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https://www.courtlistener.com/api/rest/v3/opinions/8484208/ | J-S34004-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN THE MATTER OF THE ESTATE OF: : IN THE SUPERIOR COURT OF
L.E.K. : PENNSYLVANIA
:
:
APPEAL OF: L.E.K. :
:
:
:
: No. 576 WDA 2022
Appeal from the Decree Entered April 18, 2022
In the Court of Common Pleas of Bedford County Orphans' Court at
No(s): 2022-00008
BEFORE: DUBOW, J., MURRAY, J., and PELLEGRINI, J.*
MEMORANDUM BY DUBOW, J.: FILED: NOVEMBER 16, 2022
Appellant, L.E.K., appeals from the April 18, 2022 Order entered in the
Bedford County Court of Common Pleas that adjudicated him incapacitated
and appointed a plenary guardian of his person and estate. Appellant
challenges, inter alia, the sufficiency of the evidence. Upon review, we affirm.
Appellant is 65 years old and has been diagnosed with Parkinson’s
Disease. Appellant lives by himself and, until recently, was receiving home
services from the Huntington-Bedford-Fulton Area Agency on Aging (“the
Agency”). In the summer of 2021, Appellant was hospitalized after several
episodes where he displayed “paranoid delusional” behavior and contacted
state police concerned that someone was robbing him. N.T. Hearing, 4/14/22,
at 19. Appellant was admitted to Maybrook Hills Nursing Facility. On February
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
J-S34004-22
8, 2022, the Agency filed a Petition for Adjudication of Incapacity and
Appointment of Plenary Guardian after receiving information from in-home
service providers that it was not safe to send Appellant home, as well as a
written statement on January 5, 2022, from Appellant’s treating physician, Dr.
Carl Werne, stating that he would testify to Appellant’s incompetence. In the
petition, the Agency alleged that Appellant suffers from Parkinson’s Disease
and altered mental status, which cause him to need significant support in his
daily living, including twenty-four-hour care and supervision. The Agency also
attached Dr. Werne’s written statement. On February 9, 2022, the trial court
appointed Karen S. Hendershot, Esquire, to represent Appellant. On March
29, 2022, and March 30, 2022, Catherine S. Spayd, Ph.D., P.C., conducted a
psychological evaluation of Appellant.
On April 14, 2022, the trial court held a guardianship hearing. Appellant
was present at the hearing with Attorney Hendershot. The trial court heard
testimony from Dr. Spayd and Jim Rose, co-manager of the Agency.
In sum, Dr. Spayd testified as an expert in ascertaining a patient’s
current level of cognitive functioning. She explained that she meets with
patients for two separate sessions to get a better clinical sample of behavior,
and to account for instances where a patient is simply having a bad day. Dr.
Spayd explained that she conducted a clinical interview, obtained background
information from the Agency, and reviewed Appellant’s medications and
diagnoses.
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Dr. Spayd also conducted various tests to measure Appellant’s cognitive
functioning, including the Folstein Mini Mental State Examination; Mattis
Dementia Rating Scare; Trail Making Test that measures attention and mental
flexibility and sequencing; California Verbal Learning Test that measures
verbal recall and learning; Boston Naming Test that measures naming
abilities; F-A-S Verbal Fluency Test; Boston Diagnostic Aphasia Evaluation
Complex Ideation sub-test; Wechsler Adult Cognitive Scale; and a Clock
Drawing Test that measures non-verbal problem-solving skills.
Dr. Spayd testified that Appellant demonstrated average functioning in
various areas but had average to severely impaired attention; mildly clinically
impaired non-verbal problem solving and verbal initiation skills; moderate
impairment in the areas of receptive language; and moderate to severely
impaired abstraction and mental flexibility and sequencing ability. Dr. Spayd
testified that she diagnosed Appellant with dementia secondary to his
Parkinson’s Disease and concluded:
[Appellant] is unable to make effective life decisions on his own
due to cognitive deficits. And, therefore, because he had not
established power of attorney [] previously, a plenary
guardianship would be clinically indicated. . . Due to his cognitive
deficits, I recommend twenty-four-hour supervision and
assistance with his daily care.
N.T. Hearing at 12. Finally, Dr. Spayd explained that “a Parkinson’s based
dementia presents differently than, for example, Alzheimer’s based dementia,
which tends to be more apparent to the casual observer. . . . So on a basic
level to [a] observer, yes, I think he would appear mostly intact.” Id. at 15.
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In her expert report, which the Agency entered into evidence, Dr. Spayd
made the following relevant treatment recommendations:
2. Given his currently identified moderate level of neuro-
cognitive disorder, [Appellant] is assessed to currently be
incapable of making good life decisions. Specifically, test
results suggest he is currently unable to consistently attend
to, to recall, or to effectively comprehend information
needed to make important life decisions, to effectively
problem solve or to think abstractly regarding such
decisions, nor to initiate action upon them. Because the
patient has not previously established [Power of Attorney]
documents, plenary guardianship of both person and estate
is thus clinically indicated at this time.
3. Given the current severity level of [Appellant]’s identified
cognitive deficits, 24-hour supervision of and assistance
with his daily activities are clinically indicated at this time,
to assure he accurately takes medications, completes
medical appointments and procedures, receives consistent
nutrition, safely manages appliances, is protected financially
from potential designing persons, and can be assisted in
possible emergency situations. This level of care could be
provided by 24-hour caregivers in his home, or by continued
placement in a long-term residential setting.
Petitioner’s Ex. 1, Psychological Evaluation, at 6.
Mr. Rose, who has been employed by the Agency for six years and
working with Appellant since August 2021, testified to the above events.
Additionally, Mr. Rose testified that Appellant “needs maximum assistance for
his medications” and the assistance of one or two individuals to perform daily
activities. N.T. Hearing at 22. Mr. Rose stated that Appellant is “taking care
of his own finances” and “deals with a credit union in California.” Id. at 23.
Finally, Mr. Rose testified that he has helped Appellant with some minor
financial issues, but Appellant has “tried to stay diligent in trying to pay taxes.
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He even called at the beginning of the year to get certified checks to try to
pay his local taxes.” Id. at 24. Mr. Rose was unaware if the taxes were
actually paid.
At the conclusion of the hearing, the trial court adjudicated Appellant
incapacitated and appointed a plenary guardian of his person and estate.
Appellant timely appealed. Both Appellant and the trial court complied
with Pa.R.A.P. 1925.
Appellant raises the following issues for our review:
1. Did the lower court have jurisdiction of the person of the
alleged incapacitated person?
2. Was there presentation of clear and convincing evidence
sufficient for a finding that the ability of the alleged
incapacitated person to receive and evaluate information
effectively and communicate decisions in any way was impaired
to such a significant extent that he was totally unable to
manage his financial resources or to meet essential
requirements for his physical health and safety?
3. Did various shortcomings in the proceedings deny the alleged
incapacitated person his basic rights to due process of law?
Appellant’s Br. at 5.
A.
It is well-settled that “[t]he findings of a judge of the orphans’ court
division, sitting without a jury, must be accorded the same weight and effect
as the verdict of a jury, and will not be reversed by an appellate court in the
absence of an abuse of discretion or a lack of evidentiary support.” In re
Jackson, 174 A.3d 14, 23 (Pa. Super. 2017) (citation omitted). “This rule is
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J-S34004-22
particularly applicable to findings of fact which are predicated upon the
credibility of the witnesses, whom the judge has had the opportunity to hear
and observe, and upon the weight given to their testimony.” Id. (citation
omitted). This Court’s “task is to ensure that the record is free from legal
error and to determine if the [o]rphans’ [c]ourt’s findings are supported by
competent and adequate evidence and are not predicated upon capricious
disbelief of competent and credible evidence.” Id. (citation omitted)
Consequently, “[o]ur review of the trial court’s determination in a
competency case is based on an abuse of discretion standard, recognizing, of
course, that the trial court had the opportunity to observe all of the witnesses,
including, as here, the allegedly incapacitated person.” In re Hyman, 811
A.2d 605, 608 (Pa. Super. 2002). “An abuse of discretion exists when the
trial court has rendered a judgment that is manifestly unreasonable, arbitrary,
or capricious, has failed to apply the law, or was motivated by partiality,
prejudice, bias, or ill will.” Harman ex rel. Harman v. Borah, 756 A.2d
1116, 1123 (Pa. 2000). Notably, for an appellant to establish an abuse of
discretion, it “is not sufficient to persuade the appellate court that it might
have reached a different conclusion under the same factual situation.”
Fancsali v. Univ. Health Ctr. of Pittsburgh, 761 A.2d 1159, 1162 (Pa.
2000).
Under Pennsylvania law, an incapacitated person is “an adult whose
ability to receive and evaluate information effectively and communicate
decisions in any way is impaired to such a significant extent that he is partially
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or totally unable to manage his financial resources or to meet essential
requirements for his physical health and safety.” 20 Pa.C.S. § 5501. “The
court, upon petition and hearing and upon the presentation of clear and
convincing evidence, may find a person domiciled in the Commonwealth to be
incapacitated and appoint a guardian or guardians of his person or estate.”
20 Pa.C.S. § 5511(a). A person is presumed to be mentally competent, and
the burden is on the petitioner to prove incapacity by clear and convincing
evidence. In Re Myers' Estate, 150 A.2d 525, 526 (Pa. 1959). We have
explained that “[t]he standard of clear and convincing evidence is defined as
testimony that 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.” In re R.N.J., 985 A.2d 273, 276 (Pa. Super. 2009)
(citation and internal quotation marks omitted).
Further, when making a determination of incapacity, the court shall
consider and make specific findings of fact concerning:
(1) The nature of any condition or disability which impairs the
individual’s capacity to make and communicate decisions.
(2) The extent of the individual’s capacity to make and
communicate decisions.
(3) The need for guardianship services, if any, in light of such
factors as the availability of family, friends and other supports to
assist the individual in making decisions and in light of the
existence, if any, of advance directives such as durable powers of
attorney or trusts.
(4) The type of guardian, limited or plenary, of the person or
estate needed based on the nature of any condition or disability
and the capacity to make and communicate decisions.
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(5) The duration of the guardianship.
(6) The court shall prefer limited guardianship.
20 Pa.C.S. § 5512.1(a).
B.
In his first issue, Appellant avers, for the first time on appeal, that the
trial court did not have personal jurisdiction over him. Appellant’s Br. at 10.
Appellant argues that the record is devoid of evidence that the Agency
personally served the adjudication of incapacity petition on Appellant as
required by 20 Pa.C.S. § 5511(a) and Pa.O.C. Rule 14.2(f), which both require
written notice of the petition and hearing to be personally served on the
alleged incapacitated person at least 20 days before the hearing. Id.
Appellant also argues that the Agency failed to present the citation and proof
of service at the hearing as required by Pa.O.C. Rule 14.6(a). Id. Therefore,
Appellant contends, the trial court never had jurisdiction of his person and the
final decree is void for lack of jurisdiction. Upon review, Appellant has waived
these challenges.
“Personal jurisdiction is a court's power to bring a person into its
adjudicative process.” Grimm v. Grimm, 149 A.3d 77, 83 (Pa. Super. 2016)
(internal quotation marks and citation omitted). “Jurisdiction of the person
may be obtained through consent, waiver or proper service of process.”
Fleehr v. Mummert, 857 A.2d 683, 685 (Pa. Super. 2004). One can waive
service of process by various means, including a voluntary appearance in
court. Id. See also Hicks’ Estate, 199 A.2d 283, 285 (Pa. 1964) (explaining
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that a court cannot establish personal jurisdiction “[u]nless the court has the
parties before it, by appearance or service of process”). A party demonstrates
an intent to submit to the court's jurisdiction when the party takes some action
pertaining to the merits of the case, thus evidencing an intent to forego
objection to any defective service. Fleehr, 857 A.2d at 685.
Furthermore, it is axiomatic that issues which are not raised in the trial
court are waived and cannot be raised for the first time on appeal to this Court.
Pa.R.A.P. 302(a). The failure to challenge personal jurisdiction constitutes
waiver of that defense. Wagner v. Wagner, 768 A.2d 1112, 1119 (Pa.
2001). “This Court has long held that questions of personal jurisdiction must
be raised at the first reasonable opportunity or they are lost.” Manack v.
Sandlin, 812 A.2d 676, 683 (Pa. Super. 2002)
Instantly, Appellant appeared in court and participated in the hearing,
thereby waiving any objection to personal jurisdiction. Additionally, Appellant
failed to raise any challenge regarding personal jurisdiction, service of
process, or compliance with Section 5511 or Rules 14.2 and 14.6 at the trial
court level. Accordingly, Appellant has failed to preserve these challenges for
our review.1
____________________________________________
1 Appellant also argues, for the first time in his brief, that the Agency failed to
comply with the jurisdictional procedural provisions of the Probate, Estates,
and Fiduciaries Code, specifically 20 Pa.C.S. §§ 764-766, which, inter alia,
require a party in interest to obtain personal jurisdiction by serving a citation.
Appellant’s Br. at 14. Appellant failed to include this challenge in his Rule
1925(b) statement and, thus, failed to preserve this issue for our review. See
(Footnote Continued Next Page)
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C.
In his second issue, Appellant avers that the Agency did not present
clear and convincing evidence that Appellant was totally incapacitated and
that the appointment of a plenary guardian of his person and estate was the
least restrictive alternative. Appellant’s Br. at 19. Appellant argues that Dr.
Spayd’s testimony “leaps from a factual predicate of findings of moderate to
severe impairment in some cognitive domains to a conclusion that plenary
guardianship of both person and estate is the only clinically indicated result.”
Id. at 23 (emphasis added). Additionally, Appellant argues that the trial court
should have considered Mr. Rose’s testimony that Appellant was able to take
care of his own finances. Id. at 21. Essentially, Appellant is challenging the
weight of the evidence.
Instantly, the trial court placed little weight on Mr. Rose’s testimony that
Appellant was able to contact his credit union and had tried to pay his taxes,
emphasizing that “it is unknown whether those taxes were paid,” and placed
greater weight on Dr. Spayd’s uncontradicted expert testimony and report.
Trial Ct. Op., filed 6/13/22, at 18-19. The trial court emphasized Dr. Spayd’s
____________________________________________
Pa.R.A.P. 1925(b)(4)(vii) (“Issues not included in the Statement . . . are
waived”). Moreover, as discussed above, Appellant waived any challenge to
personal jurisdiction when he appeared in court and participated in the
hearing.
Appellant further argues, for the first time in his brief, that it is unclear
whether the trial court appointed Attorney Hendershot to serve as a guardian
ad litem (“GAL”), an attorney, or both. Appellant’s Br. at 15-18. Appellant
likewise failed to include this issue in his Rule 1925(b) statement and the issue
is, thus, waived. See Pa.R.A.P. 1925(b)(4)(vii).
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conclusions in her expert report that Appellant is “currently unable to
consistently attend to, to recall, or to effectively comprehend information
needed to make important life decisions [or] to initiate action upon them.”
Id. at 19 (quoting Petitioner’s Ex. 1, Psychological Report, at 6.)
Moreover, the trial court credited Dr. Spayd’s uncontradicted expert
testimony that Appellant is suffering from dementia secondary to Parkinson’s
Disease and her expert opinion that Appellant needs a plenary guardian of his
person and estate. The trial court opined:
Based upon the expert testimony of Dr. Spayd, as well as the
written report entered as evidence at the hearing, this [c]ourt
found by clear and convincing evidence, that [Appellant] suffers
from a condition that totally impairs his capacity to receive and
evaluate information effectively and to make and communicate
decisions concerning his management of financial affairs or to
meet essential requirements for his physical health and safety. As
there were no family members or friends who were willing to serve
as plenary guardian of the person and estate of [Appellant].
Id.at 18. The trial court’s findings are supported in the record. We decline
to usurp the trial court’s credibility determinations or reweigh the evidence.
Accordingly, we find no abuse of discretion.
D.
In his third and final issue, Appellant avers that various shortcomings in
the proceedings amounted to a denial of his right to due process of law, which
is guaranteed to him by the 14th Amendment to the Constitution. Appellant’s
Br. at 24. Appellant avers, “in essence, this claim is that this poor guy got
the bum’s rush.” Id. at 25.
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To support his claim, Appellant reiterates his arguments that the Agency
failed to comply with Pa.O.C. Rule 14.2, that the Agency failed to perfect
proper service on Appellant, and that Attorney Hendershot served as a GAL
rather than an attorney. As explained above, all of these challenges are
waived. Essentially, Appellant attempts to resurrect several waived claims of
error into an overarching due process claim of error. Appellant fails to provide
this Court with any relevant legal authority to support this broad claim.
Accordingly, Appellant is not entitled to relief on this issue.
E.
In conclusion, Appellant’s personal jurisdiction and due process claims
of errors are waived. The record supports the trial court’s conclusion that
Appellant is incapacitated and in need of a plenary guardian of his person and
estate. Accordingly, we find no abuse of discretion.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
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https://www.courtlistener.com/api/rest/v3/opinions/8484205/ | J-A20010-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN THE INTEREST OF: M.E.B.-H., A : IN THE SUPERIOR COURT OF
MINOR : PENNSYLVANIA
:
:
APPEAL OF: M.H., FATHER :
:
:
:
: No. 976 EDA 2022
Appeal from the Decree Entered March 11, 2022
In the Court of Common Pleas of Philadelphia County Juvenile Division at No(s):
CP-51-AP-0000714-2021
IN THE INTEREST OF: M.Q.H., A MINOR : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
APPEAL OF: M.H., FATHER :
:
:
:
:
: No. 977 EDA 2022
Appeal from the Decree Entered March 11, 2022
In the Court of Common Pleas of Philadelphia County Juvenile Division at No(s):
CP-51-AP-0000715-2021
IN THE INTEREST OF: M.M.H., A MINOR : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
APPEAL OF: M.H., FATHER :
:
:
:
:
: No. 978 EDA 2022
Appeal from the Decree Entered March 11, 2022
In the Court of Common Pleas of Philadelphia County Juvenile Division at No(s):
CP-51-AP-0000716-2021
IN THE INTEREST OF: M.B., A MINOR : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
APPEAL OF: M.H., FATHER :
:
J-A20010-22
:
:
:
: No. 988 EDA 2022
Appeal from the Order Entered April 11, 2022
In the Court of Common Pleas of Philadelphia County Juvenile Division at No(s):
CP-51-DP-0001008-2020
IN THE INTEREST OF: M.Q.H., A MINOR : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
APPEAL OF: M.H., FATHER :
:
:
:
:
: No. 989 EDA 2022
Appeal from the Order Entered April 11, 2022
In the Court of Common Pleas of Philadelphia County Juvenile Division at No(s):
CP-51-DP-0001009-2020
IN THE INTEREST OF: M.H., A MINOR : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
APPEAL OF: M.H., FATHER :
:
:
:
:
: No. 990 EDA 2022
Appeal from the Order Entered April 12, 2022
In the Court of Common Pleas of Philadelphia County Juvenile Division at No(s):
CP-51-DP-0000520-2020
BEFORE: BENDER, P.J.E., STABILE, J., and PELLEGRINI, J.*
MEMORANDUM BY BENDER, P.J.E.: FILED NOVEMBER 16, 2022
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
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J-A20010-22
M.H. (“Father”) appeals from the decrees entered on March 11, 2022,
which granted the petitions filed by the Philadelphia Department of Human
Services (“DHS”) for the involuntary termination of Father’s parental rights
to his minor children, M.E.B.-H. (born in December of 2016), M.Q.H. (born in
May of 2018), and M.M.H. (born in April of 2020) (collectively “the
Children”), pursuant to sections 2511(a)(1), (2), (5), (8), and (b) of the
Adoption Act, 23 Pa.C.S. §§ 2101-2938.1 Father also appeals from the
orders entered on April 11 and April 12, 2022, which changed the
permanency goals for the Children from reunification with Mother and Father
to adoption.2, 3 After careful review, we affirm in part, vacate in part, and
remand with instructions.
We reproduce the following factual background and procedural history
of this matter, as summarized by DHS:
[DHS] first learned of the family in 2016[,] after [it] received a
General Protective Services (GPS) report that Mother had tested
positive for Percocet at the time of M.[E.B.-]H.’s birth[, i]n
December [of] 2016. DHS continued to monitor and stay
involved with the family over the next few years.
____________________________________________
1Decrees involuntarily terminating the parental rights of T.B. (“Mother”)
were entered on the same date; however, Mother has not filed an appeal.
2 Mother has not filed an appeal from the April 11 and April 12, 2022
permanency review orders.
3 By per curiam order entered May 9, 2022, this Court sua sponte
consolidated the appeals at Nos. 976, 977, 978, 988, 989, and 990 EDA
2022, as these matters involve related parties and issues.
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M.M.H.[, born in April of 2020,] suffered withdrawal symptoms
from Mother’s use of 20 drugs including amphetamines and
spent a month in the hospital NICU. Father never once visited
M.M.H. in the hospital. On May 8, 2020, M.M.H. was ready for
discharge; DHS obtained an Order of Protective Custody (OPC)
for M.M.H. and placed him in the care of his paternal aunt.[4]
The trial court adjudicated M.M.H. dependent on June 10, 2020,
with Father present.[5]
In August 2020, DHS learned that M.E.B.-H. and M.Q.H. lacked
routine medical and dental care. On September 14, 2020, DHS
filed urgent petitions for M.E.B.-H. and M.Q.H. On November
20, 2020, the court adjudicated M.E.B.-H. and M.Q.H. as
dependent and committed them to DHS custody.[6] Father failed
to attend the hearing.
DHS’s Brief at 9-10 (citations to record omitted).
____________________________________________
4 On May 18, 2020, the Community Umbrella Agency (“CUA”) held an initial
single case plan (“SCP”) meeting, at which the following objectives were
determined for Father: 1) comply with CUA services; 2) attend court
hearings; 3) seek and attend anger management therapy; and 4) attend
weekly, supervised visits with M.M.H. Father’s Brief at 9. Father did not
attend the SCP meeting. Id.
5 At the June 10, 2020 hearing, Mother and Father were referred to the
Achieving Reunification Center (“ARC”) for parenting classes and
employment assistance. The court further referred Mother and Father for
domestic violence counseling, and Father was referred for anger
management counseling. Father’s Brief at 10.
6 At the November 20, 2020 adjudicatory hearing, Father was “referred to
ARC for parenting education, housing assistance, and employment services;
ordered to sign releases and consents; and ordered to comply with the
[Protection from Abuse (“PFA”) order that Mother obtained against him].”
Father’s Brief at 14. Additionally, “Father was referred to [a Continuing
Education Unit (“CEU”)] for a dual diagnosis assessment and three random
drug screens prior to the next court date[,] and ordered to engage in
Menergy for domestic violence counseling.” Id.
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On November 29, 2021, DHS filed petitions to involuntarily terminate
Father’s parental rights to Children, along with petitions for a goal change to
adoption. A combined hearing was held on these matters on March 11,
2022, at which DHS called multiple witnesses and Father testified on his own
behalf. Following is a summary of the evidence produced at the hearing:
1. Incarceration
Father was incarcerated on firearms offenses in approximately
September [of] 2021. Since being incarcerated, Father has not
reached out to [the CUA] to have any telephone contact with
M.E.B.-H. and M.Q.H. Nor has Father taken advantage of any
programming offered at the prison to complete his case plan
objectives.
2. Allegations of Domestic Violence
Father received domestic violence and anger management
objectives because Mother made allegations of abuse against
Father[,] and M.E.B.-H. stated she was scared of Father. Mother
and Father continued to be in a relationship despite the ongoing
domestic violence. Mother had a PFA [order] against Father at
one point.
Father had multiple criminal charges for domestic violence, with
Mother as the complainant. All charges were later withdrawn.
3. Father’s Drug Use and Unemployment
[Father] has a history of drug use for which he has never
received treatment. The trial court referred [F]ather for
employment services but he never attended.
4. Lack of Reunification Efforts
At M.M.H.’s adjudication hearing, Father received his single case
plan objectives for reunification. His case plan objectives
included compliance with CUA case management and court
orders, biweekly visits with M.M.H., weekly supervised visits with
M.E.B.-H. and M.Q.H., compliance with [ARC] services,
parenting, housing, employment, attendance at … Menergy,
anger management, a [CEU] assessment for dual diagnosis,
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J-A20010-22
three random drug screens prior to next court hearing, as well
as a requirement to make his whereabouts known to CUA case
management. Before his incarceration, CEU attempted to
contact Father multiple times to assist him[,] but their efforts
were unsuccessful.
To help him meet his objectives, Father also received a referral
to ARC services in September 2020 for employment, parenting[,]
and housing assistance. Father failed to respond to phone calls
and text messages from the reunification intake specialist and as
a result he was closed out for services the following month on
October 30, 2020. [Natalie] Turner[, the case manager
supervisor,] stated … that there had been no contact from Father
regarding these objectives throughout the life of the case.
Father never attended ARC, never attended any other courses
for parenting, housing[,] or employment and has not made any
outreach to CUA to try to communicate any efforts towards these
objectives. Father failed to receive any treatment for anger
management and domestic violence. Father had 14 months
prior to his incarceration to make progress toward his case plan
objectives but he failed to do so.
At the termination of parental rights (TPR) hearing on March 22,
2022[, from] which the instant appeal arises, Father testified
that he knew the objectives he needed to complete to begin the
process of reunification. When asked why those objectives were
incomplete, he said that he did not have time because he was
“going through a lot.” When asked why he never visited M.M.H.,
he responded “no comment.” … Finally, when asked why he did
not visit with M.E.B.-H. and M.Q.H., he stated that he was going
through a lot[,] and he assumed they were taken care of.
Father has failed to make any substantial reunification efforts.
5. Minimal Parenting
At the TPR hearing, the court heard detailed testimony regarding
Father’s lack of involvement in the Children’s lives over the
years. … Ms. Turner[] testified as the case manager supervisor
for the life of the case. Ms. Turner stated that Father never took
M.M.H. to any medical appointments and does not provide for
him in any way. When M.E.B.-H. and M.Q.H. came into DHS[’s]
care, they were behind on medical and dental[ care,] and they
did not become up to date with care until they were removed
and placed with [their] maternal great grandmother.
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Further, Father never had any visits with M.M.H.[,] nor has he
had any telephone contact with him. As for M.E.B.-H. and
M.Q.H., Father was supposed to have supervised visits with
them[,] but his last visit was in 2020 at M.M.H.’s birth. Father
has never provided financially for M.M.H., M.E.B.-H, and M.Q.H.
Father has never sent cards, letters, or gifts to the three
[C]hildren[,] and the [C]hildren do not ask to see him.
When Father had the opportunity to express any desire for
reunification at the TPR hearing, he instead stated that he did
not want to push the kids onto others….
6. Children’s Bond with Current Caregivers
All three [C]hildren were in the care of trusted, DHS-approved
relatives at the time of the TPR hearing. All of the Children are
in pre-adoptive homes. M.M.H. had been living with [his]
paternal aunt since his shelter care order on May 11, 2020.
M.E.B.-H. and M.Q.H. were placed with [their] maternal great-
grandmother since CUA received the case.
Ms. Turner testified at the TPR hearing that M.M.H. only
recognizes [his] paternal aunt as his parent. Ms. Turner
described their relationship as “loving, caring; he looks to her as
a mother. He calls her mommy.” When asked to explain who
M.M.H. looks to when he’s sick, hungry[,] and hurt, Ms. Turner
testified that M.M.H. looks to [his] paternal aunt.
Paternal aunt takes M.M.H. to his medical appointments and
provides financially for M.M.H. In later testimony, Ms. Turner
testified that the only mother M.M.H. recognizes is [his] paternal
aunt and that’s who he calls [“]mom[”]. As of March 10, 2020,
M.M.H. was deemed by DHS to be in a safe home with his needs
being met.
M.E.B.-H. and M.Q.H. have been with [their] maternal great
grandmother for the life of the case. Ms. Turner was asked to
testify to [the] maternal great grandmother’s relationship with
M.E.B.-H. and M.Q.H. When asked to describe the relationship,
she described it as “loving and caring as well.” When asked who
they look to when they’re sick, hungry[,] or hurt, Ms. Turner said
[their] maternal great grandmother. Finally, when asked who
takes the Children to their medical appointments, Ms. Turner
said [the Children’s] maternal great grandmother. On March 10,
2022, the trial court found that M.E.B.-H and M.Q.H. were in a
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safe home with [their] maternal great grandmother, with their
needs being met.
DHS’s Brief at 10-15 (citations to record omitted).
At the conclusion of the hearing, the trial court found clear and
convincing evidence to warrant the involuntary termination of Father’s
parental rights to the Children under 23 Pa.C.S. §§ 2511(a)(1), (2), (5), (8),
and (b), and it entered decrees accordingly. The court further determined
that a goal change to adoption was in the best interest of the Children;
however, it appears that the trial court inadvertently entered orders on
March 11, 2022, reflecting a continued goal of reunification. On April 11 and
12, 2022, the trial court entered amended permanency review orders to
reflect its intended goal change to adoption.
On April 11, 2022, Father filed timely notices of appeal, along with
concise statements of matters complained of on appeal, pursuant to 23
PA.C.S. § 2511(a)(2)(i). The trial court subsequently filed a notice of
compliance with Pa.R.A.P. 1925(a), indicating that the reasons for its
involuntary termination of Father’s parental rights and changing the
permanency goals to adoption were stated on the record at the March 11,
2022 hearing, and it attached a copy of the transcript accordingly. Father
now presents the following questions for our review:
1. Whether the trial court erred by terminating the parental
rights of [Father] under 23 Pa.C.S.[]§[]2511(a)(1)?
2. Whether the trial court erred by terminating the parental
rights of [Father] under 23 Pa.C.S.[]§[]2511(a)(2)?
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3. Whether the trial court erred by terminating the parental
rights of [Father] under 23 Pa.C.S.[]§[]2511(a)(5)?
4. Whether the trial court erred by terminating the parental
rights of [Father] under 23 Pa.C.S.[]§[]2511(a)(8)?
5. Whether the trial court erred by terminating the parental
rights of [Father] under 23 Pa.C.S.[]§[]2511(b)?
6. Whether the trial court erred by determining it to be in the
[C]hildren’s best interest to change the goal from
reunification to adoption?
Father’s Brief at 5-6 (unnecessary capitalization and suggested answers
omitted).
Father’s first five issues relate to the trial court’s termination of his
parental rights. We review such a decree in accordance with the following
standard:
When reviewing an appeal from a decree terminating parental
rights, we are limited to determining whether the decision of the
trial court is supported by competent evidence. Absent an abuse
of discretion, an error of law, or insufficient evidentiary support
for the trial court’s decision, the decree must stand. Where a
trial court has granted a petition to involuntarily terminate
parental rights, this Court must accord the hearing judge’s
decision the same deference that we would give to a jury
verdict. We must employ a broad, comprehensive review of the
record in order to determine whether the trial court’s decision is
supported by competent evidence.
In re R.N.J., 985 A.2d 273, 276 (Pa. Super. 2009) (quoting In re S.H., 879
A.2d 802, 805 (Pa. Super. 2005)). Moreover, we have explained that:
The standard of clear and convincing evidence is defined as
testimony that 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.”
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Id. (quoting In re J.L.C. & J.R.C., 837 A.2d 1247, 1251 (Pa. Super. 2003)).
The trial court is free to believe all, part, or none of the evidence presented
and is likewise free to make all credibility determinations and resolve
conflicts in the evidence. In re M.G., 855 A.2d 68, 73-74 (Pa. Super.
2004). If competent evidence supports the trial court’s findings, we will
affirm even if the record could also support the opposite result. In re
Adoption of T.B.B., 835 A.2d 387, 394 (Pa. Super. 2003).
We are guided further by the following: Termination of parental rights
is governed by section 2511 of the Adoption Act, which requires a bifurcated
analysis.
Our case law has made clear that under [s]ection 2511, the
court must engage in a bifurcated process prior to terminating
parental rights. 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 [s]ection
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 [s]ection
2511(b): determination of the needs and welfare of the child
under the standard of best interests of the child. One major
aspect of the needs and welfare analysis concerns the nature
and status of the emotional bond between parent and child, with
close attention paid to the effect on the child of permanently
severing any such bond.
In re L.M., 923 A.2d 505, 511 (Pa. Super. 2007) (citing 23 Pa.C.S. § 2511,
other citations omitted). The burden is upon the petitioner to prove by clear
and convincing evidence that the asserted grounds for seeking the
termination of parental rights are valid. R.N.J., 985 A.2d at 276.
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With regard to section 2511(b), we direct our analysis to the facts
relating to that section. This Court has explained that:
Subsection 2511(b) focuses on whether termination of parental
rights would best serve the developmental, physical, and
emotional needs and welfare of the child. In In re C.M.S., 884
A.2d 1284, 1287 (Pa. Super. 2005), this Court stated,
“Intangibles such as love, comfort, security, and stability are
involved in the inquiry into the needs and welfare of the child.”
In addition, we instructed that the trial court must also discern
the nature and status of the parent-child bond, with utmost
attention to the effect on the child of permanently severing that
bond. Id. However, in cases where there is no evidence of a
bond between a parent and child, it is reasonable to infer that no
bond exists. In re K.Z.S., 946 A.2d 753, 762-63 (Pa. Super.
2008). Accordingly, the extent of the bond-effect analysis
necessarily depends on the circumstances of the particular case.
Id. at 763.
In re Adoption of J.M., 991 A.2d 321, 324 (Pa. Super. 2010).
Instantly, the trial court terminated Father’s parental rights pursuant
to sections 2511(a)(1), (2), (5), (8), and (b). We need only agree with the
trial court as to any one subsection of section 2511(a), as well as section
2511(b), in order to affirm. In re B.L.W., 843 A.2d 380, 384 (Pa. Super.
2004) (en banc). Herein, we analyze the court’s decision to terminate under
section 2511(a)(2) and (b), which provide as follows:
(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:
…
(2) The repeated and continued incapacity, abuse,
neglect or refusal of the parent has caused the child
to be without essential parental care, control or
subsistence necessary for his physical or mental
well-being and the conditions and causes of the
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incapacity, abuse, neglect or refusal cannot or will
not be remedied by the parent.
…
(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)(2), (b).
We first address whether the trial court abused its discretion by
terminating Father’s parental rights pursuant to section 2511(a)(2).
In order to terminate parental rights pursuant to 23 Pa.C.S. [] §
2511(a)(2), the following three elements must be met: (1)
repeated and continued incapacity, abuse, neglect or refusal; (2)
such incapacity, abuse, neglect or refusal has caused the child to
be without essential parental care, control or subsistence
necessary for his physical and mental well-being; and (3) the
causes of the incapacity, abuse, neglect or refusal cannot or will
not be remedied.
In re Adoption of M.E.P., 825 A.2d 1266, 1272 (Pa. Super. 2003) (citation
omitted). “The grounds for termination due to parental incapacity that
cannot be remedied are not limited to affirmative misconduct. To the
contrary, those grounds may include acts of refusal as well as incapacity to
perform parental duties.” In re A.L.D., 797 A.2d 326, 337 (Pa. Super.
2002) (citations omitted).
In the case of an incarcerated parent, this Court has stated:
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[T]he fact of incarceration does not, in itself, provide grounds for
the termination of parental rights. However, a parent’s
responsibilities are not tolled during incarceration. The focus is
on whether the parent utilized resources available while in prison
to maintain a relationship with his or her child. An incarcerated
parent is expected to utilize all available resources to foster a
continuing close relationship with his or her children…. Although
a parent is not required to perform the impossible, he must act
affirmatively to maintain his relationship with his child, even in
difficult circumstances. A parent has the duty to exert himself,
to take and maintain a place of importance in the child’s life.
Thus, a parent’s basic constitutional right to the custody and
rearing of his child is converted, upon the failure to fulfill his …
parental duties, to the child’s right to have proper parenting and
fulfillment of his … potential in a permanent, healthy, safe
environment. A parent cannot protect his parental rights by
merely stating that he does not wish to have his rights
terminated.
In re B., N.M., 856 A.2d 847, 855-56 (Pa. Super. 2004) (internal citations
and quotation marks omitted). “Thus, the fact of incarceration alone neither
compels nor precludes termination of parental rights. Parents must still
provide for the emotional and physical well-being of their children.” In re
Z.P., 994 A.2d 1108, 1120 (Pa. Super. 2010). Moreover, we note that
“[t]he cause of incarceration may be particularly relevant to the [s]ection
2511(a) analysis, where imprisonment arises as a direct result of the
parent’s actions which were ‘part of the original reasons for the removal’ of
the child.” Id. (quoting In re C.L.G., 956 A.2d 999, 1006 (Pa. Super.
2008)).
Instantly, Father claims that DHS failed to meet its burden to establish
grounds for termination under section 2511(a)(2). Father’s Brief at 25. In
support of his argument, however, Father merely states that he “has
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contacted the [C]hildren through their caregivers, has housing[,] and is
willing to remedy the issues that brought the [C]hildren into care.” Id. He
does not provide any explanation for his lack of parental involvement with
his Children prior to his incarceration or his failure to maintain a bond with
the Children while incarcerated, nor does he explain how he plans to remedy
any of the causes or conditions of his incapacity, abuse, neglect or refusal,
which caused the Children to be without essential parental care. We remain
unconvinced that Father is due any relief on this claim.
As DHS argues, Father has never acted as a father to the Children.
DHS’s Brief at 19. Although the Children originally entered care due to
Mother’s drug addiction, DHS notes that Father was unable to provide them
with a safe home or parental care. Id. at 19-20. M.Q.H. and M.E.B.-H had
not received routine medical care or immunizations since 2018, and both
Mother and Father failed to address the behavioral health needs of M.Q.H.
Id. at 20. Additionally, DHS indicates that Father did not respond to
telephone calls from an intake specialist at ARC to set up services for
housing and employment, nor has he attended any other courses for
parenting, housing, or employment. Id. Prior to his incarceration, Father
was unemployed and living with his uncle and his uncle’s brother. Id. (citing
N.T. Hearing, 3/11/22, at 85-86 (Father’s testifying that if he were to be
reunified with his Children, all the Children would stay in a bedroom with
him in his uncle’s apartment)). Father also failed to address domestic
violence or substance abuse issues, despite Mother’s PFA against him,
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M.Q.H.’s fear of him, and referrals to Menergy and domestic violence
courses. Id. In sum, DHS concludes that Father refused or was incapable
of prioritizing reunification with his Children and that it would not be
appropriate “to continue holding these [C]hildren’s lives in abeyance waiting
for Father to get his act together.” Id. at 21. “Not only did Father refuse to
obtain appropriate housing, … but he failed to attend parenting classes,
failed to access employment assistance, failed to visit any of his [C]hildren,
failed to talk with them on the phone, failed to attend drug treatment, and
generally failed to comply with anything the trial court ordered.” Id.
Moreover, it is clear that the trial court took into consideration Father’s
period of incarceration when considering termination under section
2511(a)(2); however, it emphasized that “for the first 14 months of this
case, [F]ather was not incarcerated and there were no attempts by [F]ather
to remedy any of the situations which led to the [C]hildren[’s] being
rendered dependent.” N.T. Hearing at 95-96. Based on all the evidence
presented, we conclude that the record supports the trial court’s findings of
clear and convincing evidence establishing that “the repeated and continued
incapacity[, ab]use, neglect or refusal to parent has caused the [C]hild[ren]
to be without essential parental care, control or subsistence necessary for
[their] physical or mental well-being and [that] the conditions and causes of
incapacity, abuse, neglect or refusal cannot or will not be remedied by
[Father].” Id. at 95. As such, we discern no abuse of discretion or error of
law in the court’s termination of Father’s parental rights under this section.
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As for the trial court’s analysis under section 2511(b), Father argues
that the evidence presented by DHS “did not rise to the level of clear and
convincing evidence” to prove that termination of his parental rights is in the
best interests of the Children. Father’s Brief at 27. However, in support of
his claim, he merely states: “Father had telephone contact with the
[C]hildren through telephone calls. When [F]ather is released he could
continue to make the bond between the [C]hildren and [F]ather stronger.”
Id.
DHS counters that no bond exists between Father and the Children
and that substitute caregivers currently perform all the parenting tasks for
Children and provide them with love and affection. DHS’s Brief at 26. As for
Father’s assertion that he could continue to strengthen his bond with the
Children after his release from prison, DHS maintains that such a claim is
“inappropriate and incredible. What matters is the bond Father has
established during the Children’s lives thus far,” which is nonexistent. Id.
DHS further explains:
[T]he evidence established that there was no bond between
Father and the Children. He has not visited with any of the
Children during their time in care. He has spoken to the
caregivers of the older children, but there is no evidence of any
regularity and no testimony or other evidence of any other
contact with the [C]hildren. The caseworker testified that there
is no parent/child relationship between Father and the Children.
Father has never provided financially for the Children and has
never sent cards, letters, or gifts to the Children. The Children
do not ask to see Father. Father failed to establish a bond with
the Children prior to his incarceration, and the caseworker
testified that even if he were to attempt to complete his
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objectives after his release, they could not be completed within
… any reasonable period of time given how long the Children
have already been in care. The caseworker did not believe that
terminating Father’s rights would cause any irreparable harm to
the Children.
Instead, the Children are bonded with their relatives who have
been caring for them for their entire time in care. M.M.H. is with
his paternal aunt (and has been there since his discharge from
the hospital[] after being born exposed to drugs)[,] and the
older two children are with [their] maternal great grandmother.
Id. at 25-26 (citations to record omitted).
DHS further suggests:
In addition to examining the existence of a parent-child bond,
the trial court should also consider the “love, comfort, security,
and stability” the [C]hildren might have with their resource
parents. In re A.S., 11 A.3d 473, 483 (Pa. Super. 2010). Here,
the Children are all in pre-adoptive homes, and it is the resource
parents who have been providing for the day-to-day needs of
the Children. The Pennsylvania Supreme Court stated in In re[]
T.S.M. that “[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 [251,] 268 [(Pa. 2013)]. The
caseworker testified that M.M.H. only recognizes [his] paternal
aunt as his parent. Paternal aunt meets all of his needs[,] and
he calls her “Mommy.” M.E.B.-H and M.Q.H. have been with
[their] maternal great grandmother for the life of the case.
Their relationship is “loving and caring,” per the caseworker.
Maternal great-grandmother meets their daily needs[,] and they
look to her for car[e] and support.
Terminating Father’s parental rights would best serve the
Children’s needs and welfare by helping them achieve safety,
stability, and permanency.
Id. at 26-27 (citations to record omitted).
After considering all the evidence presented, the trial court concluded
“there’s clearly no bond between the parents [and Children]. While they
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may know who they are[, the court] question[s] whether they do. And they
certainly do not know them in the traditional sense of a mother and father
because they’ve not been a mother and father to the [C]hildren since they
were placed into the system and rendered dependent.” N.T. Hearing at 98-
99. Based on the foregoing, we deem the trial court’s decision to terminate
Father’s parental rights under section 2511(b) to be supported by the
record, and we discern no abuse of discretion or error of law.
Having determined that the trial court did not err in terminating
Father’s parental rights, we proceed with addressing the merits of Father’s
final issue pertaining to the permanency goal changes. In doing so, we are
guided by the following:
In cases involving a court’s order changing the placement goal …
to adoption, our standard of review is abuse of discretion. In re
N.C., 909 A.2d 818, 822 (Pa. Super. 2006). To hold that the
trial court abused its discretion, we must determine its judgment
was “manifestly unreasonable,” that the court disregarded the
law, or that its action was “a result of partiality, prejudice, bias
or ill will.” Id. (quoting In re G.P.-R., 851 A.2d 967, 973 (Pa.
Super. 2004)). While this Court is bound by the facts
determined in the trial court, we are not tied to the court’s
inferences, deductions and conclusions; we have a “responsibility
to ensure that the record represents a comprehensive inquiry
and that the hearing judge has applied the appropriate legal
principles to that record.” In re A.K., 906 A.2d 596, 599 (Pa.
Super. 2006). Therefore, our scope of review is broad. Id.
In re S.B., 943 A.2d 973, 977 (Pa. Super. 2008).
Furthermore, this Court has stated:
Placement of and custody issues pertaining to dependent
children are controlled by the Juvenile Act[, 42 Pa.C.S. §§ 6301-
65], which was amended in 1998 to conform to the federal
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Adoption and Safe Families Act (“ASFA”). The policy underlying
these statutes is to prevent children from languishing indefinitely
in foster care, with its inherent lack of permanency, normalcy,
and long-term parental commitment. Consistent with this
underlying policy, the 1998 amendments to the Juvenile Act, as
required by the ASFA, place the focus of dependency
proceedings, including change of goal proceedings, on the child.
Safety, permanency, and well-being of the child must take
precedence over all other considerations, including the rights of
the parents.
In re N.C., 909 A.2d 818, 823 (Pa. Super. 2006) (citations and footnotes
omitted; emphasis in original). Additionally, we recognize that “the agency
has the burden to show a goal change would serve the child’s best
interests….” In re R.M.G., 997 A.2d 339, 347 (Pa. Super. 2010).
Specifically, section 6351 of the Juvenile Act provides direction to the
court for the disposition of dependent children, stating in pertinent part:
(f) Matters to be determined at permanency hearing.—At
each permanency hearing, a court shall determine all of the
following:
(1) The continuing necessity for and appropriateness of the
placement.
(2) The appropriateness, feasibility and extent of
compliance with the permanency plan developed for the
child.
(3) The extent of progress made toward alleviating the
circumstances which necessitated the original placement.
(4) The appropriateness and feasibility of the current
placement goal for the child.
(5) The likely date by which the placement goal for the
child might be achieved.
(5.1) Whether reasonable efforts were made to finalize the
permanency plan in effect.
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(6) Whether the child is safe.
…
(9) If a child has been in placement for at least 15 of the
last 22 months or the court has determined that
aggravated circumstances exist and that reasonable efforts
to prevent or eliminate the need to remove the child from
the child’s parent, guardian or custodian or to preserve
and reunify the family need not be made or continue to be
made, whether the county agency has filed or sought to
join a petition to terminate parental rights and to identify,
recruit, process and approve a qualified family to adopt the
child unless:
(i) The child is being cared for by a relative best
suited to the physical, mental and moral welfare of
the child;
(ii) The county agency has documented a compelling
reason for determining that filing a petition to
terminate parental rights would not serve the needs
and welfare of the child; or
(iii) The child’s family has not been provided with
necessary services to achieve the safe return to the
child’s parent, guardian or custodian within the time
frames set forth in the permanency plan.
(10) If a sibling of a child has been removed from his
home and is in a different placement setting than the child,
whether reasonable efforts have been made to place the
child and the sibling of the child together or whether such
joint placement is contrary to the safety or well-being of
the child or sibling.
(11) If the child has a sibling, whether visitation of the
child with that sibling is occurring no less than twice a
month, unless a finding is made that visitation is contrary
to the safety or well-being of the child or sibling.
(12) If the child has been placed with a caregiver, whether
the child is being provided with regular, ongoing
opportunities to participate in age-appropriate or
developmentally appropriate activities. In order to make
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the determination under this paragraph, the county agency
shall document the steps it has taken to ensure that:
(i) The caregiver is following the reasonable and
prudent parent standard; and
(ii) The child has regular, ongoing opportunities to
engage in age-appropriate or developmentally
appropriate activities. The county agency shall
consult with the child regarding opportunities to
engage in such activities.
…
(f.1) Additional determination.—Based upon the
determinations made under subsection (f) and all relevant
evidence presented at the hearing, the court shall determine one
of the following:
(1) If and when the child will be retuned to the child’s
parent, guardian or custodian in cases where the return is
best suited to the safety, protection and physical, mental
and moral welfare of the child.
(2) If and when the child will be placed for adoption, and
the county agency will file for termination of parental
rights in cases where return to the child’s parent, guardian
or custodian is not best suited to the safety, protection and
physical, mental and moral welfare of the child.
(3) If and when the child will be placed with a legal
custodian in cases where the return to the child’s parent,
guardian or custodian or being placed for adoption is not
best suited to the safety, protection and physical, mental
and moral welfare of the child.
(4) If and when the child will be placed with a fit and
willing relative in cases where return to the child’s parent,
guardian or custodian, being placed for adoption or being
placed with a legal custodian is not best suited to the
safety, protection and physical, mental and moral welfare
of the child.
…
(f.2) Evidence.—Evidence of conduct by the parent that places
the health, safety or welfare of the child at risk, including
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evidence of the use of alcohol or a controlled substance that
places the health, safety or welfare of the child at risk, shall be
presented to the court by the county agency or any other party
at any disposition or permanency hearing whether or not the
conduct was the basis for the determination of dependency.
(g) Court order.—On the basis of the determination made
under subsection (f.1), the court shall order the continuation,
modification or termination of placement or other disposition
which is best suited to the safety, protection and physical,
mental and moral welfare of the child.
42 Pa.C.S. § 6351(f), (f.1), (f.2), (g).
Additionally, this Court has provided further considerations that apply
in goal change situations, stating:
Because the focus is on the child’s best interests, a goal change
to adoption might be appropriate, even when a parent
substantially complies with a reunification plan. In re N.C.,
supra [at] 826-27. Where a parent’s “skills, including [his or]
her judgment with regard to the emotional well-being of her
children, remain problematic[,]” a goal change to adoption might
be appropriate, regardless of the parent’s compliance with a
permanency plan. Id. at 825. The agency is not required to
offer services indefinitely, where a parent is unable to properly
apply the instruction provided. In re A.L.D., 797 A.2d 326, 340
(Pa. Super. 2002). See also In re S.B., supra at 981 (giving
priority to child’s safety and stability, despite parent’s substantial
compliance with permanency plan); In re A.P., 728 A.2d 375,
379 (Pa. Super. 1999), appeal denied, 560 Pa. 693, 743 A.2d
912 (1999) (holding where, despite willingness, parent cannot
meet “irreducible minimum parental responsibilities, the needs of
the child must prevail over the rights of the parent”). Thus,
even where the parent makes earnest efforts, 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.” In re Adoption of R.J.S., 901 A.2d 502,
513 (Pa. Super. 2006).
In re R.M.G., 997 A.2d at 347.
- 22 -
J-A20010-22
Here, Father claims that the trial court erred in determining that a goal
change to adoption is in the Children’s best interest. Father’s Brief at 27.
He specifically disputes that reasonable efforts were made by DHS to finalize
his permanency plan, asserting that the “CUA made no outreach to [him],
did not send him updated single case plans[,] or arrange any physical,
virtual[,] or telephone visits from August 2021 to the time of the hearing[.]”
Id. at 28. Father further argues that he was willing to take parenting and
other programs offered by the CUA, that he had housing and was to be
released within four days of the hearing, and that he is willing to take the
steps to remedy the condition that brought the [Children] into care once he
is released from prison. Id.
Unfortunately, the trial court’s pronouncement of its decision to
change the permanency goals from reunification to adoption is devoid of any
reference to the section 6351(f) and (f.1) factors, which the court is required
to consider prior to making such determinations. See 42 Pa.C.S. § 6351(f)
(listing the factors that a court shall determine at a permanency hearing);
42 Pa.C.S. § 6351(f.1) (providing additional determinations that the court is
required to make “based upon the determinations made under subsection (f)
and all relevant evidence presented at the hearing”). In its notice of
compliance with Rule 1925(a), the trial court directs us to the notes of
testimony from the March 11, 2022 hearing for its statement of reasons for
terminating Father’s parental rights and changing the Children’s permanency
goals to adoption. See Notice of Compliance, 5/12/22, at 2 (citing N.T.
- 23 -
J-A20010-22
Hearing at 95-99). Our review of the transcript, however, reveals only the
trial court’s analysis under section 2511(a) and (b) pertaining to the
termination of Father’s parental rights, followed by a single statement that
“it’s in the best interest of these [C]hildren to have this goal changed to
adoption.” N.T. Hearing at 95-97. No explanation for the goal change has
been provided. “Questions regarding the propriety of an order granting or
denying a goal change petition are … discrete inquiries requiring an analysis
of interests exquisitely separable from those interests reviewed in questions
relating to the involuntary termination of parental rights.” In re R.I.S., 36
A.3d 567, 575 (Pa. 2011). Without a proper analysis of the relevant section
6351(f) and (f.1) factors in support of the trial court’s decision to change the
permanency goals to adoption, our ability to perform appellate review is
impeded. Thus, we are constrained to vacate the April 11 and 12, 2022
orders granting the goal changes, and we remand for an examination of the
merits of the goal change petitions under the appropriate statutory
provisions.
Accordingly, we affirm the March 11, 2022 decrees involuntarily
terminating Father’s parental rights to Children, we vacate the April 11 and
12, 2022 orders changing the permanency goals to adoption, and we
remand with instructions consistent with this memorandum.
Decrees affirmed. Orders vacated. Case remanded. Jurisdiction
relinquished.
- 24 -
J-A20010-22
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
- 25 - | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484211/ | J-S35043-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
COMMONWEALTH OF PENNSYLVANIA : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
ELEAZAR YISRAEL :
:
Appellant : No. 647 MDA 2022
Appeal from the PCRA Order Entered April 6, 2022
In the Court of Common Pleas of Luzerne County Criminal Division at
No(s): CP-40-CR-0003750-2015
BEFORE: BENDER, P.J.E., McLAUGHLIN, J., and STEVENS, P.J.E.*
MEMORADUM BY STEVENS, P.J.E.: FILED NOVEMBER 16, 2022
Appellant, Eleazar Yisrael, appeals from the order entered in the Court
of Common Pleas of Luzerne County dismissing his counseled motion to
reinstate his rights to file a Post-Conviction Relief Act (“PCRA”) 1 appeal after
this Court had dismissed his PCRA appeal seven months earlier for the failure
to complete a docketing statement form pursuant to Pa.R.A.P. 3517. Counsel
for Appellant has filed a purported “Anders brief”2 and a petition to withdraw
as counsel. We reverse the order, deny counsel’s petition to withdraw, and
remand for further proceedings.
____________________________________________
* Former Justice specially assigned to the Superior Court.
1 42 Pa.C.S.A. §§ 9541-9546.
2 Anders v. California, 386 U.S. 738 (1967).
J-S35043-22
The trial court aptly summarizes the facts and procedural history of the
present matter:
This matter arises from an information filed by the Luzerne County
District Attorney against [Appellant] on November 30, 2015. The
charges contained in the information were criminal homicide,
robbery, burglary, tampering with or fabricating physical evidence
and abuse of corpse. These charges resulted from the fatal
shooting of Samuel Vacante in his residence located at 20
Coventry Lane, Drums, Luzerne County, Pennsylvania.
Appellant entered a plea of not guilty at his arraignment on
December 1, 2015. Following a six-day trial which concluded on
December 13, 2016, Appellant was found guilty on all charges.
Appellant was immediately sentenced to a mandatory term of life
in prison for first degree murder, a consecutive term of ninety-six
to one hundred ninety-two months for robbery, fifty-four to one
hundred eight months for burglary, a consecutive term of nine to
eighteen months for tampering with or fabricating physical
evidence and a consecutive term of fifteen to thirty months for
abuse of corpse. The total sentence was life plus one hundred
seventy-four to three hundred forty-eight months. His post-
sentence motion was denied by order dated March 30, 2017.
A notice of appeal was then filed twenty-five days later.
Appellant’s convictions and judgment of sentence were affirmed
by the Superior Court of Pennsylvania in a non-precedential
decision filed on April 24, 2018. The Supreme Court of
Pennsylvania denied Appellant’s Petition for Allowance of Appeal
on October 31, 2018.
A pro se Motion for Post-Conviction Collateral [(“PCRA”)]Relief
was filed by Appellant on November 4, 2019. Counsel was
appointed to represent Appellant and he filed a Supplement to the
PCRA petition. On March 30, 2021, a PCRA hearing was held.
Appellant testified on his own behalf and the Commonwealth
presented the testimony of trial counsel. Appellant’s Motion for
PCRA relief was denied by order dated April 19, 2021.
A Notice of Appeal was filed on behalf of Appellant on May 6, 2021.
. . . [None of the issues raised in his court-ordered Pa.R.A.P.
1925(b) statement had been addressed at the PCRA hearing]. On
-2-
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July 28, 2021, Appellant’s [counseled] appeal was dismissed by
the Superior Court of Pennsylvania due to the failure to comply
with Pa.R.A.P. 3517.
More than seven months later, a Motion to Reinstate Appeal was
filed on behalf of Appellant in the trial court.3 This motion was
denied on April 6, 2022.
...
[The lower court explained its reason for denying the motion, as
follows:]
____________________________________________
3In the motion filed with the lower court, conflicts counsel (now acting in a
pro bono capacity) stated the following:
1. On July 28, 2021, the Superior Court dismissed the appeal in this
matter[, pursuant to Pa.R.A.P. 3517, Docketing Statement], due to
the failure of the Appellant to submit a Docketing Statement.
2. It is believed that this Docketing Statement was not filed due to
confusion by Appellant’s [prior] Counsel of Record; more
particularly, Appellate Counsel of Record was representing the
Appellant in Counsel’s capacity as an Assistant Conflicts Counsel
while Undersigned Counsel was to take over said appeal, in his
capacity as Assistant Conflicts Counsel.
3. This matter was being reassigned within the Luzerne County
Conflicts office to Undersigned Counsel, however Undersigned
Counsel in his capacity as Assistant Conflicts Counsel, had not yet
entered his appearance of record with the Appellate court and
expected Counsel of Record to protect the record until such time.
4. It is believed that the failure to file the Docketing Statement, which
caused the appeal to be dismissed was due to miscommunication
between appellate Counsel of Record and Undersigned Counsel.
5. Undersigned Counsel has since terminated his association with the
Luzerne County Conflicts office [and is representing Appellant pro
bono].
Defendant’s Motion to Reinstate Appeal, 3/21/22, at 1-2.
-3-
J-S35043-22
As previously indicated, Appellant’s current appeal is
from the order denying reinstatement of his appellate
rights. Appellant’s appeal was dismissed by the
Superior Court of Pennsylvania. [The lower court] has
no authority to reinstate an appeal dismissed by an
appellate court. Appellant’s remedy is to seek
reinstatement of the appeal from the appellate court.
See 24 Corpus Juris Secundum Reinstatement of
Appeal Section 2556. “Judges of coordinate
jurisdiction sitting in the same case should not
overrule each other’s decision.” Commonwealth v.
Turner, 73 A.3d 1283, 1286 (Pa. Super. 2013). It
would follow that a trial court should not, and cannot,
overrule a decision of an appellate court. As a result,
the April 6, 2022 Order denying Appellant’s Motion to
Reinstate Appeal should be affirmed.
Lower Court Opinion, 6/16/22, at 1-3. This timely appeal followed.
Appellate counsel’s “Anders brief” presents the following questions for
our review:
1. Whether the [lower] court erred as a matter of law in denying
Mr. Yisrael’s motion to reinstate appeal?
2. Whether there are any substantive issues of merit that are
cognizable by the Superior Court in this matter?
Anders brief, at 3. In fact, because the present appeal stems from the denial
of PCRA relief, as explained below, counsel should have filed a Turner/Finley
letter or brief instead.4
____________________________________________
4 When counsel seeks to withdraw on an appeal form the denial of PCRA relief,
counsel should file a Turner/Finley letter or brief, not an Anders brief. See
Commonwealth v. Turner, 544 A.2d 927 (Pa. 1988); Commonwealth v.
Finley, 550 A.2d 213 (Pa. Super. 1988) (en banc). However, we may accept
an Anders brief in lieu of a Turner/Finley letter because an Anders brief
offers broader protection. See Commonwealth v. Widgins, 29 A.3d 816,
(Footnote Continued Next Page)
-4-
J-S35043-22
As we have observed, the lower court determined that because this
Court issued the order dismissing Appellant’s PCRA appeal, the lower court
possessed neither the authority nor jurisdiction to entertain Appellant’s motion
for reinstatement of his PCRA appeal rights. This determination was
erroneous, as it was incumbent upon the lower court to review
Appellant's counseled motion to reinstate his PCRA rights nunc pro tunc as a
subsequent PCRA petition. See Commonwealth v. Robinson, 837 A.2d
1157 (Pa. 2003) (treating petition seeking reinstatement of PCRA appeal
rights as a PCRA petition); Commonwealth v. Weimer, 756 A.2d 684, 686
(Pa. Super. 2000) (treating appellant’s motions, including motion to reinstate
appeal rights, as a PCRA petition).
Our standard of review from the denial of post-conviction relief is
“limited to examining whether the court’s determination is supported by the
evidence of record and whether it is free of legal error.” Commonwealth v.
Ousley, 21 A.3d 1238 (Pa. Super. 2011). In the case sub judice, because the
lower court declined to consider Appellant’s motion, we are without an
evidentiary record necessary to review his claim that a mutual
miscommunication involving prior counsel, present counsel, the Luzerne
County Conflicts office, and, perhaps, the administrative/secretarial
operations of the lower court reflected the type of breakdown warranting
____________________________________________
817 n.2 (Pa. Super. 2011). If counsel has filed an Anders brief instead of
a Turner/Finley brief, we analyze whether counsel's brief meets the
standards of Turner/Finley.
-5-
J-S35043-22
reinstatement of his PCRA appeal rights notwithstanding the patent
untimeliness of his most recent PCRA petition in which he raises this claim.
Therefore, we deem it necessary to remand this matter to the PCRA
court for further development of material facts of record with respect to
Appellant’s request for reinstatement of his PCRA appeal rights nunc pro tunc.
Order reversed. Case remanded for further proceedings consistent with
this decision. Petition to withdraw as counsel denied. Jurisdiction
relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
-6- | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484209/ | J-A15034-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
CELINA DIETRICH : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
JORDAN DIETRICH : No. 1299 WDA 2021
Appeal from the Order Entered October 21, 2021
In the Court of Common Pleas of Armstrong County
Civil Division at No(s): 2018-1342-CIVIL
BEFORE: BOWES, J., KUNSELMAN, J., and SULLIVAN, J.
MEMORANDUM BY SULLIVAN, J.: FILED: NOVEMBER 16, 2022
Celina Dietrich (“Ms. Dietrich”) 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 Jordan Dietrich (“Mr. Dietrich”). We affirm.
While employed at the office of Gregory W. Swank, Esquire (“Attorney
Swank”), Shea Kraft, Esquire (“Attorney Kraft”) represented Ms. Dietrich in a
divorce and custody case against Mr. Dietrich. Attorney Generelli, a member
of the GLG firm, represented, and continues to represent, Mr. Dietrich 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. Dietrich 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-A15034-22
Generelli’s and the GLG firm’s continued representation of Mr. Dietrich
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 Fetterman v. Cochran, and are listed
consecutively before this panel at J-A15031-22 to J-A15033-22. We address
those appeals in separate decisions.
-2-
J-A15034-22
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. Dietrich’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.
____________________________________________
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-
J-A15034-22
Dietrich 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 Ms. Dietrich, would not participate in the case at
the GLG firm in any way or reveal confidential information about Ms. Dietrich,
the case, or the litigation strategy, and had not taken any case files or
materials concerning the case. The letter also explained to Ms. Dietrich the
procedures the GLG firm would use to protect Ms. Dietrich’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. Dietrich’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. Dietrich 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
____________________________________________
3 Attorney Kraft sent similar letters to his former clients in the other conflict
cases. See N.T., 10/20/21, at 22-28.
4 At the hearing on the joint disqualification motions, neither Ms. Dietrich 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-
J-A15034-22
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
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
____________________________________________
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-A15034-22
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
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.
-6-
J-A15034-22
Testimony at the disqualification hearing established that when
employed by Attorney Swank, Attorney Kraft performed fifty hours of work in
three years on Ms. Dietrich’s case, which included preparing a pretrial
statement for a custody trial, conducting a custody trial, and substantial work
on the related divorce case. N.T. 10/20/21, at 46, 83-84.7
The day after the hearing, the trial court entered an order denying Ms.
Dietrich’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.
Dietrich 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).
____________________________________________
7 No evidence was presented at the hearing that Ms. Dietrich had responded
to Attorney Kraft’s letter, and Ms. Dietrich did not assert that Attorney Kraft
had disclosed confidential information about her case.
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
Ms. Dietrich failed to do. See Pa.R.A.P. 1925(a)(2)(i). We nevertheless
decline to quash Ms. Dietrich’s appeal because she substantially complied with
the rule, and her 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).
-7-
J-A15034-22
Ms. Dietrich raises the following issue for our review:
Did the trial court err in concluding that [Ms. Dietrich’s] trial
counsel, having left his employment with the law firm representing
[Ms. Dietrich] 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. Dietrich’s Brief at 8.9
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 Electric Utilities
Corporation, 268 A.3d 470, 478 (Pa. Super. 2022); see also Pa.R.A.P. 313
(governing collateral orders).
Ms. Dietrich asserts that Rule 1.10(b) compels the disqualification of
Attorney Generelli and the GLG firm from continuing to represent Mr. Dietrich
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
____________________________________________
9 Ms. Dietrich 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. Dietrich does not allege that Attorney Kraft represents
Mr. Dietrich.
-8-
J-A15034-22
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
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
-9-
J-A15034-22
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
place particular emphasis on the creation by the attorney’s new firm of a
reasonably adequate wall or screen10 to protect information the disqualified
____________________________________________
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.
- 10 -
J-A15034-22
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. Dietrich argues that Mr. Dietrich 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. Dietrich 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. Dietrich
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.
- 11 -
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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. Dietrich’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.
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
- 12 -
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conclude that because there was no violation of the Rules of Professional
Conduct, Ms. Dietrich 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. Dietrich seeks.
At the outset, Attorney Kraft satisfied the requirement of Rule
1.10(b)(2) by sending a prompt letter to Ms. Dietrich and all the other clients
he had represented in the conflict cases. Ms. Dietrich 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.
Dietrich and his move to the GLG firm, which represents Ms. Dietrich’s
opponent, supports Ms. Dietrich’s position, as does Attorney Kraft’s arguably
substantial relationship with Ms. Dietrich, and involvement in the case, which
included preparing a pretrial statement for a custody trial, conducting a
custody trial, and doing substantial work on the divorce action. See N.T.,
10/20/21, 82-83. However, those factors would weigh more heavily if
Attorney Kraft had actively represented Mr. Dietrich or had the GLG firm’s
screen been defective, and neither is the case in this matter.
- 13 -
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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. Dietrich nor any other appellant 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,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
____________________________________________
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.
- 14 -
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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, 67-71.12
The GLG firm’s screen contained a reasonably adequate firm policy
against breach, including sanctions, physical and/or geographical separation.
____________________________________________
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 Ms. Dietrich’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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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.13
____________________________________________
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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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).
- 17 -
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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.14
We also do not agree with Ms. Dietrich 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
____________________________________________
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.
- 18 -
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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
notice of the conflict;16 (2) the departing attorney served as de facto counsel
____________________________________________
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 persons’ 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. Dietrich’s right to a fair trial.
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. 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
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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 Ms.
Dietrich, his former client, there is no evidence that Ms. Dietrich responded to
Attorney Kraft’s letter, and Attorney Kraft has not worked as opposing counsel
on the Dietrich litigation at the GLG firm. Further, there is no evidence that
Attorney Kraft used or disclosed Ms. Dietrich’s confidential information, and
the GLG firm erected its screen before he began working there. For these
____________________________________________
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, this 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.
- 20 -
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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, Ms. Dietrich 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. Dietrich’s right to a fair trial.18
Thus, the trial court properly denied Ms. Dietrich’s disqualification motion.
Order affirmed.
____________________________________________
18 We do not ignore Ms. Dietrich’s assertion of her expectation of attorney
loyalty. However, Ms. Dietrich 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. Dietrich’s case to the GLG firm. Moreover,
we will not lightly disturb Mr. Dietrich’s right to representation by counsel of
his choice. See Rudalavage, 268 A.3d at 478.
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Judge Bowes joins in this memorandum.
Judge Kunselman concurs in the result.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/16/2022
- 22 - | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484215/ | UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________
No. 22-1499
_______________
MS. LINDA MIGLIORI; FRANCIS J. FOX;
RICHARD E. RICHARDS; KENNETH RINGER; SERGIO RIVAS,
Appellants
v.
ZACHARY COHEN,
Intervenor – Plaintiff
v.
LEHIGH COUNTY BOARD OF ELECTIONS
v.
DAVID RITTER,
Intervenor - Defendant
________________________
Appeal from the United States District Court
for the Eastern District of Pennsylvania
No. 5-22-cv-00397
District Judge: Honorable Joseph F. Leeson
On Remand from
the Supreme Court of the United States
_______________
Before: GREENAWAY JR., MATEY, and McKEE,* Circuit Judges
JUDGMENT ORDER
In accordance with the mandate of the Supreme Court of the United States issued
November 14, 2022, it is
*
The Honorable Theodore A. McKee assumed senior judge status on October 21, 2022.
ORDERED and ADJUDGED the above captioned appeal is dismissed as moot.
The Clerk is directed to issue the mandate forthwith.
By the Court,
s/ Joseph A. Greenaway, Jr.
Circuit Judge
ATTEST:
s/ Patricia S. Dodszuweit
Clerk
Date: November 16, 2022 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484218/ | Filed 11/16/22 P. v. Rivera CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
THE PEOPLE, C095003
Plaintiff and Respondent, (Super. Ct. No. 20FE004184)
v.
DANTE DAVE RIVERA,
Defendant and Appellant.
A jury found defendant Dante Dave Rivera guilty of one count of rape and two
counts of digital penetration. The trial court sentenced defendant to six years in state
prison.
On appeal, defendant raises two claims. First, he contends the trial court erred in
removing the lone holdout juror, who did not disclose her son was once threatened by a
similar accusation during jury selection. Second, he argues the People failed to present
sufficient evidence to prove beyond a reasonable doubt that defendant digitally
1
penetrated the victim more than once. We disagree with both contentions and affirm the
judgment.
FACTS AND HISTORY OF THE PROCEEDINGS
The victim, M.D., attended a party at defendant’s mother’s house on the night of
February 15, 2018. M.D. took prescription medicine, pain killers, and cocaine prior to
the party, and consumed hard alcohol at the party.
Towards the end of the night, M.D. became concerned that she was too intoxicated
to drive home safely and decided to take a nap in the house to sober up. She asked
defendant, then 22 years old, if she could nap in the house; defendant agreed and
suggested M.D. sleep in his bed. M.D. complied. She followed defendant into his room,
laid on top of the covers of his bed with her clothes on, and fell asleep.
M.D. awoke to defendant taking her pants off. She had had no prior discussion
with defendant about any type of sexual conduct and had no desire for sexual engagement
with defendant. Nevertheless, defendant inserted his finger into M.D.’s vagina over her
protest. He then forced M.D.’s legs apart and put his penis inside her vagina even though
she repeatedly said no. Defendant eventually stopped and fell asleep next to M.D. After
defendant fell asleep, M.D. gathered her belongings and left the house.
After leaving the house, M.D. headed to a hospital where a sexual assault
examination was done, and a sexual assault evidence collection kit was prepared.
The jury found defendant guilty of one count of rape (Pen. Code, § 261, subd.
(a)(2)); statutory section citations that follow are found in the Penal Code unless
otherwise stated) and two counts of digital penetration (§ 289, subd. (a)(1)). The trial
court sentenced defendant to six years in state prison. Defendant timely appealed.
2
DISCUSSION
I
Removal of Juror No. 10
Defendant contends the trial court erred in removing Juror No. 10 based on her
failure to disclose during jury selection a similar accusation made against her son,
arguing her son’s incident did not impair her ability to deliberate.
A. Additional Background
During the two-day voir dire, both the prosecutor and defense counsel repeatedly
informed the prospective jurors that this was a sexual assault case. Defense counsel
asked prospective jurors if any of them “know[s] anyone . . . who has been accused of
inappropriate sexual conduct or sexual harassment.” Only one prospective juror
responded affirmatively, and he was ultimately excused. When asked about their
positions with regard to the victim rights organization such as the Me Too Movement, a
prospective juror admitted she was a survivor of sexual assault, as well as several of her
friends. This prospective juror was also excused. The prosecutor later stated the law
allows conviction of a sexual assault crime to be based on the testimony of the alleged
victim alone and asked if any prospective jurors were uncomfortable with the standard.
Several prospective jurors stated they needed to hear more evidence, but Juror No. 10 did
not join in.
Following these discussions, the trial court started asking questions of Juror
No. 10. She stated she had worked as a legal secretary and a paralegal for two decades
handling civil sexual assault cases on behalf of school districts. She had no “thoughts or
feelings about the nature of the charges in this case that cause [her] pause about serving
as a juror.” When asked about the “criminal experience” in her family, Juror No. 10
responded her brother-in-law was arrested for driving under the influence. Finally, the
3
court asked Juror No. 10 if there was “anything you think is important for us to know
about your ability to serve as a juror,” and Juror No. 10 answered, “No.”
On the second day of jury deliberations, the jury foreperson alerted the trial court
that Juror No. 10 disclosed her son was once threatened with a rape accusation.
According to the foreperson: “[Juror No. 10] disclosed that she had particular concerns
and feelings because of her own son having had a similar accusation against him from a
former girlfriend, and she had discussed the accusation with police and apparently it did
not rise to a prosecution or anything like that, but it was concerning to her, and it
provided her some personal concerns that affected her ability to consider the case
impartially.”
The trial court then questioned Juror No. 10. Juror No. 10 admitted her son was
once threatened by an ex-girlfriend, when he was 18 years old, and that she would tell the
police he committed statutory rape. At the time, Juror No. 10 “instantly dealt with” the
threat “based on [her] knowledge of how to do things.” She contacted the police
department, asked them how to handle the issue if “something happens,” and the police
“addressed it with” her. But no charges were ever filed against her son.
As to the circumstances surrounding the disclosure of her son’s incident, Juror
No. 10 stated she was “the last one to hold [her] ground” and “there’s a lot of irritation
because of it.” The trial court asked her: “Do you think it was pressure that you were
feeling that . . . bubbled this up to make you disclose?” Juror No. 10 responded: “Yes.”
The court then asked if Juror No. 10 attempted to explain her holdout to other jurors
using her son’s incident: “Maybe this is why I feel this way, this is what can happen
because this is what happened to my son?” Juror No. 10 agreed: “I think that it caused it
to come out, yes.” She later reiterated: “I’m a little upset because I do feel because I am
the person with the doubt that I am being pushed and pressured, and that is why I brought
up this, you know, I’ve had personal experience with this, but I haven’t to an extent.”
4
But she denied her son’s “situation ha[d] anything to do with the way [she] perceive[d]
this case, because [she] looked at the facts and looked at all the statements.”
The trial court stated it was concerned that Juror No. 10 did not disclose her son’s
situation during voir dire, noting “this is something that would have been very important
[sic] everybody to know when we were picking a jury.” Juror No. 10 apologized,
claiming “[i]t did not come to mind” when she was asked. She just “totally did not even
put that in [her] head.” The prosecutor asked Juror No. 10: “In retrospect given the
subject matter of a young man that was around the same age as your son that’s accused of
rape, would you acknowledge this maybe wasn’t the best case for you?” Juror No. 10
agreed but insisted her son’s situation had nothing to do with “the way [she] perceive[d]
this case.”
Defense counsel asked Juror No. 10 whether she believed she could continue to
deliberate with other jurors based on the pressure she described. Juror No. 10 responded
“personally” she could “sit there and take it,” but she was not sure if other jurors could
continue the deliberation with her because she had “dug [her] heals [sic] in, and the heals
[sic] are probably going to stay there and not going to be happy and not moving along.”
Nevertheless, she was “willing to go in there and do the job [she] was asked to do.”
During the examination, Juror No. 10 also stated several times that she was willing
to “step aside.” The prosecutor later noted she “[c]learly heightened her voice” when she
asked to step aside, arguing her emotional state threatened her ability to deliberate.
After the questioning, the trial court decided to excuse Juror No. 10. It noted Juror
No. 10 “did not disclose something that’s incredibly relevant to the issues in this case,
incredibly relevant to a determination of whether or not she would be excused for cause
that her young son was close to—accused or threatened to be accused of rape, which is
the same charges here against another young man.” The incident relating to her son, the
court observed, likely caused her to be the holdout juror. Specifically, the court
recounted Juror No. 10’s admission that her feelings about her son “bubbled up” when
5
she was trying to explain to fellow jurors the reasons behind her holdout. The court
expressed concerns that Juror No. 10 was “stepping into the shoes of the protective
mother again,” and her “feelings were getting tangled up in her deliberations.” The court
stressed it had no problem with Juror No. 10 holding her ground, but it feared the reason
for her holdout was she “had a son in a similar situation, et cetera, et cetera.”
Defense counsel “strenuously object[ed]” to the replacement of Juror No. 10,
arguing Juror No. 10 was being replaced because she was the lone holdout juror. But he
conceded her feelings about her son “were bubbling up as court indicated” and Juror
No. 10 “[m]aybe being a protective mother.” The trial court again clarified it was not
excusing Juror No. 10 because she disagreed with other jurors, but because she “readily
admitted that . . . this was based on feelings that bubbled up about her son.”
An alternate juror was seated on the jury the next day. The jury started
deliberation anew and reached guilty verdicts on the same afternoon.
B. Analysis
A trial court may, upon good cause, discharge a juror who is unable to perform his
or her duty. (§ 1089.) This includes when the court “finds that the juror’s state of mind
would prevent him or her from being impartial.” (People v. Ledesma (2006) 39 Cal.4th
641, 670.)
A juror’s intentional concealment of material information during voir dire
constitutes juror misconduct, creating a rebuttable presumption that the misconduct was
prejudicial. (People v. Blackwell (1987) 191 Cal.App.3d 925, 929.) On the other hand,
where a juror inadvertently or unintentionally failed to disclose material information
during voir dire, the trial court should consider whether the juror is “ ‘ “sufficiently
biased to constitute good cause for the court to find under [section] 1089 . . . that he [or
she] is unable to perform his duty.” ’ ” (People v. San Nicolas (2004) 34 Cal.4th 614,
644; People v. Jackson (1985) 168 Cal.App.3d 700, 706.) Whether a juror is sufficiently
biased is “ ‘within the discretion of the trial court. Except where bias is clearly apparent
6
from the record, the trial judge is in the best position to assess the state of mind of a
juror.’ ” (San Nicolas, at p. 644; accord, People v. Clark (2011) 52 Cal.4th 856, 895
[“The trial court is in the best position to determine the potential juror’s true state of mind
because it has observed firsthand the prospective juror’s demeanor and verbal
responses”].)
“ ‘We review a trial court’s decision to discharge a juror under an abuse of
discretion standard, and will uphold such decision if the record supports the juror’s
disqualification as a demonstrable reality.’ ” (People v. Williams (2015) 61 Cal.4th 1244,
1262.) “This means simply that the record must reveal the reason for the court’s decision
to discharge a juror and in turn substantial evidence must support that reason.” (People v.
Peterson (2020) 10 Cal.5th 409, 472-473.) But we do not reweigh the evidence and we
defer to the trial court’s assessments of the juror’s credibility based on their firsthand
observations. (Williams, at p. 1262.)
Here, the trial court correctly found good cause to excuse Juror No. 10. When
Juror No. 10’s son was threatened with a rape accusation at 18 years old, Juror No. 10
“instantly” utilized her professional knowledge and resources to help her son in case
“something happens.” This event, as the court observed and Juror No. 10 conceded, was
“incredibly relevant” to the determination of her ability to serve on the jury in a case
where another young man was accused of rape. Juror No. 10 admitted her son’s incident
“bubbled up” when she was trying to explain to other jurors the reasons behind her
holdout—her son almost suffered a false accusation, and so could defendant. The jury
foreperson also informed the court that Juror No. 10 disclosed her son’s incident
“provided her some personal concerns that affected her ability to consider the case
impartially.” These statements sharply contrasted Juror No. 10’s claim that her son’s
situation had nothing to do with her decision in this case. We accept the trial court’s
determination of Juror No. 10’s state of mind. (People v. Clark, supra, 52 Cal.4th at
p. 895 [if a juror’s statements are conflicting, the trial court’s determination of the
7
person’s state of mind is binding]; People v. Barnwell (2007) 41 Cal.4th 1038, 1053 [the
evidence on a juror’s bias during deliberation is often in conflict, and we defer to the trial
court’s factual findings based on its “firsthand observations unavailable to us on
appeal”].)
This determination is further supported by the prosecutor’s observation that Juror
No. 10 “[c]learly heightened her voice” every time she asked about stepping aside,
suggesting Juror No. 10 was emotional about her decision. (See People v. Stewart (2004)
33 Cal.4th 425, 451 [“a trial judge who observes and speaks with a prospective juror and
hears that person’s responses (noting, among other things, the person’s tone of voice,
apparent level of confidence, and demeanor), gleans valuable information that simply
does not appear on the record”].) Thus, sufficient evidence supports the trial court’s
conclusion that Juror No. 10 “stepp[ed] into the shoes of the protective mother” and “her
feelings were getting tangled up in her deliberations,” leading to her holdout. The trial
court did not abuse its discretion in excusing Juror No. 10.
Because we conclude the trial court correctly found Juror No. 10’s bias constituted
good cause to excuse her, we need not decide whether Juror No. 10’s concealment of her
son’s incident was intentional.
II
Sufficiency of the Evidence
Defendant argues the People failed to prove beyond a reasonable doubt two counts
of digital penetration because M.D. testified at trial that defendant only digitally
penetrated her once.
A. Additional Background
At the hospital immediately after the assault, M.D. provided a recorded statement
of the incident to Deputy Sheriff William Mundy and his trainee. At trial, on August 17,
2021, Mundy testified he spent “quite a while” taking M.D.’s statement because he was
training a new deputy.
8
According to Mundy, M.D. stated defendant penetrated her with his finger “a few
times in two separate instances during the incident.” Mundy reaffirmed this statement
after reviewing the transcript of the interview. M.D. also confirmed the statement she
provided to Mundy accurately described the incident, although she did not “have a
perfect recollection of” every statement she gave relating to the incident. She admitted
she might have forgotten some details in the statement to Mundy.
At trial, M.D. testified defendant digitally penetrated her once.
B. Analysis
“When reviewing a challenge of the sufficiency of the evidence, we ask
‘ “whether, after viewing the evidence in the light most favorable to the prosecution, any
rational trier of fact could have found the essential elements of the crime beyond a
reasonable doubt.” ’ ” (People v. Banks (2015) 61 Cal.4th 788, 804.) “If the
circumstances reasonably justify the trier of fact’s findings, reversal of the judgment is
not warranted simply because the circumstances might also reasonably be reconciled with
a contrary finding.” (People v. Lindberg (2008) 45 Cal.4th 1, 27.)
Here, sufficient evidence supported the jury’s finding. The trial took place more
than three years after the assault. A witness’s recollection of an incident can fade over
time, and a witness might suppress the memory of such a traumatic event. As M.D.
acknowledged, her statement made immediately after the sexual assault best described
the incident. Thus, viewing the evidence in the light most favorable to the prosecution,
we conclude sufficient evidence supports the jury’s finding of two instances of digital
penetration.
Defendant argues M.D.’s statement to Mundy was “less accurate” because she was
“under the influence of alcohol, cocaine, and several opioid drugs at the time of the
incident.” Instead, defendant contends M.D.’s testimony at trial was more accurate
because she was “clean and sober.” But we fail to see how, if M.D.’s memory was
9
impaired at the time of the incident due to alcohol and drug use, she could regain a better,
more objective recollection of the incident after the fact.
DISPOSITION
The judgment is affirmed.
HULL, Acting P. J.
We concur:
MAURO, J.
BOULWARE EURIE, J.
10 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484216/ | Case 1:16-vv-01024-EGB Document 88 Filed 11/01/22 Page 1 of 31
In the United States Court of Federal Claims
OFFICE OF SPECIAL MASTERS
No. 16-1024V
(to be published)
************************* Chief Special Master Corcoran
M.R., *
*
Petitioner, * Dated: October 3, 2022
*
v. *
*
SECRETARY OF HEALTH AND *
HUMAN SERVICES, *
*
Respondent. *
*
*************************
Ronald Craig Homer, Conway Homer, P.C., Boston, MA, for Petitioner.
Sarah Christina Duncan, U.S. Department of Justice, Washington, DC, for Respondent.
ENTITLEMENT DECISION1
On August 18, 2016, M.R. filed a petition for compensation under the National Vaccine
Injury Compensation Program (the “Program”). 2 ECF No. 1. Petitioner alleges that an influenza
(“flu”) vaccination administered to him on October 21, 2014, caused him to experience left-sided
sensorineural hearing loss (“SNHL”). An entitlement hearing in the matter was held on February
25, 2022, in Washington, D.C.
Having reviewed the record, all expert reports and associated literature, and listened to the
witnesses who testified at the hearing, I hereby deny an entitlement award. As discussed in greater
1
This Decision will be posted on the United States Court of Federal Claims’ website in accordance with the E-
Government Act of 2002, 44 U.S.C. § 3501 (2012). This means the Decision will be available to anyone with access
to the internet. As provided by 42 U.S.C. § 300aa-12(d)(4)(B), however, the parties may object to the published
Ruling’s inclusion of certain kinds of confidential information. Specifically, under Vaccine Rule 18(b), each party has
fourteen (14) days within which to request redaction “of any information furnished by that party: (1) that is a trade
secret or commercial or financial in substance and is privileged or confidential; or (2) that includes medical files or
similar files, the disclosure of which would constitute a clearly unwarranted invasion of privacy.” Vaccine Rule 18(b).
Otherwise, the entire Decision will be available to the public in its current form. Id.
2
The Vaccine Program comprises Part 2 of the National Childhood Vaccine Injury Act of 1986, Pub. L. No. 99-660,
100 Stat. 3758, codified as amended at 42 U.S.C. §§ 300aa-10 through 34 (2012) [hereinafter “Vaccine Act” or “the
Act”]. Individual section references hereafter will be to § 300aa of the Act (but will omit that statutory prefix).
Case 1:16-vv-01024-EGB Document 88 Filed 11/01/22 Page 2 of 31
detail below, Petitioner’s acoustic neuroma/vestibular schwannoma was the most likely cause of
his SNHL—not the flu vaccine.
I. Fact History
Vaccination and Onset of Symptoms
Petitioner was a forty-nine-year-old registered nurse when he received a flu vaccine in his
left arm on October 21, 2014, at his place of employment, Robert Wood Johnson (“RWJ”)
University Hospital. Pet. 1 at 1; Ex. 18 at 1 (“M.R. Affidavit”). His past medical history was
significant for morbid obesity, urinary tract stone disease, allergic rhinitis, elevated
cholesterol/triglycerides, and elevated hemoglobin A1C in 2013. Ex. 2 at 2–5, 8–10, 23–24; Ex. 3
at 3–4. Petitioner had also previously received flu vaccines at work for at least the prior three years,
but with no reported adverse events. Ex. 12 at 15.3
On October 27, 2014 (six days after vaccination), M.R. presented to the emergency room
(“ER”) of RWJ Hospital, “complaining of severe vertigo with hearing loss to the left ear.” Ex. 7
at 113. Petitioner reported an “abrupt onset of painless vertigo beginning 2 days ago [on October
25th] that ha[d] been intermittent until today.” Id. An ER physician treated Petitioner with
Meclizine, which provided a “good relief of symptoms.” Id. at 114. A CT scan revealed no
abnormalities, and the examination yielded results deemed within normal limits except for some
horizontal nystagmus.4 Id. at 115. Petitioner was diagnosed with acute labyrinthitis and discharged
the same day. Id. at 113–14. The differential diagnoses included a cerebellopontine angle (“CPA”)
tumor. Tr. at 114–15
Petitioner next presented to otolaryngologist Dr. Michael Goldrich on October 30, 2014,
complaining of “symptoms of vertigo since Saturday [October 25].” Ex. 5 at 43. Petitioner reported
hearing loss in his left ear and one episode of nausea and vomiting. Id. An audiogram from that
same day revealed profound sensorineural hearing loss in petitioner’s left ear. Id. at 46, 54–55. Dr.
Goldrich’s impression was acute hearing loss and vertigo. Id. at 46.
The following day, Dr. Goldrich performed a left myringotomy, tube insertion, and steroid
instillation. Ex. 7 at 1, 15, 50. Dr. Goldrich noted that “5 days [after] flu vaccine on 10/21/14
[patient with] reports of hearing loss [in his left] ear.” Id. at 25. Both the preoperative and
3
Petitioner had volunteered for a non-contrast brain magnetic resonance imaging (“MRI”) in February 2003, which
was unremarkable except for mild sinus mucosal thickening. Ex. 20 at 1.
4
Nystagmus is defined as “an involuntary, rapid, rhythmic movement of the eyeball, which may be horizontal, vertical,
rotatory, or mixed.” Nystagmus, Dorland’s Medical Dictionary Online,
https://www.dorla ndsonline.com/dorland/definition?id=34565&searchterm=nystagmus (la st visited Oct. 3, 2022).
2
Case 1:16-vv-01024-EGB Document 88 Filed 11/01/22 Page 3 of 31
postoperative diagnoses were eustachian tube dysfunction and acute SNHL in Petitioner’s left ear.
Id. at 50.
On November 3, 2014,5 Petitioner saw Dr. Goldrich, whose continued assessment was that
Petitioner had experienced acute hearing loss and vertigo. Ex. 5 at 40, 42. That same day, Petitioner
had a hearing consultation with otolaryngology surgeon Jed Kwartler, M.D. Ex. 9 at 16. Petitioner
indicated to Dr. Kwartler that his sudden hearing loss occurred about a week before. Id. He denied
any recent viral illness, but mentioned that he had received the flu vaccine prior to the onset of his
symptoms. Id. Petitioner’s hearing test showed a profound left SNHL, with normal hearing in his
right ear. Id. at 18. Dr. Kwartler diagnosed Petitioner with unspecified sudden hearing loss and
hypoactive labyrinthine dysfunction. Id. He prescribed a Prednisone taper, discussed hyperbaric
oxygen therapy, and ordered an MRI. Id.
Two days later, on November 5, 2014, Petitioner presented to the RWJ Center for Wound
Healing for hyperbaric oxygen therapy. Ex. 16 at 1. He reported that he received “a flu shot at
work [on] 10/21/2014 and stated he felt discomfort radiating up [the] left side of [his] neck and
ear.” Id. He also indicated that shortly after vaccination, he developed vertigo that initially lasted
for five minutes and then dissipated on its own with severe dizziness. Id. He reported more
episodes of vertigo the next day that were severe to the point of nausea and vomiting. Id. Petitioner
stated that he felt like he was getting better, but still felt a little unbalanced. Id. The physician noted
that Petitioner was “scheduled to have an MRI on Monday to make sure that there [wa]s no
evidence of acoustic neuroma.” 6 Id. Petitioner received a trial of hyperbaric oxygen therapy at this
visit and underwent a total of twenty-three hyperbaric oxygen treatments through December 15,
2014. Id. at 1, 51.
Additional Testing and Evaluation
A November 10, 2014 brain MRI performed on M.R. revealed a “round 5 mm x 4 mm
structure in the distal aspect of the left internal auditory canal.” Ex. 5 at 58. The
neuroradiologist’s impression was that the structure most likely represented a vestibular
schwannoma. Id. Dr. Kwartler reviewed the MRI results with Petitioner on November 11, 2014.
5
That same day, Petitioner filed a Vaccine Adverse Event Reporting System (“VAERS”) report, and reportedly
contacted the pharmaceutical manufacturer of the vaccine, as well. Ex. 5 at 81; Ex. 12 at 1. VAERS is a database
maintained by the Center for Disease Control (“CDC”) to compile information from reports about reactions to
immunizations listed on the Vaccine Injury Table, 42 U.S.C. § 300aa–14(a).
6
An acoustic neuroma, also known as vestibular schwannoma, is “a progressively enlarging, benign tumor, usually
within the internal auditory canal arising from Schwann cells of the vestibular division of the eighth cranial nerve; the
symptoms, which vary with the size and location of the tumor, may include hearing loss, headache, disturbances of
balance and gait, facial numbness or pain, and tinnitus. It may be unilateral or bilateral. ” Acoustic Neuroma,
Dorland’s Medical Dictionary Online, https://www.dorlandsonline.com/dorla nd/definition?id=92588 (last visited
Oct. 3, 2022).
3
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Ex. 9 at 13. Dr. Kwartler observed that the MRI showed “a left lateral internal auditory canal lesion
consistent with an acoustic neuroma.” Id. at 14. His assessment was unilateral SNHL and acoustic
neuroma. Id. Petitioner agreed to hold off on additional treatment until he had completed his
hyperbaric oxygen therapy. Id. Dr. Kwartler added that if Petitioner did not recover, “it might be
reasonable to proceed with a translabyrinthine approach for tumor removal” or, alternatively,
repeat Petitioner’s “MRI in 6 months to monitor for any growth.” Id.
M.R. continued to see Dr. Goldrich for follow-up visits through December 2014 for
steroid instillation into his external auditory canal. Ex. 5 at 19, 31, 36, 40. Dr. Goldrich first
referenced Petitioner’s prior vaccination on November 6, 2014, noting Petitioner’s report that
“[s]ymptoms began 4 days after receiving Flu Vaccine.” Id. at 36. On November 12, 2014, Dr.
Goldrich noted that Petitioner had “acute hearing loss and vertigo following Influenza
vaccination.” Id. at 33–34. During this visit he also noted that an MRI had revealed “a small
acoustic neuroma on the left [side].” Id. at 31. By November 20, 2014, Petitioner was reportedly
doing well, experiencing no vertigo or disequilibrium. Id. at 23. Dr. Goldrich noted that an
audiogram conducted that day showed “some improvement in bone conduction levels on the left.”
Id. However, a December 16, 2014, audiogram showed “no improvement in hearing on the left
after 20+ treatments with hyperbaric oxygen.” Id. at 19.
On December 22, 2014, Petitioner filed an employee accident/illness report with RWJ,
reporting that approximately five days after his vaccination he had developed episodes of vertigo
and hearing loss. Id. at 88. He related his symptoms to vaccination. Id. The following day, on
December 23, 2014, Petitioner underwent a hearing aid evaluation. Id. at 71. His medical history
indicated that Petitioner “suspect[ed] that he lost his hearing in the left ear following administration
of the flu shot.” Id.
On January 26, 2015, Petitioner returned to Dr. Kwartler to discuss hearing rehabilitation
options. Ex. 9 at 10. In particular, they discussed a hearing aid—the attract bone-anchored hearing
aid (“BAHA”) system7—and Dr. Kwartler ordered another MRI. Id. at 11. At his March 11, 2015,
follow-up with Dr. Goldrich, Petitioner reported “stable symptoms of disequilibrium and hearing
loss” and expressed an interest in pursuing a BAHA fitting. Ex. 8 at 23.
Another brain MRI was performed on April 9, 2015, and it showed an intracanalicular left
vestibular schwannoma, but otherwise no changes from the first MRI (conducted on November
10, 2014). Ex. 14 at 86. On April 17, 2015, Dr. Kwartler surgically placed petitioner’s BAHA
implant. Ex. 11 at 25. Petitioner had no complaints at his first post-operative visit six days later.
Ex. 9 at 7. On May 11, 2015, he presented to Dr. Kwartler with a small amount of irritation along
his incision, but this appeared to have cleared by May 27, 2015. Id. at 3, 5. He indicated to Dr.
7
In January 2015, Petitioner also tried a different hearing aid system, but had difficulty in the cafeteria and places
with loud noise, so he returned the device. Ex. 13 at 9.
4
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Goldrich at his June 23, 2015, follow-up visit that he had a BAHA fitting and was doing well, with
no new complaints. Ex. 8 at 27–28. However, on July 20, 2015, he “[d]iscussed issues related to
tissue change around the magnet” with Dr. Kwartler. Ex. 9 at 1.
Petitioner underwent a third brain MRI on September 24, 2015, and it (again) revealed “a
left intracanalicular mass measuring 6 mm unchanged compared to prior MRI of 4/9/2015 which
is consistent with vestibular schwannoma. . . .” Ex. 15 at 4. On October 5, 2015, Petitioner
reviewed this MRI with Dr. Kwartler, who indicated that there was no change in his tumor size.”
Id. at 2. Upon physical examination, Petitioner’s “[m]agnet site remain[ed] nicely healed,” his
“cranial nerves intact,” and his “gait [was] steady.” Id. Dr. Kwartler’s diagnosed Petitioner with
acoustic neuroma and unilateral SNHL. Id.
New Hearing Aid System and Continued Care
In November 2015, Petitioner expressed interest in switching to a new hearing aid system
due to tissue build-up at his implant site that was interfering with magnet retention. Ex. 13 at 3.
On November 19, 2015, Petitioner presented to otolaryngologist Kianoush Sheykholeslami, M.D.
for an evaluation for a new hearing aid system. Id. Petitioner reported that he lost his left-sided
hearing four days after a flu shot. Id. Dr. Sheykholeslami noted that there was “[n]o change in
hearing sensitivity,” and recommended a follow-up to schedule the BAHA surgery. Id.
On December 17, 2015, Dr. Sheykholeslami revised Petitioner’s BAHA device. Ex. 14 at
8; Ex. 17 at 4. His preoperative and postoperative diagnoses remained unchanged as left unilateral
deafness. Ex. 14 at 18. On December 24, 2015, Petitioner returned to Dr. Sheykholeslami, stating
that he was doing very well. Ex. 17 at 2.
A repeat brain MRI was performed on March 31, 2016. As with the prior MRIs, it
“reveal[ed] a 6 mm enhancing lesion in the left internal auditory canal . . . most consistent with a
vestibular schwannoma.” Ex. 17 at 1. Several months later, Petitioner saw Dr. Kwartler on
September 26, 2016, complaining of left ear pressure. Ex. 26 at 5. Dr. Kwartler advised continued
monitoring of the acoustic tumor, which had not changed in size. Id.
On February 14, 2017, Petitioner saw audiologist Laura Matlin, Au.D., for an annual
hearing evaluation. Ex. 21 at 1. Dr. Matlin documented Petitioner’s medical history, noting that in
October 2014, “he reported a sudden hearing loss in the left ear 4 days following administration
of the flu shot A subsequent MRI revealed evidence of a ‘5 mm’ vestibular schwannoma in
the left internal auditory canal.” Id. Upon examination, Petitioner exhibited normal hearing across
all frequencies in his right ear and profound sensorineural hearing loss in his left ear. Id. Petitioner
requested increased volume in his hearing aid. Id. Dr. Matlin recommended regular monitoring of
5
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the left-sided vestibular schwannoma and annual audiologic exams to monitor petitioner’s hearing.
Id. at 2.
On July 3, 2018, Petitioner presented to his primary care provider (“PCP”), Dr. Brian
Cassidy, for a comprehensive physical exam. Ex. 27 at 214. Dr. Cassidy noted:
Since I last saw [Petitioner] he had an[] acoustic neuritis culminating in the need for a
BAHA procedure on the left by Dr. Kwartler. It was felt that it was related to an influenza
immunization that he had been given and he has now gotten lifelong exemption for
receiving further influenza immunizations.8
Id. A repeat brain MRI performed on April 25, 2019, showed a stable 6 mm vestibular
schwannoma. Id. at 171.
On October 14, 2020, M.R. followed up with otolaryngologist P. Ashley Wackym, M.D.,
regarding his left vestibular schwannoma. Ex. 25 at 1. Dr. Wackym reviewed Petitioner’s June
11, 2020 brain MRI, which showed a “small left distal vestibular schwannoma that extends to the
fundus of his internal auditory canal.” Id. Dr. Wackym also reviewed Petitioner’s August 25,
2020 audiogram, which confirmed that Petitioner remained deaf in his left ear. Id. Dr. Wackym
discussed cochlear implantation, but Petitioner stated that his tinnitus was not bothersome. Id. Dr.
Wackym recommended a repeat MRI and audiogram in one year. Id. Petitioner has since had stable
left-sided vestibular schwannoma, and his last documented MRI occurred in July 2021. Ex. 31 at
11–17.
II. Witness Testimony
A. M.R.
Petitioner was the only fact witness to testify. See generally Tr. at 5–23. His testimony
largely consisted of his recollection of symptom onset and treatment.
Prior to vaccination, Petitioner stated, he was in good health, active, and had a normal
social life. Tr. at 6. He never experienced hearing loss or vestibular symptoms. Id. at 15. On
October 21, 2014, Petitioner received the flu vaccine as a suggestion of a co-worker.9 Id. at 7. He
described the vaccination as “pretty much painless.” Id. at 7. The following day he developed
8 Dr. Cassidy did recommend other vaccinations, however, including for tetanus, diphtheria, and pertussis, pneumonia,
and shingles. Ex. 27 at 37. And during a February 16, 2021 visit, he “strongly advised [receipt of] the COVID vaccine.”
Id. at 8.
9
In 2014, Petitioner was not required to get the flu shot for his job as a registered nurse. Tr. at 7, 21. As of the date of
the hearing, Petitioner noted that it was required by his job, but he had a lifetime exemption granted by treaters due to
his purported reaction from the flu vaccine at issue in this case. Id. at 16, 22.
6
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soreness at the injection site, and over the next four days he described the pain as travelling up his
shoulder, to his neck, and eventually to his left ear. Id. at 7–8.
He began experiencing symptoms related to his hearing loss on October 25, 2014—four
days post-vaccination—when he noticed sound becoming distant in his left ear followed by a
sudden onset of vertigo lasting four to five minutes before clearing up.10 Tr. at 8. The next day, he
had two similar episodes of hearing loss in his left ear followed by vertigo, which lasted between
three to five minutes before clearing up. Id. at 8.
On the morning of October 27, 2014, Petitioner had another episode of hearing loss in his
left ear followed by vertigo, but it did not dissipate as it had previously. 11 Tr. at 8. That morning
he arrived at work, but was instructed by his supervisor to go to the ER. Id. at 9. At the ER he
underwent a CAT scan to rule out a tumor or stroke, and was referred to an ear, nose, and throat
specialist (Dr. Goldrich) who sent him for a myringotomy tube to distribute steroids, and in turn
referred him to a neurotologist (Dr. Kwartler). Id. at 9–10. Dr. Kwartler increased Petitioner’s
steroids, recommended hyperbaric oxygen therapy, 12 and ordered an MRI. Id. at 10. The MRI
found a small vestibular schwannoma or acoustic neuroma on the left side. Id. at 11.
Petitioner returned to work after three and a half to four weeks, but continued to experience
vertigo. Tr. at 12. Following his return, he attended hyperbaric oxygen therapy three times a week
for four to five weeks, and continued with steroids until the course was finished. Id. At that point,
Petitioner’s hearing in his left ear had not yet returned. Id.
As traditional hearing aids do not work for Petitioner’s type of hearing loss, he currently
uses a BAHA. Tr. at 12. He developed a pressure ulcer or bedsore due to the BAHA Attract13 and
had to change to a “Connect” 14 device. Id. at 13. Petitioner filed a workers compensation claim
due to his hearing loss and vertigo, which was denied as it was not a covered problem, and he did
not file an appeal. Id. at 21.
10
In M.R.’s affidavit he stated that his vertigo lasted about two minutes rather than four to five minutes. M.R.
Affidavit at 2.
11
By this point, Petitioner’s vertigo did not go away for three to four weeks, and he lost all hearing in his left ear. Tr.
at 8, 11.
12
Petitioner described the hyperbaric oxygen therapy as a 60-90 minute session where he was in a pressurized
container brought down to two atmospheres at 100 percent oxygen, and slowly brought back up. Tr. at 11.
13
Petitioner described the Attract as a small screw placed into the mastoid bone behind the ear attached by a magnet.
Tr. at 13. The device would attach to the outside of the magnet and the sound was transmitted from the device into the
bone, and is picked up by the right ear. Id. Petitioner wore this device about 16 hours a day, and the constant pressure
of the magnet caused the pressure ulcer or bedsore. Id.
14
The Connect does not use a magnet, but has an abutment post that protrudes through the skin where the device
connects. Tr. at 13. Petitioner did not originally opt for the Connect because the skin was not totally closed, and in his
role as a registered nurse he has patients with infections, but later determined the risk was low. Id. at 14, 22.
7
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Petitioner is now single-sided deaf on the left side and continues to experience vertigo if
he turns quickly or closes his eyes. Tr. at 14–15. Other than some age-related hearing loss, his right
ear is normal and he is in normal health. Id. at 19. He was initially getting an MRI every six
months, but reduced the frequency to once a year, and is planning to reduce it again to once every
two years because there is no growth of his tumor noted on the MRI. Id. at 15, 21. He also visits
his hearing specialist treaters, and undergoes and audiology exam, once a year. Id. at 15.
M.R. testified that he has had some difficulties and concerns in daily life due to his hearing
loss. He does not have sound localization due to the lack of stereo hearing, but has learned to
accommodate this. Tr. at 16. Even with the BAHA, Petitioner can only receive 50 percent of
sound on his left side which makes him more cautious while driving. Id. at 17. In a professional
setting, he must position himself with his right ear toward whoever he is having a conversation
with—especially while performing a procedure with a physician, and there is some difficulty
when using a stethoscope. Id. Petitioner can no longer scuba dive, and he finds it difficult to hear in
noisy environment, which has impacted his social life. Id. at 18. He has concerns for the future as
his insurance does not cover the cost of replacing the BAHA (approximately $5,000) and they
tend to wear out every four to five years. Id. at 18–19. Petitioner is looking into getting a cochlear
implant. Id. at 19–20.
B. Petitioner’s Expert – Edwin Monsell, M.D., Ph.D.
Dr. Monsell, an otolaryngologist, submitted two expert reports and testified for the
Petitioner in support of the contention that the flu vaccine can cause SNHL. See generally Tr. at
24–104, 151–58; Report, dated Feb. 27, 2017, filed as Ex. 22 (ECF No. 24-1) (“Monsell First
Rep.”); Report, dated Jan. 21, 2022, filed as Ex. 24 (ECF No. 70-1) (“Monsell Second Rep.”).
Dr. Monsell attended Williams College for his undergraduate degree in biology. See
Curriculum Vitae, dated Feb. 27, 2017, filed as Ex. 23 (ECF No. 24-2) (“Monsell CV”) at 1; Tr.
at 24. He also attended Duke University for his doctorate in cell biology and neuroscience, and the
University of North Carolina School of Medicine for his medical degree. Monsell CV at 1; Tr. at
24, 32–33. He then completed his business degree from Oakland University. Monsell CV at 1; Tr.
at 26. For over 20 years, Dr. Monsell has served as a Director and Professor Emeritus of
Otolaryngology—Head and Neck Surgery at Wayne State University. Monsell CV at 1; Monsell
First Rep. at 1; Tr. at 27. He has maintained an active practice in otology and neurology for over
30 years, treated thousands of patients with hearing loss, and performed over 3,500 major ear
operations to remove tumors, infection, and restore hearing. Monsell First Rep. at 1; Tr. at 107,
110. He is board certified in otolaryngology and neurotology. Monsell First Rep. at 1; Monsell CV
at 4; Tr. at 26. He has also published literature specifically on vestibular schwannoma and has
around 85 peer-reviewed papers, case reports, and book chapters. Tr. at 30.
Dr. Monsell began with a summary of the medical records, reiterating M.R.’s prior
testimony. Tr. at 33–35; Monsell First Rep. at 1–2. He then opined on Petitioner’s diagnosis,
8
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explaining that he had sudden SNHL in the left ear, vertigo, and tinnitus (although the latter
symptom was delayed in its onset). Tr. at 35. In embracing this diagnosis, Dr. Monsell relied on
the medical records and Petitioner’s treating physicians, who consistently diagnosed Petitioner
with SNHL. Id. at 37. He also assessed the possibility of Petitioner obtaining a cochlear implant
and the role of vestibular schwannoma as a cause of hearing loss, maintaining that the prescribing
doctor would need to be sure that the cochlear nerve was active and functional. Id. at 151–55.
Dr. Monsell described some of the relevant medical concepts bearing on Petitioner’s claim.
SNHL, he explained, is generally defined as hearing loss that develops over a 72-hour period, with
thresholds worsening by 30 decibels or more in three or more contiguous octave intervals. Tr. at
36; Monsell First Rep. at 2. He distinguished SNHL from comparable conditions, such as age-
related hearing loss and noise-reducing hearing loss, which tend to develop gradually over years.
Tr. at 36. Importantly, Dr. Monsell admitted that the causal sequence in sudden SNHL is not yet
known. Monsell Second Rep. at 1.
Dr. Monsell also attempted to explain a vestibular schwannoma, maintaining overall that
while a schwannoma could be related to SNHL, it amounted only to a risk factor as opposed to a
direct causal element.15 Tr. at 62–63, 70–72. A vestibular schwannoma, Dr. Monsell explained, is
a tumor of cells that grow on the vestibular (or hearing balance) nerve. Id. at 63; Monsell First
Rep. at 4–5. They are also called acoustic neuromas. Tr. at 91.16 A vestibular schwannoma can
result in a slow, progressive or more rapid hearing loss. Id. at 63; Monsell Second Rep. at 4; A.
Aslan et al., Clinical Observations on Coexistence of Sudden Hearing Loss and Vestibular
Schwannoma, 117 Otolaryngology – Head & Neck Surgery 580, 580 (1997), filed as Ex. 24, Tab
A (ECF No. 70-2) (“Aslan”).17
Vestibular schwannomas can exist without symptoms, and thus are sometimes discovered
as an incidental finding—such as when trying to understand the etiology of a patient’s headaches.
Tr. at 65. Dr. Monsell agreed, however (and somewhat contrary to his prior contention that acoustic
neuromas were not always themselves causal of hearing loss), that the possibility of an acoustic
neuroma should be considered in all patients presenting with asymmetric SNHL or with other
persistent unilateral or asymmetric ear symptoms. Id. at 91. Treatment includes steroids
15
Other risk factors included hypertension and severe obesity. Tr. at 71, 84. One study noted that hypertension was
more prevalent in a group of subjects with sudden SNHL, but no difference was found in the prevalence of personal
cardiovascular risk factors (e.g., hypertension, diabetes, hyperlipidemia, or smoking) in 96 patients with sudden SNHL
versus 190 age and gender-matched controls. Monsell First Rep. at 5; I. Mosnier et al., Cardiovascular and
Thromboembolic Risk Factors in Idiopathic Sudden Sensorineural Hearing Loss: A Case-Control Study, Audiology
& Neurotology 55, 62–64 (2011), filed as Ex. 22, Tab S (ECF No. 67-9). Dr. Monsell also suggested that the flu
vaccine might have heightened importance for high-risk individuals, though he argued Petitioner was probably more
at risk due to his own obesity or hypertension. Tr. at 71, 84.
16
Both terms shall be used interchangeably in this Decision.
17
Also filed as Respondent’s Ex. A, Tab 7. (ECF No. 29-8).
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administered intratympanic or orally, and hyperbaric oxygen. Id. at 69–70; Monsell First Rep. at
5. Dr. Monsell admitted that medical science could at this point only speculate about how an
acoustic neuroma might manifest and in turn cause SNHL. Tr. at 65. He also did not deny that
there is a statistical and probably causal relationship between sudden SNHL and the discovery of
an existing vestibular schwannoma in the relevant individual. Id. at 91–92; Monsell Second Rep.
at 3.
During his testimony, Dr. Monsell went into great detail as to how the ear works, relying
on a diagram to do so. Tr. at 37–42; Trial Ex. 1. He discussed the cochlea—the inner ear—and
explained how its many functions are connected. Tr. at 38. The neural tissues of the inner ear are
encased in hard bone. Id. The cochlea of the inner ear is coiled up, and the area across the spiral is
the basilar membrane, which vibrates with the frequency of sound. Id. at 39. The hair cells are the
auditory receptors, which convert vibrations of sound into nerve impulses. Id. These hair cells then
bend and mechanically open ion gates, letting in calcium and potassium. Id. at 40. There are two
chambers that contain high potassium solution, called the scala vestibuli perilymph and scala
tympani perilymph. Id. at 38. Additionally, the scala media has endolymph, which is also high in
potassium. Id. The difference between these chambers is created and maintained by the stria
vascularis, which has many blood vessels to provide necessary oxygen and nutrients (and is where
the immune-mediating processes have been localized with immunohistochemistry). Id. at 38–39,
42. The opening of the ion gates leads to an electrical change in the hair cells, which is picked up
at the bottom of the hair cell by the dendrites of the auditory neurons through the synaptic
connection. Id. at 40.
Dr. Monsell also described the interplay between the inner ear and inflammation. The
cochlea is metabolically active, so the stria vascularis and the outer and inner hair cells are
responsible for shunting potassium. Tr. at 42–43; Monsell First Rep. at 5; D. R. Trune, Ion
Homeostasis and Inner Ear Disease, Medical Otology and Neurotology 21, 24 (2006), filed as Ex.
22 Tab, FF (ECF No. 69-2) (“Trune”) (showing the path of potassium recycling). Any form of
labyrinthitis (inner ear inflammation) could compromise the ion hemostasis, which is crucial for
the function of hearing, by effects on the vasculature of the cochlear lateral wall and stria
vascularis. Tr. at 42; Monsell First Rep. at 5; Monsell Second Rep. at 4; Trune at 21. This can
often affect the balance function of the inner ear as well. Tr. at 42. However, the inner ear has its
own local system for dealing with inflammation. Id. at 43–44; M. Fujioka et al., Inflammatory and
Immune Responses in The Cochlea: Potential Therapeutic Targets for Sensorineural Hearing
Loss, 5 Frontiers Pharmacology 1, 1–3 (2014), filed as Ex. 2, Tab J (ECF No. 66-10) (“Fujioka”).
For example, macrophages, which are immune surveillance cells, wind their processes through the
hair cells and the spiral ligaments and constantly monitor the inner ear for inflammation. Tr. at 43–
44; Fujioka at 3.
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Next, Dr. Monsell proposed a causal mechanism for sudden SNHL: the stress response
theory. Tr. at 45. At the outset, he noted difficulty in studying the inner ear, which made it hard to
provide more definitive reliable support for the theory, and there was otherwise no solid proof of
this mechanism, but that the concept did find some support in the scientific/medical community.
Id. at 45, 50–51, 73, 83; M. Masuda & J. Kanzaki, Cause of Idiopathic Sudden Sensorineural
Hearing Loss: The Stress Response Theory, 3 World J. Otorhinolaryngology 42, 50 (2013), filed
as Ex. 29 (ECF No. 53-1) (“Masuda”) (addressing potential immune reactant as a stimulation, but
not addressing the flu vaccine specifically nor acoustic neuromas); S. Merchant et al., Pathology
and Pathophysiology of Idiopathic Sudden Sensorineural Hearing Loss, 26 Otology &
Neurotology 151, 158–59 (2005), filed as Ex. 24, Tab G (ECF No. 70-8) (“Merchant”).
Dr. Monsell deemed Merchant to provide particularly good support for how the stress
response theory could explain vaccine-induced SNHL. Tr. at 45–46. Merchant’s authors engaged
in a postmortem evaluation of human temporal bones in the ear, and they did not conclude that
viral infection alone could be causal of sudden SNHL. Id. at 46; Merchant at 158–59. However,
Merchant hypothesized that sudden SNHL was most likely the result of activation of cell stress
pathways involving the nuclear factor kappa beta (“NF-kB”), the master immune complex that
regulates inflammation and responds to injury in the tissue. Tr. at 46, 82; Monsell First Rep. at 5;
but see Merchant at 158 (noting that none of the studied patients had acoustic neuromas).
Merchant specifically speculated that sudden SNHL might reflect the end-result of rapid
progression of events after NF-kB activation. Tr. at 47; Monsell Second Rep. at 1; Merchant at
158–59. SNHL’s unilateral character was echoed by animal studies demonstrating that NF-kB was
also activated mainly in one ear. Tr. at 47; Monsell Second Rep. at 1; Merchant at 158–59. One
particular animal study (which localized messenger RNA for several inflammatory factors)18
provided more details about how the NF-kB activation might occur. Tr. at 48; Monsell Second
Rep. at 1; J. Adams, Clinical Implications of Inflammatory Cytokines in the Cochlea: A Technical
Note, 23 Otology & Neurotology 316, 317–20 (2002), filed as Ex. 24, Tab B (ECF No. 70-3)
(“Adams”). Adams proposed that SNHL associated with NF-kB could be explained by the
disruption of the normal balance of inflammatory cytokines, and thus that a systemic challenge
elsewhere in the body could theoretically stimulate the immune system in the inner ear (though
Adam’s authors admitted that, given the sparse experimental evidence to support this contention,
the contention remained speculative).19 Tr. at 49–50, 81–82; Monsell Second Rep. at 1; Adams at
321; J. C. Adams et al., Selective Activation of Nuclear Factor Kappa Bin the Cochlea by Sensory
18
Dr. Monsell also mentioned IL-6, one of the key cytokines produced by the activation of NF-kB- and that has the
ability to create positive feedback so it can be released by NF-kB and then in turn stimulate NF-kB. Tr. at 51.
19
On cross examination, Dr. Monsell also addressed articles he cited regarding the flu virus proteins having been
shown to stimulate NF-kB in the immune system. Tr. at 80–81. He admitted that these articles all focused on the flu
virus infection, as opposed to the vaccine, a nd acknowledged that infection and vaccination are different, but argued
that what was known about the wild infectious process could be used as a model. Id.
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And Inflammatory Stress, Neuroscience 530, 536 (2009), filed as Ex. 24, Tab C (ECF No. 77-1)
(“Adams & Seed”).
Dr. Monsell then attempted to demonstrate how the flu vaccine in particular could, via the
stress response theory, cause SNHL in an individual.20 Tr. at 51–53; Monsell Second Rep. at 1;
see generally Adams & Seed at 536–38 (describing how this mechanism works in an animal
model). Administration of the vaccine would, he proposed, cause an increase in circulating
cytokines of several kinds, including IL-6 and interleukin-6. Tr. at 52. In support, Dr. Monsell
referenced an article that describes the inflammatory response after flu vaccination, and the kinds
of humoral cells that the vaccine can cause to be released or increased. See, e.g., Id. at 52, 102–04;
Monsell First Rep. at 5; C. Carty et al., Inflammatory Response After Influenza Vaccination in Men
with and Without Carotid Artery Disease, Arteriosclerosis, Thrombosis,& Vascular Biology 2738,
2741–43 (2006), filed as Ex. 30 (ECF No. 53-2) (“Carty”); P. Liuba et al., Cause of Idiopathic
Sudden Sensorineural Hearing Loss: The Stress Response Theory, Annals Med. 392, 397–98
(2007), filed as Ex. 22, Tab Q (ECF No. 67-7) (“Liuba”) (demonstrating inflammation following
the administration of the flu vaccine in humans, but noting that the relatively low number of
individuals in the study and short duration of follow-up preclude definitive conclusions regarding
the significance of their findings). Despite its admitted limitations, Liuba showed (in Dr. Monsell’s
estimation) that the flu vaccine can result in a mild, measurable, acute phase reaction. Tr. at 52.
And Carty revealed how the flu vaccine causes an immediate increase in IL-6—a cytokine known
to stimulate NF-kB. Id. at 52; Carty at 2739–41. Carty thus allowed for the possibility of NF-kB
stimulation in the ear, as well—even if the article literally did not discuss hearing loss whatsoever.
Tr. at 78–80.
In addition to seeking to bulwark his mechanistic theory, Dr. Monsell attempted to respond
to certain items of epidemiologic literature, which had found no association between the flu
vaccine and high rates of sudden SNHL. Tr. at 56, 76; R. Baxter et al., Sudden-Onset Sensorineural
Hearing Loss After Immunization: A Case-Centered Analysis, 115 Otolaryngology – Head & Neck
Surgery 81, 84–85 (2016), filed as Ex. 22, Tab B (ECF No. 66-2) (“Baxter”) (no statistically
significant association between sudden SNHL and receipt of other vaccinations, including the flu
vaccine, out of eight million patients in sample).21 Dr. Monsell generally questioned Baxter’s
20
Dr. Monsell denied that variability in immune responses in individuals impacted the validity of his proposed stress
response mechanism. Tr. at 58–59; C. Thomas & M. Moridani, Interindividual Variations in the Efficacyand Toxicity
of Vaccines, Toxicology 204, 207, 209 (2010), filed as Ex. 22, Tab EE (ECF No. 69-1) (offering the hypothesis that
adverse reactions may not be random but partly genetically determined, so no two individuals will respond in the exact
same way). Additionally, Dr. Monsell addressed anatomical asymmetry, pre-existing cochlear injury, and genetic
factors, with one study observing that various forms of stress, challenges, and dysregulation could impact cochlear
ischemia and increase cytokine production. Tr. at 59–60; Masuda at 49–50. However, he could not point to evidence
of genetic susceptibility for Petitioner to adverse events from vaccination. Tr. at 86–87.
21
Also filed as Respondent’s Ex. A, Tab 8. (ECF No. 29-9).
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methodologic reliability.22 For example, he pointed to its Table 2, which identified a risk interval
of 1 to 14 days with an odds ratio of 1.235. Tr. at 56; Baxter at 84. There were 92 cases of hearing
loss occurring within the 14-day risk interval, and when Baxter’s authors compared the two
groups (vaccinated versus unvaccinated), the odds ratio did not favor an association. Tr. at 56. Dr.
Monsell stated that the standard statistical criterion for significance is a “P value” 23 less than
0.05, so the odds ratio in this case did not permit high confidence in the findings (even if they did
not facially favor an association). Id. at 56–57. Thus, despite Baxter’s overall conclusion, Dr.
Monsell denied that it excluded any vaccine association. Id. at 58. On cross examination,
however, Respondent noted that M.R.’s onset had actually occurred within the shorter risk
interval of 1-7 days, and that Baxter not only considered the odds ratio for this period as well but
(unlike the expanded 1-14 day period) did find a statistically-significant lack of association for
the shorter timeframe— a point Dr. Monsell did not persuasively rebut. Id. at 76–77; Baxter at
84.
In addition, there was a related deficiency in Dr. Monsell’s opinion—since much of the
literature he relied upon involved wholly distinguishable vaccines, rather than the inactivated flu
vaccine. Tr. at 73–76; Monsell First Rep. at 2–3; A. Asatryan et al., Live Attenuated Measles and
Mumps Viral Strain-Containing Vaccines And Hearing Loss: Vaccine Adverse Event Reporting
System (VAERS), United States. 1990-2003, Vaccine 1166, 1170–71 (2008), filed as Ex. 22, Tab
A (ECF No. 66-1) (“Asatryan”)24 (suggesting that it was biologically possible that hearing loss
could be causally associated with the measles and mumps vaccine given that they contain the live-
attenuated strains of the viruses (not discussing the inactivated version of the flu vaccine relevant
in this case)). Other studies only addressed the effect of different kinds of wild infections. See,
e.g., M. McKenna, Measles, Mumps, and Sensorineural Hearing Loss, Annals N.Y. Acad. Sci.
291, 296–97 (1997), filed as Ex. 22, Tab R (ECF No. 67-8) (studying measles and mumps and
SNHL); R. Veltri et al., The Implication of Viruses in Idiopathic Sudden Hearing Loss: Primary
Infection or Reactivation of Latent Viruses?, Otolaryngology – Head & Neck Surgery 137, 140
(1981), filed as Ex. 22, Tab JJ (ECF No. 69-6) (focusing on a theory of reactivation and infectious
agents (such as an actual infection as opposed to vaccination)); W. Wilson et al., Viral and
Epidemiologic Studies of Idiopathic Sudden Hearing Loss, 91 Otolaryngology – Head and Neck
22
Dr. Monsell also questioned whether Baxter was sufficiently powered to yield reliable results. Tr. at 77; Monse l
Second Rep. at 2. However, on cross examination it was pointed out that power was actually dependent on the number
of vaccines administered and then considered in the study. Tr. at 77–78; Baxter at 85. Even though Baxter’s authors
forthrightly concluded that their findings of a lack of vaccine association were quite robust, given the eight million flu
vaccine doses considered, Dr. Monsell maintained that the possibility that the flu vaccine could cause sudden SNHL
could not be excluded, even in such a large sample. Tr. at 78; Baxter at 85; Monsell First Rep. at 3–4; Monsell Second
Rep. at 2.
23
The P value is defined as “the probability of obtaining by chance a result at least as extreme as that observed, even
when the null hypothesis is true and no real difference exists; when P ≤ 0.05 the sample results are usually deemed
significant at a statistically important level and the null hypothesis rejected.” P value, Dorland’s Medical Dictionary
Online, https://www.dorlandsonline.com/dorland/definition?id=116692 (la st visited Oct. 3, 2022).
24
Also filed as Respondent’s Exhibit A, Tab 10.
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Surgery 653, 656 (1983), filed as Ex. 22, Tab LL (ECF No. 69-8) (centering on viral infections as
opposed to vaccination). And some articles involved experiments involving direct stimulation of
the ear, as opposed to the systemic impact of vaccination administered elsewhere in the body. L.
Davis, Comparative Experimental Viral Labyrinthitis, Am. J. Otolaryngology 382, 387 (1990),
filed as Ex. 22, Tab G (ECF No. 66-7) (using inner ear or intranasal inoculation in an animal study,
which was not how Petitioner received the vaccine in this case). Ultimately, Dr. Monsell
acknowledged that he could not identify any paper that specifically addressed the situation of
patients with acoustic neuromas who also received the flu vaccine, and whether the two might
have any synergistic interaction. Tr. at 98. He also was not aware of medical literature that
indicated whether a patient with an acoustic neuroma was more susceptible to sudden SNHL after
receiving the flu vaccine. Id. at 98.
The vestibular schwannoma that Petitioner was discovered to possess did not alter Dr.
Monsell’s opinion regarding the medical reliability of his proposed mechanism of sudden SNHL.
Tr. at 53–54; Monsell Second Rep. at 2–3. He agreed that literature suggested an association. See,
e.g., J. Saunders et al., Sudden Hearing Loss in Acoustic Neuroma Patients, 113 Otolaryngology
– Head & Neck Surgery 23, 30–31 (1995), filed as Ex. 24, Tab M (ECF No. 71-4) (“Saunders”)25
(considering what might cause sudden hearing loss in the setting of vestibular schwannoma).
Saunders, one of the larger studies specific to the question, considered 13 patients and concluded
that it was possible that vestibular schwannoma may predispose the cochlear system to a
biomechanical change, such as a membrane rupture (although no evidence of a membrane rupture
was found in its sample). Tr. at 54; Saunders at 30–31. But Saunders also discussed 79 acoustic
neuroma patients treated at the author’s clinic, all of whom had well-documented sudden SNHL
as their initial symptom (ranging from mild to profound). Tr. at 97; Saunders at 26. Although Dr.
Monsell admitted that Saunders established the existence of variation for hearing loss in the
context of an acoustic neuroma, he argued that rarely can a tumor alone be causally associated
with SNHL in the absence of other factors, like an inflammatory milieu. Tr. at 97-98; Monsell
First Rep. at 5; Monsell Second Rep. at 2–3.
Dr. Monsell thus deemed Petitioner’s acoustic neuroma not likely causative of his SNHL.
In his view, the nature of Petitioner’s SNHL was not consistent with half the cases involving
vestibular schwannoma present with sudden SNHL, 26 (although this also meant that it was
consistent with the other half). Tr. at 64, 69–71, 93–94; Monsell Second Rep. at 2–3. Dr. Monsell
also alleged that Petitioner’s tumor was too small to have caused the severe27 level of hearing loss
25
Also filed as Respondent’s Ex. A, Tab 5. (ECF No. 29-6).
26
Inconsistencies with symptoms included Petitioner’s presentation of acute vertigo, but Dr. Monsell acknowledged
clinical presentations can vary. Tr. at 96–97; Monsell First Rep. at 5. He also agreed that patients with acoustic
neuromas sometimes do not find steroid treatments effective. Tr. at 97.
27
The severity was, in Dr. Monsell’s view, obvious from Petitioner’s medical records—specifically, M.R.’s
audiologic findings from an October 30, 2014 visit reporting that the outer hair cells in the left ear had no response.
14
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present, leaving the flu vaccine as the exclusive cause of Petitioner’s injury. Tr. at 64, 69–71, 100.
On cross examination, Respondent noted poor scientific or medical correlation between the level
of hearing loss and the size of the tumor, but Dr. Monsell maintained that most correlational studies
do not measure a tumor as small as Petitioner’s, so the studies cannot be applied in the same way
(although he could not cite any independent evidence for this contention). Id. at 94–96.
Petitioner’s medical history was, in Dr. Monsell’s reading, supportive of the conclusion
that the flu vaccine had most likely caused his sudden SNHL. Tr. at 60, 70–72; Monsell First Rep.
at 6. Prior to vaccination, M.R. was in excellent general and neurologic health, and had no
problems with his hearing or balance prior to vaccination. Tr. at 60–61. Even if Petitioner had
already possessed a vestibular schwannoma pre-vaccination, lowering the threshold for cochlear
damage, Dr. Monsell could not find evidence of any alternative cause for Petitioner’s SNHL other
than vaccination. Id. at 61, 71.28 He also maintained that the medical record consistently referenced
Petitioner’s vaccination in relation to his hearing loss. Id. at 61.
Dr. Monsell also attempted to address the fact that M.R. had received the flu vaccine in
several prior years without any adverse effect. Tr. at 87. It was possible, Dr. Monsell argued, that
Petitioner could have been exposed to antigens throughout but that he only reacted to after the
“last” dose, and there was the inherent variability of immune responses due to age and
environmental factors to take into account, as well. Id. at 87, 101; Ex. 12 at 15. Thus, Dr. Monsell
maintained that the stress response theory was still applicable despite the lack of adverse effects
after previous vaccinations. Tr. at 87. However, Dr. Monsell acknowledged that aside from a local
reaction, the record revealed no evidence of any objective markers of inflammation around the
time of hearing loss onset. Id.; Monsell Second Rep. at 1. Petitioner also did not undergo the type
of testing that would demonstrate inflammation. Tr. at 87–88. And though Dr. Monsell argued that
inflammation could be potentially inhibited by steroids (and thus theoretically receipt of steroids
could mask an inflammatory background), Petitioner in this case did not even see therapeutic
benefit from the steroid treatments he received (something Dr. Monsell argued was simply further
proof of the severity of his injury). Id. at 88–89.
Finally, Dr. Monsell opined that Petitioner’s onset of symptoms (four days after
vaccination) was a medically appropriate timeframe in which the proposed inflammatory
mechanism would occur. Tr. at 71. Hearing loss symptoms could, under Dr. Monsell’s theory,
Tr. at 66–67; Ex. 8 at 11. Another visit on November 20, 2014, stated in the audiogram and otoacoustic emissions
(another type of auditory test) report that the left ear was not responding at all. Tr. at 65–69; Ex. 8 at 6–7.
28
For example, the medical record established that Petitioner’s medical providers had recommended an MRI—the
gold standard of diagnostic test for an acoustic neuroma. Tr. 91, 93. When Petitioner first presented to the ER on
October 27, 2014, the attending physician noted that potential diagnosis included a cerebellopontine angle (“CPA”)
tumor (a type of acoustic neuroma). Id. at 93; Ex. 7 at 113–15. However, Petitioner’s treatment course did not change
as a result of his MRI, and there were no additional treatments recommended, even after the MRI revealed the
vestibular schwannoma. Tr. at 100.
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occur as early as one day, but typically would take a few days do manifest, and could happen even
a few weeks afterward. Id. at 71–72. In support of this assertion, he cited Baxter, which observed
92 cases of hearing loss within the first 14 days of vaccination, and three occurring within a week.
Id. at 72; Monsell First Rep. at 6; Baxter at 84. He also cited to Carty, which showed vaccine
stimulation of IL-6 upregulation still strong at 24-hours post-vaccination, indicating these
processes are cascades and there is variability within the ranges discussed. Tr. at 72; Carty at 2741–
42.
C. Respondent’s Expert – Douglas Bigelow, M.D.
Dr. Bigelow, an otolaryngologist, testified on behalf of Respondent, and submitted two
expert reports. See generally Tr. at 106–51; Report, dated May 17, 2017, filed as Ex. A (ECF No.
29-1) (“Bigelow First Rep.”); Report, dated Sept. 14, 2017, filed as Ex. C (ECF No. 34-1)
(“Bigelow Second Rep.”). Dr. Bigelow disputed the flu vaccine’s role in causing hearing loss.
Dr. Bigelow attended Hamline University for his undergraduate degree in chemistry. See
Curriculum Vitae, dated May 18, 2017, filed as Ex. B (ECF No. 30-3) (“Bigelow CV”) at 1. He
then attended the University of Minnesota School of Medicine for his medical degree. Bigelow
CV at 1; Tr. at 106. He is currently an Associate Professor in the Department of
Otorhinolaryngology: Head and Neck Surgery at the University of Pennsylvania School of
Medicine and the Director of the Division of Otology and Neurotology at the University of
Pennsylvania Medical Center. Bigelow CV at 2; Tr. at 107. He has over 25 years of experience as
an attending physician managing patients with otology problems, including hearing loss, dizziness,
and acoustic neuromas. Bigelow First Rep. at 11. He has lectured extensively on hearing loss,
dizziness, and acoustic neuromas, and has co-authored at least forty peer-reviewed publications.
Bigelow CV at 5–18; Tr. at 108–09. He is also board certified in otolaryngology and neurotology.
Id. at 2; Bigelow First Rep. at 11; Tr. at 107.
Dr. Bigelow began with a background summary of sudden SNHL. Tr. at 110–14. SNHL
typically presents as sudden or rapid hearing loss occurring over a number of hours to a period of
days, with some patients also experiencing dizziness. Id. at 110–11. Dr. Bigelow stated that there
is not typically an inciting event, though some patients have been known to have experienced upper
respiratory symptoms beforehand. Id. at 111; Bigelow First Rep. at 10. SNHL is, in Dr. Bigelow’s
view, somewhat common; a 2013 study, for example, determined there are over 66,000 new cases
in the U.S. every year. Tr. at 111; Bigelow First Rep. at 8; T. Alexander & J. Harris, Incidence of
Sudden Sensorineural Hearing Loss, Otology & Neurotology 1586, 1587–88 (2013), filed as Ex.
A, Tab 1 (ECF No. 29-2) (“Alexander & Harris”).
Though there is no particular demographic of people that most commonly experience
SNHL, it occurs more frequently in older patients. Tr. at 112; Bigelow First Rep. at 8; Alexander
& Harris at 1588 (noting that 70 per 100,000 patients over 65 experienced sudden hearing loss,
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whereas approximately 27 per 100,000 patients under 65 experienced the phenomenon). For the
majority of SNHL patients, no etiology is ever identified. Tr. at 126; Bigelow First Rep. at 8.
Sudden hearing loss is typically diagnosed by an audiogram, and other tests may be ordered, like
blood work or an MRI scan to evaluate for the presence of an acoustic neuroma or other tumors.
Tr. at 112–13. Treatment focuses on steroids, and occasionally patients also use hyperbaric
oxygen. Id. at 113. Patients typically have total or partial improvement after steroids, but that is
not always the case. Id.
Dr. Bigelow next described acoustic neuroma, identifying it as a common cause of sudden
hearing loss. Tr. at 118–19, 121–22, 130; Bigelow First Rep. at 8; Bigelow Second Rep. at 5.
While he acknowledged that acoustic neuromas were not themselves common, he did not agree
with Dr. Monsell’s characterization that they were exceedingly rare (and in any event, the point
was irrelevant—since it cannot be disputed that Petitioner had in this case experienced one). Tr.
at 131, 132; Bigelow First Rep. at 9. A neuroma is a benign tumor growing from the Schwann
cells.29 Tr. at 118. Typically, the growth occurs on the vestibular portion of the eighth cranial
nerve, which controls hearing and balance. Id. at 118–19. The tumor can grow slowly over a period
of years as evidenced by monitoring serial scans. Id. at 119. The classic clinical presentation
associated with the existence of an acoustic neuroma is progressive hearing loss that is associated
with vertigo and ringing noises, pressure, and fullness in the affected ear.30 Id. at 121, 145. He also
noted that an acoustic neuroma does not require a triggering factor, such as inflammation, to cause
hearing loss, and it is otherwise unknown why the neuroma would precipitate such loss. Id. at 132,
144–45; Bigelow Second Rep. at 5.
Dr. Bigelow surmised that anywhere from 3-20 percent of acoustic neuroma patients
experience sudden hearing loss, making them at high risk for SNHL.31 Tr. at 130–31, 145–46;
Bigelow First Rep. at 9; Bigelow Second Rep. at 5, 8; D. Moffat et al., Sudden Deafness in
Vestibular Schwannoma, J. Laryngology & Otology 116, 117 (1994), filed as Ex. C, Tab 1 (ECF
29
Schwann cells are “any of the large nucleated cells whose cell membrane spirally enwraps the axons of myelinated
peripheral neurons and is the source of myelin; a single Schwann cell supplies the myelin sheath between two nodes
of Ranvier.” Schwann Cell, Dorland’s Medical Dictionary Online,
https://www.dorla ndsonline.com/dorland/definition?id=64407&searchterm=Schwann+cell (la st visited Oct. 3, 2022).
30
Dr. Bigelow’s citation to Saunders—an article stating that vestibular symptoms were not usually present in SNHL
patients with acoustic neuroma—was raised in cross-examination questioning. Tr. at 146–47; Bigelow First Rep. at
8–9; J. Saunders at 8. But Dr. Bigelow argued in response that it is understood that vestibular symptoms can be present
with an acoustic neuroma, regardless of whether SNHL is also evident. Tr. at 146; Bigelow Second Rep. at 5–6. He
also disputed Saunders’s proposition that an acoustic neuroma would predispose the cochlear system to an
inflammatory process capable of harming hearing. Tr. at 147; Bigelow First Rep. at 8–9; Saunders at 8. And
although Saunders’s authors acknowledged other diseases or precipitating events that might contribute to SNHL in
patients with acoustic neuroma, Dr. Bigelow felt much of these proposed alternative causes were speculative and
lacking in corroborating proof. Tr. at 147; Bigelow First Rep. at 8–9; Saunders at 8.
31
Dr. Bigelow acknowledged, however, that some individuals with an acoustic neuroma never develop hearing loss
despite the risk. Tr. at 134.
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No. 34-2) (“Moffat”) (identifying a 12 percent incidence of sudden SNHL in 284 patients with
vestibular schwannomas; in 10 percent of patients, sudden SNHL was the presenting symptom);
H. Berg et al., Acoustic Neuroma Presenting as Sudden Hearing Loss with Recovery, 94
Otolaryngology – Head & Neck Surgery 15, 17 (1986), filed as Ex. C, Tab 3 (ECF No. 34-4)
(detecting a 13 percent incidence of sudden SNHL in 133 patients with acoustic neuromas); M.
Pensak et al., Sudden Hearing Loss and Cerebellopontine Angle Tumors, Laryngoscope 1188,
1188 (1985), filed as Ex. C, Tab 4 (ECF No. 34-5) (“Pensak”) (pinpointing a 14.5 percent
incidence of sudden SNHL in 69 patients with acoustic neuroma); E. Sauvaget et al., Sudden
Sensorineural Hearing Loss as a Revealing Symptom of Vestibular Schwannoma, Acta Oto-
Laryngological 592, 593 (2005), filed as Ex. C, Tab 5 (ECF No. 34-6) (“Sauvaget”) (finding a 20
percent incidence of sudden SNHL in 139 patients with vestibular schwannomas). The mechanism
that causes a subclinical acoustic neuroma to become symptomatic with hearing loss is unknown.
Tr. at 135. Dr. Bigelow noted that treatment for acoustic neuroma patients with hearing loss can
include steroids, although they are not consistently effective. Id. at 124; Bigelow First Rep. at 11.
In addition, Dr. Bigelow stressed that acoustic neuromas can cause profound hearing loss
regardless of the tumor size. Tr. at 124, 132. Dr. Bigelow noted that in his practice and in the
literature, it was also fairly common for a patient to have a small tumor and yet experience
profound hearing loss. Id. at 122–24; Bigelow First Rep. at 8–9; K-H. Jeong et al., Abnormal
Magnetic Resonance Imaging Findings in Patients with Sudden Sensorineural Hearing Loss, 95
Medicine 1, 3 (2016), filed as Ex. A, Tab 2 (ECF No. 29-3) (“Jeong”) (recognizing that sudden
SNHL is more frequently encountered in small tumors less than 1 centimeter than in medium-sized
tumors greater than 1 centimeter); C. Lin et al., The Clinical Characteristics and Treatment for
Sudden Sensorineural Hearing Loss with Vestibular Schwannoma Eur. Archives
Otorhinolaryngology 839, 841–42 (2015), filed as Ex. A, Tab 3 (ECF No. 29-4) (“Lin”)
(discussing how small tumors more easily cause sudden SNHL than larger tumors); Aslan at 581–
82 (finding that sudden hearing loss is less frequently seen in larger tumors and there was no
obvious frequency difference in cases with small tumors and medium tumors). Petitioner’s tumor
was 5 millimeters (half a centimeter) in size. Tr. at 123; Ex. 5 at 58.
Dr. Bigelow then summarized M.R.’s medical history. Tr. at 114–21. He noted
Petitioner’s first visit to a medical provider following his flu vaccination on October 27, 2016. Id.
at 114; Ex. 7 at 113–15. The record from this ER visit reflected that Petitioner had experienced
abrupt onset of painless vertigo beginning two days prior that turned into more constant symptoms
on the day of presentation. Tr. at 114; Ex. 7 at 113–15. The examination was within normal limits
except for some horizontal nystagmus. Tr. at 114; Ex. 7 at 113–15. The differential diagnoses
include CPA tumor (also known as an acoustic neuroma), which Dr. Bigelow explained was a
cerebellopontine angle. Tr. at 114–15; Bigelow First Rep. at 8; Ex. 7 at 113–15. This was the space
between the cerebellum pons and the temporal bone—an area where the seventh and eighth nerves
travel from the brainstem to get into the internal auditory canal. Tr. at 114. Petitioner also had a
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CT scan during this visit, which came back negative, but Dr. Bigelow explained that it was often
difficult to see an acoustic neuroma on a CT scan. Tr at 115; Ex. 7 at 113–15.
After this ER visit, Petitioner saw Dr. Goldrich on October 30, 2014. and the examination
was unremarkable except findings suggesting hearing loss in the left ear. Tr. at 115–16; Ex. 5 at
43–46. An audiogram was also performed on that date confirming profound SNHL on the left side.
Tr. at 116; Bigelow First Rep. at 7; Ex. 5 at 54–55. The audiologist’s impression was consistent
with the examination, and there was an addendum added by Dr. Goldrich diagnosing Petitioner
with left-sided SNHL. Tr. at 116–17; Ex. 5 at 55. On November 3, 2014, Petitioner saw Dr.
Kwartler, who continued with treatment and scheduled an MRI, which Dr. Bigelow argued was
intended to rule out acoustic neuroma or another type of tumor. Tr. at 118–19; Ex. 9 at 18. The
noncontrast MRI scan 32 revealed a round 5-milimeter structure in the left internal auditory canal,
which most likely represented a vestibular schwannoma, and further MRI scans were
recommended. Tr. at 120; Bigelow First Rep. at 7; Ex. 5 at 58. A later MRI from July 2021 noted
the presence of a stable left-sided vestibular schwannoma. Tr. at 120–21; Ex. 31 at 12–13. The
scan suggested that the tumor had not grown from the time of diagnosis. Tr. at 121; Ex. 31 at 12–
13.
At the time of this hearing, Petitioner was considering a cochlear implant, which Dr.
Bigelow agreed was reasonable if the hearing loss was centered in the cochlea. Tr. at 133–34, 148–
49. However, he did not agree that this step was evidence that a vestibular schwannoma had not
likely caused Petitioner’s sudden SNHL. Id. at 134. Cochlear implants used by patients with
acoustic neuromas have variable results, and are in Dr. Bigelow’s experience often utilized even
though the cochlea is not the most likely source of the SNHL. When an acoustic neuroma causes
an issue with the cochlear labyrinthine artery that supplies blood to the cochlea, then the cochlear
nerve may be functioning, and a cochlear implant will provide a benefit. Id. at 149–50. However,
if the cochlear nerve is damaged such that it cannot transmit electrical signals from the cochlea,
then the cochlear implant will not provide a benefit. Id.
Dr. Bigelow did not find Dr. Monsell’s theory of causation reliable, although he credited
many of Dr. Monsell’s foundational points about the different possible means by which the ear’s
functioning can be compromised.33 Tr. at 127–29, 138; Bigelow First Rep. at 10. Masuda, which
discussed the stress response theory embraced by Dr. Monsell, was now eight years old, with no
32
Dr. Bigelow explained that the noncontrast scan would not affect the results, but giving contrast (or gadolinium)
provides more information, as acoustic neuromas will typically “light up” in the image produced, becoming bright
and thus more easily identified. Tr. at 120.
33
For example, Dr. Bigelow said it was conceivable that inflammation of the inner ear can compromise ion
homeostasis. Tr. at 137. He agreed that NF-kB is a transcription factor found throughout the body, with a significant
amount present in the cochlea. Id. at 137–38. He agreed that NF-kB was originally believed to have a protective effect
of the inner ear. Id. at 138. He also agreed that when NF-kB is pathologically activated, it can operate as a cellular
stress pathway that can induce cytokine production. Id.
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subsequent studies corroborating its findings. Tr. at 128–29; Masuda at 42. Otherwise, the concept
Masuda embraced was not, in Dr. Bigelow’s understanding, widely accepted among the medical
community. Tr. at 129. Dr. Bigelow also did not find the research from Merchant on the activation
of NF-kB cells applicable. Tr. at 128; Merchant at 158–59. Merchant’s authors induced an
inflammatory response by injecting lipopolysaccharides into the abdomen of a mouse—hardly
equivalent to vaccinating a human. Tr. at 128, 138–39, 141–43; Bigelow Second Rep. at 6;
Merchant at 159. Otherwise, even if Dr. Monsell’s theory was correct, Dr. Bigelow would have
expected steroid treatments to reduce inflammation, as reflected in the Adams & Seed study, and
thus mitigate any sudden hearing loss. Tr. at 129; Adams & Seed at 537. Yet steroids were not
effective for Petitioner—undermining the applicability of the stress response theory to this case.
Tr. at 129.
Dr. Bigelow admitted that he had not submitted literature disputing the validity of the stress
response theory, but he opined that if it were scientifically valid, there would be more cases of
sudden hearing loss generally. Tr. at 144. He also denied literature support for the more general
proposition that the flu vaccine causes or is associated with sudden hearing loss.34 Id. at 126;
Bigelow First Rep. at 9; Bigelow Second Rep. at 6. To the contrary—some large scale studies
undermined the possibility of such an association. Baxter, for example, considered more than eight
million vaccination doses, finding there was no correlation between vaccination and sudden
hearing loss. Tr. at 126; Bigelow First Rep. at 9; Bigelow Second Rep. at 6–7; Baxter at 85. At
most, Dr. Monsell could point to studies associating hearing loss with distinguishable vaccines,
like the MMR (where the underlying wild infection (mumps) was also associated with hearing
loss—unlike the wild flu virus). Tr. at 126–27; Bigelow First Rep. at 9–10; Asatryan at 1166, 1168.
And Dr. Bigelow deemed VAERS data connecting the flu vaccine to SNHL to be particularly
unreliable, since anyone can call and report a post-vaccination symptom, regardless of whether the
claimed adverse effect actually happened. Tr. at 127.
Dr. Bigelow thus ultimately opined that the flu vaccine had not caused M.R.’s sudden
SNHL. Tr. at 133. Though M.R. testified that after receiving the vaccine he experienced
inflammation at the injection site and pain radiating up to his neck and left ear, Dr. Bigelow
argued that this reaction did not likely have any bearing on his sudden hearing loss, since post-
vaccination malaise-like reactions were common (and could cause some radiating pain as well).
Id. at 125. And (contrary to Dr. Monsell’s opinion), Dr. Bigelow did not find that any of M.R.’s
treating physicians proposed an association with the flu vaccine. Id. at 129. Thus, although Dr.
Goldrich noted in a medical history section of a record that Petitioner’s hearing loss
34
Dr. Bigelow referenced one case report from 2010, which discussed an instance of bilateral sudden deafness
following the H1N1 vaccination, but the exact cause was not conclusively identified. Bigelow First Rep. at 9; H-H.
Hua ng et al., Bilateral Sudden Deafness Following H1N1 Vaccination, 143 Otolaryngology – Head & Neck Surgery
849, 850 (2010), filed as Ex. A, Tab 9 (ECF No. 29-10). That version of the flu vaccine is not at issue in this case.
Bigelow First Rep. at 9.
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occurred after vaccination, he provided no professional commentary on whether there was any
scientific/medical association between the vaccine and SNHL. Id. at 130; Ex. 7 at 25.
However, Dr. Bigelow did not deem the cause of M.R.’s hearing loss to be unknown.
Rather, he opined that the most likely cause was his acoustic neuroma, giving its well-
understood association with SNHL. Tr. at 130, 132; Bigelow First Rep. at 8, 10–11. Dr. Bigelow
also opined that Petitioner’s vestibular schwannoma likely existed prior to his vaccination but was
asymptomatic. Tr. at 135–36.
Dr. Bigelow concluded with a discussion of the timing of Petitioner’s onset, denying that
the manifestation of M.R.’s vertigo and hearing loss four days after vaccination said anything
about the likelihood of causation. Tr. at 125, 147–48; Bigelow First Rep. at 10. In support, he
referenced Baxter, noting that it only showed a heightened risk of association in a longer
timeframe than the four days at issue in this case. Tr. at 136; Bigelow First Rep. at 9; Baxter at 84.
III. Procedural History
M.R. filed his petition on August 18, 2016. ECF No. 1. By September 2016, Petitioner
had filed all relevant medical records and a Statement of Completion. ECF No. 16. Respondent
filed a Rule 4(c) report on November 8, 2016, contesting Petitioner’s right to compensation. ECF
No. 18. The process of filing expert reports completed in the following year. After the matter was
transferred to me on March 2, 2021, I held a status conference with the parties and subsequently
scheduled the matter for a March 2021 one-day trial. ECF No. 50. The trial occurred as
scheduled, and the matter is now ripe for resolution.
IV. Applicable Legal Standards
A. Petitioner’s Overall Burden in Vaccine Program Cases
To receive compensation in the Vaccine Program, a petitioner must prove either: (1) that
he suffered a “Table Injury”—i.e., an injury falling within the Vaccine Injury Table—
corresponding to one of the vaccinations in question within a statutorily prescribed period of time
or, in the alternative, (2) that his illnesses were actually caused by a vaccine (a “Non-Table
Injury”). See Sections 13(a)(1)(A), 11(c)(1), and 14(a), as amended by 42 C.F.R. § 100.3; §
11(c)(1)(C)(ii)(I); see also Moberly v. Sec’y of Health & Hum. Servs., 592 F.3d 1315, 1321 (Fed.
Cir. 2010); Capizzano v. Sec’y of Health & Hum. Servs., 440 F.3d 1317, 1320 (Fed. Cir. 2006).35
In this case, Petitioner does not assert a Table claim.
35
Decisions of special masters (some of which I reference in this ruling) constitute persuasive but not binding
authority. Hanlon v. Sec’y of Health & Hum. Servs., 40 Fed. Cl. 625, 630 (1998). By contrast, Federal Circuit rulings
concerning legal issues are binding on special masters. Guillory v. Sec’y of Health & Hum. Servs., 59 Fed. Cl. 121,
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For both Table and Non-Table claims, Vaccine Program petitioners bear a “preponderance
of the evidence” burden of proof. Section 13(1)(a). That is, a petitioner must offer evidence that
leads the “trier of fact to believe that the existence of a fact is more probable than its nonexistence
before [he] may find in favor of the party who has the burden to persuade the judge of the fact’s
existence.” Moberly, 592 F.3d at 1322 n.2; see also Snowbank Enter. v. United States, 6 Cl. Ct.
476, 486 (1984) (mere conjecture or speculation is insufficient under a preponderance standard).
Proof of medical certainty is not required. Bunting v. Sec’y of Health & Hum. Servs., 931 F.2d
867, 873 (Fed. Cir. 1991). In particular, a petitioner must demonstrate that the vaccine was “not
only [the] but-for cause of the injury but also a substantial factor in bringing about the injury.”
Moberly, 592 F.3d at 1321 (quoting Shyface v. Sec’y of Health & Hum. Servs., 165 F.3d 1344,
1352–53 (Fed. Cir. 1999)); Pafford v. Sec’y of Health & Hum. Servs., 451 F.3d 1352, 1355 (Fed.
Cir. 2006). A petitioner may not receive a Vaccine Program award based solely on his assertions;
rather, the petition must be supported by either medical records or by the opinion of a competent
physician. Section 13(a)(1).
In attempting to establish entitlement to a Vaccine Program award of compensation for a
Non-Table claim, a petitioner must satisfy all three of the elements established by the Federal
Circuit in Althen, 418 F.3d at 1278: “(1) a medical theory causally connecting the vaccination and
the injury; (2) a logical sequence of cause and effect showing that the vaccination was the reason
for the injury; and (3) a showing of proximate temporal relationship between vaccination and
injury.”
Each of the Althen prongs requires a different showing. Under Althen prong one, petitioners
must provide a “reputable medical theory,” demonstrating that the vaccine received can cause the
type of injury alleged. Pafford, 451 F.3d at 1355–56 (citations omitted). To satisfy this prong, a
petitioner’s theory must be based on a “sound and reliable medical or scientific explanation.”
Knudsen v. Sec’y of Health & Hum. Servs., 35 F.3d 543, 548 (Fed. Cir. 1994). Such a theory must
only be “legally probable, not medically or scientifically certain.” Id. at 549.
Petitioners may satisfy the first Althen prong without resort to medical literature,
epidemiological studies, demonstration of a specific mechanism, or a generally accepted medical
theory. Andreu v. Sec’y of Health & Hum. Servs., 569 F.3d 1367, 1378–79 (Fed. Cir. 2009) (citing
Capizzano, 440 F.3d at 1325–26). Special masters, despite their expertise, are not empowered by
statute to conclusively resolve what are essentially thorny scientific and medical questions, and
thus scientific evidence offered to establish Althen prong one is viewed “not through the lens of
the laboratorian, but instead from the vantage point of the Vaccine Act’s preponderant evidence
standard.” Id. at 1380. Accordingly, special masters must take care not to increase the burden
124 (2003), aff’d 104 F. Appx. 712 (Fed. Cir. 2004); see also Spooner v. Sec’y of Health & Hum. Servs., No. 13-159V,
2014 WL 504728, at *7 n.12 (Fed. Cl. Spec. Mstr. Jan. 16, 2014).
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placed on petitioners in offering a scientific theory linking vaccine to injury. Contreras, 121 Fed.
Cl. at 245.
In discussing the evidentiary standard applicable to the first Althen prong, the Federal
Circuit has consistently rejected the contention that it can be satisfied merely by establishing the
proposed causal theory’s scientific or medical plausibility. See Boatmon v. Sec’y of Health & Hum.
Servs., 941 F.3d 1351, 1359 (Fed. Cir. 2019); see also LaLonde v. Sec’y of Health & Hum. Servs.,
746 F.3d 1334, 1339 (Fed. Cir. 2014) (“[h]owever, in the past we have made clear that simply
identifying a ‘plausible’ theory of causation is insufficient for a petitioner to meet her burden of
proof” (citing Moberly, 592 F.3d at 1322)). And petitioners always have the ultimate burden of
establishing their overall Vaccine Act claim with preponderant evidence. W.C. v. Sec’y of Health
& Hum. Servs., 704 F.3d 1352, 1356 (Fed. Cir. 2013) (citations omitted); Tarsell v. United States,
133 Fed. Cl. 782, 793 (2017) (noting that Moberly “addresses the petitioner’s overall burden of
proving causation-in-fact under the Vaccine Act” by a preponderance standard).
The second Althen prong requires proof of a logical sequence of cause and effect, usually
supported by facts derived from a petitioner’s medical records. Althen, 418 F.3d at 1278; Andreu,
569 F.3d at 1375–77; Capizzano, 440 F.3d at 1326; Grant v. Sec’y of Health & Hum. Servs., 956
F.2d 1144, 1148 (Fed. Cir. 1992). In establishing that a vaccine “did cause” injury, the opinions
and views of the injured party’s treating physicians are entitled to some weight. Andreu, 569 F.3d
at 1367; Capizzano, 440 F.3d at 1326 (“medical records and medical opinion testimony are favored
in vaccine cases, as treating physicians are likely to be in the best position to determine whether a
‘logical sequence of cause and effect show[s] that the vaccination was the reason for the injury’”)
(quoting Althen, 418 F.3d at 1280). Medical records are generally viewed as particularly
trustworthy evidence, since they are created contemporaneously with the treatment of the patient.
Cucuras v. Sec’y of Health & Hum. Servs., 993 F.2d 1525, 1528 (Fed. Cir. 1993).
Medical records and statements of a treating physician, however, do not per se bind the
special master to adopt the conclusions of such an individual, even if they must be considered and
carefully evaluated. Section 13(b)(1) (providing that “[a]ny such diagnosis, conclusion, judgment,
test result, report, or summary shall not be binding on the special master or court”); Snyder v. Sec’y
of Health & Hum. Servs., 88 Fed. Cl. 706, 746 n.67 (2009) (“there is nothing . . . that mandates
that the testimony of a treating physician is sacrosanct—that it must be accepted in its entirety and
cannot be rebutted”). As with expert testimony offered to establish a theory of causation, the
opinions or diagnoses of treating physicians are only as trustworthy as the reasonableness of their
suppositions or bases. The views of treating physicians should be weighed against other, contrary
evidence also present in the record—including conflicting opinions among such individuals.
Hibbard v. Sec’y of Health & Hum. Servs., 100 Fed. Cl. 742, 749 (2011) (not arbitrary or capricious
for special master to weigh competing treating physicians’ conclusions against each other), aff’d,
698 F.3d 1355 (Fed. Cir. 2012); Veryzer v. Sec’y of Dept. of Health & Hum. Servs., No. 06-522V,
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2011 WL 1935813, at *17 (Fed. Cl. Spec. Mstr. Apr. 29, 2011), mot. for review denied, 100 Fed.
Cl. 344, 356 (2011), aff’d without opinion, 475 F. Appx. 765 (Fed. Cir. 2012).
The third Althen prong requires establishing a “proximate temporal relationship” between
the vaccination and the injury alleged. Althen, 418 F.3d at 1281. That term has been equated to the
phrase “medically-acceptable temporal relationship.” Id. A petitioner must offer “preponderant
proof that the onset of symptoms occurred within a timeframe which, given the medical
understanding of the disorder’s etiology, it is medically acceptable to infer causation.” de Bazan
v. Sec’y of Health & Hum. Servs., 539 F.3d 1347, 1352 (Fed. Cir. 2008). The explanation for what
is a medically acceptable timeframe must align with the theory of how the relevant vaccine can
cause an injury (Althen prong one’s requirement). Id. at 1352; Shapiro v. Sec’y of Health & Hum.
Servs., 101 Fed. Cl. 532, 542 (2011), recons. denied after remand, 105 Fed. Cl. 353 (2012), aff’d
mem., 503 F. Appx. 952 (Fed. Cir. 2013); Koehn v. Sec’y of Health & Hum. Servs., No. 11-355V,
2013 WL 3214877 (Fed. Cl. Spec. Mstr. May 30, 2013), mot. for rev. denied (Fed. Cl. Dec. 3,
2013), aff’d, 773 F.3d 1239 (Fed. Cir. 2014).
B. Legal Standards Governing Factual Determinations
The process for making determinations in Vaccine Program cases regarding factual issues
begins with consideration of the medical records. Section 11(c)(2). The special master is required
to consider “all [ ] relevant medical and scientific evidence contained in the record,” including
“any diagnosis, conclusion, medical judgment, or autopsy or coroner's report which is contained
in the record regarding the nature, causation, and aggravation of the petitioner's illness, disability,
injury, condition, or death,” as well as the “results of any diagnostic or evaluative test which are
contained in the record and the summaries and conclusions.” Section 13(b)(1)(A). The special
master is then required to weigh the evidence presented, including contemporaneous medical
records and testimony. See Burns v. Sec'y of Health & Hum. Servs., 3 F.3d 415, 417 (Fed. Cir.
1993) (determining that it is within the special master's discretion to determine whether to afford
greater weight to contemporaneous medical records than to other evidence, such as oral testimony
surrounding the events in question that was given at a later date, provided that such determination
is evidenced by a rational determination).
As noted by the Federal Circuit, “[m]edical records, in general, warrant consideration as
trustworthy evidence.” Cucuras, 993 F.2d at 1528; Doe/70 v. Sec'y of Health & Hum. Servs., 95
Fed. Cl. 598, 608 (2010) (“[g]iven the inconsistencies between petitioner's testimony and his
contemporaneous medical records, the special master's decision to rely on petitioner's medical
records was rational and consistent with applicable law”), aff'd, Rickett v. Sec'y of Health & Hum.
Servs., 468 F. App’x 952 (Fed. Cir. 2011) (non-precedential opinion). A series of linked
propositions explains why such records deserve some weight: (i) sick people visit medical
professionals; (ii) sick people attempt to honestly report their health problems to those
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professionals; and (iii) medical professionals record what they are told or observe when examining
their patients in as accurate a manner as possible, so that they are aware of enough relevant facts
to make appropriate treatment decisions. Sanchez v. Sec'y of Health & Hum. Servs., No. 11–685V,
2013 WL 1880825, at *2 (Fed. Cl. Spec. Mstr. Apr. 10, 2013); Cucuras v. Sec'y of Health & Hum.
Servs., 26 Cl. Ct. 537, 543 (1992), aff'd, 993 F.2d at 1525 (Fed. Cir. 1993) (“[i]t strains reason to
conclude that petitioners would fail to accurately report the onset of their daughter's symptoms”).
Accordingly, if the medical records are clear, consistent, and complete, then they should
be afforded substantial weight. Lowrie v. Sec'y of Health & Hum. Servs., No. 03–1585V, 2005 WL
6117475, at *20 (Fed. Cl. Spec. Mstr. Dec. 12, 2005). Indeed, contemporaneous medical records
are often found to be deserving of greater evidentiary weight than oral testimony—especially
where such testimony conflicts with the record evidence. Cucuras, 993 F.2d at 1528; see also
Murphy v. Sec'y of Health & Hum. Servs., 23 Cl. Ct. 726, 733 (1991), aff'd per curiam, 968 F.2d
1226 (Fed. Cir. 1992), cert. den'd, Murphy v. Sullivan, 506 U.S. 974 (1992) (citing United States
v. United States Gypsum Co., 333 U.S. 364, 396 (1947) (“[i]t has generally been held that oral
testimony which is in conflict with contemporaneous documents is entitled to little evidentiary
weight.”)).
However, the Federal Circuit has also noted that there is no formal “presumption” that
records are accurate or superior on their face to other forms of evidence. Kirby v. Sec’y of Health
& Hum. Servs., 997 F.3d 1378, 1383 (Fed. Cir. 2021). There are certainly situations in which
compelling oral or written testimony (provided in the form of an affidavit or declaration) may be
more persuasive than written records, such as where records are deemed to be incomplete or
inaccurate. Campbell v. Sec'y of Health & Hum. Servs., 69 Fed. Cl. 775, 779 (2006) (“like any
norm based upon common sense and experience, this rule should not be treated as an absolute and
must yield where the factual predicates for its application are weak or lacking”); Lowrie, 2005 WL
6117475, at *19 (“[w]ritten records which are, themselves, inconsistent, should be accorded less
deference than those which are internally consistent”) (quoting Murphy, 23 Cl. Ct. at 733)).
Ultimately, a determination regarding a witness's credibility is needed when determining the
weight that such testimony should be afforded. Andreu, 569 F.3d at 1379; Bradley v. Sec'y of
Health & Hum. Servs., 991 F.2d 1570, 1575 (Fed. Cir. 1993).
When witness testimony is offered to overcome the presumption of accuracy afforded to
contemporaneous medical records, such testimony must be “consistent, clear, cogent, and
compelling.” Sanchez, 2013 WL 1880825, at *3 (citing Blutstein v. Sec'y of Health & Hum. Servs.,
No. 90–2808V, 1998 WL 408611, at *5 (Fed. Cl. Spec. Mstr. June 30, 1998)). In determining the
accuracy and completeness of medical records, the Court of Federal Claims has listed four possible
explanations for inconsistencies between contemporaneously created medical records and later
testimony: (1) a person's failure to recount to the medical professional everything that happened
during the relevant time period; (2) the medical professional's failure to document everything
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reported to her or him; (3) a person's faulty recollection of the events when presenting testimony;
or (4) a person's purposeful recounting of symptoms that did not exist. La Londe v. Sec'y of Health
& Hum. Servs., 110 Fed. Cl. 184, 203–04 (2013), aff'd, 746 F.3d 1334 (Fed. Cir. 2014). In making
a determination regarding whether to afford greater weight to contemporaneous medical records
or other evidence, such as testimony at hearing, there must be evidence that this decision was the
result of a rational determination. Burns, 3 F.3d at 417.
C. Analysis of Expert Testimony
Establishing a sound and reliable medical theory often requires a petitioner to present
expert testimony in support of his claim. Lampe v. Sec’y of Health & Hum. Servs., 219 F.3d 1357,
1361 (Fed. Cir. 2000). Vaccine Program expert testimony is usually evaluated according to the
factors for analyzing scientific reliability set forth in Daubert v. Merrell Dow Pharm., Inc., 509
U.S. 579, 594–96 (1993). See Cedillo v. Sec’y of Health & Hum. Servs., 617 F.3d 1328, 1339 (Fed.
Cir. 2010) (citing Terran v. Sec’y of Health & Hum. Servs., 195 F.3d 1302, 1316 (Fed. Cir. 1999).
Under Daubert, the factors for analyzing the reliability of testimony are:
(1) whether a theory or technique can be (and has been) tested; (2) whether the
theory or technique has been subjected to peer review and publication; (3) whether
there is a known or potential rate of error and whether there are standards for
controlling the error; and (4) whether the theory or technique enjoys general
acceptance within a relevant scientific community.
Terran, 195 F.3d at 1316 n.2 (citing Daubert, 509 U.S. at 592–95).
In the Vaccine Program the Daubert factors play a slightly different role than they do when
applied in other federal judicial settings, like the district courts. Typically, Daubert factors are
employed by judges (in the performance of their evidentiary gatekeeper roles) to exclude evidence
that is unreliable or could confuse a jury. By contrast, in Vaccine Program cases these factors are
used in the weighing of the reliability of scientific evidence proffered. Davis v. Sec'y of Health &
Hum. Servs., 94 Fed. Cl. 53, 66–67 (2010) (“uniquely in this Circuit, the Daubert factors have
been employed also as an acceptable evidentiary-gauging tool with respect to persuasiveness of
expert testimony already admitted”). The flexible use of the Daubert factors to evaluate the
persuasiveness and reliability of expert testimony has routinely been upheld. See, e.g., Snyder, 88
Fed. Cl. at 742–45. In this matter (as in numerous other Vaccine Program cases), Daubert has not
been employed at the threshold, to determine what evidence should be admitted, but instead to
determine whether expert testimony offered is reliable and/or persuasive.
Respondent frequently offers one or more experts in order to rebut a petitioner’s case.
Where both sides offer expert testimony, a special master's decision may be “based on the
26
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credibility of the experts and the relative persuasiveness of their competing theories.”
Broekelschen v. Sec'y of Health & Hum. Servs., 618 F.3d 1339, 1347 (Fed. Cir. 2010) (citing
Lampe, 219 F.3d at 1362). However, nothing requires the acceptance of an expert's conclusion
“connected to existing data only by the ipse dixit of the expert,” especially if “there is simply too
great an analytical gap between the data and the opinion proffered.” Snyder, 88 Fed. Cl. at 743
(quoting Gen. Elec. Co. v. Joiner, 522 U.S. 146 (1997)); see also Isaac v. Sec'y of Health & Hum.
Servs., No. 08–601V, 2012 WL 3609993, at *17 (Fed. Cl. Spec. Mstr. July 30, 2012), mot. for
review den'd, 108 Fed. Cl. 743 (2013), aff'd, 540 F. App’x. 999 (Fed. Cir. 2013) (citing Cedillo,
617 F.3d at 1339). Weighing the relative persuasiveness of competing expert testimony, based on
a particular expert's credibility, is part of the overall reliability analysis to which special masters
must subject expert testimony in Vaccine Program cases. Moberly, 592 F.3d at 1325–26
(“[a]ssessments as to the reliability of expert testimony often turn on credibility determinations”);
see also Porter v. Sec'y of Health & Hum. Servs., 663 F.3d 1242, 1250 (Fed. Cir. 2011) (“this court
has unambiguously explained that special masters are expected to consider the credibility of expert
witnesses in evaluating petitions for compensation under the Vaccine Act”).
D. Consideration of Medical Literature
Both parties filed numerous items of medical and scientific literature in this case, but not
all such items factor into the outcome of this decision. While I have reviewed all the medical
literature submitted in this case, I discuss only those articles that are most relevant to my
determination and/or are central to Petitioner’s case—just as I have not exhaustively discussed
every individual medical record filed. Moriarty v. Sec’y of Health & Hum. Servs., No. 2015–5072,
2016 WL 1358616, at *5 (Fed. Cir. Apr. 6, 2016) (“[w]e generally presume that a special master
considered the relevant record evidence even though he does not explicitly reference such
evidence in his decision”) (citation omitted); see also Paterek v. Sec’y of Health & Hum. Servs.,
527 F. App’x 875, 884 (Fed. Cir. 2013) (“[f]inding certain information not relevant does not lead
to— and likely undermines—the conclusion that it was not considered”).
27
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ANALYSIS
I. Treatment of Hearing Loss Claims in the Vaccine Program
Program claimants have frequently argued that SNHL was attributable to a vaccine. Many
(but not all) have not succeeded.36 See, e.g., Kelly v. Sec'y of Health & Hum. Servs., No. 16-878V,
2021 WL 5276373, at *23 (Fed. Cl. Spec. Mstr. Oct. 18, 2021), mot. for review den’d, 2022 WL
2314746 (Fed. Cl. Apr. 13, 2022) (dismissing the case and finding that petitioner failed to establish
any preexisting condition that was aggravated by the flu vaccine); Inamdar v. Sec’y of Health &
Hum. Servs., No. 15-1173V, 2019 WL 1160341, at *16 (Fed. Cl. Spec. Mstr. Feb. 8, 2019)
(referencing multiple prior negative decisions involving SNHL or hearing loss); Donica v. Sec’y
of Health and Hum. Servs., No. 08-625V, 2010 WL 3735707, at *1, 10 (Fed. Cl. Spec. Mstr. Aug.
31, 2010) (finding that the flu vaccine not demonstrated to cause adult hearing loss); Hopkins v.
Sec’y of Health & Hum. Servs. Nos. 00-745V & 00-746V, 2007 WL 2454038, at *13 (Fed. Cl.
Spec. Mstr. Aug. 10, 2007) (noting that the specific onset of hearing loss in child siblings after
receipt of several vaccines could not be established). In most such cases, the fact of post-
vaccination SNHL was not disputed, but the claimants could not demonstrate the vaccine was
causal.
I recently decided entitlement in Kelly, a case in which it was similarly alleged that the flu
vaccine had caused SNHL. Kelly, 2021 WL 5276373, at *1. Although that petitioner maintained a
significant aggravation claim, I found that my determination would have been the same even if the
petitioner had alleged a causation-in-fact claim, and a discussion of all three Althen prongs were
incorporated in that decision. Id. at *24. Petitioner proposed two mechanisms, a rapid Type I
sensitivity reaction and an autoimmune response. Id. at *25. There was limited evidence to
support this connection, however, and petitioner’s contention that SNHL could be driven by an
autoimmune process was inconsistent with the timeframe presented. Id. I also found that
petitioner’s onset of less than two hours was too short to be deemed medically acceptable. Id. at
*24.
In Inamdar (another case I decided), a petitioner argued that the flu vaccine had caused
SNHL, with onset the following day, based on two theories. Inamdar, 2019 WL1160341, at *5.
First, the claimant argued that the vaccine “could cause the production of proinflammatory
cytokines immediately upon vaccine administration.” Id. But I determined that this argument relied
too heavily on what was known about the wild virus rather than the vaccine. Id. at *6. The second
36
As already noted, I am not bound by the decisions of my colleagues—or even the Court’s decisions on review
(except when stemming from a case I decided). Boatmon, 941 F.3d at 1358–59; Hanlon, 40 Fed. Cl. at 630.
Nevertheless, special masters reasonably draw upon their overall, collective experience in resolving Vaccine Act
claims. Doe v. Sec’y of Health & Hum. Servs., 76 Fed. Cl. 328, 338–39 (2007) (“[o]ne reason that proceedings are
more expeditious in the hands of special masters is that the special masters have the expertise and experience to know
the type of information that is most probative of a claim”). They would thus be remiss in ignoring prior cases
presenting similar theories or factual circumstances, along with the reasoning employed in reaching such decisions.
28
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theory was that specific components of the vaccine “were structurally homologous with
ganglioside receptors on the neuronal myelin contained in the inner ear tissue, and that antibodies
generated in response to the vaccine could also cross-react with the self-myelin, resulting in tissue
damage.” Id. I found, however, that this contention misapplied mechanisms relevant in other
contexts. I also ruled that an alternative cause for the SNHL (the fact that the claimant was
receiving antibiotics at the time) existed, as well as that the short onset was not preponderantly
defended. Inamdar, 2019 WL1160341, at *19. A too-short onset has been a notable obstacle to
recovery in other cases. See, e.g., Donica, 2010 WL 3735707, at *13 (two-hour post-vaccination
onset of SNHL not demonstrated to be medically acceptable).
A different recent reasoned decision, by contrast, resulted in an entitlement decision
favorable to the petitioner, and suggests the existence of some reliable science supporting the
contention that a vaccine could cause abrupt hearing loss. See Madigan v. Sec’y of Health & Hum.
Servs., No. 14-1187V, 2021 WL 3046614, at *1, 4 (Fed. Cl. Spec. Mstr. June 25, 2021) (flu vaccine
caused adult petitioner’s SNHL). In Madigan, the petitioner relied on the stress response theory
(also utilized in this case) and a theory of reactivation of a latent HSV-1 infection. Madigan, 2021
WL 3046614, at *17. As observed in Madigan, that theory was not presented in prior adverse
decisions like Inamdar or Kelly. In addition, Petitioner’s symptoms arose between three to four
days post-vaccination—also consistent with the timeframe in this case. Madigan, 2021 WL
3046614, at *4, 20. Madigan offers positive parallels to this case—although (as discussed below)
its petitioner did not possess so glaring an alternative explanation for his hearing loss.
II. An Alternative Cause/Factor Unrelated (Acoustic Neuroma) Most Likely
Explains Petitioner’s SNHL
As noted above, even in cases where a petitioner meets his prima facie obligations under
Althen, Respondent can still prevail if he then carries the burden (which shifts under such
circumstances) of establishing preponderantly that a “factor unrelated” is the cause of the alleged
injury. Section 13(a)(1)(B); Schilling v. Sec'y of Health & Hum. Servs., No. 16-527V, 2022 WL
1101597, at *21 (Fed. Cl. Spec. Mstr. Mar. 17, 2022). The Vaccine Act provides that “factors
unrelated to the administration of the vaccine,” are those “which are shown to have been the agent
... principally responsible for causing the petitioner's illness, disability, injury, condition or death.”
Section 13(a)(2)(B).
Here, the alternative cause evidence is strong enough to be dispositive of the claim
overall—even without evaluating whether Petitioner met his initial burden 37—since it precludes
37
Because the case turns on the second Althen prong, I need not fully consider whether the other two prongs were
satisfied. I note, however, that Petitioner did offer a theory with many reliable components. The NF-kB immune
complex could theoretically be disrupted by cytokine-prompting events (including infection or vaccination), and it is
possible an inflammatory environment in the ear could then trigger hearing loss. This theory was deemed sound and
reliable in Madigan. See Madigan, 2021 WL 3046614, at *17. It was also demonstrated by Petitioner that different
vaccines might be associated with SNHL, opening the door to the possibility that the same was true of the flu vaccine.
29
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the determination that the vaccine “did cause” his SNHL (Althen prong two). Snyder v. Sec'y of
Health & Hum. Servs., 553 F. App'x 994, 1000 (Fed. Cir. 2014) (“ ‘no evidence should be
embargoed from the special master’s consideration simply because it is also relevant to another
inquiry under the statute’ ”) (quoting Stone v. Sec'y of Health & Hum. Servs., 676 F.3d 1373, 1380
(Fed. Cir. 2012); see also de Bazan, 539 F.3d at 1353 (“[t]he government, like any defendant, is
permitted to offer evidence to demonstrate the inadequacy of the petitioner’s evidence on a
requisite element of the petitioner’s case-in-chief”).
As discussed above, the evidence in this case robustly supports the conclusion that
Petitioner’s acoustic neuroma/vestibular schwannoma was the most likely cause of his SNHL. 38
Reliable evidence was offered to establish that acoustic neuromas frequently result in hearing loss.
Moffat at 117; Pensak at 1188; Saunders at 26; Sauvaget at 593. Dr. Monsell for his part did not
deny a potential causal relationship between sudden SNHL and the discovery of an existing
vestibular schwannoma. See Tr. at 63, 91–92. Moreover, Dr. Bigelow persuasively established,
over Dr. Monsell’s counterargument, that in this case the small size of the tumor was irrelevant—
and in fact more likely to produce hearing loss than a larger one. Jeong at 3; Lin at 841–42; Aslan
at 581–82. And Dr. Monsell’s efforts to diminish the likely role of the neuroma in causing
Petitioner’s SNHL were otherwise unpersuasive.
In addition, treaters largely embraced the neuroma as the causal explanation. Although
there are instances where the vaccine’s causal role is discussed, it seems more commonly to reflect
Such evidence must, however, be weighed against the lack of evidence suggesting any association between
the wild flu virus or vaccine and hearing loss, as well as larger-scale studies like Baxter (which may not disprove the
possibility of an association, but certainly offer some reliable evidence casting doubt on the connection). There is also
the fact, as pointed out by Dr. Bigelow, that the stress response theory embraced herein has not been corroborated in
much (if any) subsequent literature or scientific studies. And the more general issue of how a vaccine, administered
in the periphery of the human body, would lead to sufficient systemic inflammation to have a focal immunologic
impact in the ear was largely not explained in Petitioner’s theory to any satisfying degree.
Petitioner’s third prong timeframe showing, by contrast, was a bit more persuasive. Petitioner’s four-day,
post-vaccination onset was not disputed, and that timeframe is consistent with his theory about how long an aberrant
cytokine-driven process would take to occur. Reliable science bulwarks it, and it is also consistent with the timeframe
deemed medically acceptable in the few other favorable decisions involving hearing loss. Madigan, 2021 WL
3046614, at *20 (finding that a three-to-four-day onset was reasonable). Of course, Baxter suggests that if in fact there
is any flu vaccine-SNHL risk at all, it does not come into play within a week’s time post-vaccination (since the odds
ratio for that period was exceedingly low), but later. Baxter at 84–85. But the timeframe was reasonably substantiated
otherwise.
38
For these same reasons, I would not find in this case, under a “Shyface” analysis, that the flu vaccine and the neuroma
were equally potentially causative, permitting an entitlement decision for Petitioner. Shyface, 165 F.3d at 1352–53.
Not only did Dr. Bigelow not concede that the flu vaccine can be causal, but the evidence in this case preponderates
far more strongly in favor of the neuroma as causal. And Dr. Monsell offered nothing that would illuminate how
causation might come about in the context of both vaccination and the presence of an acoustic neuroma. See, e.g.,
Tr. at 98.
30
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an effort to record Petitioner’s history than to evince reasoned opining as to cause. Ex. 9 at 14, 16,
18.39 All of the above preponderantly supports the conclusion that it was the neuroma (which likely
predated vaccination) that produced Petitioner’s SNHL and not the vaccine.
CONCLUSION
A Program entitlement award is only appropriate for claims supported by preponderant
evidence. Here, Petitioner has not made such as showing. Petitioner is therefore not entitled to
compensation.
In the absence of a motion for review filed pursuant to RCFC Appendix B, the Clerk of the
Court SHALL ENTER JUDGMENT in accordance with the terms of this Decision.40
IT IS SO ORDERED.
/s/ Brian H. Corcoran
Brian H. Corcoran
Chief Special Master
39
It could be inferred from Petitioner’s obtaining of a future flu vaccine exemption (as reflected in Ex. 27 at 214) that
some treaters concurred as to the vaccine’s likely causal role, and hence recommended Petitioner not receive the flu
vaccine again. However, the record overall does not suggest or demonstrate that these same treaters discounted the
neuroma’s role—or even considered its causal role for that matter. And since special masters are never tied to a treater
view, I do not give this particular item of evidence more weight than the ample record evidence of the acoustic
neuroma itself.
40
Pursuant to Vaccine Rule 11(a), the parties may expedite entry of judgment if (jointly or separately) they file notices
renouncing their right to seek review.
31 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484220/ | Filed 11/16/22 In re Jesse Y. CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
In re JESSE Y., A Person 2d Juv. No. B320613
Coming Under the Juvenile (Super. Ct. No. J072972)
Court Law. (Ventura County)
VENTURA COUNTY HUMAN
SERVICES AGENCY,
Plaintiff and Respondent,
v.
JUAN C.,
Defendant and Appellant.
Juan C. appeals orders of the juvenile court denying his
status as a presumed father, declaring that his biological minor
1
child is adoptable, and terminating parental rights. (Fam. Code,
§ 7611, subd. (d); Welf. & Inst. Code, § 366.26, subd. (c)(1).)1
This appeal concerns Juan C.’s presumed father status and
the adequacy of initial inquiries regarding Indian ancestry of
dependent child Jesse Y. We conclude that substantial evidence
supports the juvenile court’s denial of Juan C.’s presumed father
status. We also decide that error in failing to make initial
inquiries of extended family members pursuant to the Indian
Child Welfare Act of 1978 (ICWA) (25 U.S.C. § 1901 et seq.) and
related California law was error, and we conditionally reverse.
(In re Benjamin M. (2021) 70 Cal.App.5th 735, 744 [discussing
the “readily obtainable information” rule].)
FACTUAL AND PROCEDURAL HISTORY
S.S. (Mother) gave birth to Jesse Y. in October 2021. When
she gave birth, Mother had positive toxicology results for
amphetamine. In 2019, Mother’s two older children became
dependents of the juvenile court due to her substance abuse and
incidents of domestic violence. Mother then failed to engage in
family reunification services and her parental rights to the two
older children were terminated.
The Ventura County Human Services Agency (HSA) took
Jesse Y. into protective custody at birth. In response to questions
from the HSA social worker, Mother declined to name the
biological father of Jesse Y. The social worker also questioned
Mother regarding possible Indian ancestry. Mother denied that
either she or Jesse Y. were members or eligible to become
members of an Indian tribe. The social worker later signed and
1 All further statutory references are to the Welfare and
Institutions Code unless otherwise stated.
2
submitted an ICWA-020 form, on behalf of Mother, in which
Mother denied any Indian membership or ancestry.
On October 19, 2021, the juvenile court held a detention
hearing. Mother did not appear at the hearing or at any further
court hearings regarding Jesse Y. The court ordered Jesse Y.
detained and granted temporary custody and care of the infant to
HSA. The juvenile court judge also stated: “[W]e have a history
with this mother, and . . . we need to check the siblings’ files on
the issue of ICWA given that mom is not present and that there
may be relatives that we have contact with or can contact to
gather that information. But right now, there’s no reason to
believe this is an Indian child, and right now, ICWA does not
apply.”
Although Mother refused to name Jesse Y.’s biological
father, she informed the HSA social worker that the father’s first
name was “Juan,” and that he was incarcerated. Through
research of Mother’s arrest records, the social worker learned
that Mother had resided with Juan C. and they had been
involved in a domestic dispute.
Prior to the jurisdiction and disposition hearing, the HSA
social worker contacted Juan C. who confirmed that he had been
in a relationship with Mother, had lived with her during her
pregnancy, and could be Jesse Y.’s biological father. Juan C. was
not present at Jesse Y.’s birth because he was incarcerated from
July 2021 through November 2021. He requested that the
juvenile court order a paternity test and appoint an attorney to
represent him. Juan C. informed the social worker that he would
like to be involved in Jesse Y.’s life if paternity was confirmed.
On December 20, 2021, the juvenile court held a
jurisdiction and disposition hearing at which Juan C. attended as
3
an alleged father. The court ordered a paternity test and
appointed counsel for Juan C., but denied visitation with Jesse Y.
pending paternity test results. The court then sustained the
allegations of the dependency petition. (§ 300, subds. (b), (j).)
The court also found that Mother and Juan C. each had two other
minor children (with different partners) who were dependent
children and with whom they had failed to reunify. The court
then ordered that family reunification services not be provided to
Mother and a permanent plan hearing for Jesse Y. be scheduled.
(§§ 361.5, subd. (b)(10), (11), (13) [reunification services bypass
provisions], 366.26.)
During the pendency of the permanent plan hearing, the
paternity test revealed that Juan C. was Jesse Y.’s biological
father. Juan C.’s attorney informed the juvenile court that
Juan C. did not “have any facts to present to the court at the time
regarding presumed father status.” The attorney added that
Juan C. would file a modification petition prior to the permanent
plan hearing. The court then found that Juan C. was Jesse Y.’s
biological father and, based upon an ICWA-20 form signed and
submitted on Juan C.’s behalf, that neither he nor Jesse Y. are
members of or eligible for membership in an Indian tribe. The
juvenile court judge stated: “[T]here’s no reason to believe this is
an Indian child and that ICWA does not apply.”
On April 13, 2022, the juvenile court intended to hold a
permanent plan hearing. Juan C. was present and requested a
contested hearing. The court denied his request because he was
a biological, not a presumed father. The court continued the
hearing, however, to allow Juan C. to file a modification petition
regarding presumed father status.
4
On April 22, 2022, Juan C. filed a modification petition
alleging changed circumstances. (§ 388.) Among other things, he
stated that he had visited Jesse Y. seven times, during which he
fed him, provided clothing and toys, and changed his diapers.
Juan C. also stated that he had complied with his probation
terms, including drug testing. He requested presumed father
status and reunification services.
During an evidentiary hearing prior to the permanent plan
hearing, the juvenile court addressed Juan C.’s modification
petition. Juan C. testified that he learned that Mother was
pregnant while he was incarcerated. She gave birth while he
remained incarcerated. When Juan C. was released from jail, he
contacted Mother but she would not provide information about
Jesse Y., who was then detained and living in foster care.
Juan C. requested a paternity test after the HSA social worker
contacted him. He admitted that he had recently failed two drug
tests for methamphetamine and had missed three drug tests.
Also, Juan C. was again confined in local custody.
The juvenile court denied Juan C.’s modification petition,
deciding that he did not meet the statutory requirements to be
declared a presumed father and that providing him with
reunification services would not be in Jesse Y.’s best interests.
The court then proceeded to the permanent plan hearing, found
that Jesse Y. was adoptable, and terminated parental rights.
(§ 366.26.) Jesse Y. had been placed with a non-relative extended
family member who had adopted Mother’s two older children
(half-siblings of Jesse Y.) and the family member intended to
adopt Jesse Y.
5
ICWA Compliance
During HSA’s investigation of the events giving rise to the
dependency, Mother and Juan C. informed the HSA social worker
that neither they nor Jesse Y. nor any lineal ancestors were
enrolled in an Indian tribe or eligible for membership in an
Indian tribe. The HSA social worker filed completed ICWA-020
forms on behalf of Mother and Juan C. to that effect. At the
conclusion of the detention hearing, the juvenile court found that
ICWA did not apply to Jesse Y., but that HSA should check the
dependency files of the half-siblings “on the issue of ICWA
[because] . . . there may be relatives that we have contact with or
can contact to gather that information.” Neither Mother nor
other family members appeared at the detention hearing. One
month later, the court commented that the extended family
caretaker for the half-siblings had not yet been interviewed and it
was unknown whether the half-siblings’ dependency files had
been reviewed. Approximately five months later, however, the
court found that “[n]o new information [regarding ICWA] has
been discovered to change the previous finding that there’s no
reason to believe or know that this is an Indian child.”
Juan C. appeals and contends that the juvenile court erred
by: 1) denying his request for presumed father status, and 2)
finding that ICWA was not applicable because HSA and the court
did not fully comply with their initial duties of inquiry regarding
Indian ancestry. (§§ 224.2, subd. (b), 224, subd. (c).)
DISCUSSION
I.
Juan C. argues that the juvenile court erred by denying his
petition for presumed father status. (Fam. Code, § 7611, subd.
(d) [“presumed parent” is one who “receives the child into their
6
home and openly holds out the child as their natural child”].) He
points out that Mother delayed in revealing his identity but that
following the finding of paternity, he visited Jesse Y. weekly,
purchased him toys and supplies, and cared for him during the
visits.
The Uniform Parentage Act (Fam. Code, § 7600 et seq.)
provides the statutory framework by which California courts
make paternity determinations. (In re J.L. (2008) 159
Cal.App.4th 1010, 1018, superseded by statute on other grounds,
as stated in In re Alexander P. (2016) 1 Cal.App.5th 1262, 1274.)
Pursuant to this statutory scheme, California law distinguishes
“alleged,” “biological,” and “presumed” fathers. (Ibid.) A father
whose biological paternity has not been established or who has
not achieved presumed father status is an “alleged” father.
(Ibid.) “Presumed” fathers are accorded greater parental rights
than “alleged” or “biological” fathers. (Ibid.) Biological
fatherhood does not in and of itself qualify a person for presumed
father status. (Ibid.) Rather, “[a] man who has held the child out
as his own and received the child into his home is a ‘presumed
father.’ ” (In re Jerry P. (2002) 95 Cal.App.4th 793, 801.)
Presumed fatherhood for purposes of dependency proceedings
denotes a man who promptly comes forward and demonstrates a
full commitment to his paternal responsibilities – emotional,
financial, and otherwise. (Id. at pp. 801-802.) A statutorily
presumed father and the child’s mother are entitled to family
reunification services in juvenile dependency proceedings.
(§ 361.5, subd. (a); Jerry P., at p. 801.)
A man who claims presumed father status has the burden
of establishing that status by a preponderance of the evidence.
(In re T.R. (2005) 132 Cal.App.4th 1202, 1210.) In determining
7
whether presumed father status has been established, courts
consider whether the father: actively helped the mother in
prenatal care, paid pregnancy and birth expenses consistent with
his financial abilities, sought to have his name placed on the
child’s birth certificate, cared for the child and for how long,
acknowledged the child and to whom, or provided for the child,
among other things. (Id. at p. 1211.) We review the juvenile
court’s paternity finding for substantial evidence. (In re
Cheyenne B. (2012) 203 Cal.App.4th 1361, 1371.)
The juvenile court properly found that Father did not
establish that he is a presumed father. Juan C. never received
Jesse Y. into his home for even temporary visits and did not
request the juvenile court to enter a voluntary declaration of
parentage. Juan C. informed the court that he did not have
appropriate housing for Jesse Y. or the means to provide for him.
Juan C. did not provide evidence that he helped Mother pay for
prenatal care or birth expenses despite living with her for many
months before Jesse Y.’s birth and knowing that she was
pregnant. He also made no attempt to have his name placed on
Jesse Y.’s birth certificate or provide evidence that he
acknowledged Jesse Y. as his son. Juan C.’s visits with Jesse Y.
were limited to weekly one-hour supervised visits in a
department store. This presumed father evidence falls short of
proof of “a fully developed parental relationship” with a child.
(R.M. v. T.A. (2015) 233 Cal.App.4th 760, 776.)
Although Mother may have withheld birth information
from Juan C., Jesse Y. was removed at birth by HSA and placed
in a confidential foster home. Juan C. was not released from
incarceration until approximately one month following Jesse Y.’s
birth. Based upon the HSA social worker’s sleuthing, Juan C.
8
learned of Jesse Y.’s birth and dependency approximately one
month following release from incarceration. Any delay
occasioned by Mother’s refusal to name Jesse Y.’s father was
minimal and could not have prejudiced Juan C.
II.
Juan C. argues that insufficient evidence supports the
juvenile court’s ICWA finding because HSA and the court did not
fully comply with their initial duties of inquiry. He asserts that
the court and HSA should have inquired of him when he
appeared in court, reviewed the maternal and paternal half-
siblings’ dependency case files, and inquired of the pre-adoptive
parent who has adopted the maternal half-siblings. Juan C.
contends that the termination of parental rights order must be
conditionally reversed to ensure compliance with the initial
inquiry requirements of ICWA and related California law.
An “Indian child” is defined as an unmarried individual
under 18 years of age who is either 1) a member of a federally
recognized Indian tribe, or 2) eligible for membership in a
federally recognized tribe and is the biological child of a member
of a federally recognized tribe. (25 U.S.C. § 1903(4) & (8);
§§ 224.2, subd. (e)(1).) The juvenile court and the county child
welfare department have an affirmative and continuing duty to
inquire whether a child subject to dependency proceedings is or
may be an Indian child. (§ 224.2, subd. (a); Cal. Rules of Court,
rule 5.481.) The duty includes asking the child, parents,
extended family members, and others who have an interest in the
child whether the child is or may be an Indian child. (§ 224.2,
subd. (b).) The court must also inquire of the parties and
participants appearing in court whether the child may be an
Indian child. (§ 224.2, subd. (c).) We examine the juvenile court’s
9
ICWA findings for substantial evidence. (In re H.V. (2022) 75
Cal.App.5th 433, 438.)
Here the HSA social worker completed and signed the
ICWA-020 forms on behalf of Mother and Juan C., but neither
HSA nor the juvenile court queried Juan C. when he appeared in
court; the pre-adoptive mother when she briefly appeared in court
at the jurisdiction and disposition hearing; or reviewed the
dependency files of the half-siblings.
The failure to inquire constitutes reversible error only if
there was readily available information that was likely to bear
meaningfully upon whether the child is an Indian child. (E.g., In
re Benjamin M., supra, 70 Cal.App.5th 735, 744 [“the readily
obtainable information” rule].) Here the information was readily
available from juvenile court appearances and the court and HSA
dependency files.
DISPOSITION
The order terminating parental rights is conditionally
reversed. The matter is remanded to the juvenile court with
directions to comply with the inquiry provisions of ICWA and
sections 224.2 and 224.3. Following the inquiry, if neither HSA
nor the court has reason to believe or to know that the minor
child is an Indian child, the order terminating parental rights
shall be reinstated.
NOT TO BE PUBLISHED.
GILBERT, P. J.
I concur:
BALTODANO, J.
10
YEGAN, J., Dissenting:
I agree with the determination that affirms the order
regarding “presumed father” status. But I dissent from the
conditional reversal for the reasons stated in In re J.K. (2022) 83
Cal.App.5th 498 (dis. opn. of Yegan, J.).
NOT TO BE PUBLISHED.
YEGAN, J.
1
Manuel J. Covarrubias, Judge
Superior Court County of Ventura
______________________________
Donna P. Chirco, under appointment by the Court of
Appeal, for Defendant and Appellant.
Tiffany N. North, County Counsel, Joseph J. Randazzo,
Principal Assistant County Counsel, for Plaintiff and
Respondent. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484222/ | IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
D. ROBERT FREEMAN and MELISSA )
FREEMAN, )
)
Defendants Below, Appellants, )
) C.A. No. N21C-09-081 EMD
v. )
)
LESLIE CARTER and MEEGHAN )
CARTER, )
)
Plaintiffs Below, Appellees, )
)
and )
)
MEGAN BROOMALL-FILLIBEN, )
ESQUIRE, )
)
Additional Defendant Below, )
Appellee. )
Submitted: August 10, 2022
Decided: November 15, 2022
Upon Third-Party Defendant Broomall-Filliben’s Motion for Summary Judgment upon Third-
Party Plaintiffs Freemans’ Third-Party Complaint
GRANTED
Melissa Freeman and D. Robert Freeman, pro se.
Jeffrey M. Weiner, Esq., The Law Offices of Jeffrey M. Weiner, P.A., Wilmington, Delaware.
Attorney for Third-Party Defendant Megan Broomall-Filliben.
Donald L. Gouge, Jr., Esquire, Wilmington, Delaware. Attorney for Plaintiffs Below, Appellees
Leslie Carter and Meeghan Carter.
DAVIS, J.
I. INTRODUCTION
This civil proceeding involves tort and contractual claims and comes to the Court on
appeal from the Court of Common Pleas and the Justice of the Peace Court. Third-Party
Plaintiffs D. Robert Freeman and Melissa Freeman filed an answer to a complaint filed by
Plaintiffs Below/Appellees Leslie Carter and Meeghan Carter. The Freeman’s answer also
asserted counterclaims and third-party claims against Third-Party Defendant Megan Broomall-
Filliben.1 The Third-Party Complaint initially asserted four causes of action against Ms.
Broomall-Filliben: (i) Breach of Implied Contract; (ii) Negligent Misrepresentation; (iii) Fraud;
and (iv) Contractual/Equitable Indemnification.2 Upon a motion, The Court dismissed the
Negligent Misrepresentation and Fraud claims.3
Ms. Broomall-Filliben filed her Third-Party Defendant Broomall-Filliben’s Motion for
Summary Judgment upon Third-Party Plaintiffs Freemans’ Third-Party Complaint (the
“Motion”) on April 5, 2022.4 In the Motion, Ms. Broomall-Filliben seeks summary judgment on
the Breach of Implied Contract claim and the Contractual/Equitable Indemnification claim.5 The
Freemans opposed the Motion.6 The Court held a hearing on the Motion on August 10, 2022.
At the conclusion of the hearing, the Court took the Motion under advisement.
For the reasons stated below, the Court GRANTS the Motion.
1
D.I. No. 1, Ex. B.
2
Id.
3
D.I. No. 22.
4
D.I. No. 31.
5
D.I. No. 31. Third-Party Defendant Broomall-Filliben’s Motion for Summary Judgment Upon Third-Party
Plaintiffs Freemans’ Third-Party Complaint (hereinafter, “Broomall-Filliben Mot. for SJ”).
6
D.I. No. 33.
2
II. RELEVANT FACTS
In September 2015, the Freemans leased a house (the “House”) in Delaware to Leslie
Carter (later with Meeghan Carter, the “Carters”).7 In February 2019, the Freemans decided to
place the House for sale.8 On February 25, 2019, the Freemans terminated the lease with the
Carters effective April 30, 2019.9
The Carters secured financing and planned to purchase the house.10 On May 8, 2019, the
Freemans were informed that Ward & Taylor would be representing the Carters.11 Ms. Broomall-
Filliben is a real estate attorney at Ward & Taylor. The Freemans contend that Ms. Broomall-
Filliben was also representing them as sellers in a limited capacity.12 On February 28, 2020, the
Freemans rescinded their offer to sell the house to the Carters.13
On September 14, 2021, Ms. Broomall-Filliben filed a Motion to (Partial) Dismiss Third-
Party Plaintiffs’ Third-Party Complaint (“Broomall-Filliben Motion to Dismiss”).14 On October
11, 2021, the Freemans filed a Response to Ms. Broomall-Filliben’s Motion to Dismiss.15 As
stated above, on February 24, 2022, this Court entered an Order that dismissed the Negligent
Misrepresentation and Fraud claims of the Third-Party Complaint.16 The only remaining counts
against Ms. Broomall-Filliben are the Freemans’ Breach of Implied Contract and
Contractual/Equitable Indemnification claims.17
7
Motion ¶ 3.
8
Id. ¶ 4.
9
Id.
10
Id.
11
Id. ¶ 7.
12
D.I. No. 33. Third-Party Plaintiffs’ Response to Third-Party Defendant’s Motion for Summary Judgment
(hereinafter, “Freemans Response”), ¶ 4.
13
Broomall-Filliben Mot. for SJ, ¶ 10.
14
D.I. No. 2. Third-Party Defendant Broomall-Filliben’s Motion to (Partial) Dismiss Third-Party Plaintiffs’ Third-
Party Complaint (hereinafter, “Broomall-Filliben Mot. to Dismiss”).
15
D.I. No. 11. Defendants Below, Appellants Response to Third-Party Defendant Broomall-Filliben’s Motion to
(Partial) Dismiss Third-Party Plaintiff’s Third-Party Complaint.
16
Broomall-Filliben Mot. for SJ, ¶ 1.
17
Id.
3
On April 5, 2022, Ms. Broomall-Filliben filed the Motion On May 4, 2022, the Freemans
filed a Response to Ms. Broomall-Filliben’s Motion for Summary Judgment (the “Response”).18
On May 24, 2022, Ms. Broomall-Filliben filed a Reply in Support of her Motion for Summary
Judgment (the “Reply”).19 The Court held a hearing on the Motion, the Response and the Reply
on August 10, 2022. After the hearing, the Court took the Motion under advisement.
For the reasons set forth below, the Court GRANTS the Motion.
III. PARTIES’ CONTENTIONS
A. THE MOTION
Through the Motion, Ms. Broomall-Filliben argues that she is entitled to summary
judgment on all remaining third-party claims.20 The remaining claims are the Breach of Implied
Contract and Contractual/Equitable Indemnification.21 Ms. Broomall-Filliben claims that there
was never a valid contract between herself and the Freemans. Ms. Broomall-Filliben contends
“it is true that the attorney owes a general duty to the judicial system, [however] it is not the type
of duty which translates into liability for negligence to an opposing party where there is not
foreseeable reliance by that party on the attorney’s conduct.”22 Ms. Broomall-Filliben also
asserts she owed no special duty to the Freemans.23
B. THE RESPONSE
The Freemans oppose summary judgment, contending that there are genuine disputes as
to material facts. The Freemans claim Ms. Broomall-Filliben was working as their real estate
18
See Freemans Response.
19
D.I. No. 36. Additional (Third-Party) Defendant Megan Broomall-Filliben’s Reply in Support of her Motion for
Summary Judgment (hereinafter, “Broomall-Filliben Support Motion”).
20
Broomall-Filliben Mot. for SJ, ¶ 14.
21
Id. ¶ 1.
22
Id. ¶ 12.
23
Id.
4
attorney on a limited basis—i.e., the real estate transaction involving the House.24 In addition,
the Freemans assert that Ms. Broomall-Filliben entered an implied contract of representation
with the Freemans. The Freemans maintain an April 24, 2019, Agreement of Sale (“AOS”)
created a binding contract between themselves and Ms. Broomall-Filliben.25 Further, the
Freemans argue Ms. Broomall-Filliben breached her duties when she failed to inform the
Freemans of the Carters’ breach of the AOS. The Freemans claim the breach denied them the
opportunity to cancel the AOS and mitigate damages.26
Ultimately, the Freemans appear to be arguing that Ms. Broomall-Filliben breached her
attorney-client (contractual) duty to the Freemans and that allowed the Carters to breach the
AOS.
IV. STANDARD OF REVIEW
The standard for review on a motion for summary judgment is well-settled. Summary
judgment may only be granted when there are no genuine disputes as to material facts.27
Specifically, the Court must “view the evidence in the light most favorable to the non-moving
party.”28 When faced with a motion for summary judgment the trial court must “identify
disputed factual issues whose resolution is necessary to decide the case, but not to the decide
such issues.”29 The moving party bears the initial burden of proving that there are no material
issues of fact.30 If the motion is properly supported then the burden shifts to a non-moving party
to demonstrate that a material issue of fact is present.31
24
Freemans Response, ¶¶ 4 and 7.
25
Id. ¶ 5.
26
Id. ¶ 11.
27
Merrill v. Crothall-American, Inc., 606 A.2d 96, 99 (Del. 1992) (citing Moore v. Sizemore, 405 A.2d 679, 680
(Del. 1979)).
28
Id. (citing Adickes v. S.H. Kress & Co., 398 U.S. 144 (1970)).
29
Id. (citing United States v. Diebold, Inc., 369 U.S. 654 (1962)).
30
Moore, 405 A.2d 679, 680 (Del. 1979) (citing Ebersole v. Lowengrub, 180 A.2d 467 (Del. 1962)).
31
Id. (citing Hurtt v. Goleburn, 330 A.2d 134 (Del. 1974)).
5
V. DISCUSSION
A. MS. BROOMALL-FILLIBEN IS ENTITLED TO SUMMARY JUDGMENT ON THE FREEMANS’
BREACH OF CONTRACT CLAIM.
1. No Valid Contract Exists
A valid contract exists when (i) the parties intended for the contract to bind them, (ii) the
terms of the contract are sufficiently definite, and (iii) the parties exchange legal consideration.32
An implied contract “is one inferred from the conduct of the parties, though not expressed in
words. The parties’ intent and mutual assent to an implied in-fact-contract is proved through
conduct rather than words.”33
Ms. Broomall-Filliben contends there is no valid contract between herself and the
Freemans. Ms. Broomall-Filliben maintains she only represented the Carters as the purchasers
of the house.34 Ultimately, Ms. Broomall-Filliben argues that the Freemans cannot meet the first
element of a valid contract. The Freemans claims that Ms. Broomall-Filliben undertook duties to
assist the Freemans with completing the sale which undertaking created an implied contract.35
Ms. Broomall-Filliben concedes she sent a blank contract to the Freemans for the sale;
however, she notes that she was not otherwise involved in the negotiation of the AOS.36 In
support, Ms. Broomall-Filliben contends she was not a recipient or involved with the April 16,
2019 Email (“April 16 Email”).37 In the April 16 Email the Carters inform the Freemans they
will review the AOS.38 The Freemans argue the April 16 email is the original AOS and that they
32
Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010).
33
Clouser v. Marie, 2022 WL 453551, at *3 (Del. Super. 2022) (citing Capital Mgmt. Co. v. Brown, 813 A.2d 1094,
1098 (Del. 2002)).
34
Broomall-Filliben Mot. for SJ, ¶ 7.
35
Freemans Response, ¶ 11.
36
Broomall-Filliben Mot. for SJ, ¶ 5, 9.
37
Broomall-Filliben Support Motion, ¶ 5.
38
Id.
6
had sent it to Ms. Broomall-Filliben.39 However, the Freemans do not offer any evidence that
Ms. Broomall-Filliben received the April 16 email, or that Ms. Broomall-Filliben helped in any
with further negotiations. Ms. Broomall-Filliben offers multiple instances of continued
communications directly between the Freemans and the Carters.40 These communications do not
include Ms. Broomall-Filliben. The facts do not support the argument that Ms. Broomall-
Filliben undertook any action other than forwarding a form document. All subsequent
discussions were between the Freemans and the Carters. Ms. Broomall-Filliben was not
involved in these negotiations and/or communications.
The Freemans argue an implied contract existed between themselves and Ms. Broomall-
Filliben. The Freemans contend Ms. Broomall-Filliben undertook the duty of helping the
Freemans complete the correct forms for the sale and providing updates on scheduling and
closing delays.41
Further, the Freemans argue Ms. Broomall-Filliben should have been aware that the
Freemans believed Ms. Broomall-Filliben was also working as their real estate attorney.42 The
Freemans contend because the Freemans and the Carters had previously worked with a real
estate agent in a dual capacity that their belief that Ms. Broomall-Filliben was their attorney was
reasonable.43 However, on May 8, 2019 the Freemans received a letter from Ms. Broomall-
Filliben’s firm, Ward & Taylor, that the firm represented the Carters.44 There is no evidence that
the Freemans attempted to clarify if Ms. Broomall-Filliben would also be working as their
attorney.
39
Freemans Response, ¶ 5.
40
Broomall-Filliben Mot. for SJ, ¶ 9.
41
Freemans Response, ¶ 11.
42
Id.
43
Id.
44
Broomall-Filliben Mot. for SJ, ¶ 7.
7
In addition, the record is devoid of any evidence that Ms. Broomall-Filliben took on the
role of the Freemans’ attorney. While Ms. Broomall-Filliben was working with the Carters in
the process of purchasing the Freemans’ home it is expected she would have to communicate
with the Freemans. However, it does not appear Ms. Broomall-Filliben entered into an
agreement, explicit or implicit, to represent the Freemans.
The Freemans contend Ms. Broomall-Filliben had implied contractual duties to review
and communicate with the parties about the AOS and to convey accurate and truthful reasons for
closing delays to the Freemans.45 The Freemans argue Ms. Broomall-Filliben breached these
duties by not disclosing the Carters’ modifications to the AOS and that Quicken Loans had
denied the Carters’ mortgage application.46
Ms. Broomall-Filliben offers communication between the Freemans and the Carters as
evidence that she was not a part of the continued negotiations.47 On September 6, 2019, the
Carters emailed the Freemans that “although qualified for a mortgage, balancing cash and paying
the asking price contributes to the challenge.”48 The Freemans responded “[o]k, thanks. Keep us
posted.”49 On October 23, 2019, the Carters emailed the Freemans that the mortgage “situation
is status quo” and that Cardinal Financial was the Carters mortgage company.50 At this point the
Carters had pushed back the original April 30 closing date multiple times directly with the
Freemans.51 Ms. Broomall-Filliben does not appear to have been a party to these emails.
Following the April 16 Email Ms. Broomall-Filliben does not appear to have any further
communication with the Freemans regarding the AOS. Ms. Broomall-Filliben argues on April
45
Freemans Response, ¶ 11.
46
Id.
47
Broomall-Filliben Mot. for SJ, ¶ 9.
48
Id.
49
Id.
50
Id.
51
Id.
8
24, 2019, the Carters made changes to the contract the Freemans signed on April 16, 2019, which
constitutes a counteroffer. The Freemans dispute and deny that they agreed to the Carters’
counteroffer.52 It appears that Ms. Broomall-Filliben points to this discrepancy as evidence that
she was not involved in contract negotiations regarding the AOS.
In response, the Freemans argue Ms. Broomall-Filliben failed to inform them that the
Carters attempted to modify the agreement.53 The Freemans contend the April 24 AOS
modifications should have prompted Ms. Broomall-Filliben to disclose the issues to the
Freemans.54 The Freemans argue the modifications would interfere with Ms. Broomall-
Filliben’s ability to schedule a closing, which the Freemans argue was Ms. Broomall-Filliben’s
duty.55 However, Ms. Broomall-Filliben has offered evidence that the Freemans and Carters
continued to communicate and push back the closing date without Ms. Broomall-Filliben's
assistance.
The Court finds there are no genuine issues as to material facts and that Ms. Broomall-
Filliben is entitled to judgment on the Breach of Implied Contract Claim. The record—when
viewed in a light most favorable to the Freemans—does not support a contractual relationship
between the Freemans and Ms. Broomall-Filliben. Ms. Broomall-Filliben initially notified the
Freemans that she and her firm represented the Carters. In addition, Ms. Broomall-Filliben never
acted as the lawyer of the Freemans, provided legal advice to the Freemans or involved herself in
the discussions between the Carters and the Freemans.
52
Freemans Response, ¶ 5.
53
Id. ¶ 11.
54
Id. ¶ 12.
55
Id.
9
2. Ms. Broomall-Filliben did not owe the Freemans a duty.
Absent an express agreement a lawyer-client relationship can still be implied. A lawyer-
client relationship may be inferred “from the conduct of the parties.”56 In order for an implied
lawyer-client relationship to be found, “there would have to be, at the very least, a preexisting
relationship that would create a reasonable expectation on the ‘client’s’ part that the attorney was
representing his [or her] interests, and reliance by the client on that expectation.”57 However,
“[t]he Court will not extend an attorney’s duty to a third-party when an adversarial relationship
exists between the parties.”58
In Delaware, an attorney may provide legal services to multiple parties in the real estate
transaction.59 Further, real estate settlements, which do not involve foreclosure or threatened
foreclosure, are not generally considered adversarial.60 Therefore, an attorney will be found to
owe a duty if the client can show the attorney “committed fraud or collusion, that it had privity
of contract, or that it was the intended beneficiary of services.”61
Ms. Broomall-Filliben argues she does not owe any duty to the Freemans. Ms. Broomall-
Filliben points to the fact that her law firm sent the Freemans an email explaining that Ms.
Broomall-Filliben would be representing the Carters.62 Ms. Broomall-Filliben does not offer any
other evidence as to her relationship with the Freemans. Ms. Broomall-Filliben relies on Nichols
v. Twilley, Street & Braverman, P.A., to illustrate her lack of duty to a non-client.63
56
Korotki v. Hiller & Arban, LLC., 2017 WL 2303522, at *6 (Del. Super. 2017) (internal citation omitted).
57
Id. (citing SBC Interactive, Inc. v. Corporate Media Partners, 1997 WL 770715, at *4 (Del. Super. 1997).
58
Farmers Bank of Willards v. Becker, 2011 WL 3925428, at *4 (Del. Super. 2011) (citing Keith v. Sioris, 2007 WL
544039, at *6).
59
Id. (internal citations omitted).
60
Id.
61
Id.
62
Broomall-Filliben Mot. for SJ, ¶ 7.
63
Id. ¶ 12.
10
In response, the Freemans contend that the Carters refused to work with the Freemans
real estate agent and the Freemans were unwilling to move forward without expert help.64 After
the Freemans and Carters stopped using the Freemans’ real estate agent the Carters
recommended Ms. Broomall-Filliben.65 The Carters did not advise the Freemans to seek
different representation.66 The Freemans maintain that Ms. Broomall-Filliben then took on
duties on behalf of the Freemans that were not already owed to the Carters.67 Ultimately, the
Freemans contend the Carters and Freemans had previously used a joint real estate agent and Ms.
Broomall-Filliben should have been aware she was representing both parties.
The Freemans may have believed Ms. Broomall-Filliben was their attorney; however,
Ms. Broomall-Filliben’s conduct does not establish an implied duty. The factual record does not
provide evidence that Ms. Broomall-Filliben offered legal advice to the Freemans or otherwise
acted as their attorney. Ms. Broomall-Filliben’s firm provided the Freemans with a letter
expressly stating that they were representing the Carters. The Freemans did not seek out Ms.
Broomall-Filliben’s advice in any exchanges with the Carters. Further, the shared real estate
agent situation between the Freemans and Carters did not involve Ms. Broomall-Filliben. The
prior situation with a shared real estate agent does not establish a situation where Ms. Broomall-
Filliben should have been aware that the Freemans viewed her as their attorney.
B. MS. BROOMALL-FILLIBEN IS ENTITLED TO SUMMARY JUDGMENT ON THE FREEMANS’
CONTRACTUAL/EQUITABLE INDEMNIFICATION CLAIM.
Delaware will enforce indemnification when the intention to indemnify appears in the
terms of the agreement.68 Ms. Broomall-Filliben does not directly address the
64
Freemans Response, ¶ 4.
65
Id.
66
Id. ¶ 11.
67
Id.
68
Howard, Needles, Tammen & Bergendoff v. Steers, Perini & Pomroy, 312 A.2d 621, 624 (Del. 1973).
11
Contractual/Equitable Indemnification claim outside of her argument for summary judgment on
the implied contract claim. However, this claim must arise out of the Implied Contract claim.
Because the Court finds there was no implied contract between Ms. Broomall-Filliben and the
Freemans, the Court also finds that there cannot be a contractual indemnification claim.
Accordingly, the Court will grant summary judgment in favor of Ms. Broomall-Filliben on the
Contractual/Equitable Indemnification claim.
VI. CONCLUSION
For the foregoing reasons, the Court GRANTS the relief sought in the Third-Party
Defendant Broomall-Filliben’s Motion for Summary Judgment upon Third-Party Plaintiffs
Freemans’ Third-Party Complaint and ENTERS judgment in favor of Ms. Broomall-Filliben on
the Freemans’ Breach of Implied Contract claim and Contractual/Equitable Indemnification
claim of the Third-Party Complaint.
IT IS SO ORDERED
Dated: November 15, 2022
Wilmington, Delaware
/s/ Eric M. Davis
Eric M. Davis, Judge
cc: File&ServeExpress
Melissa and D. Robert Freeman (by mail)
12 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484224/ | 11/16/2022
DA 22-0109
Case Number: DA 22-0109
IN THE SUPREME COURT OF THE STATE OF MONTANA
2022 MT 234
NETZER LAW OFFICE, P.C. and
DONALD L. NETZER,
Plaintiffs and Appellants,
v.
STATE OF MONTANA by and through
AUSTIN KNUDSEN in his official capacity
as Attorney General and LAURIE ESAU,
Montana Commissioner of Labor and Industry,
Respondents and Appellees.
APPEAL FROM: District Court of the Seventh Judicial District,
In and For the County of Richland, Cause No. DV-21-89
Honorable Olivia Rieger, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Jared R. Wigginton, Good Steward Legal, PLLC, Whitefish, Montana
Joel G. Krautter, Netzer Law Office, P.C., Sidney, Montana
For Appellees:
Austin Knudsen, Montana Attorney General, David M.S. Dewhirst,
Solicitor General, Brent Mead, Assistant Solicitor General, Helena,
Montana
Emily Jones, Special Assistant Attorney General, Jones Law Firm,
PLLC, Billings, Montana
Submitted on Briefs: October 5, 2022
Decided: November 16, 2022
Filed:
v,,,6A•-if
__________________________________________
Clerk
2
Chief Justice Mike McGrath delivered the Opinion of the Court.
¶1 This is an appeal from a Seventh Judicial District Court order denying an application
filed by Netzer Law Office, P.C. and Donald L. Netzer (collectively, “Netzer”)1 to
preliminarily enjoin the State of Montana from enforcing House Bill 702, as enacted by
the Montana State Legislature and signed by the Governor.
¶2 We restate the issues on appeal as follows:
Issue One: Did the District Court err by not evaluating whether House Bill 702
contained only one subject, clearly expressed in its title, as required by Article V,
Section 11(3), of the Montana Constitution?
Issue Two: Did the District Court manifestly abuse its discretion in declining to
preliminarily enjoin § 49-2-312, MCA, based on alleged infringement of Netzer’s
fundamental rights?
Issue Three: Did the District Court err by not evaluating § 49-2-312, MCA, under
any level of constitutional scrutiny?
We affirm in part and remand for further proceedings consistent with this Opinion.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 During the 2021 legislative session, the Montana State Legislature passed HB 702,
codified as § 49-2-312, MCA. The bill was titled “An act prohibiting discrimination based
on a person’s vaccination status or possession of an immunity passport; providing an
exception and an exemption; providing an appropriation; and providing effective dates.”
1
Netzer Law Office, as a corporation, is not entitled to the same constitutional protections and
remedies as citizens, such as the fundamental rights in Article II, Section 3, of the Montana
Constitution at issue in this case. For simplicity and clarity, this Opinion collectively refers to the
Netzer Law Office and Netzer, as an individual, as “Netzer.”
3
Sections 1, 2, 4, 5, and 6 of the bill went into effect on May 7, 2021; Section 3 went into
effect on July 1, 2021.
¶4 The bill declared the following as unlawful discriminatory practices:
(a) a person or a governmental entity to refuse, withhold from, or deny to
a person any local or state services, goods, facilities, advantages, privileges,
licensing, educational opportunities, health care access, or employment
opportunities based on the person’s vaccination status or whether the person
has an immunity passport;
(b) an employer to refuse employment to a person, to bar a person from
employment, or to discriminate against a person in compensation or in a
term, condition, or privilege of employment based on the person’s
vaccination status or whether the person has an immunity passport; [and]
(c) a public accommodation to exclude, limit, segregate, refuse to serve,
or otherwise discriminate against a person based on the person’s vaccination
status or whether the person has an immunity passport.
Section 49-2-312(1)(a-c), MCA. The statute allows employers to recommend that an
employee receive a vaccine and provides certain accommodations for health care facilities
to obtain the vaccination status of employees, but does not allow those facilities to require
employees, patients, or visitors to be vaccinated. Section 49-2-312(3)(a-b), MCA.2 That
prohibition does not apply to schools or daycare facilities. Section 49-2-312(2), MCA.
¶5 As noted by the District Court, the COVID-19 pandemic continues to spread across
Montana.3 The SARS-Co-V-2 virus, which causes COVID-19 infections, transmits itself
through respiratory fluids. Exposure to the virus occurs predominately through three ways:
inhalation of respiratory droplets and aerosol particles; droplets and particles encountering
2
Further, “[a]n individual may not be required to receive any vaccine whose use is allowed under
an emergency authorization or any vaccine undergoing safety trials.” Section 49-2-312(4), MCA.
3
Facts are restated from the District Court’s findings of fact.
4
exposed mucous membranes; and the touching of hands spotted with virus-containing
respiratory fluids to mucous membranes. Though HB 702 became law during the
COVID-19 pandemic, its provisions apply to all vaccines.
¶6 The Center for Disease Control (CDC) identified numerous ways to prevent the
spread of COVID-19. Vaccination is one such way but breakthrough infections—instances
in which vaccinated individuals are infected by the virus and have the capacity to spread
the virus to others—do occur. Furthermore, vaccines vary in their effectiveness based on
the reaction of each person’s body; no vaccine is 100% effective against a disease. Regular
testing, wearing a mask, washing hands, and working from home are strategies that
vaccinated and non-vaccinated individuals can use to reduce the odds of being infected
with and spreading COVID-19.
¶7 Netzer is an employee and majority shareholder of Netzer Law Office, which
employs three attorneys and two legal assistants. On October 26, 2021, in response to the
ongoing COVID-19 pandemic, Netzer sought to preserve the ability to enforce a vaccine
mandate on current and prospective employees by filing this action and simultaneously
applying to enjoin the State’s enforcement of HB 702. Netzer alleged that the statute
violated several of his fundamental rights as set forth in the Montana Constitution. On
November 15, 2021, the State responded by opposing the application for a preliminary
injunction and moving to dismiss the case.
¶8 On December 14, 2021, the District Court held a hearing on Netzer’s motion for a
preliminary injunction. On February 1, 2022, the court issued its Findings of Fact,
Conclusions of Law, and Order Denying Plaintiffs’ Application for Preliminary Injunction.
5
The court concluded that Netzer failed to satisfy his burden of establishing a prima facie
case that he will suffer irreparable harm caused by the implementation of the law prior to
the final resolution of the case on the merits. Given that shortcoming, the court did not
assess which level of constitutional scrutiny should apply to the law. The court dismissed
Netzer’s claim that the title of HB 702 violated Article V, Section 11(3), of the Montana
Constitution as “redundant” because the bill’s title does not appear in the codified text,
§ 49-2-312, MCA.
STANDARD OF REVIEW
¶9 We review a district court’s grant or denial of a preliminary injunction for a manifest
abuse of discretion. Stand Up Mont. v. Missoula Cty. Pub. Schs., 2022 MT 153, ¶ 6, 409
Mont. 330, 514 P.3d 1062. This review does not include a review of the underlying merits
of the case. Benefis Healthcare v. Great Falls Clinic, Ltd. Liab. P’ship, 2006 MT 254,
¶ 19, 334 Mont. 86, 146 P.3d 714. A district court abuses its discretion when it acts
arbitrarily, without employment of conscientious judgment, or in excess of the bounds of
reason, resulting in a substantial injustice. Stand Up Mont., ¶ 6. The abuse of a district
court’s discretion must be obvious, evident, or unmistakable to constitute a manifest abuse
of discretion. Stand Up Mont., ¶ 6.
¶10 The legal conclusions of a district court receive de novo review by this Court.
Stand Up Mont., ¶ 6. If a district court relied on legal conclusions to rule on a motion for
preliminary injunction, we review whether the district court correctly interpreted the law.
Driscoll v. Stapleton, 2020 MT 247, ¶ 12, 401 Mont. 405, 473 P.3d 386. A district court’s
findings of fact receive clear error review. Larson v. State, 2019 MT 28, ¶ 16, 394 Mont.
6
167, 434 P.3d 241. Clearly erroneous findings of fact lack support by substantial evidence,
result from the district court’s misapprehension of the effect of evidence, or emerge from
what this Court is convinced was a mistake by the district court. Larson, ¶ 16.
DISCUSSION
¶11 Issue One: Did the District Court err by not evaluating whether House Bill 702
contained only one subject, clearly expressed in its title, as required by Article V,
Section 11(3), of the Montana Constitution?
¶12 Netzer argues that the District Court should have voided HB 702 because its title
misled the public and members of the Legislature about the subjects it embraced in
violation of the Montana Constitution. Netzer specifically claims that the title violated
Article V, Section 11(3), of the Montana Constitution, which requires that:
Each bill, except general appropriation bills and bills for the codification and
general revision of the laws, shall contain only one subject, clearly expressed
in its title. If any subject is embraced in any act and is not expressed in the
title, only so much of the act not so expressed is void.
According to Netzer, a constitutionally permissible title would have referred to the effect
the bill had on vaccine mandates. The District Court did not examine this issue because it
determined that the codified version of HB 702 did not contain the bill’s title, which
rendered Netzer’s claim “redundant.”
¶13 Codification of a bill does not render a court’s analysis of whether a bill’s title
satisfies the single-subject requirement moot or “redundant.” For many years, this Court
has assessed the constitutionality of a bill’s title, despite the codification of that bill.
7
See, e.g., State v. Cunningham, 35 Mont. 547, 90 P. 755 (1907).4 Nothing in the record or
in the briefs of the respective parties justifies the district court abandoning that practice.
This Court remands with instructions for the District Court to evaluate HB 702 under
Article V, Section 11(3), of the Montana Constitution, as it considers the merits of Netzer’s
other claims.
¶14 Issue Two: Did the District Court manifestly abuse its discretion in declining to
preliminarily enjoin § 49-2-312, MCA, based on alleged infringement of Netzer’s
fundamental rights?
¶15 This issue turns on whether Netzer has demonstrated that the District Court
manifestly abused its discretion in determining that Netzer will not suffer harm prior to
final resolution on the merits of each of his claims of infringement of his fundamental
rights. Our decision is narrow, as it is well established that a court does not decide the
merits of a claim in a preliminary injunction proceeding; rather, it must remain focused on
the limited purpose of a preliminary injunction—to preserve the status quo and minimize
the harm pending final resolution on the merits. Driscoll, ¶ 14 (citations omitted).
¶16 Section 27-19-201, MCA, provides that a preliminary injunction may be granted in
the following cases:
(1) when it appears that the applicant is entitled to the relief demanded
and the relief or any part of the relief consists in restraining the commission
or continuance of the act complained of, either for a limited period or
perpetually;
(2) when it appears that the commission or continuance of some act
during the litigation would produce a great or irreparable injury to the
applicant . . . .
4
Article V, Section 11(3), of the Montana Constitution is “substantively identical” to Article V,
Section 23, of the 1889 Montana Constitution. MEA-MFT v. State, 2014 MT 33, ¶ 8, 374 Mont.
1, 318 P.3d 702.
8
These sections are written in the disjunctive. BAM Ventures, LLC v. Schifferman, 2019
MT 67, ¶ 14, 395 Mont. 160, 437 P.3d 142. In BAM, we held that “all requests for
preliminary injunctive relief require some demonstration of threatened harm or injury,
whether used under the ‘great or irreparable injury’ standard of subsection (2), or the lesser
degree of harm implied within the other subsections of § 27-19-201, MCA.” BAM, ¶ 16.
“In considering whether to issue a preliminary injunction, a district court must exercise its
otherwise broad discretion only in furtherance of the limited purpose of a preliminary
injunction: to preserve the status quo and minimize the harm to all parties pending final
resolution on the merits.” Driscoll, ¶ 14 (citations omitted).
¶17 If a preliminary injunction will not accomplish its limited purpose, then it should
not issue. In Davis v. Westphal, we explained that preliminary injunctive relief is an
equitable remedy governed by general principles of equity codified in Title 27, chapter 19,
MCA, and that injunctive relief is an extraordinary remedy not available as a matter of
right. 2017 MT 276, ¶ 24, 389 Mont. 251, 405 P.3d 73. Further, “injunctive relief is highly
discretionary and critically dependent on the particular facts, circumstances, and equities
of each case.” Davis, ¶ 24. Where appropriate on balance of the equities, injunctive relief
is available as a supplemental remedy to afford complete relief on a claim. Thus, “even
on proof of any grounds enumerated in § 27-19-201, MCA, a preliminary injunction should
not issue absent an accompanying prima facie showing, or showing that it is at least
uncertain, that the applicant will suffer irreparable injury prior to the final resolution on the
merits.” Davis, ¶ 24; see Porter v. K & S Partnership, 192 Mont. 175, 181, 627 P.2d 836,
839 (1981); Rea Bros. Sheep Co. v. Rudi, 46 Mont. 149, 160, 127 P. 85, 87 (1912). With
9
these principles in mind, we turn to whether the District Court manifestly abused its
discretion in denying Netzer’s request for preliminary injunctive relief pending final
resolution on the merits.
¶18 Considering § 27-19-201(1), MCA, the District Court, after a review of the alleged
economic harms, concluded that Netzer failed to make out the requisite prima facie case.
The District Court relied on substantial evidence, such as evidence from the CDC, to reach
its conclusion that the potential economic losses alleged by Netzer would have occurred
even if the injunction had been granted. For example, if Netzer could enforce vaccine
mandates on its employees, the firm would likely still have to provide clients and guests,
as well as employees, with masks. Similarly, Netzer failed to set forth sufficient facts to
show that enforcement of vaccine mandates would allow the firm to avoid office closures
due to outbreaks. The court noted that such closures could occur where individuals are
vaccinated. The alleged economic harm to the law firm is minimal. Without addressing
the appropriateness of equitable injunctive relief where economic damages may suffice,
we conclude the court did not manifestly abuse its discretion in finding Netzer had not
demonstrated he would suffer an injury prior to final resolution on the merits sufficient to
justify supplemental preliminary injunctive relief based on § 27-19-201(1), MCA.
¶19 Next, we focus our inquiry on § 27-19-201(2), MCA, and Netzer’s claims that
§ 49-2-312, MCA, violates certain fundamental rights afforded to him and his employees
by the Montana Constitution—namely, the right to a clean and healthful environment, the
right to pursue life’s basic necessities, the right to enjoy and defend one’s life and liberties,
the right to acquire, possess and protect property, and the right to seek health and safety.
10
Netzer argues that the District Court manifestly abused its discretion by not concluding
that enforcement of § 49-2-312, MCA, would infringe those rights.
¶20 The loss of a constitutional right constitutes harm or irreparable injury for the
purposes of issuing a preliminary injunction. Mont. Democratic Party v. State, 2020 MT
244, ¶ 15, 401 Mont. 390, 472 P.3d 1195; see Driscoll, ¶¶ 20, 24-25 (concluding that a
district court did not abuse its discretion by enjoining legislation where the evidentiary
record demonstrated the likelihood of irreparable injury due to the loss of a right to vote).
Although Netzer alleges the violation of several constitutional rights, he still must
demonstrate, as with all subsections of § 27-19-201, MCA, that, upon balance of the
equities, facts, and particular circumstances of his case, he would suffer an irreparable
injury prior to final resolution on the merits if the highly discretionary relief of preliminary
injunctive relief were not granted.
The Right to a Clean and Healthful Environment
¶21 The Montana Constitution establishes an inalienable right “to a clean and healthful
environment.” Mont. Const. art II, § 3. Netzer interprets “environment” to include indoor
environments. The District Court, like Netzer, found that “environment” as used in Article
II, Section 3, of the Montana Constitution includes indoor environments. Still, because the
court did not find that § 49-2-312, MCA, prevented Netzer from enjoying a clean and
healthful environment in his office, it concluded that his fundamental right had not been
infringed. The court noted that § 49-2-312, MCA, did not prevent Netzer or any other
employer from taking myriad measures to reduce the odds of the indoor environment being
a threat to the health of any employee.
11
¶22 The District Court did not manifestly abuse its discretion in determining that
§ 49-2-312, MCA, would not cause Netzer to suffer an irreparable injury prior to final
resolution on the merits. As noted by the court, § 49-2-312, MCA, does not thwart
employers from taking other significant and effective measures to maintain a clean and
healthful environment in their office. The District Court considered the facts and particular
circumstances of the case and concluded that it was not reasonable to enjoin the statute
because Netzer would not suffer an irreparable injury prior to final resolution on the merits.
We conclude there was no manifest abuse of discretion.
The Right to Pursue Life’s Basic Necessities
¶23 Article II, Section 3, of the Montana Constitution grants Montanans the right to
“pursue life’s basic necessities.” Netzer regards the right to safely operate a business as
one such necessity and claims that § 49-2-312, MCA, would unconstitutionally infringe on
his pursuit of that necessity. The District Court agreed with Netzer that the right includes
owning and operating a business, but Netzer did not identify any means by which
§ 49-2-312, MCA, would interfere with the right and the various pursuits to which it applies
and protects.
¶24 Netzer did not establish a prima facie case that he would suffer, prior to trial, an
irreparable injury due to the alleged unconstitutional burden imposed by § 49-2-312, MCA,
on his right to pursue life’s basic necessities. The court exercised its discretion under the
particular facts and circumstances of this case to conclude that considerations of equity did
not justify issuing a preliminary injunction before trial on the merits. The court reasoned
that Netzer had not demonstrated how the inability to fire and hire employees based on
12
vaccination status would prevent him from pursuing the ownership and operation of his
business. We conclude the court did not manifestly abuse its discretion.
The Right to Enjoy and Defend One’s Life and Liberties
¶25 Article II, Section 3, of the Montana Constitution grants Montanans the right of
“enjoying and defending their lives and liberties[.]” The District Court agreed with Netzer
that the right applies to more situations than just the exercise of self-defense when faced
with an unlawful use of force—the State, however, maintains that the right solely covers
that latter situation. The court, however, refrained from explicitly endorsing Netzer’s
interpretation—that “[t]he plain language of [the right] necessarily includes the right to
defend against deadly diseases and government actions that unnecessarily or seriously
threaten one’s life by increasing exposure to such diseases”—prior to trial on the merits.
Instead, the court acknowledged that the right was broader than the State’s interpretation.
¶26 However, the District Court determined that Netzer failed to establish a prima facie
case that he would suffer, prior to trial, an irreparable injury. The court concluded that
§ 49-2-312, MCA, does not stop employees and employers alike from taking myriad steps
to reduce the odds of their exposure to the COVID-19 virus. The court reasoned that the
purpose of the statute, protecting the public’s welfare by reducing a form of discrimination
in the workplace, is an appropriate exercise of the State’s police power. We make no
conclusions as to the ultimate merits of Netzer’s claim; we only conclude that the court’s
rationale was not arbitrary, unreasonable, or resulted in a substantial injustice under these
particular facts and circumstances. The court’s decision to deny preliminary injunctive
relief did not constitute a manifest abuse of discretion.
13
The Right to Acquire, Possess and Protect Property
¶27 Article II, Section 3, of the Montana Constitution grants Montanans the right of
“acquiring, possessing and protecting property[.]” Netzer claims that § 49-2-312, MCA,
infringes his ability to protect and manage his property—the Netzer Law Firm offices.
¶28 The District Court determined that § 49-2-312, MCA, does not impose any unjust
limitations on Netzer with respect to the operation of the Netzer Law offices. As the court
pointed out, Netzer is not foreclosed from protecting his property through the
implementation of numerous and effective health and safety measures through trial on the
merits. We conclude the court’s rationale was not unreasonable, arbitrary, or that it resulted
in a substantial injustice and, therefore, the court did not manifestly abuse its discretion in
denying preliminary injunctive relief prior to final resolution on the merits.
The Right to Seek Safety, Health, and Happiness
¶29 Article II, Section 3, of the Montana Constitution grants Montanans the right to seek
“their safety, health and happiness[.]” Netzer alleges that this right grants him the authority
to implement “proven health and safety measures during an ongoing pandemic[.]” The
right’s reference to “health” carries great weight in Netzer’s interpretation of its meaning.
Citing only the ordinary meaning of “health” and an isolated quote from the 1972 Montana
Constitutional Convention,5 he concludes that the “undisputed plain language of this
provision supports” his position. Netzer does not cite any caselaw in support of his
interpretation.
5
“[L]ife without health is a very sorry proposition.” Montana Constitutional Convention,
Verbatim Transcripts, March 7, 1972, Vol. V, 1637.
14
¶30 The District Court reasoned that while Montanans have a right to seek health, they
must comply with lawful state regulations while doing so. “[T]he right to seek health is
circumscribed by the State’s police power to protect the public health and welfare.”
Mont. Cannabis Indus. Ass’n v. State, 2012 MT 201, ¶ 22, 366 Mont. 224, 286 P.3d 1161
(internal citation omitted). The State explained the purpose of § 49-2-312, MCA, as
protecting the public’s welfare by reducing a form of discrimination in the workplace.
¶31 Netzer’s opening brief used four sentences—one of which stated the law and
another his conclusion—to allege this error. Given the particular facts and circumstances
of this case, two sentences will not suffice to demonstrate the District Court manifestly
abused its discretion in denying preliminary injunctive relief for this claim. Netzer did not
establish a prima facie case that enforcement of § 49-2-312, MCA, should be enjoined on
the balance of equities prior to trial on the merits.
¶32 Issue Three: Did the District Court err by not evaluating § 49-2-312, MCA, under
any level of constitutional scrutiny?
¶33 Netzer asserts that the District Court incorrectly failed to declare § 49-2-312, MCA,
unconstitutional because the law infringes on fundamental rights and the State did not
demonstrate both a compelling state interest and that § 49-2-312, MCA, is closely tailored
to effectuate that interest.
¶34 The government need not demonstrate that a law survives strict scrutiny or any level
of scrutiny where the movant fails to make out a prima facie case of a violation of its
constitutional rights. See Driscoll, ¶ 39. For the reasons stated above, Netzer failed to
15
make a prima facie case of an infringement of any of the constitutional rights he advanced
through trial on the merits.
¶35 The District Court did not manifestly abuse its discretion. Given Netzer’s failure to
shift the burden to the State, the court had no obligation to review which level of scrutiny
it may have applied to a review of the constitutionality of the statute.
CONCLUSION
¶36 We remand with instructions that the District Court evaluate HB 702 under Article
V, Section 11(3), of the Montana Constitution. In all other respects, we conclude the
court’s rationale was not unreasonable, arbitrary, or that it resulted in a substantial injustice
and, therefore, the court did not manifestly abuse its discretion in denying injunctive relief
prior to resolution of the final merits. The District Court properly denied Netzer’s motion
for preliminary injunction.
¶37 Affirmed in part and remanded for further proceedings consistent with this Opinion.
/S/ MIKE McGRATH
We Concur:
/S/ LAURIE McKINNON
/S/ INGRID GUSTAFSON
/S/ BETH BAKER
/S/ JIM RICE
16 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484229/ | Case: 22-50202 Document: 00516546756 Page: 1 Date Filed: 11/16/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 16, 2022
No. 22-50202
Lyle W. Cayce
Summary Calendar
Clerk
Officer Mary Teague, formerly known as Mary
Werchan,
Plaintiff—Appellant,
versus
Williamson County,
Defendant—Appellee.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:18-CV-1098
Before Higginbotham, Graves, and Ho, Circuit Judges.
Per Curiam:*
Plaintiff Mary Teague (“Teague”) worked as a deputy for the
Williamson County Sheriff’s Office (“Williamson County”) from January
2011 until her honorable discharge in November 2013. Teague later applied
*
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: 22-50202 Document: 00516546756 Page: 2 Date Filed: 11/16/2022
No. 22-50202
to work for the Travis County Constable Precinct Two (“Travis County”)
in 2016 and the Giddings Police Department (“Giddings”) in 2017, but
neither department hired her. Teague claims that Williamson County
retaliated against her by providing negative references to Travis County and
Giddings in violation of Title VII of the Civil Rights Act of 1964 and the
Texas Commission on Human Rights Act (“TCHRA”).
The district court granted Williamson County’s motion for summary
judgment as to these claims. Applying the elements of a prima facie
retaliation claim, 1 the district court concluded that Teague failed to satisfy
the second prong: an adverse employment action. While the provision of a
negative reference may form the basis of a retaliation claim, the district court
found that Teague offered no competent summary judgment evidence that
Williamson County provided a negative reference to either Travis County or
Giddings.
We review a district court’s grant of summary judgment de novo.
Brown v. City of Houston, Tex., 337 F.3d 539, 540 (5th Cir. 2003). We view the
evidence and the inferences to be drawn therefrom in the light most favorable
to the non-moving party. Id. at 541. As a corollary, unsubstantiated
assertions, improbable inferences, and unsupported speculation are not
sufficient to defeat a motion for summary judgment. Id.
The factual background of this appeal is sufficiently set forth in the
district court’s order, and we incorporate it here by reference.
1
To make a prima facie retaliation claim, Teague must demonstrate that: “(1) [she]
engaged in a protected activity pursuant to one of the statutes, (2) an adverse employment
action occurred, and (3) there exists a causal link connecting the protected activity to the
adverse employment action.” Badgerow v. REJ Properties, Inc., 974 F.3d 610, 618 (5th Cir.
2020). The elements are identical for a retaliation claim under TCHRA. Gorman v. Verizon
Wireless Texas, L.L.C., 753 F.3d 165, 170 (5th Cir. 2014).
2
Case: 22-50202 Document: 00516546756 Page: 3 Date Filed: 11/16/2022
No. 22-50202
On appeal, Teague argues there is a genuine issue of material fact as
to whether Williamson County provided a negative reference to Travis
County and Giddings. As in her briefing before the district court, Teague
premises this argument on Texas Government Code § 614.023. Section
614.023 provides that a signed complaint must be given to a law enforcement
officer within a reasonable time and no disciplinary action may be taken
against the officer unless the signed complaint is given. Tex. Gov’t Code §
614.023(a)-(b). Additionally, an officer may not be indefinitely suspended or
terminated unless the complaint is investigated and there is evidence to prove
the allegation of misconduct. Id. § 614.023(c). The district court found this
provision “inapplicable to the current case given that neither party contends
that Teague ever sustained a complaint while employed at Williamson
County or that Williamson County told Teague’s prospective employers that
she had.” Teague disputes this finding and repeatedly asserts in her briefing
that she was subject to three sustained misconduct complaints for
insubordination, endangerment, and untruthfulness during her employment
at Williamson County. She then insists that because she had complaints
lodged against her, she should have been afforded the procedural protections
of section 614.023. As Williamson County points out, there is simply no
record evidence of these complaints. To the contrary, Williamson County’s
Internal Affairs Lieutenant Storey Sherouse confirmed that the investigation
of another officer in which Teague served as a witness was not punitive
against Teague and did not involve investigations of Teague for any policy
violations. According to Williamson County’s form memorializing Teague’s
honorable discharge, she “[r]etired, resigned, or separated from employment
with or died while employed by a law enforcement agency while in good
standing and not because of pending or final disciplinary actions or a
documented performance problem.” On this record, any claim that Teague
was indeed subject to a disciplinary complaint is unsupported speculation
3
Case: 22-50202 Document: 00516546756 Page: 4 Date Filed: 11/16/2022
No. 22-50202
and insufficient to defeat a motion for summary judgment. See Brown, 337
F.3d at 541. Additionally, Teague alleged in her First Amended Complaint
that “no reprimands or disciplinary proceedings were ever conducted against
Officer Teague during her employment with [Williamson County].” Teague
is bound by the allegations in her live pleading, and she may not now seek
factual findings that would contradict them. Davis v. A.G. Edwards & Sons,
Inc., 823 F.2d 105 (5th Cir. 1987) (“Factual assertions in pleadings are
judicial admissions conclusively binding on the party that made them.”).
Teague’s arguments based on section 614.023 are unavailing. After
carefully reviewing the record and the remaining issues raised on appeal, we
agree with the district court that Teague has failed to present summary
judgment evidence to establish the second element of her retaliation claims.
Therefore, we AFFIRM for the reasons discussed above in addition to the
reasons set forth by the district court, and we incorporate its order in full by
reference.
AFFIRMED.
4 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484227/ | Case: 21-51150 Document: 00516547179 Page: 1 Date Filed: 11/16/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
November 16, 2022
No. 21-51150 Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee,
versus
Kevin Lavern Johnson, II,
Defendant—Appellant.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 6:21-CR-26-1
Before Richman, Chief Judge, and Elrod and Oldham, Circuit Judges.
Per Curiam:*
Kevin Lavern Johnson, II and his partner-in-crime stole four guns and
a safe. He was later arrested after leading police on a high-speed car chase
through residential neighborhoods. Johnson pleaded guilty to possessing a
stolen firearm and was sentenced to 110 months in prison. Johnson raises
*
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: 21-51150 Document: 00516547179 Page: 2 Date Filed: 11/16/2022
No. 21-51150
three challenges to his sentence. The first two are meritless, but the third
necessitates a new sentencing hearing.
I.
A.
Kevin Lavern Johnson, II and Emilio Terrazas were smoking
marijuana with three women when one of the women noticed a firearm was
missing from the living room entertainment center. She confronted Johnson
and Terrazas. They responded by stealing three more firearms and a safe,
shoving the woman against the wall, and pointing a gun at her head while
commanding her to “shut up.” Two witnesses overheard the robbery, and
one chased Johnson and Terrazas as they fled to their car. But the witness
backed off when one of the robbers pointed a gun at him. The owner of the
apartment and the firearms—a soldier who was away from home for military
exercises—later identified the stolen guns as a Galil Ace AK-47, a Palmetto
State Armory AR-15, a Century Arms AK-47, and a Sig Sauer 1911 pistol.
Several photos appeared on social media of Johnson with the Galil.
Three weeks later—on February 8, 2021—Johnson and Terrazas
robbed a convenience store in Killeen, TX. The same day, an FBI task force
commenced an investigation and discovered that Terrazas was hiding out in
a camper. They set up surveillance in the area. And when Terrazas realized
he was surrounded by police, he called Johnson and asked Johnson to rescue
him. Johnson agreed. He borrowed his girlfriend’s SUV, picked up Terrazas,
and led agents on a high-speed chase of up to 90 mph through residential
neighborhoods. During the chase an agent identified Johnson in the back seat
of the SUV, holding the stolen Galil.
The SUV ultimately reached a dead end, jumped a curb, and stopped.
Then Johnson and Terrazas fled on foot. Terrazas was found hiding behind
2
Case: 21-51150 Document: 00516547179 Page: 3 Date Filed: 11/16/2022
No. 21-51150
a shed in a residential area. Johnson escaped. He left the Galil behind an
unknown residence and paid a “stupid white boy” to retrieve it later.
When Johnson was later located and arrested, he initially denied
committing any robberies. But after being confronted with the social media
photos, he admitted to participating in the apartment robbery, picking up
Terrazas in his girlfriend’s SUV, and possessing the Galil during the high-
speed chase.
A Waco grand jury charged Johnson with possessing a stolen firearm,
the Galil, in violation of 18 U.S.C. § 922(j). Johnson pleaded guilty.
B.
The Presentence Report (“PSR”) determined that U.S.S.G. § 2K2.1
provided the offense level for a violation of 18 U.S.C. § 922(j). But because
the firearm Johnson possessed was used in connection with a robbery, the
PSR followed the cross-reference provision of § 2K2.1(c)(1) to the robbery
guideline, § 2B3.1. Consequently, it assigned Johnson a base offense level of
20 and assessed a total of 7 levels in enhancements under § 2B1.3(b). The
PSR also assessed a two-level enhancement for obstruction of justice under
§ 3C1.2 because Johnson recklessly created a substantial risk of death or
serious bodily injury while fleeing from law enforcement. With a three-level
reduction for acceptance of responsibility, Johnson’s total offense level was
26. And the PSR assigned him to criminal history category II. This created
an advisory guidelines range of 70–87 months’ imprisonment.
Johnson objected to the PSR calculations. First, he asserted that the
cross-reference to the robbery guideline should not apply because there was
no evidence that he used the Galil in connection with a robbery. Second,
Johnson challenged the two-level enhancement for reckless endangerment.
He asserted that because he was merely a passenger in the fleeing SUV, he
3
Case: 21-51150 Document: 00516547179 Page: 4 Date Filed: 11/16/2022
No. 21-51150
couldn’t have created a substantial risk of harm to anyone. The district court
overruled both objections.
At sentencing, the court adopted the findings and conclusions in the
PSR without change, advised Johnson that it was considering an upward
variance, and continued the hearing to give Johnson time to prepare. Prior to
the reconvened hearing, Johnson filed a memorandum in which he made
various arguments in mitigation of his sentence: the absence of his father
during his childhood, his youth at the time of the offense, his experience
being sexually molested as a child, his bipolar disorder and other mental
health issues, his good grades in high school, and his close family
connections. He attached several letters from family members and a former
teacher in support of his memo.
At the reconvened sentencing hearing, Johnson’s attorney presented
testimony from Johnson’s father but made no arguments of his own. The
court concluded that an upward variance was appropriate. Without affording
Johnson the opportunity to allocute, the court sentenced Johnson to 110
months’ imprisonment followed by three years of supervised release.
Johnson timely appealed, challenging his sentence based on the
court’s guidelines calculations and violation of his allocution right. We have
jurisdiction under 18 U.S.C. § 3742 and 28 U.S.C. § 1291. Because the
guidelines challenges were preserved, “we review the district court’s
interpretation and application of the guidelines de novo and its factual
findings . . . for clear error.” United States v. Perryman, 965 F.3d 424, 426
(5th Cir. 2020) (quotation omitted). “A factual finding is not clearly
erroneous if it is plausible in light of the record as a whole,” and we find clear
error “only if a review of the record results in a definite and firm conviction
that a mistake has been committed.” United States v. Zuniga, 720 F.3d 587,
590 (5th Cir. 2013) (quotation omitted). Plain-error review applies to the
4
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unpreserved allocution violation. United States v. Brooker, 858 F.3d 983, 985
(5th Cir. 2017).
II.
Johnson first argues that § 2K2.1(c)(1)’s cross-reference to the
robbery guideline should not apply. We disagree.
The applicable offense level for possession of a stolen firearm is found
at § 2K2.1. But § 2K2.1(c)(1) instructs that a cross-reference to the guideline
for a different offense should instead apply if the cross-reference increases
the offense level and “the defendant used or possessed any firearm or
ammunition cited in the offense of conviction in connection with the
commission or attempted commission of another offense[.]” U.S.S.G.
§ 2K2.1(c)(1). The phrase “in connection with” is defined as “facilitated, or
had the potential of facilitating.” U.S.S.G. § 2K2.1, cmt., n.14(A). Thus, the
cross-reference is applicable if the defendant used or possessed the stolen
firearm and such use or possession facilitated, or had the potential to
facilitate, the commission or attempted commission of another offense.
The district court found that Johnson’s possession of the stolen Galil
during the apartment robbery facilitated, or had the potential of facilitating,
the commission of the apartment robbery. Johnson asserts this was clear error
because (1) he could not use a gun he had not yet stolen to facilitate the same
robbery in which he stole it, and (2) there is no evidence that he “pointed
[the Galil] at the head of one of the females.” He urges that for the
§ 2K1.2(c)(1) cross-reference to apply, his possession of the stolen firearm
had to precede, and be independent from, the cross-referenced robbery.
The Government counters with United States v. Armstead, 114 F.3d
505 (5th Cir. 1997). There, the Armsteads were convicted under 18 U.S.C.
§ 922(u) for stealing firearms from a licensed firearms dealer. Id. at 505. We
upheld the district court’s application of the sentencing enhancement under
5
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§ 2K2.1(b)(5), 1 which provided a four-level increase if the defendant “used
or possessed” the stolen firearms “in connection with another felony
offense.” Ibid. Even though the defendants came into possession of the
firearms during a burglary, we nevertheless held that the burglary was
“another felony offense” that occurred “in connection with” the
defendants’ firearm possession. Id. at 510–13.
It is true that Armstead did not involve the specific cross-reference
provision at issue here, § 2K2.1(c)(1). But the operative text in the two cross-
references is similar. Cf. United States v. Mitchell, 166 F.3d 748, 756 (5th Cir.
1999) (analyzing the similarity and holding § 2K2.1(c)(1) “mandates a closer
relationship between the firearm and the other offense than that required for
§ 2K2.1(b)(5)” (quotation omitted)). And the application note to § 2K2.1
explicitly says that § 2K2.1(c)(1) applies
. . . in a case in which a defendant who, during the course of a
burglary, finds and takes a firearm, even if the defendant did
not engage in any other conduct with that firearm during the
course of the burglary . . . because the presence of the firearm
has the potential of facilitating . . . another offense.
U.S.S.G. § 2K2.1, cmt., n.14(B).
Of course, Application Note 14(B) discusses burglary. But Johnson
offers no compelling reason—or any argument at all—why the same logic
doesn’t apply to the robbery context. If anything, this case provides a clear
example of how a stolen gun can be used to facilitate the same robbery in
which it was stolen: After Johnson and Terrazas stole and possessed all four
firearms, they then stole a safe, shoved one of the women against the wall
while pointing a gun at her head, and fended off the witness who tried to
1
The identical provision was later moved to § 2K2.1(b)(6).
6
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thwart their getaway by threatening him with a gun. The Galil thus clearly
facilitated, or had the potential of facilitating, the apartment robbery. And
that is all the Guidelines require.
III.
Next, Johnson argues that the § 3C1.2 obstruction enhancement was
improper because he was merely a backseat passenger during the high-speed
chase of up to 90 mph through residential neighborhoods. Section 3C1.2
provides for a two-level increase in a defendant’s offense level if, in fleeing
from a law enforcement officer, “the defendant recklessly created a
substantial risk of death or serious bodily injury to another person.” U.S.S.G.
§ 3C1.2. “[T]he flight [must be] related to the offense the defendant is
convicted of violating.” United States v. Gould, 529 F.3d 274, 276 (5th Cir.
2008). And the Guideline commentary clarifies that a “defendant is
accountable for [his] own conduct and for conduct that the defendant aided
or abetted, counseled, commanded, induced, procured, or willfully caused.”
U.S.S.G. § 3C1.2, cmt., n.5.
Johnson does not dispute that Terrazas’s actions would qualify for the
obstruction enhancement. That is because “leading police officers on a high-
speed chase . . . by itself create[s] a substantial risk of serious injury.” United
States v. Lee, 989 F.2d 180, 183 (5th Cir. 1993). Likewise, because Johnson
possessed the Galil during that chase, there is a sufficient nexus between the
flight and his underlying conviction for possession of the stolen Galil. See
United States v. Witt, 187 F. App’x 406, 407–08 (5th Cir. 2006) (per curiam)
(citing United States v. Southerland, 405 F.3d 263, 268 (5th Cir. 2005)).
Instead, Johnson argues that a mere backseat passenger does not
deserve the enhancement. See United States v. Iracheta-Garces, 2001 WL
1485742 (5th Cir. Nov. 7, 2001) (per curiam) (so holding). But Johnson was
no mere backseat passenger. Instead, Johnson’s involvement in the chase is
7
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closer to United States v. Terrazas, 815 F. App’x 767, 770 (5th Cir. 2020) (per
curiam), where we upheld the district court’s finding of reckless
endangerment for a passenger in a high-speed chase who ignored the driver’s
repeated instructions to get out of the vehicle and who fled on foot when the
high-speed pursuit ended—indicating that he was an “active participant
throughout the pursuit” and “not merely a passenger.” Or United States v.
Lima-Rivero, 971 F.3d 518, 520 n.1 (5th Cir. 2020), where we determined that
the enhancement was appropriate because the defendant continued the chase
on foot and hid from police, thereby aiding and abetting his coconspirator’s
flight. Johnson agreed to pick up Terrazas to help his partner-in-crime avoid
arrest, provided the getaway car, held a stolen firearm in the car during the
high-speed chase, continued to flee on foot after the car chase ended, hid his
weapon, and successfully evaded arrest. Thus, the district court’s reckless-
endangerment finding was not clearly erroneous, and its application of the
Guidelines was manifestly correct.
IV.
Finally, Johnson argues that the district court committed reversible
error by denying him the opportunity to allocute at sentencing. The parties
agree that this claim is reviewable under the familiar four-part plain-error
standard. See Puckett v. United States, 556 U.S. 129 (2009). The parties also
agree that Johnson meets the first three prongs. The only dispute is on the
fourth.
The fourth plain-error prong asks whether the “failure to correct the
error would seriously affect the fairness, integrity or public reputation of
judicial proceedings.” United States v. Sanchez-Hernandez, 931 F.3d 408, 410
(5th Cir. 2019) (quotation omitted). We have held that, “we will ordinarily
remand for resentencing” where a district court commits plain error by
denying the right to allocution. United States v. Chavez-Perez, 844 F.3d 540,
8
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543 (5th Cir. 2016); see also Reyna, 358 F.3d at 352–53 (similar); United States
v. Avila-Cortez, 582 F.3d 602, 606 (5th Cir. 2009) (similar). That said,
allocution errors aren’t “fundamental defect[s] that inherently result[] in a
complete miscarriage of justice,” United States v. Magwood, 445 F.3d 826,
830 (5th Cir. 2006) (quotation omitted), so reversal is “not automatic,”
Avila-Cortez, 582 F.3d at 604. Instead, we “conduct a thorough review of the
record” to determine whether to exercise our discretion to correct the error.
Reyna, 358 F.3d at 353; see also Avila-Cortez, 582 F.3d at 605 (“[T]his is a
highly fact-specific inquiry.”) “Among the factors we consider are [A]
whether the defendant had a prior opportunity to allocute, [B] whether the
defendant has explained what exactly he or she would have said during
allocution that might mitigate the sentence, and [C] whether defense counsel
offered mitigating arguments on behalf of the defendant.” Aguirre-Romero,
680 F. App’x at 296 (quotation omitted); see also Palacios, 844 F.3d at 532
(outlining the same factors).
A.
We first consider whether Johnson had earlier opportunities to
allocute. In Reyna, for example, the defendant had two allocution
opportunities in prior proceedings before the same judge. 358 F.3d at 352–53.
And at the second proceeding, the judge warned Reyna that he would
automatically receive a one-year sentence if he ever breached the supervised
release. Ibid. Reyna breached his terms of release. And the court did exactly
what it had warned it would but denied Reyna an opportunity to allocute at
the final hearing. Based on the “unusual” posture of the case, we decided
that the error didn’t seriously affect the fairness, integrity, or public
reputation of judicial proceedings. Id. at 353. By contrast, where the
defendant did not have earlier opportunities to allocate, the first factor
generally favors resentencing. See United States v. Lister, 229 F. App’x 334
(5th Cir. 2007); Figueroa-Coello, 920 F.3d at 265–66 (considering whether
9
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defendant had “several prior clear chances to allocute”); Aguirre-Romero,
680 F. App’x at 296 (same).
The only words Johnson uttered during the entire reconvened hearing
were “Yes, sir”—in response to the district court’s questions whether
Johnson understood why he was there and whether he was prepared to
proceed. Cf. Avila-Cortez, 582 F. 3d at 605 (reversing where the only time
defendant spoke was when he twice said “Yes, sir”). This is obviously a stark
difference from the situation in Reyna. And it weighs in favor of resentencing.
See, e.g., Palacios, 844 F.3d at 530, 532 (“[T]he district court allowed
[defendant] the opportunity to speak with regard to acceptance of
responsibility,” thus going beyond “barely addressing the defendant at all.”
(quotation omitted)); Aguirre-Romero, 680 F. App’x at 294 (“[Defendant]
engaged in a colloquy with the court regarding his convictions for injury to a
child, representing that he had the support of his family, he did not hurt his
daughter, he believed he was pleading guilty only to endangering a child, the
other people living with them were responsible for his daughter’s injuries,
and he was a loving father.”); cf. Avila-Cortez, 582 F.3d at 607 (“[Defendant]
was never given any opportunity whatsoever to speak to the court, which is
unlike any of the cases in which we have declined to exercise our discretion
to correct the error.”).
B.
Next we consider what evidence the defendant would have included
in his allocution. As we have said elsewhere, defendants are ordinarily
required “to show some objective basis that would have moved the trial court
to grant a lower sentence.” Chavez-Perez, 844 F.3d at 545 (quotation
omitted). The proposed allocution need not be particularly “lengthy” or
“extensive,” but it must be “sufficiently detailed and specific.” Figueroa-
Coello, 920 F.3d at 266–67 (comparing defendant’s proposed allocution with
10
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the lengthy allocution in Palacios and the less extensive allocution in Avila-
Cortez—both of which were sufficient to trigger remand); cf. United States v.
Neal, 212 F. App’x 328, 332 (5th Cir. 2007) (declining to correct the error
where defendant asserted “conclusionally he was not given an opportunity
to discuss his ‘family, background, his conduct in prison, his activities during
his months of successful supervised release, or other areas’”); Chavez-Perez,
844 F.3d at 545 (similarly conclusory). In Magwood, for example, the
defendant did “not furnish any information about what he would have
allocuted to that might have mitigated his sentence,” so we affirmed despite
the denial of allocution. 445 F.3d at 830 (emphasis added).
Johnson, unlike Magwood, provides a detailed and specific
description of the mitigating facts he would have offered had he been afforded
the opportunity to speak. Johnson explains in his brief that he would have
expressed remorse; explained his childhood trauma, mental health issues
(including bipolar disorder, ADHD, and oppositional defiant disorder), and
intent to return to psychiatric care (which had helped in the past);
underscored his good grades and family support; and articulated his plan to
finish high school, attend college or trade school, and find a job in which he
could help others. Johnson’s proposed allocution was supported by a five-
page sentencing memorandum and six letters from family members and a
former teacher. Particularly important are Johnson’s remorse, desire to seek
psychiatric care, and plan to return to school. See Figueroa-Coello, 920 F.3d
at 268 (“We have previously recognized statements of remorse and sincere
willingness to change as a possible ‘objective basis’ for lessening a
sentence.”). Thus, Johnson’s proposed allocution is adequately specific and
“constitutes ‘some objective basis’ that could have influenced [his]
sentence.” Aguirre-Romero, 680 F. App’x at 298 (quoting Magwood, 445 F.3d
at 830).
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C.
Finally, Johnson’s attorney made no mitigating arguments at
sentencing, and Johnson’s father only spoke about a small subset of
Johnson’s proposed mitigation considerations. “The right of allocution
exists because counsel may not be able to provide the same quantity or quality
of mitigating evidence as the defendant at sentencing.” Figueroa-Coello, 920
F.3d at 268 (quotation omitted); see Green v. United States, 365 U.S. 301, 304
(1961) (“The most persuasive counsel may not be able to speak for a
defendant as the defendant might, with halting eloquence, speak for
himself.”). That said, whether counsel made mitigating arguments at
sentencing is still relevant to whether an uncorrected allocution error would
seriously affect the fairness, integrity, or public reputation of judicial
proceedings. In many of our allocution cases, counsel spoke in favor of
mitigation during the sentencing hearing, 2 and we evaluated whether the
defendant’s proposed allocution would have added something over and
above what their attorney had already presented. E.g., Chavez-Perez, 844 F.3d
at 545 (“Most of the arguments Chavez-Perez claims he would have made
were raised either by him or defense counsel at the sentencing hearing, and
2
See, e.g., Magwood, 445 F.3d at 830 (“The district court heard arguments from
Magwood’s counsel, who put forward mitigating factors[.]”); Avila-Cortez, 582 F.3d at 606
(“During Avila-Cortez’s sentencing, his counsel gave general mitigation arguments in an
attempt to secure a sentence at the low end of the Guidelines range.”); Palacios, 844 F.3d
at 533 (“Palacios’s defense counsel made a few, somewhat cursory, mitigating statements
on Palacios’s behalf[.]”); Chavez-Perez, 844 F.3d at 542 (“Defense counsel . . . offered
numerous reasons for a low-end Guidelines sentence.”); Aguirre-Romero, 680 F. App’x at
296 (“[C]ounsel did put forward several arguments on Aguirre-Romero’s behalf.”);
Figueroa-Coello, 920 F.3d at 263–64 (counsel offered various mitigation arguments and
“ask[ed] for a sentence as lenient as possible”); United States v. Villegas, 2022 WL
2073831, at *2 (5th Cir. June 9, 2022) (“Most of the arguments Villegas claims he would
have made were raised either by those letters or defense counsel at the sentencing hearing,
and Villegas does not provide any new mitigating information in his appellate brief.”
(quotation omitted)).
12
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Chavez-Perez does not provide any new mitigating information in his
appellate brief.”). When defense counsel makes no mitigating arguments on
behalf of the defendant, the defendant’s allocution is all the more important.
Here, Johnson’s counsel made no argument in mitigation; made no
reference to the mitigation facts included in the sentencing memorandum;
and, other than presenting the testimony of Johnson’s father, did nothing to
oppose the court’s proposed upward variance. Thus, any mitigation
argument Johnson might have made during allocution would necessarily have
been more fulsome than that provided by counsel. See Palacios, 844 F.3d at
532 (“[Defendant’s proposed] statement is specific, thorough, and gives
detail, expression, and expansion to the statements provided by defense
counsel.” (quotation omitted)).
The Government counters that Johnson’s arguments were
nevertheless before the district court via the sentencing memorandum, the
PSR, and his father’s presentation. That might have made a difference had
the district court demonstrated it read and considered the memorandum.
Compare Palacios, 844 F.3d at 533 (“[A]s in Avila-Cortez, the record in this
case does not indicate that the district court contemplated, or subsequently
rejected, defense counsel’s mitigating statements.”), with Villegas, 2022 WL
2073831, at *2 (“[M]ost of the arguments Villegas claims he would have
made were raised either by those letters or defense counsel . . . , [and] the
record shows that the sentencing judge read the letters.” (quotation
omitted)); see also Figueroa-Coello, 920 F.3d at 267 (“[I]tems referenced in
the PSR but not referenced by counsel will be treated as ‘specific facts or
additional details’ that may persuade the trial court, and thus may constitute
grounds for remand.”). The district court did not do so, however, so a new
sentencing hearing is warranted.
VACATED and REMANDED.
13 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484240/ | Filed 11/16/22 P. v. Saechao CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
THE PEOPLE, C095794
Plaintiff and Respondent, (Super. Ct. No. 06F01200)
v.
NAI SAECHAO,
Defendant and Appellant.
In 2007, defendant Nai Saechao pled guilty to first degree murder and admitted the
perpetrator was armed with a firearm and intentionally killed the victim by lying in wait.
In 2021, defendant filed a petition for resentencing under Penal Code section 1172.61
(former section 1170.95), which the trial court denied. Defendant appeals that denial,
1 Undesignated statutory references are to the Penal Code. Effective June 30, 2022,
former section 1170.95 was recodified without substantive change to section 1172.6.
(Stats. 2022, ch. 58, § 10.)
1
contending the trial court erred in finding him ineligible for relief as a matter of law. We
will affirm the judgment.
I. BACKGROUND
The factual basis for defendant’s 2007 guilty plea was drawn from the
prosecution’s trial brief, summarized on the record as follows:
“[I]n 2005 the defendant was married—had a common law marriage with the
victim Si Saeturn. And in the summer or the spring of 2005 the defendant began an
extra-marital relationship with Mimi Le, who became pregnant, that the defendant’s wife,
the victim in this case, Si Saeturn, learned about the affair, tried to stop it, that in the fall
of 2005 the defendant and Mimi Le began to conspire to have the victim Si Saeturn
killed, that in efforts to do that the defendant made various attempts to obtain a firearm,
that Mimi Le made various attempts to obtain a firearm, that in fact the defendant
approached his cousins, a Khae Saephanh and Lo—and Chiang Saephanh and also a
friend of theirs named Lo Saephanh and they became involved with the conspiracy on the
defendant’s behest to have his wife murdered.
“And ultimately on the 29th of December, 2005, the defendants Khae Saephanh
and Lo Saephanh went to a park where they essentially recruited a juvenile . . . and
offered him money—up to $400 if he would actually commit the killing. They drove the
juvenile to the scene of where the victim was working. Around [10] p.m. she got off
work, left her business. [The juvenile] came up to her and shot her once in the head and
once in the abdomen. He had been waiting—lying in wait for at least 10 to 20 minutes
hiding behind a wall for her to come out to catch her by surprise which he did.
“The evidence will show that the defendant in this case aided and abetted Khae
Saephanh, Lo Saephanh, and [the juvenile] by conspiring with them, by orchestrating the
procurement of a weapon and ammunition for that weapon to be used in this murder.”
Defense counsel agreed the factual basis “would be a sufficient basis for this
plea.” Defendant personally indicated he did not disagree with the factual basis. He pled
2
guilty to murdering Si “unlawfully and with malice aforethought and with premeditation
and deliberation” (§§ 187, subd. (a), 189), admitted the special circumstance that she was
intentionally killed by lying in wait (§ 190.2, subd. (a)(15)), and admitted an allegation
that a principal was armed with a firearm (§ 12022, subd. (a)(1)). In exchange, a count of
murder of a fetus, a multiple murder special circumstance allegation (§ 190.2, subd.
(a)(3)), and a count of conspiracy (§ 182, subd. (a)(1)) were dismissed in the interest of
justice. Pursuant to the plea agreement, defendant was sentenced to state prison for life
without the possibility of parole, plus one year. We affirmed the judgment with a
modification to defendant’s custody credits. (People v. Saechao (May 5, 2008, C056926)
[nonpub. opn.].)
In March 2022, the trial court denied defendant’s 2021 petition for resentencing
pursuant to section 1172.6, which grants resentencing relief to those convicted under
now-defunct theories of imputed malice based solely on their participation in a crime.
The court concluded defendant was ineligible for relief as a matter of law because
“readily ascertainable facts in the record show that his murder conviction is still valid
under current law,” namely, “the stipulated factual basis show[s] that Saechao conspired
with his lover to kill his wife; recruited people to do the killing; provided those people
with ammunition; helped develop the plan for carrying it out by lying in wait; and then
pressured them into carrying out the murder.” The court noted that “[t]he record contains
no factual circumstances that support the notion that Saechao was prosecuted under either
a felony murder or [natural and probable consequences] theory.” And, “when Saechao
admitted that the lying-in-wait special circumstance was true, he necessarily
acknowledged that he acted with the intent to kill.” The court concluded, “there is simply
no plausible basis to support the notion that Saechao’s murder conviction was premised
on a defunct felony-murder or [natural and probable consequences] theory.”
3
II. DISCUSSION
Defendant contends the trial court erred when it ruled his resentencing petition did
not present a prima facie case for relief because his stipulation to the prosecution’s
recitation of facts reflected in its trial brief “did not foreclose the possibility of the
defense presenting facts that could have undermined or countermanded the prosecution’s
evidence.” We disagree.
Senate Bill No. 1437 (2017-2018 Reg. Sess.) (Stats, 2018, ch. 1015; Senate Bill
1437), which became effective on January 1, 2019, restricted the application of the
felony-murder rule and the natural and probable consequences doctrine, as applied to
murder, by amending sections 188 and 189. (People v. Lamoureux (2019)
42 Cal.App.5th 241, 248-249.) As amended, section 188 provides that “[e]xcept as stated
in subdivision (e) of Section 189, in order to be convicted of murder, a principal in a
crime shall act with malice aforethought. Malice shall not be imputed to a person based
solely on his or her participation in a crime.” (§ 188, subd. (a)(3); Stats. 2018, ch. 1015,
§ 2.) Senate Bill 1437 added subdivision (e) of section 189 to provide that “[a]
participant in the perpetration or attempted perpetration of a felony listed in subdivision
(a) in which a death occurs is liable for murder only if one of the following is proven: [¶]
(1) The person was the actual killer. [¶] (2) The person was not the actual killer, but,
with the intent to kill, aided, abetted, counseled, commanded, induced, solicited,
requested, or assisted the actual killer in the commission of murder in the first degree. [¶]
(3) The person was a major participant in the underlying felony and acted with reckless
indifference to human life, as described in subdivision (d) of Section 190.2.” (Stats.
2018, ch. 1015, § 3.)
Senate Bill 1437 also added former section 1170.95, “which provides a procedure
for convicted murderers who could not be convicted under the law as amended to
retroactively seek relief.” (People v. Lewis (2021) 11 Cal.5th 952, 959.) If a prima facie
showing of eligibility is made, the trial court must issue an order to show cause and hold
4
an evidentiary hearing to determine whether to vacate the conviction and recall the
sentence. (§ 1172.6, subds. (c), (d).) The burden shifts to the prosecution to prove
beyond a reasonable doubt that the petitioner is guilty of murder under the amended
versions of sections 188 and 189. (Id., subd. (d)(3).)
To make a prima facie case for eligibility under section 1172.6, the petitioner must
show: “(1) A complaint, information, or indictment was filed against the petitioner that
allowed the prosecution to proceed under a theory of felony murder [or] murder under the
natural and probable consequences doctrine . . . . [¶] (2) The petitioner . . . accepted a
plea offer in lieu of a trial at which the petition could have been convicted of murder
. . . . [¶] (3) The petitioner could not presently be convicted of murder . . . because of
changes to [s]ection 188 or 189 made effective January 1, 2019.” (§ 1172.6, subd. (a).)
“[T]he ‘prima facie bar was intentionally and correctly set very low.’ ” (People v. Lewis,
supra, 11 Cal.5th at p. 972.) The trial court must accept the petitioner’s allegations as
true and “should not engage in ‘factfinding involving the weighing of evidence or the
exercise of discretion.’ ” (Ibid.) “The record of conviction will necessarily inform the
trial court’s prima facie inquiry under section [1172.6], allowing the court to distinguish
petitions with potential merit from those that are clearly meritless. This is consistent with
the statute’s overall purpose: to ensure that murder culpability is commensurate with a
person’s actions, while also ensuring that clearly meritless petitions can be efficiently
addressed as part of a single-step prima facie review process.” (Id. at p. 971.)
A petitioner is ineligible for relief as a matter of law if the record of conviction
shows that he or she was not convicted under a theory of liability affected by Senate Bill
1473’s amendments to the law of murder. (People v. Mancilla (2021) 67 Cal.App.5th
854, 864.) One such theory, applicable here, is directly aiding and abetting murder.
“Senate Bill 1437 does not eliminate direct aiding and abetting liability for murder
because a direct aider and abettor to murder must possess malice aforethought.”
(People v. Gentile (2020) 10 Cal.5th 830, 848.) Under “direct aiding and abetting
5
principles, an accomplice is guilty of an offense perpetrated by another if the accomplice
aids the commission of that offense with ‘knowledge of the direct perpetrator’s unlawful
intent and [with] an intent to assist in achieving those unlawful ends.’ ” (Id. at p. 843.)
Here, defendant necessarily admitted to directly aiding and abetting murder with
malice aforethought when he pled guilty to first degree murder of Si. He admitted the
killing was committed intentionally by lying in wait, which requires intent to kill. (See
People v. Robbins (2018) 19 Cal.App.5th 660, 670 [“ ‘ “Lying in wait is the functional
equivalent of proof of premeditation, deliberation, and intent to kill” ’ ”].) Had he
proceeded to trial, he faced the charge of conspiracy to commit murder, which also
requires intent to kill. (See People v. Swain (1996) 12 Cal.4th 593, 602, 607.) Instead,
he personally acceded to the prosecution’s summary of the factual basis for his plea,
which established defendant sought to have Si killed and orchestrated the procurement of
a firearm and ammunition to achieve that end. Moreover, unlike the authorities
defendant relies on, there is no mention in this record of a lesser crime that could have
been used as the basis for felony murder liability or as a target offense under the natural
and probable consequences doctrine. (Compare People v. Eynon (2021) 68 Cal.App.5th
967, 978 [defendant admitted murder was committed during a robbery]; People v. Rivera
(2021) 62 Cal.App.5th 217, 239 [evidence of intent to participate in target offense of
assault].) The record thus admits of no factual dispute that defendant, as a direct aider
and abettor to murder, harbored murderous intent. Accordingly, no weighing of evidence
or exercise of discretion was necessary for the trial court to conclude defendant is, as a
matter of law, ineligible for relief under section 1172.6.
6
III. DISPOSITION
The judgment is affirmed.
/S/
RENNER, J.
We concur:
/S/
ROBIE, Acting P. J.
/S/
EARL, J.
7 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484235/ | Filed 10/20/22; Certified for Publication 11/16/22 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
NATASHA THOMPSON, B307969 & B311569
Plaintiff and Appellant, Los Angeles County
Super. Ct. No. BC687511
v.
COUNTY OF LOS ANGELES et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Mark A. Young, Judge. Affirmed.
The Law Office of Cliff Dean Schneider and Cliff Dean
Schneider for Plaintiff and Appellant.
David Weiss Law, David J. Weiss, Nicholas A. Weiss, and
Skyla L. Gordon for Defendants and Respondents.
____________________
Natasha Thompson sued the County of Los Angeles and
other county defendants (the County) for removing her son, J.G.,
from her care.
The County demurred. The trial court sustained the
demurrer without leave to amend. It found the County was
immune from suit and Thompson failed to allege a mandatory
duty sufficient to overcome immunity. Thompson appealed
(appellate case No. B307969). She says she alleged a mandatory
duty and, in the alternative, the court should have allowed her to
amend her complaint.
The court later denied Thompson’s motion to tax expert
witness fees. Thompson appealed this ruling (appellate case No.
B311569).
We consolidated the two appeals for oral argument and
opinion. We affirm.
I
J.G. is the son of Natasha Thompson and Delmas Griffin.
On August 31, 2016, when he was four years old, J.G. fell at his
school’s playground. The fall fractured his arm. J.G. has a
developmental delay and was nonverbal.
Two days after the fall, J.G.’s parents took him to a doctor.
The doctor did not diagnose the fracture as abuse by J.G.’s
parents.
The principal at J.G.’s school called the Los Angeles Police
Department and reported physical abuse of J.G. by an unknown
party.
The Los Angeles County Department of Children and
Family Services investigated J.G.’s injury. A Department social
worker spoke to police officers, J.G.’s school principal, Thompson,
Griffin, and J.G. The social worker reported that when she asked
2
J.G. who injured him, J.G. pointed to Griffin, J.G.’s father. The
social worker concluded J.G. was at risk of harm and took him
into protective custody on September 15, 2016. The Department
filed a Welfare and Institutions Code section 300 petition.
A juvenile court found there was prima facie evidence J.G.
was a child described in Welfare and Institutions Code section
300 and detention was appropriate.
On December 24, 2016, a forensic child abuse expert
reported J.G.’s injury could have been an accident.
On January 5, 2017, the juvenile court dismissed the
petition and released J.G. to his parents.
On December 19, 2017, Thompson and Griffin sued the
County in Los Angeles Superior Court. Only Thompson has
appealed. For readability, we refer to the trial court plaintiffs as
“Thompson.”
On February 16, 2018, Thompson filed a first amended
complaint. This complaint is not in our record. It apparently
contained state and federal claims.
The County removed the case to federal court, where
Thompson filed a second amended complaint. On March 11,
2019, the federal court granted motions for summary judgment in
the County’s favor for Thompson’s federal claims and remanded
the remaining claims to state court.
On October 8, 2019, Thompson filed another second
amended complaint in state court alleging two causes of action:
negligence per se and intentional infliction of emotional distress.
The County demurred.
The court sustained the demurrer and dismissed
Thompson’s claims with prejudice. The court concluded
Thompson did not allege a mandatory duty.
3
After the court sustained the demurrer, the County filed a
memorandum of costs seeking $51,997.52. This figure included
$37,315 in expert fees. The form the County used specified the
expert fees were “per Code of Civil Procedure section 998.” That
section permits a defendant who makes a settlement offer that
the plaintiff does not accept to recover costs for expert witnesses
in certain circumstances. (Id., subd. (c)(1).)
Thompson moved to tax costs. As to the expert fees, her
motion said the fees should not be taxed for several reasons.
Thompson did not mention Code of Civil Procedure section 998 in
the motion.
The County opposed the motion and argued it was entitled
to fees under Code of Civil Procedure section 998 because it had
made a settlement offer in federal court. In reply, Thompson
argued for the first time that this section did not apply.
The trial court denied the motion to tax expert fees. The
court gave two grounds for its decision. First, Thompson gave no
legal authority to support her argument about why Code of Civil
Procedure section 998 did not apply. Second, Thompson waived
the argument by failing to raise it in her initial motion.
Thompson appealed the court’s rulings on the demurrer
and the motion to tax costs.
II
A
The trial court correctly sustained the demurrer. Because
Thompson attacks the trial court’s finding about the mandatory
duty exception to immunity, only, we limit our discussion to this
issue. The trial court properly found Thompson did not allege a
breach of a mandatory duty sufficient to overcome immunity.
4
Although Thompson does not cite this provision in her
appellate briefing, her mandatory duty argument seems to be
about Government Code section 815.6, which says, “Where a
public entity is under a mandatory duty imposed by an
enactment that is designed to protect against the risk of a
particular kind of injury, the public entity is liable for an injury
of that kind proximately caused by its failure to discharge the
duty unless the public entity establishes that it exercised
reasonable diligence to discharge the duty.”
Liability under Government Code section 815.6 may only
be based on an enactment that creates an obligatory duty and
may not be based on a discretionary or permissive duty. (Haggis
v. City of Los Angeles (2000) 22 Cal.4th 490, 498.) It is not
enough that an enactment requires a public entity or officer to
perform a function if the function itself involves the exercise of
discretion. (Ibid.)
Thompson cites a provision that does not create a
mandatory duty. The provision comes from the state’s Child
Welfare Services Manual of Policies and Procedure. The
provision requires social workers to make “necessary collateral
contacts” with people “having knowledge of the condition” of
children subject to allegations. (Cal. Dept. of Social Services,
Child Welfare Services Manual of Policies and Procedures (eff.
April 8, 1994) p. 62, Div. 31, former Ch. 31-125.222 [eff. Oct. 1,
2016, amended Ch. 31-125.22 substantially includes the same
language].) Thompson says the County violated its duty to make
necessary collateral contacts by not speaking to J.G.’s doctor.
We assume without deciding that the collateral contacts
provision Thompson cites is a regulation with legal force. The
court in Scott v. County of Los Angeles (1994) 27 Cal.App.4th 125
5
(Scott) found that provisions in the Manual adopted pursuant to
Welfare and Institutions Code section 16501 and the
Administrative Procedures Act have the force of law. (Scott, at p.
145.) Thompson cites Scott without explaining whether the
provision at issue in her case was adopted pursuant to these
laws. Because Thompson’s argument fails for other reasons, we
assume the provision she cites has legal force.
Thompson’s argument about the provision fails, however,
because the provision is discretionary. The County must exercise
discretion to determine what constitutes a “necessary” collateral
contact. In other words, the County must make contacts,
generally, but the decision to make contact with a particular
person is discretionary. This is logical because the universe of
people with “knowledge” of a child’s “condition” is vast. It could
include a child’s parents, siblings, grandparents, aunts, uncles,
cousins, school bus drivers, teachers, principals, school nurses,
classmates, friends, friends’ parents, neighbors, police officers,
doctors, and dentists, to name a few. When the County decides
whom to deem a necessary contact, it balances various interests:
child safety, family preservation, and limited time and resources.
This balancing requires the County to exercise discretion. The
provision does not create a mandatory duty to contact particular
individuals.
Thompson refers to a second provision, but she does not tell
us what that regulation says, nor does she say how it creates a
mandatory duty. She has therefore waived contentions about it.
(See Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836,
852.)
Thompson cites Scott, supra, 27 Cal.App.4th 125, but that
case does not support her position. The rule at issue in Scott
6
required social workers to make monthly face-to-face contact with
children and foster parents. (Id. at p. 138.) A social worker could
make less frequent visits under certain circumstances, but only if
a supervisor approved this in writing. Despite reports of abuse
while the child was placed with the foster parent in Scott, the
social worker did not make monthly visits, and a supervisor had
not approved less frequent visits. The court held that monthly
visitation was a mandatory requirement. (Id. at pp. 139, 142.)
Scott therefore involved a specific obligation with no room to
exercise discretion. In contrast, as we explained, the provision
Thompson cites does not impose a clear and unequivocal
mandatory duty because determining who is a necessary contact
is inherently subjective and requires the exercise of discretion.
The trial court did not abuse its discretion by denying
Thompson leave to amend. Thompson has the burden to
establish a reasonable possibility she could amend the complaint
to state a claim. (See Zelig v. County of Los Angeles (2002) 27
Cal.4th 1112, 1126.) She says the determination of whether the
collateral contacts provision created a mandatory duty is a
factual issue and she “can likely identify more” collateral
contacts. As we explained, the collateral contacts provision gives
social workers discretion to determine which contacts are
necessary. As a matter of law, it does not create a mandatory
duty. Thompson’s assertion that she can identify other collateral
contacts is vague and does not establish a reasonable possibility
she can amend the complaint to state a claim. Furthermore, the
collateral contact provision would remain discretionary even if
Thompson were to name other contacts. The trial court properly
exercised its discretion.
7
B
Turning to costs, Thompson waived her argument by failing
to raise it in her motion to tax costs. On appeal, she challenges
the expert witness fees, only. The trial court relied on waiver as
one ground for its ruling denying Thompson’s motion to tax these
fees. The court’s ruling was proper because the County requested
expert witness fees pursuant to Code of Civil Procedure section
998 and Thompson did not address this section in her motion. On
appeal, Thompson ignored the waiver ground in her opening brief
and she filed no reply brief. We affirm on the ground of waiver.
Because Thompson offers no challenge to this ground, we need
not and do not address her other arguments about expert witness
fees.
DISPOSITION
The judgment is affirmed. Costs are awarded to the
Respondents.
WILEY, J.
We concur:
GRIMES, Acting P. J.
HARUTUNIAN, J.*
* Judge of the San Diego Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
8
Filed 11/16/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
NATASHA THOMPSON, B307969 & B311569
Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BC687511
v. ORDER CERTIFYING
OPINION
COUNTY OF LOS ANGELES et FOR PUBLICATION
al.,
[No change in judgment]
Defendants and Respondents.
THE COURT:
The opinion in the above-entitled matter filed on October
20, 2022, was not certified for publication in the Official Reports.
For good cause, it now appears that the opinion should be
published in the Official Reports and it is so ordered.
There is no change in the judgment.
____________________________________________________________
GRIMES, Acting P. J. WILEY, J. HARUTUNIAN, J.*
*Judge of the San Diego Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California
Constitution. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484228/ | Case: 22-50075 Document: 00516547077 Page: 1 Date Filed: 11/16/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 16, 2022
No. 22-50075 Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee,
versus
Robert Michael Handlon,
Defendant—Appellant.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 7:12-CR-314-2
Before Higginbotham, Southwick, and Higginson, Circuit
Judges.
Stephen A. Higginson, Circuit Judge:
Robert Michael Handlon is serving a federal sentence of 240 months’
imprisonment for conspiring to possess and distribute methamphetamine
and hydrocodone. Since July 2020, Handlon has filed three motions for
compassionate release pursuant to 18 U.S.C. § 3582(c)(1)(A)(i). The district
court rejected Handlon’s first motion because he had failed to exhaust his
administrative remedies, and denied Handlon’s second motion on the merits
on November 18, 2020. More than a year later, Handlon filed a third motion
for compassionate release. The district court denied the third motion “for
Case: 22-50075 Document: 00516547077 Page: 2 Date Filed: 11/16/2022
No. 22-50075
the same reasons stated in” its November 18, 2020 order. Handlon now
appeals the district court’s order denying his third motion. Because the
district court did not provide a sufficient factual basis for us to exercise
appellate review, we VACATE the district court’s order and REMAND
for further proceedings.
I.
From 1976 to 2018, federal law did not authorize prisoners like
Handlon to file motions to reduce their sentences. Instead, during this
period, the Bureau of Prisons (“BOP”) had the exclusive power to file
compassionate-release motions. See 18 U.S.C. § 4205(g) (repealed 1987);
Pub. L. No. 98-473, Title II, ch. 2, § 212(a), 98 Stat. 1837, 1998 (1984)
(enacting 18 U.S.C. § 3582(c)); United States v. Shkambi, 993 F.3d 388, 390-
91 (5th Cir. 2021) (explaining this history). To obtain compassionate release
for a prisoner, BOP had to show that relief was “consistent with applicable
policy statements issued by the Sentencing Commission,” among other
requirements. Shkambi, 993 F.3d at 391. In 2006, the Sentencing
Commission first issued a policy statement explaining what circumstances
could justify a sentence reduction. See U.S.S.G. § 1B1.13; Shkambi, 993 F.3d
at 391.
In 2018, the First Step Act amended Title 18 to permit prisoners to
bring compassionate-relief motions on their own behalf. See Shkambi, 993
F.3d at 391. Now, under § 3582(c)(1)(A)(i), a district court can modify a term
of imprisonment on a defendant’s motion if, after considering the factors
listed in 18 U.S.C. § 3553(a), 1 the district court concludes that
1
Some of the § 3553(a) factors include “the nature and circumstances of the
offense and the history and characteristics of the defendant”; “the need for the sentence
imposed” “to reflect the seriousness of the offense, to promote respect for the law, and to
provide just punishment for the offense,” “to afford adequate deterrence to criminal
2
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No. 22-50075
“extraordinary and compelling reasons” warrant a reduction and a reduction
“is consistent with applicable policy statements issued by the Sentencing
Commission.” 18 U.S.C. § 3582(c)(1)(A)(i).
Even though the text of § 1B1.13 refers only to “motion[s] of the
Director of the Bureau of Prisons,” U.S.S.G. § 1B1.13, some courts
continued to treat § 1B1.13 and its conditions as binding on compassionate-
relief motions filed by prisoners. In United States v. Shkambi, we clarified that
§ 1B1.13 does not bind district courts addressing prisoners’ motions under
§ 3582. 993 F.3d at 393. After Shkambi, “our usual practice” has been to
vacate and remand a district court’s denial of a prisoner’s motion where the
court “did not have the benefit of Shkambi” and “mistakenly concluded that
[§] 1B1.13 governed its analysis.” United States v. Jackson, 27 F.4th 1088,
1089 (5th Cir. 2022).
Handlon’s second compassionate-release motion was submitted and
decided before Shkambi. Relevant here, Handlon asserted that the COVID-
19 pandemic was an extraordinary and compelling reason for a sentence
reduction, and explained that he had suffered “lung issues” as a result of a
COVID-19 infection. In response, the government contended that COVID-
19 was not an extraordinary and compelling reason within the meaning of §
1B1.13, and the government treated § 1B1.13 as binding in its analysis. The
government also argued that the § 3553(a) factors did not support a sentence
reduction. Among other factors, the government argued that “[n]o sentence
conduct,” “to protect the public from further crimes of the defendant,” and to provide the
defendant with needed “medical care”; “the kinds of sentences available”; “the kinds of
sentence and the sentencing range . . . set forth in the guidelines”; the policy statements of
the Sentencing Commission; “the need to avoid unwarranted sentence disparities”; and
“the need to provide restitution to any victims of the offense.” 18 U.S.C. § 3553(a)(1)-(7).
3
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No. 22-50075
reduction [was] necessary to provide [Handlon] with needed medical care,”
in part because Handlon had contracted and recovered from COVID-19.
On November 18, 2020, the district court denied Handlon’s motion.
In its order, the district court noted that it had received Handlon’s moving
papers and the government’s opposition. Then, the district court said,
“[a]fter considering the applicable factors provided in 18 U.S.C. § 3553(a)
and the applicable policy statements issued by the Sentencing Commission,
the [c]ourt [denies] the [d]efendant’s [m]otion on its merits.” The district
court gave no further explanation.
A week after the district court denied motion, Handlon moved for
reconsideration, which the district court denied on November 30, 2020.
On January 21, 2022, Handlon filed a third motion for compassionate
release. While Handlon focused on rebutting the government’s arguments
about his potential danger to the public, he also explained that he had caught
COVID-19 for a second time. Handlon also attached his request to BOP for
compassionate release, which claims that he had suffered “lasting
complications” from COVID-19 like “shortness of breath,” liver issues, and
“memory weakness.” A letter in support of Handlon’s motion, dated
August 29, 2021, corroborates that Handlon’s “liver enzymes have been
affected negatively.” The government did not file an opposition.
The district court denied Handlon’s January 2022 motion in a text
order on the docket. The one-sentence decision explained that the motion
was denied “for the same reasons stated in [the court’s] [o]rder . . . dated
[November 18, 2020].”
Handlon has timely appealed the district court’s denial of his third
compassionate-release motion.
4
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No. 22-50075
II.
We review the denial of a motion for compassionate release for abuse
of discretion. United States v. Cooper, 996 F.3d 283, 286 (5th Cir. 2021). A
court abuses its discretion when “it bases its decision on an error of law or a
clearly erroneous assessment of the evidence.” Ward v. United States, 11
F.4th 354, 359 (5th Cir. 2021) (citation omitted).
Construed liberally, Handlon’s brief argues that the district court did
not give a sufficient explanation for denying his third motion. We agree.
It is an abuse of discretion for a district court to deny a motion for
compassionate release without providing “specific factual reasons” for its
decision. United States v. Chambliss, 948 F.3d 691, 693 (5th Cir. 2020). The
amount of explanation required to meet this standard is context dependent.
See Chavez-Meza v. United States, 138 S. Ct. 1959, 1965 (2018) (discussing 18
U.S.C. § 3582(c)(2)); United States v. Pina, 846 F. App’x 268, 269 (5th Cir.
2021) (per curiam) (applying Chavez-Meza to a § 3582(c)(1)(A)(i) motion);
United States v. Shorter, 850 F. App’x 327, 328 (5th Cir. 2021) (per curiam)
(same). Sometimes, “it may be sufficient for purposes of appellate review
that the judge simply relied upon the record, while making clear that he or
she has considered the parties’ arguments and taken account of the § 3553(a)
factors, among others.” Chavez-Meza, 138 S. Ct. at 1965.
In determining whether a district court sufficiently explained itself, we
look to the entire record and the circumstances in which it was created.
Where the judge deciding the compassionate-release motion is the same
judge who sentenced the defendant, the record from the original sentencing
may shed light on the judge’s reasoning as to the compassionate-release
motion. See, e.g., United States v. Sauseda, No. 21-50210, 2022 WL 989371,
at *2 (5th Cir. Apr. 1, 2022) (per curiam). And where the government has
opposed a prisoner’s motion, it may be possible to tell that the district court’s
5
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No. 22-50075
order adopted the government’s analysis from its opposition brief. See, e.g.,
United States v. Franco, No. 21-50041, 2022 WL 1316218, at *1 (5th Cir. May
3, 2022) (per curiam); United States v. Pleasant, No. 21-50212, 2021 WL
5913090, at *1 (5th Cir. Dec. 14, 2021) (per curiam).
Applying those principles, our cases have reached inconsistent
results. Take three cases involving orders drafted by the same judge who
denied Handlon’s motions. In United States v. Sauseda, the district court
used the same language to deny Sauseda’s motion as it did in denying
Handlon’s second motion: “After considering the applicable factors
provided in 18 U.S.C. § 3553(a) and the applicable policy statements issued
by the Sentencing Commission, the [c]ourt [denies] the [d]efendant’s
[m]otion[] on its merits.” 2022 WL 989371, at *1. Because “the
[g]overnment did not object or otherwise file any response,” and because the
“judge deciding the motion was not the judge who originally sentenced
Sauseda,” we concluded that the record did not sufficiently illuminate the
district court’s reasoning to permit appellate review. Id. at *2. So we vacated
the order and remanded. Id. at *3. United States v. Suttle went a step further
in vacating an identically worded order even though the government had filed
an opposition to the motion. No. 21-50576, 2022 WL 1421164, at *1, *1 n.6
(5th Cir. May 5, 2022) (per curiam). We decided that “the district court did
not adopt the [g]overnment's reasoning, or otherwise indicate that the
[g]overnment's arguments provided the ‘specific factual reasons’ for its
decision.” Id. at *1 n.6. However, in United States v. White, we reached the
opposite conclusion with respect to the same boilerplate order where the
government filed an opposition. No. 21-50943, 2022 WL 1699467, at *1 (5th
Cir. May 26, 2022) (per curiam). We explained that “the denial of relief was
based in part on an independent assessment of the § 3553(a) factors, which
the [g]overnment had argued as an additional basis for denying the motion.”
Id.
6
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No. 22-50075
We need not resolve how Suttle and White should be reconciled
because this case is more extreme. The government opposed Handlon’s
second motion, and a judge who had not sentenced Handlon denied his
motion “[a]fter considering the applicable factors provided in 18 U.S.C. §
3553(a) and the applicable policy statements issued by the Sentencing
Commission”—the exact language and circumstances at issue in Suttle and
White. But the order on appeal here is the district court’s denial of Handlon’s
third motion. And the reason given for denying Handlon’s third motion was
simply “the same reasons stated in [the court’s] [o]rder” denying the second
motion.
Even assuming the order denying Handlon’s second motion was
“based in part on an independent assessment of the § 3553(a) factors, which
the [g]overnment had argued as an additional basis for denying the motion,”
White, 2022 WL 1699467, at *1, we cannot draw the same inference about
the order denying Handlon’s third motion. The government did not file an
opposition to the third motion, so the district court did not have any
reasoning to incorporate by reference in its order. That matters because
Handlon’s third motion presented new factual circumstances relating to the
need to provide the defendant with “medical care . . . in the most effective
manner,” 18 U.S.C. § 3553(a)(2)(D), which the district court could not have
considered before. Specifically, Handlon stated that he had caught COVID-
19 a second time and included evidence that he had suffered serious
complications as a result. Since the district court’s original order did not
explain how it balanced the § 3553(a) factors or its specific factual
conclusions as to any of those factors, it is impossible to tell how the district
court would have considered this new information. And the government’s
earlier opposition, which we assume for the sake of argument formed the
basis for the district court’s analysis, see White, 2022 WL 1699467, at *1,
7
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No. 22-50075
rested on an assumption that Handlon had “recovered from COVID-19.” As
Handlon’s motion asserts, this may no longer be true.
Litigants sometimes pepper a district court with repetitive motions,
and orders invoking “the same reasons stated” in an earlier ruling are an
important docket-management tool. But a court cannot deny a second or
subsequent motion for compassionate release “for the reasons stated” in a
prior denial where the subsequent motion presents changed factual
circumstances and it is not possible to discern from the earlier order what the
district court thought about the relevant facts. As we explained, this is the
case here. Cf. United States v. Montoya-Ortiz, No.21-50326, 2022 WL
2526449, at *3 (5th Cir. July 7, 2022) (per curiam) (affirming “perfunctory
one-page order” denying subsequent motion because court had issued
fifteen-page order addressing prior motion and the defendant’s “new
theories and evidence” would not have changed the court’s prior analysis).
Finally, the district court’s order also poses a Shkambi problem.
Maybe the district court considered Handlon’s second COVID-19 case and
his other arguments, decided that the § 3553(a) did weigh in favor of release,
but persisted in adopting the government’s argument that the binding
§ 1B1.13 policy statement foreclosed relief. If the district court had made that
mistake, we would vacate the order and remand under Shkambi. See Jackson,
27 F.4th at 1089. Yet the order is too cryptic to make clear whether the
district court committed a legal error.
Handlon’s third compassionate-release motion may have little chance
of success. But judges have an obligation to say enough that the public can
be confident that cases are decided in a reasoned way. See Chavez-Meza, 138
S. Ct. at 1963-64 (discussing Rita v. United States, 551 U.S. 338, 356 (2007)).
Accordingly, we VACATE the district court’s order denying Handlon’s
motion for compassionate release and REMAND for reconsideration
8
Case: 22-50075 Document: 00516547077 Page: 9 Date Filed: 11/16/2022
No. 22-50075
consistent with this opinion. Handlon’s motion to appoint counsel is
DENIED as moot.
9 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484232/ | Case: 22-30122 Document: 00516547006 Page: 1 Date Filed: 11/16/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
No. 22-30122 November 16, 2022
Lyle W. Cayce
Clerk
Donald Barnes,
Plaintiff—Appellant,
versus
Darryl Vannoy, Warden; Peter Lollis, Major; John Maples,
Major; Shawn Miller, Sergeant,
Defendants—Appellees.
Appeal from the United States District Court
for the Middle District of Louisiana
USDC No. 3:19-CV-764
Before Elrod, Graves, and Ho, Circuit Judges.
Per Curiam:*
Donald Barnes, Louisiana prisoner # 385417, has moved for leave to
proceed in forma pauperis (IFP) on appeal from the dismissal without
prejudice of his 42 U.S.C. § 1983 complaint. The district court found that
Barnes did not exhaust his administrative remedies and granted summary
*
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: 22-30122 Document: 00516547006 Page: 2 Date Filed: 11/16/2022
No. 22-30122
judgment in favor of the defendants. Barnes is contesting the district court’s
certification that his appeal is not taken in good faith. See Baugh v. Taylor,
117 F.3d 197, 202 (5th Cir. 1997). Our inquiry into an appellant’s good faith
“is limited to whether the appeal involves legal points arguable on their
merits (and therefore not frivolous).” Howard v. King, 707 F.2d 215, 220 (5th
Cir. 1983) (internal quotation marks and citation omitted).
To exhaust, a prisoner must comply with deadlines and procedural
rules. Woodford v. Ngo, 548 U.S. 81, 90-91 (2006). Nonetheless, prisoners
must exhaust only available remedies. Ross v. Blake, 578 U.S. 632, 642-44
(2016). Without support, Barnes argues that the rejection of his grievance as
untimely deprived him of the ability to challenge that determination through
the second step of the grievance procedure. Barnes effectively concedes that
he did not proceed to the second step of the prison grievance procedure.
Accordingly, there is no genuine issue of material fact as to whether he
exhausted his administrative remedies, and summary judgment was proper.
See Wilson v. Epps, 776 F.3d 296, 299 (5th Cir. 2015).
Barnes has failed to show that there is a nonfrivolous issue on appeal.
See Howard, 707 F.2d at 220. The district court did not err in deciding that
his appeal was not taken in good faith. See id. at 219-20. His request to
proceed IFP is DENIED, and the appeal is DISMISSED as frivolous. See
Baugh, 117 F.3d at 202 n.24; 5th Cir. R. 42.2.
The dismissal of this appeal as frivolous counts as a “strike” under 28
U.S.C. § 1915(g). See Coleman v. Tollefson, 575 U.S. 532, 537-39 (2015).
Barnes is WARNED that if he accumulates three strikes, he will not be able
to proceed IFP in any civil action or appeal filed while he is incarcerated or
detained in any facility unless he is under imminent danger of serious physical
injury. See § 1915(g).
2 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484236/ | Filed 11/15/22 Thompson v. Ito CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
NANCY THOMPSON,
Plaintiff and Respondent, G059403
v. (Super. Ct. No. 30-2018-01027543)
THOMAS YOSHIO ITO, OPINION
Defendant and Appellant.
Appeal from a judgment of the Superior Court of Orange County, David L.
Belz, Judge. Affirmed as modified. Appellant’s request for judicial notice. Denied.
Appellant’s motion to augment record. Granted in part and denied in part.
Thomas Yoshio Ito, in pro. per., for Defendant and Appellant.
Albertson & Davidson, Stewart R. Albertson, Jeffrey M. Hall, Michelle P.
Nguyen, and Omid J. Afait for Plaintiff and Respondent.
The trial court found Thomas Yoshio Ito committed financial elder abuse
and used undue influence in causing his mother, Yoko Itow, to sign a trust naming
1
Thomas as the sole primary beneficiary. The court therefore deemed the trust to be
invalid and unenforceable.
On appeal, Thomas raises numerous challenges to the judgment. We agree
with Thomas the trial court erred by ordering Nancy Itow Thompson be appointed as
executor of Yoko’s estate, as the trial court never had jurisdiction of that issue. We will
modify the judgment to remove that order.
We find no merit in any of Thomas’s other arguments, and affirm the
judgment as modified.
STATEMENT OF FACTS
Yoko and Robert Itow had two children — Thomas and Nancy. In May
1999, Yoko executed a will leaving her entire estate to her husband, if he survived her,
and to Thomas and Nancy in equal shares if he did not.
Until 2008, Yoko and Nancy lived about one mile from each other and
visited several times a month. Nancy and her family moved to Hawaii in 2008. Between
January 2008 and December 2013, Yoko and Nancy spoke by telephone several times per
month, and Yoko regularly mailed holiday and birthday cards with monetary gifts to
Nancy and Nancy’s sons.
In 2010, Yoko designated Thomas as her attorney-in-fact under a General
Durable Power of Attorney and agent for healthcare decisions under an Advanced
1
We will refer to the parties by their first names to avoid confusion. The trust at issue in
this case is the Itow Family Trust. In various places in the appellate record, trustor Yoko
Itow’s last name is spelled Ito. Throughout this opinion, when necessary to mention the
individual’s last names, we use the spelling of that person’s name that predominates in
the appellate record.
2
Healthcare Directive. In August 2014, Thomas filed for Chapter 7 bankruptcy. One
month later, Thomas and his family moved into Yoko’s house on Scenic Bay Lane.
In 2016, Yoko’s driver’s license was suspended, and she became
increasingly reliant on Thomas. Thomas frequently drove Yoko to doctor’s appointments
and communicated details of Yoko’s injuries, complaints, and condition to her doctors.
Thomas handled Yoko’s medications, and retrieved her prescriptions from the pharmacy.
Thomas also drove Yoko to the market to buy food, and testified at his deposition he
knew of no other way for Yoko to obtain food after her driver’s license was suspended.
Yoko’s care provider stated Thomas bathed Yoko, although he denied it.
After Thomas moved into Yoko’s home in 2014, Nancy’s telephone calls
with Yoko decreased to one or two per year. Nancy left messages every week, but rarely
received return calls. The transcript of a voicemail message from Yoko to Nancy during
this time which was played at the trial reads: “Ah, anyway, I have a hard time calling
you, you know, because your brother gets mad. Anyway, Nancy, I’ll call you again,
okay. Bye.” Yoko was afraid to contact Nancy because of Thomas’s anger. Yoko also
stopped sending birthday and holiday cards. When they did speak, Nancy sensed Yoko
was emotionally reserved and scared to speak in Thomas’s presence, and Thomas
interrupted Nancy and Yoko’s conversations. In April 2016, Nancy bought Yoko a
personal phone so they could contact each other, but it broke a few months later.
In March 2016, Nancy flew from Hawaii to San Diego, California, and then
drove with her husband and her son Joshua to visit Yoko and Robert. Yoko was shocked
and scared when they arrived because “‘Tommy doesn’t like that.’” Thomas arrived
during the visit, seemed angry, and screamed at and insulted Nancy. In December 2016,
Nancy’s other son, Matthew, drove from Northern California to introduce Yoko to his
fiancé. Thomas refused to let them in.
Yoko’s personal physician testified that between 2013 and 2018 he had
treated Yoko for chronic anemia, kidney disease, diastolic heart failure,
3
emphysema/COPD, neuropathy, depression, and ulcers on her foot that turned into a
necrotizing wound. The doctor prescribed antidepressants, cholesterol medication, heart
medication, muscle relaxants, and pain medication for Yoko. Eventually, Yoko
developed an opioid dependency. Yoko had difficulty walking, and suffered multiple
falls due to lack of balance, resulting in broken bones and dislocated joints.
When Robert passed away on October 13, 2016, Thomas did not call Nancy
to let her know because he did not think she cared. After Robert’s death, Yoko became
reclusive, more introverted, and less talkative. Thomas and his family were the people
with whom she had her primary interaction.
In August 2017, Thomas scheduled, drove Yoko to, and sat in on an initial
meeting with attorney Stuart Wallach to prepare new estate planning documents for
Yoko. Thomas exchanged e-mails and telephone calls with Wallach and his staff
regarding Yoko’s estate plan. Specifically, Thomas communicated to Wallach that Yoko
wanted Nancy removed as a beneficiary from the trust. Yoko never personally
communicated her alleged intention to disinherit Nancy to Wallach.
On November 22, 2017, Thomas drove Yoko to Wallach’s office, but
waited outside the room while she signed her new estate planning documents. The Itow
Family Trust (the Trust) provided that on Yoko’s death, 100 percent of the trust assets
were to be distributed to Thomas, and if Thomas should predecease her, 100 percent of
the trust assets were to be distributed to Thomas’s wife Sylvia. Thomas was named as
the successor trustee to Yoko, with Sylvia named as second successor, and Nancy named
as third successor.
In addition to the Trust, Yoko signed a pourover will, an affidavit of the
death of the joint tenant of the Scenic Bay house, and a quitclaim deed transferring the
Scenic Bay house to the Trust. The will devised the entirety of Yoko’s estate to the
Trust, and named Thomas as the executor and Sylvia as the executor if Thomas was
unable or unwilling to serve.
4
On July 14, 2018, Yoko died at the age of 80. Shortly after her death,
Thomas seized control of the bank accounts in Yoko and Robert’s names. These
accounts were not a part of the Trust at the time of Yoko’s death, and Thomas obtained
the assets contained in them through the use of Probate Code section 13100 declarations.
An applied behavioral analyst who worked with Thomas’s son testified she
or a member of her staff worked in the house with Thomas’s son several hours a week,
and all were mandated reporters. The analyst further testified no one on her staff had
reported anything negative about Thomas. The analyst had personally observed Thomas
interacting with Yoko, and had never seen him yell or become angry at her.
PROCEDURAL HISTORY
In October 2018, Nancy filed a petition for an order invalidating the Trust
2
based on undue influence, and for damages against Thomas for financial elder abuse.
The court conducted a four-day bench trial in January 2020, and issued a detailed
21-page statement of decision in March 2020. Relevant to this appeal are the trial court’s
findings regarding Thomas’s lack of credibility as a witness:
“The court found the testimony of Thomas Itow to lack credibility.
Mr. Itow was not confident in his responses to questions. Mr. Itow contradicted himself
in his deposition testimony and in his trial testimony. Cases for undue influence and
elder abuse often are determined by the credibility of the witnesses. This was one of
those cases where the court’s review of the testimony revealed credibility gaps in Thomas
Itow’s testimony.” No party filed objections or requests for clarification regarding the
statement of decision.
The court entered a final judgment in June 2020. In the judgment, the trial
court made the following factual findings that are relevant to the issues on appeal:
2
Nancy’s claim the Trust was the product of lack of capacity was dismissed before trial.
5
“1. At all times mentioned herein, Yoko Itow was an elder and dependent
adult as defined in Welfare and Institutions Code Section 15610.27.
“2. With Regard to Undue Influence. The Court finds that the
November 22, 2017 Itow Family Trust was executed by Yoko Itow as the result of
excessive persuasion and as the result of undue influence as defined in Welfare and
Institutions Code 15610.70. Therefore, the Trust is deemed to be invalid and
unenforceable. The Court further finds that Yoko Itow was vulnerable to undue influence
due to her age, due to her health issues and due to her being isolated from other family
members. The Court finds that Thomas Itow exercised apparent authority over Yoko
Itow as a family member and care provider by providing Yoko with companionship and
affection and as a fiduciary carrying her Durable Power of Attorney. The Court finds that
Thomas controlled the interactions of Yoko with other family members. The Court finds
that Yoko Itow was unduly influenced and persuaded to change her estate plan
documents by disinheriting her daughter Nancy Itow. The Court arrived at these findings
after hearing all of the evidence presented in this case and the circumstances of the family
dynamics and history of isolation, control and conflict. The Court further finds there was
inequity in the result because Nancy Thompson was disinherited by and through the
November 22, 2017 Itow Family Trust.
“3. The Court invalidates the Quitclaim Deed recorded on July 18, 2018 in
the Orange County Recorder’s Office as Document number 2018-000261635.
“4. The Court orders the return of the real property at 19842 Scenic Bay
Lane, Huntington Beach, CA 92648 to Yoko Itow in her individual capacity and
confirming that this real property be administered under Yoko Itow’s estate.
“5. The Court orders the November 22, 2017 Itow Family Trust
invalidated.
“6. The Court orders Nancy Itow to be appointed as Executor for the Estate
of Yoko Itow.
6
“7. The Court finds that the allegations of financial elder abuse pursuant to
Welfare & Institutions Code Section 15610.30 were proven by a preponderance of the
evidence and grants the Petition for findings of financial elder abuse. The Court further
finds that Thomas committed acts of financial elder abuse by taking and obtaining real or
personal property of Yoko by undue influence and for a wrongful use and that such
taking and obtaining was harmful to Yoko as it deprived Yoko of her property right to
properly dispose of her earthly estate. At the time of the taking, Thomas knew or
reasonably should have known the conduct was likely to be harmful to Yoko Itow.
[¶] . . . [¶]
“10. As to the request for attorney fees & costs made by Nancy in
accordance with Welfare and Institutions Code Section 15657.5 for financial elder abuse,
the Court grants this request as Nancy has shown by a preponderance of the evidence that
Thomas committed acts of financial elder abuse pursuant to Welfare and Institutions
Code Section 15610.30(a)(1) & (3). The Court grants the request for attorney fees and
costs as provided for in Welfare and Institutions Code Section 15657.5. The Court
reserves on findings as to the amount of attorney fees and costs.”
Thomas appealed from the judgment.
DISCUSSION
I.
SUBSTANTIAL EVIDENCE SUPPORTS THE TRIAL COURT’S FINDING OF
UNDUE INFLUENCE TO INVALIDATE THE TRUST
The trial court found the Trust was the product of undue influence by
Thomas, and therefore set it aside. Welfare and Institutions Code section 15610.70
defines undue influence as “excessive persuasion that causes another person to act or
refrain from acting by overcoming that person’s free will and results in inequity.” (Id.,
subd. (a).) To determine whether an act or omission was the product of undue influence,
7
the court must consider (1) the victim’s vulnerability, (2) the apparent authority of the
influencer, (3) the influencer’s actions or tactics, and (4) the equity of the result. (Ibid.)
Probate Code section 86 incorporates this definition of undue influence.
Nancy was required to establish undue influence by clear and convincing
evidence. (Doolittle v. Exchange Bank (2015) 241 Cal.App.4th 529, 545.) “When
reviewing a finding that a fact has been proved by clear and convincing evidence, the
question before the appellate court is whether the record as a whole contains substantial
evidence from which a reasonable fact finder could have found it highly probable that the
fact was true. In conducting its review, the court must view the record in the light most
favorable to the prevailing party below and give appropriate deference to how the trier of
fact may have evaluated the credibility of witnesses, resolved conflicts in the evidence,
and drawn reasonable inferences from the evidence.” (Conservatorship of O.B. (2020)
9 Cal.5th 989, 1011-1012.)
The trial court’s finding that Yoko was vulnerable was amply supported by
substantial evidence. At the time Yoko executed the Trust, she was 79 years of age and
had numerous health issues, including a history of depression for which she was taking
medication since 2013, a fractured right shoulder due to a fall in 2015, a fractured arm
due to a fall in 2017, and a dislocated right shoulder in October 2017. She was suffering
from chronic obstructive pulmonary disease, vascular disease, aortic calcification, and
anemia. Yoko was taking Norco as a pain reliever, as well as antidepressants and muscle
relaxers. After losing her driving privileges, she was reliant on Thomas for “necessities
of life,” including groceries, medications, and basic daily activities such as bathing.
The trial court also found Thomas had apparent authority over Yoko
because he held a general power of attorney to act on her behalf as a fiduciary and legal
agent. Additionally, Thomas and his family had moved into Yoko’s house in 2014 and
lived with her until her death.
8
As to actions by the influencer, Thomas, the trial court relied on testimony
that Nancy’s close relationship with Yoko declined after Thomas moved in with Yoko.
Thomas controlled and limited Nancy’s communications with Yoko and limited Yoko’s
interactions with other members of the family. In particular, the court relied on a voice
mail message from Yoko to Nancy, quoted ante. The court found all of this to be
“evidence of tactics of isolation, dependency and intimidation.”
As to the inequity of the changes to Yoko’s estate plan, “there was no
evidence that Yoko knew or understood the nature of the changes to the estate plan that
she executed on November 22, 2017.” The attorney preparing the documents, Wallach,
had no recollection of meeting with Yoko. Thomas initiated the calls with Wallach’s
office, transported Yoko to her meetings with Wallach, and communicated to Wallach’s
office on Yoko’s behalf. Most importantly, Thomas advised Wallach of Yoko’s alleged
request to make Thomas the Trust’s sole beneficiary after Yoko’s death, and cut out
Nancy completely, although Yoko’s previous estate plan had left her assets evenly to
Thomas and Nancy. Many of the cases Thomas cites find a lack of undue influence
where the party merely transported the decedent to the attorney’s office or set up
meetings with the attorney. Thomas’s admitted involvement in providing the direction to
disinherit Nancy to the attorney, with no evidence Yoko was even aware of this change,
distinguishes the present case. Substantial evidence supported the trial court’s finding the
Trust was the product of Thomas’s undue influence.
II.
SUBSTANTIAL EVIDENCE SUPPORTS THE TRIAL COURT’S FINDINGS OF
FINANCIAL ELDER ABUSE
Financial elder abuse must be proven by a preponderance of the evidence.
(Welf. & Inst. Code, § 15657.5, subd. (a); Das v. Bank of America, N.A. (2010) 186
Cal.App.4th 727, 735, fn. 5.) We review the trial court’s findings for substantial
evidence. (Keading v. Keading (2021) 60 Cal.App.5th 1115, 1125.)
9
As relevant to this case, financial elder abuse occurs when a person takes or
obtains property from an elder for a wrongful use, with intent to defraud, or by undue
influence. (Welf. & Inst. Code, § 15610.30, subd. (a)(1), (3).) If the person takes or
obtains the property and knows or should have known that to do so would be harmful to
the elder, wrongful use is presumed. (Welf. & Inst. Code, § 15610.30, subd. (b); Mahan
v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 866.)
The trial court found Thomas took or obtained property from Yoko by
causing the Scenic Bay house to be transferred to the Trust, in which Thomas received a
100 percent interest. Because the prior estate plan gave all property to Thomas and
Nancy 50/50, the new plan deprived Yoko of the right to determine to whom the property
would pass. “The right to acquire, own, enjoy and dispose of property is . . . a basic
fundamental right guaranteed by the Fourteenth Amendment to the United States
Constitution.” (People v. Beach (1983) 147 Cal.App.3d 612, 622.) Depriving an
individual of the ability to determine to whom their property should pass after their death
by the use of undue influence is therefore a taking for purposes of financial elder abuse.
(See Bounds v. Superior Court (2014) 229 Cal.App.4th 468, 472; Lintz v. Lintz (2014)
222 Cal.App.4th 1346, 1350-1351 (Lintz).) Substantial evidence supported the trial
court’s finding Thomas committed financial elder abuse.
III.
THE TRIAL COURT’S REFERENCE TO YOKO AS A DEPENDENT ADULT
WAS NOT PREJUDICIAL
Thomas argues that because the trial court referred to Yoko as a dependent
adult and as an elder in the judgment, substantial prejudice resulted throughout the final
10
3
decision. Given their definitions, one cannot be a member of both groups at the same
time. At all relevant times, Yoko was an elder, not a dependent adult. However,
dependent adults and elders are treated the same for purposes of determining whether
financial abuse occurred (Welf. & Inst. Code, § 15610.30) and whether the defendant
should be required to pay attorney fees due to their acts of financial abuse (id.,
§ 15657.5). Further, in the judgment the trial court cited Welfare and Institutions Code
section 15610.27, which defines the term elder. Therefore, despite the trial court’s error
in referring to Yoko as a dependent adult as well as an elder, no prejudice occurred.
IV.
THE TRIAL COURT DID NOT RELY ON THE REBUTTABLE PRESUMPTION OF
UNDUE INFLUENCE IN PROBATE CODE SECTION 21380
Thomas argues the presumption that a trust instrument making a donative
transfer to a care custodian is the product of undue influence should not apply in this
case. Probate Code section 21380 creates a rebuttable presumption that a donative
transfer is the product of fraud or undue influence when made to certain persons. Probate
Code section 21382 creates certain exceptions to section 21380. In Rice v. Clark (2002)
28 Cal.4th 89, 91-92, the court, interpreting a predecessor statute, held a person “who
provides information needed in the instrument’s preparation and who encourages the
donor to execute it, but who does not direct or otherwise participate in the instrument’s
transcription to final written form” does not cause an instrument to be transcribed, and is
3
As defined in the Welfare and Institutions Code, “elder” and “dependent adult” are
distinct types of protected persons. “‘Dependent adult’ means a person, regardless of
whether the person lives independently, between the ages of 18 and 64 years who resides
in this state and who has physical or mental limitations that restrict his or her ability to
carry out normal activities or to protect his or her rights, including, but not limited to,
persons who have physical or developmental disabilities, or whose physical or mental
abilities have diminished because of age . . . [and] includes any person between the ages
of 18 and 64 years who is admitted as an inpatient to a 24-hour health facility . . . .”
(Welf. & Inst. Code, § 15610.23, subds. (a), (b).) “‘Elder’ means any person residing in
this state, 65 years of age or older.” (Welf. & Inst. Code, § 15610.27.)
11
therefore not presumptively disqualified under the predecessor statute to Probate Code
section 21380. Thomas argues that because he did not participate directly in transcribing
the Trust and other documents, the rebuttable presumption of undue influence should not
have applied.
However, the trial court did not rely on the rebuttable presumption of
Probate Code section 21380 in finding Thomas acted with undue influence over Yoko.
Instead, the court found clear and convincing evidence proving each element of undue
influence under Welfare and Institutions Code section 15610.30.
V.
THE TRIAL COURT DID NOT IMPROPERLY RELY ON LINTZ
Thomas challenges the judgment on the ground the trial court improperly
relied on Lintz, supra, 222 Cal.App.4th 1346. Probate Code section 21385 was enacted
to supersede Lintz’s holding regarding the presumption of undue influence in
property-related transactions between spouses. (Lintz, supra, 222 Cal.App.4th at
pp. 1353-1354; see Stats. 2019, ch. 43, § 2.)
The trial court cited Lintz, supra, 222 Cal.App.4th 1346 only for the
unassailable proposition that “[t]he court determines issue[s] of undue influence by
inferences drawn from all the facts and circumstances.” Estate of Garibaldi (1961) 57
Cal.2d 108, 113, cited by Thomas in his opening appellate brief, states the same, as do
numerous other opinions. For the point on which the trial court cited it, Lintz is still good
law; the trial court did not err in relying on it.
VI.
THOMAS’S ACTIVITIES IN OBTAINING THE TRUST AND RELATED DOCUMENTS
WERE MORE THAN “INCIDENTAL”
Thomas next argues the trial court erred by determining his incidental
activities were tantamount to active participation in using undue influence over Yoko.
Thomas initially contacted Wallach’s office, scheduled Yoko’s first appointment, and
12
drove Yoko to and attended her first meeting with Wallach. There was no evidence Yoko
ever communicated directly with Wallach; to the contrary, Thomas made all telephone
calls and exchanged all e-mails with Wallach’s office. Most significantly, Thomas
admitted he communicated to Wallach Yoko’s alleged request Nancy be disinherited, and
Thomas receive 100 percent of the estate. There was no evidence Yoko understood the
change in beneficiaries from her earlier will, in which her estate would be divided 50/50.
The trial court could properly find this to be clear and convincing evidence proving
Thomas’s role in obtaining the Trust was more than incidental.
The cases Thomas cites in support of this argument are distinguishable.
First, in all the cases Thomas cites, the courts applied a presumption of undue influence,
which was not the case here. Second, the activities of the individuals being charged with
undue influence in those cases were significantly less than Thomas’s activities.
In Estate of Lombardi (1954) 128 Cal.App.2d 606, 613, the testatrix called
the attorney and provided data for her will to be drawn up. Although the daughter drove
the testatrix to the attorney’s office and was present when the will was signed, she did not
participate in the conversation regarding the will or try to encourage her mother to sign or
not sign the will.
In both Estate of Mann (1986) 184 Cal.App.3d 593, 608, and Estate of
Bould (1955) 135 Cal.App.2d 260, 275-276, the courts held none of the following brings
the presumption of undue influence into play: procuring an attorney to prepare the will;
selecting an attorney and accompanying the testator to the attorney’s office; presence in
the attorney’s outer office; presence at the will’s execution; or presence during both the
giving of instructions for the will and at its execution.
In Rice v. Clark, supra, 28 Cal.4th at page 92, the court held “a person who
provides information needed in the instrument’s preparation and who encourages the
donor to execute it, but who does not direct or otherwise participate in the instrument’s
transcription to final written form” did not cause the instrument to be transcribed,
13
pursuant to Probate Code former section 21350, and was therefore not presumptively
disqualified from taking under that instrument. The individual in Rice v. Clark, supra, 28
Cal.4th at page 105, gave the attorney a list of the decedent’s assets, arranged
appointments with the attorney and drove the decedent to those appointments, urged the
attorney’s secretary to prepare the documents promptly, and encouraged the decedent to
sign them; the court held he did not “‘cause’” the instruments to be transcribed.
Thomas’s direction to attorney Wallach that 100 percent of the trust assets should pass to
himself distinguishes the present case from Estate of Mann, Estate of Bould, and Rice v.
Clark.
Thomas also contends Nancy failed to prove Yoko lacked capacity to
execute the Trust. However, Nancy dismissed her claim for invalidation of the Trust
based on lack of capacity, and the trial court made no findings regarding Yoko’s capacity.
VII.
THE ISSUE OF UNNATURAL DISPOSITION IS IRRELEVANT IN THIS CASE
Thomas next argues the judgment should be reversed because naming
Thomas as the sole beneficiary of the Trust was not an unnatural disposition of Yoko’s
estate. While the cases Thomas cites for this argument hold it is not unnatural for a
person to devise all or a significant portion of their estate to a nonrelative with whom
they have a close bond rather than to a relative, or to give more to one relative than
another, the evidence in those cases also established no undue influence had been
exercised by the person receiving the estate. (Estate of Fritschi (1963) 60 Cal.2d 367,
373-374; Estate of Sarabia (1990) 221 Cal.App.3d 599, 604; Estate of Wright (1963) 219
Cal.App.2d 164, 169-170; Estate of Locknane (1962) 208 Cal.App.2d 505, 515; Estate of
Jacobs (1938) 24 Cal.App.2d 649, 652; see Estate of Bould, supra, 135 Cal.App.2d at
p. 272 [confidential relationship not enough to prove undue influence where there is no
evidence of activity in preparation of will].)
14
The trial court’s judgment does not deny Yoko the right to dispose of her
property as she saw fit. To the contrary, the trial court impliedly found her testamentary
intent had been overcome by Thomas’s undue influence. Substantial evidence supports
that finding.
VIII.
LOSS OF A PROPERTY RIGHT BY YOKO WAS ESTABLISHED
To prevail on a claim of financial elder abuse, the plaintiff must prove the
defendant deprived the elder of “any property right, including by means of an agreement,
donative transfer, or testamentary bequest, regardless of whether the property is held
directly or by a representative of an elder.” (Welf. & Inst. Code, § 15610.30, subd. (c).)
Thomas argues that because the Trust did not deprive Yoko of the use of her property
during her lifetime, he did not commit a taking of her property.
Depriving a person of an intended post-death distribution of property
constitutes a taking for purposes of financial elder abuse. (See Bounds v. Superior Court,
4
supra, 229 Cal.App.4th at p. 472; Lintz, supra, 222 Cal.App.4th at pp. 1350-1351.)
IX.
THE TRIAL COURT DID NOT HAVE JURISDICTION TO APPOINT NANCY AS EXECUTOR
Thomas argues the trial court erred by ordering Nancy to be appointed as
executor of Yoko’s estate. Yoko’s will names Thomas as executor and Sylvia, Thomas’s
wife, as successor executor.
The judgment does not invalidate the will that was signed by Yoko at the
same time as the Trust. More importantly, the issues of Yoko’s will, estate, and executor
were never before the court in connection with Nancy’s petition to invalidate the Trust.
Nancy’s petition did not seek an order prohibiting Thomas, much less Sylvia, from
4
This is not the portion of the Lintz holding superseded by Probate Code section 21385.
15
serving as executor or from being appointed to that role. The trial court did not have
jurisdiction to determine who should serve as the executor for Yoko’s estate.
At oral argument, Nancy’s counsel for the first time argued the trial court
did not err by bypassing Sylvia and appointing Nancy as executor. First, Nancy argued
Sylvia waived any claim to appointment because she did not timely file a petition to be
named as executor, citing Probate Code sections 8001 and 8440. Probate Code section
8001 provides: “Unless good cause for delay is shown, if a person named in a will as
executor fails to petition the court for administration of the estate within 30 days after the
person has knowledge of the death of the decedent and that the person is named as
executor, the person may be held to have waived the right to appointment as personal
representative.” First, there would be no reason for any proposed executor to file a
petition for probate and appointment until after the trial court invalidated the declaration
of trust. Second, Nancy herself did not file a petition for probate asking to be appointed
as executor until July 2020, after the trial court entered its judgment on the trust petition
and more than two years after Yoko’s death.
Second, Nancy argued both Thomas and Sylvia are ineligible for
appointment as executor under Probate Code sections 8402 and 8502. Probate Code
section 8402 provides, in relevant part: “Notwithstanding any other provision of this
chapter, a person is not competent to act as personal representative in any of the
following circumstances: . . . There are grounds for removal of the person from office
under Section 8502.”
In turn, Probate Code section 8502 provides a properly designated executor
or personal representative may be removed if “(a) The personal representative has
wasted, embezzled, mismanaged, or committed a fraud on the estate, or is about to do so.
[¶] (b) The personal representative is incapable of properly executing the duties of the
office or is otherwise not qualified for appointment as personal representative. [¶]
(c) The personal representative has wrongfully neglected the estate, or has long neglected
16
to perform any act as personal representative. [¶] (d) Removal is otherwise necessary for
protection of the estate or interested persons. [¶] (e) Any other cause provided by
statute.”
While the trial court’s findings about Thomas’s involvement in the drafting
and execution of the Trust may make him ineligible to serve as executor, no findings
were made against Sylvia because the issue was not before the trial court. The judgment
5
will be modified to remove this order only.
X.
THOMAS’S MOTION TO AUGMENT AND REQUEST FOR JUDICIAL NOTICE
Thomas filed a motion to augment the record on appeal, and a request for
judicial notice. Both were unopposed.
The motion to augment the appellate record with the documents attached to
the motion as Exhibits 1, 2, 3, 6, 7, 8 and 9 is granted. (Cal. Rules of Court, rule
8.155(a)(1)(A).) The motion is denied as to the documents attached as Exhibits 4 and 5,
as these documents are already a part of the appellate record. (See Clerk’s Transcript
pages 42-46, and 66.)
The request for judicial notice is denied. (Cal. Rules of Court, rule
8.252(a); Evid. Code, §§ 452, subd. (d)(1), 459.) The documents attached to the request
are not relevant to the issues on appeal, and were filed after the judgment that is the
subject of this appeal. (Cal. Rules of Court, rule 8.252(a)(2)(A) & (D).)
DISPOSITION
The judgment is modified to delete the order appointing Nancy Itow
Thompson as executor for the estate of Yoko Itow. In all other respects, the judgment is
5
This opinion is not intended to take any position as to whom should be appointed
executor of Yoko’s estate.
17
affirmed. Because both parties prevailed in part, in the interests of justice neither party
shall recover costs on appeal.
MOTOIKE, J.
WE CONCUR:
GOETHALS, ACTING P. J.
SANCHEZ, J.
18 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484239/ | Filed 11/16/22 P. v. Shepherd CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
THE PEOPLE, C094300
Plaintiff and Respondent, (Super. Ct. No. 08F04840)
v.
SHAWN SHEPHERD,
Defendant and Appellant.
Over a decade ago, a jury found defendant guilty of, among other things, second
degree murder. The trial court sentenced defendant to 15 years to life in state prison.
In 2019, the Legislature enacted Senate Bill No. 1437 (2017-2018 Reg. Sess.)
(Stats. 2018, ch. 1015; Senate Bill 1437), which amended the rule on murder and allowed
those convicted of murder under the former law to seek retroactive relief. Defendant
filed a petition for resentencing. Applying a sufficiency of the evidence standard at the
evidentiary hearing, the trial court denied the petition.
1
On appeal, defendant raises two claims. First, he argues the trial court erred in
applying a sufficiency of the evidence standard in denying his petition, and the People
agree. Second, he asks us to disqualify the trial judge on remand, arguing the trial
judge’s order created an appearance of bias.
We agree with the parties on defendant’s first contention and remand the case to
the trial court for a new evidentiary hearing. However, we find no appearance of bias and
decline to disqualify the trial judge on remand.
I. BACKGROUND
In 2010, a jury found defendant guilty of second degree murder, identity theft, and
forgery. The trial court sentenced defendant to 15 years to life in state prison.
After the enactment of Senate Bill 1437 in 2019, defendant petitioned for
resentencing. Finding defendant made a prima facie case for relief, the trial court issued
an order to show cause. In their motion to dismiss defendant’s petition, the People
argued Senate Bill 1437 was unconstitutional on several grounds. The People also
contended in their response to the trial court’s order to show cause that the court should
review the petition for sufficiency of the evidence but acknowledged a split of authority
among the appellate courts on this issue. But the People made no mention of their right
to a jury trial in either brief.
At the evidentiary hearing on April 2, 2021, the trial judge asked whether a
beyond a reasonable doubt standard would deny the People’s right to a jury trial. The
judge explained he noticed this issue when reading an opinion that “was not controlling
authority,” and had yet to see the appellate courts or our Supreme Court address it. The
People responded that “it could in certain circumstances” and agreed with the court that
the denial “would be unconstitutional.” Defendant’s trial counsel concurred, stating the
judge was “absolutely correct that [the beyond a reasonable doubt standard] would deny
the People sort of a right to a jury trial.” Thus, the judge stated he wanted to “make sure
that there is sufficient record” before the appellate courts and our Supreme Court to show
2
that “this is something that many of us are dealing with at the trial court level – are
concerned about.”
After the evidentiary hearing, on April 29, 2021, the trial judge issued a written
order denying defendant’s petition. The judge concluded a sufficiency of the evidence
was the appropriate standard to apply in reviewing a Penal Code section 1172.6 (former
section 1170.95) petition,1 relying partially on the need to protect the People’s right to a
jury trial. Defendant timely appealed.
II. DISCUSSION
A. Senate Bill 1437
Both parties agree the sufficiency of the evidence standard applied by the trial
court in denying defendant’s petition is no longer valid under the amended statute. So do
we. We will remand the matter for a new evidentiary hearing.
Senate Bill 1437, effective January 1, 2019, was enacted to amend the felony-
murder rule and eliminate natural and probable consequences liability for first and second
degree murder. (Stats. 2018, ch. 1015, § 1, subd. (f); People v. Gentile (2020) 10 Cal.5th
830, 849.) It added former section 1170.95, which allowed a defendant who was
convicted under the former law to petition for resentencing. (§ 1172.6; People v. Strong
(2022) 13 Cal.5th 698, 708.)
The Legislature later passed Senate Bill No. 775 (2021-2022 Reg. Sess.) (Stats.
2021, ch. 551), effective January 1, 2022, amending former section 1170.95 to, among
other things, “reaffirm[] that the proper burden of proof at a resentencing hearing under
this section is proof beyond a reasonable doubt.” (Stats. 2021, ch. 551, § 1, subd. (c).)
The amended former section 1170.95, subdivision (d)(3) added: “A finding that there is
1 Further statutory references are to the Penal Code. Effective June 30, 2022, former
section 1170.95 was recodified without substantive change to section 1172.6. (Stats.
2022, ch. 58, § 10.)
3
substantial evidence to support a conviction for murder . . . is insufficient to prove,
beyond a reasonable doubt, that the petitioner is ineligible for resentencing.” (Stats.
2021, ch. 551, § 2.) These changes apply to defendant’s case. (People v. Montes (2021)
71 Cal.App.5th 1001, 1006-1007; People v. Porter (2022) 73 Cal.App.5th 644, 652.)
Here, the trial court applied a sufficiency of evidence standard in denying
defendant’s petition, which is no longer valid under the amended statute. We will
remand the matter for a new evidentiary hearing.
B. Disqualification
Defendant further asks us to disqualify the trial court judge and assign the matter
to a new judge on remand. While conceding the record does not demonstrate actual bias,
defendant argues the trial judge “on [his] own initiative raised and briefed the issue of the
state’s jury trial right,” creating an appearance of bias. We disagree.
Code of Civil Procedure section 170.1, subdivision (c) requires a reviewing court
to consider, upon request by a party, “whether in the interests of justice it should direct
that further proceedings be heard before a trial judge other than the judge whose
judgment or order was reviewed by the appellate court.” This power must be exercised
“sparingly, and only when the interests of justice require it.” (People v. LaBlanc (2015)
238 Cal.App.4th 1059, 1079.) Disqualification may be ordered “when necessary to
dispel the appearance of bias, for example, when the record shows the trial judge became
embroiled or personally invested in the outcome of the proceedings.” (Ibid.) Proper
grounds for disqualification include “where a reasonable person might doubt whether the
trial judge was impartial [citation], or where the court’s rulings suggest the ‘whimsical
disregard’ of a statutory scheme.” (Hernandez v. Superior Court (2003) 112 Cal.App.4th
285, 303.) But “[m]ere judicial error does not establish bias and normally is not a proper
ground for disqualification.” (LaBlanc, supra, at p. 1079.)
Here, the trial judge’s inquiry into the People’s right to a jury trial was a good
faith attempt to resolve a then-novel issue created by Senate Bill 1437. (See People v.
4
Duchine (2021) 60 Cal.App.5th 798, 811 [“Since Senate Bill 1437 was adopted and its
mechanism for retroactive application has come into play through the filing of section
[1172.6] petitions, many questions have arisen about that process and percolated up
through appeals from resentencing decisions”].) At the time, the trial judge faced
competing appellate decisions regarding the appropriate standard of review at the
evidentiary hearing. The judge noted a beyond a reasonable doubt standard could
infringe the People’s right to a jury trial from his research and gave both parties an
opportunity to address this issue. Both sides agreed with the judge. In fact, the most
resolute support came from defense counsel, who stated the judge was “absolutely correct
that” a beyond a reasonable doubt standard “would deny the People sort of a right to a
jury trial.” Recognizing this was a novel, unresolved issue, the trial judge decided to
present a sufficient record for the appellate courts to understand the constitutional
question created by Senate Bill 1437 that “many of us are dealing with at the trial court
level.” Following the hearing, the judge issued a detailed order explaining his rationale
for applying the sufficiency of the evidence standard. Nothing in the record shows any
bias or personal investment in the outcome by the trial judge. Instead, it demonstrates the
judge’s efforts in resolving legal issues. Although the decision was erroneous in light of
subsequent legislation, it is not ground for disqualification.
Defendant urges us to follow our decision in People v. Dutra (2006)
145 Cal.App.4th 1359 to disqualify the trial judge, without explaining why Dutra is
comparable to the instant matter. Dutra offers no support for defendant’s position. The
trial judge there disobeyed our remittitur and denied defense counsel an opportunity to
explain or brief her position. (Id. at pp. 1361, 1369.) Under these circumstances, we
found disqualification of the trial judge was necessary to “forestall any claim of undue
embroilment.” (Id. at p. 1369.) The instant case is not analogous in the slightest to
Dutra. We reject defendant’s request to disqualify the trial judge on remand.
5
III. DISPOSITION
The trial court’s order denying the petition is vacated, and the matter is remanded
for a new evidentiary hearing under section 1172.6. Defendant’s request to disqualify the
trial judge and assign the matter to a new judge on remand is denied.
/S/
RENNER, J.
We concur:
/S/
MAURO, Acting P. J.
/S/
KRAUSE, J.
6 | 01-04-2023 | 11-16-2022 |
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United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 16, 2022
No. 21-60521 Lyle W. Cayce
Summary Calendar Clerk
Jose Noel Figueroa Gonzalez,
Petitioner,
versus
Merrick Garland, U.S. Attorney General,
Respondent.
Petition for Review of an Order of the
Board of Immigration Appeals
Agency No. A075 464 130
Before King, Higginson, and Willett, Circuit Judges.
Per Curiam:*
Jose Noel Figueroa Gonzalez, a native and citizen of Mexico, petitions
for review of a decision of an Immigration Judge (IJ) affirming an Asylum
Officer’s (AO’s) determination that he lacked a reasonable fear of
persecution or torture.
*
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: 21-60521 Document: 00516547165 Page: 2 Date Filed: 11/16/2022
No. 21-60521
We have not decided whether challenges to an IJ’s upholding of an
AO’s reasonable-fear determination should be reviewed under the
substantial-evidence standard or the facially-legitimate-and-bona-fide-reason
standard. There is no need for us to resolve this issue in this case, however,
as Figueroa Gonzalez cannot prevail even under the more lenient substantial-
evidence standard, which requires us to let the disputed decision stand unless
the evidence “compels” a contrary conclusion. Wang v. Holder, 569 F.3d
531, 536-37 (5th Cir. 2009); see Carbajal-Betanco v. Barr, 830 F. App’x 452,
453 n.1 (5th Cir. 2020) (“[I]t is not necessary to determine the appropriate
standard of review at this time because [the petitioner’s] claim fails even
under the less deferential substantial evidence test.”).
Figueroa Gonzalez’s challenge to the IJ’s persecution determination
fails because the evidence does not compel a conclusion that he was targeted
due to any political opinion. See Changsheng Du v. Barr, 975 F.3d 444, 448
(5th Cir. 2020) (“One could conclude that [the petitioner] expressed a[n
anti-corruption] political opinion, but the evidence does not compel that
conclusion.”). Nor does the evidence compel the conclusion that it is more
likely than not that he would be tortured if returned to Mexico. See Chen v.
Gonzales, 470 F.3d 1131, 1139 (5th Cir. 2006) (noting that judicially imposed
detention is typically not considered torture, which is defined as an act that
causes “‘severe pain or suffering’” (quoting 8 C.F.R. § 208.18(a)(1))).
Finally, his due process claim fails because he has not shown substantial
prejudice in connection with the acts and omissions underlying this claim.
See Okpala v. Whitaker, 908 F.3d 965, 971 (5th Cir. 2018).
Insofar as he argues that we should reconsider our court’s procedures
concerning motions for stays of removal, he impermissibly asks us to issue an
advisory opinion, as there is currently no outstanding motion in this appeal.
We therefore decline any such request. See Bayou Liberty Ass’n, Inc. v. U.S.
Army Corps of Eng’rs, 217 F.3d 393, 397-98 (5th Cir. 2000). Finally, the
2
Case: 21-60521 Document: 00516547165 Page: 3 Date Filed: 11/16/2022
No. 21-60521
respondent’s arguments seeking to relitigate the parties’ joint motion to
remand are unavailing because that motion has already been adjudicated.
The petition for review is DENIED.
3 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484230/ | Case: 22-10617 Document: 00516546945 Page: 1 Date Filed: 11/16/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
No. 22-10617
Summary Calendar FILED
November 16, 2022
Lyle W. Cayce
Stanley Phillips, Clerk
Plaintiff—Appellant,
versus
Cero’s L.L.C., doing business as Alert Security Asset Protection; John
Does 1–6; The Coca-Cola Company,
Defendants—Appellees.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:21-CV-3077
Before Stewart, Duncan, and Wilson, Circuit Judges.
Per Curiam:*
Stanley Phillips sued Cero’s L.L.C. (“Cero’s”) and The Coca-Cola
Company (“Coca-Cola”) for personal injuries after he slipped and fell at a
Coca-Cola facility. The district court dismissed his claims. We affirm.
*
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: 22-10617 Document: 00516546945 Page: 2 Date Filed: 11/16/2022
No. 22-10617
I.
On August 11, 2019, Phillips, a truck driver for Midnight 1 Trucking,
LLC, arrived at a Coca-Cola facility around midnight to pick up a load of
beverages. While walking towards a security gate to sign in, Phillips slipped
on a walkway and was injured. He alleges a Coca-Cola employee had released
a water-pressure valve, causing water to gush out onto the walkway near the
gate. Phillips sued, asserting negligence and premises liability claims against
both Coca-Cola and Cero’s, the security company that manned the gate. The
suit was filed on August 10, 2021—a day before the applicable statute of
limitations expired—but Coca-Cola was not served until November 9, 2021.
Cero’s moved to dismiss under Federal Rule of Civil Procedure
12(b)(6). The district court granted the motion, concluding Phillips failed to
adequately plead premises liability or negligence claims against Cero’s.
Coco-Cola then moved for summary judgment, contending Phillips’s
claims were barred by Texas’s two-year statute of limitations. The district
court agreed, finding Phillips failed to show he diligently served Coca-Cola
after the statute of limitations expired. Phillips appeals both rulings.
II.
First, Phillips argues the district court erred in dismissing his claims
against Cero’s. We review de novo a dismissal for failure to state a claim.
Powers v. Northside Indep. Sch. Dist., 951 F.3d 298, 305, 307 (5th Cir. 2020).
Although we accept “all well-pleaded facts as true” and view them favorably
to the plaintiff, we do not “accept as true legal conclusions, conclusory
statements, or naked assertions devoid of further factual enhancement.”
Franklin v. Regions Bank, 976 F.3d 443, 447 (5th Cir. 2020) (cleaned up).
Phillips pled three separate claims against Cero’s—premises liability,
ordinary negligence, and gross negligence. See United Scaffolding, Inc. v.
2
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No. 22-10617
Levine, 537 S.W.3d 463, 471 (Tex. 2017) (explaining premises liability and
negligence are related but independent theories of recovery). For premises
liability, Phillips must prove that Cero’s “possessed—that is, owned,
occupied, or controlled—the premises where the injury occurred.” Wilson v.
Tex. Parks & Wildlife Dep’t, 8 S.W.3d 634, 635 (Tex. 1999). He must also
prove that Cero’s employees had knowledge of a dangerous condition posing
an “unreasonable risk of harm,” and also failed to exercise reasonable care to
“reduce or to eliminate” the danger. Corbin v. Safeway Stores, Inc., 648
S.W.2d 292, 296 (Tex. 1983). We agree with the district court that Phillips
failed to adequately plead a violation of these standards. Beyond mere
conclusions, Phillips’s complaint does not allege how Cero’s possessed
Coca-Cola’s walkway nor how Cero’s employees knew that a Coca-Cola
employee released a valve causing the walkway to flood. Phillips therefore
failed to sufficiently plead a premises liability claim.
As for negligence, Phillips’s complaint merely asserts boilerplate
allegations that Cero’s breached various duties owed Phillips, causing his
injuries. Such conclusory allegations “masquerading as factual conclusions
will not suffice to prevent a motion to dismiss.” Firefighters’ Ret. Sys. v. Grant
Thornton, L.L.P., 894 F.3d 665, 669 (5th Cir. 2018) (citation omitted).
Phillips therefore failed to sufficiently plead a claim for ordinary negligence.
Morin v. Moore, 309 F.3d 316, 326 (5th Cir. 2002) (“To state a claim for
negligence in Texas, a plaintiff must show duty, breach, causation, and
damages.”). His gross negligence claim, which requires an even higher
evidentiary showing, fails for the same reasons. See Austin v. Kroger Tex. L.P.,
746 F.3d 191, 196 n.2 (5th Cir. 2014).
The district court correctly dismissed the claims against Cero’s.
3
Case: 22-10617 Document: 00516546945 Page: 4 Date Filed: 11/16/2022
No. 22-10617
III.
Next, Phillips challenges the summary judgment in favor of Coca-
Cola, contending the district court erroneously concluded his claims were
barred by Texas’s statute of limitations. We review summary judgments de
novo, applying the same standard as the district court. Powers, 951 F.3d at 307;
Fed. R. Civ. P. 56(d).
In Texas, personal injury claims are subject to a two-year statute of
limitations. Tex. Civ. Prac. & Rem. Code § 16.003(a); see Porterfield
v. Ethicon, Inc., 183 F.3d 464, 467 (5th Cir. 1999). “To satisfy the statute of
limitations in Texas, the plaintiff must not only file the petition within the
two-year period, but must also use diligence in serving the defendant with
process.” Rogers v. Dunham, 478 F. App’x 875, 877 (5th Cir. 2012)
(unpublished) (internal quotations omitted); see Gant v. DeLeon, 786 S.W.2d
259, 260 (Tex. 1990). If the plaintiff serves the defendant after the period
expires, the plaintiff has the “burden of ‘offer[ing] an explanation for the
delay.’” Rogers, 478 F., App’x. at 877 (alteration in original) (quoting Tranter
v. Duemling, 129 S.W.3d 257, 259 (Tex. App.-El Paso 2004)). If he meets this
burden, then the defendant must “show why [plaintiff’s] explanation is
insufficient as a matter of law.” Ibid. (alteration in original) (citation
omitted).
Phillip’s claims against Coca-Cola accrued on August 10, 2019, the
date of his alleged fall. The statute of limitations expired on August 11, 2021.
Yet Phillips did not serve Coca-Cola until November 9, 2021—90 days after
the deadline. Phillips offered the district court no explanation for the
untimely service. Instead, he argued that the two-year period was extended
81 days by two Texas Supreme Court emergency orders: the First and Eighth
Emergency Orders Regarding the Covid-19 State of Disaster. We disagree.
4
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No. 22-10617
Those orders toll only certain cases, but Phillip’s is not among them. As
amended, the orders provide:
Any deadline for the filing or service of any civil case that falls
on a day between March 13, 2020, and September 1, 2020, is
extended until September 15, 2020.
Twenty-First Emergency Order Regarding Covid-19 State of Disaster, 609
S.W.3d 128 (Tex. July 31, 2020) (effectively amending First and Eighth
Emergency Orders); see also Allen v. Sherman Operating Co., 520 F. Supp. 3d.
854, 864–66 (E.D. Tex. 2021) (explaining chronology of the emergency
orders). 1 Because the filing and service deadlines for Phillip’s claims (August
11, 2021) do not fall within the order’s listed dates (March 13–September 1,
2020), the tolling provision does not apply to Phillip’s claims. And by failing
to offer any other excuse for his untimely service, Phillips fails to meet his
burden to show he diligently served Coca-Cola. Accordingly, we find no
reversible error.
AFFIRMED.
1
The Twenty-First emergency order is the last one tolling deadlines for civil cases,
amending all previous orders. See Twenty-First Emergency Order, 609 S.W.3d 128 (Tex. July
31, 2020) (amending Eighteenth Emergency Order); Eighteenth Emergency Order, 609
S.W.3d. 122 (Tex. June 29, 2020) (amending Seventeenth Emergency Order); Seventeenth
Emergency Order, 609 S.W.3d 119 (Tex. May 26, 2020) (amending Twelfth Emergency
Order); Twelfth Emergency Order, 629 S.W.3d 144 (Tex. Apr. 27, 2020) (amending First
Emergency Order, as amended by Eighth Emergency Order); Eighth Emergency Order, 597
S.W.3d 844 (Tex. Apr. 1, 2020) (amending First Emergency Order).
5 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484238/ | Filed 11/16/22 P. v. Staley CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
THE PEOPLE, B322519
Plaintiff and Respondent, (Fresno County
Super. Ct. No. F19906389)
v.
PAUL JAMES STALEY,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Fresno
County, Houry Sanderson, Judge. Convictions affirmed.
Sentence vacated, and cause remanded with directions.
Robert L. S. Angres, under appointment by the Court of
Appeal, for Defendant and Appellant.
Ron Bonta, Attorney General, Lance E. Winters, Chief
Assistant Attorney General, Michael P. Farrell, Senior Assistant
Attorney General, Eric L. Christoffersen, Supervising Deputy
Attorney General, and Ivan P. Marrs, Deputy Attorney General,
for Plaintiff and Respondent.
_____________________
A jury convicted Paul James Staley of raping C.P., the
minor daughter of his live-in girlfriend, and on five additional
counts of sexually assaulting the child over a two-year period
beginning when C.P. was eight years old. The trial court
sentenced Staley to a determinate state prison term of 37 years to
be followed by an aggregate, consecutive indeterminate term of
55 years to life.
On appeal Staley does not challenge the sufficiency of the
evidence to support his convictions. He argues only that the trial
court improperly precluded him from impeaching C.P.’s
credibility by questioning her about a statement made to a social
worker when she was five years old that another man had
touched her private parts when she was three years old. Staley
also requests we review C.P.’s sealed mental health records to
determine whether the court erred in finding they did not contain
anything of probative value on the issue of C.P.’s credibility.
Finally, Staley contends, because the court selected the upper
term for each of the determinate sentences imposed on
three counts, he is entitled to a new sentencing hearing in light of
1
the amendments to Penal Code section 1170, subdivision (b),
made by Senate Bill No. 567 (Stats. 2021, ch. 731, § 1.3) (Senate
Bill 567), which are properly applied to all cases not yet final on
the legislation’s January 1, 2022 effective date.
We affirm Staley’s convictions and remand the matter for a
new sentencing hearing.
1
Statutory references are to this code unless otherwise
stated.
2
FACTUAL AND PROCEDURAL BACKGROUND
1. The Charges
An amended information filed October 26, 2020 charged
Staley with two counts of oral copulation or sexual penetration of
a child 10 years old or younger (§ 288.7, subd. (b); counts 1 and
3), forcible oral copulation of a child 14 years old or younger
(§ 287, subd. (c)(2)(B); count 2), sexual penetration by force of a
child under 14 years old (§ 289, subd. (a)(1)(B); count 4), sexual
intercourse with a child 10 years old or younger (§ 288.7,
subd. (a); count 5) and forcible rape of a child under 14 years old
(§ 261, subd. (a)(2); count 6). Staley pleaded not guilty to all the
charges.
2. Exclusion of Evidence of C.P.’s Prior Statement
Prior to trial Staley’s counsel moved for permission to
cross-examine C.P. about her past statement that another man
had touched her private parts, contending the claim was false
and would undermine the credibility of C.P.’s accusations against
Staley. The People objected, arguing it was not established that
C.P.’s prior statement was false.
As reflected in two police reports, when C.P. was
three years old, she lived with her biological father and his
boyfriend, Charles. When C.P. was five years old and living with
her mother, Charles accused C.P.’s mother of neglect and sought
custody of C.P. A social worker interviewed C.P. with a police
officer present. C.P. stated, when they had lived together,
Charles touched her private parts two times: once in the shower
while they both were naked, and once over her clothes. C.P. also
said she saw Charles touch his own private parts in the shower.
A second officer conducted a follow-up investigation and
attempted to interview Charles but was unable to locate him.
3
That officer concluded C.P.’s statement did not contain “any
specific sexual allegations” against Charles. The investigator
suspended the case “[b]ecause there is a lack of any real
allegation against [Charles], coupled with the fact that I cannot
locate or interview him about this report.”
The trial court denied the defense motion, finding the
two reports did not establish C.P.’s accusation was false and,
even if false, any probative value of the evidence was outweighed
by its prejudicial effect because the events occurred in a
dissimilar factual situation and alleged different conduct from
the charges against Staley. As to the latter point the court
explained, “Doing the [Evidence Code section] 352 analysis of
more probative than prejudicial effect, [the court] finds no
probative value to an allegation made against someone during a
heated custodial battle between her mother and the man in
question. And that, in fact, finds no similarities in the nature of
the events of what was said if anything was done by [Charles]
against [C.P.]. So they will not be allowed in.”
3. The People’s Evidence
C.P. was born in June 2007. When C.P. was eight years
old, Staley began dating her mother. C.P. and her mother moved
2
into an apartment with Staley and C.P.’s three half sisters.
C.P., 13 years old at the time of trial, testified Staley
started touching her vagina when they were alone in the
apartment. He would insert two fingers inside her vagina and
move them back and forth. This contact was painful and
frightened C.P. because she did not understand what was
happening. Over a two-year period, beginning when she was
2
Staley is the father of two of C.P.’s half sisters.
4
eight years old, Staley digitally penetrated her vagina more than
five times.
Staley eventually began inserting his penis into C.P.’s
vagina, which he did on more than five occasions. The first time
C.P. was scared and tried to scream “stop” and fight back by
kicking and screaming, but Staley covered her mouth with his
hand. Staley also forced his penis into C.P.’s mouth. She could
not recall how many times, but it occurred more frequently than
him putting his penis in her vagina and less frequently than him
touching her vagina.
Staley warned C.P. not to tell anyone about his conduct. To
try to avoid Staley, C.P. would ask to accompany her mother on
errands, but their car did not have enough seats for C.P. and her
sisters. C.P. also tried to lock herself in a bedroom and hide in a
bunk bed. But Staley would unlock the door with a key, pull her
out of the bed and carry her to his room.
C.P. tried to tell her mother after the assaults on one
occasion, but Staley interrupted her and covered C.P.’s mouth to
prevent her from speaking. C.P. also thought that her mother
would not believe her. Although C.P. considered telling a teacher
or a friend, she was too afraid of Staley to do so. He often hit C.P.
and her sisters with a belt, and once pinned C.P. against a wall
and choked her until she nearly lost consciousness.
When C.P. was 10 years old, Staley and C.P.’s mother
moved the family to Texas. After that state’s child protective
services agency placed C.P. and her sisters into foster care, C.P.
told her foster mother about Staley’s actions.
4. The Defense Evidence
A social worker from the Texas Department of Family and
Protective Services testified she interviewed C.P. in March 2017
5
about her home living conditions and C.P. did not mention
anything about sexual abuse.
5. Verdict and Sentence
Following an 11-day trial, the jury found Staley guilty on
all six counts. The parties stipulated that Staley had a prior
conviction in 2002 for committing a lewd act on a 14- or 15-year-
3
old child (§ 288, subd. (c)(1)).
Pursuant to section 667.6, subdivision (d)(1), the court
imposed full, separate and consecutive determinate state prison
terms of 12 years on count 2 (the upper term for forcible oral
copulation of a child 14 years old or younger), 12 years on count 4
(the upper term for sexual penetration by force of a child) and
13 years on count 6 (the upper term for forcible rape), for a total
determinate term of 37 years. The court also imposed
three consecutive indeterminate life terms: 15 years to life on
each of counts 1 and 3 (oral copulation or sexual penetration of a
child 10 years old or younger) and 25 years to life on count 5
(sexual intercourse with a child 10 years old or younger), for an
aggregate indeterminate state prison term of 55 years to life.
Explaining its sentencing decision, the trial court identified
several of the aggravating circumstances listed in California
Rules of Court, rule 4.421: “The manner in which these crimes
were carried out indicated planning, sophistication. Certainly
took advantage of a very vulnerable individual entrusted in the
care and custody of Mr. Staley. He was the adult to protect these
3
In addition to his prior conviction under section 288,
subdivision (c)(1), Staley had prior convictions for failure to
register as a sex offender in 2005 (§ 290, subd. (f)(1)) and child
cruelty in 2016 (§ 273a, subd. (a)).
6
children. Not the adult to abuse and take advantage of them.
And he certainly took advantage of this position of trust and
confidence to commit these offenses. The acts were, in fact, not
violent in the sense that they were physical as to great bodily
injury. The injuries were emotional, psychological injuries. And
as [C.P.] very aptly stated, these are things she will have to work
through, and I certainly wish her the best to do so. The
defendant also has prior convictions as an adult, and the
defendant has continued to show poor performance on various
levels of probation and or parole. He has suffered a prior felony
conviction. He has been in prison. He certainly has not complied
with a civilized lifestyle and has taken advantage of child or
children that were entrusted in his care. These are violent sex
crimes. Multiple violent sex crimes with the same victim
different occasions.” The court also noted that Staley had shown
no remorse for his actions.
Staley filed a timely notice of appeal.
DISCUSSION
1. The Trial Court Did Not Abuse Its Discretion by
Excluding Evidence of C.P.’s Prior Statement
Evidence an alleged victim of sexual assault previously
made a false report of assault or molestation is admissible to
impeach the victim’s credibility. (People v. Miranda (2011)
199 Cal.App.4th 1403, 1424; see Evid. Code, § 1103, subd. (a)(1).)
However, a prior accusation has no bearing on the victim’s
credibility unless the prior complaint was false. (People v.
Tidwell (2008) 163 Cal.App.4th 1447, 1457; see People v. Bittaker
(1989) 48 Cal.3d 1046, 1097, disapproved on another ground in
People v. Black (2014) 58 Cal.4th 912, 919 [“[t]he value of the
evidence as impeachment depends upon proof that the prior
7
charges were false”].) Additionally, “[t]he trial court has
discretion under Evidence Code section 352 to exclude evidence of
prior reports of sexual assault if proof of the falsity of the prior
complaint ‘would consume considerable time, and divert the
attention of the jury from the case at hand.’” (Miranda, at
p. 1424, fn. omitted.)
Staley characterizes then-five-year-old C.P.’s report that
Charles had touched her private parts when she was three years
old as false or provable as false and argues the trial court abused
its discretion in precluding him from questioning her about it.
There was no evidence C.P.’s statement was false. The
investigating officer’s conclusion there was “a lack of any real
allegation” against Charles was, in effect, an evaluation of the
legal significance of C.P.’s statement, not its truth or falsity; and
his decision to suspend the case when he was unable to locate
Charles similarly was unrelated to the trustworthiness of her
statement. Absent a clear showing of falsity, questioning C.P.
about her prior statement would have no bearing on her
credibility. (See People v. Miranda, supra, 199 Cal.App.4th at
p. 1425 [not an abuse of discretion for trial court to exclude social
worker’s conclusion that prior claim of sexual abuse of disabled
girl was unfounded, where “evidence showing a prior false
complaint was uncertain”]; People v. Tidwell, supra,
163 Cal.App.4th at p. 1457.)
Even if the evidence was marginally relevant on the issue
of credibility, however, the trial court acted well within its broad
discretion under Evidence Code section 352 to preclude any
questioning about the matter. (See People v. Clark (2016)
63 Cal.4th 522, 586 [“‘Under Evidence Code section 352, the trial
court enjoys broad discretion in assessing whether the probative
8
value of particular evidence is outweighed by concerns of undue
prejudice, confusion or consumption of time. [Citation.]’
[Citation.] ‘A trial court’s discretionary ruling under Evidence
Code section 352 will not be disturbed on appeal absent an abuse
of discretion’”].) Because there was no independent proof C.P.’s
statement about Charles’s conduct was false, admission of the
evidence “would in effect force the parties to present evidence
concerning . . . long-past sexual incidents which never reached
the point of formal charges. Such a proceeding would consume
considerable time, and divert the attention of the jury from the
case at hand.” (People v. Bittaker, supra, 48 Cal.3d at p. 1097 [no
abuse of discretion for trial court to exclude impeachment
evidence that a 17-year-old witness who rejected the advances of
a rape and murder suspect made prior false charges of sexual
molestation against two other men].)
In People v. Tidwell, supra, 163 Cal.App.4th 1447 the
defense sought to impeach the victim with evidence of prior false
complaints of rape. (Id. at p. 1452.) The court of appeal held,
although “the evidence was relevant and admissible pursuant to
Evidence Code section 1103, the trial court did not abuse its
discretion by excluding the evidence because the evidence was
weak on the issue of [the victim’s] credibility and would require
an undue consumption of time.” (Id. at pp. 1456-1457.)
“Although there was some evidence that [the victim] made
inconsistent statements, there was no conclusive evidence that
her prior rape complaints were false. The defense was unable to
obtain evidence from the men that [the victim] accused, and
inferences could be drawn either way from the circumstances of
the prior incidents and [the victim's] statements concerning the
incidents. In addition to the weaknesses in the evidence
9
concerning falsity of the rape complaints, admitting the evidence
would have resulted in an undue consumption of time” spent
litigating the veracity of the prior complaints. (Id. at p. 1458.)
Here, as discussed, C.P.’s statement was not proved false.
And the accuracy of a general statement of inappropriate
touching made by a five-year-old had little probative value as to
the credibility of 13-year-old C.P.’s detailed and graphic
descriptions of Staley’s repeated sexual assaults over a two-year
period, while exploring the earlier statement would have had a
significant “potential for confusing the jury and consuming an
undue amount of time” (People v. Miranda, supra,
199 Cal.App.4th at p. 1425), particularly given the prior
statement’s connection with custody “matters far afield from the
charges in this case” (id. at p. 1426). As was true in Tidwell, “We
therefore cannot say that the trial court abused its discretion in
excluding the evidence based on the weak nature of the evidence
of falsity of the complaints and the confusion of the jury and
consumption of time it would have engendered for the parties to
embark on the task of litigating the truthfulness of [the victim’s]
prior complaints.” (People v. Tidwell, supra, 163 Cal.App.4th at
p. 1458.)
Because the trial court’s ruling was not an abuse of
discretion under Evidence Code section 352, Staley’s contention
exclusion of the evidence violated his Sixth Amendment rights
also fails. (See People v. Brown (2003) 31 Cal.4th 518, 545
[“reliance on Evidence Code section 352 to exclude evidence of
marginal impeachment value that would entail the undue
consumption of time generally does not contravene a defendant’s
constitutional rights to confrontation and cross-examination”].)
10
2. Review of Mental Health Records
Prior to trial, Staley subpoenaed C.P.’s mental health
records and sought to examine the records for potential use at
trial to impeach her credibility (to the extent they disclosed any
preexisting condition or medication that may have led her to
fabricate or hallucinate incidents of sexual assault and to
discover whether she had named other people who allegedly
molested her). The trial court conducted an in camera review of
the records and heard testimony from an assessing clinician who
conducted C.P.’s mental health evaluation in 2017. The court
ruled the records contained no material relevant to the question
of C.P.’s credibility.
At Staley’s request we have reviewed C.P.’s mental health
records and the sealed transcript of the trial court’s in camera
review. We agree with the trial court’s ruling that there is no
information properly to be disclosed to Staley. (See People v. Abel
(2012) 53 Cal.4th 891, 935 [neither defendant’s right of
confrontation nor his right to due process was violated by
nondisclosure of psychiatric records that provided no basis for
impeaching the credibility of the testimony of the prosecution’s
witness].)
3. Senate Bill 567’s Amendments to Section 1170,
Subdivision (b), Require a Remand for Resentencing
a. Senate Bill 567
In Cunningham v. California (2007) 549 U.S. 270, 293
(Cunningham) the United States Supreme Court held
California’s determinate sentencing law, which provided specified
crimes were to be punished by one of three statutory terms of
imprisonment (the lower, middle or upper term), violated a
defendant’s federal constitutional right to a jury trial under the
11
Sixth and Fourteenth Amendments to the extent it authorized
the trial judge to find facts (other than a prior conviction) by a
preponderance of the evidence that subjected a defendant to the
possibility of an upper term sentence. Following the Supreme
Court’s decision in Cunningham, the Legislature amended
section 1170, subdivision (b), effective March 30, 2007 as urgency
legislation, to eliminate the statutory presumption for the middle
term and, instead, to grant the trial court full discretion to
impose the lower, middle or upper term of the triad. (Former
§ 1170, subd. (b); Stats. 2007, ch. 3. § 2 [“[w]hen a judgment of
imprisonment is to be imposed and the statute specifies three
possible terms, the choice of the appropriate term shall rest
within the sound discretion of the court”]; see People v. Sandoval
(2007) 41 Cal.4th 825, 845.)
When Staley was sentenced in December 2020,
section 1170, subdivision (b), which permitted the sentencing
court to impose any of the three terms, lacked the requirement of
weighing the circumstances in aggravation against those in
mitigation before selecting the upper term and required the court
only to state reasons for the decision to permit appellate review
for abuse of discretion. (See People v. Sandoval, supra,
41 Cal.4th at pp. 843, 847.) As discussed, exercising this
discretion the trial court selected the upper term for each of the
three counts on which it imposed a determinate sentence.
Senate Bill 567, the Legislature’s more fundamental
response to the Sixth and Fourteenth Amendment issues
addressed by the United States Supreme Court in Cunningham,
supra, 549 U.S. 270 (see Sen. Com. on Public Safety, Rep. on
Sen. Bill No. 567 (2021-2022 Reg. Sess.) April 13, 2021), amended
section 1170, subdivision (b), effective January 1, 2022, to provide
12
in subdivision (b)(1), “When a judgment of imprisonment is to be
imposed and the statute specifies three possible terms, the court
shall, in its sound discretion, order imposition of a sentence not to
exceed the middle term except as otherwise provided in
paragraph (2).” Subdivision (b)(2) in turn provides, “The court
may impose a sentence exceeding the middle term only when
there are circumstances in aggravation of the crime that justify
the imposition of a term of imprisonment exceeding the middle
term, and the facts underlying those circumstances have been
stipulated to by the defendant, or have been found true beyond a
reasonable doubt at trial by the jury or by the judge in a court
trial. . . .” Subdivision (b)(3) creates an exception to the
limitation imposed by subdivision (b)(2): “Notwithstanding
paragraphs (1) and (2), the court may consider the defendant’s
prior convictions in determining sentencing based on a certified
record of conviction without submitting the prior convictions to a
jury.”
Staley contends and the Attorney General agrees, as do we,
that because Senate Bill 567’s changes to section 1170,
subdivision (b), limit the trial court’s discretion to impose the
upper term of imprisonment, they are ameliorative changes in
the law (see People v. Frahs (2020) 9 Cal.5th 618, 628) and, as
such, apply retroactively to nonfinal judgments under the
principles articulated by the Supreme Court in In re Estrada
(1965) 63 Cal.2d 740, 742. (See People v. Zabelle (2022)
80 Cal.App.5th 1098, 1109 [“section 1170’s current statutory
language applies retroactively in all nonfinal cases”]; People v.
Lopez (2022) 78 Cal.App.5th 459, 465 [“[t]he People properly
concede that Senate Bill No. 567’s ameliorative amendments to
section 1170, subdivision (b) apply retroactively to all cases not
13
yet final as of January 1, 2022”]; People v. Flores (2022)
73 Cal.App.5th 1032, 1039 [same]; see also People v. Esquivel
(2021) 11 Cal.5th 671, 674 [“‘When the Legislature amends a
statute so as to lessen the punishment[,] it has obviously
expressly determined that its former penalty was too severe and
that a lighter punishment is proper as punishment for the
commission of the prohibited act. It is an inevitable inference
that the Legislature must have intended that the new statute
imposing the new lighter penalty now deemed to be sufficient
should apply to every case to which it constitutionally could
apply. The amendatory act imposing the lighter punishment can
be applied constitutionally to acts committed before its passage
provided the judgment convicting the defendant of the act is not
final’”]; People v. Superior Court (Lara) (2018) 4 Cal.5th 299,
307.)
b. The trial court’s error in relying on circumstances in
aggravation not stipulated to by Staley or found true
beyond a reasonable doubt at trial by the jury to
impose upper term sentences was not harmless
Staley argues his case should be remanded for resentencing
because the upper term sentences on counts 2, 4 and 6 were not
imposed in conformity with section 1170, subdivision (b), as
amended by Senate Bill 567—that is, the trial court relied on
circumstances in aggravation to which he had not stipulated and
were not found true beyond a reasonable doubt by the jury that
4
convicted him. Although the Attorney General acknowledges
4
If the trial court had imposed the now-presumptive middle
term on each of the three counts with a determinate sentencing
triad, the determinate portion of Staley’s sentence would have
been 31 years, rather than 37 years, to be followed in either case
14
Staley is entitled to the benefit of Senate Bill 567, he asserts
there was no error because the trial court properly based its
sentencing decision on Staley’s stipulated prior conviction. In
any event, the Attorney General also contends, any error was
harmless because a jury would have found additional factors in
aggravation true beyond a reasonable doubt. (See People v.
Sandoval, supra, 41 Cal.4th at p. 838 [denial of the right to a jury
trial on aggravating circumstances is reviewed under the
harmless beyond-a-reasonable-doubt standard set forth in
Chapman v. California (1967) 386 U.S. 18]; Sandoval, at p. 839
[“if a reviewing court concludes, beyond a reasonable doubt, that
the jury, applying the beyond-a-reasonable-doubt standard,
unquestionably would have found true at least a single
aggravating circumstance had it been submitted to the jury, the
Sixth Amendment error properly may be found harmless”].)
The Attorney General is correct that under Cunningham,
supra, 549 U.S. 270, a single aggravating factor established in a
manner consistent with the Sixth Amendment and amended
section 1170, subdivision (b)—here, Staley’s stipulated prior
felony conviction—would be sufficient as a matter of federal
constitutional law to justify imposition of the upper term
sentences even if the trial court also considered other
aggravating factors. (See People v. Scott (2015) 61 Cal.4th 363,
404-405 [“as long as a single aggravating circumstance complying
with Cunningham ‘renders a defendant eligible for the upper
by the aggregate indeterminate term of 55 years to life.
Regardless of the total aggregate sentence, Staley, who is now
52 years old, will be entitled to a parole suitability hearing under
the Elderly Parole Program once he has served 20 years of
continuous incarceration. (§ 3055, subd. (a).)
15
term sentence,’ ‘any additional factfinding engaged in by the trial
court in selecting the appropriate sentence among the
three available options does not violate the defendant’s right to
jury trial’”]; People v. Towne (2008) 44 Cal.4th 63, 75.)
We also agree with the Attorney General that we can
conclude beyond a reasonable doubt a jury, if asked, would have
found true beyond a reasonable doubt that Staley took advantage
of a position of trust to commit multiple sexual assaults against a
particularly vulnerable victim. (Cal. Rules of Court,
rule 4.421(a)(3) & (11) [circumstances in aggravation; factors
related to the crime].) Whether a jury would have also found the
crimes required planning and sophistication; involved great
violence or disclosed a high degree of cruelty, viciousness or
callousness; or indicated a serious danger to society—other
circumstances in aggravation cited or implied by the trial court
when sentencing Staley (see Cal. Rules of Court, rule 4.421(a)(1),
5
(8) & (b)(1))—is far less clear. Those factors are inherently
vague and subjective, “requir[ing] an imprecise quantitative or
comparative evaluation of the facts.” (People v. Sandoval, supra,
6
41 Cal.4th at p. 840.)
5
The trial court gave no explanation why it concluded
Staley’s acts indicated planning and sophistication and
inconsistently stated Staley’s acts were “not violent” physically
and caused no great bodily harm (albeit inflicting serious
emotional injury) and also they were “violent sex crimes.”
6
The Supreme Court in Sandoval observed that a reviewing
court “cannot necessarily assume that the record reflects all of
the evidence that would have been presented had aggravating
circumstances been submitted to the jury.” (People v. Sandoval,
supra, 41 Cal.4th at p. 839.) A defendant’s incentive and
16
As a matter of state law, section 1170, subdivision (b), now
requires all factors in aggravation actually relied upon by the
trial court other than a prior conviction be found true beyond a
reasonable doubt by the trier of fact or stipulated to by the
defendant. Thus, even though there was no federal constitutional
violation because Staley could be sentenced to upper terms based
on his prior conviction and his exploitation of a position of trust
to sexually assault a particularly vulnerable victim, we can
affirm imposition of those sentences only if we can conclude the
trial court “would have imposed the upper term sentence even
absent the error.” (People v. Zabelle, supra, 80 Cal.App.5th at
p. 1112.) In particular, we must consider whether it is
reasonably probable the trial court would have chosen a lesser
sentence if it had relied only upon Staley’s prior conviction and
the several additional factors in aggravation the record
overwhelmingly established. (See ibid.; cf. People v. Wandrey
(2022) 80 Cal.App.5th 962, 982, review granted Sept. 28, 2022,
S275942 [even if one aggravating factor has been properly
determined, the reviewing court must ask “whether the trial
court would have exercised its discretion in the same way if it
opportunity at the sentencing hearing to contest any aggravating
circumstances “were not necessarily the same as they would have
been had the aggravating circumstances been tried to a jury”
and, “to the extent a potential aggravating circumstance at issue
in a particular case rests on a somewhat vague or subjective
standard, it may be difficult for a reviewing court to conclude
with confidence that, had the issue been submitted to the jury,
the jury would have assessed the facts in the same manner as did
the trial court.” (Id. at pp. 839-840.)
17
had been aware of the statutory presumption in favor of the
7
middle term”].)
7
The courts of appeal have articulated a variety of harmless
error standards to determine whether a defendant sentenced to
an upper term under former section 1170 whose judgment is not
final must be resentenced. People v. Flores (2022) 75 Cal.App.5th
495, at pages 500 to 501, held simply the error is harmless if the
reviewing court determines, beyond a reasonable doubt, that the
jury would have found, beyond a reasonable doubt, at least one
aggravating circumstance true. People v. Lopez, supra,
78 Cal.App.5th at page 467, footnote 11, disagreed, holding the
error is harmless if the reviewing court “can conclude beyond
reasonable doubt that a jury would have found true beyond a
reasonable doubt all of the aggravating factors on which the trial
court relied”; if not, the reviewing court must then determine
whether it is reasonably probable the “trial court would
nevertheless have exercised its discretion to select the upper term
if it had recognized that it could permissibly rely on only a single
one of the aggravating factors, a few of the aggravating factors, or
none of the aggravating factors, rather than all of the factors on
which it previously relied.” In People v. Dunn (2022)
81 Cal.App.5th 394, review granted October 12, 2022, S275655,
the court, at pages 409 to 410, held the reviewing court
“determines (1)(a) beyond a reasonable doubt whether the jury
would have found one aggravating circumstance true beyond a
reasonable doubt and (1)(b) whether there is a reasonable
probability that the jury would have found any remaining
aggravating circumstance(s) true beyond a reasonable doubt”; if
not, the reviewing court must then determine “(2) whether there
is a reasonable probability that the trial court would have
imposed a sentence other than the upper term in light of the
aggravating circumstances provable from the record as
determined in the prior steps.” (Fn. omitted.) People v. Zabelle,
supra, 80 Cal.App.5th at page 1112, upon which we generally
rely, held the reviewing court must first determine beyond a
18
It is not clear from the trial court’s comments what weight
it gave to each of the multiple factors it articulated in sentencing
Staley to the upper terms on the three triad counts. As in People
v. Zabelle, supra, 80 Cal.App.5th 1098, the trial court here “gave
no particular weight to any of its listed aggravating
circumstances. Nor did it indicate whether its decision to impose
the upper term was (or was not) a close call.” (Id. at p. 1115; see
People v. Lopez, supra, 78 Cal.App.5th at p. 468 [“trial court
offered no indication that it would have selected an upper term
sentence even if only a single aggravating factor or some subset
of permissible factors were present”]; cf. People v. Gutierrez
(2014) 58 Cal.4th 1354, 1391 [remand for resentencing proper if
record does not “‘clearly indicate[]’” the court would have imposed
the same sentence under different sentencing presumption].)
Ameliorative changes to criminal sentencing law must be
applied broadly, not narrowly. (People v. Superior Court (Lara),
supra, 4 Cal.5th at p. 308 [“‘in the absence of contrary
indications, a legislative body ordinarily intends for ameliorative
changes to the criminal law to extend as broadly as possible,
distinguishing only as necessary between sentences that are final
reasonable doubt that the “jury would have found true at least
one of the aggravating circumstances that the trial court relied
on,” and then determine whether, if the trial court relied on other
aggravating circumstances, “it is reasonably probable that the
trial court would have chosen a lesser sentence in the absence of
the error,” which requires determining “for each aggravating fact,
. . . whether it is reasonably probable that the jury would have
found the fact not true” and “then, with the aggravating facts
that survive this review, . . . whether it is reasonably probable
that the trial court would have chosen a lesser sentence had it
considered only these aggravating facts.”
19
and sentences that are not’”].) Given the severity of the three
consecutive indeterminate life terms imposed by the court
(aggregating 55 years to life), if the aggravating circumstances
considered by the trial court had been limited to Staley’s prior
conviction and those additional factors a jury inevitably would
have found true, there is at least a reasonable probability the
trial court would have adopted amended section 1170,
subdivision (b)’s presumption in favor of using the middle term
and imposed determinate state prison terms totaling 31 years,
rather than 37 years. Accordingly, we vacate the sentence
imposed and remand the cause for the trial court to resentence
Staley.
DISPOSITION
We affirm Staley’s convictions, vacate his sentence and
remand with directions for the trial court to resentence Staley in
accordance with the terms of section 1170, subdivision (b)(2), and
all other applicable, newly enacted ameliorative legislation.
PERLUSS, P. J.
We concur:
SEGAL, J.
FEUER, J.
20 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484226/ | 11/16/2022
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
Assigned on Briefs August 1, 2022
FIRST BANK F/D/B/A NORTHWEST GEORGIA BANK v.
MOUNTAIN APARTMENTS, LLC, ET AL.
Appeal from the Circuit Court for Hamilton County
No. 16C1341 John B. Bennett, Judge
___________________________________
No. E2021-01433-COA-R3-CV
___________________________________
The plaintiff bank appeals the trial court’s summary dismissal of its breach of contract
action against the defendants pursuant to the law in Georgia. We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed; Case Remanded
JOHN W. MCCLARTY, J., delivered the opinion of the court, in which FRANK G. CLEMENT,
JR., P.J., M.S. and CARMA DENNIS MCGEE, J., joined.
Walter N. Winchester and Ryen M. Lamb, Knoxville, Tennessee, for the appellant, First
Bank f/d/b/a Northwest Georgia Bank.
Christopher T. Varner, Chattanooga, Tennessee, for the appellees, Suresh and Anita
Anandani.
OPINION
I. BACKGROUND
On February 28, 2008, Mountain Apartments, LLC, a registered company in
Tennessee, executed a promissory note to secure a loan in excess of 3 million dollars with
First Bank f/d/b/a Northwest Georgia Bank (“the Plaintiff”). As pertinent to this appeal,
the note was further secured by personal guaranties signed by Suresh and Anita Anandani
(collectively “the Defendants”). The loan documents and the guaranties contained a choice
of law provision providing that the terms of the agreements would be governed by Georgia
law. Defendants last remitted payment in December 2011.
Plaintiff filed this action on November 18, 2016, alleging, inter alia, breach of
contract. However, Plaintiff did not properly issue service of process to Defendant Anita
until April 29, 2019. Defendant Suresh was served on August 29, 2019. Defendants filed
motions to dismiss and for summary judgment, asserting that the claim was barred by the
applicable statute of limitations for failure to timely execute service of process pursuant to
the Tennessee Rules of Civil Procedure.1 Rule 3 provides as follows:
All civil actions are commenced by filing a complaint with the clerk of the
court. An action is commenced within the meaning of any statute of
limitations upon such filing of a complaint, whether process be issued or not
issued and whether process be returned served or unserved. If process
remains unissued for 90 days or is not served within 90 days from issuance,
regardless of the reason, the plaintiff cannot rely upon the original
commencement to toll the running of a statute of limitations unless the
plaintiff continues the action by obtaining issuance of new process within
one year from issuance of the previous process or, if no process is issued,
within one year of the filing of the complaint.
The statute of limitations in this action expired in December 2017. See Tennessee Code
Annotated section 28-3-109(a)(3) (providing that causes of actions based upon contract
must be commenced within six years after the cause of action accrued). Service was not
complete in this case within one year of the filing of the complaint to toll the statute of
limitations, thereby making the complaint for breach of contract untimely filed.
The parties agreed that Plaintiff failed to timely complete service of process on the
Defendants pursuant to Rule 3. However, Plaintiff argued that Defendants waived their
right to assert the statute of limitations as a defense to their liability on the note based upon
their execution of the personal guaranties, which provided, in pertinent part, as follows:
“Guarantor hereby waives. . . any and all defenses to payment as permitted by law.”
The parties further agreed that if the language in the guaranties did not operate to
waive the applicable statute of limitations, then the claim was time-barred pursuant to the
six-year statute of limitations set forth in Section 28-3-109(a)(3). Accordingly, the sole
issue before the trial court was whether the waiver language found in the personal
guaranties barred the action under Georgia law.
1
While Georgia law governs the interpretation of the agreement, Tennessee law governs procedural
matters, including service of process and the statute of limitations. See generally Charles Hampton’s A–1
Signs, Inc. v. Am. States Ins. Co., 225 S.W.3d 482, 487 (Tenn. Ct. App. 2006).
-2-
Following extensive briefing and hearings on the issue, the court found that the
language in the guaranties waiving “any and all defenses as permitted by law” was
ambiguous and should be strictly construed. The trial court further found that, under
Georgia law, “modifications to statutes of limitation [must] be express in order for the same
to be evaluated for purposes of determining if the modification to the statute of limitation
is unreasonable or unconscionable.” Finding no such express waiver, the court held that
the action was time-barred based upon the failure to complete service of process in
accordance with Rule 3. The trial court dismissed the action as untimely filed and certified
the judgment as final. This timely appeal followed.
II. ISSUE
The sole dispositive issue on appeal is as follows: Whether the trial court erred in
dismissing the action based upon its finding that the guaranties did not operate as a waiver
of the statute of limitations.
III. STANDARD OF REVIEW
We review the trial court’s factual findings de novo upon the record, affording them
a presumption of correctness unless the evidence preponderates otherwise. See Tenn. R.
App. P. 13(d); Armbrister v. Armbrister, 414 S.W.3d 685, 692 (Tenn. 2013). We review
questions of law de novo, affording the trial court’s decision no presumption of correctness.
Armbrister, 414 S.W.3d at 692 (citing Mills v. Fulmarque, 360 S.W.3d 362, 366 (Tenn.
2012)). The interpretation of a written agreement is a question of law and the standard of
review is de novo with no presumption of correctness. Bratton v. Bratton, 136 S.W.3d
595, 601 (Tenn. 2004); Mark VII Transp. Co. v. Responsive Trucking, Inc., 339 S.W.3d
643, 647 (Tenn. Ct. App. 2009).
IV. DISCUSSION
Plaintiff argues that the court’s interpretation of the written agreement and its
application of Georgia law is flawed. Plaintiff asserts that Georgia law does not require an
express waiver of enumerated defenses. Rather, the contract must merely be clear and
unambiguous in its meaning like the waiver presented here. Defendants respond that the
court’s ruling was in keeping with Georgia’s suretyship law. Defendants continue that the
statute of limitations is not a defense to payment as suggested by Plaintiff but that it is a
procedural defense that bars the Plaintiff’s recovery. Defendants alternatively assert that
the waiver itself is ambiguous and overbroad, inviting the court to determine what is and
is not permitted by law and permitting more than one reasonable interpretation.
-3-
“The cardinal rule of contract construction is to ascertain the intention of the parties.
... When the terms of a contract are clear and unambiguous, the reviewing court looks only
to the contract itself to determine the parties’ intent.” Langley v. MP Spring Lake, LLC,
834 S.E.2d 800, 804 (Ga. 2019) (internal quotations and citations omitted). “[W]here there
is ambiguity, the agreement will be construed against the drafter and in favor of the non-
drafter.” Id. (citation omitted).
Plaintiff has provided a number of cases for our review in which defendants
expressly waived the statute of limitations as a bar to recovery in Georgia. However,
Plaintiff has not presented a case in which the trial court applied a broad waiver of “all
defenses” to the statute of limitations. Plaintiff conceded before the trial court that one was
not readily available. We, like the trial court, find Georgia’s suretyship law instructive,
specifically, the Official Code of Georgia Annotated section 10-7-3, which provides as
follows:
The contract of suretyship is one of strict law; and the surety’s liability will
not be extended by implication or interpretation.
In consideration of the foregoing, we likewise agree with the trial court that a modification
to the statute of limitations must be express and not by implication or interpretation. Such
a waiver has not been presented here. Accordingly, we affirm the trial court’s dismissal of
the action as untimely pursuant to the applicable statute of limitations.
V. CONCLUSION
For the reasons stated above, we affirm the decision of the trial court. The case is
remanded for such further proceedings as may be necessary. Costs of the appeal are taxed
to the appellant, First Bank f/d/b/a Northwest Georgia Bank.
_________________________________
JOHN W. MCCLARTY, JUDGE
-4- | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484246/ | 11/16/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 21-0578
No. DA 21-0578
CITY OF WHITEFISH,
Plaintiff and Appellee,
v.
ALEXANDRU CURRY,
Defendant and Appellant.
ORDER
Upon consideration of Appellant’s motion for extension of time,
and good cause appearing,
IT IS HEREBY ORDERED that Appellant is granted an extension
of time to and including December 27, 2022, within which to prepare,
file, and serve Appellant’s opening brief on appeal.
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 16 2022 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484247/ | 11/16/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA
Case Number: DA 22-0630
Supreme Court No. DA 22-0630
JOHN BUTLER,
Appellant and
Plaintiff/Counter Defendant,
-vs-
ELINOR SWANSON and DOES 1-20, ORDER GRANTING
inclusive, APPELLANT AND
PLAINTIFF/COUNTER
Appellee and DEFENDANT JOHN
Defendant/Counter Plaintiff. BUTLER’S
UNOPPOSED
ELINOR SWANSON, MOTION FOR EXTENSION
OF TIME TO FILE
Third-Party Plaintiff, APPELLANT BRIEF
-vs-
JOSEPH FARZAM and JOSEPH
FARZAM LAW FIRM, a Professional
Corporation,
Third-Party Defendants.
Pursuant to Appellant and Plaintiff/Counter Defendant John Butler’s Motion
for Extension of Time to file his opening Appellant Brief, and pursuant to Mont. R.
App., P. 26(1), and noting that Appellee does not object, Appellant is granted a
thirty-day (30) extension within which to file his Appellant brief. Appellant’s
Opening Brief shall be due January 13, 2023.
DATED this _____ day of _______________, 2022.
By:
Electronically signed by:
Bowen Greenwood
Clerk of the Supreme Court
November 16 2022 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484241/ | Filed 11/16/22 P. v. Larraburu CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
THE PEOPLE, H048362
(Santa Clara County
Plaintiff and Respondent, Super. Ct. No. C1804870)
v.
PAUL GABRIEL LARRABURU,
Defendant and Appellant.
A jury convicted appellant Paul Gabriel Larraburu of several offenses arising out
of an altercation at the home of his ex-girlfriend, Loraine S.,1 including the infliction of
corporal injury on a partner while having a prior conviction for the same crime within
seven years (count 2). Larraburu was also charged with assault by means of force likely
to produce great bodily injury (count 1). Though the jury acquitted Larraburu of that
charge, on count 1 it found him guilty of the lesser included offense of misdemeanor
assault. The trial court sentenced Larraburu to eight years in prison.
On appeal, Larraburu claims his conviction on count 1 for assault is barred under a
judicially created exception to Penal Code section 9542 and by constitutional principles of
Loraine S. and Loraine S.’s daughter, Valerea G., are alleged as victims in the
1
information. We refer to the victims and other witnesses by first name and last initial to
protect their privacy interests. (See Cal. Rules of Court, rule 8.90(b)(4), (10)–(11).)
2
Unspecified statutory references are to the Penal Code.
double jeopardy. He observes that simple assault is a lesser-included offense of count 2
and contends the jury’s verdict does not support a finding that separate acts resulting in
separate injuries supported the different counts.
For the reasons explained below, we reject Larraburu’s contentions and affirm the
judgment. We also note an error in the abstract of judgment and direct the superior court
clerk to prepare a corrected abstract.
I. FACTS AND PROCEDURAL BACKGROUND
A. Procedural Background
In November 2019, the Santa Clara County District Attorney filed a second
amended information (information) charging Larraburu with assault by means likely to
produce great bodily injury upon Loraine S. (§ 245, subd. (a)(4); count 1), infliction of
corporal injury on a former cohabitant, Loraine S., with a prior conviction within seven
years (§ 273.5, subd. (f)(1); count 2), violation of a protective order within seven years of
a prior violation (§ 166, subd. (c)(4); count 3), and misdemeanor battery upon Valerea G.
(§ 243, subd. (a); count 4). The information also alleged that Larraburu had suffered two
prior strike convictions (§§ 667, subds. (b)–(i), 1170.12) for assault with a deadly weapon
(§ 245, subd. (a)(1)) and assault with a firearm (§ 245, subd. (a)(2)).
In December 2019, a jury found Larraburu guilty of all counts as charged, except
for count 1, for which the jury convicted him of the lesser included offense of simple
assault (§ 240). The jury also found true the allegation that Larraburu had suffered a
prior conviction within seven years of the violation of section 273.5, subdivision (a), that
he had suffered a prior conviction within seven years for a violation of a protective order
(§ 166, subd. (c)(1)), and that his conduct in violating the protective order involved an act
of violence. In January 2020, Larraburu admitted suffering the prior strike convictions
alleged in the information.
In July 2020, the trial court sentenced Larraburu to eight years in prison on count 2
and a consecutive term of 16 months on count 3, which the court stayed pursuant to
2
section 654. As to misdemeanor counts 1 and 4, the court imposed concurrent sentences
of 100 days, which it deemed served.
B. Evidence Presented at Trial3
1. The September 2018 Incident
By late September 2018,4 Larraburu and Loraine S. had dated off and on for three
or four years. They had most recently broken up two or three weeks earlier. On
September 25,5 Larraburu contacted Loraine S. to tell her he was going to stop by the
house where she lived with her two adult daughters and two grandchildren. Loraine S.
was home with her daughter, Valerea G., Peter S. (Valerea G.’s boyfriend), and Valerea
G.’s son.
That evening, Larraburu arrived to pick up items he had at the house, including a
toolbox, some clothing, and paperwork. According to Loraine S., she and Larraburu
were both “very short” with each other and “wanted to get it over with.” Larraburu went
to the garage and she went to her room because she wanted to “give him his space.” She
was lying in bed watching T.V. when Larraburu entered and began to gather the rest of
his belongings from the closet and a box beneath the dresser. She asked him to hurry up
and leave. Larraburu asked her to get him the paperwork for a vehicle (a 1964 Riviera)
that they owned together. She told him to leave and they would take care of it later.
Larraburu responded angrily and began yelling and walking toward Loraine S. He
stood over her as she lay on the bed and punched her in the face with a closed fist. The
blow landed in her eye. She tried to get up but Larraburu pushed her down and grabbed
her throat. She tried to scream for her daughter and Peter S. to help her. She was not
3
In addition to the testimony described below, the prosecution presented expert
testimony on intimate partner violence and domestic violence. That evidence is not
relevant to this appeal.
4
Unless otherwise indicated, all dates occurred in 2018.
5
There is some inconsistency in the trial testimony as to the date of the September
2018 incident, which the prosecutor referred to as “September 28,” though the
information and other trial testimony confirms the date was September 25.
3
able to get up off the bed or to overpower him. Larraburu struck her several times on her
arm and head. He was holding her down, “probably” around her neck but she did not
remember if he put pressure on her windpipe. Her daughter, Valerea G., came into the
room and tried to get Larraburu off. Then Valerea G. yelled to Peter S. The next thing
Loraine S. remembered was talking with police officers at the front door.
Valerea G. testified that at the time of the incident on September 25, she was in the
house with her boyfriend (Peter S.) and her son, who was already asleep. Valerea G. and
her boyfriend were in her bedroom when she heard her mother calling for her, but in a
“screeching” or “weird screaming way” that sounded like her voice was being restrained.
Valerea G. ran to her mother’s bedroom. The first thing she saw was Larraburu hitting
Loraine S. in the face with a “full fist.” Loraine S. was lying in the bed. Valerea G. saw
Larraburu hit Loraine S. four or five times. Valerea G. also later saw finger marks on
Loraine S.’s neck.
Valerea G. tried to pull Larraburu off of Loraine S. Larraburu pushed Valerea G.
away toward the windowsill, then hit Valerea G. twice in the back and once in the face.
Valerea G. called for Peter S., who arrived and told Larraburu he needed to leave. Peter
S. began shoving Larraburu out the door. Valerea G. joined Peter S. outside to make sure
Larraburu left. Larraburu punched Valerea G. on the left side of her torso. Valerea G.
told Larraburu she was calling the police, and he left before the police arrived.
Peter S. testified that he was in Valerea G.’s room at the back of the house when
he heard “loud voices,” which he thought was “a normal argument” and ignored. He and
Valerea G. were already getting ready for bed. Valerea G. went to see what Loraine S.
wanted. Peter S. was dozing off when Valerea G. screamed his name to come to her. He
got to the room and saw Valerea G. was upset and telling Larraburu to get out. Larraburu
“kind of” struck Valerea G. with a straight punch and hit her on the face. Peter S.
became “really upset,” told Larraburu he needed to get out, and tried to push him toward
the door. Loraine S. was lying on the bed and starting to get up. Peter S. did not see her
4
face and was focused on getting Larraburu out of the room. Peter S. took Larraburu
outside. The pair exchanged pushes and blows back and forth before Larraburu got in his
car and drove away.
The trial court admitted a copy of a certified restraining order served on Larraburu
on September 13, 2017, which expired on September 13, 2020. The restraining order was
a no-contact order and required Larraburu to stay away from Loraine S.’s house where
the September 2018 incident occurred.
City of San Jose Police Officer Marco Mercado testified that he responded to the
incident and arrived at the house. Loraine S. opened the front door and was holding a
frozen product to her left eye, where he saw a “notable swelling.” The eye was “pretty
much shut.” Officer Mercado also observed contusions and welts to Loraine S.’s left
hand and wrist and forearm area. She appeared calm and said she would seek her own
medical attention.
Officer Mercado testified that one of the standard questions in conducting an
assessment in response to a report of domestic violence is “ ‘Has the person tried to
strangle you?’ ” When Mercado asked this question of Loraine S., she explained that
“ ‘that’s how this whole thing started.’ ” She recounted that Larraburu had “put his hands
around her – tried to choke her, and she [had] pushed him away.” Though Loraine S. told
officers the first thing that happened was Larraburu tried to put his hands around her neck
and choke her, she testified at trial to her belief that the punching occurred first. Loraine
S. also testified that she was certain about what happened but unsure in “what order” the
events occurred. Loraine S. also told officers that Larraburu tried to strike Valerea G.
She did not know how much Valerea G. saw because she (Loraine S.) was “covering up”
to protect her face from being hit.
On redirect, Loraine S. testified that after thinking about it “all night” after the first
day of testimony, she believed she “was laying on the bed when he came towards [her],”
she “put [her] hand and [her] arm up, . . . like, to back [him] up,” and “[t]hat’s when he
5
grabbed [her] throat. And he sa[id], you’re not going to do this to me. And he held [her]
– pushed [her] so [she] couldn’t get up. [She] couldn’t move. He held [her], and then
[she], kind of – [her] foot pushed him off. And that’s when [she] got hit in the eye.”
On a scale of one to 10, with 10 being excruciating pain, Loraine S. testified that
her pain that day was a 10. Her eye was swollen shut. She went to the hospital the next
day for treatment. At the hospital, they cut and drained the eye which relieved the
pressure from the swelling. She required pain medication and was in pain for about one
week. The discoloration on her face lasted about three to four weeks.
Loraine S. left Larraburu voicemail messages after the September incident saying
things like “ ‘I’m going to fuck you up’ ” and “ ‘I’m going to win this one. I love it.’ ”
In another voicemail message, she told Larraburu, “ ‘I’m going to fuck you up for real
this time. No car, no clothes. Nothing you have at my house you get. I’m going to fuck
you up, Paul, you little bitch, punk-ass bitch, motherfucker.’ ”
2. Prior Incidents
Loraine S. testified at trial about prior incidents in which Larraburu was violent
towards her.
In 2013, Loraine S. and Larraburu got into an argument over the 1964 Riviera
vehicle, which they had bought together but which Larraburu had gifted to Loraine S.
She was driving with Larraburu in her car on an expressway when he grabbed the
steering wheel and jerked it. She pulled over, told him to get out, and refused to drive
further with him. He slammed the door and walked away. Later, when he returned to the
house, Loraine S. told him to gather his belongings and get out. Larraburu went into
Loraine S.’s bedroom to look for the Riviera’s keys and registration, which was in
Loraine S.’s name. Larraburu punched Loraine S. on the head and pushed her onto the
bed. Later, in the garage, Larraburu told her that if he could not have the car, no one
could have it. Larraburu then took a pickaxe to the car. He broke four of the car
windows and damaged the rear body. Larraburu then left. The police came and took a
6
report. At the time, Loraine S. told the police officer that before attacking the Riviera,
Larraburu had told her that if he was going to jail, it was going to be “for something.”
At the time of the 2013 incident, Loraine S. did not want to testify against
Larraburu. She transferred title of the Riviera to him at his request so that he would not
be convicted of felony vandalism. Loraine S. and Larraburu also entered into a private
agreement that, once the court proceedings were completed, Larraburu would transfer
title of the car back to Loraine S. Charges were filed against Larraburu, and a protective
order issued preventing him from having contact with Loraine S. In April 2014,
Larraburu was convicted of willfully inflicting corporal injury resulting in a traumatic
condition upon Loraine S., a person with whom he previously had a dating relationship
(§ 273.5, subd. (a)).
Another incident occurred in 2016, when she and Larraburu were not dating and
not living together. Loraine S. went to her car in the evening to get her backpack out of
the trunk. It was dark outside. She heard a hissing noise coming from the left side of the
car, and Larraburu stood up next to the vehicle. Loraine S. assumed he had popped her
tire. She and Larraburu “exchanged words,” and Larraburu tried to pull her out of his
way. Loraine S. called to her daughter, and Larraburu took off running down the street.
Larraburu was convicted of willfully and knowingly violating a protective order or stay-
away order issued pursuant to section 136.2 (§ 166, subd. (c)(1)).
3. Loraine S.’s Prior Convictions
Loraine S. was convicted of misdemeanor welfare fraud in 2001. She testified at
trial that she did not recall whether she was also arrested for domestic violence in 2001
and did not recall two convictions for theft of utilities in San Mateo County in 2003 and
2004. The parties stipulated that Loraine S. was arrested in 2001 but was not charged and
was released from custody.
7
II. DISCUSSION
Larraburu contends that his conviction on count 1 for simple assault (§ 240)
should be reversed and dismissed because simple assault is a lesser included offense of
the crime for which he was convicted on count 2, the infliction of corporal injury on
Loraine S., a former cohabitant (§ 273.5), and he may not be convicted of both offenses.
Larraburu asserts that the offense for inflicting corporal injury is a “continuing offense”
for which multiple convictions “are permissible where separate acts of violence lead to
separate injuries.” He further asserts that “[w]ithout a separate act causing concomitant
injury, the act of holding [Loraine] S. down while striking her becomes subsumed in the
continuing violation of section 273.5.” Larraburu claims that his multiple convictions
violate the judicially created exception to section 954 and the constitutional protection
against double jeopardy.6
The Attorney General responds that the simple assault conviction was proper
because the verdict on count 1 was based on Larraburu’s act of strangling Loraine S. and
that act was separate from his acts of injuring her and causing a traumatic condition that
formed the bases for count 2.
Section 954 sets forth the general rule that defendants may be charged with and
convicted of multiple offenses based on a single act or an indivisible course of conduct.
It provides in relevant part: “An accusatory pleading may charge two or more different
offenses connected together in their commission, or different statements of the same
offense or two or more different offenses of the same class of crimes or offenses, under
separate counts . . . . The prosecution is not required to elect between the different
offenses or counts set forth in the accusatory pleading, but the defendant may be
convicted of any number of the offenses charged, and each offense of which the
defendant is convicted must be stated in the verdict or the finding of the court.” (§ 954.)
6
We note that Larraburu makes no argument under section 654 as to his county
jail sentence on count 1.
8
“In general, a person may be convicted of, although not punished for, more than
one crime arising out of the same act or course of conduct. ‘In California, a single act or
course of conduct by a defendant can lead to convictions “of any number of the offenses
charged.” ’ ” (People v. Reed (2006) 38 Cal.4th 1224, 1226, italics omitted.)
Although section 954 generally allows for multiple convictions, under a judicially
created exception to that doctrine a defendant charged with an offense may not be
convicted of both that offense and a lesser included offense. (See People v. Montoya
(2004) 33 Cal.4th 1031, 1034; People v. Pearson (1986) 42 Cal.3d 351, 355 (Pearson),
rejected on other grounds in People v. Vidana (2016) 1 Cal.5th 632, 651; People v.
Moran (1970) 1 Cal.3d 755, 763.) Nevertheless, “a defendant may be convicted of
multiple crimes—even if the crimes are part of the same impulse, intention or plan—as
long as each conviction reflects a completed criminal act.” (People v. Kirvin (2014) 231
Cal.App.4th 1507, 1518 (Kirvin).)
“Simple assault is the ‘unlawful attempt, coupled with a present ability, to commit
a violent injury on the person of another.’ (§ 240.) The offense of infliction of corporal
injury occurs where a person ‘willfully inflicts corporal injury resulting in a traumatic
condition upon a victim described [in the statute] . . . .” (§ 273.5, subd. (a).) For
purposes of section 273.5, the term ‘willfully’ simply means an intent to commit the act
that results in corporal injury. [Citation.] The term ‘corporal injury’ is unambiguous and
means bodily injury. [Citation.] Finally, the term ‘traumatic condition’ is statutorily
defined to mean ‘a condition of the body, such as a wound, or external or internal injury,
. . ., whether of a minor or serious nature, caused by a physical force.’ (§ 273.5, subd.
(d).)” (People v. Serrano (2022) 77 Cal.App.5th 902, 919 (Serrano); see CALCRIM
No. 840.)
We accept the premise underlying Larraburu’s contention that simple assault is a
lesser offense of infliction of corporal injury. Indeed, “[i]t is evident that a person who
intends to inflict, and does inflict, bodily injury on a person which results in a traumatic
9
condition on that person, necessarily commits an assault. Thus, simple assault is a lesser
included offense of infliction of corporal injury result[ing] in a traumatic condition.”
(Serrano, supra, 77 Cal.App.5th at p. 919.) However, the judicially created exception to
section 954 does not bar convictions for a greater and lesser offense if each is based on a
separate completed criminal act. (See People v. Benavides (2005) 35 Cal.4th 69, 98
(Benavides); Pearson, supra, 42 Cal.3d at p. 355; see also Kirvin, supra, 231 Cal.App.4th
at p. 1519.)
“[T]he crime described by section 273.5 is complete upon the willful and direct
application of physical force upon the victim, resulting in a wound or injury.” (People v.
Johnson (2007) 150 Cal.App.4th 1467, 1477 (Johnson).) Simple assault “requires an act
that by its nature would directly and probably result in the application of physical force to
a person. [Citations.] This is the physical act of assault that creates a potential for harm
to a victim. The crime is complete even if the act does not actually result in a physical
injury to the victim.” (People v. Harring (2021) 69 Cal.App.5th 483, 503 (Harring).)
In the present case, the trial court instructed the jury that to convict Larraburu of
simple assault of Loraine S. in count 1 (as a lesser offense of the greater charged offense
(§ 245, subd. (a)(4)), the jury had to unanimously find that Larraburu “committed that
offense by acts of strangulation” upon Loraine S. The court also instructed the jury that
to convict Larraburu of inflicting corporal injury on Loraine S. as charged in count 2, the
jury had to find unanimously that Larraburu “committed that offense through hitting
[Loraine S.] while she was in her bedroom.” Thus, in accord with the statutory elements,
the simple assault crime was complete when Larraburu strangled Loraine S., having done
so willfully with the present ability to apply force and which act by its nature would
directly and probably result in the application of physical force to a person. (See
Harring, supra, 69 Cal.App.5th at p. 503; see also CALCRIM No. 915.) By contrast,
the infliction of corporal injury offense was complete upon Larraburu’s willful and direct
10
application of physical force upon Loraine S. “through hitting” that resulted in a wound
or injury. (See Johnson, supra, 150 Cal.App.4th at p. 1477.)
Larraburu asserts that because his simple assault conviction did not require that the
jury find a separate injury, the act of strangulation on which his conviction was based
“becomes subsumed in the continuing violation of section 273.5.” We do not agree. The
elements of simple assault do not require the prosecution prove that Larraburu actually
touched someone or that anyone was actually injured by his act. Thus, simple assault
offense was complete regardless of any injury and, critically, was accomplished by an act
that is different than the acts upon which the conviction for infliction of corporal injury
was based.
Consistent with the jury instructions, the evidence supports the jury’s requisite
findings (in light of the specific instructions given here) that Larraburu’s convictions on
counts 1 and 2 were based on separate acts. Loraine S. testified that Larraburu pushed
her down on her bed and grabbed her throat. Though she was not certain whether he had
compressed her windpipe, she was sure that Larraburu had put his hands around her
throat and “strangled” or “choked” her. She told Officer Mercado that Larraburu’s
attempt to choke or strangle her was “ ‘how it started.’ ”
Additionally, Loraine S. testified that Larraburu punched her in the eye and caused
traumatic injury. As a result, she could not open her eye. Larraburu also punched
Loraine S. “about five times” on her arm, wrists, and head. The evidence demonstrates
ample basis for the jury to conclude that Larraburu’s act of strangulation, which was
necessary to convict him on count 1, was separate from his acts of injuring Loraine S. and
causing a traumatic condition, which was necessary to convict him on count 2. (See
Benavides, supra, 35 Cal.4th at p. 98; cf. Serrano, supra, 77 Cal.App.5th at p. 920.)
Therefore, under the circumstances presented here, the counts do not fall within the
judicially created exception to section 954 barring convictions for necessarily included
offenses. Likewise, we decide that Larraburu’s constitutional double jeopardy claim
11
lacks merit. (See Benavides, at p. 98; see also People v. Sloan (2007) 42 Cal.4th 110,
121; Ohio v. Johnson (1984) 467 U.S. 493, 501.)
In support of his argument, Larraburu relies on Johnson, supra, 150 Cal.App.4th
1467 and People v. Thompson (1984) 160 Cal.App.3d 220. Those cases, however, are
inapposite because neither addressed a contention akin to Larraburu’s nor held that any
simple assault offense committed by a separate act during the same course of conduct as
an infliction of corporal injury offense, but which did not result in injury, merges with the
infliction of corporal injury offense.
Although not raised by either party, we observe that the abstract of judgment does
not indicate the length of the punishment imposed and then stayed, under section 654, for
count 3 (violation of protective order within seven years of a prior). Although we affirm
the judgment, we direct the trial court to prepare a new abstract of judgment which
indicates the term imposed (surrounded by parentheses in the “TIME IMPOSED” column
of item No. 1) for count 3 on which the punishment was stayed pursuant to section 654.
III. DISPOSITION
The judgment is affirmed. The superior court clerk is ordered to prepare a new
abstract of judgment which indicates the term imposed (surrounded by parentheses in the
“TIME IMPOSED” column of item No. 1) for count 3 on which the punishment was
stayed pursuant to Penal Code section 654.
12
______________________________________
Danner, J.
WE CONCUR:
____________________________________
Bamattre-Manoukian, Acting P.J.
____________________________________
Wilson, J.
H048362
People v. Larraburu | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484261/ | 11/16/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA
Case Number: DA 21-0028
DA 21-0028
_________________
STATE OF MONTANA,
Plaintiff and Appellee,
v. ORDER
TIMOTHY JOHN STRYKER,
Defendant and Appellant.
_________________
Pursuant to the Internal Operating Rules of this Court, this cause is classified for
submission on briefs to the Court sitting en banc.
The Clerk is directed to provide a copy hereof to all counsel of record and to the
Honorable Nickolas C. Murnion, District Judge.
For the Court,
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 16 2022 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484249/ | Filed 11/16/22 Ramirez v. Real Time Staffing Services CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
MARIA RAMIREZ, B313232
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC715058)
v.
REAL TIME STAFFING
SERVICES, LLC et al.,
Defendants and
Respondents.
APPEAL from an order of the Superior Court of
Los Angeles County, Daniel J. Buckley, Judge. Affirmed.
Gutierrez Law Group, Rolando Gutierrez; Matthew J. Kita;
Arias Sanguinetti Wang & Torrijos, Mike Arias, Craig S. Momita
and Robert M. Partain for Plaintiff and Appellant.
CDF Labor Law, David G. Hagopian, Robyn E. Frick and
Jeffrey Sikkema for Real Time Staffing Services, LLC.
Krieger & Krieger and Lawrence R. Cagney for Defendant
and Respondent Cosway Company, Inc.
______________________________
Maria Ramirez filed a putative class action lawsuit against
Real Time Staffing Services, LLC1 and Cosway Company, Inc.,
alleging violations of Labor Code wage-and-hour provisions and a
cause of action for unfair business practices. The trial court
granted Real Time and Cosway’s motion to compel Ramirez to
arbitrate her individual claims, dismissed the class allegations
without prejudice and stayed the superior court proceedings
pending resolution of arbitration.
On appeal (under the death knell doctrine) Ramirez argues
the arbitration agreement signed by Ramirez as part of her
application for employment is unenforceable for lack of
consideration and the court erred in dismissing the class
allegations because the arbitration agreement, concededly
governed by the Federal Arbitration Act (FAA) (9 U.S.C.
§ 1 et seq.), contained no class action waiver. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Ramirez applied for employment with Real Time, a staffing
agency, on January 24, 2012. Real Time placed Ramirez with
Cosway, a manufacturer of personal care products for nationwide
distribution, in September 2012, where Ramirez worked on the
production line until September 2015.
1 Ramirez’s complaint named as defendants both Real Time
Staffing Services, Inc. and Real Time Staffing Services, LLC.
Real Time converted from a corporation to a limited liability
company on May 12, 2014, more than four years before Ramirez
filed her initial complaint.
2
Ramirez filed her initial complaint on July 24, 2018 and on
December 7, 2018 the operative first amended complaint, alleging
wage-and-hour causes of action against Real Time and Cosway,
as her joint employers, for failure to pay overtime and double
time compensation, to provide meal and rest periods and to
provide accurate itemized wage statements and also alleging
causes of action for Labor Code waiting time penalties and unfair
competition and unlawful business practices. Ramirez asserted
her claims as an individual and on behalf of a class consisting of
all current and former nonexempt employees who worked or had
worked for Real Time or Cosway at any time from July 23, 2014
to the present.
1. The Motion To Compel Arbitration
Real Time and Cosway on August 31, 2020 moved to
compel arbitration of Ramirez’s individual claims, to dismiss the
putative class claims and to stay the action pending arbitration.
In their motion they argued Ramirez agreed to arbitrate all of her
employment claims with Real Time and, through agency
principles, with Cosway when she applied for employment in
January 2012. The arbitration agreement, they asserted, was
covered by the FAA, as expressly recited in the agreement and by
virtue of Cosway’s national distribution of the products it
manufactured and was neither substantively nor procedurally
unconscionable. They also argued under well-established case
law concerning the FAA, an employer cannot be compelled to
arbitrate claims on a classwide basis absent an express
agreement to do so, citing, among other cases, Lamps Plus, Inc. v.
Varela (2019) 587 U.S. ___ [139 S.Ct. 1407, 1412, 1417-1419],
which held that a court may not compel class arbitration when
the arbitration agreement does not expressly provide for such
3
arbitration and that ambiguity does not constitute consent to
arbitrate class claims.
The Mutual Arbitration Agreement (Acuerdo Mutuo Para
Arbitrar) initialed and signed by Ramirez stated, translated from
Ramirez’s Spanish-language form, “In the event the Employer
and I are unable to informally resolve any dispute, I agree for the
dispute to be filed and settled by final and binding arbitration in
accordance with the procedures of the Federal Arbitration Act
and the California Arbitration Act (California Civil Procedure
Code Sec. 1280, et seq.), including section 1283.05 and discovery
rights. Such disputes may include but are not limited to any
breach of contract, fraud, misrepresentation, defamation,
personal damages, salary, wrongful termination, vacation pay,
sick pay, overtime pay, implied federal and state employment
rules, . . . [and] state laws regarding unfair competition or unfair
business practices . . . . I agree to have the arbitration held in
Santa Barbara, CA.”2
2 Real Time’s associate policy handbook, which Ramirez
acknowledged receiving, also contained an agreement to arbitrate
“any dispute between the Employer and I relating to or arising
out of, or related to my employment or termination of my
employment.” The arbitration provision in the handbook also
contained a purported express waiver of the employee’s “right to
bring or join any type of collective or class claim in arbitration, in
any court, or in any other forum.” Real Time and Cosway did not
base their motion to compel arbitration on the provision in the
handbook and advised the trial court they were relying solely on
the separate Mutual Arbitration Agreement initialed and signed
by Ramirez as part of her employment application, explaining,
“The handbook merely serves as a reminder that Plaintiff was
aware of her agreement to arbitrate with Real Time.”
4
2. Ramirez’s Opposition to the Motion
In her opposition to the motion to compel arbitration and
dismiss class claims, Ramirez argued no valid arbitration
agreement had been formed because the parties to be bound by
the agreement could not be identified (the “Employer”
purportedly subject to the agreement was not specified) and
because the agreement lacked consideration (the promise to
arbitrate was not mutual). As to the second point, Ramirez
emphasized that, although the heading referred to a mutual
agreement to arbitrate, the provision itself only stated, “I agree.”
Ramirez also argued the agreement was unconscionable
and, therefore, unenforceable. She again identified ambiguity
and lack of mutuality as grounds for finding substantive
unconscionability; contended Santa Barbara was an
unreasonable forum; and asserted, as establishing procedural
unconscionability, she had been denied any meaningful
opportunity to review the arbitration agreement before being
pressured to complete her application and sign the documents
she had been handed.
Ramirez’s opposition memorandum did not address Real
Time and Cosway’s argument that her claims on behalf of current
and former employees could not be arbitrated.
3. The Order Granting the Motion
After taking the matter under submission following receipt
of a reply memorandum from Real Time and Cosway and oral
argument from the parties, the trial court on April 7, 2021
granted the motion to compel arbitration after severing the
provision requiring the arbitration to take place in Santa
Barbara. (Real Time and Cosway had conceded in their reply
memorandum that they were willing to arbitrate in the greater
5
Los Angeles area.) Citing AT&T Mobility LLC v. Concepcion
(2011) 563 U.S. 333, 346-348, but without further discussion in
its minute order, the court struck the class allegations. Pursuant
to Code of Civil Procedure section 1281.4 the court stayed the
case pending resolution of arbitration. At the request of Ramirez,
the court subsequently clarified that its order striking the class
allegations was without prejudice.3
4. Ramirez’s Death Knell Appeal
Ramirez filed a notice of appeal within 60 days of the
court’s April 7, 2021 ruling. Real Time moved to dismiss the
appeal, joined by Cosway, arguing an order compelling
arbitration is nonappealable. Ramirez filed an opposition,
contending the order striking the class allegations was
immediately appealable under the death knell doctrine and the
simultaneously issued and closely related order compelling
arbitration was, as a consequence, appealable as well, citing
several cases for that proposition, including Franco v. Athens
Disposal Co., Inc. (2009) 171 Cal.App.4th 1277, 1288 (an order to
arbitrate individual claims is appealable if it constitutes the
“death knell” for class litigation). (But see Nixon v. AmeriHome
Mortgage Co., LLC (2021) 67 Cal.App.5th 934, 943 [“[i]t is far
from certain whether the judicially created death knell exception
to the one final judgment rule for an order dismissing class
3 In an April 28, 2021 message to counsel on
caseanywhere.com under the title “tomorrow’s status conference,”
the trial judge stated, “In your joint statement, you asked if the
ruling to strike the class action allegations is with or without
prejudice. It is without prejudice. We can discuss tomorrow.”
The record on appeal does not include any order or reporter’s
transcript from a status conference on April 29, 2021.
6
claims extends to make appealable an otherwise nonappealable
order compelling arbitration when the two orders are issued
simultaneously”].) We denied the motion to dismiss.4
DISCUSSION
1. Governing Law and Standard of Review
Code of Civil Procedure section 1281.2 requires the
superior court to order arbitration of a controversy “[o]n petition
of a party to an arbitration agreement alleging the existence of a
written agreement to arbitrate a controversy and that a party to
the agreement refuses to arbitrate such controversy . . . if it
determines that an agreement to arbitrate the controversy
exists.” As the language of this section makes plain, the
threshold question presented by every petition to compel
arbitration is whether an agreement to arbitrate exists.
(American Express Co. v. Italian Colors Restaurant (2013)
570 U.S. 228 [it is an “overarching principle that arbitration is a
matter of contract”]; Pinnacle Museum Tower Assn. v. Pinnacle
Market Development (US), LLC (2012) 55 Cal.4th 223, 236
(Pinnacle) [“‘“a party cannot be required to submit to arbitration
any dispute which he [or she] has not agreed so to submit”’”];
Gordon v. Atria Management Co., LLC (2021) 70 Cal.App.5th
1020, 1026 [“California has a strong public policy in favor of
arbitration, but ‘“a party cannot be compelled to arbitrate a
dispute that [he or she] has not agreed to resolve by
arbitration”’”].)
4 Real Time in its respondent’s brief stated it did not
challenge appealability based on the death knell doctrine, and
Cosway joined in that brief.
7
The party seeking to compel arbitration bears the burden of
proving by a preponderance of the evidence an agreement to
arbitrate a dispute exists. (Pinnacle, supra, 55 Cal.4th at p. 236;
Rosenthal v. Great Western Fin. Securities Corp. (1996)
14 Cal.4th 394, 413; Nixon v. AmeriHome Mortgage Co., LLC,
supra, 67 Cal.App.5th at p. 946.) To carry this burden of
persuasion the moving party must first produce “prima facie
evidence of a written agreement to arbitrate the controversy.”
(Rosenthal, at p. 413; accord, Gamboa v. Northeast Community
Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa).) “If the moving
party meets its initial prima facie burden and the opposing party
disputes the agreement, then . . . the opposing party bears the
burden of producing evidence to challenge the authenticity of the
agreement.” (Gamboa, at p. 165; accord, Engalla v. Permanente
Medical Group, Inc. (1997) 15 Cal.4th 951, 972; Rosenthal, at
p. 413.) If the opposing party produces such evidence, then “the
moving party must establish with admissible evidence a valid
arbitration agreement between the parties.” (Gamboa, at p. 165.)
“Despite the shifting burden of production, ‘[t]he burden of
proving the agreement by a preponderance of the evidence
remains with the moving party.’” (Trinity v. Life Ins. Co. of North
America (2022) 78 Cal.App.5th 1111, 1120 (Trinity);
see Rosenthal, at p. 413.)
Absent conflicting evidence, we review de novo the trial
court’s interpretation of an arbitration agreement. (Rosenthal v.
Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 413;
Trinity, supra, 78 Cal.App.5th at p. 1120; Nyulassy v. Lockheed
Martin Corp. (2004) 120 Cal.App.4th 1267, 1277.) Where the
trial court’s ruling is based on a finding of fact, we review the
decision for substantial evidence. (Gamboa, supra,
8
72 Cal.App.5th at p. 166; Fabian v. Renovate America, Inc. (2019)
42 Cal.App.5th 1062, 1066.) Under this deferential standard,
“‘all factual matters will be viewed most favorably to the
prevailing party [citations] and in support of the judgment.’”
(Campbell v. Southern Pacific Co. (1978) 22 Cal.3d 51, 60;
accord, Western States Petroleum Assn. v. Superior Court (1995)
9 Cal.4th 559, 571; see Nissan Motor Acceptance Cases (2021)
63 Cal.App.5th 793, 818 [“We must not review the evidence to
determine whether substantial evidence supports the losing
party’s version of the evidence. Instead, we must determine if
there is any substantial evidence, contradicted or uncontradicted,
to support the trial court’s findings”].)
2. Adequate Consideration Supports the Mutual
Arbitration Agreement
Abandoning the arguments concerning unconscionability
she advanced in the trial court, Ramirez on appeal contends only
that the Mutual Arbitration Agreement is unenforceable because
it lacked consideration. In support of this argument,
emphasizing the agreement states “I agree,” rather than “we
agree,” and was not signed on behalf of “Employer,” Ramirez
asserts Real Time did not promise to arbitrate disputes and,
accordingly, there was no mutuality of obligation necessary to
constitute valid consideration. (See, e.g., Bleecher v. Conte (1981)
29 Cal.3d 345, 350 [“A bilateral contract is one in which there are
mutual promises given in consideration of each other.
[Citations.] The promises of each party must be legally binding
in order for them to be deemed consideration for each other”];
Chicago Title Ins. Co. v. AMZ Ins. Services, Inc. (2010)
188 Cal.App.4th 401, 421-422 [“‘[a]n agreement is illusory and
9
there is no valid contract when one of the parties assumes no
obligation’”].)
Ramirez’s argument is fundamentally flawed. As Ramirez
explained in her declaration in opposition to the motion to compel
arbitration, she initialed and signed the Spanish-language
version of the Mutual Arbitration Agreement as part of the
employment application package with Real Time: “After
completing the initial application, I was directed to a young lady’s
desk to initial and sign a packet of forms. . . . [¶] . . . When I
inquired about the forms, this young lady only instructed me that
I needed to sign them before I can begin working. While sitting
at her desk, this young lady indicated on the forms where I had
to initial and sign.” That is, in return for Ramirez agreeing to
arbitrate employment-related disputes, Real Time offered her a
job. Whether or not Real Time also agreed to arbitrate disputes
with Ramirez, the offer of employment, which Ramirez accepted,
was adequate consideration for Ramirez’s promise to do so. (Civ.
Code, § 1605 [“[a]ny benefit conferred, or agreed to be conferred,
upon the promisor, by any other person, to which the promisor is
not lawfully entitled . . . is a good consideration for a promise”];
cf. Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 14 [offer of
continuing employment provides consideration for modification of
the conditions of employment]; Harris v. TAP Worldwide,
LLC (2016) 248 Cal.App.4th 373, 384 [“[p]laintiff cannot have it
both ways, acceptance of the at-will job offer with all its
emoluments and no responsibility to abide by one of its express
conditions”].)
To be sure, if the Mutual Arbitration Agreement, despite its
title, actually created only a unilateral obligation requiring
Ramirez, but not Real Time, to arbitrate employment-related
10
disputes, that lack of mutuality, together with the arguably
adhesive nature of the agreement as described by Ramirez, would
be factors in determining whether the agreement to arbitrate was
unenforceable as procedurally and substantively unconscionable.
(See generally Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83, 120 [“an arbitration
agreement imposed in an adhesive context lacks basic fairness
and mutuality if it requires one contracting party, but not the
other, to arbitrate all claims arising out of the same transaction
or occurrence or series of transactions or occurrences”].) But
Ramirez on appeal expressly disclaimed any challenge to the
arbitration agreement as unconscionable and even purported to
distinguish cases addressing mutuality and “I agree” language in
arbitration agreements, including this court’s decision in Roman
v. Superior Court (2009) 172 Cal.App.4th 1462 (Roman), as
inapposite because they addressed the issue of unconscionability,
not consideration.
In any event, the Mutual Arbitration Agreement, as its title
denoted, was bilateral notwithstanding its use of the “I agree”
language emphasized by Ramirez. We considered a similar issue
in Roman, supra, 172 Cal.App.4th 1462, which the trial court
cited for our holding that the use of “I hereby agree” did not
vitiate an otherwise bilateral obligation to arbitrate “‘all disputes
and claims that might arise out of my employment.’” (Id. at
pp. 1466-1467, 1471.) We held in Roman the “I hereby agree”
language at most created an ambiguity that, under ordinary
rules of contract interpretation and in light of the public policy
favoring arbitration and the agreement’s explicit reference to
mandatory arbitration of “all disputes,” was best understood to
mean that both parties were bound to arbitrate any disputes.
11
(Id. at pp. 1472-1473; see McManus v. CIBC World Markets
Corp. (2003) 109 Cal.App.4th 76, 100 [agreement to arbitrate
“‘[a]ll disputes arising out of your employment’” created mutual
obligation to arbitrate].)
Like the arbitration agreement in Roman, and unlike the
agreement in Serpa v. California Surety Investigations, Inc.
(2013) 215 Cal.App.4th 695, 705, which on its face required the
employee to submit to arbitration “any such dispute[s]” involving
her employment without imposing a similar obligation on the
employer,5 the agreement initialed and signed by Ramirez
required arbitration of “any dispute” and specifically included
within the scope of arbitration claims for breach of contract, fraud
and defamation—causes of action that could be pursued by Real
Time, as well as one of its employees.
Moreover, we properly look to the circumstances under
which an agreement was made when interpreting it. (Civ. Code,
§ 1647.) Here, not only was the agreement to arbitrate captioned
“Mutual” (“Mutuo”), but also the associate policy handbook made
available to Ramirez and which she acknowledged receiving on
the same day she applied for employment, although not
incorporated by reference and not claimed by Real Time and
Cosway to be an enforceable agreement to arbitrate, included a
5 Despite the use of “any such” rather than simply “any” or
“all” in the arbitration agreement at issue in Serpa, we concluded
the agreement was bilateral because it incorporated the
arbitration policy in the employee handbook, which “establish[ed]
an unmistakable mutual obligation on the part of [the employer]
and [the employee] to arbitrate ‘any dispute’ arising out of her
employment.” (Serpa v. California Surety Investigations, Inc.,
supra, 215 Cal.App.4th at p. 705.)
12
provision that expressly stated “the Employer and I agree” to
submit any employment-related dispute to arbitration. Under
these circumstances there can be no question the Mutual
Arbitration Agreement was intended to be, and was in fact,
mutual.
3. The Trial Court Properly Exercised Its Discretion in
Dismissing the Class Allegations
The Mutual Arbitration Agreement did not address class
actions. There was neither a class action waiver, express or
implied (that is, the agreement did not state employees must
arbitrate their claims on an individual basis)6 nor consent to
arbitrate classwide claims. In light of this silence, the trial court
properly agreed with Real Time and Cosway that, under the
FAA, Ramirez’s claims on behalf of a putative class of current
and former employees were not subject to arbitration. (Lamps
Plus, Inc. v. Varela, supra, 139 S.Ct. at p. 1412 [“a court may not
compel arbitration on a classwide basis when an agreement is
‘silent’ on the availability of such arbitration”]; accord, Stolt-
Nielsen S. A. v. AnimalFeeds Int’l Corp. (2010) 559 U.S. 662, 684;
see also Lamps Plus, at p. 1419 [“courts may not infer from an
ambiguous agreement that parties have consented to arbitrate on
a classwide basis”].)
Ramirez does not challenge this aspect of the trial court’s
April 7, 2021 order. Rather, asserting that she never entered an
enforceable class action waiver (a point Real Time and Cosway do
not contest), Ramirez contends the court erred in striking her
6 As noted, the arbitration provision in Real Time’s associate
policy handbook waived the employee’s right to bring “any type of
collective or class claim” in any forum. (See fn. 2.)
13
class claims “without analysis” and urges us to remand those
claims for a trial on the merits.
Ramirez’s argument fails to mention that the trial court’s
order striking the class allegations was “without prejudice.”
Because the court has retained jurisdiction over the action,
staying it pending resolution of the arbitration (Code Civ. Proc.,
§ 1281.4), once arbitration has been completed, Ramirez will be
free to file a new pleading reasserting any putative class claims,
assuming Ramirez can still allege in good faith, as she did in her
first amended complaint, that she will fairly and adequately
protect the interest of the class she seeks to represent. Requiring
that the case progress in this manner was well within the trial
court’s broad discretion to control the order of proceedings. (See
Code Civ. Proc., § 128, subd. (a)(3); Little v. Pullman (2013)
219 Cal.App.4th 558, 570 [“[i]t is beyond dispute that the court
may control its processes so as to most efficiently and effectively
safeguard judicial economy and administer substantial justice”];
see also Natkin v. California Unemployment Ins. Appeals Bd.
(2013) 219 Cal.App.4th 997, 1012.)
DISPOSITION
The order compelling arbitration and dismissing the class
allegations in Ramirez’s first amended complaint is affirmed.
Real Time and Cosway are to recover their costs on appeal.
PERLUSS, P. J.
We concur:
SEGAL, J. FEUER, J.
14 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484256/ | The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
November 17, 2022
2022COA132
No. 21CA1242, Anschutz v. Department of Revenue — Taxation
— Colorado Income Tax Act of 1987 — Federal Taxable Income
— Coronavirus Aid, Relief, and Economic Security (CARES) Act
A division of the court of appeals holds as a matter of first
impression that the state income tax code incorporates
retrospective changes to federal tax law in the calculation of taxable
income.
COLORADO COURT OF APPEALS 2022COA132
Court of Appeals No. 21CA1242
City and County of Denver District Court No. 21CV31103
Honorable J. Eric Elliff, Judge
Philip Anschutz and Nancy Anschutz,
Plaintiffs-Appellants,
v.
Colorado Department of Revenue of the State of Colorado, and Mark
Ferrandino, in his official capacity as Executive Director of the Colorado
Department of Revenue,
Defendants-Appellees.
JUDGMENT REVERSED AND CASE
REMANDED WITH DIRECTIONS
Division III
Opinion by JUDGE TOW
Fox and Yun, JJ., concur
Announced November 17, 2022
Lewis Roca Rothgerber Christie LLP, James M. Lyons, Frederick J. Baumann,
Kenneth F. Rossman, IV, Denver, Colorado, for Plaintiffs-Appellants
Philip J. Weiser, Attorney General, Russell Johnson, Senior Assistant Attorney
General, Emma Garrison, Assistant Attorney General, Denver, Colorado, for
Defendants-Appellees
¶1 The Colorado Constitution permits the General Assembly to
define taxable income for state income tax purposes by reference to
federal taxable income pursuant to federal tax law. Colo. Const.
art. X, § 19. The General Assembly has explicitly done so in the
Colorado Income Tax Act of 1987 (state income tax code).
§§ 39-22-101 to -5304, C.R.S. 2022.
¶2 The question this appeal presents — one never before
addressed by a Colorado appellate court — is whether a
congressional amendment to federal income tax laws that lowers a
taxpayer’s federal taxable income for prior tax years entitles a
Colorado taxpayer to file an otherwise timely amendment to their
state income tax return for those prior years in order to claim a
refund.
¶3 Philip and Nancy Anschutz (the Anschutzes) say it does and
filed an amended 2018 state income tax return to take advantage of
just such a change to federal law. The Colorado Department of
Revenue and its Executive Director, Mark Ferrandino (collectively,
the Department) say it does not and denied the refund. When the
Anschutzes appealed the denial pursuant to section 39-21-105,
1
C.R.S. 2022, the district court agreed with the Department and
granted the Department’s C.R.C.P. 12(b)(5) motion to dismiss.
¶4 Because we agree with the Anschutzes, we reverse the district
court’s judgment dismissing the Anschutzes’ claim and remand for
further proceedings.
I. Legal Background
¶5 A Colorado taxpayer’s state income tax liability begins with
their “federal taxable income, as determined pursuant to section 63
of the internal revenue code.” § 39-22-104(1.7), C.R.S. 2022. That
figure is then adjusted by certain additions and subtractions to
arrive at the final taxable income. § 39-22-104(2)-(4). That
adjusted amount is then multiplied by the statutory tax rate to
determine the amount of tax owed. § 39-22-104(1.7).
¶6 The state income tax code defines “internal revenue code” as
“the provisions of the federal ‘Internal Revenue Code of 1986,’ as
amended, and other provisions of the laws of the United States
relating to federal income taxes, as the same may become effective
at any time or from time to time, for the taxable year.”
2
§ 39-22-103(5.3), C.R.S. 2022 (footnote omitted).1 The state income
tax code further provides that “[a]ny term used in this article,
except as otherwise expressly provided or clearly appearing from the
context, shall have the same meaning as when used in a
comparable context in the internal revenue code, as amended, in
effect for the taxable period.” § 39-22-103(11).2
¶7 On March 27, 2020, Congress enacted the Coronavirus Aid,
Relief, and Economic Security (CARES) Act. Pub. L. No. 116-136,
134 Stat. 281 (2020). The CARES Act modified several provisions of
the IRC, including amending 26 U.S.C. § 461(l) to suspend the
“excess business loss”3 deduction limits for the 2018 through 2020
1 Because the state income tax code’s use of the term “internal
revenue code” encompasses more than just the federal Internal
Revenue Code, we distinguish between the two by referring to the
federal Internal Revenue Code of 1986 as the IRC.
2 This approach to state income taxation is known as “rolling
conformity,” meaning a state “essentially incorporates all the new
federal provisions into its state tax code automatically.” Andrew
Appleby, Designing the Tax Supermajority Requirement, 71 Syracuse
L. Rev. 959, 1001 (2021).
3 “Excess business loss” means the excess (if any) of the aggregate
deductions of the taxpayer attributable to trades or businesses of
such taxpayer, over the sum of the aggregate gross income or gain
of the taxpayer attributable to those trades or businesses plus
$250,000 (or $500,000 in the case of a joint return). 26 U.S.C.
§ 461(l)(3).
3
tax years, allowing taxpayers with losses in excess of the threshold
to claim the entirety of the loss. CARES Act § 2304, 134 Stat. at
356. In other words, for taxpayers who had such losses, the
CARES Act provisions retroactively reduced their federal taxable
income for tax years 2018 and 2019.4
¶8 In June 2020, the Department adopted Emergency
Rule 39-22-103(5.3). See Dep’t of Revenue Rule 39-22-103(5.3), 1
Code Colo. Regs. 201-2 (effective June 2, 2020-Sept. 29, 2020)
(Emergency Rule). The Emergency Rule was replaced with a
permanent rule effective September 30, 2020. See Dep’t of Revenue
Rule 39-22-103(5.3), 1 Code Colo. Regs. 201-2 (effective Sept. 30,
2020). (Though the pertinent language of the rules is identical, we
reference the Emergency Rule because it was in effect when the
Department denied the Anschutzes’ refund claim.) The Emergency
Rule states:
“Internal revenue code” does not, for any
taxable year, incorporate federal statutory
changes that are enacted after the last day of
that taxable year. As a result, federal
statutory changes enacted after the end of a
taxable year do not impact a taxpayer’s
4 Such taxpayers’ federal taxable income would also be reduced for
the 2020 tax year, but that is not relevant to this case.
4
Colorado tax liability for that taxable year.
Changes to federal statutes are incorporated
into the term “internal revenue code” only to
the extent they are in effect in the taxable year
in which they were enacted and further taxable
years.
Id.5
¶9 At around the same time, the General Assembly enacted
section 39-22-104(3)(l)-(n), which prevents taxpayers from using
certain CARES Act provisions in calculating their Colorado taxable
income for tax years beginning after the enactment of the CARES
Act and before January 1, 2021. Ch. 277, sec. 2,
§ 39-22-104(3)(l)-(n), 2020 Colo. Sess. Laws 1358-59.6 This
amendment requires taxpayers, in calculating their Colorado
taxable income, to include the amount that their federal taxable
income had been reduced by the CARES Act provisions. Id.
Specifically, when calculating their taxable income for state tax
purposes, taxpayers must now add back to their taxable income the
5 In December 2020, the Office of Legislative Legal Services issued a
memorandum stating that the Department’s interpretation of
“internal revenue code” conflicted with the unambiguous language
in section 39-22-103(5.3), C.R.S. 2022, and thus recommended
against extending the rule.
6 The bill became effective when the Governor signed it on July 11,
2020. Ch. 277, sec. 8, 2020 Colo. Sess. Laws 1361.
5
amount by which their federal taxable income was reduced by any
“excess business loss.” Id. § 39-22-104(3)(m), 2020 Colo. Sess.
Laws at 1359. However, this provision only applies to taxable
income for tax years ending after the enactment of the CARES Act
but before January 1, 2021. Id.7
II. The Anschutzes’ Amended Tax Return
¶ 10 In April 2020, in the wake of the passage of the CARES Act
and before the General Assembly amended the state income tax
code, the Anschutzes filed amended federal and Colorado income
tax returns for the 2018 tax year, claiming the entirety of their
“excess business loss” and seeking income tax refunds.
¶ 11 In September 2020, the Department rejected the Anschutzes’
state income tax refund claim, citing the Emergency Rule. The
Anschutzes appealed the denial of their refund claim to the district
7 The General Assembly further amended the state income tax code
the following year by providing that, for tax years beginning in
2021, taxpayers could subtract up to $300,000 of excess business
losses and could carry over up to $150,000 per year in excess
business loss from the 2021 tax year for up to the next four tax
years. Ch. 5, sec. 1, § 39-22-104(4)(z), 2021 Colo. Sess.
Laws 30-31. By its terms, this amendment applies only to taxable
income in tax years beginning in 2021, see id. § 39-22-104(4)(z)(I),
2021 Colo. Sess. Laws at 30, and thus, like the 2020 amendment,
has no bearing on the Anschutzes’ amended 2018 tax return.
6
court, asserting a claim for allowance of their 2018 tax year refund
and, among others, a claim for a declaratory judgment that “[w]hen
Congress passed the CARES Act, the tax provisions included
therein were immediately incorporated into Colorado tax law
pursuant to Colorado statute.”8 The Department moved to dismiss
the complaint for failure to state a claim. The district court granted
the motion to dismiss, concluding that section 39-22-103(5.3) is
ambiguous, and that the Department’s interpretation was
reasonable, consistent with the General Assembly’s later
amendments to the statute, and entitled to deference.
III. Analysis
¶ 12 The parties disagree about how to interpret the definition of
internal revenue code in section 39-22-103(5.3): “the provisions of
the [IRC], as amended, and other provisions of the laws of the
United States relating to federal income taxes, as the same may
8 The Anschutzes also sought a declaratory judgment that the
Emergency Rule was invalid. The district court concluded that
their request was untimely and that it did not have jurisdiction to
set aside the rule. The Anschutzes did not appeal the district
court’s order in this regard.
7
become effective at any time or from time to time, for the taxable
year.” (Footnote omitted.)
A. Standard of Review
¶ 13 We review de novo a district court’s grant of a C.R.C.P. 12(b)(5)
motion to dismiss. Wagner v. Grange Ins. Ass’n, 166 P.3d 304, 307
(Colo. App. 2007). “Questions of statutory interpretation are also
subject to de novo review.” Nieto v. Clark’s Mkt., Inc., 2021 CO 48,
¶ 12.
¶ 14 “When interpreting a statute, our primary aim is to effectuate
the legislature’s intent.” Id. We look to the entire statutory scheme
to give consistent, harmonious, and sensible effect to all parts and
apply words and phrases in accordance with their plain and
ordinary meaning. Id. “[W]here the plain language is
unambiguous, we apply the statute as written.” Id.
¶ 15 We may consider and even defer to an agency’s interpretation
of the statute. BP Am. Prod. Co. v. Colo. Dep’t of Revenue, 2016 CO
23, ¶ 15. Deference to the agency is only warranted, however, when
a statute “is subject to different reasonable interpretations and the
issue comes within the administrative agency’s special expertise.”
Huddleston v. Grand Cnty. Bd. of Equalization, 913 P.2d 15, 17
8
(Colo. 1996). Deference is not warranted where the agency’s
interpretation is contrary to the statute’s plain language. BP Am.
Prod., ¶ 15.
B. Interpretation of the State Income Tax Code
¶ 16 The Anschutzes contend that the statutory definition of
internal revenue code automatically incorporates congressional
amendments to the IRC, even if such changes relate to previous tax
years. The Department contends that the definition of internal
revenue code only incorporates amendments to the IRC to the
extent that they are in effect for the taxable year in which they were
enacted and for future taxable years.
¶ 17 Based on the plain language of the state income tax code, we
agree with the Anschutzes’ interpretation.
1. Plain Language
¶ 18 Given the grammatical structure of the statutory language,
there are two types of federal statutory provisions that make up the
definition of internal revenue code: (1) those found in the IRC “as
amended” and (2) those found elsewhere in the laws of the United
States to the extent they relate to federal income taxes.
§ 39-22-103(5.3). However, both provisions are modified by the
9
phrase “for the taxable year.” Id.; see also People v. Lovato, 2014
COA 113, ¶ 24 (Under the series-qualifier canon of statutory
construction, “when several words are followed by a clause which is
applicable as much to the first and other words as to the last, the
natural construction of the language demands that the clause be
read as applicable to all.” (quoting In re Estate of Pawlik, 845
N.W.2d 249, 252 (Minn. Ct. App. 2014))).
¶ 19 Section 39-22-103(5.3) plainly and unambiguously states that
the phrase “internal revenue code” includes “the provisions of the
[IRC], as amended, . . . for the taxable year,” without any limitation
as to when any amendment is enacted or goes into effect. See
Nieto, ¶ 22 (“[J]ust as important as what the statute says is what
the statute does not say.” (quoting Mook v. Bd. of Cnty. Comm’rs,
2020 CO 12, ¶ 35)). Thus, a taxpayer can take advantage of any
amendment that is in effect for (not just in) a taxable year. Because
there is no other reasonable interpretation — notwithstanding the
parties’ disagreement — we perceive no ambiguity. See Goodyear
Tire & Rubber Co. v. Holmes, 193 P.3d 821, 825 (Colo. 2008)
(concluding that the plain meaning of the statute was clear despite
the parties’ disagreement).
10
¶ 20 The Department contends that because the General Assembly
used different phrases — “as amended” and “at any time or from
time to time” — in describing the two types of federal statutory
provisions included in the definition of internal revenue code, the
use of “as amended” must signal a narrower scope than “at any
time or from time to time.” Thus, the Department argues, the
“[IRC], as amended,” means the federal statute as it exists to the
end of the relevant tax year, but not beyond.
¶ 21 But the Department misses a simpler explanation for the use
of different phrases. Because the IRC is already in existence it can
be “amended,” whereas “other provisions of the laws of the United
States relating to federal income taxes, as the same may become
effective” are not necessarily in existence yet. Such provisions are
not “amended” but, rather, “become effective” upon enactment,
which may occur “at any time or from time to time.” Thus, the
plain language of the statute contradicts the Department’s
interpretation.
¶ 22 Nor are we persuaded by the Department’s reliance on the
statutory presumption of prospective application. To the extent the
Department is suggesting the amendment to the federal statute
11
should be presumptively prospective, that suggestion directly
conflicts with Congress’s language making the CARES Act
provisions applicable to prior tax years. To the extent the
Department’s argument is directed at an amendment to the state
statute, it is misplaced because the CARES Act did not (and could
not) amend Colorado law. Rather, the effect of the congressional
amendment flows from the existing state income tax code language
(and its incorporation by reference to the IRC “as amended”).9
2. Legislative Declaration
¶ 23 We also disagree with the Department’s contention that the
Anschutzes’ interpretation of section 39-22-103(5.3) is contrary to
the legislative declaration in the state income tax code.
¶ 24 The legislative declaration states that one purpose of the act
includes “[s]implifying the preparation of state income tax returns.”
§ 39-22-102(1)(a), C.R.S. 2022.
¶ 25 The Department contends that because the Anschutzes had to
file an amended state income tax return, the act did not simplify the
9 Notably, the Colorado Constitution expressly permits state income
taxes to be calculated “by reference to provisions of the laws of the
United States . . . , whether retrospective or prospective in their
operation.” Colo. Const. art. X, § 19 (emphasis added).
12
preparation of the return. But an interpretation of the statute that
requires taxpayers to take their federal taxable income, as
calculated under federal law, and then determine which, if any,
amendments to the IRC must be incorporated for purposes of
determining their state taxable income, depending on the date of
their enactment, creates complexity contrary to the legislative
declaration. Cf. Ball Corp. v. Fisher, 51 P.3d 1053, 1058 (Colo. App.
2001) (“When Colorado’s tax provisions have counterparts at the
federal level, incorporating amendments to the federal tax code
simplifies compliance and enforcement under the Colorado tax
code.”).
¶ 26 By automatically incorporating amendments to the IRC into
the state income tax code, a taxpayer’s preparation of state income
tax returns is simplified. And if a taxpayer needs to file an
amended federal income tax return, it does not complicate the
preparation of any amended state income tax return, but rather
simplifies it by allowing both amended returns to be filed at the
same time and based on the same amendments to the
determination of taxable income.
13
3. The Emergency Rule
¶ 27 Nor does the Emergency Rule provide the Department safe
harbor. The Emergency Rule specified that changes to federal tax
law only apply prospectively. Dep’t of Revenue Rule 39-22-103(5.3),
1 Code Colo. Regs. 201-2. But the language that the Department
used in its Emergency Rule did not appear in the plain language of
the state income tax code as it existed before the amendment that
became effective in July 2020. See Ch. 277, sec. 2,
§ 39-22-104(3)(l)-(n), 2020 Colo. Sess. Laws 1358-59. Indeed, had
the statute provided for prospective application only, the
Department would not have had to issue the Emergency Rule. The
Department stated in the Rule that “[t]he purpose of [the
Emergency Rule] is to clarify that the term ‘internal revenue code’
incorporates changes to federal statute only on a prospective basis.”
Dep’t of Revenue Rule 39-22-103(5.3), 1 Code Colo. Regs. 201-2.
But this was more than a clarification — it read words into the
statute that were not there.
¶ 28 Because the Emergency Rule’s interpretation of “internal
revenue code” is contrary to the statute’s plain language, and we
decline to defer to it. See Ansel v. Dep’t of Hum. Servs., 2020 COA
14
172M, ¶ 39 (concluding that agency interpretation of the statute
was inconsistent with the plain language and was contrary to law).
4. Legislative Amendment to Section 39-22-104
¶ 29 The Department argues (and the district court agreed) that the
fact that the General Assembly later amended section 39-22-104
supports its interpretation. We disagree.
¶ 30 First, as noted, the 2020 and 2021 amendments expressly
apply only to later tax years. Thus, they do not impact the
Anschutzes’ amended 2018 tax return.
¶ 31 Nevertheless, the Department asserts that the fiscal note to
the 2020 bill indicated that the statutory language was simply a
recognition of existing law as set forth in the Emergency Rule.
Fiscal notes can, in some circumstances, be helpful in gleaning
legislative intent “to the extent they provide a glimpse into what was
known at the time the amendment was being considered.” Bd. of
Cnty. Comm’rs v. Colo. Dep’t of Pub. Health & Env’t, 2020 COA 50,
¶ 28 n.7, aff’d in part and vacated in part on other grounds, 2021
CO 43. First, having concluded that the statutory language is
unambiguous, we do not resort to external aids to determine the
meaning of the statute. People v. J.J.H., 17 P.3d 159, 162 (Colo.
15
2001). In any event, the probative value of this particular fiscal
note statement is suspect, particularly in light of the fact that the
General Assembly’s own Office of Legislative Legal Services has
opined in a memorandum that the Emergency Rule conflicted with
the operative statutory language.
¶ 32 Even assuming that the fiscal note and the legislative
amendment to section 39-22-104 endorsed the Department’s
Emergency Rule, as we have noted, the Emergency Rule was
contrary to the plain language of the statute then in effect. The
General Assembly can, of course, amend the state income tax code
to not conform with changes to the IRC, as it did by amending
section 39-22-104 both in 2020 and 2021. But until such
amendments become effective, Colorado law automatically
incorporates amendments to the IRC.
5. Application
¶ 33 The Anschutzes filed an amended state income tax return for
the 2018 tax year, relying on the CARES Act provisions that
16
amended the IRC.10 Those provisions allowed taxpayers to reduce
their taxable income by the amount of excess business loss they
experienced. By its terms, the CARES Act provisions applied to the
2018 tax year and nothing in the state income tax code limited that
modification.
¶ 34 Accordingly, the district court erred by granting the
Department’s motion to dismiss.
IV. Disposition
¶ 35 We reverse the district court’s judgment and remand the case
for further proceedings.
JUDGE FOX and JUDGE YUN concur.
10 The Department has never contended that the Anschutzes’
amended return was untimely. Thus, we assume that it was timely
filed.
17 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484250/ | Filed 11/16/22 P. v. Williams CA5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
THE PEOPLE,
F082301
Plaintiff and Respondent,
(Super. Ct. No. VCF395918)
v.
TYRONE LAVONO WILLIAMS, OPINION
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Tulare County. Juliet L.
Boccone, Judge.
Audrey R. Chavez, under appointment by the Court of Appeal, for Defendant and
Appellant.
Rob Bonta, Attorney General, Lance E. Winters, Chief Assistant Attorney
General, Michael P. Farrell, Assistant Attorney General, Darren K. Indermill and
Catherine Tennant Nieto, Deputy Attorneys General, for Plaintiff and Respondent.
-ooOoo-
INTRODUCTION
Appellant sexually assaulted three victims in separate incidents. A jury convicted
him of five counts of lewd act upon a child under 14 years of age (Pen. Code, § 288,
subd. (a); counts 1, 2, 5, 6, and 7),1 one count of sodomy upon a child under 14 years of
age (§ 286, subd. (c)(1); count 3), and one count of forcible rape (§ 261, subd. (a)(2);
count 4). Appellant was also found to have had multiple victims (§ 667.61, subd. (e)(4)),
to be a habitual sex offender (§ 667.71), and to have suffered two prior strike convictions
(§§ 667, subds. (b)-(i), 1170.12, subds. (a)-(d)), a prior serious felony conviction (§ 667,
subd. (a)(1)), and a prior sex offense (§ 667.61, subds. (a) & (d)). He was sentenced to
480 years to life in state prison.
On appeal, appellant contends the information and jury instructions contained an
inaccurate date range that included a window of time after one of the victim’s 14th
birthday, there was insufficient evidence that one of the victims was under the age of 14
at the time of the offenses, the jury never made an express finding that he suffered two
prior strikes, and the trial court erred in admitting evidence of his prior convictions
pursuant to Evidence Code section 1108. We find no error and affirm.
BACKGROUND
I. Offenses Involving A.A. — Counts 5, 6, and 7.
A.A. was born in August 2001. In 2015, she was living with her mother, her
siblings, and her mother’s boyfriend. A.A.’s mother’s boyfriend’s sister was dating
appellant and the two of them lived together in the sister’s house. A.A. viewed appellant
as an uncle figure.
A.A. first met appellant when she was 12 years old and in the seventh grade. At
that time, she would go with her mother to appellant’s girlfriend’s house two to three
times per month for large family parties. The parties would generally start inside of the
1 All further statutory references are to the Penal Code unless otherwise indicated.
2.
house then move outside. A.A. would stay in the living room because she was
introverted and did not like parties. Appellant would often join her inside.
Nothing improper happened with appellant until A.A. was 13 years old and in
eighth grade. When she was alone with him in the living room during parties, he began
making comments to her about how she was beautiful, and that she should not be
depressed. Later, he began making comments about her body, usually about her legs and
thighs. He would tell her to stand up and then turn around in front of him so that he
could look at her. On several occasions he rubbed her thighs with his hands.
During one party, when A.A. was still 13 years old, appellant took her outside to
the front yard. There were approximately 50 people outside in the back yard playing loud
music. He took her near a car where they were alone in the dark. He pushed her up
against the car so that she was facing the car with her hands on top of it. He stood behind
her, put his hands on top of hers, pushed his body up against her and rubbed his erect
penis side to side against her buttocks. She did not know what to do and started to cry.
At some point while appellant was still rubbing against her, the police arrived, apparently
in response to the loud music. Appellant immediately stopped touching her and showed
the police to the back of the house.
A.A. described a similar incident that occurred at another party while she was still
13 years old. Appellant again pushed her up against a car and rubbed his penis against
her buttocks. After this second incident, she stopped attending family parties as often.
The last incident involving appellant occurred when she was walking home from
school. Appellant sent her a text message that he was going to drive her home, then
picked her up in his car. Once she was inside of his car, he touched the inside of her
thighs and moved his hands up to where her shorts ended. While touching her, he asked
her if she had ever had sex, and whether she would have sex with someone over the age
of 18. When he dropped her off, he told her to walk on the sidewalk in front of him so he
could watch her walk away, and to move her hips side to side.
3.
After the last incident, A.A.’s best friend could tell that something was wrong and
told her she should go to the principal’s office, which she did. After A.A. reported
appellant’s conduct, school administrators contacted law enforcement, which responded
to the school and commenced an investigation.
II. Offenses Involving S.Y. — Count 4.
On August 26, 2019, S.Y., an adult female, was released from county jail where
she had been incarcerated for a “misdemeanor petty theft warrant.” A jail transport
dropped her off at the courthouse in Visalia shortly after midnight. She did not have a
ride to her home in Porterville or any way to contact friends or family, so she walked
with an older lady who had also been on the jail transport to a nearby convenience store.
Appellant approached S.Y. while she was standing in front of the store. She
initially thought he seemed nice. He told her he would “protect her until daylight,” and
bought her cigarettes. He also observed that she was cold and took her to a nearby gym
at which he was a member and let her inside so that she could take a hot shower.
However, after she finished at the gym, he began making sexual comments and became
increasingly threatening, suggesting that she owed him something for helping her.
Appellant escorted S.Y. to a nearby park, forced her to sit down on top of a picnic
table, and stood in front of her, blocking her from standing up. S.Y. told him she wanted
to go back to the convenience store, but he responded the neighborhood was too
dangerous for her to go alone. He then told her she owed him a favor. In an effort to
placate him, she gave him a hug and thanked him for the cigarettes. Appellant responded
that the hug made his “dick hard,” and he grabbed her by the arm and pulled her to a
bench in the dugout area of a baseball field. He pulled her onto his lap and told her he
wanted her to “grind on him,” and pushed her back on forth on his lap. She pleaded with
him to stop and to let her go, but he did not. He then pulled down his shorts and her
shorts and penetrated her vagina with his penis. She tried to resist by standing up and
4.
pulling her body away from him, but he held her in place. Eventually, a car with its
headlights on parked nearby. This seemed to scare appellant, and he pushed S.Y. off his
lap.
Appellant walked S.Y. back to the gym and told her he would be back to help her
in the morning. S.Y. went into the gym and took another shower and fell asleep.
The next morning, S.Y. walked to the hospital because she wanted to be checked
by a doctor. From the hospital, she was taken to a rape crisis center where she received a
Sexual Assault Response Team (SART) examination. During the exam, the SART nurse
took swabs from her vagina and anus for DNA testing.
The swabs were analyzed by a criminalist from the California Department of
Justice. The vaginal swab tested positive for sperm cells. A DNA profile was developed
and entered into the Combined DNA Index System (CODIS) database. The database
matched the DNA profile to appellant. Officers later obtained a reference sample from
appellant, and subsequent analysis confirmed appellant’s DNA matched the DNA profile
from the vaginal swab.
After receiving the match in the CODIS database, officers created a photographic
lineup containing appellant’s photograph, and S.Y. identified appellant as the person who
attacked her. Officers also obtained records from appellant’s account at the gym, which
showed he checked into the gym on August 25 and August 26, 2019.
III. Offenses Involving A.N. — Counts 1, 2, and 3.
A.N. was born in May 2006. On March 31, 2020, when she was 13 years of age,
she snuck out of her house around 11:15 p.m. While walking down the street she was
approached by appellant who was riding a bicycle. He asked her what she was doing out
this late. She responded that she was “[j]ust walking.” A.N. continued walking by
herself, but later she encountered appellant again. He told A.N. that someone was
looking at her. He then walked with A.N. to a nearby park.
5.
At the park, appellant gave A.N. methamphetamine, which she snorted. He gave
her a ride on his bicycle to an apartment complex next to a convenience store, where they
sat on a bench and talked. Appellant left briefly, and when he returned, they used more
drugs. A.N. and appellant then hugged and kissed, and he touched her on her buttocks
and vagina. After she removed some of her clothes, appellant rubbed his penis on the
outside of her vagina, but it did not go inside. She then felt appellant put his penis inside
of her anus.
Afterward, appellant and A.N. did more drugs together. Appellant left the area,
and A.N. fell asleep outside near the apartment complex. At some point before appellant
left, he gave A.N. his camouflage hoodie. The next morning, she bought food from the
convenience store next to the apartment complex.
A.N. was found by a family member around 10:00 p.m. the next day when she
“popped out of the bushes” near a restaurant. A.N. was fidgety and appeared to be
intoxicated. Family members took A.N. to the hospital where tests revealed she had
methamphetamine in her system.
Approximately two weeks later, A.N. was interviewed by police, and she provided
a description of appellant. Based on that description, law enforcement was able to locate
appellant, and A.N. identified him in a photographic lineup. When interviewed by police,
appellant was shown a photograph of A.N. Appellant stated he recognized A.N. from the
night of the assault, but claimed he only told her to go home.
Law enforcement also recovered surveillance video from the convenience store
next to the apartment complex. It shows appellant arrive on the night of the assault
around 11:00 p.m. on a bicycle wearing a camouflage hoodie. Around noon the next day,
the video shows A.N. outside of the convenience store wearing the same camouflage
hoodie.
6.
IV. Prior Offenses Involving a Prior Victim — Evidence Code Section 1108.
In 1995 a jury found appellant guilty of four counts of forcible rape in concert
(§ 264.1) and two counts of forcible rape (§ 261, subd. (a)(2)). The trial court granted the
People’s motion to admit evidence of these offenses pursuant to Evidence Code section
1108. The prior victim was legally unavailable to testify,2 so her testimony from the
1995 trial was read for the jury.
In January 1995, the victim was 16 years old. She was living with a friend and his
family in Monterey County. On January 11, 1995, she ran into appellant while walking
to a bus stop. She had met appellant previously and had been around him on two or three
occasions. She hung around with appellant and his group of friends for a while, then took
a bus with them to Seaside. The group included appellant, his codefendant Dutra, a male
named Pookie, a female named La Fay, and a couple of other males. On the bus, she told
the group she was 16 years old.
Once in Seaside, the group went to a liquor store and purchased alcohol, then went
to a shed behind appellant’s house where they drank, played cards, and listened to music.
At some point in the evening, La Fay left with Dutra. While they were gone, the victim
danced with appellant. Dutra returned soon after, and appellant, Dutra, Pookie, and
appellant’s cousin tried to get the victim to strip for them, which she refused to do. She
tried to leave, but appellant turned the lights off, and Dutra started touching her chest.
She told him to get off her, to which he responded, “[w]hat are you going to do?” She
kicked him, he hit her in the face, and they started fighting. Appellant kept turning the
lights on and off, and when the room went dark, Dutra would continue beating her.
Everyone else in the shed stood around watching and laughing excitedly. The victim
tried to get out of the shed several times, but each time she was pulled back inside, and
Dutra continued to hit her.
2 The victim committed suicide in 2003. The fact that she was deceased was not
revealed to the jury.
7.
Appellant eventually pulled the victim outside by her wrist. He let go of her so he
could urinate on a fence. She tried to escape by fleeing through a hole in the fence but
was caught in the alleyway on the other side by Dutra. She screamed and tried to get
away but was trapped. Dutra resumed hitting her, then appellant, Dutra, and Pookie
forced her back into the shed.
Once inside, appellant and Dutra both noticed they had been scratched by the
victim and became angry. Dutra held the victim down on the couch and started choking
her to the point that she felt she was going to lose consciousness. She heard someone
say, “You’re choking her. She’s turning purple. You’re going to kill her.” Dutra let go
of her, but then threw her on another couch and resumed hitting her in the face. She felt
dizzy and pretended to be unconscious. As she lay on the couch, she heard appellant say,
“We’re gonna toss this bitch like a salad. Who’s gonna go first?” She felt someone
check her pulse, and she noticed her face was covered with blood. Her clothing was
taken off her body, then everyone exited the shed but appellant. Appellant started kissing
her, then turned her over and attempted anal intercourse. She yelled, and appellant turned
her back over, slapped her on each side of the face, and raped her vaginally. After
appellant finished, Pookie, appellant’s cousin, and Dutra all took turns raping her as she
continued to feign unconsciousness. Appellant then entered the shed and raped her a
second time.
After the second rape, appellant told the victim to look in the mirror, and she saw
her face was bruised and bloody. He reminded her that she had been fighting with Dutra
and told her she was a “tough girl.” He then told her to lie next to him on the couch and
raped her a third time. She lay there for several hours until she was able to leave.
The next morning, the victim returned to her friend’s house. Her friend’s mother
took her to the police station and then to the hospital.
8.
V. Appellant’s Testimony.
Appellant elected to testify. He acknowledged being around A.A. at parties, but
claimed he was never alone with her and never did anything sexual with her. With
respect to S.Y., he claimed they had consensual intercourse, and they had met before the
night in question. As to A.N., he claimed he encountered her in a parking lot around
noon and told her she needed to go home. He denied giving her drugs or doing anything
sexual with her.
DISCUSSION
I. The Second Amended Information was not Defective on its Face for Failure
to State a Public Offense.
In the second amended information, the People alleged that counts 5, 6, and 7, the
three violations of section 288, subdivision (a) pertaining to A.A., occurred “[o]n or
about and between May 1, 2014 and October 29, 2015.” A violation of section 288,
subdivision (a), requires proof that the victim was “under the age of 14 years.” A.A.
turned 14 years of age on August 16, 2015, so the date range included a period during
which A.A. was not under the age 14 years. Appellant contends that as a result the
information did not state a public offense, and reversal is required.
A. Background.
At the start of trial, counts 5, 6 and 7 were charged in the first amended
information as violations of section 288, subdivision (c)(1), lewd act upon a child aged 14
or 15, alleged to have occurred between August 16, 2015 and October 29, 2015.
Following A.A.’s testimony, the People filed the second amended information, which
changed counts 5, 6, and 7, to violations of section 288, subdivision (a), with an alleged
date range between May 1, 2014 and October 29, 2015. Appellant did not demur to the
second amended information or otherwise object.
9.
B. Standard of review.
“A demurrer is not a proper means of testing the sufficiency of the evidence
supporting an accusatory pleading. [Citation.] Rather, a demurrer lies only to challenge
the sufficiency of the pleading. It is limited to those defects appearing on the face of the
accusatory pleading, and raises only issues of law.” (People v. Biane (2013) 58 Cal.4th
381, 388.) Thus, the People’s “ ‘ability to prove the allegations, or the possible difficulty
in making such proof, does not concern the reviewing court.’ ” (People v. Keating (1993)
21 Cal.App.4th 145, 151.)
C. Counts 5, 6, and 7 of the information stated a public offense.
As a threshold matter, respondent contends that appellant forfeited this claim by
failing to demur to the second amended information. Appellant replies that because he
relies solely on the legal ground that the information failed to state a public offense
(§ 1004, subd. (4)), his claim is not subject to forfeiture.
We agree the claim has not been forfeited. “The legal grounds for demurrer to an
accusatory pleading are limited to those specifically enumerated in Penal Code section
1004. [Citations.] Failure to assert one of the enumerated grounds, other than an
objection to the jurisdiction of the court or that the facts stated do not constitute a public
offense, ‘shall be deemed a waiver thereof.’ (Pen. Code, § 1012.)” (People v. Biane,
supra, 58 Cal.4th at p. 388.) Therefore, despite appellant’s failure to demur on the
ground that the information did not state a public offense, “the defect can be raised on
appeal.” (People v. Paul (1978) 78 Cal.App.3d 32, 42.)
Although not subject to forfeiture, appellant’s claim lacks merit because counts 5,
6, and 7 stated a public offense. A charge need only include “a statement that the
accused has committed some public offense,” which “may be made in ordinary and
concise language without any technical averments or any allegations of matter not
essential to be proved.” (§ 952.) Here, the People met this requirement in each count by
stating appellant was charged with “LEWD ACT UPON A CHILD … in violation of
10.
Penal Code section 288(a),” and including a brief description of the elements of the
offense, including that the act was committed on “A.A., a child under the age of fourteen
years.”
Appellant contends the counts are subject to demurrer because the offenses were
alleged to have occurred between May 1, 2014 and October 29, 2015, and A.A. turned 14
years old on August 16, 2015. In support, he cites section 955, which provides, in
pertinent part: “The precise time at which the offense was committed need not be stated
in the accusatory pleading … except where the time is a material ingredient in the
offense.”
Appellant’s reliance on A.A.’s date of birth is misplaced. A demurrer is limited to
the facial sufficiency of the information. (People v. Biane, supra, 58 Cal.4th at p. 388.)
A.A.’s date of birth is not listed in the information, and there is no legal requirement that
it must be included. Moreover, section 955 is inapplicable because the date of a violation
of section 288, subdivision (a), is only material to the offense as it pertains to the age of
the victim. Instead of listing A.A.’s date of birth in the information, the People stated a
public offense by pleading that A.A. was under the age of 14. Ultimately, appellant’s
demurrer claim fails because nothing in the information suggests A.A. was age 14 or
older at the time of the offenses.
We recognize that at the time the second amended information was filed, A.A.’s
date of birth was in evidence and not subject to dispute. As we explained above, this
does not affect our conclusion, as our analysis is not concerned with the evidence
presented at trial. Even assuming we could consider A.A,’s date of birth for purposes of
this demurrer analysis, we would still reach the same conclusion. Counts 5, 6, and 7 were
alleged to have occurred between May 1, 2014 and October 29, 2015, and A.A. turned 14
years old on August 16, 2015. Thus, while acts committed after A.A.’s 14th birthday
could not support a violation of section 288, subdivision (a), the date range of the
allegations also encompassed a window of approximately 15 months during which A.A.
11.
was under the age of 14. Accordingly, counts 5, 6, and 7 would still state a public
offense, and this claim lacks merit.
II. The Jury Instructions did not Mislead the Jury into Believing it Could
Convict Appellant of Section 288, Subdivision (a), When the Victim was 14
Years Old.
The trial court’s instructions to the jury contained references to the same date
range listed in counts 5, 6, and 7 in the second amended information. Appellant contends
these references misled the jury into believing it could find appellant guilty of section
288, subdivision (a) for acts committed at any point during that date range, even if A.A.
was 14 years old at the time of the act.
A. Background.
The jury instructions included the date range listed in the second amended
information in two places. The first was in CALCRIM No. 207, which instructed the jury
that the People are only required to prove that the alleged offense happened reasonably
close to the dates alleged. The second was in CALCRIM No. 3501, which instructed the
jury on the unanimity requirement when evaluating generic testimony. Both instructions
contained the following sentence: “It is alleged that the crimes in Counts 5-7 occurred
between May 1, 2014 and October 29, 2015.”
The jury was also instructed on the elements of section 288, subdivision (a).
(CALCRIM No. 1110.) The instruction specified that the People are required to prove
the victim “was under the age of 14 at the time of the act,” and included no reference to
any date range.
B. Standard of review.
We review a claim of instructional error de novo. (People v. Cole (2004) 33
Cal.4th 1158, 1210.) “A defendant challenging an instruction as being subject to
erroneous interpretation by the jury must demonstrate a reasonable likelihood that the
jury understood the instruction in the way asserted by the defendant.” (People v. Cross
12.
(2008) 45 Cal.4th 58, 67–68; People v. Bacon (2010) 50 Cal.4th 1082, 1110.) “We
interpret the instructions so as to support the judgment if they are reasonably susceptible
to such interpretation, and we presume jurors can understand and correlate all instructions
given.” (People v. Vang (2009) 171 Cal.App.4th 1120, 1129.)
C. Instructional error did not occur.
We conclude there is no reasonable likelihood the jurors misunderstood the jury
instructions. Appellant argues the jurors may have mistakenly believed they could find
appellant guilty of section 288, subdivision (a) so long as the act occurred within the May
1, 2014 through October 29, 2015 date range. However, the jury was clearly and
unambiguously instructed that an element of section 288, subdivision (a) is that the
victim was under the age of 14 at the time of the act, and that appellant could not be
found guilty unless each element was proven beyond a reasonable doubt. Although the
May 1, 2014 through October 29, 2015 date range was included elsewhere in the jury
instructions, the prosecutor clarified any potential ambiguity in closing argument. (See
People v. Hajek and Vo (2014) 58 Cal.4th 1144, 1220–1221, disapproved on another
ground in People v. Rangel (2016) 62 Cal.4th 1192, 1216.) The prosecutor made clear
her theory was the evidence showed A.A. was under the age of 14 when all three
incidents occurred, stating:
“We know that [A.A.] was under 14 years old. We got her date of birth in
there: August 16, 2001…. She was 12 years old [when she met appellant]
and she reported to her school in October of 2015 when she was 14. That
was her first year of 9th grade. She said the incident happened when she
was 13 years old and in 8th grade. So we know that based on the timeline
[of when she first met appellant] and when she reported, how old she would
be during the period she was in 8th grade, that she was 13 years old for all
the incidents.”
Given the prosecutor’s argument and the trial court’s clear instruction that the jury must
find the victim was under the age of 14 at the time of the act to convict appellant of
13.
section 288, subdivision (a), there is no reason to believe the jury’s verdict was based on
an incorrect legal theory and, therefore, instructional error did not occur.
III. Appellant’s Convictions Were Supported by Sufficient Evidence.
In addition to his challenges related to the date range alleged in counts 5, 6, and 7,
appellant contends the evidence was insufficient that A.A. was under the age of 14 when
the acts occurred, and therefore the corresponding section 288, subdivision (a)
convictions were not supported by substantial evidence.
A. Standard of review.
“To determine the sufficiency of the evidence to support a conviction, we review
the entire record in the light most favorable to the prosecution to determine whether it
contains [substantial] evidence that is reasonable, credible and of solid value, from which
a rational trier of fact could find that the elements of the crime were established beyond a
reasonable doubt.” (People v. Tripp (2007) 151 Cal.App.4th 951, 955.) We “presume in
support of the judgment the existence of every fact the trier could reasonably deduce
from the evidence.” (People v. Redmond (1969) 71 Cal.2d 745, 755.) “We need not be
convinced of the defendant’s guilt beyond a reasonable doubt; we merely ask whether
‘ “any rational trier of fact could have found the essential elements of the crime beyond a
reasonable doubt.” ’ ” (People v. Tripp, supra, 151 Cal.App.4th at p. 955, italics
omitted.)
“In California conviction of a sex crime may be sustained upon the uncorroborated
testimony of the [victim].” (People v. Poggi (1988) 45 Cal.3d 306, 326.) Moreover,
“[i]n deciding the sufficiency of the evidence, a reviewing court resolves neither
credibility issues nor evidentiary conflicts. [Citation.] Resolution of conflicts and
inconsistencies in the testimony is the exclusive province of the trier of fact.” (People v.
Young (2005) 34 Cal.4th 1149, 1181.) “ ‘[I]t is for the trier of fact to consider internal
inconsistencies in testimony’ [citation], and it is for us when reviewing for substantial
14.
evidence to resolve the inconsistencies in favor of the verdict.” (People v. Collins (2021)
65 Cal.App.5th 333, 345.)
B. Counts 5, 6, and 7 were supported by sufficient evidence.
1. Counts 5 and 6.
Counts 5 and 6 pertain to the first and last incident, respectively, in which
appellant took A.A. outside during a party, pushed her up against a car, and rubbed his
penis against her buttocks.
A.A. was unable to recall precisely when each incident occurred, but she
remembered she was age 13 and in the eighth grade. She explained that she first met
appellant when she was 12 years old and in seventh grade, and that nothing inappropriate
happened until she was 13 years old and in eighth grade. When asked how she
remembered she was 13 years old when the first incident (count 5) occurred, she
explained: “Because I was 14 when I started high school, and I know who I was with,
who I was dating at the time.” When asked how old she was when the second incident
(count 6) occurred, she reiterated that it occurred when she was 13 years old and in the
eighth grade. No other evidence presented at trial contradicted A.A.’s recollection of her
age at the time she was assaulted. Accordingly, A.A.’s testimony provided sufficient
evidence from which a rational trier of fact could have found A.A. was under 14 years of
age at the time counts 5 and 6 were committed.
2. Count 7.
Count 7 pertains to the incident in which appellant picked A.A. up in his car and
touched her thighs.
A.A. first testified that she was age 14 when this incident occurred and had just
started high school. She did not remember the exact date, but recalled the incident
happened in August, “a little bit after school started.” She reported the incident to a high
school administrator on October 29, 2015. She initially stated she reported the incident
15.
the day after it happened, but later in her testimony she clarified it could have occurred
months prior to her report. On cross-examination, she acknowledged that she told a
police officer in October 2015 that the incident occurred in September, but she explained
that was only her best guess, and she could not remember exactly when it happened.
On redirect by the People, A.A. testified the incident happened when she was in
eighth grade and was 13 years old. When recalled by the prosecution later in the trial,
she again testified the incident happened when she was in eighth grade, before she
reached high school. Neither party asked A.A. to explain the discrepancy in her
testimony regarding how old she was when the incident occurred.
Abel Loza, a counselor at A.A.’s high school, testified that A.A. reported an
incident involving her “uncle” on October 29, 2015. He recalled that A.A. stated the
incident occurred a few weeks or a few months prior.
It is apparent from the record that A.A struggled to recall the dates of a traumatic
event that occurred five years prior to trial. However, we conclude her testimony was
still sufficient to support the verdict as to this count. The verdict indicates the jury found
A.A. credible and accepted her testimony that the incident occurred when she was 13
years old. As we explained above, it is not the province of this court to make credibility
assessments or resolve conflicts in the evidence when reviewing the record for substantial
evidence. A.A.’s testimony that she was 13 years old at the time of the incident, while
contradicted by her testimony earlier in the trial, was not “physically impossible or
inherently improbable.” (People v. Young, supra, 34 Cal.4th at p. 1181.) As the sole
finder of fact, the jury was entitled draw the conclusion from her testimony that she was
13 years old at the time of the incident. Therefore, the verdict as to count 7 was
supported by substantial evidence.
16.
IV. Appellant Was Properly Sentenced as a Third Strike Offender.
Appellant contends his sentence under the “Three Strikes” law is invalid because
the language of the jury verdict forms did not foreclose the possibility that the jurors only
found true that he suffered one strike conviction. He argues the jury was only asked to
make a finding that he suffered one conviction that constitutes a prior strike, and
therefore he should not have been sentenced as a third strike offender.
A. Background.
Prior to trial, appellant moved to bifurcate allegations relating to his prior
convictions, including two prior strike conviction allegations (§§ 667, subds. (b)-(i),
1170.12, subds. (a)-(d)), habitual sex offender allegations (§ 667.71), allegations that he
suffered a prior sex offense (§ 667.61, subds. (a) & (d)), and allegations he suffered a
prior serious felony conviction (§ 667, subd. (a)(1)). Appellant’s counsel also indicated
he would not be waiving his right to a jury trial on the truth of the prior convictions. The
trial court denied the motion, reasoning bifurcation would be meaningless because the
court had already granted the People’s motion to admit evidence of appellant’s prior sex
offenses pursuant to Evidence Code section 1108.
At trial, in addition to the prior victim’s trial testimony, the People introduced
certified court records from Monterey County Superior Court showing a jury convicted
appellant of four counts of forcible rape in concert (§ 264.1) and two counts of forcible
rape (§ 261, subd. (a)(2)). Appellant admitted the truth of his prior convictions when he
testified.
The jurors received three instructions pertaining to appellant’s prior convictions.
In the first two instructions, which dealt with the prior sex offense conviction allegation
and the habitual sex offender allegation, the trial court instructed the jury that it must
decide whether appellant was “previously convicted of Rape, in violation of Penal Code
section 261(a)(2), or Rape in Concert, in violation of Penal Code section 264.1” The
third instruction guided the jurors on prior conviction allegations in a nonbifurcated trial
17.
(CALCRIM No. 3100). In the instruction, the court explained “[i]t has already been
determined that [appellant] is the person named in exhibit 1,” the certified Monterey
County Superior Court records of appellant’s 1995 convictions, and that the jury must
“decide whether the evidence proves that [appellant] was convicted of the alleged
crimes.” The trial court then explained that the People alleged appellant has been
convicted of the following offenses:
“Two violations of Penal Code section 261(a)(2), on July 18, 1995, in the
Monterey Superior Court, in Case Number SC950855B.
“Four violations of Penal Code section 264.1 on July 18, 1995, in the
Monterey Superior Court, in Case Number SC950855B.”
The verdict forms for each of the seven counts included special allegations that
appellant suffered a prior sex offense conviction and was a habitual sex offender. The
special allegation finding for the prior sex offense conviction included the following
language: “[Appellant] was previously convicted of Rape, in violation of Penal Code
section 261(a)(2) and/or Rape in Concert, in violation of Penal Code section 264.1” The
special allegation finding for the habitual sex offender allegation included similar
language: “[Appellant] was previously convicted of a crime in violation of Penal Code
section 261(a)(2) and/or PC 264.1 on 07/18/95 in the Superior Court of Monterey
County.” The jury found all the special allegations “True.”
The trial court sentenced appellant as a third strike offender. Appellant did not
object to his sentence under the Three Strikes law or otherwise contend that the
consideration of his prior strike convictions was improper.
B. Applicable legal standards.
Under the Three Strikes law each qualifying prior strike conviction must be pled
and proved beyond a reasonable doubt. (§§ 667, subd. (c), 1170.12, subd. (a); see People
v. Garrett (2001) 92 Cal.App.4th 1417, 1433.) A separate finding must be made as to
each prior conviction. (§ 1158; People v. Williams (2002) 99 Cal.App.4th 696, 700.)
18.
C. The evidence that appellant suffered multiple prior strike convictions was
overwhelming. Any presumed error was harmless.
It appears the trial court and the parties concluded that requiring the jury to make
separate findings appellant suffered prior strike convictions would have been redundant
because forcible rape (§ 261, subd. (a)(2)) and rape in concert (§ 264.1) are both strike
offenses. (§ 667.5, subd. (c)(3), (18).) At trial, the evidence that appellant suffered
multiple prior strike convictions was overwhelming: the prosecution submitted certified
records of conviction, appellant admitted suffering the convictions, and the jury heard the
prior victim’s trial testimony in which she described appellant’s underlying criminal
conduct in detail. Appellant did not contest the truth of his prior convictions at trial, and
the jury found true all 14 of the special allegations that were based on his prior
convictions for forcible rape and rape in concert. At sentencing, appellant did not
question that the jury found he suffered multiple prior strike convictions.
Nonetheless, appellant now argues the “and/or” language in the verdict forms for
the special allegations only required the jury to find that appellant had been convicted of
either forcible rape or rape in concert, but not both. He contends that the jury only found
appellant suffered one prior strike, and that the absence of a second finding had the same
effect as a “not true” finding by the jury.
Considering the overwhelming evidence appellant suffered multiple prior strike
convictions, and the jury’s finding of guilt on every count and that every special
allegation was true, it is inconceivable that the jury only found appellant suffered one
prior strike conviction. Appellant was convicted of all his prior strike convictions in the
same trial, so the evidence establishing the truth of each conviction was essentially
identical. There is no basis on which a rational jury could find appellant was convicted
of only one prior strike conviction, but not two or more prior strike convictions.
Given this background, we need not discuss appellant’s claim in detail because
any presumed error was harmless. In People v. Epps (2001) 25 Cal.4th 19, 28–30 (Epps),
19.
our high court held the right to a jury trial on the truth of a prior conviction allegation is
“purely a creature of state statutory law,” and therefore subject to review for harmless
error. Our high court also held harmless error applies in the analogous context of the
denial of the Sixth Amendment right to a jury trial where the jury was not asked to make
a factual finding on the truth of aggravating circumstances. (People v. Sandoval (2007)
41 Cal.4th 825, 838–839.)
Based on the holding in Epps, we believe the less onerous standard of review set
forth in People v. Watson (1956) 46 Cal.2d 818, 836, is applicable here. However, we
conclude the presumed error was harmless under any standard. Under the more stringent
“harmless beyond a reasonable doubt” standard set forth in Chapman v. California
(1967) 386 U.S. 18, 24, the error was harmless “if a reviewing court concludes, beyond a
reasonable doubt, that the jury, applying the beyond-a-reasonable-doubt standard,
unquestionably would have found” the allegation true. (People v. Sandoval, supra, 41
Cal.4th at p. 839.) As we explained above, the evidence appellant suffered multiple prior
strike convictions was uncontroverted and so overwhelming that no reasonable juror
could conclude appellant suffered only one prior strike conviction. Accordingly, any
presumed error was harmless beyond a reasonable doubt.
V. The Trial Court did not Abuse its Discretion in Admitting Evidence of
Appellant’s Prior Sex Offenses Pursuant to Evidence Code Section 1108.
Appellant contends the trial court should have denied the People’s motion to admit
evidence of appellant’s prior sex offenses. He argues his prior offenses were much more
inflammatory than the charged offenses because they involved physical assault and gang
rape, and as a result, the jury was so prejudiced against him that he did not receive a fair
trial.
A. Background.
Prior to trial, the trial court granted the People’s motion in limine to admit
evidence of appellant’s prior offenses pursuant to Evidence Code section 1108. The trial
20.
court concluded “there is a reason we have [Evidence Code section] 1108, and I think this
case is probably one of these reasons.” The trial court explained that appellant’s prior
conduct was not too remote in time, given that he was incarcerated until 2011 for his
prior offenses, and that there were “enough similarities among victims in order to
warrant” admission. Finally, the court noted that the inflammatory impact of the prior
conduct would be lessened by the fact that the prior victim’s testimony would be read for
the jury, as opposed to her testifying in person.
B. Standard of review.
Evidence Code section 1108, subdivision (a), states: “In a criminal action in
which the defendant is accused of a sexual offense, evidence of the defendant’s
commission of another sexual offense or offenses is not made inadmissible by Section
1101, if the evidence is not inadmissible pursuant to Section 352.”
Evidence Code section 1108 provides an exception to the general rule that
“ ‘propensity evidence is not admissible to prove a defendant’s conduct on a specific
occasion.’ ” (People v. Dworak (2021) 11 Cal.5th 881, 899.) Before such evidence is
admitted, the trial court must “engage in a careful weighing process under [Evidence
Code] section 352.” (People v. Falsetta (1999) 21 Cal.4th 903, 916–917.) This requires
the trial court to “undertake[] a careful and specialized inquiry to determine whether the
danger of undue prejudice from the propensity evidence substantially outweighs its
probative value.” (People v. Merriman (2014) 60 Cal.4th 1, 41.) “Among the factors to
consider are the ‘ “nature, relevance, and possible remoteness [of the evidence], the
degree of certainty of its commission and the likelihood of confusing, misleading, or
distracting the jurors from their main inquiry, its similarity to the charged offense, its
likely prejudicial impact on the jurors, the burden on the defendant in defending against
the uncharged offense, and the availability of less prejudicial alternatives to its outright
21.
admission, such as admitting some but not all of the defendant’s other sex offenses.” ’ ”
(People v. Erskine (2019) 7 Cal.5th 279, 296.)
“On appeal, we review the admission of other acts or crimes evidence under
Evidence Code section 1108 for an abuse of the trial court’s discretion.” (People v.
Dejourney (2011) 192 Cal.App.4th 1091, 1104.) “As a reviewing court, we accord
deference to a trial court’s determination that the probative value of a particular piece of
evidence outweighs any danger of prejudice.” (People v. Dworak, supra, 11 Cal.5th at
p. 899.) We will not disturb that exercise of discretion “ ‘ “ ‘ “except on a showing that
the court exercised its discretion in an arbitrary, capricious or patently absurd manner that
resulted in a manifest miscarriage of justice.” ’ ” ’ ” (People v. Miles (2020) 9 Cal.5th
513, 587–588.)
C. Evidence of appellant’s prior sex offenses was properly admitted.
Appellant’s argument that his prior conduct was significantly more inflammatory
than the charged offenses because it involved physical violence as well as sexual assault
is unavailing. While we agree appellant’s prior conduct was appalling, the charged
offenses were also highly inflammatory. Appellant victimized three different women,
including two 13-year-old girls, one of whom he gave methamphetamine to prior to the
assault. While the brutal violence in appellant’s prior offenses cannot be minimized, we
do not find it to be so much more inflammatory than the charged conduct that it posed
“ ‘an intolerable “risk to the fairness of the proceedings or the reliability of the outcome”
[citation].’ ” (People v. Tran (2011) 51 Cal.4th 1040, 1047.)
Conversely, appellant’s prior sex offenses were highly probative evidence of his
propensity to commit further sex offenses, which is inherently relevant under Evidence
Code section 1108. (See People v. Falsetta, supra, 21 Cal.4th at p. 915 [“Section 1108
provides the trier of fact in a sex offense case the opportunity to learn of the defendant’s
possible disposition to commit sex crimes.”].) The probative value of the prior sex
22.
offenses was further enhanced by their similarity to the charged offenses. While the
circumstances of each of appellant’s offenses are different, in every instance appellant
preyed on a victim in a vulnerable situation and took further steps to isolate them before
effectuating his assaults.
We also find that the risk of undue prejudice was minimized by the fact that
appellant suffered convictions because of his prior conduct and was sent to prison. As
our high court has explained, “the prejudicial impact of the evidence is reduced if the
uncharged offenses resulted in actual convictions and a prison term, ensuring that the jury
would not be tempted to convict the defendant simply to punish him for the other
offenses, and that the jury’s attention would not be diverted by having to make a separate
determination whether defendant committed the other offenses.” (People v. Falsetta,
supra, 21 Cal.4th at p. 917.)
In sum, while we do not doubt that the evidence of appellant’s prior sex offenses
had a significant impact on the jury, the impact was the result of the highly probative
value of the evidence rather than undue prejudice. Accordingly, the trial court did not
abuse its discretion by admitting evidence of appellant’s prior sex offenses pursuant to
Evidence Code section 1108.
DISPOSITION
The judgment is affirmed.
LEVY, Acting P. J.
WE CONCUR:
FRANSON, J.
SMITH, J.
23. | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484255/ | Filed 11/16/22 Hudson v. Hudson CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
DANIEL HUDSON et al., B322589
Plaintiffs and Appellants, (Santa Clara County
Super. Ct. No. 18PR184315)
v.
KENNON HUDSON,
Defendant and
Respondent.
APPEAL from an order of the Superior Court of
Santa Clara County, Julie A. Emede, Judge. Affirmed.
Hopkins & Carley, Steven A. Ellenberg and Ryan D.
Cunningham for Plaintiffs and Appellants Daniel Hudson and
Michael Hudson.
McManis Faulkner, James McManis and Abimael Bastid
for Defendant and Respondent.
________________________
Daniel Hudson and Michael Hudson appeal from the
probate court’s order denying their petition to enforce the no
contest clause in the 2017 Amendment and Restatement of the
Robert B. Hudson Trust against their stepmother, Kennon
Hudson.1 Daniel and Michael contend the probate court erred in
finding Kennon’s creditor’s claim in the probate proceeding did
not violate the no contest clause in the trust. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. The 2017 Amendment and Restatement of the Robert B.
Hudson Trust
In 2007 Daniel and Michael’s father, Robert Hudson,
established the Robert B. Hudson Trust, which was amended
several times, most recently on July 12, 2017. The trust stated
that, upon Robert’s death, the trust assets were to be distributed
mainly to Kennon, Daniel and Michael. After $10,000 gifts to
two of Robert’s nephews, Kennon was to receive $350,000 cash,
the contents of all bank and brokerage accounts, certain real and
personal property and interests in several partnerships and
corporations. Daniel and Michael were to receive interests in
various corporate entities. In addition, certain real estate and
corporate interests would be held in a qualified terminable
interest property (QTIP) trust for Kennon’s benefit and, upon her
death, the QTIP trust property would be distributed to Daniel’s
and Michael’s children or grandchildren. Any remaining assets
of the trust were to be divided between Daniel and Michael.
1 Because the parties share the same surname, we refer to
them by their first names for clarity.
2
The trust contained a no contest clause, which stated, “If
any beneficiary under this instrument, singularly or in
combination with any other person or persons, directly or
indirectly does any of the following acts, then the right of that
person to take any interest given to him or her by this
instrument shall be void . . . . [¶] (a) Without probable cause
challenges the validity of this instrument, or the validity of any
contract, . . . or other document executed by the settlor . . . . [¶]
(b) Files a pleading to challenge the transfer of property under
this trust or a settlor’s will . . . on the grounds that it was not the
transferor’s property at the time of transfer; [¶] (c) Files a
creditor’s claim or prosecutes any action against the trust for any
debt alleged to be owed to the beneficiary-claimant.”
2. The Last Will of Robert B. Hudson
On July 12, 2017, after signing the trust amendment,
Robert executed a pour-over will, bequeathing the residue of his
estate to the trustee of the Robert B. Hudson Trust to be added to
the trust principal and distributed in accordance with the trust
provisions. The will contained a no contest clause similar to the
no contest clause of the trust, including a provision that the no
contest clause would apply to any beneficiary who “[f]iles a
creditor’s claim or prosecutes any action against my estate for
any debt alleged to be owed to the beneficiary-claimant.”
3. Robert’s Death and Kennon’s Creditor’s Claim
Robert died on December 20, 2017. At the time of his
death, the direct distributions to Kennon under the trust were
estimated to be worth more than $5 million, the value of assets
transferred to the QTIP trust were estimated to be approximately
$15 million and the distributions to Daniel and Michael were
valued at approximately $4.5 million each. Robert’s share of
3
community property, valued at approximately $2 million, was
held for Kennon’s benefit in a different trust not subject to this
dispute.
In the two months following Robert’s death Kennon wrote
two checks to herself for approximately $600,000 from a checking
account that had become trust property. Kennon later explained
the payments were reimbursements for living expenses incurred
by the couple in 2017 that she had paid from her separate
property. In August 2018 the trustee filed a petition seeking
return of the $600,000 of trust assets from Kennon. After an
evidentiary hearing the probate court ordered Kennon to return
the funds to the trustee, and it appears she complied with that
order.
On December 17, 2018 Kennon filed a petition for letters of
special administration, which stated she was “potentially a
creditor of the decedent[,] and in order to present a proper claim,
a formal probate proceeding must be commenced.” The probate
court granted the petition and appointed the trustee as special
administrator of the estate. On December 19, 2018 Kennon filed
a creditor’s claim against Robert’s estate seeking reimbursement
of the $600,000 she had expended for the couple’s living expenses
in 2017. In July 2019 the special administrator rejected
Kennon’s claim. Kennon has abandoned the claim, and it is now
time-barred.
4. The Petition To Enforce the No Contest Clauses in the
Trust and the Will
On October 18, 2019 Daniel and Michael filed a petition to
enforce the no contest clauses contained in the trust and the will.
They contended Kennon’s creditor’s claim in the probate
proceeding violated the prohibition against filing a creditor’s
4
claim against Robert’s estate. Further, they argued, because
there were no assets in the estate, a successful claim against the
estate could be satisfied only by the personal representative
seeking payment from the trustee of trust assets. Accordingly,
Daniel and Michael argued, Kennon’s claim sought funds from
the trust assets and violated the trust’s prohibition against filing
a claim against the trust.
In her opposition Kennon argued her claim did not violate
the no contest clauses because its payment would not affect the
distribution of trust assets and it was Robert’s intent that she be
reimbursed for her payment of the couple’s living expenses.
Kennon submitted a declaration explaining that, during their
16-year marriage, it was the couple’s practice that Kennon would
pay their joint expenses and Robert would reimburse her at the
end of the year. Kennon claimed she was merely acting in
accordance with that practice when she wrote herself the checks
after Robert’s death and she had not understood all payments at
that point had to be made by the trustee.
Kennon’s opposition also included two documents she
maintained corroborated her account that Robert annually
reimbursed her for living expenses. First, Kennon filed a copy of
the couple’s premarital agreement, which stated Robert would
pay all living expenses from his separate property funds and
would not be entitled to any reimbursement from Kennon for
those expenses. Second, Kennon filed a copy of a declaration
signed by Robert six weeks before his death. In the declaration
Robert acknowledged that Daniel believed Kennon had been
improperly withdrawing funds from Robert’s bank and securities
accounts for more than 10 years. Robert stated he had reviewed
the accounts in detail with his accountant and his attorney prior
5
to signing the declaration, and he understood there had been a
significant increase in yearly withdrawals during the latter
years. However, Robert declared, “I have no issue and no
complaint with Kennon receiving the amounts [paid]. I
wholeheartedly approve her receipt of these funds.” Regarding
Daniel’s claim Kennon was taking advantage or stealing from
Robert, Robert stated, “I wholeheartedly reject that claim. I do
not want, intend or plan to pursue any such claim during my
lifetime, nor do I want anyone to pursue any such claim after my
death. As noted above, the sums that went to Kennon have my
approval and blessing.” Robert’s signing of the declaration was
witnessed by his attorney. Daniel and Michael objected to the
filing of the premarital agreement and Robert’s declaration on
the ground they were inadmissible extrinsic evidence.
5. The Court’s Order and the Appeal
The probate court heard argument from the parties on
August 19, 2020. The court found it need not consider Daniel and
Michael’s evidentiary objections because “the information I need
to consider is contained in the trust document itself, as well as
the papers that have already been filed with the Court in the
estate matter.”
During the hearing Kennon’s counsel conceded the no
contest clause in the will was violated by the filing of Kennon’s
creditor’s claim in the probate matter but maintained that action
did not trigger the no contest clause in the trust. The court
agreed, stating, “I believe the no contest provision requires the
creditor’s claim to be made against the trust. If Ms. Hudson had
proceeded with her creditor’s claim, obtained a judgment, and
then went against the trust, now I think we’re having a very
different conversation. But that is not what happened in this
6
particular case.” Accordingly, the court entered an order finding
Kennon had violated the no contest clause of the will but not that
of the trust. Daniel and Michael filed a timely notice of appeal
from the court’s order.2
DISCUSSION
1. Governing Law and Standard of Review
“No contest clauses, whether in wills or trusts, have long
been held valid in California. [Citations.] Such clauses promote
the public policies of honoring the intent of the donor and
discouraging litigation by persons whose expectations are
frustrated by the donative scheme of the instrument. [Citation.]
[¶] In tension with these public policy interests are the policy
interests of avoiding forfeitures and promoting full access of the
courts to all relevant information concerning the validity and
effect of a will, trust, or other instrument.” (Donkin v. Donkin
(2013) 58 Cal.4th 412, 422; see also Burch v. George (1994)
7 Cal.4th 246, 255.) In light of these opposing interests both the
statutory and common law recognize no contest clauses must be
“‘strictly construed and may not extend beyond what plainly was
the testator’s intent.’” (Meyer v. Meyer (2008) 162 Cal.App.4th
983, 991; see Donkin, at p. 422 [“the common law in California
recognized the enforceability of no contest clauses, albeit strictly
construed”]; Burch, at p. 256 [“[f]ollowing the rule of strict
construction [citation], we must ascertain from these provisions
whether [the trustor] unequivocally intended that [the
beneficiary] would forfeit the distribution provided for her under
the trust instrument”]; Scharlin v. Superior Court (1992)
2 Pursuant to an order of the Chief Justice on August 9,
2022, this matter was transferred from the Sixth District Court
of Appeal to the Second District Court of Appeal.
7
9 Cal.App.4th 162, 169 [“‘[o]nly where an act comes strictly
within the express terms of the forfeiture clause may a breach
thereof be declared’”]; see also Prob. Code, § 21311, subd. (a) [“[a]
no contest clause shall only be enforced against the following
types of contests: [¶] . . . [¶] (3) The filing of a creditor’s claim or
prosecution of an action based on it. A no contest clause shall
only be enforced under this paragraph if the no contest clause
expressly provides for that application”].)
“‘“Whether there has been a ‘contest’ within the meaning of
a particular no-contest clause depends upon the circumstances of
the particular case and the language used.”’” (Meyer v. Meyer,
supra, 162 Cal.App.4th at p. 991.) We review the language of the
trust de novo unless its interpretation depends upon the
credibility of extrinsic evidence or a conflict therein. (Burch v.
George, supra, 7 Cal.4th at pp. 254-255; Key v. Tyler (2019)
34 Cal.App.5th 505, 540.)
2. The Trial Court Did Not Err in Concluding Kennon’s
Creditor’s Claim Against the Estate Did Not Constitute a
Claim Against the Trust
As discussed, the no contest clause in the 2017 Amendment
and Restatement of the Robert B. Hudson Trust applies to a
beneficiary who files a creditor’s claim “against the trust.” Daniel
and Michael acknowledge Kennon’s claim was filed only in the
probate proceeding rather than directly against the trust, but
argue it nonetheless triggered the clause because “the purpose
and effect of the creditor’s claim [was] to initiate a legal process
for the recovery of trust assets.” While this may have been the
purpose and effect of the creditor’s claim if successful, the plain
meaning of the phrase “against the trust” is not reasonably
susceptible to the expansive definition proposed by Robert’s sons,
nor is there any indication Robert intended the provision to
8
disinherit anyone who filed a creditor’s claim that had the
potential to impair the trust.
This common sense interpretation of the no contest clause
is reinforced by the fact that Robert, had he intended to void the
trust distribution to any beneficiary who filed a creditor’s claim
against the estate or a claim that could ultimately be satisfied by
trust assets, could have easily, and explicitly, done so. In fact,
unlike the prohibition on creditor’s claims, other sections of the
no contest clause include language expanding their prohibitions
beyond challenges to the trust itself. The paragraph prohibiting
challenges to the validity of the trust states a beneficiary may
not, without probable cause, challenge “the validity of this
instrument, or the validity of any contract, agreement (including
any trust agreement), declaration of trust, beneficiary
designation, or other document executed by the settlor.” The
next paragraph states a beneficiary may not file a pleading to
challenge the transfer of property “under this trust or a settlor’s
will.” Robert, however, did not use similar expansive language in
the paragraph concerning creditor’s claims.
Daniel and Michael’s reliance on the no contest clause’s
prohibition on a beneficiary “directly or indirectly do[ing] any of
the following acts” is unavailing. They argue this language is
triggered by any creditor’s claim that indirectly sought the assets
of the trust. However, the words “directly or indirectly” do not
modify the phrase “against the trust,” they modify the act of
filing the claim. In other words, a beneficiary who indirectly files
a creditor’s claim against the trust, perhaps through a guardian
ad litem or a corporate entity, would trigger the no contest
clause. However, a claim that is indirectly against the trust,
perhaps filed against the estate or a business entity associated
9
with the decedent, even if it may ultimately be paid by trust
assets, would not trigger the no contest clause here.
Finally, Daniel and Michael argue that failing to find
forfeiture here creates a loophole allowing beneficiaries to file
creditor’s claims against empty probate estates and then seek
payment from trust assets as a way to avoid triggering the no
contest clause of a decedent’s trust. This argument is not
compelling. First, as discussed, trust settlors can easily avoid
this hypothetical result by including more expansive language in
their trust documents. Second, a beneficiary who follows this
procedure would still be required to seek recourse against the
trust for payment of the claim. Such a demand for payment,
whether made through the trust claims procedures set forth in
the Probate Code (see Prob. Code, § 19000 et seq.) or by a request
for payment from the estate’s personal representative pursuant
to the applicable provisions of the trust document, would
constitute a creditor’s claim against the trust and would trigger
the no contest clause.
In sum, the plain meaning of the trust language in this
case does not demonstrate an unequivocal intent on Robert’s part
to disinherit a beneficiary who files a creditor’s claim against the
probate estate.
10
DISPOSITION
The order of the probate court is affirmed. Kennon is to
recover her costs on appeal.
PERLUSS, P. J.
We concur:
SEGAL, J.
FEUER, J.
11 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484257/ | The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
November 17, 2022
2022COA133
No. 22CA0305, People in the Interest of S.Z.S. — Juvenile
Court — Dependency and Neglect — Termination of the Parent-
Child Legal Relationship; Health and Welfare — Disability —
Americans with Disabilities Act — Reasonable Accommodations
A division of the court of appeals holds that a parent
challenging termination of her parental rights cannot claim for the
first time on appeal that she has a qualifying disability under the
Americans with Disabilities Act of 1990 that the department of
human or social services or the court failed to accommodate. The
division also holds that when a court terminates parental rights for
abandonment under section 19-3-604(1)(a), C.R.S. 2022, it does not
need to consider whether the parent had a reasonable amount of
time to comply with a treatment plan or whether the department
made reasonable efforts to rehabilitate the parent.
COLORADO COURT OF APPEALS 2022COA133
Court of Appeals No. 22CA0305
Boulder County District Court No. 20JV235
Honorable Norma A. Sierra, Judge
The People of the State of Colorado,
Appellee,
In the Interest of S.Z.S., a Child,
and Concerning T.Z.D.M. and T.G.,
Appellants.
JUDGMENT AFFIRMED
Division II
Opinion by JUDGE J. JONES
Brown and Kuhn, JJ., concur
Announced November 17, 2022
Benjamin Pearlman, County Attorney, Debra W. Dodd, Special County
Attorney, Jeanne Banghart, Deputy County Attorney, Boulder, Colorado, for
Appellee
Josi McCauley, Guardian Ad Litem
Patrick R. Henson, Office of Respondent Parents’ Counsel, Andrew Gargano,
Office of Respondent Parents’ Counsel, Denver, Colorado, for Appellant
T.Z.D.M.
Steven Baum, Office of Respondent Parents’ Counsel, Denver, Colorado, for
Appellant T.G.
¶1 T.Z.D.M. (mother) and T.G. (father) appeal the judgment
terminating the parent-child legal relationship between them and
S.Z.S. (the child). We affirm.
I. Background
¶2 In April 2020, the Boulder County Department of Housing and
Human Services initiated an action in dependency and neglect and
assumed temporary legal custody of the newborn child. The
Department alleged, among other things, that the child had been
born at home without proper medical care and had tested positive
for marijuana after mother took her to the hospital. When the
Department filed the petition, it didn’t have any information about
the identity of the child’s father.
¶3 About a month later, the Department asked to amend the
petition to add father as the child’s alleged father. The juvenile
court granted the Department’s request to serve father by
publication. Father didn’t appear, and the juvenile court
adjudicated the child dependent and neglected as to father by
default judgment. The court then adopted a treatment plan for
father.
1
¶4 Meanwhile, mother denied the allegations in the petition and
asked for a jury trial. The jury found in favor of the Department,
and the juvenile court adjudicated the child dependent and
neglected as to mother based on the jury’s verdict. The court
adopted a treatment plan for mother.
¶5 In April and May 2021, a psychologist performed a
psychological evaluation of mother. The psychologist forwarded her
report to the Department in late June 2021. The report included
several recommendations for treatment and further consultation.
But the psychologist didn’t diagnose mother as suffering from any
mental impairment rising to the level of a disorder under the DSM-
V.
¶6 In September 2021, the Department moved to terminate
mother’s and father’s parental rights. Shortly thereafter, father
contacted the caseworker for the first time and requested genetic
testing. However, he didn’t comply with testing for several months.
Genetic testing confirmed father’s paternity in December 2021. The
court adopted an amended treatment plan for father in January
2022.
2
¶7 The juvenile court held an evidentiary hearing on the
Department’s termination motion in February 2022. After hearing
the evidence, the juvenile court terminated mother’s parental rights
under section 19-3-604(1)(c), C.R.S. 2022, and father’s parental
rights under section 19-3-604(1)(a).
II. Mother’s Appeal
¶8 Mother contends that the juvenile court erred by finding that
(1) the Department made reasonable efforts to rehabilitate her and
reunify her with the child when she had a disability that the
Department didn’t reasonably accommodate, and (2) she couldn’t
become fit in a reasonable time. We disagree with both contentions.
A. Termination Criteria and Standard of Review
¶9 Under 19-3-604(1)(c), the juvenile court may terminate
parental rights if it finds, by clear and convincing evidence, that
(1) the child was adjudicated dependent and neglected; (2) the
parent hasn’t complied with an appropriate, court-approved
treatment plan or the plan hasn’t been successful; (3) the parent is
unfit; and (4) the parent’s conduct or condition is unlikely to change
within a reasonable time.
3
¶ 10 Whether a juvenile court properly terminated parental rights
presents a mixed question of fact and law because it involves
application of the termination statute to evidentiary facts. People in
Interest of A.M. v. T.M., 2021 CO 14, ¶ 15. We won’t disturb the
court’s factual findings if evidence in the record supports them. Id.
The credibility of the witnesses — as well as the sufficiency,
probative effect, and weight of the evidence and the inferences and
conclusions to be drawn from it — is within the juvenile court’s
province. People in Interest of A.J.L., 243 P.3d 244, 249-50 (Colo.
2010). A determination of the proper legal standard to be applied in
a case and the application of that standard to the particular facts of
the case are questions of law that we review de novo. M.A.W. v.
People in Interest of A.L.W., 2020 CO 11, ¶ 31.
B. Reasonable Efforts
¶ 11 Mother first contends that the Department failed to make
reasonable accommodations for her disability, as required by the
Americans with Disabilities Act of 1990 (ADA), 42 U.S.C. §§ 12101-
12213, when it didn’t implement the recommendations in her
psychological evaluation. In response, the Department argues that
mother didn’t preserve an ADA claim for appellate review, and
4
therefore we shouldn’t address it. See People in Interest of M.B.,
2020 COA 13, ¶ 14 (“[A]ppellate courts review only issues presented
to and ruled on by the lower court.”).
¶ 12 For the reasons discussed below, we agree with the
Department that mother didn’t preserve her ADA claim, and we
therefore decline to review it.
1. Law
¶ 13 Before the court may terminate parental rights under section
19-3-604(1)(c), the county department of human or social services
must make reasonable efforts to rehabilitate the parent and reunite
the family. §§ 19-1-103(114), 19-3-100.5(1), 19-3-208, 19-3-
604(2)(h), C.R.S. 2022. Reasonable efforts means the “exercise of
diligence and care” for a child who is in out-of-home placement, and
the reasonable efforts standard is satisfied when services are
provided in accordance with section 19-3-208. § 19-1-103(114).
¶ 14 A parent may not assert the ADA as a defense in a termination
of parental rights proceeding. People in Interest of T.B., 12 P.3d
1221, 1223 (Colo. App. 2000). Nonetheless, the department has an
affirmative duty to make reasonable accommodations for a parent
with a qualifying disability when providing rehabilitative services to
5
that parent. People in Interest of S.K., 2019 COA 36, ¶¶ 25, 34; see
42 U.S.C. § 12102 (defining “disability” under the ADA); 42 U.S.C.
12111(8) (defining “qualified individual” under the ADA). And the
juvenile court must consider whether the department made
reasonable accommodations for a parent’s disability when
determining whether it made reasonable efforts. S.K., ¶ 34; § 19-3-
208(2)(g) (services provided under this section must meet the
provisions of the ADA). Absent reasonable modifications to
rehabilitative services offered to a parent with a disability, the
department fails to perform both its duty under the ADA to
reasonably accommodate a disability and its obligation to make
reasonable efforts to rehabilitate the parent, and thus it does not
satisfy the criteria for terminating parental rights under section 19-
3-604(1)(c). S.K., ¶ 33.
2. ADA
¶ 15 Mother contends that her ADA claim is preserved because her
attorney argued in closing that mother had “psychological issues”
and “there were a number of modalities recommended in the
psychological evaluation that were never referred.” We aren’t
persuaded.
6
¶ 16 For a parent to benefit from a reasonable accommodation, the
parent must raise the issue of the ADA’s applicability in a timely
manner. See In re Terry, 610 N.W.2d 563, 570 (Mich. Ct. App.
2000). “The [d]epartment can accommodate, and the juvenile court
can address, only disabilities that are known to them.” S.K., ¶ 22.
Preferably, if the parent knows or has reason to know she has an
ADA-cognizable disability, the issue should be raised before the
court adopts a treatment plan and enters a dispositional order, so
the department can include the requested accommodations in the
treatment plan for court approval and can provide services
accommodating the disability throughout the case. See In re
Adoption of Gregory, 747 N.E.2d 120, 127 (Mass. 2001); see also
§ 19-3-507(1)(c), C.R.S. 2022 (where a parent has a disability, the
department must identify accommodations and modifications in the
report prepared for the dispositional hearing). “A parent who waits
until the eleventh hour to request a modification under the ADA
may thoroughly undermine her ability to establish that such
modification is reasonable, particularly once the best interests of
the child are taken into account.” State in Interest of K.C., 2015 UT
92, ¶ 27.
7
¶ 17 In some jurisdictions, courts have held that a parent may not
raise the ADA issue for the first time at the termination hearing.
See Gregory, 747 N.E.2d at 127; Terry, 610 N.W.2d at 570-71. But
in Colorado, at least one division of this court has determined that
a parent can preserve an ADA claim by raising it for the first time in
closing argument at the termination hearing. People in Interest of
C.Z., 2015 COA 87, ¶ 9. At any rate, waiting until the termination
hearing to raise the ADA issue is problematic because when the
department and the juvenile court don’t know that the parent has a
disability, the department can’t provide, and the court can’t order
the department to provide, reasonable accommodations to
rehabilitate the parent during the case. S.K., ¶ 22.
¶ 18 However, even if we assume that a parent can preserve an
appellate claim by raising the ADA for the first time in closing
argument at a termination hearing, we still conclude that mother’s
counsel didn’t do so. We acknowledge that mother’s counsel noted
in closing that mother had some “psychological issues” and that the
Department should have made additional referrals based on the
recommendations in the psychological evaluation. But neither
mother nor her attorney ever specifically mentioned the ADA,
8
asserted that she had a qualifying disability within the meaning of
the ADA, or argued that the recommendations in the psychological
evaluation amounted to reasonable accommodations for that
disability. While we agree with mother that her attorney wasn’t
required to use “talismanic language” to preserve her appellate
claim, she still needed to present the court with an adequate
opportunity to make findings of fact and legal conclusions on the
ADA issue. People v. Melendez, 102 P.3d 315, 322 (Colo. 2004)
(quoting People v. Syrie, 101 P.3d 219, 223 n.7 (Colo. 2004)).
Mother’s counsel didn’t do so.
¶ 19 Still, mother insists that her disability, which she describes
generally as a “mental impairment,” was obvious. See 42 U.S.C.
§ 12102(1)(A) (a disability includes a mental impairment); 28 C.F.R.
§ 35.108(b)(1)(ii) (2021) (mental impairment includes an
“intellectual disability, organic brain syndrome, emotional or mental
illness, and specific learning disability”). If the parent’s disability is
obvious, the department should know that an individual is disabled
and would thus be required under the ADA to provide reasonable
accommodations. S.K., ¶ 22; see also In re Hicks/Brown, 893
9
N.W.2d 637, 640 (Mich. 2007). But, in this case, no ADA-
cognizable disability was obvious.
¶ 20 Mother relies on the caseworker’s testimony at a temporary
custody hearing before a magistrate that mother had difficulty
paying attention to the child’s cues and “she’s diagnosed herself
with [post-traumatic stress disorder (PTSD)],” and on her own
testimony at that hearing that she was taking prescription
medication for her anxiety. But mother’s counsel did not then (or
at any time later) indicate that this condition constituted an ADA-
cognizable disability. And even the psychological evaluation, on
which mother also relies, and which was provided to the
Department more than a year later, concluded that she doesn’t
have a specific learning disorder, obsessive compulsive disorder, or
borderline personality disorder. Although the evaluation identified
some issues with anxiety, the evaluator noted that mother’s
symptoms didn’t “reach the level of clinical paranoia.” And while
the evaluation notes that mother may have been “significantly
traumatized” in the past, she “endorsed only two of the three
required symptom clusters” for a PTSD diagnosis.
10
¶ 21 Considering all this, we aren’t convinced that the court was on
notice that mother had a disability under the ADA. If mother’s
counsel believed that she did, given the Department’s failure to
recognize any such disability, it was incumbent on mother’s counsel
to raise the issue with the court so that it could resolve that factual
question. See S.K., ¶ 21 n.2 (whether a parent is a qualified
individual with a disability under the ADA requires a fact-specific
determination that, if disputed, the court should resolve). But
because mother never raised the ADA issue, even by implication,
either before or during the termination hearing, the juvenile court
didn’t make any specific findings about the applicability of the ADA
for us to review. And we “don’t (and, indeed, can’t) make findings of
fact.” Carousel Farms Metro. Dist. v. Woodcrest Homes, Inc., 2019
CO 51, ¶ 19.1
1 In her reply brief, mother urges us to review her ADA argument
under the miscarriage of justice exception to preservation,
sometimes applied in dependency and neglect cases, if we conclude
that the argument isn’t preserved. See People in Interest of E.S.,
2021 COA 79, ¶ 14. We decline to do so. As discussed, this issue
is inherently fact-dependent, People in Interest of S.K., 2019 COA
36, ¶¶ 21 & n.2, 35 & n.4, and we don’t make factual
determinations. Moreover, mother didn’t develop a factual record
on the issue in the juvenile court sufficient to enable the juvenile
court to make the relevant factual findings.
11
C. Fit Within a Reasonable Time
¶ 22 Mother next contends that the juvenile court erred by finding
that she couldn’t become fit within a reasonable time.
¶ 23 An unfit parent is one whose conduct or condition renders her
unable or unwilling to give a child reasonable parental care. People
in Interest of D.P., 160 P.3d 351, 353 (Colo. App. 2007). Reasonable
parental care requires, at a minimum, that the parent provide
nurturing and safe parenting sufficiently adequate to meet the
child’s physical, emotional, and mental needs and conditions.
People in Interest of A.J., 143 P.3d 1143, 1152 (Colo. App. 2006).
¶ 24 In determining whether a parent’s conduct or condition is
likely to change within a reasonable time, the court may consider
whether any change has occurred during the proceeding, the
parent’s social history, and the chronic or long-term nature of the
parent’s conduct or condition. People in Interest of D.L.C., 70 P.3d
584, 588-89 (Colo. App. 2003). Where a parent has made little to
no progress on a treatment plan, the juvenile court need not give
the parent additional time to comply. See People in Interest of
R.B.S., 717 P.2d 1004, 1006 (Colo. App. 1986); see also People in
Interest of V.W., 958 P.2d 1132, 1134-35 (Colo. App. 1998) (even
12
“increased compliance” over the course of a case may not justify
additional time).
¶ 25 A “reasonable time” isn’t an indefinite time and must be
determined by considering the child’s physical, mental, and
emotional conditions and needs. A.J., 143 P.3d at 1152. What
constitutes a reasonable time is fact-specific and varies from case to
case. People in Interest of D.Y., 176 P.3d 874, 876 (Colo. App.
2007). However, when, as in this case, the child is under six years
old, the court must also consider the expedited permanency
planning provisions, which require that the child be placed in a
permanent home as expeditiously as possible. §§ 19-1-102(1.6),
19-1-123, C.R.S. 2022.
¶ 26 The juvenile court determined that mother was unfit based on
her continuing mental health problems; lack of demonstrated
sobriety; “history of engagement in domestic violence, both as a
perpetrator and as a victim,” for which she hadn’t participated in
treatment; and inability to integrate feedback from her parenting
coaches. See § 19-3-604(2)(e) (a parent may be unfit based on
“[e]xcessive use of intoxicating liquors or controlled substances”);
People in Interest of K.T., 129 P.3d 1080, 1082 (Colo. App. 2005)
13
(substance abuse); People in Interest of C.T.S., 140 P.3d 332, 334
(Colo. App. 2006) (domestic violence). While the court recognized
that mother had made some improvements during the case, it didn’t
believe that she could become fit within a reasonable time. See
V.W., 958 P.2d at 1134-35. The court noted that the child was very
young, had been in foster care most of her life, and needed stability
as soon as possible.
¶ 27 The record supports the court’s findings. The caseworker
testified at the termination hearing that mother “uses high levels of
marijuana that aren’t managed,” stopped participating in individual
treatment, didn’t engage in domestic violence treatment at all, and
wasn’t able to integrate feedback from her parenting coaches during
parenting time. The caseworker opined that, given mother’s
inability to address the major concerns in the case, mother couldn’t
provide the child with reasonable parental care. The caseworker
also opined that mother couldn’t become fit within a reasonable
time, given the length of time that the child had been in foster care,
as well as the length of time that mother had been given to
demonstrate improvement. See A.J.L., 243 P.3d at 256 (“[T]he trial
court could reasonably find and conclude that the children’s age
14
and need for permanency precluded giving mother more time to
address her mental health needs.”).
¶ 28 Mother argues that she could become fit within a reasonable
time because she substantially complied with her treatment plan.
Specifically, she notes that she maintained regular contact with the
Department, attended about eighty percent of her visits, had
housing and income from legal sources, participated in therapy,
and completed the required evaluations. Coupled with her
compliance, mother further asserts that, had the Department made
reasonable accommodations for her disability, she could have
become fit in a reasonable time.
¶ 29 We aren’t persuaded by mother’s argument, for two reasons.
First, while there is record support for mother’s assertion that she
complied with parts of her treatment plan, we can’t reweigh the
evidence or substitute our judgment for that of the juvenile court.
See People in Interest of K.L.W., 2021 COA 56, ¶ 62. The record
shows that the court properly considered evidence supporting
mother’s compliance, weighed it against contrary evidence and the
needs of the child, and determined that mother couldn’t become fit
within a reasonable time. Because there is record support for the
15
court’s finding, we can’t disturb it. See A.M., ¶¶ 15, 48. Second,
because we have already determined that mother didn’t preserve
her ADA argument, her assertion that she could become fit within a
reasonable time if she had reasonable accommodations necessarily
fails.
III. Father’s Appeal
¶ 30 Father contends that the juvenile court erred by terminating
his parental rights because (1) he didn’t have a reasonable amount
of time to comply with his treatment plan, and (2) the Department
didn’t make reasonable efforts. The Department contends that,
because the juvenile court terminated father’s parental rights under
section 19-3-604(1)(a), the court didn’t need to consider whether
father had a reasonable amount of time to comply with his
treatment plan or whether the Department made reasonable efforts.
We agree with the Department.2
A. Reasonable Time to Comply with the Treatment Plan
¶ 31 The juvenile court adopted a treatment plan for father in June
2020, following the entry of a default adjudication. This treatment
2 Father doesn’t challenge the sufficiency of the evidence supporting
termination under subsection (1)(a).
16
plan only required that father contact and cooperate with the
Department. But after father contacted the Department over a year
later, the court adopted an amended treatment plan that was more
comprehensive in January 2022. This was only a few weeks before
the termination hearing.
¶ 32 Unlike mother, however, the juvenile court terminated father’s
parental rights under subsection (1)(a), which required the
Department to prove, by clear and convincing evidence, that the
parent (1) surrendered physical custody of the child for a period of
six months or more and (2) didn’t manifest during such period the
firm intention to resume physical custody of the child or make
permanent legal arrangement for the care of the child. In contrast
to subsection (1)(c), subsection (1)(a) doesn’t require that a parent
be provided with a treatment plan before the court may terminate
parental rights. See People in Interest of L.M., 2018 COA 57M, ¶ 19;
see also § 19-3-508(1)(e)(I), C.R.S. 2022 (the court may find that an
appropriate treatment plan can’t be devised as to a particular
parent because the child has been abandoned as set forth in
section 19-3-604(1)(a)).
17
¶ 33 Under subsection (1)(c), once a reasonable treatment plan is
approved by the juvenile court, the parent must be given a
reasonable amount of time to comply with its provisions. D.Y., 176
P.3d at 876. But subsection (1)(c) is the only basis for termination
in section 19-3-604 that requires the juvenile court to have first
approved an appropriate treatment plan. L.M., ¶ 23. Thus, the
requirement that a court allow a parent a reasonable time to comply
with a treatment plan only applies in cases in which parental rights
are terminated under subsection (1)(c). See D.Y., 176 P.3d at 876
(under section 19-3-604(1)(c), “the General Assembly intended that
a parent would be afforded a reasonable time to comply with an
appropriate treatment plan before parental rights could be
terminated”).
¶ 34 Because the juvenile court terminated father’s parental rights
under section 19-3-604(1)(a), his reliance on subsection (1)(c) and
D.Y. is misplaced. Under subsection (1)(a), the juvenile court isn’t
required to provide a parent with a treatment plan and allow a
reasonable time for compliance with the plan before it can
terminate parental rights. We therefore reject father’s contention.
18
B. Reasonable Efforts
¶ 35 Father next contends that the Department failed to make
reasonable efforts because it did not seek to engage him after
paternity was established and instead immediately pursued
termination. We disagree.
¶ 36 As noted, when a juvenile court terminates parental rights
under section 19-3-604(1)(c), it must consider whether reasonable
efforts have been unable to rehabilitate the parent. See § 19-3-
604(2)(h). However, because the court isn’t required to adopt a
treatment plan under subsection (1)(a), the court isn’t required to
make a finding of reasonable efforts when it terminates parental
rights under that subsection. See C.Z., ¶ 57 (when a juvenile court
finds that no appropriate treatment plan can be devised pursuant
to section 19-3-604(1)(b), “the Department is relieved of its
obligation to provide reasonable efforts”).
¶ 37 Nonetheless, we recognize that the court did, in fact, adopt a
treatment plan for father. Of course, the Department is obligated to
provide the services envisioned in the plan while the plan remains
in effect. See id. at ¶ 58. But a court can make an abandonment
finding under subsection (1)(a) regardless of whether a treatment
19
plan was adopted or services were provided. See People in Interest
of Z.P.S., 2016 COA 20, ¶ 29 (“[T]he court may proceed to terminate
a parent’s rights based on no appropriate treatment plan even when
the existing dispositional order includes the provision of a
treatment plan for the parent.”). And under those circumstances,
the court isn’t required to consider whether the Department made
reasonable efforts before entering its termination order. See C.Z.,
¶ 59. Thus, because the juvenile court ultimately terminated
parental rights under section 19-3-604(1)(a), it wasn’t required to
consider whether the Department had made reasonable efforts. See
id.
IV. Conclusion
¶ 38 The judgment is affirmed.
JUDGE BROWN and JUDGE KUHN concur.
20 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484251/ | Filed 11/16/22 P. v. Saldana CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
THE PEOPLE,
Plaintiff and Respondent,
v.
A164812
FERNANDO SALDANA,
Defendant and Appellant. (Solano County
Superior Court No. FCR353418)
After Fernando Saldana pleaded no contest to felony domestic assault
and misdemeanor child endangerment, he was placed on probation subject to
a number of terms, including a warrantless search and seizure condition.
The probation department did not recommend an electronics search
condition, nor did the trial court impose it at the time of sentencing.
Nonetheless, on appeal, Saldana argues that the search and seizure condition
is improper because it neither includes nor excludes electronic devices. He
asks this court to modify his order of probation by “excluding his electronic
devices from warrantless search or seizure” or to remand the matter for
reconsideration. The Attorney General takes the position that this issue is
moot, because the court never included Saldana’s electronic devices in the
search condition in the first place. Saldana has not filed a reply brief.
1
Because we conclude that the trial court did not impose an electronics search
condition and there is no showing of anything improper in the order of
probation, we will affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
We draw our very brief description of the facts from the probation
department’s summary of a City of Vacaville police report. Shortly before
6:00 p.m. on July 9, 2020 a police officer responded to a report of a family
altercation. The officer found C.G., Saldana’s wife of six years. She reported
that she and Saldana had two children, then ages 5 and 3, and that she had a
10-year-old child from a previous relationship. C.G. described her marriage
to Saldana as difficult, and said Saldana was on “one of his rampages.” C.G.
also disclosed previously unreported incidents of domestic violence and child
abuse, including an incident on December 30, 2019 that she had documented
with time-stamped photographs after the incident.
C.G. reported that what began on December 30, 2019 as a verbal
altercation between her and Saldana escalated after Saldana threw food at
her. When she told him to clean it up, Saldana grabbed her by the throat and
dragged her six to 10 feet, lifted her off the ground by the throat, and held
her against the wall. C.G. described being strangled, having difficulty
breathing, and becoming dizzy and faint. C.G. told the officer that Saldana
would have continued but one of their children intervened and kicked
Saldana “in the balls.” She said that this made Saldana upset, so he lowered
her and tossed her onto the floor; she landed on her back and her head hit the
floor. Both of their children were present and witnessed the domestic
violence; they were screaming and crying. One of the children tried to
intervene with Saldana to be nice to C.G., but the child returned to C.G.
2
crying and appeared to have scratches above his left ear that he attributed to
Saldana.
The police officer reviewed the photographs taken after the December
30, 2019 incident and saw redness on C.G.’s throat and scratches on one of
the children.
Saldana was charged by complaint with inflicting corporal injury upon
C.G. resulting in a traumatic condition (Pen. Code1, § 273.5, subd. (a)—counts
1 and 4); assault likely to produce great bodily injury upon C.G. (§ 245, subd.
(a)(4)—count 2); and child endangerment (§ 273a, subd. (b)—count 3). All but
count 3 were felonies.
As part of a negotiated disposition, Saldana pleaded no contest to
counts 1 and 3 (both based on the December 30, 2019 incident), and the
remaining counts were dismissed.
In advance of sentencing Saldana submitted proof that he had
relinquished ownership and possession of 15 firearms, as required by section
29810.
On March 11, 2022, the trial court suspended imposition of sentence
and granted Saldana probation for three years, with terms and conditions
including that he complete a 52-week domestic batterer’s treatment program
and a child abuse counseling program. As a condition of probation, the trial
court also imposed a standard warrantless search and seizure condition, with
terms identical to those recommended in the probation office presentence
report.
1 All statutory references are to the Penal Code.
3
At the sentencing hearing, Saldana’s counsel acknowledged that his
client owned firearms, which he had relinquished,2 but asked that the search
condition not be imposed because there was no evidence Saldana had used
the firearms “in the nature of these offenses” and without a “nexus, that term
of probation would be inappropriate.” The trial court stated that there was a
“nexus” and that there was “sufficient information in the record to support
the order.” No mention was made by the court or Saldana’s counsel of an
electronics search condition, nor is there any indication in the record it was
imposed. To the contrary: In the probation office presentence report, which
the trial court had read and considered before sentencing, the probation
officer recommended a standard warrantless search condition, and did not
check the applicable box that would have recommended that such term
“includes search and seizure of any electronic devices [defendant]
owns/possesses/has access to, and provide passwords.”
This appeal followed.
DISCUSSION
When a defendant accepts probation rather than incarceration, the
sentencing court is accorded authority under state law to impose conditions of
probation that are “fitting and proper . . . for the reformation and
rehabilitation of the probationer.” (§ 1203.1, subd. (j).) To that end, our
Supreme Court has recognized that the sentencing court has “ ‘broad
discretion to impose conditions to foster rehabilitation and to protect public
2 As a person who had been convicted of a felony (§ 273.5), Saldana was
prohibited by section 29800 from owning, purchasing, receiving or possessing
a firearm, and was required to relinquish firearms and any ammunition in
the manner required under section 29810, subdivision (a)(1).
4
safety pursuant to Penal Code section 1203.1.’ ” (People v. Moran (2016) 1
Cal.5th 398, 402-403) (Moran).)
The trial court’s authority is broad, but not unfettered. In People v.
Lent (1975) 15 Cal.3d 481 (Lent), our Supreme Court stated the criteria for
assessing the validity of a probation condition: Upon review, “[a] condition of
probation will not be held invalid unless it ‘(1) has no relationship to the
crime of which the offender was convicted, (2) relates to conduct which is not
in itself criminal, and (3) requires or forbids conduct which is not reasonably
related to future criminality[.]’ ” (Id. at p. 486.) “Conversely, a condition of
probation which requires or forbids conduct which is not itself criminal is
valid if that conduct is reasonably related to the crime of which the defendant
was convicted or to future criminality.” (Ibid.)
In Ricardo P., our Supreme Court clarified that the requirement that a
probation condition be reasonably related to future criminality “contemplates
a degree of proportionality between the burden imposed by a probation
condition and the legitimate interests served by the condition.” (In re
Ricardo P. (2019) 7 Cal.5th 1113, 1122 (Ricardo P.).)
We review a trial court’s imposition of a condition of probation for
abuse of discretion. (Moran, supra, 1 Cal.5th at p. 403.)
In the introduction to his brief on appeal, appellant states that the trial
court “erred in imposing a condition of probation that required appellant’s
submission to unlimited search and seizure of his person and property,
including his electronic devices.” (Emphasis added.) But in the conclusion to
his brief on appeal, he reframes the facts, and describes the “case at bar” as
“involv[ing] a standard search-and-seizure probation condition, which
unreasonably burdens appellant’s privacy interests insofar as it neither
explicitly includes or excludes his electronic devices.” (Emphasis added.) The
5
relief he seeks on appeal is to “ask[] this court to modify his order of
probation by excluding his electronic devices from warrantless search and
seizure, or to remand the matter to the trial court for reconsideration
consistent with section 1546.1, subdivision (c).” (Emphasis added.) After the
Attorney General filed its respondent’s brief stating that the trial court “did
not include an electronics search condition in appellant’s conditions of
probation,” and that any claim that such a condition of probation was
unreasonable is moot, appellant did not file a reply.
From Saldana’s opening brief (and his non-response to the Attorney
General’s brief), we understand that Saldana is no longer challenging the
imposition of a standard search-and-seizure probation condition, to which he
briefly and unsuccessfully objected in the trial court. His point on appeal is
that the trial court “fail[ed] to exclude appellant’s electronic devices” from the
search condition, or, put another way, failed to “insulate appellant’s
electronic devices from warrantless search and seizure” and that this makes
the search condition somehow invalid under Lent.3
It is apparent from the record that the trial court did not impose an
electronics search condition. We see no need to undertake a Lent analysis
analyzing a condition that was not imposed. Nor do we see how the trial
3 To the extent that Saldana does challenge the imposition of a
standard search-and-seizure probation condition, we readily find that the
challenge has no merit. Having been convicted of felony domestic violence,
Saldana was prohibited from owning or having in his possession, custody or
control any firearms or ammunition. Given that shortly before sentencing he
relinquished 15 firearms pursuant to section 29810, a standard warrantless
search condition is not an unreasonable way to ensure that he obeys all laws
and complies with the terms of his probation, thus curtailing future criminal
conduct. Nor can it be said that the burden on Saldana’s privacy from a
general search condition here is “substantially greater . . . than the
circumstances warrant.” (Ricardo P., supra, 7 Cal.5th at p. 1128.)
6
court’s asserted “failure to exclude appellant’s electronic devices from the
search and seizure condition of probation” constitutes an abuse of discretion,
when the trial court did not impose the term.
Finally, we are unpersuaded by Saldana’s argument that In re I.V.
(2017) 11 Cal.App.5th 249 requires us to construe the trial court’s imposition
of a general search condition as including electronic devices when it says
nothing of the sort, or to take any further action. There a juvenile made a
facial constitutional challenge (raised for the first time on appeal) that a
search condition was unconstitutionally vague as to whether it encompassed
electronic data. The Court of Appeal rejected the challenge, noting that
search conditions like the one imposed on I.V. were routine, there was
nothing in the record to suggest that the juvenile court meant to authorize
search of electronic data, and giving the search condition its “reasonable and
practical construction,” it only extended to tangible property. (Id. at p. 262.)
DISPOSITION
The challenged order is affirmed.
7
_________________________
Miller, J.
WE CONCUR:
_________________________
Richman, Acting P.J.
_________________________
Stewart, J.
A164812, People v. Saldana
8 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492694/ | MEMORANDUM OF DECISION
JAMES H. WILLIAMS, Bankruptcy Judge.
Pending before the Court is the motion for summary judgment filed by the Plaintiff, Robert L. Cohen, the Chapter 11 Trustee (Trustee) of Miller Mining, Inc. (Debtor’), in his action to recover, pursuant to 11 U.S.C. § 549, an alleged unauthorized postpetition payment of $17,753.67 to the Defendant, KDC Financial Services, Inc. (KDC). KDC has filed a memorandum in opposition to the trustee’s motion and the Trustee has responded. The Court comes now to render its decision on the motion.
FACTS
The Debtor filed a petition for relief under Chapter 11 of Title 11 of the United States Code on June 4, 1997. On July 23, 1997, the Court directed the appointment of a Trustee to oversee the Debtor’s bankruptcy estate and operate the Debtor’s business. On August 5,1997, Robert L. Cohen was confirmed by this Court as Trustee for the Debtor.
On October 23, 1996, the Debtor had entered into a security agreement-conditional sales contract with Columbus Equipment Co. for a Komatsu Dozer. This contract was subsequently assigned to KDC. On June 25, 1997, the Debtor made a postpetition payment to KDC in the amount of $17,753.67. Both parties stipulate that the payment was not made pursuant to an order of this Court.
On August 1,1997, the Debtor commenced this adversary proceeding by filing a complaint seeking to have KDC return this post-petition payment'to the Debtor’s bankruptcy estate pursuant to 11 U.S.C. § 542. The complaint was later amended by the Trustee on October 28, 1997, to assert a claim under 11 U.S.C. § 549. On November 17, 1997, KDC filed its answer admitting that the pay*221ment by the Debtor was made postpetition and was not authorized by court order. KDC, however, alleges that the payment is exempt from avoidance as a payment made in the ordinary course of the Debtor’s business pursuant to 11 U.S.C. § 1108 and § 363(c)(1) KDC also alleges that the payment by the Debtor was, in fact, an adequate protection payment to reimburse it for the depreciation of the collateral which was being used by the Debtor in its postpetition operations.
The Trustee has filed a motion for summary judgment asserting that there are no genuine issues of material fact. KDC responds to the contrary.
DISCUSSION
The Court has jurisdiction in this adversary proceeding by virtue of Section 1334(b) of Title 28 of the United States Code and General Order No. 84 entered in this district on July 16, 1984. This is a core proceeding under Section 157(b)(2)(A) and (0) of Title 28 of the United States Code. This Memorandum of Decision constitutes the Court’s findings of fact and conclusions of law pursuant' to Rule 7052 of the Federal Rules of Bankruptcy Procedure.
Standards on summary judgment under Rule 56 of the Federal Rules of Civil Procedure are made applicable to bankruptcy proceedings by Rule 7056 of the Federal Rules of Bankruptcy Procedure. Rule 56(c) provides for a grant of summary judgment as follows:
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.
The party seeking summary judgment bears the initial burden of asserting that the pleadings, depositions, answers to interrogatories, admissions and affidavits establish the absence of a genuine issue of material fact. Celotex Corp. n Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir.1989). The ultimate burden of demonstrating the existence of a genuine issue of material fact, however, lies with the nonmoving party. Celotex Corp., 477 U.S. at 324, 106 S.Ct. at 2553. See also, First National Bank v. Cities. Service Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968).
When the moving party has carried its burden under Rule 56(e), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts.... In the language of the Rule, the nonmoving party must come forward with “specific facts showing that there is a genuine issue for trial.” F.R.Civ.Proc. 56(e) (emphasis added)____where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no “genuine issue for trial.”.
Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (citations and footnotes omitted).
The Elements of 11 U.S.C. § 549
The Trustee seeks to recover the unauthorized postpetition transfer of property of the Debtor’s bankruptcy estate in the amount of $17,753.67 to KDC pursuant to 11 U.S.C. § 549 which reads, in pertinent part:
Except as provided in subsection (b) or (e) of this section, the trustee may avoid a transfer of property of the estate—
(1) made after the commencement of the case; and
(2)(A) that is authorized only under section 303(f) or 542(c) of this title; or
(B) that is not authorized under this title or by the court.
11 U.S.C. § 549(a).
The Trustee must therefore, prove four elements to avoid a transfer of property from the Debtor’s bankruptcy estate pursuant to 11 U.S.C. § 549. First, the unauthorized transfer must occur after the commencement of the case. Second, property of the bankruptcy estate must be involved. *222Third, the Trustee must show that the Debt- or transferred the property. Fourth, the transfer must not be authorized by the court or the Bankruptcy Code. Gibson v. United States (In re Russell), 927 F.2d 413, 417-18 (8th Cir.1991). If the transfer is avoidable under 11 U.S.C. § 549, the Trustee can recover for the estate the property transferred or the value of such property from the initial transferee or the entity for whose benefit the transfer was made. 11 U.S.C. § 550(a):
KDC has admitted that it received the $17,753.67 ■ payment from the Debtor after the commencement of the case and has admitted that neither 11 U.S.C. § 303(f) or § 542(c) are applicable to this proceeding. See KDC Answer ¶ 6, ¶ 9. Furthermore, it is undisputed that the $17,753.67 payment was made from' the Debtor’s bankruptcy estate through a check written on the Debtor’s checking account. Lastly, KDC admits the transfer was made without court authorization. See KDC Answer ¶ 9. Thus, the only issue in dispute is whether the payment was authorized by a provision under the Bankruptcy Code.
The Elements of 11 U.S.C. § 363(c)(1)
KDC asserts that the postpetition transfer is exempt from 11 U.S.C. §■ 549 because it was made by the Debtor in the ordinary course of its business pursuant to 11 U.S.C. § 11081 and § 363(c)(1). Section 363(c)(1) provides that:
If the business of the debtor is authorized to be operated under section 721, 1108, 1203, 1204, or 1304 of this title and unless the court orders otherwise, the trustee may enter into transactions, including the sale or lease of property of the estate, in the ordinary course of business, without-notice or a hearing, and may use property of the estate in the ordinary course of business \rtthout notice or a hearing;
11 U.S.C. § 363(c)(1). “The purpose behind the ordinary course of business rule outlined-in 11 U.S.C. § 363(c)(1) is to allow a business to continue its daily operations without incurring the burden of obtaining.court approval or notifying creditors for minor transactions, while at the same time protecting secured creditors and others from the dissipation of estate assets.” Lopa v. Selgar Realty Corporation (In re Selgar Realty Corporation), 85 B.R. 235, 240 (Bankr.E.D.N.Y.1988)(emphasis added).
Because the term “ordinary course of business” is not defined in the Bankruptcy Code, courts have applied a two-part test to determine whether a transaction is, indeed, in the ordinary course of business. In the first part of the test, the “vertical dimension” test, the Court analyzes the transaction “from the vantage point of a hypothetical creditor and inquires whether the transaction subjects a creditor to economic risks of a nature different from those he accepted” when he initially contracted with the Debtor. Burlington Northern Railroad Company v. Dant & Russell, Inc. (In re Dant & Russell, Inc.), 853 F.2d 700, 705 (9th Cir.1988) (citations omitted). In the second part of the analysis, the “horizontal dimension” test, the Court must determine “whether the postpetition transaction is of a type that other similar businesses would engage in as ordinary business.” In re Dant & Russell, 853 F.2d at 704. Under this two-part analysis, “[t]he touchstone of ‘ordinariness’ is thus the interested parties’ reasonable expectations of what transactions the debtor-in-possession is likely to enter in the course of its business.” Armstrong World Industries, Inc. v. James A Phillips, Inc. (In re James A Phillips, Inc.), 29 B.R. 391, 394 (S.D.N.Y.1983). Another court has noted that:
A good ease can be made for the proposition that ordinary course includes only those payments of ordinary day-to-day operating expenses that, while necessary, are relatively insignificant; and for which the requirement of prior Court approval on notice and hearing, would unduly burden the Court and the debtor.
Northern Bank v. Metropolitan Cosmetic and Reconstructive Surgical Clinic, P.A. (In re Metropolitan Cosmetic and Reconstructive Surgical Clinic, P.A), 115 B.R. 185, 188 (Bankr.D.Minn.1990).
*223In the present case, it is clear that the postpetition transfer to KDC fails the vertical dimension test because a hypotheti-. cal creditor could not reasonably expect a debtor-in-possession or a Trustee to make, a postpetition payment on a prepetition debt to a secured creditor without notice and a hearing. It is obvious that such a payment would expose a hypothetical creditor “to economic risks of a nature different from those he accepted” when he initially contracted with the Debtor. In re Dant & Russell, Inc., 853 F.2d at 705. Absent notice and a hearing, other creditors would have no reasonable way of knowing whether such a payment was being discussed or was being made. Further, without notice and a hearing, creditors are not provided with adequate information upon which to object to such' a payment being made. As was noted by the court in In re Quality Interiors, Inc., 127 B.R. 391, 396-97 (Bankr.N.D.Ohio 1991):
The payment by a debtor-in-possession of prepetition claims outside of a confirmed plan of reorganization is generally prohibited by the Bankruptcy Code, and such transfers are recoverable. 11 U.S.C. § 549____ This Court often permits the payment of prepetition wages so that the debtor-in-possession may maintain an effective work force, especially where the amount of the payment is relatively small.... But in no event may such payments be made without prior authorization from the bankruptcy court.
Id. If a postpetition payment of outstanding prepetition wages even in small amounts requires court approval, it is clear that a post-petition payment by the Debtor in the amount of $17,753.67 to partially satisfy KDC’s prepetition obligation would require court approval and fall outside the “ordinary course of business.” To find otherwise, would prejudice the position of other creditors by removing their right to object to such a payment being made.
It is also clear that the Debtor’s post-petition payment to KDC does not satisfy the “horizontal dimension” test. The horizontal dimension test is described as an industry-wide perspective in which the Debtor’s business is compared to other like businesses. In re Dant & Russell, Inc., 853 F.2d at 704. In this comparison, the test is whether the postpetition transaction is one which other similar businesses would engage in as ordinary business. Id. This test finds a transaction occurring in the Debtor’s ordinary course of business where there, is a showing that the transaction is the sort occurring in the day-to-day operations of enterprises akin to the Debtor’s. Committee of Asbestos-Related Litigants and/or Creditors v. Johns-Manville Corp. (In re Johns-Manville Carp.), 60 B.R. 612, 618 (Bankr.S.D.N.Y.1986), rev’d on other grounds, 801 F.2d 60 (2nd Cir.1986). “[Tjhis showing is required merely to assure that neither the debtor nor the creditor [did] anything abnormal to gain advantage, over other creditors.” Id., quoting In re Economy Milling Co., 37 B.R. 914, 922 (D.S.C.1983).
It is obvious that the Debtor’s payment in the amount of $17,753.67, which partially satisfied the Debtor’s prepetition obligation to KDC, did not occur in the day-to-day operations of the Debtor’s business and does not constitute an ordinary course of business transfer under 11 U.S.C. § 363(c)(1). This is the type of payment which is simply not authorized by 11 U.S.C. § 363(c)(1) and is properly recoverable by the Trustee pursuant to 11 U.S.C. § 549 and § 550. This transfer did not involve a payment to KDC of its cash collateral. It cannot be said that the $17,753.67 payment to KDC was insignificant or that the requirement for court approval would be burdensome to the Court or to the Debtor. This is the type of transaction where notice and a hearing are required in order to afford interested parties the right to be heard and object to such a transfer if desired and to protect the parties to the transaction, if the .transaction is later questioned. . ,
The Court finds persuasive the reasoning of the United States Bankruptcy Court for the District of Minnesota in In re Metropolitan Cosmetic and Reconstructive Surgical Clinic, P.A., supra, which held that a Debt- or’s postpetition payments on unexpired pre-petition leases were not made in the ordinary course of business, were not authorized by the Bankruptcy Code or the court, and could *224be avoided by the Trustee. The court in Metropolitan stated that:
Postpetition payment of a prepetition debt is not authorized by 11 U.S.C. § 363(c)(1). The fact that such payment might 'actually reduce an allowed secured 'claim, thereby creating or increasing equity in property of the estate, does not legitimize the payment, at least when made from other than the recipient’s cash collateral. Unsecured cash, not necessary for postpetition ordinary operating expenses is, absent court order, subject to §§ 507 and 726 priority and distribution provisions. Such cash is not properly available for payment of pre-petition debt, secured or unsecured, under 11 U.S.C. § 363(c)(1). To hold otherwise, would allow some claimants to improve their prepetition positions at the expense and prejudice of § 507 and § 726 interests, without notice and hearing.
In re Metropolitan Cosmetic & Reconstructive Surgical Clinic, P.A., 115 B.R. at 189.
KDC asserts that this transfer falls within the ordinary course of the Debtor’s business and is thus exempted from the trustee’s avoidance powers under 11 U.S.C. § 549 because a “hypothetical creditor could and should reasonably expect a Debtor involved in the business of strip coal mining to require the use of a dozer in order for it to conduct business____and the transaction at issue is certainly one in which another company involved in the business of strip coal mining would enter into in the ordinary course of business.” See KDC’s Memorandum in Opposition at p. 4. The issue in this proceeding, however, - is not the Debtor’s use of KDC’s equipment in its coal mining operations but the postpetition payment of $17,753.67 made to KDC without court approval. If such a payment needed to be made to continue using KDC’s equipment, notice and a hearing was necessary to provide other, creditors the opportunity to object.
KDC also attempts to characterize the payment it received from the Debtor as adequate protection against its collateral’s depreciation. However, adequate protection payments are not within the Debtor’s ordinary course of business. Section 363(e) of the Bankruptcy Code provides, in pertinent part, that:
Notwithstanding any other provision of this section, at any time, on request of an entity that has an interest in property used, sold, or leased, or proposed to be used, sold, or leased, by the trustee, the court with or without a hearing, shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest.
11 U.S.C. § 363(e). Clearly from this statutory language, court authorization is required before adequate protection payments can be made by a Debtor. Furthermore, adequate protection payments are not authorized “until it is requested and approved by the court on notice and hearing.” Metropolitan Cosmetic and Reconstructive Surgical Clinic, P.A., 115 B.R. at 190. Adequate'protection payments made in the ordinary course of business would constitute an anomaly because a Debtor is required to seek court approval before such payments are made, which is entirely inconsistent with the “ordinary course of business.” Moreover, unless ex parte relief is granted, notice and a hearing normally is required before adequate protection payments can be made by a Debt- or in order to provide all interested parties with the opportunity to voice their opinions on the decision to make such payments.2 For the foregoing reasons, the Court finds that the postpetition payment to KDC, even if characterized as an adequate protection payment, does not qualify as a transaction occurring in the ordinary course of the Debt- or’s business under 11 U.S.C. § 363(c)(1).
It is undisputed that the postpetition payment received by KDC was not its cash collateral nor was it authorized by the Court. The payment was meant to partially satisfy KDC’s secured claim against the Debtor. The nature or the amount of KDC’s claim was never determined by this Court prior to this *225payment. Further, the Court was not asked to, nor did it approve any adequate protection payments to KDC at the time of the transfer. Viewing the evidence in the light most favorable to KDC, the Court finds there are no genuine issues of material fact. For the reasons outlined herein, the Court finds the postpetition payment to KDC in the amount of $17,753.67 was unauthorized and does not fall within the Debtor’s ordinary course of business. The transaction is subject to the trustee’s avoidance powers under 11 U.S.C. § 549(a)(2)(B) and is entitled to be recovered pursuant to 11 U.S.C. § 550(a).
. 11 U.S.C. § 1108 provides that "Unless the court, on request of a party in interest and after notice and a hearing, orders otherwise, the trustee may operate the debtor’s business.”
. Rule 4001 of the Federal Rules of Bankruptcy Procedure provides, in Chapter 11 cases, that a request for' adequate protection must be served on the Debtor, the creditor's committee or, if no creditors’ committee has been appointed, on the twenty largest unsecured creditors, and on such other entities as the court may direct. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492696/ | ORDER DENYING MOTION TO AMEND
MARY D. SCOTT, Bankruptcy Judge.
THIS CAUSE is before the Court upon the plaintiffs Motion to Amend filed on March 24, 1998. The motion being untimely, this .Court is without discretion to grant the amendment. In December 1995, two radio stations, KWHK Broadcasting Co., Inc. (“KWHK”) and KBHS Broadcasting Co., Inc. (“KBHS”) filed suit in the Kansas district court against Mack Sanders. Case No. 95-1575 was by KWHK against Mack Sanders for recission, damages, and breach of fiduciary duty. Case No. 95-1574, was by KBHS Broadcasting against Sanders and others for similar breaches of contractual obligations.1 The cases were consolidated for discovery purposes only.
May 28, 1997, John -Bozeman filed a chapter 13 bankruptcy, but did not schedule these plaintiffs nor advise the Kansas court of the ease. Bozeman also inadequately discloses on his bankruptcy petition that he is known by other names, including Mack Sanders.2 On October-21, 1997, the case was converted from chapter 13 to chapter 7 and a trustee appointed. The last day to object to discharge or dischargeability was January 20,1998. Based upon timely motions properly filed in the main case file, extensions were *255granted to KWHK and KBHS to March 23, 1998. The Orders granting the extension were prepared by these entities and submitted to the Court for signature. The Orders provide:
that the deadline ... to file a complaint objecting to the discharge of the debtor or to determine the dischargeability of certain types of debts is continued for thirty (30) days, to and including March 23, 1998.
In re Bozeman, No. 97-60480, docket entries 45, 46 (Bankr.E.D.Ark. Feb. 27, 1998).
On February 25, 1998, the Kansas district court transferred the cases pending against Mack Sanders to this Court. KWHK Broadcasting Co. v. Sanders was assigned AP No. 98-6011 and KBHS Broadcasting Co. v. Sanders was assigned AP No. 98-6010. Rather than filing separate complaints objecting to discharge and dischargeability, on March 24, 1998, KWHK and KBHS filed3 motions to amend the complaints in these pending adversary proceedings. The proposed amended complaints, properly appended as exhibits to the motions, state causes of action under sections 523(a) and 727(a).
Federal Rule of Bankruptcy Procedure 4007(c) provides that complaints to determine dischargeability must be filed “not later than 60 days following the first date set for the meeting of creditors held pursuant to § 341(a) ... On motion of any party in interest, after hearing on notice, the court may for cause extend the time fixed under this subdivision. The motion shall be made before the time has expired.” Similarly, Rule 4004(a) provides a time limitation for filing objections to discharge., Both of these rules state statutes of limitations and these are strictly construed. In re De la Cruz, 176 B.R. 19 (9th Cir. BAP 1994). Indeed, the Court’s only authority to extend the deadline is that stated in Rules 4004 and 4007. Rule 9006, which provides for enlargements of time generally, expressly limits the Court’s power to extend the deadline to file discharge and dischargeability complaints. See Fed. R.Bankr.Proc. 9006(b)(3); In re Isaacman, 26 F.3d 629 (6th Cir.1994); In re Stratton, 106 B.R. 188 (Bankr.E.D.Cal.1989). Motions to extend the time period must be made before the time for filing such complaints has expired. Edwards v. Whitfield (In re Whitfield), 41 B.R. 734, 736 (Bankr.W.D.Ark.1984) (Mixon, J.); In re Biederman, 165 B.R. 783 (Bankr.D.N.J.1994).
On March 23,1998, the time for filing complaints objecting to the discharge or dis-chargeability of debts expired. On that date, the Court lost the ability to further extend the time period such that any complaints based on Bankruptcy Code sections 523(a) or 727(a) were untimely. While the Court does not believe that a motion to amend the existing complaint suffices as the filing of a complaint objecting to either discharge or dis-chargeability of a debt, that issue need not be expressly decided. Since the motion to amend was itself untimely, the Court has no authority to grant the motion. Accordingly, it is
ORDERED that the plaintiffs Motion to Amend filed on March 24, 1998, is Denied.
IT IS SO ORDERED.
. Several of the defendants in separate proceeding No. 98-6010 are corporate defendants. Mack Sanders and others have apparently filed pleadings on their behalf. Like the Kansas district court, the Court advises the debtor that this constitutes the practice of law without a license, a violation of Arkansas law. It is well-settled that corporations must be represented by counsel in order to appear in federal court. See, e.g., Ackra Direct Marketing Corp. v. Fingerhut Corp., 86 F.3d 852 (8th Cir.1996); United States v. Van Stelton, 988 F.2d 70, 70 (8th Cir.1993); Can Enters., Inc. v. United States, 698 F.2d 952, 953 (8th Cir.1983); In re Brown (Brown v. Granite Financial Services Coip.), 1997 WL 311508 (Bankr.E.D.Ark. May 5, 1997); 28 U.S.C. § 1654.
. Although the petition does not recite, as is required under the Federal Rules of Bankruptcy Procedure, all of the debtor’s names, a scrutiny of the main case file reveals that Mack Sanders and John Bozeman are the same person. It is incumbent upon the debtor to amend his schedules to reflect all names by which he is known to adequately provide notice of this bankruptcy case. Fed.R.Bankr.P. 1005. It is also confusing to the Court, and, presumably, to the creditors, that Mack Sanders and John Bozeman have different addresses and that John Bozeman has a different address for purposes of the separate adversary proceedings from that reflected in the main case file.
. A document is filed when it is delivered and received into the custody of the clerk, not merely sent through the United States mails. Chrysler Motors Corp. v. Schneiderman, 940 F.2d 911, 914 (3d Cir.1991); French Bourekas, Inc. v. Turner, 199 B.R. 807, 814 (E.D.N.Y.1996). Thus, the fact that plaintiffs served the motion upon defendants and mailed the motion to the Clerk of the Bankruptcy Court on March 20, 1998, does not render the motion timely. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492697/ | MEMORANDUM OPINION ON MOTION FOR ATTORNEY’S FEES
LEWIS M. KILLIAN, Jr., Bankruptcy Judge.
This matter is before the Court on the Defendant’s Motion for Attorney’s Fees incurred while defending a complaint by the Plaintiff, First Deposit National Bank, to determine the dischargeability of a debt pursuant to the provisions of 11 U.S.C. § 523(a)(2)(A). The Court determined the debt to be dischargeable and the Defendant, Mrs. Mack, requests payment of attorney’s fees in accordance with 11 U.S.C. § 523(d). The facts giving rise to this decision can be found in First Deposit National Bank v. Mack (In re Mack), 216 B.R. 981 (Bankr.N.D.Fla.1997).
The Plaintiff argues that it was substantially justified in challenging the discharge because of the presence of several objective factors,1 including the dire financial condition of the Defendant when she used the card and her inability to repay based upon her lack of employment. The Plaintiff did not present any evidence at the hearing, other than its review of the Defendant’s account activity, to show that it did any investigation prior to trial.
Discussion
To deter frivolous objections to a discharge of consumer debts, § 523(d) of the Bankruptcy Code allows a debtor to recover attorney’s fees if a creditor fails on its dis-chargeability claim. Mercantile Bank v. Williamson (In re Williamson), 181 B.R. 403, 409 (Bankr.W.D.Mo.1995). If a creditor challenges a debtor’s discharge and fails, the court shall award the debtor costs and attorney’s fees if the court finds that the creditor was not substantially justified in filing the complaint, absent special circumstances that would make the award unjust. 11 U.S.C. *314§ 523(d) (1998). The burden is on the creditor to prove that there was substantial justification to challenge discharge of the debt, which requires proof that the complaint had a reasonable basis in fact and in law. First Card v. Leonard (In re Leonard), 158 B.R. 839, 846 (Bankr.D.Colo.1993).
Substantial Justification
Substantial justification' requires that a plaintiff have a reasonable basis in both law and fact to request an' exception from discharge. Williamson, 181 B.R. at 408. If a creditor pursues or continues to pursue a claim after it knows or should have known it could not prevail, there is no reasonable basis. Id. Thus, conducting a sufficient investigation prior to filing a complaint is the key in determining whether substantial justification exists with respect to awarding a debtor attorney’s fees. See AT & T Universal Card Services v. Chinchilla (In re Chinchilla), 202 B.R. 1010, 1017 (Bankr.S.D.Fla.1996); AT & T Universal Card Services v. Grayson, 199 B.R. 397 (Bankr.W.D.Mo.1996) AT & T Universal Card Services v. Mobley (In re Grayson), 199 B.R. 397, 398 (Bankr.W.D.Mo.1996). Although a comprehensive pre-filing investigation is not necessary, a creditor must do enough pre-filing investigation to ensure that the complaint is substantially justified. The Bankruptcy Code requires creditors to undergo some' form of discovery, even if it is an informal conversation with the debtors or their counsel prior to filing a complaint. See Williamson, 181 B.R. at 408. It simply is not acceptable to follow what appears to be the norm in the credit card industry of only ensuring that a couple of the objective factors are present prior to filing. Although creditors constantly use this as their basis for substantial justification, such a mechanical application of the factors is inadequate. An analysis of the facts of the individual case along with the relevant factors is necessary. Grayson, 199 B.R. at 403.
The Grayson court held that in order to assess the appropriateness of the factors to a particular case, the creditor must examine the debtor in some manner before filing the complaint. Id.; see also Leonard, 158 B.R. at 846 (concluding that if the creditor had undertaken discovery prior to filing the complaint, the facts divulged at trial would have been developed before trial, thus alerting the creditor to the weakness of its case and likely foregoing a trial). Since the creditor in Grayson neither appeared at the § 341 meeting of creditors nor requested a Rule 2004 examination, either of which should have at least alerted the creditor that it did not have substantial justification, the court found the complaint to be unjustified. Id. at 403.
In the present case, the Plaintiff mechanically applied the factors to the Defendant. It specifically focused on the Defendant’s inability to repay and her dire financial situation at the time she made the charges. The Plaintiff did not attend the meeting of creditors, request a Rule 2004 examination, or contact the Defendant at any time about the bankruptcy petition. The Plaintiff should have been aware of facts indicating the Defendant did not have fraudulent intentions if it had conducted even an informal inquiry into the situation. For instance, the cash advances were made more than six months before the Deféndant consulted a bankruptcy attorney and the last charge was made four months prior to the filing. Also, Mrs. Mack was not aware of the family’s dire financial condition when she made the charges. At the very least, these facts would have made First Deposit seriously consider the situation before filing a complaint to except the debt from discharge.
Substantial justification also requires having a reasonable basis in law and fact for believing that every element necessary for exception to discharge can be proven, including that the creditor justifiably relied on the debtors’ alleged implied misrepresentation as to their intent to pay the charges incurred. See Providian Bancorp v. Stockard (In re Stockard), 216 B.R. 237 (Bankr.M.D.Tenn.); see also Manufacturer’s Hanover Trust Co. v. Cordova (In re Cordova), 153 B.R. 352 (Bankr.M.D.Fla.) (holding that a creditor was not substantially justified in challenging the dischargeability of a debt where the creditor “freely assumed the risk to extend credit to the debtors.”) All too often, the sole basis of a *315creditor’s claim is the debtor’s financial condition when the charges were made. This emphasis on a debtor’s financial condition for substantial justification in filing a complaint is not only legally insufficient, but also is a “disturbing display of institutional hypocrisy.” Chinchilla, 202 B.R. at 1015. A creditor is not substantially justified in challenging the dischargeability of a debt where there is no evidence that the creditor inquired into the credit worthiness or financial condition and personal situation of the debtors, either before or after the credit was initially extended to them. First Card v. Leonard (In re Leonard), 158 B.R. 839, 844 (Bankr.D.Colo.1993). The court in Leonard concluded that because the creditors did not take any steps to ensure its pre-approved extension of credit was done in a diligent, responsible manner the creditor’s reliance, if any, was not sufficient to except the debt from discharge. Id. at 845.
The Defendant’s finances were in poor condition at the time she was solicited for the pre-approved credit card and did not significantly change after that time. Inquiry prior to issuing the card would certainly have alerted the Plaintiff of her financial situation. The Plaintiff presented absolutely no evidence of any credit check prior to issuing the card to the Defendant. Thus, it cannot now claim that it justifiably relied on any representations she made because her financial situation was virtually the same when she incurred the charges as it was when the Plaintiff sought her out and issued the card to her. Additionally, the Plaintiff did not provide any witnesses or present any records other than the Defendant’s account history that would show it was substantially justified in filing the complaint. The only basis for the complaint is the Defendant’s account history and that, standing alone, is not enough to meet the necessary threshold under the facts of this ease.
Based on the above analysis, I find that the Plaintiff was not substantially justified in filing the complaint.
Special Circumstances
Little case law exists addressing the special circumstances exception. AT & T Universal Card Services v. McIvor, 1997 WL 749425 at *3 (E.D.Pa.1997). However, courts which have found special circumstances to exist have done so where the opposing party has either presented a novel legal theory, or shown that the debtor has unclean hands. See id.; see also Carthage Bank v. Kirkland, 121 B.R. 496 (Bankr.S.D.Miss.1990)(holding that neither the creditor’s good faith in making a loan to the debtor, the debtor’s attitude toward the creditor, nor the debtor’s ability to pay constituted special circumstances that would warrant the denial of attorney’s fees); Firstbanks v. Goss (In re Goss), 149 B.R. 460 (Bankr.E.D.Mich.1992)(holding that special circumstances did not exist where the creditor failed to request relief from the dis-chargeability judgment because it .did not receive notice of the trial).
Novel Legal Theory
Creditors, cannot merely restate the grounds used for substantial justification when asserting that special circumstances exist that would make an award of attorney’s fees unjust. ITT Financial Services v. Woods (In re Woods), 69 B.R. 999, 1004 (Bankr.E.D.Pa.1987). The Plaintiff is claiming that special circumstances exist that should preclude an award of attorney’s fees. However, its only support for this contention is that the Defendant’s behavior “was at the very least strong evidence of knowing use of the credit card without ability to repay and is at worst, an indication of bad faith on the part of the Defendant.” (PI. Resp. and Mem. in Opp’n to Defs Mot. for Atty’s Fees at 7.) However, the Plaintiff is not asserting any novel legal theory. It is merely restating the same circumstances argued in support of its claim of substantial justification.
Unclean Hands
In determining whether special circumstances exist that would make an award of attorney’s fees unjust courts have consistently recognized that the guiding considerations should be equitable principles balanced with the goal of deterring creditors from filing unwarranted exceptions to discharge. Kirkland, 121 B.R. at 499. This line of authority holds that it would be inequitable to allow dishonest debtors to recover *316their costs and attorney’s fees. Goss, 149 B.R. at 462.
I find that the evidence presented in this case is not sufficient to establish that the Defendant had unclean hands. There is no evidence of an intent to defraud or anything else that implies she was being dishonest when she incurred the charges. She did not solicit the card and the charges at issue were mostly for necessities. Also, the last cash advance occurred over six months before she filed for bankruptcy.
Thus, there are no special circumstances present that would make an award of costs and attorney’s fees unjust.
Conclusion
To successfully challenge a motion for attorney’s fees, a creditor has the burden of either proving that it was substantially justified in challenging the discharge or that special circumstances exist that would make awarding attorney’s fees unjust. Based on the evidence presented, the Plaintiff has not met its burden in this case. Thus, the Defendant’s motion for attorney’s fees will be granted. I find the requested amount of fees to be reasonable and award the Defendant $6,558.25 for payment of attorney’s fees.
. The court has adopted a non-exclusive list of twelve (12) objective factors which may be considered in determining a debtor's intent while incurring charges on a credit card. See Citibank F.S.B. v. Cox (In re Cox), 150 B.R. 807, 811-812 (Bankr.N.D.Fla.1992). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484262/ | 11/16/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 22-0185
No. DA 22-0185
STATE OF MONTANA,
Plaintiff and Appellee,
v.
DEVIN DERUSKY LANDUCCI,
Defendant and Appellant.
ORDER
Upon consideration of Appellant’s motion for extension of time,
and good cause appearing,
IT IS HEREBY ORDERED that Appellant is granted an extension
of time to and including December 21, 2022, within which to prepare,
file, and serve Appellant’s opening brief on appeal.
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 16 2022 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484263/ | 11/16/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 22-0224
No. DA 22-0224
STATE OF MONTANA,
Plaintiff and Appellee,
v.
AMIEL JON GARDIPE JR.,
Defendant and Appellant.
ORDER
Upon consideration of Appellant’s motion for extension of time, and
good cause appearing,
IT IS HEREBY ORDERED that Appellant is granted an extension
of time to and including December 21, 2022, within which to prepare,
file, and serve Appellant’s opening brief on appeal.
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 16 2022 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484264/ | 11/16/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA
Case Number: DA 22-0241
DA 22-0241
_________________
IN RE THE PARENTING OF:
S.D., and B.D.,
Minor Children,
JENNIFER A. DUCHARME n/k/a, BRICK,
ORDER
Petitioner and Appellant,
and
RICHARD B. DUCHARME,
Respondent and Appellee.
_________________
Pursuant to the Internal Operating Rules of this Court, this cause is classified for
submission on briefs to a five-justice panel of this Court.
The Clerk is directed to provide a copy hereof to Jennifer Brick, to all counsel of
record, and to the Honorable Peter B. Ohman, District Judge.
For the Court,
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 16 2022 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484266/ | 11/16/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA
Case Number: DA 22-0055
DA 22-0055
_________________
DENNIS DEE MCDONALD as a general
partner, managing partner and limited partner of
the OPEN SPEAR RANCH FAMILY
LIMITED PARTNERSHIP,
Counter-Defendant and Appellant,
v.
ORDER
SHARON MCDONALD, as a general partner,
managing partner and limited partner, KELLY
MCDONALD FRASER, as a limited partner,
COURTNEY MCDONALD, as a limited partner;
and CASEY MCDONALD, as limited partner,
OPEN SPEAR RANCH FAMILY LIMITED
PARTNERSHIP,
Counterclaimants and Appellees.
_________________
Pursuant to the Internal Operating Rules of this Court, this cause is classified for
submission on briefs to a five-justice panel of this Court.
The Clerk is directed to provide a copy hereof to all counsel of record and to the
Honorable Brenda Gilbert, District Judge.
For the Court,
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 16 2022 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484268/ | 11/16/2022
IN THE SUPREME COURT OF THE STATE OF MONTANA
Case Number: DA 22-0301
DA 22-0301
_________________
DUNCAN BEN ABBEY,
Plaintiff and Appellee,
v.
ORDER
JOSEPH R. HARTLEY, individually and as
Trustee of the Joseph Robert Hartley Living Trust;
and the JOSEPH ROBERT HARTLEY LIVING
TRUST,
Defendants and Appellants
_________________
Pursuant to the Internal Operating Rules of this Court, this cause is classified for
submission on briefs to a five-justice panel of this Court.
The Clerk is directed to provide a copy hereof to all counsel of record and to the
Honorable Luke Berger, District Judge.
For the Court,
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 16 2022 | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484270/ | Vitenko v City of New York (2022 NY Slip Op 06515)
Vitenko v City of New York
2022 NY Slip Op 06515
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
MARK C. DILLON, J.P.
COLLEEN D. DUFFY
JOSEPH J. MALTESE
LARA J. GENOVESI, JJ.
2018-11032
(Index No. 150426/13)
[*1]Malvina Vitenko, etc., appellant-respondent,
vCity of New York, et al., respondents-appellants.
Alonso Krangle LLP (Andres F. Alonso and Mischel & Horn, P.C., New York, NY [Scott T. Horn and Lauren E. Bryant], of counsel), for appellant-respondent.
Sylvia O. Hinds-Radix, Corporation Counsel, New York, NY (Fay Ng, Lorenzo Di Silvio, and Claude S. Platton of counsel), for respondents-appellants.
DECISION & ORDER
In an action, inter alia, to recover damages for negligence and wrongful death, the plaintiff appeals, and the defendants cross-appeal, from a judgment of the Supreme Court, Richmond County (Orlando Marrazzo, Jr., J.), dated July 6, 2018. The judgment, insofar as appealed from, upon a jury verdict on the issue of liability finding the defendants 70% at fault in the happening of the accident and the plaintiff's decedent 30% at fault, upon a jury verdict on the issue of damages finding that the plaintiff sustained damages, inter alia, in the principal sums of $440,000 for past pecuniary loss and $1,050,000 for future pecuniary loss for a period of 15 years, and upon an order of the same court (Phillip G. Minardo, J.) dated November 6, 2017, inter alia, granting that branch of the defendants' motion pursuant to CPLR 4404(a) which was to set aside, as excessive, so much of the jury verdict on the issue of damages as found that the plaintiff sustained damages for past pecuniary loss and future pecuniary loss to the extent of reducing the award of damages for past pecuniary loss from the principal sum of $440,000 to the principal sum of $308,000, and reducing the award of damages for future pecuniary loss from the principal sum of $1,050,000 for a period of 15 years to the principal sum of $210,000 for a period of 3 years, is in favor of the plaintiff and against the defendants in the principal sum of only $390,600. The judgment, insofar as cross-appealed from, upon the jury verdicts on the issues of liability and damages, and upon the order, inter alia, denying that branch of the defendants' motion pursuant to CPLR 4404(a) which was to set aside the jury verdict on the issue of liability and for judgment as a matter of law, is in favor of the plaintiff and against the defendants in the principal sum of $390,600.
ORDERED that the judgment is modified, on the facts and in the exercise of discretion, by deleting the provisions thereof awarding damages for past pecuniary loss and future pecuniary loss; as so modified, the judgment is affirmed insofar as appealed and cross-appealed from, without costs or disbursements, and the matter is remitted to the Supreme Court, Richmond County, for a new trial on the issue of damages for past pecuniary loss and future pecuniary loss, and for the entry of an appropriate amended judgment thereafter, unless within 30 days after service upon the plaintiff of a copy of this decision and order with notice of entry, the plaintiff serves and files in the office of the Clerk of the Supreme Court, Richmond County, a written stipulation consenting to reduce the verdict as to damages for past pecuniary loss from the principal sum of $440,000 to the principal sum of $308,000 and for future pecuniary loss from the principal sum of $1,050,000 to the [*2]principal sum of $400,000, and to the entry of an appropriate amended judgment accordingly; in the event the plaintiff so stipulates, then the judgment, as so amended, is affirmed insofar as appealed and cross-appealed from, without costs or disbursements.
On July 13, 2011, the plaintiff's 21-year-old son, Bohdan Vitenko, drowned while swimming in a pool owned and operated by the defendant New York City Department of Parks and Recreation. Bohdan and a friend, Jonathan Proce, were exercising by swimming under water for extended periods of time. The pool was 3½ feet deep around the edges and 5 feet deep in the middle. Bohdan and Proce both succumbed to a phenomenon known as shallow water blackout, which occurs if a swimmer repeatedly hyperventilates and then holds his or her breath. The plaintiff commenced this action, inter alia, to recover damages for negligence and wrongful death.
Following a jury trial on the issue of liability, the jury found that the defendants were negligent in not providing training to lifeguards with regard to shallow water blackout, that the defendants were negligent in failing to assign an adequate number of lifeguards on the day of the accident, and that the lifeguards were negligent on the day of the accident. The jury found the defendants 70% at fault in the happening of the accident and Bohdan 30% at fault. Following a trial on the issue of damages, the jury found that the plaintiff sustained damages in the principal sums of $440,000 for past pecuniary loss, $1,050,000 for future pecuniary loss for a period of 15 years, and $40,000 for funeral expenses.
The defendants moved pursuant to CPLR 4404(a), inter alia, to set aside the jury verdict on the issue of liability and for judgment as a matter of law or, in the alternative, to set aside, as excessive, so much of the jury verdict on the issue of damages as found that the plaintiff sustained damages for past pecuniary loss and future pecuniary loss. In an order dated November 6, 2017, the Supreme Court, inter alia, denied that branch of the defendants' motion which was to set aside the jury verdict on the issue of liability and for judgment as a matter of law, and granted that branch of the motion which was to set aside, as excessive, so much of the jury verdict on the issue of damages as found that the plaintiff sustained damages for past pecuniary loss and future pecuniary loss to the extent of reducing the award of damages for past pecuniary loss from the principal sum of $440,000 to the principal sum of $308,000, and reducing the award of damages for future pecuniary loss from the principal sum of $1,050,000 for a period of 15 years to the principal sum of $210,000 for a period of 3 years. A judgment was thereafter issued awarding the plaintiff the principal sum of $390,600, which reflected the reduced damages awards and the jury's apportionment of fault. The plaintiff appeals, and the defendants cross-appeal.
Contrary to the defendants' contention, the Supreme Court properly denied that branch of their motion pursuant to CPLR 4404(a) which was to set aside the jury verdict on the issue of liability and for judgment as a matter of law. "A motion pursuant to CPLR 4404(a) to set aside a jury verdict and for judgment as a matter of law will be granted where there is no valid line of reasoning and permissible inferences which could possibly lead rational persons to the conclusions reached by the jury on the basis of the evidence presented at trial" (Barril v McClure, 163 AD3d 752, 752-753 [internal quotation marks omitted]; see Cohen v Hallmark Cards, 45 NY2d 493, 499; Glynn v Altobelli, 181 AD3d 567, 569). Here, the plaintiff established that there were not enough lifeguards on duty on the morning of the accident, the lifeguards were not trained with regard to shallow water blackout, and one of the two lifeguards who was on duty was not on the pool deck, but was 40 meters away when the accident occurred. Based on this evidence, viewed in the light most favorable to the plaintiff (see Barril v McClure, 163 AD3d at 753), a valid line of reasoning and permissible inferences exist from which the jury could conclude that the defendants were negligent and that their negligence was a proximate cause of Bohdan's death.
Further, we reach the plaintiff's contention that the jury's apportionment of 30% fault to Bohdan was contrary to the weight of the evidence. This contention may be reviewed on appeal in the absence of a motion by the plaintiff pursuant to CPLR 4404(a) to set aside the jury's apportionment of fault as contrary to the weight of the evidence (see Evans v New York City Tr. Auth., 179 AD3d 105, 111). The jury's finding that Bohdan was 30% at fault in the happening of the accident was not contrary to the weight of the evidence.
Finally, while the 21-year-old Bohdan, who worked in the family business, lived with his parents, and cared for his younger sibling, was described as a wonderful, loving son who was especially helpful around the home, based on the record, the Supreme Court properly concluded that the jury awards for past pecuniary loss and future pecuniary loss were excessive. We find, however, that the amount of damages for future pecuniary loss should have been reduced only to the extent indicated above (see Donofrio v Montalbano, 240 AD2d 617, 619). Moreover, it was procedurally improper for the court to reduce the awards of damages for past pecuniary loss and future pecuniary loss without granting a new trial on those issues unless the plaintiff stipulated to reduce the verdict (see Nieva-Silvera v Katz, 195 AD3d 1035, 1038; Reilly v St. Charles Hosp. & Rehabilitation Ctr., 143 AD3d 692, 694).
The defendants' remaining contention is without merit.
DILLON, J.P., DUFFY, MALTESE and GENOVESI, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484278/ | Rhinebeck Bank v WA 319 Main, LLC (2022 NY Slip Op 06507)
Rhinebeck Bank v WA 319 Main, LLC
2022 NY Slip Op 06507
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
COLLEEN D. DUFFY, J.P.
REINALDO E. RIVERA
DEBORAH A. DOWLING
JANICE A. TAYLOR, JJ.
2019-12021
(Index No. 50957/17)
[*1]Rhinebeck Bank, respondent,
vWA 319 Main, LLC, et al., defendants, Jacob Frydman, appellant.
Lewis S. Fischbein, P.C., Riverdale, NY, for appellant.
Corbally, Gartland & Rappleyea, LLP, Poughkeepsie, NY (Brooke D. Youngwirth of counsel), for respondent.
DECISION & ORDER
In an action to foreclose a mortgage, the defendant Jacob Frydman appeals from an order of the Supreme Court, Dutchess County (Hal B. Greenwald, J.), dated August 12, 2019. The order, insofar as appealed from, granted that branch of the plaintiff's motion which was for leave to enter a deficiency judgment against the defendants WA 319 Main, LLC, and Jacob Frydman in the principal sum of $366,343.12.
ORDERED that the appeal from so much of the order as granted that branch of the plaintiff's motion which was for leave to enter a deficiency judgment against the defendant WA 319 Main, LLC, in the principal sum of $366,343.12 is dismissed, as the appellant is not aggrieved from that portion of the order; and it is further,
ORDERED that the order is modified, on the law and the facts, by deleting the provision thereof granting that branch of the plaintiff's motion which was for leave to enter a deficiency judgment against the defendant Jacob Frydman in the principal sum of $366,343.12, and substituting therefor a provision granting that branch of the plaintiff's motion to the extent of granting the plaintiff leave to enter a deficiency judgment against the defendant Jacob Frydman in the principal sum of $104,186.56, and otherwise denying that branch of the motion; as so modified, the order is affirmed insofar as reviewed; and it is further,
ORDERED that one bill of costs is awarded to the appellant.
The plaintiff commenced this action against the defendant Jacob Frydman (hereinafter Frydman), among others, to foreclosure a mortgage encumbering real property located in Poughkeepsie. After entry of a judgment of foreclosure and sale, the property was sold at public auction on October 10, 2018, for the sum of $795,001. Thereafter, the plaintiff moved, inter alia, for leave to enter a deficiency judgment against Frydman in the principal sum of $366,343.12. In support of the motion, the plaintiff submitted a certified appraisal which presented varying possible estimated values for the property, the highest of which was $1,060,000, and the lowest of which was $620,000, representing the "liquidation value" of the property. Based on this evidence, the plaintiff argued that the Supreme Court should accept the estimated liquidation value of $620,000 as the property's market value for purposes of calculating the deficiency judgment, and calculated the [*2]deficiency by taking the difference between the amount that it was owed as calculated by a referee and the sale price at auction of $795,001. In an order dated August 12, 2019, the court, among other things, granted that branch of the plaintiff's motion which was for leave to enter a deficiency judgment against Frydman in the principal sum of $366,343.12. Frydman appeals.
"RPAPL 1371(2) permits the mortgagee in a mortgage foreclosure action to recover a deficiency judgment for the difference between the amount of indebtedness on the mortgage and either the auction price at the foreclosure sale or the fair market value of the property, whichever is higher" (New York Commercial Bank v 18 RVC, LLC, 173 AD3d 751, 752 [internal quotation marks omitted]; see Flushing Sav. Bank, FSB v Bitar, 25 NY3d 307, 312). "It is the lender who bears the initial burden of demonstrating, prima facie, the property's fair market value as of the date of the auction sale" (Flushing Sav. Bank, FSB v Bitar, 25 NY3d at 312; see Capital Bank v 868 Little E. Neck Rd. Realty, LLC, 200 AD3d 843, 845). "When a lender moves to secure a deficiency judgment against a borrower, 'the court . . . shall determine, upon affidavit or otherwise as it shall direct, the fair and reasonable market value of the mortgaged premises as of the date such premises were bid [o]n at auction or such nearest earlier date as there shall have been any market value thereof'" (U.S. Bank, N.A. v 199-02 Linden Blvd. Realty, LLC, 197 AD3d 1208, 1210, quoting RPAPL 1371[2]).
Here, to the extent that the Supreme Court, in effect, determined that the estimated liquidation value of $620,000 reflected the fair and reasonable market value of the property, this was error. "A property's market value is defined as 'the amount which one desiring but not compelled to purchase will pay under ordinary conditions to a seller who desires but is not compelled to sell'" (Manson v Kejo Enters., LLC, 145 AD3d 994, 995, quoting 936 Second Ave. L.P. v Second Corporate Dev. Co., Inc., 10 NY3d 628, 632 [internal quotation marks omitted]; see Plaza Hotel Assoc. v Wellington Assoc., 37 NY2d 273, 277; Heiman v Bishop, 272 NY 83, 86). "'Fair market value' means neither panic value, auction value, speculative value, nor a value fixed by depressed or inflated prices" (Matter of Board of Water Supply of City of N.Y., 277 NY 452, 458-459; see Matter of City of New York, 98 AD2d 166, 191; Mathias v Jacobs, 238 F Supp 2d 556, 576 [SD NY]). Here, the record does not support a finding that the estimated liquidation value of $620,000 constituted the fair and reasonable market value of the property at the time of the foreclosure sale (see Mortgage Corp. of N.Y. v Long Beach on Ocean, Inc., 265 App Div 1015, 1015). Rather, the record supports a determination that the higher estimated value of $1,060,000 presented by the plaintiff's appraiser constituted the fair and reasonable market value of the property at the time of the foreclosure sale. As this value is higher than the auction price for the property, the deficiency judgment must be calculated as the difference between the amount of the indebtedness on the mortgage and $1,060,000 (see RPAPL 1371[1]). Accordingly, we modify the order so as to grant that branch of the plaintiff's motion which was for leave to enter a deficiency judgment against Frydman to the extent of granting the plaintiff leave to enter a deficiency judgment against Frydman in the sum of $104,186.56.
Frydman's remaining contentions are without merit.
DUFFY, J.P., RIVERA, DOWLING and TAYLOR, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484280/ | People v Williams (2022 NY Slip Op 06502)
People v Williams
2022 NY Slip Op 06502
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
MARK C. DILLON, J.P.
ROBERT J. MILLER
LINDA CHRISTOPHER
BARRY E. WARHIT, JJ.
2019-08313
(Ind. No. 9863/16)
[*1]The People of the State of New York, respondent,
vAntoine Williams, appellant.
Patricia Pazner, New York, NY (David L. Goodwin and Brandon Kronstat of counsel), for appellant.
Eric Gonzalez, District Attorney, Brooklyn, NY (Leonard Joblove and Keith Dolan of counsel), for respondent.
DECISION & ORDER
Appeal by the defendant from a judgment of the Supreme Court, Kings County (Martin P. Murphy, J.), rendered July 1, 2019, convicting him of criminal possession of a weapon in the third degree, upon his plea of guilty, and imposing sentence. The appeal brings up for review the denial, after a hearing, of that branch of the defendant's omnibus motion which was to suppress physical evidence.
ORDERED that the judgment is affirmed.
The Supreme Court properly denied that branch of the defendant's omnibus motion which was to suppress a gun found during a search of an apartment shared by the complainant, her daughter, and the defendant. A party who shares a common right of access to or control over property with a defendant may voluntarily consent to the search of the property (see United States v Matlock, 415 US 164; People v Cosme, 48 NY2d 286, 290). "[C]onsent can be established by conduct as well as words" (People v Gonzalez, 222 AD2d 453, 453; see People v Satornino, 153 AD2d 595, 595; People v Davis, 120 AD2d 606, 606-607). With respect to apparent authority, "where the searching officers rely in good faith on the apparent capability of an individual to consent to a search and the circumstances reasonably indicate that . . . individual does, in fact, have the authority to consent, evidence obtained as the result of such a search should not be suppressed" (People v Adams, 53 NY2d 1, 9; see People v Miloro, 22 AD3d 768, 769).
The hearing record supports the Supreme Court's finding that the search was valid as it was based on the complainant's filing of a domestic incident report at the precinct, which reported that the defendant had threatened to kill her. The complainant further informed the police that she was residing in the apartment to care for her daughter who was recovering from a serious illness, and that the complainant had frequently seen the gun in the bedroom closet shared by her daughter and the defendant. The record further established that, after the police made a video recording of the complainant's consent, they proceeded to the apartment, where the complainant answered the door and allowed them to enter. The police properly relied on the complainant's apparent authority to consent to the search of the apartment, including the bedroom closet and shoebox containing the seized weapon (see People v Downey, 181 AD3d 900, 900-901; People v [*2]Singson, 40 AD3d 1015). Contrary to the defendant's contention, the hearing record failed to establish that the complainant's daughter denied consent to the search (cf. Georgia v Randolph, 547 US 103; People v Watson, 101 AD3d 913; People v McClain, 61 AD3d 416).
DILLON, J.P., MILLER, CHRISTOPHER and WARHIT, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484279/ | People v Wood (2022 NY Slip Op 06503)
People v Wood
2022 NY Slip Op 06503
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
VALERIE BRATHWAITE NELSON, J.P.
REINALDO E. RIVERA
JOSEPH J. MALTESE
LARA J. GENOVESI, JJ.
2020-00981
(Ind. No. 7003/01)
[*1]The People of the State of New York, respondent,
vEllis Wood, appellant.
Twyla Carter, New York, NY (Angie Louie and Stroock & Stroock & Lavan, LLP [Caitlin Sikes], of counsel), for appellant.
Eric Gonzalez, District Attorney, Brooklyn, NY (Leonard Joblove and Rhea A. Grob of counsel; Darci Siegel on the memorandum), for respondent.
DECISION & ORDER
Appeal by the defendant, as limited by his motion, from a sentence of the Supreme Court, Kings County (Matthew D'Emic, J.), imposed December 23, 2019, upon his plea of guilty, on the ground that the sentence was excessive.
ORDERED that the sentence is affirmed.
The sentence imposed was not excessive (see People v Suitte , 90 AD2d 80).
BRATHWAITE NELSON, J.P., RIVERA, MALTESE and GENOVESI, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484276/ | Sauteanu v BJ's Wholesale Club, Inc. (2022 NY Slip Op 06509)
Sauteanu v BJ's Wholesale Club, Inc.
2022 NY Slip Op 06509
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
FRANCESCA E. CONNOLLY, J.P.
REINALDO E. RIVERA
JOSEPH A. ZAYAS
WILLIAM G. FORD, JJ.
2019-13476
(Index No. 11108/15)
[*1]Mihaela Sauteanu, respondent,
vBJ's Wholesale Club, Inc., et al., defendants, Gateway Center Properties I, LLC, et al., appellants.
Lewis Johs Avallone Aviles, LLP, Islandia, NY (Robert A. Lifson and David L. Metzger of counsel), for appellants.
Harmon Linder & Rogowsky (Mitchell Dranow, Sea Cliff, NY, of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendants Gateway Center Properties I, LLC, and Gateway Center Parking Association, LLC, appeal from an order of the Supreme Court, Queens County (Leonard Livote, J.), entered September 10, 2019. The order, insofar as appealed from, granted that branch of the plaintiff's motion which was pursuant to CPLR 5015(a) to vacate an order of the same court dated August 29, 2018, granting the unopposed motion of those defendants for summary judgment dismissing the complaint insofar as asserted against them.
ORDERED that the order entered September 10, 2019, is reversed insofar as appealed from, on the law and in the exercise of discretion, with costs, and that branch of the plaintiff's motion which was pursuant to CPLR 5015(a) to vacate the order dated August 29, 2018, is denied.
On January 13, 2015, the plaintiff allegedly slipped and fell in a parking lot in Brooklyn. The plaintiff subsequently commenced this action to recover damages for personal injuries related to her fall. In December 2017, the defendants Gateway Center Properties I, LLC, and Gateway Center Parking Association, LLC (hereinafter together the defendants), moved for summary judgment dismissing the complaint insofar as asserted against them. On January 3, 2018, the plaintiff requested an adjournment to respond to the motion. The request was granted, and the motion was adjourned to February 28, 2018. On February 28, 2018, the plaintiff, having failed to put in her opposition papers, requested another adjournment to respond to the motion. That request was denied. In an order dated August 29, 2018, the Supreme Court granted the defendants' unopposed motion. The order, with notice of entry, was served on the plaintiff on September 12, 2018.
On May 23, 2019, the plaintiff moved, inter alia, pursuant to CPLR 5015(a) to vacate the order dated August 29, 2018. In an order entered September 10, 2019, the Supreme Court, among other things, granted that branch of the plaintiff's motion. The defendants appeal.
Pursuant to CPLR 5015(a)(1), "[t]he court which rendered a judgment or order may relieve a party from it upon such terms as may be just, on motion of any interested person . . . upon the ground of . . . excusable default." "A party seeking to vacate an order entered upon his or her default in opposing a motion must demonstrate both a reasonable excuse for the default and a potentially meritorious opposition to the motion" (Maruf v E.B. Mgt. Props., LLC, 181 AD3d 670, 671, citing CPLR 5015[a][1]). "Law office failure may qualify as a reasonable excuse for a party's default if the claim of such failure is supported by a credible" and detailed explanation of the default (Maruf v E.B. Mgt. Props., LLC, 181 AD3d at 671; see Deep v City of New York, 183 AD3d 586, 587; OneWest Bank, FSB v Singer, 153 AD3d 714, 716). The determination as to what constitutes a reasonable excuse is a matter of the court's discretion, but mere neglect will not suffice (see CPLR 2005; Maruf v E.B. Mgt. Props., LLC, 181 AD3d at 671-672; Ki Tae Kim v Bishop, 156 AD3d 776, 777; Onishenko v Ntansah, 145 AD3d 910, 911; see also Jackson v Kothuru, 183 AD3d 707, 709; Ferreira v Singh, 176 AD3d 782, 784).
Here, a managing attorney at the law firm representing the plaintiff was notified of the February 28, 2018 adjourned deadline to submit opposition papers to the defendants' motion, and a member of the firm entered a "follow up docket date" for February 7, 2018, "to ensure that the opposition was being handled" (cf. Maruf v E.B. Mgt. Props., LLC, 181 AD3d at 672; Matter of Castellotti v Castellotti, 165 AD3d 926, 927-928). However, instead of "follow[ing] up with the managing attorney to make sure the opposition was assigned," the member of the law firm returned the file to the file room. As the member of the law firm affirmed, "[i]t simply was not addressed properly." Furthermore, the plaintiff did not move to vacate the order dated August 29, 2018, for approximately eight months, or 253 days, after being served with the order and notice of entry (see Maruf v E.B. Mgt. Props., LLC, 181 AD3d at 672; Nanas v Govas, 176 AD3d 956, 957; Ki Tae Kim v Bishop, 156 AD3d at 777; Betz v Carbone, 126 AD3d 743, 744; Vardaros v Zapas, 105 AD3d 1037, 1038; cf. Stango v Byrnes, 200 AD3d 821, 823; Ferreira v Singh, 176 AD3d at 784; Amaral v Smithtown News, Inc., 172 AD3d 1287, 1290).
Under these circumstances, the plaintiff's failure to oppose the defendants' motion was the equivalent of mere neglect and was therefore insufficient to warrant vacatur (see Ki Tae Kim v Bishop, 156 AD3d at 777; OneWest Bank, FSB v Singer, 153 AD3d at 716). Accordingly, the Supreme Court improvidently exercised its discretion in granting that branch of the plaintiff's motion which was pursuant to CPLR 5015(a) to vacate the order dated August 29, 2018.
In light of our determination, we need not reach the defendants' remaining contention.
CONNOLLY, J.P., RIVERA, ZAYAS and FORD, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484277/ | Rozo v Roman Catholic Church of the Precious Blood (2022 NY Slip Op 06508)
Rozo v Roman Catholic Church of the Precious Blood
2022 NY Slip Op 06508
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
ANGELA G. IANNACCI, J.P.
REINALDO E. RIVERA
JOSEPH A. ZAYAS
JANICE A. TAYLOR, JJ.
2020-04155
(Index No. 709207/18)
[*1]Sara Rozo, respondent,
vRoman Catholic Church of the Precious Blood, appellant.
Scahill Law Group, P.C., Bethpage, NY (Keri A. Wehrheim of counsel), for appellant.
Sacco & Fillas, LLP, Astoria, NY (James R. Baez and Clifford Tucker of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Queens County (Richard G. Latin, J.), dated April 30, 2020. The order denied the defendant's motion for summary judgment dismissing the complaint.
ORDERED that the order is affirmed, with costs.
The plaintiff allegedly was injured when she tripped and fell inside premises owned by the defendant. The plaintiff subsequently commenced this action against the defendant to recover damages for personal injuries. Following discovery, the defendant moved for summary judgment dismissing the complaint, contending, inter alia, that the plaintiff did not know what had caused her to fall. The plaintiff opposed the motion. The Supreme Court denied the motion, and the defendant appeals.
In a trip-and-fall case, a defendant property owner can establish its prima facie entitlement to judgment as a matter of law by demonstrating that the plaintiff did not know what caused the fall (see Kerzhner v New York City Tr. Auth., 170 AD3d 982, 983; Lamour v Decimus, 118 AD3d 851). "[A] plaintiff's inability to identify the cause of the fall is fatal to the cause of action, because a finding that the defendant's negligence, if any, proximately caused the plaintiff's injuries would be based on speculation" (Rivera v J. Nazzaro Partnership, L.P., 122 AD3d 826, 827; see Madden v 3240 Henry Hudson Parkway, LLC, 192 AD3d 1095, 1096).
Here, viewing the evidence in the light most favorable to the plaintiff as the nonmoving party, the defendant failed to establish, prima facie, that the plaintiff did not know what caused her to fall (see Kerzhner v New York City Tr. Auth., 170 AD3d 982; Lamour v Decimus, 118 AD3d 851). Since the defendant failed to meet its initial burden as the movant, the burden never shifted to the plaintiff to submit evidence sufficient to raise a triable issue of fact (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).
Accordingly, the Supreme Court properly denied the defendant's motion for summary judgment dismissing the complaint.
IANNACCI, J.P., RIVERA, ZAYAS and TAYLOR, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484273/ | Sturm v Chaudhary (2022 NY Slip Op 06512)
Sturm v Chaudhary
2022 NY Slip Op 06512
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
MARK C. DILLON, J.P.
ROBERT J. MILLER
LINDA CHRISTOPHER
BARRY E. WARHIT, JJ.
2020-01415
(Index No. 503809/18)
[*1]Marc E. Sturm, appellant,
vMohammad A. Chaudhary, appellant.
Vaccaro & White, LLP, New York, NY (Adam D. White and Steve Vaccaro of counsel), for appellant.
The Cashman Law Firm, P.C. (Marjorie E. Bornes, Brooklyn, NY, of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from a judgment of the Supreme Court, Kings County (Ingrid Joseph, J.), dated December 11, 2019. The judgment, upon a jury verdict, is in favor of the defendant and against the plaintiff dismissing the complaint.
ORDERED that the judgment is affirmed, with costs.
The plaintiff allegedly was injured when, while riding a bicycle, he was involved in a collision with a motor vehicle operated by the defendant. The plaintiff contends on appeal that the Supreme Court's charge to the jury pursuant to PJI 2:76A that he, as a cyclist, had a duty to avoid placing himself in a dangerous position had no basis in common or statutory law. This contention is without merit.
Pursuant to Vehicle and Traffic Law § 1231, a person riding a bicycle upon a roadway shall be granted all of the rights and shall be subject to all of the duties applicable to the driver of a vehicle. A bicyclist is required to use reasonable care for his or her own safety, to keep a reasonably vigilant lookout for vehicles, and to avoid placing himself or herself into a dangerous position (see Felix v Polakoff, 178 AD3d 561; Flores v Rubenstein, 175 AD3d 1490; Palma v Sherman, 55 AD3d 891). Contrary to the plaintiff's contention, the Supreme Court's charge was consistent with case law and the Vehicle and Traffic Law, and was not inherently exculpatory of the defendant.
The plaintiff's remaining contentions are without merit.
DILLON, J.P., MILLER, CHRISTOPHER and WARHIT, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484284/ | People v Mendoza (2022 NY Slip Op 06499)
People v Mendoza
2022 NY Slip Op 06499
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
BETSY BARROS, J.P.
ROBERT J. MILLER
DEBORAH A. DOWLING
BARRY E. WARHIT, JJ.
2020-01967
[*1]The People of the State of New York, respondent,
vMiguel Mendoza, appellant. (S.C.I. No. 2525/18)
Patricia Pazner, New York, NY (Michael Arthus of counsel), for appellant.
Melinda Katz, District Attorney, Kew Gardens, NY (Johnnette Traill and Nancy Fitzpatrick Talcott of counsel; Noah Lipshie on the brief), for respondent.
DECISION & ORDER
Appeal by the defendant from a judgment of the Supreme Court, Queens County (David J. Kirschner, J.), rendered June 21, 2019, convicting him of course of sexual conduct against a child in the second degree, upon his plea of guilty, and imposing sentence.
ORDERED that the judgment is reversed, on the law, the plea is vacated, the superior court information is dismissed, and the matter is remitted to the Supreme Court, Queens County, for further proceedings consistent herewith.
The defendant was charged, by felony complaint, with one count of course of sexual conduct against a child in the first degree under Penal Law § 130.75(1)(b), and one count of endangering the welfare of a child under Penal Law § 260.10(1). He waived indictment by a grand jury and entered a plea of guilty under a superior court information to one count of course of sexual conduct against a child in the second degree under Penal Law § 130.80(1)(a). As the defendant contends, and the People correctly concede, the judgment of conviction must be reversed, the plea vacated, and the superior court information dismissed.
The single count in the superior court information was not an "offense for which the defendant [had been] held for action of a grand jury" (CPL 195.20), in that it was not an offense charged in the felony complaint or a lesser included offense of an offense charged in the felony complaint (see People v Menchetti, 76 NY2d 473, 477; People v McCall, 194 AD3d 1197, 1197-1198; People v Diego, 172 AD3d 1776, 1776-1777; People v Chacko, 137 AD3d 930, 931-932; People v Nemnom, 123 AD3d 740, 741). Thus, the superior court information was jurisdictionally defective. This defect survives the defendant's failure to raise this claim in the Supreme Court, his plea of guilty, and his waiver of the right to appeal (see People v Nemnom, 123 AD3d at 741). Accordingly, we reverse the judgment of conviction, vacate the defendant's plea of guilty, dismiss the superior court information, and remit the matter to the Supreme Court, Queens County. If warranted, further proceedings may be had on the felony complaint in the local criminal court.
In light of the foregoing, we need not reach the defendant's remaining contention.
BARROS, J.P., MILLER, DOWLING and WARHIT, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492698/ | OPINION
DAVID A. SCHOLL, Chief Judge.
A INTRODUCTION
The instant proof of claim litigation requires us to analyze several aspects of 11 U.S.C. § 507(a)(4) which appears to have escaped significant previous judicial scrutiny. We hold, consistent with the union’s position in the matter before us, that this Code section extends fourth priority classification to all employee-benefit plan indebtedness arising within 180 days of a bankruptcy filing to which pre-petition payments by the debtor have not been allocated. We also hold that *684the limitation to the extent of liability under § 507(a)(4)(B) is intended only to limit payments by the debtor to any particular employee to $4,000 in total wages and benefit plan payments. Finally, in keeping with the instant Debtor’s position, we hold that “liquidated damages” for late payments are not plan “contributions” entitled to priority treatment.
B. PROCEDURAL AND FACTUAL HISTORY
CORNELL & COMPANY, INC. (“the Debtor”), a general contracting firm, filed the voluntary Chapter 11 petition underlying this dispute on December 2, 1996. Prior to and apparently subsequent to the bankruptcy filing, the Debtor and the Cement Masons Local. Union No. 592 (“the Union”) were parties to collective bargaining agreements (“the Agreements”) which required, inter alia, that the Debtor submit reports as well as that it pay monthly contributions to the Cement Masons Union Local No. 592 Pension Fund, the Cement Masons Local Union No. 592 Welfare Fund, and the Cement Masons Union Local 592 Joint Apprenticeship Training Fund and Association Industry Advancement Program General Building Contractors (“the Funds”) for employees that were covered under the Agreements.
On January 17, 1997, the Funds filed a proof of claim (“the Claim”), classified as a priority unsecured claim under 11 U.S.C. § 507(a)(4). On January 15, 1998, the Debt- or filed an objection (“the Objection”) to the claim. After one continuance, the Objection came before us for a hearing on March 11, 1998. The parties agreed to submit the Objection on a written Stipulation of Facts (“the Stipulation”) and briefs. Although the Stipulation and the Union’s brief were several days late, all matters were submitted by March 27,1998.
The heart of the uncontested facts recited in the Stipulation are as follows:
6.During the 180 days prior to the Petition Date, contributions arising from services rendered by employees covered by the Agreements are as follows (“the Contribution Assessments”):
June 1996 $10,812.44
July 1996 $16,025.92
August 1996 $ 7,162.20
September 1996 $ 7,889.20
October 1996 $12,306.06
November 1996 $14,840.28
$69,036.10
7.Unpaid liquidated damages associated with unpaid contributions arising from services rendered by employees covered by the Agreements within 180 days prior to the Petition Date were $5,419.57.
8.The Debtor made the following payments to the Cement Masons Funds on account of services rendered by employees covered by the Agreements on the following dates:
June 14,1996 $ 5,245.71
July 17,1996 $ 9,905.16
July 31, 1996 $10,812.44
September 23,1996 $16,025.92
October 2,1996 $ 7,162.20
November 1,1996 $ 7,889.27
$57,040.70
9.On January 4, 1997, the Debtor paid to the Cement Masons Fund on account of services rendered by employees covered by the Agreements the amount of $2,472.67 for the week ending November 30,1996 prior to the Petition Date.
C. DISCUSSION
At issue is whether the Funds’ Contribution Assessments are claims that are entitled to priority status under § 507(a)(4), and, if so, in what amount. The determination of this issue requires interpretation of 11 U.S.C. § 507(a)(4), which reads as follows:
§ 507. Priorities
(a) The following expenses and claims have priorities in the following order:
(4) Fourth, allowed unsecured claims for contributions to an employee benefit plan—
(A) arising from services rendered within 180 days before the date of the filing of the petition or the date of the cessation of the debtor’s business, whichever occurs first; but only
(B) for each such plan, to the extent of—
*685(i) the number of employees covered by each such plan multiplied by $4,000; less
(ii) the aggregate amount paid to such employees under paragraph (3) of this subsection, plus the aggregate amount paid by the estate on behalf of such employees to any other employees benefit plan----
The Debtor notes that its last four prepayments, from July 31, 1996, through November 1, 1996, were identical to the Contribution Assessments for July 1996 through September 1996. See page 3, ¶¶ 6 and 8 supra. It observes that the Funds, allegedly wrongfully for purposes of a § 507(a)(4) determination, allocated certain of these payments to Contribution Assessments due for periods prior to the 180-day pre-petition period. It therefore argues that only the unpaid October 1996 and November 1996 Assessments, equal to $27,146.34, are potentially entitled to a priority.
Next, the Debtor argues that the $5,419.57 component of the Union’s claim designated as liquidated damages is not entitled to a priority, citing In re Miller Block Co., 63 B.R. 99, 101-02 (Bankr.W.D.Pa.1986).
Then, it makes what it terms “the § 507(a)(4)(B) calculation.” The parties agree that sixteen (16) Union workers, fourteen (14) of which have unpaid Assessments claims, worked' for the Debtor within the 180-day period. The § 507(a)(4)(B)® figure is therefore $56,000. From this the Debtor calculates a § 507(a)(4)(B)(ii) figure by adding the $57,040.70 sum of its payments towards the Assessments within the 180-day period and $2,742.67 stipulated as the Debt- or’s post-petition payments covering Assessments for the period after November 1,1996, and just before its filing. See page 3, ¶¶ 8 and 9 supra. Since these payments exceed the $56,000 § 507(a)(4)(B)® figure, it argues that the Funds are entitled to no priority claim and, presumably, only $27,146.34 as an unsecured claim.
The Union calculates the claim differently. The Union admits that it allocated all but $22,446.46 of the Debtor’s payments in the 180-day period to pre-180 day period Assessments, but contends that this allocation is permissible under the Agreements. The Union also defends its addition of the liquidated damages as part of the priority claim on the ground that such penalties are a portion of the Assessments, as per the Agreements. It hence concludes that it is entitled a priority claim of $74,455.67 ($69,036.10 in Assessments plus the $5,419.57 liquidated damages), less the $22,446.46 of the Debtor’s 180-day period payments allocated the Assessments in the 180-day period, or $52,-009.20.
As to the § 507(a)(4)(B) calculation, the Union argues that, since § 507(a)(4)(B)(ii) references “amounts paid by the estate ” (emphasis added), only post-petition payments are counted, because it is only at filing that a debtor’s “estate” is created, citing In re Wu, 173 B.R. 411, 413 (9th Cir. BAP 1994). Thus, only the $2,742.67 post-petition payments are deducted from the $56,000 figure in the Union’s § 507(a)(4)(B)® calculation, leaving the entire $52,009.20 as eligible for priority classification.
For the most part, the Union’s position appears correct, although we believe that the § 507(a)(4)(B) limitation is narrower than either party contends. As we read it, § 507(a)(4) is silent regarding the allocation of a debtor’s payments during the 180-day period. In the absence of Code requirements to the contrary, the general rules of allocation, described thusly by us in In re Lease-A-Fleet, Inc., 131 B.R. 945, 949 (Bankr.E.D.Pa.1991), aff'd in part & rev’d in part on other grounds, 141 B.R. 63 (E.D.Pa.1992), aff'd, 983 F.2d 1051 (3d Cir.1992), apply:
As in In re Comer, 716 F.2d 168, 175 (3d Cir.1983),
[tjhere appears to be little dispute be-' tween the parties that the applicable law on the substantive issue of allocation was stated by the Superior Court of Pennsylvania in Page v. Wilson, 150 Pa.Super. 427, 433, 28 A.2d 706, 709 (1942), and later quoted with approval by the Pennsylvania Supreme Court in In re Woods’ Estate, 350 Pa. 290, 294, 38 A.2d 28, 30 (1940). The rule is stated as:
*686“The debtor has the right to make the application in the first instance, and failing to exercise it, the same right devolves upon the creditor. When no application is made by either party, the law determines how the payments are to be applied in accordance with equitable rules and principles.... [i]t will apply the payment, when not appropriated by either party, in the way most beneficial to the creditor, that is, to the debt lease secured, unless to the prejudice of a surety.”
See also Toll-Barkan Co. v. Toll, 193 Pa.Super. 221, 225, 164 A.2d 36, 38 (1960); RESTATEMENT (SECOND) OF CONTRACTS §§ 258, 259, 260 (1982) [cited hereafter as “Restatement”].
Accord, e.g., Pristas v. Landaus of Plymouth, Inc., 742 F.2d 797, 801 (3d Cir., 1984); DuBois Nat’l Bank v. Hartford Accident & Indemnity Co., 161 F.2d 132, 137 (3d Cir.1947); Delaware Dredging Co. v. Tucker Stevedoring Co., 25 F.2d 44, 46 (3d Cir.1928); In re Penn Jersey Corp., 72 B.R. 981, 983 (Bankr.E.D.Pa.1987); Washington Natural Gas Co. v. Johnson, 123 Pa. 576, 593, 16 A. 799, 801-02 (1889); Harker v. Conrad, 12 Serg. & Rawle 301, 305 (Pa.1825); Uhl Constr. v. Fidelity & Deposit Co. of Maryland, 371 Pa.Super. 520, 526, 538 A.2d 562, 565 (1988); and 29 P.L.S. 162 (1960).
Since there is no evidence of a specific allocation of the payments by the Debtor, the Union was entitled to allocate them as it did, i.e., to the earliest, pre-180-day period Assessments delinquencies.
We have located one somewhat analogous ease, In re CirrusCorp., 196 B.R. 76 (S.D.Tex.1996), the result in which appears, at first blush, to point in a different direction. In that case an insurer requested priority for all payments which came due on account of employee- benefit plans within the 180-day period. The billing included contributions which accrued before as well as after the 180-day period. The court held that only those contribution liabilities accruing within the 180-day period were entitled to priority. Id. at 77.
We believe that the instant facts are distinguishable from those of CirrusCorp. No issue of allocation of payments within the 180-day period-was presented in that case. The instant facts would be comparable if pre-180 day period obligations were admittedly still on the Funds’ books on the date of the Debtor’s' filing. However, they were not, having been offset by the Union’s allocations of the Debtor’s payments within the 180-day period prior to the bankruptcy filing. There is no statutory justification for allowing the Debtor a credit for payments just because they were made within the 180-day period.
With respect to the § 507(a)(4)(B) limitation, we find that both parties have misread its application to the facts because they have failed to focus on its purpose. As Collier explains, § 507(a)(4) was enacted to overrule pre-Code precedents holding that fringe benefits, unlike wages, were entitled to no priority whatsoever. 3 COLLIER ON BANKRUPTCY, ¶ 507.06, at 507-35 to 507-36 (15th ed. rev.1997), citing Joint Industry Board of Electrical Industry v. United States, 391 U.S. 224, 88 S.Ct. 1491, 20 L.Ed.2d 546 (1968); and United States v. Embassy Restaurant, Inc., 359 U.S. 29, 79 S.Ct. 554, 3 L.Ed.2d 601 (1959). The intention of the § 507(a)(4)(B) limitation is to nevertheless limit any particular employee’s wage-related claims to $4,000. Id., ¶ 507.06, at 507-36; and ¶ 507.06[b], at 507-39. Thus, in § 507(a)(4)(B)(ii), the priority is limited by the amount paid to any particular employee for wages, under 11 U.S.C. § 507(b)(3); payments payable to that particular employee under the plan claimant at issue; and payments payable to that employee under “any other employee benefit plan.” (emphasis added). Both parties, in their analysis of § 507(a)(4)(B)(ii), overlook the presence of the word “other” in § 507(a)(4)(B)(ii), and seem to believe, we think erroneously, that the limitation applies to the plan claimant itself.
In light of the analysis, the issue of whether § 507(a)(4)(B)(ii) references pre-petition employee benefit payments, or only post-petition payments by a debtor’s estate, is irrelevant. The parties’ implicit agreement that this limitation applies to payments to the *687plan claimant in some way makes no logical sense and we cannot accept this reading. Collier does not appear to consider this possibility, and no ease introduces a § 507(a) (4) (B) (ii) calculation including reference to payments to the plan claimant. Such a calculation would seem antithetical to the statements in In re Edgar B, Inc., 200 B.R. 119, 123 (M.D.N.C.1996), that § 507(a)(4) “simply require[s] a ■ mathematical calculation,” by introducing an irrational element which would be difficult to calculate.
Since there is no evidence that the account of any employee covered by the Funds included any employees who received in excess of $4,000 in § 507(a)(3) wages and § 507(a)(4) benefits from the Funds and any other plans, § 507(a)(4)(B)(ii) does not limit the Union’s priority claim.
The final issue is whether the Union is entitled to priority classification of its claim for $5,419.57 assessed to the Debtor on account of liquidated damages for late payments under the terms of the Agreements. We note at the outset that this claim for liquidated damages would have been higher had the Union not allocated the Debtor’s July and August payments and part of its September 1996 payment to the older obligations as it did. The Debtor, in its implicit contention that we should reallocate its payments in the 180-day period, does not appear to suggest that we can or should recalculate the liquidated damages due upward. This observation suggests that our reasoning that we must accept the Union’s allocation in determining the amount of the Union’s claim, at pages 685-686 supra, is correct.
Neither party has cited any cases discussing a plan’s right to classify liquidated damages as a component of a § 507(a)(4) claim other than Miller Block, supra, and we could not locate any other cases addressing this point either. This may suggest that most plans recognize that such damages are not part of a § 507(a)(4) claim.
Miller Block reasons as follows on this point, 63 B.R. at 102:
Section 507(a)(4)(A) only allows a priority for prepetition delinquent contributions, for services rendered by the employees within 180 days prior to filing. No mention is made relating to a priority for attorney’s fees or liquidated amounts----
We see no reason to differ from the reasoning in Miller Block. We note that the conclusion in Burden v. United States, 917 F.2d 115 (3d Cir.1990), that equitable subordination of liquidated federal tax penalties is permissible is consistent with this result. Liquidated penalties, though contractionally based, are not actual wages or wage-related benefit plan obligations. They are “frosting on the cake.” We believe that, under § 507(a)(4), only the “cake” itself is entitled to priority treatment. Cf. In re Grant Broadcasting of Philadelphia, Inc., 71 B.R. 891, 897-98 (Bankr.E.D.Pa.1987) (administrative claims should be narrowly construed to minimize prioritizing of a debtor’s scarce resources to certain favored creditors).
We therefore conclude that, although the Union is entitled to its liquidated damage claims under the terms of the Agreement, this component of its claim is not entitled to § 507(a)(4) priority classification. We therefore conclude that the Union is entitled to a priority claim of $46,589.63 and a general unsecured claim for the $5,419.57 balance.
D. CONCLUSION
An order consistent with these conclusions will be entered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492699/ | MEMORANDUM RULING
GERALD H. SCHIFF, Bankruptcy Judge.
Darwin J. Thomas and Stephanie Thomas (“Debtors”) filed the present petition for relief under chapter 13 of the Bankruptcy Code on July 2, 1997. The United States of Amer-ica, through the Department of the Treasury, Internal Revenue Service (“IRS”), timely filed a proof of claim (“IRS Claim”). The IRS Claim is for $29,457.12, of which $16,-184.12 is alleged to be entitled to priority under section 507(a)(8) (including $2,096.96 for tax year 1993), while the balance is unsecured without priority.
The Debtors have filed an Objection to Internal Revenue Service Proof of Claim (“Objection”). A hearing on the Objection was held on January 8, 1998. Present at the hearing were Gerald J. Casey, counsel for Debtors, Thomas Thompson, counsel for the IRS, and Barton Bernard, counsel for Keith A Rodriguez (“Trustee”), the standing chapter 13 trustee. After hearing argument of counsel, the court took the matter under advisement. For the following reasons, the court overrules the Objection.
The Debtors’ first chapter 13 case, Case Number 96-21029, was filed on November 1, 1996. That case was dismissed on June 6, 1997. Shortly thereafter, on July 2,1997, the present case was filed.
The Debtors take the position that the claim for taxes for tax year 1993 is not entitled to priority under section 507(a)(8)(A) as the tax obligation became due more than 3 *722years prior to the filing of the present case. This argument is based upon a literal reading of section 507(a)(8): without any extension, the income tax return for calendar year 1993 was last due on April 15, 1994; since this case was filed subsequent to April 15, 1997, the Debtors’ obligation for 1993 taxes would thus be outside of the priority period.
The IRS, on the other hand, argues that the three-year period has not lapsed because of the pendency of the Debtor’s prior chapter 13 case. While there is no statute stating precisely this position, the case law overwhelmingly supports the position of the IRS that the three-year period was tolled during the time the first case was pending. See, e.g., In re Waugh, 109 F.3d 489 (8th Cir.1997); In re Taylor, 81 F.3d 20 (3rd Cir.1996); In re West, 5 F.3d 423 (9th Cir.1993); In re Richards, 994 F.2d 763 (10th Cir.1993); In re Montoya, 965 F.2d 554 (7th Cir.1992).
While there is no Fifth Circuit authority on the issue, a decision of the United States District Court for the Shreveport Division of the Western District of Louisiana, following the majority view of the circuits, held that the three-year period is to be suspended during the pendency of the first of two successive bankruptcies. Solito v. U.S. (In re Solito), 172 B.R. 837 (W.D.La.1994). In Soli-to, the court recognized that the policy behind section 507(a)(8) was to give the government the benefit of certain time periods to pursue its collection effects. As the government was prohibited by the automatic stay of section 362 from pursuing its collection efforts, the court reasoned that the three-year period should not run while the debtors were in their first bankruptcy at a time when the government was under the prohibitions of the automatic stay of section 362.
For the foregoing reasons, the court finds that the three-year period provided by section 507(a)(8) was suspended during the pen-dency of the Debtors’ first chapter 13 ease. Since the first chapter 13 case was pending for approximately 218 days, the three-year window for 1993 taxes was extended past April 15, 1997, for the same number of days, or, until on or about November 20, 1997. Since the instant case was filed on July 2, 1997, three years had not lapsed since the Debtors’ 1993 tax return was last due, at least for purposes of section 507(a)(8). Accordingly, the IRS is entitled to priority for the taxes due for the 1993 tax year. The Objection is OVERRULED.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492700/ | DECISION
JAMES E. SHAPIRO, Chief Judge.
PROLOGUE
Where have you .gone, Ken Maynard?
When I was a kid, my big treat was to go to the neighborhood movie theater each Saturday afternoon where, for under $1, I saw two features, the coming attractions, one or (if lucky) two cartoons, and a western serial. But the western serial alone was worth the price of admission. My all time favorite cowboy was Ken Maynard. He may not have been as popular as others during that era, such as Gene' Autry or Johnny Mack Brown, but with his two silver pistols blazing, his white hat, and riding on top of his trusted horse, Tarzan, Ken Maynard was my hero. I liked him because he was the defender of the downtrodden. Although he always had his hands full, fighting for law and order, I [mew that, in the end, justice would prevail and that all would be, right in the world (at least until the following Saturday).
That was another time. Unfortunately, the story in this case does not have such a happy ending.
FACTS
Oak Specialties, Inc. was a corporation which manufactured office furniture. One of the debtors in this ease, Michael Moore, was its sole stockholder. His wife and co-defendant-debtor, Linda Moore, was its secretary. However, Linda Moore had no active role in the operation of this business and never received a salary. Oak Specialties was purchased by Mi'. Moore in the early part of 1994. On February 1, 1996, Mr. Moore, on behalf of Oak Specialties, applied for a loan from Womens Business Initiative Corp. (“WBIC”), a non-profit development corporation which makes small loans to small businesses — primarily to women and to minorities. The maximum amount of any loan made by WBIC was $25,000.
On February 1, 1996, Mr. Moore prepared and submitted to WBIC a loan application on behalf of Oak Specialties. Previously, Mr. Moore unsuccessfully attempted to obtain a loan for Oak Specialties from several other lending institutions. Among the documents he forwarded to WBIC was his personal financial statement. The financial statement was signed by Mr. Moore but not by Mrs. Moore. WBIC approved the loan. On May 3, 1996, the loan closing took place, and WBIC provided $23,274 in funds through a series of five checks payable to Oak Specialties and to various of its creditors. Mr. and Mrs. Moore both personally guaranteed this loan. No collateral was obtained by WBIC for this loan.
Oak Specialties defaulted on the loan and, in August of 1996, went out of business— approximately three months after the loan was obtained. No portion of the $23,274 loan was ever repaid. All of Oak Specialties assets were liquidated by Firstar Milwaukee N.A., another creditor which made a separate $25,000 loan to Oak Specialties at the same time the loan was made by WBIC. Unlike WBIC, however, Firstar’s loan was secured by all of Oak Specialties assets, by a mortgage on the Moores’ home, and by a security interest in the cash surrender value of the Moores’ insurance policies.
After Oak Specialties’ default, WBIC sought recovery from Mr. and Mrs. Moore on their personal guarantees. However, on October 15, 1996, the Moores filed bankruptcy under chapter 7 and listed WBIC as an unsecured creditor in the sum of $23,274.
This adversary proceeding followed, in which WBIC seeks a determination that the debt due it from the Moores is nondischargeable under 11 U.S.C. § 523(a)(2)(B),1 based *812upon its assertion of a false financial statement.
At the trial, WBIC pointed out certain disparities in the assets and liabilities of the Moores as between the February 1, 1996 financial statement provided to it by Mr. Moore and the Moores’ bankruptcy schedules filed approximately nine months later on October 30, 1996. These differences are as follows:
Financial Statement (February 1, 1996) Bankruptcy Schedules (October 30, 1996 *)
Assets—
Residence at 914 East Bay Point Road, Bayside, Wisconsin $250,000.00 $200,000.00
Life insurance —■ cash value 11,000.00 2.581.00
Automobiles 20,000.00 12.900.00
Miscellaneous personal property (consisting of oriental rugs, oil paintings, antiques, and jewelry) 42,000.00 18,000.00
Debts— $204,000.00 ** $416,071.08
C * Of this amount, $22,000 consisted of personal debts; $180,000 home mortgage; and $2,000 accounts payable)
Income—
Annual salary of Michael Moore $ 45,000.00 $ 6,000.00 (This covers the period of January 1,1996 to October 29,1996 and includes the salaries of both Mr. and Mrs. Moore.)
ANALYSIS
11 U.S.C. § 523(a)(2)(B) requires that all of the following elements be established in order to except an obligation from discharge:
1. the existence of a statement in writing;
2. such writing must be materially false;
3. such writing must concern the debtor’s financial condition;
4. it must be a statement upon which the creditor reasonably relied; and
5. the statement was made with intent to deceive.
In re Blatz, 37 B.R. 401, 403 (Bankr.E.D.Wis.1984) (aff'd 67 B.R. 88 (E.D.Wis.1986)). See also In re Jones, 88 B.R. 899, 902-903 (Bankr.E.D.Wis.1988), and In re Harasymiw, 895 F.2d 1170, 1172 (7th Cir.1990). Each of these elements must be proven by the party seeking to except a debt from discharge by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 283-91, 111 S.Ct. 654, 657-61, 112 L.Ed.2d 755 (1991).
[2] Exceptions to discharge are to be construed strictly against the creditor and liberally in favor of the debtor. Gleason v. Thaw, 236 U.S. 558, 35 S.Ct. 287, 59 L.Ed. 717 (1915); In re Zarzynski, 771 F.2d 304, 306 (7th Cir.1985). In this case, the first three elements under § 523(a)(2)(B) and set forth above were irrefutably proven. The elements in dispute are “intent to deceive” and “reasonable reliance.”
INTENT TO DECEIVE
I find that there was an intent to deceive by Mr. Moore. He is not a naive individual. He has a solid, business back*813ground. Mr. Moore is an attorney who had been in private practice, which included dealings in general business transactions. He also worked for Koss Corporation, the world’s largest producer of stereo phones. He was its credit manager and, eventually, became its inhouse legal counsel. As an attorney, he knew full well the importance and consequences of a financial statement. He has failed to satisfactorily explain the substantial differences between his financial statement and the bankruptcy schedules with respect to his assets and also with respect to his reported salary.2
I believe that when he completed his financial statement on February 1, 1996, Mr. Moore was financially desperate and knowingly inflated the values of his assets. This is shown by the following:
1. Real estate. There was no satisfactory explanation for the $50,000 drop in the value he placed on his home in the bankruptcy schedules from what he had previously listed on the financial statement (i.e., from $250,000 to $200,000). Mr. Moore attempted to explain this discrepancy in a variety of ways— none of which was persuasive. At one point in time, he státed he thought he was only required to place a liquidation value on the schedules, when the bankruptcy schedules specifically state fair market value should be utilized. He also claimed that there was substantial deterioration in the real estate. I find this hard to believe. He also claimed that the reason he placed a $200,000 value on his home in the bankruptcy schedules is because of a $200,000 appraisal he obtained in 1990 when he refinanced his home mortgage. Yet, that does not explain why he placed a figure of $250,000 on his home in his financial statement, which was also subsequent to when the $200,000 appraisal was obtained.
2. Personal property. No clear reason was given by Mr. Moore for the drop in value of approximately $9,000 from the amount shown on his financial statement to the amount shown on his bankruptcy schedules. The oil paintings and jewelry alone were listed in his financial statement at $27,000 and were subsequently listed in the bankruptcy schedules at $8,000. ■ Mr, Moore testified that, when he was unemployed, he sold some rugs at a yard sale. He did not, however, sell any jewelry or oil, paintings.
3.Life insurance. Mr. Moore stated the reduction in cash value was the result of applying the life insurance cash value to the monthly life insurance premiums as they became due after February 1, 1996. This still left unaccounted approximately $4,000.
In addition to the glaring disparities in assets, Mr. Moore also listed his annual salary on his financial statement at $45,000. In fact, the total combined salary which both he and his wife received in 1996 (from the beginning of the year to the date of the filing of his bankruptcy petition) was $6,000. He said that the $45,000 annual salary on the financial statement was based upon his “projected salary” which, if he had in fact' received and cashed all his cheeks, would have been accurate. .At the time he filed his financial statement, he admitted having in his possession approximately 10 or more payroll checks which he could not cash due to a lack of funds in the Oak Specialties checking account. Mr. Moore had a responsibility to reveal this information to WBIC but failed to do so.
The court is persuaded that there was clearly an intent to deceive by Mr. Moore.
RELIANCE
There was no reliance at all by WBIC — reasonable or otherwise — upon the financial statement. It was not necessary for WBIC to demonstrate that the financial statement was the only factor in influencing its decision to make the loan to Oak Specialties. Here, however, it played absolutely no part in WBIC’s decision to provide the requested funds to Oak Specialties. What hap*814pened in this case is comparable to In re Dammen, 167 B.R. 545 (Bankr.D.N.D.1994), where the court, in rejecting a claim of non-dischargeability, stated, 167 B.R. at 553:
The inescapable -conclusion in this case is that Financial Statements were not taken with any serious purpose of relying upon them to any significant degree, but merely ceremonial devices routinely obtained perfunctorily as a part and parcel of the original loan transactions.
WBIC approved this loan because of its reliance upon other factors, including the presumed “family wealth” of the Moores and Mr. Moore’s law degree. Kathryn Cairney, the former vice president of WBIC and the loan officer who processed and closed the loan to Oak Specialties, stated that she was relying upon the fact that Mr. Moore was an attorney. Ms. Cairney testified that she believed Mr. Moore “could go back and get a job if the business failed and earn income that would allow him to repay the loan.” Ms. Cairney further stated that she was also relying on the fact that Firstar at that same time made a separate loan to Oak Specialties. She acknowledged that, if Firstar had not made the loan, WBIC also would not have made the loan. I am aware that Ms. Wendy Werkmeister, president of WBIC, testified that WBIC “relied” on the financial statement. She did not, however, provide any substantiation for this self-serving assertion. Just as I have never heard a debtor declare in court that he or she committed a fraud, I also never heard a creditor say in court that he or she did not rely on the financial statement. Ms. Werkmeister’s testimony in this regard is unconvincing.
What WBIC did not do is also significant and persuades this court that it placed absolutely no reliance upon the financial statement. It never sought to verify any of the information contained in the financial statement despite Ms. Werkmeister’s acknowledgment that: “to us, this is a very large loan.”. It did not even undertake an inexpensive and simple UCC search upon the Moores. It failed to check out the purported values of any of the assets listed in the financial statement. It did not order an appraisal on the real estate or upon the personal property. WBIC’s reliance upon her impression of Mr. Moore rather than upon his assets is also borne out by Ms. Cairney’s testimony when she stated that she felt “he was being honest with me when he was telling me about his history and his background.” WBIC’s lack of reliance upon the financial statement is also evidenced by Ms. Cairney’s testimony that she spent “maybe a half an hour or an hour reviewing it” but did nothing further to cheek out its authenticity.
Reliance upon Mr. Moore’s future earning capacity or upon the impression he made to WBIC is not the same as reliance upon financial information set forth in his financial statement. Although the loan application of WBIC contains a specific provision which authorized WBIC “to make the necessary and reasonable inquiries regarding the financial information provided,” no inquiry was ever made. Although WBIC’s internal procedures included a requirement for obtaining a financial statement, this was a mere formality.
Just as actual reliance may be proven by circumstantial evidence, lack of actual reliance can also be proven by circumstantial evidence. See In re Ebbin, 32 B.R. 936, 941 (Bankr.S.D.N.Y.1983).
Even, for the sake of argument, if actual reliance had been proven, it was clearly unreasonable. This was shown by the lack of any verification of the information contained in the financial statement and by the further fact that this was a first-time business dealing between these parties. Reasonableness of a creditor’s reliance must be evaluated according to the particular facts and circumstances in a given case. In re Mullet, 817 F.2d 677, 679 (10th Cir.1987). WBIC never acquired any collateral. Due to a mix-up, it also failed to follow through with obtaining a guarantee from the Milwaukee Department of City Development, which it could have obtained for 50% of this loan. When WBIC’s efforts to subordinate the outstanding notes which the Moores owed to family members and friends were refused — including a $15,000 obligation due to John Koss, the father of Linda Moore — this should have been a tip-off that WBIC’s dependence upon *815the Moores’ “family wealth” was not well founded and that something was awry. I am persuaded WBIC’s actions were so unreasonable as to amount to no actual reliance at all. See In re Garman, 643 F.2d 1252, 1255-56 (7th Cir.1980) cert. denied, 450 U.S. 910, 101 S.Ct. 1347, 67 L.Ed.2d 333 (1981); In re Phillips, 804 F.2d 930, 933 (6th Cir.1986).
Because of the failure to show not only reasonable reliance but actual reliance, § 523(a)(2)(B) has not been proven against Mr. Moore.
LINDA MOORE’S ROLE
Linda Moore’s role presents an even clearer case than that of her husband for not excepting from discharge her obligation as a guarantor to WBIC. She did not sign the financial statement. She was not instrumental in completing the financial statement, although she did read it over. Moreover, even if there was an intent by her to deceive, the lack of any reliance by WBIC doomed its case against her, as it does against her husband.
EPILOGUE
If I lived in the world of Ken Maynard, I’d know how to write a proper ending to this story. I’d whip out my silver pistols and eliminate “reliance” as a necessary requirement for proving nondisehargeability under § 523(a)(2)(B). But we live in a world far different from that of my favorite cowboy, and I am obliged to recognize all of the requirements in § 523(a)(2)(B). While the equitable powers of a court encourage it to be innovative, even original, these equitable powers are not a license for a court to disregard the clear language and meaning of the bankruptcy statutes and rules. In re Olson, 120 F.3d 98, 102 (8th Cir.1997) (citing Official Comm. of Equity Sec. Holders v. Mabey, 832 F.2d 299, 302 (4th Cir.1987)). WBIC was required to prove reasonable reliance and, unfortunately, could not do so. Sometimes, the good guys (in this case, meaning WBIC) must bite the dust.
This decision shall stand as and for findings of fact and conclusions of law in accordance with Bankruptcy Rule 7052 of the Federal Rules of Bankruptcy Procedure,
. § 523. Exceptions to discharge.
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
*812(2) for obtaining money, property, services, or an extension, renewal, or refinance of creditor, to the extent by—
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor's or an insider's financial condition;
(iii) on which the creditor to whom the debt- or is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive.
Although the Moores filed their bankruptcy petition on October 15, 1996, their bankruptcy schedules were filed on October 30,1996.
. There were also marked differences with respect to the liabilities which were listed on the financial statement and bankruptcy schedules. However, Mr. Moore testified that, on advice of his bankruptcy counsel, he listed on his bankruptcy schedules (but not on the financial statement) some promissory notes of Oak Specialties, which he signed on its behalf, as a precaution against creditors, later attempting to pierce the corporate veil. I find this to be a plausible explanation. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492701/ | Memorandum Opinión and Order
MARK W. VAUGHN, Bankruptcy Judge.
The Court has before it a motion for partial summary judgment under Rule 56(e) of the Federal Rules of Civil Procedure, made applicable to these proceedings by Federal Rule of Bankruptcy Procedure 7056, filed by one of the Respondents, Winston P. Titus (“Titus”). Titus moves this Court to grant partial summary judgment that he owns title to a certain Chevrolet C1500 pick-up truck that he bought from Fred Madore Chevrolet-Pontiae-Oldsmobile, Inc. (“Madore”). However, Shaker Valley Auto & Tire, Inc. (“Shaker”) claims title also, contending that Madore never had the right to sell Titus the vehicle: Shaker first bought the pick-up at an auction and gave it to Madore to service, not sell. Shaker therefore contends that since it never transferred the truck’s title to Madore, Titus' cannot claim it. The truck, upon which many parties have claimed ownership and liens, is the subject of this adversary proceeding, the original complaint of which was brought by the Bank of New Hampshire pursuant to sections 541(a) and (d) to determine the property interest in the truck.
Titus moves that he succeeds to all rights of Shaker in and to the C1500 Chevrolet truck pursuant to section 382~A:2-403(2) of the New Hampshire Revised Statutes Annotated. Titus also requests that this Court order Shaker to execute any necessary documents effecting a title transfer from Shaker to Titus. For the reasons set out below, the Court grants Titus’ partial summary judgment motion.
*940This 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)(2)(B) and (0).
Discussion
Titus’ partial summary judgment motion seeks a determination that, there are no material facts in dispute, and, as a matter of law, he is entitled to judgment entered in his favor.
Pursuant to Federal Rule of Civil Procedure 56(c), made applicable to these proceedings by Federal Rule of Bankruptcy Procedure 7056, the Court shall render summary judgment “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) (1997). The Court may not resolve issues of fact, but may only decide if they exist. United States v. Articles of Device, 527 F.2d 1008, 1011 (6th Cir.1976); Aetna Ins. Co. v. Cooper Wells & Co., 234 F.2d 342, 345 (6th Cir.1956). “Genuine,” in the context of Rule 56(c), means that “the evidence is such that a reasonable jury could resolve the point in favor of the nonmoving party....” Rodriguez-Pinto v. Tirado-Delgado, 982 F.2d 34, 36 (1st Cir.1993) (internal quotation marks and citations omitted). “Material,” in the context of Rule 56(c), means that the fact has “the potential to affect the outcome of the suit under applicable law.” Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701, 703 (1st Cir.1993). Courts faced with a motion for summary judgment should read the record “in the light most flattering to the nonmovant and in-dulg[e] all reasonable inferences in that party’s. favor.” Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d 576, 581 (1st Cir.1994). Thus, in order to grant the Defendant’s summary judgment motion, this Court “must examine all facts established by the record before it and conclude that, under the applicable substantive law, no reasonable fact-finder could possibly return a verdict in favor of the nonmoving party.” Boyd v. Dock’s Corner Assocs., 135 B.R. 46, 53 (Bankr.W.D.Mich.1991).
Certain facts are not in dispute. On March 10, 1997, Shaker purchased a Chevrolet C1500 pick-up truck (“Truck”) from North Shore Auto Auction in Ipswich, Massachusetts. LaCroix Aff. On or about March 10-12,1997, Shaker dropped off the Truck at Madore for servicing. LaCroix Aff. In fact, Shaker had a history of doing business with Madore: for a period of five or six years, Shaker purchased, sold, and serviced motor vehicles with the car dealership. LaCroix Aff. On March 28,1997, Madore sold the Truck to Titus. Titus Aff. Titus’ affidavit states that when he went to Madore to purchase a vehicle, the Truck was located in the sales area of the Madore dealership with eighteen to twenty other automobiles and trucks, all with sale and price signs. Titus Aff. In consideration for $11,475.00, Madore assigned a retail installment and security agreement between Madore and Titus to Bank of New Hampshire (“BNH”). Madore then prepared a title application, which it apparently failed to forward to the New Hampshire Department of Motor Vehicles.
Shaker now demands that the Truck be returned, insisting that it still retains title1 and that it never authorized Madore to sell the Truck to Titus, or anyone for that matter. According to Titus’ affidavit, in May 1997, a representative from Shaker visited Titus at a construction site where he was *941working, seeking possession of the Truck. Titus Aff.
On April 7,1997, Madore filed a petition in bankruptcy under chapter 11. Madore’s chapter 11 ease was converted to chapter 7 on June 13, 1997. On June 19, 1997, the New Hampshire Bureau of Titles notified Titus that no certificate of title had been filed on his behalf, although he executed a title application and paid a fee to Madore on March 28, 1997, when he bought the Truck from the dealership.
On September 15, 1997, BNH filed the complaint to this adversary proceeding to determine the property interest in the Truck. Titus, who has continued making payments on the Truck to BNH, filed his motion for partial summary judgment on January 27, 1998, to which Shaker objected on February 26,1998.
Taking the most favorable view to the non-moving party, this issue may be characterized as two innocent parties who were wronged, allegedly, by a third. Shaker contends that it dropped off the vehicle only for servicing. Titus contends that he bought the vehicle unaware that it may not have been Madore’s to sell. As such, both Titus and Shaker claim title to the Truck. The applicable statute under which Titus moves, New Hampshire RSA § 382-A:2-403 entitled “Power to Transfer; Good Faith Purchase of Goods; ‘Entrusting,’ states that:
(2) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.
(3) “Entrusting” includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor’s disposition of the goods have been such as to be larcenous under the criminal law.
N.H.Rev.Stat.Ann. § 382-A:2~403(2) and (3) (1994 & Supp.1997). Thus, in order to find that Titus has title to the Truck, this Court must find (1) that the vehicle was entrusted to Madore; (2) that Madore is a “merchant;” (3) that Madore is a merchant “who deals in goods of that kind;” and (4) that Titus was a “buyer in ordinary course of business.” § 382-A:2-403(2).
■ Requirements one and two are easily met. Shaker does not dispute, that it transferred the vehicle to Madore, or that Madore is a merchant.2 The affidavit submitted by ■ Robert A. LaCroix, President of Shaker, states that Shaker voluntarily, transferred possession of the vehicle to Madore’s service division. LaCroix Aff.;. see 1 James J. White & Robert S. Summers, Uniform Commercial Code § 3-12(e), at 191 & n. 32 (4th ed. 1995) (“Entrusting usually falls into one of four common fact patterns---- Third, George leaves goods to be repaired with Dealer who resells them to a buyer in ordinary course.”) (citations omitted); Anderson, Uniform Commercial Code, Sales §§ 2-403:42-43 (3d ed.1994); see Underhill Coal Mining Co. v. Hixon, 438 Pa.Super. 219, 652 A.2d 343, 346 (1994) (trespasser on land who converted timber has void title; court relied on common law, stating that “the U.C.C. contains no suggestion- that intended to alter this [common law] principle” where “owner never assented to the obtaining of the goods by the person from whom the good faith purchaser bought them”) (emphasis added); see also Litchfield v. Dueitt, 245 So.2d 190 (Miss.1971). Therefore, under section 2-403(3), this Court finds that Shaker “entrusted” the vehicle to Madore since it delivered the vehicle to Madore and Madore acquiesced to its retention. See § 382-A:2-403(3).
However, Shaker disputes requirements three and four. Shaker, in its re*942sponse, claims that Madore is not a merchant “who deals in goods of that kind,” § 382-A:2-403(2) — that Madore’s service department is separate and distinct from its sales business enough to render section 382-A:2-403(2) inapplicable. Shaker stresses it left the vehicle at Madore’s service department, not its sales department, and requests that this Court theoretically segregate the two departments and render the notion of “goods of that kind” to refer only to sales. However, the statute is to be read from the buyer’s perspective, not the party who entrusted the goods. See 1 James J. White & Robert S. Summers, Uniform Commercial Code § 3 — 12(c), at 193 & nn. 38-40 (4th ed. 1995) (Section 2-403 is to be viewed from the buyer’s perspective, not the entruster: “[T]he concern of [section] 2-403 is with a narrower class based on appearances. An individual buying a product from an apparent dealer in such goods expects to get good title.”).
In its responsive argument, Shaker cites Gallagher v. Unenrolled Motor Vessel River Queen, 475 F.2d 117 (5th Cir.1973).3 However, that case is distinguishable because the Court of Appeals held that boat owners who rented a stall at a marina did not entrust their boat to either the sales or service business' of the marina. Gallagher, 475 F.2d at 118.
In fact, where a merchant performs both service and sale functions, one cannot divorce a sales business from a service business in order to distinguish a merchant who deals “in goods of that kind” for the purposes of section 2-403. Perez-Medina v. First Team Auction, Inc., 206 Ga.App. 719, 426 S.E.2d 397 (1992) (in an unreported decision, the Georgia Supreme Court denied certiorari) (“Under the statute [§ 2-403], the tractor was ‘entrusted’ despite the fact that it was placed in Lara’s possession only for the purpose of installing equipment for appellant rather than for sale.”). In Perez-Medina, the court stated that section 2-403 requires,
from an objective viewpoint, that the en-truster know, or in the exercise of reasonable diligence should know, that he placed the goods with one who might reasonably appear to third persons to be a dealer in the types of goods in question.
Perez-Medina, 426 S.E.2d at 399 (citing Anderson, Uniform Commercial Code, Sales, § 2-403:34 (3d ed.1994)). Shaker disputes neither that Madore might reasonably appear to be a dealer who sells cars, nor that Titus should have been suspicious when he bought the vehicle. See LaCroix Aff. Rather, Shaker just requests that this Court split Madore’s business into sales and service divisions. However, tijds runs against the policy behind section 2-403, which is to put the risk of loss with the entruster if the business with which the property is entrusted can be viewed objectively by the purchasing party as “one who deals in goods of that kind.” See 1 James J. White & Robert S. Summers, Uniform Commercial Code § 3-12(c) (4th ed.1995).
Shaker also alleges that Titus was not a buyer in the ordinary course under section 382-A:2-403(2). New Hampshire RSA § 382-A:l-201(9) states:
“Buyer in ordinary course of business” means a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker(4)27 “Buying” may be for' cash or by exchange of other property or on secured or unsecured credit and includes receiving goods or documents of title under a pre-existing contract for sale but does not include a transfer in bulk or as security for on in total or partial satisfaction of a money debt.
*943N.H.Rev.StatAnn. § 382-A:l-201(9) (1994 & Supp.1997).
Shaker asserts that since Titus signed a “no money down” agreement with Madore, which then assigned that agreement to BNH for $11,475.00, Titus was neither a “buyer” nor a “buyer in the ordinary course.” However, section 1-201(9) clearly states that “buying” may be “on unsecured credit and includes securing goods ... under a preexisting contract for sale.” § 1-209(9). Titus’ affidavit states that “[t]he Madore dealership arranged financing for my purchase through the Bank of New Hampshire and prepared a retail installment contract to evidence that financing.” Titus Aff., if 5. Moreover, in National Shawmut Bank of Boston v. Jones, 108 N.H. 386, 236 A.2d 484 (1967), the New Hampshire Supreme Court found that the defendant was a buyer in the ordinary course of business where he bought a car “in the ordinary course from a person in the business of selling automobiles.” National Shawmut Bank of Boston, 236 A2d at 485. The “ordinary course” to which the court referred involved the defendant executing a “Retail Installment Contract” with Went-worth Motor Company Inc., which was later assigned to the plaintiff. Id. Titus, therefore, “bought” the Truck from Madore.
As to whether Titus is a “buyer in [the] ordinary course,” § 1-209(9), Shaker does not dispute that Titus bought the vehicle ignorant of Shaker’s potential claim to its title. LaCroix, Aff,; see 1 James J. White & Robert S. Summers, Uniform Commercial Code § 3 — 12(c), at 195 & n. 50 (4th ed. 1995) (“Generally, however, to disqualify the purchaser, it is necessary to show that the purchaser had ‘knowledge that the sale to him [was] in violation of the ownership rights ... of a third party,’ — not just knowledge that a third party had some interest.”) (internal citations omitted). Titus bought on unsecured credit, unaware that his purchase was “in violation of the ownership rights or security interest of a third party.” Id. In addition, Titus’ affidavit states that he bought three cars from Madore in the past. Titus Aff. Finally, when Titus bought the vehicle, he did not do so in “total or partial satisfaction of a money debt.” § 382 — A: 1 — 201 (9); see also Borg-Warner Acceptance Corp. v. Dugger, 9 B.R. 85 (Bankr.N.D.Tex.1981) (a secured creditor was not a “buyer in the ordinary course”'where the transfer of the security interest was for satisfaction of a money debt). Therefore, this Court finds that Titus was a “buyer in the ordinary course of business” under section 382-A:1-201(9). See Perez-Medina 426 S.E.2d at 400 (“[N]or do we find any peculiar circumstances about the sale sufficient to raise a question of fact as to whether there was a good faith purchaser.”).
Thus, since the Court cannot split the vehicle in half, partial summary judgment is granted in favor of Titus. In difficult situations such as this, the law dictates that the balance must be tipped in favor of the buyer in the ordinary course,
because that frees the marketplace and promotes commerce. This goal, called “security of transactions,” is an ideal of the commercial law. The protection of property rights .,. is not an ideal of the commercial law____On the assumption that both the entruster and buyer have been equally victimized by the dishonesty .of the merchant-dealer, section 2-403(2) resolves the issue so as to free the marketplace, rather than protect the original owner’s property rights.
Thorn v. Adams, 125 Or.App. 257, 865 P.2d 417 (1993) (citing 2 Hawkland; UCC Series § 2.403:07 (1992)). Therefore, Titus’ motion for partial summary judgment is granted. As such, the Court orders that Shaker deliver the Truck’s title forthwith to Titus.
This opinion constitutes the Court’s findings of facts and conclusions of law in accordance with Federal Rule of Procedure 7052. The Court will issue a final judgment consistent with this opinion.
. At the auction, Shaker received a Certificate of Title from the State of Maine endorsed by North Shore Auto Auction, which it still possesses. Shaker has not executed any document to transfer title to Madore or Titus. LaCroix Aff. In addition, at a previous hearing, Shaker stated that it granted a security interest to Mascoma Savings Bank ("Mascoma”). BNH moved to add Mascoma as a Respondent, which this Court granted on November 12, 1997, and BNH filed its amended complaint adding Mascoma as a defendant on December 10, 1997. However, to date, Mascoma has not filed an appearance or any responsive pleadings in this adversary proceeding.
. Section 382-A:2-104(l) defines "merchant" to mean:
a person who deals in goods .of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
N.H.Rev.StatAnn § 382-A:2-104(l) (1994 & Supp.1997).
. Titus referred to Dartmouth Motor Sales, Inc. v. Wilcox, 128 N.H. 526, 517 A.2d 804 (1986), which is just as inapplicable to the instant case. That case involved a purchaser who bought a vehicle with a bad check, and thus did not obtain valid title under N.H. RSA chapter 261, who then sold it, with facially valid title, to an innocent party. Id. The court held that Article 2-403 of the New Hampshire Uniform Commercial Code takes precedence over the title statute: the purchaser obtained voidable title, and the good faith, second "innocent” purchaser obtained good title. Id. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492702/ | Memorandum Opinion
MARK W. VAUGHN, Chief Judge.
The Court has before it a complaint filed by the Bank of New Hampshire pursuant to Bankruptcy Code sections 541(a) and (d) to determine the above-captioned parties’ property interests in a certain Chevrolet C1500 pick-up truck (“Truck”). Trial was held on March 30, 1998 at which counsel for Shaker Valley Auto & Tire, Inc. (“Shaker”) represented the interests of both Shaker and Mas-coma Savings Bank (“Mascoma”). The issues at trial were 1) whether Mascoma has a valid, perfected security interest in the Truck, and, assuming that Mascoma does have a valid lien, 2) whether Mascoma may still claim a security interest in the Truck after Fred Madore Chevrolet>-Pontiac-01dsmobile, Inc. (“Madore”) sold the Truck to Titus.
On March 24, 1998, this Court granted Winston Titus’ (“Titus”) partial summary judgment motion under Rule 56(c) of the Federal Rules of Civil Procedure, ruling that Titus owns title to the vehicle which he purchased from Madore. Since there is no dispute that the Bank of New Hampshire (“BNH”) has a valid lien on the vehicle, counsel for BNH is currently holding its title pending this Court’s ruling on this current matter. For the reasons stated below, this Court finds that, pursuant to section 9-306(2) of the New Hampshire Revised Statutes Annotated, Mascoma’s security interest does not attach to the Truck.
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 pro-*945eeeding in accordance with 28 U.S.C. § 157(b).
Discussion
For the purposes of this memorandum opinion, the Court will not restate the facts of this case which were outlined in this Court’s previous opinion on Titus’ partial summary judgment motion, Bank of N.H. v. Jeffrey Schreiber, et al., 219 B.R. 988 (Bankr.D.N.H.1998) (order granting partial summary judgment). However, the Court will note that Shaker authorized Madore to sell the Truck. The President of Shaker, Robert A. LaCroix, testified at trial on March 30, 1998, that on March 27, 1997, an employee named Garth called Mr. LaCroix asking for a “number.” This “number” referred to the amount that Mr. LaCroix would accept for Madore’s purchase of the Truck. Mr. LaCroix answered Garth that he would accept $9,800 for the Truck in its current condition;1 he also stated he would accept $9,950 if the windshield were fixed.
Section 9-306(2) of the New Hampshire Revised Statutes Annotated states:
Except where this Article otherwise provides, a security interest continues in collateral notwithstanding sale, exchange or other disposition thereof unless the disposition was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor.
N.h.Rev.StatAnn. § 382-A:9-306(2) (1994 & Supp.1997). This Court has already ruled that Shaker voluntarily transferred the Chevrolet C1500 truck to the Debtor, Madore. See Bank of N.H., 219 B.R. at 941, 943. Thus, pursuant to section 9-306(2), Mascoma’s security interest does not attach to the Truck because Mascoma, in its “Motor Vehicles Dealer Floor Plan Loan and Security Agreement,” authorized Shaker to “sell inventory in the ordinary course of its business.” Def.’s Exh. 305, ¶ 6.3, p. 7; see First Fin. Co. v. Akathiotis, 110 Ill.App.2d 377, 249 N.E.2d 663, 665 (1969) (The “acquiescence in the sale ... constitute^] an authorization of sale which, under section 9-306(2) of the Code ... allowed defendant to take free of the security interest by his seller in favor of First Finance [the secured lender].”). This authority to sell was supported by the testimony of Mr. Johnson, Vice President of Mas-coma in charge of commercial loans. Thus, when Shaker sold the Truck to Madore, Ma-dore took the Truck free of Mascoma’s security interest in it. Since Madore took the Truck free of Maseoma’s security interest, the question of whether Madore is a buyer in the ordinary course under N.H. RSA section 9-307 is irrelevant. However, Mascoma’s security interest may attach to the proceeds of the sale. See N.h.Rev.StatAnn. § 382-A:9-306(4) (1994 & Supp.1997).
Therefore, for the aforementioned reasons, this Court finds that Mascoma’s security interest does not attached to the Truck. Currently, BNH is holding title to the Truck pending the Court’s decision on this matter. BNH is hereby ordered to turn over the Truck’s title to Titus, following the necessary amendments to the Truck’s title certificate comporting to the Court’s ruling today.
This opinion constitutes the Court’s findings of facts and conclusions of law in accordance with Federal Rule of Procedure 7052. The Court will issue a final judgment consistent with this opinion.
. Shaker originally dropped the vehicle off to Madore for servicing its broken windshield. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492703/ | MEMORANDUM
DAVID T. STOSBERG, Bankruptcy Judge.
This adversary proceeding is fully briefed and submitted for decision on the record. The Trustee seeks to recover as a preferential transfer $1,438.50 in garnishments collected post-judgment by the Defendant, Community Methodist Hospital (the “Hospital”).
The Trustee filed a complaint to recoup from the Hospital money garnished within six (6) months of the debtor’s bankruptcy filing. Recognizing that the Hospital did not recover any money’within, ninety (90) days of the filing, the Trustee relies upon the Kentucky preferential transfer statutes. Ky. Rev.Stat.Ann. (“KRS”) § 378.060 and § 378.070.
This Court has determined in prior cases that the Trustee is permitted to use the avoiding powers of 11 U.S.C. § 544(b) to attack a preference under the Kentucky preference statutes. See In re Terry Lynn Goodman (Wilkey v. BellSouth Telecommunications), Case No. 97-40055; A.P. No. 97-4042 (W.D.Ky.12/17/97), adopting the position of the Sixth Circuit in Perkins v. Petro Supply Company, Inc. (In re Rexplore Drilling, Inc.), 971 F.2d 1219, 1221 (6th Cir.1992). In order to prevail under the Kentucky preference statute, the Trustee must prove that the debtor was insolvent at the time of the transfer.
However, we need not address the question of the debtor’s insolvency as the. transfer to the Hospital was perfected upon service of the garnishment order on the employer, which occurred outside of the Í80 day period preceding the debtor’s bankruptcy filing. Thus, there exists no preferential funds for the Trustee to recover.
Factual Background
The debtors filed bankruptcy on May 5, 1997. On September 5, 1996, the Hospital obtained,, a $1,851.98 judgment against the debtors in the Henderson Circuit Court. On September 10, 1996, the Hospital secured an order of garnishment, and on September 19, 1996, served the garnishment order, by mail, on the debtor’s employer.
The Hospital received the following garnishments:
October 17,1996 $191.34
October 26, 1996 $275.14
November 13,1996 $229.01
November 25,1996 $192.96
December 11,1996 $304.88
January 2,1997 $241.87
January 13,1997 $220.57
January 28,1997 $239.15
February 4,1997 $ 10.06
The Hospital did not recover any of the debtor’s wages within ninety days of the *972bankruptcy filing. November 6, 1996 is the one hundred and eightieth (180th) day prior to the bankruptcy filing. Accordingly, the Trustee seeks to recover only the garnishments received by the Hospital between November 13, 1996 through February 4, 1997, which total $1,438.50.
Legal Analysis
The issue before the Court is whether a transfer, pursuant to KRS 378.060 and 378.070, occurred within the six months preceding the bankruptcy filing. In order to avoid a post-judgment garnishment as a preference, the garnishment order must be served upon the garnishee within the preference period. In re Battery One-Stop Ltd,., 36 F.3d 493, 498 (6th Cir.1994) (interpreting the Ohio garnishment statutes). The Sixth Circuit collected the majority of bankruptcy cases in states with garnishment statutes similar to Ohio’s garnishment laws, which have found the date of delivery of a garnishment order to the garnishee to be the date of perfection of the transfer. Id. at 498 (collecting cases).
[Sjtates which create a lien upon the service of a writ of garnishment have ruled against the trustee in a preference action when the writ is served prior to the ninety (90)- day period. This is so even if actual payment comes within the ninety (90)- day period.
Id. quoting, In re McCoy, 46 B.R. 9, 11 (Bankr.D.Ariz.1984). See also, In re Arnold, 132 B.R. 13, 15 (Bankr.E.D.Mich.1991)
The Kentucky garnishment statutes reflect even stronger language than the Ohio garnishment laws analyzed by the Sixth Circuit in the Battery One-Stop case. The Kentucky garnishment statute unequivocally sets forth the perfected status of a garnishment lien.
An order of garnishment of earnings, as defined in KRS 427.005, shall create a lien on all nonexempt earnings earned during the pay period in which the order is served on the employer and during those succeeding pay periods which may be designated by the order, (emphasis added)
KRS 425.506(1). According to KRS 425.506(1), the date of the transfer is the date the garnishment lien is created, which is the date of service of the garnishment order upon the garnishee. See In re Fagan, 26 B.R. 212, 215 (Bankr.W.D.Ky.1982).
Kentucky Civil Rule 69.02 provides that a judgment creditor may serve the garnishment order by regular first class mail on the garnishee. In this case, the Hospital mailed the garnishment order to the debtor’s employer on September 19,1996. In Kentucky, service by mail is complete upon mailing. CR 5.02. The transfer of garnished funds to the Hospital was perfected upon service of the garnishment order on the debtor’s employer on September 19, 1996, which event occurred more than 180 days before the debtor filed bankruptcy on May 5, 1997. Accordingly, the Trustee may not recover the garnished funds.
We have entered an Order this same date dismissing the Trustee’s complaint against the Hospital. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492704/ | OPINION
PEARSON, Bankruptcy Judge.
Douglas R. Carmichael (“Carmichael”), a creditor in the above-captioned Chapter 11 case, appeals an order of the Bankruptcy Court for the District of New Mexico granting summary judgment in favor of the trustee both on his complaint to avoid an unauthorized postpetition transfer pursuant to 11 U.S.C. § 549, and on Carmichael’s counterclaim. For the reasons set out below, the decision of the bankruptcy court is affirmed.
*116JURISDICTION
A Bankruptcy Appellate Panel, with the consent of the parties, has jurisdiction to hear appeals from final judgments, orders and decrees of bankruptcy judges within this circuit. 28 U.S.C. § 158(a), (b)(1), (c)(1). As neither party has opted to have the appeal heard by the District Court for the District of New Mexico, they are deemed to have consented to jurisdiction. 10th Cir. BAP L.R. 8001-1(c).
The Bankruptcy Appellate Panel may affirm, modify, or reverse a bankruptcy court’s judgment, order, or decree, or remand with instructions for further proceedings. Findings of fact shall not be set aside unless clearly erroneous. Fed.R.Bankr.P. 8013. See First Bank v. Reid (In re Reid), 757 F.2d 230, 233-34 (10th Cir.1985). Conclusions of law are reviewed de novo. Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 2546, 101 L.Ed.2d 490 (1988).
Neither party challenges the jurisdiction of this panel to review the bankruptcy court’s order granting summary judgment.
FACTS
The debtor law firm, P.K.R., P.C. (“PKR”), is a New Mexico professional corporation that was retained by the Resolution Trust Corporation and the Federal Deposit Insurance Corporation (hereinafter collectively “FDIC”) to provide legal services in investigating and evaluating claims that arose from the failure of ABQ Bank in Albuquerque, New Mexico.
PKR retained Carmichael to provide expert services on behalf of the FDIC. Carmichael’s invoices were to be submitted to PKR in a format approved by the FDIC. PKR included Carmichael’s fees in its billings to the FDIC. The FDIC was to pay PKR, which in turn was to pay Carmichael.
At issue here are two bills for expert services provided by Carmichael in June and July of 1993. On July 5, 1993, Carmichael submitted a bill of $4,410.00, and on August 3, 1993, submitted a bill of $3,776.00. PKR billed the FDIC, including the amounts billed by Carmichael, on July 31,1993, and August 3.1993.
PKR filed for Chapter 11 relief on October 29.1993. A Chapter 11 trustee was appointed, and the Chapter 11 was subsequently converted to Chapter 7.1
On December 6,1993, the FDIC paid PKR $4,410.00 for Carmichael’s services. PKR then issued a check to Carmichael in that amount on January 28, 1994. The FDIC paid PKR for Carmichael’s second billing in the amount of $3,776.00 on March 9, 1994. PKR deposited the funds directly into its debtor-in-possession general account, but never paid Carmichael.
On September 13, 1994, the Chapter 11 trustee moved to pay Carmichael $3,776.00, but the motion was dismissed without prejudice. Subsequently, the bankruptcy court authorized Albuquerque Plaza Partners to file an adversary proceeding under § 549(a)(2)(B) on behalf of the trustee against Carmichael to recover the $4,410.00 that PKR paid to Carmichael. Carmichael answered and asserted a counterclaim for $3,776.00.
Both sides moved for summary judgment. After a hearing, the bankruptcy court granted summary judgment to the trustee on both the complaint and Carmichael’s counterclaim. Carmichael was ordered to repay the $4,410.00 he received postpetition. Carmichael appeals.
DISCUSSION
A trial court’s grant of summary judgment is reviewed de novo. Universal Money Ctrs., Inc. v. AT & T, 22 F.3d 1527, 1529 (10th Cir.1994). See Harris v. Beneficial Oklahoma, Inc. (In re Harris), 209 B.R. 990 (10th Cir. BAP 1997). “Summary judgment is appropriate when there is no genuine dispute over a material fact and the moving party is entitled to judgment as a matter of law.” Russillo v. Scarborough, 935 F.2d 1167, 1170 (10th Cir.1991). See Straight v. First Interstate Bank (In re Straight), 207 B.R. 217 (10th Cir. BAP 1997). The facts are viewed in the light most favorable to the party opposing summary judgment. Applied Genet*117ics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990).
The bankruptcy court held that the $4,410.00 payment to Carmichael was an unauthorized postpetition transfer pursuant to § 649 of the Bankruptcy Code, which provides:
(a) Except as provided in subsection (b) or (c) of this section, the trustee may avoid a transfer of property of the estate—
(1) that occurs after the commencement of the case; and
(2)(A) that is authorized only under section 303(f) or 542(c) of this title; or
(B) that is not authorized under this title or by the court.
11 U.S.C. § 549(a).
Carmichael presents three issues on appeal. First, Carmichael argues that the payments PKR received from the FDIC for Carmichael’s expert services were not property of the estate because they were held by PKR in a constructive trust for Carmichael’s benefit. Second, in the event that the payments PKR received from the FDIC are found to be property of the estate, Carmichael contends that the $4,410.00 payment he received from PKR was an authorized transfer under 11 U.S.C. § 1108 made in the ordinary course of PKR’s business. Third, Carmichael argues that the payments were hot property of the estate because PKR held the funds as an agent for the FDIC.
Regarding Carmichael’s first contention, he asserts that under a constructive trust theory, the FDIC’s payments to PKR for expert services were not property of the estate. Therefore, the bankruptcy court erred as a matter of law in granting the trustee judgment under § 549.
The bankruptcy court correctly rejected Carmichael’s constructive trust argument. The applicability of constructive trusts in bankruptcy proceedings has been the subject of a contentious, contradictory, and expanding body of case law. Numerous courts have held that constructive trusts are not recognized or imposed in bankruptcy proceedings unless the trust was imposed either statutorily or judicially prior to the bankruptcy.2 In *118contrast, other courts suggest that constructive trusts are applicable in the bankruptcy context.3
Generally, a bankruptcy court must look to state law to determine whether a constructive trust is applicable. See Taylor v. Rupp (In re Taylor), 133 F.3d 1336, (10th Cir.1998) (“The existence and extent of [the debtor’s] interest is determined by state law.”); Amdura Nat’l Distribution Co. v. Amdura Corp. (In re Amdura Corp.), 75 F.3d 1447, 1452 (10th Cir.1996) (“We look to state law ... to determine when the constructive trust doctrine applies.”). The Tenth Circuit has indicated that in order to impose a constructive trust in a bankruptcy proceeding, the following requirements must be demonstrated:
In order to obtain a constructive trust over property of a bankrupt, a party must (1) show either sufficient wrongdoing by the bankrupt in acquiring the property or a fiduciary relationship between the party and the bankrupt, and (2) be able to trace the wrongfully-held property.
United States Dep’t of Energy v. Seneca Oil Co. (In re Seneca Oil Co.), 906 F.2d 1445, 1449 (10th Cir.1990).4
In the present ease, under New Mexico law, ‘“[a] constructive trust arises where a person who holds title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it.’ ” Bassett v. Bassett, 110 N.M. 559, 798 P.2d 160, 167 (1990) (quoting 5 Scott & Fratcher, The Law of Trusts § 462 (4th ed.1989)). One court explained:
A constructive trust ... is not imposed to effectuate the intention of the parties, but is imposed to prevent the unjust enrichment that would result if the person having the property were permitted to retain it. The circumstances where a court might impose such a trust are varied. They may include fraud, constructive fraud, duress, undue influence, breach of a fiduciary duty, or similar wrongful conduct.
Aragon v. Rio Costilla Coop. Livestock Ass’n, 112 N.M. 152, 812 P.2d 1300, 1304 (1991) (citations omitted, emphasis supplied).
Here, the trustee received the funds postpetition for payment of a prepetition debt in the process of liquidating PKR’s receivables. The relationship between PKR and Carmichael is creditor-debtor. Carmichael cites no legal authority for the proposition that the relationship of creditor-debtor is sufficient to support the imposition of a constructive trust under either New Mexico law or that of any other jurisdiction. If the retention of funds or goods by an insolvent debtor were sufficient to support a claim for a constructive trust, the entire bankruptcy system would be unworkable. As one court noted:
[A]ny claim of unjust enrichment must take into account the circumstances in which it is made.... Whenever a debtor retains a benefit afforded it by a creditor without paying that creditor in full, the estate is arguably “unjustly enriched.” Yet this situation is a result of a congressional policy choice incorporated into the Bankruptcy Code, and bom of the reality that an insolvent debtor, by definition, is *119unable to satisfy in full the debts owed to its creditors.
First Security Bank v. Gillman, 158 B.R. 498, 507 (D.Utah 1998) (citations omitted).
The bankruptcy court was correct in its refusal to impose a constructive trust. Under the facts of this case, a constructive trust is simply not applicable.
Carmichael next argues that the $4,410.00 payment from PKR was made in the ordinary course of business pursuant to 11 U.S.C. § 1108. Carmichael’s reliance on § 1108 is misplaced. PKR was liquidating its assets when it paid Carmichael on his prepetition claim. As the debtor-in-possession, its operations were confined to collecting its receivables and liquidating its personal property. Appellee’s Brief-in-Chief at 1; Appellant’s Appendix at 105-107. Payment for prepetition services was not in the ordinary course of business. “Although Code § 1108 authorizes a debtor in possession to operate its business interest without farther order of the court, this section does not authorize the debtor to make postpetition payments with respect to prepetition debts.” 4 Norton Bankruptcy Law and Practice 2d § 77:4 (William L. Norton, Jr., ed., 2nd ed.1994). See also Hoffman v. Portland Bank (In re Hoffman), 51 B.R. 42, 46 (Bankr.W.D.Ark.1985) (“Section 1108 authorizes a debtor-in-possession to operate in business without further order of the court, but this section does not authorize postpetition payment of prepetition debts.”).
Finally, Carmichael asserts in his reply brief that PKR held the payments as agent for the FDIC and, therefore, the funds did not become part of the bankruptcy estate. On the record before this panel it is impossible to determine whether Appellant raised the agency theory before the bankruptcy court. However, even assuming that the issue is properly before the panel, Carmichael’s agency theory must fail since only the principal, the FDIC, would be entitled to the funds. The FDIC has not asserted that PKR acted as its agent or that it is entitled to recover the funds.
The bankruptcy court’s order granting summary judgment in favor of Appellee is AFFIRMED.
. The dates of appointment and conversion are not contained in this record.
. For instance, in XL/Datacomp, Inc. v. Wilson (In re Omegas Group, Inc.), 16 F.3d 1443 (6th Cir.1994), the court noted the following:
Unless a court has already impressed a constructive trust upon certain assets ... the claimant cannot properly represent to the bankruptcy court that he was, at the time of the commencement of the case, a beneficiary of a constructive trust held by the debtor.
... Because a constructive trust, unlike an express trust, is a remedy, it does not exist until a plaintiff obtains a judicial decision finding him to be entitled to a judgment ‘impressing’ the ... property or assets with a constructive trust.
Id. at 1449-51. See also Stewart v. East Tenn. Title Ins. Agency, Inc. (In re Union Sec. Mortgage Co.), 25 F.3d 338 (6th Cir.1994) (holding a constructive trust was unavailable since it had not been imposed prior to the bankruptcy); Berger, Shapiro & Davis, P.A. v. Haeling (In re Foos), 183 B.R. 149, 154 (Bankr.N.D.Ill.1995) (“[I]n a bankruptcy case filed before another court has imposed a constructive trust, the 'beneficiary' is merely an unsecured creditor, with no interest in the disputed property.”); Monfort, Inc. v. Kunkel (In re Morken), 182 B.R. 1007 (Bankr.D.Minn. 1995).
As the Supreme Court noted in Begier v. IRS, 496 U.S. 53, 110 S.Ct. 2258, 110 L.Ed.2d 46 (1990), equality of distribution among similarly situated creditors remains one of the central policies of bankruptcy law. A constructive trust, based in common law concepts of restitution, has been criticized as a violation of that cardinal policy. One court explained as follows:
Several bankruptcy decisions express the concern that assertions of trust or agency may be made by unsecured creditors to effectively elevate their claims to secured status, without the notice to other creditors that a secured claim ordinarily requires.
The requirements of a constructive trust in this setting may seem formalistic. But it is entirely appropriate to insist on their full rigor, since constructive trust doctrine creates a mechanism by which a creditor may attain a position roughly equivalent to a perfected security interest in proceeds without complying with the usual statutory formalities ... and thus to undercut the statutory scheme.
Almar Communications, Ltd. v. Telesphere Communications, Inc. (In re Telesphere Communications, Inc.), 167 B.R. 495, 503-04 n. 5 (Bankr.N.D.Ill.1994) (citation omitted) (quoting In re Auto-Train Corp., Inc., 810 F.2d 270, 275 (D.C.Cir.1987)), rev’d on other grounds, 205 B.R. 535 (N.D.Ill.1997). See also Bast v. Johnson (In re Johnson), 174 B.R. 537, 542 (Bankr.W.D.Mo.1994) (to allow a creditor a constructive trust would enable that creditor to " ‘lop off a piece of the estate’" and circumvent the Bankruptcy *118Code’s system of distribution (quoting Omegas Group, 16 F.3d at 1453)); Oxford Organisation, Ltd. v. Peterson (In re Stotler & Co.), 144 B.R. 385, 388 (Bankr.N.D.Ill.1992) ("Imposition of a constructive trust clearly thwarts the policy of ratable distribution and should not be impressed cavalierly.”). See generally Andrew Kull, Restitution in Bankruptcy: Reclamation and Constructive Trust, 72 Am. Bankr.L.J. - (forthcoming 1998).
. See Taylor v. Rupp (In re Taylor), 133 F.3d 1336 (10th Cir.1998) (holding that imposition of a constructive trust was not warranted under the facts of the case); Amdura Nat'l Distribution Co. v. Amdura Corp. (In re Amdura Corp.), 75 F.3d 1447, 1452 (10th Cir.1996); United States Dep’t of Energy v. Seneca Oil Co. (In re Seneca Oil Co.), 906 F.2d 1445 (10th Cir.1990) (refusing to impose a constructive trust on behalf of a subsidiary); Skilled Nursing Professional Servs. v. Sacred Heart Hospital (In re Sacred Heart Hospital), 175 B.R. 543 (Bankr.E.D.Pa.1994) (holding that plaintiffs failed to establish any misconduct on part of debtor or any confidential relationship required for imposition of constructive trust under Pennsylvania law).
. Here, Carmichael did not address the tracing element beyond stating that the payment from the FDIC was paid into the debtor’s bank account. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492705/ | MEMORANDUM OF DECISION ON DISCOVERY MATTERS
FRANCIS G. CONRAD, Bankruptcy Judge.
Debtors ask us1 to play magistrate to the world by (1) vacating all confidentiality provisions from all prior orders and stipulations in this matter, and (2) declaring “unenforceable as against public policy” the confidentiality provisions of litigation Bank settled in State Court. Debtors’ Cross-Motion for Modification of the Omnibus Order, 8 (Document No. 705, Feb. 10, 1998). We decline the invitation to decide matters left to other courts, but we loosen the constraints previously imposed, to permit those courts access to the information necessary to make their own decisions. We first determine the motion to vacate confidentiality of discovery in this proceeding, then deal with confidentiality proceedings of the state court settlement as it relates to this proceeding.
I. MOTION TO VACATE CONFIDENTIALITY IN THIS COURT
An acknowledged purpose of the motion to vacate confidentiality in this action is to per*197mit Debtors’ counsel to share the fruits of their discovery in this Court with others litigating against Bank in other Courts. This is a valid purpose in and of itself. Moreover, Debtors say the sharing will facilitate their rebuttal in the on-going trial with Bank. The documents at issue can be subdivided into three distinct categories: (1) documents discovered from party plaintiff AMRESCO arising from AMRESCO’s purchase from Bank of a portfolio of troubled loans, including loans to Debtors (“AMRESCO Documents”); (2)documents in which the Federal Reserve, FDIC, and State of Vermont Department of Banking, Insurance, Securities and Health Care Administration (“Vermont”) claim a regulatory interest in confidentiality (“Agency Documents”);2 and (3) “Bank Documents.”
AMRESCO, Federal Reserve, FDIC, and the State all oppose Debtors’ motion as it relates to the particular documents in which they are respectively interested. Their arguments focus primarily on their unique interests in confidentiality. Bank opposes generally, and argues that Debtors fail to meet the legal standard to modify an existing protective order. The standard Bank proposes, however, was adopted in far different circumstances in a patent case. Nevertheless, we find it gives a useful structure to our decision. Bayer AG and Miles, Inc. v. Barr Laboratories, Inc., 162 F.R.D. 456, 462-63 (S.D.N.Y.1995) held
that the following factors should be weighed where a party seeks to modify a protective order for private reasons:
(1) good cause — if good cause was shown for the original protective order, the burden is on the party seeking modification to show good cause for modification; if good cause was not shown for the original protective order, the burden of showing good cause is on the party seeking continued confidentiality protection;
(2) the nature of the protective order (i.e., narrow vs. broad, court imposed vs. court approved upon stipulation of the parties);
(3) the foreseeability at the time of the original protective order of the modification now requested; and
(4) the parties’ reliance on the protective order.
Amicus curiae briefs supporting Debtors’ motion have been filed by litigants in two other pending cases, one in the federal District Court and one in State Court. We will address each of the three categories of documents in turn, and then make specific orders as to each of the two Amici.
A. AMRESCO Documents
Debtors’ motion to vacate is denied in its entirety as to AMRESCO Documents. “Bottom feeders” like AMRESCO, though much reviled, play an important role in the efficient functioning of our economy. They help keep the economy liquid, permitting creditors to cash out, and bring into the Bankruptcy arena a strong voice advocating for the interests of the classes of creditors whose interests they acquire. They trade in distressed loans, which they sometimes acquire at deep discounts from the face amount of the obligations. AMRESCO claims the methods and strategies it uses in evaluating loan portfolios are confidential proprietary information.
AMRESCO has been an eminently reasonable participant in this litigation. It complies with court orders, files reasonable pleadings with reasonable arguments, acknowledges with candor mistaken legal positions, and reaches reasonable accommodations on points of contention. Our experience is that AMRESCO produces what it’s supposed to more or less when it’s supposed to on more or less reasonable terms. No particular need has been shown by Amici for the AM-RESCO information. Accordingly, no modification of the existing constraints on confidentiality will be permitted as to AMRESCO Documents.
*198B. Agency and Bank Discovery Practices
Discovery from Bank, Federal Reserve, and FDIC in this proceeding has been prolonged, gruelling and contentious, evidencing almost a goal-line-stance mentality. Based on the pleadings on file with this Court, the arguments and representations of counsel, and on the record in this matter, we make the following findings of fact and conclusions of law:
1. “Bank, FDIC, and Federal Reserve have prolonged the discovery phase of this adversary proceeding by engaging in tactics including unreasonable refusal to comply with Court orders and discovery requests, reargument of matters settled on appeal, and inundating the Court with documents for in camera review that were plainly relevant and not privileged.” Omnibus Discovery Order and Reinstatement of Automatic Stay on Debtors’ Residence, AMRESCO v. Vescio, No. 96-1015, slip op. at 8-9 ¶13(3) (Bankr. D.Vt. June 25, 1997).
2. Bank has admitted that it withheld documents that Debtors requested and that we ordered Bank to produce. Id., at 7 ¶¶ G(2)-(4).
3. “Bank has variously claimed mistake, confusion, and lack of permission from FDIC or Federal Reserve to release documents which this Court has ordered disclosed. It has consistently used any available excuse to evade disclosure of plainly relevant material. It has failed to comply with Debtors’ discovery requests, this Court’s orders, and Fed. R.Civ.P. 26(a)(1), as made applicable by Fed. R.Bankr.P. 7026.” Id., at 7-8 ¶ G(5).
4. Debtors were frustrated in their efforts to obtain full, free, and fair discovery in this proceeding until we brought our coercive powers to bear on Bank, FDIC and Federal Reserve.
A. Bank was “ORDERED to produce every document conceivably within the meaning of any discovery request or order of this Court,” with sanctions of $1,000 per day per document that was not timely produced. Id, at 8 ¶ G(6). We also warned Bank that “[e]ontinued abuse of the discovery process may also result in dismissal, with prejudice, of all claims and defenses asserted by The Merchants Bank, and judgment for Debtors on their counterclaims.” Id, at 8 ¶ G(7).
B. We ordered Debtor to serve a notice of deposition and subpoena duces tecum on the general counsels of the appropriate district offices of Federal Reserve and FDIC “for all reports of investigation and related documentation on, with or about The Merchants Bank and Merchants Banc-shares, Inc., dating from 1986 to the present.” Id, at 6 ¶ F(l). We warned, “[i]f the documents are not delivered for production, body executions for those named in the subpoenas will issue forthwith with incarceration to continue until such time as production is made.” Id, at 6 ¶ F(4).
5.The coercive measures imposed against Bank, FDIC, and Federal Reserve here have produced a wealth of discoverable material unavailable in other actions.
We hold that the foregoing factual findings constitute all the good cause we need to modify confidentiality as hereafter provided. Additional and independently sufficient grounds for good cause are raised below.
C. The Tenuous Basis for Confidentiality of Agency and Bank Documents
Our toleration of confidentiality of anything in either category is tenuous and attenuating. Bank argues that we should leave confidentiality in place as to all documents because document-by-document review would be impractical. This argument falls flat with respect to Agency Documents. We sat with glazed eyes, for hours, reviewing Agency Documents one by one. We found no claimed privilege applied. We nevertheless permitted those documents to remain confidential, and have accepted the somewhat cumbersome restrictions that limited access entails. We did so only because of the respect we gained for the federal banking regulators who work in the trenches as we reviewed the documents they generated in connection with Merchants Bank. We came away from our review deeply impressed by a superlative job. Regulators’ skillful intervention saved Bank from itself. Confidentiality is a part of a process that *199works; whether it is essential to that process has yet to be addressed.
The Agencies contend that we should prohibit further dissemination of Agency Documents because privilege must be determined on a case-by-case basis. Having read the documents, we take a different view. Those documents simply do not qualify for the privilege claimed.3 Whether they are relevant might vary in the particular case, but that’s for the judge or magistrate in that case to decide. It was, however, clear to us from our review that any lawyer representing litigants against the Bank for actions arising during the period the Agencies were involved with Bank would have to review those documents to understand the context in which the case arose.
Although Agency lawyers have proffered no cogent rationale for keeping Agency Documents confidential, we are reluctant to make them public at the risk of disrupting a system that works. However, we suggest, strongly, that Agency lawyers build their arguments from the ground up, beginning with a lucid explanation from the regulators themselves of why and whether confidentiality matters. Judicial patience is wearing thin. In the meantime, and for the moment, we will maintain confidentiality as it exists, in the expectation that someday the Agencies will justify it.
Bank’s argument for confidentiality in bulk has some merit with respect to Bank Documents. We have, thankfully, not had to review the 120 boxes of documents Bank ultimately produced to Debtors. Nor do we intend to. Sheer volume warrants treating Bank Documents as presumptively confidential. Bank’s insistence on maintaining customer confidentiality is well taken, and Debtors concede the point. This is the primary basis on which any confidentiality remains for Bank Documents. Bank’s argument that it will have to re-produce everything to other litigants if Debtors’ motion is granted is a red herring. Debtors’ motion, and this Order, relate only to documents that Debtors have obtained. Customer names have already been redacted from those documents. Vacation of confidentiality as to redacted Bank Documents would be an appropriate sanction for Bank’s abusive discovery tactics. We hesitate to go that far only to avoid generating more unnecessary litigation in this action.
We will grant limited relief as to Agency and Bank Documents. Bank and Agencies bear the burden of proof on maintaining confidentiality, because no good cause has ever been ■ established for the existing confidentiality provisions. They have faded to carry their burden. Even if the burden were on Debtors, however, good cause for the relief sought has been demonstrated. We imposed the existing constraints reluctantly, as a matter of administrative expedience, despite the fact that no reasonable basis has yet been established for confidentiality of the discovery at issue. It facilitated getting this matter tried. Our discomfort with confidentiality here has been regularly expressed, and it was certainly foreseeable that we would change the rules. Reliance is not an issue. Bank and Agency Documents were produced as a result of judicial coercion. Any legitimate interests in confidentiality that may exist will not be threatened by the modifications we make.
Much of the argument by Bank and the Agencies in opposition to the motion suggests that, from their perspective at least, the present system adequately protects their interests. Accordingly, although we will permit more widespread dissemination of the documents, as hereinafter set forth, we do so with confidentiality intact. The structure that worked here can be extended to include other litigants in other courts without disrupting the protection of confidentiality the Agencies and Bank may or may not be entitled to. Our decision only makes the information available to other litigants. We do not presume to suggest what other Courts should do with that information. Any orders they issue with respect to discovery in matters pending before them, will, obviously, supersede our orders.
*200D. Non-Party Requests for Access
The pleadings indicate that at least five other lawsuits have been filed against Bank in state and federal courts. Bank settled one action under a strict confidentiality order that Debtors seek to crack in a related matter we address hereafter. The Merchants Bank v. Gaynes Plaza Partners, et al., S293-93 CnC (Chitt.Sup.Ct.) (hereinafter “Gaynes Plaza”). A second action is pending on appeal before the Second Circuit. Savoie, et al. v. Merchants Bank, et al., 1:94— CV-312 (D.Vt.) (“Savoie”). The three remaining actions have been consolidated in Merchants Bank v. C.R. Davidson Co., Inc., et al., Docket No. 644-11-95-WnCv, pending in Vermont’s Windsor Superior Court. Bank’s adversaries in the latter two proceedings request direct access to the discovery obtained by Debtors. We address each request separately.
1. Savoie Action
Non-party Leon J. Savoie asks that we either vacate confidentiality altogether, or, in the alternative, grant his counsel “access to documents produced in this action, within the confines of the existing confidentiality order.” Savoie’s Amicus Brief in Support of Vescios’ Partial Objection to TMB’s Emergency Motion and Vescios’ Cross-Motion for Modification of the Omnibus Order, 2 (Document No. 717, March 16, 1998) (“Savoie Brief’). Sa-voie alleges that documents produced in this proceeding may prove what is in essence a fraud upon the United States District Court, of which the Bankruptcy Court is an adjunct.
Savoie was the named plaintiff in a putative class action against Bank, related entities, and officials (collectively “Merchants”) “on behalf of all clients of Merchants Trust who suffered losses as a result of Merchants’ actions in fraudulently inducing those clients to invest in highly speculative derivative instruments.” Savoie Brief, 2. Shortly after the Savoie Action was filed on Oct. 24, 1994, but before the class was certified, Merchants settled the ease out from under Savoie by paying the injured class $9.2 million for losses suffered. Litigation has centered since on the issue of whether the Savoie Action was a substantial cause of the settlement, entitling Savoie and/or his attorney to a payoff, Id, 2-5, and whether Bank’s position that it was not was in bad faith, justifying another payoff. Savoie alleges in the Second Circuit that:
Defendants’ ostensible justification for engaging in the last three years of litigation has been their implausible assertion that the Savoie suit did not cause Merchants to make the 1994 payment. That assertion now being admitted to be a myth, one is left with the inescapable conclusion that defendants, so as to punish plaintiffs counsel for causing Merchants to make the $9.2 million payment, engaged in their no cause litigation charade as part of a malicious attempt to deprive plaintiffs counsel of fees or, at a minimum, to make it as expensive as possible for plaintiffs counsel to obtain his fees.
Appellants/Cross Appellees’ Supplemental Brief in the Main Appeal, 3, Exh. A to Debtors’ Opposition to Merchants Bank’s Request for a Stay, and Reply Memorandum in Regard to its Cross-Motion for Modification of the Omnibus Order (Document No. 729, March 30,1997).
In his Amicus Brief, Savoie alleges a whole series of discovery abuses by Merchants in his case. His allegations are consistent with Bank discovery practices that we have experienced here. Savoie alleges that Debtors here have obtained documents that Merchants denied existed in his case. More particularly, he believes Debtors have evidence to establish “bad faith litigation, spoliation and Fed.R.Civ.P. 37(e) abuses” in his case. Savoie Brief, 2. The gravamen of his pleading is that Merchants lied to the District Court Judge and Magistrate Judge about substantial causation in his case and Debtors have the evidence to prove it.
Bank opposes Savoie’s request on the grounds that it is procedurally improper, he lacks standing, we lack jurisdiction, and the documents he seeks aren’t relevant in his action. We disagree. Bank’s procedural arguments are unavailing. A court has power and jurisdiction to determine whether sanctionable conduct, including fraud upon the court, has been committed in proceedings *201before it. In re St. Johnsbury Trucking Co., 1994 WL 832007, *1. “A fraud on the court ... occurs when it can-be demonstrated, clearly and convincingly, that a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system’s ability impartially to adjudicate a matter by hampering the presentation of the opposing party’s claim or defense.” In re St. Johnsbury Trucking Co., 184 B.R. 446, 454 (Bankr.D.Vt.1995).
Savoie makes serious allegations of misrepresentation to our District Court. He points out testimony by Bank’s president in this proceeding that is plainly inconsistent with prior testimony in the Savoie proceeding, lending credibility to his arguments. Sa-voie’s substantive allegations of egregious conduct are unrebutted. We will never knowingly permit any order of ours to shield a party from accountability to the Court of which we are a unit. That is a sufficient basis to permit Savoie access to Debtors’ discovery in this proceeding. An additional basis is simply in the interests of justice. Where the legitimate interests in confidentiality of the parties can be accommodated, there is no basis for denying litigants access to the fruits of other litigants’ labors. Bank simply has no right to make each litigant jump through every hoop jumped through by all other litigants. Finally, we find merit in Debtors’ argument that cooperation and mutual sharing of discovery with Savoie will assist Debtors in impeaching the credibility of Bank’s President, who has testified in both eases.
Accordingly, we will ORDER that Debtors may disclose to Savoie discovery in their possession in this action as follows:
1. AMRESCO Documents: No discovery shall be made.
2. Agency Documents: Savoie’s counsel shall file with this Court, the District Court, the Second Circuit, and both federal agencies, an acknowledgment that it is bound by and shall in all respects comply with this Court’s Omnibus Order and all other orders and Court-approved stipulations governing those documents in this proceeding, until such time as the District Court or the Court of Appeals otherwise orders. Upon filing of such acknowledgments, Debtors may make their discovery available to counsel for Savoie.
3.Savoie may have complete and unfettered access to all Bank documents, and his use thereof shall be governed by any appropriate outstanding orders of the District Court in his action.
2. Windsor Action
Debtors’ counsel here have filed an appearance as special counsel for defendants in the Windsor action, to prosecute their claims and defenses against Bank. Bank fairly observes that Debtors’ pleadings here advance the interests of the State Court defendants that Debtors’ counsel now represents. While obviously true, it is of no import. Various of those defendants have also filed an Amicus Brief (Document No. 722, March 18,1998) in support of Debtors’ motion to terminate confidentiality. -Their Amicus Brief includes as an exhibit a “Stipulation and Consent. Order Protecting the Confidentiality of Certain Documents” entered in that case. We have reviewed the State Court Consent Order and find that it affords Bank as much if not more protection for its documents than we have afforded Bank in this Court> but it does not address FDIC and Federal Reserve Documents. Accordingly, we hereby ORDER that Debtors may disclose to the Windsor Litigants discovery in their possession in this action as follows:
1. AMRESCO Documents: No discovery shall be disclosed.
2. Agency Documents: Counsel for the Windsor Litigants shall file with this Court, the Windsor Superior Court, the State of Vermont Department of Banking & Insurance, and both federal agencies, an acknowledgment that it is bound by and shall in all respects . comply with this Court’s Omnibus Order and all existing orders and stipulations governing Agency Documents, until such time as a Vermont State Court with competent jurisdiction otherwise orders. Upon filing of such acknowledgments, Debtors may make their discovery available to counsel for the Windsor Litigants.
*2023. The Windsor Litigants may have complete and unfettered access to all Bank Documents, subject to all terms and conditions of the Windsor Superior Court’s Consent Order on confidentiality.
II. Motion to Declare State Court Settlement Order “Unenforceable as Against Public Policy”
Debtors seek discovery of litigation Bank settled in State Court. They ask us to declare the settlement agreement invalid as against public policy, so they can have informal conversations with persons subject to the Agreement. We are unwilling to go that far.
The parties in The Merchants Bank v. Gaynes Plaza Partners, et al., S293-93 CnC (Chitt.Sup.Ct.) (hereinafter “Gaynes Plaza”), entered into a “Settlement and Termination Agreement” dated May 19, 1995. Bank has provided us with an unsigned copy of a State Court “Judgment and Decree of Foreclosure,” with the same date, which we will assume for purposes of argument that the State Court did sign. That Judgment makes no reference to confidentiality, nor rests upon any document which does. No State Court interests are implicated.
The Agreement itself permits disclosure of the information “to the extent such disclosure is required by applicable law or regulation or is ordered by a court of competent jurisdiction.” Moreover, the confidentiality provisions are structured to be simultaneously a shield and a sword. It bars disclosure against Bank, but permits Bank to disclose whenever “non-disclosure might reasonably be expected to adversely affect [Bank’s] ability to defend its interest.” Disclosure is required by the discovery rules operative in this Court, and we will order it. Accordingly, the Agreement is inoperative by its own terms.
Debtors have subpoenaed production of documents from a third party who was involved in the Gaynes Plaza litigation and is bound by the Agreement. Bank resists on the grounds that discovery is closed, we should abstain to let the Vermont State Court decide “important unsettled state public policy issues,” and the documents are not relevant. We reject Bank’s argument that discovery is closed for several reasons. First, as Bank points out, Debtors originally demanded production before the end of discovery. The documents were not produced. Applicable law required production. Second, Bank’s discovery abuses have so distorted the playing field that a little flexibility is necessary to restore the balance. Debtors had to fight prolonged battles to get what they were entitled to, then were overwhelmed by the sheer volume of what they received. Allowing Bank to hide behind this confidentiality agreement would just perpetuate that pattern. Third, Debtors concede the inadmissibility of the evidence for their case in chief, and seek it for rebuttal, an eminently proper purpose.
Bank’s attempt to send Debtors back into State Court is a fiivolous argument so totally devoid of merit that it evidences disrespect for the Court and opposing counsel. As noted above, the State Court’s Judgment in no way even references the Agreement. Bank’s relevance argument also lacks merit. In the first place, the record establishes that Bank’s positions on relevance are unreliable. In addition, discovery does not have to be relevant. “The information sought need not be admissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.” Fed.R.Civ.P. 26(b)(1), as made applicable by Fed.R.Bankr.P. 7026. Finally, a comparison between the counterclaims against Bank in Gaynes Plaza and Debtors’ claims here puts Debtors’ request well within the bounds of reasonable discovery.
Debtors’ motion to void confidentiality provisions of the Gaynes Plaza Agreement as against public policy is denied. Bank’s motion to quash Debtors’ subpoena is denied.
III. Bank’s Request for Stay
Bank requested that we grant a stay pending appeal in the event we modified confidentiality in any way. That request is denied. It is unlikely Bank or Agencies would prevail on appeal. The delay occasioned by an appeal would compromise Debtors’ ability to buttress their case on rebuttal, and hinder Amici’s access to discoverable information. Existing protections for confidentiality on al*203ready discovered documents are maintained in place, so the risk of legally cognizable harm to Bank and Agencies is unlikely.
Debtors shall submit an order consistent with the factual findings and legal conclusions herein within 10 days of the date this Memorandum of Decision is issued. Parties opposing shall have five days to object to the form of the order.
. 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), (C), (K), 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.
. The Agency Documents are more precisely identified in two prior opinions in this case in which we denied the privilege claims of Federal Reserve, Vescio v. Merchants Bank (In re Vescio), 208 B.R. 122 (Bankr.D.Vt.1997) ("Vescio I"), and FDIC, Merchants Bank v. Vescio (In re Vescio), 210 B.R. 913 (Bankr.D.Vt.1997) ("Vescio II").
. Our findings and conclusions about Agency Documents are found in Vescio I, supra, 208 B.R. 122 (Bankr.D.Vt.1997) (Federal Reserve), and Vescio II, supra, 210 B.R. 913 (Bankr.D.Vt.1997) (FDIC). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492706/ | MEMORANDUM
ROBERT R. MERHIGE, Jr., Senior District Judge.
This matter is before the Court on the Motion of Thomas J. Brandi (“Brandi”) For Reinstatement Of Attorneys Fees. The Dai-kon Shield Claimants Trust (the “Trust”) takes no position with respect to Brandi’s motion. For the reasons which follow, the Court will deny the motion.
I.
On March 1, 1995, this Court entered an Order Disallowing Unreasonable Attorneys Fees on Pro Rata Distribution (the “March 1 Order”). Paragraph 2 of that Order prohibits counsel for Daikon Shield personal injury claimants from “charging or receiving, direct*272ly or indirectly, any compensation or fees, based upon or out of any pro rata distribution received by a Daikon Shield Personal Injury Claimant from the Trust ... in excess of ten percent of such pro rata distribution.” This Court rejected all challenges to its jurisdiction to enter the March 1 Order. That ruling was unanimously affirmed by the Court of Appeals for the Fourth Circuit. In re A.H. Robins Co., 182 B.R. 128 (Bankr.E.D.Va.1995), aff'd, 86 F.3d 864 (4th Cir.1996).1
The March 1 Order also prescribed a procedure to be followed by any attorneys or firms who objected to the disallowance and wished the Court to consider reinstating fees above the ten percent limit. The procedure included the requirement that such motions to reinstate fees be filed with the Court no later than April 17, 1995. The Order gave notice of the opportunity for argument and an evidentiary hearing before the Court. On April 28, 1995, Brandi, by counsel, appeared before the Court and presented evidence in support of his Motion To Reinstate Fees.2 However, having stayed entirely the proceedings on all of the individual motions to reinstate fees during the pendency of the appeal, this Court never addressed the merits of Brandi’s Motion.
Following the unsuccessful appeal to the Fourth Circuit, this Court entered an Order dated September 17, 1996 addressing the sixty-two motions to reinstate fees still pending before the Court. That Order directed certain movants to file by November 1, 1996 their proposed findings of fact and conelu-sions of law in support of their motions to reinstate fees. Brandi made a timely submission and the matter is now ripe for disposition.
II.
Brandi is an attorney from San Francisco, California who has represented over 300 Dai-kon Shield claimants over the past fourteen years. As of the date of the April 28 hearing, Brandi’s firm represented 207 claimants. Brandi’s firm represented Daikon Shield clients both before and after A.H. Robins initiated Chapter 11 bankruptcy proceedings in 1985.3 Clients who retained Brandi prior to the bankruptcy signed one-third contingency fee contracts. Clients who retained Brandi after the bankruptcy, however, signed twenty-five percent contingency fee contracts.4 Under either fee structure, Brandi’s fee is taken from the client’s net recovery; that is, costs are first deducted from the recovery, and the fee is then calculated from the reduced amount.
Brandi claims that his firm performed many other activities, without charge, which benefited Daikon Shield claimants who were not his clients. For example, Reuvekamp testified that she personally assisted over fifty unrepresented claimants, free of charge, and gave them advice regarding their claims. Additionally, both she and Brandi appeared before the California legislature in support of a bill which eventually was signed into law which eliminated the statute of limitations as a defense in California. Finally, Brandi’s firm assisted claimants in applying for funds *273from the Trust’s in vitro fertilization program, and also negotiated with various lien holders and insurance companies, who sought to recover a portion of the medical expenses they had paid. Again, the costs associated with these activities were not directly charged to any client.
This is not to say, however, that Brandi was not compensated for his Daikon Shield-related work. On the contrary, Reuvekamp estimated that the Brandi firm earned approximately $1,000,000 in fees after payment of costs, despite the fact that as of the April 28 hearing, the firm had yet to take a case to trial.
III.
The Court recognizes that Brandi, like many other attorneys, has made a considerable effort on behalf of his Daikon Shield clients over the course of these proceedings. Nevertheless, Brandi’s protracted involvement in this ease does not, standing alone, constitute the type of “extenuating circumstances” necessary for him to be entitled to a fee of more than ten percent from the pro rata. See In re A.H. Robins Co. (Stan L. Linker), 211 B.R. 533 (E.D.Va.1997); In re A.H. Robins Co. (Henri E. Norris), 205 B.R. 771, 773 (E.D.Va.1997). This is because when the Court considers pro rata fees, the Court’s focus is not on an attorney’s efforts on the underlying claim, but on the efforts required for the client to receive the pro rata payment. Robins, 182 B.R. at 135.5 The fact that Brandi may have, as compared to other Daikon Shield attorneys, expended more resources in obtaining the maximum settlement for his clients does not entitle him to charge a higher fee for the purely ministerial task of forwarding his clients their pro rata distributions. Furthermore, with respect to the services that Brandi provided for claimants who were not his clients, the Court is not satisfied that these occasional and voluntary acts constitute the extenuating circumstances required for him to be entitled to a fee of more than ten percent. See Robins (Henri E. Norris), 205 B.R. at 773.
In short, Brandi has failed to present the type of extraordinary case or extenuating circumstances that would justify relief from the Court’s March 1, 1985 Order. In the absence of such a showing, a ten percent fee is “not only reasonable, but overly generous.” Robins, 86 F.3d at 377. Brandi’s motion for reinstatement of fees will be denied.
An appropriate Order shall enter.
. On October 20, 1995, the Court further directed all persons representing claimants receiving the December 1995 60% advance pro rata installment to send "forthwith” to each claimant "at least ninety percent of the amount of such installment." (the "No Escrow/No Costs Order”). That Order prohibited lawyers from escrowing or retaining any more than ten percent of the installment "as attorneys fees or other charges.” Subsequently, the Fourth Circuit denied a Motion to Permit Escrow of Disputed Funds filed by several lawyers seeking reversal of the No Escrow/No Costs Order. In re Paul W. Bergstrom, et al., 86 F.3d 364; In re H. Philip Grossman & James F. Szaller, Case No. 95-2611 (4th Cir. Nov. 16, 1995). On Februaty 12, 1996, this Court entered a third Order, clarifying that the prohibition on escrow and retention of sums in the No Escrow/No Costs Order applied to all 60% pro rata payments made by the Trust after the December 1995 distribution.
. Mylene L. Reuvekamp (“Reuvekamp”), an associate of Brandi, appeared at the April 28 hearing and testified on behalf of the law firm.
. The Court also notes that as a result of Brandi’s extensive involvement in this case, this Court appointed Brandi to the original claimants committee, which was later dissolved in 1986.
. Reuvekamp testified that approximately 100 of the firm’s 207 clients have one-third fee contracts, and that the remainder, approximately 107 clients, have twenty-five percent fee contracts.
. See also Robins (Henri E. Norris), 205 B.R. at 773; Robins (Stan L. Linker), 211 B.R. at 536 & n. 5; In re Robins (Cashman & Partners), 211 B.R. 536 (E.D.Va.1997). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492707/ | MEMORANDUM OPINION AND ORDER RE TRUSTEE’S OBJECTION TO CONFIRMATION
G. HARVEY BOSWELL, Bankruptcy Judge.
The Chapter 13 plan filed by the debtor listed two separate bank loans on which certificates of deposit had been pledged as collateral as the debtor’s only secured debts. Tucker’s plan proposed to repay these secured debts in full, while only proposing to pay a small percentage to her unsecured creditors. The Chapter 13 Trustee objected to this repayment plan, alleging that the debtor’s plan was not entitled to confirmation because the debtor was not devoting all of her disposable income to the repayment of debts.
The Court conducted a hearing on this matter on February 5, 1998. Fed. R.Bankr.P. 9014. Pursuant to 28 U.S.C. § 157(b)(2), this is a core proceeding. After reviewing the testimony from the hearing and the record as a whole, the Court makes the following findings of fact and conclusions of law. Fed.R.BankR.P. 7052.
I. FACTS
Sometime prior to filing her Chapter 13 bankruptcy petition, the debtor in this case, Geneva Tucker (“Tucker”), pledged two certificates of deposit as collateral for two separate loans. One certificate of deposit was in the amount of $5500 and was pledged to Leader’s Credit Union (“Leader’s”) in Jackson. Tucker used the proceeds of this loan to purchase a 1983 Cadillac Seville. The other certificate of deposit was in the amount of $7100 and was pledged to Volunteer Bank (“Volunteer”) in Jackson. No proof was introduced at the hearing as to what the proceeds of this loan were used for.
Tucker’s Chapter 13 plan was filed along with her Chapter 13 petition on October 17, 1997. In this plan, Tucker listed Leader’s and Volunteer as her only two secured creditors and proposed to repay them in full over the life of the plan. Such repayment totals approximately $15,000. In addition to repaying this secured debt, Tucker’s plan also proposed to repay unsecured creditors, but instead of the 100% repayment that the secured creditors were to receive, the approximate percentage to be paid to unsecured creditors was listed at approximately $5,000.00 or 30%.
As a result of Tucker’s proposed repayment plan, the Chapter 13 Trustee filed an objection to confirmation. In such objection, the trustee alleged that Tucker’s plan was not entitled to confirmation because it failed to devote all of the debtor’s disposable income to the plan as required by 11 U.S.C. § 1325(b)(1)(B). At the confirmation hearing for Tucker’s plan, the trustee asserted that by paying Leader’s and Volunteer as secured creditors and redeeming her CD’s, the debt- or is, in essence, paying herself. This type of repayment plan allegedly violates § 1325(b)(1)(B) because the debtor’s entire disposable income is not being used to repay creditors. In opposition to the trustee’s motion, the debtor asserted that nothing in the Bankruptcy Code defines what type of security a person can retain in Chapter 13.
II. CONCLUSIONS OF LAW
Pursuant to the directives of § 1325, a debtor is required to ensure that she will apply all projected disposable income throughout the plan period toward plan payments before a Chapter 13 plan may be confirmed. 11 U.S.C. § 1325(b)(1)(B). Disposable income is statutorily defined as “income which is received by the debtor which is not reasonably necessary to be expended for the maintenance or support of the debt- or.” 11 U.S.C. § 1325(b)(2)(A). Although *361the trustee alleged in his objection that the debtor’s plan violates the “disposable income” requirement of § 1325, this Court finds that the situation at bar is more appropriately addressed under the “good faith” requirement of Chapter 13. Both the legislative intent behind § 1325(b) and the relevant case law interpreting § 1325(b) support this conclusion.1
In the case at bar, the debtor is proposing to classify and repay the Leader’s loan and the Volunteer loan as secured debts. If this Court were to allow the debtor to do this, the net effect would be to allow the debtor to fully repay herself \ as a creditor while paying her unsecured creditors less than 100%. Such activity would not only violate the spirit of the Bankruptcy Code, but would also go against the majority of case law interpreting similar repayment proposals.
In the case of In re Jones, 138 B.R. 536 (Bankr.S.D.Ohio 1991), a bankruptcy court was faced with debtors who had borrowed against their retirement fund and then proposed to fully repay this debt as secured, while paying less than 100% to their other creditors. In refusing to allow the debtors to do this, the court aptly summed up why such a repayment scheme cannot be approved:
Here, it appears that the Debtors’ existing retirement benefits would be virtually wiped out if the loan is not repaid. Even so, this result is mandated for two reasons. First, to allow the Debtors to withdraw and claim this as a protected fund would be unfair to their creditors. Second, such a holding would provide an inappropriate message to future debtors. The holding would suggest that debtors contemplating bankruptcy could take out loans against their retirement fund and then insulate those sums from the Chapter 13 trustee.
The result would be that sums expended from future earnings on the repayment of these loans would be beyond the creditors’ reach. It is clear that Congress never intended this result. Section 1322 of the Bankruptcy Code provides that a debtor’s estate’ is subject to the total supervision and control of the Chapter 13 trustee and includes all of the debtor’s earnings while the plan is in effect.
The public policy consideration of providing debtors with a fresh start merits a similar conclusion. The granting of a fresh start must be accomplished under conditions consistent with the Bankruptcy Code. A guiding principle of bankruptcy is “good faith” and “fairness” in the treatment of creditors. As already mentioned, it would be unfair to the creditors to allow the Debtors in the present case to commit part of their earnings to the payment of their own retirement fund while at the same time paying their creditors less than a 100% dividend.
Id. at 539.
In the case at bar, Tucker is proposing to fully repay Leader’s and Volunteer’s loans and thereby redeem her certificates of deposit. Such actions are analogous to repaying a retirement fund. When Tucker fully repays the two loans, she gets her certificates of deposit back free and clear of all liens. Those two certificates are tantamount to a savings account. When the CD’s are eligible for cashing in, Tucker gets the face value of the CD’s in cash. If debtors are not entitled to redeem retirement accounts in this fashion, surely they are not entitled to do the same thing with CD’s. In proposing to do so, Tucker is evidencing a lack of good faith and, as such, her plan cannot be confirmed.
For these reasons, the Chapter 13 Trustee’s objection to confirmation will be sus*362tained and confirmation of Tucker’s plan will be denied. Should Tucker be able to increase her plan payments so that 100% is paid to unsecured creditors or should she surrender her CD’s to Leader’s and Volunteer, thereby eliminating the monthly plan payment to these creditors, her plan may be confirmed. An order will be entered accordingly.
III. ORDER
It is therefore ORDERED that the Trustee’s Objection to Confirmation is SUSTAINED. It is further ORDERED that confirmation of debtor’s Chapter 13 plan is DENIED until such time as the debtor’s plan provides for 100% payment of her unsecured debts.
IT IS SO ORDERED.
. Section 1325(b) was added to the Bankruptcy Code by the Bankruptcy Amendments and Federal Judgeship Act of 1984. This amendment was made in order to help clarify the meaning of "good faith” as used in § 1325(a)(3). "Debtors proposing to use all of their ‘projected disposable income’ for the life of the plan would be acting in good faith. Such a standard does not require any minimum amount or percentage of repayment to unsecured creditors.” 5 Collier on Bankruptcy ¶ 1325.09[1] (15th ed.1994). See also In the matter of Jones, 119 B.R. 996, 1000 (Bankr.N.D.Ind.1990)("Section 1325(b)(1)(B) requires a Chapter 13 debtor to dedicate all of its projected disposable income ‘to make payments under the plan.’ It does not require disposable income to be committed to the payment of unsecured claims under the plan — only to the plan’s payments in general.”) | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492709/ | MEMORANDUM OPINION
RONALD BARLIANT, Bankruptcy Judge.
The Trustee for this chapter 7 estate has petitioned the Court to issue a writ of mandamus against Respondents, the Cook County Board of Commissioners (“the Board”) and its president, John H. Stroger, Jr. to pay a judgment entered more than a year ago against the Defendants, David D. Orr, Cook County Clerk, and Edward J. Rosewell, Cook County Treasurer, in their official capacities. The Respondents have moved to dismiss the Trustee’s petition for mandamus on the grounds that the County has no duty to pay judgments against its officers. For reasons detailed below, the Court denies Respondents’ motion.
BACKGROUND
As previously explained by the Court:
The parties settled the above referenced adversary proceeding and an agreed judgment was entered against the Defendants (Orr and Rosewell) in the amount of $431,-472.88, on April 17, 1997. The agreed judgment provided that the judgment ‘shall constitute the reimbursement to the Plaintiff of monies found to be preferential transfers under 11 U.S.C. § 547.’ After a few months of repeated promises to pay, but with no cash forthcoming, the trustee served a non-wage garnishment on First Chicago NBD Corp. and Amalgamated Bank of Chicago, to garnish funds in the Defendants’ checking accounts.
Carmel v. Orr (In re Lakeside Community Hospital), No. 95A880, slip op. at 1 (Bankr.N.D.Ill. Dec. 3, 1997).
The State’s Attorney, on behalf of Orr and Rosewell, moved to quash the garnishment summonses and the Court granted their motion on December 3, 1997. In the motion to quash and supporting memoranda, the State’s Attorney argued that chapter 55 § 5/1-6004 of the Illinois Compiled Statutes prohibited the Trustee from enforcing the judgment by means of a wage garnishment proceeding. The Court agreed and further determined that the appropriate method of enforcement was by means of a writ of mandamus. Id. at 2. Relying on the Court’s direction, the Trustee filed a writ of mandamus which the State’s Attorney, on behalf of the Respondents, presently seeks to dismiss.
DISCUSSION
The State’s Attorney argues in his motion that the Trustee’s petition for mandamus against Stroger and the Board must be dismissed because the agreed judgment order was only entered against Orr and Rose-well and the Clerk and Treasurer “are each separate entities, completely independent of Cook County.” (Resp’ts’ Mot. to Dismiss, ¶ 9.) Therefore, he argues, “the County has no right or duty to compel the Treasurer or the Clerk to act.” (Resp’ts’ Mot. to Dismiss, ¶ 12.) The State’s Attorney’s arguments call into question the reasoning in the Court’s previous Memorandum Opinion and, hence, the Court must revisit the issue of the propriety of a garnishment proceeding as a method of enforcing the agreed judgment order. In particular, those arguments require a determination of whether the judgment is or is not covered by § 5/1-6004.
Section 5/1-6004 of Chapter 55 of the Illinois Compiled Statutes reads in pertinent part:
§ 1-6004. Payment of a judgment against a county. A judgment against a county shall not, in any case, be enforced against the lands or other property of a county; but when judgment is entered against a county, the county board shall *621direct an order to be drawn on the county treasurer for the amount of the judgment and costs, which orders shall be paid as other county debts.
55 Ill. Comp. Stat. 5/1-6004 (West 1996) (emphasis added). As stated above, when the State’s Attorney previously moved to quash the garnishment summons, he argued that enforcement of the agreed judgment order was governed by § 5/1-6004, which prohibits such enforcement of a “judgment against the county.” Necessarily, therefore, his position was that the agreed judgment order was a “judgment against the county” because otherwise the prohibition contained in the first clause of § 5/1-6004 would not have been applicable. (See Defs.’ Mot. to Quash, ¶ 4-5; Defs.’ Reply Brief for Mot. to Quash, p. 2.)
In support of his present motion to dismiss the mandamus petition, which seeks enforcement of the § 5/1-6004 duty to pay judgments, he argues that the agreed judgment order against County officers in their official capacities is not a “judgment [] entered against a county” and is therefore not subject to the payment mandated by the second clause of § 5/1-6004.
It has to be one or the other; it cannot be both. If the agreed judgment order is covered by § 5/1-6004, the order quashing the garnishment summons was correct, but the petition for writ of mandamus should be granted. If that judgment is not covered by § 5/1-6004, however, then the County has no duty under that section to pay it, and the petition for mandamus should be dismissed, but garnishment would be an appropriate remedy. Not only would, in that instance, garnishment not be prohibited by statute, but it also would not be prohibited by public policy. Highsmith v. Jefferson County, a case previously relied upon by the Trustee in opposition to the State’s Attorney’s motion to quash, holds that the public policy against garnishment of County funds is subject to limited exceptions in extraordinary circumstances. 108 Ill.App.2d 41, 246 N.E.2d 704 (1969) (garnishment appropriate when County ignored a properly obtained writ of mandamus). In addition, sovereign immunity was abolished by the 1970 revisions to the Illinois Constitution. The Illinois constitution also assures “a certain remedy in the laws for all injuries and wrongs.” Ill. Const. art I, § 12. Plainly, if mandamus is not the appropriate remedy, garnishment is.
The State’s Attorney now argues that an action to enforce a judgment can generally only be sustained against an entity or person named in the judgment. The State’s Attorney’s argument, however, does not answer the question of whether the County has a duty to pay judgments entered against its Treasurer and Clerk in their official capacities. In light of the State’s Attorney’s abrupt change of position from arguing that a judgment against Orr and Rosewell was essentially a judgment against the County to arguing that Orr and Rosewell are completely separate from the County for purposes of this proceeding, the Court will, under the doctrine of judicial estoppel, apply the State’s Attorney’s original admission that the County is liable for judgments entered against Orr or Rosewell.
The doctrine of judicial estoppel “provides that a party who prevails on one ground in a lawsuit cannot' turn around and in another lawsuit repudiate the ground.” McNamara v. City of Chicago, 138 F.3d 1219, 1225 (7th Cir.1998). “It is designed to protect courts from ‘chameleonic litigants,’ not necessarily to protect the party invoking the doctrine, who is not required to show prejudice to invoke the doctrine.” Czajkowski v. City of Chicago, 810 F.Supp. 1428, 1434-1435 (N.D.Ill.1992) (citing Levinson v. United States, 969 F.2d 260, 264 (7th Cir.1992)). Although the Illinois Appellate Court has held “[p]ublic policy forbids the application of the doctrine [of equitable estoppel] ... to a county which is a mere political subdivision of the State, particularly in the collection of revenues by taxation,” Critton v. Gurrola, 139 Ill.App.3d, 719, 724, 487 N.E.2d 726, 730, 93 Ill.Dec. 901, 905 (1985), “judicial estoppel is closer to collateral estoppel than equitable estoppel, but is still different from both equitable estoppel and collateral estoppel.” Czajkowski, 810 F.Supp. at 1445. Further, both the Seventh Circuit and the Illinois Appellate Court have applied the doctrine against government bodies. See id. at 1444-1445 (discussing the Seventh Circuit’s *622application of doctrine to government bodies); People v. Lawlor, 291 Ill.App.3d 97, 103, 683 N.E.2d 214, 217-218, 225 Ill.Dec. 270, 273-274 (1997) (applying doctrine to “prevent[] the State from [] asserting that [a] seizure order was a search warrant”); People v. Wisbrock, 223 Ill.App.3d 173, 175, 584 N.E.2d 513, 514, 165 Ill.Dec. 334, 336 (1991) (applying doctrine to prevent the State from using breathalyzer results as evidence). Here, the State’s Attorney took a wholly inconsistent position in the last judicial proceeding, where it was successful in having the garnishment proceeding dismissed, and will be estopped from arguing otherwise in the mandamus proceeding presently before the Court.1
Moreover, even apart from estoppel, there is good ground on which to hold that the agreed judgment order is enforceable by mandamus. “[A]ll moneys ... received by ... the office of the county treasurer when acting as such” are county funds. See 55 Ill. Comp. Stat. 5/3-11001. The Trustee’s preference' action sought to recover funds received by the Treasurer when he was acting in his official capacity. He was therefore acting for the county when he received the funds that were county funds. The agreed judgment provides that payment of the judgment will be “reimbursement” of the preferential transfer. That reimbursement must be with county funds. The Treasurer is acting for the county, not himself. The judgment is therefore against the “county” within the meaning of § 5/1-6004; it follows that “the county board shall direct an order to be drawn on the county Treasurer for the amount of the judgment and costs, which orders shall be paid as other county debts.” 55 Ill. Comp. Stat. § 5/1-6004 (emphasis added).
In addition, the structure of Chapter 55 of the Illinois Compiled Statutes lends support to the applicability of § 5/1-6004 to this proceeding. Article 1 of Chapter 55, in which § 5/1-6004 is contained, encompasses the chapter’s general provisions. The State’s Attorney originally read § 5/1-6004 to mean that judgments against the Treasurer or Clerk are judgments against the County. This reading appears reasonable in that Article I is a general section of Chapter 55 which can be viewed as applying to all other Articles of Chapter 55, including Article 3 which deals with officers and employees.
Further, if § 5/1-6004 does not apply, there appears to be no specific procedure for enforcing the judgment if, as the court held in Estate of DeBow v. City of East St. Louis, Illinois, garnishment of county funds is against public policy. 228 Ill.App.3d 437, 443, 170 Ill-Dec. 457, 592 N.E.2d 1137 (1992). With this public policy in mind, the Court believes it would be imprudent to hold that § 5/1-6004 does not apply to this proceeding and that, therefore, a garnishment would lie. The Court is mindful, however, and the parties should be too, that Highsmith stands for the proposition that if a county ignores a writ of mandamus, a garnishment action is a proper alternative. 108 Ill.App.2d at 45, 246 N.E.2d 704.
CONCLUSION
For the above-stated reasons, the State’s Attorney’s motion to dismiss the Trustee’s Petition for Mandamus is denied. Respondents are directed to answer the Petition on or before May 27,1998.
. It is also arguable that the "mend the hold” doctrine supports denying the State's Attorney’s motion to dismiss. "Under the doctrine of 'mend the hold,’ in force in Illinois, a party to a contract cannot ... repudiate a position taken in the course of litigation over the contract.” Horwitz-Matthews, Inc. v. City of Chicago, 78 F.3d 1248, 1251 (7th Cir.1996). See also Harbor Ins. Co. v. Continental Bank Corp., 922 F.2d 357, 362-364 (7th Cir.1990). The Seventh Circuit has stated that the reach of the doctrine is uncertain, id. at 364, and also held that contract principles apply to agreed orders. See, e.g., Martin v. Davies, 917 F.2d 336, 339 (7th Cir.1990); Ferrell v. Pierce, 743 F.2d 454, 461 (7th Cir.1984). Because judicial estoppel seems a better fit, we will not rely on the mend the hold doctrine here. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492710/ | MEMORANDUM
JOHN C. MINARAN, Jr., Bankruptcy Judge.
This case is before the court to determine if a debt owed by the debtor, Duskan Shull, to the plaintiff, Glen Soukup, is excepted from discharge under section 523(a)(2)(A), or section 523(a)(4) of the Bankruptcy Code. I conclude that a debt in the amount of $100,-000 is excepted from discharge.
Law
Section 523(a)(2) excepts from discharge debts which arise from false pretenses, false representation, or actual fraud.1 The United States Supreme Court in Field v. Mans, 516 U.S. 59, 71 n. 8, 116 S.Ct. 437, 444 n. 8, 133 L.Ed.2d 351 (1995) indicated that false pretenses, false representation, and. actual fraud may be separate and distinct concepts. However, there is considerable blending of these concepts in reported decisional law, so it is difficult to distinguish between the elements of false pretenses, false representation, and actual fraud, except in generalities.
The elements of obtaining property by false pretense are: (1) a false representation or statement of a past or existing fact, (2)made by the debtor or someone instigated by the debtor, (3) made with the knowledge of its falsity, (4) made with the intent to deceive and defraud, (5) reliance on such false representation or statement, (6) an obtaining of something of value by the debtor or someone in his behalf, (7) without compensation of the person from whom it is obtained. See 35 C.J.S. False Pretenses § 6 (1960).
The elements of fraud have been described as: (1) the defendant made a material representation, (2) the representation was false, (3) that, when the defendant made the representation, he knew that it was false, or made it recklessly, without any knowledge of its truth, (4) that he made it with the intention that it should be acted on by the plaintiff, (5) that the plaintiff acted in reliance on it, and (6) that the plaintiff thereby suffered injury. See 37 C.J.S. Fraud § 7 (1997).
The elements of false representation are: (1) the individual made a false representation, (2) with fraudulent intent, (3) with the intent that the plaintiff rely on the misrepresentation, (4) the misrepresentation induces reliance, (5) the reliance is justifiable, and (6) the false representation causes damage. See Palmacci v. Umpierrez, 121 F.3d 781, 786 (1st Cir.1997).
Under these general definitions, it is clear that in each case, an essential element of the claim is reliance. The wronged party must establish that it relied upon the fraud, misrepresentation, or false pretense.
Although section 523(a)(2)(A) does not explicitly require that a creditor rely in some fashion on the debtor’s false pretense, false representation, or actual fraud, the Supreme Court has made clear that some form of reliance is necessary. The Court has held that in order for a debt arising from actual fraud to be non-dischargeable under section 523(a)(2)(A), the reliance by the creditor must be justifiable. Field v. Mans, 516 U.S. 59, 74, 116 S.Ct. 437, 446, 133 L.Ed.2d 351 (1995). The Court left open the question of whether a different standard of reliance is applicable for debts arising from false pretenses or false representation. Id. at 71 n. 8, 116 S.Ct. at 444 n. 8. Other forms of reliance include reliance in fact, and reasonable reliance. See In re Ophaug, 827 F.2d 340 (8th Cir.1987); In re Burgess, 955 F.2d 134 (1st Cir.1992); In re Mullet, 817 F.2d 677, (10th Cir.1987).
Section 523(a)(4) excepts from discharge debts arising from (1) fraud or de*649falcation while the debtor was acting in a fiduciary capacity; and (2) embezzlement or larceny whether or not acting in a fiduciary capacity.2 Under federal bankruptcy law the required fiduciary capacity does not arise unless the debtor is a trustee of a technical or express trust, or the debtor acts in some comparable elevated, fiduciary capacity. See In re Stentz, 197 B.R. 966 (Bankr.D.Neb.1996).
Findings of Fact and Discussion
In 1987, the defendant/debtor, Duskin Shull, became associated with Mr. Emeka Nnakwe who was completing his Ph.D studies at the University of Nebraska. Mr. Nnakwe testified that he formed a company . called Deans Group of Co. Inc. (“Deans”) for the purpose of investing in Nigerian crude oil. Mr. Shull and Mr. Nnakwe were directors of the company and they were the only two individuals associated with Deans. Mr. Shull was in charge of Deans’ activities in the United States, where his job was to solicit investors and raise money to fund the purchase of oil contracts from the Nigerian National Petroleum Corporation (the “NNPC”). Mr. Nnakwe was in charge of Deans’ activities in Nigeria. His duties included dealing directly with the NNPC in acquiring interests in Nigerian oil, and to make profits through arbitrage transactions. Mr. Shull represented to various investors that they would receive a return of double to five times their investment. Mr. Shull and Mr. Nnakwe obtained hundreds of thousands of dollars from parties in the United States for these investments, and all of the money was reported as lost.
The issues before the court are very narrow. Mr. Soukup commenced this adversary proceeding asserting that Mr. Shull induced him to invest $115,000 with Deans by false pretenses, false representation or actual fraud. Alternatively, Mr. Soukup asserts that Mr. Shull incurred this debt fraudulently while acting in a fiduciary capacity. Thus, Mr. Soukup asserts that Mr. Shull is liable, personally, to him for $115,000 and that this debt is excepted from discharge under sections 523(a)(2)(A) and 523(a)(4) of the Bankruptcy Code.
Mr. Shull asserts that he did not act in a fiduciary capacity with regard to Mr. Souk-up’s investments. He further asserts that he did not obtain the money from Mr. Soukup using false pretenses, false representation or actual fraud. Mr. Shull asserts that Mr. Soukup’s investment was lost because of the acts of a third party over which neither he nor Mr. Nnakwe had control.
The pertinent facts are hotly disputed and my decision turns upon my conclusion as to the credibility of Mr. Soukup’s and Mr. Shull’s testimony. In short, I believe Mr. Soukup’s version of the facts, I do not believe Mr. Shull.
Mr. Soukup was acquainted with Mr. Shull through Mr. Shull’s father, a local chiropractor, and through Mr. Shull’s wife, for whom Mr. Soukup had previously provided legal services. Mr. Soukup became aware that Mr. Shull was investing in Nigerian oil. After several conversations with Mr. Shull, Mr. Soukup made initial investments totaling $60,000 with Deans in February or March of 1989, but Mr. Soukup does not claim that this initial $60,000 is a debt excepted from discharge. In May of 1989, Mr. Shull told Mr. Soukup that another $100,000 investment was needed to complete the oil transaction and that the money previously invested by a number of investors, including Mr. Shull’s father, would be lost unless this additional investment was made. Mr. Soukup was reluctant to advance any more funds. However, after several conversations with Mr. Shull he agreed to invest an additional $100,000 provided that certain conditions were met. Mr. Soukup borrowed $100,000 and transferred the money to Mr. Shull’s control with the specific understanding that the money would remain in the United States under Mr. Shull’s control, and that the funds would not be transferred from the United States to Nigeria unless: (1) Mr. Soukup gave his express consent, or (2) if Mr. Soukup could not be contacted when the funds were need*650ed, the funds could be transferred from Mr. Shull’s control to Nigeria only if (i) Deans had obtained rights in an oil contract, (ii) the ship carrying the oil was loaded and in international waters, and (iii) the ship was under the exclusive control of Deans. Mr. Shull accepted the $100,000 from Mr. Soukup under the false pretense and with the false representation that he would comply with the conditions imposed by Mr. Soukup. At this time, Mr. Shull did not intend to comply with these conditions.
Mr. Shull ignored the conditions under which he obtained the $100,000 from Mr. Soukup, and he wire transferred the money to Mr. Nnakwe in Nigeria almost immediately upon its receipt. At the time Mr. Shull accepted the $100,000 from Mr. Soukup, Mr. Shull intended to wire transfer the funds to Nigeria without satisfaction of Mr. Soukup’s conditions. At this time, Mr. Shull was aware of Mr. Nnakwe’s activities in Nigeria, and Mr. Shull knew that Mr. Nnakwe needed the funds immediately. Mr. Shull was in contact with Mr. Nnakwe virtually daily by telephone.
I do not know specifically what happened once the money was transferred to Mr. Nnakwe in Nigeria. However, it is clear that the money was not held in the United States under the control of Mr. Shull.
In February of 1990, Mr. Soukup advanced another $15,000 to Mr. Shull. Mr. Shull traveled to Nigeria with these funds and gave them to Mr. Nnakwe. These funds were also lost. Mr. Soukup failed to prove facts establishing that this $15,000 advance constitutes a debt excepted from discharge.
The debtor denies that he agreed to hold Mr. Soukup’s $100,000 in the United States. Mr. Shull asserts that he, Mr. Soukup, and Mr. Nnakwe had a telephone conversation in May of 1989, during which Mr. Soukup was told that his $100,000 would be held in an account in Nigeria under Mr. Nnakwe’s control. I conclude that this telephone conversation did not take place.
Mr. Shull argues that even though Mr. Soukup’s conditions for release of the money were never met, the reason that Mr. Souk-up’s money was lost was because of the actions of a third-party buyer of the oil who failed to advance funds. This argument is without merit. In a general sense, there are a myriad of reasons why the money was lost, and these include the fact that a third party buyer failed to make certain payment when due; However, the proximate cause of the loss was the failure by Mr. Shull to comply with Mr. Soukup’s conditions. If Mr. Shull had satisfied Mr. Soukup’s conditions, the funds would not have been lost in the Nigerian oil transaction because the funds would never have left the United States. The failure to comply with the conditions imposed by Mr. Soukup was the sine qua non of the loss. Furthermore, at the time Mr. Shull failed to comply with these conditions by transferring the funds to Nigeria, it was foreseeable that the money would be immediately invested by Mr. Nnakwe and that the money could be lost. This was particularly foreseeable by Mr. Shull given the fact that Mr. Nnakwe had previously lost funds sent to him in Nigeria.
In summary, I conclude that the plaintiff has proven, by a preponderance of the evidence, that Mr. Shull obtained $100,000 from Mr. Soukup under the false pretense and false representation that the money would be held in the United States until released by Mr. Soukup, or until certain conditions were met. Mr. Shull knew that the representation and pretense was false when made, because he intended to transfer the funds to Mr. Nnakwe immediately upon receipt. Mr. Shull intended to deceive Mr. Soukup, in that he knew that Mr. Soukup would not make the investment unless Mr. Soukup’s conditions were met. Mr. Soukup knew Mr. Shull personally and had invested money with him previously. Mr. Soukup was aware that the debtor’s father had a substantial amount of money invested in Nigerian oil transactions. Mr. Soukup knew that Mr. Shull was acquainted with Deans’ operations in Nigeria, and knew that Mr. Shull was in frequent contact with Mr. Nnakwe. Mr. Soukup justifiably and reasonably relied on the debtor’s representations and false pretenses. Mr. Shull did in fact receive the funds, and Mr. Soukup received no compensation for the investment. Therefore, Mr. Shull is liable to Mr. Soukup for the $100,000, and, because *651the requirements of section 523(a)(2)(A) have been met, this debt is excepted from discharge and shall not be discharged by any discharge order entered in this bankruptcy case.
Section 523(a)(4) is not applicable because Mr. Shull was not acting with the required fiduciary capacity.
A separate order will be entered consistent herewith.
IT IS SO ORDERED,
. Section 523(a)(2)(A) reads: A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt-(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by-(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.
. Section 523(a)(4) reads: A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt-(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492711/ | CONCLUSIONS OF LAW IN SUPPORT OF ORDER DENYING JURY TRIAL CLAIM
JAMES F. QUEENAN, Jr., Bankruptcy Judge.
Micron Separations, Inc. (the “Plaintiff”) brings this complaint against Pall Corporation (the “Defendant”). In requesting that the court grant it relief, the Plaintiff does so in the following words:
1. Declare that the 1996 Judgment is subject to the restrictions contained in the Agreement dated December 18, 1991, and thus Pall Corporation cannot execute on the 1996 Judgment.
2. Declare that the defendant Pall Corporation must refund to plaintiff Micron Separations, Inc. the total amount of over-payments made under the Agreement dat*734ed December 18, 1991, as calculated by KPMG Peat Marwick to be $3,726,429 as of July 7,1996 or apply that amount to the 1996 Judgment.
3. Grant such other and further relief as the court deems proper.
On September 8, 1997, I denied motions for summary judgment filed by both parties and proceeded to set down dates for a bench trial. The Defendant, however, reminded me that it had claimed a trial by jury. I conclude that the Defendant is not entitled to a jury trial in this matter. Set forth here are my reasons.
It is true, as the Defendant urges, that the Plaintiffs mere request for relief in the form of a declaratory judgment does not deprive the Defendant of its jury trial rights. If the relief requested is a declaration of rights concerning a matter on which the Defendant has a right to trial by jury, that jury trial right continues in the declaratory judgment action. Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1969) (defendant retains right to trial by jury in action seeking declaration of rights under anti-trust laws where defendant would have jury trial rights had he first brought anti-trust claims). Here, however, the relief requested in the first prayer pertains to no claim on which the Defendant has jury trial rights. The Plaintiff requests a declaration of rights concerning a judgment already entered in the Defendant’s favor on a claim for which the Defendant formerly had jury trial rights. Equally important, the complaint asks for more than a declaration of rights. It requests the court to declare that the Defendant “cannot execute on the 1996 judgment.” In substance, the Plaintiff asks that the Defendant be enjoined from executing on the judgment. An action for injunctive relief is of course equitable nature and hence does not implicate jury trial rights.
There is another reason the Defendant is not entitled to a jury trial. It has filed claims in this bankruptcy proceeding, including a claim based on the same 1996 judgment. The filing of a claim brings a claimant within the equitable jurisdiction of the bankruptcy court, terminating jury trial rights. Langenkamp v. Culp, 498 U.S. 42, 111 S.Ct. 330, 112 L.Ed.2d 343 (1990).
Nor are jury trial rights implicated by the relief requested in paragraph 2 of the prayer. The Plaintiff there requests the court to declare that the Defendant must either refund to the Plaintiff the alleged $3,726,429 overpayment or apply that amount to the 1996 judgment. In effect, the Plaintiff seeks an offset against the claim based on the 1996 judgment which, with interest, is in excess of $4 million. As discussed, disputes over a claim against a bankruptcy estate involve no jury trial rights. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492712/ | DECISION DENYING MOTION TO VACATE DISCHARGE
DOROTHY EISENBERG, Bankruptcy Judge.
This motion has come before this court pursuant to Rule 9013 of the Bankruptcy Rules and seeks to vacate an Order of Discharge granted to a debtor in Chapter 7 bankruptcy. The movants are Robert Gen-sler (“Gensler”), an unsecured creditor of the debtor Irving Bruckstein (“Debtor”), Business Interfacing & Consulting, Inc. (“BIC”) and BI & CT Corporation (“BI & CT”), also unsecured creditors of Debtor. Gensler is the president of both corporations. There is a second motion pending, not decided here, to disqualify Debtor’s counsel and for disgorgement of fees. An Adversary Proceeding to determine whether or not to revoke Debtor’s discharge for failure to report or. surrender acquired property under section 727(d)(2) of the Bankruptcy Code is also pending.
In the instant motion the movants seek to vacate the Order of Discharge on two grounds: 1) the Order of Discharge was entered prior to the conclusion of the Section 341(a) hearing and under circumstances which suggest the reasonable suspicion of fraud in Debtor’s schedules and filings; 2) Debtor has failed to file proper schedules, in particular, the Certification Pursuant to Bankruptcy Rule 2016. Debtor opposes this motion on the following grounds: 1) the motion does not state the basis for the relief sought; 2) the only support cited by movants for this motion, In re Rosenfeld, 32 B.R. 351 (Bankr.S.D.N.Y.1983) is wholly inapplicable; *663) the verified statement of Gensler, offered in support of this motion, contains allegations which amount to nothing more than innuendo, half-truths, and irrelevancies designed to prejudice this Court against Debtor; 4) mov-ants, if Gensler’s statements were taken to be true, should have brought an action to have their claims determined to be non-dis-chargeable, filed an objection to discharge, or included the allegations in the complaint movants did file to revoke the discharge; they did none of these things; 5) the only material basis on which the revocation of the Order of Discharge is sought is that the Section 341 meeting was still open; all other statements and allegations are immaterial and apparently made to defame Debtor; 6) there is no basis in law or fact on which to grant this motion.
After considering the motion papers filed by movants, the Verified Statement of Gen-sler, the Memorandum of Law in support of this motion, the Affidavits, as well as the Affirmation and Supplementary Affirmation of debtor’s counsel in opposition to the motion, and Debtor’s Memorandum of Law in opposition to the motion, and after hearing extensive oral argument by counsel to all parties at a hearing held on April 9, 1998, this Court remains unpersuaded by movants’ arguments and believes the support provided to the court for this motion to be misplaced and inapposite. This Court finds that there is no basis on which to vacate the Order of Discharge granted to Debtor.
FACTS
A voluntary Chapter 7 Petition initially was filed by Debtor pro se on July 29, 1997. The moving creditors were listed in the Debtor’s schedules, and the notice of the filing and Section 341(a) meeting of creditors was mailed to them by the Clerk’s office. Under Section 341(a) of the Bankruptcy Code a meeting of creditors was convened on August 29, 1997 at which Debtor appeared with counsel and was examined by counsel for movants. Counsel for movants was informed by counsel for Debtor that there was a possibility that the Chapter 7 Petition might be withdrawn or converted to Chapter 13 to allow issues in Debtor’s matrimonial action to resolve themselves. On October 7, 1997 a motion was made by debtor to withdraw the Chapter 7 Petition. Counsel for movants requested a postponement of the hearing on the motion in order to file opposition papers. The request was granted by Debtor’s counsel and the Court adjourned the motion. Debtor’s motion to withdraw the Chapter 7 Petition was eventually abandoned. The 341(a) meeting was adjourned several times. Debtor was examined again at a meeting held on December 30, 1997. The 341(a) meeting remained open and was not concluded. In the mean time, on December 16, 1997 an Order was entered by the Clerk discharging Debtor of all dischargeable debts. The Trustee has not joined in support of movants’ motion. The Adversary Proceeding under § 727(d)(2) was commenced by movants on February 5, 1998, after the discharge was issued, but within one year of the date the discharge was granted and is still pending.
The issue before this Court is whether, given the fact that movants filed no timely complaint objecting to the discharge and sought no extension within the time allowed to object to the discharge, there are any extraordinary facts or circumstances which would warrant vacating the discharge?
DISCUSSION
When presented with the prospect of a debtor receiving a discharge in Chapter 7 bankruptcy proceedings, the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure provide mechanisms with which a creditor may prevent, postpone or revoke the Order of Discharge. Rule 4004(a) provides:
In a Chapter 7 liquidation ease a complaint objecting to the debtor’s discharge under § 727(a) of the Code shall be filed no later than 60 days following the first date set for the meeting of creditors held pursuant to § 341(a) (emphasis added).
11 U.S.C. Rule 4004(a).
Rule 4004(b) states:
On motion of any party in interest, after hearing on notice, the court may extend for cause the time for filing a complaint objecting to discharge. The motion shall *67be made before such time has expired (emphasis added).
11 U.S.C. Rule 4004(b).
After the discharge has been granted, under section 727 of the Code:
(d) On request of the trustee, a creditor, or the United States trustee, and after notice and a hearing, the court shall revoke a discharge granted under subsection (a) of this section if—
(1) such discharge was obtained through the fraud of the debtor, and the requesting party did not know of such fraud until after the granting of such discharge;
(2) the debtor acquired property that is property of the estate or became entitled to acquire property that would be property of the estate, and knowingly and fraudulently failed to report the acquisition of or entitlement to such property, or to deliver or surrender such property to the trustee; ...
11 U.S.C. § 727(d).
Section 727(e) governs the time period allowed for revocations under (d)(1) or (d)(2) which must be requested before the later of
(A) one year after the granting of such discharge, and
(B) the date the case is closed
11 U.S.C. § 727(e)(2).
In the instant case, movants, as unsecured creditors of Debtor, now ask this Court to accept still another possibility by which a debtor may be thwarted in his efforts to obtain a discharge. Movants allege that because an Order of Discharge was entered prior to the conclusion of the § 341(a) creditors meeting while and under circumstances which allegedly suggest a suspicion of fraud in Debtor’s schedules and filings, there is sufficient grounds to vacate the discharge order. For this proposition movants rely solely on In re Rosenfeld, 32 B.R. 351 (Bankr.S.D.N.Y.1983). Movants’ reliance is ill-founded. Although the facts of Rosenfeld demand an assiduous scrutiny, no great subtlety of analysis is required to see how Ro-senfeld is distinguishable from the matter now before this Court. In Rosenfeld the following facts were significant. The debtor twice failed to show up at the meeting of creditors. The last day to object to the discharge or to file a complaint to declare a particular debt nondischargeable passed, and at the next creditors meeting subsequent to that date, the debtor was examined for the first time by the trustee and filed a schedule and a statement of financial affairs. One day after that the Trustee filed an application to extend the time to object to the discharge on the grounds that the debtor filed her schedules and statement of financial affairs after the last day to object. The court extended to those creditors who were added in the schedule filed by the debtor time to object to her discharge. Rosenfeld, at 352. Subsequent to the debtor’s first appearance at the 341(a) meeting of creditors, this meeting was adjourned yet again to enable the debtor to produce certain documents for examination by the creditors. The last day for creditors to object to the discharge came and went, and two days thereafter a discharge hearing was held at which the debtor failed to advise the court that her creditors were still waiting on her production of documents for examination. The court stated:
that under the circumstances of this case (fn.3), entry of an order of discharge prior to the closing of the Section 341(a) meeting and examination of the debtor was inappropriate and for that reason the order of discharge will be vacated ... (emphasis added).
Fn.3 Cf. former Bankruptcy Rule 404(d)(3) (“On expiration of the time fixed for filing a complaint objecting to discharge the court shall forthwith grant the discharge unless ... (3) it appears that the bankrupt has failed to attend and submit himself to examination at the first meeting of creditors or at any meeting specially called for his examination____”)
Id. at 354.
The Rosenfeld court quite deliberately and carefully restricted its holding to “the circumstances of [that] case” and, by referring in a footnote to the appropriate former Bankruptcy Rule, implied which facts were most significant. From this farrago of dates, adjournments, and various indicia of fraud *68and misrepresentation, in regard to the court which granted the discharge as well as the creditors, the salient points which can be extracted from the Rosenfeld facts and circumstances are that the last date to object to discharge or file a complaint to declare a particular debt nondischargeable was January 12,1983. In Rosenfeld, the debtor never appeared for examination at all 341(a) meetings scheduled prior to the last date to object to discharge, nor had she properly filed schedules and statement of affairs prior thereto. She was only initially examined after the date to object to discharge had passed. When the creditor Pech moved to vacate the discharge, the Trustee joined him in that motion. On its face, these facts present an argument for an extension of time based on a lack of due process having been afforded to the Trustee and to her creditors because of the debtor’s improper acts. The decision in that case is not based upon any of the arguments presented here. The facts are different. In the ease at hand, Debtor did appear at the scheduled 341(a) meeting prior to the expiration of the time to object to discharge, and had filed his schedules and statement of affairs from which the facts could be ascertained and he be examined. In such a case, the creditor has the burden of requesting an extension of time to object. If not done in a timely fashion, the Order of Discharge is issued pursuant to the Bankruptcy Code. Movants draw the attention of this Court to the fact that in Rosenfeld there were strong indications of fraudulent conduct by the debtor in that, given her business activities, her schedules and statement of affairs provided a dearth of information, from which it could be inferred that there had not been full and fair disclosure. Rosenfeld, at 352-53. Movants aver that these facts and circumstances of Rosenfeld are similar to the matter now before this Court in that Debtor is being investigated by the Bankruptcy Fraud Unit of the IRS, Nassau County Investigations for New York State Unemployment, and other allegations of fraud. All this may be relevant to the pending Adversary Proceeding, but is not germane to the issue before the Court. This Court reads In re Rosenfeld for the proposition that it is inequitable and against the principles of due process to permit the debtor to obtain a discharge before she had submitted herself to examination by the creditors and before filing her schedules and statement of affairs. The creditors in Rosenfeld had no opportunity to object because they were not able to examine the very material on which to base objections. Unlike the debtor in Rosenfeld, Debtor Bruckstein in the instant motion did appear at 341(a) meetings and was examined by the Trustee and creditors, and filed his schedules and statement of affairs, all prior to the last day on which to object to the discharge and before the Order of Discharge was granted.
If movants had suspicions of fraud before the last day to object to the discharge, they should have employed the mechanisms given them under Rule 4004 to file a complaint objecting to the upcoming discharge, or brought a motion to extend the time for filing a complaint to object to the discharge, and should have done so before the expiration of the sixty days given them to do so. The Rules and the Code are perfectly straightforward on this. See In re Emery, 132 F.3d 892, 895 (2d Cir.1998) (“If a creditor knows of a debtor’s fraud before a bar date, the creditor should object to the discharge .... A creditor then has a year to bring an action to revoke the discharge based upon knowledge of fraud obtained after the discharge date”); In re Meo, 84 B.R. 24, 27 (Bankr.M.D.Pa.1988) (when creditor discovers fraud before sixty days is up, Rule 4004(a) governs, and when creditor has no notice of misconduct until after discharge granted, time limits of § 727(e) apply, i.e., the creditor may seek revocation of discharge within one year of discharge); In re Thornton, 73 B.R. 178, 178 (Bankr.N.D.Ohio 1986) (in absence of complaint objecting to debtor’s discharge, waiver by debtor, or motion to defer granting discharge, no basis existed for court to deny Chapter 7 debtor’s discharge). See also United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 240-41, 109 S.Ct. 1026, 1029-30, 103 L.Ed.2d 290 (1989) (“as long as the statutory scheme is coherent and consistent, there generally is no need for a court to inquire beyond the plain language of the statute”). That movants now suspect *69that Debtor’s schedules are incomplete and misleading is unpersuasive for the purpose of the present motion. Furthermore, by asserting that Debtor’s petition was filed initially pro se, that a possible conversion to Chapter 13 was discussed, that there was an on-and-off again motion to -withdraw the Chapter 7 Petition, and that the 341(a) meeting of creditors was left open, movants do not overcome the underlying premise of Chapter 7, which is to grant an honest debtor a fresh start. Movants have failed to persuade this Court of any extraordinary aspects of this case which materially excuse movants from taking the appropriate measures to make a timely request for an extension of time to file objections to discharge.
It is common practice to leave the 341(a) meeting of creditors open beyond the date of discharge. See In re Flynn, 200 B.R. 481, 483 (Bankr.D.Mass.1996) (creditors meeting may be continued indefinitely); In re DiGregorio, 187 B.R. 273, 276 (Bankr.N.D.Ill.1995) (in absence of conclusion date, creditors meeting can continue indefinitely). There is no statutory authority to extend the time to object to discharge based on the continuous adjournments of the Section 341(a) meeting of creditors.
CONCLUSION
This is a core proceeding over which this Court has jurisdiction pursuant to 28 U.S.C. § 157(b)(2). Counsel for movants did not file a summons and complaint within the time allowed to object to the discharge nor did they seek to extend the time in which to object. No extraordinary circumstances exist on which to form a basis to vacate the Order of Discharge. The motion is denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492713/ | PER CURIAM.
Kevin J. Lamson timely appeals from a bankruptcy court1 order that denied his motion seeking sanctions against the debtor, David A. Russ, and the debtor’s attorneys, Faye Knowles and David MarshaK, under Fed. R. Bankr.P. 9011 and requesting an order directing the debtor and his attorneys to show cause why they should not be held in contempt of court, and that ordered Lamson to pay the reasonable expenses and attorney’s fees incurred by the debtor and his attorneys in opposing his motion. We affirm based on the thorough and well-reasoned opinion of the bankruptcy court. The bank*238ruptcy court’s order is based on findings of fact that are not clearly erroneous and no error of law appears. See 8th Cir. R. 47B; 8th Cir. BAP Local R. 8001A(b)(4).
Affirmed.
. The Honorable Nancy C. Dreher, United States Bankruptcy Judge for the District of Minnesota. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492714/ | OPINION
WILLIAM V. ALTENBERGER, Chief Judge.
Kendall Knowles (KNOWLES) was the sole shareholder, director and president of KZK Livestock, Inc. (KZK). KZK had a checking account at the First National Bank of Blandinsville (FIRST). KNOWLES was also a 60% shareholder, a director, and the principal officer of Southwest Feed & Grain, Inc. (SFG). SFG had a cheeking account at the Citizens National Bank of Macomb (CITIZENS). KNOWLES was not an authorized signatory on the CITIZENS account. Both KNOWLES and SFG had separate commodity trading accounts with ADM Investor Services, Inc. (ADM). KNOWLES was an authorized signatory on the SFG account with ADM.
On October 23, 1991, KNOWLES telephoned CITIZENS and directed it to wire transfer the sum of $116,000 from SFG’s checking account to SFG’s trading account at ADM. On the same date the funds were received, ADM transferred $54,025 from *484SFG’s trading account to KNOWLES’ trading account, at ADM, in order that both accounts would be properly margined. On October 24, 1991, KNOWLES again telephoned CITIZENS and directed it to wire transfer the sum of $135,000 from SFG’s checking account to SFG’s trading account at ADM. These transfers satisfied margin calls, which resulted from positions taken by KNOWLES, individually and on SFG’s behalf. Soon after, when CITIZENS became aware that the wire transfers were made without proper authorization, CITIZENS contacted SFG and demanded that the funds be returned to the SFG checking account.
On November 14, 1991, KNOWLES wrote three checks totaling $240,000 drawn on KZK’s account at FIRST, each payable to ADM. The checks were delivered to ADM for deposit into KNOWLES’ trading account at ADM. On November 14, 1991, KNOWLES gave telephonic directions to transfer a portion of the deposit from his trading account to SFG’s trading account with ADM. ADM advised KNOWLES that in order to effect the requested transfer it would require written instructions together with proof that the KZK checks were good funds. On November 19, KNOWLES followed up with a written instruction directing ADM to transfer $190,-409.93 from his trading account to SFG’s trading account and from that trading account on to CITIZENS for deposit into SFG’s checking account with CITIZENS. After making sure that the KZK checks cleared FIRST, ADM followed KNOWLES’ instructions and $190,409.93 was ultimately deposited into SFG’s checking account at CITIZENS.
After KZK’s Chapter 11 filing in bankruptcy was converted to one under Chapter 7 and a Trustee in bankruptcy (TRUSTEE) was appointed, the TRUSTEE sued CITIZENS to recover the $190,409.93.1 Originally, the complaint contained 6 counts. As the litigation progressed, the TRUSTEE dropped 5 of the 6 counts, leaving only Count II, alleging a fraudulent conveyance under § 548(a)(2) of the Bankruptcy Code and seeking recovery from CITIZENS under § 550(a)(1) of the Bankruptcy Code, 11 U.S.C. §§ 548(a)(2) and 550(a)(1). Both the TRUSTEE and CITIZENS filed motions for summary judgment, which were heard and taken under advisement.
§ 548(a)(2) provides in pertinent part as follows:
(a) The trustee may avoid any transfer of an interest of the debtor in property, ... if the debtor ...
(2) (A) received less than a reasonably equivalent value in exchange for such transfer or obligation;
and § 550(a)(1) provides in pertinent part as follows:
(a) [T]o the extent that a transfer is avoided under section ... 548, ... of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from—
(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made;
The TRUSTEE does not contend that CITIZENS was a “transferee”, rather that it was an “entity for whose benefit such transfer was made.” The TRUSTEE argues that the various transfers, starting with the one from the KZK account at FIRST and culminating with the one to CITIZENS were made for the benefit of CITIZENS, because CITIZENS was liable to SFG for the im*485proper wire transfers out of the SFG checking account, which liability was eliminated by the transfers out of the KZK account that ultimately found their way back to the SFG checking account at CITIZENS.
In Bonded Financial Services v. European Amer. Bank, 838 F.2d 890 (7th Cir.1988), one Michael Ryan owned both Bonded Financial Services and Shamrock Hills Farms and had borrowed $655,000 from the bank. Bonded then sent the bank a check payable to the bank with a direction to deposit it into Michael Ryan’s account at the bank. Ten days later Michael Ryan instructed the bank to debit the account in the amount of $200,000 to reduce the balance of the loan, which was done. Bonded’s Chapter 7 Trustee in bankruptcy sued the bank under § 548 and § 550, and on appeal the Seventh Circuit Court of Appeals had before it the issue of whether the bank was an “entity for whose benefit such transfer was made”.
The court concluded that the categories “transferee” and “entity for whose benefit such transfer was made” are mutually exclusive and defined the phrase “entity for whose benefit such transfer was made” by stating:
[T]he paradigm “entity for whose benefit such transfer was made” is a guarantor or debtor — someone who receives the benefit but not the money. In the Firm-Guarantor-Lender example at the end of Part I, when Firm pays the loan, Lender is the initial transferee and Guarantor, which no longer is exposed to liability, is the “entity for whose benefit”____ (Citations) Section 550(a)(1) recognizes that debtors often pay money to A for the benefit of B; that B may indeed have arranged for the payment (likely so if B is an insider of the payor); that but for the payment B may have had to make good on the guarantee or pay off his own debt; and accordingly that B should be treated the same way initial recipients are treated. If B gave value to the bankrupt for the benefit, B will receive credit in the bankruptcy, see 11 U.S.C. § 547(c)(1)(A), § 548(c), and if not, B should be subject to recovery to the same extent as A — sometimes ahead of A, although § 550 does not make this distinction. Someone who receives the money later on is not an “entity for whose benefit such transfer was made”; only a person who receives a benefit from the initial transfer....
In the case before this Court, CITIZENS is not the “entity for whose benefit such transfer under was made,” because it received the money. As it received the money it is a transferee under § 550(a)(1) or (2), and as the terms “transferee” and “entity for whose benefit such transfer was made” are mutually exclusive under § 550(a)(1), it cannot be said it was an “entity for whose benefit the transfers were made”. Furthermore, CITIZENS cannot be liable under § 550(a)(1) as under that section the benefit element relates to an initial transfer and CITIZENS received the funds from a mediate transfer. Both of these conclusions are supported by the undisputed facts. The checks drawn on FIRST were payable to ADM and deposited into KNOWLES trading account at ADM. From there they were transferred to SFG’s trading account at ADM. From there they were transferred to CITIZENS for deposit into SFG’s account at CITIZENS. CITIZENS ended up with the funds as a mediate transferee.2
For these reasons, judgment should be entered for CITIZENS and against the TRUSTEE.
This Opinion is to Serve as findings of Fact and Conclusions of Law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.
. A check kiting scheme operated by KNOWLES using a KZK bank account preceded KZK's bankruptcy and he filing of three adversary proceedings under § 548 of the Bankruptcy Code against three different types of Defendants, all of which were presented for decision by motions for summary judgment that were taken under advisement. This adversary involves the TRUSTEE’S action to recover firnds paid from KZK’s account to another bank that had improperly transferred funds from a SFG account and were repaid from the KZK account Adversary # 95-8069 involves a lender/borrower relationship where the TRUSTEE is attempting to recover loan repayments from the creditor. Adversary # 95-8015 involves the TRUSTEE’S action to recover funds paid from KZK’s account to another bank to cover the check kite. Being concerned that there could be common legal principles that would impact all three cases, this Court elected to consider the issues of all three cases at the same time. Therefore, all three Opinions are being issued concurrently.
. The court in Bonded also discussed the issues of whether the Bank was liable as an initial or a subsequent transferee, concluding it wasn’t. This Court need not make a similar determination as the TRUSTEE has limited his cause of action to one based on CITIZENS having received a benefit. In support of his position that COLCHESTER received the benefit of the transfers, the TRUSTEE would overlook the transfers to ADM and KNOWLES and treat them as mere conduits, asking this Court to ignore the fact that KNOWLES was a separate entity from KZK. This is exactly what the Defendant in Adversary # 95-8069 is asking this Court to do and which the TRUSTEE opposes. The TRUSTEE cannot have it both ways, one way in this case and a contrary way in the other adversary. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484289/ | People v Escobar (2022 NY Slip Op 06504)
People v Escobar
2022 NY Slip Op 06504
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
COLLEEN D. DUFFY, J.P.
ROBERT J. MILLER
DEBORAH A. DOWLING
BARRY E. WARHIT, JJ.
2021-06331
[*1]The People of the State of New York, respondent,
vAntonio Escobar, appellant.
Laurette D. Mulry, Riverhead, NY (Amanda E. Schaefer of counsel), for appellant.
Raymond A. Tierney, District Attorney, Riverhead, NY (Marion Tang and Glenn Green of counsel), for respondent.
DECISION & ORDER
Appeal by the defendant from an order of the Supreme Court, Suffolk County (Chris Ann Kelley, J.), dated August 4, 2021, which, after a hearing, designated him a level three sex offender pursuant to Correction Law article 6-C.
ORDERED that the order is affirmed, without costs or disbursements.
On June 28, 2004, the defendant perpetrated crimes against two complainants. The defendant, armed with a box cutter, entered the home of the first complainant while she was sleeping and fondled her breasts. When the first complainant resisted, the defendant slashed her on both of her hands with the box cutter. The defendant then fled the first complainant's home and went to the home of the second complainant, who was sleeping inside. The defendant, displaying the box cutter, sexually assaulted the second complainant and threatened to kill her and her three-year-old child if she did not comply. The defendant left the residence after the attack and was apprehended by the police shortly thereafter.
The defendant was subsequently convicted, upon his plea of guilty, of rape in the first degree, sexual abuse in the first degree (three counts), burglary in the first degree, and burglary in the second degree, and sentenced to a term of imprisonment. Prior to the defendant's release from prison, the Supreme Court conducted a hearing pursuant to the Sex Offender Registration Act (Correction Law art 6-C; hereinafter SORA). Following the hearing, the court assessed the defendant 125 points, rendering him a presumptive level three sex offender. In addition, the court determined, in the alternative, that an upward departure to a level three designation was warranted. By order dated August 4, 2021, the court designated the defendant a level three sex offender. The defendant appeals.
In establishing a defendant's risk level pursuant to SORA, the People bear the burden of establishing facts supporting the determination by clear and convincing evidence (see Correction Law § 168-n[3]; People v Jensen, 204 AD3d 846, 847). "In assessing points, evidence may be derived from the defendant's admissions, the victim's statements, evaluative reports completed by the supervising probation officer, parole officer, or corrections counselor, case summaries prepared by the Board of Examiners of Sex Offenders, or any other reliable source, including reliable hearsay" (People v Crandall, 90 AD3d 628, 629; see People v Vasquez, 189 AD3d 1480, 1481). Here, the Supreme Court properly assessed the defendant 20 points under risk factor 7. The People [*2]established, by clear and convincing evidence, that the complainants were strangers to the defendant within the meaning of that risk factor (see People v Serrano, 61 AD3d 946, 947; cf. People v McGraw, 24 AD3d 525, 526).
The Supreme Court also properly determined, in the alternative, that an upward departure to a level three designation was warranted. The People demonstrated, by clear and convincing evidence, that there were aggravating factors not adequately taken into account by the SORA guidelines, including the brutal and severe nature of the defendant's conduct (see People v Shim, 139 AD3d 68, 76; People v Maldonado, 127 AD3d 714, 715; People v Kotler, 123 AD3d 992, 993; People v Simmons, 121 AD3d 465, 466; People v Guasp, 95 AD3d 608, 608; People v Henry, 91 AD3d 927, 927; People v Miller, 48 AD3d 774, 775). Further, the court providently exercised its discretion in determining that the totality of the circumstances warranted an upward departure to avoid an underassessment of the defendant's dangerousness and risk of sexual recidivism (see People v Rodriguez, 202 AD3d 1114, 1115).
Accordingly, the defendant was properly designated a level three sex offender.
DUFFY, J.P., MILLER, DOWLING and WARHIT, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484290/ | People v Egharevba (2022 NY Slip Op 06495)
People v Egharevba
2022 NY Slip Op 06495
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
FRANCESCA E. CONNOLLY, J.P.
ANGELA G. IANNACCI
PAUL WOOTEN
LILLIAN WAN, JJ.
2022-01404
(Ind. No. 141/21)
[*1]The People of the State of New York, respondent,
vSteve Egharevba, appellant.
Patricia Pazner, New York, NY (Lynn W. L. Fahey of counsel), for appellant.
Melinda Katz, District Attorney, Kew Gardens, NY (Johnnette Traill and Eric C. Washer of counsel; Alexandra Cardinale on the brief), for respondent.
DECISION & ORDER
Appeal by the defendant from a judgment of the Supreme Court, Queens County (Karen Gopee, J., at plea; Toni M. Cimino, J., at sentence), rendered February 7, 2022, convicting him of attempted robbery in the third degree, upon his plea of guilty, and imposing sentence. Assigned counsel has submitted a brief in accordance with Anders v California (386 US 738), in which she moves for leave to withdraw as counsel for the appellant.
ORDERED that the judgment is affirmed.
We are satisfied with the sufficiency of the brief filed by the defendant's assigned counsel pursuant to Anders v California (386 US 738), and, upon an independent review of the record, we conclude that there are no nonfrivolous issues which could be raised on appeal. Counsel's application for leave to withdraw as counsel is, therefore, granted (see id.; Matter of Giovanni S. [Jasmin A.], 89 AD3d 252; People v Paige, 54 AD2d 631; cf. People v Gonzalez, 47 NY2d 606).
CONNOLLY, J.P., IANNACCI, WOOTEN and WAN, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484285/ | People v McGowan (2022 NY Slip Op 06498)
People v McGowan
2022 NY Slip Op 06498
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
VALERIE BRATHWAITE NELSON, J.P.
REINALDO E. RIVERA
JOSEPH J. MALTESE
LARA J. GENOVESI, JJ.
2021-05204
(Ind. No. 60/20)
[*1]The People of the State of New York, respondent,
vPatrick McGowan, appellant.
Thomas N. N. Angell, Poughkeepsie, NY (Jennifer Burton of counsel), for appellant.
William V. Grady, District Attorney, Poughkeepsie, NY (Anna K. Diehn of counsel), for respondent.
DECISION & ORDER
Appeal by the defendant from a judgment of the County Court, Dutchess County (Edward T. McLoughlin, J.), rendered July 7, 2021, convicting him of strangulation in the second degree and criminal contempt in the second degree, upon his plea of guilty, and sentencing him to a determinate term of imprisonment of six years to be followed by a period of postrelease supervision of five years on the conviction of strangulation in the second degree, to run concurrently with a definite term of imprisonment of one year on the conviction of criminal contempt in the second degree.
ORDERED that the judgment is modified, on the law, by reducing the period of postrelease supervision imposed on the conviction of strangulation in the second degree from five years to three years; as so modified, the judgment is affirmed.
The record demonstrates that the defendant knowingly, voluntarily, and intelligently waived his right to appeal (see People v Sanders, 25 NY3d 337, 340-342; People v Lopez, 6 NY3d 248, 256-257; People v Morrow, 198 AD3d 922, 923).
Although the defendant's contention that his plea of guilty was not knowing, voluntary, and intelligent survives his valid waiver of the right to appeal (see People v Morrow, 198 AD3d at 923), the defendant failed to preserve this contention for appellate review, since he did not move to withdraw his plea or otherwise raise this issue before the County Court (see CPL 470.05[2]; People v Peque, 22 NY3d 168, 182; People v Olmos, 199 AD3d 711). In any event, the record demonstrates that the defendant's plea was entered knowingly, voluntarily, and intelligently (see People v Garcia, 92 NY2d 869, 870; People v Principato, 194 AD3d 851; People v Leasure, 177 AD3d 770, 772; People v Moss, 166 AD3d 655).
As the People correctly concede, the period of postrelease supervision imposed on the conviction of strangulation in the second degree was illegal (see Penal Law § 70.45[2][e]). Accordingly, we modify the judgment by reducing the period of postrelease supervision imposed on that conviction to the extent indicated herein (see People v Wright, 199 AD3d 1025; People v Brown, 192 AD3d 1134).
The defendant's valid waiver of his right to appeal precludes appellate review of his contention that the terms of imprisonment imposed were excessive (see People v Lopez, 6 NY3d at 255).
The defendant's remaining contentions are without merit (see People v Outley, 80 NY2d 702, 712; People v Weinsheimer, 68 AD3d 901; People v Williams, 195 AD2d 492, 493).
BRATHWAITE NELSON, J.P., RIVERA, MALTESE and GENOVESI, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484288/ | People v Garcia (2022 NY Slip Op 06496)
People v Garcia
2022 NY Slip Op 06496
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
FRANCESCA E. CONNOLLY, J.P.
REINALDO E. RIVERA
JOSEPH A. ZAYAS
WILLIAM G. FORD, JJ.
2017-06022
(Ind. No. 1151/15)
[*1]The People of the State of New York, respondent,
vKenneth Garcia, appellant.
Patricia Pazner, New York, NY (David Fitzmaurice of counsel), for appellant.
Melinda Katz, District Attorney, Kew Gardens, NY (Johnnette Traill and Christopher J. Blira-Koessler of counsel), for respondent.
DECISION & ORDER
Appeal by the defendant from a judgment of the Supreme Court, Queens County (Evelyn L. Braun, J.), rendered May 16, 2017, convicting him of assault in the second degree, criminal possession of a weapon in the fourth degree, and endangering the welfare of a child, after a nonjury trial, and imposing sentence. The appeal brings up for review the denial, after a hearing (Deborah Stevens Modica, J.), of that branch of the defendant's omnibus motion which was to suppress identification evidence.
ORDERED that the judgment is affirmed.
The defendant was charged with various offenses stemming from his participation, with two others, in an assault that took place on May 11, 2015. Following a nonjury trial, the defendant was convicted of assault in the second degree, criminal possession of a weapon in the fourth degree, and endangering the welfare of a child.
The Supreme Court properly denied that branch of the defendant's omnibus motion which was to suppress identification evidence from a showup identification procedure. Showup procedures are disfavored, since they are suggestive by their very nature. However, they are not presumptively infirm and are permissible where exigent circumstances exist requiring immediate identification (see People v Cruz, 129 AD3d 119). Here, exigent circumstances existed because the defendant and his codefendants were not under arrest yet, at least one of the perpetrators had a weapon, and the police needed to know whether they had apprehended the right people in connection with the assault or whether they should keep looking for other suspects (see People v Howard, 22 NY3d 388, 402; People v Mayes, 200 AD3d 718; cf. People v Cruz, 129 AD3d at 124; People v Taylor, 160 AD2d 966).
Even in the absence of exigent circumstances, a showup procedure is permissible if it is conducted in close geographic and temporal proximity to the crimes and the procedure used was not unduly suggestive (see People v Brisco, 99 NY2d 596; People v Mayes, 200 AD3d 718; People v Forrest, 186 AD3d 1395). Prompt showup procedures which are conducted in close geographic and temporal proximity to the crimes are not presumptively infirm and have generally been allowed (see People v Ortiz, 90 NY2d 533, 537; People v Duuvon, 77 NY2d 541, 543; People v Gil, 21 [*2]AD3d 1120). Here, the showup procedure was conducted in close geographic and temporal proximity to the crimes, and the procedure used was not unduly suggestive. The showup procedure was part of an unbroken chain of events and an ongoing investigation (see People v Brisco, 99 NY2d at 597; People v Duuvon, 77 NY2d at 544-545; People v Cruz, 129 AD3d at 124). Although the defendant was standing with his codefendants and they were flanked by police officers during the showup procedure, the overall effect of these allegedly suggestive circumstances was not significantly greater than what is inherent in any showup procedure (see People v McGrier, 205 AD3d 431; People v Joyner, 176 AD3d 607; People v Perez, 156 AD3d 507).
Viewing the evidence in the light most favorable to the prosecution, we find that it was legally sufficient to establish the defendant's guilt of the crimes of which he was convicted beyond a reasonable doubt (see People v Contes, 60 NY2d 620, 621). Moreover, in fulfilling our responsibility to conduct an independent review of the weight of the evidence (see CPL 470.15[5]; People v Danielson, 9 NY3d 342, 348-349), we are satisfied that the verdict of guilt was not against the weight of the evidence (see People v Romero, 7 NY3d 633).
The defendant's remaining contention is unpreserved for appellate review and, in any event, without merit.
CONNOLLY, J.P., RIVERA, ZAYAS and FORD, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484295/ | People v Costume (2022 NY Slip Op 06488)
People v Costume
2022 NY Slip Op 06488
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
BETSY BARROS, J.P.
CHERYL E. CHAMBERS
JOSEPH A. ZAYAS
HELEN VOUTSINAS, JJ.
2018-01855
[*1]The People of the State of New York, respondent,
vDaniel Costume, appellant. (S.C.I. No. 9933/17)
Twyla Carter, New York, NY (Antonio Villaamil of counsel), for appellant.
Eric Gonzalez, District Attorney, Brooklyn, NY (Leonard Joblove and Morgan Dennehy of counsel; Marielle Burnett on the brief), for respondent.
DECISION & ORDER
Appeal by the defendant from a judgment of the Supreme Court, Kings County (Frederick C. Arriaga, J.), rendered December 19, 2017, convicting him of assault in the third degree, upon his plea of guilty, and imposing sentence. Assigned counsel has submitted a brief in accordance with Anders v California (386 US 738), in which she moves for leave to withdraw as counsel for the appellant.
ORDERED that the judgment is affirmed.
We are satisfied with the sufficiency of the brief filed by the defendant's assigned counsel pursuant to Anders v California (386 US 738), and, upon an independent review of the record, we conclude that there are no nonfrivolous issues which could be raised on appeal. Counsel's application for leave to withdraw as counsel is, therefore, granted (see id.; Matter of Giovanni S. [Jasmin A.], 89 AD3d 252; People v Paige, 54 AD2d 631; cf. People v Gonzalez, 47 NY2d 606).
BARROS, J.P., CHAMBERS, ZAYAS and VOUTSINAS, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484294/ | People v Craft (2022 NY Slip Op 06489)
People v Craft
2022 NY Slip Op 06489
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
FRANCESCA E. CONNOLLY, J.P.
ANGELA G. IANNACCI
PAUL WOOTEN
LILLIAN WAN, JJ.
2019-13954
(Ind. No. 8289/18)
[*1]The People of the State of New York, respondent,
vJamel Craft, appellant.
Patricia Pazner, New York, NY (Lynn W. L. Fahey of counsel), for appellant.
Eric Gonzalez, District Attorney, Brooklyn, NY (Keith Dolan of counsel; Ashley Lino-Frazier on the memorandum), for respondent.
DECISION & ORDER
Appeal by the defendant, as limited by his motion, from a sentence of the Supreme Court, Kings County (Barry E. Warhit, J.), imposed November 18, 2019, upon his plea of guilty, on the ground that the sentence was excessive.
ORDERED that the sentence is affirmed.
The sentence imposed was not excessive (see People v Suitte , 90 AD2d 80).
CONNOLLY, J.P., IANNACCI, WOOTEN and WAN, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484299/ | People v Blake (2022 NY Slip Op 06486)
People v Blake
2022 NY Slip Op 06486
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
COLLEEN D. DUFFY, J.P.
ROBERT J. MILLER
DEBORAH A. DOWLING
BARRY E. WARHIT, JJ.
2020-06701
(Ind. No. 71/17)
[*1]The People of the State of New York, respondent,
vMoses Blake, appellant.
Patricia Pazner, New York, NY (Caitlyn Carpenter of counsel), for appellant.
Melinda Katz, District Attorney, Kew Gardens, NY (Johnnette Traill and William H. Branigan of counsel; Gianna Gambino on the memorandum), for respondent.
DECISION & ORDER
Appeal by the defendant, as limited by his motion, from a sentence of the Supreme Court, Queens County (Michael B. Aloise, J.), imposed July 15, 2019, upon his plea of guilty, on the ground that the sentence was excessive.
ORDERED that the sentence is affirmed.
The record does not demonstrate that the defendant knowingly, voluntarily, and intelligently waived his right to appeal (see People v Bradshaw, 18 NY3d 257, 264-265). The Supreme Court did not discuss the appeal waiver until after the defendant had already admitted his guilt as part of the plea agreement (see People v Diallo, 196 AD3d 598), and the court failed to ascertain "that the defendant understood the nature of the appellate rights being waived" and the consequences of waiving those rights (People v Thomas, 34 NY3d 545, 559; see People v Daniel, 188 AD3d 908). Further, although the defendant executed a written waiver of the right to appeal, the written waiver contained erroneous statements with regard to the issues encompassed by the waiver of the right to appeal (see People v Chy, 184 AD3d 664, 666; People v Wilkinson, 176 AD3d 879, 880) and was insufficient to cure the deficiencies in the oral colloquy (see People v Mendez, 202 AD3d 834, 835). Accordingly, the purported waiver does not preclude appellate review of the defendant's excessive sentence claim.
However, the sentence imposed was not excessive (see People v Suitte, 90 AD2d 80).
DUFFY, J.P., MILLER, DOWLING and WARHIT, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484301/ | Parrino v People of the State of New York (2022 NY Slip Op 06484)
Parrino v People of the State of New York
2022 NY Slip Op 06484
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
MARK C. DILLON, J.P.
JOSEPH J. MALTESE
PAUL WOOTEN
LARA J. GENOVESI, JJ.
2019-06156
(Index No. 1929/14)
[*1]Robert Parrino, appellant,
vPeople of the State of New York, et al., respondents.
J. Lee Snead, Bellport, NY, for appellant.
Letitia James, Attorney General, New York, NY (Steven C. Wu and Philip J. Levitz of counsel), for respondents People of the State of New York and New York State Department of Environmental Conservation.
Dennis M. Cohen, County Attorney, Hauppauge, NY (Lisa Azzato of counsel), for respondent County of Suffolk.
DECISION & ORDER
In an action, inter alia, pursuant to RPAPL article 15 for a judgment declaring, among other things, that the plaintiff has fee simple title to the subject properties, the plaintiff appeals from an order of the Supreme Court, Suffolk County (David T. Reilly, J.), dated April 22, 2019. The order denied the plaintiff's motion for summary judgment on the first, second, and third causes of action, and granted the motion of the defendants People of the State of New York and New York State Department of Environmental Conservation, and the separate motion of the defendant County of Suffolk for summary judgment dismissing the complaint insofar as asserted against each of them and, in effect, for declarations in favor of each of them.
ORDERED that the order is affirmed, with one bill of costs payable to the respondents appearing separately and filing separate briefs, and the matter is remitted to the Supreme Court, Suffolk County, for the entry of a judgment, inter alia, making appropriate declarations in accordance herewith.
Prior to 1884, New York State owned the underwater lands of the Peconic and Gardiner's bays, except for certain lands that had already been granted or reserved (see generally Dicanio v Incorporated Vil. of Nissequogue, 189 AD2d 223, 227). In 1884, the State granted title to those underwater lands of Peconic and Gardiner's bays to the County of Suffolk, subject to the condition that if the land ceased to be used "for the purposes of oyster culture," it would revert back to the State (see L 1884, ch 385, § 1).
In 2004, Paradise Point Oyster Farms, Inc., which the plaintiff owned, purchased two underwater lots in Gardiner's bay. Paradise Point Oyster Farms, Inc., conveyed the lots to the plaintiff by deed dated December 12, 2008. In 2014, the plaintiff commenced this action seeking, among other things, a judgment declaring that he has fee simple title to the subject lots and that he [*2]is not required to obtain a permit from the New York State Department of Environmental Conservation or a permit or lease from the County of Suffolk and that he could cultivate and harvest any type of shellfish by any method he chose. The County moved, and the People of the State of New York and New York State Department of Environmental Conservation separately moved, for summary judgment dismissing the complaint insofar as asserted against each of them and, in effect, for declarations in favor of each of them. The plaintiff moved for summary judgment on the first, second, and third causes of action seeking declaratory judgments regarding his ownership and use of the subject lots. By order dated April 22, 2019, the Supreme Court granted the defendants' motions and denied the plaintiff's motion. The plaintiff appeals, and we affirm.
The State may convey a fee interest in lands under water to an individual or corporation (see Matter of Long Sault Dev. Co. v Kennedy, 212 NY 1, 8; Turiano v State of New York, 136 Misc 2d 596, 599-600 [Ct Cl]). However, such grants should be construed strictly, and "nothing is granted thereby unless expressly" (Lewis Blue Point Oyster Cultivation Co. v Briggs, 129 App Div 574, 577, affd 198 NY 287, affd 229 US 82). Here, a provision was made by the State for forfeiture or reverter in the event the land ceased to be used "for the purposes of oyster culture," thus the plaintiff did not acquire title to the subject lots in fee simple (see Trustees of Calvary Presbyt. Church of Buffalo v Putnam, 221 App Div 502, 504, affd 249 NY 111; Jamieson & Bond Co. v Reynolds, 174 App Div 78, 81; cf. Allen v Trustees of Great Neck Free Church, 240 App Div 206, affd 265 NY 570).
Moreover, contrary to the plaintiff's contention, the defendants have the right to regulate the planting and taking of shellfish with respect to the subject lots (see ECL § 13-0302).
The defendants' contention that this action is time-barred is not properly before this Court (see Mannino v Passalacqua, 172 AD3d 1190, 1194; Graham v City of New York, 136 AD3d 747, 749; Chunnulal v Rosen, 56 AD3d 409, 409).
Accordingly, we affirm the order.
Since this is, in part, an action for a declaratory judgment, we remit the matter to the Supreme Court, Suffolk County, for the entry of a judgment, inter alia, making appropriate declarations in accordance herewith (see Lanza v Wagner, 11 NY2d 317, 334).
DILLON, J.P., MALTESE, WOOTEN and GENOVESI, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484300/ | People v Armstrong (2022 NY Slip Op 06485)
People v Armstrong
2022 NY Slip Op 06485
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
MARK C. DILLON, J.P.
LINDA CHRISTOPHER
LARA J. GENOVESI
HELEN VOUTSINAS, JJ.
2018-15119
(Ind. No. 2160/16)
[*1]The People of the State of New York, respondent,
vLionel Armstrong, appellant.
Patricia Pazner, New York, NY (Cynthia Colt of counsel), for appellant.
Eric Gonzalez, District Attorney, Brooklyn, NY (Leonard Joblove and Diane R. Eisner of counsel), for respondent.
DECISION & ORDER
Appeal by the defendant from a judgment of the Supreme Court, Kings County (William M. Harrington, J.), rendered November 26, 2018, convicting him of attempted murder in the second degree and menacing in the second degree, upon a jury verdict, and imposing sentence.
ORDERED that the judgment is affirmed.
The defendant's contentions that the testimony of a police detective constituted improper inferential hearsay and that the admission of such testimony violated his rights under the Confrontation Clause of the Sixth Amendment of the United States Constitution are unpreserved for appellate review, since no specific objections were made to the challenged testimony (see CPL 470.05[2]; People v Fernandez, 115 AD3d 977, 978; People v Walker, 70 AD3d 870, 871). In any event, the testimony was properly admitted for the relevant, nonhearsay purpose of establishing the reasons behind the detective's actions and to complete the narrative of events leading to the defendant's arrest (see People v Prince, 128 AD3d 987, 987). The defendant was not deprived of his right to the effective assistance of counsel because his counsel failed to object to the admission into evidence of the detective's testimony. "A defendant is not denied effective assistance of trial counsel merely because counsel does not make a motion or argument that has little or no chance of success" (People v Adelman, 36 AD3d 926, 928).
Contrary to the defendant's further contention, his due process rights were not violated by his exclusion from a material witness hearing. The sole issue considered by the Supreme Court at the hearing was whether a witness was willing to attend trial voluntarily or should be compelled to attend via a material witness order. As such, the defendant's exclusion from the hearing did not have a substantial relationship to his ability to defend against the charges against him (see People v Fermin, 150 AD3d 876, 878).
The defendant's contention that he was deprived of a fair trial by certain of the prosecutor's summation remarks is without merit. The challenged portions of the prosecutor's summation were fair comment on the evidence and the reasonable inferences to be drawn therefrom, fair response to defense counsel's summation, or within the bounds of permissible rhetorical comment (see People v Ashwal, 39 NY2d 105, 110).
The defendant was properly sentenced as a persistent violent felony offender based upon his 1974 manslaughter conviction and 1983 attempted robbery conviction. Contrary to the defendant's contention, his vague allegations were insufficient to warrant a hearing on whether his 1974 manslaughter conviction was unconstitutionally obtained (see People v Stallone, 204 AD3d 841).
The defendant's remaining contention is unpreserved for appellate review and need not be reached in light of our determination.
DILLON, J.P., CHRISTOPHER, GENOVESI and VOUTSINAS, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484302/ | Murtha Constr., Inc. v Town of Southampton Hous. Auth. (2022 NY Slip Op 06483)
Murtha Constr., Inc. v Town of Southampton Hous. Auth.
2022 NY Slip Op 06483
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
FRANCESCA E. CONNOLLY, J.P.
ANGELA G. IANNACCI
WILLIAM G. FORD
HELEN VOUTSINAS, JJ.
2020-06508
(Index No. 70847/14)
[*1]Murtha Construction, Inc., appellant,
vTown of Southampton Housing Authority, respondent, et al., defendant.
Lite & Russell, PLLC, West Islip, NY (Justin N. Lite of counsel), for appellant.
Twomey, Latham, Shea, Kelley, Dubin & Quartararo, LLP, Riverhead, NY (Craig H. Handler of counsel), for respondent.
DECISION & ORDER
In an action, inter alia, to recover damages for breach of contract, the plaintiff appeals from an order of the Supreme Court, Suffolk County (George M. Nolan, J.), dated August 21, 2020. The order granted the motion of the defendant Town of Southampton Housing Authority for summary judgment dismissing the amended complaint insofar as asserted against it.
ORDERED that the order is affirmed, with costs.
On November 8, 2013, the plaintiff entered into a contract with the defendant Francis Leslie Kirshman to perform home renovation work at property allegedly owned by Kirshman. Prior to entering the contract, Kirshman applied for and was approved for a loan from the defendant Town of Southampton Housing Authority (hereinafter the TSHA) pursuant to a home improvement program administered by the TSHA, with the understanding that the loan would ultimately finance the payment for the renovation work to be completed by the plaintiff. After the plaintiff performed a substantial portion of the renovation work, the TSHA discovered that Kirshman was not the fee owner of the property and had misrepresented her interest in the property at the time she had applied for the home improvement program loan, and the TSHA declined to extend the loan.
The plaintiff commenced this action against the TSHA and Kirshman, alleging, as against the TSHA, breach of an express contract and breach of an implied contract on the basis of the TSHA's refusal to provide Kirshman with loan financing to pay for the renovation work completed by the plaintiff, pursuant to the plaintiff's contract with Kirshman. The TSHA moved for summary judgment dismissing the amended complaint insofar as asserted against it. The Supreme Court granted the motion, and the plaintiff appeals.
The TSHA established its prima facie entitlement to judgment as a matter of law dismissing the cause of action alleging breach of an express contract insofar as asserted against it by submitting evidence showing that it was not a party to the written contract for the home renovation work (see Moezinia v Ashkenazi, 105 AD3d 920, 921; see also Amalgamated Tr. Union Local 1181, AFL-CIO v City of New York, 45 AD3d 788, 790). In opposition, the plaintiff only made conclusory allegations that it had relied upon representations made by the TSHA that Kirshman was the owner [*2]of the property. These conclusory allegations, which were not sufficient to defeat summary judgment (see Laskaratos v Bay Ridge Hoyt Lender, LLC, 185 AD3d 908, 910), are belied by the record. Accordingly, the Supreme Court properly granted that branch of the TSHA's motion which was for summary judgment dismissing the cause of action alleging breach of an express contract insofar as asserted against it (see Starr v Akdeniz, 162 AD3d 948, 949).
"[T]he existence of a valid contract governing the subject matter of a dispute generally precludes recovery in quasi contract for events arising out of the same subject matter" (Jaybar Realty Corp. v Armato, 175 AD3d 1391, 1393). The TSHA demonstrated that a valid contract governed the subject matter at issue in this action, and the plaintiff raised no triable issues of fact in this regard. Therefore, the Supreme Court properly granted that branch of the TSHA's motion which was for summary judgment dismissing the cause of action to recover damages for breach of an implied contract insofar as asserted against it (see id. at 1393; CSI Group, LLP v Harper, 153 AD3d 1314, 1317).
The plaintiff's remaining contentions are either improperly raised for the first time on appeal or without merit.
CONNOLLY, J.P., IANNACCI, FORD and VOUTSINAS, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8484297/ | People v Christopher D. (2022 NY Slip Op 06492)
People v Christopher D.
2022 NY Slip Op 06492
Decided on November 16, 2022
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 16, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
BETSY BARROS, J.P.
VALERIE BRATHWAITE NELSON
DEBORAH A. DOWLING
LILLIAN WAN, JJ.
2017-12395
[*1]The People of the State of New York, respondent,
vChristopher D. (Anonymous), appellant. (S.C.I. No. 1601/17)
Patricia Pazner, New York, NY (Lynn W. L. Fahey and Joshua M. Levine of counsel), for appellant.
Melinda Katz, District Attorney, Kew Gardens, NY (Johnnette Traill, Christopher Blira-Koessler, and Felicia Thomas of counsel), for respondent.
DECISION & ORDER
Appeal by the defendant from a judgment of the Supreme Court, Queens County (Gia L. Morris, J.), rendered October 16, 2017, convicting him of robbery in the third degree, upon his plea of guilty, and imposing sentence.
ORDERED that the judgment is reversed, as a matter of discretion in the interest of justice, the conviction is deemed vacated and replaced with a finding that the defendant is a youthful offender (see CPL 720.20[3]), the sentence is vacated, and the matter is remitted to the Supreme Court, Queens County, for further proceedings in accordance with CPL 720.35.
In the exercise of our discretion, we determine that the defendant should be granted youthful offender treatment (see CPL 720.20[1][a]; People v Carlos M.-A., 180 AD3d 808, 808-809).
In light of our determination, we need not reach the parties' contentions regarding the
propriety of the mandatory surcharges and fees imposed on the defendant at sentencing.
BARROS, J.P., BRATHWAITE NELSON, DOWLING and WAN, JJ., concur.
ENTER:
Maria T. Fasulo
Clerk of the Court | 01-04-2023 | 11-16-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492716/ | ORDER ON EMERGENCY MOTION OF SIMON KIRKE, MICK RALPHS, ES-SKAY, LTD. AND WARDPINE, LTD. FOR TEMPORARY RESTRAINING ORDER OR, ALTERNATIVELY, RENEWED MOTION FOR RELIEF FROM STAY AND TO HOLD DEBTOR IN CONTEMPT OR IMPOSE SANCTIONS AGAINST DEBTOR (DOC. # 2)
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 13 case and the matter under consideration is an emergency motion filed by Simon Kirke, Mick Ralphs, Esskay, Ltd. and Wardpine, Ltd., (Plaintiffs) seeking a temporary restraining order or, alternatively, stay relief and to hold Brian Anthony Howe (Debtor), in contempt or impose sanctions against him.
The relevant portion of the record of this Chapter 13 case involves an ongoing slugfest between the parties which centers around *556the right to use the name of “Bad Company.” On one hand it is contended by the Debtor he is entitled to use the name when he is performing as an artist. On the other hand, the Plaintiffs contend that he has signed and relinquished all his rights to the name Bad Company and, therefore, he has not only lost the right to use the name, but by using it he is in violation of the Lanham Trade-Mark Act, § 43(a), as amended, 15 U.S.C.A. § 1125(a).
The issue was initially presented for this Court’s consideration by a Motion filed by the Debtor who sought an order authorizing him to reject an executory contract described as an Agreement entered into on June 1, 1994 (Agreement) between the Debtor and the Plaintiffs. The Agreement was designed to resolve the differences between the Debt- or and Plaintiffs, Simon Kirke and Mick Ralphs, members of the band known as “Bad Company.”
Upon the conclusion of a hearing on the Debtor’s Motion, this Court entered an Order on May 6, 1998, which determined, inter alia, that the Agreement was no longer an executory contract and, thus, was not subject to rejection. This Court also ruled that the Debtor may refer to himself only as, “Brian Howe, Former Lead Singer of Bad Company.”
The Motion under consideration alleges that notwithstanding the clear language of the May 6,1998 Order, the Debtor conducted a concert on Friday May 8,1998, in the Aztec Speedway, Aztec, New Mexico, in which he was billed as “Bad Company” with small print, “Lead Singer, Brian Howe.”
The following promotional materials were produced.
(A) Tickets for a performance scheduled for May 8,1998, at Aztec Speedway, Aztec, New Mexico listing the performers as “BAD COMPANY with BRIAN HOWE.”
(B) An advertisement for the performance on May 8,1998, at Aztec Speedway, Aztec, New Mexico listing the performs as “BAD COMPANY with former LEAD SINGER BRIAN HOWE.”
(C) Wolfman Jack Entertainment list to agents and entertainment buyers listing artists available for performances and listing Brian Howe as “BAD COMPANY with Brian Howe.”
(D)Promotional material by artists International Management, Inc. about Brian Howe. The material is headed,
BAD with Brian Howe COMPANY
It also quotes Mr. Howe as saying, “I shall have the passion to continue as I have before ... I take no prisoners ... I am BAD COMPANY!!!!!!!”
(E) An agreement between Artist International Management, Inc. and Brian Howe engaging Brian Howe for a performance at the Apache Nugget Casino in Dulce, Mew Mexico on May 5, 1998, listing Brian Howe as “Bad Company former lead singer BRIAN HOWE/Top Notch Ent. Cor (sic)”
(F) An AIM Billing Notice stating “THIS GROUP IS TO BE BILLED AS: Bad Company former lead singer BRIAN HOWE.”
See Plaintiffs’ Composite Exhibit A.
Based on these facts, the Plaintiffs’ filed the instant Emergency Motion seeking an order expressly prohibiting the Debtor from violating the May 6, 1998 Order, alternatively, relief from the automatic stay in order to continue to litigate with the Debtor in the United States District Court for the Southern District of New York. They also sought an order finding the Debtor in contempt and the imposition of sanctions. In defense the Debtor contends that he is not responsible for the actions of his promoters and intimated that it is proper and is not in violation of the May 6, 1998 Order to promote concerts featuring “Bad Company with Former Lead Singer Brian Howe.”
The plain reading of the May 6, 1998 Order leaves no doubt that the Debtor is not entitled to use the language “Bad Company with Former Lead Singer Brian Howe” in any advertisement or other promotional material, printed or otherwise. The defense that they are not responsible for the adver*557tisement is unacceptable and clearly cannot be excused.
In sum, this Court is satisfied that the Debtor violated the May 6, 1998 Order. Although technically the Debtor is in civil contempt by his willful, knowing violation of the May 6, 1998 Order, this Court will not impose any sanctions provided that no concert will be promoted hereafter, other than by using the language “Brian Howe, Former Lead Singer of Bad Company ” in any future advertisement or promotional material.
Based on the foregoing this Court is also satisfied that the Motion for relief from stay should not be granted at this time.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Motion For Temporary Restraining Order, treated as a motion for preliminary injunction, be and the same is hereby granted. The Debtor is hereby prohibited from promoting or causing to be promoted any concerts in the future by publishing any printed material or any other media in a manner other than “Brian Howe, Former Lead Singer of Bad Company.” Further, in any printed material the size of the name “Bad Company” shall not exceed 25% of the balance of the promotional material featuring the concert. It is further
ORDERED, ADJUDGED AND DECREED that the Motion for Stay Relief is denied without prejudice. It is further
ORDERED, ADJUDGED AND DECREED that Motion to Impose Sanctions is denied without prejudice. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492718/ | ORDER DENYING EMERGENCY MOTION FOR STAY PENDING APPEAL
SHIFF, Chief Judge.
The debtor, Nance Hutter, and her husband, Gerhard Hutter, have filed a joint emergency motion for stay pending appeal of this court’s June 3, 1998 order which denied the debtor’s recusal motion, set June 19, 1998 as the auction sale date of their residence, 993 Lake Ave., Greenwich Connecticut (the “Property”), and prohibited both of them from interfering with the auction sale. See In re Hutter, 221 B.R. 632 (Bankr.D.Conn.1998), appeal pending. A brief recitation of the relevant history of this case follows.1
On April 30, 1997, this court granted the trustee’s motion for judgment authorizing the sale of the Property. See In re Hutter, 207 B.R. 981 (Bankr.D.Conn.1997) (the “April 30 Sale Order”), appeal pending. On July 15, 1997, separate orders entered which implemented the April 30 Sale Order2 by approving the trustee’s notice of an auction sale on July 29 and permitting him to sell the Property free and clear of interests, claims, and hens. See 11 U.S.C. § 363(b), (f) and (h). The Hutters filed various notices of appeal with the District Court and the Bankruptcy Appellate Panel which were eventually consolidated in the District Court. Their appeals included the April 30 Sale Order and subsequent orders relating to the auction sale of the Property. In addition, the Hut-ters sought a stay pending appeal of the April 30 Sale Order.
On July 21, the Hutters retained counsel to represent them in their appeals before the District Court. On July 25, the District Court stayed the scheduled auction sale of the Property, pending a final ruling on the *650motion for stay pending appeal. On January 14, 1998, the District Court vacated the stay pending appeal as to the auction sale.
At a March 3, 1998 hearing, this court ruled that an order would enter setting March 27 as the new auction sale date. On March 11, prior to the entry of that sale order, the Hutters filed a Notice of Motion for Reimplementation of Stay Pending Resolution of Appeal in the United States Court of Appeals for the Second Circuit. On March 19, that court entered a temporary stay of the sale scheduled for March 27, pending a hearing on the motion on March 31. On March 31, that court entered the following order:
By this motion Appellants seek reinstatement, pending full briefing and determination on the merits, of a District Court’s recently vacated stay of a Bankruptcy Court’s orders (i) imposing default judgment as a discovery sanction in an adversary proceeding seeking to authorize the sale of a non-debtor’s one-half interest in his marital residence pursuant to 11 U.S.C. §§ 363(h), and thereafter (ii) authorizing an auction sale of that home.
IT IS HEREBY ORDERED that the motion be and it hereby is denied.
On April 14, this court conducted another hearing to reschedule the auction sale. On that date, the debtor filed a motion seeking my recusal pursuant to 28 U.S.C. § 455. As noted, the June 3 order denied the recusal motion and scheduled the auction sale for June 19. On or about June 8,1998, the debtor and her husband, through their attorney, each filed emergency motions with the District Court, seeking a stay of the June 19 auction sale pending a determination of the merits of their appeals. Those motions were denied by the District Court on June 12.
On June 11, 1998, the Hutters jointly filed a pro se notice of appeal with the Bankruptcy Appellate Panel together with an emergency motion for stay pending appeal. In that motion, which also was filed here, the Hutters assert that the auction sale should be stayed pending their appeal from my decision denying the debtor’s recusal motion. The Bankruptcy Appellate Panel service suspended consideration of the emergency motion pending this court’s ruling, which follows.3
Hirschfeld v. Board of Elections, 984 F.2d 35, 38 (2nd Cir.1992), cited in In re Turner, 207 B.R. 373, 375 (2nd Cir. BAP 1997), sets the standard for determining whether a stay pending appeal should be granted. The Hirschfeld factors are: (1) whether the movant will suffer irreparable injury absent a stay; (2) whether a party will suffer substantial injury is a stay is issued; (3) whether the movant has demonstrated a substantial possibility, although less than a likelihood, of success on appeal, and (4) the public interests that may be affected. Id. Applying those factors here, the Hutters are not entitled to a stay pending appeal.
The Hutters argue that they will suffer irreparable injury absent a stay, as their various appeals will be mooted by the auction sale. However, the District Court and the Court of Appeals have each determined that the Hutters are not entitled to a stay of the sale pending appeal. Indeed, the District Court has twice reached that conclusion, most recently on June 12. Moreover, the imminent irreparable injury is no different today than what it was when the Hutters’ previous stay motions were considered by those courts.4 This factor is therefore of little consequence.
*651The creditors holding allowed claims of this bankruptcy estate will suffer a substantial injury if a stay is issued. The secured creditors have not received a mortgage payment since 1991.5 The Greenwich taxing authority has not been paid since 1990. The unsecured creditors have not been paid since 1994 because of the pendency of this bankruptcy ease.
The Hutters have not presented a substantial possibility of success on appeal from the denial of the debtor’s recusal motion, because the recusal motion lacked merit. As noted in the June 3 order, the motion was untimely. Moreover, it was brought as part of a continued effort to frustrate the sale of the Property after their efforts failed in the Connecticut Superior Court, Appellate Court, and Supreme Court, and then, after the debtor commenced this bankruptcy case, in this court, the District Court and the Second Circuit Court of Appeals. Nevertheless, I considered the debtor’s arguments. My conclusion that the motion was without merit is buttressed by District Judge Squatrito’s January 14, 1998 order vacating the stay pending appeal of the auction sale, in which he rejected the Hutters’ assertion that I exhibited bias against them: “Mr. Hutter has not shown that the bankruptcy court’s ruling was tainted by an impermissible animus against Mrs. Hutter.”
Finally, the public interest weighs heavily in favor of denying a stay pending appeal, because the public has a strong interest in preventing the abuse of the court system by those who are unable and/or unwilling to pay their debts in a timely fashion.
Accordingly, the emergency motion is denied.
SO ORDERED.
. For a more detailed history, see In re Hutter, 207 B.R. 981 (Bankr.D.Conn.1997), appeal pending and In re Hutter, 215 B.R. 308 (Bankr.D.Conn.1997), appeal pending.
. Although the court lacks jurisdiction to alter or amend an order which is on appeal, In re Overmyer, 136 B.R. 374, 375 (Bankr.S.D.N.Y.1992), it retains the authority to implement or enforce previous orders absent a stay pending appeal. See In re Prudential Lines, Inc., 170 B.R. 222, 243 (S.D.N.Y.1994) (“[W]hile an appeal of an order or judgment is pending, the court retains jurisdiction to implement or enforce the order or judgment”); Hagel v. Drummond (In re Hagel), 184 B.R. 793, 798 (9th Cir. BAP 1995). There was no stay pending appeal of the April 30 Sale Order, nor is there one now. The July 15, 1997 order implemented the terms and conditions of the April 30 Sale Order. It did not modify or alter that order.
. Motions for stay of an order of a bankruptcy judge must ordinarily presented to the bankruptcy judge in the first instance. See Rule 8005, F.R. Bankr.P. On June 16, 1998, the trustee filed an election to have the Hutters' June 11 appeal and emergency motion heard by the District Court. See 28 U.S.C. § (c)(1)(B).
. The ultimate injury, of course, is that the Hut-ters will lose their home. However, because the debtor has no pecuniaiy interest in the Property, as it is now property of the bankruptcy estate, she has no standing to object to the sale. See In re Hutter, 215 B.R. 308, 312. Her argument that there is equity in the property is unconvincing. See infra, note 5. Gerhard Hutter’s claim of injury is also unavailing, because his interests are protected by the safeguards provided in § 363(h).
. The Hutters’ argument that they have viable claims against those creditors is unconvincing in view of the fact that the foreclosure of their residence was ordered by the Connecticut Superior Court, the Connecticut Appellate Court dismissed their appeals, and the Connecticut Supreme Court denied certification. See In re Hutter, 207 B.R. 981, 983. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492719/ | FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 7 liquidation case and the matter under consideration is a challenge to the dischargeability of a debt owed by the Defendant, David Scott Reynaert (Debtor) to Plaintiff, Union Planters Bank (Bank), who filed a complaint based upon 11 U.S.C. § 523(a)(2)(A).
The underlying facts in this matter are not in dispute. The debtor obtained a $2,500 cash advance using a Visa credit card (Account Number 4455083500324353) which was posted by the Bank on September 2, 1997. The account had a previous balance of $1,616.41. The Debtor made his last payment toward the credit card balance on September 22, 1997, leaving an outstanding balance of $4,104. Forty-three days after he received the cash advance, on October 15, 1997, the Debtor and his spouse filed their voluntary Petition for relief under Chapter 7 of the Bankruptcy Code.
The Bank commenced this adversary proceeding on January 22, 1998. Its complaint contended that the debt incurred as a result of the cash advance is nondisehargeable under 11 U.S.C. § 523(a)(2)(A). (Doc. No. 1). Specifically, the Bank contends that when the Debtor obtained the cash advance, the Debt- or fraudulently represented that he had the ability and the intention to repay the debt, and the Bank justifiably relied on the Debt- or’s representation. Further, the Bank con*991tends that at the time the Debtor obtained the cash advance, he had no intention to repay the debt, nor the ability to repay the debt. Hence, the Bank contends that the debt is nondischargeable pursuant to 11 • U.S.C. § 523(a)(2)(A).
The Debtor, on the other hand, contends that at the time he obtained the cash advance, he had every intention of repaying the debt. The Debtor contends that he loaned the money obtained by the advance to Global Services, Inc., an investment corporation operating from Nassau, Bahamas. At the final evidentiary hearing held on May 8, 1998, the Debtor offered into evidence a receipt for $5,000 from Global Services, dated August 31, 1997. (Defendant’s Exhibit 1). The receipt bears the signature of the Debtor, and Robert Reynaert, the Debtor’s nephew, who was also Global Services’ consultant for the transaction.
Section § 523(a)(2)(A) of the Bankruptcy Code excepts from discharge, inter alia, money obtained by “false pretenses, a false representation, or actual fraud____” Furthermore, 11 U.S.C. § 523(a)(2)(C) provides in pertinent part,
[F]or purposes of subparagraph (A) of this paragraph, ... cash advances aggregating more than $1,000 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 60 days before the order for relief under this title, are presumed to be non-disehargeable.
Courts have held that to successfully bring an action under 11 U.S.C. § 523(a)(2)(A), a creditor must prove “actual fraud.” AT&T Universal Card Services Corp. v. Chinchilla (In re Chinchilla), 202 B.R. 1010, 1013, (Bankr.S.D.Fla.1996), citing Anastas v. American Savings Bank (In re Anastas), 94 F.3d 1280, 1283 (9th Cir.1996). The elements of fraud are:
(1) the debtor made the representations;
(2) that at the time he made those representations the debtor knew they were false;
(3) that he made them with the intention and purpose of deceiving the creditor;
(4) that the creditor relied on such representations; and
(5) that the creditor sustained the alleged loss and damage as the proximate result of the representations made.
Id. When a creditor can prove that a cash advance was for more than $1,000 and it was obtained within 60 days of the filing of the bankruptcy petition, the presumption arises “that the debtor incurred the debt without the intention to repay the obligation.” AT&T Universal Card Services Corp. v. Acker (In re Acker), 207 B.R. 12, 16 (Bankr.M.D.Fla.1997), quoting American Express Centurion Bank v. Hinshaw (In re Hinshaw), 199 B.R. 786, 791 (Bankr.M.D.Fla.1995). Once the presumption has arisen, the debtor must show that he intended to repay the debt. In re Acker at 16, citing In re Chinchilla at 1014. Absent the presumption, the standard for determining dischargeability is by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
In this ease, the Debtor obtained the $2,500 cash advance forty-three days before filing the petition. Hence, the burden is initially upon the Debtor to prove that he did not fraudulently obtain the cash advance. 11 U.S.C. § 523(a)(2)(C). In other words, the Debtor must show some quantum of proof to overcome the presumption that he did not intend to repay the debt. In re Acker at 16.
The evidence presented in this very close case is equally balanced for the Bank and the Debtor. The evidence is also equally consistent with the proposition that the Debtor obtained the cash advance with no intent to repay the debt. This is especially true in light of the fact that the document offered by the Debtor at the hearing to prove that he intended to repay the debt, that is, the receipt from Global Services, facially indicates that the Debtor transferred $5,000 to Global Services on August 31,1997, two days before the $2,500 cash advance from the Bank was posted. For the foregoing reasons, the Debtor has failed to present sufficient evidence to overcome the presumption that the cash advance is nondischargeable.
*992A separate final judgment will be entered by this Court. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492720/ | OPINION AND ORDER
BARBOUR, District Judge.
Bank of Mississippi filed this declaratory judgment action in the United States Bankruptcy Court for the Southern District of Mississippi seeking a determination that a 1995 default judgment entered in its favor was valid against the Debtor Frederick D. Knight. The bankruptcy court held that the Bank of Mississippi did not have .a valid money judgment because the original 1988 default judgment was void for insufficient service of process and the 1995 action to renew the 1988 default judgment was also void. Bank of Mississippi filed an appeal in this Court.
Having considered the briefs of the parties and legal authorities, the Court finds as follows: (1) the 1998 default judgment was void for insufficient service of process because *103Mississippi Rule of Civil Procedure 4(c)(5) requires “restricted delivery” service which means delivery to the actual defendant not his wife and (2) since the 1988 judgment was void for insufficient service of process, the 1995 action to renew the 1988 default judgment was also void because subsequent action cannot be taken on a void judgment. Thus, this Court affirms the decision of the bankruptcy court.
I.BACKGROUND
In 1988, Bank of Mississippi (“the Bank”) filed suit against Frederick D, Knight (“Mr. Knight”) in the County Court of Forest County, Mississippi, for amounts he owed on a promissory note. At the time the Bank filed the lawsuit, Mr. Knight lived in Alabama. The Bank served process on Mr. Knight by mail pursuant to Mississippi Rule of Civil Procedure 4(c)(5) which requires “restricted delivery” service.
The Bank mailed Mr. Knight the summons and complaint by certified mail, return receipt requested. The Bank marked the summons and complaint for “restricted delivery” to Mr. Knight’s home address in Birmingham, Alabama. The certified mail was delivered to Mr. Knight’s home but Mrs. Knight received the mail and signed the return receipt card. Mr. Knight did not answer the complaint, and the Bank took a default judgment on July 6,1998.
In 1995, the Bank filed suit against Mr. Knight to renew the 1988 judgment. Mr. Knight did not answer the second suit to renew the 1988 judgment and the Bank took another default judgment against him on August 22,1995.
Mr. and Mrs. Knight filed for bankruptcy on January 13,1997. The Bank attempted to enforce its 1995 judgment lien. The Bank commenced an adversary proceeding, seeking a declaration that its 1995 judgment was valid.
The United States Bankruptcy Court for the Southern District of Mississippi found that the Bank’s 1988 default judgment against Mr. Knight was invalid because the Bank never effected proper service of process on Mr. Knight pursuant to Mississippi Rule of Civil Procedure 4(c)(5). The ruling of the bankruptcy court was based upon the fact that Mrs. Knight as opposed to Mr. Knight signed the return receipt card. The bankruptcy court interpreted the term “restricted delivery” to mean that process must be served upon the actual defendant in an action and not some other member in the household. The bankruptcy court held that since the 1988 judgment was void, the 1995 judgment which renewed the 1988 judgment was also void. Thus, the bankruptcy court declared that the Bank did not have a valid money judgment against Mr. Knight. The Bank appealed to this Court.
II. JURISDICTION
Under 28 U.S.C. § 158(a)(1), this Court has jurisdiction “to hear appeals from final judgments, orders, and decrees ... of bankruptcy judges ...” This Court reviews the findings of fact of the bankruptcy court for clear error and applications of law by the bankruptcy court under the de novo standard. In re Midland Indus. Service Corp., 35 F.3d 164 (5th Cir.1994).
III. DISCUSSION
A. Did the Bankruptcy Court Err in Finding that the 1988 Default Judgment was Void for Insufficient Service of Process?
The Bank served Mr. Knight pursuant to Mississippi Rule of Civil Procedure 4(c)(5), it provides:
(5) Service by Certified Mail on Person Outside State. In addition to service by any other method provided by this rule, a summons may be served on a person outside this state by. sending a copy of the summons and of the complaint to the person to be served by certified mail, return receipt requested. Where the defendant is a natural person, the envelope containing the summons and complaint shall be marked “restricted delivery.” Service by this method shall be deemed complete as of the date of delivery as evidenced by the return receipt or by the returned envelope marked “Refused.”
*104The Court agrees with the finding of the bankruptcy court and finds that the 1988 judgment was void for insufficient service of process. The “restricted delivery” language means delivery upon the actual defendant and not someone else in the household. Since the summons in the 1988 case was delivered to Mrs. Knight, as opposed to Mr. Knight, the 1988 judgment was void for insufficient service of process.
In a case involving similar facts but a different procedural rule, this Court held that service upon a defendant’s wife was insufficient where the statute required restricted delivery service. In Illinois Central Gulf Railroad v. Hampton, 117 F.R.D. 588 (S.D.Miss.1987), Jay Charles Hampton was involved in an accident with an Illinois Central Gulf Railroad (ICGRR) train. ICGRR filed an action in this Court alleging negligence on the part of Jay Charles Hampton. Since Jay Charles Hampton was not a resident of Mississippi, the Mississippi nonresident motorist statute applied. It is found at Miss.Code Ann. § 13-3-63 and provides in pertinent part that
[njotice of such service, together with a copy of the process or summons, shall be mailed forthwith as certified or registered mail, restricted for delivery to addressee only and with postage prepaid, by the secretary of state to each such nonresident defendant at his last known address ...
ICGRR served a summons and a complaint that were stamped for delivery to Jay Charles Hampton. However, Georgia Hampton received the summons and complaint and signed the receipt card. This Court held, that “service of process is ineffective unless the individual who in fact signed the return receipt, Georgia Hampton, did so as Jay Charles Hampton’s agent for acceptance of service of process. The agency status by which one is authorized to receive process for another may be express or implied.” Hampton, 117 F.R.D. at 590. This Court further stated that Georgia Hampton “was not a proper individual to receive service of process on behalf of Jay Charles Hampton, and service of process was therefore not valid.” Id. at 591.
Rule 4(e)(5), like the Mississippi nonresident motorist statute, requires restricted delivery. Similar to the Plaintiff in Hampton, the Plaintiff in this case served the Defendant’s wife as opposed to the actual Defendant. Therefore, this Court holds that the service ,of process in this case was invalid because restricted delivery means delivery to the actual defendant, not his wife. See also United States v. Tra, 1994 WL 321200 at *3 (E.D.La.1994) (recognizing that the term “restricted delivery” means delivery only to the addressee or to the addressee’s agent authorized to receive mail on behalf of the addressee); Lake Oswego Review, Inc. v. Steinkamp, 298 Or. 607, 695 P.2d 565 (1985).
In support of its argument, the Bank cites an opinion written by the undersigned in the case of Wesley v. Miss. Transp. Comm’n, 857 F.Supp. 523 (S.D.Miss.1994). In Wesley, this Court found that the plaintiff had effected proper service under the Mississippi nonresident motorist statute even though the actual defendant did not receive the summons and complaint. However, Wesley can be distinguished from the facts of this case. In Wesley, the defendant had actual notice of the suit whereas in this case, there is no evidence that Mr. Knight had actual notice of the 1988 default judgment.
B. Did the Bankruptcy Court Err in Finding that the 1995 Action to Renew the 1988 Default Judgment was Void?
The Bank next argues that Mr. Knight was obligated to raise his void judgment argument as an affirmative defense in the 1995 action by the Bank. The Bank argues foreign authority to support its point. However, the Mississippi Supreme Court has held that “[a] void judgment, of course, can furnish no basis for any subsequent action ...” Southern Trucking Service, Inc. v. Mississippi Sand and Gravel, Inc., 483 So.2d 321, 324 (Miss.1986). This Court has already found that the 1988 default judgment was void for insufficient service of process. Accordingly, the Court finds that any action to renew the void 1988 judgment is also void.
IV. CONCLUSION
IT IS THEREFORE ORDERED that the decision of the bankruptcy court be affirmed.
*105IT IS FURTHER ORDERED that the appeal filed by the Bank of Mississippi be dismissed. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492721/ | ORDER
JAMES G. MIXON, Chief Judge.
On July 22,1996, Harrison Properties Ltd. and Gary R. “Butch” McCallum (“McCal-lum”) filed the above-captioned complaint against Shantilal Patel, Pragna Patel (“the Patels”), an entity styled AMBA, LLC (“AMBA”), and other defendants. The relief sought against AMBA and the Patels is a determination that AMBA holds title to certain real estate (“the motel property”) located in Boone County, Arkansas, in trust for Harrison Properties, Ltd. and/or McCallum.
On February 19, 1998, McCallum and Harrison Properties filed a motion for partial summary judgment for the return of the real property in question. On March 18, 1998, the Patels and AMBA filed a counter motion for summary judgment.
The proceeding before the Court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(0), and the Court has jurisdiction to enter a final judgment in the case. The following shall constitute the Court’s findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.
STANDARD FOR SUMMARY JUDGMENT
Summary judgment should be granted only where it appears that there is no genuine dispute as to material facts and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Fed.R.Bankr.P. *3287056; Fields v. Gander, 734 F.2d 1313, 1314 (8th Cir.1984); Schieffler v. Pulaski Bank & Trust Co. (In re Molitor), 183 B.R. 547, 549 (Bankr.E.D.Ark.1995); Toshiba Am. Inc. v. Video King of Ill., Inc. (In re Video King of Ill., Inc.), 100 B.R. 1008, 1012 (Bankr.N.D.Ill.1989). In determining whether a genuine issue of material fact exists, the Court must view the facts in the light most favorable to the party opposing the motion for summary judgment and must give that party the benefit of all reasonable inferences drawn from the underlying facts. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir.1987)(citing Economy Housing Co. v. Continental Forest Products, Inc. 757 F.2d 200, 203 (8th Cir.1985)); Fields, 734 F.2d at 1314. To be material, the fact in dispute must affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
A party opposing a motion for summary judgment may not rely upon the mere allegations of its pleadings hut must instead set forth, by affidavit or otherwise, specific facts showing that a genuine issue exists for trial. Fed. R.Civ.P. 56(e); Fed.R.Bankr.P. 7056. Chauffeurs, Teamsters & Helpers Local Union 238 v. C.R.S.T., Inc., 795 F.2d 1400, 1402-03 (8th Cir.), (citing Fed.R.Bankr.P. 54(e); Buford v. Tremayne, 747 F.2d 445, 447 (8th Cir.1984); Bouta v. American Federation of State, County & Municipal Employees, 746 F.2d 453, 454 (8th Cir.1984)).
UNDISPUTED FACTS
Both parties attached affidavits and other written materials in support of their respective motions for summary judgment and from a review of these documents, the following facts appear to be undisputed:
1. Eldenrod Partnership is a general partnership whose partners are Thomas J. Simpson, M.D., Alice Laule, Don Collins, and E.V. Monson, Jr. Harrison Properties, Ltd., is a general partnership that, when formed April 1, 1986, consisted of the following partners and ownership interests: Eldenrod Partnership (48%), Joe T. Swaffar (26%), and Gary M. “Butch” McCallum (26%).
2. The motel property located in Boone County, Arkansas, was transferred from the First National Bank of Harrison, Arkansas, to Harrison Properties, Ltd. by deed dated August 6,1985.
3. The partnership agreement of Harrison Properties, Ltd. provided in part as follows:
Title to real property if any, although in the name of the Partner or Partners, shall be deemed to be held by the partnership as if conveyed by such Partner or Partners to the partnership by appropriate deed of conveyance.
No Partner shall, without the consent of the other partners, ... shall, on behalf of the partnership ... sell or contract to sell, any property ... of the partnership other than the type of property bought and sold in the regular course of its business.
(Harrison Properties, Ltd. Partnership Agreement at ¶¶ 6(b) & 8.)
4. On March 28, 1991, McCallum gave notice of his intention to withdraw from Harrison Properties, Ltd., and the offer to withdraw was accepted May 23, 1991. Thereafter, McCallum and Swaffar engaged in litigation concerning the issue of the value of the withdrawing partner’s interest in an action in the Chancery Court of Pulaski County, Arkansas.
5. On March 5, 1993, a foreclosure suit and accompanying Lis Pendens was filed against the motel property by National Mortgage Company which held a first mortgage on the motel property. The foreclosure action was dismissed and the lis pendens notice was satisfied on August 19,1993.
6. On August 15, 1993, Swaffar, acting as “managing” partner of Harrison Properties, Ltd., executed a deed to the motel property to Motel Managers, Inc., for a purchase price of $1,500,000. The sale proceeds were disbursed as follows:
Excess deposit $200,000.00
Settlement charges 11,900.00
Payoff first mortgage 975,000.00
Payoff second mortgage 66,860.73
Payoff UBT 189,512,81
Payoff to BOM 53,258.06
County taxes 3,468.40
Total $1,500,000.00
*3297. Motel Managers, Inc. is a corporation owned by Donald Spears and Nell Spears.
8. On November 17, 1994, the Honorable Annabelle Imber, Chancellor, issued an Order valuing McCallum’s interest as a withdrawing partner at $160,451.72. The Order further provided that if the amount of McCallum’s interest was not paid by 4:30 p.m. Friday, November 18,1994, then “Plaintiff [McCallum] shall retain ownership of his 26% partnership interest in Harrison Properties, Ltd., with all rights, powers and privileges attendant thereto.” (Patel Motion for Summary Judgment, Ex. 6.)
9. On March 15, 1996, Motel Managers, Inc. sold the motel property to AMBA for a total purchase price of $1,425,000.00.
10. AMBA is owned by Shantilal Patel and Pragna Patel.
11. McCallum did not consent to the transfer of the motel property in August 1993, nor the subsequent transfer from Motel Managers, Inc. to AMBA in March 1996. McCallum has never been paid for his interest in Harrison Properties, Ltd.
12. AMBA has conveyed a mortgage lien in the motel property to Shantilal Patel and Pragna Patel, and the lien is properly recorded in the Mortgage Records of Boone County, Arkansas.
13. Neither Shantilal Patel nor Pragna Patel, individually or on behalf of AMBA had actual knowledge of any claim to the motel property by McCallum or Harrison Properties, Ltd. prior to the purchase of the motel property and had no actual knowledge that Swaffar was unauthorized, if he was so unauthorized, to transfer title from Harrison Properties, Ltd. to Motel Managers, Inc. without the consent of McCallum.
DISCUSSION
The motion for summary judgment in favor of Shantilal Patel, Pragna Patel, and AMBA shall be granted for several reasons.
McCallum and Harrison Properties argue that even though AMBA had no actual knowledge, it had constructive knowledge of the terms of the partnership agreement because the partnership agreement was recorded in the Miscellaneous Records of Boone County, Arkansas. The plaintiffs further contend that because of the recorded agreement, AMBA was under a duty to inquire as to the authority of Swaffar to convey the property and that such an inquiry would have disclosed that McCallum’s consent to the transfer was required and that he had not so consented.
However, this argument is without merit. A purchaser of real property takes with constructive notice of whatever appears in the conveyance which is his chain of title. Weiser-Brown Oil Co. v. Sneed, 265 Ark. 95, 98, 577 S.W.2d 1, 3 (1979) (quoting Abbott v. Parker, 103 Ark. 425, 147 S.W. 70 (1912)). It is doubtful that the partnership agreement is an instrument in the chain of AMBA’s title and probably does not give constructive or inquiry notice of its contents to subsequent purchasers of the real property in question.
But even if the partnership agreement were in AMBA’s chain of title and therefore AMBA were placed on inquiry notice, such an inquiry conducted in March 1996 would have revealed that McCallum had voluntarily withdrawn as a partner effective May 23,1991, that at the time of the conveyance by Harrison Properties, Ltd. to Motel Managers, Inc. in August 1993 McCallum was not a partner, and that, therefore, McCallum’s consent was not required.
McCallum and Harrison Properties argue that the language of Judge Imber’s Order of November 17, 1994, stating that if McCallum were not paid for his interest by 4:30 p.m. on November 18, 1994, he would “retain” ownership of his 26% partnership interest, is proof that McCallum was a partner on August 15,1993. This argument stretches logic because if McCallum had been a partner on November 17, 1994, Judge Imber’s Order providing for the retention of his partnership interest would have been superfluous. Further, in her Order dated March 19, 1992, Judge Imber unequivocally stated that McCallum’s withdrawal from the partnership had been accepted on May 23,1991.
A partner’s right of withdrawal or retirement from the partnership is an inseparable incident of every partnership; no party *330is compelled to continue as a partner when he chooses to withdraw. 59A Am.Jur.2d Partnership § 520 (1987). The right of a retiring partner who has not been paid for his partnership interest is that of a creditor of the partnership. Ark.Code Ann. § 4-42-614 (Michie 1987). See also Zach v. Schulman, 213 Ark. 122, 128, 210 S.W.2d 124, 128 (1948) (holding that a retiring partner or the representative of a deceased partner is a creditor of the partnership in the amount of the retiring or deceased partner’s partnership interest).
Further, the unequivocal language of the applicable partnership statutes supports the validity of the Patels’ title to the property. The statutes provide:
(1) Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member, binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority.
Ark.Code Ann. § 4-42-301(1) (Michie 1987).
(1) Where title to property is in the partnership name, any partner may convey title to the property by a conveyance executed in the partnership name; but the partnership may recover the property ... unless such property has been conveyed by the grantee or a person claiming through such grantee to a holder for value without knowledge that the partner, in making the conveyance, has exceeded his authority.
Ark.Code Ann. § 4-42-302(1) (Michie 1987).
Thus, under the statutes, even if the initial transfer from Swaffar to Spears could be avoided, the partnership may not recover the property from a subsequent purchaser or transferee for value unless it also proves that the subsequent transferee knew or had received a notification of the partner’s lack of authority with respect to the initial transfer.
The Plaintiffs do not dispute that the Pa-tels and AMBA had no actual knowledge that Swaffar lacked authority to transfer the motel property to Harrison Properties, Inc. Furthermore, nothing in the chain of title establishes the Patels had either constructive or inquiry notice. Thus, the provisions of section 302 of Arkansas’s partnership statute preclude McCallum and Harrison Properties Inc. from the relief sought.
Therefore, for the reasons stated, the motion for summary judgment by the Patels and AMBA is granted and the motion for summary judgment by the Plaintiffs is denied.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492723/ | ORDER
DENNIS D. O’BRIEN, Chief Judge.
This matter came before the Court on October 21, 1997 on Trustee’s Objection to Claimed Exempt Property. A response was filed by the Debtor. Appearances are as noted in the record. Based on the Federal and Local Rules of Bankruptcy Procedure, the Court now makes this ORDER.
I.
The issue presented is whether Minn.Stat. § 550.37, subd. 24(2)1 requires the inclusion of ERISA-qualified plans in calculating the total amount of exemptions allowable for non-ERISA plans under the statute.
The Debtor, Timothy Hawkinson, filed this Chapter 7 case on July 2, 1997. At the time of filing, the Debtor owned three retirement plans. Two of the plans were ERISA qualified: a pension plan with 3M valued at $7,580; and, a 401(k) plan valued at $25,-201.12. The third plan was an IRA account at Offerman & Co. valued at $48,900 which was not ERISA qualified. There is no dispute that the 3M pension plan and the 401(k) plan are ERISA-qualified plans. There also *335is no dispute that ERISA-qualified plans are not property of the bankruptcy estate and that the non-ERISA plan, the IRA, is property of the bankruptcy estate. As the IRA is property of the bankruptcy estate, it is subject to state exemptions as set out in Minn. Stat. § 550.37, subd. 24(2).
The Debtor takes the position that Minn. Stat. § 550.37, subd. 24(2), which provides that certain employee benefits are exempt “to the extent of the debtor’s aggregate interest under all plans and contracts up to ... [$51,000]”, does not include ERISA-qualified plans in the calculation of the aggregate interest. The Debtor claims the entire amount of the non-ERISA IRA exempt under the statute.
Both parties agree that ERISA law applies to ERISA plans. Nonetheless, the Trustee takes the position that the plain meaning of Minn.Stat. § 550.37, subd. 24(2) includes ERISA plans in the state law calculation of the amount of the exemption of non-ERISA plans subject to exemption under the statute. The Trustee’s position would result in the total amount of the ERISA plans ($32,781.12) being deducted from the state exemption limit ($51,000), leaving $18,218.88 remaining under the exemption limit. The amount of the IRA ($48,900) would then be deducted from the remaining amount of the exemption ($18,-218.88), resulting in $30,681.12 of the IRA exceeding the exemption limit.
II.
Judge Nancy Dreher recently issued an unreported decision supporting the Trustee’s position in In re Nielsen, No. 4-96-7257, 1997 WL 309148 (Bankr.D.Minn.).2 Nielsen involved the exemption calculation of Minn. Stat. § 550.37, subd. 24(2) as it pertained to six retirement accounts, two of which were ERISA qualified. The issue was whether “in calculating the aggregate interest of the Debtors in ‘all plans and contracts’ one must exclude interest in ERISA-qualified plans which are not property of the estate.” Nielsen, 1997 WL 309148 at *1. The court held that, “[plainly read, the statute [Minn.Stat. § 550.37, subd. 24(2) ] requires the inclusion of amounts in all such plans or contracts, whether excludable from the estate or not.” Id. The court, in making this holding, relied on a quote in Estate of Jones by Blume v. Kvamme which stated “[b]y its terms clause (2) governs all plans and contracts.” 529 N.W.2d 335, 339 (Minn.1995).
This Court does not agree with the Nielsen court. In this Court’s view, the plain reading of Minn.Stat. § 550.37 shows that the language “all plans and contracts” in clause (2) does not include the broad universe of all plans and contracts.
Minn.Stat. § 550.37 provides:
Subdivision 1. The property mentioned in this section is not liable to attachment, garnishment, or sale on any final process, issued from any court...
Subd. 24. Employee benefits. The debt- or’s right to receive present or future payments, or payments received by the debt- or, under a stock bonus, pension, profit sharing, annuity, individual retirement account, individual retirement annuity, simplified employee pension, or similar plan or contract on account of illness, disability, death, age, or length of service:
(2) to the extent of the debtor’s aggregate interest under all plans and contracts up to a present value of [$51,000] and additional amounts under all the plans and contracts to the extent reasonably necessary for the support of the debtor and any spouse or dependent of the debtor.
The language in clause (2) is limited by subdivision 24 itself, which relates only to non-ERISA employee benefits. Specifically, “all plans and contracts” must refer to those plans and contracts which are described in subdivision 24 and are subject to exemption under subdivision 24. If this were not the case, clause (2) would limit the Debtor’s exemption to $51,000 on all employee benefits, real estate contracts, sales contracts, and every other contract or plan imaginable. Clearly, the statute was not meant to promote such a result.
*336Additionally, case law is, at best, neutral as to whether Minn.Stat. § 550.37, subd. 24(2) is to include ERISA plans in the calculation of the amount of the exemption of non-ERISA plans subject to exemption under the statute. The Minnesota Supreme Court did state in Blume that “clause (2) governs all plans and contracts.” Blume, 529 N.W.2d at 339. This quote means no more in context of the ease than it does in context of the statute. Neither the quote in the case nor the case in general, gives any indication as to whether ERISA plans are to be included in the calculation of non-ERISA state law exemptions. In fact, the Blume court was only dealing with the constitutionality of Minn.Stat. § 550.37, subd. 24.
If Minn.Stat. § 550.37, subd. 24 required the inclusion of ERISA-qualified plans in the calculation of the total amount the exemption allowable for non-ERISA plans, the only way for the statute to make sense would be to marshal ERISA plans and include them in the calculation first. For example, if in this case the non-ERISA IRA ($48,900) was deducted first from the amount of the exemption ($51,000), the entire amount of the IRA would be exempt. The next step would be to deduct the total amount of the ERISA-quali-fied plans ($32,781.12) from the remaining amount of the exemption resulting in $18,-218.88 exceeding the exemption. However, this amount exceeding the exemption would have no practical effect on the bankruptcy estate as the ERISA-qualified plans are not property of the bankruptcy estate. Therefore, the result, if always calculating the non-ERISA plans first under the exemption limit, would be the same as if ERISA plans were not included in the calculation at all. The only way for the Trustee’s interpretation to make sense would be to calculate the ERISA plans first. However, clause (2) makes no reference to ERISA plans and is silent as to the manner of calculating the exemption if ERISA plans are involved.
Additionally, including ERISA plans in the calculation of non-ERISA exemptions under Minn.Stat. § 550.37, subd. 24 would likely violate the doctrine of preemption. State laws which “relate to” ERISA plans are preempted by ERISA, and the parties agree that Minn.Stat. § 550.37, subd. 24 does not apply to regulate or control ERISA plans.3 A law “relates to” an employee benefit plan “if it has a connection with or reference to such a plan.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983); 29 U.S.C. § 1144(a). “Relate to” was meant to be applied in its broadest sense. Shaw, 463 U.S. at 97, 103 S.Ct. at 2900. The intent of Congress in enacting this provision was “to provide comprehensive preemption of state law.” Shaw, 463 U.S. at 106, 103 S.Ct. at 2905. As ERISA exemptions are not controlled by state law, any inclusion of the amounts of ERISA-qualified plans in the calculation of exemptions under state law, specifically Minn.Stat. § 4550.37, subd. 24(2), would be inappropriate and contrary to the broad policy of preemption, regardless of the fact the ERISA plans would remain entirely exempt.
III.
IT IS HEREBY ORDERED THAT: ERISA-qualified plans are not included in the calculation of the aggregate interest of the Debtor in “all plans and contracts” under Minn.Stat. § 550.37, subd. 24(2). Therefore, the Debtor has not exceeded the statutory amount of the exemption as provided for under that subdivision, and the Trustee’s objection is overruled.
. The statute allows an exemption of $51,000 for certain non-ERISA employee benefits.
. The holding in Nielsen was not appealed as the case was converted to a case under Chapter 13.
. This issue has been resolved by the Minnesota Court of Appeals in Community Bank Henderson v. Noble, 552 N.W.2d 37 (Minn.App.1996). The court held that:
Minn.Stat. § 550.37, subd. 24, "relates to” employee benefit plans. It expressly refers to such plans in describing the types of funds that are exempt from attachment. Unless one of ERISA’s narrow exceptions to preemption applies, an express reference to employee benefit plans results in preemption by ERISA. Shaw, 463 U.S. at 96-100, 103 S.Ct. at 2899-2902. Noble, 552 N.W.2d at 39. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492874/ | MEMORANDUM OPINION
JAMES D. WALKER, Jr., Bankruptcy Judge.
This matter comes before the Court on Motion for Reconsideration by Goetschel Funding Company, LLC (“Movant”). The subject order entered on March 1, 1999 denied Movant’s Motion for Summary Judgment as to the dischargeability of a debt owed by William S. Redford, Jr. (“Debtor”). The Court’s determination of that motion was a core matter within the meaning of 28 U.S.C. § 157(b)(2)(I). Reconsideration of the order is, likewise, a core matter within the meaning of that section. ' Debtor opposes Movant’s Motion for Reconsideration. The findings of fact set out in the March 1, 1999 order are adopted for the purpose of this order.
In its motion, Movant asks this Court to reconsider its blanket denial of the motion for summary judgment. Movant asserts that no genuine issue of material fact is in dispute as to the first element of actual fraud under 11 U.S.C. § 523(a)(2)(A) — that Debtor made false representations — and that, therefore, it is entitled to partial summary judgment on that issue.
“[A] party seeking summary judgment always bears the initial responsibility of informing the ... court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)). Once the moving party has properly supported its motion with such evidence, the party opposing the motion “ ‘may not rest upon the mere allegations or denials of his pleading, but ... must set forth specific facts showing that there is a genuine issue for trial.’ ” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (quoting First Nat’l Bank v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968) (quoting Fed. R.CivP. 56(e))). A genuine issue for trial exists when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. Where some facts are in dispute—so that, ultimately, the case must go before the factfinder— but others are not, the court may, upon motion by a party, “ascertain what material facts exist without substantial controversy and what material facts are actually in good faith controverted.” Fed.R.Civ.P. 56(d). This partial summary judgment is “a pre-trial adjudication that certain issues are established for trial of the case.” FDIC v. Massingill, 24 F.3d 768, 774 (5th Cir.1994).
First, the Court must consider the evidence presented by Movant and determine whether it properly supports a basis for its motion. In support of its motion, Movant *562submitted fifty-eight affidavits sworn by representatives of companies that had received invoices from Debtor which they claim contained false representations. Movant claims Debtor further made false representations to it when Debtor assigned the invoices to Movant and represented, in accordance with the Accounts Receivable Purchase Agreement, that each invoice was “an accurate and undisputed statement of indebtedness owed to [Debtor] by a customer for a sum certain ... arising out of a bona fide sale, delivery and acceptance of merchandise or performance or service by [Debtor] to Customer in the ordinary course of [Debtor’s] business.” The Court finds that the fifty-eight affidavits properly support Movant’s motion and require a response from Debtor to the allegations contained in those affidavits.
The only response offered by Debtor to the affidavits was a general denial that he ever made any misrepresentations to the affiants or Movant. The Court finds that this response is sufficient to create a genuine issue of fact only as to six of the fifty-eight affidavits.
The six affidavits that are sufficiently disputed are numbers 9, 22, 27, 28, 37, and 46. These affidavits were sworn by company representatives who, after receiving orders, reviewed the invoices and determined that the “price of the supplies and/or quantity sent to [their] office was not as quoted on the telephone.” They determined the prices had been grossly inflated and that they would not have ordered the products at the price represented. In addition, these representatives complained that they had not been informed of the “exorbitant fees for handling and insurance on the orders.” As a result of the information contained on the invoices, they concluded they were “not liable for the amounts shown on the attached invoices.”
What these affidavits indicate is that the company representatives recognize that their company may be liable for at least a portion of the price listed on the invoice. However, they failed to specify which portion they claim to owe and which portion they do not. Such a general allegation cannot easily be denied by an opposing party. The specific evidence necessary to rebut these allegations cannot be identified by Debtor, if any exists, without knowing exactly which charges are disputed and which charges are admitted. If, for example, a price or charge is alleged to be inflated, Movant should specify the correct price or charge and compare it to the alleged inflated price or charge. To make a conclusory allegation that the entire debt is not owing because some portion of it is inflated is in reality a general allegation which is fully rebutted for the purpose of this summary judgment motion by Debt- or’s general denial. Therefore, the Court finds that Debtor’s general denial that he misrepresented anything on those invoices referred to by these six affidavits is sufficient to create a genuine dispute as to the falsity of the price contained in those invoices.
As for the remaining fifty-two affidavits, they contain allegations of sufficient specificity as to require Debtor to come forward with specific evidence showing that a genuine issue of fact remains for trial. Debtor’s general denial does not satisfy this burden. The remaining affidavits specify either that the price and/or quantity was not as quoted so that the products were returned (affidavits 1-2, 12, 14-21, 23-26, 35-36, 38-42, 50-51, 56), or the supplies were never ordered and/or the products were never received (affidavits 3-6, 8, 10-11, 13, 29-34, 40-45, 47-49, 52-55, 58), or the person listed on the invoice as having ordered the supplies was not even an employee of the company on the date of the order so that the company could not possibly have placed the order (affidavits 7, 57). Simply stating in response to these specific allegations that no misrepresentations were ever made does not create a genuine issue of material fact.
*563Therefore, the Court finds that the invoices referred to in these fifty-two affidavits amount to false representations by Debtor. The Court further finds that when Debtor assigned each invoice to Movant and represented that it was an “accurate and undisputed statement of indebtedness owed to [Debtor] by a customer for a sum certain ... arising out of a bona fide sale,” Debtor made an actual overt false representation to Movant within the meaning of section 523(a)(2)(A). See Schweig v. Hunter (In re Hunter), 780 F.2d 1577, 1580 (11th Cir.1986).
In conclusion, Movant’s motion for reconsideration and partial summary judgment on the issue of whether Debtor made a false representation is granted as to the invoices referred to in the fifty-two affidavits specified above. As to the remaining six invoices, a genuine issue of material fact exists as to whether, or to what extent, Debtor made a false representation, and therefore, Movant’s motion as to those invoices is denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492876/ | MEMORANDUM DECISION ON DEFENDANTS’ MOTION TO DISMISS AND MITCHELL E. RU-DIN’S CROSS MOTION FOR SUMMARY JUDGMENT ON HIS COMPLIANT SEEKING A MANDATORY INJUNCTION DIRECTING DEFENDANTS TO ACCEPT THE TAX CERTIORARI PETITION OF OLYMPIA & YORK MAIDEN LANE COMPANY LLC AND OLYMPIA & YORK FINANCE CORPORATION NUNC PRO TUNC TO OCTOBER 23, 1998
JAMES L. GARRITY, Bankruptcy Judge.
In this adversary proceeding, Mitchell E. Rudin (“Rudin” or “Receiver”), as receiver of certain improved real property located at 59 Maiden Lane, New York, New York (the “Property”), seeks an injunction under Fed.R.Bankr.P. 7001 and § 108(a)(2) of the Bankruptcy Code directing that the Tax Commission of the City of New York (“Tax Commission”), the Department of Finance of the City of New York (“Department of Finance”), and Norman Goodman, in his capacity as Clerk of the County of New York and Clerk of the Supreme Court of the State of New York, New York County (“Norman Goodman,” collectively “defendants”), to accept a certain Tax Certiorari Petition (the “Petition”) of Olympia & York Maiden Lane Company LLC (“0 & Y Maiden Lane”) and Olympia & York Finance Corp. (“O & Y Fiance”) (collectively the “debtors”) commencing an action (a “Tax Action”) challenging the tax assessment of the Property under the New York City Charter.
Initially, the Tax Commission and Department of Finance moved to dismiss the Receiver’s complaint (the “Complaint”) pursuant to Fed.R.Bankr.P. 7012(b)(1) and (b)(6) and FedR.Civ.P. 12(b)(1) and (b)(6). Norman Goodman joined in that motion. The Receiver opposed the motion and moved pursuant to Fed.R.Bankr.P. 7056 and Fed.R.Civ.P. 56 for summary judgment on the Complaint. On the return date of those motions, the parties executed a Statement of Undisputed Facts Pursuant to Local Rule 7056-1 (the “Joint Statement”) and agreed to treat the defendants’ motion to dismiss as one for summary judgment. Thus, the matters before us are the parties’ cross motions for summary judgment. We grant the Receiver’s motion and grant him judgment on the Complaint. We deny the defendants’ motion.
Facts
The relevant and material facts are not in dispute and we derive them from documents of record in the debtors’ cases and the parties’ Joint Statement. On or about August 28, 1998 (the “Filing Date”), the debtors filed separate petitions for relief under chapter 11 of the Bankruptcy Code. On that date, the Property was O & Y Maiden Lane’s principal asset, but pursuant to a March 5, 1997 order of the New York State Supreme Court (the “March Order”), Rudin was acting as equity receiver of the Property. By order dated September 4, 1998 (the “September Order”), and pursuant to § 543(d) of the Bankruptcy Code, we authorized Rudin to *665continue in possession, custody and control of the Property, in accordance with the March Order, nunc pro tunc to the Filing Date.
The Department of Finance is an agency that is authorized to assess for taxation all taxable real property in New York City and prepare the tax assessment role. On May 25, 1998, the Department of Finance caused the Property to be assessed (the “Assessment”) by entering it in the books entitled “The Annual Record of Assessed Valuation of Real Estate Indicated by Parcel Numbers in the Borough of Manhattan, The City of New York, July 1, 1998 to June 30, 1999.” Subsequent to January 15, 1998, the debtors’, claiming to be aggrieved by the Assessment, applied in writing under oath to the Tax Commission to correct the Assessment. On July 1, 1998, the Tax Commission denied that application. On October 27, 1998, the Receiver attempted to commence a Tax Action by filing the Petition with the County Clerk, New York County, but the clerk, as Norman Goodman’s agent, rejected the Petition as untimely under state law.
On or about November 13, 1998, the Receiver commenced this action. In his Complaint, the Receiver admits that the debtors are liable for the payment of real estate taxes for the Property, (see Complaint ¶ 9), but contends that the debtors have been aggrieved by the Assessment because it is erroneous and excessive. (See id. ¶ 11.) He admits that under applicable state law, October 23, 1998 was the last day for the debtors to file the Petition, (see id. ¶ 14), but asserts that, by virtue of the commencement of their chapter 11 case, their time to do so was extended to August 26, 2000, pursuant to § 108(a) of the Bankruptcy Code. (See id.) Accordingly, the Receiver seeks a mandatory injunction pursuant to Fed.R.Bankr.P. 7001 and § 108(a) of the Bankruptcy Code directing the defendants to accept the Petition nunc pro tunc to October 23, 1998.
Discussion
We have subject matter jurisdiction of this matter under 28 U.S.C. §§ 1334(b) and 157(a) and the Standing Order of Referral of Cases to Bankruptcy Judges of the United States District Court, dated July 10, 1984 (Ward, Acting C.J.). This is a core proceeding. See 28 U.S.C. § 157(b)(2)(A) and (O).
Fed.R.Bankr.P. 7056 makes Fed. R.Civ.P. 56 applicable herein. In relevant part, Rule 56 states that summary judgment
shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (same). Because the parties agree on all the material facts, these matters are ripe for summary judgment.
The parties agree that an Article 7 proceeding under the New York Real Property Actions and Proceedings Law is the exclusive means for the debtors to challenge the Assessment. Likewise, they agree that pursuant to § 165 of the New York City Charter, May 25, 1998 is the date that the Assessment became “final”, and the date on which the debtors’ right to commence a Tax Action accrued, and that pursuant to § 166 of the New York City Charter, the debtors had to commence a Tax Action prior to October 25, 1998.1 *666They also agree that because October 25, 1998 was a Sunday, the last day on which the debtors could timely file the Petition under § 166 was Friday, October 23, 1998.
Section 108(a) of the Bankruptcy Code states:
If applicable nonbankruptcy law, an order entered in a nonbankruptcy proceeding, or an agreement fixes a period within which the debtor may commence an action, and such period has not expired before the date of the filing of the petition, the trustee may commence such action only before the later of—
(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or
(2) two years after the order for relief.
11 U.S.C. § 108(a); see also id. § 1107 (debtor in possession is accorded all the rights of a trustee). As of the Filing Date, the debtors had the right to file the Tax Action. The Receiver attempted to file the Petition on behalf of the debtors on October 27, 1998, i.e., four days after the date specified in the New York City Charter, but within two years of the Filing Date. Accordingly, the issue that we must resolve is whether § 108(a) of the Bankruptcy Code extends the time under the New York City New York City Charter in which Rudin, acting on behalf of the debtors, can commence a Tax Action.
Rudin urges us to grant him summary judgment on the Complaint. He contends that pursuant to the plain language of the New York City Charter and Bankruptcy Code, and by application of the Supremacy and Bankruptcy Clauses of the U.S. Constitution,2 § 108(a) supercedes §§ 165 and 166 of the Charter, such that the Tax Action was timely filed.
The defendants have never challenged our September Order continuing Rudin as the receiver of the Property, and in the Joint Stipulation they agree that Rudin “is authorized to file a Tax Certiorari Petition ... to seek review of taxes that are erroneously or improperly assessed against the Property.” (Joint Stipulation ¶ 1.) Still, they contend that Rudin lacks standing to bring this adversary proceeding. We understand them to argue that because § 105(b) of the Bankruptcy Code expressly prohibits us from appointing a receiver, we erred in continuing Rudin’s appointment after the Filing Date and further, that as a “receiver”, Rudin falls outside the scope of § 108(a) of the Bankruptcy Code. To buttress their argument, the defendants cite to § lie of the Bankruptcy Act, which is the predecessor of § 108. They are correct that by its terms, § lie applied to a “receiver or trustee”3 and *667that § 108 does not include the term “receiver” because § 105(b) of the Bankruptcy Code forecloses a court from appointing one. To be sure, that section provides that “[n]otwithstanding [section 105(a) ], a court may not appoint a receiver in a case under [Title 11].” 11 U.S.C. § 105(b). That means that we cannot appoint a receiver in lieu of a bankruptcy trustee. See In re Memorial Estates, Inc., 797 F.2d 516, 519 (7th Cir.1986); Craig v. McCarty Ranch Trust (In re Cassidy Land and Cattle Co., Inc.), 836 F.2d 1130, 1133 (8th Cir.1988) cert. denied 486 U.S. 1033, 108 S.Ct. 2016, 100 L.Ed.2d 603 (1988). It does not preclude us from continuing the appointment of a state court equity receiver, like Rudin, to manage real property pursuant to § 543(d) of the Bankruptcy Code.4 See In re Memorial Estates, Inc., 797 F.2d at 519; In re Cassidy Land and Cattle Co., Inc., 836 F.2d at 1133; see also 1 Norton Bankruptcy Law and Practice § 4:48 (2d ed.1999 supp.) (appointment of receiver proper where bankruptcy court has jurisdiction over related matter, and where the appointment of the a receiver is proper under applicable nonbankruptcy law); 16 Charles Alan Wright, Et Al. Federal Practice and Procedure § 3925, n. 3 (2d ed.1996) (while Bankruptcy Code explicitly prohibits appointment of receiver, appointment is proper when state court foreclosure proceeding is removed to bankruptcy court upon filing of petition). That is what we did by our September Order. Thus, we do not read the exclusion of a “receiver” from § 108 to bar a state court equity receiver like Rudin from obtaining the relief he is seeking on behalf of the debtors, provided that he is otherwise authorized to do so. The defendants concede that he is so authorized. (See Joint Statement ¶ 1.) The state court’s March Order provides, in part, that the “Receiver be and hereby is authorized and directed ... to institute and carry on proceedings with respect to taxes, including tax certiorari proceedings .... ” NationsBank of Tennessee v. Olympia & York Maiden Lane Co., No. 123396/94 (N.Y.Sup.Ct. Mar. 5, 1997). To that end, it authorizes Rudin to “hire counsel and carry on all legal proceedings when needed to fulfill his duties to operate and preserve the [Property].... ” Id. We find that Rudin has standing to bring this complaint on behalf of the debtors.
Section 108(a) speaks of a “period within which the debtor may commence an action.” 11 U.S.C. § 108(a). The Bankruptcy Code does not define the term “period”. The parties agree, and our research confirms, that there does not appear to be any reported decision defining that term, or applying § 108(a) to § 166 of the New York City Charter. The defendants urge us to construe § 108(a) by its plain language. Quoting Black’s Law Dictionary, they contend that we should define the term “period” as “[a]ny point, space or division of time.” Black’s Law Dictionary, 1138 (6th ed. 1990) They distinguish that term from a “date” which Black’s defines as “the time given or specified—in some way ascertained or fixed.” Id. at 395. Applying those definitions, and citing R.R. Heywood Co. v. Boyland, 140 N.Y.S.2d 769 (N.Y.Sup.Ct.1955), they deny that § 166 establishes a period within which Rudin had to file the Petition for purposes of § 108(a) of the Bankruptcy Code, and contend that October 25 is a “terminal date” which cannot be extended under any circumstance.
In Heywood, the plaintiff filed a tax certiorari petition under § 166 of the New York City Charter on October 25, and *668argued that because October 24 was a Sunday, by application of § 25-a of New York’s General Construction Law (“GCL”), the petition was timely. See 140 N.Y.S.2d at 770-71. GCL § 25-a stated, in part, that “[w]hen any period of time, computed from a certain day, within which or after which or before which an act is authorized or required to be done, ends on a Sunday ... such act may be done on the next succeeding business day.” Id. The court rejected that argument, holding that
[Section 25-a] refers to a “period of time” computed from a certain day. The New York City Charter, § 166, does not fix any period of time within which or after which or before which the proceeding must be brought. The provision is that it “must be commenced before the twenty-fifty day of October.” No computation is involved here and the Charter, section 166, does not require any computation of time.
Heywood, 140 N.Y.S.2d at 771. Even assuming, arguendo, that for purposes of § 166, September 25 is a “terminal date” that cannot be extended under New York State law,5 that does not mean that we must dismiss the Complaint. Rudin is correct that courts read § 108(a) broadly6 and that we can apply it to extend a limitations period, even when the underlying state or federal law does not permit such an extension. See Mishkin v. Ageloff, 1998 WL 651065 (S.D.N.Y. September 23, 1998).7 In any event, the defendants concede that by application of the Supremacy Clause, we can grant Rudin relief under his Complaint provided that § 108(a) applies to the New York City Charter. (See February 10, 1999 Transcript at 61-62). As noted, the thrust of the defendants’ argument in opposition to Rudin’s motion, and in support of their own, is that § 108(a) is not applicable because § 166 of the New York City Charter does not fix a “period within which the debtor[s] may commence an action.”
We agree with defendants that because § 108(a) is unambiguous we must construe it to give effect to the plain language of the statute. See Atlantic Mut. Ins. Co. v. Commissioner of Internal Rev*669enue, 523 U.S. 382, -, 118 S.Ct. 1413, 1417, 140 L.Ed.2d 542 (1998) (“‘[T]he court ... must give Ml effect to the unambiguously expressed intent of Congress’ ”) quoting Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694; Escondido Mut. Water Co. v. La Jolla Band of Mission Indians, 466 U.S. 765, 772, 104 S.Ct. 2105, 80 L.Ed.2d 753 (1984) (“‘Absent a clearly expressed legislative intention to the contrary, [statutory] language must ordinarily be regarded as conclusive.’ ”) (citations omitted). We also agree that it is appropriate to apply Black’s Law Dictionary’s definition of the term “period” to this statute. However, we disagree with the defendants’ construction of § 166 of the New York City Charter because it ignores § 165. As noted, that section provides that May 25 of each year is the date on which tax assessments become final. See N.Y. City Charter, chap. 7, § 165. As the parties agree, that is the day on which “[t]he Debtor’s cause of action to review or correct the Assessment on the merits pursuant to state law accrued.... ” (Joint Statement ¶ 7.) The interval between the date the action accrued under § 165, i.e. May 25, and the so-called “terminal date” for filing the Petition under § 166, i.e. September 23, plainly is a “period” as Black’s Law Dictionary defines, and § 108(a) uses, the term.
Miscellaneous state court decisions relating to § 166 of the New York City Charter, while not on point, support our construction of the statutes. Heywood aside, those cases either refer to the time limitation in § 166 as a statute of limitations or, in describing its effect, use terminology appropriate when discussing a statute of limitations. See, e.g., People v. Lilly, 295 N.Y. 354, 355, 67 N.E.2d 579 (1946) (“[we affirm dismissal] since service on the city was not made within the time limited by section 166 of the New York City Charter”); People v. Miller, 288 N.Y. 163, 167, 42 N.E.2d 469 (1942) (court cited to “the limitations fixed by section 166 of the Charter”, and “the statutory limitations [set by § 166]”); 78 South First Street Housing Dev. Fund Corp. v. Crotty, 150 A.D.2d 218, 220, 541 N.Y.S.2d 388, 390 (N.Y.App.Div.1989) (Milonas, J. dissenting) (“[Action] was clearly brought after the expiration of the time specified by [§ 166], and claims asserted therein are, therefore, time-barred.”) rev. 75 N.Y.2d 982, 555 N.E.2d 906, 556 N.Y.S.2d 509 (1990) (adopting reasoning of dissent); G.A.D.Holding Co. v. Department of Finance, 192 A.D.2d 441, 442, 596 N.Y.S.2d 799 (1993) (“petitioner is time-barred from review of the 1990-1991 tax assessment [pursuant to § 166]”); Fleetair, Inc. v. Tax Commission of City of N.Y., 15 Misc.2d 502, 504, 181 N.Y.S.2d 645 (1958) (“[third-party defendant] is barred by the time limitation contained in section 166 of the New York City Charter.”); Alwalt Realty Corp. v. Boyland, 5 Misc.2d 1061, 1063, 160 N.Y.S.2d 504, 507 (1957) (“The failure to institute the proper [article 7] proceeding within the time allowed [by § 166] is a fatal bar to relief.”); Kaydel Realty Co. v. Miller, 255 A.D. 449, 450, 7 N.Y.S.2d 963, 964 (N.Y.App.Div.1938) (§§ 165 and 166 of the New York City Charter fix May 25th and October 25th as a five-month period within which tax certiorari proceeding may be commenced in any given year; such an action can be brought at any time between those dates, and is time barred if not brought before October 25).
Alternatively, the defendants argue that if we apply § 108(a), we must do so in light of the particular “equities” of this case. They contend that we must dismiss the Complaint because Rudin had ample opportunity to file the Petition in a timely manner. To be sure, as the defendants’ contend, in appropriate circumstances, courts deny relief under § 108(a). However we are not aware of any case in which a court has done so on equitable *670grounds,8 and as Rudin correctly asserts, the statute does not mention the equities of a case as a factor relevant to an analysis under § 108(a). Rather, as the Mishkin court found,
section 108 applies for a fixed period of time under a limited set of circumstances, and it exists by statute, which statute leaves no room for an argument of non-application based on a particular set of circumstances, equitable or otherwise ....
Mishkin v. Ageloff, 1998 WL 651065, at*6 (citations and footnote omitted). We hold the defendants to the plain language of the statute and reject their assertion that we should consider the equities of the case in considering these motions. In any event, even assuming, arguendo, that the equities are relevant to these motions, the undisputed facts plainly do not support a finding that it is inequitable to grant the Receiver summary judgment on his Complaint.
Conclusion
We grant the Receiver summary judgment on his Complaint. We deny the defendants’ motion for summary judgment dismissing the Complaint.
SETTLE JUDGMENT
. Section 165 states that:
The final determination of the tax commission upon any application for the of an assessment shall be rendered not later than the twenty-fifth day of May. Otherwise, the assessment objected to shall be deemed to be the final determination of the tax commission.
*666N.Y. City Charter, chap. 7, § 165 (New York Legal Publishing Corp.1989). Section 166 states that:
A proceeding to review or correct on the merits any final determination of the tax commission may be had as provided by law, and if brought to review a determination mentioned in [N.Y.C.C. § 165] must be commenced before the twenty-fifth day of October following the time when the determination sought to be reviewed or corrected was made.
N.Y. City Charter, chap. 7, § 166 (New York Legal Publishing Corp.1989).
. The Bankruptcy Clause of the U.S. Constitution states that "[t]he Congress shall have Power ... [t]o establish ... uniform Laws on the subject of Bankruptcies throughout the United States....” U.S. Const, art. I, § 8, cl. 4. The Supremacy Clause reads, as follows:
This Constitution, and the Laws of the UniL-ed States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.
U.S. Const, art. VI, cl. 2.
. That section provided, as follows:
A receiver or trustee may, within two years subsequent to the date of adjudication or within such further period of time as the Federal or State law may permit, institute proceedings in behalf of the estate upon any claim against which the period of limitations fixed by Federal or State law had not expired at the time of the filing of the petition in bankruptcy....
*667Bankruptcy Act § 11(e) (repealed 1978).
. Section 543 states in relevant part that:
After notice and hearing, the bankruptcy court—
(1) may excuse compliance with [the turnover provisions] of this section if the interests of creditors ... would be better served by permitting a custodian to continue in possession, custody, or control of such property....
11 U.S.C. § 543(d)(1).
. Heywood does not necessarily represent the law in New York State. Compare Elbin Realty No. 2. v. Boyland, 16 N.Y.2d 599, 261 N.Y.S.2d 56, 209 N.E.2d 103 (1965) (applying GCL § 25-a to § 160 of the New York City Charier); Fay v. Boyland, 18 Misc.2d 150, 187 N.Y.S.2d 504 (N.Y.Sup.Ct.1959) (criticizing Heywood and applying GCL § 25-a to § 163 of the New York City Charter).
. Courts in this district have applied § 108(a) to extend a wide range of statutory limitations. See, e.g., Mishkin v. Ageoff, No. 97 Civ. 2690, 1998 WL 651065, *6 (S.D.N.Y. Sept. 23, 1998) (applying § 108(a) to extend the time to commence an action under § 10(b) of the Securities and Exchange Act of 1934); GNK Enterprises, Inc. v. ConAgra, Inc. (In re GNK Enterprises, Inc.), 197 B.R. 444, 448 (Bankr.S.D.N.Y.1996) (finding that § 108(a) could apply to extend the time to commence state fraud, misrepresentation, breach of contract, and negligence actions, but did not grant extensions because both the nonbankruptcy prescriptive periods and the § 108(a) extension had expired before actions were commenced); Scherling v. Heilman Elec. Corp. (In re Westchester Structures, Inc.), 181 B.R. 730, 141 n. 17 (Bankr.S.D.N.Y.1995) (applying § 108(a) to extend time commence an action under N.Y. Lien Law § 77.2); Eisenberg v. Feiner (In re Ahead by a Length), 100 B.R. 157, 162-63 (Bankr.S.D.N.Y.1989) (applying § 108(a) to extend time to commence an action under the RICO Act); Greenwald v. Axelrod (In re Greenwald), 48 B.R. 263, 273 (S.D.N.Y.1984) (applying § 108(a) to extend time to commence an action under 42 U.S.C. § 1983); Murdock v. Plymouth Enterprises, Inc. (In re Curtina Int’n, Inc.), 23 B.R. 969, 975 (Bankr.S.D.N.Y.1982) (applying § 108(a) to extend time to commence an action under New York's bulk sales law).
.In Mishkin v. Ageloff, No. 97 Civ. 2690, 1998 WL 651065, *4 (S.D.N.Y. Sept. 23, 1998), the court applied § 108(a) to extend the time to commence an action under § 10(b) of the Securities and Exchange Act of 1934, even though the Supreme Court had held in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991), that such claims must be brought within one year of date of discovery, but no latter than three years from alleged fraud, and that such time period had run.
. The cases that the defendants' cite are not to the contrary. In Pereira v. Centel Corp. (In re Argo Communications Corp.), 134 B.R. 776, 784 (Bankr.S.D.N.Y.1991), a chapter 7 trustee for a corporate debtor sued certain related corporations seeking, among other things, money damages for their alleged breach of fiduciary duty, corporate waste, breach of contract, and negligent and fraudulent misrepresentation. Among other things, the defendants moved to dismiss portions of the complaint on the grounds that the claims were time barred under New York state law. In discussing the application of § 108(a) to the motion, the court stated that:
it'necessitates a two part analysis: first we must determine whether any claim that may have existed in favor of the debtor was still maintainable on the petition date under applicable nonbankruptcy law; and second, whether the two year extension is warranted.
Id. at 784 (citation omitted). Here, the defendants seem to argue that the second part of the proposed analysis creates an "equity test”. However, the Argo court did not apply it in that fashion and ultimately found that § 108(a) was inapplicable because more than two years had lapsed since the commencement of the case when the trustee initiated the litigation. See id. at 784-85.
The other cases cited by the defendants are equally inapposite. In those cases, the courts did not apply § 108(a) either because the underlying claim accrued postpetition, the claim was time-barred prior to commencement of the bankruptcy case, or because the nonbank-ruptcy prescriptive period and the § 108(a) extension period had run prior to commencement of the action. See Independent Fire Ins. Co. v. Pender (In re Phillip), 948 F.2d 985, 987 (5th Cir.1991) (in a converted chapter 7 case, holding that two-year extension provided for by § 108(a) does not apply to claims that arose during the pendency of the chapter 11 case because the period begins to run when order for relief is entered); Balaber-Strauss v. GTE Supply (In re Coin Phones, Inc.), 153 B.R. 135, 142-43 (Bankr.S.D.N.Y.1993) (among other things, court dismissed trustee’s breach of warranty, breach of contract, and willful misrepresentation claims because the complaint was brought after both the contractual prescriptive period and the two-year extension provided by § 108(a) had run); Baehr v. Touche Ross & Co., 62 B.R. 793, 796-97 (E.D.Pa.1986) (court held that negligence claim was time barred because the complaint was brought after both the nonbankruptcy prescriptive period and the two-year extension provided by § 108(a) had run); Dynaco Corp. v. KLA Instruments Corp. (In re Dynaco Corp.), 200 B.R. 750, 760 (Bankr.D.N.H.1996) (§ 108(a) not applicable to extend debtor-in-possession’s time because debtor’s cause of action was time-barred prior to commencement of chapter 11 case). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492877/ | OPINION
DONALD R. SHARP, Chief Judge.
Now before the Court is the Second Application of Price Waterhouse, LLP As Financial Advisors, Consultants And Accountants To The Official Committee of Unsecured Creditors of Voluntary Purchasing Groups, Inc., For Interim Allowance of Compensation For Services Rendered and Reimbursement of Expenses Incurred From October 1, 1996 Through December 31, 1997 (the “Application”). This opinion constitutes the Court’s findings of fact and conclusions of law to the extent required by Fed.R.Bankr.Proc. 7052 and disposes of all issues before the Court.
FACTUAL AND PROCEDURAL BACKGROUND
Voluntary Purchasing Group (“the Debt- or” or “VPG”), filed for relief under Chapter 11 of the Bankruptcy Code on June 10, 1996. Thereafter, on July 1, 1996, the United States Trustee appointed the Official Committee of Unsecured Creditors (the “Committee”) pursuant to Section 1102(a)(1) of the Bankruptcy Code. The Committee filed an application with this Court to approve employment of Price Wa-terhouse, LLP (“Applicant”) as its accountants in the within proceeding. This Court entered its Order authorizing Applicant’s employment effective retroactively to August 8,1996 on September 20,1996.
The immediate precipitating cause for the bankruptcy filing for VPG was the tremendous cost of defending lawsuits brought against VPG and other parties growing out of environmental claims. There were numerous class action lawsuits for personal injuries from exposure to toxic substances as well as actions by governmental regulatory agencies dealing with toxic pollution. The claims and potential claims in this case are extensive; the financial issues have been complex and litigation has been extensive. Despite the controversies, the Order Confirming Voluntary Purchasing Group’s First Plan of Reorganization, as modified, was entered of record on or about June 29,1998.
Applicant filed its first interim application for compensation and reimbursement of expenses on December 10, 1996, which was subsequently approved by this Court. The Second Interim Application is now before the Court. The Second Interim Application seeks compensation of $629,-897.40 and expenses of $13,610.43 for the period of October 1, 1996 through December 31, 1997. During the period covered by the Application, Applicant expended 4,232.6 hours performing professional services on behalf of the Committee. Southern Pacific Transportation Company and St. Louis Southwestern Railway Company *703(“the Railroads”) filed an Objection and Supplemental Objection to the Application complaining that the work done by Applicant was not beneficial to the estate. A hearing was held after which the matter was taken under advisement.
DISCUSSION
The question is whether the time spent by Applicant constituted services which provided a clear benefit to the estate. Matter of First Colonial Corp., of America, 544 F.2d 1291 (5th Cir.1977), cert. denied, 431 U.S. 904, 97 S.Ct. 1696, 52 L.Ed.2d 388 (1977). The Court has undertaken an extensive review of the Application and has carefully considered the Objections filed by the Railroads together with all testimony presented and the evidence admitted at the hearing. In addition, as requested by the parties, the Court has considered all papers and pleadings on file in this Reorganization Case. Upon review, the Court believes that Applicant’s services contributed meaningfully to the plan proponents’ ability to obtain confirmation of a plan of reorganization in a contentious legal environment.
The Railroads complain that portions of the Applicant’s time were spent without direct benefit to the creditors of the estate. The Court disagrees with the Railroads’ conclusion. VPG is a large purchasing cooperative which deals in agricultural chemicals including fertilizers, pesticides and herbicides. It had been in existence for approximately 30 years at the time of filing for relief under Chapter 11 of the Bankruptcy Code on June 10, 1996. VPG operated and still operates nationwide through a network of small locally owned merchants. It is a marketing system developed over the years to allow local merchants to better compete by merging their buying power through the cooperative. In terms of the size of its operation, VPG has a relatively small amount of fixed assets and the only tangible assets of significant value consist of the inventory stored in various warehouses around the country. The primary value to VPG is now and always has been its network of loyal dealers across the country. In that regard, the corporate structure and commercial dynamic of the Debtor are unusual. VPG’s success, notwithstanding the litigation that forced it to its knees as a business, derived from the network of relationships in the communities which it served and from the high levels of motivation and satisfaction among its distributors and clientele. It is difficult for one steeped in traditional accounting methods to diverge from standard, “comfortable” analytical conventions in order to adapt such approaches to VPG’s marketing scheme. VPG’s situation and prospects could not be analyzed by the same method as a company with fixed assets e.g., with respect to depreciation or conventional liquidation. To have attempted to do so would have been a meaningless effort. Therefore, although the Railroads may quarrel with the conclusions Applicant reached in its analysis, this Court believes that Applicant’s efforts in reaching those conclusions were necessary given that it was forced to solve problems that did not fit into a standardized mold.
The Railroads assert other allegations in their Objections that were simply not supported by the evidence at the hearings, in particular with respect to manipulation by Applicant of the balloting. Certainly, in a case of this magnitude, the job of classifying ballots is a difficult one and may lead to imperfections. This Court believes that any imperfections in tallying the ballots were inconsequential given the task and the results. Further, this Court believes that the Railroads’ contentions regarding impropriety of evidence introduced regarding the master ballots reflects the Railroads’ misunderstanding of the purposes underlying class action litigation. Based upon the record and the evidence, the Court finds that, except as indicated here-inbelow with respect to designated reductions, the Railroads’ assertions in the Objection and Supplemental Objection have *704no merit. Accordingly, the Court hereby finds the following:
Based on the size and complexity of the case, the Court will allow a maximum rate of $250.00 per hour for partners and directors in the firm and $50.00 per hour for paraprofessionals. Therefore, the Court has reduced the fees allowed for the services of J.R. Medlin, V.W. Bratic, J.W. Witte, C. Peshel, A.S. Conly, M.B. Napo-liello, B.C. Kimmey, J.E. Parker, J.S. Presley, P.B. Stewart and A.C. Vance accordingly.
The Court will not allow compensation in instances where the services performed by the professional are in the nature of overhead or could be performed by a non-billing or lower billing professional. Accordingly, the Court has reduced the fees sought for services performed by T.L. Reed, a secretary, for a total reduction of $715.00 and the Court has reduced the expenses for temporary staff in connection with ballot tabulation for a reduction of $1,904.75. In addition, the Court has reduced the fees sought for services performed by D.S. Sides by 96.50 hours [96.50 @ $120.00 =$11,580.00] of the total 474.90 billed, because the services rendered by the billing accountant are the type that could be performed by a data entry clerk or clerical staff. Specifically, Applicant requested reimbursement for “inputting ballots in database” and “organizing binders”. The foregoing resulted in a reduction of $11,580.00.
The Court finds that the other expenses were appropriate.
The Court will not allow compensation in instances when the amount of time spent to perform a task is excessive given the value to the estate of such task. Applicant seeks $85,508.50 for its services performing claims analysis. Applicant spent approximately 428.9 hours in its claims review process during the period covered by the Second Application. The Court recognizes that a significant expenditure of time and labor was required to review the 2730 proofs of claims filed in the within proceeding. The Court likewise recognizes the Railroads’ Objection that the claims review process failed to identify some 440 objectionable claims filed by tort claimants and/or their counsel. The 440 claims were duplicate claims and claims that were settled at the time the case was filed, but were erroneously included in the balloting process. To the extent such failure reduced the value of the Applicant’s services to the creditors of this estate, the Court has reduced the amount allowed for fees incurred in connection with the claims review process by $5,728.97. $5,723.97 is an amount assigned by this Court as an appropriate, proportional amount of the total sought; it corresponds to the 16.12% portion of the “problem” claims [440] to the total body of claims filed [2730],
CONCLUSION
The Court, having considered Applicant’s Second Application with respect to the twelve factors set forth in In re First Colonial Corp. of America, 544 F.2d 1291 (5th Cir.1977), cert. denied, 431 U.S. 904, 97 S.Ct. 1696, 52 L.Ed.2d 388 (1977), finds that Applicant’s services and expenses were actual, reasonable, necessary and provided value to the estate and its creditors.
For the reasons stated above, the Court believes that Applicant's request should be granted in the amount of $561,-447.03 for professional services and $11,-705.68 as reimbursement for costs and expenses, for a total interim award of $573,152.71. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492878/ | OPINION
DONALD R. SHARP, Chief Judge.
This contested proceeding began as a motion by Sears, Roebuck & Company entitled “Motion to Compel Compliance with 11 U.S.C. § 521(2) or Alternatively to Dismiss Case.” All parties agree that Sear's held a perfected purchase money security interest in miscellaneous consumer goods described in Debtors’ schedules and in the referenced Motion. In the Motion, Sears alleged that Debtors had failed to disclose material facts in their bankruptcy schedules and failed to file a statement of intention required by 11 U.S.C. § 521(2)(A) specifying whether the consumer goods would be returned, the debt would be reaffirmed or the property would be redeemed. Also pertinent to this case, Sears alleged that Debtors had violated 11 U.S.C. § 521(2)(B) by failing to perform their intention as to the consumer goods within 45 days of the filing due date1. Sears asked that, if a hearing was necessary, that Debtor be ordered to comply within ten (10) days in default of which they ask that the case be dismissed with prejudice to refiling.
Debtor responded to the above Motion with a general denial and counterclaim for attorney fees in the amount of $750.00 for a bad faith filing and ask that the matter be set for trial. Pursuant to the customary practices of this Court, the matter was set for trial and at the hearing, Debtors’ attorney introduced certified copies of the schedules complained of, the statement of intention required under 11 U.S.C. § 521, a motion to redeem property that had been filed and an order of the Court granting Debtors the right to redeem the consumer goods on which Sears held a security interest for the value of $1,000.00. Upon seeing this evidence, counsel for Sears withdrew the Motion in open court. Debtors’ counsel proceeded on his counter-claim for attorney fees and presented evidence as to the time and effort expended in responding to the Motion filed by Sears. The question of the granting of attorney fees on the counterclaim was taken under advisement at the conclusion of the trial, and this opinion constitutes the Court’s findings of fact and conclusions of law required by Federal Rule of Bankruptcy Procedure 7052 and disposes of all issues before the Court.
Factual and Procedural Background
To properly understand this controversy, one must look at the history of this bankruptcy proceeding from its inception. The Debtors filed their voluntary petition for relief under Chapter 7 of the Bankruptcy Code on November 1, 1996. Included with the petition, were all of the required schedules including the statement of. intention required by 11 U.S.C. § 521. The record reveals that proper notice of the proceeding was served on Sears, Roebuck and Company and, no complaint as to service has been made by Sears. Following the filing of this bankruptcy proceeding, the customary actions were taken in that a trustee was appointed, a first meeting of creditors was scheduled and the matter proceeded with customary administration. The trustee determined that there would be no distribution since there were no non-exempt assets to liquidate and filed such a report in late December.
On January 13, 1997, exactly 74 days after filing, Debtors filed a Motion to Redeem the consumer goods at issue in this case for their alleged value of $1,000.00. This Motion was properly served on Sears and was placed in suspense in accordance with the usual practice of this Court to await a reply. No reply was filed by Sears within the 20 day period allowed for re*707sponses and in due course, on February-10, 1997, 28 days later the order was routinely granted. Debtors then submitted the $1,000.00 to Sears.
On February 11, 1997, Sears counsel, Andrew Olivo, filed the Motion Sub Judice as well as a Notice of Representation and Appearance with a demand that all future correspondence be directed to him or his law firm. He also filed a Motion to extend the bar date for filing adversary proceedings objecting to dischargeability at the same time.
The Motion to Compel was placed in suspense in accordance with the usual practices of this Court and within the requisite time Debtors’ attorney filed his general denial and the matter was set for trial.
Discussion
The sole issue in this case is whether Debtors’ attorney, Richard Pelley, is entitled to $750.00 as attorney fees for responding to the Motion of Sears. Mr. Pelley explained in Court that he would not withdraw his request for attorney fees because this was the third action of this nature he was required to defend and he believed that he was entitled to attorney fees for responding to what he termed bad faith actions on the part of Seal’s. It was obvious that a dispute had continued for some time between Mr. Pelley, Sears and Sears counsel. Mr. Pelle/s evidence was clear that the time and effort that he spent to gather the information to properly respond to the Motion filed by Sears and the necessity to appear in Court and defend the Motion required effort justifying $750.00 in attorney fees.
Sears argued that this was simply a case of miscommunication and that if Mr. Pelley had properly communicated with Sears’ counsel to keep them apprised of what was going on in the case, he would not be before the Court since all of the matters complained of in his Motion had been taken care of. Sears’ counsel asserted that if he had seen the documents placed into evidence prior to the hearing, he would have dismissed the Motion at that time.
The problem with the position of Sears counsel is that Debtors’ counsel had done everything required of him under the Bankruptcy Code. He had filed the proper proceedings, had served them on Sears and they were all a matter of public record in the bankruptcy court. At the time that counsel filed his notice of representation, all of the documents that he claimed were missing had been a matter of public record for adequate time for him to have discovered them. The statement of intention was filed on November 1 and had been on file 102 days when Sears’ Motion to Compel the filing of the document was filed. The Motion to Redeem property was filed on January 13 and had been on file 28 days and had already been granted at the time the Motion complaining that Debtor failed to accomplish his intention within the appropriate time period. Mr. Pelley correctly pointed out that he had no obligation to serve any documents on Sears’ counsel until after February 11 when the notice of representation was placed of record. At that point, all of the documents at issue had already been properly served on Sears as required by the Bankruptcy Code.
Contrary to Sears and Sears’ counsel’s assertions that the problem was created by Mr. Pelley’s failure to keep them apprised of activities in the case, the real problem was Sears’ counsel’s failure to make even a cursory examination of the records in this bankruptcy proceeding before he filed his Motion to Compel. The very thing that Sears complains of had been put directly at issue by the filing of the Motion to Redeem on February 13 and the serving of that Motion on Sears. Sears did not even respond to the Motion and allowed a default judgment to be entered. The inescapable conclusion is that Sears’ counsel failed to make any inquiry and certainly not a reasonable inquiry into the facts of the case before he filed his Motion to Compel containing allegations of improper conduct on the part of Debtors *708and Debtors’ counsel. The Court must agree with Mr. Pelley that these actions constitute a bad faith filing on the part of Sears and its counsel.
Federal courts follow the American rule as to attorney fees and require each party in litigation to pay its own attorney fees. The exceptions are those instances where (1) a statute authorizes an award of attorney fees to the prevailing party, (2) a contractual provision authorizes the award of attorney fees to the prevailing party, (3) a litigant deliberately disobeys a court order, (4) a litigant has acted in bad faith, and (5) a litigant recovers a common fund for the benefit of others. Alyeska Pipeline Service Company v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). The exception applicable to this case is the awarding of attorney fees for bad faith conduct in connection with the litigation. Bankruptcy courts have the inherent power to award sanctions for bad faith in any proceeding in bankruptcy court. Matter of Case, 937 F.2d 1014 (5th Cir.1991). In awarding attorney fees as a sanction, the Court must conclude that the fees assessed were both (1) caused by the bad faith action and (2) objectively reasonable. In re Carruth, 161 B.R. 170 (W.D.La.1993).
The actions of Sears and its counsel in this case were clearly not designed to litigate any meaningful issue in this case. There was no justification for Sears or its counsel’s action presented to the Court and it is clear that Debtors’ attorney spent valuable time preparing for and responding to the totally unfounded pleadings and allegations. Accordingly, the Court finds that Richard Pelley is entitled to judgment against Andrew Olivo and Sears, Roebuck and Company, jointly and severally for attorney fees in the amount of $750.00.
. The actual requirement is that the election be made within 30 days and the intention be carried out in another 45 days for a total of 75 days from the filing date. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8492879/ | OPINION AND ORDER THEREON
MARILYN MORGAN, Bankruptcy Judge.
I. Introduction
The proceeding before the Court is the culmination of many years of litigation that commenced in 1992 when the trustee sued to recover a fraudulent transfer. After receiving a judgment for the value of the fraudulent transfer, the trustee was thereafter thwarted from collecting the judgment for the estate. When she was unable to recover from the transferee, the trustee sued the immediate transferee. The question that now arises is whether the one-year statute of limitations for an action against the immediate transferee commenced running when the Court ruled in the underlying fraudulent transfer action or when the judgment was entered on the docket twenty-four days later. For the reasons hereinafter explained, the Court holds that the complaint was not timely filed.
II. Background
In 1992, Suzanne L. Decker, the Chapter 7 trustee, commenced an adversary proceeding to set aside a transfer of property from the debtor, Sophie Serrato, to her son, Frank Voisenat. The trustee alleged that Serrato quitclaimed property to Voisenat in September 1988 in an attempt to defraud her creditors. At trial, testimony revealed that Voisenat then sold the property to his brother, Marc Voisenat.
In its opinion dated September 30, 1997, the Court found that Serrato fraudulently transferred the property with an actual intent to defraud her creditors, and that the estate was entitled to recover from Frank Voisenat the value of Serrato’s equi*835ty in the property. The ruling concluded that “[b]ecause the court finds that the trustee has met her burden of proving that Serrato fraudulently transferred the 102nd Avenue property to Frank with an actual intent to defraud her creditors, the trustee is entitled to recover $45,314.94, the value of Serrato’s equity in the property, from Frank Voisenat.” Decker v. Voisenat (In re Serrato), 214 B.R. 219, 232 (Bankr.N.D.Cal.1997). A judgment in the sum of $45,314.94 was entered on October 24, 1997.
The instant complaint was filed by the trustee on October 15, 1998. The complaint seeks to recover $45,314.94 from Marc Voisenat as the immediate or mediate transferee of the avoided transfer. Marc Voisenat seeks to dismiss the complaint for failure to state a claim for relief, asserting among other grounds, that the complaint was not filed timely.
III. Discussion
A. Standard for Motion to Dismiss
For a defendant to prevail on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), it must appear to a certainty that the plaintiff would not be entitled to relief under any set of facts that could be proved. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). See also Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984); Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729, 732 (9th Cir.1987). In considering a motion to dismiss, all the allegations of material fact are construed in the light most favorable to the nonmov-ing party. See Gilligan v. Jamco Development Corp., 108 F.3d 246, 248 (9th Cir.1997).
B. The Complaint Was Not Timely Filed
Section 550(f)1 states that an action to recover avoided transfers of property must be brought no later than the earlier of one year after the transfer was avoided or the date the case is closed or dismissed. The one year limitations period begins to run once the avoidance action is final. See Kapila v. Funding Inc. (In re Data Lease Financial Corp.), 176 B.R. 285, 286-87 (Bankr.S.D.Fla.1994).
A final decision generally is one that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment. See Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911 (1945). To qualify as a final decision, an opinion must contain certain elements. The language of the opinion must contain the essential elements of a judgment and must clearly evidence the court’s intention that it shall be the final act in the case. See U.S. v. F. & M. Schaefer Brewing Co., 356 U.S. 227, 232-33, 78 S.Ct. 674, 678, 2 L.Ed.2d 721 (1958).
Applying the two-prong test set out by the Supreme Court in F. & M. Schaefer, the September 30, 1997 opinion was a final decision. First, the opinion settled all matters between the’ parties. The Court held that when Serrato quitclaimed the 102nd Avenue property to Frank, her intent was to conceal her ownership of the property, to cloud the title, and to defraud her creditors. Second, the opinion specified the amount the trustee was entitled to recover. The Court stated that “[t]his amount includes the $40,314.94 that Frank received from escrow, and the $5,000 debt that Frank forgave. The court agrees that $45,314.94 is the appropriate measure of recovery pursuant to sections 544(b) and 550(a).” Serrato, 214 B.R. at 232. Finally, the Court’s ruling ended the fraudulent transfer action on the merits and left nothing for the Court to do but execute the judgment.
The trustee seeks the shelter of the “separate document” rule in asserting that the statute of limitations could not have expired prior to the filing of the instant complaint. Bankruptcy Rule 9021 states *836that “[e]very judgment entered in an adversary proceeding or contested matter shall be set forth on a separate document.” The requirement of a separate document is designed “to promote certainty as to the relatively short time that a party has to appeal a final order.” Ford v. Union Bank (In re San Joaquin Roast Beef), F.3d 1413, 1417 (9th Cir.1993). See also Bankers Trust Co. v. Mallis, 435 U.S. 381, 385, 98 S.Ct. 1117, 1120, 55 L.Ed.2d 357 (1978) (“sole purpose of the separate document requirement ... [is] to clarify when the time for appeal ... begins to run”).
However, a different policy underlies statutes of limitations. Generally a statute of limitations commences running upon the happening of an event providing notice to claimants that a cause of action has accrued. See San Joaquin Roast Beef, 7 F.3d at 1417. Under federal law, a cause of action accrues when a plaintiff “knows or has reason to know of the injury which is the basis of the action.” Vaughan v. Grijalva, 927 F.2d 476, 480 (9th Cir.1991). See also Volk v. D.A. Davidson & Co., 816 F.2d 1406, 1412 (9th Cir.1987) (“the statute of limitations is ... triggered [when] the defrauded individual has actual or inquiry notice”). Addressing statutes of limitations in the bankruptcy context, the Supreme Court has noted that:
It is obviously one of the purposes of [bankruptcy] law, that there should be a speedy disposition of the bankrupt’s assets. This is only second in importance to securing equality of distribution.... It is a wise policy, and if those who administer the law could be induced to act upon its spirit, would do much to make the statute more acceptable than it is.
Bailey v. Glover, 88 U.S. (21 Wall.) 342, 346-47, 22 L.Ed. 636 (1874). It is important to note that the Supreme Court acknowledged that the statute of limitations was “passed by the Congress of the United States as part of the law of bankruptcy,” id. at 349, and therefore is not subject to modification, absent equitable circumstances. No equitable circumstances have been shown here.
In San Joaquin Roast Beef, the Ninth Circuit Court of Appeals confronted the issue of whether, for statute of limitations purposes, an order becomes effective when signed or when entered on the docket. The trustee argued that the statute of limitations should be tolled until the order is entered on the docket because “it is a judgment, which is effective (and appealable) only when entered.” San Joaquin Roast Beef, 7 F.3d at 1417. The trustee asserted that this interpretation would be consistent with the entry of judgment rules governing notices of appeal. After analyzing the policy behind the separate judgment rule, the court disagreed, holding that the date when a written order is signed commences the running of the statute of limitations:
[T]he execution of a written order adequately promotes the policy of providing certainty to parties in bankruptcy proceedings as to the limitations period during which claims can be filed. The date the order is signed also is the event that triggers action by trustees to protect the interests of the estate and thus adequately gives notice that the statute of limitations has started running. In this case, the statute of limitations began running on May 2, 1988, the date that the bankruptcy court signed and filed the order. Accordingly, Ford’s adversary proceeding filed on May 3, 1990 is barred by section 546(a)’s two-year statute of limitations.
Id. at 1417-18. Similarly, the written opinion issued in the underlying fraudulent transfer proceeding is a triggering event that affords certainty and puts the trustee on notice that further action may be required to protect the interests of the estate.
Since the Court’s opinion of September 30, 1997 put the trustee on notice that a claim for relief had accrued and the statute of limitations began to run upon the issuance of that opinion, the deadline to bring *837a proceeding under § 550(f) was September 30, 1998. The instant complaint, filed on October 15,1998, is untimely.
V. Conclusion
The Court’s September 30, 1997 opinion was a final decision avoiding the transfer. The trustee was on notice that the period for recovering from an immediate transferee then commenced. As a result, the complaint against defendant is dismissed as untimely filed. The trustee’s counter-motion for sanctions under Bankruptcy Rule 9011 against Marc Voisenat is denied.
Good cause appearing, IT IS SO ORDERED.
. All citations are to the Bankruptcy Code found in Title 11 of the United States Code. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493629/ | RULING ON DEBTOR’S OBJECTION TO TRUSTEES APPLICATION FOR COMPENSATION
ROBERT L. KRECHEVSKY, Bankruptcy Judge.
I.
ISSUE
This proceeding requires determining the reasonable compensation for a Chapter 7 trustee. John J. O’Neil, Jr., Esq. (“O’Neil”), the Chapter 7 trustee of the estate of Hala L. Pilón (“the debtor”), on July 24, 2003, filed an application for final compensation of $33,702.36, together with his trustee’s final report. The Office of the United States Trustee (“the UST”) supported the application. The debtor objected (this being a solvent estate) contending that the requested compensation is unreasonable and excessive. After a short hearing on the application, each party, including the UST, submitted a supporting brief.
II.
BACKGROUND
The debtor, on July 26, 2000, originally filed a bankruptcy petition under Chapter 11 of the Bankruptcy Code. Her estate consisted primarily of an island, located off Cape Cod, in the town of Wareham, Massachusetts, inherited from her family. The debtor, in her schedules, valued the island at $2,450,000; disclosed as additional assets four contingent and unliquidated claims; listed recorded encumbrances, including $130,742.68 in unpaid property taxes, all totaling $355,134 on the island; and enumerated unsecured claims amounting to $35,600.
The court, on December 6, 2000, approved the debtor’s application to employ Kinlin Grover GMAC Real Estate (“Kin-lin”), a real estate brokerage firm specializing in waterfront properties in the Cape Cod area, to market the island for $2,800,000. The court, on the motion of a secured creditor, on April 17, 2001, converted the debtor’s case to one under Chapter 7 for, inter alia, unreasonable delay by the debtor that was prejudicial to creditors, and O’Neil became trustee. O’Neil continued Kinlin’s retention and Kinlin, in August, 2001, obtained a purchase offer for $625,000. Although the debtor and some unsecured creditors objected, the court, on April 10, 2002, granted O’Neil’s motion to sell the island for $625,000. O’Neil requested the appointment of his law firm, Francis, O’Neil & Del Piano, LLC (“FO’N & D”) to represent him in the sale of the island, which request the court granted. The sale concluded on May 10, 2002, and the court subsequently awarded FO’N & D fees in the amount of *561$10,968.50. FO’N & D’s fee application included 28.5 hours of services by O’Neil, as a senior member of the law firm, at the hourly rate of $250.1
The debtor, through court-approved special counsel, settled one of her contingent and unliquidated claims for $24,000. O’Neil abandoned the debtor’s remaining claims because the proceeds from the sale of the island were more than sufficient to satisfy all creditor and administrative claims, and a surplus of $26,522 was being returned to the debtor. O’Neil’s fee application asserts he spent 82.3 hours administering the debtor’s estate, and seeks compensation computed as a statutory percentage of funds turned over to creditors. See Bankruptcy Code § 326(a) infra.
III.
DISCUSSION
A
The Bankruptcy Code deals with compensation of Chapter 7 trustees in two sections. Section 330, in relevant part, provides:
(a)(1) ... the court may award to a trustee ...
(A)reasonable compensation for actual, necessary services rendered by the trustee ....
(3) ... In determining the amount of reasonable compensation to be awarded, the court shall consider the nature, the extent, and the value of such services, taking into account all relevant factors, including—
(A) the time spent on such services;
(B) the rates charged for such services;
(C) whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title;
(D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed; and
(E) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title.
Section 326, entitled Limitation on compensation of trustee, states, in relevant part:
(a) In a case under chapter 7 or 11, the court may allow reasonable compensation under section 330 of this title of the trustee for the trustee’s services, payable after the trustee renders such services, not to exceed 25 percent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable compensation not to exceed 3 percent of such moneys in excess of $1,000,000, upon all moneys disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims.
The legislative history to § 326 discusses the interaction of the “reasonable compensation” standard of § 330 and the maximum compensation imposed under § 326:
This section [§ 326] is derived in part from section 48c of the [former Bankruptcy Act]. It must be emphasized that this section [§ 326] does not authorize *562compensation of trustees. This section simply fixes the maximum compensation of a trustee. Proposed 11 U.S.C. § 330 authorizes and fixes the standard of compensation. Under section 48c of [the former] law, the maximum limits have tended to become mínimums in many cases. This section [§ 326] is not intended to be so interpreted. The limits in this section, together with the limitations found in section 330, are to be applied as outer limits and not as grants or entitlements to the maximum fees specified.
H.R.Rep. No. 95-595 at 327 (1977), U.S.Code Cong. & AdmimNews 1978, 5963, 6283; S.Rep. No. 95-989 at 37 (1978), U.S.Code Cong. & Admin.News 1978, 5787, 5823.
In applying §§ 330 and 326, it is now well settled that:
[Section] 326 sets the maximum compensation payable to the trustee; it does not establish a presumptive or minimum compensation. The computation in § 326(a) is a limitation on compensation, not a mandate for minimum commissions .... The cap of § 326(a) is implicated only when the compensation is reasonable, and reasonableness is a determination that must begin with 11 U.S.C. § 330. In re Butts, 281 B.R. 176, 178 (Bankr.W.D.N.Y.2002). Accordingly, a court awarding trustee fees must begin by assessing reasonableness under § 330(a) before applying the percentage-based cap under § 326(a).
Connolly v. Harris Trust Co. of California (In re Miniscribe Corp.), 309 F.3d 1234, 1241 (10th Cir.2002); see also Staiano v. Cain (In re Lan Assoc. XI, L.P.), 192 F.3d 109, 122 (3d Cir.1999) (“[T]he reasonableness determination under § 330(a) should not include consideration of the caps set forth in § 326(a).”).
B.
At the outset, the court notes that O’Neil has performed his duties in a timely, efficient and professional manner and that the necessity for and the reasonableness of the time spent on the services provided is unquestioned. The sole issue before the court is whether the statutory maximum requested exceeds the reasonable compensation, as defined in § 330(a), for such services. “In employing the fee setting criteria of Section 330(a), the bankruptcy judge is accorded wide discretion.” In re Lan Associates XI, L.P., 192 F.3d 109, 122 (3rd Cir.1999).
This case, having commenced under Chapter 11, was administered preconversion by the debtor. Being a single asset, solvent estate, its administration, both before and after conversion, was essentially concerned with marketing the island. O’Neil, as well as the debtor, made significant contributions toward the eventual sale of the island. O’Neil’s duties did not extend over one year, and his requested compensation is equivalent to an hourly rate of $409.50.
In reviewing attorney’s fee applications under § 330(a), the court ordinarily employs a lodestar analysis, multiplying the necessary hours worked by a reasonable hourly rate. Accordingly, a lodestar analysis provides the starting point for determination of O’Neil’s reasonable compensation. The court concludes that the rates charged for the nature, extent and value of trustee services rendered in the case would not exceed $250 per hour, O’Neil’s standard hourly rate. “While a trustee’s standard rate per hour as an attorney is not necessarily the measure that should be applied in all cases to determine the value of a trustee’s services as a trustee, it is one fact which indicates what the time of a trustee may be worth when he is employed upon tasks which would *563require commensurate skill with that which he would be required to employ as an attorney.” In re Biskup, 236 B.R. 332, 337 (Bankr.W.D.Pa.1999).
“The trustee bears the burden of proof in all matters concerning his fees.” In re Stoecker, 118 B.R. 596, 601 (Bankr.N.D.Ill.1990). In the absence of any evidence that O’Neil’s skill and experience as a trustee is more valuable than his skill and experience as an attorney, the court adopts his standard billing rate as an attorney as reasonable for his duties as a trustee.2 O’Neil’s records indicate that he has spent 82.3 hours administering the estate. At his attorney billing rate of $250 per hour, the reasonable compensation for such services is $20,575.
O’Neil argues that the court should enhance the lodestar calculation, based upon the twelve-factor analysis (“the Johnson factors”) employed in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974)3 to determine the reasonableness of an attorney’s fee application in a civil rights action. The Supreme Court has held that “the lodestar figure includes most, if not all, of the relevant [Johnson] factors constituting a ‘reasonable’ attorney’s fee.” Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S. 546, 566, 106 S.Ct. 3088, 3098, 92 L.Ed.2d 439 (1986); see also Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984); Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). O’Neil submits that the compensation sought is justified in light of “the applicable Johnson factors in this matter [which] are the time and labor required, the amount involved and the result obtained.” (O’Neil’s Response at 5.) This court, in In re Kero-Sun, 59 B.R. 630 (Bankr.D.Conn.1986) (citing the Supreme Court’s decisions in Blum and Hensley), discussed and excluded these considerations as justifying an upward adjustment to the lodestar calculation.4
*564
TV.
CONCLUSION
The court concludes that, under the circumstances of this case, an award of trustee’s fees equal to the number of hours expended by O’Neil in administering the estate multiplied by his hourly rate as an experienced, competent attorney, is consistent with the “reasonable compensation” requirement of § 330(a). Accordingly, the debtor’s objection is sustained and O’Neil’s application for compensation is reduced to $20,575 and such sum is approved. It is
SO ORDERED.
. A law firm associate also billed 17.8 hours at $220 per hour.
.The UST concedes, in her memorandum, that “the chapter 7 trustee has the burden of establishing the reasonableness of his request for compensation [and that i]f the trustee cannot ... augment the description of the services he provided so that the reasonableness of his request is established for the Court, the application, as presented, must fail.” (UST’s Mem. at 7.) The UST, after noting that O’Neil’s application is “on the high side of the range of reasonableness,” requests that "[s]hould the Court determine that [O’Neil] has not provided enough detail concerning the services provided, the U.S. Trustee would support [O'Neil] having an additional opportunity to augment his application, and that his application be denied without prejudice to his augmenting his application.” (Id.) The court’s determination that O’Neil has not met his burden of proof of entitlement to an hourly rate that exceeds his billing rate as an attorney is not based on a lack of detail regarding his services to the estate, but on a lack of evidence that the prevailing market rates for such services in nonbankruptcy matters would support his fee application.
. The twelve Johnson factors are: (l)the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill required to perform the legal service properly; (4) the preclusion of other employment; (5) the customary fee; (6) whether the fee is fixed or contingent;(7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation and ability of the attorneys; (10) the "undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. 488 F.2d at 717-719.
. In Delaware Valley, the Supreme Court deferred consideration of whether the risk of nonpayment where a fee is on a contingency basis would justify enhancement of a lodestar calculation. As this court noted in Kero-Sun, an appointed professional in an estate with assets does not risk nonpayment. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493630/ | MEMORANDUM OPINION1
MARY F. WALRATH, Chief Judge.
Before the Court is the Motion for Partial Summary Judgment filed by North-field Insurance Company (“Northfield”) seeking a declaration that the Northfield insurance contracts (“the Northfield Policies”) do not provide coverage for punitive damages which may be awarded against the Debtors in Texas. After a hearing, and consideration of the affidavits and exhibits proffered, we conclude that North-field’s motion must be denied for the reasons set forth below.
I. FACTUAL BACKGROUND
On January 18, 2000, Mariner Post-Acute Network, Inc., and its affiliates (collectively “the Debtors”) filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. The Debtors are the owners and/or operators of nursing homes, assisted living facilities and pharmacies, and provide various health care related services around the country. Through their ownership and operation of these facilities, the Debtors have been subject to numerous claims and lawsuits by current and former patients (and their estates) asserting causes of action for wrongful death, personal injury, and breach of contract. Many of these claims assert gross negligence, negligence per se, wilful and wanton conduct, and other aggravated conduct that may entitle the claimants to recover compensatory and punitive damages.
Approximately half of these claims are covered under the Debtors’ primary poli*613cies issued by Royal Surplus Lines Insurance Company (“the Royal Policies”). The Northfield Policies are “following form” insurance policies that provide both commercial and general liability insurance coverage and medical professional liability coverage in excess of the Royal Policies.
In its Motion for Partial Summary Judgment, Northfield seeks a ruling that it is not liable for punitive damages that may be awarded against the Debtors in Texas under Texas public policy and under the terms of the Northfield Policies.
II. JURISDICTION
This Court has jurisdiction over this matter, which is a core proceeding pursuant to 28 U.S.C. §§ 1384 and 157(b)(2)(A) and (0).
III. • DISCUSSION
A. Motion for Partial Summary Judgment
To grant a motion for summary judgment, the court must determine whether the moving party has established 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); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must assume that the undisputed facts set forth in the record are true.
B. Choice of Law
As a threshold matter, the parties dispute which law should be applied to determine whether punitive damages are insurable. Northfield urges us to apply Texas law, while the Debtors argue that various state laws may apply.
To decide this threshold issue, we must use the choice of law rules of the forum state, i.e., Delaware. See In re Eagle Enters., Inc., 223 B.R. 290 (Bankr.E.D.Pa.1998) (citing Klaxon Co. v. Stentor Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)).
When determining which state law governs, Delaware courts apply the “most significant relationship test” articulated in the Restatement Second of Conflict of Laws. Liggett Group v. Affiliated FM Ins. Co., 788 A.2d 134, 137 (Del.Super.Ct.2001). Section 193 of the Second Restatement provides that questions regarding the rights and validity of insurance contracts are determined by the local law of the state which the parties understood was the principal location of the insured risk during the term of the policy, unless some other state has a more significant relationship under the principles stated in Section 6. Rest. (Second) of Conflicts of Law § 193 (2003)2. See, e.g., Whiteside v. New Castle Mut. Ins. Co., 595 F.Supp. 1096, 1098 (D.Del.1984).
Since Northfield’s Motion is limited to claims arising in Texas, resulting from acts or omissions within that state, it is clear that Texas is the location of the insured risk. No other state’s interests are implicated. Therefore, we will apply Texas law.
C.Texas Public Policy
Northfield contends that Texas law establishes that punitive damages are *614uninsurable as a matter of law. Although the Texas Supreme Court has not specifically addressed the issue before us, it has long held that contracts against public policy are void and unenforceable. James v. Fulcrod, 5 Tex. 512, 520 (Tex.1851). In 1994, the Texas Supreme Court announced that the public purpose of punitive damages is to punish and deter conduct. Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 16-17 (Tex.1994).3
Applying Moriel and its progeny, the District Court for the Northern District of Texas made an Erie 4 determination that insuring against punitive damages violated Texas public policy. Hartford Cas. Ins. v. Powell, 19 F.Supp.2d 678, 696 (N.D.Tex.1998). That decision was predicated on a finding that the public policy of Texas is to ensure that a defendant, who deserves to be punished, receives an appropriate level of punishment. Id. at 684 (quoting Moriel, 879 S.W.2d at 17).
We disagree with the Powell Court’s conclusion, on which Northfield’s argument is premised. First, Texas’s insurance code does not contain a blanket provision that prohibits insuring against punitive damages. In fact, it expressly provides that, “the commissioner may approve ... coverage for exemplary damages to be used on a policy of medical professional liability insurance”. Tex. Ins.Code Ann. art. 5.15-1 § 8.5
Second, Texas case law does not support Northfield’s bright line rule. See Am. Home Assurance Co. v. Safway Steel Prod. Co., 743 S.W.2d 693, 704-05 (Tex.App.-Austin 1987, writ denied 1987). In Safway Steel, the Court held that a corporation could insure itself against the gross conduct of its agents. Id. Although this ruling was made before Moriel and Powell, Texas courts since then have not held that insuring against punitive damages is per se void. See, e.g. Westchester Fire Ins. Co v. Admiral Ins. Co., 2003 WL 21475423, 2003 Tex.App. LEXIS 5468 (Tex.App.-Fort Worth, no writ June 26, 2003). In fact, the Westchester Court held that insuring against punitive damages arising from vicarious liability does not violate Texas public policy. Id. at *10, 2003 Tex.App. LEXIS 5468, at *27-29. In so concluding, the Westchester Court stated that it could find no statute or case law that contradicted the holding of Safway. Id.
Accordingly, we conclude that Texas public policy does not prohibit insurance coverage of punitive damages in all situations. Since the Texas trial courts have not determined the basis of the Debtors’ liability, we must conclude that Northfield is not entitled to judgment as a matter of law that it is not hable for any punitive damages which may be assessed against the Debtors.
*615D. Insurance Policy Language
Northfield also asserts that this Court should grant its Motion because the Northfield Policies do not cover acts that are “expected or intended from the standpoint of the insured.” Northfield contends that this language, in conjunction with Texas law on when punitive damages may be awarded, precludes any liability for punitive damages.
In Texas, punitive damages may be awarded only if a claimant proves by clear and convincing evidence that the alleged harm resulted from: (1) fraud, (2) malice, or (3) a willful act, omission or gross neglect. Tex. Civ. Prac. & Rem Code § 41.003. The Texas Code further defines gross neglect as:
an act or omission (i) which when viewed objectively from the standpoint of the actor at the time of its occurrence involves an extreme degree of risk, considering the probability and magnitude of potential harm to others; and (ii) of which the actor has actual, subjective awareness of the risk involved, but nevertheless proceeds with conscious indifference to the rights, safety, or welfare of others.
Tex. Civ. Prac. & Rem.Code § 41.001(7)(B). Thus, Northfield argues that the Debtors’s conduct must have been “expected or intended” if an award of punitive damages is made.
Texas case law, however, provides otherwise. The Court in Westchester found that an entity may be found liable for punitive damages without expecting or intending the result. 2003 WL 21475423, at *10, 2003 Tex.App. LEXIS 5468, at *29. The Court concluded that the insurance policy (which contained language similar to the Northfield Policies’ exclusion for expected or intended injuries) did not preclude coverage for grossly negligent behavior. That conclusion was premised on a determination that it is possible to know that an act or omission is likely to cause serious harm, but not anticipate or consider it probable that the harm will actually occur. Id. at *11, 2003 Tex.App. LEXIS 5468, at *30-31.
Consequently, we cannot conclude, as Northfield argues, that under Texas law the exclusion language of the Northfield Policies would preclude coverage for any punitive damages which may be awarded against the Debtors in Texas.
IV. CONCLUSION
For the reasons set forth above, we deny Northfield’s Motion for Partial Summary Judgment.
An appropriate order is attached.
ORDER
AND NOW this 24th day of SEPTEMBER, 2003, upon consideration of the Motion for Partial Summary Judgment filed by Northfield Insurance Company and the response of the Debtors thereto, it is hereby
ORDERED that the Motion for Partial Summary Judgment filed by Northfield Insurance Company is hereby DENIED.
. This Opinion constitutes the findings of fact and conclusions of law of the Court pursuant to Federal Rule of Bankruptcy Procedure 7052.
. The relevant factors under Section 6 include: (a) the needs of the interstate systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relevant interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied. Rest. (Second) of Conflicts of Laws § 6.
. In 1994, after the Texas Supreme Court's Moriel decision, the Texas Legislature expressly provided that punitive damages levied against a defendant are to punish the defendant for outrageous, malicious, or other morally culpable conduct. Tex. Civ. Prac. & Rem.Code Ann. § 41.001(3) (1995).
. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) (where State Supreme Court has not decided an issue, federal court must determine how that court would rule).
.This provision of the Texas Insurance Code was not in effect at the time the Northfield Policies were issued. Therefore, it does not directly apply to this case. Great Am. Reserve Ins. Co. v. Laney, 488 S.W.2d 481, 485-86 (Tex.Civ.App.-Fort Worth 1972), rev'd on other grounds, 498 S.W.2d 674 (Tex.1973). However, giving the insurance commissioner authority to approve the insurance of punitive damages appears inconsistent with a public policy against such insurance. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493632/ | MEMORANDUM OPINION
BERNARD MARKOVITZ, Bankruptcy Judge.
Debtors have brought a motion to establish and authorize the payoff in full of allowed claims in their chapter 12 case from an inheritance debtor Larry Baker expects to receive. Debtors have made no provision in their motion, however, for payment of the unsecured portion of the allowed claim of United States Department of Agriculture, Farm Service Agency (hereinafter “FSA”).
FSA objects to the proposed distribution to other unsecured creditors with allowed claims and insists that it too is entitled to payment in full of its allowed unsecured claim.
We agree with FSA for reasons articulated in this memorandum opinion. FSA is entitled to receive distribution in the amount of $32,707.16 as payment in full of the unsecured portion of its allowed claim.
—FACTS—
Debtors, who are husband and wife, jointly own a 110-acre tract of land located at 165 Trexler Road, Loretto, Pennsylvania, on which they operate a dairy farm. They also jointly owned a 143-acre tract of land located at 362 Lincoln Road, Loretto, Pennsylvania, which they leased to third parties.
Debtors filed a voluntary joint chapter 11 petition on August 4,1999.
AgChoice Farm Credit (hereinafter “AgChoice”) was listed on the bankruptcy schedules as having an undisputed first-position mortgage lien against both of the properties. FSA was listed as having an undisputed second-position mortgage lien against both of the properties as well as a first-position security interest in livestock and equipment debtors use in operating their dairy farm.
FSA filed a timely proof of claim on December 16, 1999, in the amount of $235,110.84. The proof of claim expressly stated that this amount represented the total amount of the debt owed, not the actual value of its collateral, and that it was unsecured to the extent the value of the collateral was not sufficient to fully secure the claim. At no time did debtor or any other party in interest formally object to FSA’s claim.
On January 12, 2000, AgChoice brought a motion for relief from the automatic stay to allow it to foreclose on its interest in the properties subject to its mortgage liens. A stipulation resolving the matter was approved on February 2, 2000. AgChoice agreed to withdraw its motion with respect to the Trexler Road property in return for debtors’ agreement to make adequate protection payments in connection therewith. Debtors also consented to relief from stay with respect to the Lincoln Road property.
*641Upon motion by debtors, their case was converted to a chapter 12 proceeding on March 15, 2000. A chapter 12 trustee was appointed that same day.
Debtors filed an amended chapter 12 plan on July 7, 2000. Among other things, debtor proposed that the second-position mortgage lien of FSA against the Lincoln Road property would not be paid in light of the surrender of the property. The proposed plan further provided that FSA’s secured interest in their livestock and farm equipment was in the amount of $98,916.00 and would paid with interest over a period of sixty months, with a balloon payment in the sixtieth month.
FSA objected to debtors’ amended chapter 12 plan dated July 7, 2000. Among other things, FSA asserted that the plan failed to adequately recognize the extent of its secured interest in debtors’ livestock and farm equipment. It specifically objected to the methodology debtors’ employed in their liquidation analysis, wherein they discounted the value of their livestock and equipment by certain percentages and further deducted a ten-percent sales commission. According to FSA, the amount of its secured claim, “after surrender of the Lincoln Road property”, was $151,991.00.
A modified order confirming debtors’ amended chapter 12 plan dated July 7, 2000, issued on August 4, 2000. Among other things, the order provided that the allowed secured claim of FSA was acknowledged to be $151,991.00, the amount asserted by FSA. Debtors were directed to pay adequate protection to FSA for a period of six months and were to amend their chapter 12 plan yet another time by January 12, 2001, to address the “full payment” of FSA’s claim.
In their amended chapter 12 plan submitted on January 12, 2001, debtors once again asserted that FSA’s mortgage hen against the Lincoln Road property would not be paid due to its surrender. The plan further asserted once again that FSA’s secured interest in debtors’ livestock and farm equipment was $98,191.00 and was to be paid with interest over sixty months, with a balloon payment in the sixtieth month with funds received from the Farm Preservation Program. These funds, estimated at $99,000.00, were to be applied first to the FSA obligation until it was paid in full, after which remaining funds would be distributed to general unsecured creditors with allowed timely claims.
On April 4, 2002, debtors commenced an adversary action against FSA to determine the extent of FSA’s secured status pursuant to § 506(a) of the Bankruptcy Code and to modify its claim accordingly pursuant to § 1222. Count I asserted that FSA’s claim based on its mortgage lien against the Lincoln Road property was secured in the amount of $6,450.00. Count II asserted that FSA’s claim based on its secured interest in debtors’ livestock and farm equipment was secured in the amount of $91,548.00.
After consenting to have the adversary action decided on a case-stated basis, debtors and FSA submitted a joint stipulation of facts along with supporting briefs. Among other things, they stipulated that FSA’s mortgage lien against the Lincoln Road property was secured in the amount of $6,450.00. They further stipulated that the appraised values of debtors’ livestock and farm equipment were $71.600.00 and $73,900.00, respectively.
Debtors denied, however, that FSA’s claim in reality was secured in the total amount of $ 151,950.00 ($6,450.00 + $71,600.00 + $73.900.00 = $151,950.00). According to debtors, the stipulated-to appraised values of their livestock and equipment did not accurately reflect the extent *642to which FSA’s claim was secured. A discount of forty percent plus a sales commission of ten percent, they asserted, should be applied to their livestock to reduce its actual value to $39,906.00. They further asserted that a discount of twenty percent plus a sales commission of ten percent should be applied to their farm equipment to reduce the actual value thereof to $51,250.00. According to debtors, FSA’s claim was secured in the total amount of $97,876.00 ($6,450.00 + $39,520.00 + $51,250.00 = $97,876.00), not $151,950.00 as FSA maintains.
Judgment in favor of FSA and against debtors was entered in the adversary action on September 11, 2001. We determined that the extent of FSA’s secured interest in debtors’ livestock and farm equipment should be based on the appraised value of the collateral rather than on some discounted value as debtors had proposed. Debtors were directed to submit another chapter 12 plan which took the judgment into account. No appeal was taken of this order.
Debtors submitted yet another amended chapter 12 plan on December 12, 2001. Among other things, debtors asserted that FSA was undersecured with respect to its interest in the livestock and farm equipment and proposed paying the secured portion with interest over a sixty-month period. General unsecured creditors with timely-filed allowed claims were to receive a pro rata distribution of one percent starting in the fifty-fifth month.
FSA half-heartedly objected to the plan. If debtors executed new promissory notes and a new security agreement “to reflect the restructured debt”, FSA indicated that it would withdraw its objection.
An order confirming debtors’ amended plan dated December 12, 2001, issued on May 3, 2002. Among other things, the plan was modified to provide that the class of general unsecured creditors with timely-filed allowed claims would receive the greater of $7,500 or five percent of the amount of their allowed claims.
A sheriffs sale of the Lincoln Road property took place some time after AgCh-oice was granted relief from stay with respect to the property. The date of the sale is not indicated in the record of this case. AgChoice’s first-position mortgage lien against the property was paid in full from the sale proceeds, with the remainder going to FSA in partial satisfaction of its second-position mortgage lien.
On January 3, 2003, debtors brought a motion to establish and authorize the payment of claims in their chapter 12 case. According to debtors, the parents of debt- or Larry Baker had died and he has become a beneficiary of their testamentary estates. Debtors assert that sufficient funds will be available for the chapter 12 trustee to pay in full all allowed unsecured claims in their case.
Allowed secured claims are not at issue here. Debtors are directly paying such claims in accordance with the provisions of their confirmed plan dated December 12, 2001. Included among such claims are FSA’s mortgage lien against the Trexler Road property and the secured portion of its interest in debtors’ livestock and farm equipment.
In their motion, debtors propose having the chapter 12 trustee pay with the funds they anticipate receiving remaining allowed unsecured claims, including three allowed general unsecured claims. FSA, however, is not included among them. Debtors do not intend to and do not seek authorization to pay in any amount the unsecured portion of FSA’s allowed claim. The total of the proposed payments, which includes the fee of their bankruptcy counsel, is $76,883.16. Debtors seek an order *643establishing that the payments required in their confirmed chapter 12 plan can be accomplished by delivering this amount to the chapter 12 trustee.
As might be expected, FSA vigorously objected to debtors’ proposal because payment of the unsecured portion of its allowed claim was not addressed.
Oral argument on debtors’ motion and the opposition of FSA thereto was heard on August 20, 2003, after which each side in due course submitted a brief in support of its position.
—DISCUSSION—
Section 506(a) of the Bankruptcy Code defines secured and unsecured claims for bankruptcy purposes. Johns v Rousseau Mortgage Corp. (In re Johns), 37 F.3d 1021, 1023 (3d Cir.1994). It provides as follows:
An allowed claim of a creditor secured by a lien on property in which the estate has an interest ... is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property ... and is an unsecured claim to the extent that the value of such creditor’s interest ... is less than the amount of such allowed claim.
11 U.S.C. § 506(a).
A claim, proof which is filed under § 501 of the Bankruptcy Code, as FSA’s claim in this case was, is deemed allowed unless a party in interest objects to the claim. 11 U.S.C. § 502(a). Neither debtors nor any other party in interest objected to FSA’s proof of claim in the amount of $235,110.84.
Section 506(a) applies to chapter 12 cases. See 11 U.S.C. § 103(a). It sorts allowed claims into two classes. An allowed claim that is secured by a lien on a debtor’s property is secured “to the extent of the value of such creditor’s interest in the estate’s interest in such property”. To the extent the claim exceeds that value, it is deemed to be un secured. Put another way, a claim is treated as a secured claim only up to the value of the collateral; any debt in excess of this amount becomes an unsecured claim. McDonald v. Master Financial, Inc. (In re McDonald), 205 F.3d 606, 609 (3d Cir.), cert. denied, 531 U.S. 822, 121 S.Ct. 66, 148 L.Ed.2d 31 (2000).
If, as in the present matter, the value of the collateral securing an obligation is less than the amount of an allowed claim, it follows by definition that the claim is imsecured in the amount of that deficiency. This principle does not apply only where the value of the collateral is equal to or greater than the amount of the allowed claim. In such instances, a creditor is either fully secured or overse-eured.
The amount of FSA’s allowed claim is $235,110.84. The value of the collateral securing its claim, it has been determined, is $151,950.00. It therefore should follow, by definition, that FSA’s allowed claim is secured in this latter amount and is un secured in the amount of $83,160.84 ($235,-110.84 — $151,950.00 = $83,160.84) minus the amount FSA received when debtors’ Lincoln Road property was sold at a sheriffs sale.
When asked at oral argument on debtors’ motion why this conclusion does not follow in this instance and why FSA would not have an allowed unsecured claim unless the amount it received from the sheriffs sale equaled or exceeded $83,160.84, counsel to debtor tried to change the subject. Counsel offered no good reason why we should conclude otherwise.
In their motion, debtors asserted that FSA is not entitled to an unsecured claim because it took no step to establish a deficiency claim. When pressed for authority *644for the proposition that FSA was required to do so in light of the clear language of § 506(a), counsel to debtors conceded that he had none.
The most seemingly plausible argument debtors offered in support of their position was that FSA is not entitled to receive any distribution with respect to the unsecured portion of its claim because the precise amount FSA received from the sheriffs sale of the Lincoln Road property is not known. This assertion is devoid of merit.
The inference that FSA is not entitled to payment of the unsecured portion of its claim for this reason is a non sequitur. All that follows is that the precise amount of the distribution to which FSA is entitled must be determined, not that it is entitled to no distribution whatsoever.
Moreover, debtors’ assertion that it is not known how much FSA received from the sheriffs sale of the Lincoln Road property is false, perhaps even disingenuous. FSA stated in its response to debtors’ amended plan dated June 12, 2001, that it had received a total of $50,448.68 from the sale of the property. We see no reason to question the veracity of this statement and seriously doubt that it escaped debtors’ notice.
From this information debtors (and their counsel) easily could have determined the outstanding amount of the unsecured portion of FSA’s claim by utilizing simple arithmetic. The total amount of the unsecured portion of FSA’s allowed claim, we previously determined, was $83,160.64. Subtracting from this the amount FSA received as a result of the sheriffs sale leaves an outstanding balance in the amount of $32,707.15 ($83,160.64— $50,448.68 = $32,707.16).
After reviewing the record in this case in its entirety, we conclude that for reasons of their own, debtors simply do not want to pay the unsecured portion of FSA’s allowed. The reasons they have proffered for not paying this portion of FSA’s allowed claim are bogus at best and must be rejected. If debtors propose paying other general unsecured creditors with allowed claims in full, FSA is entitled to the same treatment.
An appropriate order shall issue.
ORDER OF COURT
AND NOW, at Pittsburgh this 31st day of October, 2003, for reasons set forth in the accompany memorandum opinion, it hereby is ORDERED, ADJUDGED, and DECREED that United States Department of Agriculture, Farm Service Agency, is ENTITLED to receive $32,707.16 as payment in full of the unsecured portion of its allowed claim.
It is SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493635/ | MEMORANDUM DECISION AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT
ROBERT D. DRAIN, Bankruptcy Judge.
Each party in this adversary proceeding seeks a declaratory judgment with respect to the status of a sublease (the “Sublease”) dated December 19, 2001 between Alan Nisselson (the “Fayolle Trustee”), in his capacity as chapter 11 trustee of John Fayolle (“Fayolle”), as sublessor, and Au*845thentic Hansom Cabs, Ltd. (“Authentic”), as sublessee. The Sublease pertains to a building located at 504-506 West 38th Street in New York City (the “Building”). Defendant Anchor Paper Stock Co. (“Anchor”) is the landlord under the main lease of the Budding pursuant to a Standard Form of Loft Lease and Rider, each dated as of November 1, 1997 (the “Overlease”), with Fayolle as tenant. Pursuant to an order of the Court (Hon. Richard Boha-non, J.) dated November 22, 2002, the Fayolle Trustee assumed and assigned the Overlease to 504 West 38 LLC. Under the November 22, 2002 order, the assignment to 504 West 38 LLC was free and clear of all encumbrances but expressly was subject to the rights, if any, of Authentic as determined in this adversary proceeding.
Authentic takes the position that the Sublease remains in effect. The Fayolle Trustee and the other defendants contend, instead, that the Fayolle Trustee validly terminated the Sublease for, among other things, Authentic’s non-payment of rent.
Relatedly, but separately, Authentic seeks a declaration that it has the right to offset or recoup its obligations under the Sublease against obligations owing to Authentic, specifically $100,000 that Authentic contends it is owed under a settlement agreement dated as of December 19, 2001 (the “Hudson Settlement Agreement”), between, among others, Authentic, on the one hand, and the Fayolle Trustee and Frank Sinatra (the “Aristocratic Trustee;” with the Fayolle Trustee, the “Trustees”), as chapter 11 trustee of Aristocratic Coach Corp. (“Aristocratic”), on the other. Authentic argues that such setoff or recoupment would satisfy its obligations under the Sublease or, at least, render the Fa-yolle Trustee’s termination of the Sublease defective and invalid. (Alternatively, Authentic seeks an injunction directing that the $100,000 be paid to it if it does not have a valid right of setoff or recoupment against its Sublease obligations.) Authentic also argues that Anchor’s refusal to consent to Authentic’s proposed alterations of the Building excuses Authentic’s default under the Sublease.
The Trustees and the other defendants deny that Authentic has any right of setoff or recoupment against its obligations under the Sublease, and, in any event, that the conditions under which Authentic would have been entitled to the $100,000 under the Hudson Settlement Agreement have failed. The defendants also contend that Anchor had the right to refuse to consent to the proposed alterations to the Building and, in any event, that Anchor’s wrongful withholding of consent would not excuse Authentic’s failure to perform its obligations under the Sublease.
Each side seeks summary judgment— the defendants, who have not made a formal motion for summary judgment, on the basis that “In considering a motion for summary judgment, if the Court’s analysis reveals that there are no genuine issues of material fact, but that the law is on the side of the nonmovant, the Court may grant summary judgment in favor of the nonmovant even in the absence of a cross-motion ... so long as the movant has had an adequate opportunity to come forward with all of its evidence.” Jacques v. DiMarzio, Inc., 200 F.Supp.2d 151, 162 (E.D.N.Y.2002); see also Orix Credit Alliance, Inc. v. Horten, 965 F.Supp. 481, 484 (S.D.N.Y.1997); 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2720 (2d ed.1983).
There are no material issues of disputed fact, as this is fundamentally a documentary dispute. Because Authentic’s position is not supported by the relevant documents or applicable law, Authentic’s motion for summary judgment is denied. *846Defendants’ arguments being the reverse image of Authentic’s arguments, defendants’ request for summary judgment is appropriate and is granted. The Trustees do not owe Authentic any money under the Settlement Agreement, the conditions for such payment having failed. Thus, whether Authentic has a right of setoff or recoupment in respect of the Sublease is moot. Anchor’s refusal to consent to the proposed modifications to the Building, whether or not valid, does not excuse Authentic’s defaults under the Sublease. Nor has Authentic offered any other valid reason for contesting the Fayolle Trustee’s termination of the Sublease.
Facts
The facts are found, unless otherwise noted, in Authentic’s statement pursuant to Local Bankruptcy Rule 7056-l(a) and the documents referred to therein, which are attached as exhibits to Fayolle’s affidavits dated March 4, 2003 (“Fayolle Affidavit 1”), and June 23, 2003. Defendants’ responsive statement pursuant to Local Bankruptcy Rule 7056-l(b) does not dispute the facts set forth in Authentic’s Rule 7056-l(b) statement but, rather, disagrees with Authentic’s characterization of certain of those facts.
On May 15, 2000, involuntary chapter 7 petitions were filed against Fayolle and two entities controlled by him' — Riverbank Landscape, Inc. (“Riverbank”) and Aristocratic. The debtors voluntarily converted their cases to chapter 11, but Judge Boha-non subsequently appointed the Trustees.1 The Trustees decided to market the debtors’ assets jointly. Those assets primarily consisted of the Overlease and real property owned by Aristocratic at 634 West 52nd Street, New York City (the “Aristocratic Premises”), which was used as a livery stable for hansom cab horses, and real property owned by Riverbank at 639-41 West 51st Street (the “Riverbank Premises”), which was a defunct “adult entertainment facility.” The Riverbank Premises and the Aristocratic Premises are adjacent to each other on the Hudson River waterfront and are referred to together as the “Bloekfront Properties.”
In December, 2001 the Trustees entered into an agreement to sell the Bloekfront Properties and the Overlease with stalking horse bidders, subject to higher and better offers to be received at an auction scheduled for January 25, 2002.
Two non-debtor entities controlled by Fayolle — Authentic and Hudson River Lounge, LLC (“Hudson”) — asserted leasehold interests in the Aristocratic Premises and the Riverbank Premises. To facilitate the marketing of the Bloekfront Properties, which were more attractive to prospective purchasers if Authentic and Hudson did not have the right to hold over as tenants under section 365(h) of the Bankruptcy Code, the Trustees negotiated the Hudson Settlement Agreement with Fa-yolle, Hudson and Authentic at the same time that they were negotiating with the stalking horse bidders.
Under the Hudson Settlement Agreement, Authentic agreed to terminate its lease of the Aristocratic Premises and Hudson agreed to terminate its lease of the Riverbank Premises, each waiving their right to hold over under section 365(h). In return, the Fayolle Trustee agreed to sublease the Building to Authentic, and the Trustees agreed to make two payments to Authentic, one of $75,000 and one of $25,000, under certain specified conditions. In the Hudson Settlement Agreement, Authentic also agreed to satisfy an overdue $20,000 rent obligation under its lease of the Aristocratic Premises by ap*847plying such amount in three installments to amounts owing under the Overlease. It was understood that Authentic intended to try to develop and operate the Building as a livery stable to replace the Aristocratic Premises that it was agreeing to vacate under the Hudson Settlement Agreement.2
Pacific Circle, Inc. (“Pacific Circle”) was the winning bidder at the January 25, 2002 auction. By order dated February 5, 2002 (the “February 5 Order”), Judge Bohanon approved the Trustees’ proposed sale to Pacific Circle, including the assignment of the Overlease, as well as approved the Settlement Agreement and the Fayolle Trustee’s entry into the Sublease. The term of the Sublease commenced sixty days after receipt of Court approval, or April 6, 2002, which one can infer from the Hudson Settlement Agreement was roughly the time believed to be required for Authentic to move the livery operation out of the Aristocratic Premises and into the Building in anticipation of the closing of the Pacific Circle transaction. The effectiveness of the Sublease was not conditioned, however, upon the closing of the Pacific Circle transaction. Nor was the effectiveness of the Hudson Settlement Agreement, although, as discussed in more detail below, Authentic’s right to the $100,000 was tied to the closing of the proposed sale transaction.
Paragraph K(v) of the February 5 Order recited the amount outstanding under the Overlease as of January 31, 2002 — $124,-553.57 — and required this sum, together with any additional amounts accrued through the date of the closing, to be paid as cure under section 365(b) of the Bankruptcy Code upon the assumption and assignment of the Overlease to Pacific Circle. The February 5 Order also confirmed Anchor’s consent to the Sublease, provided that it was paid an additional $57,000 security deposit.
Notwithstanding the foregoing, however, Authentic never occupied the Building under the Sublease, although Authentic contends that for some period it had access to the premises. Authentic also has not received any of the $100,000 of conditional payments set forth in the Settlement Agreement. Nor has Authentic paid any portion of the rent provided under the Sublease or the $20,000 under the Hudson Settlement Agreement. It also has not paid the $57,000 security deposit referred to in the February 5 Order. Fayolle Affidavit 1 ¶ 56.
The context of the foregoing becomes somewhat clearer when it is understood that Pacific Circle did not close the sale approved in the February 5 Order, although Pacific Circle’s failure to close does not explain why Authentic failed to make its rental payments under the Sublease and the Hudson Settlement Agreement.
It was not immediately apparent that Pacific Circle was not going to close. Instead, there was a lengthy limbo period during which the parties postponed the closing in the hope that Pacific Circle could complete its financing and simultaneously considered fallback alternatives. At one point, Pacific Circle increased its security deposit from $400,000 to $500,000 to obtain a little more time. During this period, Pacific Circle also corresponded with Anchor about Authentic’s proposed alterations to the Building. In anticipation of a closing “within the next few weeks,” on *848May 14, 2002 Pacific Circle’s counsel requested Anchor’s approval of Authentic’s preliminary alteration plans. Anchor’s counsel responded to this request in a letter dated May 30, 2002 in which he described Anchor’s reasons for withholding its consent to the proposed alterations, Anchor’s primary concerns being that the plans contemplated material structural changes to the Building (which Anchor asserts required Anchor’s consent under Article 3 of the Overlease) and that Authentic would have to provide additional information before Anchor could evaluate fire, odor, environmental and construction-related issues.3 At about the same time, Anchor’s counsel informed counsel for the Fayolle Trustee of a revised cure amount under section 365 of the Bankruptcy Code assuming a June 4, 2002 closing — $182,-517.47 — the $57,963.90 increase from the cure amount stated in the February 5 Order primarily comprising unpaid rent from February through June, 2002.
During the period that the closing of the Pacific Circle transaction was postponed, rent obviously continued to accrue under the Overlease, which presented a problem for the Trustees since Authentic was not making the rent payments required by the Sublease and the Hudson Settlement Agreement. On March 20, 2002, counsel for the Aristocratic Trustee notified counsel for Fayolle and Authentic that Authentic had defaulted on its obligation under the Hudson Settlement Agreement to pay $20,000 of back rent on the Overlease. By letter dated April 22, 2002, the Fayolle Trustee informed Fayolle that, “given the lack of progress to close the [Pacific Circle] transactions,” he was not prepared to permit Fayolle (who had no contractual privity with the Fayolle Trustee, Authentic being the subtenant) to continue to utilize the Building rent-free and was changing the locks.
Then, by letter dated July 25, 2002 (the “Termination Letter”), counsel for the Fa-yolle Trustee notified Authentic that “by reason of Sublessee’s defaults under the captioned Sublease, including without limitation under Paragraph 5 of the Sublease, [the Fayolle Trustee] has elected to terminate the Sublease, effective as of 11:59 p.m., July 31, 2002.” Separate and apart from the Fayolle Trustee’s cure obligations in respect of the Overlease, unpaid rent under the Sublease for the period from April 6, 2002 through July 31, 2002 was at least $48,387.68. Fayolle Affidavit 1 ¶ 71.
The parties dispute when Authentic received the Termination Letter, but they agree that Authentic’s counsel received it no later than August 9, 2002. In a letter dated August 14, 2002, Authentic’s counsel responded to the Termination Letter by refusing to accept the termination of the Sublease, for basically the same reasons that Authentic has raised in this adversary proceeding, and noted that the parties had “agreed to disagree for the moment without prejudice to either side.” In response to the Termination Letter, Authentic did not propose to make any payment in respect of rent under the Sublease, or the $20,000 under the Hudson Settlement Agreement, or the security deposit, all of which remained unpaid.
Roughly at the same time, on August 5, 2002 Anchor filed a motion for relief from the automatic stay under section 362 of the Bankruptcy Code to terminate the Over-lease for nonpayment of rent.
At a hearing on August 28, 2002, Judge Bohanon issued a bench ruling denying Anchor’s motion to terminate the Over-lease, on the condition, however, that the *849Fayolle Trustee promptly cure the outstanding payment defaults under the Over-lease.4 At the hearing, the Fayolle Trustee proposed to pay the cure amount with a portion of the $500,000 security deposit that Pacific Circle had forfeited upon its failure to close, the parties by that time having accepted that the Pacific Circle transaction was not going to happen. Judge Bohanon found this acceptable.
Authentic’s counsel actively opposed Anchor’s lift-stay motion at the August 28, 2002 hearing, fully supporting the Fayolle Trustee’s payment of the arrearages under the Overlease. Oddly, no party informed Judge Bohanon that the Fayolle Trustee had delivered the Termination Letter weeks before the August 28, 2002 hearing. No party has suggested, however, that the Fayolle Trustee ever rescinded or expressly waived the Termination Letter — as opposed to Authentic’s assertion that the Fa-yolle Trustee implicitly waived termination by not immediately enforcing his rights after receipt of Authentic’s response to the Termination Letter and instead “permitted” Authentic to pursue this litigation— and no such waiver appears in the record.
On August 29, 2002, the roof of the Building partially collapsed, and there is no dispute that since August 29, 2002 Authentic has not been in physical possession of the Building.
One of the Fayolle Trustee’s arguments for denying Anchor’s lift-stay motion was that the Trustees were about to seek Court approval of a new auction sale process for the Blockfront Properties and the Overlease, now that the back-up bidder who had been approved by the February 5 Order also had failed to close. Having obtained Court approval to do so, on September 18, 2002 the Trustees held another auction of the Blockfront Properties, although the Fayolle Trustee had decided by then to remove the Overlease from the assets to be auctioned that day. By order dated September 20, 2002 the Court approved the highest bidder at this second auction of the Blockfront Properties, and that high bidder has since closed the transaction. The sale price resulting from the September 18, 2002 auction was substantially less than the price under the original, January 25, 2002 auction, however.
Authentic commenced this adversary proceeding on September 18, 2002. The Fayolle Trustee continued to market the Overlease, and by order dated November 22, 2002, Judge Bohanon approved the sale of the Fayolle Trustee’s interest in the Overlease to 504 West 38 LLC, subject, as noted above, to Authentic’s rights, if any, asserted in this proceeding. The actual cure amount under section 365(b)(1)(A) of the Bankruptcy Code upon the Fayolle Trustee’s assumption and assignment of the Overlease to 504 West 38 LLC was $265,000, which the Fayolle Trustee has paid. Affidavit of Alan Nisselson, dated May 7, 2003, ¶ 15. (Apparently Anchor waited until after the closing of the assignment to 504 West 38 LLC to take its cure payment, notwithstanding Judge Boha-non’s August 28, 2002 bench ruling.)
Jurisdiction
This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), (M) and (O) and a controversy appropriate for declaratory *850judgment relief under 28 U.S.C. § 2201 and Bankruptcy Rule 7001(9).
Standard on Motion for Summary Judgment
Under Fed.R.Civ.P. 56(c), which is made applicable to this proceeding by Bankruptcy Rule 7056, summary judgment must be entered when “there is no genuine issue of any material fact and ... the moving party is entitled to judgment as a matter of law.” Summary judgment should be entered “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In determining whether a genuine issue of material fact exists, “the Court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). However, the party opposing summary judgment must do more than show “some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
Summary judgment is particularly appropriate if, as here, the issue depends on the unambiguous terms of written agreements. Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 73 (2d Cir.1989); DBL Liquidating Trust v. Clarkson Constr. Co. (In re Drexel Burnham Lambert Group, Inc.), 157 B.R. 539, 543 (S.D.N.Y.1993). When a contract governs an issue, “summary judgment may be granted when its words convey a definite and precise meaning absent any ambiguity.” Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir.1992). Contract terms are unambiguous “when they have a definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and concerning which there is no reasonable basis for a difference of opinion.” LTV Corp. v. AM Gen. Corp. (In re Chateaugay Corp.), 154 B.R. 843, 847 (Bankr.S.D.N.Y.1993) (internal quotations and citations omitted). “Unambiguous contract language is not made ambiguous simply because the parties urge different interpretations. Nor does ambiguity exist where one party’s view strains the contract language beyond its reasonable and ordinary meaning.” Id. (internal quotations and citations omitted.). Although at times Authentic has addressed the parties’ intent, especially in connection with the Hudson Settlement Agreement, Authentic and the other parties have properly kept their focus on the parties’ intent as expressed in the actual language of the Sublease, the Overlease and the Hudson Settlement Agreement, because the Court may not consider extrinsic evidence of the parties’ intent if the relevant contract language is unambiguous. Seiden, 959 F.2d at 428.
Discussion
A. Authentic’s Rights under the Hudson Settlement Agreement. Paragraph 4 of the Hudson Settlement Agreement describes the circumstances under which Authentic shall be paid, and in some cases keep, up to $100,000:
The Trustees will pay or cause to be paid to Authentic the sum of $100,000 as follows:
(a) $75,000 upon the Effective Date, payable solely from the down payments to be delivered to and held by the escrow agents under the terms and conditions of the Agreements or the Sale Agreements, for Authentic’s use first to cure all arrears and defaults on the *851[Overlease] in order to permit the Trustee to assume [the Overlease], and next to build livery stables at the [Building] within 60 days, and
(b) $25,000 to be paid at the closing of the Agreements or the Sale Agreements, provided that in the event that Authentic fails to vacate the Aristocratic Property within the 60-day time frame required in sub-paragraph (a) above, Authentic shall not be entitled to any portion of the $25,000 payment. Notwithstanding its failure to meet the 60 day time frame and the forfeiture of the $25,000 payment, Authentic’s obligations to vacate the Aristocratic Property, waive its rights arising under or in connection with the Aristocratic Property, the Authentic Lease or Bankruptcy Code § 365(h), and to withdraw the Authentic Claim will remain as continuing obligations, in full force and effect, enforceable in accordance with the terms of this Agreement.
(Emphasis added.)
The Hudson Settlement Agreement defines the “Agreements” referred to in paragraph 4, above, as the sale agreements with the Trustees’ stalking horse buyers, Specialty Malls of Tampa, Inc. and Pier West LLC, which they entered into in anticipation of and subject to the auction conducted on January 25, 2002. Hudson Settlement Agreement ¶ K. The Hudson Settlement Agreement defines the “Sale Agreements” referred to in paragraph 4 as the “Agreements, or such other agreements that may be approved as higher or better” by the Court. Id. ¶ 1. The definition is found in the Hudson Settlement Agreement’s definition of the “Effective Date” of the settlement:
This Agreement is subject in all respects to, and will be effective upon the last to occur of (a) the Court’s entry of (i) an order approving this Agreement (“Approval Order”) and (ii) an order (“Sale Order”) approving the Agreements, or such other agreements that may be approved as higher or better (“Sale Agreements”) (“Effective Date”).
1. Authentic’s Right to $25,000. It is clear from the foregoing definitions, therefore, that the condition for the Trustees’ payment of $25,000 to Authentic under paragraph 4(b) of the Hudson Settlement Agreement never occurred. Neither the “Agreements” nor the “Sale Agreements” closed. Neither the stalking horse transaction with Specialty Malls and Pier West nor the Pacific Circle transaction nor the transaction with the second highest bidder at the January 25, 2002 auction that was approved in the February 5 Order closed. Instead, the Trustees eventually had to obtain Court approval of a new auction that was held approximately nine months later, on September 18, 2002, and the winning bidder at that auction paid a substantially lower price than either Pacific Circle or the back-up bidder at the January 25, 2002 auction had agreed to pay, and, therefore, was not “higher or better” as required by paragraph 4(a).5
*8522. Authentic’s Right to $75,000. It also is clear from paragraph 4(a) of the Hudson Settlement Agreement that Authentic’s right to retain any part of the $75,000 provided for therein (which under paragraph 4(a) it could use only for building livery stables, not to pay rent under the Sublease) arose only if that sum was not first required to cure defaults and arrears under the Overlease in order to permit the Fayolle Trustee to assume the Overlease under section 365 of the Bankruptcy Code. As stated in Paragraph K(v) of the February 5 Order, those cure amounts would not be exactly known until the date of the closing under the Pacific Circle transaction. However, also as made clear in Paragraph K(v) of the February 5 Order, even as of January 31, 2002 those cure amounts substantially exceeded $75,000. Indeed, at all relevant times the cure amounts under the Overlease substantially exceeded $75,000. Therefore, under the Hudson Settlement Agreement Authentic could not have spent any portion of the $75,000 on building livery stables until after the closing of the assignment of the Overlease, and could not have reasonably expected that any portion of the $75,000 would not have been consumed in satisfying cure obligations under the Over-lease.
It is true that, contrary to paragraph 4(a) of the Hudson Settlement Agreement, Authentic never was provided with the $75,000 on the “Effective Date” of the Hudson Settlement Agreement, February 5, 2002, to hold for application under paragraph 4(a).6 However, in light of the size of the cure amounts under the Overlease, Authentic would have held such money only as a mere conduit. It would not have had the right to apply any portion of such funds, if it had been paid them, to build livery stables. Clearly Authentic would have breached the Hudson Settlement Agreement if it had applied such money to Authentic’s rent obligations under the Sublease, which was not contemplated under paragraph 4(a) even if the Overlease cure amounts were, for some reason, less than $75,000.7 Therefore, the Trustees’ failure to provide Authentic with the $75,000 for application under paragraph 4(a) was an immaterial breach of the Hudson Settlement Agreement. Judge Bohanon’s August 28, 2002 bench ruling directing the Fayolle Trustee to pay cure amounts (which exceeded $75,000) to Anchor from Pacific Circle’s forfeited security deposit tacitly recognized that point. As noted above, Fayolle’s counsel actively supported this result at the August 28, 2002 hearing.
The Fayolle Trustee now having paid the cure amounts in respect of the Over-lease in a sum well in excess of $75,000, Authentic cannot claim any portion of such $75,000 under paragraph 4(a) of the Hudson Settlement Agreement.
B. Termination of the Sublease. Paragraph 5 of the Sublease states that “It is the intention of the parties that this Sub*853lease shall be absolutely ‘net’ to the Sub-lessee .As stated in paragraph 5, “except for payments of rent from Sublessor to Overlessor and any other obligation of Sublessor expressly set forth herein, Sub-lessor shall have no obligations of payment or performance under the Overlease, all of the same to be undertaken and paid or performed by Sublessee.” Moreover, “in no event shall Sublessor be obligated to make any rent or other payment to Over-lessor unless and until Sublessor has received the corresponding payment from Sublessee.” Id.
Consistent with the foregoing, paragraph 2 of the Sublease specifically incorporates the Overlease and makes it a part of the Sublease. Paragraph 6 of the Sublease provides, further, that Authentic has assumed the terms, covenants and conditions imposed on the Fayolle Trustee under the Overlease, for purposes of Authentic’s obligations to the Fayolle Trustee under the Sublease:
For purposes of this Sublease, to the extent that the terms, covenants and conditions of the Overlease are not herein modified, cancelled or amended, such terms, covenants and conditions on the part of Sublessor thereunder to be performed, observed or complied with are hereby incorporated herein and made a part hereof with the same force and effect as though set forth at length herein. The said obligations created by the Overlease and incorporated herein by reference, imposed upon Sublessor, are hereby impressed upon Sublessee.8
See also Sublease ¶ 17:
This Sublease is and shall be in all respects subject and subordinate to the terms, covenants, conditions and prohibitions set forth in the Overlease.... In the event of any conflict between the Sublease and the Overlease, the Over-lease shall control.
The Sublease does not have a default or termination provision that modifies the default and termination provisions of the Ov-erlease; under the foregoing provisions of the Sublease, therefore, the Fayolle Trustee’s right to terminate the Sublease is governed by the Overlease. If the tenant defaults in the payment of rent, under paragraph 17(2) of the Overlease the landlord may, without any notice whatsoever, re-enter the premises, dispossess the tenant, and hold the premises as if the lease had not been made:
[I]f Tenant shall make default in the payment of the rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any other payment herein required: then and in any such events Owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant or other occupant of demised premises and remove their effects and hold the premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end.
Because Authentic defaulted in the payment of rent under the Sublease (not paying any monthly rent, among other amounts), the Fayolle Trustee therefore had the right, under paragraph 17(2) of the Overlease as incorporated in the Sublease, *854to terminate the Sublease, which he did under the Termination Letter.
Authentic makes several arguments that the Termination Letter nevertheless was ineffective, but each of them fails.
First, Authentic states that the Fayolle Trustee did not comply with the termination procedure required by the Over-lease. Authentic relies, however, on the wrong provision of the Overlease: paragraph 17(1), which expressly does not apply to defaults in the payment of rent, rather than paragraph 17(2) of the Over-lease, which does.
Second, Authentic contends that the Trustees’ default under the Hudson Settlement Agreement and the February 5 Order approving that agreement excuses Authentic’s nonpayment of rent. However (and leaving aside that paragraph 5.a. of the Sublease states that Authentic’s obligation to pay rent is absolute, “with no abatement, deduction, counterclaim or set-off whatsoever”) the Trustees have not materially defaulted under the Hudson Settlement Agreement or the February 5 Order, as discussed above. Authentic has no claim to any portion of the $100,000 that, under certain conditions specified in the Hudson Settlement Agreement, Authentic had the right to retain for its own use, those conditions not having occurred. Moreover, the Fayolle Trustee’s termination of the Sublease was not premature; if the $75,000 had been applied to cure defaults under the Overlease at the time he sent the Termination Letter, Authentic still would have had a large unpaid rent obligation, because those cure payments substantially exceeded $75,000.
Third, the Fayolle Trustee has not waived the Termination Letter by agreeing to disagree with Authentic’s position that the Sublease was improperly terminated or by participating in this adversary proceeding, as Authentic somewhat remarkably contends. To the contrary, the Fayolle Trustee has consistently defended the validity of his termination of the Sublease. Authentic, instead, took the risk that the termination of the Sublease would become effective pending the determination of the issues in this proceeding if it did not seek injunctive relief or resume performance of the Sublease. Cf. 2 Dolan, Rasch’s Landlord & Tenant § 23:53 (4th ed.2002), at 215-16:
Without the [Yellowstone ] injunction, the court is powerless to revive or extend the lease which will have expired and terminated by virtue of tenant’s breach of a conditional limitation without cure, within the time fixed in the landlord’s notice.
In addressing Authentic’s fourth and fifth arguments — that the Termination Letter was technically deficient and improperly vague — it should be kept in mind that the Fayolle Trustee has not sought the Court’s assistance to obtain possession of the Building from Authentic. At least since the roof collapsed on August 29, 2002, if not before, Authentic has not been in possession of the Building. Therefore, the detailed and somewhat onerous statutory notice requirements for purposes of a summary proceeding under N.Y. RPAPL § 711 based on the nonpayment of rent do not apply here. See Ferry Bldg. Co. v. 44 Wall Street Fund, Inc., 142 Misc.2d 54, 57, 535 N.Y.S.2d 685, 687 (N.Y. Civ.1988):
In the final analysis, what is conclusive to the determination of the jurisdictional question [of whether the tenant is in possession and RPAPL § 711 applies] is whether the petitioner can take complete possession of the premises without need of a summary proceeding. [Citation omitted.] The test is whether a Marshal or other officer of the court would give the landlord nothing under *855the final order because the premises are wholly vacant and the landlord has the keys.
Instead, this is a proceeding simply to determine whether the Sublease continues to exist or whether the Fayolle Trustee has properly exercised a right reserved in the Sublease to terminate it. See, e.g., 110-45 Queens Blvd. Garage, Inc. v. Park Briar Owners, Inc., 265 A.D.2d 415, 696 N.Y.S.2d 490, 491 (2d Dep’t 1999) (“The law permits a commercial landlord to reserve th[e] right” to peaceably “re-enter the commercial premises in issue upon termination of the lease or default in the payment of rent.”); see also Bozewicz v. Nash Metalware Co., 284 A.D.2d 288, 725 N.Y.S.2d 671 (2d Dep’t 2001); Jovana Spaghetti House, Inc. v. Heritage Co. of Massena, 189 A.D.2d 1041, 1042, 592 N.Y.S.2d 879 (3d Dep’t 1993); 2 Dolan, Rasch’s Landlord & Tenant § 23:38, at 201-02.
In section 17(2) of the Overlease, Authentic waived notice of termination for failure to pay rent, but even if such a waiver were unenforceable, the Termination Letter properly put Authentic on notice of its intention to terminate the Sublease for failure to pay rent. 2 Dolan, Rasch’s Landlord & Tenant § 23:38 at 201:
Basically, an option to terminate a lease can be exercised only by complying with the provision granting it. A notice of termination must be clear, unambiguous, and unequivocal notice of limitation; it must clearly and by its terms provide for the automatic expiration of the leasehold, and convey this fact to the other party.
See also City of Buffalo Urban Renewal Agency v. Lane Bryant Queens, Inc., 90 A.D.2d 976, 456 N.Y.S.2d 568 (4th Dep’t 1982), aff'd 59 N.Y.2d 825, 464 N.Y.S.2d 754, 451 N.E.2d 501 (1983). The Termination Notice clearly served its intended function. It gave Authentic the effective date and time of termination. It stated why the Sublease was being terminated. And it was consistent with the Fayolle Trustee’s right under paragraph 17(2) of the Overlease, as incorporated in the Sublease, to terminate the Sublease for nonpayment of rent. The Fayolle Trustee did not have to specify the amount of rent that Authentic had not paid, as Authentic contends; it was sufficient to put Authentic on notice that the Trustee was terminating the Sublease because Authentic had failed to pay rent under paragraph 5 of the Sublease, a default that continues to this day, a year later, Authentic not having paid any monthly rent. Nor did the Fayolle Trustee have the obligation under the Sublease to provide Authentic with the right to cure the rent defaults, as Authentic argues; indeed, if the Trustee had offered a cure option to Authentic, the Termination Notice might not have been effective. See 2 Dolan, Rasch’s Landlord & Tenant § 23:38, at 201 (notice to cure a default cannot be deemed a termination notice).
Authentic’s last argument — that Anchor’s refusal to consent to the alterations to the Building proposed by Authentic and its designee excuses Authentic’s failure to pay rent-also is unavailing. To resolve this issue it is not necessary to decide whether Anchor has improperly withheld consent. Even if Anchor improperly withheld consent, Authentic, as subtenant, was not in privity with Anchor, as overlandlord; Authentic, therefore, had no claim against Anchor. Full House Foods, Inc. v. 33 Street Enters. (In re Full House Foods, Inc.), 279 B.R. 71, 76-7 (Bankr.S.D.N.Y.2002); 1 Dolan, Rasch Landlord & Tenant § 9.53, at 385. Further, the Sublease has no provision excusing Authentic’s performance if Anchor breached *856such a provision of the Overlease. Indeed, paragraph 11 the Sublease provides, to the contrary, that Authentic shall make no alterations or improvements to the Building without any required consent by Anchor.9 Thus, while Anchor had not duty to Authentic, Authentic had a duty to the Fa-yolle Trustee to obtain Anchor’s consent.
Moreover, paragraph 7 of the Sublease contains the following exculpation of the Fayolle Trustee in the event of Anchor’s breach of the Overlease:
Under no circumstances whatsoever shall Sublessor be liable to Sublessee for any failure of Overlessor to provide any service or otherwise perform, observe or comply with Overlessor’s obligations under the Overlease, but Sublessor agrees to use reasonable efforts to cause Over-lessor to comply with the Overlease.10
Construing similar exculpatory language, Full House Foods held that the overland-lord’s breach of the overlease would not excuse the subtenant’s rent default under the sublease. 279 B.R. at 77-8. Therefore, even if Anchor improperly withheld its consent to the proposed alterations to the Building, an issue not here determined, Authentic would not have been excused thereby from performing its obligations under the Sublease.
Conclusion
Authentic’s motion for summary judgment is DENIED, and defendants’ request for summary judgment is GRANTED, as set forth herein.
It is SO ORDERED.
. The Fayolle Trustee also was appointed chapter 11 trustee of Riverbank.
. Neither Authentic nor any other Fayolle-controlled entity owns the hansom cab horses stabled in the Aristocratic Premises. Either Aristocratic or another Fayolle-controlled entity has some relationship with the owners of the hansom cab horses stabled in the Aristocratic Premises, but the nature of that relationship is unclear and irrelevant to the present motions.
. Thereafter, Anchor has consistently withheld its consent to the alterations to the Building proposed by Authentic or its desig-nee.
. Judge Bohanon determined that because the Pacific Circle transaction had not closed, the Fayolle Trustee had never assumed the Over-lease; therefore, the Court’s reference to "cure” in the August 28, 2002 bench ruling was not for purposes of section 365(b)(1)(A) of the Bankruptcy Code but, rather, with reference to section 365(d)(3) of the Bankruptcy Code, which requires the timely performance of a lease of real property that has not yet been assumed or rejected, and section 362(d)(1) of the Bankruptcy Code, requiring relief from the automatic stay for cause.
. Given the foregoing, it is unnecessary to determine whether the other condition to Authentic’s right to receive the $25,000 failed. The parties dispute whether Authentic vacated the Aristocratic Premises within the time specified by paragraph 4(b) of the Hudson Settlement Agreement, an issue that is somewhat complicated because (a) the Aristocratic Trustee permitted Authentic to remain at those Premises after the closing of the Pacific Circle transaction was delayed and then can-celled, yet he reserved his rights with respect to Authentic's breach of paragraph 4(b) for having failed to leave the Aristocratic Premises before such date, (b) Authentic contends it timely vacated the Premises by posting a notice to that effect, (c) orders were thereafter issued requiring Authentic to vacate the Premises by a date certain, and (d) Authentic *852nevertheless has remained at the Aristocratic Premises at the sufferance of the owner.
. Paragraph 25(a) of the February 5 Order provides that the “Trustees may withdraw from escrow and pay to Authentic $75,000 (the 'Post-Petition Indebtedness’) from the Down Payment in accordance with the terms and conditions of the [Hudson] Settlement Agreement.” Under paragraph 25(b) of the February 5 Order, this loan from Pacific Circle’s security deposit was given superpriority status under section 364(c) of the Bankruptcy Code, to be repaid, presumably, from the proceeds of the Pacific Circle transaction. The Trustees never borrowed from the security deposit, however, to pay Authentic for application under paragraph 4(a) of the Hudson River Settlement Agreement.
. Authentic, moreover, had breached its obligation under paragraph 5 of the Hudson Settlement Agreement to pay $20,000 toward postpetition arrears under the Overlease.
. The Sublease created no privity of contract between Authentic and Anchor. 1 Dolan, Rasch’s Landlord & Tenant § 9:53 (4th ed.2002), at 385. "Therefore, the subtenant’s liability is only to his sublessor, and on all the covenants contained in the sublease." Id. § 9.54 at 386.
. Authentic has pointed to paragraph 16 of the Sublease, which provides that "Sublessee shall, without the necessity of obtaining Sub-lessor’s consent, have the right to license or otherwise contract for or agree to allow occupancy of portions of the [Building] for the boarding or stabling of carriage horses and storing or garaging of equipment,” to contend that Anchor’s withholding of consent clearly was wrongful. However, this provision applies only to the Fayolle Trustee and, moreover, does not deal with alterations to the Building, which are specifically addressed by paragraph 11 of the Sublease.
. There has been no contention that the Fa-yolle Trustee failed to use reasonable efforts to cause Anchor to comply with the Over-lease. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493636/ | OPINION ON HORIZON’S SECOND MOTION FOR SUMMARY JUDGMENT
JUDITH H. WIZMUR, Bankruptcy Judge.
In this adversary proceeding, Horizon Blue Cross Blue Shield of New Jersey moves for summary judgment to dismiss claims filed against it by the Chapter 7 bankruptcy estate of LymeCare, Inc. and a related entity, Lyme Disease Treatment Center, Inc. For the reasons expressed below, Horizon’s motion is granted in part and denied in part.
FACTS
Defendant Horizon Blue Cross Blue Shield of New Jersey (“Horizon”) is a nonprofit health services corporation authorized and established under the Health Service Corporations Act, N.J.S.A. 17:48E-1 et seq. Horizon provides health benefits to its subscribers through various individual and group plans. Generally, the subscriber, or the subscriber’s employer on his/her behalf, pays a periodic subscription premium to Horizon. In return, Horizon agrees to pay certain health care providers a predetermined amount to provide specified services to Horizon’s subscribers, as outlined in the contract between the parties. To facilitate this arrangement, Horizon maintains networks of medical providers who have contractually agreed to participate in its programs, and have agreed to be bound by Horizon’s policies and procedures. These providers are referred to as “participating providers.”
Horizon’s participating providers are paid directly by Horizon for the care they provide to Horizon’s subscribers. Depending on the contract, the subscribers can also seek medical care from non-participating providers, in which case payment may be made to the subscriber, rather than directly to the provider.
The debtor, LymeCare, Inc. (“Lyme-Care”), its predecessor, Anthony L. Lion-etti, M.D., P.C., and its officer and shareholder, Dr. Anthony L. Lionetti, a licensed New Jersey physician, operated a facility in Hammonton, New Jersey, specializing in the treatment of patients with Lyme disease. They served as participating providers to Horizon subscribers from January 1, 1994 through December 28, 1998, under an “Agreement with Participating Physicians and Providers” with Horizon. In 1995, this agreement was amended to provide that the participating physician agrees to “abide by our [Horizon’s] policies and procedures as they exist today and as they may exist in the future.” On December 29, 1998, LymeCare and Dr. Lionetti were terminated by Horizon as participating providers.
On September 21, 1998, LymeCare filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code.1 In *667this adversary proceeding, LymeCare2 seeks to collect reimbursement payments from Horizon, asserting causes of action for breach of contract and for violations of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(a)(1)(B). The debtor alleges that Horizon failed to pay for medical care and treatment that the debtor provided to Horizon subscribers for Lyme disease while it was a participating provider, and that it failed to honor assignments of benefits the debtor received from Horizon subscribers after the termination of the debtor’s participating provider status with Horizon. In response, Horizon cites its uniform medical policy governing reimbursement for the treatment of Lyme disease. Because the diagnosis and treatment rendered by Dr. Lionetti were not in conformance with Horizon’s policies and procedures, the services were not covered by Horizon’s reimbursement policy and Horizon denied payment.
Horizon filed a motion for summary judgment on April 18, 2002. By opinion dated June 27, 2002, Horizon’s summary judgment motion on breach of contract grounds, including breach of the implied covenant of good faith and fair dealing, was denied. Horizon’s summary judgment motion validating and enforcing the anti-assignment of benefits clauses in its subscriber contracts was granted. Conditioned upon the validation of the debtor’s termination by Horizon as a participating provider, summary judgment in Horizon’s favor rejecting the debtor’s claims for reimbursement from Horizon based on the Assignment of Benefits forms was granted. Horizon’s summary judgment motion to strike from the debtor’s reimbursement claims those patients who have not been identified as either Horizon subscribers or subscribers of plans which Horizon administers was also granted. The motion to strike those patients who have been identified by the debtor as Horizon subscribers was denied.
DISCUSSION
Summary judgment is appropriate where the moving party is entitled to judgment, as a matter of law, and where there exists no genuine dispute as to any material fact. Nebraska v. Wyoming, 507 U.S. 584, 590, 113 S.Ct. 1689, 1694, 123 L.Ed.2d 317 (1993); Hampton v. Borough of Tinton Falls Police Dep’t, 98 F.3d 107, 112 (3d Cir.1996); Gottshall v. Consol. Rail Corp., 56 F.3d 530, 533 (3d Cir.1995). Bankruptcy Rule 7056 makes Fed.R.Civ.P. 56 applicable to adversary proceedings. Rule 56(c) provides in pertinent part 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).
By this summary judgment motion, Horizon seeks to dismiss plaintiffs’ claims arising under the Federal Employee Health Benefits Program (“FEHBP”), the State Health Benefits Plan (“SHBP”), and the self-funded plans established for the Hotel Employees and Restaurant Employees International Union Welfare Fund (hereinafter “Local 54”) and the Local 68 Engineers Union Welfare Fund (hereinafter “Local 68”). Horizon contends that plaintiffs’ claims should be dismissed because the claimants failed to exhaust their administrative remedies prior to bringing *668suit, because Horizon, as the administrator for the plans, is not the proper defendant, because the plaintiffs lack standing under ERISA to assert their claims, and because collateral estoppel bars plaintiffs from relying on Dr. Lionetti’s protocol under either the SHBP or Horizon policies. These arguments must be considered in the context of each plan under which the claims arise.3
I. Federal Employees Health Benefits Plan
Thirteen of the patients at issue here were insured under the FEHBP, the comprehensive federal program designed to subsidize payments for the coverage of health benefits provided to federal employees. See Federal Employees Health Benefits Act (“FEHBA”), 5 U.S.C. § 8901, et seq. Under the FEHBA, the Office of Personnel Management (“OPM”) is authorized to negotiate contracts with qualified carriers who provide health benefit coverage to the participants under the FEHBP plan. In this case, Horizon administers the FEHBP pursuant to a contract between Blue Cross Blue Shield and the OPM.
In their complaint, the plaintiffs contend that Horizon is indebted to the plaintiffs under the terms of ERISA and under state law on breach of contract grounds for the medical care and treatment of Lyme disease provided to Horizon’s insureds. As to patients insured under the FEHBP, the plaintiffs’ complaint fails on both grounds.
A. ERISA.
First, ERISA does not apply to FEHBP insureds. Under 29 U.S.C. § 1003(b), ERISA does not apply to “a governmental plan (as defined in section 1002(32) of this title).” Section 1002(32) defines a governmental plan to mean “a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing.” 29 U.S.C. § 1002(32). FEHBP is clearly a “governmental plan” excluded from ERISA requirements.
B. Preemption.
Second, the plaintiffs cannot succeed on state law breach of contract grounds because the FEHBA completely preempts such state law claims. See, e.g., Botsford v. Blue Cross & Blue Shield of Mont., Inc., 314 F.3d 390 (9th Cir.2002). Section 8902 provides in relevant part:
The Office of Personnel Management may contract with qualified carriers offering plans described by section 8903 or 8903a of this title, without regard to section 5 of title 41 or other statute requiring competitive bidding. Each contract shall be for a uniform term of at least 1 year.
The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.
5 U.S.C. § 8902(a); (m)(l) (reflecting 1998 amendment). A 1998 amendment to *669§ 8902(m)(l) “eliminated language that had previously limited preemption ‘to the extent that such [state] law or regulation is inconsistent with such contractual provisions.’ Courts have found this change in language to be persuasive evidence of congressional intent to completely preempt state law.” St. Mary’s Hosp. v. Carefirst of Md., Inc., 192 F.Supp.2d 384, 388 (D.Md.2002). The legislative history reflects that the 1998 amendment
confirms the intent of Congress (1) that FEHB program contract terms which relate to the nature or extent of coverage or benefits (including payments with respect to benefits) completely displace State or local law relating to health insurance or plans and (2) that this preemption authority applies to FEHB program plan contract terms which relate to the provision of benefits or coverage, including managed care programs.
H.R.Rep. 105-374 at 16 “Federal Employees Health Care Protection Act of 1997” (1997). See Doyle v. Blue Cross Blue Shield of Illinois, 149 F.Supp.2d 427, 433 (N.D.Ill.2001) (“the language of the House Report is sufficiently clear to demonstrate an intent to create complete preemption”); Rievley v. Blue Cross Blue Shield of Tennessee, 69 F.Supp.2d 1028, 1034 (E.D.Tenn.1999) (“Congress has demonstrated a clear intention that FEHBA completely preempt state law in the area of federal employee health insurance plans”). See also Botsford v. Blue Cross & Blue Shield of Mont., Inc., 314 F.3d 390, 395 (9th Cir.2002) (“courts have held that FEHBA preempts disputes over a ‘denial of benefits’ and ‘the nature or extent of coverage for benefits’ ”); Carter v. Blue Cross Blue Shield of Fla., Inc., 61 F.Supp.2d 1237, 1240 (N.D.Fla.1999) (“1998 Act removed the phrase ... that had troubled some courts in determining whether there was complete preemption”); Right v. Kaiser Found. Health Plan of the Mid-Atl. States, Inc., 34 F.Supp.2d 334, 339 (E.D.Va.1999) (“House Report noted that the purpose of the amendment was to affirm Congress’ preemptive intent”).
C. Administrative Exhaustion.
Because ERISA does not apply to plaintiffs’ claims for reimbursement for treatment of federal employees insured under FEHBP, and because state law claims are preempted, plaintiffs may recover against Horizon for treatment of FEHBP insureds only if FEHBP requirements are met. Horizon contends that plaintiffs’ FEHBP claims must be dismissed because the plaintiffs have failed to exhaust mandatory FEHBA administrative appeal procedures, and because only the OPM may be named as a defendant in an action to challenge a denial of benefits.
The Federal Employees Health Benefits Act, 5 U.S.C. § 8901, et seq. (“FEHBA”) does not specify appeal procedures for denial of claims, but does authorize the OPM to promulgate regulations to administer the FEHBP, which it has done. The applicable regulations detailing the procedures for filing a claim and for access to judicial review provide in relevant part:
(1) Each health benefits carrier resolves claims filed under the plan. All health benefits claims must be submitted initially to the carrier of the covered individual’s health benefits plan. If the carrier denies a claim (or a portion of a claim), the covered individual may ask the carrier to reconsider its denial. If the carrier affirms its denial or fails to respond as required by paragraph (c) of this section, the covered individual may ask OPM [Office of Personnel Management] to review the claim. A covered individual must exhaust both the carrier and OPM review processes specified in *670this section before seeking judicial review of the denied claim.
5 C.F.R. § 890.105.
(c) Federal Employees Health Benefits (FEHB) carriers resolve FEHB claims under authority of Federal Statute (5 U.S.C. chapter 89). A covered individual may seek judicial review of OPM’s final action on the denial of a health benefits claim. A legal action to review final action by OPM involving such denial of health benefits must be brought against OPM and not against the carrier or carrier’s subcontractors. The recovery in such a suit shall be limited to a court order directing OPM to require the carrier to pay the amount of benefits in dispute.
(d) An action under paragraph (c) of this section to recover on a claim for health benefits:
(1) May not be brought prior to exhaustion of the administrative remedies provided in § 890.105.
5 C.F.R. § 890.107. As explained by the Ninth Circuit in Botsford,
OPM has created a detailed administrative enforcement scheme for resolving disputes over FEHBA benefits. Pursuant to the regulatory scheme, a beneficiary must first submit a dispute over benefits to the carrier and then to OPM before seeking judicial review. Moreover, beneficiaries may only name OPM, not the carrier, in a suit, and “recovery ... [is] limited to a court order directing OPM to require the carrier to pay the amount of benefits in dispute.”
Botsford v. Blue Cross & Blue Shield of Mont., Inc., 814 F.3d 390, 397 (9th Cir.2002).
Here, the plaintiffs have failed to submit the dispute regarding FEHBP employees to the OPM prior to seeking judicial review, and have named the carrier, Horizon Blue Cross and Blue Shield of New Jersey, rather than the OPM, as the defendant.
“The doctrine of exhaustion of administrative remedies provides that ‘no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted.’ ” Kobleur v. Group Hospitalization & Medical Servs., Inc., 954 F.2d 705, 709 (11th Cir.1992) (quoting Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 463, 82 L.Ed. 638 (1938)). “Although the FEHBA does not expressly prescribe an administrative remedy, agency regulations promulgated under the authority of the statute may create an exhaustion requirement despite the absence of such a requirement within the text of the statute.” Id. (citing to Coit Indep. Joint Venture v. F.S.L.I.C., 489 U.S. 561, 109 S.Ct. 1361, 1374, 103 L.Ed.2d 602 (1989)). Where the exhaustion requirement is created by agency regulations, “the decision whether to require exhaustion is a matter for district court discretion.” Id. at 711. While the Third Circuit has not addressed the issue of administrative exhaustion in the context of the FEHBA, the court has opined in another context that a court may, in certain circumstances, look past the failure to exhaust administrative remedies and exercise its discretion to consider the issue presented. Anjelino v. New York Times Co., 200 F.3d 73, 87 (3d Cir.1999). See also Scholl v. QualMed, Inc., 103 F.Supp.2d 850, 853 (E.D.Pa.2000).
The plaintiffs contend that Horizon should be barred from relying on a “failure to exhaust” defense because Horizon failed to meet its obligations to provide timely or sufficient notice of claims denials and appellate procedures, because Horizon delayed in raising the issue during this litigation, and because it would be futile to *671pursue administrative remedies now, because the time to file such appeals has expired.
Factually, the plaintiffs contend that: Horizon often placed patient claims in limbo for more than a year before issuing any denial; and, in the few denials that Horizon actually issued, Horizon: always failed to set forth the pertinent plan provisions; failed in all but one instance to furnish documents relevant to the decision; in some cases failed to provide a reason for the denial; and, in one instance, give notice of the right to appeal.
Plaintiffs’ Brief in Opp. to Horizon BC-BS of NJ’s Second Motion for Partial Summary Judgment at 7. In addition, plaintiffs claim that Horizon subjected the plaintiffs “to a broad array of confusing and contradictory demands designed to delay or eliminate payment obligations,” constituting a lengthy “run-around” process. Id. at 6. Horizon does not dispute plaintiffs’ factual presentation on this summary judgment motion. I will accept the plaintiffs’ factual presentation and conclude that Horizon failed to meet noticing requirements to FEHBP participants.4
There is some support, particularly in cases arising under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001, et. seq.,5 for the proposition that where the claimant has not been properly noticed of the requisite administrative remedies, it would be unfair to invoke the exhaustion defense to bar judicial review. Sibley-Schreiber v. Oxford Health Plans, Inc., 62 F.Supp.2d 979, 988-89 (E.D.N.Y.1999) (Defendants may not plead the doctrine of exhaustion as a shield against litigation when they have failed to educate policyholders about the need to exhaust at the time the adverse decisions are made.). See also VanderKlok v. Provident Life & Accident Ins. Co., 956 F.2d 610, 617-18 (6th Cir.1992) (Insurer who failed to give sufficient detail about the reasons for claim denial and about the steps to be taken to obtain review is not entitled to the protections concerning administrative review); Curry v. Contract Fabricators Inc. Profit Sharing Plan, 891 F.2d 842, 846-47 (11th Cir.1990) (“When a plan administrator in control of the available review procedures denies a claimant meaningful access to those procedures, the district court has discretion not to require exhaustion.”).6
The plaintiffs’ contention that Horizon’s exhaustion defense should be defeated here is strengthened by the fact that Horizon failed to raise the issue as an affirmative defense in its pleadings and *672failed to raise the issue at all until May 2003, nearly four years after the commencement of the suit. “Failure to exhaust administrative remedies is generally an affirmative defense subject to waiver.” McCoy v. Board of Trustees of Laborers’ Intern. Union, Local No. 222 Pension Plan, 188 F.Supp.2d 461, 467 (D.N.J.2002).
Affirmative defenses must be raised as early as practicable, not only to avoid prejudice, but also to promote judicial economy. If a party has a successful affirmative defense, raising that defense as early as possible, and permitting a court to rule on it, may terminate the proceedings at that point without wasting precious legal and judicial resources.
Robinson v. Johnson, 313 F.3d 128, 137 (3d Cir.2002).
In these circumstances, both prejudice to the plaintiffs and waste of judicial resources are apparent. The plaintiffs have expended significant legal resources on litigating the case in this court. Had they been apprised of Horizon’s defense at an earlier stage in the proceeding,7 they might have sought OPM review sooner. Under the applicable regulations, a quest for reconsideration of the denial of a claim by the carrier must be brought within “6 months from the date of the notice to the covered individual that a claim (or a portion of a claim) was denied by the carrier.” 5 C.F.R. § 890.105(b)(1). Appeals to the OPM must be made within 90 days after the notice of the denial of the reconsideration of the claim. § 890.105(e)(1). The “OPM may extend the time limit for a covered individual’s request for OPM review when the covered individual shows he or she was not notified of the time limit or was prevented by circumstances beyond his or her control from submitting the request for OPM review within the time limit.” § 890.105(e)(l)(iii). On this record, we cannot ascertain whether OPM would extend the time limits for the receipt of a request for OPM review for claims denials, some of which involve services performed over five years ago.
However, the defeat of Horizon’s exhaustion defense on equitable grounds is complicated by the fact that the OPM is best suited to resolve the ultimate issue raised in this suit, that being whether the treatment rendered by the plaintiffs to FEHBP participants was “reasonable and necessary” within the meaning of the Plan. The OPM is the agency charged by Congress with interpreting and enforcing the insurance contracts with its carriers. If the OPM finds that the carrier incorrectly denied benefits, the carrier is contractually obligated to pay the benefits. 5 U.S.C. § 8902(j); St. Mary’s Hospital v. Carefirst of Md., 192 F.Supp.2d at 386. OPM decisions about claims are entitled to deference by a reviewing court, which may only overrule the OPM decision if the decision is arbitrary or capricious. Nesseim v. Mail Handlers Ben. Plan, 995 F.2d 804, 807 (8th Cir.1993); Bridges v. Blue Cross & Blue Shield Ass’n, 935 F.Supp. 37, 45 (D.D.C.1996). The scheme of national uniformity of coverage for FEHBP participants would be disturbed if, in the first instance, judicial officers substituted their own judgment for that of the OPM in reviewing the denial of claims by carriers. In balancing the various considerations, the primacy of OPM review overshadows Horizon’s failure to notice the FEHBP patients and providers of the appropriate appellate procedures.
*673Even if Horizon’s exhaustion defense is rejected, and the plaintiffs may-bypass administrative remedies and obtain direct judicial review, the applicable FEH-BA regulation specifies that suit be brought only against the OPM, and not the carrier. 5 C.F.R. § 890.107. The OPM has the authority to prescribe regulations to carry out the FEHBA pursuant to federal statute. 5 U.S.C. § 8913. Scholl v. QualMed, Inc., 103 F.Supp.2d 850, 853 (E.D.Pa.2000) (“Congress delegated authority to OPM to promulgate regulations implementing FEHBA.”). It is accepted that “[i]f Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.” Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844-45, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984). See also Stiver v. Meko, 130 F.3d 574 (3d Cir.1997). The plaintiffs do not assert that the regulation permitting suit to be filed only against the OPM is in any way “arbitrary, capricious, or manifestly contrary to the statute.” In fact, the jurisdictional statement of the FEHBA provides federal courts with jurisdiction solely over suits against the United States.
The district courts of the United States have original jurisdiction, concurrent with the United States Court of Federal Claims, of a civil action or claim against the United States founded on this chapter.
5 U.S.C. § 8912. There is no jurisdictional authority offered to the federal courts to entertain suits under the FEHBA against carriers who contract with the OPM.
The OPM plays a “pivotal role ... in the FEHBA scheme.” Scholl v. QualMed, Inc., 103 F.Supp.2d at 855. Under the FEHBA, the OPM must contract with private carriers, and must interpret the plans to determine carrier liability in an individual case. 5 U.S.C. § 8902. The designation of OPM as the sole defendant in a suit to challenge the denial of a health benefits claim under the FEHBP is a component of the scheme designed to provide national uniformity of coverage for federal employees. St. Mary’s Hospital v. Carefirst of Md., Inc., 192 F.Supp.2d at 390. See also Rievley v. Blue Cross Blue Shield of Tenn., 69 F.Supp.2d 1028, 1034 (E.D.Tenn.1999) (1998 Amendment to FEHBA furthers Congress’ “goal of ensuring uniform provision of benefits to federal employees across the country.”).8
I have found no basis to depart from the clear mandate of the regulation, that only the OPM may be a proper party defendant. The cited regulation clearly prohibits suit against the carriers or the carriers’ subcontractors in lieu of the OPM. The quest for judicial review of the denial of claims under FEHBA against Horizon must be dismissed, without prejudice as to the merits of the plaintiffs’ claims.
II. State Health Benefits Plan
Forty-three of the patients at issue were insured through the State Health Benefits Plan (“SHBP”), a health benefits plan for New Jersey state employees created by the State Health Benefits Commission. The New Jersey State Health Benefits *674Program Act (“NJSHBPA”) created the Commission to administer a program of comprehensive health care benefits for eligible public employees. See N.J.S.A. 52:14-17.25 et. seq. The Commission administers the SHBP through contracts with several insurers, including Horizon, under which the insurer provides the administrative services necessary to effectuate the actual delivery of health care benefits and the payment of claims for benefits. Pursuant to the Act, the Commission also has the authority to develop rules and regulations to aid in administering the plan. N.J.S.A. 52:14-17.27; 52:14-17.36. The regulations governing the SHBP are found in N.J.A.C. 17:9-1.1 et seq.
Plaintiffs contend, as they did with respect to the FEHBP, that the state insurance plan is governed by ERISA, and that Horizon is indebted to the plaintiffs for the medical care and treatment of Lyme disease provided to Horizon’s insureds. Plaintiffs seek damages under ERISA as well as under state law breach of contract grounds.
A. ERISA
As with the federal insurance plan, ERISA does not apply to the State Health Benefits Plan. The SHBP is a governmental plan established by the State of New Jersey under N.J.S.A. 52:14-17.25 et seq., to which ERISA does not apply. See 29 U.S.C. § 1003(b) and 1002(32). Plaintiffs’ ERISA based claims must be dismissed.
B. State Law Claims.
Plaintiffs also assert breach of contract claims under state law. Horizon seeks dismissal of the plaintiffs’ SHBP claims, contending that the plaintiffs failed to exhaust administrative remedies, and that the plaintiffs are collaterally estopped by the Initial Decision of an Administrative Law Judge in the case of Kagan v. State Health Benefits Commission, OAL Dkt. No. TYP 4151-99 (2001), from challenging the denial of Horizon’s claims.
1. Exhaustion of Administrative Remedies.
The appeal process for SHBP claims decisions is governed by regulations promulgated by the State Health Benefits Commission. See N.J.A.C. 17:9-1.3. The appeal process for HMO disputed claims starts with a first level appeal to Horizon, under its grievance procedures. N.J.A.C. 17:9-1.3(b). The next level of appeal is presented to the State Health Benefits Commission. Members of a traditional plan or NJ PLUS may appeal directly to the Commission. N.J.A.C. 17:9-1.3(a). If a member disagrees with the Commission’s decision, they may send a written appeal to the Commission. If the case involves solely a legal question, the Commission will prepare detailed findings of fact and conclusions of law that represent the Commission’s “final administrative determination that may then be appealed to the Superior Court, Appellate Division.” N.J.A.C. 17:9 — 1.3(d)(1). If the appeal involves a factual question, the case may be sent to the Office of Administrative Law for a hearing before an Administrative Law Judge, who will prepare an “Initial Decision” which the Commission may modify, adopt or reject. N.J.A.C. 17:9-1.3(d)(2). Upon the issuance of a Final Decision by the Commission, an appeal may be taken to the Superior Court of New Jersey, Appellate Division. See Murray v. State Health Benefits Comm’n, 337 N.J.Super. 435, 767 A.2d 509 (App.Div.2001).
The requirement of administrative exhaustion under the SHBP was addressed in Burley v. Prudential Ins. Co. of Amer., 251 N.J.Super. 493, 598 A.2d 936 (App.Div. *6751991). In Burley, Judge King held that the plaintiff was required to follow all administrative remedies prior to seeking relief in the courts. The plaintiff was a state employee, insured under the State Health Benefits Program, as administered by Prudential. Following the denial of portions of his claims by Prudential, the plaintiff brought suit against Prudential in the Superior Court of New Jersey. The Superi- or Court granted summary judgment to Prudential because the employee failed to exhaust her administrative remedies. On appeal, the court relied upon the benefits booklet for SHBP and upon N.J.A.C. 17:9-1.3 to affirm the trial court, noting that “[a]ll available and appropriate administrative remedies generally should be fully explored ‘before judicial action is sanctioned.’ ” Id. at 498, 598 A.2d at 939. The court transferred the matter to the SHBP for a hearing on the merits of the plaintiffs claim, without prejudice to any potential action at law against either Prudential or the SHBP.
Burley would dictate that Horizon may be granted summary judgment on SHBP claims, because the plaintiffs did not appeal the denial of their claims by Horizon to the Commission. Plaintiffs acknowledge the exhaustion requirement, but contend that because Horizon failed to notice the claimants of their rights to appeal when their claims were denied, Horizon cannot now assert the exhaustion remedy as a defense.9
Michael Dolich, plaintiffs’ counsel, certified that out of all of the claims asserted in this adversary proceeding, he was able to “locate]]] claims denial notices for only nine of the patients at issue.” He stated further that: “None of the notices referred to the plan provision at issue. All but one of the notices fail to provide relevant documentation. Others provide no basis for the denial. And one even fails to advise of any right to appeal.” Dolich Certif. #2. Horizon has not contested these factual allegations.
While individual patients and providers did not receive appropriate claims denial notices from Horizon, information regarding appeals procedures was available to them. The New Jersey State Health Benefits Program Medical Plans Information Handbook (“Handbook”)10 specifies that appeals from the decisions of the carrier may be taken to the Commission, which may forward the matter to the Office of Administrative Law for recommended fact findings. The Commission’s final decision is appealable to the Superior Court of New Jersey, Appellate Division. Handbook, at 28-99. As well, although the applicable SHBP regulations, N.J.A.C. 17:9-1.1 et seq., do not address the claims noticing requirements imposed upon the carrier, the right to appeal to the Commission from a carrier’s decision, and the right to appeal from an adverse decision by the Commission are specified in N.J.A.C. 17:9-1.3. As to noticing the claimants of his/her appeal rights from an adverse Commission decision, the rule provides in pertinent part as follows: *676determination is contrary to the claim made by the claimant or his or her legal representative:
*675(c) Notification of all Commission decisions will be made in writing to the member and the following statement shall be incorporated in every written notice setting forth the Commission’s determination in a matter where such
*676“If you disagree with the determination of the Commission in this matter, you may appeal by sending a written statement to the Commission within 45 days from the date of this letter informing the Commission of your disagreement and all of the reasons therefor. If no such written statement is received within the 45-day period, this determination shall be considered final.”
N.J.A.C. 17:9 — 1.3(c).
The consequence to the carrier of failing to promptly notify the claimant of a denial of a claim, and failing to notify the claimant about his appeal rights, was not set out in the regulatory scheme at the time the claims at issue in this case arose. Effective January 2, 2001, regulations were promulgated by the Department of Banking and Insurance pertaining to “Health Benefits Plans,” N.J.A.C. 11:22-1.1 et seg., which apply to all carriers who provide health care coverage in New Jersey. Claim handling requirements for “Denied and disputed claims” are specified, including the time frame for notifying the covered person and the provider, and the provision of a toll free telephone number for the carrier or its agent, who may be contacted by the provider or covered person to discuss the claim. N.J.A.C. 11:22-I.6(a). Notably, subsection (b) provides that if “[a] carrier or its agent ... does not provide the notice required by (a) above [it] shall waive its right to contest the claim for any reason other than the referral of the claim to the Office of Insurance Fraud Prosecutor in accordance with the carrier’s Fraud Prevention and Detection Plan.” N.J.A.C. ll:22-1.6(b). This regulation, waving the right of a carrier to contest a claim if the requisite notice of the denial is not sent to the patient and the provider, does not apply to the claims at issue in this case, because the claims arose before the regulation was effective. Nevertheless, the regulation underscores the significance of prompt and appropriate notice by the carrier of the denial of a claim, and of a subscriber’s or provider’s recourse in the event of the failure of such notice.
The New Jersey Supreme Court has held that while the exhaustion of administrative remedies is generally preferred, it is not an “indispensable precondition” to judicial action, Abbott v. Burke, 100 N.J. 269, 297, 495 A.2d 376, 391 (1985), and is not an absolute jurisdictional requirement. Borough of Matawan v. Monmouth County Bd. of Tax., 51 N.J. 291, 296, 240 A.2d 8 (1968). Exceptions to the doctrine exist “when only a question of law need be resolved; when the administrative remedies would be futile; when irreparable harm would result; when jurisdiction of the agency is doubtful, or when an overriding public interest calls for a prompt judicial decision.” Abbott v. Burke, 100 N.J. at 298, 495 A.2d 376 (internal citations omitted) citing to Garrow v. Elizabeth General Hospital & Dispensary, 79 N.J. 549, 561, 401 A.2d 533 (1979) (collecting cases). None of the enumerated exceptions apply here. The ultimate issue of medical necessity presented here is particularly fact-sensitive, rather than pertaining only to a question of law. There is no showing that the Commission would reject the plaintiffs’ claims,11 or that *677the plaintiffs would suffer irreparable harm by being required to present their proofs before the Commission rather than this court in the first instance. There is no doubt that the Commission is authorized to hear the disputed claim. And there is no demonstration of a compelling public interest calling for judicial review prior to the exhaustion of administrative remedies.
Where the relevant considerations to the exhaustion requirement “are in near-equipoise, ... the court must weigh them carefully to find the proper balance.” Abbott v. Burke, 100 N.J. at 298, 495 A.2d at 391. Here, on the one hand, Horizon failed to give timely and proper notice to SHBP participants about the reasons for the denial of their claims and about the steps to be taken to obtain review. The unfairness to the plaintiffs occasioned by this failure is mitigated by the fact that the Plan Handbook, which has been readily available to the plaintiffs, clearly reflects the administrative course for appealing a denial of claims by Horizon. More significantly, Dr. Lionetti is charged with actual knowledge of the appropriate administrative procedures because he testified before an Administrative Law Judge in the Ka-gan case.
On the other hand, the administrative remedy specified in the applicable regulation for claims denials, N.J.A.C. 17:9-1.3, places the Commission in the central role of fact-gathering and claims decision-making in the first instance. Statutorily, the Commission retains final authority and financial responsibility for the conduct of the SHBP.
The Commission has statutory authority to'establish “such limitations, exclusions, or waiting periods as the commission finds to be necessary or desirable to avoid inequity, unnecessary utilization, duplication of services or benefits otherwise available ...” N.J.S.A. 52:14— 17.29(B). . The Commission’s contract with Blue Cross Blue Shield establishes the types of services and supplies that are covered as eligible services. Under N.J.A.C. 17:9-2.16, the Commission has adopted by reference all of the policy provisions in the contract “to the exclusion of all other possible coverages.” No benefits may be paid unless they are “stipulated in the contracts held by the [Commission].” N.J.S.A. 52:14-17.29(B).
Murray v. State Health Benefits Comm’n, 337 N.J.Super. 435, 439-40, 767 A.2d 509, 511 (App.Div.2001). In reviewing claims and interpreting plan provisions, the Commission “must balance its obligations of meeting the health care needs of its members with a fiduciary obligation to make the program cost effective.” Id. Judicial review of the Commission’s claim determinations are
quite limited ... [and] can overturn only those administrative determinations that are arbitrary, capricious, unreasonable, or violative of expressed or implicit legislative policies. We will also reverse administrative decisions that are unsupported by substantial, or sufficient, credible evidence in the record.... [W]e cannot substitute our judgment for that of the agency, even if we would have decided the case differently had we heard the evidence.
Id. at 442-43, 767 A.2d at 512.
On balance, I conclude that the plaintiffs’ quest for the payment of medical services provided to SHBP patients can and should be considered in the first instance by the appropriate administrative agency, the Commission. There is no question that the issues of medical necessity and coverage under the SHBP “may be more effectively presented, comprehended, and assessed by a tribunal with the particular training, acquired expertise, actual ex*678perience, and direct regulatory responsibility” for the program. Abbott v. Burke, 100 N.J. at 300, 495 A.2d at 393.
In reaching the conclusion that the plaintiffs must exhaust administrative remedies before they can access judicial review, I recognize that this litigation has been especially prolonged. Although Horizon raised the exhaustion defense in its initial pleadings, it waited to raise the issue as a basis to dismiss the plaintiffs’ cause until shortly before the commencement of the trial. Nevertheless, I am convinced that the additional delay that may result from this decision is mandated by the statutory and regulatory scheme of the SHBP.12
The plaintiffs’ claims arising under the SHBP will be dismissed without prejudice, subject to plaintiffs’ opportunity to reopen this adversary proceeding as to SHBP claims following the exhaustion of administrative remedies.
2. Collateral Estoppel.
Alternatively, Horizon seeks summary judgment on the ground that plaintiffs should be collaterally estopped from litigating their SHBP claims, because the identical issues were litigated and determined before an Administrative Law Judge in the case of Kagan v. State Health Benefits Commission, OAL Dkt. No. TYP4151-99 (2001).13 The Commission affirmed the Initial Decision by Final Decision dated June 22, 2001. See N.J.S.A. 52:14B10(c).
In Kagan, the plaintiff, Allan Kagan, received health insurance coverage through the SHBP. He was treated for Lyme disease by Dr. Lionetti, and received intravenous antibiotic therapy over an extended period of time. The therapy was administered without pre-certification from Blue Cross Blue Shield of New Jersey. Kagan’s claim for coverage was denied by the N.J. Plus Appeals Committee, whereupon he appealed to the State Health Benefits Commission. The Commission forwarded the matter to the Office of Administrative Law for a plenary hearing. Dr. Lionetti testified at the hearing as an expert witness for Kagan, which testimony, in the opinion of the Administrative Law Judge, was “offered to support the payment of many thousands of dollars to himself.”
The issue addressed in the Initial Decision is whether the charges incurred by Kagan for intravenous antibiotic therapy beyond 28 days rendered by Dr. Lionetti are covered under the State Health Benefits Plan. Generally, the SHBP does not cover “charges for services or supplies that are not medically needed.” A service is considered needed if, among other things, “the prevailing opinion within the appro*679priate specialty of the United States medical profession is that it is safe and effective for its intended use, and that its omission would adversely affect the person’s medical condition.” Kagan at 27 (citing to the 1996 SHBP Handbook). In 1997, the Commission adopted a formal policy for Lyme disease intravenous antibiotic therapy coverage for all SHBP members. The policy specified that certain stages of Lyme disease may be treated with up to 30 days of intravenous antibiotic therapy, with the opportunity to approve extended intravenous therapy beyond 30 days under limited circumstances. As well, the policy required certain tests, including a spinal fluid analysis, to be done as a predicate to coverage for intravenous antibiotic therapy beyond 30 days. No such analysis was conducted on Kagan.
Administrative Law Judge Duncan concluded on three grounds that Kagan had not established entitlement to coverage under the SHBP for the Lyme disease treatment he received. First, she accepted the testimony of the expert testifying on behalf of the Commission, Dr. David J. Herman, that the course of treatment rendered by Dr. Lionetti was not medically reasonable and necessary in accordance with the prevailing opinion of the United States medical professionals treating Lyme disease. “Although Dr. Lionetti, and others, believe in the benefits of long-term antibiotic therapy, the State Health Benefits Commission is not required to pay for services rendered pursuant to unsubstantiated minority theories.” Kagan at 29. Second, she concluded that the treatment Kagan received from Dr. Lion-etti was not in accord with the Plan’s Lyme disease treatment policy, which required a spinal fluid analysis, which proscribed the diagnostic tests utilized by Dr. Lionetti, and which proscribed some of the drugs administered by Dr. Lionetti to Ka-gan. Third, Judge Duncan concluded that the evidence failed to establish that the symptoms Kagan continued to experience when he was treated by Dr. Lionetti were attributable to active Lyme disease requiring additional antibiotic therapy.
Under New Jersey law, collateral estoppel applies where the movant can show that:
(1) the particular issue to be precluded is identical to the issue decided in the previous proceeding;
(2) the issue was actually litigated in the prior action, i.e., there was a full and fair opportunity to litigate the issue in the prior action;
(3) a final judgment on the merits was issued in the prior proceeding;
(4) the determination of the issue was essential to the prior judgment; and
(5) the party against whom preclusion is asserted was a party to or in privity with a party to the earlier proceeding.
Monek v. Borough of South River, 354 N.J.Super. 442, 454, 808 A.2d 114, 120-21 (App.Div.2002); Barker v. Brinegar, 346 N.J.Super. 558, 567, 788 A.2d 834, 839 (App.Div.2002). See also Delaware River Port Auth. v. Fraternal Order of Police, 290 F.3d 567, 573 (3d Cir.2002) (applying New Jersey law); In re Estate of Dawson, 136 N.J. 1, 641 A.2d 1026 (1994). “As contrasted with res judicata, which requires an identity of the cause of action, collateral estoppel bars relitigation of the same issues in suits that arise from different causes of action.” Id. at 453-54, 808 A.2d at 120.
Applying collateral estoppel elements to the circumstances in this case presents several problems. Because Judge Duncan denied Kagan’s claim for reimbursement on several grounds, some of which pertained to the peculiar course of treatment received by Kagan, I cannot determine *680that Judge Duncan’s resolution of the prevailing opinion on the appropriate use of intravenous antibiotic therapy for the treatment of Lyme disease was essential to the denial of coverage in the Initial Decision. Most notably, the record does not support the conclusion that Dr. Lionet-ti and his companies, including LymeCare, Inc. and Lyme Disease Treatment Center, Inc., were either a party to the proceeding before the Office of Administrative Law or in privity with Kagan in the course of the proceeding.
Under New Jersey law, the court will find privity when “the party is a virtual representative of the non-party, or when the non-party actually controls the litigation.” Collins v. E.I. DuPont de Nemours & Co., 34 F.3d 172, 176 (3d Cir.1994).
“Generally, one person is in privity with another and is bound by and entitled to the benefits of a judgment as though he was a party when there is such an identification of interest between the two as to represent the same legal right, or if a person who is not a party controls or substantially participates in the control of the presentation on behalf of a party, Restatement, Judgments 2d, § 39, or if a person who is not a party to an action is represented by a party, including an ‘official or agency invested by law with authority to represent the person’s interests.’ ”
Id. (quoting Moore v. Hafeeza, 212 N.J.Super. 399, 515 A.2d 271, 273 (Ch.Div.1986)).
Virtual representation does not mean merely that someone in the suit serves the interests of the person outside the suit. It requires a relationship by which the party in the suit is the legally designated representative of the nonparty. Id. The Collins court observed that the “identity of interests” test found by some New Jersey courts to be sufficient in certain contexts to create privity, see, e.g., Moore v. Hafeeza, 212 N.J.Super. 399, 515 A.2d 271, is “in significant tension with the New Jersey cases finding that similarity of interests do not create privity” in the absence of a pre-existing legal relationship. Id. at 178, n. 2.
In this case, there is no support for the proposition that Kagan was the legally designated representative of Dr. Lionetti or his companies, LymeCare, Inc. and Lyme Disease Treatment Centers, Inc. The fact that Dr. Lionetti held a similarity of interests with Kagan in getting paid for services rendered, that he testified at the hearing, and that the same attorney represented Kagan and Dr. Lionetti at various times14 did not make Kagan Dr. Lionetti’s legally designated representative. In Collins, for instance, neither the fact that the plaintiff had the same interest as the prior plaintiffs, nor the fact that the plaintiff had the same attorney as the plaintiffs in the first suit made preclusion appropriate. Collins, 34 F.3d at 177-78. And in Marshak v. Treadwell, 240 F.3d 184, 196 (3d Cir.2001), the fact that the counter-claimant testified in the first case and had an interest in the outcome did not preclude the counter-claimant from pursuing the subsequent litigation.
Nor is there sufficient evidentiary basis in the record to support the proposition that Dr. Lionetti controlled the Kagan litigation. As noted above, Laurent W. Met-zler, Esq., certified that his firm, Metzler *681and DeSantis LLP, represented Allen Ka-gan in his quest to recover payments from the State Health Benefits Commission, that his partner, Glenn DeSantis, Esquire, tried the case, and that Dr. Lionetti “had no control over this litigation.” Metzler cert, at 2. Horizon has not otherwise disputed this statement.
Even if the elements of collateral estoppel were established on this record, the application of the collateral estoppel doctrine is discretionary and must be applied equitably, not mechanically. Azurak v. Corporate Property Investors, 347 N.J.Super. 516, 523, 790 A.2d 956, 961 (App.Div.2002).
The factors favoring issue preclusion include: “conservation of judicial resources; avoidance of repetitious litigation; and prevention of waste, harassment, uncertainty and inconsistency.” Those disfavoring preclusion include: the party against whom preclusion is sought could not have obtained review of the prior judgment; the quality or extent of the procedures in the two actions is different; it was not foreseeable at the time of the prior action that the issue would arise in subsequent litigation; and the precluded party did not have an adequate opportunity to obtain a full and fair adjudication in the prior action.
Pace v. Kuchinsky, 347 N.J.Super. 202, 216, 789 A.2d 162, 171 (App.Div.2002) (Citations omitted.).
Here, the factors clearly disfavor preclusion. Neither Dr. Lionetti nor his corporate counterparts could have obtained review of the Kagan decision. The Kagan case concerned one patient with a particular history and course of treatment. This proceeding concerns over 40 patients, each with variations in their conditions and in the treatment they received. The issue of Horizon’s conduct in claims handling was not raised in the Kagan case. Because Horizon was not a party in the Kagan case, there is no basis to claim any unfairness or harassment to Horizon in allowing the claims to proceed. Most significantly, the plaintiffs in this action did not have an adequate opportunity to obtain a full and fair adjudication in the prior action. For instance, as plaintiffs argue in their brief, “[w]hile Mr. Kagen [sic] may have lacked the incentive or resources to find and engage the experts necessary to prevail in his single action, the Plaintiffs here do have that incentive and, indeed, have made that effort.” Plaintiffs’ Brief in Opposition at 29.
I conclude that plaintiffs are not collaterally estopped from litigating their SHBP claims.
III. Self Funded Plans
The plaintiffs also seek payment from Horizon for services rendered to patients who had health insurance coverage through the self-funded plans of Local 54 and Local 68. It is not disputed that ERISA requirements apply to both of these plans. Horizon challenges the plaintiffs’ standing, as medical providers, to seek compensation from Horizon under these ERISA qualified plans.15 Horizon also challenges plaintiffs’ cause of action grounded on state law contract claims, claiming that ERISA completely preempts such claims.
A. Standing.
Horizon contends that the plaintiffs lack standing under 29 U.S.C. § 1132, *682which provides that a civil action may be brought by a plan participant, beneficiary, or fiduciary, or by the Secretary of Labor. Horizon maintains that health care providers are neither participants, nor beneficiaries, directing the court’s attention to Cameron Manor, Inc. v. United Mine Workers of America, 575 F.Supp. 1243, 1245-46 (W.D.Pa.1983); Allergy Diagnostics Lab. v. Equitable, 785 F.Supp. 523, 527 (W.D.Pa.1991), and Health Scan, Ltd. v. Travelers, Ins. Co., 725 F.Supp. 268 (E.D.Pa.1989).
Plaintiffs contend that Horizon’s citations refer to “a few aberrant cases, far outside of the mainstream”, and that the majority of courts recognize that providers can bring ERISA claims on behalf of patients, particularly where, as here, the patients have assigned their entitlement to receive benefits to the provider. See, e.g., Tango Transp. v. Healthcare Fin. Servs. LLC, 322 F.3d 888 (5th Cir.2003); Charter Fairmount Inst., Inc., v. Alta Health Strategies, 835 F.Supp. 233 (E.D.Pa.1993);
In this case, plaintiffs obtained an assignment of benefits for each of the patients treated.16 To date, the Third Circuit has not directly addressed the question of whether or not an assignee has standing under ERISA. The plaintiffs are correct that the overwhelming weight of authority among other circuits on the issue of the standing of medical provider assignees to sue for benefits under ERISA favors such standing. See, e.g., Tango Transport v. Healthcare Financial Services, supra; I.V. Servs. of Am., Inc. v. Trustees of Am. Consulting Eng’rs Council Ins. Trust Fund, 136 F.3d 114, 117 n. 2 (2d Cir.1998); Cagle v. Bruner, 112 F.3d 1510, 1515 (11th Cir.1997). “Numerous district courts in this circuit have held that health care providers have standing to sue under § 1132(a)(1)(B) where there has been an assignment of rights under the plan.” Zaslow v. Miles, 1998 WL 855496, *2 (E.D.Pa. Dec.9, 1998) (citing to Charter Fairmount Institute, Inc. v. Alta Health Strategies, 835 F.Supp. 233, 239 (E.D.Pa.1993); Northwestern Inst. of Psychiatry, Inc. v. Travelers Ins. Co., 1992 WL 236257 (E.D.Pa.1992); Winter Garden Med. Ctr. v. Montrose Foods Prods., 1991 WL 124577 (E.D.Pa.1991); and Bryn Mawr Hosp. v. Coatesville Elec. Supply Co., 776 F.Supp. 181, 184 (E.D.Pa.1991)). Horizon has not cited any specific bar to assignment in the self-funded plans under consideration here. I join with the majority view to conclude that the plaintiffs have standing to sue Horizon under ERISA provisions.
B. Preemption of State Law Contract Claims.
In their Third Amended Complaint, as it pertains to Horizon, the plaintiffs seek reimbursement from Horizon “for medical care and treatment of Lyme disease provided to its insureds” not only on ERISA grounds, but also on state law breach of contract grounds. Third Amended Complaint at 11. Horizon accurately contends that because the plaintiffs’ claims are completely preempted by ERISA, the plaintiffs’ state law claims must be dismissed.
As noted above, Section 502(a) of ERISA allows for civil actions to be brought “by a participant or beneficiary ... to recover benefits due to him under the terms of his plan.” 29 U.S.C. § 1132(a)(1)(B). “[A]n action to recover *683benefits, which challenges an administrative decision regarding whether a certain benefit is covered under an ERISA plan” is completely preempted under ERISA. Difelice v. Aetna U.S. Healthcare, 346 F.3d 442, 446-47 (3d Cir.2003). An action challenging eligibility for benefits may not be the subject of a state action. Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266 (3d Cir.2001). There is no question that in this case, the plaintiffs challenge Horizon’s denial of benefits under the ERISA-con-trolled self-funded plans. The plaintiffs’ state law claims pertaining to the self-funded plans must be dismissed.
To recap, I conclude the following:
1. As to FEHBP claims:
a. ERISA does not apply.
b. State law contract claims are preempted.
c. The plaintiffs must exhaust administrative remedies prior to judicial review.
d. Horizon is not a proper party defendant.
Summary judgment is granted to Horizon to dismiss the plaintiffs’ FEHBP claims, without prejudice to consideration of the merits of the plaintiffs’ claims.
2. As to SHBP claims:
a. ERISA does not apply.
b. The plaintiffs must exhaust administrative remedies prior to judicial review.
c.The plaintiffs are not collaterally es-topped from litigating their SHBP claims.
Summary judgment is granted to Horizon to dismiss the plaintiffs’ SHBP claims, without prejudice to consideration of the merits of the plaintiffs’ claims.
3.As to Self-Funded Plans:
a. The plaintiffs have standing under ERISA to sue Horizon.
b. The plaintiffs’ state law contract claims against Horizon are preempted by ERISA.
Partial summary judgment is granted to Horizon, dismissing the plaintiffs’ state law contract claims.
Horizon’s counsel shall submit a form of order in conformance with this opinion.17
. On October 29, 1999, the case was converted to Chapter 7 and Steven R. Neuner, Esq. was appointed as the Chapter 7 trustee.
. References to "LymeCare” or the “debtor” herein will include the Chapter 7 trustee, who, as plaintiff in this adversary, stands in the shoes of the Chapter 7 debtor, and will also include the co-plaintiff, Lyme Disease Treatment Center, Inc., an affiliated company.
. The plaintiffs argue that there should be no differentiation between the various plans as to compensability of claims, because Horizon never distinguished between the plans concerning eligibility for treatment, or methods for appealing the denial of claims. The plaintiffs' argument must be rejected. The applicable federal and/or state statutes and regulations governing each plan cannot be disregarded.
. While Horizon failed to give timely notice to insureds about the denial of their claims and about appellate procedures, all FEHBP participants received Blue Cross and Blue Shield Service Benefit Plan ("Plan”) booklets, which explained that any disputed claim must be appealed to the OPM and that the Plan participant or a person acting on his/her behalf "may not bring a lawsuit to recover benefits on a claim for treatment, services, supplies, or drugs covered by [the] Plan until [the participant has] exhausted the OPM review procedure." See Service Benefit Plan at 37-38.
. Analogy is sometimes drawn between issues arising under ERISA and issues arising under the FEHBA. See, e.g., Berry v. Blue Cross of Washington & Alaska, 815 F.Supp. 359 (W.D.Wash.1993).
. Other cases cited by plaintiffs to defeat Horizon’s exhaustion argument are not applicable here. Each of the cases relies on the futility exception to the exhaustion requirement. Fallick v. Nationwide Mutual Ins. Co., 162 F.3d 410 (6th Cir.1998); Berger v. Edgewater Steel Co., 911 F.2d 911 (3d Cir.1990), and Berry v. Blue Cross of Washington & Alaska, 815 F.Supp. 359 (W.D.Wash.1993). Here, there is no showing that an administrative appeal before the OPM would be futile, because this record does not reflect any involvement by the OPM in this dispute to date.
. The applicable FEHBP Service Benefits Plans, which clearly identify the appeals process for denial of claims, was sent to the plaintiffs' counsel at an early stage of the litigation. However, Horizon did not draw plaintiffs’ attention to the claims provision in the Plans.
. Plaintiffs’ reliance on the Rievley case to overcome the mandate of the regulation, that only the OPM and not the carrier may be sued, is misplaced. In Rievley, the plaintiff, an FEHBP insured, sued the carrier directly in state court, whereupon the action was removed to federal court. The plaintiff's motion to remand the case back to state court was denied. The court never reached the issue of the proper defendant.
. Horizon raised the exhaustion of administrative remedies defense in paragraphs 18, 19 and 20 of its affirmative defenses to the plaintiffs’ complaint.
. Several annual additions to the Handbook were presented to the court, including the 1996 Handbook for all SHBP members. The Handbook references are taken from Part One of the 1996 Handbook providing General Information for SHBP members.
. In the case of Kagan v. State Health Benefits Commission, AOL Dkt. No. TYP 4151-99 (2001), the Initial Decision by an Administrative Law Judge rejected Dr. Lionetti's claim for reimbursement as to Alan Kagan on various grounds. We do not know the Commission’s response to the decision. See discussion, infra.
. At oral argument on Horizon’s summary judgment motion, I raised the doctrine of primary jurisdiction to explore whether the statutory and regulatory framework of SHBP requires a threshold determination of coverage for plaintiffs' claims under the applicable health benefits plans by the State Health Benefits Commission prior to judicial review. See, e.g., R.J. Gaydos Ins. Agency, Inc. v. National Consumer Ins. Co., 168 N.J. 255, 773 A.2d 1132 (2001). Submissions were received from both parties. While the doctrine of primary jurisdiction serves purposes similar to the doctrine of administrative exhaustion, Abbott v. Burke, 100 N.J. at 300, n. 5, 495 A.2d at 393, it is now apparent that the focus here is on the issue of exhaustion, because the regulatory scheme affords jurisdiction for review of claims denials to the Commission. See also MCI Telecommunications Corp. v. Teleconcepts, Inc., 71 F.3d 1086 (3d Cir.1995), cert. denied, 519 U.S. 815, 117 S.Ct. 64, 136 L.Ed.2d 25 (1996).
. Plaintiffs’ contention that Horizon failed to plead collateral estoppel is rejected. In its Thirteenth Affirmative Defense, Horizon specifically raised the estoppel issue.
. At the hearing, Kagan was represented by Glenn DeSantis, Esq. Mr. DeSantis has represented Dr. Lionetti on a number of matters, and initially represented the debtor in this adversary proceeding, but withdrew his appearance during the earlier stages of this litigation. His partner, Laurent W. Metzler, certified that during the Kagan case, Lionetti had no control over the litigation.
. On this summary judgment motion, Horizon has withdrawn its contention that it did not act as an ERISA fiduciary in administering the selffunded plans. Horizon concedes that the plaintiffs have raised a factual issue regarding Horizon’s discretionary powers under those plans which must be resolved at trial.
. On Horizon’s first summary judgment motion, I determined that under New Jersey law, the anti-assignment clause in the various Horizon plans presented are valid and enforceable. That ruling does not apply to medical plans governed by ERISA and FEHBP requirements, which preempt state law.
. Several issues raised by Horizon in its summary judgment motion were resolved pri- or to the issuance of this opinion, as follows:
a. The parties apparently agree that except for a factual dispute about a negotiated rate for designated services performed by the plaintiffs, which dispute is preserved for trial, Horizon is entitled to summary judgment on the issue of damages.
b. Horizon is entitled to summary judgment to confirm that this court's prior ruling validating anti-assignment clauses under New Jersey state law, where no federal preemption is implicated, applies not only to LymeCare, Inc., but also to Lyme Disease Treatment Center, Inc. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493637/ | ORDER
JAMES G. MIXON, Bankruptcy Judge.
On August 5, 2003, this Court issued its order for Diane Sexton, Attorney-at-Law, *11to show cause why she should not be removed from representing Mary McGehee, a secured creditor in this bankruptcy case, because of a conflict of interest. Ms. Sexton was also ordered to show cause why sanctions should not be imposed pursuant to Federal Rule of Bankruptcy Procedure 9011 for filing frivolous pleadings and a fraudulent application for attorney’s fees in connection with a claim filed on behalf of Ms. McGehee.
Ms. Sexton filed a response to the Order to Show Cause on August 22, 2003, and appeared at a hearing on the matter on August 27, 2003. At the hearing, Ms. Sexton presented testimony and offered exhibits in response to the Court’s' Order to Show Cause.
The Court, for the reasons stated in open court pursuant to Federal Rule of Bankruptcy Procedure 7052, ruled from the bench that Ms. Sexton was removed as attorney for Ms. McGehee because of a conflict of interest and the other matters were taken under advisement.
BACKGROUND
According to the Court’s docket in this bankruptcy case, Ms. Sexton first appeared in this case on February 18, 2003, by filing a motion to vacate an order on behalf of Barbara Griffin, who is the wife of the Debtor, Stephen A. Griffin, and the daughter of Ms. McGehee. Since that pleading, Ms. Sexton has also appeared on behalf of the Debtor;1 Ms. McGehee; Highway 71 South Liquors, Inc.; Charlie Henderson, a creditor; and Ella Cooper, Douglas Payne, and Anna Corpening, administrative expense creditors.
FRIVOLOUS PLEADINGS
On behalf of Barbara Griffin, Ms. Sexton propounded Réquests for Admission to the Trustee pursuant to Federal Rule of Bankruptcy Procedure 7036. The Request was filed May 14, 2003. The Trustee filed his answer to the Request on June 16, 2003, and on June 17, 2003, Ms. Sexton filed a motion styled “Barbara Griffin’s Impeachment of Richard Cox’s Response to First Requests For Admission Propounded to Richard Cox, Trustee, Motion to Strike, and Request for Sanctions under FRCP 11”. The substance of the pleading is as follows:
COMES NOW, Barbara Griffin, by and through her attorney Diane Sexton of The Sexton Law Firm, and for her impeachment of Richard Cox’s responses to her First Request for Admissions, Motion to Strike, and Request for Sanctions under F.R.C.P. 11 states:
REQUEST FOR ADMISSION NO. 1: Please admit that on or about May 9, 2003 you tendered a profit and loss statement regarding Highway 71 South Liquors, Inc. for the months of February, March, and April, 2003.
RESPONSE: Denied. I have not operated a corporation.
IMPEACHMENT: The statement “I have not operated a corporation” is non-responsive. However, by Document No. 606 filed on June 11, 2003, which is substantially a duplicate of the one tendered to Ms. Griffin on or about May 9, 2003 after a letter to Judge Mixon requesting same, Richard Cox filed in this case for Highway 71 South Liquors, Inc., Mr. Cox submitted the February, 2003 “Profit and Loss” statement. The figures are identical.
By Document No. 607 filed on June 11, 2003, which is substantially a duplicate of the one tendered to Ms. Griffin on or about May 9, 2003, Richard Cox filed in this case for Highway 71 South *12Liquors, Inc., Mr. Cox submitted the March, 2003 “Profit and Loss” statement. The figures are identical.
By Document No. 608 filed on June 11, 2003, which is substantially a duplicate of the one tendered to Ms. Griffin on or about May 9, 2003, Richard Cox filed in this case for Highway 71 South Liquors, Inc., Mr. Cox submitted the April, 2003 “Profit and Loss” statement. The figures are identical.
By Document No. 609 filed on June 11, 2003, Richard Cox filed in this case for Highway 71 South Liquors, Inc., Mr. Cox submitted the May, 2003 “Profit and Loss” statement.
REQUEST FOR ADMISSION NO. 2: Please admit that you had no part in the management of Highway 71 South Liquors, Inc. prior to February 20,2003 when you took Barbara Griffin’s keys.
RESPONSE: Admitted. I have had no part in the management of a corporation.
REQUEST FOR ADMISSION NO. S: Please admit that by your own figures provided in your Profit and Loss statement that the gross profit of Highway 71 South Liquors, Inc. was $54,156.08 for February, 2003 when Barbara Griffin had been managing the business.
RESPONSE: Denied.
IMPEACHMENT: By Document No. 606 filed on June 11, 2003, Richard Cox filed in this case for Highway 71 South Liquors, Inc., Mr. Cox submitted the February, 2003 “Profit and Loss” statement. The Gross Profit for Highway 71 South Liquors, Inc. is shown as $54,156.08. Mr. Cox did not confiscate Barbara Griffin’s keys until on or after February 20, 2003. Mr. Cox demanded these keys in contravention of Arkansas law which gives Mrs. Griffin either the entirety of the land, improvements and business or her dower one-half interest free and clear of any indebtedness.
REQUEST FOR ADMISSION NO. I: Please admit that by your own figures provided in your Profit and Loss statement the gross profit of Highway 71 South Liquors, Inc. was only $21,232.48 for March, 2003, the first month of your management of the business.
RESPONSE: Denied.
IMPEACHMENT: By Document No. 607 filed on June 11, 2003, Richard Cox filed in this case for Highway 71 South Liquors, Inc., Mr. Cox submitted the March, 2003 “Profit and Loss” statement. The Gross Profit for Highway 71 South Liquors, Inc. is shown as $21,232.48.
REQUEST FOR ADMISSION NO. 5: Please admit this is a decrease of 39.2 per cent in the gross profits.
RESPONSE: Denied.
IMPEACHMENT: $21,232.48 divided by $54,156.08 is 39.2 per cent. A simple matter of mathematics.
REQUEST FOR ADMISSION NO. 6: Please admit that under your management Highway 71 South Liquors, Inc. has never met the level of gross profit as under the management of Barbara Griffin.
RESPONSE: Denied.
IMPEACHMENT: By Document 608 filed on June 11, 2003, Richard Cox filed in this case for Highway 71 South Liquors, Inc., Mr. Cox submitted the April, 2003 “Profit and Loss” statement!.] The Gross Profit for Highway 71 South Liquors, Inc. is shown as $31,840.14, which is obviously less than the $54,156.08 which Barbara Griffin made.
By Document No. 609 filed on June 11, 2003, Richard Cox filed in this case for Highway 71 South Liquors, Inc., Mr. *13Cox submitted the May, 2003 “Profit and Loss” statement. The Gross Profit for Highway 71 South Liquors, Inc. is shown as $27,523.74, which is obviously less than the $54,156.08 which Barbara Griffin made.
Based upon the above documentation, all of which has been filed for record by Richard Cox, Mr. Cox in his Responses to the Requests for Admissions was not truthful.
WHEREFORE, premises considered, Barbara Griffin moves to strike the Responses filed by Richard Cox as being untruthful, as being in violation of F.RC.P. 11(b)(1), (2) and (4), for her costs and fees incurred herein, and for all other relief which is proper.
Motion for Impeachment of Trustee, June 17, 2003.
At the time the Request for Admissions was filed on May 14, 2003, the only matter pending between the Trustee and Barbara Griffin was Adversary Proceeding 03-07039 filed by the Trustee to recover property allegedly transferred to Ms. Griffin in violation of 11 U.S.C. §§ 544, 548, 549, and 550. The Request for Admissions has virtually no connection to the issues in the pending adversary proceeding.
Request for Admission Number One propounded by Ms. Sexton was premised on the Trustee admitting that the business he was operating was Highway 71 South Liquors, Inc. This Court had previously determined by order entered April 11, 2003, that neither the real estate nor the liquor store business was ever transferred from the Debtor to the corporation, Highway 71 South Liquors, Inc., and no appeal was taken from that order. Therefore, the business was not an asset of Highway 71 South Liquors, Inc. but belonged instead to Stephen Griffin and upon the bankruptcy filing became property of the estate to be administered by the Trustee when the case was converted from Chapter 11 to 7. Request Number Three and, by implication, Request Numbers Four, Five, and Six were premised on the Trustee admitting that Highway 71 South Liquors, Inc., was a business operated by Barbara Griffin. Both issues are contested by the Trustee.
If Ms. Sexton questioned the sufficiency of the Trustee’s answer or wished to object to the answer then she should have filed a motion to determine the sufficiency of the answer pursuant to Federal Rule of Bankruptcy Procedure 7036(a). The motion to cite the Trustee for violation of Federal Rule of Bankruptcy Procedure 9011 because his answer to the Request for Admissions did not admit facts genuinely in dispute was frivolous and is itself a violation of Rule 9011. 10 Collier on Bankruptcy ¶ 9011 [4] (Alan N. Resnick & Henry J. Sommer, et al. eds., 15th ed. rev.1993) (commenting that the filing of a motion for sanctions “is itself subject to the requirements of the rule and can lead to sanctions”) (quoting Fed. R. Bankr.P. 9011 advisory committee note 1997 (quoting Fed.R.Civ.P. 11 advisory committee note 1993)).
APPRAISER’S FEE APPLICATION
On June 12, 2003, the Trustee filed an application to pay Wilson Auctioneers, Inc., $350.002 for services rendered in the performance of an appraisal of the Debt- or’s personal property located at the Debt- or’s residence in Ft. Smith and at a lake house at Mt. Ida in Montgomery County, Arkansas. On June 13, 2000, Ms. Sexton, on behalf of Barbara Griffin, filed an objection to payment of the appraiser’s fee and *14a hearing was conducted at Hot Springs, Arkansas, on July 30, 2003.
Ms. Sexton’s argument at the hearing was that “it is of [no] value to the estate. It has generated no income for the estate. No creditors have been paid. The only person to realize any benefit from this is the auctioneer himself.” (Tr. at 6, Objection to Compensation for Appraiser, July 30, 2003.) Ms. Sexton offered no evidence that the appraisal fee was not an appropriate amount or that the service was not performed. Trustees routinely seek the opinion of appraisers so they can make better informed decisions about how to liquidate property. The objection was completely frivolous and was a waste of time for the Court and the parties.
FRAUDULENT FEE APPLICATION AND CONFLICT OF INTEREST
The issue of whether to sanction Ms. Sexton under Rule 9011 for attorney’s fees charged to Ms. McGehee must be considered in light of her conflict of interest in representing Ms. McGehee. The Court has previously removed Ms. Sexton as attorney for Ms. McGehee because of a conflict of interest as detailed in open court at the hearing on August 27, 2003.
Background information about the procedural posture of this case as it relates to Ms. McGehee’s position as a creditor is necessary to a determination of whether Ms. Sexton’s fee application is sanctionable pursuant to Rule 9011. Prior to the Debt- or’s bankruptcy filing, he had executed a note secured by a deed of trust in real property located in Montgomery County, Arkansas, referred to by the parties as “the lake house.” The Debtor filed for Chapter 11 on January 14, 2002, at which time Bancorp South or its predecessor in interest held the deed of trust.
On November 19, 2002, while the Chapter 11 was still pending, the Debtor and Bancorp South entered an agreed order relaxing the automatic stay as to the lake house if the Debtor could not secure a bona fide offer to purchase by December 5, 2002. An order relaxing the stay as to the lake house was subsequently entered December 11, 2003. For reasons not shown on the record, the parties did not include in the order a paragraph abandoning the property from the estate. Bankcorp South filed a foreclosure action in state court on December 16, 2002.
Ms. McGehee, an 83-year-old widow, purchased the note secured by the lake house for $304,260.09 and by virtue of the purchase became a creditor in the case. The purchase occurred January 11, 2003. Ms. McGehee was substituted as plaintiff in the foreclosure action.
The case was converted to a case under Chapter 7 on February 5, 2003, and a trustee was appointed to administer the estate. Because the property was not abandoned from the estate, the Trustee became a party in interest in the pending state foreclosure action on the lake house. The Trustee removed the foreclosure action to the Bankruptcy Court in an application for removal filed March 4, 2003, in adversary proceeding 03-07043. Thereafter, Ms. Sexton, on behalf of Ms. McGehee, filed a motion to abandon and for relief from the stay to continue the foreclosure action. After a hearing in Fayetteville, Arkansas, on June 3, 2003, the Court denied the motion for relief and ordered the Trustee to liquidate the lake house within ninety (90) days. Ms. Sexton, on behalf of Ms. McGehee, has opposed the Trustee’s efforts to liquidate the lake house. See, e.g., Objection to Trustee’s Motion for Sale of Real Property as Being Violative of U.S. Supreme Court Case of Dewsnup, filed by Mary McGehee, July 10, 2003.
*15SHOW CAUSE HEARING
At the show cause hearing on August 27, 2003, Ms. Sexton offered her own sworn testimony, and the testimony of Barbara Griffin and Ms. McGehee.
Ms. McGehee testified that Ms. Sexton did not consult with her until after she purchased the note and mortgage. She stated that she discussed the issue of conflict of interest with Ms. Sexton on more than one occasion, and that she did not perceive any conflict. (Tr. at 19, August 27, 2003 hearing.) Ms. Sexton entered her appearance on behalf of Ms. McGehee in the foreclosure action, and Ms. McGehee wanted it to proceed. Ms. McGehee said she was satisfied with all of the legal fees Ms. Sexton had charged her and said she did not think she had been charged for time that should have been billed to Mrs. Griffin. (Tr. at 22, August 27, 2003 hearing.) She said she wanted to enjoy the lake house and keep it in the family. She testified that while the case has been pending, Mrs. Griffin has been occupying the house and that Mrs. Griffin had been paying her the accruing interest on rent, but that Ms. McGehee is not now receiving interest payments by agreement.
On examination by the Court, Ms. McGehee testified that Ms. Sexton was not her attorney before she purchased the note. She seemed confused when confronted with Ms. Sexton’s legal bills, which charged her $1,650.00 for services in connection with the purchase of the lake house note. When the Court asked her if she remembered a meeting prior to purchasing the note for which Ms. Sexton charged her $375.00, Ms. McGehee replied that she mostly consulted with her daughter, Mrs. Griffin. Ms. McGehee finally stated she must have had a lapse of memory. (Tr. at 26, August 27, 2003.)
Ms. McGehee further testified that she received assurances in regard to the note purchase from friends, Mrs. Griffin, and Ms. Sexton. She later acknowledged that Ms. Sexton advised her concerning the note, but she made up her own mind. Ms. McGehee testified that she did not recall a discussion with Ms. Sexton regarding the interest rate of the note.
When questioned by the Court, Ms. McGehee stated the following about Ms. Sexton’s court appearance in Fort Smith, Arkansas, on March 27, 2003, and in Little Rock on May 16, 2003:
Q. And you remember the day your brother passed away and you had to go to his funeral?
A. Yes.
Q. Are you telling me you think it’s correct that she should charge you $1,350.00 for being in court that day, even though it didn’t have anything to do with your case?
A. Well, it must have had some relevance or she wouldn’t be charging me for it.
Q. So you’re relying on her statement to you that it benefitted you?
A. Yes.
Q. Do you know what matters were considered at that hearing?
A. Well, since I was not there I don’t know.
Q. And the same question about the hearing in Little Rock; do you know what that was about?
A. Vaguely. I wasn’t there. Since I wasn’t there, I don’t know other than what I heard from Barbara telling me some.
Q. But you were told that this involved your issues; right?
A. Yes.
Q. Do you think that’s fair that she should charge you $1,200.00 to go down to Court and sit there and not even *16participate in a case that doesn’t involve you at all?
A. There must have been some aspect of it that did.
Q. Or she wouldn’t have charged you?
A. That’s right.
Q. So you have complete faith in Ms. Sexton?
A. I really do, yes.
(Tr. 28-29, August 27, 2003 hearing.)
Ms. McGehee was not aware that Ms. Sexton represented the Debtor at one point in time or that she represented several other creditors and parties in interest in the case.3 Ms. McGehee stated that she has paid Ms. Sexton “something like $50,000.00” as of the August 27, 2003, hearing date. (Tr. at 33, August 27, 2003 hearing.) She also stated she was not aware that when Ms. Sexton entered her appearance on behalf of Ms. McGehee as plaintiff in the foreclosure that her daughter was a defendant who was also represented by Ms. Sexton and for a time her son-in-law, the Debtor, was also represented by Ms. Sexton.
Mrs. Griffin was also called as a witness by Ms. Sexton. She agreed that Ms. Sexton met with her and her mother to discuss conflict of interest and that her mother was charged $1,425.00 for the meetings even though Mrs. Griffin was not charged. (Tr. at 57, August 27, 2003 hearing.) Mrs. Griffin acknowledged that her mother was also charged for discussing with Ms. Sexton whether Mrs. Griffin should pay her mother the accruing interest on the $304,000.00 debt. She said this issue was discussed for two hours and that her mother paid for the entire two hours because it was for “my mom’s benefit.” (Tr. at 59, August 27, 2003 hearing). Mrs. Griffin testified that she thought Ms. Sexton’s bills were fair and that Ms. McGehee was not charged for services rendered only for Mrs. Griffin’s benefit. (Tr. at 46, August 27, 2003 hearing.) She said she has ceased making interest payments on the note to her mother because her mother requested it because Ms. McGehee stated, “I know you’re strapped -” (Tr. at 53, August 27, 2003 hearing.)
Mrs. Griffin characterized her mother as a wealthy person who could afford not to receive the accruing interest on the $304,000.00 debt. Mrs. Griffin said she had paid Ms. Sexton close to $10,000.00.4 Mrs. Griffin works in Ms. Sexton’s office as a paralegal, but she is not paid for her services.
When questioned whether it was reasonable for Ms. Sexton to charge Ms. McGe-hee $150.00 per hour for 34 hours for looking at the lake house, Mrs. Griffin stated:
A. Well, and my mom is the one that keeps asking her to do this stuff. If that’s what my mom wants to do, that’s my mom. My mom is 82 years old. She’s taken care of herself this long; and whenever I try to suggest anything, she tells me, “Barbara, I am fully capable of making my own decisions.”
Q. You don’t feel that you and Ms. Sexton are taking advantage of her?
A. I don’t think my mom is a person who can be taken advantage of.
(Tr. at 60-61, August 27, 2003 hearing.)
Furthermore, Mrs. Griffin admitted that Ms. Sexton charged Ms. McGehee for the *17entire six hours the 341(a) meeting lasted, but did not charge Mrs. Griffin anything.
Mrs. Griffin was also questioned about the charges related to the March 27, 2003, hearing at Ft. Smith:
Q. And the hearing that we had on March the 27th, none of that concerned your mother’s issue; did it?
A. Again, my mom is the one that keeps — when she hears that there’s a meeting, she asks Diane to go for her because she doesn’t want to drive to these places. She’s been upset that she’s had to come to Hot Springs.
Q. Do you think that’s fair?
A. It’s my mom’s decision.
Q. You don’t think your mother is being taken advantage of when she’s billed $1,350 for a lawyer to appear at a hearing in which your issues were litigated and not hers?
A. If my mom has no problem with it, that’s her decision. I mean, I was taught to respect my mom and to respect — my dad was an Air Force man and they lived an Air Force life. He was gone all the time. He flew B-52’s, and my mom was left raising the four children; and she was very capable of making her decisions. She’s always been an astute businesswoman. She’s always done investments in stock and everything. She learned from the best of them, and I have every confidence in her decisions. She’s gotten me out of a lot of hot water in my life.
(Tr. at 61, 62, August 27, 2003 hearing.)
The Court questioned Mrs. Griffin about whether it was in Ms. McGehee’s best interest not to receive interest on the note:
Q. Do you consider that to be in her best interest if you quit paying the interest?
A. I am grateful that she said I could quit paying the interest.
Q. That wasn’t my question. Do you think that’s in her best interest?
A. Well, when the Trustee — if he sells the property, whoever buys the property ■will pay the interest. So yeah, that’s in her best interest.
Q. It’s in her best interest that you quit paying it?
A. Yes, because BankcorpSouth refused to let us pay the interest; and then when she bought the note, she had to pay all the accrued interest. So the same thing will happen this time. That’s what she said. She said, “Why should you keep paying the interest when I had to pay the interest when I bought the property.” That was her decision.
(Tr. at 62-63, August 27, 2003 hearing.)
The Trustee asked Mrs. Griffin the following:
Q. Well, at the hearing on her Motion for Abandonment held in Fayetteville, the Judge specifically informed everybody present that I wouldn’t be allowed to sell the property unless Ms. McGe-hee’s claim as allowed would be paid in full. Do you recall that?
A. Yes, I recall that.
Q. So why would there be a purpose in Ms. McGehee filing an objection to my motion to sell, which was heard here, if I would not be able to sell the property unless she was going to be paid?
A. Because I don’t have any trust in what’s decided here. We were also told we would get an appraisal at the last hearing, and we still don’t have an appraisal. We were told that Benefit Bank would get the full amount of their lien, and they ended up having to pay $22,000 and bid on their own property. I consulted with Teresa Pockrus at the Nixon Law Firm and said, “Are you sure my mom will get her money?” And *18she said, “We don’t know.” Nobody knows. We don’t have any confidence in this system. I’m sorry.
Q. So you’re saying that you and Ms. Pockrus didn’t accept the Court’s statement that the property would not be sold by me unless your mother’s claim was paid?
A. I really have no faith in what you do right now, no, sir.
Q. All right. But the purpose here, just like your mother — you’ve heard her testimony in Court today, and she said her purpose here is to retain — she wants title to the lake house for the use of her and her family.
A. She has come to that decision when she has seen that she doesn’t know if the note will continue. So she would rather be able to do the foreclosure than sell it to somebody else. She bought the note thinking that she could either keep the note as an investment or get the lake house. Those were her two possibilities when purchasing the note.
(Tr. at 66-67, August 27, 2003 hearing.)
Mrs. Griffin is listed on Ms. Sexton’s letterhead as a paralegal, but Mrs. Griffin states her function is that of a business manager, and she is not compensated for her work for Ms. Sexton. Mrs. Griffin has borrowed $20,000.00 from Ms. McGehee during this bankruptcy case, and the proceeds of the loan were used to pay the Debtor’s attorney’s fees to his current attorney, Mr. Nixon. Mrs. Griffin was unsure whether Ms. McGehee has spent $50,000.00 in attorney’s fees or some amount less than that; she stated her mother is confused on the amount in legal fees her mother has incurred. (Tr. at 80, August 27, 2003.)
Ms. Sexton testified on her own behalf. She stated that in December, Mrs. Griffin approached her about representing her mother and Ms. Sexton declined, stating, “I don’t think that would be right.” (Tr. at 101, August 27, 2003 hearing.). However, after consulting an attorney whom she respected, she decided it was permissible to represent both clients. She testified that Mrs. McGehee has paid $17,021.00 and Ms. Griffin has paid $5000.005 in legal fees and that this case is consuming most of her time. (Tr. at 108, August 27, 2003.)
She stated the reason she filed the Rule 11 motion against the Trustee was because the Trustee had alleged that Mrs. Griffin had not made a meaningful contribution sufficient to earn compensation from Highway 71 South Liquors, Inc. Ms. Sexton expressed the notion that filing the Rule 11 motion “did not impugn Mr. Cox [the Trustee] as an attorney because I just don’t think lawyers should impugn each other.” (Tr. at 107, August 27, 2003 hearing.)
Upon questioning by the Court, Ms. Sexton first denied and then admitted that she represented Ms. McGehee in connection with the purchase of the note:
Q. Okay. That’s all I asked. Did you represent Ms. McGehee in connection with the purchase of the note and the assignment of the mortgage?
A. No. Sir. I advised her not to do it, and she went ahead and they did it. I did meet with her. I did say, “Don’t sell your Wal-Mart stock; don’t do this.” I also said, “Please go and meet with other people.” We did this over a period of time. I explained to her then why I wouldn’t recommend it, but I also understand that my opinion compared to that of Dane Clay or Gary Richardson is nothing.
Q. My question is, did you or did you not represent her in connection with the *19purchase, give her advice concerning the purchase of the note?
A. I advised her not to do it.
Q. Did you represent her then?
A. I did not represent her when she met with Michael Redd to purchase it. Q. Well, you’ve charged her 11 hours at $150.00 an hour for $1,650 from December 30th to January 13th for meeting with her in connection with the purchase of the lake house from Bancorp, the feasibility of selling Wal-Mart stock, and finalizing the terms of proposed purchase of Bancorp.
A. Yes sir.
Q. I don’t understand how these time charges can be correct if you’re telling me here under oath that you didn’t represent her in connection with the purchase of the note.
A. I advised against selling the Wal-Mart stock, and I advised against the purchase. When that advice is overruled, I said, “Here’s the interest you’re making on your Wal-Mart stock. This is the value of Wal-Mart. They’ve been around a long time. This is the interest you can make on this note. This is how long it will take for you to realize your money on this note. These are decisions that you can make. I can give you my opinion.”
I did not meet with Michael Redd. I met with Ms. McGehee and Ms. Griffin.
Q. So you were representing her, and you charged her for those services, didn’t you?
A. If you want to put it that way, Sir. What I view is if you go to the closing, you’re representing them. I didn’t go to the closing.
Q. Well, you were advising her, at least?
A. Yes, Sir, for whatever my advice was worth.
Q. And you charged her for that legal advice?
A. Yes, Sir, after she said, “Are you going to send me a bill?”
Q. Okay.
A. At that point in time, I said, “Well, okay.”
Q. I mean, I just get confused because you say you didn’t represent her, and she said you didn’t represent her. In your opening statement, you said you didn’t represent her; but you charged her $1,650, which you say was for advice concerning the purchase of the note.
A. Yes, Sir. As I’m trying to explain, I advised against it. I grew up with the Mosley family, and they have one of the largest abstract companies in Northern Arkansas. If you’re representing someone in a real estate deal, as Bill would have said, you go to the closing. If you don’t go to the closing, you didn’t represent either the buyer or the seller. I did not go to the closing. i
(Tr. at 108-111, August 27, 2003 hearing.)
Ms. Sexton denied charging only Ms. McGehee for discussing conflicts of interest and stated she charged Mrs. Griffin as well, but she did not know how much.6 She said it would total at least 18 hours.
When asked whether it was fair to charge Ms. McGehee for the nine-hour hearing in Fort Smith involving matters unrelated to Ms. McGehee’s issues, Ms. Sexton stated:
A. My 82-year-old client said, “I’m the one who asked you to be there all day long and tell me what happened. You could have left at any time.” She said she felt she was the one who should pay that.
*20Q. My question is do you think that’s fair? An 82-year-old lady who trusts you, and you did all this for all these other people and billed her for this work; do you think that’s fair?
A. I don’t think any legal bill is fair.
Q. Do you think it’s fair to give that lady the bill for the work you did for her daughter that I just outlined?
A. I think it’s fair to defer to what she said.
Q. What Ms. McGehee said?
A. Yes, Sir, I do. As I said, I don’t think any legal bill is fair. God knows I’ve written off far more bills than I’ve ever collected. Little Rock is full of people who got free legal service.
(Tr. at 115, August 27, 2003 hearing.)
Ms. McGehee’s interest would have been best served if she had not purchased the note. If she wanted to buy the lake house for her son-in-law and daughter, all she had to do was bid it in at the foreclosure sale or at the Trustee’s sale. Becoming a creditor in the ease has proved to be a financial disaster for Ms. McGehee. Ms. Sexton does not understand some basic principles of bankruptcy law such as the difference between an order of abandonment and an order granting relief from the stay. This lack of knowledge impeded Ms. Sexton’s ability to represent any of her clients’ interests.7 Mrs. Griffin’s interest is served if she can prevent the sale of the lake house to a third party while Ms. McGehee’s interest is served by getting her secured claim paid in full. Ms. Sexton is sacrificing Ms. McGehee’s interest to promote the interest of Mrs. Griffin and in the process she is shamelessly and unfairly loading Ms. McGehee with most of the legal expense.8
*21SANCTIONS
Federal Rule of Bankruptcy Procedure 9011 closely follows the language of Rule 11 of the Federal Rules of CM Procedure. The bankruptcy rule provides in parts relevant to the facts of this case that:
By presenting to the Court ... a petition, pleading, written motion, or other paper, an attorney is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances—
(1) it is not being presented for any improper purpose ...
(2) the claims ... therein are warranted by existing law or by a nonfrivolous argument ...
(3) the allegations ... have evidentiary support ...
Fed. R. Bankr.P. 9011(b)(l)-(3).
The Bankruptcy Court is empowered to impose sanctions on an attorney for violation of Rule 9011. Prior to imposing sanctions, the Court is required by the rule to follow certain procedures:
(c) Sanctions. If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation.
(1)How Initiated.
(B) On court’s Initiative. On its own initiative, the court may enter an order describing the specific conduct that appears to violate subdivision (b) and directing an attorney, law firm, or party to show cause why it has not violated subdivision (b) with respect thereto.
(2) Nature of Sanction; Limitations. A sanction imposed for violation of this rule shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated. Subject to the limitations in subparagraphs (A) and (B), the sanction may consist of, or include, directives of a nonmonetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorneys’ fees and other expenses incurred as a direct result of the violation.
(3) Order. When imposing sanctions, the court shall describe the conduct determined to constitute a violation of this rule and explain the basis for the sanction imposed.
Fed. R. Bankr.P. 9011(c)(l)-(3).
See, e.g., Grunewaldt v. Mutual Life Ins. Co. (In re Coones Ranch, Inc.), 7 F.3d 740, 744 (8th Cir.1993) (affirming bankruptcy court ruling imposing sanction of attorney filing papers that were legally unreasonable, without factual foundation, and without a proper purpose); Brown v. Mitchell (In re Ark. Communities, Inc.), 827 F.2d 1219, 1221-22 (8th Cir.1987) (upholding district court’s affirmance of bankruptcy court’s sanctions of attorney pursuant to Bankruptcy Rule 9011).
Bankruptcy Rule 9011 closely tracks Federal Rule of Civil Procedure 11, which imposes “an affirmative duty to conduct a reasonable inquiry into the facts and the law.” Business Guides, Inc. v. Chromatic Communications Enters., Inc., 498 U.S. 533, 551, 111 S.Ct. 922, 112 L.Ed.2d 1140 (1991). The legal standard for alleged violations of Rule 11 is “reasonableness under the circumstances.” Business Guides, 498 U.S. at 551, 111 S.Ct. 922. Bankruptcy Rule 9011 requires a pleading *22to have evidentiary support or be likely to have evidentiary support after reasonable inquiry. Halverson v. Funaro (In re Frank Funaro, Inc.), 263 B.R. 892, 903-04 (8th Cir. BAP 2001).
The evidence before the Court is that Ms. Sexton has violated Bankruptcy Rule 9011 by filing frivolous pleadings including a Motion for Rule 11 sanctions against the Trustee and an objection to an appraiser’s fee of $350.00. Nothing about the facts or the law governing the issues in this case provided any evidentiary basis to file either pleading.
In addition, the application for attorney’s fees was filed for an improper purpose. The application is fraudulent in that Ms. Sexton has represented that she was performing services for Ms. McGehee’s benefit when in fact she was representing her own interest and the interest of Mrs. Griffin. Moreover, charges for services performed on behalf of Ms. McGehee were often excessive or the services performed were unnecessary. Ms. Sexton is guilty of overreaching a vulnerable and elderly client and has violated multiple sections of the Model Rules of Professional Conduct.9
As sanctions for violating Rule 9011 and for charging Ms. McGehee for services performed for another client, Ms. Sexton is hereby assessed a fine of $950.00 payable to the Clerk of the U.S. Bankruptcy Court for the Eastern and Western Districts of Arkansas. A copy of this opinion will be forwarded to the Arkansas Committee on Professional Conduct as a judicial complaint against Ms. Sexton.
IT IS SO ORDERED.
. Ms. Sexton was removed as attorney for the Debtor by an order entered May 6, 2003.
. Because of a scrivener's error, the amount of the fee was erroneously submitted to the Court as $350.00 when it should have been $750.00.
. The state foreclosure action was removed to the Bankruptcy Court on March 4, 2003, and was assigned AP No. 03-07043. The style of the action is "Mary F. McGehee vs. Stephen A. Griffin, Barbara Griffin ... and Richard L. Cox, Trustee”. Ms. Sexton, therefore, represents the plaintiff and one of the defendants in this adversary proceeding.
. Ms. Sexton testified that Ms. Griffin has paid $5,000.00. See page 18 infra.
. Mrs. Griffin testified she has paid $10,000.00.
. Mrs. Griffin testified that she was not billed for these conflict-of-interest conferences.
. For example, when Ms. Sexton was asked by the Trustee about the effect of a relief from stay, Ms. Sexton replied:
A. Well, according to the Appellate Court cases I have found, it means that that is outside the bankruptcy. To bring it back in, you have to show that when that ruling was made, there was no finding that it had little or no value to the estate and there was no finding that the amount owed was less than the value of the property.
I believe there was one other thing, but my mind is kinda scrambled after taking high blood pressure drugs. I enumerated every one of those, and I’ll be happy to look them up for you. They're cited in In re Abdulhas-sen and in In re Hood. I can name.several other cases. I can provide you with those cases.
I have taken the time and trouble to ask other attorneys who are quite knowledgeable in the appellate process who agree with that interpretation.
Q. So your opinion in representing Ms. McGehee in this bankruptcy proceeding is that an order granting relief from stay removes the collateral that’s the subject of that motion from being an asset of the bankruptcy estate and removes it from the jurisdiction of the Bankruptcy Court? A. Sir, that’s not my opinion. That's the opinion of the Ninth Circuit, the Fifth Circuit, the Sixth Circuit and, I believe, the Second Circuit.
Q. Ms. Sexton, my question, though, is— A. I answered your question.
Q. Well, let me ask it again because I don’t think you did. You’ve billed her $17,000, and it’s all based upon you thinking that I should not be able to sell the lake house because you believe it’s not an asset of the Chapter 7 estate?
A. And I answered that. I said no, it is not my thinking; it is the cases that are in the Ninth Circuit, the Sixth Circuit, the Second, the Third and others I could name.
(Tr. at 119-120, August 27, 2003.)
. Many of the charges are overstated in terms of time spent on the task compared with the time that should reasonably have been incurred. For example, Ms. Sexton billed 1.5 hours to prepare a four-sentence motion for continuance; 2 hours to discuss the interest rate of a fixed rate note; and 26 hours to view the lake house. For a more detailed discussion of legal fees charged to Ms. McGehee, see In re Griffin, 302 B.R. 1, 2003 WL 22861597 (Bankr.W.D.Ark.2003).
. For examples of Ms. Sexton’s violations of the Model Rules of Professional Conduct, see Rule 1.1. Competence; Rule 1.5. Fees; Rule 1.7. Conflict of interest: general rule; Rule 3.1. Meritorious claims and contentions; and Rule 8.4. Misconduct. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493638/ | MEMORANDUM OPINION
JERRY VENTERS, Bankruptcy Judge.
This matter comes before the Court on a motion for redemption pursuant to 11 U.S.C. § 722, filed by Robert Roy Podnar and Evelyn Sue Podnar (“Debtors”), seeking to redeem a 2000 Dodge Intrepid and requesting that Liberty Bank’s allowed secured claim in the motor vehicle be set at its trade-in value of $5,300.00. Liberty Bank objected to the Debtors’ motion arguing that the retail value of the motor vehicle is $9,200.00. The Court conducted a hearing on this issue in Jefferson City, Missouri, on November 6, 2003, at which time the Court took the matter under ad*51visement. After reviewing the Debtors’ motion, the objection, and the relevant case law, the Court is prepared to rule that the proper measure for valuing collateral pursuant to § 722 is the liquidation method and the appropriate date for that determination is the date of the contested hearing.
I. BACKGROUND
On July 10, 2001, the Debtors purchased a 2000 Dodge Intrepid and signed a retail installment contract for $15,852.28, which was assigned to Liberty Bank. On June 19, 2003, the Debtors filed a Chapter 7 bankruptcy. The Chapter 7 trustee determined that no assets existed for the estate to administer.
On August 28, 2003, LaDea Huftless, vice president of consumer loans at Liberty Bank, inspected the Debtors’ vehicle and observed that both the interior and exterior were in good condition. The vehicle’s odometer registered approximately 76,000 miles, and Huftless determined that as of September 1, 2003, its Black Book retail value was $9,200.00, which did not account for $550.00 in added value for the vehicle’s cd player, power moonroof, and power seats. The Debtors’ valued the motor vehicle at $5,300.00 based on the October 2003 N.A.D.A. Official Used Car Guide’s trade-in value with a deduction for high mileage, and additions for value added features. Liberty Bank argues that the proper date for making a value determination should not be any later than when it had inspected the vehicle — September 1, 2003. On the other hand, the Debtors argue that the proper date of valuation is the date of the contested hearing. As of September 24, 2003, the Debtors still owed $11,839.88 on the installment contract.
II. DISCUSSION
Pursuant to 11 U.S.C. § 506(a),1 Liberty Bank only has an allowed secured claim to the extent that the value of its collateral covers the amount of its claim. Because the amount of Liberty Bank’s claim is $11,839.88, and the value of the collateral is not more than $9,200.00, Liberty Bank is undersecured, and because the Debtors’ § 727(b) discharge will terminate any personal liability on the debt, Liberty Bank is forced to take a substantial loss — the extent of which hinges on the valuation of the collateral. In most cases, the extent of the secured creditor’s loss is determined by market conditions — -i.e., the amount for which the vehicle may be resold less the costs of sale. In the context of redemption pursuant to § 722,2 however, the court *52must determine the value of the collateral, and the effective date of valuation.
A. Methods of Valuing Collateral
Upon filing a Chapter 7 bankruptcy, the debtor generally has four choices — three of them statutory — for administering collateral. Pursuant to 11 U.S.C. § 521(2), the debtor must file a statement of intention, if applicable, to either surrender, redeem, or reaffirm the collateral; or, under certain circumstances, a debtor who is current on its payments may retain the collateral and continue to pay the creditor. See, e.g., In re Canady-Houston, 281 B.R. 286, 287-89 (Bankr. W.D.Mo.2002) (holding that the Bankruptcy Code allows a debtor to retain and pay for collateral); contra In re Gerling, 175 B.R. 295, 296-98 (Bankr.W.D.Mo.1994) (holding that the Bankruptcy Code does not allow a debtor to retain and pay for collateral). Of the available alternatives, redemption of the collateral is fairly uncommon because the debtor, whose poor economic circumstances necessitated the filing of bankruptcy, simply lacks the funds to make a lump sum payment to the secured creditor. Home Owners Funding Corp. of America v. Belanger (In re Belanger), 962 F.2d 345, 348 (4th Cir.1992). In this case, however, the Debtors apparently found a lender willing to finance the redemption price of their 2000 Dodge Intrepid, giving rise to the ensuing dispute over valuation.
Generally, the different methods for valuing a motor vehicle are: the retail value; the replacement value; the wholesale, liquidation, or foreclosure value; or some departure from a particular tests to be determined in the court’s equitable discretion. The boundaries between these tests are not always neatly delineated, and despite some underlying differences, courts generally use the terms “wholesale,” “liquidation” and “foreclosure” interchangeably.3 Zell v. Chevy Chase Bank, FSB (In re Zell), 284 B.R. 569, 572 (Bankr.D.Md.2002). Based on the Supreme Court’s holding in Associates Commercial Corp. v. Rash, 520 U.S. 953, 965, 117 S.Ct. 1879, 1886, 138 L.Ed.2d 148 (1997), the Congressional intent in formulating 11 U.S.C. § 722, and jurisprudence from other jurisdictions, this Court finds that the proper measure for valuation when a Chapter 7 debtor elects to redeem collateral is the liquidation method.
First, confronting a similar valuation problem within the context of a “cram down” in a Chapter 13 plan, the Supreme Court in Rash, 520 U.S. at 965, 117 S.Ct. 1879, concluded that “the value of the property retained ... is the cost the debt- or would incur to obtain a like asset for the same proposed use.”4 The Court determined, pursuant to the express language of 11 U.S.C. § 506(a), that a collateral’s value is determined “ ‘in light of the purpose of the valuation and of the proposed disposi*53tion or use of such property.’ ” Id. at 961, 117 S.Ct. 1879. Taking the “proposed disposition or use” of the collateral as the key valuation determination, the Court reiterated that within the context of the debtor’s Chapter 13 plan, the debtor proposed to retain the collateral and use it while paying the creditor over a period of fifty-eight months. Id. at 957, 962, 117 S.Ct. 1879. Thus, the Court reasoned that unlike the foreclosure value standard' — -which the Court implied would be applicable if the debtor had surrendered the collateral to the creditor — the replacement value standard gave meaning to the words “disposition and use” in that it more accurately reflected the loss of value of the collateral from deterioration by extended use (beyond payments for adequate protection), and more accurately gauged the debtor’s proposed use of the property. Id. at 962-63, 117 S.Ct. 1879.5
Unlike the facts confronting the Court in Rash, when a debtor redeems collateral the creditor immediately receives the collateral’s value and is not subject to risks of deterioration from extended use and does not face the danger that it may receive far less in a failed reorganization than if the debtor had immediately surrendered the collateral. Rather, the creditor receives the same amount it would expect had the debtor elected to surrender the collateral without the added burdens of administrative and disposition expenses that are incurred to resell any vehicle.
Second, Congress intended a redemption by the debtor to be the equivalent of “a right of first refusal for the debtor in consumer goods that might otherwise be repossessed.” 11 U.S.C. § 722 House Report (Reform Act of 1978) (citing H.R. Rep. No. 595, 95th Cong., 1st Sess. 380-81 (1977), U.S.Code Cong. & Admin.News 1978, 5787, 5881). The purpose of redemption is to counteract creditor threats of repossession, which often allows the secured creditor to extract more from the debtor than if it had simply repossessed or foreclosed on the property. Id. Thus, through redemption, Congress envisioned that the debtor would be able to retain his necessary property and avoid high replacement costs while still allowing the creditor its expectation value on default under the terms of the contract.6 Id. Furthermore, Congress rejected the Senate version of the current statute, which provided that a benchmark for valuation of collateral was its “fair market value.” Editors’ Comment, Norton Bankruptcy Rules Pamphlet 2002-2003 Edition, p. 813.
Finally, other jurisdictions have established that the proper method for valuating collateral the debtor seeks to redeem is the collateral’s liquidation value. See, e.g., Triad Financial Corp. v. Weathington (In re Weathington), 254 B.R. 895, 899 (6th Cir. BAP 2000) (holding that in Chapter 7 redemption cases the liquidation method is the proper benchmark for assigning a value to collateral); Zell, 284 B.R. at 572-73 (same); In re Ard, 280 B.R. 910, 915 (Bankr.S.D.Ala.2002) (same); In re Ballard, 258 B.R. 707, 709 (Bankr.*54W.D.Tenn.2001) (same); In re Donley, 217 B.R. 1004, 1007 (Bankr.S.D.Ohio 1998) (same).
Accordingly, fully consistent with the Supreme Court’s holding in Rash, Congressional intent, and case law from other jurisdictions, the Court finds that the proper starting point for valuing the Debtors’ 2000 Dodge Intrepid under 11 U.S.C. § 722 is the liquidation method. Adjustments may be necessary, were appropriate, to account for the absence inventory, storage and reconditioning costs. The Debtor asserts that the N.A.D.A. Official Used Car Guide’s trade-in value should be used to determine a vehicle’s auction or wholesale value. The N.A.D.A. Official Used Car Guide, however, specifically states that its projected trade-in value is “not an [ajuction or wholesale value.” Nevertheless, in the absence of any other evidence, the Court will accept a vehicle’s trade-in value as a measure of what that vehicle would receive on liquidation.7
B. Effective Date of Valuation
Having determined that the liquidation method is the appropriate measure for valuing collateral pursuant to 11 U.S.C. § 722, the Court must now determine the effective date of that valuation. For the reasons stated herein, the appropriate date for valuing collateral is the date of the hearing on redemption. Holt v. Commerce Bank of Bolivar (In re Van Holt), 28 B.R. 577, 578 (Bankr.W.D.Mo.1983).
The filing of a case under Chapter 7 of the Bankruptcy Code creates an estate consisting of all the debtor’s property. 11 U.S.C. § 541(a). Pursuant to § 521(2)(A), a debtor has thirty days after the date of filing a petition under Chapter 7 of the Bankruptcy Code to file a statement of intention specifying the property the debt- or intends to redeem. Within forty-five days after filing the notice of intent, the debtor “shall perform his intention with respect to such property,” and the trustee has the obligation to ensure that the debt- or performs the specified intention. §§ 521(2)(B) and 704(3). Thus, the date that the debtor files a petition for relief is the date that the statutory right of redemption accrues, and it is the filing date that initiates the time-lines for the debtor to make an election with regard to the estate’s property. The time limits imposed in § 521, however, are not mandatory, and often a dilatory debtor will fail to file a statement of intention until goaded into action by a creditor seeking to repossess the debtor’s property by filing a motion for relief from the automatic stay. In re Eagle, 51 B.R. 959, 962 (Bankr. N.D.Ohio 1985) (stating that the legislative history “clearly shows that the notice and time limitations of section 521(2) are not intended to abrogate the debtors’ substantive rights under the Code.”).
Although a party’s secured status is determined on the date an order for relief is filed, the actual amount to which the creditor is secured may not determined until foreclosure on the collateral, or at some later date.8 Between the date of filing, and the date that the debtor makes the election to redeem property, the creditor may either receive adequate protection payments pursuant to 11 U.S.C. § 361, or seek relief from the automatic stay pursuant to § 362(d), and foreclose on the property. Although the Bankruptcy Code affords the debtor some breathing space to *55make an election to redeem collateral, the Court notes that a creditor’s repossession and sale of collateral is also attendant with delay in liquidating the property. In re Henderson, 235 B.R. 425, 428 (Bankr.C.D.Ill.1999). Namely, the right of a secured creditor to repossess is “delayed until the automatic stay against such action is lifted by specific order, the discharge is granted or denied, or the case is dismissed or closed.” In re King, 75 B.R. 287, 290 (Bankr.S.D.Ohio 1987). Practically, a secured creditor incurs significant delay before it is able to repossess and liquidate its collateral; thus, setting the value of property as of the date of the order for relief results in a greater advantage to the secured creditor than if the debtor had not elected to redeem the collateral and the secured creditor had to repossess the vehicle after seeking relief from the automatic stay. Accordingly, the Court finds that it is the day that the debtor files a motion to redeem property that is the appropriate date for determining a collateral’s value; and if contested, the date of the hearing is appropriate because that date most closely approximates the time frame during which a secured creditor could repossess and sell the collateral following a debtor’s bankruptcy filing. The Court admonishes, however, that an earlier date might be used if the creditor demonstrates undue delay, gross negligence or other acts of the debtor which had unfairly decrease the value of the collateral.
In this case, the contested hearing on the Debtors’ motion to redeem was held by the Court on November 6, 2003, at which time the Debtors submitted the October 2003 N.A.D.A. trade-in value was $5,300.00.
III. CONCLUSION
For the foregoing reasons, the Court will grant the Debtors’ motion for redemption pursuant to 11 U.S.C. § 722. The Court finds that the proper measure for valuing the Debtors’ 2000 Dodge Intrepid is the liquidation method. The proper date for making that determination is the date of the contested hearing, and the Debtor submitted uncontroverted evidence that the most recent N.A.D.A. guide listed the vehicle’s trade-in value at $5,300.00. In the absence of any other evidence, the Court will accept the trade-in value as a measure of the vehicle’s liquidation value. This opinion constitutes the Court’s findings of fact and conclusions of law pursuant to Fed. R. Bankr.P. 9014(c) and 7052. A separate order shall be entered pursuant to Fed. R. Bankr.P. 9021.
. That section provides:
An allowed claim of a creditor secured by a lien on property in which the estate has an interest ... is a secured claim to the extent of the value of such creditor's interest in the estate’s interest in such property ... and is an unsecured claim to the extent that the value of such creditor’s interest ... 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 properly, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.
11 U.S.C. § 506(a).
. The statute provides:
An individual debtor may, whether or not the debtor has waived the right to redeem under this section, redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is exempted under section 522 of this title [11 USCS § 522] or has been abandoned under section 554 of this title [11 USCS § 554], by paying the holder of such lien the amount of the allowed secured claim of such holder that is secured by such lien.
*5211 U.S.C. § 722.
. The Court in this case will not parse the differences in value, if any, between the wholesale, foreclosure, or liquidation value. For the sake of convenience, the Court will refer to the test as the liquidation method.
. The Court explained that the replacement value was not what it would cost for the debtor to purchase the product brand new, but it was the price a willing buyer in the debtor's trade, business or situation would pay a willing seller to obtain property of like age or condition. Rash, 520 U.S. at 959 n. 2, 117 S.Ct. 1879. The Court further explained that the bankruptcy courts, as the trier of fact, must determine whether the replacement value was the equivalent of retail, wholesale, or some other value based on the type of debtor and the nature of the property. Adjustments are necessary, where appropriate, to account for the absence of warranties, inventory, storage and reconditioning, charges. Id. at 965 n. 6, 117 S.Ct. 1879.
. The bankruptcy courts for the Western District of Missouri, consistent with Rash, have adopted a "starting point” valuation standard in Chapter 13 cases whereby the replacement value of a motor vehicle is set at the Blue Book retail value less five percent. In re Renzelman, Til B.R. 740, 742 (Bankr.W.D.Mo.1998).
. Congress opined that the proper method of valuation may be the fair market value of the collateral if the debtor deliberately allowed the property to depreciate in value. 11 U.S.C. § 722 House Report (Reform Act of 1978) (citing S. Rep. No. 989, 95th Cong., 2nd Sess. 95 (1978), U.S.Code Cong. & Admin.News 1978, 5787, 5881). No such allegations have been asserted in this case.
. This is not to say that the N.A.D.A. Official Used Car Guide is the only source the Court will accept in determining a vehicle's trade-in value.
. In Chapter 13 cases, the value of the collateral is determined on the date of plan confirmation. In re Owens, 120 B.R. 487, 492 (Bankr.E.D.Ark. 1990). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493639/ | PER CURIAM.
Charles J. Dugan (“Dugan”) appeals an order of the United States Bankruptcy Court for the District of Massachusetts, denying without comment, Dugan’s motion to amend an adversary complaint. For the reasons set forth below, we affirm.
I. JURISDICTION AND STANDARD OF REVIEW
The United States Bankruptcy Appellate Panel for the First Circuit (the “Panel”) has jurisdiction over this appeal pursuant to 28 U.S.C. §§ 158(a) and (b). Generally, an order denying a motion to amend a complaint is reviewed for abuse of discretion. Watson v. Deaconess Waltham Hosp., 298 F.3d 102, 109 (1st Cir.2002).
II. BACKGROUND
FlightTime Corporation (“FlightTime”) acquired Wyvern Ltd. (“Wyvern I”) in March of 2000. To complete the acquisition, all of the assets of Wyvern I were purchased by a wholly owned subsidiary of FlightTime, which subsequently became Wyvern Aviation Consulting Ltd. (“Wy-vern II”). Dugan was an employee of Wyvern I and subsequently an employee of Wyvern II until August of 2001.
In April of 2002, Dugan filed a complaint against FlightTime, two employees of FlightTime and Wyvern II in the United States District Court for the District of New Jersey, for failure to contribute to a 401(k) plan, failure to respond to written requests for the Summary Plan Description and for unpaid commissions. Flight-Time filed a voluntary petition under Chapter 7 on June 28, 2002 and the New Jersey District Court administratively terminated the New Jersey litigation as to FlightTime and stayed the proceedings as to the other defendants.
On August 28, 2002, Joseph G. Butler (the “Trustee”), acting for FlightTime, as the sole shareholder of Wyvern II, sold all of the assets of Wyvern II to a newly formed corporation, Wyvern Consulting Ltd. (“Wyvern III”). The Trustee did not *116seek authorization from the bankruptcy court to complete the sale and did not provide notice to FlightTime’s creditors. Walter D. Lamon III (“Lamon”) is the president and sole shareholder of Wyvern III. Lamon had also been the owner of Wyvern I, the president of Wyvern II and a shareholder and vice president of Flight-Time. Wyvern III assumed most of the liabilities of Wyvern II, but disavowed liability for a debt to FlightTime, compensation claims by employees of Wyvern II and any liability arising from Wyvern II employee participation in FlightTime’s profit sharing plan. The disavowed liability included Dugan’s claims.
On October 9, 2002, Dugan filed an adversary complaint against Wyvern II, Wy-vern III, Lamon and the Trustee seeking to avoid the sale of Wyvern II’s assets to Wyvern III as a fraudulent transfer. On November 18, 2002, Wyvern III and La-mon filed a motion to dismiss the complaint for lack of jurisdiction and failure to state a claim. On the same date, the Trustee also filed a motion to dismiss on the same grounds. Dugan filed an opposition on December 4, 2002.
At a hearing held on December 18, 2002, at which Dugan was present, the bankruptcy court concluded that the assets of Wyvern II were not property of Flight-Time. The bankruptcy court concluded that it did not have jurisdiction because Wyvern II, Wyvern III and Lamon were not debtors before the court. The bankruptcy court concluded that because it did not have jurisdiction over any of the counts of the complaint, the motions to dismiss would be granted. On the same date, the bankruptcy court entered a separate order granting the motions to dismiss.
On December 30, 2002, Dugan filed a motion for reconsideration of the order of dismissal. On January 6, 2003, the bankruptcy court denied the motion. The bankruptcy court also gave a separate notice of dismissal of the complaint on January 15, 2003. Dugan did not appeal the dismissal or the denial of the motion for reconsideration. On January 21, 2003, Du-gan filed a motion to amend the complaint to include a claim for avoidance of a post petition transfer of property of the estate pursuant to 11 U.S.C. § 549. The Trustee filed an opposition on January 31, 2003. The bankruptcy court denied the motion to amend on February 12, 2003. On February 20, 2003, Dugan filed a notice of appeal of the denial of the motion to amend the complaint.
On appeal, Dugan claims that the bankruptcy court abused its discretion in denying his motion for leave to amend the complaint without explanation. Dugan also raises numerous issues regarding the bankruptcy court’s findings and conclusions made at the hearing on the motions to dismiss.
III. DISCUSSION
The Federal Rules of Civil Procedure provide that “[a] party may amend the party’s pleading once as a matter of course at any time before a responsive pleading is served.... Otherwise a party may amend the party’s pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.” Fed. R.Civ.P. 15(a), made applicable by Fed. R. Bankr.P. 7015. Notwithstanding this liberal amendment policy, the United States Court of Appeals for the First Circuit (the “First Circuit”) has squarely held that after a complaint is dismissed, it is too late for a plaintiff to amend a complaint as a matter of right. Jackson v. Salon, 614 F.2d 15, 17 (1st Cir.1980). Likewise, the First Circuit has held that a final, appeal-able judgment results whenever a district court dismisses a complaint without ex*117pressly granting the plaintiff leave to amend the complaint. Acevedo-Villalobos v. Hernandez, 22 F.3d 384, 389 (1st Cir.1994), cert. denied, 513 U.S. 1122, 115 S.Ct. 925, 130 L.Ed.2d 804 (1995). “If leave to amend is contemplated, we require an express judicial statement to that effect because doing so ‘avoids confusion over when a plaintiffs right to amend a dismissed complaint terminates, the order becomes final, and the time for appeal begins to run.’ ” Mirpuri v. ACT Mfg., Inc., 212 F.3d 624, 628 (1st Cir.2000) (citing Acevedo-Villalobos, 22 F.3d at 388 (quoting Cuartana v. Utterback, 789 F.2d 1297, 1300 (8th Cir.1986))).
In Acevedo-Villalobos, the defendants sought dismissal of the plaintiffs’ complaint for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). The district court granted the motion to dismiss. The district court entered a judgment on a separate document on the same date. The plaintiffs filed a timely motion for reconsideration and sought to amend the complaint, which was denied. Within ten days of the denial of the first motion for reconsideration, the plaintiffs filed a second motion for reconsideration, which was denied. The plaintiffs then appealed the dismissal, the denial of the motions for reconsideration and the denial of the motion to amend.
The First Circuit concluded that the second motion for reconsideration did not effect the time for appealing the order of dismissal. Acevedo-Villalobos, 22 F.3d at 389. The court concluded that the dismissal order was final. Id. at 388. The court considered that the dismissal order was entered on a separate document, as required by Fed.R.Civ.P. 58. Id. Moreover, the court considered that because the plaintiffs filed a motion for reconsideration of the dismissal under Fed.R.Civ.P. 59(e), they “apparently understood the judgment to be final.” Id. Third, the dismissal fit comfortably within the Supreme Court’s definition of a “final decision” as one that “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Id. (quoting Catlin v. U.S., 324 U.S. 229, 65 S.Ct. 631, 89 L.Ed. 911 (1945)).
Because the plaintiffs did not file a timely appeal of the judgment of dismissal or the denial of the original motion for reconsideration, the First Circuit lacked appellate jurisdiction over an attack on the dismissal of the complaint. Id. at 389. The First Circuit held that the plaintiffs “had both the right to appeal from the judgment dismissing their complaint and the duty to do so in a timely manner.” Id. at 385. The court reiterated its previous holding in Jackson, stating that “... a plaintiffs time to amend his or her complaint as a matter of right within the First Circuit terminates upon a district court’s dismissal of the complaint.” Id. at 388 (citing Jackson, 614 F.2d at 17). In discussing the availability of leave to amend a complaint after dismissal, the court stated:
Where, as here, a complaint is dismissed without leave to amend, the plaintiff can appeal the judgment, or alternatively, seek leave to amend under Rule 15(a) after having the judgment reopened under either Rule 59 or 60. Unless post-judgment relief is granted, the district court lacks power to grant a motion to amend the complaint under Rule 15(a). See Public Citizen v. Liggett Group, Inc., 858 F.2d 775, 781 (1st Cir.1988), cert. denied, 488 U.S. 1030, 109 S.Ct. 838, 102 L.Ed.2d 970 (1989); see also 3 Moore supra ¶ 15.10 at 15-107 (“[A]fter a judgment of dismissal plaintiff must move under Rules 59(e) or 60(b) to reopen the judgment.”); 6 Charles A. Wright & Arthur R. Miller[, & Mary K Kane], Federal Practice and Procedure § 1489 at 692-93 (1990) (“[0]nce judg*118ment is entered the filing of an amendment cannot be allowed until the judgment is set aside or vacated under Rule 59 or Rule 60.”).
Acevedo-Villalobos, 22 F.3d at 389. Accordingly, after a complaint is dismissed, a plaintiff must appeal or obtain relief from the order of dismissal for the trial court to have jurisdiction over a motion to amend the complaint.
In the present case, Dugan filed his complaint against Wyvern II, Wyvern III, Lamon and the Trustee. Wyvern III, Lamon and the Trustee did not file responsive pleadings, but rather filed motions to dismiss for failure to state a claim and for lack of jurisdiction. Dugan was present at the hearing held on the motions on December 18, 2002. At the hearing, the bankruptcy court granted the motions to dismiss after finding that it did not have jurisdiction over any of the defendants, specifically mentioning Wyvern II and Wyvern III, nor did it have jurisdiction over any of the counts of the complaint. Although Wyvern II did not appear in the proceeding, it was clear from the bankruptcy court’s findings and conclusions that the court was dismissing the entire proceeding. The bankruptcy court entered a separate order on the same date granting the motions to dismiss, as is required for final judgments under Fed. R.Civ.P. 58, made applicable by Fed. R. Bankr.P. 9021. The bankruptcy court did not expressly grant Dugan the right to amend his complaint in the order of dismissal. There can be no doubt from the bankruptcy court’s findings and order that the dismissal was a “final decision” which ended the litigation on the merits and left nothing for the court to do but execute the judgment.
Dugan sought timely reconsideration of the dismissal of the complaint under Fed.R.Civ.P. 59(e), made applicable by Fed. R. Bankr.P. 9023, and it was denied by the bankruptcy court on January 6, 2003. In seeking reconsideration of the dismissal, Dugan demonstrated an understanding that the complaint had been dismissed and that it was a final order. Moreover, the bankruptcy court sent a separate notice of dismissal of the complaint. Pursuant to Fed. R. Bankr.P. 8002, Dugan had ten days from January 6, 2003, to appeal the dismissal and the denial of the motion for reconsideration. Dugan failed to appeal and the order of dismissal and the order denying his motion for reconsideration became firm, final and unappealable.1 After the order of dismissal was final, on January 21, 2003, Dugan sought to amend his complaint. The proposed amended complaint again seeks relief against the Trustee, Wyvern III and Lamon, who were clearly dismissed from the proceeding.
Dugan argues that he is not appealing the dismissal of the complaint or the denial of the motion for reconsideration, but only the denial of the motion for leave to amend. This Panel concludes that because the order of dismissal was final when Dugan filed his motion for leave to amend his complaint, there was nothing to amend. Dugan’s right to amend his complaint terminated when the time to appeal the denial of the motion for reconsideration of the dismissal expired. The bankruptcy court did not have jurisdiction over the motion to amend. Likewise, the Panel lacks appellate jurisdiction over an attack *119on the dismissal of the complaint. Thus, postjudgment relief is not available to Du-gan and without it, the bankruptcy court did not have the power to grant Dugan’s motion to amend his complaint.2 See Acevedo-Villalobos, 22 F.3d at 389.
IV. CONCLUSION
The bankruptcy court properly denied Dugan’s motion to amend his adversary complaint. Accordingly, we AFFIRM the bankruptcy court’s order denying the motion to amend.
. Because Dugan did not appeal the dismissal, we do not consider his objections to the bankruptcy court’s finding that the assets of Wyvern II were not property of FlightTime’s bankruptcy estate or the conclusion that the bankruptcy court lacked jurisdiction over all the defendants and all counts of the complaint.
. We note that the result would be the same if under some conceivable interpretation, Du-gan's complaint remained viable as to Wyvern II, after the dismissal as to the other defendants. Prior to the adversary proceeding, all of the assets of Wyvern II were sold. In the original and in the proposed amended complaint, Dugan requested relief against Wyvern III, Lamon and the Trustee, all of whom were no longer parties to the proceeding. Under this scenario, any amendment of the complaint as to Wyvern II would have been futile. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493640/ | *221
DECISION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
This cause comes before the Court after a Trial on the Complaint of the Plaintiff/Creditor, Universal Bank, to determine the dischargeability of a debt. The Plaintiff brings its Complaint pursuant to 11 U.S.C. § 523(a)(2)(A), which generally excludes from the scope of a bankruptcy discharge those debts incurred by fraud. The conduct allegedly giving rise to this statutory exception to discharge involves the Defendant/Debtor’s purported misuse of a credit card issued by the Plaintiff. Also participating as a plaintiff at the Trial was Citibank, who similarly alleged, in a separate complaint, that the Debtor improperly incurred debts on a credit card it had issued. As the issues involved in both these adversary cases concern common questions of fact and law, they will be addressed together in this Decision.
DISCUSSION
The Plaintiffs Complaint to determine dischargeability is brought pursuant to § 523(a)(2)(A) of the Bankruptcy Code which provides:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by— (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition!)]
An action brought under this section is deemed a “core proceedings” over which this Court has the jurisdictional authority to enter final orders. 28 U.S.C. § 157(b)(2)(I).
It is well-settled that a cause of action brought under § 523(a)(2)(A) requires that the movant establish, by at least a preponderance of the evidence, the existence of the following elements which are derived directly from the common law elements for fraud: (1) the debtor made false representations; (2) the debtor knew such representations to be false at the time they were made; (3) the representations were made with the intent to deceive the creditor; (4) the creditor relied on the representations; and (5) the creditor’s loss was the proximate result of the misrepresentation having been made. Coman v. Phillips (In re Phillips), 804 F.2d 930, 932 (6th Cir.1986); Bernard Lumber Co. v. Patrick (In re Patrick), 265 B.R. 913, 916 (Bankr.N.D.Ohio 2001). As it concerns the applicability of these requirements, the Court makes the following findings of fact in accordance with Bankruptcy Rule 7052:
The Debtor was divorced in 1998. One child was born as issue from this marriage. In 1999, the Debtor and her ex-husband fought a custody battle over this child, with the Debtor eventually prevailing.
In December of 1999, the Debtor gave birth to a second child. At approximately this same time, the father of the child, with whom the Debtor was living, stopped contributing to the household income.
In January of 2000, the Debtor’s father passed away.
At the end of March of 2000, the Debtor was laid off her job.
By July of 2000, the Debtor had a driving school in operation. This business eventually failed.
Universal Bank is the creditor of an AT & T card issued to the Debtor within the past few years. Similarly, Citibank is*222sued a card by the same name to the Debtor within the past few years.
During the months of February and March of the year 2000, the Debtor made three significant transactions on her AT & T credit card: (1) $4,251.68 to a Lumber Company on February 2; (2) $159.90 to an Electronics Store on March 14, 2000; and (3) $580.00 to Circuit City on March 25. Before the time these transactions occurred, the Debtor had a zero balance on this account with a credit limit of $5,000.00. After incurring these charges, the Debtor’s available credit had been reduced to only 47 cents. (Plaintiffs Ex.# 1).
During the months of February and March of the year 2000, the Debtor made four significant transactions on her Citibank Credit Card: (1) $1,019.92 to Office Max on February 6; (2) $474.71 to Meijer Inc. on February 6; (3) $955.00 to Circuit City on March 25; and (4) $605.02 to Kohl’s Department Store on March 25. At the time these charges were incurred, the Debtor had a total credit line of $10,500.00 of which $8,915.41 had already been used. After conducting these transactions, the Debt- or, although making two payments totaling $341.00, had exceed her credit limit by over $100.00. (Plaintiffs Ex. #2). The above credit card charges were made to purchase products used in the Debtor’s driving school business. — e.g., computer equipment and an outdoor building. In addition, some of the above charges were incurred to purchase necessities for the Debtor and her children.
In June of 2000, the Debtor first saw an attorney to discuss her financial problems. On July 24, 2000, the Debtor filed a petition in this Court for relief under Chapter 7 of the United States Bankruptcy Code. At the time of filing, the Debtor had approximately $67,000.00 in other credit card debt. In total, the Debtor listed in her petition assets of $86,270.00 and liabilities of $160,403.00. In her petition, the Debtor also disclosed an annual gross income of $22,000.00 for the year 1998, and $12,000.00 for the year 1999. In addition, the Debtor disclosed that at the time of filing she had a monthly income of just over $2,000.00.
Based upon the above facts, and as is typical in many cases brought under § 523(a)(2)(A), the focus in the present case is on whether the Debtor acted with the requisite intent to defraud and whether the Plaintiff was justified in relying on those representations made by the Debtor. For purposes of this Decision, the Court will begin its analysis with whether the Debtor acted with the requisite intent to defraud the Plaintiff.
Central to the concept of fraud under § 523(a)(2)(A) is that the notion that the debtor must have acted with the intent to harm or deceive the injured party. This requirement, however, has created some difficulty in a situation, such as this, where a credit card is utilized. This difficulty arises because, unlike typical credit transactions which involve a direct transaction between two parties, credit card transactions normally involve three parties: (1) the debtor/card holder; (2) the creditor/card issuer; and (3) the merchant who honors the credit card. The existence of this arrangement, thus, makes it difficult for the creditor to establish that the debtor made an intentional misrepresentation as normally the creditor has had no direct contact with the debtor. Citibank (South Dakota), N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1087 (9th Cir.1996).
To overcome this difficulty, courts have applied various legal theories to credit card transactions under § 523(a)(2)(A). Of the legal theories applied to credit card *223transactions, this Court originally adopted the theory known as the “implied representation” test. Mid-American National Bank & Trust Co. v. Higgs (In re Higgs), 39 B.R. 181, 184 (Bankr.N.D.Ohio 1984); First Deposit Nat’l Bank v. Gonzales (In re Gonzales), 213 B.R. 990, 993 (Bankr. N.D.Ohio 1996); Fifth-Third Bank of Northwest Ohio, N.A. v. Spitler (In re Spitler), 229 B.R. 1, 4 (Bankr.N.D.Ohio 1998); Chase Manhattan Bank v. Robinson (In re Robinson), 238 B.R. 681, 685 (Bankr.N.D.Ohio 1999); AT & T Universal Bank v. Pennell (In re Pennell), 238 B.R. 737, 741 (Bankr.N.D.Ohio 1999). This theory, which has been very widely adopted, holds that a credit card holder impliedly represents, upon using a credit card, that he has both the ability and the intention of paying for the goods and/or services that are obtained on credit. Sears Roebuck & Co. v. Faulk (In re Faulk), 69 B.R. 743, 752 (Bankr.N.D.Ind.1986); Maas Bros., Inc. v. Ratajczak, 5 B.R. 583, 586 (Bankr.M.D.Fla.1980).
As might be expect, a very important, and sometimes determinative consideration under the “implied representation” test, concerns the extent of the debtor’s solvency at the time of the alleged fraudulent transaction. ITT Fin. Serv. v. Hulbert (In re Hulbert), 150 B.R. 169, 173 (Bankr.S.D.Tex.1993). Thus, if this Court were to apply this Test to the facts of this case, the Debtor’s substantial insolvency at the time of the credit card transactions would become a primary focus of this Court’s analysis. Specifically, a serious question would arise given that at the time she was incurring well over Eight Thousand dollars ($8,000.00) in debt on her AT & T and Citibank credit cards, the Debtor, despite having an annual income of only Twenty Thousand dollars ($20,000.00), had approximately Sixty-seven Thousand dollars ($67,000.00) in other unsecured consumer debt. As a result, it seems unlikely that there was any realistic possibility that the Debtor would have been able to service her loan obligations on her AT & T and Citibank credit cards.
The application of the “implied representation” theory, however, was later overruled by the Sixth Circuit Court of Appeals in Rembert v. AT & T Universal Card Servs., Inc. (In re Rembert), wherein it was stated:
We believe that the representation made by the cardholder in a credit card transaction is not that he has an ability to repay the debt; it is that he has an intention to repay. To measure a debt- or’s intention to repay by her ability to do so, without more, would be contrary to one of the main reasons consumers use credit cards: because they often lack the ability to pay in full at the time they desire credit. Further, the language of 523(a)(2)(A) expressly prohibits using a statement respecting the debt- or’s or an insider’s financial condition as a basis for fraud.
# j}:
Thus, we hold that the proper inquiry to determine a debtor’s fraudulent intent is whether the debtor subjectively intended to repay the debt.
141 F.3d 277, 281 (6th Cir.1998). (internal quotations and citations omitted). Thus, as this language clearly shows, the Sixth Circuit’s application of § 523(a)(2)(A) to credit card debts completely discounts — in contravention to the “implied representation” theory — the debtor’s present ability to pay the debt, and instead focuses solely on the debtor’s subjective state of mind at the time of the alleged fraud.1
*224Nevertheless, a debtor will rarely, if ever, admit to acting with the requisite intent to defraud; thus, it is still necessary for a court to look to circumstantial evidence involving the traditional indicia of fraud — e.g., the suspicious timing of events. Binger v. Bloomfield (In re Bloomfield), 293 B.R. 148, 154 (Bankr. N.D.Ohio 2003). For example, and although not dispositive, substantial insolvency at the time of the alleged fraudulent transaction is still strong circumstantial evidence as to the debtor’s state of mind. In evaluating the circumstantial evidence presented in a case, the Sixth Circuit, however, cautioned against “factor-counting,” instead holding, “[w]hat courts need to do is determine whether all the evidence leads to the conclusion that it is more probable than not that the debtor had the requisite fraudulent intent.” Id. at 282 citing Chase Manhattan Bank v. Murphy (In re Murphy), 190 B.R. 327, 332 (Bankr.N.D.111.1995). As a result, in cases such as this where a debtor is substantially insolvent at the time of the alleged fraudulent transaction, fraudulent intent is not to be presumed, but instead, a court must still look to whether additional circumstances exist concerning whether the debtor, at the time the obligation was incurred, intended to pay the debt. Chase Manhattan Bank v. Alnajjar (In re Alnajjar), 276 B.R. 844 (Bankr.ND.Ohio 2002).
All the same, even in going beyond the Debtor’s substantial insolvency many attendant circumstances still cause this Court to question the Debtor’s supposed benign motives in incurring the credit card debts at issue. To begin with, in a relatively short period of time, the Debtor charged rather large amounts on her credit cards; specifically, a total of Eight Thousand Forty-Six and 23/100 dollars ($8,046.23). In doing so, the Debtor on her AT & T card reached her credit limit and on the CitiBank card the Debtor exceeded her credit limit. Standing alone such conduct is, to say the least, highly irregular, especially given the Debtor’s rather modest means.
In addition, and even more troubling from the Court’s perspective, is the Debtor seeing an attorney regarding her insolvency just three months after incurring her significant credit card charges. Thus, in the absence of a significant intervening event, the Debtor had to be aware that at the time the transactions at issue occurred in this case, her financial situation was precarious at best. In this regard, the Debtor, to help explain her conduct, brought to the Court’s attention certain difficulties that had occurred in her life which, according to her, had strained her both emotionally and financially — e.g., a custody battle with her ex-husband, the death of her father with whom she was close, and the temporary loss of her job. The weakness with this argument, however, is that such events either occurred before or during the time the charges were *225being made, and thus they do not fully account for the Debtor’s almost complete failure to make any remuneration on these debts.
In addition to the above justifications, the Debtor, to refute any inference of fraudulent intent, raised two overall points. First, the Debtor called to the Court’s attention the fact that some of her credit card charges were used to buy necessities for herself and her children. Second, the Debtor maintains that many of the debts at issue in this case were incurred to start her business- — -i.e., the driving school— which, if it had been successful, would have enabled her to pay back her debts.
With respect to the Debtor’s first argument, the Court must reject it outright. This is because the manner in which funds are spent does not, on that basis alone, pertain to the issue of fraudulent intent. In specific terms, while it may not seem as culpable, a debtor who, with no intent of repaying the debt, purchases necessities such as food is no less liable for fraudulent intent than a debtor who purchases luxury items.
As it concerns the Debtor’s second argument, the Court certainly agrees that many debts are incurred in the hope that the proceeds obtained therefrom can be utilized to generate a future stream of income to pay the debt; this is, after all, the basis of business. However, the key here is not that a debtor desires a future stream of income, but rather that circumstances show that the debtor intended to pay the debt from the future stream of income. In this regard, the Court has certain difficulties with the Debtor’s position.
First, the veracity of the Debtor’s position is weakened by the fact that no plan or similar type of corroborating evidence was presented to the Court to demonstrate how the driving school was going to enable her to service her debt obligations to AT & T and Citibank. In particular, the Court was not presented with any evidence concerning anticipated earnings of the business. Second, the operation of the Debt- or’s driving school business in no way seems appreciably intertwined with the payment of her credit card debts. Most noticeably, the Debtor continued to operate her driving school business even after she filed for bankruptcy. Similarly, in the short time between incurring her credit card obligations and then filing for bankruptcy, the Debtor did not make any payments on her AT & T card and only made a couple of minimal payments on her Citibank card.
Accordingly, for all the reasons stated above, the Court finds that when looking at the evidence presented in this case as a whole, it is more probable than not that at the time the credit card obligations at issue were incurred, the Debtor had no real intention of repaying such obligations. As a result, the Plaintiff has sustained its burden of showing that the Debtor made false representations with the intent to deceive. The Court will thus now turn to the next issue concerning whether the Plaintiff relied on the Debtor’s representations.
Any analysis of reliance must necessarily begin with the Supreme Court’s decision in Field v. Mans, where it was held that a creditor’s reliance under § 528(a)(2)(A) must be “justifiable” as opposed to the higher standard of “reasonable.” 516 U.S. 59, 116 S.Ct. 437, 138 L.Ed.2d 351 (1995). A key attribute to this standard is that it is subjective, and thus looks solely to the individual characteristics of the creditor. Although relatively straightforward in most situations, the application of this Test has, like with the issue of intent, created difficulties in *226the context of credit card transactions. On the one side are those cases which hold that, in the absence of any “red flags,” a simple cursory investigation such as a credit check is sufficient to satisfy justifiable reliance standard of § 523(a)(2)(A). AT & T Universal Card Services Corp. v. Feld (In re Feld), 203 B.R. 360 at 370 (Bankr.E.D.Pa.1996); F.C.C. National Bank v. Cacciatore (In re Cacciatore), 209 B.R. 609, 616 (Bankr.E.D.N.Y.1997). On the other end are those cases which hold reliance is only justifiable if the credit card company conducted a very thorough and complete investigation of the debtor. Providian Bancorp, v. Stockard (In re Stockard), 216 B.R. 237, 243 (Bankr.M.D.Tenn.1997); Star Bank, N.A. v. Stearns (In re Steams), 241 B.R. 611, 628 (Bankr. D.Minn.1999). In addition, some courts have sought to shape a rule to reflect the unique circumstances of the situation. For example, in AT & T Universal Card Services v. Ellingsworth (In re Ellingsworth), it was held that, as a matter of law, a credit card company cannot justifiably rely on an unsolicited preapproved credit card application. 212 B.R. 326 at 338-339 (Bankr. W.D.Mo.1997); see also Chevy Chase Bank, FSB v. Briese (In re Briese), 196 B.R. 440 at 453-454 (Bankr.W.D.Wis.1996).
While each of these approaches has merit, the Supreme Court’s decision in Field seems to envision a more fact intensive approach that takes into consideration the unique circumstances of each case. Of particular noteworthiness, the Supreme Court explained that justifiable reliance for purposes of § 523(a)(2)(A) “is a matter of the qualities and characteristics of the particular plaintiff, and the circumstances of the particular case, rather than the application of a community standard of conduct to all cases.” Id. at 70-71, 116 S.Ct. at 444 (internal quotations and citation omitted). Thus, while a simple credit check may suffice in large number of circumstances, more may be required in the case of someone, such as a student, who has essentially no credit history. Similarly, a higher degree of investigation may be required when a creditor raises the credit limit on a card that already carries with it a significant amount of debt; or, as appears to be the situation here, when a debtor who already has a significant degree of debt is offered an additional credit card. On the other hand, a cursory credit check, or possibly no check at all would most likely be sufficient in the situation where there is already an established relationship between the Parties.
Nevertheless, the Field decision does make one thing clear: the reliance requirement of § 523(a)(2)(A) is not to be ignored. See also Manufacturer’s Hanover Trust Co. v. Ward (In re Ward), 857 F.2d 1082, 1084 (6th Cir.1988) (although applying a reasonable standard to § 523(a)(2)(A), this decision makes it clear that reliance cannot be simply ignored). In particular, the Supreme Court was careful to point out that justifiable reliance is a higher standard than just actual reliance. In particular, it was stated that “a person is required to use his senses, and cannot recover if he blindly relies upon a misrepresentation the falsity of which would be patent to him if he had utilized his opportunity to make a cursory examination or investigation.” Id. (internal quotation and citation omitted). In addition, the Supreme Court also made it clear that the reasonableness of the reliance should not be completely discounted:
As for the reasonableness of reliance, our reading of the Act does not leave reasonableness irrelevant, for the greater the distance between the rebanee claimed and the limits of the reasonable, the greater the doubt about reliance in *227fact. Naifs may recover, at common law and in bankruptcy, but lots of creditors are not at all naive. The subjectiveness of justifiability cuts both ways, and reasonableness goes to the probability of actual rebanee.
Id. at 76,116 S.Ct. at 446.
The record in this case, however, is completely devoid of any possible inference of rebanee. For example, there was simply no evidence that the Plaintiff, despite her large amount of unsecured debt, even conducted a credit check of the Debt- or. Also, no evidence of the Debtor’s payment history was introduced. In fact, the only evidence put forth concerning reliance was testimony to the effect that it is the Plaintiffs view that the foundation of having a credit card is that its member will repay the debt. However, as this is the basis of ab commercial transactions, such a statement is insufficient to create a finding of justifiable rebanee.
Accordingly, as the creditor bears the burden of estabbshing justifiable reliance, the Court is constrained to find that the Plaintiff has not satisfied its burden under § 523(a)(2)(A). Accordingly, despite the fact that the obbgations set forth herein were fraudulently incurred, the Defendant is still entitled to receive a discharge of these obbgations. In reaching this Decision, the Court has considered all of the evidence, exhibits and arguments of counsel, regardless of whether or not they are specifieahy referred to in this Decision.
Accordingly, it is
ORDERED that the credit card obligation of the Defendant, Penny Stephens, to the Plaintiff, Universal Bank, be, and is hereby, determined to be a DISCHARGE-ABLE DEBT.
. In doing so, the Sixth Circuit has ostensibly adopted what has become to be known as the *224"common law” test. The other tests applied to credit card debts under 523(a)(2)(A) are the "assumption of the risk” theory and the "totality of the circumstances” theory. Under the "assumption of the risk” theory, a credit card user will only be found to have intentionally made a false representation when three conditions are met: (1) the credit card has been revoked; (2) revocation of the card has been communicated to the card holder; and (3) the card holder continues to use the card. First Nat’l Bank v. Roddenberry, 701 F.2d 927, 932-33 (11th Cir.1983). This approach, which very often results in the dischargeability of credit card debts, has not been widely adopted. The "totality of the circumstances” theory holds that a debtor's intent to repay a debt must be inferred from the totality of the circumstances. Under this test, courts use a list of objective factors (i.e., badges of fraud) to determine if a debtor acted in a fraudulent manner. Chevy Chase Bank FSB v. Kukulc (In re Kukuk), 225 B.R. 778, 786 (10th Cir. BAP 1998). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493641/ | DECISION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
This cause comes before the Court upon the Plaintiffs Motion for Summary Judgment and Memorandum in Support. In its Motion, the Plaintiff raised one issue for resolution: whether a finding of nondis-chargeability entered through a consent judgment in a prior bankruptcy case implicates the doctrine of res judicata so as to exclude that same debt from discharge in a subsequent bankruptcy case? On this issue, the Defendants/Debtors did not, within the time frame set forth by Local Bankruptcy Rule 9013 — 1(b), file a response to the Plaintiffs Motion for Summary Judgment.
On the issue raised by the Plaintiff, judicial notice may be taken of these facts: (1) in a previous bankruptcy case, the Honorable Walter J. Krasniewski signed a consent judgment entry wherein the Debtors agreed to the nondischargeability of a debt owed to the Plaintiff; and (2) the instant adversary complaint stems from a Chapter 7 petition filed by the Debtors on December 4, 2002. In addition, as it regards these facts, it is not disputed that at the time they filed their instant bankruptcy case, the Debtors had failed to satisfy their *266obligation as set forth in the consent judgment.
A consent judgment is defined as a “judgment, the provisions and terms of which are settled and agreed to by the parties to the action.” Kearns v. Chrysler Corp., 32 F.3d 1541 (Fed.Cir.1994). Given the consensual nature of such judgments, it is the general rule that, in the absence of fraud, consent judgments are, as between the parties, to be given preclusive effect with respect to the underlying cause of action. Amalgamated Sugar v. NL Industries, 825 F.2d 634, 640 (2nd Cir.1987), cert. denied, 484 U.S. 992, 108 S.Ct. 511, 98 L.Ed.2d 511 (1987). This rule has been applied by the Sixth Circuit Court of Appeals. For example, in Schlegel Manufacturing Co. v. USM Corp., it was held that even though the degree of judicial involvement is different between a consent decree and a litigated result, the difference is not so consequential so as to justify different res judicata treatment. 525 F.2d 775, 780 (6th Cir.1975), cert. denied, 425 U.S. 912, 96 S.Ct. 1509, 47 L.Ed.2d 763 (1976). Similarly, in Vulcan, Inc. v. Fordees Corp., the Sixth Circuit found that the important public interest of achieving finality in litigation was advanced by giving res judicata effect to consent decrees. 658 F.2d 1106, 1111 (6th Cir.1981), cert. denied, 456 U.S. 906, 102 S.Ct. 1752, 72 L.Ed.2d 162 (1982). The Supreme Court of Ohio has also given preclusive effect to consent judgments. Horne v. Woolever, 170 Ohio St. 178, 10 O.O.2d 114, 163 N.E.2d 378 (1959); Sponseller v. Sponseller, 110 Ohio St. 395, 144 N.E. 48 (1924).
As it pertains to the above, this Court, after reviewing the consent judgment entered by Judge Krasniewski, as well as the record of the Debtors’ prior bankruptcy case, could not discern any irregularities, and none has been called to this Court’s attention, which would suggest that any fraud was involved in the procurement of this judgment. Accordingly, based upon the standard set forth in Bankruptcy Rule 7056, judgment will be granted in the Plaintiffs favor. In reaching this conclusion, 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 Decision.
Accordingly, it is
ORDERED that the Motion for Summary Judgment of the Plaintiff, Farmers & Merchants State Bank, be, and is hereby, GRANTED.
It is FURTHER ORDERED that the obligation set forth in the consent judgment entered by the Honorable Walter J. Krasniewski, in the Case of Farmers & Merchants State Bank v. Jeffrey and Diane Siebert (Case No. 96-3103), be, and is hereby, determined to be a NONDIS-CHARGEABLE DEBT on the same terms and conditions as set forth therein. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493642/ | OPINION
LARRY L. LESSEN, Bankruptcy Judge.
This matter came before the Court for trial on October 3, 2003, on Plaintiffs *273Complaint to Determine Dischargeability of Debt. At issue is whether a judgment arising out of marital dissolution proceedings ordering Defendant to pay a joint debt of the parties and his obligation to indemnify Plaintiff and hold her harmless from said debt is subject to discharge under 11 U.S.C. § 523(a)(15).
Plaintiff and Defendant were formerly wife and husband, respectively. A Judgment of Dissolution of Marriage was entered by the Circuit Court of Sangamon County, Illinois, on November 28, 1998. The Judgment incorporated a Marital Settlement Agreement entered into by the parties. Section III, Paragraph 1 of the Marital Settlement Agreement states that “Husband shall pay the following debts and will not at any time hold Wife responsible for them, and shall indemnify Wife from liability on same: Mastercard' — Acet. 5411 1790 0128 7139....” Defendant made payments on the Mastercard debt for several years. Defendant filed his voluntary petition in bankruptcy pursuant to Chapter 7 of the Bankruptcy Code on April 23, 2003. Plaintiff filed her Complaint to Determine Dischargeability of Debt on June 5, 2003. At the time of trial on October 3, 2003, approximately $9,000 remained due and owing on the Mastercard debt.
11 U.S.C. § 523(a)(15) provides in pertinent part as follows:
(a) A discharge under section 727... of this title does not discharge an individual debtor from any debt—
(15) not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record... unless—
(A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor...; or
(B) discharging the debt would result in a benefit to the debtor that outweighs the detrimental consequences to the spouse, former spouse, or child of the debtor(.)
To prevail under § 523(a)(15), the debt in question must be other than the type set forth in § 523(a)(5), that was awarded by a court in the course of a divorce proceeding or separation. In re Paneras, 195 B.R. 395, 403 (Bankr.N.D.Ill.1996) citing In re Silvers, 187 B.R. 648, 649 (Bankr.W.D.Mo.1995). Once this is established (and it is not disputed in ornease), the burden of proving that the debt falls within either of the two exceptions to nondischargeability rests with the debtor. In re Crosswhite, 148 F.3d 879, 884-85 (7th Cir.1998). Hence, once the creditor’s initial proof that the claim falls under § 523(a)(15) of the Bankruptcy Code is made, the debt is excepted from discharge and the debtor is responsible for the debt unless the debtor can prove either of the two exceptions, subpart (A), the “ability to pay” test, or (B), the “detriment” test. Id., 148 F.3d at 885.
If the debtor can show the inability to pay the debt, the examination stops and the debtor prevails. The debt will remain dischargeable if paying the debt would reduce the debtor’s income below that necessary for the support of the debtor and the debtor’s dependents. In re Hill, 184 B.R. 750, 754 (Bankr.N.D.Ill.1995). However, if the debtor can afford to make the payment, either in a lump sum or in installments over time, then the inquiry proceeds to § 523(a)(15)(B) where the debtor has the burden to show that the benefit to the debtor from not having to pay the debt at issue is greater than the detrimental ef*274fects on the creditor' — his spouse, former spouse, or child — who then must pay the debt. In re Crosswhite, supra, 148 F.3d at 885.
In this case, Defendant and his current spouse bring home approximately $2,967 per month. According to Defendant’s Affidavit of Income and Expenses, his monthly household expenses total $2,666. Accordingly, by Defendant’s own calculation, he has the ability to pay $300 per month toward the subject indebtedness, which is a surplus substantial enough that the debt could be repaid in full over the course of several years. Thus, the Defendant, having the ability to pay the indebtedness in installments, has failed to establish a nondischargeability exception under § 523(a)(15)(A), and the inquiry proceeds to the “detriment” test of § 523(a)(15)(B).
Through the alternate provision of § 523(a)(15)(B), debtors who fail to prove a nondischargeability exception under § 523(a)(15)(A) may still have such debts deemed dischargeable if doing so “would result in a benefit to the debtor that outweighs the detrimental consequences to the spouse, former spouse, or child of the debtor.” 11 U.S.C. § 523(a)(15)(B). Given the nature of its inquiry, courts evaluate a number of factors in making an evaluation under § 523(a)(15)(B). Primarily, the income and expenses of each party, the nature of the debt in question, and the former spouse’s ability to pay are among the relevant factors for examination. In re Hill, supra, 184 B.R. at 755; see also In re Smither, 194 B.R. 102, 111 (Bankr.W.D.Ky.1996) (where the court offered a non-exclusive list of eleven factors to consider).
In this case, Plaintiff and her current spouse bring home approximately $4,004 per month. The household income is also augmented by the receipt of $500 per month child support. The 2002 federal income tax return also suggests that Plaintiff and her spouse are substantially over-withholding federal income taxes inasmuch as their 2002 federal income tax refund was slightly over $3,000. However, Plaintiffs monthly household expenses total approximately $4,210, and monthly payments on outstanding indebtedness (excluding items included in monthly household expenses) total approximately $1,258. Accordingly, Plaintiff and her husband are running a deficit each month.
This is a close case. Defendant has the ability to repay the indebtedness over time, but his family earns less and lives more frugally that Plaintiff and her family. Plaintiffs household budget runs a deficit each month, but there is certainly more money coming in to support a household of similar size and composition. On balance, though, the Court finds that the equities favor the Plaintiff. This is not one of those eases where the Plaintiff would suffer little or no detriment from the Defendant’s nonpayment of an obligation because of her excess income. Cf. Taylor v. Taylor, 199 B.R. 37, 42 (N.D.Ill.1996) (debt of $60,000 deemed dischargeable under § 523(a)(15)(B) where non-debtor spouse’s net disposable income was expected to be in excess of $750,000). This is also not one of those cases where the Plaintiff would suffer little or no detriment from the Defendant’s nonpayment because, for whatever reason, the debt could not ultimately be collected from her. See H.Rep. No. 103-835, 103rd Cong., 2nd Sess. 54, reprinted in 1994 U.S.Code Cong. & Admin. News 3363. The subject debt is a joint marital debt, and the creditor can pursue Plaintiff for collection of the debt. Finally, the Defendant has had the benefit of a discharge in bankruptcy, which has allowed him to discharge over $16,000 in unsecured *275debt. In contrast, Plaintiffs household has approximately $150,000 in secured and unsecured household debt to service. Under these circumstances, the equities favor requiring Defendant to repay a marital debt which he promised to pay and which he has the ability to repay.
Inasmuch as the burden of proof is upon Defendant to show that the benefits to him of discharging the subject debt outweigh the detriments to Plaintiff of having the debt deemed nondischargeable, the Court finds that the Defendant has failed to meet his burden. Accordingly, the Court finds the subject debt nondischargeable under 11 U.S.C. § 523(a)(15).
This Opinion is to serve as Findings of Fact and Conclusions of Law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493643/ | ORDER
JOYCE BIHARY, Bankruptcy Judge.
This adversary proceeding is before the Court on cross-motions for summary judgment. Plaintiff Morton P. Levine in his capacity as the Chapter 11 Trustee seeks to recover $100,000.00 plus interest and attorney’s fees from defendant David E. Cicchinelli (“Cicchinelli”) on a demand note dated September 1, 1998. Defendant argues that there was no consideration for the note and that the $100,000.00 he received from the debtor was a bonus, not a loan. Defendant filed a counterclaim for unpaid bonuses and the value of some stock in the debtor which defendant alleges is owed pursuant to an alleged employment agreement between the debtor and defendant. The parties agree that this is a core proceeding as defined by 28 U.S.C. § 157.1 The parties each request a summary judgnent on the note claim, and plaintiff seeks a summary judgment in his favor on defendant’s counterclaim. After carefully considering the parties’ motions, briefs and the supporting material submitted, the Court concludes that plaintiffs summary judgment motion should be granted and defendant’s motion for summary judgnent should be denied.
A court will enter summary judgment only upon a showing that there is no genuine issue as to any material fact and that the moving party is entitled to judgnent as a matter of law. Fed.R.Civ.P. 56(c). Courts must review all evidence in the light most favorable to the non-moving party. Samples on Behalf of Samples v. City of Atlanta, 846 F.2d 1328, 1330 (11th Cir.1988). “Genuine disputes are those by which the evidence is such that a reasonable jury could return a verdict for the non-movant, [and][i]n order for factual issues to be ‘genuine’ they must have a real basis in the record.” Szomjassy v. OHM Corp., 132 F.Supp.2d 1041, 1046 (N.D.Ga.2001). If the nonmoving party’s evidence is merely colorable or is not significantly probative summary judgment may be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The nonmoving party “must do more than show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indust. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Rather, the non-movant must present specific, significant, probative evidence supporting its case sufficient to require the trier of fact to resolve the different versions of the truth at trial. Ellenberg v. Bouldin (In re Bouldin), 196 B.R. 202, 207 (Bankr.N.D.Ga.1996). Summary judgment is proper “if the party opposing summary judgment fails to indicate that he can produce the requisite quantum of evidence to enable him to reach the jury with his claim.” Williams v. Obstfeld, 314 F.3d 1270, 1277 (11th Cir.2002) (quoting Smith v. First Nat’l Bank of Atlanta, 837 F.2d 1575, 1580 (11th Cir.1988)). “Where the judge is also the ultimate trier of fact, and where a trial would not enhance the court’s *391ability to draw inferences and conclusions from the undisputed facts, then the court is free to draw such inferences and conclusions within the context of a motion for summary judgment.” Lanting v. Lanting (In re Lanting), 198 B.R. 817, 821 (Bankr.N.D.Ala.1996) (quoting In re Communications Management & Info. Inc., 172 B.R. 136, 141 (Bankr.N.D.Ga.1994)).
The material facts are undisputed. Debtor Flooring America, Inc. was formerly known as The Maxim Group, Inc. The Maxim Group, Inc. operated one of the largest networks of specialty floor covering stores in North America. Debtor filed for relief under Chapter 11 of the Bankruptcy Code on June 15, 2000, and plaintiff Morton P. Levine was appointed as a Chapter 11 Trustee in the case on February 25, 2001.
Defendant Cicchinelli was employed by the debtor from May of 1998 until April of 1999. On or about August 24, 1998, debtor issued two checks to Mr. Cicchinelli totaling $250,000.00. One check was check number 026489 in the amount of $100,000.00 payable to defendant David Cicchinelli; check 024689 was not accompanied by a check request form indicating the check’s purpose. The second check, check number 026490, was in the amount of $150,000.00, but this check was accompanied by a check request form indicating that the reason for the check was for a bonus payment. (Dep. of David Cicchinelli, Exhibits 7,11 and 12).
It is undisputed that Mr. Cicchinelli signed a demand note (“the Note”) for $100,000.00. The Note was dated September 1,1998, one week after he received the check for $100,000.00. The Note provided for interest at eight and one-half percent (8.5%) per annum and included a provision increasing the interest rate upon Mr. Cic-chinelli’s default. The Note also contained a standard provision for attorney’s fees.
The Note’s language begins with the phrase “[flor value received, the undersigned, DAVID E. CICCHINELLI, ... promises to pay to the order of THE MAXIM GROUP, INC., ... the principal sum of ONE HUNDRED THOUSAND AND NO/100TH DOLLARS ($100,000.00) ....” The Note also contains the following language: “This Note is to evidence loans now being made by Payee to Maker and/or additional loans to Maker which may be made from time to time by Payee in the future. All such loans shall be evidenced by this Note and shall be subject to its terms.” Plaintiff made a proper demand for payment of principal and interest and informed defendant of his intent to seek attorney’s fees under the Note’s terms. The Note remains unpaid to this date.
In Mr. Cicchinelli’s affidavit, he admits receiving the $100,000.00, he admits signing the Note one week later, and he admits that he has made no payments under the Note. Nonetheless, he argues that he cannot be hable under the Note, because he contends that the $100,000.00 given to him was not intended as a loan, but was intended as a bonus. This argument is not supported by the evidence in the record.
In support of his motion for summary judgment, plaintiff presents evidence of several instances where debtor memorialized having made a $100,000.00 loan to Mr. Cicchinelli in September of 1998. On page 9 of its Proxy Statement dated November 18,1998, debtor states that:
In September 1998, the [debtor] loaned $100,000.00 to David E. Cicchinelli, the [debtor’s Chief Operating Officer and a director. This loan bears interest at an annual rate of 8.5%, payable monthly, with principal due on demand. The loan was made to Mr. Cicchinelli to fund certain of his personal expenses.
*392Again, on page 9 of its Proxy Statement dated November 12, 1999, debtor states that:
In September 1998, the [debtor] loaned $100,000 to David E. Ciechinelli, who at the time was serving as the [debtor’s Chief Operating Officer and a director. This loan bears interest at an annual rate of 8.5%, payable monthly, with principal due on demand. The loan was made to Mr. Ciechinelli to fund certain of his personal expenses. As of October 1, 1999, $109,000, including accrued interest, remained outstanding on this loan.
In its Annual Report for the fiscal year ending February 5, 2000, debtor reaffirms that it had loaned $100,000.00 to Mr. Cic-chinelli, stating that:
In September 1998, we loaned $100,000 to David E. Ciechinelli, who at the time was serving as our Chief Operating Officer and a director. This loan bears interest at an annual rate of 8.5%, payable monthly, with principal due on demand. The loan was made to Mr. Cic-chinelli to fund certain of his personal expenses. The highest amount owed to us by Mr. Ciechinelli during fiscal 2000 was $112,000. As of February 5, 2000, $112,000, including accrued interest, remained outstanding on this loan.
There are two additional documents which Mr. Ciechinelli signed in which he confirms the loan of $100,000.00. At the time he signed the Note, he also signed an amendment to certain stock option agreements in which he admitted signing the Note for $100,000.00. In this document, he agreed that the stock option would terminate upon any default under the Note and that furthermore, he could not exercise any option as long as any amounts remained outstanding under the Note. Significantly, on March 20, 1999, Mr. Cicchi-nelli signed a confirmation as part of an audit performed by Arthur Andersen, agreeing that the debtor held a demand note from Mr. Ciechinelli dated September 1, 1998, that the unpaid principal on the Note was $100,000.00, that the interest rate on the Note was 8.5%, and that no interest had been paid to date. In regard to this confirmation letter to the auditors, defendant argues, somewhat remarkably, that this letter does not indicate any money is owed. To the contrary, the letter is captioned “Note Receivable — $100,000” and it clearly shows that defendant confirmed a demand note with unpaid, principal of $100,000.00 and no interest paid to date.
Mr. Ciechinelli points to nothing in the record to support his argument that the $100,000.00 check in August of 1998 was intended as a bonus. As previously discussed, the debtor had issued two checks to Mr. Ciechinelli in August of 1998, one for $100,000.00 and the other for $150,000.00. Only the $150,000.00 check was accompanied by a request form indicating that the reason for the check was a bonus. None of the debtor’s records support defendant’s claim that this $100,000.00 check was issued as a bonus. Furthermore, defendant has failed to offer any evidence that he paid income taxes on the $100,000.00 alleged bonus.
Defendant’s other grounds for opposing plaintiffs summary judgment motion also find no support in the record. Defendant argues that the language in the Note meant that the $100,000.00 had to be advanced after September 1, 1998. This is contradicted by the language in the Note as it begins with the words “For value received.” Both the terms of the Note along with debtor’s records, the public statements issued by the debtor to the Securities & Exchange Commission (“SEC”), and Mr. Cicchinelli’s signed confirmation to the auditors all indicate clear*393ly that the Note was in fact funded by the $100,000.00 check issued just days before the date on the Note.
Finally, Mr. Cicchinelli argues that he really only signed the Note “for the auditors,” and that Mr. A.J. Nassar, the CEO of the debtor, told him sometime in late 1999 that he would not have to repay the $100,000.00 referenced in the Note. While these arguments may have significance in other proceedings pending against this defendant and others, these arguments do not provide Mr. Cicchinelli with any defense in this action brought by the Chapter 11 Trustee.
In summary, a reasonable fact finder evaluating this evidence could not draw more than one inference from these facts. The only inference to be drawn is that the debtor loaned Mr. Cicchinelli $100,000.00 for personal expenses, that Mr. Cicchinelli signed a Note, that the debtor reflected this Note in its proxy statements and annual reports, that Mr. Cicchinelli confirmed this obligation to the debtor’s auditors, and that Mr. Cicchinelli owes the debtor principal, interest and attorney’s fees under this Note.
There is also no genuine dispute of fact pertaining to defendant’s counterclaim. Defendant alleges that in January of 1998, A.J. Nassar, as president and CEO of the debtor, offered employment to the defendant as president of the debtor and that the offer included the issuance to Mr. Cicchinelli of 250,000 shares of the company’s stock. Defendant alleges that he accepted the offer, assumed the position of president in May of 1998, and resigned in May of 1999. He prays for a judgment equal to the bonuses and stock he alleges he should have received. The Trustee seeks a summary judgment on this counterclaim, arguing that it is undisputed that Mr. Cicchinelli never attained the position of president of The Maxim Group, Inc., that the Board of Directors never elected Mr. Cicchinelli as president, and that the Board never authorized the issuance of 250,000 shares of stock to the defendant.
The only evidence offered by the defendant in support of his counterclaim is a letter dated January 30, 1998, from Mr. Nassar to Mr. Cicchinelli. The letter provides as follows:
Dear Dave:
This letter will serve as an understanding of the proposed agreement between The Maxim Group, Inc. and you. Your title will be President of The Maxim Group, Inc. and your compensation will be as follows: $250,000.00 per year, base pay and a bonus of 100% for reaching corporate budget, determined by the executive committee. In addition, 250,000 shares of stock will be issued. And on a per quarter basis for achieving quarterly budget numbers an additional 50,000 shares of stock will be issued (per quarter) for the first two years. In addition to your base pay, the company will furnish you with an apartment and a car for one year, while you are employed by the company and full hospitalization consistent with senior management’s present policies. Additional bonuses will be established for any improvement over budget for $50,000, per 1/2 point of EBIT achieved over and above said budget.
If you are in agreement with the above terms and conditions I will draw up a formal proposal and proceed as soon as possible. I look forward to hearing from you soon.
Very truly yours,
A.J. Nassar
President and CEO
(Emphasis added)
However, some two weeks later, on February 17, 1998, Mr. Nassar again wrote *394Mr. Cicchinelli, stating that he had received Mr. Cicchinelli’s letter declining the employment offer and that he was very disappointed. There is no evidence of an agreement and no evidence of a formal proposal as referenced in the January 30, 1998 letter.
The Bylaws of the debtor provided that officers of the company, including specifically the president of the company, must be elected by the Board of Directors. The Minutes of the debtor do not indicate that Mr. Cicchinelli was ever elected president of the debtor. In addition, the debtor’s SEC filings for 1998 and 1999 do not refer to Mr. Cicchinelli as president of the debt- or, but instead refer to Mr. Nassar as president and chief executive officer and Mr. Cicchinelli as chief operating officer. Finally, plaintiff has presented an employment announcement dated May 11, 1998, stating that Mr. Cicchinelli will be President of the Retail Group. The Trustee argues that the Retail Group was only a division of the debtor. The defendant has not refuted that argument.
Once again, a genuine issue is one by which the evidence is such that a reasonable fact finder could return a judgment for the non-movant. In order for the factual issue to be genuine, it has to have a real basis in the record. While Mr. Cieehi-nelli’s brief employment status with the debtor is less than clear, the Trustee has met the Celotex initial burden of establishing the nonexistence of a triable fact as to whether he was he debtor’s president. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the Trustee meets that burden, the burden of production shifts to the counter-claimant (the defendant) and he must come forward with sufficient evidence to prove each and every element of the counterclaim. Rollins v. TechSouth, Inc., 833 F.2d 1525, 1528 (11th Cir.1987). This the defendant has not done. Here, the record as a whole could not lead a rational trier of fact to find that the defendant was president of the debtor, that his employment as president of the debtor was ever formalized, and that he was ever entitled to receive 250,000 shares of stock pursuant to any employment agreement. Accordingly, there is no purpose to be served by going to trial on the defendant’s counterclaim, and plaintiff is entitled to a summary judgment.
In accordance with the above reasoning, plaintiffs motion for summary judgment is hereby granted, defendant’s motion for summary judgment is hereby denied, and a judgment in favor of the plaintiff will be issued.
. Plaintiff's complaint alleges that this matter is core proceeding and that the Court has jurisdiction over this matter pursuant to 28 U.S.C. § 157 and 1334. (Plain.’s Compl., at para. 2). Defendant admits that this is a core proceeding in its answer. (Def.’s Answer, at para. 2). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493644/ | ORDER
JOYCE BIHARY, Bankruptcy Judge.
This adversary proceeding is before the Court on plaintiffs Motion for Summary Judgment. Plaintiff Morton P. Levine is the Chapter 11 Trustee for the estate of Flooring America, Inc. (“Flooring America”), and he seeks to recover $128,146.04 in principal, interest, and attorneys fees from defendant Edward Kenny on a promissory note. Defendant opposes the motion and argues that Flooring America had agreed to purchase the assets of a company owned by Mr. Kenny, Carpet Mills Direct, Inc. (“Carpet Mills”) and that the alleged purchase price or the net profits Flooring America collected while running Carpet Mills’ business should be setoff against the amount owed by Mr. Kenny on the note. Mr. Kenny also argues that he *405is owed certain bonus payments by Flooring America which should be offset against the plaintiffs claim on the note. The parties agree that this is a core proceeding under 28 U.S.C. § 157(b)(2). After carefully considering the briefs and affidavits submitted, the Court finds that plaintiffs motion for summary judgment should be granted in part and denied in part.
A court will enter summary judgment only upon a showing that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). Courts must review all evidence “in the light most favorable to the non-moving party.” Samples on Behalf of Samples v. City of Atlanta, 846 F.2d 1328, 1330 (11th Cir.1988). In the instant case, the trustee bears the initial burden of establishing that there is no issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). After the trustee meets this initial burden, the burden shifts to the defendant who must go beyond the pleadings and show that an issue of material fact indeed does exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If a reasonable fact finder evaluating the evidence could draw more than one inference from the facts, and if that inference introduces a genuine issue of material fact, then the court should not grant the summary judgment motion. Samples, 846 F.2d at 1330.
Some material facts are undisputed. On or about August 26, 1996, Mr. Kenny executed a promissory note (the “Note”) in favor of Flooring America, then operating as the Maxim Group, Inc., in the principal amount of $112,000.00. The Note required Mr. Kenny to make monthly payments of $5,000.00. The Note also required Mr. Kenny to pay all costs of collection, including reasonable attorneys fees. The Note made no reference to any purchase agreement between Flooring America and Carpet Mills or Mr. Kenny. Some payments were made, but Mr. Kenny did not repay the full amount due under the Note. On June 15, 2000, Flooring America filed for relief under Chapter 11 of the Bankruptcy Code, and Morton P. Levine was appointed as Chapter 11 Trustee on February 26, 2001. On June 10, 2002, Mr. Levine filed this complaint to recover the amount due under the Note.
The parties dispute many facts relevant to Mr. Kenny’s defenses and claims. Mr. Kenny contends that there was an oral agreement for Flooring America to purchase the assets of Carpet Mills and that Carpet Mills performed its obligations under the agreement by delivering all of its assets to Flooring America. Mr. Kenny claims that the alleged agreement should be enforced and that he should be entitled to offset the amount he owes on the Note against the allegedly agreed-upon purchase price or against the amount of net profits Flooring America collected while operating the Carpet Mills business. Plaintiff disagrees and contends that there were only discussions regarding the purchase of the assets and that no agreement was ever reached. Plaintiff also contends that to the extent a claim for setoff exists, it belongs to Carpet Mills, not to Mr. Kenny.
The Trustee is entitled to summary judgment on the Note claim. Mr. Kenny signed the Note in the principal amount of $112,000.00, and the Note calls for monthly payments. Mr. Kenny did not make all of the required monthly payments. The Trustee has met his initial burden of establishing that Mr. Kenny is liable under the terms of the Note. Mr. Kenny contends that the parties intended the amount advanced in the Note to be part of the payment for Carpet Mills’ busi*406ness. In support of his argument, Mr. Kenny relies on his affidavit and on the affidavit of A.J. Nassar, former C.E.O. of Flooring America. This argument is insufficient to defeat plaintiffs claim on the Note. The Note makes no reference to any purchase agreement between Flooring America and Carpet Mills. Any agreements reached before the execution of the Note which alter or change the unambiguous terms of the Note are barred by the parol evidence rule and may not be considered. First Data POS, Inc. v. Willis, et al., 273 Ga. 792, 794, 546 S.E.2d 781, 784 (2001); Dolanson Co., et al. v. Citizens & Southern Nat’l Bank, 242 Ga. 681, 683, 251 S.E.2d 274, 277 (1978). Accordingly, plaintiff is entitled to summary judgment for principal, interest and attorneys’ fees due under the Note.
The Trustee is also entitled to summary judgment on Mr. Kenny’s claim that amounts owed by Flooring America to Carpet Mills should be setoff against Mr. Kenny’s debt on the Note. Defendant Kenny asserts that he is entitled to offset the amount he owes to Flooring America under the Note against the amounts Flooring America owes to Carpet Mills for the purchase of Carpet Mills’ assets or for the amount of net proceeds Flooring America collected while operating the Carpet Mills business. The Trustee properly contends that, to the extent such an offset exists, it belongs to Carpet Mills and not to Mr. Kenny. The problem with Mr. Kenny’s argument is that a setoff requires a mutual debt: if A owes B, A cannot use a claim by C against B to offset or reduce A’s liability. 4 COLLIER ON BANKRUPTCY ¶ 553.03[3][b] (15th ed.2000).
Section 553 of the Bankruptcy Code deals with the right of setoff and requires that the obligation giving rise to the setoff arose before filing bankruptcy and that mutuality of obligation exists. B.F. Goodrich Employees Fed. Credit Union v. Patterson (In re Patterson), 967 F.2d 505, 509 (11th Cir.1992); accord 4 Collier on Bankruptcy ¶ 553.03[3][b] (15th ed.2000) (“The threshold requirement of mutuality is that the relevant claim and debt exist between the ‘same parties,’ .... ”). “The purpose of setoff is to avoid ‘the absurdity of making A pay B when B owes A.’ ” Patterson, 967 F.2d at 508 (quoting Studley v. Boylston Nat’l Bank, 229 U.S. 523, 528, 33 S.Ct. 806, 57 L.Ed. 1313 (1913)); see also Bakst v. Dellaquila, et al. (In re Chatam, Inc.), 239 B.R. 837, 840 (Bankr.S.D.Fla.1999). Whether mutuality exists is an issue of state law. According to Georgia law, “[s]etoff must be between the same parties and in their own right.” O.C.G.A. § 13-7-4 (West Group 2003); Straughair v. Palmieri (In re Palmieri), 31 B.R. 111, 112 (Bankr.N.D.Ga.1983). Under Georgia law, a party sued under a promissory note who claims that a right of setoff exists must assert the right of setoff as a counterclaim rather than as a defense to the claim under the promissory note. Gouldstone et al v. Life Investors Ins. Co. of America, 236 Ga.App. 813, 817-18, 514 S.E.2d 54 (1999).
“[T]he plain language of Rule 56(c) mandates the entry of summary judgment, ..., against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “In such situation, there can be ‘no genuine issue as to any material fact,’ since a complete failure of proof concerning an essential element of the nonmoving party’s case necessarily renders all other facts immaterial.” Id., at 322-23, 106 S.Ct. 2548. Because a right of setoff is a counterclaim under Georgia law, Mr. Kenny bears the burden of establish*407ing the elements of setoff at trial. However, Mr. Kenny presents no evidence to support any finding that the net proceeds Flooring America collected while operating the Carpet Mills business belong to him rather than Carpet Mills or that any amount allegedly owed by Flooring America for the purchase of Carpet Mills’ assets belongs to him. Mr. Kenny has failed to show that a genuine issue of material fact exists as to the mutuality element of his setoff counterclaims, and the Trustee is entitled to summary judgment on those claims.
Mr. Kenny’s claim that he is entitled to setoff a bonus due from Flooring America in 2000 against the amount he owes under the Note is not as easily resolved on summary judgment. The mutuality requirement is met, and the parties seem to dispute whether the conditions were met for the award of a bonus. In support of his claim, Mr. Kenny relies on his own affidavit and an employment contract which outline conditions under which Mr. Kenny would be entitled to a bonus payment. The Trustee submits that the conditions that would have entitled Mr. Kenny to a bonus payment were never met. This setoff claim appears to involve disputed issues of material fact, and a trial will be necessary for the Court to make proper findings relating to the claim for a bonus.
In accordance with the above reasoning, plaintiffs motion for summary judgment on the Note and on the defendant’s setoff claims which lack mutuality is GRANTED, and plaintiffs motion for summary judgment on defendant’s bonus claim is DENIED. A final judgment will issue after this claim has been adjudicated.
The parties shall have until October 1, 2003 to complete discovery. Counsel for the plaintiff and counsel for the defendant shall confer and present to this Court a consolidated (not separate) proposed Pretrial Order on or before October 15, 2003 in the above-styled adversary proceeding in accordance with BLR 7016-1, NDGa. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493645/ | DECISION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
The instant adversary proceeding was brought by the Debtor to determine the dischargeability of certain tax debts owed to the Defendant, the State of Ohio, Department of Taxation. Just prior to conducting a Trial on this matter, it was agreed that no factual issues were in dispute, and thus the Parties submitted the matter to the Court for resolution based solely upon those arguments contained in their respective supporting briefs. After reviewing these briefs, it is the Court’s understanding that only one issue is in dispute: whether those penalties levied against the Debtor for failing to file sales tax returns are dischargeable? The relevant facts giving rise to this issue may be summarized as follows.
The Debtor failed to file numerous state sales tax returns during the years 1987, 1988, 1989, and 1992. As a result, the Defendant, the State of Ohio Department of Taxation, estimated the Debtor’s sales tax liability, thereafter making an assessment for the unpaid taxes. On January 30, 2001, the Debtor filed a petition in this Court for relief under Chapter 7 of the United States Bankruptcy Code. Thereafter, on June 16, 2002, the Debtor filed the appropriate sales tax returns for the years previously assessed.
As it concerns these facts, it is the Defendant’s position that the Debtor’s late filing of his sales tax return — i.e., on June 16, 2002 — caused any penalties due thereunder to be excepted from the scope of a bankruptcy discharge. (Doc. 28, pg. 2). As a statutory basis for this assertion, the Defendant cited to § 523(a)(l)(B)(ii) which excludes from discharge any tax debt related to a return that was filed within two years of the debtor’s bankruptcy petition. In opposition, it is the Debtor’s position that since he was merely filing the returns to correct erroneous amounts assessed by the Defendant, he should not be penalized for such acts. (Doc. 27, pg. 1).
DISCUSSION
For dischargeability purposes, tax penalties are treated separately from the underlying tax obligation. See, e.g., United States v. Schottenstein, Zox & Dunn (In re Unitcast, Inc.), 219 B.R. 741, 751 *566(6th Cir. BAP 1998) (holding that “taxes” and “penalties” relating to a tax have separate identities and differing treatments throughout the Bankruptcy Code). Specifically, two separate provisions govern the dischargeability of tax penalties: § 523(a)(7); and § 507(a)(8)(G), which, as a priority debt, is accorded with the status of a nondischargeable debt pursuant to § 523(a)(1)(A). Thus, instead of looking to § 523(a)(l)(B)(ii) to determine the dis-chargeability of those tax penalties imposed against the Debtor — as the Defendant argues — the Court will, beginning with § 507(a)(8)(G), address the applicability of both of the statutory grounds by which a tax penalty may be found to be nondischargeable in bankruptcy.
Section 507(a)(8)(G) states that a tax penalty is not dischargeable if it is “related to a claim of a kind specified in this paragraph and in compensation for actual pecuniary loss.” Thus, under this section, a tax penalty will not be discharged if two conditions are met: (1) the underlying tax obligation is also afforded priority status under § 507(a)(8); and (2) the penalty, as opposed to being punitive in nature, was made in compensation for an actual pecuniary loss.
As it pertains to these requirements, and in particular the latter requirement, there is simply no indication that those penalties imposed against the Debtor were meant to compensate the Defendant for an actual pecuniary loss. In this respect, it is the general rule that the purpose of tax penalties is “to punish those who fail to abide by the taxing structure, and to deter those who might be inclined to avoid tax payment.” In re Manchester Lakes Assoc., 117 B.R. 221, 224 (Bankr.E.D.Va.1990). Consequently, most tax penalties, being punitive in nature, are not meant to compensate a taxing authority for an actual pecuniary loss. Bates v. United States (In re Bates), 974 F.2d 1234, 1237 (10th Cir.1992). Consequently, even if the underlying tax imposed against the Debtor is, in accordance with the first requirement of 507(a)(8)(G), a priority obligation, it is not subject to the exception to discharge set forth in § 507(a)(8)(G).
The second basis upon which a tax penalty may be excepted from discharge is set forth in § 523(a)(7), and provides, in relevant part:
(a) A discharge under section 727, ... of this title does not discharge an individual debtor from any debt-
(7) to the extent such debt is for a ... penalty, ... payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty-
(A) relating to a tax of a kind not specified in paragraph (1) of this subsection; or
(B) imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition!.]
In summary then, a tax penalty, notwithstanding its status under § 507(a)(8)(G), may be discharged as long as it is not punitive in nature and it is shown that, pursuant to paragraph (A), the penalty is related to an underlying tax debt that is dischargeable or, under paragraph (B), the penalty relates to a transaction or event that occurred more than three years before the date of the filing of the bankruptcy petition.
As applied to this case, and in conformance with the introductory portion § 523(a)(7), it has already been set forth that the tax penalties levied against the Debtor were punitive in nature. On the other hand, and contrary to the requirement of paragraph (B) of § 523(a)(7), there is no dispute that the tax penalties at issue *567were imposed on tax obligations that arose more than three years prior to the filing of the Debtor’s bankruptcy petition. Consequently, in giving effect to the disjunctive structure of paragraphs (A) and (B) of § 523(a)(7), a plain reading of the statute clearly affords the Debtor a discharge of those tax penalties imposed against him.
Nevertheless, some courts, relying primarily on the legislative history of the statute, have held that § 523(a)(7) is not to be read in the disjunctive, but rather in the conjunctive; that is, the conditions in paragraph (A) — which looks to the dischargeability of the underlying tax — as well as the requirement of paragraph (B) of § 523(a)(7) must both be met for a tax penalty to be dischargeable. See, e.g., Cassidy v. C.I.R., 814 F.2d 477 (7th Cir.1987). For purposes of this case, to adopt such an approach would undoubtedly render the Debtor’s tax penalties nondischargeable given that, in violation of paragraph (A), the Debtor’s underlying tax debts are undoubtedly nondisehargeable. For example, the Debtor’s failure to pay Ohio sales tax, which results in a priority trust fund tax under § 507(a)(8)(C), necessitates that such debt be excepted from discharge under §§ 523(a)(1)(A) and 507(a)(8)(C). See DeChiaro v. New York State Tax Commission, 760 F.2d 432, 435 (2nd Cir.1985). In addition, under § 523(a)(1)(B), a tax debt will not be discharged in bankruptcy if the taxpayer fails, as is the situation here, to file a tax return when there is a legal obligation to do so. For this purpose, a tax return prepared and filed by the taxing authority, without any help from the taxpayer, does not qualify as a return. U.S.A. v. Hindenlang (In re Hindenlang), 164 F.3d 1029 (6th Cir.1999); Villalon v. United States (In re Villalon), 253 B.R. 837, 840 (Bankr.N.D.Ohio 2000).
In Ferrara v. Dept. of Treasury, 103 B.R. 870 (Bankr.N.D.Ohio 1989), this Court suggested that such an approach may be appropriate, noting that, “[i]t appears instead that § 523(a)(7)(B) was intended to apply to penalties which are not computed by reference to a tax liability, while § 523(a)(7)(A) is for penalties relating to a tax.” Id. at 873. Nevertheless, this was merely dicta because the tax penalties at issue in Ferrara were less than three years old, and thus not subject to discharge under either paragraph (A) or (B) of § 523(a)(7). Furthermore, since the time of this decision the Supreme Court of the United States has repeatedly reinforced that, in the absence of ambiguity, a court should not try to infer an intent from a statute that is clearly contrary to its language. Patterson v. Shumate, 504 U.S. 753, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992); Conn. Nat’l Bank v. Germain, 503 U.S. 249, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992); Toibb v. Radloff, 501 U.S. 157, 111 S.Ct. 2197, 115 L.Ed.2d 145 (1991); Pa. Dept. of Pub. Welfare v. Davenport, 495 U.S. 552, 110 S.Ct. 2126, 109 L.Ed.2d 588 (1990); United States v. Ron Pair Enters., Inc., 489 U.S. 235, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). Thus, despite any wording to the contrary in Ferrara, the Court believes that the use of the word “or” between paragraphs (A) and (B) of § 523(a)(7) means exactly that: A debtor may receive a discharge of any tax penalty as long as the conditions in either paragraph (A) or (B) of § 523(a)(7) have been met.
In coming to this decision, the Court adopts the reasoning of the Tenth Circuit’s decision in Roberts v. United States, where, in confronting this exact issue, the Court stated:
The government urges first that the two subsections, 11 U.S.C. 523(a)(7)(A) and (B), must be read in the conjunctive rather than the disjunctive. It suggests *568that the drafters’ use of the disjunctive ‘or’ in the statutory language is an anomaly and so insignificant that it should be ignored in favor of the legislative history. However, the legislative history, whatever its weight, does not support the government’s first position. If the two subsections were read in the conjunctive, a tax penalty, to be dis-chargeable would have to be both: (1) computed by reference to a dischargea-ble tax, and (2) related to a taxable year or other taxable event occurring more than three years prior to the bankruptcy petition. Under the government’s proposed conjunctive interpretation, penalties assessed on dischargeable tax liabilities arising less than three years before bankruptcy could not be discharged. Such an approach is inconsistent with the viewpoint voiced by the legislation’s managers as well as the express language of the statute.
906 F.2d 1440, 1442-43 (10th Cir.1990).
Further in addressing the assertion of ambiguity in the statute, the Court in Roberts v. United States, went on to explain:
First, the language of subsection (A) and subsection (B) is neither ambiguous nor difficult to understand. Subsection (A) provides that a tax penalty is discharge-able if it is related to a nondischargeable tax liability. Subsection (B) creates an arbitrary cutoff of three years, after which all uncollected tax penalties may be discharged in bankruptcy. Although this time limit is an innovation on pre-Code law, it is nevertheless clear and understandable. The only confusion created is the result of the government’s insistence that such a blanket discharge after three years is not what Congress intended. That the statutory enactment differs from widely held expectations does not necessarily demonstrate ambiguity in its language.
Id. at 1443 (internal citation omitted).
Therefore, in this case, since the penalties at issue stem from transactions that occurred more than three years prior to the time the Debtor filed his bankruptcy petition, such penalties are dischargeable pursuant to 11 U.S.C. § 523(a)(7)(B). 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 Decision.
Accordingly, it is
ORDERED that any penalties imposed by the Defendant, the State of Ohio, Department of Taxation, as the result of the Debtor’s failure to file sales tax returns in the years 1987, 1988, 1989, and 1992, be, and are hereby, determined to be DIS-CHARGEABLE DEBTS. | 01-04-2023 | 11-22-2022 |
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