, 58 So. 3d 904, 906 (Fla. 1st DCA 2011)
(quoting Allstate Ins. Co. v. Kaklamanos, 843 So. 2d 885, 890 (Fla. 2003)).
5
LEGAL ANALYSIS
Notice of the Public Hearing
Chapter 166, Florida Statutes (2021)
Section 166.041, Florida Statutes (2021), codifies the procedures for
the adoption of ordinances and resolutions. The statute contains certain
minimum notice requirements and provides:
[A] municipality may specify additional requirements for the
adoption or enactment of ordinances or resolutions or prescribe
procedures in greater detail than contained herein. However, a
municipality shall not have the power or authority to lessen or
reduce the requirements of this section or other requirements as
provided by general law.
§ 166.041(6), Fla. Stat. In this context,
[s]tanding to initiate a challenge to the adoption of an ordinance
or resolution based on a failure to strictly adhere to the provisions
contained in this section shall be limited to a person who was
entitled to actual or constructive notice at the time the ordinance
or resolution was adopted.
§ 166.041(7), Fla. Stat.
Section 33-310, Code of Miami-Dade County, Florida
Consistent with these provisions, section 33-310 of the Miami-Dade
County Code, entitled, in part, “Notice and Hearing Prerequisite to Action,”
sets forth the notice requirements applicable to public hearings on zoning
applications before the Board of County Commissioners. The Code prohibits
action on any application “until a public hearing has been held upon notice
6
of the time, place, and purpose of such hearing.” Miami-Dade County, Fla.,
Code § 33-310(c) (2021).
The Code envisions four distinct forms of notice.3 Notice must first be
published in “a newspaper of general circulation in Miami-Dade County.” §
33-310(c)(1). Notice must then be both mailed to homeowners within a
specified radius and posted on the affected property, and a courtesy copy
should then be furnished to the president of certain specified homeowners’
associations. § 33-310(c)(2)–(3), (e). Failure to publish, post, or mail notice
to affected homeowners “renders voidable any hearing held on the
application.” § 33-310(g).4
The plain language of the Code makes clear that published notice is
mandatory and not discretionary. See § 33-310(c)(1)–(3); see also Fla.
Tallow Corp. v. Bryan, 237 So. 2d 308, 309 (Fla. 4th DCA 1970) (“The word
‘shall’ when used in a statute or ordinance has, according to its normal
usage, a mandatory connotation.”); City of Hollywood v. Pettersen, 178 So.
2d 919, 921 (Fla. 2d DCA 1965) (“In the promulgation of zoning regulations
there must be strict adherence to the requirements of notice and hearing
3
Notice must be provided no later than fourteen days prior to the public
hearing. Id.
4
Conversely, “[t]he failure to provide courtesy notices shall not render a
hearing voidable.” Id.
7
preliminary to the adoption of such regulations.”). This is consistent with the
overwhelming weight of modern authority in this arena. See Patricia E.
Salkin, Mandatory Requirements, in American Law of Zoning § 8:3 (5th ed.
2022) (“The procedural steps required by the state zoning enabling statutes
usually are regarded as mandatory. A failure substantially to comply with
such requirements renders a zoning ordinance invalid.”); 83 Am. Jur. 2d
Zoning and Planning § 470 (same).
Respondents, however, argue that published notice was unnecessary
because the Commission merely postponed the hearing. This argument
misses the mark. The original hearing was not convened and recessed.
Instead, it was canceled the day before it was scheduled to occur. Thus, the
hearing on the resolution cannot be deemed a mere continuation of a
properly noticed hearing. See Shaughnessy v. Metropolitan Dade County,
238 So. 2d 466, 468 (Fla. 3d DCA 1970) (holding zoning appeals board
abided by statutory notice provisions where board’s consideration of unusual
or special use application was continuation of previously noticed hearing).
Further, the Code contains no notice exception for canceled and
rescheduled hearings, and no court in this state has determined that such
an exception exists. See Forsythe v. Longboat Key Beach Erosion Control
Dist., 604 So. 2d 452, 454 (Fla. 1992) (“It is a fundamental principle of
8
statutory construction that where the language of a statute is plain and
unambiguous there is no occasion for judicial interpretation.”). Instead, in
closely considering the analogous question of whether the failure to provide
statutory notice of a rescheduled public hearing is fatal to the viability of a
subsequently enacted zoning ordinance, this court and others have
universally concluded that “[s]trict compliance with the notice requirements
of the state statute is a jurisdictional and mandatory prerequisite to the valid
enactment of a zoning measure.” Webb v. Town Council of Town of Hilliard,
766 So. 2d 1241, 1244 (Fla. 1st DCA 2000) (quoting Lady J. Lingerie, Inc. v.
City of Jacksonville, 973 F. Supp. 1428, 1434 (M.D. Fla. 1997)). This view
has been applied equally to rescheduled or postponed public hearings. See
Coleman v. City of Key West, 807 So. 2d 84, 85–86 (Fla. 3d DCA 2001)
(holding ordinance null and void where rescheduled public hearing on
proposed zoning failed to comply with statutory notice requirements); City of
Fort Pierce v. Davis, 400 So. 2d 1242, 1245 (Fla. 4th DCA 1981) (holding
ordinance void for failure to give notice as required by applicable statute
where public hearing had been rescheduled).
This interpretation is consistent with the purpose underlying the notice
requirements. Zoning action notice provisions are designed to:
[P]rotect interested persons, who are thus given the opportunity
to learn of proposed ordinances; given the time to study the
9
proposals for any negative or positive effects they might have if
enacted; and given notice so that they can attend the hearings
and speak out to inform the city commissioners prior to ordinance
enactment.
Coleman, 807 So. 2d at 85. Notice requirements further ensure that
unknown individuals with an interest in zoning matters are constructively
informed of contemplated action and aid the Commission in gathering
sufficient information to sagaciously discharge their duties. Absent strict
compliance, these three objectives fail.
Accordingly, in concluding no published notice of the public hearing
was required, the circuit court strayed from the plain language of the Code
and applicable precedent. Gonzalez v. State, 15 So. 3d 37, 39 (Fla. 2d DCA
2009) (“A departure from the essential requirements of law, alternatively
referred to as a violation of clearly established law, can be shown by a
misapplication of the plain language in a statute.”); Just. Admin. Comm’n v.
Peterson, 989 So. 2d 663, 665 (Fla. 2d DCA 2008) (“When the circuit court
does not apply the plain and unambiguous language of the relevant statute,
it departs from the essential requirements of law.”).
Standing
Standing to Challenge a Zoning Action
We next examine whether Prieto possessed standing to void the
Commission’s action. In the seminal case of Renard v. Dade County, 261
10
So. 2d 832 (Fla. 1972), the Florida Supreme Court articulated the legal
standing necessary to “challenge the zoning action or inaction” of a
municipality. Rinker Materials Corp. v. Metropolitan Dade County, 528 So.
2d 904, 906 (Fla. 3d DCA 1987). There, the court determined that “[a]n
aggrieved or adversely affected person having standing to sue is a person
who has a legally recognizable interest which is or will be affected by the
action of the zoning authority in question.” Renard, 261 So. 2d at 837. In
this regard, the aggrieved party must suffer “special damages,” defined as
“a definite interest exceeding the general interest in community good
share[d] in common with all citizens.” Id. Critically, a court must consider
“the proximity of [the party’s] property to the property to be zoned or rezoned,
the character of the neighborhood, . . . and the type of change proposed.”5
Id.; see also Rinker, 528 So. 2d at 906.
Ordinarily, abutting homeowners have standing by virtue of their
proximity to the proposed area of rezoning. See Paragon Grp, Inc. v.
Hoeksema, 475 So. 2d 244, 246 (Fla. 2d DCA 1985), review denied, 486 So.
2d 597 (Fla. 1986) (holding owner of single-family home directly across from
5
Although the court noted that “notice requirements are not controlling on
the question of who has standing,” it expressly recognized that “[t]he fact that
a person is among those entitled to receive notice under the zoning
ordinance is a factor to be considered on the question of standing to
challenge the proposed zoning action.” Id.
11
rezoned property had standing to challenge proposed rezoning); see also
Elwyn v. City of Miami, 113 So. 2d 849, 851 (Fla. 3d DCA 1959) (“Plaintiffs
as abutting home owners were entitled to maintain the suit challenging the
propriety, authority for and validity of the ordinance granting the variance.”).
Such proximity generally establishes that the homeowners have an interest
greater than “the general interest in community good share[d] in common
with all citizens.” Renard, 261 So. 2d at 837.
Standing to Void an Improperly Noticed Public Hearing
Those seeking to void an improperly noticed public hearing on a land
use decision bear a slightly lower burden. Renard provides that where there
is a defect in notice, “[a]ny affected resident, citizen or property owner of the
governmental unit in question has standing to challenge such an ordinance.”
Id. at 838; see also Citizens Growth Mgmt. Coal. of W. Palm Beach, Inc. v.
City of W. Palm Beach, Inc., 450 So. 2d 204, 206 (Fla. 1984) (quoting
Renard, 261 So. 2d at 834) (“This [c]ourt held that . . . an affected resident,
citizen, or property owner had standing” to challenge an ordinance “enacted
without proper notice required under the enabling statute or authority
creating the zoning power.”).
In the first-tier proceedings, the circuit court acknowledged the location
of Prieto’s home. However, conflating the concerns she raised with those of
12
other objecting residents, the court further determined that her complaints
were limited to traffic congestion and reduced property values, both of which
it deemed insufficient to confer standing. Casting aside the fact that this
court has previously determined that an adverse effect on the value of
property “surely represents a legally recognizable interest,” Rinker, 528 So.
2d at 906, this reasoning fails to account for the principle that “[a]ny affected
resident, citizen or property owner . . . has standing to challenge” a zoning
action effectuated at an improperly noticed public hearing. Renard, 261 So.
2d at 838. The failure to apply these controlling legal standards constituted
“a classic departure from the essential requirements of the law.”6 State v.
Jones, 283 So. 3d 1259, 1266 (Fla. 2d DCA 2019).
CONCLUSION
The decision to grant or withhold relief by way of second-tier certiorari
largely depends on our “assessment of the gravity of the error and the
adequacy of other relief.” Custer, 62 So. 3d at 1092 (quoting Haines City
6
While the first-tier briefs alluded to traffic congestion, the record of the
public hearing contains no such reference. “[T]he well[-]established rule
applicable to . . . certiorari proceeding[s] [is] that the reviewing court’s
consideration shall be confined strictly and solely to the record of
proceedings by the agency or board on which the questioned order is
based.” Dade County v. Marca, S.A., 326 So. 2d 183, 184 (Fla. 1976). “This
rule controls the determination of the factual basis establishing standing to
initiate a certiorari proceeding in the circuit court.” City of Fort Myers v. Splitt,
988 So. 2d 28, 32–33 (Fla. 2d DCA 2008).
13
Cmty. Dev. v. Heggs, 658 So. 2d 523, 531 n.14 (Fla. 1995)). In the instant
case, if the legal error is left uncorrected, it will remain unknown whether
other objectors were foreclosed from the proceedings or Prieto would have
presented a more developed objection. Allowing the decision to stand
threatens to compromise the due process the regulatory framework strives
to afford. Accordingly, we grant the petition for certiorari and quash the order
under review.
Petition granted; order quashed.
14 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484155/ | 21-1679
Sabato Torres v. N.Y.C. Dep’t of Educ.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals for the Second Circuit,
2 held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of
3 New York, on the 16th day of November, two thousand twenty-two.
4
5 PRESENT:
6 PIERRE N. LEVAL,
7 REENA RAGGI,
8 MYRNA PÉREZ,
9 Circuit Judges.
10 _____________________________________
11
12 Sabato Torres,
13
14 Plaintiff-Appellant,
15
16 v. No. 21-1679
17
18 New York City Department of Education,
19
20 Defendant-Appellee.
21 _____________________________________
22
23 FOR PLAINTIFF-APPELLANT: THOMAS RICOTTA ,
24 Ricotta & Marks, P.C.,
25 Long Island City, NY.
26
27 FOR DEFENDANT-APPELLEE: KATE FLETCHER (Richard
28 Dearing, Deborah A.
29 Brenner, on the brief), for
30 Georgia M. Pestana,
31 Corporation Counsel of the
32 City of New York, New
33 York, NY.
1 Appeal from a judgment of the United States District Court for the Eastern District of New
2 York (Rachel P. Kovner, J.).
3 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
4 DECREED that the judgment of the district court entered on June 8, 2021, is AFFIRMED.
5 Plaintiff Sabato Torres appeals from a grant of summary judgment in favor of his employer,
6 the New York City Department of Education (“DOE”), in a case brought under the Americans
7 with Disabilities Act (“ADA”), 42 U.S.C. §§ 12101 et seq. As explained below, Torres has entirely
8 failed to advance any evidence or argument sufficient to sustain a claim past this step. We assume
9 the parties’ familiarity with the underlying facts, the procedural history of the case, and the issues
10 on appeal, which we reference only as necessary to explain our decision to affirm.
11 Standard of Review
12 This Court reviews a district court’s award of summary judgment de novo. See McBride
13 v. BIC Consumer Prods. Mfg. Co., 583 F.3d 92, 96 (2d Cir. 2009). Summary judgment is
14 warranted only where, construing the evidence in the light most favorable to the non-movant, and
15 drawing all reasonable inferences in that party’s favor, “there is no genuine dispute as to any
16 material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A
17 fact is “material” if it “might affect the outcome of the suit under the governing law,” and an issue
18 is “genuine” if “the evidence is such that a reasonable jury could return a verdict for the nonmoving
19 party.” Holtz v. Rockefeller & Co., 258 F.3d 62, 69 (2d Cir. 2001) (internal quotation marks and
20 citation omitted).
21 “A plaintiff who raises a disability discrimination claim bears the initial burden of
22 establishing a prima facie case.” Wernick v. Fed. Rsrv. Bank of N.Y., 91 F.3d 379, 383 (2d Cir.
2
1 1996). For Torres to carry this burden on his claim that DOE failed to accommodate his disability,
2 he had to adduce evidence admitting an inference that: (1) he is “a person with a disability under
3 the meaning of the ADA”; (2) DOE “had notice of his disability”; (3) “with reasonable
4 accommodation, [Torres] could perform the essential functions of the job at issue”; and (4) DOE
5 “refused to make such accommodations.” Graves v. Finch Pruyn & Co., 457 F.3d 181, 184 (2d
6 Cir. 2006) (quoting Rodal v. Anesthesia Grp. of Onondaga, P.C., 369 F.3d 113, 118 (2d Cir.
7 2004)). Here, our inquiry concerns the third and fourth factors.1
8 This Court uses “a two-step process to evaluate whether the failure to provide a proposed
9 accommodation constitutes a violation of the ADA.” Jackan v. N.Y. State Dep’t of Lab., 205 F.3d
10 562, 566 (2d Cir. 2000). At the first step, Torres “bears the burdens of both production and
11 persuasion as to the existence of some accommodation that would allow [him] to perform the
12 essential functions of [his] employment, including the existence of a vacant position for which [he]
13 is qualified.” McBride, 583 F.3d at 97. At the second step, we consider whether Torres’s proposed
14 accommodation is reasonable, see Jackan, 205 F.3d at 566, i.e., whether it would enable him “to
15 perform the essential functions of” his position as a teacher, 29 C.F.R. §§ 1630.2(o)(1)(ii). A
16 reasonable accommodation may include “reassignment to a vacant position.” 42 U.S.C. §
17 12111(9)(B); see also 29 C.F.R. § 1630.2(o)(2)(ii). At this step, “the plaintiff bears only a burden
18 of production,” which is not “heavy.” Borkowski v. Valley Cent. Sch. Dist., 63 F.3d 131, 138 (2d
19 Cir. 1995). But an employer need not grant a facially unreasonable accommodation. See U.S.
20 Airways, Inc. v. Barnett, 535 U.S. 391, 401 (2002).
1
We assume, without deciding, that Torres was disabled within the meaning of the ADA at the relevant times. And
there is no dispute that DOE had notice of Torres’s claimed disability.
3
1 Discussion
2 1. August 2016 Transfer Request
3 In August 2016, DOE twice granted Torres precisely the relief that he requested: first, a
4 hardship transfer, and then, a restoration-of-health leave for the duration of the 2016–17 school
5 year. There is no question that the hardship transfer constituted a reasonable accommodation. See
6 42 U.S.C. § 12111(9)(B).2 Torres, however, elected to take the leave rather than to effectuate the
7 transfer.
8 Torres faults DOE for forcing him to choose between two accommodations rather than
9 allowing him to take leave while also effecting his transfer. The record does not support this
10 characterization. While DOE did not effect Torres’s transfer while he was on leave, it did not
11 foreclose the possibility of a transfer if Torres returned to work nor force him to return to P.S.
12 295Q. Rather, DOE required Torres to reapply for a transfer closer to his return date. It was not
13 then certain that Torres would return for the 2017–18 school year. Indeed, Torres ultimately
14 remained on restoration-of-health leave until February 2018. Under those circumstances, no
15 reasonable factfinder could conclude that DOE’s reasonable accommodation obligation required
16 it to hold open Torres’s approved transfer for at least the one-year leave period he requested. See
17 Vangas v. Montefiore Med. Ctr., 823 F.3d 174, 181 (2d Cir. 2016) (construing New York State
18 Human Rights Law, N.Y. Exec. Law §§ 290 et seq.); see also Graves, 457 F.3d at 186 n.6.
19 2. April 2017 Transfer Request
20 Torres erroneously contends that he satisfied his burden of production and persuasion. To
2
We do not decide whether a school-year-long unpaid leave of absence can constitute a reasonable accommodation
under the ADA. This Court has not squarely articulated when, if ever, a leave of absence for a finite period might
qualify as a reasonable accommodation, but we have noted that the idea of unpaid leave is a “troublesome problem,”
in part because of the “oxymoronic anomaly it harbors—the idea that allowing disabled employee to leave a job
allows him to perform that job’s functions.” Graves, 457 F.3d at 185 n.5 (internal quotation marks and citation
omitted).
4
1 demonstrate the existence of a vacant position in April 2017, Torres offers only: (1) his counsel’s
2 conclusory statement that there are “virtually always” open teaching positions within DOE, and
3 (2) the urged inference that because there was a position available in August 2016, there was also
4 a position available in April 2017.
5 The first assertion is formulaic and speculative, which is insufficient to defeat summary
6 judgment. See McBride, 583 F.3d at 97–98 (holding that “[a]n ADA plaintiff does not satisfy her
7 burden to identify a potential accommodation merely by reciting the formula that her employer
8 could have reassigned her”); Jackan, 205 F.3d at 566 (“The burden of persuasion on the existence
9 of an effective accommodation is not satisfied by mere speculation.” (internal quotation marks
10 omitted)). The second claim is also unavailing because a plaintiff must demonstrate the existence
11 of an available position “within a reasonable amount of time” of his request. Shannon v. N.Y.C.
12 Transit Auth., 332 F.3d 95, 104 (2d Cir. 2003). The availability of a position in August 2016 is
13 not a reasonable indicator of a vacant position eight months later at an entirely different point in
14 the school year.
15 3. Interactive Process
16 Nor does Torres succeed on his claim of failure to accommodate by failing to engage in an
17 interactive process. Torres contends that DOE’s failure to engage in an interactive process when
18 he sought both transfers also violated the ADA. Though “[t]he ADA envisions an interactive
19 process by which employers and employees work together to assess whether an employee’s
20 disability can be reasonably accommodated,” Jackan, 205 F.3d at 566 (internal quotation marks
21 omitted), an employer’s failure to comply with the interactive process requirement does not
22 provide the basis for an independent ADA claim. See Noll, 787 F.3d at 98; Williams v. MTA Bus
5
1 Co., 44 F.4th 115, 136 (2d Cir. 2022).
2 We have considered all of Torres’s remaining arguments and conclude they are without
3 merit. For the foregoing reasons, we AFFIRM the judgment of the district court.
4 FOR THE COURT:
5 Catherine O’Hagan Wolfe, Clerk of Court
6
6 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484163/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-1233
Lower Tribunal No. F08-35663
________________
Taytreon Edwards,
Appellant,
vs.
The State of Florida,
Appellee.
An Appeal under Florida Rule of Appellate Procedure 9.141(b)(2) from
the Circuit Court for Miami-Dade County, Joseph Perkins, Judge.
Taytreon Edwards, in proper person.
Ashley Moody, Attorney General, and Ivy R. Ginsberg, Assistant
Attorney General, for appellee.
Before HENDON, GORDO, and BOKOR, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484168/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-0068
Lower Tribunal No. 20-21402
________________
Midasa, Inc., etc., et al.,
Appellants,
vs.
Ocean Bank, etc.,
Appellee.
An appeal from the Circuit Court for Miami-Dade County, Reemberto
Diaz, Judge.
Pomeranz & Associates, P.A., and Mark L. Pomeranz (Hallandale), for
appellants.
Law Offices of Mandel, Manganelli & Leider, P.A., and Melisa
Manganelli (Boca Raton), for appellee.
Before EMAS, MILLER, and LOBREE, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484176/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
Nos. 3D22-659 & 3D22-660
Lower Tribunal No. 20-25304
________________
God's Blessing Ltd., et al.,
Appellants,
vs.
Kathy Salas,
Appellee.
Appeals from non-final orders from the Circuit Court for Miami-Dade
County, Charles Johnson, Judge.
Stroup & Martin, P.A., and James W. Stroup (Fort Lauderdale), for
appellants.
Kathy Salas, in proper person.
Before SCALES, MILLER, and LOBREE, JJ.
PER CURIAM.
In these consolidated appeals, appellants, God’s Blessing Ltd., Roger
West, and James Larman, challenge a series of non-final orders reinstating
interim maintenance and cure payments on an emergency basis to appellee,
Kathy Salas, prior to an adjudication on the merits. We have jurisdiction.
See Fla. R. App. P. 9.130(a)(3)(B). Consistent with our reasoning in God’s
Blessing Ltd v. Salas, 339 So. 3d 1086 (Fla. 3d DCA 2022), we treat the
orders as preliminary injunctions and reverse without prejudice to the filing
of “a renewed motion in a form compliant with the [Florida Rules of Civil
Procedure].” Id. at 1089.
Reversed and remanded.
2 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484164/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-1209
Lower Tribunal No. F20-11530
________________
Steven Dieguez,
Appellant,
vs.
The State of Florida,
Appellee.
An Appeal under Florida Rule of Appellate Procedure 9.141(b)(2) from
the Circuit Court for Miami-Dade County, Daryl E. Trawick, Judge.
Steven Dieguez, in proper person.
Ashley Moody, Attorney General, and Sandra Lipman, Assistant
Attorney General, for appellee.
Before SCALES, LINDSEY and LOBREE, JJ.
PER CURIAM.
Steven Dieguez appeals the court’s postconviction order denying his
motion to correct jail credit filed under Florida Rule of Criminal Procedure
3.801. However, Dieguez was released from custody on October 17, 2022.
Because Dieguez has completed his sentence and been released, the jail
credit issue is moot. See Boggs v. State, 166 So. 3d 899, 900 (Fla. 2d DCA
2015); Toomer v. State, 895 So. 2d 1256, 1256–57 (Fla. 1st DCA 2005).
Accordingly, we dismiss this appeal.
Dismissed.
2 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484184/ | DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
KENNETH JEROME GODWIN, JR.,
Appellant,
v.
STATE OF FLORIDA,
Appellee.
No. 4D22-645
[November 16, 2022]
Appeal of order denying rule 3.850 motion from the Circuit Court for
the Nineteenth Judicial Circuit, St. Lucie County; Robert E. Belanger,
Judge; L.T. Case No. 562017CF735A.
Kenneth J. Godwin, Jr., Lowell, pro se.
Ashley Moody, Attorney General, Tallahassee, and Anesha Worthy,
Assistant Attorney General, West Palm Beach, for appellee.
PER CURIAM.
Kenneth Godwin appeals an order summarily denying his rule 3.850
motion for post-conviction relief and directing the clerk to amend the
judgment and sentence to reflect that he entered a plea to a different
offense. We affirm the denial of relief under rule 3.850 but reverse the
portion of the order directing the clerk to amend the judgment and
sentence.
Godwin was arrested for driving with a revoked license as a habitual
traffic offender, a third-degree felony in violation of section 322.34(5),
Florida Statutes (2016). However, the State charged Godwin by
information with driving while his license was canceled, suspended, or
revoked after two or more prior convictions, a third-degree felony in
violation of an earlier subsection, section 322.34(2)(c), Florida Statutes
(2016). He entered an open plea of no contest to that offense and was
sentenced to ten years in prison.
In a rule 3.850 motion, Godwin argued that counsel failed to advise
that he could not be prosecuted under section 322.34(2)(c) because he had
been designated as a habitual traffic offender. See § 322.34(2), Fla. Stat.
(2016); Finney v. State, 219 So. 3d 254, 255–56 (Fla. 1st DCA 2017).
Godwin alleged he would not have entered a plea and instead would have
insisted on going to trial if counsel had advised him of this “complete
defense.” The State conceded Godwin should not have been charged under
section 322.34(2)(c) but argued he was not entitled to relief under rule
3.850 because he failed to establish prejudice. The court agreed with the
State that Godwin was not entitled to relief under rule 3.850 but directed
the clerk to amend the judgment and sentence to reflect that he had
entered a plea to a violation of section 322.34(5) instead of section
322.34(2)(c).
We affirm the court’s ruling that Godwin was not entitled to relief under
rule 3.850 because he failed to establish prejudice resulting from counsel’s
alleged error. To establish prejudice, Godwin needed to demonstrate a
reasonable probability that he would not have entered a plea—and would
have insisted on going to trial—if counsel had advised him that he had a
“complete defense” under section 322.34(2)(c). See Grosvenor v. State, 874
So. 2d 1176, 1179 (Fla. 2004) (citing Hill v. Lockhart, 474 U.S. 52, 59
(1985)). The viability of the defense is relevant to evaluating the probability
that Godwin would have insisted on going to trial. See Grosvenor, 874 So.
2d at 1179–82.
Godwin did not demonstrate that his designation as a habitual traffic
offender would have been a viable defense at trial as he failed to show that
the State would have been precluded from amending the information to
charge him under the proper subsection, section 322.34(5), if he had
raised the issue. 1 A charge under section 322.34(5) would have required
the same substantive proof and carried the same potential sentence as a
charge under section 322.34(2)(c), and Godwin was on notice that his
conduct likely violated section 322.34(5) because he was arrested under
that subsection. See Thach v. State, 342 So. 3d 620, 623–24 (Fla. 2022)
(holding that the State can amend the information during trial unless the
defendant makes an individualized showing of prejudice to his substantial
rights). Because Godwin failed to show that his designation as a habitual
traffic offender would have been a viable defense at trial, the court did not
err in ruling that he failed to establish a reasonable probability that he
1 Godwin’s reliance on Finney, 291 So. 3d at 255–56, is misplaced. In Finney,
the defendant could not be prosecuted under section 322.34(2)(c) because he had
been designated as a habitual traffic offender. Id. However, he also could not be
prosecuted under section 322.34(5) because he had never had a driver’s license.
Id. Here, the record reflects that Godwin had a driver’s license that had been
revoked upon his designation as a habitual traffic offender.
2
would have insisted on going to trial.
However, we reverse the portion of the court’s order directing the clerk
to amend the judgment and sentence to reflect that Godwin entered a plea
to a violation of section 322.34(5) instead of section 322.34(2)(c). The
information was never amended to charge Godwin under section
322.34(5), and it is a due process violation for the judgment and sentence
to show that he was adjudicated guilty and sentenced for a crime that was
not charged in the information. See Bodie v. State, 143 So. 3d 420, 422
(Fla. 1st DCA 2013) (citing Crain v. State, 894 So. 2d 59, 69 (Fla. 2004)).
On remand, the court is directed to reinstate the original judgment and
sentence reflecting that Godwin entered a plea to a violation of section
322.34(2)(c) as charged in the information. We affirm on all other issues
raised without additional comment.
Affirmed in part, reversed in part, and remanded with instructions.
KLINGENSMITH, C.J., CIKLIN and ARTAU, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
3 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484169/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-561
Lower Tribunal No. 21D-01337
________________
Maximo C. Gomez,
Appellant,
vs.
Florida Department of Children and Families,
Appellee.
An Appeal from the State of Florida Department of Children and
Families, Office of Appeal Hearings.
Maximo C. Gomez, in proper person.
Leslie Hinds, Regional Legal Counsel, for appellee.
Before LOGUE, LINDSEY, and LOBREE, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484170/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D21-1357
Lower Tribunal No. 17-5089
________________
La Fe Nursery & Landscaping, Inc.,
Appellant,
vs.
HSBC Bank USA National Association, etc.,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Michael A.
Hanzman, Judge.
Albert D. Rey, P.A., and Albert D. Rey, for appellant.
Ballaga, Freedman & Atkins, LLP, and Leonard C. Atkins IV, for
appellee.
Before LOGUE, LINDSEY, and BOKOR, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484174/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D20-1823
Lower Tribunal No. F19-5942
________________
Isaac M. Dilver, Jr.,
Appellant,
vs.
The State of Florida,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Marisa
Tinkler Mendez, Judge.
Eugene Zenobi, Criminal Conflict and Civil Regional Counsel, Third
Region, and Jacqueline Rae Brandt, Assistant Regional Counsel, for
appellant.
Ashley Moody, Attorney General, and David Llanes, Assistant Attorney
General, for appellee.
Before EMAS, SCALES and LOBREE, JJ.
EMAS, J.
INTRODUCTION
Isaac Dilver appeals from judgments and sentences for aggravated
stalking in violation of an injunction for protection against repeat violence
(Count One) and two counts of violating an injunction for protection against
repeat violence (Counts Two and Three). For the reasons that follow, we
reverse and remand with directions for the trial court to vacate the judgments
and sentences on all three counts; enter a judgment of acquittal on Count
Two and Count Three; enter a judgment of guilt as to Count One for the
reduced offense of stalking; and hold a new sentencing hearing on the
judgment for Count One, as reduced.
FACTUAL AND PROCEDURAL BACKGROUND
Isaac Dilver was charged by Information with one count of aggravated
stalking (Count One) and two counts of violating an injunction for protection
against repeat violence (Counts Two and Three).
As to the aggravated stalking charge (Count One), the Information
alleged that Dilver engaged in this stalking conduct “after the entry against
the defendant of an injunction for protection against repeat violence or dating
2
violence, pursuant to s. 784.046, Fla. Stat. [or] an injunction for protection
against domestic violence pursuant to s. 741.30, Fla. Stat.” 1
Counts Two and Three expressly alleged that Dilver did “willfully
violate the provisions of an injunction for protection against repeat violence
and/or sexual violence and/or dating violence, issued pursuant to section
784.046.”
At trial, the victim testified to multiple instances in which she was
stalked by Dilver. The victim further testified that she sought and was
granted a temporary injunction against Dilver. The injunction obtained by
the victim—entitled “Final Judgment of Injunction for Protection Against
Stalking Violence”—was admitted into evidence and indicates on its face that
it was issued after the “petition for injunction for protection against stalking
violence under section 784.0485, Florida Statutes, and other papers filed
in this Court have been reviewed.” (Emphasis added.)
1
To prove the crime of stalking, the State must prove a defendant “willfully,
maliciously, and repeatedly follow[ed], harasse[d] or cyberstalk[ed]” the
victim. See § 784.048(2), Fla. Stat. (2019); Fla. Std. J. Inst. (Crim.) 8.6.
Aggravated stalking, as charged in Count One of the Information, includes
the additional element that, at the time of the conduct, “an injunction for
protection against repeat violence, sexual violence, or dating violence
pursuant to s. 784.046, or an injunction for protection against domestic
violence pursuant to s. 741.30,” had been entered against the defendant for
the benefit of the victim. See § 784.048(4), Fla. Stat. (2019); Fla. Std. J.
Instr. (Crim.) 8.7(b).
3
Accordingly, this injunction did not establish the crime of aggravated
stalking as charged in the Information—that the victim sought and obtained
an injunction for protection against repeat violence pursuant to section
784.046, or an injunction for protection against domestic violence pursuant
to section 741.30. Indeed, the State’s entire theory of prosecution, advanced
from opening statement to closing argument, was that Dilver had committed
the crime of aggravated stalking by violating an injunction for protection
against repeat violence, as provided by section 784.046. The State’s theory
and argument also formed the basis for the relevant instruction on the law
provided by the trial court to the jury:
COUNT ONE
AGGRAVATED STALKING
(Injunction Entered)
§ 784.048(4), Fla. Stat.
To prove the crime of Aggravated Stalking, the State must prove
the following three elements beyond a reasonable doubt:
1. Isaac Dilver, on, about or between March 05, 2019 and
March 19, 2019 knowingly, willfully, maliciously, and
repeatedly followed or harassed [the victim].
2. At the time of the following or harassing, an injunction for
protection against repeat violence had been entered
against Isaac Dilver for the benefit of [the victim].
3. Isaac Dilver knew that the injunction had been entered
against him.
(Emphasis added.)
4
In like fashion, the allegations in the complaint, as well as the State’s
theory and argument, was that Dilver was guilty of Counts Two and Three
because he willfully violated the provisions of an injunction for protection
against repeat violence, sexual violence, or dating violence, issued pursuant
to section 784.046. Again, however, the only injunction introduced into
evidence in support of these charges was the injunction against stalking,
issued pursuant to section 784.0485.
Dilver properly preserved this issue, arguing in his motion for judgment
of acquittal that the State failed to prove any of the three counts because the
State expressly based its allegations, proof and argument on the “fact” that
each count involved a violation of an “injunction against repeat violence,”
pursuant to section 784.046, while the evidence at trial established the
issuance of an injunction against stalking (section 784.0485).
An injunction against repeat violence (section 784.046) and an
injunction against stalking (section 784.0485) are two distinct types of
injunctions arising from separate causes of action, the violation of which can
result in different and distinct penalties. 2 The trial court denied Dilver’s
motion for judgment of acquittal.
2
For example, the crime of aggravated stalking as charged in the Information
(stalking committed after entry of an injunction for protection against repeat
violence), is a third-degree felony. See § 784.048(4). The crime of stalking,
5
The jury was instructed on the elements of all three counts, and was
further instructed (as to Count One, Aggravated Stalking) on the necessarily
lesser-included offense of stalking (which does not require proof that an
injunction had been entered against Dilver). The jury returned verdicts of
guilty as charged on all three counts.
As to Count One (Aggravated Stalking), Dilver was sentenced as a
habitual felony offender to two years’ imprisonment followed by seven years
of probation. As to Count Two and Count Three (each a first-degree
misdemeanor), Dilver was sentenced to 364 days in the county jail to be
served concurrently with each other and concurrently with the sentence on
Count One. 3
and the crime of violating an injunction for protection against stalking, are
both first-degree misdemeanors. See §§ 784.048(2) and 784.0487(4)(a),
Fla. Stat. (2022).
3
Prior to sentencing, defense counsel moved for a competency evaluation
of Dilver and for a competency hearing. Several evaluations were conducted
and a competency hearing scheduled. The day before the final hearing,
defense counsel requested additional time to prepare for a follow-up
competency evaluation because counsel had located Dilver’s family and
discovered that Dilver had a mental health history which had not been
discovered by Dilver’s prior counsel or by the physicians who had previously
evaluated him. The next day the trial court considered the motion for
continuance but found Dilver competent to proceed to sentencing. This was
based in part on her observations of Dilver during trial.
6
DISCUSSION AND ANALYSIS
On appeal, Dilver contends the trial court erred in denying his motion
for judgment of acquittal because the State failed to prove the issuance of
an injunction against repeat violence (pursuant to section 784.046) or an
injunction for protection against domestic violence (pursuant to section
741.30), an essential element of aggravated stalking as charged in Count
One of the Information. We review this issue de novo, Williams v. State, 305
So. 3d 673 (Fla. 3d DCA 2020), and we hold that the trial court erred in
denying Dilver’s motion for judgment of acquittal.
Dilver contended (both in the trial court and here on appeal) that an
injunction for protection against stalking under section 784.0485 is not the
same as an injunction for repeat violence or dating violence under section
784.046, or an injunction for domestic violence under section 741.30.
Indeed, the State has conceded this point, and has further and commendably
conceded that the State did not (and could not) prove Dilver committed
aggravated stalking as charged in Count One of the Information, because
the State did not (and could not) establish that Dilver engaged in these acts
after the issuance of an injunction against repeat violence or dating violence
(pursuant to section 784.046) or domestic violence (pursuant to section
7
741.30), an essential element for aggravated stalking as charged in Count
One of the Information.
Simply stated, proof of the issuance and existence of an injunction for
protection against stalking under section 784.0485 was legally insufficient to
establish the charge of aggravated stalking under section 784.048(4) which
requires proof of the issuance and existence of an injunction issued for
protection against repeat violence or dating violence (pursuant to section
784.046) or domestic violence (pursuant to section 741.30).
This same infirmity applies with respect to Counts Two and Three,
each charging a violation of an injunction against repeat violence. Again, the
only injunction introduced by the State was the injunction against stalking,
issued pursuant to section 784.0485. The State has commendably
conceded error on this issue as well, and has further conceded that, as a
result, the judgments and convictions for Counts Two and Three must be
vacated with instructions on remand to enter judgments of acquittal on those
two counts.
As to Count One, however, the State contends there was sufficient
evidence to support a conviction for stalking (a necessarily lesser-included
offense of aggravated stalking), and that the jury was properly instructed on,
and necessarily found the State had proven all of the elements of, this lesser
8
included offense. Thus, the State posits, this court should reverse the
judgment and sentence for aggravated stalking and remand for entry of
judgment for stalking (section 784.048(2), Florida Statutes (2019)) and for a
new sentencing hearing on that judgment. We find merit in the State’s
position.
Stalking is a Category One (necessarily lesser-included) 4 offense of
aggravated stalking: establishing the elements for the crime of aggravated
stalking necessarily establishes the elements for the crime of stalking. See
Fla. Std. J. Inst. (Crim.) 8.7(b), Aggravated Stalking Under § 784.048(4)
(listing Stalking under § 784.048(2) as a Category One necessarily lesser-
included offense).
Had the trial court properly granted Dilver’s motion for judgment of
acquittal as to Count One, it would have resulted in a reduction of the offense
from aggravated stalking (as charged) to stalking, as the record amply
demonstrates the State established the elements for stalking under section
784.048(2), and that the jury, by its guilty verdict on the charge of aggravated
4
There are two categories of lesser-included offenses—necessary lesser
offenses (also known as Category One) and permissive lesser offenses (also
known as Category Two). Sanders v. State, 944 So. 2d 203, 206 (Fla. 2006).
An offense is a necessary (Category One) lesser “[i]f the statutory elements
of the lesser included offense are always subsumed by those of the charged
offense.” Stevens v. State, 195 So. 3d 403, 405 (Fla. 2d DCA 2016) (citing
Williams v. State, 957 So. 2d 595, 598 (Fla. 2007)).
9
stalking, found beyond a reasonable doubt that the State had proven all of
the elements of the lesser-included offense of stalking.
The Florida Rules of Criminal Procedure provide for just such a
circumstance:
Rule 3.620. When Evidence Sustains Only
Conviction of Lesser Offense
When the offense is divided into degrees or necessarily includes
lesser offenses and the court, on a motion for new trial, is of the
opinion that the evidence does not sustain the verdict but is
sufficient to sustain a finding of guilt of a lesser degree or of a
lesser offense necessarily included in the one charged, the court
shall not grant a new trial but shall find or adjudge the defendant
guilty of the lesser degree or lesser offense necessarily included
in the charge, unless a new trial is granted by reason of some
other prejudicial error.
Fla. R. Crim. P. 3.620. See § 924.34, Fla. Stat. (2022) (providing: “When the
appellate court determines that the evidence does not prove the offense for
which the defendant was found guilty but does establish guilt of a lesser
statutory degree of the offense or a lesser offense necessarily included in
the offense charged, the appellate court shall reverse the judgment and
direct the trial court to enter judgment for the lesser degree of the offense or
for the lesser included offense”); State v. Sigler, 967 So. 2d 835, 844 (Fla.
2007) (construing § 924.34 and holding: “To the extent that section 924.34
can be read to provide for conviction of an offense whose elements have not
been determined by the jury, it would be unconstitutional. Otherwise, when
10
all of the elements of a lesser offense have been determined by the jury,
section 924.34 is a valid exercise of the legislative prerogative allowing
appellate courts to direct a judgment for such an offense”); Michelson v.
State, 927 So. 2d 890, 893 (Fla. 4th DCA 2005) (“[W]e find no constitutional
prohibition against remand for conviction for a lesser degree or lesser
included offense where the jury has specifically found the existence of all
elements of the offense and where the error causing remand does not disturb
those findings.”) See also K.H. v. State, 8 So. 3d 1155 (Fla. 3d DCA 2009)
(reversing delinquency adjudication for felony battery on a law enforcement
officer where the State failed to prove the officer was engaged in the lawful
performance of his duties; however, finding all the elements of simple battery
had been proven, and relying upon Sigler, remanding to the trial court with
instructions to reduce the adjudication to the necessarily lesser-included
misdemeanor offense of simple battery).
CONCLUSION
We therefore reverse and remand, and direct the trial court to vacate
the judgments and sentences on Counts One, Two and Three; enter a
judgment of acquittal on Count Two and Count Three; enter a judgment of
guilt as to Count One for the reduced (and necessarily lesser-included)
11
offense of stalking under section 784.048(2); and hold a new sentencing
hearing on this judgment for Count One as reduced. 5
Reversed and remanded with directions. 6
5
We recognize that, because the judgment on remand is to be entered for a
first-degree misdemeanor, Dilver may have already served the maximum
possible sentence.
6
Given our holding, the other issue raised by Dilver (see note 3 supra) is
moot. See, e.g., Bracero v. State, 10 So. 3d 664, 666 (Fla. 2d DCA 2009)
(finding moot defendant’s argument that “the judge erred in failing to sua
sponte order a competency evaluation” based on the defendant’s remarks at
sentencing but noting: “Because we are remanding for further proceedings,
defense counsel will have the opportunity to seek a competency
determination if such is warranted at the time”) (emphasis added); Williams
v. State, 295 So. 3d 258, 259 (Fla. 4th DCA 2020) (“On remand, the court
shall strike Williams's conviction and sentence for assault. After doing so,
and if the court determines that Williams is competent to be sentenced, the
court shall resentence Williams for attempted robbery.”)
12 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484175/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-1112
Lower Tribunal No. F20-10705
________________
Guy Greene II,
Appellant,
vs.
The State of Florida,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Teresa
Pooler, Judge.
Carlos J. Martinez, Public Defender, and Andrew Stanton, Assistant
Public Defender, for appellant.
Ashley Moody, Attorney General, and Linda Katz, Assistant Attorney
General, for appellee.
Before HENDON, MILLER and BOKOR, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484178/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-0572
Lower Tribunal No. 19-7742
________________
Elizabeth Maya,
Appellant,
vs.
Deutsche Bank National Trust Company, etc.,
Appellee.
An Appeal from non-final orders from the Circuit Court for Miami-Dade
County, Reemberto Diaz, Judge.
Elizabeth Maya, in proper person.
Lapin & Leichtling, LLP, and Jan Timothy Williams (Jacksonville) and
Adam B. Leichtling, for appellee.
Before LOGUE, LINDSEY, and GORDO, JJ.
PER CURIAM.
Appellant Elizabeth Maya appeals two orders denying her objection to
a foreclosure sale. The property at issue was the subject of two prior
appeals to this Court. See Maya v. Deutsche Bank Nat’l Tr. Co., 309 So. 3d
256 (Fla. 3d DCA 2020); Maya v. Deutsche Bank Nat’l Tr. Co., 264 So. 3d
1076 (Fla. 3d DCA 2019).
Upon our review of the record, we find Appellant has failed to meet her
burden to overcome the presumption of correctness of the trial court’s
order. See Zarate v. Deutsche Bank Nat. Tr. Co. as Tr., 81 So. 3d 556, 557
(Fla. 3d DCA 2012) (“An appellant has the burden to present a record that
will overcome the presumption of the correctness of the trial court's
findings.”); Applegate v. Barnett Bank of Tallahassee, 377 So. 2d 1150, 1152
(Fla. 1979) (affirming where record of appellant inadequate to demonstrate
reversible error).
Affirmed.
2 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484181/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
Nos. 3D21-2015 & 3D21-2159
Lower Tribunal No. F18-8964
________________
Brenard Carr,
Appellant,
vs.
The State of Florida,
Appellee.
Appeals from the Circuit Court for Miami-Dade County, Michelle
Delancy, Judge.
Eugene F. Zenobi, Criminal Conflict and Civil Regional Counsel, Third
Region, and Kristen Kawass, Assistant Regional Counsel, for appellant.
Ashley Moody, Attorney General, and Katryna Santa Cruz, Assistant
Attorney General, for appellee.
Before LOGUE, SCALES, and HENDON, JJ.
PER CURIAM.
Affirmed. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484179/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D21-1801
Lower Tribunal No. 20-27319
________________
EcoVirux, LLC,
Appellant,
vs.
BioPledge, LLC, et al.,
Appellees.
An appeal from the Circuit Court for Miami-Dade County, Jose M.
Rodriguez, Judge.
Goodkind & Florio, P.A., Vanessa A. Rousso, and Brian K. Goodkind,
for appellant.
Akerman LLP, Alexandra M. Mora, Alejandro J. Paz, Davis Law Firm,
and Bryan T. Davis (Whitefish, MT), for appellees.
Before LOGUE, LINDSEY, and MILLER, JJ.
MILLER, J.
Appellant, EcoVirux, LLC, challenges a final order dismissing its
lawsuit against appellees, Alex Baranga, Christina Baranga, and BioPledge,
LLC, with prejudice. The primary issue on appeal presents a purely legal
issue of contract construction, namely, whether the forum selection clause
contained within the parties’ distribution agreement is mandatory such that
any action arising under the contract may be maintained only in the state or
federal courts of Denton County, Texas. Finding that the clause is
unambiguously exclusive and there is a clear nexus between the claims
alleged and the agreement, we affirm in all respects, save the “with
prejudice” nature of the dismissal.
BACKGROUND
The genesis of this dispute lies in the unprecedented demand for
disinfecting products that arose in the infancy of the COVID-19 pandemic.
The Barangas owned BioPledge, a Texas limited liability company.
BioPledge marketed and distributed a commercial disinfectant spray known
as BioPledge AntiMicrobial Protection+. EcoVirux sought distribution rights,
and the Barangas and BioPledge drafted a proposed distribution agreement
containing a forum selection clause. Before executing the agreement,
EcoVirux modified two words in the forum selection clause. The clause, in
its final form, reflected the following:
2
This Agreement shall be governed by and interpreted in
accordance with the laws of Texas. The exclusive venues for
any dispute(s) arising under this Agreement (including but not
limited to breach, validity, and enforceability of the Agreement)
shall may be brought in the state and federal courts for Denton
County, Texas. The parties’ consent to the personal jurisdiction
of and venue in such courts for all of such cases and
controversies, which include any action at law or in equity.
Within months of signing the distribution agreement, EcoVirux filed suit
against BioPledge and the Barangas in the circuit court of Miami-Dade
County. In the operative complaint, EcoVirux alleged counts for fraud,
conspiracy to commit fraud, negligent misrepresentation, breach of contract,
and violation of section 501.201 et seq., Florida Statutes (2020), known as
the “Florida Deceptive and Unfair Trade Practices Act.” The claims all
centered around common allegations that BioPledge and the Barangas
misrepresented their ownership of the distribution rights and effectiveness of
the product. The distribution agreement was appended to the complaint.
Invoking the forum selection clause, the Barangas and BioPledge filed
a joint motion to dismiss for improper venue pursuant to Florida Rule of Civil
Procedure 1.140(b)(3). EcoVirux opposed the motion, contending the forum
selection clause was permissive rather than mandatory, or, at a minimum,
ambiguous, and, alternatively, dismissal should be without prejudice. After
convening a hearing, the trial court dismissed the complaint with prejudice.
Rehearing proved unsuccessful, and the instant appeal ensued.
3
STANDARD OF REVIEW
In construing a forum selection clause, we apply a de novo standard
of review. Antoniazzi v. Wardak, 259 So. 3d 206, 209 (Fla. 3d DCA 2018).
Similarly, “[t]he existence of ambiguity in a contract term is . . . a question of
law reviewed de novo.” Gold Crown Resort Mktg. Inc. v. Phillpotts, 272 So.
3d 789, 792 (Fla. 5th DCA 2019).
ANALYSIS
“[I]t is settled . . . that parties to a contract may agree in advance to
submit to the jurisdiction of a given court . . . .” Nat’l Equip. Rental, Ltd. v.
Szukhent, 375 U.S. 311, 315–16 (1964). Forum selection clauses serve the
laudatory purpose “of dispelling any confusion about where suits arising from
the contract must be brought and defended, sparing litigants the time and
expense of pretrial motions to determine the correct forum and conserving
judicial resources that otherwise would be devoted to deciding those
motions.” Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 594 (1991).
Placing a high premium on freedom of contract, the courts of this state
enforce such clauses absent a showing that enforcement would be unjust or
unreasonable. See Manrique v. Fabbri, 493 So. 2d 437, 440 (Fla. 1986);
Am. Safety Cas. Ins. Co. v. Mijares Holding Co., 76 So. 3d 1089, 1092 (Fla.
3d DCA 2011).
4
There is a critical distinction between mandatory and permissive forum
selection clauses. “Permissive clauses constitute nothing more than a
consent to jurisdiction and venue in the named forum and do not exclude
jurisdiction or venue in any other forum.” Garcia Granados Quinones v.
Swiss Bank Corp. (Overseas), S.A., 509 So. 2d 273, 274–75 (Fla. 1987). In
contrast, mandatory forum selection clauses provide “for a mandatory and
exclusive place for future litigation.” Id. at 274.
Absent a latent ambiguity—as distinct from a patent ambiguity—the
determination as to whether a clause is mandatory or permissive is a matter
of pure contractual interpretation. 1 See Gold Crown Resort, 272 So. 3d at
792–93. Clauses containing language of exclusivity are construed as
mandatory. See Sonus-USA, Inc. v. Thomas W. Lyons, Inc., 966 So. 2d
1
“Patent ambiguities are on the face of the document, while latent
ambiguities do not become clear until extrinsic evidence is introduced and
requires parties to interpret the language in two or more possible ways.”
Prime Homes, Inc. v. Pine Lake, LLC, 84 So. 3d 1147, 1151–52 (Fla. 4th
DCA 2012); see also Francis Bacon, Maxims of Law Regula XXV, in 4 The
Works of Francis Bacon 79 (J. Johnson 1803) (“There be two sorts of
ambiguities of words, the one is ambiguitas patens, and the other latens.
Patens is that which appears to be ambiguous upon the deed or instrument:
latens is that which seemeth certain and without ambiguity, for anything that
appeareth upon the deed or instrument; but there is some collateral matter
out of the deed that breedeth the ambiguity.”). “Parol evidence is admissible
to resolve a contract’s ambiguity only where that ambiguity is latent.” Napoli
v. Bureau of State Emp.’s W/C Claims/ The Div. of Risk Mgmt., 260 So. 3d
449, 450 (Fla. 1st DCA 2018).
5
992, 993 (Fla. 5th DCA 2007); Antoniazzi, 259 So. 3d at 209. No “magic
words” are required, but the language employed must evince the parties’
clear intent to limit venue. See Celistics, LLC v. Gonzalez, 22 So. 3d 824,
826 (Fla. 3d DCA 2009). In the absence of such language, a clause is
deemed permissive. Sonus-USA, 966 So. 2d at 993.
Against these principles, we examine the case at hand. Here, the
forum selection clause provides: “[t]he exclusive venues for any dispute(s)
. . . may be brought in the state and federal courts for Denton County,
Texas.” Courts have consistently construed clauses containing the word
“exclusive” and its variants as mandatory. See Weisser v. PNC Bank, N.A.,
967 So. 2d 327, 331 (Fla. 3d DCA 2007); Gold Crown Resort, 272 So. 3d at
793; H. Gregory 1, Inc. v. Cook, 222 So. 3d 610, 611 (Fla. 4th DCA 2017);
Antoniazzi, 259 So. 3d at 209–10. Notwithstanding this line of authority,
EcoVirux seizes on the word “may” for the proposition the clause is
permissive or, at a minimum, ambiguous.
Divorced from its contractual context, the phrase “may be brought”
could indeed be interpreted as permissive. It is well-settled, however, that
words and phrases in a contract cannot be considered in isolation. See
Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal
Texts 174 (2012) (footnote omitted) (“If possible, every word and every
6
provision is to be given effect (verba cum effectu sunt accipienda).”). None
should be ignored, and any “apparent inconsistencies” must be “reconciled
if possible.” Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369
So. 2d 938, 941 (Fla. 1979); see also Restatement (Second) of Contracts §
202(2) (1981) (“A writing is interpreted as a whole, and all writings that are
part of the same transaction are interpreted together.”).
In the instant case, the contract clearly provides that the parties
selected the state and federal courts of Denton County, Texas, to litigate any
disputes. In designating these courts as the exclusive fora, the parties
necessarily eschewed all other venues.
The phrase “may be brought” does not detract from this expressed
intention. Instead, the clause simply states the obvious. No aggrieved party
is compelled to file suit to resolve a given dispute. If the party elects to do
so, however, suit is proper only in either the state or federal courts of Denton
County, Texas. See Copacabana Recs., Inc. v. WEA Latina, Inc., 791 So.
2d 1179, 1180 (Fla. 3d DCA 2001) (holding forum selection clause
mandatory despite “seemingly contradictory language” where clause
contained words of exclusivity and permissive language); Agile Assurance
Grp., Ltd. v. Palmer, 147 So. 3d 1017, 1017–18 (Fla. 2d DCA 2014) (finding
forum selection clause mandatory where it provided any action “may be
7
instituted exclusively” in the Philippines); Coffee Bean Trading-Roasting,
LLC v. Coffee Holding, Inc., 510 F. Supp. 2d 1075, 1077 (S.D. Fla. 2007)
(holding forum selection clause mandatory when it stated in pertinent part:
“the parties hereto hereby . . . agree that exclusive venue of any such action
or proceeding may be laid in the State of Delaware”); Golf Scoring Sys.
Unlimited, Inc. v. Remedio, 877 So. 2d 827, 828–29 (Fla. 4th DCA 2004)
(concluding forum selection clause mandatory where it stated “[t]he parties
hereto consent to Broward County, Florida, as the proper venue for all
actions that may be brought pursuant hereto”).
Drawing on the parties’ pre-contract negotiations, EcoVirux
alternatively contends that parol evidence would establish the clause was
intended to be permissive. It is axiomatic that “extrinsic evidence . . . should
not be used to introduce [a contractual] ambiguity where none exists.”
Interwest Const. v. Brown, 29 F.3d 611, 615 (Fed. Cir. 1994). In this vein,
the parol evidence rule excludes evidence of prior negotiations to change or
modify the terms of a binding integrated contract, and differing interpretations
of the same words in a contract will not give rise to an ambiguity. See
Restatement (Second) of Contracts § 213 cmt. a–b (1981); see also Garcia
Granados Quinones, 509 So. 2d at 275; McLane Foodservice, Inc. v. Table
Rock Rests., L.L.C., 736 F.3d 375, 378 (5th Cir. 2013); Parisi v. Parisi, 107
8
A.3d 920, 929 (Conn. 2015); Gulf Metals Indus., Inc. v. Chicago Ins. Co.,
993 S.W.2d 800, 806 (Tex. App. 1999). To allow otherwise would be to
“cast[] a long shadow of uncertainty over all transactions.” Trident Ctr. v.
Conn. Gen. Life Ins. Co., 847 F.2d 564, 569 (9th Cir. 1988).2 Thus, because
the clause is clear and unambiguous, the trial court properly rejected parol
evidence to defeat the parties’ expressed intent.
Finally, the claims alleged in the complaint all trace their origins to the
distribution agreement. Without the contract, there would be no basis for the
lawsuit. Hence, there is a clear nexus between the agreement and the
allegations, and resolution of the dispute requires reference to the
agreement itself. See Jackson v. Shakespeare Found., Inc., 108 So. 3d 587,
593 (Fla. 2013); Stewart Org., Inc. v. Ricoh Corp., 810 F.2d 1066, 1070 (11th
Cir. 1987); World Vacation Travel, S.A., de C.V. v. Brooker, 799 So. 2d 410,
412–13 (Fla. 3d DCA 2001); SAI Ins. Agency, Inc. v. Applied Sys., Inc., 858
So. 2d 401, 404 (Fla. 1st DCA 2003). Because the claims stem directly from
the contract and the commercial relationship of the parties relates to the
agreement itself, the non-signatories to the agreement, the Barangas, are
2
This argument further fails to account for the adage “ambiguities and
inconsistencies in a contract are to be interpreted against the draftsman.”
Pomona Park Bar, 369 So. 2d at 942. Here, EcoVirux implemented the
contractual modifications.
9
equally entitled to enforce the forum selection provision. See Antoniazzi,
259 So. 3d at 210 n.4; W. Bay Plaza Condo. Ass’n, Inc. v. Sika Corp., 338
So. 3d 32, 34–35 (Fla. 3d DCA 2022).
Accordingly, we affirm in all respects except insofar as the trial court
dismissed the case “prejudice.” See Carr v. Stetson, 741 So. 2d 567, 569
(Fla. 4th DCA 1999) (“[D]ismissal for improper venue is not a decision on the
merits.”); Chase v. Jowdy Indus., Inc., 913 So. 2d 1173, 1175 (Fla. 4th DCA
2005) (same). Upon remand, EcoVirux is entitled to raise any further claims
that are not encompassed within the ambit of the forum selection clause and
prosecute its current causes of action in Denton County, Texas.
Affirmed in part, reversed in part, and remanded for further
proceedings.
10 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484182/ | DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
T.T., a child,
Appellant,
v.
STATE OF FLORIDA,
Appellee.
No. 4D22-909
[November 16, 2022]
Appeal from the Circuit Court for the Nineteenth Judicial Circuit, St.
Lucie County; Michael J. Linn, Judge; L.T. Case Nos. 562021CJ000043A
and 562022CJ000162A.
Carey Haughwout, Public Defender, and Erika Follmer, Assistant
Public Defender, West Palm Beach, for appellant.
Ashley Moody, Attorney General, Tallahassee, and Rachael Kaiman,
Assistant Attorney General, West Palm Beach, for appellee.
PER CURIAM.
A juvenile appeals disposition orders withholding adjudication of
delinquency and placing him on probation in two cases. Counsel has filed
an Anders brief. 1 We have reviewed the case for error and found none.
We affirm but remand the case for the trial court to strike the teen court
cost assessment. See F.F. v. State, 218 So. 3d 455, 456 (Fla. 4th DCA
2017) (the juvenile must have been adjudicated delinquent for teen court
costs to be assessed). The trial court should also correct the scrivener’s
error on the disposition order in case 2022-CJ-162A to reflect that the
petition was filed on March 29, 2022.
Affirmed and Remanded.
MAY, GERBER and CONNER, JJ., concur.
1 Anders v. California, 386 U.S. 738 (1967).
* * *
Not final until disposition of timely filed motion for rehearing.
2 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484183/ | DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
MANWANI HOLDING COMPANY, LLC,
Appellant,
v.
FEDERAL HOME LOAN MORTGAGE CORPORATION,
Appellee.
No. 4D22-498
[November 16, 2022]
Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Andrea Gundersen, Judge; L.T. Case No. CACE21-
015992.
Raymond Carrero of Raymond Carrero, P.A., Pinecrest, for appellant.
Allison Morat of Bitman O’Brien & Morat, PLLC, Lake Mary, for
appellee.
PER CURIAM.
Affirmed. See Tr. No. 602W0 Dated 7/16/15, Dema Invs., LLC v. Wells
Fargo Bank, N.A., 207 So. 3d 977, 978 (Fla. 5th DCA 2016) (“The law is
well settled that a purchaser pendente lite is not entitled to intervene or
otherwise be made a party to the ongoing lawsuit.”) (citations omitted).
MAY, GERBER and ARTAU, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492051/ | *596MEMORANDUM OPINION ON COMPLAINT FOR TURNOVER OF AUTOMOBILE
BENJAMIN COHEN, Bankruptcy Judge.
This matter came before the Court on a Complaint filed by the Plaintiff on November 22, 1994. After notice, a trial was held on January 9, 1995. David Tucker, the Debtor, Debra Bennett Winston, the attorney for the Debtor, Shea Maze, President of the Defendant, and Harold Ackerman, the attorney for the Defendant, appeared. The matter was submitted to the Court on arguments of counsel, the testimony of the Debtor, his son, David Tucker, Jr., James Stidham, a representative of the Defendant, and Ms. Maze, and on documentary evidence submitted by the parties.
Contentions
The Debtor contends that the Defendant wrongfully sold the title to the automobile his son pledged as security for the loan. The Defendant contends that it was entitled to sell the title and the automobile pursuant to the Alabama Pawnshop Act, Ala.Code 1975, § 5-19A-1 through § 5-19A-20. The Debt- or’s son pledged a car to the Defendant in exchange for a loan. The son gave the Defendant the title to the car as evidence of the car. When the son defaulted on the loan, the Defendant sold the ear title to a third party who retrieved the car from the son’s possession.
Findings of Fact
The events spawning this matter were complicated by, and strongly influenced by, the fact that both the Debtor and the Debt- or’s son are named David Tucker. The Debtor is David Tucker, Sr. His son is David Tucker, Jr. The automobile subject to the complaint is titled in the generic name of David Tucker. The Debtor maintains that he was the owner of the automobile. The Debtor’s son, not the Debtor, pledged the automobile as security for a loan.
The automobile is a 1984 Nissan 300 ZX automobile which the Debtor purchased from Budget Auto Sales approximately three years ago. Although he purchased the car for his use, the Debtor allowed his son to use the car. After about two and one half years, the Debtor completed payment of the car and received title. The certificate of title lists the owner as David Tucker. The Debtor purchased a second car about two years ago. After that purchase he allowed his son full-time access to the Nissan.
On August 27, 1993 the Debtor’s son pledged the car to the Defendant. Both the Debtor and his son testified that the Debtor gave his son permission to pledge the car for a loan.1 Both also testified that the Debtor did not know that his son had taken the car title from his father’s house and that the Debtor did not know that the pledge had been made.
When the pledge was made, the Debtor’s son told the Defendant that he was David Tucker, Jr., but did not tell the Defendant that he was not the David Tucker listed on the certificate of title. The Defendant created an account in the name of David Tucker, Jr. Defendant’s exhibit #2, a copy of the Defendant’s record of the pledge, shows the date pledged as August 27, 1993, an account in the name of David Tucker, Jr., the amount advanced as $580.00, the amount due as $696.00, and the due date as November 27, 1993. A renewal date of November 3,1993 is shown but no ending date is given. The exhibit, signed by the Debtor’s son includes the phrase, “the pledgor has the right to sell or pawn these items.”
The Debtor filed his bankruptcy petition on January 24, 1994, some five months after the pledge was made. He did not of course address the pledge in his bankruptcy petition because he did not know that the pledge had been made.
The president of the Defendant testified that the last payment made on the account was a check dated January 24,1994, and that efforts were made to collect the balance of the debt. The Debtor’s son failed to abide by the pledge agreement and defaulted on the loan. Because the ear title was not *597redeemed within 30 days following the originally fixed maturity date, pursuant to § 5-19A-6, Code of Ala.1975, title to the car passed to the defendant. On November 16, 1994, the Defendant sold the ear title to a third party who, on November 17, 1994, picked up the Debtor’s car. The adversary proceeding before this Court was filed on November 22, 1994.
The facts demonstrate that the Defendant had no knowledge of the Debtor’s bankruptcy filing. After the car was repossessed, calls were made to the Defendant advising that a bankruptcy had been filed, but those calls were made after the Defendant had sold the title to the automobile and after the third party had picked up the car. The parties disagree about the content of these conversations and disagree about what promises and agreements were made at that time; however, the Court does not consider those facts pertinent to the decision in this ease.
Issues
The general issue in cases involving the pawning of ear titles, especially where the pawnshop completes the transaction of selling the ear title during the bankruptcy, is whether the car, the car title, or both are property of the bankruptcy estate. This question of course invokes many other issues; however, the facts of this case distinguish it from all others that this Court has reviewed, and this Court finds that there is no need to consider the issues considered by those other courts.2 The equitable issue here is whether the Court should require the return of the Debtor’s automobile, or require an equivalent payment, where the Defendant, in arms length transactions, “purchased” that automobile’s title from the Debtor’s son and sold it to a third party, while the Defendant had no knowledge of the Debtor’s bankruptcy or the Debtor’s claimed ownership of the automobile or title. The dispositive legal issue is whether the automobile title, or the automobile, is property of this estate.
Conclusions of Law
Although the Debtor retained legal title to his automobile before his son pledged it to the Defendant, the Debtor not only gave the car to his son for his son’s sole use, but also gave his son the permission to pledge the car for a loan. The Defendant did not drive the pledged car. The Debtor’s son exercised both physical and legal control over the car in his daily activities and his pledging of the car for a loan. He did not tell the Defendant that his father “owned” the car or that he was pledging the car by permission only. Whether these actions could be characterized as a gift of the car to his son, or some other transfer of ownership, this Court is not willing to penalize the Defendant and its third party purchaser because the Debtor and his son did not communicate their intentions. Pledging a car title to a pawnbroker is a serious matter with legal consequences. Maybe neither the Debtor nor his son considered those consequences when they agreed that the ear could be pledged.3
The Defendant did not have knowledge of the Debtor’s bankruptcy. The Debtor’s son’s actions represented to the Defendant that the son owned the ear. The Defendant never had contact with the Debtor and the only account the Defendant created in connection with this automobile was in the name of David Tucker, Jr.
The actions of the Debtor and his son convince this Court that both of them considered the Debtor’s son as the owner of the automobile and consequently, the automobile could not be considered an asset of this estate. The title to the car, in turn, also *598could not be considered an asset of this estate. Section 541(d) of the Bankruptcy Code reads:
Property in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest, such as a mortgage secured by real property, or an interest in such a mortgage, sold by the debtor but as to which the debtor retains legal title to service or supervise the servicing of such mortgage or interest, becomes property of the estate under subsection (a)(1) or (2) of this section only to the extent of the debtor’s legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold.
In a case similar to the instant one, the Bankruptcy Court for the Northern District of Florida held that under section 541(d) where title to an automobile was transferred to the debtor for the benefit of the debtor’s daughter, and where the debtor held only bare legal title to the car, that the car was not property of the estate and that any other interest in the car was subject to the daughter’s beneficial interest. In re Smith, 73 B.R. 211 (Bankr.N.D.Fla.1986).4
Conclusion
This Court finds that pursuant to section 541(d) of the Bankruptcy Code, neither the Debtor’s car nor the car title are property of the estate and that the transfer of title to the car from the Debtor’s son to the Defendant and then to a third party purchaser were appropriate transfers under the Alabama Pawnshop Act, Ala.Code 1975, § 5-19A-1 through § 5-19A-20, and that the Debtor’s Complaint to Recover Money or Property is due to be denied.5
. Permitting the son to pledge the car satisfies § 5-19A-5(a), Code of Ala. 1975, which reads in part, "The pledgor or seller shall sign a statement verifying that the pledgor or seller is the rightful owner of the goods or is entitled to sell or pledge the goods....”
. In re Dunlap, 158 B.R. 724 (M.D.Tenn.1993) (whether a statutory pawn redemption period may be extended during a bankruptcy filing); see also, In re Jackson, 133 B.R. 541 (Bankr.W.D.Okl.1991); In re Odom, No. 93-07819 (Bankr.N.D.Ala.1994) (whether a violation of the automatic stay occurs where title passes to the pawnshop under state law but the pawnshop, with knowledge of the bankruptcy, retrieves a car from the debtor’s possession after the bankruptcy is filed); Evans v. Mid-City Jewelry, Inc., 22 B.R. 608 (D.Neb.1982) (whether a debtor retains sufficient legal or equitable interests in pawned goods to subject those goods to the automatic stay).
. The Supreme Court of Alabama held that car titles may be pledged to pawnbrokers for loans even where the pledgor retains physical possession of the automobile. Floyd v. Title Exchange and Fawn of Anniston, Inc., 620 So.2d 576 (Ala.1993).
. The Court of Appeals for the Eleventh Circuit has not ruled on the issue before this Court.
. Because the Debtor retained no equitable interest in either the car or the car title, creating an exclusion from the property of the estate pursuant to section 541(d), the Debtor's selling of the car title and the third party's taking of the car does not create a violation of the automatic stay. Whether such actions would be violations of the automatic stay had the Debtor retained full interest in the car is not an issue before this Court. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492052/ | MICHAEL J. KAPLAN, Chief Judge.
In this Chapter 7 ease, the trustee has objected to an administrative expense claim of the Internal Revenue Service (“I.R.S.”) of $31,613.01.
Debtor, Quid Me Broadcasting, Inc. (“Quid Me”), operated a radio station in Buffalo *717known as “WECK.” In 1989, prior to filing for bankruptcy, Quid Me sold the radio station and its assets. The terms of the sale included a $600,000 unsecured promissory note to be paid over to Quid Me.
Later in 1989, Quid Me filed a Chapter 7 bankruptcy petition. The Chapter 7 trustee timely filed a tax return for 1989, which showed a tax liability of $88,394, mostly due to capital gains on the sale of the radio station. Not having sufficient assets in the estate, and waiting to administer the entire estate at once, the trustee did not pay the taxes when he filed the return.
At some point a few years later, the payments from the purchaser to the Debtor on the promissory note stopped, and in 1994, the Court approved a cash settlement on the remaining balance of the note. The trustee then filed amended tax returns for the tax years 1989-92 to reflect the loss carrybacks. The amended returns showed, and the I.R.S. agreed, that there was no income tax due for 1989. The I.R.S., however, filed a claim for $31,613.01, representing a Chapter 7 administrative expense for interest on the $88,-394.00 tax liability for the 1989 tax year which they say should have been paid at the time that the return was filed.
ISSUE
Although the Chapter 7 trustee and the I.R.S. have argued and briefed a variety of issues, it is necessary to consider only one: whether a Chapter 7 trustee who is not an “operating” trustee according to 11 U.S.C. § 721 is obligated to pay to the I.R.S. administrative expense taxes when they are due,1 or whether such tax payments must (in the absence of a court order) await complete administration of the bankruptcy estate and subsequent distribution under 11 U.S.C. § 726 and Bankruptcy Rule 3009. The Court need not address the question of whether administrative expense interest accrues on administrative tax liabilities, because in this case the Internal Revenue Service agrees with the amended tax returns which conclude that there is no underlying administrative tax liability in light of subsequent events. Put simply, the issue is whether it is the bankruptcy estate or the I.R.S. that was entitled to the use of the $88,394 while the trustee was performing his duty to “collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest.”2
DISCUSSION
In the Court’s view, not only is there no requirement at law that a non-operating Chapter 7 trustee remit federal income tax payments when they would be due under applicable non-bankruptcy law, but in fact the governing statutes require that the trustee not do so unless an appropriate showing has been made to the Court to cause the Court to direct an “interim” distribution.
The practical consequences of the Internal Revenue Service’s position in this case are well argued by the trustee in his supplemental letter memo of March 27, 1995. He states:
For sake of discussion, let us assume that the United States attains its goal and the Court classifies the 1989 tax as a Section 503(b)(1)(B) expense of administration. At the time of the filing of the 1989 return (on or about March 15, 1990) the Bankruptcy Estate had slightly upwards of $30,000.00 in its coffers with a reported tax due of approximately three times that amount. Had the Trustee remitted to the Internal Revenue Service every dime on deposit on March 15, 1990, he would have left the Estate without any funds with a large tax deficiency still due and owing. More to the point, however, is the fact that additional expenses of administration entitled *718to the same distribution level as that of the Internal Revenue Service had accrued and would continue to accrue. Those expenses included accountant’s fees, attorney’s fees, Trustee’s commissions, litigation disbursements and the like for which the Estate would have had no ability to pay. Clearly, this is not what Congress intended under 11 U.S.C. Section 726(b) when it provided for pro rata distribution to all creditors holding claims of similar class.
... [T]he Trustee should not be placed into the position of being a prophet with the ability to determine what assets will flow into the Bankruptcy Estate at some point in the future. He is constrained by Statute to make pro rata distribution in the event there are insufficient assets to cover claims in full. He must be afforded the luxury of waiting until case closing and final distribution to make certain that there are sufficient funds to cover all expenses of administration and therefore there can be no duty to timely remit [tax payments] despite a duty to file [tax returns].
Trustee’s Supplemental Letter Memo at 4-5.
The trustee also explains that because all expenses accruing during the administrative period share the same priority, “ ‘the trustee acts negligently and at his own risk if he gives such taxes precedence over other administrative expenses, the same as if he paid his attorneys without considering his liabilities for other costs of administration, for instance, the wages of watchmen.’ ” Trustee’s Supplemental Letter Memo at 5 (quoting 3A James W. Moore & Robert S. Oglebay, Collier on Bankruptcy ¶ 62.14, at 1533 (James W. Moore & Lawrence P. King eds., 14th ed. 1975) (footnotes omitted)).
The practical problems, then, of obedience to the I.R.S.’s demands are evident.3 But the question still remains of whether any provision of law supports the position of one side or the other in the matter at bar.
The I.R.S. argues that a non-operating trustee has a statutory duty to pay taxes when due pursuant to 28 U.S.C. § 960 and 26 U.S.C. § 6012(b). As to 28 U.S.C. § 960, the I.R.S. recognizes that the trustee here was not authorized to operate the business of the Debtor under 11 U.S.C. § 721, but it cites cases recognizing that § 960 applies, at least in certain regards, to non-operating trustees whose activities or operations are of a taxable nature. The cases that the I.R.S. cites for that proposition, however, are cases that address the taxability of a non-operating trustee’s activities, not the question of when accrued taxes must be paid. For example, Ernst v. Iowa Dep’t Revenue (In re Hubs Repair Shop, Inc.), 28 B.R. 858 (Bankr.N.D.Iowa 1983), merely established that 28 U.S.C. § 960 did not render a non-operating trustee immune from the assessment of retail sales taxes on bankruptcy liquidation sales of the debtor’s tangible personal property; and In re I.J. Knight Realty Corp., 501 F.2d 62 (3rd Cir.1974), similarly concluded that § 960 did not limit liability for income tax to “operating trustees” alone.
The issues addressed in those cases have long since been laid to rest. It is clear that with certain enumerated statutory exceptions, the activities of a non-operating Chapter 7 trustee are taxable and that the bankruptcy estate may be a taxable entity. That is not the question in this case. The question is by what authority is a non-operating Chapter 7 trustee required to remit taxes when due, in the face of the practical problems noted by the trustee in his letter brief.
The I.R.S. answers that since 26 U.S.C. § 6012(b)(3) requires the trustee to file the return that the corporation would otherwise have to file under § 6012(a)(2), then 26 U.S.C. § 6151(a) requires the trustee to pay at the time of filing. That provision states that any person required to make a return “shall, without assessment or notice and demand from the Secretary, pay such tax to the internal revenue officer with whom *719the return is filed, and shall pay such tax at the time and place fixed for filing the re-turn_” That latter provision, however, does not specifically deal with trustees or fiduciaries and is inconsistent with provisions of the Bankruptcy Code that more specifically govern trustees’ duties and responsibilities.
It has been long understood that general provisions of tax law must fall to specific provisions of the bankruptcy laws. In the case of Cohen v. United States, 115 F.2d 505 (1st Cir.1940), the court considered § 64 of the Bankruptcy Act of 1898, insofar as it addressed the priority and allowance of tax claims. The contemporary equivalents would be 11 U.S.C. § 505 on determination of tax liability, § 507(a)(8) with regard to priority pre-petition tax claims, and § 503 and § 507(a)(1) with regard to administrative expense tax claims. In Cohen, the court stated that,
We cannot see any legitimate distinction between taxes assessed before or after bankruptcy where proof of claim must be filed in the bankruptcy proceedings. It is clearly the intention of Section 64, sub. a, that any controversy as to the amount or legality of any tax against a bankrupt should be promptly ascertained and determined before the first dividends are declared.
... Full and complete opportunity is given to the trustee to try the question of tax liability on its merits before the referee, and in light of the obvious intention of Congress through the Bankruptcy Act to protect fully the bankrupt’s interest while expediting the settlement of his estate, we do not believe that Congress intended to allow the trustee to disregard the opportunities given by the Bankruptcy Act and rely on the provisions allowing suit for refund applicable to ordinary taxpayers.
Cohen, 115 F.2d at 507 (citation omitted).
It is no different today. Even if the trustee had the means and inclination to have paid the $88,000 tax liability at the time he filed the tax return, he would have violated the Bankruptcy Code had he made the payment without approval of the Court. To the extent that 26 U.S.C. § 6151 might suggest the contrary, it must fall under the well-established principle that the terms of a more specific statute take precedence over those of a more general statute where both statutes speak to the same concern. See Busic v. United States, 446 U.S. 398, 406, 100 S.Ct. 1747, 1752-53, 64 L.Ed.2d 381 (1980); Preiser v. Rodriguez, 411 U.S. 475, 489-90, 93 S.Ct. 1827, 1836-37, 36 L.Ed.2d 439 (1973).
The more specific provisions of the Bankruptcy Code clearly must prevail. 11 U.S.C. § 503(a) states that, “An entity may timely file a request for payment of an administrative expense, or may tardily file such request if permitted by the court for cause.” Consequently, for the I.R.S. to suggest that a non-operating trustee must pay administrative expense taxes before there has been any request therefor is problematic.
Additionally, the Bankruptcy Code contemplates that the Court will “allow” administrative expenses after notice and hearing, and “any tax incurred by the estate” is specifically required to be so approved. 11 U.S.C. § 503(b)(l)(B)(i). This bespeaks no authority on the part of the trustee to pay administrative taxes until they have been allowed and approved by the Court. When a trustee is an “operating” trustee, on the other hand, § 363 of the Code permits the trustee to use the property of the estate in the ordinary course of business, and this, together with 28 U.S.C. § 960 would presumably permit the trustee to pay taxes in the ordinary course of business without further specific approval of the Court.
Even stronger language lies in 11 U.S.C. § 726(a), which dictates that property of the estate shall be distributed “first in payment of claims of the kind specified in, and in the order specified in section 507 of this title” where proof of the claim was timely filed under § 501 or tardily filed before the date on which the trustee commences distribution. This language refers to that portion of § 507 that states that first priority is given to “administrative expenses allowed under section 503(b).” 11 U.S.C. § 507(a)(1). This sub-section reinforces the requirement that administrative expenses must be allowed before they may be paid in a non-operating Chapter 7 case.
*720In the absence of express approval by the Bankruptcy Court of specific expenses, or general approval by the Court in the form of an order permitting operation of the Debtor or other similar blanket authority to pay expenses in the ordinary course of administration, there is no provision of the Bankruptcy Code or Rules that would permit, let alone require, the trustee to disburse funds of the estate as the I.R.S. demands.
CONCLUSION
The Court concludes that unless the I.R.S. or another party in interest seeks and obtains an order allowing the tax liabilities and directing an interim distribution, a non-operating Chapter 7 trustee has no duty to remit to the I.R.S. any payments for perceived administrative expense tax liabilities. Therefore, in this case in which it has now been determined that there is no underlying income tax liability to the I.R.S., and in which any administrative expense claimed by the I.R.S. for accrued interest could be based only on a duty to remit, and not on any underlying tax liability, the trustee’s objection to such administrative expense claim for interest must be sustained. In other words, there can be no claim for interest on what is ultimately determined to be a non-existent liability in a non-operating Chapter 7 case.
It is imperative to note that today’s holding does not constitute a declaration that administrative expense tax liabilities do not accrue interest while the estate is being administered. Unlike other categories of administrative expense, administrative taxes are the subject of a statute imposing interest. The case at bar is unique in that it has now been finally determined that there is no tax liability, and said statute can have no application. However, it is equally true that the Court does not today confirm that administrative expense tax liability is entitled to the accrual of interest. To the extent, if any, that that is in doubt, it must await a proper case.
SO ORDERED.
. It will be assumed for the sake of argument only that the taxes in question are Chapter 7 administrative expense taxes. The Court renders no decision on that question.
. 11 U.S.C. § 704(1). It should be noted that at the time that the trustee reported the $88,000 tax liability, he had only approximately $30,000 in assets. Consequently, even the formulation expressed above is not totally accurate since at the time in question, the trustee did not have $88,-000 for either the bankruptcy estate or the Internal Revenue Service to use.
. Even if it were possible for the I.R.S. to promptly disgorge any payments that it received in excess of its pro rata share of administrative expense payments, the trustee would still face the problem of having no assets at hand with which to pay ongoing administrative expenses that cannot be deferred such as filing fees, transcript fees, and the maintenance of insurance, utilities, and other obligations necessary to the preservation of property until its liquidation. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492053/ | OPINION AND ORDER
JOHN J. THOMAS, Bankruptcy Judge.
Before this court are the consolidated matters of a Motion for Relief from the Automatic Stay filed by Western Pocono Estates, Inc., the Objection to the Chapter 13 Plan of the Debtor by Western Pocono Estates, Inc., and the Complaint of the Debtor, Gregory B. Miskowski, for Declaratory Judgment.
On June 12, 1984, the Debtor and his non-debtor spouse, Agnes N. Miskowski, entered into an agreement with Western Pocono Estates, Inc., (‘Western”), for the sale of real estate wherein Western would sell a parcel of land located at Lot 1004 at Rossland Lake, Ross Township, Monroe County, Pennsylvania, for the sum of Ten Thousand Dollars ($10,000.00) payable within sixty (60) days. The seller agreed to finance the purchase with a loan of Nine Thousand Dollars ($9,000.00) over an eight (8) year term at an interest rate of 13.5%. The contract provided that time was “of the essence” (paragraph 12 of the agreement) and possession was to be delivered at the time of settlement (paragraph 10).
For reasons that are unclear, settlement never took place although the buyer went into possession. Despite the specific terms of the agreement, on or about August 1, 1984, the Debtor began a series of periodic payments to Western pursuant to an amortization schedule which provided that payments of One Hundred Fifty-Three and 80/100 Dollars ($153.80) per month would be made for a series of ninety-six (96) months.
The Debtor made irregular payments until March of 1992 when the delinquency was such that an action in ejectment was filed in state court by Western.
On November 18, 1993, Debtor and Western entered into a settlement stipulation whereby the Debtor would pay to Western the sum of Seven Thousand Dollars ($7,000.00) on or before December 10, 1993 or agree that the county court would enter an order of ejectment. The parties were represented by different counsel at that time.
The Debtor now maintains that this sales contract was, in effect, an installment sales contract which should be treated as a security interest under state law pursuant to Anderson Contracting Co. v. Daugherty, 274 Pa.Super. 13, 417 A.2d 1227 (1979).
If this is treated as a security interest, then the Debtor, in a manner of a mortgagor, *7would be entitled to repay the “arrearage” over the life of the Chapter 13 plan.
On the other hand, if the contract in question was executory in nature, the Debtor would be obligated to assume or reject that contract before confirmation [11 U.S.C. § 365(d)(2) ] and, if assumed, cure all defaults within a reasonable period of time. Contrary to the arguments of the Debtor, the definition of executory contracts is a matter of federal law. In re Terrell, 892 F.2d 469 (6th Cir.1989); Cameron v. Pfaff Plumbing and Heating, Inc., 966 F.2d 414 (8th Cir.1992); In re Cochise College Park, Inc., 703 F.2d 1339 (9th Cir.1983); In re Streets & Beard Farm Partnership, 882 F.2d 233 (7th Cir.1989).
The definition espoused by Professor Vem Countryman in his well-known treatise on executory contracts has been accepted by the Supreme Court and our circuit. N.L.R.B. v. Bildisco and Bildisco, 465 U.S. 513, 522-26, 104 S.Ct. 1188, 1194 n. 6, 79 L.Ed.2d 482 (1984) and Sharon Steel Corp. v. National Fuel Gas Distribution Corp., 872 F.2d 36, 39 (3rd Cir.1989). That treatise defines execu-tory contracts as “... a contract under which the obligation of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would constitute a material breach excusing the performance of the other.” Professor Yern Countryman, Execu-tory Contracts in Bankruptcy: Part I, 57 Minn.L.Rev. 439, 460 (1973).
The contract in question bears little resemblance to the current relationship of the parties. The legal owner of the property is Western Pocono Estates, Inc.. The Debtor is in possession and apparently has constructed a dwelling of sorts and has leased that property out to others. The local sewage enforcement officer is currently pursuing the owner, Western, with regard to violations on the property. The property taxes have been paid by Western even though the Debt- or has offered to address same in his Chapter 13 plan. The court concludes that the initial agreement for sale of real estate dated June 12, 1984 has been modified into an installment sales contract with a stipulated arrearage of Seven Thousand Dollars ($7,000.00) payable on or before December 10, 1993. Because that sum of money was not paid on or before December 10,1993, the contract was effectively terminated by agreement since the parties had stipulated that “an order of ejectment” would be entered in lieu of trial.
The Chapter 13 bankruptcy filed on December 17,1993 cannot resurrect a terminated installment sales contract. In re Internet Realty Partnership, 26 B.R. 383 (Bankr. E.D.Pa.1983).
Although Pennsylvania law abhors forfeitures (In re C & C TV & Appliance, Inc., 97 B.R. 782 (Bankr.E.D.Pa.1989), it does recognize the validity of a seller declaring a forfeiture if there is a failure to make the payments during a stipulated time. See Weaver v. Griffith, 210 Pa. 13, 59 A. 315 (1904). We have said so much in an earlier opinion. See In re Romberger, 150 B.R. 125 (Bankr.M.D.Pa.1992).
We are certainly aware of a multitude of cases which suggest that an installment sales contract is, in effect, a security interest and should therefore be treated as same rather than an executory contract with all of its onerous burdens such as an abbreviated time to cure and a possible loss of all accumulated
“equity”. Heartline Farms, Inc. v. Daly, 934 F.2d 985 (8th Cir.1991) affg. Heartline Farms, Inc. v. Daly, 128 B.R. 246 (D.Neb.1990). But see Cameron v. Pfaff Plumbing and Heating, supra at n. 1 which suggests that Heartline applied state law only because of an agreement between the parties. In re Booth, 19 B.R. 53 (Bankr.D.Utah 1982); In re Fox, 83 B.R. 290 (Bankr.E.D.Pa.1988) which lists at 296 various additional cases supporting this proposition; In re Paoeglio, No. 1-92-01171, slip op., 1995 WL 465339 (Bankr.M.D.Pa. May 21, 1993); and In re Gochenour, No. 1-91-00147, slip op. (Bankr.M.D.Pa. May 19, 1993).
Executory contracts, while not defined by the Bankruptcy Code, are clearly addressed in Section 365. Indeed, Professor Countryman suggests that, historically, the courts have had such little difficulty in fashioning a workable definition that reference in the statute was not of urgent necessity. Professor Yern Countryman, Executory Contracts in *8Bankruptcy: Part II, 58 Minn.L.Rev. 479, 563 (1974).
Even though Pennsylvania law may consider an installment sales contract as akin to a security interest, “... state courts’ characterization of the contract seems irrelevant.” Professor Yern Countryman, Executory Contracts in Bankruptcy: Part I, 57 Minn. L.Rev. 439, 466, n. 106 (1973).1
“Certainly, a contract under which the vendee still owes the material part of the purchase price and the vendor has not transferred title, and is not obligated to do so until that price is fully paid, is an execu-tory contract.” Professor Vern Countryman, Executory Contracts in Bankruptcy: Part I, 57 Minn.L.Rev. 439, 469 (1973).
To suggest that somehow this arrangement between the parties can be classified as a security interest would, in this court’s opinion, do violence to the clear interpretation of the statute.
A security interest is defined by the Bankruptcy Code as a “lien created by an agreement”. 11 U.S.C. § 101. Such security interest is plainly not present in the documents at issue.
“The plain meaning of legislation should be conclusive, except in the rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intention of its drafters.” U.S. v. Ron Pair Enterprises, Inc., 489 U.S. 235, [242] 109 S.Ct. 1026, 1031, 103 L.Ed.2d 290 (1989). [Citation omitted.]
It is for these reasons that the court issues the attached Order.
ORDER
The Motion of Western Pocono Estates, Inc. for Relief from the Automatic Stay is hereby granted.
The Objection of Western Pocono Estates, Inc. to the Debtor’s Chapter 13 Plan is hereby sustained.
The Complaint of the Debtor, Gregory B. MiskowsM, asking for a declaration that the agreement in question is equivalent to a security interest is disposed of by rejecting said conclusion and deeming the agreement terminated pre-petition.
. "What constitutes an ‘executory contract’ within the meaning of the Bankruptcy Act is no more to be determined by how the state characterized the contract for other purposes than is the meaning of ‘property’ in § 70(a)(5) to be determined by state characterizations for other purposes." Professor Vern Countryman, Executory Contracts in Bankruptcy: Part I, 57 Minn.L.Rev. 439, 456, n. 71 (1973). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492056/ | MEMORANDUM OPINION
LETITIA Z. CLARK, Bankruptcy Judge.
The court has considered the Verified Emergency Motion for Order Finding Probable Insufficiency of Funds to Pay Administrative Expenses, or to Authorize Sale of Wainoco Stock to Pay Estimated Quarterly Taxes of the Estate (Docket No. 135) filed by Debtor. The following are the Findings of Fact and Conclusions of Law of the court. To the extent any of the Findings of Fact may be considered Conclusions of Law, they are adopted as such. To the extent any of the Conclusions of Law may be considered Findings of Fact, they are adopted as such.
Findings of Fact
1. John B. Ashmun filed a voluntary petition under Chapter 11 of the Bankruptcy Code on May 23, 1994 (“Petition Date”). Ann B. Ashmun filed a voluntary petition under Chapter 11 of the Bankruptcy Code on September 26, 1994. The two cases were substantively consolidated by an order entered November 30, 1994 (Docket No. 115). Mr. and Mrs. Ashmun (“Debtors”) have continued as debtor in possession since their respective petition dates.
2. The Debtors’ principal assets on the Petition Date were 516,338 shares of stock of Wainoco Oil Corporation. Mr. Ashmun scheduled the value of those shares at $2,452,605.00.
3. The court takes judicial notice of the fact that stock of Wainoco Oil Corporation is publicly traded.
4. Agreed Orders were entered on September 15, 1994 permitting sale of certain shares between September 15, 1994 and November 15, 1994 as necessary to retire Debt- or’s secured debt to Bank One of Texas, N.A., and permitting the sale of 5,000 shares to satisfy the secured debt of Northern Trust Bank of Texas, N.A. (Docket Nos. 62, 63).
*195. Debtors report that sales of stock valued at approximately $520,000.00 have taken place, and that after crediting the sales price to the secured debts pursuant to the Agreed Orders, there remained a net yield transfer to the estate of $3,700.00.
6. Debtors have estimated their tax liability for their 1994 tax year, which Mr. Ash-mun testified ends April 30, 1995, to be approximately $120,000.00. Based on their estimate, Debtors estimate that they were required to make quarterly tax payments by the first quarter of 1995 of approximately $90,000.00. The court finds this estimate to be credible for the purpose of the instant motions. The court does not make any finding with respect to the amount of the tax actually due for 1995.
7. Debtors seek a determination that they face a probable insufficiency of funds to pay administrative expenses in order to obtain a waiver of the statutory penalties under the tax code for failing to make estimated payments. In the alternative, Debtors seek authority to sell more of the Wainoco Oil Corp. stock in order to pay their estimated quarterly taxes.
8. The sole issue presented is whether the value of the Wainoco Oil Corp. stock must be counted in determining whether there is a probable insufficiency of funds to pay administrative expenses.
Conclusions of Law
1. When the bankruptcy court finds a probable insufficiency of funds to pay administrative expenses, the Internal Revenue Service (“IRS”) is not entitled to collect penalties for a deficiency in tax payments. 26 U.S.C. § 6658(a)(1).
2. The Internal Revenue Code does not define “funds” for the purposes of Section 6658. Debtor suggests that the court limit its meaning to cash on hand. IRS asserts that “funds” is a broad term which is contemplated by the statute to include all assets available to creditors.
3. The purpose of Section 6658 is to preclude the imposition of the penalties when a court determines that the estate was unable to make the required payments at the time when they were due. In re DuPage Boiler Works, Inc., 98 B.R. 907 (Bankr.N.D.Ill.1989).
4. “Funds” is defined as “a generic term and all-embracing as compared with the term “money”, etc., which is specific. A sum of money or other liquid assets set apart for a specific purpose, or available for the payment of general debts, claims, or expenses.” Black’s Law Dictionary 673 (6th Ed.1990).
5. The court concludes that the term “funds” as applied to this case includes the Wainoco Oil Corporation stock. As a result, there is no probable insufficiency of funds to pay administrative expenses.
6. The court concludes that it is in the best business judgment of debtors in possession to sell additional Wainoco Oil Corporation stock to the extent necessary to pay quarterly estimated taxes.
Based on the foregoing, a separate Judgment will be entered authorizing Debtors to sell Wainoco Oil Corporation stock to the extent necessary to pay quarterly estimated taxes. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492057/ | MEMORANDUM OPINION
WILLIAM S. HOWARD, Bankruptcy Judge.
This matter is before the Court on the Motion for Summary Judgment filed by defendant Automotive Finance Corporation (“AFC”) and the Cross-Motion for Summary Judgment filed by the plaintiff. AFC filed its Motion on January 31,1995. The plaintiff filed a Response to AFC’s Motion on February 14, 1995, and AFC filed a Reply to the plaintiff’s Response on February 22, 1995. The plaintiff filed its Cross-Motion on March 6,1995, along with a Supplemental Memorandum in Opposition to Motion for Summary Judgment. This matter was submitted for decision by order of this Court entered on March 31, 1995.
This action originated in Boone Circuit Court with the filing of a Complaint styled “SCT Motor Cars, Inc. v. ADE of Lexington, Inc., d/b/a ADESA-Lexington and Kentucky Department of Motor Vehicles” on July 28, 1994. Responsive pleadings were filed in that action, and then on August 31, 1994, defendant ADE of Lexington, d/b/a ADESA-Lexington (“ADE”) removed the action to the United States District Court for the Eastern District of Kentucky at Covington.
Removal was based on the fact that the debtor herein was involved in the above-referenced action. ADE filed its Answer on September 13, 1994, and then moved for an Order of Reference on September 26, 1994. The U.S. District Court entered an Order of Reference on October 5, 1994, referring the matter to this Court. The parties have stated that this is a non-core proceeding, and they have consented to the entry of final orders or judgment by this Court.
ADE filed a Motion for Protective Order and a Motion to Dismiss on January 24,1995, alleging that it neither had nor claimed any interest in the vehicle or title documents which are the subject of the plaintiffs Complaint, and that the plaintiff had amended its Complaint to name AFC as a party defendant. (At that point, the plaintiff had not yet amended its Complaint.). AFC filed its Answer on January 26, 1995. This Court entered an Order Dismissing Complaint Against ADE of Lexington, Inc. on March 1, 1995. The plaintiff also filed its Amended Complaint on March 1, 1995.
The matter in controversy herein is the ownership of a certain vehicle, a 1992 Chevrolet Lumina purchased by the debtor through ADE. The parties have not filed a Stipulation of Fact, but seem to agree upon certain facts. ADE is in the business of running vehicle auctions in several states including Kentucky. Defendant AFC is a wholly owned subsidiary of ADE, and is in the business of financing used automobiles for automobile dealers under floor plan programs within its market area. The debtor applied for and was approved for financing with AFC in March 1992. It executed several documents including a promissory note and security agreement in this regard. AFC perfected its security interest by filing its *24Financing Statement with the Boone County Clerk’s office on April 6, 1992.
The debtor purchased the Lumina through ADE on April 14, 1994. The seller assigned the title to the Lumina to the debtor pursuant to KRS 186A.220. The debtor financed the purchase price with AFC under its note and security agreement, and AFC forwarded the purchase price for the Lumina to ADE for payment to the seller. Pursuant to the debtor’s Dealer Operating Agreement with AFC, physical possession of the title certificate was delivered to AFC. The debtor took possession of the Lumina and placed it for resale on its lot.
On April 17,1994, the plaintiff entered into a Purchase Agreement with the debtor to purchase the Lumina for $8,350.00. The plaintiff paid the purchase price, and then agreed to sell the vehicle to Tri-City Motors, Inc. (“Tri-City”). The certificate of title to the vehicle was not delivered to plaintiff or Tri-City. Tri-City then delivered possession of the Lumina to AFC which liquidated it. The record does not indicate the circumstances or the reason for Tri-City’s delivery of the Lumina to AFC. Tri-City did not pay the plaintiff for the Lumina.
The issue, as stated above, is the ownership of the subject vehicle. AFC contends in its Motion for Summary Judgment that the plaintiff cannot be the owner of the vehicle because it never obtained title from the debt- or because physical possession of the title remained with AFC and no assignment to plaintiff was made. AFC’s position is based on the requirements set forth in KRS Chapter 186A, and especially in KRS 186A.220. The plaintiff contends that despite the fact that it was never assigned a certificate of title it may still be considered the owner of the vehicle. The plaintiff argues that equitable considerations and provisions of the Uniform Commercial Code support its position.
AFC bases its argument to some extent on a line of Kentucky cases which deal with the question of the ownership of a vehicle in the context of liability insurance coverage. These cases include Cowles v. Rogers, 762 S.W.2d 414 (Ky.1988) and Potts v. Draper, 864 S.W.2d 896 (Ky.1993). The Court of Appeals in Cowles stated:
The initial issue we must address in this appeal is whether the legislature, by enacting KRS Chapter 186A, the automated motor vehicle registration and titling system, intended to prevent the absolute sale of an automobile from becoming legally effective until such time as the seller executes and delivers a certificate of title for the vehicle to the buyer.
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Given the specific and mandatory nature of the provisions of KRS 186A.215(1) governing the transfer of vehicle titles, we conclude that the previous decisions of our courts applying the general laws of sales to determine who owns a motor vehicle for purposes of insurance coverage are no longer viable.... We hold, therefore, that since the effective date of KRS 186A, the provisions of that statute, rather than the general law of sales, govern the issue of who owns a motor vehicle for purposes of insurance coverage.
At pp. 415, 416-417.
The Supreme Court in Potts cited Cowles in holding that the provisions of KRS Chapter 186A govern “ ‘... the issue of who owns a motor vehicle for the purposes of insurance coverage.’” The Court further stated that the case it was considering was “... not about a contract or sale or when such a transaction is complete, but rather it is about when title passes to buyer from seller for the purpose of liability insurance coverage.” Potts v. Draper, at p. 899. See also Guaranty National Insurance Co. v. Cain, 851 F.Supp. 265 (E.D.Ky.1994). These cases, as well as Rogers v. Wheeler, 864 S.W.2d 892 (Ky.1993), all address the insurance aspects of transfer of ownership and are not necessarily dispositive in this instance.
As regards KRS 186A.220, that subsection provides in part:
(1) Except as otherwise provided in this chapter, when any motor vehicle dealer licensed in this state buys or accepts such a vehicle in trade, which has been previously registered or titled for use in this or another state, and which he holds for resale, he shall not be required to obtain a certificate of title for it, but shall, within *25fifteen (15) days after acquiring such vehicle, notify the county clerk of the assignment of the motor vehicle to his dealership and pay the required transferor fee.
(2) Upon purchasing such a vehicle or accepting it in trade, the dealer shall obtain from his transferor, properly executed, all documents required by KRS 186A.215, to include the odometer disclosure statement thereon, together with a properly assigned certificate of title.
The plaintiff admittedly did not fulfill the requirements set out above. It argues however that this matter should be resolved pursuant to provisions of the Uniform Commercial Code (“UCC”) which, it says, control over the Certificate of Title Act.
Specifically, the plaintiff maintains that as a buyer in the ordinary course of business (“BOCB”), it is entitled to have its interest in the vehicle determined under Article 9 of the UCC, without regard to certificate of title considerations. KRS 355.9-307(1) provides in pertinent part:
A buyer in ordinary course of business, ... takes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence.
The plaintiff discusses at length its qualifications as a BOCB, as it is defined in KRS 355.1-201(9), including whether a merchant is eligible for such classification and which good faith standard must be applied. However, the plaintiff does not consider the basic question of whether it attained the status of buyer, or in the alternative, whether a sale had occurred.
In this regard, the question of whether transfer of title provisions govern the determination of whether a sale has occurred is considered at length in In re Superior Ground Support, Inc., 140 B.R. 878 (Bkrtcy.W.D.Mich.1992). There the court applied the Michigan Vehicle Code which contains definitions and requirements similar to those found in KRS Chapters 186 and 186A, to determine that
... transfer of ownership in a motor vehicle must be accomplished in compliance with the vehicle code. A sale does not take place and a buyer emerge until the
statutory duties have been performed. The vehicle code states clearly that the term ‘owner’ means, in relevant part, ‘a person holding legal title of a vehicle.’ ... This makes sense since no ownership rights are transferred by a void sale. (Cite omitted).
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... the protection afforded to a buyer in the ordinary course of business of motor vehicles does not result without compliance with the Michigan vehicle code’s provisions on the transfer of ownership.
At page 883.
This Court agrees with this interpretation and finds it applicable in this matter. Statutory duties concerning transfer of title were not performed, and therefore there was no sale completed by the debtor to the plaintiff. The automobile in question followed a tortuous route from one dealer to another, and the facts concerning some of the transfers are murky at best. However, two salient facts allow the Court to resolve this matter in AFC’s favor: title to the vehicle was never transferred to the plaintiff, and AFC had a perfected security interest in it. AFC was justified in liquidating the vehicle to satisfy its security interest.
The initial burden of the movant for Summary Judgment is to show that there is no basis in the record for findings of facts that might determine a result of the case in favor of the non-movant. Such a showing would satisfy the movant’s burden under Federal Rule of Civil Procedure 56(e) that there are no genuine issues as to any material fact. In re Calisoff, 92 B.R. 346 (Bkrtcy.N.D.Ill.1988), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, at 251, 106 S.Ct. 2505, at 2510, 91 L.Ed.2d 202, at 214.
The Court finds that the defendant Automotive Finance Corporation has satisfied its burden. The plaintiff, in its Response to Motion for Summary Judgment and its own Motion for Summary Judgment, does not set forth specific facts showing that there is a genuine issue for trial, as required by FRCP 56, in defense of the Motion for Summary Judgment. No genuine issue as to any mate*26rial fact having been presented, therefore, the defendant is entitled to judgment as a matter of law. An order in conformity with this opinion will be entered separately. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492289/ | *254
ORDER OVERRULING TRUSTEE’S OBJECTION TO DEBTOR’S CLAIM OF EXEMPTION
JOHN TeSELLE, Bankruptcy Judge.
On September 19, 1995, Debtor filed his voluntary petition for relief under Chapter 7 of the Bankruptcy Code. On October 5, 1995, Debtor filed the required Schedule C— Property Claimed as Exempt, in which he claimed as exempt his homestead property located in the Putnam Heights Addition to Oklahoma City. According to Debtor’s schedules, the homestead is valued at $65,-000, and is subject to two mortgages totaling $62,068.52.1
On December 14, 1995, Trustee timely objected to Debtor’s claimed homestead exemption, asserting the property exceeded % acre and was located within the city limits of Oklahoma City. Trustee thus sought a determination that the portion of Debtor’s homestead exceeding % acre was non-exempt. In response, Debtor conceded the property was approximately Hi acre, but argued that Oklahoma law allows exemption of up to one acre for homestead within the city limits if its value does not exceed $5,000.
On January 30, 1996, the Court conducted a hearing on this issue, during which Debtor, pro se,2 and counsel for Trustee presented arguments and authorities. At the conclusion of the hearing the Court took the matter under advisement. Having reviewed the applicable law and having considered the arguments of the parties, the Court rules as follows.
Applicable Law and Discussion
Debtor’s homestead occupies approximately Jé acre within the city limits of Oklahoma City. The Oklahoma homestead exemption statute provides for the exemption of Hi acre within a city or town, regardless of value.3 If the value of such homestead does not exceed $5,000, the exempt homestead can consist of up to one acre.4
The issue raised is whether the term “value”, as used in the statute, refers to the actual value of the homestead property, or only to Debtor’s equity in the property. While the Oklahoma Supreme Court has squarely addressed this issue, the question appears to be one of first instance in the bankruptcy courts in this state.
In Dallas Ceramic Co. v. Morgan, the only published opinion on this issue,5 the Oklahoma Supreme Court held that “the homesteader’s value, pursuant to 31 O.S. 1971, § 2, is his equitable interest in the premises, i.e., the fair market value less outstanding encumbrances.” 560 P.2d 197, 200 (Okla.1977).6 Applying the holding of Dallas *255Ceramic to this ease, where Debtor represents that the value of his homestead is $65,000,7 and represents that the encumbrances thereon total $62,068.52, the “value” of Debtor’s homestead is $2,931.48. As this amount does not exceed $5,000, it would appear that Debtor’s homestead property is exempt in its entirety, and Trustee’s objection should be overruled. However, the only evidence before the Court regarding the value of Debtor’s homestead and the principal balances on the two mortgages was contained in Debtor’s pleadings. At the hearing, Trustee requested additional time to investigate Debtor’s representations regarding value. The Court will grant Trustee twenty-one (21) days from the date of this Order in which to complete such investigation and seek reconsideration of this Order, should the investigation reveal credible evidence that the value of Debtor’s equity in his homestead exceeds $5,000.
Decision
Based upon the foregoing, Debtor’s homestead is exempt in its entirety, and Trustee’s objection thereto is overruled. Trustee is granted twenty-one days from the date of this Order in which to seek reconsideration of this ruling if, after investigation, Trustee desires the opportunity to present credible evidence that the value of Debtor’s equity in his homestead property exceeds $5,000.
IT IS SO ORDERED.
. The first mortgage, with a principal balance of $42,068.52, is held by PNC Mortgage Corporation, and the second mortgage, with a principal balance of $20,000 is held by William and Paula Rogalin.
. Though Debtor appeared pro se in this case, he is a licensed attorney in Oklahoma.
. Oklahoma law provides that:
A. Except as otherwise provided in this title and notwithstanding subsection B of this section, the following property shall be reserved to every person residing in the state, exempt from attachment or execution and every other species of forced sale for the payment of debts, except as herein provided: 1. The home of such person, provided that such home is the principal residence of such person....
Okla.Stat. tit. 31, § 1(A)(1).
. In addressing the homestead exemption more specifically, the statute provides that:
The homestead within any city or town, owned and occupied as a residence only, shall consist of not exceeding one (1) acre of land, to be selected by the owner: Provided, that the same shall not exceed in value the sum of Five Thousand Dollars ($5,000.00), and in no event shall the homestead be reduced to less than one-quarter (Hi) of an acre, without regard to value....
Okla.Stat. tit. 31, § 2.
. For an article discussing the Dallas Ceramic case, see Steven M. Dickey, Forcing the Defendant to Select his Exempt Urban Homestead During General Execution, 63 O.B.J. 905, 906 (March 28, 1992).
. This holding is consistent with “every modem decision ... in adopting] the view that the homestead amount is part of the homeowner’s equity and not part of the value subject to the mortgage.” See Mercier v. Partlow, 149 Vt. 523, 526, 546 A.2d 787, 789 (Vt.1988), and cases cited therein.
. Debtor supplied an appraisal dated June 6, 1989, stating the market value of his homestead was $60,000. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492290/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
JERRY A. FUNK, Bankruptcy Judge.
This proceeding is before the Court upon a Motion for Summary Judgment (Doc. No. 25) and supporting Memorandum of Law filed by Plaintiff and a Motion for Summary Judgment (Doc. No. 31) and Memorandum of Law in Opposition to Plaintiffs Motion for Summary Judgment and in Support of Defendants’ Motion for Summary Judgment (Doe. No. 30) filed by Defendants.
FINDINGS OF FACT
Defendant, Bethany B. Coleman, is the former spouse of the Debtor, Carl R. Coleman. A Final Judgment of Dissolution of Marriage was entered on July 9, 1990 and recorded in the Pubhc Records of Columbia County, Florida on July 9,1991 at Book 0748, Pages 0161 through 0169. Defendant, Paul Louis is an attorney who represented Defendant, Bethany B. Coleman in the dissolution proceeding. Among other marital issues, the Final Judgment of Dissolution of Marriage awarded attorney’s fees to Bethany Coleman. Paragraph VI of the Final Judgment of Dissolution of Marriage stated:
VI. Attorney’s Fees
The next issue to be decided is the husband’s liability for an amount of the wife’s attorney’s fees. The Court finds that the husband shall be responsible for a reasonable attorney’s fee for the wife’s attorney.
* H* ‡
However, based upon the ability of the husband to pay, and on the generalized formula set in Travieso v. Travieso, supra, the Court hereby orders the husband to pay to the wife’s attorney the sum of $40,-000.
This sum shall be paid in quarterly installments of $2,500 each, the first installment being due September 15,1990.
The Final Judgment of Dissolution of Marriage was the subject of a plenary appeal to the District Court of Appeal, Third District, *270and was affirmed on or about November 14, 1991.
The Debtor filed a petition in bankruptcy on November 22,1991. In a separate adversary proceeding, Paul A. Louis v. Carl R. Coleman, Adversary No. 92-204, the Court determined that all attorney’s fees assessed against the Debtor in the dissolution proceeding survived the bankruptcy discharge, pursuant to the provisions of 11 U.S.C. § 523(a)(5).
The Chapter 7 Trustee of the Debtor’s Bankruptcy Estate has now filed this adversary to determine the validity, extent or priority of an asserted lien against property of the estate. Defendants’ assert that the recorded Final Judgment of Dissolution of Marriage is a lien on real property of the Debtor in Columbia County, pursuant to Fla. Stat. § 55.10. The Trustee maintains that no such lien exists and that all of the Debtor’s interest in the real property is available to the estate, and that the Trustee is entitled to sell the property free of the asserted lien under 11 U.S.C. § 363(f)(4).
The sole issue presented for determination in both the Plaintiffs and Defendants’ Motions for Summary Judgment is whether the $40,000 attorney’s fee award is a judgment lien under Fla.Stat. § 55.10.
CONCLUSIONS OF LAW
Florida Statute, Section 55.10 is the general lien statute for the state of Florida. It provides:
(1) A judgment, order, or decree becomes a hen on real estate in any county when a certified copy of it is recorded in the official records or judgment hen record of the county, whichever is maintained at the time of recordation, and it shah be a hen for a period of 7 years from the date of the recording....
It is axiomatic that a judgment must be a “final” judgment for it to create a hen under a general hen statute. Execution is not permitted on judgments that do not determine with finality the rights and habihties of the parties. Shakarian v. Daum, 561 So.2d 1222, 1223 (Fla. 2d DCA 1990). An interlocutory or declaratory judgment would not be final in the sense needed to create a hen on real property. “A final judgment is one that determines the rights of the parties and disposes of the cause on its merits leaving nothing more to be done other than to enforce the judgment.” Donaldson Eng’g, Inc. v. Plantation, 326 So.2d 209, 210 (Fla. 4th DCA 1976). The fact that a document is entitled “Final Judgment” does not conclusively establish that it is, indeed, a final judgment. Chipola Nurseries, Inc. v. Division of Admin., State Dep’t of Transp., 335 So.2d 617, 618 (Fla. 1st DCA 1976). “An order is not final where a question remains open for judicial determination.” In re Walsh (Ewers v. Walsh), 123 B.R. 925, 928 (Bankr.M.D.Fla.1991) (Corcoran, J.).
Some courts in this circuit have decided that so-called “magic” words, such as “for which let execution issue” are not required to make a judgment final. Walsh, supra at 928 (holding that failure to include the “magic” language of standard form books is not fatal to a determination that an order is a final judgment.) DuBreuil v. Regnvall, 527 So.2d 249 (Fla. 3rd DCA 1988) (explaining that execution of a judgment should not depend on the judgment containing the “archaic”— but customary — words “for which let execution issue”). Chan v. Brunswick Corp., 388 So.2d 274 (Fla. 4th DCA 1980) (holding that words “for which let execution issue” are not essential to finality of judgment). Haines City v. Allen, 549 So.2d 678 (Fla. 2d DCA 1989) (stating that language is not essential to final judgment). Plaintiff and Defendants, in their Memorandums submitted to the Court, agree that “magic” words are not necessary to create a final judgment. Although not dispositive of the ease at bar, this Court would not so easily dismiss the importance of having the form language in an order, indicating to the reader that it is intended to be a final judgment. The Final Judgment of Dissolution of Marriage at issue in this case did not contain any language resembling the “for which let execution issue” which is customary, in the section awarding attorney’s fees to the Defendants. The Court will not determine the finality of the judgment at issue on this basis alone, but believes that it is noteworthy.
*271This main issue for determination can be distilled even further to, whether or not the Final Judgment of Dissolution of Marriage was a final judgment as to the attorney’s fees awarded in it, so that it could create a lien on real property, once recorded. Although there are a multitude of cases regarding the determination of final judgments, it appears to be a novel question of law in this state and circuit, as to whether a final judgment of dissolution is a final judgment as to the attorney’s fees awarded therein. In Snoddy v. NCNB Nat’l Bank, 575 So.2d 231 (Fla. 4th DCA 1991), the Court held that an order awarding attorney’s fees did not create a judgment lien, because the order was a non-reeordable instrument. However, in its one paragraph opinion, the Court did not explain why it was a nonrecordable instrument, merely citing Fla.Stat. §§ 55.10 and 28.291. Therefore, this case provided little guidance for the issue at hand.
Other courts across the country have dealt with judgment liens created by final judgments of dissolution. In Dunn v. Thompson, 174 Ill.App.3d 944, 124 Ill.Dec. 477, 529 N.E.2d 297 (1988), the court held that a final judgment of dissolution did not create a judgment lien for purposes of a lump sum property settlement awarded in it. The wife had been awarded $30,000 as a property settlement upon dissolution of her marriage. When her former husband did not fulfill his obligation, she attempted to foreclose upon real property owned by her former husband, on the basis that a judgment lien had been created under the Illinois general lien statute, when the final judgment of dissolution was recorded. The court stated that there are two qualifications a judgment must possess in order to create a lien: (1) it must be final, valid, and for a definite amount of money; and (2) it must be such a judgment that execution may issue thereon. The court held that the dissolution order could not be classified as a judgment for purposes of the judgment lien provisions, stating that “without a judgment specifically evidencing a monetary obligation, there is no judgment for purposes of the judgment lien statute.” Id. at 479, 529 N.E.2d at 299. The court noted that the finality of the dissolution judgment was questionable, as it had already been modified once to extend the payment deadline for the property settlement. Additionally, the dissolution judgment itself made no mention of the creation of a lien.
A similar issue was also addressed in Bryan v. Nelson, 180 Ariz. 366, 884 P.2d 252 (1994), in which the court held that a decree of dissolution did not create a lien under the Arizona general lien statute. The former husband had been awarded the marital home, and the former wife was awarded the sum of $20,000 from the proceeds of the sale of the home. When the former husband defaulted on the mortgage, the bank moved to foreclose. The former wife of the defendant brought a declaratory action to establish that her dissolution decree made her holder of a first lien against the home. The court held that “absent specific language creating an equitable lien, a divorce decree that orders the payment of money at some future time is not conclusive enough to support a general lien under [the Arizona general lien statute.]” Id. at 255. The court reiterated that “divorce decrees ordering future payments ... do not qualify as final, conclusive judgments for purposes of creating a judgment lien.” Id.
Additionally, in Uhrich v. Uhrich, 173 Ind. App. 133, 362 N.E.2d 1163 (1977), the court refused to find that a divorce judgment created a judgment lien for unpaid alimony. The former wife sought to have the unpaid balance of alimony declared a lien on her former husband’s real estate. The court stated that while the alimony judgment was for a gross sum, it was not then due and payable and subject to execution, because it was to be paid in monthly payments. Therefore, it did not create a judgment lien under the general lien statute of Indiana.
Although all of these cases dealt with judgment liens in the realm of support payments, and not the awarding of attorney’s fees in divorce, the Court feels that these cases are analogous to the case at bar. A Final Judgment of Dissolution of Marriage is final as to the marriage it is dissolving, but it *272is not a “final judgment” as to anything else. Alimony and child support are inherently modifiable, so they are not “final” in the sense that they could support a lien. In the instant case, a sum certain of attorney’s fees was awarded to Defendant Coleman. That sum is not modifiable. However, the attorney’s fees are analogous to a property settlement awarded in a dissolution decree. The purpose of the property settlement in Florida is to “equitably distribute” the couple’s property acquired during the marriage. The amount of the property settlement is not modifiable. Nevertheless, as in Dunn v. Thompson, supra at 477, 529 N.E.2d at 297, where the court found that a lump sum property settlement awarded in a divorce decree could not support a general lien, this Court does not believe that the dissolution decree can create a lien under the Florida general lien statute. Similarly, in Bryan v. Nelson, supra at 252, one spouse had been awarded a lump sum of $20,000 from the proceeds of the sale of the marital home. The court found that this did not create a lien under the general lien statute of that state. In both of these cases, the award was a sum certain that was not modifiable as to amount, but in both eases the respective courts found that the dissolution decree did not create a lien for these awards.
In the instant case, the award of $40,000 in attorney’s fees was payable in quarterly installments of $2,500, meaning over a period of four years. The Final Judgment of Dissolution of Marriage did not expressly create any lien on any real property of the Debtor. This Court agrees with the court in Bryan v. Nelson, supra at 255 that “divorce decrees ordering future payments ... do not qualify as final, conclusive judgments for purposes of creating a judgment lien.”
Unlike a final monetary judgment, where a debt is already owed, and the Court simply orders judgment and execution on the debt, the attorney’s fees were not owed until they were awarded in the Final Judgment of Dissolution of Marriage. There was no debt until it was created by the Final Judgment. Once the debt was created, and once the Debtor defaulted on the quarterly payment obligation, Defendants could have gone back to court to obtain a final executable monetary judgment, that once recorded, would have created a lien on the real property of the Debtor. The Defendants did not obtain such a judgment, and this Court does not believe that the decree of dissolution of marriage was a final judgment that could create a lien on real property pursuant to Fla.Stat. § 55.10. The Final Judgment of Dissolution of Marriage created the debt; it did not order execution on the debt, nor did it create a lien to collateralize the debt.
Accordingly, the Plaintiffs Motion for Summary Judgment will be granted, and the Defendants’ Motion for Summary Judgment will be denied. A separate final judgment will be entered in accordance with the foregoing.
. Florida Statute § 28.29 provides in pertinent part: "Orders of dismissal and final judgments of the courts in civil actions shall be recorded in official records...." | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492291/ | DECISION AND ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT (DOC. # 16)
WILLIAM A. CLARK, Chief Judge.
This matter is before the court upon “Defendant’s Motion for Summary Judgment” (Doc. # 16), “Angela Alderman’s Affidavit in Support of Defendant’s Motion for Summary Judgment” (Doe. # 20), “Plaintiffs Response to Defendant’s Motion for Summary Judgment” (Doe. # 18), and a “Submission of Affidavit of Lawrence McKinney” (Doe. # 19). The court has jurisdiction pursuant to 28 U.S.C. § 1334 and the standing order of reference entered in this district. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (0).
PROCEDURAL POSTURE AND UNDISPUTED FACTS
On June 8, 1995, debtors Lawrence and Judy McKinney, Jr., filed a complaint against defendant Level Propane alleging that the plaintiffs had entered into a lease agreement to rent a propane tank from the defendant for $1.00 a year and that the defendant violated the automatic stay of § 362 of the Bankruptcy Code by exerting control over property of the bankruptcy estate by removing a regulator from the propane tank thereby making the tank inoperable. The following facts appear to be undisputed by the parties.
1) The plaintiffs filed a petition for relief under chapter 7 of the Bankruptcy Code on March 29,1995.
2) The plaintiffs listed a debt to defendant as an unsecured claim.
3) Prior to his bankruptcy filing, Mr. McKinney signed a “standard customer contract” with the defendant which contains the following relevant provisions:1
“Customer Credit Application and Agreement for Propane Service and Equipment Lease”
USE, OWNERSHIP AND ACCESS TO EQUIPMENT — Equipment leased hereunder will be used only in connection with propane purchased from Level, all items of equipment furnished by level are and will remain the property of Level or its lessor. ...
OPTION TO PURCHASE — Customer has no option to purchase equipment leased hereunder.
EARLY TERMINATION/CUSTOMER’S DEFAULT
(b) Level may terminate this agreement before the end of the term by not less than 30 days written notice to customer or immediately and without notice if customer fails to comply with this agreement or to pay for propane purchased from Level when due.
(d) If customer defaults Level may adjust or disconnect equipment to terminate propane withdrawal therefrom, repossess equipment leased hereunder and repossess *460and dispose of any propane therein not paid by the customer....
SURRENDER OF EQUIPMENT — Customer shall surrender equipment leased hereunder in good condition to Level at the location described above upon expiration of the term or earlier termination of this agreement.
4) On May 18, 1995, defendant removed a regulator from the propane tank.
Presently before the court is defendant’s motion for summary judgment under Fed. R.Civ.P. 56.
CONCLUSIONS OF LAW
Section 362(a) of the Bankruptcy Code provides that the filing of a petition in bankruptcy operates as a stay of many acts against a debtor, property of a debtor and property of the debtor’s bankruptcy estate. 11 U.S.C. § 362(a).
The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.
H.R.Rep. No. 595, 95th Cong., 1st Sess. 340 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 54-55 (1978); 1978 U.S.C.C.A.N. 5787, 5840-5841, 6296-6297.
In the instant case, the plaintiffs allege that the defendant’s activities with respect to a propane tank constituted a violation of a provision of § 362 of the Bankruptcy Code which stays “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.” 11 U.S.C. § 362(a)(3). If it is proven that the defendant has willfully violated the automatic stay, sanctions will be imposed against the defendant.
An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.
11 U.S.C. § 362(h).
Under the Federal Rules of Civil Procedure, summary judgment is appropriate when there is no genuine issue of material fact, and the party moving for summary judgment is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). Here, the court finds that there is a genuine issue of material fact regarding the defendant’s knowledge of the existence of the automatic stay which arose upon the debtors’ initiation of bankruptcy proceedings. As a result, the court finds it inappropriate to grant summary judgment to the defendant.
That being said, the court is also of the opinion that it may assist the parties’ settlement negotiations if certain preliminary observations are made by the court. The fundamental premise of defendant’s motion for summary judgment is that “neither the equipment nor the gas were ever property of the estate” (Doc # 16):
By the terms of the contract, Level Propane reserves the control and possession of the tank and equipment. In the case at bar, because there was no billing for the lease, no lease can be said to have come into effect. The tank was on the Debtors’ premises as an adjunct to the provision of propane to the Debtors. As was clear from the terms set forth above, Level at all times reserved control and possession of the tank_ [Tjhere was no consideration paid to transfer any leasehold or leasehold rights. Hence Level never conveyed any rights to the Debtors with respect to the equipment, either to control or possess. The equipment could not, by the terms of 11 U.S.C. § 541, become the property of the estate. As property outside the possession or control of the Debtors or the estate, the equipment could not become subject of the automatic stay under 11 U.S.C. § 362. Id.
Initially, the court finds that it is unpersuaded by defendant’s assertion and argument that neither the debtors nor their bank*461ruptcy estate controlled or possessed the propane tank. Despite language in the parties’ agreement reserving control and possession to the defendant, the fact that the tank and gas were located on the debtors’ premises belies the defendant’s theory and clearly evidences the debtors’, and thereby their bankruptcy estate’s, possession and control of the tank and propane gas.
A problem also exists with respect to the defendant’s contention that, because the debtors were not billed separately for lease charges, no lease existed between the parties, but rather the tank was on the debtors’ premises as an “adjunct” to the provision of propane to the debtors. Nothing in the affidavit of Angela Alderman establishes that no consideration was separately paid by the debtors to the defendant for the lease of the propane tank. Further, it is likely that the debtors’ purchase price for the propane gas furnished consideration for both the propane gas and the rental of the propane tank, i.e., for the entire service “package.” In any event, in Ohio mutual promises are sufficient consideration to support a contract. Breslin v. Brown, 24 Ohio St. 565 (Ohio 1874).
“A lease is an agreement for the delivery of property to another under certain limitations for a specified period of time after which the property is to be returned to the owner.” Brown Motors Leasing v. Reucher, 80 Ohio App.3d 225, 608 N.E.2d 1162, 1164 (1992). At this time, the court will not belabor the point, but an examination of the contract provisions, swpra, which are replete with references to equipment leasing, clearly establishes that the agreement entered into by the parties constituted an equipment lease agreement.
Section 541 of the Bankruptcy Code provides that property of a bankruptcy estate is comprised of “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1) (emphasis supplied). The scope of § 541(a)(1) is broad and includes all kinds of property, including “a possessory interest, or leasehold interest.” H.R.Rep. No. 595, 95th Cong., 1st Sess. 367 (1977); S.R. No. 989, 95th Cong., 2d Sess. 82 (1978) (emphasis supplied). 1978 U.S.C.C.A.N. 5868, 6323. As a result, “[a] leasehold is property of the estate if a debtor is the lessee of the property at the time the petition for bankruptcy is filed.” Arizona Appetito’s Stores, Inc. v. Paradise Village Investment Co. (In re Arizona Appetito’s Stores, Inc.), 893 F.2d 216, 218 (9th Cir.1990). “Moreover, once a leasehold interest is categorized as property of the debtor’s estate, an action may not be commenced in contravention of the automatic stay provisions of 11 U.S.C. § 362.” Babco, Inc. v. Markusic (In re Babco, Inc.), 28 B.R. 656, 658 (D.W.D.Pa.1983).
As stated, these observations by the court are preliminary and designed to assist counsel in any attempts to resolve this adversary proceeding.
For the foregoing reasons, it is hereby ORDERED that the defendant’s motion for summary judgment is DENIED. The proceeding is set for trial on Wednesday, April 3,1996, at 9:30 A.M.
. The affidavit of Angela Alderman (the defendant's credit manager) states that Exhibit "B” is a "standard customer contract or the kind signed by Mr. McKinney." This photocopy of the agreement does not contain Mr. McKinney's signature nor the monetary terms of the agreement. Mr. McKinney does not, however, deny that he signed such an agreement, and the court concludes that the submitted agreement is the type signed by Mr. McKinney. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492292/ | ORDER
JAMES J. BARTA, Chief Judge.
The matter is before the Court on a Motion to Dismiss the adversary proceeding for lack of subject matter jurisdiction. The motion was filed by Fredrich J. Cruse (“Cruse”), Defendant/Crossclaim Defendant and Operating Trustee of The Landing, the Reorganized Debtor (“Debtor”). The Debtor is operating under a confirmed plan of reorganization and is engaged in the orderly liquidation of its assets. The adversary ease was filed by Mark Twain Bank (“MTB”) seeking a declaratory judgment as to the ownership of certain equipment. Laurlin, Inc. (“Laurlin”), Defendant/Counterclaim, Cross-Claim and Third Party Plaintiff, has claimed it purchased the subject equipment, along with substantially all the assets of the Debtor, from Cruse pursuant to an Order of this Court filed February 22,1994.
In the absence of specific statutory language, the Second Circuit has recognized a Bankruptcy Court’s jurisdiction as it was described in a confirmed plan. “A bankruptcy court retains post-confirmation jurisdiction in a chapter 11 proceeding only to the extent provided in the plan of reorganization. The bankruptcy court’s post-confirmation jurisdiction therefore is defined by reference to the Plan.” Hospital and University Property Damage Claimants v. Johns-Manville Corp. (In re Johns-Manville Corp.), 7 F.3d 32, 34 (2d Cir.1993). In the Eighth Circuit, “a bankruptcy court may explicitly retain jurisdiction of aspects of a plan related to its administration and interpretation.” United States v. Unger, 949 F.2d 231, 234 (8th Cir.1991); see also In re Dogpatch, U.S.A., Inc., 810 F.2d 782, 785 (8th Cir.1987) (the bankruptcy court retained jurisdiction over certain parties for “all purposes until full consummation of the confirmed plan of reorganization”).
The Debtor in this case is operating under a confirmed plan in a Chapter 11 case that has not been closed or converted. The Court has retained jurisdiction in this case pursuant to the terms of the Second Amended Plan of Reorganization. Document 804, filed August 3, 1994. Under the provisions of Article VII, ¶ 7.0(a), the Court has retained jurisdiction to insure that the Debtor complies with the provisions of the Plan and with all orders of the Court pursuant to the Plan and to enable the Debtor to take all actions contemplated by the Plan. In Article VII, ¶ 7.0(f), the Court has retained jurisdiction to adjudicate all claims or controversies arising out of any purchases, sales, or contracts made or undertaken by the Debtor during the pendency of this liquidation case.
As a liquidating plan, the Second Amended Plan contemplates the sale of all of the Debt- or’s assets. The matter before the Court in the adversary proceeding is a controversy that is related to the provisions of the Plan in that it concerns a sales contract between the Debtor and Laurlin that was consummated pursuant to an Order of the Court. The sale to Laurlin resulted in the liquidation of substantially all of the Debtor’s assets. Thus, under Article VII, ¶ 7.0(a) and (f) the Bankruptcy Court has retained jurisdiction in this matter pursuant to the terms in the Plan. Therefore,
IT IS ORDERED that Cruse’s Motion to Dismiss the adversary proceeding for Lack of Subject Matter Jurisdiction is DENIED; and that the determination of the Cruse motion for a more definite and certain statement is deferred pending a ruling on the Laurlin motion to withdraw the reference of this adversary proceeding; and
That this matter is continued and reset to March 20, 1996 at 10:00 a.m. in Bankruptcy Courtroom No. 1, U.S. Bankruptcy Court, Eastern District of Missouri, One Metropolitan Square, 211 North Broadway, 7th Floor, St. Louis, Missouri as a continued pretrial conference. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492294/ | OPINION
VOLINN, Bankruptcy Judge:
OVERVIEW
Bankruptcy Rule 4007(c)1 requires a creditor in a case under Chapters 7,11, and 12 of the Bankruptcy Code2 to file a nondis-chargeability complaint pursuant to *542§ 523(c)3 within 60 days of the first date set for the meeting of creditors under § 341(a). In the instant case, the bankruptcy court clerk sent out two notices regarding the meeting of creditors. The earlier notice was designated “Notice Rescheduling the First Meeting of Creditors (341A) [sic].” The second notice was substantially in the form of Official Form 9 of the Bankruptcy Rules of Procedure providing for notice of the commencement of the bankruptcy case and the initial meeting of creditors held pursuant to § 341(a) and setting forth a specific date of a time limit for filing dischargeability claims. The appellant filed a § 523(c) complaint more than 60 days after the first notice, but within the time limit set by the second notice. The trial court dismissed the complaint on the grounds that it was untimely. We REVERSE.
FACTS
On March 31, 1993, appellant Magdalena Wilzig initiated an involuntary bankruptcy case against Alexander P. Lopez. On November 22,1993, Lopez stipulated to entry of the order for relief.
On September 30, 1994, the clerk of the bankruptcy court sent all listed creditors, including Wilzig, a notice titled “Notice Rescheduling the First Meeting of Creditors (341A)” (“the September notice”). The September notice appears to be a form order generated by the clerk to reschedule § 341(a) meetings. The notice contained several errors. First, it purported to amend a prior notice and to “reschedule” the meeting of creditors to November 14, 1994; however, there was no prior notice and no meeting of creditors had been previously scheduled. Second, it stated: “The automatic stay and other matters referred to in the original order have not been altered and continue in effect,” however, the “original order,” as indicated, did not exist. Third, the notice did not state a bar date for filing dischargeability complaints as required by Rule 4007(c).
On November 15, 1994, approximately six weeks after the September notice was sent, the clerk of court sent creditors, including Wilzig, a second notice entitled “Notice of Commencement of Case Under Chapter 7 of the Bankruptcy Code, Meeting of Creditors, and Fixing of Dates” (“the November notice”). This notice, cast in terms of Official Form 9, as indicated, had no facial errors. It stated that the meeting of creditors would be held on December 12, 1994, and stated expressly that the bar date for filing complaints objecting to the dischargeability of certain debts was February 10, 1995. Wilzig filed her complaint on February 10. We note that 60 days after the date of the first meeting of creditors (November 14, 1994) set forth in the earlier notice was January 13,1995.
On March 20,1995, Lopez filed a motion to dismiss the complaint as late filed. The matter was heard on April 13, 1995. At the hearing, the court stated its understanding of the procedural facts:
THE COURT: What happened in this case based upon the evidence given to me by the defendant moving party, is that the clerk of court issued a notice of 341(a) meeting of creditors, the first meeting of creditors—
[Wilzig’s Counsel]: That’s right.
THE COURT: — with a specific provision giving notice of the deadline for filing complaints under 4007(e).
And then the clerk, because of a continued 341(a), issued a notice of that continued 341(a) and included not only the date for that continued 341(a) but a provision setting a second and separate deadline for the 4007(c) complaint deadline. Correct?
[Wilzig’s Counsel]: Correct.4
*543Transcript April 13, 1995 at 7:23-8:13 (Appellant’s ER, exhibit 10).
The foregoing statement of facts is inaccurate in several respects: 1) The September notice purported to be a “rescheduling order”; 2) it did not contain a Rule 4007(c) deadline; 3) the later November notice purported to be a “case commencement” notice; and 4) although it set a deadline for filing dischargeability complaints, that deadline was the first one expressly set, not a “second and separate” deadline. The court may also have believed that the November notice purported to be a rescheduling notice.
The court found that the September notice constituted the “date first set” for the meeting of creditors. The court further found that Wilzig presented no evidence that she had reasonably relied on the November notice and declined to extend the filing deadline. Accordingly, the court dismissed the complaint as untimely.
STANDARD OF REVIEW
The interpretation of Rule 4007(c) is a question of law reviewed de novo; findings of fact affecting the notice of bar dates are reviewed under the clearly erroneous standard. In re De la Cruz, 176 B.R. 19, 22 (9th Cir. BAP 1994). Whether circumstances such as an erroneous notice of the bar date justifies a trial court granting relief from the bar date is reviewed under the abuse of discretion standard. See In re Anwiler, 958 F.2d 925, 929 (9th Cir.) cert. denied, 506 U.S. 882 113 S.Ct. 236, 121 L.Ed.2d 171 (1992). “A bankruptcy court would necessarily abuse its discretion if it bases its ruling upon an erroneous view of the law or a clearly erroneous assessment of the evidence.” In re Rainbow Magazine, Inc., 136 B.R. 545, 550 (9th Cir. BAP 1992) (citation omitted).
ISSUES PRESENTED
Whether the court abused its discretion by holding that the bar date of 60 days expressed in Rule 4007(c) was necessarily implicit in the earlier notice, although not set forth therein, and that the unexpressed date, despite the anomalous appearance of the notice, over-rode the explicit bar date set forth in the subsequent notice which substantially conformed with Official Form 9.
DISCUSSION
I
Bankruptcy Rule 4007(e) sets the bar date for filing dischargeability complaints by stating that such complaints “shall be filed not later than 60 days following the first date set for the meeting of creditors held pursuant to § 31.1(a).” Fed.R.Bankr.P. 4007 (emphasis supplied). The rule continues: “The court shall give all creditors not less than 30 days notice of the time so fixed....” Id. “Section 523(c) as implemented by Rule 4007(e) places a heavy burden on the creditor to protect its rights.” In re De la Cruz, 176 B.R. at 22.
A creditor with actual knowledge of a bankruptcy case has an affirmative duty to take action to protect its claim even where it receives no notice of the bar date. In re Dewalt, 961 F.2d 848, 850 (9th Cir.1992); In re Price, 871 F.2d 97, 99 (9th Cir.1989). However, where the court misleads a creditor regarding the deadline for filing complaints, a bankruptcy court may employ its equitable powers under § 105(a) to hold a complaint timely filed. In re Anwiler, 958 F.2d 925, 929 (9th Cir.1992).
If a creditor receives contradictory notices, the “heavy burden” imposed by Rule 4007(c) is attenuated by the clerk’s error. For example, in Anwiler, two notices setting conflicting deadlines for filing complaints were issued by two separate courts due to a change in venue. The trial court dismissed the complaint as late-filed. A panel of the BAP reversed, and the Ninth Circuit Court of Appeals affirmed the BAP’s ruling stating, “if a court had made a mistake upon which a party relied to its detriment, a court could use its equitable power to grant relief and correct its mistake.” 958 F.2d at 926.
*544In In re Halstead, 158 B.R. 485 (9th Cir. BAP 1993), creditors similarly received conflicting notices, but the court subsequently corrected its mistake by vacating the erroneous notice. The creditors, however, did not receive timely notice of the vacation. Although the BAP concluded that creditors could not rely on a vacated order, it nevertheless reversed dismissal of the late-filed complaints reasoning that the creditors’ lack of notice that the order had been vacated in time to take effective action mitigated their erroneous reliance on the later date.
A review of cases dealing with notice issues demonstrates that rulings are dependent on the circumstances of each case. A creditor may be required to review the docket to ascertain the bar date; where the issue of late filing is raised, the court must review the circumstances and determine whether they are such as would prompt a creditor to investigate further and whether such investigation would be fruitful.
Because a creditor’s actual knowledge of a bankruptcy case creates an affirmative duty to ascertain the bar dates, arguably the implication of the September notice of the existence of an earlier date set for the meeting of creditors should have elicited an attempt by the creditor to determine the earlier date. However, under the circumstances attendant here, a confusing problem was presented. An investigation of the docket would have shown that no earlier order had been entered. While this information could have led the creditor to the assumption that the September notice announced the “first date set,” this conclusion is not readily apparent. Since the notice facially purports not to set the first date and refers to a prior effective order, this assumption could reasonably not have come to mind. In this instance, the erroneous notice placed the creditor in a worse position than no notice at all.
II
Nevertheless, the debtor contends that the deadline for filing claims should be derived solely by the timing of the notices, ignoring their content. Adoption of this view would yield an inequitable result. The defects and misdirected context set forth in the September notice created confusion at the outset. This, together with the apparently appropriate form and explicit direction of the November notice, should not result in the creditor being time-barred by an overly mechanistic application of Rule 4007(c).
To be effective, a notice which announces the running of a time period must do so clearly. Conversely, unless circumstances indicate otherwise, a party is entitled to rely on information issued by the court, and where such information is subsequently determined to be erroneous, fairness requires that the court correct its mistakes.
Although the date set for the meeting of creditors in the September notice literally constituted the first such date set, the notice, by purporting to reschedule an earlier date, concealed and obscured this vital information. Confusion was compounded by the absence of a stated bar date for filing claims, which is required by Rule 4007(c). The notice offered no indication that it had the legal effect of establishing the bar date for preserving important rights.
Parties are entitled to be notified in clear and unambiguous terms of deadlines, particularly when they are critical. Holding the September notice to constitute effective notice of the bar date would implicate due process concerns, since notice must be “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950). A notice cannot be said to be “reasonably calculated” to afford interested parties an opportunity to protect legal rights where its factual premise is not readily discernible and is misleading.
This conclusion is buttressed by the fact that within the time set to file complaints (the day after the meeting of creditors was to be held), the clerk of court sent out the first (and only) case commencement notice. This notice set both the date for the meeting of creditors, and additionally, expressly set a bar date for filing complaints. Accordingly, *545a creditor could reasonably conclude that the bar date provided in the November notice was correct.
As evidenced by the court’s colloquy quoted above, the court did not consider the facial defects of the September notice nor the content of the November notice. Had the court been aware of these facts, it may well have ruled differently. Under the circumstances, the trial court should have invoked its discretion under § 105(a) to vacate the September notice and repair its uncertainty. The court abused its discretion by basing its decision on a clearly erroneous assessment of the evidence.
Ill
Two other issues may be addressed briefly. The court ruled that the creditor failed to present any evidence of reliance on the November notice. In response, the creditor proposes that the requisite standard is not proof of actual reliance but simply a demonstration that the notice could induce reliance, citing Halstead, 158 B.R. at 487, which states that equitable relief should be granted when “the creditor could reasonably believe that the second notice was operable.” (emphasis added) (citing Anwiler, 958 F.2d at 928-929). However, Halstead goes on to state that the court may grant equitable relief “only when a creditor could reasonably rely on the notice.” Id. (emphasis added).
As this language implies, actual reliance is required, or else a negligent creditor would receive an unwarranted reprieve. Here, however, the burden of proof has been met by the admitted facts. The creditor’s rebanee on the bar date stated in the November notice is evidenced by the fact that she filed her complaint within the time, albeit on the last permissible date stated in the November notice.
Finahy, the debtor argues that he was prejudiced because the creditor initiated the involuntary petition and then waited two years to file her complaint. However, the only time span relevant here is that between January 13, 1995 and February 10, 1995. The debtor does not demonstrate how this one-month delay created prejudice.
CONCLUSION
The September notice was intrinsically un-rebable and could not constitute adequate notice of the deadline for filing complaints. The creditor reasonably rebed on the expressly stated later date. The trial court’s ruhng was based on a clearly erroneous assessment of the evidence, and is, therefore, reversed. These proceedings are remanded for the court to vacate the September notice and reinstate the creditor’s complaint.
REVERSED and REMANDED.
. Time for Filing Complaint Under § 523(c) in Chapter 7 Liquidation, Chapter 11 Reorganization, and Chapter 12 Family Farmer’s Debt Adjustment Cases; Notice of Time Fixed. A complaint to determine the dischargeability of any debt pursuant to § 523(c) of the Code shall be filed not later than 60 days following the first date set for the meeting of creditors held pursuant to § 341(a). The court shall give all creditors not less than 30 days notice of the time so fixed in the manner provided in Rule 2002. On motion of any party in interest, after hearing on notice, the court may for cause extend the time fixed under this subdivision. The motion shall be made before the time has expired.
Fed.R.Bankr.P. 4007(c).
. Unless otherwise stated, all references to "sections" and “rules" will refer to the Bankruptcy Code, 11 U.S.C. §§ 101 et seq., and Federal Rules of Bankruptcy Procedure 1001-9036.
. Except as provided in subsection (a)(3)(B) of this section, the debtor shall be discharged from a debt of a kind specified in paragraph (2), (4), (6), or (15) of subsection (a) of this section, unless, on request of the creditor to whom such debt is owed, and after notice and a hearing, the court determines such debt to be excepted from discharge under paragraph (2), (4), (6), or (15), as the case may be, of subsection (a) of this section.
11 U.S.C. § 523(c)(1) (as amended, October 22, 1994).
. It is difficult to understand whether counsel agreed with the court’s misapprehension of the *543facts, but the brief colloquy falls short of an unqualified and intentional stipulation as to an erroneous factual statement. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492296/ | ORDER
J. RICH LEONARD, Bankruptcy Judge.
George A. Eborn (“Eborn”), a judgment creditor of the debtor, brings this adversary proceeding to have his debt declared nondis-chargeable pursuant to § 523(a)(6) of the Bankruptcy Code. This is a core proceeding as that term is defined in to 28 U.S.C. § 157(b)(2)(I), and over which this court has jurisdiction pursuant to 28 U.S.C. §§ 1334 and 157(a).
This case is before the court on the plaintiff’s motion for summary judgment. A hearing of this motion was held on May 10, 1995 in Wilson, North Carolina. For the reasons given below, the plaintiffs motion is granted.
I. Undisputed Facts
Eborn is a seaman formerly employed on the F/V CINDY, a shrimping vessel owned by the debtor/defendant, Chancy Junior Sawyer (“Sawyer”). On May 25, 1989, Eborn was injured when his hand was pinned between a rope and a winch used in the operation of the shrimping nets. He remained out of work and under a doctor’s supervision until August 7, 1989. During this time, he incurred lost wages, as well as medical expenses of $11,388.74.
After the accident, Eborn asked Sawyer to pay maintenance, cure, and lost wages as required by the law of admiralty. Sawyer refused, and Eborn brought suit against him in the United States District Court for the Eastern District of North Carolina. Eborn’s admiralty claims were eventually brought to trial before the Honorable Charles K. McCotter, Jr., United States Magistrate Judge for the Eastern District.
After a full bench trial, Judge McCotter entered an order on July 9, 1993 finding that Eborn’s injuries were not caused by any unseaworthy condition aboard the CINDY. Nevertheless, Sawyer was found liable for maintenance of $1,260, cure of $11,388.74, and lost wages of $2,133.75. In addition, Judge McCotter found that:
Sawyer’s attempts to shield himself of liability, denial of any knowledge of the accident, and refusal to pay after the suit was filed constitute willful and arbitrary conduct that justifies an award of both attorney’s fees and punitive damages.
Eborn v. Sawyer, No. 91-121-CIV-MC (Slip op. at 8, July 9, 1993). On this basis, Sawyer was ordered to pay $1,000 in punitive damages and attorney’s fees of $14,404.26.
The federal judgment was docketed with the Clerk of Superior Court of Hyde County, North Carolina on June 7, 1994. Six weeks *673later, on July 21, 1994, Sawyer filed a petition for relief under chapter 7 of the Bankruptcy Code. On October 24, 1994, Ebom filed this adversary proceeding seeking to have his judgment debt declared nondis-ehargeable under § 523(a)(6).1
II. Standard of Review
“[Sjummary 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.’ ” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In making this determination, conflicts are resolved by viewing all facts and inferences to be drawn from the facts in the light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). Summary judgment should be granted if “the evidence is such that a reasonable jury could [not] return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).
III. Discussion
Section 523(a)(6) of the Bankruptcy Code excepts from discharge:
(а) ... any debt— ...
(б) for willful and malicious injury by the debtor to another entity or to the property of another entity....
11 U.S.C. § 523(a)(6). Here, the debt to plaintiff arises from a judgment that contains a specific finding that the defendant’s conduct was “willful and arbitrary.” The plaintiff contends that this judgment conclusively establishes that he has suffered a “willful and malicious injury” for purposes of § 523(a)(6).
The defendant counters with an affidavit stating that he was not present when the plaintiff injured his hand, and attesting that he has never willfully or maliciously injured the plaintiff. He also points out that Judge MeCotter refused to find that the plaintiffs physical injury was caused by any act or omission on his part, or that the CINDY was unseaworthy in any way. In the defendant’s view, Judge McCotter’s order establishes only that he willfully failed to pay a debt that is itself dischargeable. This, he argues, is not equivalent to a finding that his conduct was willful and malicious for purposes of § 523(a)(6).
The Fourth Circuit Court of Appeals has held that a prior final judgment may, in some circumstances, prove dispositive of discharge-ability proceedings brought under § 523(a). The court explained the reach of res judicata in this context in M & M Transmissions, Inc. v. Raynor (In re Raynor), 922 F.2d 1146 (4th Cir.1991).
To preclude a debtor from litigating an issue dispositive of discharge, the record of the ease giving rise to the judgment debt must show that the issue was actually litigated and determined by a final valid judgment in an earlier proceeding and that it was necessary to the decision.
922 F.2d 1146, 1149 (citations omitted). The bankruptcy court is instructed to make these determinations “with particular care.” Combs v. Richardson, 838 F.2d 112, 113 (4th Cir.1988).
Judge McCotter’s July 9, 1993 order was entered after a bench trial before the court. The findings of fact and law contained in his order are the product of litigation, and were reduced to a final judgment binding upon the parties. Accordingly, the doctrine of res ju-dicata precludes this court from relitigating any issues resolved in Judge McCotter’s order.
The July 9 order contains two separate sets of findings that pertain to the defendant’s conduct. First, Judge MeCotter found that the plaintiffs physical injury was not caused by any unseaworthy condition aboard *674the defendant’s boat. Second, he held that the defendant’s refusal to pay maintenance and cure was willful and arbitrary. As instructed by Combs v. Richardson, the court will carefully examine each of these findings to determine whether they correspond to the issue raised in this adversary proceeding.
A. Physical Injury
Judge McCotter refused to find the defendant directly liable for the injury to the plaintiffs hand. Indeed, he found that the plaintiff had failed to produce any evidence that established the cause of his accident.
... Ebom has not shown that Sawyer breached his duty to provide a winch drum that was reasonably safe for its intended use.... Ebom does not know how the accident occurred. His assumption about the cause of the accident alone does not convince the court that the unseaworthy condition [assumed above] caused the accident nor is the court capable of making this inference.
(Slip op. at 4.)
These findings are quite specific and are directly on point. They demonstrate that the plaintiff was given a full opportunity to establish the cause of his injury, and was unable to link it to any act or omission by the defendant. It follows that any subsequent effort to prove that the plaintiffs physical injury was caused by the defendant’s willful and malicious conduct is precluded.
B. Refusal to Pay Maintenance and Cure
Taken together, maintenance and cure represent a shipowner’s duty to care for seamen who become injured or ill while in his service. Maintenance is the seaman’s right to food and lodging “comparable to that to which [he] is entitled while at sea.” Calmar Steamship Corp. v. Taylor, 303 U.S. 525, 528, 58 S.Ct. 651, 653, 82 L.Ed. 993 (1938). Cure is “care, including nursing and medical attention during such period as the duty continues.” Id. The shipowner’s obligation to pay maintenance and cure is “of ancient vintage,” and is a well-established tenet of general maritime law in the United States. Thomas J. Schoenbaum, Admiralty and Maritime Law 159 (1987); see also The Osceola, 189 U.S. 158, 23 S.Ct. 488, 47 L.Ed. 760 (1903).
In his July 9 order, Judge McCotter found that the defendant had a duty to provide maintenance, cure, and lost wages to the plaintiff. He further found that the defendant, despite learning of the plaintiffs injury soon after it occurred, denied knowledge of the accident and refused to pay maintenance and cure. Finally, he found that the defendant had attempted to disclaim liability by posting a sign on the CINDY warning seamen that he would not be responsible for their injuries. Judge McCotter found that these actions constituted willful and arbitrary conduct that justified an award of attorney’s fees and punitive damages.
Under maritime law, a shipowner’s failure to pay maintenance and cure is an independent tort that renders the shipowner liable for any aggravation of the seaman’s injury. See, e.g., The Iroquois, 194 U.S. 240, 24 S.Ct. 640, 48 L.Ed. 955 (1904). Moreover, if the shipowner’s failure to pay is willful and arbitrary, the seaman may be entitled to attorney’s fees and punitive damages. Holmes v. J. Ray McDermott & Co., Inc., 734 F.2d 1110 (5th Cir.1984); Stewart v. Steamship Richmond, 214 F.Supp. 135 (E.D.La.1963).
Consistent with these rules, Judge McCot-ter’s order treats the defendant’s refusal to pay maintenance and cure as a distinct wrong, separate from any physical injury suffered by the plaintiff. In addition, the judge finds that the defendant’s attempts to evade this obligation were willful and arbitrary, justifying a separate award of costs and damages.
Section 523(a)(6) excepts from discharge any debt that can be characterized as a willful and malicious injury. Courts have generally held that this section does not require proof of actual malice, but only of “a deliberate and intentional act which necessarily leads to injury.” Lawrence P. King, 3 Collier on Bankruptcy § 523.16, p. 523-129 (1993). Nondisehargeability under this subsection is premised on the debtor’s intent to injure, not on whether the debtor’s actions were motivated by “personal hatred, spite or ill-will.” Id.
*675The bloodless nature of the injury contemplated by § 523(a)(6) is demonstrated by the fact that the statute extends beyond personal injuries to include injuries to property. Indeed, a number of courts have held claims based on the intentional conversion of another’s property to be nondischargeable under this section. See Security Bank of Nevada v. Singleton, 10 C.B.C.2d 429, 37 B.R. 787 (Bankr.D.Nev.1984); Bombardier Corp. v. Penning (In re Penning), 22 B.R. 616 (Bankr.E.D.Mich.1982).
Judge McCotter’s order establishes that the defendant’s refusal to pay maintenance and cure was willful and arbitrary as a matter of admiralty law. However, there are no reported cases addressing whether a shipowner’s refusal to pay is also a willful and malicious injury for purposes of § 523(a)(6). After a careful consideration of the policies protected by § 523(a)(6), this court concludes that a shipowner’s knowing refusal to pay maintenance and cure to an injured seaman is the sort of willful and malicious injury contemplated by the statute.
Admiralty law elevates a shipowner’s obligation to pay maintenance and cure to a special status, beyond his obligation to repay ordinary debts. It is not, as the defendant argues, analogous to the bad faith failure to repay a normal claim. Rather, under admiralty law, the failure to pay maintenance and cure is an independent tort, itself com-pensable with punitive damages.
Judge McCotter has found that the defendant willfully and arbitrarily failed to pay maintenance, cure, and lost wages to the plaintiff. That finding is binding in this proceeding, and, in this court’s view, is sufficient to establish that the plaintiffs debt is nondis-chargeable under § 523(a)(6).
Conclusion
Based upon the foregoing, the defendant’s counterclaims are dismissed as moot, and the plaintiffs motion for summary judgment is granted.
So Ordered.
. Ebom originally asserted a secured claim against Sawyer in the underlying bankruptcy case. This prompted Sawyer to file counterclaims in this adversary proceeding to avoid Ebom’s judgment lien under §§ 522(f)(2) and 547. This issue was addressed collaterally on January 18, 1995, when the court denied an objection to Sawyer's exemption of the affected properly. Two days later, Ebom filed an amended proof of claim conceding that his claim is unsecured. This action effectively disposes of Sawyer's counterclaims, and these are, accordingly, dismissed as moot. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492297/ | MEMORANDUM OPINION
RONALD BARLIANT, Bankruptcy Judge.
INTRODUCTION
The chapter 7 Trustee has filed an adversary complaint virtually identical to a complaint filed pre-bankruptcy by the Debtor. That action was dismissed post-bankruptcy only because the Debtor’s attorneys had withdrawn and were not replaced by new counsel in the time required by a local rule. The issue here is whether that dismissal was “on the merits” and therefore res judicata as to this proceeding. Applying the plain language of Fed.R.Civ.P. 41(b), this Court finds that the dismissal order was on the merits and will therefore grant the defendant’s motion to dismiss this proceeding.
FACTS
The Trustee’s complaint states claims for breach of contract (Count I) and on account stated (Count II). This is the third complaint filed against the defendant on these claims. The Debtor, Unis International Corporation, filed the first action in the district court for this district. That case was dismissed for lack of jurisdiction over the defendant. The Debtor filed a second complaint in the district court of Maryland on May 21, 1993. Between November 1994 and December 1994, two attorneys for the Debtor withdrew, leaving Unis with one attorney who advised Unis that he also intended to withdrew. As required by Local Rule 101.2.(b), counsel notified Unis that it was required to have new counsel enter an appearance within 30 days of the filing of the motion to withdraw, or be subject to dismissal of its claims.
On March 27,1995, the clerk of the district court served a notice upon Unis advising it that 1) on March 9,1995, its counsel had filed a motion to withdraw; 2) Unis had 30 days from that date to have new counsel enter an appearance; and 3) if Unis did not obtain new counsel, the action could be dismissed. A copy of Local Rule 101.2.b, governing withdrawal of counsel, was attached to the notice.1
*717Unis had until April 8, 1995, to obtain new counsel. It failed to do so, but, on April 4, 1995, Unis filed a petition in this court under Chapter 7 of the Bankruptcy Code. On April 28, 1995, after determining that Unis had not had new counsel enter an appearance on its behalf, the Maryland district court dismissed the action.
Meanwhile, in the bankruptcy case, the Trustee was appointed shortly after the petition was filed. On August 15, 1995, the Trustee obtained court approval to retain special counsel in the Maryland litigation. At the same time, the Trustee filed a motion in the Maryland case to vacate the order of dismissal pursuant to Fed.R.Civ.P. 60(b) and to be substituted as plaintiff in the case. On September 26, 1995, the district court granted the motion to substitute, but denied the motion to vacate. The Trustee filed a notice of appeal with the Fourth Circuit. That appeal is still pending.
On November 2, 1995, the Trustee commenced this proceeding by filing a complaint that is almost identical to the complaint in the Maryland case. The defendant filed a motion to dismiss the adversary proceeding on the grounds that the Maryland court’s order of dismissal was on the merits and with prejudice pursuant to Fed.R.Civ.P. 41(b), and, therefore, the present action is barred by res judicata. Alternately, the defendant argues that federal comity principles, or the “first to file rule,” require that the later action be dismissed.
DISCUSSION
Res Judicata
Res judicata will operate to bar a later action when the following three requirements have been met: “(1) A final judgment on the merits of an earlier action; (2) an identity of the cause of action in both the earlier and later suit; and (3) an identity of parties or privies in the two suits.” In re Maurice, 167 B.R. 136, 138 (Bankr.N.D.Ill.1994). Of the three elements, the only one at issue here is whether the order of dismissal in the Maryland case was a final judgment on the merits.
The order of dismissal entered by the Maryland district court did not specify whether dismissal was with or without prejudice. However, Rule 41(b), Fed.R.Civ.P., clearly states:
Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join a party under Rule 19, operates as an adjudication upon the merits. [Emphasis added.]
Accordingly, when an action is dismissed, and the court does not specify that the dismissal is without prejudice, it is deemed to be with prejudice. LeBeau v. Taco Bell, Inc., 892 F.2d 605, 609 (7th Cir.1989); Kimmel v. Texas Commerce Bank, 817 F.2d 39, 41 (7th Cir.1987).
Despite the clarity of this rule, the trustee argues that 1) the order of dismissal cannot be with prejudice against a trustee in bankruptcy, relying on In re Raymond Constr. Co. of Florida, Inc., 6 B.R. 793 (Bankr.M.D.Fla.1980); and 2) the order should not be interpreted as a dismissal with prejudice.
In Raymond the court determined that a sua sponte state court order dismissing the plaintiff/debtor’s case was not binding on the trustee. This Court disagrees with the reasoning applied by the court in Raymond and declines to follow it. The bankruptcy judge relied upon a local rule of the state court providing for 90 days to substitute parties and § 108(a) of the bankruptcy code to extend that time as much as two years. The bankruptcy court’s reliance on § 108(a) was incorrect. Section 108(a) governs the time in which to commence an action. In Raymond the state court action was already pending; therefore, § 108(b) governed. Section 108(b) allows the trustee only an additional 60 days to act.2
The eases relied upon by the Trustee in support of his argument that the dismissal order should not be interpreted as with prejudice are equally unavailing in light of the unambiguous language of Rule 41(b). The *718Trustee argues that because the relevant local rule does not specify the effect of dismissals thereunder, while a local rule governing dismissals for “want of prosecution” specifies that they are without prejudice, the intent of Local Rule 101.2.b must have been that any dismissal also be without prejudice. But it could also be argued that the district court for Maryland knew how to exercise the discretion afforded courts by Rule 41(b) and chose to exercise that discretion with respect to dismissals for want of prosecution, but not for other types of dismissals. This Court need not get into such a guessing game. Rule 41(b) was adopted to avoid precisely this type of speculation. What matters is that the order dismissing the case did not specify that it was without prejudice; under Rule 41(b), therefore, it “operates as an adjudication on the merits.” The local rule’s silence or, at most, ambiguity on the matter cannot substitute for the specificity required by Rule 41(b).
The Trustee cites Zaroff v. Holmes, 379 F.2d 875 (D.C.Cir.1967), where the D.C. Circuit determined that an ambiguity in a local rule requiring dismissal for failure to appear at a pretrial conference required finding that the dismissal was without prejudice. However, as Judge Burger correctly pointed out in his concurring opinion, because the local rule failed to specify whether dismissal was with or without prejudice, Rule 41(b) required that the dismissal was with prejudice. Judge Burger supported the result because he concluded that the local rule was otherwise inconsistent with Rule 41(b) by allowing an examiner to exercise judicial discretion to dismiss a case. Id. at 877-78. This Court agrees with Judge Burger’s analysis and declines to apply the majority opinion to the facts here. See Nagle v. Lee, 807 F.2d 435, 443 (5th Cir.1987) (“At any rate, the rationale of the majority opinion in Zaroff is contrary to the unambiguous provisions of rule 41(b)....”)
The Trustee also points to Maryland district court opinions that expressly provide that dismissals were without prejudice and opinions of the Fourth Circuit reversing dismissals with prejudice and stating that such dismissals are not favored as sanctions. Those decisions are not authority for disregarding the plain terms of Rule 41(b). It is not this Court’s function to review the order of the district court in Maryland, but only to give it its proper effect. That effect is dictated by Rule 41(b).3 In another case relied on by the plaintiff, however, Choice Hotels International v. Goodwin and Boone, 11 F.3d 469 (4th Cir.1993), the court was applying Rule 41(a)(2), not 41(b). Rule 41(a)(2) says that a dismissal on the plaintiff’s motion is without prejudice unless the court specifies otherwise — the reverse of an involuntary dismissal under Rule 41(b).
Accordingly, this Court holds that under Rule 41(b) the dismissal entered by the district court in the Maryland litigation “operates as an adjudication upon the merits” and the present action is therefore barred by principles of res judicata. It is therefore unnecessary to consider the comity or “first to file rule” issues.
. That rule provides in relevant part (emphasis added):
b. Parties other than individuals. In the case of any party other than an individual, including corporation, partnerships, unincorporated associations and government entities, appearance of counsel may be withdrawn only with leave of Court and if (1) appearance of other counsel has been entered, or (2) withdrawing counsel files a certificate stating (a) the name and last known address of the client, and (b) that the written notice has been mailed to or otherwise served upon the client at least five days previously advising the client of counsel's proposed withdrawal and notifying it that it must have new counsel enter an appearance or be subject to the dismissal of its claims and/or default judgment on claims against it. In the event that within thirty days of the filing of the motion to withdraw, new counsel has not entered an appearance, the Court may take such action, if any, that it deems appropriate, including granting the motion to withdraw and dismissing any affirmative claim for relief asserted by the party and/or directing the party to show cause why a default should not be entered on claims asserted against it.
. Section 108(b) did not help the trustee in this case. The additional time provided by that section had also expired by the time the trustee had taken any action in the Maryland case.
. The Trustee makes a small argument that Rule 41(b) does not apply because the first sentence says “a defendant may move for dismissal ..." and here the order was entered sua sponte. But the second sentence proclaims the effect of not only "a dismissal under this subdivision" but also "any dismissal not provided for in this rule.” So even if the dismissal at issue here was not one provided for by Rule 41 because it was not on motion of a defendant, its effect still must be determined in accordance with that rule. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492299/ | ORDER DENYING MOTION FOR SUMMARY JUDGMENT
ARTHUR B. FEDERMAN, Bankruptcy Judge.
Debtor Deborah Ann Kraft (“debtor”) is indebted to Plaintiff Princess House, Inc. (“plaintiff’) in the amount of $439,817.00 pursuant to a judgment obtained by plaintiff in the United States District Court-Western District of Missouri (the “District Court”) on November 4, 1994. Plaintiff brought an adversary proceeding in debtor’s Chapter 11 bankruptcy case claiming said debt is nondis-chargeable pursuant to 11 U.S.C. § 523(a)(6). Plaintiff asked this Court to give collateral estoppel effect to the District Court judgment and to grant its motion for summary judgment. A hearing was held on plaintiffs motion for summary judgment on January 8, 1996.
Rule 7056 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) provides that Rule 56 of the Federal Rules of Civil Procedure applies when one party moves for summary judgment in an adversary proceeding in this Court. Rule 56 states that “the judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c); Beverly Hills Foodland, Inc. v. United Food and Commercial Workers Union, Local 655, 39 F.3d 191, 194 (8th Cir.1994). Plaintiff maintains there *737is no genuine issue of material fact as to the nondischargeability of the judgment debt based upon the District Court verdict, and the District Court judgment should be given collateral estoppel effect in this adversary proceeding. A judgment debtor may be precluded from relitigating an issue that was actually litigated and decided in an earlier proceeding. Combs v. Richardson, 838 F.2d 112, 113 (4th Cir.1988). However, the “determination that an issue was actually litigated and necessary to the judgment must be made with particular care.” Id. The Eighth Circuit requires that four criteria must be met before the doctrine of collateral estoppel applies: “(1) the issue sought to be precluded must be the same as that involved in the prior litigation; (2) that issue must have been actually litigated; (3) it must have been determined by a valid and final judgment; and (4) the determination must have been essential to the judgment.” Lovell v. Mixon, 719 F.2d 1373, 1376 (8th Cir.1983) (citing In re Piper Aircraft Distribution System Antitrust Litigation, 551 F.2d 213 (8th Cir.1977)). Thus, issue preclusion is limited to those issues actually litigated in a prior proceeding and essential to the judgment.
A brief summary of the District Court case is in order. Plaintiff makes home decoration products including lead crystal. It recruits “consultants” to sell Princess House products at in-home parties. Debtor began working for Princess House as a consultant in 1972, having been recruited by her mother. Over the years, debtor became an “organizer,” which means she recruited other people to sell Princess House products at in-home parties and received a sales commission called an “overwrite” on all products her recruits sold. Debtor claims that in the mid 1980’s plaintiffs product became harder to sell, and the product which was sold was backordered for long periods of time. Debt- or, therefore, decided to sell Jewels by Park Lane to supplement her decreasing income. She also informed some of her Princess House recruits about the advantages of selling Jewels by Park Lane. Debtor had no restrictions in her contract with plaintiff which prevented her from selling other products at in-home parties. Her sales recruits, however, had such a restriction in their contracts with Princess House. The jury found that debtor tortiously interfered with the contract between Princess House and debt- or’s sales recruits when she encouraged said recruits to sell Jewels by Park Lane.
After finding that debtor interfered with plaintiffs contractual relationships, the jury in the District Court case awarded actual damages against debtor in the amount of $357,087.00 for such interference. The jury also found that debtor willfully misappropriated and/or wrongfully used plaintiffs trade secrets and awarded actual damages in the amount of $439,817.00. There is, however, no specific provision of the Bankruptcy Code (the “Code”) which provides that debts arising from tortious interference with contractual relationships or misappropriation of trade secrets are nondisehargeable. See 11 U.S.C. § 523(a). Plaintiff, however, filed this adversary complaint under section 523(a)(6) of the Code. The issue for this Court, therefore, is whether a judgment based upon one or both of these torts is nondisehargeable in a subsequent bankruptcy case pursuant to 11 U.S.C. § 523(a)(6). The dischargeability of debt is a matter of federal law governed by the terms of the Code. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 658, 112 L.Ed.2d 755 (1991); Brown v. Felsen, 442 U.S. 127, 120-30, 99 S.Ct. 2205, 2208-09, 2211, 60 L.Ed.2d 767 (1979).
Section 523(a)(6) of the Code provides:
(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt—
(6)for willful and malicious injury by the debtor to another entity or to the property of another entity;
11 U.S.C. § 523(a)(6). Although the jury found that debtor acted willfully, there was no finding that her actions were malicious. The issue then is whether the jury’s findings are tantamount to a finding that debtor acted with malice. If so, the motion for summary judgment should be sustained, and the debt should be held nondisehargeable. If not, this Court should make its own determination as to whether debtor acted both willfully and *738maliciously, within the meaning of Bankruptcy Code Section 523(a)(6).
The Eighth Circuit holds that section 523(a)(6) is directed “at the nature of the conduct which gives rise to the debt, rather than the nature of the debt.” Johnson v. Miera (In re Miera), 926 F.2d 741, 745 (8th Cir.1991); See 3 Collier on Bankruptcy ¶ 523.16[1] (Lawrence P. King et al. eds. 15th ed. 1995). The Eighth Circuit also holds that conduct is intentional or willful if it is headstrong and knowing. Barclays American/Business Credit, Inc. (In re Long), 774 F.2d 875, 879 (8th Cir.1985) (citing Davis v. Aetna Acceptance Co., 293 U.S. 328, 332-33, 55 S.Ct. 151, 153, 79 L.Ed. 393 (1934)). Conduct is malicious if it is targeted at the creditor, at least in the sense that the conduct is certain or almost certain to cause financial harm. Id. The Court in Long goes on to state that a debtor acts with malice when he or she intends or fully expects to harm the economic interests of the creditor. Id. at 882.
In asking the Court to determine the collateral estoppel effect of a jury verdict, plaintiff has the “burden of introducing a record sufficient to reveal the controlling facts and pinpoint the exact issues litigated in the prior action.” Bender v. Tobman, 107 B.R. 20, 23 (S.D.N.Y.1989). Plaintiff alleges that the actions of debtor, as proven in the District Court, constitute conduct which resulted in willful and malicious injury to the plaintiff. Plaintiff submitted the jury instructions which were given to the jury prior to its deliberation. Jury Instruction No. 24 provides that:
In order to prevail on a claim for tor-tious interference, Princess House must prove the following elements:
1. The existence of a protectable contractual relationship between the plaintiff and a third party;
2. That the defendant knew of the relationship or expectancy;
3. That the defendant caused the third party to breach or terminate the contract;
4. That the defendant caused the breach or ending of the relationship intentionally and without justification or excuse; and
5. That the plaintiff suffered damages as a result of the defendant’s interference.
Doe. # 10, Ex. G, pg. 28. Plaintiff argued at the hearing that the fourth element of tor-tious interference requires the equivalent of a finding that debtor’s actions were willful and malicious. Plaintiff claims that debtor’s conduct, which caused the breach of plaintiffs contractual relationship with third parties, was certain or almost certain to cause plaintiff financial harm. Therefore, under Long, plaintiff argues such conduct is malicious. Such reasoning, if adopted, would mean that actions of a debtor which have the incidental effect of harming plaintiff would be considered malicious. But, as the Eighth Circuit has held, “[f]or conduct to be malicious under Long ... the conduct must not only be ‘certain or almost certain to cause ... harm,’ it must also be targeted at the creditor.” In re Miera, 926 F.2d 741, 744 (8th Cir.1991), citing In re Long, 774 F.2d at 881. In other words, the jury must have found that debtor’s conduct was motivated by an “intent to cause injury” to plaintiff, “rather than [being] merely an ‘intentional act which causes an injury.’ ” Id. at 880. Here, the fact that the jury found that debtor, acting in her own self-interest, took steps which resulted in harm to plaintiff, does not necessarily mean that the jury also found that she acted with malice towards the plaintiff.1
In Instruction No. 26 the jury was instructed that it had discretion to award punitive damages if it found debtor’s conduct to be “outrageous because of her evil motive or because of her reckless indifference to the rights of others.” Doc. # 10, Ex. G, pg. 31. *739The jury did not award punitive damages. Thus, the only possible basis for collateral estoppel is the finding that debtor acted “intentionally and without justification or excuse.” Doc. # 10, Ex. G, Jury Instruction No. 24 at pg 28. Such finding — without more — does not translate into a holding that debtor acted both willfully and maliciously. Therefore, I cannot find that the issue of debtor’s malicious conduct was actually litigated in the District Court case.
For these reasons, I find that there is a genuine issue of material fact as to whether debtor acted with malice when she interfered with plaintiff’s contractual relationships and misappropriated plaintiffs trade secrets. Plaintiffs motion for summary judgment is, therefore, DENIED.
Within 15 days of the date of this Order, counsel should prepare a joint pretrial Order, should determine the approximate amount of time required for trial, and should obtain a trial date from the Court.
IT IS SO ORDERED.
. At the hearing, plaintiffs counsel cited In re Hallaban, 113 B.R. 975 (C.D.Ill.1990), in which a Court found that a debt arising out of an intentional breach of a covenant not to solicit was “willful" and nondischargeable under Section 523(a)(6). In making such holding, the Court's analysis did not include a finding that such conduct was also malicious. In this Circuit, courts recognize that the elements of "willfulness” and "malice” are distinct, and must be analyzed separately in applying Section 523(a)(6). Long, 774 F.2d at 880-81. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492300/ | MEMORANDUM OF DECISION
ALFRED C. HAGAN, Bankruptcy Judge.
The Debtor, Roger G. Carlson, applied for, and will receive, approximately $3,624.00 from the Independent School District of Boise City in July of this year. The payment will be made to the Debtor under the provisions of the Boise City Independent School District Early Retirement Incentive Program (“ERIP”). The chapter 7 Trustee contends these funds are property of the chapter 7 estate. The Debtor claims the funds are exempt property under the provisions of Idaho Code § ll-604(l)(e). The Trustee further alleges that if the funds are exempt under the provisions of Idaho Code § 11-604(l)(e), the funds are still not necessary for the support of the Debtor and his dependents as that phrase is defined by the provisions of Idaho Code § 11-604(2).
FACTS
The Debtor filed his chapter 7 petition on October 26,1995. The Debtor was employed with the Boise School District. He elected to take early retirement and to participate in the ERIP program. Under that program, he will receive the sum of $3,624.26 as calculated by the Administrator of Business Operations of the Independent School District of Boise City. The payment is due in July, 1996. The gross amount to which the Debtor would be entitled is $5,642.50. The $3,624.26 is an estimate of the amount the Debtor will receive in July after deducting state and federal withholding taxes.
The Debtor admits he is not a party to a marriage contract but lives with and supports a women he considers his common-law spouse and her two children. He helps with the support of the two children. The spouse has no separate income.
DISCUSSION
The ERIP program of the Independent School District of Boise City is essentially a “buy-out” program whereby the School District offers cash incentives to employees to induce early retirement. It is not a program to which an employee has a vested right to participate in and it is not based on contract. An employee needs to apply to participate in the program and acceptance into the program is at the option of the District. The payment is termed a “grant” by the District in it’s written description of the program.
In order to be eligible for the ERIP, an individual must have been employed by the Independent School District of Boise City for *756at least fifteen consecutive years and must have attained the age of fifty-five years.
Idaho Code § 11-604(1) states:
Paragraph exempt to extent reasonably necessary for support.—
(1) An individual is entitled to exemption of the following property to the extent reasonably necessary for the support of him and his dependents ...
(e) Assets held, payments made, and amounts payable under a stock bonus, pension, profit-sharing, annuity, or similar plan or contract, providing benefits by reason of age, illness, disability, or length of service.
I conclude the Early Retirement Incentive Program of the Independent School District of Boise City fits into this statute. While the benefits of the plan are not a pension or an annuity, it is a “similar plan” that provides retirement benefits to those individuals accepted in the program based upon age and length of service.
Since the Debtor has no other source of income afforded by regular employment, these funds are reasonably necessaiy for his support regardless of the issue raised by the Trustee as to the Debtor’s legal obligation to support his spouse and her two children.
The Trustee’s objection to the Debtor’s claim of exemption will be denied. A separate order will be entered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484177/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D21-2206
Lower Tribunal No. 20-16054
________________
Emmanuela Bruno,
Appellant,
vs.
BHUJ 1 LLC,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Beatrice
Butchko, Judge.
The Monestime Firm, P.A., and Regine Monestime, for appellant.
Arnaldo Velez, P.A., and Arnaldo Velez; Salina Jivani, for appellee.
Before LOGUE, LINDSEY, and MILLER, JJ.
PER CURIAM.
Appellant Emmanuela Bruno challenges several orders on
appeal. Only one is timely. In that order, Bruno challenges the trial court’s
denial of her objection to the judicial sale without an evidentiary
hearing. Based on the record before us, we reverse and remand for an
evidentiary hearing. See Arsali v. Chase Home Fin. LLC, 121 So. 3d 511
(Fla. 2013).
Reversed and remanded.
2 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484145/ | IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Department of Health, :
Petitioner :
:
v. : No. 585 C.D. 2021
: Submitted: January 21, 2022
William Capouillez (Office of :
Open Records), :
Respondent :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, President Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE STACY WALLACE, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
PRESIDENT JUDGE COHN JUBELIRER FILED: November 16, 2022
The Department of Health (Department) petitions for review of the Final
Determination issued by the Office of Open Records (OOR) that granted in part and
denied in part William Capouillez’s (Requester) appeal from the decision of the
Department denying Requester’s Right-to-Know Law1 (RTKL) request. Requester
sought certain records relating to the Department’s actions in response to COVID-
19 mitigation orders and compliance measures regarding all gyms and fitness centers
in Mifflin County, Pennsylvania (Request). The Department denied the Request,
asserting that the responsive records are confidential under the Disease Prevention
and Control Law of 19552 (DPCL) and exempt from disclosure under the
noncriminal investigation exception set forth in Section 708(b)(17) of the RTKL, 65
1
Act of February 14, 2008, P.L. 6, 65 P.S. §§ 67.101-67.3104.
2
Act of April 23, 1956, P.L. (1955) 1510, 35 P.S. §§ 521.1-521.21.
P.S. § 67.708(b)(17). The OOR concluded that while some of the records are exempt
from disclosure, others were not protected by either the DPCL or the RTKL, or are
disclosable pursuant to Section 2805-11 of the Act of July 27, 2020, P.L. 702, No.
77 (Act 77), 71 P.S. § 720.305.3 On appeal, the Department argues the OOR erred
in concluding that the records ordered disclosed are not exempt under the DPCL or
that Act 77 operated to make records that are otherwise exempt from disclosure
subject to disclosure, and that the Department did not meet its burden of proving that
Section 708(b)(17) applied. For the reasons that follow, we affirm.
I. BACKGROUND
A. The Request and Denial4
On December 17, 2020, Requester filed the Request, which the Department
received on December 23, 2020, in which Requester sought
[a] copy of all records and supporting Departmental policy and
guidance pertaining to all transactions and activity taken by the []
Department . . . relative to the COVID-19 Orders and those compliance
measures undertaken by the Department regarding all gyms and health
& fitness centers located in Mifflin County P[ennsylvania] within the
last 12 months. To include[,] but not limited to: all complaints
received, Department letters and citations sent to M.R. Stax . . . and
Lewistown Health & Fitness Center . . . .
(Reproduced Record (R.R.) at 003, 007.)5 After obtaining a 30-day extension to
respond, the Department’s Open Records Officer (AORO) issued a letter on
3
Act 77 amended the Act of April 9, 1929, P.L. 177, known as the Administrative Code
of 1929, providing for access to records during a disaster declaration.
4
The Request, the Department’s Open Records Officer’s response, and Requester’s appeal
are found at Item 1 of the Certified Record and pages 001-008 of the Reproduced Record.
5
The page numbers of the Department’s Reproduced Record do not include the small “a”
required by Pennsylvania Rule of Appellate Procedure 2173, Pa.R.A.P. 2173 (“[T]he pages of . . .
(Footnote continued on next page…)
2
February 1, 2021, denying the Request. The Department asserted, among other
reasons, that the records sought are exempt from public disclosure under: (1) the
noncriminal investigation exception set forth in Section 708(b)(17) of the RTKL;
and (2) Section 102(2) of the RTKL because the records are confidential pursuant to
Section 15 of the DPCL, 35 P.S. § 521.15.6 (Id. at 003-004.) The Department
indicated that the records are part of epidemiological investigations, which are “an
exercise of the Department’s authority to conduct a noncriminal investigation.” (Id.
at 5.) Requester filed a timely appeal of the denial to the OOR. (Id. at 001-002.)
B. Appeal to the OOR
1. Department’s Position Statement & Affidavit
In support of its denial, the Department submitted an affidavit of Sharon
Watkins, Ph.D., the Director of the Department’s Bureau of Epidemiology (Bureau),
and legal argument contending that the records sought are exempt under the DPCL
and the RTKL.7 Specifically, the Department argued that pursuant to Section 102 of
the RTKL, records that are exempt under state law or regulation are not included in
the definition of public records. (Id. at 019.) The Department asserted that, with
limited exceptions, it does not have the authority to release any information it obtains
the reproduced record . . . shall be numbered separately in Arabic figures . . . thus, 1, 2, 3, etc.,
followed . . . by a small a, thus 1a, 2a, 3a, etc.”). For consistency of reference, the citations used
are as reflected in the Reproduced Record.
6
The AORO also denied the Request, asserting that the requested documents “would
disclose individually identifiable health information” and are, thus, exempt from disclosure under
Section 708(b)(5) of the RTKL, 65 P.S. § 708(b)(5); include records “which would disclose
personal identification information” and are, therefore, exempt under Section 708(b)(6)(i)(A) of
the RTKL, 65 P.S. § 67.708(b)(6)(i)(A); and the records were withheld as being attorney work-
product under Section 305 of the RTKL, 65 P.S. § 67.305. (R.R. at 003-005.) These alternative
reasons for denying the Request are not at issue in the present appeal.
7
The Department’s initial submission is found at Item 3 of the Certified Record and pages
015-027 of the Reproduced Record.
3
in the course of furthering the DPCL. (Id.) The Department argued that it is allowed
to disclose information that would otherwise be confidential under the DPCL when
“the Department determines that disclosure would further the purpose of the
[DPCL], which is to prevent and control the spread of disease, and for research
purposes, subject to strict supervision by health authorities,” and “if the individual
who is the subject of the information provides written authorization that the
information can be disclosed.” (Id. at 020 & n.2.) Thus, the Department argued that
the DPCL prohibits disclosure of information except in very limited circumstances
and that improper disclosure of information protected under the DPCL is a summary
offense. (Id. (citing Section 20 of the DPCL, 35 P.S. § 521.20).) The Department
further asserted that the requested records are protected under the DPCL because
they are “maintained by the Department as a result of investigating the COVID-19
pandemic, a disease or condition reportable under the Communicable and Non-
communicable Diseases Regulations promulgated pursuant to the DPCL.” (Id.)
Thus, the Department argued the records are protected from disclosure pursuant to
the DPCL.
The Department also argued that the requested records are protected under the
noncriminal investigation exception under Section 708(b)(17) of the RTKL, 65 P.S.
§ 67.708(b)(17). (Id. at 022.) The Department argued that, based on the definition
of “record,” the information that is contained in a complaint that is received by an
agency is exempted from disclosure and is, therefore, not a “public record.” (Id.
(citing Stein v. Plymouth Twp., 994 A.2d 1179, 1184 (Pa. Cmwlth. 2010) (Friedman,
S.J. concurring)).) Thus, the Department contended that the requested records are
also protected under the noncriminal investigation exception of the RTKL.
4
The Department also submitted Dr. Watkins’ affidavit. Therein, Dr. Watkins
attested to the purpose and role of the Bureau under the DPCL, which include
surveillance and investigation of diseases; consultation with and providing guidance
to health professionals, county boards of health, other government agencies, and the
public; and making recommendations on disease control and prevention. (R.R. at
024-025.) As to the Request, Dr. Watkins stated:
10. The records requested in the instant case deal with the Department’s
epidemiological investigation regarding a disease or condition
reportable under the Communicable and Non-communicable Diseases
Regulations promulgated pursuant to the DPCL. See [Sections 2(k), 3,
4, 5 of the DPCL,] 35 P.S. §§ 521.2(k) (definition of “reportable
disease”), 521.3 (relating to responsibility for disease prevention and
control), 521.4 (reports)[,] and 521.5 (control measures)[,] and 28 Pa.
Code § 27.3 (relating to reporting outbreaks and unusual diseases,
infections and conditions).
11. Specifically, the records requested in the instant case involve the
2019 novel coronavirus (COVID-19), a highly contagious virus
characterized as a pandemic by the World Health Organization on
March 11, 2020. Since approximately January 2020, in conjunction
with numerous federal agencies and various state agencies and
organizations, the focus of the Bureau has been to effectively manage
and prevent the spread of COVID-[19.]
12. The rapid spread of COVID-19, coupled with the pace and volume
of data and information accompanying the pandemic response,
necessitated that the Bureau receive and distribute information through
program areas that may normally not be tasked with doing so. Although
the Bureau has led the epidemiological response, numerous areas
within the Department have provided pivotal support.
....
15. Any information regarding the Department’s epidemiological
investigation constitute records received, created or maintained by the
Department pursuant to the Department’s authority under the DPCL
and are, therefore, confidential under the DPCL.
16. The records may be released only if the Department deems release
necessary to prevent and control the spread of disease.
5
17. The Department has released all records currently deemed
necessary to prevent and control the spread of disease at: [a link to a
website].
(R.R. at 024-027.)
2. Requester’s Response
Requester responded to the Department’s position statement and Dr. Watkins’
affidavit, arguing that there would be, in existence, some records that would not
breach confidentiality provisions and “would be applicable as to how the
Department reacted to the COVID-19 epidemic and what control measures and
preventative procedures [it] developed.” (Id. at 028.)8 Requester further argued that
not all of the records given to the Department as they relate to its approach to the
COVID-19 pandemic compliance measures breach the confidentiality provisions or
“meet the definition of not being deemed necessary to prevent and control the spread
of the disease.” (Id.) In response to the Department’s contention that it had released
all records it deemed necessary for the prevention and control of the spread of
COVID-19, Requester maintained that it is not incumbent upon him to “sort through
an entire website and an ominous volume of narratives, references, and documents
and make a determination as to what information is actually derived from written
Departmental guidance, policy, standard operating procedures or directives” as
related to the Bureau and the Department meeting their “overarching role with regard
to COVID-19.” (Id. at 029 (emphasis omitted).)
Requester’s response is found at Item 4 of the Certified Record and pages 028-029 of the
8
Reproduced Record.
6
3. Department’s Supplemental Response
At OOR’s request, the Department submitted a supplemental response with a
privilege log and attestation from its AORO.9 In its supplemental response, the
Department argued that its interpretation of the Request is reasonable. Specifically,
the Department interpreted the Request as “seek[ing] a single group of documents
as pertaining to complaints, citations, records and guidance specifically involving
gyms in Mifflin County.” (Id. at 036.) Based on the language of the Request itself,
the Department maintained that its interpretation, rather than the OOR’s apparent
interpretation that the Request involved two categories, the first generalized as to the
Department’s policy and guidance, and the second related to specific complaints and
citations about gyms in Mifflin County, is reasonable, but, under either
interpretation, its withholding of the records pursuant to the DPCL is proper. (Id.)
Additionally, the Department contended that the records are exempt from disclosure
pursuant to Section 305 of the RTKL, 65 P.S. § 67.305, because they are privileged
under the attorney work-product doctrine. (Id.) As to any complaints, the
Department also argued that the complainants have a constitutional right to privacy
under Pennsylvania State Education Association v. Department of Community and
Economic Development, 148 A.3d 142, 158 (Pa. 2016) (PSEA), and those privacy
interests outweighed the public benefit achieved through the disclosure of the
records sought. (Id. at 036-037.)
The Department reasserted its arguments that the records are exempt from
disclosure under both the DPCL and Section 708(b)(17) of the RTKL. With respect
to the noncriminal investigation exception, the Department argued that it has
statutory authority pursuant to the DPCL and Section 2102(a)-(b) of the
9
The Department’s supplemental response is found at Item 7 of the Certified Record and
pages 033-046 of the Reproduced Record.
7
Administrative Code of 1929, 71 P.S. § 532(a)-(b), to conduct an epidemiological
investigation, which is a noncriminal investigation. (Id. at 039.) Thus, the
Department maintained that “any complaint submitted to the Department regarding
the business closure order is a complaint related to the Department’s authority to
conduct epidemiological investigations and issue disease control measures and is[,]
thus[,] not a public record under the RTKL.” (Id. (footnote omitted).) With respect
to the confidentiality provision of the DPCL, the Department argued that any
document received or maintained pursuant to the DPCL is protected by the strict
confidentiality provision contained therein. (Id.) The Department maintained that
the requested records are “records which would be maintained pursuant to t[he
DPCL] because they are records related to a disease control measure” and, therefore,
covered by the DPCL’s prohibition on disclosure and not public records under
Section 102 of the RTKL. (Id. at 040 (citing 65 P.S. § 67.102).)
Finally, the Department argued that Act 77 did not apply to make the
requested records disclosable. (Id.) The Department explained that only certain
otherwise exempt records are public under Act 77, as set forth in Section 305 of Act
77, 71 P.S. § 720.305, subject to the Section 708(b) RTKL exceptions. (Id.) Relying
on its privilege log and the AORO’s attestation, which indicated that the named
record was not public under Act 77, the Department argued that Act 77 was not
implicated. (Id. at 040-041.) The privilege log reflects: the Bates numbers of the
15 records responsive to the Request; a description of the records in the form of the
records’ name; the legal bases for the exclusion, citing Section 15 of the DPCL,
Section 305 of the RTKL for attorney work-product, and/or Section 708(b)(17) of
the RTKL for the noncriminal investigation; and whether the document was a
“Public Record under Act 77 of 2020,” which listed each document as “No.” (Id. at
8
042-045.) In relevant part, the AORO attested that “[e]ach of the responsive records
withheld are described in the . . . [privilege] log” and “[n]one of the withheld records
constitute public records within the meaning of Act 77 of 2020.” (Id. at 046.)
4. Requester’s Supplemental Response
Requester responded to the Department’s submissions, arguing that, because
many of the complaints were anonymous, no privacy interest attached as the people
did not provide their name, address, or phone number.10 (Id. at 049.) Requester
further argued that the fact that the Department admits that these records, including
complaints, exist shows they are a part of the workings of government of which the
public should be informed. If they are not provided, Requester asserted, there would
be no way of knowing whether there was actually an issue of a business’s
noncompliance with the Department’s COVID-19 mitigation orders. (Id. at 049-
050.) With respect to the noncriminal investigation exception, Requester argued
that, while the Department admitted in the privilege log that investigations were
occurring, there was no information that could be used to discern how the
investigations were conducted or to identify “any criminal investigation and
compliance records, or fines and incarceration processes as referenced via a formal
reprimand letter,” which Requester maintained were in his possession. (Id. at 050.)
Accordingly, Requester asserted that the Department has public records that are
subject to disclosure under the RTKL. (Id. at 052.)
10
Requester’s supplemental response is found at Item 8 of the Certified Record and pages
048-052 of the Reproduced Record.
9
5. OOR’s Final Determination11
On April 26, 2021, the OOR issued its Final Determination granting
Requester’s appeal in part and denying it in part. The OOR found that the
Department failed to meet its burden in proving that the noncriminal investigation
exception applied. In doing so, the OOR explained that the affidavits of both Dr.
Watkins and the AORO did “not address its noncriminal investigations as required
under Section 708(b)(17) of the RTKL” and that “[the Department’s] unsworn
statements in its position statement may not be relied upon as competent evidence
to withhold records under the RTKL.” (OOR’s Final Determination at 5 (citing
Housing Auth. of the City of Pittsburgh v. Van Osdol, 40 A.3d 209 (Pa. Cmwlth.
2012)).) The OOR also determined that, of the 13 records claimed in the privilege
log to be confidential pursuant to Section 15 of the DPCL, the Department did not
establish that a final draft of a checklist for mitigation and enforcement (Final
Checklist) and 4 drafts of the checklist for mitigation and enforcement (Draft
Checklists) are covered by the DPCL’s confidentiality provision. (Id. at 9-10.)
Instead, the OOR concluded that
the checklist for mitigation and enforcement appear[ed] to be a tool or
form used by the Department in carrying out its duty under the DPCL,
but does not appear to be “reports of diseases, any records maintained
as a result of any action taken in consequence of such reports, or any
other records maintained pursuant to the [DPCL] or any regulations.”
(Id. (citing 35 P.S. § 521.15).) In contrast, the OOR held that “Spreadsheet[s] of
COVID business complaint[s] form response data” for six time periods
(Spreadsheets), a May 11, 2020 email complaint (Complaint), and a
11
The OOR’s Final Determination is found at Item 9 of the Certified Record, pages 054-
068 of the Reproduced Record, and as an attachment to the Department’s brief.
10
“[w]arning/notification letter of receipt of complaint dated May 22, 2020,” (Warning
Letter), are maintained pursuant to the Department’s authority under the DPCL. (Id.
at 9-10.)
However, the OOR did not end its analysis because Act 77 could make certain
records that are otherwise exempt from disclosure public during a disaster
declaration, subject to Section 708 of the RTKL. (Id. at 10.) While the OOR agreed
that, based on the attestation of Dr. Watkins and the privilege log submitted by the
Department, some of the records are protected under the DPCL, the OOR concluded
that six Spreadsheets may be subject to Act 77. (Id. at 11.) Based on its application
of Act 77 to those records, the OOR determined that, because the Spreadsheets
“contain data of complaints relating to the compliance of these businesses [in Mifflin
County], Act 77 makes such ‘data,’ used to implement policies or actions taken in
relation to a disaster declaration, public information.” (Id. at 11-12.) The OOR
rejected the AORO’s affidavit because the AORO merely stated that Act 77 did not
apply, which was “insufficient to meet the Department’s burden of proof.” (Id. at
12.) Accordingly, the OOR concluded that the Spreadsheets are subject to disclosure
pursuant to Act 77.
The OOR last addressed the claims of attorney work-product and whether
redactions would be permitted. On the first issue, the OOR concluded that the
Department could withhold a “Draft of checklist for mitigation and enforcement
with commentary from legal staff” and a “Draft memorandum between
D[epartment] legal staff regarding enforcement authority under the DPCL with
commentary” under the attorney work-product doctrine. (Id.) On the second issue,
the OOR held that the Department could redact the names of complainants from the
Spreadsheets, as the names were protected pursuant to PSEA. (Id. at 13.)
11
Based on these determinations, the OOR directed the Department to provide
Requester the Final Checklist, Draft Checklists, and Spreadsheets, subject to
redaction of any complainants’ names. (Id. at 15.) The Department now petitions
this Court for review of the OOR’s Final Determination.12
II. DISCUSSION
A. General Legal Principles
Under the RTKL, Commonwealth agencies are required to “provide public
records” to requesters “in accordance with [the RTKL].” Section 301(a) of the
RTKL, 65 P.S. § 67.301(a). The term “public record” is defined as “[a] record,
including a financial record, of a Commonwealth . . . agency that (1) is not exempt
under [S]ection 708; (2) is not exempt from being disclosed under any other Federal
or State law or regulation or judicial order or decree; or (3) is not protected by a
privilege.” 65 P.S. § 67.102. Records possessed by a Commonwealth agency are
presumed to be public records, but this “presumption shall not apply if: (1) the
record is exempt under [S]ection 708; (2) the record is protected by a privilege; or
(3) the record is exempt from disclosure under any other Federal or State law or
regulation or judicial order or decree.” 65 P.S. § 67.305(a). The Commonwealth
agency has the burden of proving, by a preponderance of the evidence, that the
record is exempt from public access. 65 P.S. § 67.708(a)(1). Thus, the Department
bears the burden of proving that the requested records are not public records
disclosable under the RTKL because either the DPCL precludes disclosure or the
records are exempt under Section 708 of the RTKL.
12
“[A] reviewing court, in its appellate jurisdiction, independently reviews the OOR’s
orders and may substitute its own findings of fact for that of the agency,” and “[is] entitled to the
broadest scope of review.” Bowling v. Off. of Open Recs., 990 A.2d 813, 818, 820 (Pa. Cmwlth.
2010) (en banc), aff’d, 75 A.3d 453 (Pa. 2013).
12
B. Department’s Arguments13
On appeal, the Department argues14 that the OOR erred in failing to conclude
that the records ordered disclosed are confidential and not disclosable pursuant to
the DPCL and its associated regulations, and, therefore, are not public records under
Section 102 of the RTKL.15 The Department asserts that Section 15 of the DPCL
prevents disclosure of not only reports of diseases, but also “‘any records maintained
as a result of any action taken in consequence of such reports, or any other records
maintained pursuant to this act or any regulations.’” (Department’s Brief (Br.) at 23
(quoting 35 P.S. § 521.15) (emphasis omitted).) According to the Department, the
disclosure of records under Section 15 of the DPCL falls within its judgment, and
the OOR erred in substituting its judgment for that of the Department. With respect
to the Final Checklist and Draft Checklists, the Department argues that the OOR
recognized that they are “a tool or form used by the Department in carrying out its
duty under the DPCL[,]” but nonetheless concluded that those records “do not
appear to be records that would be covered by the DPCL,” which reflected a
disregard of the plain language of Section 15 of the DPCL and Dr. Watkins’
affidavit. (Id. at 25-26 (emphasis in original).) As for the Spreadsheets, the
Department asserts that the OOR recognized that these records are covered by the
DPCL, but erred in concluding that Act 77 compelled the release of the records. The
Department contends that Act 77 does not preclude “an agency from invoking, as
appropriate, the existing exemptions in Section 708 of the RTKL.” (Id. at 30-31
13
Requester was precluded from filing a brief due to failing to comply with the Court’s
October 5, 2021 order, that required him to file a brief within 14 days of the date of that order.
14
The Department lists the Complaint and Warning Letter as being two of the records at
issue. (See Department’s Br. at 5.) However, the OOR did not order these to be disclosed. (See
Final Determination at 15.)
15
We have reorganized the Department’s arguments.
13
(internal quotations omitted; footnote omitted).) The Department contends that
because the Spreadsheets are exempt under Section 708(b)(17), they are not
disclosable under Act 77, and the OOR erred in concluding otherwise. (Id. at 31-
32.)
The Department further asserts that all of the records ordered disclosed are
exempt from disclosure under the noncriminal investigation exception set forth in
Section 708(b)(17) of the RTKL. Specifically, the Department contends that the
OOR erred in finding the affidavits of Dr. Watkins and its AORO insufficient to
support the application of this exception where those affidavits were found to be
sufficient for DPCL purposes. (Department’s Br. at 14-16.) The Department argues
that the privilege log’s description of the records made it clear that the records were
related to the Department’s ongoing, noncriminal investigation of noncompliance
with the COVID-19 mitigation orders, which fell within the Department’s statutory
authority. (Id. at 16-17 (citing Dep’t of Health v. Off. of Open Recs., 4 A.3d 803
(Pa. Cmwlth. 2010)).) Even if the affidavits are insufficient, the Department
maintains that the OOR still erred in finding this exception inapplicable because the
existence of the Department’s noncriminal investigations, and the relationship of
these records thereto, is apparent from the face of the record or is not in dispute. (Id.
at 17-18 (citing Off. of Governor v. Davis, 122 A.3d 1185 (Pa. Cmwlth. 2015)).)
This error is further demonstrated, the Department contends, by the OOR’s deviation
in this matter from its past decisions, which “recognized the precise noncriminal
investigative powers of the Department implicated by the records at issue in the
instant appeal,” for the same or similar records. (Id. at 19-20 (citing Mastriano v.
Pa. Dep’t of Health, Pa.Off.Open Rec. Docket No. AP 2020-1496, 2020 WL
6261478 (Final Determination filed Oct. 21, 2020); Upson v. Pa. Dep’t of Health,
14
Pa.Off.Open Rec. Docket No. AP 2020-0972, 2020 WL 4734761 (Final
Determination filed Aug. 12, 2020)).) Thus, the Department contends that the OOR
erred in determining that the noncriminal investigation exception does not apply to
the requested records. (Id. at 18, 21.)
C. Analysis
Section 102 of the RTKL excludes from the definition of “public records”
records which are “exempt from being disclosed under any other Federal or State
law . . . .” 65 P.S. § 67.102. The Department argues that the OOR erred in
concluding that the Final Checklist and Draft Checklists are not exempt under the
DPCL, and, therefore, these records are not public records as defined by the RTKL.
We disagree.
The DPCL addresses the prevention and control of diseases in the
Commonwealth. Section 4 of the DPCL requires that all communicable and non-
communicable diseases be reported to the Department. 35 P.S. § 521.4. “Upon the
receipt . . . by the [D]epartment . . . of a report of a disease which is subject to
isolation, quarantine, or any other control measure, . . . the [D]epartment shall carry
out the appropriate control measures in such manner and in such place as is provided
by rule or regulation.” Section 5 of the DPCL, 35 P.S. § 521.5; see also 28 Pa. Code
§ 27.60 (relating to disease control measures). The Administrative Code also
addresses the public health concerns and vests the Department with, inter alia, the
following authority:
(a) To protect the health of the people of this Commonwealth, and to
determine and employ the most efficient and practical means for the
prevention and suppression of disease;
(b) To cause examination to be made of nuisances, or questions
affecting the security of life and health, in any locality, and, for that
15
purpose, without fee or hindrance, to enter, examine and survey all
grounds, vehicles, apartments, buildings, and places, within the
Commonwealth, and all persons, authorized by the [D]epartment to
enter, examine and survey such grounds, vehicles, apartments,
buildings and places, shall have the powers and authority conferred
by law upon constables.
71 P.S. § 532(a)-(b). Section 15(a) of the DPCL, which governs the confidentiality
of reports and records, provides:
(a) State and local health authorities may not disclose reports of
diseases, any records maintained as a result of any action taken in
consequence of such reports, or any other records maintained
pursuant to th[e DPCL] or any regulations, to any person who is not
a member of the [D]epartment or of a local board or department of
health, except as follows:
(1) Where necessary to carry out the purposes of this act.
(2) Where necessary to inform the public of the risk of a
communicable disease.
35 P.S. § 521.15(a). Thus, reports of diseases, any records maintained as a result of
any action taken in consequence of such reports, or any other records maintained
pursuant to the DPCL, are confidential and subject to release in very limited
circumstances.
The OOR concluded that the Final Checklist and Draft Checklists are not
covered by Section 15(a) of the DPCL. (Final Determination at 9.) The OOR
reasoned that these checklists are not “reports of diseases, any records maintained as
a result of any action taken in consequence of such reports, or any other records
maintained pursuant to th[e DPCL] or any regulations,” which would fall under
Section 15(a), but are “tool[s] or form[s] used by the Department in carrying out its
duty under the DPCL.” (Id. at 9-10.) We agree with the OOR that the Final
16
Checklist and Draft Checklists are not protected under Section 15(a) of the DPCL.
Neither the affidavits nor the privilege log provided by the Department explain how
these Checklists fit within the confidentiality provision of the DPCL. Without a
description of the Checklists or an explanation as to why they are confidential, the
Court cannot conclude that the OOR erred in determining that they are not covered
under the DPCL. See Off. of the Dist. Att’y of Phila. v. Bagwell, 155 A.3d 1119,
1130 (Pa. Cmwlth. 2017) (holding that a conclusory affidavit, without more, is not
sufficient for the agency to sustain its burden of proving the responsive records were
exempt from disclosure).
In contrast, the OOR determined that the Spreadsheets are records subject to
Section 15(a) of the DPCL, a result not challenged by the Department or Requester.16
(Final Determination at 10.) Instead, the Department challenges the OOR’s
conclusion that, despite Section 15(a) of the DPCL applying to the Spreadsheets,
Act 77 operates to make the Spreadsheets disclosable based on its determination that
the Department did not establish that the noncriminal investigation exception set
forth in Section 708(b)(17) of the RTKL applied, a conclusion the Department also
asserts was in error.
Act 77 amended the Administrative Code to provide for certain categories of
records to be considered “public” during a disaster declaration issued pursuant to
Section 7301(c) of the Emergency Management Services Code, 35 Pa.C.S.
§ 7301(c). Section 2805-H of the Administrative Code of 1929 provides, subject to
Section 708 of the RTKL, the following is considered a public record during a
disaster declaration:
16
Because neither the Department nor Requester challenged the OOR’s determination that
the Spreadsheets are records subject to Section 15(a) of the DPCL, that determination is not before
the Court for review.
17
(1) Data used by a Commonwealth agency for any rules, policies or
action taken by the Commonwealth agency in relation to a disaster
declaration.
(2) The process by which a Commonwealth agency determines how the
Commonwealth agency will collect the data used by the
Commonwealth agency for any rules, policies or actions taken by the
Commonwealth agency in relation to a disaster declaration.
(3) Any quantitative or predictive models based on the data collected
by a Commonwealth agency which are then used by the
Commonwealth agency for any rules, policies or actions taken by the
Commonwealth agency in relation to a disaster declaration.
71 P.S. § 720.305 (emphasis added). Under its plain language, the applicability of
Act 77 – that is, a confidential record will become a public record during a disaster
declaration, is subject to Section 708 of the RTKL, which authorizes Commonwealth
agencies to establish that a record is exempt from disclosure if the record falls into
an enumerated exception.
The OOR, in its Final Determination, concluded that the Spreadsheets are
subject to Act 77. (Final Determination at 11.) The OOR explained Act 77 could
apply because “the responsive spreadsheets contain data of complaints relating to
the compliance of these businesses” to the COVID-19 orders, which made the
Spreadsheets “‘data,’ used to implement policies or actions taken in relation to a
disaster declaration, public information.” (Id. at 11-12.) The OOR concluded that
the affidavits provided, which merely stated that Act 77 did not apply, are
insufficient to establish that the Spreadsheets should be exempt under Section 708
of the RTKL.
The Department does not argue that the OOR erred in concluding that the
Spreadsheets fall within Act 77 because they constitute “data” that the Department
18
used to implement policy or take action in relation to the disaster declaration.17
Accordingly, whether the OOR erred in applying Act 77 to the Spreadsheets is tied
to whether the OOR erred in concluding that the Department failed to meet its burden
of proving that the Spreadsheets, along with the Final Checklist and Draft Checklists,
are exempt under Section 708 of the RTKL. If the OOR’s determination that the
Department failed to meet its burden of proof under Section 708 is upheld, its
determination on Act 77’s application to the Spreadsheets should also be upheld.
The only exception to disclosure under Section 708 of the RTKL that the
Department asserts is the noncriminal investigation exception, found at Section
708(b)(17), which exempts from public disclosure:
(i) Complaints submitted to an agency
(ii) Investigative materials, notes, correspondence, and reports.
....
(iv) A record that includes information made confidential by law.
....
(vi) A record that, if disclosed, would do any of the following:
(A) Reveal the institution, progress or result of an agency
investigation, except the imposition of a fine or civil penalty, . . . .
17
Even if it did, we would agree with the OOR’s conclusion that the Spreadsheets are “data
of complaints relating to the compliance of” various businesses. (Final Determination at 11.) The
plain language of Act 77 states that “[d]ata used by a Commonwealth agency for any rules, policies
or actions taken by the Commonwealth agency in relation to a disaster declaration” are deemed
expressly public. See 71 P.S. § 720.305(1). The Spreadsheets are data sets that are compiled over
a period of time relating to a business’s noncompliance with the business closure orders. Thus,
while the Spreadsheets fall under the ambit of the DPCL, because the information is data used by
the Department “for any rules, policies or actions taken by the” Department, 71 P.S. § 720.305(1),
during the COVID-19 pandemic, the information is made expressly public during a disaster
declaration.
19
65 P.S. § 67.708(b)(17)(i)-(ii), (iv), and (vi)(A). This Court has determined that the
term “investigation” means “a systemic or searching inquiry, a detailed examination,
or an official probe.” Dep’t of Health, 4 A.3d at 811. For this exception to apply,
an agency’s inquiry, examination, or official probe must be conducted as “part of
the agency’s official duties.” Id. at 814. “As such, in order for an agency to conduct
any type of investigation, the investigation would necessarily be a part of the
agency’s official duties.” Id.
The Department argues that it met its burden of proving that all of the
responsive records, including the Final Checklist, Draft Checklists, and
Spreadsheets that were ordered disclosed, are exempt under the noncriminal
investigation exception of the RTKL because those records were created and
maintained in its epidemiological investigation relating to the ongoing COVID-19
pandemic, which falls into its official duties under the DPCL. In support of its claim
that the requested records were exempt, the Department provided Dr. Watkins’
affidavit, in which she attested, in relevant part:
2. The Bureau, whose records are the focus of this RTKL request, and
whose purpose is to assist in meeting the Department’s assigned
statutory obligations pursuant to the [DPCL] and subject to the
confidentiality provisions therein . . . .
3. The role of the Bureau is to:
• Understand disease patterns and at-risk populations
• Identify unusual patterns of illness and injury in the
Commonwealth
• Identify causative factors for disease and injury
• Investigate emergent public health problems
• Develop recommendations, control measures, and preventative
procedures for illness and injury
• Evaluate the success of public health interventions and programs
in reducing disease and injury incidence[.]
....
20
9. The Bureau directly conducts or indirectly supervises hundreds of
disease outbreak investigations per year.
10. The records requested in the instant case deal with the Department’s
epidemiological investigation regarding a disease or condition
reportable under the Communicable and Non-communicable Diseases
Regulations promulgated pursuant to the DPCL.
....
15. Any information regarding the Department’s epidemiological
investigation constitute records received, created or maintained by the
Department pursuant to the Department’s authority under the
DPCL . . . .
(R.R. at 024-027.) In addition to Dr. Watkins’ affidavit, the Department provided
the privilege log wherein the AORO identified 10 records, including those ordered
disclosed by the OOR, as being withheld from disclosure pursuant to the noncriminal
investigation exception under the RTKL. (Id. at 042-046.) However, the OOR
determined that the affidavits of Dr. Watkins and the AORO “do not address [the
Department’s] noncriminal investigations as required under Section 708(b)(17) of
the RTKL,” and thus, concluded that the Department failed to meet its burden
showing that this exception applies. (Final Determination at 5.) Upon our review
of the Department’s evidentiary submissions, we agree.
“Testimonial affidavits found to be relevant and credible may provide
sufficient evidence in support of a claimed exemption.” Heavens v. Pa. Dep’t of
Env’t Prot., 65 A.3d 1069, 1073 (Pa. Cmwlth. 2013). This Court has aptly stated
that
[a]ffidavits are the means through which a governmental agency . . .
justifies nondisclosure of the requested documents under each
exemption upon which it relied upon. The affidavits must be detailed,
nonconclusory, and submitted in good faith . . . . Absent evidence of
bad faith, the veracity of an agency’s submissions explaining reasons
for nondisclosure should not be questioned.
21
Off. of the Governor v. Scolforo, 65 A.3d 1095, 1103 (Pa. Cmwlth. 2013) (en banc)
(emphasis added) (internal citation omitted). Additionally, “a privilege log, which
typically lists the date, record type, author, recipients, and a description of the
withheld record, can serve as sufficient evidence to establish an exemption,
especially where the information in the log is bolstered with averments in an
affidavit.” McGowan v. Pa. Dep’t of Env’t Prot., 103 A.3d 374, 381 (Pa. Cmwlth.
2014) (citing Heavens, 65 A.3d at 1075-77). However, the Court has cautioned that
while testimonial affidavits may provide sufficient evidence in support of an
exception, “conclusory affidavits, standing alone, will not satisfy the burden of proof
an agency must sustain to show that an” exception applies to deny access to records.
Bagwell, 155 A.3d at 1130.
In this matter, Requester seeks “all transactions and activity taken by the []
Department . . . relative to COVID-19 Orders and those compliance measures
undertaken by the Department regarding all gyms and health & fitness centers
located in Mifflin County P[ennsylvania,] within the last 12 months” which includes
“complaints received, Department letters and citations sent” to two specific gyms
Requester identified. (R.R. at 007.) While Dr. Watkins attested to the records being
within the ambit of the Department’s statutorily granted authorities, the attestation
lacks any reference to the Department’s authority as it relates to the COVID-19
pandemic in particular. Dr. Watkins attests that “[t]he records requested in the
instant case deal with the Department’s epidemiological investigation regarding a
disease or condition reportable under the Communicable and Non-communicable
Diseases Regulations promulgated pursuant to the DPCL.” (Id. at 026.) The
affidavit does not state, other than generally referencing the DPCL and the
Department’s regulations, how the requested records relate to the Department
22
epidemiological investigation or how such investigation relates to the asserted
RTKL exception. In short, Dr. Watkins’ affidavit summarizes the Department’s
statutory and regulatory duties without linking those duties to the requested records.
The affidavit “contains no further specifics. It is, therefore, without more, not
sufficient to prove that the records are exempt” under the noncriminal investigation
exception of the RTKL. Scolforo, 65 A.3d at 1104. Additionally, the privilege log
submitted by the Department simply describes the record by name and the legal basis
for the exclusion by citing the claimed relevant statutory provision without any
additional information. (R.R. at 042-045.) The privilege log does not provide the
“date, . . . , author, recipients, [or] a description of the withheld record[s].”
McGowan, 103 A.3d at 381. Thus, neither the affidavit nor the privilege log, either
individually or taken together, is enough to satisfy the Department’s burden of
showing that the responsive records, and the Final Checklist, Draft Checklists, and
Spreadsheets, in particular, are exempt from disclosure under Section 708(b)(17) the
RTKL, and the OOR did not err in so concluding.18 Correspondingly, as the
Department did not establish that the disclosure of the Spreadsheets under Act 77
was prevented by Section 708 of the RTKL, the OOR did not err in holding that Act
77 required their disclosure subject to the redaction of the complainants’ names.
18
Although the Department argues the OOR’s Final Determination conflicts with some of
the OOR’s prior opinions, we are not bound by those opinions. Further, a close review of those
prior opinions reveals that the affidavits filed by the Department in those matters appear to have
been more detailed and gave more specific descriptions of the responsive records and/or the bases
underlying why those records were exempt as records relating to the noncriminal investigation
implemented pursuant to alleged violations of business closure orders. See Mastriano, slip op. at
3-4; Upson, slip op. at 4-5.
23
III. CONCLUSION
Based on the foregoing reasons, the records directed to be disclosed by the
OOR – the Final Checklist, Draft Checklists, and Spreadsheets with the
complainants’ names redacted – are not exempt from disclosure under the DPCL,
the RTKL, or Act 77. Accordingly, the OOR’s Final Determination is affirmed.
__________________________________________
RENÉE COHN JUBELIRER, President Judge
24
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Department of Health, :
Petitioner :
:
v. : No. 585 C.D. 2021
:
William Capouillez (Office of :
Open Records), :
Respondent :
ORDER
NOW, November 16, 2022, the Order of the Office of Open Records, entered
in the above-captioned matter, is hereby AFFIRMED.
__________________________________________
RENÉE COHN JUBELIRER, President Judge | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484185/ | DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
KARL W. JOHNSON,
Appellant,
v.
STATE OF FLORIDA,
Appellee.
No. 4D21-3042
[November 16, 2022]
CORRECTED OPINION
Appeal of order denying rule 3.850 motion from the Circuit Court for
the Fifteenth Judicial Circuit, Palm Beach County; Kirk C. Volker, Judge;
L.T. Case No. 502016CF005091A.
Karl W. Johnson, Raiford, pro se.
Ashley Moody, Attorney General, Tallahassee, and Deborah Koenig,
Assistant Attorney General, West Palm Beach, for appellee.
PER CURIAM.
Karl Johnson appeals an order summarily denying his multi-claim
motion filed under Florida Rule of Criminal Procedure 3.850. We reverse
and remand for further review of Appellant’s claim that defense counsel
failed to present evidence to support Appellant’s entrapment defense. We
affirm in all other respects.
Appellant was convicted following a jury trial of trafficking in heroin.
Subjective entrapment was his trial defense. See § 777.201(2), Fla. Stat.
(2016) (“A person prosecuted for a crime shall be acquitted if the person
proves by a preponderance of the evidence that his or her criminal conduct
occurred as a result of an entrapment.”). “Subjective entrapment … ‘is
applied in the absence of egregious law enforcement conduct and focuses
on inducement of the accused based on an apparent lack of predisposition
to commit the offense.’” State v. Laing, 182 So. 3d 812, 815 (Fla. 4th DCA
2016) (quoting State v. Henderson, 955 So. 2d 1193, 1194 (Fla. 4th DCA
2007)).
A detective was the State’s primary witness. The detective was working
undercover when he contacted Appellant to set up a drug buy which led
to Appellant’s arrest and conviction.
Within his Rule 3.850 motion, Appellant contends defense counsel
failed to present available video evidence to support the entrapment
defense and corroborate Appellant’s trial testimony. Appellant alleges the
video shows promises made to him by the detective that induced Appellant
to engage in the drug deal, and the video would also impeach the
detective’s testimonial claim that he didn’t know “Alicia,” an individual
whom Appellant claims was an integral person in the alleged entrapment.
To refute the claim, the State and trial court relied on a Nelson 1 hearing
which the trial court held during sentencing regarding the video. However,
that hearing solely addressed Appellant’s complaint that trial counsel
failed to use the video to adequately impeach the detective.
In evaluating Appellant’s Rule 3.850 motion, the trial court did not view
the video at issue. Because the prior Nelson hearing did not sufficiently
cover the factual allegations made in the postconviction motion regarding
substantive use of the evidence, we reverse and remand for further review
of the claim. See Brown v. State, 770 So. 2d 1285, 1285 (Fla. 3d DCA
2000) (“Because testimony at the Nelson hearing did not fully address the
factual issues raised in the defendant’s 3.850 motion and sworn affidavit,
we reverse and remand for an evidentiary hearing.”). On remand, the trial
court may attach additional portions of the record that conclusively refute
Appellant’s claim or, alternatively, conduct an evidentiary hearing.
Affirmed in part, reversed in part and remanded.
WARNER, CIKLIN and FORST, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
1 Nelson v. State, 274 So. 2d 256 (Fla. 4th DCA 1973).
2 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484189/ | 2022 IL App (1st) 220247
Nos. 1-22-0247, 1-22-0504 (cons.)
Third Division
November 16, 2022
____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
____________________________________________________________________________
BRIAN LESS, Individually and as ) Appeal from the Circuit Court
Independent Administrator of the Estate of ) of Cook County.
Dayna Less, )
)
Plaintiff-Appellee, ) No. 19 L 012720
)
v. )
) The Honorable
MERCY HOSPITAL AND MEDICAL ) Karen L. O’Malley,
CENTER, an Illinois Corporation; SDI ) Judge Presiding.
SECURITY, INC., an Illinois Corporation; )
TRINITY HEALTH CORPORATION, an )
Indiana Corporation; and MARGARITA )
CADENA, as Independent Administrator )
for the Estate of Juan Lopez, Deceased )
)
Defendants )
)
(Mercy Hospital and Medical Center, an )
Illinois Corporation, Defendant-Appellant). )
)
____________________________________________________________________________
JUSTICE GORDON delivered the judgment of the court, with opinion.
Justices Reyes and Burke concurred in the judgment and opinion.
No. 1-22-0247
OPINION
¶1 In November 2018, an armed assailant shot and killed three people at Mercy Hospital and
Medical Center (Mercy Hospital) in Chicago, Illinois. About two months later, the hospital
retained two investigators to determine if safety protocols could be improved. Each
investigator generated a report of his findings. Subsequently, Brian Less (plaintiff), the father
of one of the victims, filed a wrongful death suit against the hospital. During written discovery,
plaintiff requested the production of the investigators’ reports. Mercy Hospital refused to
produce the reports, citing privilege under the Medical Studies Act (735 ILCS 5/8-2101 (West
2016)), which exempts from production documents “used in the course of internal quality
control or of medical study for the purpose of reducing morbidity or mortality, or for improving
patient care or increasing organ and tissue donation.” In response, plaintiff argued that the
Medical Studies Act was inapplicable to the reports at issue. Ultimately, the trial court ordered
production of both reports. Mercy Hospital still refused to produce the reports and instead
moved the trial court for a finding of friendly civil contempt in order to challenge the discovery
orders. The trial court granted the motions. On appeal, Mercy Hospital challenges the orders
requiring production of the reports. For the following reasons, we affirm the trial court’s orders
requiring production of both reports but vacate the findings of friendly civil contempt and fines.
¶2 I. BACKGROUND
¶3 On November 18, 2018, Juan Lopez shot and killed three people at Mercy Hospital in
Chicago. On November 21, 2019, plaintiff filed a complaint against the hospital 1 on behalf of
his deceased daughter, Dayna Less, who was killed by Lopez. In his complaint, plaintiff
1
The complaint also named Mercy Hospital’s parent company, Trinity Health Corporation, as
well as Mercy Hospital’s security guard provider, SDI Security, Inc., as defendants.
2
No. 1-22-0247
alleged that defendants’ numerous negligent acts and omissions, including their failure to lock
the lobby doors or to timely announce the presence of an active shooter, resulted in Dayna’s
death.
¶4 In January 2019, less than two months after the shootings, Mercy Hospital retained William
Sako of Telgian Engineering and Consulting, and Frederick A. Carmen of Holy Cross Health
to assess whether safety improvements could be made at the hospital. Sako and Carmen
generated reports of their findings (Sako report and Carmen report, respectively). Sako
completed his report on January 22, 2019, and Carmen completed his report on April 24, 2019.
¶5 On November 21, 2019, plaintiff filed his initial complaint consisting of 12 counts,
including wrongful death and survival claims. Written discovery commenced shortly after the
filing of the complaint. Plaintiff sought to determine, among other things, how and why Lopez
was undetected on the hospital premises for over an hour and a half and then reentered the
hospital through unlocked doors several minutes after he fired multiple shots in Mercy
Hospital’s parking lot (killing his first victim in plain view of hospital security) and how and
why Mercy Hospital security failed to announce a “Code Silver” to warn people about the
active shooter situation until well after Dayna was dying on the floor of the hospital lobby.
¶6 On December 31, 2019, plaintiff filed his first set of interrogatories to Mercy Hospital,
which included a request for the identification of the people and entities that investigated the
shootings. Mercy Hospital objected to answering this interrogatory on the basis of attorney-
client privilege, insurer-insured privilege, attorney work product, and the Medical Studies Act
and provided a privilege log to plaintiff and the court identifying the Sako and Carmen reports.
In support of its privilege claims, Mercy Hospital submitted the affidavit of Lisa Vidovic,
Mercy Hospital’s director of quality and patient safety. Vidovic averred that on January 10,
3
No. 1-22-0247
2019, Mercy Hospital’s Quality and Safety Committee “authorized assessments into the
Department of Public Safety by third parties to identify if opportunities exist for improvement
in safety.” She further attested that the Sako and Carmen reports were “generated at the
direction of the [hospital’s] Quality and Safety Committee with the goal of determining if any
opportunities for improvement and safety at [the hospital existed] and recommendations to the
Department of Quality and Safety in that area would be made.”
¶7 After learning about the existence of the Sako and Carmen reports, plaintiff issued a
subpoena to Sako requesting all documents relating to the shootings that were in his possession,
custody, or control. Mercy Hospital then filed a motion to quash plaintiff’s subpoena, claiming
that Sako’s report was privileged under the Medical Studies Act and that Sako was a consultant
in the litigation. Plaintiff filed a response in opposition to the motion to quash and filed a cross-
motion to compel production of the reports.
¶8 The trial court heard oral arguments on the motion to quash and the cross-motion to compel
and took them under advisement. On September 28, 2021, plaintiff moved to compel the
production of the documents that Mercy Hospital (and Trinity Health Corporation) were
withholding as privileged, including the reports at issue. The trial court conducted an in camera
review of the reports but did not make any specific findings as to that review other than what
was contained in its ruling. On January 10, 2022, the trial court ruled that the Carmen report
was not privileged under the Medical Studies Act because Carmen was retained to evaluate
security measures, not the quality of patient care as contemplated by the Medical Studies Act.
The court also ruled that the Sako report was protected by litigation consultant work-product
privilege under Illinois Supreme Court Rule 201(b)(3) (eff. July 1, 2014).
4
No. 1-22-0247
¶9 Disagreeing with the trial court’s ruling that the Carmen report was not privileged, Mercy
Hospital moved for the entry of an order finding Mercy Hospital to be in friendly civil contempt
pursuant to Illinois Supreme Court Rule 304(b)(5) (eff. Mar. 8, 2016), which permits an
interlocutory appeal of “[a]n order finding a person or entity in contempt of court which
imposes a monetary or other penalty.” It also requested a fine in the amount of $50. The trial
court granted the motion.
¶ 10 On February 22, 2022, Mercy Hospital filed a timely notice of appeal of three orders: 1)
the January 10, 2022, order that found the Carmen report was not privileged, 2) the January
18, 2022, order that required production of, inter alia, the Carmen report, and 3) the January
28, 2022, order that held Mercy Hospital in friendly civil contempt.
¶ 11 Disagreeing with the trial court’s ruling that the Sako report was protected, plaintiff moved
the trial court to reconsider its ruling. On March 3, 2022, the trial court heard oral arguments
on that motion. The trial court found that it had erred in concluding that the Sako report was
protected under Rule 201(b)(3). The court reasoned that although Sako had eventually been
retained as a consultant by Mercy Hospital, he was initially retained by the hospital’s Quality
and Safety Committee to assess its security measures. The report that was generated was based
on that initial assessment of security measures that existed before Sako was retained as a
consultant. Since Rule 201(b)(3) pertains only to consultants retained in anticipation of
litigation, the trial court found it inapplicable to the Sako report. Therefore, the trial court
ordered production of the Sako report.
¶ 12 Mercy Hospital then followed the same procedure to challenge the ruling requiring
production of the Sako report: it moved the court to enter an order holding Mercy Hospital in
friendly civil contempt. The trial court granted that motion and fined Mercy Hospital $50.
5
No. 1-22-0247
¶ 13 On April 12, 2022, Mercy Hospital filed a timely notice of appeal of the two orders: (1)
the March 4, 2022, order granting plaintiff’s motion to reconsider and requiring Mercy
Hospital’s production of the Sako report and (2) the March 16, 2022, order holding Mercy
Hospital in friendly civil contempt.
¶ 14 These appeals were consolidated and are now properly before this court for consideration.
¶ 15 II. ANALYSIS
¶ 16 On appeal, Mercy Hospital claims that the trial court erred in ordering production of the
Carmen and Sako reports. The instant appeal was filed pursuant to Illinois Supreme Court Rule
304(b)(5) (eff. Mar. 8, 2016), which permits an interlocutory appeal of “[a]n order finding a
person or entity in contempt of court which imposes a monetary or other penalty.” Here, the
trial court found defendant in friendly civil contempt of court and imposed a monetary penalty.
Accordingly, we have jurisdiction to consider defendant’s appeal. “Because discovery orders
are not final orders, they are not ordinarily appealable.” Norskog v. Pfiel, 197 Ill. 2d 60, 69
(2001). “However, it is well settled that the correctness of a discovery order may be tested
through contempt proceedings.” Norskog, 197 Ill. 2d at 69. “When [a party] appeals contempt
sanctions imposed for violating, or threatening to violate, a pretrial discovery order, the
discovery order is subject to review. [Citation.] Review of the contempt finding necessarily
requires review of the order upon which it is based.” Norskog, 197 Ill. 2d at 69. Before
addressing the two discovery orders at issue, we set forth the applicable standard of review.
¶ 17 Whether a privilege under the Medical Studies Act applies to reports generated by safety
protocol investigators is a question of law that we review de novo. See Eid v. Loyola University
Medical Center, 2017 IL App (1st) 143967, ¶ 40. De novo consideration means we perform
6
No. 1-22-0247
the same analysis that a trial judge would perform. Khan v. BDO Seidman, LLP, 408 Ill. App.
3d 564, 578 (2011).
¶ 18 The Medical Studies Act provides, in relevant part:
“All information, interviews, reports, statements, memoranda ***or other data of ***
medical organizations under contract with health maintenance organizations or with
insurance or other health care delivery entities or facilities, *** or committees of
licensed or accredited hospitals or their medical staffs, including Patient Care Audit
Committees, Medical Care Evaluation Committees, Utilization Review Committees,
Credential Committees and Executive Committees, or their designees (but not the
medical records pertaining to the patient), used in the course of internal quality control
or of medical study for the purpose of reducing morbidity or mortality, or for improving
patient care or increasing organ and tissue donation, shall be privileged, strictly
confidential and shall be used only for medical research, increasing organ and tissue
donation, the evaluation and improvement of quality care, or granting, limiting or
revoking staff privileges or agreements for services ***.” (Emphasis added) 735 ILCS
5/8-2101 (West 2016).
¶ 19 Thus, to be privileged under the Medical Studies Act, Mercy Hospital must establish that
the reports were (1) documents of (2) an organization covered under the Medical Studies Act
that (3) were used for one of the purposes specified in the Medical Studies Act.
¶ 20 A. The Carmen Report
¶ 21 On appeal, Mercy Hospital argues that the Carmen report is privileged under the Medical
Studies Act. As noted above, the Carmen report was generated by Frederick A. Carmen of
Holy Cross Health to assess whether safety improvements should be made at the hospital.
7
No. 1-22-0247
¶ 22 There does not appear to be a dispute regarding whether the Carmen report is a “document”
or whether Mercy Hospital is an organization covered under the Medical Studies Act. The
point of contention is whether the Carmen report was used for one of the purposes specified in
the Medical Studies Act. We therefore start with the text and purpose of the Medical Studies
Act.
¶ 23 As noted above, the Medical Studies Act protects, in relevant part, documents “used in the
course of internal quality control or of medical study for the purpose of reducing morbidity or
mortality, or for improving patient care or increasing organ and tissue donation.” The purpose
of the Medical Studies Act “is to ensure that members of the medical profession will effectively
engage in self-evaluation of their peers in the interest of advancing the quality of health
care.” Roach v. Springfield Clinic, 157 Ill. 2d 29, 40 (1993). The Medical Studies Act also
serves “to encourage candid and voluntary studies and programs used to improve hospital
conditions and patient care or to reduce the rates of death and disease.” Niven v. Siqueira, 109
Ill. 2d 357, 366 (1985). “The statute is premised on the belief that, absent the statutory peer-
review privilege, physicians would be reluctant to sit on peer-review committees and engage
in frank evaluations of their colleagues.” Roach, 157 Ill. 2d at 40. “The Act was never intended
to shield hospitals from potential liability [citation], and legal advice is not a goal of the
protection offered by the Act.” (Internal quotation marks omitted.) Webb v. Mount Sinai
Hospital & Medical Center of Chicago, Inc., 347 Ill. App. 3d 817, 825 (2004).
¶ 24 In the case at bar, Carmen was retained by the hospital to assess the security department at
the medical center and provide a report of his findings. The Medical Studies Act, however,
extends privilege to documents related to patient care. Though we recognize that security
measures may conceivably bear on patient care, such a broad reach is not contemplated by the
8
No. 1-22-0247
Medical Studies Act, as its very language specifically refers to “improving patient care” and
has no mention regarding hospital security or safety. 735 ILCS 5/8-2101 (West 2016).
¶ 25 Mercy Hospital asserts that Carmen’s report dealt with internal quality control and that is
sufficient to bring it under the scope of the Medical Studies Act. However, the plain language
of the statute also states that the internal quality control must be “for the purpose of reducing
morbidity or mortality.” In our cases dealing with the Medical Studies Act, morbidity and
mortality are metrics used in the patient care context, not in the security context. Moreover,
Mercy Hospital has not identified a single case to support its broad reading of the Medical
Studies Act language. In other words, it can point to no case where a document unrelated to
the provision of patient medical care has been found to be privileged under the Medical Studies
Act.
¶ 26 We turn to our prior decisions in Giangiulio v. Ingalls Memorial Hospital, 365 Ill. App. 3d
823 (2006), and Dunkin v. Silver Cross Hospital, 215 Ill. App. 3d 65 (1991), for further
guidance. In Giangiulio, a patient at a hospital was attacked by another patient during her stay,
and filed a lawsuit against the hospital alleging that the hospital was negligent because it failed
to prevent the attack by a third party—the other patient. Giangiulio, 365 Ill. App. 3d at 826.
During discovery, the victim in that case requested production of numerous documents related
to the treating staff and hospital employees, including their identities, addresses, and phone
numbers. Giangiulio, 365 Ill. App. 3d at 826-27. This court, noting the narrow scope of the
Medical Studies Act, held that the Medical Studies Act does not cover a document “that is not
used in connection with a program or study designed to improve internal quality control,
patient care or reduce morbidity or mortality.” Giangiulio, 365 Ill. App. 3d at 835. The court
found that because the information requested regarding treating staff and hospital was “not
9
No. 1-22-0247
quality assurance information involving patient care,” the Medical Studies Act did not apply.
Giangiulio, 365 Ill. App. 3d at 835-36.
¶ 27 In Dunkin, a hospital visitor fell on a hospital’s stairway and sued the hospital for injuries
sustained caused by negligence. Dunkin, 215 Ill. App. 3d at 66. During discovery, the plaintiff
there requested incident reports of past slip-and-falls on the staircase at issue. Dunkin, 215 Ill.
App. 3d at 66. The hospital refused to produce the reports based on privilege, and the trial court
ordered its production. Dunkin, 215 Ill. App. 3d at 66-67. The appellate court affirmed the trial
court’s finding that the Medical Studies Act did not apply because the incident reports were
not related to patient medical care. Dunkin, 215 Ill. App. 3d at 68.
¶ 28 The information and documents requested in Giangiulio and Dunkin did not deal with
patient care, and therefore, the Medical Studies Act did not apply. Here, as in those two cases,
the report at issue does not relate to patient care and is therefore not privileged under the
Medical Studies Act.
¶ 29 Mercy Hospital relies on the Zajac v. St. Mary of Nazareth Hospital Center, 212 Ill. App.
3d 779 (1991), and Flannery v Lin, 176 Ill. App. 3d 652 (1988), decisions, arguing they support
their claim of privilege. In Zajac, a medical malpractice case, the plaintiff sought information
regarding the hospital’s review of one of its doctors. Zajac, 212 Ill. App. 3d at 789. Moreover,
the hospital review procedures there were used for internal quality control, improving patient
care, and reducing mortality and morbidity. Zajac, 212 Ill. App. 3d at 789. Because these are
all purposes specially enumerated in the Medical Studies Act, the court determined they were
privileged. Zajac, 212 Ill. App. 3d at 789.
¶ 30 In Flannery, the patient sought production of the “code blue evaluation report.” Flannery,
176 Ill. App. 3d at 655. An affidavit submitted therewith explained that that report was part of
10
No. 1-22-0247
the hospital’s internal quality control procedure: the report was presented to the hospital’s
“ICU/CCU” committee, which then made policy recommendations to the department of
medicine regarding which changes in procedure might improve the quality of patient care.
Flannery, 176 Ill. App. 3d at 658. The court found that this uncontroverted affidavit adequately
showed that the report was used for internal quality control and therefore privileged. Flannery,
176 Ill. App. 3d at 658.
¶ 31 Mercy Hospital’s reliance on the Zajac and Flannery cases is not persuasive. The Zajac
and Flannery cases, both of which were medical malpractice cases, are distinguishable from
the case at bar because the information sought in those cases dealt directly with patient care
and quality control and was therefore privileged under the Medical Studies Act. Since Carmen
was retained to investigate the safety and security protocols at the hospital and not for the
purpose of improving patient care, his report on his findings falls outside the scope of the
Medical Studies Act. We note that, at oral argument, Mercy Hospital was unable to identify
anything in Carmen’s report (or Sako’s report) that dealt specifically with improving patient
care. Accordingly, Mercy Hospital cannot rely on privilege under the Medical Studies Act to
withhold the Carmen report and must produce it.
¶ 32 B. The Sako Report
¶ 33 Regarding the Sako report, Mercy Hospital asserts two bases for privilege: the Medical
Studies Act and Illinois Supreme Court Rule 201(b)(3) (eff. July 1, 2014). As noted above, the
Sako report was generated by William Sako of Telgian Engineering and Consulting at the
behest of Mercy Hospital’s Quality and Safety Committee to identify whether opportunities
existed for improving safety at the hospital.
11
No. 1-22-0247
¶ 34 Regarding the claim of privilege under the Medical Studies Act, we find that the Sako
report is not privileged for the same reasons set forth above in our discussion on the Carmen
report. We turn now to Mercy Hospital’s claim under Illinois Supreme Court Rule 201(b)(3)
(eff. July 1, 2014), which reads, in relevant part,
“Consultant. A consultant is a person who has been retained or specially employed in
anticipation of litigation or preparation for trial but who is not to be called at trial. The
identity, opinions, and work product of a consultant are discoverable only upon a
showing of exceptional circumstances under which it is impracticable for the party
seeking discovery to obtain facts or opinions on the same subject matter by other
means.”
¶ 35 In the case at bar, Vidovic’s affidavit indicates that Sako was retained on January 10, 2019,
at the behest of Mercy Hospital’s Quality and Safety Committee to determine whether safety
improvements could be made. On January 11, 2019, he was retained as a consultant by Mercy
Hospital’s counsel. Thus, Sako was retained by the hospital for two separate roles. The report
that he generated regarding safety improvements was the product of his role in assessing safety
protocols at the hospital. Nothing in the record indicates that the report was generated in
anticipation of litigation. Moreover, based on the in camera review undertaken by the trial
court, there is nothing to indicate that the report contained any privileged discussions between
Sako and Mercy Hospital’s counsel. Rather, as the trial court noted, the report detailed
“meetings that [Sako] conducted in the generation of the report, and that included an on-site
visit, meeting with the director of public safety, and meetings with various hospital personnel
and stakeholders.”
12
No. 1-22-0247
¶ 36 Since Sako’s report was generated in connection with his role as a safety and security
investigator, the consultant litigation privilege under Rule 201(b)(3) does not apply to his
report, and it must be produced.
¶ 37 C. Contempt Findings
¶ 38 Despite our conclusion requiring production of the two reports, we nevertheless vacate the
trial court’s contempt findings. It is appropriate for a party to request that a contempt order be
entered against it so that party may seek immediate appeal of a trial court’s discovery
order. Webb, 347 Ill. App. 3d at 828. “In such situations, where the party sought the order in
good faith and was not contemptuous of the trial court’s authority, we may vacate the contempt
order even when we find that the trial court’s discovery order was proper.” Webb, 347 Ill. App.
3d at 828 (citing Berry v. West Suburban Hospital Medical Center, 338 Ill. App. 3d 49, 57
(2003)). In the case at bar, Mercy Hospital appropriately sought review of discovery orders
requiring the production of documents it believed were privileged. Accordingly, we vacate the
contempt orders and accompanying fines entered against Mercy Hospital.
¶ 39 III. CONCLUSION
¶ 40 For the reasons set forth above, we affirm both trial court orders requiring production of
the two reports at issue. Both reports fall outside of the scope of the Medical Studies Act as
well as Rule 201(b)(3). However, despite our findings as to the trial court’s discovery orders,
we nevertheless vacate the trial court’s contempt findings.
¶ 41 Affirmed in part and vacated in part.
13
No. 1-22-0247
Less v. Mercy Hospital & Medical Center, 2022 IL App (1st) 220247
Decision Under Review: Appeal from the Circuit Court of Cook County, No. 19-L-012720;
the Hon. Karen L. O’Malley, Judge, presiding.
Attorneys Christopher M. Daddino and Grace Burner, of Cassiday Schade
for LLP, of Chicago, for appellant.
Appellant:
Attorneys Matthew J. Piers, Mark S. Dym, Kate E. Schwartz, and Justin
for Tresnowski, of Hughes Socol Piers Resnick & Dym, Ltd., of
Appellee: Chicago, for appellee.
14 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484161/ | Third District Court of Appeal
State of Florida
Opinion filed November 16, 2022.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-83
Lower Tribunal No. 20-19028SP
________________
Tower Imaging, LLC, a/a/o Cindy Boyer,
Appellant,
vs.
Direct General Insurance Company,
Appellee.
An Appeal from the County Court for Miami-Dade County, Miesha S.
Darrough, Judge.
Daly & Barber, P.A., and John C. Daly, Matthew C. Barber and
Christina M. Kalin (Plantation), for appellant.
McFarlane Dolan & Prince, and William J. McFarlane, III and Michael
K. Mittelmark (Coral Springs), for appellee.
Before SCALES, LINDSEY and LOBREE, JJ.
PER CURIAM.
Appellant, plaintiff below, Tower Imaging, LLC a/a/o Cindy Boyer,
appeals a December 15, 2021 trial court order that granted appellee,
defendant below, Direct General Insurance Company’s June 1, 2021
amended motion to dismiss Tower Imaging’s complaint. After Tower Imaging
filed its initial brief with this Court, Direct General filed a notice conceding
that the trial court erred by granting Direct General’s dismissal motion.
Normally, in a confession of error case, upon receipt of an appellee’s
confession of error, we review the record and, assuming we agree with
appellee that the trial court erred, we issue a short reversal opinion. See,
e.g., Feldman v. Citizens Prop. Ins. Corp., 97 So. 3d 975 (Fla. 3d DCA 2012).
Upon our review of the record in this case, however, we are compelled to
dismiss the appeal for lack of jurisdiction. The challenged order merely
grants Direct General’s motion to dismiss; the order on appeal does not
dismiss Tower Imaging’s lawsuit. The challenged order, therefore, is a non-
final, non-appealable order. Notwithstanding Direct General’s confession of
error, we are without jurisdiction to adjudicate the appeal. See Bank of
America, N.A. v. Cartus, 920 So. 2d 774 (Fla. 3d DCA 2006).
Appeal dismissed.
2 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484186/ | DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
KARL W. JOHNSON,
Appellant,
v.
STATE OF FLORIDA,
Appellee.
No. 4D21-3042
[November 16, 2022]
Appeal of order denying rule 3.850 motion from the Circuit Court for
the Fifteenth Judicial Circuit, Palm Beach County; Kirk C. Volker, Judge;
L.T. Case No. 502016CF005091A.
Karl W. Johnson, Raiford, pro se.
Ashley Moody, Attorney General, Tallahassee, and Deborah Koenig,
Assistant Attorney General, West Palm Beach, for appellee.
PER CURIAM.
Karl Johnson appeals an order summarily denying his multi-claim
motion filed under Florida Rule of Criminal Procedure 3.850. We reverse
and remand for further review of Appellant’s claim that defense counsel
failed to present evidence to support Appellant’s entrapment defense. We
affirm in all other respects.
Appellant was convicted following a jury trial of trafficking in heroin.
Subjective entrapment was his trial defense. See § 777.201(2), Fla. Stat.
(2016) (“A person prosecuted for a crime shall be acquitted if the person
proves by a preponderance of the evidence that his or her criminal conduct
occurred as a result of an entrapment.”). “Subjective entrapment … ‘is
applied in the absence of egregious law enforcement conduct and focuses
on inducement of the accused based on an apparent lack of predisposition
to commit the offense.’” State v. Laing, 182 So. 3d 812, 815 (Fla. 4th DCA
2016) (quoting State v. Henderson, 955 So. 2d 1193, 1194 (Fla. 4th DCA
2007)).
A detective was the State’s primary witness. The detective was working
undercover when he contacted Appellant to set up a drug buy which led
to Appellant’s arrest and conviction.
Within his Rule 3.850 motion, Appellant contends defense counsel
failed to present available video evidence to support the entrapment
defense and corroborate Appellant’s trial testimony. Appellant alleges the
video shows promises made to him by the detective that induced Appellant
to engage in the drug deal, and the video would also impeach the
detective’s testimonial claim that he didn’t know “Alicia,” an individual
whom Appellant claims was an integral person in the alleged entrapment.
To refute the claim, the State and trial court relied on a Nelson 1 hearing
which the trial court held during sentencing regarding the video. However,
that hearing solely addressed Appellant’s complaint that trial counsel
failed to use the video to adequately impeach the detective.
In evaluating Appellant’s Rule 3.850 motion, the trial court did not view
the video at issue. Because the prior Nelson hearing did not sufficiently
cover the factual allegations made in the postconviction motion regarding
substantive use of the evidence, we reverse and remand for further review
of the claim. See Brown v. State, 770 So. 2d 1285, 1285 (Fla. 3d DCA
2000) (“Because testimony at the Nelson hearing did not fully address the
factual issues raised in the defendant’s 3.850 motion and sworn affidavit,
we reverse and remand for an evidentiary hearing.”). On remand, the trial
court may attach additional portions of the record that conclusively refute
Appellant’s claim or, alternatively, conduct an evidentiary hearing.
Affirmed in part, reversed in part and remanded.
WARNER, FORST and KUNTZ, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
1 Nelson v. State, 274 So. 2d 256 (Fla. 4th DCA 1973).
2 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484187/ | DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
GATELAND VILLAGE CONDOMINIUM, INC.,
Appellant,
v.
MARY ELIZABETH HOLLY,
Appellee.
No. 4D21-2639
[November 16, 2022]
Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Mily R. Powell, Judge; L.T. Case No. 20-5094 CACE (09).
Michele K. Feinzig of Michele K. Feinzig, P.A., Coral Springs, and Beth
G. Lindie and Jeremy M. Zubkoff of Esler & Lindie, P.A., Fort Lauderdale,
for appellant.
Tyrone A. Latour of Latour Esquire, P.A., Coral Springs, for appellee.
CIKLIN, J.
Gateland Village Condominium, Inc. (“Gateland”), appeals an order
dismissing its suit against Mary Elizabeth Holly (“Holly”). We agree with
Gateland that the trial court erred in dismissing its suit based on defective
service and a finding that Gateland failed to comply with statutory
conditions precedent to suit. We therefore reverse the challenged order.
This appeal arises from a suit brought by Gateland, a condominium
association, against Holly, a unit owner. In Count III of the complaint,
Gateland alleged Holly breached the governing documents by refusing to
provide Gateland access to her unit and by failing to maintain and repair
her air conditioning system which was causing continued damage to the
common area condominium roof and water intrusion into another
condominium owner’s unit. Gateland also alleged it satisfied all conditions
precedent to bringing suit. With respect to that count, Gateland sought a
judgment for damages including pre-judgment interest, “lien rights under
the Declaration of Condominium and Bylaws and for foreclosure upon
same, costs, and reasonable attorney’s fees and costs pursuant to Florida
Statute §718.303 and/or the Declaration of Condominium and/or
Bylaws.”
At the same time it filed its complaint, Gateland moved for a temporary
injunction based on allegations contained in the complaint. Holly filed an
opposition to the motion, asserting that the trial court lacked personal
jurisdiction due to the absence of service of process. After a hearing on
Gateland’s temporary injunction motion, at which Holly’s counsel
appeared, the trial court granted relief but made some accommodations
for Holly based in part on stipulations made by the parties. Subsequently,
Holly filed an answer (which she twice amended) and in which she sought
affirmative relief. Additionally, Holly raised affirmative defenses, including
her claim that the trial court lacked personal jurisdiction because she was
not personally served with the summons and complaint. Holly also alleged
that Gateland failed to satisfy prerequisites to filing suit required by
statutes and by the condominium’s governing documents.
Holly moved for summary judgment, seeking dismissal of the suit based
on the three affirmative defenses which she asserted, in addition to other
grounds. Gateland responded, asserting among other things that Holly
waived service of process by seeking affirmative relief, including
reinstallation of her air conditioning unit, reimbursement of prior
assessments which she had paid, and attorney’s fees. Gateland also
argued that the statutes on which Holly relied did not apply and the
bylaws’ notice provision does not apply to emergency situations.
The trial court agreed with Holly and dismissed the suit without
prejudice to refile; however, the court did not address Holly’s argument
that Gateland failed to satisfy the notice provision of the bylaws.
On appeal, Gateland argues, and we agree, that based on the record
before us, which includes court filings and transcripts of the injunction
hearing, Holly waived the issue of defective service of process and lack of
personal jurisdiction by seeking affirmative relief. See generally Babcock
v. Whatmore, 707 So. 2d 702, 704 (Fla. 1998) (“[A] defendant waives a
challenge to personal jurisdiction by seeking affirmative relief – such
requests are logically inconsistent with an initial defense of lack of
jurisdiction.”). Even if Holly had not waived the issue, dismissal was
improper. See Nationsbank, N.A. v. Ziner, 726 So. 2d 364, 367 (Fla. 4th
DCA 1999) (recognizing that where improper service by mail was made
within the allotted time period, “instead of moving for a dismissal, the
proper procedure is for a defendant to move to quash service”).
Gateland also argues the trial court erred in dismissing based on
Gateland’s purported failure to satisfy statutory conditions precedent to
2
suit found in sections 718.116(5)-(6) and 718.121(4), Florida Statutes
(2020). In a written order of dismissal, the court ruled as follows:
The Condominium Act sets out preconditions that must be
satisfied before the Association can file to foreclose on Holly.
See Florida Statute 718.121(4) and 718.116(5) and subsection
(6). These include sending a notice of intent to file a claim of
lien, recording a claim of lien, and sending a notice of intent
to foreclose a claim of lien, all before filing to foreclose. . . .
Here, the Association failed to satisfy statutory . . .
preconditions to foreclosure by (1) failing to send Holly a
notice of intent to file a claim of lien, (2) failing to record a
claim of lien against Holly, and (3) failing to send Holly a notice
of intent to foreclose a claim of lien.
This was error. Section 718.116(6) does not provide for a condition
precedent to the filing of a foreclosure suit. Rather, it provides for written
notice of intent to foreclose on a lien for unpaid assessments before a
foreclosure judgment may be entered. See § 718.116(6)(b), Fla. Stat.
(2020). Further, because Gateland’s suit also sought injunctive relief and
damages based on a breach of the condominium’s governing documents,
the trial court erred in dismissing the entire suit based on a finding that
applied only to Gateland’s request for a foreclosure judgment.
Additionally, section 718.116 does not contain an absolute requirement
of pre-lien notice or recordation of a claim of lien. Instead, section
718.116(5)(a) provides that “[t]he association has a lien on each
condominium parcel to secure the payment of assessments” and that “the
lien is effective from and shall relate back to the recording of the original
declaration of condominium.” As we explained in Calendar v. Stonebridge
Gardens Section III Condo. Ass’n, 234 So. 3d 18 (Fla. 4th DCA 2017):
Section 718.116 clearly states that an association has a lien
on each parcel, and implies that a claim of lien against a unit
owner for assessments becomes necessary only in cases
where a mortgagee is also asserting a claim:
(5)(a) The association has a lien on each condominium
parcel to secure the payment of assessments . . . . [T]he
lien is effective from and shall relate back to the recording
of the original declaration of condominium . . . . However,
as to first mortgages of record, the lien is effective from
and after recording of a claim of lien in the public records
of the county in which the condominium parcel is
3
located.
§ 718.116, Fla. Stat. Consequently, under section 718.116,
where a declaration of condominium is recorded, such as in
the instant case, recording a claim of lien is not an absolute
prerequisite to the enforcement of a lien for unpaid
assessments. . . .
Id. at 19 (alterations in original).
Finally, although the applicable version of section 718.121(4) provides
that a notice of intent must be sent to the unit owner prior to filing a lien,
Gateland did not file a lien. Rather, as previously discussed, Gateland had
a lien upon recording the original declaration of condominium.
Based on the foregoing, we reverse the dismissal of Gateland’s suit and
remand for further proceedings.
Reversed and remanded for further proceedings.
WARNER and ARTAU, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
4 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484188/ | 2022 IL App (1st) 211533
First District
Third Division
November 16, 2022
No. 1-21-1533
)
BEVERLY J. SHAW, )
)
Plaintiff and Counterdefendant-Appellee, )
)
v. )
) Appeal from the Circuit Court
U.S. FINANCIAL LIFE INSURANCE COMPANY, a ) of Cook County.
Foreign Corporation; MICHELLE SHAW McKAY; )
TERRANCE SHAW; and PHILLIP SHAW, ) No. 20 CH 04851
)
Defendants ) The Honorable
) Anna M. Loftus,
(Terrance Shaw, Defendant and Counterplaintiff- ) Judge Presiding.
Appellant). )
JUSTICE REYES delivered the judgment of the court, with opinion.
Justices Gordon and Burke concurred in the judgment and opinion.
OPINION
¶1 The instant appeal requires us to determine whether a statute governing the effect of a
judgment for dissolution of marriage on a life insurance policy should be applied retroactively.
Plaintiff, Beverly Shaw (Beverly), 1 is the former wife of decedent Tyrone Shaw (Tyrone).
During their marriage, Beverly was listed as the beneficiary of Tyrone’s life insurance policy,
with Tyrone’s three children, defendants Terrance Shaw (Terrance), Michelle Shaw McKay
(Michelle), and Phillip Shaw (Phillip), named as contingent beneficiaries. 2 When Beverly and
Tyrone dissolved their marriage, however, the judgment for dissolution of marriage
1
As most of the parties share the same surname, we refer to them by their first names.
2
Terrance is the only child involved in the instant appeal.
No. 1-21-1533
(dissolution judgment) was silent as to the life insurance policy. Several years after the entry
of the dissolution judgment, the Illinois legislature enacted a statute which provided that a
dissolution judgment generally operated to revoke an ex-spouse’s status as a beneficiary under
a previously issued life insurance policy. See 750 ILCS 5/503(b-5) (West 2018). A year later,
Tyrone died. Beverly sought to collect under the life insurance policy, but the insurer,
defendant U.S. Financial Life Insurance Company (U.S. Financial), declined payment, citing
the statute. Beverly filed a declaratory judgment action against the insurer and the children,
seeking a declaration that she was entitled to the proceeds of the life insurance policy. The
circuit court granted summary judgment in Beverly’s favor, and Terrance now appeals. For the
reasons that follow, we affirm the judgment of the circuit court.
¶2 BACKGROUND
¶3 The facts relevant to the instant appeal are largely undisputed. Beverly and Tyrone were
married in 1991. Terrance and Michelle were Tyrone’s children from a previous marriage,
while Phillip was born during the marriage; all three children were adults at the time the
marriage was dissolved.
¶4 In 2004, U.S. Financial issued a life insurance policy to Tyrone, which contained a death
benefit of $250,000, payable upon Tyrone’s death. Beverly was named as the primary
beneficiary; under “Relationship,” the policy stated “wife.” The contingent beneficiary under
the policy was listed as “all children of insured.” All premiums due under the policy were paid
in full as of the date of Tyrone’s death in 2020, and there is no dispute that the policy was in
full force and effect.
¶5 In March 2016, a dissolution judgment was entered in the circuit court of Cook County,
dissolving the marriage of Beverly and Tyrone. The judgment, which was in the form of a
2
No. 1-21-1533
preprinted form with handwritten additions, was silent regarding the policy. The dissolution
judgment was modified in April 2017, but the modification did not address life insurance.
¶6 In 2018, the Illinois legislature passed Public Act 100-871 (eff. Jan. 1, 2019), which
amended section 503 of the Illinois Marriage and Dissolution of Marriage Act (Act) (750 ILCS
5/503 (West 2016)) by adding paragraphs under subsection (b-5) (the statute). This statute,
which became effective January 1, 2019, provides that the designation of a former spouse as
beneficiary of a life insurance policy entered into prior to a dissolution judgment is no longer
effective after the entry of the dissolution judgment unless the dissolution judgment designates
the former spouse as beneficiary, the insured redesignates the former spouse as beneficiary, or
the former spouse is to receive the proceeds in trust for a child or dependent of either former
spouse. See id. § 503(b-5)(2).
¶7 Tyrone died in February 2020, and Beverly made a claim under the life insurance policy
as primary beneficiary of the policy. While U.S. Financial acknowledged that the policy was
valid and the proceeds were payable to an appropriate beneficiary, U.S. Financial refused to
pay the proceeds to Beverly, citing the statute.
¶8 In July 2020, Beverly filed a complaint for declaratory judgment in the circuit court of
Cook County, seeking a declaration that she was entitled to the proceeds from the life insurance
policy as the statute was not in effect at the time the dissolution judgment was entered.
¶9 U.S. Financial filed an appearance, followed by an answer and an interpleader
counterclaim. U.S. Financial also filed a motion for an order authorizing it to deposit the funds
at issue with the clerk of the circuit court and discharging it from any liability in the instant
case. The circuit court granted its motion (although it ordered the funds to be deposited at a
3
No. 1-21-1533
bank rather than with the clerk of the circuit court) and dismissed U.S. Financial from the
litigation with prejudice.
¶ 10 Michelle and Phillip, two of Tyrone’s children, did not file appearances, and the circuit
court entered findings of default against them for failure to appear or answer the complaint.
Terrance, however, filed an appearance, answer, and affirmative defenses. Terrance also filed
a counterclaim, seeking a declaration that he was the lawful beneficiary of the life insurance
policy and, since Michelle and Phillip had been found in default, that he was entitled to the
entirety of the proceeds.
¶ 11 In October 2020, Beverly filed a motion for summary judgment on her complaint and on
Terrance’s counterclaim, claiming that the statute did not apply to the instant case, as it was
not in effect at the time the dissolution judgment was entered.
¶ 12 While the motion for summary judgment was pending, the circuit court vacated the default
entered against Michelle, and Michelle filed an appearance. Beverly then filed a motion for
summary judgment against Michelle, raising the same claims as in her previous motion for
summary judgment. In turn, Michelle also filed a motion for summary judgment, claiming that
the statute revoked Beverly’s status as a beneficiary and, therefore, Michelle and Terrance
were entitled to the proceeds of Tyrone’s life insurance policy. Terrance subsequently also
filed a motion for summary judgment which was substantively similar to Michelle’s motion
for summary judgment. The circuit court was thus presented with four motions for summary
judgment: two filed by Beverly, one filed by Michelle, and one filed by Terrance, all of which
concerned the applicability of the statute to Tyrone’s life insurance policy.
¶ 13 On August 10, 2021, the circuit court entered an order granting Beverly’s motion for
summary judgment in part and denying Michelle’s and Terrance’s motions for summary
4
No. 1-21-1533
judgment. The circuit court found that the statute at issue was a substantive, not procedural,
one, meaning that it had only prospective effect and could not be applied retroactively. The
circuit court further found that the operative date for purposes of application of the statute was
the date of the dissolution judgment, not the date of the insured’s death, meaning that the statute
would not apply here, where the dissolution of Beverly and Tyrone’s marriage preceded the
effective date of the statute.
¶ 14 While the circuit court agreed with Beverly that the statute did not apply, the circuit court,
however, found that there were several outstanding affirmative defenses raised by Terrance
that prevented the circuit court from directing that the proceeds of the policy be paid to Beverly.
The circuit court noted that Terrance had raised affirmative defenses of unclean hands and
unjust enrichment, either of which could result in Beverly being deprived of the proceeds of
the policy, but found that these affirmative defenses were “woefully underpled.” The circuit
court therefore sua sponte dismissed Terrance’s affirmative defenses pursuant to section 2-615
of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2020)) without prejudice and
with leave to replead. The circuit court, however, indicated that “[i]f the defenses are not
repled, then the litigation would be terminated.” The circuit court gave Terrance 28 days to
replead his affirmative defenses and set the matter for a status hearing on September 14, 2021.
¶ 15 On September 14, 2021, the circuit court entered an order in which it found that Terrance
had not amended his affirmative defenses and had indicated to the circuit court that he did not
require any additional time to do so. The circuit court accordingly found “no bar to the
disbursement of the life insurance proceeds” to Beverly and entered judgment in favor of
Beverly. The circuit court further ordered the disbursement of the entirety of the life insurance
proceeds to Beverly. Finally, the circuit court dismissed U.S. Financial’s interpleader
5
No. 1-21-1533
counterclaim and Terrance’s counterclaim with prejudice and found no just reason to delay
enforcement or appeal of its order.
¶ 16 On September 30, 2021, Terrance filed a motion to reconsider the “order entered on August
10, 2021,” arguing that the circuit court had misapprehended the law in finding that the statute
did not apply. On November 23, 2021, the circuit court denied the motion to reconsider, and
this appeal follows.
¶ 17 ANALYSIS
¶ 18 On appeal, the sole issue raised by Terrance is the applicability of the statute to Tyrone’s
life insurance policy. Prior to addressing that issue, however, we must consider our jurisdiction
to decide the instant appeal, as Beverly contends that Terrance’s notice of appeal was untimely.
We note that we previously denied a motion to dismiss the appeal on the same basis. Our prior
interlocutory order, however, is not dispositive, as we may revisit the issue of our jurisdiction
at any time. See In re Application of the County Treasurer & Ex Officio County Collector of
Cook County, 308 Ill. App. 3d 33, 47 (1999) (the denial of a motion to dismiss an appeal is not
final and “the question of our jurisdiction to hear a case may and indeed must be revisited
before final disposition of the appeal”).
¶ 19 Appellate Jurisdiction
¶ 20 The question of whether we have jurisdiction over an appeal presents a question of law,
which we review de novo. In re Marriage of Demaret, 2012 IL App (1st) 111916, ¶ 25; In re
Marriage of Gutman, 232 Ill. 2d 145, 150 (2008). De novo consideration means we perform
the same analysis that a trial judge would perform. XL Specialty Insurance Co. v. Performance
Aircraft Leasing, Inc., 2019 IL App (1st) 181031, ¶ 62.
6
No. 1-21-1533
¶ 21 Illinois Supreme Court Rule 303(a)(1) (eff. July 1, 2017) provides that a notice of appeal
must be filed with the clerk of the circuit court no more than 30 days “after the entry of the
final judgment appealed from, or, if a timely posttrial motion directed against the judgment is
filed,” within 30 days after the entry of the order disposing of the last pending postjudgment
motion directed against the judgment. When an appellant fails to file a timely notice of appeal,
the appellate court lacks jurisdiction to hear the appeal, and the appeal must be dismissed.
Oruta v. Biomat USA, Inc., 2017 IL App (1st) 152789, ¶ 5.
¶ 22 In this case, the circuit court entered an order on August 10, 2021, denying Terrance’s and
Michelle’s motions for summary judgment and granting Beverly’s motions for summary
judgment in part. The circuit court, however, found that Beverly’s right to the insurance
proceeds was dependent on Terrance’s affirmative defenses, making summary judgment on
that issue inappropriate, and gave Terrance leave to amend his affirmative defenses. On
September 14, 2021, after Terrance failed to do so, the circuit court entered judgment in
Beverly’s favor and directed payment of the proceeds to her. 3 On September 30, 2021,
Terrance filed a motion to reconsider the “order entered on August 10, 2021”; this motion did
not make any reference to the September 14 order. The motion was denied on November 23,
2021, and Terrance filed a notice of appeal on November 29, 2021. Beverly contends that,
since the September 30 motion to reconsider did not expressly seek reconsideration of the
September 14 order, it was not a “timely posttrial motion directed against the judgment” and,
3
We note that Beverly suggests that “the lower court never disposed of Terrance’s cross claim
against Michelle.” Our review of the record on appeal reveals, however, that the only claim Terrance
raised against Michelle was in his counterclaim, which was expressly dismissed with prejudice by the
circuit court in its September 14 order. Accordingly, the September 14 order disposed of all outstanding
matters, and appeal was permitted under Illinois Supreme Court Rule 301 (eff. Feb. 1, 1994). Even if
Beverly was correct, however, the circuit court’s order contained language permitting appeal under
Illinois Supreme Court Rule 304(a) (eff. Mar. 8, 2016), as Beverly acknowledges.
7
No. 1-21-1533
therefore, Terrance’s November 29 notice of appeal was untimely since it was not filed within
30 days of the September 14 order. We do not find this argument persuasive.
¶ 23 The circuit court’s September 14 order did not make any substantive rulings or findings; it
merely effectuated its earlier August 10 order after determining that Terrance would be making
no additional allegations in support of his affirmative defenses. This was not a surprise—in
fact, it was exactly what the circuit court indicated that it would do when it noted in its August
10 order that “[i]f the defenses are not repled, then the litigation would be terminated.” Thus,
the fact that Terrance’s motion to reconsider addressed the August 10 order, which was the
order in which the circuit court made its substantive findings as to the merits of the summary
judgment motions, in no way suggests that the motion was not ultimately “directed against”
the final judgment—the declaration that Beverly was the sole lawful beneficiary of the life
insurance policy and the award of the proceeds from the policy. While Terrance could have
expressly listed both orders in his motion to reconsider, we cannot find that his failure to list
the September 14 order renders his notice of appeal untimely under the circumstances present
here.
¶ 24 We similarly find unpersuasive Beverly’s reliance on In re Marriage of Waddick, 373 Ill.
App. 3d 703 (2007), in support of her jurisdictional argument. While Beverly claims that this
case is “[d]irectly on point and fully dispositive,” we find the case to be wholly distinguishable
from the situation present in the instant appeal. In that case, the respondent filed a motion to
reconsider the circuit court’s decision on certain matters in a dissolution proceeding, but the
motion was filed prior to the court entering a dissolution judgment. Id. at 704-05. The motion
to reconsider was denied several months after the entry of the dissolution judgment, and the
respondent filed a notice of appeal within 30 days of that denial. Id. at 705. On appeal, the
8
No. 1-21-1533
appellate court found that it lacked jurisdiction, as the motion to reconsider could not be
considered a timely postjudgment motion where it was filed prior to the judgment being
entered and was not directed against that judgment. Id. at 707. Here, by contrast, as Beverly
acknowledges, Terrance filed his motion to reconsider after the entry of the September 14 final
judgment. Additionally, unlike the order at issue in Waddick, the September 14 order did not
contain any rulings or findings that were not already present in the earlier order—it simply
finalized the court’s earlier decision. We therefore cannot find that Waddick supports Beverly’s
jurisdictional argument and conclude that we have jurisdiction over the instant appeal. 4
¶ 25 Standard of Review
¶ 26 The order at issue on appeal resulted from the circuit court’s grant of summary judgment
in favor of Beverly. A circuit court is permitted to grant summary judgment only if the
pleadings, depositions, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2020). The circuit court must view
these documents and exhibits in the light most favorable to the nonmoving party. Home
Insurance Co. v. Cincinnati Insurance Co., 213 Ill. 2d 307, 315 (2004). We review a circuit
court’s decision to grant a motion for summary judgment de novo. Outboard Marine Corp. v.
Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992). As noted, de novo consideration
means we perform the same analysis that a trial judge would perform. XL Specialty Insurance
Co., 2019 IL App (1st) 181031, ¶ 62.
4
We also decline Beverly’s request to strike Terrance’s brief due to improper case citations, as the
case information provided by Terrance enables us to locate each of the cases on which he relies. We
caution Terrance’s counsel, however, that citations for cases filed prior to July 1, 2011, must be to the
Illinois Official Reports. See Ill. S. Ct. R. 6 (eff. July 1, 2011).
9
No. 1-21-1533
¶ 27 Summary judgment is a drastic measure and should only be granted if the movant’s right
to judgment is clear and free from doubt. Id. ¶ 63. However, mere speculation, conjecture, or
guess is insufficient to withstand summary judgment. Sorce v. Naperville Jeep Eagle, Inc., 309
Ill. App. 3d 313, 328 (1999). The party moving for summary judgment bears the initial burden
of proof. Nedzvekas v. Fung, 374 Ill. App. 3d 618, 624 (2007). The movant may meet his
burden of proof either by affirmatively demonstrating that some element of the case must be
resolved in his favor or by establishing that there is an absence of evidence to support the
nonmoving party’s case. Id. (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)). The
purpose of summary judgment is not to try an issue of fact but to determine whether a triable
issue of fact exists. Schrager v. North Community Bank, 328 Ill. App. 3d 696, 708 (2002)
(citing Luu v. Kim, 323 Ill. App. 3d 946, 952 (2001)).
¶ 28 Where, as here, the parties have filed cross-motions for summary judgment, “they agree
that only a question of law is involved and invite the court to decide the issues based on the
record.” Pielet v. Pielet, 2012 IL 112064, ¶ 28. The mere filing of such cross-motions,
however, does not establish that there is no genuine issue of material fact, nor does it obligate
a court to render summary judgment. Id. We also note that we may affirm on any basis
appearing in the record, whether or not the circuit court relied on that basis or its reasoning
was correct. Ray Dancer, Inc. v. DMC Corp., 230 Ill. App. 3d 40, 50 (1992).
¶ 29 Statute at Issue
¶ 30 As noted, the sole issue on appeal is whether the statute concerning the effect of a
dissolution judgment on life insurance policies operates to revoke Beverly’s status as the
beneficiary of Tyrone’s life insurance policy. We begin, then, with an overview of the statute
at issue.
10
No. 1-21-1533
¶ 31 Prior to 2018, the Act was silent as to the effect a dissolution judgment had on a previously
issued life insurance policy. While the Probate Act of 1975 provided that a dissolution
judgment automatically operated to revoke an ex-spouse’s status in a will (755 ILCS 5/4-7(b)
(West 2018)), there existed no similar provisions concerning life insurance policies.
Accordingly, an ex-spouse remained the beneficiary under their former spouse’s life insurance
policy even after the entry of a dissolution judgment. See Allton v. Hintzsche, 373 Ill. App. 3d
708, 711 (2007); Williams v. Gatling, 186 Ill. App. 3d 21, 22 (1989).
¶ 32 In 2018, the legislature amended section 503 of the Act, which governs disposition of
property in dissolution proceedings, by adding several paragraphs to subsection (b-5). See Pub.
Act 100-871 (eff. Jan. 1, 2019) (amending 750 ILCS 5/503). The amended subsection (b-5)
contains five paragraphs discussing life insurance policies, including subsection (b-5)(2), the
provision at issue in the instant case. 750 ILCS 5/503(b-5) (West 2018). Subsection (b-5)(2)
provides:
“(2) If a judgment of dissolution of marriage is entered after an insured has
designated the insured’s spouse as a beneficiary under a life insurance policy in force
at the time of entry, the designation of the insured’s former spouse as beneficiary is not
effective unless:
(A) the judgment designates the insured’s former spouse as the beneficiary;
(B) the insured redesignates the former spouse as the beneficiary after entry of
the judgment; or
(C) the former spouse is designated to receive the proceeds in trust for, on behalf
of, or for the benefit of a child or a dependent of either former spouse.” Id. § 503(b-
5)(2).
11
No. 1-21-1533
If a designation is not effective pursuant to subsection (b-5)(2), the proceeds are payable to the
named alternative beneficiary, if any, or to the insured’s estate. Id. § 503(b-5)(3).
¶ 33 The amendment was not the subject of extensive debate in the legislature, although both
the Senate and House of Representatives (House) sponsors of the bill made comments about
their interpretation of the statute. In the Senate, Senator Chuck Weaver described it as
“ensur[ing] that a person going through a divorce isn’t penalized for forgetting about an old
insurance policy stuck in a drawer and thereby reduces litigation and clarifies who should be
*** the beneficiary.” 100th Ill. Gen. Assem., Senate Proceedings, Apr. 11, 2018, at 39
(statements of Senator Weaver). In the House, Representative Steven Andersson indicated that
the bill amended the Act “to provide for what happens in the event of the dissolution of
marriage and after the dissolution a spouse fails to correct who the beneficiaries are on the life
insurance policy.” 100th Ill. Gen. Assem., House Proceedings, May 21, 2018, at 37 (statements
of Representative Andersson).
¶ 34 Operative Act
¶ 35 In determining whether the statute applies in the instant case, we first consider whether the
“operative act” triggering the application of the statute is the entry of the dissolution judgment
or Tyrone’s death. Beverly claims that the operative act is the entry of the dissolution judgment,
so the statute does not apply since it became effective only after that date. Terrance, by contrast,
claims that the operative act is Tyrone’s death, so the statute applies since the statute became
effective prior to that date.
¶ 36 Language of Statute
¶ 37 We begin by examining the language of the statute itself. “The fundamental objective of
statutory construction is to ascertain and give effect to the intent of the legislature.” 1010 Lake
12
No. 1-21-1533
Shore Ass’n v. Deutsche Bank National Trust Co., 2015 IL 118372, ¶ 21 (citing Bettis v.
Marsaglia, 2014 IL 117050, ¶ 13). “The most reliable indicator of legislative intent is the
statutory language, given its plain and ordinary meaning.” Id. (citing State Building Venture v.
O’Donnell, 239 Ill. 2d 151, 160 (2010)). “A reasonable construction must be given to each
word, clause, and sentence of a statute, and no term should be rendered superfluous.” Id. (citing
Slepicka v. Illinois Department of Public Health, 2014 IL 116927, ¶ 14). When statutory
language is plain and certain, the court is not free to give it a different meaning, and the court
may not depart from the statutory language by reading into it exceptions, limitations, or
conditions not expressed by the legislature. Kalkman v. Nedved, 2013 IL App (3d) 120800,
¶ 12.
¶ 38 In this case, the statute itself does not provide any clear guidance as to whether it is the
date of the dissolution judgment or the date of the death which is the operative one. We note
that the statute is located within the Act, which governs dissolution proceedings and, more
specifically, within section 503 of the Act, which governs the division of property in the
context of such proceedings. Thus, a reasonable interpretation would be that the statute also
concerns actions taken at the time of the dissolution of the marriage, not a later death. The
circuit court further noted the statute’s use of the present tense: “If a judgment of dissolution
of marriage is entered,” a designation of the former spouse as beneficiary is not effective unless
certain conditions are satisfied. (Emphasis added.) 750 ILCS 5/503(b-5)(2) (West 2018). The
statute notably does not provide, for instance, that the designation is ineffective if a judgment
of dissolution of marriage has been entered. See Hayashi v. Illinois Department of Financial
& Professional Regulation, 2014 IL 116023, ¶ 17 (noting the use of the phrase “ ‘has been
convicted’ ” supported application of the statute to past convictions). The use of the present
13
No. 1-21-1533
tense further supports an interpretation that the statute applies at the time of the dissolution
proceedings, not at some later time.
¶ 39 By contrast, however, the nature of life insurance policies suggests that the insured’s death
is the operative event. An insured may generally change the beneficiary on their life insurance
policy “on their own whim” so long as they reserve the right to do so in the policy. 5 Perkins v.
Stuemke, 223 Ill. App. 3d 839, 842 (1992). Accordingly, a beneficiary’s right to the proceeds
of a life insurance policy does not normally vest until the insured dies. Id. The beneficiary
instead merely retains an expectancy interest. Principal Mutual Life Insurance Co. v. Juntunen,
189 Ill. App. 3d 224, 227 (1989). In light of the fluid nature of life insurance policies, then, a
reasonable reading of the statute in the instant case would be that the statute merely operates
in the same way as though the insured had revoked the former spouse’s beneficiary status
himself and that it is the date of the insured’s death that fixes the ultimate rights of the parties.
Again, the language of the statute does not foreclose this reading: the former spouse may be
retained as beneficiary if “the insured redesignates the former spouse as the beneficiary after
entry of the judgment” (750 ILCS 5/503(b-5)(2)(B) (West 2018)), which by its own terms
applies only after the time of the dissolution judgment. Thus, the determination of the
beneficiary may be decided well after the entry of the dissolution judgment and is only
finalized upon the insured’s death, when no further changes may be made.
¶ 40 Since the statute itself provides limited guidance, both parties rely on what they claim are
analogous statutes in other contexts and other jurisdictions in order to inform our analysis.
Beverly relies on Illinois cases involving wills, while Terrance relies on foreign cases
involving life insurance policies.
5
The parties agree that Tyrone’s policy permitted him to change his beneficiary at any time.
14
No. 1-21-1533
¶ 41 Illinois Cases
¶ 42 In support of her argument that the entry of the dissolution judgment is the operative act,
Beverly cites three Illinois cases involving revocations of wills. In In re Will of Tuller, 79 Ill.
99 (1875), our supreme court considered an 1872 statute which revoked any will executed prior
to a testator’s marriage. There, the decedent, a widow with three children, executed a will in
1869. Id. at 100. Later that year, she remarried; her marriage to her new husband ended in
1873, and she died in 1874. Id. at 100-01. The question presented to the supreme court was the
effect of her marriage on her previously executed will, given the passage of the 1872 statute.
The supreme court noted that one of the arguments in support of applying the statute—and
therefore revoking her will—was the fact that, “as the will did not take effect, nor were any
rights acquired under it, until the testatrix’s death, its validity depends upon the law as it then
stood at the time of her death” and thus, it was irrelevant that the statute was enacted after the
execution of the will. Id. at 106-07. The supreme court, however, found this argument
unpersuasive, as the legislature had expressed no indication that it intended the statute to
“prejudice or affect the past transactions of the citizen.” Id. at 107. The supreme court
consequently found that the statute did not apply to revoke the decedent’s will. Id. at 107-08.
Later, in McAnnulty v. McAnnulty, 120 Ill. 26, 31 (1887), the supreme court discussed Tuller
and found that “[t]he court, after discussing at some length the question whether the act cited
should be extended to a will executed before its passage, finally held that it did not.”
¶ 43 In 1957, the Probate Act was amended to provide that, unless the will provided to the
contrary, the dissolution or annulment of a testator’s marriage revoked every beneficial devise,
legacy, or interest given to the testator’s former spouse in a will executed before the entry of
the dissolution judgment. Ill. Rev. Stat. 1961, ch. 3, ¶ 46. Prior to that amendment, a dissolution
15
No. 1-21-1533
judgment did not revoke a will. Champaign County Bank & Trust Co. v. Jutkins, 29 Ill. 2d 253,
255 (1963). Our supreme court interpreted this statute in Jutkins, to determine if it applied
where a marriage was dissolved after the amendment but the will was executed prior to the
amendment. The supreme court noted that some states had found that such statutes applied to
wills executed prior to the enactment, on the theory that a will is capable of being altered and
no rights under it can vest until death. Id. at 257. The supreme court, however, found that it
had previously “flatly rejected” this argument in Tuller. Id. The supreme court noted that, in
Tuller, both the marriage and the execution of the will preceded the statute and that the Tuller
court “was thus not called upon to decide whether legislation providing that a will is revoked
upon a specified event would apply when the will preceded the statute and the specified event
followed it.” Id. at 258. The supreme court nevertheless concluded that nothing in the statute
suggested that the legislature intended it to apply to wills executed before the effective date of
the amendment and “[i]ts implications are to the contrary.” Id. The supreme court, therefore,
found that the amendment did not apply to the testator’s will. Id. at 260.
¶ 44 Foreign Cases
¶ 45 In support of his argument that the date of Tyrone’s death is the operative act, Terrance
cites a number of foreign cases considering the effect of dissolution judgments on life
insurance policies. Many of these cases arose after the 1990 amendment of the Uniform
Probate Code, which included a provision revoking beneficiary designations to a former spouse
upon entry of a dissolution judgment. See Unif. Probate Code § 2-804 (Unif. Law Comm’n
2010); Sveen v. Melin, 584 U.S. ___, ___, 138 S. Ct. 1815, 1819 (2018). According to the
United States Supreme Court, “[t]he underlying idea was that the typical decedent would no
more want his former spouse to benefit from his pension plan or life insurance than to inherit
16
No. 1-21-1533
under his will. A wealth transfer was a wealth transfer—and a former spouse (as compared
with, say, a current spouse or child) was not likely to be its desired recipient.” Sveen, 584 U.S.
at ___, 138 S. Ct. at 1819. The Sveen Court calculated that, at the time of its decision, 26 states
had adopted laws substantially similar to the Uniform Probate Code. 6 Id. Naturally, conflicts
arose as to the applicability of such statutes, leading to a number of cases from various
jurisdictions construing the statutes. As relevant to the instant appeal, some of these cases
provide the same sequence of events as is present here, namely, (1) marriage, (2) life insurance
policy designating spouse as beneficiary, (3) dissolution judgment, (4) enactment of
legislation, and (5) death of insured. While we do not purport to present an exhaustive
overview of each of the cases here, we briefly address the cases that Terrance relies most
heavily on in support of his argument on appeal, as well as the ones our research has shown
are most helpful to our analysis. 7
¶ 46 We note that the cases cited by Terrance support his view that such statutes apply to revoke
beneficiary designations even where the statute at issue was enacted after the date of the
dissolution judgment. See, e.g., Meier v. Burnsed, No. 2019-000518, 2022 WL 4488505 (S.C.
Ct. App. Sept. 28, 2022); Stillman v. Teachers Insurance & Annuity Ass’n College Retirement
6
The statute at issue here is not one of those 26. It was enacted after the date of the Sveen
decision, and its language is not identical to that of the Uniform Probate Code.
7
We have no need to address cases that do not follow the fact pattern at issue in the instant case,
nor those cases that rely on statutory provisions expressly providing for the applicability of the statute to
cases arising after the entry of the dissolution judgment. See, e.g., Sveen, 584 U.S. at ___, 138 S. Ct. at
1821 (statute enacted prior to entry of dissolution judgment); Hertzske v. Snyder, 2017 UT 4, ¶ 3, 390
P.3d 307 (statute enacted prior to marriage); In re Estate of DeWitt, 54 P.3d 849, 856 (Colo. 2002)
(en banc) (statute expressly provided it would apply to decedents dying after the effective date of the
statute); Stanford v. Massachusetts Mutual Life Insurance Co., No. 130 C 002971B, ¶ 16, 2016 Nev. Dist.
Lexis 2360 (Mar. 14, 2016) (statute expressly provided it would apply to decedents dying after a certain
date, regardless of the date of the dissolution judgment); Vasconi v. Guardian Life Insurance Co. of
America, 590 A.2d 1161, 1165 (N.J. 1991) (no statute at issue, interpretation of terms of marital
settlement agreement).
17
No. 1-21-1533
Equities Fund, 343 F.3d 1311 (10th Cir. 2003) (applying Utah law); American Family Life
Assurance Co. of Columbus v. Parker, 178 N.E.3d 859 (Mass. 2022); Thrivent Financial for
Lutherans v. Andronescu, 2013 MT 13, 368 Mont. 256, 300 P.3d 117; Buchholz v. Storsve,
2007 SD 101, 740 N.W.2d 107. This uniformity in law is slightly misleading for our purposes,
however, as all of the statutes at issue were modeled after the Uniform Probate Code. This is
highly relevant, as the Uniform Probate Code contained a provision that any “rule of
construction or presumption” applied to instruments executed prior to the effective date of the
statute absent a clear indication of a contrary intent. Unif. Probate Code § 8-101(b)(5) (Unif.
Law Comm’n 2010). Several of the cases relied on this provision to find that the statute at issue
was a rule of construction and, therefore, applied to the previously executed instrument. See,
e.g., Stillman, 343 F.3d at 1317-18; Buchholz, 2007 SD 101, ¶¶ 11-12. But see Parker, 178
N.E.3d at 866 (finding that the statute at issue was not a rule of construction but nevertheless
applied to the policy due to different statutory language). The statute at issue in the case at bar
does not contain such a provision, so these cases are of limited utility to our analysis.
¶ 47 There are several cases, however, that find important the fact that a beneficiary’s interest
in a life insurance policy vests only upon the insured’s death. For instance, in Andronescu,
2013 MT 13, ¶ 12, the Supreme Court of Montana found that the statute at issue operated at
the time of the insured’s death and, therefore, applied even where the dissolution judgment
preceded its enactment. The court noted that a life insurance policy owner, like a testator, could
alter or revoke designations at any time until death and, thus, “either instrument—whether will
or insurance policy—must be interpreted and applied at death in order to effectuate the
transferor’s final intent.” Id. ¶ 7. The court further noted that, prior to the insured’s death, the
former spouse had no vested rights in the proceeds of the insurance policy and the designation
18
No. 1-21-1533
of the former spouse as beneficiary “had no legal effect before the date of” the decedent’s
death. Id. ¶ 12. Similarly, in Meier, 2022 WL 4488505, at *14, decided by a South Carolina
appellate court only a few weeks ago, the court first found that the statute at issue was a rule
of construction and therefore applied to revoke the former spouse’s status as a beneficiary. In
addition, however, the court also found that the former spouse had no vested interest in the
policy until the time that the insured died. Id.
¶ 48 Interpretation of Statute at Issue
¶ 49 Examining the language of the statute at issue in the instant case, and interpreting it in light
of the cases discussed above, we must find that the operative act triggering application of the
statute is the date of the dissolution judgment, not the date of Tyrone’s death. As noted, there
are several indications within the language of the statute itself—such as its use of the present
tense and its location within section 503 of the Act, which governs the division of property in
the context of dissolution proceedings—that suggest that it was intended to apply in the context
of dissolution proceedings, not at some later time. We additionally find that, while the
argument that a beneficiary’s interest vests only upon death has some surface appeal, this
argument is one that our supreme court has repeatedly rejected in the context of wills and the
same reasoning would apply here. Finally, we find it notable that our legislature chose not to
use the same language as contained in the Uniform Probate Code, including the language about
the effect of a “rule of construction or presumption,” which several other states have found
vital in applying their statutes in similar contexts. See, e.g., Stillman, 343 F.3d at 1317-18;
Buchholz, 2007 SD 101, ¶¶ 11-12. We therefore conclude that the most reasonable reading of
the statute is that the operative act which triggers its application is the entry of the dissolution
19
No. 1-21-1533
judgment. In the instant case, where the date of the dissolution judgment preceded the effective
date of the statute, the statute does not apply.
¶ 50 CONCLUSION
¶ 51 The circuit court’s judgment is affirmed, where the court properly found that the statute
revoking a former spouse’s status as beneficiary of a life insurance policy after a dissolution
judgment did not apply where the dissolution judgment was entered prior to the effective date
of the statute.
¶ 52 Affirmed.
20
No. 1-21-1533
Shaw v. U.S. Financial Life Insurance, 2022 IL App (1st) 211533
Decision Under Review: Appeal from the Circuit Court of Cook County, No. 20-CH-4851;
the Hon. Anna M. Loftus, Judge, presiding.
Attorneys Berton N. Ring, of Berton N. Ring, P.C. of Chicago (Edward
for Washington II, of counsel), for appellant.
Appellant:
Attorneys Richard Lee Stavins and Riccardo A. DiMonte, of Robbins
for DiMonte, Ltd., of Chicago, for appellee.
Appellee:
21 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484192/ | United States Court of Appeals
For the Eighth Circuit
___________________________
No. 21-3770
___________________________
Jose Frederico Llanas-Trejo
lllllllllllllllllllllPetitioner
v.
Merrick B. Garland, Attorney General for the United States
lllllllllllllllllllllRespondent
____________
Petition for Review of an Order of the
Board of Immigration Appeals
____________
Submitted: May 11, 2022
Filed: November 16, 2022
____________
Before ERICKSON, MELLOY, and KOBES, Circuit Judges.
____________
MELLOY, Circuit Judge.
Jose Frederico Llanas-Trejo moved for the BIA to reopen his cancellation of
removal proceedings so he could present new evidence of alleged “exceptional and
extremely unusual hardship” to his United States citizen children. See 8 U.S.C.
§ 1229b(b)(1)(D). The BIA denied his motion, finding he failed to demonstrate prima
facie eligibility for relief as to the good moral character and hardship requirements.
The timing of various underlying decisions in the present case, the substantive
content of those rulings, and the timing of precedent later cited by the BIA merit
comment. Ultimately, however, we deny the petition for review.
I. Background
Llanas-Trejo entered the United States in 1996, was convicted for a DUI
offense in 1998, and was subsequently removed. He re-entered the United States
illegally in 1999. In 2012, he was again convicted for a DUI offense, and the
government initiated removal proceedings. In 2013, during an IJ hearing, he
conceded removability but sought cancellation of removal based on hardship to his
three United States citizen children. In June 2016, the IJ administratively closed the
removal proceedings pursuant to a grant of prosecutorial discretion.
The next month, in July 2016, Llanas-Trejo was again arrested for driving
under the influence. He was later convicted on a resulting DUI charge. As a result,
the government reopened his removal proceedings. IJ hearings took place in
September and October 2018 during which the government presented arguments to
contest the issue of hardship. The government, however, expressly informed the IJ
that it would not be presenting arguments as to whether the DUI offenses
demonstrated a lack of good moral character. The government’s concession
notwithstanding, Llanas-Trejo submitted evidence in the form of affidavits from his
employer, members of his church, and others attesting to his good moral character.
In an October 5, 2018 oral decision, the IJ made an express finding that Llanas-
Trejo satisfied the good moral character requirement. The IJ also found that his
removal would cause hardship to his United States citizen children but that such
hardship would not satisfy the applicable standard of exceptional and extremely
unusual hardship. Based on this hardship determination, the IJ denied relief.
-2-
Llanas-Trejo timely appealed the IJ’s decision to the BIA, but briefing
progressed slowly. Separately, in August 2019, the Attorney General held in a
different case that multiple DUI convictions create a rebuttable presumption that an
applicant for a hardship-based cancellation of removal lacks good moral character.
See Matter of Castillo-Perez, 27 I&N Dec. 664 (AG 2019). To overcome this
presumption, a petitioner must show “substantial relevant and credible contrary
evidence” to demonstrate “that the multiple convictions were an aberration.” Id. at
671. In his brief to the BIA on appeal, Llanas-Trejo referenced Castillo-Perez.
Unsurprisingly, having prevailed as to this issue before the IJ, he did not seek to
present additional evidence regarding good moral character. In its own briefing, the
government did not challenge the IJ’s finding that Llanas-Trejo had satisfied the good
moral character requirement.
In December 2020, the BIA dismissed Llanas-Trejo’s direct appeal, expressly
adopting and affirming “the Immigration Judge’s decision that the respondent did not
establish that his removal would result in exceptional and extremely unusual hardship
to his qualifying relatives, his three United States citizen children.” The BIA did not
address the separate good moral character requirement.
Llanas-Trejo did not appeal the December 2020 ruling, and it appeared that his
case was final. In early 2021, however, he filed the present motion asserting that his
wife and United States citizen daughter recently had been the victims of a hit-and-run
accident resulting in new evidence of hardship. At the time Llanas-Trejo filed his
motion to reopen, his United States citizen daughter was 19 years old and attending
the University of Minnesota. His other two United States citizen children were still
minors.
In response to Llanas-Trejo’s motion to reopen, the government filed a
resistance addressing the issue of hardship and expressly raising the issue of the
Castillo-Perez moral-character presumption. In reply, Llanas-Trejo submitted
-3-
additional evidence of hardship. Most of the evidence Llanas-Trejo submitted
provided details as to his wife’s injuries and treatments. Evidence concerning his
daughter’s injuries was limited to a document from a state-court victims’ reparations
fund.
The BIA denied his motion to reopen on two grounds. First, the BIA noted that
Llanas-Trejo’s wife did not have an immigration status and therefore was not a
qualifying relative for whom hardship from removal could be considered. The BIA
expressly noted scant evidence of injury to Llanas-Trejo’s daughter. The BIA stated:
[W]e have not taken the majority of the respondent’s . . . submission into
consideration because it does not relate to a qualifying relative. Only
one document, a letter from the Crime Victim’s Reparations Board,
relates to the respondent’s daughter. The remaining documents relate
to the respondent’s wife, who does not have any legal status in the
United States and thus is not a qualifying relative.
The BIA did not comment as to the potential for Llanas-Trejo’s wife’s injuries to alter
the level of hardship likely to be experienced by his qualifying, United States citizen
children still under their mother’s care.
Second, the BIA cited Castillo-Perez and Llanas-Trejo’s two most recent DUIs,
concluding that he failed to rebut the Castillo-Perez presumption. The BIA expressly
noted that Llanas-Trejo did not submit evidence of good moral character in support
of his motion to reopen. The BIA, however, did not comment on the earlier
government concession, the initial record, or the IJ finding as to good moral
character.
Llanas-Trejo appeals the denial of his motion to reopen.
-4-
II. Discussion
A. Jurisdiction
The government argues we lack jurisdiction to review the denial of Llanas-
Trejo’s motion to reopen. In asserting its argument, the government cites cases that
address courts’ limited jurisdiction to review denials of cancellation of removal.
See 8 U.S.C. § 1252(a)(2)(B).1 As to such cases, the Supreme Court recently resolved
a circuit split by adopting a broad interpretation of the statutory jurisdictional bar.
See Patel v. Garland, 142 S. Ct. 1614 (May 16, 2022) (holding that the jurisdictional
bar of subsection (i) applies to underlying factual determinations regarding eligibility
and not merely to the ultimate grant or denial of discretionary relief).
1
8 U.S.C. § 1252(a)(2) provides:
(B) Notwithstanding any other provision of law (statutory or
nonstatutory), including section 2241 of title 28, or any other habeas
corpus provision, and sections 1361 and 1651 of such title, and except
as provided in subparagraph (D), and regardless of whether the
judgment, decision, or action is made in removal proceedings, no court
shall have jurisdiction to review—
(i) any judgment regarding the granting of relief under section
1182(h), 1182(i), 1229b, 1229c, or 1255 of this title, or
(ii) any other decision or action of the Attorney General or the
Secretary of Homeland Security the authority for which is
specified under this subchapter to be in the discretion of the
Attorney General or the Secretary of Homeland Security, other
than the granting of relief under section 1158(a) of this title.
...
(D) Nothing in subparagraph (B) ... shall be construed as precluding
review of constitutional claims or questions of law raised upon a
petition for review filed with an appropriate court of appeals in
accordance with this section.
-5-
But, Llanas-Trejo did not appeal the underlying December 2020 denial of
cancellation of removal. Rather, he appealed the BIA’s subsequent denial of the
motion to reopen—the motion he filed later and with new evidence of his wife and
daughter’s injuries. We have jurisdiction to review the denial of the motion to reopen
for abuse of discretion. See Urrutia Roblez v. Barr, 940 F.3d 420, 422–23 (8th Cir.
2019) (discussing Kucana v. Holder, 558 U.S. 233 (2010), and stating, “Although 8
U.S.C. § 1252(a)(2)(B)(i) limits our jurisdiction to review the Attorney General’s
exercise of his statutory discretion to grant cancellation of removal, the Supreme
Court has confirmed that this statute did not remove the long-exercised judicial
authority to review the BIA’s denial of an alien’s motion to reopen under a deferential
abuse of discretion standard.”); see also Kucana, 558 U.S. at 242, 253 (stating that
a “motion to reopen is an important safeguard intended to ensure a proper and lawful
disposition of immigration proceedings” and concluding that “[a]ction on motions to
reopen, . . . remain subject to judicial review” (citations omitted)).
In fact, the Court in Patel carefully distinguished Kucana. See Patel, 142 S.
Ct. at 1624–25. The Court emphasized that Kucana addressed jurisdiction where the
Attorney General delegated discretion to the BIA but Patel addressed jurisdiction
where Congress delegated discretion to the Attorney General. See id. at 1625
(“Kucana’s discussion is inapposite. That opinion addressed whether the Attorney
General could unilaterally proscribe review of decisions ‘declared discretionary by
the Attorney General himself through regulation.’ In drawing the comparison
between [8 U.S.C. § 1252(a)(2)(B)] clauses (i) and (ii), we thus focused on the fact
that each form of relief identified in clause (i) was entrusted to the Attorney General’s
discretion by statute. We neither said nor implied anything about review of eligibility
decisions made in the course of exercising that statutory discretion.” (citations
omitted)).
-6-
B. Abuse of Discretion Review
Although we may review the denial of a motion to reopen, such motions “are
disfavored because of the strong public interest in bringing litigation to a close and
because granting them can allow endless prolongation of . . . proceedings.” Salman
v. Holder, 687 F.3d 991, 996 (8th Cir. 2012) (quotation omitted). As such, we will
find “the BIA abuses its discretion . . . only when its decision is without rational
explanation, departs from established policies, invidiously discriminates against a
particular race or group, or where the agency fails to consider all factors presented by
the alien or distorts important aspects of the claim.” Rodriguez v. Barr, 952 F.3d 984,
991 (8th Cir. 2020) (citation omitted).
As noted, one basis the BIA provided for its denial of the motion was its refusal
to consider evidence of Llanas-Trejo’s wife’s injuries due to her lack of an
immigration status. Had this been the only basis articulated, we would find an abuse
of discretion even under this deferential standard. The material question on the issue
of hardship in a motion to reopen is whether the new evidence, if proven, would show
an “exceptional and extremely unusual hardship” to Llanas-Trejo’s United States
citizen children. See 8 U.S.C. § 1229b(b)(1)(D). The fact that the children’s injured
mother had no immigration status bears little relevance to the level of hardship the
children were likely to face. Upon Llanas-Trejo’s removal, she would have been their
sole care giver, and her ability to provide care appears to have been materially
diminished. The agency should have focused on the effect that removal would have
had on the United States citizen children in light of the injury to their mother. By
dismissing out of hand the evidence of the mother’s injury, the BIA “fail[ed] to
consider all factors . . . [and] distort[ed] important aspects of the claim.” Rodriguez,
952 F.3d at 991.
Regardless, a petitioner must demonstrate prima facie eligibility for relief as
to all required elements to have their file reopened. Njie v. Lynch, 808 F.3d 380, 385
-7-
(8th Cir. 2015). And, we find no abuse of the BIA’s substantial discretion in the
alternative ruling that Llanas-Trejo failed to rebut the Castillo-Perez presumption.
The final DUI occurred approximately one month after an initial and informal
exercise of discretion in Llanas-Trejo’s favor: the administrative closure his file in
2016. The Attorney General stated in Castillo-Perez that a grant of relief in spite of
two DUIs would be “an unusual case in which [a petitioner] . . . establish[es] that the
multiple convictions were an aberration and can show good moral character.” 27
I&N Dec. at 671. To overcome this presumption, a petitioner must show “substantial
relevant and credible contrary evidence” to demonstrate “that the multiple convictions
were an aberration.” Id. at 671. Driving under the influence one month after the
suspension of his initial removal proceedings does not suggest the unusual showing
described in Castillo-Perez.
Llanas-Trejo argues that it was unfair for the BIA to rule on this basis given the
earlier government concession, the IJ finding, and the presence of at least some
evidence of good moral character within his underlying file. Our deferential standard
of review does not permit reliance on general pleas as to fairness, and we do not
believe this case demonstrates a “depart[ure] from established policies.” Rodriguez,
952 F.3d at 991. Llanas-Trejo acknowledged Castillo-Perez in his briefing on direct
appeal, the government raised the presumption in its briefing in response to the
motion to reopen, and Llanas-Trejo failed to supplement his motion with additional
rebuttal evidence or argument. Further, although the BIA on direct appeal stated
expressly that it was adopting the IJ’s finding as to a lack of sufficient hardship, the
BIA did not address the good moral character finding. Where the BIA denies relief
on appeal based on one element, its silence as to another does not serve as an implicit
and binding adoption of the IJ’s conclusion. See N’Diaye v. Barr, 931 F.3d 656, 664
(8th Cir. 2019) (agency may reconsider in the same case an issue not previously
addressed through a final judgment); Estrada-Rodriguez v. Lynch, 825 F.3d 397,
420–03 (8th Cir. 2016) (issue previously addressed by an IJ but not addressed by the
-8-
BIA on review is not barred generally from further agency consideration by the law
of the case doctrine).
The BIA did not abuse its discretion in holding that Llanas-Trejo failed to
make a prima facie showing of good moral character with the filing of his motion to
reopen.
We deny the petition for relief and affirm the BIA’s judgment.
______________________________
-9- | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484191/ | United States Court of Appeals
For the Eighth Circuit
___________________________
No. 21-2417
___________________________
Joseph Mobley
Plaintiff - Appellant
v.
St. Luke’s Health System, Inc.
Defendant - Appellee
____________
Appeal from United States District Court
for the Western District of Missouri - Kansas City
____________
Submitted: June 16, 2022
Filed: November 16, 2022
____________
Before LOKEN and KELLY, Circuit Judges, and MENENDEZ, 1 District Judge.
____________
MENENDEZ, District Judge.
1
The Honorable Katherine M. Menendez, United States District Judge for
the District of Minnesota, sitting by designation.
Appellant Mobley appeals the District Court’s2 grant of summary judgment
in favor of Appellee St. Luke’s Health System, Inc. (“St. Luke’s”). For the following
reasons, we affirm.
I. Background
Joseph Mobley worked in customer service for St. Luke’s 3 for more than six
years, beginning in 2012. During his tenure, Mobley received two promotions, most
recently in 2016, when he was named Patient Access Supervisor. In that role,
Mobley was responsible for training and managing a team of approximately 20
employees to assist patients over the phone in verifying insurance coverage and
determining out-of-pocket healthcare costs. Most of Mobley’s direct-reports
telecommuted full time, although the lowest-performing members on Mobley’s team
worked in the office. St. Luke’s policy allowed managers to telecommute one day a
week, and, as of 2018, two days per week. Mobley’s manager, Jessica Lillard,
allowed her direct-reports additional teleworking days on a case-by-case basis.
In 2016, Mobley was diagnosed with multiple sclerosis (“MS”). As his MS
progressed, Mobley began to have difficulty walking, standing, and breathing, and
experienced fatigue and burning sensations in his eyes and hands, particularly when
his MS flared. At times, St. Luke’s management team observed Mobley’s mobility
challenges around the office. Mobley’s neurologist encouraged him to continue
working, even when his condition flared.
Mobley first requested an accommodation in December 2017, when he asked
Lillard if he could telecommute when his MS flared. Lillard indicated that she would
2
The Honorable Brian C. Wimes, United States District Judge for the Western
District of Missouri.
3
Although neither party describes what St. Luke’s is, according to its website
it “includes 16 hospitals and campuses across the Kansas City region.” About St.
Luke’s, https://www.saintlukeskc.org/about-saint-lukes (last visited August 3,
2022).
-2-
consider it and work with Mobley as the need arose. The following month, however,
Lillard denied that accommodation, explaining to Mobley that allowing him to
telecommute during a flare-up would be unfair to his co-supervisor. Instead,
St. Luke’s suggested that Mobley use paid time off and Family Medical Leave Act
leave on those occasions.
In February 2018, Mobley again asked for permission to telecommute when
his condition flared and supplied St. Luke’s a letter from his neurologist
recommending as much. Subsequently, in March 2018, Lillard and St. Luke’s
human-resources representative met with Mobley, and he renewed his request to
telecommute when he experienced a flare-up of his MS. St. Luke’s denied the
request, instructing Mobley that he could ask Lillard on a case-by-case basis to work
from home during a flare-up. Lillard advised that St. Luke’s could not accommodate
his request because he needed to supervise direct-reports in the office and because
his flare-ups were unpredictable. Mobley asked Lillard to reconsider the decision,
but she refused to do so. Despite this refusal, Mobley recalled only one instance
when Lillard denied a request to telework during a flare-up and required him to take
time off instead.
Mobley voluntarily resigned in August 2018, as he feared that he was in
danger of being discharged due to his condition. He did not communicate this
concern to St. Luke’s either before he resigned or in his resignation letter.
Mobley sued St. Luke’s pursuant to the Americans with Disabilities Act
(“ADA”), the Missouri Human Rights Act (“MHRA”), Title VII of the Civil Rights
Act of 1964, and 42 U.S.C. § 1981. Mobley alleged that St. Luke’s: discriminated
against him on the basis of his disability, gender, and race; failed to accommodate
him; and retaliated against him. St. Luke’s sought summary judgment on all issues,
and the district court granted St. Luke’s motion. Mobley appealed the district court’s
ruling regarding only his claims of disability discrimination under the MHRA and
failure to accommodate under the ADA and the MHRA.
-3-
II. ANALYSIS
A. Standard of Review
We review a grant of summary judgment de novo. Whittington v. Tyson
Foods, Inc., 21 F.4th 997, 1000 (8th Cir. 2021). Summary judgment is appropriate
“if the movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
B. Failure-to-Accommodate Claims
Mobley alleges that St. Luke’s violated the ADA and MHRA in failing
accommodate him. The district court granted summary judgment on these claims
because Mobley failed to demonstrate that he could perform his essential job
functions either with or without a reasonable accommodation, and because he did
not demonstrate that St. Luke’s failed to engage in the interactive process in good
faith regarding Mobley’s requested accommodations. Though we disagree with the
district court on the first of its holdings, we agree with the second. Therefore
summary judgment was appropriate and we affirm.
“The ADA prohibits employers from discriminating ‘against a qualified
individual on the basis of disability in regard to job application procedures, the
hiring, advancement, or discharge of employees, employee compensation, job
training, and other terms, conditions, and privileges of employment.’” Ehlers v.
Univ. of Minnesota, 34 F.4th 655, 659 (8th Cir. 2022) (quoting 42 U.S.C.
§ 12112(a)).4 Failing to make a reasonable accommodation constitutes
discrimination. § 12112(b)(5)(A).
4
Because the ADA and MHRA use the same modified burden-shifting
framework, we evaluate Mobley’s state and federal failure-to-accommodate claims
simultaneously. See Mole v. Buckhorn Rubber Prod., Inc., 165 F.3d 1212, 1216 (8th
Cir. 1999).
-4-
To make a prima facie case for a failure to accommodate under the ADA, an
employee must show that he (1) has a disability within the meaning of the ADA,
(2) is a qualified individual under the ADA, and (3) suffered an adverse employment
action due to his disability. Huber v. Wal-Mart Stores, Inc., 486 F.3d 480, 482 (8th
Cir. 2007). A “disability” under the ADA is “a physical or mental impairment that
substantially limits one or more major life activities of [an] individual.” 42 U.S.C.
§ 12102(1). Because there is no dispute that Mobley had a disability as defined by
the ADA, Mobley satisfies the first element of his prima facie case.
To meet the requirements of the second element, proving he is a qualified
individual under the ADA, an employee must demonstrate that he: (1) possesses the
skill, education, experience, and training the position requires, and (2) can perform
the essential job functions, with or without reasonable accommodation. Hill v.
Walker, 737 F.3d 1209, 1216 (8th Cir. 2013) (citing Fenney v. Dakota, Minnesota
& E. R. Co., 327 F.3d 707, 711 (8th Cir. 2003)). There is no dispute that Mobley had
the skill, education, experience, and training necessary for the position. Therefore,
we turn to whether Mobley could perform the position’s essential functions, “the
fundamental job duties of [his] . . . position,” with or without a reasonable
accommodation. 29 C.F.R. § 1630.2(n)(1). An employee must show that a desired
accommodation is “reasonable on its face.” U.S. Airways, Inc. v. Barnett, 535 U.S.
391, 401 (2002).
The district court concluded that Mobley failed to demonstrate that he could
perform his essential job functions with or without a reasonable accommodation.
However, drawing all reasonable inferences in Mobley’s favor, we conclude that a
genuine dispute of material fact exists as to whether he was able to perform the
essential functions of his job through his proposed accommodation of teleworking
while he experienced a flare-up of his condition. By allowing Mobley to consistently
work remotely aside from his medical condition, St. Luke’s implicitly demonstrated
a belief that he could perform his essential job functions without being in the office
all the time. Moreover, while working remotely, Mobley continued to receive
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positive performance reviews, reflecting that he was able to effectively supervise his
employees despite not being on site.
In support of summary judgment, St. Luke’s emphasizes the opinions of its
management team who preferred that he work in the office on all but his regularly
scheduled teleworking days. St. Luke’s explained that “[o]ne of the reasons [it]
rejected [Mobley]’s request to telecommute when his condition flared was
because—as a Patient Access Supervisor—his duties required providing in-person
supervision.” Appellee’s Br. 22 (emphasis in original). Yet nothing in the record
indicates that had Mobley been permitted to telework for an additional unquantified
number of days during flare-ups, his job performance would have been inadequate.
Indeed, St. Luke’s points to no evidence to justify its stance, merely submitting brief,
conclusory, and unsubstantiated opinions to the contrary. Additionally, St. Luke’s
does not contend that Mobley had any performance issues.
The legal authority St. Luke’s references in support of its argument does not
support summary judgment here. Most critically, none of the decisions involve a
case in which a disabled employee, much less nearly all employees in a department,
regularly teleworked, yet the employer rejected that employee’s proposed
accommodation to telework when his or her condition flared. See, e.g., Lane v. Ball,
854 F. App’x 111, 112–13 (8th Cir. 2021) (employer denied employee’s proposed
accommodation to telework because one of her job’s essential functions was
“handling questions and requests from members of the public, which she could not
do outside of business hours or from home”); Brunckhorst v. City of Oak Park
Heights, 914 F.3d 1177, 1183 (8th Cir. 2019) (employee failed to make a facial
showing that he could perform his essential job functions remotely, and admitted
that there were certain functions of his job that he was unable to perform remotely).
St. Luke’s argument that this case is analogous to Evans v. Coop. Response Ctr.,
Inc., 996 F.3d 539 (8th Cir. 2021), also misses the mark. In Evans, the plaintiff
requested additional leave, which differs from Mobley’s request to telework and
St. Luke’s ensuing instruction to take leave. Id. at 546. Mobley wanted to work
more, not less. Viewing the facts in the light most favorable to Mobley, he has raised
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a genuine dispute of material fact as to whether he could perform the essential job
functions with a reasonable accommodation.
However, for a failure-to-accommodate claim to survive summary judgment,
an employee must do more than establish a prima facie case—he must also show
that his employer failed to engage in the interactive process in good faith. See
Fjellestad v. Pizza Hut of Am., Inc., 188 F.3d 944, 952 (8th Cir. 1999). “To establish
that an employer failed to participate in the interactive process, an employee must
demonstrate that the employer knew about his disability, and that the employee
requested an accommodation for his disability.” Sharbono v. N. States Power Co.,
902 F.3d 891, 894 (8th Cir. 2018) (citing Peyton v. Fred’s Stores of Ark., Inc., 561
F.3d 900, 902 (8th Cir. 2009)). In this case, there is no dispute as to either of these
elements. However, the employee must then demonstrate that his employer “did not
make a good faith effort to assist the employee in seeking accommodations.” Id.
(quoting Fjellestad, 188 F.3d at 952); see Ehlers, 34 F.4th at 662. We agree with the
district court that the record does not demonstrate a material dispute on this element,
and that summary judgment was appropriate.
The record demonstrates several steps that St. Luke’s took in response to
Mobley’s request for accommodation. See Fjellestad, 188 F.3d at 954 (“All the
interactive process requires is that employers make a good faith effort to seek
accommodations.”) (quotation omitted). Indeed, the evidence demonstrates that after
Mobley made his initial accommodation request in December 2017, St. Luke’s
approved permission for Mobley to work from home on a case-by-case basis. The
evidence further shows that in February 2018, Mobley asked to work from home
when his condition flared, and St. Luke’s again responded that he could reach out to
his manager on a case-by-basis, but that St. Luke’s would not approve a blanket
request to work from home during flare-ups. Additionally, St. Luke’s offered that
Mobley could follow up if he had any questions or concerns. While Mobley sent an
email indicating that he might need a follow-up conversation with management
regarding this decision, he never requested one. Moreover, only one of Mobley’s
requests to work from home was actually denied, and on that day he used paid time
-7-
off. These steps support a finding that St. Luke’s engaged in the interactive process
and took action to accommodate Mobley. See Garrison v. Dolgencorp, LLC, 939
F.3d 937, 942 (8th Cir. 2019). Because there is no triable issue as to whether
St. Luke’s acted in good faith, we need not reach the final step of the analysis, which
is whether St. Luke’s could have reasonably accommodated Mobley. Summary
judgment on Mobley’s failure-to-accommodate claim is affirmed.
C. Constructive-Discharge Claim
Mobley also alleges that he was constructively discharged from his job at
St. Luke’s. However, Mobley did not raise a constructive-discharge claim before the
Equal Employment Opportunity Commission. See Henson v. Union Pac. R.R. Co.,
3 F.4th 1075, 1081 (8th Cir. 2021). Likewise, in opposing St. Luke’s motion for
summary judgment before the district court, Mobley failed to argue his constructive-
discharge claim. See Paskert v. Kemna-ASA Auto Plaza, Inc., 950 F.3d 535, 540 (8th
Cir. 2020). Therefore, the claim is not properly before this Court, and the district
court’s grant of summary judgment is affirmed.
III. Conclusion
For the foregoing reasons, the District Court’s judgment is affirmed.
______________________________
-8- | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484193/ | United States Court of Appeals
For the Eighth Circuit
___________________________
No. 21-3791
___________________________
BPP
Plaintiff - Appellant
v.
CaremarkPCS Health, L.L.C., doing business as CVS Caremark; Welltok Inc.
Defendants - Appellees
____________
Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
____________
Submitted: September 20, 2022
Filed: November 16, 2022
____________
Before GRUENDER, MELLOY, and ERICKSON, Circuit Judges.
____________
GRUENDER, Circuit Judge.
BPP sued CaremarkPCS Health, L.L.C. and Welltok, Inc., alleging a violation
of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227. The district
court1 granted Caremark and Welltok’s motion for summary judgment, and BPP
appealed. We affirm.
I.
BPP is a periodontal care provider in the St. Louis, Missouri area. Caremark
is a pharmacy benefits manager (“PBM”). Caremark’s clients are entities that
sponsor group health plans, including insurers, third-party administrators, and
employer sponsors. Caremark administers the pharmacy networks where
policyholders may fill prescriptions, conducts eligibility review for benefits, and
processes claims. Caremark does not sell prescription medications or services to
healthcare providers or their patients.
In October 2019, Caremark implemented new opioid-coverage-limitation
options that its health-plan-sponsor clients could institute. One of these options was
a three-day supply limit for patients under the age of twenty. Caremark contracted
with Welltok to send a fax announcing this supply-limitation option to more than
55,000 healthcare providers who had previously prescribed opioids to adolescent
patients. BPP was one of the recipients of Caremark’s fax.
The fax explained that “our clients have the option to apply a 3-day supply
limit on opioids prescribed for patients who are: 19 or younger; [c]onsidered opioid
naïve . . . and [b]eing prescribed short-acting opioids, including immediate release
(IR) and immediate release combination opioid products.” The fax also noted that
“[o]pioid prescriptions for cancer, sickle cell disease or palliative care will be
exempt from the 3-day supply limit” and that providers “can request prior
authorization for patients whose clinical diagnosis may require a longer day supply
for ongoing therapy.” Caremark’s marketing department reviewed a draft of the fax
before it was sent to providers.
1
The Honorable Matthew T. Schelp, United States District Judge for the
Eastern District of Missouri.
-2-
BPP sued Caremark and Welltok, alleging that Caremark’s fax was an
“unsolicited advertisement” in violation of the Telephone Consumer Protection Act.
See 47 U.S.C. § 227(b)(1)(C). Caremark and Welltok moved for summary
judgment, which the district court granted.
II.
We review a district court’s grant of summary judgment de novo, viewing the
evidence in the light most favorable to the nonmoving party and drawing all
reasonable inferences in its favor. Onyiah v. St. Cloud State Univ., 5 F.4th 926, 930
(8th Cir. 2021). We affirm because there is no genuine dispute of material fact and
Caremark and Welltok are entitled to judgment as a matter of law. See Fed. R. Civ.
P. 56(a); Lindeman v. St. Luke’s Hosp. of Kan. City, 899 F.3d 603, 605 (8th Cir.
2018).
The TCPA makes it unlawful to fax an unsolicited advertisement. 47 U.S.C.
§ 227(b)(1)(C). An “unsolicited advertisement” is defined as “any material
advertising the commercial availability or quality of any property, goods, or services
which is transmitted to any person without that person’s prior express invitation or
permission, in writing or otherwise.” 47 U.S.C. § 227(a)(5). The TCPA does not
bar the unsolicited sending of faxes that lack commercial components. See
Sandusky Wellness Ctr., LLC v. Medco Health Sols., Inc., 788 F.3d 218, 223 (6th
Cir. 2015) (“[T]he Act unambiguously defines advertisements as having commercial
components . . . .”); Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991; Junk Fax Prevention Act of 2005, 71 Fed. Reg. 25,967,
25,973 (May 3, 2006) (“[F]acsimile communications that contain only information,
such as industry news articles, legislative updates, or employee benefit information,
would not be prohibited by the TCPA rules.”).
BPP first argues that the district court incorrectly interpreted the TCPA’s
definition of an unsolicited advertisement. The district court applied the Sixth
Circuit’s interpretation in Sandusky: “[a]n advertisement is any material that
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promotes the sale (typically to the public) of any property, goods, or services
available to be bought or sold so some entity can profit.” 788 F.3d at 222. By
contrast, BPP argues that to advertise means “to give public notice of” a commercial
good or service. Accordingly, BPP contends that any fax that gives public notice of
a commercial good or service is a prohibited unsolicited advertisement, regardless
of whether it promotes a sale or whether the sender was motivated by profit.
Because Caremark’s fax gave notice of its PBM services, BPP argues that the fax
was unlawful.
We disagree with BPP’s proposed interpretation of unsolicited advertisement.
The TCPA does not ban all faxes that contain information about commercial goods
or services, as BPP would have it. Rather, it bans faxes that “advertis[e] the
commercial availability or quality of any property, goods, or services.” See 47
U.S.C. § 227(a)(5). The fax itself, and not just the underlying property, good, or
service, must have a commercial component or nexus to constitute an unsolicited
advertisement. We therefore agree with the Sixth Circuit that the TCPA
“unambiguously defines advertisements as having commercial components” and
that “to be an ad, the fax must promote goods or services to be bought or sold, and
it should have profit as an aim.” Sandusky, 788 F.3d at 222.
Next, BPP contends that the district court should have deferred to the Federal
Communications Commission’s (“FCC”) interpretation of the term “unsolicited
advertisement” under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S.
837, 843 (1984). See also Nat’l Cable & Telecomms. Ass’n v. Brand X Internet
Servs., 545 U.S. 967, 980-81 (2005) (noting the FCC’s “authority to promulgate the
binding legal rules” implementing the TCPA). BPP is incorrect. Under Chevron,
courts are required to defer to an agency’s interpretation only if the statutory term at
issue is ambiguous. 467 U.S. at 843. As previously described, the term “unsolicited
advertisement” in the TCPA is not ambiguous. See 47 U.S.C. § 227(a)(5); Sandusky,
788 F.3d at 222. Regardless, the FCC’s guidance does not support BPP’s
interpretation of the statute. The FCC has explained that a fax is not an unsolicited
-4-
advertisement when its primary purpose is informational, rather than to promote
commercial products. 71 Fed. Reg. at 25,973.
Lastly, BPP argues that even if we apply Sandusky’s interpretation of
unsolicited advertisement, there is still a genuine dispute as to whether Caremark
intended the fax to promote the sale of its PBM services or prescription drugs.
However, the language of the fax and the nature of Caremark’s business demonstrate
that the fax did not promote the sale of any goods or services. The fax simply
informed healthcare providers that they had the option to impose a three-day limit
on opioid prescriptions for certain patients. Moreover, Caremark sells its PBM
services only to insurance-plan sponsors. It does not sell any goods or services to
doctors or their patients. Therefore, Caremark could not have intended its fax to
induce doctors to pay for some other unnamed products or services. Cf. Physicians
Healthsource, Inc., v. Boehringer Ingelheim Pharms., Inc., 845 F.3d 92, 95-97 (2d
Cir. 2017) (holding that a fax inviting physicians to a dinner that was free but
included a pitch to buy the sender’s products was an unsolicited advertisement).
Nevertheless, BPP claims that there is a genuine factual dispute here because
Caremark may have intended its fax to cause providers to encourage their patients
to switch to insurance providers that use Caremark as their PBM. According to BPP,
this supposed business rationale, if found to exist, would indicate a sufficiently
commercial nexus such that the fax would be unlawful under Sandusky’s
interpretation of unsolicited advertisement. See 788 F.3d at 222. BPP contends that
the involvement of Caremark’s marketing department in drafting the fax supports its
view. However, Caremark’s marketing department reviews informational
communications as well as commercial communications. Therefore, the
involvement of the marketing department does not support an inference of
commercial purpose, and BPP otherwise does not point to facts supporting its
speculative theory.
Moreover, even if BPP could prove that Caremark’s fax had some minor or
remote commercial purpose, its claim would still fail. To consider a fax to be an
-5-
unlawful advertisement on the basis of a remote or minor commercial purpose would
vastly broaden the TCPA’s definition of unsolicited advertisement. Almost any fax
could economically benefit the sender through branding, goodwill, or other indirect
effects, regardless of whether that fax would be plainly understood as promoting a
commercial good or service.
In sum, no reasonable jury could find that the fax was an “unsolicited
advertisement” under the TCPA, and the district court’s grant of summary judgment
to Caremark and Welltok was proper.2
III.
For the foregoing reasons, we affirm.
______________________________
2
The parties also dispute whether Caremark’s fax was exempt from the TCPA
as a “transactional notice.” See 71 Fed. Reg. at 25,972-25,973. Because we hold
that Caremark’s fax was not an unsolicited advertisement, we need not consider that
issue.
-6- | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484195/ | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
UNITED STATES OF AMERICA )
)
V. ) Criminal No. 21-0598 (PLF)
)
TERENCE SUTTON )
and )
ANDREW ZABAVSKY, )
)
Defendants. )
_ )
ORDER
For the reasons and constraints set forth in the accompanying Opinion, it is hereby
ORDERED that the government’s Motion in Limine to Exclude Inadmissible
Expert Testimony [Dkt. No. 219] is GRANTED IN PART and DENIED IN PART; it is
FURTHER ORDERED that John J. Brennan’s testimony is admitted in part and
excluded in part; Bruce-Alan Barnard’s testimony is excluded in full; Michael A. Wear’s
testimony is admitted in part and excluded in part; and James K. Dahlquist’s testimony is
excluded in full; it is
FURTHER ORDERED that defendant Andrew Zabavsky’s Daubert Motion to
Preclude Expert Testimony [Dkt. No. 220] is DENIED IN FULL; it is
FURTHER ORDERED that defendant Terence Sutton’s Motion to Exclude
Expert Testimony [Dkt. No. 221] is GRANTED IN PART and DENIED IN PART; it is
FURTHER ORDERED that Robert Drago’s testimony (as proffered and
narrowed in scope on November 1, 2022) is admitted in full; Carolyn Totaro’s testimony is
admitted in part and excluded in part; and Mark Hammond’s testimony is admitted in full; it is
FURTHER ORDERED that the government’s Motion in Limine to Exclude
Defendant Sutton’s Crash Reconstruction Opinion Testimony [Dkt. No. 293] is GRANTED IN
PART and DENIED IN PART; and it is
FURTHER ORDERED Thomas Langley’s testimony is admitted in part and
excluded in part.
SO ORDERED.
PAUL L. FRIEDMAN
United States District Judge
DATE: iv fre laa | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484204/ | J-A25002-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
MIRIAM OSORIO : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
HALBLEIB AUTOMOTIVE : No. 312 WDA 2022
Appeal from the Order Entered February 18, 2022,
in the Court of Common Pleas of Allegheny County,
Civil Division at No(s): AR-22-000227.
BEFORE: KUNSELMAN, J., NICHOLS, J., and McCAFFERY, J.
MEMORANDUM BY KUNSELMAN, J.: FILED: NOVEMBER 16, 2022
Miriam Osorio appeals from the order denying her request to file an
appeal nunc pro tunc from a magisterial district judge’s (“MDJ”) judgment in
favor of Halbleib Automotive. Upon review, we affirm.
On August 3, 2021, Osorio filed a complaint with a MDJ in Allegheny
County, Pennsylvania, against Halbleib seeking money damages for allegedly
failing to repair her car. On December 17, 2021, the MDJ entered a judgment
in favor of Halbleib. Osorio had until January 18, 20221 to file an appeal if she
desired. Osorio did not file an appeal.
On January 24, 2022, Osorio filed a motion to file an appeal nunc pro
tunc. Osorio claimed that a Department of Court Records (DCR) clerk told her
____________________________________________
1The 30th day fell on a Sunday and the next day was Martin Luther King Jr.
Day.
J-A25002-22
that she could file her appeal online. When she tried to file it on the day it
was due, she could not find the appeal form. When she called DCR that day,
she was told that appeals from a MDJ judgment could not be filed online and
had to be filed in person. Since Osorio lived in Bradford County, she was
unable to drive to Pittsburgh on January 18, 2022, to file her appeal in person.
On February 18, 2022, the trial court denied Osorio’s motion on the
basis that Osorio failed to present prima facia evidence that there was any
miscommunication or misinformation as she claimed on the part of a DCR
employee other than her personal recollection of a conversation. However,
the court indicated that it would reconsider its decision if she obtained an
affidavit from the DCR employee who allegedly gave the misinformation.
Osorio did not file a motion for reconsideration.
Instead, Osorio filed this timely appeal. Osorio and the trial court
complied with Pennsylvania Rule of Appellate Procedure 1925.
On appeal, Osorio raises three issues which we have summarized as
follows:
A. Whether the trial court abused its discretion in denying Osorio’s
request to file her appeal nunc pro tunc when she alleged that
there was a break down in court operations because a DCR
employee gave her misinformation about filing her appeal
online and by requiring her to obtain an affidavit to support her
claim.
B. Whether the trial court abused its discretion in denying Osorio’s
request to file her appeal nunc pro tunc where bad wintery
weather existed creating extraordinary circumstances which
prevented her from traveling to Allegheny County to timely file
her appeal in person.
-2-
J-A25002-22
Osorio’s Brief at 6-7.
Osorio argues that the trial court erred in denying her request to appeal
nunc pro tunc. In reviewing such a decision, we apply the following standard
of review:
Allowance of an appeal nunc pro tunc lies at the sound discretion
of the trial judge. This Court will not reverse a trial court's denial
of a motion for leave to appeal nunc pro tunc unless there is an
abuse of discretion. An abuse of discretion is not merely an error
of judgment but is found where the law is overridden or
misapplied, or the judgment exercised is manifestly unreasonable,
or the result of partiality, prejudice, bias or ill will as shown by the
evidence or the record.
Fischer v. UPMC Northwest, 34 A.3d 115, 120 (Pa. Super. 2011) (internal
quotations and citations omitted).
Generally, a trial court may grant an appeal nunc pro tunc when
a delay in filing is caused by extraordinary circumstances involving
fraud or some breakdown in the court's operations through a
default of its officers.
There is a breakdown in the court's operations where an
administrative board or body is negligent, acts improperly or
unintentionally misleads a party. Cases involving a breakdown in
court operations often involve a failure on the part of the
prothonotary to fulfill his or her ministerial duties, such as the
filing of dispositions and other relevant information on the
appropriate docket, or giving notice of these dispositions to
interested parties.
Id. (internal citations and quotation marks omitted) (emphasis in original).
Moreover,
where an appeal is not timely because of non-negligent
circumstances, either as they relate to [the] appellant or his
counsel, and the appeal is filed within a short time after the
appellant or his counsel learns of and has an opportunity to
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address the untimeliness, and the time period which elapses is of
very short duration, and [the] appellee is not prejudiced by the
delay, the court may allow an appeal nunc pro tunc.
Amicone v. Rok, 839 A.2d 1109, 1114 (Pa. Super. 2003) (internal citations
omitted).
[W]hatever extraordinary circumstance is alleged as the reason for the
late filing of the appeal—fraud, breakdown of the court's operation
through default of its officers, or non-negligent conduct on the part of
appellant, appellant's attorney, or the attorney's staff—the petition to
file the appeal nunc pro tunc must be filed within a reasonable time after
the occurrence of the extraordinary circumstance.
Id. 839 A.2d at 1114.
In her first issue, Osorio claimed that there was a break down in court
operations because she was given incorrect information about whether she
could file her appeal online. The trial court concluded that she did not satisfy
her burden of proof to show good cause for filing late in order to obtain nunc
pro tunc relief.2 In particular, the court found Osorio failed to demonstrate a
____________________________________________
2 Pursuant to Rule 1002 A of the Pennsylvania Rules of Civil Procedure for
Magisterial District Judges a party has thirty (30) days to file their appeal
from the entry of the district judge's judgement with the court of common
pleas. See Pa.R.C.P.M.D.J. 1002A. Rule 1002 provides:
Rule 1002. Time and Method of Appeal
A. A party aggrieved by a judgment for money, or a
judgment affecting the delivery of possession of real
property arising out of a nonresidential lease, may appeal
the judgment within 30 days after the date of the entry of
the judgment by filing with the prothonotary of the court of
common pleas a notice of appeal on a form that shall be
prescribed by the State Court Administrator together with a
(Footnote Continued Next Page)
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breakdown in operations as she claimed in her motion. The trial court
explained:
Osorio argued that a DCR employee (Kim) advised her that she
could file an appeal electronically and that this represented a
breakdown in the court's operation warranting her to be permitted
to file an appeal nunc pro tunc. I gave her an opportunity to
provide some prima facie evidence which she was unable to
produce.
In addition, Osorio makes an admission in her Concise Statement
of Errors paragraph 15 that her conversation with Kim from DCR
took place on 12/7/2021, ten (10) days before the judgement was
entered in this case and about another case that she was a party
to. At the time of this conversation, Osorio was attempting to
change her address on the docket electronically. When Osorio
called DCR she spoke to Kim who advised her that she could not
make a change of address electronically but rather had to be
completed in person or by mail. I note that Osorio never avers
that she asked Kim from DCR specifically about whether a party
could file an appeal electronically or about the case sub judice, but
rather their conversation was limited to the procedure of changing
of a party's address with DCR on another case.
It appears that Osorio made the incorrect assumption from this
prior conversation about a different DCR procedure and different
case that she could file an appeal electronically. I do not find this
a sufficient breakdown in the operation of the court to equate to
an extraordinary circumstance for good cause. By Osorio's own
admission she did not specifically seek advisement from DCR on
filing an appeal electronically until January 18, 2022, the date the
____________________________________________
copy of the Notice of Judgment issued by the magisterial
district judge. The prothonotary shall not accept an appeal
from an aggrieved parry that is presented for filing more
than 30 days after the date of entry of the judgment without
leave of court and upon good cause shown.
Pa.R.C.P.M.D.J. 1002 (emphasis added).
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statute ran and was told correctly that she could not file her appeal
electronically.
Trial Court Opinion, 5/4/22, at 3. Upon her initial presentation, the trial court
did not find Osorio to be credible. Consequently, there was not enough
evidence for the court to grant Osorio’s petition. As is evident from Osorio’s
own admissions, the trial court’s initial refusal to accept her explanation
outright, without further substantiation, was warranted. The trial court was
generous in giving her some guidance and affording her another chance. That
the DCR employee would not give her an affidavit does not constitute an error
on the court’s part. Osorio could have presented some other evidence if it
existed, but again what she had originally alleged in her petition was not
accurate and could not be substantiated. Consequently, the trial court did not
abuse its discretion in finding that there was no breakdown in the court’s
operations which warranted the filing of Osario’s appeal nunc pro tunc.
Osorio additionally claims that the bad, snowy weather on the day her
appeal was due created extraordinary circumstances which prevented her
from driving to Pittsburgh to file her appeal that day. We observe however
that Osorio never presented this specific argument to the trial court. Instead,
she only claimed that she lived 5 hours away with kids in school and being so
late in the day. Having failed to raise this specific issue before the trial court,
Osorio has waived it for appellate review. Pa.R.A.P. 302(a) (issues not raised
in the trial court are waived on appeal). We therefore do not address the
merits.
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Based upon review, we conclude that the trial court did not abuse its
discretion in denying Osorio’s petition to file her MDJ appeal nunc pro tunc.
Judgment affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
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-8- | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484203/ | J-A23043-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: INVOLUNTARY TERMINATION : IN THE SUPERIOR COURT OF
OF PARENTAL RIGHTS TO L.J.B., A : PENNSYLVANIA
MINOR :
:
:
APPEAL OF: J.M.S., MOTHER :
:
:
: No. 778 MDA 2022
Appeal from the Decree Entered April 21, 2022
In the Court of Common Pleas of Centre County Orphans' Court at No(s):
2021-4556 A
BEFORE: BOWES, J., McCAFFERY, J., and STEVENS, P.J.E.*
MEMORANDUM BY STEVENS, P.J.E.: FILED NOVEMBER 16, 2022
J.M.S. (“Mother”) appeals from the decree granting Centre County
Children and Youth Agency (“CYS” or “Agency”) petitions to involuntarily
terminate her parental rights to her two-year-old daughter, L.J.B., under 23
Pa.C.S.A. § 2511(a)(2), (5), (8), and (b) and change the goal from
reunification to adoption. Mother's counsel (“Counsel”) has filed a petition to
withdraw and an accompanying brief pursuant to Anders. V. California, 386
U.S. 738 (1967) and Commonwealth v. Santiago, 978 A.2d 349 (Pa. 2009).
We affirm and grant counsel’s petition to withdraw.
The orphans’ court’s Pa.R.A.P. 1925(a) opinion sets forth the pertinent
facts and procedural history, as follows:
[On October 15, 2021, the Agency filed a petition seeking to
terminate the parental rights of Mother and Father.] At the April
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* Former Justice specially assigned to the Superior Court.
J-A23043-22
8, 2022 termination hearing, the Agency presented testimony
from two Agency caseworkers who worked with Mother, Father,
and L.J.B, and from a Youth Service Bureau [(“Y.S.B.”)]
reunification worker who worked with the family in connection
with providing formal reunification services. Various documents
from the dependency docket were also filed collectively as an
Agency exhibit. Mother and Father both testified in support of
their respective positions.
With respect to Mother, the evidence demonstrated the existence
of ongoing, significant safety concerns regarding her ability to
parent L.J.B. based on mental health diagnoses (depression,
anxiety, and bipolar disorder) for which Mother was not
consistently treating, substance abuse, and housing instability.
[N.T., 4/8/22, at 20, 54-57]. The Agency had been involved with
Mother and her older daughter, “M”, since the fall of 2018 based
on similar concerns and as a result of referrals that then three-
year-old M was left outside alone and unsupervised on more than
one occasion. [N.T. at 7, 13].
Mother’s parents ultimately secured custody of M and Mother had
supervised visits. [N. at 7]. The Agency continued to provide
services to Mother in connection with her parenting of M, including
parenting education and support and encouragement of Mother’s
mental health treatment. Mother was cooperative at times and at
other times uncooperative, irrational, and erratic. There was
significant conflict with her family. [N.T at 14.]
In May of 2019, Mother became involved with Father. In
November of 2019, the Agency received a report that Mother was
pregnant with L.J.B. and was abusing Adderall. The Agency,
working together with Mother’s mental health blended case
manager, attempted to address the Adderall use issue with
Mother. Mother’s mental health and related instability remained
a primary concern. Testimony established that, by 2020, Mother
was also having difficulty focusing at her job, and housing stability
became an ongoing issue due to failure to pay rent, family
conflicts, and significant property damage in a rented home that
lead [sic] to problems with Mother’s landlord. A CYS caseworker
met with mother ten days before she gave birth to L.J.B. and
[found] Mother was difficult to communicate with and unfocused.
Mother tested positive for amphetamines and marijuana at the
hospital after giving birth to L.J.B. on March 14, 2020. [N.T. at
15-20].
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L.J.B. was adjudicated dependent on April 1, 2020, and placed in
the care and custody of CYS.[ ] L.J.B. was placed with a foster
family, and she has remained in the foster home since her initial
placement. [N.T. at 21-24]. As of the time of the termination of
parental rights hearing on April 8, 2022, L.J.B. has been in foster
care for a little more than two years, [which constitutes] the
entirety of her life. L.J.B. was adjudicated dependent due to
significant safety concerns for this vulnerable child should she be
in the care and custody of either parent under the circumstances
as they existed at that time. [N.T. at 24].
As to Mother, the evidence showed that she experienced a great
deal of instability in numerous facets of her life due to ongoing
mental health problems, for which she was not adequately
treating, as well as drug abuse. Domestic violence between
Mother and Father was also a concern. Although Mother had
services available and had been connected with providers for
some time, she did not consistently follow through with services.
N.T. at 54-64].
As to Father, although he expressed an interest in taking custody
of L.J.B. on her birth, the Agency had previously been open for
services in connection with other children of Father and could not
assure the safety of newborn L.J.B. in his care and custody due to
ongoing concerns regarding drug use and housing and
employment instability. There were also concerns regarding
Father’s domestic violence.
CYS initially provided reunification services and support to Mother
and Father while they were [waitlisted] for formal purchased
reunification services to begin. Mother and Father were not living
together, and services were offered separately. Because of
pandemic conditions in early 2020, visits with L.J.B. were initially
held by Zoom. The Agency worked with Mother and Father to
facilitate effective and fulfilling visits and to help them with the
technology skills required to participate. In this initial period,
Mother did well during visits, and engaged with L.J.B. in a loving,
affectionate way. Visits were eventually moved to Mother’s home
for a time. Father participated in Zoom visits during this period,
but not consistently. [N.T. at 24-49].
Formal reunification services through YSB began in December of
2020 and continued for approximately nine months, until August
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of 2021. From the outset of formal reunification services, Mother
appeared to have decompensated from a mental health
perspective and seemed very unstable. She was unfocused and
either unable or unwilling to cooperate when it came to fairly basic
tasks such as reviewing documents and required releases. She
also consistently tested positive for various drugs, which included
cocaine, fentanyl, methamphetamine, amphetamines, opiates and
THC. [N.T. at 54-64].
The reunification worker continued addressing drug abuse
concerns with Mother and attempted to help her, to no avail.
Mother at times appeared impaired or subdued to the point that
she did not actively participate in visits with L.J.B. Mother had
been recommended for a partial hospitalization in the summer of
2020 but chose not to follow through; according to Mother, she
was afraid of losing her job. [N.T. at 64-71].
She was ultimately discharged from mental health and substance
abuse counseling for noncompliance and/or failure to attend.
Mother’s reunification counselor testified to concerns over
Mother’s ability to handle basic parenting tasks. These issues
could not be addressed because of the need to focus primarily on
Mother’s mental health and substance abuse problems, and there
was never an ability to progress beyond that focus due to mother’s
unwillingness or inability to cooperate or follow through with
treatment. [N.T. at 70-72].
[The Agency determined that] Mother’s mental health issues and
substance abuse clearly negatively impacted her ability to parent
and to provide safety for L.J.B. Mother was inappropriate in
handling of L.J.B. and in interactions with her YSB caseworkers.
Home conditions were at times found to be inappropriate for a
young child, with items such as razors found on the floor. She
was observed to be hallucinating during a visit with L.J.B. Mother
could not consistently use a car seat or highchair properly, and at
times demonstrated exasperation at being asked to try. [N.T. at
62-71]
Mother was continuing to feed L.J.B. baby food after L.J.B. had
transitioned to regular food, and on one occasion overfed L.J.B. to
the point she was gagging. Mother was harsh in her words and
tone with L.J.B. Reunification workers had to intervene during
many visits to ensure L.J.B.’s safety and well-being. [N.T. at 63,
67-68].
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At about one year of age, L.J.B. appeared fearful of Mother; she
would be tearful and at times scream when Agency workers spoke
of visits with Mother. Visits were moved from the home to an
Agency setting because of safety concerns. Visits were ultimately
terminated on July 20, 2021, after a hearing because of Mother’s
conduct and to protect L.J.B.’s well-being. [N.T. at 70-71].
Mother was fired from her job in late July of 2022[, although she
subsequently attained other employment], and [she] was
experiencing difficulties in the relationship with her landlord.
Formal reunification ended in August of 2021 given the lack of
cooperation. The Agency served Mother with paperwork for the
termination hearing in December of 2021. She appeared
disheveled and “off” to the caseworker. [N.T. at 72-100].
In January of 2022, Mother was admitted for a brief in-patient
psychiatric stay. She was released with prescribed medications.
She contacted a mental health provider, and, as of the termination
hearing date, was on a waiting list for intake. She did not provide
a release for related records.
Mother testified at the termination hearing. As of that time, she
was working with services in the community to attain stable
housing, but was living in a hotel and planning to transition to
another. She was working with other community supports to
secure connections to services. She testified to wanting to
develop a closer relationship to the foster family so she can be
close to L.J.B.
Mother dropped a PFA she had obtained against Father, and she
planned to count on him for support. According to Mother, she
and L.J.B. had formed an attachment with the Agency workers
before formal reunification services with YSB began, and she could
see a difference in L.J.B. after YSB became involved. She found
it difficult to accept criticism from the YSB caseworkers because
she did not respect them. She was proud of L.J.B.’s ability to form
a bond. She initially considered voluntary termination because
L.J.B. was doing so well but ultimately decided to fight it after
talking with Father.
...
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The evidence established that L.J.B. is well-adjusted and happy in
her foster home. She has developed a healthy bond with her
foster parents and siblings. She has started talking and calls her
foster parents “mama” and “dada.” The foster parents are actively
involved in maintaining a relationship between L.J.B. and her
maternal grandparents and her step-sister, M. L.J.B.’s foster
parents are an adoptive resource for her.
Orphans’ Court Opinion, 4/21/22, at 1-5.
Following the termination of parental rights hearing, the orphans’ court
granted the Agency’s petition involuntarily terminating Mother’s and Father’s
parental rights and changing the goal for L.J.B. to adoption. In so doing, the
Court determined that evidence sufficed to establish each of the three grounds
for termination under 23 Pa.C.S. § 2511(a)—specifically, subsections (a)(1),
(a)(5), and (a)(8)—raised by the Agency. Mother’s timely counseled appeal
followed.1
In this Court, Counsel has filed both a petition to withdraw and
an Anders brief. When presented with an Anders brief, this Court may not
review the merits of the underlying issues without first passing on the request
to withdraw. See Commonwealth v. Garang, 9 A.3d 237, 240 (Pa. Super.
2010).
Pursuant to Anders, when counsel believes an appeal is frivolous and
wishes to withdraw from representation, counsel must do the following:
(1) petition the court for leave to withdraw stating that after
making a conscientious examination of the record, counsel has
determined the appeal would be frivolous; (2) file a brief referring
to any issues that might arguably support the appeal, but which
____________________________________________
1 Father did not appeal the termination of his parental rights.
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J-A23043-22
does not resemble a no-merit letter; and (3) furnish a copy of the
brief to the defendant and advise him of his right to retain new
counsel, proceed pro se, or raise any additional points he deems
worthy of this Court's attention.
Commonwealth v. Edwards, 906 A.2d 1225, 1227 (Pa. Super. 2006)
(internal citation omitted). In Santiago, our Supreme Court addressed the
second requirement of Anders, i.e., the contents of an Anders brief, and
required that the brief:
(1) provide a summary of the procedural history and facts, with
citations to the record;
(2) refer to anything in the record that counsel believes arguably
supports the appeal;
(3) set forth counsel's conclusion that the appeal is frivolous; and
(4) state counsel's reasons for concluding that the appeal is
frivolous. Counsel should articulate the relevant facts of record,
controlling case law, and/or statutes on point that have led to the
conclusion that the appeal is frivolous.
Santiago, 978 A.2d at 361.
This Court has extended the Anders principles to appeals involving the
termination of parental rights. See In re V.E., 611 A.2d 1267, 1274-75 (Pa.
Super. 1992). “Once counsel has satisfied the [Anders] requirements, it is
then this Court's duty to conduct its own review of the trial court's proceedings
and render an independent judgment as to whether the appeal is, in fact,
wholly frivolous.” Edwards, 906 A.2d at 1228 (internal citation omitted).
Here, Counsel has filed a petition to withdraw citing Anders and
Santiago, and she includes a statement that she conducted a thorough review
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and determined there were no meritorious issues that could support Mother’s
appeal. Counsel concludes that Mother’s appeal is frivolous.
Counsel’s Anders brief also includes a summary of the facts and
procedural history of the case, and it acknowledges Mother’s chief complaint
that, in her opinion, she did not receive sufficient support or services by a
multidisciplinary team working to maintain the parent-child relationship.
Counsel discusses why this issue lacks merit:
The child has been in the care and custody of CYS the entire two
years of her life. N.T at 93. Both CYS and the reunification team
attempted to provide support and services to [Mother] in hopes of
assisting [Mother] in remedying the significant mental health and
drug abuse issues, as well as concerns about housing stability and
inadequate parenting skills. N.T. at 54-55, 66-68. Over the
course of the two years between the child’s birth and the
termination of parental rights, [Mother] demonstrated an
unwillingness or inability to consistently attend mental health and
substance abuse counseling, N.T. at 57, to refrain from abusing
illegal substances, N.T. at 54-55, to attend and cooperate with the
services provided by CYS and the reunification team, N.T. at 14,
16, and to act in a safe and appropriate manner during the
supervised visits provided by the agencies. N.T. at 65-69, 71-72.
[Mother] was able to begin addressing her mental health concerns
by completing an in-patient stay at a mental health institution and
engaging in follow-up treatment thereafter. N.T. at 101. She also
testified about taking the initiative to work with various local
agencies to secure stable housing, obtain employment and
coordinate mental health and substance abuse services. Id.
However, these developments occurred after being served with
notice of the Petition for Involuntary Termination, and the trial
court therefore was precluded from considering these positive
developments pursuant to 23 Pa.C.S. 2511(b). The trial court
properly analyzed only the circumstances from the time of the
child’s placement until December 2021.
Anders Brief, at 11-13.
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Counsel also indicates that she mailed Mother copies of her petition and
Anders brief, as well as correspondence explaining her rights to retain private
counsel or proceed pro se and raise any additional arguments she believes are
meritorious.
We conclude that Counsel has complied with the requirements of the
Anders procedure described above. Accordingly, we will conduct an
independent review to determine whether Mother’s appeal is wholly frivolous.
As noted above, Counsel identifies the following issue for review:
Mother did not receive sufficient support or services by a
multidisciplinary team working to maintain the parent-child
relationship.
Anders Brief at 10.
In an appeal from an order terminating parental rights, our scope of
review is comprehensive: we consider all the evidence presented as well as
the trial court's factual findings and legal conclusions. However, our standard
of review is narrow: when reviewing a decree terminating parental rights, this
Court must “accept the findings of fact and credibility determinations of the
trial court if they are supported by the record.” In re J.W.B., 232 A.3d 689,
695 (Pa. 2020) (internal citation omitted).
Further, the trial court is free to believe all, part, or none of the evidence
presented and is likewise free to resolve conflicts in the evidence. See In re
D.A.T., 91 A.3d at 203. “If competent evidence supports the trial court's
findings, we will affirm even if the record could also support the opposite
result.” In re M.M., 106 A.3d 114, 117 (Pa. Super. 2014) (citation omitted).
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“If the factual findings are supported, appellate courts review to determine if
the trial court made an error of law or abused its discretion.” Id. (internal
citation omitted).
Termination of parental rights is controlled by Section 2511 of the
Adoption Act. See 23 Pa.C.S.A. § 2511. The burden is upon CYS to prove by
clear and convincing evidence that its asserted grounds for seeking
the termination of parental rights are valid. See In re D.A.T., 91 A.3d 197,
203 (Pa. Super. 2014). “Clear and convincing evidence is that which is so
clear, direct, weighty and convincing as to enable the trier of fact to come to
a clear conviction, without hesitance, of the truth of the precise facts in
issue.” Interest of A.M., 256 A.3d 1263, 1270 (Pa. Super. 2021) (citation
and quotation marks omitted).
Termination of parental rights under Section 2511 requires a bifurcated
analysis.
Initially, the focus is on the conduct of the parent. The party
seeking termination must prove by clear and convincing evidence
that the parent's conduct satisfies the statutory grounds for
termination delineated in section 2511(a). Only if the court
determines that the parent's conduct warrants termination of his
or her parental rights does the court engage in the second part of
the analysis pursuant to section 2511(b): determination of the
needs and welfare of the child[.]
In re C.M.K., 203 A.3d 258, 261-262 (Pa. Super. 2019) (citation omitted).
Here, the orphans’ court terminated Mother's parental rights pursuant
to Section 2511(a)(2), (5), (8), and (b). We need only agree with the
orphans’ court as to any one subsection of Section 2511(a), as well as Section
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2511(b), in order to affirm. In re B.L.W., 843 A.2d 380, 384 (Pa. Super.
2004) (en banc). Moreover, we may uphold a termination decision if any
proper basis exists for the result reached. In re C.S., 761 A.2d 1197,
1201(Pa. Super. 2000) (en banc).
As we need only agree with the orphans’ court as to one subsection
of Section 2511(a), we analyze whether the Agency properly established
grounds for termination under Section 2511(a)(8). That section provides in
relevant part:
(a) General rule.--The rights of a parent in regard to a child may
be terminated after a petition filed on any of the following
grounds:
***
(8) The child has been removed from the care of the parent by
the court or under a voluntary agreement with an agency, 12
months or more have elapsed from the date of removal or
placement, the conditions which led to the removal or placement
of the child continue to exist and termination of parental rights
would best serve the needs and welfare of the child.
***
(b) Other considerations.—The court in terminating the rights
of a parent shall give primary consideration to the developmental,
physical and emotional needs and welfare of the child. The rights
of a parent shall not be terminated solely on the basis of
environmental factors such as inadequate housing, furnishings,
income, clothing and medical care if found to be beyond the
control of the parent. With respect to any petition filed pursuant
to subsection (a)(1), (6) or (8), the court shall not consider any
efforts by the parent to remedy the conditions described therein
which are first initiated subsequent to the giving of notice of the
filing of the petition.
23 Pa.C.S. § 2511(a)(8), (b).
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To satisfy subsection 2511(a)(8), the petitioner must show three
components: (1) that the child has been removed from the care of the parent
for at least 12 months; (2) that the conditions which had led to the removal
or placement of the child still exist; and (3)
that termination of parental rights would best serve the needs and welfare of
the child. In re Adoption of J.N.M., 177 A.3d 937, 943 (Pa. Super. 2018).
Unlike other subsections, subsection 2511(a)(8) does not require the
court to evaluate a parent's willingness or ability to remedy the conditions that
led to the placement of the children. In re M.A.B., 166 A.3d 434, 446 (Pa.
Super. 2017). In fact, the Adoption Act prohibits the court from considering,
as part of a subsection 2511(a)(8) analysis, “any efforts by the parent to
remedy the conditions described [in the petition] which are first
initiated subsequent to the giving of notice of the filing of the petition.” 23
Pa.C.S.A. § 2511(b). While “the application of [subsection 2511(a)(8)] may
seem harsh when the parent has begun to make progress toward resolving
the problems that had led to the removal of [his or] her children.,” this Court
has recognized that
by allowing for termination when the conditions that led to
removal of a child continue to exist after a year, the statute
implicitly recognizes that a child's life cannot be held in abeyance
while a parent attempts to attain the maturity necessary to
assume parenting responsibilities. The court cannot and will not
subordinate indefinitely a child's need for permanence and
stability to a parent's claims of progress and hope for the future.
Indeed, we work under statutory and case law that contemplates
only a short period of time, to wit [18] months, in which to
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complete the process of either reunification or adoption for a child
who has been placed in foster care.
In re Adoption of R.J.S., 901 A.2d 502, 513 (Pa. Super. 2006). See also
In the Interest of T.M.W., 232 A.3d 937, 949 (Pa. Super. 2020) (“[W]here
a child is in foster care, a parent has the affirmative duty to work towards the
return of the child by cooperating with the Agency to obtain the rehabilitative
services necessary for her to be capable of performing her parental duties and
responsibilities.”).
In the instant case, the orphans’ court determined that more than one
year had elapsed since the Agency removed L.J.B. from Mother’s care, that
Mother had made no progress toward remedying the problems that led to
placement of the child with the Agency, and that termination served the child’s
needs and welfare, which could no longer be placed on hold while Mother
belatedly attempted to attain stability.
To these points, the court observed:
the child “has been in [Agency] care for two years—all her life—
and during almost the entirety of that time, the conditions that
[led] to [child’s] placement continued to exist despite ongoing
diligent efforts by the Agency and by reunification workers to
provide support and connect Mother and Father with a host of
services to help remedy those conditions. The issue was not a
lack of adequate, readily available services; the issue was a
failure on the part of parents to follow through and cooperate. The
evidence established, as to both Mother and Father, that they
either could not, or would not, engage in services to remedy the
conditions leading to placement and alleviate the safety concerns
they presented in terms of parenting L.J.B, a young vulnerable
child. During that time, L continued to grow and develop and to
need love and support of a family.
- 13 -
J-A23043-22
Trial Court Opinion, at 8. As the record supports this observation, we agree
with the orphans’ court’s analysis and conclusion that the Agency established
grounds under Section 2511(a)(8) by clear and convincing evidence.
We turn now to subsection (b), which requires the court to “give primary
consideration to the developmental, physical and emotional needs and welfare
of the child.” 23 Pa.C.S.A. § 2511(b). “The emotional needs and welfare of
the child have been properly interpreted to include intangibles such as love,
comfort, security, and stability.” T.S.M., 71 A.3d at 628 (citation and
quotation marks omitted). Our Supreme Court has made clear that section
2511(b) requires the orphans’ court to consider the nature and status of bond
between a parent and child. In re E.M., 620 A.2d 481, 484-485 (Pa. 1993).
It is reasonable to infer that no bond exists when there is no evidence
suggesting the existence of one. See In re K.Z.S., 946 A.2d 753, 762–763
(Pa. Super. 2008). To the extent there is a bond, the orphans’ court must
examine whether termination of parental rights will destroy a “necessary and
beneficial relationship,” thereby causing a child to suffer “extreme emotional
consequences.” In re E.M., 620 A.2d at 484-485.
“While a parent's emotional bond with his or her child is a major aspect
of the [s]ubsection 2511(b) best-interest analysis, it is nonetheless only one
of many factors to be considered by the court when determining what is in the
best interest of the child.” In re M.M., 106 A.3d 114, 118 (Pa. Super. 2014).
“In addition to a bond examination, the trial court can equally emphasize the
safety needs of the child, and should also consider the intangibles, such as
- 14 -
J-A23043-22
the love, comfort, security, and stability the child might have with the foster
parent.” Id. In determining needs and welfare, the court may properly
consider the effect of the parent's conduct upon the child and consider
“whether a parent is capable of providing for a child's safety and security or
whether such needs can be better met by terminating a parent's parental
rights.” Interest of L.W., 267 A.3d at 524.
Furthermore, our Supreme Court has stated, “[c]ommon sense dictates
that courts considering termination must also consider whether the children
are in a pre-adoptive home and whether they have a bond with their foster
parents.” In re T.S.M., 71 A.3d at 268. The Court directed that, in weighing
the bond considerations pursuant to Section 2511(b), “courts must keep the
ticking clock of childhood ever in mind.” Id. at 269. The Court observed,
“[c]hildren are young for a scant number of years, and we have an obligation
to see to their healthy development quickly. When courts fail ... the result,
all too often, is catastrophically maladjusted children.” Id.
The orphans’ court determined the Agency proved its burden under
subsection 2511(b). Evidence established that L.J.B. had formed an emotional
bond with her foster family, now referring to them as “mama” and “dada” as
she begins to talk, whereas, in contrast, she had cried and appeared fearful
of Mother during their visits. Though Mother had exhibited a healthy bond
with the newborn child in the early months after Agency placement, the bond
had since deteriorated as she stopped cooperating with services.
- 15 -
J-A23043-22
While the orphans’ court did not doubt that Mother loved her child, it
reasoned that her unwillingness to cooperate with Agency workers and her
resultant noncompliance with goals over the majority of the relevant timeline
impeded the formation of a healthy bond between herself and her child. Under
the Section 2511(b) rubric, therefore, the trial court determined it would best
meet L.B.J.’s emotional needs and serve her well being by keeping intact the
healthy, mutual emotional bond existing between her and her foster parents.
Accordingly, the orphans’ court viewed terminating Mother’s parental rights
and changing the placement goal to adoption as serving the child’s best
interests. We discern no error with this conclusion.
Based on our review of the record, we agree with Counsel that Mother’s
challenge charging the Agency with offering insufficient services to enable her
to meet her reunification goals is wholly without merit. Furthermore,
considering our duty to ascertain whether there are any arguably meritorious
issues counsel missed or misstated, we note that we observe none. Ample
evidence supported the orphans’ court's decision to terminate Mother’s
parental rights pursuant to Subsections 2511(a) and (b).
Accordingly, we affirm the decree terminating Mother’s parental rights
and changing the placement goal from reunification to adoption, and we grant
counsel's petition to withdraw.
- 16 -
J-A23043-22
Decree affirmed. Petition to withdraw granted.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
- 17 - | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484201/ | [Cite as In re S.C., 2022-Ohio-4075.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
IN RE: S.C. C.A. Nos. 30347
T.C. 30348
APPEAL FROM JUDGMENT
ENTERED IN THE
COURT OF COMMON PLEAS
COUNTY OF SUMMIT, OHIO
CASE Nos. DN 20 10 0646
DN 20 10 0647
DECISION AND JOURNAL ENTRY
Dated: November 16, 2022
CARR, Presiding Judge.
{¶1} Appellant Mother appeals the judgment of the Summit County Court of Common
Pleas, Juvenile Division, that terminated her parental rights and granted permanent custody of her
two children to Summit County Children Services Board (“CSB” or “the agency”). This Court
affirms.
I.
{¶2} Mother and Father are the biological parents of S.C., born February 28, 2018, and
T.C., born August 26, 2019. After receiving a referral in September 2020 regarding the children’s
well-being, CSB removed them from their parents’ care and filed a complaint alleging that both
children were abused (endangered) and dependent. The agency later withdrew its allegations of
abuse, and Mother and Father stipulated that the children were dependent based on issues identified
in the complaint which focused on housing, mental health, substance abuse, and domestic violence.
2
The parents subsequently agreed to a disposition placing the children in the temporary custody of
CSB, while Mother and Father would have supervised visitation in the discretion of the agency
caseworker and the children’s guardian ad litem.
{¶3} The juvenile court adopted the agency’s case plan as its order. Mother and Father
were each required to obtain a drug and alcohol assessment, follow all recommendations, and
submit to random drug screens; obtain a mental health evaluation and follow all recommendations;
engage in parenting education with an emphasis on the impact their unemployment, drug use, and
lack of housing had on the children; and demonstrate the ability to meet the children’s basic needs,
including the utilization of community resources to supplement their incomes.
{¶4} Father relapsed into methamphetamine use early in the case, physically assaulted
Mother, and attempted suicide. Although he entered a drug treatment program, Father quickly
ceased participating. Although he continued to attend all court hearings, he never committed to
engaging in any case plan services. In addition, Father missed many opportunities to visit with the
children and struggled to interact effectively with them when he did appear.
{¶5} Mother, on the other hand, began to make progress on her case plan objectives
immediately. Unfortunately, she soon suffered a mental health crisis requiring hospitalization and
was discharged from a drug treatment program after relapsing into methamphetamine use.
Although Mother visited with the children consistently, the guardian ad litem described her visits
as “chaotic.”
{¶6} Based on the parents’ lack of progress on case plan objectives, including their
failures to address mental health and substance abuse issues and work towards remedying the
conditions that led to the children’s removal from their home, CSB filed a motion for permanent
custody. Mother filed a motion for a first six-month extension of temporary custody. The juvenile
3
court scheduled the permanent custody hearing approximately six months after CSB filed its
motion. The court delayed the hearing for another six weeks because Mother had been hospitalized
and required some recovery time. After the first day of the hearing, the juvenile court recessed for
another two months due to the unavailability of a witness. The hearing was concluded 20 months
into the case.
{¶7} After consideration, the juvenile court denied Mother’s motion for a six-month
extension of temporary custody, granted CSB’s motion for permanent custody, and terminated
Mother’s and Father’s parental rights. Mother filed a timely appeal and raises one assignment of
error for review.
II.
ASSIGNMENT OF ERROR
THE TRIAL COURT ABUSED ITS DISCRETION IN ITS GRANT OF
PERMANENT CUSTODY TO [CSB] AS SUCH DECISION WAS NOT
SUPPORTED BY THE EVIDENCE AND WAS AGAINST THE MANIFEST
WEIGHT OF THE EVIDENCE.
{¶8} Mother argues that the juvenile court’s judgment is against the weight of the
evidence. This Court disagrees.
Parental unsuitability
{¶9} As an initial matter, Mother argues that the juvenile court was required to either
grant a six-month extension of temporary custody or return the children to Mother’s legal custody
because it failed to first make a finding of parental unsuitability. Mother cites several cases,
including In re Perales, 52 Ohio St.2d 89 (1977); Masitto v. Masitto, 22 Ohio St.3d 63 (1986); In
re Hockstock, 98 Ohio St.3d 238, 2002-Ohio-7208; and In re Davis, 7th Dist. Mahoning No. 02-
CA-95, 2003-Ohio-809, in support of her argument. Significantly, none of the cases Mother cites
4
involve the determination of custody regarding children who had been adjudicated dependent,
neglected, and/or abused. Accordingly, they are inapposite to this case.
{¶10} The Ohio Supreme Court addressed the issue of parental unsuitability in a case
involving the custodial disposition of a child who had been adjudicated neglected. The high court
held that “[a] juvenile court adjudication of abuse, neglect, or dependency is a determination about
the care and condition of a child and implicitly involves a determination of the unsuitability of the
child’s custodial and/or noncustodial parents.” In re C.R., 108 Ohio St.3d 369, 2006-Ohio-1191,
¶ 23. Relying on In re C.R., this Court has recognized the parental unsuitability finding inherent
when a child has been adjudicated dependent, neglected, or abused. In re S.B., 9th Dist. Summit
No. 28276, 2017-Ohio-1353, ¶ 9.
{¶11} In this case, S.C. and T.C. were adjudicated dependent. In fact, Mother and Father
stipulated to the children’s dependency. That adjudication carries with it the implicit finding of
parental unsuitability. The juvenile court was, therefore, not obligated to make a separate finding
of unsuitability prior to awarding custody of the children to a nonparent. Accordingly, Mother’s
argument to the contrary is not well taken.
Manifest weight
{¶12} In considering whether the juvenile court’s judgment is against the manifest weight
of the evidence, this Court “weighs the evidence and all reasonable inferences, considers the
credibility of witnesses and determines whether in resolving conflicts in the evidence, the [finder
of fact] clearly lost its way and created such a manifest miscarriage of justice that the [judgment]
must be reversed and a new [hearing] ordered.” (Internal quotations and citations omitted.)
Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, ¶ 20. When weighing the evidence,
this Court “must always be mindful of the presumption in favor of the finder of fact.” Id. at ¶ 21.
5
{¶13} Before a juvenile court may terminate parental rights and award permanent custody
of a child to a proper moving agency, it must find clear and convincing evidence of both prongs
of the permanent custody test: (1) that the child is abandoned; orphaned; has been in the temporary
custody of the agency for at least 12 months of a consecutive 22-month period; the child or another
child of the same parent has been adjudicated abused, neglected, or dependent three times; or that
the child cannot be placed with either parent, based on an analysis under R.C. 2151.414(E); and
(2) that the grant of permanent custody to the agency is in the best interest of the child, based on
an analysis under R.C. 2151.414(D)(1). R.C. 2151.414(B)(1) and 2151.414(B)(2); see also In re
William S., 75 Ohio St.3d 95, 98-99 (1996). The best interest factors include: the interaction and
interrelationships of the child, the wishes of the child, the custodial history of the child, the child’s
need for permanence and whether that can be achieved without a grant of permanent custody, and
whether any of the factors outlined in R.C. 2151.414(E)(7)-(11) apply. R.C. 2151.414(D)(1)(a)-
(e); see In re R.G., 9th Dist. Summit Nos. 24834, 24850, 2009-Ohio-6284, ¶ 11. Clear and
convincing evidence is that which will “produce in the mind of the trier of facts a firm belief or
conviction as to the facts sought to be established.” (Internal quotations omitted.) In re Adoption
of Holcomb, 18 Ohio St.3d 361, 368 (1985), quoting Cross v. Ledford, 161 Ohio St. 469 (1954),
paragraph three of the syllabus.
{¶14} As to the first prong, CSB alleged that S.C. and T.C. could not or should not be
returned to either parent pursuant to R.C. 2151.414(B)(1)(a). The juvenile court found that the
agency met its burden of proof based on two of the three subsection (E) grounds alleged. Those
subsections provide as follows:
In determining at a hearing [on a motion for permanent custody] whether a child
cannot be placed with either parent within a reasonable period of time or should not
be placed with the parents, the court shall consider all relevant evidence. If the
court determines, by clear and convincing evidence, at a [permanent custody]
6
hearing * * * that one or more of the following exist as to each of the child’s parents,
the court shall enter a finding that the child cannot be placed with either parent
within a reasonable time or should not be placed with either parent:
(1) Following the placement of the child outside the child’s home and
notwithstanding reasonable case planning and diligent efforts by the agency to
assist the parents to remedy the problems that initially caused the child to be placed
outside the home, the parent has failed continuously and repeatedly to substantially
remedy the conditions causing the child to be placed outside the child’s home. In
determining whether the parents have substantially remedied those conditions, the
court shall consider parental utilization of medical, psychiatric, psychological, and
other social and rehabilitative services and material resources that were made
available to the parents for the purpose of changing parental conduct to allow them
to resume and maintain parental duties.
(2) Chronic mental illness, chronic emotional illness, intellectual disability,
physical disability, or chemical dependency of the parent that is so severe that it
makes the parent unable to provide an adequate permanent home for the child at
the present time and, as anticipated, within one year after the court holds the hearing
pursuant to division (A) of this section or for the purposes of division (A)(4) of
section 2151.353 of the Revised Code[.]
Although the agency might allege alternative first-prong grounds in support of its motion for
permanent custody, it need only prove one. In re T.B., 9th Dist. Summit Nos. 29560 and 29564,
2020-Ohio-4040, ¶ 11.
{¶15} Mother does not clearly develop an argument explaining why the juvenile court’s
award of permanent custody is against the manifest weight of the evidence. She fails to challenge
the court’s first-prong finding that S.C. and T.C. cannot or should not be returned to either parent’s
care based on the parents’ failures to remedy the concerns underlying the children’s removal,
Father’s chronic mental health issues, and both parents’ chronic chemical dependency issues. In
addition, Mother does not explain how the weight of the evidence supports a finding that a six-
month extension of temporary custody or an award of legal custody to Mother, rather than
permanent custody, is in the best interest of the children. Nevertheless, in the interest of justice
and the significant rights implicated when parents face a termination of their parental rights, this
7
Court will engage in a thorough review to determine whether the judgment is contrary to the
manifest weight of the evidence.
{¶16} This Court concludes that CSB proved by clear and convincing evidence that
Mother and Father failed continuously and repeatedly to substantially remedy the conditions that
led to the children’s removal. See R.C. 2151.414(E)(1). The agency removed the children from
the parents’ home based on housing instability, violence in the home, and both parents’ mental
health and substance abuse issues. CSB developed case plan objectives for Mother and Father that
were designed to alleviate those concerns and facilitate reunification efforts so that the children
could safely be returned to the parents’ home.
{¶17} Mother obtained a mental health and substance abuse assessment early in the case
at Community Health Center Addiction Services (“CHC”) and engaged in weekly counseling
sessions to address her anxiety, depression, and substance abuse. While her initial attendance and
communication with the service provider were good, Mother soon became inconsistent and within
a few months stopped contacting her counselor. Mother tested negative for substances during a
three-month period but did not appear for all dates on which she should have submitted to drug
screens. After Mother then tested positive for methamphetamine use, she failed to engage further
at CHC. Her counselor closed her case a couple of months later based on Mother’s failure to attend
sessions and engage in her treatment plan.
{¶18} Shortly thereafter, Mother went to Greenleaf Family Center (“Greenleaf”) for
another mental health and substance abuse assessment. She was diagnosed with stimulant use
disorder, bipolar disorder, and unspecified anxiety disorder. Mother and her counselor developed
a treatment plan that included individual counseling, group sessions, and engagement in parenting
education. She completed her parenting classes but nevertheless continued to struggle with
8
managing and setting boundaries for the children during visits. Although recommended, Mother
refused to consider intensive outpatient or inpatient treatment programs. Mother’s attendance for
individual counseling was sporadic and she did not complete the 12-week group program. After
Mother failed to communicate with her for four months, the Greenleaf counselor closed Mother’s
case for lack of participation.
{¶19} Mother next obtained an assessment at IBH Addiction Center (“IBH”) a few
months before the permanent custody hearing. Mother did not attend her first mental health
counseling session until two weeks before the first hearing date. She again refused to engage in
the recommended inpatient drug treatment but she agreed to participate in an intensive outpatient
program. Although she was permitted to attend those sessions virtually, her participation was
sporadic. After two months, Mother relapsed into methamphetamine use. At that point, Mother
agreed to engage in residential drug treatment, which typically lasts 45-60 days, followed by a step
down program such as intensive outpatient or aftercare treatment. Although the residential
treatment staff had contacted Mother, she had not scheduled her admission prior to the hearing.
{¶20} The evidence indicates that Mother fell seriously ill approximately 14 months into
the case. She was hospitalized, placed on a ventilator, and diagnosed with Guillain-Barre
Syndrome. While this Court does not make light of the significance of Mother’s illness, the
evidence demonstrates that Mother failed to engage in case plan services for a significant period
of time when she was not impacted by illness. Mother testified that she was hospitalized for two
weeks and unable to work on her case plan objectives for a total of ten weeks. She does not
explain, however, why she failed to engage consistently in services during the eleven and a half
months prior to falling ill or the three and a half months after her recovery. In fact, Mother admitted
9
during her testimony that she had resumed using methamphetamine weekly during the month
preceding the final hearing date.
{¶21} Father’s engagement in mental health services, substance abuse treatment, and
parenting education paralleled Mother’s. He also completed parenting classes but demonstrated
little ability to apply any lessons, as he struggled to set boundaries for the children during visits.
Father failed to engage in any mental health services until a couple of weeks before the permanent
custody hearing. During the case, he twice engaged in self-harm and was hospitalized each time.
He failed to sign releases of information for the CSB caseworker to obtain his hospital records.
Father initiated services with a couple substance abuse treatment providers but he never fully
engaged or followed through on any recommendations. He relapsed into methamphetamine use
on several occasions and only reinitiated substance abuse treatment shortly before the hearing.
{¶22} As for their basic needs case plan objective, neither Mother nor Father was
employed during the case. Father receives a $700 disability payment each month. He currently
pays the maternal grandmother $500 per month for rent. Mother and Father have resumed living
in the home from which the children were removed after living in multiple other homes during the
past year and a half. They briefly separated after Father relapsed on drugs and physically assaulted
Mother. The maternal grandmother also lives in the home with Mother and Father. Mother and
the maternal grandmother have a history of domestic violence, drug use, and drug manufacturing.
Although Mother testified that the maternal grandmother would move out of the two bedroom
home if the children were returned to the parents’ care, she had not made any alternate housing
arrangements. Mother and Father had no beds, clothing, or other supplies necessary for the
children in the home.
10
{¶23} The caseworker testified that the parents’ current home was not safe or appropriate
for the children because of the presence of the maternal grandmother who had ongoing physical
altercations with Mother during the case and who had a recent felony drug abuse conviction. The
prior owner of the home (the maternal great grandfather) had died, and the ownership of the home
was unknown, although it appeared that the maternal grandmother might own her deceased father’s
home. There was no lease agreement to indicate that Mother and Father could remain in the home.
{¶24} Based on this Court’s review, CSB established by clear and convincing evidence
that Mother and Father had failed to remedy the concerns that led to the children’s removal from
their home. Mother and Father continued to struggle with substance abuse issues, both relapsing
into methamphetamine use on multiple occasions during the case. Neither parent consistently
participated in drug treatment despite the agency’s referrals and the opportunity to do so with
various providers. Likewise, Mother and Father failed to address their mental health issues and
continued to exhibit symptoms associated with their diagnoses which impacted their abilities to
parent the children safely and appropriately. Despite completing parenting education classes,
neither parent demonstrated any changes in their behavior with the children during visits. Finally,
Mother and Father remained unemployed, failed to pursue community financial resources that
might have been available to them, lacked the resources and ability to provide for the children’s
basic needs, and failed to secure safe and stable housing. Accordingly, the juvenile court’s first-
prong finding that S.C. and T.C. could not or should not be returned to either parent’s care was not
against the manifest weight of the evidence.
{¶25} The agency further proved by clear and convincing evidence that an award of
permanent custody was in the children’s best interest. S.C. and T.C. were two and a half years old
and 14 months old, respectively, when removed from Mother’s and Father’s custody. Both
11
children were significantly behind in vaccinations and routine medical care at that time. After
their removal, CSB placed the children together in a foster home where they resided throughout
the 20-month duration of the case.
{¶26} Mother was fairly consistent in visiting the children, while Father was less
consistent. Initially, the children were fearful of Father when Mother left the room, but those fears
subsided over time. The caseworker and guardian ad litem testified that there is a bond between
the parents and the children. Mother and Father behaved appropriately at visits, bringing food and
activities. However, they struggled to set limits with the children and follow through with
consequences. Managing both young boys at once was often difficult for the parents. The guardian
ad litem noted that the parents would need time to establish and maintain sobriety given their recent
relapses, so that there was no immediate ability for Mother and Father to move to less structured
or unsupervised visits.
{¶27} The children are closely bonded with the foster parents who consistently meet all
the children’s physical, medical, and emotional needs. The foster parents provide a clean and safe
home where the children are comfortable.
{¶28} S.C. has speech delays and hearing issues, both of which have improved after
having tubes inserted in his ears. He is on a prescreening wait list to see if he is eligible for special
education services. S.C. is engaged in biweekly counseling to address some emotional outbursts
and unprovoked aggressive behaviors against others, including T.C. S.C. has been diagnosed with
general adjustment disorder, unspecified trauma and stressor disorder, and posttraumatic stress
disorder. The child witnessed acts of domestic violence by his grandmother against Mother.
{¶29} T.C. also has difficulty regulating his emotions. Although he is below the age
typically required for counseling, S.C.’s counselor at Child Guidance and Family Solutions has
12
incorporated T.C. into some of S.C.’s sessions to see the brothers’ interactions and get a sense for
T.C.’s struggles too. T.C. has noted developmental delays in speech and certain milestones. He
is in speech therapy and has had his adenoids removed and tubes placed in his ears to address those
issues. T.C. was recently evaluated for autism and is on a wait list for occupational and physical
therapies.
{¶30} Both children are on wait lists for full developmental assessments at Akron
Children’s Hospital. Accordingly, the boys have numerous and frequent appointments for services
which will continue indefinitely. The foster parents ensure that the children attend all
appointments. The guardian ad litem surmised that, given their struggles to maintain sobriety and
attend their own appointments for mental health and substance abuse treatment, Mother and Father
would not likely ensure that the children receive the services and interventions necessary to address
their delays and trauma.
{¶31} As S.C. was four years old and T.C. was not yet three years old at the conclusion
of the hearing, they lacked the maturity to express their desires regarding custody. The guardian
ad litem spoke on their behalf and opined that it is in the children’s best interest to be placed in the
permanent custody of CSB for purposes of adoption.
{¶32} Given the amount of time the very young children have spent in the agency’s
temporary custody, they require a permanent home that can offer them stability. Mother and Father
have made negligible progress in regard to their case plan objectives. They lack the resources and
stability necessary to provide for the children’s basic needs. Given the severity of the parents’
mental health and substance abuse issues and their failure to engage in treatment or services in a
meaningful way, the guardian ad litem opined that there was insufficient time remaining under the
statutory time limits for resolution of such cases to enable Mother and Father to address the
13
concerns underlying the children’s removal. It was only two weeks before the permanent custody
hearing that Father initiated counseling and Mother finally indicated a willingness to participate in
long-recommended inpatient drug treatment. There was no evidence to indicate that either parent
could provide a safe, appropriate, and stable home environment for the children in the foreseeable
future. Although two relatives were identified for possible placement, neither was suitable. On
the other hand, the children were comfortable, safe, and thriving in the home of the foster parents
who were willing to adopt them and provide consistency in their lives.
{¶33} Based on a thorough review of the record, this is not the exceptional case in which
the trier of fact clearly lost its way and committed a manifest miscarriage of justice by terminating
the parents’ parental rights and awarding permanent custody of S.C. and T.C. to CSB. The parents
failed to address their mental health and substance abuse issues which interfered with their ability
to take care of the children. Mother and Father did not establish safe and stable housing, and they
lacked the means to provide for the children’s basic needs. Accordingly, the juvenile court’s
permanent custody judgment is not against the manifest weight of the evidence.
{¶34} This Court further rejects Mother’s argument that the juvenile court erred by failing
to grant an extension of temporary custody based on her case plan progress or return the children
to her legal custody. R.C. 2151.415(D) permits extensions of temporary custody beyond one year
only if the extension is in the best interest of the child, a parent has made significant progress on
case plan objectives, and reunification is likely to occur within the period of extension. Mother at
best minimally complied with her case plan objectives, and her lack of participation in services
demonstrates that reunification was not likely to occur during any extension period. Moreover, it
is well settled that, where an award of permanent custody is in the children’s best interest, a six-
month extension of temporary custody or legal custody to a parent necessarily is not. See In re
14
A.S., 9th Dist. Summit No. 28743, 2017-Ohio-8984, ¶ 31; In re D.T., 9th Dist. Summit No. 29876,
2021-Ohio-1650, ¶ 15. For the above reasons, Mother’s assignment of error is overruled.
III.
{¶35} Mother’s sole assignment of error is overruled. The judgment of the Summit
County Court of Common Pleas, Juvenile Division, is affirmed.
Judgment affirmed.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period
for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to
mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the
docket, pursuant to App.R. 30.
15
Costs taxed to Appellant.
DONNA J. CARR
FOR THE COURT
CALLAHAN, J.
SUTTON, J.
CONCUR.
APPEARANCES:
THOMAS C. LOEPP, Attorney at Law, for Appellant.
SHERRI BEVAN WALSH, Prosecuting Attorney, and HEAVEN R. DIMARTINO, Assistant
Prosecuting Attorney, for Appellee. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484202/ | J-A15031-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
AMY J. WHEATLEY : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
ERIC A. WHEATLEY :
:
Appellant : No. 1296 WDA 2021
Appeal from the Order Entered October 21, 2021
In the Court of Common Pleas of Armstrong County
Civil Division at No(s): 2013-1340-CIVIL
BEFORE: BOWES, J., KUNSELMAN, J., and SULLIVAN, J.
MEMORANDUM BY SULLIVAN, J.: FILED: NOVEMBER 16, 2022
Eric A. Wheatley (“Mr. Wheatley”) appeals from the order denying his
motion to disqualify Alaine Generelli, Esquire (“Attorney Generelli”) and the
law firm of Geary, Loperfito & Generelli, LLC (“the GLG firm”) from
representing Amy J. Wheatley (“Ms. Wheatley”). We affirm.
While employed at the office of Gregory W. Swank, Esquire (“Attorney
Swank”), Shea Kraft, Esquire (“Attorney Kraft”) represented Mr. Wheatley in
a divorce and custody case against Ms. Wheatley. Attorney Generelli, a
member of the GLG firm, represented, and continues to represent, Ms.
Wheatley in that case. Attorney Kraft left Attorney Swank’s employ to work
for the GLG firm. See N.T., 10/20/21, at 11-15, 19-20, 47.
Mr. Wheatley filed a motion to disqualify Attorney Generelli and the GLG
firm in which he averred that Attorney Kraft learned secret and confidential
information relating to his case while representing him, and that Attorney
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Generelli’s and the GLG firm’s continued representation of Ms. Wheatley
constituted a conflict of interest and a violation of Pennsylvania Rules of
Professional Conduct 1.9 and 1.10 (“Rules 1.9 and 1.10”). See Motion to
Disqualify, 10/19/21, at 1-2 (unnumbered). Other clients whom Attorney
Kraft had represented while working for Attorney Swank filed similar
disqualification motions against Attorney Generelli and the GLG firm.1 On
October 20, 2021, the trial court held an evidentiary hearing on all the
disqualification motions.
We summarize the testimony at the evidentiary hearing as follows. In
August 2021, Attorney Swank began reducing Attorney Kraft’s workload and
expressed a clear intent to terminate his employment. See N.T., 10/20/21,
at 11-13. Attorney Kraft had exploratory employment discussions with the
GLG firm. See id. at 13-15. Later that month, Attorney Kraft told Attorney
Swank that he intended to find a new job, and they discussed some of Attorney
Kraft’s active case files. Thereafter, Attorney Kraft found that his key no
longer opened the door to the main office of Attorney Swank’s firm. See id.
at 15-18. At that time, the GLG firm had not yet hired Attorney Kraft and he
was considering a number of employment possibilities. See id. at 14, 23-26.
Prior to hiring Attorney Kraft, the GLG firm had a series of consultations
with an ethics attorney, Beth Ann Lloyd, Esquire (“Attorney Lloyd”), to
____________________________________________
1 Three of those cases are now on appeal before this Court, Hatch v. Hatch;
Fetterman v. Cochran; and Dietrich v. Dietrich, and are listed
consecutively before this panel at J-A15032-22 to J-A15034-22. We address
those appeals in separate decisions.
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determine, if it hired Attorney Kraft, what actions it would need to take to
comply with the screening requirements of Rule 1.10 in Mr. Wheatley’s case
and any other active case in which Attorney Generelli had been Attorney
Kraft’s opponent (the “conflict cases”). See id. at 47, 57-58. Attorney Lloyd
explained to the GLG firm that Attorney Kraft would have to withdraw from
representation in the conflict cases, and that the GLG firm would need to
screen him from any contact with the physical or electronic files in those cases,
prevent him from hearing any discussion of them, and not share with him any
of the fees in those cases. See id. at 47, 58-59. Attorney Generelli also told
the entire GLG staff that screening procedures would be put into place if
Attorney Kraft were hired. See id. at 50-51.
The GLG firm hired Attorney Kraft, having told him that his employment
was contingent upon his compliance with the ethical rules, and directed him
to follow all of Attorney Lloyd’s recommendations. See id. at 47-48, 57-59,
75.2 Attorney Lloyd helped Attorney Kraft write a letter which he sent to Mr.
Wheatley one week before he began working at the GLG firm. See id. at 21,
32.3 The letter stated that Attorney Kraft would be joining the GLG firm, would
withdraw from representing Mr. Wheatley, would not participate in the case
____________________________________________
2 Attorney Swank immediately removed Attorney Kraft from his offices when
Attorney Kraft told him about his new employment, which prevented them
from discussing the remainder of Attorney Kraft’s active cases. See N.T.,
10/20/21, at 16-18.
3 Attorney Kraft sent similar letters to his former clients in the other conflict
cases. See N.T., 10/20/21, at 22-28.
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at the GLG firm in any way or reveal confidential information about Mr.
Wheatley, the case, or the litigation strategy, and had not taken any case files
or materials concerning the case. The letter also explained to Mr. Wheatley
the procedures the GLG firm would use to protect Mr. Wheatley’s confidences
and to isolate Attorney Kraft from access to the physical and electronic files in
the case. See id. at 24-28. Additionally, the letter stated that Mr. Wheatley’s
case would not be discussed in Attorney Kraft’s presence, and that Attorney
Kraft would not share in any of the fees paid to the GLG firm in the case. See
id. at 23-26, 28, 30, 43, 47. Attorney Generelli’s testimony confirmed
Attorney Kraft’s testimony. See id. at 53, 56-59. The letter provided Mr.
Wheatley with Attorney Kraft’s cell phone number, personal email address,
fax number, and mailing address. See id. at 24-25.4
By the time Attorney Kraft began work at the GLG firm in mid-
September 2021, the firm had expended substantial time and effort and
implemented all of Attorney Lloyd’s suggested screening procedures: physical
documents in the conflict case files, other than those kept in Attorney
Generelli’s office, are maintained in a locked filing cabinet; and the electronic
files in those cases, and Attorney Generelli’s email, are password-protected
and segregated from other electronic case files. See id. at 48-49, 59-61, 64,
70-72, 75. Additionally, prior to the time Attorney Kraft began working at the
____________________________________________
4 At the hearing on the joint disqualification motions, neither Mr. Wheatley nor
any other former client in the conflict cases introduced evidence of responding
to Attorney Kraft’s letter or alleged that Attorney Kraft disclosed confidential
information in any conflict case.
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GLG firm, Attorney Generelli advised the entire firm and staff5 about the
screening procedures and directed them to: promptly remove conflict case
documents from the copier; put faxes6 relating to conflict cases in special
folders and take them to her office; and print documents in conflict cases on
their own printers and bring them directly to her. See id. at 47-54, 59-60,
67-69. The GLG firm also changed its docketing system. See id. at 59.
Employees must seek assistance to see written documents in a conflict case.
See id. at 65-66, 72-73.
Attorney Kraft testified that the GLG firm explained the screening
procedures to him before he began working at the firm. See id. at 43. Since
he joined the GLG firm, he has not seen, or had access to, any of the conflict
case files, has not discussed any of the conflict cases with anyone at the GLG
firm, has not disclosed any confidential information concerning the conflict
cases, has not heard any discussion of those cases, and recognizes his duty
under the Rules of Professional Conduct to maintain the confidences of his
former clients. See id. at 26-30, 38-43. Attorney Generelli also testified that
Attorney Kraft has been screened from all of the conflict cases and has never
disclosed confidential information to her concerning those cases. See id. at
____________________________________________
5 Attorney Kraft testified that the GLG firm now has four lawyers and also
employs a paralegal, a secretary, an office manager/paralegal, and a
receptionist, which Attorney Generelli’s testimony corroborated. See N.T.,
10/20/21, at 35-37, 39, 50, 65-66, 70.
6 Attorney Generelli receives faxes infrequently. See N.T., 10/20/21, at 70.
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52, 54. Attorney Kraft’s employment contract specifies that he can be fired
for violating the Rules of Professional Conduct. See id. at 38.
Attorney Generelli, the primary attorney who works on the conflict
cases, has instructed her paralegal, the only employee who works with her on
those cases, not to discuss them in front of Attorney Kraft. See id. at 45-46,
50, 67. Attorney Generelli testified that she has been “pretty firm and direct”
with staff about what they must do to comply with the screening protocols and
continues to discuss them with staff on an ongoing basis. See id. at 52, 60.
Additionally, all of the GLG staff observed the time and energy the firm
expended putting the protocols in place and understood that the firm took the
matter very seriously. See id. at 64. Though the firm did not create a
separate, written screening document for staff, it used Attorney Lloyd’s
written advice about the necessary elements of a screen to formulate its
screening protocols, all of which it implemented prior to the inception of
Attorney Kraft’s employment and all of which Attorney Generelli conveyed to
the entire GLG firm. See id. at 48-49, 59-61, 64, 67, 70-73, 75-76.
Testimony at the disqualification hearing established that while
employed by Attorney Swank, Attorney Kraft performed forty hours of work
on Mr. Wheatley’s case over the course of three years, which included
preparing a pretrial statement and discovery responses, and preparing for a
custody trial that did not occur. See id. at 80-81.
The day after the hearing, the trial court entered an order denying Mr.
Wheatley’s disqualification motion and all of the other disqualification motions.
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The trial court found that Attorney Kraft, Attorney Generelli, and the GLG firm
had not violated Rule 1.9 or Rule 1.10. See Trial Court Order, 10/21/21. Mr.
Wheatley filed a notice of appeal and, days later, filed a Pa.R.A.P. 1925(b)
statement.7 The trial court complied with Rule 1925(a).
Mr. Wheatley raises the following issue for our review:
Did the trial court err in concluding that [Mr. Wheatley’s] trial
counsel, having left his employment with the law firm representing
[Mr. Wheatley] in active litigation and then immediately becoming
employed by the law firm representing the opposing party in the
same litigation, did not violate the terms of Rule 1.10 of the Rules
of Professional Conduct requiring that [Attorney Kraft’s] new
employer be disqualified from representing the opposing party in
the litigation?
Mr. Wheatley’s Brief at 8.8
____________________________________________
7 This is a children’s fast track appeal, see Pa.R.A.P. 102. Appellants in such
cases, must file their Rule 1925(b) statement with their notice of appeal, which
Mr. Wheatley failed to do. See Pa.R.A.P. 1925(a)(2)(i). We nevertheless
decline to quash Mr. Wheatley’s appeal because he substantially complied with
the rule, and his initial non-compliance with the rule did not occasion prejudice
to any of the parties and did not impede the trial court’s ability to issue an
opinion. See In Re K.T.E.L, 983 A.2d 745, 747 (Pa. Super. 2009) (holding
that the failure to file a Rule 1925(b) statement with the notice of appeal in a
children’s fact track case resulted in a defective notice of appeal, but that
quashal was not compelled where neither party suffered prejudice as a
result).
8 Mr. Wheatley makes no argument concerning the Rule 1.9 violation claim he
raised in the trial court. Accordingly, we will not review it. See
Commonwealth v. Fletcher, 986 A.2d 759, 785 (Pa. 2009) (indicating that
a claim is waived where appellant fails to cite pertinent authority or relevant
detail in his brief). We note that Rule 1.9 precludes an attorney from
representing a party in a litigation where he has previously represented the
party’s opponent. Mr. Wheatley does not allege that Attorney Kraft represents
Ms. Wheatley.
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As a preliminary matter, we note that an order denying a motion to
disqualify a law firm for an alleged conflict of interest is immediately
appealable as a collateral order. See Rudalavage v. PPL Elec. Util. Corp.,
268 A.3d 470, 478 (Pa. Super. 2022); see also Pa.R.A.P. 313 (governing
collateral orders).
Mr. Wheatley asserts that Rule 1.10(b) compels the disqualification of
Attorney Generelli and the GLG firm from continuing to represent Ms.
Wheatley in the case against him because his former counsel, Attorney Kraft,
now works at the GLG firm. Under Rule 1.10(b), when a lawyer leaves one
law firm for another, his new firm may represent a person on a matter he
previously worked on for a client with materially adverse interests (and
acquired protected information that is material to the matter) if: (1) the firm
screens the lawyer from any participation in the matter and he receives no fee
for it, and (2) the lawyer gives prompt, written notice to his former client so
that the client may ascertain the lawyer’s compliance with the rule. See Rule
1.10(b). Screening requires the lawyer’s isolation from participation in the
matter through “the timely imposition of procedures . . . reasonably adequate
under the circumstances to protect information that the lawyer is obligated to
protect . . ..” Rule 1.0(k).
When reviewing a trial court’s order on the disqualification of counsel,
this Court employs a plenary standard of review. See Darrow v. PPL
Electric Utilities Corp., 266 A.3d 1105, 1111 (Pa. Super. 2021). The law
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recognizes that it is appropriate to sanction attorneys for violating ethical
rules. See McCarthy v. Southeastern Pennsylvania Transp. Auth., 772
A.2d 987, 989 (Pa. Super. 2001). However, disqualification is not freely
granted. Pennsylvania courts assign particular importance to protecting a
party’s right to counsel of his choice. See Rudalavage, 268 A.3d at 478.
Disqualification, therefore, is only appropriate when another remedy is not
available and, more important, when the right to counsel of one’s choice
interferes with the essential need to ensure that the party seeking
disqualification receives their due process right to a fair trial. Id. The
Pennsylvania Supreme Court reserves for itself the power to punish attorney
misconduct. See Reilly by Reilly v. Southeastern Pennsylvania Transp.
Auth., 489 A.2d 1291, 1299 (Pa. 1985) (stating that violations of the Rules
of Professional Conduct are not a proper subject for consideration of the lower
courts to impose punishment for attorney misconduct).
To assess the reasonable adequacy of a law firm’s screening procedures
when it hires an attorney who previously worked for the opposing party in an
active case, our Courts weigh a series of factors federal courts have identified.
See Rudalavage, 268 A.3d at 479 (citing Dworkin v. General Motors
Corp., 906 F.Supp. 273, 279-80 (E.D. Pa. 1995)); see also Darrow, 266
A.3d at 1112 (same). The “Dworkin” factors include: (1) the substantiality
of the relationship between the attorney and the former client; (2) the time
lapse between the matters in dispute; (3) the size of the firm and the number
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of disqualified attorneys; (4) the nature of the disqualified attorney’s
involvement; and (5) the timing of the wall. See Rudalavage, 268 A.3d at
479; see also Darrow, 266 A.3d at 1112. Rule 1.10 and the Dworkin factors
place particular emphasis on the creation by the attorney’s new firm of a
reasonably adequate wall or screen9 to protect information the disqualified
attorney is obligated to protect. The critical factors concerning the screen are
whether it: (1) prohibits the discussion of sensitive matters; (2) restricts the
circulation of sensitive documents; (3) restricts access to sensitive files; and
(4) manifests a strong firm policy against breach, including sanctions, physical
and/or geographical separation. See Rudalavage, 268 A.3d at 480 (citing
Dworkin, 906 F.Supp. at 280); see also Darrow, 266 A.3d at 1112 (also
citing Dworkin).
On appeal, Mr. Wheatley argues that Ms. Wheatley failed to show that
the GLG firm complied with Rule 1.10(b). He contends that Attorney Kraft’s
prior involvement in his case and the substantiality of their attorney-client
relationship, as well as the short time lapse between the matters in dispute,
and the small size of the GLG firm, support disqualification. He also asserts
that the screen was deficient since it was not in writing and did not explicitly
state the penalties for staff for violating the screen. Mr. Wheatley further
____________________________________________
9 Courts use the terms “wall” and “screen” somewhat interchangeably.
Because Rules 1.10 and 1.0(k) use the terms “screened” and “screen,” we
primarily use those terms.
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asserts that his continuing interest in Attorney Kraft’s loyalty weighs heavily
in favor of disqualification of the entire GLG firm. To that end, Mr. Wheatley
requests that the Court follow Norfolk Southern Ry. v. Reading Blue
Mountain and Northern Ry. Co., 397 F. Supp. 2d 551 (M.D. Pa. 2005),
which disqualified a law firm from representation under what he asserts were
similar factual circumstances.
As the trial court noted, the GLG firm retained a legal ethics attorney
and followed all of her recommendations, which resulted in Attorney Kraft
sending prompt letters to his clients that complied with the requirement of
Rule 1.10(b)(2), and the GLG firm instituted screening protocols prior to
Attorney Kraft’s start date with the GLG firm under which it keeps the physical
conflict files in a locked filing cabinet and password-protects the electronic
conflict files (and Attorney Generelli’s email) to screen them from Attorney
Kraft. See Trial Court Opinion, 11/10/21 at 1-2, 4. Therefore, as the trial
court stated, Mr. Wheatley’s motion sought prophylactic relief unconnected to
any actual Rule of Professional Conduct violation. See id. at 4. The trial court
also recognized that its ability to disqualify lawyers under the Rules of
Professional Conduct is narrow, and that disqualification is a serious remedy
that should not interfere with a party’s right to choose counsel unless due
process and the opposing party’s right to a fair trial is affected. See id. at 3-
4 (citing In re Estate of Pedrick, 482 A.2d 215, 221 (Pa. 1984)). The trial
court found no violation of the Rules of Professional Conduct and therefore no
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basis for the disqualification of Attorney Generelli or the GLG firm. See id. at
4-5.
We agree with the trial court that Attorneys Kraft and Generelli and the
GLG firm did not violate Rule 1.10(b). See Trial Court Opinion, 11/10/21, at
1-2, 4 (relying upon the testimony at the disqualification hearing). We further
conclude that because there was no violation of the Rules of Professional
Conduct, Mr. Wheatley did not suffer an impairment of his due process right
to a fair trial that would require disqualification. Further, the “Dworkin”
factors that might weigh in favor of disqualification do not compel the extreme
remedy Mr. Wheatley seeks.
At the outset, Attorney Kraft satisfied the requirement of Rule
1.10(b)(2) by sending a prompt letter to Mr. Wheatley and all the other clients
he had represented in the conflict cases. Mr. Wheatley offered no evidence
that he replied to the letter Attorney Kraft sent to express a concern about
Attorney Kraft’s move to the GLG firm.
This case turns on the reasonable adequacy of the GLG firm’s screen.
The very short lapse of time between Attorney Kraft’s representation of Mr.
Wheatley and his move to the GLG firm, which represents Mr. Wheatley’s
opponent, supports Mr. Wheatley’s position. However, that factor would
weigh more heavily if Attorney Kraft had actively represented Ms. Wheatley
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or had the GLG firm’s screen been defective, and neither is the case in this
matter.10
The GLG firm undertook timely and good-faith efforts to create a set of
screening procedures “reasonably adequate under the circumstances” to
protect information that Attorney Kraft was obligated to protect. See Rules
1.0(k), 1.10(b). The firm consulted with an ethics attorney to construct the
screen, and substantially restructured its physical storage, computer, and
document circulation policies to prevent any sensitive material from reaching
Attorney Kraft. Further, the firm erected its screen before Attorney Kraft
joined the firm. See Dworkin, 906 F.Supp. at 280 (noting the importance of
instituting a screening protocol when the potentially disqualifying event
occurs). Additionally, neither Mr. Wheatley nor any other conflict case client
has alleged that the screen has been breached, and the evidence at the
____________________________________________
10 Given the limited evidence Mr. Wheatley presented at the hearing, it is
difficult to assess the factors relating to the substantiality of the relationship
between the attorney and the former client, and the nature of the disqualified
attorney’s involvement in the case. Mr. Wheatley’s evidence established only
that Attorney Kraft billed forty hours on Mr. Wheatley’s case over the course
of three years, the majority of which involved discovery, as well as preparation
for a custody trial that did not occur. See N.T., 10/20/21, at 80-81. It is not
clear that proves a substantial attorney-client relationship. Further, there is
no indication in the record that the custody case is currently active. Should
Mr. Wheatley seek to challenge the custody agreement based on new or
changed circumstances, Attorney Kraft will not be privy to any such new
information. Because we decide this case on other grounds, we do not
determine whether there was a substantial attorney-client relationship
between Mr. Wheatley and Attorney Kraft or whether Attorney Kraft had
substantial involvement in the case.
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disqualification hearing did not show a breach. Attorney Generelli, the primary
attorney on the conflict cases, testified that she instructed her paralegal, the
only other person who worked with her on those cases,11 not to discuss them
in front of Attorney Kraft. See N.T. 10/20/21, at 67. Attorney Kraft testified
that he never discussed any conflict case at the GLG firm or heard any of the
cases discussed. See id. at 21, 30, 41-42. Additionally, all the members of
the firm understood the screening protocols. See id. at 48-54, 76.
The screen also effectively restricted circulation of, and restricted access
to, sensitive documents and files. The GLG firm implemented many
procedures to screen conflict matters before Attorney Kraft’s arrival. These
included the protection of the physical and electronic conflict case files, the
change in the firm’s docketing system to separate out all of Attorney
Generelli’s clients, and the creation of a new protocol requiring removing
sensitive documents from copiers and immediately placing incoming faxes in
a closed mail folder in Attorney Generelli’s office. Those undertakings
____________________________________________
11 Attorney Generelli testified that Attorney Loperfito, another member of the
firm, has some limited involvement in family law cases. Attorney Loperfito
assists on some financial issues, but he does not directly represent any family
law client in court unless Attorney Generelli needs him to fill in, and he has
declined to try any custody cases. See N.T., 10/20/21, at 73.
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prevented Attorney Kraft from having any exposure to sensitive documents or
files. See id. at 27, 29, 41-42, 44-46, 48-50, 59, 61, 67-71.12
The GLG firm’s screen contained a reasonably adequate firm policy
against breach, including sanctions, physical and/or geographical separation.
See Rudalavage, 268 A.3d at 470; see also Darrow, 266 A.3d at 1112.
Attorney Kraft testified that he was informed that if he breached the Rules of
Professional Conduct, he could face disciplinary action and be fired. See N.T.,
10/20/21, at 30-31, 38. Attorney Generelli confirmed Attorney Kraft’s
testimony. See id. at 53. Attorney Generelli also testified that everyone at
the GLG firm knew the screening protocols as a result of an open discussion
prior to Attorney Kraft’s hiring, and she has ongoing communications with the
staff to ensure that the recommended procedures remain in place. See id. at
49-50, 52, 60, 64. Further, the entire GLG firm saw how seriously the firm
regarded the screen. See id. at 64. Under these circumstances, we do not
____________________________________________
12Attorney Kraft testified on cross-examination at the disqualification hearing
that he had seen ten or eleven disqualification motions “roll in” on the fax
machine. See N.T., 10/20/21, at 41-42. Attorney Swank asked him no
further questions about that incident, which: (1) was Attorney Kraft’s only
exposure to anything related to the conflict cases while at the GLG firm, (2)
did not risk his disclosing information he was obligated to protect under Rules
1.10(b) and 1.0(k), and (3) concerned documents Mr. Wheatley’s attorney,
Attorney Swank, elected to fax to the GLG firm. This single incident does not
undermine the effectiveness of the screen. As noted, Attorney Generelli
testified that the GLG firm’s screening protocol requires personnel to take
faxes quickly to her office when they are received. See id. at 68.
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find it dispositive that the staff was not explicitly informed of the consequences
of violating the screen.13
We note that some courts have held that a law firm’s small size is a
detriment to implementing an effective screen because the attorneys at a
small firm have more opportunity for contact with each other than at a large
firm. See Dworkin, 906 F. Supp. at 280 (collecting cases). We believe that
a firm’s size is not in itself a determinative measure of the firm’s ability to
maintain an effective screen. Indeed, Dworkin itself implicitly recognizes the
limitations of such a blunt measuring device. See id. at 283 (stating that
“[t]he effectiveness of any ethics screen depends upon the integrity of the
individuals who comply with it”). There is a further problem with using the
size of a firm as an absolute measure of its ability to maintain an effective
screen. Many of Pennsylvania’s counties do not have large law firms, and
many counties are comprised of mostly small to mid-size firms. We cannot
____________________________________________
13 Some courts have assessed the strength of a law firm’s screen by focusing
on whether it expressly includes a termination penalty for all violators. See,
e.g., Norfolk Southern, 397 F. Supp. 2d at 555. We are aware that a
comment to Rule 1.0 states that appropriate screening measures will depend
on the circumstances but may include written notice and instructions to all
firm personnel other than lawyers forbidding any communication with the
screened lawyer relating to the matter. See Rule 1.0, cmt. 9. The Comment
does not state that a firm’s employees must be informed of the consequences
for violating the rule. Additionally, under the circumstances here, the GLG
firm clearly conveyed its screening protocols orally to its employees. Because
GLG’s employees heard repeated discussion of those protocols and saw the
changes in the operation of the firm, we find that they were clearly and
properly alerted to the firm’s screening protocols.
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countenance a one-size-fits-all rule, especially where it will have an
unreasonably disparate effect on attorneys who practice in smaller counties
and wish to change their employment. Thus, while we do not discount the
consideration of a firm’s size as a factor in assessing the effectiveness of a
screen, we agree with the Dworkin court that it is the integrity of the people
in a firm, and the protocols they adopt and implement, not the size of the firm
itself that is relevant to the effectiveness of a screen under Rule 1.10(b).
Nothing in the record before us suggests that the GLG firm’s size affected its
ability to maintain an effective screen.14
We also do not agree with Mr. Wheatley that the decision in Norfolk
Southern compels a different result in this case. This Court is not bound by
decisions of federal courts other than the United States Supreme Court. See
In re Stevenson, 40 A.3d 1212, 1221 (Pa. 2012). Moreover, in Norfolk
Southern, the law firm opposing disqualification failed to establish that their
new attorney, who had previously worked for the other side in an ongoing
case, would not receive any of the fees in the case. That failure alone
____________________________________________
14 We recognize that the Rudalavage and Darrow courts viewed the small
size of a firm as a factor favoring disqualification, and cited Dworkin for the
proposition that there is more contact between attorneys at a small firm. See
Rudalavage, 268 A.3d at 481; Darrow, 266 A.3d at 1114. As stated,
although the size of a firm may favor disqualification, the facts developed at
the hearing in this case show that the substantial screen the GLG firm erected,
and the efforts it devoted to enforcing the screen, outweighed the concern
about the small size of the firm. Moreover, as explained infra, other factors
of concern present in Rudalavage and Darrow are not present here.
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warranted disqualification. See Norfolk Southern, 397 F. Supp. 2d at 554.
Additionally, the new law firm in that case failed to provide prompt written
notice to the attorney’s former firm of the conflict and failed to prohibit the
discussion of sensitive matters in the presence of the new attorney. See id.
For these reasons, the facts of the Norfolk Southern case do not establish
requirements critical to Rule 1.10 and the case is not substantially similar to
the matter before this Court.15
Rudalavage and Darrow, recent cases in this Court (which neither
party cites), found a law firm’s Rule 1.10(b) screening procedures deficient
under significantly different circumstances. In Rudalavage, an attorney and
his law firm filed a wrongful death suit against PPL Electric Utilities Corporation
(“PPL”). The attorney had previously represented PPL in other cases while
employed by a previous law firm, during which he acquired confidential
knowledge about PPL’s litigation strategies. This Court determined that the
new law firm should be disqualified. Among the reasons for disqualification
cited were: (1) the departing attorney did not provide PPL with prompt written
____________________________________________
15 Norfolk Southern also states a third set of factors for assessing
disqualification that involves examining the affected party’s right to attorney
loyalty, the effect on other person’s right to counsel, and the desire not to
unreasonably hinder attorney movement. See Norfolk Southern, 397 F.
Supp. 2d at 556. No published Pennsylvania appellate court decision has
adopted this test. We do not opine on the relevance of this third set of factors
given our conclusion that the trial court did not err in finding that there was
no violation of the Rules of Professional Conduct and, more important, no
impairment of Mr. Wheatley’s right to a fair trial.
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notice of the conflict;16 (2) the departing attorney served as de facto counsel
on the case at the new firm by visiting the accident site and reviewing the
complaint; (3) the new firm did not erect a screen until almost two years
after the departing attorney had already worked on the case; (4) the new
firm did not have a written policy, and (5) the departing attorney
acknowledged that in his previous employment he had gathered significant
information concerning how to defend such suits. See Rudalavage, 268 A.3d
at 481-83.17
Here, Attorney Kraft promptly disclosed the conflict in writing to Mr.
Wheatley, his former client, there is no evidence that Mr. Wheatley responded
to Attorney Kraft’s letter, and Attorney Kraft has not worked as opposing
____________________________________________
16 This Court found the failure to make prompt disclosure of a change in
employment to be compelling proof of a Rule 1.10(b)(2) violation. The Court
stated that a client should not discover from his current attorney that his
former attorney now works for the opposition and that former counsel’s failure
to disclose that fact created “a specter of impropriety that no ex post
facto . . . [w]all can contain.” Rudalavage, 268 A.3d at 483 (citation
omitted) (emphasis in original); see also Darrow, 266 A.3d at 1115 (same).
17Darrow involved the same attorney and law firm whose disqualification this
Court found to be required in Rudalavage. In Darrow, the attorney and the
new law firm filed a personal injury suit against PPL three years after the
attorney left the law firm at which he represented PPL. Among other factors
supporting disqualification, the Court noted: (1) the attorney was privy to
proprietary information about PPL; (2) the attorney did not promptly disclose
the conflict in writing to his former client; (3) the attorney was counsel of
record for two years in the personal injury case; (4) the new law firm is small;
(5) the screen was not erected for two years after the filing of the suit; and
(6) the screening policy was not in writing. See Darrow, 266 A.3d at 1113-
15.
- 19 -
J-A15031-22
counsel on the Wheatley litigation at the GLG firm. Further, there is no
evidence that Attorney Kraft used or disclosed Mr. Wheatley’s confidential
information, and the GLG firm erected its screen before he began working
there. For these reasons, Rudalavage and Darrow address substantively
distinguishable facts and are not determinative of whether the GLG firm’s
screen was reasonably adequate under the factual circumstances here.
We also agree with the trial court that on this record, Mr. Wheatley has
failed to show that disqualification of Attorney Generelli and the GLG firm is
necessary to ensure his due process right to a fair trial. See McCarthy, 772
A.2d at 989. Our Supreme Court has clearly stated that violations of the Rules
of Professional Conduct are not a proper subject for the lower courts to impose
punishment for attorney misconduct. See Reilly, 489 A.2d at 1299; see also
Pedrick, 482 A.2d at 221 (stating that counsel may be disqualified only when
necessary to ensure the right to a fair trial, and that trial courts are not
accorded the power to punish attorney misconduct). Because Attorney
Generelli and the GLG firm did not violate Rule 1.10(b), there was no basis for
disqualification and no interference with Mr. Wheatley’s right to a fair trial.18
Thus, the trial court properly denied Mr. Wheatley’s disqualification motion.
____________________________________________
18 We do not ignore Mr. Wheatley’s assertion of his expectation of attorney
loyalty. However, Mr. Wheatley has not demonstrated that the trial court
erred when it found that the record did not support the disqualification of
Attorney Generelli and the GLG firm from participating in the case, and there
was no evidence at the hearing that Attorney Kraft disclosed any privileged or
(Footnote Continued Next Page)
- 20 -
J-A15031-22
Order affirmed.
Judge Bowes joins this memorandum.
Judge Kunselman concurs in the result.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
____________________________________________
confidential information about Mr. Wheatley’s case to the GLG firm. Moreover,
we will not lightly disturb Ms. Wheatley’s right to representation by counsel
of her choice. See Rudalavage, 268 A.3d at 478.
- 21 - | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484200/ | [Cite as Wolf v. Uncapher, 2022-Ohio-4076.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
SHELLY A. WOLF C.A. No. 29979
Appellee
v. APPEAL FROM JUDGMENT
ENTERED IN THE
BOBBYJO UNCAPHER COURT OF COMMON PLEAS
COUNTY OF SUMMIT, OHIO
Appellant CASE No. DR-2020-06-1430
DECISION AND JOURNAL ENTRY
Dated: November 16, 2022
SUTTON, Judge.
{¶1} Defendant-Appellant Bobbyjo Uncapher (“Mother”) appeals the judgment of the
Summit County Court of Common Pleas, Domestic Relations Division. For the reasons that
follow, this Court affirms.
I.
{¶2} On May 16, 2018, Shelly Wolf, the paternal grandmother of the minor children
K.C. and A.C. (“Grandmother”), filed a complaint seeking legal custody of her grandchildren,
pursuant to R.C. 2151.23(A)(2), in the Summit County Court of Common Pleas, Juvenile Division.
Simultaneously with that complaint, she also filed an ex parte motion for emergency custody and
a motion for temporary custody pursuant to R.C. 2151.33, Juv.R. 6, and Juv.R. 7. The complaint
named as defendants Mother and Ms. Wolf’s son, Troy Clark, the children’s biological father who
was incarcerated at the time of the filing of the complaint.
2
{¶3} In the documents filed with the court, Grandmother alleged that her grandchildren
were being neglected. Grandmother also alleged that Mother had a substance abuse problem
interfering with her ability to care for her children. Grandmother stated Mother was homeless and
had been living with her sister until recently, when Mother was allegedly removed from the home
by Summit County Children Services.
{¶4} The Juvenile Court initially denied Grandmother’s motion for ex parte emergency
custody but set a hearing on her motion for temporary custody and sent notice to the parents of the
children. After that hearing, the court gave temporary custody of the children to a paternal aunt.
The court also appointed a guardian ad litem and involved Summit County Children Services with
the children. The case proceeded through several status hearings, and ultimately came to a
resolution on February 1, 2019, when Grandmother and Mother agreed to and presented the court
with a shared custodial plan. The plan stated that the children would reside with both Mother and
Grandmother, specifically that Mother would have the children from Friday at 1:00 pm to Tuesday
at 1:00 pm, that Grandmother would pick the children up from school on Tuesday, and they would
remain with Grandmother for the rest of the week.
{¶5} As a result of the agreement between the parties, the magistrate issued a decision
on February 1, 2019, terminating the temporary custody of the paternal aunt and adopting the plan
agreed to by Mother and Grandmother. The magistrate’s decision stated that the guardian ad litem
found the plan drafted and agreed to by Mother and Grandmother was in the best interest of the
children, and that the magistrate had also reviewed the agreed upon plan and found that it was in
the best interest of the children to adopt the plan. The magistrate’s decision also placed the children
in the shared legal custody of both Mother and Grandmother. That same day, on February 1, 2019,
the Juvenile Court issued an order adopting the decision of the magistrate as an order of the court.
3
{¶6} On June 19, 2020, Grandmother filed a contempt motion in the Summit County
Court of Common Pleas, Domestic Relations Division, alleging that Mother violated the February
1, 2019 Juvenile Court order adopting the parties’ agreed-to custodial plan. Due to a change in
the law regarding the jurisdiction of the Summit County Juvenile Court and Summit County
Domestic Relations Court, R.C. 2151.23(A)(2) and R.C. 2301.03(I), as of October 17, 2019, the
Juvenile Court no longer had jurisdiction to hear the contempt motion, and the Domestic Relations
Court accepted transfer of the case from the Juvenile Court to the Domestic Relations Court.1
{¶7} Grandmother’s contempt motion noted that despite having the court’s order
adopting the shared custodial plan, she currently had no contact with her grandchildren. In an
affidavit filed with her contempt motion, Grandmother stated that Mother was no longer allowing
her to pick the grandchildren up from school on Tuesday as agreed upon in the shared custodial
plan.
{¶8} The matter came for a hearing before a magistrate in the Domestic Relations Court.
Mother received notice of the hearing but failed to appear. A second hearing was scheduled. Both
Mother and Grandmother appeared at the second hearing. Mother requested court appointed
counsel to defend against the contempt motion. The magistrate granted that request, appointed
counsel for Mother, and continued the hearing.
1
Effective October 17, 2019, R.C. 2151.23(A)(2) was modified by Am. Sub. H.B. 166 of
the 133rd General Assembly to subject R.C. 2151.23(A)(2) to a provision contained in R.C.
2301.03(I). R.C. 2301.03(I) stated in part 1 that in Summit county, “[e]xcept in cases that are
subject to the exclusive original jurisdiction of the juvenile court, the judges of the division of
domestic relations shall have assigned to them and hear all cases pertaining to paternity, custody,
visitation, child support, or the allocation of parental rights and responsibilities for the care of
children and all post-decree proceedings arising from any case pertaining to any of those matters.”
(Emphasis added.) R.C. 2301.03(I)(1).
4
{¶9} On September 25, 2020, the hearing on Grandmother’s contempt motion was held.
Mother was present and represented by counsel. Grandmother represented herself and testified
that despite the order granting shared legal custody, she had not seen her grandchildren since April
1, 2020. Mother did not testify at the hearing. Her arguments at the contempt hearing disputed
the validity of the shared legal custody order of the Juvenile Court
{¶10} On November 5, 2020, the magistrate issued a decision finding Mother guilty of
contempt. The magistrate found that the parties had shared legal custody and a valid shared
custodial plan, and that Mother had kept her children from Grandmother in violation of the
February 1, 2019 court order for six months. The magistrate sentenced Mother to 20 days in jail
but noted that she could purge her contempt by paying the costs of the action, reimbursing
Grandmother for the filing fee, and abiding by all orders of the court. The magistrate also awarded
Grandmother two weeks of compensatory companionship time to be taken in increments of one
day a week. The Domestic Relations Court adopted the magistrate’s decision finding Mother in
contempt as an order of the court on November 6, 2020.
{¶11} Mother timely filed objections to the magistrate’s decision, all of which the
Domestic Relations Court subsequently overruled. Mother timely appealed, assigning four errors
for this Court’s review.
II.
ASSIGNMENT OF ERROR I
THE TRIAL COURT COMMITTED REVERSIBLE AND PLAIN ERROR
BY HOLDING [MOTHER] IN CONTEMPT OF COURT BASED UPON A
JUDGMENT THAT WAS ISSUED BY A COURT THAT LACKED
SUBJECT MATTER JURISDICTION.
ASSIGNMENT OF ERROR II
5
THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY HOLDING
THAT THE UNDERLYING SUMMIT COUNTY JUVENILE COURT’S
ORDER AWARDING THE PARTIES JOINT LEGAL CUSTODY, ALONG
WITH ITS ATTACHED “SHARED PARENTING PLAN,” WAS
VOIDABLE, RATHER THAN VOID.
{¶12} In her first and second assignments of error, Mother argues the Domestic Relations
Court erred in finding her in contempt of court for violating what she characterizes as a “shared
parenting plan.” Specifically, Mother submits the Juvenile Court, which ordered shared legal
custody and adopted the shared custodial plan, lacked subject matter jurisdiction to issue such an
order and thus the court order that formed the basis for Grandmother’s contempt complaint against
her was void. For the reasons that follow, we disagree.
Shared Custodial Plan
{¶13} The Ohio Supreme Court has recognized that “a parent may voluntarily share with
a nonparent the care, custody, and control of his or her child through a valid shared-custody
agreement.” In re Mullen, 129 Ohio St.3d 417, 2011-Ohio-3361, ¶ 11, citing In re Bonfield, 97
Ohio St.3d 387, 2002-Ohio-6660, ¶ 50. While a shared custody agreement can be adopted by a
court between a parent and a nonparent, the Ohio Supreme Court has held it is not the plan that
designates a legal custodian of a child; “that designation is made by the court in an order or decree.”
See Fisher v. Hasenjager, 116 Ohio St.3d 53, 2007-Ohio-5589, ¶ 31. Further, a trial court is given
broad discretion in deciding child custody matters. See Reynolds v. Goll, 75 Ohio St.3d 121, 124
(1996).
{¶14} In her brief, Mother argues that the addendum to the Juvenile Court’s order granting
legal custody to Mother and Grandmother was a shared parenting plan, rather than a shared
custodial plan, and that the order granting shared legal custody was thus void because the Juvenile
Court lacked jurisdiction to adopt a shared parenting plan between a parent and a non-parent.
6
While Mother and Grandmother obtained a shared parenting plan template from the internet, the
record indicates that the parties modified the shared parenting plan template to create a shared
custodial plan to which they both agreed.
{¶15} Further, the Juvenile Court never granted shared parenting rights to Grandmother.
The Juvenile Court only ordered shared legal custody between Mother and Grandmother. And as
stated above, it is the trial court’s order that determines the nature of the rights a party possesses.
{¶16} Both parties signed the plan and represented to the Juvenile Court that it was an
agreed-to shared custodial plan. The Juvenile Court’s order dated February 1, 2019, adopted the
magistrate’s finding that the parties had adopted a valid shared custodial plan. The Juvenile Court,
by its order, awarded Mother and Grandmother shared legal custody of the children and adopted
in its entirety the attached shared custodial plan. Therefore, to the extent Mother’s arguments
assert the Juvenile Court lacked jurisdiction and its order was void because it adopted a “shared
parenting plan” between a parent and non-parent rather than a shared custodial plan, those
arguments are overruled.
Statutory Subject Matter Jurisdiction of Juvenile Court
{¶17} Mother also argues that the Juvenile Court lacked subject matter jurisdiction under
the statute. “A juvenile court may exercise jurisdiction only if expressly granted the authority to
do so by statute.” In re: R.G., 9th Dist. Wayne No. 20AP0012, 2021-Ohio-93, ¶ 21, citing Rowell
v. Smith, 133 Ohio St.3d 288, 2012-Ohio-4313, ¶ 13, citing Ohio Constitution, Article IV, Section
4(B); see also In re Gibson, 61 Ohio St.3d 168, 172 (1991); In re: C.W., 9th Dist. Lorain No.
19CA011521, 2020-Ohio-2660, ¶ 13. Jurisdiction of a juvenile court is an issue that this Court
reviews de novo. See In re: C.W. at ¶ 14, quoting In re: J.L.M., 9thDist. Summit No. 28867, 2018-
Ohio-2175, ¶ 9.
7
{¶18} R.C. 2151.23(A)(2) currently states that a juvenile court has exclusive original
jurisdiction “[s]ubject to divisions (G), (I), (K), and (V) of section 2301.036 of the Revised Code,
to determine the custody of any child not a ward of the court of this state[.]” In relevant part, R.C.
2301.03(I) states that for judges in Summit County, Ohio, “[e]xcept in cases that are subject to the
exclusive original jurisdiction of the juvenile court, the judges of the division of domestic relations
shall have assigned to them and hear all cases pertaining to paternity, custody, visitation, child
support, or the allocation of parental rights and responsibilities for the care of the children and all
post-decree proceedings arising from any case pertaining to any of those matters.”
{¶19} Mother argues that R.C. 2301.03(I) divested the Juvenile Court of jurisdiction, and
it was the Domestic Relations Court that had exclusive jurisdiction over Grandmother’s complaint.
However, the provision of the statute that excludes custody cases from the jurisdiction of the
Summit County Juvenile Court was not in effect when Grandmother filed her complaint for legal
custody. Indeed, the addition of the exclusion of custody cases from the Juvenile Court’s
jurisdiction did not go into effect until October 17, 2019. However, the Juvenile Court issued the
order adopting the shared custodial plan on February 1, 2019. Thus, at the time the case was
decided by the Juvenile Court, the Juvenile Court had jurisdiction to hear Grandmother’s
complaint for custody. And because the Juvenile Court had jurisdiction to hear the matter, the
order forming the basis for Grandmother’s contempt complaint was neither void nor voidable.
{¶20} Mother’s first and second assignments of error are overruled.
ASSIGNMENT OF ERROR III
THE TRIAL COURT COMMITTED REVERSIBLE ERROR AND
VIOLATED [MOTHER’S] RIGHTS TO DUE PROCESS IN FINDING
THAT [MS. WOLF’S] CONTEMPT MOTION GAVE [MOTHER]
SUFFICIENT NOTICE WITH PARTICULARITY OF THE
ALLEGATIONS TO SUPPORT THE MOTION FOR CONTEMPT.
8
{¶21} In her third assignment of error, Mother argues the Domestic Relations Court
violated her due process rights because Grandmother’s contempt complaint failed to give her
sufficient notice with particularity of the allegations that supported her complaint for contempt.
For the following reasons, we disagree.
Standard of Review
{¶22} This Court reviews a trial court’s action with respect to a magistrate’s decision for
an abuse of discretion. Tabatabai v. Tabatabai, 9th Dist. Medina No. 08CA0049-M, 2009-Ohio-
3139, ¶ 17, citing Fields v. Cloyd, 9th Dist. Summit No. 24150, 2008-Ohio-5232, ¶ 9. Under this
standard, we must determine whether the trial court’s decision was arbitrary, unreasonable, or
unconscionable-not merely an error of law or judgment. Blakemore v. Blakemore, 5 Ohio St.3d
217, 219 (1983).
{¶23} In so doing, we consider the trial court’s action with reference to the nature of the
underlying matter. Tabatabai at ¶ 18. Consequently, we must consider, in this case, whether the
trial court abused its discretion by determining that Grandmother’s motion for contempt was
sufficient to put Mother on notice as to Grandmother’s allegations in support of her motion for
contempt. Because this issue implicates Mother’s due process rights, which constitutes an issue
of law, we review de novo. Wintrow v. Baxter-Wintrow, 9th Dist. Summit No. 26439, 2013-Ohio-
919, ¶ 11.
{¶24} “Due process of law involves the essential rights of notice, hearing and the
opportunity to be heard before a competent tribunal.” Id. at ¶ 12, citing State v. Edwards, 157 Ohio
St. 175(1952). “‘Due course of law’ as guaranteed by Section 16, Article I of the Ohio Constitution
is virtually the same as the ‘due process' clause of the Fourteenth Amendment, United States
Constitution.” Id. citing In re Hua, 62 Ohio St.2d 227 (1980).”
9
{¶25} Pursuant to R.C. 2705.031(B)(2), any person who is subject to or granted parenting
time or visitation rights by court order may initiate a contempt action for a failure to comply with,
or an interference with, that order. R.C. 2705.031(C) provides a number of procedural safeguards
regarding what must be included in the hearing notice and summons, and states as follows:
In any contempt action initiated pursuant to division (B) of this section, the accused
shall appear upon the summons and order to appear that is issued by the court. The
summons shall include all of the following:
(1) Notice that failure to appear may result in the issuance of an order of arrest,
and in cases involving alleged failure to pay support, the issuance of an order for
the payment of support by withholding an amount from the personal earnings of
the accused or by withholding or deducting an amount from some other asset of the
accused;
(2) Notice that the accused has a right to counsel, and that if indigent, the accused
must apply for a public defender or court appointed counsel within three business
days after receipt of the summons;
(3) Notice that the court may refuse to grant a continuance at the time of the
hearing for the purpose of the accused obtaining counsel, if the accused fails to
make a good faith effort to retain counsel or to obtain a public defender;
(4) Notice of the potential penalties that could be imposed upon the accused, if the
accused is found guilty of contempt for failure to pay support or for a failure to
comply with, or an interference with, a parenting time or visitation order or decree
(5) Notice that the court may grant limited driving privileges under section
4510.021 of the Revised Code pursuant to a request made by the accused, if the
driver's license was suspended based on a notice issued pursuant to section 3123.54
of the Revised Code by the child support enforcement agency and if the request is
accompanied by a recent noncertified copy of a driver’s abstract from the registrar
of motor vehicles.
Additionally, Summit County Court of Common Pleas Domestic Relations Division Local Rule
13.01 requires all motions for contempt “shall be accompanied by an affidavit setting forth the
specific facts forming the basis for the motion.”
{¶26} Here, Grandmother filed an affidavit with her contempt motion that stated:
[Mother] has not been allowing me to pick up my 2 grandchildren on my times,
which are set by the kids pre-school hours. I have Tues @ 4:00 pm I’d get from
school and keep the school week. [Mother] would get [the children] from school
Fri at 4:00 and have the weekend. Someone informed [Mother] that even if I
showed up with police that they would not make her give me the children. There
10
is a 50/50 custody [shared] [] agreement that [Grandmother] wrote and [Mother]
signed, it was accepted on [February 1, 2019.]
The Domestic Relations Court, in overruling Mother’s objection, found the affidavit was sufficient
because it specifically identified the court order that Grandmother alleged Mother was in violation
of, and also described the ways in which Mother was violating that order.
{¶27} Additionally, in the contempt motion, Grandmother checked a box indicating that
Mother was interfering with her visitation. Grandmother further checked an additional box and
wrote in that she had “no contact with the kids” despite a shared “[50-50] custody” order. Ms.
Wolf also indicated that Mother was in violation of the order dated February 1, 2019.
{¶28} Mother does not challenge that the Domestic Relations Court violated any of the
statutory procedural safeguards in place. Rather, she argues the Domestic Relations Court was
incorrect in concluding that the affidavit provided her with sufficient notice of the nature of
Grandmother’s contempt allegation because the affidavit did not state exactly how Mother was
preventing Grandmother from seeing the children, whether Mother contacted the preschool to
advise the school not to release the children to Grandmother, or whether Mother ever
“surreptitiously [went] to the preschool in advance” and took the children before Grandmother
arrived at the school. However, Mother points to no case law in support of her position that such
information was required to be in the affidavit.
{¶29} The record shows that Mother was on notice that it was the February 1, 2019 order
she was allegedly violating, that the nature of the alleged violation was that Grandmother had no
contact with her grandchildren despite having a shared custodial plan with Mother that had been
adopted as an order of the court, and that the manner in which Mother was allegedly violating that
order was by preventing Grandmother from picking up the children at the times designated in the
shared custodial plan. After reviewing the record and the law, we cannot conclude the trial court
11
abused its discretion in overruling Mother’s objection and finding that Grandmother provided
Mother with sufficient notice of the nature of the contempt allegations that Grandmother was
making.
{¶30} Mother’s third assignment of error is overruled.
ASSIGNMENT OF ERROR IV
THE TRIAL COURT COMMITTED REVERSIBLE ERROR IN FINDING
THAT THERE WAS CLEAR AND CONVINCING EVIDENCE THAT
[MOTHER] WAS IN CONTEMPT OF COURT.
{¶31} In her fourth assignment of error, Mother argues the Domestic Relations Court
erred in finding there was clear and convincing evidence that she was in contempt of court. The
basis for Mother’s argument in this assignment of error is that the court order that Grandmother
alleged Mother violated was not a valid court order, an argument that Mother also raised in her
first and second assignments of error. Given this Court’s resolution of the first and second
assignments of error, Mother’s fourth assignment of error is overruled.
12
III.
{¶32} Mother’s assignments of error are overruled. The judgment of the Summit County
Court of Common Pleas, Domestic Relations Division, is affirmed.
Judgment affirmed.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period
for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to
mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the
docket, pursuant to App.R. 30.
Costs taxed to Appellant.
BETTY SUTTON
FOR THE COURT
HENSAL, P. J.
CONCURS.
13
CARR, J.
CONCURRING IN JUDGMENT ONLY.
{¶33} I concur in the judgment of the majority, but would limit this Court’s review of
Mother’s combined first and second assignments of error to whether the juvenile court had subject
matter jurisdiction to adopt the shared custody agreement at issue. Because this is not a direct
appeal from the juvenile court’s judgment adopting the custody agreement, Mother is confined to
raising challenges that rendered the agreement void, not merely voidable. See In re K.G., 9th Dist.
Summit No. 30221, 2022-Ohio-3218, ¶ 13.
{¶34} “‘[A] void judgment is one that has been imposed by a court that lacks subject-
matter jurisdiction over the case or the authority to act.’” State v. Straley, 159 Ohio St.3d 82,
2019-Ohio-5206, ¶ 25, quoting State v. Payne, 114 Ohio St.3d 502, 2007-Ohio-4642, ¶ 27. “If a
court possesses subject-matter jurisdiction, any error in the invocation or exercise of jurisdiction
over a particular case causes a judgment to be voidable rather than void.” Bank of Am., N.A. v.
Kuchta, 141 Ohio St.3d 75, 2014-Ohio-4275, ¶ 19.
{¶35} To support her argument that the substance of the shared custody agreement is void,
and subject to collateral attack in this proceeding, Mother relies primarily on In re G.R.-Z., 9th
Dist. Summit No. 28316, 2017-Ohio-8393, and In re Bonfield, 97 Ohio St.3d 387, 2002-Ohio-
6660. Both those decisions involved challenges to shared parenting plans between a parent and
non-parent that were addressed on direct appeal. Neither decision supports Mother’s underlying
premise that shared parenting agreements are void as against public policy, rather than merely
voidable.
{¶36} Consequently, I would not reach the merits of Mother’s non-jurisdictional
argument that the shared custody agreement is unenforceable. Any defect in the substance of that
14
agreement would render it voidable, not void, and is not subject to collateral attack through this
contempt proceeding.
{¶37} I concur in the remainder of the majority’s decision.
APPEARANCES:
NEIL P. AGARWAL, Attorney at Law, for Appellant.
SHELLY A. WOLF, pro se, Appellee. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484194/ | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
UNITED STATES OF AMERICA )
)
V. ) Criminal No. 21-0598 (PLF)
)
TERENCE SUTTON )
and )
ANDREW ZABAVSKY, )
)
Defendants. )
)
OPINION
Pending before the Court are four pretrial Daubert motions seeking the exclusion
of proposed expert testimony at trial. The government has proffered four expert witnesses and
defendants have proffered five. Defendant Terence Sutton challenges three of the four
government experts — Robert Drago, Carolyn Totaro, and Mark Hammond.!' Defendant Andrew
Zabavsky separately challenges Robert Drago. The government has filed motions seeking the
exclusion of all four experts proposed by Mr. Sutton — John J. Brennan, Bruce-Alan Barnard,
Michael A. Wear, and Thomas Langley — along with Mr. Zabavsky’s expert, James K. Dahlquist.
The parties appeared for oral argument on three of the four pending motions on
l There is no defense challenge to government expert Brian F. Chase, the Chief
Vehicle Forensic Examiner and collision reconstruction expert at Comprehensive Motor Vehicle
Services and Consulting. See Government Discovery Letter #8 and Expert Disclosures [Dkt.
No. 220-1].
September 1, 2022. See Transcript of Motions Hearing, September 1, 2022 [Dkt. No. 265].”
The Court has carefully considered the parties’ written submissions, the oral
arguments presented by counsel, and the applicable authorities. It concludes that Robert Drago’s
testimony (as proffered and narrowed in scope on November 1, 2022) will be admitted in full;
Carolyn Totaro’s testimony will be admitted in part and excluded in part; and Mark Hammond’s
testimony will be admitted in full. With regard to defendants’ experts, John J. Brennan’s
testimony will be admitted in part and excluded in part; Bruce-Alan Barnard’s testimony is
excluded in full; Michael A. Wear’s testimony will be admitted in part and excluded in part;
Thomas Langley’s testimony will be admitted in part and excluded in part; and James K.
Dahlquist’s testimony is excluded in full.
2 The Court has reviewed the following documents and their attachments:
Government’s Motion in Limine to Exclude Inadmissible Expert Testimony (“Gov’t Mot.”)
[Dkt. No. 219]; Terence D. Sutton’s Expert Notice and Disclosure (“Sutton Discl.”) [Dkt.
No. 219-1]; Defendant Andrew Zabavsky’s Expert Disclosure (“Zabavsky Discl.”) [Dkt.
No. 219-3]; Defendant Andrew Zabavsky’s Daubert Motion to Preclude Expert Testimony
(“Zabavsky Mot.”) [Dkt. No. 220]; Government Discovery Letter #8 and Expert Disclosures
(“Gov't Discl.”) [Dkt. No. 220-1]; Robert Drago Letter (“Drago Letter”) [Dkt. No. 220-2];
Terence D. Sutton, Jr.’s Motion to Exclude Expert Testimony (“Sutton Mot.”) [Dkt. No. 221];
Defendant Andrew Zabavsky’s Opposition to Government’s Motion in Limine to Exclude
Inadmissible Expert Witness Testimony (“Zabavsky Opp.’’) [Dkt. No. 229]; Government’s
Omnibus Opposition to Defendants’ Motions to Exclude Expert Testimony (“Gov’t Opp.”) [Dkt.
No. 231]; Terence D. Sutton, Jr.’s Opposition to Government’s Motion in Limine to Exclude
Inadmissible Expert Testimony (“Sutton Opp.”) [Dkt No. 232]; Terence D. Sutton, Jr.’s Reply in
Support of His Motion to Exclude Expert Testimony (“Sutton Reply”) [Dkt. No. 245];
Government’s Reply in Support of Its Motion in Limine to Exclude Inadmissible Expert
Testimony (“Gov’t Reply”) [Dkt. No. 246]; Defendant Andrew Zabavsky’s Reply in Support of
His Daubert Motion to Preclude Expert Testimony (“Zabavsky Reply”) [Dkt. No. 247];
Government’s Motion in Limine to Exclude Defendant Sutton’s Crash Reconstruction Opinion
Testimony (“Gov’t Crash Mot.”) [Dkt. No. 293]; Thomas Langley Letter (“Langley Letter’’)
[Dkt. No. 293-1]; Terence D. Sutton, Jr.’s Opposition to the Government’s Motion in Limine to
Exclude Testimony of Expert Thomas Langley (“Sutton Crash Opp.”) [Dkt. No. 317]; and Reply
to Defendant Sutton’s Opposition to Government’s Motion to Exclude Expert Testimony of
Thomas Langley (“Gov’t Crash Reply”) [Dkt. No. 320].
2
I. LEGAL FRAMEWORK
Rule 702 of the Federal Rules of Evidence provides:
A witness who is qualified as an expert by knowledge, skill,
experience, training, or education may testify in the form of an
opinion or otherwise if: (a) [t]he expert’s scientific, technical, or
other specialized knowledge will help the trier of fact to understand
the evidence or to determine a fact in issue; (b) [t]he testimony is
based on sufficient facts or data; (c) [t]he testimony is the product
of reliable principles and methods; and (d) [t]he expert has reliably
applied the principles and methods to the facts of the case.
FED. R. EVID. 702. “In general, Rule 702 has been interpreted to favor admissibility.”
Khairkhwa v. Obama, 793 F. Supp. 2d 1, 10 (D.D.C. 2011); see also FED. R. EVID. 702 advisory
committee’s note (2000) (“A review of the caselaw after Daubert shows that the rejection of
expert testimony is the exception rather than the rule.”). Trial judges are generally afforded
broad discretion in rendering evidentiary rulings “[i]n deference to their familiarity with the
details of the case.” Youssef v. Lynch, 144 F. Supp. 3d 70, 80 (D.D.C. 2015); accord Graves v.
District of Columbia, 850 F. Supp. 2d 6, 11 (D.D.C. 2011).
Rule 702 of the Federal Rules of Evidence effectively codifies the Supreme
Court’s decisions in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and
Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999). In Daubert, the Court charged trial judges
with the responsibility of acting as “gatekeepers” to shield unreliable or irrelevant expert
testimony and evidence from the jury. See Daubert v. Merrell Dow Pharmaceuticals, Inc., 509
U.S. at 597. In Kumho, the Court made clear that the gatekeeper function applies to all expert
testimony, not just scientifically based testimony. See Kumho Tire Co. v. Carmichael, 526 U.S.
at 148-49. Consistent with the Court’s role as the “gatekeeper for expert testimony,” Little v.
Wash. Metro. Area Transit Auth., 249 F. Supp. 3d 394, 408 (D.D.C. 2017), the Court has “broad
discretion in determining whether to admit or exclude expert testimony.” Blake v. Securitas Sec.
3
Servs., Inc., 292 F.R.D. 15, 17 (D.D.C. 2013) (quoting U.S. ex rel. Miller v. Bill Harbert Int’]
Constr., Inc., 608 F.3d 871, 895 (D.C. Cir. 2010)).
As the D.C. Circuit has explained, the twin requirements for the admissibility of
expert testimony are evidentiary reliability and relevance. See Ambrosini v, LaBarraque, 101
F.3d 129, 133 (D.C. Cir. 1996); see also United States v. Naegele, 471 F. Supp. 2d 152, 156-57
(D.D.C. 2007); McReynolds v. Sodexho, 349 F. Supp. 2d 30, 34-35 (D.D.C. 2004). With respect
to reliability, the court’s focus must be on the methodology or reasoning employed by
application of the factors in Rule 702 and the non-exhaustive lists of factors set forth in Daubert
and Kumho. See Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. at 595 (“The focus, of
course, must be solely on principles and methodology, not on the conclusions that they
generate.”); Ambrosini v. LaBarraque, 101 F.3d at 140 (“[T]he admissibility inquiry focuses not
on conclusions, but on approaches.”). With respect to relevance, the court must determine
whether the proffered testimony is sufficiently tied to the facts of the case and whether it will aid
the jury in resolving a factual dispute. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S.
at 592-93,
For an expert to be “qualified” under Rule 702, “it is not necessary that the
witness be recognized as a leading authority in the field in question or even a member of a
recognized professional community.” 29 CHARLES ALAN WRIGHT & ARTHUR R. MILLER,
FEDERAL PRACTICE & PROCEDURE § 6264.1 (2d ed. 2022). “[A]n expert may be qualified on the
basis of his or her practical experience.” Khairkhwa v. Obama, 793 F. Supp. 2d at 11. As the
“gatekeeper” to shield the jury from unreliable or irrelevant expert testimony, the trial judge “‘is
to make certain that an expert, whether basing testimony upon professional studies or personal
experience, employs in the courtroom the same level of intellectual rigor that characterizes the
practice of an expert in the relevant field,” but “reasonable measures of reliability in a particular
case is a matter that the law grants the trial judge broad latitude to determine.” Kumho Tire Co.
v. Carmichael, 526 U.S. at 152-53.
The D.C. Circuit has held that expert testimony consisting of legal conclusions is
impermissible because such testimony may improperly influence the decisions of the trier of fact
— the jury — and impinge upon the responsibilities of the trial court. See United States ex rel.
Mossey v. Pal-Tech, Inc., 231 F. Supp. 2d 94, 98 (D.D.C. 2002) (citing Burkhart v. Wash.
Metro. Area Transit Auth., 112 F.3d 1207, 1212-13 (D.C. Cir. 1997)). Whether expert opinion
testimony is admissible “depends, in part, on whether it will ‘assist the trier of fact’ in either
‘understand[ing] the evidence or . . . determin[ing] a fact in issue.’”” Burkhart v. Wash. Metro.
Area Transit Auth., 112 F.3d at 1212 (quoting FED. R. EviD. 702). Expert testimony consisting
of legal conclusions is not admissible because it “cannot properly assist the trier of fact in either
respect.” Id. Thus “an expert may offer his opinion as to facts that, if found, would support a
conclusion that the legal standard at issue was satisfied, but he may not testify as to whether the
legal standard has been satisfied.” Id. at 1212-13; see also Halcomb v. Wash. Metro. Area
Transit Auth., 526 F. Supp. 2d 24, 27 (D.D.C. 2007).
Under Rule 704(a) of the Federal Rules of Evidence, “{a]n opinion is not
objectionable just because it embraces an ultimate issue.” FED. R. EVID. 704(a). Other rules,
however, including Rule 702, “may still be used to exclude ‘opinions which would merely tell
the jury what result to reach.” United States v. Boney, 977 F.2d 624, 630 (D.C. Cir. 1992)
(quoting FED. R. EviD. 704, Note of Advisory Committee on 1972 Proposed Rules); see also 3
STEPHEN A. SALTZBURG, MICHAEL M. MARTIN & DANIEL J. CAPRA, FEDERAL RULES OF
EVIDENCE MANUAL § 704.02[1] (12th ed. 2022) (“Rule 704(a) permits ultimate issue testimony,
but only if it will be helpful in accordance with Rule 701 or 702.”). Rule 704 is “not intended to
allow experts to offer opinions embodying legal conclusions.” SALTZBURG, MARTIN & CAPRA,
supra, § 704.02[3] (quoting United States v. Scop, 846 F.2d 135, 139 (2d Cir. 1988)). In
drawing a line between “testimony on ultimate factual conclusions and testimony on the
law ... [t]he question is always whether the expert testimony will assist the jury — and it is
within the trial court’s discretion to determine the helpfulness of such ultimate testimony in a
specific case.” Id.
Under Rule 704(b), “[iJn a criminal case, an expert witness must not state an
opinion about whether the defendant did or did not have a mental state or condition that
constitutes an element of the crime charged or of a defense. Those matters are for the trier of
fact alone.” FED. R. EvID. 704(b). This rule was originally “enacted to limit psychiatric
testimony when a criminal defendant relies upon the defense of insanity,” but it “applies in fact
to all instances in which expert testimony is offered as to a mental state or condition constituting
an element of the crime charged or defense thereto.” See United States v. Boyd, 55
F.3d 667, 671 (D.C. Cir. 1995) (citing S. Rep. No. 98-225, at 230 (1983)). The D.C. Circuit has
adopted the view that “what is proscribed is questioning that produces responses suggesting
some special knowledge of the defendant’s mental processes.” United States v. Watson, 171
F.3d 695, 703 (D.C. Cir. 1999).
II. DISCUSSION
A. Police Experts
The parties have proffered six experts to testify on topics relating to police
procedures. The government has proffered Robert Drago, Carolyn Totaro, and Mark Hammond;
Mr. Sutton has proffered John J. Brennan and Michael A. Wear; and Mr. Zabavsky has proffered
James K. Dahlquist.
1. Relevance of National and Local Policing Standards
As an initial matter, Mr. Sutton challenges the government’s police experts on the
ground that their testimony regarding both local and national police standards is not probative or
relevant to the charges in this case. The Court disagrees. First, with regard to local standards,
Mr. Sutton argues that “any evidence or expert testimony that Ofc. Sutton did not comply with
the [Metropolitan Police Department’s] policies, practices, or training is not probative or relevant
as it has no bearing on the charges pending in this case.” Sutton Mot. at 16. The Court rejects
this argument. Under the D.C. second degree murder statute, whether a particular defendant
acted with a “depraved heart” “may be shown by a ‘gross deviation from a reasonable standard
of care’ or by other acts that may lead the finder of fact to determine that the ‘defendant was
aware of a serious risk of death or serious bodily harm.’” Jennings v. United States, 993 A.2d
1077, 1080 (D.C. 2010) (quoting Comber v. United States, 584 A.2d 26, 39 (D.C. 1990) (en
banc)). “The Court has determined that this standard involves both subjective and objective
elements — namely, whether the defendant was subjectively aware of the risk created by his or
her conduct; and whether there was an objectively ‘gross deviation from a reasonable standard of
care.”” United States v. Sutton, Crim. No. 21-0598, 2022 WL 13940371, at *4 (D.D.C. Oct. 23,
2022) (emphasis in original) (citing United States v. Sutton, Crim. No. 21-0598, 2022 WL
2828995, at *3 (D.D.C. July 20, 2022)). Furthermore, the Metropolitan Police Department
(“MPD”) General Orders “may illuminate the contours of the reasonable standard of care that
applied to Mr. Sutton as he pursued Mr. Hylton-Brown on October 23, 2020.” United States v.
Sutton, 2022 WL 2828995, at *3. Based on this determination, the Court concludes that expert
testimony about “MPD’s policies, practices, or training” is both probative and relevant to
whether there was an objectively gross deviation from a reasonable standard of care. Sutton
Mot. at 16. The police experts offered by both sides — to the extent that the Court finds them
qualified — may testify about this issue.
Second, with regard to national standards, Mr. Sutton argues that testimony
regarding “nationally accepted police practices should be excluded because it is not relevant.”
Sutton Mot. at 19. Mr. Sutton cites cases litigated under 42 U.S.C. § 1983 and 18 U.S.C. § 242
to support this proposition. See id. at 17-19. These cases, however, are not analogous or
persuasive. To start, 42 U.S.C. § 1983 and 18 U.S.C. § 242 give government officials qualified
immunity if “their conduct does not violate clearly established statutory or constitutional rights
of which a reasonable person would have known.” Pearson v. Callahan, 555 U.S. 223, 231
(2009) (quoting Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982)); see also United States v.
Lanier, 520 U.S. 259, 265 (1997). These statutes therefore require proof that a defendant’s
conduct violated “clearly established” controlling federal court precedent. Pearson v. Callahan,
555 U.S. at 231. A plaintiff in a Section 1983 suit therefore must show that a right is “clearly
established” by a federal court and cannot prove their case merely by eliciting testimony about
“well established law enforcement standards.” Marquez v. City of Albuquerque, 399
F.3d 1216, 1222 (10th Cir. 2005). A determination of an officer’s liability in a Section 1983 suit
is confined to the analysis of the cases decided under the Fourth Amendment — in use of force
cases — or other relevant constitutional principles. See United States v. Perkins, 470
F.3d 150, 159 (4th Cir. 2006) (explaining that “the word ‘reasonable’ in the § 242 context has a
specific legal meaning’); see also Marquez v. City of Albuquerque, 399 F.3d at 1222 (affirming
the district court’s ruling that “testimony regarding law enforcement standards was both
irrelevant and confusing on the ground that the violation of such standards is not ipso facto a
Fourth Amendment violation”). But the calculus is different under the District of Columbia
second degree murder statute. As discussed above, one of the ways the government can prove
that Mr. Sutton had the requisite mental state is if it shows a “gross deviation from a reasonable
standard of care.” Jennings v. United States, 993 A.2d at 1080. Nationally accepted police
practices therefore may illuminate that standard of care.
Consistent with this distinction, courts in this Circuit have concluded that expert
testimony regarding police procedures is admissible both within the Section 1983 context and
outside of this context. For example, in Butera v. District of Columbia, the court of appeals
affirmed a jury verdict that awarded damages for claims under the District of Columbia’s
Survival Act and Wrongful Death Act. See Butera v. District of Columbia, 235 F.3d 637 (D.C.
Cir. 2001). The case involved a civil action brought by a mother who sued the District of
Columbia and individual MPD police officers who engineered an undercover operation during
which the plaintiff's son was beaten to death while serving as an undercover operative. See id.
at 640-43. At trial, “[t]he district court ruled that expert testimony concerning proper police
procedures for the undercover operation was warranted.” Id. at 659. The D.C. Circuit affirmed,
concluding that the expert, who had twenty-five years of experience at MPD, “presented
sufficient evidence to establish a national standard of care” because “[rJather than relying on
[his] experience in the abstract to proffer a national standard of care, [the expert] set forth
concrete bases for his expert testimony.” Id, at 660. The court held that an expert, testifying as
to whether a defendant met a national standard of care, “must refer to commonly used police
procedures, identifying specific standards by which the jury could measure the defendant’s
actions.” Id. at 659.
Following Butera, judges in this district have made similar rulings regarding
police procedures experts. For example, this Court previously concluded that an expert “may
offer opinions with respect to the issues in this case only to the extent that those opinions are tied
to and based upon identifiable, objective standards of police practice such as those set forth in
publications of the International Association of Chiefs of Police (“IACP’) or similarly
authoritative and relevant documents.” Halcomb v. Wash. Metro. Area Transit Auth., 526 F.
Supp. 2d at 30. In Sherrod v. McHugh, Judge Rudolph Contreras rejected a challenge to a police
expert and concluded that his report “set forth concrete bases for his expert testimony[, |
[including] his review of the MPD’s General Orders, his consultation with personnel from
hundreds of law enforcement agencies, and his assessment of ‘the principles of police practices,
policies, and procedures as thoroughly discussed by several national law enforcement
999
organizations.’” Sherrod v. McHugh, 334 F. Supp. 3d 219, 259 (D.D.C. 2018) (emphasis
added). And in McKnight v. District of Columbia, Magistrate Judge Alan Kay permitted an
expert to opine on whether a police officer “acted outside the scope of accepted police practice in
the United States and outside the D.C. Metropolitan Police Department policy governing use of
force” and whether “the various policies regarding use of force [and] the training officers receive
on when and under what circumstances to use deadly force.” McKnight v. District of Columbia,
Civ. Action No. 00-2607, 2006 WL 6904002, at *2 (D.D.C. Jan. 17, 2006). The expert,
however, was prohibited from testifying “that he believes that [an officer’s] use of force was
‘unreasonable’ or ‘unjustified,’ as this is the question the jury will ultimately have to decide.”
Id. The police experts noticed by both parties in this case — to the extent that the Court finds
them qualified — will be permitted to offer similar testimony, with similar limitations, regarding
local and national standards of care.
10
Mr. Sutton also seeks to exclude on relevancy grounds Mr. Drago’s testimony on
whether “[s]tandard police practice and procedure, both nationally and as stated in the
Washington D.C. police department policy, requires a pursuit to be terminated once the subject is
identified.” Drago Letter at 2. For the reasons described above, the Court declines to exclude
this opinion and agrees with the government that testimony on “nationally accepted police
standards concerning vehicular pursuits,” and how they compare to MPD policies, is relevant to
the elements of second degree murder and obstruction of justice. Gov’t Opp. at 7; see United
States v. Sutton, Crim. No. 21-0598, 2022 WL 13940371, at *4 (D.D.C. Oct. 23, 2022)
(“[E]vidence of Mr. Sutton’s training on the General Order will be [] one factor the jury may
consider.”’); see also Transcript of Jury Trial - Day 7 (Morning Session), November 3, 2022 at
42:23-43:1 (explaining that the MPD General Order on vehicular pursuits is “relevant to
obstruction”); id. at 43:7-11 (“[T]he relevance of testimony about the MPD general orders, in
combination later with fact witnesses who will testify about what happened, and inferences the
government may want to draw, suggests that this proposed instruction should apply to both
defendants.”). Any risk of jury confusion does not substantially outweigh the probative value of
Mr. Drago’s proposed testimony. See FED. R. EvID. 403.
For the same reasons, the Court will not exclude Mr. Wear’s opinion that “[u]nder
the vehicular pursuit policy, activating the lights and sirens on an emergency vehicle does not
immediately or automatically constitute a vehicular pursuit.” Sutton Discl. at 7-8. The Court has
already concluded that expert testimony about “MPD’s policies, practices, or training” is both
probative and relevant. Sutton Mot. at 16. The testimony of Ms. Totaro and Mr. Hammond
about “MPD’s policies and practices” and “the training defendant Sutton received in these areas”
11
is also probative and relevant. Gov’t Opp. at 7; see also United States v. Sutton, 2022
WL 13940371, at *4. The Court declines to exclude their opinions on these topics.
In addition, the police experts noticed by both parties in this case — to the extent
that the Court finds them qualified — will be permitted to offer testimony regarding whether the
defendants’ conduct conformed to the professional police standards they will testify about. This
testimony is consistent with the Federal Rules of Evidence. See Halcomb v. Wash. Metro. Area
Transit Auth., 526 F. Supp. 2d at 27 (“There is no doubt that under Rules 702 and 704 an expert
may testify about applicable professional standards and the defendants’ performance in light of
those standards.” (quoting Richman v. Sheahan, 415 F. Supp. 2d 929, 945-46 & n.16 (N.D. Ill.
2006))); see also Restivo v. Hessemann, 846 F.3d 547, 580 (2d Cir. 2017) (holding that the
district court did not abuse its discretion in admitting expert testimony “about what minimally
accepted police practices required and about [the expert’s] opinion that [the defendant’s] conduct
departed from accepted police practices”). For example, in Sherrod v. McHugh, after concluding
that the plaintiffs’ police practices expert could testify about the national standard of care, Judge
Contreras further held that the expert’s “opinions regarding the [] steps [the defendant] should
have taken according to the standard of care” were admissible. Sherrod v. McHugh, 334 F.
Supp. 3d at 273. He stated that “because the [plaintiffs] have made the requisite threshold
showing of admissibility[,| further disputes go to weight, not admissibility.” Id. (internal
quotations and brackets omitted). He further noted that “[d]efendants may exercise their
disagreement by presenting their own expert testimony contradicting [plaintiffs’ expert’s]
opinions, and by vigorously cross-examining [plaintiffs’ expert] at trial.” Id. The same logic
applies here. The parties’ police experts, however, are prohibited from opining on whether
Mr. Sutton or Mr. Zabavsky acted “reasonably” or “appropriately” — testimony which “[i]n
12
varying contexts, a number of courts have been unwilling to allow... on the theory that the
opinion constitutes an impermissible legal conclusion.” Richman v. Sheahan, 415 F. Supp. 2d
at 946 & n.16 (collecting cases).
2. Robert Drago, John J. Brennan, and Michael A. Wear
For the reasons that follow, the testimony of Robert Drago (as proffered and
narrowed in scope on November 1, 2022) will be admitted in full, and the testimony of John J.
Brennan and Michael A. Wear will be admitted in part and excluded in part. The Court
addresses in turn the various issues that the parties raise.
a. Qualifications
Robert Drago is a retired Lieutenant Colonel of the Broward County, Florida
Sheriff's Office. On November 1, 2022, the government proffered in open court that Mr. Drago
would not testify on the incident at issue in this case and how Mr. Sutton and Mr. Zabavsky’s
conduct conformed to national police standards. See Transcript of Jury Trial — Day 5 (Afternoon
Session), November 1, 2022 at 37:3-38:4. The Court therefore need not address issues that the
parties earlier raised regarding proposed testimony from Mr. Drago as to whether Mr. Sutton’s
and Mr. Zabavsky’s conduct conformed to police standards. Mr. Drago testified in this trial on
November 3, 2022.
Mr. Drago worked in the field of law enforcement for thirty-eight years before
retiring in 2017. According to the government, Mr. Drago “chaired or participated in
committees that formulate law enforcement policy including use of force and vehicular pursuit
policies” and has “extensive knowledge of national model policing standards, including those
standards concerning use of force and vehicular pursuits as employed by the International
13
Association of Chiefs of Police.” Gov’t Discl. at 4-5. The government called Mr. Drago to
testify about “nationally accepted police practices and standards concerning vehicular
pursuits . . . as well as how they compare to the MPD general order on vehicular pursuits . . . that
was in effect at the time of this incident.” Id. at 5. Mr. Zabavsky argued that Mr. Drago is not
qualified because his CV “fails to establish expertise.” Zabavsky Mot. at 4. The Court disagrees
with Mr. Zabavsky. Mr. Drago is a qualified police procedures expert whose expertise is based
on his practical experience. See Robert Drago CV [Dkt. No. 220-3] at 1-9.
John J. Brennan was employed with the MPD for forty-four years, retiring
in 2015. He then worked for three years as a civilian supervisor of “detectives conducting
investigations of drug and gun violence in Washington DC and surrounding areas.” Sutton
Discl. at 12. The government seeks to exclude Mr. Brennan on the grounds that he “has no
training of any kind listed on his resume other than the MPD police academy, from which he
graduated in 1971.” Gov’t Mot. at 4. Further, the government challenges Mr. Brennan’s
“purported brea[d]th of . . . experience and expertise.” Id. at 5. Mr. Sutton argues that
Mr. Brennan’s “training and over four decades of personal experience with the MPD have
supplied [Mr. Brennan] with the requisite specialized knowledge to qualify as an expert on
police procedures and practices because he was a leader in the very same policy strategy
employed by the City.” Sutton Opp. at 3. Mr. Sutton further argues that Mr. Brennan’s
“personal experience with the Crime Suppression Team and its prior iterations provides him the
specialized experience and knowledge to opine” on the Crime Suppression Team (“CST”), to
which Mr. Sutton belonged. Id. The Court agrees with Mr. Sutton. Based on his decades of
experience with MPD, Mr. Brennan is qualified as an expert on police procedures and MPD
policies.
14
Michael A. Wear was a memher of MPD for twenty-nine non-consecutive years,
most recently from November 2018 to October 2020 as a senior officer, sergeant, and reserve
sergeant. Sutton Discl. at 25. Mr. Sutton noticed Mr. Wear as a police procedures expert —
specifically, an expert in “training standards for operation of law enforcement vehicles, vehicular
pursuits, identification of criminal behaviors and tactics to reduce crime, contacts and Terry
stops, and training standards for criminal and civil liabilities of law enforcement officers.” Id.
at 6-7. In Mr. Wear’s most recent role with the MPD, he was responsible for “oversight of
99 66
departmental policy,” “monitoring and evaluating patrol methods ensuring current and emerging
law enforcement practices were being adhered [to],” and “[p]resent[ing] vehicle training as a
subject matter expert.” Id. at 25. The Court agrees with Mr. Sutton that Mr. Wear is qualified to
testify on police procedures and MPD policies.
b. Reliability and Scope of Expertise
Mr. Zabavsky challenges the reliability of Mr. Drago’s methodology, and the
government challenges the scope of Mr. Brennan’s expertise and the reliability of Mr. Wear’s
opinions. With respect to Mr. Drago, Mr. Zabavsky argues that Mr. Drago’s testimony is not
reliable because “neither the Government’s expert disclosure nor the expert report state what
materials Mr. Drago was provided or how those materials influenced his findings” and
“(without knowing what materials Mr. Drago reviewed, the Court cannot determine whether the
methodologies used to reach the conclusion are reliable.” Zabavsky Mot. at 5. In addition,
Mr. Zabavsky argues that Mr. Drago’s testimony is unreliable because “[t]he factual inaccuracies
in the expert report indicate that Mr. Drago lacked a proper investigation.” Id. at 7. The Court is
not persuaded by these arguments.
15
Mr. Drago’s methodology is reliable. As Mr. Drago states in his letter, his
“opinions are based not only on the materials reviewed in this case, but [his] experience and
training concerning proper policies and police practices in citizen contacts, use of force,
detention, police pursuits and arrest procedures.” Drago Letter at 1; see Sherrod v. McHugh, 334
F. Supp. 3d at 258-59 (permitting similar methodology for a police expert). Furthermore, the
Court agrees with the government’s contention that “[e]ven if the defendants dispute certain facts
upon which Mr. Drago relied . . . those assertions speak to the accuracy of his testimony and the
weight the jury should give it, not to the gatekeeping role of the Court addressing a Daubert
challenge.” Gov’t Opp. at 21; see also United States v. Smith, Crim. No. 19-324, 2020
WL 5995100, at *24 (D.D.C. Oct. 9, 2020) (“[T]he party offering the expert need not prove that
the expert’s opinions are correct but rather that the expert is a qualified person who has reached
her opinions in a methodologically reasonable manner.” (citing Ambrosini v. Labarraque, 101
F.3d at 133)).
With respect to Mr. Brennan, the government first seeks to exclude several of his
proffered opinions on the grounds that these “opinions are beyond the scope of any expertise
Sgt. Brennan may have” and “will mislead the jury concerning the legal standard[s].” Gov’t
Mot. at 7-8; see FED. R. EVID. 702; FED. R. EvID. 403. The government argues that “it is unclear
how Sgt. Brennan has specialized training or knowledge that would allow him to opine on any of
these issues” because “he has no experience in police administration other than being a line
supervisor of a CST-type unit, no experience training officers about their job responsibilities
and/or MPD policies, and no experience working in the Internal Affairs Division.” Gov’t Mot
at 7. The government also challenges Mr. Brennan’s expertise on these topics on the additional
basis that he “last worked as a sworn officers in 2015” and “retired his civilian employment with
16
MP?) in 2019,” prior to the October 2020 events of this case. Id. at 8. Mr. Sutton responds that
“Sgt. Brennan’s personal experience with the Crime Suppression Team and its prior iterations
provides him the specialized experience and knowledge to opine on the Crime Suppression
Team’s training, their mission and objectives, and their authority to employ certain tactics.”
Sutton Opp. at 3.
The Court agrees with Mr. Sutton that certain opinions that the government
challenges are within the scope of Mr. Brennan’s expertise as a police procedure and MPD
policies expert, especially given Mr. Brennan’s “experience with the Crime Suppression Team
and its prior iterations.” Sutton Opp. at 3. Discussions of national or local police standards —
and the defendants’ conformity with these standards — are not outside the scope of Mr. Brennan’s
expertise, and as detailed in Section II.A.1, supra, any risk of this testimony “mislead[ing] the
jury” does not substantially outweigh the probative value of Mr. Brennan’s expert opinion on
these topics. See FED. R. EVID. 403. Mr. Brennan, therefore, may opine on whether
Mr. Sutton’s occasional use of his siren and emergency lights was consistent with applicable
MPD policies “to alert citizens to the police activity in their neighborhood,” Sutton Discl. at 3,
and on whether Mr. Sutton should have “notiflied] either MPD Major Crash or MPD Internal
Affairs Division regarding the collision.” Id. at 4.
The Court agrees with the government that the following opinions are outside of
the scope of Mr. Brennan’s expertise on police procedures:
e Whether Mr. Sutton was “one of the most experienced and
honored CST officers within MPD.”
e Whether “(t]he CST units would have been in dereliction of
their duty had they not followed Hylton-Brown... .”
17
° Whether “Officer Sutton’s occasional increase in speed,
travel through intersections, and U tums . . . endanger[ed]
any member of the public.”
° Whether “[a]fter the collision, Officer Sutton appropriately
began to investigate the circumstances surrounding the
event.”
° Whether, “until Officer Sutton was relieved, his conduct was
appropriate, the report accurate, and his conduct was fully
consistent with his duties at the time... .”
® Whether “[b]ased on the declining medical condition of
Hylton-Brown at the hospital . . . it was inevitable that Major
Crash and JAD would be notified ....”
Sutton Discl. at 2-4. Mr. Brennan, as a policing expert, does not have any expertise on, special
insight into, or personal knowledge of the “experience” or “honors” of Mr. Sutton; whether
Mr. Sutton would have been derelict in his duty had he not followed Mr. Hylton-Brown; whether
Mr, Sutton’s driving “endanger[ed]” any member of the public; the appropriateness of
Mr. Sutton’s investigation of the accident scene; or the “declining medical condition” of
Mr. Hylton-Brown. Id.
In addition, the Court agrees with the government that Mr. Brennan may not
provide testimony on certain topics on the grounds that “[tJhere is no basis for Sgt. Brennan to
testify to any of these facts, as he has no personal knowledge of them, they were not grounded on
any expertise he has, and they are not contained in the materials he reviewed.” Gov’t Mot. at 11.
Mr. Brennan is prohibited from providing testimony on whether “[t]he CST units received
information from uniformed officers on Kennedy Street that decedent Hylton-Brown was
observed earlier engaged in a heated verbal argument with another dealer” and whether
“[ujniformed officers thought Hylton-Brown was intoxicated on some substance, and they feared
his return.” Sutton Discl. at 2.
18
The government also challenges as unreliable certain proffered opinions from
Mr. Wear. See Gov’t Mot. at 21-22 (citing FED. R. EVID. 702). The Court declines to exclude
Mr. Wear’s testimony that “Officer Sutton’s following of Hylton-Brown would not be classified
as a police pursuit under the MPD’s pursuit policy in effect on October 23, 2020.” Sutton Discl.
at 8. In the context of Mr. Wear’s testimony as a policing expert, reliable data and methods are
based on his years of experience in law enforcement. See FED. R. Evip. 702. And the Court
previously ruled that Mr. Sutton may “offer evidence and elicit testimony about how the MPD
General Orders differ and what specific changes were made to new versions” and “about how the
new General Orders would have applied to defendants’ conduct.” United States v. Sutton, 2022
WL 13940371, at *7. The Court will exclude Mr. Wear’s opinion that during the period in
which Officer Sutton followed Mr. Hylton-Brown, “there was no threat to the safety of the
general public, Officer Sutton, or any law enforcement officers” because expert testimony on this
point is not necessary to help the jury determine whether there was a threat to safety — that is
something the jury can determine for itself. Sutton Discl. at 8; see FED. R. EVID. 702(a).
c. Legal Conclusions
Some of the opinions proffered by Mr. Brennan and Mr. Wear go beyond policing
practices and policies. As the government points out, some of Mr. Brennan’s and Mr. Wear’s
proffered opinions constitute inadmissible legal opinions that “infringe on the jury’s role as the
sole fact-finder,” and some are “irrelevant [and] will mislead the jury.” Gov’t Mot. at 5-6, 20;
see FED. R. EvID. 702(a); FED. R. EVID. 403. As noted supra in Section I, an expert’s legal
opinions are inadmissible because these opinions “cannot properly assist the trier of fact” in
“understand[ing] the evidence or . . . determin[ing] a fact in issue.” Burkhart v. Wash. Metro.
Area Transit Auth., 112 F.3d at 1212 (quoting FED. R. EvID. 702(a)). Thus, “an expert may offer
19
his opinion as to facts that, if found [by the jury], would support.a conclusion that the legal
standard at issue was satisfied, but he may not testify as to whether the legal standard has been
satisfied.” Id. at 1212-13.
In particular, on the question of Terry stops, the Court has already ruled that
“Mr. Sutton is prohibited from presenting a legal argument about whether he was entitled to
conduct a Terry stop of Mr. Hylton-Brown” because “[t]he probative value of any legal
determination of a Terry stop is substantially outweighed by the risk of confusion, misleading the
jury, or permitting them to make decisions about the law.”” United States v. Sutton, 2022
WL 13940371, at *19 (citing FED. R. Evip. 403). In the context of expert testimony, not only
does an opinion about whether Mr. Sutton had sufficient grounds to conduct a Terry stop risk
misleading the jury under Rule 403, it is also inadmissible under Rule 702(a) as a legal opinion.
Mr. Sutton is, however, permitted to present testimony “concerning his knowledge and training
related to the MPD General Order on Field Contacts, Stops, and Protective Pat Downs.” Id.
at *18. Accordingly, Mr. Brennan is prohibited from testifying about whether Mr. Sutton had
legal cause to conduct a Terry stop of Mr. Hylton-Brown, but not about whether Mr. Sutton’s
conduct complied with MPD training concerning contacts and stops. See Restivo v. Hessemann,
846 F.3d at 579-80 (“When an expert offers an opinion relevant to applying a legal
standard . . . the expert’s role is limited to describing sound professional standards and
identifying departures from them.” (quoting Jimenez v. City of Chicago, 732 F.3d 710, 721 (7th
Cir, 2013))). References to decisions of the Supreme Court, “constitutional policing standards,”
and other similar matters are also prohibited. See Sutton Discl. at 2.
The government challenges the following opinion proffered by Mr. Brennan:
“The officers did not pursue Hylton-Brown, but rather followed him as Hylton-Brown remained
20
in the area yet alluding [sic] police. This ‘following’ is a conventional and lawful tactic utilized
by CST units, their predecessors and other specialized units of MPD.” Sutton Discl. at 3. The
Court concludes that Mr. Brennan may provide an opinion on whether Mr. Sutton and
Mr. Zabavsky “pursued” Mr. Hylton-Brown, as “pursuit” is defined within the MPD vehicular
pursuit policy. See Section II.A.1, supra. Mr. Brennan may also provide an opinion on whether
Mr. Sutton’s and Mr. Zabavsky’s actions prior to the collision were “conventional” tactics
utilized by other CST units of MPD. Mr. Brennan, however, may not opine on whether Mr.
Sutton’s or Mr. Zabavsky’s actions were “lawful,” as this is a legal conclusion and therefore
inadmissible. See, e.g., United States v. Perkins, 470 F.3d at 158 (“[Testimony involving] the
use of terms with considerable legal baggage . . . nearly always invades the province of the
jury.”); Richman v. Sheahan, 415 F. Supp. 2d at 946 (noting that “a number of courts have been
unwilling to allow” testimony on whether a defendant acted “reasonably” or “appropriately” “‘on
the theory that the opinion constitutes an impermissible legal conclusion”).
The government also challenges the following opinion proffered by Mr. Brennan:
“MPD officers are privileged to violate D.C. traffic laws in the performance of their duties.
Officer Sutton’s conduct in following Hylton-Brown was consistent with this privilege.” Sutton
Discl. at 3. The Court rules that Mr. Brennan may provide an opinion on whether MPD officers
are exempted from D.C. traffic laws and whether Mr. Sutton’s conduct was consistent with this
exemption, as “exemptions” are discussed in MPD Institute of Police Science’s “Legal Aspects
and Civil Liability of Law Enforcement Driving” presentation, already admitted into evidence as
Exhibit 413-H. See Gov’t Trial Ex. 413-H (titled “USAO_010309 legal aspects ppt training’’).
Mr. Brennan may not opine on whether MPD officers are privileged to violate D.C. traffic laws
and whether Mr. Sutton’s conduct was consistent with such a privilege. “Privilege” is “a term of
21
art with a meaning ‘separate’ and ‘distinct’ from the vernacular,” and the D.C. Circuit has held
that expert testimony that invokes a “legal term of art . . . constitute[s] an impermissible legal
conclusion.” Burkhart v. Wash. Metro. Area Transit Auth., 112 F.3d at 1213 (deeming expert’s
use of the term “as effective” an “impermissible legal conclusion” because “the phrase as used in
the [Attorney General’s] regulations [implementing the Americans with Disabilities Act] is a
term of art with a meaning ‘separate’ and ‘distinct’ from the vernacular”).
With respect to the government’s challenge to Mr. Wear’s proffered opinions,
Mr. Wear, like Mr. Brennan, is prohibited from offering legal opinions, referring to
“constitutional policing,” and opining on “whether [Mr. Sutton] was entitled to conduct a Terry
stop of Mr. Hylton-Brown.” United States v. Sutton, 2022 WL 13940371, at *19. Mr. Wear
may provide testimony on whether Mr. Sutton “acted in accordance with his training [and]
departmental policy” on the night of the incident, see Section II.A.1, supra, but Mr. Wear may
not opine on whether Mr. Sutton had sufficient grounds to conduct a Terry stop of
Mr. Hylton-Brown “under the law.” Sutton Discl. at 7. Mr. Wear is also prohibited from
opining on whether “[i]n the District of Columbia, law enforcement officers are legally permitted
to pursue a suspect for any crime committed in the officer’s presence, regardless of whether such
a pursuit would be authorized under the MPD’s vehicular pursuit policy”; whether “[t]he
Department’s policies . . . create legal standards”; and whether “violations of departmental
policy .. . amount to violations of law or legal standards.” Sutton Discl. at 7 (emphases added);
see FED. R. EVID. 702(a).
d. State of Mind Testimony
The government seeks to exclude certain portions of Mr. Brennan’s and
Mr. Wear’s proffered opinions under Rule 704(b) of the Federal Rules of Evidence. With
22
respect to Mr. Brennan, the government claims that the following opinions “improperly seek to
introduce evidence of the defendant’s subjective knowledge and state of mind concerning an
essential element of the charged crimes.” Gov’t Mot. at 9. The Court agrees with the
government that under Rule 704(b), Mr. Brennan may not testify as to Mr. Sutton’s state of
mind. See FED. R. EvID. 704(b). Statements about what Mr. Sutton “knew” and “had no reason
to believe” are opinions about elements of the crimes charged — they address the question of
Mr. Sutton’s mens rea required under the obstruction of justice and conspiracy charges. Id.; see
also Indictment 47 31, 50. Accordingly, the following opinions are excluded:
° The draft accident report on which Officer Sutton
collaborated with Officer Novick was an appropriate
presentation of what [Mr. Sutton] knew at the scene.
° As an experienced CST officer, Officer Sutton knew that his
report would not be final until reviewed by his chain of
command.
° Officer Sutton had no reason to believe that any of his
conduct would be scrutinized by the United States
Attorney’s Office before he learned that Hylton-Brown was
unlikely to survive.
e Officer Sutton had no reason to believe, even after the death
of Hylton-Brown, that he would face criminal charges.
Sutton Discl. at 3-4 (emphases added).
Likewise, Mr. Wear may not provide testimony on Mr. Sutton’s state of mind.
See FED. R. EVID. 704(b). Mr. Wear’s opinion that “Officer Sutton had no reason to believe that
he would be subjected to criminal charges for any of the actions he took in the late evening of
October 23, 2020” is an opinion about the mens rea required under the obstruction of justice and
conspiracy charges and is therefore in admissible under Rule 704(b). Sutton Discl. at 8; see also
Indictment fj 31, 50.
23
e. Unprecedented Prosecution Testimony
Mr. Brennan and Mr. Wear proffer opinions relating to defendants’ allegations of
selective or unprecedented prosecution in this case. This Court previously concluded that
“defendants’ assertions that this is an unprecedented criminal case” is “irrelevant, inappropriate
for consideration by the jury, invite[s] jury nullification, and distract|s] from the issues at trial.”
United States v. Sutton, 2022 WL 13940371, at *18. For the same reason, the Court will exclude
Mr. Brennan’s testimony that “[n]o criminal case has been brought by [the U.S. Attorney’s
Office] against an MPD officer who did not inflict a fatal injury on a suspect.” Sutton Discl.
at 4. Mr. Brennan’s knowledge of the types of charges brought against MPD officers in the past
has no bearing on the defendants’ states of mind for this case and improperly seeks to make the
jury second guess the charging decisions of the government and grand jury. Similarly,
Mr. Wear’s opinions that he “has never seen a case like the one charged in the Indictment in his
entire career” and “MPD officers are not trained or taught that the conduct alleged in the
Indictment could subject them to criminal prosecution” inappropriately challenge prosecutorial
discretion and the decisions of the grand jury. Id. at 8. These opinions are excluded as well.
3. Carolyn Totaro and Mark Hammond
For the reasons discussed below, the testimony of Carolyn Totaro will be
admitted in part and excluded in part, and the testimony of Mark Hammond will be admitted in
full.
Carolyn Totaro is a vehicle skills instructor at the MPD Training Academy.
Ms. Totaro estimates that she has “provided approximately 520 hours of training as a vehicle
skills instructor at MPD, both to new recruits and to experienced officers who are referred to the
24
Training Academy for re-training following officer discipline.” Gav’t Discl. at 2. The
government anticipates calling Ms. Totaro as both a fact witness and an expert witness to explain
“the training requirements of the driver training course at MPD for new recruits and the topics
covered in the course,” including “vehicular pursuits.” Id. The government also proffers that
Ms. Totaro will “opine that defendant Sutton engaged in a pursuit of Hylton-Brown that did not
comply with MPD policy or comport with MPD training.” Id. at 3.
Mark Hammond is a former vehicle skills instructor at the MPD Training
Academy. According to the government, Mr. Hammond “taught the vehicle skills class at the
MPD Training Academy that defendant Sutton attended as an MPD recruit.” Gov’t Discl. at 6.
The government anticipates calling Mr. Hammond “primarily as a fact witness” to provide
testimony on “the training defendant Sutton received and the concepts and lessons” that
Mr. Hammond taught in his vehicle skills class. Id. The government also anticipates that
Mr. Hammond will give expert testimony to provide “an explanation of the lesson concepts
concerning vehicular pursuits and the relevant MPD general orders that were taught to defendant
Sutton’s recruit class.” Id.
Mr. Sutton seeks to exclude some of Ms. Totaro’s opinions on the grounds that
they are not relevant or probative. See Sutton Mot. at 16-17, 19-20. For the same reasons that
the Court excluded some of Mr. Brennan’s and Mr. Wear’s proffered opinions on Terry stops,
see Section II.A.2.c, supra, the Court concludes that Ms. Totaro may not opine on whether
Mr. Sutton had “probable cause” or “reasonable suspicion” to stop Mr. Hylton-Brown. .Gov’t
Discl. at 3; see also United States v. Sutton, 2022 WL 13940371, at *19 (citing FED. R.
Evin. 403). Ms. Totaro may, however, opine on whether Mr. Sutton’s conduct conformed to
MPD policies and training. See Gov’t Discl. at 3-4.
25
Mr. Sutton also seeks to exclude Ms. Totaro’s and Mr. Hammond’s testimony on
the ground that the government anticipates calling them as dual-role fact and expert witnesses.
Sutton Mot. at 25. In this Circuit, there is no bar to dual testimony as both a fact and expert
witness. See United States v. Smith, 640 F.3d 358, 365 n.3 (D.C. Cir. 2011) (citing United
States v. Ramsey, 165 F.3d 980, 984 (D.C. Cir. 1999)); see also United States v. Catlett, 97
F.3d 565, 571 (D.C. Cir. 1996) (“[E]very federal court to consider the issue of dual testimony as
both a fact and expert witness has concluded that the Federal Rules of Evidence permit such
testimony.”). The Court recognizes that in some cases, “concerns about juror confusion may
require, under Rule 403, the exclusion altogether of, or imposition of strict scope limits on, the
expert portion of a hybrid witness’s testimony or the use of other procedural safeguards against
jury confusion.” Phoenix Restoration Grp., Inc. v. Liberty Mut. Grp. Inc., Civ. Action
No. 18-2121, 2020 WL 622152, at *4 (D.D.C. Feb. 10, 2020). In this case, any risk of jury
confusion over hybrid witnesses’ testimony does not substantially outweigh the probative value
of the testimony of Ms. Totaro or Mr. Hammond. See FED. R. EVID. 403. The Court therefore
declines to exclude their testimony on the basis of their dual roles as both fact and expert
witnesses.
Finally, the Court disagrees with Mr. Sutton regarding the adequacy of the
government’s disclosure of Ms. Totaro’s and Mr. Hammond’s proposed testimony under
Rule 16(a)(1)(G) of the Federal Rules of Criminal Procedure. Rule 16(a)(1)(G) of the Federal
Rules of Criminal Procedure requires the government to provide, at the defendant’s request, “a
written summary of any testimony that the government intends to use” as evidence at trial under
Rules 702, 703, or 705 of the Federal Rules of Evidence. FED. R. CRIM. P. 16(a)(1)(G). The
summary “must describe the witness’s opinions, the bases and reasons for those opinions, and
26
the witness’s qualifications.” Id. Mr. Sutton argues that the government’s disclosure
inadequately “justifies or explains the science behind ‘high speed pursuit syndrome,’ or ‘target
fixation’ which appear[s] to underly the thoughts of Ofc. Totaro . . . and those of
Mr. Hammond.” Sutton Mot. at 22. The Court concludes that the government’s disclosure
satisfies the purpose of the Rule to “prevent unfair surprise at trial,” to “prepare for
cross-examination at trial,” and to “provide the opponent with a fair opportunity to test the merit
of the expert’s testimony through focused cross-examination.” United States v. Naegele, 468 F.
Supp. 2d 175, 176 (D.D.C. 2007) (discussing the analogous requirements in Rule 16(b)(1)(C))
(internal quotations omitted).
The following testimony offered by Ms. Totaro and Mr. Hammond therefore is
admissible:
Officers are [] taught about “high speed pursuit syndrome,” in which
an officer may develop tunnel vision, and may mirror a suspect’s
moves, causing the pursuit to become increasingly dangerous.
Officers are trained on techniques to avoid these issues, including
use of radio communications, slowing down (which may lead the
suspect to slow down as well), and to avoid fixation on the suspect
vehicle.
Gov’t Discl. at 3 (describing portion of Ms. Totaro’s anticipated testimony).
[Mr.] Hammond may also opine on the [body-worn camera] footage
of the incident in this case from defendant Sutton’s front seat
passengers (Tejera), and that the defendant’s manner of driving in
the final alleyway before the crash suggested target fixation because
the defendant’s car was moving quickly toward the moped, without
concern for fixed objects in the alley such as telephone poles.
Id. at 6 (describing portion of Mr. Hammond’s anticipated testimony).
27
4. James K. Dahlquist
For the reasons that follow, James K. Dahlquist’s testimony is excluded in full.
Before retiring in 2021, Mr. Dahlquist worked for the Cobb County, Georgia police department
for twenty-six years and was a certified Georgia Traffic Accident Reconstruction Specialist.
Mr. Zabavsky noticed Mr. Dahlquist as a crash reconstruction and police procedure expert.
From December 1997 to March 2003, Mr. Dahlquist was a field training officer for the Cobb
County, Georgia police department. See Zabavsky Discl. at 12. The government challenges
Mr. Dahlquist’s qualifications, arguing that “[w]hile Mr. Dahlquist’s experience appears to
qualify him as a crash reconstructionist, that is not the purpose for which the defendant seeks to
call him as a witness.” Gov’t Mot. at 26. The government notes that Mr. Zabavsky’s notice
“appears to anticipate that Mr. Dahlquist will instead testify as a ‘police procedures expert’” and
“Tnjothing in his resume indicates he is qualified to serve as an expert on that topic.” Id. The
government argues that Mr. Dahlquist’s opinions on police procedures are beyond the scope of
his expertise. See id. Mr. Zabavsky responds that Mr. Dahlquist, during his time as a field
training officer, “was responsible for teaching recruits who had just graduated from the academy
all policies and procedures of his department as well as the proper procedures for daily routines
and other specialty tasks.” Zabavsky Opp. at 4. Mr. Zabavsky argues that this experience
“qualifies [Mr.] Dahlquist as an expert in police procedures.” Id. at 4-5.
The Court agrees with the government. Mr. Dahlquist’s experience with the Cobb
County, Georgia police department does not qualify him as a police procedures expert, much less
an expert on MPD policies. Mr. Dahlquist’s only experience with training other officers appears
to be his position as a field training officer in Cobb County, Georgia. Zabavsky Discl. at 12.
According to his CV, he held this position for six years, id., and during that time trained recruits
28
on the “policies and procedures of his department” only. Zabavsky Opp. at 4 (emphasis added).
Unlike Mr. Drago, who has experience with “formulat[ing] law enforcement policy” and
“extensive knowledge of national model policing standards,” there is no indication that
Mr. Dahiquist has sufficient experience or familiarity with national standards, let alone local
standards in Washington, D.C. Gov’t Discl. at 4-5.
Moreover, Mr. Dahlquist’s proposed testimony covers topics that go beyond the
scope of the expertise of either a crash reconstructionist or a police procedures expert. For
example, statements that “Mr. Hylton-Brown’s visible injuries were minimal”; “[hJuman
biological material at the scene appears to be vomit and not blood”; and “[i]t did not appear that
officers or fire department responders were engaged in cardiopulmonary resuscitation” are better
suited for medical experts or for the jury itself. Zabavsky Discl. at 4. Coming from
Mr. Dahlquist, this testimony is neither reliable nor helpful to the trier of fact. See Halcomb v.
Wash. Metro. Area Transit Auth., 526 F. Supp. 2d, at 27 (“Rule 702 bars [defendant’s police
procedures expert] from offering opinion testimony as to the ‘source and severity’ of plaintiffs
injuries. Such opinions would be outside [the expert’s] areas of expertise.” (citations omitted)).
Mr. Dahlquist’s proposed testimony that “Lieutenant Zabavsky and other MPD ‘members’ at the
scene may not have understood the seriousness of Mr. Hylton-Brown’s injuries” is similarly
beyond the scope of Mr. Dahlquist’s expertise and much too speculative to satisfy the reliability
threshold of Rule 702. Zabavsky Discl. at 4. Mr. Dahlquist’s testimony is therefore excluded in
full.
29
B. Non-Police Experts
1. Bruce-Alan Barnard
Mr. Sutton noticed Bruce-Alan Barnard, J.D., LLM, as “‘an expert in
constitutional policing standards and police training.” Sutton Discl. at 4. The Court excludes
Mr. Barnard’s testimony in full.
To start, the government is correct that the Court has already concluded that
“questions concerning whether defendant Sutton committed any constitutional violations, acted
‘reasonably’ under constitutional precedents, or violated Hylton-Brown’s constitutional rights
during this incident are wholly irrelevant to this case.” Gov’t Mot. at 13; see also United States
v. Sutton, 2022 WL 13940371, at *5-6. The Court has made clear that a violation of the D.C.
second degree murder statute — a criminal statute of general applicability — does not require that
the government meet the test for reasonableness under the Fourth Amendment to the United
States Constitution. See Transcript of Oral Ruling on Motion Hearing, August 3, 2022 (“Oral
Ruling Tr.”) [Dkt. No. 217] at 11:21-19:9. Furthermore, the government need not prove a
constitutional violation to demonstrate that Mr. Sutton’s conduct violated the D.C. second degree
murder statute. “[P]olice officers like everyone else are subject to generally applicable laws
unless there’s an express [exemption] made and the Constitution does not give them an
exemption.” Id. at 18:25-19:3.
Moreover, “Mr. Barnard’s other opinions suffer from similar defects.” Gov’t
Mot. at 13. For example, Mr. Sutton states that Mr. Barnard is expected to testify that “Officer
Sutton could not have an engaged in a conspiracy to thwart a federal civil rights investigation
because officers do not understand policy violations to lead to criminal liability.” Sutton Discl.
at 6. But this Court has already definitively ruled on this issue. See United States v. Sutton,
30
Crim. No. 21-0598, 2022 WL 11744415, at *4 (D.D.C. Oct. 20, 2022).? In this case, the
defendants are not charged with committing a civil rights violation. They are charged with
engaging in misleading conduct with the intent to hinder communication to authorities who
might investigate the matter as a civil rights violation. See Indictment at 132. As the Court has
already stated, “[t]he government need only charge and prove possible existence of a federal
crime and a defendant's intention to thwart an inquiry [into] that crime.” Oral Ruling Tr.
at 26:23-27:1; see also 18 U.S.C. § 1512(b)(3) (‘Whoever knowingly . . . engages in misleading
conduct toward another person, with intent to... hinder, delay, or prevent the communication to
a law enforcement officer . . . of information relating to the commission or possible commission
of a Federal offense . . . shall be fined under this title or imprisoned not more than 20 years, or
both.” (emphasis added)).
These issues have been squarely decided and may not be the subject of testimony
by an expert witness at trial. As discussed supra at Section I, the D.C. Circuit has held that
“[e]xpert testimony that consists of legal conclusions cannot properly assist the trier of fact in
either respect, and thus it is not [] admissible.” Burkhart v. Wash. Metro. Area Transit
Auth., 112 F.3d at 1212 (internal quotations omitted). And as stated in the Court’s opinion
resolving five motions in limine in this case, defendants are not “permitted to present evidence,
or argue to the jury, that they were legally entitled to conduct a Terry stop of Mr. Hylton-Brown
on October 23, 2020, . . . or otherwise put the question to the jury of whether such a procedure
was legally appropriate.” United States v. Sutton, 2022 WL 13940371, at *19 (internal
3 Mr. Barnard is also certainly not qualified to opine that “officers do not
understand policy violations to lead to criminal liability.” Sutton Discl. at 6. This is a blanket
statement about the innerworkings of an entire profession of people. It is up to the jury to decide
whether Mr. Sutton — as an individual officer — had the requisite mental state under the
obstruction of justice statute.
31
quotations omitted), These types of legal arguments will not he permitted at trial hecause “it
would risk leading the jurors to believe, erroneously, that they are supposed to make [] legal
determination[s] about the Terry stop, or that if the defendants were conducting a legitimate
Terry stop, it somehow mitigates defendant Sutton’s later conduct as he continued to chase
Mr. Hylton-Brown over the course of several minutes.” Id. The Court will instruct the jury on
the law, as appropriate.‘
Finally, Mr. Barnard’s opinions regarding the adequacy of MPD training
materials, and whether or not MPD is accredited, are irrelevant. The government rightly points
out that “MPD itself is not on trial here, and its training materials are relevant only to show the
defendant’s subjective state of mind about what he knew he was allowed to do (and not do) in an
MPD vehicle.” Gov’t Mot. at 17. In sum, Mr. Barnard’s testimony will be excluded in full.
2. Thomas Langley
Mr. Sutton noticed Thomas Langley as an accident reconstruction expert. See
Sutton Discl. at 8. For the reasons that follow, Mr. Langley’s testimony will be admitted in part
and excluded in part.
The government seeks to exclude Mr. Langley’s testimony on the grounds that it
is “unreliable under Daubert”; “misleading to the jury”; “did not employ reliable methods and
principles[] and did not reasonably apply appropriate methods and principles to the facts of the
7 Beyond the legal issues discussed above, Mr. Barnard’s proposed testimony is
also inadmissible under Rule 704. See FED. R. EvID. 704(b). Mr. Sutton seeks to elicit opinions
from Mr. Barnard regarding the mental state underlying the charges in the Indictment, including
that “nothing [Mr. Sutton] did could legitimately be characterized as negligent or grossly
negligent as he would have understood those terms from his training,” and that Mr. Sutton
“would not have understood based on the facts contained in the Indictment” that he could be
charged with obstruction. Sutton Discl. at 6. These opinions are not admissible expert
testimony.
32
case”; and “exceeds the scope of [Mr. Langley’s] expertise.” Gov’t Crash Mot. at 1. The Court
concludes that Mr. Langley is a qualified accident reconstruction expert. He is a retired Cobb
County, Georgia police sergeant with twenty-seven years of experience in accident investigation
and reconstruction. See Langley Letter at 8. He is accredited in accident reconstruction through
the Accreditation Commission on Traffic Accident Reconstruction. See id. at 8-9.
The government raises several arguments with respect to the reliability of
Mr. Langley’s proffered opinions and the methodology upon which he relied. First, the
government seeks to exclude as unreliable under Rule 702 Mr. Langley’s testimony on “vehicle
speeds at various points in time during the pursuit.” Gov’t Crash Mot. at 8. Mr. Langley’s
report provides the following estimates of the average speeds of vehicles involved in the alleged
pursuit:
e The speed of Mr. Hylton-Brown’s Revel moped as he
approached the intersection of the alleyway and Kennedy
Street. :
o “This gives an average speed across this distance of
22.91 feet per second or 15 miles per hour.”
o “Mr. Hylton-Brown, as he approached the intersection of
the alleyway and Kennedy Street, slowed to
approximately 15 miles per hour as he was cutting the
corner of the turn... .”
e The speed of Mr. Hylton-Brown’s Revel moped as he turned
onto Kennedy Street and into the Scion XB.
o “Speed of the Revel moped as it approaches the end of
the alleyway and into Kennedy [Street] is estimated at
10-12 miles per hour.”
o “Mr. Hylton-Brown was travelling [sic] 10-12 miles per
hour as he turned the Revel Moped left and into the
passenger front corner of the Scion XB.”
33
e The speed of Mr. Sutton’s vehicle as it traveled through the
alleyway.
o “This is an average speed through the alleyway of 21
miles per hour.”
o “After entering the alleyway, Officer Sutton averaged a
speed of about 21 miles per hour.”
Langley Letter at 5-6.
The government argues that these opinions are unreliable because “there is not
enough evidence available in this case to calculate the average speed” of either
Mr. Hylton-Brown’s or Mr. Sutton’s vehicles. Gov’t Crash Mot. at 11-12. The government
contends that there are “key shortcoming with the specific body-worn camera footage
Mr. Langley used for these calculations,” including moments when the footage of Mr. Sutton’s
speedometer or Mr. Hylton-Brown’s Revel moped were obscured. Id. at 9-11. Mr. Sutton
agrees with the government that “this particular accident lacked the data necessary” to
“corroborate [Mr. Langley’s] findings regarding the speed of Ofc. Sutton’s vehicle and
Hylton-Brown’s Revel moped.” Sutton Crash Opp. at 4. He acknowledges that Mr. Langley’s
opinions “are limited to calculating the speeds of the moped and Officer Sutton’s vehicle” using
“basic mathematical formulas.” Id. at 4-5. According to Mr. Sutton, Mr. Langley’s
methodology for arriving at his calculations involved reviewing “frame timing information from
the [body-worn camera] footage” and “distance measurements” from a software called Agisoft
Metashape and calculating average speed by dividing “the distance by the time elapsed.” Id.
at 4. Mr. Sutton argues that “video footage is regularly used by law enforcement agencies and
crash reconstructionists to calculate distance and time traveled” and that “[t]here is no industry
standard dictating that [body-worn camera] footage is an unacceptable or improper source for the
purpose of calculating distance and time traveled.” Id.
34
Second, the government contests the reliability of Mr. Langley’s use of Agisoft
Metashape software in his calculations, noting that “the Agisoft Metashape software creates
diagrams of scenes” and nothing more. Gov’t Crash Mot. at 8. The government argues that the
software “is not typically relied upon to accurately calculate distance for a crash reconstruction.”
Id. In response, Mr. Sutton explained that Mr. Langley’s process for using Agisoft Metashape to
create a diagram of the scene — a process called “photogrammetry” — was as follows:
Agisoft Metashape is used internationally for high resolution
photogrammetry reconstructions and is considered to be as reliable
and accurate as a laser scanner for purposes of scene reconstruction.
Mr. Langley took photographs using a Sony A7R full frame camera
and took drone scene video footage using a DJI Mavic3 Cine Drone.
The videos captured by the drone were then imported into a gaming
computer and frames were exported to still images. Over 1,000
photographs and still images were then input into Agisoft
Metashape to create a 3D diagram of the scene at 720 Kennedy
Street. The 3D map was then reduced to a scaled 2D orthomosaic
and imported into AutoCad, an Autodesk diagramming software, to
create the scene diagram.
Sutton Crash Opp. at 3. Mr. Sutton argues that the use of “photogrammetry programs like
Agisoft is a widely accepted and verified method for accident and crime scene investigation and
reconstruction. For decades, courts have not only held photogrammetry to be a reliable method,
but have also stated it as a preferred and efficient way to investigate and litigate cases.” Id.
(citing United States v. Williams, 235 F. App’x 925 (3d Cir. 2007); United States v. Quinn, 18
F.3d 1461 (9th Cir. 1994)). In its reply, the government tries to distinguish the cases that
Mr. Sutton cites in support of photogrammetry, noting that in United States vy. Williams and
United States v. Quinn “the photographs at issue were used to determine a defendant’s height”
and were “from a fixed surveillance camera.” Gov’t Crash Reply at 3.
The Court concludes that Mr. Langley may provide testimony regarding his
estimates of the speeds of Mr. Sutton’s and Mr. Hylton-Brown’s vehicles, given that these
35
estimates were calculated for specific moments of the alleged pursuit only, and through a reliable
methodology. The Court agrees with Mr. Sutton that Mr. Langley’s methodology — consisting of
his renderings of the crash scene using Agisoft Metashape software, his observations from the
body-worn camera footage of Mr. Sutton and Officer Carlos Tejera, and his estimates of the time
and distance that various vehicles traveled — is reliable under Rule 702. Mr. Langley’s use of
photogrammetry and Agisoft Metashape software appears sound, given that Mr. Langley took
photographs and “drone scene video footage” of the scene and used “fo]ver 1,000 photographs
and still images” in creating a diagram of the scene. Sutton Crash Opp. at 3. The appropriate
weight to be accorded to Mr. Langley’s testimony is a question for the jury. The government
may challenge Mr. Langley regarding his calculations through cross-examination.
Mr. Langley may not, however, testify as to whether Mr. Sutton or
Mr. Hylton-Brown were traveling “slowly,” at a “slow speed,” or at a “low speed.” Langley
Letter at 4-6. This is a subjective characterization and includes inferences the jury can make on
its own. There is no need for an expert to testify to this. Similarly, statements that the speed of
Mr. Sutton’s vehicle “was slow enough to stop without striking Mr. Hylton-Brown” are also
impermissible. Id. at 6. Mr. Langley also may not testify that “Mr. Hylton-Brown’s low speed is
supported by the evidence that he did not sail or slide across the front of the Scion XB but stayed
on the passenger side striking the windshield and passenger side rear view mirror.” Id. As
Mr. Sutton himself noted, Mr. Langley did not have access to data on the Scion XB, including its
speed and momentum. See Sutton Crash Opp. at 5. Without this information, any opinion on
Mr. Hylton-Brown’s speed based solely on his impact with the Scion XB is too speculative and
will only serve to mislead rather than edify the jury.
36
Finally, the government contends that certain topics on which Mr. Langley seeks
to testify are beyond the scope of his expertise as an accident reconstructionist. The Court
agrees. Mr. Langley may not provide any testimony on the following topics: whether
Mr. Hylton-Brown was intoxicated and its possible effects on Mr. Hylton-Brown’s control of the
Revel moped; Mr. Hylton-Brown’s state of mind prior to the collision, including whether he had
“regard for persons or property” or whether he was “reckless” in his driving; and whether
Mr. Sutton had attempted to perform a “traffic stop” on Mr. Hylton-Brown and whether
Mr. Hylton-Brown “refused to stop.” See Langley Letter at 4, 6-7.
An Order consistent with this Opinion will issue this same day.
SO ORDERED.
PAUL L. FRIEDMAN
United States District Judge
DATE: is te(a2
37 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484198/ | IN THE SUPREME COURT OF THE STATE OF DELAWARE
TREMAYNE GARRISON, §
§ No. 177, 2022
Defendant Below, §
Appellant, §
§ Court Below–Superior Court
v. § of the State of Delaware
§
STATE OF DELAWARE, §
§ Crim. ID No. 1904012875 (S)
Appellee. §
Submitted: September 21, 2022
Decided: November 15, 2022
Before SEITZ, Chief Justice; VALIHURA and VAUGHN, Justices.
ORDER
After consideration of the appellant’s opening brief, the State’s motion to
affirm, and the record on appeal, it appears to the Court that:
(1) The appellant, Tremayne Garrison, appeals the Superior Court’s denial
of his motion for modification of sentence. The State has filed a motion to affirm
the judgment below on the ground that it is manifest on the face of Garrison’s
opening brief that his appeal is without merit. We agree and affirm.
(2) On June 9, 2021, Garrison pleaded guilty to one count of drug dealing
(tier two quantity) as a lesser-included offense of drug dealing (tier four quantity).
In exchange for his guilty plea, the State agreed to dismiss the remaining counts of
the indictment and to cap its sentencing recommendation at four years of Level V
incarceration. Following a presentence investigation, the Superior Court sentenced
Garrison to fifteen years of incarceration, suspended after four years followed by
decreasing levels of supervision. Garrison did not appeal his conviction or sentence.
(3) In April 2022, Garrison filed a timely motion for sentence modification
under Superior Court Criminal Rule 35(b). The Superior Court denied the motion,
finding that Garrison’s sentence remained appropriate in light of Garrison’s criminal
history and the severity of the offense. This appeal followed.
(4) We review the Superior Court’s denial of a Rule 35(b) motion for abuse
of discretion.1 Under this “highly deferential” standard, the test is whether “the trial
court acted within a zone of reasonableness or stayed within a range of choice.”2
(5) On appeal, Garrison argues that the Superior Court abused its discretion
when it denied his Rule 35(b) motion because: (i) the State agreed not to seek a term
of incarceration, (ii) the Superior Court denied Garrison his right to allocution at
sentencing, (iii) the Superior Court denied Garrison’s motion with a closed mind,
and (iv) the Superior Court did not properly credit Garrison for the time he had
previously served.
(6) A judge exhibits a closed mind when he acts in a manner that is based
on a “preconceived bias without consideration of the nature of the offense or the
1
Benge v. State, 101 A.3d 973, 976-77 (Del. 2014).
2
Id. at 977 (internal quotation marks and citation omitted).
2
character of the defendant.”3 To the extent that Garrison contends that the Superior
Court judge denied his Rule 35(b) motion with a closed mind, the record does not
support this conclusory argument. And, to the extent that Garrison maintains that
the Superior Court judge sentenced him with a closed mind, his argument is belied
by the sentencing transcript, which reflects that the judge considered the nature of
Garrison’s offense as well as Garrison’s continued use of his brother’s name as an
alias.
(7) Because Garrison did not raise his remaining arguments in the Superior
Court in the first instance, we ordinarily would not entertain them on appeal and
review only for plain error.4 In any event, Garrison’s arguments are meritless. First,
Garrison’s claim that the State agreed not to seek a term of incarceration is refuted
by the plea agreement paperwork, which indicates that the State agreed to cap its
sentencing recommendation to four years of incarceration. Second, the sentencing
transcript reflects that Garrison was given, and availed himself of, the opportunity
to address the court. Third, we find no plain error where the record reflects that
Garrison was credited with “all time previously served” in the Superior Court’s
3
Weston v. State, 832 A.2d 742, 746 (Del. 2003).
4
Del. Supr. Ct. R. 8; Del. Elec. Coop. v. Duphily, 703 A.2d 1202, 1206 (Del. 1997) (“It is a basic
tenet of appellate practice that an appellate court reviews only matters considered in the first
instance by a trial court.”).
3
March 11, 2022 violation-of-probation sentencing order.5 In sum, the Superior
Court did not abuse its discretion when it denied Garrison’s motion for sentence
modification.
NOW, THEREFORE, IT IS ORDERED that the motion to affirm is
GRANTED and the judgment of the Superior Court is AFFIRMED.
BY THE COURT:
/s/ Karen L. Valihura
Justice
5
State’s Mot. to Affirm, Exhibit C.
4 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492303/ | ORDER DENYING, IN PART, DEBTORS’ MOTION FOR RECONSIDERATION
ARTHUR N. VOTOLATO, Bankruptcy Judge.
Heard on February 12 and 13, 1996, on the Debtors’ Emergency Motion for Reconsideration of our January 29, 1996 Order appointing separate trustees in each of the above captioned Chapter 11 cases. It is alleged that the United States Trustee is unable to provide people willing to serve as trustee in these cases, because the Debtors’ *808business involves the manufacture and sale of “chemicals,” and that proposed trustees will decline the appointment unless they are authorized to immediately close the operation, to avoid exposure to personal liability. The only evidence presented was the testimony of the principal, William Grossman, who stated that he is seeking financing. There is no commitment, formal or otherwise, regarding the infusion of funds necessary to run the business, without further eroding the secured creditor’s cash collateral position.
“[T]o succeed on a motion to reconsider, ‘the Court requires that the moving party show newly discovered evidence or a manifest error of fact or law.’” Champagne v. Equitable Credit Union (In re Champagne), 146 B.R. 506, 508 (Bankr.D.R.I.1992) (quoting In re Wedgestone Financial, 142 B.R. 7, 8 (Bankr.D.Mass.1992); In re Bank of New England Corp., 142 B.R. 584, 587-88 (D.Mass.1992). In Champagne we adopted the bankruptcy judge’s remarks in In re Armstrong Store Fixtures Corp., 139 B.R. 347, 350 (Bankr.W.D.Pa.1992) ... :
[ijnitial arguments are not to be treated as a dress rehearsal for a second attempt to prevail on the same matter. Counsel is also expected to ‘get it right’ the first time and to present all the arguments which counsel believes support its position. Arguments which counsel did not present the first time or which counsel elects to hold in abeyance until the next time will not be considered.
139 B.R. at 350; see also Champagne, 146 B.R. at 508.
In re Almacs, Inc., 181 B.R. 143, 143-44 (Bankr.D.R.I.1995).
John Boyajian, Esq., and Louis Geremia, Esq., who were nominated by the U.S. Trustee to serve as trustee in these cases, dispute the Debtors’ allegations, and add that their joint decision to decline to serve as trustee, if required to operate, was based upon the Debtors’ cash flow operating reports. Both Messrs. Boyajian and Geremia conclude, based upon the Debtors’ own figures and projections, that a successful reorganization is not reasonably in prospect, and that the main objective here is, as much as possible by operation through the busy summer season, to somehow reduce the liability of the principals, who are guarantors of the major creditor which is grossly undersecured. Based on the record, the Debtors have fallen far short of their burden and have shown no reason, nor do we find any, to vacate our Order removing the Debtor in Possession. Accordingly, as to that request, the Motion for Reconsideration is DENIED.
However, in light of the United States Trustee’s recent expression that her prior concern over potential conflicts of interests between these two estates have abated for the time being, the appointment of one trustee, coupled with an order authorizing the joint administration of these estates is now appropriate, and it is so ORDERED. If it later appears that the appointment of a single trustee in these cases is not in the best interest of either of these estates, we will revisit the issue of separate trustees. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492304/ | MEMORANDUM OF DECISION
JAMES H. WILLIAMS, Chief Judge.
This matter is before the court on an objection to confirmation filed by one of these Chapter 13 debtors’ secured creditors, First Merit/First National Bank, fka Peoples Federal (First Merit). The narrow issue for determination is the proper rate of interest which First Merit is entitled to be paid as an admittedly fully secured creditor.
There appears to be no dispute that the balance owing to First Merit is $18,-945.33. The debtors proposed to repay the obligation through their plan with interest at the rate of 8% per annum; the note executed by the debtors on November 9,1994, slightly more than nine months before they filed their bankruptcy case, calls for an annual interest rate of 8.25%; and First Merit argues for, and offers evidence in support of, a current “market rate” of interest of 10.25% per annum.
It is the burden of the lender, First Merit, to show that the prevailing market rate exceeds the contract rate. General Motors Acceptance Corporation v. Jones, 999 F.2d 63, 70-71 (3d Cir.1993). The court is satisfied that First Merit has met that challenge here.
However, of fundamental concern is whether such proof is relevant under the circumstances before us. First Merit points to the pronouncement in Memphis Bank & Trust Company v. Whitman, 692 F.2d 427, 431 (6th Cir.1982) in which the court held that “in the absence of special circumstances bankruptcy courts should use the current market rate of interest used for similar loans in the region.” This holding is based on the theory that the creditor is making a new loan to the debtor in the amount of the current value of the collateral. The reasons for any departure from the market rate must be explained by the court. Id. at n. 3.
Memphis Bank must be reconciled, if possible, with Cardinal Federal Savings & Loan v. Colegrove, 771 F.2d 119, 123 (6th Cir.1985) where the court held that “the most equitable rate to establish in this type of situation is the prevailing market rate of interest on similar types of secured loans at the time of allowance of the creditors (sic) claim and the confirmation of the plan in bankruptcy with a maximum limitation on such rate to be the underlying contract rate of interest.” (emphasis added). In Colegrove, the debtors proposed to pay all future mortgage payments on their house to the secured creditor and cure the unpaid arrearage. Thus, the creditor was not forced to accept a write-down of its note.
One can read Colegrove and Memphis Bank together to provide that when a creditor is undersecured, the market rate of interest should be used without limitation, but when the creditor is fully secured, the market rate should be used to the extent it does not exceed the contract rate. The Sixth Circuit has apparently agreed with this interpretation. U.S. v. Arnold, 878 F.2d 925, 929-30 (6th Cir.1989). In Arnold, the Sixth Circuit accepted the creditor’s argument that *882the difference between Memphis Bank and Colegrove was that in the former the creditor was “forced by operation of law to write-down the current value of the loan, thus ... creating a new loan ...” while in the latter, the creditor was “completely secured and was not required to accept unsecured status as to any portion of its debt.” The court further noted “[i]t would not have been equitable to allow the creditor in Colegrove to recover interest at a rate in excess of that prescribed in the contract; for then the creditor would have received a windfall because of the bankruptcy.”
First Merit, as previously stated, is fully secured by virtue of its security interest in both a vehicle and a mortgage on the debtors’ real property. Therefore, under Cole-grove, the bank is entitled to a market rate of interest but only to the extent that such rate does not exceed the contract rate, here, 8.25% per annum. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492305/ | DECISION RE MOTION TO ABSTAIN OR DISMISS
BURTON PERLMAN, Bankruptcy Judge.
Pursuant to 11 U.S.C. § 303(b)(3)(A), Irvin J. Tessler, a general partner of the debtor partnership, June 9,1995 filed an involuntary *901petition under Chapter 7 of the Bankruptcy Code against the debtor partnership. The business of the partnership had been the ownership and management of two real estate properties, Hillcrest Tower and the Ly-Mns Property, the latter being a service station/food mart in Springdale, Ohio. At the behest of Tessler, the Common Pleas Court of Ohio on July 18, 1994 had appointed a receiver, Koll Management Services, Inc., as receiver for the Hillcrest Tower, and also on December 15, 1994, of the Lykins Property. When the Common Pleas Court entered a further order which would terminate the receivership on June 10, 1995, the present involuntary petition was filed (June 9, 1995). Tessler sought and was granted an expedited hearing by this court as to whether the receiver should remain in possession after June 10,1995. Tessler’s motion seeking that relief was denied.
Thereafter, on July 21, 1995, Ayer filed a motion to require a bond of Tessler, and also a motion for abstention or to dismiss the case. These motions came on for hearing. It is disposition of these motions which is now before the court. As to the motion for bond, it is only necessary to state in summary fashion that that motion was denied by order entered September 22, 1995. What remains, then, is the motion to abstain or dismiss.
At the outset, the court notes that there has been substantial litigation between Tes-sler and Ayer in the state court. Tessler has provided us with a decision dated May 18, 1994, by the First Appellate District of Ohio Court of Appeals in Appeal Nos. C-930133 and C-930134; an opinion dated October 25, 1995, from the same court in Appeal Nos. C-940574, C-940632, C-940780, and C-940849; and an opinion dated December 29, 1995, from the same court in Appeal Nos. C-950027 and C-950195. A review of the decision of the First Appellate District of Ohio Court of Appeals dated May 18, 1994, discloses that the court reviewed the background facts pertinent to the present question before this court. That background is that in 1985 Tessler and Ayer, in order to invest in commercial real estate, formed the present debtor partnership, with Ayer owning a five-sixths interest, and Tessler the remaining one-sixth interest. The partnership agreement contained an arbitration clause which required that all controversies between the parties be submitted to arbitration. Tessler’s interest was financed by a loan from Ayer for $100,000.00 and secured by his one-sixth interest in the partnership. On May 20,1991, negotiations began between Tessler and Ayer for Ayer to purchase Tes-sler’s partnership interest. A controversy arose as to the value to be accorded the interest and negotiations broke down. The court says that Ayer then repossessed Tes-sler’s one-sixth interest in the partnership for an alleged default on the loan.
Tessler on April 30, 1992, filed suit in Hamilton County Common Pleas Court, but trial was stayed pending arbitration pursuant to the partnership agreement. Arbitration was had on August 26,1992, and the arbitrator determined that Tessler was to pay Ayer $50,714.70, and when this was paid Ayer was to return Tessler’s one-sixth interest in the partnership, the award to be in full settlement of all claims submitted to arbitration. Tessler paid the required amount and thereafter the trial court grantee Tessler’s motion to enter judgment on the award, the judgment entry requiring Ayer to return the one-sixth partnership interest to Tessler. Ayer, on February 24, 1993, took an appeal from the judgment of the Common Pleas Court. Tessler moved the trial court to appoint a receiver for certain properties, but the trial court overruled Tessler’s motion. The outcome in the Court of Appeals in its Decision entered May 18, 1994, was that Ayer’s assignments of error were overruled by the Court of Appeals, while Tessler’s assignment of error with regard to the denial of the appointment of a receiver was granted.
The second decision by the First Appellate District of Ohio Court of Appeals is dated October 25, 1995. From the caption, it appears that it addresses two separate law suits, one by Tessler against Ayer, and the other Ayer against Tessler. This opinion recounts the identical background as the pri- or account. It adds to that account the fact that the trial court on remand of the case entered a judgment which appointed Koll as *902receiver and Ayer appealed from that order. Ayer filed a motion for relief from judgment with respect to the judgment ordering a return to Tessler of the one-sixth interest in the partnership, Ayer claiming that the partnership had already been dissolved. In that case, said Ayer, Tessler was entitled only to the book value of the one-sixth interest eq-ualling $96,072.00. This motion was overruled at the trial level and Ayer took an appeal. Further, there was a quiet title action by Ayer on August 16, 1994, regarding the Hillcrest Tower and Lykins Property. Tessler’s motion to dismiss that action was granted, and Ayer filed an appeal from it.
The third opinion of the First Appellate District of Ohio Court of Appeals dated December 29, 1995, comments that it “is the third set of appeals between these parties based on the same set of facts.” The Court of Appeals rejected all of the assignments of error advanced by Ayer in this appeal. The court characterized the appeal as frivolous and awarded attorney’s fees to Tessler.
The foregoing summary extracted from the decisions by the First Appellate District of Ohio Court of Appeals discloses that the contending parties before this court, Tessler and Ayer, have been engaged in litigation in the Ohio state courts since 1991. The litigation arose because Tessler wished to withdraw from the partnership. The effect of the desire of a partner to withdraw from this partnership was governed by a partnership agreement which is in evidence before this court. The parties disagreed as to the interpretation of the agreement and it was this which led to the arbitration, the litigation in the Common Pleas Court, and the appeals in the Appellate Court. We regard it as significant that a receiver was installed for the subject properties at the behest of Tessler, and it was only when the Common Pleas Court concluded that the receivership should be terminated that Tessler filed the present involuntary petition. The state court entry terminating the receivership is before us. Termination resulted after the state court appointed an auditor who, after investigating the affairs of the debtor, concluded that there was no sign of irregularity. Tessler’s first initiative here was to ask of this court that we retain the receiver in possession. As we have noted, that relief was denied.
Against the foregoing background, Ayer and Tessler presented evidence to this court regarding the Motion to Abstain or Dismiss filed by the debtor. At the hearing in this court, Ayer on behalf of the putative debtor, movant, presented evidence to show that pri- or to the receivership, debtor was current in its debts, and has been current in its debts subsequent to termination of the receivership. In addition, the evidence presented by movant tended to show that debtor contested substantial debts incurred by the receivership. In opposition to the evidence of mov-ant, Tessler presented testimony to show that there had not been objections to charges by the receivership. It is fair to characterize the evidence as raising an issue of fact as to whether the debtor partnership is hable for all of the receiver’s charges.
The foregoing, then, is the factual background and evidence before us. With these matters constituting the evidentiary record, the parties in argument dealt with the question of whether debtor was paying its bills as they came due, as though that were the only dispositive issue. There is, however, a threshold question which must be dealt with before that issue is reached. That question is whether limitations exist on when a general partner may place a partnership in a Chapter 7 involuntary bankruptcy. This court is of the view that the answer to the foregoing question is affirmative. There are limitations on when a general partner may place a partnership in bankruptcy. Further, we hold that this is a case where a general partner may not do so.
At bottom, what is at hand here is a dispute between the only two partners in a general partnership regarding the correct interpretation of their partnership agreement. There has been no indication that there is any creditor interest in the dispute. It is a state court matter which the parties have litigated strenuously for almost five years in the state courts. What has been brought here is just a continuation of the state court litigation. Perceiving liquidation in bankruptcy to be a useful weapon in his struggle against Ayer, Tessler has now attempted to *903extend the battlefield to this court. There is, however, no reason to believe that the struggle cannot be concluded in the state courts.
Additionally, there are serious questions of fact regarding debts incurred by a receivership installed by the Common Pleas Court of Ohio, and those disputes ought to be resolved by that court. Moreover, there is no reason to believe that a distribution to partners upon a liquidation in bankruptcy would not involve interpretation of the partnership agreement between the parties, and a resolution of the consequences of that agreement should reside in the state courts where the parties have dealt with it heretofore. Under those circumstances, this court concludes that the present motion should be granted.
We find support for our conclusion In re ABQ-MCB Joint Venture, 153 B.R. 338 (Bankr.D.N.M.1993). At p. 341, that court said:
This Court agrees that it must consider each of the factors suggested by ABQD and MCB. The Court finds these factors mandate dismissal of this proceeding. It appears to this Court that MCB in using the bankruptcy process solely for the purpose of moving state court litigation to this forum. No showing has been made that any preferences exist that may only be dealt with in this forum. No showing has been made that a discharge is important to the debtor. No showing has been made that speed or economy mandate the use of this forum over state court.
Other courts have held that dismissal pursuant to Section 305(a)(1) is appropriate when the petitioning party is seeking to use the bankruptcy court as an alternative approach to state court procedures to resolve intra-company procedures to resolve intra-company management and stockholder disputes. See Matter of Win-Sum Sports, Inc., 14 B.R. 389 (Bankr.D.Conn.1981); In re Beacon Reef Limited Partnership, 43 B.R. 644 (Bankr.S.D.Fla.1984).
See also In re Axl Industries, Inc., 127 B.R. 482 (Bankr.S.D.Fla.1991).
While movant has not stated the basis for his motion, this court regards it as one pursuant to 11 U.S.C. § 305. Accordingly, we dismiss the case because the interests of creditors and the debtor would be better served by such dismissal. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492306/ | OPINION
WILLIAM V. ALTENBERGER, Chief Judge.
The matter presently before the Court is the motion of the First National Bank of Chillicothe (FIRST) to dismiss the cross-claim of the Prineeville State Bank (PRINCEVILLE). The facts giving rise to this adversary proceeding and the cross-claim are set forth in two previous opinions of this Court1. For the purposes of FIRST’S motion they are summarized as follows.
On September 3,1991, the Debtor, through Kevin Martin, its President and Chief Operating Officer, issued a check in the amount of $300,000.00 payable to Rumbold Valley Farms. Kevin Martin then placed an endorsement on the reverse side of the check “Pay to the order of Martin Farms, Inc.” and beneath that endorsement he added the words “Rumbold Valley Farms” and signed “Elwin Rumbold.” Kevin Martin then deposited the cheek in the Martin Farms, Inc. account at FIRST. FIRST accepted the check for deposit and credited the account of Martin Farms, Inc. PRINCEVILLE paid the check when presented by FIRST.
After an order of relief was entered against the Debtor, the Chapter 7 Trustee in Bankruptcy (TRUSTEE), on September 29, 1992, brought this adversary proceeding against both FIRST and PRINCEVILLE to recover the amount of the check. On October 29, 1992, PRINCEVILLE filed a motion to dismiss the complaint and in that motion stated:
3. There is no liability as a matter of law under these circumstances. PRINCE-VILLE STATE BANK is merely a “pay- or” bank as that term is defined by Section 4-105 of the Uniform Commercial Code. FIRST NATIONAL BANK OF CHILLI-COTHE is the collecting bank, which war*940rants to the payor bank that all prior signatures are genuine. The Uniform Commercial Code places no responsibility on a bank that is merely acting as a payor bank to ensure that the endorsements by the payee of the instrument, or subsequent endorsements, are genuine.2
On August 4, 1993, PRINCEVILLE filed its Answer and Affirmative Defenses, the Second Affirmative Defense being:
Plaintiff is barred from any ultimate recovery from PRINCEVILLE STATE BANK under Section 3 — 417 of the Uniform Commercial Code due to the fact that FIRST NATIONAL BANK OF CHILLI-COTHE, as the depository bank, by law gives to the payor bank, PRINCEVILLE STATE BANK, a warranty of endorsement. Therefore, if any liability is found, FIRST NATIONAL BANK OF CHILLI-COTHE must indemnify PRINCEVILLE STATE BANK.
The Joint Pretrial Statement, filed October 6, 1993, provided in part as follows:
b. The trustee’s cause of action against the Prineeville bank is occasioned by Princeville’s payment of a check with a forged endorsement. But Prineeville is entitled to rely on its warranties as against Chillicothe. The trustee believes that the ultimate loss should fall on Chillicothe.
On March 6, 1995, PRINCEVILLE filed a Motion for Summary Judgment which stated in part:
13. The admissions of the trustee set forth in the trustee’s Brief in Opposition to Prineeville State Bank’s Motion to Dismiss states:
As between Chillicothe and Prineeville, the loss falls ultimately on Chillicothe ... Ultimately, as ■ between the two banks, the loss falls on Chillicothe by reason of the warranties imposed by UCC Sec. 3-417.3
On November 1, 1995, PRINCEVILLE filed its Cross-Claim against FIRST based on § 3-417 and § 4-208 of the Uniform Commercial Code (UCC) as adopted in Illinois, 810 ILCS 5/3-417 and 5/4-208. In response, FIRST filed the Motion to Dismiss the Cross-Claim, relying on § 3 — 118(g) of the UCC, 810 ILCS 5/3-118(g) which provides as follows:
(g) Unless governed by other law regarding claims for indemnity or contribution, an action (i) for conversion of an instrument, for money had and received, or like action based on conversion, (ii) for breach of warranty, or (iii) to enforce an obligation, duty, or right arising under this Article and not governed by this Section must be commenced within 3 years after the cause of action accrues.
Both § 3-417 and § 4-208 contain a subsection (f) which provides as follows:
(f) A cause of action for breach of warranty under this Section accrues when the claimant has reason to know of the breach.
FIRST contends that the TRUSTEE gave PRINCEVILLE notice of the forged endorsed check on September 25, 1992, so PRINCEVILLE’S cause of action against FIRST accrued on September 25, 1992, and that PRINCEVILLE filed its cause of action against FIRST more than three years later, when it filed its cross-claim on November 1, 1995. PRINCEVILLE contends, first, that § 3-118(g) is not applicable as it became effective January 1, 1992.4 Second, PRINCEVILLE contends that its affirmative defense filed August 4, 1993, alerted FIRST of its cross-claim and the actual filing of the cross-claim relates back to the affirma*941tive defense, so that the cause of action was filed within three years.
The current version of the UCC became effective January 1, 1992. As the check was drawn, negotiated, and honored, prior to that date, PRINCEVILLE contends § 3-118(g) of the UCC is not applicable. In this adversary proceeding, PRINCEVILLE earlier argued that the previous version of the UCC, and not the current version, governs the applicable substantive law, and this Court so held. However, PRINCEVILLE’s cross-claim is pled based on the current version of the UCC. FIRST’S motion attacking the cross-claim is also based on the statute of limitations found in the current version of the UCC. This Court again holds that the substantive law applicable to this adversary proceeding is the law found in the previous version of the UCC. This Court further holds that as PRINCEVILLE has based its cross-claim on the current version of the UCC, the statute of limitations found in the current version of the UCC should be applied. PRINCEVILLE cannot pick and choose. Regardless of whether that was a correct allegation, as it chose to base its cross-claim on the current version of the UCC, the statute of limitations found in the current version of the UCC must be applied.
PRINCEVILLE now argues that it doesn’t make any difference which version of the UCC is applied. While it is true that both the previous and the current versions of the UCC contain similar warranty provisions applicable to the facts of this adversary proceeding, there are some differences. In Brady on Bank Checks, (7th Ed.) ¶ 12.14, p. 12-30, it is stated:
The 1990 UCC changes the structure and wording of the provisions on presentment warranties from those of the 1962 UCC but the changes do not represent any shift in the basic law governing such warranties. The cases discussed previously should for the most part, remain good law under the 1990 UCC.
When discussing the 1990 UCC, however, various differences are mentioned. It is stated at p. 12-32:
The 1990 provisions on transfer warranties are a revision of the 1962 provisions and also separate into different sections the rules on presentment and transfer warranties. The basic warranties are given by a customer or collecting bank that transfers an item and receives a settlement or other consideration. The warranties run to a transferee and to any subsequent collecting bank, but not to the drawee or payor.
The warranties are substantially those of the 1962 UCC: (1) that the warrantor is entitled to enforce the instrument; (2) that all signatures are authentic and authorized; (3) that the item has not been altered; (4) that the item is not subject to a defense or claim in recoupment available against the warrantor; and (5) that the warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor, or the drawer of an unaccepted draft.
It is also added however, at p. 12-33:
Under the 1990 UCC, a customer or collecting bank also gives an engagement to pay the item if it is dishonored. This engagement runs to the transferee and to any subsequent collecting bank. The engagement may not be disclaimed by a without recourse or similar indorsement.
In discussing the damages for a breach of warranty, it is stated at ¶ 12.16, p. 12-36:
The 1990 UCC expands the damages rule of the 1962 UCC in several different provisions ...
In discussing other warranty provisions at ¶ 12.17, p. 12-38, it is stated:
The 1990 UCC also has a provision requiring the giving of notice of a claim for breach of warranty, but substitutes a thirty-day period in place of the reasonable time of the 1962 UCC.
The 1990 UCC also has a provision stating that a cause of action for breach of warranty accrues when the claimant has reason to know of the breach. No such rule was in the 1962 UCC, and it is not clear when a cause of action would accrue under the 1962 breaeh-of-warranty provisions. The statute of limitations for bring*942ing a claim for breach of warranty is three years under the 1990 UCC.
In the 1995 Cum.Supp. No. 2, to Brady, it discusses the retroactive application of the changes at ¶ 1.8, at p. Sl-5:
Two courts have held, under Illinois law, that the 1990 UCC should not be applied retroactively to facts that antedate the effective date of that version in Illinois. One court has held that under Minnesota law, the 1990 UCC should not be applied retroactively. Another Minnesota case also involved an issue of retroactive application of the 1990 UCC Articles 3 and 4, which were adopted in Minnesota and took effect in 1992. The action involved a complaint for breach of contract that was filed in 1990; the plaintiff amended the complaint in 1993 to add conversion and fraud claims. The court held that the action was governed by the law in effect in 1990 and that new UCC Articles 3 and 4 could be relied upon to the extent that they served merely to clarify the intent of the old UCC or to clarify previously recognized usages and practices.
The latter case discussed is Lassen v. First Bank Eden Prairie, 514 N.W.2d 831 (Minn.Ct.App.1994).
One of the Illinois cases referred to is this Court’s earlier decision in In re Ostrom-Martin, Inc., 155 B.R. 997 (Bkrtey.C.D.Ill.1993), and the other one is Johnson v. Johnson, 244 Ill.App.3d 518, 185 Ill.Dec. 214, 614 N.E.2d 348 (1993). At issue in Johnson was whether a note was a negotiable instrument under the UCC because it failed to state a sum certain as required by § 3-104. Addressing the argument that the 1992 amendment applied to the note, the court stated:
This amendment to the UCC affects the manner in which we construe commercial paper. It establishes new criteria for defining negotiable instruments. It is clearly substantive in nature and amendatory acts will be construed as prospective where the change is substantive rather than procedural. (Citations)
While we believe that the 1992 amendment has no retroactivity, at least one State (New Jersey) has adopted a contrary view. (Carnegie Bank v. Shalleck, (1992), 256 N.J.Super. 23, 606 A.2d 389.) Where the note was executed in 1989, the trial held in 1990, and the New Jersey UCC amended in 1992, the New Jersey court determined that the amendment was curative, embracing the expectations of the parties. With remarkable casuistry, the New Jersey court suggests that an exception to the non-retroactivity rule the amendment attempts to improve a statutory scheme and bring the law into harmony with the expectations of the parties and the law in the commercial market place. (Citation)
Applying such retroactivity does just the opposite. It is generally unfair and makes the parties unsure of the bargain they have Struck. The New Jersey court has contorted the rules of statutory construction to meet the exigencies of current lending [sic] practices. In Illinois, we do not so bend.
Had our General Assembly desired, it could have designated that the amendment be given retroactive application. Had the American Law Institute which promulgated the uniform act had such a desire, retroactivity could have been included in the comment.
In Geldert v. American Nat’l Bank, 506 N.W.2d 22 (Minn.Ct.App.1993), the court held that § 3^420 would not be applied retroactively:
[§ 3-420] clears up the confusion created by former [3-419], which did not specifically indicate to whom a depositary or collecting bank might be liable if it failed to act in good faith or in accordance with reasonable commercial standards. [§ 3-420] now expressly identifies those persons or entities who cannot maintain a conversion action against a depositary or collecting bank.
Revised Article 3 has no application to this ease. Here, the conversion of the instruments occurred in 1984 and the suit was commenced before August 1,1992, the effective date of [the amendment.] Furthermore, statutes are presumed to have no retroactive effect unless the legislature clearly and manifestly intended such appli*943cation. (Citation.) Nothing in the new statutory language or the comments indicates that the legislature intended [the amendment] to apply retroactively.
While the previous and current versions of the UCC are similar, there are differences. At this stage this Court does not know if those differences would affect the outcome of a trial. Therefore, as PRINCEVILLE has opted to base its cross-claim on the current version of the UCC, it must also comply with the statute of limitations found in the current version.
The check was written on September 3, 1991. PRINCEVILLE received notice of the forged endorsement on September 25, 1992. The TRUSTEE filed this adversary proceeding on September 29, 1992. PRINCEVILLE had until September 25, 1995, to make its claim against FIRST. As the cross-claim was not filed until November 1, 1995, it is barred by the Statute of limitations found in § 3-118(g), unless saved by PRINCEVILLE’s previous pleadings in this adversary proceeding.
PRINCEVILLE’s main argument is that it can take advantage of the relation back doctrine and that its cross-claim relates back to its previous pleadings which were filed prior to the statute of limitation running. It relies on Federal Rule of Civil Procedure 15(c), applicable in adversary proceedings by reason of Bankruptcy Rule 7015, which provides, in pertinent part:
(c) Relation Back of Amendments. An amendment of a pleading relates back to the date of the original pleading when
(1) relation back is permitted by the law that provides the statute of limitations applicable to the action, or
(2) the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading....
FIRST contends the doctrine is not available to PRINCEVILLE, relying on three Illinois cases which interpret Ill.Rev.Stat. ch. 83, § 18, which provides:
A defendant may plead a set-off or counter claim barred by the statute of limitation, while held and owned by him, to any action, the cause of which was owned by the plaintiff or person under whom he claims, before such set-off or counter claim was so barred, and not otherwise: ....
Those cases hold that the statute does not permit a defendant to file a cross-claim, even though a cross-claim is called a “counterclaim” under the Illinois Practice Act. See Dignan v. Midas-International Corp., 65 Ill.App.3d 188, 22 Ill.Dec. 239, 382 N.E.2d 559 (1st Dist.1978); Cassidy v. Derek Bryant Ins. Brokers, 244 Ill.App.3d 1054, 184 Ill.Dec. 609, 613 N.E.2d 1201 (1st Dist.1993) (a defendant’s claims against co-defendants pleaded in a counterclaim do not relate back to the original complaint). PRINCEVILLE counters by contending that it is the Federal Rules, and not the state statutes, that control.
In U.S. for Bros. Builders Sup. v. Old World Artisans, 702 F.Supp. 1561 (N.D.Ga.1988), the court stated:
The issue of whether a cross-claim may relate back is resolved by federal common law in actions based upon federal question jurisdiction, and upon state law when the cause of action is based upon a state statute.
As PRINCEVILLE’s cross-claim is based on state law, the doctrine of relation back is governed by state law. Under the laws of the State of Illinois, relation back is not available to PRINCEVILLE.
But even if federal law were applied, the doctrine is not available to save the cross-claim. Section 15(e)(1) of the Federal Rules of Civil Procedure would permit relation back if the UCC as adopted in Illinois permitted relation back. But as just noted, it doesn’t. So § 15(c)(1) is not available to PRINCEVILLE.
Nor is § 15(c)(2) available to PRINCEVILLE. In Kansa Reinsurance v. Congressional Mortg. Corp., 20 F.3d 1362 (5th Cir.1994), the court held that a cross-claim did not “relate back” to the filing of the original answer. The court stated:
Federal Rule of Civil Procedure 15(c) is a procedural provision to allow a party to *944amend an operative pleading despite an applicable statute of limitations in situations where the parties to litigation have been sufficiently put on notice of facts and claims which may give rise to future, related claims. The rationale of the rule is that, once litigation involving a particular transaction has been instituted, the parties should not be protected by a statute of limitations from later asserted claims that arose out of the same conduct set forth in the original pleadings. 6A CHARLES A. WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE § 1496 (1990). Rule 15(c) provides, in relevant part, that:
Whenever the claim or defense asserted in the amended pleading arose out of the same conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading.
FED.R.CIV.P. 15(c). This so-called “relation back” doctrine “does not extend the limitations period, but merely recognizes that the purposes of the statute are accomplished by the filing of the initial pleading.” (Citation)
As the district court observed, “[t]he necessary implication of the rule is that in order for an amended pleading to relate back for statute of limitations purposes, there must be a previous pleading to which the amendment dates back.” It concluded that no such pleading existed. United Postal argues on appeal that the cross-claim related back to either HGIC’s original complaint or to its [amended answer and counterclaim.] The cross-claim filed by United Postal is, however, an “original” cross-claim against a co-party, not an amendment to a previously filed pleading. Accordingly, it does not appear to be within the province of Rule 15(c). Furthermore Rule 13(g) governing cross-claims does not permit relation back of a cross-claim seeking affirmative and independent relief to the original complaint. (Citation)
United Postal relies heavily upon an unpublished opinion from the Southern District of New York, Hemmerick v. Chrysler Corp., 1989 WL 4493 (S.D.N.Y. Jan. 18, 1989) in which the court allowed a plaintiff to amend his original complaint to assert an otherwise untimely cross-claim against his co-plaintiff. Pertinent to that case was the fact that both co-plaintiffs had been previously represented by the same counsel and that the cross-plaintiff sought to assert the cross-claim only after retaining independent counsel. In the instant case, by contrast, Stewart and United Postal have been represented by independent counsel with no potential conflict which would prevent United Postal from asserting the cross-claim. We are not persuaded that the Hemmerick result would be proper under the circumstances of this ease.
United Postal alternatively argues that its amended answer is the relevant pleading to which we look for Rule 15(c) purposes and argues that this answer was effectively amended by the cross-claim; thus, it concludes, the cross-claim “relates back” to April 18, 1989. We disagree. The cross-claim does not amend the answer because it does not contain any of the allegations in either the amended answer or the counterclaim; rather, it stands alone. Moreover, the amended answer was a responsive pleading which did not assert — or even intimate — any allegations or wrongdoing against Stewart even though all the facts necessary to give rise to such allegations were present in HGIC’s original complaint. In fact, the counterclaim did not even mention Stewart. Further, the counterclaim contained in the amended answer was aimed solely against HGIC and cannot be viewed as having put Stewart on notice that United Postal sought relief against Stewart. See Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147, 149-50 n. 3, 104 S.Ct. 1723, 1724-25 n. 3, 80 L.Ed.2d 196 (1984) (holding that Rule 15(c) was designed to allow parties to present untimely claims based upon the same transaction so long as it would not work unfair surprise or prejudice). Stewart was not put on notice by the amended answer that it might have to satisfy two separate potential judgments.
The case presented is not one of joint and several liability where Stewart would at least be aware of the potential of a *945contribution or indemnification cross-claim by United Postal. See e.g. B.S. Livingston Export Corp. v. M/V Ogden Fraser, 727 F.Supp. 144 (S.D.N.Y.1989) (allowing amendment to assert cross-claim for indemnification of damages plaintiff might potentially recover from cross-claiming defendant). Rather, the relief HGIC sought against United Postal was merely recis-sionary; there are no allegations that United Postal was an active participant in any scheme to defraud. This distinction is important because it has been carried over from the common law rule, and the federal courts still employ it. The courts are usually willing to allow a defendant to relate back a cross-claim in the nature of recoupment, indemnity, or contribution which seeks to reduce the amount a plaintiff can recover from that defendant; conversely, however, if the defendant’s cross-claim “is an affirmative or independent cause of action not in the nature of a defensive claim, the defendant must comply with the applicable statute of limitations.” Brothers Builders, 702 F.Supp. at 1569; see also Appelbaum v. Ceres Land Co., 546 F.Supp. 17, 20 (D.Minn.1981), Aff'd, 687 F.2d 261 (8th Cir.1982).
As PRINCEVILLE’s cross-claim is not in the nature of a defensive claim to the TRUSTEE’S complaint, but an affirmative or independent cause of action against a co-defendant, the doctrine of relation back does not prevent the running of the statute of limitations.
PRINCEVILLE also argues it was only complying with this Court’s previous order giving it the right to vouch-in FIRST. Section 3-803, the previous version of the UCC, provides:
§ 3-803. Notice to Third Party
Where a defendant is sued for breach of an obligation for which a third person is answerable over under this Article he may give the third person written notice of the litigation, and the person notified may then give similar notice to any other person who is answerable over to him under this Article. If the notice states that the person notified may come in and defend and that if the person notified does not do so he will in any action against him by the person giving the notice be bound by any determination of fact common to the 2 litigations, then unless after seasonable receipt of the notice the person notified does come in and defend he is so bound.
The Official UCC Comment provides, in part:
The section is new. It is intended to supplement, not to displace existing procedures for interpleader or joinder of parties.
The current version found in 810 ILCS 5/3-119 provides:
§ 3-119. Notice of right to defend action. If an action for breach of an obligation for which a third person is answerable over pursuant to this Article or Article 4, the defendant may give the third person written notice of the litigation, and the person notified may then give similar notice to any other person who is answerable over. If the notice states (i) that the person notified may come in and defend and (ii) that failure to do so will bind the person notified in an action later brought by the person giving the notice as to any determination of fact common to the 2 litigations, the person notified is so bound unless after seasonable receipt of the notice the person notified does come in and defend.
Both versions of the UCC are designed to have fact findings common to two actions determined in a single action, but contemplate a second action. As the TRUSTEE could not directly sue FIRST, this Court gave PRINCEVILLE the opportunity to vouch-in FIRST and thereby bind both banks as to any factual findings. However, vouching-in would only bind PRINCEVILLE and FIRST as to the facts. It would not eliminate the need for PRINCEVILLE to bring an action against FIRST.
This Opinion is to serve as Findings of Fact and Conclusions of Law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.
See written Order.
ORDER
For the reasons set forth in the Opinion entered this day, IT IS HEREBY ORDERED that the Motion of the First Nation*946al Bank of Chillicothe to dismiss the cross-claim of the Princeville State Bank is ALLOWED and the cross-claim is hereby dismissed.
. In re Ostrom-Martin, Inc., 188 B.R. 245 (Bkrtcy.C.D.Ill.1995) and 155 B.R. 997 (Bkrtcy. C.D .111.1993).
. The motion to dismiss was joined in by FIRST, and was denied by this Court on June 29, 1993.
. FIRST also filed a motion for summary judgment. On October 12, 1995, PRINCEVILLE’S motion was denied. As to FIRST'S motion for summary judgment, this Court held that the TRUSTEE could not bring a direct action and gave PRINCEVILLE the opportunity to vouch-in FIRST.
.As stated in Brady on Bank Checks, (7th Ed.) ¶ 4.18, prior to the amendment to the UCC:
"There is no general statute of limitations in the 1962 UCC for either Article 3 or Article 4. Instead, statutes of limitation governing the time to sue in particular kinds of transactions or settings for particular states would govern. The 1990 UCC does have statutes of limitations governing the time to sue under both Articles 3 and 4.” (Footnotes omitted) | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492308/ | MEMORANDUM DECISION
JOHN J. HARGROVE, Bankruptcy Judge.
This is an action by several Warner Springs Ranch Co-Owners (“Co-Owners”) for payment of attorney fees under 11 U.S.C. § 503(b)(3) and (4).
This court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1334 and § 157(b)(1) and General Order No.'312-D of the United States District Court, Southern District of California. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A).
FACTS
This case was commenced in April of 1992 when an involuntary petition was filed against the debtor under Chapter 7 of the Bankruptcy Code. The case was subsequently converted to one under Chapter 11.
In February 1995, debtor filed a motion for approval of a disclosure statement for a plan of reorganization calling for the forced sale of approximately 1,240 undivided interests (“UDI’s”) by approximately 1,600 Co-Owners. Debtor also commenced an adversary proceeding against each of the Co-Owners, individually, seeking to sell their UDI’s pursuant to Bankruptcy Code § 363(f) and (h).
Debtor’s counsel informed counsel for the Ranehowners’ Association (“Association”), a major creditor of debtor, that debtor would strongly object to the Association’s attorneys representing individual Co-Owners in the adversary proceeding. Counsel for the Association contacted the law firm of Lorenz Alha-deff Cannon & Rose (“LAC & R”) about representing the individual Co-Owners. Counsel for the Association informed LAC & R that it supported the formation of a committee of Co-Owners to facilitate the litigation, but questioned whether such a commit*30tee would be allowed by the bankruptcy court. LAC & R soon began representing, through a group of eight co-owner representatives, most or all of the individual Co-Owners in the adversary proceeding.
In February of 1995, counsel for the Association moved for an order precluding the debtor from further prosecuting the adversary proceeding. On February 24, 1995, an order was entered granting an open extension of time to respond to the complaint. Debtor and the Association then entered into settlement negotiations.
On March 1, 1995, LAC & R filed its “Emergency Motion For Order Appointing An Official Creditors’ Committee of Ranch Co-Owners.” On March 22, 1995, the case was transferred to this court.
On July 31,1995, LAC & R requested that the court grant the motion to appoint an official creditors’ committee nunc pro tunc to February 21, 1995 or, in the alternative, grant a motion for payment of its fees and costs as an administrative expense under Bankruptcy Code §§ 503(b)(3) and (4).1 Oppositions were filed by the debtor, the Association, and the Resolution Trust Corporation and the matter came on for hearing on August 29, 1995. This court denied the emergency motion for appointment of an official creditors’ committee of Ranch Co-Owners. The matter involving the payment of fees as an administrative expense was taken under submission.
DISCUSSION
The Co-Owners assert a right to payment of administrative expense pursuant to 11 U.S.C. § 503(b)(3)(D)2 and § 503(b)(4).
1. Section 503 Does Not Apply to the Co-Owners:
Section 503(b)(3)(D) provides for payment of actual, necessary expenses incurred by:
[A] creditor, an indenture trustee, an equity security holder, or a committee representing creditors or equity security holders other than a committee appointed under section 1102 of this title, in making a substantial contribution in a case under Chapter 9 or 11 of this title;
11 U.S.C. § 503(b)(3)(D) (emphasis added). Section 503(b)(4) provides that there shall be allowed administrative expenses for:
reasonable compensation for professional services rendered by an attorney ... of an entity whose expense is allowable under paragraph (3) of this subsection, based upon the time, the nature, the extent and the value of services, and the cost of comparable services other than in a case under this title, and reimbursement for actual, necessary expenses incurred by such attorney ...
The Co-Owners are not creditors of the debtor in this case. As the debtor points out in its opposition, any recovery from the debtor under the Conditions, Covenants & Restrictions for unpaid assessments belongs to the Association and not to individual Co-Owners. The Co-Owners, in their Appointment Motion, requested the formation of a committee “to appear in the adversary proceeding ... on behalf of all co-owners-” Further, this Court has already found that there is no legal basis for the formation of an official “creditors' ” committee of Ranch Co-Owners.
At all times during this case, the Co-Owners were defendants in debtor’s adversary proceeding for the forced sale of the undivided interests and nothing more.3 Accordingly, the Co-Owners lack standing to seek payment of their administrative fees under § 503(b)(3)(D) and § 503(b)(4).
*312. The Doctrine of Judicial Estoppel Does Not Apply in This Case:
Alternatively, Co-Owners argue that the Association is estopped from opposing the fees because the Association, in its motion for joinder and support of the Co-Owners’ emergency motion, stated that it supported the formation of a committee of ranch owners.
However, application of the doctrine of judicial estoppel depends upon the particular facts and circumstances of each case. In re Haynes, 97 B.R. 1007, 1010 (9th Cir. BAP 1989). In this case, the Association supported the formation of a committee at a time when the adversary proceeding was pending and its unabated continuation threatened the estate with financial ruin. Hence, at that time, Association’s support was consistent with its interests and the status of the case.
Shortly thereafter, the Association obtained an order granting an open extension of time to respond to debtor’s complaint for all defendants in the adversary proceeding. This order and the commencement of settlement negotiations clearly eliminated the need for a Co-Owners’ committee.4 Nonetheless, LAC & R continued “monitoring” events and seeking approval of the committee.
This monitoring did not provide a “substantial contribution” to the estate, nor was it justified in light of the firm’s knowledge of the order and ongoing negotiations. Accordingly, the Association’s subsequent opposition to LAC & R’s fees was consistent with its continuing interest and the changed status of the case.
The Association’s position is, therefore, not “inconsistent” as contemplated by the court in Haynes. Far from playing “fast and loose with the courts,” the Association opposes fees for services which were clearly unnecessary and provided no conceivable benefit to the estate.
Co-Owners’ motion for payment of administrative expenses is denied.
CONCLUSION
This Memorandum Decision constitutes findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052. Counsel for the Association is directed to file with this court an order in conformance with this Memorandum Decision within ten (10) days from the date of entry hereof.
. LAC & R seeks payment of $27,014.50 in fees and $4,229.56 in costs.
. The co-owners do not specify under which subsection of § 503(b)(3) they seek payment but they base their motion on the grounds that they have made a "substantial contribution” to resolution of the case. A substantial contribution is only at issue in a case involving § 503(b)(3)(D), therefore, this court analyzes the co-owners' motion under the standards applicable to that subsection.
.It is most instructive to note that LAC & R's time records and other documents specifically refer to the proposed committee as a “Litigation Response Committee.”
. The Court notes that Mr. Cannon is highly experienced bankruptcy counsel. Accordingly, the effect of the order and commencement of settlement negotiations on the need for a Co-Owners' committee should have been abundantly clear. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492309/ | OPINION AND ORDER
ENRIQUE S. LAMOUTTE, Chief Judge.
Before the court is a Motion for Summary Judgment (docket No. 3) filed by plaintiffs asserting that defendants entered into a transfer of property with the intent to defraud creditors and that such transfer should be declared void and rescinded. Defendants/debtors filed an Opposition ... and Memorandum of Law ... (docket Nos. 8 & 9) and the Chapter 7 trustee filed a Motion to Intervene, which was granted on December 21, 1995, whereby he adopts plaintiffs’ allegations.
Two issues are before the court as presented by the parties. The first is whether the *120transfer of debtors’ only asset, the residential property, to their daughters was fraudulent. Second, whether the plaintiffs/creditors may collect from property of the conjugal society where neither the conjugal society nor the second debtor spouse was named as liable for the judgment issued. After review of the law, it is clear that each of these questions must be answered in the affirmative. Accordingly, the court grants plaintiffs request for summary judgment.
DISCUSSION
The facts are not in dispute and are determinative in addressing the issue of fraudulent transfer of property. On February 21, 1991 defendant Jose Sepulveda, a licensed public car driver, had an accident when traveling from Cabo Rojo to Mayaguez, Puerto Rico. Plaintiffs were passengers in defendant’s ear at the time. Shortly thereafter, defendant was indicted for criminal violation under the Vehicles Law of Puerto Rico. On February 22, 1992 plaintiffs instituted a suit for damages against Jose Sepulveda.
While awaiting trial on the criminal charges, defendants Jose Sepulveda and Elizabeth Zelaya transferred the deed of their residential property at 48 Henna Street, Cabo Rojo, Puerto Rico, their only asset, to their daughters, Maria and Edith Sepulveda on April 13, 1992. This transfer was duly executed by donation deed and, therefore, without consideration. In addition, the deed provided that Jose Sepulveda and Elizabeth Zelaya retain use of the property for the remainder of their lives.
Thereafter on December 14, 1994 the Superior Court, Mayaguez Part, entered judgment for damages against Jose Sepulveda and in favor of plaintiffs for thirty-nine thousand, seven hundred and fifty dollars ($39,750.00). Jose Sepulveda and Elizabeth Zelaya initiated Chapter 7 bankruptcy proceedings on February 23, 1995.
FRAUDULENT TRANSFER
The validity of the contract and the determination of whether the transfer the residential property was executed with the intent to defraud is based upon the laws of Puerto Rico. Local law provides that a “gift is an act of liberality by which a person disposes gratuitously of a thing in favor of another, who accepts it.” 31 L.P.R.A. § 1981. In addition, the law provides that gifts which cause effects inter vivos are governed by the general provisions of contracts and obligations of the Laws of Puerto Rico. 31 L.P.R.A. § 1986.
Under the Laws of Puerto Rico, even though a contract is legally executed, it may be rescinded in particular circumstances. 31 L.P.R.A. § 3491. Contracts which are “executed in fraud of creditors, when the latter cannot recover, in any other manner, what is due them” shall be rescinded. 31 L.P.R.A. § 3492. This provision does not require that the debtor intended to harm his creditors, it merely requires that he knew of the results of his action, i.e. insolvency. De Jesus Diaz v. Carrero, 112 P.R.R. 789, 796 (1982).
Furthermore, the law provides that “[contracts by virtue of which the debtor alienates property, for a good consideration, are presumed to be executed in fraud of creditors.” 31 L.P.R.A. § 3498.1 As construed by the Supreme Court of Puerto Rico, aside from determining whether alienation was for “good consideration”, the trier should weigh other factors including the haste in which the alienation was conducted, the debt- or’s insolvency, the relation of kinship or closeness with the acquirer, the state of business of the conveyer and pending judicial claims against him. De Jesus Diaz, 112 P.R.R. at 794-95. This presumption is re-buttable.
We find that the facts in this case clearly support a finding that a fraudulent transfer of property occurred. First, the transfer occurred for no consideration. Second, the transfer was executed subsequent to the accident, indictment of criminal charges resulting therefrom and the initiation of a damages suit by plaintiffs. Un-*121doubtably, at the time of the transfer, defendants were aware that one of the possible consequences of the accident, though not yet enforceable, could be liability for damages. Third, defendants’ filing of a bankruptcy petition indicates insolvency. The alienation of the residential property was the direct result of defendants’ inability to pay plaintiffs the damages to which they are entitled.2
In light of the facts and defendants failure to challenge allegations with other evidence on this matter, we find that the transfer was fraudulent. Therefore, the contract executing the transfer of the residential property executed by defendants is void.
COMMUNITY PROPERTY
Defendants’ sole defense rests on allegations that local law prohibits the payment of Mr. Sepulveda’s debt from property of the conjugal partnership because neither Ms. Zelaya, his wife, nor the conjugal partnership were sued in the local court case and, therefore, not liable. Furthermore, “[t]he Bankruptcy proceeding shall not be used to establish a claim against the conyu-gal (sic) partnership when there was none.” Docket No. 9, p. 2.
Defendants’ argument is legally unsustainable on all counts. Examination of the Laws of Puerto Rico governing property of the conjugal partnership support the opposite conclusion. Title 31 L.P.R.A. § 3661 states that “[a]ll debts and obligations contracted during marriage by either spouse” may be credited against the marital property. Furthermore, “[a]ll property of the marriage shall be considered as partnership property until it is proven that it belongs exclusively to the husband or wife.” 31 L.P.R.A. § 3647. Defendants have not presented evidence to indicate that the residential property belongs solely to Ms. Zelaya.
Furthermore, the Supreme Court has construed this provision where the actions of one spouse results in extra contractual civil liability in the form of a fine, penalty or liability for damages. In Lugo Montalvo v. Gonzalez Manon, 104 P.R.R. 519, 524 (1975), the Supreme Court of Puerto Rico found that whether such liability is personal or community rests on the particular facts, however, “it is generally recognized that if the husband’s action or enterprise produces financial benefits to the bulk of the community property the liability shall also fall upon said property.” This finding was reiterated in a later case factually similar to the one at bar. In Albaladejo v. Vilella, 106 P.R.R. 398, 404 (1977), the Supreme Court of Puerto Rico held that community property was liable for damages resulting from an auto accident which occurred while one spouse was performing duties at the benefit the conjugal partnership. See, also, Garcia Gonzalez v. Montero Saldana, 107 P.R.R. 353, 375 (1978).
The construction of local provisions is consonant with those governing property of the estate under federal bankruptcy law.3 Upon the filing of a bankruptcy petition, property of the estate includes “[a]ll interests of the debtor and the debtor’s spouse in community property as of the commencement of the case that is ... under the sole, equal, or joint management and control of the debtor ...” 11 U.S.C. § 541(2)(A). In Puerto Rico, all property acquired during marriage shall be considered community property and is jointly administered. 31 L.P.R.A. §§ 3647 & 284. See, also, 4 Collier *122on Bankruptcy, ¶ 541.15[7] (15th ed. 1995) (Puerto Rico identified as a community property jurisdiction pursuant to local law).
CONCLUSION
In light of the foregoing legal conclusions, plaintiffs Ines Velez Santiago, et als.’ Motion for Summary Judgment is hereby GRANTED. The contract executed by defendants’ Jose Sepulveda Figueras and Elizabeth Zela-ya donating their residential property at 48 Henna Street, Cabo Rojo, Puerto Rico, to their daughters Maria Guillermina Sepulveda Zelaya and Edith Sylvia Sepulveda Zelaya is void and rescinded.
Clerk of the Court shall enter judgment.
SO ORDERED.
. The phrase "for a good consideration” is defined as consideration founded upon “duty, moral obligation, affection generosity” as opposed to monetary or economic value. See, 31 L.P.R.A. § 3498, editorial note.
. Defendants minimize the effect of the transfer on their insolvency by asserting that the it occurred almost four years prior to the bankruptcy filing. This observation is meaningless given the facts of this case. The accident occurred in February, 1991; the transfer of property was executed in April, 1992; judgment for plaintiffs was awarded in December, 1994; and, bankruptcy was declared in February, 1995. The relation between the dates of the transfer and the filing of bankruptcy is irrelevant except to indicate the pace at which the case was resolved in local court. What is important is the fact that the transfer occurred after the accident which could have resulted in an obligation to plaintiffs although not yet enforceable. See, e.g. Castellon v. Padin, 60 P.R.R. 369, 373-74 (1942). The filing of bankruptcy shortly after the issuance of judgment clearly indicates the transfer resulted in insolvency.
. Even if defendants' conclusions regarding the local law were correct, it is important to note that where local law is contrary to federal bankruptcy law, the former is preempted. F.D.I.C. v. Torrefaccion Cafe Cialitos, Inc., 62 F.3d 439, 443 (1st Cir.1995). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492310/ | DECISION ON ORDER GRANTING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT
WILLIAM A. CLARK, Chief Judge.
This matter is before the court upon defendant’s “Motion for Partial Summary Judgment” (Doc. # 8). The court has jurisdiction pursuant to 28 U.S.C. § 1334 and the standing order of reference entered in this district. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(F).
PROCEDURAL POSTURE AND FACTS
On December 29, 1994, plaintiff Ruth A. Slone-Stiver — trustee for the bankruptcy estate of Tower Metal Alloy (“debtor”) — filed an adversary proceeding against defendant Clemens Oil Company. The complaint alleges that the defendant received $7,483.45 from the debtor on April 3, 1991, and $4,214.41 on April 12, 1991, and that both transfers are voidable by the trustee as preferential transfers under § 547 of the Bankruptcy Code.1
In its amended answer, the defendant does not deny receiving the transfers from the debtor but does deny that such transfers were preferential under the Bankruptcy Code. In addition, the defendant sets forth four affirmative defenses. Of importance to the instant decision is the defendant’s defense that, because it provided new value to the debtor after the alleged preferential transfers were made to the defendant, a significant portion of the alleged preferential transfers are excepted from avoidance by virtue of § 547(c)(4) of the Bankruptcy Code.
Currently before the court is the defendant’s “Motion for Partial Summary Judgment” whereby the defendant requests the court to reduce the alleged preferential transfers from $11,697.86 by the amount of “new value” extended ($8,266.90) to a new alleged preferential amount of $3,430.84. Accompanying the defendant’s motion is the “Affidavit of Ed Clemens” (Doc. # 9), defendant’s former president, who states that the following information from Exhibit “B” of his affidavit is an ongoing schedule of the net balances in the Tower account and accurately reflects the value of products shipped to Tower on or after April 3, 1991, at $8,266.90, leaving an account of $3,430.84” (Doe. # 9):
[[Image here]]
Id., Exhibit B.
CONCLUSIONS OF LAW
Fed.R.Civ.P. 56(c) reads, in part, that:
*275The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with 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.
Section 547(c)(4) of the Bankruptcy Code provides that the trustee may not avoid under § 547(b) a transfer—
(4) to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor—
(A) not secured by an otherwise unavoidable security interest; and
(B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor.
11 U.S.C. § 547(c).
“This exception removes the unfairness of allowing the trustee to void all transfers made by the debtor to a creditor during the preference period without giving the creditor any corresponding credits for subsequent advances of new value to the debtor’s estate.” Colliers on Bankruptcy, para. 547.12 (15th ed. 1995). Prior to the enactment of the Bankruptcy Reform Act of 1978, courts frequently utilized the so-called “net result rule” which netted all transactions between the debtor and the defendant during the entire ninety-day preference period “irrespective of whether the value furnished by the creditor to the debtor [was] advanced either before or after the transfer from the debtor to the creditor.” Waldschmidt v. Ranier (In re Fulghum Construction Corp.), 706 F.2d 171, 173 (6th Cir.1983). “The net result rule is a judicially created doctrine, predicated upon principles of equity, which evolved shortly after the enactment of the Bankruptcy Act of 1898 to presumably rectify what was judicially perceived to be inequities in bankruptcy law.” Id. The Bankruptcy Reform Act of 1978 did not, however, completely codify the net result rule. Instead, “Congressional metamorphosis ... transformed the judicially created net result rule into what may be characterized as a subsequent advance rule and ... codified this augmented version into § 547(e)(4)....” Id. at 174. “[T]he subsequent advance rule of § 547(e)(4) is more circumscribed in application [than the ‘net result rule’] and forecloses avoidance of the transfer by the trustee only if the creditor provides additional value after the transfer from the debtor to the creditor.” Id. at 173.
In the instant case, for the purposes of the defendant’s motion regarding § 547(c)(4) of the Bankruptcy Code, the court finds that there is no genuine issue as to any material fact. In determining whether the defendant is entitled to a partial summary judgment as a matter of law, the court must examine one of the computational problems inherent in applying the subsequent advance rule. As stated by the defendant,2 “[t]he only question is whether the excess of shipments after the payment of § 4,214.41 on April 12, 1991, can be allocated to the prior payment of $7,483.45 on April 3,1995” (Doc. # 8).
Under the minority approach set forth in Leathers v. Prime Leather Finishes Co., 40 B.R. 248, 251 (D. Maine 1984) (emphasis supplied), “the proper mode of analysis is that after each preferential payment, an assessment must be made as to how much property the creditor restored to the debtor before the next preferential payment was made.”
Basically, under the Leathers approach, the creditor is protected only to the extent that it gives “new value” subsequent to each preference but before the next payment is received from the debtor. This approach essentially divides the 90-day preference period into a series of isolated transactions in which the “new value given” by the creditor is netted only against the immediately preceding preference. Crichton v. Wheeling Nat’l Bank (In re Meredith Manor, Inc.), 902 F.2d 257, 258-259 (4th Cir.1990).
*276The Leathers approach, however, “has been criticized by the majority of courts which have considered this issue for its arbitrary refusal to permit set-off against earlier transfers.” Schilling v. Jackson Oil Co. (In re Transport Associates, Inc.), 171 B.R. 232, 238 (Bankr.W.D.Ky.1994). This court also rejects the Leathers approach. Nothing in the language of § 547(c)(4) requires the Leathers result, Mosier v. Ever-Fresh Food Company (In re IRFM, Inc.), 52 F.3d 228, 233 (9th Cir.1995), and “[s]uch a rule would encourage creditors to limit new shipments strictly to the amount of the prior invoice paid, regardless of the debtor’s need for the new value infusion. Such an artificial distinction would interfere with the ordinary commercial flow of goods and services to troubled debtors.” The Successor Committee of Creditors Holding Unsecured Claims v. Bergen Brunswig Drug Co. (In re Ladera Heights Community Hosp., Inc.), 152 B.R. 964, 969 (Bankr.C.D.Cal.1993). Instead, this court will follow the variation of the net result rule known as the Garland3 rule.
This method looks at the 90-day preference period and calculates the difference between the total preferences and the total advances, provided that each advance is used to offset only prior (although not necessarily immediately prior) preferences. Unlike Leathers, Garland permits preferences to be carried forward until exhausted by subsequent advances. In other words, the creditor is allowed to apply the giving of “new value” against the immediately preceding preference as well as against all prior preferences....
... [T]he Garland rule, in addition to better serving the legislative goal of encouraging creditor assistance to financially troubled debtors, also reflects a more realistic view of commercial practices. An open credit line is a fluid relationship which normally does not emphasize individual loan repayments. Instead, it is the debtors’ entire financial picture and repayment history, not the latest payment, which are the bases for maintaining the line of credit. In re Meredith Manor, Inc., supra, 902 F.2d at 259.
For the foregoing reasons the court finds that the new value extended by the defendant after debtor’s payment of April 12,1991, may be offset not only against the payment of April 12, 1991, but also against debtor’s payment of April 3, 1991. In other words, the calculations set forth in defendant’s Exhibit “B” are correct. The court also finds no evidence has been presented that the new value was secured by an otherwise unavoidable security interest, nor that the debtor made an otherwise unavoidable transfer to the defendant on account of the new value. Therefore, $8,266.90 of the transfers made to the defendant by the debtor may not be avoided by the trustee under § 547(b).
It is hereby ORDERED that defendant’s Motion for Partial Summary Judgment is GRANTED, and the alleged preference to the defendant of $11,697.86 is reduced by the new value ($8,266.90) extended by the defendant to an alleged preferential amount of $3,430.84.
With respect to the other issues in this adversary proceeding, which involve the remaining alleged preferential amounts, it is hereby ORDERED that a Pretrial Conference is set for Thursday, March 7, 1996, at 11:00 A.M.
. (b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property'—
(1) to or for the benefit of a creditor;
(2) for or pn account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made—
(A) on or within 90 days before the date of the filing of the petition; or
(B) between 90 days arid one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
(5)that enables such creditor to receive more than such creditor would receive if—
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
'll U.S.C. § 547(b).
. The plaintiff has not responded to the defendant's motion for partial summary judgment, and, therefore, the court does not know whether she opposes or agrees with the defendant's position.
. Thomas W. Garland, Inc. v. Union Electric Co. (In re Thomas W. Garland, Inc.), 19 B.R. 920 (Bankr.E.D.Mo.1982). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492312/ | MARVIN A. HOLLAND, Bankruptcy Judge:
Before this Court are cross-motions for summary judgment by Paul I. Krohn, Chapter 7 Trustee (hereinafter, the “Trustee”) of the estate of the Debtor, Dependable Food Products, Inc. (hereinafter, the “Debtor”), and ADM Milling Co. (hereinafter, “ADM”), the Defendant in this adversary proceeding.
*663For the reasons that follow, we GRANT ADM’s motion for summary judgment and DENY the Trustee’s motion.
FACTS
On March 15, 1993 (hereinafter, the “Petition Date”), the Debtor filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. On December 15, 1993, an order was entered converting the case to one under Chapter 7 of the Bankruptcy Code.
Before the conversion, the Debtor operated a wholesale and retail bakery. ADM supplied flour to the Debtor for use in the Debtor’s business.
During the ninety days preceding the Petition Date (hereinafter, the “Preference Period”), ADM received twenty-two (22) separate payments from the Debtor and made new value shipments of flour to the Debtor immediately after seventeen (17) of those payments as follows (the schedule is adopted from the Trustee’s Cross-Motion):
[[Image here]]
*664[[Image here]]
On or about March 13, 1995, the Trustee commenced this adversary proceeding pursuant to 11 U.S.C. §§ 547 and 550 seeking the recovery of $301,463.74 transferred to ADM within the Preference Period. On May 12, 1995, ADM answered the complaint, interposing affirmative defenses based on 11 U.S.C. §§ 547(c)(2) and (c)(4). ADM and the Trustee each seek summary judgment.
THE CROSS-MOTIONS FOR SUMMARY JUDGMENT
The parties agree that the payments made to ADM during the Preference Period constitute preferential transfers under 11 U.S.C. § 547(b)1. The dispute addressed by the cross-motions concerns the appropriate interpretation of the “new value” defense asserted by ADM and contained in 11 U.S.C. § 547(e)(4).
Section 547(c)(4) of the Bankruptcy Code provides in pertinent part:
The trustee may not avoid under this section a transfer—
(4) to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor—
(A) not secured by an otherwise unavoidable security interest;
(B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor.
As the above schedule indicates, seventeen (17) of the payments made during the Preference Period were followed by shipments of “new value” prior to any subsequent payment to ADM. Thus, with respect to these payments, the following chain of events occurred: payment — shipment(s)—payment— shipment(s), etc.
As to each of these seventeen payments, the Trustee concedes that they are subject to the “new value” defense. However, the Trustee maintains that new value shipments can be used only to offset the immediately preceding payment, and that to the extent the new value exceeds the immediately pre*665ceding payment, such excess cannot offset earlier payments. To illustrate, assume that the following occurred after a long-standing unpaid balance:
Payment # 1 made on January 1, 1995 in the amount of $10,000;
Shipment # 1 made on January 5, 1995 in the amount of $10,000;
Payment # 2 made on January 15, 1995 in the amount of $20,000;
Shipment # 2 made on January 16,1995 in the amount of $15,000;
Payment # 3 made on January 18, 1995 in the amount of $30,000;
Shipment # 3 made on January 19,1995 in the amount of $55,000.
According to the Trustee’s position, Shipment # 1 would completely offset and be a complete defense against Payment # 1; Shipment # 2 would partially offset and be a partial defense against Payment # 2 with the result that there is a preferential transfer avoidable to the extent that the payment exceeds the shipment (in this hypothetical, $5,000); Shipment # 3 would completely offset and be a complete defense against Payment #3; however, to the extent that the shipment exceeds the payment (in this hypothetical, $25,000) such excess cannot be used to offset prior payments such as Payment #2 that had not been completely offset by prior shipments.
Applying this theory to the five (5) payments made to ADM that were not followed by shipments of new value prior to the ensuing payment, the Trustee would have us hold that such payments are not subject to any new value defense.
In sum, with respect to all preferential payments, the Trustee asserts that “a creditor’s shipment of new value may be applied to offset only the specific preferential transfer immediately preceding that shipment.” Trustee’s Cross-Motion p. 2, ¶2. [emphasis in original]. In contrast, ADM contends that a single shipment of new value may be applied to offset any and all prior payments.
The differences between the parties’ contentions is significant. Under the Trustee’s view, ADM is liable to the Trustee for $125,-459.98. Under ADM’s position, there is no preference liability.
STANDARDS GOVERNING MOTIONS FOR SUMMARY JUDGMENT
Fed.R.Civ.P. 56(c), made applicable to bankruptcy proceedings by Fed. R.Bankr.P. 7056, governs motions for summary judgment in the federal courts. The purpose of the motion is to dispose of issues which can be decided upon established, admitted or ascertainable facts without a trial. The court must deny summary judgment where there is a genuine issue as to any material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). On the other hand, summary judgment is “appropriate ... if the Court determines that ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.’ ” United States Trust Co. v. LTV Steel Co. (In re Chateaugay Corp.), 150 B.R. 529 (Bankr.S.D.N.Y.1993), aff'd, 170 B.R. 551 (S.D.N.Y.1994) (quoting, Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986)).
Since we have no disputed material facts, summary judgment is appropriate.
DECISION
ADM seeks to offset its advances of new value against any and all prior payments. The Trustee is seeking to limit such offset to the payments immediately preceding the shipment of new value.
The Trustee cites Leathers v. Prime Leather Finishes Company, 40 B.R. 248 (D.Me.1984) under which “the creditor is protected only to the extent that it gives ‘new value’ subsequent to each preference but before the next payment is received from the debtor. This approach essentially divides the 90-day preference period into a series of isolated transactions in which the ‘new value given’ by the creditor is netted only against the immediately preceding preference.” In re Meredith Manor, Inc., 902 F.2d 257, 258-59 (4th Cir.1990).
*666Leathers has been sharply criticized and represents the minority view. See In re Transport Assocs., 171 B.R. 282, 238 (Bankr.W.D.Ky.1994).
The majority view was first articulated in In re Thomas W. Garland, Inc., 19 B.R. 920 (Bankr.E.D.Mo.1982), where the court rejected the Leathers approach, stating:
The Debtor-in-Possession ... urges that section 547(c)(4) be interpreted to allow set off only of new value provided immediately after one preferential transfer and prior to the next preferential transfer. I hereby reject Garland’s suggested interpretation of section 547(c)(4). Such an interpretation places limitations on the creditor’s right of set off not found in the statutory language. In addition, this suggested interpretation, if applied, would be tantamount to treating the preferential transfer and subsequent unsecured advances as a substantially contemporaneous exchange, coverage of which is already provided for in section 547(e)(1).
Garland, 19 B.R. at 926.
Instead, the Garland court adopted an approach described as follows:
This method looks at the 90-day preference period and calculates the difference between the total preferences and the total advances, provided that each advance is used to offset only prior (although not necessarily immediately prior) preferences. Unlike Leathers, Garland permits preferences to be carried forward until exhausted by subsequent advances. In other words, the creditor is allowed to apply the giving of “new value” against the immediately preceding preference as well as against all prior preferences.
Meredith Manor, 902 F.2d at 259.
Courts adhering to the majority view have supported their decisions on a number of grounds. In In re Baumgold Bros., 103 B.R. 436 (Bankr.S.D.N.Y.1989), the court reasoned that “[i]f a creditor were not allowed to set off subsequent new value against a net balance of all prior preferences, there would be little incentive for him to continue shipping any new value to the debtor in excess of the immediately preceding payment, regardless of the amount of prior payments by the debtor.” Baumgold, 103 B.R. at 440. The court in Meredith Manor followed the majority view on the basis that the Garland approach, “in addition to better serving the legislative goal of encouraging creditor assistance to financially troubled debtors, also reflects a more realistic view of commercial practices.” Meredith Manor, 902 F.2d at 259.
Finally, the court in Transport Assocs. in comparing the two approaches stated that the Garland approach “better serves the legislative goal of encouraging creditors to continue doing business with financially troubled debtors [citation omitted]_ In comparison, the Leathers approach ... would discourage creditors from advancing new value in excess of the amount of the prior invoice paid, regardless of debtor’s need for an infusion of new value [citation omitted].... ‘Such an artificial legal distinction would interfere with the ordinary commercial flow of goods and services to troubled debtors’ [citation omitted].” In re Transport Assocs., 171 B.R. 232, 239 (Bankr.W.D.Ky.1994).
Not having been addressed by the Court of Appeals for this circuit, we are free to choose the reasoning of either Leathers or Garland.
The Trustee would have us adopt the minority view because “[t]he Leathers decision is consistent with the overall policy underlying Section 547, which is to promote equality of distribution among creditors of the debtor and its estate,” and [a]pplying the approach urged by ADM will permit a creditor to retain preferences to the detriment of other creditors-” Trustee’s Cross-Motion p. 6, ¶ 18-19. We reject the Trustee’s position.
First, under Garland, a creditor would have an offset against preferential payments only to the extent that it had provided new value subsequent to the payments. Thus, creditors can retain preferential payments only by replenishing the estate with new value. To the extent that new value is used to offset prior payments, there is neither monetary benefit or loss to either the estate or the preference creditor.
Second, creditors and the estate will actually benefit under the Garland approach be*667cause it encourages creditors to extend new value to financially troubled debtors. Under Leathers, creditors would not extend new value to the extent it exceeds the amount of the immediately preceding preferential payment. Under this approach, debtors that do not have sufficient funds to pay for all of the subsequent goods or supplies they need would be unable to secure such goods.
Third, preference actions are rarely, if ever, fully recoverable. Settlement for substantially less that the amount sued for is commonplace, and in those rare instances where significant judgments are obtained, they are achieved only after expensive legal fees have been incurred. As a practical matter, the only way that a debtor can obtain full face value for its potential preference recovery is by offset against new value provided by the creditor. By providing a greater incentive for creditors to make additional shipments to the debtor, Garland enables the debtor to recover full face value of the payments offset thereby.
Finally, Leathers places a limitation on the new value defense that simply does not exist in the language of 11 U.S.C. § 547(c)(4). As set forth above, 11 U.S.C. § 547(c)(4) provides, in pertinent part, that the “trustee may not avoid ... a transfer ... to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor_” [emphasis added]. We find it compellingly persuasive that Congress did not place the word “immediately” before the words italicized above. Had Congress intended the Leathers approach, it could have provided for the language of the statute to read “immediately after such transfer” or “immediately after such transfer and prior to any additional transfer(s) ”. “Our task is to apply the text, not to improve upon it.” Pavelic & LeFlore v. Marvel Entertainment, 493 U.S. 120, 126, 110 S.Ct. 456, 459-60, 107 L.Ed.2d 438 (1989). Just as the fact that the intervention of Tuesday between Monday and Wednesday does not alter the fact that Wednesday occurs after Monday, the intervention of new value between the payment and subsequent additional new value does not alter the fact the subsequent new value occurred after the payment.
Concurring with Garland’s majority position, we hold that ADM may properly apply new value not only against the immediately preceding preferential payment, but all earlier preferential payments as well.
ADM shall settle an order consistent with the foregoing within fifteen days.
. Section 547(b) of the Bankruptcy Code provides in pertinent part:
Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property-—
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made—
(A) on or within 90 days before the date of the filing of the petition; or
(B) ...
(5) that enables such creditor to receive more than such creditor would receive if— (A) the case were a case under chapter 7 of this title; .... | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492313/ | OPINION
JUDITH H. WIZMUR, Bankruptcy Judge.
Before the court is a motion by Metro Commercial Real Estate, Inc., an unsecured creditor of debtor’s estate, for allowance of its late filed claim, filed in conjunction with the rejection of its pre-petition executory contract with the debtor partnership.
FACTS
Recognizing that the United States Supreme Court’s decision in Pioneer Inv. Services v. Brunswick Assocs., 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993) requires a fact-sensitive examination of the record to determine whether the totality of the circumstances supports the filing of the late proof of claim, we review the procedural history of debtor’s case, the aspects of the case involving Metro, and the events leading up to the motion under consideration. See Chemetron Corp. v. Jones, 72 F.3d 341 (3d Cir.1995).
*732I. Procedural History:
Debtor, LAN Associates XIV, L.P., was the owner of certain real property, consisting of approximately 90 acres of raw land located at Oxford Valley Road and U.S. Route 1 in Falls Township, Bucks County, Pennsylvania.1 The property was subject to a mortgage held by the Howard Savings Bank (succeeded by the Federal Deposit Insurance Corporation as receiver in November, 1992) in the approximate amount of $14 million. Pursuant to a plan to develop the property as a shopping center, to be known as the Plaza at Oxford Valley, LAN Associates hired plaintiff Metro Commercial Real Estate, Inc. (“Metro”) to serve as its leasing agent. Although the leasing agreement was scheduled to terminate on November 1, 1991, the parties voluntarily extended the agreement six times until December 15, 1992. Prior to the filing of debtor’s bankruptcy petition, Metro obtained several signed leases for the debt- or’s project.
On July 6, 1992, LAN Associates filed a voluntary petition pursuant to Chapter 11 of the Bankruptcy Code.2 The first meeting of creditors was scheduled for September 1, 1992, and the deadline to file a proof of claim was set for November 20,1992.3
Following a series of negotiations, debtor and Goldenberg Development, Inc. (“GDI”) entered into an agreement of sale dated September 15,1993 for the sale of debtor’s single real property asset to GDI for $10.7 million, subject to higher and better offers. The FDIC supported the sale. Jack R. Loew of Hough/Loew Associates, who asserted that his interest in the project was initiated and maintained by Metro, submitted a competing bid. At a hearing on the sale on November 29, 1993, following a vigorous auction held in court, GDI was the successful bidder for the property at $14.55 million. The sale to GDI was approved under 11 U.S.C. § 363(b), and an order was entered on December 23, 1993. Metro’s objection to the sale was overruled. The purchaser, GDI, declined to assume the leases arranged by Metro and conditioned the purchase on the rejection by the debtor of the leasing agreement with Metro.4
On December 12, 1994, debtor filed its proposed Chapter 11 Plan of Reorganization and Disclosure Statement.5 As amended on January 27, 1995, debtor’s disclosure statement describes the additional terms of the sale to GDI as follows:
The Agreement of Sale also provides that GDI will pay $50,000.00 to provide for payment to counsel for the Debtor. Subsequent to the approval of the Agreement of Sale by the Bankruptcy Court, GDI requested that the Debtor file a Complaint with the Court to fix the assessment of the Real Property since same has allegedly been over-assessed for many years. The result of such overassessment is that there is a little over a million dollars in real estate taxes presently charged against the Real Property. Under the Agreement of Sale, all real estate taxes were to be purchased by GDI. As a result of GDI’s assertion that the property is over-assessed, the Debtor and GDI entered into an arrangement, pursuant to which the Debtor has agreed to challenge the amount and the validity of the real estate tax assessment and as a result GDI has agreed to pay the Debtor a sum equal to twenty-five percent (25%) of any tax savings achieved. Since GDI is obligated to pay all real estate taxes, any savings would not *733otherwise inure to the benefit of the Debt- or. However, as a result of this arrangement with GDI, it is possible that the Debtor will generate sums as a result of the reduction in taxes which would otherwise not become part of the estate.
Disclosure Statement pp. 6-7.
Debtor’s plan proposed to liquidate rather than reorganize debtor’s estate. The Plan provided for the payment of $14,550,000.00 to the FDIC in satisfaction of its interest, and for the creation of a Plan Fund, comprised of the potential 25% tax savings explained above plus the balance remaining after payment of allowed administrative expenses, plus any other sums held by the debtor. Id. at 8-9. See Articles 1.24, 2.1, 6.2 and 9.3 of debtor’s Plan. Pursuant to the Plan, priority claimants were classified as Class 1, the FDIC constituted Class 2, general unsecured creditors were included in Class 3, and the interests of the limited partners were included in Class 4. It was expected that under the Plan, Class 1 and Class 2 would be paid as indicated, Class 3 would receive nothing, unless there was a recovery from the tax appeal and there were any remaining funds after the payment of the administrative expenses, and Class 4 would receive nothing.
On January 30, 1995, debtor’s disclosure statement was approved for adequacy and an order was entered on February 10, 1995. Debtor’s liquidating plan was confirmed on April 25,1995.
II. Background with respect to Metro:
Following debtor’s filing, Metro continued to solicit new tenants and even obtained a new tenant for the subject property. On September 4, 1992, counsel for Metro filed a request for notice of all further pleadings, notices, or other correspondence. Debtor filed a motion on September 18, 1992 to assume the leasing agreement with Metro, as an executory contract pursuant to 11 U.S.C. § 365. This motion was adjourned and regularly continued, apparently at the debtor’s request, over a period of thirteen months, and ultimately denied by court order dated December 23, 1993 approving the sale of debtor’s property to GDI. An application to employ Metro as a real estate broker for the debtor was filed on September 25, 1992. An objection to the application was filed by FDIC’s predecessor in interest, Howard Savings Bank. Apparently, the application was never pursued by the debtor and was never approved. None of the leases mentioned above were ever assumed by the debtor.
On December 12, 1994, nearly a year after its executory contract with the debtor had been rejected, Metro filed a complaint, adversary no. 94-1436, to recover certain commissions from the FDIC, allegedly owed by the debtor on the leases arranged by Metro. Metro relied primarily upon 11 U.S.C. § 506(c). Following a hearing on July 10, 1995, we granted the FDIC’s motion to dismiss, and an order was entered on August 7, 1995.6 We relied on 11 U.S.C. § 365(g)(1), which governs the import of the rejection of Metro’s executory contract by the debtor and provides that such a rejection “constitutes a breach of such contract ... immediately before the date of the filing of the petition.” Accordingly, by operation of law, debtor’s breach of the lease agreement with Metro, including provisions regarding a minimum lump sum payment in the event that the property is sold, gave rise to an unsecured pre-petition claim by Metro against the debt- or.
As to plaintiffs post-petition activities in arranging leases for the debtor, we noted that as a general matter, it is well recognized that administrative priority status cannot be granted in the debtor’s estate for professional services unless the court has authorized the employment prior to the performance of the services. We concluded that the plaintiff operated at its own risk following the filing of the petition in the absence of specific court approval. In this regard, we observed that there was never an application or a written agreement to retain Metro as a broker to sell the property. The leasing agreement between the debtor and Metro, as well as the application to retain Metro as a broker, related only to Metro’s activities in procuring tenants for the project.
*734There was no dispute that prior to the filing of the petition, plaintiff held a valid, binding agreement with the debtor to procure tenants for debtor’s project. The agreement made specific provision that in the event of the sale of the property and election by a third party purchaser to terminate the agreement, the debtor would be responsible to Metro to pay a real estate sale commission which would in no event be less than $300,-000. Neither could it be disputed that Metro performed valuable services for the debtor in procuring tenants for the project, which would have been of value to the debtor if the project had been developed as initially contemplated. Nonetheless, we concluded that these services, however valuable at the time, simply produced a pre-petition claim held by Metro against the debtor.7
Following the rejection of its 506(c) cause of action, Metro filed a motion for relief from the stay to seek a judgment against the debtor and Antonio Reale as defendants for breach of the pre-petition leasing agreement. For procedural purposes only and not to allow recovery of a judgment against the debtor,8 Metro’s motion was granted on April 25,1995. There is no indication in the record that an order reflecting the relief granted was submitted or entered.
III. Events leading to Metro’s filing of a •proof of claim:
On October 16,1995, Antonio Reale moved to vacate the order confirming debtor’s Chapter 11 Plan to allow a modification of the plan as a result of monies received from a successful real estate tax appeal.9 Since Classes 1 and 2 were satisfied pursuant to the terms of the Plan, and the unsecured creditors in Class 3 will receive a dividend, Mr. Reale’s proposal sought a distribution of any excess funds to the equity holders.10
Both the FDIC and Metro filed objections to Mr. Reale’s motion. Asserting that no bar date had been set by the court for the filing of a claim in connection with the rejection of its executory contract with the debtor, Metro also filed a proof of claim in the amount of $769,000.11 At a hearing on November 20, 1995, we granted Mr. Reale’s motion to modi*735fy debtor’s confirmed plan to provide that Class 4 equity holders will receive any excess monies after all prior classes are paid pursuant to the terms of the plan.12
On December 1,1995, Metro filed a motion for allowance of its claim. Metro now acknowledges that pursuant to Local Rule of Bankruptcy Procedure 26(b),13 rejection claims must be filed within 30 days of the date of rejection. In this case, the rejection of the executory contract with Metro was effective as of the date of the order approving the sale of debtor’s real property, December 23, 1993. The time for filing a proof of claim under Local Rule 26(b) expired on or about January 24, 1994. Metro explains its failure to file a timely proof of claim as follows:
At the time a proof of claim was required to be filed, the Debtor’s real estate had been sold for less than the amount of the FDIC’s secured debt and the Debtor had incurred substantial administrative claims. Indeed, the Debtor later filed a plan which provided that no distribution would be made to unsecured creditors. Accordingly, Metro did not expect that any funds would be available for unsecured creditors. Metro did not file a proof of claim because it appeared that filing the proof of claim would be futile.
Certif. of Peter C. Hughes, Esq. in Support of Metro’s Motion at 2-3.
Metro submits that its claim should be allowed, notwithstanding its late-filed status, on the basis that its failure to file timely constitutes excusable neglect within the framework established in Pioneer Inv. Services v. Brunswick Assocs., 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993). According to Metro, there was little prospect of a dividend to unsecured creditors at the time of the sale of the property or at the time of the confirmation of the plan, and the filing of a proof of claim appeared to be futile until an actual recovery from tax savings was achieved by the estate. Allowing Metro’s claim will not prejudice the estate or delay its administration, because the debtor has completed the sale of its property and confirmed a liquidating plan. All that is left is to distribute the cash on hand to administrative and unsecured claimants.
In response, Antonio Reale contends that application of the Pioneer factors should defeat the Metro claim. Reale asserts that allowing the claim would be prejudicial to the debtor in that it would vastly dilute funds available to other unsecured creditors, and it would delay distribution pending resolution of the extent of the claim. As well, Reale suggests that in its § 506(c) action against the FDIC and its state court action against the FDIC and Reale, Metro has elected to pursue the FDIC and Antonio Reale instead of pursuing the debtor, and has, in effect, waived its claims against the debtor. According to Reale, Metro was noticed by the plan provisions and at the confirmation hearing, which Metro’s counsel attended, that unsecured creditors might receive a dividend from potential tax savings achieved by GDI’s challenge to the property assessment.14 *736Reale submits that there is no justification under these circumstances for the allowance of Metro’s late-filed claim.
In conjunction with his objection, Reale also sought the imposition of sanctions against Metro under F.R.Bankr.P. 9011 and 28 U.S.C. § 1927 asserting that Metro’s motion “is patently unmeritorious and frivolous because it has no basis in law or in fact.” Reale Brief at 10.
At the January 3, 1996 hearing on this matter, we declined to conclude that Metro’s pursuit of a § 506(c) cause of action against the FDIC constituted a waiver of its claims against the debtor, or that Metro’s request for relief from stay was an election of remedies, which precluded the filing of a proof of claim. We also rejected Reale’s cross motion for sanctions. We reserved decision on whether Metro’s late-filed claim could be allowed.
DISCUSSION
Federal Rule of Bankruptcy Procedure 3003(c)(3)15 allows the court to fix a bar date for the filing of proofs of claim and “for cause” to extend that time period. New Jersey bankruptcy courts have fixed the deadline to file a proof of claim by local rule. Under Local Bankruptcy Rule 26(b), a proof of claim arising from the rejection of an executory contract shall be filed within thirty days after the date of rejection.16 Under Bankruptcy Rule 9006(b)(1),17 for cause shown, a court may permit a proof of claim to be filed out of time where the failure to file the proof of claim was the result of excusable neglect.
The Rule 9006(b) excusable neglect standard was addressed by the United States Supreme Court in Pioneer Inv. Services v. Brunswick Assocs., 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993). The Pioneer Court recognized a range of possible explanations for a creditor’s failure to file a timely claim:
... At one end of the spectrum, a party may be prevented from complying by forces beyond its control, such as by an act of God or unforeseeable human intervention. At the other, a party simply may choose to flout a deadline. In between lie cases where a party may choose to miss a deadline although for a very good reason, such as to render first aid to an accident victim discovered on the way to the courthouse, as well as cases where a party *737misses a deadline through inadvertence, miscalculation, or negligence.
507 U.S. at 388, 113 S.Ct. at 1494. [Emphasis in original]. In the “in between” eases, where “neglect” on the part of a party in missing a deadline is shown to be “excusable”, the party may qualify for extension of the deadline under Bank.R. 9006(b).
Using Webster’s Ninth New Collegiate Dictionary, the Court defined “neglect” to mean “ ‘to give little attention or respect’ to a matter, or, ... ‘to leave undone or unattended to especially] through carelessness.’ ” 507 U.S. at 388, 113 S.Ct. at 1494-95 (citing to Webster’s Ninth New Collegiate Dietionaiy 791 (1983)) [Emphasis in original]. The Court defined the term neglect to include “both simple, faultless omissions to act and, more commonly, omissions caused by carelessness.” 507 U.S. at 388, 113 S.Ct. at 1495. The majority found that “Congress plainly contemplated that the courts would be permitted, where appropriate, to accept late filings caused by inadvertence, mistake, or carelessness, as well as by intervening circumstances beyond the party’s control.” 507 U.S. at 388, 113 S.Ct. at 1495.
As to whether the negligent conduct of the party seeking extension of a deadline is “excusable,” the Court explained that the equitable determination requires “taking account of all relevant circumstances surrounding the party’s omission.” 507 U.S. at 395,113 S.Ct. at 1498. Among the circumstances to be considered are:
(1) the danger of prejudice to the debtor,
(2) the length of the delay and its potential impact on judicial proceedings,
(3) the reason for the delay, including whether it was within the reasonable control of the movant, and
(4) whether the movant acted in good faith.
Id. See also Chemetron Corp. v. Jones, 72 F.3d 341, 349 (3d Cir.1995).
In this case, Metro’s failure to file a timely proof of claim neither constitutes “neglect” nor qualifies as “excusable” under the Pioneer criteria. As to the characterization of Metro’s omission as “neglect”, Metro acknowledges that it consciously and deliberately failed to file a timely proof of claim because it appeared that filing the proof of claim would be “futile”. There was no expectation on Metro’s part, either at the time of the sale of debtor’s property or at the time of debtor’s plan confirmation, that there would be assets to distribute to unsecured creditors. In other words, Metro’s failure was not due to inadvertence, carelessness, mistake, or faultless omission. Rather, the failure represented a conscious business decision by Metro, arising from its evaluation of debtor’s circumstances, including the apparently un-dersecured status of the FDIC’s claim, the substantial administrative claims incurred, and the unlikely prospect of a dividend to unsecured creditors, that filing a proof of claim would be “futile”. Even when a liquidating plan was confirmed which created a potential, albeit speculative, Plan Fund for unsecured creditors, Metro relied upon the prospect that no distribution would be made to unsecured creditors and elected not to file a proof of claim. Metro was not prevented from complying by forces beyond its control, or by neglect or carelessness. It simply “chose” not to file. On the Pioneer spectrum of reasons for not making a timely filing, Metro’s failure is akin to choosing “to flout a deadline.” 507 U.S. at 388, 113 S.Ct. at 1494.
We conclude that Metro’s failure to file a timely proof of claim did not constitute “neglect” under F.R.Bankr.P. 9006(b) as defined in Pioneer. Therefore, we must deny Metro’s quest to enlarge the time to file a proof of claim.
Our conclusion that the concept of “neglect” is absent in this case accords with other court decisions in similar circumstances. In Agribank v. Green, 188 B.R. 982, 989 (C.D.Ill.1995), the district court determined that the plaintiffs deliberate choice in delaying its filing until after the bar date did not constitute “neglect”, a decision that obviated the need to reach the issue of whether or not that action was “excusable”.18 The court stated that “the prerequisite to using such a balancing test to determine whether an action or omission is ‘excusable’ is a find*738ing that the claimant’s behavior constitutes ‘neglect’ as that term is understood in its ‘ordinary, contemporary, [and] common meaning.’ ” Id. See also In re Brown, 159 B.R. 710, 717-18 (Bankr.D.N.J.1993) (The Supreme Court’s definition of neglect “virtually excludes any possibility that a late filing which is the result of a party’s deliberate choice can constitute ‘neglect’.”)
In In re Bicoastal Corp., 176 B.R. 966 (Bankr.M.D.Fla.1994), a former employee of the Chapter 11 debtor moved to file a late claim for indemnification for legal fees nearly four years after the bar date. The court found that:
it is evident that the failure to act by [the employee] has nothing to do with neglect but it was a conscious business decision at that time not to pursue [the debtor]. Even after being informed by [the purchaser of one of the debtor’s divisions] that they will no longer pay [the employee’s] legal expenses, [the employee] did nothing to pursue his claim against [the debtor], obviously because he assumed that there was little or no money available for distribution in [the debtor’s] Chapter 11 case.
Id. at 971. The court remarked that “[t]he decision to file or not to file was fully within [the employee’s] control and was based on the then-held belief of [the employee] that it was economically pointless to pursue the Debtor.” Id. at 972.
Even assuming Metro’s failure to file a timely proof of claim could be characterized as “neglect”, we conclude that Metro’s cause would fail because its omission cannot be deemed “excusable” under the applicable standards. As we noted above, we must consider all relevant circumstances including such factors as prejudice, delay and good faith.
A. Prejudice:
Metro asserts that in a Chapter 11 liquidation, there can be no prejudice to the debtor, but only to unsecured creditors, whose pro rata distribution will be reduced. Reale claims that the reduction in pro rata distribution, as well as the delay, constitutes prejudice to the debtor. We have seen varying perspectives on this issue in the case law.
In In re Sacred Heart, 186 B.R. 891 (Bankr.E.D.Pa.1995), the court concluded that in a liquidating Chapter 11 ease:
there is no reorganizational plan or purpose which is served by a claims bar date. Allowance of a late claim, in such circumstances, will generally merely result in a slightly different distribution of a liquidating debtor’s assets. Exactly how the debt- or’s assets are distributed is ultimately of little consequence to the debtor, so long as the claim is not filed so late as to disrupt the distribution process.
Id. at 897. Judge Scholl allowed a claim filed less than four months after the bar date, where the Chapter 11 liquidating plan was confirmed after the claim was filed, and where no prejudice to the debtor or to the distribution process could be discerned.
In In re Lee Way Holding Co., 178 B.R. 976, 985 (Bankr.S.D.Ohio 1995), a Chapter 11 debtor’s computer equipment lessor filed a $3,000,000 claim for lease rejection damages eight years after the bar date for filing claims. Concluding that the lessor had failed to meet its burden of proving excusable neglect, the court noted the distinction drawn in Pioneer between Chapter 7 liquidation cases requiring “prompt closure and distribution of the debtor’s estate”, and Chapter 11 reorganization eases “with the aim of rehabilitating the debtor and avoiding forfeitures by creditors.” Id. (citing Pioneer, 507 U.S. at 389, 113 S.Ct. at 1495). In a Chapter 11 liquidating mode, in the context of applying the Pioneer equitable factors to determine whether excusable neglect was established, the court expressed concern regarding the delay in the administration of the estate, and the impact on the dividend to unsecured creditors. “The Trustee and creditors are entitled to a level of certainty as to the potential claims pool to allow for case administration and plan projections. If allowed, the [untimely claim] would significantly reduce the dividend to timely filed claims.” Id.
We need not choose between these seemingly differing approaches on the issue of prejudice. We are convinced that under either formulation, the late filed claim in this case would be disallowed as prejudicial to the distribution process. Debtor’s liquidating *739plan was confirmed in April, 1995, with the assent of unsecured creditors who presumably believed that distribution would follow plan confirmation promptly. The resolution of all claims appears to be substantially complete and distribution appears imminent. If Metro’s claim is not disallowed as tardily filed, it will be challenged on substantive grounds, preventing prompt distribution and closure of the debtor’s estate, and causing the accrual of additional administrative expenses. We believe that these circumstances constitute the type of prejudice that would preclude a finding of excusable neglect under Pioneer.
B.The length of delay and impact upon proceedings:
In this case, Metro failed to file its proof of claim until nearly two years after the court order rejecting Metro’s contracts, 22 months after the Rule 26(b) bar date, and seven months after confirmation of debtor’s liquidating plan. We compare the delay in Pioneer, where the bar date was missed by twenty days, and in Sacred Heart, where the bar date was missed by four months, but before plan confirmation.
As we have noted, allowance of Metro’s claim will most likely delay consummation of the plan, will add to administrative expenses, and will impact substantially upon the pro rata distribution to the unsecured creditors. These factors favor disallowance of the claim.
C. The reason for the delay:
Metro readily acknowledges that it did not file a proof of claim because it believed that filing the proof of claim would be futile. A conscious business decision was made not to file a claim. Metro was not prevented from complying by forces beyond its control. It simply “chose” not to file. The ability to timely file a proof of claim was clearly within Metro’s reasonable control.
Metro’s reason for the delay in filing a timely proof of claim also disfavors allowing the claim.
D. Good faith:
There is no indication in the record that Metro failed to act in good faith. Metro merely made a business decision not to file a proof of claim. There is no suggestion of any untoward motive on the part of the creditor with regard to the delay.
In sum, notwithstanding the apparent good faith of the creditor, we conclude that the factors here weigh heavily in favor of disallowing Metro’s untimely proof of claim. The factors include the need for expeditious distribution of debtor’s estate, the prejudice of delay to those unsecured creditors who did file timely, the length of Metro’s delay in filing, and the fact that the reason for the delay was simply a conscious business decision by Metro. Metro has failed to establish excusable neglect under Fed.R.Bankr.P. 9006. Metro’s motion for allowance of its late filed claim is denied.
Counsel for the moyant Metro will prepare an order in conformance with this decision.
. Antonio Reale holds a 1% interest in the limited partnership as debtor's sole general partner, and an additional 63% interest as a limited partner. The remaining 36% interest in the partnership is divided equally between Joseph Reale and Sara Capobianco.
. Debtor’s original petition attached as Exhibit A a list of the 20 largest unsecured creditors. Only 10 creditors were listed, and Metro was listed as # 10 with a claim of $350.00. Metro was not included in debtor’s Exhibit C, a list of creditors, or on debtor's mailing matrix. Debtor’s schedules were filed on July 22, 1992, but Metro was not included in the schedules.
. Metro was apparently not served with notice of this bar date.
. The Loew proposal would have provided for the acceptance of Metro’s executory contract. As part of the sale to GDI, the December 23, 1993 order specifically rejected the executory contracts.
. Counsel for Metro was served with notice of the proposed plan and disclosure statement.
. On August 14, 1995, we considered Metro’s motion for reconsideration, which we subsequently denied by order dated August 21, 1995. On August 24, 1995, Metro appealed the decision dismissing the complaint to the United States District Court, where it is still pending.
. Metro's quest for relief against the FDIC on counts of unjust enrichment and imposition of an equitable lien were also denied. No unjust enrichment can be shown where the property was purchased on condition that all leases be rejected, and on condition that the leasing agreement with Metro also be rejected. Nor can unjust enrichment be shown where there was no agreement in place regarding Metro’s role as broker for the purchaser. As to movant’s request for an equitable lien, it was noted that no post-petition lien was authorized by the court. In terms of pre-petition activities between the parties, as reflected in the leasing agreement, there was no expression of intention that the proceeds of any sale of the property would be designated to serve as security for the obligations thereunder.
. Excerpts from the April 25, 1995 hearing reflect the following:
MR. LESSER: ... [W]e are trying to collect on leasing commissions from the general partner of the debtor, not actually the debtor. But given the fact that there’s a substantial likelihood that an issue regarding joinder of the debtor may arise as a required party in the action, we requested that we have relief from stay merely to name them as a party and — but not actually to seek any collection or attach any assets of the debtor.
Tr. p. 3, 1.24top. 4, 1.6.
THE COURT: ... The order that would be issued in connection with your motion will confirm that there is no recovery sought against the debtor; that it is for procedural purposes that the naming of the debtor is sought, if it is necessary; and that your aim is to clarify that you are entitled to proceed with your quest for relief against the general partner; and that’s basically it.
Tr. p. 5, 1.10-16.
. Oxford Valley Road Associates, L.P. and GDI filed a complaint against Bucks County, et al. in adversary no. 95-1181 to determine the amount and legalily of the taxes assessed against debtor's property. The tax delinquency assessed by the taxing authority was $1,911,856.91. The parties consented to a settlement in the amount of $1,635,000.00 on October 2, 1995. Pursuant to debtor's Plan, GDI remitted to the debtor 25% of the savings, or the sum of $69,214.20. Of this amount, $37,974.97 has already been drawn down by Nagel, Rice & Dreifuss, debtor’s counsel, pursuant to three prior fee awards approved by the court. $35,235.66 remains available for distribution to unsecured creditors.
. Although the FDIC believes that there are unsecured claims in the amount of $188,061.05, Mr. Reale believes that as the result of certain releases and other settlements, the total amount of unsecured claims is $66,438.17.
. On November 15, 1995, Metro filed a proof of claim in the amount of $753,018.14 through its non-bankruptcy counsel. By its motions papers filed on December 1, 1995, Metro requests that the court disregard this proof of claim.
. On January 2, 1996, debtor moved for an order expunging and/or reducing certain claims against the debtor’s estate. Debtor's motion was granted by order dated January 29, 1996. Excluding the proofs of claim filed by Metro, allowed claims now total $65,375.67.
. Local R.Bankr.P. 26 provides:
(a) A proof of claim or interest required under Fed.R.Bankr.P. 3003(c)(2) shall be filed within 90 days after the first date set for the meeting of creditors called pursuant to § 341(a) of the Code.
(b) A proof of claim arising from rejection of executory contracts or unexpired leases shall be filed within the later of
(1)30 days after the date of rejection; or
(2) 90 days after the first date set for the meeting of creditors called pursuant to § 341(a).
.At the April 25, 1995 plan confirmation hearing, the following exchange took place:
THE COURT: ... even though without any votes we would — we might consider the unsecured class to have deemed to reject the plan since it’s unlikely that they will receive any dividend, but yet there are affirmative votes in favor of the plan.
MR. PACITTI: Your Honor, there is the plan fund that will be funded from the tax savings as a result of the tax litigation; so there will be a fund available to distribute to unsecured creditors a percentage of the tax savings achieved as a result of that litigation and it's money that actually will be paid into a fund and distributed to creditors.
THE COURT: Yes, I appreciate that notation and my only comment is the prospect that it will reach — meaning that we have some administrative expenses and clearly it’s not guaranteed that such a fund will be available; so *736you’re right, there may be some prospect. Okay.
(T14-13 to T15-2).
. Bankruptcy Rule of Procedure 3003 provides in relevant part:
(c) Filing Proof of Claim.
(1) Who May File. Any creditor or indenture trustee may file a proof of claim within the time period prescribed by subdivision (c)(3) of this rule.
(2) Who Must File. Any creditor or equity security holder whose claim or interest is not scheduled or scheduled as disputed, contingent, or unliquidated shall file a proof of claim or interest within the time prescribed by subdivision (c)(3) of this rule; any creditor who fails to do so shall not be treated as a creditor with respect to such claim for the purposes of voting and distribution.
(3) Time for Filing. The court shall fix and for cause shown may extend the time within which proofs of claim or interest may be filed. Notwithstanding the expiration of such time, a proof of claim may be filed to the extent and under the conditions stated in Rule 3002(c)(2), (c)(3), and (c)(4).
. See text of Local Bankruptcy Rule 26(b) in footnote 13, supra.
.Bankruptcy Rule of Procedure 9006 provides in relevant part:
(b) Enlargement.
(1) In General. Except as provided in paragraphs (2) and (3) of this subdivision, when an act is required or allowed to be done at or within a specified period by these rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if the request made therefor is made before the expiration of the period originally prescribed or as extended by a previous order or (2) on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect.
(2) Enlargement Not Permitted. The court may not enlarge the time for taking action under Rule 1007(d), 1017(b)(3), 2003(a) and (d), 7052, 9023, and 9024.
(3) Enlargement Limited. The court may enlarge the time for taking action under Rules 1006(b)(2), 1017(e), 3002(c), 4003(b), 4004(a), 4007(c), 8002, and 9033, only to the extent and under the conditions stated in those rules.
. Notwithstanding this decision, the court indicated that it would also have found that the plaintiff's actions were not "excusable". See id. at 991 n. 5. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492315/ | MEMORANDUM OPINION
STEPHEN S. MITCHELL, Bankruptcy Judge.
In this action, the plaintiffs, Joel T. Broyhill and Northern Virginia Realty, Inc. Profit Sharing Trust seek a declaration that the defendants, Robert and Marilyn DeLuca, were properly removed as the managers of D & B Countryside, L.L.C., and that Joel T. Broyhill was properly appointed as the successor manager.1 A trial of the issues was held on September 15 and 18, 1995. At the conclusion of the evidence, the court took the matter under advisement and invited the parties to submit post-trial briefs. The parties have done so, and the matter is now ripe for decision.2
*68
Findings of Fact
D & B Countryside, L.L.C., (“D & B Countryside”) is a Virginia limited liability company that was formed on April 12, 1994 to develop a shopping center and office development in Sterling, Virginia, known as Parc City Centre. The project originally consisted of approximately 12 acres, but at the present time there remain 3.766 acres which are intended to be subdivided into four retail “pad sites.”3 The original members of the company were Joel T. Broyhill (“Broyhill”) and Robert and Marilyn DeLuca (“the DeLu-cas”). The organization of the company was set forth in an Operating Agreement dated April 12, 1994 (“the operating agreement”), signed by Broyhill and the DeLucas. Under the terms of the operating agreement, Broy-hill and the DeLucas were each 50% members,4 and the DeLucas were named as joint managing members. The operating agreement stated that the manager of the company must be appointed by unanimous vote5 but was silent on removal of a manager. The operating agreement further required written consent of the other members for the assignment or pledge of a member’s interest.6 Finally, the agreement provided in ¶ 9.1 for the dissolution of the company on December 31, 2024 or the earlier occurrence of certain specified events, including
(c) the death, resignation, expulsion, bankruptcy or dissolution of a Member ... unless the business of the Company is continued by the unanimous consent of the remaining Members
With respect to termination occurring because of the death, resignation, expulsion, bankruptcy or dissolution of a member, ¶ 9.2 of the agreement further provided
the business of the Company shall be continued on the terms and conditions of this Agreement if, within ninety (90) days after such event, the remaining Members elect in writing that the business of the Company should be continued and, if the Affected Member was also the only Manager, elect a new Manager....
Under the terms of the operating agreement, Broyhill and the DeLucas were each to make $1,000,000 capital contributions;7 any further contributions were to be made pro rata. This would have resulted in $2,000,000 of paid-in capital, but from the testimony it appears that significantly less was actually *69paid in.8 The source of the capital funds for both Broyhill and the DeLucas was a $1,500,-000 loan from NationsBank. Broyhill testified his understanding was that the entire loan proceeds were to be paid to D & B Countryside. In fact, as it turns out, only $200,000 of the loan proceeds were actually deposited in D & B Countryside’s bank account.
In July 1994, the DeLucas solicited Theodore Boinis (“Boinis”), the president of Northern Virginia Realty, Inc. (“NVRI”) and trustee of its profit sharing plan, to become a member and offered him a 15% interest in the company in exchange for a $600,000 investment. Additionally, the DeLucas offered to personally guarantee a 10% minimum rate of return on NVRI’s investment. NVRI agreed to the proposal and wire-transferred the $600,000 to D & B Countryside’s bank account on July 22, 1994. Within a week, $594,300 of those funds had been transferred to other DuLuea-related entities or Robert DeLuca personally. Sometime later (apparently in September), Boinis and the DeLucas signed an Amended and Restated Operating Agreement dated “as of July 22, 1994” (“the amended operating agreement”), which assigned to the NVRI Profit Sharing Trust9 a 7.5% portion of the Deluca’s interest in the company and a 7.5% portion of Broyhill’s interest.10 Although the DeLucas told Boinis that the amended operating agreement would be sent to Broyhill for signature, it never was, and was never signed by Broyhill. Broyhill testified at trial that, although he had not seen the amended operating agreement until approximately mid-January, 1995, he had no objection to any of its provisions except for language in one paragraph acknowledging his having “received all amounts and other consideration due ... on account of this membership assignment.” ¶ 1.4. Indeed, in a memorandum to the DeLucas dated September 27, 1994, Broyhill acknowledged the existence of NVRI’s 15% interest and registered no protest.
Beginning in September or October 1994, the relationship between the DeLucas and Broyhill soured, largely because the DeLucas did not respond to a number of requests by Broyhill for information concerning his investment. After Broyhill learned that almost *70all of the $600,000.00 invested by Boinis had been immediately transferred out of D & B Countryside and that the DeLucas had placed a $3,000,000.00 deed of trust against D & B Countryside’s property without his knowledge,11 Broyhill and NVRI Profit Sharing Trust executed a document on April 14, 1995, purporting to remove the DeLucas as D & B Countryside’s managers and electing Broyhill as manager. No notice was given to the DeLucas of the meeting of Broyhill and Boinis at which the document was signed. Written notice was sent to the DeLucas that same date, however, that the action had been taken. In addition, notice was also sent that same date to the attorney who was representing the DeLucas, and who subsequently filed the chapter 11 petition on behalf of D & B Countryside, advising him that the DeLu-cas had been removed as managers and that he had no authority to represent D & B Countryside or to make any filings for D & B Countryside in the United States Bankruptcy Court. On May 5,1995, the DeLucas filed a voluntary chapter 11 petition in this court, and on May 9, 1995, they caused D & B Countryside to file a voluntary chapter 11 petition. Subsequent to the DeLucas’ petition, Broyhill and NVRI Profit Sharing Trust executed a document in which they elected to continue the business and confirmed the election of Broyhill as the new manager.12
At or around the time the DeLucas filed their own petition, they also caused chapter 11 petitions to be filed on behalf of twelve other partnerships, limited partnerships, or limited liability companies, in addition to D & B Countryside, which they owned or controlled (“the DeLuea entities”). In response to vocal creditor complaints related to the DeLucas’ management of the various DeLu-ca entities, the debtor itself moved for appointment of a chapter 11 trustee, and the court granted the motion with respect to ten of the thirteen entities, including D & B Countryside. Stanley M. Salus, Esquire, was appointed as the chapter 11 trustee on June 27, 1995, and is currently serving in that capacity.
Conclusions of Law
This court has jurisdiction of this controversy as a “related” non-core proceeding under 28 U.S.C. §§ 1384 and 157(a) and the general order of reference entered by the United States District Court for the Eastern District of Virginia on August 15, 1984.13 *71The parties have consented to the entry of a final order or judgment by a bankruptcy judge, subject to the right to appeal under 28 U.S.C. § 158(a).
There are two major issues raised by the complaint and the evidence. The first is whether the April 28,1995 action by Broyhill and NVRI was effective to remove the DeLu-cas as the managers of D & B Countryside and to appoint Broyhill as the successor manager. If not, the second issue is whether the chapter 11 filing by the DeLucas terminated their right to act as manager and permitted Broyhill and NVRI Profit Sharing Trust to elect to continue the business with Broyhill as the manager. Each of these issues will be discussed in turn.
A. Whether the April 28, 1995 action was effective to remove the DeLucas as managers.
As noted above, D & B Countryside is a limited liability company. Limited liability companies, although a relatively recent innovation, have become an increasingly popular form of business organization. As explained by one commentator,
In response to favorable tax rulings, most states recently have followed the lead of Wyoming and Florida and enacted legislation for the formation and recognition of the limited liability company (LLC). The LLC is a form of legal entity that has attributes of both a corporation and a partnership but is not formally characterized as either one. Generally, an LLC offers all of its members, including any member-manager, limited liability as if they were shareholders of a corporation but treats the entity and its members as a partnership for tax purposes.
Thomas F. Blakemore, “Limited Liability Companies and the Bankruptcy Code: A Technical Overview,” 13 Am.Bankr.Inst.J. 12. In Virginia, limited liability companies are governed by the Virginia Limited Liability Company Act, §§ 13.1-1000 to 13.1-1069, Va.Code Ann. (Supp1991), enacted in 1991. A Virginia limited liability company may engage in any lawful business that a corporation, partnership or other business entity may conduct under Virginia law. § 13.1-1009(17), Va.Code Ann. A limited liability company in Virginia is formed by filing articles of organization with the State Corporation Commission. § 13.1-1010, Va.Code Ann. A person that owns an interest in the company is called a “member.” § 13.1-1002, Va.Code Ann. The members may (and in practice invariably do) also enter into an operating agreement which regulates and establishes the conduct of the company’s business and the relationship of its members. § 13.1-1023(A), Va.Code Ann. Management of the company is vested in the members in proportion to their capital contributions, as adjusted for additional contributions and distributions, unless the articles of organization or the operating agreement provide that the company will be managed by one or more managers. § 13.1-1022, Va.Code Ann. Managers, if provided for in the articles of organization or operating agreement, are elected by the members. § 13.1-1024(D), Va.Code Ann. In a manager-managed limited liability company, only managers can contract for the company’s debts or execute documents for the acquisition, mortgage or disposition of the company’s property. § 13.1-1024(G), Va.Code Ann.
In order to determine whether the April 28, 1995 action by Broyhill and NVRI was effective to remove the DeLucas as managers, it is necessary first to resolve just who the members of D & B Countryside were. The DeLucas, in their pleadings and through *72counsel, have denied that NVRI became a member of the company because the operating agreement required 'unanimous consent to assign a membership interest or to admit a new member and Broyhill never signed the amended operating agreement which assigned a portion of Broyhill’s and the DeLu-cas’ membership interest to NVRI and recognized NVRI as a member. In addition, counsel for the DeLucas point out that in correspondence, counsel for NVRI referred to his client’s investment in the company as a “loan.”
The DeLucas themselves in testimony (as distinguished from their attorneys in argument) candidly admitted on the witness stand that they always regarded NVRI, following its $600,000 investment, as owning a 15% interest in the company. This is consistent with their conduct, in connection with the Regal Cinema sale, in remitting to NVRI a “15% distribution” of the net sales proceeds ($68,105.75 of $454,038.34). Additionally, D & B Countryside’s schedules, signed by Robert DeLuca under penalty of perjury, reflect NVRI (although erroneously called “Virginia Realty Trust”) as the holder of a 15% equity interest in the company. The DeLucas, by signing the Amended and Restated Operating Agreement, effectively (1) assigned a 7.5% portion of their own membership interest to NVRI and (2) consented to an assignment of a 7.5% portion of Broyhill’s interest to NVRI. Although Broy-hill never executed a writing explicitly assigning the 7.5% portion of his interest or consenting to the assignment of a similar portion of the DeLuca’s interest, he testified at trial that he consented in fact to both actions, that he had never been sent the amended operating agreement to sign, and that the only reason he would not now sign the amended operating agreement was because of the language acknowledging that he had received all amounts to which he was due on account of the assignment.14 The requirement in the original operating agreement that any assignment and consent to assignment be in writing is clearly for the protection and benefit of the party whose interest would be adversely affected by the assignment, and that party is free to waive, as Broyhill has done in this case, the requirement of a writing. Accordingly, the court concludes that Broyhill’s failure to sign the amended operating agreement did not, under the facts of this case, prevent NVRI from becoming a 15% member of D & B Countryside and that NVRI is in fact the holder of a 15% membership interest.15
As discussed above, the original operating agreement required that the manager of the company be elected by unanimous vote of the members but was silent on removal of an existing manager. The plaintiffs argue, and the court concurs, that where the operating agreement is silent, resort must be had to the statute. In this connection, § 13.1-1024(F), Va.Code Ann. provides,
All managers or any lesser number may be removed in the manner provided in the articles of organization or an operating agreement. If the articles of organization or an operating agreement does not pro*73vide for the removal of managers, then all managers or any lesser number may be removed with or without cause by a majority vote of the members.
(emphasis added). Since Broyhill’s 42.5% interest and NVRI’s 15% interest clearly constituted a majority of the membership interest, their joint action removing the DeLucas as managers was, under the plain language of the statute, effective to accomplish its stated purpose. The court rejects the DeLu-cas’ argument that, because the operating agreement required election of a manager to be unanimous, removal likewise necessarily had to be unanimous. That result simply does not follow. The obvious purpose of the operating agreement was to prevent a manager from being elected who did not enjoy the unanimous support of the members. By April 28, 1995, the DeLucas not only no longer had the unanimous support of the members, their continued retention in office was actively opposed by the majority of the members. Thus, their removal from office by the majority, pursuant to the statute, was not at all inconsistent with the requirement of the operating agreement that a manager had to be elected by unanimous vote.
At the same time, the requirement in the operating agreement for a unanimous vote in order to elect a manager presents an obvious practical difficulty. Since the manager may be removed by a majority, but less than unanimous, vote, the company could well find itself in the difficult and untenable position of having removed a manager but being unable to elect a new one, thereby leaving the company essentially paralyzed. If that were to occur, the only apparent remedy would be a judicial winding up under § 13.1-1047, Va. Code Ann.16 That potentially is the situation that exists in the present case. Although the April 28, 1995 action was effective to remove the DeLucas as the managers of D & B Countryside, since the plain language of the operating agreement requires a unanimous vote to elect a manager, NVRI and Broyhill could not, by their sole act, elect Broyhill as the new manager, unless, as argued by NVRI and Broyhill, the DeLucas’ subsequent chapter 11 filing in effect terminated their membership and gave NVRI and Broyhill the right under the operating agreement to elect to continue the business of the company and select a new manager. It is to that question that we must now turn.
B. The effect of the DeLucas’ chapter 11 filing on their management rights.
As noted above, the operating agreement explicitly provided that the bankruptcy of a member would trigger the dissolution of the company,17 but that within 90 days of the bankruptcy “event,” the remaining members could elect in writing to continue the business of the company and, if the bankrupt member were also the only manager, could elect a new manager. Since Broyhill and NVRI have done precisely that, the question is whether the provisions of the operating agreement are enforceable in bankruptcy or whether, as argued by the DeLucas, they constitute an impermissible “ipso facto” clause which is unenforceable in bankruptcy.
*74Limited liability companies are a recent innovation. It is not surprising, therefore, that counsel have been unable to cite the court to any cases specifically dealing with this issue in the context of a limited liability company, nor has the court’s own research found any such case. As discussed above, limited liability companies are a conceptual hybrid, sharing some of the characteristics of partnerships and some of corporations. “In general, the purpose of forming a limited liability company is to create an entity that offers investors the protections of limited liability and the flow-through tax status of partnerships.” Jonathan R. Macey, The Limited Liability Company: Lessons for Corporate Law, 73 Wash.U.L.Q. 433 (1995). In order to achieve the desired goal of pass-through tax treatment, it is necessary under applicable U.S. Treasury Regulations that the company have more of the attributes of a partnership than of a corporation. Macey, supra; Treas.Reg. § 301.7701-2(a)(1). In particular, a limited liability company will be treated as a partnership for tax purposes as long as the company does not possess the corporate characteristics of (1) continuity of life and (2) free transferability of interests. Macey, supra; Rev.Rul. 88-76, 1988-2 C.B. 360, 361. On the other hand, simply because a limited liability company is most closely analogous to a partnership (or limited partnership) for tax purposes, does not mean than it might not be considered a corporation for other purposes. Por example, the Bankruptcy Code defines a “corporation” as including, among other entities, a “partnership association organized under a law that makes only the capital subscribed responsible for the debts of such association.” § 101(9)(A)(ii), Bankruptcy Code. Under § 13.1-1019, Ya.Code Ann., the members of a Virginia limited liability company are not, solely by reason of their membership interest, personally liable for the company’s debts, obligations, and liabilities. Nevertheless, for the purpose of analyzing the effect of a member’s bankruptcy filing upon the continued exercise of membership rights, it seems most appropriate to treat the relationship among members of a limited liability company as analogous to that of that among the partners of a partnership. In particular, the fact that membership interests in a limited liability company, unlike shares of stock in a corporation, are not freely transferable mirrors the restriction on entry of new members into a partnership, which ordinarily cannot occur without the agreement of all existing members. See, §§ 13.1-1039 and 13.1-1040, Va. Code Ann. (although membership interest may be assigned unless assignment is restricted by the operating agreement or articles of organization, the assignee becomes a member only if the members unanimously consent to the assignee’s admission; otherwise assignment only entitles the assignees to receive the distributions to which the assignor would be entitled, and does not permit participation in the company’s management or affairs.)
Whether the provision in D & B Countryside’s operating agreement for dissolution of the company upon the bankruptcy of a member is enforceable depends on the interplay of several section of the Bankruptcy Code. First, under § 541(a) of the Bankruptcy Code, the commencement of a bankruptcy case creates an estate of “all legal and equitable interests of the debtor in property as of the commencement of the ease.” Furthermore, the debtor’s interest becomes property of the estate “notwithstanding any provision in an agreement ... or applicable nonbank-ruptcy law — (A) that restricts or conditions transfer of such interest by the debtor; or (B) that is conditioned on ... the commencement of a case under this title, or on the appointment of or taking possession by a trustee in a ease under this title ... and that effects or gives an option to effect a forfeiture, modification, or termination of the debt- or’s interest in property.” § 541(c), Bankruptcy Code. Where the debtor’s interest arises under an executory contract,18 the *75trastee, or, in a chapter 11 case, a debtor in possession,19 may, with court approval, assume the contract. § 365(a), Bankruptcy Code. Once assumed, the contract may be assigned “notwithstanding a provisions in an executory contract ..., or in applicable law, that prohibits, restricts, or conditions the assignment of such contract.” § 365(f). As with property of the estate generally, the debtor’s interest in an executory contract “may not be terminated or modified, and any right or obligation under such contract ... may not be terminated or modified, at any time after the commencement of the case, solely because of a provision in such contract ... that is conditioned on— ... (B) the commencement of a case under this title.” The clear intent of these provisions is to preserve, for the benefit of the creditors of the bankruptcy estate, all of the debtor’s property rights by making unenforceable so-called “ipso facto” clauses conditioned upon the debtor’s bankruptcy.
There is, however, a limited class of execu-tory contracts with respect to which assumption or assignment cannot be forced on an unwilling party. Under § 365(c), Bankruptcy Code, these include contracts to make a loan or to extend other debt financing or financial accommodation and also “personal service” contracts where
(1)(A) applicable law excuses a party, other than the debtor, to such contract ... from accepting performance from or rendering performance to an entity other than the debtor or debtor in possession whether or not such contract ... prohibits or restricts assignment of rights or delegation of duties; and
(B) such party does not consent to such assumption or assignment.
Similarly, under § 365(e)(2), Bankruptcy Code, the unenforceability of contract provisions which modify a debtor party’s rights on the filing of bankruptcy
does not apply to an executory contract ..., whether or not such contract ... prohibits or restricts assignment of rights or delegation of duties, if—
(A)(i) applicable law excuses a party, other than the debtor, to such contract ... from accepting performance from or rendering performance to the trustee or to an assignee of such contract ..., whether or not such contract ... prohibits or restricts assignment of rights or delegation of duties; and
(ii) such party does not consent to such assumption or assignment.
As an initial matter, the court is required to determine the nature of the De-Lucas’ interest in D & B Countryside. In the partnership context, it has been held that the interest of a debtor general partner is
comprised of three components: the right to participate in profits, losses, distributions and proceeds of the partnership (“Economic Interest”); the right to participate in the management of the partnership (“Management Interest”); and the ownership share in partnership property as a tenant-in-partnership.
In re Cardinal Industries, Inc., 116 B.R. 964, 970-971 (Bankr.S.D.Ohio 1990). In a limited liability company, members have no direct interest in the company’s property,20 but *76members have an economic interest, referred to in the statute as a “membership interest,”21 and, in addition, both the managing member and, where the manager cannot or is not authorized to act, all members, have a management interest.
Courts have generally held partnership agreements to be a form of executory contract. Breeden v. Catron (In re Catron), 158 B.R. 624, 626 (Bankr.E.D.Va.1992) (Tice, J.), aff'd, 158 B.R. 629 (E.D.Va.1993), aff'd, 25 F.3d 1038 (4th Cir.1994). They have split, however, on whether such contracts are of the “personal service” variety which, under § 365(e)(2), Bankruptcy Code, cannot be forced on an unwilling party, or whether, conversely, they are subject to the prohibition on enforceability of ipso facto clauses under § 365(e)(1). Compare, Catron, supra, 158 B.R. at 627 (“Fundamentally a partnership is based upon the personal trust and confidence of the partners;” because of this relationship, “the agreement or contract governing the partnership is essentially a contract for personal services, which renders it also nondelegable and nonassumable”),22 with Summit Investment and Development Corp. v. LeRoux, 69 F.3d 608 (1st Cir.1995) (ipso facto termination clause in limited partnership agreement and limited partnership statute unenforceable against debtor general partner).23 Still other courts have adopted a pragmatic, case by case analysis that looks to the specific partnership in question, and the nature of the debtor’s responsibilities, to determine whether the partnership agreement is an executory contract. In re Antonelli, 148 B.R. 443, 448 (D.Md.1992) (Motz, J.) (nondebtor party is excused from performance only “if the identity of the debtor is a material condition of the contract when considered in the context of the obligations which remain to be performed under the contract”).
In Catron, this court and the District Court held that a debtor, as debtor in possession, is “a separate entity from the debtor who entered [into] the contract prepetition.” *77158 B.R. at 627. In so holding, this District has rejected the contrary holding of the leading case of Cardinal Industries, supra, 116 B.R. at 981. This aspect of Catron has been criticized by other courts, which have noted its apparent inconsistency with the holding of the United States Supreme Court in National Labor Relations Board v. Bildisco & Bildisco, 465 U.S. 513, 528, 104 S.Ct. 1188, 1197, 79 L.Ed.2d 482 (1984).24 See, e.g., Summit Investment and Development Corp., supra, 69 F.3d at 610. Since Cardinal Industries and the cases which follow it view the debtor in possession as the same entity as the pre-petition debtor, they do not reach, in the assumption context, the issue of whether a partnership agreement is a personal service contract.
Upon careful consideration, this court concludes that the operating agreement governing D & B Countryside is an executo-ry contract, since the object of the agreement — the development of the Parc City Center project — has not yet been accomplished and the parties have on-going duties and responsibilities to bring the project to a successful conclusion.25 The court further concludes that the nature of those duties and responsibilities are such as to make the contract one for personal services. In Antonelli supra, Judge Motz, while declining to adopt a per se rule that would characterize all partnership agreements as personal service contracts, recognized that there were a number of partnership agreements that would fall into that category. For example,
a reorganization plan could not require that a law firm accept as a partner the assignee of one of their partners who had become bankrupt. The nature of the duties which law partners owe, not only to one another but to their clients, make their identities material to the very existence of the partnership.
148 B.R. at 448-449. With respect specifically to real estate partnerships, Judge Motz distinguished between “development” projects on the one hand “in which the general partner must administer the planning, construction and leasing of the building,” and “matured” projects on the other “that require only routine management and leasing functions.” 148 B.R. at 449. In the former, “the identity of a general partner will be critical to the limited partners and to the prospect of a successful investment,” while in the latter, “the identity of a general partner is less significant.” Id, D & B Countryside is a paradigm example of a development project where the identity of the managers is material to very existence of the company. Since the court has concluded that the DeLu-cas were properly removed as the managers of the company prior to the filing of their chapter 11 petition, the issue of their assuming the management functions specified in the operating agreement is not implicated, but upon their removal they would have had the right and duty to participate in the election of a successor manager, acceptable to all the members, to carry on the management function. Additionally, they would have had the right and duty to vote on any matter with respect to which a manager could not act unilaterally. Particularly in view of the highly questionable conduct of the DeLucas in having allowed a deed of trust to be recorded against the company’s property to secure a personal loan and in having siphoned out of the company essentially all of NVRI’s $600,-000 investment within a week of its having been paid in, and given that the Parc City Centre project is still very much in the development phase, with important decisions to be *78made with respect to the sale or lease of parcels and possible further financing (which, as with the current financing, could very well require the personal guarantees of members), there is no way the identity of the DeLueas would not be material to the other members and to the success of the project. Consequently, the court concludes that the provisions of the operating agreement that provide for the dissolution of the company upon a member’s bankruptcy filing, with the remaining members having the right to elect to continue the business and to elect a new manager, fall within the exception of § 365(e)(2) and accordingly are not invalid “ipso facto” provisions under § 365(e)(1). It therefore follows that the action taken by Broyhill and NVRI following the DeLueas bankruptcy “confirming” the prepetition election of Broyhill as the new manager was effective under ¶¶ 9.2 of the operating agreement to accomplish the election of Broyhill as the new manager, effective at least as of the date the document was signed. Such action, of course, does not deprive the DeLueas’ bankruptcy estate of the economic interest— the right to share in profits, losses, and distributions — the DeLueas have as a result of their 42.5% membership interest. Under § 544(a), Bankruptcy Code, a trustee, and by extension a debtor in possession, has the rights of a lien creditor “who extends credit to the debtor at the time of the commencement of the ease, and that obtains, at such time and with respect to such credit, a judicial lien on all property on which a creditor on a simple contract could have obtained such a judicial lien.” § 13.1-1041, Va.Code Ann., gives such a creditor the right to obtain a charging order against the member’s interest in the company. Such an order confers on the creditor the rights of an assignee of the member’s interest, which includes, under § 13.1-1039, Va.Code Ann., the right “to receive ... any share of profits and losses and distributions to which the assignor would be entitled.” Thus, the DeLueas’ bankruptcy estate will be entitled to any distributions due on account of the DeLueas’ membership interest.
C. The effect of the court’s ruling.
The court’s conclusion that the De-Lucas were properly removed as the managers of D & B Countryside prior to their (and the company’s) chapter 11 filing and that Broyhill was properly elected as the successor manager subsequent to such filing has a number of ramifications. First, it would appear to follow that the DeLueas had no authority to file a chapter 11 petition on behalf of D & B Countryside.26 Whether the petition must or should be dismissed as a result of such lack of authority is an issue not before the court at this time, and the court makes no ruling.27 Second, since a chapter 11 trustee has been appointed and is currently serving, the ruling that Broyhill was properly elected as the successor manager has no immediate practical effect, since all business decisions are currently being made by the chapter 11 trustee. Since, however, the chapter 11 trustee was ordered appointed in response to vocal creditor complaints about the DeLueas’ conduct in managing their various entities, including D & B Countryside, the determination that the DeLueas are not the managers of D & B Countryside may— an issue the court expressly does not de*79eide — -justify the termination of the trustee’s appointment.28 Finally, the court’s ruling means that the Joint Plan of Reorganization proposed by the DeLucas in the name of D & B Countryside is not, as a technical matter, the debtor’s plan with respect to D & B Countryside. At this point, however, there is no exclusive right on the part of the debtor to propose and obtain confirmation of a plan — that right having terminated under § 1121(c)(1), Bankruptcy Code, when the chapter 11 trustee was appointed. Accordingly, any party in interest, including an equity security holder, may file a plan. Consequently, it would appear that the DeLucas, as debtors in possession in their own chapter 11 case, have the right, as the assignees of their own membership interest, to file a plan in the case of D & B Countryside, and the fact that the plan may be improperly labeled as a debtor’s plan rather than an equity security holder’s plan is of no consequence.
Conclusion
For the foregoing reasons, which constitute the court’s findings of fact and conclusions of law under Fed.R.Bankr.P. 7052, the court determines (1) that the DeLucas were properly removed as the managers of D & B Countryside prior to the filing of their chapter 11 petition and (2) that Broyhill was, subsequent to the DeLucas’ chapter 11 filing, properly elected as the successor manager. A separate judgment will be entered consistent with this opinion.
. Northern Virginia Realty, Inc. Profit Sharing Trust (“NVRI”) was named in the complaint as a defendant but at its request was realigned by the court at trial as a plaintiff in recognition of its actual interest, which was consistent with that of Joel T. Broyhill and adverse to that of Robert and Marilyn DeLuca. D & B Countryside was also named in the complaint as formal party defendant, but was subsequently, over the objection of the plaintiffs, dismissed by the court as a party, since no relief was sought against it.
. The DeLucas have requested the court to stay the issuance of a final order or judgment pending settlement. During the period the court has had this matter under advisement, the DeLucas and ten of the DeLuca entities, including D & B Countryside, have filed a joint plan of reorganization, subsequently amended, which would, if confirmed, resolve all existing controversies between Broyhill and the DeLucas. With respect specifically to D & B Countryside, management control would be transferred to Broyhill upon approval of the disclosure statement, and the DeLucas’ equity interest would be transferred to Broyhill, in exchange for Broyhill's interest in certain other entities, on plan confirmation. *68Broyhill and NVRI oppose any stay of judgment and urge the court to enter a judgment notwithstanding the proposed settlement, since the settlement is dependent upon plan confirmation, which is by no means assured. The court concurs that, at least at this point, the controversy has not become moot: the proposed joint plan, while not unconfirmable on its face, embodies a number of problematical provisions, and creditors in a number of the cases have objected vigorously. While there is an obvious judicial economy to be achieved in not issuing a formal ruling where the matter may become moot in another month or two, at the same time the court must consider the adverse effect of further delay on the administration of justice and on the rights of the parties if the proposed settlement is ultimately not consummated. Accordingly, the motion to stay the issuance of the court's ruling will be denied.
. The fair market value of the property is listed on D & B Countryside’s schedules at $3,625,000.
. “5.1. Contributions and Membership Interests. Simultaneously with the full execution of this Agreement, Broyhill shall make an initial cash contribution to the Company in an amount equal to $1,000,000 and R. DeLuca and M. DeLuca shall each make an initial cash contribution to the company in an amount equal to $1,000,000 for a total of $2,000,000. Thereupon, each Member shall have an interest in the Company expressed as a percentage of the whole ("Membership Interest”). The Membership Interest of R. DeLuca and M. DeLuca jointly shall be fifty percent (50%) and the Membership Interest of Broyhill shall be fifty percent (50%).”
. "6.1. Appointment of Manager. The management of the affairs of the Company shall be vested in one or more managers (the “Manager”) elected by the unanimous vote of the Members.”
. “8.1. General. No Member may pledge, mortgage, hypothecate, assign or otherwise transfer its interest in the Company without the prior written consent of the other Members.”
. Actually, the Agreement literally states that Broyhill would contribute $1,000,000 and that the DeLucas would each contribute $1,000,000. It would appear, however, that the word "each” is a scrivener’s error, and that the actual intent was an aggregate initial capitalization of $2,000,-000 — $1,000,000 from Broyhill and $1,000,000 collectively from the DeLucas.
.To say that the details of D & B Countryside's capitalization are murky would be an understatement. Marilyn DeLuca testified that the actual initial capital contribution was $400,000 ($200,-000 each for Broyhill and the DeLucas). An accountant who examined D & B Countryside’s financial records for Broyhill reconstructed the capitalization in a chart (Plaintiff's Exhibit 63) that resembles one of Rube Goldberg’s creations. Of the $1,500,000 loaned by NationsBank to Broyhill and the DeLucas personally, $200,000 went into D & B Countryside’s operating account, $800,000 went into the DeLucas' personal account, and $500,000 went to the operating account of Kiln Creek Golf & Country Club ("Kiln Creek"), an entity in which both Broyhill and the DeLucas had an interest, apparently to fund Broyhill’s capital contribution in that entity. A $1,000,000 investment account of Kiln Creek served as collateral for the NationsBank loan (and, when the loan later went into default, was applied to the debt). As the accountant reconstructed the capital accounts, Broyhill and the DeLucas had each contributed $500,000 (for a $1,000,000 total initial capitalization), but the DeLucas had immediately withdrawn $800,000. After the $600,000 capital infusion by NVRI and the payment to the partners of a total of $454,-038 from the sale of the movie theater site to Regal Cinema, the account balances as of August 31, 1995, as reconstructed by the accountant, stood at $307,034 for Broyhill, a negative $492,-966 for the DeLucas, and $531,894 for NVRI. This contrasts with the figures shown on D & B Countryside's December 31, 1994 balance sheet, which reflects capital account balances at that time (prior to the Regal Cinema transaction) of $504,946.83 each for the DeLucas and Broyhill and $600,000 for NVRI. One of the reasons for the difference is that the pledge of the $1,000,000 Kiln Creek investment account (which ultimately was applied by NationsBank to the $1,500,000 loan) was recorded on D & B Countryside's books as part of Broyhill’s and the DeLucas’ capital investment. For the purpose of this opinion, it is not necessary to make a finding as to the actual capital account balances, since regardless of whether one accepts the figures shown on the debtor’s balance sheet (as adjusted for the subsequent distributions from the Regal Cinema sale) or those testified to hy the accountant, Broyhill and NVRI had a majority capital as well as membership interest.
. For convenience, the trust will be referred to in this opinion simply as "NVRI."
. “1.4 Assignment of R. DeLuca’s, M. DeLuca’s, and Broyhill’s Interest. R. DeLuca hereby assigns 3.75% of his interest in and to the Company to NVRI. M. DeLuca hereby assigns 3.75% of her interest in and to the Company to NVRI; and Broyhill hereby assigns 7.50% of his interest in and to the Company to NVRI.”
. The deed of trust secured a promissory note in favor of S.P. "Chip” Newell that consolidated four prior promissory notes that had been personal liabilities of the DeLucas. The D & B Countryside schedules reflect that $1,250,000 was owed on the date the chapter 11 petition was filed. At the time the deed of trust was placed on the property, the DeLucas executed a borrowing authorization on behalf of D & B Countryside in which they certified that they "are, or have the authority of, all Members” of the limited liability ■ company. In fact, neither Broyhill nor NVRI knew of or consented to the deed of trust.
. The document, which is captioned "Resolution,” is undated but bears a facsimile transmission header dated July 24, 1995 and recites that it was executed "within 90 days of May 5, 1995.” Based on the exhibit and the testimony of Boinis and Broyhill, the court finds that the document was executed on or about July 24, 1995 and within 90 days of the chapter 11 filing by the DeLucas.
. The complaint filed June 15, 1995 alleged that this was a core proceeding under 28 U.S.C. 157(b)(2)(A) and (O). (“matters concerning the administration of the estate” and “other proceedings affecting ... the equity security holder relationship.”) NVRI's answer filed July 14, 1995 admitted the allegation concerning core status, however, the DeLucas’s answer filed July 24, 1995 denied that the matter was a core proceeding. Upon consideration, the court has concluded that the adversary proceeding is non-core. Under 28 U.S.C. §§ 1334, bankruptcy jurisdiction extends to "cases under title 11" and to civil proceedings "arising under,” "arising in,” or “related to” a bankruptcy case. The first two categories ("arising under" and "arising in”) constitute “core” proceedings, with respect to which a bankruptcy judge may enter final judgments or orders, subject to the right to appeal to the U.S. District Court under 28 U.S.C. § 158(a). "In order for a proceeding to ‘arise under’ Title 11, the claim must be predicated on a right created in Title 11. Examples ... include preference actions and fraudulent conveyance actions. On the other hand, ‘arising in’ proceedings are those that are not based on any right expressly created by Title 11 but would have no practical existence but for the bankruptcy. Examples would include actions to determine the validity of liens or claims.” Lux v. Spotswood Constr. Loans, 176 B.R. 416, 418 (E.D.Va.1993) (Merhige, J.) (internal citations omitted). The third category of matters ("related to”) are those where "the outcome could in some way alter the parties’ rights in bankruptcy or affect the admin*71istration of the estate.” Id. The distinction is important, because although a bankruptcy judge may hear a non-core "related to” proceeding, the bankruptcy judge may not enter a final judgment or order unless the parties expressly consent; otherwise, the bankruptcy judge submits proposed findings of fact and conclusions of law to the U.S. District Court, "and any final order or judgment shall be entered by the district judge after considering de novo those matters to which any party has timely and specifically objected.” 28 U.S.C. § 157(c)(1); Fed.R.Bankr.P. 7012(b) and 9033. The present controversy does not involve any right created by the Bankruptcy Code or which would have no practical existence outside the bankruptcy context; indeed, this is a suit that, although it clearly affects the rights of parties to D & B Countryside's reorganization case, could as easily have been heard in state court were it not for the happenstance that the DeLucas and D & B Countryside are chapter 11 debtors.
. Marilyn DeLuca testified that at a meeting held in April, 1995 at Broyhill’s office, Broyhill had made a statement to the effect that he was not willing to recognize NVRI as a member and that NVRI’s 15% interest should come entirely out of the DeLuca’s original 50% interest and not out of Broyhill’s. The timing of the meeting (which occurred after Broyhill had commenced a suit against the DeLucas in state court and filed a lis pendens against D & B Countryside's property) and surrounding circumstances clearly reflect that the purpose of the meeting was to negotiate a settlement of the dispute between Broyhill and the DeLucas. Accordingly, evidence of Broy-hill's statements at the meeting are presumptively inadmissable under Fed.R.Evid. 408, which precludes “[e]vidence of conduct or statements made in compromise negotiations” unless "it is offered for another purpose” (i.e., other than “to prove liability for or invalidity of the claim or its amount”). Even assuming the proferred testimony properly fell within the "other purpose" exception, the court finds that Broyhill’s statements at the meeting were mere posturing and that he did not, at the time NVRI was admitted, oppose its entry or expect that its 15% interest would come solely out of the DeLuca’s share.
. The fact that NVRI’s attorney at one point wrote a letter to the DeLucas describing the transaction as a "loan" is not conclusive. It appears that at the time the letter was written the attorney had not had an opportunity to review the relevant documents and was flying somewhat by the seat of the pants in sending out the demand letter.
. "On application by or for a member, the circuit court of the locality in which the registered office of the limited liability company is located may decree dissolution of a limited liability company if it is not reasonably practicable to carry on the business in conformity with the articles of organization and any operating agreement."
. This provision of the operating agreement is consistent with § 13.1-1046, Va.Code Ann., which at the time the DeLucas filed their chapter 7 petition, provided as follows:
A limited liability company ... is dissolved and its affairs shall be wound up upon the happening of the first to occur of the following events:
* * * * *
3. Upon the death, resignation, retirement, expulsion, bankruptcy, or dissolution of a member or occurrence of any other event that terminates the continued membership of a member in the limited liability company, unless within six months after the event the limited liability company is continued by the consent of all or such lesser percentage or number (but not less than a majority in interest) of the remaining members as may be provided in writing in the articles or organization or operating agreement of the limited liability company.
(emphasis added).
. The term "executory contract” is not defined in the Bankruptcy Code, but most courts and commentators have concurred with the definition first proposed by Professor Vem Countryman:
a contract under which the obligations of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would consti*75tute a material breach excusing performance of the other.
Countryman, Executory Contracts in Bankruptcy, 57 Minn.L.Rev. 439, 450-460 (1973). 2 King, Collier on Bankruptcy, ¶ 365.02, n. 3, p. 365-16.5 (15th ed). See, Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir.1985), cert. denied 475 U.S. 1057, 106 S.Ct. 1285, 89 L.Ed.2d 592 (1986) (contract is executory if performance is due to some extent on both sides).
. Although § 365(a) refers only to a "trustee,” under § Í107, Bankruptcy Code, a debtor in possession has all of the rights, powers, and duties of a trustee, except the right to compensation.
. See, § 13.1-1021, Va.Code Ann ("Any estate or interest in property may be acquired in the name of the limited liability company, and title to any estate or interest so acquired vests in the limited liability company.”); § 13.1-1034 ("Except as provided in writing in the articles of organization or an operating agreement, a member, regardless of the nature of his or its contribution, has no right to demand and receive any distribution from a limited liability company in any form other than cash.”); § 13.1-1038 ("A membership interest in a limited liability company is personal property.”); § 13.1-1041 (judgment creditor has right to obtain a charging order against member’s interest but "has only *76the rights of an assignee of the interest in the limited liability company.”)
. " ‘Membership interest’ or ‘interest’ means a member’s share of the profits and the losses of the limited liability company and the right to receive distributions of the limited liability company's assets.” § 13.1-1002, Va.Code Ann. See § 13.1-1029, Va.Code Ann. ("Sharing of profits and losses") and § 13.1-1030, Va.Code Ann. ("Sharing of distributions").
. Other cases holding that the bankruptcy of a general partner dissolves the partnership or strips the debtor general partner of management rights include Phillips v. First City, Texas-Tyler, N.A. (In re Phillips), 966 F.2d 926 (5th Cir.1992) (partner who was chapter 11 debtor did not have authority to file chapter 11 petition for partnership); In re Doddy, 164 B.R. 276 (Bankr. S.D.Ohio 1994) (nondebtor partnership dissolved on chapter 13 filing by debtor general partner); In re Tip O Texas RV Village, 87 B.R. 195 (Bankr. M.D.Fla.1988) (debtor general partner had no right to manage four limited partnerships against whom involuntary petition had been filed); In re Sunset Developers, 69 B.R. 710 (Bankr.D.Idaho 1987) (debtor general partner had no authority to file involuntary petition against partnership; as debtor in possession, the general partner was a new entily and entitled only to contract profit to which an assignee is entitled, without management or voting rights); In re Minton Group, 27 B.R. 385 (Bankr.S.D.N.Y.1983), aff'd, 46 B.R. 222 (S.D.N.Y.1985) (chapter 11 filing by general partner dissolved limited partnership and deprived debtor general partner of management authority); Normandin v. Normandin (In re Normandin), 106 B.R. 14 (Bankr.D.Mass.1989) (debtor general partner may not sell partnership assets; provision of state law denying debtor partner the right to control the winding up process not in conflict with Bankruptcy Code).
.Other cases holding that a general partner’s bankruptcy filing does not dissolve a partnership or strip the general partner of management rights include In re Clinton Court, 160 B.R. 57 (Bankr.E.D.Pa.1993) (debtor partnership not dissolved by prior chapter 11 filing of general partner); In re Corky Foods Corp., 85 B.R. 903 (Bankr.S.D.Fla.1988) (motion to require debtor partner to abandon interest in partnership because of dissolution denied; state statute providing for dissolution held to be invalid ipso facto clause); In re BC & K Cattle Co., 84 B.R. 69 (Bankr.N.D.Tex.1988) (general partner's chapter 11 filing did not deprive him of authority to file involuntary petition against partnership); In re Rittenhouse Carpet, Inc., 56 B.R. 131 (Bankr.E.D.Pa.1985) (“removal of a debtor general partner of a limited partnership may not be predicated merely on the filing of a petition in bankruptcy, notwithstanding provisions of state law to the contrary”); Quarles House Apts. v. Plunkett (In re Plunkett), 23 B.R. 392 (Bankr.E.D.Wis.1982) (debtor general partner’s right to manage non-debtor partnership’s business and to receive management fee under partnership agreement is property of the estate).
. "[I]t is sensible to view the debtor-in-possession as the same ‘entity’ which existed before the filing of the bankruptcy petition, but empowered by virtue of the Bankruptcy Code to deal with its contracts and property in a manner it could not have done absent the bankruptcy filing.”
. One of those responsibilities is the contribution of any additional capital needed to bring the project to fruition. Although the operating agreement contains no express obligation for the contribution of additional sums beyond the initial capitalization of $2,000,000 (which in any event was never folly achieved), the obligation is implied in ¶5.1, which, after reciting the initial capitalization amounts, states, "Thereafter, any additional contributions shall be made pro rata by each Member.” In a memorandum to the DeLucas dated September 27, 1994, Broyhill acknowledged this responsibility: “I am and will continue to promptly and timely fund my 50% share of the cash requirements to perform and develop the Parc Center project."
. See, In re Old Grind Co., Inc., 99 B.R. 317 (Bankr.W.D.Va.1989) (Krumm, J.) (Chapter 11 petition dismissed since under Virginia law corporation’s president had no authority, solely in his capacity as president, to file on behalf of corporation.); Thomas F. Blakemore, Limited Liability Companies and the Bankruptcy Code, 13 Am.Bankr.Inst.J. 12 (June 1994) (suggesting that unanimous consent of members may be required for bankruptcy filing unless operating agreement clearly confers such authority on manager).
. Although both under the operating agreement and state law the chapter 11 filing by the DeLu-cas triggered the dissolution of D & B Countryside, such dissolution did not in and of itself make D & B Countryside ineligible to be a chapter 11 debtor. For one thing, the agreement and the statute both permitted the remaining members to vote to continue the company's business. Second, even had they not done so, the company's formal existence would have continued until its business was wound up. See, Grant v. Bank of Va. (In re 2111 Associates-Chicago), 580 F.2d 705 (4th Cir.1978) (Partnership continued for purpose of permitting involuntary petition to be filed against it even though only remaining general partner had filed an arrangement proceeding under chapter XII of the Bankruptcy Act); In re Wine Farms, Inc., 94 B.R. 410 (Bankr.W.D.Va.1988) (under Virginia law, a dissolved corporation may file for chapter 11 relief),
. "At any time before confirmation of a plan, on request of a party in interest or the United States Trustee, and after notice and a hearing, the court may terminate the trustee’s appointment and restore the debtor to possession and management of the property of the estate and of the operation of the debtor’s business.” § 1105, Bankruptcy Code. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492316/ | MEMORANDUM OPINION
STEPHEN S. MITCHELL, Bankruptcy Judge.
The plaintiff in this adversary proceeding, JTB Enterprises, L.C. (“JTB”), seeks a determination that R & M Kiln Creek, L.C. (“R *82& M Kiln Creek”) was properly removed as the managing member of D & B Venture, L.C. (“D & B Venture”), one of the debtors in these jointly administered cases, and that JTB was properly substituted as the managing member. A trial of the issues was held on September 22 and September 28, 1995. At the conclusion of the plaintiffs evidence, defendant R & M Kiln Creek moved under Fed.R.Bankr.P. 7053 and Fed.R.Civ.P. 53(c) for judgment as a matter of law, which the court granted with respect to one of the plaintiffs three alternate grounds for relief. The defendant then presented its evidence. At the conclusion of the evidence the court took the matter under advisement and invited the parties to submit post-trial briefs on the remaining issues. These have been filed, and the matter is ripe for determination.1
Findings of Fact
D & B Venture, the subject of this adversary proceeding, is a Virginia limited liability company. It is also the debtor in one of fourteen related chapter 11 cases filed in this court, all which are currently (at least in theory) being jointly administered.2 The other related cases are the individual chapter 11 case of real estate developers Robert and Marilyn DeLuca (“the DeLucas”) and the chapter 11 cases of various partnerships, limited partnerships, and limited liability companies which they own or control (“the DeLuca entities”).
D & B Venture has two members. One is R & M Kiln Creek, itself a limited liability company, whose sole members are the DeLu-cas. The other member of D & B Venture is JTB, also a limited liability company, whose members are Joel T. Broyhill (“Broyhill”) and Richard Houser.
D & B Venture was formed as part of a coordinated transaction in which a real estate project known as the Villages of Kiln Creek, located in Newport News and York County, Virginia, was sold by a joint venture consisting of an affiliate of Crestar Bank and a limited partnership owned by the DeLucas. Robert DeLuca had approached Broyhill in February 1993 and proposed, in effect, a joint venture between the DeLucas and Broyhill to develop and sell the property. Crestar was being asked to provide financing for the acquisition and development and apparently did not wish to malm the loan directly to an entity in which the DeLucas had an interest. The purchase transaction was accordingly accomplished in two stages, separated by approximately three days. First, D & B Venture was set up with Broyhill individually as a 50% member with an initial capital cash contribution of $497,500 and with JTB as the other 50% member with a capital contribution of $2,495,000. The Kiln Creek property was then deeded to D & B Venture, which also executed a deed of trust securing Crestar Bank.
Immediately upon the recording of the deed and deed of trust, the D & B Venture operating agreement was amended and restated, with Broyhill’s individual 50% interest being assigned to R & M Kiln Creek in exchange for $497,500 paid by the DeLucas. An Amended and Restated Operating Agreement dated “as of’ May 10, 1993 (the “amended operating agreement”) provided that JTB and R & M Kiln Creek would each have a 50% membership interest.3 In addi*83tion to succeeding to Broyhill’s $497,500 capital interest, R & M Kiln Creek was obligated under the agreement to contribute up to $500,000 in additional capital.4 If the company needed funds beyond the additional $500,-000, the agreement provided that “the Company may obtain such funds through loans upon such terms as shall be approved by the Members.” ¶ 5.2(b). In the event such loans were not obtained, any member could, but was not required to, make additional capital contributions after written notice was given to all members of the opportunity to participate pro rata. If a member did not make an additional contribution within 30 days of the notice, the manager was free to make a unilateral capital contribution.5 The amended operating agreement further provided that the members had no “right or obligation to make any additional contribution to the capital of the Company except as expressly provided in this Agreement.” ¶ 5.2(d).
Under the amended operating agreement, each member of the company had a capital account. JTB began with an initial capital account balance of $2,495,000. The agreement provided that R & M Kiln Creek would succeed to Broyhill’s individual capital account of $495,000 and that its capital account would be “increased to reflect the cash capital contribution made” pursuant to the requirement to contribute the additional $500,-000. ¶5.2. The agreement further stated, “Loans by any Member to the Company shall not be considered contributions to the capital of the Company.” ¶ 5.4. Profits and losses were allocated according to a complicated formula that first equalized the capital accounts of the members; thereafter, profits and losses were to be allocated in accordance with the membership interests. Broyhill testified he understood the distribution formula to mean, in effect, that JTB would receive $3 in distributions to every $1 received by R & M Kiln Creek until R & M Kiln Creek had contributed the additional $500,000, at which point JTB would receive $2 for every $1 going to R & M Kiln Creek.
The amended operating agreement vested management of the affairs of the company in R & M Kiln Creek as the company’s manager. The agreement contained no language specifically addressing removal of a manager or appointment of a successor manager. It did provide that the company would be dissolved upon the occurrence of certain specified events, among them either R & M Kiln Creek or JTB “dissolving or becoming Bankrupt.” ¶ 11.1(c). It further specified that upon dissolution, “the Manager shall take full account of the Company assets and liabilities, shall liquidate the assets as promptly as is consistent with obtaining the fair value thereof and the proceeds from such liquidation shall be distributed ... to the Members_” ¶ 11.4.
Beginning shortly after the acquisition of the property, R & M Kiln Creek, through Marilyn DeLuea, began sending JTB statements on a monthly basis itemizing costs which R & M Kiln Creek asserted it had advanced on behalf of D & B Venture and advising that R & M Kiln Creek considered such advances as applying toward its obligation under the amended operating agreement to make the additional $500,000 capital *84contribution.6 JTB did not object to either the characterization or amount of the claimed advances. After the asserted advances had reached the $500,000 level, Marilyn DeLuca continued to send JTB Enterprises notices (sometimes bi-monthly rather than monthly) which simply described the sums as “expenses paid” without stating that they were being treated as capital contributions.7 The last memo sent, on May 2, 1994, asserted that the total amount of the advances that R & M Kiln Creek had made on behalf of D & B Venture was $710,247.66.
As parcels were sold, the note to Crestar was partially paid down, and distributions were made to the members in a manner consistent with Broyhill’s understanding of the distribution formula.8 According to a summary prepared by Marilyn DeLuca at Broyhill’s request, JTB had received, as of November 29, 1994, $1,006,631 in distributions, reducing its capital account to $1,488,-369, while R & M had received $350,324 in distributions, reducing its capital account to $647,176.9 Pltf. Ex. 30.
Beginning in approximately October 1994, the relationship between Broyhill and the DeLucas began to sour, largely because Broyhill felt he was not being provided with the detailed information he requested concerning Kiln Creek and other projects he was involved in as an investor with the De-Lucas. On or about April 28, 1995, JTB, asserting that it was the owner of the majority capital interest in D & B Venture, executed a written instrument purporting to remove R & M Kiln Creek as manager of the limited liability company and appointing itself as the successor manager.10 On May 5, *851995, the DeLueas filed a voluntary chapter 11 petition in this court; they remain in possession of their estate as debtors in possession. The DeLueas caused D & B Venture to file a voluntary chapter 11 petition on May 14, 1995. In response to vociferous creditor complaints concerning the DeLueas’ management of the various DeLuca entities, D & B Venture itself moved for appointment of a chapter 11 trustee. The court granted the motion, and Stanley M. Salus, Esquire, was appointed as the chapter 11 trustee on June 27,1995.
Conclusions of Law
This court has jurisdiction of this controversy as a “related” non-core proceeding under 28 U.S.C. §§ 1334 and 157(a) and the general order of reference entered by the United States District Court for the Eastern District of Virginia on August 15, 1984.11 The parties have consented to the entry of final orders and judgments by this court, subject to the right to appeal to the United States District Court under 28 U.S.C. § 158(a). Venue is proper in this District under 28 U.S.C. § 1409(a).
The plaintiff has articulated three arguments as to why it should prevail. The first is that, as the holder of the majority capital interest in D & B Venture, it had, and properly exercised, the power to remove R & M Kiln Creek as manager. The second is that the chapter 11 filing of the DeLueas resulted in the dissolution of R & M Kiln Creek, thereby rendering it incapable of acting as the manager of D & B Venture. The third argument, which follows from the second, is that R & M Kiln Creek’s dissolution statutorily conferred on JTB, as the sole remaining member able to act, the right to wind up D & B Venture’s affairs. Each of these contentions will be discussed in turn.
A. Whether JTB Enterprises could by its sole vote remove R & M Kiln Creek as manager.
This issue was resolved adversely to JTB at trial. Some discussion of the issue is warranted, however, in order to provide a framework for the remaining issues. Accordingly, this memorandum opinion will supplement the court’s findings of fact and conclusions of law made orally on the record.
As noted above, D & B Venture is a limited liability company. Limited liability companies, which have become increasingly pop*86ular as a form of business organization, are a relatively recent innovation. As explained by one commentator,
In response to favorable tax rulings, most states recently have followed the lead of Wyoming and Florida and enacted legislation for the formation and recognition of the limited liability company (LLC). The LLC is a form of legal entity that has attributes of both a corporation and a partnership but is not formally characterized as either one. Generally, an LLC offers all of its members, including any member-manager, limited liability as if they were shareholders of a corporation but treats the entity and its members as a partnership for tax purposes.
Thomas F. Blakemore, “Limited Liability Companies and the Bankruptcy Code: A Technical Overview,” 13 Am.Bankr.Inst.J. 12. In Virginia, limited liability companies are governed by the Virginia Limited Liability Company Act, §§ 13.1-1000 to 13.1-1069, Va.Code Ann., enacted in 1991. A Virginia limited liability company may engage in any lawful business that a corporation, partnership or other business entity may conduct under Virginia law. § 13.1-1009(17), Va. Code Ann. A limited liability company in Virginia is formed by filing articles of organization with the State Corporation Commission. § 13.1-1010, Va.Code Ann. A person that owns an interest in the company is called a “member.” § 13.1-1002, Va.Code Ann. The members may (and in practice invariably do) enter into an operating agreement which regulates and establishes the conduct of the company’s business and the relationship of its members. § 13.1-1023(A), Va.Code Ann. Management of the company is vested in the members in proportion to their capital contributions, as adjusted for additional contributions and distributions, unless the articles of organization or the operating agreement provide that the company will be managed by one or more managers. § 13.1-1022, Va.Code Ann. Managers, if provided for in the articles of organization or operating agreement, are elected by the members. § 13.1-1024(D), Va.Code Ann. In a manager-managed limited liability company, only managers can contract for the company’s debts or execute documents for the acquisition, mortgage or disposition of the company’s property. § 13.1-1024(G), Va. Code Ann.
JTB asserts that because its capital account balance ($1,488,369) was greater than that of R & M Kiln Creek ($647,146)— even giving R & M Kiln Creek the benefit of the $500,000 it claims to have contributed by paying D & B Venture expenses — JTB had the right to remove R & M Kiln Creek as manager, since (1) under § 13.1-1024(F), Va. Code Ann., “If the articles of organization or an operating agreement of a limited liability company does not provide for the removal of managers, then all managers or any lesser number may be removed with or without cause by a majority vote of the members ” (emphasis added), and (2) under § 13.1-1022, Va.Code Ann.,
Unless otherwise provided in the articles of organization or an operating agreement, the members of a limited liability company shall vote in proportion to their contributions to the limited liability company, as adjusted from time to time to reflect any additional contributions or withdrawals, and a majority vote of the members of a limited liability company shall consist of the vote or other approval of members having a majority share of the voting power of all members.
(emphasis added). R & M Kiln Creek disputes that JTB had the larger capital account, but the issue is not one which need be resolved, since the provision of § 13.1-1022 that members “shall vote in proportion to their contributions” only applies in the absence of contrary provisions in the articles of organization or operating agreement. Under the terms of the amended operating agreement for D & B Venture, “membership interest” was not tied to the level of capital contributions. Even at the outset, when R & M Kiln Creek first succeeded to Broyhill’s individual 50% membership interest and had a capital account only one-fifth of JTB’s, the amended operating agreement unambiguously assigned R & M Kiln Creek a 50% membership interest. The amended operating agreement clearly treats membership interest as distinct both from capital accounts and distribution rights and provides separate *87treatment for each. While the amended operating agreement never explicitly states how votes are to be counted in connection with what are described as “Major Decisions” by the company requiring member vote (¶ 6.2),12 the clear implication is that each of the members has an equal vote. Accordingly, the court concludes that JTB, as the holder of a 50% membership interest, could not under the amended operating agreement cast “a majority vote of the members” to remove R & M Kiln Creek as manager notwithstanding that JTB may have had the larger capital account.13
B. Whether the chapter 11 filing by the DeLucas resulted in the dissolution of R & M Kiln Creek.
JTB argues that under the plain terms of R & M Kiln Creek’s operating agreement, the chapter 11 filing by the De-Lucas triggered the dissolution of R & M Kiln Creek, and that under the amended operating agreement for D & B Venture and applicable Virginia law, the dissolution of R & M Kiln Creek in turn caused D & B Venture to be dissolved14 and conferred on JTB, as the sole remaining member able to act, the right to wind up the company’s affairs.15 In this connection, R & M Kiln Creek’s operating agreement contains the following provision:
9.1 Time for Dissolution. The Company shall be dissblved upon the earlier to occur of:
(e) the death, resignation, expulsion, bankruptcy or dissolution of a member ... unless the business of the company is continued by the unanimous consent of the remaining members ...
This language, like the similar provision in D & B Venture’s operating agreement, is consistent with § 13.1-1046, Va.Code Ann., which at the time of the DeLucas’ chapter 11 filing, read as follows:
A limited liability company organized under this chapter is dissolved and its affairs shall be wound up upon the happening of the first to occur of the following events:
*881. At the time or on the happening of the events specified in the articles of organization or an operating agreement;
* * * ‡ *
3. Upon the death, resignation, expulsion, bankruptcy or dissolution of a member unless the business of the limited liability company is continued by all or such lesser percentage or number (but not less than a majority in interest) of the remaining members as may be provided in writing in the articles of organization or operating agreement of the limited liability company.
Since the operating agreements do in fact provide for dissolution of R & M Kiln Creek and D & B Venture under the circumstances stated (and since there were no “remaining members” in R & M Kiln Creek who could have voted to continue the business), the issue is whether those provisions are — as R & M Kiln Creek vigorously contends — unenforceable in bankruptcy as an “ipso facto” clause.
As an initial matter, the court is required to determine the nature of the DeLucas’ interest in R & M. As discussed above, limited liability companies are a conceptual hybrid, sharing some of the characteristics of partnerships and some of corporations. “In general, the purpose of forming a limited liability company is to create an entity that offers investors the protections of limited liability and the flow-through tax status of partnerships.” Jonathan R. Macey, The Limited Liability Company: Lessons for Corporate Law, 73 Wash.U.L.Q. 433 (1995). In order to achieve the desired goal of pass-through tax treatment, it is necessary under applicable U.S. Treasury Regulations that the company have more of the attributes of a partnership than of a corporation. Macey, supra; Treas.Reg. § 301-7701-2(a)(l). Consequently, it makes sense to look for guidance to those bankruptcy decisions which have considered the effect of clauses in partnership agreements or state law which provide for the dissolution of partnerships upon the filing of a bankruptcy petition by a partner.
In the partnership context, it has been held that the interest of a debtor general partner is
comprised of three components: the right to participate in profits, losses, distributions and proceeds of the partnership (“Economic Interest”); the right to participate in the management of the partnership (“Management Interest”); and the ownership share in partnership property as a tenant-in-partnership.
In re Cardinal Industries, Inc., 116 B.R. 964, 970-971 (Bankr.S.D.Ohio 1990). In a Virginia limited liability company, members have no direct interest in the company’s property,16 but members have an economic interest, referred to in the statute as a “membership interest,”17 in the profits, losses and distributions of the company. Additionally, the members have a management interest, the degree of which depends on whether the company is member-managed or manager-managed and, if the latter, on the kind of decisions which the articles of organization or operating agreement confer on the manager.
Under § 541(a) of the Bankruptcy Code, the commencement of a bankruptcy ease creates an estate of “all legal and equitable interests of the debtor in property as of the commencement of the case.” Furthermore, *89the debtor’s interest becomes property of the estate
notwithstanding any provision in an agreement ... or applicable nonbankruptey law — (A) that restricts or conditions transfer of such interest by the debtor; or (B) that is conditioned on ... the commencement of a case under this title, or on the appointment of or taking possession by a trustee in a case under this title ... and that effects or gives an option to effect a forfeiture, modification, or termination of the debtor’s interest in property.
§ 541(e), Bankruptcy Code. Where the debtor’s interest arises under an exeeutoiy contract,18 the trustee, or, in a chapter 11 case, a debtor in possession,19 may, with court approval, assume the contract. § 365(a), Bankruptcy Code. Once assumed, the contract may be assigned “notwithstanding a provision in an executory contract ..., or in applicable law, that prohibits, restricts, or conditions the assignment of such contract.” § 365(f), Bankruptcy Code. As with property of the estate generally, the debtor’s interest in an executory contract
may not be terminated or modified, and any right or obligation under such contract ... may not be terminated or modified, at any time after the commencement of the case, solely because of a provision in such contract . •.. that is conditioned on— ... (B) the commencement of a case under this title.
The clear intent of these provisions is to preserve, for the benefit of the creditors of the bankruptcy estate, all of the debtor’s property rights by making unenforceable so-called “ipso facto” clauses that terminate or impair a debtor’s property rights when the debtor files a bankruptcy petition.
There is, however, a limited class of execu-tory contracts with respect to which assumption or assignment cannot be forced on an unwilling party. These include contracts to make a loan or to extend other debt financing or financial accommodation and “personal service” contracts where
(1)(A) applicable law excuses a party, other than the debtor, to such contract ... from accepting performance from or rendering performance to an entity other than the debtor or debtor in possession whether or not such contract ... prohibits or restricts assignment of rights or delegation of duties; and
(B) such party does not consent to such assumption or assignment.
§ 365(c), Bankruptcy Code. Similarly, under § 365(e)(2), Bankruptcy Code, the unenforce-ability of contract provisions which modify a debtor party’s rights on the filing of bankruptcy
does not apply to an executory contract ..., whether or not such contract ... prohibits or restricts assignment of rights or delegation of duties, if—
(A)(i) applicable law excuses a party, other than the debtor, to such contract ... from accepting performance from or rendering performance to the trustee or to an assignee of such contract ..., whether or not such contract ... prohibits or restricts assignment of rights or delegation of duties; and
(ii) such party does not consent to such assumption or assignment.
Courts have generally held partnership agreements to be a form of executory contract. Breeden v. Catron (In re Catron), 158 B.R. 624, 626 (Bankr.E.D.Va.1992) (Tice, J.), *90aff'd, 158 B.R. 629 (E.D.Va.1993), aff'd, 25 F.3d 1038 (4th Cir.1994). They have split, however, on whether such contracts are of the “personal service” variety which, under § 365(e)(2), Bankruptcy Code, cannot be forced on an unwilling party, or whether, conversely, they are subject to the prohibition on enforceability of ipso facto clauses under § 365(e)(1). Catron took the position that “[flundamentally a partnership is based upon the personal trust and confidence of the partners,” and that because of this relationship, “the agreement or contract governing the partnership is essentially a contract for personal services, which renders it also non-delegable and nonassumable.” 158 B.R. at 627. See, also, Phillips v. First City, Texas-Tyler, N.A. (In re Phillips), 966 F.2d 926 (5th Cir.1992) (partner who was chapter 11 debtor did not have authority to file chapter 11 petition for partnership); In re Doddy, 164 B.R. 276 (Bankr.S.D.Ohio 1994) (non-debtor partnership dissolved on chapter 13 filing by debtor general partner); In re Tip 0 Texas RV Village, 87 B.R. 195 (Bankr. M.D.Fla.1988) (debtor general partner had no right to manage four limited partnerships against whom involuntary petition had been filed); In re Sunset Developers, 69 B.R. 710 (Bankr.DJdaho 1987) (debtor general partner had no authority to file involuntary petition against partnership; as debtor in possession, the general partner was a new entity and entitled only to contract profit to which an assignee is entitled, without management or voting rights); Turner v. Lee (In re Minton Group), 27 B.R. 385 (Bankr.S.D.N.Y.1983), aff'd, 46 B.R. 222 (S.D.N.Y.1985) (chapter 11 filing by general partner dissolved limited partnership and deprived debtor general partner of management authority); Normandin v. Normandin (In re Normandin), 106 B.R. 14 (Bankr.D.Mass.1989) (debtor general partner may not sell partnership assets; provision of state law denying debtor partner the right to control the winding up process not in conflict with Bankruptcy Code).
Other eases have reached a contrary position. See, Cardinal Industries, supra (debt- or general partner’s right to manage limited partnership not terminated by chapter 11 filing); In re Clinton Court, 160 B.R. 57 (Bankr.E.D.Pa.1993) (debtor partnership not dissolved by prior chapter 11 filing of general partner); In re Corky Foods Corp., 85 B.R. 903 (Bankr.S.D.Fla.1988) (motion to require debtor partner to abandon interest in partnership because of dissolution denied; state statute providing for dissolution held to be invalid ipso facto clause); In re BC & K Cattle Co., 84 B.R. 69 (Bankr.N.D.Tex.1988) (general partner’s chapter 11 filing did not deprive him of authority to file involuntary petition against partnership); In re Ritten-house Carpet, Inc., 56 B.R. 131 (Bankr.E.D.Pa.1985) (“removal of a debtor general partner of a limited partnership may not be predicated merely on the filing of a petition in bankruptcy, notwithstanding provisions of state law to the contrary”); Quarles House Apts. v. Plunkett (In re Plunkett), 23 B.R. 392 (Bankr.E.D.Wis.1982) (debtor general partner’s right to manage nondebtor partnership’s business and to receive management fee under partnership agreement is property of the estate); Summit Investment and Development Corp. v. LeRoux, 69 F.3d 608 (1st Cir.1995) (ipso facto termination clause in limited partnership agreement and limited partnership statute unenforceable against debtor general partner).
Finally, still other courts have adopted a pragmatic, case by case approach that looks to the specific partnership in question, and the nature of the debtor’s responsibilities, to determine whether the partnership agreement is a non-assignable executory contract. See, In re Antoneltt, 148 B.R. 443, 448 (D.Md.1992) (Motz, J.) (nondebtor party is excused from performance only “if the identity of the debtor is a material condition of the contract when considered in the context of the obligations which remain to be performed under the contract”).
The analysis in the present ease is complicated by a number of factors. First, since the DeLueas are members of R & M, not of D & B Venture, they have no direct economic or management interest in D & B Venture. It would appear, however, that R & M is little more than a conduit or shell; its only apparent function is to hold technical title to what is in substance the DeLueas’ interest in D & B Venture. Amazingly, the *91DeLucas do not even list their ownership of R & M Kiln Creek in their schedules. Under the amended operating agreement for D & B Venture, the actual entity designated as the “developer” of the project is American Property Services, Inc., a separate corporation which is wholly-owned by the DeLucas. With respect to R & M Kiln Creek, the DeLucas are the only members.- Consequently, there are no other members to object to their assumption of its management, regardless of whether its operating agreement is considered a personal service contract. At the time of trial, the DeLucas had not taken any steps in their chapter 11 case to assume the operating agreement of R & M Kiln Creek — hardly surprising, given that R & M Kiln Creek is not listed in their schedules.20 In any event, the only purpose of assuming the management function of R & M Kiln Creek would be, through it, to continue the management of D & B Venture. This is, in short, one of those situations where it appears appropriate to disregard the form of the DeLucas’ interest in D & B Venture and to look to the substance.
That substance is the DeLucas’ effort, through R & M Kiln Creek, to manage D & B Venture over the adamant opposition of JTB, the only other member. Although R & M Kiln Creek argues that Catron, supra, was wrongly decided, Catron is the controlling authority within this District. Even if this court were to adopt the pragmatic approach of Antonelli, supra, rather than Catron, the result would not be different. In Antonelli, Judge Motz, while rejecting a per se rule that would characterize all partnership agreements as personal service contracts, recognized that there were certain partnership agreements that would clearly fall into that category. For example,
a reorganization plan could not require that a law firm accept as a partner the assignee of one of their partners who had become bankrupt. The nature of the duties which law partners owe, not only to one another but to their clients, make their identities material to the very existence of the partnership.
148 B.R. at 448-449. With respect specifically to real estate partnerships, Judge Motz distinguished between “development” projects on the one hand “in which the general partner must administer the planning, construction and leasing of the building,” and “matured” projects on the other “that require only routine management and leasing functions.” 148 B.R. at 449. In the former, “the identity of a general partner will be critical to the limited partners and to the prospect of a successful investment,” while in the latter, “the identity of a general partner is less significant.” Id. D & B Venture is a clear example of a “development project” where the identity of the manager is material to very existence of the enterprise, since there are still significant development decisions to be made and parcels to be sold.
Accordingly, the court concludes that R & M Kiln Creek, to the extent that the amended operating agreement gives it management control of D & B Venture, should be treated (consistent with its own operating agreement) as having been dissolved as a result of the DeLucas’ chapter 11 filing. In doing so, the court is aware that it reaches a contrary result from the only other reported bankruptcy decision to have considered this issue in the context of a limited liability company. In Matter of Daugherty Construction, Inc., 188 B.R. 607 (Bankr.D.Neb.1995), the court held that a chapter 11 filing by one of the members of two Nebraska limited liability companies (each formed to develop an apartment building) did not result in the dissolution of the companies or permit the non-debtor members to terminate the debtor as general contractor for the projects. The court held that the provisions of the articles of organization and of the Nebraska Limited Liability Companies Act for the dissolution of the companies upon the bankruptcy of one or more members' was unenforceable under *92§§ 541(c)(1), 363(i), and 365(e), Bankruptcy Code. The court agreed that the articles of organization and the operating agreements constituted executory contracts,21 but held that “[t]he debtor and debtor in possession are the same entity for executory contract purposes in a Chapter 11 reorganization.” 188 B.R. at 613. Since the debtor in possession was the same entity as the pre-petition debtor, the bar against assumption of personal service contracts over the objection of an unwilling party simply did not apply. Whatever else may be said of this argument, it is, as noted above, contrary to controlling authority in this district, and this court therefore cannot accept the result reached in Daugherty Construction.
Since R & M Kiln Creek is not itself in bankruptcy, there is no bankruptcy policy that protects it against the effect of its own dissolution. Giving effect to the operating agreements does not deprive the DeLu-cas of their economic interest in R & M Kiln Creek or, through it, their economic interest in D & B Venture — that is, their right to receive the distributions due to R & M Kiln Creek under the amended operating agreement. Even though both D & B Venture and R & M Kiln Creek are “dissolved,” such dissolution merely commences the process of winding up. Given the nature of D & B Venture’s remaining business — the development and sale of commercial real estate — any winding up will necessarily consist of the sale of the remaining parcels and the distribution of the sales proceeds, after expenses of sale and payment of the company’s debts, to the members in accordance with the amended operating agreement. Thus, the DeLucas will receive, in connection with a winding up, essentially what they would have received even had D & B Venture not been dissolved.
C. Whether JTB has the right to direct the winding up of D & B Venture.
The Virginia Limited Liability Company Act, as it read at the time the DeLucas’ chapter 11 petition was filed, provided as follows:
Unless otherwise provided in the articles of organization or an operating agreement, the members who have not wrongfully dissolved a limited liability company may wind up a limited liability company’s affairs.
§ 13.1-1048 (emphasis added).22 JTB relies on this provision as establishing its sole right to control the winding up.
In one sense, the issue of who has the right to direct the winding up of D & B Venture is moot, since a chapter 11 trustee is currently serving and as a practical matter is winding up the company’s affairs by selling its remaining real estate. It is also true, however, that a chapter 11 trustee’s appointment may be terminated by the court at any time before confirmation. § 1105, Bankruptcy Code. JTB has advised the court that if JTB is determined to have the right to wind up the company’s affairs, it will move to terminate the trustee’s appointment and may move to dismiss the chapter 11 case. Since the chapter 11 trustee was appointed as a response to creditor complaints concerning the DeLucas’ management of the various De-Luca entities, and since the value of the company’s real estate may be sufficient to pay all creditors in full outside bankruptcy, JTB may well be entitled to follow-on relief if the issue of control is decided in its favor. *93Accordingly, the court does not consider the issue moot.
The question is whether, as JTB contends, only it has the right to direct the winding up. The operating agreement, although providing for the dissolution of the company upon either member’s bankruptcy or dissolution, also provides in ¶ 11.4 that the manager will direct the winding up without addressing what would happen if the manager were the member that had been dissolved. The statute states, “Unless otherwise provided, in the articles or organization or an operating agreement, the members who have not wrongfully dissolved a limited liability company may wind up a limited liability company’s affairs.” § 13.1-1048. The initial question, then, is whether the amended operating agreement “otherwise provide[s]” for the winding up. Taken literally, it certainly does: it expressly states that “[u]pon any dissolution of the Company ... the Manager ... shall liquidate the assets” (emphasis added). The conceptual issue is how the manager can do so if it is no longer capable, because of its own dissolution, of continuing to act as manager. Even granted that R & M Kiln Creek’s “dissolution” does not result in the immediate termination of its existence as a legal entity, it does terminate its right to engage in business except to the extent necessary for the orderly winding up of its business affairs. The question, then comes down to this: does R & M Kiln Creek’s right to wind up its own affairs include the right to wind up a limited liability company of which it is a member? No authority has been cited to the court either way, and the court’s own research has not uncovered any. While in some respects it certainly seems incongruous to permit a dissolved entity to control the winding up of another dissolved entity, when there is an entity (in this case, JTB) that is fully capable of acting, nevertheless that is what the operating agreement says.
Given the policy apparent throughout the Virginia Limited Liability Company Act of giving the members of a limited liability company broad freedom to structure their relationships as they choose, this court is not free to disregard the language of the amended operating agreement simply because its application might seem problematical or odd in particular circumstances. Accordingly, I cannot conclude that, outside bankruptcy, JTB would have the exclusive right to direct the winding up of D & B Venture based solely on the forced dissolution of R & M Kiln Creek.23
This is not to suggest, were D & B Venture’s Chapter 11 case to be dismissed, that JTB would not be entitled to invoke the aid of the appropriate state circuit court under § 13.1-1048, Va.Code Ann., with respect to the winding up, and to ask the state court to appoint it as the receiver for the company. With respect specifically to the proceedings in this court, however, I am of the opinion that at the present time, the best interest of both creditors and equity security holders, is served by having the chapter 11 trustee continue as the representative of the debtor. The chapter 11 trustee has . consulted extensively with the DeLucas and with Broyhill and has been active in marketing the remaining unsold parcels. As long as the dispute between Broyhill and the DeLucas remains unresolved, management of D & B Venture by a neutral chapter 11 trustee is clearly preferable to vesting management authority in either of the two warring members.
*94For the foregoing reasons, which constitute the court’s findings of fact and conclusions of law under Fed.R.Bankr.P. 7052, a separate order will be entered determining (1) that the action of April 28, 1995, was not effective to remove R & M Kiln Creek as the manager of D & B Venture and to elect JTB as the new manager; (2) that R & M Kiln Creek has been dissolved as a result of the chapter 11 fihng by the DeLucas; and (3) that JTB is not entitled to sole control over the winding up of D & B Venture.
.Since the trial, principals of JTB and R & M Kiln Creek have entered into a proposed global settlement that would resolve all controversies between them, including the issues raised by the present adversary proceeding. With respect specifically to D & B Venture, R & M Kiln Creek would concede management rights to JTB and would assign to JTB its equity interest. It is tempting to say that the pending settlement renders the present controversy moot and makes a decision unnecessary. The proposed settlement, however, requires court approval, and since several parties have filed objections, such approval is by no means a foregone conclusion. Accordingly, the court concludes that the litigation is not at the present time moot, even though it may become so.
. An order for joint administration was entered shortly after the cases were filed. Subsequently, a chapter 11 trustee has been appointed in 10 of the cases (including D & B Venture), while the debtors remain in possession in the remaining cases.
. "5.1 Percentage Interests. Upon the execution of this Agreement, each Member shall have an interest in the Company expressed as a percentage of the whole ("Membership Interest"), with the initial Membership Interest in the Company *83of Enterprises being fifty percent (50%) and the initial Membership Interest in the Company of R & M being fifty percent (50%).”
. "5.2. Additional Capital Contributions, (a) R & M shall be obligated to make one or more capital contributions to the Company up to a maximum of Five Hundred Thousand and No/ 100 Dollars ($500,000.00) ("Mandatory Contributions ") to the extent such funds are needed to satisfy the obligations of the Company.”
. "(c) In the event such loans are not obtained, any Member may, but shall not be obligated or required to, make contributions to the capital of the Company (“Optional Contributions "). If all the Members desire to participate in any Optional Contribution to the Company, the Optional Contributions shall be made by the Members in accordance with their respective Membership Interests or in such other percentages as the Members shall agree. The Manager shaft send written notice to the Members of the opportunity to make Optional Contributions and the Members will have thirty (30) days to respond to such request by advancing its respective pro rata share of the Optional contribution amount to the Manager within such 30-day period. To the extent that a Member does not advance its pro rata share of the Optional Contribution requested within such 30-day period, the Manager may, in its sole discretion, contribute such amount to the Company.”
. A typical example is a July 27, 1993, memorandum from Marilyn DeLuca addressed to Robert DeLuca, Joel BroyhiE, and Dick Houser captioned "July D & B Budget Draw”:
Enclosed please find the July 1993, draw for the D & B expenses and costs. I have enclosed a summary sheet, plus the respective invoices.
Pursuant to the D & B Operating Agreement, R & M Kiln Creek will fund these costs until such time as a total of $500,000.00 has been paid by R & M, or JTB Enterprises, L.C., has been repaid its additional capital payment of $500,-000.00, advanced at closing. The expenses enclosed have been funded by R & M Kiln Creek. The $136,639.01 funded herewith coupled with the May and June 1993 expenses paid by R & M Kiln Creek of $132,921.99, brings the total advanced to date by R & M to $269,561.00.
A review of the attached invoices and checks reflects that a significant amount of the expenses were actuafly biEed to or paid by other DeLuca-related entities rather than R & M Kiln Creek, including ViEages of Kiln Creek, L.P., Kiln Creek Country Club, Robert R. DeLuca, J & B Enterprises, RMS Associates, and American Property Services, Inc.
. A typical example is a December 9, 1993, memorandum from Marilyn DeLuca to Robert DeLu-ca, Joel BroyhiE, and Dick Houser, captioned "October and November D & B Budget Draw”:
Enclosed please find the October and November 1993 draws for the D & B expenses and costs. I have enclosed a summary sheet, plus the respective invoices.
The expenses paid by R & M Kiln Creek to date, including this most recent draw, equals $564,811.15.
. A November 8, 1993 memorandum from Marilyn DeLuca to BroyhiE stated:
It should be noted that with the filing of the October 1993 draw of operating expenses, fuEy funded by R & M Kiln Creek, we wiE have reached the required $500,000.00 partner contribution. Therefore, commencing with the November 1993 closing, the partner distributions wiE revert to the initial 67% JTB Enterprises/33% R & M Kiln Creek as prescribed in the partnership agreement.
. In addition, BroyhiE received approximately $400,000 under a provision of the amended operating agreement that caEed for him to be paid a fee of $20,000 per month. In the testimony, this was described as an "asset management fee," although the agreement itself (¶ 9.2) simply describes it as a "guaranteed payment,” without any further indication of its purpose. The DeLu-cas, in addition to receiving distributions under the amended operating agreement and repayment of certain advances, received indirectly through American Property Services, Inc. a “development fee” of 3% of the sales price of each parcel sold.
. At or about this time, BroyhiE caused a suit to be filed in state court seeking to take control of the company and filed a memorandum of lis pendens against its real estate. BroyhiE testified that the reason he filed the suit and took action to remove R & M Kiln Creek as the manager was that he because he felt he had to take over the project to protect himself. Although some sales contracts were being closed, JTB had not received a distribution since March 1994. BroyhiE was personaEy liable on the Crestar revolving loan, which at that point had a balance of approximately $4,000,000. BroyhiE has been pay*85ing the interest on that loan since the chapter 11 filing.
. The complaint alleged that this was a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O) (“matters concerning the administration of the estate” and "other proceedings affecting ... the equity security holder relationship.”) R & M Kiln Creek’s answer, however, denied that the matter was a core proceeding. Upon consideration, the court has concluded that the adversary proceeding is non-core. Under 28 U.S.C. § 1334, bankruptcy jurisdiction extends to "cases under title 11” and to civil proceedings "arising under,” "arising in,” or “related to” a bankruptcy case. The first two categories ("arising under” and "arising in”) constitute "core” proceedings, with respect to which a bankruptcy judge may enter final judgments or orders, subject to the right to appeal to the U.S. District Court under 28 U.S.C. § 158(a). "In order for a proceeding to 'arise under’ Title 11, the claim must be predicated on a right created by Title 11. Examples ... include preference actions and fraudulent conveyance actions. On the other hand, ‘arising in' proceedings are those that are not based on any right expressly created by Title ■ 11 but would have no practical existence but for the bankruptcy. Examples would include actions to determine the validity of liens or claims.” Lux v. Spotswood Constr. Loans, 176 B.R. 416, 418 (E.D.Va.1993) (Merhige, J.) (internal citations omitted). The third category of matters ("related to”) are those where "the outcome could in some way alter the parties’ rights in bankruptcy or affect the administration of the estate.” Id. The distinction is important, because although a bankruptcy judge may hear a non-core "related" proceeding, the bankruptcy judge may not enter a final judgment or order unless the parties expressly consent. Otherwise, the bankruptcy judge submits proposed findings of fact and conclusions of law to the U.S. District Court, "and any final order or judgment shall be entered by the district judge after considering de novo those matters to which any party has timely and specifically objected." 28 U.S.C. § 157(c)(1); Fed.R.Bankr.P. 7012(b) and 9033. The present controversy, involving as it does the rights of the company’s members inter se, does not assert any right created by the Bankruptcy Code or which would have no practical existence outside the bankruptcy context. Indeed, except for the happenstance that D & B Venture and the DeLueas are chapter 11 debtors, this is a proceeding that would have been decided in state court.
. While not directly raised as an issue in this adversary proceeding, it is clear that the decision to file a chapter 11 petition was a "major decision” that required the vote of the members and that R & M Kiln Creek had no authority, solely in its capacity as manager, to file a chapter 11 petition on behalf of D & B Venture. See, In re Old Grind Co., Inc., 99 B.R. 317 (Bankr.W.D.Va. 1989) (Krumm, J.) (Chapter 11 petition dismissed since under Virginia law corporation's president had no authority, solely in his capacity as president, to file on behalf of corporation); Thomas F. Blakemore, Limited Liability Companies and the Bankruptcy Code, 13 Am.Bankr. Inst.J. 12 (June 1994) (suggesting that unanimous consent of members may be required for bankruptcy filing by LLC unless operating agreement clearly confers such authority on manager).
. R & M Kiln Creek made an offer of proof that Marilyn DeLuca would testify that R & M Kiln Creek had a larger capital account than JTB, presumably based on treating all the claimed expenses paid by R & M Kiln Creek as capital contributions. The operating agreement, however, did not give R & M Kiln Creek the unilateral right to contribute additional capital beyond the $500,000 required under the agreement, and there was no evidence that R & M had ever given JTB notice of the opportunity to join in making additional capital contributions. Accordingly, the court concludes that any expenses advanced beyond the level of the $500,000 mandatory additional contribution to the company constituted loans by R & M Kiln Creek to the company; and, indeed, such characterization is consistent with the company’s income tax returns and with the schedule prepared by Marilyn DeLuca for Broy-hill summarizing sales, distributions, and capital account balances (i.e., $1,488,369 for JTB and $647,176 for R & M Kiln Creek). Since, based on the court’s interpretation of the amended operating agreement, any expenses paid on D & B Venture's behalf beyond the $500,000 did not constitute capital contributions, and since, in any event, under the amended operating agreement JTB and R & M Kiln Creek each had an equal vote without regard to the state of their capital accounts, the court declined to receive the proffered testimony.
. See ¶ 11.1 of the amended operating agreement for D & B Venture: "The Company shall be dissolved and ... its business wound up, upon the earlier to occur of: ... R & M or Enterprises dissolving or becoming Bankrupt” (emphasis added).
. See § 13.1-1048, Va.Code Ann.: "Unless otherwise provided in the articles of organization or an operating agreement, the members who have not wrongfully dissolved a limited liability company may wind up a limited liability company’s affairs” (emphasis added). '
. See, § 13.1-1021, Va.Code Ann. (“Any estate or interest in property may be acquired in the name of the limited liability company, and title to any estate or interest so acquired vests in the limited liability company.”); § 13.1-1034 ("Except as provided in writing in the articles of organization or an operating agreement, a member, regardless of the nature of his or its contribution, has no right to demand and receive any distribution from a limited liability company in any form other than cash.”); § 13.1-1038 ("A membership interest in a limited liability company is personal property.”); § 13.1-1041 (judgment creditor has right to obtain a charging order against member's interest but "has only the rights of an assignee of the interest in the limited liability company.”)
. " 'Membership interest’ or 'interest' means a member's share of the profits and the losses of the limited liability company and the right to receive distributions of the limited liability company’s assets.” § 13.1-1002, Va.Code Ann. See § 13.1-1029, Va.Code Ann. ("Sharing of profits and losses”) and § 13.1-1030, Va.Code Ann. ("Sharing of distributions”).
. The term "executory contract” is not defined in the Bankruptcy Code, but most courts and commentators have concurred with the definition first proposed by Professor Vem Countryman:
a contract under which the obligations of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would constitute a material breach excusing performance of the other.
Countryman, Executory Contracts in Bankruptcy, 57 Minn.L.Rev. 439, 450-460 (1973). 2 King, Collier on Bankruptcy, ¶ 365.02, n. 3, p. 365-16.5 (15th ed.). See, Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir.1985), cert. denied 475 U.S. 1057, 106 S.Ct. 1285, 89 L.Ed.2d 592 (contract is executory if performance is due to some extent on both sides).
. Although § 365(a) refers only to a "trustee,” under § 1107, Bankruptcy Code, a debtor in possession has all of the rights, powers, and duties of a trustee, except the right to compensation.
. Under § 365(d)(2), Bankruptcy Code, such ex-ecutory contracts may be assumed or rejected “at any time before the confirmation of the plan” unless the court, on motion of a party to the contract, sets a specified time for the assumption or rejection. Subsequent to the trial, the DeLu-cas filed a proposed Third Amended Joint Plan of Reorganization that contains general language assuming all their “Partnership Agreements,” without specifically delineating what those agreements are. That proposed plan has not yet been confirmed.
. “Each LLC is an ongoing business. The continuation of business contemplates an ongoing relationship and mutual obligations between each LLC’s members. The member relationships are essentially executory in character.... The unperformed obligations of LLC members inter se are executory obligations which, if not performed, would constitute a material breach excusing performance by other members. Therefore, I conclude that the LLC Articles and Agreements constitute executory contracts under section 365.” 188 B.R. at 612
. Effective July 1, 1995, the statute was amended to delete the italicized language and now reads as follows:
Except as otherwise provided in writing in the articles of organization or an operating agreement, upon the dissolution of a limited liability company, the members may wind up the limited liability company’s affairs; but the circuit court of the locality in which the registered office of the limited liability company is located, on cause shown, may wind up the limited liability company’s affairs on application of any member, his legal representative, or as-signee.
. Since I find that the language of the amended operating agreement controls, I do not reach the semantic issue of whether R & M Kiln Creek “wrongfully” dissolved D & B Venture, thereby precluding it from participating in the winding up. R & M Kiln Creek argues that "wrongfully,” in its ordinary sense, connotes some level of impropriety or wrongdoing, and that a member can be barred from participating in the winding up of a limited liability company only if the member's inequitable or unjust conduct forced the company’s dissolution. JTB argues that "wrongfully” should not be read so expansively as to require a finding of misconduct, and that in context the clear meaning is simply that the member whose conduct or status triggered dissolution is not entitled to participate in the winding up. While the issue is not free from doubt, I would be inclined to agree with JTB on this point if I had to make a choice. Since the General Assembly, in its 1995 amendments to § 13.1— 1048, dropped the language in question, and the statute now simply provides that "the members” may wind up the company's affairs, future courts will not have to struggle with this particular issue of statutory construction. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492317/ | ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND DENYING SUMMARY JUDGMENT IN FAVOR OF DEFENDANT
Marilyn SHEA-STONUM, Bankruptcy Judge.
This declaratory judgment action is before the Court on cross-motions for summary judgment filed by Plaintiff-Debtor, Kent Klingshim (the “Debtor”), and by Defendant, Internal Revenue Service (“IRS”). This proceeding arises in a case referred to this Court by the Standing Order of Reference entered in this District on July 16, 1984. It is determined to be a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (B) and Bankruptcy Rule 7001(9) over which this Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b), 157(a) and (b).
1. PROCEDURAL HISTORY
On September 15, 1994, the Debtor filed a petition under chapter 13 of the Bankruptcy Code. Schedule E of the Debtor’s petition listed one unsecured, priority debt owing to the IRS in the amount of $52,454.87. Paragraph 2 of the Debtor’s Plan indicated that the amount owing to the IRS was disputed and that it would be subject to an objection by the Debtor. The IRS filed a proof of claim1 for $174,923.58 in past due taxes, penalties, and interest (the “Claim”)2 that it claimed were owing as of the date the petition was filed.
On November 29, 1994, the Debtor filed a Complaint for Declaratory Judgment3 requesting that this Court determine that the Claim was barred by the running of the limitations period and that, therefore, the IRS has no viable claim in his pending chapter 13 case. After obtaining an extension, the IRS timely filed its Answer on February 8,1995 alleging that the statute of limitations for collection of the Debtor’s taxes had been tolled by a previous bankruptcy filing and that the Debtor’s taxes were therefore still due.
After a pre-trial conference, held on May 10, 1995, it was determined that this matter might be resolved by the filing of dispositive motions. On August 31, 1995, the Debtor *156filed a Motion for Summary Judgment. On October 2, 1995, the IRS filed a Cross-Motion for Summary Judgment and a response to the Debtor’s motion. On November 6, 1995, the Debtor filed a brief in opposition to the IRS’ cross-motion and on December 1, 1995, the IRS filed a reply to that document. The matter is now poised for resolution.4
II. FACTS
The undisputed, pertinent facts of this case are set forth in the following chronology:
August-November, 1981 Form 9415 taxes assessed against the Debt- or for unpaid taxes in the principal amount of $49,014.76.
July 11,1983 Form 940 6 taxes assessed against the Debt- or for unpaid taxes in the principal amount of $2,354.97.
June 25,1986 The Debtor and IRS executed Tax Collection Waivers 7 (the “Waiver”) and agreed that the collection period for the aforementioned taxes would be extended to December 31, 1992 and further agreed that “if an offer in compromise is made by the taxpayer(s) on or before the date to which the statutory period has been extended, then the time for making any collection will be further extended beyond that date by the number of days ... the offer is pending ..., plus one year.”
October 21,1986 The Debtor submitted an Offer in Compromise to IRS.
June 10,1987 The Debtor withdrew the Offer in Compromise.
March 6,1991 The Debtor filed for relief under chapter 7 of the Bankruptcy Code.
July 25,1991 The Debtor received a discharge.
December 31,1992 Original deadline for commencement of IRS collection activity as specified in the Waiver.
August 20,1994 Deadline for commencement of IRS collection activity as extended according to the terms of the Waiver.
September 13,1994 IRS attached the Debt- or’s checking account for $179,722.87 in taxes, penalties and interest related to the 1981 and 1983 assessments.
September 15,1994 The Debtor filed for relief under chapter 13 of the Bankruptcy Code.
Based.upon these undisputed facts the parties disagree as to the appropriate limitations period governing the IRS’ collection of taxes.
III. RELEVANT STATUTES
Section 6502 of the Internal Revenue Code sets forth two alternative time frames in which the IRS may collect taxes from a taxpayer after the taxes have been assessed. That statute states:
(a) Length of period. — Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in *157court, but only if the levy is made or the proceeding begun—
(1) within 6 years after the assessment of the tax, or
(2) prior to the expiration of any period for collection agreed upon in writing by the Secretary and the taxpayer before the expiration of such 6-year period ...
The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.
26 U.S.C. § 6502 (1989) (omitting provisions not relevant to this case).8
Both the Bankruptcy Code and the Internal Revenue Code address the potential modification of certain periods of time due to the pendency of a bankruptcy ease. Section 108(e) of the Bankruptcy Code states:
[I]f applicable nonbankruptcy law, an order entered in a nonbankruptcy proceeding, or an agreement fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor, ... and such period has not expired before the date of the filing of the petition, then such period does not expire until the later of—
(1) the end of such period, including the suspension of such period occurring on or after the commencement of this case; or
(2) 30 days after notice of the termination or expiration of the stay under section 362, 922, 1201, or 1301 of this title, as the case may be, with respect to such claim.
11 U.S.C. § 108(c). Section 6503(h) of the Internal Revenue Code states:
Cases under title 11 of the United States Code — The running of the period of limitations provided in section 6501 or 6502 on the making of assessments or collection shall, in a case under title 11 of the United States Code, be suspended for the period during which the Secretary is prohibited by reason of such case from making the assessment or from collecting and—
‡ ‡ ‡ ‡ ‡ $
(2) for collection, 6 months thereafter.
26 U.S.C. § 6503(h).9
IY. THE PARTIES’ LEGAL CONTENTIONS
A. THEIRS
The IRS contends that 26 U.S.C. § 6503(h) mandates that the limitations period provided for in the Waiver should be lengthened by the time in which the Debtor’s prior chapter 7 ease was pending, thus extending that period to June 28, 1995. The IRS argues that the time in which it could properly commence collection activities for the Claim was extended, first, by the execution of the Waiver, second, by the submission' of an offer in compromise, and finally, by the filing of the Debtor’s chapter 7 bankruptcy in accordance with 26 U.S.C. § 6503(h). The IRS thus implicitly argues that, in the terms of 11 U.S.C. § 108(c), this controversy is controlled by “an applicable nonbankruptcy law [that fixed] a period for commencing ... a civil action in a court other than a bankruptcy court on the claim against the debtor.” See 11 U.S.C. § 108(e).
B. THE DEBTOR
The Debtor contends that the collection period expired on August 20, 1994, the end of the period specified in the Waiver as lengthened to include the time the offer in compromise was pending plus one year. The Debtor further contends that, because the deadline for commencement of the IRS’ collection activity in this case is governed by 26 U.S.C. § 6502(a)(2) and is not a limitations period addressed § 6502(a)(1), the period of time during the pendency of the Debtor’s *158prior chapter 7 case cannot be “tacked on” to the August 20,1994 date.
The Debtor attempts to distinguish subsection (a)(1) of 26 U.S.C. § 6502, arguing that it contemplates the passing of a defined period of time, from subsection (a)(2) of 26 U.S.C. § 6502, arguing that it contemplates the passing of a certain date established by agreement, and not a “block of time which may run down.” The effect of this distinction, the Debtor argues, is that there can be no extension, pursuant to 26 U.S.C. § 6503(h), of the latter, and therefore the duration of a prior bankruptcy filing cannot be “tacked on” to extend the date certain. As authority for this position, the Debtor relies upon United States v. Newman, 405 F.2d 189 (5th Cir.1968).
In Newman, the Fifth Circuit panel analyzed the distinction between the two time periods available for tax collection after assessment and held that, when the period is established by an agreement between the taxpayer and the IRS, the six-year statutory limitation period no longer has any effect in determining the timeliness of an IRS action.10 Newman, 405 F.2d at 197-98. The Newman Court rejected the IRS’ argument that the deadline for the commencement of collection of the debtor’s taxes was measured by the number of days between the date the waiver agreement was signed and the date on which the period was to end. Newman, 405 F.2d at 198. Instead, the court noted that because the waiver agreement created a date certain beyond which the government could not bring suit, its cause of action “became lifeless” on that date. Id.
The Debtor thus argues implicitly that, in terms of 11 U.S.C. § 108(c), the resolution of this controversy is controlled by “an agreement [that fixed] a period for commencing ... a civil action in a court other than a bankruptcy court on a claim against the debt- or.” See 11 U.S.C. § 108(c).
Y. ISSUE
The issue in this case is the interpretation of 11 U.S.C. § 108(c) in the context of the Debtor’s prior bankruptcy case on the measurement of the time in which the IRS could commence collection of the Claim.
YI. ANALYSIS
Section 108(c) of the Bankruptcy Code permits the commencement or continuation of a civil action against a debtor until the later of two periods. The first is the end of a period that is established by nonbank-ruptcy law or an agreement between the debtor and the party initiating the action, that has not expired at the time of a debtor’s bankruptcy filing. The second is for 30 days after notice of the termination or expiration of the automatic stay barring such action. Applying this section to the deadline established by the Waiver raises the question of whether this Court is bound by a nonbank-ruptcy statute, 26 U.S.C. § 6503(h), or by the terms of the parties’ agreement, the Waiver.
Given that § 108(c) gives effect to “an agreement [that] fixes a period,” this Court would be ignoring the language of that statute if it failed to look to the parties’ agreement to determine when the IRS could commence its action against the Debtor. Further, given that 26 U.S.C. § 6502(a)(2) clearly provides that a taxpayer and the IRS can enter into an agreement fixing a deadline for the IRS’ commencement of tax collection against a taxpayer, looking to the parties’ agreement would harmonize the two statutes.
Turning to the parties’ agreement, it is clear that the Waiver took the parties outside the purview of the statute of limitations established by 26 U.S.C. § 6502(a)(1). Instead *159of depending upon that statutorily defined period of time, the parties provided that:
[t]he taxpayers) and the District Director of Internal Revenue agree that the above unpaid balance of assessment ... may be collected from the taxpayers by levy or proceeding in court begun on or before the date to which the statutory period has been extended. Further, they agree that if an offer in compromise is made by the taxpayer(s) on or before the date to which the statutory period has been extended, then the time for making any collection will be further extended beyond that date by the number of days (1) the offer is pending ..., plus one year.
By the terms of that Waiver, the period for the IRS to timely collect the assessed taxes was set at December 31, 1992 or such later date as contemplated by possible future actions of the Debtor specifically addressed in the agreement.
The parties’ agreement was executed on a pre-printed IRS Form 900, a document that was revised by the IRS in July, 1981. In 1981, the provision of 11 U.S.C. § 108(c) which incorporates an agreement between the parties was well established law.11 Further, court decisions recognizing the distinction between subsections (a)(1) and (a)(2) of 26 U.S.C. § 6502 also existed prior to 1981. See, e.g., United States v. Newman, 405 F.2d 189 (5th Cir.1968). In fact, the Debtor contends, and the IRS does not dispute, that in response to the Newman decision, Form 900 was amended to require a taxpayer to specifically agree to extend the collection period for the number of days that an Offer in Compromise was pending, plus one year. However, despite the IRS’ response to Newman, the current Form 900 contains no reference to an automatic extension of the deadline specified in such waiver agreements upon the taxpayer’s bankruptcy filing or to the incorporation of any statutory provisions, including 26 U.S.C. § 6503(h).
Although the Waiver is not a contract, see Stange v. United States, 282 U.S. 270, 271, 51 S.Ct. 145, 146, 75 L.Ed. 335 (1931), principles of contract construction would still govern aspects of the agreement. One of the fundamental principles of such construction is that the terms of a document are to be strictly construed against the drafter. See United States v. Seckinger, 397 U.S. 203, 210, 90 S.Ct. 880, 884, 25 L.Ed.2d 224 (1970) (indicating that this principle of contract construction apples to the government). As drafter of Form 900, the IRS could have easily inserted a provision which indicated that in addition to lengthening the agreed upon deadline by the time an Offer in Compromise was pending, plus one year, the agreed upon deadline would also be lengthened by the time a taxpayer might have the protection of the automatic stay in any prospective bankruptcy cases. Form 900 con*160tains no such provision. On this state of documentation, the IRS has only the protection of 11 U.S.C. § 108(c).
Because the Waiver did not include a provision for either a suspension or extension measured by the duration of a taxpayer’s bankruptcy, then pursuant to 11 U.S.C. § 108(c), the duration of the Debtor’s prior chapter 7 case cannot be “tacked on” to extend the agreed upon date. The effect of § 108(c) would therefore only be to ensure that if the deadline established by the Waiver had expired during the pendency of the Debtor’s prior chapter 7 case, then the IRS’s action against the debtor could still be timely brought for up to 30 days after notice of the termination or expiration of the automatic stay. See Rogers v. Corrosion Products, Inc., 42 F.3d 292, 296-297 (5th Cir.1995); Aslanidis v. U.S. Lines, Inc., 7 F.3d 1067, 1073 (2nd Cir.1993); In re Radcliffe’s Warehouse Sales, Inc., 31 B.R. 827, 831 (Bankr. W.D.Wash.1983).
The parties, in their motions for summary judgment, ignored the application of 11 U.S.C. § 108(c) and set forth arguments advocating the application of 26 U.S.C. § 6503(h). However, even if the provisions of § 108(c) were disregarded and § 6503(h) were viewed as controlling, the Court’s finding that the IRS’ action was untimely would be the same.
When deciding upon the application of a statute, the Court must first look to the language used, U.S. v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989); Landreth Timber Co. v. Landreth, 471 U.S. 681, 685, 105 S.Ct. 2297, 2301, 85 L.Ed.2d 692 (1985), and, if possible, must give effect to each word. Reiter v. Sonotone Corp., 442 U.S. 330, 339, 99 S.Ct. 2326, 2331, 60 L.Ed.2d 931 (1979); Barker v. Chesapeake & Ohio R.R., 959 F.2d 1361, 1367 (6th Cir.1992), cert. denied, 506 U.S. 1000, 113 S.Ct. 603, 121 L.Ed.2d 539 (1992). The language used in 26 U.S.C. § 6503(h) addresses “the running of the period of limitations,” and it does so in terms of a “suspension” and not an “extension” of time. It is useful then to look at the definitions of the words used. The word “suspend” means to interrupt, to postpone or to discontinue temporarily with an expectation of resumption. BLACK’S LAW DICTIONARY, 1297 (5th ed. 1979). The word “extend” means to expand, to enlarge, to lengthen, or to draw out further than the original limit. Blaok’s Law Dictionary, 523 (5th ed. 1979). The application of the suspension provision of § 6503(h) differs significantly depending upon how the limitations period is defined. Section § 6502(a)(1) of Title 26 deals with periods computed by the passage of a defined number of days, months, or years. By executing the Waiver, the parties agreed to redefine their limitation rights from the § 6502(a)(1) “computational” approach to a § 6502(a)(2) “deadline” approach,12 simply defined by a calendar end date. This is the distinction noted in Newman, supra. See also United States v. Simons, 864 F.Supp. 171 (D.Utah 1994).
When the parties provided for the date certain to establish the deadline for commencement of IRS collection activity, the alternative measure established by the statute of limitations became “functus officio.”13 See Newman, 405 F.2d at 198; Simons, 864 F.Supp. at 173.
Whereas neither time or [sic] tide can stop the arrival of a date certain, a limitations period or span of time may be temporarily dammed up (stored for release at a future date) while calendar time continues to run.
’ Id. Given the terminating effect of the “deadline” approach, unless that deadline came during a period when the bankruptcy was pending or on which the bankruptcy had an effect, there is nothing to be suspended. The language of 26 U.S.C. § 6503(h) itself *161reinforces this distinction by use of the phrase “the running of the period of limitations.” This phrase plainly applies to a period defined by a “computational” approach. By contrast, it is difficult to apply that phrase to a period defined by an agreed deadline.
In the ease at bar, the date by which the IRS had to commence collection activity was August 20, 1994. The Debtor’s chapter 7 case ended on July 25,1991, and the IRS was able to timely commence collection activity for more than three years after the bankruptcy and prior to August 20, 1994. Since the deadline date did not arrive during the pendency of that ease, there was no date or deadline to be suspended. In essence, the IRS’ argument proceeds as if § 6503(h) provides for an extension of the time within which it must commence collection activity, rather than the possible suspension actually provided for in the section. Thus, based upon the chronology of this case, the “suspension” addressed in § 6503(h) is not available to the IRS to extend the deadline in the Waiver.
VII. CONCLUSION
Pursuant to 11 U.S.C. § 108(c), the terms of the Waiver must be given effect. Pursuant to the terms of the Waiver, the duration of the Debtor’s prior chapter 7 bankruptcy case cannot act to extend the date certain agreed upon. As such, the final day in which the IRS could timely pursue collection efforts against the Debtor was August 20, 1994. Given that the IRS first attached Debtor’s checking account on September 13, 1994, its action was not timely.
Based upon the foregoing, the Court finds that no genuine issues of material fact exist in this case. As such, the Court denies the IRS’ cross motion for summary judgment and grants summary judgment in favor of the Debtor.
IT IS SO ORDERED.
.The IRS filed its first proof of claim on November 22, 1994. Thereafter a series of amended proofs of claim were filed, the last of which was filed on May 31, 1995. That final proof of claim asserted that Debtor owed $126,072.09 in priority debt and $48,851.49 in unsecured debt. This opinion addresses only whether the IRS is within the statute of limitations in pursuing collection against the Debtor. It does not include any determination with respect to the amount of the IRS’ claim.
. As discussed later in this opinion, the Debtor had filed a chapter 7 bankruptcy case in 1991. This opinion will deal with the effect of that filing on the timing of the right of the IRS to pursue such taxes, penalties and interest and the phrase, the Claim, shall refer to the IRS’ right to collect these taxes at various points in time.
. On March 8, 1995, Debtor filed an Amended Complaint for Declaratory Judgment which contained all of the same Counts and dates as the first Complaint but which revised some of the amounts alleged to be part of the Claim.
. A court shall grant a parly’s motion for summary judgment "if ... there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). The party moving for summary judgment bears the initial burden of showing the court that there is an absence of a genuine dispute over any material fact, Searcy v. City of Dayton, 38 F.3d 282, 286 (6th Cir.1994) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-5, 91 L.Ed.2d 265 (1986)), and, upon review, all facts and inferences must be viewed in the light most favorable to the non-moving party. Searcy v. City of Dayton, 38 F.3d 282, 285 (6th Cir.1994); Boyd v. Ford Motor Co., 948 F.2d 283, 285 (6th Cir.1991), cert. denied, 503 U.S. 939, 112 S.Ct. 1481, 117 L.Ed.2d 624 (1992). Given that the material facts in this case are not in dispute, judgment as a matter of law is appropriate.
. Form 941 taxes refer to Federal Insurance Contribution Act (FICA) taxes which are imposed upon every employer pursuant to 26 U.S.C. §§ 3101-3128.
. Form 940 taxes refer to Federal Unemployment Tax Act (FUTA) taxes that are imposed upon every employer pursuant to 26 U.S.C. §§ 3301-3311.
. On June 25, 1986, the Debtor and the IRS executed three separate Tax Collection Waivers. Each of those waivers agreed to set the deadline for commencement of IRS collection activity at December 31, 1992. For the purposes of this opinion, those three waivers will be referred to in the singular as the Waiver.
. This provision of the Internal Revenue Code was amended on November 5, 1990 to provide for a 10 year period of limitations. Although the parties do not agree on whether this amended period of time applies to the facts of this case, they do agree on the fact that its application is not dispositive to this case given that the Waiver contemplated a deadline that was beyond even a 10 year statute of limitations.
. Prior to the 1990 amendments to the Internal Revenue Code, § 6503(h) was designated as § 6503(i).
. The Newman case dealt with 26 U.S.C. § 276(c). That statute was the precursor to 26 U.S.C. § 6502(a), and stated:
(c) Collection after assessment — Where the assessment of any income tax imposed by this chapter has been made within the period of limitation properly applicable thereto, such tax may be collected by distraint or by a proceeding in court, but only if begun (1) within six years after the assessment of the tax, or (2) prior to the expiration of any period for collection agreed upon in writing by the Commissioner and the taxpayer before the expiration of such six-year period. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.
26 U.S.C. § 276(c) (1952).
. Subsection (c) of 11 U.S.C. § 108 is derived from 1898 Act § 11(f) which suspended any statute of limitations affecting provable debts until 30 days after denial of discharge, waiver or loss of discharge, or dismissal of proceedings, whichever occurred first. That concept was in turn incorporated into the 1938 revision of federal bankruptcy law known as the Chandler Act. See 11 U.S.C. § 29(f) (1970). The current § 108(c) was enacted with the Bankruptcy Reform Act of 1978. As originally enacted, that subsection stated:
(c) Except as provided in section 524 of this title, if applicable law, an order entered in a proceeding, or an agreement fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor, or against an individual with respect to which such individual is protected under section 1301 of this tide, and such period has not expired before the date of the filing of the petition, then such period does not expire until the later of—
(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; and (2) 30 days after notice of the termination or expiration of the stay ..., with respect to such claim.
11 U.S.C. § 108 (1978). The legislative history to § 108(c) of the Bankruptcy Reform Act of 1978 indicated that "if a creditor is stayed from commencing or continuing an action against the debtor because of the bankruptcy case, then the creditor is permitted an additional 30 days after notice of the event by which the stay is terminated, whether that event be relief from the automatic stay under proposed 11 U.S.C. 362 or 1301, the closing of the bankruptcy case (which terminates the stay), or the exception from discharge of the debts on which the creditor claims." H.R.Rep. No. 595, 95th Cong., 2d Sess. 318 (1977). (This italicized language refers to a provision that did not become a part of the Bankruptcy Reform Act of 1978).
. Because § 6502(a)(2) contemplates an agreement between the parties, it cannot be assumed that all such agreements will incorporate the "deadline” approach. The agreement at issue in each case must therefore be reviewed to determine whether it incorporates a "computational” approach or a "deadline” approach to redefine the parties' limitation rights.
. The term “functus officio” means “Having fulfilled the function, discharged the office, or accomplished the purpose, and therefore of no further force or authority.” Black’s Law Dictionary, 606 (5th ed. 1979). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492687/ | MEMORANDUM OF DECISION DENYING DEFAULT PREMIUM
FRANCIS G. CONRAD, Bankruptcy Judge.
Changes in the applicable decisional law *719require us to revisit1 the issue of what interest rate must be paid to secured creditors whose objections to confirmation are “crammed down.” Both of the two Chapter 12 cases covered by this Memorandum of Decision are back in front of us on remand after appeals by Bank. In each case, “[p]ur-suant to [our] policy as set forth in In re Smith, 178 B.R. 946 (Bankr.D.Vt.1995), [we] imposed, without any premium, the interest rate prevailing on the United States Treasury instrument closest in maturity as of the plan confirmation hearing date.” Merchants Bank v. Goodyear, Civ. No. 1:96CV105 (D.Vt. March 10, 1997). Smith holds, for a plethora of reasons that boil down to efficiency and entitlement, that the Treasury rate is “the appropriate rate because it includes the components of interest to which an oversecured creditor is entitled — pure interest, inflation, and liquidity premiums, while eliminating the components to which the creditor is not entitled, principally the default premium.” Smith, supra, 178 B.R. at 954.
While the appeals were pending, the Second Circuit decided In re Valenti, 105 F.3d 55 (2d Cir.1997), a Chapter 13 case which addressed two issues critical to our determination of this matter. The first issue addressed was valuation of collateral, which is necessary to determine the amount of the creditor’s secured claim under § 506(a).2 The second issue addressed in Valenti was the rate of “interest” that debtors must pay on secured claims under a Plan of Reorganization to provide the secured creditor with “value, as of the effective date of the plan, [which] is not less than the allowed amount of such claim.” § 1325(a)(5)(B)(ii).3
Valenti upheld Smith’s positions on efficiency and entitlement in interest rate determinations in several important respects, even citing it as authority. First, Judge Parker repudiated the “coerced loan” theory, with its egregiously wrongheaded notion that secured creditors are entitled to profit on their claims in bankruptcy. Valenti, swpra, 105 F.3d at 63-64. The Collier treatise, 5 Collier on Bankruptcy, ¶ 1129-03, p. 1129-99, 15th ed. (1994), fabricated this theory from whole cloth, “ ‘[without citing any case or other authority that existed at the time,’ ” and it “ ‘has skewed analysis ever since.’ ” Smith, supra, 178 B.R. at 950-51, quoting, In re Computer Optics, Inc., 126 B.R. 664, 671 (Bkrtcy.D.N.H.1991). Second, Valenti rejected the “cost of funds” approach for efficiency reasons: .
This approach ... is difficult for bankruptcy courts to apply efficiently and inexpensively. Because individual creditors borrow funds at different rates, bankruptcy courts would have to conduct evidentia-ry hearings to determine a creditor’s cost of funds on a case-by-case basis. In addition, bankruptcy courts using a “cost of funds” approach are likely to treat debtors inequitably. [D]ebtors would be charged different interest rates depending upon *720how much their respective creditors have to pay for funds.
Valenti, supra, 105 F.3d at 64. Finally, Judge Parker held that interest “should be fixed at the rate on a United States Treasury instrument with a maturity equivalent to the repayment schedule under the debtor’s reorganization plan.”
This method of calculating interest is preferable to either the “cost of funds” approach or the “forced loan” approach because it is easy to apply, it is objective, and it will lead to uniform results. In addition, the treasury rate is responsive to market conditions.
Id., at 64.
Valenti, however, did reject a major premise of Smith. It required default premium. Smith held that none is permitted.
The Code makes no provision for a default premium. Indeed, the attempt to provide one protects the creditor from what has in fact happened. Although it is often forgotten, bankruptcy is a default. See, e.g., Central Trust Co. v. Chicago Auditorium Association, 240 U.S. 581, 592, 36 S.Ct. 412, 415, 60 L.Ed. 811 (1916) (“proceedings, whether voluntary or involuntary, resulting in an adjudication of bankruptcy, are the equivalent of an anticipatory breach”); H.R.Rep. No. 595, 95th Cong., 1st Sess. 353 (1977), U.S.Code Cong. & Admim.News 1978, 5787, 6308-6309, reprinted in Norton Bankruptcy Code Pamphlet, 1994-95 ed. (revised), p. 374 (bankruptcy operates as the acceleration of the principal amount of all claims against the debtor). The object of the default premium in the pre-petition contract rate of interest was to protect the creditor from the risk of default. We see no reason to protect creditors from what has in fact happened. Awarding a default premium on the claim of secured creditors is like making the farmer’s other creditors insure the bam after it’s burned. Moreover, the statute clearly separates out the issues of risk and interest. Under § 1225(a)(5)(B)(ii), the creditor is entitled only to the present value of its claim. Risk enters the picture under § 1225(a)(6), which requires the Court to find that “the debtor will be able to make all payments under the plan and to comply with the plan.”
Smith, supra, 178 B.R. at 955.
Valenti unambiguously overruled us, on this point.
Because the rate on a treasury bond is virtually risk-free, the § 1325(a)(5)(B)(ii) interest rate should also include a premium to reflect the risk to the creditor in receiving deferred payments under the reorganization plan. A review of the caselaw in those jurisdictions that use this approach to determine a fair rate of interest suggests that the risk premium has been set by bankruptcy courts at from one to three percent. The actual rate will depend upon the circumstances of the debtor, including prior credit history as well as the viability of the reorganization plan. We hold that a range of one to three percent is reasonable in this circuit but leave it to the bankruptcy court in the first instance to make a specific determination. If the parties are unable to stipulate to the applicable risk premium, then the bankruptcy court may conduct a hearing limited solely to a determination of that premium.
Valenti, supra, 105 F.3d at 64.
We are, obviously, bound by the determinations of the Second Circuit, and ordinarily would swallow our reservations about the holdings of the higher court without comment. The procedural postures of these cases, however, warrant a couple of observations about Valenti’s requirement of a default premium. We note first that we shudder at the prospect of conducting hearings “limited solely to a determination of that premium,” when the outcome depends upon “the circumstances of the debtor, including prior credit history as well as the viability of the reorganization plan.” Id. This is not in fact a limited hearing at all, but a full-blown trial on feasibility made even larger by the inquiry permitted into debtors’ pre-petition history, which is ordinarily off limits. It would, we believe, be far more efficient to conduct hearings on the creditor’s cost-of-funds, which the Second Circuit rejected for efficiency reasons. Second, the costs of such a procedure will most often be way out of line *721with any conceivable benefit to the parties. A three percent default premium on the $7,850 secured claim of the creditor in Valenti, for example, would yield the creditor only $235.50 a year. Third, bankruptcy is a zero-sum game. More for one creditor means less for someone else. We have yet to come across any plausible argument that secured creditors are statutorily entitled to a default premium. Finally, Valenti’s approach to the default premium requires a ease-by-ease determination, just like its approach to valuation. The Supreme Court specifically rejected this approach to valuation in Rash, to which we now turn, for reasons that apply as well to determination of interest rates.
After Valenti was decided, the District Court remanded the Goodyears’ case and the Bankruptcy Appellate Panel remanded the Linehans’ case.4 We were instructed in each case to revisit the question of interest in light of Valenti. While the remands were pending, however, the U.S. Supreme Court released its opinion in Associates Commercial Corp. v. Rash, — U.S.- 117 S.Ct. 1879, 138 L.Ed.2d 148 (1997). That decision controls our determination here in two important respects. First, Rash, “reject[ed]” Valenti’s “ruleless approach allowing, use of different valuation standards based on the facts and circumstances of individual cases.” Id., — U.S. at --n. 5, 117 S.Ct. at 1886 n. 5. Instead, the Court said, “ ‘a simple rule of valuation is needed’ to serve the interests of predictability and uniformity.” Id., — U.S. at -, 117 S.Ct. at 1885 (citations omitted). Valenti’s holding on how to determine the appropriate risk factor is also a “ruleless approach,” and is thus, subject to the same infirmities as its holdings on valuation. More importantly, however, Rash shifted compensation for the risk of default from the “interest” component of “value” to the valuation component. The Supreme Court explicitly addressed the risks run by secured creditors whose collateral is retained and used by a debtor.
When a debtor surrenders the property, a creditor obtains it immediately, and is free to sell it and reinvest the proceeds .... If a debtor keeps the property and continues to use it, the creditor obtains at once neither the property nor its value and is exposed to double risks: The debtor may again default and the property may deteriorate from extended use. Adjustments in the interest rate and secured creditor demands for more “adequate protection,” 11 U.S.C. § 361, do not fully offset these risks.
Id., — U.S. at -, 117 S.Ct. at 1886 (citations omitted). Unlike interest rate adjustments, which “do not fully offset these risks,” “the réplacement-value standard accurately gauges the debtor’s ‘use’ of the property.” Id. If the risks of depreciation occasioned by a debtor’s retention and use of the collateral are “accurately gauge[d]” in the valuation process, then there is no occasion to provide additional compensation for the same risk when determining the appropriate interest rate.
With this background out of the way, we now affirm ourselves in light of Valenti and Rash for two independent reasons. First, we do not believe Valenti applies to either of these two cases. The secured creditor in Valenti was underwater, and its collateral was valued at the mid-range between wholesale and retail values. Here, by contrast, Bank is comfortably oversecured in both these pending cases.5 Accordingly, Valenti does not apply, and no risk premium is appropriate. Alternatively, we hold that because Bank is oversecured, the appropriate risk premium is 0 percent.
The second reason we affirm ourselves is that Rash created a new context in which to *722understand the issues, and made it possible for us to harmonize the various values articulated by Smith and Valenti. All three cases make it abundantly clear that efficiency and predictability in the resolution of contested issues is an important consideration. Valenti and Rash each also make it patently clear that bankruptcy courts must recognize and award secured creditors compensation for their heightened risk where debtors propose to retain and use the collateral. Valenti said the means to that end is by including a default premium in the interest rate. Rash requires that the risk premium be considered in connection with the valuation of collateral. Because use of the “replacement value standard accurately gauges the debtor’s ‘use’ of the property,” an additional default premium would give creditors more than they are entitled to. Rash, supra, — U.S. at -, 117 S.Ct. at 1885. Accordingly, having reviewed our decisions in these two cases in light of Valenti and Rash, we conclude that the interest rates should remain as originally imposed, with no default premium.
. Our subject matter jurisdiction over this controversy arises under 28 U.S.C. § 1334(b) and the General Reference to this Court under Part V of the Local District Court Rules for the District of Vermont. This is a core matter under 28 U.S.C. §§ 157(b)(2)(A), (B), (L), and (O). This Memorandum of Decision constitutes findings of fact and conclusions of law under Fed.R.Civ.P. 52, as made applicable by Fed.R.Bkrtcy.P. 7052.
. Section 506(a) provides, in pertinent part, as follows:
An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to sétoff under section 553 of this title, is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor’s interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.
.Although Valenti was a Chapter 13 case, the relevant statutory language is substantively identical in both Chapters 12 and 13. In each Chapter, confirmation of a 13 Plan requires, inter alia, that "with respect to each allowed secured claim provided for by the plan ... the value, as of the effective date of the plan, of property to be distributed by the trustee or the debtor under the plan on account of such claim is not less than the allowed amount of such claim.” The only difference in language between the two provisions is that Chapter 12 contains the italicized phrase and Chapter 13 does not. We hold that this difference in language is not significant.
. The District Court’s remand order appears in Merchants Bank v. Goodyear, Civil No. 1:96CV105, slip op. at 2 (D.Vt. March 11, 1997) (Murtha, C.J.). The BAP remand, based on a stipulation between the parlies, appears at In re Linehan, No. 96-50035, slip op. at 1 (2d Cir. BAP April 15, 1997) (Gallet, B.J.).
. The basis of our finding that Bank is comfortably oversecured in both cases is not ás clear-cut as we’d like. It is based on the entire record, and in particular the fact that both Debtors’ counsel and the Chapter 13 Trustee alleged that Bank was oversecured at the combined hearing on remand. Bank has consistently declined to address the issue or contest valuation. Accordingly, we find that Bank is oversecured in both cases. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492688/ | MEMORANDUM OPINION AND ORDER
JAMES H. WILLIAMS, Bankruptcy Judge.
Pending before the court are motions for sanctions to be imposed against the Debtor herein, Geraldine McCaulley, for her failure to submit to examination under Fed.R.Bankr. P.2004. The motions are brought by Mary L. McCaulley, Administratrix of the Estate of James A. McCaulley, Deceased; McCaul-ley Dairy, Inc.; Wintersong Village of Hayesville, Inc.; J.A. Reeder & Sons, Inc.; Ray Kissel, CPA; Terry Mairs; Medical Properties Advisors Corp.; and Oak Grove Manor, Inc., all creditors of the debtor.
The hearing on said motion was noticed for December 23, 1997. The Debtor was duly served with said notice by ordinary United States mad on December 2, 1997. At the hearing, the Debtor appeared through her then counsel, D. Jean Sanchez, Esq. who, pleading a lack of opportunity to prepare her client’s defense to the motions for sanctions, requested a continuance. The Court, being satisfied with the reasons given by counsel in support of her request, accordingly adjourned the hearing to January 21, 1998.
The Court heard arguments in support of and in opposition to the motions for sanctions on January 21,1998. Then counsel for Debt- or, D. Jean Sanchez, Esq. argued on behalf of her client. The Court verbally indicated its intention to grant the motions and directed counsel to supply evidence, in the form of affidavits, of fees and expenses incurred in *867their efforts to compel the Debtor to comply with the Court’s orders. The same have now been filed. This instruction was likewise given to Eric S. Miller, Esq., counsel for Betty J. Cordial and Larry D. Cordial, also creditors herein, and Mr. Miller has accordingly supplied an affidavit relative to his fees in seeking to examine the Debtor under Rule 2004.
The Court would observe that rarely, if ever, in over twenty-five years on the bench, has it had the misfortune to deal with a debtor so recalcitrant, so oblivious to her responsibilities and duties as a debtor seeking the protection of the bankruptcy laws, as Mrs. McCaulley. Most frustrating, perhaps, is that all of her actions, and non-actions, are undertaken with the wide-eyed feigned innocence of a poor, helpless widow who simply does not understand the importance of attending hearings (or punctuality of appearance at those she does deign to favor with her presence) and who has frustrated a string of attorneys whom she has persuaded to appear on her behalf and who have tried valiantly to help her, to deal with and communicate with her, all without visible success with the result that each has requested the Court to permit his or her withdrawal as counsel of record for the Debtor. Mrs. McCaulley is currently without representation, despite her assurances that she is “in negotiations” with counsel to enter the case on her behalf.
The Court clearly has the right to impose sanctions to compel compliance with its orders and attempt to redress the wrongs done to third parties by a debtor who refuses to obey. The Elder-Beerman Stores Corp. v. Thomasville Furniture Industries, Inc. (In re the Elder-Beerman Stores Corp.), 197 B.R. 629 (Bankr.S.D.Ohio 1996).
Accordingly, the Court GRANTS the motions before it and awards, as sanctions for the Debtor’s unwarranted obstructive conduct, compensation to various counsel as follows, taking into account, where applicable, the Court’s Guidelines for Compensation which permit only one-half of each professional’s asserted hourly rate for time spent in travel:
To Rick L. Brunner, Esq. and Marla K. Bressler, Esq. of Brunner & Brunner Co., L.P.A. the sum of: $1,252.50
To Michael P. Morley, Esq. of Weldon, Huston & Keyser, counsel for J.A. Reeder & Sons, Inc.; Ray Kissel, CPA; Terry Mairs; Mary L. McCaul-ley, Administratrix; McCaulley Dairy, Inc. and Wintersong Village of Hayesville, Inc. the sum of: $1,350.00
To Erie S. Miller, Esq., counsel for Betty J. Cordial and Larry D. Cordial the sum of: $ 704.50
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492689/ | DECISION
ROBERT E. GRANT, Bankruptcy Judge.
Debtor is a 98 year old man in poor health. He became incompetent in January of 1997. His daughter, Ruth Lockwood, acting through a power of attorney, filed a petition for relief under Chapter 7 on his behalf. The matter is before the court for a decision following trial of the issues raised by the trustee’s objection to Debtor’s claimed exemption for residential real estate. Debt- or’s right to the exemption is determined as of the date of the petition, In re Baker, 71 B.R. 312, 315 (Bankr.W.D.La.1987), and the trustee bears the burden of proving that it has not been properly claimed. Fed.R.Bankr.P. 4003(c).
Real estate located at 1313 Wabash Avenue, Lafayette Indiana has been claimed exempt, to the extent of $7,500, as Debtor’s residence. I.C. 34-2-28-l(a). The trustee has objected to the exemption, arguing that the property does not constitute Debtor’s residence. Debtor acknowledges that he does not live in the exempted property, but defends the exemption with the contention that his absence is involuntary, due to poor health, and he has never intended to abandon that home as his residence.
Debtor has not lived at the Wabash Avenue property since he and his wife moved into a nursing home more than three years ago. Since then, he has been in nursing homes, hospitals or living with his daughter, Mrs. Lockwood. On the date of the petition Debtor was residing with her, at her home, and had been doing so since his wife’s death in the summer of 1996. As rent, Debtor pays his daughter $111 per month and also pays for many of her household expenses, including the cable television, telephone, gas, water softener, and car repairs. Due to his advanced age and failing health, Debtor is not able to live on his own and requires around the clock care, which his daughter provides. The property Debtor claims as exempt is occupied by his other two daughters, who pay the property’s taxes.
Indiana has exercised its opportunity to opt out of the federal bankruptcy exemptions. See 11 U.S.C. § 522(b). Its citizens may only claim exemptions in the property specified by Indiana law. I.C. 34-2-28-0.5. Consequently, whether or not Debtor is entitled to his claimed exemption for residential property is a question of state law.
Indiana permits an exemption of up to $7,500 in “real estate or personal property constituting the personal or family residence of the debtor or a dependant of the debtor ... ”. I.C. 34r-2-28-1(a). The present dispute turns upon what constitutes such a residence. The phrase is not defined by the statute and neither the parties’ briefs nor the court’s own research has discovered any Indiana cases addressing its meaning. The trustee reads the statute as referring to the place where one actually fives. Debtor would essentially equate residence with domicile, by arguing for a construction that does not depend upon physical presence but focuses more upon the debtor’s intent or where the debtor considers its residence to be. The dispute is not surprising as the two concepts are closely associated, see State ex rel. Flaugher v. Rogers, 226 Ind. 32, 77 N.E.2d 594, 595 (1948) (residence is one circumstance to determine domicile), and the terms are sometimes used interchangeably. See State Election Board v. Bayh, 521 N.E.2d 1313, 1317 (Ind.1988). Nonetheless, they are distinct.
“Domicile” means “the place where a person has his true, fixed, and permanent home and principal establishment, and to which he has, whenever he is absent, the intention of returning.” Bayh, 521 N.E.2d at *8991317. See also Black’s Law Dictionary, 6th Ed. Once acquired, a domicile is presumed to continue until a new one is established. Bayh, 521 N.E.2d at 1317. To change one’s domicile requires actual relocation, combined with an intent to go to a given place and remain there. Consequently, a person may be absent from their domicile for long periods of time without losing it, so long as a new domicile is not acquired. Id. See also, Flaugher v. Rogers, 77 N.E.2d at 595.
Residence is different from domicile. While domicile focuses largely upon one’s intent to remain at or return to a given place, residence focuses more upon actual physical presence. ‘While ordinarily used in a sense of fixed and permanent abode, as distinguished from a place of temporary occupation, the term ‘residence’ does not include the intention required for domicile.” Collier on Bankruptcy ¶522.06.1 Residence is the. “place where one actually lives or has his home; a person’s dwelling place or place of habitation.” Black’s Law Dictionary, 6th Ed. While a person may have more than one residence, they may have only one domicile. Consequently, a person’s residence may be at one place, while their domicile may be at another. Flaugher v. Rogers, 77 N.E.2d at 595.
Indiana’s exemption statute uses both domicile and residence to determine who may take advantage of this state’s exemption laws and what may be claimed as exempt. “[A] debtor domiciled in the State of Indiana” is entitled to claim certain property as exempt. I.C. 34-2-28-1. That property includes “the personal or family residence of the debtor ..'. ”. I.C. 34-2-28-1(a). The Indiana General Assembly was undoubtedly aware of the difference between the two terms and used residence in paragraph (1)(a) to mean something different from domicile as used in paragraph (1). Its decision to do so should be respected. The court concludes that I.C. 34-2-28-l(a) applies only to the property where the debtor or its dependants actually reside. It is not sufficient that the property constitutes the debtor’s' domicile.
Debtor did not live in the property, which he claims exempt as his residence, on the date of the petition and he had not done so for at least three years. This undisputed fact is sufficient to rebut the presumed propriety of the claimed exemption and “shifts to the debtor the burden of producing evidence to show, as a matter of fact, that the property for which the exemption is claimed serves as a ‘residence’ for [him] or [his] dependants]_” In re Hollar, 79 B.R. 294, 296 (Bankr.S.D.Ohio 1987). Furthermore, in light of Debtor’s absence, the fact that his daughters occupy the property as tenants, paying the property’s taxes, also operates against the claim that the property constitutes Debtor’s residence.2 See In re Bradshaw, 125 B.R. 782, 786 (Bankr.E.D.Wis.1991).
Debtor’s case in support of the claimed exemption consists of Mrs. Lockwood’s testimony that he did not intend to abandon that property as his residence when he originally left it and the argument that, since due to his present condition he is not able to live on his own, his absence is involuntary. Mrs. Lockwood’s testimony concerning her father’s intent is not only self-serving, see Moneer, 188 B.R. at 27; Bradshaw, 125 B.R. at 786, but also largely irrelevant, given that residence turns more on actual physical presence than on intent. As for the argument that Debt- or’s absence is involuntary due to his poor health, the evidence does not warrant that conclusion. The relevant time to determine whether Debtor left the property voluntarily *900or involuntarily3 was as of three years ago, when he and his wife moved into a nursing home. The evidence presented to the court, however, related to Debtor’s present condition. Furthermore, although Debtor may very well need around the clock attention, there seems to be no compelling reason why he must live at Mrs. Lockwood’s home to receive it. She apparently could provide her father with the same type of care by moving into his home, rather than he into hers, or he could live with his other two daughters, without changing anyone’s living arrangements. It seems that Debtor’s present location may be more a matter of everyone’s convenience than Debtor’s necessity.
Given the evidence concerning Debtor’s intent, the property at 1313 Wabash Avenue, Lafayette Indiana may well be Debtor’s domicile; the court cannot, however, find that it is his residence. The trustee’s objection to Debtor’s claimed exemption for residential real estate is sustained and the exemption for that property will be denied.4 An appropriate order will be entered.
. Although Indiana’s statute does not use the term, another concept frequently associated with exemptions is homestead. Like domicile, a homestead exemption has an intent component, see e.g., In re Bratty, 202 B.R. 1008, 1009 (Bankr.S.D.Fla.1996); In re Moneer, 188 B.R. 25, 27 (Bankr.N.D.Ill.1995); In re Bradshaw, 125 B.R. 782, 784-85 (Bankr.E.D.Wis.1991); In re Johnson, 61 B.R. 858, 865 (Bankr.D.S.D.1986), which residence lacks.
. Even though the property may not be the debt- or’s residence, Indiana’s exemption statute permits the exemption to be claimed if the property is the "residence of ... a dependant of the debt- or ...”. I.C. 34-2-28-1 (l)(a). In this case, however, there is no evidence or argument that the two daughters who occupy the home are depen-dants of the debtor.
. The court accepts, solely for the purposes of argument, Debtor's contention that if one leaves their residence due to circumstances beyond their control, this will not lead to the loss of the exemption they might otherwise be able to claim for the property. The Indiana courts have not addressed the issue and, since the evidence does not bring Debtor within such a rule, this court need not do so.
. Sustaining the trustee’s objection does not necessarily preclude Debtor from claiming an exemption in the property. Since it is not his residence, the property could be claimed as exempt, through I.C. 34-2-28-l(b) as "other real estate ... ”. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492690/ | ORDER RE: MOTION FOR SUMMARY JUDGMENT
WILLIAM L. EDMONDS, Chief Judge.
The matter before the court is plaintiff’s motion for summary judgment on his complaint for turnover of property of the estate. Hearing on the motion was held November 4, 1997 in Sioux City. Donald H. Molstad appeared for plaintiff Keith Klemme. A. Frank Baron appeared for defendant Leon Matthias, d/b/a Matthias Arabians.
Matthias has possession of an Arabian horse, Of Blarney Bey, owned by Klemme. Matthias took possession of the horse on or about June 6,1995 pursuant to an agreement of that date. The agreement, titled “Show Expenses and Training Fees,” is attached to Matthias’s answer as Exhibit A.
Klemme filed a Chapter 13 bankruptcy petition May 21, 1997. On July 3, 1997, Klemme commenced this action to obtain turnover of the horse as property of his bankruptcy estate. Matthias answered that he has a lien under Chapter 579 of the Iowa Code, and that he is entitled to preserve and enforce the lien. Doc. 5.
On September 23, 1997, Klemme filed a motion for summary judgment on the issue whether Matthias perfected his Chapter 579 lien. Docs. 8, 9. At the hearing on the motion, Klemme argued that, as a Chapter 13 debtor-in-possession, he has the strong-arm power of the trustee under 11 U.S.C. *907§ 544 to avoid such a lien if it was not perfected on the date of the bankruptcy- filing. Matthias claims he has both an enforceable statutory lien' under Iowa Code § 579.1 and a UCC lien perfected by possession.
DISCUSSION
Klemme contends that Matthias has an unperfected lien because Iowa Code § 579.1 incorporates the filing requirement of Iowa Code § 579A.2(2). It is undisputed that no financing statement was filed. ' •
Prior to 1995, § 579.1 read as follows:
Livery and feed stable keepers, herders, feeders, keepers of stock and of places for the storage of motor' vehicles, boats and boat engines and boat motors shall have a hen on all property coming into their hands, as such, for their charges and- the expense of keeping, but such hen shah be subject to ah prior hens of record.
In 1995, the statute was amended. The hen for storage of vehicles and boats was made a separate paragraph. The paragraph granting a hen for care of stock now reads:
1. Livery and feed stable keepers, herders, feeders, or keepers of stock shall have a hen on ah property coming into their hands, as such, for their charges and the expense of keeping, but such hen shah be subject to chapter 579A and ah prior hens of record.
Iowa Code § 579.1, as amended by Acts 1995 (76 G.A.) ch. 59, § 1 (enacted April 24,1995). The law as amended became effective July 1, 1995. Iowa Const, art. Ill, § 26; Iowa Code § 3.7(1).
The 1995 legislation also adopted new Chapter 579A, creating a hen for a “custom cattle feedlot operator.” A feedlot operator has a hen on cattle while they are on his lot and for one year thereafter; the hen is further “preserved” by filing a hen statement with the Secretary of State. Iowa Code § 579A.2(2). Under the statute, “cattle” are bovine animals. Iowa Code § 579A.1(1). A “feedlot” is “a lot, yard, corral, or other area in which hvestock are confined, primarily for the purposes of feeding and growth prior to slaughter.” Iowa Code § 579A.1(4), incorporating Iowa Code § 172D.1(6). The court assumes the Show Expenses and Training Fees agreement fairly describes Matthias’s business, which is the care, training and showing of Arabian horses. Chapter 579A does not apply independently to Matthias.
Klemme argues that the amendment of § 579.1 requires a keeper of livestock to perfect his lien by using the filing procedure in § 579A.2(2).. The court disagrees. The court assumes for argument that amended § 579.1, which became effective nearly a month after Matthias acquired possession of Klemme’s horse, applies to Matthias’s lien. Prior to the 1995 amendment, a livestock keeper’s lien was “subject to all prior liens of record.” Any such lien of record had priority over a lien for the care of stock. Beh v. Moore, 124 Iowa 564, 100 N.W. 502 (1904) (keeper of cattle had lien inferior to recorded mortgage). The “subject to” phrase was a rule of priority; it did not incorporate methods of perfecting other liens.
The court concludes that the phrase as amended in 1995 has the same meaning. “Prior liens of record” take precedence over a lien acquired under § 579.1. Moreover, because a feeder of cattle could now have a lien under either Chapter 579 or 579A, amended § 579.1 provides that a cattle feeder using the filing procedure in § 579A.2(2) has priority over a cattle feeder who relies solely on § 579.1. The method for acquiring a statutory lien for the care of a horse was not changed by the 1995 amendment. Because Matthias retains possession of Klemme’s horse, he has a lien securing repayment of the debt for care of the animal under § 579.1.
Despite Klemme’s relianee in oral argument on § 544, there is no avoidance proceeding pending in this case.1 Because Matthias has an unavoided lien, Klemme’s right to turnover is subject to providing adequate protection. 11 U.S.C. § 363(e); 5 Collier on Bankruptcy ¶ 542.02[2] at 542-11 to - 12 (15th ed. rev.1997) (discussing United *908States v. Whiting Pools, Inc., 462 U.S. 198, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983)). Adequate protection involves issues of fact and is not a matter for summary judgment.
The only issue raised on summary judgment was the interpretation of Iowa Code § 579.1. The court concludes that Klemme’s argument is incorrect and the motion should be denied. Therefore, it is unnecessary to decide Matthias’s alternative argument that he has a perfected UCC lien.
IT IS ORDERED that plaintiff’s motion for summary judgment is denied.
. The Bankruptcy Appellate Panel for the Eighth Circuit has recently held that a Chapter 13 debt- or does not generally have the trustee’s avoid-anee powers. In re Merrifield, 214 B.R. 362 (8th Cir. BAP 1997). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492691/ | JUDGMENT
JAMES F. QUEENAN, Jr., Bankruptcy Judge.
Micron Separations, Inc. (“MSI”) has brought this action against Pall Corporation (“Pall”) seeking a declaration of MSI’s payment obligations under its agreement with Pall dated December 18, 1991 (the “Agreement”). The Agreement obligated MSI to pay Pall two-thirds of MSI’s net áfter-tax profits, subject to certain adjustments, all as determined by KPMG Peat Marwick (“KPMG”) in a manner consistent with generally accepted accounting principles and the terms of the Agreement. MSI’s concern centers on two patent infringement judgments issued by the District Court of Massachusetts against MSI in favor of Pall, one dated November 24, 1995 in the sum of $12,250,-364.00 (the “1995 Judgment”) and the other dated October 3, 1996 in the sum of $4,085.033.00 (the “1996 Judgment”). This court completed trial of the present case on September 23, 1997 and, at the conclusion of trial, dictated into the record its findings of fact and conclusions of law. ' - -
The judgment herein entered is contingent upon MSI assuming the Agreement pursuant to court approval. It is
ORDERED, ADJUDGED and DECREED that
1. MSI is not in breach of, or in default under, the Agreement.
2. The Agreement governs MSI’s payment obligations under the 1996 Judgment as well ás the 1995 Judgment.
3. KPMG’s interpretation of the Agreement’s provisions governing MSI’s obligations, and its. computation of MSI’s net after tax-profits, are in all respects consistent with the Agreement and generally accepted accounting principles, including without limitation the following:
*2(a) MSI’s legal expenses in its patent litigation with Pall are proper deductions;
(b) Prejudgment interest included in the 1995 judgment is a proper deduction even though some such interest was postjudgment interest on a prior judgment issued on June 24,1991;
(c) Tax deductions relating to the two judgments are not yet “realized” within the meaning of the Agreement.
(d) The deductions computed by KPMG for salaries and bonuses are proper deductions.
4. MSI is presently entitled to a credit of $8,726,429.00 on its payment obligations under the Agreement. This is a credit only, not a right of payment or reimbursement held by MSI. Pursuant to the terms of the Agreement, the payments that are the basis of such credit are to be applied first to postjudgment interest, accrued to today, on both the 1995 Judgment and the 1996 Judgment. Because the issue was not litigated, the court makes no determination of whether any remaining credit should be applied first to the principal amount of the 1995 Judgment or first to the principal amount of the 1996 Judgment.
5. The entry of the 1995 Judgment on November 24, 1995 constitutes the “entry of final judgment pursuant to mandate after appellate review” within the meaning of the Agreement, so that by reason of the Agreement MSI’s manufacture and sale of nylon products prior thereto (and after the September 27, 1995 judgment of the United States Court of Appeals for the Federal Circuit) was not in violation of the District Court’s injunction.
6. So long as MSI remains free of default under the Agreement (and if it assumes the Agreement), Pall is hereby enjoined from taking any action to collect the 1995 Judgment or the 1996 Judgment. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484207/ | J-A15033-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
STEPHANIE FETTERMAN : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
SIMON E. COCHRAN :
:
Appellant : No. 1300 WDA 2021
Appeal from the Order Entered October 21, 2021
In the Court of Common Pleas of Armstrong County
Civil Division at No(s): 2018-092-CIVIL
BEFORE: BOWES, J., KUNSELMAN, J., and SULLIVAN, J.
MEMORANDUM BY SULLIVAN, J.: FILED: NOVEMBER 16, 2022
Simon Cochran (“Mr. Cochran”) appeals from the order denying his
motion to disqualify Alaine Generelli, Esquire (“Attorney Generelli”) and the
law firm of Geary, Loperfito & Generelli, LLC (“the GLG firm”) from
representing Stephanie Fetterman (“Ms. Fetterman”). We affirm.
While employed at the office of Gregory W. Swank, Esquire (“Attorney
Swank”), Shea Kraft, Esquire (“Attorney Kraft”) represented Mr. Cochran in a
custody case against Ms. Fetterman. Attorney Generelli, a member of the
GLG firm, represented, and continues to represent, Ms. Fetterman in that
case. Thereafter, Attorney Kraft left Attorney Swank’s employ to work for the
GLG firm. See N.T., 10/20/21, at 11-15, 19-20, 47.
Mr. Cochran filed a motion to disqualify Attorney Generelli and the GLG
firm in which he averred that Attorney Kraft learned secret and confidential
information relating to his case while representing him, and that Attorney
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Generelli’s and the GLG firm’s continued representation of Ms. Fetterman
constituted a conflict of interest and a violation of Pennsylvania Rules of
Professional Conduct 1.9 and 1.10 (“Rules 1.9 and 1.10”). See Motion to
Disqualify, 10/19/21, at 1-2 (unnumbered). Other clients whom Attorney
Kraft had represented while working for Attorney Swank filed similar
disqualification motions against Attorney Generelli and the GLG firm.1 On
October 20, 2021, the trial court held an evidentiary hearing on all the
disqualification motions.
We summarize the testimony at the evidentiary hearing as follows. In
August 2021, Attorney Swank began reducing Attorney Kraft’s workload and
expressed a clear intent to terminate his employment. See N.T., 10/20/21,
at 11-13. Attorney Kraft had exploratory employment discussions with the
GLG firm. See id. at 13-15. Later that month, Attorney Kraft told Attorney
Swank that he intended to find a new job, and they discussed some of Attorney
Kraft’s active case files. Thereafter, Attorney Kraft found that his key no
longer opened the door to the main office of Attorney Swank’s firm. See id.
at 15-18. At that time, the GLG firm had not yet hired Attorney Kraft and he
was considering a number of employment possibilities. See id. at 14, 23-26.
____________________________________________
1 Three of those cases are now on appeal before this Court, Wheatley v.
Wheatley, Hatch v. Hatch; and Dietrich v. Dietrich, and are listed
consecutively before this panel at J-A15031-22, J-A15032-22, and J-A15034-
22. We address those appeals in separate decisions.
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We summarize the testimony at the evidentiary hearing as follows. In
August 2021, Attorney Swank began reducing Attorney Kraft’s workload and
expressed a clear intent to terminate his employment. See N.T., 10/20/21,
at 11-13. Attorney Kraft had exploratory employment discussions with the
GLG firm. See id. at 13-15. Later that month, Attorney Kraft told Attorney
Swank that he intended to find a new job, and they discussed some of Attorney
Kraft’s active case files. Thereafter, Attorney Kraft found that his key no
longer opened the door to the main office of Attorney Swank’s firm. See id.
at 15-18. At that time, the GLG firm had not yet hired Attorney Kraft and he
was considering a number of employment possibilities. See id. at 14, 23-26.
Prior to hiring Attorney Kraft, the GLG firm had a series of consultations
with an ethics attorney, Beth Ann Lloyd, Esquire (“Attorney Lloyd”), to
determine, if it hired Attorney Kraft, what actions it would need to take to
comply with the screening requirements of Rule 1.10 in Mr. Cochran’s case
and any other active case in which Attorney Generelli had been Attorney
Kraft’s opponent (the “conflict cases”). See id. at 47, 57-58. Attorney Lloyd
explained to the GLG firm that Attorney Kraft would have to withdraw from
representation in the conflict cases, and that the GLG firm would need to
screen him from any contact with the physical or electronic files in those cases,
prevent him from hearing any discussion of them, and not share with him any
of the fees in those cases. See id. at 47, 58-59. Attorney Generelli also told
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the entire GLG staff that screening procedures would be put into place if
Attorney Kraft were hired. See id. at 50-51.
The GLG firm hired Attorney Kraft, having told him that his employment
was contingent upon his compliance with the ethical rules, and directed him
to follow all of Attorney Lloyd’s recommendations. See id. at 47-48, 57-59,
75.2 Attorney Lloyd helped Attorney Kraft write a letter which he sent to Mr.
Cochran one week before he began working at the GLG firm. See id. at 21,
32.3 The letter stated that Attorney Kraft would be joining the GLG firm, would
withdraw from representing Mr. Cochran, would not participate in the case at
the GLG firm in any way or reveal confidential information about Mr. Cochran,
the case, or the litigation strategy, and had not taken any case files or
materials concerning the case. The letter also explained to Mr. Cochran the
procedures the GLG firm would use to protect Mr. Cochran’s confidences and
to isolate Attorney Kraft from access to the physical and electronic files in the
case. See id. at 24-28. Additionally, the letter stated that Mr. Cochran’s case
would not be discussed in Attorney Kraft’s presence, and that Attorney Kraft
would not share in any of the fees paid to the GLG firm in the case. See id.
____________________________________________
2 Attorney Swank immediately removed Attorney Kraft from his offices when
Attorney Kraft told him about his new employment, which prevented them
from discussing the remainder of Attorney Kraft’s active cases. See N.T.,
10/20/21, at 16-18.
3 Attorney Kraft sent similar letters to his former clients in the other conflict
cases. See N.T., 10/20/21, at 22-28.
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at 23-26, 28, 30, 43, 47. Attorney Generelli’s testimony confirmed Attorney
Kraft’s testimony. See id. at 53, 56-59. The letter provided Mr. Cochran with
Attorney Kraft’s cell phone number, personal email address, fax number, and
mailing address. See id. at 24-25.4
By the time Attorney Kraft began work at the GLG firm in mid-
September 2021, the firm had expended substantial time and effort and
implemented all of Attorney Lloyd’s suggested screening procedures: physical
documents in the conflict case files, other than those kept in Attorney
Generelli’s office, are maintained in a locked filing cabinet; and the electronic
files in those cases, and Attorney Generelli’s email, are password-protected
and segregated from other electronic case files. See id. at 48-49, 59-61, 64,
70-72, 75. Additionally, prior to the time Attorney Kraft began working at the
GLG firm, Attorney Generelli advised the entire firm and staff 5 about the
screening procedures and directed them to: promptly remove conflict case
documents from the copier; put faxes6 relating to conflict cases in special
____________________________________________
4 At the hearing on the joint disqualification motions, neither Mr. Cochran nor
any other former client in the conflict cases introduced evidence of responding
to Attorney Kraft’s letter or alleged that Attorney Kraft disclosed confidential
information in any conflict case.
5 Attorney Kraft testified that the GLG firm now has four lawyers and also
employs a paralegal, a secretary, an office manager/paralegal, and a
receptionist, which Attorney Generelli’s testimony corroborated. See N.T.,
10/20/21, at 35-37, 39, 50, 65-66, 70.
6 Attorney Generelli receives faxes infrequently. See N.T., 10/20/21, at 70.
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folders and take them to her office; and print documents in conflict cases on
their own printers and bring them directly to her. See id. at 47-54, 59-60,
67-69. The GLG firm also changed its docketing system. See id. at 59.
Employees must seek assistance to see written documents in a conflict case.
See id. at 65-66, 72-73.
Attorney Kraft testified that the GLG firm explained the screening
procedures to him before he began working at the firm. See id. at 43. Since
he joined the GLG firm, he has not seen, or had access to, any of the conflict
case files, has not discussed any of the conflict cases with anyone at the GLG
firm, has not disclosed any confidential information concerning the conflict
cases, has not heard any discussion of those cases, and recognizes his duty
under the Rules of Professional Conduct to maintain the confidences of his
former clients. See id. at 26-30, 38-43. Attorney Generelli also testified that
Attorney Kraft has been screened from all of the conflict cases and has never
disclosed confidential information to her concerning those cases. See id. at
52, 54. Attorney Kraft’s employment contract specifies that he can be fired
for violating the Rules of Professional Conduct. See id. at 38.
Attorney Generelli, the primary attorney who works on the conflict
cases, has instructed her paralegal, the only employee who works with her on
those cases, not to discuss them in front of Attorney Kraft. See id. at 45-46,
50, 67. Attorney Generelli testified that she has been “pretty firm and direct”
with staff about what they must do to comply with the screening protocols and
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continues to discuss them with staff on an ongoing basis. See id. at 52, 60.
Additionally, all of the GLG staff observed the time and energy the firm
expended putting the protocols in place and understood that the firm took the
matter very seriously. See id. at 64. Though the firm did not create a
separate, written screening document for staff, it used Attorney Lloyd’s
written advice about the necessary elements of a screen to formulate its
screening protocols, all of which it implemented prior to the inception of
Attorney Kraft’s employment and all of which Attorney Generelli conveyed to
the entire GLG firm. See id. at 48-49, 59-61, 64, 67, 70-73, 75-76.
Testimony at the disqualification hearing established that when
employed by Attorney Swank, Attorney Kraft performed fifteen hours of work
on Mr. Cochran’s case in the two years he worked on it, which included
researching psychological evaluations and preparing for a custody trial that
was continued. Two other attorneys worked on the case. See N.T., 10/20/21,
at 46, 85.7
The day after the hearing, the trial court entered an order denying Mr.
Cochran’s disqualification motion and all of the other disqualification motions.
The trial court found that Attorney Kraft, Attorney Generelli, and the GLG firm
____________________________________________
7 No evidence was presented at the hearing that Mr. Cochran had responded
to Attorney Kraft’s letter, and Mr. Cochran did not assert that Attorney Kraft
had disclosed confidential information about his case.
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had not violated Rule 1.9 or Rule 1.10. See Trial Court Order, 10/21/21. Mr.
Cochran filed a notice of appeal and, days later, filed a Pa.R.A.P. 1925(b)
statement.8 The trial court complied with Rule 1925(a).
Mr. Cochran raises the following issue for our review:
Did the trial court err in concluding that [Mr. Cochran’s] trial
counsel, having left his employment with the law firm representing
[Mr. Cochran] in active litigation and then immediately becoming
employed by the law firm representing the opposing party in the
same litigation, did not violate the terms of Rule 1.10 of the Rules
of Professional Conduct requiring that [Attorney Kraft’s] new
employer be disqualified from representing the opposing party in
the litigation?
Mr. Cochran’s Brief at 8.9
____________________________________________
8 This is a children’s fast track appeal, see Pa.R.A.P. 102. Appellants in such
cases, must file their Rule 1925(b) statement with their notice of appeal, which
Mr. Cochran failed to do. See Pa.R.A.P. 1925(a)(2)(i). We nevertheless
decline to quash Mr. Cochran’s appeal because he substantially complied with
the rule, and his initial non-compliance with the rule did not occasion prejudice
to any of the parties and did not impede the trial court’s ability to issue an
opinion. See In Re K.T.E.L, 983 A.2d 745, 747 (Pa. Super. 2009) (holding
that the failure to file a Rule 1925(b) statement with the notice of appeal in a
children’s fact track case resulted in a defective notice of appeal, but that
quashal was not compelled where neither party suffered prejudice as a
result).
9 Mr. Cochran makes no argument concerning the Rule 1.9 violation claim he
raised in the trial court. Accordingly, we will not review it. See
Commonwealth v. Fletcher, 986 A.2d 759, 785 (Pa. 2009) (indicating that
a claim is waived where appellant fails to cite pertinent authority or relevant
detail in his brief). We note that Rule 1.9 precludes an attorney from
representing a party in a litigation where he has previously represented the
party’s opponent. Mr. Cochran does not allege that Attorney Kraft represents
Ms. Fetterman.
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As a preliminary matter, we note that an order denying a motion to
disqualify a law firm for an alleged conflict of interest is immediately
appealable as a collateral order. See Rudalavage v. PPL Elec. Util. Corp.,
268 A.3d 470, 478 (Pa. Super. 2022); see also Pa.R.A.P. 313 (governing
collateral orders).
Mr. Cochran asserts that Rule 1.10(b) compels the disqualification of
Attorney Generelli and the GLG firm from continuing to represent Ms.
Fetterman in the case against him because his former counsel, Attorney Kraft,
now works at the GLG firm. Under Rule 1.10(b), when a lawyer leaves one
law firm for another, his new firm may represent a person on a matter he
previously worked on for a client with materially adverse interests (and
acquired protected information that is material to the matter) if: (1) the firm
screens the lawyer from any participation in the matter and he receives no fee
for it, and (2) the lawyer gives prompt, written notice to his former client so
that the client may ascertain the lawyer’s compliance with the rule. See Rule
1.10(b). Screening requires the lawyer’s isolation from participation in the
matter through “the timely imposition of procedures . . . reasonably adequate
under the circumstances to protect information that the lawyer is obligated to
protect . . ..” Rule 1.0(k).
When reviewing a trial court’s order on the disqualification of counsel,
this Court employs a plenary standard of review. See Darrow v. PPL
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Electric Utilities Corp., 266 A.3d 1105, 1111 (Pa. Super. 2021). The law
recognizes that it is appropriate to sanction attorneys for violating ethical
rules. See McCarthy v. Southeastern Pennsylvania Transp. Auth., 772
A.2d 987, 989 (Pa. Super. 2001). However, disqualification is not freely
granted. Pennsylvania courts assign particular importance to protecting a
party’s right to counsel of his choice. See Rudalavage, 268 A.3d at 478.
Disqualification, therefore, is only appropriate when another remedy is not
available and, more important, when the right to counsel of one’s choice
interferes with the essential need to ensure that the party seeking
disqualification receives their due process right to a fair trial. Id. The
Pennsylvania Supreme Court reserves for itself the power to punish attorney
misconduct. See Reilly by Reilly v. Southeastern Pennsylvania Transp.
Auth., 489 A.2d 1291, 1299 (Pa. 1985) (stating that violations of the Rules
of Professional Conduct are not a proper subject for consideration of the lower
courts to impose punishment for attorney misconduct).
To assess the reasonable adequacy of a law firm’s screening procedures
when it hires an attorney who previously worked for the opposing party in an
active case, our Courts weigh a series of factors federal courts have identified.
See Rudalavage, 268 A.3d at 479 (citing Dworkin v. General Motors
Corp., 906 F.Supp. 273, 279-80 (E.D. Pa. 1995)); see also Darrow, 266
A.3d at 1112 (same). The “Dworkin” factors include: (1) the substantiality
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of the relationship between the attorney and the former client; (2) the time
lapse between the matters in dispute; (3) the size of the firm and the number
of disqualified attorneys; (4) the nature of the disqualified attorney’s
involvement; and (5) the timing of the wall. See Rudalavage, 268 A.3d at
479; see also Darrow, 266 A.3d at 1112. Rule 1.10 and the Dworkin factors
place particular emphasis on the creation by the attorney’s new firm of a
reasonably adequate wall or screen10 to protect information the disqualified
attorney is obligated to protect. The critical factors concerning the screen are
whether it: (1) prohibits the discussion of sensitive matters; (2) restricts the
circulation of sensitive documents; (3) restricts access to sensitive files; and
(4) manifests a strong firm policy against breach, including sanctions, physical
and/or geographical separation. See Rudalavage, 268 A.3d at 480 (citing
Dworkin, 906 F.Supp. at 280); see also Darrow, 266 A.3d at 1112 (also
citing Dworkin).
On appeal, Mr. Cochran argues that Ms. Fetterman failed to show that
the GLG firm complied with Rule 1.10(b). He contends that Attorney Kraft’s
prior involvement in his case and the substantiality of their attorney-client
relationship, as well as the short time lapse between the matters in dispute,
____________________________________________
10 Courts use the terms “wall” and “screen” somewhat interchangeably.
Because Rules 1.10 and 1.0(k) use the terms “screened” and “screen,” we
primarily use those terms.
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and the small size of the GLG firm, support disqualification. He also asserts
that the screen was deficient since it was not in writing and did not explicitly
state the penalties for staff for violating the screen. Mr. Cochran further
asserts that his continuing interest in Attorney Kraft’s loyalty weighs heavily
in favor of disqualification of the entire GLG firm. To that end, Mr. Cochran
requests that the Court follow Norfolk Southern Ry. v. Reading Blue
Mountain and Northern Ry. Co., 397 F. Supp. 2d 551 (M.D. Pa. 2005),
which disqualified a law firm from representation under what he asserts were
similar factual circumstances.
As the trial court noted, the GLG firm retained a legal ethics attorney
and followed all of her recommendations, which resulted in Attorney Kraft
sending prompt letters to his clients that complied with the requirement of
Rule 1.10(b)(2), and the GLG firm instituted screening protocols prior to
Attorney Kraft’s start date at the GLG firm under which it keeps the physical
conflict files in a locked filing cabinet and password-protects the electronic
conflict files (and Attorney Generelli’s email) to screen them from Attorney
Kraft. See Trial Court Opinion, 11/10/21 at 1-2, 4. Therefore, as the trial
court stated, Mr. Cochran’s motion sought prophylactic relief unconnected to
any actual Rule of Professional Conduct violation. See id. at 4. The trial court
also recognized that its ability to disqualify lawyers under the Rules of
Professional Conduct is narrow, and that disqualification is a serious remedy
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that should not interfere with a party’s right to choose counsel unless due
process and the opposing party’s right to a fair trial is affected. See id. at 3-
4 (citing In re Estate of Pedrick, 482 A.2d 215, 221 (Pa. 1984)). The trial
court found no violation of the Rules of Professional Conduct and therefore no
basis for the disqualification of Attorney Generelli or the GLG firm. See id. at
4-5.
We agree with the trial court that Attorneys Kraft and Generelli and the
GLG firm did not violate Rule 1.10(b). See Trial Court Opinion, 11/10/21, at
1-2, 4 (relying upon the testimony at the disqualification hearing). We further
conclude that because there was no violation of the Rules of Professional
Conduct, Mr. Cochran did not suffer an impairment of his due process right to
a fair trial that would require disqualification. Further, the “Dworkin” factors
that might weigh in favor of disqualification do not compel the extreme
remedy Mr. Cochran seeks.
At the outset, Attorney Kraft satisfied the requirement of Rule
1.10(b)(2) by sending a prompt letter to Mr. Cochran and all the other clients
he had represented in the conflict cases. Mr. Cochran offered no evidence
that he replied to the letter Attorney Kraft sent to express a concern about
Attorney Kraft’s move to the GLG firm.
This case turns on the reasonable adequacy of the GLG firm’s screen.
The very short lapse of time between Attorney Kraft’s representation of Mr.
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Cochran and his move to the GLG firm, which represents Mr. Cochran’s
opponent, supports Mr. Cochran’s position. However, that factor would weigh
more heavily if Attorney Kraft had actively represented Ms. Fetterman or had
the GLG firm’s screen been defective, and neither is the case in this matter.11
The GLG firm undertook timely and good-faith efforts to create a set of
screening procedures “reasonably adequate under the circumstances” to
protect information that Attorney Kraft was obligated to protect. See Rules
1.0(k), 1.10(b). The firm consulted with an ethics attorney to construct the
screen, and substantially restructured its physical storage, computer, and
document circulation policies to prevent any sensitive material from reaching
Attorney Kraft. Further, the firm erected its screen before Attorney Kraft
joined the firm. See Dworkin, 906 F.Supp. at 280 (noting the importance of
____________________________________________
11 Given the limited evidence Mr. Cochran presented at the hearing, it is
difficult to assess the factors relating to the substantiality of the relationship
between the attorney and the former client, and the nature of the disqualified
attorney’s involvement in the case. Mr. Cochran’s evidence established that
Attorney Kraft billed fifteen hours on Mr. Cochran’s case over the course of
two years, the majority of which involved discovery, as well as preparation for
a custody trial that was continued, see N.T., 10/20/21, at 85, a delay Ms.
Fetterman alleges was Mr. Cochran’s responsibility. See Ms. Fetterman’s Brief
at 32-33. It is not clear that proves a substantial attorney-client relationship.
Further, should there be further litigation of the custody agreement based on
new or changed circumstances, Attorney Kraft will not be privy to any such
new information. Because we decide this case on other grounds, we do not
determine whether there was a substantial attorney-client relationship
between Mr. Cochran and Attorney Kraft or whether Attorney Kraft had
substantial involvement in the case.
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instituting a screening protocol when the potentially disqualifying event
occurs). Additionally, neither Mr. Cochran nor any other conflict case client
has alleged that the screen has been breached, and the evidence at the
disqualification hearing did not show a breach. Attorney Generelli, the primary
attorney on the conflict cases, testified that she instructed her paralegal, the
only other person who worked with her on those cases,12 not to discuss them
in front of Attorney Kraft. See N.T. 10/20/21, at 67. Attorney Kraft testified
that he never discussed any conflict case at the GLG firm or heard any of the
cases discussed. See id. at 21, 30, 41-42. Additionally, all the members of
the firm understood the screening protocols. See id. at 48-54, 76.
The screen also effectively restricted circulation of, and restricted access
to, sensitive documents and files. The GLG firm implemented many
procedures to screen conflict matters before Attorney Kraft’s arrival. These
included the protection of the physical and electronic conflict case files, the
change in the firm’s docketing system to separate out all of Attorney
Generelli’s clients, and the creation of a new protocol requiring removing
sensitive documents from copiers and immediately placing incoming faxes in
____________________________________________
12 Attorney Generelli testified that Attorney Loperfito, another member of the
firm, has some limited involvement in family law cases. Attorney Loperfito
assists on some financial issues, but he does not directly represent any family
law client in court unless Attorney Generelli needs him to fill in, and he has
declined to try any custody cases. See N.T., 10/20/21, at 73.
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a closed mail folder in Attorney Generelli’s office. Those undertakings
prevented Attorney Kraft from having any exposure to sensitive documents or
files. See id. at 27, 29, 41-42, 44-46, 48-50, 59, 61, 67-71.13
The GLG firm’s screen contained a reasonably adequate firm policy
against breach, including sanctions, physical and/or geographical separation.
See Rudalavage, 268 A.3d at 470; see also Darrow, 266 A.3d at 1112.
Attorney Kraft testified that he was informed that if he breached the Rules of
Professional Conduct, he could face disciplinary action and be fired. See N.T.,
10/20/21, at 30-31, 38. Attorney Generelli confirmed Attorney Kraft’s
testimony. See id. at 53. Attorney Generelli also testified that everyone at
the GLG firm knew the screening protocols as a result of an open discussion
prior to Attorney Kraft’s hiring, and she has ongoing communications with the
staff to ensure that the recommended procedures remain in place. See id. at
49-50, 52, 60, 64. Further, the entire GLG firm saw how seriously the firm
____________________________________________
13Attorney Kraft testified on cross-examination at the disqualification hearing
that he had seen ten or eleven disqualification motions “roll in” on the fax
machine. See N.T., 10/20/21, at 41-42. Attorney Swank asked him no
further questions about that incident, which: (1) was Attorney Kraft’s only
exposure to anything related to the conflict cases while at the GLG firm, (2)
did not risk his disclosing information he was obligated to protect under Rules
1.10(b) and 1.0(k), and (3) concerned documents Mr. Cochran’s attorney,
Attorney Swank, elected to fax to the GLG firm. This single incident does not
undermine the effectiveness of the screen. As noted, Attorney Generelli
testified that the GLG firm’s screening protocol requires personnel to take
faxes quickly to her office when they are received. See id. at 68.
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regarded the screen. See id. at 64. Under these circumstances, we do not
find it dispositive that the staff was not explicitly informed of the consequences
of violating the screen.14
We note that some courts have held that a law firm’s small size is a
detriment to implementing an effective screen because the attorneys at a
small firm have more opportunity for contact with each other than at a large
firm. See Dworkin, 906 F. Supp. at 280 (collecting cases). We believe that
a firm’s size is not in itself a determinative measure of the firm’s ability to
maintain an effective screen. Indeed, Dworkin itself implicitly recognizes the
limitations of such a blunt measuring device. See id. at 283 (stating that
“[t]he effectiveness of any ethics screen depends upon the integrity of the
individuals who comply with it”). There is a further problem with using the
size of a firm as an absolute measure of its ability to maintain an effective
____________________________________________
14 Some courts have assessed the strength of a law firm’s screen by focusing
on whether it expressly includes a termination penalty for all violators. See,
e.g., Norfolk Southern, 397 F. Supp. 2d at 555. We are aware that a
comment to Rule 1.0 states that appropriate screening measures will depend
on the circumstances but may include written notice and instructions to all
firm personnel other than lawyers forbidding any communication with the
screened lawyer relating to the matter. See Rule 1.0, cmt. 9. The Comment
does not state that a firm’s employees must be informed of the consequences
for violating the rule. Additionally, under the circumstances here, the GLG
firm clearly conveyed its screening protocols orally to its employees. Because
GLG’s employees heard repeated discussion of those protocols and saw the
changes in the operation of the firm, we find that they were clearly and
properly alerted to the firm’s screening protocols.
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screen. Many of Pennsylvania’s counties do not have large law firms, and
many counties are comprised of mostly small to mid-size firms. We cannot
countenance a one-size-fits-all rule, especially where it will have an
unreasonably disparate effect on attorneys who practice in smaller counties
and wish to change their employment. Thus, while we do not discount the
consideration of a firm’s size as a factor in assessing the effectiveness of a
screen, we agree with the Dworkin court that it is the integrity of the people
in a firm, and the protocols they adopt and implement, not the size of the firm
itself that is relevant to the effectiveness of a screen under Rule 1.10(b).
Nothing in the record before us suggests that the GLG firm’s size affected its
ability to maintain an effective screen.15
We also do not agree with Mr. Cochran that the decision in Norfolk
Southern compels a different result in this case. This Court is not bound by
decisions of federal courts other than the United States Supreme Court. See
In re Stevenson, 40 A.3d 1212, 1221 (Pa. 2012). Moreover, in Norfolk
____________________________________________
15 We recognize that the Rudalavage and Darrow courts viewed the small
size of a firm as a factor favoring disqualification, and cited Dworkin for the
proposition that there is more contact between attorneys at a small firm. See
Rudalavage, 268 A.3d at 481; Darrow, 266 A.3d at 1114. As stated,
although the size of a firm may favor disqualification, the facts developed at
the hearing in this case show that the substantial screen the GLG firm erected,
and the efforts it devoted to enforcing the screen, outweighed the concern
about the small size of the firm. Moreover, as explained infra, other factors
of concern present in Rudalavage and Darrow are not present here.
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Southern, the law firm opposing disqualification failed to establish that their
new attorney, who had previously worked for the other side in an ongoing
case, would not receive any of the fees in the case. That failure alone
warranted disqualification. See Norfolk Southern, 397 F. Supp. 2d at 554.
Additionally, the new law firm in that case failed to provide prompt written
notice to the attorney’s former firm of the conflict and failed to prohibit the
discussion of sensitive matters in the presence of the new attorney. See id.
For these reasons, the facts of the Norfolk Southern case do not establish
requirements critical to Rule 1.10 and the case is not substantially similar to
the matter before this Court.16
Rudalavage and Darrow, recent cases in this Court (which neither
party cites), found a law firm’s Rule 1.10(b) screening procedures deficient
under significantly different circumstances. In Rudalavage, an attorney and
his law firm filed a wrongful death suit against PPL Electric Utilities Corporation
(“PPL”). The attorney had previously represented PPL in other cases while
____________________________________________
16 Norfolk Southern also states a third set of factors for assessing
disqualification that involves examining the affected party’s right to attorney
loyalty, the effect on other person’s right to counsel, and the desire not to
unreasonably hinder attorney movement. See Norfolk Southern, 397 F.
Supp. 2d at 556. No published Pennsylvania appellate court decision has
adopted this test. We do not opine on the relevance of this third set of factors
given our conclusion that the trial court did not err in finding that there was
no violation of the Rules of Professional Conduct and, more important, no
impairment of Mr. Cochran’s right to a fair trial.
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employed by a previous law firm, during which he acquired confidential
knowledge about PPL’s litigation strategies. This Court determined that the
new law firm should be disqualified. Among the reasons for disqualification
cited were: (1) the departing attorney did not provide PPL with prompt written
notice of the conflict;17 (2) the departing attorney served as de facto counsel
on the case at the new firm by visiting the accident site and reviewing the
complaint; (3) the new firm did not erect a screen until almost two years
after the departing attorney had already worked on the case; (4) the new
firm did not have a written policy, and (5) the departing attorney
acknowledged that in his previous employment he had gathered significant
information concerning how to defend such suits. See Rudalavage, 268 A.3d
at 481-83.18
____________________________________________
17 This Court found the failure to make prompt disclosure of a change in
employment to be compelling proof of a Rule 1.10(b)(2) violation. This Court
stated that a client should not discover from his current attorney that his
former attorney now works for the opposition and that former counsel’s failure
to disclose that fact created “a specter of impropriety that no ex post
facto . . . [w]all can contain.” Rudalavage, 268 A.3d at 483 (citation
omitted) (emphasis in original); see also Darrow, 266 A.3d at 1115 (same).
18Darrow involved the same attorney and law firm whose disqualification this
Court found to be required in Rudalavage. In Darrow, the attorney and the
new law firm filed a personal injury suit against PPL three years after the
attorney left the law firm at which he represented PPL. Among other factors
supporting disqualification, the Court noted: (1) the attorney was privy to
proprietary information about PPL; (2) the attorney did not promptly disclose
the conflict in writing to his former client; (3) the attorney was counsel of
(Footnote Continued Next Page)
- 20 -
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Here, Attorney Kraft promptly disclosed the conflict in writing to Mr.
Cochran, his former client, there is no evidence that Mr. Cochran responded
to Attorney Kraft’s letter, and Attorney Kraft has not worked as opposing
counsel on the Fetterman-Cochran litigation at the GLG firm. Further, there
is no evidence that Attorney Kraft used or disclosed Mr. Cochran’s confidential
information, and the GLG firm erected its screen before he began working
there. For these reasons, Rudalavage and Darrow address substantively
distinguishable facts and are not determinative of whether the GLG firm’s
screen was reasonably adequate under the factual circumstances here.
We also agree with the trial court that on this record, Mr. Cochran has
failed to show that disqualification of Attorney Generelli and the GLG firm is
necessary to ensure his due process right to a fair trial. See McCarthy, 772
A.2d at 989. Our Supreme Court has clearly stated that violations of the Rules
of Professional Conduct are not a proper subject for the lower courts to impose
punishment for attorney misconduct. See Reilly, 489 A.2d at 1299; see also
Pedrick, 482 A.2d at 221 (stating that counsel may be disqualified only when
necessary to ensure the right to a fair trial, and that trial courts are not
accorded the power to punish attorney misconduct). Because Attorney
____________________________________________
record for two years in the personal injury case; (4) the new law firm is small;
(5) the screen was not erected for two years after the filing of the suit; and
(6) the screening policy was not in writing. See Darrow, 266 A.3d at 1113-
15.
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Generelli and the GLG firm did not violate Rule 1.10(b), there was no basis for
disqualification and no interference with Mr. Cochran’s right to a fair trial.19
Thus, the trial court properly denied Mr. Cochran’s disqualification motion.
Order affirmed.
Judge Bowes joins in this memorandum.
Judge Kunselman concurs in the result.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
____________________________________________
19 We do not ignore Mr. Cochran’s assertion of his expectation of attorney
loyalty. However, Mr. Cochran has not demonstrated that the trial court erred
when it found that the record did not support the disqualification of Attorney
Generelli and the GLG firm from participating in the case, and there was no
evidence at the hearing that Attorney Kraft disclosed any privileged or
confidential information about Mr. Cochran’s case to the GLG firm. Moreover,
we will not lightly disturb Ms. Fetterman’s right to representation by counsel
of her choice. See Rudalavage, 268 A.3d at 478.
- 22 - | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484206/ | J-A15032-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
JANA DIANE HATCH : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
MARK ALLEN HATCH, SR. : No. 1297 WDA 2021
Appeal from the Order Entered October 21, 2021
In the Court of Common Pleas of Armstrong County
Civil Division at No(s): 2018-0672-CIVIL
BEFORE: BOWES, J., KUNSELMAN, J., and SULLIVAN, J.
MEMORANDUM BY SULLIVAN, J.: FILED: NOVEMBER 16, 2022
Jana Diane Hatch (“Ms. Hatch”) appeals from the order denying her
motion to disqualify Alaine Generelli, Esquire (“Attorney Generelli”) and the
law firm of Geary, Loperfito & Generelli, LLC (“the GLG firm”) from
representing Mark Allen Hatch, Sr. (“Mr. Hatch”). We affirm.
While employed at the office of Gregory W. Swank, Esquire (“Attorney
Swank”), Shea Kraft, Esquire (“Attorney Kraft”) represented Ms. Hatch in a
divorce and equitable distribution case against Mr. Hatch. Attorney Generelli,
a member of the GLG firm, represented, and continues to represent, Mr. Hatch
in that case. Thereafter, Attorney Kraft left Attorney Swank’s employ to work
for the GLG firm. See N.T., 10/20/21, at 11-15, 19-20, 47.
Ms. Hatch filed a motion to disqualify Attorney Generelli and the GLG
firm, in which she averred that Attorney Kraft learned secret and confidential
information relating to her case while representing her, and that Attorney
J-A15032-22
Generelli’s and the GLG firm’s continued representation of Mr. Hatch
constituted a conflict of interest and a violation of Pennsylvania Rules of
Professional Conduct 1.9 and 1.10 (“Rules 1.9 and 1.10”). See Motion to
Disqualify, 10/19/21, at 2-3 (unnumbered). Other clients whom Attorney
Kraft had represented while working for Attorney Swank filed similar
disqualification motions against Attorney Generelli and the GLG firm.1 On
October 20, 2021, the trial court held an evidentiary hearing on all the
disqualification motions.
We summarize the testimony at the evidentiary hearing as follows. In
August 2021, Attorney Swank began reducing Attorney Kraft’s workload and
expressed a clear intent to terminate his employment. See N.T., 10/20/21,
at 11-13. Attorney Kraft had exploratory employment discussions with the
GLG firm. See id. at 13-15. Later that month, Attorney Kraft told Attorney
Swank that he intended to find a new job, and they discussed some of Attorney
Kraft’s active case files. Thereafter, Attorney Kraft found that his key no
longer opened the door to the main office of Attorney Swank’s firm. See id.
at 15-18. At that time, the GLG firm had not yet hired Attorney Kraft and he
was considering a number of employment possibilities. See id. at 14, 23-26.
____________________________________________
1 Three of those cases are now on appeal before this Court, Wheatley v.
Wheatley; Fetterman v. Cochran; and Dietrich v. Dietrich, are listed
before this panel at J-A15031-22, J-A15033-34, and J-A15034-22. We
address those appeals in separate decisions.
-2-
J-A15032-22
Prior to hiring Attorney Kraft, the GLG firm had a series of consultations
with an ethics attorney, Beth Ann Lloyd, Esquire (“Attorney Lloyd”), to
determine, if it hired Attorney Kraft, what actions it would need to take to
comply with the screening requirements of Rule 1.10 in Ms. Hatch’s case and
any other active case in which Attorney Generelli had been Attorney Kraft’s
opponent (the “conflict cases”). See id. at 47, 57-58. Attorney Lloyd
explained to the GLG firm that Attorney Kraft would have to withdraw from
representation in the conflict cases, and that the GLG firm would need to
screen him from any contact with the physical or electronic files in those cases,
prevent him from hearing any discussion of them, and not share with him any
of the fees in those cases. See id. at 47, 58-59. Attorney Generelli also told
the entire GLG staff that screening procedures would be put into place if
Attorney Kraft were hired. See id. at 50-51.
The GLG firm hired Attorney Kraft, having told him that his employment
was contingent upon his compliance with the ethical rules, and directed him
to follow all of Attorney Lloyd’s recommendations. See id. at 47-48, 57-59,
75.2 Attorney Lloyd helped Attorney Kraft write a letter which he sent to Ms.
Hatch one week before he began working at the GLG firm. See id. at 21, 32.3
____________________________________________
2 Attorney Swank immediately removed Attorney Kraft from his offices when
Attorney Kraft told him about his new employment, which prevented them
from discussing the remainder of Attorney Kraft’s active cases. See N.T.,
10/20/21, at 16-18.
3 Attorney Kraft sent similar letters to his former clients in the other conflict
cases. See N.T., 10/20/21, at 22-28.
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The letter stated that Attorney Kraft would be joining the GLG firm, would
withdraw from representing Ms. Hatch, would not participate in the case at
the GLG firm in any way or reveal confidential information about Ms. Hatch,
the case, or the litigation strategy, and had not taken any case files or
materials concerning the case. The letter also explained to Ms. Hatch the
procedures the GLG firm would use to protect Ms. Hatch’s confidences and to
isolate Attorney Kraft from access to the physical and electronic files in the
case. See id. at 24-28. Additionally, the letter stated that Ms. Hatch’s case
would not be discussed in Attorney Kraft’s presence, and that Attorney Kraft
would not share in any of the fees paid to the GLG firm in the case. See id.
at 23-26, 28, 30, 43, 47. Attorney Generelli’s testimony confirmed Attorney
Kraft’s testimony. See id. at 53, 56-59. The letter provided Ms. Hatch with
Attorney Kraft’s cell phone number, personal email address, fax number, and
mailing address. See id. at 24-25.4
By the time Attorney Kraft began work at the GLG firm in mid-
September 2021, the firm had expended substantial time and effort and
implemented all of Attorney Lloyd’s suggested screening procedures: physical
documents in the conflict case files, other than those kept in Attorney
Generelli’s office, are maintained in a locked filing cabinet; and the electronic
files in those cases, and Attorney Generelli’s email, are password-protected
____________________________________________
4 At the hearing on the joint disqualification motions, neither Ms. Hatch nor
any other former client in the conflict cases introduced evidence of responding
to Attorney Kraft’s letter or alleged that Attorney Kraft disclosed confidential
information in any conflict case.
-4-
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and segregated from other electronic case files. See id. at 48-49, 59-61, 64,
70-72, 75. Additionally, prior to the time Attorney Kraft began working at the
GLG firm, Attorney Generelli advised the entire firm and staff 5 about the
screening procedures and directed them to: promptly remove conflict case
documents from the copier; put faxes6 relating to conflict cases in special
folders and take them to her office; and print documents in conflict cases on
their own printers and bring them directly to her. See id. at 47-54, 59-60,
67-69. The GLG firm also changed its docketing system. See id. at 59.
Employees must seek assistance to see written documents in a conflict case.
See id. at 65-66, 72-73.
Attorney Kraft testified that the GLG firm explained the screening
procedures to him before he began working at the firm. See id. at 43. Since
he joined the GLG firm, he has not seen, or had access to, any of the conflict
case files, has not discussed any of the conflict cases with anyone at the GLG
firm, has not disclosed any confidential information concerning the conflict
cases, has not heard any discussion of those cases, and recognizes his duty
under the Rules of Professional Conduct to maintain the confidences of his
former clients. See id. at 26-30, 38-43. Attorney Generelli also testified that
Attorney Kraft has been screened from all of the conflict cases and has never
____________________________________________
5 Attorney Kraft testified that the GLG firm now has four lawyers and also
employs a paralegal, a secretary, an office manager/paralegal, and a
receptionist, which Attorney Generelli’s testimony corroborated. See N.T.,
10/20/21, at 35-37, 39, 50, 65-66, 70.
6 Attorney Generelli receives faxes infrequently. See N.T., 10/20/21, at 70.
-5-
J-A15032-22
disclosed confidential information to her concerning those cases. See id. at
52, 54. Attorney Kraft’s employment contract specifies that he can be fired
for violating the Rules of Professional Conduct. See id. at 38.
Attorney Generelli, the primary attorney who works on the conflict
cases, has instructed her paralegal, the only employee who works with her on
those cases, not to discuss them in front of Attorney Kraft. See id. at 45-46,
50, 67. Attorney Generelli testified that she has been “pretty firm and direct”
with staff about what they must do to comply with the screening protocols and
continues to discuss them with staff on an ongoing basis. See id. at 52, 60.
Additionally, all of the GLG staff observed the time and energy the firm
expended putting the protocols in place and understood that the firm took the
matter very seriously. See id. at 64. Though the firm did not create a
separate, written screening document for staff, it used Attorney Lloyd’s
written advice about the necessary elements of a screen to formulate its
screening protocols, all of which it implemented prior to the inception of
Attorney Kraft’s employment and all of which Attorney Generelli conveyed to
the entire GLG firm. See id. at 48-49, 59-61, 64, 67, 70-73, 75-76.
Testimony at the disqualification hearing established that when
employed by Attorney Swank, Attorney Kraft performed thirty-four hours of
work on Ms. Hatch’s case over three years, which included preparing
appraisals and an inventory of the marital estate and preparing for a full
master’s hearing. N.T. 10/20/21, at 46, 78-79.
-6-
J-A15032-22
The day after the hearing, the trial court entered an order denying Ms.
Hatch’s disqualification motion and all of the other disqualification motions.
The trial court found that Attorney Kraft, Attorney Generelli, and the GLG firm
had not violated Rule 1.9 or Rule 1.10. See Trial Court Order, 10/21/21. Ms.
Hatch filed a notice of appeal and, days later, filed a Pa.R.A.P. 1925(b)
statement. The trial court complied with Rule 1925(a).
Ms. Hatch raises the following issue for our review:
Did the trial court err in concluding that [Ms. Hatch’s] trial counsel,
having left his employment with the law firm representing [Ms.
Hatch] in active litigation and then immediately becoming
employed by the law firm representing the opposing party in the
same litigation, did not violate the terms of Rule 1.10 of the Rules
of Professional Conduct requiring that [Attorney Kraft’s] new
employer be disqualified from representing the opposing party in
the litigation?
Ms. Hatch’s Brief at 8.7
As a preliminary matter, we note that an order denying a motion to
disqualify a law firm for an alleged conflict of interest is immediately
appealable as a collateral order. See Rudalavage v. PPL Elec. Util. Corp.,
____________________________________________
7 Ms. Hatch makes no argument concerning the Rule 1.9 violation claim she
raised in the trial court. Accordingly, we will not review it. See
Commonwealth v. Fletcher, 986 A.2d 759, 785 (Pa. 2009) (indicating that
a claim is waived where appellant fails to cite pertinent authority or relevant
detail in his brief). We note that Rule 1.9 precludes an attorney from
representing a party in a litigation where he has previously represented the
party’s opponent. Ms. Hatch does not allege that Attorney Kraft represents
Mr. Hatch.
-7-
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268 A.3d 470, 478 (Pa. Super. 2022); see also Pa.R.A.P. 313 (governing
collateral orders).
Ms. Hatch asserts that Rule 1.10(b) compels the disqualification of
Attorney Generelli and the GLG firm from continuing to represent Mr. Hatch in
the case against her because her former counsel, Attorney Kraft, now works
at the GLG firm. Under Rule 1.10(b), when a lawyer leaves one law firm for
another, his new firm may represent a person on a matter he previously
worked on for a client with materially adverse interests (and acquired
protected information that is material to the matter) if: (1) the firm screens
the lawyer from any participation in the matter and he receives no fee for it,
and (2) the lawyer gives prompt, written notice to his former client so that
the client may ascertain the lawyer’s compliance with the rule. See Rule
1.10(b). Screening requires the lawyer’s isolation from participation in the
matter through “the timely imposition of procedures . . . reasonably adequate
under the circumstances to protect information that the lawyer is obligated to
protect . . ..” Rule 1.0(k).
When reviewing a trial court’s order on the disqualification of counsel,
this Court employs a plenary standard of review. See Darrow v. PPL
Electric Utilities Corp., 266 A.3d 1105, 1111 (Pa. Super. 2021). The law
recognizes that it is appropriate to sanction attorneys for violating ethical
rules. See McCarthy v. Southeastern Pennsylvania Transp. Auth., 772
A.2d 987, 989 (Pa. Super. 2001). However, disqualification is not freely
-8-
J-A15032-22
granted. Pennsylvania courts assign particular importance to protecting a
party’s right to counsel of his choice. See Rudalavage, 268 A.3d at 478.
Disqualification, therefore, is only appropriate when another remedy is not
available and, more important, when the right to counsel of one’s choice
interferes with the essential need to ensure that the party seeking
disqualification receives their due process right to a fair trial. Id. The
Pennsylvania Supreme Court reserves for itself the power to punish attorney
misconduct. See Reilly by Reilly v. Southeastern Pennsylvania Transp.
Auth., 489 A.2d 1291, 1299 (Pa. 1985) (stating that violations of the Rules
of Professional Conduct are not a proper subject for consideration of the lower
courts to impose punishment for attorney misconduct).
To assess the reasonable adequacy of a law firm’s screening procedures
when it hires an attorney who previously worked for the opposing party in an
active case, our Courts weigh a series of factors federal courts have identified.
See Rudalavage, 268 A.3d at 479 (citing Dworkin v. General Motors
Corp., 906 F.Supp. 273, 279-80 (E.D. Pa. 1995)); see also Darrow, 266
A.3d at 1112 (same). The “Dworkin” factors include: (1) the substantiality
of the relationship between the attorney and the former client; (2) the time
lapse between the matters in dispute; (3) the size of the firm and the number
of disqualified attorneys; (4) the nature of the disqualified attorney’s
involvement; and (5) the timing of the wall. See Rudalavage, 268 A.3d at
479; see also Darrow, 266 A.3d at 1112. Rule 1.10 and the Dworkin factors
-9-
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place particular emphasis on the creation by the attorney’s new firm of a
reasonably adequate wall or screen8 to protect information the disqualified
attorney is obligated to protect. The critical factors concerning the screen are
whether it: (1) prohibits the discussion of sensitive matters; (2) restricts the
circulation of sensitive documents; (3) restricts access to sensitive files; and
(4) manifests a strong firm policy against breach, including sanctions, physical
and/or geographical separation. See Rudalavage, 268 A.3d at 480 (citing
Dworkin, 906 F.Supp. at 280); see also Darrow, 266 A.3d at 1112 (also
citing Dworkin).
On appeal, Ms. Hatch argues that Mr. Hatch failed to show that the GLG
firm complied with Rule 1.10(b). She contends that Attorney Kraft’s prior
involvement in her case and the substantiality of their attorney-client
relationship, as well as the short time lapse between the matters in dispute,
and the small size of the GLG firm, support disqualification. She also asserts
that the screen was deficient since it was not in writing and did not explicitly
state the penalties for staff for violating the screen. Ms. Hatch further asserts
that her continuing interest in Attorney Kraft’s loyalty weighs heavily in favor
of disqualification of the entire GLG firm. To that end, Ms. Hatch requests that
the Court follow Norfolk Southern Ry. v. Reading Blue Mountain and
____________________________________________
8 Courts use the terms “wall” and “screen” somewhat interchangeably.
Because Rules 1.10 and 1.0(k) use the terms “screened” and “screen,” we
primarily use those terms.
- 10 -
J-A15032-22
Northern Ry. Co., 397 F. Supp. 2d 551 (M.D. Pa. 2005), which disqualified
a law firm from representation under what she asserts were similar factual
circumstances.
As the trial court noted, the GLG firm retained a legal ethics attorney
and followed all of her recommendations, which resulted in Attorney Kraft
sending prompt letters to his clients that complied with the requirement of
Rule 1.10(b)(2), and the GLG firm instituted screening protocols prior to
Attorney Kraft’s start date at the GLG firm under which it keeps the physical
conflict files in a locked filing cabinet and password-protects the electronic
conflict files (and Attorney Generelli’s email) to screen them from Attorney
Kraft. See Trial Court Opinion, 11/10/21 at 1-2, 4. Therefore, as the trial
court stated, Ms. Hatch’s motion sought prophylactic relief unconnected to any
actual Rule of Professional Conduct violation. See id. at 4. The trial court
also recognized that its ability to disqualify lawyers under the Rules of
Professional Conduct is narrow, and that disqualification is a serious remedy
that should not interfere with a party’s right to choose counsel unless due
process and the opposing party’s right to a fair trial is affected. See id. at 3-
4 (citing In re Estate of Pedrick, 482 A.2d 215, 221 (Pa. 1984)). The trial
court found no violation of the Rules of Professional Conduct and therefore no
basis for the disqualification of Attorney Generelli or the GLG firm. See id. at
4-5.
- 11 -
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We agree with the trial court that Attorneys Kraft and Generelli and the
GLG firm did not violate Rule 1.10(b). See Trial Court Opinion, 11/10/21, at
1-2, 4 (relying upon the testimony at the disqualification hearing). We further
conclude that because there was no violation of the Rules of Professional
Conduct, Ms. Hatch did not suffer an impairment of her due process right to a
fair trial that would require disqualification. Further, the “Dworkin” factors
that might weigh in favor of disqualification do not compel the extreme
remedy Ms. Hatch seeks.
At the outset, Attorney Kraft satisfied the requirement of Rule
1.10(b)(2) by sending a prompt letter to Ms. Hatch and all the other clients
he had represented in the conflict cases. Ms. Hatch offered no evidence that
she replied to the letter Attorney Kraft sent to express a concern about
Attorney Kraft’s move to the GLG firm.
This case turns on the reasonable adequacy of the GLG firm’s screen.
The very short lapse of time between Attorney Kraft’s representation of Ms.
Hatch and his move to the GLG firm, which represents Ms. Hatch’s opponent,
supports Ms. Hatch’s position. However, that factor would weigh more heavily
if Attorney Kraft had actively represented Mr. Hatch or had the GLG firm’s
screen been defective, and neither is the case in this matter.9
____________________________________________
9 Given the limited evidence Ms. Hatch presented at the hearing, it is difficult
to assess the factors relating to the substantiality of the relationship between
the attorney and the former client, and the nature of the disqualified attorney’s
(Footnote Continued Next Page)
- 12 -
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The GLG firm undertook timely and good-faith efforts to create a set of
screening procedures “reasonably adequate under the circumstances” to
protect information that Attorney Kraft was obligated to protect. See Rules
1.0(k), 1.10(b). The firm consulted with an ethics attorney to construct the
screen, and substantially restructured its physical storage, computer, and
document circulation policies to prevent any sensitive material from reaching
Attorney Kraft. Further, the firm erected its screen before Attorney Kraft
joined the firm. See Dworkin, 906 F.Supp. at 280 (noting the importance of
instituting a screening protocol when the potentially disqualifying event
occurs). Additionally, neither Ms. Hatch nor any other conflict case client has
alleged that the screen has been breached, and the evidence at the
disqualification hearing did not show a breach. Attorney Generelli, the primary
attorney on the conflict cases, testified that she instructed her paralegal, the
only other person who worked with her on those cases,10 not to discuss them
____________________________________________
involvement in the case. Ms. Hatch’s evidence established that Attorney Kraft
billed thirty-four hours on her case over the course of three years and
prepared for a forthcoming master’s hearing. See N.T., 10/20/21, at 79. It
is not clear whether that proves a substantial attorney-client relationship.
Because we decide this case on other grounds, we do not determine whether
there was a substantial attorney-client relationship between Ms. Hatch and
Attorney Kraft or whether Attorney Kraft had substantial involvement in the
case.
10 Attorney Generelli testified that Attorney Loperfito, another member of the
firm, has some limited involvement in family law cases. Attorney Loperfito
assists on some financial issues, but he does not directly represent any family
(Footnote Continued Next Page)
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in front of Attorney Kraft. See N.T. 10/20/21, at 67. Attorney Kraft testified
that he never discussed any conflict case at the GLG firm or heard any of the
cases discussed. See id. at 21, 30, 41-42. Additionally, all the members of
the firm understood the screening protocols. See id. at 48-54, 76.
The screen also effectively restricted circulation of, and restricted access
to, sensitive documents and files. The GLG firm implemented many
procedures to screen conflict matters before Attorney Kraft’s arrival. These
included the protection of the physical and electronic conflict case files, the
change in the firm’s docketing system to separate out all of Attorney
Generelli’s clients, and the creation of a new protocol requiring removing
sensitive documents from copiers and immediately placing incoming faxes in
a closed mail folder in Attorney Generelli’s office. Those undertakings
prevented Attorney Kraft from having any exposure to sensitive documents or
files. See id. at 27, 29, 41-42, 44-46, 48-50, 59, 61, 67-71.11
____________________________________________
law client in court unless Attorney Generelli needs him to fill in, and he has
declined to try any custody cases. See N.T., 10/20/21, at 73.
11Attorney Kraft testified on cross-examination at the disqualification hearing
that he had seen ten or eleven disqualification motions “roll in” on the fax
machine. See N.T., 10/20/21, at 41-42. Attorney Swank asked him no
further questions about that incident, which: (1) was Attorney Kraft’s only
exposure to anything related to the conflict cases while at the GLG firm, (2)
did not risk his disclosing information he was obligated to protect under Rules
1.10(b) and 1.0(k), and (3) concerned documents Ms. Hatch’s attorney,
Attorney Swank, elected to fax to the GLG firm. This single incident does not
undermine the effectiveness of the screen. As noted, Attorney Generelli
(Footnote Continued Next Page)
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The GLG firm’s screen contained a reasonably adequate firm policy
against breach, including sanctions, physical and/or geographical separation.
See Rudalavage, 268 A.3d at 470; see also Darrow, 266 A.3d at 1112.
Attorney Kraft testified that he was informed that if he breached the Rules of
Professional Conduct, he could face disciplinary action and be fired. See N.T.,
10/20/21, at 30-31, 38. Attorney Generelli confirmed Attorney Kraft’s
testimony. See id. at 53. Attorney Generelli also testified that everyone at
the GLG firm knew the screening protocols as a result of an open discussion
prior to Attorney Kraft’s hiring, and she has ongoing communications with the
staff to ensure that the recommended procedures remain in place. See id. at
49-50, 52, 60, 64. Further, the entire GLG firm saw how seriously the firm
regarded the screen. See id. at 64. Under these circumstances, we do not
find it dispositive that the staff was not explicitly informed of the consequences
of violating the screen.12
____________________________________________
testified that the GLG firm’s screening protocol requires personnel to take
faxes quickly to her office when they are received. See id. at 68.
12 Some courts have assessed the strength of a law firm’s screen by focusing
on whether it expressly includes a termination penalty for all violators. See,
e.g., Norfolk Southern, 397 F. Supp. 2d at 555. We are aware that a
comment to Rule 1.0 states that appropriate screening measures will depend
on the circumstances but may include written notice and instructions to all
firm personnel other than lawyers forbidding any communication with the
screened lawyer relating to the matter. See Rule 1.0, cmt. 9. The Comment
does not state that a firm’s employees must be informed of the consequences
for violating the rule. Additionally, under the circumstances here, the GLG
firm clearly conveyed its screening protocols orally to its employees. Because
(Footnote Continued Next Page)
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We note that some courts have held that a law firm’s small size is a
detriment to implementing an effective screen because the attorneys at a
small firm have more opportunity for contact with each other than at a large
firm. See Dworkin, 906 F. Supp. at 280 (collecting cases). We believe that
a firm’s size is not in itself a determinative measure of the firm’s ability to
maintain an effective screen. Indeed, Dworkin itself implicitly recognizes the
limitations of such a blunt measuring device. See id. at 283 (stating that
“[t]he effectiveness of any ethics screen depends upon the integrity of the
individuals who comply with it”). There is a further problem with using the
size of a firm as an absolute measure of its ability to maintain an effective
screen. Many of Pennsylvania’s counties do not have large law firms, and
many counties are comprised of mostly small to mid-size firms. We cannot
countenance a one-size-fits-all rule, especially where it will have an
unreasonably disparate effect on attorneys who practice in smaller counties
and wish to change their employment. Thus, while we do not discount the
consideration of a firm’s size as a factor in assessing the effectiveness of a
screen, we agree with the Dworkin court that it is the integrity of the people
in a firm, and the protocols they adopt and implement, not the size of the firm
itself that is relevant to the effectiveness of a screen under Rule 1.10(b).
____________________________________________
GLG’s employees heard repeated discussion of those protocols and saw the
changes in the operation of the firm, we find that they were clearly and
properly alerted to the firm’s screening protocols.
- 16 -
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Nothing in the record before us suggests that the GLG firm’s size affected its
ability to maintain an effective screen.13
We also do not agree with Ms. Hatch that the decision in Norfolk
Southern compels a different result in this case. This Court is not bound by
decisions of federal courts other than the United States Supreme Court. See
In re Stevenson, 40 A.3d 1212, 1221 (Pa. 2012). Moreover, in Norfolk
Southern, the law firm opposing disqualification failed to establish that their
new attorney, who had previously worked for the other side in an ongoing
case, would not receive any of the fees in the case. That failure alone
warranted disqualification. See Norfolk Southern, 397 F. Supp. 2d at 554.
Additionally, the new law firm in that case failed to provide prompt written
notice to the attorney’s former firm of the conflict and failed to prohibit the
discussion of sensitive matters in the presence of the new attorney. See id.
For these reasons, the facts of the Norfolk Southern case do not establish
____________________________________________
13 We recognize that the Rudalavage and Darrow courts viewed the small
size of a firm as a factor favoring disqualification, and cited Dworkin for the
proposition that there is more contact between attorneys at a small firm. See
Rudalavage, 268 A.3d at 481; Darrow, 266 A.3d at 1114. As stated,
although the size of a firm may favor disqualification, the facts developed at
the hearing in this case show that the substantial screen the GLG firm erected,
and the efforts it devoted to enforcing the screen, outweighed the concern
about the small size of the firm. Moreover, as explained infra, other factors
of concern present in Rudalavage and Darrow are not present here.
- 17 -
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requirements critical to Rule 1.10 and the case is not substantially similar to
the matter before this Court.14
Rudalavage and Darrow, recent cases in this Court (which neither
party cites), found a law firm’s Rule 1.10(b) screening procedures deficient
under significantly different circumstances. In Rudalavage, an attorney and
his law firm filed a wrongful death suit against PPL Electric Utilities Corporation
(“PPL”). The attorney had previously represented PPL in other cases while
employed by a previous law firm, during which he acquired confidential
knowledge about PPL’s litigation strategies. This Court determined that the
new law firm should be disqualified. Among the reasons for disqualification
cited were: (1) the departing attorney did not provide PPL with prompt written
notice of the conflict;15 (2) the departing attorney served as de facto counsel
____________________________________________
14 Norfolk Southern also states a third set of factors for assessing
disqualification that involves examining the affected party’s right to attorney
loyalty, the effect on other person’s right to counsel, and the desire not to
unreasonably hinder attorney movement. See Norfolk Southern, 397 F.
Supp. 2d at 556. No published Pennsylvania appellate court decision has
adopted this test. We do not opine on the relevance of this third set of factors
given our conclusion that the trial court did not err in finding that there was
no violation of the Rules of Professional Conduct and, more important, no
impairment of Ms. Hatch’s right to a fair trial.
15 The Court found the failure to make prompt disclosure of a change in
employment to be compelling proof of a Rule 1.10(b)(2) violation. The Court
stated that a client should not discover from his current attorney that his
former attorney now works for the opposition and that former counsel’s failure
to disclose that fact created “a specter of impropriety that no ex post
facto . . . [w]all can contain.” Rudalavage, 268 A.3d at 483 (citation
omitted) (emphasis in original); see also Darrow, 266 A.3d at 1115 (same).
- 18 -
J-A15032-22
on the case at the new firm by visiting the accident site and reviewing the
complaint; (3) the new firm did not erect a screen until almost two years
after the departing attorney had already worked on the case; (4) the new
firm did not have a written policy, and (5) the departing attorney
acknowledged that in his previous employment he had gathered significant
information concerning how to defend such suits. See Rudalavage, 268 A.3d
at 481-83.16
Here, Attorney Kraft promptly disclosed the conflict in writing to Ms.
Hatch, his former client, there is no evidence that Ms. Hatch responded to
Attorney Kraft’s letter, and Attorney Kraft has not worked as opposing counsel
on the Hatch litigation at the GLG firm. Further, there is no evidence that
Attorney Kraft used or disclosed Ms. Hatch’s confidential information, and the
GLG firm erected its screen before he began working there. For these
reasons, Rudalavage and Darrow address substantively distinguishable
facts and are not determinative of whether the GLG firm’s screen was
reasonably adequate under the factual circumstances here.
____________________________________________
16 Darrow involved the same attorney and law firm whose disqualification we
found to be required in Rudalavage. In Darrow, the attorney and the new
law firm filed a personal injury suit against PPL three years after the attorney
left the law firm at which he represented PPL. Among other factors supporting
disqualification, the Court noted: (1) the attorney was privy to proprietary
information about PPL; (2) the attorney did not promptly disclose the conflict
in writing to his former client; (3) the attorney was counsel of record for two
years in the personal injury case; (4) the new law firm is small; (5) the screen
was not erected for two years after the filing of the suit; and (6) the screening
policy was not in writing. See Darrow, 266 A.3d at 1113-15.
- 19 -
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We also agree with the trial court that on this record, Ms. Hatch has
failed to show that disqualification of Attorney Generelli and the GLG firm is
necessary to ensure her due process right to a fair trial. See McCarthy, 772
A.2d at 989. Our Supreme Court has clearly stated that violations of the Rules
of Professional Conduct are not a proper subject for the lower courts to impose
punishment for attorney misconduct. See Reilly, 489 A.2d at 1299; see also
Pedrick, 482 A.2d at 221 (stating that counsel may be disqualified only when
necessary to ensure the right to a fair trial, and that trial courts are not
accorded the power to punish attorney misconduct). Because Attorney
Generelli and the GLG firm did not violate Rule 1.10(b), there was no basis for
disqualification and no interference with Ms. Hatch’s right to a fair trial.17
Thus, the trial court properly denied Ms. Hatch’s disqualification motion.
Order affirmed.
Judge Bowes joins this memorandum.
Judge Kunselman concurs in the result.
____________________________________________
17 We do not ignore Ms. Hatch’s assertion of her expectation of attorney
loyalty. However, Ms. Hatch has not demonstrated that the trial court erred
when it found that the record did not support the disqualification of Attorney
Generelli and the GLG firm from participating in the case, and there was no
evidence at the hearing that Attorney Kraft disclosed any privileged or
confidential information about Ms. Hatch’s case to the GLG firm. Moreover,
we will not lightly disturb Mr. Hatch’s right to representation by counsel of
his choice. See Rudalavage, 268 A.3d at 478.
- 20 -
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
- 21 - | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484210/ | J-A22024-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
JOSEPH COYLE : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
TAMMY YOUNG :
:
Appellant : No. 429 WDA 2022
Appeal from the Order Entered March 17, 2022
In the Court of Common Pleas of Indiana County Civil Division at No(s):
10258 CD 2020
BEFORE: OLSON, J., DUBOW, J., and COLINS, J.*
MEMORANDUM BY DUBOW, J.: FILED: NOVEMBER 16, 2022
Tammy Young (“Mother”) appeals from the March 17, 2022 Order
entered in the Indiana County Court of Common Pleas that granted shared
legal and physical custody of N.C. (“Child”) to Mother and Joseph Coyle
(“Father”). Upon review, we affirm.
In its March 17, 2022 Opinion and Order of Court, the trial court set
forth a detailed procedural and factual history, as well as a summary of
evidence, which we adopt for purposes of this appeal. See Opinion, filed
3/17/22, at 1-10. In sum, Mother and Father (collectively, “Parents”) were
never married and are parents to four-year-old Child, who was born in
November of 2017. Parents were in a long-term romantic relationship and
lived together until they broke up when Child was eight months old. Father
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
J-A22024-22
has two older children from a previous marriage. Father is currently remarried
to Stepmother, who also has an older child from a prior relationship.
When Parents broke up, Mother had primary physical custody of Child
and Father had informal visitation. On January 10, 2020, when Child was two
years old, Father filed a Complaint for Custody requesting shared physical and
legal custody of Child. An interim custody order provided Father with visitation
every other weekend and Wednesday evenings. The court held a custody trial
on February 28, 2022, and March 1, 2022.
The court heard extensive testimony from numerous witnesses,
including: Father, Stepmother, a visitation supervisor, Parents’ friend,
Father’s ex-wife, Parents’ co-worker, Mother’s cousin, Mother’s aunt, and
Mother’s parents. After evaluating the sixteen custody factors, the court found
that the factors did not favor one party over the other. The court awarded
shared physical and legal custody to Parents, with a schedule that increased
Father’s custody every few weeks over the summer months until shared
physical custody was 50/50.
Mother timely appealed and filed a Pa.R.A.P. 1925(b) statement. The
trial court relied on its March 17, 2022 Opinion and Order of Court in lieu of a
Rule 1925(a) opinion.
Mother raises the following issues for our review:
1. Did the trial court abuse its discretion and commit an error of
law when its consideration of the custody factors was based
on factual findings and inferences that were not contained in
the evidence of [] record.
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2. Did the trial court abuse its discretion and commit an error of
law by not giving full consideration to the best interests of
[Child] (including but not limited to the impact to the child of
the substantial change in custody and whether that change
served to enhance a parent/child relationship) when moving
from Mother as the primary physical custodian to (eventually)
a shared 50/50 schedule for Mother and Father and by relying
on inaccurate information.
Mother’s Br. at 18.
A.
This court reviews a custody determination for an abuse of discretion,
and our scope of review is broad. S.W.D. v. S.A.R., 96 A.3d 396, 400 (Pa.
Super. 2014). This court will not find an abuse of discretion “merely because
a reviewing court would have reached a different conclusion.” In re K.D.,
144 A.3d 145, 151 (Pa. Super. 2016). This Court must accept the findings of
the trial court that the evidence supports. S.W.D., 96 A.3d at 400.
Importantly, “[o]n issues of credibility and weight of the evidence, we defer
to the findings of the trial judge who has had the opportunity to observe the
proceedings and demeanor of the witnesses.” K.T. v. L.S., 118 A.3d 1136,
1159 (Pa. Super. 2015) (citation omitted). We can interfere only where the
“custody order is manifestly unreasonable as shown by the evidence of
record.” Saintz v. Rinker, 902 A.2d 509, 512 (Pa. Super. 2006) (citation
omitted). Further, in a custody case, relief is not warranted unless the party
claiming error suffered prejudice from the mistake. J.C. v. K.C., 179 A.3d
1124, 1130 (Pa. Super. 2018).
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The Custody Act requires a trial court to consider all of the Section
5328(a) custody factors when “ordering any form of custody,” and further
requires the court to give “weighted consideration to those factors which affect
the safety of the child[.]” 23 Pa.C.S. § 5328(a). A trial court must “delineate
the reasons for its decision when making an award of custody either on the
record or in a written opinion.” S.W.D., 96 A.3d at 401. See also 23 Pa.C.S.
§ 5323(a) and (d). However, “there is no required amount of detail for the
trial court’s explanation; all that is required is that the enumerated factors are
considered and that the custody decision is based on those considerations.”
M.J.M. v. M.L.G., 63 A.3d 331, 336 (Pa. Super. 2013).
When reviewing child custody matters and the trial court’s consideration
of the Section 5328(a) custody factors, our paramount concern is the best
interests of the child. See Saintz, 902 A.2d at 512 (explaining that this
Court’s “paramount concern and the polestar of our analysis” in custody cases
is the best interests of the child) (citation omitted). “The best-interests
standard, decided on a case-by-case basis, considers all factors which
legitimately have an effect upon the child’s physical, intellectual, moral, and
spiritual well-being.” D.K.D. v. A.L.C., 141 A.3d 566, 572 (Pa. Super. 2016)
(citations omitted). “Common sense dictates that trial courts should strive,
all other things being equal, to assure that a child maintains a healthy
relationship with both of his or her parents, and that the parents work together
to raise their child.” S.C.B. v. J.S.B., 218 A.3d 905, 916 (Pa. Super. 2019).
Finally, in any action regarding the custody of the child between the parents
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of the child, there shall be no presumption that custody should be awarded to
a particular parent and no preference based upon gender. 23 Pa.C.S. §§
5327(a) and 5328(b).
B.
In both of her issues, Mother avers that the trial court abused its
discretion when its consideration of the custody factors was based on factual
findings and inferences that were not contained in the record. Mother’s Br. at
23. Mother concedes that the trial court did an analysis of the sixteen custody
factors but contends that the trial court made two factual findings that were
not supported in the record. Id. at 25-26.
Mother first avers that the trial court erred when it found that both
parties live in the United School District because the record reflects that only
Mother lives in that school district. Id. at 26-27.
Our review of the record confirms Mother’s assertion and reveals that
Father does not live in the United School District, but Mother does. N.T. Trial,
2/28/22, at 7, 30-31; N.T. Trial, 3/1/22, at 290. Father testified that he would
like Child to attend the school in Mother’s school district when Child is school
age because the school is highly rated. N.T. Trial, 2/28/22, at 30-31. When
analyzing custody factor four—the need for stability and continuity in the
child’s education, family life, and community life—the trial court found, in
relevant part:
[Child] is currently too young for school and both parties live in
the United School District. While the [c]ourt recognizes that
[Child] has spent more time with Mother throughout his life,
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J-A22024-22
Father desires to be more active in [Child]’s life. The evidence
supports a finding that Father’s increased involvement in [Child]’s
life will promote better continuity with his family, including two
step-siblings. The testimony presented by both [p]arties show
that each party is involved in [Child]’s life and want what is best
for [Child]. The [c]ourt finds that both parties are not only
capable, but have shown a[] desire and intent to provide stability
and continuity in [Child]’s life. Accordingly the [c]ourt finds this
factor is neutral.
Trial Ct. Op., filed 3/17/22, at 15 (emphasis added).
As stated above, we agree with Mother’s assertion that the trial court
made a mistake of fact when it found that Father lived in the United School
District. However, Mother fails to explain how this incorrect factual finding
impacted the trial court’s analysis of custody factor four or the trial court’s
overall disposition. Notably, Child was not yet old enough to attend school
when the trial court analyzed factor four—the need for stability and continuity
in Child’s life. Essentially, Mother fails to assert that she suffered any actual
harm as a result of the trial court’s mistake. Accordingly, Mother is not entitled
to relief on this issue. See J.C., 179 A.3d at 1130 (explaining that, in a
custody case, relief is not warranted unless the party claiming error suffered
prejudice from the mistake).
Mother next avers that the court erred when it found that both parties
are boilermakers by trade and only work several weeks per year because the
record reflects that it is Mother who works up to six weeks out of the year
while Father works a full-time job. Mother’s Br. at 27. Mother argues that
the trial court relied on this inaccurate information about Father’s work
schedule when it increased Father’s physical custody. Id. at 31. Mother avers
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J-A22024-22
that the practical effect of this custody change is a significant increase in
physical custody time to Stepmother, who will be watching Child when Father
is at work, and a significant decrease in physical custody time for her. Id. at
31. Finally, Mother argues that increased time with Stepmother is not in
Child’s best interest and fails to further the trial court’s intended effect of
strengthening the bond between Child and Father. Id.
Upon review, we agree with Mother that the trial court made a mistake
of fact regarding Father’s work schedule. At trial, Father testified that he
currently has a three-month contract working as a welder fabricator with a set
work schedule of 6:00 AM to 2:00 PM Monday through Friday. N.T. Trial,
2/28/22, at 12. Father further testified that he intends to continue working
when his contract ends in two months, and he recently had an interview for a
job as a boiler operator, which would be a rotating shift. Id. at 13. Father
and Stepmother both testified that Stepmother would be available to help care
for Child when, and if, Father’s work schedule changes. Id. at 31, 44, 115.
When analyzing custody factor twelve—each party’s availability to care
for the child or ability to make appropriate child-care arrangements—the trial
court found:
Both parties are boilermakers by trade and work several weeks
out of the year. Accordingly, child-care would likely not be
needed. However, in the event that child-care is needed, Father’s
wife works from home and has flexible hours, allowing for her to
watch [Child] when needed. Mother also testified that her parents
and aunt can watch [Child] if needed. This [c]ourt finds that both
parties have presented appropriate child[-]care arrangements.
Accordingly, this factor is neutral.
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Trial Ct. Op. at 20-21.
We agree that the trial court incorrectly characterized Father’s work
schedule as part-time when analyzing custody factor twelve. However, we
are unpersuaded by Mother’s argument that the trial court relied on this
mistake of fact when the court increased Father’s physical custody and,
therefore, Mother was prejudiced. Notably, the court heard evidence that
Father’s employment was temporary at the time of trial. When analyzing
custody factor twelve, the trial court made an alternative finding and
concluded that, in the event child-care was needed, both parents presented
appropriate child-care arrangements. This finding is supported by evidence
in the record. Moreover, it is well-settled that a parent’s work schedule may
not deprive a parent of custody if suitable arrangements are made for the
child’s care in the parent’s absence. Johnson v. Lewis, 870 A.2d 368, 374
(Pa. Super. 2005). Finally, Mother offers no legal authority to support her
position that a trial court should not increase a parent’s physical custodial time
to 50/50 if the practical effect is spending more time with a stepparent and
other household members.
C.
In conclusion, Mother fails to establish that the trial court’s two mistakes
of fact prejudiced her or impacted the trial court’s overall disposition.
Accordingly, she is not entitled to relief.
Order affirmed.
-8-
J-A22024-22
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
-9- | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484212/ | J-S36022-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellee :
:
v. :
:
KELLI NORMAN RINI, JR. :
:
Appellant : No. 969 WDA 2021
Appeal from the Judgment of Sentence Entered June 29, 2021
In the Court of Common Pleas of Allegheny County
Criminal Division at No(s): CP-02-CR-0004229-2020
BEFORE: STABILE, J., KING, J., and COLINS, J.*
MEMORANDUM BY KING, J.: FILED: NOVEMBER 16, 2022
Appellant, Kelli Norman Rini, Jr., appeals from the judgment of sentence
entered in the Allegheny County Court of Common Pleas, following his bench
trial conviction for indecent assault.1 We affirm.
In its opinion, the trial court set forth the relevant facts of this case as
follows:
On February 8, 2020, the victim in this case and her friend
went out for a night of drinking in Pittsburgh, Pennsylvania.
The victim and her friend became intoxicated. The victim
called Uber to obtain a ride home. The Uber driver arrived
to pick them up and began driving the victim and her friend
to the victim’s residence. The Uber driver was [Appellant].
During the ride home, the victim and her friend began
arguing. [Appellant] stopped the vehicle and ordered the
victim’s friend to exit the vehicle. [Appellant] drove the
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
1 18 Pa.C.S.A. § 3126(a)(4).
J-S36022-22
victim to her residence. Upon arriving at her residence, the
victim realized she left her apartment keys in her vehicle
which she left behind at the drinking establishment.
[Appellant] ended the Uber ride but took the victim back to
her vehicle to obtain her apartment keys. [Appellant] then
transported the victim back to her residence. At
approximately 6:15 a.m., the victim and [Appellant] arrived
at her apartment. [Appellant] escorted her into the
apartment and the victim realized she left her phone in
[Appellant’s] vehicle. [Appellant] offered to retrieve the
phone. The victim gave [Appellant] her apartment keys so
[Appellant] could get back into her apartment after
retrieving the phone. [Appellant] retrieved the phone and
came back into the victim’s apartment.
The victim testified that upon entering her apartment, she
went to bed. She believed she passed out. She awoke to
[Appellant] using a vibrator on her genital area. She was
wearing underwear but [Appellant] had pulled the
underwear to the side and had partially inserted the vibrator
past her labia and it was forcefully pressing against her
clitoris. It took the victim a few seconds to realize what had
occurred and she immediately told [Appellant] to stop. She
did not know if [Appellant] left right away but she was lying
on her bed in a fetal position wearing nothing but a shirt and
panties.
When the victim woke up the next morning, [Appellant] sent
her a text message advising that he still had her apartment
keys and her work badge. The victim sent [Appellant] a text
message accusing him of touching her while she was asleep.
[Appellant] responded by admitting that he touched her. He
further admitted he was “totally wrong” and he apologized
for touching her. The victim called the police and charges
were filed against [Appellant].
(Trial Court Opinion, filed 1/18/22, at 2-3) (internal footnote omitted).
Procedurally, following a bench trial, the court convicted Appellant of
indecent assault—person unconscious. The court sentenced Appellant on June
29, 2021, to 9 to 18 months’ imprisonment, plus three years’ probation.
-2-
J-S36022-22
Appellant timely filed post-sentence motions on July 9, 2021, which the court
denied on July 27, 2021. Appellant filed a timely notice of appeal on August
19, 2021. That same day, the court ordered Appellant to file a concise
statement of errors complained of on appeal per Pa.R.A.P. 1925(b), and
Appellant complied following the grant of an extension of time.
Appellant raises three issues for our review:
Was the verdict against the sufficiency of the evidence?
Was the verdict against the weight of the evidence?
Did the court abuse its discretion at sentencing by elevating
Appellant to “a position of care?”
(Appellant’s Brief at 2).
After a thorough review of the record, the briefs of the parties, and the
relevant law, we conclude that the trial court properly addressed and disposed
of Appellant’s first and second issues in its opinion. The trial court explained
that the victim did not unequivocally consent to the indecent contact by
Appellant, and there was sufficient evidence to demonstrate that the victim
was unaware that she was being touched by Appellant in the manner she
described at trial. Upon realizing that Appellant was touching her, the victim
told Appellant to stop. Appellant admitted that he touched the victim and
apologized the next day for having touched her. The court found the victim’s
trial testimony credible. More specifically, the court indicated that the
evidence showed Appellant touched the victim’s genitals with a vibrator while
she was unaware that conduct was occurring, and the obvious purpose of the
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J-S36022-22
touching was to arouse or sexually gratify Appellant or the victim. Further,
the court indicated that the Commonwealth produced credible, competent,
and reliable evidence to establish each element of the indecent assault
subsection at issue. The court did not find the verdict to shock any rational
sense of justice such that it was against the weight of the evidence. (See
Trial Court Opinion at 3-7). We agree with the court’s sound analysis and
affirm Appellant’s first and second issues based on the trial court’s opinion.
In his third issue, Appellant challenges the discretionary aspects of his
sentence. Preliminarily, we observe that challenges to the discretionary
aspects of sentencing do not entitle an appellant to an appeal as of right.
Commonwealth v. Anderson, 830 A.2d 1013 (Pa.Super. 2003). Prior to
reaching the merits of a discretionary sentencing issue:
[W]e conduct a four-part analysis to determine: (1) whether
appellant has filed a timely notice of appeal, see Pa.R.A.P.
902 and 903; (2) whether the issue was properly preserved
at sentencing or in a motion to reconsider and modify
sentence, see Pa.R.Crim.P. [720]; (3) whether appellant’s
brief has a fatal defect, Pa.R.A.P. 2119(f); and (4) whether
there is a substantial question that the sentence appealed
from is not appropriate under the Sentencing Code, 42
Pa.C.S.A. § 9781(b).
Commonwealth v. Evans, 901 A.2d 528, 533 (Pa.Super. 2006), appeal
denied, 589 Pa. 727, 909 A.2d 303 (2006) (internal citations omitted).
When appealing the discretionary aspects of a sentence, an appellant
must invoke the appellate court’s jurisdiction by, inter alia, including in his
brief a separate concise statement demonstrating that there is a substantial
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J-S36022-22
question as to the appropriateness of the sentence under the Sentencing
Code. Commonwealth v. Mouzon, 571 Pa. 419, 425-26, 812 A.2d 617,
621-22 (2002); Pa.R.A.P. 2119(f). “The determination of what constitutes a
substantial question must be evaluated on a case-by-case basis.” Anderson,
supra at 1013. A substantial question exists “only when the appellant
advances a colorable argument that the sentencing judge’s actions were
either: (1) inconsistent with a specific provision of the Sentencing Code; or
(2) contrary to the fundamental norms which underlie the sentencing
process.” Commonwealth v. Brown, 741 A.2d 726, 735 (Pa.Super. 1999)
(en banc), appeal denied, 567 Pa. 755, 790 A.2d 1013 (2001).
Instantly, Appellant did not include the requisite Rule 2119(f) statement
in his appellate brief. The Commonwealth objects to this deficiency. (See
Commonwealth’s Brief at 9, 19). Appellant’s failure to include the Rule
2119(f) statement renders his sentencing challenge waived on appeal. See
Commonwealth v. Griffin, 149 A.3d 349 (Pa.Super. 2016), aff’d, 652 Pa.
127, 207 A.3d 827 (2019) (stating if appellant fails to include Rule 2119(f)
statement and Commonwealth objects, appellant has waived discretionary
aspects of sentencing challenge). Accordingly, we affirm.
Judgment of sentence affirmed.
Judge Stabile joins this memorandum.
Judge Colins notes his dissent.
-5-
J-S36022-22
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
-6-
Circulated 11/03/2022 10:20 AM
Allegheny County - Department of Court Records
Criminal Division -Filings Information
County caseID:CP-02-CR-0004229-2020(OPINION)
Case Description: COMMONWEALTH OF PENNSYLVANIA v. LNAME RINI
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1 OPINION 01/18/2022
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I - OPINION
IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA
CRIMINAL DIVISION
uHIGINAL
!.';riminal Division
COMMONWEALTH OF PENNSYLVANIA ;ear, O₹ Court Records
1i-•r141 i1V ominty, PA
,
VS. CC No. 2020-04229
KELLY NORMAN RINI
Defendant.
OPINION
Mariani, J.
This is adirect appeal wherein the defendant, Kelly Norman Rini, appeals from
the judgment of sentence of June 29, 2021 which became final on July 27, 2021 when
post-sentencing motions were denied. Germane to this appeal, after anon-jury trial, this
Court found the defendant guilty of Indecent Assault and not guilty of Involuntary
Deviate Sexual Intercourse. This Court sentenced the defendant to a period of
incarceration of not less than nine months nor more than 18 months followed by aterm of
three years' probation. The defendant challenges the convictions as set forth in the
Concise Statement of Matters Complainted of on Appeal alleging that the evidence was
legally insufficient to convict him, the verdict was against the weight of the evidence and
that this Court's sentence was manifestly excessive.
The facts of record adduced in this case are as follows:
On February 8, 2020, the victim in this case and her friend went out for anight of
drinking in Pittsburgh, Pennsylvania. The victim and her friend became intoxicated. The
victim called Uber to obtain aride home'. The Uber driver arrived to pick them up and
began driving the victim and her friend to the victim's residence. The Uber driver was
the defendant. During the ride home, the victim and her friend began arguing. The
defendant stopped the vehicle and ordered the victim's friend to exit the vehicle. The
defendant drove the victim to her residence. Upon arriving at her residence, the victim
realized she left her apartment keys in her vehicle which she left behind at the drinking
establishment. The defendant ended the Uber ride but took the victim back to her
vehicle to obtain her apartment keys. The defendant then transported the victim back to
her residence. At approximately 6:15 a.m., the victim and the defendant arrived at her
apartment. The defendant escorted her into the apartment and the victim realized she left
her phone in the defendant's vehicle. The defendant offered to retrieve the phone. The
victim gave the defendant her apartment keys so the defendant could get back into her
apartment after retrieving the phone. The defendant retrieved the phone and came back
into the victim's apartment.
The victim testified that upon entering her apartment, she went to bed. She
believed she passed out. She awoke to the defendant using avibrator on her genital area.
She was wearing underwear but the defendant had pulled the underwear to the side and
had partially inserted the vibrator past her labia and it was forcefully pressing against her
clitoris. It took the victim a few seconds to realize what had occurred and she
1 Uber is aprivate taxi service.
2
immediately told the defendant to stop. She did not know if the defendant left right away
but she was lying on her bed in afetal position wearing nothing but ashirt and panties.
When the victim woke up the next morning, the defendant sent her atext message
advising that he still had her apartment keys and her work badge. The victim sent the
defendant a text message accusing him of touching her while she was asleep. The
defendant responded by admitting that he touched her. He further admitted he was
"totally wrong" and he apologized for touching her. The victim called the police and
charges were filed against the defendant.
The defendant first claims that the evidence was legally insufficient to convict
him. The standard of review for sufficiency of the evidence claims is well settled:
the standard we apply in reviewing the sufficiency of the
evidence is whether viewing all the evidence admitted at
trial in the light most favorable to the verdict winner, there
is sufficient evidence to enable the fact-finder to find every
element of the crime beyond a reasonable doubt. In
applying the above test, we may not weigh the evidence
and substitute our judgment for the fact-finder. In addition,
we note that the facts and circumstances established by the
Commonwealth need not preclude every possibility of
innocence. Any doubts regarding adefendant's guilt may be
resolved by the fact-finder unless the evidence is so weak
and inconclusive that as amatter of law no probability of
fact may be drawn from the combined circumstances. The
Commonwealth may sustain its burden of proof [ofJ
proving every element of the crime beyond areasonable
doubt by means of wholly circumstantial evidence. More-
over, in applying the above test, the entire record must be
evaluated and all the evidence actually received must be
considered. Finally, the trier of fact while passing upon the
credibility of witnesses and the weight of the evidence
3
produced, is free to believe all, part or none of the
evidence.
Commonwealth v. Lehman, 820 A.2d 766, 772 (Pa. Super. 2003)
Defendant first claims that the evidence was insufficient to convict him of
indecent assault. That offense is set forth in 18 Pa.C.S.A. § 3126:
(a) Offense defined.--A person is guilty of indecent
assault if the person has indecent contact with the
complainant, causes the complainant to have indecent
contact with the person or intentionally causes the
complainant to come into contact with seminal fluid, urine
or feces for the purpose of arousing sexual desire in the
person or the complainant and:
(4) the complainant is unconscious or the person
knows that the complainant is unaware that the indecent
contact is occurring;
"Indecent contact" is defined as " any touching of the sexual or other intimate parts of the
person for the purpose of arousing or gratifying sexual desire, in either person." 18
Pa.C.S. § 3101.
This Court finds the testimony of the victim credible. "[TJhe uncorroborated
testimony of asexual assault victim, if believed by the trier of fact, is sufficient to convict
adefendant...." Commonwealth v. Charlton, 2006 PA Super 149, 902 A.2d 554, 562
(Pa. Super. 2006). The victim did not unequivocally consent to the indecent contact of the
defendant and there is sufficient evidence in the record to also demonstrate that the victim
4
was unaware that she was being touched by the defendant in the manner she described at
trial. She told the defendant to stop upon realizing she was being touched and the
defendant admitted he touched her and apologized for touching her the next day.
Additionally, the evidence in this case clearly indicates that the defendant had
touched the victim's labia and clitoris with avibrator while the victim was unaware that
such conduct was occurring. The obvious purpose of the touching was to arouse or
gratify sexual desire both in the defendant and in the victim. The implement used to
touch the victim, avibrator, is an object that is used for sexual arousal. This evidence
clearly demonstrates non-consensual indecent sexual contact as described in the statute.
Accordingly, the defendant's conviction for indecent assault should be affirmed.
The defendant next claims that the guilty verdict was contrary to the weight of the
evidence. As forth in Criswell v. King, 834 A.2d 505, 512. (Pa. 2003):
Given the primary role of the jury in determining questions of
credibility and evidentiary weight, the settled but
extraordinary power vested in trial judges to upset ajury
verdict on grounds of evidentiary weight is very narrowly
circumscribed. A new trial is warranted on weight of the
evidence grounds only in truly extraordinary circumstances,
i.e., when the jury's verdict is so contrary to the evidence that
it shocks one's sense of justice and the award of anew trial is
imperative so that right may be given another opportunity to
prevail. The only trial entity capable of vindicating aclaim
that the jury's verdict was contrary to the weight of the
evidence claim is the trial judge -- decidedly not the jury.
5
834 A.2d at 512. Armbruster v. Horowitz, 572 Pa. 1, 813 A.2d 698, 703 (Pa. 2002);
Commonwealth v. Brown, 538 Pa. 410, 648 A.2d 1177, 1189 (Pa. 1994)). Although
Criswell spoke in terms of ajury verdict, there is no distinction relative to anon jury verdict.
The initial determination regarding the weight of the evidence is for the fact-finder.
Commonwealth v. Jarowecki, 923 A.2d 425, 433 (Pa.Super. 2007). The trier of fact is free
to believe all, some or none of the evidence. Id. A reviewing court is not permitted to
substitute its judgment for that of the fact-finder. Commonwealth v. Small, 741 A.2d 666,
672 (Pa. 1999). A verdict should only be reversed based on aweight claim if that verdict
was so contrary to the evidence as to shock one's sense of justice. Id. See also
Commonwealth v. Habay, 934 A.2d 732, 736-737 (Pa.Super. 2007). Importantly "[a]
motion for a new trial on the grounds that the verdict is contrary to the weight of the
evidence concedes that there is sufficient evidence to sustain the verdict but claims that
`notwithstanding all the facts, certain facts are so clearly of greater weight that to ignore
them or to give them equal weight with all the facts is to deny justice." Commonwealth v.
Widmer. 744 A.2d 745 (Pa. 2000)). When the challenge to the weight of the evidence is
predicated on the credibility of trial testimony, appellate review of atrial court's decision
is extremely limited. Unless the evidence is so unreliable and/or contradictory as to make
any verdict based thereon pure conjecture, weight of evidence claims shall be rejected.
Commonwealth v. Rossetti, 2004 PA Super 465, 863 A.2d 1185, 1191 (Pa. Super. 2004).
The fact-finder's rejection of a defendant's version of events or the rejection of an
affirmative defense is within its discretion and not avalid basis for aweight of evidence
attack. Commonwealth v. Bowen, 55 A.3d 1254, 1262 (Pa.Super. 2011).
6
The defendant's weight claim essentially argues that the sexual contact between the
victim and the defendant was consensual. Inasmuch as the defendant's weight claim
concedes that the evidence was sufficient to convict in this case, the issue of consent was
specifically considered by this Court after assessing the credibility of the victim. Because a
weight of the evidence claim cannot be based solely on achallenge to the Court's credibility
determinations, the defendant's weight claim fails. The trial evidence presented by the
Commonwealth has been recounted herein and was credible, competent and reliable and
established every element of indecent assault. This Court has reviewed the trial record and
believes that the verdict does not shock any rational sense of justice and, therefore, the
verdict was not against the weight of the evidence.
The defendant's final claim is that this Court's sentence was excessive and
unreasonable. A sentencing judge is given agreat deal of discretion in the determination
of asentence, and that sentence will not be disturbed on appeal unless the sentencing
court manifestly abused its discretion." Commonwealth v. Boyer, 856 A2d 149, 153 (Pa.
Super. 2004), citing Commonwealth v. Kenner, 784 A.2d 808, 811 (Pa.Super. 2001)
appeal denied, 568 Pa. 695, 796 A.2d 979 (2002); 42 Pa.C.S.A. § 9721. An abuse of
discretion is not amere error of judgment; it involves bias, partiality, prejudice, ill-will,
or manifest unreasonableness. See Commonwealth v. Flores, 921 A.2d 517, 525
(Pa.Super. 2007), citing Commonwealth v. Busanet, 817 A.2d 1060, 1076 (Pa. 2002).
7
Furthermore, the "[s]entencing court has broad discretion in choosing the range of
permissible confinements which best suits aparticular defendant and the circumstances
surrounding his crime." Boyer, supra, quoting Commonwealth v. Moore, 617 A.2d 8, 12
(1992). Discretion is limited, however, by 42 Pa.C.S.A. § 9721(b), which provides that
asentencing court must formulate asentence individualized to that particular case and
that particular defendant. Section 9721(b) provides: "[t]he court shall follow the general
principle that the sentence imposed should call for confinement that is consistent with the
protection of the public, the gravity of the offense, as it relates to the impact on the life of
77
the victim and on the community, and the rehabilitative needs of the defendant .
Boyer, supra at 153, citing 42 Pa.C.S.A. § 9721(b). Furthermore,
In imposing sentence, the trial court is required to consider
the particular circumstances of the offense and the character
of the defendant. The trial court should refer to the
defendant's prior criminal record, age, personal
characteristics, and potential for rehabilitation. However,
where the sentencing judge had the benefit of apresentence
investigative report, it will be presumed that he or she was
aware of the relevant information regarding the defendant's
character and weighed those considerations along with
mitigating statutory factors.
Boyer, supra at 154, citing Commonwealth v. Burns, 765 A.2d 1144,1150-1151 (Pa.Super.
2000) (citations omitted).
In fashioning an appropriate sentence, courts must be mindful that the sentencing
guidelines "have no binding effect, in that they do not predominate over individualized
sentencing factors and that they include standardized recommendations, rather than
mandates, for aparticular sentence." Commonwealth v. Walls, 592 Pa. 557, 567, 926 A.2d
8
957, 964 (2007). A sentencing court is, therefore, permitted to impose a sentence
outside the recommended guidelines. If it does so, however, it "must provide awritten
statement setting forth the reasons for the deviation...." Id., 926 A.2d at 963.
A sentencing judge can satisfy the requirement of placing reasons for aparticular
sentence on the record by indicating that he or she has been informed by the pre-
sentencing report; thus properly considering and weighing all relevant factors. Boyer,
supra, citing Burns, supra, citing Commonwealth v. Egan, 451 Pa.Super. 219, 679 A.2d
237 ( 1996). See also Commonwealth v. Tirado, 870 A.2d 362, 368 (Pa.Super. 2005) (if
sentencing court has benefit of presentence investigation, law expects court was aware of
relevant information regarding defendant's character and weighed those considerations
along with any mitigating factors). In Commonwealth v. Moury_, 992 A.2d 162, 171
(Pa.Super. 2010), the Superior Court explained that where asentencing court imposes a
standard-range sentence with the benefit of apresentence report, areviewing court will
not consider asentence excessive.
The record in this case supports the sentence imposed by this Court. The
sentence imposed by this Court was within the standard range of the sentencing
guidelines. The record reflects that this Court was guided by the presentence report and
that the defendant did not object to the contents of that report. The defendant provided a
presentence statement denying culpability in this matter. This Court considered the fact
that the defendant failed to accept responsibility for his actions in this case. Additionally,
in this Court's view, the defendant, as an Uber driver operating ataxi service, was in a
9
position of care and owed aduty of care to the victim. Rather than honor that duty of
care, the defendant violated the duty of care, entered the apartment of the victim and
indecently assaulted the victim while the victim was unaware of the circumstances. The
defendant was keenly aware of the victim's intoxicated state and took advantage of the
victim's intoxication for his own personal selfish sexual arousal. This Court believed
that astandard range sentence was appropriate.
Defendant finally includes in his concise statement of issues complained of on
appeal a section titled "Intermediate Punishment." There is no claim of error
challenging aruling of this Court included in this section. Accordingly, that section is
not addressed in this opinion.
For the foregoing reasons, the judgment of sentence should be affirmed.
Date: By the Court:
JJWv,Wy
10 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484213/ | J-S27023-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
TROY MCCOY :
:
Appellant : No. 166 EDA 2022
Appeal from the Judgment of Sentence Entered October 25, 2021
In the Court of Common Pleas of Bucks County Criminal Division at
No(s): CP-09-CR-0004774-2020
BEFORE: STABILE, J., NICHOLS, J., and SULLIVAN, J.
MEMORANDUM BY NICHOLS, J.: FILED NOVEMBER 16, 2022
Appellant Troy McCoy appeals from the judgment of sentence imposed
following his conviction for aggravated assault and related offenses. Appellant
challenges the sufficiency and weight of the evidence, the trial court’s
evidentiary rulings, and the discretionary aspects of his sentence. We affirm.
We adopt the trial court’s summary of the facts and procedural history
underlying this case. See Trial Ct. Op., 3/21/22, at 1-4. Briefly, on August
9, 2020, Appellant and Shakerra Bonds (co-defendant) visited Sesame Place
with a group of family members. N.T. Trial, 7/8/21, at 166. While Appellant
was in line for the carousel ride, a 17-year-old employee (the victim) asked
Appellant to pull up his face mask in accordance with the park’s COVID-19
policy. N.T. Trial, 7/7/21, at 125. After Appellant became argumentative, the
victim walked away in order “to avoid any problems.” Id. at 127. Later that
day, the victim was in the operating booth for another ride at the park. Id.
J-S27023-22
at 128. After Appellant spotted the victim, he demanded to be released from
the ride, then approached the victim and asked if he wanted to go somewhere
private to fight. Id. at 133. The victim responded that he did not want to
fight and then pressed the call button for assistance. Id. at 133-34. As staff
members escorted the victim to the employee break room for his own
protection, co-defendant began following the victim and cursing at him. Id.
at 134. While the victim’s back was turned, Appellant jumped over a fence
and punched the victim in the left side of his face. Id. at 57. As a result of
the attack, the victim suffered a broken jaw, underwent surgery, and spent
two weeks in the hospital with his jaw wired shut. Id. at 148.
Appellant was subsequently arrested and charged with aggravated
assault, recklessly endangering another person (REAP), simple assault,
harassment, and two counts of disorderly conduct.1 Appellant’s co-defendant
was also charged with simple assault and other offenses for her involvement
in the attack. On July 7, 2021, both matters proceeded to consolidated jury
trial. Ultimately, on July 9, 2021, Appellant and co-defendant were convicted
of all charges. On October 25, 2021, the trial court sentenced Appellant to a
term of five to ten years’ incarceration for aggravated assault and a concurrent
____________________________________________
1 18 Pa.C.S. §§ 2702(a)(1), 2705, 2701(a)(1), 2709(a)(1), and 5503(a)(1),
respectively.
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term of two years’ probation for REAP.2 The trial court also ordered Appellant
to pay restitution.
Appellant filed a timely post-sentence motion, which the trial court
denied. Appellant subsequently filed a timely notice of appeal and a court-
ordered Pa.R.A.P. 1925(b) statement. The trial court issued a Rule 1925(a)
opinion addressing Appellant’s claims.
On appeal, Appellant raises multiple issues, which we have reordered as
follows:
1. Did the trial court err in permitting testimony regarding
Appellant’s pre-arrest silence?
2. Did the trial court err in admitting the hearsay testimony of
Detective Viscardi?
3. Was the verdict of guilty of aggravated assault supported by
sufficient evidence?
4. Was the verdict of guilty of aggravated assault against the
weight of the evidence?
5. Did the trial court abuse its discretion in sentencing Appellant
by imposing manifestly excessive sentences, failing to consider
all relevant factors, and relying on improper factors in imposing
said sentence?
Appellant’s Brief at 10.
____________________________________________
2 Appellant’s sentence for both aggravated assault and REAP were within the
standard guideline range. At the time of sentencing, Appellant’s prior record
score (PRS) was a two. Under the Sentencing Guidelines, the standard
minimum guideline range for aggravated assault is forty-eight to sixty-six
months of confinement, plus or minus twelve months for aggravating or
mitigating circumstances. See 204 Pa.Code §§ 303.15, 303.16(a). For REAP,
the standard minimum guideline range is restorative sanctions to nine
months, plus or minus three months for aggravating or mitigating
circumstances. See id.
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Pre-Arrest Silence
In his first issue, Appellant argues that the trial court erred by allowing
the Commonwealth to elicit testimony concerning Appellant’s pre-arrest
silence. Appellant’s Brief at 24.
By way of background to this claim, we note that prior to trial, the trial
court rejected the Commonwealth’s request to question a Sesame Place
security supervisor, Sergeant Jesus Hernandez Ceron, about Appellant’s
refusal to provide a statement immediately after the incident. N.T. Pre-Trial
Mot. Hr’g, 7/6/21, at 8-18. When the issue resurfaced at trial, the court
reiterated that it would “err on the side of caution” as it did not “feel
comfortable letting anyone refer to the defendant’s right not to speak.” N.T.
Trial, 7/8/21 at 79-80. However, the court warned both Appellant and co-
defendant’s counsel that that they “need[ed] to be careful when [they] cross-
examine[d] because if [they] even go near it[, the court was] going to allow
it.” Id. at 79.
Later that day, co-defendant’s counsel asked Sergeant Ceron about a
statement that Appellant made to him after the incident occurred. Id. at 117-
18. Appellant did not object. Id. Before the Commonwealth began re-direct
examination, the trial court stated that the co-defendant had “opened the
door” for the Commonwealth to question Sergeant Ceron about statements
Appellant made after the incident. Id. at 119. Appellant did not object. Id.
Thereafter, the following exchange occurred:
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[The Commonwealth]: There was another statement that
[Appellant] made to you, correct, that you didn’t previously
discuss on your [d]irect [examination], right?
[Sergeant Ceron]: Correct.
[The Commonwealth]: And what [Appellant] tells you is what?
[Sergeant Ceron]: He said, “Don’t touch me. I don’t want to talk
to you.”
[The Commonwealth]: So, you’re attempting to talk to him,
correct?
[Sergeant Ceron]: Correct.
[The Commonwealth]: Why are you attempting to talk to him?
[Sergeant Ceron]: I want to know what happened.
[The Commonwealth]: In response to you trying to figure out what
happen[ed], what does [Appellant] tell you?
[Sergeant Ceron]: He doesn’t want to talk. Don’t touch me.
N.T. Trial, 7/8/21, at 120. On re-cross examination, both Appellant and co-
defendant’s counsel continued to question Sergeant Ceron about his
interactions with Appellant after the incident. Id. at 120-23.
On appeal, Appellant argues that the trial court erred in concluding that
co-defendant’s counsel “opened the door” to testimony concerning Appellant’s
pre-arrest silence. Appellant’s Brief at 27. Appellant claims that “[i]n essence,
the trial court conditioned the protection of Appellant’s constitutional rights on
the requirement that co-defendant not open the door by eliciting evidence
helpful to her defense.” Id. Further, Appellant contends that the
Commonwealth relied on this testimony during closing argument, when the
Commonwealth “lump[ed] Appellant’s silence with his flight and suggest[ed]
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that both [were] evidence that Appellant knew that he committed a crime and
consciousness of guilt.” Id. at 27. Therefore, Appellant concludes that even
if the testimony was properly admitted, “the use of the evidence to infer guilt
was in violation of Appellant’s constitutional rights.” Id.
The Commonwealth responds that Appellant has waived these claims by
failing to object to the Commonwealth’s questions during re-direct
examination or the trial court’s ruling that co-defendant’s counsel had “opened
the door” to such testimony. Commonwealth’s Brief at 32. Further, the
Commonwealth argues that Appellant waived his challenge to the
Commonwealth’s statements during cross-examination. Id.
Initially, we must determine whether Appellant has preserved his claim
for review. It is well settled that “[t]he absence of a contemporaneous
objection below constitutes a waiver of the claim on appeal.”
Commonwealth v. Rodriguez, 174 A.3d 1130, 1145 (Pa. Super. 2017)
(citation and quotation marks omitted); see also Pa.R.A.P. 302(a) (stating
that “[i]ssues not raised in the trial court are waived and cannot be raised for
the first time on appeal”). As this Court has explained, the trial court must
be given “an opportunity to correct errors at the time they are made. A party
may not remain silent and afterwards complain of matters which, if erroneous,
the court would have corrected.” Commonwealth v. Strunk, 953 A.2d 577,
579 (Pa. Super. 2008) (citations omitted and some formatting altered).
Here, the record confirms that Appellant did not object to the trial court’s
ruling that co-defendant’s counsel “opened the door” to testimony about what
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Appellant said to Sergeant Ceron after the incident, nor did he object during
the Commonwealth’s redirect examination of Sergeant Ceron. See N.T. Trial,
7/8/21, at 119-20. Therefore, that claim is waived. See Rodriguez, 174
A.3d at 1145.
Further, to the extent Appellant challenges the Commonwealth’s
references to Appellant’s pre-arrest silence during closing argument, Appellant
did not raise that issue at trial or in his Rule 1925(b) statement. See N.T.
Trial, 7/9/21, at 52-53; Rule 1925(b) Statement, 3/2/22. Therefore, this
claim is also waived. See Rodriguez, 174 A.3d at 1145; see also
Commonwealth v. Castillo, 888 A.2d 775, 780 (Pa. 2005) (stating that
“[a]ny issues not raised in a Pa.R.A.P. 1925(b) statement will be deemed
waived” (citation omitted)). Accordingly, Appellant is not entitled to relief.
Hearsay Testimony
Appellant next argues that the trial court erred in allowing the
Commonwealth to elicit inadmissible hearsay testimony from Detective
Christopher Viscardi. Appellant’s Brief at 29.
By way of background, we note that at trial, co-defendant’s counsel
called Detective Viscardi to testify about the contents of the criminal complaint
and the victim’s prior statement that he had accidentally pushed and/or hit
co-defendant during the attack. N.T. Trial, 7/8/21, at 160. On cross-
examination, the trial court permitted the Commonwealth to elicit the
following testimony from Detective Viscardi:
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J-S27023-22
[The Commonwealth]: When you filed this complaint you had
talked to how many other witnesses when you seen their
statements?
[Appellant]: Objection, Your Honor. Hearsay.
THE COURT: When you filed this complaint you had talked to how
many other witnesses when you seen their statements? That was
the question.
[Appellant]: Yes. The objection is that it’s suggesting that they
told him certain information that led him to his conclusion.
THE COURT: The only thing he’s asking is if he talked to him. As
long as he asked that question that’s okay.
[Appellant]: Understood.
THE COURT: Overruled.
[The Commonwealth]: How many witnesses did you talk to or see
statements from?
[Detective Viscardi]: 30-plus.
[The Commonwealth]: Included in those, was Beyonce Best
included?
[Detective Viscardi]: Yes.
[The Commonwealth]: Was Nadia Gonzalez included in that?
[Detective Viscardi]: Yes.
[The Commonwealth]: Was Andrew Beck included in that?
[Detective Viscardi]: Yes.
[The Commonwealth]: Was Captain Reynolds and Sergeant Ceron
included in that information?
[Detective Viscardi]: Yes.
[The Commonwealth]: After you talked to those witnesses and
gathered the evidence, that’s when you wrote in your criminal
complaint that [the victim] may have accidentally—
[Appellant]: I object again.
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J-S27023-22
THE COURT: You can object but [co-defendant’s counsel]
questioned him extensively on that, and this is cross-examination
so I’m going to allow it. He was questioned on it on direct. You
may not have asked questions about it but, certainly, it’s proper
cross-examination in my view. I’ll overrule the objection.
[The Commonwealth]: So, after you talked to at least those five
witnesses that testified in court yesterday and today who told us
that they never saw [the victim] touch, shove, push, hit [co-
defendant], that’s when you filled out the affidavit of probable
cause and you wrote in the probable cause that [the victim] may
have accidentally touched [co-defendant]?
[Detective Viscardi]: Yes.
[The Commonwealth]: And you would have taken into account,
both, the witness’s statements, as well as what [the victim] had
told you, correct?
[Detective Viscardi]: Correct.
[The Commonwealth]: And when you wrote that, that is what you
believed happened?
[Detective Viscardi]: Yes.
N.T. Trial, 7/8/21, at 160-62.
On appeal, Appellant cites to this portion of testimony and asserts that
Detective Viscardi “was permitted to testify to what upwards of thirty people
told him and to suggest that what they told him was consistent with what the
victim told him.” Appellant’s Brief at 32. Therefore, Appellant concludes that
Detective Viscardi’s testimony was inadmissible hearsay and that the trial
court erred in concluding that co-defendant opened the door to that testimony
on cross-examination. Id. at 32-33.
The Commonwealth responds that Appellant “does not advance any
argument about how the testimony was a statement, out of court, and/or
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uttered for its truth.” Commonwealth’s Brief at 44. Further, the
Commonwealth argues that Detective Viscardi’s statements were admissible
to show “how he proceeded in the investigation.” Id. at 45. Finally, the
Commonwealth contends that any alleged error was harmless, as the
testimony about the victim’s statement was beneficial to Appellant’s case and
did not have any prejudicial effect. Id. Therefore, the Commonwealth asserts
that Appellant is not entitled to relief.
We review a trial court’s evidentiary rulings for an abuse of discretion.
Commonwealth v. Rivera, 238 A.3d 482, 492 (Pa. Super. 2020) (citation
omitted), appeal denied, 250 A.3d 1158 (Pa. 2021).
Hearsay is defined as “a statement that . . . the declarant does not make
while testifying at the current trial or hearing; and . . . offer[ed] in evidence
to prove the truth of the matter asserted in the statement.” Pa.R.E. 801(c).
Generally, hearsay evidence is inadmissible “except as provided by [the Rules
of Evidence], by other rules prescribed by the Pennsylvania Supreme Court,
or by statute.” Pa.R.E. 802.
Our Supreme Court has explained:
The rule against admitting hearsay evidence stems from its
presumed unreliability, because the declarant cannot be
challenged regarding the accuracy of the statement. But it is well
established that certain out-of-court statements offered to explain
the course of police conduct are admissible because they are
offered not for the truth of the matters asserted but rather to show
the information upon which police acted. The trial court, in
exercising discretion over the admission of such statements, must
balance the prosecution’s need for the statements against any
prejudice arising therefrom.
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Commonwealth v. Chmiel, 889 A.2d 501, 532-33 (Pa. 2005) (citations
omitted); see also Commonwealth v. Jones, 658 A.2d 746, 751 (Pa. 1995)
(concluding that a police officer’s testimony was proper because it was not
offered for the truth of the matter asserted, was admitted in order to explain
police conduct, and merely repeated matters covered in testifying witnesses’
own testimony).
Here, the trial court addressed Appellant’s claim as follows:
[T]he first statement uttered by Detective Viscardi (that he spoke
to thirty witnesses) is not hearsay. Detective Viscardi did not
testify to what those witnesses said, only that he spoke to them.
Further, while Detective Viscardi’s second statement (that the
information gathered was used when writing the complaint) may
constitute hearsay, co-defendant’s counsel “opened the door” to
the testimony when he questioned Detective Viscardi extensively
on the subject during direct examination. Co-defendant’s counsel
asked a plethora of questions about the content of the incident
report, ranging from what information witnesses provided for the
complaint to whether the witnesses used specific terms that
Detective Viscardi included. N.T. Trial, 7/8/2021, 134-140. “If a
defendant delves into what would be objectionable testimony on
the part of the Commonwealth, the Commonwealth can probe
further into the objectionable area.” Commonwealth v.
McCabe, 498 A.2d 933, 934 (Pa. Super. 1985). Therefore, this
[c]ourt did not err in allowing hearsay testimony but properly
admitted a statement that was heavily questioned during direct
examination.
Trial Ct. Op. at 6-7.
Following our review of the record, we discern no abuse of discretion by
the trial court. See Rivera, 238 A.3d at 492. Although Detective Viscardi
referred to some of the witnesses’ statements during his testimony, he did so
in response to questions about what information he relied on when preparing
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the criminal complaint. Therefore, the trial court did not err in overruling
Appellant’s hearsay objection. See Chmiel, 889 A.2d at 532 (concluding that
“it is well established that certain out-of-court statements offered to explain
the course of police conduct are admissible because they are offered not for
the truth of the matters asserted but rather to show the information upon
which police acted” (citations omitted)). Accordingly, Appellant is not entitled
to relief.
Sufficiency of the Evidence
Appellant next argues that the Commonwealth failed to prove the intent
element for aggravated assault. Appellant’s Brief at 14. Specifically, although
Appellant concedes that the victim suffered serious bodily injury,3 he claims
that a single punch does not prove that he acted with the intent to cause
serious bodily injury. Id. at 18 (citing Commonwealth v. Alexander, 383
A.2d 887 (Pa. 1978)). Therefore, Appellant concludes that there was
insufficient evidence to sustain his conviction for aggravated assault.
In reviewing a challenge to the sufficiency of the evidence, our standard
of review is as follows:
Because a determination of evidentiary sufficiency presents a
question of law, our standard of review is de novo and our scope
of review is plenary. In reviewing the sufficiency of the evidence,
____________________________________________
3We note that serious bodily injury is defined as “[b]odily injury which creates
a substantial risk of death or which causes serious, permanent disfigurement,
or protracted loss or impairment of the function of any bodily member or
organ.” 18 Pa.C.S. § 2301; see also Commonwealth v. Nichols, 692 A.2d
181, 184 (Pa. Super. 1997) (holding that a broken jaw and being confined to
a liquid diet constitutes a serious bodily injury).
- 12 -
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we must determine whether the evidence admitted at trial and all
reasonable inferences drawn therefrom, viewed in the light most
favorable to the Commonwealth as verdict winner, were sufficient
to prove every element of the offense beyond a reasonable doubt.
[T]he facts and circumstances established by the Commonwealth
need not preclude every possibility of innocence. It is within the
province of the fact-finder to determine the weight to be accorded
to each witness’s testimony and to believe all, part, or none of the
evidence. The Commonwealth may sustain its burden of proving
every element of the crime by means of wholly circumstantial
evidence. Moreover, as an appellate court, we may not re-weigh
the evidence and substitute our judgment for that of the fact-
finder.
Commonwealth v. Palmer, 192 A.3d 85, 89 (Pa. Super. 2018) (citation
omitted).
Section 2702(a)(1) of the Crimes Code states that “[a] person is guilty
of aggravated assault if he . . . attempts to cause serious bodily injury to
another, or causes such injury intentionally, knowingly[,] or recklessly under
circumstances manifesting extreme indifference to the value of human life[.]”
18 Pa.C.S. § 2702(a)(1).
“When a victim actually sustains serious bodily injury, the
Commonwealth can, but does not necessarily have to, establish specific intent
to cause such harm.” Commonwealth v. Burton, 2 A.3d 598, 602 (Pa.
Super. 2010) (en banc). In such cases, “the statute’s intent requirement can
be met if the defendant acts recklessly under circumstances manifesting an
extreme indifference to human life.” Id. (citation omitted).
Our Supreme Court has stated that the defendant’s intent may be
inferred from the circumstances surrounding an attack. Alexander, 383 A.2d
at 889. Such factors include (1) whether the defendant “was
- 13 -
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disproportionately larger or stronger than the victim,” (2) whether the
defendant would have escalated his attack but was restrained from doing so;
(3) whether the defendant possessed a weapon, and (4) “statements before,
during, or after the attack which might indicate [defendant’s] intent to inflict
further injury upon the victim.” Id. (citation omitted).
In Alexander, the defendant was convicted of aggravated assault after
he delivered a single punch to the victim’s head. Id. at 888. Although the
victim was injured, he did not sustain serious bodily injury. On appeal, our
Supreme Court explained that because the victim did not sustain serious
bodily injury, the Commonwealth was required to prove that Appellant acted
with intent to cause such injury. Id. at 889. However, the Court noted that
the surrounding circumstances of the attack were insufficient to prove intent,
as the defendant “delivered one punch and walked away.” Id. Therefore, the
Alexander court reversed this Court’s order affirming the defendant’s
judgment of sentence. Id. at 890.
Here, the trial court addressed Appellant’s claim as follows:
This court is without a doubt that the evidence presented by the
Commonwealth is sufficient to support Appellant’s conviction for
aggravated assault. Appellant jumped over a fence and charged
at [the v]ictim, a seventeen-year-old minor, before sucker
punching him in the face. N.T. Trial, 7/7/2021, at 58. Appellant
struck [the v]ictim with such force that there was an audible sound
upon contact and it knocked [the v]ictim onto the floor,
unconscious. N.T. Trial, 7/8/2021, at 22. This was not an
accidental hit. Even if Appellant did not necessarily intend to
break [the victim’s] jaw in two places[,] to the extent that it had
to be operated on and wired shut for two weeks, Appellant should
have known that sucker punching a minor from behind would
- 14 -
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result in serious injury. At the very least, Appellant’s behavior
was reckless—no one throws a punch and reasonably expects the
victim to not get hurt. Therefore, the Commonwealth adequately
proved beyond a reasonable doubt Appellant’s mens rea and any
assertion to the contrary is without merit.
Trial Ct. Op. at 14 (some formatting altered).
Following our review of the record, and viewing the evidence in the light
most favorable to the Commonwealth as verdict winner, we find no error in
the trial court’s conclusion. See Palmer, 192 A.3d at 89. As noted
previously, there is no dispute that the victim suffered serious bodily injury as
a result of the attack.4 Therefore, the Commonwealth was only required to
prove that Appellant acted “recklessly under circumstances manifesting an
extreme indifference to human life.” Burton, 2 A.3d at 602 (citation omitted).
At trial, the Commonwealth presented witness testimony establishing that
Appellant reacted angrily towards the victim when directed to comply with the
park’s mask policy, then later confronted the victim and attempted to start a
physical altercation. After the victim walked away from Appellant, witnesses
testified that Appellant “came out of nowhere,” approached the victim from
behind, and “punched [the victim] extremely hard” in the left side of his face,
at which point the victim “blacked out” and fell to the ground. N.T. Trial,
____________________________________________
4 As noted previously, Appellant concedes that the victim suffered serious
bodily injury. Further, we note that at trial, the victim testified that his jaw
was broken in two places, which required him to undergo multiple surgeries
and spend two weeks in the hospital with his jaw wired shut. N.T. Trial,
7/7/21, 140, 142, 147-48. Under these circumstances, we conclude that there
was sufficient evidence to establish “serious bodily injury” for purposes of
aggravated assault.
- 15 -
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7/7/21, at 55-58, 137; see also N.T. Trial, 7/8/21, at 22. Beyonce Best
testified that while the victim was on the ground, Appellant placed the victim
in a “headlock” while wrapping his legs around the victim’s body. N.T. Trial,
7/7/21, at 55. Under these circumstances, we agree with the trial court that
there was sufficient evidence to establish that Appellant acted recklessly. See
Burton, 2 A.3d at 602; Alexander, 383 A.2d at 889. Accordingly, Appellant
is not entitled to relief.
Weight of the Evidence – Aggravated Assault
In his next claim, Appellant argues that his conviction for aggravated
assault was against the weight of the evidence. Appellant’s Brief at 11. In
support, Appellant asserts that both the victim and witness Beyonce Best
provided inconsistent statements regarding the details of the assault and that
their testimony “was so contradictory and inconsistent that the guilty verdict
shocks one’s sense of justice.” Id. at 20-21. Further, Appellant contends that
the victim “may have gained financially” from the incident, which “goes to his
bias.” Id. at 22. Therefore, Appellant contends that he is entitled to a new
trial.
In reviewing a weight claim, this Court has explained:
A motion for a new trial based on a claim that the verdict is against
the weight of the evidence is addressed to the discretion of the
trial court. A new trial should not be granted because of a mere
conflict in the testimony or because the judge on the same facts
would have arrived at a different conclusion. When a trial court
considers a motion for a new trial based upon a weight of the
evidence claim, the trial court may award relief only when the
jury’s verdict is so contrary to the evidence as to shock one’s
sense of justice and the award of a new trial is imperative so that
- 16 -
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right may be given another opportunity to prevail. The inquiry is
not the same for an appellate court. Rather, when an appellate
court reviews a weight claim, the court is reviewing the exercise
of discretion by the trial court, not the underlying question of
whether the verdict was against the weight of the evidence. The
appellate court reviews a weight claim using an abuse of discretion
standard.
At trial, the jury [is] the ultimate fact-finder and the sole arbiter
of the credibility of each of the witnesses. Issues of witness
credibility include questions of inconsistent testimony and
improper motive. A jury is entitled to resolve any inconsistencies
in the Commonwealth’s evidence in the manner that it sees fit. . .
.
[I]nconsistencies in eyewitness testimony are not sufficient to
warrant a new trial on grounds that the verdict was against the
weight of the evidence.
Commonwealth v. Jacoby, 170 A.3d 1065, 1080-81 (Pa. 2017) (citations
and quotation marks omitted).
Here, the trial court addressed Appellant’s weight claim as follows:
[T]he Commonwealth presented a plethora of evidence from a
variety of witnesses, including [the v]ictim. Each witness
consistently testified to the same general story outlined above:
Appellant and [his co-d]efendant physically assaulted [the v]ictim
after he asked them to wear their masks properly. The
Commonwealth also introduced photographs and video of the
incident as exhibits. Thus, the verdict is not so contrary to the
evidence as to shock the conscience. Appellant’s weight of the
evidence claim is meritless.
Trial Ct. Op. at 15.
Following our review of the record, we discern no abuse of discretion by
the trial court in rejecting Appellant’s weight claim. See Jacoby, 170 A.3d at
1080-81. Although Appellant claims that there were alleged inconsistencies
in the witnesses’ testimony, the jury was permitted to consider the evidence
- 17 -
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and resolve any alleged inconsistencies in the Commonwealth’s favor. See
id. Therefore, Appellant is not entitled to relief on this issue.
Discretionary Aspects of Sentence
In his final claim, Appellant challenges the discretionary aspects of his
sentence. Appellant’s Brief at 34. Specifically, Appellant contends his
sentence is manifestly excessive and unreasonable because the trial court
“improperly focused on the nature of the crime” and did not consider
Appellant’s character, history, or rehabilitative needs. Id. at 42. Further,
Appellant argues that although his sentence for aggravated assault was within
the standard range, it was “excessive” in light of the fact that Appellant
punched the victim one time and “did not threaten the victim, did not have a
weapon, and did not attempt to further strike or hit” the victim after the initial
attack. Id. at 41. Further, Appellant claims that the trial court relied on
inappropriate sentencing factors by following the sentencing recommendation
from the presentence investigation (PSI) report, which was “based on
consideration of uncharged conduct” and the incorrect assertion that Appellant
failed to express remorse. Id. at 41-42. Therefore, Appellant requests that
we vacate his judgment of sentence and remand for resentencing. Id. at 42.
“[C]hallenges to the discretionary aspects of sentencing do not entitle
an appellant to review as of right.” Commonwealth v. Derry, 150 A.3d 987,
991 (Pa. Super. 2016) (citations omitted). Before reaching the merits of such
claims, we must determine:
- 18 -
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(1) whether the appeal is timely; (2) whether Appellant preserved
his issues; (3) whether Appellant’s brief includes a [Pa.R.A.P.
2119(f)] concise statement of the reasons relied upon for
allowance of appeal with respect to the discretionary aspects of
sentence; and (4) whether the concise statement raises a
substantial question that the sentence is inappropriate under the
sentencing code.
Commonwealth v. Corley, 31 A.3d 293, 296 (Pa. Super. 2011) (citations
omitted).
“To preserve an attack on the discretionary aspects of sentence, an
appellant must raise his issues at sentencing or in a post-sentence motion.
Issues not presented to the sentencing court are waived and cannot be raised
for the first time on appeal.” Commonwealth v. Malovich, 903 A.2d 1247,
1251 (Pa. Super. 2006) (citations omitted); see also Pa.R.A.P. 302(a)
(stating that “[i]ssues not raised in the trial court are waived and cannot be
raised for the first time on appeal”).
Here, the record reflects that Appellant preserved his sentencing claims
in his post-sentence motion, filed a timely notice of appeal, and included the
issues in his Rule 1925(b) statement. Appellant has also included a Rule
2119(f) statement in his brief.5 Further, Appellant’s sentencing claims raise a
substantial question for our review. See Commonwealth v. Caldwell, 117
____________________________________________
5 We note that in his Rule 2119(f) statement, Appellant cites to a case where
this Court found that the appellant raised a substantial question by claiming
that the trial court failed to provide adequate reasons for the appellant’s
sentence. However, because Appellant does not develop this claim in his brief,
we decline to address that issue on appeal. See Commonwealth v. Garcia,
661 A.2d 1388, 1395-96 (Pa. Super. 1995) (noting that issues that are not
developed or supported with appropriate argument will be deemed waived);
see also Pa.R.A.P. 2119(a), (b), (c) and (d).
- 19 -
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A.3d 763, 770 (Pa. Super. 2015) (en banc) (stating that “an excessive
sentence claim—in conjunction with an assertion that the court failed to
consider mitigating factors—raises a substantial question” (citations
omitted)); Commonwealth v. Downing, 990 A.2d 788, 792 (Pa. Super.
2010) (explaining that the defendant’s claim that “the trial court relied on an
improper factor raises a substantial question permitting review” (citations
omitted)); see also Commonwealth v. Coulverson, 34 A.3d 135, 143 (Pa.
Super. 2011) (concluding that the defendant raised a substantial question in
claiming that the trial court focused on the seriousness of the offense and
failed to consider the defendant’s rehabilitative needs). Therefore, we will
review the merits of Appellant’s claims.
Our well-settled standard of review is as follows:
Sentencing is a matter vested in the sound discretion of the
sentencing judge, and a sentence will not be disturbed on appeal
absent a manifest abuse of discretion. In this context, an abuse
of discretion is not shown merely by an error in judgment. Rather,
the appellant must establish, by reference to the record, that the
sentencing court ignored or misapplied the law, exercised its
judgment for reasons of partiality, prejudice, bias or ill will, or
arrived at a manifestly unreasonable decision.
Commonwealth v. Raven, 97 A.3d 1244, 1253 (Pa. Super. 2014) (citation
omitted).
“When imposing a sentence, the sentencing court must consider the
factors set out in 42 Pa.C.S. § 9721(b), [including] the protection of the public,
[the] gravity of offense in relation to impact on victim and community, and
- 20 -
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[the] rehabilitative needs of the defendant.” Commonwealth v. Fullin, 892
A.2d 843, 848 (Pa. Super. 2006) (citation omitted and formatting altered).
“[T]he trial court is required to consider the particular circumstances of
the offense and the character of the defendant,” including the defendant’s
“prior criminal record, age, personal characteristics, and potential for
rehabilitation.” Commonwealth v. Ventura, 975 A.2d 1128, 1135 (Pa.
Super. 2009) (citation omitted). This Court has held that “where the
sentencing judge had the benefit of a [PSI report], it will be presumed that he
or she was aware of the relevant information regarding the defendant’s
character and weighed those considerations along with mitigating statutory
factors.” Id. (citation omitted). This Court may only disturb a standard range
sentence if we find that the circumstances of the case rendered the application
of the guidelines “clearly unreasonable.” 42 Pa.C.S. § 9781(c)(2).
Here, at the outset of the sentencing hearing, Appellant’s counsel
objected to “the reference to any [un]charge[d] or [un]prosecuted criminal
conduct” in the PSI report. N.T. Sentencing Hr’g, 10/25/21, at 5. In response,
the trial court stated: “Yeah, I won’t take that into consideration. . . . That’s
not a conviction and there’s been no disposition. So that’s not a factor in my
mind.” Id.. Ultimately, after considering testimony from Appellant,
Appellant’s witnesses, and arguments from counsel, the trial court explained:
When imposing sentence, there are a number of things, as the
lawyers know, that I must take into consideration: The facts of
the case, the nature and character and background of the
defendant, the sentencing guidelines, the impact upon the
- 21 -
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community, the defendant, the need to protect the community,
and, of course, your need for rehabilitation.
The facts of this case are clear. [Appellant and co-defendant,
along] with family members[,] were at Sesame Place during the
pandemic when people were required to wear masks. One might
suggest we should still be wearing them as some of you are.
In any event, Sesame Place was open. And I might add, the young
people working there, teenagers or college age, are there either
to make life better for themselves, notwithstanding the risks of
working at a park during a pandemic or because they had to and
because they wanted to go to college.
In any event, I might point out . . . all of them were quite polite
and respectful when they appeared here. And there’s nothing to
suggest that they were anything but that on the day of this
incident contrary to the testimony and inferences that the jury
was asked to draw.
For what it’s worth, I thought they all represented Sesame Place
appropriately, and I would consider hiring them myself if I were
in a position of authority of that institution. That’s how well I
thought they came across and how well they presented. And
clearly the jury believed what they had to say.
This was a violent, unprovoked assault on a defenseless teenager.
He was struck from behind with such force that his jaw was broken
on both sides. [His] teeth, I’m not sure if they were broken or
dislodged. But he continues to heal physically and emotionally
today, according to the presentence report. The injuries resulted
in physical and mental trauma. And that [Appellant] failed to
exercise remorse or accept responsibility.
Quite frankly, I think today he has demonstrated a level of
remorse and acceptance of responsibility that the probation officer
probably didn’t see. So I think that he’s to get some credit for
that.
So I have taken into account the facts. Of course, [Appellant and
co-defendant] left, and as was pointed out in the [PSI] report of
[co-defendant] having been trained in emergency medicine as an
EMT, she left and didn’t complete the report and didn’t remain to
provide a report. And we all recall the video of them running out
of the park trying to avoid apprehension. It was really clear to
- 22 -
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anyone who saw [it] that that’s exactly what they were trying to
do.
So I’ve taken into consideration the facts that were testified to at
trial and found presumably by the jury in its verdict. I have taken
into account the [PSI] report for each of them subject to the
objections of counsel.
But, nevertheless, the [PSI] reports have given me a complete
and thorough background, at least in my opinion it did.
[Appellant] has presented a number of witnesses, all of whom
testified quite well on his behalf, although I have to admit I am
somewhat perplexed by [his mother’s testimony that he helped
her get off drugs when] he sold drugs previously. But,
nevertheless, I have given him credit for the family support and
show of support that is in the courtroom today.
* * *
[The Sentencing Guidelines] recommend a sentence of 36 months
in the mitigated range, 48 to 66 months in the standard, and 78
in the aggravated range [for aggravated assault].
I have taken all of that into account as well as the impact it’s had
upon the victim. Of course, the impact upon the victim is
immeasurable. He at this point still continues to suffer from the
consequences of what took place that day, and I can’t emphasize
it enough. It was completely and unequivocally, at least in my
mind and the minds of the jury, unprovoked. You struck him from
behind. He could not even defend himself against a violent blow
to the face.
The need to protect the community I think is clear as well, and
the need for your rehabilitation is just as clear in my mind.
So I have taken all of those things into account. They’ve all been
testified to or covered by the [PSI] report and I believe have been
covered by the attorneys.
And lastly, before I forget . . . I have considered the victim impact
statements as well. In any event, the [PSI] report for [Appellant]
recommends a lengthy sentence of total confinement in the state
correctional institution. And as has been pointed out, the
guidelines for that offense recommend 48 to 66 months, and that
would be on count number [one, aggravated assault].
- 23 -
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Id. at 62-70.
In its Rule 1925(a) opinion, the trial court explained:
Appellant’s claim that this court erred in sentencing is meritless.
This court found that this was a “violent, unprovoked assault on a
defenseless teenager . . . [that] resulted in physical and mental
trauma.” N.T. Sentencing Hr’g, 10/25/21 at 64. [The v]ictim, a
seventeen-year-old child, was working at Sesame Place, in large
crowds in the middle of a pandemic, to further better his life when
he was struck from behind by Appellant, a forty-year-old grown
adult, which resulted in injuries that [the v]ictim is still trying to
heal from-over a year later. Id. at 63-64. This court found that
[the v]ictim had no chance to defend himself against Appellant’s
violent blow to [the v]ictim’s face and the impact of this assault
on [the v]ictim is immeasurable. Id. at 67. While this court did
take into consideration the fact that Appellant demonstrated a
level of remorse and acceptance of responsibility during
sentencing, this court found that remorse to be overdue, as
Appellant failed to show any sort of concern for [the v]ictim when
he immediately ran to leave the park after the assault. Id. at 64-
67. These reasons for sentencing were clearly outlined on the
record, despite Appellant’s unfounded and perplexing argument to
the contrary.
Accordingly, this court found a sentence of five to ten years in a
state correctional institution necessary to protect the public and
to rehabilitate Appellant. Appellant’s sentence is within the
standard range of his Sentencing Guidelines. This court did not
rely on improper factors, as Appellant asserts, but rather only
needed to rely on the egregious facts of the case, sentencing
guidelines, and additional circumstances as noted above.
Appellant’s assertions that this court abused its discretion in
sentencing are meritless.
Trial Ct. Op. at 17-18 (some formatting altered).
Based on our review of the record, we discern no abuse of discretion by
the trial court. See Raven, 97 A.3d at 1253. The record reflects that the
trial court did not consider improper factors when imposing Appellant’s
- 24 -
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sentence. Instead, the trial court considered the PSI report, the appropriate
sentencing factors, and the mitigating evidence presented at the sentencing
hearing. See Ventura, 975 A.2d at 1135. Ultimately, the trial court
concluded that a standard-range sentence of five to ten years’ incarceration
was necessary in light of the impact of Appellant’s crimes and in order to
protect the public. Under these circumstances, we have no basis upon which
to conclude that the trial court’s application of the guidelines was “clearly
unreasonable.” See 42 Pa.C.S. § 9781(c)(2). Therefore, Appellant is not
entitled to relief. Accordingly, we affirm.
Judgment of sentence affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
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