url stringlengths 56 59 | text stringlengths 3 913k | downloaded_timestamp stringclasses 1 value | created_timestamp stringlengths 10 10 |
|---|---|---|---|
https://www.courtlistener.com/api/rest/v3/opinions/8487936/ | WEEKS, Judge
DECISION FINDINGS OF FACT AND CONCLUSIONS OF LAW
PARTIES: Plaintiff is a nonprobationary, nontenured employee of the University of Guam and is classified as an "academic" employee of the University under the Unversity of Guam Federation of Teachers-Board of Regents contract.
Defendant Peckens is the acting president of the University, defendant Carter is the president of the University. Defendant University of Guam is the instrumentality under the laws of Guam responsible for administration of the University facilities in Mangilao, Guam.
JURISDICTION: Jurisdiction of this Court is invoked pursuant to Section 82 of the Code of Civil Procedure of Guam and injunctive relief is sought pursuant to Rule 65 of the Guam Rule of Civil Procedure.
*82BACKGROUND: In September 1979, plaintiff left Guam on study leave to attend Washington State University. On 28 September, he withdrew from the University course. He asserts that program was not the one he intended to enter. The University asserts (Exhibit A to their brief) that he was specifically instructed to remain. On 20 of October a notice of proposed adverse action was issued indicating that the University intended to dismiss him as an employee for "gross insubordination" and inviting him to submit an answer to the notice within 20 days, either in person or in writing and also affidavits, if he wished. He was simultaneously suspended.
On 5 December, plaintiff filed this action alleging that for the University to go forward in this manner was a violation of his right to due process. Plaintiff seeks a declaratory judgement regarding the parties' rights and enjoining of further action by the University until rules of procedure for such a dismissal action are promulgated.
Defendant alleges that due process is met by the present notice with opportunity to respond (Exhibit A) and that in any event an employee in plaintiff's category may be dismissed summarily.
The traditional guidelines to injunctive relief are:
1) the significance of the threat of irreparable harm to plaintiff if the injunction is not granted.
2) the state of the balance between this harm and the injury that granting the injunction would inflict on defendant.
3) the probability that plaintiff will succeed on the merits.
4) the public interest1.
Firstly, the Court rejects defendant's argument that the plaintiff's application for injunctive relief is premature; although indeed the decision to terminate has not been made as of this date, the wording of the Notice of Proposed Adverse Action indicates a reasonable probability that the plaintiff will be fired. The very purpose of an injunction is to prevent a threatened action.
Considering defendant's response to the application in the order given, the first argument is based on the premise that an untenured employee can be summarily fired. In support of this, defendant cites Board of Regents of State College v. Roth, 92 S. Ct. 2701.
That case however differs from the fact situation before us. Roth dealt with the nonhiring of a nontenured employee for a subsequent year. As pointed out in Burdeau v. Trustee of California State Colleges, 507 F.2d 770 , 773, citing Roth, releasing someone for named charges even if they are not criminal charges, is indeed a different situation from a mere failure to renew a contract. "Where a person's good name. *83reputation, honor, or integrity is at stake because of what the government is doing to him, notice and an opportunity to be heard are essential" Wisconsin v. Constantineau, 91 S. Ct. 507 (1971).
The Court next considers what the plaintiff has available to him as a hearing and whether it fulfills due process requirements.
Executive Order 72-19 sets out as policy the Rules and Regulations Relative to Demotion, Suspension, Dismissal and Appeal of such Adverse Actions.
Plaintiff's counsel has asserted orally and in his answering memorandum that the Rules and Regulations of Executive Order 72-19 are not mandated for the University but says that the defendant's acknowledgment of the rules as the procedural guidelines for the hearing would safeguard his client.
In response to a query of plaintiff as to whether the University had adopted Executive Order 72-19, counsel for the Board of Regents said, quoting from Rule XIV of Government of Guam Rules and Regulations which it is undisputed have been adopted by the Board of Regents as their interim operating rules under §11841 of its enabling legislation:
"MR. RODGERS: It says in Rule 14, "Pursuant to — " Excuse me, "The right to appeal to the Civil Service Commission as provided in the Civil Service Rules and Regulations relative to demotions, suspensions, dismissals--" and so forth. By adopting these rules and regulations, it certainly has adopted the Civil Service rules regarding demotions, dismissals and so forth."
The Court accepts defendant's assertion that these Rules and Regulations of Executive Order 72-19 are procedural safeguards available to plaintiff.
This Court has jurisdiction over the subject matter and the parties.
There is no evidence that summary dismissal of plaintiff is being considered.
Counsel for defendant has represented to Court that the very procedure that plaintiff wished is integrated into the rules governing a hearing.
The foregoing constitute Finding of Facts and Conclusions of Law pursuant to Rule 52(a), Rules of Civil Procedure for the Superior Court of Guam.
*84The requested Rules being used, there is no danger of irreparable injury to plaintiff, therefore the request for injunctive relief should be and the same is hereby denied.
SO ORDERED.
Footnote:
. Wright and Miller, Federal Practice and Procedure, Vol. II §2940, p. 430 and 431. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487937/ | RAKER, Judge
DECISION AND ORDER
This matter came before the Court on defendant's summary judgment motion and motion to dismiss. Defendant was represented by Assistant Attorney General Roger Willmeth, the plaintiff was represented by Timothy Stewart. The motions were heard by Judge John P. Raker and decision was reserved.
*85Defendant's motion to dismiss is based on §6500.10 of the Government Claims Act, which defendant argues divests the Court of jurisdiction over counts one and two of the first cause of action, count one of the third cause of action, counts one and two of the fourth cause of action and counts one and two of the fifth cause of action.
The Court first will examine this claim as regards the first and third causes of action. The first cause of action sounds in negligence, count one against defendant Taijeron and count two against defendant Aguigui. Plaintiff has plead $200.00 in damages on each count. The third cause of action is against defendant Taijeron for negligent supervision and claims $400,000 in damages. Each of these counts are against an individual defendant government employee and plead in excess of $100,000 damages.
It is defendant's position that the Court lacks jurisdiction as Government Code §6500.10 prohibits actions against an individual defendant once a claim has been filed pursuant to the Government Claims Act, as was done in this case. Such a position does not take, into account Government Code §6500.20, which specifically allows "further proceedings against the employee" if "the Court certifies that it would have awarded the claimant more but for the limitations of 6500.13." Section 6500.13 limits the Government's liability to $100,000.00 (See Decision and Order of February 11, 1980, Paulin v. Government of Guam, Superior Court civil Case No. 842-78.) Thus all of the above counts are specifically authorized by Government Code §6500.20 as more than $100,000 is claimed, and these counts are within the jurisdiction of the Court. The motion to dismiss as to these counts is therefore DENIED.
The second claim that this Court lacks jurisdiction regards counts one and two of the fourth and fifth causes of action. These are once again against the individual named defendants, but in this instance based on allegations of intentional tort. Once again defendants base their claim that the Court lacks jurisdiction over these counts on a reading of Section 6500.10.
Guam's Government Claims Act differs from those of many other jurisdictions, for while the act waives the sovereign immunity of the territory, it does not indemnify or immunize the employee. Rather, it provides that judgment or settlement of a government claims action bars further action against the employee (6500.20). Further, the Act only covers negligent torts, and sovereign immunity is not waived for intentional wrongs of the employee.
Thus there is no possibility of a Government Claims Action based on an intentional tort, and the plaintiff has not attempted to plead such a cause of action. What plaintiff has done is *86proceed on alternative theories; negligence against the Government (and should they prove more than $100,000 in damages against the individuals) and intentional tort against the individual. Defendants would read §6500.10 to preclude such alternative causes of action.
This reading of §6500.10 reaches an absurd result. The legislature has made the determination that it will make it possible to proceed against the territory rather than the employee on negligence claims. Thus employees are freed to some extent from concern about individual liability which make them overly cautious about their actions being found negligent and adversely affect their function as employees. The legislature determined that a similar rationale did not exist for intentional wrong doing by government employees. Yet the reading of §6500.10 urged by defendants is that simply by plaintiff's' act of filing a claim with the government for alleged negligence an employee is completely immunized should it turn out that the act was intentional. Thus the act would provide absolute protection for an intentional tort-feasor, while providing a recovery against no one, and would indemnify a negligent tort-feasor to the extent of $100,000. This is a very strange result, and there is no indication that this was the intent of the legislature. Beyond creating a chilling effect on filing a claim with the government because a plaintiff would lose all should he be mistaken in his theory, this reading also creates troublesome due process problems as such an irrevocable election would have to e made before the plaintiff has the opportunity for any sort of discovery. The election would have to be made before the filing of claim, let alone a law suit.
It is the decision of this Court that any bar to a plaintiff's action against an individual tort-feasor under the Government Claims Act (Government Code §6500 et. seq.) is limited to actions which may be brought under the Claims Act, and thus does not affect an allegation of an intentional tort.
The motion to dismiss causes of action four and five is DENIED.
The final motion to be disposed of is a summary judgment motion on the second cause of action. The basis of this motion is that this cause of action for negligent hiring, training and supervision of the defendant employees is not within the scope of the claim filed by plaintiff, and thus barred. Resolution of this motion requires examination of the claim filed. The claim is for "all injuries proximately caused by the negligence... of the Government of Guam, its officers and employees, for injuries arising out of the wrongful arrest and wrongful imprisonment of claimant.. .said wrongful arrest and wrongful imprisonment having occurred on May 1, 1976, and May 2, 1976." This claim *87for negligence of all employees resulting in these specified injuries, though broad, obviously includes negligent hiring, training and supervision of the employees involved in the incident.
Defendant relies on Kauss v. Government of Guam, Superior Court Case No. 680-77. But in Kauss summary judgment was granted where a plaintiff filed a claim for intentional acts, and later a complaint for negligence. Here there is no question that the claim and complaint sound in negligence.
The question is whether the claim is too broad, rather than too narrow as in Kauss. The notice of claim is not a pleading, neither is it a trap for the unwary. The claimant is not required to list his theories of recovery, but rather the facts which lead to liability. The Court notes that such a claim may often be prepared by a lay person of limited education.
If the claim gives such facts as would enable the Government to investigate its liability, it should be judged sufficient. The government has all the tools of any civil suit to refine the plaintiff's theory before trial. By this standard the plaintiffs claim, though broad, is sufficient.
The motion for summary judgment is DENIED.
IT IS SO ORDERED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487938/ | WEEKS, Judge
DECISION AND ORDER
This matter was submitted for decision without oral argument by stipulation of the parties. Plaintiffs were represented by Timothy Stewart. Defendant Lopez was represented by Ladd Baumann and defendant Tengan was represented by Harry Boertzel.
Defendants Lopez and Tengan have moved to be dismissed from this action pursuant to Rule 12(b)(g). Their motions are more properly treated as Rule 56 summary judgment motions as each has submitted an affidavit in support of the motion.
The basis of each of these motions is identical: that the individual defendants are not within the jurisdiction of the Court by operation of the Government Claims Act, Government Code §6500 et. seq.. Defendants base this reading of the Government Claims Act on dicta from a Superior Court Decision in Manibusan v. Guam Memorial Hospital, Civil Case No 285-78. This decision dated 2 November 1978 held that the Government Claims Act did not apply to Guam Memorial Hospital, but also suggested that the Act "makes Claims Act procedures applicable to suits against individual Government Health Professionals and inapplicable in suits against Guam Memorial Hospital itself."
The decision in Manibusan was a result of an analysis of Public 14-29, the "Guam Memorial Hospital Act", and especially an analysis of the legislative history and intent of Public Law 14-29. A plain reading of the Hospital Act does not result in the Government Claims Act being applicable to Hospital employees while inapplicable to claims against the Hospital itself, and there is no indication in the legislative history that this result was intended. To the contrary, the legislative history reflects the concern and intent that the Government of Guam not be liable for the actions of Hospital employees and agents.
The result urged by defendant is an odd one for the liability which the Hospital has under Manibusan largely flows from the acts of its employees and agents. It would be an absurd result if a plaintiff were allowed to proceed via the Claims Act against Government of Guam and against an autonomous instrumentality of the Government of Guam, the Hospital, for the same negligent acts of the same employee. There is no indication the legislature intended such double recovery.
A second ground exists for denial of defendants' motions. Even if the Claims Act were applicable to the defendants, it does not result in a dismissal as urged by the defendants. Thus it is not necessary to decide if §6500.13(e) and (b) *89provide an independent basis of Government liability for "health care professionals" from that of being an agent or employee of the hospital. The Government Claims Act does not immunize or indemnify Government employees, rather it waives the sovereign immunity of the Government of Guam on certain terms. It provides that a plaintiff may have judgment or settlement against either the individual or the Government, but not both (except in certain situations set forth in §6500.20, see Paulin v. Government of Guam, Superior Court Civil Case No. 842-78, Decision of February 11, 1980.)
Thus, the lack of a filing with the Attorney General as shown by defendants' affidavits does not immunize these defendants. If the Claims Act did apply, then in the absence of a claim there could be no settlement or judgment against the Government and thus no bar to this action against the individual.
The motion is denied.
IT IS SO ORDERED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487939/ | RAKER, Judge
DECISION
This is a complaint filed on September 17, 1976, based on an employment contract between plaintiff Alexander Kent and defendant Government of Guam. The contract, Exhibit 7, provided that the contract shall be effective November 23, 1974 for a period of one year. The position as Assistant Special Prosecutor and carried an annual salary of $27,040.00, increased to $35,000.00, Exhibit A. Count One demanded $6,732.00 for the contract period September 13, 1975 to November 23, 1975. Count Two demanded $3,768.22 for retroactive pay at the rate of $35,000.00 for the period November 23, 1974 to May 15, 1975. No evidence was presented by the plaintiff to justify the claim for retroactive pay. The plaintiff performed his duties from November 23, 1974 through September 12, 1975. On July 23, 1975, Public Law 13-53 became effective. This act pertinent part:
a. Abolished the Office of Independent Special Prosecutor and repealed Public Law 12-173, Section 4.
b. Appropriated funds for the Office of Independent Special Prosecutor for the period July 1, 1975 through September 12, 1975, Section 3.
Plaintiff was aware in late July, 1975 that he would not be paid after September 13, 1975. Plaintiff was not paid for that part of the contract period from September 13, 1975 to November 23, 1975, and on September 22, 1975, filed a claim under the Government of Guam Claims Act, §6500 et. seq., of the Government Code of Guam for payment under his contract for the period September 13, 1975 to November 23, 1975 and for retroactive pay.
On December 3, 1975, defendant by registered mail addressed to plaintiff notified him that his claim was denied. This denial of claim was received by plaintiff on December 8, 1975. Defendant failed to notify his attorney that the claim had been denied.
*91On December 30, 1975, counsel for plaintiff wrote to the Attorney General requesting what disposition, if any, had been made of the claim. On December 31, 1975, the Attorney General replied requesting a copy of the plaintiff's claim. Exhibit 14.
The Attorney General never notified counsel for plaintiff that the claim had been denied. Plaintiff performed no services under the contract and was not gainfully employed during the period of September 13, 1975 to November 23, 1975.
There is apparently no dispute between the parties as to the facts stated. However, three legal issues are contested as follows:
1. Is the defendant estopped to raise the defense of statute of limitations, §6500.21 of the Government Code of Guam, which provides as follows:
Statute of limitations. Every action under §6500.11 shall be barred unless commenced within one (1) year from the date the claim was filed with the Attorney General under §6500.03, or within six (6) months from the date of notification of rejection of the claim under §6500.11, whichever is sooner. (Added by P.L. 3-78, effective June 29, 1956; Repealed and added by P.L. 9-175, effective March 14, 1968. Sections 6500.11, 6600.14, and 6500.18 were amended by P.L. 9-256, effective January 8, 1969.)
2. Is plaintiff's claim based on an invalid contract?
3. Is plaintiff's claim barred because of his failure to mitigate damages?
ESTOPPEL TO RAISE STATUTE OF LIMITATION: The plaintiffs suit filed on September 17, 1976 is barred by the statute of limitations, quoted above, unless it can be found that the defendant is estopped from raising the defense. Estoppel can be found either by intent ' (fraud) or negligence. 18 Cal.Jur.2d, Estoppel, Sections 10 and 11. There is no evidence that the Government of Guam intended to mislead the plaintiff's attorney. Counsel for plaintiff wrote to the Attorney General on December 30, 1975 requesting that he be advised of the disposition of plaintiff's claim. The Attorney General replied on December 31, 1975 requesting a copy of the claim which had not been enclosed with the letter. The Attorney General failed to respond concerning the disposition of the claim stating that the claim was still under consideration. Plaintiff claims that this failure by defendant estops the defendant from raising the statute of limitations. We will assume that defendant was negligent in failing to respond to the written request of plaintiff's attorney. We must then examine the conduct of *92plaintiff and his attorney to see whether such conduct will permit the defense of estoppel.
1. Plaintiff's attorney made only one written request and failed to make an additional written request after a suitable time had elapsed. It is suggested that normal procedure in both business and professions would be a follow-up written request.
2. Plaintiff had actual knowledge of the denial of the claim on December 8, 1975 when he received written notification of denial but he never so advised his attorney or forwarded to him the letter of denial of the claim. This is difficult to understand since plaintiff is himself an attorney and should realize that it is essential that a client provide his attorney with all relevant information and documents.
The negligence of the plaintiff and his counsel will not permit plaintiff to raise the doctrine of estoppel. 28 Am.Jur. 2d, Estoppel and Waiver, Section 80, pp. 720-723. It is essential that the party asserting the estoppel must have been ignorant of the true state of facts. 18 Cal.Jur.2d, Estoppel, Section 9.
Not commented on by counsel for defendant is the rule that when, as here, a statute creates a cause of action when none existed before, and prescribes a limitation of time for bringing suit, the right of action is conditioned on its enforcement within the prescribed period and the defendant may not be estopped from setting up the limitation. 51 Am.Jur. 2d, Limitation of Action, §435, p. 902. Although this rule is not uniformly followed in some recent cases, the Court feels that it should be followed:
1. Where there is absent intentional, misrepresentations by the defendant, and
2. Where the plaintiff is himself negligent.
The Court has, as noted above, found that defendant made no intentional misrepresentations and plaintiff was himself negligent.
The Court concludes that defendant is not estopped from raising the defense of statute of limitations.
CLAIM BASED ON INVALID CONTRACT: The Supreme Court of Guam held that the creation of the Office of Special Prosecutor was invalid because it violated the separation of powers provisions of the Organic Act. Territory of Guam v. Camacho, et. al., [1 Guam R. 501] Criminal Case Nos. 37F-75 through 47F-75. A contract cannot be predicated on such a statute and the legislature cannot bind the state by a statute which it has no power to enact. 17 Am.Jur.2d, Contracts, §165. Where a contract is entered into pursuant to such a *93statute it is void and not subject to the prohibition against impairment of contracts set forth in 48 U.S. C.A., §1421b(j).
Because the contract under which Mr. Kent claims a right to compensation was entered into under authority of a law which was contrary to the Organic Act and unenforceable, his claim is unenforceable and must be denied.
The decision of the Supreme Court of the United States in the Territory of Guam v. Olsen, 431 U.S.1975, 52 L.Ed. 2d 250 (1977) did not render void the judgment in Camacho. The decision in Olsen decided that the transfer by the Guam Legislature of the District Court's appellate jurisdiction to the Supreme Court of Guam was invalid. The decision did not invalidate the creation of the Court itself or any original jurisdiction assigned to it. See Section 16(a) of Public Law 12-173. Camacho was clearly a case of original jurisdiction brought under Section 16(a) of Public Law 12-173 and thus is not effected by Olsen.
Plaintiff claims that he was a public employee and not a public officer and that termination of his employment before the expiration of his one year contract by Public Law 13-153 violated the prohibition against impairment of contracts contained in the Organic Act of Guam, 48 U.S.C.A. 1421(b)(j). Although his original appointment was as Assistant Special Prosecutor, he changed his position to that of a public officer. The last paragraph of his appointment as Special Prosecutor (Exhibit A) reads as follows:
Your term of office shall conform with the provisions of Section 11, Public Law 12-173, or as may be otherwise provided by law." Emphasis supplied.
MITIGATION OF DAMAGES: Answers to interrogatories, Exhibit 6, Nos. 2, 3 and 4, indicate:
1. That plaintiff made no serious attempt to obtain any other professional employment,
2. That such employment was reasonably available at least on Guam, and
3. That plaintiff's sole interest at the time of termination was his further formal education in the law.
"... The commonest example is an employment contract. An employee wrongfully discharged cannot sit idle for the balance of his term and recover the full salary promised. If other employment of a similar kind is available to him in the same locality he must exercise diligence in an effort to procure it, and so utilize the time left on his hands. If he fails to do so, that part of the loss of use of his time results from his own failure to act reasonably, and not *94from the defendant's breach. . ." Simpson on Contracts, 2nd Ed., §199, p. 403.
The foregoing shall constitute the Court's findings of facts and conclusion of law.
Judgment shall be for defendant. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487940/ | RAKER, Judge
JUDGMENT
This cause came on regularly for trial before the Honorable John P. Raker presiding. Plaintiff appeared by his attorney Ronald C. Geedman and the defendant appeared by his attorney Roger E. Willmeth and evidence both oral and documentary having been presented by both parties, and the cause having been argued and submitted for decision and the Court having made and caused to be filed its written decision on March 6, 1980.
IT IS SO ORDERED AND ADJUDGED that judgment be entered for the defendant. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487941/ | ABBATE, Judge
DECISION AND ORDER
This matter came before the Court on defendant's motion to dismiss. Defendant was represented by Assistant Attorney General Richard Opper. Plaintiff was represented by David Dooley. The matter was regularly heard before Judge Paul J. Abbate, and decision was reserved.
The basis of defendant's motion is that this action is barred by the Government Claims Act (§6500 et. seq. of the Government Code, and hereafter referred to as the Claims Act), and must therefore be dismissed. Plaintiff responds that a plain reading of the Claims Act does not produce this result, and that if the Act is given the reading the Attorney General's Office urges, there are serious Constitutional questions regarding the validity of the Act.
Defendant argues that Government Code §6500.10 as amended by Public Law 13-116:6 forbids a suit against an individual once there has been a claim filed under the Act on *96the same act or transaction. §6500.10 states that the "remedies provided by this chapter shall be exclusive" and that "No further or additional proceedings against the employee or employees, officer or officers, agent or agents, whose acts or omissions gave rise to the claim may be heard by any Court once a claim has been filed pursuant to this chapter." Defendant further argues that any reading of §6500.10 which would not produce a bar to a second suit against the individual "would nullify the basic premise of the Government's Limitations on Tort Liability [Government Code of Guam §6500.13]."
A threshold question is whether there is a §6500.13. As originally included in the Claims Act, §6500.13 limited recovery to $10,000 in a wrongful death action and $25,000 in any other tort action. Public Law 12-26 made these limits respectively $35,000 and $100,000.00. Public Law 13-116:8 repealed and re-enacted §6500.13, adding subsections 'a' and 'b' which dealt with government 'health care professionals' and moving the limits on recovery to subsection (c) without changing them. Public Law 13-116:8 expired by terms of Public Law 13-116:9 one year from its effective date. Thus as the act went into effect on December 24, 1975, Government Code §6500.13 expired on December 24, 1976.
On May 27, 1977 Public Law 14-29:6 purported to repeal the repealer clause of Section 9 of Public Law 13-116, but after it had already gone into effect. In Manisuban v. G.M.H., Superior Court of Guam Case No. 285-78 [2 Guam R. 63, 66], the Court in its Decision and Order of November 2, 1978 ruled that "§6500.13 was revived by Section 6 of Public Law 14-29.", citing 1Á Sutherland on Statutory Construction, Section 23.31 (3rd Ed.). The Court will follow this ruling in the present case, as the intent of the Legislature is clearly to revive §6500.13.
However, following this action the Fourteenth Guam Legislature once again attempted to affect Government Code §6500.13. In Section 4 of Public Law 14-79 the Legislature purportedly amended Section 9 of Public Law 13-116 to read: "The provisions of Section 8 shall expire June 30, 1978." Section 8 of Public Law 13-116 was, of course, the section which repealed and re-enacted the original Government Code §6500.13. What is the effect of this statute?
This Court has held that Public Law 14-29 repealed Section 9 of Public Law 13-116. Thus, Public Law 14-97:4 is a purported amendment of a repealed section.
[S]ince an amendatory act alters, modifies, or adds to a prior statute, all courts hold that a repealed act cannot be amended. No court will give the attempted *97amendment the effect of reviving the repealed act. 1A Sutherland Statutory Construction■ §22.03.
The only remaining question is whether the amendment itself should be given any effect. Some jurisdictions give no effect to purported amendments to repealed statutes. Other courts "recognize the mistake of the legislature and try to determine and give effect to its intent." Sutherland, supra, §22.03. In this case, it is not necessary to try to place Guam in one school of thought or the other, for even should the court attempt to effect the intent of the legislature, it is impossible to ascertain what that intent was.
In enacting Public Law 14-97:4, the Legislature was evidently unaware that it has previously revived Government Code §6500.13 without a time limit by Public Law 14-29:6. The Legislature determined that it was better to revive §6500.13 with a time limit of June 30, 1978 than to have no time limit at all. But the Court cannot say that the Legislature would have acted in the same manner if it had been aware that §6500.13 had been revived by Public Law 14-29 without a time limit. It is a different decision to add to the Act, as the Legislature thought it was doing in Public Law 14-97 and to time limit the effect of the Act, as the Legislature was actually doing. Thus, it is the decision of this Court that Public Law 14-97:4 had no effect, and that §6500.13 is operative.
The validity of Government Code §6500.13 is a prelude to deciding this motion, for Plaintiff relies on Government Code §6500.20. As defendant noted in brief, prior to the enactment of Public Law 13-116, the limitations on actions were contained in Government Code §6500.20, which provides: "Settlement . . . or final judgment . . . shall bar the claimant from any further proceedings against the employee . . . unless: (b) the Court certifies that it would have awarded the claimant more but for the limitations of §6500.13." Thus, if there still are limitations on the amount of recovery against the Government, it is plaintiff's argument that as the prayer in his suit against the Government is more than the amount of the limit, it is for the possibility of a recovery against the individual after certification under Government Code §6500.20 that the instant suit is filed. §6500.20 has not been amended since Public Law 9-175, the original Claims Act, and as the Harvard Student Legislative Reserach Bureau who drafted the Act put it in their official comments which were before the Ninth Legislature: "if the claim is a large one, and the trial judge certifies that he would have awarded more but for the limitaitons of §6500.13, the claimant may sue the employee for what is in effect a deficiency judgment."
*98Defendants' reading of Government Code §6500.10 produces a contradiction of §6500.20. But the Legislature could have amended or repealed §6500.20 when it enacted Public Law 13-116, and chose not to do so. "In terms of legislative intent, it is assumed that whenever the Legislature enacts a provision it has in mind previous statutes relating to the same subject matter." Sutherland, supra, §51.02. "Statutes in pari materia, although in apparent conflict, are so far as reasonably possible construed to be in harmony with each other."
Thus, before reading §6500.10 as an absolute bar to suit against the individual, it is first the duty of the Court to seek a construction which does not contradict §6500.20. If §6500.10 is read to provide a stay in proceedings against an individual until the close of the Government Claims case (to await possible certification under §6500.20) when it states that "no further or additional proceedings against the employee or employees, officer or officers, agent or agents, whose acts or omissions gave rise to the claim may be heard by any Court once a claim has been filed pursuant to this Chapter.", such a harmonious reading is possible. And such a reading does not violate the mandate of §6500.10 that the Act be an "exclusive" remedy, for the suit against the individual is authorized by an a part of the Act. Such a reading also does not leave a plaintiff perhaps barred from initiating suit against the individual by the statute of limitations due to the lapse of time before a §6500.20 certification of the right to proceed.
Given this reading of the statutes, it is not necessary to reach plaintiffs arguments regarding the validity of the statutes if given the reading urged by defendant.
The motion to dismiss is DENIED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487943/ | ABBATE, Judge
DECISION AND ORDER
This matter came for hearing on April 14, 1980 to consider Respondent Juan U. Rivera's motion to set aside the previous order granted Petitioner on February 28, 1980, directing Respondent to convey certain real property to the Petitioner, and to grant a hearing on Petitioner's motion.
Respondent makes this motion for equitable relief to have an adverse judgment because his attorney was not served with notice of hearing and, as a result, did not appear. The above order was then entered against Respondent. Both sides have submitted conflicting affidavits on the issue of service.
A judgment may be vacated pursuant to Code of Civil Procedure §473, which states:
"... The Court ... may upon such terms as may be just, relieve a party or his legal representative, from, a judgment, order, or other proceeding taken against him through his mistake, inadvertence, surprise, or excusable neglect ..."
In various cases relief from default judgment can be granted where the defense counsel failed to appear because he *101did not receive a notice of the trial from the opposing attorney due to clerical error. 21 A.L.R. 1255. In the case of Yeck v. Department of Labor & Industries, 27 Wash, 2d 92, 176 P.2d 359, the court set aside a default judgment against the defendant where, through error on the part of both the defendant's employees and the attorney general's staff, notice was not received by the defendant informing him of the time for hearing.
It appears clear that the circumstances surrounding the present motion creates a sufficient doubt in the Court's mind as to whether or not notice was in fact duly made. Both counsels have submitted affidavits from their respective secretaries, as well as oral testimony, indicating an unresolvable discrepancy in the facts.
The Court believes equity can best be served by vacating the previous order directing Respondent to convey certain real property, and by allowing Respondent to present the merits of his case at hearing.
IT IS HEREBY SO ORDERED that Respondent's motion to set aside the previous order be granted. Hearing on said motion is set for the 8th day of May, 1980 at 8:30 A.M.
IT IS SO ORDERED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487959/ | NOT RECOMMENDED FOR PUBLICATION
File Name: 22a0465n.06
No. 21-3740
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Nov 18, 2022
DEBORAH S. HUNT, Clerk
)
UNITED STATES OF AMERICA,
)
Plaintiff-Appellee, ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
v. ) COURT FOR THE NORTHERN
) DISTRICT OF OHIO
DENNIS LEE COFFMAN, )
Defendant-Appellant. )
OPINION
)
)
Before: COLE, CLAY, and MATHIS, Circuit Judges.
MATHIS, Circuit Judge. Dennis Lee Coffman pled guilty to receipt and distribution of
child pornography and possession of child pornography. The district court sentenced him to 108
months of imprisonment. Coffman now appeals the district court’s denial of his motion to
withdraw his guilty plea and the court’s two-level upward departure from the sentencing guidelines
based on the duration of one of the child pornography videos. For the following reasons, we
affirm.
I. BACKGROUND
On September 13, 2018, FBI Task Force Officer (“TFO”) Ryan Anschutz initiated an
online undercover operation on the BitTorrent network. Between September 13, 2018, and
November 19, 2018, TFO Anschutz used his undercover computer to connect to an IP address
registered to Coffman. TFO Anschutz discovered that Coffman had downloaded approximately
49 child pornography files during the time he was connected to Coffman’s IP address.
Case No. 21-3740, United States v. Coffman
On December 18, 2018, law enforcement officers executed a search warrant at Coffman’s
residence. During the search, officers seized a flash drive, a small spiral-bound paper notebook,
and three cellular telephones, including an LG cellular phone. A forensic examination of the LG
phone revealed that it contained several child pornography files, including three videos of child
pornography, one of which was 89 minutes long, and the BitTorrent application. In the spiral-
bound notebook, Coffman’s wife complained about Coffman viewing child pornography.
On December 20, 2018, TFO Anschutz filed a criminal complaint against Coffman. TFO
Anschutz participated in transporting Coffman to the courthouse for his initial appearance. TFO
Anschutz later testified that as he transported Coffman to the courthouse, Coffman “admitted to
wanting to plead guilty and that he did the crime so he needs to pay his punishment.” [R. 41,
PageID 929-30.]
On January 16, 2019, a grand jury indicted Coffman for receipt and distribution of child
pornography (Count 1) in violation of 18 U.S.C. § 2252(a)(2), and possession of child pornography
(Count 2) in violation of 18 U.S.C. § 2252A(a)(5)(B). At his arraignment on January 25, 2019,
Coffman pled not guilty to the charges. On May 10, 2019, Coffman filed a motion to change his
plea. At a status hearing on May 28, 2019, Coffman stated that he did not have enough time to
review the plea offer but felt that he should plead guilty to the possession charge and not guilty to
the charge for receipt and distribution of child pornography. On July 15, 2019, Coffman pled
guilty to both counts of the indictment. During the pre-sentence investigation process, Coffman
provided a statement to the probation officer advising that he “viewed child porn because meth
made [him] a pervert.” [R. 15, PageID 59.] On October 28, 2019, Coffman’s former counsel filed
a motion to withdraw as counsel, citing irreconcilable differences, which the district court granted.
2
Case No. 21-3740, United States v. Coffman
Coffman and his former counsel dispute what led to Coffman’s guilty plea. His former
counsel testified that he advised Coffman to plead guilty and focus on mitigation because of the
three incriminating videos found on his LG phone. Coffman, however, testified that before he
pled guilty, his former counsel told him that he had spent three hours on Coffman’s LG phone and
that the Government had “all the evidence against [him] and everything else.” [R. 27, 131-32.]
But, Coffman contends that after he pled guilty, his former counsel told him that he never went
through Coffman’s LG phone. According to Coffman, he then said to his former counsel, “[w]hy
did I plead guilty? . . . . I told you I never used a BitTorrent to do any of this. I never viewed any
of the videos the prosecution is accusing me of [viewing].” [Id. at 132.] Coffman further explained
to the district court that he was on an adult porn site and then came across child pornography.
According to Coffman, his former counsel responded that the child pornography would be the only
thing that the Government would bring up at trial and then said, “[p]lead guilty or you’ll get 20
years.” [Id.]
Coffman secured new counsel, who retained an expert to perform a forensic review of the
LG phone. The report from the forensic review indicated that the 49 child pornography files that
were downloaded to Coffman’s IP address were not located on the LG phone.
On June 8, 2020, Coffman filed a motion to withdraw his guilty plea, arguing that his “plea
was premised on ineffective assistance of counsel and in violation of his Sixth Amendment
right . . . .” [R. 29, PageID 143.] In the motion, Coffman argued that his former counsel’s “failure
to review the evidence or, alternatively, to obtain the assistance of a forensic computer expert to
understand the evidence fell below an objective standard of reasonableness.” [R. 29, Page ID 146.]
Coffman also argued that but for his prior counsel’s statement that the Government had enough
evidence to prove the charges against him, he would not have pled guilty.
3
Case No. 21-3740, United States v. Coffman
The district court conducted an evidentiary hearing on Coffman’s motion, at which both
Coffman and his former counsel testified. Coffman’s former counsel testified that prior to the
change of plea hearing, he told Coffman that the 49 child pornography files were not found on the
LG phone. Coffman’s new counsel conceded that the forensic report did not add any additional
information to that which was provided by the Government during discovery. After considering
Coffman’s and his former counsel’s “substantially contradictory accounts” of the conversations
between them and finding the former counsel’s testimony to be credible, the district court denied
Coffman’s motion to withdraw his plea. [R. 32, PageID 174, 183.]
Further, in denying the motion, the district court found that Coffman’s “substantial delay
in bringing the motion weighed heavily against withdrawal.” [Id. at 187.] The district court also
rejected Coffman’s argument that his former counsel’s failure to enlist an expert was unreasonable
because (1) the new expert report added no new information, and (2) Coffman’s former counsel
credibly testified that he told Coffman that the downloaded files were not found on his LG phone.
At sentencing, the district court applied a three-level enhancement for the three child
pornography videos found on Coffman’s LG phone. The district court also applied a two-level
upward departure because one of the three videos was substantially longer than five minutes. The
district court sentenced Coffman to 108 months of imprisonment.
II. ANALYSIS
On appeal, Coffman contends that his former counsel provided ineffective assistance of
counsel at the guilty plea phase. He also argues that the district court erred in denying his motion
to withdraw his guilty plea. Finally, assuming his guilty plea stands, Coffman asserts that the
district court erred in applying a two-level upward departure pursuant to U.S.S.G. § 2G2.2(b)(7).
4
Case No. 21-3740, United States v. Coffman
Finding that the district court did not err, we affirm the denial of Coffman’s motion to withdraw
his plea and uphold the imposed sentence.
A. Ineffective assistance of counsel.
We typically do not address claims of “ineffective assistance of counsel on direct appeal
because the record is usually insufficient to permit an adequate review . . . .” United States v.
Gardner, 417 F.3d 541, 545 (6th Cir. 2005) (citing United States v. Shabazz, 263 F.3d 603, 612
(6th Cir. 2001). “An exception to this principle exists for cases in which the record is adequately
developed to allow the court to properly assess the merits of the issue.” United States v. Fortson,
194 F.3d 730, 736 (6th Cir. 1999) (citation omitted). “The record may be adequate for review on
direct appeal when the district court held an evidentiary hearing on a motion to withdraw a guilty
plea at which both parties presented evidence on the ineffective assistance of counsel claim at issue
on appeal.” United States v. Carson, 32 F.4th 615, 621 (6th Cir. 2022) (citing United States v.
Wynn, 663 F.3d 847, 850–51 (6th Cir. 2011)).
On February 10, 2021, the district court held an evidentiary hearing on Coffman’s motion
to withdraw his guilty plea, at which both parties presented evidence on the ineffective assistance
of counsel issue. Thus, the record is sufficiently developed to assess Coffman’s ineffective
assistance of counsel claim. We review a district court’s disposition of an ineffective assistance
of counsel claim de novo and its findings of fact for clear error. See Harries v. Bell, 417 F.3d 631,
636 (6th Cir. 2005) (citation omitted).
To succeed on an ineffective assistance of counsel claim challenging a guilty plea, a
defendant must demonstrate that his counsel’s performance was deficient, and that the deficient
performance prejudiced his defense such that “there is a reasonable probability that, but for
counsel’s errors, he would not have pleaded guilty and would have insisted on going to trial.”
5
Case No. 21-3740, United States v. Coffman
Hill v. Lockhart, 474 U.S. 52, 58–59 (1985); see also Strickland v. Washington, 466 U.S. 668, 687
(1984). We reject Coffman’s ineffective assistance of counsel claim because he cannot show
deficient performance by his former counsel, nor can he show prejudice.
1. Deficient performance.
To establish deficient performance, a defendant must prove that “counsel’s representation
fell below an objective standard of reasonableness.” Hill, 474 U.S. at 57 (quoting Strickland, 466
U.S. at 687–88). In evaluating whether an attorney’s performance was constitutionally deficient,
we “recognize that counsel is strongly presumed to have rendered adequate assistance and made
all significant decisions in the exercise of reasonable professional judgment.” Strickland, 466 U.S.
at 690.
Coffman contends that his former counsel was ineffective because, by failing to retain an
expert to conduct a forensic review of his LG phone to ascertain the presence (or absence) of child
pornography, he did not adequately investigate the facts of the case. The district court thoroughly
evaluated Coffman’s arguments regarding his prior counsel’s effectiveness when it denied his
motion to withdraw his guilty plea.
First, as the district court noted, Coffman’s “new counsel conceded at the evidentiary
hearing that the Defense Forensic Report added no new information . . . .” [R. 32, PageID 186.]
Second, as the district court explained, “there is no requirement that a defendant produce a fully
prepared and documented defense for trial before seeking to withdraw a guilty plea . . . .” [Id.]
Third, the district court credited Coffman’s former counsel’s testimony “that he told Coffman that
the downloaded files, connected to the IP address for his residence, were also not found on his LG
cellular phone.” [Id. at 187.] See United States v. Vance, 956 F.3d 846, 853 (6th Cir. 2020) (“this
court will defer to the district court’s credibility determinations absent reason to believe that they
6
Case No. 21-3740, United States v. Coffman
are clearly erroneous”) (internal quotation and citation omitted). And fourth, the district court
concluded that it was a “reasonable position” for the former counsel to advise “Coffman to plead
guilty, gain the benefit of acceptance of responsibility, and offer sentencing arguments designed
to limit his sentencing exposure, given Coffman’s admissions and the circumstantial evidence in
the case.” We have previously concluded that strategic advice to plead guilty and focus on
mitigation can be reasonable. See Post v. Bradshaw, 621 F.3d 406, 417 (6th Cir. 2010).
We agree with the district court that Coffman’s former counsel’s advice was objectively
reasonable, as the evidence against Coffman included: (1) approximately 49 child pornography
files downloaded from an IP address connected to Coffman; (2) child pornography videos found
on Coffman’s LG phone; and (3) Coffman’s wife’s notebook, which included an entry indicating
that one of her problems with Coffman was his consumption of “child porn.” [R. 1, PageID 4-6.]
Because the district court’s factual findings are supported by the record and we do not have the
“definite and firm conviction” that the district court made a mistake, we find no clear error. See
United States v. Castano, 906 F.3d 458, 467 (6th Cir. 2018) (quoting Easley v. Cromartie, 532
U.S. 234, 242 (2001)).
2. Prejudice.
Even if Coffman established that his former counsel provided deficient representation, he
has failed to show prejudice. Coffman must show that but for his former counsel’s errors, he
would not have pled guilty and would have instead insisted on going to trial. See Hill, 474 U.S. at
59. “[W]here the alleged error of counsel is a failure to investigate or discover potentially
exculpatory evidence, the determination whether the error ‘prejudiced’ the defendant by causing
him to plead guilty rather than go to trial will depend on the likelihood that discovery of the
evidence would have led counsel to change his recommendation as to the plea.” Moreover, “in
7
Case No. 21-3740, United States v. Coffman
determining whether a defendant has shown prejudice, a court must predict whether the correction
of the deficient performance might have enabled the defendant to succeed at trial.” Hodges v.
Colson, 727 F.3d 517, 538 (6th Cir. 2013).
Coffman argues that his former counsel’s failure to investigate whether the 49 child
pornography files downloaded from an IP address connected to Coffman were on his LG phone
resulted in his decision to plead guilty, and that had he not received ineffective counsel, he would
have taken the case to trial. It is not enough, however, that Coffman would have taken his case to
trial. He must establish that “correction of the deficient performance might have enabled [him] to
succeed at trial.” Hodges, 727 F.3d at 538. Coffman has not met his burden because the evidence
simply does not support his argument. As mentioned above, Coffman’s new counsel
acknowledged during the hearing on Coffman’s motion to withdraw his guilty plea that the
forensic report prepared by Coffman’s retained expert contained no information that was different
than the information the Government provided to Coffman’s former counsel. And the district court
found that Coffman’s former counsel credibly testified that he informed Coffman that the 49 files
were not located on the LG phone. Additionally, Coffman has made no challenge to the three
videos containing child pornography that were located on his LG phone. There is no indication
that Coffman would have succeeded at trial if his former counsel had commissioned an expert
report, and so, Coffman has failed to show prejudice.
B. Motion to withdraw guilty plea.
Coffman challenges the district court’s denial of his motion to withdraw his guilty plea.
“We review the denial of a motion to withdraw a guilty plea under the abuse-of-discretion
standard.” United States v. Haygood, 549 F.3d 1049, 1052 (6th Cir. 2008). “A district court abuses
its discretion where ‘it relies on clearly erroneous findings of fact, improperly applies the law or
8
Case No. 21-3740, United States v. Coffman
uses an erroneous legal standard.’” United States v. Goddard, 638 F.3d 490, 493 (6th Cir. 2011)
(quoting United States v. Ellis, 470 F.3d 275, 280 (6th Cir. 2006)). The defendant has the burden
to demonstrate that proper grounds exist for withdrawing his guilty plea. See United States v.
Dixon, 479 F.3d 431, 436 (6th Cir. 2007) (citing United States v. Triplett, 828 F.2d 1195, 1197
(6th Cir. 1987)).
The “withdrawal of a guilty plea is inherently in derogation of the public interest in finality
and the orderly administration of justice.” Ellis, 470 F.3d at 280 (quotation omitted). Accordingly,
“[a] defendant may withdraw a plea of guilty . . . after the court accepts the plea, but before it
imposes sentence if: . . . the defendant can show a fair and just reason for requesting the
withdrawal.” Fed. R. Crim. P. 11(d)(2)(B). “This rule is designed to allow a hastily entered plea
made with unsure heart and confused mind to be undone, not to allow a defendant to make a tactical
decision to enter a plea, wait several weeks, and then obtain a withdrawal if he believes he made
a bad choice in pleading guilty.” Ellis, 470 F.3d at 280–81 (6th Cir. 2006) (quotation and citation
omitted).
Courts consider several factors to determine whether a defendant meets his burden of
proving that the withdrawal of his guilty plea is for a fair and just reason, including:
(1) the amount of time that elapsed between the plea and the motion
to withdraw it; (2) the presence (or absence of) a valid reason for the
failure to move for withdrawal earlier in the proceedings;
(3) whether the defendant has asserted or maintained his innocence;
(4) the circumstances underlying the entry of the guilty plea; (5) the
defendant’s nature and background; (6) the degree to which the
defendant has had prior experience with the criminal justice system;
and (7) potential prejudice to the government if the motion to
withdraw is granted.
Id. at 281 (quoting United States v. Bashara, 27 F.3d 1174, 1181 (6th Cir. 1994) superseded on
other grounds by statute as recognized in United States v. Caseslorente, 220 F.3d 727, 734 (6th
9
Case No. 21-3740, United States v. Coffman
Cir. 2000)). The above factors are a “general, non-exclusive list and no one factor is controlling.”
United States v. Bazzi, 94 F.3d 1025, 1027 (6th Cir. 1996). “The relevance of each factor will vary
according to the ‘circumstances surrounding the original entrance of the plea as well as the motion
to withdraw.’” Haygood, 549 F.3d at 1052 (quoting United States v. Triplett, 828 F.2d 1195, 1197
(6th Cir. 1987)).
1. Lapse of time between guilty plea and motion to withdraw guilty plea.
Coffman pled guilty on July 15, 2019. He filed his motion to withdraw his guilty plea on
June 8, 2020. That is a span of 329 days. We have “not fashioned a precise cut-off point beyond
which delay is unreasonable[,]” but we have “affirmed decisions denying the withdrawal of a
guilty plea after delays as short as one or two months.” United States v. Carson, 32 F.4th 615, 624
(6th Cir. 2022) (quotation omitted); see also Haygood, 549 F.3d at 1053 (affirming the denial of a
motion to withdraw filed four and a half months after the guilty plea); United States v. Valdez, 362
F.3d 903, 913 (6th Cir. 2004) (affirming the denial of a motion to withdraw filed 75 days after the
guilty plea). Therefore, this factor weighs heavily against Coffman.
2. Valid reason for failing to move for withdrawal earlier in the proceedings.
In determining whether to grant a motion to withdraw a guilty plea, courts consider whether
the defendant can establish “a valid reason for the failure to move for withdrawal earlier in the
proceedings.” Bashara, 27 F.3d at 1181. If a defendant can identify a valid reason, a court is more
likely to grant a motion to withdraw a guilty plea. Id. On the contrary, “where a defendant is
aware of the condition or reason for a plea withdrawal, at the time the guilty plea is entered, a case
for withdrawal is weak[ened].” United States v. Spencer, 836 F.2d 236, 239 (6th Cir. 1987) (citing
United States v. Usher, 703 F.2d 956, 959 (6th Cir. 1983)). Coffman argues that he did not move
to withdraw his guilty plea earlier in the proceedings because he was unaware that the 49 files of
10
Case No. 21-3740, United States v. Coffman
child pornography were not on his LG phone until he received the forensic report from his expert.
The district court did not abuse its discretion in finding that Coffman was aware of this fact even
before he pled guilty because his former counsel had informed him. The district court found the
former counsel’s testimony credible on this point. Thus, Coffman cannot establish a valid reason
for not moving forward with withdrawal earlier in the proceedings. This factor also weighs against
Coffman.
3. Asserting or maintaining innocence.
While, at times, Coffman has asserted his innocence, he has also indicated his guilt at
various points in these proceedings. According to testimony from law enforcement, when
Coffman was arrested and advised of the charges against him by law enforcement, he indicated he
was guilty. On May 28, 2019, during a hearing before the district court, he stated “I feel that I
should plead guilty to the possession . . . charge, but not guilty to the receipt and distribution.” At
his change of plea hearing, Coffman admitted to the offense conduct while under oath in open
court. He also admitted to viewing child pornography in a statement to the probation officer during
the presentence investigation. Coffman argues that he has maintained his innocence throughout
this case, and that he did so on four occasions: first, at his arraignment, when he initially entered a
not guilty plea; second, at the hearing on May 28, 2019, when he stated that he should plead guilty
to the possession charge, but not guilty to the receipt and distribution charge; third, when he
testified that he never viewed the videos, did not use BitTorrent, and was on an adult porn site
when he came across child porn; and fourth, at his sentencing hearing, when he maintained that he
never downloaded or viewed the videos himself.
While a defendant’s “vigorous and repeated protestations of innocence” may support the
decision to allow withdrawal of a guilty plea, United States v. Baez, 87 F.3d 805, 809 (6th Cir.
11
Case No. 21-3740, United States v. Coffman
1996), claims of innocence are not convincing when the defendant has vacillated over time. See
United States v. Dixon, 479 F.3d 431, 437 (6th Cir. 2007). At best, Coffman has vacillated in
asserting/maintaining his innocence. The district court did not abuse its discretion in finding that
this factor weighs against Coffman.
4. Circumstances underlying Coffman’s guilty plea.
“When a defendant has entered a knowing and voluntary plea of guilty at a hearing at which
he acknowledged committing the crime, the occasion for setting aside a guilty plea should seldom
arise.” Ellis, 470 F.3d at 280 (quotation omitted). Indeed, a court should rarely grant a motion to
withdraw a guilty plea unless the Government obtained the plea “unfairly” or “through ignorance,
fear or inadvertence.” Kercheval v. United States, 274 U.S. 220, 224 (1927). In order to ensure
that a guilty plea is knowing and voluntary, Federal Rule of Criminal Procedure 11(b) sets forth
the procedures a district court must follow before accepting a plea. See Fed. R. Crim. P. 11(b). In
accepting Coffman’s guilty plea, the district court followed the Rule 11(b) procedures.
Coffman contends that this factor weighs in his favor because he received ineffective
assistance of counsel at the guilty plea phase. We addressed, and rejected, Coffman’s ineffective
assistance of counsel claim in Section II.A. above. This factor weighs against Coffman.
5. Coffman’s nature and background and prior experience with the criminal
justice system.
The district court weighed Coffman’s nature and background and prior experience with the
criminal justice system as factors against him. The district court observed that while Coffman
struggled in the past with addiction and had limited education, he “was able to understand and
appreciate the nature and gravity of the proceedings.” [R. 32, PageID 190.] The district court also
found that based on his prior criminal convictions, Coffman was “sufficiently familiar with the
12
Case No. 21-3740, United States v. Coffman
criminal justice system to appreciate the significance and ramifications of the plea process.” [Id.
at 190–91.]
Coffman does not challenge the district court’s findings. He argues, however, that these
factors are irrelevant because he received ineffective assistance of counsel. Because we have
rejected Coffman’s ineffective assistance of counsel claim and because Coffman admittedly does
not challenge the district court’s findings regarding these factors, we find that these factors weigh
against Coffman.
6. Potential prejudice to the Government.
The final factor is “potential prejudice to the government if the motion to withdraw is
granted.” Bashara, 27 F.3d at 1181. However, “the government is not required to establish
prejudice that would result from a plea withdrawal, unless and until the defendant advances and
establishes a fair and just reason for allowing the withdrawal.” Ellis, 470 F.3d at 286 (quoting
Spencer, 836 F.2d at 240). Thus, because the district court did not abuse its discretion when it
determined that the first six factors weighed against Coffman, it did not abuse its discretion when
it found it unnecessary to consider this factor.
C. Sentencing.
Coffman challenges the district court’s decision to apply a two-level upward departure
based on the extended length of a child pornography video found on Coffman’s LG phone.
Specifically, Coffman contends that the district court failed to assess the nature of the images in
the 89-minute video and, instead, applied the entire length of the video to support the upward
departure without determining how much of the video constitutes visual depictions of child
pornography. This Court “review[s] de novo the district court’s interpretation of the Sentencing
Guidelines and review[s] its findings of fact for clear error.” United States v. Fugate, 964 F.3d
13
Case No. 21-3740, United States v. Coffman
580, 583 (6th Cir. 2020) (citation omitted). Accordingly, we “accept the findings of fact of the
district court unless they are clearly erroneous and . . . give due deference to the district court’s
application of the guidelines to the facts.” 18 U.S.C. § 3742(e).
As applied in child pornography cases, U.S.S.G. § 2G2.2(b)(7) provides that “[i]f the
offense involved . . . at least 150 images, but fewer than 300, increase by three levels . . . .” Further,
when determining the number of images, “[e]ach video . . . shall be considered to have 75 images.
If the length of the visual depiction is substantially more than 5 minutes, an upward departure may
be warranted.” U.S.S.G. § 2G2.2 cmt. n.6. We have found that “one could reasonably decide ‘that
videos and movies’ cause more harm and so ‘should be weighed much more heavily than photos
or pictures.’” United States v. Lynde, 926 F.3d 275, 280 (6th Cir. 2019) (citation omitted).
The district court, as permitted by the sentencing guidelines, found that each of the three
videos of child pornography was 75 images, resulting in a three-level enhancement. The district
court also granted a two-level upward departure for the 89-minute video because it was
substantially longer than five minutes. While Coffman argues that a two-level upward departure
should not have applied because the district court did not find that the entire video contained a
“lascivious display” of child pornography, he cites no authority for this proposition. The district
court explained its rationale for its upward departure, and its findings were not clearly erroneous.
Accordingly, we do not find that the district court abused its discretion in applying the two-level
upward departure.
III. CONCLUSION
For these reasons, we affirm.
14 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487958/ | NOT RECOMMENDED FOR PUBLICATION
File Name: 22a0467n.06
No. 21-6137
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Nov 18, 2022
) DEBORAH S. HUNT, Clerk
UNITED STATES OF AMERICA,
)
Plaintiff-Appellee, ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
v. ) COURT FOR THE EASTERN
) DISTRICT OF KENTUCKY
JOHN MICHAEL ESSEX, )
Defendant-Appellant. ) OPINION
)
Before: SUTTON, Chief Judge; COLE and GRIFFIN, Circuit Judges.
GRIFFIN, Circuit Judge.
A jury convicted defendant John Essex of drug trafficking and firearm crimes, and the
district court sentenced him to thirty-four years imprisonment. He raises three issues in this appeal:
(1) the district court’s denial of a motion to suppress evidence; (2) the sufficiency of the evidence
supporting his convictions; and (3) the district court’s imposition of a two-level sentencing
enhancement for obstructing justice. Because these issues are without merit, we affirm.
I.
We first address defendant’s contention that the district court erred in denying his motion
to suppress evidence. “When reviewing a district court’s ruling on a motion to suppress, we will
reverse findings of fact only if they are clearly erroneous. Legal conclusions as to the existence of
probable cause are reviewed de novo. When the district court has denied the motion to suppress,
we review all evidence in a light most favorable to the Government.” United States v. Coffee,
434 F.3d 887, 892 (6th Cir. 2006) (brackets, internal citations, and quotation marks omitted).
No. 21-6137, United States v. Essex
Mercer County Sheriff’s Deputy Sean Brown was trying to locate and arrest Patrick Jones,
who had an outstanding arrest warrant for first-degree assault. So he patrolled an area where it
was known that Jones was staying in Harrodsburg, Kentucky: the property containing the trailer
defendant John Essex shared with his girlfriend, Nicole Votaw. Deputy Brown saw Votaw driving
a Jeep that Jones was known to drive (and, at the time, believed Jones was in the passenger seat—
it was later determined the passenger was Patrick’s brother, Derrick). He then observed the car
drive through the front yard to the back of the trailer and heard car and trailer doors open and close,
indicating that the pair in the Jeep entered the trailer. Brown called for backup and made sure that
no one left the trailer while he waited. Like Patrick Jones, Votaw also had an active arrest warrant
and Deputy Brown knew that.
Sheriff’s Deputy David Prather soon arrived, the two announced their presence, and
continually knocked on the trailer’s door for several minutes. Essex eventually came out, and,
believing Votaw was still in the trailer, Deputy Prather entered, found Votaw showering, and
escorted her to the master bedroom to retrieve clothing. Marijuana and drug paraphernalia were
in plain view on the nightstand. That contraband formed the factual basis for a later-executed
search warrant, during which officers discovered the gun and various drugs supporting defendant’s
charges (and ultimate convictions) for possessing 50 grams or more of methamphetamine with
intent to distribute in violation of 21 U.S.C. § 841(a)(1), possessing 40 grams or more of a
substance containing detectable amounts of heroin and fentanyl with intent to distribute in
violation of 21 U.S.C. § 841(a)(1), and possessing a firearm as a convicted felon in violation of
18 U.S.C. § 922(g)(1). Essex appeals the district court’s order denying his motion to suppress this
-2-
No. 21-6137, United States v. Essex
evidence, claiming the Fourth Amendment precluded the officers’ warrantless entry into the trailer
to arrest Votaw.
A law enforcement officer must generally obtain a search warrant to enter a home without
consent, see Lange v. California, 141 S. Ct. 2011, 2017 (2021), including when entering a third-
party’s home to look for an arrestee subject to an arrest warrant, see Steagald v. United States,
451 U.S. 204, 212–16 (1981). But not so when it is the home of the person subject to the arrest
warrant—“[F]or Fourth Amendment purposes, an arrest warrant founded on probable cause
implicitly carries with it the limited authority to enter a dwelling in which the suspect lives when
there is reason to believe the suspect is within.” Payton v. New York, 445 U.S. 573, 603 (1980).
This is a two-part inquiry, whereby the officers must have reason to believe the home is the
subject’s dwelling and that the subject is inside. See El Bey v. Roop, 530 F.3d 407, 416 (6th Cir.
2008).
Discerning the meaning of Payton’s “reason to believe” language (which, importantly,
guides our review of these two factors) has eluded our review. In United States v. Pruitt, we
concluded officers need only satisfy the “lesser reasonable belief standard, and not probable
cause . . . to enter a residence to enforce an arrest warrant,” which is informed by “common sense
factors and evaluating the totality of the circumstances.” 458 F.3d 477, 482 (6th Cir. 2006). Yet,
we cast aside Pruitt’s holding as dicta in United States v. Hardin, albeit in dicta itself. 539 F.3d
404, 412–15 (6th Cir. 2008); but see id. at 427–40 (Batchelder, J., concurring in part) (concluding
that Pruitt’s reasonable-belief standard is the law of the circuit). And following Hardin, our
approach has been to note our “vacillat[ion]” between the two standards, and then resolve the
appeal using the higher probable-cause standard. United States v. Cammon, 849 F. App’x 541,
544–45 (6th Cir. 2021). We do the same here.
-3-
No. 21-6137, United States v. Essex
Because Essex does not dispute officers reasonably believed Votaw was in the trailer, our
sole focus is whether it was her residence. At the suppression hearing, Deputy Brown testified
that he freshly learned from informants whom he had successfully used in the past that Votaw was
“dating Mr. Essex, and living in the residence with him.” The magistrate judge deemed these
informants “credible.” This information, combined with the observation of Votaw driving on the
property and entering the trailer, demonstrates the requisite “recent and firsthand knowledge”
sufficient to give the officers probable cause, let alone “reasonable belief,” that Votaw was living
in the trailer. Hardin, 539 F.3d at 421–22 (collecting cases, commenting that “[a] common feature
of [cases finding sufficient reason for belief] is recent, eyewitness evidence connecting the suspect
to the residence, and often even conduct by the suspect that demonstrates a tie to the residence”);
see also United States v. Lewis, 676 F. App’x 440, 445 (6th Cir. 2017); United States v. Block, 378
F. App’x 547, 550 (6th Cir. 2010); United States v. Ellis, 125 F. App’x 691, 696 (6th Cir. 2005).
Essex resists this conclusion on a few fronts. He contends that the officers should have
verified Votaw’s warrant status before entering; however, as the district court concluded, they
knew she had an active warrant and there was no reason for them to believe otherwise. Essex also
suggests Brown should have provided more information about his known informants’ identities,
but that failure is not fatal to the government’s case—whether probable cause exists requires
examining the totality of the circumstances and not applying a mechanical checklist. See Illinois
v. Gates, 462 U.S. 213, 230 (1983); cf. United States v. May, 399 F.3d 817, 824–25 (6th Cir. 2005)
(“The statements of an informant[,] . . . whose identity was known to the police and who would be
subject to prosecution for making a false report, are thus entitled to far greater weight than those
of an anonymous source.”). And finally, he argues on appeal that the officers entered his home
not to arrest her, but rather after they detained him (and Derrick Jones), and then conducted a
-4-
No. 21-6137, United States v. Essex
subsequent “protective sweep” of the trailer during which they discovered Votaw and the
contraband. But he made no such argument to the district court, nor did he object to the magistrate
judge’s conclusion that the officers “went inside to serve her outstanding arrest warrant.” He has
thus forfeited this issue on appeal. United States v. Crawford, 943 F.3d 297, 310–11 (6th Cir.
2019).
Finally, we would be remiss to not point out that the district court considered other evidence
concerning Votaw’s residence that officers did not learn about until after they entered the trailer,
including admissions by her and Essex that she was living at the trailer. It should not have done
so. See Dickerson v. McClellan, 101 F.3d 1151, 1155 n.3 (6th Cir. 1996) (“[W]e must consider
only the facts the officers knew at the time of the alleged Fourth Amendment violation.”). This
error does not mandate reversal because the district court’s judgment “can be justified for any
reason.” Hardin, 539 F.3d at 421 (citation and emphasis omitted).
For these reasons, the district court properly denied defendant’s motion to suppress.
II.
Essex next contends the government did not sufficiently establish that he constructively
possessed the drugs and gun forming the factual basis of his convictions. A defendant claiming
insufficient evidence “faces a high bar” on appeal. United States v. Persaud, 866 F.3d 371, 379–
80 (6th Cir. 2017). This is because we must uphold a jury’s conviction if, “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.” Jackson v. Virginia, 443 U.S.
307, 319 (1979). We can sustain a conviction based on circumstantial evidence alone, and the
evidence need not disprove every hypothesis except that of guilt. United States v. Lindo, 18 F.3d
353, 357 (6th Cir. 1994). A sufficiency claim does not allow us to “weigh the evidence presented,
-5-
No. 21-6137, United States v. Essex
consider the credibility of witnesses, or substitute our judgment for that of the jury.” United States
v. Jackson, 470 F.3d 299, 309 (6th Cir. 2006) (citation omitted). Rather, we “draw all available
inferences and resolve all issues of credibility in favor of the jury’s verdict.” Id. (citation omitted).
Constructive possession occurs “when the defendant does not have possession but instead
knowingly has the power and intention at a given time to exercise dominion and control over an
object, either directly or through others.” United States v. Vichitvongsa, 819 F.3d 260, 275
(6th Cir. 2016) (internal quotation marks omitted). “Proof that the person has dominion over the
premises where the [prohibited item] is located is sufficient to establish constructive possession.”
United States v. Kincaide, 145 F.3d 771, 782 (6th Cir. 1998) (internal quotation marks omitted).
Put differently, “[a] jury is entitled to infer that a person exercises constructive possession over
items found in his home.” United States v. Hill, 142 F.3d 305, 312 (6th Cir. 1998) (internal
quotation marks omitted).
Viewing the evidence in the light most favorable to the government, any rational jury
member could conclude defendant constructively possessed the hundreds of grams of
methamphetamine and heroin/fentanyl mixture that officers found in a green ammunition storage
box by the bed in the trailer’s master bedroom. The jury heard from Votaw, who testified that
Essex regularly slept in that bed (and indeed was doing so when she entered the trailer after seeing
Deputy Brown) and kept personal belongings there. The trailer’s owner also testified that he rented
the trailer to defendant. And the jury listened to a jailhouse recording of defendant himself talking
about living in that trailer. Finally, the government presented significant evidence tying defendant
to drug-trafficking activities, thus circumstantially corroborating his control over the distribution-
level quantities of drugs officers found in the bedroom, including: Essex’s possession of large
amounts of cash, digital scales, and a drug testing kit; deleted text messages discussing drug deals;
-6-
No. 21-6137, United States v. Essex
and numerous individuals visited the trailer “all the time” to “get[] high.” None of this is direct
evidence of possession—Essex points out, for example, the lack of forensic evidence tying him to
the drugs. But circumstantial evidence equally can provide the basis for a conviction “and such
evidence need not remove every reasonable hypothesis except that of guilt.” United States v. Hall,
20 F.4th 1085, 1106 (6th Cir. 2022) (internal quotation marks omitted). For these reasons, the
evidence presented at trial more than demonstrates constructive possession generally and the
“modicum of additional evidence” specifically needed to tie Essex to the drugs given that Votaw
(and possibly others) also lived there. United States v. Latimer, 16 F.4th 222, 227 (6th Cir. 2021).
Further, any rational juror could similarly find that Essex constructively possessed a rifle
officers found in a Nissan sedan parked on the same property as the trailer. One could begin and
end with Essex’s admission to Deputy Brown that he had purchased the Nissan. But beyond that
evidence of ownership, other facts demonstrate Essex controlled the Nissan—it was parked near
the trailer Essex rented, and other witnesses saw Essex routinely driving it. Given these facts, that
other individuals were also known to drive the Nissan and that the government again relied on
circumstantial evidence of his possession does not give us reason to question the jury’s more-than-
rational conclusion.
III.
Finally, Essex challenges as erroneous the district court’s application of a sentencing
enhancement for obstructing justice under U.S.S.G. § 3C1.1. That provision increases a
defendant’s offense level by two “[i]f (1) the defendant willfully obstructed or impeded, or
attempted to obstruct or impede, the administration of justice with respect to the investigation,
prosecution, or sentencing of the instant offense of conviction, and (2) the obstructive conduct
related to (A) the defendant’s offense of conviction and any relevant conduct; or (B) a closely
-7-
No. 21-6137, United States v. Essex
related offense.” U.S.S.G. § 3C1.1. The government must demonstrate that the obstruction-of-
justice enhancement applies by a preponderance of the evidence. United States v. Dunham,
295 F.3d 605, 609 (6th Cir. 2002). Although we review legal conclusions de novo and factual
findings for clear error, we have “sent mixed messages” on how to “review the application of th[is]
guideline to the facts”; sometimes we apply a de novo review of the district court’s application,
for others we turn to the more deferential clear-error standard, and occasionally we pick something
in between. See United States v. Thomas, 933 F.3d 605, 608 (6th Cir. 2019) (collecting cases). As
above, we need not resolve this tension because, even if we used the more demanding de novo
standard, the district court properly applied the enhancement.
The facts supporting the enhancement stem from a phone call Essex placed just before the
district court’s hearing on his suppression motion to a Pete Jones, with whom Votaw was living at
the time. In that call, he stressed to Pete Jones that Votaw and Derrick Jones (the brother of the
man police were initially looking for on defendant’s property) needed to “tell the truth” at the
upcoming suppression hearing, and more specifically that “[h]is version of the truth” was that
Votaw was inside the trailer and not with Derrick Jones in the Jeep when Deputy Brown came
across the property. (Such a fact, of course, would undermine the justification for entering the
trailer without a search warrant). He also expressed his frustration with Votaw’s refusal to talk to
him and apparent unwillingness to testify in that manner in a not so subtle and intimidating way—
he angrily told Pete Jones that she needed to be “throw[n . . .] out in the street,” “kill[ed], and
throw[n . . .] out in a goddamn river” and that he needed to get his “buddy” to “talk to her.” At
the suppression hearing, both Derrick Jones and Essex testified that Votaw was inside the trailer
(and Votaw did not testify). The district court subsequently concluded that the enhancement
-8-
No. 21-6137, United States v. Essex
applied because defendant suborned Derrick Jones’s perjury, committed perjury, and threatened
Votaw.
On appeal, Essex takes issue only with the first two factual bases and says nothing with
respect to the district court’s conclusion that his threats to Votaw obstructed justice. Nor could he.
“[A] defendant has obstructed justice when his behavior can be reasonably construed as a threat,”
United States v. Robinson, 813 F.3d 251, 263 (6th Cir. 2016) (internal quotation marks omitted),
and his not-so-veiled, indirect threat immediately before his suppression hearing about Votaw
more than suffices to support application of the enhancement, see United States v. French, 976
F.3d 744, 749 (6th Cir. 2020) (“Section 3C1.1 covers indirect threats delivered through an
intermediary . . . regardless of whether an intended recipient learns of the threat or actually feels
intimidated by the threat.”). Because this basis independently supports application of the
enhancement, we see no reason to reverse the district court on this issue. United States v. Paull,
551 F.3d 516, 526 n.2 (6th Cir. 2009). (And even if he we were to look past his threat to Votaw
to his perjury and suborning perjury, we agree with the district court that a preponderance of the
evidence equally and independently demonstrates Essex obstructed justice for purposes of
§ 3C1.1.).
IV.
For these reasons, we affirm the district court’s judgment.
-9- | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494180/ | MEMORANDUM DECISION
EILEEN W. HOLLOWELL, Bankruptcy Judge.
I. INTRODUCTION
The Debtor seeks to avoid two Deeds of Trust on her homestead. Because she lacks standing to seek such relief, this adversary will be dismissed.
II. FACTS AND PROCEDURAL HISTORY
In November of 2004, the Debtor’s son was arrested. In response to his request that she obtain his release from jail, the Debtor, a widow in her 70’s, using information from the yellow pages, contacted a number of bail bond companies to see if a bail bond could be obtained using her son’s van as collateral. None of the companies she contacted would accept the van as collateral. Ultimately, the Debtor retained the services of Dorine’s Bail Bonds to post a $7,500 bond to obtain his release. Dorine’s Bail Bonds agreed to post the bond if real property was pledged as collateral. The Debtor and her daughter testified that the Debtor offered to pledge a vacant lot she owned in Benson (“Benson Lot”). Dorine Garcia, the principal of Do-rine’s Bail Bonds and the sole shareholder of Dorine’s Bail Bonds Inc., testified that the only collateral that was offered for the first bond was the Debtor’s home.
In connection with the issuance of the $7,500 bond, the Debtor executed an Indemnity Agreement, Waiver of Abandonment of Homestead, a Deed of Trust and Assignment of Rents (“First Deed of Trust”), Durable Power of Attorney, and a Bail Bond Agreement. All of the agreements, other than the First Deed of Trust, were between the Debtor and “Dorine’s Bail Bonds.” The First Deed of Trust lists Dorine’s Bail Bonds, Inc. as both the trustee and the beneficiary at the same address as Dorine’s Bail Bonds. The Debtor also signed and was given a copy of a Collateral Receipt which lists the Debt- or’s home as her address and the collateral received as being a “prop lien.”1 The First Deed of Trust, which lists the property pledged as the Debtor’s home, was recorded on November 15, 2004.
The Debtor’s son was re-arrested in January, 2005. The Debtor again used Dorine’s Bail Bonds to post a bond of *890$25,000 to obtain his release. On January 6, 2005, the Debtor executed a second set of agreements with Dorine’s Bail Bonds and a Deed of Trust and Assignment of Rents (“Second Deed of Trust”) which lists Dorine’s Bail Bonds, Inc. as both the trustee and the beneficiary at the same address as Dorine’s Bail Bonds. The Debtor executed and was given a copy of a second Collateral Receipt listing her home address as her address and describing the collateral received as a “prop lien.” The Second Deed of Trust was recorded on April 29, 2005. Like the First Deed of Trust, it lists the Debtor’s home as the pledged property. Again, the parties disagree about what collateral the Debtor agreed to pledge. The Debtor asserts that she only agreed to place a Second Deed of Trust on the Benson Lot. Dorine Garcia testified that the Debtor agreed to pledge her home.
The Debtor’s son was re-arrested in March of 2005. She again retained the services of Dorine’s Bail Bonds to post a $20,000 bond to obtain his release. No separate agreements were executed by the Debtor with respect to the $20,000 bond. Dorine Garcia made changes to the Second Deed of Trust, which added the amount of the $20,000 bond to the Second Deed of Trust, so that the total amount of the debt secured by the Second Deed of Trust was $45,000. Dorine Garcia testified that the changes were made in front of the Debtor and with her consent. The Debtor did not initial the changes and denies that the changes were made in her presence or that she agreed to increase the amount of the indebtedness secured by the Second Deed of Trust from $25,000 to $45,000.
Dorine Garcia testified that the first and only time the Debtor mentioned the Benson Lot was in response to an inquiry about supplemental collateral for the third bond. In fact, the third Collateral Receipt issued to the Debtor on March 24, 2005, lists the Benson Lot as her home address and again describes the collateral received as a “prop lien.”
The Debtor and her daughter, who was present when all the agreements were signed, testified that Dorine Garcia never explained the content of any of the documents the Debtor was asked to sign. Do-rine Garcia disputed that testimony. It is undisputed that Debtor never read any of the documents she signed. The Debtor testified that she signed the documents because she was told by Dorine Garcia that if she did not do so, her son would not be released from jail.
Copies of the agreements, including the First and Second Deeds of Trust, (collectively “Deeds of Trust”) were not provided to the Debtor nor did she request copies until this litigation commenced. Debtor testified that she always believed that the only property being pledged to secure three bonds totaling over $50,000 was the Benson Lot. Debtor also testified that she would have never signed any of the documents if she knew that she was pledging her house, rather than the Benson Lot, as collateral for the bonds.
All of the documents were notarized by Dorine Garcia, but the Debtor testified that the documents were not notarized in her presence. While Dorine Garcia disputes that assertion, she conceded that she did not request any identification from the Debtor before notarizing her signature. Dorine Garcia also did not maintain a “notary book” in 2004 and 2005.
The Debtor’s son did not timely appear for his court date and all three bonds were forfeited to the State of Arizona in June of 2005.2 Thereafter, Dorine’s Bail Bonds, *891Inc., (“Dorine’s”) retained counsel who substituted in as the trustee under the Deeds of Trust. Thereafter, a Trustee’s Sale was commenced to foreclose the Debtor’s house. In response, the Debtor filed a chapter 13 petition.
The Debtor’s Schedules value the Benson Lot at $2,700. During the trial, Debt- or testified that she had an oral offer of $10,000 for it and believed it was worth about $22,000. The Debtor’s Chapter 13 plan provides for monthly payments of $25 a month for 60 months with no return to unsecured creditors whose claims total $7,000. All of the Plan payments will be used to pay the Debtor’s lawyer or the Chapter 13 Trustee.
Shortly after the Chapter 13 case was filed, Dorine’s moved for stay relief. The Debtor objected asserting that Dorine’s did not have a secured claim due to various alleged defects in the Deeds of Trust and because the Debtor alleged that Dorine Garcia had fraudulently included the legal description of Debtor’s home in the Deeds of Trust rather than the Benson Lot. Debtor then filed this adversary seeking a determination of the validity of the Deeds of Trust. Dorine’s has agreed to continue the final hearing on its motion for relief from stay until this adversary is decided. Debtor has made no payments of any kind to Dorine’s since filing her Chapter 13 case, final hearing on its motion for relief from stay until this adversary is decided. Debtor has made no payments of any kind to Dorine’s since filing her Chapter 13 case.
The Debtor’s complaint seeks a determination that the two Deeds of Trust are unenforceable because: (1) they were not properly notarized; (2) using the Debtor’s home as the pledged collateral was fraudulent because the Debtor only agreed to pledge the Benson Lot; (3) the Second Deed of Trust was not timely recorded; (4) the agreements secured by the Deeds of Trust were too incomplete to be valid contracts; (5) Dorine’s Bail Bonds, Inc. is not qualified under Arizona law to act as a trustee of the Deeds of Trust; and (6) the Second Deed of Trust was altered to add $20,000 to the amount pledged without the Debtor’s consent. The relief requested was a determination that the Deeds of Trust are invalid and a declaration that Dorine’s claim is unsecured. The Complaint does not include a jurisdictional statement. The Joint Pretrial Statement asserts that this Court has jurisdiction over the adversary under 11 U.S.C. §§ 548 and 105.
Trial was held on September 12, 2006. After a number of extensions, both sides submitted closing argument in the form of post-trial briefs. The Debtor’s Post-Trial Memorandum asserts that because the Second Deed of Trust was recorded more than 60 days after execution and was altered without Debtor’s consent, it can be avoided by the Debtor under 11 U.S.C. §§ 544 and 522(h). The Debtor’s Post-Trial Memorandum also includes an allegation, not made in the Complaint, but raised at trial, that in order for the Deeds of Trust to be valid and enforceable, the beneficiary should be Dorine’s Bail Bonds— the party to the various agreements purportedly secured by the Deeds of Trust, not Dorine’s Bail Bonds, Inc., a separate legal entity.
*892III. STATEMENT OF JURISDICTION
If the court has jurisdiction, it would be pursuant to 28 U.S.C. § 157(b)(2)(F) and 11 U.S.C. § 522(h).
IV. ISSUES
Does the court have jurisdiction to consider Debtor’s claims? If so, are the Deeds of Trust void or voidable under applicable state or bankruptcy law?
V. DISCUSSION
As noted in the Defendant’s post-trial brief, the only issue in this adversary is whether the debt due to Dorine’s is secured by the Debtor’s home. In order to challenge Dorine’s security interest, the Debtor must have standing to do so. If the Debtor does not have such standing, this court lacks subject matter jurisdiction to decide if the Deeds of Trust create a valid security interest in Debtor’s home. The jurisdiction of the Bankruptcy Court is grounded in and limited by statute. Celotex v. Edwards, 514 U.S. 300, 115 S.Ct. 1493, 1493, 131 L.Ed.2d 403 (1995); see also Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (citation omitted) (“Without jurisdiction, the court cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause.”).
The Debtor asserts that she has standing to challenge the validity of the Deeds of Trust based on 11. U.S.C. §§ 522(g) and (h). Section 552(h) provides as follows:
(h) The debtor may avoid a transfer of property of the debtor or recover a set-off to the extent that the debtor could have exempted such property under subsection (g)(1) of this section if the trustee had avoided such transfer, if&emdash;
(1) such transfer is avoidable by the trustee under section 544, 545, 547, 548, 549, or 724(a) of this title or recoverable by the trustee under section 553 of this title; and
(2) the trustee does not attempt to avoid such transfer.
Section 522(g)(1) limits the Debtor’s avoidance rights by providing that a debtor may only exempt property recovered under § 522(h) if: (1) the transfer was not voluntary, and (2) the debtor did not conceal the property.3
Read together, § 522(g) and § 522(h) allow a debtor to avoid the transfer of property that the trustee could have avoided, but failed to do so if the property is legitimately exempt, was not concealed and was not voluntarily transferred. In this case, the only issue which could preclude Debtor's standing to challenge the Deeds of Trust is whether she voluntarily granted a security interest in her house when she executed the Deeds of Trust.
The purpose for excepting a voluntary transfer of property from a debt- or’s avoidance rights is to prevent a debtor from receiving a windfall, which would en*893able him to benefit from his own voluntary act. In re Davis, 169 B.R. 285, 295 (E.D.N.Y.1994). However, the Bankruptcy Code does not define the term “voluntary” for purposes of a transfer under §§ 522(g). Courts have recognized that involuntary transfer may occur under circumstances which involve fraud, material misrepresentation or coercion. The burden of proving that the transfer was not voluntary is on a debtor. Davis, 169 B.R. at 295, In re Corwin, 135 B.R. 922, 924 (Bankr.S.D.Fla.1992).
In this case, the Debtor asserts that Dorine Garcia committed fraud by using the Debtor’s house as the pledged collateral rather than the Benson Lot. In order to prove that the Debtor’s house was fraudulently pledged, the Debtor must demonstrate that Dorine Garcia made a knowingly, materially false representation with the intent of deceiving the Debtor, that the Debtor was both ignorant of the falsity of the representation and had a right to rely on it. Peery v. Hansen, 120 Ariz. 266, 269, 585 P.2d 574, 577 (Ariz.App.1978).
However, the testimony of the Debtor that she believed the Benson Lot was the collateral for the Deeds of Trust is not credible. Both the Debtor and her daughter testified that they had attempted to obtain a bond to secure the release of Debtor’s son by pledging his van. No bonding company would accept the van as adequate collateral. The Debtor’s schedules indicate she placed a very low value on the Benson Lot-not even half the value of the first $7,500 bond. Even if the Debt- or’s testimony at trial that the Benson Lot is worth around $22,000 is accepted, that value is insufficient to adequately collateralize bonds totaling over $50,000. The Debtor was aware that there were only two alternatives to obtain her son’s release&emdash;(1) pay cash in the full amount of the bond, something the record indicates she did in Tucson City Court4 or (2) pay a bail bondsman a fee of 10% of the bond and post collateral to cover the cost of the bond in the event it was forfeited. Debtor could not have reasonably believed that any bond would be issued if the pledged collateral was worth far less than the bond.
Even if the Debtor’s testimony was credible, she cannot meet the reasonable reliance requirement needed to prove her fraud claim because she did not read the agreements, including the Deeds of Trust. The general rule under Arizona law is that parties have a duty to read the agreements they sign and if they do not do so, they will not be permitted to avoid a contract because they supposed its terms were different than what they really were. See Mutual Benefit Health & Accident Association v. Ferrell, 42 Ariz. 477, 487, 27 P.2d 519, 523 (Ariz.1933) (overruled on other grounds). There are exceptions to that rule when “there are special and peculiar circumstances justifying the signer in relying upon the representations, such as a fiduciary relation between the parties, that the signer was ... unable to understand the nature of the agreement and the like.” Ferrell, 42 Ariz. at 487-88, 27 P.2d at 523, cited in Darner Motor Sales, Inc. v. Universal Underwriters Insurance Company, 140 Ariz. 383, 399, 682 P.2d 388, 404 (Ariz.1984).
However, there is no evidence that a fiduciary relationship existed between the Debtor and Dorine’s. Nor has any Arizona case or statute been cited by the Debtor that creates such a fiduciary duty. Also, there is no evidence that the Debtor was unable to understand the agreements she signed. She simply did not take the *894time to read the agreements because she was anxious to obtain her son’s release. The Debtor, therefore, has not met her burden of demonstrating that Dorine’s committed fraud by including the Debtor’s homestead in the Deeds of Trust.
While the Debtor did not prove that Dorine’s committed fraud, the transfer may nevertheless not have been voluntary. An involuntary transfer occurs where a debtor is either: (1) subjected to an outside influence which overcame her free will or (2) lacked knowledge of all facts essential to her decision to grant the transfer. In re Corwin, 135 at 924; see also In re Reaves, 8 B.R. 177, 181 (Bankr.D.S.D.1981). In this case, the Debtor was not shamed, harassed, insulted or pressured by Dorine Garcia, so there is no basis for assuming that she was not able to exercise her free will. Debtor’s disputed testimony was that the content and consequences of the various agreements were not explained to her and that had she known all of the essential facts, she would not have executed the documents, especially if she had been told it could result in the loss of her home. Even if Debtor’s allegations are true, they would be insufficient to make the Deeds of Trust involuntary transfers. As one court has noted:
Financial institutions are not required to issue “Miranda type” admonitions. The failure to explain the effect of the deed of trust is insufficient to show an involuntary transfer. To be involuntary, the debtor must further prove that the creditor pressured him into transferring the property through harassment, insults or shame ....
In re Echoles, 21 B.R. 280, 281-82 (Bankr.D.Ariz.1982) (citation omitted). The Debt- or was told if she did not execute the documents, her son would not be released from jail, but that was a simple statement of fact. Without adequate collateral for the bonds, the bonds would not be posted and the Debtor’s son would have remained in jail. See Corwin, 135 B.R. at 924 (evidence was insufficient to establish that creditor intended to harass, insult or shame the debtors where failure to make the transfer would, in fact, result in serious legal ramifications).
VI. CONCLUSION
Having failed to establish that the granting of the Deeds of Trust were involuntary transfers as required by § 522(g)(1), the Debtor lacks standing under § 522(h) to set aside the Deeds of Trust. This court, therefore, lacks jurisdiction to decide the claims in the Debtor’s Complaint, including the challenge to the validity of the Deeds of Trust based on claims of improper notarization, unauthorized alteration, and the effect of the disparity between the named beneficiary in the Deeds of Trust and the party to the other agreements (i.e. the allegation that Dorine’s Bail Bonds is not the same entity as Dorine’s Bail Bonds, Inc.).
The foregoing constitutes the findings of fact and conclusions of law required by Fed. R. Bankr.P. 7052. A separate order will be entered this date dismissing this adversary with prejudice. Counsel for Do-rine’s is also directed to submit an order, upon 10 days’ notice to Debtor and her counsel, granting Dorine’s relief from the automatic stay.
. A.R.S. § 20-340.01(E) requires that bail bondsmen issue pre-numbered receipts to the party paying for the bond. Whether the receipts provided to the Debtor met the requirement of A.R.S. § 20-340.01 is not addressed in this decision.
. Debtor’s post-trial brief asserts that because canceled checks were not produced at trial, *891there is no proof that Dorine’s Bail Bonds, Inc. actually paid Pima County for the forfeited bonds. This assertion is without merit. The Joint Pre-Trial Statement's — Statement of Uncontested Issues of Material Fact included a statement that Dorine’s Bail Bonds was required.to pay Pima County Superior Court the full amount of the bonds. Three different judgments of bond forfeiture were also admitted into evidence without objection from the Debtor.
. There is a split of authority on whether Chapter 13 debtors may exercise the trustee's avoidance rights free from the limitations of § 522(g). Compare In re Cohen, 305 B.R. 886, 897 (9th Cir. BAP 2004) (Debtor has concurrent power with the Chapter 13 Trustee to exercise avoidance powers "for the benefit of the estate”) with In re Hansen, 332 B.R. 8, 13 (10th Cir. BAP 2005) (Congress limited Chapter 13 debtors' avoidance powers to those set forth in § 522(h)). However, in this case, the Debtor's Chapter 13 plan, which provides for no distribution to creditors other than her lawyer, demonstrates that the Debtor is seeking to avoid the Deeds of Trust, not for the benefit of the Chapter 13 estate, but to preserve Debtor’s homestead. Accordingly, the limitations of § 522(g) apply.
. Transcript at p. 74, lines 23-25. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494181/ | FEDERMAN, Bankruptcy Judge.
Debtor Alvin Leroy Baldwin appeals from the Bankruptcy Court’s1 March 28, 2006 Order denying his motion, which we deem to be a Rule 60(b)(4)2 motion for relief from the Court’s March 9, 2006 Order dismissing his case. For the reasons that follow, the Order is affirmed.
FACTUAL BACKGROUND
Debtor Alvin Leroy Baldwin has filed eight Chapter 13 bankruptcy cases since 1996, all of which were dismissed prior to confirmation of a plan. Four of the cases were filed after he entered into a home loan with the predecessor of Credit Based Asset Servicing and Securitization (CBASS) in May 2002. Specifically, on January 6, 2003, the Debtor filed what was his fifth Chapter 13 case. That case was dismissed two months later, on March 10, 2003, on the trustee’s motion for failure to commence plan payments. He filed his *415sixth Chapter 13 case eleven days later on March 21, 2003. CBASS filed a Proof of Claim in that case showing a prepetition arrearage of $8,255.24. That case was dismissed two months later, on May 21, 2003, on a creditor’s motion to dismiss. No payments had been made under that plan. After that sixth case was dismissed, CBASS scheduled a foreclosure sale for March 24, 2005. That same day, the Debt- or filed his seventh Chapter 13 case. CBASS filed a Proof of Claim in that case showing prepetition arrearage of $12,618.52. The seventh case was dismissed two months later on May 19, 2005, for the Debtor’s failure to appear at the § 341 meeting. No payments had been made under that plan. After that seventh case was dismissed, CBASS set another foreclosure sale for July 14, 2005. That sale was canceled because the Debtor and CBASS entered into a workout agreement which provided for increased payments to bring the account current. The Debtor defaulted under the terms of the workout agreement and CBASS scheduled another foreclosure sale for March 2, 2006. The Debtor, pro se, filed the instant Chapter 13 petition, his eighth case, on February 23, 2006.
Upon being notified of the current bankruptcy filing, CBASS postponed the March 2 foreclosure sale to March 9, 2006 at 11:00 a.m., which is the maximum length of time a scheduled foreclosure sale can be continued under Missouri law, without the consent of the mortgagor.3 On March 3, 2006, CBASS filed a Motion to Expedite Hearing and Motion to Dismiss, or in the Alternative, for Relief from the Automatic Stay. CBASS also requested that the Court bar the Debtor from filing another case for 180 days. The Bankruptcy Court set the hearing on CBASS’s Motion for 9:00 a.m. on March 9, 2006, which was the day scheduled for the postponed foreclosure sale. On the morning of March 9, when the Bankruptcy Court called the matter at 9:00, the Debtor was not present, so the Court passed the matter to the end of the morning’s docket to give the Debtor more time in which to appear. The Court reconvened the matter at approximately 10:38 a.m. Again, the Debtor was not present.
The Debtor did not appear at the hearing because, he says, he did not receive notice of it due to his being out of town on business as an over-the-road truck driver. He did find out about the hearing, however, after the Motion and Notice were delivered by the postal service and opened by his live-in companion at approximately 10:45 a.m. that morning, which was not enough time for him to appear or otherwise respond prior to the hearing.
In any event, at the hearing, CBASS alleged that the bankruptcy case should be dismissed, or relief from the stay granted, because this was the Debtor’s eighth bankruptcy filing and the third time CBASS had stayed or canceled a pending foreclosure sale on this property. The Bankruptcy Court granted the motion to expedite, dismissed the case, and barred the Debtor from refiling for 180 days, finding that this case was filed solely to hinder, delay and frustrate creditors, and thus not filed in good faith. The Court denied as moot the motion for relief from the stay. CBASS proceeded with its foreclosure sale at approximately 11:00 a.m. and sold the property to a third party, Cody Properties, as the highest bidder at the sale.
That same day, at 12:34 p.m., the Debtor filed a pleading in the Bankruptcy Court, entitled “Debtor’s Motion Agstin [sic] Motion for Expedited Hearing,” in which he objected to the expedited hearing and requested that “the motion to release for *416sale be rescinded and that I be allowed to contest this motion in a timely manner.” He stated in that Motion that he had not been at his home in months, and that his driving logs would verify he had been on the road between Pennsylvania and California since March 3. Hence, he did not receive notice of the hearing in time to be there. He stated he was still in California, even at the time of the hearing that day, so he asked that the request for expedited hearing be denied. On March 15, the Court denied this motion as moot because the hearing had already taken place. On March 23, 2006, the Debtor filed a motion requesting that his bankruptcy case be reinstated and the foreclosure sale be set aside as void, again asserting he did not receive notice due to his being on the road since the first part of February. On March 28, 2006, the Bankruptcy Court denied that motion as being untimely since it was filed more than ten days after the Order dismissing the case was entered. The Debtor filed his Notice of Appeal on April 3, 2006. The Debtor requested a stay pending appeal, but the Court denied that request.
CBASS filed a motion to dismiss the appeal, asserting it was moot because the Debtor failed to obtain a stay pending appeal and the foreclosure sale had already occurred. We denied CBASS’s motion but cautioned that, due to the procedural posture of the case, any appeal from the Court’s Order dismissing the case as being filed in bad faith was untimely, so the appeal was limited to the issue of whether the Court erred in denying the Debtor relief from the dismissal Order on the ground it was void for due process violations.
DISCUSSION
We review the bankruptcy court’s legal conclusions de novo and its factual findings for clear error.4
At the outset, we note that the Bankruptcy Court’s March 28 Order denied the Debtor’s March 23 Motion because it was filed more than ten days after the dismissal Order was entered. However, because we deemed the March 23 Motion to be a Rule 60(b) motion to vacate the dismissal Order, it was timely. Nevertheless, we are not bound by the grounds articulated by the bankruptcy court for denying the Debtor’s motion, and we may affirm the judgment on any other grounds supported by the record.5 Because we conclude that the Debtor received sufficient notice under the particular circumstances, the Bankruptcy Court did not err in refusing to set aside the dismissal Order.
Section 1307(c) provides, in relevant part, that “on request of a party in interest ... and after notice and a hearing,” the court may convert or dismiss a Chapter 13 case for cause.6 Such cause includes filing a bankruptcy petition in bad faith, including unfairly manipulating the bankruptcy code through multiple filings.7 As stated above, the issue here is not whether the Bankruptcy Court erred in dismissing the case due to bad faith, be*417cause any appeal from that Order was untimely; rather, the sole issue is whether the Bankruptcy Court erred in failing to set aside the Order dismissing the Debt- or’s case due to insufficiency of the notice of CBASS’s Motion and the hearing.
The phrase “after notice and a hearing” means “after such notice as is appropriate in the particular circumstances, and such opportunity for a hearing as is appropriate in the particular circumstances.”8 The phrase authorizes an act without an actual hearing if such notice is given properly and “there is insufficient time for a hearing to be commenced before such act must be done, and the court authorizes such act.”9
Rule 1017 provides that Rule 9014 governs a proceeding to dismiss a case under § 1307(c).10 Motions for relief from the stay are also contested matters to which Rule 9014 is applicable.11 Under Rule 9014:
(a) Motion. In a contested matter in a case under the Code not otherwise governed by these rules, relief shall be requested by motion, and reasonable notice and opportunity for hearing shall be afforded the party against whom relief is sought. No response is required under this rule unless the court orders an answer to a motion.
(b) Service. The motion shall be served in the manner provided for service of a summons and complaint by Rule 7004. Any paper served after the motion shall be served in the manner provided by Rule 5(b) F.R.Civ.P.12
Rule 7004(b) authorizes service by first class mail prepaid postage “[u]pon the debtor, after a petition has been filed ... by mailing a copy of the summons and complaint to the debtor at -the address shown in the petition or statement of affairs or to such other address as the debt- or may designate in a filed writing and, if the debtor is represented by an attorney, to the attorney at the attorney’s post-office address.”13
CBASS filed the Motion on Friday, March 3, 2006. Hearing was set for March 9. When asked about service at that hearing, CBASS’s counsel stated that the Motion and Notice were mailed on March 3 and that she had obtained personal service on the Debtor on March 7. The Debt- or does not dispute that CBASS’s attorney mailed the Motion and Notice on March 3, and that it was mailed to his correct address as reflected on his petition. He does dispute the assertion that CBASS obtained personal service on him, reiterating that he is an over-the-road truck driver who had not been home since the first part of February and did not return until sometime after the date of the foreclosure sale on March 9. Because CBASS did not submit an affidavit of personal service, we will presume for these purposes that it did not obtain personal service on the Debtor.
Thus, the question is whether the mailed Notice and Motion, which were mailed via first-class mail on Friday, March 3, was reasonable and appropriate notice of the hearing on Thursday, March 9, under the particular circumstances. The parties each point to Rule 9006’s computation of time formulas,14 but that rule *418deals only with situations where a response or act is computed from the date of service. It has no applicability here because the issue is not whether the Debtor had a certain number of days in which to act or respond to CBASS’s Motion, but whether the notice of the Motion and hearing was reasonable under the particular circumstances.
With regard to expedited hearings, the Local Rules for the Bankruptcy Court in the Eastern District of Missouri provide:
Service of Notice of Hearing. Movant must serve the notice of hearing upon the same parties served with the motion (L.B.R. 9013-1 A.) When a motion is heard on an expedited or emergency basis (L.B.R.9013-2), the motion and notice of hearing must be served as expeditiously as possible (e.g. by personal service or electronic means) upon opposing counsel or upon the opposing party if not represented by counsel, and any other necessary parties.15
The Debtor asserts that the regular first-class mail notice, mailed six days prior to the hearing, and on a Friday, is insufficient to meet this requirement. Under other circumstances, we might agree. However, in this case, the Debtor filed his bankruptcy case when he knew a foreclosure sale was pending, and while he was away from the only address known for him for a period of several weeks. This was the Debtor’s eighth bankruptcy filing, and not his first case filed for the purpose of staying a foreclosure sale. Because the Debt- or chose to file his case pro se such that CBASS could not contact an attorney, and he filed the case during a weeks-long period of time when he was absent from the State of Missouri, there was no reasonable way for CBASS to have provided him with notice in any form. Accordingly, we conclude that the mailed notice six days prior to the hearing was sufficient under the circumstances.
The Debtor relies on In re Krueger, which said that although the concept of “notice and a hearing” is a flexible one, it was inappropriate under the circumstances of that case for the debtors to be uninformed of the hearing at which their bankruptcy case was dismissed.16 Further, although the statutes require only that the moving party provide a debtor with adequate notice of the hearing, and not personal service, the panel in Krueger pointed out that notice is not only a statutory requirement, but a constitutional requirement as well.17 “An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all of the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.”18 Hence, because the debtors in that case had not received notice of the hearing, the BAP reversed the order dismissing the case and declared the foreclosure sale void.
We agree with the general notice and due process principles outlined in Krueger. However, the facts in that case are distinguishable from the facts here. In Krueger, despite being specifically directed by the court to do so, the foreclosing creditor did not even attempt to provide the debtors with notice of the continued hearing following which the case was dismissed. Nor did it notify the debtors that it had *419rescheduled its foreclosure sale. The court expressly found that the creditor in that case had acted in bad faith. The same is not true here. CBASS attempted to serve the Debtor personally and through the mail.
Moreover, this is the Debtor’s eighth bankruptcy filing, the fourth since he entered into the loan with CBASS’s predecessor. It is also the third time CBASS has stayed or canceled a foreclosure sale. He filed this case pro se such that an attorney could not be contacted by CBASS, and he filed it while he was out of town and would not return until after the foreclosure sale. We recognize that the automatic stay is a valuable benefit provided by the Code, and that many debtors legitimately invoke it to prevent foreclosure. However, “a debtor does not have a constitutional or fundamental right to a discharge in bankruptcy.”19 The automatic stay should not be viewed as a right, but more as a privilege, which may be denied to petitioners who abuse it.20 Hence, a person cannot file a pro se case on the eve of a foreclosure and then absent himself so that he cannot be notified of a motion for relief from stay, particularly when it is not the first foreclosure stayed.21 If circumstances mandate that a debtor file a bankruptcy case under such conditions, then the debtor has a duty to actively keep himself apprised of the events in his case by checking the court’s docket or contacting the creditor’s counsel.
In this case, CBASS attempted both personal service and first-class mail notification of its Motion six days prior to the hearing. The Debtor also concedes he had notice of the foreclosure sale. Under the particular circumstances of this case, we conclude this was sufficient notice and opportunity for hearing under the requirements of the Bankruptcy Code, the Rules and Local Rules, and that the Debtor’s constitutional due process rights were adequately protected.
Accordingly, the Bankruptcy Court’s Order denying the Debtor’s March 23 Motion to vacate is AFFIRMED.
. The Honorable Barry S. Schermer, United States Bankruptcy Judge for the Eastern District of Missouri.
. Fed.R.Civ.P. 60(b), made applicable to bankruptcy proceedings pursuant to Fed. R. Bankr.P. 9024.
. Mo.Rev.Stat. Ann. § 443.355.2.
. First Nat’l Bank of Olathe v. Pontow (In re Pontow), 111 F.3d 604, 609 (8th Cir.1997); Sholdan v. Dietz (In re Sholdan), 108 F.3d 886, 888 (8th Cir.1997); Fed. R. Bankr.P. 8013.
. Matter of Royale Airlines, Inc., 98 F.3d 852, 856 (5th Cir.1996) (citing Forsyth v. Bair, 19 F.3d 1527, 1534 n. 12 (5th Cir.), cert. denied, 513 U.S. 871, 115 S.Ct 195, 130 L.Ed.2d 127 (1994)); Arthur Pew Const. Co. v. Lipscomb, 965 F.2d 1559 (11th Cir. 1992).
. 11 U.S.C. § 1307(c).
. See In re Molitor, 76 F.3d 218, 220 (8th Cir.1996).
. 11 U.S.C. § 102(1)(A).
. 11 U.S.C. § 102(1)(B).
. Fed. R. Bankr.P. 1017(f)(1).
. Fed. R. Bankr.P. 4001(a).
. Fed. R. Bankr.P. 9014(a) and (b).
. Fed. R. Bankr.P. 7004(b)(9).
. Fed. R. Bankr.P. 9006(a) and (f).
. L.B.R. 9060-1 C (emphasis added).
. 88 B.R. 238, 241 (9th Cir. BAP 1988).
. Id.
. Id. (quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950)).
. In re Golden State Capital Corp., 317 B.R. 144, 149 (Bankr.E.D.Cal.2004) (citing Grogan v. Garner, 498 U.S. 279, 287, 111 S.Ct. 654, 659, 112 L.Ed.2d 755 (1991)).
. Id. (citing In re Tolbert, 258 B.R. 387, 390 (Bankr.W.D.Mo.2001)).
. See In re Martwick, 60 F.3d 482 (8th Cir. 1995) (holding that the bankruptcy court did not abuse its discretion in denying the debtors' motion for continuance of the expedited hearing on a foreclosing creditor’s motion for relief from stay and to dismiss due to debtors’ counsel being out of town; counsel’s election to file the case and then leave the state on the eve of the foreclosure sale, knowing that the creditor would likely seek to lift the stay, did not warrant a continuance of the expedited hearing). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494182/ | TALLMAN, Bankruptcy Judge.
This matter involves a dispute between the Debtors’ Chapter 7 trustee (“Trustee”) and Wachovia Bank, N.A. (“Wachovia”), with respect to rights in the Debtors’ manufactured home.2 Wachovia is the fore*480closing creditor who purchased Debtors’ real property in a foreclosure sale. The Trustee appeals from the bankruptcy court’s judgment denying his Complaint to Avoid and Preserve Unperfected Security Interest and granting Wachovia’s Petition to Quiet Title. The bankruptcy court based its judgment on the doctrine of claim preclusion. Because claim preclusion does not bar the Trustee from asserting his rights to the Debtors’ manufactured home, we reverse.
I. BACKGROUND
On November 29, 2001, the Debtors executed a note and real estate mortgage in favor of Long Beach Mortgage Company (“Long Beach”), Wachovia’s predecessor in interest. The Debtors’ real property consisted of a parcel located in Arkansas City, Kansas (the “Real Estate”), with their 1997 Schultz manufactured home (the “Manufactured Home”) situated on it. In an affidavit attached to the mortgage, the Debtors stated: 1) there is a Manufactured Home on the Real Estate which is permanently affixed to it; 2) the wheels have been removed and the Manufactured Home is permanently attached to utilities; 3) the Manufactured Home is titled to the same persons who hold title to the Real Estate; and 4) it is the Debtors’ intent that the Manufactured Home be considered as part of the Real Estate.3 It is undisputed that neither party took steps to have Long Beach’s security interest noted on the Debtors’ certificate of title for the Manufactured Home.4 Long Beach’s note and mortgage were subsequently assigned to Wachovia.
The Debtors filed their bankruptcy case on April 16, 2003. Wachovia sought relief from the automatic stay and, on July 18, 2003, the bankruptcy court entered an order granting relief to Wachovia with respect to the Real Estate.5 Wachovia did not request, and the bankruptcy court did not grant, stay relief with respect to any personal property. The bankruptcy court’s stay relief order provides that a judicial foreclosure may proceed in state court naming the Trustee as an in rem party only. It also provides that the estate will be entitled to full redemption rights and that the Trustee must receive notice of any sheriffs sale conducted with respect to the Real Estate.6 On January 22, 2004, the Real Estate was sold at a sheriffs sale. The Certificate of Purchase shows that Wachovia purchased the Real Estate for $118,839.31.7
The Trustee was named as an interested party in the Kansas judicial foreclosure proceedings but he took no action in the case. Neither the Trustee nor Wachovia’s counsel were aware of the fact that a manufactured home was located on the Real Estate. However, before Wachovia *481could insure its title to the Real Estate, the title insurance company required it to undertake a quiet title action to make sure that its title to the Real Estate included the Manufactured Home.
On August 6, 2004, Wachovia commenced its quiet title action in the District Court of Cowley County, Kansas (the “State Court”). At that time, the Trustee learned that the Real Estate contained the Manufactured Home. On August 30, 2004, the Trustee filed his Notice of Removal to remove the quiet title action from the State Court to the bankruptcy court. At the same time, the Trustee filed a separate adversary action in the bankruptcy court alleging that Wachovia did not have a perfected lien on the Manufactured Home and seeking to avoid Wachovia’s lien under 11 U.S.C. § 544(a) for the benefit of the bankruptcy estate. The quiet title action and the lien avoidance action were consolidated and submitted to the bankruptcy court on stipulated facts.8 The bankruptcy judge concluded that, because the Trustee was a party to the prior State Court foreclosure action, claim preclusion barred him from asserting any rights to the Manufactured Home.9
II.APPELLATE JURISDICTION
This Court has jurisdiction to hear timely-filed appeals from “final judgments, orders, and decrees” of bankruptcy courts within the Tenth Circuit, unless one of the parties elects to have the district court hear the appeal.10 Neither party elected to have this appeal heard by the United States District Court for the District of Kansas, thus consenting to review by this Court.
III. STANDARD OF REVIEW
“For purposes of standard of review, decisions by judges are traditionally divided into three categories, denominated questions of law (reviewable de novo), questions of fact (reviewable for clear error), and matters of discretion (reviewable for ‘abuse of discretion’).”11 De novo review requires an independent determination of the issues, giving no special weight to the bankruptcy court’s decision.12
This appeal presents issues requiring interpretation of Kansas law and a determination of the applicability of the doctrine of claim preclusion. These are exclusively legal issues that we will review de novo.13
IV. DISCUSSION
A. Statutory Background
Prior to 1991, the titling of manufactured homes and the perfection of security interests in manufactured homes was controlled by Kansas’s motor vehicle titling statutes.14 In the 1987 case of Beneficial *482Finance Co. of Kansas; Inc. v. Schroeder, the Kansas Court of Appeals held that notation of a security interest on a manufactured home certifícate of title was the exclusive method of perfecting a security interest in a manufactured home notwithstanding the fact that the manufactured home had been permanently affixed to the real estate upon which it stood.15
In 1991, the Kansas Manufactured Housing Act16 (the “KMHA”) was enacted into law. The KMHA is comprehensive legislation covering the licensing and regulation of manufacturers, distributors, dealers, and installers of manufactured housing; regulating sales transactions involving manufactured housing; setting uniform installation standards; and regulating the titling of manufactured homes as well as perfection of security interests.
Under the KMHA, manufactured homes are no longer treated as motor vehicles.17 Nonetheless, the procedure for recording an ownership interest and for perfecting a security interest is similar to the procedure used for motor vehicles. Kansas Statute § 58-4204 provides that a certificate of title is to be issued for a manufactured home and that any security interests applicable to a given manufactured home must be noted on that certificate of title. In addition, that section sets out procedures to be followed when ownership of a manufactured home is transferred under various circumstances, including through judicial sale.18
*483Under the KMHA, all ownership interests and security interests in manufactured homes are still registered with the Kansas Division of Vehicles.19 That original version of the KMHA provided no mechanism for treating those titling and security interest issues differently once a manufactured home became permanently affixed to real property. To the contrary, it provided “[t]he certificate of title shall be good for the life of the manufactured home or mobile home while owned or held by the original holder of the certificate of title.”20
In 2002, shortly after the Debtors obtained financing from Wachovia’s predecessor and granted to it the real estate mortgage, amendments to the KMHA became effective. A number of new statutory sections were added. One of those, Kansas Statute § 58-4214, provides a mechanism for eliminating the certificate of title to a manufactured home and treating the manufactured home as part of the real estate on which it sits:
(a) Whenever a manufactured home or mobile home is permanently affixed to real property, by placement upon a permanent foundation of a type not removable intact from such real property, the manufactured home or mobile home shall be considered for all purposes an improvement to real property, if the certificate of title which has been issued or is required to be issued for such manufactured home or mobile home pursuant to K.S.A. 58-4204, and amendments thereto, is eliminated pursuant to this section.... 21
Thus, under current law, two requirements must be satisfied before a manufactured home may be considered to be an improvement to a parcel of real estate: 1) it must be permanently affixed to the property; and 2) the procedures for elimination of the manufactured home title set out in Kansas Statute § 58-4214 must be followed.
The procedure set out in § 58-4214 involves filing an application with the Divi*484sion of Vehicles of the Department of Revenue. The application must include an affidavit signed by all parties with any ownership, lien, or security interest in the manufactured home, which discloses all of the interests of those various parties. In addition, any and all security interests in the manufactured home must be released.22
The 2002 amendments to the KMHA also included amendments to Kansas Statute § 58^1204. That section now provides: “For purposes of this section, a manufactured home or mobile home shall be considered to be personal property.”23 It also states that: “The provisions of this section shall apply to any certificate of title issued prior to January 1, 2003, which indicates that there is a lien or encumbrance on such manufactured home or mobile home.”24
B. Claim Preclusion
In this case, the bankruptcy judge held that the doctrine of claim preclusion applied to prevent the Trustee from asserting an interest in Debtors’ Manufactured Home because the State Court foreclosure proceeding had already determined those interests.
The Trustee took no part in the State Court foreclosure action. Because the Trustee was an in rem party in that proceeding, he was under no obligation to assert any claim that he may have had against Wachovia as a compulsory counterclaim. The Kansas rule on counterclaims is patterned after Federal Rule of Civil Procedure 13 and, under the circumstances of this case, the Trustee lost no rights under that Rule by not filing a counterclaim with respect to his rights in the Manufactured Home.25 Nonetheless, if the doctrine of claim preclusion applies in this matter, it could still bar the Trustee from asserting rights in the Manufactured Home.26
The doctrine of claim preclusion, also called res judicata,27 “prevents relitigation of previously litigated claims and consists] of the following four elements: (1) same claim; (2) same parties; (3) claims were or could have been raised; and (4) a final judgment on the merits.”28 *485Our focus here is on the first of the claim preclusion elements: whether Wachovia’s claim in the State Court foreclosure action is the same as the claims the Trustee seeks to assert in his lien avoidance action and in Wachovia’s quiet title action. Since all four claim preclusion elements must be present to bar the Trustee from asserting his rights with respect to the Manufactured Home, if Wachovia fails to demonstrate the presence of any one of those elements, the defense of claim preclusion must fail.
The same claim would be involved in both the State Court foreclosure action and this case only if, under applicable Kansas law, the Debtors’ Manufactured Home was an improvement or fixture to the Real Estate. If that were the case, then the prior foreclosure action, which adjudicated rights to the Debtors’ Real Estate, would have necessarily included rights with respect to the improvements on that Real Estate. But if the Debtors’ Manufactured Home is personal property, which is merely situated upon the Real Estate that was the subject matter of the foreclosure action, then the prior determination of rights in the Real Estate, without more, would not preclude subsequent litigation over interests in that personal property because the claims involved in the different actions involve completely different interests.
The record on appeal in this matter does not include a copy of either the petition or the judgment in that State Court foreclosure proceeding. However, Wachovia’s Certificate of Purchase is part of the record. The Certificate of Purchase discloses that Wachovia purchased a parcel of real estate only. Wachovia purchased no personal property.29
C. The Common Law of Fixtures is Inapplicable to Debtors’ Manufactured Home
Under the common law in Kansas, a piece of personal property may become a fixture to a piece of real estate under certain circumstances.30
The tests to be applied in determining whether or not personal property becomes a fixture are: (1) Annexation to the realty; (2) adaptation to the use of that part of the realty with which it is connected; (3) the intention of the party making the annexation to make the article a permanent annexation to the freehold.31
The Debtors’ Affidavit, which is attached to Wachovia’s mortgage, states that the Manufactured Home is permanently affixed to the Real Estate and that it was the Debtors’ intention that the Manufactured Home be considered as an improvement to the Real Estate and covered by Wachovia’s mortgage. If we were to apply the common law of fixtures to the Debtors’ Manufactured Home, the Debtors’ Affidavit in conjunction with the facts stipulated to by the parties32 would necessarily lead to the conclusion that the Manufactured Home is a fixture on the Real Estate.
The Debtors granted the mortgage to Wachovia’s predecessor in November of 2001, prior to the 2002 amendments to the KMHA. If we were reviewing this case under the law as it existed prior to those 2002 amendments, it would be reasonable *486to conclude that the manufactured home titling procedures set out in the KMHA were intended by the Kansas legislature to abrogate the common law of fixtures as to manufactured homes. The KMHA was comprehensive in nature and addressed multiple issues related to manufactured housing in its various forms. The statute provided procedures for the titling of manufactured homes and for the notation of security interests on the title. It provided that the manufactured home title, once issued, was good for the life of the manufactured home. Finally, the statute, as originally enacted, was silent as to any process for eliminating that certifícate of title.
Given that the original version of the KMHA provided that all ownership and security interests were to be evidenced by a certificate of title, there would seem to be no place for the operation of the common law of fixtures with respect to a manufactured home. Furthermore, the rule that statutes in derogation of the common law should be strictly construed is not applicable. Kansas law specifically provides that statutes in derogation of the common law “shall be liberally construed to promote their object.”33
But we need not rely on those factors in making our analysis of whether or not the Manufactured Home remained personal property. The 2002 amendments to the KMHA clarify when a manufactured home is to be considered personal property and when it is to be considered a fixture. Those amendments also clarify that current provisions of the KMHA apply to the Manufactured Home. Under the plain language of the KMHA, as it is currently constituted, manufactured homes are considered to be personal property unless the procedure for elimination of the certificate of title in Kansas Statute § 58^1214 is followed.34 Furthermore, even though the transaction at issue in this case was entered into before that provision was added to the KMHA, § 58-4204 plainly states that its provisions are applicable to any manufactured home certificate of title issued prior to “January 1, 2003, which indicates that there is a lien or encumbrance on such manufactured home or mobile home.”35
The bankruptcy judge’s opinion states that “the certificate of title has been lost or destroyed, and the state’s title record for the home shows that a different bank (probably the one whose mortgage was refinanced) is the only holder of a lien on the manufactured home.”36 That information comes from a “Vehicle Title and Owner Lien Inquiry” dated April 1, 2004. That document appears in the Appellant’s Appendix37 and discloses that a certificate of title for the Manufactured Home was issued on March 14, 1997. It also shows “BAHS Bank of America FSB” as a lien-holder. Because it appears that a certificate of title was issued prior to January 1, 2003, which noted a lien against the Manufactured Home, we conclude that, under a straightforward reading of § 58-4204, its provision that manufactured homes are personal property is applicable to the Debtors’ Manufactured Home.
It might be argued that Kansas Statute § 58-4214 merely provides an al*487ternative method for causing a manufactured home to become an improvement to real estate and that its provisions may coexist with the common law with respect to fixtures. But the Court does not believe that the Kansas common law of fixtures may apply to manufactured homes in harmony with § 58-4214. To view them as simply alternatives to the same end would largely render § 58^4214 a nullity.
Section 58-4214 requires that an application for elimination of title must be made to the Division of Vehicles; that all persons having an interest in the manufactured home must sign off on an affidavit to be included with the application; that all security interests must be released before the manufactured home title may be eliminated; and that the approved application must be recorded in the office of the register of deeds.38 Section 58-4214 sets out a process that results in a public record being made to document the change in status of a manufactured home from personal property to a fixture. That process also requires notice to, and participation of, all those who claim any interest in the manufactured home. Those very clear requirements establish with certainty the status of a manufactured home as either personal property or as a fixture. By contrast, the common law relies both on observable facts and upon the intention of the manufactured home’s owner to cause personal property to become a fixture. The common law fixture elements may be present and no search of public records would disclose that fact.
The clarity of the process outlined in § 58-4214 plainly protects parties holding, or seeking to acquire, interests in manufactured homes. If the common law were also applicable to determine the fixture status of a manufactured home, that high degree of certainty would be ineffective absent a subsequent judicial determination that a given manufactured home had, or had not, become a fixture under the common law standard.
This very case vividly illustrates the point. The parties failed to follow the clear dictates of the Kansas statutes for the establishment, recording, and release of security interests in manufactured homes.39 If Wachovia’s interest had been properly documented under the KMHA, and foreclosed under the established procedures to foreclose security interests in personal property, Bank of America would not still be reflected in the Division of Vehicles’ records as a lienholder and it would have been unnecessary for Wachovia to undertake a quiet title action to sort out the interests.
We conclude that, under Kansas law, the Manufactured Home was personal proper*488ty at the time that the Debtors granted the real estate mortgage to Wachovia’s predecessor. Furthermore, it was personal property at the time Wachovia received stay relief from the bankruptcy court and subsequently foreclosed its real estate mortgage.
D. Wachovia’s Relief from Stay was Limited to Foreclosure of its Real Property Interests
We cannot be entirely certain that Wachovia’s State Court foreclosure action was limited to foreclosing only its interest in the Real Estate because the record on appeal does not contain copies of the State Court foreclosure petition or judgment. Nonetheless, it is clear that the bankruptcy court’s order granting relief from the stay would not have allowed Wachovia to foreclose on any personal property interest because the stay relief was strictly limited to the Real Estate. “It is well established that any action taken in violation of the stay is void and without effect.”40 So, even if the State Court foreclosure action could be construed to include personal property associated with the Real Estate, any relief that Wachovia may have received in State Court beyond foreclosure of its interest in the Real Estate would be a nullity.
E. Application of Claim Preclusion
As we noted above, in order for claim preclusion to apply in this case, the claim adjudicated in the State Court foreclosure action would have to be the same as the claims asserted by the Trustee in the current case. The bankruptcy court lifted the automatic stay with respect to the Debtors’ Real Estate only, therefore, Wachovia’s claim in the State Court foreclosure action was limited to its rights in the Real Estate. Wachovia’s claim in its quiet title action and the Trustee’s claim in his lien avoidance action are plainly limited to rights in the Manufactured Home. Since we have determined, as a matter of Kansas law, that the Manufactured Home was personal property, and not a fixture or improvement to the Real Estate, we must conclude that the claim adjudicated by the State Court in the real estate foreclosure action could not have included the personal property interests in the Manufactured Home that were interposed in the lien avoidance and quiet title actions. As a consequence, the prior State Court adjudication and the current case involve separate and distinct claims. It follows that claim preclusion is not applicable and the Trustee is not precluded from pursuing his rights in Wachovia’s quiet title action and in his lien avoidance action.
Y. CONCLUSION
Based upon the facts stipulated to in the bankruptcy court and upon information contained in the pleadings, which were filed in that court and considered by the bankruptcy judge, the relief Wachovia received in its prior foreclosure action with respect to Debtors’ Real Estate was limited to the real property interests covered by its mortgage. As such, the relief granted in that action did not touch upon any interest in the Debtors’ Manufactured Home, which is personal property. Consequently, the doctrine of claim preclusion is no bar to the Trustee’s pursuit of whatever rights he may have in the Manufactured Home. The judgment below is reversed and the matter is remanded to the bankruptcy court for further proceedings consistent with this Opinion.
. We note that the Debtor Michael Thomas was omitted from the caption for this appeal. The Clerk is directed to update the records in this appeal accordingly.
. Manufactured/Mobile Home Affidavit ("Affidavit''), Ex. C to Petition to Quiet Title, Attach. to Notice of Removal, in Appellant's App. at 119.
. In 2001, when the Debtors executed the mortgage now held by Wachovia, Kansas Statute § 58-4204(g) (2001) required the grantor of a security interest in a manufactured home to surrender the certificate of title to the creditor and for the creditor to make application to the Division of Vehicles for a new certificate of reflecting the security interest.
. Order Granting Motion of Wachovia Bank, N.A. (Formerly Known as First Union National Bank), as Trustee [For] Long Beach Mortgage Loan Trust 2001-4 Relief from Automatic Stay, in Appellant's App. at 65.
. Id. at 2, in Appellant’s App. at 66.
. Certificate of Purchase, Ex. H to Petition to Quiet Title, Attach, to Notice Removal, in Appellant’s App. at 140.
. Stipulations of Fact, in Appellant’s App. at 153.
. Opinion Determining that Trustee Cannot Avoid Creditor’s Lien on Manufactured Home at 2-3, in Appellant’s App. at 176-77.
. 28 U.S.C. § 158(a)(1), (b)(1), and (c)(1); Fed. R. Bankr.P. 8002.
. Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988); see Fed. R. Bankr.P. 8013; Fowler Bros. v. Young (In re Young), 91 F.3d 1367, 1370 (10th Cir. 1996).
. Salve Regina Coll. v. Russell, 499 U.S. 225, 238, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991).
. See MACTEC, Inc. v. Gorelick, 427 F.3d 821, 831 (10th Cir.2005), cert. denied,-U.S. -, 126 S.Ct. 1622, 164 L.Ed.2d 334 (2006); Wilkes v. Wyo. Dept. of Employment Div. of Labor Standards, 314 F.3d 501, 503 (10th Cir.2002).
. See Beneficial Fin. Co. of Kan., Inc. v. Schroeder, 12 Kan.App.2d 150, 737 P.2d 52 (1987).
. Id. at 55.
. Kan. Stat. Ann. §§ 58-4201 to 58-4212.
. Kan. Stat. Ann. § 8-2401 (2005).
. A few of the provisions of the version of § 58-4204 that was in effect in November of 2001, when the Debtors executed the mortgage in favor of Wachovia’s predecessor, were the following:
(a) Upon the transfer or sale of any manufactured home or mobile home by any person or dealer, the new owner thereof, within 30 days, inclusive of weekends and holidays, from the date of such transfer or sale, shall make application to the [D]ivision [of Vehicles] for the issuance of a certificate of title evidencing the new owner’s ownership of such manufactured home or mobile home. An application for certificate of title shall be made by the owner of the manufactured home or mobile home, or the owner’s agent, upon a form furnished by the division, and it shall state all liens or encumbrances thereon ....
(d) The fee for each original certificate of title shall be $3.50. The certificate of title shall be good for the life of the manufactured home or mobile home while owned or held by the original holder of the certificate of title.
(e) Upon sale and delivery to the purchaser of every manufactured home or mobile home subject to a purchase money security interest ... the dealer or secured party may complete a notice of security interest .... The dealer or secured party may, within 10 days of the sale and delivery, mail or deliver the notice of security interest ... to the division. The notice of security interest shall be retained by the division, until it receives an application for a certificate of title to the manufactured home or mobile home and a certificate of title is issued. The certificate of title shall indicate any security interest in the manufactured home or mobile home.
(f) In the event of a sale or transfer of ownership of a manufactured home or mobile home for which a certificate of title has been issued, which certificate of title is in the possession of the transferor at the time of delivery of the manufactured home or mobile home, the holder of such certificate of title shall endorse on the same an assignment thereof ... and the transferor shall deliver the same to the buyer ....
The buyer shall then present such assigned certificate of title to the division, and a new certificate of title shall be issued to the buyer upon payment of the fee of $3.50.... If any manufactured home or mobile home is destroyed, dismantled or sold as junk, the owner shall immediately notify the division by surrendering the original or assigned certificate of title.
(g) When a person acquires a security agreement on a manufactured home or mobile *483home subsequent to the issuance of the original title ... such person shall require the holder of the certificate of title to surrender the same and sign an application for a mortgage title in such form as prescribed by the director. Upon such surrender, the person shall immediately deliver the certificate of title, application and a fee of $3.50 to the division. Upon receipt thereof the division shall issue a new certificate of title, showing the liens or encumbrances so created ....
(h) In the event of the sale of a manufactured home or mobile home under the order of a court, the officer conducting such sale shall issue to the purchaser a certificate naming the purchaser and reciting the facts of the sale .... Any such purchaser shall be allowed 30 days, inclusive of weekends and holidays, from the date of sale to make application to the division for a certificate of title.
Kan. Stat. Ann. § 58-4204 (2001).
. In Morris v. Citifinancial (In re Trible), 290 B.R. 838 (Bankr.D.Kan.2003), the court compared the KMHA with the statutory scheme as it existed when Schroeder was decided. The court concluded that, with respect to perfection of security interests in manufactured homes, enactment of the KMHA simply had the effect of moving the statutory authority for titling of manufactured homes and perfection of security interests in them from Chapter 8 to Chapter 58 of the Kansas Statutes. However, the requirement for notation of a security interest on the title to the manufactured home remains the same and the court concluded that notice to the Division of Vehicles of the Department of Revenue and notation of the security interest on a manufactured home’s certificate of title is still the exclusive method of perfecting a security interest in a manufactured home. Id. at 843-44.
. Kan. Stat. Ann. § 58-4204(d) (2001).
. Kan. Stat. Ann. § 58-4214(a) (2005).
. Kan. Stat. Ann. § 58-4214(b)(3) (2005).
. Kan. Stat. Ann. § 58-4204(a) (2005).
. Kan. Stat. Ann. § 58-4204(b) (2005).
. See Kan. Stat. Ann. 60-213 (2005); Fed. R.Civ.P. 13. The same is true with respect to Wachovia’s relief from stay action. The Trustee’s failure to raise the avoidability of Wachovia’s lien interest in the Manufactured Home during the relief from stay proceedings does not preclude him from pursuing his claim for avoidance of Wachovia's lien in a subsequent action. See, e.g., Cardwell v. Gilman United Fed. Credit Union (In re Carter), 291 B.R. 211, 213-14 (Bankr.S.D.Ga.2002); Pereira v. Lehigh Sav. Bank (In re Artha Mgmt., Inc.), 174 B.R. 671, 676 (Bankr. S.D.N.Y.1994).
. A defendant who may interpose a claim as a counterclaim in an action but fails to do so is precluded, after the rendition of judgment in that action, from maintaining an action on the claim if ... [t]he relationship between the counterclaim and the plaintiff's claim is such that successful prosecution of the second action would nullify the initial judgment or would impair rights established in the initial action.
Restatement (Second) of Judgments § 22(2)(b) (1982).
. "[T]he modern trend is to refer to claim preclusion as res judicata and issue preclusion as collateral estoppel.” Waterview Resolution Corp. v. Allen, 274 Kan. 1016, 58 P.3d 1284, 1290 (2002) (citing 46 Am.Jur.2d Judgments § 516).
. Winston v. State Dept. of Soc. and Rehab. Servs., 274 Kan. 396, 49 P.3d 1274, 1285 (2002).
. Certificate of Purchase, Ex. H to Petition to Quiet Title, Attach, to Notice of Removal, in Appellant’s App. at 140.
. Kan. City Millwright Co., Inc. v. Kalb, 221 Kan. 658, 562 P.2d 65, 70 (1977).
. Id. (quoting Dodge City Water & Light Co. v. Alfalfa Land & Irrigation Co., 64 Kan. 247, 67 P. 462, 464 (1902)).
. Stipulations of Fact, in Appellant's App. at 153.
. Kan. Stat. Ann. § 77-109 (2005).
. Kan. Stat. Ann. §§ 58-4204(b) & 58-4214(a) (2005).
. Kan. Stat. Ann. § 58-4204(b) (2005).
. Opinion Determining that Trustee Cannot Avoid Creditor’s Lien on Manufactured Home at 3, in Appellant's App. at 177.
. Vehicle Title and Ownership Lien Inquiry, Ex. F to Petition to Quiet Title, Attach, to Notice of Removal, in Appellant's App. at 140.
. Kan. Stat. Ann. § 58-4214(b)-(c) (2005).
. The Court has reviewed the documentation that Long Beach, Wachovia’s predecessor, prepared at the time the loan was made to the Debtors. There can be no question that Long Beach knew of the presence of the Manufactured Home on the Real Estate because the mortgage document includes the Debtors' Affidavit concerning the Manufactured Home. Yet, Long Beach made no attempt to document its security interest in accordance with the requirements of the KMHA. Under Kansas Statute § 58-4204(g) (2001), Long Beach should have required the Debtors to surrender their certificate of title and sign an application for a mortgage title. If the original certificate of title had been lost, § 58-4204(a) (2001) would have allowed the Division of Vehicles to issue a duplicate. The loan documentation creates the impression that Long Beach was simply unaware of the requirements of the KMHA. Instead, the Affidavit is plainly designed to satisfy the common law elements required in order to consider personal property as a fixture, ostensibly in an attempt to create a security interest in the Manufactured Home via the mortgage's boilerplate language concerning fixtures and appurtenances to the Real Estate.
. Ellis v. Consol. Diesel Elec. Corp., 894 F.2d 371, 372 (10th Cir.1990) (citing Kalb v. Feuerstein, 308 U.S. 433, 438, 60 S.Ct. 343, 84 L.Ed. 370 (1940)). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494183/ | DECISION DENYING MOTIONS TO DISMISS
ADLAI S. HARDIN, JR., Bankruptcy Judge.
Before the Court are defendants’ motions to dismiss the amended complaints in ninety-five adversary proceedings pursuant to Bankruptcy Rules 7009 and 7012 and Federal Rules of Civil Procedure 9(b) and 12(b)(6). The adversary proceedings were commenced by debtors-plaintiffs to recover alleged fraudulent conveyances under Sections 544 and 548 of the Bankruptcy Code and Sections 273-276 of the New York Debtor and Creditor Law (“DCL”).1
The plaintiffs in these 95 adversary proceedings (Bayou Superfund, LLC, Bayou No Leverage Fund, LLC and Bayou Accredited Fund, LLC) are three hedge funds organized in 2003 (collectively, the “Bayou Hedge Funds” or, together with other Bayou-related entities, the “Bayou Entities”). The defendants are persons and entities who invested in the Bayou Hedge Funds. The gravamen of the amended complaints is that the Bayou Entities including the Bayou Hedge Funds were operated by their pre-petition principals — Samuel Israel III and Daniel E. Marino (“Israel” and “Marino”) — as a “massive Ponzi scheme.” As summarized at page 2 of plaintiffs’ Memorandum of Law in response to the motions to dismiss (“Plaintiffs’ Memorandum”):
Israel and Marino siphoned many millions of dollars from the Bayou Hedge Funds for their personal benefit, disseminated false financial reports indicating that the Bayou Hedge Funds had enjoyed substantial investment gains when in fact they had experienced substantial *627losses, created a phony accounting firm to certify those false financial reports, and caused the Bayou Hedge Funds to make redemption payments to certain investors in inflated amounts derived from those false reports. When the fraudulent scheme collapsed, hundreds of investor creditors lost all of their principal investments totaling approximately $250 million....
Essential to the fraudulent investment scheme was the transfer of over $135 million in inflated redemption payments of non-existent principal and fictitious profits to the Defendants, each of whom redeemed during the fourteen months preceding the Bayou Hedge Funds’ demise in August 2005. To effect the fraud, the Bayou Entities purposefully paid Defendants substantially more than their investments were actually worth in order to validate the falsified performance reports and financial statements, with the specific intent to conceal the fraud from existing investors and to induce prospective investors to entrust new investments to the Bayou Hedge Funds. As such, these redemption payments were the sine qua non of the fraud, and thus were made with actual intent to defraud present and future creditors.
The alleged fraudulent conveyances sought to be recovered are payments to the defendants of “non-existent principal and fictitious profits” in redemption of defendants’ purported but non-existent interests in the Bayou Hedge Funds as reflected in the Funds’ false financial reports (id. at 3).
Jurisdiction
This Court has jurisdiction over these core proceedings under 28 U.S.C. §§ 1334(b) and 157(a) and (b)(2) and the standing order of reference to bankruptcy judges dated July 10, 1984 signed by Acting Chief Judge Robert J. Ward.
Background
The material facts alleged in the amended complaints may be briefly summarized.
It is alleged that the original Bayou Fund was organized by Israel and Marino in 1996. Soon after the Bayou Fund opened and started trading, it sustained heavy losses amounting to millions of dollars during 1997 and 1998. To conceal those losses, the Bayou Fund began falsifying its financial disclosures and fraudulently misrepresenting its investment performances. Because the Bayou Fund’s losses could not withstand the scrutiny of an independent audit of year-end 1998 financial results, the Bayou Fund’s independent auditor was terminated and, in its place, Marino (an accountant) created a fictitious accounting firm (Richmond-Fair-field Associates, CPA, PLLC) to pose as the independent auditor.
Beginning in 1999 and continuing through 2005 Israel and Marino caused the Bayou Entities, under cover of purported “audits” by Richmond-Fairfield, to continue to generate false performance summaries and false financial statements designed to mislead investors. Because the Bayou Entities were self-administered and lacked a truly independent auditor, they were able to and did maintain books and records that fraudulently misrepresented their true financial performance. As alleged in the amended complaints (quoting from the amended complaint in adversary proceeding no. 06-08354):
14. As Israel and Marino both admitted in their respective plea allocutions, they and their co-conspirators:
caused to be mailed quarterly reports to investors that contained fictitious rates of return on trading in the funds and annual financial statements that contained fictitious rates of return on trading and inflated net asset[] values. [They] also had faxed and *628mailed weekly newsletters that also misrepresented the performance of the funds at various times during the time period set forth in the information. All these communications to investors [ ] made it appear that Bayou was earning profits on trading when in fact it was not.
Israel further admitted that this false financial information concerning Bayou’s performance was disseminated to “current and prospective clients of Bayou” in order to “induce [ ] people to invest in Bayou or continue to keep their money in Bayou.”
From 1999 to 2003 the Bayou Fund continued to lose substantial amounts of money and never earned a profit, all the while drawing in hundreds of millions of dollars of new investments. As a result of a reorganization in February 2003, the original Bayou Fund was liquidated and four separate on-shore hedge funds were created, including the three Bayou Hedge Funds which are the debtor-plaintiffs in these adversary proceedings. Investors could transfer their investment in the original Bayou Fund to one of the four new Bayou Hedge Funds. Each of the new Bayou Hedge Funds subsequently sustained millions of dollars in losses, which were concealed through dissemination of false investment performance reports and false financial statements.
In addition to trading losses, the Bayou Hedge Funds were depleted for the personal financial benefit of the principals of the Bayou Entities. Tens of millions of dollars in high volume trading commissions were paid to a broker-dealer wholly owned by the principals, and millions of dollars of incentive bonus payments were made to the principals based on non-existent profits. The Bayou Hedge Funds made a series of bank transfers exceeding $100 million out of the Bayou Entities’ accounts to various bank accounts in Europe, which were eventually deposited in a bank account in the United States. This bank account was seized by the Arizona Attorney General in May 2005, and the funds were eventually transferred to the United States Marshals Service, apparently for distribution pro rata to victims of the Bayou fraud.
During the summer of 2005 the Bayou Entities’ Ponzi scheme finally collapsed. Despite assurance of full payment to the investors, the Bayou Hedge Funds did not repay any money to their investor-creditors. It is alleged on information and belief that the Bayou creditors lost approximately $250 million principal invested.
Fraudulent Redemption Payments to Investors
The fraudulent conveyance claims asserted in these adversary proceedings seek to recover payments made to the defendant Bayou investors in purported redemption of part or all of their investment interests in the several Bayou Hedge Funds as reflected in the published financials for each of the Funds. Since the financials fraudulently overstated the assets and failed to disclose the losses of the Bayou Hedge Funds and, therefore, overstated the investment accounts of all of the redeeming investors, the redemption payments in respect of greatly reduced or non-existent principal and fictitious profits exceeded the redeeming investors’ contractual entitlements. The Bayou fraud is characterized in the amended complaint as in the nature of a Ponzi scheme because the fraudulent payments to the redeeming investor-defendants were necessarily funded by monies received from new investors.
The fraudulent redemption payment scheme alleged in the amended complaints is set forth in the following paragraphs common to all the amended complaints *629(quoting from the amended complaint in adversary proceeding no. 06-08854):
24. Prior to August 2005, and during the period of the Bayou Entities’ fraudulent financial scheme, various Bayou investors, including [the named defendants) ], sought to, and did, redeem all or part of their investment in the Bayou Hedge Funds (the “Redeeming Investors”). At the time, the Bayou Hedge Funds’ falsified financial statements reported that the Redeeming Investors’ accounts included substantial gains on their investments. In reality, the Bayou Hedge Funds had lost a substantial portion of investors’ principal and had not made any profits. A true statement of the Redeeming Investors’ accounts would have shown an amount significantly less than the Redeeming Investors’ principal contributions and of course no profits.
25. In an attempt to conceal the ongoing fraud and thereby hinder, delay, or defraud other current and prospective investors, the Bayou Entities paid the Redeeming Investors the inflated amount reflected in the falsified financial statements, including non-existent principal and fictitious profits, not the Redeeming Investors’ true depleted account balances.
26. Due to heavy trading losses and the siphoning of additional funds, the Bayou Entities did not have the funds to pay these redemptions of non-existent principal and fictitious profits to the Redeeming Investors. Accordingly, the Bayou Entities aggressively pursued new investors, and used the incoming capital from those new investors to continue operations and pay redemption proceeds to investors who sought to exit the Bayou Hedge Funds. The Bayou Entities were able to stay afloat only by using the principal invested by new clients to pay the Redeeming Investors. In this way, the Bayou Entities operated as a “Ponzi” scheme.
Section 548 Fraudulent Conveyance Claims and Defense
Actual fraud
Fraudulent conveyance claims based on actual fraud arise under Bankruptcy Code Section 548(a)(1)(A), which provides as follows:
(a)(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debt- or in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or
Several observations may be made concerning this statute which are germane to the motions to dismiss. This provision, like analogous provisions under state law, avoids the entire amount of “any transfer” which was made by the transfer- or with actual intent to hinder, delay or defraud creditors. Moreover, the entirety of the transfer is avoidable whether or not the debtor received value in exchange, and the plaintiff need not allege and prove that the transfer was for less than fair value if actual intent is alleged and proved under Section 548(a)(1)(A). See Sharp Int’l Corp. v. State Street Bank and Trust Co. (In re Sharp Int’l Corp.), 403 F.3d 43, 56 (2d Cir.2005) (citing United States v. *630McCombs, 30 F.3d 310, 328 (2d Cir.1994)) (“[W]here actual intent to defraud creditors is proven, the conveyance will be set aside regardless of the adequacy of consideration given.”) (applying the actual fraudulent conveyance provision of the DCL); see also Scholes v. Lehmann, 56 F.3d 750, 757 (7th Cir.1995), reh’g en banc denied, 1995 U.S.App. LEXIS 17088 (7th Cir. 1995), cert. denied sub nom. African Enterprise, Inc. v. Scholes, 516 U.S. 1028, 116 S.Ct. 673, 133 L.Ed.2d 522 (1995) (under analogous Illinois fraudulent conveyance statute, “if fraudulent intent is proved, then ... the defendant, unless he had no knowledge of the transferor’s fraudulent intent must return the entire payment that he received rather than just the amount by which it exceeded the consideration that he gave in exchange for the payment”); Hayes v. Palm Seedlings Partners-A (In re Agric. Research and Tech. Group, Inc.), 916 F.2d 528, 538 (9th Cir.1990) (under Section 548(a)(1)(A), “the entire transfer may be avoided, even if reasonably equivalent value was given, so long as the transferor actually intended to hinder, delay or defraud its creditors and the transferee accepted the transfer without good faith”); Kendall v. Turner (In re Turner), 335 B.R. 140, 145 (Bankr.N.D.Cal.2005), modified on reconsideration by, 345 B.R. 674 (Bankr.N.D.Cal.2006) (“the entire transfer is avoided” under Section 548(a)(1)(A) of the Bankruptcy Code); 5 Collier on Bankruptcy ¶ 548.01[1] at 548-11 (15th ed. 2006) (“[I]f the transaction is fraudulent within the rules set forth in section 548, the trustee may avoid it in its entirety without any limitation on the extent of the recovery other than those imposed by § 548(c) to protect transferees and obligees in good faith.” (footnote omitted)).
Consistent with the statutory language (“any transfer”) and the foregoing authorities, the courts have held in the context of fraudulent investment schemes that the entirety of redemption payments made to investors may be avoided including repayments of principal actually invested by the defendants. See Jobin v. McKay (In re M & L Business Machine Co., Inc.), 84 F.3d 1330, 1334 (10th Cir.1996) (upholding district court’s affirmance of bankruptcy court’s ruling that “the trustee was entitled to avoid all of the challenged transfers under § 548(a)(1)”); Terry v. June, 432 F.Supp.2d 635, 642 (W.D.Va.2006) (“a defendant who wishes to retain the principal he received back must establish the good faith defense when the plaintiff has established that the transferor conveyed funds to him with actual intent to defraud creditors”); see also Mark A. McDermott, Ponzi Schemes and the Law of Fraudulent and Preferential Transfers, 72 Am. Bankr. L.J. 157, 173 (1998) (A claim of actual fraud “presents a substantial advantage to the trustee in a fraudulent conveyance action ... [since] under an actual fraud theory, the trustee may be able to recover all amounts transferred to an investor, including both fictitious profits and returns of the investor’s principal investments, regardless of the investor’s subjective good faith.”).
One of the defendants has argued mistakenly that redemption of principal investments cannot be avoided under Section 548(a)(1)(A) and that the cases “are legion” holding that “repayment of less than all of the principal investment to a defrauded investor cannot be a fraudulent conveyance.” Two of the cases this defendant relies upon, Scholes v. Lehmann and Terry v. June (both cited above), hold precisely the opposite, and the other cases relied upon (including this Court’s decision in Balaber-Strauss v. Sixty-Five Brokers (In re Churchill Mortgage Investment Corp.), 256 B.R. 664 (Bankr.S.D.N.Y.2000), aff'd sub nom. Balaber-Strauss v. Lawrence, 264 B.R. 303 (S.D.N.Y.2001)) involved constructive fraud claims under Section *631548(a)(1)(B), rather than actual fraud claims under Section 548(a)(1)(A).
Note that the three kinds of misconduct mentioned in the statute are in the disjunctive — the mischief at which the statute is aimed is to “hinder, delay, or defraud.” Moreover, the statute covers such mischief whether aimed at present or future creditors of the debtor.
As is clear from the statutory language (“if the debtor ... made such transfer ... with actual intent..”), the claim of actual fraud looks only to the fraudulent intent of the transferor/debtor. Neither the language of Code Section 548(a)(1)(A) nor the case law requires the plaintiff to allege or prove that the transferee had any intent to hinder, delay or defraud or any knowledge of the transfer- or’s fraudulent intent. Although the knowledge or innocence of the transferee is irrelevant to a plaintiffs claim based on the transferor’s intent to “hinder, delay, or defraud,” it is central to the defendant-transferee’s affirmative defense under Section 548(e).
The defense of good faith and value
“Good faith” and “value” may be a defense to a fraudulent conveyance claim under subsection (c) of Section 548, which provides:
(c) Except to the extent that a transfer or obligation voidable under this section is voidable under section 544, 545, or 547 of this title, a transferee or obligee of such transfer or obligation that takes for value and in good faith has a lien on or may retain any interest transferred or may enforce any obligation incurred, as the case may be, to the extent that such transferee or obligee gave value to the debtor in exchange for such transfer or obligation.
The good faith/value defense provided in Section 548(c) is an affirmative defense, and the burden is on the defendant-transferee to plead and establish facts to prove the defense. Silverman v. Actrade Capital, Inc. (In re Actrade Fin. Techs. Ltd.), 337 B.R. 791, 805 (Bankr.S.D.N.Y.2005) (quoting Breeden v. L.I. Bridge Fund, LLC (In re Bennett Funding Group, Inc.), 232 B.R. 565, 573 (Bankr.N.D.N.Y.1999)) (“Under the Bankruptcy Code, § 548(c) ‘has been construed as an affirmative defense, all elements of which must be proven by the defendant-transferee.’ ”); Gredd v. Bear, Stearns Sec. Corp. (In re Manhattan Inv. Fund Ltd.), 310 B.R. 500, 508 (Bankr.N.D.N.Y.2002), leave to appeal denied, 288 B.R. 52 (2002) (“[Section 548(c) designates the transferee’s good faith as an affirmative defense which may be raised and proved by the transferee at trial.”) (emphasis in original); 5 Collier on Bankruptcy ¶ 548.10 at 548-81 (15th ed.2006) (“The party that seeks to be established as a good faith transferee or obligee within this saving clause has the burden of proof (risk of non-persuasion) thereon.”(footnote omitted)). It bears repeating on these motions that the plaintiff in a Section 548(a)(1)(A) claim does not have the burden to allege and prove that the defendant-transferee did not give value for or act in good faith in receiving the transfer.
Constructive fraud
Claims based on constructive fraud arise under subpart (B) of Section 548(a)(1), which provides in pertinent part [omitting new subsection (IV) ]:
... if the debtor voluntarily or involuntarily:
# * * ❖ * *
(B) (i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(ii) (I) was insolvent on the date that such transfer was made or such obligation was incurred, or be*632came insolvent as a result of such transfer or obligation;
(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debt- or was an unreasonably small capital;
(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured; or
The plaintiff in a claim for constructive fraud under Section 548(a)(1)(B) has the burden of pleading and proving that the debtor received less than reasonably equivalent value for the transfer, and also that the debtor was insolvent at the time of or was rendered insolvent by the transfer.
The Motions to Dismiss
The motions to dismiss are based on Federal Rules of Civil Procedure 9(b) and 12(b)(6), made applicable in bankruptcy proceedings under Bankruptcy Rules 7009 and 7012. Rule 12(b)(6) provides for a motion “(6) to dismiss for failure of the pleading to state a claim upon which relief can be granted.” Rule 9(b) states:
Rule 9. Pleading Special Matters
******
(b) Fraud, Mistake, Condition of the Mind. In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.
Under Rule 12(b)(6), a defendant may move to dismiss a complaint on the ground that it fails to state a claim upon which relief may be granted. Balaber-Strauss v. Sixty-Five Brokers (In re Churchill Mortgage Inv. Corp.), 256 B.R. at 672. In reviewing a motion to dismiss under Rule 12(b)(6), “a court merely assesses the legal feasibility of the complaint, and does not weigh the evidence that may be offered at trial.” Global Entertainment, Inc. v. New York Telephone Co., et al., 2000 WL 1672327, at *2 (S.D.N.Y. Nov. 6, 2000) (citing Festa v. Local 3, Int’l Brotherhood of Elec. Workers, 905 F.2d 35, 37 (2d Cir. 1990), cert. denied, 510 U.S. 864, 114 S.Ct. 183, 126 L.Ed.2d 142 (1993)). The court “must construe any well-pleaded factual allegations in the complaint in favor of the plaintiff....” Sykes v. James, 13 F.3d 515, 519 (2d Cir.1993), cert. denied, 512 U.S. 1240, 114 S.Ct. 2749, 129 L.Ed.2d 867 (1994). See also, Cohen v. Koenig, 25 F.3d 1168, 1171-72 (2d Cir.1994) (“When ruling on a motion pursuant to Rule 12(b)(6) to dismiss for failure to state a claim upon which relief may be granted, the court must accept the material facts alleged in the complaint as true.” (citations omitted)); see also, Zdenek Marek v. Old Navy (Apparel) Inc., 348 F.Supp.2d 275, 279 (S.D.N.Y.2004). This is not to say, however, that every statement in a complaint must be accepted as true. In re Churchill Mortgage Inv. Corp., 256 B.R. at 673. The Court may not dismiss a complaint for failure to state a claim “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (footnote omitted).
In resolving a Rule 12(b)(6) motion the Court may consider “documents attached to the complaint as exhibits, or incorporated in it by reference, to matters of which judicial notice may be taken or to documents on which the plaintiff relied in bringing suit.” Mosello v. ALI, Inc. (In re Mosello), 190 B.R. 165, 168 (Bankr. S.D.N.Y.1995), aff'd, 193 B.R. 147 (1996), aff'd, 104 F.3d 352 (2d Cir.1996). See also, In re Leslie Fay Companies, Inc., 166 B.R. 802 (Bankr.S.D.N.Y.1994) (citing *633Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir.1993)).
Defendants’ Contentions
Rule 9(b) and sufficiency of allegations of “actual intent”
Relying on the requirement of Rule 9(b) that allegations of fraud be pleaded with particularity, defendants argue that the amended complaints do not sufficiently allege that the Bayou redemption payments were made with the “actual intent” to hinder, delay and defraud required under Section 548(a)(1)(A). They assert that the Bayou facts do not constitute a classic Ponzi scheme so that the “Ponzi scheme presumption” does not apply, and that plaintiffs have not alleged “badges of fraud” sufficient to give rise to an inference of actual intent.
Defendants’ restricted definition of “a true Ponzi scheme” (promise of high returns, no legitimate underlying business activity and the certainty that later investors cannot possibly be repaid) does not accord with the case law. Numerous decisions have established two broad principles. First, the label “Ponzi scheme” has been applied to any sort of inherently fraudulent arrangement under which the debtor-transferor must utilize after-acquired investment funds to pay off previous investors in order to forestall disclosure of the fraud. See Rosen v. Neilson (In re Slatkin), 310 B.R. 740, 743 n. 3 (C.D.Cal.2004) (citing Danning v. Bozek (In re Bullion Reserve of N. Am.), 836 F.2d 1214, 1219 n. 8 (9th Cir.1988)) (“A ‘Ponzi’ scheme is any sort of fraudulent arrangement that uses later acquired funds or products to pay off previous investors.”); Hayes v. Palm Seedlings Partners (In re Agric. Research and Tech. Group, Inc.), 916 F.2d 528, 536 (9th Cir. 1990) (“Distributing funds to earlier investors from the receipt of monies from later investors is the hallmark of Ponzi schemes.”); Cuthill v. Kime (In re Evergreen Sec., Ltd.), 319 B.R. 245, 249 (Bankr. M.D.Fla.2003) (finding a Ponzi scheme where the debtor “used most funds received from new investors to pay prior investor claims”). Second, where funds acquired from the later investors are used to make payments to earlier investors in redemption of impaired or non-existent account balances and fictitious profits, “actual intent” to hinder, delay and defraud is presumed. Quilling v. Stark, 2006 WL 1683442, at *6 (N.D.Tex. June 19, 2006) (“The existence of a Ponzi scheme as alleged in the complaint makes the transfer of investor funds fraudulent as a matter of law.”(citation omitted)) (emphasis in original); Terry v. June, 432 F.Supp.2d 635, 639 (W.D.Va.2006) (“[C]ourts have widely found that Ponzi scheme operators necessarily act with actual intent to defraud creditors due to the very nature of their schemes.”); Jobin v. Lalan (In re M & L Business Machine Co., Inc.), 160 B.R. 851, 857 (Bankr.D.Colo.1993), aff'd, 167 B.R. 219 (1994) (“[I]n a Ponzi scheme the only inference that a court can make is that the Debtor had the requisite intent to hinder, delay or defraud under § 548(a)(1).”). See also, Bauman v. Bliese, et al. (In re McCarn’s Allstate Fin., Inc.), 326 B.R. 843, 850 (Bankr.M.D.Fla.2005) (“Bankruptcy courts nationwide have recognized that establishing the existence of a Ponzi scheme is sufficient to prove a Debtor’s actual intent to defraud.”); Rieser v. Hay slip, et al. (In re Canyon Sys. Corp.), 343 B.R. 615, 636-37 (Bankr.S.D.Ohio 2006) (holding that “[a]ctual intent to hinder, delay or defraud may be established as a matter of law in cases in which the debtor runs a Ponzi scheme or a similar illegitimate enterprise”).
A “Ponzi scheme” within the broader scope defined in these authorities is precisely what is alleged in the amended complaints in these adversary proceedings. *634The presumption of “actual intent” to hinder, delay and defraud is both intuitive and inescapable on the facts which are alleged in the amended complaints — that redemption payments of wholly- or partially-nonexistent investment account balances and wholly-fictitious profits, as reflected on fraudulent financial statements, were made to earlier investors requesting redemption using funds invested by subsequent investors. Indeed, it is impossible to imagine any motive for such conduct other than actual intent to hinder, delay or defraud.
Putting aside the Ponzi scheme presumption, the “badges of fraud” alleged in the amended complaints are more than ample to comply with the requirement of Rule 9(b) that fraud be pleaded with particularity. The amended complaints alleged that the Bayou Hedge Funds never earned a profit and suffered heavy trading losses; that the Bayou Entities’ former principals siphoned money from the Bayou Hedge Funds for their own personal use; that the Bayou Entities intentionally disseminated false financial statements and performance reports misrepresenting that the Funds had earned substantial investment gains; that from 1998 on the Bayou Entities made use of a fictitious “independent” auditor, Riehmond-Fairfield, to certify the false financial statements; that the Bayou Entities’ principals, Israel and Marino, pleaded guilty to felonies related to the fraudulent conduct alleged in the amended complaints; and that Israel’s plea allocution, which is quoted in the amended complaints, acknowledges that the fraud was designed to “induce[ ] people to invest in Bayou or continue to keep their money in Bayou.” It is difficult to imagine a more comprehensive compendium of alleged “badges of fraud,” all of which compel the inference that the redemption payments sought to be recovered here were made by the Bayou Hedge Funds with the actual intent to hinder, delay and defraud both present and future creditors, ie., present investors who were induced to continue their investments and prospective investors which the principals of the Bayou Hedge Funds hoped to and did induce to invest in the Funds in the future.
Value; fictitious profits
Defendants assert that by returning investment principal to the defendants the Bayou Hedge Funds satisfied their antecedent debt to the defendants and thereby received “value.” A few simple propositions will suffice to demonstrate why this proposition, although true, does not support dismissal of the amended complaints for failure to state a claim.
The defendants cannot and do not claim that they, as investors, had any contractual right to repayment or redemption of amounts invested to the extent that their investments had been depleted by losses or misappropriation by Bayou insiders. It is also clear under the case law, as defendants assert, that persons who were induced by fraud to invest in the Bayou Hedge Funds or predecessor funds may have a state law claim for rescission, and that this tort claim is an antecedent debt which constitutes value for purposes of Section 548(a)(1)(B) and Section 548(c).
Plaintiffs acknowledge that defendants’ tort claims for rescission of the entire amount of their principal invested constitute value for purposes of Section 548(a)(1)(B). Consequently, plaintiffs’ constructive fraud claims under Section 548(a)(1)(B) are limited to any fictitious profits which were paid to any of the defendants.
But as noted above, plaintiffs’ claims under Section 548(a)(1)(A) based on actual intent seek to recover the entirety of “any transfer” by the Bayou Hedge Funds to the defendants, not simply those transfers as to which the Funds did not *635receive any value. Plaintiffs are entitled to recover the entirety of any transfer made with actual intent to defraud whether or not the plaintiffs received value in exchange for the transfer. Accordingly, the fact that the Bayou Hedge Funds received value on account of the redemption payments by reason of the extinguishment of the defendants’ rescission tort claims is irrelevant to plaintiffs’ claims under Section 548(a)(1)(A) and does not constitute a ground to dismiss those claims.
Several defendants have advanced alternate theories that the fictitious profits portion of redemption payments which they received should be deemed to constitute payments on antecedent debts for interest on their Bayou investments, either contractual interest relying on Daly v. Deptula (In re Carrozzella & Richardson), 286 B.R. 480 (D.Conn.2002) and Lustig v. Weisz and Associates, Inc. (In re Unified Commercial Capital, Inc.), No. 01-MBK-6004L, 2002 WL 32500567 (W.D.N.Y.2002), or as statutory “prejudgment interest” under New York Civil Practice Law and Rules Section 5001. Neither theory is sustainable.
The Carrozzella and Unified Commercial Capital cases both involved contractual rights to interest. Bayou investors had no contractual right to interest. The concept of prejudgment interest is not applicable because there is no generalized right, or claim to, or cause of action for such interest independent of a judgment. CPLR § 5001 provides for prejudgment interest “upon a sum awarded.” When the defendants demanded redemption of and were paid their Bayou account balances including the fictitious profits recorded in the fictitious Bayou financial statements, there was no “present or antecedent debt” for prejudgment interest. Defendants’ receipt of their redemption payments extinguished any putative rights to statutory prejudgment interest which might have been awarded if they had sought and obtained a judgment against the Bayou Hedge Funds, which they did not. “An acceptance of payment on a principal indebtedness extinguishes the claim for prejudgment interest....” Guy James Constr. Co. v. Trinity Indus., Inc., 644 F.2d 525, 532 (5th Cir.1981), opinion modified by, 650 F.2d 93 (1981); see also Bedard v. Martin, 100 P.3d 584, 589 (Colo. Ct.App.2004) (finding that where plaintiff accepted payment “representing the full purchase price of the property, he lost his right to recover prejudgment interest.”); Hammond v. Carthage Sulphite Pulp & Paper Co., 34 F.2d 157, 158 (N.D.N.Y. 1928) (“Interest, except in cases where there is a contract to pay it, does not constitute a debt capable of a distinct claim.... [T]he acceptance of the principal, even under protest, without a separate agreement for the payment of interest, extinguishes the claim and bars a claim for its payment.”(eitations omitted)); 47 C.J.S. Interest & Usury § 136 (West 2006) (“[W]here interest is recoverable other than under a contract, and payment of the principal as such is made and accepted, no interest can be recovered, the payment of the debt extinguishing the right to recover interest thereon. Interest, in such a case, is merely incidental to the debt or principal and cannot exist without it. Thus interest cannot be recovered in a separate action.”(footnotes omitted)). The Second Circuit has held that “contingent, inchoate interests in property” such as the theoretical right to receive prejudgment interest on a putative judgment for fraudulent inducement claims that were never asserted do not constitute “fair consideration” under the analogous provision of DCL § 272. HBE Leasing Corp. v. Frank, 61 F.3d 1054, 1058-59 (2d Cir.1995) (transferee did not provide “fair consideration” by giving up “contingent rights that otherwise might *636accrue to [transferee’s] benefit in the future”) (emphasis in original).
Plaintiffs are correct in asserting in their brief “that -virtually every court to address the question has held unflinchingly ‘that to the extent that investors have received payments in excess of the amounts they have invested, those payments are voidable as fraudulent transfers,’ ” quoting Soule v. Alliot (In re Tiger Petroleum Co.), 319 B.R. 225, 239 (Bankr. N.D.Okla.2004). See also, Scholes v. Lehmann, 56 F.3d at 757; Sender v. Buchanan (In re Hedged-Investments Assoc., Inc.), 84 F.3d 1286, 1290 (10th Cir.1996); Wyle v. C.H. Rider & Family (In re United Energy Corp.), 944 F.2d 589, 595 n. 6 (9th Cir.1991); Terry v. June, 432 F.Supp.2d 635, 642-43 (W.D.Va.2006); and Rieser v. Hayslip, et al. (In re Canyon Sys. Corp.), 343 B.R. 615, 643-45 (Bankr. S.D.Ohio 2006).
Misplaced reliance on Sharp and Churchill decisions
The defendants rely heavily on a decision of the Court of Appeals for the Second Circuit in Sharp International Corp. v. State Street Bank and Trust Company (In re Sharp International Corp.), 403 F.3d 43 (2d Cir.2005). In that case debtor Sharp, a closely-held corporation, was looted by its controlling shareholders. Through its trustee in bankruptcy Sharp sued one of the company’s former lenders, State Street Bank and Trust Company (“State Street”), for (i) aiding and abetting the insiders’ breaches of fiduciary duty, and for receiving payment from Sharp that constituted (ii) a constructive fraudulent conveyance or (iii) an intentionally fraudulent conveyance. The Bankruptcy Court’s dismissal of these claims was affirmed by the District Court and by the Second Circuit.
State Street began to suspect fraud on the part of Sharp in the summer of 1998, conducted a private investigation and concluded in November 1998 that its suspicions were well founded. As noted by the Second Circuit, “[t]he nub of the complaint is that State Street then arranged quietly for the Spitzes [controlling Sharp insiders] to repay the State Street loan from the proceeds of new loans from unsuspecting lenders.... ” 403 F.3d at 47. When State Street demanded repayment, Sharp arranged for a financing from certain investor-noteholders in the amount of $25 million, $10 million more than Sharp owed to State Street. Sharp paid State Street approximately $12.25 million from the proceeds, and the Sharp insiders gave personal promissory notes for the remaining $2.75 million of the State Street debt.
The Court of Appeals rejected the aiding and abetting claim on the grounds that State Street had come by whatever knowledge it had of the fraud by the Sharp insiders “through diligent inquiries that any other lender could have made. Sharp fails to identify any duty on State Street’s part to participate in its own loss in order to protect lenders that were less diligent.” Id. at 52-53. The constructive and actual fraudulent conveyance claims, asserted under the New York DCL, were also dismissed. The constructive fraudulent conveyance claim failed because there was no basis to allege lack of “fair consideration” in Sharp’s repayment to State Street of $12.25 million of the $15 million for which Sharp was indebted to State Street. As such, the repayment constituted no more than a preference of one non-insider creditor over others which was not within ninety days of the bankruptcy filing and therefore was not recoverable under Section 547 of the Bankruptcy Code.
In rejecting the intentional fraudulent conveyance claim, the Court of Appeals began by noting that under DCL § 276 a creditor must show intent to defraud on the part of the transferor, and that where *637such intent is shown the conveyance will be set aside regardless of the adequacy of consideration. After adverting to the New York case law under which actual intent to hinder, delay or defraud may be established circumstantially by reference to “badges of fraud,” the Court said:
Sharp argues that the district court inappropriately focused on “badges of fraud” even though the Spitzes’ fraud was so clearly established that it need not be detected by indicia. However, the intentional fraudulent conveyance claims fails [sic] for the independent reason that Sharp inadequately alleges fraud with respect to the transaction that Sharp seeks to void, i.e., Sharp’s $12.25 million payment to State Street, [citation omitted]
The fraud alleged in the complaint relates to the manner in which Sharp obtained new funding from the Note-holders, not Sharp’s subsequent payment of part of the proceeds to State Street. The $12.25 million payment was at most a preference between creditors and did not “hinder, delay, or defraud either present or future creditors.” [citations omitted]
Id. at 56.
The reliance of several defendants on a passage quoted from this Court’s decision in Balaber-Strauss v. Sixty-Five Brokers (In re Churchill Mortgage Investment Corp.), 256 B.R. 664 is also inapposite. The decision in the Churchill case granted motions to dismiss in 65 adversary proceedings against individual brokers who were employed as independent contractors by the Churchill entities to identify and solicit investors in the various Churchill investment funds. The adversary proceedings sought to recover as constructive fraudulent conveyances the commissions paid to the brokers for success in finding investors. It was not alleged that any of the brokers had any knowledge of the fraud perpetrated by the Churchill entities. The passage relied upon by several defendants was part of this Court’s discussion of legal authorities concerning constructive fraudulent conveyance claims, not claims based upon actual intent to hinder, delay or defraud. The passage in question reads:
Suffice it to say that Independent Clearing House stands for the universally-accepted rule that investors may retain distributions from an entity engaged in a Ponzi scheme to the extent of their investments, while distributions exceeding their investments constitute fraudulent conveyances which may be recovered by the Trustee.
256 B.R. at 682. As shown by the discussion and citations above, this is a correct statement of the law with respect to constructive fraudulent conveyance claims.
In the Churchill case, the Trustee acknowledged that there was no basis to assert that the Churchill entities acted with intent to hinder, delay or defraud in paying the brokers the commissions which the brokers concededly earned. Rather, the Trustee argued that the brokers did not provide equivalent “value” or “fair consideration” in exchange for their commission payments because the new investors which their efforts produced for the Churchill funds enabled the Churchill Ponzi scheme to continue and increased the ultimate universe of defrauded investors. This theory was rejected by this Court, and by the District Court which affirmed, because the transaction at issue — the good faith rendition of services by the brokers and their compensation in the form of commissions at fair market rates — were not constructively fraudulent because the services rendered constituted fair value in exchange for the commissions.
The Court of Appeals decision in Sharp and the Bankruptcy and District Court decisions in Churchill all stand for a cen*638tral postulate in fraudulent conveyance analysis. That is, the Court must focus precisely on the specific transaction or transfer sought to be avoided in order to determine whether that transaction falls within the statutory parameters of either an intentional or constructive fraudulent conveyance. In Churchill, the specific transaction at issue was the payment of commissions to brokers who were lawfully hired for a lawful purpose to render lawful services at commission rates which were concededly fair compensation for the services actually rendered. The fact that the Churchill entities were engaged in fraudulent activities which were collateral to the lawful and good faith work of and payments to the brokers was not germane under the language of the statutes (both the Bankruptcy Code and the DCL) which require the Court to focus on the specific transfers at issue.
In the Sharp case, the specific transfer at issue was the repayment of a loan which Sharp owed to State Street. The satisfaction of a legitimate antecedent debt constituted fair value, which foreclosed any constructive fraudulent conveyance claim. The repayment of State Street doubtless resulted in the preference of State Street over other creditors, and as such the repayment would have been avoidable under Section 547 of the Bankruptcy Code if it had occurred within ninety days of Sharp’s bankruptcy filing. But there was nothing inherently fraudulent, deceitful, unlawful or otherwise wrongful in Sharp’s fully-disclosed repayment of a valid antecedent debt.
The contrast with the redemption payments at issue in these adversary proceedings is stark and erystalizes the fundamental difference between Sharp and the Section 548(a)(1)(A) claims here. In contrast to the lawful and disclosed payment of a valid contractual antecedent debt in Sharp, the redemption payments at issue here of non-existent investor account balances as misrepresented in fraudulent financial statements were themselves inherently fraudulent and constituted an integral and essential component of the fraudulent Ponzi scheme alleged in the amended complaints. The payments alleged here of fictitious account balances and profits were inherently deceitful and unlawful and were necessarily made with intent to “hinder, delay or defraud” present and future creditors. No such allegation was made in Sharp, which involved only a disclosed repayment of a valid antecedent debt actually owed to State Street.
The Court of Appeals in Sharp focused on the specific transaction there at issue— Sharp’s repayment of its loan indebtedness to State Street — and concluded that there was nothing inherently fraudulent in that repayment. Noting that “[t]he fraud alleged in the complaint relates to the manner in which Sharp obtained new funding from the Noteholders, not Sharp’s subsequent payment of part of the proceeds to State Street,” the Court of Appeals refused to attribute to Sharp’s lawful repayment to State Street an “actual intent to hinder, delay or defraud” based not on the lawful payment to State Street, but upon a separate and different transaction, Sharp’s fraudulent obtaining of funds from the Noteholders.
Unlike the lawful repayment of loan indebtedness to State Street, the redemption payments in this case were themselves inherently fraudulent, and Bayou’s only possible intent in making the redemption payments was to hinder, delay and defraud creditors.
The good faith defense
Little need be said of defendants’ contentions that they received the redemption payments in good faith and without knowledge of any fraud, and that the amended complaints do not adequately *639plead want of good faith on their part. It is sufficient to point out that the defendants’ good faith is an affirmative defense under Section 548(c) which must be pleaded in the first instance as a defense by the defendants. It is not incumbent on the plaintiffs to plead lack of good faith on defendants’ part because lack of good faith is not an element of a plaintiffs claim under Section 548(a)(1). Moreover, the plaintiffs are entitled to conduct discovery on the issue of defendants’ good faith and, if the plaintiffs discover evidence which they believe may be sufficient to rebut the defense under Section 548(c), the issue generally would entail disputed issues of fact requiring a trial.
In any event, the plaintiffs’ failure to adequately plead a lack of good faith on the part of the defendants is not a ground for dismissal under Rule 12(b)(6).
Conclusion
Accepting as true the facts pleaded in the amended complaints and drawing all inferences which may be warranted by such facts, the plaintiffs in these adversary proceedings have pleaded valid, prima facie claims for avoidance of the redemption payments in their entirety under Section 548(a)(1)(A) based on actual intent to hinder, delay or defraud, and valid claims for avoidance of payments in redemption of purported fictitious profits as constructive fraudulent conveyances under Section 548(a)(1)(B). Plaintiffs may or may not be able to prove the requisite facts to establish the elements of their claims under Sections 548(a)(1)(A) and (B) or to rebut the defendants’ assertions of good faith under Section 548(c) after discovery and a trial on the merits. But the plaintiffs’ claims have been adequately pleaded, and the motions to dismiss under Rule 9(b) and Rule 12(b)(6) must be denied. Plaintiffs’ counsel are directed to prepare an appropriate order and circulate it to all defense counsel for approval as to form before submission to this Court.
_Schedule A_
Bayou Accredited Fund, LLC v. Eric Garfinkel & Adv. Proe. No. 06-08294(ASH) Diane Garfinkel_
Bayou No Leverage Fund, LLC v. Antonia M. Marsden Adv. Proc. No. 06-08317(ASH) Revocable Trust_
Bayou Accredited Fund, LLC v. Redwood Growth Adv. Proc. No. 06-08318(ASH) Partners, L.P._
Bayou Accredited Fund, LLC v. Barrett Klein & Claire Adv. Proc. No. 06-08319(ASH) Klein__
Bayou No Leverage Fund, LLC v. Christian Bros. H.S. Adv. Proc. No. 06-08320(ASH) Endowment_
Bayou Superfund. LLC v. D. Canale Beverages, Inc._Adv. Proc. No. 06-08321(ASH)
Bayou Superfund, LLC v. Daedalus Financial Adv. Proc. No. 06-08322(ASH) Corporation_
Bayou Superfund, LLC v. Dale A Sauser Trust_Adv. Proc. No. 06-08323(ASH)
Bayou Superfund, LLC v. Doug Brown II_Adv. Proc. No. 06-08324CASH)
Bayou Superfund, LLC v. John J. Shea, Jr._Adv. Proc. No. 06-08326(ASH)
Bayou Superfund, LLC v. Elizabeth S. Gile-Ratcliff_Adv. Proc. No. 06-08327(ASH)
Bayou No Leverage Fund, LLC v. Fred Montesi IRA Adv. Proc. No. 06-08329(ASH) and Fred Montesi_
Bayou Superfund, LLC v. Gary Hegewald & Judith Adv. Proe. No. 06-08330(ASH) Hegewald_
Bayou Superfund, LLC v. Graves Family Partnership_Adv. Proc. No. 06-0833RASH)
*640Bayou Superfund, LLC v. Helen Yulman Revocable Adv. Proc. No. 06-08332(ASH) Trust_
Bayou Superfund, LLC v. Heritage Hedged Equity Adv. Proc. No. 06-08333(ASH) Fund LP_
Bayou Superfund, LLC v. J. Robert Routt_Adv. Proc. No. 06-08334(ASH)
Bayou No Leverage Fund, LLC v. Inherited IRA of Adv. Proc. No. 06-08335(ASH) John Sammond Marital Trust # 1 and Diana Denholm Sammond_
Bayou Superfund, LLC v. John D Canale III_Adv. Proc. No, 06-08336(ASH)
Bayou Superfund, LLC v. KFI Capital Partners LLC_Adv. Proc. No. 06-08337(ASH)
Bayou Superfund, LLC v. Mary P. Smythe Residuary Adv. Proc. No. 06-08338(ASH) Trust_
Bayou Superfund. LLC v. Mary Jane Pidgeon Sledge_Adv. Proc. No. 06-08339(ASH)
Bayou No Leverage Fund, LLC v. Mayer and Morris Adv. Proc. No. 06-08340(ASH) Kaplan Foundation_
Bayou Superfund, LLC v. YK Investment Partnership Adv. Proc. No. 06-08341(ASH) II_
Bayou No Leverage Fund, LLC v. Wesley E. Mudge Adv. Proc. No. 06-08345(ASH) Trust_
Bayou Superfund, LLC v. Volunteer. LLC_Adv. Proc. No. 06-08346ÍASH)
Bayou Accredited Fund, LLC v. Thomas Swanson_Adv. Proc. No. 06-08347(ASH)
Bayou Accredited Fund, LLC v. Samuel E. Christen_Adv. Proc. No. 06-08349(ASH)
Bayou Superfund, LLC v. Wright Family Capital LP_Adv. Proc. No. 06-08350(ASH)
Bayou Superfund, LLC v. Zoltán P. Horvath and Adv. Proc. No. 06-08351(ASH) Marilyn D. Horvath_
Bayou Superfund, LLC v. Ronald Eastman and Marilyn Adv. Proc. No. 06-08353(ASH) Eastman_
Bayou Superfund, LLC v. Warren L. Bauer and Lydia Adv. Proc. No. 06-08354(ASH) M. Bauer_
Bayou Accredited Fund, LLC v. Walter Ratterman_Adv. Proc. No. 06-08355(ASH)
Bayou Accredited Fund, LLC v. Wintsch Family Trust_Adv. Proc. No. 06-083561ASH)
Bayou Accredited Fund, LLC v. Ronald Weingart and Adv. Proc. No. 06-08357(ASH) Jenyne Weingart_
Bayou No Leverage Fund, LLC v. Margaret J. Adv. Proc. No. 06-08359(ASH) Hartzler IRA and Margaret J. Hartzler_
Bayou Accredited Fund, LLC v. Charles Weidmer Adv. Proc. No. 06-08360(ASH) Trust_
Bayou Accredited Fund, LLC v. Meyer Investment Adv. Proc. No. 06-08361(ASH) Partners and C. Paul Meyer_
Bayou Accredited Fund, LLC v. Morris Investment Adv. Proc. No. 06-08362(ASH) Company_
Bayou Accredited Fund, LLC v. Neal and Jean Ross. Adv. Proc. No. 06-08363(ASH) Family Trust_
Bayou No Leverage Fund, LLC v. John C. Brunk, John Adv. Proc. No. 06-08366(ASH) C. Brunk IRA, and John C. Brunk Rollover IRA_
Bayou Accredited Fund, LLC v. John H. Waldock Adv. Proc. No. 06-08367(ASH) Trust_
Bayou Superfund, LLC v. Marvin E. Bruce Living Adv. Proc. No. 06-08368(ASH) Trust_
Bayou Superfund, LLC v. Raleigh L Shaklee Trust_Adv. Proc. No. 06-08369(ASH)
Bayou Superfund, LLC v. Richard A. Lewis and Adv. Proc. No. 06-08370(ASH) Roberta D. Lewis Trust___
*641Bayou No Leverage Fund, LLC v. Singer 1995 Family Adv. Proc. No. 06-08371(ASH) Trust _
Bayou Accredited Fund, LLC v. Freestone Low Adv. Proc. No. 06-08373(ASH) Volatility Partners LP_
Bayou Superfund. LLC v. Dorothy H Bjurstom Trust_Adv. Proc. No. 06-08374(ASH)
Bayou Superfund. LLC v. Shangri-La LLC_Adv. Proc. No. 06-08385(ASH)
Bayou Superfund, LLC v. Insight Multi-Strategy Fund, Adv. Proc. No. 06-08386(ASH) LLC f/k/z LWM Aggressive Multi-Strategy Fund_
Bayou Superfund, LLC v. Randall M. Rothstein and Adv. Proc. No. 06-08389(ASH) Sheryl B. Rothstein_
Bayou Superfund, LLC v. Steve Rubin_Adv. Proc. No. 06-0839KASH)
Bayou Superfund, LLC v. George Crowley_Adv. Proc. No. 06-08392(ASH)
Bayou Superfund, LLC v. Harris Kaplan_Adv. Proc. No. 06-08393(ASH)
Bayou Superfund, LLC v. Michael Lebowitz and Adv. Proc. No. 06-08395(ASH) Marilyn Lebowitz_
Bayou Superfund, LLC v. Gerald Friesen_Adv. Proc. No. 06-08396(ASH)
Bayou Superfund, LLC v. Daisy Family Limited Adv. Proc. No. 06-08397(ASH) Partnership_
Bayou Superfund, LLC v. Chula Partners, L.P._Adv. Proc. No. 06-08399(ASH)
Bayou Superfund, LLC v. Canning Limited Partnership_Adv. Proc. No. 06-08400(ASH)
Bayou Accredited Fund, LLC v. Steven R. Selcer_Adv. Proc. No. 06-0840KASH)
Bayou Superfund, LLC v. Terry A. Perl Revocable Adv. Proc. No. 06-08402(ASH) Trust_
Bayou Accredited Fund, LLC v. Madison Capital Adv. Proc. No. 06-08403(ASH) Advisors Ltd._
Bayou Accredited Fund, LLC v. SGW Holdings LLC_Adv. Proc. No. 06-08404(ASH)
Bayou Accredited Fund, LLC v. Prosperity, Inc._Adv. Proc. No. 06-08405(ASH)
Bayou Superfund, LLC v. Schilit Family Partnership_Adv. Proc. No. 06-08406(ASH)
Bayou Accredited Fund, LLC v. Jewish Fed’n of Adv. Proc. No. 06-08407(ASH) Greater Washington_
Bayou Superfund, LLC v. Mever Mutual Fund, LLC_Adv. Proc. No. 06-08408(ASH)
Bayou Superfund, LLC v. Bansal Foundation_Adv. Proc. No. 06-08409(ASH)
Bayou Superfund, LLC v. Joseph Kampf and Barbara Adv. Proc. No. 06-08410(ASH) Kampf_
Bayou Accredited Fund, LLC v. Ciconia & Co., LLC_Adv. Proc. No. 06-0841KASH)
Bayou Superfund. LLC v. Highgate Partners LP_Adv. Proc. No. 06-08412(ASH)
Bayou Superfund, LLC v. Gary Brown Revocable Trust_Adv. Proc. No. 06-08414(ASH)
Bayou Superfund. LLC v. Small Family Trust_Adv. Proc. No. 06-08416CASH)
Bayou No Leverage Fund, LLC v. David L. Lieb Adv. Proc. No. 06-08417(ASH) Foundation, Inc._
Bayou No Leverage Fund, LLC v. Pomerance Family Adv. Proc. No. 06-08418(ASH) Trust_
Bayou Superfund, LLC v. Mvrna Bennett_Adv. Proc. No. 06-08420(ASH)
Bavou Superfund. LLC v. H & B Hedge Fund II LLC Adv. Proc. No. 06-08422(ASH)
Bayou No Leverage Fund, LLC v. Mare Fleisher IRA Adv. Proc. No. 06-08423(ASH) and Mare Fleisher_
Bayou Superfund, LLC v. Karen Wolford and Douglas Adv. Proc. No. 06-08429(ASH) Wolford_
Bayou No Leverage Fund, LLC v. Peter Haje IRA and Adv. Proc. No. 06-08430(ASH) Peter Haje_
Bayou Superfund, LLC v. Kevin Bass_Adv. Proc. No. 06-0843KASH)
*642Bayou Superfund, LLC v. Eric Rothfeld and Harriet Adv. Proc. No. 06-08433(ASH) Rothfeld_
Bayou Superfund, LLC v. Michael Davidson_Adv. Proc. No. 06-08435(ASH)
Bayou Superfund, LLC v. Dor Family LLC_Adv. Proc. No. 06-08436(ASH)
Bayou No Leverage Fund, LLC v. Revelle LaBarbera Adv. Proc. No. 06-08441(ASH) Trust_
Bayou Accredited Fund, LLC v. DeoVolente, LP_Adv. Proc. No. 06-08442(ASH)
Bayou No Leverage Fund, LLC v. Carl V. LaBarbera Adv. Proc. No. 06-08443(ASH) Trust_
Bayou No Leverage Fund, LLC v. Revelle LaBarbera Adv. Proc. No. 06-08444(ASH) IRA_
Bayou Superfund, LLC v. Tag Master Hedged Equity Adv. Proc. No. 06-08489(ASH) Fund, LLC_
Bayou Superfund, LLC v. Trust Agreement for the Adv. Proc. No. 06-08490(ASH) Deferral Plan for Senior Executive Officers of Triare Companies Inc, f/b/o Peter May_
Bayou Superfund, LLC v. Trust Agreement for the Adv. Proc. No. 06-08491(ASH) Deferral Plan for Senior Executive Officers of Triare Companies Inc, f/b/o Nelson Peltz_
Bayou Superfund, LLC v. PCM Multi-Strategy Fund Adv. Proc. No. 06-08492(ASH) LP_
Bayou Superfund, LLC v. Sterling Stamos Growth Adv. Proc. No. 06-08493(ASH) Fund L.P., Sterling Stamos Liquidity Fund, L.P., Sterling Stamos Security Fund Friends and Family L.P., and Sterling Stamos Security Fund, L.P._
Bayou Superfund, LLC v. DB Structured Products, Inc._Adv. Proc. No. 06-08494(ASH)
Schedule B
DECHERT LLP
By: H. Jeffrey Schwartz, Esq.
Gary J. Mennitt, Esq. (Argued)
Elise Scherr Frejka, Esq.
Jonathan D. Perry, Esq.
30 Rockefeller Plaza
New York, N.Y. 10112
Counsel for the Debtors and Debtors-imPossession
KLESTADT & WINTERS, LLP
By: Tracy L. Klestadt, Esq. (Argued)
Brendan M. Scott, Esq.
292 Madison Avenue, 17th Floor
New York, N.Y. 10017
Conflicts Counsel for the Debtors and Debtors-inr-Possession
KASOWITZ BENSON TORRES & FRIEDMAN LLP
By: Joseph A. Gershman, Esq.
1633 Broadway
New York, N.Y. 10019
Bankruptcy Counsel for the Official Unsecured Creditors’ Committee
KIRKPATRICK & LOCKHART PRESTON GATES ELLIS, LLP
By: Richard A. Kirby, Esq. (Argued)
Philip M. Guess, Esq.
1735 New York Avenue NW, Suite 500
Washington, DC 20006-5221
Litigation Counsel for the Official Unsecured Creditors’ Committee
KRAMER, LEVIN, NAFTALIS & FRANKEL, LLP
*643By: Philip Bentley, Esq. (Argued)
Jonathan T. Koevary, Esq.
Peggy Farber, Esq.
1177 Avenue of the Americas
New York, N.Y. 10036
Counsel to Inherited IRA of John Sammond Marital Trust # 1 and Diana Denholm Sammond; Eric Garfinkel and Diane Garfinkel; Antonia M. Marsden Revocable Trust; Daedalus Financial Corporation; Dale A. Sauser Trust; Doug Broum II; John J. Shea, Jr.; Elizabeth S. Gile-Ratelijf; Gary Hegewald & Judith Hegewald; Graves Family Partnership; J. Robert Routt; Wesley E. Mudge Trust; Volunteer, LLC; Thomas Sioanson; Wright Family Capital LP; Zoltán P. Horvath and Marilyn D. Horvath; Ronald Eastman and Marilyn Eastman; Warren L. Bauer and Lydia M. Bauer, Walter Ratterman; Wintsch Family Trust; Ronald Weingart and Jenyne Weingart; Margaret J. Hartzler IRA and Margaret J. Hartzler; Charles Weidmer Trust; Meyer Investment Partners and C. Paul Meyer; Morris Investment Company; Neal and Jean Ross Family Trust; John C. Brunk, John C. Brunk IRA o/nd John C. Brunk Rollover IRA John H. Waldock Trust; Raleigh L. Shaklee Trust; Richard A. Lewis and Roberta D. Lewis Trust; Dorothy H. Bjurstom Trust; Shangri-La LLC; Insight Multi-Strategy Fund, LLC f/k/a LWM Aggressive Multi-Strategy Fund; George Crowley; Michael Lebowitz and Marilyn Lebowitz; Gerald Friesen; Canning Limited Partnership; Terry A. Perl Revocable Trust; SGW Holdings LLC; Schilit Family Partnership; Jewish Federation of Greater Washington; Meyer Mutual Fund, LLC; Bansal Foundation; Joseph Kampf and Barbara Kampf; Gary Broum Revocable Trust; Small Family Trust; Douglas Wolford and Karen Wolford; Dor Family LLC; Revelle LaBarbera Trust; Carl V. LaBarbera Trust; Revelle LaBarbera IRA and Revelle LaBarbera; DeoVolente, LP
SONNENSCHEIN NATH & ROSEN-THAL LLP
By: Carole Neville, Esq. (Argued)
Arthur H. Ruegger, Esq.
John A. Bicks, Esq.
1221 Avenue of the Americas
New York, N.Y. 10020
Counsel to Redwood Growth Partners, L.P.; D. Canale Beverages, Inc.; Fred Montesi IRA and Fred Montesi; Heritage Hedged Equity Fund LP; John D. Canale III; KFI Capital Partners LLC; Mary P. Smythe Residuary Trust; Mayer and Morris Kaplan Foundation; YK Investment Partnership II; Marvin E. Bruce Living Trust; Randall M. Rothstein and Sheryl B. Rothstein; Steve Rubin; Harris Kaplan; Daisy Family Limited Partnership; Chula Partners, L.P.; Steven R. Selcer; Madison Capital Advisors Ltd.; Prosperity, Inc.; Myma Bennett; H & B Hedge Fund II LLC; Marc Fleisher IRA and Marc Fleisher; Kevin Bass; Helen Yulman Revocable Trust; Ciconia & Co., LLC; David L. Lieb Foundation, Inc.; Michael Davidson
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP
By: Bonnie Steingart, Esq. (Argued)
Kalman Ochs, Esq.
One New York Plaza
New York, N.Y. 10004-1980
Counsel to Pomerance Family Trust; Peter Haje IRA and Peter Haje; Eric Rothfeld and Harriet Rothfeld; Tog Master Hedged Equity Fund, LLC; Trust Agreement for the Deferral Plan for Senior Executive Officers of Triare Companies Inc. f/b/o Peter May; Trust Agreement for
*644
the Deferral Plan for Senior Executive Officers of Triare Companies Inc. f/b/o Nelson Peltz; PCM Multi-Strategy Fund LP
CAHILL GORDON & REINDEL LLP
By: Charles A. Gilman, Esq. (Argued)
Kevin J. Burke, Esq.
80 Pine Street
New York, N.Y. 10005-1702
Counsel to DB Structured Products, Inc.
LORD BISSELL BROOK LLP
By: Jay G. Safer, Esq. (Argued)
Joseph N. Frochlich, Esq.
885 Third Avenue, 26th Floor
New York, N.Y. 10022
Counsel to Singer 1995 Family Trust
SEWARD & KISSEL LLP
By: M. William Munno, Esq. (Argued)
One Battery Park Plaza
New York, N.Y. 10004
Counsel to Mary Jane Pidgeon Sledge
SCHULTE ROTH & ZABEL LLP
By: Michael L. Cook, Esq. (Argued)
Sung-Hee Suh, Esq.
James E. Breitenbucher, Esq.
919 Third Avenue
New York, N.Y. 10022
Counsel to Sterling Stamos Growth Fund L.P., Sterling Stamos Liquidity Fund, L.P.,¡Sterling Stamos Security Fund-Friends and Family L.P., Sterling Stamos Security Fund, L.P.
LOEB & LOEB LLP
By: P. Gregory Schwed, Esq. (Argued) Christian D. Carbone, Esq.
345 Park Avenue
New York, N.Y. 10154
Counsel to Highgate Partners L.P.
ROSENBERG FELDMAN SMITH LLP
By: Richard B. Feldman, Esq.
551 Fifth Avenue, 24th Floor
New York, N.Y. 10176
Counsel to Freestone Low Volatility Partners LP
KATTEN MUCHIN ROSENMAN LLP
By: Robert W. Gottlieb, Esq.
575 Madison Avenue
New York, N.Y. 10022
Counsel to WAM Long/Short Fund II, L.P. f/k/a WAM Long/Short Fund, L.P.
JAECKLE FLEISCHMANN & MUGEL, LLP
By: Joseph W. Allen, Esq. (Argued)
12 Fountain Plaza Buffalo, N.Y. 14202-2292
Counsel to Christian Brothers High School Endowment
RICHARD M. ALLEN, ESQ.
P.O. Box 108
45 Second Street
North Egremont, MA 01252
Counsel to Dr. Samuel E. Christen
. Because the relevant provisions of the DCL are substantially similar to Bankruptcy Code Section 548, the discussion here will focus on Section 548. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494184/ | MEMORANDUM OPINION
JAMES D. WALKER, JR., Bankruptcy Judge.
This matter comes before the Court on the Chapter 7 Trustee’s motion for summary judgment on a preference claim. This is a core matter within the meaning of 28 U.S.C. § 157(b)(2)(F). After considering the pleadings, the evidence, and the applicable authorities, the Court enters the following findings of fact and conclusions of law in conformance with Federal Rule of Bankruptcy Procedure 7052.
Uncontested Facts
Debtors Scot and Brenda Werner filed a joint Chapter 7 petition on October 3, 2005. During the 90 days prior to the petition date, Mr. Werner used a credit card to pay $4,000 to Defendant The Wal-man Optical Company. Mr. Werner made the payment to satisfy an obligation of *285Georgia Family Eyecare for invoiced contact lens products. Mr. Werner was a personal guarantor of the obligation; his guarantee had matured at the time of the transfer. Based on an analysis of the bankruptcy estate, the Chapter 7 Trustee’s accountant indicated by affidavit that Debtor’s assets on the petition date were insufficient to pay creditors in full in a hypothetical liquidation.
The Chapter 7 Trustee filed a complaint to recover the $4,000 as a preferential transfer followed by a motion for summary judgment. The Court held a hearing on the motion on February 7, 2007. For the following reasons, the Court will grant the motion.
Conclusions of Law
Summary judgment is governed by Federal Rule of Civil Procedure 56, made applicable to adversary proceedings through Federal Rule of Bankruptcy Procedure 7056. Under Rule 56, a party is entitled to summary judgment when the “pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R.Civ.P. 56(c); McCaleb v. AO. Smith Gorp., 200 F.3d 747, 750 (11th Cir.2000). The Court views all evidence and reasonable factual inferences in the light most favorable to the nonmoving party. Burton v. Tampa Housing Auth, 271 F.3d 1274, 1277 (11th Cir.2001).
At issue in this case is whether a credit card payment made by Debtor Scot Wer-ner to Walman Optical may be avoided as a preference. Section 547(b) provides as follows:
Except as provided in subsections (c) and (i) of this section, the trustee may avoid any transfer of an interest of the debtor in property—
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made—
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
(5) that enables such creditor to receive more than such creditor would receive if—
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
11 U.S.C. § 547(b).
Several of the elements of a preference are undisputed. Walman Optical has admitted the transfer (1) was made for the benefit of a creditor, (2) was made on account of antecedent debt owed by Debt- or, (3) was made within 90 days prior to the petition date, and (4) satisfies the greater percentage test.1 Consequently, the Trustee must establish the remaining two elements to prevail on his motion.
Interest of the Debtor in Property
First, the Court must address the threshold issue of whether the charge to *286Debtor’s credit card constituted a transfer of an interest of Debtor in property. The Court is aware of only one case on all fours with the facts in this adversary proceeding. In Loveridge v. The Ark of Little Cottonwood, Inc. (In re Perry), 343 B.R. 685 (Bankr.D.Utah 2005), the debtor paid the defendant $9,000 by credit card, and the trustee commenced a preference action to recover the payment. The defendant filed a motion to dismiss for failure to state a claim, which the court granted. The only preference element in issue was whether the transfer was of an interest of the debtor in property. Id. at 686-87.
Because “interest of the debtor in property” is undefined by the Bankruptcy Code, the court in Perry applied the definition supplied by the Supreme Court in Begier v. IRS, 496 U.S. 53, 110 S.Ct. 2258, 110 L.Ed.2d 46 (1990). In Begier, the court defined the term as “property that would have been part of the estate had it not been transferred before the commencement of the bankruptcy proceedings.” Id. at 58, 110 S.Ct. at 2263, 110 S.Ct. 2258; see also Perry, 343 B.R. at 687 n. 6. The Supreme Court noted this definition furthered the fundamental bankruptcy policy of equality of distribution to similarly situated creditors. 496 U.S. at 58, 110 S.Ct. at 2262-63.
Relying on the Begier definition, the court in Perry found that a debtor’s use of a credit card does not constitute a transfer of an interest of the debtor in property. 343 B.R. at 688. The court reasoned, “[a]t most, a debtor’s credit constitutes merely potential wealth. Creditors of an estate cannot force a debtor to use credit to create liquidity available for distribution.” Id.
The Trustee has cited two preference cases in which the debtors initiated balance transfers from one credit card to another. Reisz v. Napus Fed. Credit Union (In re Anderson), 275 B.R. 264 (Bankr.W.D.Ky.2002); Growe v. AT & T Univ. Card Servs. (In re Adams), 240 B.R. 807 (Bankr.D.Maine 1999). In Anderson, the balance transfer was made directly from one credit card issuer to the other. 275 B.R. at 265. The defendant argued the transfer was not a preference because it did not diminish the estate. The court analyzed the argument as an earmarking defense (in which funds from one creditor are designated to pay another creditor). Id. at 265-66. The court rejected that argument and noted that the key fact was the debtor’s control over the money. Id. at 266. “[I]f the debtor decides which creditor is paid, the proceeds were not ‘earmarked’ by the new lender for repayment of the existing loan, and thus, the proceeds still constitute ‘an interest of the debtor in property’ avoidable under § 547(b).” Id. (citing In re Spitler, 213 B.R. 995, 998 (Bankr.N.D.Ohio 1997)).
In Adams, the debtor used convenience checks from one credit card issuer to pay the balance due on a different credit card, and the defendant also raised the earmarking doctrine. 240 B.R. at 808. Rather than focusing on whether the debtor had dominion and control over the funds transferred, the court in Adams set forth a three-part test for earmarking: first, the new lender and the debtor must expressly agree the funds loaned will be used to pay a specific debt to a different creditor; second, the agreement must be performed according to its terms; and third, the transaction must not diminish the bankruptcy estate. Id. at 810. The court quickly dispensed with the first two elements, noting there was no agreement between the debtor and the new credit card company that the convenience checks would be used to pay a specific debt. Without an agreement, the second ele*287ment, performance, is impossible. Id. at 811.
However, the court concluded that the transfer did diminish the estate, not by increasing the debtor’s liabilities, but “negatively impact[ing] equal distribution of assets among [the debtor’s] creditors.” Id. at 812. The debtor accessed funds available to her. Although she could have distributed the funds among all her creditors, she transferred them to one select creditor. Id. Consequently, the court concluded, the transfer was of an interest of the debtor in property. Id.
The Court finds the reasoning in Anderson and Adams more persuasive than the reasoning in Perry. Walman Optical is essentially advancing a tracing argument: because the source of the funds in this case can be traced to a party other than Debtor, the funds cannot be said to be an interest of Debtor in property. However, tracing is irrelevant to a preference claim. Allowing it in this case because the trace is an easy one would only open the door to endless possibilities in more difficult cases. The fact is Walman Optical benefitted by receipt of a payment during the preference period on an obligation owed by Debtor. Debtor initiated and directed the transfer of funds from his credit card account to Walman Optical. He could not have done so if he had no interest in the funds. There is no reason to distinguish this scenario from one in which a debtor obtains a cash advance and uses the advance to pay one of many creditors.
For the foregoing reasons, the Court finds that the Trustee has met his burden to prove that the transfer at issue was an interest of Debtor in property.
Made While the Debtor Was Insolvent
A debtor is presumed to be insolvent during the 90 days prior to bankruptcy. 11 U.S.C. § 547(f). In this case Wal-man Optical has conceded that the transfer occurred within 90 days prior to the bankruptcy filing. Thus, it falls within the period during which Debtor is presumed insolvent. On a summary judgment motion, to overcome the presumption of insolvency, Walman must identify evidence that would create a dispute of fact. Because Walman has failed to identify any such evidence, the Trustee receives the benefit of the presumption of insolvency. 5 Collier on Bankruptcy ¶ 547.03[5] (15th ed. rev’d 2006). Therefore, the Court finds Debtor made the transfer while insolvent.
Prior Settlement of Claim
In addition to its challenges to specific elements of a preference, Walman Optical has raised an estoppel defense. According to Walman Optical, recovery of the transfer at issue in this case was resolved as part of a settlement reached with the Trustee in the Georgia Family Eye-care2 bankruptcy case. However, Wal-man Optical has been unable to offer any legal basis by which the Trustee in the corporate case can bind the Trustee in the individual case. Even assuming the corporate Trustee assured Walman Optical the settlement would be valid in the individual case, Walman Optical’s recourse would be against the Trustee for misrepresenting the scope of his authority. Therefore, the Court rejects this defense as having no basis in law.
Conclusion
The Trustee has produced evidence to prove each element of a preference. Wal-man Optical has not disputed any material *288facts or identified any conflicting evidence. Therefore, the Court finds the Trustee is entitled to judgment as a matter of law.
An Order in accordance with this Opinion will be entered on this date.
. Walman Optical initially challenged the greater percentage test, but conceded at the February 7, 2007, hearing that the Trustee had produced sufficient undisputed evidence to satisfy of the test.
. Georgia Family Eyecare was the primary obligee whose debt Debtor guaranteed. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494186/ | MEMORANDUM REGARDING SUMMARY JUDGMENT
DONALD MacDONALD, IV, Bankruptcy Judge.
Mary Ellen Meddleton represented the debtor, Karsten Rodvik, in a domestic violence action in October of 2003. She also represented him in a subsequent divorce proceeding. The divorce proceeding was contentious and involved the custody of three young children. Meddleton withdrew from her representation of Rodvik in November of 2004, prior to his divorce trial. On January 6, 2005, Meddleton filed a “Notice of Attorney’s Lien” in the divorce action for $14,118.43 in unpaid fees. She also recorded the lien notice in the Anchorage Recording District.
Trial in Rodvik’s divorce proceeding was held in February, 2005, one month after Meddleton filed, served and recorded her notice. Rodvik represented himself at trial. The divorce decree that was subsequently entered awarded him the marital residence. The following year, on March 29, 2006, Rodvik filed his chapter 13 petition. He now seeks to invalidate Meddle-ton’s claim of lien upon the home.
“There is no common law attorney’s lien in Alaska. In order to have a valid attorney’s lien, the requirements of AS 34.35.430 must be met.”1 AS 34.35.430 provides:
(a) An attorney has a lien for compensation, whether specially agreed upon or implied, as provided in this section
(1) first, upon the papers of the client that have come into the possession of the attorney in the course of the professional employment;
(2) second, upon money in the possession of the attorney belonging to the client;
(3) third, upon money in the possession of the adverse party in an action or proceeding in which the attorney is employed, from the giving of notice of the lien to that party;
(4) fourth, upon a judgment to the extent of the costs included in the judgment or, if there is a special agreement, to the extent of the compensation specially agreed on, from the giving of notice of the lien to the party against whom the judgment is given and filing the original with the clerk where the judgment is entered and docketed.
(b) The lien described in (a) of this section is superior to all subsequent liens except tax liens. The lien is a charge on the action, and the parties to the action may not extinguish or affect the attorney’s lien by any means, including settlement, other than by satisfying the underlying claim of the attorney for the fees and costs incurred in connection with the action. Nothing in this subsec*150tion precludes a party from contesting an attorney’s lien under applicable law.2
Alaska’s statutory attorney lien provision has existed, in substantially the same form as found in AS 34.35.040(a), since 1913.3 Subsection 34.35.430(a)(4), which provides for an attorney’s lien upon a judgment, creates a charging lien.4
This special, particular, or charging lien is the right of an attorney ... to receive his fees in money expended on behalf of his client from a fund recovered through his efforts, and also the right of the court to interfere to prevent payment by the judgment debtor to the creditors in fraud of his right to the same, and also to prevent and set aside assignments or settlements made in fraud of his right.5
Unlike several other statutory lien provisions,6 the attorney’s lien statute does not provide for the recordation of the lien.7 And even in instances where a statutory lien may be recorded against specific property, the lien remains a charge on such property only for a limited period of time, typically six months, unless a civil action to foreclose the lien is timely filed.8 The statutory lien, alone, cannot encumber the affected property indefinitely.
The attorneys lien authorized by AS 34.35.430(a)(4) is a lien upon the judgment, only. It is perfected by filing the lien with the court clerk where the judgment is entered and giving notice of the lien to the party against whom the judgment is entered.9 Post-judgment, lien enforcement should be sought through the courts;10 there is no provision for recorda*151tion of the lien outside of the action. Nor has Ms. Meddleton reduced her claim for fees to a judgment, which could have been recorded as a lien against the debtor’s real property.11
Ms. Meddleton argues that the intent of the attorney’s lien statute is remedial and its provisions should be liberally construed. The Alaska statutes do so provide, with regard to the statutory liens permitted under Chapter 35.12 But Alaska courts have long held that the provisions which give rise to the creation of the lien itself must be strictly construed.13 The attorney’s lien statute does not provide for the recordation of this type of lien. Ms. Meddleton’s recorded notice of lien is invalid as a lien against the debtor’s home.14
The plaintiffs motion for summary judgment will be granted. The prayer in the plaintiffs complaint requests an award of attorney’s fees and costs. Costs may be awarded to the plaintiff.15 Moreover, as the issues in this proceeding were resolved under applicable state law, the plaintiff is entitled to an award of attorney’s fees.16
An order will be entered consistent with this memorandum.
. In re Sea Catch, Inc., 36 B.R. 226, 230 (Bankr.D.Alaska 1983), citing Pitcher Const. Co. v. United States ex. rel. Wright Bros. Const. Co., 322 F.2d 843, 845 (9th Cir.1963).
. AS 34.35.430 (emphasis added)(LexisNexis 2006).
. See In re Winston’s Lien, 6 Alaska 482, 484-85 (D.Alaska. Terr.1922).
. Id. at 483.
. Id. at 483-84.
. See AS 34.35.070 (providing for the recordation of a mechanic’s lien upon buildings improved by the claimant’s labor or materials); AS 34.35.160 (providing for the recordation of a lien for work performed on mines, wells, mills, or in the extraction of minerals); AS 34.35.185 (providing for the recordation of a lien upon chattels which have been improved by claimant’s work); AS 34.35.240 (providing for the recordation of timber liens); AS 34.35.330 (providing for the recordation of a lien against fish products or the fish processing plant by fish packers or processors); AS 34.35.391 (allowing the recordation of a fisherman’s lien); AS 34.35.405 (permitting the recordation of a lien for a watchman’s services upon the real or personal property under his care); AS 34.35.440 (authorizing the recordation of a wage lien against products or goods worked upon by a claimant); AS 34.35.460 (permitting the recordation of a lien by a hospital, physician or nurse).
. There are a few other statutory liens which do not expressly permit recordation of the lien. For example, AS 34.35.225 provides that a carrier, warehouse or livestock lien may be satisfied only by the sale, after notice, of the property in the possession of the lien claimant. A hotel or boardinghouse lien is created only to the extent of the guest’s personal possessions located at the hotel or boardinghouse (AS 34.35.510), and the lien is foreclosed by the sale, after notice, of these possessions (AS 34.35.520).
. The following statutes provide that the lien will bind the affected property for no more than 6 months from recordation unless suit is brought to enforce the lien: AS 34.35.080 (mechanic’s lien); AS 34.35.165 (lien on mines and wells); AS 34.35.205 (chattel lien); AS 34.35.260 (timber lien); AS 34.35.345 (fish packers and processors lien); AS 34.35.415 (watchman’s lien); AS 34.35.445 (lien for wages).
. Sheehan v. Estate of Gamberg, 677 P.2d 254, 257 (Alaska 1984).
. See, e.g., Sea Catch, 36 B.R. at 229 (attorneys moved for disposition of proceeds received in execution on a judgment to satisfy their lien); Sheehan, 677 P.2d at 256-57 (attorney filed a motion to confirm and enforce *151his attorney’s lien against certain assets which were to be transferred to his client under the provisions of a divorce decree.)
. AS 09.30.010.
. AS 34.35.930.
. See, e.g., Nerox Power Sys. v. M-B Contracting Co., Inc., 54 P.3d 791, 800-801 (Alaska 2002); Sullens & Hoss, Inc. v. Farvour, 117 F.Supp. 535, 538 (D.Alaska. Terr.1954); Johnson v. Halls, 7 Alaska 638, 639-40 (D.Alaska. Terr.1927); In re Craig Lumber Co., 6 Alaska 356, 360 (D.Alaska. Terr.1921).
. AS 34.35.950(a). A "nonconsensual common law lien” is invalid unless it is authorized by court order. AS 34.35.950(d)(2) defines such a lien as "a lien on real or personal property” that
(A) is not provided for by a specific state or federal statute;
(B) does not depend on the consent of the owner of the property affected for its existence; and
(C) is not an equitable, constructive, or other lien imposed by a court recognized under state or federal law;
. Fed. R. Bankr.P. 7054(b).
. Ford v. Baroff (In re Baroff), 105 F.3d 439, 441-42 (9th Cir.1997). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487944/ | BENSON, Judge
DECISION AND ORDER
This Court finds that the affidavit filed in support of motion to vacate order of stay does not comply with the requirements of Title 50 United States Code §520 and hence will not support an order to vacate.
The privilege of stay granted defendant under the Soldiers' and Sailors' Civil Relief Act may be vacated if the opposing party shall make it appear that defendant's ability to prosecute of defend shall not be "materially impaired" by his military service. Roark v. Roark, 201 S.W.2d, 862, 863 (Tex 1974). A method by which plaintiff can establish that defendant's rights shall not be materially impaired or that he is no longer entitled to the benefits of the section is to satisfy the requirements of §520.
Section 520 requires that "an affidavit setting forth facts showing that the defendant is not in military service" be filed before a judgment by default may be entered against defendant. Upon reading of the section, it is concluded that.the certificate of nonmilitary status issued solely by the United States Army is not the equivalent of the affidavit required by §520. See Crowder v. Capital Greyhound Lines, 51 A.2d 372 (D.C. 1974).
Motion to vacate stay is hereby DENIED.
SO ORDERED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487946/ | ABBATE, Judge
DECISION AND ORDER
Defendant's motion for new trial came on for hearing before this Court on August 13, 1980. Defendant was represented by Daniel Del Priori, Esquire, and the People were represented by D. Paul Vernier, Assistant Attorney General. This decision is based on the pleadings before the Court, the *107transcript of the trial, the Court's observations during the trial, the memorandum of points and authorities filed by counsel, and the oral arguments made at the hearing.
The Court has weighed the evidence and has determined that it was sufficient to justify the verdict. "While it is the exclusive province of the jury to find the facts, it is the duty of the trial court to see that this function is intelligently and justly performed, and in the exercise of its supervisory power over the verdict, the Court, on motion for a new trial, should consider the probative force of the evidence and satisfy itself that the evidence as a whole is sufficient to sustain the verdict. It has been stated that a defendant is entitled to two decisions on the evidence, one by the jury and the other by the Court on motion for new trial. This does not mean, however, that the Court should disregard the verdict or that it should decide what result it would have reached if the case had been tried without a jury, but instead that it should consider the proper weight to be accorded to the evidence and then decide whether or not in its opinion, there is sufficient credible evidence to support the verdict" [Cites omitted] People v. Robarge (1953) 41 C2d 628, 633. The Court finds that the jury's verdict was not contrary to the evidence.
Defendant's second contention is that the prosecution engaged in prejudicial conduct. The Court, after carefully reviewing the record, finds no conduct that would be grounds for a new trial. Defense counsel argues that the prosecution argued to the jury that defendant was guilty of practicing law without a license. The Court cannot find a reference to the defendant being guilty of this act. The prosecutor did argue that defendant was practicing law without a license, but he did not use the word "guilty." The Court finds that an inference could be made from the facts presented to the jury that would support this conclusion as part of an argument to support a showing of deception. This was not prejudicial misconduct.
"The right of counsel to discuss the merits of case, both as to the law and facts, is very wide, and he has the right to state fully his views as to what the evidence shows, and as to the conclusions to be fairly drawn therefrom. The adverse party cannot complain if the reasoning be faulty and the deductions illogical, as such matters are ultimately for consideration of the jury. In the argument before the jury, any reasonable inference may be drawn from the evidence, and it is a matter within the discretion of the trial court to determine whether counsel stays within the permissible range of discussion." People v. Beivelman, (1968) 70 C.2d 60, 76-77.
*108Defendant's argument as to the marital privilege is incorrect. The new Rules of Evidence have done away with the rule that neither spouse could testify for or against the other without the consent of both. Under the old rule it was improper to comment on defendant spouse's failure to testify,for the defendant could not compel his spouse to testify either for or against him. Under the new Rules of Evidence, a defendant's spouse has no privilege to prevent his spouse from testifying, and comment on her testifying against defendant husband does not, therefore, constitute comment on the exercise of a privilege that defendant has or on his failure to call a witness that he cannot compel to testify on his behalf. Since defendant's failure to call his spouse was a failure to call a material and important witness, his not doing so could be considered by the jury and commented upon by the prosecuting attorney." [Cites Omitted] People v. Coleman, (1969) 71 C2d 1159, 1167.
As to defendant's argument that the prosecution committed error by using a suppressed prior statement for impeachment purpose, the Court ruled already during the trial that this use was proper under Harris v. New York, (1971) 401 US 222, 91 S.Ct. 643. The Court reaffirms that ruling here.
Defense counsel's final argument is that the prosecution indulged in prejudicial misconduct through racially prejudiced remarks. The Court finds this allegation totally unfounded. The record shows that if anything, the prosecution was speaking against any racial prejudice being held against the victim because of his nationality. There was clearly no attack on any person based on racial or national backgrounds.
For all of the above-stated reasons, the Court DENIES defendant's 'Motion for a New Trial.
IT IS SO ORDERED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487948/ | BENSON, Judge
DECISION AND ORDER
This matter came before the Court on Defendant's motion to quash request for jury on March 7, 1980, before Judge Richard H. Benson. Plaintiff was represented by David Dooley, and defendant was represented by Davor Pevec and Thomas Himrod. The Court ruled to reserve decision on the motion to quash.
Plaintiff contends that §6500.15 of the Government Code, which prohibits of jury trial in claims against the Government, is repealed by §680.1 of the Code of Civil Procedure, which provides for jury trial in "all cases at law" exceeding twenty dollars ($20.00).
The general trend of authority is against an interpretation of repeal by implication. Where no inconsistency strong enough to evoke a repeal exists, a repeal by implication will not be found. It cannot be presumed that the legislature intended to undo or repeal an act to which it had but just assigned a valid function. People v. Fitzgerald, 14 Cal.App 2d 180 (1936) cert. den. 299 U.S. 593, 57 S.Ct. 115. Sutherland Statutory Construction, Vol. 1A Section 23.09.
The presumption is that the legislature intended to achieve a consistent body of law. In the absence of an irreconcilable conflict, or where two provisions of legislation are so clearly repugnant as to vital matters which they relate, courts should construe all acts harmoniously where such construction is reasonably possible. Sutherland Statutory Construction, Vol. 1A Section 23.10.
While there appears to be a conflict in consistency between the Claims Act and the Civil Procedure Code regarding jury trial, it does not appear so repugnant an inconsistency that the two provisions cannot stand together. A suit filed under the Claims Act is a very narrow and limited area for relief. The Government consents to be sued only as provided in the Act. It can not be easily construed in the absence of express language that the adoption of §680.1 of the Code of Civil Procedure necessarily implied a repeal of §6500.15 of the Government Code.
*112Given the above trend in statutory construction, and based on a reasonable reading of both sections together, this court grants defendant its motion to quash request for jury trial.
The motion is GRANTED.
SO ORDERED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487949/ | ABBATE, Judge
DECISION AND ORDER
Defendant Raymond Quidachay's motion to dismiss was heard on December 14, 1979. Defendant contends that the indictment relating providing "escape implements" (§58.50 Criminal and Correctional Code of Guam) [9 GCA] is unconstitutionally vague.
Section 58.10(d) of the Guam Criminal and Correctional Code defines "escape implements". Therefore, it is the Decision of the Court that the Motion be and is hereby DENIED.
SO ORDERED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487950/ | WEEKS, Judge
DECISION AND ORDER
This matter came on for hearing in the above entitled court, the Honorable Janet Healy Weeks presiding, on the 3rd, 4th and 5th day of October, 1979. The Territory was represented by Assistant Attorney General Howard Rose and the defendant was represented by Frederick Kerley. Defendant moved to suppress oral statements made at his home and at police headquarters on February 27 and 28, 1979 and a written statement made at police headquarters on the grounds that they were involuntary and in violation of his rights to counsel and to remain silent.
I. STATEMENT AT DEFENDANT'S HOME.
It is undisputed that the defendant was given his "Miranda" rights at his home. It is the finding of this Court that following the advice of rights the defendant made "an intentional abandonment of a known right or privilege" (Johnson v. Zerbst, 304 U.S. 458, 464, 58 S. Ct. 1019, 1023) in waiving his right to silence and an attorney.
There are no allegations of coercion regarding the situation at the defendant's home, and thus the Court finds that the Territory has in the totality of the circumstances met its burden of showing by a preponderance of the evidence that the statement was freely and voluntarily given. (Lego v. Twomey, 404 U.S. 477, 92 S. Ct. 619 (1972). The statement at the residence will therefore not be suppressed.
*114II. ORAL AND WRITTEN STATEMENTS AT THE POLICE STATION.
Following the statement at the defendant's residence, there was a break in the interrogation. The defendant was again interrogated upon arriving at Police Headquarters. It is undisputed that the defendant was given and understood his "Miranda" rights. He initialed each of his rights to show that he understood them. However, he refused to sign the waiver of rights form.
The fact that a defendant refuses to sign a waiver of rights form is not dispositive of the question of waiver of the right to counsel and to remain silent (U.S. v. McDaniel, 462 F2d 129, 135, 5th Cir. 1972, U.S. v. Phelps, 443 F2d 246, 248, 5th Cir. 1971), for despite refusal to sign a waiver form a defendant may volunteer a statement without having been questioned further by the authorities (U.S. v. Hopkins, 5th Cir. 1970, 433 F2d 1041, 1044).
The Fifth Circuit framed the issue before this Court in U.S. v. Phelps, supra.
It is clear that after Phelps refused to sign the waiver, the officers should have ceased interrogating him. It is also clear that subsequent conversation did occur between the investigators and Phelps. The hearing on the motion to suppress does not reveal, however, whether the subsequent questions by the officers were the result of voluntary conversation initiated by Phelps or whether these questions were initiated by the officers themselves without any instigation by Phelps. If the former situation obtains, then under our decision in Hopkins, Phelps' subsequent answers would be admissible. If the latter situation obtain, however, Miranda compels that we hold answers inadmissible. (443 F2d 249, 250)
This language gives effect to the rules laid down by Miranda v. Arizona, 1966, 384 U.S. 436, 86 S. Ct. 1602. First, "If the individual indicated in any manner at any time prior to or during questioning, that he wishes remain silent, the interrogation must cease. At this point he has shown that he intends to exercise his Fifth Amendment privilege; and statement taken after the person invokes his privilege cannot be other than the product of compulsion, subtle or otherwise." 384 U.S. 373 , 86 S. Ct. 1627.
Second, "If the individual states that he wants an attorney, the interrogation must cease until an attorney is present.....If the interrogation continues without the presence of an attorney and a statement is taken, a heavy burden rests on the Government to demonstrate that the defendant knowingly and intelligently waived his privilege *115against self-incrimination and his right to retain appointed counsel." 384 U.S. 474-75, 86 S. Ct. 1628.
In the instant case the Government has not met its "heavy burden" of showing knowing and intelligent waiver. Defendant refused to sign a statement which said "I am willing to make a statement and answer questions. I do not want a lawyer at this time." This refusal came at 7:00 p.m. It is undisputed that defendant's subsequent statement was the result of questions propounded by officers, and was signed four to five hours after the refusal to sign the waiver form.
[A] valid waiver will not be presumed simply from the silence of the accused after warnings are given or simply from the fact that a confession was in fact finally obtained...
Whatever the testimony of the authorities as to waiver of rights by an accused, the fact of lengthy interrogation or incommunicado incarceration before a statement is made is strong evidence that the accused did not validly waive the right and that the individual eventually made a statement is consistent with the conclusion that the compelling influence of the interrogation finally forced him to do so. It is inconsistent with any motion of a voluntary relinquishment of the privilege. Miranda, supra, 384 U.S. 475-76 86 S. Ct. 1628.
On the facts of this case it is the conclusion of the Court that the Government has met its burden of showing that the defendant was advised of his Fifth and Sixth Amendment rights, but that the Government has not met the burden of showing that there was a knowing and intelligent waiver of such rights. Consequently, all oral and written statements made at police headquarters on February 27 and 28, 1979 must be suppressed.
IT IS SO ORDERED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487951/ | WEEKS, Judge
DECISION
This matter was filed as a nine count complaint requesting money damages, declaratory relief and an injunction regarding the construction of a new Airport facility on Guam. Hearing was had on the issue of a preliminary injunction between November 5 and 13, 1979. On November 21 the preliminary injunction issued.
Thereafter, all parties met in chambers on November 29, 1979. At the request of the parties, the court agreed that it would hear the matter as a declaratory judgment action on the record and briefs of the preliminary injunction hearing1 should the parties by stipulation settle the damage and injunctive relief aspects of the case. Although the parties requested the court take this course of action so as to decide the matter expeditiously and save public monies due to the rising cost of construction of the airport which is the subject matter of this litigation, it was not until December 27, 1979 that such a stipulation was filed.
This stipulation provided that plaintiffs dismiss their damage claims and that defendant Guam Airport Authority act *118under its reserved power in the contract documents to reject all bids for construction of the Airport Facility, thus mooting the claim for injunctive relief. The matter was thereupon submitted to the court for a declaratory judgment on the applicability and effect of Sections 1 thought 3 of Public Law 14-8 (which provides a bid credit for contractors who limit employment of nonresident aliens below a certain percentage on public works contracts) and Section 25 of Public Law 15-66 (which restricts an employer with more than 40% nonresident alien workers from being awarded a public works contracts). As the validity of Public Law 14-8 and Public Law 15-66 was not briefed or argued in the preliminary injunction hearing, the parties were given until January 11, 1980 to brief this issue, and the matter was submitted.
Although the bid award which was the subject matter of this action has been withdrawn, there remains a real and actual controversy as to the effect and applicability of these statutes to any rebid of the project. Because of our determination that these statutes are void and violative of the Organic Act of Guam, it is not necessary to state the specific questions presented beyond the first: Are Public Laws 14-8 Sections 1-3 and 15-66 Section 25 valid and legally enforceable? We ■ turn now to the merits.
Public Laws 14-8:1-3 and 15-66:25 exceed the legislative power granted the Government of Guam by the Organic Act and are thus void. 48 U.S.C. 1423(a) provides the standard which circumscribes any exercise of power by the Guam Legislature: "The legislative power of Guam shall extend to all subjects of legislation of local application not inconsistent with the provisions of this' chapter and the United States applicable to Guam." Judged by this standard, these questioned statutes must fall on three distinct grounds.
I. PUBLIC LAW 14-8 SECTIONS 1-3 AND PUBLIC LAW 15-66 SECTION 25 ARE NOT CONCERNED WITH A SUBJECT OF LOCAL APPLICATION.
Public Law 15-66 disqualifies a contractor who has more than a stated percentage of nonresident alien workers from receiving certain contracts from the Government of Guam. As the Supreme Court said of a similar statute which set a limit on the percentage of alien workers which might be employed by a private employer, "the act undertakes to operate directly upon the employment of aliens, and if enforced would compel the employer to discharge a sufficient number of his employees to bring the alien quota within the prescribed limit." Truax v. Raich, 239 U.S. 33, 38, 36 S.Ct. 9 (1915).
Similarly, Public Law 14-8 operates to discourage the employment of nonresident aliens, albeit by giving financial incentives to employers who discriminate against nonresident *119aliens rather than penalizing the employer of nonresident aliens. The purpose of Public Law 14-8 is stated in Section 2 of the bill: "In order to induce contractors to hire more United States citizens and permanent residents. ..." As the bill's sponsor, Senator Charfauros put it: "by hiring local people . . . you get advantage in the bidding process and I think that . . . this is just one step in reducing our alien workforce . . . ."2 The legislative intent is clearly to affect the employment of nonresident aliens:
The authority to control immigration - to admit or exclude aliens - is vested solely in the Federal Government. Fong Yue Ting v. U.S., 149 U.S. 698, 713, 13 S.Ct 1016. The assertion of an authority to deny to aliens the opportunity of earning a livelihood when lawfully admitted to the state would be tantamount to the assertion of the right to deny them entrance and abode, for in ordinary cases they cannot live where they cannot work. And, if such a policy were permissible, the practical result would be that those lawfully admitted to the country under the authority of the Acts of Congress, instead of enjoying in a substantial sense and in their full scope the privileges conferred by the admission, would be segregated in such of the states as chose to offer hospitality. Truax, supra, 239 U.S. at 42, 36 S.Ct. at 11.
What Truax says regarding the states is no less true of the Territory of Guam, for neither 48 U.S.C. 1423(a) nor any other Federal Statute shows any intent to delegate this exclusive Federal power to Guam.
"Local interest" has long been a word of art in the realm of the U.S. Constitution, Article I, Section 8, Clause 4, the Supremacy Clause as it applies to the states. For local interests, the several states of the Union exist; but for international purposes, embracing our relations with foreign nations, we are but one people, one nation, one power." Chai Chin Ping vs. U.S., 130 U.S. 581, 606, 9 S.Ct. 623, 630 (1889), Fong Yue Ting vs. U.S., 149 U.S. 698, 706, 13 S.Ct. 1016, 1019 (1893). Acts such as these which operate to discriminate against aliens do do not concern a subject matter which is of local interest. Rather, they operate in an area which is of particular national interest. These acts must therefore be held violative of 48 U.S.C. 1423(a).
*120II. PUBLIC LAW 14-8 SECTION 1-3 AND PUBLIC LAW 15-66 SECTION 25 ARE INCONSISTENT WITH THE LAWS OF THE UNITED STATES APPLICABLE TO GUAM, AND THUS VIOLATE 48 U.S.C. 1423(a).
In the Immigration and Nationality Act of 1952 as amended (8 U.S.C. §1101 et seq.) Congress has regulated the entry of nonresident alien workers. As the California Supreme Court put in in unanimously striking down a state law restricting the right to public employment by aliens:
In light of the comprehensive federal scheme for dealing with the admission of aliens who seek to enter the American labor market, any state [territorial] legislation affecting this same subject matter runs a high risk of conflict with the supreme law .... Moreover, [the] section interferes with the federal scheme for admission of nonimmigrants to perform temporary but essential services in this country; regardless of the national interest at stake . . . California [Guam] prevents such persons from performing otherwise valuable services simply because they labor on public works. Purdy and Fitzpatrick vs. State of California, 71 C.2d 566, 575, 456 P.2d 645 (1969).
The specific concern of these statutes is the nonresident alien worker, often referred to as an "H-2" worker because the reference to such workers in the definitions section to 8 U.S.C. is contained in §1101(a)(15)(H)(ii). Such a person is precluded from entering the U.S.
. . . for the purpose of performing skilled or unskilled labor, unless the Secretary of Labor has determined and certified to the Secretary of State and the Attorney General that (A) there are not sufficient workers who are able, willing, qualified (or equally qualified in the case of aliens who are members of the teaching profession or who have exceptional ability in the sciences or the arts), and available at the time of application for a visa and admission to the United States and at the place where the alien is to perform such skilled or unskilled labor, and (B) the employment of such aliens will not adversely affect the wages and working conditions of the workers in the United States similarly employed. 8U.S.C. 1182(a)(14).
The Immigration Act is made applicable to Guam. 8 U.S.C. 1101 (a)(36). Thus these acts which deny employment to nonresident aliens after the Secretary of Labor certifies that there is a need for them in this area and that it will not adversely affect wages must be seen as "inconsistent with the laws of the United States applicable to Guam," (48 U.S.C. 1423(a)) and invalid.
*121III. PUBLIC LAW 14-8 SECTION 1-3 AND PUBLIC LAW 15-66 SECTION 25 ARE VIOLATIVE OF THE EQUAL PROTECTION CLAUSE OF THE FOURTEENTH AMENDMENT, MADE APPLICABLE TO GUAM BY 48 U.S.C. 1421(b)(u).
The Fourteenth Amendment and the laws adopted under its authority thus embody a general policy that all persons lawfully in this country shall abide "in any state" on an equality of legal privileges with all citizens under non-discriminatory laws. Takahashi vs. Fish and Game Comm'n., 334 U.S. 410, 420, 68 S.Ct. 1138, 1143 (1948).
It has long been settled that aliens are 'persons' for the purposes of the equal protection and due process of law clauses of the Fourteenth Amendment,3 and 48 U.S.C. 1421(b)(u) extends the equal protection clause to the Territory of Guam and states that it "shall have the same force and effect there as in the United States or in any State."
Decisions of the United States Supreme Court "have established that classifications based on alienage, like those based on nationality or race, are inherently suspect and subject to close judicial scrutiny."4 "Not only must the classification reasonably relate to the purposes of the law, but also the state must bear the burden of establishing that the classification constitutes a necessary means of accomplishing a legitimate state interest, and that the law serves to promote a compelling state interest. "5
Before turning to apply this standard to the statutes under question, it first must be noted that the statutes do not operate against all aliens, but rather favor citizens and resident aliens over nonresident aliens. In such a case involving discrimination between classes of aliens, is strict scrutiny still the applicable test?
The Supreme Court has answered this question in the affirmative. "Appellants claim [the statute] should not be subjected to such strict scrutiny because it does not impose a classification based on alienage. [I]t is said the statute distinguishes 'only within the "heterogeneous" class of aliens' and does not distinguish between citizens and aliens vel non.' [The] important points are that [the statute] is directed at aliens and that only aliens are harmed by it. The fact that the statute is not an absolute bar does not mean that it does not discriminate against the class."6
The standard by which these statutes must be judged is strict scrutiny. But as the Supreme Court said in invalidating a Puerto Rico statute which discriminated against foreign engineers:
*122We do not suggest, however, that a State, Territory, or local government, or certainly the Federal Government may not be permitted some discretion in determining the circumstances under which it will employ aliens or whether aliens may receive public benefits or partake of public resources on the same basis as citizens. In each case, the governmental interest claimed to justify the discrimination is to be carefully examined in order to determine whether that interest is legitimate and substantial, and. inquiry must be made whether the means adopted to achieve the goal are necessary and precisely drawn.7
We turn then to the governmental interests which are claimed to justify these acts.
First, the legislative history indicates a concern with protecting citizens and resident aliens from nonresident alien economic competition. But as these nonresident aliens are 'persons' within the meaning of the Fourteenth Amendment, "[sjuch a purpose constitutes prima facie discrimination for its own sake; and if the state sought truly effective protection against alien economic competition by extending a prohibition or limitation against all types of alien employment, such a scheme would clearly offend equal protection."8
"May the [territory] simply favor its own citizens in the disbursement of public funds? First, since [nonresident] aliens support the [territory] with their tax dollars, any preference in the disbursement of public funds which excludes [nonresident] aliens appears manifestly unfair. Second, [the statute] prevents [nonresident] aliens from receiving the federal funds which largely support the construction of our highways and other projects; the [territory] can urge no claim to a proprietary interest in such federal funds. Finally, any classification which treats all [nonresident] aliens as undeserving and all United States citizens [and resident aliens] as deserving rests upon a very questionable basis."9
Concern with local employment is certainly a rational concern of a local legislature. But these statutes favor a resident alien or citizen who may be domiciled in Hawaii or California over a non-resident alien who may already be present in Guam. And as noted supra, before admission of a nonresident alien, the Department of Labor has already determined administratively that there are not sufficient local laborers. Having used a suspect classification to produce such a result, it cannot be held that these statutes serve a compelling territorial interest, that this classification reasonably relates to the purpose of the law. or that such a classification is a necessary means of accomplishing a legitimate state interest. We note the fact that the territory has the means to address the problem of local employment in the construction trades in a *123variety of ways other than a discriminatory classification, such as the requirement that bidders have apprenticeship and training programs, which was contained in Public Law 14-8.
Judged by the strict scrutiny standard. Public Law 14-8:1-3 and Public Law 15-66:25 must clearly be held invalid as violative of equal protection.
The Court feels that it is worthwhile to add two final notes. First, Public Law 14-8 had a saving clause:
Section 8. Severability. If any provision of Sections 1 to 3 of this Act or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of the act which can be given effect without the invalid provision or application, and to this end the provisions of these sections are severable.
The Court has attempted in vain to reach a construction of Public Law 14-8 which would sever and save that portion of the act which is non-discriminatory and does not impede on federal concerns: the requirement of apprenticeship and training programs for the bid credits. This requirement was a predicate for each of the bid credits based on different discriminatory percentages. The court has been unable to say that the granting of any of the bid credits for the apprenticeship requirement alone would reflect the intent of the legislature, and must strike down the sections in their entirety.
Finally, as may be noted from the jurisdictions which have struggled with this problem, how to deal with alien labor is not a problem unique to Guam. We cite and adapt the language of the California Supreme Court when it was required to strike down similar legislation:
[Guam] need not, however, abandon its concern for the state labor market. The gross remedy of [P.L. 14-3 and P.L. 15-66] may not stand, but the [territory] may and should inform the Secretary of Labor and other federal officials concerning the labor conditions within [Guam] and within particular industries and occupations. [Guam] does not remain, therefore, without power to act, but merely without power to act with final authority upon a matter for which Congress has determined that one national policy administered by the federal government should prevail.10
Footnotes:
. Rule 65(a)(2) allows that "any evidence received on an application for a preliminary injunction which would be admissible upon the trial on the merits becomes part of the record on the trial and need not be repeated on the *124trial." See, Wright and Miller, Federal Practice and Procedure, Vol. II, Section 2950, p. 493 (1973).
. Legislative debate on Bill No. 43, Fourteenth Guam Legislature, p. 5.
. Yick Wo v. Hopkins, 118 U.S. 356, 369, 6 S.Ct. 1064, 1070 (1886).
"These provisions are universal in their application, to all persons within the territorial jurisdiction, without regard to any differences of race, of color, of nationality; and the equal protection of the laws is a pledge of the protection of equal law."
. Graham v. Richardson, 403 U.S. 369, 372, 91 S.Ct. 1848, 1852 (1971).
. Purdy and Fitzpatrick, supra, 71 C2d at 579. Citations omitted.
. Nyquist v. Mauccet, 97 S.Ct. 2120 (1977).
. Board of Eng. v. Otero, 426 U.S. 572 , 604 , 605, 96 S.Ct. 2764, 2282.
. Purdy and Fitzpatrick, supra, 71 C2d 566, 581, citing Truax v. Raich, 239 U.S. 33.
. Id., 581, 582.
. Id., 577. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487952/ | ABBATE, Judge
DECISION AND ORDER
The defendant James S. Martinez moved this Court for a severance pursuant to 8 GCA §65.35 of the Criminal Procedure Code setting forth facts that a joint trial would be prejudicial. The defendant was indicted for the charge of Burglary, Theft by unlawful taking, and Commission of a burglary by a felon. After arrest, defendant gave a written confession implicating the codefendant Johnny S. Cruz. Cruz at the time of this arrest confessed to his involvement in the case implicating Martinez.
Motion for severance DENIED. Parker v. Randolph, 99 S.Ct, 2132 (1979).
SO ORDERED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487954/ | WEEKS, Judge
DECISION AND ORDER
This matter came before the court on Plaintiff's motion for an order to show cause. The defendant interposed as a defense to the granting of such a motion that §139 of the Civil Code which provides for the payment of child support by fathers, but not by mothers, is a violation of equal protection of the law on the basis of sex.
There can be little doubt that Civil Code §139 is exactly the sort of law condemned as a violation of the equal protection of the laws by Orr v. Orr 99 S.Ct. 1102 (1979). However, this is not dispositive of the question before the court.
First, Civil Code §138 provides a basis for the award of child support which is not sex based. Thus, even if §139 were found to be void as urged, there is a basis for the award of child support.
Second, although this statute as written is violative of the Constitution, and by authority of Orr v. Orr void, this court need not reach this result, or indeed a federal constitutional issue, in this case. The Fourteenth Guam Legislature enacted P.L. 14-28(b), which provides "Equality of Rights under the law shall not be denied or abridged on account of sex. All laws, rules, regulations, and Executive Orders with the force of law which are inconsistent with this section are hereby repealed to the extent of such ■ inconsistency." Thus, before reaching any federal constitutional issue, this Court must first decide the effect under Guam law of these two statutes when read together. And as P.L. 14-28(b) speaks to repeal to the extent of inconsistency, not the voiding of statutes which are violative of equal protection, it is the court's task to determine whether Civil Code §139 must be held repealed in whole or in part.
Where a statute denies equal protection by making an unconstitutional classification, the classification can be abolished by making the statute operate either on everyone or on no one ..... Though the test is imprecise, a court must weigh the general interest in retaining the statute against the court's reluctance to extend legislation to those not previously covered. Such an inquiry may lead a court into examination of legislative purpose, the overall statutory scheme, statutory arrangements in connected fields and the needs of the public. Developments in the Law-Equal Protection, 82 Harv. L.Rev. 1065, 1136-37 (1979) (footnote omitted), as quoted in Commonwealth v. Butler 328 A.2d 851, 860 (Pa. 1974).
*129The overall Guam statutory scheme in the area of divorce is built around the concept of child support, and in the more than 25 years since the enactment of §139, the people of Guam have adjusted their affairs in reliance that this concept exists.
"When a statute, either alone or in conjunction with another statute or statutes, infringes on constitutional rights, this court has an obligation to make every effort to salvage the statute by an appropriate exclusion so long as legislative intent will not be frustrated thereby." Commonwealth v. Butler 328 A.2d 851, 860 (Pa. 1974).
This is especially true, when as here, we have a governing statute which speaks in terms of repeal "to the extent of such inconsistency." Accordingly, it is the ruling of this court that all references to "husband", "wife", "him", and "her" in the Civil Code §139 are repealed, and that this statute should be read with the non-sex-based term "a party" wherever such terms are used.
Plaintiff's motion for an Order to show Cause is GRANTED, and Plaintiff's attorney is to make a motion for a hearing date.
IT IS SO ORDERED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494187/ | MEMORANDUM DECISION DENYING MOTION TO REOPEN ADVERSARY PROCEEDING NO. 05-896.
SARAH SHARER CURLEY, Bankruptcy Judge.
I. INTRODUCTION
This matter comes before the Court on a “Motion to Reopen Adversary Proceeding” (“Motion”) filed by Cathy Blake, the Plaintiff herein, on January 28, 2007. Joseph G. Trutwein, the Debtor and Defendant herein, filed an “Objection to Plaintiffs Motion to Reopen Adversary Proceeding” (“Objection”) on March 1, 2007. The Plaintiff filed a “Memorandum in Support of Motion to Reopen Adversary Proceeding” (“Reply”) on March 2, 2007, and the Court conducted a hearing in the matter on March 6, 2007. At the conclusion of the hearing, the Court took the matter under advisement.
In this Memorandum Decision, the Court has set forth its findings of fact and conclusions of law pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure. The issues addressed herein constitute a core proceeding over which this Court has jurisdiction. 28 U.S.C. §§ 1334(b) and 157(b) (West 2007).
II. FACTUAL BACKGROUND
The Debtor filed his Chapter 7 bankruptcy petition on July 28, 2005. His Section 341 meeting of creditors took place on September 9, 2005, allowing the Plaintiff until November 8, 2005 to file the requisite complaints relating to the discharge of certain debts. On November 6, 2005, two days prior to the bar date, the Plaintiff, acting through counsel, filed her Complaint pursuant to 11 U.S.C. § 523(a)(15), requesting a determination that an obligation owed to the Plaintiff by the Debtor be deemed nondischargeable. On November 22, 2005, the Plaintiff requested a summons, which was issued by the Clerk’s Office on November 23, 2005. On December 7, 2005, the Plaintiff requested a Replacement, or Alias, Summons.1 This Alias Summons was issued on December 8, 2005. Also on that date, the Plaintiff filed an Amended Complaint.
In a letter dated December 13, 2005, the Debtor’s counsel advised the Plaintiffs counsel that the Debtor did not oppose the relief requested by the Plaintiff, provided that the Plaintiff did not seek attorneys’ fees and costs or other unidentified relief.2 See Exhibit 1 to Plaintiffs Reply.3 Specifically, the Debtor objected to the portion of the wherefore clause of the Complaint, seeking “further relief as the court deems just and equitable.” Id. The letter explicitly requested notice in the event that the Plaintiff decided to pursue any additional relief, so that the Debtor could file an answer. Id.
*161Neither the original Complaint nor the Amended Complaint was ever modified to address the concern of the Debtor’s counsel before a default judgment could be entered against the Debtor with the Debt- or’s consent. Rather, on January 23, 2006, the Plaintiff filed her “Application for Entry of Default and Default Judgment” (“Application”).4 This Application was improperly drafted for a number of reasons. For example, it requested the Clerk’s Office enter a default judgment under Federal Rule of Civil Procedure 55(b)(2). Rule 55, incorporated by Federal Rule of Bankruptcy Procedure 7055, sets forth the two-step process a party must follow to obtain a default judgment where the relief requires the Court to review the facts and law, and the judgment is not for a sum certain. Under Rule 55(a), the party seeking default judgment must present an affidavit or make some other showing that the opposing party has not appeared, at which point the Clerk’s Office places an Entry of Default on the docket. Rule 55(b)(2) then provides that “the party entitled to judgment by default shall apply to the court therefor.” Because of this Rule, a separate document containing the judgment itself must be submitted to the Court. Such a judgment may not be entered by the Clerk. A separate judgment was never submitted to, or signed by, the Court.
A “Deficiency Memo” regarding the Application was mailed to the Plaintiff on January 25, 2006.5 The Deficiency Memo stated that it was mailed in regard to an
“Application for Entry of Default” and stated that the Clerk’s Office could not enter default because no affidavit of service of the Summons and Amended Complaint was on file. The Deficiency Memo made no mention of a default judgment and clearly stated the requirements for an “entry of default” only. An Affidavit of Service of the Summons and Amended Complaint was filed on January 31, 2006, curing the deficiency.
On February 1, 2006, the Clerk’s Office entered default against the Debtor and served a copy of the “Clerk’s Entry of Default” on the Plaintiffs counsel, the Plaintiff, and the Debtor.6 The Entry of Default was never mailed to Debtor’s counsel, who had declined to appear in the case in order to facilitate the default process. It was the responsibility of Plaintiffs counsel to mail the Entry of Default to the Debtor’s counsel, particularly when portions of the Complaint or Amended Complaint to which the Debtor’s counsel and the Debtor had objected remained viable.
Ultimately, however, this omission had no immediate impact on the Debtor, because the Plaintiff took no action in the adversary for seven and one-half months. Finally, because of a failure to enter a default judgment or take other action in the adversary, the Court issued, on September 14, 2006, an “Order Re: Potential Dismissal of Adversary,” which was mailed to the Plaintiffs counsel.7 Such an Order *162should have alerted Plaintiffs counsel to check the docket to ensure that all required action had been taken, lest the adversary proceeding be dismissed before the relief requested had been granted. Yet the Court received no response, and on October 20, 2006, after ample time for response or objection, the Court entered an Order Dismissing Adversary.8 Despite the fact that said Order was mailed to the Plaintiffs counsel, he failed to act on it, or object to it, for a number of months. On January 28, 2007, he filed a Motion to Reopen the Adversary Proceeding, evidently because counsel representing the Debtor in the ongoing domestic relations proceedings in the Maricopa County Superior Court argued that the Plaintiff had failed to obtain a judgment in her bankruptcy adversary proceeding, so the Plaintiffs obligation has been discharged. See Motion to Reopen at 2.
III. DISCUSSION
The Order Dismissing the Adversary entered by the Court on October 20, 2006, was a final order of the Court. It is well settled that the Court’s inherent authority allows it “to clear [its] calendar of cases that have remained dormant because of the inaction or dilatoriness of the parties seeking relief.” Link v. Wabash Railroad Company, 370 U.S. 626, 629-30, 82 S.Ct. 1386, 1388, 8 L.Ed.2d 734 (1962). Although it may cause hardship to a plaintiff, he or she must bear the consequences when such a dismissal results from counsel’s “unexcused conduct.” Id. at 633-34, 82 S.Ct. at 1390 (emphasis added). “Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyer-agent.” Id. at 634, 82 S.Ct. at 1390. This seemingly harsh rule is ameliorated by the availability of opportunities to set aside or modify judgments under certain circumstances. Federal Rule of Civil Procedure 60(b), made applicable to bankruptcy proceedings through Federal Rule of Bankruptcy Procedure 9024, provides that on motion within one year of the entry of the judgment, and just terms, a court may relieve a party from a final judgment or order for “mistake, inadvertence, surprise, or excusable neglect,” or other reasons not relevant here. However, this power is not to be exercised lightly. Bankruptcy courts, as courts of equity, have power to reconsider, modify, or vacate their previous orders only so long as no intervening rights have become vested in reliance on orders. In re Lenox, 902 F.2d 737 (9th Cir.1990). Additionally, where setting aside a dismissal order to reopen a case would be an exercise in futility, a court does not abuse its discretion by refusing to engage in such a “pointless” activity. In re Beezley, 994 F.2d 1433, 1434 (9th Cir.1993).
In interpreting the phrase “excusable neglect,” the United States Supreme Court held that determining whether neglect is “excusable” involves an equitable analysis that must take into account all relevant circumstances surrounding the party’s omission. Pioneer Inv. Svcs. Co. v. Brunswick Assoc. Ltd. P’nership, 507 U.S. 380, 395, 113 S.Ct. 1489, 1498, 123 L.Ed.2d 74 (1993). In Pioneer, the plaintiffs counsel untimely filed the plaintiffs proof of claim and sought an order from the bankruptcy court allowing the late-filed claim. The order was denied. When the dispute reached the United States Supreme Court, the Court held that the late-filed claim should be allowed. It reasoned that the plaintiffs were bound by their attorney’s conduct, and that the “excusable neglect” analysis must focus on the attorney’s ae*163tion. The Court gave “little weight” to counsel’s assertion that he was experiencing personal difficulties and upheaval in his law practice at the time. Id. at 398, 113 S.Ct. at 1499. Rather, it placed significance on the notice of the claims bar date provided by the bankruptcy court, which had been “outside the ordinary course in bankruptcy cases.” The claims bar date had a “peculiar and inconspicuous placement ... in a notice regarding a creditors’ meeting.” Id. at 398, 113 S.Ct. at 1500. The Court found that the attorney’s failure to apprehend the bar date on the “unusual” and “ambiguous” notice was excusable. Additionally, there was no prejudice to the debtor or to the interests of efficient judicial administration. Id. at 398, 113 S.Ct. at 1499. Thus, the late-filed claim was allowed.
In the decision of In re Estate of Butler’s Tire & Battery Co., Inc. 592 F.2d 1028 (9th Cir.1979), the Ninth Circuit analyzed somewhat similar issues. The plaintiff obtained a judgment against the defendant, but the defendant failed to apply for an extension of time in which to file an appeal within the ten days allowed by the rule governing such time limits. The bankruptcy court allowed the appeal to go forward, but the District and Ninth Circuit Courts reversed. The defendant’s counsel argued that his neglect in failing to apply in a timely manner for an extension of time was excusable, because he did not know of the time limit until after it had expired. The Ninth Circuit, citing Harlan v. Graybar Electric Co., 442 F.2d 425 (9th Cir.1971), held that “counsel’s misreading of the rule indeed showed neglect, but it certainly does not make the neglect ‘excusable.’” 592 F.2d at 1033. Additionally, “difficulty with office help, inadvertence, and the press of other business were insufficient to constitute excusable neglect.” Id. (internal citations omitted); see also In re Sibson, 235 B.R. 672 (Bankr.M.D.Fla.1999) and In re Bautista, 235 B.R. 678 (Bankr.M.D.Fla.1999) (holding that cases dismissed due to a lawyer’s failure to amend the complaint were not controlled by Pioneer, because the lawyer had received clear, unambiguous notice of his duty to act, unlike the Pioneer counsel, and because the lawyer’s mere carelessness was not grounds for a finding of “excusable neglect” under Rule 60(b)).
In this case, the Plaintiffs counsel believed the Clerk’s Entry of Default was actually the default judgment he had intended to obtain, and thus, he asserts the Dismissal Order should be set aside on the grounds of excusable neglect. However, at the March 6, 2007 hearing on the matter, Plaintiffs counsel presented no law in support of his position. When the Court examines all relevant circumstances surrounding the counsel’s omission,9 the Court’s docket and the pleadings of Plaintiffs counsel establish a pattern of neglect from the outset of this case. As noted above, the Plaintiffs counsel failed to serve in a timely manner the initial Summons in the case; failed to cooperate with the Debtor’s counsel’s requests concerning consent to the entry of a default judgment; misread or failed to comply with Rule 55(b)(2); and failed to remedy his error despite multiple notices from the Court. The notices sent to Plaintiffs counsel regarding the “Clerk’s Entry of Default” were clear and unambiguous. Unlike the document received by the counsel in Pioneer, the notices mailed to the counsel at bar did not contain notice of multiple events. Rather, each notice was clearly titled in bold at the top of the pages, and was mailed in regard to a single docket item or particular act. The Plaintiffs *164counsel is an experienced practitioner and has appeared before this Court for a number of years. At the March 6 hearing, he conceded that in other cases, he did not perceive the Clerk’s Entry of Default as being the same as a default judgment.
Moreover, in the form submitted by the Plaintiffs counsel, he appended an order at the end of the form. As noted previously, in a request for entry of default and default judgment, the Plaintiffs counsel was required to submit a separate judgment for the relief requested, which he did not do. Even his own form stated that he requested entry of a judgment pursuant to Rule 55(b)(2). That particular subsection requires that only the Court may grant such relief. Therefore, when the Plaintiffs counsel argued that he thought the Clerk’s Entry of Default on the docket was the same as a default judgment, he should have realized that in his own request for relief, he was asking the Court to act. A review of the document that he submitted on the electronic docket would have clearly shown that the Court never took action on the improper order appended at the end of his Application. The Plaintiffs counsel never submitted an appropriate judgment which the Court could execute. Even when the Court notified the Plaintiffs counsel that the adversary was about to be dismissed because of inactivity, counsel did not request a hearing or take any other action. Thus, no “excusable” reason was given for his neglect in this case. The Supreme Court, Ninth Circuit, and other case precedent make clear that misreading a rule; failing to understand a clear, unambiguous notice of the sort ordinarily issued by the Bankruptcy Court; and mere carelessness do not constitute “excusable” neglect.
Moreover, an equitable analysis under Pioneer requires an examination of “the danger of prejudice to the debtor, [and] the length of the delay and its potential impact on judicial proceedings.” 507 U.S. 380, 395, 113 S.Ct. 1489, 1498, 123 L.Ed.2d 74. The underlying Complaint in this matter alleges that the obligation owed to the Plaintiff by the Defendant was nondischargeable pursuant to 11 U.S.C. § 523(a)(15). The underlying nature of such a complaint is time sensitive, and the relief may be denied if not timely asserted. Relief must be requested within the time period specified by Federal Rule of Bankruptcy Procedure 4007(c).10 Because of the time limitations, the dismissal of a time-barred action is effectively a dismissal with prejudice. Indeed, unless a court provides otherwise, all dismissals under Federal Rule of Civil Procedure Rule 41(b) other than for lack of jurisdiction, improper venue, or failure to join an indispensable party are with prejudice, even if not so stated. In re Marino, 213 B.R. 846, 851 (9th Cir. BAP 1997), reversed on other grounds by In re Marino, 181 F.3d 1142 (9th Cir.1999). Such actions are rarely reopened, because the discharged debtor is entitled to have all such matters adjudicated promptly. Other claims may be brought against a discharged debtor even if such claims require the debtor’s case to be reopened; however, Congress has determined, by setting a bar date for the filing of such complaints, that a complaint under Section 523(a)(15) is not among them.
*165It is well settled that excusable neglect is no basis for a court to allow the late filing of a time-barred complaint. See In re Hill, 811 F.2d 484 (9th Cir.1987); In re Santos, 112 B.R. 1001, 1008 (9th Cir. BAP 1990); In re Ricketts, 80 B.R. 495, 497 (9th Cir. BAP 1987). In the decision of In re Hill, a judgment creditor missed the filing deadline to bring an action determining the dischargeability of its debt under 11 U.S.C. § 523(a)(6). The Ninth Circuit found that excusable neglect had existed, but held that a court had no discretion to enlarge the time limit in which to file such a complaint. 811 F.2d at 485. Rule 4007(c) clearly provided that the complaint had to be filed in the time allowed; and if the time were to be enlarged, such extension has to be requested prior to the expiration of the original time period. Id. at 486. It noted that although the time limits might impose a hardship on certain creditors, such rules were necessary to further the prompt resolution of bankruptcy cases and did not unreasonably frustrate the creditors’ substantive rights. Id. at 487. See also In re Santos, 112 B.R. at 1007, 1009 (noting that Rule 4007 protects a debtor’s interest in certainty, finality, prompt administration, and the receipt of a fresh start).
In the case at bar, the Debtor received his bankruptcy discharge on November 21, 2005. Although the Plaintiffs adversary proceeding was still pending at that time, the Debtor had conditionally agreed to accept a default judgment against him. If the adversary proceeding had been prosecuted expeditiously, such a judgment could have been entered promptly after the Clerk’s Entry of Default on February 1, 2006. However, the adversary proceeding was not prosecuted expeditiously, or at all, and was dismissed approximately seven and one-half months later, after ample notice and opportunity for the Plaintiff to respond or object. Additionally, the default judgment being sought did not comport with the terms to which the Debtor had agreed. Once the adversary proceeding was dismissed and his discharge received, the Debtor had a right to rely on the finality of the orders entered in his case, and to begin the “fresh start” he was promised.
The Debtor was not the only one relying on the finality of the orders entered in his case. From the parties’ assertions in the pleadings and at the March 6 hearing in this matter, it appears that property settlement matters were moving forward in the parties’ divorce proceedings. Such matters would necessarily rely on orders entered by the Bankruptcy Court in the Debtor’s case, and it is possible that the Debtor’s rights have become vested in reliance on those orders. See In re Lenox, 902 F.2d 737 (9th Cir.1990) (holding that bankruptcy courts may not vacate or modify final orders if intervening rights have become vested in reliance on said orders). Even if no such rights have become vested, the Court concludes that the neglect of Plaintiffs counsel was not “excusable,” so as to warrant this Court vacating its Dismissal Order. Additionally, the time-barred nature of the underlying Complaint and the resulting prejudice to the Debtor militate against the Plaintiffs position. See Pioneer, 507 U.S. at 397-98, 113 S.Ct. at 1499 (noting that the lack of prejudice to the debtor or to the interests of judicial administration weighed in favor of vacating the offending order). Where a party cannot be accorded relief, such as in the case of a time-barred claim, a Court should not undertake an exercise in futility by reopening the case. In re Beezley, 994 F.2d 1433, 1434 (9th Cir.1993).
IV. CONCLUSION
Based upon the foregoing, the Plaintiffs Motion to Reopen Adversary Proceeding is *166denied. The Plaintiff has demonstrated no excusable neglect that would allow the Court to vacate its Dismissal Order pursuant to Federal Rule of Civil Procedure 60(b). Moreover, the time-barred nature of the claim, and the public interest in efficient administration of judicial proceedings prevent the Court from entering the relief requested. The Court will execute a separate order incorporating this Decision.
.A replacement, or alias, summons must be issued if a plaintiff fails to serve the original summons in the ten-day period allotted by Federal Rule of Bankruptcy Procedure 7004(e).
.It is unclear to the Court whether the Defendant’s counsel wrote in response to the original Complaint, or to the Amended Complaint, filed four days prior to the date of the letter.
.See Dkt. Entry No. 22.
. Dkt. Entry No. 7.
. The Deficiency Memo may be found at Dkt. Entry No. 8; the Bankruptcy Noticing Center’s Certificate of Service thereof appears at Dkt. Entry No. 9.
. Dkt. Entry No. 12. The entry of default itself appears at Dkt. Entry No. 11, and is clearly titled “Clerk’s Entry of Default” (emphasis added).
.Dkt. Entry No. 13; related Certificate of Service at Dkt. Entry No. 14. Such Orders are routinely generated by the Court when no activity has occurred in a case for at least six months. "The power to invoke this sanction is necessary in order to prevent undue delays in the disposition of pending cases and to avoid congestion in the calendars of the District Courts.” Link v. Wabash Railroad Company, 370 U.S. 626, 629-30, 82 S.Ct. 1386, 1388, 8 L.Ed.2d 734 (1962).
. Dkt. Entry No. 15; related Certificate of Service at Dkt. Entry No. 16.
. See Pioneer, 507 U.S. 380, 395, 113 S.Ct. 1489, 1498, 123 L.Ed.2d 74.
. Rule 4007(c) (West 2005) provides that a complaint filed pursuant to 11 U.S.C. § 523(c) "shall be filed no later than 60 days after the first date set for the meeting of creditors under § 341(a).” Section 523(c) (West 2005) provides that a debtor shall be discharged of debts of the kind specified in Subsections 523(a)(2), (4), (6), or (15), unless the creditor to whom the debt is owed receives a nondischargeability determination from the court after notice and a hearing. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494188/ | MEMORANDUM DECISION REGARDING STANDARD FOR VALUATION OF CREDITOR’S CLAIM
ARTHUR S. WEISSBRODT, Bankruptcy Judge.
Before the Court is the Debtors’ Motion to Modify Chapter 13 Plan (“Motion”). The Debtors, Casey and Barbara Young (“Debtors”), filed their original Chapter 13 plan (“Plan”) on July 30, 2004. The Plan was confirmed without objection on September 24, 2004.
Debtors filed the instant Motion on October 5, 2005. Having received no objection, Debtors filed a request for entry of default on October 26, 2005. On October 27, 2005, Creditor CIT Group/Sales Financing, Inc. (“Creditor”) filed an objection to the Motion on the basis that the valuation of the collateral for its secured claim, Debtors’ mobile home, was too low. Neither counsel for Debtor nor counsel for Creditor scheduled a hearing on the Motion, so on May 3, 2006, the Chapter 13 Trustee set the matter on the Court’s calendar. An initial hearing was held on June 5, 2006. The hearing was continued to permit, inter alia, the parties to obtain appraisals and submit additional briefing. The Court held a final argument on the Motion on January 26, 2007, and took the matter under submission.
Debtors in this case are represented by James J. Gold, Esq. of Gold and Hammes. Craig C. Chiang, Esq. of Buchalter Nemer represents Creditor.
The Court now makes the following findings of fact and conclusions of law, pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure.
I.
STATEMENT OF FACTS
Debtors purchased a 1998 Silvercrest W-69 mobile home on November 12, 1998, financing the purchase through Advantage Mobile Homes (“Advantage”) with a loan in the sum of $109,502.00. When Debtors purchased the mobile home, it was already in its current location in a mobile home park in San Jose, California. Debtors make separate monthly payments to the owner of the mobile home park for rental of the space on which the mobile home sits.
The loan agreement (“Agreement”) between Debtors and Advantage granted Advantage a security interest in the mobile home. Advantage assigned its interest in the Agreement to Creditor on the same day, November 12, 1998. The Agreement grants Creditor “a security interest under the Uniform Commercial Code in the commodity and all proceeds thereof and accessions thereto until [the Debtors] have paid the balance in full and completely satisfied all other requirements of this contract and any modifications to it.” The Agreement contains a section entitled “Itemization of Amount Financed”, which contains a list of items and states that, “[i]f checked, the Total Cash Price includes the following:”. The list of items includes skirting and *185awnings. However, none of the individual boxes is checked, and the entire section is marked “N/A” to indicate that it does not apply. The awnings and skirting are physically attached to the mobile home. Also located on Debtors’ space in the mobile home park are a carport, shed and a patio. While the Agreement does not grant Creditor a security interest therein, the awnings and skirting were included in the mobile home purchase, according to Debtors. The carport, shed and patio were not included in the purchase of the mobile home, are not physically attached to the mobile home, and are property of the park, not Debtors.1 Creditor did not submit any evidence to the contrary.
Debtors filed a chapter 13 petition, along with the Plan, on July 30, 2004. The contract balance on the petition date was $107,365.79. The Plan provided for monthly payments of $900 and a dividend of 15% to general unsecured creditors. It did not list Creditor’s claim, and was confirmed on September 24, 2004. At the time of confirmation, Debtors intended to make ongoing monthly payments to Creditor at the contract rate of $1,003.90.
Debtors soon realized that they could not afford the monthly outlays required by both the $900 monthly Plan payment and the $1003.90 monthly payments to Creditor. Accordingly, Debtors filed the instant Motion on October 5, 2005. Under the proposed modification, Debtors sought to decrease Plan payments retroactively to $366 per month for July through September 2005, which would then increase to $1,500 in October 2005 and continue at that level for the balance of the Plan term. The Motion also sought to pay Creditor’s claim through the Plan, proposing to value the collateral at $40,000, with monthly payments of $400 and interest at 9.5% (which equals the contract interest rate). Debtors’ proposed valuation is based on the NADA Manufactured Housing Appraisal Guide for the relevant period. The Motion also sought to decrease the dividend to general unsecured creditors to 1%.
Creditor opposed the Motion on the ground that the valuation of its collateral was too low. Creditor proposes to value the mobile home at $103,586, based on an appraisal of its “in-place” value by California licensed real estate appraiser Jim Moore.2 In addition to the mobile home itself, the $103,586 appraisal includes and attributes separate value to the carport ($2,778), awnings ($2,045), patio ($2,919), shed ($903) and skirting ($2,240), based on the square footage of each. The appraisal also includes $26,800 based on the value of the park space.
The matter has now been fully briefed and argued, and was taken under submission by the Court on January 26, 2007.
II.
ANALYSIS
There are three possible methods for treatment of an allowed secured claim such as the one held by Creditor under a chapter 13 plan: (1) the holder of the claim may accept the plan, (2) the debtor may surrender the collateral, or (3) the plan must comply with the chapter 13 cram down provisions. 11 U.S.C. § 1325(a)(5).3 *186In this case, Debtors propose to retain the collateral and Creditor has objected to the proposed plan modification. Accordingly, the Plan, as modified, must satisfy the elements of cram down. Creditor retains the lien securing its claim, and the Plan must provide Creditor with payments, over the life of the Plan, that will total the present value of the allowed secured claim, ie., the present value of the collateral. Associates Commercial Corp. v. Rash, 520 U.S. 953, 957, 117 S.Ct. 1879, 138 L.Ed.2d 148 (1997). In this case, the Court must determine the proper method for valuing the collateral, ie., the 1998 Silvercrest mobile home.
Section 506(a) 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 distribution or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.
11 U.S.C. § 506(a).
It is undisputed that Creditor’s interest in the estate’s interest in the mobile home is defined by the Agreement. According to the Agreement, Creditor’s security interest extends only to the mobile home itself. In addition, Debtors concede that the awnings and skirting were included in the purchase of the mobile home.4 The terms of the Agreement do not grant Creditor a security interest in the carport, shed, or patio. Moreover, Debtors submitted a declaration stating that those items are property of the mobile home park and are not physically attached to the mobile home. Creditor did not submit any contrary evidence. In addition, the form of the Agreement specifically permits Creditor to claim a security interest in such items if appropriate, and it was not done in this case. Having determined the property that comprises Creditor’s interest — the 1998 Silvercrest mobile home — the question in this case is how to value that interest for purposes of cram down.
Debtors contend that Rash supplies the standard for valuing Creditor’s secured claim: “under § 506(a), the value of property retained because the debtor has exercised the § 1325(a)(5)(B) ‘cram down’ option is the cost the debtor would incur to obtain a like asset for the same ‘proposed ... use.’ ” Rash, 520 U.S. at 965, 117 S.Ct. 1879. The standard set by Rash is the replacement value of the property, as distinguished from foreclosure value. Debtors contend that the replacement value of the mobile home can be found in the relevant NADA Manufactured Housing Appraisal Guide (which Debtors submitted into evidence), and is $40,000.
Creditor contends that the appropriate valuation of the mobile home is not the replacement value asserted by Debtors, but is instead the “in-place” value. In re Valdez, 338 B.R. 97 (Bankr.N.D.Cal.2006). In Valdez, the bankruptcy court determined that the value of the collateral for purposes of fixing the amount of the secured creditor’s claim under § 506 was the mobile home’s in-place value. The bankruptcy court arrived at this conclusion by *187looking to the California state law rights of the legal owner of the mobile home, ie., the secured creditor. Reasoning that, because state statutory law governing mobile home foreclosure gave the legal owner the right, in a foreclosure, to sell the mobile home in its present location within the mobile home park and to retain all proceeds from such a sale, the Valdez court held that the appropriate value of the secured creditor’s claim under § 506 was the in-place value of the mobile home. The bankruptcy court stated that “[b]ecause this right arises by statute, it does not depend upon [secured creditor’s] having a perfected security interest in any leasehold.” 338 B.R. at 99. The court’s decision did not address the Supreme Court’s decision in Rash.
Citing the bankruptcy court’s decision in Valdez, Creditor asserts that $103,586.00 is the value of its claim. Creditor contends that the in-place value of the collateral in this case, as of the petition date, was $103,586.00, which is set forth in Creditor’s appraisal, conducted on July 10, 2006, and the accompanying declaration of appraiser Jim Moore.
The Court concludes that Rash controls the situation at bar. Rash mandates application of a replacement value standard for purposes of valuing a partially secured claim under § 506(a) where the debtor has exercised the cram down option under § 1325(a)(5).
In Rash, the secured creditor held a loan and lien on a tractor truck purchased by the debtors for use in a freight hauling business. The contract balance was $41,171. The debtors proposed to retain the collateral and invoked the cram down provision. The secured creditor objected to confirmation, sought to repossess the truck, and disputed the value assigned to the truck by the debtors. The secured creditor argued that the proper measure of valuation was the replacement value of the truck, estimated at $41,000. The debtors advocated application of the foreclosure value standard, estimated at $31,875. The bankruptcy court adopted the debtors’ position and confirmed the plan. The district court and the Fifth Circuit affirmed. The Supreme Court reversed. Justice Ginsburg, writing for the majority, held that § 506(a) “directs application of the replacement-value standard.” 520 U.S. at 956,117 S.Ct. 1879.
In a footnote, the Supreme Court explained the meaning of the term replacement value: “by replacement value, we mean the price a willing buyer in the debtor’s trade, business or situation would pay a willing seller to obtain property of like age and condition.” 520 U.S. at 959, n. 2,117 S.Ct. 1879.
In deciding whether to apply foreclosure or replacement value, the Supreme Court stated that, under § 506(a), “the ‘proposed disposition or use’ of the collateral is of paramount importance to the valuation question.” 520 U.S. at 962, 117 S.Ct. 1879. Where a creditor objects to confirmation, the debtor has only two options for dealing with allowed secured claims: (1) surrender the collateral under § 1325(a)(5)(C) or (2) retain the collateral and exercise the cram down option under § 1325(a)(5)(B).
The “disposition or use” of the collateral thus turns on the alternative the debtor chooses — in one case, the collateral will be surrendered to the creditor, and in the other, the collateral will be retained and used by the debtor. Applying a foreclosure — value standard when the cram down option is invoked gives no significance to the different consequences of the debtor’s choice to surrender the property or retain it. Employing a replacement value standard when the debtor retains the property, on the other hand, distinguishes retention from *188surrender and renders meaningful the key words “disposition or use.”
520 U.S. at 962,117 S.Ct. 1879.
The Rash majority explicitly rejected the Fifth Circuit’s reasoning that the replacement value standard was disrespectful of state law, under which the secured creditor could sell the collateral and obtain its net foreclosure value “and nothing more.” 520 U.S. at 964, 117 S.Ct. 1879, quoting 90 F.3d 1036,1044 (1996).
In allowing Chapter 13 debtors to retain and use collateral over the objection of secured creditors, however, the Code has reshaped debtor and creditor rights in marked departure from state law. The Code’s cram down option displaces a secured creditor’s state-law right to obtain immediate foreclosure upon a debtor’s default. That change, ordered by federal law, is attended by a direction that courts look to the “proposed disposition or use” of the collateral in determining its value. It no more disrupts state law to make “disposition or use” the guide for valuation than to authorize the rearrangement of rights the cram down power entails.
520 U.S. at 964, 117 S.Ct. 1879 (citations omitted).
Creditor attempts to distinguish Rash on the ground that the case involved a truck, rather than a mobile home. There is no support for such a position, other than Valdez, which, as noted above, does not discuss Rash. It is well established that the holding of Rash applies to all manner of personal property, including mobile homes. See, for example, In re Stratton, 248 B.R. 177 (Bankr.D.Mont.2000)(mobile home); In re Mitchell, 320 B.R. 687 (Bankr.E.D.Mo.2005)(car); In re Nice, 355 B.R. 554 (Bankr.N.D.W.Va.2006) (SUV), In re Bivens, 317 B.R. 755 (Bankr.N.D.Ill.2004)(van); In re Spraggins, 316 B.R. 317 (Bankr.E.D.Wis.2004)(computer and television); In re Nguyen, 2006 WL 2846822 (Bankr.W.D.La. Mar. 21, 2006)(shrimp boat).
It is not possible to discern whether or not Valdez implicitly takes account of the Supreme Court’s holding. It is, however, difficult to apprehend how Valdez can be construed consistently with the replacement value standard set by Rash. Extension of Valdez’s logic to other personal property is illustrative. Take, for instance, a partially secured automobile loan. Where the debtor elects the cram down option and the creditor objects, under Valdez, the creditor’s rights would be defined by state law. Under California law, a creditor holding a security interest in an automobile may repossess the collateral and sell it at auction — just as the legal owner of a mobile home may do. The fundamental difference between the two situations is that, with respect to automobiles, the replacement value, often defined by the Kelley Blue Book, is substantially higher than what the creditor would obtain at a hypothetical foreclosure sale. Unlike a mobile home, an automobile that is sold at auction receives no premium based on its location. If Valdez is applied to a partially-secured automobile loan, where the debtor elects to retain the collateral, the creditor would only be entitled to be paid the amount it would be able to obtain if it exercised its state law foreclosure rights, which is, generally speaking, significantly lower than the replacement value. Not only would such a situation be highly objectionable from the perspective of secured auto lenders, it is not the law. Where a debtor elects the cram down option with respect to an automobile, the debtor must pay the secured creditor the replacement value of the vehicle. Rash, 520 U.S. at 963, 117 S.Ct. 1879; In re Schwalb, 347 B.R. 726, 758 (Bankr.D.Nev. *1892006). In this Court’s opinion, the same is true when the collateral involved is a mobile home. See Stratton, 248 B.R. at 182. This conclusion is not altered by the fact that, in this particular case, the foreclosure value of the mobile home happens to be greater than the replacement value.
Creditor argues that, when determining Creditor’s interest in the collateral, the Court must evaluate the “in-place” interest. This appears to be an attempt by Creditor to divorce the issue from the question of the appropriate method for valuation — which, according to Rash, is replacement value. Instead, Creditor attempts to frame the issue as requiring a determination of (1) Creditor’s interest that is being valued; and (2) how to value that interest. Creditor contends that the answer to the first question, pursuant to Valdez, is that the interest to be valued is the mobile home in-place in the mobile home park, and it therefore follows that, under state law, a creditor could foreclose and sell the property in its present location. The logic of this position is circular. The reason why Creditor believes its interest is the “in-place” interest relates to state foreclosure law, to which the Valdez court looked to determine the appropriate method of valuation. Logically, under Creditor’s analysis, there would be no need to analyze separately the value of Creditor’s interest, because Creditor’s answer to the first part of the inquiry supplies the same answer to the second valuation question in every instance — ie., if the proposition that Creditor’s interest is the “in-place” interest is accepted, then the value, by definition, is the foreclosure value under state law. In this Court’s opinion, this analysis is purely obfuscatory, and is incorrect for a number of reasons, the most significant being that it is directly contrary to the replacement value standard set by the Supreme Court in Rash.
In reality, there is no dispute over the answer to the first question posed by Creditor — Creditor’s interest is defined by the Agreement and state law. The answer to the second question — the valuation question — however, is not defined solely by state law. If it were, the appropriate standard may be foreclosure value, as stated in Valdez. The Supreme Court has, however, explicitly rejected this position (which was, in fact, urged by the debtors in the Rash case) by defining the valuation question not in terms of state law, but rather in terms of bankruptcy law under § 506 and in light of the proposed use or disposition of the collateral. As the Supreme Court held, application of the replacement value standard, rather than foreclosure value, properly accounts for the debtor’s continued use of the collateral. Rash, 520 U.S. at 962, 117 S.Ct. 1879. The replacement value standard values “the creditor’s interest in the collateral in light of the proposed [repayment plan] reality: no foreclosure sale and economic benefit for the debtor derived from the collateral equal to ... its [replacement] value.” Id., quoting In re Winthrop Old Farm Nurseries, Inc., 50 F.3d 72, 75 (1st Cir.1995). In this case, Debtors propose to retain and use the collateral in the same manner as was contemplated when it was originally purchased and as such property is customarily used-as a place of residence.
Creditor argues that Debtors misinterpret Rash and its replacement value mandate and suggests that, because Debtors have elected to continue using the collateral they must pay Creditor $103,586. Creditor has no explanation for its contention that, because Debtors propose to retain the collateral, they must pay the foreclosure value ascribed to it by Creditor. Creditor has been unable to explain how its proposed valuation represents anything but foreclosure value — the standard that was explicitly rejected by Rash. Creditor *190has not made an argument that its $103,586 valuation represents an estimate of replacement value, and any such argument would be incorrect in any event.
Despite its attempts to distinguish Rash, Creditor asserts that Rash actually supports its position because “if Debtors choose not to surrender the Mobilehome to [Creditor], they must pay [Creditor] more than the foreclosure value of the Mobile-home. To take into account the additional risk that Debtors may default, [Creditor] is allowed a secured claim for the higher, fair market value of the Mobilehome.” Creditor’s Supplemental Brief at 7:26-8:2. Creditor’s position is that, where Debtors propose to retain the collateral over Creditor’s objection, Creditor must be paid more than the foreclosure value. But Rash merely mandates application of replacement value without any reference to whether that value is higher or lower than the foreclosure value.5 It is true that under the facts of Rash, the replacement value was higher than the foreclosure value. But it is not true that where the situation is reversed — as it is in this case— that the creditor is entitled to select the higher of the two. Replacement value is the standard set by the Supreme Court and this Court is bound to follow it, whether or not, in a particular case, it is higher or lower than the foreclosure value.
State foreclosure law has a specific purpose, which is to allow the creditor to sell the collateral in a very short period of time and recover as much money as possible. State law with respect to mobile homes, cited in Valdez and urged by Creditor, makes a great deal of sense in that context. In a foreclosure, the debtor loses the property. In that situation, allowing the foreclosing creditor to reap the benefit of the mobile home’s in-place value has no negative effect on the debtor and provides a potentially enormous benefit to the creditor. That policy is, however, substantially at odds with the Bankruptcy Code, where, as here, Debtors’ intention is to keep the property. The purpose of the cram down provision is to permit Debtors to retain the property by paying Creditor its value. Till v. SCS Credit Corp., 541 U.S. 465, 476, 124 S.Ct. 1951, 158 L.Ed.2d 787 (2004). Under such circumstances, it makes no sense to include in the valuation of the collateral items that the creditor did not provide and in which it has no security interest. The Bankruptcy Code alters debtor and creditor rights “in marked departure from state law,” by “displacing] a secured creditor’s state-law right to obtain immediate foreclosure upon a debtor’s default.” Rash, 520 U.S. at 964, 117 S.Ct. 1879. This reshaping of parties’ rights by the Bankruptcy Code will benefit debtors in some instances (specifically where, as here, the foreclosure value of the collateral is higher than the replacement value), and creditors in others (where the situation is reversed). Even application of the law is essential.
The fact that foreclosure value in this case is significantly higher than replacement value is largely a reflection of the current state of the California real estate market. Mobile home spaces are scarce in this area. That scarcity, and the particulars of the location (neighborhood safety, quality of schools, etc.), contribute significantly to the foreclosure value. See October 26, 2005 Declaration of Patty Lambert, ¶ 7; see also July 28, 2006 appraisal report, attributing a value of $26,800 to the park space. In this case, Creditor is not secured to any extent by Debtors’ leasehold interest in the mobile home space, yet Creditor insists that, in order to retain the *191mobile home, Debtors must pay Creditor an additional $26,800 for the value of the park space. Review of the Agreement shows that the form is drafted to permit Creditor to take a security interest in the mobile home park tenancy, if desired. This was not done in the instant case. Debtors already possess a mobile home space inside the park, which is provided by the park owner and for which they make separate payments. Those separate payments to the park landlord presumably reflect the full value of the location. It would be inequitable, therefore, to require Debtors — as a condition of retaining their home — also to pay Creditor for the portion of value that the mobile home park tenancy contributes to the value asserted by Creditor. The same is true of the carport, shed and patio. In a foreclosure situation, Creditor could reap the benefit of the value added to the mobile home by these items. The evidence is clear, however, that Creditor has no security interest in these items. They are property of the mobile home park, and presumably some portion of the monthly space rent is also attributable to their value. To the extent that Creditor now contends under Valdez that it should be paid for these items because it would receive value for them under state foreclosure law, despite its lack of a security interest therein, the Court rejects this argument as both unfair and contrary to the Bankruptcy Code, for the same reasons set forth above.
III.
CONCLUSION
The Court concludes that the appropriate standard for valuing Creditor’s claim in this case is replacement value as set forth in Rash. The parties agree that the proper date for valuation is the petition date, July 30, 2004. The Court finds that Creditor’s security interest includes the skirting and awnings, which were acquired as part of Debtors’ purchase of the mobile home. The Court finds that Creditor’s interest does not extend to the carport, shed or patio, which are not property of Debtors, and belong to the mobile home park. The calculation of the replacement value does not include the mobile home’s in-place value and may not attribute any value to the carport, shed or patio, in which Creditor has no interest.
In order to determine whether the Plan can be modified as Debtors propose, the actual value of Creditor’s claim must be set. The parties have submitted different estimates of the replacement value of Debtors’ mobile home. This may be resolved by stipulation, or the parties may contact the Court to schedule an evidentia-ry hearing to determine the replacement value.
. See October 26, 2006 Declaration of Casey Young.
. Creditor’s appraisal asserts an "in-place” value for the mobile home, as of the petition date, of $103,586.00 and a value on a dealer lot of $76,786.00. See August 18, 2006 Declaration of Jim Moore.
.Unless otherwise noted, all statutory references are to Title 11, United States Code (the Bankruptcy Code), as it existed when Debtors *186filed this bankruptcy petition on July 30, 2004.
. Since Debtors do not contest this issue, the Court will treat the awnings and skirting as part of Creditor's collateral.
. In this case, Debtors’ proposed modified plan also proposes to pay Creditor the contract rate of interest, and Creditor does not argue that it is entitled to a higher rate. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494189/ | MEMORANDUM OF DECISION
ROBERT SOMMA, Bankruptcy Judge.
Introduction
Before the Court is a relief from stay motion (“Motion”) filed by the Debtor’s former divorce lawyer, Stephen G. Crowne (“Crowne”) concerning a prepetition fee award of $18,320.03 in Crowne’s favor issued in post-divorce litigation between the Debtor and his former wife (“Fee Award”). Crowne asks that the Court (a) find that collection of the Fee Award from exempt property of the Debtor is not subject to the automatic stay as a domestic support obligation or (b) if it is subject thereto, grant relief for him to collect the Fee Award from such exempt property. The Debtor opposes the Motion.
Procedural Status
On June 12, 2006, I held an evidentiary hearing on the Motion. I did so in accordance with an order I issued on March 23, 2006. See In re O’Brien, 339 B.R. 529 (Bankr.D.Mass.2006). Having considered my prior order in this matter, the written submissions by the parties, the testimony and exhibits at trial, and applicable law, I now render my decision.
Background
The post-divorce litigation between the Debtor and his former wife concerned modifications to, and alleged breaches of, the parties’ divorce decree and related separation agreement, primarily as to child support matters. After trial, the probate court issued various rulings on the child support issues and found (among other things) both the Debtor and his former wife guilty of contempt.
On December 2, 2005, the probate court issued the Fee Award on account of legal services provided to the Debtor by Crowne in the litigation. The Fee Award was to be paid by the Debtor from retirement accounts established and maintained for the Debtor through his employment at the Massachusetts Institute of Technology (“Retirement Accounts”). The Debtor commenced this Chapter 7 case on December 7, 2005, at which time payment of the Fee Award had not been made. In his Chapter 7 case, the Debtor claimed the Retirement Accounts as exempt (“Exemption Claim”). Neither Crowne nor any other party in interest filed an objection to the Exemption Claim.
Discussion
The Debtor timely filed the Exemption Claim and no party in interest objected thereto. Accordingly, the Retirement Accounts are exempt property and thus not property of the Debtor’s bankruptcy estate. 11 U.S.C. § 522(d) and 11 U.S.C. § 522(1). The Fee Award is not a domestic support obligation. By his own testimony, Crowne was employed by the Debtor to represent him in the litigation, and he did so. He did not represent the *244Debtor’s former wife, their children or a guardian ad litem. The Fee Award resulted from, and was occasioned by, his representation of the Debtor, and, ultimately, is based upon the contractual relationship between client and lawyer. 11 U.S.C. § 101QL4A). See In re Rios, 901 F.2d 71, 72-73 (7th Cir.1990); In re Akamine, 217 B.R. 104, 110-113 (D.N.Y.1998); and In re Miceli, 2000 WL 1285347 (Bankr.N.D.Ill.2000).
Because the Fee Award is not a domestic support obligation, it is subject to the automatic stay and is not collectible from the Retirement Accounts as a domestic support obligation.
However, the matter does not rest there. The probate court’s order in respect of the Fee Award appears to have effectuated a judicial lien on the Retirement Accounts to the extent of the Fee Award. Crowne has not claimed such a lien in this ease and, should he do so, the Debtor may assert whatever rights he may have to avoid that lien under the provisions of the Bankruptcy Code protecting the impairment of exemptions. 11 U.S.C. § 522(f). Hence, while the Motion is properly denied, Crowne is entitled to pursue that judicial lien claim subject to whatever protective rights the Debtor may have to avoid or otherwise to challenge such claim.1
Conclusion
For the foregoing reasons, the Motion is denied and Crowne may not collect the Fee Award as a domestic support obligation against the Retirement Accounts. The denial is without prejudice to Crowne’s right to assert a judicial lien on and against the Retirement Accounts and to seek relief from stay to enforce such a lien provided that (a) he shall file any such motion by May 31, 2007 and (b) the Debt- or’s rights to challenge or to avoid such lien are fully reserved.2
A separate order will issue.
. The probate court apparently recognized an attorney’s lien in Crowne's favor in the post-divorce litigation. See M.G.L.A. c. 221 § 50. Crowne has not requested relief in respect of this lien and, in any case, the lien seems inchoate and of uncertain value given the outcome of the litigation.
. In view of my ruling, Crowne’s motion to extend the deadline for a complaint as to discharge or exception to discharge will be granted. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494191/ | MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER AND PROPOSED FINDINGS OF FACT AND RECOMMENDATIONS
STEPHEN D. GERLING, Chief Judge.
Before the Court are two motions related to the August 29, 1996 Amended Complaint (“Complaint”) filed by Richard C. Breeden, Trustee (“Trustee”) in The Bennett Funding Group, Inc. case.
The first is a motion filed on Sept. 28, 2005 by the Trustee for Partial Summary Judgment (“Trustee’s Motion”) pursuant to Rule 56 of the Federal Rules of Civil Procedure (“Fed.R.Civ.P.”), and Rule 7056 of the Federal Rules of Bankruptcy Procedure (“Fed.R.Bankr.P.”) on counts XI, XXVII and XXIX of the Trustee’s Complaint.
The second is Patrick Bennett’s (“Bennett”) Motion to Dismiss (“Bennett’s Motion”) filed on March 6, 2006, which seeks to dismiss those counts of the Complaint which name Bennett as a defendant,1 or, in the alternative, to dismiss the Complaint in its entirety.
The Court heard oral argument on both motions at its regular motion term in Uti-ca, New York on March 30, 2006.2 Upon the conclusion of the March 30th hearing, the Court indicated that it would allow the parties until April 20, 2006 to submit supplemental briefs, and would take the matter under submission on that date.
*275JURISDICTION
The Court has jurisdiction over the parties and subject matter of this adversary proceeding pursuant to 28 U.S.C. §§ 1334, 157(a), (b)(1), (b)(2)(E), (H), (0) and (c)(1).
For purposes of the Trustee’s Motion, Counts V and XXIX to XLIII of the Complaint are acknowledged by the Trustee to be “related to” claims within the meaning of 28 U.S.C. §§ 157(a) and 1334. See Complaint, ¶4. As such, this Court will treat Bennett’s Motion (to dismiss as to these counts of the Complaint) as a “related to” non-core matter on which this Court can make only proposed findings of fact and conclusions of law. 28 U.S.C. § 157(c)(1).
FACTS
On July 6, 1996 the Trustee commenced this adversary proceeding by filing a Complaint in The Bennett Funding Group Inc.’s case3 against numerous defendants, including Bennett himself.4,5 The Complaint contains allegations relating to what this Court has previously characterized as a “financial superweb” of dealings involving entities owned and/or controlled by the Bennett family, including Bennett. The Complaint contains forty-three counts in which the Trustee alleges, inter alia, actual and constructive fraud, unreasonably small capital, breach of fiduciary duty, negligence, turnover, and constructive trust.
Since the filing of the Trustee’s Complaint, Bennett was indicted and tried on criminal charges in the U.S. District Court for the Southern District of New York. Bennett was convicted on seven counts of perjury and obstruction on March 2, 1999. At a second trial, ending on June 10, 1999, Bennett was convicted of forty-two felony counts of securities fraud, bank fraud, money laundering and transacting business with unlawfully obtained property. See Trustee’s Statement of Uncontested Facts, ¶¶ 16, 23.6 The jury also returned a forfeiture verdict against Bennett in the amount of $109,088,889.11.7 It is Bennett’s convictions at this second criminal trial that are relevant to the Trustee’s Motion, which seeks partial summary judgment on counts XI, XXVII and XXIX of the Complaint. See Trustee’s Motion at 5.
ARGUMENT
Trustee’s Motion for Partial Summary Judgment
Collateral Estoppel
The Trustee’s Motion asserts that the doctrine of collateral estoppel precludes *276Bennett from denying or re-litigating any of the facts or issues which formed the basis of the jury’s guilty verdicts at Bennett’s second criminal trial, but especially those which are related to the Complaint’s counts XI, XXVII and XXIX. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979), and Emich Motors Corp. v. Gen. Motors Corp., 340 U.S. 558, 568, 71 S.Ct. 408, 95 L.Ed. 534 (1951). The Trustee cites to the four specific requirements for the application of collateral estoppel:
(1) the issues in both proceedings must be identical, (2) the issue in the prior proceeding must have been actually litigated and actually decided, (3) there must have been a full and fair opportunity for litigation in the prior proceeding, and (4) the issue previously litigated must have been necessary to support a valid and final judgment on the merits.
Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 44 (2d Cir.1986).
The Trustee then proceeds to make the following connections between Bennett’s convictions at his second criminal trial, and counts XI, XXVII and XXIX of the Trustee’s Complaint.
Count XI of the Trustee’s Complaint
Count XI of the Trustee’s Complaint seeks the turnover, pursuant to Code § § 541 and 542, of $10 million which Bennett allegedly caused to be transferred to himself from BMDC.
In his Motion, the Trustee asserts that Bennett’s conviction on criminal counts 85, 86, 87, 89 and 91 establishes that Bennett deposited five specific checks totaling $1.25 million drawn on BFG company accounts into his personal account. These criminal counts allege that Bennett “engage[d] and attempted to engage in monetary transactions in and affecting interstate commerce in criminally derived property that was of a value greater than $10,000, and that was derived from specified unlawful activity, to wit, mail fraud, wire fraud, and fraud in the sale of securities.” See Indictment, United States v. Bennett et al, S1 97 Cr. 639(TPG), ¶ 79, Exhibit ‘C’ to the Affidavit of James G. Gamble.
Based on this conviction, the Trustee argues that Bennett caused at least $1.25 million in estate funds to be transferred to his personal accounts, facts sufficient to require turnover of that amount under Code §§ 541 and 542. To support this argument, the Trustee offers the criminal court’s instructions to the jury which convicted Bennett on these counts. These instructions, in essence, required the jury to find that Bennett knowingly engaged or attempted to engage in monetary transactions involving criminally derived property valued over $10,000. See Trustee’s Motion, p. 10. The Trustee asserts that these facts demonstrate that Bennett intentionally made the above transfers for the purpose of furthering unlawful activity.
Bennett’s opposition to the Trustee’s motion for partial summary judgment on count XI falls under two headings.
First, Bennett makes the argument that because the transfers referred to in counts 85, 86, 87, 89 and 91 took place prior to BFG’s filing for bankruptcy protection, they cannot be subject to a turnover proceeding. See Bennett Reply Memorandum of Law, pgs. 2, 15; see also Bennett’s Motion, p. 10.8
Second, Bennett asserts that because he did not have a possessory interest in the property at the time of the commencement *277of the case, a motion for turnover is not appropriate. See Bennett’s Motion, p. 11.
Count XXVII of Trustee’s Complaint
Count XXVII of Trustee’s Complaint alleges fraudulent conveyance claims against all defendants, under Code §§ 548(a)(1), 544 and 550, and §§ 270 through 281 of the New York Debtor and Creditor Law (“NYDCL”). The Trustee asserts that Bennett’s convictions on criminal counts 85, 86, 87, 89 and 91, as well as counts 64-69, 71, 72 and 77 (the money laundering counts), also preclude Bennett from re-litigating those issues as they pertain to count XXVII of the Complaint. The Trustee asserts that Bennett’s convictions on those criminal counts, establishing that he caused to be transferred to his personal accounts $1.25 million in estate funds, and that he engaged in money laundering, entitles the Trustee to partial summary judgment on this fraud count against Bennett under §§ 548(a)(1), 544 and 550 of the Code, and §§ 270 through 281 of the NYDCL. This is because under these sections it need only be shown that the transfers were made with the “actual intent to hinder, delay or defraud” present or future creditors of the estate. The Trustee asserts that Bennett’s convictions on criminal counts 85, 86, 87, 89, 91, 64-69, 71, 72 and 77 establish this.
Bennett responds that Count XXVII specifically alleges transfers of funds which took place between March 30, 1995 and March 29, 1996, but that the transfers for which he was convicted under criminal counts 85, 86, 87, 89, 91 and 64-69, 71, 72 and 77 all took place between April 7, 1993 and January 3, 1995, not during the time period specified in Count XXVII of the Complaint. See Indictment, United States v. Bennett et al, SI 97 Cr. 639(TPG), p. 40, Exhibit ‘C’ to the Affidavit of James G. Gamble. As a result, Bennett argues that his criminal convictions on these counts cannot possibly support the application of collateral estoppel to the Trustee’s civil count XXVII.
Count XXIX of Trustee’s Complaint
Count XXIX of Trustee’s Complaint alleges breach of fiduciary duty by Bennett by, inter alia, exposing the BFG companies to civil and criminal liabilities, penalties and sanctions, and damaging BFG’s business reputation and goodwill. The Trustee asserts that Bennett’s conviction on criminal counts 64-69, 71-72 and 77, involving money laundering by causing the Debtors to make unlawful payments to third parties in the amount of $46,915,000, constitutes a breach of his fiduciary duty as outlined in civil count XXIX. The Trustee also contends that Bennett’s conviction on criminal counts 25, 32, 33 and 38, involving Bennett’s defrauding three federally-insured savings institutions by inducing them to provide loans to the Debtors totaling $4,812,375.87, constitutes a breach of his fiduciary duty.
To support his contention that Bennett’s criminal conviction on these counts constitutes a breach of his fiduciary duty, the Trustee cites the District Court’s jury instruction, charging the jury that in order to convict Bennett on these charges (counts 64-69, 71-72 and 77), they must find:
First, that the defendant knowingly conducted or attempted to conduct a financial transaction;
Second, that the financial transaction involved property which, in fact, constituted • the proceeds of specified unlawful activity;
Third, that the defendant knew that the property involved in the financial transactions was the proceeds of some form of unlawful activity;
Fourth, that the defendant engaged in the financial transaction with the intent *278to promote the carrying on of the specified unlawful activity; or the defendant engaged in the financial transaction knowing that the transaction was designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership or the control of the proceeds or specified unlawful activity.
Jury Charge, pgs. 2457-58, Exhibit ‘F’ to Affidavit of James G. Gamble.
The Trustee asserts that because a jury found Bennett guilty of money laundering pursuant to these instructions, Bennett is necessarily “proven to have violated his fiduciary duties to the Debtors.” Trustee’s Motion at 13.
Similarly, under counts 25, 32, 33 and 38, for defrauding three federally-insured savings institutions into providing loans to the Debtors in the amount of $4,812,375.87, the jury was instructed that in order to find Bennett guilty they were required to find:
First: That ... the defendant executed or attempted to execute a scheme or artifice to defraud a bank, or that the defendant executed or attempted to execute a scheme or artifice to obtain money owned by or under the custody or control of that bank by means of false or fraudulent pretenses, representations or promises;
Second: The defendant knowingly and willfully engaged in a scheme or artifice ... and with specific intent to defraud the bank or to obtain, by deceiving the bank, money owned or controlled by the bank ...”
Jury Charge, pgs. 2453-54, Exhibit ‘F’ to Affidavit of James G. Gamble.
The Trustee again argues that the type of behavior described in these counts and jury instructions “are clear breaches of fiduciary duty.” Trustee’s Motion, p. 13.
Bennett’s arguments against granting the Trustee partial summary judgment on count XXIX based on his conviction on the criminal counts noted above, as far as this Court can decipher them, are as follows:
First, Bennett claims that the Trustee’s count XXIX allegations of breach of fiduciary duty are limited specifically to BFG and BMDC. Because of this specificity, counts 23 and 24 from Bennett’s second criminal trial cannot be used to support partial summary judgment because they concern exclusively BRC and BRC II.
Second, Bennett claims that count XXIX is a non-core, “related to” count, and that this Court “lacks jurisdiction to enter any judgment on count [XXIX].” See Bennett Reply Memorandum of Law, p. 3; 3/30/06 Hearing Transcript, pgs. 24-28.
Third, Bennett attempts to make much of the fact that neither criminal trial resulted in his conviction on a Ponzi or “pyramid” scheme count. Bennett argues that because the Trustee’s Complaint contains repeated allegations of a Ponzi scheme, the Trustee must establish that BFG was run as a Ponzi scheme in order to succeed on his motion for partial summary judgment. Bennett addresses this point several times. See Bennett Supplemental Memorandum of Law 4/14/06, pgs. 13, 14; Bennett Reply Memorandum of Law 3/17/06, pgs. 11, 12, 32, 38; Bennett’s Motion, pgs. 19-22, 39, 41, 45, 47; and 3/30/06 Hearing Transcript, pgs. 75-77.
On a more general level, Bennett argues that collateral estoppel cannot be used by the Trustee to preclude him from re-litigating the issues in question because he has a habeas petition pending before the U.S. District Court for the Southern District of New York, seeking to set his criminal convictions aside due to ineffective assistance of counsel and a sentence imposed contrary to Apprendi v. New Jersey, 530 *279U.S. 466, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000). See 3/30/06 Hearing Transcript, pgs. 75-77.9
Also as an argument against the application of collateral estoppel, Bennett offers the fact that an Administrative Law Judge declined to allow New York State to invoke collateral estoppel in a tax proceeding against Bennett, because “the criminal convictions were not tax-related offenses ...” Bennett Reply Memorandum of Law p. 29; see also 3/30/06 Hearing Transcript, p. 78.
Standing
In further opposition to the Trustee’s Motion, Bennett also makes several allegations regarding the Trustee’s lack of standing to maintain these claims because of the lack of any individual creditor who has such standing. See Bennett’s Motion, p. 24; 3/30/06 Hearing Transcript, pgs. 32-35; Bennett Reply Memorandum of Law, p. 15. The Trustee argues that under Code § 544, the Trustee has standing to bring claims on behalf of creditors, thousands of whom have been named in this case, and whose claims have been allowed. See Trustee’s Reply Memorandum of Law, p. 5; see also 3/30/06 Hearing Transcript, p. 42.
Bennett’s Motion to Dismiss
Bennett, in turn, seeks dismissal of the Complaint based on seven separate grounds.10 The first two, failure to allege a Ponzi scheme, and failure to satisfy Fed. R.Civ P. 9(b), apply to all forty-three counts of the Complaint. The third, that the Complaint was improperly based upon information and belief, applies only to the sixteen Bennett Counts. The remaining four grounds apply to various Bennett Counts. Each of these alleged seven grounds for dismissal will be set out infra, with the two applicable to all forty-three counts treated first.
1. Failure to Allege a Ponzi Scheme
Bennett argues that all forty-three counts of the Complaint must be dismissed because they “attempt to accuse Bennett” of conducting a Ponzi scheme, and rely on “the underlying allegation of a Ponzi scheme throughout the amended complaint.” Bennett’s Motion, p. 20. “Breeden’s reliance on the underlying requirement to allege a Ponzi scheme is in-terwound throughout, and central to, all aspects of the amended complaint.” Id., p. 21. “Each count of the amended complaint reincorporates and rely [sic ] on the paragraphs that attempt to allege a Ponzi scheme ...” Id., p. 22. “[T]he amended complaint [fails] to properly allege the elements of a Ponzi scheme ...” Id.
In response, the Trustee points to a Second Circuit Court of Appeals case defining a Ponzi scheme as:
a scheme whereby a corporation operates and continues to operate at a loss. The corporation gives the appearance of being profitable by obtaining new investors and using those investments to pay for the high premiums promised to earlier investors. The effect of such a scheme is to put the corporation farther and farther into debt by incurring more and more liability and to give the corporation the false appearance of profitability in order to obtain new investors.
Trustee’s Response, p. 9 citing Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1088 n. 3 (2d Cir.1995).
*280The Trustee contends that ¶¶ 1, 38, 39 and 54 of the Complaint satisfactorily allege the existence of a Ponzi scheme as set out by the Second Circuit Court of Appeals in Hirsch. Those paragraphs of the Complaint allege that Bennett caused the Debtors to assign fictitious leases to investors or assign actual leases to multiple investors and lenders (Complaint, ¶ 39), caused the debtors to incur liabilities to individual investors far in excess of the available revenue stream from leases it actually funded (Complaint, ¶ 54), and produced fraudulent financial statements which created the appearance of income to the Debtors (Complaint, ¶ 1), resulting in the Debtors’ liabilities exceeding their assets by over $650 million (Complaint, ¶ 38).
The Trustee argues that even though the facts alleged in the Complaint meet the Second Circuit Court of Appeals’ definition of a Ponzi scheme as set out in Hirsch, it is not necessary for the Court to find that Bennett conducted a Ponzi scheme in order find in favor of the Trustee on each of the Bennett Counts.
2. Failure to Satisfy Fed.R.Civ.P. 9(b)
Bennett argues that all forty-three counts of the Complaint must be dismissed because they fail to allege fraud with particularity as required by the heightened pleading requirements of Fed.R Civ P. 9(b).11 Bennett cites several cases for the proposition that a plaintiff alleging fraud must “specify the time, place, speaker, and content of the alleged misrepresentations.” Caputo v. Pfizer, Inc., 267 F.3d 181, 191 (2d Cir.2001); See Bennett’s Motion, p. 5-7. Bennett argues that the Complaint lacks the “who, what, where and why” level of specificity required by Fed. R.Civ.P. 9(b). Id.
The Trustee responds that its allegations of fraud are supported by thirty-three detailed paragraphs spread over a dozen pages of its Complaint.12 Again, the Trustee contends that these paragraphs detail the fraudulent activity (including the assignment of fictitious leases, multiple assignment of the same leases, and issuance of securities to investors using false and misleading offering documents), which led to the BFG’s and BMDC’s liabilities exceeding their assets by over $650 million. Alluding to the “law of the case” doctrine, the Trustee cites this Court’s own findings in an earlier Bennett Decision concerning the detail of the allegations in the Complaint regarding the Fed.R.Civ.P. 9(b) requirements:
the Trustee has gone into great detail in setting forth the factual allegations concerning [Bennett’s] involvement in what the Trustee describes as a Ponzi scheme ... For example, in ¶ 41 of the [ ]Complaint, the Trustee alleges that P.Bennett ‘caused Bennett Funding Group to assign leases to individual investors on leases that Bennett Funding Group did not own or were non-existent.’ Paragraph 49 of the [] Complaint alleges that P. Bennett ‘fraudulently and in breach of his fiduciary duties repeatedly caused Bennett Funding Group (a) to pledge to financial institutions, as collateral for loans, leases that were also assigned to individual investors; and (b) to assign to individual investors leases that were also pledged to financial institutions as collateral for loans.’ The Court *281finds that the Trustee has satisfied the requirements of Fed.R.Civ.P. 9(b).
Trustee’s Response, p. 8, citing Breeden v. Bennett, Case No. 97-65399, Adv. Pro. No. 98-70876A, slip op. at 5 (Bankr.N.D.N.Y. February 9, 1999).
In addition, the Trustee asserts that what Fed.R.Civ.P. 9(b) requires is “a pleading of 1) specified facts, 2) sources that support the alleged specific facts and 3) a basis from which an inference of fraud may fairly be drawn.” Breeden v. Bennett (In re Bennett Funding Group), 220 B.R. 743, 753 (Bankr.N.D.N.Y.1997). These three requirements, the Trustee argues, are more than met by the Complaint’s detailed discussion of specific fraudulent transactions and the methodology used to perpetrate them.
Moreover, the Trustee points out that the Fed.R.Civ.P. 9(b) particularity requirement applies only to fraud counts; of the Bennett Counts, only counts I, XVI and XXVII are claims of fraud. The remaining Bennett Counts, II, VII, X, XI, XII, XVII, XXVIII, XXIX, XXXIV, XXXV, XXXVI, XLI and XLII are not claims based on fraud, so the heightened standard would not apply to them.
3. Improperly Based “Upon Information and Belief’
In support of his argument that the sixteen Bennett Counts must be dismissed because they are improperly based upon information and belief, Bennett cites Lesa-voy v. Lane, 304 F.Supp.2d 520, 527 (S.D.N.Y.2004) for the proposition that “[p]leadings ‘on information and belief are inadequate and must be dismissed as a matter of law.” Bennett’s Motion, p. 8 (citing Lesavoy, 304 F.Supp.2d at 527). He also cites Di Vittorio v. Equidyne Extractive Industries, Inc., 822 F.2d 1242, 1247 (2d Cir.1987) for the proposition that “Rule 9(b) pleadings cannot be based upon information and belief.” Bennett does acknowledge an exception to the Di Vittorio rule: that a plaintiff can plead upon information and belief “as to facts peculiarly within the opposing party’s knowledge, in which event the allegations must be accompanied by a statement of the facts upon which the belief is based.” Id. Bennett argues that this exception does not apply to the instant case because at the time the Complaint was drafted, the Trustee had in his possession the books and records of BFG, and had spent “tens of millions of dollars” to have accountants and attorneys review those records. The exception also would not apply, according to Bennett, because the allegations in the Complaint “were not accompanied by a statement of the facts upon which the belief is based.” Bennett’s Motion, p. 9 (citing DiVittorio, 822 F.2d at 1247).
The Trustee asserts that his Complaint was not pled entirely on information and belief, but was, in fact, “brought on the Trustee’s personal knowledge as to himself and his own actions and on information and belief as to all other matters, based upon an ongoing investigation involving numerous interviews and the review of thousands of pages of documents.” Trustee’s Response, p. 10, citing Complaint, p. 2. In addition, the Trustee contends that the DiVittorio exception to Fed.R.Civ.P. 9(b) pleadings is relevant in this instance because at the time the Complaint was filed the Trustee “clearly was not in possession of detailed information regarding all of the fraudulent acts committed by Bennett and his co-conspirators.” Trustee’s Response, p. 5.
4. Code § 548 One Year Time Limit
Bennett contends that counts I, II, XVI, XVII, XXVII and XXVIII which allege, inter alia, violations of Code § 548, must be dismissed because they do not allege *282any violations within the one year period immediately preceding the Debtors’ filing, as required by that section of the statute. Bennett claims that he “combed the entire 97 page [Complaint] and [did] not find the specific transactions ... that took place allegedly between ‘March 30, 1995 and March 29, 1996.’ ” Bennett’s Motion, p. 13. Bennett cites In re OPM Leasing Services, Inc., 32 B.R. 199 (Bankr.S.D.N.Y.1983) rev’d on other grounds, 48 B.R. 824 (S.D.N.Y.1985) for the proposition that there is no “elasticity” in the one year period specified in Code § 548.
The Trustee asserts that the three predicate transactions underlying each of these counts occurred within the one year limit imposed by Code § 548, and that the relevant dates of the transactions are set out clearly in each of these counts in the Complaint. Moreover, the Trustee argues that even if the predicate transactions took place outside of the one-year limit, each of these counts also alleges violations of §§ 270 through 281 of the NYDCL, which have a statute of limitations reaching back six years from the date of the filing of the petition and are made applicable here pursuant to Code § 544(b).
5. Improperly Asserted Turnover Counts
Bennett contends that counts VII, X, XI, and XII must be dismissed because these counts seek turnover of funds which were transferred prior to the commencement of BFG’s filing. Bennett argues that any transfer effected prior to the commencement of filing is not subject to turnover pursuant to Code § 542. He also argues that in order to be subject to a Code § 542 turnover action, the property in question must have been in Bennett’s “possession, custody or control” at the time of the commencement of BFG’s bankruptcy case. Bennett’s Motion, p. 11 (citing In re Golden Distributors, Ltd., 128 B.R. 342 (Bankr.S.D.N.Y.1991)).
The Trustee counters that, purely as a matter of law, United States v. Whiting Pools, 462 U.S. 198, 202-03, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983) does not require that the debtor have a possessory interest in the property subject to Code § 542 turnover at the commencement of the case.
Secondly, the Trustee asserts that as to the possession, custody or control issue, count X does allege that Bennett was in possession, custody or control of the specific property. As for counts VII, XI and XII, the Trustee contends that because cash is fungible, the Trustee is not required to allege that the “specific cash proceeds” were still in Bennett’s possession, custody or control at the time of the petition.
6. Trustee Lacks Standing Under § § 544 and 550
Bennett asserts that counts I, II, XVI, XVII, XXVII and XVIII which allege, inter alia, violations of Code §§ 544 and 550, must be dismissed because the Trustee lacks standing to maintain these counts. Bennett asserts that in order for the Trustee to have standing to utilize his powers under these sections of the Code, § 544 requires that the Trustee “name the actual unsecured creditor who would have standing to attack the transfer.” Bennett’s Motion, p. 16. Bennett cites In re Wingspread Corporation, 178 B.R. 938 (Bankr.S.D.N.Y.1995) for the proposition that “the mere allegation of the existence of an unsecured creditor who would have standing [is] insufficient” to meet this requirement. Bennett’s Motion, p. 16 (citing In re Wingspread Corporation, 178 B.R. at 946). Bennett contends that the Trustee did not name such a creditor in his Complaint, and as a result does not have standing under Code § 544 to maintain counts I, *283II, XVI, XVII, XXVII and XVIII of the Complaint.
The Trustee responds, first, that even if Bennett were correct that the Complaint did not allege the existence of an unsecured creditor who would have standing, each of the relevant counts also alleges violations of NYDCL §§ 270 through 281, which do not require the existence of such a creditor. As a result, the counts would remain viable in any event. But the Trustee also argues that the Complaint does in fact contain the names of unsecured creditors as required by Code § 544 and In re Wingspread. The Trustee notes that the Complaint states that the Trustee has standing “acting on behalf of BFG, BMDC and their creditors.” Trustee’s Response, p. 11, citing Complaint, ¶ 171. Secondly, the Trustee contends that the Code § 544 and In re Wingspread standing requirement is met because the Complaint contains the names of several creditors allegedly defrauded by Bennett, such as Karl L. Ackerman (Complaint, ¶ 50), the Edwin Golden Living Trust (Complaint, ¶ 56), and Robert and Frances Cavalero (Complaint, ¶ 58).
7. Failure to Allege a State or Federal Statute
Bennett argues that counts XXIX, XXXIV, XXXV, XLI and XLII, alleging, respectively, Breach of Fiduciary Duty, Breach of Fiduciary Duty&emdash;Self Dealing, Breach of Fiduciary Duty-Corporate Waste and Mismanagement, Accounting, and Constructive Trust, must be dismissed because they fail to put Bennett on notice as to alleged violations of any specific state or federal statute. As a result, Bennett argues, he is not “on notice of the charges upon which he must defend himself, to ensure [Bennett’s] constitutional rights to due process of law.” Bennett’s Motion, p. 18.
The Trustee responds that counts XXIX, XXXIV, and XXXV are also violations of Bennett’s duties under § 720 of the New York Business Corporation Law (“NYBCL”), which allows an action to be maintained against an officer or director of a corporation “to procure judgment for ... [t]he neglect of, or failure to perform, or other violation of his duties in the management and disposition of corporate assets committed to his charge ...” NYBCL § 720. Moreover, the Trustee argues that counts XLI and XLII, seeking an accounting and to impose a constructive trust, are grounded in the Complaint’s allegations of § 542(a) violations. However, the Trustee does not discuss how this would address Bennett’s concerns regarding lack of notice of a violation of a specific statute in the Complaint itself.
DISCUSSION
Trustee’s Motion for Partial Summary Judgment
Standing
The Trustee, as representative of the estate, has the exclusive capacity to sue and be sued on behalf of the estate. See Code § 323(b); In re Henry-Luqueer Properties, Inc., 145 B.R. 771, 774 (Bankr.E.D.N.Y.1992) (holding that under Code § 323(b) a trustee is empowered to commence an adversary proceeding on behalf of the estate). Fed.R.Bankr.P. 6009 permits the Trustee to prosecute any action on behalf of the estate without the need to obtain bankruptcy court approval. See Fed. R. Bankr.P 6009; In re Capgro Leasing Associates, 169 B.R. 305, 312-13 (Bankr.E.D.N.Y.1994) (holding that Fed. R.Bankr.P. 6009 gives a Trustee the discretion to decide whether to litigate an action, and to do so without court approval). However, neither Code § 323 nor *284Fed.R.Bankr.P. 6009 confers standing on the Trustee.
Code §§ 541, 544 and 547 do confer such standing on the Trustee. “Under the Bankruptcy Code, the bankruptcy trustee may bring claims founded, inter alia, on the rights of the debtor and on certain rights of the debtor’s creditors ...” Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1093 (2d Cir.1995) (citing Code §§ 541, 544 and 547).13 Moreover,
[u]nder federal law, bankruptcy trustees have standing to pursue the claims of the bankruptcy estate, that is, the insolvent corporation. While a bankruptcy trustee may assert only the claims that belong to the bankruptcy estate, those claims may include the interests of creditors in the sense that the trustee has the duty to marshall the assets of the estate so that they can be distributed to creditors on a pro rata basis.
In re Parmalat Securities Litigation, 377 F.Supp.2d 390, 420 (S.D.N.Y.2005).
As suggested above, the Trustee’s standing is not limited exclusively to actions belonging to the debtor. Standing is generally governed by state law; that does not mean, however, that state law claims belonging to creditors are beyond the Trustee’s reach:
The Bankruptcy Code permits the trustee to assert claims which belong to the debtor, or under his ‘strong arm’ or avoiding powers, belong to the debtor’s creditors under state law. The Bankruptcy Code authorizes the trustee to prosecute such claims for the benefit of all creditors, and necessarily deprives individual creditors of standing to pursue the same claims for their sole benefit.
In re Keene Corp., 164 B.R. 844, 851 (Bankr.S.D.N.Y.1994) (citing St. Paul Fire and Ins. Co. v. PepsiCo, Inc., 884 F.2d 688 (2d Cir.1989)).
Counts XI and XXVII of the Complaint were brought by the Trustee on behalf of “BFG, BMDC and their creditors.” As these two counts allege violations of Code §§ 541, 542, 544, 548(a)(2) and 550 as well as NYDCL §§ 270 through 281, the Trustee clearly has standing to bring these actions.
Nor is the Trustee’s standing limited to the avoidance powers allotted to him by the Code. Case law also provides that a trustee has standing to pursue an officer of the debtor for breach of fiduciary duty. “[WJhile normally the fiduciary obligation of officers, directors and shareholders is enforceable directly by the corporation or through a stockholder’s derivative action, it is, in the event of bankruptcy of the corporation, enforceable by the trustee.” Mitchell Excavators, Inc. v. Mitchell, 734 F.2d 129, 131 (2d Cir.1984) (citing Pepper v. Litton, 308 U.S. 295, 306-7, 60 S.Ct. 238, 84 L.Ed. 281 (1939)). Thus, the Trustee has standing to maintain count XXIX, alleging Bennett’s breach of fiduciary duty to BFG and BMDC.
One exception to a trustee’s standing to bring suit was set out in Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114 (2d Cir.1991). “A claim against a third party for defrauding a corporation with the cooperation of management accrues to creditors, not to the guilty corporation.” Id. at 120. It is clear, however, that Bennett was not a third party when he committed the acts which resulted in his convictions at his second criminal tri*285al.14 And it is those convictions upon which the Trustee seeks to base his Motion for Partial Summary Judgment. Hence, the Wagoner exception to the Trustee’s standing does not apply to the matter currently before the Court.
Collateral Estoppel15
Gelb Factors
The Trustee lists the four criteria for the application of collateral estoppel in a federal case as set out in Gelb, 798 F.2d at 44.16 As the doctrine of collateral estop-pel is at the very center of the Trustee’s motion for summary judgment, it is worth taking the time to examine these criteria.
Whether or not the issues addressed in Bennett’s second criminal trial and the matter sub judice are identical,17 as well as the previously litigated issue’s necessity to the final judgment, and whether they were actually litigated and decided, will be addressed infra, as the Trustee’s motion for partial summary judgment on each of the Complaint’s counts XI, XXVII and XXIX is analyzed.
First, Bennett claims that he did not have a full and fair opportunity to litigate the issue in the second criminal trial.18 See Bennett Reply Memorandum of Law, p. 28. Bennett maintains that during that trial he was represented by court-appointed public defenders from the Legal Aid Society, who were “admittedly ill-equipped to represent Bennett in a complex case ...” Id. More specifically, these public defenders exhibited a “failure to understand the essential elements and required factual findings for the second trial counts of conviction.” Id. at 25. Moreover, these lawyers repeatedly failed “to lodge timely objections to ... erroneous [jury] instructions.” Id. Bennett also asserts that the jury instructions the Trustee relies upon in his motion “were plagued with prejudicial, constitutional errors, resulting in an unreliable verdict ...” Id.
If these allegations were to prove credible, they could indeed call into question Bennett’s “full and fair opportunity” to litigate the relevant issues in the second criminal trial. Significantly, another court has had the opportunity to subject these allegations, and the record underlying them, to close analysis. In a very recent *286decision, District Judge Paul A. Crotty of the U.S. District Court for the Southern District of New York, examined Bennett’s allegations of nineteen errors by his trial and appellate counsel which allegedly deprived him of his Sixth Amendment right to effective assistance of counsel and appellate counsel. Judge Crotty reviewed the trial and appellate records, and each of these nineteen allegations in detail, and found no merit whatsoever to any of them, or to their claimed “cumulative effect.” See Bennett v. United States, 2006 WL 738162, *8-15, 2006 U.S. Dist. LEXIS 12395, *25-46 (S.D.N.Y.2006), aff'd on reconsideration, 2006 WL 1751242, 2006 U.S. Dist. LEXIS 43225 (S.D.N.Y.2006). Judge Crotty also found that with respect to Bennett’s allegations of incorrect jury instructions, “the [trial] court’s charges and instructions correctly stated the law.” Id. at *10, 2006 U.S. Dist. LEXIS 12395, *31. As a result, this Court finds that Bennett’s counsel’s representation did not deprive him of a full and fair opportunity to litigate the issues in question.19 And as Bennett offers no other evidence for his not having had a full and fair opportunity to litigate the issues, this Court finds that Bennett has not fulfilled his burden of demonstrating that he did not have such a full and fair opportunity.
Other Collateral Estoppel Issues
Bennett also contends that the existence of his habeas petition pending before the U.S. District Court for the Southern District of New York (seeking to set his criminal convictions aside due to ineffective assistance of counsel and a sentence imposed contrary to Supreme Court jurisprudence), should prevent the Trustee from successfully invoking collateral estop-pel.20
This argument fails for two reasons. First, “[p]endency of an appeal does not deprive a judgment of its preclusive effect.” In re Bennett Funding Group, Inc., 1998 Bankr.LEXIS 1938 *77 (Bankr.N.D.N.Y.1998) (citations omitted). See also In re Kelly, 155 B.R. 75, 78 (Bankr.S.D.N.Y.1993) (holding that collateral es-toppel may be applied when the prior judgment is on appeal).21 Second, as indicated above, since this matter was submitted, Bennett’s habeas petition was dismissed in its entirety by Bennett v. United States, 2006 WL 738162, 2006 U.S. Dist. LEXIS 12395 (S.D.N.Y.2006). That decision held not only that Bennett’s habeas petition presented no question of substance for appellate review, but also that its decision was not appealable. Bennett’s subsequent motion for reconsideration was denied by Bennett v. United States, 2006 WL 1751242, 2006 U.S. Dist. LEXIS 43225 (S.D.N.Y.2006).22
There remains Bennett’s contention that an Administrative Law Judge in a *287New York State tax proceeding against Bennett did not grant preclusive effect to Bennett’s criminal convictions in that proceeding. As quoted by Bennett, however, the rationale for not applying collateral estoppel in that proceeding was that “the criminal convictions were not tax-related offenses ...” Bennett Reply Memorandum of Law p. 29; see also 3/30/06 Hearing Transcript, p. 78. In the matter at hand, however, Bennett’s criminal convictions are “Code-related” offenses. The Trustee has outlined in considerable detail how the acts for which Bennett received criminal convictions are also violations of the Code and NYDCL sections specified in the Complaint. The fact that Bennett’s criminal convictions were not granted preclusive effect in a state tax proceeding offers little in the way of a colorable argument against the application of collateral estoppel in the matter sub judice.
Count XI of the Trustee’s Complaint
The Trustee’s argument is that Bennett’s conviction on criminal counts 85, 86, 87, 89 and 91 (that he unlawfully deposited five specific checks drawn on a Bennett company account totaling $1.25 million into his personal account), entitles the Trustee to partial summary judgment in that specific amount on count XI of the Complaint for turnover of some $10 million which Bennett allegedly transferred to himself from BMDC. There is the requisite identity of issues between the two proceedings because the five unlawful transfers for which Bennett was convicted fall within the purview of, or are encompassed by, civil count XI’s “$10 million wrongfully diverted to [Bennett’s] personal account from BMDC from 1992 through 1995 ...” Clearly the issue of Bennett’s illegal transfer of these funds was, as required by Gelb, necessary to support a valid and final judgment on counts 85, 86, 87, 89 and 91; Bennett could not have been convicted on those counts otherwise.
Bennett opposes summary judgment on this count first on the basis that the transfers in question cannot be the subject of a turnover because they occurred prior to the time the Debtors entered bankruptcy. However, Bennett neglects to note that “the general turnover provision of the Bankruptcy Code recognizes that property of the estate includes property in the possession of third parties other than the debtor at the time of the commencement of the bankruptcy case.” Bankruptcy Service, L.Ed. § 4B:29 (2006) (emphasis added) (citing In re Brown, 106 B.R. 546 (Bankr.N.D.Ill.1989), rev’d on other grounds, 126 B.R. 767 (N.D.Il.1991)). Thus, by its very definition, turnover under Code § 542 exists to address transfers of estate property which took place prior to the commencement of the case. Indeed, United States v. Whiting Pools, 462 U.S. 198, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983), the landmark U.S. Supreme Court case cited by Bennett, involved a pre-petition transfer which the Court held was subject to the Code’s turnover provision.23
Second, Bennett argues that because the Trustee’s Complaint does not allege that Bennett had a possessory interest in the property at the time of the commencement of the case, a motion for turnover is not appropriate.24 Bennett’s *288argument here may stem from his lack of awareness that Code § 542, unlike the Bankruptcy Act of 1898, does not require that the property in question be “in the actual or constructive possession, custody or control of the bankruptcy court ...”25 In re Brown, 106 B.R. at 548. Nor did the turnover provisions of the 1898 Act extend to property held by third persons under claim of right. Code § 542 does. See In re Brown, Id. (opining that the turnover provisions of the Code represent a radical departure from the scheme under the Bankruptcy Act, and clearly include as property of the estate property in the possession of third parties on the date of the filing of debtor’s petition.)
Under the Code, requiring possession by the defendant of the property sought for turnover simply makes no sense. “Section 542(a) ... requires the delivery of the property or the value of the property. Otherwise, upon receiving a demand from the trustee, the possessor of property of the debtor could thwart the demand simply by transferring the property to someone else. That is not what the statute says ... and can’t be what it means.” In re Dybalski, 316 B.R. 312, 315 (Bankr.S.D.Ind.2004) (emphasis in original) (citing Boyer v. Carlton, Fields, Ward, Emmanuel, Smith and Cutler, P.A. (In re USA Diversified Products, Inc.), 100 F.3d 53 (7th Cir.1996)).
A leading bankruptcy treatise sheds more light on the possession issue upon which Bennett seeks to rely:
The general turnover provision of the Bankruptcy Code which requires the delivery of property to the estate is generally limited to the return of specific property in the actual or constructive possession of a third party at the time the turnover proceeding is commenced. Nevertheless, lack of possession of the property at issue is not an obstacle which will prevent the court from ordering a turnover of such property, where there is a person or entity in a fiduciary relationship with the debtor and such person or entity intentionally divests the property in breach of that relationship.
Bankruptcy Service, L.Ed. § 4B:34 (citing In re DeBerry, 59 B.R. 891, 896 (Bankr.E.D.N.Y.1986) (holding that the lack of possession is not an obstacle to turnover where there is a person in a fiduciary relationship with the debtor who intentionally diverts the property in a breach of that relationship)).26
The record in Bennett’s criminal trials makes it extremely clear that, as in DeBer-ry, Bennett’s lack of possession will pose no bar to an order for turnover given his *289convictions and, as discussed infra, the resulting breach of fiduciary duty.
Many of the cases Bennett cites to support his position are pre-Code cases. Needless to say, these cases do not comport with current law regarding possession and turnover. And when Bennett does cite a Code case, it usually offers less than compelling support for his proposition. For example, Bennett cites In re Golden Distributors, Ltd. for the proposition that a “trustee cannot bring [a] turnover action absent defendant[’]s being in possession of property that could be subject to ‘turnover.’ ” Bennett’s Motion, p. 11 (citing In re Golden Distributors, Ltd., 128 B.R. 342 (Bankr.S.D.N.Y.1991)). However, the facts in Golden Distributors were such that the movant “could not point to any res, or property of the estate, in the possession or control of the defendants which may be the subject of a turnover proceeding.” Id. at 347. In the words of the Golden Distributors court, the property sought to be turned over simply did not exist: “... no confidential lists of the debtor’s delivery routes ... no confidential proprietary business information ... no property interest with respect to its potential customers ...” Id. In the case at bar, the Trustee has pointed to a specific res which may be the subject of a turnover proceeding — the BMDC funds Bennett was convicted of illegally diverting to his personal account.
Bennett’s citation to In re Burkey, 68 B.R. 270 (Bankr.M.D.Fla.1986), however, is on slightly firmer ground. In Bur-key the court held that the property in question, stock certificates, was not subject to turnover because it was legally transferred prior to commencement of the case. What Bennett misses, however, is that the Burkey court looked to state law in order to determine whether the stock certificates had been legally transferred. In turnover motions, courts routinely look to state law in order to determine whether the property in question is property of the estate. See In re Mid-Island Hospital, 254 B.R. 71, 74 (E.D.N.Y.2000) (holding that whether a particular item is property of the estate in bankruptcy is governed by principles of state law); see also In re Nat’l Equip. & Mold Corp. 64 B.R. 239 (Bankr.N.D.Ohio 1986); In re Stage, 85 B.R. 880 (Bankr.M.D.Fla.1988). In Burkey, the court found that the stock certificates had been lawfully transferred pursuant to Florida securities laws prior to commencement of the case. Hence, they were not, in the language of Code § 542(a), “... property that the trustee may use, sell, or lease under section 363 of this title ...” Unfortunately for Bennett, a jury of his peers reached a quite different conclusion regarding the legality of his transfer of the $1.25 million of BMDC funds at issue here. Thus, the Burkey decision is of no relevance to the matter at hand.27
There is identity of the issues between those determined in Bennett’s conviction on criminal counts 85, 86, 87, 89 and 91 and those alleged in count XI of the Complaint, and Bennett’s objections to the application of Code § 542 lack a foundation in the Code and case law. For these reasons, as well as the fact that the criminal court’s findings on the issues were *290necessary to the jury verdict on the illegal transfer of the funds to Bennett’s personal account, the application of collateral estop-pel to the criminal trial’s jury verdict in the second criminal trial is appropriate as to count XI.
Count XXIX of Trustee’s Complaint
First, this Court need not reach the merits of Bennett’s argument that criminal counts 23 and 24 cannot be used to support partial summary judgment on count XXIX for breach of fiduciary duty because those criminal counts concern BRC and BRC II exclusively.28 This is because the Trustee’s Complaint lists a half dozen other criminal counts for which the judge in the criminal trial issued the jury charge set out above. Bennett makes no attempt to convince the Court that his conviction on those counts would not constitute serious breaches of fiduciary duty.
Second, Bennett claims that count XXIX is a non-core, “related to” count, and that this Court “lacks jurisdiction to enter any judgment on count [XXIX].” Bennett Reply Memorandum of Law, pgs. 3, 8.
In compliance with Fed.R.Bankr.P. 7008, the Trustee included a statement in his Complaint admitting that count XXIX was a non-core “related to” proceeding within the meaning of 28 U.S.C. §§ 157(a) and 1334. The Trustee makes a strong argument, however, both in section 1(A) of its Memorandum of Law in Reply to Bennett’s opposition to the Trustee’s Motion for Partial Summary Judgment, and in oral argument (see 3/30/06 Hearing transcript, pgs. 25-27), that by asking this Court to dismiss count XXIX, Bennett has effectively consented to this Court’s jurisdiction to enter a final order.
If parties do not consent to the entry of final judgment in a non-core proceeding, the bankruptcy court must submit its proposed findings of fact and conclusions of law to the district court, which is empowered to enter final judgment after a de novo review of any disputed issues. See 28 U.S.C. § 157(c)(1). In In re Basix Corporation, 1996 WL 517667, 1996 U.S. Dist. LEXIS 13263 (S.D.N.Y.1996) District Court Judge John S. Martin, Jr. of the U.S. District Court for the Southern District of New York held that consent to entry of a final judgment may be either express or implied. Id. at *4-5, 1996 U.S. Dist. LEXIS 13263, *12. Judge Martin ruled that a party’s request for final judgment from a bankruptcy court constituted such an implied consent to entry of a final judgment. The Second Circuit Court of Appeals has held that a party’s silence on the core/non-core jurisdictional issue can be construed as implied consent. See In re Men’s Sportswear, Inc., 834 F.2d 1134, 1138 (2d Cir.1987); see also In re Donald Sheldon & Co., Inc., 1992 WL 396885, *4, 1992 U.S. Dist. LEXIS 19232 *12 (S.D.N.Y.1992) (holding that a demand for an order dismissing the complaint is consent to entry of final judgment).29
It is also true, however, as Bennett averred in both his Reply Memorandum of Law and at oral argument on March 30, 2006, that in his March 17, 2006 Answer to [the Trustee’s] Complaint, Bennett expressly refused to consent to the entry of a *291final order or judgment by this Court. See Bennett Answer to [Trustee’s] Complaint, ¶¶ 11-13; Bennett Reply Memorandum of Law, p. 3; 3/30/06 Hearing Transcript, pgs. 24-28. While the case law is clear about a request for final judgment constituting implied consent to the entry of a final judgment, there are no cases addressing the issue of a party expressly refusing to consent to the entry of a final judgment, while at the same time impliedly consenting to it. Thus, this Court will treat the Trustee’s motion for partial summary judgment as to count XXIX of the Complaint as a “related to” non-core matter on which this Court can make only proposed findings of fact and conclusions of law. See 28 U.S.C. § 157(c)(1).
Third, this Court is at a loss to understand Bennett’s argument that the lack of a conviction on a Ponzi or ‘pyramid’ scheme count, in the face of all the other acts for which Bennett was convicted, somehow nullifies the Trustee’s civil count for breach of fiduciary duty. Bennett makes this argument again and again. It is true that this Court has never finally ruled on whether the fraudulent activity which resulted in BFG’s collapse constituted a Ponzi or ‘pyramid’ scheme. However, this Court is compelled to agree with Judge Martin, who presided over Bennett’s second criminal trial, and “... found that the evidence ‘established beyond any conceivable doubt that Bennett was the prime mover in a fraud that took hundreds of millions of dollars from the victim investors.’ ” United States v. Bennett, 252 F.3d 559, 565 (2d. Cir.2001) (quoting United States v. Bennett, 2000 WL 420547, 2000 U.S. Dist LEXIS 4928 (S.D.N.Y.2000)). That this fraud may not technically constitute a Ponzi or ‘pyramid’ scheme is of little moment to the Trustee’s argument that the acts for which Bennett was convicted, on the criminal counts listed above, do in fact constitute breaches of fiduciary duty on Bennett’s part as outlined in civil count XXIX.
Bennett contends that the Trustee’s Complaint “reincorporates and relies on the allegation of a Ponzi scheme ... [and the Trustee’s] motion fails as a matter of law.” Bennett’s Supplemental Memorandum of Law p. 14, 4/14/06. But the Trustee does not rest his entire argument of Bennett’s breach of fiduciary duty on the Ponzi scheme allegation: “[c]ommitting bank fraud as an officer of a company and either running a Ponzi scheme ... or falsifying the audited financial statement of the company are clear breaches of fiduciary duty.” Trustee’s Motion, p. 14. (emphasis added). Bennett offers no cogent opposition to the Trustee’s contention that the acts underlying his convictions on the bank fraud and falsifying audited financial statements charges constitute breaches of Bennett’s fiduciary duties. Moreover, this Court cannot conceive of a successful argument that such acts would not violate those fiduciary duties.
As for the identity requirement of collateral estoppel, this Court finds that the issues determined in Bennett’s criminal convictions on the money laundering counts of 64-69, 71-71 and 77, and defrauding the three savings institutions counts of 25, 32, 32 and 38, are substantially identical with the Trustee’s civil count XXIX for breach of fiduciary duty. Those issues were actually litigated in the criminal trial, and that trial’s determinations regarding those issues was essential to the verdict returned.
As a result, the application of collateral estoppel to the criminal trial’s jury verdict is appropriate as to count XXIX. This Court will submit proposed findings of fact and conclusions of law to the District Court to that effect.
*292
Count XXVII of Trustee’s Adversary Proceeding Complaint
As discussed above, collateral es-toppel requires identity of issue between the two actions. The criminal counts on which Bennett was convicted, and upon which the Trustee seeks to base his motion for partial summary judgment on civil count XXVII, are 64-69, 71, 72 and 77 (the money laundering counts), and 85, 86, 87, 89 and 91 (the counts regarding Bennett’s illegal transfer of Bennett company funds to his personal account).
Each one of these criminal counts corresponds to acts which took place on specific days between April 7, 1993 and January 3, 1995. As Bennett correctly points out, however, the acts set forth in the Trustee’s civil count XXVII were alleged to have taken place between March 30, 1995 and March 29, 1996. In other words, Bennett was convicted of criminal behavior during one time period, and the Trustee now seeks to use collateral estoppel in order to obtain partial summary judgment on a count involving behavior during an entirely different, later period. This is not the purpose for which collateral estoppel was intended. As noted above, of the four elements required in order for collateral estoppel to apply, “[t]he most difficult element ... is the requisite ‘identity of issue’ requirement of the first prong.” Hon. Barry Russell, Bankruptcy Evidence Manual, § 3:1, at 257 (2007). Although the criminal counts upon which the Trustee seeks to base his partial summary judgment on count XXVII (64-69, 71, 72, 77, and 85, 86, 87, 89 and 91) are similar to those alleged in that count, they are not identical. See, e.g. Dixie Nat’l Life Ins. Co. v. McWhorter (In re McWhorter), 887 F.2d 1564, 1568 (11th Cir.1989) (holding that although defendant’s acts of fraud and misrepresentation were similar in nature and close in time to those then before the court, that was not enough to satisfy the identity of issue requirement in order to apply collateral estoppel). See also Rufe-nacht v. Iowa Beef Processors, Inc., 656 F.2d 198 (5th Cir.1981) (holding that since each claim was referable to a separate and distinct transaction, and although they were similar in nature and close in time, they were not identical for the purposes of applying collateral estoppel). In the matter at hand, the issues determined by Bennett’s conviction on the criminal counts specified by the Trustee simply do not meet the identity of issue requirement when compared to the allegations in count XXVII of the Complaint.
The Trustee argues that civil count XXVII includes a claim under NYDCL §§ 270-281, which has a six year statute of limitations. The Trustee contends that the acts alleged in count XXVII should be understood to have occurred as far back as that statute of limitations reaches; this would result in count XXVII’s encompassing the time period covered by the relevant criminal counts. This argument is unavailing. A plain reading of count XXVII reveals allegations of fraudulent conveyances committed by the defendants “between March 30, 1995 and March 29, 1996.” That these acts were also alleged to have violated NYDCL §§ 270-281 does not push back the dates of the alleged criminal acts to the encompass that entire six year statute of limitations. The Trustee has provided no case law to support such an interpretation.
The failure of the Trustee’s allegations in count XXVTI to meet the identity of issue requirement in relation to the cited criminal counts is fatal to his application to apply collateral estoppel to the conviction resulting from those criminal counts.
*293Exceptions to Collateral Estoppel30
Although not raised by either party, the Court examined the Restatement 2d of Judgments, § 28, “Exceptions to the General Rule of Issue Preclusion:”
Although an issue is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, relitigation of the issue in a subsequent action between the parties is not precluded in the following circumstances:
(1) The party against whom preclusion is sought could not, as a matter of law, have obtained review of the judgment in the initial action; or
(2) The issue is one of law and (a) the two actions involve claims that are substantially unrelated, or (b) a new determination is warranted in order to take account of an intervening change in the applicable legal context or otherwise to avoid inequitable administration of the laws; or
(3) A new determination of the issue is warranted by differences in the quality or extensiveness of the procedures followed in the two courts or by factors relating to the allocation of jurisdiction between them; or
(4) The party against whom preclusion is sought had a significantly heavier burden of persuasion with respect to the issue in the initial action than in the subsequent action; the burden has shifted to his adversary; or the adversary has a significantly heavier burden than he had in the first action; or
(5) There is a clear and convincing need for a new determination of the issue (a) because of the potential adverse impact of the determination on the public interest or the interests of persons not themselves parties in the initial action, (b) because it was not sufficiently foreseeable at the time of the initial action that the issue would arise in the context of a subsequent action, or (c) because the party sought to be precluded, as a result of the conduct of his adversary or other special circumstances, did not have an adequate opportunity or incentive to obtain a full and fair adjudication in the initial action.
Restatement 2d of Judgments, § 28. See also In re Selheimer & Co., 319 B.R. 395, 403 (Bankr.E.D.Pa.2005) (applying § 28 of the Restatement, and explaining that the application of this section is for the “rare exception” to the doctrine of issue preclusion) (emphasis added).
Each of these five exceptions to the doctrine of collateral estoppel, as they would apply to the matter sub judice, will be examined seriatim.
First, Bennett clearly availed himself of the opportunity to obtain review of the judgment in the initial criminal action by his appeal of that verdict. Second, the two actions do not involve substantially unrelated claims; in fact, they involve very closely related claims. Nor is a new determination warranted to take into account an “intervening change in the applicable legal context” or to avoid inequitable administration of the laws. Third, there are no material differences in the quality or extensiveness of the procedures followed in the District Court of the Southern District of New York and this Court which would warrant a new determination. Nor are there any factors relating to the allocation of jurisdiction between these two courts which would warrant a new determination. Fourth, Bennett did not have a *294“significantly heavier burden of persuasion” in the District Court for the Southern District of New York than he would have in this Court. In fact, the opposite is true: the elements of the criminal charges against Bennett had to be proven by the government ‘beyond a reasonable doubt,’ a standard of proof exceeding that of the ‘ordinary preponderance of the evidence’ standard to which the Trustee would be held in this Court.31 And fifth, Bennett had an adequate opportunity (a fair trial and subsequent appeal) and significant incentive (to avoid incarceration) to obtain a full and fair adjudication in the initial action. In addition, granting preclusive effect to Bennett’s criminal convictions would not have an adverse impact on the public interest, and cannot be said to have been unforeseeable at the time of the initial action, as the Trustee’s Complaint (upon which the Trustee’s Motion is based) was filed several years prior to Bennett’s criminal trial.
As a result, none of the exceptions to the application of collateral estoppel to Bennett’s criminal convictions would prevent the preclusive effect of those convictions as to civil counts XI and XXIX of the Complaint.
Conclusion
The moving party is entitled to 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). See also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In deciding if summary judgment is proper, the court must resolve all ambiguities and draw all justifiable inferences in favor of the non-moving party. Keeffe v. Natalie, 337 B.R. 11, 13 (N.D.N.Y.2006).
“Summary judgment is appropriate under the doctrine of collateral estop-pel (issue preclusion) when all the material facts in a pending action have been actually and necessarily resolved in a prior proceeding.” Mishkin v. Ageloff, 299 F.Supp.2d 249, 252 (S.D.N.Y.2004).32
As outlined above, this Court finds that the essential elements the Trustee in this case would have to prove to establish Bennett’s liability as to civil counts XI and XXIX were actually and necessarily determined against Bennett in counts 85, 86, 87, 89 and 91 (count XI) and counts 25, 32, 33, 38, 64-69, 71-72 and 77 (count XXIX) of his criminal trial and appeals thereof, and that Bennett has not met his burden of demonstrating that he did not have a full and fair opportunity to litigate the issues at his criminal trial. As a result, the Trustee is entitled to partial summary judgment on count XI of the Complaint. *295Because count XXIX is a “related to” non-core matter, this Court will submit proposed findings of fact and conclusions of law to the District Court recommending a finding that the Trustee is entitled to partial summary judgment as to that count.
Also as outlined above, this Court finds that because the identity requirement of collateral estoppel has not been met, the Trustee is not entitled to partial summary judgment on civil count XXVII based on Bennett’s conviction on criminal counts 64-69, 71-72, 77, 85, 86, 87, 89 and 91.
Bennett’s Motion to Dismiss
At the outset, the Court notes that a pro se litigant is generally afforded some degree of flexibility in demonstrating the validity of its claim. See In re Fanelli 263 B.R. 50, 58 (Bankr.N.D.N.Y.2001) (citing Boguslavsky v. Kaplan, 159 F.3d 715, 719 (2d Cir.1998)). In addition, a pro se litigant’s complaint and supporting papers may be read liberally so as to raise the strongest arguments suggested therein. Id. Moreover, “implicit in the right to self-representation is an obligation, on the part of the court to make reasonable allowances to protect pro se litigants from inadvertent forfeiture of important rights because of their lack of legal training.” Id. (citing Traguth v. Zuck, 710 F.2d 90, 95 (2d Cir.1983)).
Bennett has styled his pleading as a Fed.R.Civ.P. 12(b)(6) motion to dismiss. However, he has appended to his motion an affidavit and six exhibits.33 In a Fed.R.Civ.P. 12(b)(6) motion, a court may not consider material beyond the four corners of the complaint. In fact, “if a party presents matters outside the complaint, the court must convert the motion to dismiss into a summary judgment motion.” 2-17 Moore’s Manual of Federal Practice and Procedure, § 17.03[3], Matthew Bender & Co., Inc. (2006). See also Vasile v. Dean Witter Reynolds Inc., 20 F.Supp.2d 465, 474 (E.D.N.Y.1998) (holding that when deciding a Fed.R.Civ.P. 12(b)(6) motion, courts are directed to treat the motion as one for summary judgment if matters outside the pleading are presented to and not excluded by the court).
The Court finds the affidavit and exhibits Bennett attached to his Motion irrelevant to the substance of his Motion, and thus will not consider them as supporting documents thereto or as matters outside of the Complaint. As a result, the Court will continue to treat Bennett’s motion as a Fed.R.Civ.P. 12(b)(6) motion to dismiss the Complaint, rather than convert the motion to one seeking summary judgment.
This Court has previously set out in this case the standard for ruling on a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6):
The court is to dismiss the complaint only if it appears that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. The court should not weigh the evidence but should instead accept the facts as they appear in the complaint as true, to find whether the plaintiff has alleged *296sufficiently all of the legal elements necessary to state a claim under the law.... Based on the foregoing standards, this Court must analyze Plaintiffs Complaint to determine whether he has alleged any set of facts, along with any reasonable inferences which may be drawn in his favor, which are sufficient to entitle him to relief.
Breeden v. Sphere Drake Insurance PLC, 2000 Bankr.Lexis 1693, Adv. Pro. No.9770049A (Bankr.N.D.N.Y. March 3, 2000) (citations omitted).
1. Failure to Allege a Ponzi Scheme
As mentioned in this Decision’s discussion of Bennett’s argument against granting preclusive effect to his criminal convictions as they apply to the Complaint’s count XXIX, the Court has never finally ruled on whether the fraudulent activity which resulted in the Bennett Companies’ collapse constituted a Ponzi or ‘pyramid’ scheme. As discussed in that same section, however, this Court is compelled to agree with U.S. District Court Judge John S. Martin, Jr., who presided over Bennett’s second criminal trial and “... found that the evidence ‘established beyond any conceivable doubt that Bennett was the prime mover in a fraud that took hundreds of millions of dollars from the victim investors.’ ” United States v. Bennett, 252 F.3d 559, 565 (2d Cir.2001) (quoting United States v. Bennett, 2000 WL 420547, U.S. Dist LEXIS 4928 (S.D.N.Y.2000)).
More specifically, however, the question here is twofold: whether any of the counts of the Complaint rely upon the proof of the existence of a Ponzi scheme at any of the BFG companies; and if so, can the Trustee prove no set of facts in support of that claim which would entitle him to relief?
First, the Court is unable to detect how any one of the forty-three counts of the Complaint fails without proof that BFG was operated as a Ponzi scheme. It is true that the Trustee, in the Overview and Facts sections of the Complaint, does allege that what took place at BFG was a Ponzi scheme.34 None of the following forty-three counts, however, depends entirely upon that allegation. Each of those counts can easily stand upon its own without proof of the existence of a Ponzi scheme.35
Secondly, even if one, several, or all of the forty-three counts of the Complaint did in fact depend upon proof of the existence of a Ponzi scheme, Bennett’s argument still does not meet the burden imposed upon him by the motion to dismiss standard. Both the S.E.C.’s characterization of the events which led to the collapse of BFG as a Ponzi scheme (Complaint, pgs.2-3), and the Trustee’s argument that those same events meet the elements of a Ponzi scheme as set out in Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1088 n. 3 (2d Cir.1995), would make it impossible for this Court to rule that the Trustee could prove no set of facts in support of his claim which would entitle him to relief.
2. Failure to Satisfy Fed.R.Civ.P. 9(b)
The need to plead fraud with particularity pursuant to Fed.R.Civ.P. 9(b)36 is well settled, and Bennett correctly cites *297to several cases which confirm this rule.37
But the Trustee correctly points out that this Court has already examined the Complaint with regard to Fed.R.Civ.P. 9(b), and found that the Complaint alleged facts with sufficient particularity to satisfy the requirements of Fed.R.Civ.P. 9(b). See Breeden v. Patrick R. Bennett, Case No.97-65399, Adv.Pro.No. 98-770876A, slip op. at 5 (Bankr.N.D.N.Y. February 9, 1999). Under the “law of the case” doctrine, “when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.” Roman v. Fulton County National Bank and Trust Co., 857 F.Supp. 1032, 1042 (N.D.N.Y.1994) (citing DiLaura v. Power Authority of State of New York, 982 F.2d 73, 76 (2d Cir.1992)). This Court’s prior holding regarding the particularity of the Complaint’s fraud allegations is just the sort of ruling to which the law of the case doctrine is meant to apply. The Court sees no reason to rule differently in the present matter.
In fact, case law supplies ample precedent for a less than rigorous application of the Fed.R.Civ.P. 9(b) particularity requirement in a matter such as this. “Greater liberality in the pleading of fraud is particularly appropriate in bankruptcy cases, because ... it is often the trustee, a third party to the fraudulent transaction, that must plead the fraud on secondhand knowledge for the benefit of the estate and all of its creditors.” Securities Investor Protection Corporation v. Stratton Oakmont, Inc., 234 B.R. 293, 310 (Bankr.S.D.N.Y.1999) (citing In re White Metal Rolling & Stamping Corp., 222 B.R. 417, 422 (Bankr.S.D.N.Y.1998)). Or, again, “[w]hen the trustee’s lack of personal knowledge is compounded with complicated issues and transactions which extend over lengthy periods of time, the trustee’s handicap increases!,] and courts, therefore, should afford him or her even greater latitude.” Id. (citing A.I.A. Holdings, S.A. v. Lehman Brothers, Inc., 1998 WL 159059, 1998 U.S. Dist. Lexis 4175 (S.D.N.Y. April 1, 1998)). See also Sunrise Indus. Joint Venture v. Ditric Optics, Inc., 873 F.Supp. 765, 772 (E.D.N.Y.1995) (holding that “the particularity requirement of Rule 9(b) is appropriately relaxed where the individual defendant is a corporate insider.”) Given the length of time during which the fraud in question is alleged to have occurred, its level of complexity, and Bennett’s status as a corporate insider the entire time of the alleged fraud,38 the Trastee has satisfied the Fed. R.Civ.P. 9(b) particularity requirement.
*298
3. Improperly Based “Upon Information and Belief’
First, as with the Fed.R.Civ.P. 9(b) issue, the law of the ease controls here. This Court has already ruled that the Complaint meets the Fed.R.Civ.P. 9(b) particularity requirements. Hence, any argument that the because the complaint is pled on information and belief it does not meet the Fed.R.Civ.P. 9(b) requirement fails at the outset.
But even absent the law of the case doctrine, Bennett’s allegation that any element of a complaint pled upon information and belief “must be dismissed as a matter of law” (Bennett’s Motion, p. 8) is incorrect. First, Bennett misquotes the primary case he cites for this proposition; the actual citation is “[cjonclusory pleadings on information and belief are inadequate as a matter of law.” Lesavoy v. Lane, 304 F.Supp.2d 520, 527 (S.D.N.Y.2004) (emphasis added). Whether or not the pleadings on information and belief are conclusory becomes very relevant when other case law on this issue is examined. First, there is the DiVittorio exception, which Bennett acknowledges, stating that pleadings on information and belief are acceptable “as to facts peculiarly within the opposing party’s knowledge, in which event the allegations must be accompanied by a statement of the facts upon which the belief is based.” DiVittorio, 822 F.2d at 1247. Bennett’s argument that this exception does not apply because the Trustee has had considerable access to BFG’s books and records, and because his allegations “were not accompanied by a statement of the facts upon which the belief is based” (Bennett’s Motion, p. 9) is unavailing. This is true because despite the Trustee’s post hoc access to BFG’s books and records, the byzantine nature and extensive duration of the alleged fraud necessarily resulted in certain facts remaining peculiarly within Bennett’s knowledge. Secondly, Bennett’s allegation that the Complaint does not contain “a statement of the facts upon which the belief is based” is not supported at all in Bennett’s Motion, which merely states that this “requirement [is] clearly not met here.” Bennett’s Motion, p. 9. Such a conclusory allegation belies either a lack of careful reading on Bennett’s part, or a willful effort to ignore the first fifty-four pages of the Complaint. The facts set out in those first fifty-four pages at the very least effectively prevent the allegations contained in the Trustee’s counts from being characterized as conclu-sory. See also Prince v. Madison Square Garden, 427 F.Supp.2d 372, 385 (S.D.N.Y.2006) (holding that allegations pled on information and belief are proper if accompanied by a statement of the facts upon which the belief is founded) (citing Shopping Mall Investors, N.V. v. E.G. Frances & Co., Inc., 1985 WL 210, 1985 U.S. Dist. Lexis 23199 (S.D.N.Y.1985)).39
4. Code § 548 One Year Time Limit
As stated above, Bennett asserts that counts I, II, XVI, XVII, XXVII and XXVIII which allege, inter alia, violations of Code § 548, must be dismissed because they do not allege any violations within the one year period immediately preceding the Debtors’ filing, as required by that section of the statute.
The Trustee asserts that the three predicate transactions underlying each of these counts occurred within the one year limit imposed by Code § 548, and that the relevant dates of the transactions are set out *299clearly in each of these counts in the Complaint. In fact, a review of ¶¶ 78, 118, and 257 of the Complaint, when read in conjunction with the relevant counts, bears out this assertion. Moreover, the Trustee is correct in asserting that even if the predicate transactions took place outside of the one-year limit, each of these counts also alleges violations of §§ 270 through 281 of the NYDCL, made applicable pursuant to Code § 544(b), which have a statute of limitations of six years from the date of the filing of the petition. Thus, even absent the Code § 548 allegations, these counts cannot be dismissed insofar as Bennett has proffered no argument for dismissing those portions of the counts alleging violation of NYDCL §§ 270-281.
5.' Improperly Asserted Turnover Counts
Bennett argues that 1) counts VII, X, XI, and XII seeking turnover of estate property must be dismissed on the basis that the transfers in question occurred before the Debtors entered bankruptcy, and 2) that because the Complaint does not allege that Bennett had a possessory interest in the property at the time of the commencement of the case, a motion for turnover is not appropriate.40 Each of these arguments is treated in great detail in this Decision’s discussion of the Trustee’s Motion for Partial Summary Judgment on count XI of the Complaint, supra. As set forth in that discussion, the Trustee’s turnover counts are properly asserted.
6. Trustee Lacks Standing Under §§ 544 and 550
Bennett bases his argument that the Trustee lacks standing to bring counts I, II, XVI, XVII, XXVII and XXVIII on the fact that the Complaint does not “allege the existence of a creditor who would have standing to attack the ... transfers, much less as required to give Bennett required notice of a specific creditor.” Bennett’s Motion, p. 17. As the Trustee points out, however, the Complaint names three separate creditors, at ¶¶ 50, 56 and 58 of the Complaint, thus meeting the requirement that the Trustee name an unsecured creditor who would have standing to challenge the transfer, as set out in In re Wingspread, 178 B.R. 938, 946 (Bankr.S.D.N.Y. 1995).41
However, the Trustee falters when he contends that each of the relevant counts also alleges violations of NYDCL §§ 270 through 281, which do not require the existence of such a creditor. In fact, in order to qualify for standing under 544(b), the Trustee “must show that at least one of the present unsecured creditors of the estate hold an allowable claim, against whom the transfer or obligation was invalid under applicable state or federal law.” In re Wingspread, 178 B.R. at 945 (emphasis added). See also In re Lol*300lipop, Inc., 205 B.R. 682, 687 (Bankr.E.D.N.Y.1997) (holding that as required by Code § 544(b), the Trustee may utilize state fraudulent conveyance law to avoid a transfer only if there exists an actual unsecured creditor who could void the transfer under applicable law.) The only time a trustee would not need to name an actual unsecured creditor to establish standing would be when the applicable state law allows a trustee in bankruptcy to bring the proceeding on his own behalf rather than succeeding to the rights of an actual unsecured creditor. See In re Wingspread, 178 B.R. at 946. New York Business Corporation Law § 720(b) is such a statute.42 NYDCL §§ 270-281, however, is not. Hence, the Trustee cannot maintain that he has standing on the state law NYDCL allegations in the event he does not succeed to the rights of an actual unsecured creditor. But, as outlined supra, this Court finds that the Trustee does have standing to maintain the relevant counts, because his naming of three unsecured creditors in the Complaint meets the requirement set out in In re Wingspread.
7. Failure to Allege a State or Federal Statute
Bennett argues that counts XXIX, XXXIV, XXXV, XLI and XLII, alleging, respectively, Breach of Fiduciary Duty, Breach of Fiduciary Duty — Self Dealing, Breach of Fiduciary Duty — Corporate Waste and Mismanagement, Accounting, and Constructive Trust, must be dismissed because they fail to put Bennett on notice as to alleged violations of any specific state or federal statute. As a result, Bennett argues, he is not “on notice of the charges upon which he must defend himself, to ensure [Bennett’s] constitutional rights to due process of law.” Bennett’s Motion, p. 18. This is a creative and sophisticated argument, but it is completely wrong. It is so convincing, however, that even the Trustee seems to have been flummoxed by it. In the Trustee’s Response he parries Bennett’s argument by belatedly listing several statutes which would have been violated by the actions alleged in those counts, completely evading Bennett’s point that the Complaint did not put him on notice as to which statutes he was alleged to have violated.
However, two of the nation’s most esteemed appellate jurists disagree. Judge Richard A. Posner of the U.S. Seventh Circuit Court of Appeals has made it clear that a complaint need not put the defendant on notice as to which state or federal statute he or she is alleged to have violated:
The civil rules, as both the Supreme Court and this court have emphasized repeatedly [ ], establish a system of notice pleading. The plaintiff is not required to plead fads or legal theories or cases or statutes, but merely to describe his claim briefly and simply. In a suit to collect on a promissory note, for example, all the plaintiff has to allege is that he is holding the defendant’s note to him and the defendant owes him dollars on it. He doesn’t have to specify the statute or common law principle that the defendant has violated by failing to pay him.
Shah v. Inter-Continental Hotel Chicago Operating Corp., 314 F.3d 278, 282 (7th Cir.2002) (emphasis added) (citations omitted).
*301Judge Frank H. Easterbrook, also of the U.S. Seventh Circuit Court of Appeals, addressed the same issue:
Although it is common to draft complaints with multiple counts, each of which specifies a single statute or legal rule, nothing in the Rules of Civil Procedure requires this. To the contrary, the rules discourage it. Complaints should be short and simple, giving the adversary notice while leaving the rest to further documents. [ ] Instead of asking whether the complaint points to the appropriate statute, a court should ask whether relief is possible under any set of facts that could be established consistent with the allegations.
Bartholet v. Reishauer A.G., 953 F.2d 1073 (7th Cir.1992) (emphasis added) (citations omitted).
It is clear that the counts Bennett seeks to have dismissed here meet the three requirements of a pleading set out in an earlier Bennett decision: “... the pleading must be specific enough to serve the three purposes of Rule 9(b), which are (1) to provide a defendant with notice of the claims against it; (2) to protect a defendant from harm to its reputation or goodwill by unfounded allegations of fraud; and (3) to reduce the number of strike suits.” In re Bennett Funding Group, Inc., 1997 Bankr.Lexis 2366 *36 (Bankr.N.D.N.Y.1997). Even more to the point,
[i]n federal practice, pleadings are intended simply to put the defendant on notice as to the basic nature of plaintiff’s case and to give the plaintiff a general idea of the defenses raised. Pleadings are to be liberally construed and a complaint should not be dismissed for insufficiency unless it appears to a certainty that the plaintiff is entitled to no relief under any state of facts which could be proved in support of the claim.
In re E.C.Ernst, Inc., 1 B.R. 262, 263 (Bankr.S.D.N.Y.1979) (citation omitted).
Thus, Bennett’s argument that counts XXIX, XXXIV, XXXV, XLI and XLII should be dismissed for failure to allege a state or federal statute fails itself. He cannot be heard to say that these counts of the Complaint did not put him on notice as the nature of the [Trustee’s] case.
Conclusion
On each of the seven grounds upon which Bennett seeks to dismiss each of the counts in the Trustee’s Complaint, Bennett has not met his burden to show that the Trustee can prove no set of facts in support of his claim which would entitle him to relief. Each of these seven grounds fails as a basis for dismissal because it either incorrectly states the law (improperly asserted turnover, failure to allege a state or federal statute), is based upon an incomplete reading of the case law (failure to satisfy Fed.R.Civ.P. 9(b), improperly based upon information and belief), or an incomplete reading of the Complaint (Code § 548 one year time limit, Trustee lacks standing under §§ 544 and 550) or is irrelevant (failure to prove a Ponzi scheme). It would have made no difference to the outcome if the standard had been one for summary judgment rather than Fed. R.Civ.P. 12(b)(6) dismissal.
Based on the foregoing, it is hereby
ORDERED that the Trustee’s motion for partial summary judgment with respect to count XI of the Complaint is granted; and it is further
ORDERED that the Trustee’s motion for partial summary judgment with respect to count XXVII of the Complaint is denied; and it is further
RECOMMENDED to the United States District Court for the Northern District of New York pursuant to 28 U.S.C. § 157(c)(1) that the Trustee’s motion for *302partial summary judgment with respect to count XXIX of the Complaint be granted; and it is further
ORDERED that that portion of Bennett’s Motion to Dismiss Counts I through IV and VI through XXVIII of the Complaint is denied; and it is further
RECOMMENDED to the United States District Court for the Northern District of New York pursuant to 28 U.S.C. § 157(c)(1) that that portion of Bennett’s Motion to Dismiss Counts V and XXIX through XLIII of the Complaint be denied.
. Specifically, Bennett seeks dismissal of the following sixteen (16) counts of the Complaint: I, II, VII, X, XI, XII, XVI, XVII, XXVII, XXVIII, XXIX, XXXIV, XXXV, XXXVI, XLI, and XLII (the "Bennett Counts”).
. Bennett is presently incarcerated at the Federal Correctional Institution, Loretto, Pa., and participated telephonically in the oral argument.
. On March 29, 1996, The Bennett Funding Group, Inc. (“BFG”), Bennett Receivables Corp. ("BRC”), Bennett Receivables Corp. II (“BRC II”) and Bennett Management and Development Corp. ("BMDC”) (collectively “BFG” or “Debtors”) filed petitions pursuant to Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101-1330 ("Code”)
. Bennett was, at all times relevant to the Trustee’s Motion, an officer and director of one or more of the Debtors. See Trustee's Statement of Uncontested Facts, ¶ 4; Affidavit of James G. Gamble, ¶ 6.
. On August 29, 1996, the Trustee filed the Amended Complaint which is referred to above and is the subject of these two motions.
. See also Bennett v. United States, 2006 WL 738162, *1, 2006 U.S. Dist. Lexis 12395 *3 (S.D.N.Y.2006).
. Bennett was sentenced to thirty years imprisonment, followed by three years supervised release. This sentence was later vacated by the Second Circuit Court of Appeals, however, and remanded to the District Court for re-sentencing. See United States v. Bennett, 252 F.3d 559 (2d Cir.2001). Bennett ultimately received a twenty-two year prison sentence, which was subsequently affirmed by the Second Circuit. See United States v. Bennett, No.02-1379, 2003 U.S.App. LEXIS 19394 (2d Cir. Sept. 18, 2003).
. For purposes of his argument regarding civil count XI, Bennett incorporates by reference into his Reply Memorandum of Law certain portions, primarily pgs. 10-12, of his 2/24/06 Motion to Dismiss [the Trustee's] Complaint ("Bennett’s Motion”).
. For the status of Bennett’s habeas petition, see this Decision’s “Other Collateral Estoppel 9 Issues” section, infra.
. Bennett’s Motion lists thirteen separate grounds for dismissal of the various Bennett Counts of the Complaint. When those grounds are organized to take into account redundancy, their number reduces to seven.
. That rule, made applicable to the Adversary Proceeding by Fed.R.Bankr.P. 7009, reads, in relevant part: "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." Fed.R.Civ.P. 9(b)
. See Complaint, pgs. 13-25, ¶¶ 37-70.
. But see Id. (holding that "when creditors ... have a claim for injury that is particularized as to them, they are exclusively entitled to pursue that claim, and the bankruptcy trustee is precluded from doing so.”) (emphasis added).
. Bennett was, at all times relevant to the Trustee’s Motion, an officer and director of one or more of the Debtors. See Trustee's Statement of Uncontested Facts, ¶ 4; Affidavit of James G. Gamble, ¶ 6.
. For the purposes of this Decision, the terms "collateral estoppel” and "issue preclusion” will be used interchangeably. See Collier on Bankruptcy, 15th Ed. Rev. § 523.06 (2006) (stating that collateral estoppel is also referred to as issue preclusion).
. (1) The issues in both proceedings must be identical, (2) the issue in the prior proceeding must have been actually litigated and actually decided, (3) there must have been a full and fair opportunity for litigation in the prior proceeding, (4) the issue previously litigated must have been necessary to support a valid and final judgment on the merits. See Gelb, supra.
. It is worth noting that "[t]he most difficult element of the test is the requisite ‘identity of issue’ requirement of the first prong.” Hon. Barry Russell, Bankruptcy Evidence Manual § 3:1, at 257 (2007).
. "The party seeking the benefit of collateral estoppel has the burden of demonstrating the identity of the issues ... whereas the party attempting to defeat its application has the burden of establishing the absence of a full and fair opportunity to litigate the issue [in the prior action].” Evans v. Ottimo, 469 F.3d 278, 281-82 (2d Cir.2006) (citation omitted) (emphasis added). See also In re Moskowitz, 310 B.R. 21, 28 (Bankr.E.D.N.Y.2004); In re Halperin, 215 B.R. 321, 335 (Bankr.E.D.N.Y.1997).
. See discussion, infra, regarding the status of Bennett’s appeal of this decision and its effect on the Court’s findings.
. Ibid.
. “Although the doctrines of preclusion require a final judgment before they can be applied effectively, this requirement is more flexible for purposes of issue preclusion than it is [for] claim preclusion. The Restatement (Second) [of Judgments § 13 (1982) ] provides that for ‘purposes of issue preclusion ... final judgment includes any prior adjudication of an issue that is determined to be sufficiently firm as to be accorded conclusive effect.’ ” Christopher Klein et al., Principles of Preclusion and Estoppel in Bankruptcy Cases, 79 Am. Bankr.L.J. 839, 853 (2005).
. Bennett recently succeeded in obtaining a Certificate of Appealability regarding this decision from the U.S. Second Circuit Court of Appeals. However, because pendency of an appeal does not deprive a judgment of its preclusive effect, that development in no way changes this Court's findings.
. "The Supreme Court noted specifically that § 542(a) of the Bankruptcy Code is a provision that brings property into the bankruptcy estate that was not in the possession of the debtor at the time the bankruptcy proceeding was commenced.” Bruce H. White, Debtors’ Redemption Rights in Repossessed Vehicles and Turnover of Estate Property, 17-10 Am. Bankr.Inst. J., Dec. 1998 (citing Whiting Pools).
. Bennett does not indicate who was in actual or constructive possession of the property *288sought for turnover at the time of BFG’s filing. This is not surprising, given his criminal convictions on the counts cited by the Trustee. See this Decision's discussion of collateral es-toppel, passim.
. Under the Bankruptcy Act of 1898 the question of whether a bankruptcy referee had summary or plenary jurisdiction over a matter, as well as what constituted “property of the estate” hinged on whether the debtor or referee (“bankruptcy court”) had "actual or constructive possession of the debtor’s property.” With the advent of the Bankruptcy Code, the summary/plenary jurisdictional distinction was eliminated in favor of "core” and "non-core” matters as set out in 28 U.S.C. § 157. (Turnover is a "core” matter pursuant to 28 U.S.C. § 157(b)(2)(e)). Bennett relies on cases which held that absent actual or constructive possession of the property by the debtor on the date of filing, a motion for turnover is not appropriate. Such cases no longer represent good law.
. Bennett, however, cites In re DeBerry for the proposition that the "trustee must allege and prove that property sought to be turned over is in possession or control of the defendant at time proceeding is commenced.” Bennett’s Motion, p. 12.
. Had the circumstances been slightly different, Bennett might have argued that the $1.25 million is not property of the estate for the purposes of turnover because fraudulently transferred property does not become property of the estate until it is recovered. See, e.g., In re Teligent, Inc., 307 B.R. 744, 751 (Bankr.S.D.N.Y.2004) (holding that the trustee cannot compel turnover of non-estate property under § 542 and circumvent the more restrictive requirements of a fraudulent transfer claim in the process.) (citing FDIC v. Hirsch (In re Colonial Realty Co.), 980 F.2d 125, 131 (2d Cir.1992)).
. None of the other criminal counts referenced in the Trustee's Motion or in this Decision 28 involve BRC or BRC II. Each involves some combination of BFG, BMDC and/or Bennett.
. See In re Durso Supermarkets, Inc., 1995 WL 739549, *3, 1995 U.S. Dist. LEXIS 18440 *9 (S.D.N.Y.1995) (holding that a dismissal is a final judgment on the merits); Carlin v. Gold Hawk Joint Venture, 778 F.Supp. 686, 693 (S.D.N.Y.1991) (holding that a dismissal of the complaint with prejudice constitutes a final judgment).
. The four prongs of the Gelb test for application of collateral estoppel are referred to by that court as 'limitations” on the doctrine of collateral estoppel. See Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 44 (2d Cir.1986).
. See Evans v. Ottimo, 469 F.3d 278, 283 (2d Cir.2006) (opining that where the first court's determination of fraud involving elements congruent with fraud under bankruptcy law is established by a stricter standard, considerations in favor of applying collateral estoppel are greatly enhanced).
. The facts in Mishkin are analogous to the present matter. Defendants were convicted in a criminal trial of violations of Section 10(b) of the Securities and Exchange Act of 1933. The plaintiff Trustee brought an action under the Securities Investor Protection Act of 1970 ("SIPA''). The Mishkin court found that the SIPA violation allegations brought by the Trustee "paralleled] the events and charges determined at the [criminal] trial." Mishkin at 253. The court found that "the essential elements the Trustee would be required to prove to sustain Defendants' liability in this action were determined against the defendants in the criminal proceeding and embodied in the judgments there rendered.” Id.
. These exhibits consist of a Settlement Agreement Bennett reached with the S.E.C. on July 7, 2004 ("Ex.l”); a Summary Order of the May 31, 2001 U.S. Second Circuit Court of Appeals decision affirming Bennett’s criminal convictions (''Ex.2”); a Summary Order of the September 18, 2003 Second Circuit Court of Appeals decision affirming Bennett’s sentence (’’Ex.3”); two pages from an April 3, 2003 New York State Division of Tax Appeals Administrative Law Judge decision declining to give preclusive effect to Bennett's criminal convictions in a tax dispute (’’Ex.4”); two pages from a December 6, 2001 decision of State Supreme Court Justice Stone regarding Bennett’s defamation claims against various defendants ("Ex.5”); and a January 25, 2000 report prepared by the 'Halo Group’ regarding BFG's financial position ("Ex.6”).
. See Complaint, ¶¶ 1,116,117,122,154.
. Even count XXIX, which of all forty-three counts in the Complaint most specifically alleges the existence of a Ponzi scheme, also alleges that Bennett assigned leases to BFG investors which were either fictitious or had already been assigned to other investors. See Complaint, ¶ 265.
.See footnote 10, supra.
. Bennett’s citation to In re Sinder, 102 B.R. 978 (Bankr.S.D.Ohio 1989), however, is curious. Bennett cites Sinder for the proposition that "merely alleging that substantial sums of money are unaccounted for due to [a] party's alleged fraud does not satisfy [the] pleading requirements of Rule 9(b).” Bennett’s Motion, p. 6. The Sinder court, however, reasoned that “a balancing factor in completing an analysis of the specificity requirements of Rule 9(b) is the recognition that the essence of fraud and misrepresentation is the absence of truthfulness and the full disclosure required in the particular circumstances. For that reason, Rule 9(b) does not require the pleading of detailed evidentiary matter.” In re Sinder, 102 B.R. at 986 (citations omitted). So not only did the Sinder court acknowledge that Fed.R.Civ.P. 9(b) is not to be applied without analysis, it also acknowledged that the existence of the fraud itself by its very nature involves the absence of full disclosure and truthfulness on the defendant’s part, thus relieving the plaintiff of the requirement to plead "detailed evidentiary matter.” Id. The Sinder court went on to hold that the complaint in that case was, in fact, "based on and supplemented by tangible evidence ... related to the transactions in question.” Id. at 986-87.
. See footnote 3, supra.
. This line of cases seems to dispose of the DiVittorio requirement that there must be facts which are “peculiarly within the opposing party’s knowledge” in order for a party to plead "on information and belief.”
. Bennett does not indicate who was in actual or constructive possession of the property sought for turnover at the time of BFG’s filing. This is not surprising, given his criminal convictions on the counts cited by the Trustee.
. Bennett characterizes the In re Wingspread court as dismissing the trustee's complaint because the trustee had merely alleged the existence of unsecured creditors. Motion, p. 16. That is not correct. In reality, the In re Wingspread court noted that the trustee had named “trade creditors of Kayser-Roth and/or subsidiaries” generally as unsecured creditors, and held that this lack of specificity was not enough to grant summary judgment to defendant. Instead, the Wingspread court held that "... at trial the trustee must prove the existence of at least one unsecured creditor who ... could have ... attacked and set aside the transfer under consideration.” In re Wingspread, 178 B.R. at 946. (emphasis added).
. That section reads, in relevant part, "An action may be brought for the relief provided in this section ... by a corporation, or a receiver, trustee in bankruptcy, officer, director or judgment creditor thereof ..." New York Business Corporation Law § 720(b) (McKinney’s) (2006) (emphasis added). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487963/ | NOT RECOMMENDED FOR PUBLICATION
File Name: 22a0466n.06
No. 22-3358
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Nov 18, 2022
) DEBORAH S. HUNT, Clerk
MARIA INES VILLALOBOS,
)
Petitioner, )
) ON PETITION FOR REVIEW
v. ) FROM THE UNITED STATES
) BOARD OF IMMIGRATION
MERRICK B. GARLAND, Attorney General, ) APPEALS
Respondent. )
) OPINION
)
Before: READLER, MURPHY, and MATHIS, Circuit Judges.
PER CURIAM. Maria Ines Villalobos, a native and citizen of El Salvador, petitions this
court for review of an order of the Board of Immigration Appeals (BIA) affirming the denial of
her motion to reopen her removal proceedings. As set forth below, we DENY Villalobos’s petition
for review.
Upon Villalobos’s unlawful entry into the United States in April 2005, the Department of
Homeland Security arrested her and then served her with a notice to appear in removal
proceedings, charging her with removal as an alien present in the United States without being
admitted or paroled. See 8 U.S.C. § 1182(a)(6)(A)(i). Villalobos appeared for the first removal
hearing and was personally served with a notice scheduling the next hearing for January 18, 2006.
When Villalobos failed to appear at the second hearing, the immigration judge (IJ) ordered her
removal in absentia.
Fourteen years later, in April 2020, Villalobos filed a motion to reopen her removal
proceedings and to rescind the in absentia removal order, asserting that she never received notice
No. 22-3358, Villalobos v. Garland
of the hearing, that she was unable to attend the hearing because she had an automobile accident,
and that she was unaware of the hearing date because someone broke into her apartment and stole
her papers. Along with her motion, Villalobos submitted an application for asylum, withholding
of removal, and protection under the Convention Against Torture (CAT) and an application for
cancellation of removal. Villalobos also filed a motion to change venue to Louisiana, where she
resided.
An IJ denied Villalobos’s motions. The IJ first determined that Villalobos had failed to
establish lack of notice to warrant reopening of her removal proceedings and rescission of the in
absentia removal order. See 8 U.S.C. § 1229a(b)(5)(C)(ii). The IJ pointed out that Villalobos did
not dispute receiving the notice to appear and hearing notices and that her appearance at the first
hearing demonstrated actual notice of the removal proceedings. With respect to whether
exceptional circumstances excused Villalobos’s failure to appear, the IJ found that her motion was
neither filed within 180 days of the in absentia removal order nor supported by corroboration to
carry her burden of establishing extraordinary circumstances. See 8 U.S.C. § 1229a(b)(5)(C)(i).
The IJ recognized that a party may move to reopen at any time to apply for asylum, withholding
of removal, or CAT protection based on changed country conditions. See 8 U.S.C.
§ 1229a(c)(7)(C)(ii); 8 C.F.R. § 1003.23(b)(4)(i). According to the IJ, Villalobos had failed to
present material evidence of changed country conditions that could not have been discovered or
presented at her last hearing, and even if she had, her application failed to state a prima facie case
for asylum, withholding of removal, or CAT protection. The IJ also refused to reopen Villalobos’s
case sua sponte based on her failure to move for reopening until 14 years had passed and her failure
to present any corroborating evidence to support her claimed reasons for failing to appear. Finally,
the IJ found that Villalobos had failed to show good cause for a change in venue.
-2-
No. 22-3358, Villalobos v. Garland
Villalobos appealed the denial of her motion to reopen to the BIA. Villalobos argued that
the IJ had “failed to recognize several exceptional factors” and that she had established prima facie
eligibility for cancellation of removal based on her qualifying relatives and continuous residence
in the United States as well as eligibility for asylum, withholding of removal, and CAT protection
based on discrimination and violence against women in El Salvador. The BIA affirmed the IJ’s
decision without opinion.
This timely petition for review followed. Villalobos argues that the agency abused its
discretion in denying her motion to reopen based on changed country conditions. Villalobos has
forfeited any challenge to the agency’s other grounds for denying her motion to reopen by failing
to address those grounds before this court. See Gafurova, 911 F.3d at 327 n.2.
Where, as here, the BIA affirms the IJ’s decision without opinion, we review the IJ’s
decision as the final agency determination. Hassan v. Gonzales, 403 F.3d 429, 433 (6th Cir. 2005).
We review the denial of a motion to reopen for an abuse of discretion. Dieng v. Barr, 947 F.3d
956, 960 (6th Cir. 2020). We will find an abuse of discretion if the denial “was made without a
rational explanation, inexplicably departed from established policies, or rested on an impermissible
basis such as invidious discrimination against a particular race or group.” Trujillo Diaz v. Sessions,
880 F.3d 244, 248 (6th Cir. 2018) (quoting Allabani v. Gonzales, 402 F.3d 668, 675 (6th Cir.
2005)). Given that motions to reopen are disfavored and that the agency has broad discretion to
grant or deny such motions, “[t]he party filing a motion to reopen bears a heavy burden.”
Harchenko v. INS, 379 F.3d 405, 410 (6th Cir. 2004); see Gafurova v. Whitaker, 911 F.3d 321,
325-26 (6th Cir. 2018).
There is no time limit for filing a motion to reopen to apply for asylum, withholding of
removal, or CAT protection “based on changed country conditions arising in the country of
-3-
No. 22-3358, Villalobos v. Garland
nationality or the country to which removal has been ordered, if such evidence is material and was
not available and would not have been discovered or presented at the previous proceeding.”
8 U.S.C. § 1229a(c)(7)(C)(ii); see 8 C.F.R. § 1003.23(b)(4)(i). “A ‘motion to reopen is properly
denied where the motion does not introduce previously unavailable material evidence.’”
Gafurova, 911 F.3d at 326 (quoting Sunarto v. Mukasey, 306 F. App’x 957, 962 (6th Cir. 2009)).
Villalobos’s motion to reopen included an application for asylum, withholding of removal,
and CAT protection asserting that she came to the United States because of threats from gang
members. Villalobos failed to submit any evidence in support of this claim, let alone any evidence
of a material change in country conditions since the first IJ ordered her removal in absentia. On
appeal to the BIA, Villalobos asserted that laws protecting women were not enforced in El
Salvador, but she failed to make any argument or point to any evidence that conditions for women
had changed since the in absentia removal order. Villalobos’s brief in support of her petition for
review raises new claims of changed country conditions, such as a gang truce in 2012 and an
attempted coup in 2020, but these new claims are unexhausted and unsupported by the
administrative record. See 8 U.S.C. § 1252(b)(4)(A), (d)(1).
Because Villalobos did not present any material evidence of changed country conditions
in support of her motion to reopen, the agency did not abuse its discretion in denying her motion.
We therefore need not reach whether Villalobos demonstrated prima facie eligibility for asylum,
withholding of removal, or CAT protection.1 See Gafurova, 911 F.3d at 327.
For these reasons, we DENY Villalobos’s petition for review.
1
To the extent that Villalobos argues that she is eligible for cancellation of removal, she was served
with a statutorily compliant notice to appear in removal proceedings upon her unlawful entry into
the United States in 2005, which precluded her from accruing the necessary period of continuous
physical presence in the United States to qualify for cancellation of removal. See 8 U.S.C.
§ 1229b(b)(1), (d)(1); Pereira v. Sessions, 138 S. Ct. 2105, 2110-11 (2018).
-4- | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487968/ | Filed 11/18/22 Whitlach v. Premier Valley 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
JAMES R. WHITLACH,
F082322
Plaintiff and Appellant,
(Super. Ct. No. CV-19-005627)
v.
PREMIER VALLEY, INC. et al., OPINION
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Stanislaus County. John D.
Freeland, Judge.
Clapp & Lauinger, James F. Clapp and Marita Lauinger; Wynne Law Firm and
Edward J. Wynne; Altshuler Berzon and Michael Rubin, for Plaintiff and Appellant.
Arena Hoffman, Ronald D. Arena, Conor D. Mack and Michael Moore, for
Defendant and Respondent Premier Valley, Inc.
O’Melveny & Myers, Apalla U. Chopra, Adam J. Karr, Andrew Lichtenstein,
Jason Zarrow and Anton Metlitsky, for Defendant and Respondent Century 21 Real
Estate LLC.
June Babiracki Barlow, Neil Kalin and Jenny Li for California Association of
Realtors as Amicus Curiae on behalf of Defendant and Respondent.
-ooOoo-
Plaintiff James Whitlach pursued a claim under the Labor Code Private Attorney
General Act of 2004 (Lab. Code, § 2698 et seq.) against Defendants Premier Valley, Inc.
(doing business as Century 21 MM) and Century 21 Real Estate LLC, to enforce civil
penalties for violations of the Labor Code. The trial court sustained defendants’ demurrer
to the operative complaint without leave to amend. Whitlach appealed.
This appeal involves issues of statutory interpretation with regard to the following
question: What is the applicable test or governing standard for determining whether a
real estate salesperson is an “employee” or an “independent contractor” for purposes of
the Labor Code’s wage and hour provisions. Resolution of this question turns on
interpreting recently enacted Labor Code section 2778, subdivision (c)(1), and other
provisions incorporated therein.
We conclude the applicable test for the purpose at hand is the test set forth in
Unemployment Insurance Code sections 650 and 13004.1, as incorporated in Business
and Professions Code section 10032, subdivision (b), which is itself incorporated in
Labor Code section 2778, subdivision (c)(1).
The trial court reached the same conclusion and applied the correct test in ruling
on defendants’ demurrer. We affirm the judgment.
PROCEDURAL BACKGROUND
I. Complaint
Plaintiff James Whitlach is a former real estate agent who was affiliated with
defendant Premier Valley, Inc., doing business as Century 21 MM (Premier Valley), a
real estate brokerage firm located in Oakdale. Premier Valley is a franchisee of co-
defendant Century 21 Real Estate LLC (Century 21), a Delaware Corporation with its
principal place of business in Parsippany, New Jersey.
On December 20, 2018, Whitlach filed a class action complaint in this matter,
alleging multiple violations of the Labor Code, among other claims. The complaint
2.
alleged he was bringing the class action “on behalf of similarly situated [real estate
agents] who were misclassified as independent contractors [when they should have been
considered employees,] and as a result were not properly paid all wages due and owing,
[were] subject[ed] [to] unlawful deductions, and were not reimbursed for reasonable and
necessary business expenses.”
On February 15, 2019, Whitlach filed a first amended complaint (FAC). The FAC
added a representative claim under the Labor Code Private Attorney General Act of 2004
(PAGA), which allows an “ ‘aggrieved employee’ ” to recover civil penalties for Labor
Code violations committed by an employer. (Lab. Code, §§ 2698, 2699, subd. (a).) The
FAC alleged Whitlach was an “aggrieved employee” for purposes of his PAGA claim.
The FAC further alleged that Whitlach’s PAGA claim was brought “on behalf of himself
and other current and former [real estate agents]” affiliated with Premier Valley, to seek
civil penalties for Labor Code violations committed by Premier Valley and Century 21.
On June 5, 2019, Whitlach’s class claims were dismissed upon the trial court’s adoption
of a stipulated order to this effect, leaving at issue only the PAGA claim.
On November 15, 2019, Premier Valley and Century 21 demurred to the FAC on
the ground that Whitlach was precluded from asserting a PAGA claim (or any derivative
Labor Code claim) because he was an independent contractor, not an employee. The trial
court heard the demurrer on June 12, 2020. The court concluded the applicable test for
determining Whitlach’s employee or independent contractor status for purposes of his
PAGA cause of action and derivative Labor Code claims was the Unemployment
Insurance Code section 650 test incorporated in Business and Professions Code section
10032, subdivision (b) (Bus. & Prof. Code, § 10032(b)), itself incorporated in Labor
Code section 2778, subdivision (c)(1) (Lab. Code, § 2778(c)(1)) (formerly Lab. Code,
§ 2750.3, subd. (d)(1).) Applying the Unemployment Insurance Code section 650 test,
3.
the trial court ruled that Whitlach was an independent contractor as a matter of law and
dismissed the FAC with leave to amend.
On June 30, 2020, Whitlach filed a second amended complaint (SAC), which is
the operative complaint in this case. The SAC again asserted a single PAGA cause of
action, premised on alleged misclassification of real estate agents as independent
contractors rather than employees, and attendant Labor Code violations, by Premier
Valley. In addition, the SAC contained multiple new allegations directed to the trial
court’s rationale for dismissing the FAC (i.e., that Whitlach was an independent
contractor as a matter of law).
The test applied by the trial court in determining that Whitlach was an independent
contractor as a matter of law turned, in part, on the existence of a written contract or
independent contractor agreement between Whitlach and Premier Valley. In the SAC,
Whitlach alleged the independent contractor agreement he had signed was
unconscionable and, therefore, unenforceable. Whitlach alleged, alternatively, that
should he be determined to be an independent contractor and not an employee under
Business and Professions Code section 10032(b), as incorporated in Labor Code section
2778(c)(1) (the statutes the trial court had relied on in dismissing the FAC), then Labor
Code section 2778(c)(1) violated equal protection and was unconstitutional under the
California Constitution. Finally, Whitlach alleged he was an employee for purposes of
PAGA and his derivative Labor Code claims because he had entered into a separate
contract or management employment agreement with Premier Valley, in his capacity as a
sales manager for the firm.
On August 6, 2020, defendants Premier Valley and Century 21 demurred to the
SAC. Premier Valley and Century 21 again argued that Whitlach was an independent
contractor as a matter of law; they further argued that Labor Code section 2778(c)(1) was
not unconstitutional, the independent contractor agreement between Whitlach and
4.
Premier Valley was not unconscionable, and the separate contract Whitlach had with
Premier Valley for his work as a sales manager was irrelevant for purposes of his
representative claims. The trial court heard the demurrer on November 10, 2020; the
court sustained defendants’ demurrer and dismissed the SAC without leave to amend.
Whitlach appeals the trial court’s ruling sustaining the demurrer to the SAC and
the subsequent judgment of dismissal. He contends the trial court applied the wrong test
for determining whether he was an independent contractor or employee of Premier Valley
for purposes of his PAGA cause of action and derivative Labor Code claims. In the
alternative, he argues Labor Code section 2778(c)(1) is unconstitutional, his independent
contractor agreement with Premier Valley is unconscionable and unenforceable, and
there is a question of fact as to whether the management employment contract for his
sales manager position constitutes the operative agreement for purposes of evaluating his
status as an employee or independent contractor with regard to his representative claims.
We affirm.
DISCUSSION
I. Standard of Review
An order sustaining a demurrer is reviewed de novo to determine whether the
complaint states a cause of action. (Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494,
1501; People for Ethical Operation of Prosecutors etc. v. Spitzer (2020) 53 Cal.App.5th
391, 398 [we review “a sustained demurrer” and any embedded legal questions de
novo].)
II. Under Labor Code Section 2778(c)(1), and Business and Professions Code
Section 10032(b) as Incorporated Therein, Whitlach is an Independent
Contractor as a Matter of Law
The parties agree that in order for Whitlach to proceed on his PAGA claim, he was
required to be an employee of Premier Valley, because PAGA, as well as the Labor Code
statutes Whitlach seeks to enforce through PAGA, apply only to employees, and not to
5.
independent contractors. (See Lab. Code, § 2699, subd. (a) [PAGA action must be
brought by “an aggrieved employee on behalf of himself or herself and other current or
former employees”]; Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th
903, 913 (Dynamex) [California’s labor laws protect only employees, not independent
contractors].) The principal question on appeal is therefore whether Whitlach was an
employee or independent contractor for purposes of his PAGA cause of action and/or
derivative Labor Code claims.
The parties further agree that the starting point for this analysis is Labor Code
section 2778(c)(1), formerly Labor Code section 2750.3, subdivision (d)(1), which was
enacted in 2019 by Assembly Bill No. 5 (2019-2020 Reg. Sess.) (Stats. 2019, ch. 296,
§ 2) (AB 5), and became effective on January 1, 2020, prior to the trial court’s dismissal
of both Whitlach’s FAC and operative SAC.1 Before we turn to the implications of
Labor Code section 2778(c)(1), we will address the background against which this
provision was enacted in some detail.
A. Prior Tests for Determining Employee or Independent Contractor Status
Prior to the enactment of Labor Code section 2778(c)(1), the California Supreme
Court decided, in 2018, the watershed Dynamex case. (Dynamex, supra, 4 Cal.5th 903.)
Dynamex characterized the issue before that court as follows: “The issue in this case
relates to the resolution of the employee or independent contractor question in one
specific context. Here we must decide what standard applies, under California law, in
determining whether workers should be classified as employees or as independent
contractors for purposes of California wage orders, which impose obligations relating to
1 As indicated, Labor Code section 2778(c)(1) was originally numbered as Labor
Code section 2750.3, subdivision (d)(1). Effective September 4, 2020, Labor Code
section 2750.3 was repealed and renumbered as Labor Code sections 2775-2787. (Stats.
2020, ch. 38, § 1.) We refer to the current code sections as the parties have not noted any
substantive change to the code sections relevant to this appeal.
6.
the minimum wages, maximum hours, and a limited number of very basic working
conditions (such as minimally required meal and rest breaks) of California employees.”2
(Dynamex, supra, at pp. 913-914.)
Dynamex provided “a historical review of the treatment of the employee or
independent contractor distinction under California law.” (Dynamex, supra, 4 Cal.5th at
p. 927.) Dynamex noted: “ ‘Few problems in the law have given greater variety of
application and conflict in results than the cases arising in the borderland between what is
clearly an employer-employee relationship and what is clearly one of independent
entrepreneurial dealing. This is true within the limited field of determining vicarious
liability in tort. It becomes more so when the field is expanded to include all of the
possible applications of the distinction.’ ” (Ibid.)
Dynamex explained: “As the above quotation suggests, at common law the
problem of determining whether a worker should be classified as an employee or an
independent contractor initially arose in the tort context—in deciding whether the hirer of
the worker should be held vicariously liable for an injury that resulted from the worker’s
actions. In the vicarious liability context, the hirer’s right to supervise and control the
details of the worker’s actions was reasonably viewed as crucial, because ‘ “[t]he extent
to which the employer had a right to control [the details of the service] activities was …
highly relevant to the question whether the employer ought to be legally liable for
them….” ’ [Citation.] For this reason, the question whether the hirer controlled the
details of the worker’s activities became the primary common law standard for
determining whether a worker was considered to be an employee or an independent
contractor.” (Dynamex, supra, 4 Cal.5th at p. 927.)
2 The court explained that “[i]n California, wage orders are constitutionally
authorized, quasi-legislative regulations that have the force of law.” (Dynamex, supra, 4
Cal.5th at pp. 913-914.)
7.
“Prior to [the California Supreme Court’s] 1989 decision in [S. G.] Borello[ &
Sons, Inc. v. Department of Industrial Relations (1989)] 48 Cal.3d 341, California
decisions generally invoked this common law ‘control of details’ standard beyond the tort
context, even when deciding whether workers should be considered employees or
independent contractors for purposes of the variety of 20th century social welfare
legislation that had been enacted for the protection of employees. Thus, for example, in
Tieberg v. Unemployment Ins. App. Bd. (1970) 2 Cal.3d 943, 946 …, in determining
whether a worker was an employee or independent contractor for purposes of California’s
unemployment insurance legislation, the court stated that ‘[t]he principal test of an
employment relationship is whether the person to whom service is rendered has the right
to control the manner and means of accomplishing the result desired.’ ” (Dynamex,
supra, 4 Cal.5th at pp. 927-928.)
“In addition to relying upon the control of details test, however, the pre-Borello
decisions listed a number of ‘secondary’ factors that could properly be considered in
determining whether a worker was an employee or an independent contractor. The
decisions declared that a hirer’s right to discharge a worker ‘ “at will, without cause” ’
constitutes ‘ “[s]trong evidence in support of an employment relationship.” ’ ”
(Dynamex, supra, 4 Cal.5th at p. 928.) “The decisions also pointed to the following
additional factors … ‘(a) whether or not the one performing services is engaged in a
distinct occupation or business; (b) the kind of occupation, with reference to whether, in
the locality, the work is usually done under the direction of the principal or by a specialist
without supervision; (c) the skill required in the particular occupation; (d) whether the
principal or the workman supplies the instrumentalities, tools, and the place of work for
the person doing the work; (e) the length of time for which the services are to be
performed; (f) the method of payment, whether by the time or by the job; (g) whether or
8.
not the work is a part of the regular business of the principal; and (h) whether or not the
parties believe they are creating the relationship of employer-employee.’ ” (Ibid.)
“In 1989, in Borello, supra, 48 Cal.3d 341, [our Supreme Court] addressed the
employee or independent contractor question in an opinion that has come to be viewed as
the seminal California decision on this subject.” (Dynamex, supra, 4 Cal.5th at p. 929.)
“The particular controversy in Borello, supra, 48 Cal.3d 341, concerned whether
farmworkers hired by a grower to harvest cucumbers under a written ‘sharefarmer’
agreement were independent contractors or employees for purposes of the California
workers’ compensation statutes.” (Dynamex, supra, at p. 929.) The Borello court
recognized that “ ‘[t]he distinction between independent contractors and employees arose
at common law to limit one’s vicarious liability for the misconduct of a person rendering
service to him’ [citation], and that it was in this context that ‘the “control of details” test
became the principal measure of the servant’s status for common law purposes’ (ibid.).
[Citation.] The court then took note of the prior California decisions discussed above,
which generally [also] utilized the common law control-of-details standard in
determining whether workers were employees or independent contractors for purposes of
social welfare legislation, but which [further] identified the numerous additional
‘secondary’ factors [see above] that may be relevant to that determination. [Citation.]
The [Borello] court observed that ‘the individual factors cannot be applied mechanically
as separate tests; they are intertwined and their weight depends often on particular
combinations.” ’ ” (Dynamex, supra, at pp. 929-930.)
Finally, Borello explained that “ ‘the concept of “employment” embodied in the
[Workers’ Compensation Act] is not inherently limited by common law principles.’ ”
(Dynamex, supra, 4 Cal.5th at p. 930.) Rather, the court observed that “ ‘[t]he common
law and statutory purposes of the distinction between “employees” and “independent
contractors” are substantially different,’ ” whereby “ ‘[t]he nature of the work, and the
9.
overall arrangement between the parties, must be examined to determine whether they
come within the “history and fundamental purposes” of the statute.’ ” (Ibid.) Borello
concluded that “ ‘[e]ach service arrangement must be evaluated on its facts, and the
dispositive circumstances may vary from case to case.’ ” (Id. at pp. 931, 934 [“although
we have sometimes characterized Borello as embodying the common law test or standard
for distinguishing employees and independent contractors [citation], it appears more
precise to describe Borello as calling for resolution of the employee or independent
contractor question by focusing on the intended scope and purposes of the particular
statutory provision or provisions at issue”].) In sum, “Borello calls for application of a
statutory purpose standard that considers the control of details and other potentially
relevant factors identified in prior California … cases in order to determine which
classification (employee or independent contractor) best effectuates the underlying
legislative intent and objective of the statutory scheme at issue.” (Id. at p. 934.)
After providing a historical overview of various tests for distinguishing between
employees and independent contractors, Dynamex turned to resolving the question of
what test or standard applies “in determining whether workers should be classified as
employees or as independent contractors for purposes of California wage orders.”
(Dynamex, supra, 4 Cal.5th at p. 913.) Dynamex adopted “the so-called ‘ABC’ test” for
this purpose. (Id. at p. 955.) “The ABC test presumptively considers all workers to be
employees, and permits workers to be classified as independent contractors only if the
hiring business demonstrates that the worker in question satisfies each of three
conditions: (a) that the worker is free from the control and direction of the hirer in
connection with the performance of the work, both under the contract for the performance
of the work and in fact; and (b) that the worker performs work that is outside the usual
course of the hiring entity’s business; and (c) that the worker is customarily engaged in
an independently established trade, occupation, or business of the same nature as that
10.
involved in the work performed.” (Id. at pp. 955-956, 957.) Under the ABC test, “[t]he
hiring entity’s failure to prove any one of these three prerequisites will be sufficient in
itself to establish that the worker is an included employee, rather than an excluded
independent contractor, for purposes of the wage order.” (Id. at p. 964.)
B. Recently Enacted Labor Code Section 2778(c)(1)
In 2019, the Legislature passed AB 5 (Stats. 2019, ch. 296, § 2), which enacted,
effective January 1, 2020, Labor Code section 2750.3, subsequently renumbered as Labor
Code sections 2775-2787, effective September 4, 2020 (Stats. 2020, ch. 38, § 1).
Assembly Bill No. 5 codified Dynamex’s ABC test as the controlling test for determining
a worker’s employment status for purposes of the Labor Code, the Unemployment
Insurance Code, and the wage orders of the Industrial Welfare Commission (IWC). (See
Lab. Code, § 2775, subd. (b)(1).)3
However, AB 5, further provided that multiple occupational classifications were
exempted from the sweep of Labor Code section 2775, subdivision (b)(1). For the
exempted occupational classifications, the ABC test—as set forth in Dynamex and
subsequently incorporated in Labor Code section 2775, subdivision (b)(1)—was not the
controlling test for resolving the employee or independent contractor question for
purposes of the Labor Code, Unemployment Insurance Code, and wage orders. “Real
3 Labor Code section 2775, subdivision (b)(1) provides: “For purposes of this code
and the Unemployment Insurance Code, and for the purposes of wage orders of the
Industrial Welfare Commission, a person providing labor or services for remuneration
shall be considered an employee rather than an independent contractor unless the hiring
entity demonstrates that all of the following conditions are satisfied: [¶] (A) The person
is free from the control and direction of the hiring entity in connection with the
performance of the work, both under the contract for the performance of the work and in
fact. [¶] (B) The person performs work that is outside the usual course of the hiring
entity’s business. [¶] (C) The person is customarily engaged in an independently
established trade, occupation, or business of the same nature as that involved in the work
performed.”
11.
estate licensee” was one of the occupational classifications that was specifically
exempted from the purview of Labor Code section 2775, subdivision (b)(1), and in turn
from the application of Dynamex and the ABC test for purposes of the Labor Code,
Unemployment Insurance Code, and wage orders. (See Lab. Code, § 2778, subd. (c) &
(c)(1) (formerly Lab. Code, § 2778, subd. (b) & (b)(1), see Stats. 2021, ch. 422, § 1,
correcting numbering error within Lab. Code, § 2778).)
Labor Code section 2778, subdivision (c) and (c)(1), which collectively remove
real estate licensees from the purview of Labor Code section 2775, subdivision (b)(1) and
application of Dynamex’s ABC test, provide as follows: “(c) Section 2775 and the
holding in Dynamex do not apply to the following, which are subject to the Business and
Professions Code: [¶] (1) A real estate licensee licensed by the State of California
pursuant to Division 4 (commencing with Section 10000) of the Business and Professions
Code, for whom the determination of employee or independent contractor status shall be
governed by subdivision (b) of Section 10032 of the Business and Professions Code. If
that section is not applicable, then this determination shall be governed as follows: [¶]
(A) For purposes of unemployment insurance by Section 650 of the Unemployment
Insurance Code. [¶] (B) For purposes of workers’ compensation by Section 3200 et seq.
[of the Labor Code]. [¶] (C) For all other purposes in the Labor Code by Borello. The
statutorily imposed duties of a responsible broker under Section 10015.1 of the Business
and Professions Code are not factors to be considered under the Borello test.” (Italics
added.)
C. Business and Professions Code Section 10032 (Enacted Post-Borello, in
1991)
Business and Professions Code section 10032 provides as follows:
“(a) All obligations created under [the Real Estate Law,] Section 10000,
and following, all regulations issued by the [Real Estate] commissioner
relating to real estate salespersons, and all other obligations of brokers and
12.
real estate salespersons to members of the public shall apply regardless of
whether the real estate salesperson and the broker to whom he or she is
licensed have characterized their relationship as one of ‘independent
contractor’ or of ‘employer and employee.’
“(b) A real estate broker and a real estate salesperson licensed under that
broker may contract between themselves as independent contractors or as
employer and employee, for purposes of their legal relationship with and
obligations to each other. Characterization of a relationship as either
‘employer and employee’ or ‘independent contractor’ for statutory
purposes, including, but not limited to, withholding taxes on wages and for
purposes of unemployment compensation, shall be governed by Section
650 and Sections 13000 to 13054, inclusive, of the Unemployment
Insurance Code. For purposes of workers compensation the
characterization of the relationship shall be governed by Section 3200, and
following, of the Labor Code.” (Italics added.)
Section 10032, subdivisions (a) and (b), were added to the Business and
Professions Code in 1991, by Senate Bill No. 630 (1991-1992 Reg. Sess.) (SB 630). (See
Stats. 1991, ch. 679, § 1.) Defendants Premier Valley and Century 21 contend the
Legislature added Business and Professions Code section 10032 in 1991, to, inter alia,
identify the proper test for determination of employee or independent contractor status for
real estate agents/salespersons, for purposes of the Labor Code, among other statutory
schemes. They contend the Legislature acted to do so after several cases from the Court
of Appeal, in resolving this question for a variety of purposes (including labor disputes),
either applied the common law/Borello test to find that real estate agents were employees
or determined that real estate agents were employees as a matter of law (in light of their
designation as such in the Real Estate Law). Premier Valley and Century 21 contend,
furthermore, that the passage of AB 5 and enactment of Labor Code section 2778(c)(1),
confirmed the continued vitality of Business and Professions Code section 10032(b) and
the Unemployment Insurance Code section 650 test incorporated therein, as the standard
for resolving the employee or independent contractor question for real estate salespersons
for purposes of the Labor Code, including its wage and hour provisions.
13.
Whitlach, on the other hand, argues that the Unemployment Insurance Code
section 650 test, as incorporated in Business and Professions Code section 10032(b), was
never the standard for resolving the employee or independent contractor status of real
estate salespersons for purposes of the Labor Code, including its wage and hour
provisions. More specifically, Whitlach argues that, for purposes of the Labor Code,
prior to passage of AB 5, this question was controlled by the Borello test, and the same is
true after the passage of AB 5 and enactment of Labor Code section 2778(c)(1).
As discussed in detail below, we conclude that defendants Premier Valley and
Century 21 have the better argument, in that the Unemployment Insurance Code section
650 test, as incorporated in Business and Professions Code section 10032(b), has long
provided, and continues to provide, the controlling test for resolving the employee or
independent contractor question for real estate salespersons, for purposes of the wage and
hour provisions of the Labor Code.
D. Test for Determining Employee or Independent Contractor Status Set
Forth in Unemployment Insurance Code Sections 650 and 13004.1 (Same
Test Appears in Both Sections), as Incorporated in Business and
Professions Code Section 10032(b)
As noted, Business and Professions Code section 10032(b) incorporates the test
for determining the employee or independent contractor status set forth in Unemployment
Insurance Code sections 650 and 13004.1, respectively. Unemployment Insurance Code
section 650 provides: [¶] “ ‘Employment’ does not include services performed as a real
estate … broker or as a real estate … salesperson, by an individual if all of the following
conditions are met: [¶] (a) The individual is licensed under the provisions of … Part 1
(commencing with Section 10000) of Division 4 of, the Business and Professions
Code.… [¶] (b) Substantially all of the remuneration (whether or not paid in cash) for the
services performed by that individual is directly related to sales or other output (including
the performance of services) rather than to the number of hours worked by that individual
14.
[i.e., the remuneration is in the form of a commission]. [¶] (c) The services performed by
the individual are performed pursuant to a written contract between that individual and
the person for whom the services are performed and the contract provides that the
individual will not be treated as an employee with respect to those services for state tax
purposes.” Section 13004.1 of the Unemployment Insurance Code perfectly mirrors
section 650 of that code.
Defendants Premier Valley and Century 21 contend that Business and Professions
Code section 10032(b) and the Unemployment Insurance Code sections 650/13004.1 test
incorporated therein, provide the applicable standard for determining employee or
independent contractor status for real estate salespersons for purposes of the Labor Code,
including its wage and hour provisions. Defendants further contend that all the
conditions of the three-factor test set forth in Unemployment Insurance Code sections
650 and 13004.1 “are indisputably satisfied here,” a contention that Whitlach does not
challenge (Whitlach rather argues the aforementioned statutes do not provide the
applicable test for resolving the employee or independent contractor question for
purposes of the Labor Code). As Premier Valley and Century 21 point out, the SAC and
its exhibits, along with documents judicially noticed by the trial court, establish that
Whitlach was a licensed real estate agent; he was paid by commission; and he entered
into a written contract regarding his services as a real estate agent that specified he was
an independent contractor for state tax purposes. In short, the three-factor test set forth in
Unemployment Insurance Code sections 650 and 13004.1 is satisfied here. Premier
Valley and Century 21 posit, “[t]hat is the end of the matter” as “[u]nder the statutes’
plain text, Whitlach was clearly and unambiguously an independent contractor.”
We will now analyze the primary question presented in this appeal, that is, what is
the proper test for resolving the employee or independent contractor question for real
estate salespersons for purposes of the wage and hour provisions of the Labor Code.
15.
E. Analysis
The unique relationship between real estate brokers and agents is both commonly
recognized and has long been reflected in California law. A web of statutes and
regulations require brokers to exercise significant control over agents and to direct work
performed by agents under their supervision. (See, e.g., Cal. Code Regs., tit. 10, § 2725;
2 Miller & Starr, Cal. Real Estate (4th ed. 2021) § 4:31.) Such a legal regime would
normally complicate determining real estate agents’ employment status because a
principal’s right to control his agent is usually the most important factor suggesting the
agent is an employee rather than an independent contractor. (See Borello, supra, 48
Cal.3d at p. 350 [right to control most important consideration].) Yet the Legislature has
signaled, at the same time, that real estate agents were free to structure independent
contractor arrangements, and that, in many contexts, traditional or common law-based
tests did not make sense for resolving the employee or independent contractor question
for real estate agents.
Thus, the Legislature enacted Unemployment Insurance Code section 650 in 1953,
and subsequently Unemployment Insurance Code section 13004.1 (these are nearly
identical to a provision in the federal tax code, 26 U.S.C. § 3508), both of which statutes
excluded real estate agents from the definitions of “employee” and “employment” for
purposes of that code when the individual agent was licensed by the state, was paid by
commission rather than in relation to the number of hours of worked, and performed the
relevant services pursuant to a written contract, with the latter specifying that the
individual would not be treated as an employee with respect to those services, for state
tax purposes.
There were no statutory tests to resolve the employee or independent contractor
question for real estate agents in other contexts. California courts were thus left to
evaluate whether real estate agents were employees or independent contractors by
16.
recourse to the general control-based test and/or the provisions of the Real Estate Law
(Bus. & Prof. Code, § 10000 et seq.), and to tackle the question under what
circumstances, if at all, real estate agents could enter into independent contractor
relationships with brokers. Some of the resulting disputes centered on the proper test for
ascertaining the liability of brokers for the tortious acts of real estate salespersons
(Gipson v. Davis Realty Co. (1963) 215 Cal.App.2d 190 (Gipson)), others involved
disputes as to whether a real estate salesperson was entitled to minimum wages (Grubb &
Ellis Co. v. Spengler (1983) 143 Cal.App.3d 890 (Grubb & Ellis)), and whether a
salesperson was an employee under workers’ compensation law (Payne v. White House
Properties (1980) 112 Cal.App.3d 465 (Payne)).
Still another dispute involved an instance in which the “State Labor
Commissioner” had “interpreted the relationship [between brokers and real estate agents]
as that of an employer/employee for purposes of applying provisions of the Labor Code,”
specifically in mediating “commission disputes between [brokers and agents],” despite
the fact that the brokers and agents had entered into contracts establishing the agents as
independent contractors. (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading
analysis of SB 630, dated April 29, 1991.) (See Resnik v. Anderson & Miles (1980) 109
Cal.App.3d 569 (Resnik) [holding Labor Commissioner properly intervened on behalf of
real estate salesperson in matter of unpaid sales commissions, because a real estate
salesperson is an employee as a matter of law under Gipson and the Real Estate Law].)
The Gipson case, and its progeny, including Resnik, had significant implications
for the real estate industry. As noted, Gipson concerned the question of a broker’s
liability for the tortious acts of a salesperson. After reviewing various provisions of the
Real Estate Law that governed the relationship between brokers and salespersons, the
Gipson court concluded, “a salesman, insofar as his relationship with the broker who
employs him is concerned, cannot be classed as an independent contractor” because “the
17.
Legislature has, by virtue of statutory enactment, made such a salesman an agent [or
employee] of the broker as a matter of law.” (Gipson, supra, 215 Cal.App.2d at pp. 206-
207.) Gipson further held that any contract purporting to make the salesperson an
independent contractor is “invalid as being contrary to the provisions of the Real Estate
Law.” (Id. at p. 207.) Resnik extended Gipson’s holding to the arena of Labor Code
requirements, and reemphasized, with reference to the provisions of the Real Estate Law,
that “the Legislature has made” real estate salespersons “employee[s]” of brokers “as a
matter of law.” (Resnik, supra, 109 Cal.App.3d at p. 572.)
On the other hand, in Payne, in considering whether a real estate salesperson was
an employee under workers’ compensation law, the court concluded, based on the Real
Estate Law that, “[i]n most instances the real estate salesperson would be an employee
for purposes of worker’s compensation, but that determination remains a question of
fact.” (Payne, supra, 112 Cal.App.3d at p. 471.) Finally, Grubb & Ellis, considered
whether a real estate salesperson was entitled to minimum wages. Grubb & Ellis
described the different ways courts had determined the employee or independent
contractor status of real estate agents in various contexts. Grubb & Ellis concluded that,
in that case, the question of the proper test for determining the status of real estate agents
for purposes of application of state minimum wage laws was essentially moot because,
although the plaintiff claimed he was an employee under the traditional common law
“ ‘control’ ” test, he had offered “minimal evidence” in support of his claim. (Grubb &
Ellis, supra, 143 Cal.App.3d at p. 898.)
In 1991, the Legislature addressed the disputes around the employee or
independent contractor question for real estate agents, as well as the focus on the Real
Estate Law in the caselaw addressing this question, by passing SB 630, which enacted
Business and Professions Code section 10032. The legislative history of SB 630, as
included in the record on appeal, indicates that the bill’s sponsor, the California
18.
Association of Realtors, sought legislative action to require recognition, in certain legal
contexts (including the labor law arena), of the contractual arrangements between brokers
and their sales agents and to effectuate such contractual arrangements when applying
specific provisions of law. Thus, as reflected in, among other documents, an April 1991
report of the Senate Committee on Business and Professions issued shortly after the
introduction of SB 630 in that committee, the purpose of the proposed statute (i.e.,
Business and Professions Code section 10032) was “to recognize legitimate contractual
relationships of real estate licensees when applying specific provisions of law (i.e., Labor
Code, Revenue and Taxation Code and the Insurance Code) to the broker-salesperson
relationship,” while leaving in place “existing obligations of a real estate broker
regarding liability [and] workers compensation insurance.”
Ultimately, Business and Professions Code section 10032, subdivision (a)
preserved the status quo for obligations of brokers and agents regarding liability to the
public (e.g., under tort law and the Real Estate Law (Business & Professions Code,
§ 10000 et seq.)). Subdivision (b) of the statute supplied the rule with respect to “their
legal relationship with and obligations to each other,” as well as the test or governing
standard for determining the employee or independent contractor status of real estate
agents for certain “statutory purposes,” with the express exception of the workers’
compensation scheme (set forth in specific provisions of the Labor Code). The test
incorporated in Business and Professions Code section 10032(b) for determining, for
certain “statutory purposes,” the employee or independent contractor status of real estate
agents, is the test set forth in Unemployment Insurance Code sections 650/13004.1. The
present case requires us to address the scope of subdivision (b) of Business and
Professions Code section 10032, specifically, whether the test (for determining the
employee or independent contractor status of real estate agents for certain “statutory
19.
purposes”) incorporated therein, applies to the wage and hour provisions of the Labor
Code.4
By its terms, subdivision (b) of Business and Professions Code section 10032
incorporates the test supplied by the Unemployment Insurance Code, i.e., Unemployment
Insurance Code sections 650 and 13004.1, for resolving the employee or independent
contractor question for “statutory purposes,” excluding workers’ compensation purposes.
And as noted above, the provisions of the Unemployment Insurance Code incorporated in
Business and Professions Code section 10032(b), dictate that a real estate agent is an
independent contractor if three basic conditions are satisfied: (1) the agent is licensed;
(2) the agent is paid through commissions; and (3) the agent has signed an independent
contractor agreement.
Premier Valley and Century 21 point out: “For more than a quarter century,
everyone has understood that [Business and Professions Code section 10032(b)] dictates
that real-estate agents are independent contractors for purposes of California labor law
where [the specified] three conditions are met. This understanding is so well-settled, in
fact, that the California Association of Realtors (which sponsored [the bill that enacted
Business and Professions Code section] 10032[(b)]) developed a standard independent-
contractor agreement in line with this test. [Citation.] Thousands of brokers and real-
estate agents, in other words, have structured their affairs based on this understanding.”
Premier Valley and Century 21 further note: “While this action was pending, the
Legislature enacted AB-5. For many industries—particularly those comprising the ‘gig
4 We recognize that the question whether the test set forth in Unemployment
Insurance Code sections 650/13004.1, as incorporated in Business and Professions Code
section 10032(b), applies to PAGA is also implicated. However, we need only address
whether this test, as incorporated in Business and Professions Code section 10032(b),
provides the appropriate test for determining the employee or independent contractor
status of real estate agents for purposes of the wage and hour provisions of the Labor
Code.
20.
economy’—AB-5 effected sweeping changes. It did so by codifying the ‘ABC’
employment test set out in Dynamex Operations West, Inc. v. Superior Court (2018) 4
Cal.5th 903. But the Legislature made expressly clear in AB-5 that it did not intend to
alter the rules for the real-estate industry. As even Whitlach recognizes, in enacting AB-
5 ‘the Legislature wanted to retain [Business and Professions Code section 10032(b)’s]
original meaning.’ [Citation.] Thus, in a section setting out exceptions from the
[application of] the ABC test, the Legislature expressly incorporated into the Labor Code
the rule established by [Business and Professions Code section 10032(b)]. [¶]
Specifically, Labor Code [section] 2778(b)(1) [added by AB-5] provides that the
employment-status test for real-estate agents ‘shall be governed by subdivision (b) of
Section 10032 of the Business and Professions Code,’ and further provide[s] alternative
rules [in] various other provisions that [apply] if [Business and Professions Code section]
10032(b) [is] ‘not applicable.’ ”
We agree with defendants Premier Valley and Century 21 that, upon its enactment
in 1991, Business and Professions Code section 10032, and Unemployment Insurance
Code sections 650/13004.1 as incorporated therein, provided the appropriate test for
resolving the employee or independent contractor question for real estate salespersons for
purposes of the wage and hour provisions of the Labor Code that are at issue here. We
further agree with defendants Premier Valley and Century 21 that after enactment of
Labor Code section 2778 (including Labor Code section 2778(c)(1)) by AB 5 in 2020,5
Business and Professions Code section 10032(b) and Unemployment Insurance Code
sections 650/13004.1 as incorporated therein, continue to provide the appropriate test for
resolving this question for this purpose.
We will first discuss the former proposition or initial issue presented, that is,
whether upon its enactment, Business and Professions Code section 10032(b) (and
5 Labor Code section 2778 was previously numbered as Labor Code section 2750.3.
21.
Unemployment Insurance Code sections 650/13004.1, as incorporated therein), provided
the appropriate test for resolving the employee or independent contractor question for real
estate salespersons for purposes of the wage and hour provisions of the Labor Code.
Thereafter we will address the ultimate question, that is, whether Business and
Professions Code section 10032(b) (and Unemployment Insurance Code sections
650/13004.1, as incorporated therein), continue to provide the appropriate test for
resolving this question for this purpose.
(i) The Unemployment Insurance Code Sections 650/13004.1 Test,
as Incorporated in Business and Professions Code Section
10032(b), Has Applied to the Wage and Hour Provisions of the
Labor Code Since Enactment of Business and Professions Code
Section 10032(b)
Defendants Premier Valley and Century 21 submitted to the trial court, the
legislative history file for SB 630, in connection with their demurrers to the FAC and
SAC, and the trial court took judicial notice thereof. We have reviewed the legislative
history documents that are part of the record on appeal. Senate Bill 630 was introduced
on March 4, 1991, and, amended four times over the following months (on April 15 and
29, July 18 (amended in Assembly), and September 4, 1991 (amended in Assembly)),
before it passed on September 12, 1991. Rather than exhaustively detailing the
legislative history of SB 630, we will highlight a few relevant aspects.
Senate Bill 630 was directed to the Real Estate Law in the Business and
Professions Code. It is instructive to look at an early draft version of SB 630, bearing in
mind that, at the time, “for purposes of the administration of the real estate law, the
salesperson [was treated as] the employee and agent of the broker,” and this concept was
reflected in various provisions of the Real Estate Law. (Grubb & Ellis, supra, 143
Cal.App.3d at p. 895; former Bus. & Prof. Code, § 10132; 2 Miller & Starr, Cal. Real
Estate (4th ed. 2021), § 3:72.) As noted above, at the time, courts were focused on the
relationship between real estate agents and brokers as specified in the Real Estate Law,
22.
when determining the employee or independent contractor status of real estate
salespersons in disparate contexts, including for purposes of tort law and labor law. Early
versions of SB 630 reflect a legislative intent to stem, for certain purposes, the direction
in which the caselaw was evolving, by, among other measures, revamping the definition
of the terms “employee” and “employ,” in the Real Estate Law (subsequent versions of
the bill took a different approach to reach the same result). The legislative history of SB
630 also indicates the Legislature wanted to effectuate the contractual relationship
between brokers and agents for purposes of the Labor Code.
An early version of SB 630 from May 1991, provided, in pertinent part:
“SECTION 1. Section 10032 is added to the Business and Professions
Code, to read:
“10032. As used in this part [of the Real Estate Law], the term ‘employee’
shall include independent contractors and the term ‘employ’ shall refer to
contractual relationships of both an employee and an independent
contractor. All obligations created under this part, all regulations issued by
the commissioner relating to employees, and all other obligations of
employees to members of the public, shall also apply to independent
contractors.
“Sec. 2. This act is intended only to recognize legitimate contractual
relationships of licensees when applying the provisions of the Labor Code,
Revenue and Taxation Code, and the Insurance Code to the broker-
salesperson relationship and not to increase or decrease any existing
obligations of a real estate broker regarding liability or workers
compensation insurance, nor shall it be interpreted or applied to affect the
holding in Gipson[, supra,] 215 Cal.App.2d 190, that real estate
salespersons cannot be classified as independent contractors [for purposes
of tort liability] and that any contract which purports to change that
relationship to that of an independent contractor is invalid.” (First italics
added.)
A bill analysis dated May 1, 1991, conducted by the Department of Finance,
analyzed the version of SB 630 excerpted above. We mention this bill analysis because it
23.
summarizes and highlights points that are reflected in multiple documents throughout the
legislative history file. The bill analysis states:
“Current law [i.e., the Real Estate Law] provides for the Department
of Real Estate (DRE) to license and regulate persons involved in the sale,
lease, or exchange of real property. The current law defines particular
terms with respect to these provisions.
“This bill would add a provision specifying that [as used in the Real
Estate Law] an ‘employee’ includes independent contractors and that the
term ‘employ’ refers to contractual relationships of both employees and
independent contractors. The bill also states legislative intent that existing
contractual relationships of licensees be recognized when applying the
provisions of the Labor Code, Revenue and Taxation Code, and the
Insurance Code to the broker-salesperson relationship. The bill is not
intended to affect existing obligations of real estate brokers regarding
liability, workers compensation, or the provisions of a court case[, i.e.,
Gipson, supra, 215 Cal.App.2d 190,] which does not consider real estate
salespersons to be independent contractors for tort liability purposes.”
“The sponsors of this measure [i.e., the California Association of
Realtors or CAR] wish to clarify in law the contractual relationship that
may exist between real estate brokers and agents; it is common practice for
real estate agents to function as independent contractors of brokers.
Despite the existence of contracts, disputes have arisen with the State
Labor Commissioner over employer/employee relationships during the
mediation of disagreements.
“[Department of Real Estate] is concerned that this bill would not
achieve its goal of clarifying the law. In its analysis of the bill, the
department states, ‘It would do nothing but confuse existing law on the
relationship of brokers and salespersons under all existing laws, even the
Real Estate Law.’ ” (Italics added.)
On a different note, the legislative history file contains multiple references to the
Department of Industrial Relations’ (DIR) opposition to the early versions of SB 630,
including the May 1991 draft version quoted above. The DIR opposed the bill on
grounds that, by redefining “employee” to include independent contractors, the bill was
susceptible to an interpretation, or, rather, misinterpretation, that would potentially
24.
expand the jurisdiction of the Department of Labor Standards Enforcement (DLSE)6 to
include broker-salesperson disputes, thereby increasing the DLSE’s workload and
interfering with the real estate industry’s system of private arbitration. In this vein, a bill
analysis by the DIR from May 1991 states:
“[Senate Bill No. 630] would add Section 10032 to the Business and
Professions Code, relating to real estate salesmen and real estate brokers,
and would establish an employee/employer relationship between these two
occupations. [¶]
“Existing law regulates real estate salesmen and real estate brokers
involved in the sale, lease, or exchange of real property. [¶] … [¶]
“This bill would provide that the term ‘employee’ shall include heretofore
independent contractors engaged in the activities of real estate salesmen
and real estate brokers, and the term ‘employ’ shall refer to the contractual
relationship between these two occupations. The bill would provide that all
obligations created under these provisions shall apply to the heretofore
independent contractor relationship between these two occupations.
[¶] … [¶]
“The Department is concerned that the provisions of this bill would expand
the jurisdiction of the Division of Labor Standards Enforcement to include
the contractual relationship between real estate salesmen and real estate
brokers, and would unnecessarily interfere with the system of private
arbitration [that is set up] between these two occupations to settle any
disputes that may arise between them.
“The Department believes that the bill is unnecessary [for purposes of labor
violations] in that sufficient contractual remedies exist through a binding
arbitration agreement between these two entities such that involvement of
the Division in these disputes is both unwarranted and unnecessary.”
On July 18, 1991, SB 630 was amended in the Assembly by adding three
subsections (i.e., subsections (a), (b), and (c)) to proposed Business and Professions Code
section 10032. Subsection (c), as it appeared in the July 18, 1991 version of SB 630,
6 The DLSE is the administrative agency authorized to enforce California’s labor
laws, including IWC wage orders. (See, e.g., Dynamex, supra, 4 Cal.5th at p. 946; Kilby
v. CVS Pharmacy, Inc. (2016) 63 Cal.4th 1, 13.)
25.
provided: “A real estate broker and a real estate salesperson licensed under that broker
may contract between themselves as independent contractors or as employer and
employee, for purposes of their legal relationship with and obligations to each other.
Characterization of a relationship as either ‘employer and employee’ or ‘independent
contractor’ for statutory purposes, including, but not limited to, withholding taxes on
wages and for purposes of unemployment compensation, shall be governed by Section
650 and Sections 13000 to 13054, inclusive, of the Unemployment Insurance Code. For
purposes of workers compensation the characterization of the relationship shall be
governed by Section 3200, and following, of the Labor Code.” (Italics added.)
On September 4, 1991, SB 630 was further amended in the Assembly, deleting the
proposed new definitions for the terms, “employee” and “employ,” for purposes of the
Real Estate Law. An analysis of the amendments prepared by the Senate Rules
Committee on September 10, 1991, indicates the definitions of the terms “employee” and
“employ” were deleted so as to “[a]llow a real estate broker and a real estate salesperson
licensed under that broker to contract between themselves as independent contractors or
as employer and employee.” The analysis includes a “Comment” as follows: “The
sponsors of this measure wish to clarify in law the contractual relationship that may exist
between real estate brokers and agents; it is common practice for real estate agents to
function as independent contractors of brokers. Despite the existence of contracts,
disputes have arisen with the State Labor Commissioner over employer/employee
relationships during the mediation of disagreements.”
After the September 4, 1991 amendments, the bill took its final form, as follows
(in pertinent part):
“Section 10032 is added to the Business and Professions Code, to read:
“10032. (a) All obligations created under Section 10000, and following,
all regulations issued by the commissioner relating to real estate
salespersons, and all other obligations of brokers and real estate
26.
salespersons to members of the public shall apply regardless of whether the
real estate salesperson and the broker to whom he or she is licensed have
characterized their relationship as one of ‘independent contractor’ or of
‘employer and employee.’
“(b) A real estate broker and a real estate salesperson licensed under that
broker may contract between themselves as independent contractors or as
employer and employee, for purposes of their legal relationship with and
obligations to each other. Characterization of a relationship as either
‘employer and employee’ or ‘independent contractor’ for statutory
purposes, including, but not limited to, withholding taxes on wages and for
purposes of unemployment compensation, shall be governed by Section
650 and Sections 13000 to 13054, inclusive, of the Unemployment
Insurance Code. For purposes of workers compensation the
characterization of the relationship shall be governed by Section 3200, and
following, of the Labor Code.
“SEC. 2. This act shall not be interpreted or applied to affect the obligation
or ability, if any, of a broker to maintain workers compensation insurance,
or the holding in [Gipson, supra,] 215 Cal.App.2d 190, that a real estate
broker may be vicariously liable under the doctrine of respondeat superior
for tortious acts of a salesperson licensed under the broker; and further, that
real estate salespersons cannot be classified as independent contractors for
purposes of liability to third parties and that any provision in a contract
which purports to change that relationship from that of an agent to
independent contractor is invalid as being contrary to law for purposes of
tort liability to third parties.” (Italics added.) (See Stats. 1991, ch. 679.)
The legislative history of SB 630, which enacted Business and Professions Code
section 10032, indicates that in enacting this statute, the Legislature intended that, for
certain “statutory purposes,” which included parts of the Labor Code, the employee or
independent contractor question for real estate salespersons would be resolved by
application of the three-factor test set forth in Unemployment Insurance Code sections
650/13004.1. Thus, as noted above, early versions of the bill expressly stated: “This act
is intended only to recognize legitimate contractual relationships of licensees when
applying the provisions of the Labor Code, Revenue and Taxation Code, and the
Insurance Code to the broker-salesperson relationship and not to increase or decrease any
existing obligations of a real estate broker regarding liability or workers compensation
27.
insurance.” Later versions of the bill supplanted the specific reference to the “Labor
Code, Revenue and Taxation Code, and the Insurance Code,” with the broader term
“statutory purposes.”
Many additional legislative history documents concerning SB 630 indicate that the
Legislature intended and anticipated that Business and Professions Code section 10032(b)
would apply to various provisions of the Labor Code. For example, another analysis, this
one by the Assembly Committee on Consumer Protection, Governmental Efficiency and
Economic Development, dated June 19, 1991, states that the bill “is intended only to
recognize legitimate contractual relationships of licensees (independent contractor status)
when applying provisions of the Labor Code, Revenue and Taxation Code, and the
Insurance Code to the broker-salesperson relationship,” and “is not intended to increase
or decrease any existing obligations of a real estate broker regarding liability or workers
compensation insurance.”
The June 19, 1991 committee analysis further notes: “A real estate salesperson
who is ‘employed’ by a broker is somewhat of a hybrid because while the salesperson has
no official hours and in many respects is not subject to control by the broker in how sales
are accomplished, the law does require the broker to perform certain supervisorial tasks
with respect to the salesperson which take the relationship out of the true independent
contractor realm.” The analysis adds: “The [bill] sponsor [i.e., the California
Association of Realtors or CAR] notes that the bill, in establishing an independent
contractor relationship between a broker and a salesperson for purposes of … laws such
as tax law … or labor law, is not intended to interfere with any other responsibilities that
currently exist in tort law. Thus, the bill contains specific language to clarify this and the
fact that the bill does not overturn the holding of the court in the Gipson case regarding
tort liability.” (Italics added.)
28.
The analysis also provides: “The Department of Real Estate is neutral on this bill.
The department was originally concerned that the bill might weaken a broker’s obligation
to supervise a salesperson or a broker’s liability to third parties. The amendment which
clarified that the provision is not to be interpreted to apply to affect the Gipson case
alleviated these concerns.” The analysis notes that the bill’s sponsor, that is, CAR, was
motivated by “problems with the State Labor Commissioner,” but indicates the bill
sought to accomplish its goals “indirectly by adding a section to the Business and
Professions Code,” rather than by directly amending the Labor Code and tax codes,
because of various complications (such as the need to exclude workers compensation
obligations).
The indications in the legislative history of SB 630 that the bill was proposed in
response to the position taken by the State Labor Commissioner, in some instances, that
real estate agents were employees for purposes of disputes over commissions, among
other things, suggest that provisions of the Business and Professions Code section
10032(b), including the test set forth in Unemployment Insurance Code sections
650/13004.1 incorporated therein, were intended to apply to the Labor Code, or at least to
its wage and hour provisions.
Importantly, if ironically, the Department of Industrial Relations opposed the early
versions of SB 630 on grounds the language therein could potentially result in expanding
the jurisdiction of the DLSE to cover disputes between brokers and real estate
salespersons. It is noteworthy that the department evidently dropped its opposition once
the bill was amended to accommodate the department’s concerns by, for instance,
adopting the test forth in Unemployment Insurance Code sections 650/13004.1 for
determining the status of real estate agents for “statutory purposes,” including the wage
and hour provisions of the Labor Code.
29.
An “enrolled bill report” prepared by DIR on September 19, 1991, recommends
that the Governor sign the bill. The report states: “The sponsors have indicated that they
wish to have the benefits of the independent contractor relationship as between real estate
salespersons and real estate brokers in resolving disputes over commissions, except for
purposes of workers’ compensation … where an employer/employee relationship would
apply [pursuant to Borello, supra, 48 Cal.3d 341]. Although the language contained in
this bill which allows the parties to characterize their relationship as being that of
independent contractor or employer/employee is confusing and could lead to enforcement
problems in the context of other employment relationships, the bill as enrolled, does not
present any enforcement issues to be considered by the Department of Industrial
Relations.”
The implications of the legislative history of SB 630 are reinforced by the text of
Business and Professions Code section 10032(b). While Business and Professions Code
section 10032(b) adopts the Unemployment Insurance Code sections 650/13004.1 test for
determining the employee or independent contractor status of real estate agents for
“statutory purposes,” it carves out workers compensation as an area where the employee
or independent contractor status of real estate agents is to be determined pursuant to the
Borello test. Specifically, Business and Professions Code section 10032(b) states: “For
purposes of workers compensation the characterization of the relationship shall be
governed by Section 3200, and following, of the Labor Code.” Pursuant to Labor Code
section 3351, for purposes of workers compensation, “ ‘[e]mployee[s]’ include most
persons ‘in the service of an employer under any …contract of hire’ [citation], but do not
include independent contractors.” (See Borello, supra, 48 Cal.3d at p. 349.) As for
independent contractors, under Labor Code section 3353, for purposes of workers
compensation, independent contractor means “ ‘any person who renders service for a
specified recompense for a specified result, under the control of his principal as to the
30.
result of his work only and not as to the means by which such result is accomplished.’ ”
(See Borello, supra, at p. 349.) Our Supreme Court interpreted these workers
compensation provisions in Borello and held that, for purposes of workers compensation,
“[t]he determination of employee or independent contractor status is one of fact,” to be
decided by application of the control of details test augmented by other relevant factors.
(See Borello, supra, at pp. 349, 350-351.)
In short, Business and Professions Code section 10032(b), creates an express
exception for a subpart of the Labor Code, that is, workers compensation, in that it
provides that determination of the employee or independent contractor status of real
estate agents for purposes of workers compensation is to be made pursuant to the Borello
test. This carve out for workers compensation indicates that the Unemployment
Insurance Code sections 650/13004.1 test is applicable to other parts of Labor Code, and
specifically, as relevant here, the wage and hour provisions of the Labor Code.7 (See
Harris v. Olszewski (6th Cir. 2006) 442 F.3d 456, 469 [“The very nature of an exception
is to carve out matters otherwise covered by the rule.”].) If the Legislature had intended
determination of the employee or independent contractor status of real estate agents for
purposes of the Labor Code was to be made pursuant to the Borello test, a specific carve
out to this effect for workers compensation would not have been necessary.
Another factor indicating that the Unemployment Insurance Code sections
650/13004.1 test, as incorporated in Business and Professions Code section 10032(b),
was intended to apply more broadly than simply in determining the employee or
independent contractor status of real estate agents for purposes of tax withholding and
7 The uncodified “Section 2” of SB 630 (see above) emphasizes, “[t]his act shall not
be interpreted or applied to affect the obligation or ability, if any, of a broker to maintain
workers compensation insurance.” Had the Unemployment Insurance sections
650/13004.1 test been inapplicable to the Labor Code altogether, there would be no need
for this targeted disclaimer.
31.
unemployment compensation, is that this test was already applicable for the latter
purposes. By incorporating this test into Business and Professions Code section
10032(b), the Legislature appears to have intended this test to apply for a broader array of
“statutory purposes.”
We need not clarify the full scope of the term, “statutory purposes,” in Business
and Professions Code section 10032(b), because the question before us is specifically
whether this term encompasses the wage and hour provisions of the Labor Code (see
footnote 3, ante). In light of the text and legislative history of SB 630, we conclude the
test forth in Unemployment Insurance Code sections 650/10034.1, incorporated in
Business and Professions Code section 10032(b), as enacted by SB 630, applied to the
wage and hour provisions of the Labor Code from the date of enactment of Business and
Professions Code section 10032.
(ii) Assembly Bill 5 Adopted the Test Encompassed in Business and
Professions Code Section 10032(b), for Resolving the Employee
or Independent Contractor Question for Real Estate
Salespersons for Purposes of the Labor Code’s Wage and Hour
Provisions
Both parties take the position, which we accept, that since AB 5 and Labor Code
section 2778, subdivision (c) and (c)(1) incorporate Business and Professions Code
section 10032(b) without any change or limitation, it follows the Legislature did not
intend to make any change to the latter statute but, rather, adopted it with its original
meaning and scope intact. As noted above, AB 5 codified Dynamex’s ABC test as the
controlling test for determining a worker’s employment status for purposes of the Labor
Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare
Commission. (See Lab. Code, § 2775, subd. (b)(1).) However, AB 5 also enacted Labor
Code section 2778, subdivisions (c) and (c)(1), which collectively remove real estate
licensees from the purview of Labor Code section 2775, subdivision (b)(1) and
application of Dynamex’s ABC test.
32.
To reiterate, Labor Code section 2778, subdivision (c) and (c)(1), provide as
follows: “(c) Section 2775 and the holding in Dynamex do not apply to the following,
which are subject to the Business and Professions Code: [¶] (1) A real estate licensee
licensed by the State of California pursuant to Division 4 (commencing with Section
10000) of the Business and Professions Code, for whom the determination of employee or
independent contractor status shall be governed by subdivision (b) of Section 10032 of
the Business and Professions Code. If that section is not applicable, then this
determination shall be governed as follows: [¶] (A) For purposes of unemployment
insurance by Section 650 of the Unemployment Insurance Code. [¶] (B) For purposes of
workers’ compensation by Section 3200 et seq. [of the Labor Code]. [¶] (C) For all other
purposes in the Labor Code by Borello. The statutorily imposed duties of a responsible
broker under Section 10015.1 of the Business and Professions Code are not factors to be
considered under the Borello test.” (Italics added.)
Here, Whitlach’s complaint complies with the requirements of PAGA by alleging
violations of the Labor Code, specifically, Labor Code sections 226.8 (misclassification
of an employee as an independent contractor); 2802 (failure to reimburse reasonable
business expenses); 221-223 and 400-410 (taking of unlawful deductions from wages);
204 and 226 (failure to timely pay wages or provide proper wage statements); 1194,
1197, 1197.1 (failure to pay minimum wages); and 226.7, 512, and 558 (failure to
provide required meal periods). Whitlach’s complaint also alleges violations of wage
orders in a few instances, in conjunction with corresponding Labor Code violations, as in
his allegations regarding failure to pay minimum wages and failure to provide required
meal periods, but these alleged wage order violations are derivative of Labor Code
provisions.8 More importantly, for our purposes, Whitlach cannot directly enforce,
8 For example, the Labor Code provides that the minimum wage set by the IWC is
the minimum wage (Lab. Code, § 1197), and expressly authorized the IWC to determine
the applicable minimum wage (Lab. Code, §§ 1173, 1178.5, 1182, 1185). The same is
33.
through PAGA, any alleged wage order violations; he can only do so indirectly, by
enforcing provisions of the Labor Code.
As noted, Whitlach’s instant PAGA claim alleges violations of the wage and hour
provisions of the Labor Code. To the extent Whitlach contends his PAGA claim alleges,
in part, violations of IWC wage orders, which he posits are not “statutory,” within the
meaning of Business and Professions Code section 10032(b), that argument is not well
taken. The IWC wage orders are not independently actionable; rather, Whitlach seeks to
enforce certain provisions of the wage orders through the vehicle of PAGA, which
“authorizes recovery of civil penalties only for violations of the Labor Code.” (Thurman
v. Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th 1112, 1131-1132 [citing
PAGA, Lab. Code, § 2699, subd. (a),9 and noting “ ‘PAGA allows the recovery of civil
penalties only for violations of “this code,” meaning the California Labor Code’ ”],
overruled on other grounds by ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175.)
“Although PAGA actions can serve to indirectly enforce certain wage order provisions by
enforcing statutes that require compliance with wage orders (e.g., § 1198, which prohibits
longer work hours than those fixed by wage order or employment under conditions
prohibited by a wage order), the PAGA does not create any private right of action to
directly enforce a wage order.” (Thurman, supra, at p. 1132, fn. omitted; see, e.g.,
true for meal-and-rest-break rules (Lab. Code, §§ 226.7, 516, 1198). The wage orders are
thus “incorporate[d]” into, statutes. (Gonzales v. San Gabriel Transit, Inc. (2019) 40
Cal.App.5th 1131, 1158.)
9 Section 2699, subdivision (a), which establishes the right of an aggrieved
employee to sue on behalf of other employees, states: “Notwithstanding any other
provision of law, any provision of this code that provides for a civil penalty to be
assessed and collected by the Labor and Workforce Development Agency or any of its
departments, divisions, commissions, boards, agencies, or employees, for a violation of
this code, may, as an alternative, be recovered through a civil action brought by an
aggrieved employee on behalf of himself or herself and other current or former
employees pursuant to the procedures specified in Section 2699.3.” (Italics added.)
34.
Cortez v. Doty Bros. Equipment Co. (2017) 15 Cal.App.5th 1, 14 [“[A]n employee may
enforce the protections of the wage order in court only by bringing a claim under the
Labor Code.”].)
“Only the Legislature, through the enactment of a statute, can create a private right
of action to directly enforce … a wage order.” (Thurman, supra, 203 Cal.App.4th at p.
1132.) “The IWC has not created, and has no power to create, a private right of action
for violation of a wage order, and we are aware of no statute that creates a private right of
action for a violation of an IWC wage order when the violation at issue is not also a
violation of the Labor Code. Absent statutory authorization, there is no right of action
under the PAGA to enforce an IWC wage order.” (Ibid.)
Pivoting back to Business and Professions Code section 10032(b), we concluded
above that this statute adopts the test set forth in Unemployment Insurance Code sections
650/13004.1 for purposes of determining employee or independent contractor status for
real estate agents for certain “statutory purposes,” including for purposes of the wage and
hour provisions of the Labor Code. Assembly Bill No. 5, for its part, adopts Business
and Professions Code section 10032(b)—and, in turn, the Unemployment Insurance Code
sections 650/13004.1 test incorporated therein—as the primary test for “determination of
employee or independent contractor status” for “real estate licensees,” where Business
and Professions Code section 10032(b), is “applicable.”
Here, Whitlach had entered into a written contract with Premier Valley specifying
that Whitlach was an independent contractor, as expressly contemplated by Business and
Professions Code section 10032(b). Furthermore, as discussed above, the primary test for
determining employee or independent status under Business and Professions Code
section 10032(b) (i.e., the test set forth in Unemployment Insurance Code sections
650/13004.1) applies to the wage and hour provisions of the Labor Code. Given these
circumstances, we conclude that, under Labor Code section 2778(c)(1), the three-factor
35.
test set forth in sections 650/13004.1 of the Unemployment Insurance Code as
incorporated in Business and Professions Code section 10032(b), provides the standard
for determining Whitlach’s employee or independent contractor status for purposes of his
wage and hour claims.
The question whether Whitlach is an employee or independent contractor is
pivotal for the survival of Whitlach’s substantive claims because the wage and hour
provisions of the Labor Code apply only to employees. (Dynamex, supra, 4 Cal.5th 903,
913 [California’s labor laws protect only employees, not independent contractors].)
Resolving the employee or independent contractor question by applying the three-factor
test set forth in sections 650/13004.1 of the Unemployment Insurance Code requires
consideration of whether the relevant real estate salesperson, here, Whitlach, (1) was a
licensed real estate agent; (2) was paid by commission; and (3) had entered into a written
contract regarding his services as a real estate agent that specified he was an independent
contractor for state tax purposes. As addressed above, under this test, Whitlach was
undisputedly an independent contractor as a matter of law. The trial court therefore
properly granted the demurrer to the SAC, without leave to amend. We are not
persuaded by Whitlach’s arguments to the contrary.10
III. Labor Code Section 2778(c)(1) is Constitutional
Whitlach argues, in the alternative, that in carving out an exception to the
codification of Dynamex’s ABC test and adopting a unique test for resolving the
employee or independent contractor question for real estate salespersons, Labor Code
section 2778(c)(1) violates equal protection and is unconstitutional under the California
Constitution. (See Cal. Const., art. 1, § 7, subd. (a).) We reject this contention.
10 Whitlach filed, on January 18, 2022, a request for judicial notice as to certain
judicial and legislative materials relevant to his arguments on appeal. Defendants
Premier Valley and Century 21 did not oppose the request. Accordingly, the request for
judicial notice is granted.
36.
“ ‘ “The concept of equal protection of the laws compels recognition of the
proposition that persons similarly situated with respect to the legitimate purpose of the
law receive like treatment.” ’ ” (People v. Chatman (2018) 4 Cal.5th 277, 287
(Chatman).) “At core, the requirement of equal protection ensures that the government
does not treat a group of people unequally without some justification.” (Id. at p. 288.)
Where, as here, “the law challenged neither draws a suspect classification nor burdens
fundamental rights,” courts will “find a denial of equal protection only if there is no
rational relationship between a disparity in treatment and some legitimate government
purpose.” (Id. at pp. 288-289.) “This core feature of equal protection sets a high bar
before a law is deemed to lack even the minimal rationality necessary for it to survive
constitutional scrutiny.” (Id. at p. 289.) “Coupled with a rebuttable presumption that
legislation is constitutional, this high bar helps ensure that democratically enacted laws
are not invalidated merely based on a court’s cursory conclusion that a statute’s tradeoffs
seem unwise or unfair.” (Ibid.)
“In order to decide whether a statutory distinction is so devoid of even minimal
rationality that it is unconstitutional as a matter of equal protection, we typically ask two
questions. We first ask whether the state adopted a classification affecting two or more
groups that are similarly situated in an unequal manner. [Citation.] If we deem the
groups at issue similarly situated in all material respects, we consider whether the
challenged classification ultimately bears a rational relationship to a legitimate state
purpose. [Citation.] A classification in a statute is presumed rational until the challenger
shows that no rational basis for the unequal treatment is reasonably conceivable.”
(Chatman, supra, 4 Cal.5th at p. 289.)
Whitlach has failed to show that real estate salespersons are similarly situated as
other workers who are not subject to Labor Code section 2778(c)(1). (See Kimco Staffing
Services., Inc. v. State of California (2015) 236 Cal.App.4th 875, 885 [“ ‘[The] initial
37.
inquiry is not whether persons are similarly situated for all purposes, but “whether they
are similarly situated for purposes of the law challenged.” ’ ”].) The real estate sales
profession historically has a unique structure that does not have a precise analog among
other professions. The unique structure of the real estate sales profession appears to have
been a key consideration in the distinct tests adopted in Labor Code section 2778(c)(1),
for purposes of resolving the employee or independent contractor question for real estate
salespersons. (See Am. Soc. of Journalists and Authors, Inc. v. Bonta (9th Cir. 2021) 15
F.4th 954, 965 [noting, with respect to AB 5: “It is certainly conceivable that differences
between occupations warrant differently contoured rules for determining which
employment test better accounts for a worker’s status.”].) To the extent the unique
structure of the real estate sales profession appears to have informed the substance of
Labor Code section 2778(c)(1), we cannot say that real estate salespersons are similarly
situated as other workers for purposes of this law.
In short, Whitlach’s equal protection claim to the effect that Labor Code section
2778(c)(1) violates equal protection by treating real estate salespersons differently than
other workers, fails.
IV. The Independent Contractor Agreement (ICA) Between Premier Valley and
Whitlach is not Unconscionable and Unenforceable
Whitlach next contends, in the alternative, that his ICA is unconscionable in large
part because it designates him an independent contractor. To prevail, he must show both
“procedural” and “substantive” unconscionability. (Armendariz v. Foundation Health
Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 114.) Whitlach alleges that the ICA is
procedurally unconscionable because it is a contract of adhesion. “When, as here, there
is no other indication of oppression or surprise, ‘the degree of procedural
unconscionability of an adhesion agreement is low, and the agreement will be
enforceable unless the degree of substantive unconscionability is high.’ ” (Serpa v.
38.
California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704 (Serpa); see The
McCaffrey Group, Inc. v. Superior Court (2014) 224 Cal.App.4th 1330, 1349
(McCaffrey).)
Substantive unconscionability “ ‘pertains to the fairness of an agreement’s actual
terms and to assessments of whether they are overly harsh or one-sided.’ ” (McCaffrey,
supra, 224 Cal.App.4th at p. 1349.) Because “[c]ommerce depends on the enforceability,
in most instances, of a duly executed written contract,” “[a] party cannot avoid a
contractual obligation merely by complaining that the deal, in retrospect was unfair or a
bad bargain.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 911.)
Instead, a contract term must be “ ‘ “ ‘ “overly harsh [citation], “ ‘unduly oppressive’ ”
[citation], “ ‘so one-sided as to shock the conscience’ ” [citation], or “unfairly one-
sided.” ’ ” (Id. at pp. 910-911.) “ ‘All of these formulations point to the central idea that
unconscionability doctrine is concerned not with “a simple old-fashioned bad bargain,”
[citation] but with terms that are “unreasonably favorable to the more powerful party.” ’ ”
(Id. at p. 911.)
A. The ICA is Not Unconscionable Merely Because It Designates Whitlach
as an Independent Contractor
Whitlach’s main argument is that sections 3A and 3F of the ICA are
unconscionable because they establish an independent contractor relationship and thereby
deprive him of the protection of statutes that apply only to employees. We are not
persuaded. Whitlach’s argument flies in the face of Business and Professions Code
section 10032(b), which authorizes brokers and agents to determine their relationship by
contract and expressly allows for real estate agents to operate as independent contractors.
(See Connick v. Teachers Ins. and Annuity Ass’n of Am. (9th Cir. 1986) 784 F.2d 1018,
1021 [contract was “not unconscionable” where it was “expressly permitted by statute”].)
39.
B. Whitlach’s Other Claims of Unconscionability Have No Merit
Whitlach contends that four provisions of the ICA—sections 4A, 5A, 8F, and 9—
result, in combination, in an illegal forfeiture, and are therefore unconscionable. These
provisions collectively (1) require any representation agreement to be in the name of the
broker, (2) specify that files are the property of the broker, (3) allow other agents to take
over clients upon termination of the ICA, and (4) permit mutual termination of the
relationship without cause. More specifically, Whitlach claims these provisions effect a
forfeiture as in a situation where, for example, a salesperson who quits or is fired before a
home goes under contract forfeits his or her investment of time and money in generating
the client and loses out on commissions from future transactions. We are not persuaded,
as this hypothetical situation is incidental to the way business is conducted in the real
estate industry. If the agent does not make a sale, he or she does not get compensated,
but if the agent makes a sale and leaves, under section 8F of the ICA, he or she is entitled
to the net commission.
Although the ICA does not have a non-compete provision, Whitlach next argues
that two provisions (§§ 5 and 9) effectively prohibit competing after termination and are
therefore unconscionable. Section 5 provides that the “Broker’s method of conducting
business” is a “trade secret,” and it prevents salespersons from using for personal
advantage “any information gained for or from the business, or files of Broker.”
Section 9 prevents former real estate agents from interfering “with existing contractual
obligations.” We need not further examine Whitlach’s claims as to these post-
termination provisions as both are severable in any event; they are not related to the
ICA’s core purpose, which is to establish an independent contractor relationship between
the parties (the agreement is titled, “Independent Contractor Agreement” and the first
substantive section is titled “Independent Contractor Relationship”). (See Marathon
Entertainment, Inc. v. Blasi (2008) 42 Cal.4th 974, 996 [“ ‘[i]f the illegality is collateral
40.
to the main purpose of the contract, and the illegal provision can be extirpated from the
contract,’ ” then the provision may be severed]; accord Baeza v. Superior Court (2011)
201 Cal.App.4th 1214, 1230.)
Whitlach further contends that section 17 of the ICA, which provision entitles
brokers or agents to attorney’s fees upon prevailing in litigation or arbitration, is
unconscionable in the context of a PAGA claim. The availability of attorney’s fees on
one particular type of claim is properly considered collateral to the ICA’s core purpose of
establishing an independent contractor relationship and is wholly or partially severable.
(See Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 183-184
[collecting cases]; Serpa, supra, 215 Cal.App.4th at p. 710; Bermudez v. PrimeLending
(C.D. Cal. Aug. 14, 2012, LA CV12-00987 JAK (Ex)) 2012 U.S. Dist.LEXIS 197023.)
Finally, Whitlach contends that section 12F, a confidentiality provision specific to
arbitration, is unconscionable. However, Whitlach admits he waived this point by
omitting it from his complaint. Furthermore, arbitration clauses are “viewed as severable
from the main contract” (Luxor Cabs, Inc. v. Applied Underwriters Captive Risk
Assurance Co. (2018) 30 Cal.App.5th 970, 979), so the confidentiality provision would
be severable from the ICA even if the whole arbitration scheme was alleged to be
unconscionable.
V. Whitlach’s Separate Employment Agreement for His Sales Manager Position
is Not Relevant for Purposes of His Representative PAGA Cause of Action
Finally, Whitlach argues the trial court “improperly ignored” his management
employment agreement, in ruling on the demurrer to the SAC. (Unnecessary
capitalization omitted.) We reject this contention.
Whitlach brought his representative PAGA cause of action on behalf of
“ ‘aggrieved employees,’ ” including himself, who were “real estate salespersons,” that
is, persons in a “position that involved the sales of homes and/or real estate.” (SAC,
41.
¶ 13.) Among its factual allegations, the SAC stated that Premier Valley committed
multiple Labor Code violations with regard to these salespersons. (SAC, ¶¶ 13-22.) The
SAC further alleged that Whitlach and the other aggrieved employees were “required to
identify themselves as salespersons of [Premier Valley],” engaged in “[s]elling real
estate,” and generated “sales commissions” for Premier Valley. (SAC, ¶¶ 16, 17.)
Under the management employment agreement, Whitlach accepted employment
“in a management position as Sales Manager.” In this regard, the SAC alleged, in a
single paragraph, that to the extent some aggrieved employees, including Whitlach, had
entered into employment agreements for management positions, they were designated as
“employees” therein, and their respective compensation for their management roles was
in salary form, and, therefore, they did “not meet the criteria set forth in Unemployment
Ins. Code[,] [section] 650.” (SAC, ¶ 38.)
However, since the “aggrieved employees” on whose behalf the PAGA cause of
action was brought were “real estate salespersons,” the operative agreements and relevant
form of compensation were those related to their roles as “real estate salespersons.”
Thus, since Whitlach’s management employment agreement only governed his work “in
a management position as Sales Manager,” the agreement had no relevance to his PAGA
cause of action.
The trial court concluded that the SAC’s “cursory reference to a concurrent
employment agreement [did] not support a PAGA claim based on the same, nor [did] the
pleading allege facts which relate the terms of the employment agreement to the
challenged statutory provisions.”
We agree with the trial court that the isolated reference to a management
employment contract in the SAC does not support a separate PAGA claim. The sole
allegation in the SAC relating to the management employment agreement was that, in
light of the agreement, Whitlach and other managers “d[id] not meet the criteria set forth
42.
in Unemployment Ins. Code § 650.” (SAC, § 38.) In other words, the SAC alleged that
the existence of the management employment agreement made Whitlach an employee for
all purposes, not that his rights were violated in his work as a manager. Nor did the SAC
allege that the management employment agreement was a novation or modification of his
independent contractor agreement, as Whitlach now suggests.
Accordingly, the trial court properly sustained the demurrer to the SAC.
DISPOSITION
The judgment is affirmed. Defendants Premier Valley and Century 21 are
awarded their respective costs on appeal.11
SMITH, J.
WE CONCUR:
LEVY, Acting P. J.
SNAUFFER, J.
11 Recently, on September 7, 2022, when the case was ready for oral argument,
Premier Valley and Century 21 filed a motion to dismiss this appeal without prejudice.
Premier Valley and Century 21 contended the motion should be granted because a new
decision from the United States Supreme Court, Viking River Cruises, Inc. v. Moriana
(2022) 142 S.Ct. 1906, had changed the law regarding the ability of defendants, in a
PAGA representative action, to compel the plaintiff to arbitrate. More specifically,
Premier Valley and Century 21 stated: “Under the Federal Arbitration Act, 9 U.S.C. § 1,
et seq., as construed by the [U.S.] Supreme Court in Viking River Cruises, Inc. v.
Moriana (2022) 142 S.Ct. 1906, Whitlach’s PAGA claim is now arbitrable and
California’s rule to the contrary is preempted. Accordingly, Whitlach’s appeal should be
dismissed without prejudice so Respondents can assert their rights to arbitrate under
Viking River.” Whitlach filed an opposition to the motion to dismiss the appeal filed by
Premier Valley and Century 21 and the latter parties filed a reply. Our affirmance of the
judgment of dismissal has rendered moot the motion to dismiss this appeal brought by
Premier Valley and Century 21, and, consequently, we will not express our views on the
merits of that motion.
43. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487971/ | Filed 11/18/22 P. v. Parker CA4/2
Opinion following transfer from Supreme Court
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 TWO
THE PEOPLE,
Plaintiff and Respondent, E074742
v. (Super.Ct.No. ICR22535)
KERRY LUGENE PARKER, OPINION
Defendant and Appellant.
APPEAL from the Superior Court of Riverside County. John D. Molloy, Judge.
Reversed.
Jan B. Norman and Siri Shetty, under appointment by the Court of Appeal, for
Defendant and Appellant.
Xavier Becerra and Rob Bonta, Attorneys General, Lance E. Winters, Chief
Assistant Attorney General, Julie L. Garland and Charles C. Ragland, Senior Assistant
Attorneys General, and Lynn G. McGinnis, Robin Urbanski and Donald W. Ostertag,
Deputy Attorneys General, for Plaintiff and Respondent.
1
In 1997, petitioner Kerry Lugene Parker was convicted on three counts of first
degree murder, on a felony-murder theory, with felony-murder special circumstances. In
2019, he filed a petition to vacate the murder convictions under Penal Code section
1172.6.1 The trial court denied the petition; it ruled that the felony-murder special
circumstance findings conclusively established that he was not eligible for relief.
Petitioner contends that this was error. Under People v. Strong (2022) 13 Cal.5th
698 (Strong) — decided while this appeal was pending — he is correct.
I
DISCUSSION
Under section 1172.6, the trial court must vacate a first-degree murder conviction
that was based on a felony-murder theory, unless the petitioner either (1) was the actual
killer, (2) had the intent to kill and aided and abetted the commission of first-degree
murder, or (3) was a major participant in the underlying felony and acted with reckless
indifference to human life.2 (§ 1172.6, subd. (d)(3), incorporating § 189, subd. (e).)
1 All further statutory citations are to the Penal Code.
The petition was actually filed under former section 1170.95. (Enacted by Stats.
2018, ch. 1015, § 4, amended by Stats. 2021, ch. 551, § 2.) While this appeal was
pending, former section 1170.95 was renumbered as section 1172.6, with no change in
text. (Stats. 2022, ch. 58, § 10.) We will use section 1172.6, somewhat
anachronistically, to refer to whichever one of the two statutes was in effect at the
relevant time.
2 Or — we note for completeness, although it is not relevant here — unless
the victim was a police officer killed in the course of his or her duties and the defendant
knew or should have known that. (§ 189, subd. (f).)
2
A felony-murder special circumstance, however, requires that the defendant either
(1) was the actual killer, (2) had the intent to kill and aided and abetted the commission of
first-degree murder, or (3) was a major participant in the underlying felony and acted
with reckless indifference to human life. (§ 190.2, subds. (a)(17), (b)-(d).)
Accordingly, when first confronted with the question, this court held that a true
finding on a felony-murder special circumstance conclusively established ineligibility for
relief under section 1172.6. (People v. Jones (2020) 270 Cal.Rptr.3d 362, review granted
Jan. 27, 2021, S265854, depublished and transferred with directions Sept. 28, 2022.)
While this appeal was pending, however, Strong held that People v. Banks (2015)
61 Cal.4th 788 (Banks) and People v. Clark (2016) 63 Cal.4th 522 (Clark) “substantially
clarified” the requirements of a felony murder special-circumstance finding. (Strong,
supra, 13 Cal.5th at p. 706.) Therefore, a felony murder special-circumstance finding
made before Banks and Clark were decided does not conclusively establish ineligibility
for relief under section 1172.6. (Strong, supra, at pp. 710-720.)
The People concede that, in light of Strong, the trial court erred, and we must
reverse the order appealed from. We agree, and we will do so.
Petitioner also argues that we should direct the trial court to issue an order to show
cause. (See § 1172.6, subd. (c).) Because the trial court denied the petition based on the
felony-murder special circumstances, it has not yet ruled on whether the petition
otherwise stated a prima facie case. We decline to review a ruling the trial court has not
3
made. We leave the question of whether to issue an order to show cause to be decided by
the trial court in the first instance.
Finally, petitioner also argues that he was denied his right to counsel when the trial
court proceeded to deny his petition after his counsel declared a conflict. Because we are
reversing on other grounds, we need not reach this contention.
II
DISPOSITION
The order appealed from is reversed.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
RAMIREZ
P. J.
We concur:
MILLER
J.
SLOUGH
J.
4 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487965/ | RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 22a0245p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
┐
COMMONWEALTH OF KENTUCKY; STATE OF TENNESSEE,
│
Plaintiffs-Appellees, │
> No. 21-6108
v. │
│
JANET YELLEN, in her official capacity as Secretary of the │
U.S. Department of the Treasury; RICHARD K. DELMAR, in │
his official capacity as Acting Inspector General of the U.S. │
Department of the Treasury; UNITED STATES DEPARTMENT │
OF THE TREASURY, │
Defendants-Appellants. │
┘
Appeal from the United States District Court for the Eastern District of Kentucky at Frankfort.
No. 3:21-cv-00017—Gregory F. Van Tatenhove, District Judge.
Argued: July 21, 2022
Decided and Filed: November 18, 2022
Before: DONALD, BUSH, and NALBANDIAN, Circuit Judges.
_________________
COUNSEL
ARGUED: Daniel Winik, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Appellants. Brett R. Nolan, OFFICE OF THE ATTORNEY GENERAL OF
KENTUCKY, Frankfort, Kentucky, for Appellees. ON BRIEF: Daniel Winik, Alisa B. Klein,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellants. Brett R.
Nolan, Barry L. Dunn, Matthew F. Kuhn, OFFICE OF THE ATTORNEY GENERAL OF
KENTUCKY, Frankfort, Kentucky, Andrée S. Blumstein, Brandon J. Smith, OFFICE OF THE
ATTORNEY GENERAL AND REPORTER OF TENNESSEE, Nashville, Tennessee, for
Appellees. Paul D. Clement, KIRKLAND & ELLIS LLP, Washington, D.C., Joseph D.
Henchman, NATIONAL TAXPAYERS UNION FOUNDATION, Washington, D.C., Sheng Li,
NEW CIVIL LIBERTIES ALLIANCE, Washington, D.C., Drew C. Ensign, OFFICE OF THE
ATTORNEY GENERAL OF ARIZONA, Phoenix, Arizona, for Amici Curiae.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 2
BUSH, J., delivered the opinion of the court in which DONALD, J., joined in full, and
NALBANDIAN, J., joined in part. NALBANDIAN, J. (pp. 43–51), delivered a separate opinion
concurring in part and dissenting in part.
_________________
OPINION
_________________
JOHN K. BUSH, Circuit Judge. In response to the grave economic challenges posed by
COVID-19, Congress enacted the American Rescue Plan Act of 2021 (“ARPA” or “the Act”).
Pursuant to Congress’s spending power, ARPA set aside $195.3 billion in stimulus funds, to be
distributed by the Treasury Department to states and the District of Columbia. This appeal
concerns a challenge brought by Kentucky and Tennessee (“the States”) to what they allege is an
ambiguous, coercive, and commandeering condition attached to those funds. Specifically, to get
the money, the States had to certify that they would comply with the Act’s “Offset Provision.”
Its terms bar the States from enacting tax cuts and then using ARPA funds to “directly or
indirectly offset a reduction in [their] net tax revenue” resulting from such tax cuts. 42 U.S.C.
§ 802(c)(2)(A). And a related portion of the Act explains that should a State violate the Offset
Provision, Treasury may initiate a recoupment action to recover the misused funds. 42 U.S.C.
§ 802(e)(1)–(2).
What the Offset Provision actually means, however, is the subject of grave dispute.
Because money is fungible, enacting any tax cut and then spending ARPA funds could be
construed, the States say, as having impermissibly used those funds to “indirectly offset” a
revenue reduction from the tax cut. Appellees’ Br. at 12–13. As a result, should the States wish
to expend their ARPA funds, they are effectively barred from enacting any tax cuts1—despite
their desire to do so—for fear that Treasury could construe the cuts as implicating an “indirect
offset” and correspondingly pursue recoupment. Id. at 22–23; 38. Compounding the Act’s
indeterminacy, the Offset Provision itself never explains which fiscal year (“FY”) serves as the
baseline for calculating a “reduction” in net tax revenue. Id. at 13, 40. That omission allegedly
1
This alleged restriction applies at least during ARPA’s “covered period,” 42 U.S.C. § 802(g)(1), which
extends until “the last day of the fiscal year of such State . . . in which all funds received by the State . . . have been
expended or returned to, or recovered by, the Secretary,” § 802(g)(1)(B).
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 3
leaves the States in the dark about when Treasury may deem them to have violated the Act. Id.
And even though a Treasury regulation has since offered a narrowing construction of the Offset
Provision, the States assert that this construction in no way follows clearly from the text of the
Offset Provision itself. Id. at 41. Thus, the States object that the Offset Provision failed to
provide them with clear notice of whatever conditions it entails. And because of those
indeterminacies, they contend that the Offset Provision is unenforceable under the clear-
statement rule the Supreme Court has long instructed governs spending legislation.
Worse yet, the States argue, they were coerced into relinquishing this control over their
sovereign taxing authority. Amended Complaint ¶74, R. 23. By offering such a massive aid
package—promising to confer on the States a sum equal to one-fifth of their annual budgets—in
a time of fiscal crisis no less, the federal government made the States an offer they couldn’t
refuse. Appellees’ Br. at 4, 12. Given these alleged intrusions upon their sovereignty, the States
filed suit against the Treasury Department. They sought an injunction of the Offset Provision’s
enforcement and a declaratory judgment that the provision is unenforceable.
Relying on the coercion rationale alone, the district court granted the States a permanent
injunction in September 2021. Treasury’s appeal of that order is now before us. It asserts that
the States’ challenges are nonjusticiable and that, in any event, their objections to the Offset
Provision fail on the merits.
We agree that Kentucky’s challenge is nonjusticiable. At the outset of their suit, both
Kentucky and Tennessee had standing to bring their pre-enforcement challenges, since the Offset
Provision itself at least arguably proscribed the post-acceptance enactment of any revenue-
reducing tax cut. Thus, the Offset Provision at least arguably threatened a significant intrusion
upon state taxing authority—an intrusion that arguably offended the Spending Clause because it
was not clearly authorized by the Offset Provision itself. But Treasury later promulgated an
implementing regulation (“the Rule”) that disavowed this interpretation of the Offset Provision
and established certain safe harbors permitting the States to cut taxes. See Coronavirus State and
Local Fiscal Recovery Funds, 86 Fed. Reg. 26,786 (proposed May 17, 2021) (interim final rule);
see also Coronavirus State and Local Fiscal Recovery Funds, 86 Fed. Reg. 4,338 (Jan. 27, 2022)
(final rule); 31 C.F.R. § 35 et seq. In response, Kentucky and Tennessee offered no additional
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 4
evidence of a concrete plan to violate the Rule, so they failed to establish that Treasury will
imminently seek recoupment because of any demonstrated policy they wish to pursue.
And because Kentucky offered no evidence for any other theory of injury, the Rule mooted its
challenge to the Offset Provision. We thus reverse the district court’s conclusion that
Kentucky’s claim is justiciable and vacate the injunction to the extent that it bars enforcement of
the Offset Provision against Kentucky.
Tennessee, by contrast, did adduce additional evidence of a distinct theory of injury: that
Treasury’s Rule (and the underlying Offset Provision it implements) burden the State with
compliance costs. See Eley Dec., R. 25-3. These costs represent additional labor and other
expenses that Tennessee must incur to ensure that its recent and proposed tax cuts do not violate
the Offset Provision; expenses that it would not incur were enforcement of the Offset Provision
enjoined. Far from mooting the compliance-costs theory of injury, the Rule in fact exacerbated
the harm with its more detailed explanation of the measures required to comply with the Offset
Provision. Thus, we hold that Tennessee’s challenge is justiciable.
On the merits of Tennessee’s claim, we affirm the district court’s injunction on the basis
that the Offset Provision is impermissibly vague under the Spending Clause. Because the Offset
Provision is subject to a range of plausible meanings, Tennessee was deprived of the requisite
“clear notice” of ARPA’s conditions when it accepted the funds. Cummings v. Premier Rehab
Keller, P.L.L.C., 142 S. Ct. 1562, 1574 (2022) (quoting Arlington Cent. Sch. Dist. Bd. of Educ. v.
Murphy, 548 U.S. 291, 296 (2006)). As a result, Treasury cannot use its Rule to impose
compliance requirements upon Tennessee that are not clearly authorized by the Offset Provision
itself. And because this defect suffices to affirm, we need not consider Tennessee’s additional
objections to the Offset Provision.
I.
Congress enacted ARPA in March 2021 to make available almost $2 trillion in COVID-
related relief funding. Approximately $195.3 billion of that sum was set aside for distribution to
the states and the District of Columbia. “Kentucky’s allotment under the Act is about $2.1
billion,” while Tennessee’s is about $3.7 billion. Amended Complaint ¶¶26–27, R. 23. These
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 5
sums amount to nearly one-fifth of the States’ respective annual general revenues. Id. In the
States’ view, “[t]he financial aid the Act offer[ed] . . . is simply unparalleled in size.” Id. ¶28.
That offer also came with several conditions. For instance, the States may spend their
ARPA funds in only four particular areas that Congress deemed relevant to economic recovery
from the pandemic. Those four areas are as follows:
(A) to respond to the public health emergency with respect to the Coronavirus
Disease 2019 (COVID-19) or its negative economic impacts, including
assistance to households, small businesses, and nonprofits, or aid to impacted
industries such as tourism, travel, and hospitality;
(B) to respond to workers performing essential work during the COVID-19 public
health emergency by providing premium pay to eligible workers of the State,
territory, or Tribal government that are performing such essential work, or by
providing grants to eligible employers that have eligible workers who perform
essential work;
(C) for the provision of government services to the extent of the reduction in
revenue of such State, territory, or Tribal government due to the COVID-19
public health emergency relative to revenues collected in the most recent full
fiscal year of the State, territory, or Tribal government prior to the emergency;
or
(D) to make necessary investments in water, sewer, or broadband infrastructure.
42 U.S.C. § 802(c)(1)(A)–(D).
Conversely, the States are specifically forbidden from using ARPA funds for two
particular applications. First, “[n]o State or territory may use funds made available under this
section for deposit into any pension fund.” § 802(c)(2)(B). And second—the crux of this
lawsuit—the States may not use ARPA funds:
to either directly or indirectly offset a reduction in the net tax revenue of such
State or territory resulting from a change in law, regulation, or administrative
interpretation during the covered period that reduces any tax (by providing for a
reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the
imposition of any tax or tax increase.
§ 802(c)(2)(A). This is the so-called “Offset Provision”—the States have dubbed it the “Tax
Mandate”—that has provoked legal challenges across the country. See, e.g., Missouri v. Yellen,
39 F.4th 1063 (8th Cir. 2022); Arizona v. Yellen, 34 F.4th 841 (9th Cir. 2022); West Virginia v.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 6
U.S. Dep’t of Treas., No. 7:21-cv-00465-LSC, 2021 WL 2952863, *1 (N.D. Ala. July 14, 2021);
Texas v. Yellen, No. 2:21-CV-079-Z, 2022 WL 1063066, *1 (N.D. Tex. Apr. 8, 2022).
Accompanying the Offset Provision are a couple of related enforcement mechanisms.
First is the statute’s reporting requirement, which instructs the states:
To provide to the Secretary periodic reports providing a detailed accounting of—
(A) the uses of funds by such State, territory, or Tribal government,
including, in the case of a State or a territory, all modifications to the
State’s or territory’s tax revenue sources during the covered period;
and
(B) such other information as the Secretary may require for the
administration of this section.
§ 802(d)(2)(A)–(B). And second is the statute’s recoupment procedure. Should a state violate
the Act’s requirements, Treasury may initiate a recoupment action to seek reimbursement from a
state “equal to the amount of funds used in [the] violation.” § 802(e).
Kentucky and Tennessee were not alone, it turns out, in their apprehensions about this
statutory scheme. Several of their sister-states were similarly puzzled by the Offset Provision’s
requirements. So they wrote jointly to Secretary Yellen to seek clarification about the precise
obligations it imposed. Secretary Yellen—who elsewhere had acknowledged that the
“fungibility of money” presented “thorny questions” about the meaning of the Offset
Provision—wrote back to explain that the States could expect “further guidance” from Treasury
in the near future. Treasury Secretary & Federal Reserve Chair Testimony on COVID-19
Economic Recovery, C-SPAN (Mar. 24, 2021), at 58:00–59:11, available at https://www.c-
span.org/video/?510059-1/treasury-secretary-federalreserve-chair-testimony-covid-19-economic-
recovery; see Yellen Letter, R. 1-2.2 But she also explained that Treasury did intend to enforce
whatever prohibitions the Offset Provision was revealed to entail. See id. Perhaps
2
In particular, Senator Mike Crapo asked Secretary Yellen, “How do you intend to approach the question
of what is ‘directly or indirectly offsetting’ a tax cut?” The Secretary responded, “Well, when I said that we have
‘thorny questions’ to work through, you’ve just indicated why we do. We will have to define what it means to use
money from this Act as an ‘offset’ for tax cuts. And, given the fungibility of money, it’s a hard question to answer.”
Treasury Secretary & Federal Reserve Chair Testimony on COVID-19 Economic Recovery at 58:30–59:05
(emphasis added), available at https://www.c-span.org/video/?510059-1/treasury-secretary-federalreserve-chair-
testimony-covid-19-economic-recovery.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 7
unsurprisingly, given these lingering uncertainties, several states filed suit to restrain the Offset
Provision’s enforcement.
Kentucky and Tennessee brought their own challenge in April 2021. They each alleged
that because of the funds’ irresistible nature in the midst of an economic crisis, they intended to
accept their respective funding allotments.3 But they also alleged that the Offset Provision tied
to those funds injured the States with a coercive and ambiguous restriction that
“unconstitutionally intrud[es] on the [States’] sovereign authority, by interfering with their
ordinary management of their fiscal affairs, and by requiring them to forgo their constitutional
taxing powers or face an action to return much-needed federal funds after they have already been
spent.” Complaint ¶12, R. 1.
In response to this and other suits, Treasury attempted to clarify the Offset Provision by
promulgating an Interim Final Rule in May 2021. See 86 Fed. Reg. at 26,786. In relevant part,
the Interim Final Rule explained that Treasury did not read the Offset Provision to proscribe all
tax cuts during ARPA’s “covered period.” Id. at 26,807. Rather, it views the Provision as
proscribing only a tax cut that (1) results in a revenue reduction as compared to revenues for the
“fiscal year ending in 2019,” and (2) for which a state fails to identify a permissible, non-ARPA
source of additional funds to offset the revenue reduction. Id.; see also id. at 26,810.
In particular, Treasury said, it would not initiate a recoupment action even after a state enacted a
revenue-reducing tax cut and expended ARPA funds so long as the state could show that the
revenue reduction was offset with (1) a state tax increase on some other activity, (2) additional
inlays from macroeconomic growth, or (3) a state spending cut in an area the state is not
expending ARPA funds. Id.; see also Appellants’ Br. at 5; 31 C.F.R. §§ 35.1–35.12 (codifying
the Rule).
The States reacted with an amended complaint in June 2021. The Interim Final Rule
notwithstanding, the States reprised their contention that the Offset Provision functionally
3
Kentucky ultimately accepted the funds after the complaint was filed and certified that it would comply
with the Offset Provision, while Tennessee accepted the funds only after the district court entered its permanent
injunction. See Recording of Oral Arg. at 27:38–27:55. Additionally, Tennessee accepted the funds with a
reservation that it considered the Offset Provision invalid. Id.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 8
proscribes all future tax cuts to the extent a state wishes to expend its ARPA funds. Amended
Complaint ¶32, R. 23 (alleging that Congress, as a condition of ARPA, required the States to
“promise that [they] will not lower taxes on their residents for four years”). But they augmented
their complaint with an allegation about compliance costs. See id. ¶12. In addition to their
“imminent recoupment” and “sovereign authority” theories of injury, the States complained that
“the Tax Mandate w[ould] impose administrative burdens on [them] by obligating them to spend
resources on calculation and reporting requirements.” Id. And the States alleged that all of those
injuries “are traceable to the Tax Mandate and Defendants’ efforts to enforce it.” Id. Thus, they
continued to seek a declaratory judgment that the Offset Provision is unconstitutional and an
injunction to restrain Treasury from initiating an enforcement action.
Two days later, the States submitted their corresponding motion for summary judgment
and a permanent injunction. They reiterated their view that they have standing to challenge the
Offset Provision for the three aforementioned reasons: that it intrudes on state taxing authority,
could result in a recoupment action if the States were to pursue their desired tax cuts, and
imposes administrative burdens and compliance costs. As to the merits, they argued that the
Offset Provision is impermissibly ambiguous under the Spending Clause, not reasonably related
to ARPA’s nominal goal of fiscal recovery, and unconstitutionally coercive and commandeering.
Given Treasury’s strenuous objections to justiciability, the corresponding evidence the
States submitted in support of their motion for summary judgment deserves particular scrutiny.
Kentucky offered merely a confirmation email indicating its acceptance of the ARPA funds. See
Submission Confirmation, R. 25-1. By contrast, Tennessee submitted declarations from two
state officials. First was a declaration from N. Antonio Niknejad, Policy Director to Governor
Bill Lee. See Niknejad Dec., R. 25-2. Niknejad explained that Tennessee has “a long history of
cutting taxes and spending in order to spur economic growth,” that Tennessee had recently
enacted several tax cuts on gym memberships, professional licensing, agricultural products, and
broadband fiber optic cables, and that Tennessee is contemplating several future tax cuts. Id.
¶¶6, 8, 9–11. Yet he explained that uncertainty about how the Offset Provision could be
construed has caused policymakers in Tennessee to “defer, slow, or reconsider some of [their]
taxing decisions.” Id. ¶14.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 9
The second was a declaration from Commissioner Howard H. Eley of Tennessee’s
Department of Finance and Administration. See Eley Dec., R. 25-3. Unlike Niknejad, who
focused on anticipated tax cuts, Eley described the administrative burdens and compliance costs
the Offset Provision (and Rule) would inflict on Tennessee. We quote three particularly relevant
paragraphs from his declaration below:
8. Tennessee is required by its state constitution to enact a balanced budget.
General fund expenditures, which include certain reductions in tax revenue due to
a statutory or regulatory change, are described by category, agency, program, and
the recurring or non-recurring nature of the expenditure. State revenues, which
include federal funds and reimbursements, are described by source. The enacted
budget appropriates a specific amount from the general fund and other funds to
fund the State’s programs and operations. But in determining whether the budget
is balanced, the Department of Finance and Administration generally compares
total expenditures to total revenues and does not typically connect expenditures to
specific revenue sources or “indirect” causes for those revenues. If the State
receives federal funds to offset certain state expenditures, the state funds that
would have been used to pay for those expenditures are not used and can be
returned to the general fund for future appropriation. To comply with the Tax
Mandate, the Department will be required to create new accounting processes
that specifically track whether federal funds received under the Rescue Plan are
being used to “directly or indirectly offset” any state expenditures resulting from
a reduction in tax revenue that otherwise would have been funded from state
appropriated tax revenues. That will include tracking whether any cost savings
resulting from the receipt of federal funds to offset certain state expenditures are
ultimately and indirectly used to offset a tax reduction. Establishing these
additional processes and preparing the required reports will require at least one
budget analyst and one revenue analyst to divert at least some of their work to
that task and other state employees to support and review that work.
9. To comply with the Secretary’s Regulations attempting to implement and
enforce the Tax Mandate, the State of Tennessee will be forced to expend
additional resources adjusting Tennessee’s “baseline” level of tax revenue for
inflation each year during the covered period “using the Bureau of Economic
Analysis’s Implicit Price Deflator for the gross domestic product of the United
States” and then using that adjusted figure to determine whether the State’s tax
policies may violate the Secretary’s interpretation of the Tax Mandate. 31 C.F.R.
§§ 35.3, 35.8(b).
10. The State of Tennessee would not incur these additional costs to determine
whether any revenue reductions could be said to have been “directly or indirectly
offset” by funds received under the Rescue Plan or to report its revenue
modifications to the Secretary but for the Tax Mandate.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 10
Eley Dec. ¶¶8–10, R. 25-3 (emphases added). Given both these compliance costs and the
asserted threat of a recoupment action should the States pursue their desired tax cuts, the States
asked the district court to grant them summary judgment and permanently enjoin the Offset
Provision’s enforcement.
Treasury cross-moved for summary judgment, or, alternatively, to dismiss the complaint.
It introduced no evidence of its own, and thus it did not attempt to controvert Niknejad or Eley’s
declarations. Rather, it argued that even taking the declarations as true, the States lacked
standing and that their merits challenges failed as a matter of law. See Mot. to Dismiss & Mot.
for Summ. J. at 8, 17, R. 32. Concerning a recoupment action, Treasury argued that none was
imminent. Id. at 10. For even if the States had established that they wish to cut taxes, they failed
to show that not only would such cuts result in revenue reductions, but also that they intended to
use ARPA funds to offset those reductions. Id. at 11. As to compliance costs, it argued that
(1) any administrative burdens were traceable solely to the reporting requirement, not the Offset
Provision, and (2) no injury occurs because the States are permitted to use ARPA funds “to cover
administrative costs.” Id. at 14–15. As to the merits, Treasury conceded that its Rule cannot
cure potential ambiguities in the Offset Provision for purposes of the Spending Clause. Id. at 30.
But it claimed that the text of the Offset Provision itself is unambiguous. Id. It likewise argued
that no precedents support the States’ view that the Offset Provision is unduly coercive or
commandeers state taxing authority. Id. at 18–26.
The district court rendered its opinion on these motions in September 2021. As to
justiciability, it concluded that both Kentucky and Tennessee had satisfied the pre-enforcement-
challenge standing test described in Susan B. Anthony List. See id. at 3–5 (citing Susan B.
Anthony List v. Driehaus, 573 U.S. 149 (2014)). First, both the States intended to accept ARPA
funds and yet asserted that doing so entailed compliance with the arguably unconstitutional “Tax
Mandate.” Op. & Order at 4–5. Second, the “Tax Mandate” at least arguably proscribed the
States’ desired efforts to cut taxes. Id. at 5. And third, Secretary Yellen had expressed intent to
enforce the Offset Provision in her earlier letter to the States, demonstrating a credible threat of
enforcement. Id. The district court thus held that both Kentucky and Tennessee had standing to
challenge the Offset Provision. Id.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 11
As for the merits, the district court concluded that ARPA violated the Spending Clause
because it had coerced the States into relinquishing control over their taxing authority to the
federal government. Id. at 11. In essence, it said, the economic crisis made the federal
government’s aid offer irresistible, and so it represented an “undue influence” on the States’
authority to tax. Id. at 6 (quoting Nat’l Fed. of Indep. Bus. v. Sebelius, 567 U.S. 519, 576 (2012)
(opinion of Roberts, C.J.)); see also id. at 11. The district court thus granted summary judgment
to the States and imposed a permanent injunction4 restraining enforcement of the Offset
Provision. Id. at 16–17.
II.
The district court’s order granting the States summary judgment and imposing a
permanent injunction was a final decision. See, e.g., Reform Am. v. City of Detroit, 37 F.4th
1138, 1147 (6th Cir. 2022) (citation omitted). Thus, 28 U.S.C. § 1291 gives us statutory
jurisdiction to handle Treasury’s appeal. We examine Article III jurisdiction over the States’
respective claims below.
As for our standards of review, we consider summary-judgment orders de novo. See
Jordan v. Howard, 987 F.3d 537, 542 (6th Cir. 2021) (citation omitted). Thus, drawing all
reasonable inferences in favor of the non-movant, we ask whether the party seeking summary
judgment demonstrated “that there is no genuine dispute as to any material fact” and that it is
“entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). On cross-motions for summary
judgment, we apply these same standards to each of the individual motions. See Taft Broad. Co.
v. United States, 929 F.2d 240, 248 (6th Cir. 1991) (citation omitted); accord Reform Am.,
37 F.4th at 1147; B.F. Goodrich Co. v. U.S. Filter Corp., 245 F.3d 587, 592 (6th Cir. 2001).
Concerning the district court’s decision to grant a permanent injunction, several standards
of review are relevant. “[F]actual findings are reviewed under the clearly erroneous standard,
legal conclusions are reviewed de novo, and the scope of injunctive relief is reviewed for an
abuse of discretion.” Sec’y of Lab. v. 3Re.com, Inc., 317 F.3d 534, 537 (6th Cir. 2003) (quoting
4
By contrast, the district court denied the States’ requested declaratory judgment, reasoning that such relief
was subsumed into its order awarding a permanent injunction. Op. & Order at 14, R. 42.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 12
S. Cent. Power Co. v. Int’l Brotherhood. of Elec. Workers, Loc. Union 2359, 186 F.3d 733, 737
(6th Cir. 1999)).
III.
As is our obligation, we consider first whether Kentucky and Tennessee established that
their respective challenges to the Offset Provision are justiciable. See, e.g., Arbaugh v. Y&H
Corp., 546 U.S. 500, 514 (2006). We hold that Tennessee alone satisfied that showing. We then
explain our view that the text of the Offset Provision is insufficiently clear under the relevant
Spending Clause jurisprudence for Treasury, through promulgation of its Rule, to impose the
specific obligations that Tennessee complains have inflicted compliance costs upon it.
A. Justiciability
1. Kentucky and Tennessee’s Initial Standing to Sue
From the States’ original complaint onward, their central theory of standing has been as
follows. First, they said, they both intended to accept ARPA funds. Complaint ¶¶26–27, R. 1.
But second, the Offset Provision at least arguably proscribes enacting any post-acceptance tax
cut should the States wish to expend their funds. Id. ¶32. Indeed, because money is fungible,
spending ARPA funds and then cutting taxes (or vice versa) could arguably be construed as
having used those funds to “indirectly offset” a resultant revenue reduction. Id. ¶35. And
second, the States alleged, both Kentucky and Tennessee desire to enact (or have enacted) tax
cuts. Kentucky, for instance, recently enacted a tax-deferral bill to revitalize an area of
Louisville. Id. ¶41. Likewise, Tennessee is considering eliminating its professional-privilege
tax, and it has recently enacted cuts to several other taxes. Id. ¶42. But the States complained
that such tax cuts “could be construed to come within the Tax Mandate if they result in a revenue
decrease.” Id. They thus contended that the Offset Provision constrained their sovereign
authority to tax and exposed them to an imminent recoupment action should they wish to pursue
their preferred policies.
These original theories sufficed for standing. Whether a party has standing to redress an
injury is measured as of the time the injury is first asserted; here, in the original complaint. See
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 13
Lynch v. Leis, 382 F.3d 642, 647 (6th Cir. 2004). As of that moment, therefore, we apply two
relevant frameworks to assess whether these “imminent-recoupment” and “sovereign-authority”
theories sufficed for standing. The first framework derives from the Supreme Court’s decision in
Lujan, which explained that plaintiffs must establish an injury that is (1) actual or imminent and
concrete and particularized, (2) traceable to the defendant, and (3) likely to be redressed by a
favorable decision. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992). Here at least,
elements (2) and (3) are not subject to serious dispute. A recoupment action initiated by
Treasury is no doubt traceable to Treasury, and an injunction restraining such a proceeding
would provide the States corresponding relief. But what about an injury in fact? No recoupment
action is now pending. So the question is whether a future such proceeding is sufficiently
imminent to say the States have suffered a de facto injury for purposes of Article III.
That brings us to the second, more specialized framework, which instructs us how to
determine whether an enforcement action is sufficiently imminent to support Article III
jurisdiction over a pre-enforcement challenge. See Susan B. Anthony List, 573 U.S. at 158–59.
Under that test, we ask whether the States, when they first asserted these injuries, had established
(1) an intention to engage in a course of conduct arguably affected with a constitutional interest,
(2) that this course of conduct was arguably proscribed by the Offset Provision, and (3) that if the
States should pursue such a course of conduct, there was a credible threat that Treasury would
pursue a recoupment action. See id. at 161–64. Before the eventual advent of the Rule, we
believe, the States had satisfied this tripartite showing.
First, Kentucky and Tennessee alleged that despite their intention to accept and expend
ARPA funds, they had either enacted or planned to enact tax cuts that could potentially result in
revenue reductions. Complaint ¶¶41–42, R. 1. And their decision to do so was at least arguably
affected with a constitutional interest, given that states have a powerful sovereign prerogative
under federalism principles to control their own internal taxation policies. See id. ¶40; see also
Lane County v. Oregon, 74 U.S. 71, 76 (1868) (describing states’ control over “the power of
taxation” as “indispensable” and “an essential function of government”); Dep’t of Revenue of
Oregon v. ACF Indus., Inc., 510 U.S. 332, 345 (1994) (“Subsection (b)(4), like the whole of
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 14
§ 11503, sets limits upon the taxation authority of state government, an authority we have
recognized as central to state sovereignty.”).
Second, this course of conduct was at least arguably proscribed by the Offset Provision.
As we noted before, “money is fungible.” Complaint ¶35, R. 1; see also United States v. Sperry
Corp., 493 U.S. 52, 62 n.9 (1989) (“Unlike real or personal property, money is fungible.”);
Ransom v. FIA Card Servs., N.A., 562 U.S. 61, 79 (2011) (same); Ark Encounter, LLC v.
Parkinson, 152 F. Supp. 3d 880, 904 (E.D. Ky. 2016) (“Because money is fungible, such
benefits will to some extent have the incidental effect of allowing the institution’s other funds to
be used to advance their [other] purposes if they wish. Indeed any reimbursement, aid, or tax
exemption necessarily frees up other funds for other purposes.”). As a result, merely enacting a
revenue-reducing tax cut and expending ARPA funds could at least arguably be construed as
having used the funds to “indirectly offset” the revenue reduction, given that the ARPA funds
could support continued state spending rendered otherwise impossible by the tax cuts.5
Indeed, Treasury acknowledged in the commentary to its own Final Rule that this is at
least a plausible interpretation of the statute. For instance, it explained, “because money is
fungible, even if [ARPA] funds are not explicitly or directly used to cover the costs of changes
that reduce net tax revenue, those funds may be used in a manner inconsistent with the statute by
indirectly being used to substitute for the state’s or territory’s funds that would otherwise have
been needed to cover the costs of the reduction.” 87 Fed. Reg. at 4,424 (emphasis added). For
that matter, the plausibility of the States’ money-is-fungible interpretation is the very reason
Treasury had to promulgate its Rule—to disavow that interpretation and attempt to clarify the
Offset Provision. See, e.g., id. at 4,423–24. Thus, the States’ desire to cut taxes while spending
ARPA funds was at least arguably proscribed by the Offset Provision.
Last, the States had illustrated a credible threat of enforcement. For instance, the States
produced Secretary Yellen’s letter indicating that Treasury intended to enforce the Offset
5
The question may arise why a revenue reduction would necessarily make additional spending impossible,
since it would seem the States could continue to spend at the same levels by taking on debt. The answer is that this
sort of debt-financed spending is restricted under Kentucky and Tennessee’s respective constitutions, which have
balanced-budget amendments. See Ky. Const. §§ 49–50, 171; Tenn. Const. Art. II, § 24.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 15
Provision. See Yellen Letter, R. 1-2. The letter reiterated that “[ARPA] funding may not be
used to offset a reduction in net tax revenue resulting from certain changes in state law.” Id. at 1.
It also explained that Treasury would later promulgate “further guidance” about what sort of
changes in state law could provoke a recoupment action.6 Id. at 1–2. Thus, the letter itself
acknowledged that (1) the Offset Provision would be enforced, but (2) it was not yet clear, based
on the statute alone, how the States could comply with the Provision (and stave off recoupment).
So as of the original complaint, the States had satisfied the Supreme Court’s pre-enforcement-
challenge test. In addition to traceability and redressability, in other words, they had also
established a sufficiently imminent injury for jurisdiction.
2. The Interim Final Rule Complicates the Initial Imminent-Recoupment
and Sovereign-Authority Theories of Injury
A little over a month after the States had filed their original complaint, Treasury
promulgated its Interim Final Rule (“IFR”) offering its construction of the Offset Provision.
Several features of that Rule are relevant to this dispute. First, the IFR supplied the missing
baseline for calculating whether a tax cut results in a revenue reduction. It clarified that the
revenue baseline would be the state’s “fiscal year 2019 tax revenue adjusted for inflation.”
86 Fed. Reg. at 26,808.7 Second, the IFR attempted to provide guidance about when a state
would be understood to have “directly or indirectly offset a reduction in . . . net tax revenue.”
42 U.S.C. § 802(c)(2)(A). Treasury’s commentary explained as follows:
A recipient government would only be considered to have used Fiscal Recovery
Funds to offset a reduction in net tax revenue resulting from changes in law,
regulation, or interpretation if, and to the extent that, the recipient government
could not identify sufficient funds from sources other than the Fiscal Recovery
6
Technically, even this letter explained Secretary Yellen’s position that the Offset Provision does not
render tax cuts impermissible per se. See Yellen Letter at 1, R. 1-2. But the letter also acknowledged that the Offset
Provision created significant uncertainty about when tax cuts were permissible versus when they were not, which
was why Treasury intended to promulgate “further guidance” about when it would pursue recoupment actions. Id.
at 2. Thus, in the absence of those clarifying regulations, it was at least arguable that the tax cuts Kentucky and
Tennessee had enacted or planned to enact could provoke a recoupment action. Indeed, as this Circuit’s precedent
recognizes, a threatened enforcement action should only be understood as too remote to support jurisdiction when
the defendants have provided “clear assurances” they will not undertake the enforcement action. See, e.g., Universal
Life Church Monastery Storehouse v. Nabors, 35 F.4th 1021, 1035 (6th Cir. 2022).
7
The Final Rule likewise confirms that the fiscal year ending in 2019 is the relevant baseline. See
31 C.F.R. § 35.3; 87 Fed. Reg. at 4,423.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 16
Funds to offset the reduction in net tax revenue. If sufficient funds from other
sources cannot be identified to cover the full cost of the reduction in net tax
revenue resulting from changes in law, regulation, or interpretation, the remaining
amount not covered by these sources will be considered to have been offset by
Fiscal Recovery Funds, in contravention of the offset provision. The interim final
rule recognizes three sources of funds that may offset a reduction in net tax
revenue other than Fiscal Recovery Funds—organic growth, increases in revenue
(e.g., an increase in a tax rate), and certain cuts in spending.
86 Fed. Reg. at 26,807. The IFR thus provided the “further guidance” Secretary Yellen had
promised in her initial letter to the States. As we explained before, Treasury construed the Offset
Provision not to bar a revenue-reducing tax cut so long as a state identifies replacement funds
from (1) macroeconomic growth, (2) increased state taxation on some other activity, or (3) state
spending cuts in an area where the state is not expending ARPA funds. Id.; see also Appellants’
Br. at 5.
Yet this narrowing construction created apparent justiciability issues for the States’
challenge to the Offset Provision. In their initial complaint, the States had alleged only that they
have enacted or plan to enact tax cuts that may result in reduced state revenues. Complaint
¶¶41–42, R. 1. They never additionally alleged that they would then fail to identify a permissible
source of revenue—such as from macroeconomic growth or a reduction in certain state
spending—to offset the resultant reductions in inlays. And only if that contingency were to
occur, according to Treasury’s new Rule, would Treasury pursue a recoupment action against the
States. See 86 Fed. Reg. at 26,807; see also Appellants’ Br. at 5. The IFR thus rendered it
unclear why there was a reasonable prospect of a recoupment action.
And the States’ sovereign-authority theory now suffered from a similar issue. The States’
apparent view was that they had either been injured (1) in the past from the receipt of an
ambiguous or coercive offer, or (2) are being continuously injured because the Offset Provision
“prohibit[s] . . . tax relief.” Appellees’ Br. at 46. But an injunction cannot be used to redress a
purely past injury. See City of Los Angeles v. Lyons, 461 U.S. 95, 105 (1983). Rather, the States
had to show why they were likely to suffer some present or future harm. Id. So that leaves the
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 17
claim that the Offset Provision “prohibits . . . tax relief.” Appellees’ Br. at 46.8 But the IFR
subsequently disavowed the States’ interpretation of the Offset Provision, clarifying that they
remain free to expend ARPA funds and enact tax cuts resulting in revenue reductions so long as
they identify a permissible source of offsetting funds. See, e.g., 86 Fed. Reg. at 26,807. And the
Final Rule crystallized precisely the same understanding. See, e.g., 87 Fed. Reg. at 4,426.9 Yet
the States never established that they would fail to meet that obligation. Thus, we do not see
how the sovereign-authority theory could support injunctive relief when the States identified no
specific course of conduct they wish to pursue but against which Treasury will initiate an
enforcement proceeding. See Whole Woman’s Health v. Jackson, 141 S. Ct. 2494, 2495 (2021)
(“[F]ederal courts enjoy the power to enjoin individuals tasked with enforcing laws, not the laws
themselves.” (citing California v. Texas, 141 S. Ct. 2104, 2115–16 (2021)).
3. The States File Their Amended Complaint and Motion for Summary
Judgment But Provide No Evidence that They Intend to Violate the
Rule
About a month after the IFR’s promulgation, the States filed their amended complaint
and corresponding motion for summary judgment and a permanent injunction. Despite the
advent of the IFR, the States made no allegations and adduced no specific evidence about how
8
In response to our request for supplemental briefing on mootness, the States emphasized their contention
that their “sovereign authority” theory remains live even despite the Rule because the Offset Provision still “limits
the range of policy options available to the[m].” Appellees’ Supp. Br. at 4 (quoting Appellees’ Br. at 20–21). Of
course, any law could be said to “limit the range,” in an abstract sense, of a plaintiff’s legitimate behavior. But
merely because enjoining the law’s enforcement could be said to expand the range of potential behaviors a plaintiff
might permissibly engage in does not alone establish the plaintiff’s standing to seek an injunction. Rather, the
plaintiff must show that he is “able and ready” to violate the law and that an enforcement action would realistically
and likely ensue in response to the violation. Carney v. Adams, 141 S. Ct. 493, 501–02 (2020); Babbitt v. United
Farm Workers Nat. Union, 442 U.S. 289, 298 (1979). Thus, as concerns the “sovereign authority” theory, the States
still had the burden to establish, with evidence, why they plan to imminently pursue some policy objective outside
the range of conduct permitted by the Rule and against which Treasury would correspondingly take action. Lujan,
504 U.S. at 561; cf. Whole Woman’s Health v. Jackson, 141 S. Ct 2104, 2495 (2021) (“[F]ederal courts enjoy the
power to enjoin individuals tasked with enforcing laws, not the laws themselves.” (citing California v. Texas, 141 S.
Ct. 2104, 2115–16 (2021))).
9
We do not hold today that the interim final rule itself necessarily mooted the imminent-recoupment and
sovereign-authority theories. Interim final rules are subject to revision after the notice-and-comment process, so a
rule’s content could still change from its interim form to its final form in some way relevant to justiciability. But
that concern is absent from this particular case, given that the final rule varied from the interim final rule in no way
material to this dispute. Both disavow enforcement in exactly the same way and present exactly the same safe
harbors for states and enforcement constraints on the Treasury Department.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 18
they have pursued or intend to pursue a course of conduct that would arguably violate the Rule.
In other words, they provided no declarations or other evidence about how they intend to enact
tax cuts that (1) would result in net revenue reductions compared to 2019 inlays, and (2) would
then fail to identify a permissible funding source (such as from growth or spending cuts) to offset
the revenue reduction. Indeed, the only evidence Kentucky adduced in the States’ motion for
summary judgment was its notification that it intended to accept the ARPA funds. See
Submission Confirmation, R. 25-1.
Those omissions are problematic for justiciability, since the States produced no evidence
about why there is a realistic risk of an enforcement proceeding. And justiciability must be
established with the degree of evidence required at each respective stage of the suit. See Lujan,
504 U.S. at 561. So the States were obliged to submit evidence—such as a sworn declaration—
detailing how they are “able and ready” to pursue a course of action that would run afoul of the
Rule. Carney v. Adams, 141 S. Ct. 493, 501–02 (2020). For only then would there be a
demonstrated risk of a recoupment action, which a federal court could redress by enjoining such
action. See Jackson, 141 S. Ct. at 2495 (citing California, 141 S. Ct. at 2115–16). In the
absence of that evidence, we conclude that Treasury’s disavowal of the money-is-fungible
interpretation dispelled the States’ claim that they run the risk of an imminent enforcement
action—as when, for instance, a prosecutor credibly disavows that he will enforce a challenged
statute. See, e.g., Mink v. Suthers, 482 F.3d 1244, 1256–57 (10th Cir. 2007); cf. Commodity
Trend Serv., Inc. v. Commodity Futures Trading Comm’n, 149 F.3d 679, 687 (7th Cir. 1998)
(explaining that courts will find a credible threat of enforcement when “the Government fails to
indicate affirmatively that it will not enforce the statute” (emphasis omitted)).
The only remaining question is what kind of justiciability defect Treasury’s disavowal
created. The parties initially framed the issue as one of the States’ “standing.” But we disagree
with that characterization. Whether an “intervening circumstance” arising after a suit has been
filed causes a plaintiff’s asserted injury to dissipate is really a question of mootness. See Genesis
Healthcare Corp. v. Symczyk, 569 U.S. 66, 72 (2013). And whether the Rule mooted the
imminent-recoupment and sovereign-authority theories comes down to whether we should credit
Treasury’s voluntary disavowal of a broad view of the Offset Provision; in essence, whether
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 19
Treasury established10 that there is no “reasonable possibility” it will act as if the Offset
Provision forbids tax cuts per se. Resurrection Sch. v. Hertel, 35 F.4th 524, 529 (6th Cir. 2022)
(en banc).
We hold that Treasury satisfied this showing. Its Final Rule resulted from the notice-and-
comment process, and thus it may be rescinded only pursuant to that process as well. See
5 U.S.C. § 551(5); Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 101 (2015). And we have no
evidence that Treasury plans to pursue such rescission. Indeed, and more importantly, Treasury
has repeatedly taken the position in this litigation that its Rule necessarily follows from the plain
text of the Offset Provision itself. See, e.g., Reply Br. at 1; Appellants’ Supp. Br. at 2 n.2. So
even without the Rule, according to Treasury, it would pursue recoupment against Kentucky and
Tennessee—even if they were to enact a revenue-reducing tax cut and expend ARPA funds—
only if the States additionally failed to identify one of the permissible sources of offsetting funds,
such as a tax increase or macroeconomic growth.11 Id. On those bases, then, we conclude that
Treasury has affirmatively and credibly disavowed the money-is-fungible interpretation of the
Offset Provision. Thus, because the States failed to provide evidence that they intend to
10
Aside from how standing and mootness concern the parties’ interests at different stages of a lawsuit, they
can also present different burdens of proof. See Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 98 (1993).
The burden to establish jurisdiction rests on the party invoking jurisdiction—here, the States—while the burden to
defeat jurisdiction with a mootness objection rests on the party asserting mootness—here, Treasury. Id. Because of
this burden-shifting issue, we ordered supplemental briefing to solicit Treasury’s affirmative case as to why the
States’ challenge is moot. See Order, ECF No. 45. After agreeing that mootness (rather than standing) is the
appropriate framework to assess the impact of the Rule’s advent, Treasury’s supplemental brief once again
disavowed the money-is-fungible interpretation of the Offset Provision and disclaimed that Treasury has any intent
to pursue recoupment in response to tax cuts per se. See Appellants’ Supp. Br. at 1. We thus understand Treasury,
through its supplemental briefing, to have discharged its duty to make an affirmative showing about why at least the
imminent-recoupment and sovereign-authority theories are moot.
11
In their supplemental briefing, the States contended that the Rule did not moot the imminent-recoupment
and sovereign-authority theories because it contains a reservation of authority. See Appellees’ Supp. Br. at 5 (citing
31 C.F.R. § 35.4(a)). And, true, the Rule provides that “[n]othing in this part shall limit the authority of the
Secretary to take action to enforce conditions or violations of law, including actions necessary to prevent evasions of
this subpart.” 31 C.F.R. § 35.4(a). But we have no evidence (or even argument) about how the States plan to
engage in conduct that Treasury would construe as an “evasion,” much less why Treasury would construe behavior
clearly permitted by other parts of the Rule to constitute such an “evasion.” Moreover, Treasury insists that the
Rule’s narrowing construction “flows naturally from the text of the Offset Provision itself.” Appellants’ Supp. Br.
at 2 n.2. So even if the Rule arguably did not bar Treasury from pursuing recoupment under, for instance, the
money-is-fungible interpretation, Treasury has solemnly represented before us that the Offset Provision itself would
preclude such an enforcement action. Again, Treasury’s position is that the Offset Provision itself unambiguously
dispels that interpretation of the statute. Reply Br. at 1; Appellants’ Supp. Br. at 2.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 20
specifically violate the Rule (and provoke recoupment), and because Treasury established that
there is no realistic prospect it will enforce the States’ expansive interpretation of the Offset
Provision, we deem the imminent-recoupment and sovereign-authority theories moot.
Moreover, that holding ends the case for Kentucky. Kentucky submitted nothing other
than an email indicating its intent to accept the ARPA funds. Submission Confirmation, R. 25-1.
It furnished no proof about how it intends to violate the Rule, or about why it suffers a
continuing sovereign injury when it identified no desired tax cut that, if enacted, would likely
provoke recoupment. It also offered no additional theory of injury, such as compliance costs,
that might sustain its challenge even in the absence of an imminent recoupment action. See
Recording of Oral Arg. at 30:38–30:45 (conceding that there is no evidence in the record about
Kentucky’s budgeting processes). Thus, the district court should have dismissed its challenge to
the Offset Provision as moot.12
4. Tennessee’s Challenge Remains Justiciable, However, Under a
Compliance-Costs Theory of Injury
The same cannot be said for Tennessee. Recall how, in their amended complaint, the
States made allegations about an additional injury the Offset Provision would inflict upon them:
12
Kentucky insists that its challenge to the Offset Provision is justiciable if we determine that Tennessee’s
challenge to the Offset Provision is justiciable. See, e.g., Recording of Oral Arg. at 30:15–30:20; Appellees’ Br. at
16 n.4. We disagree. “Standing is not dispensed in gross.” DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 353
(2006) (quoting Lewis v. Casey, 518 U.S. 343, 358 n.6 (1996)). Rather, to win summary judgment and obtain
injunctive relief, Kentucky and Tennessee each had to demonstrate, with evidence, why it was suffering
particularized continuing or imminent injuries in fact, and why that remained the case even after promulgation of
the Rule. Lujan, 504 U.S. at 561; see also id. at 560 n.1 (“By particularized, we mean that the injury must affect the
plaintiff in a personal and individual way.”); Trump v. New York, 141 S. Ct. 530, 534 (2020) (“A foundational
principle of Article III is that an actual controversy must exist not only at the time the complaint is filed, but through
all stages of the litigation.” (cleaned up)). Thus, the district court had no authority to issue an injunction protecting a
party that failed to demonstrate that its challenge was even justiciable. Instead, a “remedy must . . . be limited to the
inadequacy that produced the injury in fact that the plaintiff has established.” DaimerChrysler Corp., 547 U.S. at
353. The case that Kentucky cites to the contrary—Rumsfeld v. Forum for Academic & Institutional Rights, Inc.—is
inapposite. See Appellees’ Br. at 16 n.4 (citing 547 U.S. 47, 52 n.2 (2006)). There, determining the standing of
each individual plaintiff (and thus the legitimate scope of injunctive relief) was irrelevant; since plaintiffs had all
advanced the same non-meritorious claim, the Court needed to find standing only as to a single plaintiff to deem
their shared legal theory erroneous. Id. at 70. But while such cases “give courts license to avoid complex questions
of standing in cases where the standing of others makes a case justiciable, it does not follow that these cases permit a
court that knows that a party is without standing to nonetheless allow that party to participate in the case.” Nat’l
Rifle Ass’n of Am., Inc. v. McCraw, 719 F.3d 338, 344 n.3 (5th Cir. 2013). The proper course is, instead, to limit
relief only to those parties who established the district court’s jurisdiction to award it. DaimlerChrysler Corp.,
547 U.S. at 353.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 21
compliance costs. Amended Complaint ¶12, R. 23. Unlike Kentucky, Tennessee then submitted
uncontroverted evidence of those costs. Eley Dec. ¶¶8–10, R. 25-3. As Eley’s declaration
explains, the Offset Provision requires Tennessee to expend time and money that it would not
expend but for the Offset Provision to ensure that none of the tax cuts it has enacted or will enact
could be construed as having been “indirectly offset” by ARPA spending. Id. ¶8. Likewise, it
must also expend resources it would not otherwise have to expend “adjusting [its] ‘baseline’
level of tax revenue for inflation each year during the covered period” to determine whether its
tax policies may provoke a recoupment action. Id. ¶9. These injuries were not mooted by the
advent of the Rule, since Tennessee must still expend resources to maintain compliance with the
Offset Provision (and, for that matter, the Rule as well). See id.
And, unlike with the imminent-recoupment and sovereign-authority theories, we have no
similar imminence concern about the compliance-costs argument.13 Tennessee already accepted
the funds, so it must undertake compliance efforts at present. Given those facts, we conclude
that Tennessee satisfied its obligation to show an actual injury traceable to the defendants and
likely redressable by a favorable decision. Indeed, compliance costs are a recognized harm for
purposes of Article III. See, e.g., Federal Election Comm’n v. Ted Cruz for Senate, 142 S. Ct.
1638, 1646 (2022); Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973, 983 (2017) (“For standing
purposes, a loss of even a small amount of money is ordinarily an ‘injury.’”); see also State Nat.
Bank of Big Spring v. Lew, 795 F.3d 48, 53 (D.C. Cir. 2015) (Kavanaugh, J.) (“The Rule also
offers a safe harbor, but banks such as State National Bank must incur costs to ensure that they
are properly complying with the terms of that safe harbor. . . . Under Lujan, the Bank therefore
has standing to challenge the constitutionality of the Bureau.”); Grand River Enters. Six Nations,
Ltd. v. Boughton, 988 F.3d 114, 121 (2d Cir. 2021) (collecting cases). Tennessee’s expenditure
of those resources, as we explain below, is traceable to the Offset Provision. Its proscriptions are
why Tennessee must incur such costs—to maintain compliance with the Offset Provision and
stave off a recoupment action.14 And permanently enjoining the Offset Provision’s enforcement
13
We thus assess Tennessee’s standing argument under the ordinary Lujan framework. See supra at 12–13.
14
Supreme Court doctrine, we note, provides that a federal court has jurisdiction over a regulated entity’s
pre-enforcement challenge even when no enforcement action is imminent if the enforcement action’s remoteness
stems from the regulated entity’s own involuntary efforts to comply with the contested proscription. MedImmune,
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 22
would redress that injury. For if enforcement of the Offset Provision were enjoined, Tennessee
would have no reason to continue expending resources to maintain compliance with an
unenforceable provision.
Still, however, Treasury disputes several aspects of this analysis. Its objections focus on
whether these compliance costs are a legitimate injury in fact, and, even assuming they are,
whether such an injury is truly traceable to the Offset Provision. After more fully describing
those objections below, we explain why none persuades us that we lack jurisdiction.
a. Treasury’s Objection that Tennessee’s Compliance Costs are
not an Injury in Fact
Treasury at points seems to dispute that the compliance costs the Offset Provision (and
Rule) inflict on Tennessee even constitute an injury in fact. See, e.g., Reply Br. at 4 n.1. Its
argument rests on a portion of the Final Rule—which, we note, acknowledges that ARPA
imposes an “administrative burden” on the States—but that permits states to use ARPA funds to
defray the costs of complying with ARPA’s reporting requirement. Id.; 87 Fed. Reg. at 4,444.
The theory seems to be that Tennessee cannot be injured by ARPA-related compliance costs
when ARPA funds may themselves be used to offset administrative expenses.
We perceive two central problems with this argument. The first is that even if the Rule
permits states to use ARPA funds to defray the costs of complying with the reporting
requirement, 87 Fed. Reg. at 4,444, that is simply beside the point as concerns Tennessee’s
compliance-costs argument. Tennessee complained of compliance costs distinct from those
imposed by the reporting requirement. See Eley Dec. ¶¶8–9, R. 25-3. Indeed, Eley’s declaration
draws an explicit distinction between the costs of reporting Tennessee’s uses of ARPA funds, on
the one hand, and the costs of tracking whether any such use could be construed as an “indirect
offset,” on the other. Id. ¶10. And that distinction makes perfect sense based on the statute’s
text. The reporting requirement explains that states must provide a “detailed accounting
Inc. v. Genentech, Inc., 549 U.S. 118, 128–30 (2007). MedImmune concerned a declaratory judgment, of course, but
the Declaratory Judgment Act did not expand federal courts’ jurisdiction beyond that which they already could have
exercised to award traditional remedies like money damages or an injunction. Skelly Oil Co. v. Phillips Petroleum
Co., 339 U.S. 667, 671–72 (1950). So since the court in MedImmune had jurisdiction to adjudicate a declaratory-
judgment action concerning alleviation of a prospective harm, it necessarily would have had jurisdiction to entertain
an injunctive suit (such as the one at issue here) as well.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 23
of . . . the uses of [ARPA] funds” and “all modifications to the State’s . . . revenue sources during
the covered period,” along with “other information as the Secretary may require[.]” 42 U.S.C.
§ 802(d)(2)(A)–(B). The Offset Provision, by contrast, presents a different obligation: that such
“uses” may not be for “indirect” offsets of revenue-reducing tax cuts. § 802(c)(2)(A). So a state
could violate the Offset Provision—indirectly offsetting tax cuts with ARPA funds—while
complying with the reporting requirement—by simply telling Treasury that it was using the
funds in an impermissible manner. Thus, even if we assumed that the States were not injured by
the reporting requirement, given that they may defray associated administrative expenses with
ARPA funds, that would in no way dispel Tennessee’s distinct injury from additional costs
incurred to comply with the Offset Provision.
Second, and more fundamentally, even if we assumed that the Rule permitted Tennessee
to use ARPA funds to defray its Offset Provision-related compliance costs, that would still
represent an injury in fact. Tennessee has an independent interest in expending its ARPA funds
on other legitimate uses; for instance, spending in one of the four areas that Congress deemed
necessary to recovery from the pandemic. 42 U.S.C. § 802(c)(1)(A)–(D). ARPA funds
expended on compliance with an invalid Offset Provision are necessarily ARPA funds not
productively expended on economic recovery. So a “diversion of resources” from useful areas to
compliance with an invalid condition would nonetheless constitute an injury in fact. Dep’t of
Com. v. New York, 139 S. Ct. 2551, 2565 (2019). Put simply, Tennessee has a live interest in not
wasting its ARPA funds on compliance with an invalid condition.
b. Additional Concerns about Traceability
Next, Treasury reframes the same argument as an objection to traceability—that all of
Tennessee’s compliance costs are traceable solely to the unchallenged reporting requirement,
rather than to the Offset Provision. Reply Br. at 4. But we reject this argument for the same
reason we rejected it above; again, that it is undercut by both law and fact. The reporting
requirement contains no prohibition on how funds may be used. It establishes only an obligation
that states inform Treasury of which uses a state pursues. The Offset Provision, by contrast,
contains a substantive prohibition on use—that the funds cannot be used to “indirectly offset”
revenue reductions resulting from tax cuts. 42 U.S.C. § 802(c)(2)(A). And Eley’s
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 24
uncontroverted declaration establishes that these distinct obligations incur distinct sets of
compliance costs upon Tennessee.
That discussion appears to exhaust Treasury’s arguments about why the compliance-costs
injury is nonjusticiable. But given our independent obligation to ensure that we have
jurisdiction, we find a few additional comments about traceability in order. See, e.g., Arbaugh,
546 U.S. at 514. One important issue, we note, is whether Tennessee’s compliance costs are
truly traceable to the Offset Provision itself, or whether they are traceable merely to the Rule. In
our view, Tennessee’s costs are most proximately traceable to the Rule, rather than to the Offset
Provision’s text. If the Rule had never existed, after all, the statute alone arguably might have
entailed obligations wholly distinct from those described by the Rule, and thus a distinct set of
compliance costs as well. Absent the Rule’s safe harbors about growth, tax increases, and
spending cuts, for instance, the Offset Provision itself, under the money-is-fungible
interpretation, arguably proscribed all revenue-reducing tax cuts during ARPA’s “covered
period.” So compliance costs under that regime would have been much simpler: just don’t cut
taxes if you want to expend ARPA funds. But the Rule clarified that Tennessee may cut taxes
insofar as it establishes a new tracking procedure to ensure that funds offsetting a tax cut stem
from a permissible replacement revenue source (e.g., growth) rather than from ARPA funds.
Eley Dec. ¶8, R. 25-3. Likewise, Eley’s declaration explained that Tennessee must expend
additional resources to inflation-adjust its revenues for each year of the “covered period” and
then compare them with a 2019 baseline to determine whether any year during the “covered
period” witnessed a “reduction” in net tax revenue. That specific requirement only became clear
from the Rule. Id. ¶9 (citing 31 C.F.R. § 35.3, 35.8(b)).
Yet while these refined obligations’ origin in the Rule may highlight the indeterminacies
of the underlying Offset Provision, they do not establish that Tennessee’s injuries cannot be
traced to the Offset Provision itself. The Supreme Court recently confronted an analogous issue
in Federal Election Commission v. Ted Cruz for Senate. 142 S. Ct. at 1638. There, the Cruz
campaign challenged a campaign-finance restriction found in an agency regulation implementing
a statute but absent from the underlying statute’s text. Id. at 1648. Thus, the government argued,
“[a] challenge to the regulation . . . is separate from a challenge to the statute that authorized it.”
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 25
Id. But the Court declined to endorse this distinction. To the contrary, it held that an injury from
a regulation implementing a statute was still traceable to the statute itself. Id. at 1649. “An
agency, after all, ‘literally has no power to act’—including under its regulations—unless and
until Congress authorizes it to do so by statute.” Id. (citations omitted). And “[a]n agency’s
regulation cannot ‘operate independently of’ the statute that authorized it.” Id. (citation omitted).
So even if Tennessee’s injuries are most proximately traceable to the Rule, we nonetheless
conclude that these injuries also suffice for standing to challenge the Offset Provision itself. For
if enforcement of the Offset Provision itself were enjoined, it would necessarily preclude
enforcement of the Rule, at least to the extent it implements the Offset Provision.
Last, we address the notion that Tennessee’s compliance costs are a “self-inflicted injury”
and are thus traceable solely to its own conduct in accepting the ARPA funds, rather than to
some wrongful conduct of the federal government.15 It is in some sense true that Tennessee
exposed itself to the risk of compliance costs when it accepted the ARPA funds. Of course,
Tennessee did so with a reservation about the Offset Provision, and it also insists that it took the
funds under duress. See Recording of Oral Arg. at 27:38–27:55; Appellees’ Br. at 29. But even
if we assumed that Tennessee took the money purely of its own volition, that would not make its
compliance costs “self-inflicted” in a way that would defeat jurisdiction. The Supreme Court
recently rejected a similar argument in, incidentally, Ted Cruz for Senate. 142 S. Ct. at 1647–48.
There, the Cruz campaign stipulated that its “sole and exclusive motivation” for violating the
campaign-finance restriction was to create a factual basis for challenging the restriction. Id. at
1647. The government accordingly argued that any resultant injury was traceable not to the
restriction, but to the Cruz campaign’s willful violation of it. Id. Again, however, the Court
unequivocally rejected this theory. As it explained, “[w]e have never recognized a rule of this
kind under Article III. To the contrary, we have made clear that an injury resulting from the
application or threatened application of an unlawful enactment remains fairly traceable to such
application, even if the injury could be described in some sense as willingly incurred.” Id.; see
15
The district court raised this concern at the permanent-injunction hearing, apparently sua sponte. See
9/8/2021 Tr. of Hearing at 4:15-23, R. 41. As the States point out, Treasury has declined to press it either below or
before us. See Appellees’ Br. at 18 n.5. We nonetheless address it because, again, we have independent obligation
to assure ourselves of jurisdiction. See, e.g., Arbaugh, 546 U.S. at 514.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 26
also id. at 1648 (“That appellees chose to subject themselves to those provisions does not change
the fact that they are subject to them, and will face genuine legal penalties if they do not
comply.”). So even if Tennessee had voluntarily chosen to subject itself to the Offset Provision,
it would not defeat (and, indeed, would establish) Tennessee’s standing to challenge it.
Moreover, Tennessee points out, such a jurisdictional bar would be irreconcilable with
the Supreme Court’s broader Spending Clause jurisprudence. See Appellees’ Br. at 18 n.5. In
any Spending Clause challenge, it could be argued, states that accepted federal funds assumed
the risk that an ambiguous condition could be construed against their interests. Id. For instance,
states might have recognized that the term “costs” in the Individuals with Disabilities Education
Act (“IDEA”) could be construed to include expert-witness fees. Arlington Cent. Sch. Dist. Bd.
of Educ., 548 U.S. at 293–94. That it did was, in fact, the position of three dissenting Justices.
See id. at 308 (Breyer, J., dissenting, joined by Stevens, J., and Souter, J.). Or, states might have
recognized, the term “appropriate relief” could be construed to include money damages—a
position that two dissenting Justices called “self-evident.” Sossamon v. Texas, 563 U.S. 277, 293
(2011) (Sotomayor, J., dissenting, joined by Breyer, J.). But in neither of those cases were the
states held subject to such obligations, since the question is not whether states could have
conceived of those liabilities when accepting the funds; it is instead whether they assumed an
obligation about which the relevant statute conferred notice clearly and unambiguously.
Arlington Cent. Sch. Dist. Bd. of Educ., 548 U.S. at 298; Sossamon, 563 U.S. at 289–91.
Conversely, therefore, jurisdiction is not defeated by (and the merits of the challenge are
established by) a spending law’s omission of clear warnings about the obligations it entails.
B. The Merits
Having concluded that Tennessee’s challenge is justiciable, we now explain why we
agree with Tennessee that the Offset Provision did not establish, with the requisite clarity, the
putative obligations it was revealed to entail by the Rule.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 27
1. Under the Relevant Spending Clause Jurisprudence, the Offset
Provision Fails to Provide States Clear Notice of the Conditions It
Entails
At the outset, we note that the States have labeled their challenge as against an
“unconstitutionally ambiguous” piece of spending legislation. See, e.g., Amended Complaint
¶57, R. 23. Neither of those terms is entirely accurate. First, as a technical matter, the Offset
Provision is more than merely “ambiguous.” Ambiguity refers to situations in which language
has at least two definite meanings and a court must select between or among them. See Caleb
Nelson, Statutory Interpretation 77–80 (2011). (For instance, the word “bank” without further
context might refer to either a riverside or a financial institution.) Vagueness, by contrast, arises
when a term is open-ended and lacks inherent or definite content. Id. The Offset Provision is
better described as suffering from the latter defect. The States could not have known from the
statute itself the reticulated way that Treasury’s Rule would construe the Offset Provision, since
that construction was hardly obvious ex ante. Nor could they have reliably predicted which of
the several potential baselines Treasury would select to measure a “reduction,” nor when
Treasury might deem such a reduction to have “resulted” from a tax cut. To the contrary, the
statute’s open-endedness gave Treasury expansive discretion to construe its terms in the
particular way Treasury saw fit.
And second, the Offset Provision is not “unconstitutional” under the Spending Clause,
strictly speaking, just because of those indeterminacies. Rather, the Supreme Court has
explained that because Congress can cajole the states to enact policies indirectly (through a
spending inducement) that it could never directly order them to perform with its other
enumerated powers, we must employ a federalism-based clear-statement rule when construing
spending legislation as a matter of statutory interpretation. See, e.g., South Dakota v. Dole,
483 U.S. 203, 207 (1987); Cummings, 142 S. Ct. at 1570, 1574; Sch. Dist. of City of Pontiac v.
Sec’y of U.S. Dep’t of Educ., 584 F.3d 253, 283–84 (6th Cir. 2009) (en banc) (Sutton, J.,
concurring) (describing the clear-statement rule as a “statutory limitation on Congress’s spending
power”); see also Haight v. Thompson, 763 F.3d 554, 568 (6th Cir. 2014) (“One of the
distinguishing features of the spending power is that it allows Congress to exceed its otherwise
limited and enumerated powers by regulating in areas that the vertical structural protections of
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 28
the Constitution would not otherwise permit.”). In other words, Congress does not necessarily
lack the constitutional power to enact vague spending laws in the same way that, for instance, it
lacks the power to enact a law “respecting an establishment of religion.” U.S. Const. amend. I.
But those laws may be unenforceable in certain circumstances when they fail to provide states
with clear notice of a purported funding condition.
So, as we explain below, we do not hold the Offset Provision “unconstitutional” under
the Spending Clause. Rather, our holding is this. As a matter of statutory interpretation, we
conclude that the Offset Provision does not clearly explain (1) how to calculate a “reduction” in
net tax revenue, (2) how to determine whether such a reduction resulted from a tax cut, or
(3) how to tell what particular conduct constitutes an “indirect” offset. And Treasury’s
attempted liquidation of the Offset Provision via the Rule in no way followed clearly from the
Offset Provision’s text. Thus, Tennessee may legitimately discontinue the compliance
procedures entailed by the Rule, and if, as a result, it should engage in conduct Treasury deems a
violation of the Offset Provision, Treasury may not initiate enforcement proceedings in response.
2. Applying the Spending Clause Clear-Statement Rule
It is undisputed that ARPA was enacted pursuant to the Spending Clause. Unlike ordinary
coercive legislation, “legislation enacted pursuant to the spending power is much in the nature of
a contract: in return for federal funds, the States agree to comply with federally imposed
conditions. The legitimacy of Congress’[s] power to legislate under the spending power thus
rests on whether the State voluntarily and knowingly accepts the terms of the ‘contract.’”
Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17 (1981). And “[s]tates cannot
knowingly accept conditions of which they are ‘unaware’ or which they are ‘unable to
ascertain.’” Arlington Cent. Sch. Dist. Bd. of Educ., 548 U.S. at 296 (quoting Pennhurst,
451 U.S. at 17)). As a result, Congress must provide “clear notice” of the obligations a spending
law entails. Pennhurst, 451 U.S. at 25. “After all, when considering whether to accept federal
funds, a prospective recipient would surely wonder not only what rules it must follow, but also
what sort of penalties might be on the table.” Cummings, 142 S. Ct. at 1570. And this clear-
statement rule applies with particular force where “a State’s potential obligations under the Act
are largely indeterminate.” Pennhurst, 451 U.S. at 24. “Accordingly, if Congress intends to
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 29
impose a condition on the grant of federal moneys, it must do so unambiguously” and with a
“clear voice.” Id. at 17. Applying these principles reveals that neither the “indirectly offset”
language nor the “reduction in the net tax revenue . . . resulting from” language provided the
states the requisite “clear notice” of whatever obligations such language entails. Id. To the
contrary, these are “largely indeterminate” provisions susceptible to a range of plausible
meanings. Id. at 24; cf. Boechler, P.C. v. Comm’r, 142 S. Ct. 1493, 1498 (2022) (“Where
multiple plausible interpretations exist—only one of which is jurisdictional—it is difficult to
make the case that the jurisdictional reading is clear.” (citation omitted)).
a. “Indirectly Offset”
In assessing justiciability, we spoke at length about the Offset Provision’s
indeterminacies; particularly, the prohibition on “indirect” offsets. So we briefly reiterate those
points here. The first core issue with the Offset Provision, again, is that its text does not clearly
explain what it means to “indirectly offset” revenue-reducing tax cuts with ARPA funds.
“Indirectly” means “not directly; obliquely; not straightforwardly, or the like; in an indirect,
roundabout, or subtle manner.” Indirectly, Webster’s New International Dictionary 1267 (2d ed.
1960); see also Indirectly, New Practical Standard Dictionary 677 (1956) (“Not in direct relation;
not tending to a result by the shortest or plainest course; inferential.”); Indirectly, Compact
Edition of the Oxford English Dictionary 1418 (1971) (“By indirect action, means, connexion,
agency, or instrumentality; through some intervening person or thing; mediately.”). And
“offset,” in the relevant sense, simply means “to counterbalance” or “compensate” for
something. Offset, Webster’s New International Dictionary at 1691; see also Offset, New
Standard Practical Dictionary at 917 (“Anything regarded or advanced as a counterbalance or
equivalent; set-off.”); Offset, Compact Edition of the Oxford English Dictionary at 1981 (“To set
off as an equivalent against something else.”). So, as Treasury contends, this statutory language
apparently stands for the general proposition that states may not circumvent the use restriction
“with formalities.” Appellants’ Supp. Br. at 3. Beyond that general notion, however, what this
language actually obliges the States to do is difficult to say.
For instance, the States contend that an “indirect offset” could plausibly occur whenever
a state enacts a revenue-reducing tax cut and expends ARPA funds—no matter whether the state
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 30
pours the ARPA funds into the precise area it cut taxes. See Appellees’ Br. at 38–39. This is the
money-is-fungible interpretation of the Offset Provision that we described above. See id.; see
also Amended Complaint ¶35, R. 23. Nothing about ARPA’s text or context suggests that this
interpretation is particularly far-fetched. The macroeconomic assumption underlying the Act
seems to be that recovery from a recession is best achieved by high levels of spending, rather
than static levels of spending accompanied by cuts in taxation. See, e.g., 86 Fed. Reg. at 26,786–
87 (explaining that the “demand for government services is high,” but that “State, local, and
Tribal government austerity measures can hamper overall economic growth, as occurred in the
recovery from the Great Recession.”). So, chilling tax cuts to facilitate high levels of spending
would seem consistent with ARPA’s purpose. Id. And even Treasury’s own Rule acknowledges
that the money-is-fungible interpretation is at least a plausible concern with the Offset
Provision.16 Once again, it explained, “because money is fungible, even if [ARPA] funds are not
explicitly or directly used to cover the cost of changes that reduce net tax revenue, those funds
may be used in a manner inconsistent with the statute by indirectly being used to substitute for
the state’s or territory’s funds that would otherwise have been needed to cover the costs of the
reduction.” 87 Fed. Reg. at 4,424 (emphasis added).17 The plausibility of this interpretation was
the very reason that Treasury had to shed so much ink attempting to disavow it with the Rule.
16
In its reply brief, Treasury invoked the canon of constitutional avoidance to suggest that the money-is-
fungible interpretation of the Offset Provision is implausible (though, we note, it raised this point in its objections to
justiciability rather than the merits). See Reply Br. at 3 (citing Jennings v. Rodriguez, 138 S. Ct. 830, 842 (2018)).
We find this canon of minimal importance to either justiciability or the merits for two key reasons. First, “[f]or
standing purposes, we accept as valid the merits of appellees’ legal claims.” Ted Cruz for Senate, 142 S. Ct. at
1647; see also Warth v. Seldin, 422 U.S. 490, 500 (1975) (“[S]tanding in no way depends on the merits of the
plaintiff’s contention that particular conduct is illegal.”). So it would be inappropriate for us, at the justiciability
stage, to render a merits interpretation of the Offset Provision and to then declare based on that merits interpretation
that the controversy is not even justiciable. See, e.g., Trump v. Hawaii, 138 S. Ct. 2392, 2416 (2018). After all, if
the laws of the United States when “given one construction” would establish jurisdiction and would defeat it when
“given another,” then the plaintiff has established jurisdiction. Bell v. Hood, 327 U.S. 678, 685 (1946). Second,
concerning the merits, the constitutional-avoidance canon would at most dispel the States’ money-is-fungible
interpretation of the Offset Provision. But establishing whatever obligations the Offset Provision does not impose
cannot suffice to defeat a Spending Clause challenge, for the critical question would still remain about whatever
obligations the Offset Provision does impose—such as those it is claimed to impose in the Rule—and whether it
does so clearly and unambiguously.
17
Or, once again, consider Secretary Yellen’s acknowledgement that “[w]e will have to define what it
means to use money from this Act as an ‘offset’ for tax cuts. And, given the fungibility of money, it’s a hard
question to answer.” Treasury Secretary & Federal Reserve Chair Testimony on COVID-19 Economic Recovery at
58:30–59:05, available at https://www.c-span.org/video/?510059-1/treasury-secretary-federalreserve-chair-
testimony-covid-19-economic-recovery.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 31
See, e.g., Yellen Letter, R. 1-1 (explaining that Treasury would promulgate “further guidance” so
that states could understand their obligations under the Offset Provision).
True, the Rule—as distinct from the Offset Provision itself—went on to clarify that
such an “indirect offset” would not be deemed to have occurred in three particular situations:
where the spending cut is offset with macroeconomic growth, another state tax increase, or a
state spending reduction. 87 Fed. Reg. at 4,423; see also Appellants’ Br. at 5. But why is the
presence of any safe harbor dictated by the underlying statute, much less clearly so? And why
do those particular safe harbors reside in the statutory text, much less clearly so? In reality, the
statute is silent on those questions. Precisely because the Offset Provision is so indeterminate
about what behavior might constitute an “indirect offset,” Treasury was necessarily left with a
huge range of discretion about which state behavior it would deem permissible versus
impermissible. As a result, the statute itself failed to provide “clear notice” to Tennessee about
whichever particular conduct Treasury would permit or proscribe. Arlington Cent. Sch. Dist. Bd.
of Educ., 548 U.S. at 296. And no doubt because of the Offset Provision’s lack of inherent
content, Treasury found it necessary to promulgate a Final Rule with a hundred pages of
commentary in its attempt to establish some concrete “guidance.” See Yellen Letter, R. 1-2.
b. “A Reduction in the Net Tax Revenue . . . Resulting From” a
Tax Cut
The Offset Provision’s language concerning “a reduction in the net tax
revenue . . . resulting from” a tax cut is similarly indeterminate. 42 U.S.C. § 802(c)(2)(A).
Several major issues prevent it from having provided the States “clear notice” of their
“obligations” under the statute. Cummings, 142 S. Ct. at 1574.
The first, as we mentioned before, is that this portion of the statute never actually
specifies which fiscal year’s revenue inlays serve as the baseline against which to determine
whether a state experienced a “reduction” in its revenues. See Appellees’ Br. at 40. And even
Treasury’s own Rule acknowledges how critical this omission was: “Measuring a ‘reduction’ in
net tax revenue requires identification of a baseline. In other words, a ‘reduction’ can be
assessed only by comparing two amounts.” 87 Fed. Reg. at 4,426. In response to that omission,
the Rule happened to set the baseline for the Offset Provision as “the fiscal year ending in 2019.”
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 32
31 C.F.R. § 35.3; 87 Fed. Reg. at 4,423. Yet nothing in the Offset Provision’s text clearly
dictates why a 2019 baseline applies. For instance, Treasury might have selected a cascading
baseline, in which the Offset Provision was construed to “prohibit[ ] the States from cutting taxes
in any given year relative to the year prior.” Appellees’ Br. at 40. Or it might have set the
baseline as the fiscal year of ARPA’s enactment. And that might have been an especially
obvious baseline, given that we typically assess statutory meaning as of “the time Congress
enacted the statute.” Wis. Cent. Ltd. v. United States, 138 S. Ct. 2067, 2070 (2018) (quoting
Perrin v. United States, 444 U.S. 37, 42 (1979)).
The point is that the statute itself is “indeterminate” with respect to whatever baseline the
offer entailed. Pennhurst, 451 U.S. at 24. And that wasn’t because there was some inherent
obstacle to Congress’s specification of a baseline. For instance, compare the Offset Provision
with the provision just above it—§ 802(c)(1)(C)—which establishes one of the permissible uses
of ARPA funds. Congress there explained that states may spend the funds “for the provision of
government services to the extent of the reduction in revenue of such State . . . relative to
revenues collected in the most recent full fiscal year of the State . . . prior to the emergency.”
42 U.S.C. § 802(c)(1)(C) (emphasis added). So Congress specified a baseline there. Why not
specify a baseline for the Offset Provision itself?18
Second, setting aside the baseline issue, the Offset Provision contains further
indeterminacies about how states must assess whether a reduction in tax revenue “result[ed]
from a change” in state tax policy. § 802(c)(2)(A) (emphasis added). Put simply, the actual
effect of a tax cut may be hard to predict ex ante. See 87 Fed. Reg. at 4,406, 4,423, 4,426; see
18
The simultaneous enumeration of a baseline in § 802(c)(1)(C) and the omission of one in
§ 802(c)(2)(A)—the Offset Provision—creates further clear-notice issues. Treasury interprets the “most recent full
fiscal year . . . prior to the emergency” in § 802(c)(1)(C) as imposing a baseline consistent with revenues collected in
the fiscal year ending in 2019. 87 Fed. Reg. at 4,426. It also interprets the Offset Provision to impose the same
baseline, despite the Offset Provision having omitted the relevant language from § 802(c)(1)(C). Perhaps states
were supposed to extrapolate that the § 802(c)(1)(C) baseline also applied to the Offset Provision. See, e.g., 31
C.F.R. § 35.4. But the typical presumption is that when Congress omits specific language in one provision that it
includes in another, the omission implies a difference in meaning between the two provisions. See, e.g., Dean v.
United States, 556 U.S. 568, 573 (2009) (“[W]here Congress includes particular language in one section of a statute
but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and
purposely in the disparate inclusion or exclusion.” (quoting Russello v. United States, 464 U.S. 16, 23 (1983)). So
the differing text in §§ 802(c)(2)(A) and 802(c)(1)(C) would complicate the notion that states had clear notice that
differently worded provisions imposed the same baseline.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 33
Appellees’ Br. at 41–44. So states considering tax cuts must necessarily generate and rely upon
estimates of the real-world effects a tax cut will produce when assessing the cut’s potential
impact on their budgets. For instance, a state in one fiscal year might collect $10 million per
annum from a particular tax. But the state’s budget analysts might forecast that the state could
collect the same amount of tax—$10 million per annum—even if the state reduced the relevant
tax rate, as doing so might stimulate the occurrence of additional transactions subject to the tax.
So imagine that the state, acting upon that assumption, enacted a tax cut in the relevant area. But
during the next fiscal year, that same tax generated only $9 million in inlays. Did that fall in
inlays result from the tax cut?
The Offset Provision itself does not supply an answer, because it never specifies whether
it prohibits a reduction in expected tax revenues, which a state would be able to control ex ante,
or whether it prohibits a reduction in actual tax revenues, which a state could potentially
determine only ex post. Yet the difference matters. In the above hypothetical, for instance, the
state’s tax cut did not reduce its expected tax revenues, since the best information then available
to it suggested that the effect of the tax cut would be revenue-neutral. But the tax cut arguably
reduced its actual tax revenues, assuming that the only variable that changed from one year to
the next was the tax cut.19
Recognizing that the Offset Provision itself is silent on this issue, the Rule, perhaps
surprisingly, suggests that whether a revenue reduction “resulted” from a tax cut hinges on
whichever accounting method a state uses to determine the effect of the tax cut. 87 Fed. Reg. at
4,406–07. As it explains, “[i]n assessing whether a tax change has had the effect of reducing tax
revenue, recipients may either calculate the actual effect on revenue or rely on estimates
prepared at the time the tax change was adopted,” so long as those estimates were “based on
19
In real-world applications, of course, determining causation can be much more complicated. For
instance, as Treasury acknowledges, many variables “exogenous” to a tax cut itself affect whether the tax cut, even
if preceding a reduction in actual revenues, caused the reduction in actual revenues. 87 Fed. Reg. at 4,406. So
isolating whether a tax cut ultimately caused a reduction in actual revenues can be extremely difficult. Id. Treasury
attempted to resolve this problem by establishing a causation presumption that, whether sound policy or not, has
little apparent relationship to ARPA’s plain text: the IFR “included a presumption that all revenue loss is due to the
pandemic,” rather than to a tax cut. Id. The Final Rule then explained that this presumption applied to revenue
reductions experienced before January 6, 2022, but did not apply to revenue reductions experienced after January 6,
2022. Id.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 34
reasonable assumptions.” Id. (emphases added). So assuming that a state uses an “actual effect”
accounting method in the above example, the revenue reduction arguably resulted from the tax
cut. But if a state uses a “reasonable expectations” accounting method, the revenue reduction
seemingly did not result from the tax cut, as the state did not reasonably expect an actual revenue
reduction ex ante. Yet how were the States supposed to know about these critical points based
on the Offset Provision alone?
Or consider this issue: the Offset Provision itself never specifies the timespan during
which we assess whether a revenue reduction occurred. For instance, imagine a state recorded
$100 million in tax revenues in FY 2019, enacted a tax cut in FY 2020 that stimulated the
economy and produced $120 million in tax revenues, but then experienced a downturn in FY
2021 resulting in tax revenues of only $95 million (which arguably might have been higher
absent the FY 2020 tax cut). Does that scenario count as a “reduction . . . in net tax revenue”
resulting from the FY 2020 tax cut, given that the tax cut arguably resulted in reduced inlays in
FY 2021? Or did the state actually experience an increase in net tax revenues, since, combining
the inlays from FY 2020 and 2021, the state recorded a net gain of $15 million in inlays versus
FY 2019? Whatever the answer, it is at least unclear from the Offset Provision itself whether
such a “net reduction” is measured across the entire “covered period” or on a year-to-year basis
within the “covered period.” 42 U.S.C. § 802(c)(2)(A).
For those reasons, therefore, neither operative portion of the Offset Provision—
“indirectly offset” and “reduction in . . . net tax revenue . . . resulting from” a tax cut—provided
Tennessee “clear notice” about the measures required to maintain compliance. Cummings,
142 S. Ct. at 1570.20 Nor—as we explain below—can Treasury’s subsequent promulgation of its
Rule cure this vagueness defect.
20
Treasury emphasized in its reply brief that no court decision has ever “declared any . . . funding condition
to be ‘unconstitutionally ambiguous’ in the abstract, as a facial matter. Rather, the Supreme Court and other courts,
including this one, have relied on the clear-statement principle as a tool of statutory interpretation, to be used when
adjudicating concrete disputes over the application of particular funding conditions.” Reply Br. at 5. With today’s
opinion, the trend continues. Nowhere have we deemed the Offset Provision “unconstitutional” under the Spending
Clause because of its indeterminacies. We instead have conducted our analysis as a matter of statutory
interpretation. Likewise, that analysis has not unfolded “in the abstract,” but has focused on two concrete
obligations imposed by Treasury’s rule: (1) that Tennessee, should it wish to enact revenue-reducing tax cuts, must
trace any dollars arguably used to offset those reductions to three particular, ad hoc safe harbors, and (2) that in
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 35
c. Why Treasury’s Rule Cannot Cure Spending-Law Vagueness
The question whether agency regulations construing spending legislation are entitled to
deference has generated some occasional academic interest. See, e.g., Peter J. Smith, Pennhurst,
Chevron, and the Spending Power, 110 Yale L.J. 1187, 1189–90 (2001). But we note at the
outset that this issue is not in the present case: Treasury categorically waived reliance on the
Rule to cure a vagueness defect under the Spending Clause. As it told the district court, “agency
regulations should have no bearing on the Spending Clause analysis.” Defs.’ Mot. to Dismiss &
Mot. for Summ. J. at 30, R. 32 (emphasis added). It argued instead that the Offset Provision
itself satisfied the Spending Clause, since at the very least it put the States on notice that the offer
came with “a condition”—no matter whether the contours of that condition presented significant
indeterminacies as a matter of the statutory text. Id. at 39.
Treasury has reprised these arguments before us. It does not argue that the Rule—even
though it was promulgated before the States accepted the ARPA funds—can provide clear notice
to the States of their obligations. Rather, it argues that it was the Offset Provision’s text alone
that “clearly place[d] States ‘on notice’ that their acceptance of Fiscal Recovery Funds ‘is
conditioned upon compliance with’ the requirement not to use those funds to pay for tax cuts.”
Reply Br. at 7; see also Appellants’ Supp. Br. at 2 n.2. So again, Treasury acknowledges that
whether Tennessee’s Spending Clause challenge succeeds hinges on whether the Offset
Provision itself is impermissibly vague about whichever obligations it imposes on the states.
But we note that even if we were bound to independently assess whether Treasury’s Rule
could provide clear notice of conditions left otherwise indeterminate by the statute, we still
would hold that it could not do so in these particular circumstances.21 Our primary concern here
assessing whether such a revenue reduction occurred, Tennessee must establish and use an accounting procedure to
compare its current inlays to its inflation-adjusted revenue in “its fiscal year ending in 2019.” 31 C.F.R. § 35.3.
Those are the relevant obligations, we conclude, of which Tennessee did not have clear notice from the Offset
Provision itself.
21
We confront the Rule’s effect even despite Treasury’s waiver because we recognize that there are serious
and unresolved disputes about, for instance, whether the government may validly waive Chevron deference.
Compare Guedes v. BATFE, 920 F.3d 1, 23 (D.C. Cir. 2019) (concluding that Chevron deference cannot be waived
if the “underlying agency action” would otherwise merit Chevron deference), with Guedes v. BATFE, 140 S. Ct.
789, 790 (2020) (Gorsuch, J., concurring in denial of certiorari) (arguing that the D.C. Circuit’s conclusion was
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 36
is the legitimate domain of Chevron deference—whether we (or a state) must accept as binding
an agency regulation establishing an otherwise-uncertain spending-law condition. For instance,
Treasury suggested before us that deference might be appropriate at least if we understood the
relevant content of the Rule—the meaning of an “indirect” offset, the baseline for a revenue
reduction, and how to tell whether such a reduction “resulted from” a tax cut—to constitute mere
“implementation details.” Reply Br. at 7–8. And, to that end, it invoked a couple of circuit
decisions where we indeed deferred to agencies’ reasonable views about marginal ambiguities in
spending laws: one concerning whether the term “medical devices” includes “incontinence
products” and the other concerning whether “records maintained by a law enforcement unit of
[an] education agency or institution that were created by that law enforcement unit for the
purpose of law enforcement” includes student disciplinary records involving “serious criminal
conduct.” See id. (citing Harris v. Olszewski, 442 F.3d 456, 467–68 (6th Cir. 2006), and then
citing United States v. Miami Univ., 294 F.3d 797, 814–15 (6th Cir. 2002)).
Yet we find that whether deference was warranted on such arcane topics as those has
little relevance to the Offset Provision. It is difficult to see how the Rule represents mere
“implementation details” when it supplied content without which the Offset Provision literally
could not function. And, in any event, Treasury is wrong to suggest that we should act “as if we
were interpreting a statute which has no implications for the balance of power between the
Federal Government and the States.” Va. Dep’t of Educ. v. Riley, 106 F.3d 559, 567 (4th Cir.
1997) (en banc).22 Unlike the distribution of incontinence products or the release of disciplinary
records, control over taxation is a core aspect of state sovereignty. See Dep’t of Revenue of Or.,
510 U.S. at 345; Lane County, 74 U.S. at 76. For Congress to impose conditions in that area, it
must do so in clear and unmistakable terms. See, e.g., SWANCC v. U.S. Army Corps of Eng’rs,
531 U.S. 159, 172–73 (2001) (explaining that the Court “would not extend Chevron deference”
to an agency interpretation involving “federal encroachment upon a traditional state power.”);
see also Ala. Ass’n of Realtors v. Dep’t of Health & Hum. Servs., 141 S. Ct. 2485, 2489 (2021).
erroneous because the “[Supreme] Court has often declined to apply Chevron deference when the government fails
to invoke it”).
22
We quote from Judge Luttig’s dissenting panel opinion, the relevant portion of which a majority of the
full Fourth Circuit adopted upon en banc rehearing. See Va. Dep’t of Educ., 106 F.3d at 561.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 37
When such a clear-statement rule is in play, it is insufficient merely that an agency reasonably
liquidated ambiguities in the relevant statute. Id.; see also Va. Dep’t of Educ., 106 F.3d at 567
(declining to apply Chevron deference to an ambiguous spending statute because “[i]t is
axiomatic that statutory ambiguity defeats altogether a claim by the Federal Government that
Congress has unambiguously conditioned the States’ receipt of federal monies in the manner
asserted”); Carter v. Welles-Bowen Realty, Inc., 736 F.3d 722, 731 (6th Cir. 2013) (Sutton, J.,
concurring) (“All manner of presumptions, substantive canons and clear-statement rules take
precedence over conflicting agency views.”). Rather, in such circumstances, Congress itself
must have spoken with a “clear voice.” Pennhurst, 451 U.S. at 17.23
3. Treasury’s Counterarguments
Before we close, we address a couple of Treasury’s counterarguments to our conclusions
above. We first discuss the import of our decision in Cutter v. Wilkinson, which affirmed the
Religious Land Use and Institutionalized Persons Act (“RLUIPA”) against a Spending Clause
challenge. 423 F.3d 579, 585–86 (6th Cir. 2005). We then address Treasury’s claim that
Tennessee should have enjoyed clear notice of the Offset Provision’s meaning because the
phrase “directly or indirectly” “appears more than a thousand times in the U.S. Code.”
Appellants’ Supp. Br. at 3.
a. Cutter v. Wilkinson and the RLUIPA Comparison
Resisting our merits analysis, Treasury asserts that our decision today conflicts with
circuit precedent sustaining RLUIPA against a Spending Clause challenge. Cutter, 423 F.3d at
585–86. We agree that RLUIPA is a helpful comparison—just not in the way Treasury thinks.
We begin with some background about RLUIPA itself. From 1963 to 1990, the Supreme
Court interpreted the Free Exercise Clause to require state officials to justify even incidental
23
Conversely, though, we note that this analysis has no effect on our earlier mootness determination
concerning Kentucky. Even if the Rule cannot fill in missing Spending Clause conditions, it can at least still bind
Treasury in how it will administer the statute. And neither Tennessee nor Kentucky sought vacatur of the Rule
under 5 U.S.C. § 706. Vacatur at least possibly could have revived the specter of Treasury enforcing the Offset
Provision consistent with the money-is-fungible interpretation. But even after vacatur, that possibility would still
seem rather remote, given Treasury’s insistence that the text of the Offset Provision alone precludes the money-is-
fungible reading. See, e.g., Appellants’ Supp. Br. at 2 n.2.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 38
burdens on religious free exercise under strict scrutiny. See, e.g., Sherbert v. Verner, 374 U.S.
398, 403 (1963). A plaintiff could make out a prima facie case of a constitutional violation if she
could establish that she had a sincere religious belief upon which the government had imposed a
substantial burden, even if the burden were merely incidental. Id. And if that showing were
made, the state then had to prove that its interest in imposing the burden was “compelling,” id.,
and that it had employed the means least restrictive on religious exercise in achieving its
compelling interest. Thomas v. Rev. Bd. of Ind. Emp. Sec. Div., 450 U.S. 707, 718 (1981).
During the quarter-century in which this framework prevailed, the Supreme Court produced a
sizeable corpus of decisions describing its particular contours. See, e.g., Sherbert, 374 U.S. at
398; Gillette v. United States, 401 U.S. 437 (1971); Wisconsin v. Yoder, 406 U.S. 205 (1972);
Thomas, 450 U.S. at 707; United States v. Lee, 455 U.S. 252 (1982); Goldman v. Weinberger,
475 U.S. 503 (1986); Bowen v. Roy, 476 U.S. 693 (1986); Hobbie v. Unemployment Appeals
Comm’n of Fla., 480 U.S. 136 (1987); Lyng v. Nw. Indian Cemetery Protective Ass’n, 485 U.S.
439 (1988); Frazee v. Ill. Dep’t of Emp. Sec., 489 U.S. 829 (1989). And the lower courts applied
it to hundreds of concrete disputes. See generally James E. Ryan, Smith and the Religious
Freedom Restoration Act: An Iconoclastic Assessment, 78 Va. L. Rev. 1407 (1992) (cataloging
lower-court applications).
In 1990, however, the Supreme Court functionally overruled this body of precedent,
holding that incidental burdens on religious practice merited only rational-basis review. Emp.
Div., Dep’t of Hum. Res. of Or. v. Smith, 494 U.S. 872, 878–79 (1990). But Congress, incensed
by the Smith decision, twice attempted to overrule it. See 42 U.S.C. § 2000bb et seq. (Religious
Freedom Restoration Act); 42 U.S.C. § 2000cc et seq. (RLUIPA). Its second attempt, RLUIPA,
restored strict-scrutiny analysis in the land-use and prison-administration contexts. § 42 U.S.C.
§§ 2000cc, 2000cc–1. Congress partially rooted its power to enact such a statute in the Spending
Clause, 42 U.S.C. § 2000cc-1(b)(1)–(2), and so it conditioned the receipt of certain federal funds
on compliance with the old strict-scrutiny framework. See, e.g., § 2000cc-1(a)(1)–(2). Ohio
(and various other states) argued that strict scrutiny was too indeterminate to form an enforceable
Spending Clause condition. See Gerhardt v. Lazaroff, 221 F. Supp. 2d 827, 841, 844 (S.D. Ohio
2002). But the district court rejected the argument, holding that strict scrutiny was such a well-
established framework before RLUIPA that even if it might present marginal indeterminacies in
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 39
certain applications, the states could easily discern what core obligations the statute entailed in
the mine-run of cases. See, e.g., id. at 844 (“Courts have been enforcing that exact standard
against state action for years.”).
Whether we ever actually adjudicated the correctness of that holding, we note, is
uncertain. It appears that Ohio’s officials pressed a different ambiguity argument on appeal to
this circuit: that RLUIPA did not clearly specify that it applied to existing federally funded
programs, rather than merely to programs established after its enactment. See Cutter, 423 F.3d at
585–86; see also Gerhardt, 221 F. Supp. 2d at 841 (distinguishing between the retroactivity
argument and the strict-scrutiny-is-too-indeterminate argument). But we held that RLUIPA
imposed that obligation clearly, since its text “explains that the Act applies to ‘any program or
activity that receives Federal financial assistance.” Cutter, 423 F.3d at 586 (citing 42 U.S.C.
§ 2000cc-1(b)(1)). And, given that statutory language, it is difficult to see how a different result
could have ensued.
Before us, however, Treasury appears to have erroneously exaggerated Cutter’s
precedential effect by claiming that our circuit also rejected the strict-scrutiny-is-too-
indeterminate argument. In particular, its reply brief claims that Ohio argued “RLUIPA’s ‘least
restrictive means standard’ constituted an ambiguous condition’ that was impermissible under
Pennhurst. Cutter, 423 F.3d at 586 (quotation marks omitted). But this Court disagreed,
explaining that ‘Congress need not ‘delineate every instance in which a State may or may not
comply with the least restrictive means test.’” Reply Br. at 6–7.24 In reality, the portions of
Cutter that Treasury quotes were describing a Seventh Circuit decision that had rejected “a
similar Pennhurst-based challenge to RLUIPA”—the strict-scrutiny-is-too-indeterminate
argument, not the anti-retroactivity argument before the panel in Cutter. Cutter, 423 F.3d at 586
(citing Charles v. Verhagen, 348 F.3d 601, 608 (7th Cir. 2003)).
24
Treasury doubled down on this representation at oral argument, stating, “[o]n the question of how much
has to be spelled out in the statute itself, Cutter involved a challenge to RLUIPA. RLUIPA said if you restrict the
religious exercise of people in covered institutions, you have to satisfy strict scrutiny. It’s of course highly unclear
how strict scrutiny is going to apply to a particular kind of policy. But the court said, and every other court to
consider the issue said, you don’t have to have spelled that out in the statute.” Recording of Oral Arg. at 16:46–
17:09.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 40
Set aside Treasury’s misreading of Cutter, however, and pretend that Cutter had actually
adjudicated the strict-scrutiny-is-too-indeterminate argument, so that we were bound today by a
holding that RLUIPA’s least-restrictive-means test satisfied the Spending Clause. What is that
supposed to tell us about the Offset Provision? There is no comparable quarter-century of
history in which the Supreme Court decided dozens of cases, and the lower courts decided
hundreds of cases, construing what it means to “directly or indirectly offset a reduction in the net
tax revenue . . . resulting from” a tax cut. 42 U.S.C. § 802(c)(2)(A). Indeed, Treasury conceded
at oral argument that it is aware of no example in which the phrase “directly or indirectly offset”
has ever even been used in a Spending Clause statute, much less been given an authoritative
construction by the Supreme Court in the context of tax cuts. Recording of Oral Arg. at 43:00–
43:50. So Treasury’s invocation of RLUIPA, it turns out, underscores a reason the Offset
Provision is impermissibly vague: given its terms’ apparent novelty, there is, unlike in the
context of religious free exercise, no expansive and authoritative corpus of federal-court
precedents which the states might have consulted in attempting to discern the nature of their
obligations.
b. “Directly or Indirectly” in the U.S. Code
Perhaps implicitly recognizing the dearth of relevant caselaw, Treasury last suggests that
Tennessee should have been able to ascertain its obligations under the Offset Provision because
various other federal statutes employ the phrase “directly or indirectly.” Appellants’ Supp. Br.
at 3. It “is commonly used simply to underscore that a restriction cannot be circumvented
through formalities,” Treasury says, and “appears more than a thousand times in the U.S. Code.”
Id. That is perhaps true, but this factoid seems of no consequence to us for at least three reasons.
First, as we noted above, Treasury conceded that it has no example of such a phrase in a
Spending Clause statute, much less one in the particular context of taxation, and, less still, one
that survived ambiguity challenges in federal court. Recording of Oral Arg. at 43:00–43:50.
Second, most of these other uses appear to have no conceivable relevance to the Offset
Provision. And, for that matter, they may make the vagueness issues even worse. For instance,
consider 22 U.S.C. § 9214(a)(3), which provides that Treasury may freeze the assets of anyone
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 41
who “knowingly, directly or indirectly, imports, exports, or reexports luxury goods into North
Korea.” The phrase in that context seemingly bars the use of third-party intermediaries to
circumvent a trade restriction. So Company A, wishing to execute proscribed shipments to
North Korea, still violates the statute by shipping the goods to Company B in Shanghai for
reexport into Pyongyang. Or take 29 U.S.C. § 432(a)(2), which requires officers of labor
organizations to report on stock they hold “directly or indirectly” in the business they seek to
unionize. Once again, the statute seems to bar circumvention through the use of a third-party
intermediary, such as holding the stock indirectly in an index fund. Or last, consider 15 U.S.C.
§ 7410(b), which prohibits the award of a “grant or fellowship . . . directly or indirectly, to any
alien from a country that is a state sponsor of international terrorism.” Again, and for the third
time, the phrase seems to bar the use of a third-party intermediary to circumvent the restriction:
the grant cannot be distributed to an “institution of higher education” for redistribution to the
alien. § 7410(c). So at best, these other uses have nothing to do with the Offset Provision, and, at
worst, might have misleadingly suggested that it imposed some particularized bar on the use of
third-party intermediaries to launder ARPA funds.
Last, as the above examples suggest, the relevant phrase is not just “directly or
indirectly,” but “directly or indirectly offset.” 42 U.S.C. § 802(c)(2)(A). The issue here is not
establishing that the Offset Provision bars “circumvent[ion] through formalities” in some broad,
general sense, but in determining whatever conduct the Offset Provision might treat as having
“directly or indirectly offset” a tax cut. For only then could the states have “ascertain[ed]” their
obligations under the Act. Arlington Cent. Sch. Dist. Bd. of Educ., 548 U.S. at 296 (quoting
Pennhurst, 451 U.S. at 17)). But that phrase, as far as we can tell from our research, occurs
exactly once in the entire U.S. Code—in the Offset Provision.
IV.
In closing, we reiterate the central conclusions we have reached today. Treasury’s
credible disavowal of the money-is-fungible interpretation mooted Kentucky’s challenge to the
Offset Provision, and so the district court erred when it enjoined Treasury from enforcing the
Offset Provision against Kentucky. We thus REVERSE the district court’s justiciability holding
as to Kentucky and VACATE the permanent injunction to the extent it bars enforcement of the
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 42
Offset Provision against Kentucky. By contrast, we AFFIRM the district court’s injunction as to
Tennessee. We do so because “[c]larity is demanded whenever Congress legislates through the
spending power[.]” Haight, 763 F.3d at 568. Yet clarity is just what the Offset Provision lacks.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 43
______________________________________________________
CONCURRING IN PART AND DISSENTING IN PART
______________________________________________________
NALBANDIAN, Circuit Judge, concurring in part and dissenting in part. I concur with
nearly all of the majority’s well-reasoned opinion. Importantly, I agree with the majority that the
vagueness of the American Rescue Plan Act of 2021 (“ARPA”) violates the Spending Clause.
And I agree that Tennessee has standing for the reasons that the majority gives. My only
disagreement is about whether Kentucky can press its claim. In short, I believe that both
Tennessee and Kentucky (“States”) have standing for reasons related to the federal government’s
intrusion on their sovereign-taxing authority. And I don’t believe that the Department of
Treasury’s (“Treasury”) Rules on ARPA’s enforcement (“Rules”) affect justiciability.1 So I
concur with respect to Tennessee’s participation in the case, but respectfully dissent over
Kentucky’s.
I.
Standing arises here in three possible ways: through what the majority calls the
“imminent-recoupment,” “compliance-cost,” and “sovereign-authority” theories. My concern is
1
My analysis assumes that the majority is correct that the one-party rule doesn’t apply. (See Majority
Opinion, at 20 n.12.) But I’m not sure that’s the case. The rule allows courts to review claims so long as one
plaintiff has standing. Massachusetts v. EPA, 549 U.S. 497, 505 (2007). And courts have applied the rule to other
Article III requirements like mootness. Nat’l Rifle Ass’n of Am. v. Magaw, 132 F.3d 272, 278 n.4 (6th Cir. 1997);
see Nat’l Rifle Ass’n of Am., Inc. v. McCraw, 719 F.3d 338, 344 n.3 (5th Cir. 2013). But this doesn’t mean that a
party can obtain relief to which it is not entitled. So we can eventually address standing when a plaintiff would
obtain “attorney’s fees” or other “relief different from that sought by plaintiffs whose standing has not been
questioned.” Gen. Bldg. Contractors Ass’n v. Pennsylvania, 458 U.S. 375, 402 n.22 (1982); see 13B Charles A.
Wright & Arthur R. Miller, Federal Practice & Procedure, § 3531.15, at *4 (3d ed. 2022).
But a different situation arises when each plaintiff would obtain the same relief regardless. For cases involving
injunctive or declaratory remedies, the practical effects of granting relief may apply to each plaintiff even if we
dismiss one for lack of standing. For example, in Bowsher v. Synar, the Supreme Court applied the one-party rule to
avoid analyzing other plaintiffs’ standing. 478 U.S. 714, 721 (1986). Without returning to the standing questions,
the Court affirmed relief that declared a statute unconstitutional. See id. at 736. Because the standing
determinations wouldn’t affect how the Court distributed relief, the Court didn’t need to revisit its use of the rule.
See id.; accord McCraw, 719 F.3d at 344 n.3 (recognizing that courts “do not need to verify the independent
standing of the other co-plaintiffs” when one party with standing “rais[es] the same claims and issues” (quotation
omitted)). Here, Tennessee meets Article III’s requirements, and the relief granted to Tennessee applies to
Kentucky regardless: Treasury cannot enforce ARPA’s unconstitutional conditions. So we did not need to resolve
Kentucky’s mootness. That aside, I analyze why both States meet Article III’s requirements.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 44
with the last theory, under which I believe both States have standing. To establish standing
under any theory, of course, the States must assert an injury that is (1) actual or imminent and
concrete and particularized, (2) traceable to Treasury, and (3) likely to be redressed by a
favorable decision. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992). Looking at the
sovereign-authority theory, I believe that the only question here is whether the States assert an
imminent injury under the first inquiry. And I find that both Kentucky and Tennessee meet this
requirement.
With respect to “injury,” courts have recognized for over a century that states “are not
normal litigants for the purposes of invoking federal jurisdiction.” Massachusetts v. EPA,
549 U.S. 497, 518 (2007). This regard stems from each state’s “well-founded desire to preserve
its sovereign territory.” Id. at 519. For that reason, we don’t treat states as “mere provinces or
political corporations.” Alden v. Maine, 527 U.S. 706, 715 (1999). Instead, we recognize their
“residuary and inviolable sovereignty.” The Federalist No. 39, at 245 (James Madison) (Clinton
Rossiter ed., 1961). And we give “special” recognition to a case when a state sues the federal
government. Saginaw County v. STAT Emergency Med. Servs., Inc., 946 F.3d 951, 957 (6th Cir.
2020).
Although states hold a unique status in federal court, they cannot avoid “the
constitutional baseline” of Article III. Id. States must still prove a cognizable case or
controversy. Arizona v. Biden, 40 F.4th 375, 385 (6th Cir. 2022) (“Article III’s foundational
standing requirements remain for private and public litigants alike.”).
Still, states have “special solicitude” when they incur “quasi-sovereign” injuries. Id.
They cannot “bypass proof of injury in particular or Article III in general,” but they may incur
injuries that private parties cannot. Id. at 385–86. Among other things, states can allege
sovereign-related injuries like federal regulation over local-lawmaking authorities, threatened
intrusions on state territory, or public nuisances, in which a state seeks “to safeguard its domain
and its health, comfort and welfare.” Id at 386. (quoting Kentucky v. Biden, 23 F.4th 585, 596
(6th Cir. 2022)); see Massachusetts, 549 U.S. at 517, 521–23 (recognizing the sovereign and
quasi-sovereign interests in protecting coastal lands from rising sea levels).
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 45
And the list doesn’t end there. This Court has acknowledged other ways that sovereign
or quasi-sovereign interests can support state standing. States can “plausibly allege[] that the
federal government has intruded upon an area traditionally left to the states.” Kentucky, 23 F.4th
at 599. They can allege that federal enforcement threatens current or future state policies. See
id. And they can allege federal threats to their economies. See id. at 599–601 (“[States] . . . have
a quasi-sovereign interest in defending their economies from the alleged negative ramifications
of [federal law].”). Indeed, as federal regulation has increased over the states, the list of
sovereign injuries has grown.
Finally, a quick note about the “imminence” part of the injury-in-fact inquiry. The
majority analyzes imminence using the “pre-enforcement” test from Susan B. Anthony List v.
Driehaus, 573 U.S. 149 (2014).2 And that is the way that we typically assess imminence when a
case concerns a pre-enforcement challenge. But because the States here allege sovereign and
quasi-sovereign injuries, we can assess imminence under a slightly different analysis.
A state can establish an imminent injury by showing a “risk of harm” to their sovereign
or quasi-sovereign interests. Massachusetts, 549 U.S. at 521 (quoting Lujan, 504 U.S. at 560).
In Massachusetts v. EPA, EPA’s refusal to regulate greenhouse gas emissions presented an
imminent injury to state interests related to climate change. Id. The “risk of harm” of sea levels
rising and damaging state-coastal property created the imminent injury. Id. at 521–23; see
Saginaw County, 946 F.3d at 957 (recognizing that the imminence in Massachusetts came from
this “risk”). And the Supreme Court reasoned that a state that has a procedural right to protect its
sovereign interests can satisfy Article III’s requirements “without meeting all the normal
standards for redressability and immediacy.” Massachusetts, 549 U.S. at 517–18.
We have analyzed imminent harms to sovereign interests in pre-enforcement challenges
too. In our recent decision in Kentucky v. Biden, which concerned a pre-enforcement challenge
to COVID-19 mandates, we found standing under the sovereign-authority theory. See 23 F.4th
2
Under the Susan B. Anthony test, the States needed to show (1) injuries in the original complaint that
establish an intention to engage in conduct arguably affected with a constitutional interest, (2) that ARPA arguably
proscribes this conduct, and (3) that if the States should pursue such conduct, a credible threat of recoupment action
exists. See 573 U.S. at 161–64.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 46
at 598–601. We held that the sovereign injuries alleged met Article III’s imminence
requirements because the states there “show[ed the] negative effects” of federal policy on their
sovereign interests. Id. at 602. And sister circuits applying the sovereign-authority theory have
also analyzed imminence similarly.3 Here, the States allege the same risk of harm to their
sovereign interests.
II.
Applying the sovereign-authority framework, the States have standing in this case. See
Massachusetts, 549 U.S. at 520. They allege that ARPA “unconstitutionally intrud[es] on their
sovereign authority, by interfering with the orderly management of their fiscal affairs, and by
requiring them to forgo their constitutional taxing powers or face an action to return much-
needed federal funds after they have already been spent.” (R. 1, Original Complaint, PageID 5
¶ 12.) Each threat poses an imminent “risk of harm to” their sovereign interests. Massachusetts,
549 U.S. at 521. As described below, they have alleged with particularity ARPA’s “negative
effects” on their taxing powers, citizens, and economy. Kentucky, 23 F.4th at 602.
This Court’s growing list of sovereign and quasi-sovereign injuries reinforces the States’
standing in three ways. First, they have “plausibly alleged that the federal government has
intruded upon an area traditionally left to the states”—state taxes on state citizens. Kentucky,
23 F.4th at 599; see (R. 1, Original Complaint, PageID 2–3, 5–6 ¶¶ 1–3, 12 (discussing the
federalism implications of ARPA); R. 1, Original Complaint, PageID 15–16 ¶ 40 (“[T]he power
to tax and spend is a sovereign function that lies at the core of State power.”)); see generally
Dep’t of Revenue of Or. v. ACF Indus., Inc., 510 U.S. 332, 345 (1994) (describing the tax power
as “central to state sovereignty”).
3
See, e.g., Texas v. Biden, 20 F.4th 928, 970 (5th Cir. 2021) (reasoning that a state’s “special solicitude in
the standing inquiry . . . means imminence and redressability are easier to establish [] than usual”), rev’d and
remanded on other grounds, 142 S. Ct. 2528 (2022); Texas v. United States, 809 F.3d 134, 154–55 (5th Cir. 2015)
(concluding that states had sovereign-authority standing in a pre-enforcement challenge to federal immigration law
without using the pre-enforcement framework); Sturgeon v. Masica, 768 F.3d 1066, 1073–74 (9th Cir. 2014)
(reasoning that a state failed to prove an “actual or imminent” injury by not identifying “any actual conflict”
between federal and state law that showed how a federal requirement would “interfere[] with the state’s control over
and management of” state affairs), vacated and remanded sub nom. on other grounds, Sturgeon v. Frost, 577 U.S.
424 (2016); Se. Fed. Power Customers, Inc. v. Geren, 514 F.3d 1316, 1322–23 (D.C. Cir. 2008) (concluding that
states had an injury-in-fact because they “credibly claim[ed] to fear” that proposed changes to water-storage uses
would result in diminished water flows).
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 47
Second, after discussing their past tax cuts, they allege that ARPA’s vague restrictions
“chill[] legislative action” to enact similar policies. (R. 1, Original Complaint, PageID 17 ¶ 43;
see id. at PageID 16–17 ¶¶ 41–42.) Financial hardship in part led the States to cut taxes for
homeowners and businesses alike. (Id.) Kentucky, for example, enacted a bill intended to
“invest in and revitalize a predominantly minority community in Kentucky’s largest city.” (Id. at
PageID 16 ¶ 41 (citing 2021 Ky. H.B. No. 321 (NS)).) The tax cuts there fall within a “core part
of its sovereign duty” and will lead to a “decrease in net revenue.” (Id.) Likewise, Tennessee
seeks to cut its “professional privilege tax” to “attract new businesses and residents, continuing
Tennessee’s proven record in promoting economic growth that benefits the entire [s]tate.” (Id. at
PageID 16 ¶ 42 (citing H.B. 0987, S.B. 0184, 112th General Assembly (2021)).) Tennessee also
expects the bill to reduce state revenue. (Id.)
All this to say, ARPA’s vague conditions chill the States from enacting similar tax cuts.
The States allege they cannot confidently enact tax policy because they fear imminent
recoupment action for exercising their sovereign-taxing authority. (See id. at PageID 17 ¶¶ 43–
44.) And because of the “fungible” quality of money, the States construe ARPA to “potentially
affect[] all State legislative and executive actions that reduce net tax revenues,” even if they have
nothing to do with ARPA’s COVID-19 relief. (Id. at PageID 16, 17 ¶¶ 41, 44 (quotation
omitted).) ARPA then “likely implicates” the powers to “make and enforce policies and
regulations” and the “traditional prerogative to superintend” local taxes on state citizens.
Kentucky, 23 F.4th at 599.
To top it all off, the States have standing because ARPA’s chilling effect “threatens to
damage each of the [S]tates’ economies.” Id. at 599. The chilling effect to enact tax policies
that “invest in and revitalize” communities, (R. 1, Original Complaint, PageID 16 ¶ 41), or
“attract new businesses and residents” to promote “economic growth,” (id. at PageID 16 ¶ 42),
stagnates the States’ fiscal health and interest in helping their citizens. Kentucky and Tennessee
plausibly allege that resistance to ARPA will result in fewer tax cuts for homeowners and
businesses, “all to the detriment of their state economies.” Kentucky, 23 F.4th at 601. Because
the States have sovereign and quasi-sovereign interests in “defending their economies from the
alleged negative ramifications” of ARPA, they also “have standing to contest it.” Id.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 48
The States’ “sovereign prerogatives are now lodged in the Federal Government, and
Congress has ordered” Treasury to enforce the Offset Provision and initiate recoupment actions
to recover any misused funds. Massachusetts, 549 U.S. at 519; see 42 U.S.C. § 802(e). That the
States face threats from exercising their traditional-taxing authority only reinforces that they
have a sufficient stake in the case so as “to warrant the exercise of federal judicial power.”
Massachusetts, 549 U.S. at 519. So along with giving this case “special” recognition because the
States are suing the federal government, Saginaw County, 946 F.3d at 957, we should afford the
States “special solicitude in our standing analysis.” Massachusetts, 549 U.S. at 520.
Thus, I agree with the majority that the States allege imminent injuries that grant them
standing.4 Recognizing that the States suffer from sovereign injuries raises this question: Did
Treasury’s Rules moot the States’ legal interests in obtaining relief?
III.
This is where I part ways with the majority; I believe the answer is no. Treasury’s Rules
do not moot Kentucky or Tennessee’s controversy over their sovereign interests. Even with the
guidance, the States still suffer from the same harm explained above. And both meet Article
III’s requirements as a result.
A case only becomes moot “when the issues presented are no longer live or parties lack a
legally cognizable interest in the outcome.” Thomas v. City of Memphis, 996 F.3d 318, 323 (6th
Cir. 2021). Said differently, parties do not have a mootness problem if “the relief sought would,
if granted, make a difference to the legal interests of the parties.” Ford v. Wilder, 469 F.3d 500,
504 (6th Cir. 2006) (internal quotation omitted). Even with the Rules, the States still need
injunctive and declaratory relief to avoid Treasury’s enforcement of ARPA’s unconstitutionally
vague conditions.
4
One oddity about this case, it’s not crystal clear to me what the States’ cause of action is here—ARPA, for
example, doesn’t appear to recognize their right to sue the federal government. And this Court has held that a cause
of action must exist apart from standing, even in a sovereign-authority case. Kentucky, 23 F.4th at 602. It appears
to me, however, that the Supreme Court has recognized an action in cases that allege Spending Clause violations
under the Constitution itself. See Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 540, 575 (2012); New York v.
United States, 505 U.S. 144, 154, 172 (1992); South Dakota v. Dole, 483 U.S. 203, 205, 210–12 (1987). And,
tellingly, the government here does not contest the States’ ability to sue apart from their justiciability arguments.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 49
The States’ claims withstand mootness because their issues are still “live.” Thomas,
996 F.3d at 323. As they originally alleged, ARPA still fails to provide clear notice of a funding
condition. (R. 1, Original Complaint, PageID 17–19 ¶¶ 46–54.) And even later, the States
alleged that Treasury “cannot cure the inherent ambiguity in [ARPA] because Congress must
provide the recipients of federal funds with clear notice of any conditions on the use of the
funds.”5 (R. 23, Amended Complaint, PageID 148 ¶ 51.) (emphasis in original). With that in
mind, they allege the Rules “cannot save” ARPA from its unconstitutional conditions. (Id. at
PageID 150 ¶ 61.) This all rings true.
Although the Rules tried to fill in the blanks of ARPA, Treasury cannot resolve ARPA’s
open-endedness. The Rules tried to construct ARPA’s guidelines by providing what ARPA
didn’t: a revenue baseline and guidance on when Treasury would enforce the Offset Provision.
See 31 C.F.R. §§ 35.3; 35.8(b); see also Coronavirus State and Local Fiscal Recovery Funds,
87 Fed. Reg. 4338, 4423, 4428 (Jan. 27, 2022) (to be codified at 31 C.F.R. § 35). But Treasury
couldn’t provide the clear notice of the conditions ARPA entailed; Congress, through ARPA
alone, had that responsibility. And nothing in ARPA alludes to the Rules’ selected baseline or
construction of the Offset Provision. ARPA’s text does not clearly determine why a 2019
baseline applies or why another baseline (like a different year) does not. Nor does ARPA
address whether it prohibits a reduction in expected tax revenues or whether it prohibits a
reduction in actual tax revenues. Only the Rules purport to provide the answer (that states can
choose either), but that answer does not stem from ARPA’s text.
And, perhaps most importantly, the regulation does not fix the Offset Provision in three
other ways: Vagueness still exists from ARPA’s lack of explanation on how to (1) calculate a
“reduction” in net tax revenue, (2) determine whether such a reduction resulted from a tax cut,
and (3) tell what particular conduct constitutes an “indirect” offset.
5
Indeed, one scholar contends that only federal statutes―not federal agency conditions―can “defeat state
law.” Philip Hamburger, Purchasing Submission: Conditions, Power, and Freedom 130 (2021). As traditionally
recognized, statutes “enjoy the obligation of law” because “a legislative body representative of the people” adopts
them. Id. Hamburger notes that this logic does not legitimize a federal agency’s elaboration of a statute. Id. at 131.
Agencies, of course, do not represent the people in the same way Congress does, so their rules may not render state
law void. Id.
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 50
Indeed, Kentucky and Tennessee allege that the Rules made their concerns over their
tax authorities even worse. (See R. 23, Amended Complaint, at PageID 147 ¶ 50.) If ARPA
is impermissibly vague, as the States allege and the majority concludes, then Kentucky and
Tennessee still face “an unlawfully-imposed quandary in determining how to exercise its
sovereign taxing power.” Ohio v. Yellen, 547 F. Supp. 3d 713, 725 (S.D. Ohio 2021).
The States’ legislators considering tax changes may delay, second guess, or abandon parts of tax
policies because ARPA does not explain the impact that such changes will have on their ability
to retain ARPA funds. See id.
And even if the Rules could clarify ARPA’s open-endedness, the States still face a live
threat to their sovereign authority. The Rules seek to allow states to enact tax cuts resulting in
revenue reductions so long as they identify permissible sources of offsetting funds. See, e.g.,
87 Fed. Reg. at 4428. Although allowing for some tax cuts, the Rules still narrow the range of
permissible tax policies the States may enact, which in turn takes a toll on the States’ citizens and
economies.
What’s more, the Rules do not ease the States’ concern regarding Treasury’s enforcement
against them. Secretary Yellen’s threat to enforce the Offset Provision in her earlier letter to the
States still stands. (See R. 1-2, Yellen Letter, PageID 33–34.) Indeed, the Rules make matters
worse. They expressly reserve the Secretary’s broad authority to enforce ARPA’s requirements
and provide that “[n]othing” in the Rules “shall limit the authority of the Secretary to take action
to enforce conditions or violations of law . . . .” 31 C.F.R. § 35.4(a) (2022). So the Rules do not
limit ARPA’s enforcement; they instead provide the Secretary broad enforcement discretion. If a
state accepts the funds and the Secretary believes that the state violates ARPA, that state must
“repay to the Secretary an amount equal to the amount of funds used in violation [thereof].”
42 U.S.C. § 802(e). All this considered, a credible threat of enforcement still stands.
Next, while facing “live” issues, the States continue to have “a legally cognizable interest
in the outcome” of this case. Thomas, 996 F.3d at 323. The Rules do not “mak[e] it ‘impossible
for the [C]ourt to grant any effectual relief[.]’” Id. at 330 (quotations omitted). The Court can
still grant injunctive and declaratory relief given the States’ continued stake in the case without
creating an “advisory opinion that Article III prohibits.” Id. That such relief “would have [a]
No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 51
practical effect” on the States reaffirms that mootness does not pose a problem here. Id.; see
Ford, 469 F.3d at 504. Because ARPA’s vague conditions still restrict States from enacting tax
cuts in their sovereign capacities and Treasury-recoupment actions remain a credible threat, the
relief sought affects the parties’ current legal interests. See Ford, 469 F.3d at 504–05. If
granted, the States’ relief would help them avoid enforcement of ARPA’s unconstitutionally
vague conditions.
For these reasons, I do not find the claims moot like the majority. I acknowledge that the
States did not allege they would fail to offset their funds with a permissible revenue source. See
87 Fed. Reg. at 4428. But I don’t believe that moots Treasury’s threat of recoupment action.
Again, the Rules still limit the States from enacting tax policies if they do not offset a net
reduction with permissible revenue sources. This restraint makes the States fear that they
“cannot lower their citizens’ tax burdens without suffering a penalty.” (R. 23, Amended
Complaint, PageID 131 ¶ 1.) And seeing that the Rules do not “limit the authority of the
Secretary” to enforce ARPA, a credible threat of recoupment action still stands. 31 C.F.R.
§ 35.4(a). Or if the States wish to comply with the Rules, they must do something—either raise
other taxes or lower expenditures elsewhere in the budget to offset a revenue reduction. That
something creates an ongoing injury. On that note, the Rules also leave the States’ claims of
vagueness intact, which leads ARPA to intrude upon the States’ tax powers—“an area
traditionally left to the states.” Kentucky, 23 F.4th at 599. And the chilling effects and the threats
to the States’ economies remain. See id. at 599–601. Because the States still face the effects of
ARPA’s vagueness, the Rules do not moot this case.
IV.
I concur with almost all of the majority opinion. But I respectfully dissent in part only to
explain why I believe the Rules do not moot the States’ controversy over their sovereign-tax
interests. Thus, I would grant both Kentucky and Tennessee their sought-after relief. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487970/ | Filed 11/18/22 P. v. Zamora-Canada 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, C090890
Plaintiff and Respondent, (Super. Ct. No. 16FE021333)
v.
GERMAN ZAMORA-CANADA,
Defendant and Appellant.
Defendant German Zamora-Canada (defendant) and codefendant Julian Garcia
(Garcia) left a Sacramento area nightclub and were driving away when they received a
phone call from a man who was with them at the club. A short time later, they returned
to the club’s parking lot armed with handguns. An argument ensued near a taco truck
between defendant, Garcia, and an intoxicated group of men who were acting
belligerently and picking fights outside the club. In response, defendant and Garcia drew
their guns and started shooting at the unarmed members of the victim group. Three
people suffered nonfatal gunshot wounds. An innocent bystander who worked in the taco
truck suffered multiple gunshot wounds and died.
1
Defendant was charged with murder (§§ 187, subd. (a)—count one),1 three counts
of attempted murder (§§ 664, 187, subd. (a)—counts two, three & four), and being a
felon in possession of a firearm. (§ 29800, subd. (a)(1)—count six.) After trial, the jury
found defendant guilty of second degree murder and one count of attempted murder, both
with firearm enhancements. The jury also found defendant guilty of being a felon in
possession of a firearm. In a bifurcated trial, the court found true that defendant suffered
a prior strike conviction. The court sentenced defendant to a total aggregate term of 99
years four months to life in prison.
On appeal, defendant argues there was insufficient evidence to support his
convictions for attempted murder and murder and that the court erroneously instructed
the jury regarding causation. He also argues that the trial court erred in denying his
motion for a mistrial after a prosecution witness breached a pretrial in limine ruling.
Finally, he contends that his sentence must be vacated and the matter remanded for a new
sentencing hearing because he was constructively denied his constitutional right to
counsel or, alternatively, received ineffective assistance of counsel, and makes other
claims of error relating to the imposition of sentence and the abstract of judgment. We
agree that defendant was constructively denied his constitutional right to the assistance of
counsel at sentencing. We shall vacate the sentence and remand for resentencing. The
judgment of conviction is otherwise affirmed.
BACKGROUND FACTS AND PROCEDURE
A. Attempted murders of Marcos, Alexis, and Jose
On the evening of October 8, 2016, Marcos H. (Marcos), attended a concert at a
Sacramento area nightclub with a group that included his brothers, Alexis C. (Alexis) and
Victor C. (Victor), and friends Jose C. (Jose) and Jesus C. (Jesus).
1 Undesignated statutory references are to the Penal Code.
2
The concert ended at approximately 1:30 a.m., at which point Marcos’s group
exited the club to a parking lot full of people. They were unarmed, and most of the
members of the group had been drinking heavily and were visibly intoxicated. Security
at the event described them as loud, obnoxious, and aggressive, and that they were
picking fights and “causing trouble” that night.
In front of the club, members of Marcos’s group got into a physical fight with one
of the bands that played that night. The fight began in front of the club and moved to the
rear before security broke it up. The security team then escorted Marcos’s group back to
the front of the club, where Victor’s wife, Jennifer C. (Jennifer), was waiting to drive
them home. On the way, some of those in Marcos’s group punched at cars that were
driving by and yelled at the occupants of the cars. Security officers specifically recalled a
verbal altercation between Marcos’s group and the occupants of a black sedan.
Meanwhile, in front of the club, several members of Marcos’s group, including
Alexis, Jose, and Jesus, decided to get some food from a taco truck parked outside the
club. Marcos testified that when they arrived at the truck, Alexis and Jose started
“cutting the line,” “bumping into people,” and Jesus was loudly demanding his tacos. An
argument ensued with two men, who appeared to be friends, standing in (or near) the line
at the taco truck. After Jesus loudly demanded his tacos, Marcos testified that one of the
men turned and said, “Don’t scream in my ear.” Marcos told the police that the other
man, later identified as defendant, was wearing a red soccer jersey, whom Marcos had
recalled seeing earlier inside the club. Marcos told the police that defendant said, “You
guys really think you can fuck with me like that?” Marcos testified that Alexis then
looked at defendant and gestured with his head, as if to say, “What’s up?” Marcos
testified that defendant then lifted his shirt and drew a black semiautomatic handgun from
his waistband. As another man also began lifting his shirt, Jesus fled.
Marcos testified that he instinctively ran toward defendant, who was about 10 feet
away, and tried to bear hug him to “keep the gun down.” However, after a brief struggle,
3
he was shot once in the right leg and fell to the ground. Alexis testified that when he saw
the gun, he also attempted to grab it, but he was shot as well and fell to the ground.
Jose testified that after hearing shots, he tried to tackle the shooter from behind,
but fell during the struggle. Jose testified that as he lay on the ground, someone shot him
several times in the stomach, neck, and legs.
Security guard Veronica H. (Veronica), who was standing near the taco truck,
testified that she saw Marcos’s group arguing with two men in the food line. She saw
one of those two men pull out a black gun with an extended magazine (an “extra piece
[on] the bottom”) and point it in the direction of the group. She testified that she saw two
shots fired before she hid behind her car. Her description of the shooter was generally
consistent with defendant’s appearance: Hispanic, around 20 to 25 years old, black hair
pulled into a ponytail, neck tattoos, four dots tattooed under his left eye, wearing a red T-
shirt, blue jeans, and white shoes. She recognized the shooter as someone who had been
in the club earlier that evening in a group with three to five others.
Cesar Aleman-Luna (Aleman-Luna) and Gustavo C. (Gustavo) were working in
the taco truck at the time of the shooting. Gustavo testified that he heard an argument
outside and then saw a man in a red T-shirt draw a gun from his waistband and point it at
another man, dressed in black, who tried to flee. Gustavo did not see the shooter fire the
gun, but he heard the gunshots and concluded the fleeing man in black had been shot
because the man “jumped to the floor.”
Witnesses also described seeing a second shooter. Catherine G. (Catherine), who
had attended the concert that night, identified the second shooter as codefendant Garcia.
Catherine testified that she saw Garcia standing and pointing a gun at a man on the
ground. She heard the man on the ground yelling, “Don’t shoot. Don’t shoot,” as Garcia
shouted, “Get up,” before seeing Garcia shoot the prone man “[p]robably twice.”
4
Consistent with Catherine’s account, a security guard testified that he saw a
second shooter stand over someone and fire several shots. His description of this shooter
was generally consistent with the appearance of Garcia.
B. Murder of Aleman-Luna
Multiple witnesses testified that after the initial round of gunshots, there was a
brief pause before shooting resumed. Gustavo testified that during the pause, Aleman-
Luna left the truck to shut off the propane tanks. Through the truck’s side mirror,
Gustavo watched Aleman-Luna bend down at the back of the truck. As Aleman-Luna
stood back up, he was shot five times. He died from his wounds. None of the witnesses
who testified were able to see who shot Aleman-Luna and there was no evidence as to
what type of gun was used to shoot him.
After the shooting, a witness described seeing defendant and two other men flee
the scene in a silver Jeep Grand Cherokee registered to codefendant Orlando Vidana
(Vidana).
C. Ballistics evidence
Officers recovered 13 bullet casings from the scene: two .40-caliber casings and
11 nine-millimeter casings. A criminalist testified that the two .40-caliber casings were
fired from a single .40-caliber firearm and that the nine-millimeter casings also were fired
from a single gun.
D. Investigation and arrest
Based on surveillance videos and cell phone records, police detectives determined
that defendant, Garcia, Vidana, and two other men (Jason C. and Alejandro J.) arrived at
the club together in two cars: Vidana’s silver Jeep and a dark sedan. After the concert
ended, at approximately 1:30 a.m., defendant’s group returned to their cars and the dark
sedan followed the Jeep around the parking lot before the Jeep drove away.
At approximately 2:00 a.m., security guards can be seen on video reacting to a
disturbance outside the club. At around the same time, a dark sedan can be seen driving
5
through the parking lot of the club. Shortly thereafter, Jason C. called defendant.
Vidana’s Jeep, which had been traveling away from the club, made a U-turn and headed
back to the club. The shooting occurred within minutes after the Jeep returned to the
club. Immediately after the shooting, cameras recorded the Jeep fleeing the scene.
Approximately 10 days after the shooting, police found Vidana’s Jeep abandoned
at an apartment complex in Vallejo. The license plates had been removed. Samples
taken from inside the Jeep revealed gunshot residue particles on the driver’s seat and the
left rear passenger seat. Investigators found a live nine-millimeter ammunition cartridge
in the glove box. DNA taken from the interior of the Jeep consistent with Vidana and
Garcia was found, but inconclusive as to defendant. DNA taken from the cartridge was
consistent with Vidana.
Police subsequently arrested Garcia and Vidana. Inside Garcia’s residence, police
found clothing that matched what he reportedly had been wearing on the night of the
shooting: a pair of black dress pants and a white button-up collared shirt.
Defendant was arrested in December 2016 after a car chase. Alex L. (Alex), who
was in the car with defendant during the pursuit, told police that defendant kept yelling,
“I’m going away for life.” Alex also told police that defendant had been staying with
him “on and off.” Police searched Alex’s residence and found a box of .40-caliber
ammunition cartridges in a bedroom. Neither a red shirt nor the firearms used in the
shooting were recovered.
Witnesses identified defendant and Garcia as the shooters in photographic lineups
and at trial.
E. Verdict and sentencing
The People filed an information charging defendant and codefendants Garcia and
Vidana with the following felonies: the murder of Aleman-Luna (§§ 187, subd. (a)—
count one); the attempted murder of Alexis (§§ 664, 187, subd. (a)—count two); the
attempted murder of Marcos (§§ 664, 187, subd. (a)—count three); and the attempted
6
murder of Jose. (§§ 664, 187, subd. (a)—count four.) The information alleged in counts
one through four that defendant and Garcia personally and intentionally discharged a
firearm causing great bodily injury or death (§ 12022.53, subds. (b), (c) & (d)) as to each
of the four victims. It also charged defendant with being a felon in possession of a
firearm. (§ 29800, subd. (a)(1)—count six.)2 The information further alleged that
defendant suffered a prior strike conviction for robbery (§ 211) within the meaning of the
Three Strikes law. (§§ 667, subds. (b)-(i), 1170.12, subd. (c)(2).)
After trial, the jury found Garcia guilty of the first degree murder of Aleman-Luna
(count one), the attempted murders of Alexis (count two) and Jose (count four), and being
a felon in possession of a firearm (count five), but not guilty of the attempted murder of
Marcos (count three). The jury found codefendant Vidana not guilty of counts one and
four, but deadlocked on counts two and three.
The jury found defendant not guilty of the attempted murder of Alexis and Jose
(counts two & four), but guilty of the second degree murder of Aleman-Luna (count one),
the attempted murder of Marcos (count three), and being a felon in possession of a
firearm (count six). The jury also found true the firearm allegations attached to counts
one and three. In a bifurcated proceeding, the trial court found true that defendant
suffered a prior strike conviction.
The court imposed a total aggregate sentence of 99 years four months to life,
consisting of a determinate term of 19 years four months, plus an indeterminate term of
80 years to life. The determinate term was comprised of the upper term of nine years on
count three, and a consecutive term of eight months (one-third the middle term) on count
six, each doubled under the Three Strikes law. The indeterminate term was composed of
15 years to life on count one, doubled under the Three Strikes law, plus two consecutive
2 Count five charged the same offense against Garcia.
7
terms of 25 years to life for the firearm enhancements on counts one and three.
Defendant filed a timely notice of appeal.
DISCUSSION
I
Sufficiency of the Evidence
Defendant argues there was insufficient evidence to support his convictions for the
murder of Aleman-Luna and the attempted murder of Marcos. We disagree.
A. Standard of review
We review a sufficiency of the evidence challenge under the deferential
substantial evidence test. (People v. Wilson (2010) 186 Cal.App.4th 789, 805.) Under
that standard, we review the entire record to determine whether it contains substantial
evidence—evidence that is reasonable, credible, and of solid value—from which a
reasonable trier of fact could find the defendant guilty beyond a reasonable doubt.
(People v. Lindberg (2008) 45 Cal.4th 1, 27.) We do not reweigh the evidence or
reevaluate the witnesses’ credibility. (Ibid.) Rather, we view the facts in the light most
favorable to the judgment and presume in support of the judgment the existence of every
fact the trier of fact reasonably could infer from the evidence. (Ibid.) “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. [Citation.]” (Ibid.)
B. Attempted murder
Defendant contends his conviction for attempted murder (count three) must be
reversed because there was insufficient evidence for the jury to find beyond a reasonable
doubt that he intended to kill Marcos.
To prove the crime of attempted murder, the prosecution must establish that the
defendant had the specific intent to kill the attempted murder victim. (People v. Sanchez
(2016) 63 Cal.4th 411, 457; CALCRIM No. 600.) Because there rarely is direct evidence
8
of a defendant’s mental state, the intent to kill ordinarily may be inferred from the
defendant’s acts and the underlying circumstances. (Sanchez, supra, at p. 457; People v.
Smith (2005) 37 Cal.4th 733, 741 (Smith).) “Whether a defendant possessed the requisite
intent to kill is, of course, a question for the trier of fact.” (People v. Lashley (1991)
1 Cal.App.4th 938, 946 (Lashley).) Our sole function on appeal is to determine if any
rational trier of fact could have found the requisite intent to kill beyond a reasonable
doubt. (Ibid.; People v. Johnson (1980) 26 Cal.3d 557, 576.) On this record, we
conclude the evidence was sufficient to reasonably infer defendant harbored an intent to
kill.
The evidence shows that after the concert ended, members of Marcos’s group
were belligerent, picking fights with other attendees, including people attempting to drive
home, and “causing trouble” with security personnel. Around 2:00 a.m., there was a
verbal altercation in the parking lot between Marcos’s group and the occupants of a dark
sedan. A short time later, Jason C. called defendant, at which point Vidana’s Jeep turned
around and returned to the club. Defendant armed himself with a handgun before
returning to the scene.
Shortly after returning to the club, defendant was involved in a verbal altercation
with some members of Marcos’s group. Defendant was heard saying, “You guys really
think you can fuck with me like that?” Witnesses then saw defendant pull out a firearm,
point it at the unarmed victims, and fire at least two shots in the direction of the victims,
striking Marcos once. Immediately after the shooting, defendant fled the scene. A few
months later, when defendant was fleeing from police, he was heard saying, “I’m going
away for life.”
Viewing the evidence in the light most favorable to the verdict, as we must, the
jury reasonably could have drawn the inference that when defendant shot Marcos, he
harbored an intent to kill. (See Smith, supra, 37 Cal.4th at pp. 741-742 [the act of
purposefully firing a lethal weapon at another human being at close range, without legal
9
excuse, may support an inference that the shooter acted with an intent to kill]; People v.
Jackson (1989) 49 Cal.3d 1170, 1201 [act of firing shotgun at close range supported
inference of intent to kill]; People v. Cardenas (2020) 53 Cal.App.5th 102, 119-120
[pointing a gun in the direction of men and firing multiple shots supported inference of
intent to kill]; Lashley, supra, 1 Cal.App.4th at p. 945 [same].)
Relying primarily on Marcos’s testimony that he was shot during a struggle,
defendant argues the evidence does not support a finding that he intended to shoot
Marcos, let alone kill him. Defendant emphasizes that there is no evidence he aimed the
gun at a vital area of Marcos’s body, and no evidence that he took any additional steps to
kill Marcos after he was shot and fell to the ground. However, the jury was not required
to accept Marcos’s version of what happened.
Contrary to defendant’s claim that the evidence surrounding the shooting is
“essentially undisputed,” the jury heard evidence that contradicted Marcos’s account.3
That evidence included the testimony of Gustavo, the taco truck worker, who saw a man
in a red shirt draw a gun and point it at a Hispanic man in a black dress shirt who was
“one of the guys . . . he was arguing with.” His description of the clothing the victim was
wearing is consistent with what Marcos was wearing when he was shot: a “black button-
up shirt.” Gustavo testified that after defendant pointed the gun, there was a slight
“pause” before the man in the black shirt “[t]urned and tried to run.” Although Gustavo
did not see the shooter fire the gun, he heard the gunshots and assumed the fleeing man
was shot because the man fell to the ground.
Veronica, one of the security guards, offered a similar account. She testified that
she saw a man matching the description of defendant pull out a gun and fire two shots in
3 We also note that Marcos’s account is not necessarily inconsistent with the other
witnesses. The jury could have credited his testimony that there was a struggle, while
also concluding that defendant pointed the gun at Marcos, before or after that struggle.
10
the direction of the members of Marcos’s group who had been arguing with the shooter.
She testified that when the shooter pulled out the gun, the members of Marcos’s group
started to run. Likewise, in her initial statement to the police, Victor’s wife Jennifer said
that a man dressed in red pulled out a gun and started “shooting at [her] family.”
Defendant is adamant that the victim’s account must prevail, but a reasonable jury
could have credited the testimony of the impartial security guard and taco truck worker
over the memories of an admittedly intoxicated victim. On review, we may not substitute
our evaluation of a witness’s credibility for that of the jury. (People v. Ochoa (1993)
6 Cal.4th 1199, 1206.)
We reject defendant’s argument that there was insufficient evidence of intent to
kill because the bullet struck Marcos in the leg and defendant did not then shoot him
again. As the court recognized in Lashley, supra, 1 Cal.App.4th at page 945, “[t]here is
nothing inherently illogical or absurd in a finding that a person who unsuccessfully
attempted to kill another did so with the intent to kill. The fact that the shooter may have
fired only once and then abandoned his efforts out of necessity or fear does not compel
the conclusion that he lacked the animus to kill in the first instance. Nor does the fact
that the victim may have escaped death because of the shooter’s poor marksmanship
necessarily establish a less culpable state of mind.” (Accord, People v. Cardenas, supra,
53 Cal.App.5th at p. 120.) Even when an act of shooting is done “ ‘without advance
consideration and only to eliminate a momentary obstacle or annoyance,’ the jury could
still infer, from the totality of the circumstances, that [the defendant] acted with express
malice toward that victim.” (Smith, supra, 37 Cal.4th at pp. 743-744.)
On this record, we conclude a rational jury could find beyond a reasonable doubt
that defendant harbored an intent to kill Marcos.
C. Second degree murder
In supplemental briefing, defendant challenges the sufficiency of the evidence to
support his conviction for the murder of Aleman-Luna, either as a direct perpetrator or as
11
an aider and abettor. Defendant argues that because there is no direct evidence as to who
shot Aleman-Luna, or the caliber of the weapon used, there is insufficient evidence to
prove defendant fired the fatal shot. And because the jury acquitted Garcia of the
attempted murders of Jose and Alexis, defendant argues he cannot be held vicariously
liable as a direct aider and abettor.
The People respond that there was ample evidence to support a finding that
defendant aided and abetted Garcia in the murder of Aleman-Luna. The People argue
that because Garcia’s intent to kill transferred to Aleman-Luna under the doctrine of
transferred intent, defendant likewise became liable for the murder of Aleman-Luna. The
People also argue that any inconsistency in the verdicts is irrelevant as a defendant may
not challenge the sufficiency of the evidence based on the jury’s determination that
evidence on another count was insufficient. (People v. Lewis (2001) 25 Cal.4th 610, 656
[sufficiency of the evidence review is independent of the jury’s determination of evidence
on another count]; People v. Palmer (2001) 24 Cal.4th 856, 860-861 [inconsistent
verdicts are allowed to stand].)
In reply, and despite having addressed aiding and abetting months earlier in his
supplemental opening brief, defendant argues that his conviction cannot be affirmed on
an aiding and abetting theory because the prosecution did not argue that theory at trial.
Defendant is incorrect.
We, of course, cannot affirm a conviction under a theory on which the jury was
not instructed at trial. (People v. Kunkin (1973) 9 Cal.3d 245, 250-251.) But that is not
the situation here. The trial court gave the jury the standard instructions defining aiding
and abetting. (CALCRIM Nos. 400 & 401.) Thus, the jury was instructed that a person
may be guilty of a crime either as the direct perpetrator or as someone who aided and
abetted the direct perpetrator. The jury was instructed that a “person is guilty of a crime
whether he or she committed it personally or aided and abetted the perpetrator.”
12
Nothing in the instructions suggested that the aiding and abetting instructions did
not apply to defendant or that defendant could not be found guilty of the charges in count
one under an aiding and abetting theory. To the contrary, the jury specifically was
instructed that unless otherwise indicated, “all instructions apply to each defendant.”
In finding defendant guilty, the jury was not bound by the prosecution’s arguments
at trial. The “prosecutor’s argument is not evidence and the theories suggested are not
the exclusive theories that may be considered by the jury.” (People v. Perez (1992)
2 Cal.4th 1117, 1126; accord, People v. Leonard (2014) 228 Cal.App.4th 465, 487; see
also People v. Barton (1995) 12 Cal.4th 186, 203 [court’s sua sponte duty to instruct on
lesser included offenses arises not from the arguments of counsel but from the evidence
at trial].) Thus, even if the prosecution advanced only a direct perpetrator theory at trial,
based on the evidence presented and the instructions given, the jury nevertheless could
have found defendant guilty as an aider and abettor. (People v. Alexander (2010)
49 Cal.4th 846, 920-921 (Alexander).)4 Further, provided each juror was convinced
beyond a reasonable doubt that defendant was guilty of murder, the jury need not have
agreed upon the particular theory of guilt. (Alexander, supra, at p. 921; accord, People v.
Majors (1998) 18 Cal.4th 385, 408.)
Our review of the sufficiency of the evidence also is not limited by the
prosecution’s theories at trial, but instead by the evidence presented. Where, as here, the
jury may have relied on more than one valid theory of guilt, we must review the evidence
in the record to determine whether it supported any theory. (People v. Zamudio (2008)
43 Cal.4th 327, 357 [it must be clear that upon no hypothesis whatever is there sufficient
4 A trial court has a duty to instruct on general principles of law raised by the
evidence and necessary for the jury’s understanding of the case, even if inconsistent with
the parties’ theories of the case. (Alexander, supra, 49 Cal.4th at p. 920; People v.
Wickersham (1982) 32 Cal.3d 307, 323, overruled on other grounds by People v. Barton,
supra, 12 Cal.4th at p. 200.)
13
evidence to support the verdict]; see also People v. Kaufman (2017) 17 Cal.App.5th 370,
381; People v. Sanchez (2001) 26 Cal.4th 834, 854 (Sanchez).) We conclude that the
evidence in this case was sufficient to find defendant guilty of murder both as an aider
and abettor and as a direct perpetrator.
“A person aids and abets the commission of a crime when he [or she] acts with
knowledge of the unlawful purpose of the perpetrator and with the intent or purpose of
encouraging or facilitating the commission of the crime, and his [or her] act or advice in
some manner aids, promotes, encourages or instigates the commission of the crime.
[Citation.]” (People v. Johnson (2019) 32 Cal.App.5th 26, 58.) Here, the evidence
shows that almost immediately after receiving the call from Jason C., defendant and
Garcia returned to the club armed with handguns. A few minutes later, defendant got
into an argument with some members of Marcos’s group. Defendant and Garcia then
pulled out guns, aimed them at unarmed members of Marcos’s group, and fired multiple
shots at close range before fleeing the scene together. Defendant instigated the shooting
by drawing his firearm first.
This evidence was sufficient for a jury to find, beyond a reasonable doubt, that
defendant knew of Garcia’s murderous intent; that defendant intended to commit,
encourage, or facilitate Garcia in committing murder; and that defendant did in fact aid or
abet Garcia in committing murder. (See People v. McCoy (2001) 25 Cal.4th 1111, 1117-
1118, 1122; see also People v. Shabazz (2006) 38 Cal.4th 55, 62 [discussing doctrine of
transferred intent].) Indeed, in a situation such as this, where two persons commit a
crime together, “both may act in part as the actual perpetrator and in part as the aider and
abettor of the other . . . .” (McCoy, supra, at p. 1120, italics omitted.) Thus, even if
Garcia fired the shots that killed Aleman-Luna, there was sufficient evidence to hold
defendant liable for second degree murder under an aiding and abetting theory.
The evidence also was sufficient for the jury to convict defendant under a direct
perpetrator theory. To find defendant guilty as a direct perpetrator, the People were
14
required to prove that defendant, with malice aforethought, committed an act that caused
Aleman-Luna’s death. (CALCRIM No. 520; see People v. Kerley (2018) 23 Cal.App.5th
513, 532-533.)
“[M]alice, either express or implied, ‘does not exist in the perpetrator only in
relation to an intended victim.’ ” (People v. Bland (2002) 28 Cal.4th 313, 323 (Bland).)
“ ‘ “[M]ens rea . . . is an elastic thing of unlimited supply. . . . It may combine with a
single actus reus to make a single crime. It may as readily combine with a hundred acti
rei, intended and unintended, to make a hundred crimes . . . .” ’ ” (People v. Concha
(2009) 47 Cal.4th 653, 660.) Thus, a defendant may be liable for two murders if, in the
course of killing an intended victim, the defendant or an accomplice also kills a
bystander. (Ibid.) As discussed above, there was substantial evidence to support a
finding that defendant had a specific intent to kill.
To satisfy the actus reus element of murder, the defendant (or an accomplice) must
have caused the person’s death. (People v. Concha, supra, 47 Cal.4th at p. 660.) An act
causes death if the death is a direct, natural, and probable consequence of the act and the
death would not have happened without the act. (CALCRIM No. 520.) A natural and
probable consequence is one that a reasonable person would know is likely to happen if
nothing unusual intervenes. (CALCRIM No. 520.)
Proximate cause is clearly established where the defendant’s unlawful act is
directly connected with the victim’s death, with no intervening cause. (People v.
Cervantes (2001) 26 Cal.4th 860, 866.) But a defendant also may be held criminally
liable for a result directly caused by his or her act, even though there is another,
intervening cause. (Id. at pp. 866-867.) “ ‘ “If an intervening cause is a normal and
reasonably foreseeable result of defendant’s original act[,] the intervening act is
‘dependent’ and not a superseding cause, and will not relieve defendant of liability.” ’ ”
(Id. at p. 871.) The consequence need not have been a strong probability; it is enough
that the defendant should have foreseen the possibility of some harm of the kind that
15
might result from his act. (Ibid.) “ ‘[T]here is no bright line demarcating a legally
sufficient proximate cause from one that is too remote.’ ” (Ibid.; accord, Zemek v.
Superior Court (2020) 44 Cal.App.5th 535, 553.)
“[I]t has long been recognized that there may be multiple proximate causes of a
homicide, even where there is only one known actual or direct cause of death.” (Sanchez,
supra, 26 Cal.4th at p. 846.) “ ‘ “When the conduct of two or more persons contributes
concurrently as the proximate cause of the death, the conduct of each is a proximate
cause of the death if that conduct was also a substantial factor contributing to the
result.” ’ ” (Id. at p. 847, italics omitted.)
In Sanchez, supra, 26 Cal.4th 834, our Supreme Court upheld a murder conviction
where two rival gang members engaged in a gun battle that killed an innocent bystander,
even though it could not be determined who fired the single fatal bullet. (Id. at pp. 838-
839.) The court held that because they were jointly engaged in life-threatening deadly
acts, inducing each other to act, the unlawful conduct of each was a substantial
concurrent, and hence proximate, cause of the victim’s death. (Id. at pp. 845-849, 851-
852; see also id. at pp. 854-859 (conc. opns. of Kennard & Werdegar, JJ.).)
Similarly, in People v. Pock (1993) 19 Cal.App.4th 1263, cited with approval in
Sanchez, supra, 26 Cal.4th at page 845, the Court of Appeal upheld a murder conviction
when it could not be determined which of several robbers, all of whom shot at the victim,
fired the fatal bullet. (Pock, supra, at pp. 1267, 1269-1271, 1278.) The court held that
even if there was doubt as to whether the defendant was the actual killer, the jury
properly was instructed that defendant could be liable for murder if his conduct was a
substantial factor in causing the victim’s death. (Id. at pp. 1275-1276.) The court
affirmed the conviction because the evidence showed that even if the defendant did not
fire the fatal shot, he “certainly was responsible for instigating the firing of the fatal
shot.” (Id. at p. 1274.)
16
In People v. Kemp (1957) 150 Cal.App.2d 654, also cited with approval in
Sanchez, supra, 26 Cal.4th at page 846, a defendant and codefendant were jointly
convicted of manslaughter after a car occupied by the victim was struck by the
codefendant’s car during a street race, killing the victim. (Kemp, supra, at p. 656.) The
appellate court affirmed the defendant’s conviction, holding that since the defendant and
codefendant were not acting independently, and were inciting and encouraging one
another to drive at a fast and reckless rate of speed on a residential street, they both were
a proximate cause of the victim’s death. (Id. at pp. 659-660.)
In People v. Cornejo (2016) 3 Cal.App.5th 36, a case addressing instructional
error, this court recognized that a defendant can proximately cause a person’s death even
without proof that the defendant was an actual or direct cause of the victim’s death. (Id.
at pp. 61-62.) The three defendants in Cornejo were gang members, two of whom shot
multiple times at the victim’s car. (Id. at pp. 41-42, 44-46.) The victim was killed by a
single gunshot wound, but it was unknown who fired the fatal shot. (Id. at p. 61.)
Nevertheless, we held that the jury properly concluded that both shooters proximately
caused the victim’s death, regardless of whose bullet caused the fatal wound. (Id. at pp.
61-62; accord, Bland, supra, 28 Cal.4th at pp. 318, 337-338.)
Similarly, here, even if it could not be determined who fired the shots that killed
Aleman-Luna, the evidence was sufficient for the jury reasonably to infer that defendant
was a proximate cause of the victim’s death by drawing his weapon first and setting in
motion a chain of events that led to the victim’s death.5
5 Because we find the evidence sufficient to convict defendant as a direct
perpetrator even if Garcia fired the fatal shots, it is unnecessary for us to decide whether
the evidence also was sufficient for the jury to find that defendant directly contributed to
the death by shooting Aleman-Luna.
17
II
Motion for Mistrial
In supplemental briefing, defendant contends that the trial court erred in denying
his motion for a mistrial after a prosecution witness ran afoul of a pretrial ruling by
describing defendant’s tattoo as “gang-related.” We find no error.
A. Additional background
Before trial, the prosecution filed a motion in limine to prevent the defense from
referencing the victims’ gang membership, affiliation, or activities. After discussion, the
court prohibited either side from introducing any “gang information” during the People’s
case-in-chief. The court confirmed that if defense counsel sought to introduce gang
evidence to support a theory of self-defense, the admissibility of that evidence would be
litigated after the People’s case-in-chief.
During the prosecution’s case-in-chief, the prosecutor asked the security guard,
Veronica, about defendant’s tattoo. The following colloquy transpired:
“[People:] You said you remember a tattoo. [¶] What do you remember about a
tattoo or tattoos?
“[Veronica:] In his left side under his eye.
“[People:] What do you remember about a tattoo under his left eye?
“[Veronica:] I just noticed a tattoo.
“[People:] Do you know what kind of tattoo, or what it was of?
“[Veronica:] A gang-related.”
At that point, counsel for defendant interjected, “Your Honor, may I be heard for a
second?” The court said, “No.” The prosecution then continued questioning Veronica,
who described the tattoo as “four dots.”
During the next break, defendant’s counsel moved for a mistrial based on the
witness’s reference to a “gang-related” tattoo. Defense counsel conceded that the
18
prosecutor had not intentionally sought to elicit the testimony, but argued that it did not
matter because the evidence was prejudicial and there was no way to “unring that bell.”
The court denied the motion. Although the court acknowledged that gang
evidence can be prejudicial, it concluded that the potential prejudice in this case was
“relatively minimal” and could be cured by striking the witness’s statement and
admonishing the jury. In the end, defense counsel refused the offer for a curative
instruction because he did not believe it was possible to sanitize the gang reference and
did not want to highlight the testimony.
B. Analysis
A motion for mistrial should be granted “ ‘only when “ ‘a party’s chances of
receiving a fair trial have been irreparably damaged’ ” ’ [citation], that is, if it is ‘apprised
of prejudice that it judges incurable by admonition or instruction’ [citation]. ‘Whether a
particular incident is incurably prejudicial is by its nature a speculative matter, and the
trial court is vested with considerable discretion in ruling on mistrial motions.’ ” (People
v. Avila (2006) 38 Cal.4th 491, 573.) Accordingly, we review a trial court’s ruling on a
motion for mistrial under the deferential abuse of discretion standard. (People v. Bolden
(2002) 29 Cal.4th 515, 555.)
Applying that standard, we find no abuse of discretion. Although we acknowledge
the potentially inflammatory nature of gang evidence, defendant overstates the
significance of the testimony at issue in this case. Unlike the cases cited by defendant
that involved extensive evidence of gang membership or gang affiliations,6 the evidence
6 See People v. Albarran (2007) 149 Cal.App.4th 214, 227 [“panoply of
incriminating gang evidence”]; People v. Cardenas (1982) 31 Cal.3d 897, 905-906
[cumulative evidence that went far beyond mere gang membership]; see also People v.
Williams (1997) 16 Cal.4th 153, 193 [court did not err in denying motion to exclude gang
evidence]; People v. Cox (1991) 53 Cal.3d 618, 660, overruled on other grounds as stated
in People v. Doolin (2009) 45 Cal.4th 390, 421, fn. 22 [not ineffective assistance of
counsel to inquire into defendant’s involvement in gang activity].
19
here consisted of a single, fleeting reference to a possible “gang-related” tattoo. The
witness’s testimony was brief, easy to miss, and insignificant in the context of a 12-day
trial involving 25 separate witnesses. Further, because the witness was not an expert on
gangs or a member of law enforcement, her unsubstantiated opinion about defendant’s
tattoo did not automatically mean that defendant was in a gang or that the shooting was
gang related.
The court subsequently struck the brief reference to a “gang-related” tattoo from
the record in case the jury requested a readback. During deliberations, the jury requested
a readback of the security guard’s testimony and the jury was instructed to accept the
readback as accurate. We presume the jury understood and followed the court’s
instructions. (People v. Holt (1997) 15 Cal.4th 619, 662.) There was no evidence of bad
faith.
On this record, we conclude the witness’s brief and spontaneous reference to a
“gang-related” tattoo was not incurably prejudicial. (People v. Avila, supra, 38 Cal.4th at
pp. 572-574 [brief reference to defendant having been in prison did not deny fair trial];
People v. Bolden, supra, 29 Cal.4th at pp. 554-555 [fleeting reference to parole office did
not deny fair trial]; see also People v. Mendoza (2000) 24 Cal.4th 130, 162-163,
superseded by statute on other grounds as stated in People v. Brooks (2017) 3 Cal.5th 1,
62-63 & fn. 8 [fleeting references to gang evidence did not deny due process].) The court
was well within its discretion in denying the mistrial motion.
III
Causation Instruction
In a second supplemental brief, defendant contends the trial court erred and
violated due process by failing to sua sponte instruct the jury on the definition of
causation as part of its murder instructions. We conclude that any error was harmless and
did not deny defendant due process.
20
A. Additional background
Defendant was charged in count one with the murder of Aleman-Luna, with an
enhancement for personally and intentionally discharging a firearm causing great bodily
injury or death. After the People rested, the trial court and the parties conferred off the
record regarding jury instructions. After going back on the record, the trial court
summarized the instructions that would be given to the jury, and the parties indicated
they were “satisfied” with the proposed instructions. Defense counsel raised no
objections.
After closing arguments, the trial court instructed the jury on the elements of
murder using CALCRIM No. 520, the pattern instruction. As relevant here, the court
instructed the jury that “[t]o prove that a defendant is guilty of this crime the People must
prove that: [¶] 1. The defendant committed an act that caused the death of another
person; [¶] AND [¶] 2. When the defendant acted, he had a state of mind called ‘malice
aforethought’; [¶] AND [¶] 3. He killed without lawful excuse or justification.”
In providing these instructions, the trial court did not include the following
bracketed portions of the instruction defining causation: “An act causes death if the death
is the direct, natural, and probable consequence of the act and the death would not have
happened without the act. A natural and probable consequence is one that a reasonable
person would know is likely to happen if nothing unusual intervenes. In deciding
whether a consequence is natural and probable, consider all of the circumstances
established by the evidence. [¶] There may be more than one cause of death. An act
causes death only if it is a substantial factor in causing the death. A substantial factor is
more than a trivial or remote factor. However, it does not need to be the only factor that
causes the death.” (CALCRIM No. 520.) The court also did not give the jury a more
21
general causation instruction under CALCRIM No. 240 or CALCRIM No. 620, nor were
they requested.
B. Analysis
Defendant contends the trial court committed reversible error by omitting the
bracketed paragraphs on causation from the CALCRIM No. 520 pattern instruction on
murder. The short answer to this contention is that, even if we assume the court erred by
failing to give such instructions, and that the claim was not forfeited, the error was
harmless under both the state and federal standards of prejudice. (Chapman v. California
(1967) 386 U.S. 18, 24 [17 L.Ed.2d 705, 711]; People v. Watson (1956) 46 Cal.2d 818,
837.)
Under the instructions given, the jury properly concluded that defendant “caused”
the death of Aleman-Luna. While the court’s instructions on murder did not include a
legal definition of causation, any error had no effect on the jury’s verdict. Indeed, the
omitted definition of causation was likely broader, not narrower, than jurors otherwise
might assume where, as here, the issue was whether defendant’s conduct was a
substantial factor in bringing about the victim’s death. (See Bland, supra, 28 Cal.4th at p.
338.) Further, the possibility of jury confusion was diminished by the prosecutor’s
closing arguments, which emphasized that the People did not have to prove defendant’s
bullet hit Aleman-Luna, only that defendant “did an act that naturally and probably” led
to Aleman-Luna’s death. (See People v. Hajek and Vo (2014) 58 Cal.4th 1144, 1220,
overruled in part on other grounds in People v. Rangel (2016) 62 Cal.4th 1192, 1216.)
In any event, the record reflects the jury necessarily determined the causation
question adversely to defendant in the context of another, properly given instruction. For
the firearm enhancement, the trial court instructed the jury under CALCRIM No. 3149.
In relevant part, the jury was instructed: “If you find the defendant guilty of the crimes
charged in Counts 1, 2, 3, or 4, you must then decide whether, for each crime, the People
have proved the additional allegation that the defendant personally and intentionally
22
discharged a firearm during that crime causing great bodily injury or death. [¶] You
must decide whether the People have proved this allegation for each crime, and return a
separate finding for each crime. [¶] To prove this allegation the People must prove that:
[¶] 1. The defendant personally discharged a firearm during the commission of that
crime; [¶] 2. The defendant intended to discharge the firearm; [¶] AND [¶] 3. The
defendant’s act caused great bodily injury to, or the death of, a person.”
Unlike the instructions on murder, the instructions on the firearm enhancement
included the bracketed language relating to causation. (CALCRIM No. 3149.) That
language is virtually identical to the bracketed portions of the instruction omitted from
CALCRIM No. 520, except that it applies to “great bodily injury or death” instead of just
“death.” (Cf. CALCRIM Nos. 520 & 3149.) When the jury found true the allegation that
defendant “intentionally and personally discharged a firearm . . . and thereby caused the
death of [Aleman-Luna] within the meaning of []section 12022.53(d)” the jury
necessarily found that defendant’s conduct was both a cause-in-fact and proximate cause
of Aleman-Luna’s death. Thus, any alleged instructional error with respect to the murder
charge was harmless beyond a reasonable doubt and did not deny defendant due process.
(People v. Carrillo (2008) 163 Cal.App.4th 1028, 1037-1038.)
IV
Sentencing Issues
A. Assistance of counsel
Defendant argues that his sentence must be vacated and this matter remanded for a
new sentencing hearing because his counsel’s performance at the October 2019
sentencing hearing was so inadequate that he was constructively deprived of his
constitutional right to counsel. Alternatively, defendant argues that he received
ineffective assistance of counsel. We agree.
Under the Sixth Amendment, a criminal defendant has the right to the assistance
of counsel. (People v. Ledesma (1987) 43 Cal.3d 171, 215; In re Perez (1966) 65 Cal.2d
23
224, 229.) The right to counsel is the right to the effective assistance of counsel.
(Strickland v. Washington (1984) 466 U.S. 668, 686 [80 L.Ed.2d 674, 692].) This right
applies at all “ ‘critical stages’ ” of a criminal proceeding in which the substantial rights
of a defendant are at stake, including sentencing. (People v. Bauer (2012) 212
Cal.App.4th 150, 155.)
A defendant has the burden of proving a claim of ineffective assistance of counsel.
(People v. Bell (2020) 48 Cal.App.5th 1, 22.) Ordinarily, to establish such a claim, a
defendant must show both that (1) counsel’s performance was deficient, falling below an
objective standard of reasonableness under prevailing professional norms; and (2) the
deficient performance resulted in prejudice. (Strickland v. Washington, supra, 466 U.S.
at pp. 687-688, 693-694; People v. Ledesma, supra, 43 Cal.3d at pp. 216-218.)
Relying on United States v. Cronic (1984) 466 U.S. 648 [80 L.Ed.2d 657]
(Cronic), defendant argues that his case falls into a small subset of cases in which
prejudice must be presumed because counsel’s conduct was so egregious as to constitute
a complete abandonment of the client. (United States v. Olano (9th Cir. 1995) 62 F.3d
1180, 1193; Florida v. Nixon (2004) 543 U.S. 175, 190 [160 L.Ed.2d 565, 580].) In
Cronic, the United States Supreme Court identified three such scenarios where prejudice
may be presumed: (1) when the accused is denied the presence of counsel at a critical
stage of the proceeding; (2) when counsel fails to subject the prosecution’s case to
“meaningful adversarial testing”; and (3) when counsel must render assistance under
circumstances where the likelihood that any lawyer could provide effective assistance is
so small that a presumption of prejudice is appropriate. (Cronic, supra, at pp. 659-660;
Bell v. Cone (2002) 535 U.S. 685, 695-696 [152 L.Ed.2d 914, 927-928]; accord, In re
Avena (1996) 12 Cal.4th 694, 727.)
24
Here, defendant argues that counsel’s performance at the sentencing hearing was
so inadequate that it should be deemed a constructive denial of his right to assistance of
counsel.7 We agree.
At sentencing, counsel for defendant essentially conceded that he was unprepared
to meaningfully represent defendant, informing the court that “sentencing came up very,
very quickly,” and that because he had been in trial since the jury verdict, he had not had
“much time to talk to [his] client about it.” When the judge asked whether counsel had
received a copy of the probation report and had an opportunity to review it with
defendant, counsel hedged, “I’ve received it. He has read it. He will have a copy of it.
[¶] Again, I didn’t get it until just a couple days ago, and I’ve been quite engaged since
then, but he has no questions on it.” Defense counsel also put on the record that during
trial he had discussed with defendant the idea of filing a motion for a new trial if there
was a conviction, but that defendant subsequently asked him “not to make the motion to
ask for the continuance based on that.”
Aside from these brief comments, defense counsel did nothing to represent
defendant at the sentencing hearing. Counsel did not file a sentencing memorandum, did
not raise any arguments during the trial on defendant’s prior conviction, did not ask the
court to dismiss defendant’s prior strike conviction or the firearm enhancements, did not
present any mitigating evidence or oppose the prosecution’s aggravation argument, or
make even a single comment regarding the court’s sentencing choices.8
7 Defendant also argues in passing that his counsel’s performance constructively
deprived him of the assistance of counsel at the court trial of the prior strike conviction.
We may disregard this argument as it was not properly presented under a discrete heading
with appropriate analysis. (People v. Carroll (2014) 222 Cal.App.4th 1406, 1412, fn. 5.)
8 Defendant also complains that his counsel failed to argue that the prior strike
conviction was invalid because of a jurisdictional defect in the complaint and/or because
of the passage of Proposition 57 (approved Nov. 2016) or Senate Bill No. 1391 (2017-
25
We are persuaded that this is the rare case in which defense counsel’s performance
was so inadequate that it amounted to a constructive denial of the assistance of counsel at
sentencing. (Miller v. Martin (7th Cir. 2007) 481 F.3d 468, 473 (per curiam) [applying
exception where counsel essentially said nothing throughout sentencing hearing];
Patrasso v. Nelson (7th Cir. 1997) 121 F.3d 297, 303-305 [constructive denial where
counsel performed no investigation before sentencing and made no effort to contradict
the prosecution’s case or obtain mitigated punishment]; Tucker v. Day (5th Cir. 1992)
969 F.2d 155, 159 [constructive denial where counsel remained silent throughout
resentencing hearing]; Harding v. Davis (11th Cir. 1989) 878 F.2d 1341, 1345 [prejudice
presumed where defense counsel was silent throughout trial].) Accordingly, the
circumstances justify a presumption of prejudice.
The People argue that even if defense counsel was not prepared for the hearing,
there was no constructive denial of defendant’s assistance of counsel because it was
defendant who made the decision to proceed with sentencing. We find two problems
with this argument. First, the record shows that defendant merely asked counsel not to
request a continuance for purposes of preparing a new trial motion. This is hardly proof
that defendant wanted counsel to proceed with sentencing despite knowing that counsel
was unprepared to do so.
Second, even if it was defendant’s wish to proceed to sentencing without delay,
this would not excuse counsel’s failure to request a continuance if it were necessary for
counsel to adequately prepare for the hearing. Except when certain fundamental rights
are implicated, it is the attorney who controls the conduct of the case and has the
2018 Reg. Sess.). These arguments lack merit. As the People note, the jurisdictional
defect in the complaint was cured by amendment. And defendant was not entitled to any
ameliorative benefit under Proposition 57 or Senate Bill No. 1391 because, as he
concedes, his judgment became final before the effective date of the changes in the law.
(People v. Superior Court (Lara) (2018) 4 Cal.5th 299, 303-304; see also People v.
Esquivel (2021) 11 Cal.5th 671, 680.)
26
authority and duty to determine questions of strategy and trial tactics. (People v.
Frierson (1985) 39 Cal.3d 803, 812-814; Townsend v. Superior Court (1975) 15 Cal.3d
774, 781.) The statutory right to be sentenced within 20 judicial days after the verdict
(§ 1191) is not one of those fundamental rights within a defendant’s ultimate control.
(See Townsend, supra, at p. 781 [constitutional right to speedy trial is fundamental right,
but statutory right to be tried within 60 days is not].) Thus, if a continuance was
necessary, it was incumbent on counsel to request one, even if the request would have
been contrary to defendant’s wishes.
The failure of defense counsel to represent his client’s interests or provide any
meaningful assistance at the sentencing hearing was a constructive denial of defendant’s
right to counsel at a critical stage of the proceeding. Accordingly, under Cronic, supra,
466 U.S. 648, we shall vacate defendant’s sentence and remand for a new sentencing
hearing.
At resentencing, defendant will be entitled to the benefit of Senate Bill No. 81
(2021-2022 Reg. Sess.), which amended section 1385 to specify factors that the court
must consider when deciding whether to strike enhancements from a sentence in the
interest of justice. (People v. Sek (2022) 74 Cal.App.5th 657, 674.)
B. Designation of concurrent/consecutive sentence under section 669
Defendant next contends that the trial court failed to determine whether his
determinate sentence in the current case should run consecutively or concurrently to a
determinate term imposed in a prior case. Defendant contends that because the trial court
failed to make this determination, under section 669, subdivision (b), the determinate
sentence in this case must run concurrently to the determinate sentence in the other case.
The People agree, as do we.
Section 669, subdivision (a) provides that when a person is convicted of two or
more crimes, in the same proceeding or court or in different proceedings or courts, the
court, at the time of pronouncing the subsequent judgment, shall determine whether the
27
terms shall run concurrently or consecutively. (§ 669, subd. (a).) Subdivision (b)
provides that if the court fails to make that determination within 60 days after
imprisonment upon the subsequent judgment, then “the term of imprisonment on the
second or subsequent judgment shall run concurrently.” (§ 669, subd. (b).)
Here, the probation report shows that in 2017 in Solano County, defendant was
convicted of other felonies and sentenced to 16 years in prison (Solano County case No.
VCR228205). There was no mention of this prior judgment and sentence during the
pronouncement of judgment in this case or within 60 days after the commencement of his
imprisonment upon the judgment. Accordingly, under section 669, subdivision (b), the
term of imprisonment imposed in this case must run concurrently to the term of
imprisonment imposed in the Solano County case.
C. Error in abstract of judgment
Defendant also contends that the abstract of judgment mistakenly shows a firearm
enhancement attached to count two instead of count three. He is correct. Defendant was
convicted in counts one, three, and six, and the jury found the firearm allegations true as
to counts one and three. The abstract of judgment contains a mistake and should be
corrected. (People v. Pack-Ramirez (2020) 56 Cal.App.5th 851, 858.)
DISPOSITION
Defendant’s sentence is vacated and the matter remanded for resentencing in a
manner consistent with this opinion. Following resentencing, the trial court shall prepare
an amended and corrected abstract of judgment and forward a certified copy to the
Department of Corrections and Rehabilitation. The judgment of conviction is otherwise
affirmed.
28
The clerk of this court shall forward a copy of this opinion to the State Bar of
California and notify defense counsel in the trial court proceedings, as required by
statute. (See Bus. & Prof. Code, § 6086.7, subds. (a)(2) & (b).)
KRAUSE , J.
We concur:
HULL , Acting P. J.
MAURO , J.
29 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487966/ | USCA11 Case: 22-10460 Date Filed: 11/18/2022 Page: 1 of 6
[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-10460
Non-Argument Calendar
____________________
ROSE MARIE NESBITT CAIN,
Plaintiff-Appellant,
versus
SOCIAL SECURITY ADMINISTRATION, COMMISSIONER,
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Northern District of Alabama
D.C. Docket No. 4:20-cv-00924-CLM
____________________
USCA11 Case: 22-10460 Date Filed: 11/18/2022 Page: 2 of 6
2 Opinion of the Court 22-10460
Before JORDAN, NEWSOM, and EDMONDSON, Circuit Judges.
PER CURIAM:
Rose Marie Cain appeals the district court’s order affirming
the Social Security Commissioner’s denial of her application for
supplemental security income (“SSI”). No reversible error has
been shown; we affirm.
When -- as in this case -- an Administrative Law Judge
(“ALJ”) denies an application for benefits and the Appeals Council
denies review, we review the ALJ’s decision as the Commissioner’s
final decision. See Doughty v. Apfel, 245 F.3d 1274, 1278 (11th Cir.
2001).
Our review of the Commissioner’s decision is limited to
whether substantial evidence supports the decision and whether
the correct legal standards were applied. See Winchel v. Comm’r
of Soc. Sec., 631 F.3d 1176, 1178 (11th Cir. 2011). “Substantial evi-
dence is more than a scintilla and is such relevant evidence as a rea-
sonable person would accept as adequate to support a conclusion.”
Id. We review de novo the ALJ’s application of the law. Harner v.
Soc. Sec. Admin., Comm’r, 38 F.4th 892, 896 (11th Cir. 2022). We
review de novo the district court’s determination about whether
substantial evidence supports the ALJ’s decision. See Wilson v.
Barnhart, 284 F.3d 1219, 1221 (11th Cir. 2002).
A person who applies for SSI benefits must first prove that
she is disabled. See 20 C.F.R. § 416.912(a). The Social Security
USCA11 Case: 22-10460 Date Filed: 11/18/2022 Page: 3 of 6
22-10460 Opinion of the Court 3
Regulations outline a five-step sequential evaluation process for de-
termining whether a claimant is disabled. See 20 C.F.R. §
416.920(a)(4). The ALJ must evaluate (1) whether the claimant en-
gaged in substantial gainful work; (2) whether the claimant has a
severe impairment; (3) whether the severe impairment meets or
equals an impairment in the Listings of Impairments; (4) whether
the claimant has the residual functional capacity (“RFC”) to per-
form his past relevant work; and (5) whether, in the light of the
claimant’s RFC, age, education, and work experience, there exist
other jobs in the national economy the claimant can perform. Id.
Cain filed an application for SSI in July 2017, alleging disabil-
ity based on heart problems and arthritis. The ALJ denied Cain’s
application in July 2019. Applying the five-step evaluation process,
the ALJ determined that Cain had these severe impairments: hy-
pertensive vascular disease, osteoarthritis, and allied disorders.
The ALJ determined that Cain had the RFC to perform light work
with specific postural and environmental limitations. Considering
Cain’s age, education, work experience, and RFC (together with
the vocational expert’s testimony), the ALJ determined that Cain
could perform work in the national economy. Accordingly, the
ALJ concluded that Cain was “not disabled.”
Cain administratively appealed the ALJ’s decision to the Ap-
peals Council. The Appeals Council denied Cain’s request for re-
view. The district court affirmed.
On appeal, Cain first argues that the ALJ failed to accord
proper weight to the medical opinion of her treating physician, Dr.
USCA11 Case: 22-10460 Date Filed: 11/18/2022 Page: 4 of 6
4 Opinion of the Court 22-10460
McCain, and that the ALJ failed to explain adequately his reasons
for discounting Dr. McCain’s opinion. Cain argues that -- under
the “treating-physician rule” -- the ALJ was required to give sub-
stantial weight to the opinion of her treating physician absent a
showing of good cause. We disagree.
In 2017, the Commissioner promulgated new regulations
governing the consideration of medical opinions for purposes of
reviewing applications for SSI and for Disability Insurance Benefits.
See 20 C.F.R. §§ 404.1520c; 416.920c. Under the new regulations,
an ALJ is to give no deference or “specific evidentiary weight, in-
cluding controlling weight,” to a treating physician’s opinion. See
20 C.F.R. §§ 404.1520c(a); 416.920c(a). Instead, the ALJ must weigh
medical opinions based on their persuasiveness. See id. The new
regulations apply to claims filed on or after 27 March 2017. Id. §§
404.1520c; 416.920c. Because Cain filed her SSI application in July
2017, her claim is governed by the new regulation.
Cain contends that this Court’s precedent applying the treat-
ing-physician rule remains good law and is controlling here despite
the Commissioner’s later-promulgated regulations. Cain’s argu-
ment is foreclosed by our decision in Harner. See Harner, 38 F.4th
at 896 (concluding -- in the context of an application for disability
insurance benefits -- that the Commissioner’s promulgation of the
new regulation in 20 C.F.R. § 404.1520c abrogated this Court’s ear-
lier precedent establishing and applying the treating-physician rule;
the new regulation thus applied to claims filed on or after 27 March
2017). Here, the ALJ applied the proper legal standard by
USCA11 Case: 22-10460 Date Filed: 11/18/2022 Page: 5 of 6
22-10460 Opinion of the Court 5
evaluating the persuasiveness of Dr. McCain’s opinion instead of
treating Dr. McCain’s opinion as controlling under the treating-
physician rule.
On appeal, Cain focuses only on the ALJ’s failure to apply
the treating-physician rule in weighing Dr. McCain’s opinion. Cain
raises no substantive challenge to the ALJ’s assessment about the
persuasiveness of Dr. McCain’s opinion under the new regulation.
Accordingly, we need not address that issue. Nevertheless, sub-
stantial evidence supports the ALJ’s finding that Dr. McCain’s opin-
ion about Cain’s functional limitations lacked support in the record
and was inconsistent with both Dr. McCain’s own treatment rec-
ords and with Cain’s testimony.
Cain next asserts -- in conclusory statements and without
supporting argument -- that the ALJ erred in finding that Cain re-
tained the RFC to perform light work and that the ALJ failed to
discuss adequately the supporting evidence as required by SSR 96-
8p. This portion of Cain’s counseled brief consists of page-long
block quotes from cases decided by this Court and by other courts
with no discussion about how the cited cases are analogous to
Cain’s circumstances or otherwise support her claim. Nor does
Cain explain how the ALJ erred in considering the pertinent evi-
dence. We have said that an appellant forfeits an issue when she
“raises it in a perfunctory manner without supporting arguments
and authority.” See Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d
678, 681 (11th Cir. 2014). Under the circumstances presented here,
Cain has forfeited her challenges to the ALJ’s RFC determination.
USCA11 Case: 22-10460 Date Filed: 11/18/2022 Page: 6 of 6
6 Opinion of the Court 22-10460
See Harner, 38 F.4th at 898-99 (concluding that the claimant “for-
feited any challenge” to aspects of the ALJ’s decision mentioned in
her brief when the claimant’s counseled brief “consist[ed] only of
block quotations from and cursory mentions of various decisions
of this and other courts” without reference to the facts of claimant’s
case and without “any meaningful explanation” about how the
cited decisions applied to her claim).
AFFIRMED. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487969/ | Filed 11/18/22 Shami v. Shami CA2/1
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 ONE
MINA SHAMI, B319824
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. 21GDCV00872)
v.
OMAR SHAMI,
Defendant and Respondent.
APPEAL from an interlocutory judgment of the Superior
Court of Los Angeles County, Joel L. Lofton, Judge. Affirmed.
Law Offices of Ivey McCray and Ivey McCray for Plaintiff
and Appellant.
Law Office of Wali Abdul Malik and Wali Abdul Malik for
Defendant and Respondent.
____________________________
In a marriage dissolution action, Omar Shami claimed a
particular house was his separate property. As evidence, he
offered a quitclaim deed signed by his wife, Mina Shami,
conveying the property to him.1 Mina disputed Omar’s claim and
contended the house was community property.
Four years later, while the dissolution action was still
pending, Mina filed a lawsuit claiming the quitclaim deed was
forged, and seeking a 50 percent interest in the house. The trial
court sustained Omar’s demurrer on the basis that the same
issue was before the court in the dissolution action, and abated
Mina’s lawsuit pending resolution of the dissolution action. On
appeal, Mina challenges the order sustaining the demurrer.
We affirm. The parties, issues, and evidence are identical
in the two proceedings, and both concern the same primary right,
namely Mina’s entitlement to the property under dispute. Mina
cites no authority that the court in a marriage dissolution
proceeding cannot determine the validity of a deed, and fails to
show any error on the part of the trial court.
BACKGROUND
On June 23, 2017, Omar filed a petition for dissolution of
his marriage to Mina. The petition requested the family law
court confirm as his separate property certain assets listed in an
attached property declaration form. This included a house in
Duarte (the Duarte house).2
1 Because the parties share a last name, for clarity we
refer to them by their first names. No disrespect is intended.
2 The trial court in Mina’s action took judicial notice of
Omar’s dissolution petition, but did not expressly take judicial
notice of the property declaration form, which Omar provided to
2
Mina filed a response to the dissolution petition contending
there were no separate property assets to be confirmed by the
court. She requested that “[a]ll assets listed by Omar Shami as
community and separate [property] be declared community
property,” and “[a]ll rents collected by Omar Shami from the
home listed in the property declarations be declared community
property . . . .”
Four years later, on June 28, 2021, while the dissolution
action remained pending, Mina filed a complaint against Omar
for quiet title and constructive trust concerning the Duarte
house. The complaint alleged the following: Mina and Omar had
purchased the Duarte house in 1998 as a married couple using
“community property funds.” In the pending dissolution action,
Omar was claiming the house was his separate property based on
a quitclaim deed purportedly signed by Mina. Mina’s signature
on the quitclaim deed, however, was a forgery, and the
handwriting “appeared near similar” to Omar’s own signature on
other documents. Mina claimed Omar had forged the quitclaim
deed in order to “depriv[e]” her “of her entitled proportion of the
community property.” Mina requested the trial court declare the
quitclaim deed void, and grant her a 50 percent ownership
interest in the Duarte house.
Omar demurred to the complaint, contending under Code of
Civil Procedure3 section 430.10, subdivision (c) there was another
the court in a separate filing. To the extent the trial court did not
take judicial notice of the property declaration form, we do so now
as a record of the family law court. (Evid. Code, §§ 452, subd. (d),
459.)
3Unspecified statutory citations are to the Code of Civil
Procedure.
3
action pending between the same parties on the same cause of
action, namely the dissolution proceeding. Omar argued Mina’s
quiet title action sought the same relief she sought in the
dissolution proceeding, a determination by the court that the
Duarte house was community property rather than Omar’s
separate property.
Mina opposed the demurrer, arguing the issue of the
legality of the allegedly forged deed was not before the family law
court in the dissolution proceeding.
The trial court sustained the demurrer under section
430.10, subdivision (c). The court found that the parties and the
causes of action were the same in both the dissolution action and
the quiet title action. Although Mina framed her claims
differently in the quiet title action, the court concluded both
actions concerned the same primary right, namely Mina’s
interest in the Duarte house. “The evidence submitted in the
[quiet title] case to establish that the quitclaim is fraudulent
would likely be the same evidence as used to establish that the
subject property is community property in the [dissolution
action].”
The trial court ordered Mina’s quiet title action “abated
pending the outcome” of the dissolution action, and set for six
months later an order to show cause regarding the status of the
dissolution action. Mina timely appealed.
DISCUSSION
A. Standard of Review
“We review an order sustaining a demurrer de novo.
[Citation.] We accept the truth of material facts properly pled in
the operative complaint, but not contentions, deductions, or
4
conclusions of fact or law.” (2710 Sutter Ventures, LLC v. Millis
(2022) 82 Cal.App.5th 842, 850.)
B. The Trial Court’s Order Is Appealable
Under section 430.10, subdivision (c), a defendant may
demur to a complaint on the basis that “[t]here is another action
pending between the same parties on the same cause of action.”
“Where a demurrer is sustained on the ground of another action
pending, the proper order is not a dismissal, but abatement of
further proceedings pending termination of the first action.”
(Plant Insulation Co. v. Fibreboard Corp. (1990) 224 Cal.App.3d
781, 788.) Under section 597, “where . . . a demurrer based upon
subdivision (c) of Section 430.10 is sustained . . . an interlocutory
judgment shall be entered in favor of the defendant pleading the
same to the effect that no trial of other issues shall be had until
the final determination of that other action . . . .” The
interlocutory judgment is appealable “in the same manner . . .
provided by law for appeals from judgments.” (§ 597.)
Omar argues Mina’s appeal is not proper because the trial
court never entered an interlocutory judgment, but merely an
order sustaining the demurrer. In support, Omar quotes Setliff v.
E. I. Du Pont de Nemours & Co. (1995) 32 Cal.App.4th 1525,
which states, “An order sustaining a demurrer is not appealable;
the judgment of dismissal is.” (Id. at p. 1533.)
Here we are dealing with an abatement order, not a
dismissal, but we will assume arguendo the principle from Setliff
applies. We nonetheless conclude Mina’s appeal is proper. Even
in the absence of a formal judgment, “ ‘ “when the trial court has
sustained a demurrer [without leave to amend] to all of the
complaint’s causes of action, appellate courts may deem the order
to incorporate a judgment of dismissal, since all that is left to
5
make the order appealable is the formality of the entry of a
dismissal order or judgment.” [Citation.]’ [Citation.]” (Bullock v.
City of Antioch (2022) 78 Cal.App.5th 407, 411, fn. 1.) We deem
the trial court’s order sustaining the demurrer and abating the
quiet title action to incorporate an interlocutory judgment under
section 597, and will review the order. (See Bullock, at p. 411,
fn. 1.)
Mina argues the order is appealable because, despite the
abatement language, the order in effect dismisses her entire
action. This is incorrect. Nothing in the trial court’s order
indicates a dismissal of any causes of action. The trial court
instead put Mina’s complaint on hold pending resolution of the
dissolution action. The order is appealable not as an order of
dismissal, but as an interlocutory order of abatement under
section 597.
C. Mina Fails To Show the Trial Court Erred By
Sustaining the Demurrer
The crux of Mina’s argument on appeal is that the family
law court, although having jurisdiction in the dissolution action
to determine whether property is separate or community, lacks
the power to quiet title and set aside the allegedly forged deed.
She contends she therefore was entitled to bring a parallel civil
action to obtain the relief unavailable in the dissolution
proceeding.4
4 Mina also suggests the order sustaining the demurrer
improperly relied on claim preclusion or res judicata. We have
found no language in the trial court’s order referring expressly or
implicitly to claim preclusion or res judicata, nor does Mina
identify any such language.
6
A defendant demurring under section 430.10,
subdivision (c) “must show that the parties, cause of action, and
issues are identical, and that the same evidence would support
the judgment in each case.” (5 Witkin, Cal. Procedure (6th ed.
2021) Pleading, § 970, p. 365.) Here, the dissolution action and
Mina’s quiet title action involve the same parties and address the
same issue, namely whether Mina is entitled to 50 percent of the
Duarte house. It would appear Mina would rely on the same
evidence in both proceedings in order to prove the deed conveying
the house to Omar was forged—certainly on appeal Mina does
not identify any evidentiary differences between the two
proceedings.
Mina argues, “The elements to prove a [quiet title] action
are not the same as proving community property interest in a
divorce.” In determining what constitutes a cause of action,
California applies “ ‘[t]he “primary rights” theory, under which
the invasion of one primary right gives rise to a single cause of
action.’ [Citations.]” (Bay Cities Paving & Grading, Inc. v.
Lawyers’ Mutual Ins. Co. (1993) 5 Cal.4th 854, 860.) Under the
primary rights theory, “ ‘the “cause of action” is based upon the
harm suffered, as opposed to the particular theory asserted by
the litigant. . . . Even where there are multiple legal theories
upon which recovery might be predicated, one injury gives rise to
only one claim for relief.’ [Citation.]” (Ibid.; see Pitts v. City of
Sacramento (2006) 138 Cal.App.4th 853, 856 [applying primary
rights analysis when reviewing demurrer under section 430.10,
subdivision (c)].)
The trial court found, and we agree, that the primary right
at issue in Mina’s quiet title suit was identical to a primary right
at issue in the dissolution proceeding—Mina’s entitlement to the
7
Duarte home. It does not matter for purposes of section 430.10,
subdivision (c) that Mina’s quiet title action asserts that right
under different theories with different elements.
Mina’s assertion that the family law court lacks jurisdiction
to resolve the property dispute at issue is not supported by the
case law. The family law court has “jurisdiction to divide
community property in a dissolution action.” (Askew v. Askew
(1994) 22 Cal.App.4th 942, 961 (Askew).) “[T]he actual division of
community property is affected by the characterization of specific
assets [as community or separate property], so the issue of
characterization also reposes in the family law court.” (Id. at
p. 962.) Thus, the family law court, acting within its jurisdiction,
may determine if the Duarte house is separate or community
property, the question at the center of Mina’s quiet title action.
The trial court’s sustaining Omar’s demurrer in deference
to the family law court’s jurisdiction is consistent with the case
law, which holds “when a dissolution proceeding is pending in the
family court, another department of the superior court may not
act so as to interfere with the family court’s exercise of its powers
in that proceeding.” (Dale v. Dale (1998) 66 Cal.App.4th 1172,
1183.) In Askew, for example, the Court of Appeal held that the
court in a civil action lacked jurisdiction to impose constructive
trusts on properties when the family law court in an earlier-filed
dissolution action had yet to characterize the properties as
community or separate. (Askew, supra, 22 Cal.App.4th at p. 962.)
Similarly, in the instant case the issue whether the Duarte house
is community property is before the family law court in the
dissolution proceeding, and therefore, the trial court in Mina’s
quiet title action cannot interfere with that determination.
8
Mina claims “[a]mple case law” indicates that when
dissolution actions overlap with quiet title issues, the quiet title
claims should be consolidated with the dissolution action rather
than abated. Mina’s cited case authority does not support these
propositions. Rather, as we explain below, the cited authority is
inapposite and/or supports the trial court’s ruling in the instant
case.
In In re Marriage of McNeill (1984) 160 Cal.App.3d 548
(McNeill), disapproved on other grounds by In re Marriage of
Fabian (1986) 41 Cal.3d 440, the trial court consolidated the
wife’s dissolution action with the husband’s action seeking, inter
alia, to set aside the deed to the couple’s residence, to void an
earlier marital settlement agreement, and to obtain
compensatory and exemplary damages for the wife’s alleged
fraud. (McNeill, at p. 555.) The parties stipulated to an advisory
jury hearing “on the issue[ ] of fraud.” (Id. at pp. 555–556 & fn. 2,
italics omitted.) On appeal, the wife challenged the consolidation
order, contending the husband’s causes of action were not within
the statutory scope of a dissolution proceeding. (Id. at p. 556.)
The Court of Appeal agreed the husband’s claim for
damages by statute could not be part of the dissolution
proceeding, but nothing prohibited consolidation of that claim
with the dissolution proceeding. (McNeill, supra, 160 Cal.App.3d
at p. 556.) “Here husband sought to void the deed and the
agreement, asked for damages resulting from wife’s fraud, and
sought exemplary damages. Neither the existence of the marital
relationship nor the fact wife was contemporaneously seeking a
dissolution prohibited husband from his requested relief.
Husband could have tested the validity of the deed and
agreement in the dissolution or by an independent action.
9
[Citation.] But damages could not have been pleaded in the
dissolution action; to be compensated for fraud, husband had to
file a separate civil action.” (Id. at p. 557.) The court then cited
precedent for the proposition that consolidation “allows issues
which could not be raised in the dissolution action nevertheless to
be heard concurrently.” (Ibid.)
McNeill concerned the interplay of a dissolution action with
a separate action for damages, relief McNeill concluded was not
available in a dissolution action. It is not instructive here, where
Mina has not filed a claim for damages. McNeill in fact
contradicts Mina’s assertion that the court in a dissolution action
cannot adjudicate the validity of a deed, stating the husband
“could have tested the validity of the deed . . . in the
dissolution . . . .” (McNeill, supra, 160 Cal.App.3d at p. 557.)
Mina notes that in that same sentence, the McNeill court
stated the husband also could have tested the validity of the deed
“by an independent action.” (McNeill, supra, 160 Cal.App.3d at
p. 557.) To the extent Mina suggests this language indicates it
was improper for the trial court to abate her quiet title action,
we disagree. There is no indication that the wife in McNeill
demurred to the husband’s complaint on the ground that his
challenge to the deed was duplicative of issues in the dissolution
action. “ ‘[C]ases are not authority for propositions not
considered.’ [Citation.]” (Howard Jarvis Taxpayers Assn. v.
Newsom (2018) 39 Cal.App.5th 158, 169.) We therefore will not
construe the statement that the husband could bring a challenge
to the deed in an independent action as addressing the issue
presented in the instant case.
Mina contends Porter v. Superior Court (1977)
73 Cal.App.3d 793 (Porter) held that when determining the order
10
of proceedings between a dissolution action and an action to set
aside a deed, “the better method is to abate the division of the
property until the independent claim as to the deed transference
is ruled upon”—that is, that the family law court should not
address disposition of the Duarte house until the trial court
resolves Mina’s separate action challenging the deed.
Mina misreads Porter. In that case, the wife filed a
dissolution action in which she claimed the couple’s home was
community property. (Porter, supra, 73 Cal.App.3d at pp. 796,
805.) The husband in response contended the home originally
was his separate property, and he later deeded it to himself and
his wife as joint tenants. (Id. at p. 796.) He further claimed his
wife had obtained that joint tenancy through fraud or undue
influence. (Id. at p. 797.)
The husband then filed his own complaint seeking to set
aside the joint tenancy deed and establish the home as his sole
separate property. (Porter, supra, 73 Cal.App.3d at p. 797.) After
overruling the wife’s demurrer on the basis of another action
pending, the trial court took the dissolution action off calendar
pending resolution of the husband’s action to set aside the deed.
(Ibid.) The wife sought a writ of mandate directing the trial court
to proceed with her dissolution action. (Id. at p. 795.)
The Court of Appeal began by rejecting the husband’s
argument that he was entitled to a jury trial, and thus a separate
proceeding, on his action to set aside the deed. (Porter, supra,
73 Cal.App.3d at p. 801.) The appellate court further held the
trial court “erred in unconditionally removing the dissolution
proceedings from the trial calendar.” (Id. at p. 805.) The
husband, through his separate action, could not “prevent the
[trial] court from proceeding with the dissolution action insofar as
11
it involves the status of the parties and the wife’s claim that the
property is community property. If she [were] successful in that
claim, it would put an end to the matter.” (Ibid.)
The Court of Appeal noted, however, a “ ‘general rule [that]
the superior court in a divorce proceeding has no jurisdiction to
deal with the separate property of the spouses’ ” unless the
spouses consent to that jurisdiction.5 (Porter, supra,
73 Cal.App.3d at pp. 804–805.) Therefore if, as the husband
claimed, the home had been his separate property, and “that by
the conveyance into joint tenancy, the husband created separate
property interests in himself and his wife, there may be a serious
question as to whether the court could determine the validity of
the deed in the dissolution proceedings over the husband’s
objection.” (Id. at p. 805.)
The Court of Appeal then explained the preferred order of
proceedings if the trial court in the dissolution action concluded
the home was not community property, but the separate property
of each spouse by virtue of the joint tenancy. In that event,
“discretion indicates that the court in the dissolution proceedings
abate proceedings concerning the property in question, and
5 Porter predated what is now codified at Family Code
section 2650, which provides that “[i]n a proceeding for division of
the community estate, the court has jurisdiction, at the request of
either party, to divide the separate property interests of the
parties” if “held by the parties as joint tenants or tenants in
common.” (Italics added; see Askew, supra, 22 Cal.App.4th at
p. 963.) This statutory section “was intended to close a historical
loophole, pursuant to which separate property interests—even
those held in joint title between spouses—could only be
partitioned in a separate civil action.” (In re Marriage of Braud
(1996) 45 Cal.App.4th 797, 810.)
12
reserve jurisdiction to act if the property is not disposed of in the
collateral action” to set aside the deed. (Porter, supra,
73 Cal.App.3d at p. 805.) Alternatively, the wife’s dissolution
action and the husband’s action to set aside the deed “could be
ordered consolidated.” (Ibid.)
Porter does not support Mina’s contention that her quiet
title action should take precedence over Omar’s earlier-filed
dissolution action. Rather, Porter counseled that the trial court
first determine in the dissolution action whether the residence
was community or separate property. (See Porter, supra,
73 Cal.App.3d at p. 805.) Only if the trial court determined the
residence was held as separate property—in that case through a
joint tenancy deed granting separate property interests to each
spouse—would it be proper to allow an independent challenge to
the deed to proceed, either consolidated with the dissolution
proceeding or as a separate action. (Ibid.) In contrast, if the wife
were “successful in [her] claim” in the dissolution action that the
home was community property, “it would put an end to the
matter” and render further proceedings in the husband’s separate
action unnecessary. (See ibid.)
Porter therefore supports the trial court’s ruling in the
instant case, which left it to the family law court in the earlier-
filed dissolution proceeding to determine in the first instance
whether the Duarte house was community or separate property.
Mina’s other cited authority also is unavailing. In Beehler
v. Beehler (1979) 100 Cal.App.3d 376 (Beehler), the wife filed a
petition for dissolution. (Id. at p. 381.) She then filed a separate
lawsuit against the husband and several business associates
alleging misconduct in numerous property transactions. (Id. at
pp. 379–381.) The trial court sustained a demurrer to the
13
complaint based on the grounds of another action pending, i.e.,
the dissolution action. (Id. at p. 381.)
The Court of Appeal held that the demurrer properly was
sustained as to the husband on a cause of action pertaining to the
couple’s community property interests, and “[o]n that cause of
action the trial court could properly have entered an order
abating or continuing the action until the dissolution action had
been concluded or dismissed.” (Beehler, supra, 100 Cal.App.3d at
p. 385.) The appellate court otherwise reversed the sustaining of
the demurrer, reasoning that the parties and issues in the other
causes of action were not before the court in the dissolution
action, as required under section 430.10, subdivision (c).
(Beehler, at pp. 382–384.) Although joinder was permissible, the
wife had chosen not to join the defendants other than her
husband to the dissolution proceeding. (Id. at p. 384.) The Court
of Appeal noted the trial court nonetheless could order the
actions consolidated, “thereby providing for resolution of the
entire matter in one proceeding.” (Ibid.)
Beehler, which held that the trial court properly sustained
the demurrer to the second action to the extent it overlapped with
the dissolution proceeding, supports the trial court’s sustaining of
the demurrer in the instant case. To the extent Beehler endorsed
consolidation, it was in the context of claims asserted against
parties other than the husband, or that could not be asserted
against the husband in the dissolution action. There are no
parties in the instant case apart from Omar and Mina, nor has
Mina identified any authority that her cause of action asserting
her interest in the Duarte house cannot be adjudicated in the
dissolution proceeding.
14
In re Marriage of Buford (1984) 155 Cal.App.3d 74,
disapproved on other grounds by In re Marriage of Fabian, supra,
41 Cal.3d 440, relied on Porter and former provisions of the Civil
Code to hold that although the court in a dissolution action had
jurisdiction to characterize assets as community or separate, it
lacked jurisdiction to impose a constructive trust on the wife’s
separate property in favor of the husband. (Buford, at p. 78.)
The husband’s claim for a constructive trust therefore had to be
brought in an independent action, although that action could be
consolidated with the dissolution action. (Id. at p. 79.)
In re Marriage of Buford is distinguishable from the instant
case in that the Buford husband sought a constructive trust over
what had already been determined to be his wife’s separate
property, and therefore, per the Buford court’s reasoning, beyond
the jurisdiction of the court adjudicating the dissolution. Here, in
contrast, Mina, in both the dissolution action and her separate
action, seeks to establish the Duarte house as community
property, through quiet title, constructive trust, or otherwise. To
the extent consolidation was necessary in Buford to allow the
court adjudicating the dissolution also to adjudicate disposition of
the wife’s separate property, Mina’s lawsuit contending the
Duarte house is community property raises no such issue.
In In re Marriage of Testa (1983) 149 Cal.App.3d 319, the
Court of Appeal held that the trial court erred in ruling that a
prior judgment vacating an interlocutory order of divorce also
automatically vacated the parties’ property settlement
agreement. (Id. at pp. 320, 322.) The appellate court stated,
“The validity of the agreement may still be tested on remand if
husband seeks to enforce it or by wife in an independent action.”
15
(Id. at p. 322.) The case did not address demurrers or
overlapping lawsuits, and is not instructive in the instant case.
Watkins v. Watkins (1983) 143 Cal.App.3d 651 held that
where an unmarried couple subject to an implied agreement
under Marvin v. Marvin (1976) 18 Cal.3d 660 later marry, the
Marvin agreement nonetheless remains enforceable. (Watkins, at
p. 652.) As a matter of background, the Court of Appeal noted
the trial court had consolidated the husband’s dissolution action
with the wife’s separate action to enforce the Marvin agreement.
(Watkins, at p. 653.) The consolidation order was not at issue in
the appeal, nor was there any discussion of overlapping causes of
action and abatement, so the appellate court reached no holdings
pertinent to the instant case.
Mina contends that Medeiros v. Medeiros (1960)
177 Cal.App.2d 69 (Medeiros) indicates that “the issue of quiet
title must be adjudicated on its own terms, not swallowed in an
assessment of community or separate property interests” under
the Family Code. Medeiros, which did not involve a marriage
dissolution or any family law action, says no such thing.6 That
case applied the rules from Thomson v. Thomson (1936) 7 Cal.2d
671 to determine if the quiet title action at issue was equitable or
legal. (Medeiros, at p. 72.) The appellate court concluded the
action was legal in nature, and the plaintiff therefore was
entitled to a jury trial. (Id. at p. 73.) Medeiros said nothing
about the interrelation of quiet title actions and family law cases.
6 Plaintiff Mary Medeiros and defendant John F. Medeiros
were not husband and wife. The lawsuit concerned the property
of the late Manuel Madeiros, to whom Mary Madeiros had been
married. (Madeiros, supra, 177 Cal.App.2d at p. 71.)
16
Apart from these unavailing cases, Mina points to no
statute, case law, or other authority suggesting the court in a
dissolution action cannot set aside a deed or quiet title as part of
its determination that a particular asset is community property.
In the absence of citation to authority supporting her contentions,
Mina provides no basis to reverse the trial court. (Grappo v.
McMills (2017) 11 Cal.App.5th 996, 1006 [appellant has burden
to demonstrate error].)
Mina argues that the fraudulence of the deed must be
adjudicated in a separate trial, citing Civil Code section 1572,
which lists conduct constituting “[a]ctual fraud.” That code
section says nothing about procedure, much less separate trials,
and thus does not suggest that a court in a dissolution action
cannot determine the validity of a deed.
Mina argues she had a right to file a separate action and
doing so was not in bad faith. We see no indication the trial
court’s ruling was based on a finding of bad faith, nor does our
holding here depend on any such finding.
Mina argues, “If the divorce action is dismissed without a
resolution [of] the ownership or community property interest
decided, and if the demurrer is sustained without leave, the
entire quiet title action will face legal challenges as to whether
res judicata occurred upon refiling the quiet title action, or when
a second divorce action is filed.” To the extent Mina is concerned
that a dismissal of her quiet title action would pose problems
should the dissolution action not resolve all issues, we reiterate
that the trial court did not dismiss her quiet title action, but
merely put it on hold pending resolution of the dissolution action.
17
DISPOSITION
The interlocutory judgment is affirmed. Omar Shami is
awarded his costs on appeal.
NOT TO BE PUBLISHED.
BENDIX, J.
We concur:
ROTHSCHILD, P. J.
WEINGART, J.*
* Judge of the Los Angeles County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
18 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487964/ | RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 22a0248p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
┐
JONATHAN DAVID HEWITT-EL,
│
Petitioner-Appellee, │
> No. 22-1188
│
v. │
│
MICHAEL BURGESS, Warden, │
Respondent-Appellant. │
┘
Appeal from the United States District Court for the Eastern District of Michigan at Detroit.
No. 2:19-cv-10652—Sean F. Cox, Chief District Judge.
Argued: October 19, 2022
Decided and Filed: November 18, 2022
Before: SUTTON, Chief Judge; BOGGS and KETHLEDGE, Circuit Judges.
_________________
COUNSEL
ARGUED: Scott R. Shimkus, OFFICE OF THE MICHIGAN ATTORNEY GENERAL,
Lansing, Michigan, for Appellant. Matthew A. Monahan, STATE APPELLATE DEFENDER
OFFICE, Detroit, Michigan, for Appellee. ON BRIEF: Scott R. Shimkus, OFFICE OF THE
MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellant. Matthew A.
Monahan, Katherine L. Marcuz, STATE APPELLATE DEFENDER OFFICE, Detroit,
Michigan, for Appellee.
_________________
OPINION
_________________
KETHLEDGE, Circuit Judge. To recite the facts of this case is nearly to decide it. Here,
the State of Michigan convicted Jonathan Hewittel of armed robbery and related offenses based
No. 22-1188 Hewitt-El v. Burgess Page 2
solely on the testimony of the victim, James Lemon. Three witnesses—one of them simply a
conscientious citizen with little relationship with anyone in the case—were prepared to testify in
support of Hewittel’s alibi that he was at home, almost a half-hour from the crime scene, when
the crime occurred. Yet Hewittel’s trial counsel failed to call any of those witnesses at trial.
That failure was the result not of any strategic judgment, but of a simple mistake of fact:
Hewittel’s counsel thought the crime occurred between noon and 12:30 p.m., when Hewittel was
at home alone; whereas the victim twice testified (both times in counsel’s presence) that the
crime occurred at 1:00 or 1:30 p.m.—by which time all three witnesses were present at
Hewittel’s home. Counsel then compounded that mistake of fact with a mistake of law, namely
his belief that evidence of Hewittel’s prior convictions would have unavoidably come in at trial.
Instead, that evidence almost certainly would have been excluded, if Hewittel’s counsel had only
asked. Yet from his opening statement, to his direct and redirect examinations of Hewittel, to his
closing argument, Hewittel’s counsel reminded the jury again and again—in a case where his
client was on trial for armed robbery—that his client had been convicted of armed robbery five
times before.
Thereafter the trial judge twice ordered that Hewittel have a new trial, but the Michigan
Court of Appeals ultimately reversed—based in part on the same mistake of fact (regarding the
time of the offense) that counsel himself had made. In federal court, the district court granted a
writ of habeas corpus to Hewittel. We affirm.
I.
A.
On Valentine’s Day 2010, in Detroit, someone shot James Lemon in the abdomen in the
living room of his home. Lemon escaped through a window and alerted his neighbors, who
called 911. When the police arrived, Lemon said that he had started drinking and smoking
marijuana around noon that day, and that Jonathan Hewittel and a man known as “Terry” had
joined him around 12:35 p.m. But Terry soon pulled a gun and demanded that Lemon hand over
his money and his own gun. Lemon responded that he had neither; and (according to Lemon)
Hewittel said “shoot him.” Terry then shot Lemon, who jumped through a window to escape.
No. 22-1188 Hewitt-El v. Burgess Page 3
Three days later Lemon gave the police another statement. This time, he said that Terry
had demanded only his money, that Lemon had handed over $600 to the two men, and that Terry
(at Hewittel’s direction) shot him anyway. The police soon arrested Hewittel, who was charged
with armed robbery, being a felon in possession of a firearm, and related offenses.
Hewittel’s father or brother asked a family friend, David Cross, to represent Hewittel at
his arraignment. Cross agreed and stayed on for the preliminary exam the following month.
There, Cross heard Lemon testify that the shooting occurred at “1:30 or 1:45” p.m.—rather than
around noon or 12:30—on February 14.
Meanwhile Hewittel’s case moved toward a trial date in May. Cross continued as
Hewittel’s attorney, without charging any fee. Hewittel was being held in the Wayne County
Jail, where Cross had no contact with him (apparently because Hewittel was held in a medical
unit for part of that time) until the two met about a week before trial. Hewittel told Cross that
several people, including his fiancée, Sheila Jackson, could confirm that he was at his own
home—rather than across town at Lemon’s—when the shooting occurred. By the time of
Hewittel’s meeting with Cross, however, Michigan’s statutory deadline for providing the
prosecution with notice of any alibi defense had already passed, at least as to the May trial date,
see Mich. Comp. Laws 768.20(1); and Cross did not seek an adjournment.
Hewittel’s case proceeded to trial in May, only three months after the shooting itself.
Before jury selection, Hewittel told the court that he wanted a new attorney, mostly because
Cross had not pursued his alibi witnesses, including Sheila Jackson and a woman named “Kelly.”
Cross then addressed the court, saying that “I have known from the beginning that Mr.
Hewitt[el], he has told me from the beginning that he was not there.” He added: “I have spoken
with Sheila Jackson. And after that conversation, it was my impression that she would not be an
alibi witness.” Cross continued:
I have been given other names. And my position has been that those persons
either needed to contact me so that I can interview them to determine whether or
not they would be alibi witnesses. And the one, it was the gentleman that, in spite
of this—Well, first of all, he’s not here. And in spite of his testimony, he would
not be an alibi witness either.
No. 22-1188 Hewitt-El v. Burgess Page 4
The court denied Hewittel’s motion for a new attorney, and the next morning the parties
proceeded with their proofs. Lemon testified that Hewittel and Terry robbed him at gunpoint
between 1:00 and 1:30 p.m. on February 14, 2010. Other than Lemon’s word, the prosecution
presented no other evidence, physical or otherwise, connecting Hewittel to the crime. Cross then
delivered his opening statement, which he began by disclosing Hewittel’s criminal record: “My
client, what we believe the evidence will show, first of all, is that my guy, my client is not a
perfect cat. He’s got a criminal record. I think you kind of got an indication of that by what’s
gone on before.” Cross continued in this vein when Hewittel took the stand:
Q: And Mr. Hewitt, let’s get right to it. You have been previously convicted of
crimes here in the state of Michigan, is that correct?
A: Yes.
Q: And you were incarcerated in prison for those crimes, is that correct?
A: Yes.
Q: And how long did you spend in prison?
A: A total of nineteen years.
Q: Nineteen years. Okay.
After that preamble, Hewittel told the jury his side of the story, testifying that Lemon had
called him early that Valentine’s Day, asking to buy Vicodin. Hewittel told him to call “Terry”
(whose real name was apparently Steve) and gave him a number; Lemon called Hewittel back
between 12:00 and 12:30 to say that he had made contact. The following exchange then
occurred between Cross and Hewittel:
Q: Okay. And where were you when he made the second phone call to you?
A: Oh, I was still at home. I was at home—because about 12:30, 12:00 or 12:30
is when I got up to start cooking dinner for my fiancée for Valentine’s Day.
Q: Okay.
A: So I was up preparing my food.
Q: And were you, were you with—was there someone else there with you?
A: No. Nobody else was in my home.
Cross never asked Hewittel where he had been between 1:00 and 1:30 p.m. that day,
which is when Lemon had testified the shooting occurred—and by which time, Hewittel would
No. 22-1188 Hewitt-El v. Burgess Page 5
have testified, three other people had joined him at home. Instead, Cross returned to Hewittel’s
criminal history:
Q: Now, you indicated, I believe in the beginning, that you had been convicted of
a couple of felonies before, is that correct?
A: Yes.
Q. And how old were you when you committed the and were convicted of the first
felony?
A: About twenty-five.
Q: About twenty-five. And the second?
A: Thirty.
Q: Thirty. Okay. And can you tell the jury the circumstances under which you
were convicted?
At that point, the court cut off the question, saying “[t]hat’s not relevant, sir.”
The prosecutor then cross-examined Hewittel and promptly walked through the door
opened by his direct testimony. After confirming that Hewittel had previously been convicted of
robbery, the prosecutor led him through the following exchange:
Q: And how many—was it just one case?
A: No.
Q: How many cases?
A: To my recollection, five.
Q: And was it—What type of robbery? Was it armed robbery?
A: Yes.
Q: Each time?
A: Yes. It was.
On redirect, Cross immediately returned to the subject of Hewittel’s criminal history:
Q: Mr. Hewitt, how long have you been incarcerated for this particular—
The Court: (Interposing) That’s not relevant.
Cross then began to ask another question, which the court again cut off as irrelevant. Then the
defense rested.
No. 22-1188 Hewitt-El v. Burgess Page 6
In closing arguments, the prosecutor said the case turned on Hewittel’s credibility; and
she suggested that the jury should not believe him, because “out of his own mouth, [he] has been
convicted five times of a crime involving theft or dishonesty. And he testified that it was armed
robbery.” During Cross’s closing argument, he agreed that the case “boils down to credibility.
Who do you believe?” Cross also emphasized the prosecution’s lack of evidence, but referred
several times more to Hewittel’s criminal record and suggested that Hewittel was “a bad guy.”
A trial in which the proofs began at 9:15 thus concluded before the lunch break; and after less
than an hour’s deliberation the jury found Hewittel guilty.
B.
A different attorney, Daniel Rust, represented Hewittel on appeal. In four pages of
argument, Rust argued that the trial court had erred by denying Hewittel’s request for a new
lawyer and by allowing the prosecutor to impeach Hewittel with his prior convictions. The court
of appeals rejected those arguments—as to the latter, the court held, Cross’s own questioning had
opened the door to the prosecutor’s questions about Hewittel’s criminal record. Rust also
argued, in the alternative, that Cross had rendered ineffective assistance when he failed to seek
exclusion of those convictions at trial. But the court of appeals held that Rust’s brief had “not
address[ed] the merits” of that argument, meaning it was “abandoned.” People v. Hewitt, 2011
WL 4129523, at *4 (Mich. App., Sept. 15, 2011). The Michigan Supreme Court denied leave to
appeal.
Hewittel thereafter filed a pro se motion for relief from judgment, claiming among other
things that his trial counsel had been ineffective on various grounds. As an exhibit, Hewittel
attached a sworn affidavit from Sheila Jackson, who said that, on the day of the offense, she had
“returned home from church at approximately 1:15-1:30 p.m. to find Jonnathan [sic] and his son
Leon outside our apartment building doing something to Leon’s truck.” Jackson also said that
“Mr. Cross told me that I could not be an alibi witness because I could not say where Jonathan
was from 12:00-12:45 p.m.”; that she had “attempted to supply Mr. Cross with known
information and possible locations of Leon, Craig, and Kelly that could clear Jonathan of these
charges”; but that “Mr. Cross told me that I needed to have those individuals contact him so that
he could determine if he could use them.”
No. 22-1188 Hewitt-El v. Burgess Page 7
The trial court—being the same judge who presided over Hewittel’s trial—chose to hold
an evidentiary hearing on his motion. On the first day of that hearing, the court heard testimony
from Rust and Hewittel’s son, Leon. (Despite a subpoena from the defense, Cross did not show.)
Rust testified that Hewittel had discussed his alibi with him and that he had tried without success
to contact Sheila Jackson. (Hewittel’s relationship with her ended at some point after his
conviction.) Rust said he had made no attempt to contact any of Hewittel’s other witnesses,
however, because he had not believed Hewittel’s alibi:
Q: All right. Did you believe defendant’s alibi? Did you—
A: (Interposing) No.
Q: Why not?
A: If I recall correctly, according to the testimony, he testified he was home alone
at the time this occurred. Therefore, if he had an alibi, it would have contradicted
his sworn testimony.
Hence Rust too was mistaken about the time of the crime: based on Hewittel’s testimony at trial
that he was alone during a phone call with Lemon at 12 p.m., Rust rejected Hewittel’s assertion
that others had joined him by the time of the shooting—which Lemon twice testified had
occurred between 1:00 and 1:30 p.m.
At one point, the trial court asked Rust directly about Cross’s repeated references to
Hewittel’s criminal record at trial:
The Court: Could you understand, at all, why he impeached his own client?
The Witness: No.
The Court: And as a practicing attorney, wouldn’t you say that that was one of the
most asinine tactics that you had ever seen?
The Witness: Not one of the most. It was questionable—
The Court: (Interposing) Certainly, it was, it was a huge one.
Leon testified next, saying that he spent most Sunday afternoons with his father: they’d
“go play ball,” or his father would “come watch me play basketball.” On the Sunday of the
shooting, however, Leon went to his father’s house because “he knew how to hook up a radio.
And I had a pick-up truck and I wanted to get a radio installed.” Leon arrived at his father’s
residence around “12:30, 12:45” in the afternoon and found Hewittel upstairs. They went
No. 22-1188 Hewitt-El v. Burgess Page 8
outside and worked on his truck together until around 2:00, when Leon left to go to the gym,
which opened at 3.
Leon said that he had told Cross he would testify, but that Cross turned him down:
Q: Okay. So, did Mr. Hewitt’s lawyer or anyone on behalf of his lawyer ever
contact you prior to the trial?
A: Well, I knew David, well, Mr. Cross. And I had let him know that I was
willing to testify.
Q: Okay. Did you tell him, basically, what you said here, that you were at his, at
Mr. Hewitt’s house?
A: Yeah.
Q: And you told him that you were willing to testify?
A: Yeah.
Q: And what did Mr. Cross tell you?
A: He said he didn’t want to put me on the stand because he thought I would lie
for him.
The court scheduled a second day of testimony, to hear from Cross and Hewittel’s other
witnesses. This time, Cross appeared, but—despite having five months’ notice of the
rescheduled hearing date—he said he had misplaced his files and remembered little about the
case. Cross acknowledged that Hewittel had given him the names of several alibi witnesses, but
reiterated the position he had taken before the trial court:
Q: And I, I believe you told the trial court that it was up to the witnesses to
contact you. Do you remember saying that?
A: Well, I may have said that. Yeah. And that kind of was my position with Mr.
Hewitt, that not having any contact information for these people, someone would
have to contact them and have them get in contact with me.
Cross did remember talking to Sheila Jackson. But he had ruled her out as a witness, he
said, because she could not place herself with Hewittel at the time of the crime. That conclusion
was based on the time of the offense in the initial police report—12:35 p.m.—because “at that
time, that’s all I had.” During questioning by Hewittel himself, however, Cross conceded he had
not considered Lemon’s testimony at the preliminary examination, which was that the crime
No. 22-1188 Hewitt-El v. Burgess Page 9
occurred at 1:30 or 1:45 p.m.—about the same time that Sheila had said she came home that day,
to find Hewittel and his son outside the apartment building.
The court then heard from Mark McCline—a third party unaffiliated with anyone else in
the case—whom a mutual friend had referred to Hewittel as someone who could “put a radio
inside my wife’s car.” McCline said that day was “easy” for him to remember: “It was my first
Valentine’s [Day] with my wife . . . my wife makes me remember that day.” McCline said that
he “had an engagement” with his wife at 2 p.m. that day; that he arrived at Hewittel’s building
“between 12:00 and 12:30”; and that Hewittel finished installing the radio around 1:15 p.m.
McCline also remembered seeing Leon there as Hewittel finished installing the radio:
A: [A] young man approached as it was practically being completed. [Hewittel]
was actually in the car. I’m standing outside the car. The young man approached.
I kind of take the position of defense. And [Hewittel] looked up and is like:
That’s my son. As if to tell me, you know, like this individual I know him, he all
right, calm down.
McCline also testified that Sheila had called him “three to five times” to discuss his
willingness to testify at trial:
A: Actually, Sheila called me as an extension, I guess, of his investigation part
and was asking me would I be willing to talk to a lawyer, this, that and the other.
And I really didn’t care. I was like, you know: I’ll talk to whoever and just—Like
it wasn’t an inconvenience. Now, it became an inconvenience somewhat because
ya’ll trial dates kept changing. So, every time, I’ve got to turn around and have
different schedules for my children to be watched and ya’ll cancelled. But I’m
glad we here today to get this over with now.
But Cross never reached out, and McCline never realized he was expected to do so
himself:
A: . . . I never had an intuitive nature to say, you know, you need to go talk to
somebody. I never knew I was valuable to the case or involved in the case or
none of that to the degree that make me say: Well, let me go talk to the police.
No. . . . Whoever [Sheila] wanted me to meet with never contacted me.
McCline also said that Sheila “was overwhelmed” by the situation, and that he eventually
“passed her off” to his wife, “because I really couldn’t relate to her, what she’s going through.”
Sheila had the phone number for McCline’s wife:
No. 22-1188 Hewitt-El v. Burgess Page 10
Q: What’s your wife’s name?
A: Kelly.
Q: And the last name?
A: McCline.
Q: And so, your understanding is that Sheila called Kelly as well?
A: Yes.
Q: Sheila had—so Sheila had Kelly’s phone number to call her?
A: Eventually, she got it because I couldn’t handle the stress that she presented.
On the final day of the hearing, Hewittel himself testified. He began by explaining that,
before trial, he had seen Cross “twice for two short periods of time, no more than thirty or forty
minutes each time.” He reiterated that he had been home alone on the day of the crime until his
son and McCline showed up around 12:30:
Q: Now, did somebody come to your apartment after 12:30?
A: Yeah. Shortly, later on, Mr. McCline showed up as far as with his wife’s
vehicle for me to put in the CD player. And he was there for a short while. And
then my son showed up. And I was supposed to do something with his [truck]
and, you know, he, we end up, end up not doing his. I did Mr. McCline’s, but I
ain’t never, did not do my son’s [truck radio]. And then we went back upstairs for
a few, for a little while.
...
Q: Do you recall about what time it was that he left?
A: My son had to leave between 2:00, 2:00 and 3:00, or between 1:30 or 2:30,
between 2:00 and 3:00.
When asked why he did not offer this same testimony at trial, Hewittel explained that Cross had
told him to answer only “the questions as I was asked”; and as to Hewittel’s whereabouts, Cross
had asked him only where he had between “between 12:00 and 12:30.”
C.
The trial court later entered an order granting Hewittel a new trial, finding that Cross had
rendered ineffective assistance by opening the door to Hewittel’s prior convictions and by failing
to investigate alibi witnesses or anything else before trial. The Michigan Court of Appeals
No. 22-1188 Hewitt-El v. Burgess Page 11
vacated that order on procedural grounds. People v. Hewitt, No. 299241, 2011 WL 4129523
(Mich. App., Sept. 15, 2011).
On remand, the trial court again granted a new trial. As an initial matter (regarding the
procedural grounds on which the trial court’s earlier order had been vacated), the court held that
Rust had been ineffective during Hewittel’s direct appeal, by failing to address the merits of his
argument that Cross should have sought exclusion of Hewittel’s prior convictions at trial. That
failure by Rust, the trial court found, resulted in “absolute prejudice to Defendant.”
The court then found that Cross had been ineffective, citing his “wholesale failure to
advocate for Defendant’s interests during trial.” Specifically, the court found that “Counsel took
the position that the putative witnesses would have to contact him. Counsel did not attempt to
hire an investigator to locate the witnesses.” The court also found that those witnesses could
have been located: “as Sheila was in contact with the McClines, Mark and Kelly”—a name, the
court noted, that Hewittel had given to Cross—“further investigation would have led to
additional witness(es) who were purportedly willing to testify with regard to Defendant’s alibi
during the time frame in question.” The court also reiterated that Cross’s repeated references to
Hewittel’s prior convictions had amounted to ineffective assistance.
The Court of Appeals again reversed, in part on the mistaken ground that it had already
adjudicated the merits of the prior-convictions claim it had deemed “abandoned” in Hewittel’s
direct appeal. People v. Hewitt-El, No. 332946, 2016 WL 6825877 (Mich. App., Nov. 7, 2016).
For that reason, the Michigan Supreme Court vacated the Court of Appeals’s order and
remanded for reconsideration. People v. Hewitt-El, 501 Mich. 1031 (2018). The Court of
Appeals again reversed the trial court’s grant of a new trial. People v. Hewitt-El, No. 332946,
2018 WL 2121478 (Mich. App. 2018). The Michigan Supreme Court denied leave to appeal,
over the dissents of two justices. People v. Hewitt-El, 502 Mich. 907 (2018).
Hewittel then sought habeas relief in federal court, asserting, as relevant here, claims that
Cross had been ineffective by opening the door to his prior convictions at trial (the “prior-
convictions claim”) and by failing to investigate his alibi witnesses (the “alibi-witnesses claim”).
The district court found both claims meritorious and granted the writ. This appeal followed.
No. 22-1188 Hewitt-El v. Burgess Page 12
II.
We review de novo the district court’s grant of habeas relief. Stermer v. Warren, 959
F.3d 704, 720 (6th Cir. 2020).
A.
As an initial matter, the State argues that Hewittel procedurally defaulted both of his
claims in state court. A habeas claim is defaulted—meaning we cannot adjudicate it, absent
good cause for the default—if the petitioner’s failure to comply with a state procedural rule was
an “adequate and independent” ground for the state court’s denial of relief on that claim.
Guilmette v. Howes, 624 F.3d 286, 290 (6th Cir. 2010). To determine whether state courts
denied relief on such a ground, we look to the state courts’ last reasoned opinion as to the claim.
Ylst v. Nunnemaker, 501 U.S. 797, 806 (1991).
Here, the parties agree that the relevant opinion is the last one rendered by the Michigan
Court of Appeals, in 2018. See People v. Hewitt-El, 2018 WL 2121478. And in light of that
opinion, we disagree with the State that the alibi-witnesses claim was defaulted. A state court’s
denial of relief on a claim is “independent”—for purposes of whether the court denied relief on
an “adequate and independent” state ground—if the decision rests on a state-law ground that is
“independent of the merits of the federal claim.” Harris v. Reed, 489 U.S. 255, 260 (1989)
(internal quotation marks omitted); see also, e.g., Girts v. Yanai, 501 F.3d 743, 753 (6th Cir.
2007) (same). Here, as to the alibi-witnesses claim, the Court of Appeals denied relief on the
ground that Cross’s “failure to call alibi witnesses was not objectively unreasonable.” People v.
Hewitt-El, 2018 WL 2121478 at *6. That is the standard for deficient performance under
Strickland v. Washington, 466 U.S. 668, 687-88 (1984); and that ground thus rested on the
claim’s merits, as the State itself recognizes in its brief. See Br. at 28. That ground was
therefore not “‘independent’ of the merits of the federal claim.” Harris, 489 U.S. at 260. To the
contrary, it was wholly dependent upon them, which means that the state court did not deny
relief on an “independent” state ground. Hence the claim was not defaulted for purposes of
habeas review. Id.
No. 22-1188 Hewitt-El v. Burgess Page 13
The State makes a better case that the prior-convictions claim was defaulted. As to that
claim, the Court of Appeals denied relief on the ground that Hewittel had not shown “actual
prejudice” as defined by Michigan Court Rule 6.508(D)(3)(b). That definition, Hewittel agrees,
differs somewhat from the definition of prejudice under Strickland, 466 U.S. at 694. See
generally Walker v. Hoffner, 534 F. App’x 406, 412 (6th Cir. 2013) (describing the differences
between the two definitions). The state court’s ground of decision was thus arguably
independent of the merits of Hewittel’s federal claim. That ground was also, undisputedly, an
“adequate” ground of decision; and on this record nobody disputes that it was procedural. Hence
the claim was arguably defaulted.
Yet any default here would be excused. We may consider a claim’s merits if its default
was itself the result of ineffective assistance of appellate counsel. See, e.g., Chase v. MaCauley,
971 F.3d 582, 591-92 (6th Cir. 2020). We decide that issue de novo. See id. at 592. Here, the
default was the result of Rust’s failure to brief the merits of his argument that Cross had rendered
ineffective assistance when he failed to seek exclusion of Hewittel’s convictions at trial. Rust’s
failure was ineffective assistance if it amounted to “deficient performance” that prejudiced
Hewittel (as that term is defined in Strickland). Strickland, 466 U.S. at 687. As to deficient
performance, neither the State nor anyone else has identified any reason, strategic or otherwise,
why Rust would nominally raise the argument that Cross had been ineffective when he failed to
seek exclusion of the prior convictions, yet choose not to brief the merits of that argument. Nor
is there any colorable argument that briefing those merits would have diluted the force of
Hewittel’s other arguments or otherwise taxed the court’s patience. To the contrary, Rust’s brief
was threadbare and short to a fault. And the argument’s omitted merits were notably strong.
Even the Court of Appeals later recognized that Cross had rendered deficient performance by
failing to seek exclusion of Hewittel’s convictions at trial. Not even the State argues otherwise
here. Cross’s failure to brief the merits of an argument that was obviously much stronger than
the merits of the two claims that he did brief was deficient performance under Strickland.
That leaves the issue of prejudice, which turns on whether, absent Rust’s failure to brief
the merits of this argument, there existed “a reasonable probability” that the outcome of
Hewittel’s direct appeal would have been different. See Chase, 971 F.3d at 595. As an initial
No. 22-1188 Hewitt-El v. Burgess Page 14
matter, the State’s speculation about what the panel of judges in Hewittel’s direct appeal would
have done with that argument is beside the point. “The assessment of prejudice” is objective,
and does not “depend on the idiosyncrasies of the particular decisionmaker.” Strickland, 466
U.S. at 695.
Here, the existence of prejudice instead depends on whether, in Hewittel’s appeal, a
reasonable, impartial decisionmaker would have found that Cross’s failure to exclude Hewittel’s
conviction undermined confidence in the verdict. Id.; see Phillips v. White, 841 F.3d 567, 581
(6th Cir. 2017). The trial itself boiled down to a “one-on-one credibility contest” with Lemon.
People v. Snyder, 301 Mich. App. 99, 112 (2013). The judge who presided over Hewittel’s trial,
for his part, found that Cross had “sabotaged his client’s credibility.” The Court of Appeals later
concluded that “[a]llowing the jury to learn that defendant had previously been convicted of
armed robbery five times substantially increased the risk of unfair prejudice to the defendant,
particularly where defendant was presently charged with armed robbery.” 2018 WL 2121478 at
*5. In another case, the Court of Appeals also held, in such a credibility contest, that the
admission of even a single “prior conviction undermined the reliability of the verdict.” Snyder,
301 Mich. App. at 112. On de novo review we think an impartial decisionmaker would conclude
that—on this record, in a one-on-one credibility contest where the prosecution otherwise lacked
any evidence of guilt—counsel’s failure to exclude evidence of the defendant’s five convictions
for armed robbery, when he was on trial for armed robbery, undermined confidence in the
verdict.
Rust himself therefore rendered ineffective assistance of counsel when he failed to brief
the merits of this issue on direct appeal. That excuses the default of the prior-convictions
claim—which means we can consider the merits of both of Hewittel’s claims here.
B.
To obtain habeas relief, Hewittel must show that the state court of appeals unreasonably
applied Supreme Court precedent, or based its decision “on an unreasonable determination of the
facts in light of the evidence presented in the State court proceeding,” when it reversed the trial
court’s grant of postconviction relief. 28 U.S.C. §2254(d). An unreasonable application of
No. 22-1188 Hewitt-El v. Burgess Page 15
Supreme Court precedent, for purposes of the habeas statute, is one with which no fairminded
jurist would agree. Harrington v. Richter, 562 U.S. 86, 101 (2011). The relevant precedent here
is Strickland v. Washington, 466 U.S. 668 (1984). There, the Court held that a defendant
claiming ineffective assistance must show that his counsel’s performance “fell below an
objective standard of reasonableness,” and that “there is a reasonable probability that, but for
counsel’s unprofessional errors, the result of the proceeding would have been different.” Id. at
688, 694.
1.
We begin with the question whether Cross’s performance “fell below an objective
standard of reasonableness.” Id. at 688. As to the prior-convictions claim, not even the State
disputes that Cross’s performance was objectively unreasonable when he impeached his own
client with five armed-robbery convictions in a trial for armed robbery. Cross admitted he did
not “consider moving the Court to suppress” those convictions, explaining that, because Hewittel
“was charged with a felon in possession of a firearm . . . [h]is prior, prior criminal convictions
would have come out” at trial. But Hewittel had already stipulated to his status as a felon, for
purposes of the felon-in-possession charge; and a competent defense lawyer would have known
that Hewittel therefore could have excluded, as unfairly prejudicial, evidence that he had
multiple felony convictions for the very same offense for which he was on trial. See People v.
Allen, 429 Mich. 558, 571 (1988); cf. Old Chief v. United States, 519 U.S. 172, 191-92 (1997).
Cross’s decision not to seek exclusion of Hewittel’s prior convictions, therefore, resulted simply
from a mistake of law on his part. Meanwhile, as noted above, the state court of appeals itself
held that “defense counsel’s performance fell below an objective standard of reasonableness in
that regard.” 2018 WL 2121478 at *5. Suffice it to say that we agree.
As for the alibi-witnesses claim, the Supreme Court has made clear that “[c]ounsel has a
duty to make reasonable investigations or to make a reasonable decision that makes particular
investigations unnecessary.” Strickland, 466 U.S. at 691; see also, e.g., Rompilla v. Beard,
545 U.S. 374, 387 (2005) (“It is the duty of the lawyer to conduct a prompt investigation of the
circumstances of the case and to explore all avenues leading to facts relevant to the merits of the
No. 22-1188 Hewitt-El v. Burgess Page 16
case”) (internal quotation marks omitted). That means Cross had a duty to investigate potential
alibi witnesses.
Yet Cross undisputedly did almost nothing to discharge that duty. Instead he was
apparently unaware of it, since he twice told the trial court that—though he had “been given”
names of alibi witnesses—“my position has been that those persons either needed to contact me
so that I can interview them to determine whether or not they would be alibi witnesses.” And
what little Cross did to investigate those witnesses was fruitless because of his own mistake of
fact about when the crime occurred. At trial, Cross asked Hewittel about his whereabouts only
between 12:00 and 12:30 p.m. on the day of the crime. And at the post-conviction hearing—in
response to a question from Hewittel himself—Cross admitted that, “[m]ore than likely,” his
understanding of the “time frame” for the crime came “from the police report because, at that
time, that’s all I had.” That police report put the time of the crime at “12:35 p.m.” But the report
was not all Cross had, because he had been present at the preliminary exam a month later—
where Lemon testified under oath that the time of the crime was 1:30 or 1:45 p.m. Cross’s
mistake of fact, then, was his belief that the “time frame” for the crime was the one he asked
Hewittel about at trial: 12:00 to 12:30 p.m.
What Cross did to investigate alibi witnesses, in turn, was to talk to Sheila Jackson and,
almost certainly, to Leon. As noted above, Jackson stated in an affidavit that she returned home
from church (and saw Hewittel and Leon there) between 1:15 and 1:30 p.m.—almost exactly
when Lemon said the crime had occurred. And as to Cross’s conversation with Jackson, Cross
admitted (again in response to a question from Hewittel at the post-conviction hearing): “Based
upon that conversation and the time frame that I used in that conversation, Ms. Jackson could
not place you with her at that same time frame.” Cross told the court the same thing before jury
selection. On the basis of his own mistake of fact, therefore, Cross dismissed Jackson out of
hand as an alibi witness.
Cross did the same with Leon—who knew Cross as a family friend, and who testified that
Cross had likewise rejected him as an alibi witness (on the ground that he would “lie”). And
given that Cross never spoke to Mark McCline, Leon was almost certainly “the gentleman”
about whom Cross said at the outset of trial that, “in spite of his testimony, he would not be an
No. 22-1188 Hewitt-El v. Burgess Page 17
alibi witness either.” For Leon too had said that he arrived at his father’s home around 1:15 p.m.
that day, rather than during Cross’s “time frame.” Cross’s failure to take these witnesses
seriously thus “resulted from inattention, not reasoned strategic judgment.” Wiggins v. Smith,
539 U.S. 510, 526 (2003). And given that Sheila Jackson was in frequent contact with Kelly
McCline before trial, Cross easily could have connected with Mark McCline, had he not
dismissed Sheila out of hand.
The Court of Appeals nonetheless held that Cross’s “failure to call alibi witnesses was
not objectively unreasonable.” 2018 WL 2121478 at *6. Respectfully, however, that court
simply recited Cross’s version of events and then pronounced his performance adequate. See id.
And in doing so the court made the same mistake of fact that Cross did. As to Jackson in
particular, the court asserted that, “given the opportunity to testify, she may have perjured
herself.” Id. As shown above, however, that assertion is flatly contradicted by the record here.
The state court’s determination that Cross’s “failure to call alibi witnesses was not objectively
unreasonable,” therefore, was itself “based on an unreasonable determination of the facts in light
of the evidence presented in the State court proceeding.” 28 U.S.C. § 2254(d)(2). Cross’s
performance as to alibi witnesses was objectively unreasonable as defined by Strickland.
Strickland, 466 U.S. at 691.
2.
As to the prior-convictions and alibi-witnesses issues alike, therefore, Cross’s
representation of Hewittel was constitutionally deficient. Hence we must ask whether “there is a
reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding
would have been different.” Strickland, 466 U.S. at 694. We therefore consider the cumulative
effect of Cross’s deficient performance.
The Court of Appeals addressed part of that question, namely whether Cross’s failure to
exclude Hewittel’s prior convictions prejudiced him at trial. But the Court of Appeals
considered whether Cross’s deficient performance amounted to prejudice as defined by Michigan
Court Rule 6.508(d)(3)(b)—which, as noted above, differs in some respects from the Strickland
definition. And here our determination of prejudice is cumulative, rather than limited to the
No. 22-1188 Hewitt-El v. Burgess Page 18
prior-convictions issue alone. Whether we owe any deference to the court’s determination on
that point, therefore, is unclear.
We need not decide whether we owe any deference to that determination, however,
because in any event we conclude that Hewittel has shown the requisite prejudice. Hewittel’s
trial, such as it was, was strictly a credibility contest between Hewittel and Lemon; the
prosecution otherwise lacked any evidence, physical or otherwise, connecting Hewittel to the
crime. Yet Cross himself impeached Hewittel’s credibility with his prior convictions—thereby
allowing the prosecution to do the same—and then failed to bolster it with testimony from Sheila
Jackson, or Leon, or anyone else. Even the Court of Appeals recognized that “[a]llowing the
jury to learn that defendant had previously been convicted of armed robbery five times
substantially increased the risk of unfair prejudice to defendant, particularly where defendant
was presently charged with armed robbery.” 2018 WL 2121478 at *5. As the prosecution
emphasized in closing, that blunder caused Hewittel to admit “out of his own mouth” that he had
been convicted five times for the very crime he was accused of. True, the Court of Appeals
ultimately found no prejudice as defined by the Michigan court rule, because the court thought
that “the prosecution had a strong case,” given Lemon’s “unwavering testimony” that Hewittel
was present at the crime scene. Id. at *6. That sets a notably low bar for what counts as a
“strong case”—and, on this record, likely would amount to an unreasonable application of
Strickland if we were to treat it as such.
But we here consider the cumulative effect of Cross’s mistakes. In doing so, we decide
de novo the prejudicial effect of Cross’s failure to call any alibi witnesses, since the Court of
Appeals never addressed that question. See Rompilla, 545 U.S. at 390. A trial without Cross’s
mistakes indisputably would have been much harder for the prosecution than the trial was here.
Common to both would have been that the prosecution’s only evidence of guilt was Lemon’s
testimony. And a trial in which the jury did not hear (again and again) about Hewittel’s prior
convictions, but instead heard Sheila Jackson’s testimony that Hewittel was at home with Leon
at the time of the crime, when she returned there from church—would itself have been one in
which there would have been “a reasonable probability” that the result “would have been
different.” Strickland, 466 U.S. at 694. For in that event the contest would have been Lemon’s
No. 22-1188 Hewitt-El v. Burgess Page 19
word against both Hewittel’s and Jackson’s, with Hewittel unencumbered by his prior
convictions for armed robbery.
The likelihood of a different result would have been even stronger if Cross had allowed
Leon to testify as well, since that would have pitted three witnesses against one in a pure
credibility contest. And if Mark McCline had testified—which, as explained above, he would
have, had Cross not dismissed Jackson out of hand—Hewittel would have had a strong
probability of acquittal. McCline was a disinterested witness who missed a day’s work to testify
and arranged for someone to watch his children, simply because he chose to honor his subpoena.
His testimony would have directly supported Hewittel’s alibi. McCline’s testimony would have
powerfully corroborated Leon’s testimony as well. McCline’s testimony also included details—
like his encounter with Leon, and Hewittel’s assurance, as he looked up from inside McCline’s
car, that Leon was “my son”—that would have been hard to make up if they were not true. And
McCline had no reason to make anything up.
Thus, even if one assigns to Cross’s prior-convictions deficiency the same measure of
prejudice that the state court assigned to it—namely, a “substantially increased risk of unfair
prejudice” to Hewittel—that mistake, when combined with Cross’s failure to call any alibi
witnesses, resulted in prejudice as defined by Strickland. The trial here was an extreme
malfunction in the criminal-justice system. Harrington, 662 U.S. at 102. The district court was
right to grant the writ.
* * *
The district court’s judgment is affirmed. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487976/ | Filed 11/18/22 Marriage of Hiramanek CA2/2
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 TWO
In re the Marriage of KAMAL B306215
and ADIL HIRAMANEK. (Santa Clara County Super.
Ct. No. 2009-1-FL-149682)
KAMAL KAPADIA,
Respondent,
v.
ADIL HIRAMANEK,
Appellant.
APPEAL from the orders of the Superior Court of Santa
Clara County, Roberta S. Hayashi and Deborah A. Ryan, Judges.
Dismissed.
Adil Hiramanek, in pro. per., for Appellant.
No appearance for Respondent.
* * *
Adil Hiramanek (husband) purports to appeal two orders of
the family court—namely, (1) the order denying him, as a
vexatious litigant, permission to file a new motion, and (2) the
order denying his mother’s request to contact his three adult
children. The first order is not appealable, and husband has no
standing to bring the second. Accordingly, we dismiss the appeal
in its entirety.
FACTS AND PROCEDURAL BACKGROUND
I. Dissolution Proceedings
Husband and Kamal Kapadia (wife) filed a stipulation and
order in June 2009, in which husband agreed to stay away from
wife and their three then-minor children. Pursuant to that
agreement, wife and the kids were to stay in the family residence.
II. Order Declaring Husband a Vexatious Litigant
In June 2010, the family court declared husband a
vexatious litigant. That order was affirmed on appeal. (In re
Marriage of Hiramanek (Aug. 23, 2012, H035887) [nonpub.
opn.].)
III. Order Regarding Taxes and Fair Rental Value of
Family Residence
In January 2019, the family court issued an order
regarding two still-outstanding issues from the marital
2
dissolution. First, the court ordered husband and wife to each
pay one-half of the outstanding tax liability for their 2006 income
taxes. They were required to pay within 30 days of the service of
the court’s order. Second, the court deferred resolution of the
question of what amount, if any, wife owed husband for her use of
the family residence since the party’s separation. The June 2009
stipulation had “reserved” this issue for later resolution. The
court found the issue still not ripe for resolution in January 2019
because the paternal grandmother, who contended she had an
ownership interest in the family residence, was in the midst of
appealing the order regarding the sale of that residence.
IV. Order Regarding Paternal Grandmother’s Access to
Children
In a January 2020 oral ruling and March 2020 written
ruling, the family court denied the paternal grandmother’s
request to order husband and wife’s children to contact the
grandmother because she was ill and dying. Although the court
declined to order any contact because the children were now
adults, the court sought and obtained mother’s voluntary
agreement to pass along grandmother’s contact information to
the children so they could reach out to her if they wished. The
day after the January 2020 hearing, wife filed a declaration
indicating she had passed along the grandmother’s contact
information.
V. Order Denying Husband’s Request to File a Request
for Order in the Pending Dissolution Case
On March 6, 2020, husband filed a request to file new
litigation—namely, a request for orders (1) holding wife in
contempt for not paying her half of the 2006 outstanding income
tax amount by the family court’s deadline, and (2) calculating the
3
reasonable rental value of the family residence and awarding
husband “an advance” on that amount to cover husband’s living
expenses.
The family court denied husband’s request to file new
litigation on March 16, 2020.
VI. Appeal
Husband filed a timely notice of appeal, seeking to appeal
(1) the denial of his request to file new litigation; and (2) the
order denying the paternal grandmother’s request for the adult
children’s contact information.
DISCUSSION
I. Order Denying Request to File New Litigation Is Not
Appealable
We have no jurisdiction over husband’s appeal to the extent
it seeks to challenge the family court’s denial of his request to file
new litigation; the appropriate remedy is dismissal. (In re
Marriage of Deal (2022) 80 Cal.App.5th 71, 79 (Deal) [“[A]
vexatious litigant’s request to file new litigation under section
391.7 is not appealable. And without an appealable order, we
must dismiss the appeal.”].)
Husband resists this conclusion with what appear to be
three arguments.
First, he seems to suggest that he was incorrectly
designated as a vexatious litigant back in 2010. We must reject
this argument because that designation—which was already
affirmed in a prior appeal—is not subject to collateral attack.
(Deal, supra, 80 Cal.App.5th at p. 78, fn. 3; Stolz v. Bank of
America (1993) 15 Cal.App.4th 217, 223.)
Second, he argues that his request for orders does not
qualify as “new litigation” subject to the prefiling requirement to
4
which he is subject as a vexatious litigant. He is wrong. The
vexatious litigant statute explicitly provides that “‘litigation’
includes any petition, application, or motion other than a
discovery motion, in a proceeding under the Family Code . . ., for
any order.” (Code Civ. Proc., § 391.7, subd. (d).) Husband’s
“motion” for an “order” in this “Family Code” “proceeding”
accordingly qualifies as “litigation” subject to the prefiling
requirement. Husband cites Shalant v. Girardi (2011) 51 Cal.4th
1164, but that case merely held that a lawsuit filed by a
vexatious litigant while the litigant had a lawyer was not
retroactively subject to dismissal if the person subsequently fired
the lawyer and proceeded pro se. (Id. at p. 1168.) Shalant did
not purport to address the very different situation in this case,
which is governed by the plain text of the vexatious litigant
statute.
Third, he argues that the request for orders he sought to
file has merit. Because we have no jurisdiction to consider the
propriety of the family court’s denial of his prefiling request, we
are without jurisdiction to reach the merits of that denial.
II. Order Denying Paternal Grandmother’s Request for
Adult Children’s Contact Information
We must also dismiss husband’s purported appeal of the
denial of grandmother’s request for an order seeking the adult
children’s contact information. As husband recognized during the
hearing on this matter, grandmother was the “moving party”—
not husband. As a result, husband is not the party aggrieved by
the denial of the order, and thus has no standing to attack it on
appeal. (Conservatorship of Gregory D. (2013) 214 Cal.App.4th
62, 67-68 (Gregory D.); Hargrove v. Legacy Healthcare, Inc. (2022)
80 Cal.App.5th 782, 788.) To be sure, husband purported to file a
5
motion before the family court attacking the family court’s denial
order and proposing line edits to the order, but husband’s filing
did not retroactively make him the movant, and hence did not
give him standing. The remedy for lack of standing is dismissal.
(Gregory D., at pp. 67-68.)
During oral argument, husband relayed that grandmother
has passed away. As a result, the trial court’s denial of an order
granting her request to have the adult children contact her is
necessarily moot.
DISPOSITION
The appeal is dismissed.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
______________________, J.
HOFFSTADT
We concur:
_________________________, P. J.
LUI
_________________________, J.
CHAVEZ
6 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487972/ | Filed 11/18/22 P. v. Miles 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, C093598
Plaintiff and Respondent, (Super. Ct. No. 09F09113)
v.
GENNEL MILES,
Defendant and Appellant.
In 2013, defendant Gennel Miles was ordered to serve a life sentence after a jury
found him guilty of murder and other offenses based on his participation in a robbery.
The jury found true a felony-murder special-circumstance allegation (a murder during a
robbery).
1
After defendant’s conviction, our Supreme Court issued two decisions providing
substantial guidance on factors that must be considered by a jury in felony-murder
special-circumstance sentencing enhancements. (People v. Banks (2015) 61 Cal.4th 788;
People v. Clark (2016) 63 Cal.4th 522.) Specifically, Banks clarified the factors that
need to be considered in determining whether a defendant was a major participant in the
underlying felony. (Banks, at pp. 797-804.) In Clark, the court clarified the factors that
must be considered in determining whether a defendant acted with reckless indifference
to human life. (Clark, at pp. 611-623.)
In 2019, defendant filed a petition seeking to vacate his murder conviction and to
be resentenced under Penal Code1 section 1172.6.2 The trial court summarily denied
defendant’s petition, reasoning that the felony-murder special-circumstance finding
rendered him ineligible for relief under section 1172.6 as a matter of law. While
defendant’s appeal was pending, our Supreme Court held that a pre-Banks/Clark felony-
murder special-circumstance finding does not render a section 1172.6 petitioner ineligible
for relief as a matter of law. (People v. Strong (2022) 13 Cal.5th 698 (Strong).) Based
on Strong, we must vacate the trial court’s order and remand the matter for further
proceedings not inconsistent with Strong.
FACTUAL AND PROCEDURAL BACKGROUND
1. Defendant’s Case
Given the nature of the instant appeal, a detailed recitation of the facts underlying
defendant’s convictions is unnecessary. In sum, defendant and two compatriots lured the
1 Undesignated statutory references are to the Penal Code.
2 Effective June 30, 2022, the Legislature renumbered former section 1170.95 to
section 1172.6. (Stats. 2022, ch. 58, § 10.) There were no substantive changes to the
statute. Defendant filed his petition under former section 1170.95 but we will cite to the
current section number throughout this opinion.
2
victim to the home of one of the compatriots under the pretext of a marijuana transaction,
tied him up, and beat him. They then drove the victim’s car to his home, tied up the
victim’s wife, and stole marijuana plants. They then took the victim to a nearby spot and
shot and killed him. The next day, the victim’s car was burned. (People v. Shorter et al.
(Sept. 7, 2016, C072977) [nonpub. opn.] (Shorter).)
A jury found defendant guilty of first degree murder (§ 187, subd. (a)), first degree
robbery (§§ 211 & 213, subd. (a)(1)(A)), kidnapping (§ 207, subd. (a)), torture (§ 206),
arson (§ 451, subd. (d)), and carjacking (§ 215). The jury also found true that defendant
committed the murder while he was engaged in a robbery (§ 190.2, subd. (a)(17)) and
that he had a prior serious felony (§ 667, subd. (a)). In 2013, the trial court sentenced
defendant to life without the possibility of parole plus 27 years 8 months consecutive in
state prison. On appeal, we reversed the arson conviction and affirmed the judgment as
modified. (Shorter, supra, C072977.)
2. Defendant’s Petition
In March 2019, defendant filed a petition for resentencing pursuant to Senate Bill
No. 1437 (2017-2018 Reg. Sess.) (Senate Bill 1437). He attached a declaration stating a
complaint was filed against him that allowed the prosecution to proceed under a theory of
felony murder or murder under the natural and probable consequences doctrine; that he
was not the actual killer; that he did not, with the intent to kill, aid, abet, counsel,
command, include, solicit, request, or assist the actual killer in the commission of murder
in the first degree; that he was not a major participant in the felony or he did not act with
reckless indifference to human life during the course of the crime. The prosecution
opposed defendant’s motion, arguing that Senate Bill 1437 is unconstitutional and that
defendant was ineligible for relief because he had been convicted of a special
circumstance murder. Defendant, with the assistance of counsel, responded that the
robbery-murder special-circumstance finding did not render him ineligible because his
3
trial took place before Banks and Clark, which led to changes in the jury instructions
regarding “reckless indifference” and “major participant.”
In February 2021, the trial court denied defendant’s petition and declined to issue
an order to show cause, finding defendant had failed to show he fell within the provisions
of section 1172.6. The trial court reasoned that, in finding the robbery-murder special
circumstance to be true, the jury “necessarily found that defendant . . . was either the
actual killer, acted with intent to kill, or was a major participant in the underlying crime
who acted with reckless indifference to human life. The jury was specifically instructed
with CALCRIM [No.] 703 that it must make such a finding before finding true the . . .
robbery-murder special circumstance.” The court also noted that the jury had “ample
evidence to make the finding as articulated in [Banks and Clark].”
DISCUSSION
Legal Background
Senate Bill 1437, which became effective on January 1, 2019, “amend[ed] the
felony murder rule and the natural and probable consequences doctrine, as it relates to
murder, to ensure that murder liability is not imposed on a person who is not the actual
killer, did not act with the intent to kill, or was not a major participant in the underlying
felony who acted with reckless indifference to human life.” (Stats. 2018, ch. 1015,
§ 1(f).)
Section 188, which defines malice, now provides in part: “Except 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.)
Section 189, subdivision (e) now limits the circumstances under which a person may be
convicted of felony murder: “A participant in the perpetration or attempted perpetration
of a felony listed in subdivision (a) [(defining first degree murder)] in which a death
occurs is liable for murder only if one of the following is proven: [¶] (1) The person was
4
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, now section 1172.6, which
allows those convicted of felony murder or murder under the natural and probable
consequences theory to petition the trial court to vacate and resentence the defendant.
(§ 1172.6, subd. (a).) “If the petitioner makes a prima facie showing that the petitioner is
entitled to relief, the court shall issue an order to show cause.” (§ 1172.6, subd. (c).)
The prima facie inquiry under section 1172.6, subdivision (c) is “limited.”
(People v. Lewis (2021) 11 Cal.5th 952, 971.) The court “ ‘ “takes petitioner’s factual
allegations as true and makes a preliminary assessment regarding whether the petitioner
would be entitled to relief if his or her factual allegations were proved.” ’ ” (Ibid.)
Although the court may rely on the record of conviction (including a prior appellate court
opinion) in determining whether defendant has made a prima facie showing, the court
“should not engage in ‘factfinding involving the weighing of evidence or the exercise of
discretion.’ ” (Id. at p. 972.)
Analysis
Defendant contends that the trial court erred in determining he did not fall within
the provisions of section 1172.6 given the jury’s robbery-murder special-circumstance
finding. In supplemental briefing, defendant argues this approach was rejected in Strong,
and the People concede. Defendant further argues the trial court engaged in improper
factfinding and weighing of evidence when it determined that the evidence was sufficient
to support the robbery-murder special-circumstance finding.
In Strong, our Supreme Court made clear that when a defendant’s case “was tried
before both Banks and Clark, the special circumstance findings do not preclude him from
5
making out a prima facie case for resentencing under section 1172.6.” (Strong, supra, 13
Cal.5th at p. 721.) “This is true even if the trial evidence would have been sufficient to
support the findings under Banks and Clark.” (Id. at p. 710.) The Strong court noted that
the Banks and Clark cases “both substantially clarified the law governing findings under
. . . section 190.2, subdivision (d).” (Id. at p. 706.)
Here, the jury made its special circumstances finding more than two years before
Banks and Clark. Pursuant to Strong, that finding does not preclude defendant from
stating a prima facie case for relief. (Strong, supra, 13 Cal.5th at p. 721.) And,
regardless of the trial court’s evaluation of the trial evidence, Strong makes clear that a
defendant’s prima facie case is not barred even if the trial evidence was sufficient to
support the special circumstance finding after Banks and Clark. (Id. at p. 710; People v.
Lewis, supra, 11 Cal.5th at p. 972 [in reviewing the record at the prima facie stage, “a
trial court should not engage in ‘factfinding involving the weighing of evidence or the
exercise of discretion’ ”].)
Defendant’s resentencing petition was facially sufficient and alleged the essential
facts necessary for relief under section 1172.6. Nothing in the record demonstrates
defendant is ineligible for relief as a matter of law, so we must remand the matter for the
trial court to issue an order to show cause and, to the extent necessary, conduct an
evidentiary hearing. (§ 1172.6, subd. (d).) We express no opinion on the ultimate
resolution of the petition.
6
DISPOSITION
The trial court’s order denying defendant’s resentencing petition is reversed. On
remand, the court is directed to issue an order to show cause and, to the extent necessary,
hold an evidentiary hearing on the petition.
/s/
HOCH, J.
We concur:
/s/
MAURO, Acting P. J.
/s/
RENNER, J.
7 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487978/ | Filed 11/18/22 In re R.A. 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
In re R.A., a Person Coming Under the
Juvenile Court Law.
ORANGE COUNTY SOCIAL G061210
SERVICES AGENCY,
(Super. Ct. No. 20DP1622)
Plaintiff and Respondent,
OPINION
v.
R.H., et al.,
Defendants and Appellants.
Appeal from an order of the Superior Court of Orange County, Daphne
Grace Sykes, Judge. Affirmed. Request for judicial notice. Deny.
Marisa L. D. Conroy, under appointment by the Court of Appeal, for
Defendant and Appellant R.H.
Jesse McGowan, under appointment by the Court of Appeal, for Defendant
and Appellant C.A.
Leon J. Page, County Counsel, Karen L. Christensen and Deborah B.
Morse, Deputy County Counsel, for Plaintiff and Respondent.
No appearance for Minor.
R.H. (Father) and C.A. (Mother) appeal from the juvenile court’s order
terminating their parental rights as to R.A. (minor) pursuant to Welfare and Institutions
Code section 366.26 (.26 hearing). (All further statutory references are to the Welfare
and Institutions Code unless otherwise specified.) Father and Mother contend they were
not provided the statutorily required notice of the continued .26 hearing date. As
discussed below, we conclude the notice requirements were met. Father also contends
the juvenile court erred by finding inapplicable the parental-benefit exception because its
analysis does not comport with the requirements of In re Caden C. (2021) 11 Cal.5th 614
(Caden C.). As explained below, we conclude the record supports the juvenile court’s
findings on the parental-benefit exception. Accordingly, we affirm.
FACTS
A. Dependency Proceedings
On December 26, 2020, senior social worker Mariela Flores filed a request
for a protective custody warrant to remove the minor, who was born the day before via C-
section, from Father and Mother because the child’s physical environment posed a threat
to her safety or health. The application alleged: (1) the parents remain in a relationship
although they have a prior history of domestic violence, some of which occurred in the
presence of siblings and half-siblings, and Father was in jail for recently violating a
protective order; (2) the parents have unresolved substance abuse problems; (3) and the
parents have a history of unstable housing. The juvenile court granted the request the
same day. On December 28, 2020, the minor was placed with the maternal aunt, who
1
also had custody of minor’s siblings and half-siblings.
1
We deny SSA’s request for judicial notice of the prior proceeding relating to the
siblings, because those documents are not material to this appeal.
2
On December 29, 2020, SSA filed a dependency petition, alleging the
parents failed to protect the minor and abused or neglected the minor’s siblings. The
juvenile court found SSA made a prima facie showing the minor came within section
300. The court granted Mother eight hours of supervised weekly visits. It ordered no
visitation for Father while he was in custody, but later granted four hours of supervised
visits weekly, when Father was out of custody. The court ordered SSA to provide
reunification services. At the jurisdictional hearing, the juvenile court amended the
petition and found the allegations of the amended petition relating to (b)(1) [failure to
protect] and (j) [abuse of siblings], true by a preponderance of the evidence.
At the November 10, 2021 dispositional hearing, the juvenile court found
that reasonable efforts were made to prevent or eliminate the need for removal of the
child from her home, and that vesting custody with parents would be detrimental to the
child and to vest custody with SSA would serve the child’s best interests. The court set
the .26 hearing date for March 8, 2022, in the presence of both parents who were
represented by their respective counsel.
SSA served written notice of the March 8, 2022 hearing on Mother by first-
class mail on December 23, 2021, and on Father by personal service on January 5, 2022.
At the January 5, 2022, and January 28, 2022, Notice Review hearings, the parents’
respective counsel objected to “notice,” but the court found both parents had been
2
served.
At the March 8, 2022 .26 hearing, the court continued the matter to March
16, 2022, because as stated in the minute order, “a hearing is required and counsel is
unavailable.” There is no hearing transcript in the record. The minute order does not
show that the parents were present. Although the unavailability of counsel was stated as
a reason for continuing the hearing, the minute order indicates counsel for both parents
2
Whether the parents were properly served notice of the March 8, 2022 hearing is not an
issue in this appeal.
3
appeared at the March 8, 2022 hearing, and they objected to notice and the .26 hearing.
The court ordered both counsel to provide notice to their respective clients of the next
court date. On March 16, 2022, the parents did not appear for the .26 hearing. Counsel
for each parent detailed their efforts to contact their respective clients as to the March 16,
2022 continued hearing date.
On March 16, 2022, the court proceeded with the .26 hearing, and read,
considered and accepted into evidence SSA’s report recommending the minor be placed
for adoption. In that report, SSA stated the child had no medical or development issues.
The child was engaged and comfortable with her caregivers, “go[ing] to them for all her
needs.” The report noted the caregivers wanted to adopt the minor, and were adopting
the minor’s siblings. With respect to father’s visitation, the report noted Father was
granted visits once he was released from jail. While the visits went well, their regularity
was interrupted by Father’s failure to comply with required procedures, such as
confirming attendance before 10 a.m. on the day of the visits and complying with COVID
preventative measures. Visitation also was interrupted twice because Father was arrested
for violating the protective order and incarcerated.
The court then found the parents received proper notice of the March 16,
2022 hearing. It terminated parental rights, found adoption was appropriate, and found
none of the exceptions to adoption applied.
DISCUSSION
A. Notice of Continued .26 Hearing
Father and Mother contend the juvenile court denied them due process
when it terminated their parental rights without notice of the continued .26 hearing date.
We are not persuaded.
4
Section 294, subdivision (a), provides that notice of a section 366.26
hearing must be provided to, among others, the mother, the father, and all counsel of
record. Section 294, subdivision (f), provides that notice to the parents may be given as
follows: “If the parent is present at the hearing at which the court schedules a hearing
pursuant to Section 366.26, the court shall advise the parent of the date, time, and place
of the proceedings, their right to counsel, the nature of the proceedings, and the
requirement that at the proceedings the court shall select and implement a plan of
adoption, legal guardianship, placement with a fit and willing relative, or another planned
permanent living arrangement, as appropriate, for the child. The court shall direct the
parent to appear for the proceedings and then direct that the parent be notified thereafter
only by first-class mail to the parent’s usual place of residence or business, or by
electronic service pursuant to Section 212.5.” (§ 294, subd. (f)(1).)
Section 294 further provides: “Regardless of the type of notice required, or
the manner in which it is served, once the court has made the initial finding that notice
has properly been given to the parent, or to any person entitled to receive notice pursuant
to this section, subsequent notice for any continuation of a Section 366.26 hearing may be
by first-class mail to any last known address, by an order made pursuant to Section 296,
by electronic service pursuant to Section 212.5, or by any other means that the court
determines is reasonably calculated, under any circumstance, to provide notice of the
continued hearing.” (§ 294, subd. (d), italics added.)
Finally, section 294, subdivision (j), provides: “Notwithstanding
subdivision (a), if the attorney of record is present at the time the court schedules a
hearing pursuant to Section 366.26, no further notice is required, except as required by
subparagraph (A) of paragraph (7) of subdivision (f).” Section 294, subdivision
(f)(7)(A), provides for service on the attorney of record or publication where the parent
cannot be located or served by first-class mail or personal service despite due diligence.
5
Here, substantial evidence supports a finding that counsel for Mother and
Father were present at the March 8, 2022 hearing. The minute order for that hearing
reflects that attorneys for both Father and Mother made an appearance and objected to
notice and the setting of the .26 hearing. Although the minute order states the matter was
continued because a hearing was required and counsel was unavailable, the most
reasonable inference is that counsel was present but was unable to proceed thus
necessitating a continuance. Because the attorneys of record for Mother and Father were
present when the court continued the hearing to March 16, 2022, no further notice was
required under section 294, subdivision (j). The exception provided by section 294,
subdivision (f)(7)(A), does not apply because parents were previously served by first-
class mail and/or personal service.
Moreover, even though notice to the parents was not required, the juvenile
court nevertheless provided notice to the parents of the March 16, 2022 hearing. That
notice complied with the requirements of section 294, subdivision (d). There is no
dispute the juvenile court made “the initial finding that notice had properly been given to
the parent[s].” (§ 294, subd. (d).) The record shows Father and Mother were present in
court when the court set the initial .26 hearing date, the court provided the required
advisements, and SSA served written notice of the initial hearing date on the parents.
The record also shows the parents were not present for the initial .26 hearing, and the
court ordered parents’ counsel to provide notice of the continued hearing scheduled for
March 16, 2022, to their respective clients. Father and Mother have not shown how
ordering notice to them through their respective trial counsel was not “reasonably
calculated, under any circumstance, to provide notice of the continued hearing.” (§ 294,
subd. (d).) We note that trial counsel who represented the parents in prior proceedings,
including the January 2022 Notice Review hearings and the initial .26 hearing on March
8, 2022 were the same. There was no reason for the juvenile court to believe counsel
would not diligently notify or attempt to notify the parents of the continued date. Indeed,
6
at the March 16, 2022 hearing, counsel detailed their multiple attempts to contact their
respective clients to inform them of the new date. Thus, the court met the requirements
of section 294, subdivision (d), because it provided notice to the parents by means that “is
reasonably calculated, under any circumstance, to provide notice of the continued
hearing.” (§ 294, subd. (d).) In sum, the record shows the court complied with
statutorily-mandated notice requirements relating to the .26 hearing.
B. Parental-Benefit Exception
The parental-benefit exception permits the selection of another permanent
plan if “[t]he parents have maintained regular visitation and contact with the child and the
child would benefit from continuing the relationship.” (§ 366.26, subd. (c)(1)(B)(i).) To
show the exception applies, the parent bears the burden of establishing three elements: (1)
regular visitation and contact with the child, taking into account the extent of visitation
permitted; (2) the existence of a substantial, positive, emotional attachment between the
child and the parent -- the kind of attachment implying that the child would benefit from
continuing the relationship; and (3) that terminating the parent-child relationship would
be detrimental to the child even when balanced against the countervailing benefit of a
new, adoptive home. (Caden C., supra, 11 Cal.5th at p. 636.) In evaluating whether the
exception applies, courts should look to several factors, including the age of the child, the
amount of time he spent in his parent’s custody, the quality of interaction between parent
and child, and the child’s particular needs. (In re Autumn H. (1994) 27 Cal.App.4th 567,
576.) If the parent establishes all three elements, the exception applies, and the court
should select a permanent plan other than adoption. (Caden C., supra, at pp. 636-637.)
The juvenile court’s findings on the first two elements—regular visitation
and whether the child would benefit from continuing the relationship—are reviewed for
substantial evidence. (Caden C., supra, 11 Cal.5th at pp. 639-640.) Courts review the
third element using a hybrid standard: reviewing factual determinations for substantial
7
evidence and the weighing of the relative harms and benefits of terminating parental
rights for an abuse of discretion. (Ibid.) But where, as here, “the issue on appeal turns on
a failure of proof at trial,” “the question for a reviewing court becomes whether the
evidence compels a finding in favor of the appellant as a matter of law. [Citations.]
Specifically, the question becomes whether the appellant’s evidence was (1)
‘uncontradicted and unimpeached’ and (2) ‘of such a character and weight as to leave no
room for a judicial determination that it was insufficient to support a finding.’” (In re
I.W. (2009) 180 Cal.App.4th 1517, 1528, disapproved on other grounds by
Conservatorship of O.B. (2020) 9 Cal.5th 989, 1010, fn. 7.)
Father contends the juvenile court’s ruling on the parental-benefit exception
did not comport with the requirements of Caden C. because it did not perform a specific
analysis of the three elements. We disagree. At the outset, we note Father has the burden
to prove all three elements, and failure to prove any one element is sufficient to support
the juvenile court’s ruling here. As to the first element, we note the juvenile court did not
make an express finding whether Father maintained regular visitation with the minor.
The court, however, is not required to make express findings when it concludes the
parental-benefit exception does not apply. (In re A.L. (2022) 73 Cal.App.5th 1131, 1156
[the juvenile court is not required to recite specific findings when it concludes that
terminating parental rights would not be detrimental to the child].) Where, as here, the
record does not clearly establish the court resolved the issue of visitation in Father’s
favor, we must construe the court’s ruling on “the visitation element in a manner that
supports its order terminating father’s parental rights.” (In re Eli B. (2022)
73 Cal.App.5th 1061, 1069; see also Winograd v. American Broadcasting Co. (1998)
68 Cal.App.4th 624, 631 [the trial court’s ruling is presumed correct, and ambiguities are
resolved in favor of affirmance].) Thus, we presume the court found Father did not meet
the regular visitation element.
8
Father has not met his heavy burden on appeal to show the juvenile court’s
finding on the first element was erroneous. The record shows Father missed several
visits because he failed to comply with visitation protocols. More important, the
regularity of the visits was interrupted on two separate occasions due to Father’s
incarceration for his intentional violations of the protective order. Given the minor’s
young age, it is not unreasonable to infer that missing the visits interfered with the
minor’s ability to form a significant, positive, emotional attachment to Father. (See
McDermott Will & Emery LLP v. Superior Court (2017) 10 Cal.App.5th 1083, 1105
[“[S]ubstantial evidence standard of review requires us to resolve all conflicts and draw
all reasonable inferences from the evidence in favor of the trial court’s order”].) Thus,
the undisputed evidence is insufficient to compel a finding as a matter of law that Father
had enough regular visitation and contact with the child to fulfill the first element.
Nor has Father shown the juvenile court erred in ruling against him on the
other two elements. To prove the second element, the parent must show that “the child
has a substantial, positive, emotional attachment to the parent—the kind of attachment
implying that the child would benefit from continuing the relationship.” (Caden C.,
supra, 11 Cal.5th at p. 636.) In assessing whether the child would benefit from
continuing their relationship with the parent, “the focus is the child. And the relationship
may be shaped by a slew of factors, such as ‘[t]he age of the child, the portion of the
child’s life spent in the parent’s custody, the “positive” or “negative” effect of interaction
between parent and child, and the child’s particular needs.’ [Citation.]” (Id. at p. 632.)
Here, the undisputed evidence shows Father was not present at the minor’s birth, and the
minor was placed with the prospective adoptive parents two days after her birth, where
she remains to this day. While the visits were generally positive, there is no evidence the
child formed a substantial, positive emotional attachment to Father. In sum, the
undisputed evidence is insufficient to compel a finding as a matter of law that the second
element was met.
9
For the third element, the parent must show that terminating the parent-
child attachment “would be detrimental to the child even when balanced against the
countervailing benefit of a new, adoptive home.” (Caden C., supra, 11 Cal.5th at p. 636.)
In evaluating this element, the court “decides whether the harm of severing the
relationship outweighs ‘the security and the sense of belonging a new family would
confer.’” (Id. at pp. 633-634.) “When the relationship with a parent is so important to
the child that the security and stability of a new home wouldn’t outweigh its loss,
termination would be ‘detrimental to the child due to’ the child’s beneficial relationship
with a parent.” (Ibid.) “In many cases, ‘the strength and quality of the natural
parent/child relationship’ will substantially determine how detrimental it would be to lose
that relationship, which must be weighed against the benefits of a new adoptive home.”
(Id. at p. 634.) Here, Father failed to show the juvenile court abused its discretion in
terminating parental rights. (See id. at p. 640 [“the ultimate decision — whether
termination of parental rights would be detrimental to the child due to the child’s
relationship with his parent — is discretionary and properly reviewed for abuse of
discretion”].) As noted above, the minor was removed from the parents’ custody when
she was only a few days old, and contact with Father was sporadic. As a result the minor
never had a chance to develop a deep bond with Father necessary to invoke the parental-
benefit exception. Also, nothing in the record convincingly shows the minor formed such
a bond with Father in spite of the irregular visitation. In sum, the record fails to show the
minor’s bond with Father was so strong that the interest in keeping it intact outweighs the
benefits she would obtain from adoption.
10
DISPOSITION
The juvenile court’s order terminating the parental rights of Father and
Mother is affirmed.
MARKS, J.*
WE CONCUR:
MOORE, ACTING P. J.
MOTOIKE, J.
*Judge of the Orange County Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
11 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487977/ | Filed 11/18/22 Kabrins v. Novella CA2/1
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 ONE
HOWDY S. KABRINS et al., B308446
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC670095)
v.
DIEGO DOUGHERTY NOVELLA,
Defendant and Respondent.
APPEAL from an order of the Superior Court of Los
Angeles County. Mark A. Young, Judge. Affirmed.
Murphy Rosen, Paul D. Murphy, Daniel N. Csillag;
Covington & Burling, Daniel N. Shallman for Plaintiff and
Appellant Howdy S. Kabrins.
Tisdale & Nicholson, Michael D. Stein for Plaintiff and
Appellant Doris Weitz.
Holland & Knight, Kristina S. Azlin and Samuel J. Stone
for Defendant and Respondent.
___________________________________
In 2015, Diego Novella, a resident of Guatemala, murdered
his girlfriend, Gabriella Kabrins Alban, who grew up in Southern
California but sometimes lived in Guatemala, while the two were
travelling in South Africa to seek treatment for Alban’s Lyme
disease. Novella was convicted of the murder and sentenced to
20 years in a South Africa prison. Alban’s parents, Howdy S.
Kabrins and Doris Weitz, both California residents, sued Novella
for wrongful death. The trial court granted Novella’s motion to
quash service of summons on the ground that it lacked
jurisdiction. We affirm that order.
BACKGROUND
Alban was born in Los Angeles and resided in California for
most of her life. Novella also resided in California for several
years but was most recently a resident of Guatemala. In 2013,
Alban began dating Novella, and the following year moved to
Guatemala to live with him.
Alban suffered from Lyme disease, originally misdiagnosed
as Addison’s disease, which caused her constant physical and
emotional pain. In December 2014, she returned from
Guatemala to California, where she was largely bedridden.
In March 2015, Alban discovered a clinic in Germany that
might be able to treat her Lyme disease, and scheduled a trip to
the clinic for late May 2015.
Meanwhile, Novella had traveled from Guatemala to South
Africa to obtain medical treatment for “prior psychological
trauma” from Rhoda Slabbert-Barron, who offered a “purification
program” consisting of colon cleansing, sauna purification and
“sacred plant medicine” involving cannabis oil and ibogaine, a
dangerous hallucinogen.
2
Before and after undergoing this treatment, Novella
communicated with Alban in Los Angeles through telephone
calls, emails, and text messages, touting the ibogaine treatment
and suggesting that Alban undergo it to treat her Lyme disease.
She was eager to do so, telling him in an email: “I’m desperate to
regain my health completely and would do anything. So please
keep me posted and I am glad you are the guinea pig – despite
the fact that if I was more courageous like you . . . I would hop on
a plane on my bday and go do it at the same time. But of course –
aside from that being unrealistic, wishful thinking and just day-
dreaming for me – as I wouldn’t want to impose myself on your
journey. I hope you get all the answers you are seeking and if
this medicine ends up curing me too – in the near future – I
would be eternally grateful.
At his criminal trial, Novella testified, “Gabriella said to me
take the medicine. You try it first and according to how it goes
with you, then I’m going to take it myself as well.” “I spoke to her
on the 21st of May. I told her that it went very well with the
medicine. . . . I told her to come, that it has been a fantastic
experience.”
Although Novella insisted that Alban come to South Africa
for the ibogaine treatment and said it had gone well, in fact the
treatment entirely failed him, and Slabbert-Barron refused to
treat him further. He never informed Alban of these facts. On
May 22, 2015, he emailed, “I LOVE YOUUUUU[] BEBE!!!” And
on May 28, he wrote: “Hi Gabs, these people will be around in
June so you can come and take your medicine.”
On June 21, 2015, Alban flew from Los Angeles for
Guatemala to leave her two dogs with a caretaker before going to
South Africa. After a delay in Guatemala for health reasons, she
3
arrived in South Africa on July 10, 2015. Novella murdered her
shortly thereafter.
On July 26, 2017, Kabrins and Weitz filed a wrongful death
complaint against Novella in Los Angeles Superior Court,
personally serving him with the complaint in his South African
jail cell.
Novella moved to quash service of process on jurisdictional
grounds, and on January 19, 2018, appellants served him with
jurisdictional discovery requests. Novella moved to quash this
discovery. The trial court largely denied the motion but ordered
that Novella need not respond to form interrogatory number 17.1,
which propounded requests for admission. Novella responded to
the jurisdictional discovery on December 17, 2019.
In September 2020, after almost two years of delays, the
trial court held a hearing on Novella’s motion to quash. The
court found that although Novella induced Alban to seek ibogaine
treatment in South Africa, appellants failed to show this contact
with the forum related to their claim for wrongful death because
insufficient evidence showed that Novella invited Alban to South
Africa with the intention of killing her or committing any other
tort. The court also found that the exercise of personal
jurisdiction over Novella would be unjust because he was a
resident of Guatemala, had only minimal contacts with
California, and was incarcerated in South Africa. Therefore, the
court granted Novella’s motion to quash.
This appeal followed.
DISCUSSION
The sole issue is whether the trial court acquired personal
jurisdiction over Novella.
4
A. General Principles of Jurisdiction
California courts may exercise jurisdiction over
nonresidents “on any basis consistent with the Constitution of
California and the United States.” (Snowney v. Harrah’s
Entertainment, Inc. (2005) 35 Cal.4th 1054, 1061; Code Civ. Proc.,
§ 410.10 [long-arm statute].) These constitutions permit the
exercise of jurisdiction over a nonresident defendant “if the
defendant has such minimum contacts with the state that the
assertion of jurisdiction does not violate ‘ “traditional notions of
fair play and substantial justice.” ’ ” (Vons Companies, Inc. v.
Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444 (Vons).) “[E]ach
individual has a liberty interest in not being subject to the
judgments of a forum with which he or she has established no
meaningful minimum ‘contacts, ties or relations.’ [Citations.] As
a matter of fairness, a defendant should not be ‘haled into a
jurisdiction solely as the result of “random,” “fortuitous,” or
“attenuated” contacts.’ ” (Id. at p. 445.) Nor is the minimum
contacts test satisfied by “[t]he unilateral activity of those who
claim some relationship with a nonresident defendant . . . .”
(Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 474.)
“Personal jurisdiction may be either general or specific.”
(Vons, supra, 14 Cal.4th at p. 445.) Because appellants do not
claim general jurisdiction, we consider only whether specific
jurisdiction exists here. A nonresident defendant “may be subject
to the specific jurisdiction of the forum[] if the defendant has
purposefully availed himself or herself of forum benefits [citation]
. . . the ‘controversy is related to or “arises out of” a defendant’s
contacts with the forum,’ ” and the assertions of personal
jurisdiction would comport with fair play and substantial justice.
(Id. at p. 446.)
5
“When a defendant moves to quash service of process on
jurisdictional grounds, the plaintiff has the initial burden of
demonstrating facts justifying the exercise of jurisdiction.” (Vons,
supra, 14 Cal.4th at p. 449.) A plaintiff must meet this burden
with competent evidence of jurisdictional facts. (Nobel Farms,
Inc. v. Pasero (2003) 106 Cal.App.4th 654, 657-658.) The
evidence need not be conclusive, nor need the plaintiff prove the
elements of the asserted causes of action. But the plaintiff must
provide some evidence allowing the trial court to conclude that
the defendant’s contacts with California relate to the causes of
action. Allegations in an unverified complaint and vague
declarations of ultimate facts do not suffice to establish the facts
of jurisdiction; a plaintiff must provide declarations and
authenticated documents that permit the court to form an
independent conclusion. (Ibid.)
“ ‘ “ ‘The purposeful availment inquiry . . . focuses on the
defendant’s intentionality. [Citation.] This prong is only
satisfied when the defendant purposefully and voluntarily directs
its activities toward the forum so that it should expect, by virtue
of the benefit it receives, to be subject to the court’s jurisdiction
based on’ its contacts with the forum.” [Citation.] Thus,
purposeful availment occurs where a nonresident defendant
“ ‘purposefully directs’ its activities at residents of the forum,
purposefully derives benefits from its activities in the forum”
[citation], “creates a ‘substantial connection’ with the forum”
[citation], “ ‘deliberately’ has engaged in significant activities
within” the forum [citation], or “has created ‘continuing
obligations’ between itself and residents of the forum.” ’ ” (Jayone
Foods, Inc. v. Aekyung Industrial Co. Ltd. (2019) 31 Cal.App.5th
543, 554 (Jayone).)
6
Even if a defendant purposefully directs his activities
toward the forum, specific jurisdiction exists only if the lawsuit
arises out of or relates to the defendant’s contacts with the forum.
(Bristol-Myers Squibb Co. v. Superior Court (2017) 137 S.Ct.
1773, 1780.) This requirement is satisfied “ ‘if there is a
substantial nexus or connection between the defendant’s forum
activities and the plaintiff’s claim.’ [Citations.] ‘A claim need not
arise directly from the defendant’s forum contacts in order to be
sufficiently related to the contact to warrant the exercise of
specific jurisdiction. Rather, as long as the claim bears a
substantial connection to the nonresident’s forum contacts, the
exercise of specific personal jurisdiction is appropriate.’ ” “Only
when the operative facts of the controversy are not related to the
defendant’s contact with the state can it be said that the cause of
action does not arise from that contact.” (Jayone, supra, 31
Cal.App.5th at pp. 559-560; see also In re Automobile Antitrust
Cases I & II (2005) 135 Cal.App.4th 100, 116 [“If the operative
facts of the allegations of the complaint do not relate to the
[defendant’s] contacts in this state, then the cause of action does
not arise from that contact such that California courts may
exercise specific personal jurisdiction”].)
Once a plaintiff has demonstrated facts establishing
minimum contacts with the forum state, it becomes the
defendant’s burden to demonstrate that the exercise of
jurisdiction would be unreasonable. (Vons, supra, 14 Cal.4th at
p. 449.)
We independently review a trial court’s legal conclusions
concerning jurisdiction. (Rivelli v. Hemm (2021) 67 Cal.App.5th
380, 393.) We review its express and implied factual
determinations for substantial evidence. (Ibid.)
7
B. Application
Here, Alban lived in Los Angeles from March to June 2014,
during which time Novella purposefully directed electronic
communications to her to induce her to travel to South Africa for
an ibogaine treatment for her Lyme disease. Assuming for the
sake of argument that in so doing, Novella purposely availed
himself of forum benefits, no evidence suggests appellants’
wrongful death claims arose from or were related to these
contacts.
The elements of a cause of action for wrongful death are a
wrongful act, the resulting death, and damages. (B.B. v. County
of Los Angeles (2020) 10 Cal.5th 1, 31.) Appellants failed to
establish that Novella’s murder of Alban in South Africa arose
from or was related to Novella’s contacts with California. For
example, no evidence suggested that Novella urged Alban to
travel to South Africa with the intention of killing her or
committing any other tort related to California.
Appellants argue that Novella induced Alban to travel to
South Africa under false pretenses, knowing the ibogaine
treatment was ineffective because it had not worked for his
conditions. As to the claim of false pretenses, as the trial court
found, no evidence suggests Novella knew the proposed
treatment would be ineffective for Alban. The only evidence was
that he knew—and failed to inform Alban—that it had not
worked for him. But even if one assumes Novella did cause
Alban to travel to South Africa under false pretenses, that
activity is far too attenuated from the tort at issue. Just because
a relationship need not rise to the level of causation to support
jurisdiction “does not mean anything goes. In the sphere of
specific jurisdiction, the phrase ‘relate to’ incorporates real limits,
8
as it must to adequately protect defendants foreign to a forum.”
(Ford Motor Co. v. Montana Eighth Judicial Dist. Court (2021)
___U.S.___ [141 S.Ct. 1017, 1026, 209 L.Ed.2d 225, 236].)
Appellants’ theory would impose no real limits on specific
jurisdiction. Although we agree that Alban would not have been
in South Africa but for Novella’s invitation, that was only one of
myriad but-for factors that lined up to put her in South Africa. A
single but-for circumstance does not itself establish a substantial
connection between Novella’s California contacts and Alban’s
death. If it did, any invitation to a California resident to travel
internationally, or any other activity directed at the resident
which enabled her to reach a foreign country—for example the
sale of a ticket or housing of a pet—would be a basis for
jurisdiction over any tort occurring thereafter.
Appellants argue the trial court made several evidentiary
errors and held them to an improper evidentiary standard. We
need not reach these issues because even considering all of
appellants’ evidence, no basis exists to exert jurisdiction over
Novella simply because he invited Alban to South Africa. Neither
need we decide whether Novella successfully demonstrated that
exercise of jurisdiction would be unreasonable, nor whether the
wrongful death statute applies when the death occurred in
another country.
Because appellants were unable to show any evidence of an
act furthering Novella’s intention to kill Alban—neither an act
occurring in this state nor one that occurred outside the state
that was directed toward California—California cannot assert
jurisdiction over Novella consistent with federal due process and
California's long-arm statute.
9
DISPOSITION
The trial court’s order granting respondent’s motion to
quash service is affirmed. Respondent is to recover his costs on
appeal.
NOT TO BE PUBLISHED
CHANEY, J.
We concur:
ROTHSCHILD, P. J.
WEINGART, J.*
*
Judge of the Los Angeles County Superior Court, assigned
by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
10 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487979/ | Filed 11/18/22 Cal. Water Curtailment Cases 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
CALIFORNIA WATER H047927
CURTAILMENT CASES. (Santa Clara County
Super. Ct. No. 1-15-CV285182;
JCCP No. 4838)
These appeals primarily concern the availability of Code of Civil Procedure
section1 1021.5 attorney fees to appellants, a group of irrigation districts2 (the Districts),
which prevailed in mandate actions against respondent State Water Resources Control
1
Unspecified statutory references are to the Code of Civil Procedure.
2
Appellants are Byron-Bethany Irrigation District (BBID), Central Delta Water
Agency (CDWA), South Delta Water Agency (SDWA), San Joaquin Tributaries
Authority (SJTA), Oakdale Irrigation District, and South San Joaquin Irrigation District.
CDWA and SDWA have filed joint briefs on appeal, and we refer to them together as
CDWA/SDWA. Since SJTA, Oakdale Irrigation District, and South San Joaquin
Irrigation District brought a joint motion for fees and have filed joint briefs on appeal, we
refer to them collectively as SJTA. BBID and West Side Irrigation District (WSID),
which had been a party to this appeal, consolidated into a single entity called BBID after
the trial court’s order. We subsequently granted BBID’s request to substitute itself for
WSID. We refer to the two entities separately only where necessary.
Board (the Board).3 In the underlying litigation, the trial court issued writs of mandate
finding that the Board had unlawfully issued water diversion curtailment notices to the
Districts without jurisdiction and without according the Districts due process.
In a postjudgment order that is the subject of these appeals, the trial court denied
the Districts’ section 1021.5 motions seeking attorney fees they incurred in the court
litigation leading to the writs of mandate on the ground that they had failed to show that
their financial burden in bearing those fees exceeded their pecuniary interest in the
litigation. The trial court also denied the Districts’ motions for attorney fees they had
incurred during administrative enforcement proceedings before the Board, finding those
proceedings were not useful and necessary to the Districts’ court victory. The trial court
partially granted the Board’s motions to tax costs and taxed the expenses that the Districts
had incurred in the administrative enforcement proceedings.
Across their three appeals, the Districts challenge all of these rulings. All of the
Districts challenge the trial court’s rulings on attorney fees. They contend the trial court
erred under section 1021.5 in denying them attorney fees because they demonstrated that
the financial burden of the fees they incurred in the court litigation exceeded any
pecuniary interest they had in the court litigation. The Districts also maintain that they
were entitled to attorney fees arising out of the administrative enforcement proceedings
because they were useful and necessary to their court victory. In addition, BBID and
SDWA/CDWA challenge the trial court’s ruling on costs. They assert that the trial court
3
The Board was joined by intervenors State Water Contractors and Department of
Water Resources. We refer to them collectively as the Board except where it is necessary
to distinguish between them. The Districts make no separate contentions concerning
intervenors, who also moved to strike or tax costs. The trial court found that it would not
be “fair or appropriate to allocate any costs to the intervenors, whose participation in the
case was limited and whose involvement did not cause petitioners’ costs to increase.”
The Districts do not challenge this ruling on appeal.
2
erred under sections 1032 and 1095 and contend they were entitled to recover the costs
taxed by the trial court.
As explained further below, we agree that the trial court erred under section
1021.5 in denying the Districts attorney fees for the court litigation. We affirm the trial
court’s ruling that the Districts were not entitled to their attorney fees for the
administrative proceedings. We also affirm the trial court’s ruling on costs.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Curtailment Notice Mandate Actions and Administrative Enforcement
Proceeding
On April 23, 2015, the Board sent out curtailment notices to a group of water right
holders after it “determined that the existing water supply in the San Joaquin River
watershed is insufficient to meet the needs of all water rights holders.” (See generally
California Water Curtailment Cases (2022) 83 Cal.App.5th 164.) These notices told “all
holders of post-1914 appropriative water rights within the San Joaquin River
watershed . . . to immediately stop diverting under their post-1914 water rights.” The
notices also “advised that, if you continue to divert under a claim of pre-1914 right, most
or all pre-1914 rights in the San Joaquin River watershed are likely to be curtailed later
this year due to the extreme dry conditions.” On May 1, 2015, the Board sent nearly
identical notices to water right holders within the Sacramento River watershed.
In June 2015, the Board sent curtailment notices to water right holders, including
the Districts, with “pre-1914 claims of right, with a priority date of 1903 and later for the
Sacramento-San Joaquin watersheds and the Delta” telling them “that, due to ongoing
drought conditions, there is insufficient water in the system to service their claims of
right.” The notices told the recipients “to immediately stop diverting water . . . until
water conditions improve.” (Underlining omitted.)
The June 2015 notices expressly stated, under the heading “Potential
Enforcement”: “If the State Water Board finds following an adjudicative proceeding that
3
a person or entity has diverted or used water [] unlawfully, the State Water Board may
assess penalties of $1,000 per day of violation and $2,500 for each acre-foot diverted or
used in excess of a valid water right. (See Water Code, §§ 1052, 1055.) Additionally, if
the State Water Board issues a Cease and Desist Order against an unauthorized diversion,
violation of any such order can result in a fine of $10,000 per day. (See Water Code,
§§ 1831, 1845.)” In all, the Board’s 2015 curtailments applied to “9,218 water rights.”
The Districts filed court mandate actions challenging the curtailment notices on
due process and jurisdictional grounds.4 The Districts asserted that the Board had
violated their due process rights by issuing the curtailment notices without providing
them with a predeprivation hearing. They also contended that the Board had exceeded its
jurisdiction in curtailing their water rights because it lacked the authority to regulate pre-
1914 appropriative water rights. BBID, WSID, and SJTA also asserted takings causes of
action against the Board.
BBID’s petition alleged: “A curtailment of BBID’s pre-1914 appropriative water
right will result in the loss of more than $65 million in crops.” The petition filed by
WSID, CDWA, and SDWA alleged that if they continued diverting in defiance of the
Board’s curtailment notice for one month, they would incur over $12 million in
penalties.5 SJTA, whose constituent districts cover a territory exceeding 72,000 acres,
alleged in its petition that a single 200-acre farm would incur a penalty of over $1.5
million in 20 days if it defied the curtailment notice. WSID, CDWA, and SDWA sought
a temporary restraining order and a preliminary injunction against the Board barring the
curtailments. WSID asserted that injunctive relief was necessary because curtailment of
water would result in approximately $25 million in crop losses within WSID’s district.
4
These three actions and two others were filed in four different counties. The
Judicial Council ordered the five actions coordinated in the Santa Clara County Superior
Court.
5
Woods Irrigation Company was also a party to the petition filed by WSID,
CDWA, and SDWA, but it is not a party to this appeal.
4
The court granted “a temporary restraining order and an order to show cause as to
why a preliminary injunction should not issue requiring the Board to issue a revised
letter/notice that is informational in nature.” The court found that the curtailment notices
were “coercive in nature,” they would cause irreparable harm, and the districts were
likely to prevail on the merits. The court reasoned that the language of the notices
expressed that the Board had already determined without a hearing that these districts
were no longer permitted to divert water, which violated their due process rights.
On July 15, 2015, the Board issued a “partial rescission” and “clarification” of the
April, May, and June 2015 notices. The partial rescission and clarification told the
recipients, including the Districts, that the Board was “rescind[ing] the ‘curtailment’
portions of the unavailability notices you received. To the extent that [those]
notices . . . contain language that may be construed as an order requiring you to stop
diversions under your affected water right, that language is hereby rescinded.” It also
stated: “information available to the State Water Board continues to indicate that there is
insufficient water available for the categories of junior water users identified in the State
Water Board’s prior correspondence, identified above. . . . [¶] Diversion is always
subject to water availability limitations, and diversions under your affected water right
may be subject to enforcement should the State Water Board find such diversions are or
were unauthorized. The State Water Board is continuing its drought-year inspections to
determine whether diverters are using water to which they are not entitled. [¶] Those
who are found to be diverting water beyond what is legally available to them may be
subject to administrative penalties, cease and desist orders, or prosecution in court.” On
July 30, 2015, the court discharged the order to show cause after it found that the Board’s
July 2015 partial rescission and clarification complied with its order. The Board began
lifting the curtailment notices in September 2015 and had lifted all of them by November
2015.
5
While the 2015 curtailment notices were still in effect, the Board initiated
administrative enforcement proceedings against BBID and WSID alleging unauthorized
diversions. SDWA, CDWA, and SJTA notified the Board that they would appear and
participate in the administrative enforcement proceedings, including by presenting expert
witness and other testimony and by cross-examining witnesses.
In June 2016, the Board dismissed the administrative enforcement proceedings
after an administrative hearing demonstrated that the Board’s prosecution team could not
satisfy its burden of proof.6 Although the Board dismissed the enforcement proceedings,
the Board’s dismissal order expressly rejected the Districts’ claims that the Board lacked
jurisdiction over pre-1914 appropriative water right holders under Water Code section
1052, subdivision (a). After the dismissal of the administrative enforcement proceedings,
the Districts filed three additional mandate petitions in court challenging the Board’s
dismissal order on the ground that the Board lacked jurisdiction over pre-1914 water
rights.7
The Districts incurred substantial attorney fees, costs, expert witness fees, exhibit
expenses, and deposition costs in connection with the administrative enforcement
proceedings. In the administrative proceedings, they asked the Board to award them
more than $1.1 million in costs. The Board rejected this request, concluding that section
1032 did not apply to administrative proceedings, and no other statutory authority
provided for an award by the Board of costs incurred in an administrative enforcement
proceeding.
6
The Board asserts that the administrative record from the enforcement
proceedings is not properly before this court. Since the enforcement administrative
record was before the trial court and was considered by it in ruling on the fees motions
and the motions to tax costs, we reject the Board’s position.
7
These 2016 mandate actions were filed in Sacramento County, but they were
ultimately coordinated with the 2015 curtailment notice mandate actions that had been
coordinated in Santa Clara County.
6
After the dismissal of the administrative enforcement proceedings, the Districts
continued to litigate in court their mandate actions challenging the Board’s 2015
curtailment notices. They also filed and litigated mandate actions challenging the
Board’s 2016 dismissal of the administrative enforcement proceedings. In 2016, SJTA
dismissed its takings cause of action.
The Districts’ mandate actions challenging the curtailment notices were tried to
the trial court in January 2018 in phase 1 of a trial that was originally expected to have
three phases. In April 2018, the trial court issued a final statement of decision from phase
I in favor of the Districts. The court resolved the jurisdictional issue in the Districts’
favor and also concluded that the Board’s issuance of the 2015 curtailment notices
violated the Districts’ due process rights by failing to provide them with predeprivation
hearings or any other opportunity to challenge the bases for the notices. The court
addressed the due process issue even though it was technically moot as a fundamental
issue of broad public interest likely to recur.8
BBID and WSID dismissed their takings causes of action (which were to be tried
in phase 3) in the summer of 2018. The Districts voluntarily dismissed all of the
remaining causes of action that would have been resolved in phase 2 and phase 3, thus
obviating the need for a phase 2 or phase 3 trial. In June 2019, the court issued its
judgments granting peremptory writs of mandate against the Board. The court dismissed
the Districts’ three mandate actions challenging the Board’s order dismissing the
administrative enforcement proceedings.
B. Costs Memorandums and Motions to Strike or Tax Costs
Following the trial court’s entry of judgment against the Board, CDWA, SDWA,
and WSID jointly filed a memorandum of costs seeking $292,177.50 in costs, which
included $273,660.83 in expert witness fees. The expert witness fees arose from the
8
The court subsequently decided that its due process decision applied to “all four
notices,” including the April and May 2015 notices that concerned only post-1914 rights.
7
sadministrative enforcement proceedings. SJTA filed a memorandum of costs seeking
$3,926.60 in deposition costs. These costs, too, arose from the administrative
enforcement proceedings.9 BBID filed a memorandum of costs seeking $862,294.09,
which largely consisted of $811,384.32 in expert witness fees. These expert witness fees
arose from the administrative enforcement proceedings.
The Board filed motions to strike or tax the costs claimed by the Districts.10 It
asserted that there was no authority for recovery of costs incurred in the administrative
enforcement proceedings. The Board also maintained that the expert witness fees and
deposition costs were not legally recoverable.
The Districts opposed the Board’s motions to strike or tax costs. SJTA claimed
that the deposition costs it incurred in the administrative proceedings were recoverable
under sections 1032 and 1033.5. BBID, WSID, CDWA, and SDWA argued that their
costs in the administrative proceedings were recoverable under sections 1032 and 1095
because the administrative proceedings qualified as an “ ‘action or proceeding’ ” under
the terms of those statutes.
C. Attorney Fees Motions
The Districts filed in the trial court three motions for attorney fees under section
1021.5. The amounts sought were based on both the court and administrative
proceedings. SJTA sought $607,758, WSID, CDWA, and SDWA sought $962,137.25,
and BBID sought $1,957,950.73.
The Board opposed the Districts’ attorney fees motions.
9
SJTA does not challenge the trial court’s ruling taxing its costs.
10
Intervenor and respondent State Water Contractors and Department of Water
Resources also moved to strike or tax costs on similar grounds and also on the ground
that, as intervenors, they could not be liable for costs incurred before their intervention.
State Water Contractors notes that the Districts’ appeals do not challenge the court’s
ruling that it is not responsible for their costs, and it argues that fees are not available
against it because it is a private entity. As the Districts do not challenge the trial court’s
ruling that intervenors could not be liable for costs, we do not address this issue further.
8
D. Trial Court’s Order on Fees and Costs
The court issued a lengthy written order in December 2019 addressing the motions
for attorney fees and costs. The court acknowledged that it was undisputed that the
Districts had prevailed and had enforced an important right affecting the public interest.
The court “assume[d]” that the Districts had “conferred a significant benefit” on a large
group of people other than themselves as a result of the court proceedings, but not as a
result of the administrative proceedings.11
The court’s attorney fees analysis primarily focused on the financial burden
element of section 1021.5. The court recognized that this element would be satisfied if
the cost of the litigation placed a burden on the Districts that was “out of proportion” to
their “individual stake[s]” in the case. The court viewed the issue as whether the
potential financial benefits to the Districts at the time litigation decisions were made was
insufficient to justify the litigation in economic terms. The court evaluated the potential
financial benefits to the Districts at three different “decision points” in the litigation.
The court described the first decision point as the initiation of the court
proceedings in June 2015, prior to the lifting of the curtailment notices. At that point, the
court found that the Districts faced “enormous financial penalties” if they failed to
comply with the curtailment notices, and “enormous” “economic damage from lost
crops,” which in BBID’s case alone would have exceeded “$65 million,” if they
complied with the curtailment notices. The court found that these financial incentives
dwarfed the attorney fees that the Districts ultimately devoted to the litigation. “Thus, it
is clear that the petitioners had ample financial incentive to file the five original actions
herein, far outweighing the attorney fees they request now.”
The court identified the second decision point as the Districts’ opposition to the
enforcement actions that were initiated in July 2015. The court recognized that fees
11
The court characterized the Districts as “major stakeholders in the Delta.”
9
incurred in administrative proceedings were recoverable under section 1021.5 if
“ ‘ “useful and necessary” ’ ” to the court litigation. The court found that the
enforcement actions sought $10,000 per day in fines against WSID and $1.5 million in
penalties against BBID. Because the enforcement actions were intended to establish a
“ ‘precedent,’ ” the court found that all of the Districts, not just BBID and WSID, had a
financial incentive to oppose the enforcement actions and that the burden they bore was
not out of proportion to their personal stake in the litigation.
The court described the third decision point as the Board’s dismissal of the
enforcement proceedings in June 2016, after the curtailment notices had been lifted. At
this point, the Districts continued the existing court litigation and also filed the mandate
actions challenging the Board’s dismissal order. The court noted that, at this point, the
Districts were still pursuing takings claims against the Board and seeking large amounts
of damages. The final takings claims were not dismissed until 2018. While the court
found that the Districts’ financial incentives were reduced after the dismissal of the
enforcement actions, it nevertheless concluded that the Districts had failed to establish
that their financial incentives were inadequate to justify their continued pursuit of the
litigation.
On the general issue of financial incentives, the trial court observed, “Petitioners
have failed to present evidence on this issue, and the evidence available suggests that
they and their constituents still have enormous financial incentives to defend their water
rights with an eye to future droughts. The Court cannot ignore that a decision making it
harder for [the Board] to curtail petitioners’ water rights increases the value of those
water rights and dependent economic interests—including agricultural interests worth
many millions of dollars.” The court concluded that the Districts had failed to satisfy
their burden of demonstrating that the cost of the litigation exceeded their personal
financial stakes in it, as required to recover attorney fees under section 1021.5.
10
The court then turned to the Board’s motions to strike or tax costs. The main point
of contention was whether the Districts were entitled to recover costs incurred in the
administrative enforcement proceedings. The Districts premised their claims to those
costs on sections 1032 and 1095. The parties agreed that an award of costs was
discretionary under both sections. The court found that the Districts were the prevailing
parties in the curtailment notice mandate actions. The court noted that most of the
claimed costs were expert witness fees, “which are an impermissible category of costs
under section 1032.” (See § 1033.5, subd. (b)(1).) The court ruled that sections 1032 and
1095 categorically did not apply to costs incurred in administrative proceedings. But it
also ruled, on fairness grounds, that it “would not exercise its discretion to award
petitioners costs incurred in the administrative proceedings even if [] the statutes
authorized it to do so.” The court awarded the Districts their “ordinary costs” in the court
proceedings.12 The Districts timely filed notices of appeal from the court’s fees and costs
order.13
II. DISCUSSION
As described above, we have before us three separate appeals—one brought by
BBID, one brought by SJTA, and a joint appeal by CDWA and SDWA. All three
appeals challenge the trial court’s denial of the Districts’ requests for attorney fees under
section 1021.5. In addition, BBID and CDWA/SDWA challenge the trial court’s partial
grant of the Board’s motions to tax costs. We begin with the trial court’s order on
attorney fees, which centers on its application of section 1021.5.
12
SJTA’s costs memorandum was struck entirely. The costs memorandum filed
by WSID, CDWA, and SDWA was taxed as to all costs except $241.08 in filing and
motion fees. BBID’s costs memorandum was taxed as to all costs except $12,964.75 in
costs arising in the curtailment notice mandate action.
13
SJTA has requested that we take judicial notice of a document on the Board’s
website from 2021. The challenged fees and costs order is from 2019. As this document
was not before the trial court when it issued the challenged order, we deny the request.
11
A. Attorney Fees Under Section 1021.5 for the Court Litigation
“ ‘Section 1021.5 codifies the ‘private attorney general’ doctrine of attorneys fees
articulated in Serrano v. Priest (1977) 20 Cal.3d 25 . . . and other judicial decisions.’ ”
(Broad Beach Geologic Hazard Abatement Dist. v. 31506 Victoria Point LLC (2022) 81
Cal.App.5th 1068, 1095.) Section 1021.5 provides: “Upon motion, a court may award
attorneys’ fees to a successful party against one or more opposing parties in any action
which has resulted in the enforcement of an important right affecting the public interest
if: (a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on
the general public or a large class of persons, (b) the necessity and financial burden of
private enforcement, or of enforcement by one public entity against another public entity,
are such as to make the award appropriate, and (c) such fees should not in the interest of
justice be paid out of the recovery, if any.” (§ 1021.5.)
The trial court’s denial of the Districts’ attorney fees motions for the court
litigation turned entirely on the second element, which addresses financial burden. “In
determining the financial burden on litigants, courts have quite logically focused not only
on the costs of the litigation but also any offsetting financial benefits that the litigation
yields or reasonably could have been expected to yield. ‘ “An award on the ‘private
attorney general’ theory is appropriate when the cost of the claimant’s legal victory
transcends his personal interest, that is, when the necessity for pursuing the lawsuit
placed a burden on the plaintiff ‘out of proportion to his individual stake in the matter.’
[Citation.]” ’ [Citation.] ‘This requirement focuses on the financial burdens and
incentives involved in bringing the lawsuit.’ [Citation.] [¶] . . . ‘The trial court must
first fix—or at least estimate—the monetary value of the benefits obtained by the
successful litigants themselves . . . . Once the court is able to put some kind of number
on the gains actually attained it must discount these total benefits by some estimate of the
probability of success at the time the vital litigation decisions were made which
eventually produced the successful outcome. . . . [¶] ‘After approximating the estimated
12
value of the case at the time the vital litigation decisions were being made, the court must
then turn to the costs of the litigation—the legal fees, deposition costs, expert witness
fees, etc., which may have been required to bring the case to fruition. . . . [¶] The final
step is to place the estimated value of the case beside the actual cost and make the value
judgment whether it is desirable to offer the bounty of a court-awarded fee in order to
encourage litigation of the sort involved in this case. . . . [A] bounty will be appropriate
except where the expected value of the litigant’s own monetary award exceeds by a
substantial margin the actual litigation costs.’ [Citation.] [¶] . . . ‘As the statute makes
clear, subdivision (b) of section 1021.5 focuses not on plaintiffs’ abstract personal stake,
but on the financial incentives and burdens related to bringing suit. Indeed, in the
absence of some concrete personal interest in the issue being litigated, the putative
plaintiff would lack standing to bring an action.’ [Citation.] [¶] . . . [¶] . . . As a
logical matter, a strong nonfinancial motivation does not change or alleviate the
‘financial burden’ that a litigant bears. Only offsetting pecuniary gains can do that.”
(Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1215–1217 (Whitley).)
Section 1021.5 did not always permit a public entity to seek recovery of its
attorney fees from another public entity. In 1993, the Legislature amended section
1021.5 to include public entities within its purview. “[T]he Legislature essentially
recognized that sometimes there may be a need for one public entity to engage in public
interest litigation against another public entity under circumstances that make a fee award
under section 1021.5 appropriate. . . . [T]he amendment was aimed (at least in part) at
‘enabl[ing] small public entities to resist large, well-financed public entities, who, in the
absence of [the amendment], [would] simply bludgeon the former into legal submission.’
[Citation.] Thus, in the wake of the 1993 amendment, there may be circumstances in
which it is proper to pay a ‘bounty’ under section 1021.5 to encourage public entities to
pursue public interest litigation against other public entities.” (State Water Resources
Control Bd. Cases (2008) 161 Cal.App.4th 304, 314.)
13
The California Supreme Court’s seminal opinion in Whitley made two points
germane to our analysis here. First, the court explained that “ ‘[a] bounty will be
appropriate except where the expected value of the litigant’s own monetary award
exceeds by a substantial margin the actual litigation costs.’ ” (Whitley, supra, 50 Cal.4th
at p. 1216.) Second, it established that “[o]nly offsetting pecuniary gains” “change or
alleviate the ‘financial burden’ that a litigant bears.” (Id. at p. 1217.)
That is not to say that the absence of a monetary award as a result of the litigation
means that a litigant is automatically entitled to recover its fees. “[T]he absence of a
monetary award, or of precise amounts attached to financial incentives, does not prevent
a court from determining whether the plaintiff’s financial burden in pursuing the lawsuit
is ‘ “ ‘out of proportion to his individual stake in the matter.’ [Citation.]” ’ [Citation.]
The trial court is not required to (and indeed may not) take financial incentives out of the
calculation, or conclude there are none, simply because the plaintiff sought [or obtained]
no monetary award in the litigation.” (Summit Media, LLC v. City of Los Angeles (2015)
240 Cal.App.4th 171, 193.)
1. Standard of Review
Our standard of review is well established. “ ‘On review of an award of attorney
fees after trial, the normal standard of review is abuse of discretion. However, de novo
review of such a trial court order is warranted where the determination of whether the
criteria for an award of attorney fees and costs in this context have been satisfied amounts
to statutory construction and a question of law.’ ” (Connerly v. State Personnel
Bd. (2006) 37 Cal.4th 1169, 1175.) “ ‘[R]eversal is appropriate “where no reasonable
basis for the action is shown.” ’ ” (Baggett v. Gates (1982) 32 Cal.3d 128, 143
(Baggett).)
“If the court applied incorrect legal standards, its denial order ‘necessarily [fell]
outside the scope of [its] discretion’ and must be vacated.” (Doe v. Westmont
College (2021) 60 Cal.App.5th 753, 763.) “In reviewing the ruling, ‘ “we must pay
14
‘ “particular attention to the trial court’s stated reasons in denying or awarding fees and
[see] whether it applied the proper standards of law in reaching its decision.” ’ ”
[Citation.] “The pertinent question is whether the grounds given by the court . . . are
consistent with the substantive law of . . . section 1021.5 and, if so, whether their
application to the facts of this case is within the range of discretion conferred upon the
trial courts under section 1021.5, read in light of the purposes and policy of the statute.” ’
[Citation.] ‘The trial court’s determination may not be disturbed on appeal absent a
showing that there is no reasonable basis in the record for the award.’ ” (Children &
Families Com. of Fresno County v. Brown (2014) 228 Cal.App.4th 45, 58 (Children).)
2. The Trial Court’s Financial Burden Findings
Our standard of review requires us to scrutinize the trial court’s stated reasons to
determine whether they are consistent with the legal standards governing section 1021.5
fees and whether a reasonable basis supports those reasons.
The trial court’s order analyzed the financial burden element at three different
points in time when the Districts made critical litigation decisions. At the first decision
point, when the Districts filed the curtailment notice mandate petitions in June 2015, the
court found that the Districts faced “enormous financial penalties” if they failed to
comply with the curtailment notices, and “enormous” “economic damage from lost
crops” if they complied with the curtailment notices. At the second decision point, after
the curtailment notices were lifted in the fall of 2015, the court found that the Districts’
financial incentives continued because the administrative enforcement actions sought
large fines and penalties against WSID and BBID, and were intended to be precedential,
which, in the court’s view, gave all of the Districts a strong financial incentive to oppose
the enforcement actions. At the final decision point, after the dismissal of the
administrative enforcement proceedings, the trial court found that the Districts’ financial
incentives were reduced, but it concluded that because the Districts still had takings
causes of action against the Board seeking large amounts of damages, the Districts’
15
financial incentives exceeded the burden of their attorney fees. The court found that the
Districts had “failed to present evidence on this issue” and had “enormous financial
incentives to defend their water rights with an eye to future droughts” because “a decision
making it harder for [the Board] to curtail [the Districts’] water rights increases the value
of those water rights and dependent economic interests—including agricultural interests
worth many millions of dollars.”
3. Additional Background
Because the trial court’s ruling on attorney fees rested in part on its conclusion that
the value of the land owned by landowners in the Districts increased as a result of the
court litigation, we consider the legal status of the Districts themselves. “Under
California law, an irrigation district is a public corporation governed by a board of
directors, usually elected by voters in the district. It is empowered to distribute and
otherwise administer water for the beneficial use of its inhabitants and to levy
assessments upon the lands served for the payment of its expenses.” (Bryant v. Yellen
(1980) 447 U.S. 352, 356, fn. 1; see also Wat. Code, §§ 22280, 25650.) Irrigation
districts are “state agencies formed and existing for governmental purposes.” (Wat.
Code, § 20570.) They are responsible for allocating water among the landowners in their
districts when there is an inadequate supply. (Wat. Code, § 22252.3.)
4. Analysis
The Districts’ victory in the curtailment notice mandate actions plainly “resulted
in the enforcement of an important right affecting the public interest” and conferred “a
significant benefit . . . on the general public or a large class of persons,” and the trial
court did not find otherwise. (§ 1021.5.) The trial court’s denial of the Districts’ fees
motions for the court litigation rested solely on its finding that the Districts had failed to
satisfy section 1021.5’s financial burden element. That element is satisfied if “the
necessity and financial burden of . . . enforcement by one public entity against another
public entity, are such as to make the award appropriate.” (Ibid.)
16
The trial court’s order identified the following as the bases for its finding that the
Districts had “enormous financial incentives” to pursue the court litigation: (1) the fines
and penalties that the Districts faced if they violated the curtailment notices between the
issuance of the notices in June 2015 and the lifting of the notices in the fall of 2015; (2)
the economic damage from crop losses that the landowners in the Districts faced if the
District complied with the curtailment notices during that period; (3) the fines and
penalties that the Board sought in its administrative enforcement proceedings against
BBID and WSID, which the court found provided a financial incentive for all of the
Districts because the administrative enforcement proceedings were intended to be
precedential; (4) the Districts’ takings causes of action, which sought damages from the
Board; (5) the value of the Districts’ water rights, which the court found would be
increased by the Districts’ victory because that victory made it more difficult for the
Board to curtail their rights; and (6) the value of “agricultural interests” of the landowners
in the Districts, which the court found would be more valuable as a result of the Districts’
victory.
We bear in mind that “[o]nly offsetting pecuniary gains” can “change or alleviate
the ‘financial burden’ that a litigant bears.” (Whitley, supra, 50 Cal.4th at p. 1217.) A
trial court’s denial of fees cannot be upheld on appeal if there is “no reasonable basis” for
the trial court’s ruling. (Baggett, supra, 32 Cal.3d at p. 143.) In Baggett, the California
Supreme Court reversed the trial court’s denial of section 1021.5 fees, finding that there
was “no reasonable basis” for the trial court’s ruling, because the plaintiffs had “secured
the enforcement of basic procedural rights” that “may well not result in any pecuniary
benefit to plaintiffs themselves.” (Id. at p. 143.)
As in Baggett, we cannot identify any pecuniary benefit that flowed to the
Districts from the court litigation here. That litigation resulted in the trial court’s finding
that the Board had violated water right holders’ right to due process and lacked
jurisdiction under Water Code section 1052, subdivision (a) to issue the curtailment
17
notices. However, this victory did not preclude the Board from exercising jurisdiction
under any authority other than Water Code section 1052, subdivision (a), or curtailing the
Districts’ diversions after providing due process.
The Board, citing the trial court’s findings, claims that the Districts accrued
identifiable pecuniary gains from their victory. We disagree. The trial court’s findings
did not identify any direct pecuniary gains realized by the Districts as a result of their
court victory that could offset the burden of their signficant attorney fees.
We recognize that the Districts had an incentive to obtain a definitive ruling on the
validity of the curtailment notices while the notices were in effect. If the Districts obeyed
the notices, the landowners in their districts would suffer extreme hardship, including
crop losses, economic damage, and the loss of drinking water, but if the Districts violated
the notices the Districts would suffer fines and penalties. If the court invalidated the
notices, the Districts would be relieved of this harsh choice. Nevertheless, due to the
timing of the court litigation, this incentive did not offer the Districts the prospect of any
direct pecuniary gain that could offset the burden of their attorney fees in the court
litigation.
The only significant part of the court litigation that occurred before the curtailment
notices were lifted was the filing of the curtailment notice mandate actions themselves
and the initial court proceedings that led to the partial rescission and clarification of the
curtailment notices shortly after they issued. Thus, at the time of the bulk of the court
litigation, the Districts did not face any potential fines hinging on the validity of the
curtailment notices.
We also discern no reasonable basis for the court’s finding that the fines and
penalties that the Board sought in its administrative enforcement proceedings against
BBID and WSID offset the burden of the Districts’ attorney fees in the court litigation.
The Districts’ victory in the court litigation had no impact on the administrative
enforcement proceedings, which were dismissed on grounds unrelated to the due process
18
and jurisdictional issues upon which the Districts prevailed in court. Further, the court
litigation was tried in 2018, but the administrative proceedings were dismissed in 2016.
Thus, the administrative proceedings were dismissed long before the bulk of the court
litigation even took place. Accordingly, the threat of fines and penalties BBID and
WSID faced in the administrative enforcement proceedings did not offer the Districts a
pecuniary incentive that might offset the burden of their attorney fees in the court
litigation that took place when they faced no fines or penalties.
We do not agree with the trial court’s conclusion that the mere existence of takings
causes of action brought by some of the Districts gave the Districts a financial incentive
to litigate the due process and jurisdictional issues in the court proceedings. The takings
causes of action were bifurcated for trial in phase 3, which never took place, and were
dismissed after phase 1. The Districts never litigated the takings causes of action and did
not seek to recover any fees associated with those causes of action, and upon which they
did not prevail. Unlitigated causes of action for which no fees were sought could not
have provided a pecuniary incentive that offset the burden of fees incurred for litigation
of other causes of action upon which the Districts prevailed.
The trial court’s conclusion that the value of the Districts’ water rights and the
“agricultural interests” of the landowners within the Districts were increased by the
Districts’ victory, thereby resulting in a pecuniary gain for the Districts, lacked a
reasonable basis. As the California Supreme Court described in Whitley, in assessing the
benefits under section 1021.5, “the trial court must first fix—or at least estimate—the
monetary value of the benefits obtained by the successful litigants themselves.” (Whitley,
supra, 50 Cal.4th at p. 1215, italics added.) The Districts, which are governmental
entities, did not “enjoy[] any direct pecuniary benefit from the litigation.” (Keep Our
Mountains Quiet v. County of Santa Clara (2015) 236 Cal.App.4th 714, 739 (Keep Our
Mountains Quiet).)
19
Further, any future pecuniary gains to the Districts’ landowners were speculative.
Neither the Districts nor the landowners within the Districts enjoyed a direct financial
benefit from the court litigation. During the bulk of the litigation, the curtailment notices
had been lifted, and the Board remained free to pursue future water curtailments on a
number of legal theories.
The financial burden element is intended to balance the burden imposed by fees
against the litigant’s gains from the successful litigation. Where there are no gains but
only the possibility that future detriment might be mitigated, the litigant has not achieved
any gain that may offset fees. As this court held in Keep Our Mountains Quiet, where the
only evidence of a possible pecuniary interest is of an indirect, speculative, potential
future benefit, such a possible interest is not the type of pecuniary benefit that may offset
the financial burden of fees and that disqualifies a litigant from recovering fees under
section 1021.5. (Keep Our Mountains Quiet, supra, 236 Cal.App.4th at pp. 739–740; see
also Heron Bay Homeowners Assn. v. City of San Leandro (2018) 19 Cal.App.5th 376,
392–395.)
In short, the Districts’ victory, requiring the Board to act within its jurisdiction and
to accord water right holders due process, merely protected the existing value of the
Districts’ water rights and the interests of the landowners within the Districts. The
Districts did not thereby obtain any pecuniary gain that they could utilize to offset the
burden of their attorney fees.
We do not disregard the fact that the Districts, as the moving parties, bore the
burden of demonstrating that the financial burden of their attorney fees was not offset by
their pecuniary gains. (Beach Colony II v. California Coastal Com. (1985) 166
Cal.App.3d 106, 113.) However, this is not a case in which the Districts failed to marshal
evidence of the financial burden of their fees or of their lack of any pecuniary gain. The
evidence was essentially undisputed. The Districts bore millions of dollars in attorney
20
fees but realized no direct pecuniary gain as a result of their victory on due process and
jurisdictional grounds.
The cases relied on by the Board to support both its arguments and the trial court’s
order do not undermine our conclusion that the trial court abused its discretion in denying
attorney fees here.
City of Maywood v. Los Angeles Unified School Dist. (2012) 208 Cal.App.4th 362
does not establish that avoiding harm to the economic interests of the landowners in the
Districts provided the Districts with pecuniary gains that offset their attorney fees. In
Maywood, the Second District Court of Appeal concluded that “when applying section
1021.5’s ‘financial burden’ criterion to political subdivisions, the trial court should
consider whether the burden of the litigation transcended the interests of both the political
entity and the collective interests of the individuals that the entity represents.” (Id. at
p. 435.) “[W]hen assessing this factor in the context of a public entity’s legal victory, the
trial court may only consider the public entity’s pecuniary interests and the pecuniary
interests of its constituents.” (Ibid.) The Second District Court of Appeal did not
actually decide in Maywood whether the city was entitled to its fees, because it concluded
that the trial court had improperly denied fees based on considerations that were not
limited to the city’s pecuniary interests. (Id. at p. 435.) The Court of Appeal in
Maywood held that the Supreme Court’s analysis of section 1021.5 in Whitley applied to
public enforcement actions. (Id. at p. 432.) The decision does not stand for the
proposition here that the landowners’ individual interests should be equated to those of
the Districts.
As the Districts point out, the landowners in their districts did not secure any
direct pecuniary gain from the court’s ruling that due process and jurisdictional limits
must be observed, since neither ruling prevented the Board from curtailing water
diversions on other grounds. Furthermore, while irrigation districts may act in the
interests of the landowners in their districts, we do not consider these landowners to be
21
akin to a city’s “constituents.” Unlike a city, an irrigation district is a public entity
charged with the responsibility of allocating water among the landowners in its district
for beneficial uses. (See Abatti v. Imperial Irrigation Dist. (2020) 52 Cal.App.5th 236,
256–260 (Abatti).)
In Millview County Water Dist. v. State Water Resources Control Bd. (2016) 4
Cal.App.5th 759, the water district itself had undisputed direct pecuniary interests that
offset its financial burden because its victory in the litigation allowed it to retain an asset
worth $2.1 million for which it had paid only $500,000 and provided it with a future
source of “ ‘free’ water.” (Id. at p. 770.) Nothing similar is true here. The Districts’
victory merely secured their due process rights and limited the Board to acting within its
jurisdiction. The Districts realized no direct pecuniary gains; nor did the court litigation
carry the potential of pecuniary gains for them.
In Young v. State Water Resources Control Bd. (2013) 219 Cal.App.4th 397, the
Third District Court of Appeal found that a water district’s customers, farmers who had
prevailed on a due process claim that served their “personal financial interests,” were not
entitled to recover their fees under section 1021.5 because the benefits were only to them,
not to “the public generally.” (Id. at p. 407.) The Third District acknowledged that had
the customers prevailed on a jurisdictional issue, “there might have been grounds for an
award of fees,” but they had not. (Ibid.) Here, the Districts received no “personal
financial benefits,” such as those secured by the prevailing parties in Young. (Ibid.)
In Children, supra, 228 Cal.App.4th 45, several county commissions successfully
obtained the invalidation of a state statute that would have required the local
commissions to remit more than $30 million from their local funds to a statewide trust
fund.14 (Id. at pp. 50–53.) The commissions sought to recover their attorney fees, which
14
The parties dispute whether the fact that the victory benefitted others should, by
itself, entitle a public entity to recover its fees. The Districts claim that the burden on
them was disproportionate because many other water right holders also benefitted from
22
were less than $1 million, under section 1021.5. They conceded that their victory meant
that they would retain many millions in funds, but they maintained that they had satisfied
the financial burden element because the retained funds would be held in trust for the
benefit of their constituents. (Id. at pp. 52–53.) The trial court found that they had not
satisfied the financial burden element because “the Trust Fund money they preserved far
exceeded the fees incurred and therefore the bounty of a fee award was not required to
encourage the litigation.” (Id. at p. 58.) The Fifth District Court of Appeal agreed with
the trial court. “In bringing suit, the Commissions were protecting their sole source of
funding, without which they would not exist. The trial court reasonably could conclude
that, in a situation where the Commissions stood to preserve for their constituents funds
that greatly exceeded the attorney fees expended, they did not deserve a reward for
pursuing litigation that coincidentally conferred statewide benefits.” (Id. at p. 60.)
Children is readily distinguishable. In Children, the commissions’ victory secured
the commissions’ rights to over $30 million in funds at a cost of less than $1 million in
fees. The pecuniary benefit of this victory provided a reasonable basis for the trial
court’s finding that the commissions did not “deserve a reward” for pursuing the
litigation. (Children, supra, 228 Cal.App.4th at p. 60.) Here, on the other hand, the
Districts’ victory did not secure any pecuniary gain for the Districts. Moreover, the
Districts’ responsibilities extend beyond its landowners: “[L]andowner water rights are
subordinate to district purposes.” (Abatti, supra, 52 Cal.App.5th at p. 259; see also id. at
p. 260 [rejecting the contention that “the District’s purpose is to enable landowners to
their victory. This claim misconstrues the nature of the appropriate inquiry. The
financial burden assessment, unlike some of the other section 1021.5 elements, does not
turn on whether others (even many others) benefitted from the Districts’ victory but only
on whether the Districts’ fees burden was disproportionate to the Districts’ offsetting
pecuniary benefits. The fact that others also benefitted from the Districts’ victory plays
no role in the weighing of the burden of the Districts’ fees against the District’s pecuniary
gains.
23
irrigate” and observing “the District’s purposes and powers extend beyond irrigation . . .
it is obligated to provide equitable service to all beneficial users”].)
The Board claims that California Licensed Foresters Assn. v. State Bd. of
Forestry (1994) 30 Cal.App.4th 562 (CLFA) supports the trial court’s ruling in this case.
We disagree. In CLFA, the association, whose 700 members were licensed foresters,
successfully challenged emergency regulations that would have put licensed foresters out
of business, and the association then successfully obtained a ruling from the trial court
that it could recover under section 1021.5 about $43,000 that it had expended on attorney
fees. (CLFA, at pp. 568–571 & p. 569, fn. 7.) The trial court’s fees ruling was
overturned by the Third District Court of Appeal because the pecuniary stake of the
association’s members established that the association’s fees would not impose an
inappropriate financial burden on the association. (Id. at pp. 571–572.) CLFA is not on
point here. The Districts obtained no pecuniary gain for themselves or any of their
“constituents,” as their victory merely ensured that the Board would provide due process
and act within its jurisdiction. That victory did not secure any pecuniary benefit for the
Districts that could offset the financial burden of their attorney fees.
The Board also cites Department of Forestry & Fire Protection v. Howell (2017)
18 Cal.App.5th 154, disapproved on an unrelated point in Presbyterian Camp &
Conference Centers, Inc. v. Superior Court (2021) 12 Cal.5th 493, 516, footnote 17, in
support of the trial court’s ruling. In Howell, the trial court had awarded millions of
dollars in section 1021.5 fees to the defendants. (Id. at pp. 198–199.) The Third District
Court of Appeal reversed the trial court on the ground that the trial court failed to
compare the financial burden of the fees to the “exposure defendants faced in the
litigation,” which exceeded $8 million. (Id. at p. 202.) The Third District held that “the
financial exposure defendants faced was decidedly not out of proportion with the
financial burden they incurred in defending the action,” so they were not entitled to
recover fees under section 1021.5. (Ibid.) Howell is not on point. The Districts were not
24
defendants in a lawsuit in which they faced the possibility of a large damages verdict
against them. Instead, they were petitioners in a mandate action in which they sought
procedural protections against unlawful actions by the Board. Their victory did not
shield them from a large damages award, and they obtained no pecuniary gain that could
offset the very substantial attorney fees that they incurred to obtain that victory.
We decide that the trial court erred in its legal analysis of the financial burden
element in concluding that the Districts had failed to establish that the financial burden of
their fees was disproportionate to their pecuniary interest in the litigation. We therefore
determine the trial court abused its discretion, and its order must be reversed. As the
evidence on the financial burden element was largely undisputed, we will direct the trial
court on remand to award the Districts under section 1021.5 the attorney fees that they
incurred for the court litigation.15
B. Attorney Fees For the Administrative Proceedings
The Districts contend that the trial court also erred in failing to award them the
attorney fees they incurred in the administrative enforcement proceedings. The Board, on
the other hand, argues that the trial court properly denied the Districts recovery of fees
they incurred in the administrative enforcement proceedings because the administrative
enforcement proceedings were “not necessary or useful” to the court’s resolution of the
court action.
15
The Board contends that the Districts “did not segregate their fees incurred in
the litigation before the superior court from those incurred in the administrative
[enforcement] proceedings.” However, in their fees motions, the Districts itemized fees
and costs by task and date range, which provides the court the necessary information to
allocate fees and costs between the court litigation and the administrative enforcement
proceedings.
25
1. Legal Principles
California cases have established the standards for recovery of section 1021.5
attorney fees for services provided in proceedings separate from the court litigation in
which the party prevailed.
In Wallace v. Consumers Cooperative of Berkeley, Inc. (1985) 170 Cal.App.3d
836 (Wallace), the cooperative decided to challenge the validity of minimum milk retail
price regulations by selling milk at a lower price. (Id. at p. 841.) The state obtained a
temporary restraining order and a preliminary injunction against the cooperative barring
it from violating the regulations. (Ibid.) The cooperative then filed a cross-complaint
challenging the validity of the regulations. (Ibid.) The state filed a complaint against the
cooperative seeking civil penalties. (Ibid.) Before any of these actions could be tried, the
parties entered into an agreement. (Ibid.) Under this agreement, if the state commenced
administrative proceedings and suspended the minimum price regulations within a
specified period, the parties would dismiss their actions. (Id. at pp. 841–842.) The state
held administrative proceedings resulting in the suspension of the minimum price
regulations. (Id. at p. 842.) The cooperative then sought and obtained its attorney fees
under section 1021.5, including the fees it had incurred in the administrative proceedings.
(Ibid.)
On appeal, the state unsuccessfully challenged the award of fees for the
administrative proceedings. (Wallace, supra, 170 Cal.App.3d at p. 847.) The First
District Court of Appeal observed that “[w]hen computing the time expended, the court
should ordinarily consider only time reasonably spent on the merits of the action, and
should not include peripheral activities unless they may be shown to have contributed to
the result reached.” (Ibid.) It looked to federal cases for guidance and noted that
“[u]nder federal law, the hours reasonably expended on an action may include services
performed in closely related administrative proceedings.” (Ibid.) The First District
reasoned that the trial court’s award was proper because the administrative proceedings
26
were “ ‘intertwined inextricably’ ” (id. at p. 848) with the court proceedings and “the
legal services performed in those proceedings were both useful and necessary to the
ultimate resolution of the action, and directly contributed to that resolution.” (Id. at
pp. 848–849.)
In Best v. California Apprenticeship Council (1987) 193 Cal.App.3d 1448 (Best),
the Fourth District Court of Appeal adopted the First District’s reasoning in Wallace.
Best had brought a mandate action to overturn the result of administrative proceedings.
(Id. at p. 1454.) Best ultimately prevailed, and a writ issued directing an administrative
decision in Best’s favor. (Ibid.) Best sought attorney fees under section 1021.5 for the
fees he had incurred in the administrative proceedings. (Ibid.) The trial court denied him
fees for the administrative proceedings, and Best appealed. (Ibid.) The Fourth District
reversed and held that “the appropriate inquiry to determine whether attorney’s fees
should be awarded by a court for services provided during administrative proceedings is
whether they were useful and of a type ordinarily necessary to the vindication of the
public interest litigated by the private party.” (Id. at p. 1459.) “[T]he fact the vindication
of the public interest was sought beginning in an administrative rather than judicial
forum, should not be allowed to frustrate the legislative intent of encouraging public
interest litigation.” (Id. at p. 1461, fn. omitted.) “Since the administrative proceedings
here were the first step in the litigation leading to the mandamus proceeding (§ 1094.5),
by their very nature they were useful and of a type ordinarily necessary to the public
interest litigation.” (Ibid.) “[W]hether administrative proceedings precede [as in Best] or
follow [as in Wallace] a court action, is a distinction without a difference, since the order
alone does not make the proceedings any less intertwined, useful and of a type ordinarily
necessary to the court action.” (Id. at p. 1462.)
The standards set forth in Wallace and Best have not been limited to
administrative proceedings. In Children’s Hospital & Medical Center v. Bonta (2002) 97
Cal.App.4th 740 (Children’s), the plaintiffs had filed both federal court and state court
27
actions. (Id. at pp. 750, 752.) The federal litigation, which turned on the applicability of
a federal statute, sought only declaratory and injunctive relief. (Id. at p. 750.) The state
court action sought damages, a remedy that was not available in the federal action. (Id. at
pp. 752–753.) However, the legal issues were inextricably intertwined, and the trial court
in the state court action relied on several of the federal court’s findings to support its
ruling. (Id. at p. 778.) After the plaintiffs prevailed in the state court action, that court
awarded them attorney fees under section 1021.5, which included a substantial amount of
fees attributable to the federal action. (Id. at pp. 756, 775.)
In the Children’s appeal, the First District examined whether the trial court had
erred in awarding fees incurred in the federal proceedings. (Children’s, supra, 97
Cal.App.4th at pp. 775, 777–778.) The First District held that fees for a “collateral
action” (id. at p. 779) could be awarded under section 1021.5 even if the collateral action
“may not have been absolutely necessary to the action in which fees are awarded but was
nonetheless closely related to the action in which fees are sought and useful to its
resolution.” (Id. at p. 780.) Because the federal action “related very directly to the issues
presented in the action in which fees were awarded,” even though “the federal
proceedings may not have been a necessary precondition of the superior court action,
they materially contributed to the resolution of the constitutional issues presented to that
court. The federal rulings not only relieved the superior court of burdensome
adjudicative responsibilities it would otherwise have had to undertake but also
diminished the work required of counsel.” (Id. at p. 781.)
2. The Trial Court’s Findings
The trial court made several findings in support of its decision denying the
Districts recovery of the attorney fees they had incurred in the administrative
enforcement proceedings. We may uphold the trial court’s decision on any of these
grounds. (Wal-Mart Real Estate Business Trust v. City Council of San Marcos (2005)
132 Cal.App.4th 614, 625.) We therefore limit our review to the trial court’s finding that
28
the Districts could not recover the fees they incurred in the administrative enforcement
proceedings because they had failed to demonstrate that their opposition to the
enforcement proceedings was “ ‘ “useful and necessary” ’ ” to the court litigation.
Specifically, the court found that the administrative proceedings were not “a prerequisite”
to the court litigation and primarily concerned the water methodology issue, which was
unrelated to the due process and jurisdictional issues upon which the Districts prevailed
in the court litigation.16
3. Analysis
The Districts have not persuaded us that the trial court abused its discretion in
finding that they were not entitled to recover their fees incurred in the administrative
enforcement proceedings because they failed to establish that the administrative
proceedings were useful and necessary to the trial court’s resolution of the court
litigation.
Section 1021.5 fees are available only if the administrative proceedings were
“ ‘intertwined inextricably’ ” (Wallace, supra, 170 Cal.App.3d at p. 848) with the court
proceedings and “the legal services performed in those [administrative] proceedings were
both useful and necessary to the ultimate resolution of the [court] action, and directly
contributed to that resolution.” (Id. at pp. 848–849.) “[T]he appropriate inquiry to
determine whether attorney’s fees should be awarded by a court for services provided
during administrative proceedings is whether they were useful and of a type ordinarily
necessary to the vindication of the public interest litigated by the private party.” (Best,
supra, 193 Cal.App.3d at p. 1459.) While the administrative proceedings need not have
16
The court also found that the Districts “had a strong financial motivation to
contest the[] [administrative] enforcement proceedings” and that their opposition to the
administrative enforcement proceedings did not provide a “ ‘significant benefit’ to
others” because the administrative proceedings ultimately resolved only the validity of
the Board’s “water availability methodology” with respect to the Delta. Because we
uphold the trial court’s order on a different ground, we do not address the validity of
these findings.
29
been “absolutely necessary to the action in which fees are awarded,” the administrative
proceedings must have been “closely related to the action in which fees are sought and
useful to its resolution.” (Children’s, supra, 97 Cal.App.4th at p. 780.)
We accept that the administrative enforcement proceedings were related to the
court litigation. Yet we perceive no abuse of discretion in the trial court’s determination
that the legal services performed for the Districts in the administrative enforcement
proceedings were not inextricably intertwined with the court litigation and were neither
useful nor necessary to the trial court’s resolution of the court litigation.
The court litigation that led to the Districts’ victory involved due process and
jurisdictional challenges to the validity of the curtailment notices issued to the Districts
and to many others. The administrative enforcement proceedings concerned enforcement
of those notices against only BBID and WSID and ultimately resolved only the Districts’
challenge to the Board’s water availability methodology, which was never addressed or
resolved in the court litigation and played no significant role in the court’s resolution of
the due process and jurisdictional issues. Although the Board also resolved the
jurisdictional issue against the Districts, this erroneous legal finding was not useful to the
trial court in resolving the court litigation, which reached the opposite conclusion. Since
the Board lacked jurisdiction under Water Code section 1052, subdivision (a) as a matter
of law to issue the curtailment notices to pre-1914 water right holders, the validity of the
Board’s specific water availability methodology underlying those notices was immaterial
and was neither necessary nor useful to the court’s resolution of the court litigation.
The Districts argue that the administrative enforcement proceedings were
“necessary” to resolution of the court litigation because the Districts were “compelled to
litigate the Enforcement Action before [they] could have [their] day in court.” While the
timing of the administrative enforcement proceedings meant that those proceedings were
resolved before the court litigation terminated, the administrative proceedings were not a
necessary precursor to the court litigation, nor was the resolution of the administrative
30
proceedings useful in the resolution of the court litigation. Although BBID and WSID
were targets of the Board’s administrative enforcement proceedings and undoubtedly had
a need to defend themselves in those proceedings, the Districts’ victory in the court
litigation was essentially unrelated to the resolution of the administrative proceedings
because the issues resolved in the separate proceedings were distinct. The decision in the
administrative proceedings turned solely on the Board’s resolution of the water
availability methodology issue, while the court litigation did not consider that issue and
resolved only the due process and jurisdictional issues.
The Districts argue that even if the administrative proceedings were not
“necessary” to the court litigation, the administrative proceedings were “closely related
and useful” to it. The Districts rely heavily on the trial court’s denial of a motion to stay
the administrative proceedings, but we do not consider the court’s denial of the stay
motion to be material to the issue of whether the administrative proceedings were useful
and necessary to the court litigation. Although the Districts assert that the denial of the
stay made their defense in the administrative proceedings “a precondition” for the court
litigation, the trial court’s denial of the stay motion was consistent with its conclusion
that the administrative proceedings were ancillary to the court litigation due to the water
methodology issue and could properly proceed on a separate track without regard to the
timeline for the court action. Unlike the cases the Districts rely on, this was not a case in
which the administrative proceedings were necessary to exhaust administrative remedies
or to resolve the court litigation.
The Districts claim that the trial court erroneously relied on the “sequencing” of
the administrative proceedings and the court litigation, but we see no improper reliance.
The trial court found that the administrative proceedings did not resolve the issues that
the court litigation resolved, so they were neither necessary nor useful. The order in
which the proceedings occurred was immaterial. The Districts suggest that the trial court
improperly relied on the fact that the administrative proceedings involved a large amount
31
of fees expended on the water availability methodology issue. The trial court’s
determination that the administrative proceedings were not useful or necessary to the
court litigation did not turn on the amount of fees expended in the administrative
proceedings, so we discern no impropriety.
The Districts maintain that the administrative proceedings and the court litigation
were inextricably intertwined because “the issues raised in both proceedings stem from
the water availability analysis.” However, the legal issues resolved in the court litigation
did not depend on the validity of the Board’s water availability analysis. Further, we do
not agree with the Districts’ claim that the administrative proceedings and the court
litigation involved “identical issues.” The court litigation did not resolve the water
availability methodology issue resolved in the administrative proceedings, and the
Board’s rejection of the jurisdictional issue in the administrative proceedings was neither
useful nor necessary to the resolution of that legal issue in the court proceedings.
Finally, the Districts urge that the administrative proceedings played a useful role
in the trial court’s resolution of the due process issue because the resolution of the
administrative proceedings demonstrated the need for a due process hearing. However,
we find no basis in the record to disturb the trial court’s conclusion that the
administrative proceedings were not useful or necessary to its resolution of the court
litigation. The trial court was in the best position to assess whether the administrative
proceedings played a useful role in its decision making. We defer to its finding that they
did not.
We conclude that the trial court did not abuse its discretion in finding that the
Districts were not entitled under section 1021.5 to recover the attorney fees they incurred
in the administrative enforcement proceedings.
C. Costs
BBID and CDWA/SDWA contend that the trial court erred in partially granting
the Board’s motions to tax their costs. The taxed costs were expert witness fees,
32
deposition costs, and exhibit costs incurred in the administrative enforcement
proceedings. No witnesses, depositions, or exhibits were used in the curtailment notice
mandate proceedings.
CDWA/SDWA claim that the trial court had discretion under sections 1032 and
1095 to award them the costs they incurred in the administrative enforcement
proceedings. BBID contends that the court was mandated to award it the costs it incurred
in the administrative enforcement proceedings because it was the prevailing party in the
administrative enforcement proceedings.
Section 1032 provides: “Except as otherwise expressly provided by statute, a
prevailing party is entitled as a matter of right to recover costs in any action or
proceeding.” (§ 1032, subd. (b).) It defines “ ‘[p]revailing party’ ” as “the party with a
net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant
where neither plaintiff nor defendant obtains any relief, and a defendant as against those
plaintiffs who do not recover any relief against that defendant. If any party recovers
other than monetary relief and in situations other than as specified, the ‘prevailing party’
shall be as determined by the court, and under those circumstances, the court, in its
discretion, may allow costs or not and, if allowed, may apportion costs between the
parties on the same or adverse sides pursuant to rules adopted under [s]ection 1034.”17
(Id., subd. (a)(4).)
The trial court determined that CDWA, SDWA, and BBID were the prevailing
parties in the curtailment notice mandate actions. This finding did not mandate that the
court award to the Districts any costs. Because the Districts did not recover any
17
The Districts do not explain how section 1095 broadens the mandate for costs.
Section 1095 provides: “If judgment be given for the applicant, the applicant may
recover the damages which the applicant has sustained, as found by the jury, or as may be
determined by the court or referee, upon a reference to be ordered, together with costs;
and a peremptory mandate must also be awarded without delay. Damages and costs may
be enforced in the manner provided for money judgments generally.” (§ 1095.) We
therefore review whether the trial court erred under section 1032.
33
“monetary relief” in the mandate actions, the court could designate them as the prevailing
parties and “in its discretion, may allow costs or not.” (§ 1032, subd. (a)(4).) The court
expressly exercised this discretion and denied them the costs they incurred in the
administrative enforcement proceedings. It found: “[I]n this case, an award of costs
pursuant to either section 1032 or section 1095 is ultimately within the Court’s discretion.
Here, the Court would not exercise its discretion to award petitioners costs incurred in the
administrative proceedings even if [] the statutes authorized it to do so.[18] . . . Under the
circumstances, the Court finds it fair and appropriate for [the Districts and the Board] to
share the bulk of the costs arising from this dispute, which were incurred during the
enforcement proceedings.”
CDWA/SDWA argue that the court had discretion to award them the costs they
incurred in the administrative proceedings. Since the court expressly exercised its
discretion to deny CDWA and SDWA those costs, they may prevail only if they persuade
us that the court’s “fair and appropriate” rationale was outside the bounds of its broad
discretion. As they make no serious attempt to do so, we reject their challenge to the trial
court’s order taxing their costs.
BBID argues that the court should have found that it was the prevailing party in
the administrative enforcement proceedings, which in its view would have entitled it to a
mandatory award of costs because those proceedings against it were dismissed. Section
1032 mandates an award of costs to a “a defendant in whose favor a dismissal is entered.”
(Id., subd. (a)(4).) It defines “ ‘[d]efendant’ ” as “a person against whom a complaint is
filed, or a party who files an answer in intervention.” (Id., subd. (a)(2).)
Only WSID and BBID were subjects of administrative enforcement proceedings.
WSID was not “a person against whom a complaint is filed” (§ 1032, subd. (a)(2)) in
18
The court also found that sections 1032 and 1095 categorically did not apply to
costs incurred in administrative proceedings. We need not consider the validity of this
finding.
34
those proceedings because the enforcement action against WSID was initiated by a draft
cease and desist order, not a complaint. BBID was “a person against whom a complaint
was filed” (ibid.) in the sense that the administrative enforcement proceedings against
BBID were initiated by an “administrative civil liability complaint.” The administrative
civil liability complaint against BBID was dismissed. Nevertheless, the mere fact that the
administrative complaint against BBID was dismissed did not entitle BBID to a
mandatory award of costs in the curtailment notice mandate action. The costs
memorandum filed by BBID that was taxed by the trial court was filed in the curtailment
notice mandate action, not in the administrative enforcement proceedings in which the
complaint against BBID was dismissed.
BBID’s attempt to persuade us that costs incurred in one proceeding must be
awarded in a separate proceeding lacks a foundation in authority. BBID contends that
because the administrative proceedings were “adjudicative” they fell within the purview
of section 1032.19 It cites Edna Valley Watch v. County of San Luis Obispo (2011) 197
Cal.App.4th 1312 in support of this contention, but the issue in Edna Valley was whether
attorney fees incurred in administrative proceedings were recoverable under section
1021.5 in a mandate action challenging an administrative decision that was inextricably
intertwined with and necessary and useful to resolution of the mandate action. (Id. at p.
1318.) Although the Second District Court of Appeal adopted a broad interpretation of
“ ‘action’ ” in section 1021.5, the definition of “ ‘action’ ” in section 1032 was not at
19
BBID’s reliance on Williams v. Santa Maria Joint Union High Sch. Dist. (1967)
252 Cal.App.2d 1010 is misplaced. In that case, the court held that the expense of
preparing transcripts of a hearing before an administrative agency to defend against a
challenge to the administrative decision in a mandate action in court was a recoverable
expense after the mandate action was unsuccessful. (Id. at pp. 1012–1013.) The
expenses incurred in Williams were record preparation expenses in the mandate action.
Here, the expenses were not incurred in the mandate action but solely in the
administrative enforcement proceedings, and the curtailment notice mandate actions were
not challenges to the administrative enforcement proceedings decision.
35
issue in Edna Valley. (Ibid.) The fees awarded in Edna Valley were awarded in the
mandate action. In contrast, here we have already decided that the administrative
enforcement proceedings were not inextricably intertwined with or useful and necessary
to the mandate actions.
As the Districts did not recover monetary relief, the trial court had discretion to
allow or disallow their costs in its discretion under section 1032, subdivision (a)(4). Its
decision to exercise that discretion to deny them those costs is one that we defer to unless
it exceeds the bounds of reason. As BBID and CDWA/SDWA have not persuaded us
that the court’s exercise of its discretion was unreasonable, we reject their challenges to
the court’s partial grant of the Board’s motions to tax their costs.
III. DISPOSITION
The trial court’s fees and costs order is reversed, and the trial court is directed to
enter a new order granting the Districts their attorney fees under section 1021.5 for the
court litigation, denying the Districts their attorney fees for the administrative
proceedings, and, as it originally did, partially granting the Board’s motions to tax costs.
The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
36
______________________________________
Danner, J.
WE CONCUR:
____________________________________
Greenwood, P.J.
____________________________________
Wilson, J.
H047927
In re California Water Curtailment Cases
37 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487980/ | Filed 11/18/22 Banga v. The Regents of the U. of Cal. CA1/5
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 FIVE
KAMLESH BANGA,
Plaintiff and Appellant,
v. A162936
THE REGENTS OF THE
UNIVERSITY OF CALIFORNIA et (San Francisco City and County
al., Super. Ct. No. CGC-16-549780)
Defendants and Respondents.
While Kamlesh Banga pursued a personal injury lawsuit
against a third party based on hearing loss she suffered as a
result of a car accident, defendant health care providers tested
her hearing and reported that she was exaggerating her injuries.
After settling her personal injury lawsuit, Banga (representing
herself) sued defendants. She originally asserted negligence
causes of action and later asserted that she was injured by the
defendants’ intentional refusal to provide complete medical
records. Banga argues that the trial court erred in sustaining
(without leave to amend) defendants’ demurrer with respect to
four of her six causes of action. We disagree and affirm.
1
BACKGROUND
A.
Banga filed her personal injury lawsuit in 2010 and had
“medical legal evaluation[s]” of her hearing in 2012 and 2013.
The tests were conducted by defendants Anga Lao, Au.D., and J.
Andrew Dundas, Ph.D., in consultation with Banga’s treating
physician Lawrence Lustig, M.D., who were all employees of
defendant The Regents of the University of California
(collectively, the Regents).
The first report indicated that Banga’s first set of tests (in
April 2012) showed she had profound hearing loss and was not
exaggerating her symptoms. After subsequent tests (in
November 2012 and October 2013), the Regents reported that she
only had moderate hearing loss and was exaggerating her
symptoms. Banga’s attorney paid the Regents $2,632.20 for the
April 2012 tests, $2,021.40 for the November 2012 tests, and
$2,177.46 for the October 2013 tests.
Before she settled her personal injury action (in 2014),
Banga underwent similar medical testing at Stanford Hospital,
and thereafter received a report more favorable to her and her
underlying lawsuit. Stanford’s report also included computerized
data from the tests.
Banga repeatedly requested copies of medical records
related to defendants’ reports and evaluations—specifically the
objective findings from the testing—in October 2013, September
2014, January 2016, February 2017, and April 2019. However,
the Regents did not produce complete records for any of the
testing dates until July 2019—when defendants released a 24-
page report for her November 2012 testing, which included for
the first time underlying objective test data. According to her
operative complaint, defendants continue to withhold at least the
objective findings from Banga’s October 2013 testing.
2
B.
This is the second appeal Banga has filed in this litigation.
In her first appeal, this court reversed the trial court’s order
sustaining defendants’ demurrer to her first amended complaint
without leave to amend. (Banga v. Regents of the Univ. of Cal.
(Oct. 1, 2019, A151758) [nonpub. opn.] (Banga I).)
In Banga I, this court observed that the Legislature had
established procedures to ensure patient access to health care
records (Health & Saf. Code, § 123110),1 and also permitted an
action, with discretionary award of fees and costs to the
prevailing party, to enforce these provisions. (§ 123120; see
Person v. Farmers Ins. Group of Companies (1997) 52
Cal.App.4th 813, 816-818.)
Accordingly, Banga I determined that the trial court
abused its discretion by denying Banga leave to amend so that
she could plead claims seeking equitable relief to enforce her
requests for medical records (Health & Saf. Code, § 123120; Bus.
& Prof. Code, §§ 17200, 17203). The judgment was reversed and
remanded, with directions to the trial court to enter an order
sustaining the demurrer and granting Banga leave to file a
second amended complaint. (Banga I, supra, A151758.)
C.
On remand, Banga filed a second amended complaint and
then, after defendants’ demurrer was granted with leave to
amend some of her causes of action, a third amended complaint
(her operative complaint). Banga’s operative complaint alleged
causes of action for: (1) breach of contract; (2) violation of Health
and Safety Code section 123110; (3) fraudulent concealment of
medical records; (4) intentional concealment of medical records;
1Undesignated statutory references are to the Health and
Safety Code.
3
(5) intentional infliction of emotional distress and (6) violation of
the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.).
With the exception of her two statutory (second and sixth)
causes of action that sought equitable relief, Banga sought
compensatory damages, alleging that defendants’ suppression of
her medical records reduced her settlement in the underlying
personal injury litigation and caused emotional distress.
Defendants demurred again, arguing Banga’s first, third,
fourth, and fifth causes of action failed to allege facts sufficient to
state a cause of action. The trial court sustained the demurrer
without leave to amend with respect to those four causes of
action. Banga then dismissed her remaining second and sixth
causes of action (without prejudice) and appealed from the
judgment entered in defendants’ favor.
DISCUSSION
A.
With respect to Banga’s third, fourth, and fifth causes of
action, the trial court did not err when it sustained defendants’
demurrer without leave to amend because these are barred tort
claims for spoliation of evidence.
1.
We review an order sustaining a demurrer de novo,
considering whether the complaint states a cause of action on any
available legal theory. (Rosen v. St. Joseph Hospital of Orange
County (2011) 193 Cal.App.4th 453, 458 (Rosen).) We assume the
truth of all material facts that are properly pled, but disregard
contentions, deductions, or conclusions of fact or law. (State Dept.
of State Hospitals v. Superior Court (2015) 61 Cal.4th 339, 346.)
We also look past the form of the pleading (and its labels) and
focus on its substance, giving it a reasonable construction in
context. (Rosen, supra, at p. 458.)
4
2.
In her third through fifth causes of action, Banga alleges in
substance that defendants intentionally withheld, concealed, or
altered some of the medical records from her hearing tests, which
entitles her to compensatory damages because she could not use
the undisclosed records to support her personal injury action.
She alleges this suppression of evidence caused her emotional
distress and a reduced recovery in her personal injury lawsuit.2
The trial court properly recognized that she is, in
substance, asserting tort claims for spoliation of evidence.
Intentional destruction, suppression, or alteration of evidence is
spoliation. (See Temple Community Hospital v. Superior Court
(1999) 20 Cal.4th 464, 469, 476-477 (Temple); R.S. Creative, Inc.
v. Creative Cotton, Ltd. (1999) 75 Cal.App.4th 486, 497.)
The law is clear that, for numerous policy reasons
(including discouraging endless and speculative litigation by
disappointed litigants), there is no tort remedy for the spoliation
of evidence, regardless of whether it is brought against a party to
the underlying litigation or a third party (as Banga alleges). (See
Temple, supra, 20 Cal.4th at p. 466; Cedars-Sinai Medical Center
v. Superior Court (1998) 18 Cal.4th 1, 17-18 (Cedars-Sinai);
Strong v. State of California (2011) 201 Cal.App.4th 1439, 1458-
1459.) Defendants are correct that this rule applies to all
substantive claims of spoliation, notwithstanding the label a
2 To the extent Banga’s third cause of action alleges she
relied on a purportedly false statement by Dr. Lustig (that the
objective findings did not exist), she does not state an
independent cause of action for fraud because she does not allege
any harm she suffered as a result of her reliance on that
statement. The harm she allegedly suffered was from the
withholding of the objective findings, not from her reliance on
anything Dr. Lustig said.
5
plaintiff attaches to a particular cause of action. (Rosen, supra,
193 Cal.App.4th at pp. 455-457, 462.)
Banga suggests that defendants acted as her fiduciaries
because of the existence of a doctor-patient relationship and
thereby had a duty, as a matter of law, to produce any and all
medical records including the data that she seeks. She does not
explain, however, how we could allow her to seek tort damages
from defendants for withholding, concealing, or altering her
medical records without violating Cedars-Sinai and Rosen—both
of which also involved alleged spoliation of a patient’s medical
records. (See Cedars-Sinai, supra, 18 Cal.4th at pp. 4-5, 17-18;
Rosen, supra, 193 Cal.App.4th at p. 456; Rosen at p. 463
[“general, preexisting relationships are not sufficient to support a
spoliation of evidence claim”].)
Banga is correct that our Supreme Court has recognized
that a duty to preserve and produce evidence may exist
independently of tort law. (Temple, supra, 20 Cal.4th at p. 477
[“to the extent a duty to preserve evidence is imposed by statute
or regulation upon the third party, the Legislature or the
regulatory body that has imposed this duty generally will possess
the authority to devise an effective sanction for violations of that
duty”].) And Banga I, supra, A151758, determined that Banga
has a remedy for suppression of medical records under Health
and Safety Code section 123120, and that she might have an
additional remedy (for the same alleged statutory violation)
under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et
seq.) However, Banga voluntarily dismissed those statutory
claims, which she pled after remand, and they are not before us
on this appeal.
We also reject Banga’s assertion that Banga I established
law of the case relevant to her spoliation tort claims. There were
no such claims before the court on the prior appeal. And the law
of the case doctrine has no application to points of law that were
6
not presented and determined in a prior appeal. (Leider v. Lewis
(2017) 2 Cal.5th 1121, 1127.)
The Legislature devised a system of rights and procedures
to ensure patient access to health care records. (Health & Saf.
Code, §§ 123110, 123120.) Health and Safety Code section
123120 permits an aggrieved patient to bring an action to enforce
these provisions, and to potentially obtain attorney fees and costs
if they prevail. (See Person v. Farmers Ins. Group of Companies,
supra, 52 Cal.App.4th at pp. 816-818.) When a patient is
represented by counsel (as Banga was in her personal injury
action), additional procedures and enforcement mechanisms for
obtaining medical records are provided in the Evidence Code.
(Evid. Code, § 1158.) Criminal penalties are also provided for
alteration of medical records with fraudulent intent. (Pen. Code,
§ 471.5.)
Our Supreme Court has decided that non-tort remedies
such as these are sufficient to deter spoliation and to protect its
victims. (Temple, supra, 20 Cal.4th at p. 471; Cedars-Sinai,
supra, 18 Cal.4th at p. 11.) We are bound by that conclusion.
(Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450,
455.) The trial court did not err in sustaining defendants’
demurrer to Banga’s third through fifth causes of action without
leave to amend.
B.
Banga also contends that the trial court erred by sustaining
defendants’ demurrer to her breach of contract cause of action.
We disagree.
Notwithstanding the absence of a tort remedy for
spoliation, a defendant who expressly promises to preserve
evidence can be held liable on breach of contract or promissory
estoppel theories. (Temple, supra, 20 Cal.4th at p. 477; Rosen,
7
supra, 193 Cal.App.4th at pp. 460-461; Cooper v. State Farm
Mutual Automobile Ins. Co. (2009) 177 Cal.App.4th 876, 894.)
In her first cause of action, Banga alleges (in conclusory
fashion) that defendants breached a contractual obligation to
provide her with all medical records from her tests, including
underlying objective findings, thereby causing her to receive a
reduced personal injury settlement. But, despite the trial court’s
previous demurrer ruling pointing out the flaw in Banga’s
pleading, her third amended complaint does not allege the
existence of any such express agreement or promise—to provide
all the underlying data in her medical records.
Instead, Banga provides the full text of two emails that Lao
sent to Banga’s personal injury attorney before the November
2012 tests. These emails mention “ ‘[m]ed legal’ ” testing and a
“ ‘[m]ed legal report’ ” but contain no explicit agreement or
promise to preserve or provide all underlying records, data, or
findings. Implied obligations are insufficient to support a
contractual spoliation claim. (Rosen, supra, 193 Cal.App.4th at
pp. 462-464; Cooper v. State Farm Mutual Automobile Ins. Co.,
supra, 177 Cal.App.4th at p. 904.)
In her opening brief, Banga fails to meet her burden to
show how she can amend her complaint to change its legal effect.
(See Rakestraw v. California Physicians’ Service (2000) 81
Cal.App.4th 39, 43-44.) She forfeited the points raised for the
first time in her reply brief or at oral argument. (See Rubinstein
v. Fakheri (2020) 49 Cal.App.5th 797, 809.)
The trial court did not err in sustaining defendants’
demurrer to Banga’s first cause of action without leave to amend.
We have considered Banga’s remaining arguments and find them
either unpersuasive or mooted by our decision to affirm the trial
court’s order sustaining defendants’ demurrer.
8
DISPOSITION
The judgment is affirmed. Defendants are entitled to their
costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)
9
______________________
BURNS, J.
We concur:
____________________________
JACKSON, P.J.
____________________________
SIMONS, J.
A162936
10 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487981/ | THE SUPERIOR COURT OF THE STATE OF DELAWARE
STATE OF DELAWARE )
)
v. ) ID No. 1712008053
)
IVAN GALINDEZ, )
)
Defendant. )
Submitted: August 5, 2022
Decided: November 18, 2022
MEMORANDUM OPINION AND ORDER
On this 18th day of November 2022, upon consideration of Defendant, Ivan
Galindez’s (“Defendant”) Motion for Postconviction Relief (“Motion”), 1 trial
counsel’s affidavit in response to claims of ineffective assistance of counsel,2 the
State’s response to the Motion,3 the parties’ supplemental briefing,4 and the record
in this case, it appears that:
I. Factual and Procedural History
1. On December 12, 2017, a police officer of the Wilmington Police
Department was dispatched in response to a 911 call reporting a robbery. Upon
arrival, the officer observed Jorge Luis Franco Martinez (the “victim”) in obvious
1
D.Is. 31, 42.
2
D.I. 44.
3
D.I. 45.
4
D.Is. 48, 51.
distress, bleeding from the face and head areas. Also present at the scene was
Richard Canongo, who stated he had called 911 when he heard the victim yelling for
help.
2. The victim reported to the police that, at approximately 9:00 p.m. on
December 12, 2017, he drove to Rodriguez Food Market, near W. 4th and Connell
Streets in Wilmington, to buy groceries. When the victim was returning to his
parked vehicle, he was approached by a man who demanded money. When the
victim refused, the man struck him in the face and head with a metal object (possibly
brass knuckles) repeatedly, eventually knocking him to the ground. Amidst the
struggle, the victim managed to enter his vehicle, but was unable to drive away
before the man broke the driver’ side window and held a pointed object to his neck.
The victim then turned over his money and the man fled.
3. On December 13, 2017, the day after the incident, the victim spotted the
man who robbed him in the same area and the man was dressed the same as the night
before. The victim took a picture of the man on his cellphone and later provided the
photo to the police. Based on the photo, the police obtained a warrant and arrested
Defendant on December 14, 2017. When Defendant was processed, a photograph
was taken of him and included in a six-pack photo line-up. When presented with the
photo line-up, the victim immediately identified Defendant as the man who robbed
him. The photo array was later introduced at trial.
2
4. At trial, the victim testified to the foregoing, explained that he saw
Defendant’s face clearly on the night of the attack, and identified Defendant in court
as his assailant. The person who called 911 after the incident, Richard Canongo,
also testified at trial. He gave his account of the incident, which was substantially
consistent with the victim’s. Canongo also testified that the man pictured in the
photograph taken by the victim was the man who assaulted and robbed the victim.
5. On August 16, 2018, after a two-day jury trial, Defendant was found guilty
and convicted of one count of Robbery First Degree, one count of Assault First
Degree, two counts of Possession of a Deadly Weapon During the Commission of a
Felony, and one count of Criminal Mischief under $1,000 Damage to Property.5 On
January 18, 2019, Defendant was sentenced to fifty-four years of Level V
imprisonment, followed by concurrent probation for two years and six months. 6
Defendant filed a timely Notice of Appeal to the Delaware Supreme Court.7 On
October 30, 2019, the Delaware Supreme Court affirmed Defendant’s convictions.8
6. On January 17, 2020, Defendant filed a pro se Motion for Postconviction
Relief and Motion for Appointment of Counsel, under Superior Court Criminal Rule
5
D.I. 15.
6
D.I. 23.
7
D.I. 27.
8
D.I. 30.
3
61.9 On July 9, 2020, the Court granted Defendant’s Motion for Appointment of
Counsel.10 On September 24, 2021, an Amended Motion for Postconviction Relief
(the “Amended Motion”) was filed by Defendant’s postconviction counsel on his
behalf.11 On January 5, 2022, Defendant’s trial counsel filed an affidavit in response
to Defendant’s claims of ineffective assistance of counsel.12 On March 9, 2022, the
State filed a response to Defendant’s Amended Motion for Postconviction Relief.13
On June 1, 2022, Defendant filed a supplement14 to the Amended Motion, to which
the State filed a supplemental response15 on August 5, 2022. This matter is now ripe
for the Court’s consideration and decision.16
II. Standard of Review
7. Superior Court Criminal Rule 61 is the exclusive remedy for persons “in
custody under a sentence of this court seeking to set aside the judgment of conviction
9
D.Is. 31, 32.
10
D.I. 35.
11
D.I. 42.
12
D.I. 44.
13
D.I. 45.
14
D.I. 51.
15
D.I. 48.
16
The sole argument raised in Defendant’s Amended Motion is based upon purported newly
discovered evidence, including trial counsel’s alleged ineffectiveness in failing to identify the
evidence before trial. Defendant also raised several other ineffective assistance of counsel claims
in his original pro se Motion. The Court will first address the argument regarding the newly
discovered evidence and then address the pro se arguments.
4
. . . .”17 In considering a motion for postconviction relief, the Court “must first
consider the procedural requirements of Rule 61 before addressing any substantive
issues.” 18 The procedural bars of Rule 61 include: timeliness, repetitiveness,
procedural default, and former adjudication. 19 This is Defendant’s first Rule 61
Motion and it was filed within one year after the judgment of conviction became
final. The Motion is therefore timely and not repetitive. The Court will then address
whether the Motion satisfies other procedural requirements under Rule 61(i), and if
yes, will consider the Motion on its merits.
III. Analysis
A. Newly Discovered Evidence
8. Defendant contends that there is new exculpatory evidence not presented
at trial that warrants postconviction relief. The State argues that this claim is
procedurally barred under Rule 61(i)(3) because it was not asserted in the
proceedings leading to the judgment of conviction and does not fall within the
exceptions provided under Rule 61(i)(5).
17
Super. Ct. Crim. R. 61(a)(1).
18
Bradley v. State, 135 A.3d 748, 756-57 (Del. 2016) (citing Younger v. State, 580 A.2d 552, 554
(Del. 1990)). See also Super. Ct. Crim. R. 61(i) (setting forth Rule 61’s procedural bars).
19
Super. Ct. Crim. R. 61(i)(1)-(4).
5
9. Rule 61(i)(3) provides that “[a]ny ground for relief that was not asserted in
the proceedings leading to the judgment of conviction, as required by the rules of
this court, is thereafter barred, unless the movant shows (A) [c]ause for relief from
the procedural default and (B) [p]rejudice from violation of the movant’s rights.”20
Here, Defendant contends that he has become aware of a new eyewitness named
Robert Perry Figgs, who is willing to testify that Defendant “acted in self-defense”
in the incident for which he was convicted.21 Specifically, the new eyewitness will
testify that the victim “initiated an argument with [Defendant] and “threw the first
punch.” The claim of self-defense, supported by testimony of a proposed eyewitness,
could have been, but was not, raised at trial or upon direct appeal. 22 Defendant also
fails to show “cause for relief” from the procedural default. Defendant contends that
the failure to present the self-defense claim at trial was due to his trial counsel’s
deficient performance in failing to discover and identify the eyewitness. As will be
discussed in detail below, the Court finds that the trial counsel’s alleged failure to
20
Super. Ct. Crim. R. 61(i)(3).
21
The Court notes that Defendant’s Amended Motion states that Defendant’s postconviction
counsel “has discovered the names and contact information of two previously unknown witnesses”
who “will contradict evidence used to convict [Defendant] at his trial,” without supplying more
information regarding those additional witnesses. It is not until Defendant submitted his
supplement to the Amended Motion that he provided the information regarding the new eyewitness,
including his name, date of birth, physical address, and proposed testimony. This is the only new
evidence presented in the Motion.
22
See e.g., State v. Prince, 2022 WL 211704, at *4 (Del. Super. Jan. 24, 2022) (finding
prosecutorial misconduct claims that could have been but were not raised on direct appeal barred
as procedurally defaulted).
6
identify this eyewitness or pursue a self-defense claim falls short of ineffective
assistance of counsel, which is required to constitute cause for relief from the
procedural default.23 Therefore, the petition for relief based on purported newly
discovered evidence that supports a self-defense claim is barred under Rule 61(i)(3).
10. Defendant’s newly discovered evidence claim could otherwise proceed if
it satisfies one of the exceptions provided under Rule 61(i)(5). Rule 61(i)(5)
provides that the bars to relief in paragraphs (1)-(4) of Rule 61(i) do not apply to a
claim that “pleads with particularity that new evidence exists that creates a strong
inference that the movant is actually innocent in fact of the acts underlying the
charges of which he was convicted.” 24 “Actual innocence” requires “more than
innocence of intent; it requires new evidence that a person other than the petitioner
committed the crime.”25
11. In State v. Taylor, the defendant asserted in his second postconviction
motion that there was new evidence that negated the requisite intent for his
23
See Shelton v. State, 744 A.2d 465, 475 (Del. 2000) (“Attorney error which falls short of
ineffective assistance of counsel does not constitute cause for relief from a procedural default.”)
(internal citation omitted).
24
Super. Ct. Crim. R. 61(i)(5); 61(d)(2). The procedural bars are also inapplicable to a claim that
the Court lacked jurisdiction or a claim that pleads with particularity that a new, retroactive rule
of constitutional law applies to the movant’s case and renders the conviction invalid. Id. It is clear
from the Motion and related filings that the only exception implicated in this case is the “actual
innocence” exception.
25
Purnell v. State, 254 A.3d 1053, 1095 (Del. 2021) (internal citation omitted).
7
conviction of First Degree Murder, the particular offense at issue in that case, and
thus proved that he was actually innocent of that crime.26 This Court rejected that
argument, finding that the defendant offered no evidence that shows he did not kill
the victim.27 The Taylor court relied upon a 10th Circuit case, Long v. Peterson,
where the federal court found that “actual innocence means factual innocence, not
legal innocence”, and that the defendant was not factually innocent, because he
“admits his actions caused his father’s death”, although he claimed “he only intended
to hurt his adoptive father, not kill him.”28 The Taylor court held that the proffered
evidence that purported to show the defendant’s lack of intent fails to meet Rule 61’s
actual innocence standard.29
12. In the instant case, the proffered newly discovered evidence likewise fails
to show that Defendant is factually innocent of the underlying crimes of which he
was convicted. Defendant does not contend that he did not rob or assault the victim
or cause his injuries; nor does he allege that someone else committed those crimes.
The alleged new evidence simply purports to show that Defendant conducted all
26
State v. Taylor, 2018 WL 3199537, at *7 (Del. Super. June 28, 2018).
27
Id. at *8.
28
Id. at *7 (discussing Long v. Peterson, 291 Fed. Appx. 209 (10th Cir. 2008)). The Taylor court
also quoted languages from a United States Supreme Court case that explained the meaning of
actual innocence. See Id. (quoting Sawyer v. Whitley, 505 U.S. 333, 340-41 (1992)) (“A
prototypical example of “actual innocence” in a colloquial sense is the case where the State has
convicted the wrong person of the crime.”).
29
Id. at *8. The Taylor decision was later affirmed by the Delaware Supreme Court upon appeal.
Taylor v. State, 206 A.3d 825 (TABLE), 2019 WL 990718 (Del. Feb. 27, 2019).
8
those acts out of self-defense. This concerns the legal sufficiency of Defendant’s
conviction at best and does not create an inference that Defendant was “actually
innocent in fact.” Accordingly, Defendant’s claim regarding the newly discovered
evidence fails to overcome Rule 61’s procedural bar.
B. Ineffective Assistance of Counsel
13. Defendant in his pro se Motion raised several claims based on ineffective
assistance of counsel.30 It is well-established under Delaware law that a claim of
ineffective assistance of counsel is not barred under Rule 61(i)(3) because it could
not have been raised in the proceedings leading to his conviction.31 The ineffective
assistance of counsel claims are first raised in this Motion and were not formerly
adjudicated. Therefore, these claims are not procedurally barred, and the Court will
consider them on the merits.
14. To prevail on an ineffective assistance of counsel claim, a defendant must
demonstrate that: (1) his defense counsel’s representation “fell below an objective
standard of reasonableness;” and (2) “there is a reasonable probability that, but for
counsel’s unprofessional errors, the result of the proceeding would have been
30
These claims were raised both in the original pro se Motion and the Amended Motion filed by
Defendant’s postconviction counsel. The Court will first address the one claim raised in the
Amended Motion and then address the pro se claims.
31
See, e.g., Desmond v. State, 654 A.2d 821, 829 (Del. 1994) (internal citations omitted).
9
different.”32 As to the first prong, there is a “strong presumption that counsel’s
conduct falls within the wide range of reasonable professional assistance.”33 And a
fair assessment of counsel’s performance should avoid the “distorting effects of
hindsight” and should “evaluate the [challenged] conduct from counsel’s perspective
at the time.”34 As to the second prong, a defendant must “make, and substantiate,
specific allegations of actual prejudice.”35
(1) Counsel’s Alleged Failure to Identify Witnesses
15. In the Amended Motion, Defendant contends that his trial counsel was
ineffective by failing to discover and identify the eyewitness who is willing to
provide testimony to support a self-defense claim.36 The Court disagrees. The Court
finds that the alleged failure to identify the newly discovered eyewitness does not
satisfy either prong of the ineffective assistance of counsel analysis.
16. First, Defendant fails to assert that reasonable legal assistance would
require the trial counsel to discover such a witness or to pursue a self-defense
32
Strickland v. Washington, 466 U.S. 668, 688, 694 (1984); see also Wright v. State, 671 A.2d
1353, 1356 (Del. 1996).
33
Strickland, at 689 (“Judicial scrutiny of counsel’s performance must be highly deferential.”).
34
Id.
35
Gattis v. State, 697 A.2d 1174, 1178-79 (Del. 1997) (internal citations omitted).
36
Specifically, Defendant’s Amended Motion states that “[t]he cumulative errors in this case
include the deficient performance by Defendant’s Trial Counsel in failing to discover and identify
the aforementioned witness to buttress Defendant’s claim of innocence.”
10
claim.37 Defendant also fails to explain why the trial counsel should have been able
to identify the witness or how a reasonable investigation would have revealed the
existence and/or identity of the witness. To the contrary, Defendant’s trial counsel,
in a sworn affidavit, states that he “utilized the investigator of the Public Defender’s
office to identify and secure potential sources of video from Downtown Visions’
cameras located at 3rd and Connell Streets, and 4th and Broom Streets” for the date
of the incident. Defendant also did not provide his trial counsel with the names of
any witnesses that could assist in his defense. Therefore, Defendant fails to
demonstrate that the trial counsel’s defense of the case fell below any objective
standard of reasonableness by failing to identify this single self-defense witness.
17. Moreover, even if the proffered witness was identified before and
presented the testimony regarding self-defense at trial, Defendant has failed to show
that there is a reasonable probability that the ultimate result would not have been the
same. There was ample evidence presented at trial that supports Defendant’s
conviction. On the day after the incident, the victim took a picture of Defendant,
who was dressed in the same clothes as the night before, and located in the same
area where the incident occurred. An eyewitness testified at trial that the man in the
picture taken by the victim was the victim’s assailant. The victim identified
37
There is no indication in the record that Defendant ever spoke with his trial counsel about self-
defense as a potential trial strategy.
11
Defendant in a photo line-up as well as in open court. Both the victim and the
eyewitness testified at trial how the incident occurred and unfolded, which testimony
was substantially consistent with each other. It is not probable that a reasonable jury
would disregard the above evidence and instead adopt the “self-defense” version of
the incident from Defendant’s newly proposed witness.
18. Furthermore, the limited information given regarding the proffered
testimony appears insufficient to support a valid self-defense claim. Defendant
simply states that the new witness will testify that Defendant “acted in self-defense”
and the victim “initiated an argument with [Defendant] and “threw the first punch.”38
There is no evidence offered to support a finding that the subsequent use of force,
including usage of a metal object (possibly brass knuckles), upon the victim’s face
and head was “immediately necessary” to protect Defendant “on the present
occasion.”39 That the victim “initiated an argument” and “threw the first punch,”
even if believed to be true, is certainly insufficient to justify Defendant’s subsequent
breaking into the victim’s car and concomitant robbery of Defendant. Therefore, it
is not reasonably probable that the self-defense theory would have prevailed and
changed the result of the trial.
38
It is noted that the Motion fails to provide an affidavit from the new witness that illustrates in
detail what the proffered testimony includes; nor does the Motion explain why one was not
provided.
39
See 11 Del. C. § 464(a).
12
(2) Counsel’s Failure to Object to Eyewitness Identification Jury Instruction
19. Defendant raised several pro se arguments regarding ineffective
assistance of counsel. One of the arguments is that his trial counsel failed to object
to the jury instruction regarding eyewitness identification given by the trial court and
failed to provide the court with an alternative jury instruction that purportedly lists
a number of factors the jury should consider in examining the accuracy of the
eyewitness identification.
20. As an initial matter, the propriety of the eyewitness identification jury
instruction given by the trial court in this case has already been argued before and
adjudicated by the Delaware Supreme Court upon direct appeal. To the extent that
Defendant casts it as an ineffective assistance of counsel claim, the Court finds it to
be without merit. Contrary to what Defendant claims here, Defendant’s trial counsel
did propose a more expansive eyewitness identification jury instruction based on
model instructions used in Massachusetts and New Jersey. The trial Court denied
defense counsel’s proposed jury instructions and proceeded with the standard
Delaware Superior Court instruction on eyewitness identification. There is also no
conceivable prejudice to Defendant, because the trial court’s decision to not give the
instruction proposed by Defendant was affirmed on appeal.
13
(3) Counsel’s Alleged Failure to Provide Defendant with the Evidence
Against Him Before Trial
21. In his pro se Motion, Defendant also claims that his trial counsel failed to
provide him pretrial discovery materials, rendering him unable to make an informed
decision about his case. Defendant’s trial counsel, in his sworn affidavit, states that
he reviewed the evidence Defendant would confront at trial with him both at the first
case review on April 23, 2018 and the final case review on July 23, 2018. The Court
finds it unnecessary to further inquire into whether and how Defendant’s trial
counsel discussed the evidence against Defendant with him, as Defendant fails to
make or substantiate any specific allegations of the prejudice suffered by him.40 In
particular, Defendant, now being aware of all the evidence that has been presented
against him at trial, fails to specify how his case would have come out differently if
he was informed of the incriminating evidence earlier (assuming his trial counsel did
not do so before trial). For that reason, Defendant’s ineffective assistance of counsel
claim must fail.41
40
See Strickland, 466 U.S. at 697 (“[A] court need not determine whether counsel’s performance
was deficient before examining the prejudice suffered by the defendant as a result of the alleged
deficiencies.”); Ploof v. State, 75 A.3d 811, 825 (Del. 2013) (“Strickland is a two-pronged test,
and there is no need to examine whether an attorney performed deficiently if the deficiency did
not prejudice the defendant.”).
41
In his pro se Motion, Defendant also states, without any supporting detail, that the State
suppressed a video depicting the suspect and victim during the robbery. However, Defendant
failed to raise this issue at trial or in his direct appeal and is now barred from pursuing it in his
14
IV. Conclusion
22. For the reasons stated above, the Court finds that the proffered newly
discovered evidence does not warrant relief in the postconviction proceeding
because the evidence does not create a strong inference that Defendant was factually
innocent of the underlying crime. The Court also finds no evidence that Defendant’s
counsel’s representation was substandard or that Defendant suffered any prejudice
therefrom, which are both required to establish a valid ineffective assistance of
counsel claim. Accordingly, Defendant’s Motion for Postconviction Relief is hereby
DENIED.
IT IS SO ORDERED.
Sheldon K. Rennie, Judge
Original to Prothonotary
Cc: Monil D. Amin, DAG
Raj Srivatsan, Esq.
Kevin J. O’Connell, Esq.
request for postconviction relief. Moreover, Defendant has not established, or even attempted to
articulate, cause for relief from the procedural default. Super. Ct. Crim. R. 61(i)(3) (“[a]ny ground
for relief that was not asserted in the proceedings leading to the judgment of conviction, as required
by the rules of this court, is thereafter barred, unless the movant shows (A) [c]ause for relief from
the procedural default and (B) [p]rejudice from violation of the movant’s rights).
15 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487986/ | [Cite as Standifer v. Ohio Dept. of Health, 2022-Ohio-4129.]
IN THE COURT OF CLAIMS OF OHIO
LAUREN (CID) STANDIFER Case No. 2022-00217PQ
Requester Special Master Jeff Clark
v. ORDER
OHIO DEPARTMENT OF HEALTH
Respondent
{¶1} On October 6, 2022, respondent Ohio Department of Health (ODH) filed a
“Request to Seal Document Titled ‘Copy of 2012[sic]-2016 Unintentional Drug
ODDisSell.’” This document had been filed by requester Laura Standifer as an attachment
to her reply pleading. The motion is DENIED for the reasons that follow.
Background
{¶2} On August 24, 2021, Lauren Standifer, a freelance data journalist, made a
public records request to ODH for a copy of “the death certificate master file from 2020,
including all data fields.” (Complaint at 4.) On September 23, 2021, ODH provided a
responsive file of “vital statistics data” (Id. at 7) but withheld a number of death data fields
on the assertion that they contain “protected health information” pursuant to
R.C. 3701.17. (Id. at 8.) Standifer asked ODH to explain how they could deny her request
now, when they had released the same data in the past:
[I]n 2017, the Ohio Department of Health provided the Cleveland Plain
Dealer with all the fields I have requested, including detailed information
about cause of death, for all individuals who died in Ohio of opioid
overdoses between 2010 and 2016 (available here). Can you explain why
the department did not consider these fields protected health information in
2017, but does now? Did the department violate health privacy laws in
2017?
(Id. at 6 – Standifer to Priddle email of 9-24-21.) In addition to the 2010-2016 file of
individuals who died of opioid overdoses, Standifer reminded ODH that it “has provided
the full, un-redacted [death certificate master] file in the past to myself and The Plain
Case No. 2022-00217PQ -2- ORDER
Dealer when I worked there.” (Id. at 2-3, 7.) ODH declined to explain the change to its
past practice of disclosing the full, unredacted file. (Id. at 8-9.)
{¶3} Standifer then filed a complaint with this court alleging denial of access to
public records in violation of R.C. 149.43(B) and attached a copy of the 2020 death data
printout she had received in response to her request, showing how few data fields had
been provided to her. ODH filed a response asserting, inter alia, that the withheld data
fields are protected health information ODH is forbidden to disclose under R.C. 3701.17.
(Response at 10-12.)
Motion to Seal
{¶4} On August 25, 2022, the Special Master issued an order directing Standifer
to file a reply including “a copy of the 2010 to 2016 opioid death data report referenced in
the Standifer to Priddle email of 9-24-21” to evidence for the court’s review the additional
death data fields ODH had provided in 2017. Standifer filed her reply with a copy of the
opioid death data report on October 6, 2022 and ODH filed its request to seal later the
same day. The request argued as follows:
The Ohio Department of Health maintains that the information contained in
the document is protected health information as that term is defined in R.C.
3701.17. Publication in this manner does not qualify as one of the
exceptions to R.C. 3701.17 and therefore, the document should not be
made publicly available under these circumstances. The confidentiality of
the information in the document is a contested issue in this case and the
document should be subjected to in camera inspection rather than made
public.
Out of an abundance of caution, the Special Master ordered the clerk to temporarily lock
the attachment, and directed ODH to file any additional support for its claim that
R.C. 3701.17:
1. prevents any private individual legally in possession of the document from
disclosing any or all of its content, and/or
2. prevents this court from accepting the document for open filing by a private
individual legally in possession of the document.
(Oct. 7, 2022 Order.)
Waiver
Case No. 2022-00217PQ -3- ORDER
{¶5} ODH’s release of the document to the Cleveland Plain Dealer in 20171
constituted the voluntary relinquishment of any public records exemption that might have
applied to the document and the data therein. State ex rel. Ohio Republican Party v.
Fitzgerald, 145 Ohio St.3d 92, 2015-Ohio-5056, 47 N.E.3d 124, ¶ 29 (“Release of
[security record] data to the press also precludes the assertion that the data are excepted
from disclosure pursuant to the public-records law.”); Shaffer v. Budish at ¶ 19. (previous
disclosure to the media of jail interior images waives claim to exemption as “infrastructure
records”). Although ODH’s previous waivers do not preclude the office from applying any
valid defense in the future, Bollinger v. River Valley Local Sch. Dist., Ct. of Cl. No. 2020-
00368PQ, 2020-Ohio-6637, ¶ 7, ODH is not entitled to “do-overs” of its previous years of
voluntary releases of death file data.2
{¶6} Following its waiver, ODH concedes that Standifer as a private individual may
freely publish, file in court, and otherwise disseminate her copy of the document because
R.C. 3701.17(B) does not direct her behavior. (Oct. 18, 2022 Resp. to Order at 2.) See
also Shaffer v. Budish, Ct. of Cl. No. 2017-00690PQ, 2018-Ohio-1539, ¶ 38-40. ODH
states only that it “would prefer that it not be published” because
its release is likely to harm the families and friends of the individuals listed
in the report. Public availability of sensitive protected health information may
carry far reaching consequences and is possibly psychologically or
emotionally detrimental to the decedents’ survivors and the decedents’
legacies.
(Oct. 18, 2022 Resp. to Order at 3.) ODH offers no evidence in support of this bare
assertion of potential harm, or even its plausibility in light of the ready public availability
of cause of death and other individual data from other sources.
{¶7} In response, Standifer asserts that attempting to seal the 2010-2016 death
data as filed in this case would be inappropriate and futile, both legally and practically:
By providing this data in response to a public records request, the
department demonstrated it did not consider this data protected health
information. Further, this data has already been used in media reporting,
namely “Ohio construction workers seven times more likely to die of an
1
Respondent’s Oct. 7, 2022 Response to Order, Exh. A - Priddle Aff., ¶ 5.c. and 5.c.iii.
2
Prior, at the earliest, to “the 2019 ODH/VS reassessing of the scope of R.C. 3701.17.” Respondent’s
Oct. 7, 2022 Response to Order, Exh. A - Priddle Aff., ¶ 5.c.iii.
Case No. 2022-00217PQ -4- ORDER
opioid overdose in 2016” published Nov. 5, 2017. Subsequent to The Plain
Dealer’s publication of this story, the data was shared with multiple scholars
and health experts whose work addresses the opioid crisis. This data was
also uploaded to the data-sharing website data.world where it could be
accessed by other staff at The Plain Dealer and partner news organizations.
I will continue to share this data with any other parties I believe are
committed to understanding and combating the overdose crisis, which
continues to claim Ohioans’ lives at an increasing rate. This information is
thus already in the public domain, and sealing it in this case would be a
meaningless gesture.
Further, it is nonsensical for the respondents to claim this information
should be sealed in its aggregate form when public records law explicitly
states that the public has the right to examine individual death records
containing all the information included in this filing. The Ohio Department of
Health has suggested the respondent [sic] request death data not from
ODH, which claims it has no responsibility to generate a report of the
requested death data, but from each individual county coroner’s office.
Fellow reporter Rachel Dissell has received complete information on
decedents with all the fields I am now requesting from Ohio Department of
Health as late as August 2022 from the Cuyahoga County Medical
Examiner’s Office for homicides that have taken place in the county. If data
of this type is freely available in fragments, there is no reason it should be
sealed in aggregate form.
In short, in addition to being legally a public record, as I argue overall
in this case, the data I have submitted is de facto public because it has
already been released and continues to be available through sources other
than the Ohio Department of Health.
(Oct. 24, 2022 Response to Order, passim.)3
Equities and Policy Do Not Favor Sealing
{¶8} In contradiction of the required interpretation of the Public Records Act in favor
of disclosure,4 ODH seeks to seal unequivocally public data filed on this court’s docket.
Not because the law compels it – ODH admits the document is unrestricted. Not because
3
This pleading was not accompanied by a completed proof of service, in the absence of which “[d]ocuments
filed with the court shall not be considered.” Civ.R. 5(B)(4). However, in the interest of justice the Special Master
reviewed the reply and referenced relevant portions. In an order of Oct. 24, 2022, Standifer was reminded of her
obligation to file proof of service. She has not responded as of the date of this order.
4
The Act is construed liberally in favor of broad access, with any doubt resolved in favor of disclosure of
public records. State ex rel. Hogan Lovells U.S., L.L.P. v. Dept. of Rehab. & Corr., 156 Ohio St.3d 56, 2018-Ohio-5133,
123 N.E.3d 928, ¶ 12.
Case No. 2022-00217PQ -5- ORDER
it did not mean to release the data – ODH freely released it in 2017. Not because it is not
otherwise available – ODH has and will release all protected health information data in its
death certificates to any person,5 and county coroners will release this data as well. See
R.C. 313.09 and R.C. 313.10(A)(1) and (B). Not to catch the 2010-2016 data before it is
publicized – that horse is five years out of the barn. Not to protect a constitutional right of
privacy – there is no general constitutional right of nondisclosure of personal information,
even for the living. Lambert v. Hartman, 517 F.3d 433, 442 (6th Cir.2008). Only ODH’s
recent re-interpretation of the language in R.C. 3701.17(B) enables it to withhold the
same data, and then only in the aggregate, as to how, why and when its individual citizens
are dying. Whatever purpose the General Assembly had in enacting R.C. 3701.17(B), it
did not include absolute secrecy of data in the death certificate master file. All of the data
in the master file is publicly available upon request for death certificates.
{¶9} As with Standifer’s current request to facilitate “analysis of the occupations
where the risk of death from the coronavirus has been highest” (Complaint at 2), the 2010-
2016 opioid death records were sought by the Cleveland Plain Dealer to analyze and
report on a matter of enormous public concern. Courts recognize that the news media
enable an informed public by gathering and reporting information about government
operations:
"(I)n a society in which each individual has but limited time and resources
with which to observe at first hand the operations of his government, he
relies necessarily upon the press to bring to him in convenient form the facts
of those operations. Great responsibility is accordingly placed upon the
news media to report fully and accurately the proceedings of government,
and official records and documents open to the public are the basic data of
governmental operations."
Kallstrom v. Columbus, 165 F.Supp.2d 686, 697 (S.D.Ohio 2001), quoting Cox Broad.
Corp. v. Cohn, 420 U.S. 469, 492, 95 S.Ct. 1029, 43 L.Ed.2d 328 (1975). "Thus, the
Supreme Court has concluded, 'an untrammeled press [is] a vital source of public
5
R.C. 3705.23. Ohio death certificates are submitted to ODH's Office of Vital Statistics (ODH/VS) on a
prescribed form. R.C. 3705.16(C), O.A.C. 3701-5-02(A)(2) Certificate of death (Appendix B). Local officials may not
omit any item requested on the form. O.A.C. 3701-5-02(B)(1) to (3). Requested items include “the disease, injuries,
or complications that caused the death.” O.A.C. 3701-5-02(A)(2) Certificate of death (Appendix B). The death
certificate data is maintained by ODH in the Electronic Death Registration System (EDRS). R.C. 3705.07(A).
Case No. 2022-00217PQ -6- ORDER
information', and an informed public the essence of working democracy." (Citations
omitted.) Id. at 698. "One of the salutary purposes of the Public Records Law is to ensure
accountability of government to those being governed." State ex rel. Strothers v.
Wertheim, 80 Ohio St.3d 155, 158, 684 N.E.2d 1239 (1997).
Rules of Superintendence for the Courts of Ohio (Sup.R.)
{¶10} Without itself requesting the court to restrict public access, ODH notes that
Sup.R. 45(E) would permit the court on its own volition to restrict public access to the
document. (Oct. 18, 2022 Response to Order at 3-4.) Like the Ohio Public Records Act,
Sup.R. 45 starts from the proposition that “Court records are presumed open to public
access.” Sup.R. 45(A). It then authorizes restriction of public access as follows:
(2) A court shall restrict public access to information in a case document or, if
necessary, the entire document, if it finds by clear and convincing evidence that
the presumption of allowing public access is outweighed by a higher interest after
considering each of the following:
(a) Whether public policy is served by restricting public access;
(b) Whether any state, federal, or common law exempts the document or
information from public access;
(c) Whether factors that support restriction of public access exist, including
risk of injury to persons, individual privacy rights and interests, proprietary
business information, public safety, and fairness of the adjudicatory
process.
(Sup.R. 45(E)(2). In support of these factors, ODH notes only that the document contains
information that “is protected health information when in the possession of ODH.”
(Emphasis added.) (Oct. 18, 2022 Response to Order at 4.) Axiomatically, the information
in the document is not protected health information when not in the possession of ODH.
{¶11} For public records, the Supreme Court has determined that personal privacy
concerns are addressed as matters of public policy by the legislature:
See, e.g., State ex rel. Toledo Blade Co. v. Univ. of Toledo Found. (1992),
65 Ohio St.3d 258, 266, 602 N.E.2d 1159 (“It is the role of the General
Assembly to balance the competing concerns of the public’s right to know
and individual citizens’ right to keep private certain information that
becomes part of the records of public offices. The General Assembly has
Case No. 2022-00217PQ -7- ORDER
done so, as shown by numerous statutory exceptions to R.C. 149.43(B),
found in both the statute itself and in other parts of the Revised Code”);
State ex rel. James v. Ohio State Univ. (1994), 70 Ohio St.3d 168, 172,
1994 Ohio 246, 637 N.E.2d 911 (“in enumerating very narrow, specific
exceptions to the public records statute, the General Assembly has already
weighed and balanced the competing public policy considerations between
the public’s right to know how its state agencies make decisions and the
potential harm, inconvenience or burden imposed on the agency by
disclosure”).
State ex rel. WBNS TV, Inc. v. Dues, 101 Ohio St.3d 406, 2004 Ohio 1497, 805 N.E.2d
1116, ¶ 36. Thus,
“Although there may be good policy reasons to exempt settlement [figures],
these policy considerations cannot override R.C. 149.43, because the
General Assembly is the ultimate arbiter of public policy.” Cf. State ex rel.
Cincinnati Enquirer, 98 Ohio St.3d 126, 2002 Ohio 7041, 781 N.E.2d 163,
P21. “Respondents cannot withhold public records simply because they
disagree with the policies behind the law permitting the release of these
records.” State ex rel. Consumer News Serv., Inc. v. Worthington City Bd.
of Edn., 97 Ohio St.3d 58, 2002 Ohio 5311, 776 N.E.2d 82, P54.
Id. at ¶ 37. The General Assembly has chosen to exempt protected health information
only when in the possession of ODH, and even there does not exempt the exact same
health information from release in publicly available death certificates. The General
Assembly has not chosen to exempt such data when in the possession of coroners or
private persons. Further, ODH asks the court to deny access to admittedly public records
in violation of case law prohibiting such an act: "Once clothed with the public records
cloak, the records cannot be defrocked of their status." (Citations omitted.) State ex rel.
Cincinnati Enquirer v. Hamilton Cty., 75 Ohio St.3d 374, 378, 662 N.E.2d 334 (1996); see
generally Dissell v. Cleveland, Ct. of Cl. No. 2017-00855PQ, 2018-Ohio-5444, ¶ 23-28.
{¶12} Considering the waiver of any public records exemptions by ODH, and the
five years that the document has been in the hands of multiple media organizations, and
the current availability of the same data from multiple alternative government sources, the
Special Master finds (a) that no public policy would be served, legally or practically, by
restricting public access to the document, (b) that by ODH’s own admission no state,
federal, or common law exempts the document from public access in either Standifer’s
hands or this court’s, and (c) that ODH has not provided evidence of any other factors
that support restriction of public access, including, under the facts and law discussed
Case No. 2022-00217PQ -8- ORDER
infra, any individual privacy rights and interests, constitutional or otherwise. The Special
Master concludes that ODH has failed to show by clear and convincing evidence that the
presumption of allowing public access is outweighed by any higher interest.
Conclusion
{¶13} In the absence of any dispute as to Standifer’s right to use and disclose the
vital statistics data she received from ODH, or any basis for this court to seal such data,
the request to seal is DENIED and the clerk is directed to unlock the Copy of 2012[sic]-
2016 Unintentional Drug ODDisSell attached to Standifer’s reply.
JEFF CLARK
Special Master
Filed October 31, 2022
Sent to S.C. Reporter 11/18/22 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487982/ | *
IN THE
*
COURT OF APPEALS
IN THE MATTER OF THE PETITION
*
FOR REINSTATEMENT OF JEFFREY
OF MARYLAND
LAWSON TO THE BAR OF
*
MARYLAND
Misc. Docket AG No. 100
*
September Term, 2020
*
ORDER
Upon consideration of Jeffrey Lawson’s Verified Petition for Reinstatement, and Bar
Counsel’s response to the petition, it is this 18th day of November 2022, by the Court of
Appeals of Maryland,
ORDERED that the Verified Petition for Reinstatement of Jeffrey Lawson is,
GRANTED, and it is further
ORDERED that upon taking, in open court, the oath prescribed by § 10-212 of the
Business Occupations and Professions Article, Jeffrey Lawson will be reinstated as a member
of the Bar of Maryland, and it is further
ORDERED that, following the taking of the oath, the Clerk of the Court shall replace
the name of Jeffrey Lawson upon the register of attorneys entitled to practice law in this Court
and certify that fact to the Trustees of the Client Protection Fund and the Clerks of all judicial
tribunals in this State.
Pursuant to the Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State
Government Article) this document is authentic.
2022-11-18 14:44-05:00
/s/ Matthew J. Fader
Chief Judge
Gregory Hilton, Clerk | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487961/ | RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 22a0246p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
┐
REBEKAH BUETENMILLER; SAMANTHA BILLS; STACEY
│
GLASS,
│
Plaintiffs-Appellants, │
│
v. > No. 22-1103
│
│
MACOMB COUNTY JAIL, et al., │
Defendants, │
│
│
WILLIAM HORAN; CORRECT CARE SOLUTIONS, LLC; │
WELLPATH, LLC; MACOMB COUNTY, MICHIGAN, │
Defendants-Appellees. │
┘
Appeal from the United States District Court for the Eastern District of Michigan at Detroit.
No. 2:20-cv-11031—David M. Lawson, District Judge.
Decided and Filed: November 18, 2022
Before: McKEAGUE, THAPAR, and READLER, Circuit Judges.
_________________
COUNSEL
ON BRIEF: Caitlin E. Malhiot, MARKO LAW, PLLC, Detroit, Michigan, for Appellants.
John A. Schapka, James M. Surowiec, MACOMB COUNTY CORPORATION, Mount
Clemens, Michigan, for Macomb County Appellees. Richard W. Warren, Erica L. Jilek,
MILLER, CANFIELD, PADDOCK AND STONE, P.L.C., Detroit, Michigan, for Appellee
Wellpath, LLC.
No. 22-1103 Buetenmiller, et al. v. Macomb Cnty. Jail, et al. Page 2
_________________
OPINION
_________________
CHAD A. READLER, Circuit Judge. Dr. Steven Cogswell sexually assaulted three
women at the Macomb County Jail while working as the jail’s medical care contractor.
Cogswell was fired and eventually convicted of second degree criminal sexual conduct. The
women filed federal and state civil claims against Cogswell, his employer, Macomb County, and
a corrections officer, alleging that defendants knew of Cogswell’s assaults before they were
reported. Due to the absence of evidence supporting this allegation, we affirm the district court’s
grant of summary judgment to defendants.
I.
Wellpath, a health care service company, contracted with the Macomb County Jail to
provide on-site medical staff and services. Wellpath assigned employee Dr. Steven Cogswell to
work at the jail. While there, he sexually assaulted three inmates—Samantha Bills, Rebekah
Buetenmiller, and Stacey Glass—during their visits to the medical clinic. (Appellants’ brief does
not spell Rebekah’s last name consistently. We use the district court action spelling. Fed. R.
App. P. 12(a).) Cogswell saw Bills four times in the medical unit, Buetenmiller and Glass once
each.
During their visits, Cogswell stretched a white privacy screen across the doorway before
assaulting the inmates. None of the women called out for help or otherwise indicated to the jail
staff that anything untoward was occurring. Bills, however, recounted one instance where she
purported to see an unidentified officer “glance through the little crack of the white curtain [and
give] kind of like a head nod,” which Bills interpreted as the officer saying to Cogswell “I got
your back.” Bills was left with the feeling that “a jail officer at least had ‘suspicion’ about what
was going on.”
Wellpath had a policy that “every patient that we treat [be] afforded privacy of care,” but
“if there was a sensitive exam going on, then there would be a chaperone.” At some point during
Cogswell’s tenure, Macomb County Officer William Horan, who was assigned to the medical
No. 22-1103 Buetenmiller, et al. v. Macomb Cnty. Jail, et al. Page 3
clinic, reported to Wellpath’s nursing director and a Wellpath paramedic that Cogswell was
potentially violating this policy by seeing patients unchaperoned while using the privacy screen.
So, at Horan’s request, the nursing director “pop[ped] [her] head in” to see Cogswell. When she
did, she saw “nothing out of the ordinary[ or] suspicious going on.”
Included in the record are three surveillance video recordings of the medical clinic
waiting area: two corresponding to when Bills was assaulted, and one to Buetenmiller. The
videos have no sound. One shows there was no officer on duty in the medical unit while
Cogswell sexually assaulted Bills, as Horan’s shift had ended. Another shows Horan standing
near his desk, walking around the waiting area, and conversing with a woman waiting in the
clinic. The third shows Buetenmiller leaving the medical clinic area, at which point Cogswell
leaned down and said something to Horan before the two exited the video frame.
Days after their assaults, Buetenmiller and Glass reported the incidents to the jail.
Wellpath learned of the reports the day they were made. The company immediately informed
Cogswell not to report to work. And following an investigation, his employment was
terminated. Cogswell would later be convicted of second degree criminal sexual conduct.
Based upon the events just described, Bills, Buetenmiller, and Glass sued Cogswell,
Horan, Macomb County, and Wellpath for violations of state and federal law. Relevant here are
three sets of claims asserted by the inmates. Two of those were brought under 42 U.S.C.
§ 1983—claims against Horan for violating the Eighth and Fourteenth Amendments, and claims
against the County and Wellpath alleging Monell municipal liability. The third are state law
claims against Wellpath.
A default judgment was entered against Cogswell. The remaining defendants moved for
summary judgment. The district court granted their motion, a ruling plaintiffs now challenge on
appeal.
II.
We review the district court’s grant of summary judgment de novo. Stein v. Gunkel, 43
F.4th 633, 639 (6th Cir. 2022) (citations omitted). Summary judgment is appropriate when no
No. 22-1103 Buetenmiller, et al. v. Macomb Cnty. Jail, et al. Page 4
reasonable jury could find for the nonmoving party based on the evidence. Id.; Fed. R. Civ. P.
56(a). We view the video evidence in the light it depicts and all other evidence in the light most
favorable to plaintiffs. Stein, 43 F.4th at 639; Scott v. Harris, 550 U.S. 372, 380–81 (2007).
Bills’s And Buetenmiller’s Eighth Amendment Claim Against Horan. Two inmates allege
that Horan failed to protect them despite knowing that Cogswell had previously assaulted the
inmates, in violation of the Eighth Amendment’s prohibition against cruel and unusual
punishment. To succeed on their claims, the inmates must show that (1) the deprivation alleged
is objectively, sufficiently serious and (2) while engaging in the conduct at issue, Horan had a
“sufficiently culpable state of mind,” one that was “deliberate[ly] indifferen[t]” to inmate safety.
Farmer v. Brennan, 511 U.S. 825, 834 (1994) (citation omitted). No party takes issue with the
first prong, so we turn to the second, deliberate indifference. Horan was deliberately indifferent
if he (1) was aware of facts from which the inference could be drawn that a substantial risk of
serious harm existed, (2) drew the inference, and (3) disregarded the excessive risk to inmate
safety by failing to act. Id. at 837. The inmates may demonstrate those elements in “the usual
ways, including inference from circumstantial evidence.” Id. at 842.
Reading inferences in their favor, the inmates nonetheless fail to satisfy their evidentiary
burden. Both acknowledge that they did not call out for help, nor did they complain directly to
Horan about their assaults, admissions that make a finding of deliberate indifference on Horan’s
part exceedingly unlikely. See Bishop v. Hackel, 636 F.3d 757, 770–71 (6th Cir. 2011) (holding
that plaintiffs failed to make out a triable issue of fact as to whether an officer exhibited
deliberate indifference in part because the officer who had worked in the jail health unit did not
“hear any complaints or conversations or arguments”). The best the inmates can do is point to
Bills’s speculation that Horan was aware of something “suspicious” going on. Even so,
knowledge of something “suspicious” is not akin to demonstrating awareness of a specific risk of
sexual assault. Cf. Jane Doe v. Jackson Loc. Sch. Dist. Bd. of Educ., 954 F.3d 925, 933–34 (6th
Cir. 2020) (“To be aware of facts from which the inference could be drawn that a substantial risk
of serious harm exists, a public official must know more than a general risk of harm. The
official must know of the specific risk that later develops.”) (cleaned up). All things considered,
No. 22-1103 Buetenmiller, et al. v. Macomb Cnty. Jail, et al. Page 5
the inmates lack evidence showing that Horan was “aware of facts from which the inference
could be drawn that a substantial risk of serious harm exist[ed].” See Farmer, 511 U.S. at 837.
Even if Horan was aware of Cogswell’s conduct, the inmates have not offered evidence
showing that Horan “disregard[ed]” any risks to their safety by “failing to act.” Id. at 836. The
record, in fact, reveals the opposite. Horan notified Cogswell’s superiors that a chaperone may
be needed during Cogswell’s examinations. He went so far as to ask the nursing director to “pop
[her] head in.” At that point, Horan was not required to do more. Any further invasion of
Cogswell’s examinations, keep in mind, risked interfering with the practice of medicine,
something Horan was not authorized to do. See Mitchell v. Hininger, 553 F. App’x 602, 608 (6th
Cir. 2014) (holding that a health service administrator was not deliberately indifferent to an
inmate’s request for medical care in part due to her “lack of responsibility for overseeing” his
medical care).
The inmates offer a variety of responses. First, they emphasize Horan’s acknowledgment
that he is responsible for the well-being and safety of inmates. But a broad recognition of one’s
job duties is not tantamount to conceding knowledge of specific facts amounting to a substantial
risk of serious harm to an inmate. Cf. Jane Doe, 954 F.3d at 934 (“The official must know of
the specific risk . . . .”).
Much the same is true for Horan’s reports to Wellpath. At most, those reports show
Horan’s knowledge that Cogswell was alone with patients. See id. Knowledge of potential
policy violations, however, is not enough to prove knowledge of a substantial risk of sexual
assault. See id.
The inmates next point to the videos capturing aspects of their visits to Cogswell. Those
also barely move the evidentiary needle. Start with Buetenmiller’s video. It shows Horan sitting
at his desk, listening to Cogswell, and leaving the room behind him, everyday activities of an
officer stationed at the medical clinic. Then consider Bills’s videos. The first shows that Horan
was not on duty during Bills’s assault, rendering it irrelevant as to a claim against Horan. And
the second, much like Buetenmiller’s, shows only mundane activities by Horan: standing near
his desk, walking around the room, and conversing with an awaiting patient.
No. 22-1103 Buetenmiller, et al. v. Macomb Cnty. Jail, et al. Page 6
Finally, Bills spotlights her testimony about the “head nod” she saw an officer give
Cogswell through the privacy screen. Of course, it is not clear that Bills is referencing Horan as
the nodding officer. And even if so, Bills’s interpretation of the event, without more, is
speculation at best. See K.V.G. Props., Inc. v. Westfield Ins. Co., 900 F.3d 818, 823 (6th Cir.
2018) (“[A] party may not avoid summary judgment by resorting to ‘speculation[ or] conjecture
. . . .’” (citation omitted)). All told, there is insufficient evidence to survive summary judgment
on the Eighth Amendment claims against Horan.
Glass’s Fourteenth Amendment, Failure To Protect Claim Against Horan. We turn next
to pretrial detainee Glass’s failure to protect claim against Horan. Because Glass was a pretrial
detainee at the time of the events in question, her claim is governed by the Fourteenth
Amendment, rather than the Eighth. See Greene v. Crawford County, 22 F.4th 593, 606 (6th Cir.
2022); see also Westmoreland v. Butler County, 35 F.4th 1051, 1051–52 (6th Cir. 2022) (Bush,
J., dissenting from denial of rehearing en banc) (noting the difficulties that arise in applying “a
standard that changes an official’s liability for the same action for two individuals with differing
trial statuses housed in the same facility”). By way of background, it bears noting that for many
years we applied Farmer’s two-prong test to failure to protect claims both by pretrial detainees
(under the Fourteenth Amendment) as well as convicted prisoners (under the Eighth
Amendment). More recently, we held that the reasoning in our Brawner decision (rather than
Farmer) now controlled with respect to affirmative duties to act concerning a pretrial detainee’s
well-being. Greene, 22 F.4th at 607. That development has significance in that Brawner
“modified” Farmer’s subjective prong to incorporate a reasonable officer standard in the context
of a claim for deliberate indifference to serious medical needs. Id. at 606 (citing Brawner v.
Scott County, 14 F.4th 585, 592 (6th Cir. 2021)).
This legal evolution also informs our analysis of Fourteenth Amendment failure to
protect claims. Today, we employ a four-prong test for resolving these claims. See
Westmoreland v. Butler County, 29 F.4th 721, 729 (6th Cir. 2022). Under that test, an officer
violates the Fourteenth Amendment when (1) he acts intentionally “with respect to the conditions
under which the plaintiff was confined,” (2) those conditions “put the plaintiff at substantial risk”
No. 22-1103 Buetenmiller, et al. v. Macomb Cnty. Jail, et al. Page 7
of harm, (3) he does not take reasonable steps to abate that risk, and (4) by failing to do so he
actually causes the plaintiff’s injuries. Id.
Glass’s claim fails from the start. Westmoreland offers an example of the first prong’s
application. The claims there, pursued by a detainee who was attacked by another detainee,
turned on the allegation that jail officials should have recognized the dangers posed to the first
detainee by the second. Id. We held that a reasonable juror could conclude that officials knew
about those dangers because the plaintiff’s mother informed jailers that “she thought her son was
in danger.” Id. Being advised of “concerns about [the plaintiff’s] well-being” and choosing to
do nothing in light of those concerns, we explained, amounted to an “intentional decision about
[the plaintiff’s] conditions of confinement, meeting the first element.” Id.
But the evidence in this case is less persuasive than that in Westmoreland. Glass,
remember, did not inform Horan that she “was in danger.” See id. And any concerns Horan may
have had about Cogswell’s potential policy violations were largely allayed when Wellpath’s
nursing director “pok[ed] [her] head in” and determined that “nothing suspicious” was going on
with Cogswell. Cf. id. (finding an intentional decision where the officer was advised that there
were concerns about the plaintiff’s safety and those concerns were not later refuted). All things
considered, Glass’s claim fails to satisfy Westmoreland’s first prong.
Monell Claims Against Macomb County And Wellpath. In the district court,
Buetenmiller, Bills, and Glass also brought Monell claims against Macomb County and
Wellpath, alleging that both failed to train and supervise Cogswell. See Monell v. Dep’t of Soc.
Servs. of New York, 436 U.S. 658 (1978). In their opening brief, however, any argument in that
respect is virtually absent. All that can be found is a conclusory assertion that Wellpath “fail[ed]
to supervise” Cogswell. Conspicuously absent is any citation to Monell. Those shortcomings
are fatal. It is insufficient “for a party to mention a possible argument in the most skeletal way,
leaving the court to . . . put flesh on its bones.” McPherson v. Kelsey, 125 F.3d 989, 995–96 (6th
Cir. 1997) (citation omitted). And in instances where “[i]ssues [are] adverted to in a perfunctory
manner, unaccompanied by some effort at developed argumentation,” we consider them
forfeited. Id. (citation omitted). That is the case here.
No. 22-1103 Buetenmiller, et al. v. Macomb Cnty. Jail, et al. Page 8
State Law Claims. The inmates assert two varieties of Michigan state law claims against
Wellpath. Begin with their sexual harassment claims under the Elliott-Larsen Civil Rights Act.
The Act prohibits denying “an individual the full and equal enjoyment of the goods, services,
facilities, privileges, advantages, or accommodations of a place of public accommodation or
public service because of . . . sex.” M.C.L.A. § 37.2302. The inmates are correct that, in this
statutory setting, discrimination because of sex includes “sexual harassment.” Id. § 37.2103(i).
To demonstrate as much, the inmates must show that Wellpath’s “agent made submission to the
proscribed conduct a term or condition of obtaining public services.” Hamed v. Wayne County,
803 N.W.2d 237, 244 (Mich. 2011). But if Wellpath is not “vicariously liable for the acts of its
agent under traditional principles of respondeat superior, the [inmates’] claim[s] under
[Michigan’s Civil Rights Act] fail[] as a matter of law.” Id.
The inmates’ tort claims against Wellpath also rest on the assertion that Wellpath is liable
for Cogswell’s acts under a respondeat superior theory. Part and parcel of a respondeat superior
claim, of course, is proof that the agent was acting within the scope of his employment. See id.
at 244–45. And that does not describe sexual assault, conduct “intended solely to further the
employee’s individual interests,” not the principal’s. Id. at 244; see also Zsigo v. Hurley Med.
Ctr., 475 Mich. 215, 231 (2006) (“[P]laintiff has failed to establish that defendant Hurley
Medical Center is vicariously liable for the sexual conduct of its nursing assistant who was
clearly not acting within the scope of his employment when he engaged in acts of sexual
misconduct with plaintiff.”).
In view of the roadblock Michigan law puts in place, the inmates ask us to apply
Vermont’s interpretation of scope of employment instead. But they did not make this same
request in district court, meaning the argument is forfeited. See Greco v. Livingston County, 774
F.3d 1061, 1064 (6th Cir. 2014). So too for the inmates’ argument that Wellpath had
“constructive notice” of the risk of harm to Cogswell’s patients. As that argument spans just one
sentence in the inmates’ brief, it is hard to classify it as anything but perfunctory, meaning it is
deemed forfeited in this Court. McPherson, 125 F.3d at 995–96.
No. 22-1103 Buetenmiller, et al. v. Macomb Cnty. Jail, et al. Page 9
* * * * *
Cogswell was held liable for his criminal conduct. But his victims have failed to offer a
viable case for civil liability against third parties arising out of that conduct. Accordingly, we
affirm the judgment of the district court. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487960/ | RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 22a0244p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
┐
STATE OF OHIO,
│
Plaintiff-Appellee, │
│
v. > No. 21-3787
│
│
JANET YELLEN, in her official capacity as Secretary of │
the U.S. Department of the Treasury; RICHARD K. │
DELMAR, in his official capacity as Acting Inspector │
General of the U.S. Department of the Treasury; │
UNITED STATES DEPARTMENT OF THE TREASURY, │
Defendants-Appellants. │
┘
Appeal from the United States District Court for the Southern District of Ohio at Cincinnati.
No. 1:21-cv-00181—Douglas Russell Cole, District Judge.
Argued: January 26, 2022
Decided and Filed: November 18, 2022
Before: GRIFFIN, DONALD, and BUSH, Circuit Judges.
_________________
COUNSEL
ARGUED: Daniel Winik, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Appellants. Benjamin M. Flowers, OFFICE OF THE OHIO ATTORNEY GENERAL,
Columbus, Ohio, for Appellee. ON BRIEF: Daniel Winik, Sarah E. Harrington, Alisa B. Klein,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellants. Benjamin
M. Flowers, Sylvia May Davis, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus,
Ohio, for Appellee. Joseph D. Henchman NATIONAL TAXPAYERS UNION FOUNDATION,
Washington, D.C., Paul D. Clement, KIRKLAND & ELLIS LLP, Washington, D.C., Gary P.
Gordon, Jason T. Hanselman, Kyle M. Asher, DYKEMA GOSSETT PLLC, Lansing, Michigan,
Robert Alt, THE BUCKEYE INSTITUTE, Columbus, Ohio, John J. Vecchione, NEW CIVIL
LIBERTIES ALLIANCE, Washington, D.C., Timothy Sandefur, Jacob Huebert, GOLDWATER
INSTITUTE, Phoenix, Arizona, Drew C. Ensign, OFFICE OF THE ARIZONA ATTORNEY
GENERAL, Phoenix, Arizona, for Amici Curiae.
No. 21-3787 Ohio v. Yellen, et al. Page 2
_________________
OPINION
_________________
JOHN K. BUSH, Circuit Judge. Seeking to mitigate the devastating economic effects of
COVID-19, Congress enacted the American Rescue Plan Act (“ARPA” or “the Act”) in March
2021. See 42 U.S.C. § 802 et seq. ARPA appropriated $195.3 billion in aid to the states and the
District of Columbia. But to get the money, states had to certify that they would comply with
several conditions. One was ARPA’s “Offset Provision,” which forbids a state from using the
funds “to either directly or indirectly offset a reduction in the net tax revenue” that “result[s]
from” a tax cut. § 802(c)(2)(A). Claiming that this condition amounts to a prohibition on tax
cuts during ARPA’s “covered period,” id., and that such a condition would violate the
Constitution in multiple respects, Ohio brought the present challenge. See, e.g., Mot. for Prelim.
Injunction at 1–2, 5, R. 3. And the district court found Ohio’s objections persuasive,
permanently enjoining enforcement of the Offset Provision on the ground that its terms are
“unconstitutionally ambiguous” under the Spending Clause. Ohio v. Yellen, 547 F. Supp. 3d
713, 740 (S.D. Ohio. 2021).
The Treasury Department appeals, arguing, among other things, that the district court
should never have reached the merits of this case, as Ohio failed to establish a justiciable
controversy. We agree with Treasury. Regardless of standing, the controversy is moot.
Treasury later promulgated a regulation (the “Rule”) disavowing Ohio’s interpretation of the
Offset Provision and explaining that it would not enforce the Provision as if it barred tax cuts per
se. See Coronavirus State and Local Fiscal Recovery Funds, 86 Fed. Reg. 26,786 (proposed May
17, 2021) (interim final rule); see also Coronavirus State and Local Fiscal Recovery Funds,
87 Fed. Reg. 4,338 (Jan. 27, 2022) (final rule); 31 C.F.R. § 35 et seq. We have no reason to
believe that Treasury will not abide by its disavowal of Ohio’s interpretation of the Offset
Provision as it administers the statute. So, we hold, Treasury’s credible disavowal of Ohio’s
broad view of the Offset Provision mooted the case. We thus reverse the district court’s
determination that the case is justiciable and vacate the permanent injunction.
No. 21-3787 Ohio v. Yellen, et al. Page 3
I.
Like its sister-states, Ohio stood poised to receive billions of dollars from the federal
government if it agreed, in accepting its ARPA funds, to abide by a number of attached
conditions. For instance, the Act provides that states must expend their funds in four particular
areas that Congress deemed relevant to recovery from the pandemic:
(A) to respond to the public health emergency with respect to the Coronavirus
Disease 2019 (COVID-19) or its negative economic impacts, including
assistance to households, small businesses, and nonprofits, or aid to impacted
industries such as tourism, travel, and hospitality;
(B) to respond to workers performing essential work during the COVID-19 public
health emergency by providing premium pay to eligible workers of the State,
territory, or Tribal government that are performing such essential work, or by
providing grants to eligible employers that have eligible workers who perform
essential work;
(C) for the provision of government services to the extent of the reduction in
revenue of such State, territory, or Tribal government due to the COVID-19
public health emergency relative to revenues collected in the most recent full
fiscal year of the State, territory, or Tribal government prior to the emergency;
or
(D) to make necessary investments in water, sewer, or broadband infrastructure.
42 U.S.C. § 802(c)(1)(A)–(D).
The Act also provides that states may not use their ARPA funds for two particular
applications. For instance, “[n]o State or territory may use funds made available under this
section for deposit into any pension fund.” § 802(c)(2)(B). Nor may the states use ARPA funds:
to either directly or indirectly offset a reduction in the net tax revenue of such
State or territory resulting from a change in law, regulation, or administrative
interpretation during the covered period that reduces any tax (by providing for a
reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the
imposition of any tax or tax increase.
§ 802(c)(2)(A). This is the so-called “Offset Provision”—which Ohio has labeled the “Tax
Mandate”—that lies at the center of the present suit.
Accompanying the Offset Provision are a couple of related enforcement mechanisms.
First is the statute’s reporting requirement, which instructs the states:
No. 21-3787 Ohio v. Yellen, et al. Page 4
To provide to the Secretary periodic reports providing a detailed accounting of—
(A) the uses of funds by such State, territory, or Tribal government,
including, in the case of a State or a territory, all modifications to the
State’s or territory’s tax revenue sources during the covered period;
and
(B) such other information as the Secretary may require for the
administration of this section.
§ 802(d)(2)(A)–(B). Second is the statute’s recoupment procedure. Should a state violate the
Act’s requirements, Treasury may initiate a recoupment action to seek reimbursement from a
state “equal to the amount of funds used in [the] violation.” § 802(e).
Six days after President Biden signed this text into law, Ohio filed its complaint outlining
its objections to the Offset Provision. First was its Spending Clause coercion argument. In
essence, Ohio said, by offering such a generous aid package during an economic crisis, the
federal government left Ohio with “no real choice” but to accept the funds. Complaint ¶40, R. 1.
And such coercion was especially egregious because of its intrusion upon Ohio’s “sovereign
authority to set tax policy as it sees fit.” Id. ¶41. Specifically, “because changes to tax policy
that reduce revenues violate the Tax Mandate,” Ohio alleged, the federal government had
essentially conditioned the aid on Ohio’s promise not to reduce taxes during ARPA’s “covered
period.” Id. Otherwise, “[s]uch violations could be used to force the State to return funding
received through the Act.” Id. Second, Ohio claimed that the Offset Provision also violates the
Spending Clause because “it is ambiguous regarding what precisely constitutes a change in tax
policy that ‘indirectly’ offsets a loss in revenue.” Id. ¶43. Yet “Spending Clause legislation
must articulate ‘unambiguously’ the conditions it imposes on the states.” Id. (citing South
Dakota v. Dole, 483 U.S. 203, 207 (1983)).1 And last, Ohio relatedly alleged that Congress had
violated the Tenth Amendment by “commandeer[ing] state taxing authority” with the Offset
Provision. Id. ¶48.
1
Ohio appears to have made these arguments in the alternative: that the Offset Provision either (1) forbids
tax cuts, making it an unconstitutional intrusion upon state taxing authority, or, alternatively, (2) at least could be
read to forbid tax cuts, but does not forbid such cuts sufficiently clearly to satisfy the Spending Clause.
No. 21-3787 Ohio v. Yellen, et al. Page 5
On the same day it filed its complaint, Ohio also moved for a preliminary injunction. See
Mot. for Prelim. Injunction, R. 3. It asked the district court to restrain the Treasury Department
from pursuing any recoupment action during the litigation—until the district court could rule on
Ohio’s ultimate request for permanent-injunctive relief. And its accompanying memorandum
further described the nature of Ohio’s constitutional challenges. As to ambiguity, Ohio pointed
out the basic principle that “[m]oney is fungible.” Id. at 1 (citing Holder v. Humanitarian Law
Project, 561 U.S. 1, 37 (2010)). Thus, it said, “any money that a State receives through the Act
will necessarily offset, either directly or indirectly, every tax reduction that the State might
pursue.” Id. So the Offset Provision, which contains a prohibition on “indirectly” offsetting a tax
cut with ARPA funds, could at least arguably be construed to bar states’ ability to pursue tax
cuts. See, e.g., id. at 5 (“[E]very change in tax policy that leads to a decrease in tax revenue
violates the Tax Mandate.”). But even assuming that Congress might otherwise be able to
impose such a condition with unambiguous text, Ohio argued alternatively, it couldn’t have done
so in these circumstances. For offering the state $5.5 billion in the midst of a crisis went beyond
mere “mild encouragement” to surrender control over state taxation policy. Id. Such a generous
offer was instead asserted to represent the very “coercion” and “dragooning” the Supreme Court
has held the Spending Clause to forbid. Id. at 10–11 (citing Nat’l Fed. of Indep. Bus. v. Sebelius,
567 U.S. 519, 582 (2012) (opinion of Roberts, C.J.)). Accordingly, Ohio asked the district court
to enjoin enforcement of—and only of—the Offset Provision. Id. at 18 (“Ohio seeks to enjoin
only the Tax Mandate[.]”). It thus left unchallenged ARPA’s corollary restrictions, such as the
four approved spending categories and the reporting requirement.
Treasury responded about a month later. It argued as an initial matter that Ohio’s
challenge was not justiciable under Article III. Ohio lacked standing, it said, because it had not
alleged that it planned to enact “any tax cut, let alone shown that any hypothetical tax cut
[would] decrease net tax revenue[,] or that the State plans to use Rescue Plan funds to offset that
theoretical reduction.” Opp’n to Mot. for Prelim. Injunction at 1, R. 29. Relatedly, it argued that
Ohio’s challenge was unripe. Id. at 1–2; see also id. at 8–12. Ohio’s asserted injury was a
potential recoupment action, yet Ohio had given the court no reason to think such enforcement
proceedings were imminent. And it opposed Ohio’s merits arguments across the board,
contending that the Offset Provision was neither coercive (it does not threaten to take away
No. 21-3787 Ohio v. Yellen, et al. Page 6
existing state funds) nor ambiguous (it clearly conditions states’ receipt of ARPA funds on a
promise not to use such funds to finance state tax cuts). See id. at 12–23.
Soon after that briefing, the district court held a hearing on the preliminary injunction,
and it issued its decision denying such relief in May 2021. It agreed with the Treasury
Department that Ohio’s imminent-recoupment theory could not suffice for Article III
jurisdiction, given that an enforcement action was then “too remote to satisfy the injury-in-fact
requirement.” Op. & Order at 17, R. 36. The district court reasoned that Ohio had not yet
accepted ARPA funds at that point, so it was difficult to see why any enforcement proceeding
might soon transpire. Id. For the same reason, it declined to issue a preliminary injunction on
the merits: Because it was doubtful that Treasury would pursue recoupment before the district
court could rule on Ohio’s request for permanent relief, the district court exercised its equitable
discretion to withhold preliminary relief. Id. at 32–35.
But the district court declined to dismiss Ohio’s entire case on justiciability grounds,
given its conclusion that Ohio was suffering a distinct, justiciable injury: the receipt of an
“unconstitutionally ambiguous” spending offer. Id. at 15, 17–18. The district court reasoned
that, under the Supreme Court’s Spending Clause jurisprudence, states have the right to receive a
spending offer that is unambiguous about whatever conditions it requires. See, e.g., id. at 9
(citing Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17 (1981)). Yet the Offset
Provision was far from clear. See, e.g., id. at 27. Its prohibition on “indirect” offsets, for
instance, at least arguably could be read in the way that Ohio asserted it could: to prohibit
essentially any tax cuts during ARPA’s covered period. Id. at 26–27. True, Treasury disputed
Ohio’s reading and attempted to offer its own narrowing construction. See, e.g., Opp’n to Mot.
for Prelim. Injunction at 2–3, 21–23, R. 29. But because the Offset Provision itself did not
clearly proscribe such cuts, the district court said, Ohio had suffered an “affront” to its
sovereignty. Op. at 17, R. 36. In essence, it was forced to “ponder accepting an ambiguous
deal.” Id. at 15. So the district court believed that injury, even if insufficient for a preliminary
injunction, sufficed to establish jurisdiction concerning the case overall. Id.
A day later, on May 13, 2021, Ohio accepted its ARPA funds. See Murnieks Dec. ¶3,
R. 38-1. It thus certified to the federal government that it would comply with the Offset
No. 21-3787 Ohio v. Yellen, et al. Page 7
Provision and the “regulations implementing [it].” Award Terms & Conditions, R. 38-1. Six
days later, however, it filed its combined motion for a declaratory judgment that the Offset
Provision is unconstitutional and a permanent injunction against the Offset Provision’s
enforcement.
Treasury’s response argued, once again, that Ohio’s challenge was both nonjusticiable
and failed on the merits. At the permanent-injunction stage, however, it offered slightly different
justiciability objections. First, Treasury pointed out that Ohio could no longer rely upon the
injury the district court had first found persuasive: that the state was being forced to decide
whether to accept the funds under the cloud of allegedly ambiguous conditions. Opp’n to Mot.
for Permanent Injunction at 7–8, R. 45. For Ohio now had accepted the funds, mooting any
concern about whether Ohio was suffering “a cognizable injury from uncertainty over the
proposed deal.” Id. at 8. Second, even if the Offset Provision itself were ambiguous, Treasury
had now promulgated an Interim Final Rule (“IFR”)—posted three days before Ohio had
accepted the funds and published in the Federal Register four days after—that clarified Ohio’s
particular obligations. Id. at 8–9. And, indeed, the IFR disavowed Ohio’s broad, money-is-
fungible reading of the Offset Provision. See 86 Fed. Reg. at 26,807. Treasury explained that it
did not read the Offset Provision to proscribe tax cuts per se, but only to bar tax cuts that
(1) result in revenue reductions, and (2) for which a state fails to identify a permissible source of
alternative offsetting funds, such as funds derived from a state tax increase on another activity,
from a state spending cut in an area where the state is not expending ARPA funds, or from
macroeconomic growth. Id. So Treasury claimed that the IFR had likewise mooted Ohio’s
“supposed ambiguity-as-injury” argument. Opp’n to Mot. for Permanent Injunction at 8, R. 45.
And last, Treasury again pressed its view that the Offset Provision was neither coercively
imposed nor a violation of the Tenth Amendment. Id. at 10–23.
The district court confronted these issues in its opinion and order on the permanent
injunction, issued on July 1, 2021. See Ohio, 547 F. Supp. 3d at 713. Of particular importance is
the district court’s rationale for why it believed Ohio’s challenge remained justiciable—even
after Ohio’s acceptance of the funds and after Treasury’s promulgation of the IFR. The district
court acknowledged that the initial reason for why it believed Ohio’s challenge justiciable—that
No. 21-3787 Ohio v. Yellen, et al. Page 8
Ohio was “contemplating whether to accept an ambiguous deal”—was “now gone.” Id. at 724–
25. Ohio had already accepted the funds, in other words, and so it was no longer “ponder[ing]”
whether to accept the deal under a cloud of uncertainty. Id. But with that injury moot, the
district court reasoned that the challenge remained justiciable because of a different injury Ohio
was now suffering: that, having accepted the funds, it faced an “unlawfully-imposed quandary in
determining how to exercise its sovereign taxing power.” Id. at 725.
This particular theory of injury was intertwined with the district court’s merits conclusion
about the Offset Provision—that it is “unconstitutionally ambiguous” under the Spending Clause.
Id. In essence, it said, because of the Offset Provision’s indeterminacies, Ohio still labors under
significant uncertainty about when Treasury might deem it to have “indirectly offset” a tax cut
with ARPA spending. Id. at 725–27. And so the Offset Provision continued to unlawfully
intrude upon Ohio’s sovereign taxing authority, since it “cast[s] a pall over legislators’ abilities
to contemplate such tax changes.” Id. at 725. Moreover, it concluded, the IFR could not cure
that “pall” by providing the guidance required to make the funding conditions sufficiently clear
to satisfy the Spending Clause. It grounded that conclusion on two bases. First, as it had already
explained in its preliminary-injunction opinion, the IFR was just that—an interim final rule—and
so its details could at least potentially change after the notice-and-comment period when
Treasury promulgated its Final Rule. Op. at 28, R. 36. And second, in any event, the district
court suggested that the Rule was simply ultra vires agency action. Ohio, 547 F. Supp. 3d at
734–39. For under the federalism canon and the major-questions doctrine, Congress had not
delegated to Treasury, with sufficient clarity, the authority to promulgate a rule attempting to
clarify the Offset Provision. Id. The district court thus concluded that the IFR’s promulgation
had not mooted Ohio’s case.
On the merits, the district court then explained its view that the Offset Provision
is “unconstitutionally ambiguous” under the Spending Clause. Id. at 740. Two major
indeterminacies in the text of the Provision drove that conclusion. First, its prohibition on
“indirect” offsets provides little guidance about when Treasury might deem Ohio to have used
ARPA funds for an impermissible purpose. Id. at 731–33. Money is fungible, after all, and so
the Offset Provision at least arguably could be read to proscribe Ohio’s desired tax cuts during
No. 21-3787 Ohio v. Yellen, et al. Page 9
ARPA’s “covered period.” Id. at 733. Moreover, the Offset Provision itself never explains the
fiscal-year baseline against which Treasury will measure a “reduction” in net tax revenue. Id. at
731–32. And, depending on whichever baseline Treasury selects, Ohio’s obligations could
change substantially. The district court thus permanently enjoined the Treasury Department
from enforcing the Offset Provision against Ohio. Id. at 741. Treasury timely appealed.
II.
The district court’s permanent-injunction order was a “final decision.” See, e.g., Trayling
v. St. Joseph Cnty. Emps. Chap. of Local #2995, 751 F.3d 425, 426 (6th Cir. 2014). As a result,
we have statutory jurisdiction to consider Treasury’s appeal under 28 U.S.C. § 1291.
We examine Article III jurisdiction below.
III.
A fundamental principle under Article III is that we may adjudicate only live cases or
controversies. See, e.g., Hollingsworth v. Perry, 570 U.S. 693, 700 (2013). Thus, the plaintiff
must show at the outset of the suit its standing to sue—that it has suffered an actual or imminent
and concrete and particularized injury in fact traceable to the defendant and likely to be redressed
by a favorable decision. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992). And the
plaintiff must continue to have a live interest in such a remedy throughout the proceeding.
Trump v. New York, 141 S. Ct. 530, 534 (2020). If that interest is lost—for instance, through the
advent of an “intervening circumstance” after the complaint is filed—then the plaintiff’s case
may become moot. Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 72 (2013). When that
intervening circumstance is the defendant’s voluntary abandonment of a contested behavior,
however, the case remains live unless the defendant establishes that there is no “reasonable
possibility” it will resume such behavior. Resurrection Sch. v. Hertel, 35 F.4th 524, 529 (6th
Cir. 2022) (en banc).
No. 21-3787 Ohio v. Yellen, et al. Page 10
Applying those principles, we conclude that, irrespective of whether Ohio established its
initial standing to sue, its challenge is now moot.2 As the district court itself acknowledged, the
injury that Ohio asserted in its complaint—that it was “ponder[ing]” whether to accept its ARPA
funds under a cloud of uncertainty about the Offset Provision’s meaning—“is now gone.” Ohio,
547 F. Supp. 3d at 724. Ohio accepted the funds nonetheless, and so it is no longer
contemplating whether to take them. That alleged injury is now well in the past. But there is, of
course, no jurisdiction for injunctive relief unless the plaintiff establishes why a past harm is
inflicting some injury at present or is likely to inflict some injury in the future. City of Los
Angeles v. Lyons, 461 U.S. 95, 105 (1983); see also Kanuszweski v. Mich. Dep’t of Health &
Hum. Servs., 927 F.3d 396, 406 (6th Cir. 2019). Thus, as the district court recognized, Ohio
cannot rest on its claim that it was injured by having had to “ponder” a deal with unclear
conditions. Ohio, 547 F. Supp. 3d at 724. It instead must illustrate some ongoing or imminent
future injury to keep the case alive.
The district court thought that showing satisfied, however, by what we will label the
“pall” theory—that, at present, the Offset Provision “casts a pall over [Ohio’s] abilities to
contemplate” desired tax changes because it must labor under “an unlawfully-imposed quandary
in determining how to exercise its sovereign taxing power.” Id. at 725. The district court
believed that this “pall” theory was distinct from the question whether any recoupment action is
imminent, and so Ohio’s challenge remained live even if there were no realistic, imminent
prospect of recoupment. Id. at 726–27 (claiming that Ohio “need not rely on the prospect of
future recoupment to avoid mootness”). So it deemed the case live on that basis and entered its
injunction accordingly.
2
Though we must dismiss a cause before reaching the merits upon the discovery of a jurisdictional defect,
“there is no mandatory ‘sequencing of jurisdictional issues.’” Sinochem Intern. Co. Ltd. v. Malaysia Intern.
Shipping Corp., 549 U.S. 422, 431 (2007) (quoting Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584 (1999)).
Rather, “a federal court has leeway ‘to choose among threshold grounds for denying audience to a case on the
merits.’” Id. (citing Ruhrgas, 526 U.S. at 585). Thus, we need not conclusively decide whether Ohio’s theories
sufficed to establish its standing when the complaint was first filed. We are barred from reaching the merits in any
event because of our determination that Ohio’s challenge is moot. See Steel Co. v. Citizens for a Better Env’t, 523
U.S. 83, 94 (1998).
No. 21-3787 Ohio v. Yellen, et al. Page 11
Yet we cannot agree that Ohio’s challenge remained live even absent any imminent
recoupment action. The very reason why there might be some “pall” over Ohio’s tax policy is
because pursuing a particular policy could entail a real-world consequence—a recoupment
action. It is not enough that a statute may impose some “subjective chill” in the abstract upon a
plaintiff’s desired course of conduct.3 See, e.g., Laird v. Tatum, 408 U.S. 1, 13–14 (1972)
(quotation marks omitted); see also Morrison v. Bd. of Educ. of Boyd Cnty., 521 F.3d 602, 610
(6th Cir. 2008). Rather, to mount a pre-enforcement challenge and obtain an injunction, the
plaintiff must show why there is some realistic, likely risk of an enforcement proceeding if it
were to engage in its desired behavior. See, e.g., Babbitt v. United Farm Workers Nat’l Union,
442 U.S. 289, 298 (1979). After all, equity does not enjoin laws themselves, but enjoins officials
from taking action based upon those laws. See Whole Woman’s Health v. Jackson, 141 S. Ct.
2494, 2495 (2021) (“[F]ederal courts enjoy the power to enjoin individuals tasked with enforcing
laws, not the laws themselves.” (citing California v. Texas, 141 S. Ct. 2104, 2115–16 (2021)).
And, moreover, justiciability must be established with the degree of evidence required at each
successive stage of the proceeding. Lujan, 504 U.S. at 561. To obtain a permanent injunction,
therefore, Ohio needed to submit concrete evidence about why Treasury might imminently
pursue a recoupment action in response to its behavior past, present, or future.
But in this regard, Ohio came up short. Its steadfast contention below was that Treasury
could read the Offset Provision in a broad way—as barring any tax cut during ARPA’s covered
period—and thus that it risked recoupment should it exercise its sovereign prerogative to cut
taxes. Yet Treasury repeatedly disavowed Ohio’s money-is-fungible reading of the statute. It
did so in its briefing below, in the Interim Final Rule,4 in its briefing before us, and in the Final
3
We also note that it is difficult to see how the “pall” theory aligns with Ohio’s real-world behavior. Even
before the district court imposed its injunction, Ohio enacted a sizeable tax cut. See Appellee’s Br. at 42. True, that
was after the district court deemed the Offset Provision likely unconstitutional in its opinion denying a preliminary
injunction. Id. at 48. But Ohio presented no evidence that its legislators considered any potential ramifications from
the Offset Provision before enacting that tax cut. See Appellants’ Br. at 10 (“Ohio identifies nothing in the record
suggesting that the Offset Provision played any role in state legislators’ enactment of that budget.”).
4
As we mentioned, the district court held that the Interim Final Rule did not suffice to moot the case
because it was merely interim and thus could be revised through the notice-and-comment process. Op. at 28, R. 36.
But even if we assume that particular ruling is correct, Ohio has conceded that the Final Rule is the same as the
Interim Final Rule in all respects material to this dispute. See Flowers Letter, ECF No. 49 (“Because the Final Rule
is materially identical to the interim final rule in all respects relevant to this case, its issuance does not affect the
No. 21-3787 Ohio v. Yellen, et al. Page 12
Rule as well.5 See, e.g., Opp’n to Mot. for Prelim. Injunction at 17–18, R. 29; 86 Fed. Reg. at
26,807; Appellants’ Br. at 5; 87 Fed. Reg. at 4,426. In the face of those facts, we conclude that
Treasury established there is no “reasonable possibility” it will adopt Ohio’s broad view of the
Offset Provision. Resurrection Sch., 35 F.4th at 525. As a result, Ohio needed to establish why
it would not only enact a tax cut, but also that such a cut would (1) result in a reduction in its net
tax revenue, and (2) that Ohio would then offset such a reduction with ARPA funds, or (3) fail to
identify a permissible source of offsetting funds from a state spending cut, state tax increases in
some other area, or macroeconomic growth. 86 Fed. Reg. at 26,807; 87 Fed. Reg. at 4,426.
Only then would Treasury seek recoupment. But we have no evidence that Ohio will pursue that
course of conduct. So we have no reason to believe that Treasury will initiate recoupment
against any policy that Ohio has shown, with evidence, it intends to pursue.
Resisting that conclusion, Ohio claims on appeal that it still suffers five distinct and
cognizable injuries from the Offset Provision, and so its challenge remains live. We find none of
those arguments persuasive, however, and we will address them one by one.
First, Ohio says, it was injured when it was denied its entitlement to an unambiguous and
non-coercive offer. Appellee’s Br. at 46–48. Yet we have already largely dealt with this
assertion above. Even assuming that the initial offer was ambiguous or coercive, those are
analysis of the questions presented.”). So even if there were a possibility Treasury could have modified its view of
the Offset Provision from the Interim Final Rule to the Final Rule in a way that could have saved Ohio’s claims, in
actual fact, it did not.
5
We have no need to opine here on whether agency regulations may validly clarify an otherwise-
ambiguous Spending Clause condition or whether, even if an agency could do so for ordinary spending legislation, it
could not have done so here under the major-questions doctrine or federalism canon. Contra Ohio, 547 F. Supp. 3d
at 734–39. The argument that the Rule is ultra vires under the major-questions doctrine or federalism canon might
have supported an attempt to seek vacatur of the Rule under 5 U.S.C. § 706, but Ohio has never asked for vacatur of
the Rule. So the still-standing Rule continues to bind Treasury in its administration of the statute. The justiciability
of Ohio’s pre-enforcement constitutional challenge thus hinges on whether it showed it would violate the Rule—
irrespective of whether the Rule is potentially unauthorized or does not represent the best reading of the statute—
since violation of the Rule is what would provoke recoupment. In other words, even if the underlying spending
legislation here is constitutionally infirm, the unchallenged Rule has prevented Ohio, based on the harms it asserted,
from having established a concrete controversy in which it could advance its merits objections to the Offset
Provision. We would also note that even if the Rule were vacated, Treasury has consistently represented that the
text of the Offset Provision alone refutes the money-is-fungible interpretation. See, e.g., Opp’n to Mot. for Prelim.
Injunction at 17–18, R. 29 (explaining Treasury’s position, before the advent of the IFR, that the text of the Offset
Provision alone did not support Ohio’s reading); see also Recording of Oral Arg. at 7:21–9:00 (disclaiming that the
validity of the Offset Provision hinges “in any way” on the Rule, calling the Rule “not relevant,” and arguing that
the statute is valid on its own).
No. 21-3787 Ohio v. Yellen, et al. Page 13
merely past injuries. That a past offer could have been clearer or fairer does not create
jurisdiction for injunctive relief. Rather, Ohio had to establish why that past injury had some
continuing negative effect redressable with a prospective remedy. See Lyons, 461 U.S. at 105;
see also Kanuszweski, 927 F.3d at 406. So this theory of injury is insufficient, by itself, to
establish jurisdiction.
Second, perhaps realizing this prospectivity issue, Ohio asserts that the Offset Provision
“arguably proscribes” its desired tax policies. Appellee’s Br. at 41–43, 49. Ohio makes that
argument by asserting, again, that “any revenue-negative reduction in tax rates could be read to
contravene the Mandate.” Id. at 42. But even assuming that’s true, Treasury subsequently
explained that it does not, in fact, read the Offset Provision as proscribing “any revenue-negative
reduction in tax rates.” Id. (emphasis added). Nor will it take enforcement actions based on tax
cuts per se. Rather, it has repeatedly explained its position that it will pursue recoupment under
the Offset Provision only should a state enact a revenue-reducing tax cut and then fail to identify
a permissible source of offsetting funds, such as those derived from other state tax increases,
state spending cuts, or macroeconomic growth. So even if the Offset Provision “could be read”
in a broader way, Treasury pointedly does not read it that way. Given that Treasury has
repeatedly and credibly disavowed Ohio’s broad reading of the Offset Provision, we fail to see
why there is a reasonable possibility of a recoupment action predicated on that broad reading.
See Missouri v. Yellen, 39 F.4th 1063, 1069 (8th Cir. 2022).
Third, Ohio asserts, with little elaboration, that the Offset Provision interferes with its
sovereign authority and the “orderly management” of its affairs. Appellee’s Br. at 43–44.
Again, however, we cannot see how this can be so, when, after Treasury’s disavowals, Ohio
never established any particular conduct it wishes to pursue but against which Treasury may
credibly take action. Nor, as we explain below, did Ohio put forth any concrete evidence about
how the Offset Provision interferes with the “orderly management” of its affairs, at least in a way
that might be redressed by enjoining enforcement solely of the Offset Provision.
Fourth, Ohio argues that it was injured when it was forced to choose between “receiving
federal benefits” or “surrendering some of its sovereign authority over tax policy.” Appellee’s
Br. at 45. But for the reasons we have already explained, a past choice without a demonstrated
No. 21-3787 Ohio v. Yellen, et al. Page 14
continuing negative effect does not establish jurisdiction for injunctive relief. See Lyons,
461 U.S. at 105; see also Kanuszweski, 927 F.3d at 406. Nor has Ohio established a continuing
and concrete harm, given that it has identified no policy it wishes to pursue but that Treasury
regards as proscribed. So there is no reason to suppose, based on what Ohio has shown it wishes
to do, that there is a reasonable possibility Treasury will hale it into a recoupment action that a
federal court of equity might enjoin.
Fifth and last, Ohio claims that the Offset Provision inflicts compliance costs upon it that
would be redressed by letting the injunction stand. Appellee’s Br. at 45–46. It says that these
costs arise in two discrete ways. First, “States that accept Rescue Plan funds are statutorily
bound to provide a ‘detailed accounting’ proving their compliance with, among other things, the
Mandate.” Id. at 46 (citing 42 U.S.C. § 802(d)(2)). And second, it asserts, Ohio has been
“forced to reallocate resources to ensuring compliance with the Mandate.” Id. Yet, separate
from our mootness analysis above, we find neither of these points sufficient to have even
established Ohio’s standing to seek an injunction of the Offset Provision.
Take the point about the reporting requirement first. Unlike the Offset Provision—which
represents a substantive prohibition on how states may use ARPA funds—the reporting
requirement simply instructs states to report “the uses of [such] funds” and “other information”
pertinent to “the administration of this section.” 42 U.S.C. § 802(d)(2)(A)–(B). So it is possible
for a state to be in compliance with the Offset Provision—using ARPA funds exclusively for
permissible purposes—yet in violation of the reporting requirement, should it fail to convey a
“detailed accounting” of those permissible uses to Treasury. Id. Or, conversely, a state could
violate the Offset Provision—directly or indirectly offsetting tax cuts with ARPA funds—and
remain in compliance with the reporting requirement, so long as it informed Treasury that it was
using ARPA funds for impermissible purposes. Compare 42 U.S.C. § 802(c)(2)(A), with
§ 802(d)(2)(A)–(B). So the Offset Provision and the reporting requirement are simply different
portions of the statute with different purposes and different effects on the states.
But those facts are fatal to Ohio’s compliance-costs argument. For even if enforcement
of the Offset Provision were enjoined, Ohio still would have to furnish a “detailed accounting” of
how it used its ARPA funds so that Treasury could ensure Ohio’s compliance with all the other
No. 21-3787 Ohio v. Yellen, et al. Page 15
unchallenged use restrictions. See, e.g., 42 U.S.C. § 802(c)(1)(A)–(D). Additionally, Ohio
never waged the uphill battle that the Offset Provision and reporting requirement are inseverable,
so that an injunction against the Offset Provision brings down the reporting requirement as well.
Cf. Seila Law, LLC v. CFPB, 140 S. Ct. 2183, 2209 (2020); Free Enter. Fund v. Pub. Co. Acc.
Oversight Bd., 561 U.S. 477, 508 (2010). To the contrary, Ohio was adamant that its challenge
is only to the Offset Provision; it makes no claim that the reporting requirement itself is void or
unenforceable. See, e.g., Mot. for Prelim. Injunction at 18, R. 3 (“Ohio seeks to enjoin only the
Tax Mandate[.]”). Thus, to establish a compliance-costs injury from the reporting requirement
redressable by enjoining enforcement of the separate Offset Provision, Ohio would have needed
evidence about why the reporting-costs burden would have been lowered from the injunction
even if the reporting requirement itself were left operable. Yet Ohio furnished no such evidence
to the district court. So we have no evidentiary basis to conclude that an injunction against the
Offset Provision is somehow redressing a compliance-costs injury traceable to the separate and
unchallenged reporting requirement.
That leaves us with Ohio’s vague claim about how it has been “forced to reallocate
resources to ensuring compliance with the Mandate.” Appellee’s Br. at 46. Ohio never made
this allegation in its complaint, see Recording of Oral Arg. at 12:20–12:40; cf. Lynch v. Leis,
382 F.3d 642, 647 (6th Cir. 2004) (“Standing is to be determined as of the time the complaint is
filed.” (cleaned up)), and it has provided no insight about the alleged resources it is referring to.
Moreover, Ohio had the burden to establish whatever such costs have ensued with evidence;
conclusory allegations about them in its briefing could not suffice. Yet Ohio put forth no
“specific facts” by “affidavit or other evidence” about what, if any, particular resources it has
reallocated to ensure compliance with the Offset Provision. Lujan, 504 U.S. at 561.6 As to the
resource-reallocation claim, therefore, we lack the requisite basis to conclude that Ohio
established a concrete and particularized injury in fact.
6
That the Supreme Court was speaking here in the context of the showing required to illustrate justiciability
at a summary-judgment proceeding only underscores the deficiency of Ohio’s showing. For “the proof required for
the plaintiff to obtain a [permanent] injunction is much more stringent than the proof required to survive a summary
judgment motion.” Leary v. Daeschner, 228 F.3d 729, 739 (6th Cir. 2000); see also McNeilly v. Land, 684 F.3d
611, 615 (6th Cir. 2012).
No. 21-3787 Ohio v. Yellen, et al. Page 16
IV.
As Treasury itself acknowledges, our decision today does not permanently deprive Ohio
of the opportunity to challenge any of ARPA’s funding conditions. Appellants’ Br. at 10–11;
Reply Br. at 7–8. Rather, should a future, justiciable dispute arise, Ohio may reassert its merits
arguments therein. Id. But Ohio did not establish that this challenge is justiciable. Accordingly,
we reverse the district court’s determination otherwise and vacate the permanent injunction. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487984/ | Lee Boyd Malvo v. State of Maryland
No. 29, September Term, 2021.
Criminal Procedure – Constitutional Law – Sentencing of Juvenile Offender –
Homicide. Recent Supreme Court decisions have held that the Eighth Amendment to the
United States Constitution does not permit a sentence of life without parole for a juvenile
offender convicted of homicide if the sentencing court determines that the offender’s crime
was the result of transient immaturity, as opposed to permanent incorrigibility. That
constitutional constraint applies retroactively. However, a court that imposes a sentence
in a discretionary sentencing regime need not make an explicit finding as to a juvenile
offender’s incorrigibility. In a case where sentencing took place prior to the recent
Supreme Court decisions and where the sentencing judge may have determined that the
defendant was not permanently incorrigible, the defendant is entitled to be resentenced to
ensure compliance with the Eighth Amendment. The terms of that sentence remain within
the discretion of the sentencing court.
Criminal Procedure – Sentencing of Juvenile Offender – Juvenile Restoration Act.
Under the Juvenile Restoration Act (“JUVRA”), a juvenile offender who was convicted as
an adult and who is serving a sentence that was imposed before October 1, 2021 may file
a motion for reduction of sentence after serving 20 years of the sentence. JUVRA likely
provides the “meaningful opportunity for release” required for most such offenders under
the Supreme Court’s recent decisions interpreting the Eighth Amendment. However, in
the specific case of a juvenile offender serving multiple consecutive sentences of life
without parole that were imposed prior to the Supreme Court decisions, and where the
sentencing court could not have determined whether, under those decisions, the offender
was one of the few offenders not entitled to a meaningful opportunity for release, JUVRA
is not a substitute for resentencing.
Circuit Court for Montgomery County
Case No. 102675C
Argued: February 8, 2022 IN THE COURT OF APPEALS
OF MARYLAND
No. 29
September Term, 2021
LEE BOYD MALVO
v.
STATE OF MARYLAND
*Getty, C.J.,
*McDonald
Watts
Hotten
Booth
Biran
Gould,
JJ.
Opinion by McDonald, J.
Watts, Hotten, and Gould, JJ., dissent.
Filed: August 26, 2022
*Getty, C.J., and McDonald, J., now Senior Judges,
participated in the hearing and conference of this
case while active members of this Court. After
being recalled pursuant to Maryland Constitution,
Article IV, §3A, they also participated in the
Pursuant to the Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State
decision and the adoption of this opinion.
Government Article) this document is authentic.
2022-11-18 14:13-05:00
Gregory Hilton, Clerk
To be legal, a sentence in a criminal case must be consistent both with the law
governing the offense for which the defendant was convicted and with the Eighth
Amendment’s proscription against “cruel and unusual” punishments. During the past two
decades, the United States Supreme Court has issued several decisions elaborating on the
application of the Eighth Amendment to juvenile offenders sentenced as adults. This case
concerns whether a juvenile offender who was sentenced prior to key decisions pertinent
to his situation should be resentenced to ensure that his sentence complies with the
Constitution and therefore is legal.
Over the course of three weeks in October 2002, Petitioner Lee Boyd Malvo, then
age 17, and John Allen Muhammad, then age 41, committed a series of murders in the
greater Washington, D.C. area, primarily by shooting a high-powered rifle while concealed
in the trunk of a modified automobile so as to terrorize the area of the country in which Mr.
Muhammad’s ex-wife lived. These crimes received considerable national media attention
and became known as the “DC sniper attacks.”
Mr. Malvo and Mr. Muhammad were charged with multiple counts of murder and
other crimes in Virginia and Maryland. In Virginia, Mr. Malvo was convicted on four
counts of first-degree murder. In Maryland, Mr. Malvo voluntarily testified against Mr.
Muhammad and, in 2006, pled guilty to six counts of first-degree murder in the Circuit
Court for Montgomery County. At his sentencing that year, the prosecutor stated that Mr.
Malvo, once under the sway of an “evil man,” had changed and “grown tremendously”
since his participation in the crimes. The sentencing court similarly acknowledged Mr.
2
Malvo’s cooperation with law enforcement, his remorse, and his transformation since he
was arrested. The court sentenced Mr. Malvo to the maximum sentence of six terms of life
in prison without the possibility of parole, to run consecutively to each other and to the
four sentences of life without parole that he was serving in Virginia.
Mr. Malvo’s sentence was consistent with the pertinent State statute and with the
advisory State sentencing guidelines at that time. Since then, however, the Supreme Court
has held that the Eighth Amendment does not permit a sentence of life without parole for
a juvenile homicide offender if a sentencing court determines that the offender’s crime was
the result of transient immaturity, as opposed to permanent incorrigibility.1 The Supreme
Court has further held that this constraint applies retroactively and, thus, it applies to Mr.
Malvo’s case.
In 2017, Mr. Malvo filed a motion to correct an illegal sentence, based in part on
the ground that the sentencing court did not have the benefit of the subsequent, but
retroactive, Supreme Court decisions at the time he was sentenced. The Circuit Court for
Montgomery County denied the motion.
This case presents the question whether ambiguity in a sentencing court’s remarks
about a juvenile offender’s post-offense conduct and character, when made before the
Supreme Court issued the decisions that govern the sentencing of a juvenile offender to life
without the possibility of parole, rendered such a sentence illegal under the Eighth
1
Miller v. Alabama, 567 U.S. 460 (2012); Montgomery v. Louisiana, 577 U.S. 190
(2016) (holding that the incorrigibility standard is retroactive); Jones v. Mississippi, 141 S.
Ct. 1307 (2021) (reaffirming Miller and Montgomery while holding that a sentencing court
need not make a specific finding of incorrigibility).
2
Amendment. Based on the record of this case, opposing inferences can be drawn as to
whether the sentencing judge determined that Mr. Malvo was not “the rare juvenile
offender whose crime reflects irreparable corruption” for whom the Eighth Amendment
allows a sentence of life without parole. If the sentencing judge reached that conclusion,
the sentence failed to comport with the Constitution. In light of this ambiguity, Mr. Malvo
must be resentenced.
As a practical matter, this may be an academic question in Mr. Malvo’s case, as he
would first have to be granted parole in Virginia before his consecutive life sentences in
Maryland even begin. Ultimately, it is not for this Court to decide the appropriate sentence
for Mr. Malvo or whether he should ever be released from his Maryland sentences. We
hold only that the Eighth Amendment requires that he receive a new sentencing hearing at
which the sentencing court, now cognizant of the principles elucidated by the Supreme
Court, is able to consider whether or not he is constitutionally eligible for life without
parole under those decisions.
I
Background
A. Limits on the Punishment of Juvenile Offenders
1. Limits under the Eighth Amendment to the United States Constitution
The Eighth Amendment to the United States Constitution forbids the imposition of
“cruel and unusual” punishments. The Supreme Court has explained that giving effect to
the provision’s guarantee requires “referring to the evolving standards of decency that mark
the progress of a maturing society to determine which punishments are so disproportionate
3
as to be cruel and unusual.” Roper v. Simmons, 543 U.S. 551, 561 (2005) (citation and
internal quotation marks omitted). “This is because the standard of extreme cruelty is not
merely descriptive, but necessarily embodies a moral judgment. The standard itself
remains the same, but its applicability must change as the basic mores of society change.”
Graham v. Florida, 560 U.S. 48, 58 (2010) (citation and internal quotation marks omitted).
In recent years, the Supreme Court has issued a series of decisions applying this
Eighth Amendment standard in the context of juvenile offenders sentenced to severe
punishments in the criminal justice system. As recounted in Part I.B.4 of this opinion, Mr.
Malvo’s sentencing occurred in late 2006 near the beginning of this series of decisions and
preceded a number of decisions significant to the resolution of this case.
Supreme Court Precedent as of 2006
In 2005, Roper was the first in the Supreme Court’s series of decisions concerning
the application of the Eighth Amendment to the sentencing of juvenile offenders. There,
the Court held that the Eighth Amendment forbids the execution of an offender who
committed the crime when younger than 18 years old. 543 U.S. at 568. The Court noted
that a majority of states had already banned the punishment and emphasized that “three
general differences between juveniles under 18 and adults demonstrate that juvenile
offenders cannot with reliability be classified among the worst offenders.” Id. at 569.
Specifically, those differences are (1) juveniles’ lack of maturity and an underdeveloped
sense of responsibility resulting in “impetuous and ill-considered actions and decisions”;
(2) juveniles’ greater vulnerability or susceptibility to negative influences and outside
pressures; and (3) the more mutable nature of juveniles’ character and personality traits.
4
Id. at 569-70. In light of these differences, the Court determined that the two distinct social
purposes served by the death penalty – retribution and deterrence – apply to juveniles with
lesser force than to adults. Id. at 570. In rejecting the argument that juveniles’ reduced
culpability can be adequately considered on a case-by-case basis, the Court identified an
“unacceptable likelihood … that the brutality or cold-blooded nature of any particular
crime would overpower mitigating arguments based on youth … even where the juvenile
offender’s objective immaturity, vulnerability, and lack of true depravity should require a
sentence less severe than death.” Id. at 572-73.
Supreme Court Precedent after 2006
Roper dealt exclusively with the death penalty. Five years later, in 2010 – four years
after Mr. Malvo’s sentencing – the Supreme Court first declared that the Eighth
Amendment also imposes constraints on the imposition of a life without parole sentence
on a juvenile offender. In Graham v. Florida, 560 U.S. 48, 59, 74 (2010), the Court held
that the Constitution forbids sentencing a juvenile non-homicide offender to life without
parole, announcing for the first time a categorical restriction under the Eighth Amendment
on a punishment other than the death penalty. The Court noted that “life without parole
sentences share some characteristics with death sentences” in that they “alter[] the
offender’s life by a forfeiture that is irrevocable.” Id. at 69. Such sentences are particularly
harsh when imposed on a juvenile offender, who will “on average serve more years and a
greater percentage of his life in prison than an adult offender.” Id. at 70.
In addition to identifying a national and international consensus against sentencing
juvenile non-homicide offenders to die in prison, the Graham Court returned to the
5
discussion of juvenile culpability that it began in Roper. 560 U.S. at 62, 80. In a review
of the four legitimate penological objectives – retribution, deterrence, incapacitation, and
rehabilitation – the Court found that none justified a life without parole sentence for a
juvenile not convicted of murder. Id. at 71. Such offenders must instead have a
“meaningful opportunity to obtain release based on demonstrated maturity and
rehabilitation.” Id. at 75.
Two years later, in the first of a trilogy of decisions that are particularly relevant to
this case, the Court held that “the Eighth Amendment forbids a sentencing scheme that
mandates life in prison without possibility of parole for juvenile offenders.” Miller v.
Alabama, 567 U.S. 460, 479 (2012). The Court reiterated the three general differences
between juveniles and adults first articulated in Roper – immaturity, susceptibility to
negative influences, and mutability – and extended the reach of its reasoning in Graham:
“[N]one of what [Graham] said about children – about their distinctive (and transitory)
mental traits and environmental vulnerabilities – is crime specific. … So Graham’s
reasoning implicates any life-without-parole sentence imposed on a juvenile, even as its
categorical bar relates only to nonhomicide offenses. Most fundamentally, Graham insists
that youth matters in determining the appropriateness of a lifetime of incarceration without
the possibility of parole.” Id. at 473. Thus, mandatory sentencing schemes that “remov[e]
youth from the balance” contravene the “foundational principle” of Graham and Roper:
“that imposition of a State’s most severe penalties on juvenile offenders cannot proceed as
though they were not children.” Id. at 474.
6
The Court went on to articulate some of the mitigating circumstances that
mandatory sentences fail to account for:
Mandatory life without parole for a juvenile precludes consideration of
his chronological age and its hallmark features – among them,
immaturity, impetuosity, and failure to appreciate risks and
consequences. It prevents taking into account the family and home
environment that surrounds him – and from which he cannot usually
extricate himself – no matter how brutal or dysfunctional. It neglects
the circumstances of the homicide offense, including the extent of his
participation in the conduct and the way familial and peer pressures
may have affected him. Indeed, it ignores that he might have been
charged and convicted of a lesser offense if not for incompetencies
associated with youth – for example, his inability to deal with police
officers or prosecutors (including on a plea agreement) or his incapacity
to assist his own attorneys.
567 U.S. at 477-78. In the Court’s view, occasions for sentencing juveniles to life without
parole “will be uncommon” due to the difficulty inherent in distinguishing between
juvenile offenders whose crimes reflect transient immaturity and those whose crimes
reflect irreparable corruption. Id. at 478-80. Before a sentencing court could make that
judgment, the Court required that it “take into account how children are different, and how
those differences counsel against irrevocably sentencing them to a lifetime in prison.” Id.
at 480.
In 2016, 10 years after Mr. Malvo’s sentencing, the Supreme Court clarified that
Miller announced a substantive rule of constitutional law with retroactive effect.
Montgomery v. Louisiana, 577 U.S. 190 (2016). In Montgomery, the Court rejected the
argument that Miller merely announced a new rule of procedure that applied prospectively.
Instead, it held that the procedural component of Miller – “a hearing where youth and its
attendant characteristics are considered as sentencing factors” – is the means of
7
implementing its substantive guarantee – “that life without parole is an excessive sentence
for children whose crimes reflect transient immaturity.” Id. at 209-10 (internal quotation
marks omitted). The Court explained that even though “Miller did not impose a formal
factfinding requirement,” it “does not leave States free to sentence a child whose crime
reflects transient immaturity to life without parole. To the contrary, Miller established that
this punishment is disproportionate under the Eighth Amendment.” Id. at 211.
In 2021, after Mr. Malvo had filed a motion to correct an illegal sentence, the
Supreme Court returned yet again to the topic of juvenile life-without-parole sentencing,
this time to clarify the procedural component of Miller. In Jones v. Mississippi, 141 S. Ct.
1307, 1313 (2021), the Court held that “[i]n a case involving an individual who was under
18 when he or she committed a homicide, a State’s discretionary sentencing system is both
constitutionally necessary and constitutionally sufficient.” The petitioner in Jones had
been given a mandatory life-without-parole sentence for a homicide he committed as a
juvenile. After Miller was decided, he received a new sentencing hearing, at which his
counsel argued that he was not the rare, irreparably corrupt juvenile offender. The
sentencing judge acknowledged the Supreme Court’s holding in Miller and his own
sentencing discretion, but imposed the same life-without-parole sentence. Id.
On appeal, Jones argued that a sentencing court must make either an explicit or
implicit finding of permanent incorrigibility before it can constitutionally sentence a
juvenile homicide offender to life without parole. The Supreme Court disagreed,
explaining that “if the sentencer has discretion to consider the defendant’s youth, the
sentencer necessarily will consider the defendant’s youth, especially if defense counsel
8
advances an argument based on the defendant’s youth.” Id. at 1319 (emphasis in original).
In the context of that case, the Court essentially concluded that the fact of the sentencing
court’s authority to exercise discretion as to whether to make parole available when
sentencing a juvenile to life imprisonment, paired with the imposition of a life-without-
parole sentence, is itself an implicit finding of incorrigibility.
The Court did not have occasion to address a situation in which a sentencing court
finds that a crime was the result of the offender’s transient immaturity but nonetheless
sentences the offender to life without parole. Although the Court’s opinion in Jones
focused almost exclusively on Miller’s procedural component, it explicitly did “not disturb
Montgomery’s holding that Miller applies retroactively on collateral review[,]” 141 S. Ct.
at 1317 n.4, a holding that was based on the Montgomery Court’s conclusion that Miller
announced a new substantive rule. In a footnote, the Jones Court quoted Montgomery’s
“key paragraph,” which included the passage indicating that a court is not “free to sentence
a child whose crime reflects transient immaturity to life without parole.” Id. at 1315 n.2,
quoting Montgomery, 577 U.S. at 211. Because Miller’s substantive holding, as articulated
in Montgomery, remains good law, it follows that an offender deemed corrigible cannot
constitutionally be sentenced to life without the possibility of parole.
2. Maryland Juvenile Restoration Act
The General Assembly enacted the Juvenile Restoration Act (“JUVRA”) in 2021.
Chapter 61, Laws of Maryland 2021. JUVRA made three significant changes to
Maryland’s sentencing practices for juvenile offenders convicted as adults. Specifically,
it gave sentencing courts discretion to impose sentences less than the minimum required
9
by law, prospectively banned sentences of life without the possibility of parole, and
authorized offenders sentenced before October 1, 2021 who have spent more than 20 years
in prison to file a motion to reduce their remaining sentence. Maryland Code, Criminal
Procedure Article (“CP”), §§6-235, 8-110. Only the final provision is relevant here.
An eligible offender who files a motion to reduce the offender’s remaining sentence
is entitled to a hearing at which the offender must be present, either in person or by video.
CP §8-110(b). Notice of the hearing must be given to the victim or the victim’s
representative. Id. Both the offender and the State may introduce evidence in support of
or in opposition to the motion. Id. Following the hearing, the court may reduce the duration
of the offender’s sentence if it concludes that (1) the individual is not a danger to the public;
and (2) the interests of justice will be better served by a reduced sentence. CP §8-110(c).
The statute outlines 10 factors – as well as “any other factor the court deems relevant” –
that a court is to consider and address in a written decision, including: the individual’s age
at the time of the offense; the nature of the offense and the history and characteristics of
the individual; any statement offered by or on behalf of a victim of the offense; the extent
of the individual’s role in the offense and whether and to what extent an adult was involved
in the offense; the diminished culpability of a juvenile as compared to an adult; and whether
the individual has demonstrated maturity, rehabilitation, and fitness to reenter society. CP
§8-110(d). If the offender’s motion is denied or granted in part, the offender may file
another motion after three years. A third and final motion can be filed after an additional
three-year waiting period. CP §8-110(f). Relief sought under JUVRA is distinct from and
10
does not affect other terms of the sentence, such as the offender’s opportunity to seek
parole.
B. Facts and Proceedings
1. The Homicides
Mr. Malvo was born in Kingston, Jamaica, in 1985. In 2000, at the age of 15, he
met Mr. Muhammad, a Gulf War veteran and United States citizen, in Antigua. At the
time, Mr. Muhammad was engaged in a custody dispute concerning his own children. In
May 2001, Mr. Muhammad brought Mr. Malvo to the United States. In February 2002,
Mr. Muhammad and Mr. Malvo set out to find Mr. Muhammad’s children. They also
embarked on a series of shootings that would leave at least 12 people dead. They shot
people at random, usually with a high-powered rifle while concealed in the trunk of Mr.
Muhammad’s modified Chevy Caprice. Apparently, the purpose was to terrorize the area
of the country in which Mr. Muhammad’s ex-wife lived.2
In July 2002, Mr. Muhammad learned that his children were living in Clinton,
Maryland. On September 5, 2002, Mr. Malvo shot and robbed a man in Clinton. Ten days
later, Mr. Malvo shot another man in Clinton. Neither victim died.3 Mr. Malvo and Mr.
Muhammad then traveled to Montgomery, Alabama, where, on September 21, 2002, Mr.
2
Muhammad v. Commonwealth, 619 S.E.2d 16, 37 (Va. 2005). Many of the facts
concerning the offenses and prosecutions of Mr. Muhammad and Mr. Malvo are also
described in Muhammad v. State, 177 Md. App. 188 (2007), cert. denied, 401 Md. 614
(2008); Muhammad v. Kelly, 575 F.3d 359 (4th Cir. 2009); and Malvo v. Mathena, 893
F.3d 265 (4th Cir. 2018).
3
Mathena, 893 F.3d at 267.
11
Muhammad shot two women as they closed up a liquor store. One of the women died.
Police officers responding to the scene reportedly saw Mr. Malvo going through the
victims’ purses and gave chase, but he was able to evade capture. However, he left behind
evidence that would eventually tie him and Mr. Muhammad to the crimes, including the
pistol used in the two Clinton shootings.4 On September 23, 2002, the manager of a beauty
salon was shot and killed in a Baton Rouge parking lot. Police later determined that the
fatal bullet was fired from the same Bushmaster rifle later found in Mr. Muhammad’s car
when he and Mr. Malvo were ultimately apprehended in Maryland. Witnesses reportedly
saw Mr. Malvo fleeing the scene.5
The pair then returned to the Washington, D.C. area, where they shot 13 people
between October 2 and October 22, 2002. Ten were killed. All were struck by a single
bullet fired from a distance. On October 24, 2002, Mr. Muhammad and Mr. Malvo were
apprehended while sleeping in their vehicle at a rest stop in Frederick County. 6 Initially,
following his apprehension, Mr. Malvo referred to Mr. Muhammad as “his father” and told
authorities that he had pulled the trigger in 10 of the shootings. In his testimony four years
later at Mr. Muhammad’s trial in Maryland, he said that he had generally functioned as the
“spotter” and that Mr. Muhammad was usually the shooter in the attacks.7
4
Kelly, 575 F.3d at 362.
5
Mathena, 893 F.3d at 267-68.
6
Mathena, 893 F.3d at 268.
7
Appendix A, pp. 10-11.
12
On October 25, 2002, a Statement of Charges was filed against Mr. Malvo in the
District Court in Montgomery County. It consisted of six charges of first-degree murder.
That charging document was superseded on June 16, 2005, when he and Mr. Muhammad
were indicted by a grand jury in the Circuit Court for Montgomery County on the same six
counts.
2. Trial and Guilty Pleas
Mr. Malvo and Mr. Muhammad had also been charged with homicide and related
offenses in Virginia, and those charges were tried first. Trial on the Virginia charges
against Mr. Malvo took place in November and December of 2003. Mr. Malvo’s attorneys
presented an insanity defense on the theory that he had been controlled by Mr.
Muhammad.8 Calling more than 40 witnesses, defense counsel painted a portrait of Mr.
Malvo’s upbringing and relationship with Mr. Muhammad. However, the jury rejected the
insanity defense and Mr. Malvo was convicted of the two murder charges and a firearms
charge. In the sentencing phase of the case before the jury in March 2004, the prosecution
8
Mr. Muhammad was tried separately in Virginia on essentially the same charges.
He was convicted and sentenced to the death penalty. The convictions and sentence were
affirmed on appeal. Muhammad v. Commonwealth, supra. He was executed in November
2009. Ian Urbina, Sniper Who Killed 10 is Executed in Virginia, NEW YORK TIMES (Nov.
10, 2009), available at https://perma.cc/G86B-NRWX.
13
sought the death penalty,9 but the jury recommended, and the court imposed, two terms of
life in prison without parole.10
In October 2004, Mr. Malvo entered an Alford plea,11 pursuant to a plea agreement,
to additional murder and firearms counts in a different county in Virginia. As part of the
plea agreement, he was sentenced to two additional terms of life without parole plus eight
years.12
Prior to the resolution of his own charges in Maryland, Mr. Malvo offered to testify
against Mr. Muhammad at the latter’s trial in the Circuit Court for Montgomery County.13
At that trial, which took place in May 2006, Mr. Malvo testified voluntarily, without a plea
deal, on behalf of the State. He testified for nearly two full days and gave a detailed account
of his travels with Mr. Muhammad and their crime spree.14 In affirming Mr. Muhammad’s
conviction, the Court of Special Appeals noted that much of what Mr. Malvo testified to
9
The sentencing preceded the 2005 Roper decision that held that the death penalty
may not be constitutionally imposed on juvenile offenders.
10
Mathena, 893 F.3d at 268-69.
11
An Alford plea is the “functional equivalent” of a guilty plea without an actual
admission of guilt. Bishop v. State, 417 Md. 1, 20 (2010); see also North Carolina v.
Alford, 400 U.S. 25 (1970).
12
Mathena, 893 F.3d at 269-70.
13
Mr. Muhammad had been extradited to Maryland while awaiting execution in
Virginia. At the trial in Maryland, Mr. Muhammad was convicted on all six counts and
sentenced to life without parole on each of the six counts, to be served consecutively to
each other and to the sentences imposed in Virginia. Muhammad, 177 Md. App. at 199.
14
Muhammad, 177 Md. App. at 217-22.
14
was otherwise unknown to the police. Muhammad v. State, 177 Md. App. at 221. It further
noted that the only inconsistency in his testimony with prior statements to law enforcement
was that he had previously claimed to be the triggerman in all of the shootings, in
accordance with Mr. Muhammad’s direction that Mr. Malvo claim responsibility, while at
trial he admitted to pulling the trigger in two of the shootings. Id. at 221-22.
Several months later, on October 10, 2006, Mr. Malvo pled guilty to all six charges
of first-degree murder pending against him in the Circuit Court for Montgomery County.
The prosecutor informed the court that the guilty pleas were not induced by any
concessions by the State – in other words, there was no plea deal. Mr. Malvo agreed with
the State’s statement of facts concerning the six murders, as set forth in Appendix A to this
opinion. Sentencing was scheduled for a month later.
3. Investigation of Mr. Malvo’s Background
In preparation for Mr. Malvo’s sentencing, his defense counsel sought to provide
the court with information concerning Mr. Malvo’s background, his bond with Mr.
Muhammad, his break with Mr. Muhammad, and the developments that led him to testify
against Mr. Muhammad and to plead guilty to all charges in Maryland without a deal with
the State. Counsel commissioned a detailed report from a licensed clinical social worker
and submitted that report to the sentencing court, together with a report by a forensic
15
psychiatrist that had been completed three years earlier in connection with the Virginia
case.15 Both are contained in Appendix B to this opinion.
According to the report of the forensic psychiatrist, Mr. Malvo’s parents separated
when he was five years old, after which he rarely saw his father. His mother was later
diagnosed with bipolar disorder. Beginning when he was nine years old, his mother left
him in the care of others for extended periods of time while she pursued work elsewhere
in the Caribbean. Mr. Malvo suffered physical and emotional abuse during this period and
began displaying symptoms of clinical depression.
In the fall of 2000, Mr. Malvo met Mr. Muhammad in Antigua. Mr. Muhammad
had absconded to the island with his children in the midst of a custody dispute. Mr.
Malvo’s mother purchased fraudulent citizenship documents from Mr. Muhammad and
moved to the United States in December 2000. Mr. Malvo then moved in with Mr.
Muhammad, who quickly gained significant influence over Mr. Malvo. During this time,
the 15-year-old Malvo adopted Mr. Muhammad’s religion and accent, began referring to
himself as “John Lee Muhammad,” and underwent rigorous physical and ideological
training by Mr. Muhammad. In May 2001, Mr. Muhammad took Mr. Malvo to Florida,
where Mr. Malvo was reunited with his mother.
15
According to the report, the forensic psychiatrist personally interviewed Mr.
Malvo on 20 occasions, conducted 11 phone interviews with key figures in Mr. Malvo’s
life, reviewed tapes or transcripts of more than 50 additional interviews conducted by
defense investigators and mitigation specialists, and reviewed other records and discovery
relevant to the case.
16
Mr. Malvo believed that his best chance of becoming a United States citizen was to
be adopted by Mr. Muhammad. In October 2001, he left Florida to join Mr. Muhammad,
who had since lost custody of his own children, in Washington State. There, his
relationship with Mr. Muhammad deepened. In December 2001, Mr. Malvo and his mother
– who had travelled to Washington State to attempt to pry her son away from Mr.
Muhammad – were arrested and detained by the federal immigration authorities. After his
release from confinement in January 2002, Mr. Malvo rejoined Mr. Muhammad, who
dramatically escalated his isolation and indoctrination efforts, including combat training
and constant exposure to anti-government thinking.
The forensic psychiatrist concluded that, as a result of Mr. Muhammad’s coercive
persuasion, Mr. Malvo developed a dissociative disorder: “He was programmed by
Muhammad to become adept at inducing trance-like states, lost his sense of identity and
became totally dependent on and obedient to his all-knowing father.” The forensic
psychiatrist concluded that, at the time he committed his crimes, Mr. Malvo was “severely
impaired in his ability to distinguish right from wrong and was severely impaired in his
ability to resist the impulse to commit the act.”
According to the report, as Mr. Malvo awaited trial in Virginia, his defense counsel
attempted to detach him from Mr. Muhammad, to whom he initially expressed complete
devotion. They put Mr. Malvo in touch with his biological father for the first time in years,
as well as an influential teacher and guardian from Mr. Malvo’s youth. According to the
report, Mr. Malvo improved enough to cooperate with his defense team in his initial trial,
but in 2004 he would sometimes revert back into his Muhammad identity.
17
By March 2006, Mr. Malvo decided that he should testify against Mr. Muhammad.
Before he had discussed that decision with his defense counsel, he wrote to the prosecution,
stating that “I need to do this for myself and for the victims.” As noted above, two months
later, he voluntarily testified as a key witness at Mr. Muhammad’s trial and later pled guilty
to all of the charges against him without a plea deal.
4. Sentencing
Mr. Malvo was sentenced in the Circuit Court on November 8, 2006. At the time
of the sentencing, Maryland law required the sentencing court to impose a sentence of life
imprisonment for each murder conviction. Maryland Code, Criminal Law Article (“CR”),
§2-201(b) (2006).16 However, the judge had discretion to, among other things, suspend all
or part of a sentence, allow or prohibit eligibility for parole, and make a sentence concurrent
with or consecutive to other sentences.
The presentence report that had been prepared by the Division of Parole and
Probation stated that, under the Maryland sentencing guidelines, Mr. Malvo should receive
six consecutive terms of life in prison without the possibility of parole, in light of the fact
that his offenses resulted in the deaths of six persons. Relatives of two of the murder
victims spoke at the sentencing proceeding. One understandably asked the court to ensure
that Mr. Malvo would never re-enter society. The second forgave him for killing her son,
16
At that time, the Maryland statute authorizing imposition of the death penalty for
first-degree murder had set a minimum age of 18 for that punishment since 1987 – two
decades before the Supreme Court’s Roper decision. See CR §2-202(b)(2)(i) (2006);
Chapter 636, Laws of Maryland 1987. The statutory provision authorizing the death
penalty for adults has since been repealed as well. Chapter 156, Laws of Maryland 2013.
18
told Mr. Malvo it would have changed his life if he had known her son, and urged him to
make amends with God. Both speakers expressed appreciation to the court system and
others.
The State acknowledged that Mr. Malvo “has changed,” and had expressed genuine
remorse and “grown tremendously,” but it also recommended that he receive “the absolute
maximum allowable under the law” – six consecutive sentences of life without parole.
Referring to Mr. Malvo’s testimony against Mr. Muhammad, the prosecutor said “[t]hese
acts of contrition … advanced the healing process and the closure process for the victims’
families and the entire community….” In the prosecutor’s words, Mr. Malvo was a “tragic
figure,” “under the sway of a truly evil man who infused a 17-year-old with the ideology
of hate, an ideology, it appears that Mr. Malvo has now escaped from.”
Mr. Malvo’s defense counsel requested that the Circuit Court impose life sentences
concurrent to one another and concurrent to his existing life sentences in Virginia. His
attorneys did not request parole-eligible sentences. After his counsel gave brief remarks,
Mr. Malvo expressed his remorse.
The Circuit Court first acknowledged Mr. Malvo’s cooperation with law
enforcement in the case against Mr. Muhammad and said that Mr. Malvo “should be
commended for [his] acceptance of guilt and voluntary assistance without any promise of
leniency.” The court further stated:
It appears you’ve changed since you were first taken into
custody in 2002. As a child, you had no one to establish values or
foundations for you. After you met John Allen Muhammad and
became influenced by him, your chances for a successful life became
worse than they already were.
19
You could have been somebody different. You could have been
better. What you are, however, is a convicted murderer. You will think
about that every day for the rest of your life. You knowingly, willingly,
and voluntarily participated in the cowardly murders of innocent,
defenseless human beings.
You’ve shown remorse and you’ve asked for forgiveness.
Forgiveness is between you and your God, and personally, between you
and your victims, and the families of your victims. This community,
represented by its people and the laws, does not forgive you.
You’ve been held accountable for the crimes you’ve committed
here. You will receive the maximum sentence allowed by the law of
this State.
The Circuit Court then imposed six sentences of life without parole, consecutive to each
other and to Mr. Malvo’s life sentences in Virginia.
5. Motion to Correct an Illegal Sentence
More than a decade later, in January 2017, Mr. Malvo filed a motion to correct an
illegal sentence under Maryland Rule 4-345(a) in the Circuit Court. The motion was based
on the intervening Supreme Court decisions in Miller and Montgomery. Mr. Malvo’s
counsel asserted that, under those decisions, a juvenile homicide offender could be
sentenced to life in prison without the possibility of parole only if the sentencing judge first
determined that the offender was irredeemable. Because that determination had not been
made at Mr. Malvo’s sentencing, he argued, a new sentencing hearing was required.
The Circuit Court heard argument on the issue and, in August 2017, issued a
memorandum opinion denying the request for a new sentencing hearing.17 The Circuit
17
The judge who had presided at Mr. Malvo’s guilty plea and sentencing retired in
2006 shortly after sentencing Mr. Malvo. A different judge conducted the motion hearing
and issued the memorandum opinion in 2017.
20
Court stated that the substantive rule on sentencing made retroactive by Montgomery
applied only to mandatory life-without-parole sentences and, given that the sentencing
judge in Mr. Malvo’s case had discretion under Maryland law to sentence him to life with
the possibility of parole, Mr. Malvo’s sentence was not illegal within the meaning of
Maryland Rule 4-345(a). Noting that the ruling was likely to be appealed, the court went
on to consider whether Mr. Malvo’s sentencing complied with the requirements of Miller.
The court stated that the sentencing judge was presumed to be aware of the Supreme Court
decision in Roper – the first of the Supreme Court’s decisions distinguishing the juvenile
and adult sentencing for purposes of the Eighth Amendment and the only one that preceded
Mr. Malvo’s sentencing. The court also noted that the sentencing judge was presented with
mitigating evidence related to Mr. Malvo’s youth at the time of sentencing, acknowledged
some of it, and presumably took it into account in imposing the sentence. The court
concluded that the sentence did not violate the principle set forth in Miller.
Mr. Malvo appealed the Circuit Court’s ruling. The Court of Special Appeals stayed
the appeal pending this Court’s decision of several cases that later resulted in the decision
in Carter v. State, 461 Md. 295 (2018). While that stay was still in effect, Mr. Malvo filed
a pre-judgment petition for a writ of certiorari in this Court in January 2018. We held that
petition pending the Supreme Court’s decision in Jones. Following the Supreme Court’s
decision in that case and supplemental filings related to Mr. Malvo’s petition, we granted
a writ of certiorari in August 2021.
21
II
Discussion
A. Standard of Review
Under Maryland Rule 4-345(a), a court may correct an illegal sentence at any time.
The legality of a sentence is a question of law that an appellate court reviews de novo.
Bailey v. State, 464 Md. 685, 696 (2019). A sentence that constitutes cruel and unusual
punishment under the Eighth Amendment or the Maryland Declaration of Rights is an
illegal sentence for purposes of Maryland Rule 4-345(a). Harris v. State, 479 Md. 84, 113
(2022); see also Randall Book Corp. v. State, 316 Md. 315, 322 (1989).
B. Whether the Sentencing Complied with the Eighth Amendment
As outlined above, Miller and Montgomery established that the Eighth Amendment
requires a hearing where “youth and its attendant characteristics” are considered as
sentencing factors so that life without parole is not imposed in cases where a juvenile
offender’s crime resulted from transient immaturity. In Jones, where the sentencing
occurred after Miller and Montgomery, the Court clarified that a discretionary sentencing
system is “both constitutionally necessary and constitutionally sufficient” to satisfy the
procedural component established by Miller and Montgomery. No explicit finding of the
offender’s incorrigibility is a prerequisite to a sentence of life without parole; instead, a
defense presentation of argument about the offender’s youth and the exercise of the court’s
discretion to impose a no-parole sentence can serve as an implicit finding of incorrigibility.
While sentencing Mr. Malvo against a constitutional background that lacked all of
Graham, Miller, Montgomery, and Jones, the judge appeared to recognize that his crimes
22
– heinous as they were – were committed by a vulnerable and impressionable youth deeply
under the sway of an adult he viewed as a father figure. Also, the judge stated that Mr.
Malvo had changed in the four years since he had committed those crimes. At the same
time, the judge told Mr. Malvo that “[w]hat you are, however, is a convicted murderer.”
These statements lead to two equally reasonable, though conflicting, inferences as to the
sentencing judge’s view on whether Mr. Malvo was “the rare juvenile offender whose
crime reflects irreparable corruption” and who thus was constitutionally eligible under the
subsequent Supreme Court cases for a sentence of life without parole. Miller, 567 U.S. at
479-80. A third, and perhaps more likely, inference is that the sentencing judge, who in
2006 had no reason to predict the Supreme Court’s development of that standard, did not
consider it.
The State argues that resentencing of Mr. Malvo is foreclosed by the Supreme
Court’s most recent decision in Jones and the fact that Maryland has a discretionary
sentencing system. Mr. Malvo’s sentencing is distinct from that in Jones. It is certainly
true that Maryland had a discretionary sentencing regime when Mr. Malvo was sentenced
in 2006 and, as usual, we presume that a sentencing judge knows the applicable law – that
is, the range of the judge’s discretion under the extant law. However, the sentencing in
Jones took place after Miller had been issued and was in fact a resentencing following a
remand from an appellate court as a result of Miller. The sentencing court in Jones
acknowledged that it had discretion to impose a different sentence in light of Miller and
explicitly exercised its discretion not to do so. See Jones, 141 S. Ct. at 1311, 1313.
23
In contrast, Mr. Malvo was sentenced before the decisions in Miller and
Montgomery were issued and the sentencing court was therefore unaware of the Eighth
Amendment constraints that those decisions would announce. We presume that a
sentencing judge knows and applies the law, but we do not presume that a sentencing judge
is clairvoyant.18 Indeed, in Jones, the Supreme Court acknowledged that most offenders
18
The dissenting opinion of Judge Watts equates Mr. Malvo’s sentencing
proceeding to that in Harris v. State, 479 Md. 84 (2022). As Judge Watts acknowledges,
in that case, a juvenile offender was sentenced to life with parole and, accordingly, the
substantive requirement of Miller did not apply. However, the Court in Harris noted in
dicta that the sentencing proceeding complied with Miller’s procedural requirement, as
construed in Jones. 479 Md. at 118-20. Like the resentencing at issue in Jones, the
sentencing in Harris occurred after the Supreme Court had announced the substantive
incorrigibility standard in Miller and Montgomery. We can presume, as we usually do, that
the sentencing court applied that existing law. As explained in the text, that is not this case,
where the sentencing occurred before those decisions.
The dissenting opinion of Judge Hotten likewise merges the procedural and
substantive elements of Miller and therefore does not recognize that Jones “[did] not
disturb” the substantive requirement of Miller that, as recognized in Montgomery, made it
retroactive to cases such as this one. Jones, 141 S. Ct. at 1317 n.4. Contrary to the
suggestion in Judge Hotten’s dissent, there is no dispute that Jones held that a “separate
factual finding” is not required to satisfy the procedural component of Miller. Dissent of
Judge Hotten at 7-8 n.2. But that does not mean that a sentencing that is completely
ignorant of the substantive standard set by Miller – i.e., one that preceded its announcement
– necessarily complies with the Eighth Amendment. Indeed, if the mere existence of a
discretionary sentencing regime that could take a defendant’s youth into account alone is
sufficient to satisfy Miller, there would have been no reason for the Supreme Court to
vacate life-without-parole sentences imposed prior to Miller and Montgomery under
discretionary sentencing regimes and remand those cases for resentencing in light of those
cases. But that is what the Court did. See, e.g., Tatum v. Arizona, 137 S. Ct. 11 (2016);
Purcell v. Arizona, 137 S. Ct. 369 (2016); Najar v. Arizona, 137 S. Ct. 369 (2016); Arias
v. Arizona, 137 S. Ct. 370 (2016); DeShaw v. Arizona, 137 S. Ct. 370 (mem.) (2016);
Blackwell v. California, 568 U.S. 1081 (2013); Mauricio v. California, 568 U.S. 975
(2012); Guillen v. California, 567 U.S. 950 (2012). As noted in the text, in referring to
juvenile offenders like Mr. Malvo, for whom Miller and Montgomery applied retroactively,
24
to whom Miller and Montgomery applied retroactively had already been resentenced.
Jones, 141 S. Ct. at 1317 n.4. (“By now, most offenders who could seek collateral review
as a result of Montgomery have done so and, if eligible, have received new discretionary
sentences under Miller.”).
The State argues that the sentencing judge in Mr. Malvo’s case would be presumed
to be aware of the Roper decision – the first of the series of Supreme Court decisions on
Eighth Amendment constraints on the sentencing of juvenile offenders, which prohibited
imposition of the death penalty. No doubt the sentencing court was well aware that the
death penalty was off the table in Mr. Malvo’s case under the relevant Maryland statute, as
it had been for almost two decades.19 And the court may well have been familiar with the
Roper decision’s interpretation of the Eighth Amendment. But it would be quite another
thing for a sentencing court to extrapolate from that case, forecast the future holdings of
Miller and Montgomery, and then silently apply that foresight in a sentencing proceeding.20
In our view, the legality of a sentence under the Eighth Amendment is not a topic
for this Court’s speculation. Here, it is unclear at best whether Mr. Malvo’s sentencing
proceeding complied with the Eighth Amendment constraint announced in Miller, made
the Supreme Court observed in Jones that “[b]y now, most offenders … have received new
discretionary sentences under Miller.” 141 S. Ct. at 1317 n.4.
19
See footnote 16 above.
20
Notably, the trial and appellate courts in Arkansas, Alabama, and Louisiana,
which issued the decisions reversed in Miller and Montgomery, also had the benefit of the
Roper decision at the time they issued the decisions that were later overturned by the
Supreme Court.
25
retroactive in Montgomery, and affirmed in Jones. Accordingly, we shall remand to the
Circuit Court for resentencing.21
21
Mr. Malvo’s flagship argument is based on the Eighth Amendment and the recent
Supreme Court decisions construing it. Alternatively, he argues that his sentence was
illegal under Article 25 of the Maryland Declaration of Rights, which prohibits the
imposition of “cruel or unusual punishment.” (emphasis added). This Court has generally
construed the language of Article 25, which pre-dates the Eighth Amendment, consistently
with the Supreme Court’s construction of the Eighth Amendment, although the Court has
noted that the textual difference in the two provisions may in some circumstances support
a broader interpretation of Article 25. Thomas v. State, 333 Md. 84, 103 n.5 (1993).
State supreme courts that have construed similarly-worded state constitutional
provisions to provide additional protections have noted a grammatical basis for doing so.
See, e.g., People v. Bullock, 485 N.W.2d 866, 872 n.11 (Mich. 1992) (observing that “it
seems self-evident that any adjectival phrase in the form ‘A or B’ necessarily encompasses
a broader sweep than a phrase in the form ‘A and B.’ The set of punishments which are
either ‘cruel’ or ‘unusual’ would seem necessarily broader than the set of punishments
which are both ‘cruel’ and ‘unusual.’”); see also Dan Friedman, Tracing the Lineage:
Textual and Conceptual Similarities in the Revolutionary-Era State Declarations of Rights
of Virginia, Maryland, and Delaware, 33 Rutgers L.J. 929, 967 (2002) (articulating similar
reasoning with respect to Article 25); cf. Jeffrey S. Sutton, 51 Imperfect Solutions: States
and the Making of American Constitutional Law (2018) at pp. 92-96 (describing early
decision striking down forced sterilization sentence under “cruel or unusual” provision of
a state constitution).
Some state supreme courts have held that such language bars the imposition of a
sentence of life without the possibility of parole for a juvenile offender. See, e.g., Bullock,
supra; Diatchenko v. District Attorney for Suffolk District, 1 N.E.3d 270 (Mass. 2013); see
also State v. Kelliher, 873 S.E.2d 366, 382-387 (N.C. 2022) (holding that the ban on “cruel
or unusual” punishments in the North Carolina constitution prohibits the imposition of a
juvenile life-without-parole sentence “unless the trial court expressly finds that a juvenile
homicide offender is one of those ‘exceedingly rare’ juveniles who cannot be
rehabilitated”); State v. Bassett, 428 P.3d 343, 349-350 (Wash. 2018) (holding that a
Washington constitutional provision prohibiting “cruel” punishment categorically bars
life-without-parole sentences for juvenile offenders).
26
C. Whether JUVRA Renders a Resentencing Unnecessary
The State argues that, regardless of whether Mr. Malvo’s life-without-parole
sentences violate the Eighth Amendment, the possibility of a sentence reduction under
JUVRA cures any constitutional deficiency. Thus, in the State’s view, Mr. Malvo’s
sentences are each effectively life with the possibility of parole – at least as far as the Eighth
Amendment is concerned.
In many instances in which a juvenile offender is serving a lengthy sentence, the
State’s argument is likely to be correct. As this Court has noted, “[t]here is no
constitutional requirement that a state have a parole system per se, so long as the state
provides a meaningful opportunity for release based on demonstrated maturity and
rehabilitation.” Carter, 461 Md. at 318.22 Both JUVRA and the parole regulations require
that a court and the Parole Commission, respectively, consider the individual’s youth at the
time of the offense(s) and assess the offender’s subsequent maturity and rehabilitation.
Compare CP §8-110 (JUVRA review criteria) with COMAR 12.08.01.18 (considerations
for parole).
As noted above, JUVRA provides that a court may reduce the duration of a juvenile
offender’s sentence if the court finds that (1) the individual is not a danger to the public;
As we are holding that the Eighth Amendment requires that Mr. Malvo be
resentenced, we need not decide whether Article 25 would require that relief even if the
Eighth Amendment did not.
22
In Carter, the Court concluded that the Maryland parole system provided the
requisite opportunity for release for Eighth Amendment purposes. 461 Md. at 365. Carter
pre-dated the passage of JUVRA.
27
and (2) the interests of justice will be better served by a reduced sentence. CP §8-110(c).
Of the 10 statutory factors that a reviewing court must consider, most direct the court to
consider the offender’s youth at the time of the offense and the offender’s subsequent
progress while incarcerated. These include “whether the individual has substantially
complied with the rules of the institution,” “whether the individual had completed an
educational, vocational, or other program,” “whether the individual has demonstrated
maturity, rehabilitation, and fitness to reenter society sufficient to justify a sentence
reduction,” and “the diminished culpability of a juvenile as compared to an adult….” CP
§8-110(d). The court must issue a written decision that addresses these factors. CP §8-
110(e).
If anything, review of a sentence under JUVRA may provide a better opportunity
than the parole process for many offenders to secure release or a sentence reduction. Unlike
parole hearings, which are described by the regulations as “interview[s]” where “formal
presentations by attorneys, relatives, and others interested are not permitted,” COMAR
12.08.01.18C,23 a juvenile offender who files a motion under JUVRA is entitled to a court
hearing at which the offender may introduce evidence in support of the motion. CP §8-
110(b). Thus, as a general rule, JUVRA is likely to provide the “meaningful opportunity
for release” contemplated by the Supreme Court.
But it is not clear that JUVRA alone would cure an illegal sentence and provide a
meaningful opportunity for release equivalent to parole for a defendant serving multiple
23
See Farmer v. State, ___ Md. ___, ___ (2022), slip op. at 2-8, for a more detailed
description of the parole standards and process.
28
consecutive life-without-parole sentences. Assuming that the individual’s sentences are
illegal for failure to comply with Miller and the defendant is entitled to be resentenced,
JUVRA might not be an adequate substitute for the imposition of legal sentences. There
are many variables at play: whether on resentencing, the sentencing court, newly mindful
of the Eighth Amendment constraints, determines that the defendant is incorrigible; if not,
how the defendant is resentenced (whether the sentences are appropriately consecutive or
concurrent and how they are aggregated24); and how JUVRA is construed to apply to
them.25
In Mr. Malvo’s case, this may be an entirely academic question. His Maryland life-
without-parole sentences run consecutively to each other and to the Virginia sentences that
he is currently serving.26 The first step – a sentencing compliant with the Eighth
Amendment – has not yet happened. At this time, we cannot say that JUVRA alone renders
his sentence compliant with the Eighth Amendment as construed in Miller.
24
That determination can also affect a defendant’s timeline for parole eligibility.
25
As noted in Farmer, ___ Md. at ___, slip op. at 26, there are several open
questions concerning the application of JUVRA. The answers to those questions may
determine the extent to which the statute functions as a meaningful opportunity for release
equivalent to parole for a juvenile offender serving multiple consecutive life-without-
parole sentences.
26
Under a law enacted in 2020, all juvenile offenders in Virginia are now eligible
for parole after serving 20 years. Va. Code §53.1-165.1(E). Of course, that law does not
mean that Mr. Malvo will be paroled in Virginia when he becomes eligible – or ever.
29
III
Conclusion
To comply with the standard that the Supreme Court has set for sentencing a juvenile
offender to life without parole, the Circuit Court must resentence Mr. Malvo. We express
no opinion on what sentence the Circuit Court should impose.27 As in any criminal case,
the sentencing court has broad discretion and there will be no question in this instance that
the sentencing court is aware of the relevant Eighth Amendment constraints.
JUDGMENT OF THE CIRCUIT COURT FOR MONTGOMERY
COUNTY VACATED AND CASE REMANDED FOR FURTHER
PROCEEDINGS CONSISTENT WITH THIS OPINION. COSTS TO
BE SPLIT EVENLY BETWEEN PETITIONER AND
MONTGOMERY COUNTY.
27
Judge Hotten’s dissent concludes that the offenses committed by Mr. Malvo were
not the product of transient immaturity and that the six consecutive life-without-parole
sentences are “just, fair, and compliant with the Eighth Amendment.” Although the
Supreme Court standard still permits a sentencing court to sentence a juvenile homicide
offender to life without parole, she asserts that the General Assembly’s policy choice in
the prospective provision of JUVRA will eliminate that option on remand. Dissent of
Judge Hotten at 22 n.8. That may well be true, but as horrible as we may find these crimes,
it is not our role to advocate for any particular sentence or to make the decision for the
sentencing court. Rather, it is to ensure that sentences are imposed in compliance with the
Eighth Amendment as interpreted by the Supreme Court.
30
Appendix A
At Mr. Malvo’s guilty plea proceeding on October 10, 2006, in the Circuit Court for
Montgomery County, the Assistant State’s Attorney prosecuting the case gave the
following statement of facts as the basis for the charges to which Mr. Malvo was pleading
guilty. Mr. Malvo indicated that he agreed with the statement to the extent it covered the
incidents in Maryland to which he was pleading guilty. His attorney indicated that he
would not admit guilt to offenses in other jurisdictions pending a global disposition of other
charges.
Had the case gone to trial, the evidence would have shown that these
six murders occurred on three separate days in October of 2002. These
victims were James Martin who was killed on October 2nd, James Buchanan
who was killed on October 3rd, Premkumar Walekar also killed on October
3rd, Maria Sarah Ramos killed on October 3rd, Lori Ann Lewis-Rivera killed
on October 3rd and finally Conrad Johnson who was murdered on October
22nd.
These six murders were part of a larger robbery, extortion and killing
spree that spanned from September the 5th of 2002 to October the 24th of
2002 in which six other victims were murdered and six more victims suffered
gunshot wounds as a result of the defendant's actions. These other shootings
occurred elsewhere in Maryland, Virginia, Washington, D.C., Alabama and
Louisiana.
The evidence would have shown that on October the 2nd, 2002 at
approximately 6:02 p.m. in the parking lot of a Shoppers Food Warehouse
located on Randolph Road, Wheaton, Montgomery County, Maryland,
James Martin was walking toward the store when he was shot once in the
back with a bullet fired from a distance. Mr. Martin said help me and fell to
the ground almost immediately dead. There were no eyewitnesses and no
meaningful ballistics evidence recovered.
1
However the autopsy revealed that the entry wound to Mr. Martin’s
back was very small, the exit wound to his chest was very large and there
were massive internal injuries, all of which are characteristic of and
consistent with a small caliber bullet fired from a high-velocity rifle. The
following day, the first of four murders that would occur within about two
hours of each other took place; the first of four murders took place at 7:41
a.m. at the Fitzgerald Auto Mall in Rockville, Montgomery County,
Maryland.
The victim, James Sonny Buchanan was mowing the lawn on the
outer perimeter of the property when he was shot once in the back with a
bullet fired from a distance. Mr. Buchanan, clutching his chest, ran on to the
parking lot of the dealership, collapsed and later died. Once again there were
no eyewitnesses and no meaningful ballistics evidence.
As with Mr. Martin, however, the autopsy revealed that the entry
wound to Mr. Buchanan's back was very small, the exit wound to his chest
was very large, there were massive internal injuries and the bullet had
fragmented into many small pieces, the so-called snowstorm effect, all of
which are characteristic of and consistent with a small caliber bullet fired
from a high-velocity rifle.
Thirty minutes later at approximately 8:12 a.m. Premkumar Walekar
was fueling his taxi cab at the Mobile Gas Station on Connecticut Avenue in
Silver Spring, Montgomery County, Maryland when he was shot once with
a bullet that was fired from a distance. Mr. Walekar staggered to a nearby car
asking for assistance; however, he died within minutes. The autopsy revealed
that the bullet had entered under his left arm.
It also showed a small entrance wound, massive internal injuries and
the snowstorm effect characteristic of and consistent with a small caliber
2
bullet fired from a high-velocity rifle. Ballistics tests later established that
the bullet fragments recovered from Mr. Walekar’s body had been fired from
the .223 caliber Bushmaster rifle that was found in the car with the defendant
and his co-defendant when they were arrested 21 days later in Frederick,
Maryland.
At approximately 8:37 a.m. again on October 3rd, 2002, Maria Sarah
Ramos was sitting on a bench in front of the Crisp & Juicy Restaurant in the
Leisure World Shopping Center in Silver Spring, Montgomery County,
Maryland. She was shot once in the head with a bullet that was fired from a
distance and she died instantly. The autopsy revealed that the bullet had
entered the front of her head and exited the back. The entrance wound was
small, the exit wound was large and the internal injuries massive
characteristic of once again and consistent with a small-caliber bullet fired
from a high-velocity rifle.
Ballistics tests later established that the bullet fragments recovered
from Ms. Ramos’ body and a copper bullet jacket recovered from inside the
restaurant had been fired from the .223 caliber Bushmaster rifle found in the
car with Mr. Malvo and his co-defendant when they were arrested.
Again on October the 3rd at approximately 9:58 a.m. Lori Ann Lewis-
Rivera was vacuuming her minivan at the Shell Station at the corner of
Connecticut Avenue and Knowles Avenue in Kensington, Montgomery
County, Maryland when she was shot once in the back with a bullet that was
fired from a distance. The entrance wound was very small, there was no exit
wound, the internal injuries were massive and the bullet once again had
fragmented with a snowstorm effect characteristic of and consistent with a
small caliber bullet fired from a high-velocity rifle.
3
Ballistics tests later established that the bullet fragments recovered
from Ms. Lewis-Rivera's body had been fired from the .223 caliber
Bushmaster rifle that was found in the car with the defendant and his co-
defendant when they were arrested. Thereafter between October the 3rd,
2002 and October the 19th, 2002, four additional victims were murdered and
three others seriously wounded in shootings that occurred in the District of
Columbia, Virginia and elsewhere in Maryland and I'll outline those
shootings in a moment.
The final murder and the sixth that occurred in Montgomery County
took place on October the 22nd, 2002 at about 6:00 a.m. While onboard his
Ride On bus in the area of Grand Pre Road in Silver Spring, Montgomery
County, Maryland, the driver, Conrad Johnson was shot once in the upper
abdomen with a bullet that was fired from a distance. Mr. Johnson was taken
by helicopter to the hospital where he later died during surgery.
The autopsy revealed that the entrance wound was very small, there
was no exit wound, the internal injuries were massive and the bullet had
fragmented with a snowstorm effect characteristic of and consistent with a
small-caliber bullet fired from a high-velocity rifle. And once again ballistics
tests later established that the bullet fragments recovered from his body had
been fired from the .223 Bushmaster that was recovered in the defendant's
possession at the time of his arrest.
In a patch of woods near the scene of Mr. Johnson’s murder,
investigators found tacked to a tree a clear plastic Ziploc bag that contained
a note. Fifty feet beyond the location of the note, investigators located a black
duffle bag, a left-handed glove and a second Ziploc bag. The note which
exhibited 13 small adhesive stars believed to represent the 13 victims stated
in part “for you Mr. Police, call me God, do not release to the press. You did
4
not respond to the message, you departed from what we told you to say and
you departed from the time. Your incompetence has cost you another life.
You have until 9:00 a.m. to deliver the money and 8:00 a.m. deliver this
response. We've caught the sniper like a duck in a noose knot to let us know
you have your demands.”
Thereafter in the early morning hours of October the 24th, 2002 at a
rest area in Frederick, Maryland, Mr. Malvo and John Allen Muhammad
were arrested while sleeping in a blue 1990 Chevrolet Caprice owned by Mr.
Muhammad.
Inside the car, investigators recovered numerous evidentiary items
including a loaded .223 caliber Bushmaster rifle that yielded Mr. Malvo’s
DNA and fingerprint, a black duffle bag containing an ammo magazine that
yielded Mr. Malvo’s DNA and a rifle sight with Muhammad’s DNA, a
global positioning system receiver, earplugs, maps and Ziploc plastic page,
a pair of walkie-talkies, a digital voice recorder with Mr. Malvo and Mr.
Muhammad’s voices recorded, receipts from Save-A-Lot and Piggly Wiggly
stores located in Baton Rouge, Louisiana, and a plastic bag from the Big
Lots store, a slip of paper containing the Sniper taskforce hotline telephone
number and a Sony laptop computer loaded with the software program
Microsoft Streets and Trips 2002.
In this program were many maps of the Washington, D.C., area
including one marked with several skull and crossbones icons at locations
where various shootings had occurred including the shootings of Mr. Martin
and Mr. Buchanan. Additionally, the computer’s hard drive included a
Microsoft Word file that contained excerpts of an extortion demand. Finally,
investigators discovered that the trunk of the Caprice had been fashioned into
a sniper's nest. The rear seat was hinged to provide easy access to the trunk,
5
the inside of the trunk was spray-painted blue to blend in with the color of
the exterior and a hole had been cut into the trunk frame just above the license
plate, a hole large enough to accommodate the muzzle of a rifle.
In perpetrating the six charged murders, Mr. Malvo and his co-
defendant were attempting to extort $10 million from the government. This
extortion campaign was preceded by a series of murder/robberies through
which the defendants generated the means and tools with which to carry out
this campaign. The first of these occurred on September the 5th, 2002 in
Clinton, Maryland, where Paul LaRuffa was shot and robbed outside of
Margellina's Restaurant which he owned. Mr. LaRuffa was shot five times
with a .22 caliber revolver. His Sony laptop and a briefcase containing bank
deposit bags and $3,500 in cash were stolen.
The Sony laptop is the one that was found in the Chevy Caprice with
the defendant at the time of his arrest. Additionally, about six weeks after
the robbery, the briefcase and empty bank deposit bags were found along
with some clothing about a mile from the LaRuffa shooting and this clothing
yielded Mr. Malvo's DNA. Ten days later on September the 15th, 2002, also
in Clinton, Maryland, Muhammad Rashid was shot while closing the Three
Roads Liquor Store. He was shot at close range with a .22 caliber revolver
by a young man he later identified as Mr. Malvo. Additionally, evidence of
two high-velocity rifle shots was recovered from inside the store.
On September the 1st , 2002, Claudine Parker and Kellie Adams were
shot immediately after closing the Zelda Road ABC Liquor Store in
Montgomery, Alabama. Mrs. Parker died from a single gunshot wound that
entered her back. Ms. Adams was shot through her neck but survived. Both
bullets came from a high-velocity rifle. Simultaneous with the shootings, a
young man later identified as Mr. Malvo ran up to the victims and began to
6
go through their purses. Mr. Malvo was pursued from the scene by a police
officer and another bystander. During the chase, he dropped a gun catalog
and a .22 caliber revolver.
The catalog yielded Mr. Malvo's fingerprints. Ballistics tests later
confirmed that the revolver that he dropped was the same gun used earlier to
shoot Mr. LaRuffa and Mr. Rashid in the shootings that I just described. In
addition ballistics tests later established that both women, Ms. Parker and
Ms. Adams had been shot with the .223 caliber Bushmaster rifle recovered
from the car at the time of the defendant's arrest.
Finally, two days later on September the 23rd, 2002 in Baton Rouge,
Louisiana, Hong Em Ballenger was murdered outside of a Beauty Depot
store. She was shot once in the neck with a bullet fired from a high-velocity
rifle. Bullet fragments recovered from her body were later established to have
been fired from the Bushmaster rifle recovered with the defendant at the time
of his arrest. Additionally two eyewitnesses saw Mr. Malvo flee the scene
with Ms. Ballenger’s purse and one of them saw him get into the Chevy
Caprice.
Now, as previously mentioned, Mr. Malvo and Mr. Muhammad began
their extortion scheme with the murders of Mr. Martin, Mr. Buchanan, Ms.
Ramos and Ms. Lewis-Rivera on October the 2nd and 3rd in Montgomery
County. At approximately 9:15 p.m. later that day on October the 3rd, 2002,
Pascal Charlot was shot once in the upper chest as he crossed Georgia
Avenue Northwest in Washington, D.C. The bullet was fired from a distance
from a high-velocity rifle. Bullet fragments recovered from his body were
found to have been fired from the .223 caliber Bushmaster rifle. In addition
eyewitnesses placed the Caprice at the scene of the shooting.
7
The next day, October the 4th, 2002, outside of Michael’s craft store
in Fredericksburg, Virginia, Caroline Seawell was wounded by a single shot
from a high-velocity rifle. An eyewitness saw the Caprice in the parking lot
at the time of the shooting. Once again ballistics tests established that Ms.
Seawell had been shot with a bullet fired from the .223 Bushmaster rifle.
Three days later on October the 7th, 2002, outside of Benjamin Tasker
Middle School in Bowie, Maryland, l3-year-old Iran Brown was shot once
in the chest from a distance with a high-velocity rifle. An eyewitness saw the
Caprice in the neighborhood in the night before the shooting. In the woods
next to the school investigators found a ballpoint pen barrel, a shell casing
and a Tarot, the death card with handwriting on it. The shell casing and bullet
fragments recovered from Iran Brown’s body were matched to the .223
caliber Bushmaster rifle. In addition, Muhammad’s DNA was found on the
pen barrel.
The recovered death Tarot card contained the first communication
from the defendants. Written on it was “for you Mr. Police, code call me
God, do not release to the press.”
These words later appeared repeatedly in the written and oral
communications received from the defendants during their extortion
campaign. Two days later on October the 9th, 2002 at a Sunoco gas station
in Manassas, Virginia, Dean Meyers was fatally shot in the head by a single
bullet fired from a high-velocity rifle later established by ballistics tests to
have been fired from the .223 Bushmaster rifle.
In addition, two eyewitnesses saw Muhammad in the Caprice in the
immediate vicinity of the shooting immediately before and after the fatal
shooting of Dean Meyers. Finally, a map recovered from the area where the
shot had been fired contained both defendants Mr. Malvo’s and Mr.
8
Muhammad’s fingerprints. On October the 11th, 2002, at an Exxon gas
station in Massaponax, Virginia, Kenneth Bridges was fatally shot by a single
bullet to the back fired from a high-velocity rifle later established by
ballistics tests to have been the .223 Bushmaster rifle. An eyewitness saw
the Caprice near the gas station on the morning of the shooting.
On October the 14th, 2002 at a Home Depot store in Fairfax, Virginia,
Linda Franklin was fatally shot in the head by a single bullet fired from a
high-velocity rifle once again later established by ballistics tests to be the
.223 Bushmaster rifle. Finally, on October the 19th, 2002, outside a
Ponderosa Steakhouse in Ashland, Virginia, the second to last shooting
occurred. Jeffrey Hopper and his wife were walking to their car after dinner
when Jeffrey Hopper who survived was shot once in the abdomen with a
bullet fired from a high-velocity rifle. Near the scene of the shooting police
recovered a shell casing, a cinna-raisin (phonetic sp.) candy wrapper and a
Ziploc bag containing a note.
The shell casing and bullet fragments recovered from Mr. Hopper's
body were established to have been fired from the .223 Bushmaster rifle. The
cinna-raisin wrapper and the Ziploc bag contained Mr. Malvo’s DNA. The
note found near the scene had five adhesive stars attached to it which the
defendants claimed of communications to be the lives lost because of police
incompetence. The note also read in part “for you Mr. Police, call me God,
do not release to the press, we've tried to contact you to start negotiation.
These people took our call for a hoax or a joke so your failure to respond has
cost you five lives.
If stopping the killing is more important than catching us now then
you will accept our demand which are non-negotiable. One you will place
$10 million in Bank of America account number, and the account number's
9
listed, we will have unlimited withdrawal at any ATM worldwide. You will
activate the bank account, credit card and pin number. We will contact you
Ponderosa Buffet, Ashland, Virginia, telephone number and the number is
provided, 6:00 a.m. Sunday morning. You have until 9:00 a.m. Monday
morning to complete transaction. Try to catch us withdrawing at least you
will have less body bags.
Two, if trying to catch us now more important that prepare your body
bags. If we give you our word that is what takes place. Word is bond. P.S..
your children are not safe anywhere at any time.
The last shooting, Conrad Johnson’s murder, took place three days
later on October the 22nd. Two days later as I've described the defendants
were arrested in the Chevy Caprice with the evidence that I previously
described.
After Mr. Malvo’s arrest and following his transfer to Fairfax County,
Virginia, Mr. Malvo spoke to investigators at length. At that time he claimed
to be the shooter in each of the October 2002 crimes. He had been instructed
to accept responsibility for the shootings by Muhammad who told Mr. Malvo
that as a juvenile he would be less likely to get the death penalty.
Subsequently however as outlined in his testimony at the trial of John Allen
Muhammad, Mr. Malvo described the origins and the motive for the scheme
that had been made up by Mr. Muhammad.
He described how he and Muhammad came to Montgomery County
where they drove around scouting areas that would be good places to shoot.
According to Mr. Malvo they looked for and targeted locations that did not
have surveillance cameras and would be easy to leave without detection. At
times they abandoned previously selected sights because of too many
witnesses or too much traffic. Mr. Malvo also testified that in all but three
10
of the shootings he acted as the spotter, sitting in the front passenger seat of
the Caprice while Muhammad went into the trunk where he fired the .223
Bushmaster rifle at the victims.
In three of the shootings, Mr. Malvo fired the shots from outside the
car while he remained in communication with Muhammad. These were the
non-fatal shootings of Iran Brown and Jeffrey Hopper and the murder of
Conrad Johnson.
11
Appendix B
Circuit Court for Montgomery County
Case No. 102675-C
Argued: February 8, 2022
IN THE COURT OF APPEALS
OF MARYLAND
No. 29
September Term, 2021
______________________________________
LEE BOYD MALVO
v.
STATE OF MARYLAND
______________________________________
*Getty, C.J.
*McDonald
Watts
Hotten
Booth
Biran
Gould,
JJ.
______________________________________
Dissenting Opinion by Watts, J., which Gould,
J., joins.
______________________________________
Filed: August 26, 2022
*Getty, C.J., and McDonald, J., now Senior
Judges, participated in the hearing and
conference of this case while active members of
this Court. After being recalled pursuant to Md.
Const., Art. IV, § 3A, they also participated in
the decision and adoption of this opinion.
Respectfully, I dissent. I have no quarrel with the Majority’s conclusion that this
case is subject to the Supreme Court’s holding in Miller v. Alabama, 567 U.S. 460, 489
(2012) that a trial court must consider a juvenile offender’s youth and attendant
circumstances before imposing a sentence of life imprisonment without the possibility of
parole, which was made retroactive in Montgomery v. Louisiana, 577 U.S. 190 (2016).
See Maj. Slip Op. at 22-24.1 That said, I would reach a different conclusion than the
majority opinion based on the record in this case, which demonstrates that the Circuit Court
for Montgomery County essentially complied with the forthcoming requirements of Miller
by considering the youth or juvenile status of Lee Boyd Malvo, Petitioner, at sentencing.
The record in this case demonstrates that Mr. Malvo received an individualized
sentencing procedure at which his youth was considered, and the circuit court recognized
that it had the discretion to impose a lesser sentence than life without parole. At the
sentencing proceeding, while explaining the basis for the sentences, when speaking to Mr.
Malvo, among other remarks, the circuit court stated: “As a child, you had no one to
establish values or foundations for you. After you met John Allen Muhammad and became
influenced by him, your chances for successful life became worse than they already were.”
Immediately afterward, the circuit court told Malvo: “You could have been somebody
different. You could have been better.”
1
On November 8, 2006, the circuit court conducted the sentencing proceeding. On
January 12, 2017, Malvo filed a motion to correct an illegal sentence. Malvo contended,
among other things, that the Supreme Court’s decision in Miller applied to Maryland’s
discretionary scheme for imposing a sentence of life imprisonment without the possibility
of parole.
The circuit court’s explanation of the reason for the sentence demonstrates that it
took Mr. Malvo’s status as a juvenile into account. To be sure, at sentencing, the circuit
court did not make an explicit finding that it would impose consecutive life without parole
sentences despite Mr. Malvo’s juvenile status or that Mr. Malvo was incorrigible. But the
circuit court pointed out that Muhammad had corrupted Mr. Malvo while he was an
impressionable child, observed that Mr. Malvo could have grown up to be a better person,
and acknowledged that Mr. Malvo remained a young man at the time of the sentencing
proceeding. The record demonstrates that Mr. Malvo received a personalized sentencing
procedure at which his youth and its attendant characteristics were considered, and the
circuit court was aware that it had the discretion to impose a lesser sentence. As such, the
circuit court satisfied the requirements of the Supreme Court’s holding in Miller. The
conclusion that the Supreme Court’s holding in Miller was satisfied in this case is
supported by Jones v. Mississippi, ___ U.S. ___, 141 S. Ct. 1307, 1319 (2021), in which
the Supreme Court held that, under Miller, a trial court is not required to find that a juvenile
offender is permanently incorrigible before imposing a sentence of life imprisonment
without the possibility of parole.
According to the majority opinion’s interpretation of the Supreme Court’s holdings
in Miller and Jones, “an offender deemed corrigible cannot constitutionally be sentenced
to life without the possibility of parole.” Maj. Slip Op. at 9. And “[n]o explicit finding of
the offender’s incorrigibility is a prerequisite to a sentence of life without parole; instead,
a defense presentation of argument about the offender’s youth and the exercise of the
court’s discretion to impose a no-parole sentence can serve as an implicit finding of
-2-
incorrigibility.” Maj. Slip Op. at 22. I will not take issue with the Majority’s distillation
of the Supreme Court’s holdings in Miller and Jones to the extent that the Majority
concludes that after Jones, Miller’s substantive holding remains good law.
But in our recent opinion in Harris v. State, 479 Md. 84, 119-20, 276 A.3d 1071,
1092 (2022), we concluded that in sentencing Mr. Harris the trial court complied with
Miller. If that is so, the record in this case plainly demonstrates that the circuit court
complied with Miller in sentencing Mr. Malvo. In Harris, a case involving a sentence of
life with the possibility of parole imposed after the Supreme Court issued Miller, we
concluded that, although Miller did not apply and the trial court was not required to take
youth into account before imposing a sentence of life imprisonment with the possibility of
parole, the record demonstrated that at sentencing the trial court had indeed complied with
Miller. See Harris, 479 Md. at 119-20, 276 A.3d at 1092. In Harris, in imposing sentence,
the circuit court did not make any statements or observations whatsoever with respect to
Harris’s youth or juvenile status. Instead, we concluded that the circuit court considered
Harris’s youthful status based on the circumstance that the circuit court received a
presentence investigation report that mentioned the Harris’s age, that Harris’s counsel
made arguments based on his age at the sentencing proceeding, and that a letter written by
Harris in which he emphasized his age was read aloud at the sentencing proceeding. See
id. at 118-19, 276 A.3d at 1091.
Under these circumstances, we reached the conclusion that in imposing sentence the
circuit court considered Mr. Harris’s status as a juvenile and although dicta (because Mr.
Harris received a sentence of life with parole), we concluded that the circuit court satisfied
-3-
the requirements of Miller. Measured against the standard that this Court set forth in Harris
for determining whether a sentencing court considered a defendant’s youth and attendant
circumstances, the resentencing ordered by the Majority in this case is unwarranted. The
circuit court plainly took Mr. Malvo’s youth, i.e., his juvenile status, into account at
sentencing.
In a footnote, the Majority criticizes this dissent as equating the sentencing
proceedings in Harris and this case. See Maj. Slip Op. at 24 n.18. But rather than critiquing
the dissent, the Majority’s remarks reinforce its point. The sentencing proceeding in Harris
occurred after the Supreme Court’s announcement of the incorrigibility standard in Miller
and Montgomery, i.e., the sentencing in Harris occurred at a time when the trial court was
presumed to have known the law. And indisputably, in reviewing the sentencing in Harris,
this Court stated that “all Miller requires is an individualized sentencing proceeding where
the sentencing judge has discretion to give the juvenile offender a sentence that is less than
life in prison without the possibility of parole.” Harris, 479 Md. at 117, 276 A.3d at 1090
(citation omitted). Thus, with the sentencing judge having made no acknowledgment of
Harris’s youth at all, this Court concluded that the sentencing proceeding in Harris would
have fulfilled the requirements set forth by the Supreme Court in Miller. See Harris, 479
Md. at 119-20, 276 A.3d at 1092. Irrespective of the circumstance that the sentencing in
this case occurred before Miller and Montgomery, the record clearly shows that the circuit
court took Mr. Malvo’s youth into consideration and that he was afforded an individualized
sentencing proceeding. If we are to rely on the discussion of Miller and Montgomery that
-4-
this Court set forth in Harris, the remand ordered by the Majority in this case is plainly
unjustified.2
Under the standard set by the Majority, every sentencing of a juvenile that occurred
before the Supreme Court’s decision in Miller and resulted in a sentence of life without
parole would be subject to resentencing—because the sentence occurred before Miller. In
this case, it could not be more evident that the sentencing judge took Mr. Malvo’s juvenile
status into account, even though the sentencing proceeding occurred before Miller. The
circumstance that a juvenile sentencing may have occurred before the Supreme Court’s
holding in Miller does not automatically mean that the sentencing judge failed to consider
the juvenile’s age and youthful characteristics or to provide an individualized sentencing
proceeding.
It is not the timing of the sentencing in Mr. Malvo’s case that raises an issue. Rather,
it is that in its discussion of what is required under Miller of a sentencing judge, this Court
explained in Harris a view that would be consistent with affirming the sentence in Mr.
Malvo’s case. But, now, the Majority raises the bar as to what Miller requires and, in doing
so, authorizes a resentencing for Mr. Malvo. The Majority does not attempt to rectify the
dichotomy between its discussion of Miller in this Court’s opinion in Harris and the
conclusions reached in this case.
The reality is that it is difficult to conceive of more egregious offenses committed
by a juvenile than those committed by Mr. Malvo. Mr. Malvo’s murders were numerous,
2
The Majority’s statement that the dissent equates the Harris and Malvo sentencings
is obviously not accurate and requires no further response. See Maj. Slip Op. at 24 n.18.
-5-
carefully planned, involved random victims whom he did not know, took place in public
over a prolonged period of time, and terrorized multiple communities. In sum, Mr. Malvo
engaged in a series of arbitrary public executions of people who happened to be outdoors.
The record reflects that although the circuit court considered Mr. Malvo’s youth, it
determined, among other things, that the nature of the offenses outweighed the
circumstance that he was seventeen years old when he committed the offenses. In other
words, the circuit court considered the circumstances of the six murders, and Mr. Malvo’s
youth and its attendant characteristics as required by Miller, and imposed six consecutive
sentences of life imprisonment without the possibility of parole given the unprecedented
and heinous nature of the offenses.
For the above reasons, respectfully, I dissent.
Judge Gould has authorized me to state that he joins in this opinion.
-6-
Circuit Court for Montgomery County
Case No. 102675C
Argued: February 8, 2022 IN THE COURT OF APPEALS
OF MARYLAND
No. 29
September Term, 2021
__________________________________
LEE BOYD MALVO
v.
STATE OF MARYLAND
__________________________________
*Getty, C.J.,
*McDonald,
Watts,
Hotten,
Booth,
Biran,
Gould,
JJ.
__________________________________
Dissenting Opinion by Hotten, J., which
Gould, J., joins.
__________________________________
Filed: August 26, 2022
* Getty, C.J. and McDonald, J., now Senior
Judges, participated in the hearing and
conference of this case while active
members of this Court. After being
recalled pursuant to Maryland
Constitution, Article IV, Section 3A, they
also participated in the decision and
adoption of the majority opinion.
I respectfully dissent. Petitioner, Lee Boyd Malvo, received sentences that were
just, fair, and compliant with the United States and Maryland Constitutions.
When Petitioner was 17-year-old, he, together with John Allen Muhammad,
perpetrated one of the most heinous series of crimes in the history of the State. Between
October 2 and 22, 2002, Petitioner and Mr. Muhammad systematically murdered six people
in Montgomery County, Maryland. Their victims were targeted at random, in the course
of their daily activities, and shot by Petitioner and Mr. Muhammad with a long-range rifle
fired from a vehicle outfitted with a sniper’s nest in its trunk. The victims included: James
Martin, who was killed in a parking lot of a Shoppers Food Warehouse; James Sonny
Buchanan, who was killed while mowing the lawn; Premkumar Walekar, who was killed
while fueling his car at a gas station; Maria Sarah Ramos, who was killed while sitting on
a bench at the Leisure World Shopping Center; Lori Ann Lewis-Rivera, who was killed
while vacuuming her minivan at a gas station; and Conrad Johnson, who was killed
stepping out of a commuter bus. In addition, a student, Iran Brown, was shot and severely
wounded on the grounds of his middle school in Prince George’s County.
These crimes were a part of a larger spree that spanned into Virginia and the District
of Columbia, during which Petitioner and Mr. Muhammad killed ten people and attempted
to kill three others. Petitioner and Mr. Muhammad became known as the “Beltway
Snipers” and intentionally perpetrated a “reign of terror” over the Washington, D.C.
metropolitan area and Montgomery County in particular. Muhammad v. State, 177 Md.
App. 188, 198, 934 A.2d 1059, 1065 (2007). Petitioner and Mr. Muhammad left
threatening notes near the scenes of their crimes, including one that said: “P.S. your
children are not safe anywhere at any time.” Id. at 210–11, 934 A.2d at 1072. Many more
murders were planned and doubtless would have been carried out, had authorities failed to
capture Petitioner and Mr. Muhammad on October 24, 2002.
For each of the six murders committed in Maryland, Petitioner received a sentence
of life imprisonment without the possibility of parole, to be served consecutively with each
other and with any sentence imposed by another jurisdiction. Petitioner has yet to serve
any of his Maryland sentences. Thus far, he has been serving sentences in Virginia that
were imposed for the murders he committed in that State. Virginia recently passed
legislation making any juvenile eligible for parole after serving twenty years in prison. See
Va. Code Ann. § 53.1-165.1E (2020). As the twenty-year anniversary of the Beltway
Sniper attacks approaches, Petitioner has chosen to challenge the validity of his Maryland
sentences.1
The Majority believes that a recent series of United States Supreme Court cases,
addressing the circumstances under which the Eighth Amendment of the United States
Constitution permits a juvenile offender to be sentenced to life in prison without the
possibility of parole, likely renders Petitioner’s sentences unconstitutional and requires his
resentencing. I disagree. As will be discussed in greater detail below, the most recent
iteration of that line of cases, Jones v. Mississippi, ___ U.S. ___, 141 S. Ct. 1307 (2021),
unequivocally holds that all that is procedurally required prior to sentencing a juvenile
1
In February 2020, the United States Supreme Court dismissed another case filed
by Petitioner that challenged his life-without-parole sentence in Virginia given the recent
passage of Va. Code Ann. § 53.1-165.1E (2020). Petitioner could be eligible for parole in
Virginia this year.
2
offender to life in prison without the possibility of parole is an individualized sentencing
proceeding in which the court has discretion to sentence the offender to less than life
without the possibility of parole. Petitioner received the required sentencing proceeding.
The sentencing court had the discretion to impose a sentence of less than life in prison
without the possibility of parole and considered mitigating factors such as Petitioner’s
youth and its attendant circumstances prior to sentencing. The record confirms that the
sentencing court considered those mitigating factors, including Petitioner’s immaturity and
ability to reform, prior to sentencing, but nonetheless, determined Petitioner’s crimes
warranted life in prison without the possibility of parole. The sentencing court was
permitted to do so under the Eighth Amendment.
Neither were Petitioner’s sentences unconstitutionally disproportionate as applied
under the Eighth Amendment, as Petitioner’s crimes were not the result of “transient
immaturity.” Article 25 of the Maryland Declaration of Rights affords no additional
protections beyond those provided under the Eighth Amendment. Finally, any alleged
deficiencies in Petitioner’s sentence have been cured by the General Assembly’s passage
of the Juvenile Restoration Act (“JUVRA”). For the foregoing reasons, which are
described below, I would affirm Petitioner’s sentences.
The Eighth Amendment and Juvenile Sentencing
The Eighth Amendment to the United States Constitution prohibits the infliction of
“cruel and unusual punishments[.]” U.S. CONST. amend. VIII. This guarantee “flows from
the basic precept of justice that punishment for crime should be graduated and proportioned
3
to both the offender and the offense.” Miller v. Alabama, 567 U.S. 460, 469, 132 S. Ct.
2455, 2463 (2012) (cleaned up).
In Graham v. Florida, the United States Supreme Court held that the Eighth
Amendment categorically prohibited a juvenile nonhomicide offender from being
sentenced to life without the possibility of parole. 560 U.S. 48, 82, 130 S. Ct. 2011, 2034
(2010), as modified (July 6, 2010). The Court elaborated that a state “is not required to
guarantee eventual freedom to a juvenile offender convicted of a nonhomicide crime” but
must impose a sentence that provides “some meaningful opportunity to obtain release
based on demonstrated maturity and rehabilitation.” Id. at 75, 130 S. Ct. at 2030. The
Court stated the Eighth Amendment does permit some juvenile non-homicide offenders to
be incarcerated for life, as “[t]hose who commit truly horrifying crimes as juveniles may
turn out to be irredeemable, and thus deserving of incarceration for the duration of their
lives.” Id., 130 S. Ct. at 2030. However, it prohibited courts “from making the judgment
at the outset that those offenders never will be fit to reenter society.” Id., 130 S. Ct. at
2030.
Two years later, in Miller v. Alabama, the United States Supreme Court addressed
the relevance of the Eighth Amendment to juveniles sentenced to life without the
possibility of parole for homicide offenses. 567 U.S. 460, 465, 132 S. Ct. 2455, 2460
(2012). The Court declined to categorically prohibit all sentences of life without parole for
juvenile offenders, but instead held that the Eighth Amendment prohibits states from
imposing mandatory life sentences without parole for homicide offenses. Id., 132 S. Ct. at
2460. The Court reasoned “youth matters in determining the appropriateness of a lifetime
4
of incarceration without the possibility of parole[,]” id. at 473, 132 S. Ct. at 2465, and
sentencing schemes that impose “mandatory life-without-parole sentences on juvenile
homicide offenders[] . . . by their nature, preclude a sentencer from taking account of an
offender’s age and the wealth of characteristics and circumstances attendant to it.” Id. at
476, 132 S. Ct. at 2467.
Alternatively, the Court required “that a sentencer have the ability to consider the
‘mitigating qualities of youth[]’” through an individualized sentencing proceeding in which
the sentencer had discretion to give a lesser sentence. Id., 132 S. Ct. at 2467. The Court
listed some of the “hallmark features” of youth that mandatory life-without-parole
sentences prohibit sentencers from considering, including: “immaturity, impetuosity, and
failure to appreciate risks and consequences[,]” “the family and home environment[,]” the
“extent of [the juvenile’s] participation in the conduct and the way familial and peer
pressures may have affected him[,]” the “incompetencies associated with youth” including
the “inability to deal with police officers or prosecutors (including on a plea agreement) or
his incapacity to assist his own attorneys[,]” and “the possibility of rehabilitation[,]” i.e.,
corrigibility. Id. at 477–78, 132 S. Ct. at 2468 (emphasis added). These are not a checklist
of “factors” the Court in Miller required every sentencing judge to review before
sentencing. Rather, they are examples of mitigating qualities of youth that are precluded
from consideration by mandatory life-without-parole sentences.
The Court in Miller concluded its opinion by stating that
[w]e therefore hold that the Eighth Amendment forbids a sentencing scheme
that mandates life in prison without possibility of parole for juvenile
offenders. . . . By making youth (and all that accompanies it) irrelevant to
5
imposition of that harshest prison sentence, such a scheme poses too great a
risk of disproportionate punishment.
Id. at 479, 132 S. Ct. at 2469. The Court declined to categorically prohibit the imposition
of sentences of life without the possibility of parole for juveniles, recognizing that a
sentencing judge may find “the rare juvenile offender whose crime reflects irreparable
corruption[]” justifying such a sentence. Id. at 479–80, 465, 132 S. Ct. at 2469. It stated
that “[a]lthough we do not foreclose a sentencer’s ability to make that judgment in
homicide cases, we require it to take into account how children are different, and how those
differences counsel against irrevocably sentencing them to a lifetime in prison.” Id. at 480,
132 S. Ct. at 2469 (footnote omitted). In Montgomery v. Louisiana, 577 U.S. 190, 212,
136 S. Ct. 718, 736 (2016), as revised (Jan. 27, 2016), the Court held Miller announced a
substantive rule that applied retroactively.
Any doubt regarding the precise holding of Miller was quelled last year, in Jones v.
Mississippi, __U.S. __, 141 S. Ct. 1307. In that case, the Court explained that Miller does
not require a sentencer to make a specific finding as to a juvenile homicide offender’s
permanent incorrigibility before sentencing the offender to life without the possibility of
parole, so long as the sentencer has the discretion to give a lesser sentence. Id. at __, 141
S. Ct. at 1319. The Court unequivocally held that “[i]n a case involving an individual who
was under 18 when he or she committed a homicide, a State’s discretionary sentencing
system is both constitutionally necessary and constitutionally sufficient.” Id. at __, 141 S.
Ct. at 1313 (emphasis added) (footnote omitted).
6
The Court in Jones was incredibly clear that, so long as a sentencing judge has
discretion to consider a juvenile youth in sentencing, it necessarily will consider the
defendant’s youth. It stated:
First, and most fundamentally, an on-the-record sentencing explanation is
not necessary to ensure that a sentencer considers a defendant’s youth.
Jones’s argument to the contrary rests on the assumption that meaningful
daylight exists between (i) a sentencer’s discretion to consider youth, and (ii)
the sentencer’s actual consideration of youth. But if the sentencer has
discretion to consider the defendant’s youth, the sentencer necessarily will
consider the defendant’s youth, especially if defense counsel advances an
argument based on the defendant’s youth. Faced with a convicted murderer
who was under 18 at the time of the offense and with defense arguments
focused on the defendant’s youth, it would be all but impossible for a
sentencer to avoid considering that mitigating factor.
It is true that one sentencer may weigh the defendant’s youth differently than
another sentencer or an appellate court would, given the mix of all the facts
and circumstances in a specific case. Some sentencers may decide that a
defendant’s youth supports a sentence less than life without parole. Other
sentencers presented with the same facts might decide that life without parole
remains appropriate despite the defendant’s youth. But the key point remains
that, in a case involving a murderer under 18, a sentencer cannot avoid
considering the defendant’s youth if the sentencer has discretion to consider
that mitigating factor.
Id. at __, 141 S. Ct. at 1319–20 (some emphasis added) (footnotes omitted).
Whether a juvenile sentence of life in prison without the possibility of parole is
“constitutionally sufficient” under the Eighth Amendment depends upon the presence
discretionary sentencing procedure.2 It is decisively not, as the majority holds, whether the
2
The Majority contends that Miller imposed a substantive requirement that the
sentencing court make a determination, at least implicitly, of permanent incorrigibility that
is distinct and apart from this procedural requirement. Malvo v. State, No. 29, Sept Term
2021, slip op. at 24 n.18 (Md. Aug. __, 2022). This interpretation was expressly rejected
(continued . . )
7
(. . . continued)
by the United States Supreme Court in Jones:
Jones relies on language in Montgomery that described Miller as permitting
life-without-parole sentences only for “those whose crimes reflect permanent
incorrigibility,” rather than “transient immaturity.” 577 U.S. at 209, 136 S.
Ct. 718. In other words, because the Montgomery Court deemed Miller to be
a substantive holding, and because Montgomery said that life without parole
would be reserved for the permanently incorrigible, Jones argues that the
Montgomery Court must have envisioned a separate factual finding of
permanent incorrigibility, not just a discretionary sentencing procedure
where youth would be considered.
That is an incorrect interpretation of Miller and Montgomery. We know as
much because Montgomery said as much. To reiterate, the Montgomery
Court explicitly stated that “a finding of fact regarding a child’s
incorrigibility . . . is not required.” 577 U.S. at 211, 136 S. Ct. 718.
To break it down further: Miller required a discretionary sentencing
procedure. The Court stated that a mandatory life-without-parole sentence
for an offender under 18 “poses too great a risk of disproportionate
punishment.” 567 U.S. at 479, 132 S. Ct. 2455. Despite the procedural
function of Miller’s rule, Montgomery held that the Miller rule was
substantive for retroactivity purposes and therefore applied retroactively on
collateral review. 577 U.S. at 206, 212, 136 S. Ct. 718. But in making the
rule retroactive, the Montgomery Court unsurprisingly declined to impose
new requirements not already imposed by Miller. As Montgomery itself
explained, the Court granted [certiorari] in that case not to consider whether
the rule announced in Miller should be expanded, but rather simply to decide
whether Miller’s “holding is retroactive to juvenile offenders whose
convictions and sentences were final when Miller was decided.” 577 U.S. at
194, 136 S. Ct. 718. On the question of what Miller required, Montgomery
was clear: “A hearing where youth and its attendant characteristics are
considered as sentencing factors is necessary to separate those juveniles who
may be sentenced to life without parole from those who may not.” Id., at
210, 136 S. Ct. 718 (internal quotation marks omitted). But a separate
finding of permanent incorrigibility “is not required.” Id., at 211, 136 S. Ct.
718.
Jones, ___ U.S. at ____, 141 S. Ct. at 1316–18 (emphasis added) (footnote omitted). As
Jones is the most recent word on the matter, it is the case we must follow.
8
sentencing court, at least implicitly, found the juvenile to be “incorrigib[le].” Malvo, slip
op. at 22; see Jones, ___ U.S. at ___, 141 S. Ct. at 1320 (“[A]n on-the-record sentencing
explanation with an implicit finding of permanent incorrigibility is not required by or
consistent with Miller.”). Contrary to the assertions of the Majority and Petitioner, a
sentencing court’s consideration of an offender’s youth and its attendant characteristics,
including his potential for corrigibility, is not dependent on the sentencer’s previous
knowledge of Miller or its progeny. See Malvo, slip op. at 23‒25. Rather, as the Court in
Jones explained, when a sentencing court has discretion to consider a defendant’s youth, it
“necessarily will” consider it, “it would be all but impossible for a sentencer to avoid”
considering it, and the sentencing court “cannot avoid” considering it. Id. at __, 141 S. Ct.
at 1319–20 (emphasis added). In fact, the Court explained in a footnote that the only
conceivable way for a sentencer to not consider a juvenile offender’s youth when given
discretion to do so is if defense counsel somehow failed to make the sentencer aware that
the offender was a juvenile. Id. at __ n.6, 141 S. Ct. at 1320 n.6. Yet the Court said that
even in that “highly unlikely scenario, the defendant may have a potential ineffective-
assistance-of-counsel claim, not a Miller claim[.]” Id., 141 S. Ct. at 1320 n.6 (emphasis
added). The proposition that a sentencing court, which has discretion to impose a sentence
less than life without the possibility of parole, could violate Miller simply because it did
not expressly consider the juvenile offender’s youth and its attendant circumstances,
directly contradicts the United States Supreme Court’s opinion in Jones.
The holding in Jones also makes practical sense. No sentencing judge is unaware
that youth entails certain infirmities in decision making due to immaturity or that juveniles
9
generally have a greater capacity to reform than adults. To say that a sentencing judge,
who has discretion and is tasked with considering mitigating and aggravating factors prior
to sentencing a juvenile offender, would not consider an offender’s youth and its attendant
characteristics as mitigating factors simply because he or she did not yet have the benefit
of reading the United States Supreme Court’s decision in Miller, contradicts both common
sense and the express holding of Jones.
Petitioner’s sentences did not violate the Eighth Amendment
Petitioner’s sentences were not violative of the Eighth Amendment under Miller and
Jones. It is uncontested that the sentencing court in Petitioner’s case had the discretion to
sentence Petitioner to less than life without the possibility of parole and was aware that he
was a juvenile when he committed the murders. That alone is sufficient under Miller and
Jones to find that the sentencing court considered Petitioner’s youth and its attendant
circumstances prior to rendering its sentence. The record in this case goes even further,
and explicitly demonstrates the sentencing court’s consideration of Petitioner’s youth and
its attendant circumstances.
As contemplated in Jones, many of defense counsel’s arguments during Petitioner’s
sentencing hearing focused on his youth and its attendant circumstances. See Jones, ___
U.S. at ____ 141 S. Ct. at 1319 (“But if the sentencer has discretion to consider the
defendant’s youth, the sentencer necessarily will consider the defendant’s youth, especially
if defense counsel advances an argument based on the defendant’s youth.”) (some
emphasis added). In seeking to mitigate Petitioner’s sentence, defense counsel stated,
among other things:
10
[T]his young man, but for the random intervention of John Allen Muhammad
in his life, would not be sitting in a courtroom in Maryland, would not be
sitting in a cell in Red Onion in Pound, Virginia for the rest of his life.
At the tender age of 15 or 16, John Allen Muhammad, who I join the choir
of people to say is a coward, took this young man under his wing when there
was no one else in the world to take care of this young man, and he turned
him into a killing machine.
* * *
But it is an absolute tragedy, absolute tragedy that this young man was
abandoned and led down a road of random violence, murder, and hatred . . .
* * *
. . . soon, there will be no Lee Boyd Malvo in our community anymore, and
Your Honor, I think that’s a sad thing because this young man has potential,
and he has a future, and he’ll have to do it from a prison cell in Virginia.
A pre-sentence investigative report was also submitted to the sentencing court for
consideration in rendering its decision. The report noted Petitioner’s age and described in
detail, among other things, his difficult upbringing and abusive family situation, which led
him to come under the sway of Mr. Muhammad and his hateful ideology. The State also
acknowledged at the sentencing hearing the relevance of Petitioner’s youth to culpability
for his crimes:
It’s not lost upon the State that [Petitioner] was under the sway of a truly evil
man who infused a 17-year-old with the ideology of hate, an ideology, it
appears that Mr. Malvo has now escaped from.
He’s probably most tragic, Your Honor, because he can add his name to those
[sic] long list of names, of those persons whose lives Mr. Muhammad
destroyed.
Finally, the sentencing court’s own statements prior to pronouncing the sentence reflected
a consideration of Petitioner’s youth and attendant circumstances:
11
As a child, you had no one to establish values or foundations for you. After
you met John Allen Muhammad and became influenced by him, your
chances for a successful life became worse than they already were.
You could have been someone different. You could have been better. . . .
These mitigating circumstances, emphasized by defense counsel, described in detail
in the pre-sentencing investigation, acknowledged by the State, and reiterated by the
sentencing judge, cover nearly all of the “hallmark features of youth” discussed in Miller,
including: “immaturity, impetuosity, and failure to appreciate risks and consequences[,]”
“the family and home environment[,]” the “extent of [the juvenile’s] participation in the
conduct and the way familial and peer pressures may have affected him[,]” as well as the
“possibility of rehabilitation[.]” Miller, 567 U.S. at 477–78, 132 S. Ct. at 2468. The
sentencing court was required under Maryland Rule 4-342 to consider mitigating
information presented by defense counsel prior to sentencing.3 See Mainor v. State, 475
3
At the time of the Petitioner’s sentencing hearing, Maryland Rule 4-342 provided,
in relevant part:
(b) Statutory sentencing procedure. When a defendant has been found
guilty of murder in the first degree and the State has given timely notice of
intention to seek a sentence of imprisonment for life without the possibility
of parole, but has not given notice of intention to seek the death penalty, the
court shall conduct a sentencing proceeding, separate from the proceeding at
which defendant’s guilt was adjudicated, as soon as practicable after the trial
to determine whether to impose a sentence of imprisonment for life or
imprisonment for life without parole.
* * *
(f) Allocution and information in mitigation. Before imposing sentence,
the court shall afford the defendant the opportunity, personally and through
(continued . . .)
12
Md. 487, 502, 257 A.3d 648, 656 (2021) (“[T]he trial judge has to consider mitigating
evidence when it is offered[]” prior to sentencing) (quoting Jones v. State, 414 Md. 686,
701, 997 A.2d 131, 139 (2010)); see also Kent v. State, 287 Md. 389, 393, 412 A.2d 1236,
1238 (1980). “Trial judges are presumed to know the law and to apply it properly.” State
v. Chaney, 375 Md. 168, 179, 825 A.2d 452, 458 (2003) (quoting Ball v. State, 347 Md.
156, 206, [699 A.2d 1170, 1194] (1997)). We must therefore presume the sentencing court
considered the mitigating arguments proffered by defense counsel based on Petitioner’s
youth and attendant circumstances.
The record reflects the sentencing court, in its exercise of sound discretion,
determined that despite the mitigating factors presented surrounding Petitioner’s youth, the
severity of his crimes warranted the punishment of life in prison without the possibility of
parole.4 The Eighth Amendment did not prohibit it from making this judgment. See Miller,
(. . . continued)
counsel to make a statement and to present information in mitigation of
punishment.
Md. Rule 4-342 (2006 Repl. Vol.). The present form of the Rule remains largely the same.
See Md. Rule 4-342 (2022 Repl. Vol.).
4
This is plainly demonstrated in the statement the sentencing court made to
Petitioner immediately prior to issuing its decision:
It appears you’ve changed since you were first taken into custody in 2002.
As a child, you had no one to establish values or foundations for you. After
you met John Allen Muhammad and became influenced by him, your
chances for successful life became worse than they already were.
(continued . . .)
13
567 U.S. at 480, 132 S. Ct. at 2469 (“[W]e do not foreclose a sentencer’s ability to make
that judgment [that a juvenile offender’s crime warrants life without parole] in homicide
cases[.]”). Miller itself contemplates a circumstance very similar to Petitioner’s as one that
would likely warrant a sentencer making the judgment that this most extreme sentence is
appropriate. In a footnote replying to arguments made by dissenting Justices, the Court
stated:
Given our holding, and the dissents’ competing position, we see a certain
irony in their repeated references to 17–year–olds who have committed the
“most heinous” offenses, and their comparison of those defendants to the 14–
year–olds here. See post, at 2477 (opinion of ROBERTS, C.J.) (noting the
“17–year old [who] is convicted of deliberately murdering an innocent
victim”); post, at 2478 (“the most heinous murders”); post, at 2480 (“the
worst types of murder”); post, at 2489 (opinion of ALITO, J.) (warning the
reader not to be “confused by the particulars” of these two cases); post, at
2489 (discussing the “17 1/2–year–old who sets off a bomb in a crowded
mall”). Our holding requires factfinders to attend to exactly such
circumstances—to take into account the differences among defendants and
crimes.
(. . . continued)
You could have been somebody different. You could have been better. What
you are, however, is a convicted murderer. You will think about that every
day for the rest of your life. You knowingly, willingly, and voluntarily
participated in the cowardly murders of innocent, defenseless human beings.
You’ve shown remorse and you’ve asked for forgiveness. Forgiveness is
between you and your God, and personally, between you and your victims,
and the families of your victims. This community, represented by its people
and the laws, does not forgive you.
You’ve been held accountable for the crimes you’ve committed here. You
will receive the maximum sentence allowed by the law of this State.
14
Miller, 567 U.S. at 480 n.8, 132 S. Ct. at 2469 n.8 (emphasis added). Petitioner was four
months away from his eighteenth birthday when these heinous crimes were committed. If
this is not one of the circumstances where a sentencing court could determine that, despite
mitigating factors pertaining to juvenile offender’s youth, life without parole was still
warranted, there is no circumstance where it would be warranted.
Petitioner’s crimes were not reflective of transient immaturity and his sentences
were not unconstitutionally disproportionate as applied
In concluding Petitioner’s sentences are likely violative of the Eighth Amendment,
the Majority relies on a footnote in Jones, quoting Montgomery, which states, “[t]hat Miller
did not impose a formal factfinding requirement does not leave States free to sentence a
child whose crime reflects transient immaturity to life without parole. To the contrary,
Miller established that this punishment is disproportionate under the Eighth Amendment.”
Jones,___ U.S. at ___ n.2, 141 S. Ct. at 1315 n.2 (quoting Montgomery, 577 U.S. at 211,
136 S. Ct. at 735). The Majority asserts that because the sentencing judge may have found
Petitioner to be corrigible, it is at least unclear whether his sentence was constitutionally
proportionate. Malvo, slip. op. at 25–26. Although not termed as such by the Majority,
this amounts to a finding that a sentence of life in prison without the possibility of parole
was potentially disproportionate as-applied to Petitioner.5 See Jones, ___ U.S. at ___ n.8,
5
Petitioner also phrases this argument as an as-applied argument in his brief.
Notably, the United States Supreme Court has never expressly adopted a heightened as-
applied challenge for disproportionality under the Eighth Amendment for juveniles
sentenced to life in prison without the possibility of parole. See Jones, ___ U.S. at ___,
141 S. Ct. at 1322 (“[T]his case does not properly present—and thus we do not consider—
any as-applied Eighth Amendment claim of disproportionality regarding Jones’s
(continued . . .)
15
141 S. Ct. at 1337 n.8 (Sotomayor, J., dissenting) (“In the context of a juvenile offender,
[an as-applied Eighth Amendment claim of disproportionality] should be controlled by this
Court’s holding that sentencing a child whose crime reflects transient immaturity to life
without parole . . . is disproportionate under the Eighth Amendment.”) (internal citations
and quotations omitted).
An as-applied challenge of disproportionality considers whether a sentence is
proportionate to the crime committed. See State v. Stewart, 368 Md. 26, 32, 791 A.2d 143,
146 (2002) (“[A] detailed proportionality review based on the criteria set out in Solem is
appropriate only in the rare case in which a threshold comparison of the crime committed
and the sentence imposed leads to an inference of gross disproportionality.’”) (emphasis
added) (quoting Harmelin v. Michigan, 501 U.S. 957, 1005, 111 S. Ct. 2680, 2707 (1991)
(Kennedy, J., concurring)). Montgomery held that it is disproportionate under the Eighth
Amendment to sentence “a child whose crime reflects transient immaturity to life without
parole.” 577 U.S. at 211, 136 S. Ct. at 735 (emphasis added). This does not equate to a
determination that any juvenile offender who has ever shown himself to be “corrigible,” is
(. . . continued)
sentence[.]”) (citing Harmelin, 501 U.S. at 996–1009, 111 S. Ct. 2680 (1991) (Kennedy,
J., concurring in part and concurring in judgment)); see also William W. Berry, The
Evolving Standards, As Applied, FLORIDA L. REV. (July 15, 2021) (forthcoming, available
at SSRN: https://perma.cc/7FRF-BNVJ) at *29 (acknowledging the United States Supreme
Court has “not articulated, in a majority opinion, the approach for an individual as-applied
challenge” to a sentence of life in prison without the possibility of parole for a juvenile).
Regardless, as articulated by Justice Sotomayor in her dissenting opinion, see Jones, ___
U.S. at ___ n.8, 141 S. Ct. at 1337 n.8 (Sotomayor, J., dissenting), the quote from
Montgomery relied upon by the majority would amount to an as-applied test of
proportionality under the Eighth Amendment.
16
prohibited from receiving a sentence of life in prison without the possibility of parole,
regardless of the severity of their crimes. Such a categorical prohibition conflicts with
Jones’s holding that there is no requirement for a sentencing court to make a finding, either
explicitly or implicitly, of permanent incorrigibility prior to sentencing a juvenile offender
to life in prison without the possibility of parole. See Jones, ___ U.S. at ___, 141 S. Ct. at
1313, 1319, 1322 (rejecting claims it was overruling Miller and Montgomery and stating
“[w]e instead rely on what Miller and Montgomery said—that is, their explicit language
addressing the precise question before us and definitively rejecting any requirement of a
finding of permanent incorrigibility[]”) (emphasis added).
I cannot agree Petitioner’s crimes reflected “transient immaturity[,]” Jones, ___
U.S. at ___ n.6, 141 S. Ct. at 1337 n.6 (Sotomayor, J., dissenting), meriting a determination
that his sentences were grossly disproportionate as applied. As explained above, we are
concerned with whether the severity of sentence imposed is grossly disproportionate to the
severity of the crime committed, and whether the crime committed is indicative of transient
immaturity. In order to render this determination, it is helpful to revisit Judge Moylan’s
discussion in Muhammad of the crimes committed by Petitioner in Maryland:
Although the reign of terror perpetrated by Muhammad and Malvo ultimately
spread over seven separate jurisdictions and involved [ten] murders and
[three] attempted murders, the epicenter was unquestionably Montgomery
County. Six of the ten murders were committed in Montgomery County.
The terror began in Montgomery County on Wednesday evening, October 2,
2002. The terror ended in Montgomery County on Tuesday evening, October
22, 2002.
Seized with epidemic apprehension of random and sudden violence, people
were afraid to stop for gasoline, because a number of the shootings had
occurred at gas stations. Schools were placed on lock-down status. On one
17
occasion, Interstate 95 was closed in an effort to apprehend the sniper. A
multi-jurisdictional state and federal task force was formed to cope with the
crisis. “Hot lines” to receive tips were created by both the Montgomery
County Police Department and the Federal Bureau of Investigation. Over
60,000 tips were ultimately received. The sense of dread that hovered over
the entire community was immeasurable. The six lives that were taken were
but a part of an incalculable toll.
1. James Martin
James Martin was a systems analyst for the National Ocean and Atmospheric
Administration. At just after 6 P.M. on October 2, 2002, he was standing in
the parking lot of a Shoppers Food Warehouse in Wheaton. Three witnesses
heard a “loud bang” as Martin clutched his chest, gave a cry for help, and
collapsed to the ground. He died almost immediately from a bullet fired into
his back.
It was determined that the shot had been fired from the rear of the parking
lot. There was later recovered from Muhammad and Malvo, on October 24,
a Bushmaster XM–15 semiautomatic .223–caliber rifle with a muzzle
velocity of approximately 3,000 feet per second. The autopsy of Martin
showed that his injuries were consistent with those inflicted by a .223–caliber
bullet fired from a Bushmaster rifle. The medical examiner testified that a
.223–caliber bullet fired by a high velocity weapon leaves a distinctive and
extremely devastating injury, as it did to Martin, because the bullet fragments
when it hits the body, causing “a tremendous amount of damage.”
* * *
2. James Buchanan
The senseless killing of October 2 escalated into a murderous rampage by
the morning of October 3. James Buchanan, who owned and operated a
landscaping business, was mowing the lawn at the Fitzgerald Auto Store near
the White Flint Mall at about 7:45 A.M. Gary Huss, an employee at the auto
store, heard a “loud bang” but looked around and saw nothing. A minute or
two later, another employee rushed into his office and said that “someone
was dead on the parking lot.” Another employee had also heard a “loud
shotgun blast” and saw Buchanan grab his chest, stumble toward the gate,
and fall. Buchanan lay dead with a “huge wound” to his chest. The post-
mortem examination revealed that a single bullet had entered Buchanan’s
body from the back. The wound was consistent with one caused by a .223
rifle shot fired by a high velocity weapon.
18
3. Premkumar Walekar
No more than 40 minutes after Buchanan was killed, Premkumar Walekar, a
taxi driver, was filling his car with gasoline at a nearby Mobil station. Dr.
Caroline Namrow was also at the gas station when she heard a “very loud
bang” and then saw Walekar walk toward her, pleading, “Call an
ambulance.” Walekar collapsed to the ground and Dr. Namrow called 911
on her cell phone. She then attempted to administer CPR, but to no avail.
Walekar was pronounced dead en route to the hospital.
The autopsy revealed that the fatal wound was from a long-range shooting.
The examiner described a wound showing a “lead snowstorm” effect inside
Walekar’s chest, consistent with the firing of a high velocity rifle, such as a
.223 rifle. After the October 24 arrest of Muhammad and Malvo, a ballistics
examination showed that the lead fragments found in Walekar’s chest had
definitely been fired from the Bushmaster rifle recovered from Muhammad’s
car.
4. Maria Sarah Ramos
Less than 30 minutes later, Maria Sarah Ramos, a 32–year–old wife and
mother who worked as a housecleaner, was shot through the head and died
instantly. She was sitting on a bench at Leisure World Plaza, waiting for her
employer to pick her up. A resident of a nearby retirement community was
walking to the mailbox when he heard a “huge explosion” and saw Mrs.
Ramos “slump over” with blood “pouring from her head.”
* * *
5. Lori Lewis Rivera
Lori Lewis Rivera was a 25–year–old nanny who was vacuuming her mini-
van at a Shell station when she was fatally shot in the back a few minutes
after 10 A.M. that same day. Maria Welsh had been loading groceries into
her car on the parking lot of a Safeway store just behind the Shell station on
Connecticut Avenue when she heard a “loud bang.” As she drove away from
the Safeway, she saw a woman lying on the ground near the vacuum cleaner
at the nearby Shell station. The woman was calling for help, and Ms. Welsh
called 911. When help arrived, Ms. Rivera had no pulse.
The autopsy revealed a gunshot wound to the back with no exit wound. The
wound was consistent with one inflicted by a high velocity rifle. The
19
ballistics examination revealed that the bullet taken from Ms. Rivera had
been fired from John Muhammad’s Bushmaster rifle.
* * *
6. Conrad Johnson
By the night of October 3, the vortex of carnage had moved beyond
Montgomery County into 1) the District of Columbia; 2) Prince George’s
County, Maryland; and 3) four separate counties in northern Virginia. For
the last of the [thirteen] shootings and [ten] murders, however, the scene of
the crime, on October 22, returned to Montgomery County. At just before
six A.M., Conrad Johnson, a husband and father of two sons and a bus driver,
was shot while stepping out of his bus. A police officer found Johnson lying
on the floor of the bus, bleeding from his chest but still conscious. Doctors
were unable to control the extensive hemorrhaging and Johnson died on the
operating table. The ballistics examination confirmed that the bullet that
killed him had been fired by John Muhammad’s Bushmaster rifle.
The officers who responded to the scene of the shooting searched a nearby
wooded area. They found a black duffel bag, a single left-handed brown
glove, and a note which had been placed inside two plastic ziplock bags and
attached to a tree. What turned out to be Malvo’s DNA was found on one of
the ziplock bags and on the glove. Muhammad could not be excluded as the
source of DNA extracted from a hair found on the duffel bag. The note
declared, as had two earlier notes in Prince George’s County and in Ashland,
Virginia, “For you, Mr. Police, call me God.” The note also taunted the
police for their “incompetence” and warned that “Your children are not safe.
Can you hear us now? Do not play these childish games with us. You know
our demands. Thank you.” The note concluded, “Next person, your choice.”
177 Md. App. at 200–04, 934 A.2d at 1066–69. Petitioner was four months shy of his
eighteenth birthday when he participated in the intentional execution of six individuals in
Maryland, at complete random, while they went about their daily lives. Between each
murder, he had the opportunity to stop, reflect, and consider what he was he was doing. As
aptly stated by Judge Moylan, “[t]he six lives that were taken were but a part of an
incalculable toll[]” that froze and terrorized an entire community. Id. at 200, 934 A.2d at
20
1066. These were not the only murders committed by Petitioner and Mr. Muhammad.
More murders were planned, and no doubt would have been carried out had law
enforcement not finally apprehended them on October 24, 2002.
In determining whether Petitioner’s crimes were representative of “transient
immaturity,” it is relevant that Petitioner was nearly an adult. It is relevant that he killed,
not only the six people in Montgomery County, but four others in Virginia and the District
of Columbia,6 and attempted to kill three others, including a thirteen-year-old student in
Prince George’s County.7 Id. at 207, 934 A.2d at 1070. It is relevant each of the killings
6
Petitioner has also confessed to murders committed in Washington State, Arizona,
Louisiana, and Alabama, and is suspected of more. See Josh White, Lee Boyd Malvo, 10
years after D.C. area sniper shootings: ‘I was a monster’, WASH. POST (Sept. 29, 2012)
https://perma.cc/TJF9-UZ92; Belway Snipers, FEDERAL BUREAU OF INVESTIGATION,
https://perma.cc/REN4-Y9YY (last visited Apr. 11, 2022); Arthur H. Rotstein, Convicted
sniper confesses to 2002 Arizona killing, police say, THE SEATTLE TIMES (Oct. 28, 2006,
12:00 AM) https://perma.cc/HPC8-NYAW; Eliott C. McLaughlin, Sniper’s apology
brings closure, no justice, CNN (Mar. 4, 2010, 9:54 AM) https://perma.cc/8MPJ-QBSF.
7
Judge Moylan described that shooting as follows:
Thirteen-year-old Iran Brown was dropped off by his aunt at the Benjamin
Tasker Middle School in Prince George’s County, Maryland, at
approximately 8 A.M. on October 7. As he waited in front of the school for
the doors to be opened, he heard a loud bang and felt a sharp and sudden pain
in his chest. He remembered nothing further until he woke up in the
Children’s Hospital one week later. His aunt testified that just after she
dropped Iran off, she heard him screaming her name and saw him lying on
the ground. She rushed him to the clinic just around the corner and called
911. Iran remained hospitalized for approximately two months. He suffered
damage to many of his internal organs; he lost his spleen, parts of his
pancreas and liver, and 80% of his stomach. The ballistics examination
revealed that the bullet that pierced his body had been fired from John
Muhammad’s Bushmaster rifle.
Muhammad, 177 Md. App. at 207, 934 A.2d at 1070.
21
were perpetrated in a removed, calculated, and repeated fashion, after which Petitioner had
the opportunity to stop and reflect about what he had done, and affirmatively chose to
continue. Under these circumstances, I cannot agree Petitioner’s crimes were indicative of
“transient immaturity” such that his sentences of life in prison without the possibility of
parole are unconstitutionally disproportionate. 8
The comments made by the circuit court during Petitioner’s sentencing proceeding
do not suggest otherwise as to require Petitioner’s resentencing. The court found that
Petitioner “knowingly, willingly, and voluntarily participated in the cowardly murders of
innocent, defenseless human beings.” (Emphasis added). The State likewise characterized
Petitioner’s crimes as perpetrated by a “cognizant, thinking, and deliberate 17-year-old”
that was “without mental defect” and who should “bear full responsibility for his criminal
actions.” Petitioner’s culpability in front of his crimes was not negated simply because the
sentencing court and the State acknowledged Petitioner had “changed” since coming into
custody. Neither does that recognition equate to a determination that Petitioner’s crimes
were the result of “transient immaturity.” I therefore reject the Majority’s conclusion that
that Petitioner’s sentences were disproportionate as applied under the Eighth Amendment.
8
In passing JUVRA, the General Assembly prohibited imposing sentences of life
in prison without the possibility of parole for juvenile offenders sentenced after October 1,
2021. See Md. Code, Criminal Procedure § 6-235; 2021 Maryland Laws Ch. 61 (S.B. 494).
Thus, the new sentencing court will no longer have the discretion to determine that
Petitioner should be given the same sentences he previously received.
22
Petitioner’s sentences did not violate Article 25
Article 25 of the Maryland Declaration of Rights, which prohibits the imposition of
“cruel or unusual punishments[,]” does not provide Petitioner with any greater protection
than the Eighth Amendment. Petitioner argues because Article 25 uses the conjunction
“or” between the terms “cruel” and “unusual,” it provides greater protection than its Eighth
Amendment parallel, which uses the term “and” between the terms “cruel” and “unusual”.
Petitioner also alleges our practice of interpreting Article 25 in pari materia with the Eighth
Amendment has only occurred in the context of sentences for adult offenders, and
Maryland has traditionally provided greater protections for juvenile offenders.
Contrary to Petitioner’s assertion, we have interpreted Article 25 in pari materia
with the Eighth Amendment when considering the constitutionality of sentences for
juvenile offenders. In Carter v. State, 461 Md. 295, 192 A.3d 695 (2018), we considered
the federal and state constitutional limits of sentences for three juvenile offenders. Id. at
306–08, 192 A.3d at 701–02. In setting the constitutional standard, we discussed Article
25 and stated although “there is some textual support for finding greater protection in the
Maryland provisions[,]” Article 169 and Article 25 “have usually been construed to provide
the same protection as the Eighth Amendment[.]” Id. at 308 n.6, 192 A.3d at 702 n.6. In
so holding, we relied on Thomas v. State, which held:
9
Article 16 of the Maryland Declaration of Rights provides: “[t]hat sanguinary
Laws ought to be avoided as far as it is consistent with the safety of the State; and no Law
to inflict cruel and unusual pains and penalties ought to be made in any case, or at any time,
hereafter.” Petitioner does not advance any arguments premised on Article 16, so it need
not be addressed.
23
Our cases interpreting Article 25 of the Maryland Declaration of Rights have
generally used the terms “cruel and unusual” and “cruel or unusual”
interchangeably. The Court of Special Appeals has suggested that “the
adjective ‘unusual’ adds nothing of constitutional significance to the
adjective ‘cruel’ which says it all, standing alone.” Because the prevailing
view of the [United States] Supreme Court recognizes the existence of a
proportionality component in the Eighth Amendment, we perceive no
difference between the protection afforded by that amendment and by the
25th Article of our Declaration of Rights.
333 Md. 84, 103 n.5, 634 A.2d 1, 10 n.5 (1993) (internal citations omitted) (quoting Walker
v. State, 53 Md. App. 171, 193 n.9 452 A.2d 1234, 1245 n.9 (1982)). Although Petitioner
attempts to distinguish Thomas on the grounds that it is applicable only to sentences for
adults, our holding in Carter, where we expressly applied its reasoning in the context of
juvenile offenders, demonstrates otherwise.
Petitioner does not offer a compelling reason to depart from our well-established
precedent and hold that Article 25 provides greater protection for juvenile offenders than
the Eighth Amendment. Petitioner’s textual argument has already been considered and
dismissed in Thomas, as noted above. 333 Md. at 103 n.5, 634 A.2d at 10 n.5. There, we
explained the term “unusual” likely adds nothing of constitutional significance to the word
“cruel”. Id., 634 A.2d at 10 n.5; see also, Ronald J. Mann, The Individualized-
Consideration Principle and the Death Penalty As Cruel and Unusual Punishment, 29
HOUS. L. REV. 493, 496 n.8 (1992) (explaining the word “unusual” as it appears in the
Eighth Amendment may not have any independent meaning, as the United States Supreme
Court “generally has not endeavored to articulate a separate requirement based on the word
‘unusual,’ but has proceeded by analyzing the word ‘cruel’”).
24
The examples given by Petitioner of instances where Maryland has provided
heightened protections for juvenile offenders are all instances where the General Assembly
has legislatively chosen to do so, not when this Court has done so through an expansive
interpretation of the Maryland Constitution.10 Fundamentally, they do not support
Petitioner’s interpretation of Article 25.
JUVRA cures any alleged deficiencies in Petitioner’s Sentence
The General Assembly has most recently provided additional protections for
juvenile offenders through JUVRA, codified in Md. Code, Criminal Procedure (“Crim.
Proc.”) §§ 6-235; 8-110. See 2021 Md. Laws, Ch. 61. Crim. Proc. § 8-110 provides
juvenile offenders who have been sentenced prior to October 1, 2021, like Petitioner,
automatically become eligible to have their sentences reduced after serving twenty years
in prison. The General Assembly has provided Petitioner with an avenue which, although
not guaranteed, may lessen his sentences.
10
Specifically, Petitioner mentions:
Maryland was one of the first States to pass legislation establishing a “House
of Refuge for Juvenile Delinquents,” Acts of 1830, ch. 64, as part of a
progressive movement that sought to “rescue children from the degradations
of adult prison.” Nell Bernstein, Burning Down the House: The End of
Juvenile Prison 38 (2014). Maryland was one of the first States to create a
specialized court for juvenile offenders. See Acts of 1902, ch. 611.
Maryland banned capital punishment for juvenile offenders nearly two
decades before Roper held that this practice was “cruel and unusual.” See
Acts of 1987, ch. 626.
(Footnote omitted).
25
In that manner, JUVRA could be said to remedy any alleged constitutional defect
regarding Petitioner’s sentences. The United States Supreme Court in Montgomery made
clear that resentencing is not necessary to cure a Miller violation. In Carter, we explained
that a violation of Miller may be remedied by permitting the offender a “‘meaningful
opportunity to obtain release based on demonstrated maturity or rehabilitation’ – by parole
or otherwise.” 461 Md. at 340, 192 A.3d at 720 (emphasis added). As discussed above,
Petitioner is not constitutionally entitled to meaningful opportunity for release, and the
sentences he received met the requirements of the Eighth Amendment and Article 25.
Nonetheless, JUVRA still provides him with such an opportunity through the possibility
of a sentence reduction.
Petitioner argues JUVRA does not grant him a meaningful opportunity to obtain
release because he has not begun to serve his sentences in Maryland. He contends that, at
a minimum, he would not become eligible for a sentence reduction under the statute for
another twenty years, and indeed, may never serve his Maryland sentences if he is not
granted parole in Virginia. The fact that Petitioner was convicted, sentenced, and is
presently incarcerated for crimes he committed in other states has no effect on the legality
of his sentences in Maryland.
Petitioner also argues it is not clear whether he would be required to serve twenty
years for each of his six life sentences before becoming eligible for a sentence reduction
under JUVRA. In Carter, we explained:
There may be any number of circumstances under which an inmate – adult
or juvenile – comes to be serving consecutive sentences that add up to a
lengthy term of incarceration. At one end of the spectrum, an individual may
26
embark on a serious crime spree, involving, for example, a series of armed
robberies or sexual assaults over weeks or months or even years. Whether
the crimes are prosecuted together or separately, the courts may sentence the
individual to significant periods of incarceration for each incident. These
circumstances are least likely to warrant the aggregate sentence being treated
as a de facto life sentence. The number of crimes, their seriousness, and the
opportunity for the juvenile to reflect before each bad decision also makes it
less likely that the aggregate sentence is constitutionally disproportionate
even after taking youth and attendant characteristics into account.
461 Md. at 356–57, 192 A.3d at 731 (emphasis added). Petitioner’s crimes undoubtably
fall under the “serious crime spree” end of the spectrum, as Petitioner committed six
murders in Maryland and had the opportunity to reflect between each of them. Insofar as
Petitioner’s eligibility for a sentence reduction under JUVRA after twenty years is akin to
a term of years sentence, being required to a serve minimum of twenty years for each of
those six sentences still does not amount to a de facto life sentence under Carter.
CONCLUSION
As reflected above, the Eighth Amendment requires only that Petitioner received an
individualized sentencing proceeding in which the sentencing court had discretion to give
him a sentence amounting to less than life in prison without the possibility of parole.
Petitioner received such a proceeding. It is also evident, both because the sentencing court
had discretion and from the record itself, that the court considered Petitioner’s youth and
attendant characteristic prior to sentencing him. Any alleged finding of “corrigibility” did
not render Petitioner’s sentences unconstitutionally disproportionate as applied. Rather the
proportionality of Petitioner’s sentences must be weighed against the severity of his crimes.
Petitioner committed some of the worst crimes in the history of the State. It was not grossly
disproportionate that a heavy penalty was imposed. Article 25 of the Maryland
27
Declarations of Rights does not provide Petitioner any greater protection than the Eighth
Amendment. Finally, any alleged constitutional insufficiency has been cured by the
General Assembly’s passage of JUVRA. Respectfully, I dissent and would affirm the
sentences imposed on Petitioner by the circuit court.
Judge Gould has authorized me to state that he joins in this opinion.
28
The correction notice(s) for this opinion(s) can be found here:
https://mdcourts.gov/sites/default/files/import/appellate/correctionnotices/coa/29a21cn.pdf | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487987/ | 11/18/2022
IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE
AT NASHVILLE
Assigned on Briefs September 13, 2022
STATE OF TENNESSEE v. AARON DEWAYNE TROUTT
Appeal from the Circuit Court for Coffee County
Nos. 42684, 42137 Vanessa A. Jackson, Judge
No. M2021-01248-CCA-R3-CD
The Defendant, Aaron Dewayne Troutt, appeals as of right from the trial court’s dismissal
of his Tennessee Rule of Criminal Procedure 36 motion to correct a clerical error. The
Defendant contends that the trial court erred by concluding it was without jurisdiction to
modify a final judgment to award behavioral and pretrial jail credit. After review, we
affirm the trial court’s decision in part, reverse in part, and remand for findings on whether
a clerical error exists regarding the Defendant’s pretrial jail credit.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed in
Part; Reversed in Part; Case Remanded
KYLE A. HIXSON, J., delivered the opinion of the court, in which JAMES CURWOOD WITT,
JR., P.J., and ROBERT L. HOLLOWAY, JR., J., joined.
Aaron Dewayne Troutt, Henning, Tennessee, Pro Se.
Herbert H. Slatery III, Attorney General and Reporter; Lindsay H. Sisco, Assistant
Attorney General; Craig Northcott, District Attorney General; Jason Ponder, Assistant
District Attorney General, for the appellee, State of Tennessee.
OPINION
I. FACTUAL AND PROCEDURAL HISTORY
This appeal involves the amount of behavioral and pretrial jail credit due the
Defendant following his guilty-pleaded convictions related to two sets of separate criminal
incidents. In case number 42137 (“the criminal simulation case”), the Defendant was
arrested on June 12, 2015, for criminal simulation.1 He posted bond and was released on
July 14, 2015. Subsequently, the Defendant was placed in custody on this case and was
released on October 13, 2015.2 In case number 42684 (“the evading arrest case”), the
Defendant was arrested on January 18, 2016, and charged with multiple drug and driving-
related offenses.3 The record before this court does not indicate that the Defendant posted
bond on the evading arrest case, nor does it indicate whether his bond in the criminal
simulation case was revoked as a result of his arrest in the evading arrest case. At some
point following his January 2016 arrest, the Defendant was sent to the Tennessee
Department of Correction (“TDOC”) because, on April 18, 2018, the trial court ordered
that the Defendant be returned from TDOC custody for a plea hearing on both cases in
Coffee County on April 25, 2018. On April 25, 2018, the Defendant pleaded guilty to one
count of criminal simulation in case number 42137 and to one count each of felony evading
arrest and the lesser-included offense of simple possession of methamphetamine in case
number 42684. The judgment in the criminal simulation case awarded the Defendant
pretrial jail credit from June 12, 2015, to July 14, 2015, and from October 7, 2015, to
October 13, 2015. The judgment further indicated that the sentence ran consecutively to
“all sentences previously imposed and [to] Coffee County case [42684.]” The judgments
in the evading arrest case contained no pretrial jail credit, nor did the prosecutor announce
that the Defendant was entitled to any credit at the guilty plea hearing. The judgment for
the felony evading arrest conviction indicated that the sentence ran consecutively to “all
sentences previously imposed and Coffee County case [sic][.]” There was no discussion
at the plea hearing in either case concerning pretrial jail credit for the period from January
18, 2016, to April 25, 2018.
On June 25, 2021, the Defendant filed a pro se motion to correct a clerical error
pursuant to Tennessee Rule of Criminal Procedure 36. He argued that the trial court failed
to award him behavioral credit and pretrial jail credit for the criminal simulation case and
the evading arrest case for his time in custody from January 18, 2016, to April 25, 2018.
The trial court, citing Barabbas A. Brown v. State4 and the Uniform Administrative
Procedures Act (“UAPA”),5 summarily dismissed the Defendant’s motion, stating that it
“was without jurisdiction to order a modification of the final judgment for this [TDOC]
inmate.” This timely appeal followed.
1
A grand jury later indicted the Defendant and charged him with 20 counts of criminal simulation.
2
The technical record does not indicate when or why the Defendant was placed in custody, only
that he was released on October 13, 2015, after posting bond for a “violation of probation.” The prosecutor
announced at the subsequent plea hearing that the Defendant was entitled to pretrial jail credit from October
7, 2015, to October 13, 2015. These dates are reflected in the judgment form for the criminal simulation
case.
3
A grand jury later indicted the Defendant and charged him with these offenses, as well as the
offense of felony evading arrest.
4
See Barabbas A. Brown v. State, No. E2004-01487-CCA-R3-CD, 2005 WL 74095 (Tenn. Crim.
App. Jan. 13, 2005).
5
See Tenn. Code Ann. §§ 4-5-101, et seq.
-2-
II. ANALYSIS
The Defendant contends the trial court erred when it summarily dismissed his Rule
36 motion on jurisdictional grounds. He argues that the trial court had jurisdiction to
correct his judgments for both the criminal simulation conviction and the evading arrest
conviction to reflect his earned behavioral and pretrial jail credit. He further argues that
the trial court abused its discretion by failing to exercise its jurisdiction to correct his
judgments. The State contends the trial court correctly ruled that it did not have jurisdiction
to address the Defendant’s behavioral credit. Further, the State argues that the Defendant
has not shown that he is entitled to Rule 36 relief regarding his pretrial jail credit. We
agree with the State regarding the behavioral credit issue but conclude that the trial court
erred by determining that it lacked jurisdiction to address the Defendant’s pretrial jail
credit.
Tennessee Rule of Criminal Procedure 36 provides that “the court may at any time
correct clerical mistakes in judgments, orders, or other parts of the record, and errors in the
record arising from oversight or omission.” Clerical errors “arise simply from a clerical
mistake in filling out the uniform judgment document and may be corrected at any time[.]”
State v. Brown, 479 S.W.3d 200, 208 (Tenn. 2015) (citation and internal quotations
omitted). Correcting clerical mistakes may include “supply[ing] omitted or overlooked
information.” State v. Allen, 593 S.W.3d 145, 154 (Tenn. 2020).
While a trial court’s ruling on a Rule 36 motion is generally reviewed on appeal for
an abuse of discretion, see Marcus Deangelo Lee v. State, No. W2013-01088-CCA-R3-
CO, 2014 WL 902450, at *3 (Tenn. Crim. App. Mar. 7, 2014) (citation omitted), the court
in this appeal must determine whether the trial court correctly ruled that it lacked
jurisdiction to hear the Defendant’s motion. This court is required to “consider whether
the trial and appellate court have jurisdiction over the subject matter, whether or not
presented for review.” Tenn. R. App. P. 13(b). Because a determination of whether subject
matter jurisdiction exists is a question of law, we will review the trial court’s ruling on
jurisdiction de novo without a presumption of correctness. See State v. Cawood, 134
S.W.3d 159, 163 (Tenn. 2004) (citation omitted).
A. Behavioral Credit
TDOC is “responsible for calculating the sentence expiration date and the release
eligibility date of any felony offender sentenced to the department and any felony offender
sentenced to confinement in a local jail or workhouse for one (1) or more years.” Tenn.
Code Ann. § 40-35-501(r). This calculation includes credit for an inmate “who exhibits
good institutional behavior” while incarcerated. See id. § 41-21-236(a)(2)(A). Claims
involving sentence reduction credit, such as credits earned for good institutional behavior,
“must be reviewed pursuant to the [UAPA.]” See Tucker v. Morrow, 335 S.W.3d 116, 122
(Tenn. Crim. App. 2009), overruled on other grounds by Brown, 479 S.W.3d at 212.
-3-
Because TDOC is solely responsible for granting sentencing credit based upon the
Defendant’s good institutional behavior, the trial court correctly ruled that it lacked
jurisdiction to correct the Defendant’s judgments on this basis.
B. Pretrial Jail Credit
While TDOC bears the sole responsibility of granting sentence reduction credit, trial
courts have a statutory duty to award pretrial jail credit:
The trial court shall, at the time the sentence is imposed and the
defendant is committed to jail, the workhouse or the state penitentiary for
imprisonment, render the judgment of the court so as to allow the defendant
credit on the sentence for any period of time for which the defendant was
committed and held in the city jail or juvenile court detention prior to waiver
of juvenile court jurisdiction, or county jail or workhouse, pending
arraignment and trial. The defendant shall also receive credit on the sentence
for the time served in the jail, workhouse or penitentiary subsequent to any
conviction arising out of the original offense for which the defendant was
tried.
Tenn. Code Ann. § 40-23-101(c). The judgment form for any criminal conviction shall
indicate “[t]he amount, if any, of pretrial jail credit awarded pursuant to § 40-23-101[.]”
Id. § 40-35-209(e)(1)(P). The appropriate avenue for relief for a defendant who seeks to
challenge the trial court’s failure to award pretrial jail credit is to seek correction of a
clerical mistake pursuant to Tennessee Rule of Criminal Procedure 36. Steven Anderson
v. Russell Washburn, Warden, No. M2018-00661-SC-R11-HC, 2019 WL 3071311, at *1
(Order) (Tenn. June 27, 2019) (citing Brown, 479 S.W.3d at 212-13).
In finding that it lacked jurisdiction to hear the Defendant’s Rule 36 claim related
to his pretrial jail credit, the trial court relied upon this court’s 2005 opinion in Barabbas
A. Brown v. State, which held that a sentencing court loses jurisdiction to modify pretrial
jail credit on a judgment once a defendant is transported to TDOC. 2005 WL 74095, at *2
(citing Tenn. Code Ann. §§ 40-35-212(c), -314(c) (2003)). The trial court’s reliance on
Barabbas A. Brown, however, does not account for the more recent authority from
Anderson stating that Rule 36 is the appropriate vehicle for claims of this nature, nor does
it account for the language of Rule 36 itself, which states that sentencing courts may correct
clerical errors in judgments “at any time[.]” Multiple panels of this court have cited
Anderson for the proposition that Rule 36 may be used to challenge a trial court’s failure
to award pretrial jail credit. See, e.g., State v. Quinton Deshawn Mostella, No. M2020-
01474-CCA-R3-CD, 2022 WL 187438, at *2 (Tenn. Crim. App. Jan. 21, 2022), perm. app.
denied (Tenn. May 18, 2022); State v. Marvin Magay James Green, No. E2020-00968-
CCA-R3-CD, 2021 WL 5578142, at *2 (Tenn. Crim. App. Nov. 30, 2021); State v. Jimmy
Lee Pearce, Jr., No. W2020-00552-CCA-R3-CD, 2021 WL 3136727, at *3 (Tenn. Crim.
-4-
App. July 22, 2021); State v. Titus Avery Brittain, W2019-01249-CCA-R3-CD, 2020 WL
5587413, at *2 (Tenn. Crim. App. Sept. 17, 2020) (noting that, while a trial court generally
lacks jurisdiction to modify a sentence after the judgment is final and the defendant has
been transferred to TDOC, a trial court may correct clerical errors related to pretrial credit
in a judgment at any time pursuant to Rule 36).
For these reasons, we conclude that the trial court erred by determining that it lacked
jurisdiction to hear the Defendant’s pretrial jail credit claim under Rule 36. The State
argues that we should nevertheless affirm the trial court’s dismissal of the motion because
“there was no prima facie showing of clerical error” on the record presented. Because the
trial court did not reach the merits of the Defendant’s pretrial jail credit claim, we decline
to address the merits of the claim on appellate review. See, e.g., State v. Ashley Carver,
No. W2019-01727-CCA-R3-CD, 2020 WL 2499940, at *2 (Tenn. Crim. App. May 14,
2020) (remanding the case for Rule 36 review following an erroneous summary dismissal).
In this instance, the trial court is in a much better position to discern whether the judgments
in this case correctly included all of the pretrial jail credit to which the Defendant is
statutorily entitled or whether the judgments need to be corrected to supply “omitted or
overlooked information.” See Allen, 593 S.W.3d at 154.
III. CONCLUSION
The trial court correctly ruled that it lacked jurisdiction over the Defendant’s
behavioral sentencing credit. However, the trial court erred in summarily dismissing the
Rule 36 motion as it relates to the Defendant’s pretrial jail credit. Accordingly, the order
dismissing the Rule 36 motion is affirmed in part and reversed in part. This matter is
remanded to the trial court for review in accordance with Rule 36.
KYLE A. HIXSON, JUDGE
-5- | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8487999/ | Nicholas, J.
An appeal has been taken from the judgment of the Criminal Court of New Orleans, pronounced upon the verdict of the jury, who found the accused guilty of manslaughter. A motion for a new trial, and also a motion in arrest of judgment, were both made in the inferior court, by the prisoner, and overruled. The correctness of the opinion of the court, a qua, upon these two motions, forms the subject of this appeal. A new trial was urged, upon two grounds : 1st. Because the verdict was contrary to law and evidence — 2d. On account of the discovery of new testimony since the trial. The judgment was sought to be arrested, on the following grounds: “ 1st. That the indictment is not wholly in the English language, as required by the laws and constitution of the State, and said indictment is wholly unmeaning, void and illegal.” 2d. That there is no intelligible or sufficient description of the means of death, or any mortal *556wound or blow. 3d. That the length and breadth of the wound alleged to have been mortal is not set forth in the indictment, as required by law, nor does it in any other manner appear from the indictment, that the wound given was sufficient to cause the death. 4th. That during the adjournment of the court from, day to day, and while the trial was proceeding, the jury was allowed repeatedly to separate and go to their homes and business, instead of being kept together, under the sheriff’s charge, during the said adjournment, as the law absolutely requires, for the purpose of preventing undue prejudices and influences from reaching the jury and determining the verdict, as actually happened in this case.”
Were the court td confine its examination to those points'alone upon which its judgment is based, the fourth reason which was assigned why the judgment should be arrested, would be sufficient for that purpose ; but believing it important for the proper administration of the criminal law of the State, that all doubtful points should be elucidated and finally settled whenever practicable, so as to furnish a proper guide for the inferior tribunals, the various reasons assigned for the reversal of the judgment will be examined, and in the order in which they are presented by the record. And first, as it regards the affidavit of the discovery of new testimony. This court has already said, in the case of The Stale v..Clark, ante, 533, that it is not sufficient to warrant the granting of a new trial, that the neioly discovered evidence might have the effect of throwing a shade of doubt over some of the incidental circumstances of the trial; it should appear to be of so decided a character, that if admitted, it would give an acquitting complexion to the case. This opinion, the court believes, establishes the true doctrine; in other words,, the testimony should appear to the court to be such as might probably produce a different verdict, to justify the court in sustaining the motion. Whether the affidavit in the present case comes within the rule here laid down, is not necessary to decide.
The four grounds urged in arrest of judgment will be examined seriatim, and in their order.
The argument of the counsel for the prisoner informs the court, that the indictment is not wholly in the English language, in this, that the word extravasion, which forms a part of the description of the cause whence death ensued, is not an English word, and consequently that the indictment is not in the language required by the constitution. The court believes that this strictness would not be required in an English court, nor by an English judge. In 1st Chitty, p. 141, (Riley’s edition, 1819,) it is stated, that this strictness does not so far prevail as to render an *557indictment invalid, inconsequence of the omission ofaletter, which does not change] the word into another of a different signification, as undertood for tmderstood, and recevd. for received. It is also laid down, that every indictment must charge with such certainty and precision, that it may be understood by every one. Now if it be admitted that there is no such word in the English language as extravasion, neither is there any such word as undertood, which latter word in England was considered amply sufficient and explicit, and sufficiently precise to be understood by every one, and therefore that the prisoner should not be permitted to pretend ignorance of what every one else understood. If the prisoner in the present case complain, that he does not understand the word extravasion, neither would he have understood the word extravasation (the word intended to be used, as admitted in the argument,) if that word had been used, and which would have been unobjectionable. Comprehending the word extra-vasation, therefore,"which he would have]been bound to do had it been found in the indictment, it is difficult to conceive how he could have been bewildered by the substitution of the word extravasion. Knowledge of the genuine word would have furnished an unerring guide to the meaning of the substitute. The charge however is properly laid in the indictment, if the objectionable word were entirely omitted, as surplusage, which the court was authorized to do. Vide State v. McCoy and others, decided by this court at its last term. Formerly in England, the judges felt themselves constrained to adhere so strictly to form, that public justice was in many cases evaded, and the most dangerous malefactors let loose upon society, in consequence of the omission of some senseless and unmeaning form. The failure on the part of the prosecution to dot an i, or to cross a t, or Something equally absurd, was considered sufficiently fatal to vitiate the whole proceedings. Substance was sacrificed to form, or rather form became substance, and substance mere form. A more correct and just appreciation of criminal justice has banished from the English courts these legal absurdities, which answered no other purpose than to protect and screen the guilty from the just punishment of their crimes. They will no longer permit the guilty man to escape punishment by averring that he cannot comprehend, and does not understand, what is palpable and evident to the common sense of every body else. True, these modern changes may not have the binding force of law in Louisiana; still it is believed, that the principles of justice should and must be the same every where, and should be carried out upon all occasions, when not prohibited by positive legal enactment. Without inquiring whence the English courts and English judges derive authority for these wise, salu*558tary and indispensable changes, that authority was undeniably confided to the courts of criminal jurisdiction in Louisiana, by the act of 1805, introducing the common law of England; this train of reasoning is applicable to, and disposes of, the first, second and third reasons filed in arrest of judgment. Vide for the description of the wound, The State v. McCoy and others, already referred to.
The separation of the jury, this court is of opinion, is fatal to the regularity of the proceedings of the court below, and entitles the accused to relief. This ground not being apparent upon the record when the motion was made, offered no cause to arrest the judgment; but the fact that the jury did separate, being shown to this court now, by the transcript filed and proceedings had in the lower court, will be examined as if offered on the motion for a new trial, which was the proper course.
The decisions upon this point, both in the United States and in England, have been various and contradictory. In early times, the rule was unbending, that the separation of the jury was fatal to their verdict, and in cases where the court was obliged, ex necessitate, to adjourn, the jury was placed in charge of a bailiff, who was sworn to keep them together. 6 Durnf. &. East, 530. In modern times the rigor of this rule has, in many instances, been relaxed ; but the decisions are so contradictory and conflicting that the question may still be fairly considered unsettled. Thus in Virginia the old rule prevails, and a separation of the jury is fatal to their verdict. In North Carolina the decisions are both ways. 1 Haywood, 241; 2 Haywood, 238. So in New York, in McLeod's Case, as reported by Gould, page 16, the court directed the sheriff to provide lodgings and places to take their meals for the jury, as it would be necessary to keep them together during the whole of the trial, and to provide them, with accommodations as near the court as possible. Graham on New Trials, 91, et seq. 1 Chitty, 628. Roscoe, Crim. Ev. 178. Aliter in Kentucky. The point appearing thus unsettled and sub lite, this court feels itself authorized to give a preference, and to adopt that rule which seems to offer the greatest security to the accused, and, at the same time, trenches in nowise upon any right necessary to ensure the due and proper execution of the law.
In capital cases, the jury should not be permitted to separate after they have been sworn, either with or without the consent of the prisoner. This rigor which the court conceives to have been the universal practice in the country parishes, can lead to no bad consequences. This precaution is necessary to protect the accused from any undue influence which may be exercised upon the members of the jury, even without their knowledge, and can*559not be tortured into a disparagement of their integrity. Improper impressions may and will be made upon their minds by artful and designing men, of which they may be perfectly unconscious; neither can they shut their ears to the expression of popular opinion ; and as well might the administration of the juror’s oath be considered as conveying a doubt of his integrity, as this temporary seclusion from intercourse with the community at large. In cases not capital, courts may, in their discretion, permit the jury to disperse until after they have received the charge of the court; but they should not be permitted to separate after the charge has been given. In these cases, misconduct on the part of the jury will set aside their verdict; in capital cases, upon a separation, misconduct and abuse will always be presumed.
One other question still remains ,to be examined, viz. the extent of the right guaranteed to the accused by article 6, section 18, of the constitution of the State. The section reads as follows: “In all criminal prosecutions the accused shall have the right of being heard, by himself or counsel, of demanding the nature and cause of the accusation against him, of meeting the witnesses face to face; of having compulsory process for obtaining witnesses in his favor” &c.
In the present organization of our courts having criminal jurisdiction, no power is given to them to coerce the personal attendance of witnesses except within restricted territorial limits. The process of no court of original criminal jurisdiction is co-extensive with the State. No statutory provision clothes the Criminal Court of New Orleans, (exempli gratia,) with authority to coerce the personal attendance of Kelly, the witness in this case, who resides in Bayou Sara; and yet this constitutional provision, at first blush, would seem- to confer a right upon the accused of which the Legislature could not deprive him, by making him amenable to the jurisdiction of a court, inefficient, from want of authority, to enforce this constitutional enactment; but to a proper understanding of this article in the constitution, it is necessary to revert to the cause and origin of the principle thus consecrated, not only in our own constitution, but in that of the United States, and of many of our sister States. It should be remembered, that this right was in former times, in England, withheld from the accused ; not only were they denied the right of issuing process for their witnesses, but the witnesses, (if present,) were not permitted to be sworn; the right was at length extorted from the government by the people, and considered at the time an extraordinary concession, not a privilege or absolute right. Our forefathers, recurring to the time when the people had no such right, and the difficulty with which it was wrested from the government, incorporated the principle into the constitution, and *560made it a part of the fundamental law of the land, whence it has been copied into most of the constitutions of the States. Thus explained, it simply means to say, that the accused shall not be debarred the right of issuing subpoenas for his witnesses, as in civil cases. Such is the construction given to a similar provision of the constitution of the United States. It is merely the enunciation of a principle, which to us, in the enjoyment of all the rights of freemen, may otherwise appear uncalled for, preposterous, and too plain a proposition to require insertion in the constitution. With equal propriety might it be said, that the right secured to the accused, in the same article, of being heard by himself or counsel, and the exemption from being compelled to give evidence against himself, as also the prohibition upon the Legislature of passing ex post facto laws, or laws impairing the obligation of contracts, in the following section, were likewise principles too plain to require a constitutional recognition ; and yet, there they are to be found, and will probably find a place in the new as well as in the present constitution.
This view of the article in our constitution is most ably illustrated by Chief Justice Spencer, in the construction given by him to the words, “ nor shall any person be subject for the same of-fence, to be twice put in jeopardy of life or limb,” contained in the fifth article of the amendments to the constitution of the United States. “The expression,” jeopardy of limb, says this enlightened jurist, “ was used in reference to the nature of the offence, and not to designate the punishment of an offence, for no such punishment as loss of limb was inflicted by the laws of any of the States, at the adoption of the constitution. Punishment by the deprivation of the limbs of the offender, would be abhorrent to the feelings and opinions of the enlightened age in which the constitution was adopted, and it had grown into disuse in England fora long period ante-cedently. We must understand the terms, jeopardy of limb, as referring to offences which, informer ages, were punishable by dismemherment, and as intending to comprise the crimes denominated felonies. The question then recurs, what is the meaning of the rule, that no person shall be subject, for the same offence, to be twice put in jeopardy of life and limb. Upon the fullest consideration, which I have been able to bestow on this subject, Í am satisfied it means no more than this; that no man shall be tried twice for Ike same offence. Should it be said, that we can scarcely conceive that a principle so universally acknowledged, and so interwoven in our institutions, should need an explicit and solemn recognition in the fundamental principles of the government of the United States, we need recur only to the history of that period, and to some other of the amendments, in proof of the assertion, that there existed such a jealousy or extreme caution on *561the part of the state governments, as to require an explicit avowal in that instrument, of some of the plainest and best established principles in relation to the rights of the citizens and the rules of common law ; the first article of the amendments prohibits Congress from making any law respecting an establishment of religion, prohibiting the free exercise thereof, or abridging the freedom of speech or of the press, or the right of (he people peaceably to assemble and petition government for a redress of grievances ; the second secures the right of the people to bear arms; and indeed without going into them minutely, nearly all the amendments of that instrument indicate either great caution in defining the powers of the national government, and the rights of the people and the States, or they evince a jealousy and apprehension that their fundamental rights might be impugned, so as to leave no doubt, that in the article under consideration, no new principle was intended to be introduced.” 1 Wheeler’s Criminal Cases, 470, et seq.
This lucid exposition, given by Chief Justice Spencer, of the fifth article of the amendments to the constitution of the United States, furnishes a convincing and satisfactory key by which the eighteenth section, sixth article, of the Louisiana constitution may be opened to our examination, and its true intent and meaning eviscerated and established ; and if the authority of his name were permitted in this instance, by northern abolitionists to exercise the same influence, and to be entitled to the same respect and weight, as is conceded to it by all others, it would put to rest all cavil upon the meaning of the words “ the right of the people peaceably to assemble and to petition,” &c., in the first article of the amendments to the constitution of the United States.
Putting out of view, the question whether the existence of slaves in a sister State be a grieva?ice against which they have a right to petition or not, it merely recognizes, if Judge Spencer’s doctrines and reasoning be correct, the right of the people to assemble and petition ; a right, to be sure, which we can scarcely imagine could ever have been denied or called in question, did we not know, that this was the grievance of which they complained in England, where their peaceable assemblies were dispersed, by order of government (after reading the riot act,) at the point of the bayonet. The people here, therefore, (as they could have done, if no such constitutional provision existed,) may peaceably assemble, and petition Congress, without let or hindrance ; without having before their eyes the fear of soldiery, or their ears offended by the reading of riot acts, &c., leaving to the government afterward to make such disposition of their petitions, and to take such action, as to it may appear meet and proper. The right to assemble and petition circumscribes and comprises *562all that is recognized and all that was intended to be guaranteed to the people. Carrying out the view\ of Judge Spencer, and giving to his reasoning a fair and bona fide application, this would be its legitimate interpretation, securing to the people the right to assemble and petition, and neitherWirporting nor intending any enactment restrictive of the pow^r of government to make any disposition it pleased, of the petitions when presented.
From this view we deduce, that the courts o'f criminal jurisdiction, not being vested with power beyond a certain prescribed and defined limit, compulsory process cannot issue beyond said limit; that the accused has an undoubted right under the constitution, to have his witnesses heard, whether they be found within or beyond said limits; that the provision of the constitution allowing the accused to be confronted with the witnesses against him, is a personal privilege which he may waive; that being entitled to a speedy trial and to compulsory process to enforce the attendance of his witnesses, this latter right can only be exercised when the witness resides or is found within the district; that the Legislature having failed to provide means to coerce the personal attendance of the witnesses, it follows as a necessary corollary, that recourse must be had to the ordinary ancl only remaining method of procuring testimony, viz: by commission.
Wherefore it is ordered, that the judgment of the criminal court be set aside, cancelled and annulled; that a new trial be granted ; and that the said criminal court conform to the principles herein established, upon the trial and prosecution of the appellant, Leonard C. Hornsby. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488000/ | King, J.
The defendant, Abraham Duncan, hairing been convicted of horse stealing, and sentenced to imprisonment at hard labor, has appealed from the judgment of the District Court. The alleged errors which he seeks to have corrected in this court, are setforjthin several bills of exceptions which accompany the record, and in an assignment of errors submitted by his counsel.
The first ground of complaint is, that the judge refused to cause the evidence adduced upon the trial to be taken down in writing by the clerk. We are aware of no law which requires the testimony to be reduced to writing in criminal proceedings of this kind.
The second bill of exceptions is in these words: “ The district attorney put the following question ; 4 Did the prisoner, or did he not, state in what the negro had betrayed him ?’ This question was objected to because it was a leading one ; and because the witness had been consigned by the district attorney previously, and could only be questioned by him on matters growing out of the cross-examination, and that this inquiry did not grow out of the cross-examination.”
A leading question is one which suggests to the witness the answer he is to deliver. The question referred to appears to be free from this objection. It does not indicate the answer which is expected, but merely directs the attention of the witness to the subject, in relation to which he is to testify. In this it offends against none of the rules of evidence.
The strictness of practice in the English courts seems to require, that the re-examination of witnesses should be confined to the subject matter of the cross-examination. Many of the rules with regard to the examination of witnesses, and the introduction of evidence have been much relaxed. It is understood to be now the universal practice of the courts of this State, in both civil and criminal proceedings, to permit a witness, after having been ex*564amined in chief, consigned and cross-examined, tobe again examined by the party introducing him, upon points touching which, he had not before testified ; and subsequently to be recalled, and interrogated in relation to facts material to the issue, which had not been previously elicited or referred to, either from inadvertence or ignorance, that they were within the knowledge of the witness. In civil cases, it has been held, that it is discretionary with the court to permit witnesses to be introduced, even after both parties had announced that the evidence had been closed. The exercise of such a discretion may frequently be as important to the safety of the accused, as to the interest of the State.
In answer to the question propounded by the counsel for the accused to witness; “ Did you send the horse on the night in question for the prisoner to ride, or did you cause the horse to be delivered to him ?” the answer was given ; “ That on the night in question, the confidential servant of Mr. O. came to witness, between eleven and twelve o’clock, and told him that a man had offered him a dollar to get him a horse, and five dollars to get him a horse, saddle and bridle, and the negro promised to steal and take the horse to him. That witness told the negro he could do as he had promised.” The answer was objected to ;* but the court permitted it to go to the jury, “ for the purpose of showing the circumstances under which the horse was sent, and the agency of Aaron Goza in sending the horse, and so instructed the jury.”' We are of opinion that the court did not err. The evidence objected to formed a part of the res gestee, and, as such, comes within one of the exceptions to the inadmissibility in evidence of the declarations of third persons, not made under oath. It has been settled, that if it be material to inquire, whether a certain person gave a particular order on a certain subject, what he has said or written may be evidence of the order. Or where it is material to inquire whether a certain fact has come to the knowledge of a third person, what he has said or written may as clearly show his knowledge as what he has done. I Phil. Ev, 234. Roscoe’s Crim. Ev. 20, 21.
It has been assigned as error, that the instructions of the judge to the jury were incorrect. His charge was in the following words; “ If the confessions of the prisoner were made under any influence produced by promises or threats made, they should not *565be taken as evidence against him. Further, if George Goza delivered, or caused to be delivered, the horse to the prisoner, or •whether or not George Goza was so authorized ; if the prisoner thought he was, and delivery was made by the knowledge of prisoner, and he took him under the said delivery, and not with a view of stealing him, he is not guilty. But if the prisoner thought he was stealing the horse, and George Goza or William Goza permitted the negro to take the horse, and place him where the prisoner could with greater facility steal him, he is guilty of larceny.”
We presume that it was intended to object to the latter part of the charge. A material ingredient in the crime of larceny is, that the goods should be taken without the consent of the owner. It has been held", however, that where the owner has been'notified-of a design formed to steal his goods, which intent he did not originate or suggest, he may, in order to detect the thief, direct his servant or agent to encourage the design, and afford facilities for the completion of the crime, and that the facilities afforded under such circumstances will not affect the criminality of the thief. 2 Russ. 1047. 2 Chitty Grim. Plead. 920. We are of opinion that the charge of the judge was correct. A motion was made in arrest of judgment, upon the ground, “that the jury were improperly and illegally constituted; that the bill of indictment was found by incompetent jurors; and that the foreman of the grand jury did not endorse on the bill “a true bill" but it was admitted by the district attorney, that he had himself endorsed on the bill “a true bill”
The record furnishes us no means of ascertaining whether any of these .alleged irregularities exist. Considering, however, the admission of the district aitorney to have been made, his act was not one which would vitiate the indictment. The words “ a true bill” as well as the capacity of the foreman, may be endorsed upon the indictment by any person under the direction of the grand jury. It is only necessary that the finding should be signed by the foreman; and it is not pretended that this formality was not observed in the present instance.
Judgment affirmed.
It appears from the bill of exceptions that the counsel for the prisoner, who had propounded the question to the witness on his cross-examination, “ objected to that portion of the answer which detailed declarations of the negro, on the ground that the witness could only state what he himself did, and not whqt the negro told him that the prisoner had said.” | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488001/ | Johnson, J.
In April of the present year, the grand jury of the First District, presented a bill of indictment for perjury against the defendant, who, on his arraignment, pleaded not guilty, and the trial progressed until the argument was opened on the merits to the jury by the district attorney, who was followed in the de-fence by J. G. Sever, Esq. At this stage of the proceedings the district attorney, discovering a flaw in the indictment, moved the court for permission to enter a nolle prosequi, which being granted, the jury were discharged from the further consideration of the case, and the accused was remanded to prison. A few days after, the grand jury presented another bill of indictment for the same offence against the defendant. On this new bill he was tried and convicted; and two assignments of error, filed by counsel in this court are relied on, to support the appeal; the first of which is, that the first prosecution was, in contemplation of law, a trial, and the entering of the nolle prosequi at the time it was entered, and the discharge of the jury without the consent of the defendant, were equivalent to an acquittal, which barred any subsequent trial for the same offence. This objection- we are to consider as in the nature of a special plea in bar, which regularly *567ought to have been interposed in the court of the first instance; but we can see no good reason for denying to the accused the full benefit of a discussion of the question in, its present condition. To sustain the position, the fifth article of the amendments to the constitution of the United States is invoked, which contains this provision; “Nor shall any person be subject for the same offence to be twice put in jeopardy of life and limb.” This constitutional prohibition is a re-affirmance of a magna charta maxim of the common law, from which its true meaning has been sought by enlightened jurists, and is now settled, as we understand it, to mean only, that no man shall be tried a second time for the same offence, after a trial by a competent and regular jury upon a good indictment, whether the verdict be one of acquittal or conviction. Tide The People v. Goodwin, Wheeler’s Criminal Cases. United States v. Pedro Gibert and others, 2 Sumner’s R. 19. What then is the test by which we must ascertain and determine whether a person has been once tried? The answer, as it appears to us, is, that it can only arise on a plea of auterfoits acquit, or on a plea of auterfoits convict; and that auterfoits acquit or convict is a good and valid plea, only when the verdict of acquittal or conviction has actually been rendered on a sufficient indictment; hence it follows, that a conviction upon an indictment defective in form, so that no judgment could be pronounced, but one of arrest, ought not to be successfully pleaded in bar of a subsequent prosecution for the same offence. Obviously, because the defendant was never in jeopardy by the first. And it follows again, that an acquittal before a tribunal not competent to try, is void, as coram non judice, and no bar to a second indictment for the same offence; although an acquittal by a competent jury, upon an insufficient indictment, is a finding in the last resort, which will protect the defendant against a second prosecution for the same offence. A defendant, on an insufficient indictment, may demur, and have the judgment of the court discharging him ; or, if he prefers taking the chances of an acquittal, and is tried and convicted, he may be discharged on motion in arrest of judgment; but in neither event will his discharge operate-as a bar to another prosecution for the same offence. The question then recurs, has the defendant, in this view of the subject, in a legal sense, been either acquitted or convicted by the verdict of a jury ? This was not the argument; but it is urged, that the nolle prosequi and discharge of the jury, under the circumstances, were equivalent to an acquittal in judgment of law. This reason is illegal and illogical, unless it can be made to appear, either that the law officer of the State was without authority at that stage of the prosecution to quash, or, if he possessed the power, that the exercise of it, after the evidence *568bad closed and the arguments to the jury bad been opened, operated an acquittal, which would bar a second prosecution in virtue of the constitutional prohibition cited, and the common law maxim on which it is based. From our investigation, we suppose there is no doubt, that the law officer of the State may, at any time before a defendant has actually been tried, on an application to the court, have an indictment quashed, if the prosecution is in good faith, and not instituted from malicious motives, or for the purposes of oppression ; especially, if it also appears, that the indictment is so defective in form that no judgment on conviction could be pronounced on it. Archbold, verbo Indictment, 7th section. And we can perceive no difference in this rule when it is applied to the right and power of the prosecuting officer to enter a nolle prosequi, under similar circumstances. But in either case, whether on motion to quash an indictment, or to enter a nolle prosequi, the presiding judge will take care to prevent abuse and oppression, by not permitting a capricious, arbitrary, or malicious exercise of the power. Bow then, can it be contended, that the entering of the nolle prosequi and the discharge of the jury have resulted in an acquittal of the defendant ? There was no verdict of guilty or of not guilty rendered in the case, and, therefore, no trial. The indictment, as the ground of the nolle prosequi, was averred to be insufficient; which has been repeated in the assignment of error under review. The permission of the court was obtained ; good faith, and not malice, seems to have influenced the conduct of the district attorney, and there is no alternative but the conclusion that, in a legal sense, the defendant, on the first indictment, was not in jeopardy, so as to exclude another prosecution for the same offence. In the case of The People v. Olcott, 2 Johns. Cas. 301, it was decided by Judge Kent, that “ the discharge of the jury in criminal cases must rest with the judge, under all the particular or peculiar circumstances of the caseand in the case of The People v. Goodwin, Spencer, Ch. J., held, that “the power to discharge a jury in a criminal case, is a delicate and highly important trust, and extends as well to felonies as misdemeanors.” In both of these cases the question arose, whether, after disagreement of the jury, when there was no prospect of their agreeing in a verdict, and they were, in consequence, discharged, the defendants were acquitted in law, or whether they could be re-tried. A venire facias de novo was awarded in both -cases, and the hypothesis of an acquittal; on the ground urged, was exploded as an antiquated fiction. In further illustration, Kent holds this emphatic language; “If the court are satisfied that the jury have made long and unavailing efforts to agree, that they are so far exhausted as to be incapable of further discussion and deliberation, this becomes a case *569of necessity and requires interference.” This able jurist further observes; “ All the authorities admit, that when any juror becomes mentally disabled by sickness or intoxication, it is proper to discharge the jury; and whether the mental disability be produced by sickness, fatigue, or incurable prejudice, the application, of the principle must be the same.*’ To-the same end Judge Story, in The United States v. Coolidge, declares, that “ the discretion to discharge a jury existed in all cases; but that it was to be exercised duly in very extraordinary and striking circumstances.” We conclude, therefore, that there can be but few of the profession who now advocate the heresy, that after a jury in a criminal case are once sworn, no other jury, under any possible circumstances, can be lawfully sworn and charged in the same case; although it is perfectly familiar to every iawyer, that systems of law give up their Uncouth barbarisms and “.unseemly nicities” slowly and reluctantly. To sustain our opinion further,we cite a few common law authorities. Blackstone, vol. 4, p. 355, says; “ To render the plea of á former acquittal a bar, it must be a legal acquittal, by judgment upon trial, for substantially the same offence, by a verdict of a petit jury and in Chitty, C. P., 376 “it is laid" down, that in order to plead the plea of auterfoits convict with effect, the crime must be the same fox* which the defendant was before convicted, and the conviction must have been lawful on a sufficient indictment / and that this plea, like that of a former acquittal, is of no avail when the first indictment has been quashed for invalidity, or is ultimately arrested on motion. The proceedings will be set aside and judgment of acquittal will be given; but it will be no bar to a subsequent indictment, which the prosecutor may immediately prefer. Hhwkins and Hale .recognize the Sariie doctrine; but it is unnecessary, we presume, to multiply authorities, for we are well satisfied, that the nolle prosequi was right; that the discharge of the jury was a discreet exercise oí the powers of the court; and that the defendant, under the first indictment was not in a legal sense, tried, and was not legitimo modo acqui-tatus.
This being the case, we pass to the consideration of the second assignment of errors, which is, that the indictment is bad, because the negation of the truth of the defendant’s alleged oath, is confined to what took place “ after the assault aud battery committed by Peter McLoud upon the body of the late Dougald Leitch,” and does not extend to or embrace any other period of time, before or after the said assault and battery by McLoud. The perjury charged in the indictment is upon that part of the oath of the defendant, where he swears, “ that shortly after the assault and battery committed by Peter McLoud unon the body of *570the late Dougald Leitch, Martin Lawson took the said Dougald Leitch by the collar, threw him down, and kicked him,” the truth of which is thus negatived ; “ whereas, in truth and in fact, the said Martin Lawson, after the assault and battery committed by Peter McLoud upon the body of the late Dougald Leitch, did not take the said Dougald Leitch by the collar, nor throw him down, nor kick him, nor commit .any battery on him.” There would be irresistible force in the objection raised, if the oath on its face did not plainly show, that the only point material to the matter before the court was, the alleged violence of Martin Lawson to the person of Dougald Leitch, after Peter McLoud had committed the assault and battery upon the body of Leitch. This is the matter wherein the perjury is assigned, and it has been negatived as clearly as the English language has the power to do it. Proof, at the trial, that Martin Lawson did, or did not, commit violence on the person of Dougald Leitch anterior to the assault and battery committed by Peter McLoud was not material to the issue, and by consequence, there was no necessity that it should appear in the indictment. The perjury assigned in the oath is, that Lawson, shortly after the assault and battery of McLoud, took Leitch by the collar, &c.; the materiality of which, in reference to the design of the oath, is to show that the injuries of Leitch, which brought him to the grave, were the result of wrongs done by Lawson, and not by Peter McLoud, who had committed an assault and battery on Leitch, and it is the falsity of the oath in this respect which constitutes the perjury. In this view we cannot think that it was essential to negative in the indictment, the idea that Martin Lawson may have committed violence on Leitch at any other time or in any other way than as it is averred.
Judgment affirmed. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488003/ | Nicholls, J.
The defendant, by his counsel, moves the court to dismiss this appeal, for this; “ That there is no provision in the law establishing the Court of Errors for an appeal by the State; and such a right, as affecting the personal security and the liberty, and even the life, of a citizen,' cannot be exercised unless it has been expressly or clearly granted.”
The question embraced in this motion is of vital importance, and on its decision is involved a principle upon which the criminal jurisprudence of the State will mainly rest. It has been urged upon the court, with great weight of argument, that the circumstance of such right having, in ho one of our sister States, ever been accorded to the commonwealth, shows conclusively the universal opinion entertained by their respective law makers, that public policy did not require such interpolation upon the principles consecrated by the common law of England; that the exercise of such a right would trench upon the liberty of the citizen, contravene the mild and just principle of the law securing him from a second trial for the same offence; abrogate the constitutional provision guarantying him a trial by jury ; and, finally deny him that speedy trial which is secured to him by the same instrument.
The examination of these various questions furnishes matter of grave consideration, and the different aspects they present entitle them to the most solemn and serious investigation of the court, inasmuch as they do, at first blush, (we are ready to admit,) carry with them obstacles to the exercise of the right of appeal on the part of the State, not only formidable, but almost impossible to be removed. Difficulties beset as on all sides. On the one hand, the acknowledged truth of the absence of any statutory provision to that effect in most of our sister States ; the novelty of the attempt now made, for the first time since the institution of this court, to appeal from the decision of the court, a qua, in favor of the accused; and last, not least, the general opinion of the bar, (so far as we have been enabled to ascertain it,) not only against the policy, but against the constitutionality of such a course of procedure. On the other hand; the plain unambiguous phraseology of the law, establishing this court, the unrestricted grant of the right of appeal in the act of 1843, the admitted power of the Legislature to pass all laws which it may *575deem proper, subject only to the constitution of the United States, and to the constitution of the State of Louisiana. All these conflicting, complicated, discordant, but, at the same time, rational views and interpretations of the laws, which have given rise to the question at issue, admonish the court to approach its investigation with a proper sense not only of its importance, but of the intrinsic difficulty involved in the examination.
“An act to establish a Court of Errors and Appeals in criminal matters, and for other purposes,” is the title of the act organizing this court. Having established the court and given it'a name in the first section, the act proceeds, in the second section, to enact • “ That this court shall have appellate jurisdiction, with power to review questions of law, which questions shall be presented by bills of exceptions taken to the opinions of the judge of the lower court, or by the assignment of errors apparent on the face of the record, taken and made in manner and form as now provided by law for appeals in civil cases.” In this section is comprised all the power and authority with which the Legislature thought proper to clothe this court. The words, as already stated, are plain and unambiguous. The court is thereby vested with authority to review questions of law — all questions of law, with this restriction, that the question he presented by bills of exceptions- or by assignment of errors apparent upon the record, taken and made in manner and form as now provided by law for appeals in civil cases. It follows then, if we confine ourselves to the requisitions of the statute, that if an appeal be taken upon a question of law, made to appear by bill of exceptions, or patent on the-record, and in manner and form as now provided by law for appeals in civil cases, we are bound to entertain jurisdiction. This appeal is prosecuted before us under the second section of the act of 1843. It does present a question of law, under a bill of exceptions, and is taken and maa.e in manner and form as now provided by law for appeals in civil cases. Are we at liberty to> reject it, upon a fancied presumption that the Legislature did not intend to say what they have said, in language so plain, so unambiguous, so emphatic, that this court cannot mistake its meaning ? Upon us it is imperative; it enjoins, it orders us to take-jurisdiction, if the appeal be taken in the manner pointed out by the statute. By dismissing the appeal, this court would not declare, but make the law. Neither has this, or any other court, a right to make a distinction where the law has made none. Ubi lex non distinguit, nec nos distinguere debemus. The second-section of the fourth article of the constitution enacts; “ That the Supreme Court shall have appellate jurisdiction only, which jurisdiction shall extend to all civil cases, when the matter in dispute shall exceed the sum of three hundred dollars.” In all *576the various acts passed by the Legislature, granting appeals from the judgments of the courts created by them, no distinction is made between the plaintiff and defendant, intending the right to be reciprocal. The language invariably used is similar to that found in the constitution; such is the language organizing this court. Strike from the title of th'e act of 1843, the words, “in criminal matters,” or rather substitute the words, “ in civil matters,” for those erased, then read the first and second sections of of the said act, and no one would have the hardihood to aver, that the right of appeal was not reciprocal — conferred by the act upon both plaintiff and defendant. No other interpretation call be given to the words used; they admit no other interpretation. Shall we {in fctvorem vitce as is erroneously pretended,) assume the right to repeal an act passed by the Legislature, upon so vain and frivolous a pretext as this — veiling this arrogant assumption of authority by another assumption equally arrogant, and beyond our power, viz., that of altering the universally accepted meaning of words, by the learned and the unlearned 1 One or both of these acts must we do, before we declare that the second section of the act of 1843, contains words restricting the right of appeal to the accused. On the contrary, we find nothing in the act organizing this court, which confines the right to the accused, or which refuses it to the State.
Again, it is urged, that the concession, of this right to the State would impinge upon and destroy the benignant and merciful provision of the common law, which secures the accused from the danger of being put in jeopardy twice for the same offence. This objection is more specious than solid. It is an illogical conclusion, a non sequitur from the premises. It by no means follows, because the State has a right to appeal, that the accused will be necessarily placed twice in jeopardy for the same offence. No better proof of the fallacy of this supposition could be required, than that which would be furnished by the record in this case, should the judgment of the inferior court be reversed. At the suggestion, and upon the motion of the party who originates the objection in this court, the indictment was quashed by the District Court, <is having been found by an illegal grand jury, an indictment upon which (according to his own allegation,) no legal trial could be had. So far, then, from having been placed twice in jeopardy, the history of the case shows he has not been put in jeopardy at all. On the contrary, he has escaped scot free, without a trial. And thus would his own, and the crimes of all other offenders, committed within the confines of the Parish of Rapides., remain unpunished, and for no better reason than because the district attorney, either through ignorance or inadvertence, may have preferred a bad indictment, or because an indictment which *577is good in law, (as is that on which these proceedings are based,) was by the court of the first instance considered bad, and quashed upon the motion of the accused. To prefer a new indictment, in conformity with the erroneous opinion of the lower court, would be the only alternative left the prosecuting attorney, necessarily to be quashed in its turn by this court, upon appeal, and also upon the motion and suggestion of the accused, thereby defeating the ends of justice and insuring impunity to crime. The speedy trial, (the deprivation thereof was caused by his own act and deed,) it is true, has been postponed and delayed from no act or fault of the district-attorney. Add to this, that, if the argument is worth anything — if, by this appeal he be placed twice in jeopardy, the same result would follow, should the district attorney (acquiescing in the erroneous opinion of the court,) prefer a second indictment after the first had been quashed, for an alleged want of form. Thus it would prove too much; it would be a felo de se, and destroy itself.
Having a right to adopt the common law, either in whole or in part, (a right which will scarcely be questioned,) the Legislature might surely modify it to suit their own views of policy and consequently no want of authority could have been successfully urged, had this benign and merciful provision (as it is called,) been expressly excluded, whatever might have been said against its humanity or justice. This point, however, it is not necessary now to examine; but it is merely suggested for the purpose of showing that the fact of its forming part and parcel of the common law, constituted no estoppel to its exclusion by the Legislature, had such been their sovereign will and pleasure. When that question presents itself, it will be time enough to examine and decide it.
This record does not show a case where the accused has been placed either once or twice in jeopardy.
The novelty of this course of proceeding (an appeal on the part of the State,) exhibits nothing so repulsive as to cause this court to hesitate, if it appear eminently promotive of the ends of justice, and not incompatible with the stern requisitions of the law. The glorious declaration of independence, the constitution of the United States, the whole fabric of our free and enlightened government, were novelties in their day — novelties entwined in every fibre of the American heart, life of its life, and blood of its blood, not to be severed but with the extinction of life itself.
In referring to principles consecrated by the common law, American courts should never forget, that that circumstance alone by no means justifies the indiscriminate adoption or recognition of them, under a system of laws presenting a modification only of the common law of England, and not the common law *578itself. Blackstone eulogizes this law as the perfection of reason, establishing as an unerring test that what is not reason is not law; admitting, however, as do all the English authorities, the legal axiom or apophthegm, cessante rations cessat et ipsa lex. Now, taking this admitted principle for our guide, (admitted alike by English and American jurists,) we should surely say, with the same independence which dictated the rule and sanctioned its application, that, whatever might be the principle recognized in England, if the reason which required its recognition and application there, did not exist in the United States, the principle could find no place under our modified system of the common law. Such would be the doctrine inculcated in England in a like contingency by the English judges — such should be the doctrine sanctioned by our courts and by our judges.
In England, in a capital case, no new trial is ever granted on the application of either the prisoner or the crown. As a corollary, necessarily deducible from this state of the law there, the pleas auterfoits acquit and auterfoits convict must always prevail, when sustained by the record. To be a bar under the first plea, the acquittal must be by trial, and by the verdict of a jury, on a valid indictment. Hawk. b. 2, ch. 35, sec. 1. 4 Black. Com. 335. On the second plea, (auterfoits convict,) it is averred, that he has been formerly tried and convicted; and as a man once tried and acquitted for an offence is not again to be placed in jeopardy for the same cause, so, a fortiori, if he has suffered the penalty due to his offence, his conviction ought to be a bar to his second indictment for the same cause, lest he should be punished twice for the same crime. 2 Hawk. 251. 4 Co. 394.
It will be observed, that in England this plea must necessarily prevail, so long as that other principle is recognized as law, (that no new trial can ever be granted in capital cases,) otherwise the harmony of the whole body of the law would be destroyed, and the ends of justice totally defeated. Instead of its being the perfection of reason, (as its eulogists proclaim it to be,) it would be the perfection of iniquity, despotic oppression and injustice. The adoption and recognition of the first principle, (that no new trial can be awarded in capital cases,) necessarily gave rise to the adoption and recognition of the second. The first is the parent of the second; it could not have been otherwise. Once convicted, the fate of the accused was sealed ; the law afforded no means by which a reversal of the conviction could be effected; there was no loop hole through which he could escape punishment. To have tried him a second time for the same offence, with this conviction suspended over him, existent, unreversed and irreversible, would have been too palpably absurd and iniquitous to have been tolerated in any stage of civilization.
*579Having established this rule in cases of conviction, even-handed justice required, that it should be meted out in the same manner, and for the same reason, in cases of acquittal, both absolutely and indispensably necessary in consequence of the rule, that no new trial should be awarded in capital cases.
A vast expenditure and waste of labor, and a great display of learning, is exhibited by Judge Story, (in 2 Sumner’s Rep. 37, et seq.) in which the power to grant new trials in capital cases is denied. The name of this distinguished jurist is a host within itself; yet his pre-eminent abilities and recondite research have signally failed to make this court a convert to his opinion. Nul-lius addictus jurare in verba magistri, the conscientious judge should consult the law itself, and the reasons on which it is founded, as a less erring guide than the opinions of any legist, however learned and profound. In the case referred to, a new trial was refused, and the prisoners condemned to suffer a disgraceful and ignominious death, by virtue of a principle, which, (according to the admissions of Judge Story himself,) sanctioned and acknowledged by all the commentators, was incorporated into the law in favorem, vitce, and for the special benefit of the accused. In other words, these men were condemned to be hanged, and were, accordingly, executed, under an apprehension that, if a new trial were accorded them, this humane principle of the law would be violated. The invocation of such a principle was a mockery of justice. This new fangled pseudo-humanity could scarcely reconcile the prisoners to their fate, nor the learned and elaborate opinion of Judge Story, occupying twenty-six pages in Sumner’s Reports, convince them of the justice, mercy, or humanity of the law. It would be in vain for the court to inform them,- that, through the benignity of the law, and as a special favor to them, they must be hanged now, lest, by granting a new trial, the constitution of the United States might be violated, and their own precious lives be put in jeopardy twice for the same offence. The fallacy of this kind of reasoning consists, evidently, in attempting to adopt a principle, homogeneous to the common law of England, and absolutely and indispensably necessary to make it harmonize, and consistent with itself; but which, in the United States, under a different modification of the same law, would produce a result diametrically the reverse, abrogating its humane and equitable provisions, destroying its symmetry, and visiting upon its victims the penalty of death, for no other reason than because such would be the judgment of an English court, under the common law of England, not divested of that bloody feature which the humanity and good sense of the respective States of this Union, upon adopting the common law, have expunged from the system. Admit the doctrine, that, in *580capital, as in all other cases, a new trial can be granted, and you restore the beauty and symmetry of the whole law; in which case, the fancied conflict with the provision contained in the constitution,pf the United States, (which provision, it will be recollected, has reference to the courts of the United States, and not to the courts of the States,) is avoided and removed.
It is next urged, on the part of the prisoner, that the Legislature, in establishing this court, transcended its constitutional powers, which were limited, and confined to the creation of inferior courts ; and our attention is drawn to the first and fourth sections of the fourth article of the constitntion of Louisiana. By the first section it is provided, that the judiciary power shall be vested in a Supreme Court and inferior courts; by the fourth, that the Legislature is authorized to establish such inferior courts as may be convenient for the administration of justice. Hence it is contended, that there can be but one Supreme Court, (viz., that created by the constitution,) and that the Legislature is strictly confined to the creation (eo nomine) of inferior courts. Now this proposition is so incontestably true, that few can be found to controvert it; it is, in fact, a self-evident postulate, that the constitution, being the s'vprema lex, its injunctions are of stringent and binding force upon legislatures convoked by virtue of its authority, and existing solely under its sanction and control. It is equally clear and undeniable, that the courts to be erected must be inferior courts, otherwise they will want that constitutional sanction to breathe into them the principle of legal vitality. The investigation is thus narrowed down to the examination of the proper meaning to be attached to the word inferior, and to ascertain in what sense it was used by the framers of the constitution. We are asked in the argument of counsel, whether a court, to which is confided in the last resort, the question of life and death — a court by whose fiat, uncontrolled, and independent of all human supervision, the citizen may be deprived of his liberty, incarcerated for life in the gloomy walls of the penitentiary, and, to crown all, delivered over to the gibbet, and an ignominious death, can be called, in any sense of the term, an inferior court; or, if this be strictly and truly an inferior court, with what attributes would you clothe a court which would legitimately assume the title of supreme under the same code of laws. It is urged, that, in proportion as. liberty and life are preferable to dollars and cents, is that court supreme (and not inferior,) to which is confided the preservation and protection of the first, over that whose mission is directed to the correction of errors in pecuniary matters, descending even to the paltry sum of three hundred dollars, the limited jurisdiction of the Supreme Court.
Were it obligatory upon this court to confine the range of its *581investigation into the signification of the word inferior solely to the attributes of the courts, that is to say, to the greater or lesser dignity of the subject matter called in litigation before them, the argument of the accused would be irresistible, and the question at once decided; but this court conceives that it is not so bound, and that the constitution did not attach so contracted a meaning to the term. Inferior, it is true, is a relative term, presupposing a superior, its relations to which are indicated in the word itself; but there can be no imaginable limit assigned to the kind, the nature, or extent of the superiority on the one hand, nor of the inferiority on the other, which are as multifarious, diversified, and capricious, as the fertile imagination of the person instituting the comparison may happen to select; thus, the lion is superior to the horse in strength and courage, whilst the horse, in his turn, asserts and establishes his superiority in docility and fleetness.
We believe that the framers of the constitution used the term supreme, in the sense, that the court should be placed by the constitution beyond the control of the Legislature, not liable to be influenced or destroyed to suit the caprices, vacillations, and wonted mutations of the popular will — immutable and intangible by legislative enactment, and that they appropriately denominated it the Supreme Court. We believe, that in using the term inferior, that word was selected with reference to the superiority as above explained, of the supreme, or constitutional court; that sovereign and supreme, as was the source from whence the first court emanated, it was natural and proper that the constitution should have applied the epithet inferior to that class of courts which owed their existence to the Legislature, whose inferiority was apparent, as being themselves creatures of a higher power, to wit, of the constitution. Deplorable indeed would be the administration of criminal justice in Louisiana if this reasoning be fallacious and unsound, or rather there could be no such thing as the administration of criminal justice at all. No court being competent to take cognizance of crime — banished by its organic law from the portals of the Supreme Court, and the doors of all inferior courts hermetically closed against admission, criminal prosecutions would have found their death wound in the adoption of the constitution, and, incapable of revival during its existence, they must necessarily have remained in a state of suspended animation until resuscitated by the new constitution; for the Supreme Court, true to the mandate of its creation, correctly repudiated all criminal jurisdiction, in the case of Laverty v. Duplessis, 3 Mart. 42. Thus, it would necessarily result, that (if in defining the word inferior, we be restricted to the subject matter coming within their jurisdictions, respectively, ratiom *582materias, that court is superior to which is confided the life and liberty of the citizen; then all courts of criminal jurisdiction, ex vi termini, being superior, are obnoxious to the constitutional prohibition. A curious anomaly, hiatus, or casus omissus would be detected in our code of laws; a violation of a criminal statute could be visited by no punishment; in fact, the whole body of the criminal law would, by one fell swoop, be virtually repealed.
Having disposed of these preliminary questions, it remains to ascertain, whether the indictment was properly quashed in the District Court. The jury having been drawn in conformity to an act of the Legislature, passed the 26th January, 1844, the accused moved the court that the panel be quashed, the jurors not having been drawn agreeably to the requirements of the constitution. That act provides, that hereafter, the inhabitants residing on the western side of the river Calcasieu and bayou Sépa, shall be exempt from serving as jurors in said parish, any law to the contrary notwithstanding.
The violation complained of consists in [raving curtailed the territorial limits whence the jury should have been drawn, thereby depriving the accused of a trial by an impartial jury of the vicinage, guarantied to him by the 18th section of the 6th article of the constitution. This court is of opinion, that it never was contemplated that the then territorial divisions should remain for ever intact and inviolate, nor that the Legislature, in the organization of inferior courts, either as regards their territorial extent or subject matter of jurisdiction, was intended to be cramped by this provision in the constitution upon which the accused succeeded in quashing the indictment; that the Legislature had clearly the right to make the jurisdiction of the district courts embrace the whole extent of a county, or limit it (as they have done,) to the lesser circle of a parish ; that that jury is an impartial one, which the Legislature declares impartial; and that that section of country whence the jury is ordered to be drawn for the court which is seized of jurisdiction over the offence, comprises the constitutional vicinage to which the party accused is entitled. It has never been doubted that the Legislature could prescribe the legal qualifications of jurors, elevating or depressing the standard as they thought proper. No good reason can be assigned why they may not exercise the same right as respects territory. An abuse of both powers is possible, though not to be supposed.
Wherefore, it is ordered, that the judgment of the District Court be set aside and annulled, that the indictment be reinstated on the docket, and that the District Court be ordered to proceed in the premises according to law, and agreeably to the principles laid down in the foregoing decision.
*583JohnsoN, J, in concurring with the opinion pronounced by Judge Nicholls on all other points, expressed his dissent from so much as recognized the right of the State to appeal. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488005/ | JohnsoN, J.
On the 7th of March, 1844, the defendant was indicted for the crime of murder, and found guilty of manslaugh- , ter. His counsel moved in arrest of judgment and for a new trial, on various grounds, which were overruled by the judge of the criminal court, and an appeal was prosecuted to this court. On the hearing here, a new trial, for irregularities in the proceedings below, was ordered and the case remanded for that purpose. Ante, p. 554.
On the 21st of November, 1844, the attorney general preferred a new indictment against the accused for manslaughter, and on the same day, with leave of the court, on motion, a nolle prose-qui was entered upon the indictment for murder. On the 16th of December, 1844, the accused having been brought to the bar for an arraignment on this new indictment, interposed the following plea, to wit:
“The accused, Leonard C. Hornsby, being arraigned on the indictment charging him with the manslaughter of Daniel H. Twogood, pleads auterfoits acquit; and also pleads, that he has heretofore, on a former indictment, been put in jeopardy of life and limb for the same offence herein charged, and that this prosecution is thereby barred and should be abated, agreeably to the principles of the constitution of the United States, and of the government and laws of Louisiana.
“And this defendant further shows, that on the 7 th day of March, 1844, an indictment in legal form and valid in law, was filed against him in the court, charging the defendant with the murder of said Daniel H. Twogood; that this defendant was arraigned thereon on the 12th day of March, A. D. 1844, and having pleaded ‘ not guilty,’ was tried thereon, and at the termination of the said trial, on the 22d day of March, 1844, the jury *585sworn in said case, returned a verdict as follows: ‘ Guilty of manslaughter, New Orleans, 22d March, 1844, Francis L. Crais, foreman,’ upon which, sentence and judgment were passed upon this defendant, on the 20th day of June, 1844, condemning this defendant to five years imprisonment at hard labor, to pay a fine of fifty dollars and the costs of the prosecution; that upon appeal from said judgment and sentence before the Court of Errors and Appeals in criminal matters, the said judgment and sentence were, on the 11th day of July, 1844, set aside, cancelled and annulled. and the case remanded for a new trial; that, on the 21st day of November, 1844, a nolle prosequi was entered upon said indictment for murder, on motion of the attorney general, which motion was allowed by the court. And this defendant for greater certainty, annexes hereunto, as a part of this plea and answer, a certified copy of the said previous plea and answer, and a certified copy of the said previous indictment for the murder of Daniel H. Twogood, in order that its identity with the present prosecution, may fully and clearly appear, and in order that the court may see with greater certainty that this defendant is actually charged with the same offence charged in said indictment for murder.
“ That this defendant will show from the records of this court, and of the said Court of Appeals -;
“ 1st. That the proceedings above alleged, amount in law and equity, to an acquittal of the crime herein alleged.
“2d. That said proceedings are a perpetual bar to the present prosecution.”
To this plea the attorney general demurred, alleging for cause, that the facts set forth in said plea, are insufficient in point of law to substantiate said plea and bar the present prosecution; on. which he prayed the judgment of the court — that said plea óf au-■terfoits acquit be overruled and rejected, and the defendant tried on the indictment found against him.
Subsequently the defendant filed the following additional pleas, to wit: “ In this case the defendant, for greater certainty and without waiving any of the exceptions contained in his pleas to the indictment in this case, sets forth, that he relies upon the following points comprehended in said pleas:
“ 1st. Upon the verdict rendered to the jury on the former indictment, and recited in this defendant’s plea and answer.
“ 2d. Upon the 5th article of the amendments to the constitution of the United States, which declares that ‘ no person shall be subject for the same offence, to be twice put in jeopardy of life or limb,’ said article being of binding force upon the courts of this and the other States of the Union.
*586“ 3d. Upon the 33d section of the acts of the Territorial Legislature, approved May the 4th, 1805.”
Under the mixed aspect of these pleas, the necessity is imposed on us, to consider what is no longer a novelty hut a very plain matter, and that is the legal import of the term auterfoits acquit. It is a plea made by a defendant indicted for a crime or misdemeanor, that he has been formerly tried and acquitted of the same offence. To be a bar the acquittal must have been by trial, and by the verdict of a jury, on a valid indictment. 1 Bouvier, 109. To render the plea of aformer acquittal a bar, it must be a legal acquittal by judgment upon, trial, by a verdict of a petit jury. 1 Chitty, 458.
These authorities prove clearly, that a legal acquittal by judgment, upon trial, by verdict of a petit jury, must be shown, to sustain the plea of auterfoits acquit, and bar the proceedings.
The argument for the accused did not appear directly to question the truth of this doctrine, nor was a technical defence of au-terfoits acquit in so many words,' insisted upon; but it was urged, that the new trial granted in the case of murder wherein a verdict for manslaughter had been rendered, and the subsequent quashing of the indictment for murder, amount in judgment of law, to an acquittal. In taking this ground, the opinion of Judge Story, in 2 Sumner’s Rep. 37, seems chiefly to have been relied on. It is there asserted, that a new trial cannot be granted in a capital case, because it would operate an acquittal of the accused, upon the common law maxim and constitutional provision that, “no person shall be subject for the same offence to be twice put in jeopardy of life and limb,” which is now well understood to mean no more than that a man shall not be tried twice for the same offence.
In England, there is no doubt, in case of treason or felony, that a new trial cannot be granted when the proceedings have been regular; but if the conviction appears to be unjust to the judge, he may respite the execution, to enable the defendant to apply for a pardon, but this court has decided, in consonance, as it thinks, with the great current of American decisions, that all judges who are empowered to hear and determine indictments for crime, are invested with a discretionary power to grant new trials in capital cases as well as in those of misdemeanor, where, upon a sufficient showing, touching the merits or irregularities in the proceedings) justice and humanity demand it.
In the case of The State v. Hornsby, ante, p. 544, we recognized this merciful principle, when, in awarding him a new trial, we decreed that, “in capital cases, upon a separation of the jury, misconduct and abuse will always be presumed.” We cannot, therefore, in this instance, give to the opinion of Judge Story, *587however eminent as a jurist he may be, the weight of authority. In the case in which it was delivered, it did not acquire the force of authority, since the other judge, (Davis,) differed in opinion with Judge Story on the point; and we are yet to be informed whether it has succeeded in making many converts any where. The learned reasoning of Judge Story led the prisoners on to execution upon the gallows, to prevent their lives from being twice put in jeopardy, thus torturing a humane constitutional provision in their favor, into one of hopeless and inevitable death, no matter how unjust and grievous the sentence of conviction. In the case of The Commonwealth v, Green, 17 Mass. Rep. 515, 533, Judge Parker said, “the court had authority to grant a new trial after conviction of a capital crime.” In 1 Johnson’s Cases, 104, The People v. Townsend, a new trial was granted, in a cage of perjury, because the verdict of' the jury was contrary to evidence. See also the samé principle acknowledged in The People v. McKay, IS Johnson’s Rep. 21. Indeed we do pot regard this question as at all open to controversy, and have given to it more consideration than it merited, and more, it may be, than was expected of us. We have, therefore, no doubt of our authority to grant, a,nd of the defendant’s right to, demand, the new trial which was awarded him on the former appeal. Let us now inquire into the legal effect of' that new trial, in view both of the rights of the accused and those of the State. What is a new trial 7 “ It is a re-hearing of the case before another jury; but with as little prejudice to either party as if it had never been heard before. No advantage is to be taken of the former verdict on the one side, or the rule of court, for awarding such second trial o.n the other,” Blackstone, 3d vol. p, 391. A new trial results then, in placing the case exactly in, the position it oct cupied before there had been a trial, in relation to the objects for which it had been awarded, and, with this qualification, all proceedings are set aside, and the party stands as if he had never been tried; and when this court, on the former appeal, ordered, that “ the judgment of the criminal court be set aside, cancelled and reversed,” the defendant stood again before that court as he stood before the trial — unprejudiced, and in the full possession of all his rights, just as they existed when he first answered to the indictment. But the new trial conferred on him no new rights.
It is not disputed that the new trial was awarded at the prayer of the defendant, and, as we think, in accordance with settled doctrine ; yet it has been argued that, in seeking and obtaining the new trial, the defendant did not, by legal intendment, consent to be tried on any other than the first indictment, the quashing of which, under the circumstances, was, it is said, equivalent to an acquittal. Upon the maturest reflection, we think that no sued *588pretension can be legitimately set up by the defendant. He took the new trial with all its legal consequences and contingencies ;■ and if the attorney general, anterior to the first trial or to the em-. pannelling of a jury for the purpose of a trial, could have entered, as we doubt not he could, a nolle prosequi on the indictment which was then pending for murder, and institute another instantly for manslaughter, without thereby acquitting the accused by judgment of law, he certainly had an equal right to adopt that course after the new trial was awarded, at the time he did exercise it with the leave of the court. All former proceedings were set aside, and the party stood as if he had not been tried at all, It is true, the verdict of manslaughter was a virtual acquittal of the charge of murder, for which grade of homicide the accused could not have been again constitutionally put on his trial under the first indictment or a second ; yet it would be a legal solecism to say he was acquitted of the manslaughter, when he was convicted of that offence by the finding of the jury, which was an insuperable barrier to a verdict for murder only, on a second trial — ^ the new trial having been granted in reference to the fact whether the homicide was manslaughter or not. In other words, the new-trial was granted as to the crime of which the accused was found guilty, the indictment affording only the form of bringing the crime before the court. The homicide was always the same in fact. It was pronounced manslaughter by the jury. The accused sue-, ceeded in setting that verdict aside, to be tried again for the same fact. It was the fact, and not the form of bringing it before the court, which the accused succeeded in having ordered to be tried again, and the fact is now brought before the court in a form most favorable to the accused. It is a rule of law, that if a man indicted for murder is found guilty of manslaughter, he cannot again be indicted for murder, if the first indictment were a good one; and if, in such a case, a new trial is awarded, it may be on the indictment for murder, because an indictment for murder includes an accusation of manslaughter. We can see, however, no legal reason, why, in a case like the present, the attorney general might not enter a nolle prosequi on the indictment for murder, on the trial of which, manslaughter was the verdict, and a new trial granted, and prefer one simultaneously for the manslaughter. It neither compromises, delays, nor takes away from the accused, any right or privilege, whilst it simplifies the prosecution.
These matters disposed of in this manner, we are to inquire into the effect of the nolle prosequi, and of the right of thp attorney general to enter it in this case. The effect of a nolle prose-qui, when obtained is to put the defendant without day; but it does not at all operate as an acquittal, for he may afterwards be re-indicted, and, even upon the same indictment, fresh process *589may be awarded. 1 Chitty, 470, 480. A nolle prosequi neither amounts to an acquittal nor to a pardon, but is simply a discharge of a particular indictment upon which it is entered, and is no bar to afuture indictment for the same offence. 2 Mass. 172. 7 Pick. 179.
A nolle prosequi is now held to be no bar to a future action for the same cause. 2 Bouvier, 103. To this point, these authorities we think ample. Now as to the right of the attorney general to enter a nolle prosequi, as to the indictment for murder, and to prefer the one for manslaughter. Afier much investigation in the case of The State v. Brown, decided by this court, ante, p. 566, we held that, “ the attorney general may at any time before a defendant has been actually tried, on application to the court, have an indictment quashed, if the prosecution is in good faith, and not instituted from malicious motives, or for the purposes of oppression; and that the presiding judge will take care to prevent abuse and oppression, by not permitting a capricious, arbitrary or malicious exercise of the power.” Upon a view of all the authorities bearing upon this question, we are satisfied, that at all stages of a criminal prosecution before a jury is empannelled, the attorney general possesses an arbitrary control over his indictments, and that he may enter a nolle prosequi as to them, at pleasure, without the consent of the court or of the accused, and not run counter to the fifth article of the amendments to the constitution of the United States. But when the jury has been charged with the trial of a case, this right of the attorney general is suspended, or at least qualified, and cannot be exercised against the consent of the court, which will in no case grant it, if the defence appears ample, or if the motion appears not to be in good faith, and to promote the ends of justice. This right may be exercised, even after conviction, when it is clear that no judgment can be pronounced on the verdict, on account of defects in the indictment. But whether this power, even with the permission of the court, can be exerted, without working an acquittal of the accused, after the jury empannelled to try have received the charge of the court, and retired to consider of their verdict, it is unimportant here to inquire; because, as has been said, the nolle prosequi. in this case was entered at a time when the attorney general needed not even the consent of the court or the accused to justify it; that is to say, before the accused had been put on his trial, after the granting of the new trial, which placed the case as to the fact of man-, slaughter precisely where it was before there had been any trial at all. We conclude, therefore, that the attorney general had a right, in this instance, to enter the nolle prosequi upon the in-, dictment for murder, and bring one forward for manslaughter; and that the action of the court and of the attorney general was in good faith and not unfavorable to any right of the accused,, *590who cannot, in consequence thereof, claim to have been acquitted in fact or in law.
No objection'was raised by the State to the right of the accused to bring this appeal from a preliminary decision or interlocutory decree of the criminal court, and we have considered the merits of the case as though such right existed ; but it is not, therefore, to be concluded that we mean to sanction, such a practice. On the contrary, we do not think that an appeal would lie in the case, as the right accrues only after verdict and judgment and sentence; and, if the attorney general had made a motion to dismiss the appeal, we should have felt bound to sustain it.
The judgment of the Criminal Court overruling the prisoner’s, pleas in bar is affirmed, and it is ordered, that the case be remanded to be proceeded in according to law. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488006/ | The opinion of a majority of the court was pronounced by
King, J.
The defendant Kennedy, was indicted before the Criminal Court of the First District for the murder of Benjamin Wood Wait, alleged to have been committed in the parish of New Orleans. Upon trial he was convicted, and having in the court below made ineffectual motions fora new trial and in arrest of judgment, he has sought relief by an appeal to this court.
The conclusion at which we have arrived, would warrant us in passing in silence over most of the grounds relied upon by the appellant in support of his motions. Pursuing, however, the practice which we hitherto observed, of disposing of all the questions submitted to our consideration in each case, we will proceed to examine those presented upon this appeal.
The first ground upon which the defendant asks for a new trial is, that after the jurors were empannelled and sworn to try the cause, they were permitted to have free communication with other persons than the sheriff’s officer.
The facts in relation to this alleged irregularity are, that at nine o’clock in the evening of the first day of the trial, it was found that the investigation could not be concluded at that sitting, and the court was adjourned until the following morning. The jury were delivered to an officer, with instructions not to speak to them himself, nor to permit others to speak to them concerning the matter then under examination. The judge also advised the jury to abstain from conversations among themselves about the case, as the evidence had been only partially heard, and their opinions should be held suspended until the whole testimony came before them. The jury spent the night in the court room, and clerk’s office, adjoining apartment in the same building, where refreshments were provided for them. The clerk and his deputy were compelled to remain in these rooms after the adjournment, in order to make up the record of the day’s proceedings, there being no other apartment to which they could repair for that purpose, and obtained a special permission from the judge to that effect. The clerk, when about to depart, said to one of the jurors “ There take my cloak,” and left the room saying nothing more.
Mr. Clement Blaney, the deputy clerk, left his office, and passed through the court room at the moment that the jury were supping, and, was invited by several of them to join in their meal. He declined the invitation, but took a glass of wine, spoke a few moments with the sheriff, and withdrew without saying a word about the matter then pending before the jury. Fabre, the officer of the court into whose charge the jury were delivered, and Labutut a deputy, who was present to assist him in the discharge of his duties, supped with the jury but neither spoke to them themselves, nor permitted others to speak to them in relation to the *593trial. These are the facts which constitute the alleged fatal irregularity.
We said in the case of The State v. Hornsby, decided at a former term of this court, ante, 554, that, in capital cases, when the jury were permitted to separate during the progress of the trial, misconduct would be presumed ; and this upon the ground, that in promiscuous intercourse with their fellow citizens, their minds were necessarily exposed to be influenced, and to receive impressions of which they themselves might peihaps not at the time be conscious ; and that it would be impossible to establish the fact by evidence. But this presumption does not arise where the jurors have been kept together. The reason of the rule then ceases. Measures are thus taken to prevent misconduct, and the means provided for ascertaining, and for establishing by proof, the precise nature and character of their irregularities, from which courts may determine whether the tendency of the acts has been to influence the verdict.
Every irregularity will not vitiate a verdict, but those only which are calculated to produce an impression upon the minds of jurors, and influence the verdict which they are to render, (2 Summer, 83 ;) and courts will satisfy themselves that such has been the tendency of the acts complained of, before new trials will be granted on the ground of misconduct on the part of the jury.
In the present instance, the few words exchanged by the jurors with persons not of their body have been detailed. The conversations were held with some officers of the court, brought unavoidably in contact with them, did not relate to the trial, and were not of a character to produce the slightest effect upon the decision of the jury.
The next ground urged is, that the bailiff into whose charge the jury was delivered was not sworn, “ to keep them together and to permit none to speak to them, nor to speak to them himself, but only to ask them, whether they are agreed.”
Hale says, that when the jurors depart from the bar, a bailiff ought to be sworn to keep them together, and not to suffer any to speak with them. 2 Hale, 396. This formality appears to be observed at all common law trials, and the books which treat of those proceedings generally concur in stating, that the oath ought to be administered, but do not assert that it is essential to the validity of a verdict; nor have we been referred to any adjudicated case where the omission was held to be fatal.
The sheriff and his deputies, before entering upon the duties of their offices, are required, by our constitution and laws, to take an oath, faithfully and impartially to perform the duties incumbent *594upon them. The duties of keeping the jury together, in such cases, and of not permitting them to speak with any one, is one of those imposed by law upon these officers, when juries are delivered into their charge, and of course are of those which they have already been sworn to perform. No additional oath would, therefore, seem to be necessary for the execution of this specific service, unless it might be to remind the officer of his duty. This was done by the judge, who gave special instructions to the deputy sheriff, into whose charge the jury was delivered, as to the nature of his duties ; and the latter appears to have executed them as strictly as though the oath contended for had been administered. The object in view was to prevent misconduct on the part of the jury, and this was attained.
By our laws, this form has been dispensed with in civil proceedings, and the practice in criminal prosecutions appears generally to have fallen into disuse in this State. It may be doubted whether our courts have the right to exact such an oath from a bailiff. The act of 1815, after prescribing the form of the oath to be administered to all officers in this State, in the sixth section provides: “that from and after the ¡passing of this act, all other oaths of office shall be, and they are hereby, repealed.” Bullard & Curry’s Dig. 611. We do not think that the oath is necessary here.
The next cause assigned for a new trial is, that the judge erred in permitting two jurors to be challenged by the Attorney Gene-eral for cause, because they were conscientiously opposed to capital punishment.
Two persons being called as jurors, and sworn upon their voir dire, were asked by the attorney general, “ whether they had any conscientious and religious scruples against finding a verdict of guilty, in any case involving the life of the accused 1” The question was answered affirmatively, and the jurors set aside for cause.
It is contended, that no such ground of recusation is known to the common law, or to the statutes of this State, and that the decisions of courts in other States recognizing the validity of this objection to jurors have been based upon special legislative enactments.
Our statute merely declares the qualifications of condition, age, sanity, residence and property, which the citizen must possess before he can be drawn and summoned as a juror, leaving the court or triors, as the case may be, subsequently to determine, upon inquiry, when he is presented to the prisoner, whether his mind is free from anger, influence’or prejudice.
“ The rule of the common law is, that the juror must stand indifferent as he stands unsworn.” Co. Litt. 155, a. He cannot *595be said to stand indifferent between the State and the accused, upon a trial for a capital crime, when, from his religious belief and conscientious scruples hecannotconvict, and is therefore previously-determined to acquit. No adjudicated ease upon this point is found in the common law reports, probably because opinions opposed to capital punishments do not prevail in England. But an English judge would not hesitate, in a capital case, to reject jurors professing such opinions, upon the common law principle, that they did not stand indifferent, that they were not above all exception, and those by whom the truth of the matter in controversy could be best ascertained. 1 Chitty, C. L. 544. Bacon’s Abridgment, Juries, G. 5.
■ A similar question arose in New York, growing out of a statute relating to persons who belonged to religious denominations opposed to the infliction of capital punishment. Mr. Chief Justice Savage, speaking of a juror who entertained the same opinion, but was not a member of a religious denomination, said, “ such a person is unfit; he has prejudged the question ; he has made up his verdict without hearing the evidence, and ought to be excluded upon common law principles. It would be a solemn mockery to go through the forms of a trial with such a jury, or even with one such juror. The prisoner is sure to be acquitted independent of the question of guilt or innocence. It would be a misnomer to call such a proceeding a trial.” 13 Wendell, 354, 355.
In the case of The United States v. Cornell, Mr. Justice Story in sustaining an objection made , to a juror upon very similar grounds, says; “ To compel a quaker to sit as a juror in such cases, is to compel him to decide against his conscience, or to commit a solemn perjury. Each of these alternatives is equally repugnant to common sense. To insist on a juror’s sitting in a cause where he acknowledges himself to be under influences, no matter whether they arise from prejudices or from religious opinions, which will prevent him from giving a true verdict according to law and evidence, would be to subvert the objects of a trial by jury, and to bring into disgrace and contempt the proceedings of courts of justice. We do not sit hereto procure the verdicts of partial and prejudiced men, but of men honest and indifferent in causes.” 2 Mason’s Rep. 105.
In Pennsylvania the question ivas similarly decided, exclusively upon common law principles ; (17 Serjeant & Rawle, 155 ;) and upon those principles we think this objection to a juror a good one in this State.
The next position taken is, that one of the jurors had not resided in the State for twelve months previous to the formation of the venire. This person came to the city of New Orleans, on the 4th *596of November, 1843. He was at that time a partner in a commercial house here, and remained here, engaged in business as a member of the firm, until the 17th June, 1844, when he returned to New York upon business, and to see his family, and was absent until the 23d September, 1844. When he first came, it was with the intention of establishing himself in mercantile business. Some three or four months after his arrival, he for the first time, made up his mind to bring his family to this city, and reside here permanently. His intention of fixing his residence in this State was, therefore, not formed until about the 4th March, 1844. The venire upon which he was summoned was formed about ’the end of February, 1845.
Our act requires a residence of twelve months previous to the formation of a venire as one of the qualifications of a juror. The juror had not acquired this residence, and therefore could not have been legally drawn or presented to the accused. 2 Robinson, 266. The want of residence is not an exception which the juror alone can plead, but a defect of which the accused may, at the proper time, avail himself. The law requires this term of residence in order that the juror may acquaint himself with the laws and institutions of the State, and incorporate and identify himself with its people, before he shall be permitted to sit in judgment upon their lives and property. The objection however comes too late. It should have been made when the juror was offered to the accused. 1 Chitty, 545, 546.
An opportunity is then afforded to the prisoner of inquiring into the qualifications of the juror upon the voir dire examination. If, upon that inquiry, he be found to want the legal qualification, he may be set aside for that cause. It would have been different if the juror, when interrogated, had stated that he had acquired the requisite residence, was free from bias, or that he possessed any other legal qualification, and it had subsequently been discovered that the statement was false. This would have been a fraud practiced upon the accused, from which he could have been relieved. Having waived the right accorded to him by law, he waived with it every objection which he might have urged to the juror. Lord Ellenborough said, that a different rule might vitiate one-half of the verdicts rendered at every assizes in England. The same remark is applicable here. 2 Bay’s Rep. 155. Graham on New Trials. 1 Chitty, 545, 546, and the authorities there quoted.
The next ground relied upon is, that new and material evidence has been discovered since the trial. In applications for new trials upon this ground, it should not only be made to appear, that there has been reasonable diligence, that the evidence has been discovered since the trial, and is material, but that it is *597not cumulative, and would probably produce a different verdict if a new trial were granted. This principle seems to be well settled.
In the cases of The Stater. Clark,and of The State v. Hornsby, decided at former terms of this court, ante, pp. 533, 554, it was held, that “ it is not sufficient to warrant the granting of a new trial, that the newly discovered evidence might have the effect of throwing a shade of doubt over some of the incidental circumstances of the trial. It should appear to be of so decided a character that, if admitted, it would give to it an acquitting complexion.”
From such of the facts as can be gathered from the record, we are not prepared to say, that the new discovered evidence is such as ought to have produced a different result, if it had been submitted to the jury, even if the credibility of the new witnesses were entirely free from suspicion. The record discloses the additional fact, that the newly discovered witness has, on a former occasion, been convicted of forgery in this city, and that, at the time of making this application, he was confined in one of the prisons of this parish under a similar accusation preferred against him. We think the court properly refused the new trial.
We will now proceed to examine the several grounds upon which an arrest of judgment has been claimed.
The first of these is, that “ the indictment does not correctly express the name of the court where the indictment was found, but erroneously styles it the Criminal Court of the First Judicial District, when the act of 1821 declares the court shall be known and called the Criminal Court of the First District; that a court is only known and properly designated by the name and style prescribed by law ; that the name of the court where the presentment is made must be expressed ; and that an erroneous statement or description of the court, of its name, style, or title to authority is fatal.”
The better to understand-the nature of the alleged error it will be necessary to transcribe that part of the indictment in which it is supposed to occur. It is as follows ;—
“ The State of Louisiana, Criminal Court of the First Judicial ¡District, parish of New Orleans :
“ The grand jurors of the State of Louisiana duly empannelled and sworn for the parishes of Jefferson, Orleans and Plaquemines, upon their oath present, that one Samuel Kennedy, late of the city of New Orleans, on the 29th day of December, in the year of our Lord one thousand eight hundred and forty-four, at the said city of New Orleans, in the parish of Orleans, and within the jurisdiction of the Criminal Court ofthe First Judicial District, did” <fcc.
*598It will be perceived that the alleged vices occur ill the commencement and statement of the indictment.
It is manifest that the name of the court differs in the indictment from that given to it in the legislative act, which is “ Criminal Court for the First District.” Bul. & Curry’s Dig. 193.
Admitting for present purposes, that the variance is material, and would be fatal in a caption, we will proceed to inquire if it be necessary in this State, to describe in any part of an indictment the court in which it was found.
At common law, the only source to which we can refer for the principles upon which the decision of the question depends, the commencement of every indictment is thus : “ Middlesex, to wit: The jurors of ourLord the King, upon their oath present, that” &c. and this is what is technically termed the commencement, after which follows the statement of the offence.
ludictments in England neither describe the court before which they are found, nor the jurors by whom they are found, nor do they aver that the court has jurisdiction of the offence. The numerous authorities to which we have been referred in support of the position that the court is to be set forth in the indictment, all concur in stating, that it is to be described in the caption and with great precision, but none, that the description is ever given in the indictment itself.
Now the caption is not to be confounded with the commencement, nor with any other part of an indictment. It forms no part of that instrument, but is a wholly separate and independent act, which is not submitted to, nor acted upon by the grand jury, prefers no charge against the accused, and never figures upon the record until after the bill has been found, and, in general, not until the indictment is removed for trial to a ■ higher tribunal, by a writ of error or of certiorari.
In England, when in obedience to one of these writs, an indictment is removed from an inferior to a superior court, it is accompanied by a history of the previous proceedings, describing the court before which it was found, the time and place where it was found, and the jurors by whom it was found. This is properly the return to the writ, from which is extracted the caption which is prefixed to the indictment in the record. Its principal object is to show, that the inferior tribunal had jurisdiction of the offence, and thence arises the necessity for the great precision required in that respect. 2 Hale, 165, 166. Chitty’s C. P. 326, 327, 328. Starkie, C. P. 258. Archbold, C. P. 24.
Captions owe their origin to the peculiar organization of the English courts, some of which, with limited jurisdiction, and not unfrequently acting under special commissions, may take indictments. These indictments may be removed to the Court *599of King’s Bench for trial. That court will require, before examining the charge, a history of the previous proceedings, and to be specially informed of the authority of the inferior court to take the indictment; for, if the inferior court transcend its authority, the whole proceedings will be null, and the indictment quashed.
There is nothing analogous to this in our judicial system. We have but one class of courts for the trial of criminal accusations preferred against free persons, viz. the Criminal Court of the First District, and the District Courts; upon these, exclusive and unlimited original jurisdiction has been conferred. Indictments can be found and tried only before them, and cannot be removed from one to another of them. When an indictment sets forth the parish or venue where the offence has been committed, the law fixes the only court which has jurisdiction of it. The same court before which the indictment was found must try it. Hence there is, in this changed condition of things, no necessity for a caption to the indictment in this State. The court which has itself taken the indictment cannot desire to be informed by what authority it was acting, nor can it desire a formal statement of proceedings, all of which have passed under its own eye, and form a part of its own records.
The error in the position assumed by the defendant has been, in insisting upon a correct averment in the indictment of a fact, which the strictness of common law proceedings only required to be stated in the caption, when a caption became necessary. We find that, at common law, the designation in an indictment of the court before which it was found, is not required. Under our system, the necessity for a caption can never arise; and it has, therefore, been in practice discarded. It follows as a consequence, that it is not necessary to make the averment in any part of our criminal proceedings. Those parts of the indictment under consideration, which are in the following words; “ The Criminal Court of the First Judicial District,” are surplusage, and, as such, may be rejected without injuring the remainder of the instrument.
It is necessary to state the venue, that is, the parish in which the offence was committed, that the court may know that it has jurisdiction. In the present instance, the venue has been distinctly expressed in the commencement; and, in the statement, the crime is alleged to have been committed in the parish of Orleans.
The next objection made to the indictment is, that “ It is defective in its statement. The allegations of the time and place of the death of the person murdered are material, and must be distinctly set forth in the indictment. It must appear that the party *600died within a year and a day. This indictment states neither time nor place of the death of the party killed, and is, therefore, fatal.”
The indictment, after stating the mortal blow, with the usual averments of time and place, proceeds: “ Of which mortal wound, so given by the said Samuel Kennedy, with the deadly weapon aforesaid, to the said Benjamin Wood Wait, the said Benjamin Wood Wait did then and there suffer and languish, and languishing did live, and a few hours after did die of the said mortal wound.”
No principle appears to be better settled than that, in indictments for high offences, those termed felonies at common law, the averment of time and place is to be repeated to every issuable and triable fact. When these have been once set forth with certainty, they may, in every subsequent averment, be referred to by the words then and there, which are deemed equivalent to a repetition of the time and place. The time should be stated with such certainty, that no doubt can be entertained of the period really intended ; and such is the precision required in this respect, that any uncertainty in the averment of time and place will vitiate the indictment.
The material facts in murder are the mortal stroke, and the consequent death, and the death must appear upon the record to have occurred within a year and day from the time when the mortal stroke was given. The averment, then, of each of these material facts must, under the well established rules of criminal pleading, be accompanied by an allegation of a certain time and place. Thus, to aver that the assault was made on two days, as on the first and second of May, or on an impossible day, is such an uncertainty as will vitiate the indictment.
If an indictment for murder state that A , at a given time and place, having a sword in his right hand, did strike B,, it is bad, for the time and place relate to the having the sword, and it is not stated when or where the stroke was given.
A., at a certain time and place, made an assault upon B., et eum cum gladio percussit, was held to be bad, because it was not said adtunc et ibidem percussit. The copulative conjunction “ and,” without the repetition of the time and place to this material ingredient of the offence, being deemed insufficient. In misdemeanors the same strictness is not required. 1 Chitty, 218, 219. Starkie, Cr. Pl. 58, 62, 65. 2 Hale, 178. Archbold, Cr. Pl. 34. 2 Hawk. cap. 23, sec. 88.
We will not further multiply instances of this precision, required in the averment of timo and place to every material fact in capital crimes. The books are full of them, and no principle is better settled. The decision of the question depends altogether *601upon authority, and the language of the authors cited, upon this as upon other points, has been used as nearly as possible.
Testing the indictment under consideration by these well established rules we find, that although there is a sufficient certainty in setting forth the time and place of the mortal stroke, yet there is no averment of the time and place of the death. The then and there immediately precede and refer to the “ languished, and languishing did live,” and not to the allegation, “ and a few hours after did. die.” The copulative and, it has been seen, is insufficient to connect the time and place with the death. Nor wilt the grammatical construction of the sentence support the position assumed in argument, that the then and there refer to the death. The facts of the time and place of death cannot be inferred or ascertained by intendment; they must be precisely and distinctly stated. Nor will the averment in the conclusion of a correct time and place of death, cure this defect, but, on the contrary, will render it repugnant to the statement. At the close of the indictment the legal conclusions are to be drawn from the facts previously set forth in the statement. The facts of the time and place of the death not having been set forth in the statement, the legal conclusion cannot be drawn, that the deceased was murdered in the parish of Orleans, on the 29th day of December, 1844.
The attorney general has called our attention to the statute of 1805, which directs that indictments, divested of all unnecessary prolixity, changing what ought to be changed, shall be according to the common law, and contends, that the frequent repetitions of time and place constitute some of the prolixities contemplated by the act, of which courts are authorized to divest indictments. We are not prepared to give this construction to the statute. We do not believe that the Legislature intended to confer upon courts authority to legislate upon the subject of criminal proceedings, or the framing of indictments, but merely to direet prosecuting officers to omit those prolixities which were acknowledged to be such at common law, and, consequently, unnecessary, although habitually inserted in indictments; such as the averment that the defendant “not having the fear of God before his eyes,” &c., with many others needless to be enumerated, which are found in old precedents, and even in those of more modern date. The changes directed by the act, we think, are those which are necessary to make our proceedings conform to our own laws and form of government; as, for instance, instead of an indictment com-menciug; “Middlesex, to wit: The jurors of our Lord the King,” it should begin; “ The State of Louisiana, Parish of Orleans: The grand jurors of the State of Louisiana;” with many others of a like nature. If, however, this legislative authority *602was ever conferred upon courts, it has long since been withdrawn by the constitution.
Whatever has been determined to be an essential averment in an indictment at common law, will be deemed necessary here, unless a statute of the State has removed the reason, and with it the necessity for the allegation. At common law, we have seen, that the averment, with certainty, of time and place of the death have been held to be indispensable in indictments for murder, and for sufficient reasons. These reasons have not been removed by our statutes, but exist here in full force; for it is equally true here, as in England, that the death must have occurred within a year and a day from the time when the blow was given, to constitute murder, and that the right to a trial by a jury of the vici-nage is secured to every citizen.
We find, then, that the indictment wants one of the averments essential to its validity at common law, and that the averment is equally necessary under our laws. The defect is not cured by the verdict, and the judgment must be arrested.
The attorney general has commented forcibly upon the regrets expressed by learned and able English judges, that the great niceties required in framing indictments offered too frequent opportunities for the escape of culprits, the tendency of which was rather the encouragement, than the suppression of crime. Lord Hale said, that the strictness required had grown to be a blemish and an inconvenience in the law. Similar opinions have since been expressed by Lord Kenyon and Lord Ellenborough. L Chitty, 170. But we are not informed that these learned judges ever felt themselves authorized to disregard the law, such as it was, or to dispense with the observance of those niceties, of whose existence they complained. Their remarks apply with full force to the criminal laws of this State; that the power to remedy the evil resides in the legislative branch of the government, and it is to be regretted that it has not already been exercised.
The English parliament attentive to the suggestions of its courts, has provided remedies for many of the inconveniences of the common law. The act, however, has been passed since 1806, and has no force,, in this State. Archbold. Stat. Geo. IT.
It is therefore ordered, that the judgment of the inferior court be reversed; that the verdict in the case be set aside, and the judgment thereon arrested. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488007/ | Nicholls, J.
dissenting. Constrained to differ upon a single point from the opinion which has just been delivered, it is a source of satisfaction that my dissent, if erroneous, will exercise *603no influence over the fate of the accused, and that a new trial will be awarded him, though a sense of duty compells me to withhold my concurrence. In all particulars I conceive, that the law has been properly expounded in the opinion of the court, except in sustaining the exception to the statement of the indictment respecting time and place, of which 1 believe the court has taken an improper view.
The indictment, or that part of it which is considered objectionable, is in the following words: “ Of which mortal wound, so given by the said Samuel Kennedy, with the deadly weapon aforesaid, to the said Benjamin Wood Wait, the said Benjamin Wood Wait did then and there suffer and languish, and languishing did live, and, a few hours after, did die of the said mortal wound.” This averment is deemed by the court defective, as not sufficiently descriptive of time and place. It is of opinion that the copulative and is insufficient to connect the time and place with the death, and that the grammatical construction of the sentence, will not support the position assumed in the argument that the then and there, refer to the death. Unable to subscribe to this position, I would observe, that there exists an ellipsis in the sentence, which should be confined grammatically no more to the absence of the words then and there, than to others equally important, and which the most fastidious hypercritic must admit as essential to convey the intended meaning, in that particular which the court considers sufficiently lucid to sustain the indictment. To insert all the words which are left out in this sentence so as to convey the meaning which the court thinks satisfactory, it should read : “ Of which mortal wound so given by the said Samuel Kennedy, with the deadly weapon, aforesaid, to the said Benjamin Wood Wait, the said Benjamin Wood Wait then, and there did suffer and languish, and languishing then and there he the said Benjamin Wood Wait did live, and a few hours after he the said Benjamin Wood Wait did then and there die." Now all the words above which are italicised, are under-derstood, and necessarily understood, to make the sentence grammatically correct, but which to avoid tautology, the genius of the language has rejected, unless it be conceded that the whole sentence is connected together by the copulative and, whose power for this purpose, is palpably as clear in the one case as in the other. Take the same liberty with the sentence by inserting the words then and there as understood, with reference to the death as is necessary to show that the man who languished and died, was Benjamin Wood Wait, (which fact is not stated in the indictment unless the name is thus understood, and which is justified and required by the grammatical and proper construction,) and *604the one averment is as distinctly made as the other; so distinctly made that, it is impossible to mistake the one or the other. But if any lingering doubt should still remain as to the place, where he died, it is abundantly made manifest, by a subsequent part of the indictment viz.: “ And so the grand jurors aforesaid, upon their oaths aforesaid, do say, that the said Samuel Kennedy, on the day aforesaid, at the time and place aforesaid, and in the manner and form aforesaid, feloniously, wilfully and of his malice aforethought, did kill and murder,” &c. Here it is averred (if any doubt remained,) that he murdered Wait at the time and place, aforesaid; the word murder, even when unaccompanied by the words feloniously, wilfully and of his malice aforesaid, comprising both the blow and the death; both must combine to comport with its meaning. Thus to me it appears to be clearly alleged that Wait received the 6low and died at the city of New Orleans, in the parish of Orleans, and on the 29¿A December, 1844; as the only lime or place mentioned in the indictment, are the city of New Orleans, parish of Orleans, the 29th December, 1844, and both stated as descriptive of the arena and epoch of this melancholy occurrence; the words, at the time and place aforesaid, refer to this time and this place, and to no other, as no other is mentioned. I find, therefore, nothing in the grammatical structure of the sentence, which would exclude my construction of the words ; on the contrary much to confirm it.
The legal phasis which the words present, offers nothing to my mind, variant from true grammatical construction. To the decisions of the English judges and English courts, I have been taught to pay great respect and deference ; in fact their intrinsic merit would extract homage from the most unwilling and prejudiced mind ; but I can never forget, that the common law of England is not the common law of Louisiana; that the Legislature, in adopting a code of laws for the prosecution of crimes, had declared (in the act of 1805,) that all the crimes, offences and misdemeanors therein named, shall be taken, intended and construed according to, and in conformity with the common law of England, and the forms of indictment, divested however of unnecessary prolixity, the method of trial, the rules of evidence, and all other proceedings whatsoever, in the prosecution of the said crimes, offences and misdemeanors, changing what ought to be changed, shall be, except as is by this act otherwise provided for, according to the said common law. In the case of The State v. McCoy and others, ante p. 545, this court declared, that the Legislature, in adopting the common law rules of proceeding, method of trial, &c., adopted the system as it existed in 1805, modified, explained and perfected by statutory enactments, so far as those enactments are not found inconsistent with the peculiar *605character and genius of our government and institutions. The common law of England thus purified, modified and pruned, I understand as the law of Louisiana. I am aware that Judge Martin, in the case of The Territory v. Nugent, 1 Mart. 173, in commenting upon the act of 1805, asks: “How shall I ascertain what is unnecessnry prolixity ? If I open the records which have hitherto been decided, I find that what the prosecutor for the Territory calls an unnecessary prolixity, has been held by wise judges an essential averment, the absence of which vitiates the indictment.1’ No doubt he did find it so, and for that very reason, and for no other, did the Legislature pass the act of 1805. Tram-melled by old forms and musty authorities, we know it was a constant source of regret with the English judges, that they were not clothed with authority to disregard and repudiate them, as no longer adapted to the improved and improving mindof the age and country. Sic lex scripta est, was the stubborn and unbending rule to which all their decisions were compelled to conform’; in consequence whereof they were obliged to resort to legal fictions and technical absurdities, for the purpose of avoiding the direct application of most of its requisitions ; many of which have now become obsolete, and have quietly sunk into desuetude, by general acquiescence rather than legislative enactment. To aver that in Louisiana crimes are prosecuted according to the common law of England, is not strictly and critically true. Neither is the refusal of Judge Martin to obey the law, because in similar cases the judges in England and in the United States have not deemed themselves warranted to pass judgment, a good reason for such refusal. He is not borne out by the fact; for never were the judges in England nor in the United States, called on to pass or refuse to pass judgment in any similar case. No such statute as thatof 1805 exists either in England or any of our sisterStates, so that no judge has ever (to my knowledge,) deemed himself unwarranted to pass judgment in any similar case. The refusal of Judge Martin to carry out the law, may be, and no doubt is, an evidence of his modesty, but the reason for the refusal is by no means satisfactory to me. If the Legislature had intended that their courts should only reject what an English court would have considered as unnecessary prolixity, and to preserve inviolate all that these courts considered essential averments, there would have been no necessity for the act of 1805 ; their courts would have been bound to do so without such an act. It could never have been contemplated, that the changes to be made, and the prolixities to be avoided, were those changes and that prolixity which would have been made or avoided in an English court, Gan it, for an instant, be supposed, that the Legislature in pass*606ing this act, had in view only such changes as are enumerated in the judgment of the court,.such as “ not having the fear of God before his eyes,” — “Middlesex, ss : the jurors for our Lord the King,” &c. It is paying but an indifferent compliment to either the Legislature or the judiciary, to suppose so. These changes the English judges would not have hesitated to make, without the sanction of any law upon the subject; such changes they have always made, and are now making. Instead of the phraseology of the indictment in England, being, at this time “ the jurors for our Lord the King,” they have wisely substituted “ the jurors for our Lady the Q,ueen,” or some such formula. This description if changed, a change required to make it conform to truth, mutatis mutandis, would have been made by all our courts without any legislative enactment. The act of 1806, therefore, to me seems intended to apply to a different state of things, and was passed for a different purpose. Great power is no doubt conferred upon the judges, to be exercised with the greatest caution, and not to be resorted to under vain and frivolous pretexts, nor upon all occasions; but it was a power which was necessary to be lodged somewhere. The idea that the Legislature could travel through the whole body of the common law, repudiating here, pruning there, re-enacting this provision and repealing that, is too preposterous to be entertained for a moment. The task was too Herculean ; in fact, it was morally and physically impossible; and yet it was important and absolutely essential that this selection should be made, and the law winnowed from the trash and crudities, with which it was originally and in early ages incorporated. To what body of men then could this august mission have been more safely entrusted than to that of the judiciary, chosen for their supposed erudition and moral worth, and trained by education and practice to the investigation of such matters ? To me it seems that this was not only the proper but the best course to adopt.
This court, and in fact, every court in the State having criminal jurisdiction, have exercised the right conferred by the act of 1805. Does the common law of England authorize new trials in capital cases? Does it justify that liberality of construction, and in many cases, that return to common sense, which every day characterizes their decisions ? Did ever any one hear of an appeal having been taken by the Crown in a criminal case of any description ? Yet these things are done, and rightfully, and legally done in our courts, changing what ought to be changed, by virtue of the act of 1805. This must be so or else we must take the common law, as we find it, for better, for worse, with all its imperfections and absurdities; and, instead of the judges being seated here, gravely examining questions of law, by recourse *607to boohs and authorities, the lists should be opened, and the trial by wager of battle substituted in its stead. The test by the corsned, and the convincing evidence of innocence furnished by the power of walking unscathed and unbnrned. over red hot ploughshares, would be substituted for their present and humane representative, the trial as now known and practised under our law. We must come to this, or my reasoning on the law is right. These features of the common law have never been altered by the Legislature, which adopted it as the law of Louisiana in criminal matters, and according to the opinion of the court, just read, can not be changed or rejected by the judiciary.
I have succinctly endeavored to show, first, that if submitted to the test of the ordinarily accepted signification of the words— their grammatical construction, — the manner in which they would be understood in common parlance — the result would be invariably the same : viz., that the blow was given in the city of New Orleans, parish of Orleans, on the 29th of December, 1844, and that the death happened at the same time and in the same place. The sentence in the indictment descriptive of the offence is a very long one, and to give effect to it, so as to convey the charge, as understood by the court, the copulative conjunction and must be enlisted in the service, and made to fill the same office to connect the sentence, which is denied to it, when sought to be applied to eke out the words then and there (tunc et ibidem) which are I think necessarily understood and implied by the rules of grammar, and thus removing every vestige of doubt as to the meaning of the words. This being the only natural meaning of the words, about which no two men, in the ordinary transactions of life, could entertain a doubt, let us see whether there be any thing arising from technicalities of the law, which would give to-them a different meaning. That arbitrary rule of the common law, which gives to the same words different meanings when applied in cases of felonies, from the meaning they would convey in a case of misdemeanor only, may possess many recommendations to the eye of the felon, though to him convicted of the minor offence, the distinction so unfavorable to his case could scarcely command his assent or approval.
To one not seeking objections, not anxious to detect flaws-where none exist, even in a technical point of view, it seems to me, this indictment is clear and explicit. It avers in the ordinary phraseology of the law, that the blow was inflicted in the city of New Orleans, and parish of Orleans, on the 29th December, 1844, (with all the precision required,) and that a few hours after he died. The smallest subdivision of time known to the law is called a day ; no fractions of a day are noticed, according *608to the maxim, de minimis non curat lex ; that the major includes the minor is a postulate which the .law easily recognizes and adopts ; but, vice versa, the minor can never include the major. Not losing sight of either of these propositions, is 'it not demonstrated, beyond the reach of cavil, that when it is alleged that the blow was given on the 29th,. December, and that a few hours after, the party died, that in the strictness of even technical precision, he must have died on the 29 th, and not on any other day? Had it been intended to aver that he died on the next day, it would have said so — that is, that he died on the next day, or that . he died on the 30th; but having alleged that the wound was inflicted on the 29th, and that he died after a few hours, it admits of no other meaning than that he died on the 29th. To declare that a particular fact happened on a given day of the month, and that, a few hours after, some other fact transpired, tested by any rule which may be adopted, must be understood as circumscribing the two events within the limit of the same day. So when we say a few minutes after twelve o’clock, we never under any circumstances intend to extend the time to one o’clock, nor would any one so understand us. Add to this the .concluding words of the indictment, and to me, it seems impossible that any doubt should remain: “And so the grand jurors aforesaid, upon their oath aforesaid, do say, that the said Samuel Kennedy, the said Benjamin Wood Wait, on the day aforesaid, at the time and place aforesaid, and in the manner and form aforesaid, feloniously, wilfully, and of his malice aforethought, did kill and murder,” &c. The time aforesaid was the 29th December, 1844, (the only time mentioned;) the place aforesaid was, the city of New Orleans, parish of Orleans, the only place mentioned; and the manner aforesaid, by stabbing him with a knife, the only manner mentioned. All this is strictly in conformity to the truth. This explains any latent ambiguity which might be found in the obnoxious sentence. Id certum est, guod cerium reddi potest. I readily concede, that to aver that the stroke took place on two days, as on the first and second of May, or on an impossible day would be fatal; because being impossible it can never be reconciled, nor can truth be converted into falsehood. But my exposition makes it conform to truth in every particular.
For these reasons I am of opinion that the judgment of the inferior court should be confirmed. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488008/ | *609Application foe. a Re-hearing.
Preston, Attorney General,
for a re-hearing. It is admitted, because the authorities are unanimous on that point, that if a material fact in an indictment be alleged with a certain day and place, the time and place of every other material fact which occurred on the same day, and at the same place, may be alleged, by referring by the adverbs then and there, to the time and place previously stated. It is admitted that it is stated in this indictment. with technical certainty, that Kennedy gave Wait a mortal stroke on the 29th day of December, 1844, in the parish of Orleans. Now the question is, whether the death of Wait, is referred by the adverbs then and there, in the indictment, to the said time and place, with technical certainty.
The indictment states, that Kennedy gave Wait a mortal stab, in the parish of Orleans, on the 29th of December, 1844, of which mortal stab he then and there suffered, languished, lived, and a few hours thereafter died.
All grammarians will agree, that the death is referred, in the foregoing sentence, by then and there, to the parish of Orleans, and the 29th of December, 1844.
The words “ a few hours thereafter,” are inserted in the statement to show precisely the facts which occurred. They refer, by grammatical construction, and by their inherent meaning, to the mortal stroke. They do not refer to the fact that Wait suffered, languished and lived, because he could not die a few hours after he suffered, languished and lived, but must have died the instant he ceased to suffer, langu ish and live.
The words “ a few hours thereafter died,” referring, therefore, to the mortal stab, and qualifying the death, as certainly connect the death with the day of the mortal stab, as the repetition of the word then would have done.
As to place, it is the opinion of the court, the indictment should have read thus: “ Of which mortal stab the said Wait there languished and lived, and a few hours thereafter there died.” The repetition of the word there adds nothing to the precise certainty of the place of the death, and therefore, is merely unnecessary prolixity, forbidden by the act of 1805.
I cannot admit for a moment, that the judgment in this case would have been arrested at common law, even before the statute of George the 4th abolished all these miserable technicalities in England. Hale, and Kenyon, and Ellenborough, and Mansfield, and Chief Justice Eyre, never would have arrested this judg*610ment after what they are reported to have said at pages 139 and and 140 of Chitty’s Criminal Law.
There are but two decisions that can be found which give any countenance to such technicalities. One reported in black letter Norman French, at pages 68-69, of Dyer, in the reign of Edward the sixth ; and Cotton’s case, in the reign of Queen Elizabeth. In the margin of the former case, Leonard, and Coke’s Institutes, are cited, later authorities to the contrary; and Lord Hale in stating the decisions says, they were given in favorem■ vitae.
In Cotton’s case, the allegation was, that Cotton, on the day, and at the place, having an axe in his hand, struck Speucer, whereof she the same day and year died. Exception was taken to the indictment, and it was held ill, because the place was alleged where he had the weapon in his hand, but not where he struck, or she died.
But this case is entirely different from the one before the court. The time and place were not connected, as here, by the copulative conjunction “ and,” with the death ; but qualified the having an axe in his hand, and not the stroke with the axe.
I have not seen the decision, that the then and there cannot be connected with the death, by the copulative and ; but that they must succeed and not precede the and. If there be such a decision, it is contrary to grammatical rules, and to the common understanding.
It cannot be pretended, but that the whole of the consequences of the mortal stroke given to the deceased Wait, are referred by the technical words then and there to the time and place when and where the mortal stroke was given, according to the strict rules of grammatical construction. Then and there qualify the words immediately following them, and all words connected with them by the copulative and.
Chitty indeed states, that that conjunction is not sufficient in some cases, but cites no authorities in support of his assertion; nor does he specify the cases in which it is insufficient. Pages 181, 220.
But if this indictment could have been arrested at common law, it cannot be by our courts. They are directed by the act of 1805, to change what ought to be changed in criminal proceedings. In England they have changed by statute the practice'of arresting judgments on such frivolous pretexts. No one will pretend that such a practice ought not to be changed here. Judgment was arrested in but two instances on such a ground in England, and that two or three hundred years ago. We have no knowledge of (hose remote and obscure cases; but we know, that the courts expressly say, that the technicalities were admitted in favorem vitae, and were inadmissible where the punishment was not capital. And why admitted in favorem vitae 7 Because a new *611trial could not be granted, aod for no other reason. No doubt, therefore, the courts finding a mao convicted, but innocent, sought the pretext for arresting judgment, in favorem viles, which the rules of law forbid in cases not capital.
Under the power to change what ought to be changed, this court established, in the case of Hornsby, that a new trial should be granted in capital cases. They had no other authority to grant that now trial, except the power to change what ought to be changed in the common law, which allowed no new trial in capital cases, and by the principles of which they were bound until changed.
The court in making this great change, abolished the whole reason on which the courts in England, two hundred years ago, allowed this frivolous technicality, in arrest of judgment, in fa-vorem vites; and by abolishing the whole reason for allowing it, abolished the technicality itself.
The court did not notice the argument, that the place of the death has become immaterial, by our law’s authorizing the prosecution at the place where the mortal stroke was given * and that the time of the death was immaterial, if the whole record showed that the death occurred within a year and a day after the mortal stroke. Archbold, 385. I relied with great confidence on these points, for I cannot conceive how a most solemn proceeding can be set aside for mere arbitrary rules, without reason. Cessante ratione, cessat et lex.
Johnson J.
The majority of the court who concurred in the decision rendered in this case, have considered the grounds urged by the attorney general for a re-hearing, without being brought to the conclusion that it ought to be granted. Time and place must be added to every material fact in an indictment. In an indictment for murder, the death must be laid on a day within a year and a day from the time at which the stroke is alleged to have been given, The time and place of the death of Wait became a material fact to be alleged in the indictment. It is immaterial that the time and place is not alleged strictly according to the truth, since, in that case, if the proof shows that the death was within the year and day, it is sufficient. But the indictment must allege the day of the mortal wound, and the day of the death, with certainty, and not leave it to be inferred by inductive reasoning. The indictment must, from an inspection, and by comparison of the date of the mortal wound with the date of the death, show that the death has occured within the limit of the year and a day. Thus, for instance, after averring the day of the mortal wound, continue■ “of which said mortal wound the said J. N., from the said 3d day of May, in the year aforesaid, until the 15th day of the said month, at the parish .aforesaid, ip the cqunty aforesaid, did lam *612guish. and languishing did live ; on which said 15th day of May, in the year aforesaid, at the parish aforesaid, in the county aforesaid, of the said mortal wound did die.” This form leaves no room for doubt as to the two periods of the mortal wound and of the death. How is the matter stated in the indictment now in hand ? After alleging that the mortal blow was given on the 29th of December, 1844, it continues; “of which mortal wound so given by the said Samuel Kennedy, with the deadly weapon aforesaid, the said Benjamin Wood Wait did then and there suffer and languish, and languishing did live; and a few hours afterwards did die of the said mortal wound.” How, we ask, is it proved on inspection of the indictment, by a comparison of the day of the mortal wound with the above account of the time of of the death, that the wound and the death both occured on the 29th of December, 1844? It is much easier to prove by process of reasoning, that it occurred on the 30th of December. For if the wound was inflicted on the 29th, and Wait then and there, (that is, at the parish of Orleans, on the 29th of December,) did Jan-guishingly live, and a few hours after, (that is to say, a few hours after the 29th of December,) did die of the said mortal wound, it would seem that he did not die on the 29th, but on the 30th. But in this respect, the indictment must prove itself; and the maxim “ that is certain which may be rendered certain,” has no force here.
We have already said, that we can take nothing to our aid in this instance, from the act of 1805, introductory of the common law. If we could, it would turn out an universal panacea for all defects in indictments, till at length it would be said, that an indictment needs no particular form. But the attorney general thinks that, in granting Hornsby a new trial, we must have drawn on that statute for the power. We were not aware of it, supposing that our right to grant a new trial, when justice and humanity required it, depended upon the act of the Legislature organizing this court, as well as upon the practice in our courts.
Re-hearing refused. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488010/ | Boyle, J.
In this case, a motion was made in the lower court, by the counsel for the defendant, to quash the indictment preferred against him, on the following grounds, to wit:
]. Because twelve jurors did not concur in the finding of the indictment.
2.Because the indictment was not found by a competent grand jury, there being persons on the jury not qualified and competent, according to law.
The motion was sustained, and the indictment quashed; and from this judgment, the district attorney has taken an appeal to this court.
It satisfactorily appears, from the evidence taken on the trial of the motion, that .Hadley P. Roberts, one of the members who sat on the grand jury, at the November term of the court, in 1844, when the bill of indictment was found, owned no taxable property in the years 1848 and 1844 ; that his name was not on the tax list of 1844, and although on that of 1843, that he had no property carried out on the list opposite to his name.
By the act of 25th March, 1831, the qualifications of a juror to serve in any of the courts of this State, are declared to be the following :
1. To be a free white male citizen of the State of Louisiana.
2. To be of full age and sound mind;
3. Not to be an apprentice, or an indented, or a domestic servant';
4. Not to have been adjudged guilty of any crime punishable according to the laws of this State, with death, or imprisonment at hard labor.
5. To have resided at least twelve months before a new venire is formed, in the parish or district in which the jury is summoned.
6. To have paid, or to be liable to pay, a State, parish or city tax.
In accordance with the provisions of the act of 6 March, 1840, the list of persons to serve as jurors in the several district courts of the State, must be drawn in every year ; the list from which the venire of forty-eight to serve as grand and petit jurors, at the November term of the district Court, for the parish of Rapides, in 1844, must, therefore, have been drawn within that year. Yet neither in that year, nor in the year previous, did the grand juror Roberts own any property, nor had he paid, nor was he liable to pay a State, parish or city tax. It is, however, urged, that the 5th section of this act destroys the effect of all objections of this character, unless made on the first day of the term of the dis*618trict court, to which the jurors are summoned, and not after-wards. The provisions of that section are confined “ to any defect or informality which may have occurred, either in the formation, drawing or summoning of said juries, or any other defect whatsoever in the construction of said juries.”
To give a different construction to this statute than that conveyed by its obvious language — to decide that no objection could be made to the competency of any individual summoned as a juror, to serve at each term of the district courts, unless upon the first day of the term, would be to deprive every person accused of a criminal offence of the right to challenge jurors for cause, a right which it is scarcely necessary to say may be exercised before the petit jurors are sworn in chief.
It only remains for this court to decide upon the legal effect of the objection taken to the want of competency in one of the members of the grand jury which found the bill. Twelve of that body, (usually numbering sixteen, as in the present instance,) may find a true bill, and it might be said, that although one of the sixteen should have been incompetent, the remaining fifteen or even twelve of them, would be sufficient to legalize the finding.
The wise policy of the law, however, which-forbids any grand juror to disclose the secrets of his fellows or his own, leaves to the court which presides over their deliberations, no means of distinguishing who of the grand jurors have found, or who ignored the bill, and no means of ascertaining whether the bill has been found by the legal number of competent grand jurors, unless the whole body should be composed of such persons.
The common law of England, which governs our methods of trial, and all our proceedings in the prosecution of crimes, furnishes us with safe precedents in all matters connected with the inquest before the grand, and the trial before the petit jury.
The statute of the 2d Henry IV. c. 9, which is declaratory of the common law, and on the same subject as our act of 25 March, 1831, uses the following expressive language: “That from henceforth no indictment be made by any such persons, but by enquests of the King’s lawful liege people, in the manner as was used by his noble progenitors, returned by the sheriff, &c., and other officers to whom it pertaineth to make the same, according to the law of England; and if any indictment be made hereafter, in any point to the contrary, that the same indictment be also void, revoked, and forever holden for none.”
We fiud from Hawkins’ Pleas of the Crown, book 2d, chap. 25, sects. 26,27,28, that in the construction of this statute, the following points have been decided :
“ That a person arraigned upon any indictment taken, con*619trary to the purview of this statute, may plead such matter in avoidance of the indictment.
“ That a person outlawed upon any such indictment without a trial, may show, in avoidance of the outlawry, that the indictment was taken contrary to the form of the statute.
“ That if any one of the grand jury, who find an indictment, be within any one of the exceptions of the statute, he vitiates the ' whole, though never so many unexceptionable persons joined 'with him in finding it.”
We feel satisfied that the language of the statute of Henry, and the construction given to it by the English courts, furnish the wisest and safest rule of decision; and that the incompetency of one of the grand jury so to find a bill of indictment, vitiates the whole proceeding.
We therefore think, that the objection to the competency of one of the grand jurors in the case before the court, was well taken, and that the judgment of the district judge, in quashing the indictment, was correct,
Judgment affirmed. | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494251/ | OPINION
MARY P. GORMAN, Bankruptcy Judge.
This matter comes before the Court upon Busey Bank’s Motion to Dismiss Count III of the Second Amended Complaint filed by Vancil Contracting, Inc. (“Vancil”), which seeks to foreclose a contractor’s lien. Busey Bank alleges that the “Contractor’s Notice and Claim for Lien” (“Lien Notice”) attached to the Second Amended Complaint as Exhibit B is defective because it is not verified by affidavit, as required by Illinois law. Although the Court agrees with Busey Bank that the Lien Notice is defective and inadequate to preserve Vaneil’s statutory lien rights, the Court also finds that Vancil preserved its lien rights by the alternative method allowed by Illinois law of filing a suit to foreclose its lien within four months of completing construction. Accordingly, Busey Bank’s Motion to Dismiss will be denied.
Vancil filed its voluntary petition under Chapter 11 on September 18, 2006. One asset of the Vancil estate is its claim that substantial funds are due to it by Tres Amigos Properties, LLC (“Tres Amigos”) relating to the construction of a Hilton Garden Inn hotel in Springfield, Illinois. Vancil filed this instant adversary proceeding to collect the sums it claims are due. Count III of Vancil’s Second Amended Complaint names Busey Bank, as succes*245sor to both Main Street Bank & Trust and First National Bank of Decatur, as a defendant. Count III seeks to foreclose Vancil’s contractor’s lien claim against the hotel property. Busey Bank has an interest in the hotel property by virtue of a recorded mortgage.
The Lien Notice is a three-page draft document which appears to have been prepared by Vancil’s attorneys. The first two pages contain six substantive paragraphs which set forth the factual allegations of the contract with Tres Amigos, the work done on the hotel construction, and the amounts claimed to remain due. The document is signed on the second page by Ron Vancil in his capacity as President of Vancil. The third page contains the following:
[[Image here]]
I, the undersigned, a Notary Public in, and for said County and State aforesaid, DO HEREBY CERTIFY, that Ron Vancil, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that she (sic) signed, sealed and delivered the said instrument as her (sic) free and voluntary act, for the uses and purposes therein set forth.
Given under my hand and official seal, this 7th day of December, 2005.
M Kelly E. Hillis (SEAL)
Busey Bank asserts that the Lien Notice is defective because the factual allegations set forth in the first two pages are not made under oath and do not constitute an affidavit. Further, Busey Bank argues that the notarization of the Lien Notice on the third page provides only a witnessing of the signature of Ron Vancil and is not a verification of the Lien Notice, as required by Illinois law. Vancil concedes that there is nothing in the first two pages which could be construed as an oath or affidavit. Vancil does, however, assert that the notarization of the document constitutes a verification sufficient to comply with Illinois law.
Section 7 of the Illinois Mechanics Lien Act (“Lien Act”) sets forth the requirements for a valid contractor’s lien, and specifically requires that any claim for lien must be “verified by the affidavit” of the contractor. 770 ILCS 60/7. The Illinois Supreme Court has held that the Lien Act must be strictly construed, and that a contractor’s lien is only enforceable if the statutory requirements for the creation of the lien have been scrupulously observed. First Federal Savings & Loan Association of Chicago v. Connelly, 97 Ill.2d 242, 246, 454 N.E.2d 314, 316, 73 Ill.Dec. 454, 456 (1983). Verification by affidavit is a clear requirement for an enforceable contractor’s lien claim, and the failure to verify renders a lien claim unenforceable. Tefco Construction Co., Inc. v. Continental Community Bank and Trust Co., 357 Ill.App.3d 714, 721, 829 N.E.2d 860, 866, 293 Ill.Dec. 935, 941 (Ill.App.2005).
Illinois law allows a notary public to perform certain acts, including “taking an acknowledgment, administering an oath or affirmation, taking a verification upon oath or affirmation, and witnessing or attesting a signature.” 5 ILCS 312/6-101(a). ‘Verification upon oath or affirmation” is defined as a 101(c). By contrast, an “acknowledgment” is defined as a declaration that a “person has executed an instrument for the purposes stated therein”, and that the person signing the instrument is actually the “person ... represented and identified therein.” 5 ILCS 312/6 — 101(b).
Illinois law also provides samples of the certificates which are sufficient to accomplish the notarial acts. For a verification *246upon oath or affirmation, “[s]igned and sworn (or affirmed) to before me” is the suggested language to be included. 5 ILCS 312/6-105 (c).
In reviewing the language of the third page of the Lien Notice, it is clear that the notary certifícate is simply an acknowledgment. It identifies Ron Vancil as the person signing, and states that the instrument was signed for the purposes set forth therein. It contains no representation that Ron Vancil was placed under oath, or that he represented to the notary that, by oath or affirmation, he was verifying the truth of the matters set forth in the Lien Notice. The language on page three of the Lien Notice is not a verification by affidavit as required by § 7 of the Lien Act.
Because verification by affidavit is a requirement of the Lien Act to create an enforceable contractor’s lien, and because the Lien Notice filed by Vancil contains no language which can be construed as a verification by affidavit, the Lien Notice was defective and inadequate to preserve Van-cil’s statutory lien rights. Busey Bank is correct in asserting that a complaint to foreclose statutory contractor’s lien rights cannot be based on a faulty document. Vancil argues, however, that even if the Lien Notice was defective, the Lien Act provides the alternative method of preserving lien rights by actually filing suit, and Vancil complied with that alternative.
Section 7 of the Lien Act provides that, in order for a contractor to preserve his or her lien rights and enforce such rights to the “prejudice of any other creditor or incumbrancer or purchaser”, the contractor must, within four months of completing work, “either bring an action to enforce his or her lien” or file the lien claim, verified by affidavit. 770 ILCS 60/7. Vancil has alleged, and it does not appear to be in dispute, that work on the hotel was completed on September 22, 2005. On December 13, 2005, Tres Amigos filed suit in the Seventh Judicial Circuit, Sangamon County, Illinois, against Vancil to resolve disputes over the construction project. On December 29, 2005, Vancil filed an Answer and Counter-Claim in that case which added Busey Bank’s predecessors, Main Street Bank and Trust and First National Bank of Decatur, as Counter-Defendants. Count I of the Counter-Claim sought to foreclose Vancil’s lien rights pursuant to the Lien Act. Because Vancil filed an action to enforce its lien rights within four months of completing work, its lien rights were preserved, despite its defective Lien Notice.
Busey Bank argues that, because Vancil plead in Count III that it preserved its lien rights by filing the Lien Notice, and because that allegation is incorrect due to the defects in the Lien Notice, Count III fails to state a cause of action upon which relief can be granted and should be dismissed pursuant to Fed. R.Civ.P. 12(b)(6). Busey Bank overlooks the fact, however, that in both the Counter-Claim filed in state court and the Second Amended Complaint filed herein, Van-cil specifically alleges, not only that its lien rights were preserved by the Lien Notice, but also that its lien rights were preserved by the timely filing of an action to foreclose. Accordingly, Count III is sufficiently plead and states a cause of action under the Lien Act. Busey Bank’s Motion to Dismiss will be denied.
This Opinion is to serve as Findings of Fact and Conclusions of Law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.
See written Order.
ORDER
For the reasons set forth in an Opinion entered this day,
*247IT IS HEREBY ORDERED that Busey Bank’s Motion to Dismiss Count III of the Second Amended Complaint filed by Van-cil Contracting, Inc. be and is hereby denied.
IT IS FURTHER ORDERED that Bu-sey Bank file an answer to the Second Amended Complaint or otherwise plead within 28 days of the date of this Order. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494252/ | ORDER ON (1) PLAINTIFF’S MOTION TO DISMISS COUNTERCLAIM; (2) PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT; AND (3) DEFENDANT, SYNOVUS BANK OF TAMPA BAY’S MOTION FOR SUMMARY JUDGMENT AS TO COUNT I OF THE COMPLAINT
PAUL M. GLENN, Chief Judge.
THIS CASE came before the Court for hearing to consider (1) the Plaintiffs Motion to Dismiss Counterclaim; (2) the Plaintiffs Motion for Summary Judgment; and (3) the Defendant, Synovus Bank of Tampa Bay’s Motion for Summary Judgment as to Count I of the Complaint.
The primary issue in this case is whether a payment made to Synovus Bank of Tampa Bay within ninety days of the Debtors’ bankruptcy petition, in connection with the sale of certain real property located in Pasco County, Florida, was a preferential transfer within the meaning of § 547(b) of the Bankruptcy Code.
I. Background
The Debtor, Dale F. Alford, Jr., was the President of a Florida corporation known as Mercury Technology Services, Inc. (Doc. 25, Affidavit of Debtor, ¶ 2).
On August 20, 2002, Mercury Technology Services, Inc. (MTS) entered into a Loan Agreement with United Bank and Trust Company, pursuant to which MTS borrowed the sum of $270,000.00 from the Bank. (Doc. 1, Complaint, Exhibit A, U.S. Small Business Administration Note). Sy-novus Bank of Tampa Bay (the Bank) is the successor in interest to United Bank and Trust Company.
The Debtor personally guaranteed the Loan from the Bank to MTS. (Doc. 1, Complaint, Exhibit D, Unconditional Guarantee).
The Loan was secured by a security interest in all of MTS’s equipment and machinery, furniture and fixtures, inventory, accounts receivable, contract rights and general intangibles. (Doc. 1, Complaint, Exhibits B and C, Security Agreement and Financing Statement).
The Loan was further secured by a Mortgage on certain Real Property located *339in Pasco County, Florida (the Real Property). (Doc. 1, Complaint, Exhibit G, Mortgage). The Real Property was owned by the Debtor and his father, Dale F. Alford, Sr., as tenants in common. (Doc. 25, Affidavit of Debtor, ¶ 16). The Mortgage provided that it was given to secure the Note dated August 20, 2002, and further provided:
This Mortgage secures a Promissory Note in the amount of $270,000.00; However, this Mortgage is limited to $100,000.00 and intangible taxes in the amount of $200.00 only are affixed hereto.
(Doc. 1, Complaint, Exhibit G, Mortgage)(Emphasis supplied). The Mortgage was signed by the Debtor and his father.
In connection with the Loan, the Debtor and his father also signed a Hypothecation Agreement. (Doc. 1, Complaint, Exhibit F, Hypothecation Agreement). The Hy-pothecation Agreement provided in part:
In order to induce Bank to make or extend loans, advances or other financial accommodations to Mercury Technology Services, Inc., a Florida corporation (the “Borrower”), and in consideration thereof, we hereby consent and agree that the property described in Exhibit “A” hereto (the “Property”), of which we are the owner, may be and is hereby mortgaged and pledged to the Bank as collateral, and Bank is hereby granted a mortgage and security interest in the Property for and to secure any and all obligations and liabilities of Borrower to Bank, whether now existing or hereafter arising, direct or contingent, due or to become due, and any extension or renewal thereof, upon any terms and conditions whatsoever (collectively, the “Liabilities”), and with the same force and effect as if the Property were owned by Borrower and mortgaged and pledged to the Bank. A separate mortgage is being-executed and delivered to Bank in furtherance hereof (the “Mortgage”).
(Doc. 1, Complaint, Exhibit F, Hypothecation Agreement, ¶ l)(Emphasis supplied). In contrast to the Mortgage, the Hypothe-cation Agreement does not contain language that limits the amount of the “pledge” to $100,000.00 or any other specific amount.
MTS discontinued its business operations in mid-2004, and the assets of the business were sold. The proceeds from the sale were not paid to the Bank at the time that the business assets were liquidated. (Doc. 27, Affidavit of Denise G. Unley, ¶ 16).
On August 30, 2005, the Debtor and his father sold the Real Property that was the subject of the Mortgage and Hypothecation Agreement for the sum of $410,000.00. Of the total sales price, the Bank received the sum of $170,863.10. (Doc. 27, Exhibit L to Affidavit of Denise G. Unley, Settlement Statement).
The Debtor and his wife filed a petition under Chapter 7 of the Bankruptcy Code on October 13, 2005.
On February 22, 2006, the Chapter 7 Trustee filed a Complaint to Avoid and Recover Preferential and Fraudulent Transfers against the Bank and the Debt- or’s father.
In Count I of the Complaint, the Trustee alleges that the Debtor transferred the sum of $170,863.10 to the Bank on August 30, 2005, in connection with the sale of the Real Property, and that the payment satisfies the elements of a voidable preference under § 547(b) of the Bankruptcy Code.
The Bank subsequently filed an Answer to the Complaint, combined with a Counterclaim against the Trustee. (Doc. 6). In the Counterclaim, the Bank seeks “the entry of a judgment imposing an equitable lien on the Real Property,” because the *340Debtor had allegedly engaged in certain improper conduct prior to the filing of the Bankruptcy petition.
The Trustee filed a Motion to Dismiss the Counterclaim on the grounds that (1) the Trustee was not the proper defendant; (2) the Bank failed to plead fraud with particularity; and (3) the Bank failed to state a cause of action for the imposition of an equitable lien.
Additionally, the Trustee and the Bank each filed a Motion for Summary Judgment.
In her Motion for Summary Judgment, the Trustee asserts that the Debtor transferred the sum of $170,863.10 to the Bank within ninety days of the filing of the bankruptcy petition, and that the transfer satisfies the elements of a voidable preference under § 547(b) of the Bankruptcy Code. (Doc. 13, ¶¶ 31-37). Specifically, the Trustee contends that the Mortgage expressly limited the Bank’s secured interest in the Real Property to the sum of $100,000.00. Consequently, the additional $70,863.10 received by the Bank when the Real Property was sold constituted a payment on account of an antecedent, unsecured debt. (Transcript, pp. 18-19).
In the Bank’s Motion for Summary Judgment, on the other hand, it asserts that the transfer cannot be avoided under § 547(b) because it did not enable the Bank to receive more than it would have received in the Chapter 7 case. Specifically, the Bank contends that it “was fully secured up to the amount of the Transfer if not to the full amount of the Loan,” because the Hypothecation Agreement contained no limit on the amount of the Bank’s security interest in the Real Property. (Doc. 24, p. 4).
II. The Motions for Summary Judgment
The primary issue in this case is whether the Bank’s lien on the Property was limited to the sum of $100,000.00, as reflected in the Mortgage, or whether the Bank’s claim was secured to the extent of “any and all obligations” owed by MTS to the Bank, as reflected in the Hypothecation Agreement. If the Bank’s lien was limited to $100,000.00 pursuant to the Mortgage, the additional $70,863.10 received by the Bank upon the sale of the Property may constitute payment of an antecedent, unsecured debt, as asserted by the Trustee.
Generally, if multiple documents are signed together as part of the same transaction, the documents should be interpreted together in an effort to determine the intent of the parties.
Where other instruments are executed contemporaneously with a mortgage and are part of the same transaction, the mortgage may be modified by these other instruments. All the documents should be read together to determine and give effect to the intention of the parties.
Boyette v. Carden, 347 So.2d 759, 761 (Fla. 1st DCA 1977)(quoted in Sardon Foundation v. New Horizons Service Dogs, Inc., 852 So.2d 416, 420 (Fla. 5th DCA 2003)). “When two documents are executed by the same parties as part of a single transaction regarding the same subject matter, they are to be read and construed together.” KRC Enterprises, Inc. v. Soderquist, 553 So.2d 760, 761 (Fla. 2d DCA 1989).
Additionally, if the multiple documents include a mortgage, it is generally held that Courts should interpret the documents with a view to effectuating the intention of the parties.
The primary rule of construction of a mortgage is to ascertain the intention of the parties, which is accomplished not only from the face of the instrument but *341also from the situation of the parties and the nature and object of the transaction.
Boyette v. Carden, 347 So.2d at 761 (quoted in Sardon Foundation, 852 So.2d at 420); Huntington National Bank v. Merrill Lynch Credit Corporation, 779 So.2d 396, 398 (Fla. 2d DCA 2000)(The primary rule of construction of a mortgage is to determine the intention of the parties, which is achieved by evaluating the terms of the documents, the situation of the parties, and the nature and purpose of the transaction.)
Finally, if the transaction in its entirety is found to be ambiguous, parol evidence is permissible to determine the parties’ intention. “If the agreement is deemed ambiguous, parol evidence, including the conduct of the parties in their course of dealings, would be admissible to ascertain the parties’ true intent.” Sar-dón Foundation, 852 So.2d at 420. If separate documents comprising a single transaction are inconsistent with one another, for example, “the ambiguity created by the mutual repugnance of the instruments requires consideration of such evidence, parol or otherwise, as the parties may present on the question of the intent of the parties.” Saco Development, Inc. v. Joseph Bucheck Construction Corporation, 373 So.2d 419, 421 (Fla. 1st DCA 1979).
In this case, the Court finds that the Note, the Guaranty, the Mortgage, the Hypothecation Agreement, and the other documents executed on August 20, 2002, were all components of a single transaction, and should be read and construed together. The documents evidence a single loan agreement pursuant to which the Bank was the lender, MTS was the borrower, and the Debtor was a guarantor and mortgagor.
Second, the Court finds that the transaction involves a Mortgage, and that the loan documents should therefore be construed so as to determine the intention of the parties. Boyette, 347 So.2d at 761.
Third, the Court finds that the terms of the Hypothecation Agreement are inconsistent with the terms of the Mortgage. The inconsistency is illustrated by contrasting the language that is hand-typed on the first page of the Mortgage with the language that is contained in the first paragraph of the Hypothecation Agreement. The Mortgage provides that it is “limited to $100,000.00 and intangible taxes.” The Hypothecation Agreement provides that the interest granted to the Bank is to “secure any and all obligations and liabilities of the Borrower (MTS) to the Bank.” The Hypothecation Agreement does not include language that corresponds to the $100,000.00 limitation that appears in the Mortgage.
Fourth, because of the clear inconsistency between the terms of the Mortgage and the terms of the Hypothecation Agreement, the Court finds that the conduct of the parties and other relevant evidence should be considered to determine the parties’ intent. Sardon Foundation, 852 So.2d at 420; Saco Development, 373 So.2d at 421.
Finally, the record reflects that a genuine issue of material fact is present in this case regarding the parties’ intent to limit the Bank’s interest in the Real Property to $100,000.00.
The Trustee contends, for example, that the Debtor intended to limit the Bank’s interest in the Real Property to the sum of $100,000.00. To support her contention, the Trustee submitted an Affidavit of the Debtor, in which the Debtor asserts that he intended for MTS’s equipment and other personal property to serve as the Bank’s primary collateral, as set forth in *342the Security Agreement executed in connection with the transaction. According to the Debtor, the Mortgage was only intended to supplement the Bank’s collateral to the extent of $100,000.00. In his Affidavit, the Debtor states in part:
10. As President of Mercury Technologies, its was my intention that the interests in personal property set forth in the Security Agreement would provide Synovus collateral for the Promissory Note, and to more fully collateralize the Promissory Note, I individually granted Synovus a $100,000.00 Mortgage on the Real Property.
12. At the time I executed the Mortgage, I only intended on granting Syno-vus a mortgage limited to the amount of $100,000.00.
13. At the time that I executed the Mortgage, I did not intend to grant Sy-novus a mortgage to cover the entire $270,000.00 Promissory Note.
15. I never intended to grant Syno-vus a Mortgage with respect to any appreciation in value of the Real Property.
(Doc. 25, Affidavit of Dale Frederick Alford, Jr.). At the hearing on the cross-Motions for Summary Judgment, the Trustee contended that the Debtor’s assertions are supported by the facts that (1) the Bank drafted the Mortgage document that contained the limiting language; (2) documentary stamps were only affixed to the Mortgage, but not the Hypothecation Agreement; and (3) the Mortgage is more specific and contains the special, typed language regarding the limitation. (Transcript, pp. 20-21).
The Bank contends, on the other hand, that the parties’ intent was for the Bank to receive an amount equal to the Debtor’s one-half interest in the Real Property in the event of default under the Loan documents. According to the Bank, the Real Property was valued at $200,000.00 at the time that the Loan was extended, so that the $100,000.00 limit set forth in the Mortgage simply reflected the value of the Debtor’s one-half interest at that time. (Doc. 26, pp. 3, 10). To support its position, the Bank filed the Affidavit of Denise G. Unley in Opposition to the Chapter 7 Trustee’s Motion for Summary Judgment. (Doc. 27). In her Affidavit, Unley stated in part:
10.... The Mortgage stated that “this Mortgage is limited to $100,000.00.” At the time of the Loan, the Property was valued at $200,000.00 with the Debtor’s one-half interest in the Property, which he owned as tenants in common with Alford, Sr., being $100,000.00. The intent of the parties was not to limit the Bank’s security interest in the Property to $100,000.00. Rather, the Bank’s intent from the beginning was that the Bank would, in the event of default, receive the Debtor’s one-half interest in the Property.
25. As a result of the sale of the Property, the Bank received the sum of $170,863.10, representing the Debtor’s one-half interest in the Property as tenants in common with Alford, Sr., minus closing costs and a $10,000.00 payment from the Debtor’s proceeds to Alford, Sr.
(Doc. 27). The Bank contends that the parties’ intent is further evidenced by the facts that (1) the Debtor had signed a Commitment Letter prior to entering the Loan, whereby he agreed to an “assignment of 1/2 interest in real estate and all improvements located in Hudson. FI;” (2) after the Loan was in default, the Debtor *343offered the Bank a Deed in Lieu of Foreclosure of his interest in the Real Property to satisfy the Bank’s claim; and (3) the Debtor and the Bank entered into a Payment Agreement while the Loan was in default, pursuant to which the Bank agreed to defer payment of the principal balance due on the Loan for six months “to allow the orderly sale of the real estate held as collateral.” (Doc. 27, Exhibits A, J, and K to Affidavit).
An issue of fact exists in this case regarding whether the parties intended for the Bank’s Mortgage on the Real Property to be limited to the sum of $100,000.00, or whether the parties intended the Mortgage to secure the full amount of the Loan, to the extent of the Debtor’s one-half interest in the Real Property. As a result of the material issue of fact, this matter is not suitable for disposition by summary judgment. Langford v. Paravant, Inc., 912 So.2d 359, 360-61 (Fla. 5th DCA 2005); Montealegre v. Banco De Credito Centro-Americano, S.A., 895 So.2d 1097, 1099 (Fla. 3d DCA 2004). The Trustee’s Motion for Summary Judgment, and the Bank’s Motion for Summary Judgment as to Count I of the Complaint, should be denied.
III. The Counterclaim
The Bank filed a Counterclaim to the Trustee’s Complaint to Avoid and Recover Preferential and Fraudulent Transfers, and requested the entry of a judgment imposing an equitable lien on the Real Property. In the Counterclaim, the Bank asserts that the Debtor liquidated the assets of MTS, which served as the Bank’s collateral, without the Bank’s consent; that the Debtor agreed to convey his interest in the Real Property to the Bank after the Loan was in default, but never intended to complete the conveyance; and that the Debtor unjustly benefited from his conduct. (Doc. 6).
In response, the Trustee filed a Motion to Dismiss the Counterclaim on the grounds that (1) the Trustee was not the proper defendant; (2) the Bank failed to pleadfraud with particularity; and (3) the Bank failed to state a cause of action for the imposition of an equitable lien. (Doc. 10).
It is well-established that a complaint or counterclaim should not be dismissed for failure to state a cause of action unless “it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)(quoted in In re Venice-Oxford Associates Limited Partnership, 236 B.R. 814, 816-17 (Bankr.M.D.Fla.1998)).
Under Florida law, an equitable lien may be imposed on real property on the basis of “(1) a contract showing an intent to charge a particular property with a debt or an obligation or (2) a court may impose such a lien out of general considerations of right or justice.” In re Diamond, 196 B.R. 635, 639 (Bankr.S.D.Fla.1996)(Emphasis supplied).
In this case, the Bank alleged that the Debtor had caused its collateral to be liquidated without the Bank’s consent, and that the Debtor had deceitfully caused the Bank to defer payments on the Loan. The Bank further alleges that it has no adequate remedy at law because its collateral was improperly sold or conveyed by the Debtor. (Doc. 6).
The Affidavit of Denise G. Unley supports the Bank’s allegation that its collateral was converted. According to Unley, after the Loan was in default, the Bank learned that “the Business Assets, which had been subject to the Bank’s properly perfected security interest pursuant to *344Chapter 679, Florida Statutes, had been liquidated without the knowledge or consent of the Bank.” (Doc. 27, ¶ 16).
Under these circumstances, the Court cannot determine that the Bank can prove no set of facts in support its claim for an equitable lien.
In the Counterclaim, however, the Bank seeks the imposition of an equitable lien “on the Real Property,” which was defined as the property that was previously owned by the Debtor and his father, and which was sold on August 30, 2005, prior to the filing of the Bankruptcy petition. Consequently, the Trustee asserts that the Bank is seeking a remedy against property that was never an asset of the bankruptcy estate.
For this reason, the Court finds that the Motion to Dismiss should be granted, and the Counterclaim should be dismissed, without prejudice to the Bank’s right to file an amended Counterclaim clarifying the precise relief that it seeks.
IV. Dale F. Alford, Sr.
In Count II and Count III of the Complaint, respectively, the Trustee seeks to recover certain payments from the Debtor’s father, Dale F. Alford, Sr., as preferential or fraudulent transfers. Dale F. Alford, Sr. did not answer the Complaint, and a Clerk’s Default was entered against him on August 15, 2006. (Doc. 21).
In the Trustee’s Motion for Summary Judgment presently under consideration, she seeks the entry of a judgment against Dale F. Alford, Sr., in addition to the Bank. The Trustee acknowledges, however, that the Motion was not served on the Debtor’s father in compliance with Rule 56(c) of the Federal Rules of Civil Procedure. (Transcript, p. 27).
Notice and an opportunity to be heard are central elements of due process, and notice of any proceeding which is to be accorded finality should be reasonably calculated to inform the interested party of the pendency of the action and an opportunity to present their objections. In re O’Neal, 214 B.R. 405, 407 (Bankr.N.D.Ala.1997).
In this case, the Trustee acknowledges that the Motion for Summary Judgment was not served on Dale F. Alford, Sr., although it appears from the record that the Affidavit of the Debtor in support of the Motion, and the Order scheduling the hearing on the Motion, were both served on the Debtor’s father at an address in Hudson, Florida. (Docs.18, 25). Nevertheless, the consequences of a judgment against Dale F. Alford, Sr., an individual, would be significant. In Count I of her Complaint, the Trustee is seeking the entry of a judgment against the Debtor’s father in an amount exceeding $60,000.00. In Count II, the Trustee is seeking a judgment that avoids a substantial debt owed by the Debtor to his father. Under these circumstances, the Court finds that due process requires service on Dale F. Alford, Sr. of the Motion seeking a final judgment against him.
The Trustee’s Motion for Summary Judgment should be denied to the extent that it seeks the entry of a judgment against Dale F. Alford, Sr., without prejudice to the Trustee’s right to pursue her default remedies against the Debtor’s father in accordance with Rule 55 of the Federal Rules of Civil Procedure and Rule 7055-2 of the Local Rules of the United States Bankruptcy Court for the Middle District of Florida.
V. Conclusion
The proceeding before the Court is an action to avoid and recover preferential and fraudulent transfers filed by the Chapter 7 Trustee in this case.
*345The Motion for Summary Judgment filed by the Trustee, and the Motion for Summary Judgment filed by the Defendant, Synovus Bank of Tampa Bay, should be denied. A genuine issue of material fact exists in this case regarding whether the parties intended for the Bank’s Mortgage on the Real Property to be limited to the sum of $100,000.00, or whether the parties intended the Mortgage to secure the full amount of the Loan, to the extent of the Debtor’s one-half interest in the Real Property.
Additionally, the Trustee’s Motion for Summary Judgment should be denied as to the Defendant, Dale F. Alford, Sr., because the Motion was not served on Dale F. Alford, Sr. pursuant to Rule 56(c) of the Federal Rules of Civil Procedure.
Finally, the Trustee’s Motion to Dismiss the Bank’s Counterclaim should be granted, and the Counterclaim should be dismissed, without prejudice to the Bank’s right to file an Amended Counterclaim to clarify the precise relief that it seeks.
Accordingly:
IT IS ORDERED that:
1. The Motion for Summary Judgment filed by the Plaintiff, Susan K Woodard, as Trustee, is denied.
2. The Motion for Summary Judgment as to Count I of the Complaint filed by the Defendant, Synovus Bank of Tampa Bay, is denied.
3. The Plaintiffs Motion to Dismiss Counterclaim is granted, and the Counterclaim filed by Synovus Bank of Tampa Bay is dismissed, without prejudice to the right of Synovus Bank of Tampa Bay to file an Amended Counterclaim within twenty (20) days of the date of this Order. If no Amended Counterclaim is filed within twenty (20) days, the Counterclaim shall be deemed finally dismissed. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494253/ | ORDER ON PLAINTIFF’S MOTION TO DISMISS AMENDED COUNTERCLAIM
PAUL M. GLENN, Chief Judge.
THIS CASE came before the Court for hearing to consider the Motion to Dismiss Amended Counterclaim filed by the Plaintiff, Susan K. Woodard, as Chapter 7 Trustee (the Trustee).
The Trustee commenced this adversary proceeding by filing a Complaint to Avoid and Recover Preferential and Fraudulent Transfers against the Defendants, Synovus Bank of Tampa Bay (the Bank) and Dale F. Alford, Sr.
The Bank subsequently filed its Restated Answer and Affirmative Defenses to the Complaint, combined with an Amended Counterclaim. In the Amended Counterclaim, the Bank asserts that it is entitled to an equitable lien on the Debtor’s interest in certain Real Property (as defined in the Complaint) and the proceeds thereof.
The matter currently before the Court is the Trustee’s Motion to Dismiss the Amended Counterclaim.
Background
The Debtor, Dale F. Alford, Jr., was the President of a Florida corporation known as Mercury Technology Services, Inc. (MTS).
On August 20, 2002, MTS entered into a Loan Agreement pursuant to which it borrowed the sum of $270,000.00 from the Bank. The Loan was secured by a security interest in all of MTS’s machinery and equipment, furniture and fixtures, inventory, contract rights, accounts receivable, and other personal property.
The Loan was also secured by a Mortgage on certain Real Property located in Pasco County, Florida, that was owned by the Debtor and his father as tenants in common. The Mortgage document provided that the “Mortgage is limited to $100,000.00 and intangible taxes in the amount of $200.00.”
Finally, in connection with the Loan, the Debtor also signed a Hypothecation Agreement that did not contain any language limiting the amount of the secured claim to $100,000.00.
On August 30, 2005, the Debtor and his father sold the Real Property for the sum *347of $410,000.00. Of the total sales price, the Bank received the sum of $170,863.10.
The Debtor and his wife filed a petition under Chapter 7 of the Bankruptcy Code on October 13, 2005.
On February 22, 2006, the Trustee filed the Complaint that initiated this adversary proceeding. In Count I of the Complaint, the Trustee alleges that the transfer of $170,863.10 to the Bank on August 30, 2005, satisfies the elements of a voidable preference under § 547(b) of the Bankruptcy Code. Specifically, the Trustee contends that the Mortgage expressly limited the Bank’s secured interest in the Real Property to the sum of $100,000.00, and that the additional $70,863.10 received by the Bank therefore constitutes a payment on account of an antecedent, unsecured debt.
In the Amended Counterclaim to the Trustee’s Complaint, the Bank contends that the Debtor had liquidated MTS’s assets without the Bank’s knowledge or consent. The Bank also contends that the Debtor had agreed to convey all of his equity in the Real Property to the Bank as compensation for his improper liquidation of the corporate assets that served as the Bank’s collateral. Finally, the Bank contends that the Debtor did not intend to complete the conveyance of his equity in the Real Property at the time that he made the agreement. Consequently, the Bank asserts that it “is entitled to an equitable lien on the Debtor’s interest in the Real Property and the proceeds thereof for the full balance” of the loan.
In the Motion at issue, the Trustee requests that the Court dismiss the Amended Counterclaim (1) pursuant to Rule 12(b) of the Federal Rules of Civil Procedure on standing grounds, (2) pursuant to Rule 9(b) for failure to plead fraud with particularity, and (3) pursuant to Rule 12(b)(6) for failure to state a cause of action.
Discussion
As set forth above, the Bank received the sum of $170,863.10 from the sale of the Real Property on August 30, 2005. The Trustee contends that the Bank’s mortgage on the Property was limited to the sum of $100,000.00, -with the result that the additional $70,863.10 that the Bank received from the sale constitutes a payment on account of an antecedent, unsecured debt. The Trustee therefore seeks to avoid the transfer of the excess payment as a preferential transfer under § 547(b) of the Bankruptcy Code.
By virtue of its Counterclaim, the Bank seeks to alter the status of the $70,863.10 indebtedness from an unsecured claim to a secured claim. Specifically, the Bank asserts that the debt should be treated as a secured claim because the Bank is entitled to an equitable lien on the Real Property or its proceeds for the full amount owed to it under the original loan.
It appears, therefore, that the Bank is. seeking to retroactively impose an equitable lien on the Real Property, since the sale of the Property to a third party was concluded prepetition, on August 30, 2005, and the proceeds of the sale were disbursed on that date. In fact, at the hearing on the Trustee’s Motion to Dismiss the Amended Counterclaim, the Bank acknowledged that it was “asking the Court to make a determination that as of the dosing we had an equitable lien on the property” because of the Debtor’s improper conduct. (Transcript, p. 22)(Emphasis supplied).
If the entire debt is characterized as a secured claim, of course, the payment to the Bank of the amount in excess of $100,000.00 would not satisfy all of the elements of a voidable preference under § 547.
*348Despite the inherent difficulties with the Bank’s assertion of an equitable lien, the Court finds that the Trustee’s Motion to Dismiss the Amended Counterclaim should be denied.
In the prior Order on the Trustee’s Motion to Dismiss the Bank’s original Counterclaim, the Court set forth the grounds that may justify the imposition of an equitable lien under Florida law. The Court also considered the Bank’s allegations that its collateral had been converted, and that the Debtor had deceitfully caused the Bank to defer payments on the Loan. Based on the allegations and supporting Affidavit, the Court declined to find that the Bank could prove no set of facts establishing its claim for an equitable lien under Florida law.
The Court also noted, however, that the Real Property had been sold prepetition, and that “the Bank is seeking a remedy against property that was never an asset of the bankruptcy estate.” Consequently, the Court dismissed the Bank’s original Counterclaim, without prejudice to the Bank’s right to file an Amended Counterclaim clarifying the precise relief that it seeks. (Doc. 35, p. 11).
In response, the Bank filed the Amended Counterclaim that is currently before the Court. In the Amended Counterclaim, the Bank asserts that it is seeking an equitable lien on “the Debtor’s interest in the Real Property and the proceeds thereof.” (Doc. 37, pp. 6-7).
The Amended Counterclaim is sufficient to survive the Trustee’s Motion to Dismiss. As stated in the Bank’s Response to the Motion to Dismiss, “the property that is the subject of the Bank’s equitable lien is the same property that the Trustee seeks to recover as a preferential transfer.” (Doc. 47, p. 2). In other words, the Bank seeks to obtain an equitable lien on the $70,863.10 that it received as proceeds from the sale of the Real Property. At the same time, the Trustee is seeking to recover the $70,863.10 received by the Bank as a preferential transfer.
Section 541(a)(3) of the Bankruptcy Code provides that the property of a bankruptcy estate includes “[a]ny interest in property that the trustee recovers under section 329(b), 363(n), 543, 550, 553, or 723 of this title.” 11 U.S.C. § 541(a)(3). Section 550 enables a trustee to recover property that was the subject of a transfer that was avoided under § 547 as a preferential payment. 11 U.S.C. § 550. By operation of § 541(a)(3) and § 550, therefore, it appears that the Bank is seeking an equitable lien on property that presently constitutes property of the estate, or that may become property of the estate if the Trustee prevails in this adversary proceeding.
Given the amended statement of its request for relief, the Court cannot determine that the Bank can prove no set of facts in support of its claim for an equitable lien. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)(quoted in In re Venice-Oxford Associates Limited Partnership, 236 B.R. 814, 816-17 (Bankr.M.D.Fla.1998)). Consequently, the Trustee’s Motion to Dismiss Amended Counterclaim should be denied.
Accordingly:
IT IS ORDERED that the Motion to Dismiss Amended Counterclaim filed by the Plaintiff, Susan K. Woodard, as Chapter 7 Trustee, is denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494254/ | ORDER ON MOTION FOR RECONSIDERATION AND/OR CLARIFICATION OF FINAL ORDER ON MOTION FOR RECONSIDERATION OF ORDERS APPROVING INTERIM FEE APPLICATIONS AND SEVENTH INTERIM FEE APPLICATION OF GLENN RASMUSSEN FOGARTY & HOOKER, P.A.
PAUL M. GLENN, Chief Judge.
THIS CASE came before the Court for hearing to consider the Motion for Reconsideration and/or Clarification of Final Order on Motion for Reconsideration of Orders Approving Interim Fee Applications and Seventh Interim Fee Application of Glenn Rasmussen Fogarty & Hooker, P.A. The Motion was filed by the equity interest holders (the Equity Holders) of the Debtor, CHC Industries, Inc.
Background
The Debtor filed its petition under Chapter 11 of the Bankruptcy Code on October 6, 2003.
On December 19, 2003, the Debtor filed a Motion for Entry of an Order Regarding Cycles and Procedures for Seeking and Awarding Interim Fees to Professionals. (Doc. 210).
On April 2, 2004, the Court entered an Order Regarding Cycles and Procedures for Seeking and Awarding Interim Fees to Professionals (the Procedural Order). (Doc. 385).
Generally, the Procedural Order authorized the Debtor to pay attorneys employed by the Debtor and the Committee on a *388monthly basis in accordance with the conditions set forth in the Order. The Procedural Order also required the attorneys to file and serve interim fee applications according to a designated schedule, and set forth the procedure for providing notice to interested parties of all hearings scheduled to consider the interim applications.
The Procedural Order was served on the Local Rule 1007-2 Parties in Interest List. (Docs. 385, 387).
On April 16, 2004, the Court entered an Order authorizing the Official Unsecured Creditors’ Committee (the Committee) in this case to employ Glenn Rasmussen Fo-garty & Hooker, P.A. (Glenn Rasmussen) as its counsel. (Doc. 398).
On March 31, 2004, August 2, 2004, November 30, 2004, April 12, 2005, August 4, 2005, and December 5, 2005, respectively, Glenn Rasmussen filed its First, Second, Third, Fourth, Fifth, and Sixth Applications for Interim Allowance and Payment of Fees and Expenses. (Docs. 382, 607, 737,1057,1347, and 1559).
A notice of the hearing scheduled on each Application was filed with the Court and served on the Local Rule 1007-2 Parties in Interest List in accordance with the Procedural Order. (Docs. 392, 611, 744, 1171, 1378, and 1562). According to each notice, the deadline for any party to object to the fee application was five days before the hearing scheduled on the application.
No objections were filed to any of the Applications submitted by Glenn Rasmussen, and no objections to Glenn Rasmussen’s Applications were asserted at the hearings conducted on April 26, 2004, November 1, 2004, January 24, 2005, July 11, 2005, September 19, 2005, and January 30, 2006.
On May 14, 2004, November 22, 2004, February 8, 2005, August 5, 2005, October 4, 2005, and February 14, 2006, respectively, the Court entered separate Orders approving Glenn Rasmussen’s First, Second, Third, Fourth, Fifth, and Sixth Fee Applications. In each instance, the fees and costs requested in the underlying Application were approved in their entirety, and the Debtor was authorized to pay the allowed amounts to Glenn Rasmussen. Also in each case, the Order provided that it was an interlocutory order, and that all aspects of the interim allowance were subject to review by the Court at any point in time during the case. (Docs. 435, 721, 856, 1359,1439, and 1645).
On February 26, 2006, the Equity Holders filed a Motion for Reconsideration of Orders Approving Interim Fee Applications. (Doc. 1671). In the Motion, the Equity Holders asked the Court to reconsider each of the Orders approving Glenn Rasmussen’s interim allowance of fees “on the basis that the attorney’s fees approved by the Court are unreasonable and excessive in amount for the services provided.”
On April 17, 2006, the Equity Holders filed an Objection to Glenn Rasmussen’s Seventh Application for Interim Allowance and Payment of Fees. (Docs. 1729, 1765).
On April 28, 2006, the Equity Holders filed a Supplemental Objection to Glenn Rasmussen’s Seventh Application. (Doc. 1775).
On September 5, 2006, the Court entered its Order on Motion for Reconsideration of Orders Approving Interim Fee Applications of Glenn Rasmussen Fogarty & Hooker, P.A. (the Reconsideration Order), and a separate Order approving Glenn Rasmussen’s Seventh Fee Application. (Docs. 1872,1873).
In the Reconsideration Order, the Court determined that it would not reconsider the interim fees previously awarded to Glenn Rasmussen because (1) the estate is not administratively insolvent, (2) the Eq*389uity Holders’ objections were essentially standard challenges that could have been asserted when the Applications were filed, (3) the Equity Holders did not show that reconsideration was warranted because of any wrongdoing or subsequent developments in the case, (4) the objections were untimely, and (5) the fees that were requested and approved were reasonable based on Glenn Rasmussen’s contributions to the case.
On September 15, 2006, the Equity Holders filed a Motion (the Second Motion) for Reconsideration and/or Clarification of the Reconsideration Order. (Doc. 1878).
Discussion
It should be noted at the outset that neither Glenn Rasmussen nor Robert B. Glenn have or have ever had any relationship, personal or professional, with the undersigned Bankruptcy Judge.
The Equity Holders’ Second Motion states that it is filed pursuant to Rule 9023 of the Federal Rules of Bankruptcy Procedure. (Doc. 1878, p. 1).
Rule 9023 provides that Rule 59 of the Federal Rules of Civil Procedure applies in cases under the Bankruptcy Code. F.R.Bank.P. 9023.
Rule 59 of the Federal Rules of Civil Procedure provides in part:
Rule 59. New Trials; Amendment of Judgments
(a) Grounds. A new trial may be granted to all or any of the parties and on all or part of the issues ... (2) in an action tried without a jury, for any of the reasons for which rehearings have heretofore been granted in suits in equity in the courts of the Unites States.
F.R.Civ.P. 59(a). The purpose of a motion filed under Rule 59 is to present newly discovered evidence or to correct manifest errors of law or fact in the Court’s prior order. Hill v. Tammac Corporation, 2006 WL 529044, at *2 (M.D.Pa.). Reconsideration “is merited when there has been a clear error or manifest injustice in an order of the court or if newly discovered evidence is unearthed.” Key Mechanical Inc. v. BDC 56 LLC, 2002 WL 467664, at *3 (S.D.N.Y.)(quoting In re Bird, 222 B.R. 229, 235 (Bankr.S.D.N.Y.1998)).
Accordingly, a judgment may be altered or amended if the party seeking reconsideration shows at least one of the following grounds: (1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court entered judgment; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.
Hill v. Tammac Corporation, 2006 WL 529044, at *2. The “only grounds” for granting a party’s motion for reconsideration under Rule 59 “are newly-discovered evidence or manifest errors of law or fact.” In re Wilson, 282 B.R. 278, 282 (Bankr.M.D.Ga.2002)(quoting In re Kellogg, 197 F.3d 1116, 1119 (11th Cir.1999)).
Further, a motion under Rule 59 should not be used “as a means to reargue matters already argued and disposed of or as an attempt to relitigate a point of disagreement between the Court and the litigant.” Hill v. Tammac Corporation, 2006 WL 529044, at *2(quoting Abu-Jamal v. Horn, 2001 WL 1609761, at *9 (E.D.Pa.)). In other words, a motion under Rule 59 “should not give the moving party another bite at the apple by permitting argument on issues that could have been or should have been raised prior to the original motion.” Key Mechanical Inc. v. BDC 56 LLC, 2002 WL 467664, at *3.
Finally, motions for reconsideration should be granted sparingly due to the extraordinary nature of the remedy. Hill *390v. Tammac Corporation, 2006 WL 529044, at *2. The criteria by which such motions are evaluated are strictly construed against the moving party. Key Mechanical Inc. v. BDC 56 LLC, 2002 WL 467664, at *3.
A. The Reconsideration Order
In this case, the Court entered an Order (the Reconsideration Order) denying the Equity Holders’ original Motion to Reconsider the Court’s prior orders approving Glenn Rasmussen’s interim fee awards. (Doc. 1872).
In the sixteen-page Reconsideration Order, the Court confirmed its authority to determine the reasonableness of professional fees in a bankruptcy case, and reviewed the circumstances under which the award of a professional’s interim fees should be reconsidered. Such circumstances generally are found, for example, if the estate becomes administratively insolvent, or if wrongdoing is discovered on the part of the professional. (Doc. 1872, pp. 7-12).
The Court ultimately determined that Glenn Rasmussen’s fees should not be reconsidered in this case, because (1) the estate is not administratively insolvent; (2) the Equity Holders’ objections were essentially standard challenges that could have been asserted when the Applications were filed; (3) the Equity Holders did not show that reconsideration was warranted because of wrongdoing or subsequent developments in the case; (4) the objections were untimely; and (5) the fees were reasonable based on Glenn Rasmussen’s contributions to the case. (Doc. 1872, pp. 12-16). In concluding that the fees were reasonable, the Court specifically noted:
[T]he Court has presided over this case since its commencement, and has observed the courtroom advocacy of all of the attorneys appearing in the case as they worked through complex issues involving a multimillion-dollar estate.
Specifically, the Court notes that an attorney from Glenn Rasmussen attended all of the major hearings in this case, and participated constructively in disputes that were often contentious or essentially deadlocked. Glenn Rasmussen’s contributions at the hearings reflected an in-depth preparedness and familiarity with the facts and issues, and an approach to the issues that served the Committee’s duties and responsibilities under § 1103 of the Bankruptcy Code.
The Court reviewed each of Glenn Rasmussen’s Interim Fee Applications prior to approving them, and found that the legal services described in the entries were consistent with the contributions to the case that the Court observed.
(Doc. 1872, p. 15). The Equity Holders’ original Motion for Reconsideration of the prior orders approving Glenn Rasmussen’s interim fee applications was denied.
B. The Second Motion
In the Motion presently before the Court (the Second Motion), the Equity Holders assert that the Reconsideration Order should be reconsidered for five reasons: (1) it is unclear whether the Court considered that “during the relevant periods Equity had no expectation that it would have an economic interest in the residual estate following the distributions to all creditors;” (2) it is unclear whether the Court considered that “the Evergreen Provisions were not followed and no fund was reserved from which excessive fees could be deducted;” (3) it is unclear whether the Court considered that Glenn Rasmussen had implicitly agreed that disgorgement would be appropriate if its fees were determined to be excessive; (4) the *391Court failed to make findings as to reasonableness with the requisite specificity; and (5) the Court failed to conduct an eviden-tiary hearing as to disputed facts regarding the reasonableness of the fees. (Doc. 1878, pp. 2-3).
Additionally, at the hearing on the Motion, the Equity Holders asserted that they did not have the opportunity to file timely objections to the Interim Fee Applications because they were not included on the service list. (Transcript, pp. 5-15). The Equity Holders also asserted that the Court’s Order did not expressly state whether it was an interim Order, or whether it was a final disposition of the issues. (Transcript, pp. 15-16).
Based on these assertions, the Equity Holders ask the Court to defer its ultimate determination regarding Glenn Rasmussen’s fees until the Final Fee Applications are filed in this case. (Transcript, p. 16).
C. Application
The Equity Holders’ Second Motion should be denied. The Court has reviewed each of the assertions contained in the Second Motion and made at the hearing, and finds that the Equity Holders have not presented any newly-discovered evidence, or identified any manifest error of law or fact committed by the Court, within the meaning of Rule 59 of the Federal Rules of Civil Procedure.
1. Existing circumstances
In the Second Motion, for example, the Equity Holders allege that “it is unclear whether or to what extent the Court considered” three particular circumstances prior to its entry of the Reconsideration Order. The three circumstances relate to (1) the Equity Holders’ expectation regarding their entitlement to a distribution in the case, (2) the parties’ compliance with the Procedural Order, and (3) Glenn Rasmussen’s acceptance of the Procedural Order’s provisions regarding disgorgement.
None of these circumstances involve any newly-discovered evidence. The circumstances were in existence and known to the Equity Holders when they filed their original Motion for Reconsideration. Additionally, the circumstances do not directly relate to the primary issue in this case: the reasonableness of Glenn Rasmussen’s fees. Consequently, even if the Court failed to evaluate the circumstances in its Reconsideration Order, such a failure would not constitute a manifest error of law or fact.
2. Notice
Further, the Equity Holders contend that they were not included on the service list for the Interim Fee Applications, and therefore did not receive notice of the hearings and deadlines for filing objections to Glenn Rasmussen’s fee requests. (Transcript, pp. 5-15). This contention was not raised in either the original Motion for Reconsideration or the Second Motion that is currently before the Court. Instead, the Equity Holders presented the argument for the first time at the hearing on the Second Motion.
This is not a case where stockholders did not know that the company had filed a petition in bankruptcy. The stock of the Debtor company was not widely held. At the time of filing, the stock was held by 60 registered stockholders, many of whom appear to be related. (Doc. 84, Statement of Financial Affairs, question 21). Of the four directors of the company that were disclosed in the Statement of Financial Affairs, all of whose relationship with the corporation terminated within one year immediately preceding the commencement of the case, three were stockholders. (Doc. 84, q. 22 & 21). A total of $980,598.44 was paid to or for the benefit of creditors who *392are or were insiders within one year immediately preceding the commencement of the case. (Doc. 84, q. 3b). Several of these insiders were also stockholders. (Doc. 84, q. 3b & 21). Stockholders were active in and familiar with the company and its operations. Although notice of many of the proceedings in a bankruptcy case, including the filing of applications for compensation, is not required to be given to equity, the Court has promulgated a Local Rule (Local Rule 2002-1) providing that any interested party may request and receive copies of all notices, orders, and other pleadings served on the Local Rule 1007-2 Parties in Interest List. The Equity Holders could easily have added themselves or a representative to this list. Practically all decisions made in a bankruptcy case affect, in some way, the distributions to be made by the Debtor and therefore the amounts ultimately remaining for equity. The statement that equity did not expect a distribution is not a reason to revisit decisions in the case that affected the liabilities and distributions of the Debtor.
The Equity Holders’ non-appearance on the service list was clearly within their knowledge at the time that they filed the original Motion for Reconsideration, and is not newly-discovered evidence. The issue apparently was raised at the hearing on the Second Motion, however, in response to the Court’s finding in the Reconsideration Order that the Equity Holders’ objections were untimely.
The untimeliness of the Equity Holders’ objection was only one basis for the Court’s conclusion that Glenn Rasmussen’s fees should not be reconsidered. The Court also found that the fees should not be reconsidered because the estate is not administratively insolvent, because the Equity Holders did not show that reconsideration is warranted due to any wrongdoing or subsequent developments in the case, and because the fees were reasonable based on Glenn Rasmussen’s contributions to the case.
These findings independently justify the Court’s ultimate conclusion that the fees awarded to Glenn Rasmussen were reasonable, regardless of whether or not the Equity Holders asserted untimely objections. The Equity Holders have not shown that the ultimate conclusion of reasonableness constitutes a manifest error of fact or law.
3. Specific findings
Additionally, the Equity Holders assert that the Court failed to make specific findings regarding the reasonableness of Glenn Rasmussen’s fees, and failed to conduct an evidentiary hearing to resolve disputed issues of fact.
Generally, Courts should explain their reasons for awarding compensation to a professional. There is no definitive guideline, however, on the extent to which a Court must set forth the details of its analysis. “The bankruptcy judge must briefly explain the findings and reasons upon which the award is based, including an indication of how each of the twelve factors listed in Johnson affected his decisions.” In re First Colonial Corp. of America, 544 F.2d 1291, 1300 (5th Cir.1977)(Emphasis supplied). The purpose of the explanation is simply to provide “some assurance that the court arrived at a just compensation based on appropriate standards.” In re Tarrant, 349 B.R. 870, 896 (Bankr.N.D.Ala.2006)(citing Davis v. Fletcher, 598 F.2d 469, 470-71 (5th Cir.1979)).
However, the “court’s order on attorney’s fees only need be specific enough to allow meaningful review....” Grant v. George Schumann Tire & Battery *393Co., 908 F.2d [874] at 878, n. 10 [(11th Cir.1990)]. Even though a bankruptcy court’s fee determination may not explicitly state which of the findings was made pursuant to which of the twelve factors, the fee determination is sufficient if it is otherwise “clear that the court considered those factors.” Id.
In re Tarrant, 349 B.R. at 896. The Court is not required to perform an hour-by-hour review if such a review would be a waste of judicial resources. In re Howell, 226 B.R. 279, 281 (Bankr.M.D.Fla.1998). Additionally, the Court is not required to conduct an evidentiary hearing unless there are disputed issues of fact that compel such an inquiry. In re Howell, 226 B.R. at 281.
In this case, the Court reviewed Glenn Rasmussen’s Fee Applications prior to the entry of the respective Orders approving Glenn Rasmussen’s requests for compensation. (Docs. 435, 721, 856, 1359, 1439, 1645, and 1873). Additionally, after the Equity Holders filed their initial Motion for Reconsideration of the Orders, the Court conducted a further review of the Applications, and entered a sixteen-page Order in which it evaluated the objections asserted by the Equity Holders, and in which it further evaluated the value of Glenn Rasmussen’s services to the case. (Doc. 1872).
The Orders entered in this case more than satisfy the requirement of a “brief explanation” showing that the Court considered all relevant factors before approving Glenn Rasmussen’s Fee Applications. In re First Colonial Corp. of America, 544 F.2d at 1300. Additionally, the Court finds that the Equity Holders have not isolated any specific issue of fact that required evidence before the compensation was approved. In re Howell, 226 B.R. at 281.
The Equity Holders have not shown that the Court committed any manifest error of fact or law in explaining the basis for its awards to Glenn Rasmussen.
4. Nature of the Reconsideration Order
Finally, the Equity Holders asserted at the hearing on its Second Motion that the Reconsideration Order did not expressly state whether it was an interim Order or a final Order. (Transcript, pp. 15-16). Consequently, the Equity Holders seek clarification as to the dispositive nature of the conclusions.
As set forth in the Order on Glenn Rasmussen’s Eighth Fee Application, entered contemporaneously herein, the Reconsideration Order was intended to represent a final determination that Glenn Rasmussen’s services were appropriate at the time that they were performed, and that the approved fees were reasonable.
5. Conclusion
In conclusion, the Court finds that the Equity Holders’ Second Motion should be denied. The Equity Holders have not presented any newly-discovered evidence, or identified any manifest error of law or fact committed by the Court, within the meaning of Rule 59 of the Federal Rules of Civil Procedure.
Accordingly:
IT IS ORDERED that the Motion for Reconsideration and/or Clarification of Final Order on Motion for Reconsideration of Orders Approving Interim Fee Applications and Seventh Interim Fee Application of Glenn Rasmussen Fogarty & Hooker, P.A., filed by the equity interest holders of CHC Industries, Inc., is denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494256/ | MEMORANDUM DECISION REGARDING MOTION TO CONVERT TO CHARTER 13
S. MARTIN TEEL, JR., Bankruptcy Judge.
After the debtor received a discharge in this case under chapter 7 of the Bankruptcy Code (11 U.S.C.) on November 12, 2001, and after the case remained closed for more than five years, this case was recently reopened on the debtor’s motion. For the reasons that follow, I will grant the debtor’s unopposed motion to convert the case to a case under chapter 13 of the Bankruptcy Code. However, as discussed below, by reason of 11 U.S.C. § 348(d),1 any claim against the debtor that arose after this case was commenced on July 12, 2001, other than a claim specified in 11 U.S.C. § 503(b),2 might be subjected to the effects of the debtor’s bankruptcy discharge (which was issued on November 12, 2001) were the case re-converted to chapter 7. It would likely be inappropriate for the debtor to have obtained a reopening of the case that would subject any such claim to that treatment. Accordingly, I will provide in the order converting the case that, if the case is re-converted to chapter 7, then for the purpose of applying § 348(d) to any claim (other than a claim specified in § 503(b)), the order converting the case to chapter 13 will be treated as never having been entered (with the case being treated for that purpose as having remained in chapter 7 and as not having been re-converted to chapter 7 under § 1307), subject to the right of the debtor (and of any holder of a postpetition claim), upon re-conversion of the case to chapter 7, to show cause why § 348(d) should apply to postpetition claims (other than a claim specified in § 503(b)).
I
The debtor filed his petition commencing this case on July 12, 2001, and that effected an order for relief under chapter 7 on that date. 11 U.S.C. § 301. He received a discharge on November 27, 2001. The chapter 7 trustee reported that there were no assets from which a distribution could be made to creditors, and the case was closed on December 28, 2001, without creditors ever being given notice of a deadline to file proofs of claim.
On November 12, 2007, almost six years after this case was closed, the debtor filed a motion to reopen the case, reporting that “[t]he debtor has been awarded a monetary recovery against Exxon Corp. which includes unpaid earnings during the period that preceded the filing of his bankruptcy case,” that he was unaware of his claim against Exxon Corp. when he commenced his case in 2001, and that he desired upon the case being reopened to have it converted to chapter 13 in order to pay claims that were subject to his chapter 7 discharge. Because I felt that creditors are entitled to have a case reopened in order to administer unscheduled assets of the estate, I reopened the case on November 14, 2007. The debtor then filed his motion to convert the case to chapter 13.
II
The debtor’s chapter 7 discharge need not be vacated in order for creditors *420to file proofs of claim in the chapter 13 case, and the debtor may not obtain a confirmed plan without according creditors the same treatment to which they would be entitled had the debtor never obtained a discharge. See In re Mosby, 244 B.R. 79 (Bankr.E.D.Va.2000) (holding that a discharge in chapter 7 does not preclude creditors from filing proofs of claim and being paid under the debtor’s chapter 13 plan). Moreover, at this juncture, there is no suggestion that conversion to chapter 13 will produce a distortion of the purposes of the Bankruptcy Code: the debtor will pursue the claim against Exxon, Inc. on behalf of the estate in chapter 13, but that would have been his right had the asset been scheduled in the first place and had he obtained a conversion of the case to chapter 13 prior to the case being closed. Accordingly, I will grant the unopposed motion to convert the case to chapter 13.
Ill
However, there is a danger that upon a re-conversion to chapter 7, claims that arose after the commencement of the case would be treated as arising prior to 2001 and as being subjected to the debtor’s discharge in chapter 7, and given the long time since the case was closed, that would (at least potentially) distort the functioning of the Bankruptcy Code that Congress intended. Section 348(d) of the Bankruptcy Code provides:
a claim against ... the debtor that arises after the order for relief, but before conversion in a case that is converted under section ... 1307 of this title, other than a claim specified in section 503(b) of this title, shall be treated for all purposes as if such claim had arisen immediately before the date of the filing of the petition.
With exceptions of no relevance here, the order for relief remains and will remain July 12, 2001, despite the conversion of the case to chapter 13 and any re-conversion to chapter 7. See 11 U.S.C. § 348(a). Accordingly, unless the court’s order converting this case to chapter 13 provided otherwise, a reconversion of the case to chapter 7 pursuant to 11 U.S.C. § 1307 (the provision of chapter 13 dealing with conversion) would probably result in the debtor’s discharge (other than claims of a nondis-chargeable character under 11 U.S.C. § 523 and claims specified in § 503(b)) being applicable to such claims.
After the closing of the case in 2001, the holders of postpetition claims against the debtor justifiably could have believed that those claims would not be subjected to a discharge other than in a case commenced in the future. They may have extended credit based on non-exempt wealth the debtor accumulated after the case was closed, and that would not be property of his estate in the case closed in 2001.3 Similarly, they may have extended credit based on income-generating employment the debtor obtained after the case was closed. In the case of creditors who extended credit after October 16, 2005, they may have believed that their claims could be discharged through a chapter 7 discharge only if the case were commenced after July 12, 2009.4 Although the court *421has reopened the case, the court has discretion to condition the conversion of the case to chapter 13 as not carrying with it the potential that postpetition claims will be subjected in an unwarranted fashion to the effects of § 348(d) should the case be re-converted to chapter 7.5 Accordingly, the order of conversion will provide that the case will not be treated as having been converted to chapter 13 for purposes of applying § 348(d) to postpetition claims (other than a claim specified in § 503(b)) should the case be re-converted to chapter 7, all of this subject to the right of the debtor (and of any holder of a postpetition claim), upon the case being reconverted to chapter 7, to show that, despite the foregoing analysis, § 348(d) should apply to post-petition claims (other than a claim specified in § 503(b)).
An order follows.
. All references in this decision to provisions of the Bankruptcy Code are to the provisions of the Bankruptcy Code as it stood prior to the significant amendments made to it in 2005.
. Section 503(b) addresses claims that are entitled to be allowed as administrative expense claims.
. To some extent the court could address this issue via 11 U.S.C. § 348(f)(2) if the debtor were to re-convert his case to chapter 7 in bad faith. However, the debtor might be unable to complete a chapter 13 plan, such that a re-conversion to chapter 7 would not be in bad faith. Nevertheless, re-conversion to chapter 7 might distort the Bankruptcy Code were § 348(d) to be applicable.
. See 11 U.S.C. § 727(a)(8) (as amended in 2005) (barring discharge if "the debtor has been granted a discharge under this section ... in a case commenced within 8 years before the date of the filing of the petition”). *421Specifically, Congress enacted legislation in 2005 that significantly altered the Bankruptcy Code effective as to cases filed on or after October 17, 2005, and the holders of claims arising after that date could justifiably expect that their claims would not be subjected to a discharge by the debtor’s filing a new case prior to July 12, 2009. In addition, the amended Bankruptcy Code contains other provisions protecting creditors upon which entities may have relied in extending the debt- or credit after October 16, 2005.
. See Marrama v. Citizens Bank of Massachusetts, - U.S. -, -, 127 S.Ct. 1105, 1112, 166 L.Ed.2d 956 (2007) (by reason of the court’s power under 11 U.S.C. § 105(a) to "prevent an abuse of process,” the court may decline to convert a case to chapter 13 if bad faith would preclude the debtor from proceeding in chapter 13). By extension, the court should have the power to vacate or modify an order converting a case to chapter 13 in order to guard against a distortion of the purposes of the Bankruptcy Code that would arise were the case later re-converted to chapter 7. Cf. In re OORC Leasing, LLC, 359 B.R. 227 (Bankr.N.D.Ind.2007) (court declined to reopen case on the grounds, in part, that the debtor’s conversion of the case to chapter 7 would expand the universe of creditors subjected to the debtor's discharge in chapter 11). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494257/ | MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
ROBERT SOMMA, Bankruptcy Judge.
By his complaint in this adversary proceeding, Donald Lassman (“the Trustee”), as trustee in the Chapter 7 case of Charles River Press Lithography, Inc. (“the Debt- or”), asserts nine counts against Hollis Meddings Group, Inc. (“HMG”), a workout consultant whom the Debtor retained pre-petition, and against Joseph Meddings (“Meddings”), a vice-president of HMG. By the various counts, the Trustee seeks to recover $160,000 paid by the Debtor to HMG for its services in the year prior to the commencement of this bankruptcy case and a $20,000 prepetition retainer for post-petition services. The adversary proceeding is before the Court on the Defendants’ motion for summary judgment as to seven of the nine counts.
Background and Procedural History
The Debtor operated a commercial printing business. In late 2001, it began experiencing financial difficulties and, upon the recommendation of its lender, Citizens Bank, sought out a turn-around consultant. Through its president, Frank Nappa, the Debtor entered into an engagement agreement with HMG, a corporation that provides turn-around consulting services to ailing businesses.
The Debtor ceased its printing operations in early November 2003. On December 18, 2003, certain petitioning creditors filed an involuntary petition against the Debtor under § 303 of the Bankruptcy Code. On January 13, 2004, when the Debtor had not answered the involuntary petition, the Court entered an order for relief against the Debtor under Chapter 7 of the Bankruptcy Code. Three days later, Donald Lassman was appointed trustee in the case, and he continues to serve in that capacity.
During the twelve months immediately preceding the filing of the involuntary petition, the Debtor made twenty-nine payments, totaling approximately $160,000.00, to HMG for services that it had previously rendered. In addition, on December 5, 2003, the Debtor, anticipating the filing of an involuntary petition against it, paid to HMG a $20,000 retainer for services to be performed for the Debtor after the bankruptcy filing.
On January 12, 2006, the Trustee filed the complaint commencing this adversary proceeding. The complaint states nine counts, and each is asserted against both defendants: one under 11 U.S.C. § 547(b) for recovery of preferential transfers aggregating approximately $71,000 within the ninety days before the commencement of the bankruptcy case; a second under 11 U.S.C. § 547(b) for recovery of preferential transfers made within one year before the filing, on the theory that HMG was an insider of the Debtor; three counts for recovery of the payments as fraudulent transfers under 11 U.S.C. § 548 and, by his power to exercise certain creditors’ rights of avoidance under 11 U.S.C. § 544(b), under Massachusetts G.L. c. 109A; one for breach of contract; one for violation of Massachusetts G.L. c 93A; one under 11 U.S.C. § 542 for turnover of the $20,000 retainer as property of the estate; and one under 11 U.S.C. § 549 for recovery of the $20,000 retainer as an unautho*425rized postpetition transfer of property of the estate. The Defendants oppose each count and do not consent to this Court’s adjudicating those that it contends are not core proceedings: the counts for breach of contract and for violation of c. 93A.
By the present motion for partial summary judgment, the defendants seeks judgment on all counts insofar as they are asserted against Joseph Meddings individually, and they seek summary judgment on seven of the nine counts against HMG.
Summary Judgment Standard
A party is entitled to summary judgment only upon a showing that there is no genuine issue of material fact and that, on the uncontroverted facts, the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).
Here, the Defendants would not bear the burden of proof at trial except on their affirmative defense to the preference counts. Where the moving party would not bear the burden of proof at trial, the movant’s initial burden is to demonstrate or point out a lack of evidence to support at least one essential element of the opposing party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden then shifts to the opposing party to adduce such evidence on each of the disputed elements as at trial would be sufficient to withstand a motion for directed verdict. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment will enter for the movant if the party bearing the burden of proof fails to establish the existence of an element essential to its ease. Celotex Corp. v. Catrett, 477 U.S. at 322-323, 106 S.Ct. 2548; In re Varrasso, 37 F.3d 760, 763 n. 1 (1st Cir.1994).
Where the burden of proof at trial would fall on the party seeking summary judgment, as it would with respect to the affirmative defense to the preference counts, that party must support its motion with evidence — in the form of affidavits, admissions, depositions, answers to interrogatories, and the like — as to each essential element of its cause of action. The evidence must be such as would permit the movant at trial to withstand a motion for directed verdict under Fed.R.Civ.P. 50(a). Anderson v. Liberty Lobby, Inc., supra. If the motion is properly supported, the burden shifts to the adverse party to submit evidence demonstrating the existence of a genuine issue as to at least one material fact. If the adverse party does not so respond, “summary judgment, if appropriate, shall be entered against the adverse party.” Fed.R.Civ.P. 56(e); Jaroma v. Massey; 873 F.2d 17, 20 (1st Cir.1989).
Count I
In Count I, the Trustee seeks under 11 U.S.C. § 547(b) to avoid and recover the value of transfers that occurred within ninety days before the filing of the involuntary petition as preferential transfers. The defendants seek summary judgment on the basis of an affirmative defense, the “contemporaneous exchange for new value” defense set forth at § 547(c)(1). Under that defense, the trustee may not avoid a transfer under § 547
(1) to the extent that the transfer was—
(A) intended by the debtor and the creditor to or for whose benefit the transfer was made to be a contemporaneous exchange for new value given to the debtor; and
(B) in fact a substantially contemporaneous exchange.
11 U.S.C. § 547(c)(1). The Defendants bear the burden of proof on this defense. 11 U.S.C. § 547(g). Therefore, to prevail on summary judgment, they must support their motion with evidence as to each element of the defense and show that the *426evidence is uncontroverted. They have failed in two respects.
First, they must show that new value — in this case, additional service— was given in exchange for payment on existing debt. The service that gave rise to the debt that was paid by the challenged transfer cannot be new value. The exchange must be one in which the creditor renders new service in exchange for payment for previously rendered service.1 This serves the purpose of the exception, which is to encourage creditors to continue dealing with financially troubled debtors. The Defendants have offered no evidence of this nature and made no attempt to correlate a given payment with new service given in exchange. Instead, they contend that each payment was contemporaneous with the service for which it was paying, and that the service being paid for is the new value. This is a misunderstanding of the defense.
Second, unlike the closely related defense in § 547(c)(4), which the Defendants do not invoke, this defense requires a showing of specific intent as to each transfer: that the transfer was “intended by the debtor and the creditor to or for whose benefit the transfer was made to be a contemporaneous exchange for new value given to the debtor.” The Defendants have not addressed the element of intent. In any event, specific intent, when disputed, is notoriously difficult to establish on summary judgment. For these reasons, the Defendants are not entitled to summary judgment on the strength of their affirmative defense.
Meddings also seeks summary judgment on this count on the alternate basis that it simply fails to state a claim against him. The Court agrees. The Court will grant summary judgment on this count, as against Meddings, because the Trustee has not alleged or adduced evidence that Meddings was a transferee of the transfers at issue. A trustee’s right of recovery, upon avoidance of a transfer, is defined by § 550 of the Bankruptcy Code:
Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 558(b), and 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from—
(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or
(2) any immediate or mediate transferee of such initial transfer.
11 U.S.C. § 550(a). Lacking evidence or allegation that Meddings was a transferee, Meddings is entitled to summary judgment as to Count I.
Avoidance Counts as Against Meddings
The same reasoning applies to each of the six avoidance counts in the complaint— Counts I, II, IV, V, VI, and VII, which are brought variously under sections 544(b), 547, 548, and 549 of the Bankruptcy Code — insofar as they are asserted against Meddings. Under each, the Trustee must first establish a right of avoidance and then, under § 550(a), recover damages from a transferee of the avoided transfer. Meddings is not a transferee, and the Trustee has not articulated an alternate theory on which avoidance of a transfer *427could lead to a right to recovery against Meddings. Accordingly, the Court will grant summary judgment as to all six avoidance counts insofar as they are asserted against Meddings.
Count II
In Count II, the Trustee seeks under 11 U.S.C. § 547(b) to avoid and recover the value of transfers that occurred between ninety days and one year before the date of the filing of the involuntary petition as preferential transfers. Under subsection 547(b)(4)(B), a trustee may avoid transfers made between ninety days and one year before the petition date “if such creditor at the time of such transfer was an insider.” 11 U.S.C. § 547(b)(4)(B). “Insider” is a defined term. Where, as here, the debtor is a corporation, “insider” includes (in relevant part) an “officer of the debtor” and a “person in control of the debtor.” 11 U.S.C. § 101(31)(B)(ii) and (iii).
HMG seeks summary judgment as to this count on the basis that the Trustee cannot demonstrate that HMG was an insider at any time during the insider avoidance period. HMG contends that it never had or exercised control of the Debtor and, despite Meddings’s formal appointment as “Chief Restructuring Officer” of the Debt- or on August 15, 2003, was never in fact an “officer” of the Debtor within the meaning of§ 101(31)(B)(ii).
The Court will deny summary judgment as to this count. First, the fact that Meddings was made “chief restructuring officer” raises a genuine issue of material fact as to whether he was in fact an officer. The Eighth Amendment of Forbearance Agreement describes the CRO’s duties as including “assisting and advising the [Debtor] in the management of its operations and cash flow.” Title is not everything, but it certainly is evidence that Citizens, Meddings, and the Debtor intended for Meddings to have the status of an officer of the Debtor. An officer is an insider without need to establish separately that he was a person in control. And an officer need not be the president, or have full powers of the president, in order to be an officer.
There is also evidence that even before his accession to the title of officer, he had a significant role in the corporation. There is evidence that Citizens had a great deal of leverage over the Debtor, and that HMG was hired because (a) Citizens insisted on the Debtor’s hiring an approved turnaround consultant and (b) HMG was one of the consultants whom Citizens approved. Meddings had authority to negotiate forbearance agreements with Citizens. He had authority to report to Citizens on the Debtor’s financial information, and both Citizens and the Debtor relied on him for that purpose. Meddings himself testified that HMG served the purpose of “adding a layer of management to the company that the bank [Citizens] sees as a void.” Though he did not have the last word in many areas, he had authority to think, plan, and negotiate for the Debtor on matters of strategic importance. Accordingly, the Motion for Summary Judgment will be denied as to Count II insofar as it seeks recovery from HMG.
Counts III and IV
Joseph Meddings seeks summary judgment as to Counts III and IV, insofar as they are asserted against him, on the basis that the complaint does not allege facts giving rise to a claim against him, and because there is no reason to impute to him any liability of HMG under these counts. The Court agrees that judgment should enter for Meddings on these counts. Count III seeks turnover of the $20,000 retainer, but the complaint does not allege, and the Trustee has not ad*428duced evidence, that the retainer was paid to Meddings or is in his possession. Count IV seeks to avoid a postpetition transfer of the same $20,000, but the complaint does not allege, and the Trustee has not adduced evidence, that the retainer was ever transferred to Meddings. Accordingly, summary judgment shall enter on these counts for Meddings.
Count V
In Count V, the Trustee seeks to avoid as a fraudulent transfer the Debtor’s payment on December 5, 2003, of $20,000 to HMG as a prepetition retainer for services to be rendered during the bankruptcy case. The basis of avoidance is 11 U.S.C. § 548(a)(1)(A), which requires proof that “the debtor” made such transfer with actual intent to hinder, delay, or defraud. 11 U.S.C. § 548(a)(1)(A). The complaint does not so allege; rather, it alleges only that, in accepting the payment, HMG acted with actual intent to hinder, delay, or defraud. The Defendants therefore contend, in essence, that Count V fails to state a claim on which relief can be granted.
In response, the Trustee states that HMG’s intent should be imputed to the Debtor because HMG was in a position to control the disposition of the Debtor’s property at the time. The Trustee contends that, although Frank Nappa did sign the check in question, he did so over his own objection.
The Court agrees with the Defendants that Count V fails to state a claim on which relief can be granted. In § 548(a)(1)(A), the relevant intent is that of the debtor. The complaint does not allege that the Debtor acted with the requisite intent. Accordingly, Count V fails to state a claim on which relief can be granted. The Trustee could perhaps move to amend Count V, but he has not done so.
Moreover, under the theory articulated by the Trustee in response to this motion, the Trustee would have to adduce evidence that HMG (a) caused the Debtor to make the transfer and (b) did so with intent to hinder, delay, or defraud a creditor. But the Trustee’s response cites no evidence of either (a) or (b). Accordingly, there is no genuine of material fact, and the Defendants are entitled to summary judgment as a matter of law.
Count VI
In Count VI, the Trustee seeks under 11 U.S.C. § 548(a)(1)(B) to avoid as fraudulent transfers some thirty payments, totaling $180,009.22, that the Debtor made to HMG during the year before the commencement of the bankruptcy case. In order to prevail on this count, the Trustee must show that, in exchange for the payments, the Debtor received “less than a reasonably equivalent value.” 11 U.S.C. § 548(a)(1)(B). The Defendants seek summary judgment on this count, arguing that the uncontroverted evidence shows that the Debtor received a reasonably equivalent value for the transfers. They cite evidence that HMG did provide consulting services to the Debtor; that, by agreement with the Debtor, negotiated at arm’s length, HMG charged the Debtor its customary hourly rates for such services; and that it billed the Debtor for services rendered on a weekly basis, using invoices that accurately reflected the time HMG actually devoted to rendering services to the Debtor. They contend that the Trustee cannot point to any evidence that suggests that rates charged by HMG were excessive or that invoices submitted were fraudulent.
In response, the Trustee points to the fact that HMG’s invoices merely stated the total number of hours worked; HMG has no detailed record, and can adduce no evidence, of the work actually performed *429and the time spent on each task. Citing In the Matter of Hedstrom Corp., 333 B.R. 815, 821-24 (Bankr.N.D.Ill.2005), the Trustee argues that in the context of professional consulting fees, the lack of meaningful invoices showing specific tasks performed is sufficient to support a claim that a professional’s fees are not reasonable.
The Trustee’s reliance on the Hedstrom case is misplaced. Hedstrom concerned the allowance of attorney’s fees to a secured lender as part of its secured claim; there, under 11 U.S.C. § 506(b), the lender bore the burden of proving the reasonableness of the fees. In the present matter, the burden of proof is not on HMG; rather, the Trustee bears the burden of proving that the services rendered were of less than a reasonably equivalent value to the payments made. The absence of detailed time records does not supply that proof. Nor has the Trustee adduced evidence of any kind in support of this necessary element of his case. Accordingly, as to Count VI, there is no genuine issue of material fact, and the Defendants are entitled to judgment as a matter of law.
Count VII
In Count VII, the Trustee seeks to avoid as fraudulent transfers the same thirty transfers as were at issue in Count VII, but he seeks to do so under the Uniform Fraudulent Transfer Act as adopted in Massachusetts, G.L. c. 109A, § 5(a)(2). Under this statute, too, the Trustee bears the burden of proving that the Debtor did not receive a reasonably equivalent value in exchange for the transfer. For the same reasons as are set forth above as to Count VI, the Defendants are also entitled to summary judgment on Count VII.
Count VIII
In Count VIII, the Trustee seeks to recover on a breach of contract theory, contending that HMG breached its management consulting agreement with the Debtor by (1) billing excessively and (2) providing no meaningful work summaries to show what management consulting services it may have provided. The Defendants make three arguments for summary judgment as to this count: first, that as against Joseph Meddings, the count must fail because he was not a party to the Debtor’s agreement with HMG or to any agreement with HMG; second, that the failure to provide detailed work summaries is not a breach of contract because the agreement between the Debtor and HMG did not require detailed work summaries; and third, as to whether HMG billed excessively, the uncontroverted evidence shows only that each of the invoices accurately reflected the amount of time actually spent providing services to the Debtor.
The first issue is whether Joseph Meddings can be liable for breach of the contract. The Debtor has adduced no evidence that Meddings was a party the agreement between HMG and the Debtor or to any other agreement with the Debt- or. Nor has the Debtor offered any theory or explanation as to how Meddings can be liable for breach of a contract to which he was not a party. Summary judgment must therefore enter for Meddings on Count VIII.
The second issue is whether the contract required HMG to provide detailed time records of the work its employees performed for the Debtor. The agreement between HMG and the Debtor contains no requirement as to the level of detail required in HMG’s record keeping and invoicing; it is simply silent on the issue. The Trustee cites no evidence of an oral agreement between the Debtor and HMG on this issue and indeed has offered no response to this argument at all. I therefore conclude that the Trustee has failed to establish a genuine issue of material fact on a necessary element of his claim as to *430the lack of detailed time records: proof that there existed a contractual obligation to maintain detailed records.
The third issue is whether the Trustee has shown the existence of a genuine issue of material fact as to whether HMG billed the Debtor, and received payment for, services in excess of those actually provided or otherwise billed excessively. The Trustee bears the burden of proving a breach of contract but has adduced no evidence that HMG did not provide the full amount of service for which it billed, or that HMG’s hourly rates were excessive. The Trustee cites only certain deposition testimony by Frank Nappa, the whole of which is as follows: when asked, “Did you ever raise a question with [Med-dings] at the time that the invoice was rendered, about the hourly that he was charging?”, Frank Nappa replied, “I had a couple of — I think I had a couple of conversations with him, and we were just going nowhere, so I said that let’s forget it.” This is the full extent of the Trustee’s evidence. It does not indicate even what Nappa’s questions were or what occasioned them. The Trustee’s evidence falls far short of creating a genuine issue of material fact as to whether HMG over-billed for its services. Summary judgment shall enter for the Defendants on this count.
Count IX
In Count IX, the Trustee contends that the Defendants committed knowing and willful violations of Massachusetts G.L. c. 93A by (i) accepting the $20,000 retainer that the Debtor paid to HMG shortly before the bankruptcy filing, for services to be rendered after the filing, and by (ii) refusing to turnover to the Trustee, upon demand, $9,366.88 of this $20,000.00.2 The Defendants seeks summary judgment as to this count on the basis that it is not an unfair or deceptive act or practice for a professional to accept a retainer from a debtor for postpetition services on the eve of bankruptcy. The Defendants do not challenge the second part of this count, where the gravamen is not acceptance of the retainer but refusal to turnover.
The Court agrees with the Defendants that it is not an unfair or deceptive trade practice, within the meaning of G.L. c. 93A, for a professional to accept a retainer from a debtor, on the eve of bankruptcy, for services to be rendered during the bankruptcy case. The Trustee cites no authority to the contrary and articulates no argument for this proposition.3 Accordingly, the Defendant’s motion will be granted as to Count IX insofar as it is predicated on mere acceptance of the retainer.
Joseph Meddings also seeks summary judgment as to this count on the basis that the complaint does not allege facts giving rise to a claim against him, and because there is no reason to impute to him any *431liability of HMG. The Court agrees that the complaint does not allege, and that the Trustee has not adduced evidence of, facts supporting a claim against Meddings under G.L. c. 93A. Meddings neither received the retainer nor refused to turn it over the Trustee on demand. These were actions of HMG. Therefore, summary judgment should enter for Meddings on Count IX.
Core Proceedings?
The Defendants argue that Counts VIII and IX are not core proceedings, and they do not consent under 28 U.S.C. § 157(c)(2) to this Court’s entering final judgment as to counts that are not core. The Debtor argues that both counts are not core and has not indicated whether he consents to this Court’s entering final judgment as to counts that the Court determines are not core. The Court holds that Count VIII, being a simple prepetition action for breach of contract, is not a core proceeding. Count IX is a not a core proceeding insofar as it seeks recovery on the basis of the simple act of accepting a prepetition retainer. However, to the extent that Count IX seeks recovery on the basis of a postpetition refusal to turnover the retainer to the Trustee, Count IX relates to the administration of the estate and therefore is a core proceeding, notwithstanding that the alleged basis of recovery is state law.4 28 U.S.C. § 157(b)(2)(A) and (E) (core proceeding include matters concerning the administration of the estate and orders to turnover property of the estate).
As to those matters which the Court has determined are not core proceedings, this Court may not enter final judgment. At the close of the adversary proceeding, the Court must and will enter only proposed findings and rulings as to those matters, subject to review de novo in the District Court under 28 U.S.C. § 157(c)(2) and Fed. R. BanxrP. 9033.
ORDER
For the reasons set forth above, the Defendants’ motion for summary judgment is granted with respect to all counts as to Joseph Meddings, granted as to Counts V, VI, VII, VIII, and IX (on the acceptance of retainer theory only) as against HMG, and denied as to Counts I and II as against HMG. The Court further determines that Count VIII and the portion of Count IX that was determined by this order are not core proceedings. The Court’s rulings as to those counts only shall constitute proposed findings and conclusion under 28 U.S.C. § 157(c)(2), which the Court shall enter at the close of the adversary proceeding.
. Another way of putting this is that "contemporaneous exchange” in subsection 547(c)(1) is not the opposite of, and involves no negation of, antecedent debt in subsection 547(b)(2). If the contemporaneous exchange in (c)(1) involved a negation of antecedent debt, the (c)(1) defense would not be an affirmative one.
. Neither the complaint nor the Trustee's response to the motion for summary judgment explains the significance of the $9,366.88.
. From the Trustee’s response to the motion for summary judgment, it now appears that the gravamen of the Trustee’s cause of action is not simply that a professional accepted a prepetition retainer from the Debtor (though this is precisely what the complaint says). Rather, the gravamen appears to be that the retainer was accepted and, despite demand for turnover by the Trustee, retained by the professional notwithstanding that the Debtor never sought or obtained approval for employment of the professional under 11 U.S.C. § 327(a). As this cause of action is neither articulated clearly in Count IX of the complaint nor a subject of the motion for summary judgment, the Court need not address the Count IX as articulated in the Trustee's response.
. I make no ruling at this juncture as to whether the obligation of turnover, which is governed by federal law, can be enforced with a remedy under state law. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494258/ | SCHERMER, Bankruptcy Judge.
Robert D. Klages (“Debtor”) appeals the bankruptcy court’s1 judgment revoking his discharge for knowingly and fraudulently failing to turn over a tax refund to the Trustee of his Chapter 7 bankruptcy estate. We have jurisdiction over this appeal from the final order of the bankruptcy court. See 28 U.S.C. § 158(b). For the reasons set forth below, we affirm.
*552ISSUE
The issue before this court is whether the bankruptcy court erred when it concluded that the Debtor’s failure to turn over his tax refund to the Trustee of his Chapter 7 bankruptcy estate was done knowingly and fraudulently. We conclude that the bankruptcy court did not err when it determined that the Debtor’s failure to turn over the tax refund was done knowingly and fraudulently. Accordingly, we affirm the revocation of the Debtor’s discharge.
BACKGROUND
The Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code on October 10, 2005. The Debtor attended the meeting of creditors pursuant to Section 341 of the Bankruptcy Code on November 15, 2005. At the meeting, Thomas L. Flynn, the Trustee of the Debtor’s Chapter 7 bankruptcy estate (“Trustee”), advised the Debtor not to spend any tax refund without first contacting the Trustee’s office. The Trustee further advised the Debtor not to spend any tax refund without first contacting the Trustee’s office even after receipt of a notice of discharge from the bankruptcy court. The Trustee gave the Debtor a written handout that contained the following admonition:
WARNING: Do not spend any of your tax refunds until you have received approval from my office, even it you have received notice from the Bankruptcy Court that a bankruptcy discharge has been entered. The bankruptcy discharge does not close your bankruptcy case or eliminate your need to turn over non-exempt assets. If it is determined that you owe nonexempt monies to your bankrupt estate, those funds need to be turned over immediately, in full (no payment plans will be accepted), upon notice from my office. Failure to comply with the terms of this letter or to cooperate with me in the administration of your bankruptcy estate may constitute cause to revoke your bankruptcy discharge. You will receive only one notice from my office of nonexempt monies due your bankruptcy estate and upon non-compliance, I will seek to revoke your bankruptcy discharge.
At the end of the meeting of creditors, the Trustee also requested the Debtor to send the Trustee a copy of his federal and state tax returns when he filed them.
The Debtor received a discharge on January 18, 2006. In February of 2006, the Debtor filed federal and state tax returns for calendar year 2005. The Debtor received a federal refund in the amount of $3,445 and a state refund in the amount of $65. The Debtor spent the tax refunds on living expenses.
On June 5, 2006, the Trustee filed a motion seeking the examination of the Debtor pursuant to Bankruptcy Rule 2004 (“First 2004 Motion”). In the First 2004 Motion, the Trustee requested the Debtor to attend an examination and to bring a copy of his 2005 federal and state tax returns to such examination. The Debtor provided the Trustee with a copy of his 2005 federal and state tax returns but did not appear for examination.
On June 21, 2006, the Trustee made demand upon the Debtor to turn over $1,556.11 of the tax refunds as the portion belonging to the Debtor’s bankruptcy estate. The Debtor failed to do so. On July 31, 2006, the Trustee filed a second motion seeking the examination of the Debtor pursuant to Bankruptcy Rule 2004 (“Second 2004 Motion”). In the Second 2004 Motion, the Trustee requested the Debtor to attend an examination and to bring $1,556.11 to the examination. The Debtor *553failed to attend or to pay any amount to the Trustee.
The United States Trustee filed a complaint seeking the revocation of the Debt- or’s discharge for, inter alia, knowingly and fraudulently failing to deliver the nonexempt tax refund to the Trustee. At the trial the Debtor acknowledged receiving an oral warning from the- Trustee at the meeting of creditors not to spend any tax refund without first contacting the Trustee’s office. The Debtor also acknowledged receipt of the written handout but stated that he did not read it. The Debtor testified that he understood the warning to mean that he should not spend any refund without further notice from the court. The Debtor also acknowledged the Trustee’s request that the Debtor provide the Trustee with a copy of his tax returns when prepared.
The Debtor testified that when he received the notice of his discharge he believed that he did not owe anybody any money and that the Trustee was no longer interested in his tax refund. The bankruptcy court found that the Debtor’s testimony that he believed he could spend the refunds was not credible in light of the warnings to the contrary that he had received. The bankruptcy court found that the Debtor knowingly spent the money -with the intent to defraud the Trastee and the bankruptcy estate. Accordingly, the bankruptcy court revoked the Debtor’s discharge pursuant to Section 727(d)(2) of the Bankruptcy Code. The Debtor appealed the revocation of his discharge.
STANDARD OF REVIEW
We review the bankruptcy court’s findings of fact for clear error and its conclusions of law de novo. Richardson v. Sugg, 448 F.3d 1046, 1052 (8th Cir.2006); Four B. Corp. v. Food Barn Stores, Inc. (In re Food Barn Stores, Inc.), 107 F.3d 558, 561 (8th Cir.1997); Miller v. Kasden (In re Kasden), 209 B.R. 239, 241 (8th Cir. BAP 1997). We will overturn a factual finding only if it is not supported by substantial evidence in the record, if it is based on an erroneous view of the law, or if we are left with the definite and firm conviction than an error was made. Richardson v. Sugg, 448 F.3d at 1052. We afford due regard to the bankruptcy court’s judgment of the credibility of the witness. Fed.R. Bankr.P. 8013; Richardson v. Sugg, 448 F.3d at 1052; In re Kasden, 209 B.R. at 241. A factual finding supported by substantial evidence is not clearly erroneous. Richardson v. Sugg, 448 F.3d at 1052. Likewise, a trial court’s choice between two permissible views of the evidence is not clearly erroneous. Id.
DISCUSSION
The discharge of a Chapter 7 debtor shall be revoked if the debtor acquired property that is property of the estate and knowingly and fraudulently failed to report the acquisition of such property or to deliver such property to the trustee. 11 U.S.C. § 727(d)(2). The parties do not dispute that the non-exempt tax refund of $1,556.11 is property of the Debtor’s bankruptcy estate; nor do they dispute that the Debtor failed to deliver such property to the Trustee. The sole issue in dispute is whether the Debtor knowingly and fraudulently failed to turn over the non-exempt tax refund. The Debtor asserts that his failure to turn over the non-exempt tax refund was the result of mistake but that his actions do not rise to the level of fraud. The United States Trustee agrees with the bankruptcy court’s conclusion that the Debtor’s actions in failing to deliver the non-exempt tax refund after express instructions to do so from the Trustee amount to fraud.
*554A discharge will be revoked only if the debtor’s failure to deliver property of the estate is done both knowingly and fraudulently. The Debtor admitted that he received the Trustee’s oral warning at the meeting of creditors not to spend any tax refund without first contacting the Trustee even if the Debtor received an order of discharge. The Debtor also admitted receiving the written warning to that effect. The Debtor acknowledged the Trustee’s request for a copy of his tax returns when prepared. The Debtor clearly knew he had a duty to provide a copy of his tax returns to the Trustee and that he may have a duty to deliver tax refunds to the Trustee. The Debtor’s failure to do so was thus done knowingly.
In order to support revocation of the discharge, the Debtor’s failure to deliver the non-exempt tax refund must also have been done fraudulently. Fraudulent intent may be established by showing that the debtor knowingly made an omission that misleads the trustee or that the debt- or engaged in a fraudulent course of conduct. In re Kasden, 209 B.R. at 244. A debtor’s intent may be inferred from all the surrounding circumstances where the debtor’s pattern of conduct supports a finding of fraudulent intent. Id. The focus is on whether the debtor’s actions appear so inconsistent with his self-serving statement of intent that the proof leads the court to disbelieve the debtor. Id. Fraudulent intent may also be established by showing that the debtor acted so recklessly that fraud can be implied. Id. at 244-45.
Fraud is rarely established by admission. Instead, the trial court must look at the circumstantial evidence and the events that occurred to try to determine intent. In re Kasden, 209 B.R. at 245. Here the trial court looked at the circumstances and determined that the Debtor knew he had a duty to turn over copies of his tax returns to the Trustee and that he knew that he should not spend any tax refund without first contacting the Trustee’s office. The court determined that the Debtor knew his obligations regarding the tax returns and tax refunds continued even if he received a discharge. The Trustee told the Debtor this and gave him a written admonition to this effect. The Debtor’s assertion that he did not read the handout is irrelevant. A debtor cannot ignore information given to him and then claim ignorance. Such behavior is so reckless that fraud can be implied. Id.
The bankruptcy court determined that the Debtor’s explanation that he thought he could spend the tax refund because of his discharge was not credible. The bankruptcy court made this determination after carefully observing the Debtor’s demeanor while he testified. We afford due deference to the bankruptcy court’s determination regarding credibility and find nothing in the record to reverse that determination. Fed.R. Bankr.P. 8013; Richardson v. Sugg, 448 F.3d at 1052; In re Kasden, 209 B.R. at 241. The bankruptcy court’s factual findings are supported by the evidence. Richardson v. Sugg, 448 F.3d at 1052. The bankruptcy court correctly applied the law. Richardson v. Sugg, 448 F.3d at 1052. Accordingly, we affirm.
CONCLUSION
The bankruptcy court found that the Debtor knowingly and fraudulently failed to deliver his non-exempt tax refund to the Trustee. Based on these findings, the court revoked the Debtor’s discharge pursuant to Section 727(d)(2) of the Bankruptcy Code. The evidence supports the bankruptcy court’s findings of fact and conclusions of law. Accordingly we affirm *555the bankruptcy court’s judgment revoking the Debtor’s discharge.
. The Honorable William L. Edmonds, Chief United States Bankruptcy Judge for the Northern District of Iowa. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494261/ | ORDER
JAMES G. MIXON, Bankruptcy Judge.
On June 29, 2007, Charles Edward Williams (Debtor) filed a voluntary petition for relief under Chapter 13 of the United States Bankruptcy Code. The Debtor filed an objection to Wells Fargo’s claim of $2,865.00, stating that the claim is unsecured. Wells Fargo filed a response asserting a perfected secured claim. A hearing was held on October 26, 2007. A stipulated statement of uncontested facts was filed and both parties submitted briefs.
The Court considers whether Wells Fargo has a perfected security interest in a K Guard Guttering System (guttering system) installed by Hanke Brothers. This Court finds that the guttering system is a consumer good as provided by Arkansas Code Annotated Section 4-9-102(23) and, therefore, the claim is allowed as secured.
This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B), and the Court has jurisdiction to enter a final judgment in the case.
I. Facts
According to the stipulated facts, the Debtor entered into a charge slip contract with Wells Fargo for the purchase and installation of a guttering system. The Debtor agreed to pay Wells Fargo principal plus interest in an original amount not shown by the record in return for payment *744by Wells Fargo to Hanke Brothers. Wells Fargo made payment to Hanke Brothers for the purchase price of the guttering system. Hanke Brothers then installed the guttering system on the Debtor’s residence. The charge slip contract between the Debtor and Wells Fargo provides that:
Where applicable, you give us a purchase money security interest in any goods, described in this charge slip. We will not claim a security interest or other lien (except judgment lien) in your principal dwelling. You agree that any property described in this charge slip will remain personal property and will not become a fixture even if attached to real property.
(Stipulated Statement of Uneontested Facts.)
The Debtor paid for the guttering system with a Home Projects Visa credit card from Wells Fargo. The credit card contains the following terms:
Use of Account: The use of your account by you or anyone permitted by you indicates acceptance of the terms of this agreement. You promise that all purchases made using your account will be for personal, family or household purposes.
Security Interest: To the extent permitted by applicable law, you hereby grant to us and we are retaining a [purchase] money security interest under the Uniform Commercial Code in the merchandise purchased on your account using your special HOME PROJECTS subaccounts until such merchandise is paid in full. You agree to assist us in executing documents necessary to perfect our security interest. If you do not make a minimum payment due on your account by the date on which it is due, we may repossess any merchandise that has not been paid in full.
(Stipulated Statement of Uncontested Facts.)
Attached to the stipulated facts was a sheet entitled, “K-GUARD Proper Installation Techniques for All Installation Personnel.” (Ex. A.) The instructions indicate that “Valley Baffles” are affixed to the roof with silicone and that screws are used in relation to a “Hood” and “Down-Spouts.” (Ex. A.) The record does not contain any explanation of these instructions. The record also lacks any explanation of how the guttering system is to be removed.
II. Argument
Wells Fargo asserts that the guttering system is personal property and is a consumer good that did not become a fixture because of the language contained in the charge slip contract. Wells Fargo further asserts that because it holds a purchase money security interest in consumer goods, the security interest is automatically perfected upon attachment and no filing is required pursuant to Arkansas Code Annotated Section 4-9-309(1). The Debt- or asserts that the guttering system became a fixture when it was affixed to the house regardless of the contract language; therefore, Wells Fargo does not have a perfected security interest and is an unsecured creditor.
III. Discussion
11 U.S.C. § 502(a) and Bankruptcy Rule 3001(f) grant prima facie effect to the validity and amount of a properly filed claim. The debtor then has the initial burden of proof to overcome the presumed validity and amount of the creditor’s secured claim. In re Robertson, 135 B.R. 350, 352 (Bankr.E.D.Ark.1992). The burden then shifts to the creditor to demonstrate by a preponderance of the evidence both the extent of its lien and the value of the collateral securing the loan. In re Robertson, 135 B.R. 350, 352 (Bankr.E.D.Ark.1992). Therefore, the burden of *745proving the validity of the claim ultimately rests with the creditor. In re Fanners’ Co-op of Arkansas and Oklahoma, Inc., 43 B.R. 619, 620 (Bankr.E.D.Ark.1984)(citing 3 Collier on Bankruptcy § 502.01[3] (15th Ed.); In re Trending Cycles for Commodities, Inc., 26 B.R. 350 (Bankr.S.D.Fla. 1982); In re Kontaratos, 35 B.R. 135 (Bankr.Me.1983); In re Central Rubber Products, Inc., 31 B.R. 865 (Bankr.Conn.1983)).
A fixture is defined as “goods that have become so related to particular real property that an interest in them arises under real property law.” Ark.Code Ann. § 4-9-102(a)(41)(Michie 2003). To perfect an interest in a fixture, a financing statement must be recorded in the office of the recorder of deeds. See Ark.Code Ann. §§ 4-9-102(a)(40), 4-9-502, 4-9-501, 14-15-401-404 (Michie 2003). The question of whether a type of property constitutes a fixture is usually a mixed question of law and fact. Brown v. Blake, 86 Ark.App. 107, 115, 161 S.W.3d 298, 304 (2004)(citing Coming Bank v. Bank of Rector, 265 Ark. 68, 576 S.W.2d 949 (1979)).
To determine whether the property is a fixture or remains personal property, Arkansas courts have adopted a three part test: (1) whether the items are annexed to the realty; (2) whether the items are appropriate and adapted to the use or purpose of that part of the realty to which the items are connected; and (3) whether the party making the annexation intended to make it permanent. Brown v. Blake, 86 Ark.App. 107, 115-116, 161 S.W.3d 298, 304 (2004) (citations omitted). The intention of the party making the annexation is considered of primary importance. Pledger v. Halvorson, 324 Ark. 302, 306 921 S.W.2d 576, 578 (1996). Intention can be inferred from the nature of the chattel, the relation and situation of the party making the annexation, the structure and mode of annexation and the purpose for which the annexation has been made. Hot Shots Burgers & Fries, Inc. v. Fas Fax Corporation, 169 B.R. 920 (Bankr.E.D.Ark.1994)(citing Corning Bank v. Bank of Rector, 265 Ark. 68, 576 S.W.2d 949, 952-53(1979)).
It is well settled that parties can treat as personal property machinery or improvements which would otherwise become a part of the realty, and thus convert it into personal property as between themselves.1 Hankins v. Luebker, 224 Ark. 425, 427, 274 S.W.2d 356, 358 (1955)(citing Thompson on Real Property, Sec. 191; 36 C.J.S., Fixtures, § 21e(1); 22 Am.Jur., Fixtures, Sec. 17.) While this is true, a contract that items remain personalty is only some evidence that the parties intended the item to remain personalty. In re Reese, 194 B.R. 782 (Bankr.D.Md.1996)(citing In re Kriger, 169 B.R. 336, 340 (Bankr.W.D.Pa.1994)). When the removal of the article from the real estate would do substantial damage to the realty such that the parties could not have intended such a result, the contract will not convert the property to personal property. 35A Am.Jur.2d Fixtures § 12 (2007)(citing In re Reese, 194 B.R. 782 (Bankr.D.Md.1996) and Harris v. Rapke, 138 Misc.2d 538, 524 N.Y.S.2d 1003 (City Ct.1988)). Some courts consider and weigh the following factors in order to decide if the contract should control: (1) the nature of the personalty involved; (2) *746the statue of the possessor of the personalty in respect to the realty; (3) the manner of annexation of the personalty; and (4) the use to which the personalty is put when making its determination. In re Kriger, 169 B.R. 336, 340 (Bankr.W.D.Pa.1994) (citations omitted). One professor opined “[expressions of intention between two parties nearly always bind them, as in an agreement to treat an article as chattel for financing purposes, even though its annexation would normally make it a fixture .... ” Alphonse M. Squillante, The Law of Fixtures: Common Law and the Uniform Commercial Code, Part II: The UCC and Fixtures 15 Hofstra L.Rev. 191, 202 (1987) (citations omitted).
There does not seem to be any agreement in the various courts as to what may and may not be agreed by contract to be personal property. The following items were agreed to be and held to remain personal property pursuant to the contract: pinspotters that were assembled inside the bowling alley and screwed down and riveted to the concrete floor, Rothermich v. Union Planters, 10 S.W.3d 610, 614-615 (Mo.App.E.D.2000); an installed telephone system, Hoffman Management Corp. v. S.L.C. of North America, Inc., 800 S.W.2d 755, 760 (Mo.App.1990); and installed theater sound and lighting equipment, Norstar Leasing Services, Inc. v. Colonie Coliseum Enterprises, Inc., 145 Misc.2d 388, 391, 546 N.Y.S.2d 942, 944 (1989). The following items have been held to be fixtures, regardless of the contract stating that they remain personalty: installed windows and roof, In re Reese, 194 B.R. 782, 792 (Bankr.D.Md.1996); and installed carpeting and padding, In re Kriger, 169 B.R. 336, 340 (Bankr.W.D.Pa.1994).
One court looked at installed windows and gutters and found -the agreement that they remain personal property was binding between the parties, but held them to be fixtures on the date of the petition because the Standing Trustee was an outside third party. In re Hinson, 77 B.R. 34, 36 (Bankr.M.D.N.C.1987).
A consumer good is a type of personal property. Consumer goods are defined as “goods that are used or bought for use primarily for personal, family, or household purposes.” Ark.Code Ann. § 4-9-102(a)(23)(Michie 2003). The sixth edition of Black’s Law Dictionary specifically refers the reader to “consumer product” under the definition of “consumer goods.” Black’s Law Dictionary 317 (6th ed.1990). Consumer product is defined as “any tangible personal property which is distributed in commerce and which is normally used for personal, family, or household purposes (including any such property intended to be attached to or installed in any real property without regard to whether it is so attached or installed).” 15 U.S.C.A. § 2301(1)(2008) and Black’s Law Dictionary 317 (6th ed.1990).
A security interest in goods is a purchase money security interest “to the extent that the goods are purchase-money collateral with respect to that security interest.” Ark.Code Ann. § 4-9-103(b)(l)(Miehie 2003). A purchase money security interest in consumer goods is perfected upon attachment. Ark.Code Ann. § 4-9-309 (Michie 2003).
The term “consumer goods” does not appear to be very exclusive. Consumer goods have been held to include: a pre-installed bathtub (it became a building material upon installation), In re Ryan, 360 B.R. 50, 51 (Bankr.W.D.N.Y.2007)(em-phasis added); home improvement products and services,2 R. Bauer & Sons Roof*747ing and Siding, Inc. v. Kinderman, 83 Ohio App.3d 53, 57, 613 N.E.2d 1083, 1086 (1992); and an installed swimming pool, In re Russell, 36 B.R. 809, 810 (Bankr.N.C.1984). According to White and Summers, “until legislators say otherwise, mobile homes, yachts, diamond wedding rings, and dining room chandeliers remain ‘consumer goods’ along with kitchen salt and Rolling Stones’ Cds.... ” J. White and R. Summers, Uniform Commercial Code § 31-6, at 141 (5th ed.2002).
IV. Analysis
Wells Fargo had an agreement with the Debtor that the property purchased was to be treated as personal property even after it was annexed to the real property. It is well settled that parties can agree that an item remain personal property and not become a fixture upon attachment, but only to an extent. When removal of the article would do substantial damage to the realty, where the parties could not have intended this, the contract will not control. Looking at the four factors set out in Kriger, the Court finds that this contract will control. The nature of the personalty are gutters attached to the roof. Logic dictates that gutters are removable because they wear out and have to be replaced. It is hard to imagine, nor was any evidence offered, that the removal of a guttering system would so harm the property that extensive damage would result.
The agreement provides that the gutters were to be bought for “personal, family, or household purposes” and the type of product involved comes within the definition of a consumer good. The Court therefore finds that the gutters fall within the purview of consumer goods and Wells Fargo’s security interest is perfected without filing pursuant to Arkansas Code Annotated Section 4-9-309(1).
IV. Conclusion
Wells Fargo has a perfected security interest in the guttering system. Wells Fargo claim of $2,865.00 is allowed as a secured claim.
IT IS SO ORDERED.
. This agreement is not binding on third parties who are unaware of the agreement. See Jacqueline S. Akins, Fixture Security Interests Under Revised Article 9, 54 Consumer Fin. L.Q. Rep. 172 (Summer 2000)(citing Parsons v. Lender Service, Inc., 801 P.2d 739 (Okla.App.1990) and Leawood Nat. Bank of Kansas City v. City Nat. Bank & Trust Co. of Kansas City, 474 S.W.2d 641, 644 (Mo.App.1971)).
. This case is examining consumer goods as defined in the Ohio Home Solicitation Sales *747Act. The Act defines consumer goods as "goods or services purchased, leased, or rented primarily for personal, family, or household purposes.” | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488014/ | USCA4 Appeal: 21-2410 Doc: 37 Filed: 11/17/2022 Pg: 1 of 7
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 21−2410
DEIDRA R. SQUIRE,
Plaintiff – Appellant,
v.
IDENTITY, INC.; FRESIA GUZMAN, Director of Youth Centers; CAROLYN
CAMACHO, Director of Youth Centers; CANDANCE KATTER, Former Senior
Program Director; DIEGO URIBURU, Executive Director,
Defendants – Appellees,
and
JOHN DOE DEFENDANTS; JANE DOE DEFENDANTS,
Defendants.
Appeal from the United States District Court for the District of Maryland at Greenbelt.
Peter J. Messitte, Senior District Judge. (8:20-cv-02062-PJM)
Submitted: October 3, 2022 Decided: November 17, 2022
Before WILKINSON and NIEMEYER, Circuit Judges, and TRAXLER, Senior Circuit
Judge.
Affirmed by unpublished per curiam opinion.
USCA4 Appeal: 21-2410 Doc: 37 Filed: 11/17/2022 Pg: 2 of 7
ON BRIEF: Percy Squire, PERCY SQUIRE COMPANY LLC, Columbus, Ohio, for
Appellant. Russel B. Berger, Sarah M. Sawyer, OFFIT KURMAN, PA, Baltimore,
Maryland, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
2
USCA4 Appeal: 21-2410 Doc: 37 Filed: 11/17/2022 Pg: 3 of 7
PER CURIAM:
After Deidra Squire brought multiple discrimination claims against her former
employer, Identity, Inc., the district court dismissed all but one—a disparate-treatment
claim under Title VII of the Civil Rights Act—and granted her leave to amend. The district
court later dismissed that remaining claim, which is the subject of the present appeal. For
the following reasons, we affirm.
I.
In October 2014, Deidra Squire, a black woman, began contracting for Identity, Inc.,
a non-profit focused on assisting Latino families in high-poverty areas of Montgomery
County, Maryland. The following month, Identity made Squire a full-time employee as
“Program Manager” for its two youth centers. In this role, Squire oversaw more than ten
staff members, weekly meetings, and a budget.
In early 2017, Identity reorganized its personnel in the youth centers. Under the new
structure, Squire had reduced responsibilities and purview of only one youth center. Marie
Dent Turner, also a black woman, was placed in an equivalent role at the other youth center,
and Fresia Guzman, a Latino woman, was to supervise both Squire and Turner. Neither of
Gruzman’s subordinates were to last at Identity. First, Turner resigned in July, which
Squires attributes to “frustration” with the reorganization, and was replaced by a Latino
woman. J.A. 74. Then, a year later, Identity eliminated Squire’s position—citing a lack of
funding—and terminated her. Identity proceeded to give Turner’s Latino successor a larger
role with responsibility over both youth centers. Although Squire had spent more time
working at Identity’s youth centers, Turner’s successor had more experience at Identity
3
USCA4 Appeal: 21-2410 Doc: 37 Filed: 11/17/2022 Pg: 4 of 7
overall. Some four months after Squire’s departure, Identity hired a Latino woman to be a
part-time “Junior Case Manager,” which Squire alleges was similar to her previous role.
In the backdrop of these personnel changes, Squire makes additional allegations
about Identity’s workplace environment. She alleges that a supervisor was fired in 2015
after raising concerns about “organizational racial discrimination” toward black
employees. J.A. 7. She further alleges that employees quit over concerns that Identity’s
focus on Latinos was compromising its ability to procure funds from Montgomery County.
Additionally, Squire asserts that Identity’s CEO referred to Latinos as “our people” and
insisted on keeping the organization’s motto, “Serving Latino youth and their families,”
despite complaints from black employees and clients. J.A. 8. Finally, Squire attests that she
raised concerns about the reorganization with a senior manager, who would not meet with
her and “retaliated” by promoting Guzman, her supervisor. J.A. 13.
After her termination, Squire filed a charge of discrimination with the Equal
Employment Opportunity Commission (EEOC), which was dismissed. She then filed suit
in the District of Maryland, setting forth eleven claims against Identity and four of its
leaders. In January 2021, the district court dismissed all of her claims against Identity’s
leaders and all but one claim—disparate treatment under Title VII—against the
organization. Squire then filed an amended complaint. In August, the district court granted
Identity’s renewed motion for dismissal, or in the alternative, summary judgment—this
time, with prejudice. Squire then filed a motion to alter or amend the judgment pursuant to
Federal Rule of Civil Procedure 59(e), which the district court also denied.
Squire timely appealed.
4
USCA4 Appeal: 21-2410 Doc: 37 Filed: 11/17/2022 Pg: 5 of 7
II.
The “doors of discovery” do not unlock “for a plaintiff armed with nothing more
than conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009). Hence, “naked assertions
devoid of further factual enhancement” are insufficient to overcome a motion to dismiss.
U.S. ex rel. Oberg v. Pa. Higher Educ. Assistance Agency, 745 F.3d 131, 136 (4th Cir.
2014) (quoting Ashcroft, 556 U.S. at 678 (internal quotation marks omitted)). Here, the
district court properly dismissed Squire’s amended complaint since she did not allege with
sufficiently particularity suffering differential treatment from similarly situated employees.
See Coleman v. Md. Ct. of Appeals, 626 F.3d 187, 190 (4th Cir. 2010).
While Squire alleges that Identity terminated her based on race, she does not plead
facts that take her inference across the “line between possibility and plausibility.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 546 (2007). The elimination of her position within the
organization—just because it came at Squire’s expense as a black employee—is not
indicative of racial animus. While her termination may be “consistent with discrimination,
it does not alone support a reasonable inference that the decisionmakers were motivated
by bias.” McCleary-Evans v. Md. Dep't of Transp., State Highway Admin., 780 F.3d 582,
586 (4th Cir. 2015). Though Identity could have opted to terminate a Latino colleague
instead, Squire asks this court to infer too much by attributing Identity’s choice to invidious
discrimination. The inferential gap is especially yawning when an “obvious alternative
explanation” could explain Identity’s decision—here, that Squire’s Latino counterpart
enjoyed a longer tenure within the organization. Id. at 588. Squire thus did not make out a
claim that her retained colleagues were similarly situated. She did not, moreover, allege
5
USCA4 Appeal: 21-2410 Doc: 37 Filed: 11/17/2022 Pg: 6 of 7
adequate factual matter to suggest that she was similarly situated to the new employee hired
by Identity several months later, who had a different title and only part-time hours.
Squire’s allegations about Identity’s workplace environment do not otherwise
satisfy her pleading burden because they do not account for her termination. Furthermore,
while Squire stresses that employees have disagreed with Identity’s Latino-focused
mission and its 2017 reorganization, such differences in outlook do not infer that Identity
eliminated the position of Squire—or any other employee—based on race. In sum, Squire’s
complaint does not “raise [her] right to relief above the speculative level” and thus cannot
survive dismissal. Id. at 585 (quoting Twombly, 550 U.S. at 555).
Because we find that the district court properly dismissed Squire’s complaint, we
need not address its grant of summary judgment in the alternative.
III.
After the dismissal of her claim, Squire motioned under Rule 59(e) for the district
court to alter or amend its judgment to “correct a clear error of law or prevent manifest
injustice.” Pac. Ins. Co. v. Am. Nat. Fire Ins. Co, 148 F.3d 396, 403 (4th Cir. 1998). To
meet this threshold, a decision must “strike [the court] as wrong with the force of a five-
week-old, unrefrigerated dead fish.” TFWS, Inc. v. Franchot, 572 F.3d 186, 194 (4th Cir.
2009) (internal quotation marks omitted). Based on Squire’s arguments, the district court
should not have caught even a whiff.
Squire’s contentions that Identity misled the district court and that the district court
mislabeled her position—even if true—fall short of justifying the “extraordinary remedy”
of reconsideration, “which should be used sparingly.” Pac. Ins. Co., 148 F.3d at 403
6
USCA4 Appeal: 21-2410 Doc: 37 Filed: 11/17/2022 Pg: 7 of 7
(quoting 11 Charles A. Wright et al., Federal Practice and Procedure § 2810.1, p. 124 (2d
ed. 1995)). Nor does Squire’s selective excerpt of the district court’s line of questioning
establish an error or injustice in its ultimate ruling, which we have now affirmed.
Altogether, we conclude that the district court did not “abuse its discretion” by denying
Squire’s Rule 59(e) motion. Sloas v. CSX Transp. Inc., 616 F.3d 380, 388 (4th Cir. 2010).
Squire lastly objects to the district court’s decision to dismiss her complaint with
prejudice. While it is true that denying leave without “determinations about prejudice, bad
faith, or futility” could amount to an abuse of discretion, that was not the case here. Matrix
Cap. Mgmt. Fund, LP v. BearingPoint, Inc., 576 F.3d 172, 194 (4th Cir. 2009). The district
court expressly articulated the futility of Squire further amending her pleading “at this
point.” J.A. 456. Squire had already received the opportunity to amend once yet continued
to make conclusory allegations without adequate factual enhancement. The district court
did not, therefore, err in declining Squire’s request for another leave.
IV.
For the foregoing reasons, we hold that Squire did not raise a plausible claim of
disparate treatment under Title VII. We thus affirm the district court’s dismissal of her case
and denial of her Rule 59(e) motion.
AFFIRMED
7 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488013/ | USCA4 Appeal: 20-7100 Doc: 19 Filed: 10/27/2021 Pg: 1 of 2
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-7100
DEMOUNT ALSTON,
Petitioner - Appellant,
v.
TRACY S. RAY, Warden,
Respondent - Appellee.
Appeal from the United States District Court for the Eastern District of Virginia, at
Alexandria. Leonie M. Brinkema, District Judge. (1:19-cv-00996-LMB-IDD)
Submitted: September 15, 2021 Decided: October 27, 2021
Before MOTZ, RICHARDSON, and QUATTLEBAUM, Circuit Judges.
Remanded by unpublished per curiam opinion.
Demount Alston, Appellant Pro Se.
Unpublished opinions are not binding precedent in this circuit.
USCA4 Appeal: 20-7100 Doc: 19 Filed: 10/27/2021 Pg: 2 of 2
PER CURIAM:
Demount Alston seeks to appeal the district court’s order dismissing his 28 U.S.C.
§ 2254 petition. In civil cases, parties have 30 days after the entry of the district court’s
final judgment or order to note an appeal, Fed. R. App. P. 4(a)(1)(A), unless the district
court extends the appeal period under Fed. R. App. P. 4(a)(5) or reopens the appeal period
under Fed. R. App. P. 4(a)(6). “[T]he timely filing of a notice of appeal in a civil case is a
jurisdictional requirement.” Bowles v. Russell, 551 U.S. 205, 214 (2007).
Alston noted his appeal more than two months after the district court entered
judgment. However, in his notice of appeal, Alston asserted that there was a severe delay
in his receipt of the district court’s judgment, due in part to a prison lockdown relating to
the Covid-19 pandemic. Based on this claim, we construe Alston’s notice of appeal as a
Fed. R. App. P. 4(a)(6) motion to reopen the appeal period, see United States v. Withers,
638 F.3d 1055, 1061 (9th Cir. 2011), and we remand to the district court for the limited
purpose of determining whether reopening the appeal period is warranted. The record, as
supplemented, will then be returned to this court for further consideration.
REMANDED
2 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488016/ | Cite as 2022 Ark. 205
SUPREME COURT OF ARKANSAS
No. D-22-613
Opinion Delivered: November 18, 2022
ARKANSAS JUDICIAL DISCIPLINE
AND DISABILITY COMMISSION PETITIONER’S REPORT AND
PETITIONER AMENDED REPORT OF
UNCONTESTED SANCTION
V.
ROBIN CARROLL, CIRCUIT JUDGE
RESPONDENT EXPEDITED PETITION GRANTED;
MODIFIED SANCTION OF
SUSPENSION WITHOUT PAY
IMPOSED.
PER CURIAM
On September 30, 2022, petitioner Arkansas Judicial Discipline and Disability
Commission (“Commission”) filed its report of uncontested sanction pursuant to Arkansas
Judicial Discipline and Disability Commission Rule 12(D) following its investigation of
complaints against respondent, Judge Robin Carroll of the Thirteenth Judicial Circuit. The
Commission and Judge Carroll agreed to recommend to this court a suspension without pay
for ninety days, with thirty days held in abeyance for one year. Judge Carroll also agreed to
certain remedial measures. On October 5, 2022, we ordered the Commission to file the
record in this matter with this court within fifteen days and suspended Judge Carroll without
pay pending our receipt and review of the record, with the suspension to begin on October
10. Ark. Jud. Discipline & Disability Comm’n v. Carroll, 2022 Ark. 175, 652 S.W.3d 560. The
Commission filed an amended report of uncontested sanction and request for expedited
consideration on October 14, 2022, stating that the only record that could be submitted to
this court was the letter of sanction and recommendation of suspension already provided.
We issued a second per curiam on October 21, 2022, ordering the Commission to file with
this court the entire record compiled in this matter, including the investigative files, by
October 24 and directing that the materials be filed under seal due to their confidential
nature. Ark. Jud. Discipline & Disability Comm’n v. Carroll, 2022 Ark. 189. We noted in that
per curiam, while Arkansas Judicial Discipline and Disability Commission Rule 7 protects
certain material from being disclosed to the public, the Commission and its executive
director have erroneously interpreted that language to preclude our court from reviewing
this material. This is simply not the case, as it would render this court’s review meaningless.
On October 24, the Commission filed the materials as ordered. We now grant the
Commission’s expedited petition and modify the recommended sanction by suspending
Judge Carroll without pay for eighteen months, with six of those months held in abeyance
for one year upon his return to the bench contingent on his compliance with certain
remedial measures. In addition, Judge Carroll is ordered to perform an assessment and
complete the corresponding plan with the Judges and Lawyers Assistance Program (“JLAP”),
as discussed in more detail later in this per curiam.
Judge Carroll has served as circuit court judge for Division Four of the Thirteenth
Judicial District, which is composed of Calhoun, Cleveland, Columbia, Dallas, Ouachita,
and Union Counties, since 2013. The report and amended report of uncontested sanctions
2
arise from complaints filed with the Commission in JDDC cases #21-284 and #22-192. The
Commission alleged three separate fact patterns of judicial misconduct in its report. The first
fact pattern summarized Judge Carroll’s dismissal of cases without due process, his actual
bias, and his failure to recuse himself. Specifically, prior to August 2021, Judge Carroll told
the county sheriff to remove a particular deputy sheriff from the courtroom and advised the
sheriff in chambers that he needed to fire the deputy. Next, on August 18, 2021, Judge
Carroll contacted a public defender by phone and stated that he would dismiss cases
involving the deputy sheriff that day if the public defender made the motions to dismiss in
court. Judge Carroll then prompted the public defender to move for dismissal in open court,
over the objection of the prosecuting attorney, and stated that the cases would be dismissed
because the deputy sheriff had “zero credibility with myself or the prosecutor’s office” and
that any other private counsel who had cases based on the deputy’s testimony would have
their cases dismissed on motion. As a result, two private attorneys came forward, and Judge
Carroll dismissed those cases as well.
The second fact pattern discussed in the Commission’s report pertained to Judge
Carroll’s attempts to exert improper influence over cases involving the Arkansas Game and
Fish Commission (“AGFC”) in other courts. In April 2021, Judge Carroll spoke with a
district court judge assigned to an AGFC case that involved a violation of regulations on
turkey hunting and discussed the case in detail. The district court judge recused himself due
to that conversation, and another judge had to be assigned. In January 2022, Judge Carroll
called the Colonel of the AGFC enforcement division and referenced two separate cases,
3
stating that “one more ticket needs to go away before trial.” Judge Carroll claimed that the
case would be embarrassing for the agency and vouched for the defendant. He then
contacted multiple people, including the (1) former director of the AGFC, (2) the Colonel
of Enforcement, (3) the special prosecuting attorney, (4) defense counsel, and (5) the
defendant, and provided the attorneys with a case citation that he believed pertained to the
legality of the AGFC’s authority to search. During the trial, the defense made arguments
related to the agency’s authority to search, and the defendant was ultimately acquitted by the
assigned judge.
Finally, in the third fact pattern, the Commission alleged that Judge Carroll, over the
course of several months, repeatedly failed to call his full docket on the record and canceled
court numerous times without appropriate prior notice to litigants, attorneys, witnesses, or
law enforcement. This would occur even after the defendants had been transported and
housed at the local jail at the individual counties’ expense. Additionally, deputy prosecutors
or public defenders would have to request that Judge Carroll’s trial court assistant mail
notices to defendants with the new court dates because official orders to appear were not
always provided to defendants in court or on the record. Judge Carroll also routinely failed
to make clear docket entries.
The Commission claimed that Judge Carroll violated Rules 1.1, 1.2, 1.3, 2.2, 2.3, 2.4,
2.5, 2.6, 2.9, and 2.11 of the Arkansas Code of Judicial Conduct. With regard to his
dismissal of cases and failure to recuse himself from proceedings involving the deputy sheriff,
the Commission found that Judge Carroll breached his duty to the public and undermined
4
the fair and impartial administration of justice, thereby fueling distrust of all judges. Further,
the Commission stated that “[t]he abuse of judicial office to benefit friends or ‘connected’
individuals is one of the most egregious types of judicial misconduct” and is both corrupt
and intolerable. The Commission indicated that had there been clear proof that Judge
Carroll’s improper meddling had affected the rulings in those cases, he would have been in
jeopardy of removal from office.1 A suspension without pay was recommended by the
Commission due only to his cooperation, admission of guilt, mitigation, and acceptance of
the remedial measures.
Judge Carroll has admitted the allegations set forth above and has agreed that a
suspension without pay is appropriate. He has also agreed that the Commission’s
recommended sanction must be reviewed by this court to determine whether we concur with
that recommendation, including the length of the suspension. See Ark. Jud. Discipline &
Disability Comm’n R. 12(D). The Commission has submitted its report and amended report
containing its recommendation to this court for expedited review pursuant to Arkansas
Judicial Discipline and Disability Commission Rule 12(B).
We now review this matter to decide the appropriate discipline. This court reviews
matters of judicial discipline de novo. Ark. Jud. Discipline & Disability Comm’n v. Sims, 2021
Ark. 126. The judicial power is vested in this court pursuant to Amendment 80 to the
1
In this instance, the Commission’s emphasis was misplaced. Judge Carroll’s attempts
to improperly influence judicial proceedings should be the focus of the Commission’s
investigation, regardless of whether he was effective in those attempts.
5
Arkansas Constitution. Ark. Const. amend. 80, §1. As a result, we have a duty to exercise
superintending control over the courts of this state. Ark. Const. amend. 80, § 4.
We have recognized certain factors to be considered in determining the appropriate
sanction for judicial misconduct, including (1) whether the misconduct is an isolated
instance or evidenced a pattern of conduct; (2) the nature, extent, and frequency of
occurrence of the acts of misconduct; (3) whether the misconduct occurred in or out of the
courtroom; (4) whether the misconduct occurred in the judge’s official capacity or in his
private life; (5) whether the judge has acknowledged or recognized that the acts occurred; (6)
whether the judge has evidenced an effort to change or modify his conduct; (7) the length of
time of service on the bench; (8) whether there have been prior complaints about this judge;
(9) the effect the misconduct has upon the integrity of and respect for the judiciary; and (10)
the extent to which the judge exploited his position to satisfy his personal desires. Jud.
Discipline & Disability Comm’n v. Thompson, 341 Ark. 253, 16 S.W.3d 212 (2000).
As the Commission found in its report, Judge Carroll’s misconduct was not an
isolated instance but rather an extended pattern of misconduct, particularly with regard to
his docket management over a prolonged period. In addition, all of the misconduct occurred
while he was on the bench or in his official capacity as a circuit court judge. Unfortunately,
it was several months into the Commission’s investigation, and after he had retained an
attorney, before Judge Carroll recognized his wrongful behavior and made any effort to
modify his conduct. Further, he committed these acts despite the benefit of many years of
experience on the bench, as well as his experience as a prosecuting attorney. Even though
6
the Commission found no evidence that Judge Carroll benefitted monetarily from his
improper actions, his behavior has had an exceedingly negative impact on the integrity of
and respect for the judiciary as a whole. We also cannot ignore that Judge Carroll’s dismissal
of criminal cases based on his actual bias against the deputy sheriff impacted not just the
defendants but also the victims and their families.
After considering the factors set forth above and the seriousness of the conduct at
issue, we conclude that the length of the suspension recommended by the Commission is
insufficient. The Commission itself equated the scope, impact, and pattern of Judge Carroll’s
actions to “one of the most egregious types of judicial misconduct,” along with being corrupt
and intolerable. We therefore modify the recommended sanction to an eighteen-month
suspension, with six of those months held in abeyance for one year upon his return to the
bench. As previously ordered by this court, Judge Carroll’s suspension began on October 10,
2022. The six months are held in abeyance on the condition that he adhere to the agreed-
upon remedial measures listed below:
• Any allegations of direct or indirect retaliation or harassment by Judge Carroll
toward any of the officials or other witnesses the Commission interviewed in this case
will be fully investigated and are grounds for the filing of a new complaint and/or the
revocation of the suspension held in abeyance in this sanction;
• Any false or misleading comments in private or public forums about the basis for
the agreement or the investigations would be a violation of this agreement;
7
• Allow the Commission monitors full access to courtrooms for proceedings, to
records kept in his official capacity, and to the staff, as needed;
• Be subject to attendance checks at his office. This may include returning calls when
asked or random visits by monitors to make sure he is working and is accessible to
court personnel;
• Attend an online class presented by the National Judicial College on judicial ethics
and docket management. Classes that would fulfill this requirement will be sent to
his counsel by the Executive Director. He needs to attend and provide proof of his
attendance within twelve months of the date his suspension was imposed;
• Refrain from habits that caused some of the issues mentioned in the report,
including needless absence from his chambers, overuse of his signature stamp, and
failure to call the whole docket on the record.
While the Commission indicated in its report that Judge Carroll had voluntarily
attended a class through JLAP, we further order him to undergo an assessment with JLAP
within fourteen days and to immediately and fully comply with any and all steps required for
and until completion of the plan resulting from the assessment. See Ark. Judges & Lawyer
Assistance Program R. 7 (providing that JLAP may accept referral of judges under
investigational, provisional, or probational status from the Commission or any disciplinary
agency with disciplinary authority and that JLAP shall provide progress reports or reports of
non-compliance). We also direct him to sign any and all disclosure forms necessary to allow
JLAP and the Commission to have access to his status and compliance at all times. Finally,
8
we refer Judge Carroll to the Supreme Court Committee on Professional Conduct and
request that the committee take whatever action it believes his actions warrant under the
Rules of Professional Conduct. A petition for rehearing of this court’s decision, if any, must
be filed within five days of the filing of this per curiam.
Expedited petition granted; modified sanction of suspension without pay imposed.
9 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488021/ | NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except
in the limited circumstances allowed under Rule 23(e)(1).
2022 IL App (3d) 210518-U
Order filed November 18, 2022
____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
2022
THE PEOPLE OF THE STATE ) Petition for Administrative Review
OF ILLINOIS, )
)
Complainant-Appellee, )
)
v. )
) Appeal No. 3-21-0518
IRONHUSTLER EXCAVATING, INC., an ) Case No. PCB-2020-16
Illinois corporation, )
)
Respondent-Appellant, )
)
and )
)
RIVER CITY CONSTRUCTION, LLC, an )
Illinois limited liability company, and )
VENOVICH CONSTRUCTION CO., an )
Illinois corporation, )
)
Respondents. )
____________________________________________________________________________
PRESIDING JUSTICE O’BRIEN delivered the judgment of the court.
Justices Daugherity and Peterson concurred in the judgment.
____________________________________________________________________________
ORDER
¶1 Held: Administrative agency did not err in finding respondent liable for violating
environmental regulations and in imposing an $80,000 penalty.
¶2 Respondent IronHustler Excavating, Inc. (IronHustler) was cited by the Illinois Pollution
Control Board (Board) for unlawfully dumping construction and demolition debris at an
unpermitted site. The Board granted summary judgment to the State, as represented by the attorney
general, in an action instituted by the Illinois Environmental Protection Agency (IEPA) against
IronHustler, River City Construction, LLC (River City) and Venovich Construction Company.
The Board found that IronHustler and River City violated various provisions of the Illinois
Environmental Protection Act (Act) (415 ILCS 5/1 et seq. (West 2018)), determined penalties were
warranted, and assessed a penalty of $80,000 against IronHustler and $35,000 against River City.
IronHustler appealed the order and opinion of the Board with a direct appeal to this court. River
City failed to timely seek review in this court and this court denied its motion to file a late petition
for review. We affirm.
¶3 I. BACKGROUND
¶4 Respondent IronHustler was hired as a subcontractor by respondent general contractor
River City to handle demolition, removal and disposal of portions of a high school in Delevan,
Illinois, at which River City was constructing a new wing. IronHustler transported 208 semi-truck
loads of debris from the high school project to the Tazewell County Landfill between June 28,
2017, and July 21, 2017. It also transported 24 loads to a farm owned by Venovich Construction
Company. On July 13, 2017, in response to an anonymous tip regarding unlawful dumping, Jason
Thorp, an investigator with the IEPA, inspected the farm site. Venovich, the owner of Venovich
Construction Company, held a permit for clean construction and demolition debris in order to
prevent erosion along the riverbank abutting the property. However, according to Venovich,
IronHustler dumped the debris without his knowledge or permission. Venovich was contacted by
the IEPA about the dumped materials, and in turn, contacted IronHustler and demanded the debris
2
be removed. The following day, IronHustler discovered by looking at its trucking timesheets that
24 loads of construction debris were taken to the farm site, not the landfill. IronHustler arranged
for removal of the debris and its proper disposal at the landfill. On July 17, 2017, IronHustler
transported 29 loads of debris from the farm to the landfill.
¶5 IronHustler thereafter terminated the employees who had arranged for the open dumping
at the farm. IronHustler implemented additional policies to prevent future diversions for unlawful
dumping. IronHustler also implemented a service agreement for nonhazardous waste that
committed third parties with whom it dealt to reject acceptance of construction debris in violation
of the Act. To further rectify the situation, IronHustler paid for the transport from the farm and
disposal at the landfill of five more loads than it dumped, paid for the double transport from the
job site to the farm and then to the landfill of the original 24 loads and bore the cost of terminating
its employees and implementing additional remedial actions.
¶6 IronHustler, River City and Venovich Construction Company each received a violation
notice from the IEPA on August 21, 2017. The notice informed the parties that they should
(1) cease all open dumping at the farm site, (2) remove all unlawfully dumped materials from the
site, and (3) submit copies of receipts indicating proper disposal of the construction debris.
Venovich reached a settlement with the IEPA and is not a party to this appeal. IronHustler
responded in writing to the IEPA’s recommendations, informing the agency that it had complied
with the recommendations two months earlier. IronHustler proposed a compliance commitment
agreement, which the IEPA rejected because of the nature and seriousness of the violations which
remained a subject of disagreement between the IEPA and the respondents. The IEPA issued a
letter on December 27, 2017, to IronHustler indicating the IEPA inspected the farm site again in
November 2017 and determined the site was returned to compliance.
3
¶7 On September 16, 2019, the State filed a seven-count complaint with the Board against
IronHustler, River City and Venovich Construction Company on behalf of IEPA. Count I alleged
open dumping (415 ILCS 5/21(a) (West 2018)); count II alleged open dumping resulting in litter
(id. § 21(p)(1)); count III alleged open dumping resulting in waste in standing or flowing waters
(id. § 21(p)(4)); count IV alleged open dumping of demolition debris (id. § 21(p)(7)(i)); count V
alleged developing and operating a landfill without a permit (35 Ill. Adm. Code 812.101(a) (2018);
415 ILCS 5/21(d)(1) (West 2018)); count VI alleged developing and operating a landfill in
violation of board regulations (415 ILCS 5/21(d)(2) (West 2018)); and count VII alleged waste
disposal at an improper site (id. § 21(e)). The complaint sought various monetary penalties based
on the alleged violations.
¶8 The State moved for summary judgment in March 2021 and IronHustler filed a cross-
motion for summary judgment in May 2021. On October 7, 2021, the Board granted summary
judgment to the State, denied IronHustler’s cross-motion for summary judgment, and assessed
penalties of $80,000 against IronHustler and $35,000 against River City. IronHustler timely filed
its petition. River City filed a late petition for review, which this court denied. River City filed a
brief and argued its position in IronHustler’s appeal. The State moved to strike River City’s brief,
which this court initially denied but thereafter granted after vacating the denial order. People v.
IronHustler, No. 3-21-0518 (Sept. 15, 2022) (unpublished dispositional order). River City is not a
party to this appeal.
¶9 II. ANALYSIS
¶ 10 IronHustler argues that summary judgment was improperly granted to the State, which it
maintains failed to establish it violated the Act. According to IronHustler, the State did not prove
it dumped waste at the farm site. IronHustler also argues that the Board erred in imposing a
4
monetary penalty. It asserts the penalty was not appropriate where the penalty was imposed for
past violations, IronHustler acted at all times in good faith, the penalty was not warranted under
the applicable statutory factors, and the amount of the penalty imposed was inappropriate. Finally,
IronHustler argues that River City was improperly penalized for IronHustler’s actions about which
River City was unaware.
¶ 11 Summary judgment is appropriate where the pleadings, depositions, and admissions on
file, along with any affidavits, show there is no genuine issue of material fact and the moving party
is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2018). When parties file
cross-motions for summary judgment, they agree that no genuine issue of material fact exists and
that the issue is a question of law. Prairie Rivers Network v. Pollution Control Board, 2016 IL
App (1st) 150971, ¶ 24. This court reviews an administrative agency’s grant of summary judgment
de novo. Id. ¶ 23. On review, this court gives deference to the administrative determination and
will only set aside a penalty “if it is clearly arbitrary, capricious or unreasonable.” City of Morris
v. Community Landfill Co., 2011 IL App (3d) 090847, ¶ 42.
¶ 12 To determine whether to impose a penalty and its amount, the Board looks to the factors in
section 33(c) of the Act and all the attendant facts and circumstances that bear on the conduct that
is the subject of the complaint. Modine Manufacturing Co. v. Pollution Control Board, 193 Ill.
App. 3d 643, 648 (1990). The severity of the penalty should bear some relationship to the
seriousness of the conduct or infraction. Id. at 649. In determining whether to impose a penalty
and its amount, good faith or lack of it is a pertinent consideration. Id.
¶ 13 A. IEPA Burden to Establish that “Waste” was Dumped
¶ 14 To begin, IronHustler submits that the IEPA failed to demonstrate that the dumped
materials were “[g]eneral construction or demolition debris” or “[w]aste” as defined in the Act.
5
See 415 ILCS 5/3.160(a), 3.535 (West 2018). Accordingly, it maintains, the State failed to carry
its burden that it violated the Act, challenging the affidavit of Thorp, the IEPA inspector, which
stated that general construction or demolition debris was present at the farm site. IronHustler
submits that anything it dumped was permissible clean construction and demolition debris.
“ ‘General construction or demolition debris’ means non-hazardous, uncontaminated
materials resulting from the construction, remodeling, repair, and demolition of ***
structures, *** limited to the following: bricks, concrete, and other masonry materials;
soil; rock; wood, including non-hazardous painted, treated, and coated wood and wood
products; wall coverings; plaster; drywall; plumbing fixtures; non-asbestos insulation;
roofing shingles and other roof coverings; reclaimed or other asphalt pavement; glass;
plastics that are not sealed in a manner that conceals waste; electrical wiring and
components containing no hazardous substances; and corrugated cardboard, piping or
metals incidental to any of those materials ***.” 415 ILCS 5/3.160(a) (West 2018).
Section 3.535 defines “ ‘Waste’ ” as:
“any garbage *** or other discarded material, including solid, liquid, semi-solid, or
contained gaseous material resulting from industrial [and] commercial *** operations,
and from community activities ***.” Id. ¶ 3.535.
¶ 15 Thorp’s affidavit was introduced by the IEPA in support of its claim of unlawful dumping.
He visited both the dump site at the farm and the high school project site on July 17, 2017. Thorp
averred that the demolition debris he discovered at the farm contained “electrical wire, metal
radiators, wood, rebar, wire conduit, metal sheeting, metal angle iron, painted brick, plywood,
metal studs, metal pipe, painted concrete, slag, and ceramic tile.” He further attested that he
reinspected the dump site on November 16, 2017, that the construction debris had been removed,
6
and that IronHustler submitted receipts showing it properly disposed of the debris at a landfill on
July 17, 2017. The IEPA submitted photographs taken by Thorp at both the farm and the high
school demolition/construction project. The farm photographs depicted the dumped construction
debris and Thorp described the type of debris shown in the photos as attested in his affidavit.
Photographs from the high school site showed construction debris similar to that found at the farm.
Photographs of both sites showed excavators bearing IronHustler markings. In its answers to
interrogatories, IronHustler stated that the operator of the excavator seen at the farm was its
employee and that the excavator had been transported to the farm by another of its employees.
¶ 16 Other than IronHustler’s denials, it did not offer any proof to rebut the IEPA’s evidence of
open dumping of waste. Its inspector documented the debris with photographs, which aligned with
his attestations that the materials dumped at the farm consisted of construction and demolition
debris and constituted waste. We conclude that there is no genuine issue of material fact that the
debris deposited at the farm site was waste and that the IEPA did not carry its burden to establish
violations of the Act.
¶ 17 B. Assessment of Penalty
¶ 18 IronHustler disputes the propriety of the monetary penalty assessed against it, arguing that
it should not be penalized for past violations, that imposition of the penalty violates the factors set
forth in section 33(c) of the Act, and that River City should not be monetarily penalized because
it played no role in the open dumping.
¶ 19 1. Past Violations
¶ 20 IronHustler argues that it was improperly assessed penalties for “wholly past” violations
of the Act, which it readily corrected, and demonstrated that it exercised good faith in complying
with the Act. It observes that the dumping took place on July 7, 2017; it was notified about it on
7
July 13, 2017; removed the debris on July 17, 2017; and the site was reinspected and found in
compliance on November 16, 2017. The IEPA did not pursue its action against it until September
16, 2019, when the State filed a complaint on its behalf. According to IronHustler, the penalties
cannot serve to enforce the Act but merely punishes it and discourages others from acting in good
faith to remedy Act violations.
¶ 21 There is no bar to the imposition of penalties for past violations of the Act. See Modine
Manufacturing Co, 193 Ill. App. 3d at 648 (“we decline to hold categorically that penalties may
not be imposed for wholly past violations”). In Modine, the appellant challenged the $10,000
penalty imposed against him for violating the Act, arguing the penalty was not necessary to aid in
the Act’s enforcement. Id. at 647. The reviewing court rejected the appellant’s argument that
because the violation had ceased before the complaint against it was filed, the monetary penalty
would not aid in enforcing the Act. Id. at 648. However, the court found under the applicable
statutory factors that a maximum penalty was not warranted and reduced the penalty to $1000. Id.
at 650. The appellant in Modine worked for several years with the IEPA to rectify its violations of
the Act, cooperated fully with the agency, and expended substantial funds to correct the problem.
Id. In contrast, although IronHustler quickly cleaned up the illegal dump site at the farm and
transported the debris to a landfill prior to the complaint being filed, the efforts were by compulsion
and without good faith. IronHustler’s compliance with the Act took place only when it got caught
dumping illegally. The fact that IronHustler’s excavator was at the farm site and more than 20
loads of debris were dumped there indicate that the illegal dumping was not small scale and the
result of the normal operations of business, as in Modine.
¶ 22 The cases on which IronHustler relies for the proposition that past violations should not be
penalized are distinguished. In CPC International, Inc. v. Illinois Pollution Control Board, 24 Ill.
8
App. 3d 203, 208 (1974), the reviewing court found the $15,000 penalty arbitrary and excessive
where the violations were not deliberate and the violator quickly corrected the problem. In
Southern Illinois Asphalt Co., Inc. v. Pollution Control Board, 60 Ill. 2d 204, 209 (1975), the court
found monetary penalties were not warranted under the Act, as the violations had ended long
before the IEPA brought its enforcement actions and there were significant mitigating
circumstances. In Park Crematory, Inc. v. Pollution Control Board, 264 Ill. App. 3d 498, 506
(1994), the reviewing court found the monetary penalty punitive in that it “in no way aid[ed] in
the enforcement of the Act,” noting the violator misunderstood the permit requirements,
cooperated promptly with the IEPA, and corrected the violations prior to the complaint.
¶ 23 In City of Moline v. Pollution Control Board, 133 Ill. App. 3d 431, 434 (1985), this court
reversed the monetary penalty imposed on Moline for its violations of the Act, finding that the
monetary penalty was purely punitive. Moline worked extensively with the IEPA to resolve the
problems, took its own initiatives to further abate the problems and ultimately operated in
compliance. Id. at 432-33. This court reasoned a monetary penalty was inappropriate for two
significant reasons. Id. at 434. First, it considered the IEPA’s complaint unnecessary, as Moline
had been working with the IEPA to resolve the issues. Id. Secondly, it noted that the burden of the
penalty would be borne by the taxpayers, who were already saddled with the increased costs
associated with Moline’s measures to comply with the Act. Id.
¶ 24 In contrast, here, the dumping was deliberate, IronHustler’s employees were aware of the
dumping, there were no long-term attempts or cooperation with the IEPA to correct violations,
there were no mitigating circumstances, and IronHustler only cleaned up the dump site after the
open dumping was discovered. Furthermore, in the cases presented by IronHustler, the violations
that had been remedied were long-term violations, not a single illegal dumping. The monetary
9
penalties were rejected because they did nothing to enforce the Act, whereas here, the penalty
serves, in part, to force future compliance. While IronHustler cleaned up the dump site in quick
fashion, the penalty was imposed because the dumping took place in the first place.
¶ 25 2. Assessment of Penalty
¶ 26 IronHustler argues that the PCB erred when it imposed an $80,000 penalty. According to
IronHustler, the section 33(c) factors do not support imposition of a penalty.
¶ 27 To determine whether to impose a penalty, the PCB is guided by the considerations set
forth in section 33(c) of the Act (415 ILCS 5/33(c) (West 2018)). Southern Illinois Asphalt Co.,
60 Ill. 2d at 207-08. Section 33(c) provides as follows:
“(c) In making its orders and determinations, the Board shall take into consideration
all the facts and circumstances bearing upon the reasonableness of the emissions,
discharges, or deposits involved, including, but not limited to:
(i) the character and degree of injury to, or interference with the protection of
the health, general welfare and physical property of the people;
(ii) the social and economic value of the pollution source;
(iii) the suitability or unsuitability of the pollution source to the area in which it
is located, including the question of priority of location in the area involved;
(iv) the technical practicability and economic reasonableness of reducing or
eliminating the emissions, discharges or deposits resulting from such pollution
source; and
(v) any subsequent compliance.” 415 ILCS 5/33(c)(i)-(v) (West 2018).
¶ 28 As to the first factor, IronHustler submits that the debris it dumped was solid waste and
presumably less harmful than if it had dumped liquid waste. While the fact the waste was solid
10
allowed an easier clean up, it does not diminish that IronHustler engaged in unlawful open
dumping of construction and demolition debris along the banks of and in a river. The dumped
waste included electrical wire, metal radiators, wood, rebar, wire conduit, metal sheeting, metal
angle iron, painted brick, plywood, metal studs, metal pipe, painted concrete, slag, and ceramic
tile. IronHustler maintains the waste only remained for a short period of time and did not leave
behind any contamination; however, the mere dumping of these items interfered with or threatened
the general welfare and health of the people. See Toyal America, Inc. v. Illinois Pollution Control
Board, 2012 IL App (3d) 100585, ¶ 40 (finding violation where unlawful emission “caused,
allowed, or threatened air pollution”) (citing 415 ILCS 5/9(a) (West 2018)).
¶ 29 The second factor weighs in favor of penalizing IronHustler, as found by the Board. The
construction of a new high school wing has social and economic value to the public but the
dumping of debris from the construction project does not.
¶ 30 The third factor, the suitability of the pollution source, also weighs in favor of a penalty.
The debris was dumped along and in the Mackinaw River. The dump site was not a permitted
landfill. IronHustler argues that the dumping was orchestrated by rogue employees; however, this
fact does not relieve IronHustler of responsibility. See Gonzalez v. Pollution Control Board, 2011
IL App (1st) 093021, ¶ 33 (standard is whether the violator “has the capability of control over the
pollution”). Nor do its claims of proactive efforts to ensure future compliance as this violation is
not the first for IronHustler, termination of rogue employees notwithstanding.
¶ 31 The fourth factor is whether reducing or eliminating the pollution was technically
practicable and economically reasonable. All IronHustler needed to do was transport the waste to
the landfill as it did with the other loads from the high school project. The landfill was permitted
11
and dumping the debris there was both practicable and reasonable. This factor weighs in favor of
a penalty.
¶ 32 The fifth and final factor is any subsequent compliance. The Board found this factor
favored IronHustler and the record supports the finding.
¶ 33 We conclude that the Board did not err in finding on these undisputed facts that IronHustler
violated the Act, that summary judgment was proper, and that a penalty was warranted. The
majority of the section 33(c) factors support the PCB’s finding that penalties were appropriate.
¶ 34 3. Amount of Penalty
¶ 35 The next inquiry is the amount of the penalty, as determined by the section 42(h) factors
(415 ILCS 5/42(h) (West 2018)). IronHustler challenges the monetary penalty of $80,000 and the
penalty against River City of $35,000, arguing the PCB’s “general analysis” of the factors was
insufficient and a proper analysis would conclude that the amount of the penalties assessed was
unwarranted.
¶ 36 Section 42(h) provides:
“(h) In determining the appropriate civil penalty to be imposed***, the Board is
authorized to consider any matters of record in mitigation or aggravation of penalty,
including, but not limited to, the following factors:
(1) the duration and gravity of the violation;
(2) the presence or absence of due diligence on the part of the respondent in
attempting to comply with requirements of this Act and regulations thereunder or
to secure relief therefrom as provided by the Act;
12
(3) any economic benefits accrued by the respondent because of delay in
compliance with requirements, in which case the economic benefits shall be
determined by the lowest cost alternative for achieving compliance;
(4) the amount of monetary penalty which will serve to deter further violations
by the respondent and to otherwise aid in enhancing voluntary compliance with this
Act by the respondent and other persons similarly subject to the Act;
(5) the number, proximity in time, and gravity of previously adjudicated
violations of this Act by the respondent;
(6) whether the respondent voluntarily self-disclosed, ***non-compliance to the
Agency;
(7) whether the respondent has agreed to undertake a ‘supplemental
environmental project’, which means an environmentally beneficial project that a
respondent agrees to undertake in settlement of an enforcement action brought
under this Act, but which the respondent is not otherwise legally required to
perform; and
(8) whether the respondent has successfully completed a Compliance
Commitment Agreement under subsection (a) of Section 31 of this Act to remedy
the violations that are the subject of the complaint.” 415 ILCS 5/42(h)(1)-(8) (West
2018).
¶ 37 The first factor, the duration and gravity of the violation, was found to be neutral by the
Board. It noted that the open dumping was discovered by the IEPA inspector on July 13, 2017,
and the material was “promptly” removed on July 17, 2017. When the dump site was inspected
again on November 16, 2017, the debris had been removed. According to the Board, the limited
13
duration of the open dumping was counterbalanced by the gravity of the violation. This factor
serves to aggravate the penalty amount.
¶ 38 The next factor is IronHustler’s due diligence in complying with the Act and its regulations.
IronHustler acted with diligence in removing the debris and bringing the site into compliance with
the Act. The Board’s finding that this factor favored IronHustler is supported by the record. This
factor is mitigating.
¶ 39 Whether there were any economic benefits to IronHustler as a result of its compliance delay
is the third factor. The Board considered this factor neutral, noting that IronHustler paid to clean
the farm site and dump the debris at a permitted site and that the State did not provide information
that IronHustler enjoyed any economic benefits from its noncompliance.
¶ 40 The next factor to be considered is the amount of penalty which will serve to deter further
violations and enhance voluntary compliance. The Board found this factor significant, calculating
the amount of the penalty to “serve to deter future violations” by IronHustler and others.
Assessment of a substantial monetary penalty would serve to urge potential violators like
IronHustler to comply with the Act initially, rather than after violating it. See Wasteland, Inc. v.
Illinois Pollution Control Board, 118 Ill. App. 3d 1041, 1055 (1983) (penalty to deter “those who
blatantly disregard applicable rules and regulations [and] others who might consider cutting
corners at the expense of the environment”). This is an aggravating factor.
¶ 41 Whether there were previously adjudicated violations is the next factor and it weighs
against IronHustler as found by the Board. It had prior adjudicated violations and penalties: in
2013, a $10,000 penalty for open dumping at a nonpermitted site, and in 2019, a $3000 penalty for
open dumping resulting in litter and the deposit of construction debris. This factor aggravates the
penalty as to IronHustler.
14
¶ 42 The next factor, whether the respondent voluntarily self-disclosed, also aggravates the
penalty, as the Board found. IronHustler did not self-disclose, and contrary to its claims that it was
unaware of the violation until notified by the IEPA, the debris was transported to and dumped at
the site by IronHustler employees using IronHustler equipment.
¶ 43 Finally, the Board stated that the record contained no evidence regarding the seventh and
eighth factors, whether IronHustler agreed to a supplemental environmental project or completed
a compliance commitment agreement, and apparently found these factors neutral.
¶ 44 We find the undisputed material facts support the Board’s analysis of the section 42(h)
factors and agree that imposition of an $80,000 penalty was appropriate under the applicable
factors.
¶ 45 4. River City’s Liability
¶ 46 Finally, IronHustler maintains that the penalty against River City was in error because
River City did not “cause or allow” a violation of the Act. As discussed above, River City failed
to timely appeal the Board’s decision and IronHustler lacks standing to present an argument on
River City’s behalf.
¶ 47 Standing “requires only some injury in fact to a legally cognizable interest.” Greer v.
Illinois Housing Development Authority, 122 Ill. 2d 462, 492 (1988). To satisfy the standing
requirement, a party must establish that its injury is distinct and palpable, can fairly be traced to
the actions of the defendant, and the grant of requested relief is “substantially likely” to prevent or
redress the party’s claimed injury. Messenger v. Edgar, 157 Ill. 2d 162, 170 (1993). “A party must
assert its own legal rights and interests, rather than assert a claim for relief based upon the rights
of third parties.” Powell v. Dean Foods Co., 2012 IL 111714, ¶ 36.
15
¶ 48 As we determined in granting the State’s motion to strike River City’s brief, we lack
jurisdiction to review the Board’s findings and penalty against it. River City failed to timely file
its petition for review of the Board’s decision and IronHustler’s petition for review referenced only
the finding and penalty against River City. See IronHustler, No. 3-21-0518. We also reject
IronHustler’s assertion that it has standing because its contract with River City obligates it to River
City for any claims arising from IronHustler’s work. Thus, IronHustler asserts, any penalty
imposed against River City is IronHustler’s responsibility to pay, and thus, it has a valid economic
interest in River City’s penalty and has standing to challenge it. Despite IronHustler’s contractual
obligation, it cannot seek relief based on River City’s rights.
¶ 49 In summary, we find that there is no genuine issue of material fact that IronHustler violated
the Act by unlawfully dumping waste at an unpermitted site. The Board did not err in granting
summary judgment in favor of the State and denying IronHustler’s cross-motion for summary
judgment.
¶ 50 III. CONCLUSION
¶ 51 For the foregoing reasons, the judgment of the Pollution Control Board is affirmed.
¶ 52 Affirmed.
16 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488022/ | 2022 IL App (1st) 211095-U
SIXTH DIVISION
November 18, 2022
No. 1-21-1095
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1).
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
______________________________________________________________________________
THE PEOPLE OF THE STATE OF ILLINOIS, ) Appeal from the
) Circuit Court of
Plaintiff-Appellee, ) Cook County.
)
v. ) No. 13 CR 13656
)
) Honorable
VINCENT GEORGE, ) Thomas M. Davy and
) Joan M. O’Brien,
Defendant-Appellant. ) Judges Presiding.
PRESIDING JUSTICE MIKVA delivered the judgment of the court.
Justices Walker and Tailor concurred in the judgment.
ORDER
¶1 Held: No clear or obvious error occurred where the trial court’s admonishments regarding
defendant’s waiver of counsel at sentencing substantially complied with Illinois
Supreme Court Rule 401(a) (eff. July 1, 1984).
¶2 Following a bench trial, the trial court found defendant Vincent George guilty of the
aggravated discharge of a firearm and sentenced him to 10 years in prison. Mr. George appeared
pro se at the sentencing hearing. Asserting that the trial court improperly admonished him under
Illinois Supreme Court Rule 401(a)(2) (eff. July 1, 1984) when it misstated the percentage of the
sentence he would serve if awarded good-conduct credit, Mr. George argues on appeal that he is
No. 1-21-1095
entitled to resentencing because he did not voluntarily, knowingly, and intelligently waive his right
to counsel. For the reasons that follow, we affirm.
¶3 I. BACKGROUND
¶4 The trial court found Mr. George guilty as charged of one count of aggravated discharge
of a firearm for discharging a firearm at or into a building that he knew or reasonably should have
known to be occupied from a place outside the building (720 ILCS 5/24-1.2(a)(1) (West 2012)).
The trial court sentenced Mr. George to 10 years in prison. This is Mr. George’s third appeal from
his conviction, this court having dismissed his two prior appeals. People v. George, Nos. 1-16-
2000 (2017) and 1-18-0033 (2019) (dispositional orders). Because Mr. George does not challenge
the sufficiency of the evidence on appeal, we summarize only the trial testimony necessary to
understand the circumstances of the offense for which he was sentenced. Mr. George was
represented by counsel at trial.
¶5 At trial, Reginald King Argue testified that on the afternoon of July 7, 2013, Mr. George,
whom Mr. Argue identified in court, attended a barbecue at Mr. Argue’s home. Mr. Argue saw
Mr. George with a small firearm that appeared to be “a .380 automatic of some kind.” At some
point, Mr. George hit Mr. Argue on the head, and Mr. Argue hit Mr. George on the head with a
bottle. Mr. Argue told Mr. George “[he] didn’t want any problems and just stop,” and Mr. George
left the barbecue. Later, Mr. Argue and his friend Edward Morris were inside Mr. Argue’s home
when they saw Mr. George walking toward the house. Neither saw Mr. George carrying a firearm
as he walked.
¶6 Mr. Argue then heard something shatter and “several pops” that sounded like gunshots.
Mr. Morris heard someone shout for Mr. Argue to come outside before he heard the gunshots,
which he described as “one popping noise which sounded like a handgun” and then multiple
-2-
No. 1-21-1095
gunshots. After the gunfire stopped, there were bullet holes in the front portion of the house and a
window of Mr. Morris’s vehicle was shattered. Mr. Argue and Mr. Morris identified Mr. George,
who was “down the block,” to police as the person they believed fired the shots. Dixie Lee, who
also attended the barbecue, testified that she observed Mr. George, whom she identified in court,
“[come] out in the middle of the street and [start] shooting.” According to her, Mr. George “let the
whole clip out” and then walked to a nearby porch, where he was later arrested.
¶7 The trial court found Mr. George guilty of the aggravated discharge of a firearm. Mr.
George, still represented by counsel, filed a motion for a new trial, which the trial court denied.
¶8 On September 11, 2015, Mr. George informed the court that he “want[ed] to invoke [his]
rights” and “no longer wish[ed]” the public defender to represent him as counsel. He confirmed
with the court that he wanted to represent himself “pursuant to Supreme Court Rule 401(a)” and
requested the court to “render full admonishment.” In response, the court entered a referral order
requesting an evaluation of Mr. George for his fitness to represent himself.
¶9 At a subsequent court date on October 8, 2015, Mr. George reiterated that he had previously
waived his right to counsel and indicated he was preparing a pro se motion raising a claim of
ineffective assistance of trial counsel pursuant to People v. Krankel, 102 Ill. 2d 181 (1984).
¶ 10 On November 19, 2015, the trial court stated that, following an evaluation, Mr. George was
found fit to represent himself. While in court, Mr. George tendered his Krankel motion, which was
filed that day. The court confirmed with Mr. George that he wished to appear pro se, stated it
would admonish him pursuant to Rule 401, and then admonished him as follows:
“THE COURT: ***as far as the charge of aggravated discharge of a firearm, it is a
Class 1 Felony, and the sentencing range for that is 4 to 15 years in the Illinois Department
of Corrections.
-3-
No. 1-21-1095
It appears that because of your prior background, *** it would be a mandatory Class
X sentencing range. So it would be charged as a Class 1, but the sentencing range would
be that of a Class X.
Class X sentencing range is 6 to 30 years in the Illinois Department of Corrections.
It is non-probationable. It is also followed by a three-year period of mandatory supervised
release.
Do you understand that those are the sentencing ranges for the charge in the case
that has already gone to trial?
[MR. GEORGE]: Yes, sir. I would like to ask is that case at 50 percent or at 85?
THE COURT: Let me just check.
***
[ASSISTANT STATE’S ATTORNEY]: *** The aggravated discharge as charged
is 50 percent.
***
THE COURT: All right. It is a 50 percent sentence as far as the aggravated
discharge. There was no bodily harm, great bodily harm which would cause it to be an 85
percent sentence.
So you understand that that’s the sentencing range.
You also understand that *** you had been represented by an attorney at trial. You
can continue to be represented by an attorney.
Do you understand that?
[MR. GEORGE]: Yes, sir.
THE COURT: You also understand that if you are proceeding on your own, that
-4-
No. 1-21-1095
would be without the benefit of an attorney *** [.]
Again, as I say, as far as the Krankel motion, that defendants do not necessarily
have to be admonished about pursuant to Rule 401.
But you understand the sentencing ranges for the case that’s already gone to trial.
***
As far as if at any point in the proceedings you wish to not represent yourself, you
can certainly let me know that; and I will reappoint an attorney for you.
And you can obviously hire your own attorney. If you could not afford one, one
would be appointed for you.
So do you understand that as well?
[MR. GEORGE]: Yes, sir.
THE COURT: *** Once again, just relating to Supreme Court Rule 401 as far as
this particular case, *** the nature of the charge here was aggravated discharge with a
firearm, *** you’ve heard from the testimony that it alleged that you had fired a gun into
a building.
So you understand that that’s what the nature of the charge is?
[MR. GEORGE]: Yes, sir.”
The trial court then continued with its Rule 401(a) admonishments, admonishing Mr. George
regarding proceeding pro se in two unrelated pending cases also before the court. It informed Mr.
George that, if found guilty, all sentences would be served consecutively.
¶ 11 The trial court continued the cases for counsel to provide Mr. George with a copy of the
transcripts and discovery. On January 8, 2016, the trial court discharged counsel for Mr. George,
and Mr. George represented himself at all posttrial proceedings. Mr. George filed an amended
-5-
No. 1-21-1095
77-page Krankel motion combined with a supplemental motion for a new trial or, in the alterative,
to set aside the verdict and enter a judgment of dismissal. The trial court held a Krankel hearing
and denied Mr. George’s motion. It then held a hearing on the motion for a new trial and denied
that motion.
¶ 12 On May 24, 2016, the trial court held a sentencing hearing at which Mr. George appeared
pro se. The State requested a sentence of more than 20 years in prison and informed the court that
Mr. George must serve 85% of the imposed sentence. Mr. George expressed to the court that on a
previous court date where he “first appear[ed] as a pro se defendant,” the court stated that, because
there was no bodily harm, he would serve 50% instead of 85% of the imposed sentence. The court
responded that, under the statute, he must serve 85% of his sentence regardless of bodily harm.
This was what was required by the statute on sentencing credit. See 730 ILCS 5/3-6-3 (a)(2)(iv)
(West Supp. 2015) (“a prisoner serving a sentence for aggravated discharge of a firearm, whether
or not the conduct leading to conviction for the offense resulted in great bodily harm to the victim,
shall receive no more than 4.5 days of sentence credit for each month of his or her sentence of
imprisonment”).
¶ 13 The court sentenced Mr. George to 10 years in prison, to be served consecutive to the 6-
year prison sentence imposed in one of his unrelated cases. Mr. George informed the court that he
wished to file a motion to reconsider his sentence. The court entered and continued leave to file
the motion to reconsider and extended the filing date past the statutory 30 days.
¶ 14 Mr. George timely filed a pro se notice of appeal (appeal number 1-16-2000) and, a few
weeks later, a timely pro se motion to reconsider his sentence. The trial court found it lost
jurisdiction to decide the motion once the notice of appeal was filed. This court, pursuant to the
parties’ agreed motion, dismissed Mr. George’s appeal and remanded the case for the trial court to
-6-
No. 1-21-1095
rule on the substantive merit of Mr. George’s motion to reconsider his sentence. George, No. 1-
16-2000 (2017) (dispositional order). On remand in 2017, the trial court stated that there were no
motions pending and Mr. George filed another pro se notice of appeal (appeal number 1-18-0033),
stating the trial court denied the motion to reconsider. This court, pursuant to the parties’ agreed
motion for summary disposition, dismissed Mr. George’s appeal and remanded for the trial court
to rule on Mr. George’s still-pending motion to reconsider sentence. George, No. 1-18-0033 (2019)
(dispositional order).
¶ 15 On remand, counsel appointed to represent Mr. George adopted his July 1, 2016, pro se
motion to reconsider his sentence. The trial court considered and denied Mr. George’s motion.
This appeal followed.
¶ 16 II. JURISDICTION
¶ 17 After Mr. George’s unsuccessful attempts to get the trial court to reconsider his sentence
described above, the court finally considered and denied the motion on June 28, 2021. Mr. George
timely filed his notice of appeal on July 1, 2021. We have jurisdiction pursuant to article VI,
section 6, of the Illinois Constitution (Ill. Const. 1970, art. VI, § 6) and Illinois Supreme Court
Rules 603 (eff. Feb. 6, 2013) and 606 (eff. March 12, 2021), governing appeals from final
judgments of conviction in criminal cases.
¶ 18 III. ANALYSIS
¶ 19 On appeal, Mr. George argues that his waiver of the right to counsel at sentencing was not
effective because the trial court did not substantially comply with the admonishments set forth in
Rule 401(a)(2) when it erroneously stated that his sentence would be served at 50% rather than
85%.
¶ 20 Mr. George concedes that the issue is forfeited as he neither objected to the admonishment
-7-
No. 1-21-1095
during any hearing nor raised the alleged error in a posttrial motion. People v. Herndon, 2015 IL
App (1st) 123375, ¶ 24. He requests review under the plain-error doctrine.
¶ 21 Under the plain-error doctrine, a reviewing court may consider forfeited errors under two
alternative prongs:
“(1) when a clear or obvious error occurred and the evidence is so closely balanced that the
error alone threatened to tip the scales of justice against the defendant, regardless of the
seriousness of the error, or (2) when a clear or obvious error occurred and the error is so
serious that it affected the fairness of the defendant’s trial and challenged the integrity of
the judicial process, regardless of the closeness of the evidence.” People v. Moon, 2022 IL
125959, ¶ 20.
¶ 22 Mr. George argues second-prong plain error. However, to prevail under either prong, he
first bears the burden of proving that a clear or obvious error occurred. People v. Mudd, 2022 IL
126830, ¶ 22. We find no error here.
¶ 23 The sixth amendment to the United States Constitution guarantees a defendant the right to
counsel in a criminal proceeding. U.S. Const., amend. VI. It is well-established that a defendant
may waive this right and choose to proceed pro se. People v. Perkins, 2018 IL App (1st)
133981, ¶ 41. But before proceeding pro se, a defendant must first voluntarily, knowingly, and
intelligently waive his right to counsel. People v. Haynes, 174 Ill. 2d 204, 235 (1996). A
defendant’s “waiver of counsel must be clear and unequivocal, not ambiguous.” People v. Baez,
241 Ill. 2d 44, 116 (2011).
¶ 24 Rule 401(a) governs the waiver of counsel and provides that a court shall not permit a
defendant to waive counsel for an offense punishable by imprisonment without first admonishing
the defendant in open court and establishing that he understands the following:
-8-
No. 1-21-1095
“(1) the nature of the charge;
(2) the minimum and maximum sentence prescribed by law, including, when
applicable, the penalty to which the defendant may be subjected because of prior
convictions or consecutive sentences; and
(3) that he has a right to counsel and, if he is indigent, to have counsel appointed for
him by the court.” Ill. S. Ct. R.401(a) (eff. July 1, 1984).
The purpose of Rule 401(a) is to ensure that a defendant’s waiver of counsel is voluntarily and
knowingly made. People v. Moore, 2014 IL App (1st) 112592-B, ¶ 38. Without proper
admonishments, there can be no effective waiver of counsel. People v. Langley, 226 Ill. App. 3d
742, 749 (1992). “Strict, technical compliance with Rule 401(a), however, is not always required.”
Haynes, 174 Ill. 2d at 236.
¶ 25 Substantial compliance is sufficient to effectuate a valid waiver of counsel “if the record
indicates that the waiver was made knowingly and voluntarily, and the admonishment the
defendant received did not prejudice his rights.” Id. A court substantially complies with the rule
when there are imperfect admonishments that do not prejudice a defendant because either (1) the
absence of detail from the admonishments did not hinder the defendant from knowingly and
intelligently waiving counsel or (2) the defendant’s degree of knowledge or sophistication excused
the omission. People v. Pike, 2016 IL App (1st) 122626, ¶ 112. Whether a defendant’s waiver of
counsel was done intelligently depends on the particular facts and circumstances of the case. Baez,
241 Ill. 2d at 116. This court reviews de novo whether the trial court’s admonishments substantially
complied with Rule 401(a). People v. Khan, 2021 IL App (1st) 190051, ¶ 46.
¶ 26 In this case, the record shows that the trial court substantially complied with Rule 401(a)
before Mr. George proceeded pro se at sentencing. On November 19, 2015, the court admonished
-9-
No. 1-21-1095
Mr. George of the nature of the charges against him, stating he was charged with the aggravated
discharge of a firearm for discharging a firearm into a building. Mr. George confirmed that he
understood this. The court also admonished Mr. George of the minimum and maximum sentence,
stating that, due to his criminal background, he would be subject to mandatory Class X felony
sentencing, which carried a sentencing range of 6 to 30 years in prison followed by 3 years of
mandatory supervised release. This was all in accordance with the applicable statutes. See 730
ILCS 5/5-4.5-95(b) (West 2016) (providing that a defendant over the age of 21 shall be sentenced
as a Class X felony offender when the defendant is convicted of a Class 1 or 2 forcible felony after
having been convicted twice of a Class 2 or greater class forcible felony); see also 730 ILCS 5/5-
4.5-25(a) (West 2016) (providing that a Class X felony offender is subject to a term of 6 to 30
years in prison). Mr. George was also told that his sentence would run consecutive to that imposed
on the conviction he had received in an unrelated case. Mr. George stated that he understood.
¶ 27 The court further admonished Mr. George of his right to counsel, stating counsel could
continue to represent him and, if at any point he no longer wished to represent himself, he could
hire his own attorney or, if he could not afford one, the court would reappoint an attorney to
represent him. Mr. George again confirmed that he understood. We find the trial court properly
admonished Mr. George as required by Rule 401(a) where it established Mr. George understood
the nature of the charge, the minimum and maximum sentence, and his right to counsel, including
the right to appointed counsel if he was indigent.
¶ 28 Mr. George’s argument is that the trial court provided inadequate admonishments
regarding the minimum and maximum sentence under Rule 401(a)(2) because it misstated the
percentage of the sentence that he would be required to serve, indicating that, with good-conduct
credit, his sentence would be served at 50% rather than at the correct 85%.
- 10 -
No. 1-21-1095
¶ 29 In our view, Mr. George’s argument must be rejected for two reasons. First, a trial court
substantially complies with the Rule 401(a) admonishments even where the admonishments
contain an error as long as that error did not preclude the defendant from making a knowing and
voluntary waiver or prejudice them. Second, good-conduct credit is not a part of the sentence itself
and thus is not a part of the Rule 401(a) admonishments.
¶ 30 Our supreme court dealt with an error in the trial court’s Rule 401(a) admonishments in
People v. Wright, 2017 IL 119561. The court noted there:
“We have recognized for 30 years that [s]trict technical compliance with Rule 401(a), ***
is not always required. Rather, substantial compliance will be sufficient to effectuate a
valid waiver if the record indicates that the waiver was made knowingly and voluntarily,
and the admonishment the defendant received did not prejudice his rights.” (Internal
quotation marks omitted.) Id. ¶ 41.
¶ 31 Our supreme court held in Wright that the defendant’s waiver of counsel was valid despite
the fact that the trial court had given him incorrect information on the maximum sentence he could
receive. Id. ¶ 52. It concluded that “the trial court substantially complied with Rule 401(a) when it
properly admonished [the] defendant in all respects except when it informed him that he faced a
maximum sentence of 60 years in prison, when it was actually 75 years.” Id. The court concluded
that there was “no basis” to conclude that the defendant was prejudiced or that he would not have
represented himself if he had known the actual maximum sentence. Id. ¶ 56.
¶ 32 Mr. George seeks to distinguish Wright on the basis that in this case he specifically asked
about the amount of good-conduct credit while there was no question from the defendant in Wright
about the maximum sentence in that case. This is correct, but the import of the supreme court’s
- 11 -
No. 1-21-1095
decision in Wright is that the admonishments need not be perfect, and the defendant must show
some way in which he was prejudiced by some error in the admonishment.
¶ 33 In this case, Mr. George offers no argument as to how he was prejudiced or how his waiver
was impacted by the incorrect information on good-conduct credit. Nor can we imagine what the
prejudice would be. Mr. George stated he understood he was subject to sentencing as a Class X
felony offender due to his background, which made him eligible for 6 to 30 years in prison, and
the imposed sentence would be served consecutive to the 6-year sentence he received for his
unrelated conviction. Mr. George chose to proceed pro se knowing this and having been fully and
repeatedly advised that he had a right to counsel. Mr. George received a 10-year sentence, which
was above the minimum and below the maximum of which he was advised.
¶ 34 This case is actually less compelling than Wright because the error that was made in this
case concerned information that was not even a part of the required admonishments under Rule
401. The court is required to admonish a defendant as to “the minimum and maximum sentence
prescribed by law, including, when applicable, the penalty to which the defendant may be
subjected because of prior convictions or consecutive sentences.” Good-conduct credit is not part
of these admonishments.
¶ 35 The good-conduct credit statute “governs only the potential credit that a defendant may
receive for good conduct.” (Emphasis in original.) People v. Davis, 405 Ill. App. 3d 585, 603
(2010). Because the award of such credit is contingent on the defendant’s behavior while in prison,
it “is not something that is definite, immediate, and largely automatic in its effect upon a
defendant’s punishment.” People v. Frison, 365 Ill. App. 3d 932, 935 (2006). The trial court does
not control the manner in which a prisoner earns good-conduct credit or the amount, if any, that
will be applied to his sentence. People v. Castano, 392 Ill. App. 3d 956, 960 (2009).
- 12 -
No. 1-21-1095
¶ 36 Even in the context of guilty pleas, we have recognized that good-conduct credit is
something separate and apart from the sentence itself and is not something that the defendant must
be advised about. In Frison, 365 Ill. App. 3d 932, the Second District considered a claim that the
court violated Supreme Court Rule 402(a)(2) (eff. July 1, 2012), which requires that the trial court
provide the same admonishment regarding the minimum and maximum sentence prior to accepting
a defendant’s guilty plea that is required under Rule 401(a)(2) for an effective waiver of counsel.
As the court explained in Frison, although good-conduct credit may affect the sentence a defendant
ultimately serves, it does not affect the sentence imposed by the trial court. Id. at 934. An award
of good-conduct credit is contingent on a defendant’s behavior while incarcerated, and eligibility
for the credit is determined by the Illinois Department of Corrections, not the court. Id. at 935.
Thus, the court in Frison concluded there was no violation of Rule 402(a)(2) and no claim for
ineffective assistance of counsel for the failure to inform the defendant of the amount of good-
conduct credit he would receive. See Castano, 392 Ill. App. 3d at 960 (following Frison, in the
context of Rule 402(a)(2)).
¶ 37 In short, all that is required to effectuate a valid waiver of counsel is substantial compliance
with Rule 401(a). A trial court may make an error and still be in substantial compliance. Moreover,
a defendant must show some prejudice resulting from that error. In addition, good-conduct credit
is not a part of the sentence itself, and therefore is not a part of the necessary Rule 401(a)
admonishments. Because this record does not reflect a clear error, plain error analysis is
unnecessary. See Herndon, 2015 IL App (1st) 123375, ¶ 33 (finding plain error analysis was not
warranted where the trial court’s admonishment substantially complied with Rule 401(a)).
¶ 38 IV. CONCLUSION
¶ 39 For the foregoing reasons, the judgment of the trial court is affirmed.
- 13 -
No. 1-21-1095
¶ 40 Affirmed.
- 14 - | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488023/ | NOTICE
2022 IL App (5th) 200213-U
NOTICE
Decision filed 11/18/22. The
This order was filed under
text of this decision may be NO. 5-20-0213 Supreme Court Rule 23 and is
changed or corrected prior to
not precedent except in the
the filing of a Petition for IN THE limited circumstances allowed
Rehearing or the disposition of
under Rule 23(e)(1).
the same.
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
______________________________________________________________________________
THE PEOPLE OF THE STATE OF ILLINOIS, ) Appeal from the
) Circuit Court of
Plaintiff-Appellee, ) St. Clair County.
)
v. ) No. 06-CF-870
)
JAMES CHERRY, ) Honorable
) Julie K. Katz,
Defendant-Appellant. ) Judge, presiding.
______________________________________________________________________________
JUSTICE WELCH delivered the judgment of the court.
Justices Moore and Barberis concurred in the judgment.
ORDER
¶1 Held: Where the defendant did not satisfy the “cause” prong of the cause-and-prejudice
test, the circuit court did not err in denying him leave to file a successive
postconviction petition, and since any argument to the contrary would lack merit,
we grant defendant’s appointed counsel on appeal leave to withdraw and affirm
the circuit court’s judgment.
¶2 Defendant, James Cherry, appeals the circuit court’s order denying leave to file a
successive postconviction petition. Defendant’s appointed attorney, the Office of the State
Appellate Defender (OSAD), filed a motion to withdraw as counsel, arguing that this appeal
presents no arguably meritorious issues. See Pennsylvania v. Finley, 481 U.S. 551 (1987). OSAD
has notified defendant of its motion. This court provided defendant with an opportunity to file a
response, and he has done so. However, after considering OSAD’s motion and supporting
memorandum and defendant’s response, and the entire record on appeal, we agree that this appeal
1
presents no arguably meritorious issue. Therefore, we grant OSAD leave to withdraw and affirm
the circuit court’s judgment.
¶3 BACKGROUND
¶4 Following a jury trial, defendant was convicted of first degree murder and sentenced to 50
years’ imprisonment. Evidence at trial showed that defendant shot Michael Roddy and his
daughter Tania. Michael Roddy’s wound was fatal. According to Tania and another witness,
defendant pointed a gun at them during an argument. Defendant and Michael Roddy “tussled”
over the gun. Defendant, on the other hand, testified that it was Michael who pulled the gun and
pushed him as he was trying to leave.
¶5 On direct appeal, defendant argued only that his sentence was excessive. This court
affirmed. People v. Cherry, 2013 IL App (5th) 110452-U.
¶6 In 2014, defendant filed a postconviction petition in which he alleged that appellate counsel
was ineffective for not communicating with him prior to filing the appeal. The circuit court
summarily dismissed the petition on the ground that defendant had not specified how he was
prejudiced by counsel’s alleged ineffectiveness.
¶7 In 2020, defendant sought leave to file a successive postconviction petition. Defendant
acknowledged that a defendant must generally allege cause and prejudice in order to file a
successive petition, but argued that because a “fundamental miscarriage of justice” had occurred,
he should be afforded some remedy.
¶8 The attached petition raised four substantive claims: (1) trial counsel was ineffective for
failing to (a) request that the gun be dusted for fingerprints, (b) ask that the victim’s hands or
clothes be tested for gunshot residue, (c) articulate a cohesive defense strategy, (d) challenge the
legality of defendant’s arrest, (e) seek dismissal of the charges, and (f) seek reconsideration of the
2
sentence; (2) appellate counsel was ineffective for failing to raise trial counsel’s failure to object
to the prosecutor’s allegedly improper comments in closing argument to the effect that the jurors
had to decide which witnesses to believe; (3) the truth-in-sentencing statute requiring him to serve
100% of his sentence was unconstitutional; and (4) defendant was never admonished that he would
have to serve a term of mandatory supervised release (MSR) after his prison sentence.
¶9 The trial court denied leave to file, finding that the issues could have been raised in the first
petition. Defendant timely appealed.
¶ 10 ANALYSIS
¶ 11 OSAD contends that there is no meritorious argument that the court erred by denying
defendant leave to file a successive petition. OSAD concludes that the ineffective-assistance
claims could have been raised in the first petition and the remaining two claims fail on the merits
in any event.
¶ 12 The Post-Conviction Hearing Act (Act) provides a remedy to a criminal defendant whose
federal or state constitutional rights were substantially violated at his trial or sentencing. People
v. Pitsonbarger, 205 Ill. 2d 444, 455 (2002). Within 90 days of its filing, the circuit court may
dismiss a petition if it is “frivolous or is patently without merit.” 725 ILCS 5/122-2.1(a)(2) (West
2020). The Act contemplates the filing of only one petition. Id. § 122-1(f). The prohibition on
successive petitions will be relaxed where a defendant (1) satisfies the cause-and-prejudice test or
(2) makes a colorable claim of actual innocence. People v. Edwards, 2012 IL 111711, ¶¶ 22-24.
“Cause” refers to an objective factor external to the defense that impeded the defendant’s ability
to raise the claim earlier. Pitsonbarger, 205 Ill. 2d at 460.
¶ 13 Clearly, defendant’s ineffective-assistance claims were based on counsels’ actions before
trial, during trial, or on direct appeal, and thus could have been raised in his initial postconviction
3
petition. Defendant alleged no factors external to the defense that prohibited him from raising
those issues there.
¶ 14 As to the latter two issues, concerning truth-in-sentencing and MSR, defendant alleged that
he was unaware of them. However, the supreme court has held that a defendant’s ignorance of the
law may never be “cause” for filing a successive postconviction petition:
“This court has made very clear that ‘all citizens are charged with knowledge of the
law’ and that ‘[i]gnorance of the law or legal rights will not excuse a delay in filing a
lawsuit.’ ” People v. Evans, 2013 IL 113471, ¶ 13 (quoting People v. Lander, 215 Ill. 2d
577, 588 (2005)).
¶ 15 In Evans, “the only excuse that defendant proffers for not raising the MSR claim sooner is
that he only ‘just discovered’ that he would be subject to a three-year term of MSR following his
release.” Id. The court noted that, when defendant was sentenced, “the Unified Code of
Corrections expressly provided that, by operation of law, every sentence ‘shall include as though
written therein a [three-year term of MSR] in addition to the term of imprisonment.’ ” Id. (quoting
730 ILCS 5/5-8-1(d)(1) (West 2004)). Thus, the defendant was presumptively charged with
knowledge of that provision, and his “ ‘subjective ignorance of it’ ” was not “ ‘an objective factor
that impeded’ ” his ability to raise the MSR claim sooner. Id.
¶ 16 Evans clearly disposes of defendant’s MSR claim. Defendant argues that the truth-in-
sentencing statute was unconstitutional, permitting him to raise the issue at any time. However,
defendant’s claim that the statute is unconstitutional is simply wrong.
¶ 17 The legislature’s first attempt to enact a truth-in-sentencing statute, Public Act 89-404, was
invalidated by the supreme court on single-subject grounds in People v. Reedy, 186 Ill. 2d 1, 11-
12 (1999). However, while Reedy was working its way through the courts, the legislature
4
reenacted the truth-in-sentencing provisions in Public Act 90-592. Defendant asserted in his
petition that, because it was passed before Reedy was decided, Public Act 90-592 (Pub. Act 90-
592 (eff. June 19, 1998)) was also unconstitutional. However, Reedy expressly rejected this
argument, holding that the amendatory act cured the defects in the original legislation. Reedy, 186
Ill. 2d at 17.
¶ 18 In his motion, defendant argued that, despite the cause-and-prejudice test, he must be
afforded some remedy where a “fundamental miscarriage of justice” had occurred. He cited,
presumably by way of example, a laundry list of statutes, rules, and cases that provide for the
consideration of otherwise defaulted issues. But none of them apply here. Defendant cites, for
example, Rule 60 of the Federal Rules of Civil Procedure, which clearly has no application to a
state-law postconviction proceeding.
¶ 19 Defendant cites out of context some passages from Murray v. Carrier, 477 U.S. 478 (1986),
in support of a broad argument that courts must find some way to reach otherwise defaulted issues
if justice demands it. However, defendant overlooks that the Murray Court, relying on the cause-
and-prejudice test, reinstated the district court’s dismissal of the defendant’s habeas corpus
petition. Id. at 497. Thus, Murray does not stand for the broad proposition that a court must
always search for some mechanism to reach defaulted claims. Indeed, it supports the proposition
that the cause-and-prejudice test is an appropriate tool to decide whether an otherwise defaulted
claim should be considered.
¶ 20 The Court did acknowledge that “ ‘[i]n appropriate cases’ ” the principles of comity and
finality that inform the concepts of cause and prejudice “ ‘must yield to the imperative of correcting
a fundamentally unjust incarceration.’ ” Id. at 495 (quoting Engle v. Isaac, 456 U.S. 107, 135
(1982)). However, defendant’s nonspecific and speculative allegations of ineffective assistance
5
of counsel fall far short of making such a showing. Defendant claims, for example, that counsel
should have challenged the validity of his arrest without suggesting any legal basis for doing so.
He claims that counsel should have had the gun tested for fingerprints, but does not inform us what
such testing might have showed. He presumably thought that Roddy’s fingerprints might be on it,
but given that all witnesses to the fight testified that both men touched the gun at some point, it is
difficult to see how proving that Roddy’s prints were on it would have altered the trial’s outcome.
We have already held that defendant’s truth-in-sentencing claim fails on the merits and that his
MSR claim was forfeited. 1 Thus, defendant cannot establish that his incarceration is so
“fundamentally unjust” that we should disregard the statutorily mandated cause-and-prejudice test
to reach his tardy claims.
¶ 21 CONCLUSION
¶ 22 Accordingly, we agree with OSAD that this appeal presents no issue of even arguable
merit. We grant OSAD leave to withdraw and affirm the circuit court’s judgment.
¶ 23 Motion granted; judgment affirmed.
1
OSAD also argues, correctly, that defendant’s MSR claim fails on the merits. Defendant cited
People v. Russell, 345 Ill. App. 3d 16 (2003), where the appellate court held that a defendant who pled
guilty in exchange for a sentencing cap but was not informed that an MSR term would be added to it was
entitled to have his sentence reduced so that the entire sentence, including MSR, was within the cap to
which he agreed. The supreme court reached the same conclusion in People v. Whitfield, 217 Ill. 2d 177
(2005). However, as defendant was convicted and sentenced following a jury trial, Russell and Whitfield
simply do not apply.
6 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488018/ | THE SUPERIOR COURT OF THE STATE OF DELAWARE
STATE OF DELAWARE, )
)
v. )
) I.D. No. 75060892DI
STERLING HOBBS, a/k/a )
AMIR FATIR, )
)
Defendant. )
Date Submitted: October 12, 2022
Date Decided: October 28, 2022
*Date Corrected: November 18, 2022
Upon Defendant’s Motion for Transcripts in Capital Case
DENIED.
ORDER
Sterling Hobbs, a/k/a Amir Fatir, Smyrna, Delaware, Defendant, pro se.
Sean P. Lugg, Esquire, Deputy Attorney General, DEPARTMENT OF JUSTICE,
820 North French Street, Wilmington, Delaware 19801, attorney for State of
Delaware.
Kevin J. O’Connell, Esquire, Chief Defender, OFFICE OF DEFENSE SERVICES,
820 North French Street, Wilmington, DE 19801.
WHARTON, J.
* Corrected n. 17.
This 18th day of November, 2022, upon consideration of the Motion for
1
Transcripts in a Capital Case, filed by Sterling Hobbs a/k/a Amir Fatir
(“Defendant”), and the record in this case, it appears to the Court that:
1. The Defendant seeks the transcripts of his 1976 capital murder trial.
That trial result in the Defendant being convicted of first degree murder and other
charges and sentenced to death. 2 The defendant’s death sentence was vacated,
along with that of all those of capital murder defendants, by order of the Delaware
Supreme Court on October 22, 1976.3 The Defendant was represented in that effort
by counsel.4 A sentence of life imprisonment without benefit of parole ultimately
was imposed on the murder charge.5 Following trial, transcripts were prepared of
the Superior Court proceedings for purposes of appeal.6 The Defendant’s direct
appeal, along with the direct appeals of his co-defendants, was unsuccessful.7 He
was represented on direct appeal by F.L. Peter Stone, Esquire of the firm of
Connolly, Bove & Lodge.8 With the assistance of the Public Defender’s Office, he
unsuccessfully sought postconviction relief in the Superior Court in 1987.9 His
appeal of that Superior Court decision, in which he also was represented by an
1
D.I. 291.
2
D.I. 70.
3
State v. Spence, 367 A.2d 983 (Del. 1976).
4
Id.
5
D.I. 131.
6
See, D.I. 75-86; 89-91; 94-97; 99, 101, 102, 104, 107-08; 110-22.
7
Hooks v. State, 416 A.2d 189 (Del. 1980).
8
Id.
9
State v. Hobbs, 1987 WL 8269 (Del. Super. Ct. Mar. 10, 1987).
assistant public defender, likewise was unsuccessful.10 Since then, the Defendant
has pursued a stream of mostly unsuccessful pro se litigation.
2. In this motion, the Defendant states that he has made several requests for
the transcripts from the Court, the Office of the Public Defender, and the Attorney
General without success.11 In support of his request for his trial transcripts, he quotes
Griffin v. Illinois, “Indigent defendants sentenced to death are provided with a free
transcript at the expense of the county where convicted,”12 and the 1975 version of
Delaware Supreme Court Rule 10A, “In any appeal from a conviction of crime by an
indigent defendant, if indigency is evidenced by appointment of counsel by the
Superior Court in the trial below, or by the filing of a pauper’s oath in this Court,
payment of the docket fee provided by Rule 24(1) shall be waived.”13 The Motion
also includes the following quotation without attribution: “In any such case the
appellant, if he requests it, shall be furnished without charge with a copy of the
transcript of the testimony…”14 (emphasis in Motion.)
3. The short answer, of course, is that the Defendant’s case is not a capital
case and was not a capital case even before his direct appeal was resolved.15 A longer
10
Hobbs v. State, 538 A.2d 723 (Del. 1988).
11
D.I. 291.
12
351 U.S. 12, 14 (1956).
13
D.I. 291, at ⁋ 7.
14
Id., at ⁋ 8.
15
The Delaware Supreme Court effectively vacated the Defendant’s death sentence,
3
answer is that the cited quote from Griffin was not its holding, but merely a statement
of Illinois law. 16 The United States Supreme Court held that Griffin, who was
indigent, but not under a death sentence, could not be denied adequate appellate
review solely because he was unable to afford transcripts of his trial.17 Here, the
Defendant has been afforded not only adequate direct appellate review with the
assistance of counsel, but adequate postconviction review and postconviction
appellate review also with the assistance of counsel. In each instance, his counsel
had the benefit of the trial transcripts. As a result, the Defendant’s rights to adequate
appellate review, insured by Griffin and former Rule 10A, have been fully respected.
4. The Defendant also alleges that he did not authorize any of the attorneys
who represented him in Spence or in his direct appeal to enter their appearances on
his behalf. 18 In fact, he contends that he opposed representation by the Public
Defender because F. L. Peter Stone “of the Public Defender’s Office”19 represented
a co-defendant whose interests were adverse to those of the Defendant, resulting in
along with those of the other capital defendants under a death sentence when it
answered certified questions in Spence in 1976. His direct appeal was decided in
1980.
16
Griffin, at 14.
17
Id., at 19.
18
D.I. 291, at ⁋ 13.
19
The Supreme Court’s Opinion in the Defendant’s direct appeal identifies Mr.
Stone as an attorney with the firm of Connolly, Bove & Lodge representing
Clarence Hooks, Wilbur Johnson, and the Defendant. Hooks, at 192.
4
a conflict of interest.20 He maintains that possession of his transcripts by the Public
Defender and Mr. Stone was “done without his permission and against his will and
possibly illegally.”21 He argues that he “was denied his right to read and study his
own transcripts and to participate in what issues would ultimately be argued as
appealable errors” effectively denying him a “true direct appeal and assistance of
counsel.”22
5. The Defendant’s direct appeal was decided on May 30, 1980, more than
40 years ago.23 In its last decision on what it treated as a motion under Superior
Court Criminal Rule 61, the Court observed:
This Motion, at least the Defendant’s sixth and likely his
seventh, is barred for multiple reasons. It is untimely,
having been filed more than a year (actually more than
three decades) after the Defendant’s judgment of
conviction became final. It is a successive motion that
does not satisfy the pleading requirements of Rules
61(d)(2)(i) or (d)(2)(ii). It is subject to procedural default
because it raises grounds for relief not previously asserted
without showing cause for relief from the procedural
default and prejudice from a violation of his rights.24
“An application for transcripts is addressed to the sound discretion of this court.”25
20
Id., at ⁋⁋ 14-16.
21
Id. at ⁋⁋ 18, 19.
22
Id., at ⁋ 19.
23
Hooks, at 192.
24
State v. Hobbs, 2019 WL 1902607, at *2 (Del. Super. Ct. Apr. 23, 2019) .
25
State v. Duonnolo, 2009 WL 3681674, at *1 (Del. Super. Ct. Nov. 4, 2009).
5
There is nothing before the Court now that warrants the Court providing the
Defendant with a complete copy of his trial transcripts or ordering the State or Office
of Defense Services to provide them to him. Nor, based on the Court’s earlier
observation, is there likely to be a sufficient reason in the future. The Court does
not envision itself entertaining ineffective assistance of counsel and related claims
that should and could have been litigated more that forty years ago. When viewed
in its proper context, the Defendant’s claim is that the State and/or the Office of
Defense Services possess property that is rightfully his. The Defendant’s closed
criminal case is not the proper vehicle for seeking the transcripts of a trial that
occurred 46 years ago.
THEREFORE, the Defendant’s Motion for Transcripts in Capital Case is
DENIED.
IT IS SO ORDERED.
/s/ Ferris W. Wharton
Ferris W. Wharton, J.
6 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488029/ | Stoneham v Joseph Barsuk, Inc. (2022 NY Slip Op 06583)
Stoneham v Joseph Barsuk, Inc.
2022 NY Slip Op 06583
Decided on November 18, 2022
Appellate Division, Fourth 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 18, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: WHALEN, P.J., SMITH, CENTRA, WINSLOW, AND BANNISTER, JJ.
670 CA 21-01542
[*1]MARK A. STONEHAM AND BONNIE STONEHAM, PLAINTIFFS-APPELLANTS,
vJOSEPH BARSUK, INC., ET AL., DEFENDANTS, AND DAVID J. BARSUK, DEFENDANT-RESPONDENT.
LIPSITZ, PONTERIO & COMERFORD, LLC, BUFFALO (JOHN N. LIPSITZ OF COUNSEL), FOR PLAINTIFFS-APPELLANTS.
GOLDBERG SEGALLA LLP, BUFFALO (JAMES M. SPECYAL OF COUNSEL), FOR DEFENDANT-RESPONDENT.
Appeal from an order of the Supreme Court, Chautauqua County (Lynn W. Keane, J.), entered October 12, 2021. The order denied plaintiffs' motion for partial summary judgment and granted the cross motions of defendant David J. Barsuk for summary judgment dismissing the Labor Law § 240 (1) cause of action against him.
It is hereby ORDERED that the order so appealed from is affirmed without costs.
Memorandum: Plaintiffs commenced this common-law negligence and Labor Law action to recover damages for injuries sustained by Mark A. Stoneham (plaintiff) while he was working on a flatbed trailer owned by defendant-respondent (defendant). At the time of the accident, plaintiff had utilized a front-end loader to lift the flatbed trailer and was replacing a leaking air tank on the trailer's brake system. The front-end loader lifting the flatbed trailer rolled backward, dropping the trailer on top of plaintiff. Plaintiffs moved for summary judgment on the issue of defendant's liability under Labor Law § 240 (1), and defendant filed cross motions for summary judgment dismissing the third cause of action, alleging the violation of Labor Law § 240 (1), against him. Plaintiffs now appeal from an order that denied their motion and granted defendant's cross motions.
We affirm. We agree with Supreme Court that plaintiff was not engaged in a protected activity within the meaning of Labor Law § 240 (1) at the time of the accident. Plaintiffs contend that plaintiff was engaged in a protected activity because, first, the replacement of the air tank constituted a repair, an enumerated activity within the meaning of the statute. Second, they contend that the flatbed trailer itself is a "production or piece of work artificially built up or composed of parts joined together in some definite manner" and, therefore, it is a "structure" within the meaning of Labor Law § 240 (1) (Caddy v Interborough R.T. Co., 195 NY 415, 420 [1909]). Even assuming, arguendo, that the replacement of the air tank is appropriately considered a repair, we conclude that the narrow view of the statutory elements proffered by plaintiffs is "too simple, and [accepting it] would lead to an expansion of section 240 (1) liability that [prior Labor Law] cases do not support and that . . . the Legislature never intended" (Dahar v Holland Ladder & Mfg. Co., 18 NY3d 521, 525 [2012]). The holding in Dahar, as well as the Court of Appeals' more recent decision in Preston v APCH, Inc. (34 NY3d 1136, 1137 [2020], affg 175 AD3d 850 [4th Dept 2019]), instruct that individual statutory terms such as "repairing" or "structure" cannot be considered in isolation. Instead, any activity must be considered in light of the text of Labor Law § 240 (1) as a whole and the statute's "central concern[, which] is the dangers that beset workers in the construction industry" (Dahar, 18 NY3d at 525).
Here, plaintiff, a certified diesel technician, was injured while installing an air tank on a flatbed trailer on the premises of a recycling plant. Inasmuch as plaintiff was "engaged in his [*2]'normal occupation' of repairing [vehicles] . . . , a task not a part of any construction project or any renovation or alteration to the [recycling plant] itself," he was not engaged in a protected activity within Labor Law § 240 (1) at the time of the accident (Warsaw v Eastern Rock Prods., 193 AD2d 1115, 1115 [4th Dept 1993]; see Foster v Joseph Co., 216 AD2d 944, 944-945 [4th Dept 1995]). Indeed, it would be inconsistent with the purpose of the statute to conclude that the vehicle repair work at issue here is entitled to the protections of Labor Law § 240 (1) when the activities associated with construction projects in Dahar and Preston were not (see Dahar, 18 NY3d at 523; Preston, 175 AD3d at 851). In light of our determination, plaintiffs' remaining contentions are academic.
All concur except Winslow and Bannister, JJ., who dissent and vote to modify in accordance with the following memorandum: We respectfully dissent and would modify the order by denying the cross motions of defendant-respondent (defendant) and reinstating the third cause of action against him. The majority concludes that the repair of the flatbed trailer by Mark A. Stoneham (plaintiff) is not an activity falling within the protections of Labor Law § 240 (1) as a matter of law. We disagree.
"Labor Law § 240 (1) provides special protection to those engaged in the 'erection, demolition, repairing, altering, painting, cleaning or pointing of a building or structure' " (Prats v Port Auth. of N.Y. & N.J., 100 NY2d 878, 880 [2003]). "Over a century ago, the Court of Appeals made clear that the meaning of the word 'structure,' as used in the Labor Law, is not limited to houses or buildings . . . The Court stated, in pertinent part, that 'the word "structure" in its broadest sense includes any production or piece of work artificially built up or composed of parts joined together in some definite manner' " (McCoy v Abigail Kirsch at Tappan Hill, Inc., 99 AD3d 13, 15-16 [2d Dept 2012], quoting Caddy v Interborough R.T. Co., 195 NY 415, 420 [1909]; see Lewis-Moors v Contel of N.Y., 78 NY2d 942, 943 [1991]; Cornacchione v Clark Concrete Co. [appeal No. 2], 278 AD2d 800, 801 [4th Dept 2000]). In Cornacchione, we held that it was error to dismiss a Labor Law § 240 (1) claim because the crane upon which the plaintiff's decedent was working fit "squarely within" the definition of a "structure" as set forth by the Court of Appeals (278 AD2d at 801; see Lewis-Moors, 78 NY2d at 943). We have also held that a plaintiff engaged in the conversion of a utility van into a cargo van "was engaged in a protected activity at the time of the accident" and that the van was "a structure" (Moore v Shulman, 259 AD2d 975, 975 [4th Dept 1999], lv dismissed 93 NY2d 998 [1999]). "Indeed, courts have applied the term 'structure' to several diverse items such as a utility pole with attached hardware and cables . . . , a ticket booth at a convention center . . . , a substantial free-standing Shell gasoline sign . . . , a shanty located within an industrial basement used for storing tools . . . , a power screen being assembled at a gravel pit . . . , a pumping station . . . , and a window exhibit at a home improvement show" (McCoy, 99 AD3d at 16). Here, the flatbed trailer upon which plaintiff was working also fits "squarely within" the definition of a "structure" (Cornacchione, 278 AD2d at 801).
We would further hold that defendant failed to establish "a prima facie showing of entitlement to judgment as a matter of law" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]) because his submissions failed to eliminate all triable issues of fact whether plaintiff was engaged in routine maintenance—which falls outside of the protections of Labor Law § 240 (1)—or a repair of the flatbed trailer, a protected activity (see generally Kostyo v Schmitt & Behling, LLC, 82 AD3d 1575, 1576 [4th Dept 2011]). "[D]elineating between routine maintenance and repairs is frequently a close, fact-driven issue" (Pieri v B & B Welch Assoc., 74 AD3d 1727, 1728 [4th Dept 2010] [internal quotation marks omitted]). "That distinction depends upon whether the item being worked on was inoperable or malfunctioning prior to the commencement of the work . . . , and whether the work involved the replacement of components damaged by normal wear and tear" (id. [internal quotation marks omitted]). "[W]ork consisting of remedying a common problem is generally considered routine maintenance" (id. at 1729; see generally Abbatiello v Lancaster Studio Assoc., 3 NY3d 46, 53 [2004]; Esposito v New York City Indus. Dev. Agency, 1 NY3d 526, 528 [2003]). Here, defendant failed to establish that the replacement of the air tank was a common occurrence due to normal wear and tear (see generally Pieri, 74 AD3d at 1728-1729). Although we are cognizant of the concerns raised by the majority and by the Court of Appeals in Dahar v Holland Ladder & Mfg. Co. (18 NY3d 521, 525 [2012]), under the unique circumstances of this case, we cannot conclude that plaintiff was not engaged in a protected activity as a matter of law.
Finally, even assuming, arguendo, that defendant established on his cross motions that plaintiff is not entitled to the protection of Labor Law § 240 (1) inasmuch as plaintiff was engaged in the task of replacing the air tank as a volunteer (see generally Cromwell v Hess, 63 AD3d 1651, 1652 [4th Dept 2009]), we conclude that plaintiffs raised a triable issue of fact in opposition in that regard (see generally Stringer v Musacchia, 46 AD3d 1274, 1276-1277 [3d Dept 2007], affd 11 NY3d 212 [2008]; Thompson v Marotta, 256 AD2d 1124, 1125 [4th Dept 1998]; Vernum v Zilka, 241 AD2d 885, 886-887 [3d Dept 1997]).
Entered: November 18, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488024/ | 2022 IL App (1st) 1182605-U
FIFTH DIVISION
November 18, 2022
No. 1-18-2605
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1).
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
THE PEOPLE OF THE STATE OF ILLINOIS, )
) Appeal from the
Plaintiff-Appellee, ) Circuit Court of Cook County.
)
v. ) 11 CR 00909
)
JEREMY BORDERS, ) Honorable Evelyn B. Clay and
) Honorable Angela Munari Petrone,
) Judges Presiding.
Defendant-Appellant. )
PRESIDING JUSTICE CONNORS delivered the judgment of the court.
Justice Delort concurred in the judgment.
Justice Mitchell specially concurred in the judgment.
ORDER
¶1 Held: Trial court erred when it denied defendant’s motions to quash arrest
and suppress evidence where there was no probable cause to arrest him;
reversed and remanded with directions.
¶2 Following a jury trial, defendant, Jeremy Borders, was found guilty of first degree
murder (720 ILCS 5/9-1(a)(3) (West 2010)) and sentenced to 55 years in prison. Before trial,
Borders filed a motion to quash arrest and suppress evidence in which he argued that he was
arrested without an arrest warrant and probable cause and requested that the court suppress the
1-18-2605
direct and indirect products of his arrest. The court denied Borders’s motion to quash arrest and
suppress evidence. Borders now appeals that ruling. For the following reasons, we reverse and
remand with directions.
¶3 I. BACKGROUND
¶4 Borders and co-defendants, Keith Watts and Darnell Stokes, were charged with
numerous counts of first degree murder (720 ILCS 5/9-1(a) (West 2010)), aggravated kidnapping
(720 ILCS 5/10-2(a)(1-3), (6) (West 2010)), and burglary (720 ILCS 5/19-1(a) (West 2010)),
among other charges, relating to the killing and kidnapping of Francisco Favela, and the
aggravated kidnapping (720 ILCS 5/10-2(a)(3), (6) (West 2010)) and aggravated battery (720
ILCS 5/12-4(b)(1) (West 2010)) of David Robles that occurred on December 11, 2010.1
¶5 Motion to Quash Arrest and Suppress Evidence
¶6 In Borders’s written motion to quash arrest and suppress evidence, he argued he was
arrested on December 13, 2010, without a valid search or arrest warrant and without probable
cause. He asserted that his arrest violated the fourth amendment and requested that the court
quash his arrest and suppress physical evidence, his statements, and identifications of him, which
were a result of his detention and arrest. The trial court held a hearing on Borders’s motion to
quash arrest and suppress evidence, where the following evidence was presented. 2
¶7 Borders testified that on December 13, 2010, at about 8 p.m., he was handcuffed and
arrested by detectives from the Chicago Police Department (CPD) at his second floor apartment
at 503 North LeClaire in Chicago. To get into his apartment, there was an outside security gate, a
main front door, and then a second door that led to a stairwell. A tenant must open the doors, and
1
Border’s codefendants, Watts and Stokes, are not parties to this appeal. Watts had a separate
trial and Stokes passed away before his case was resolved.
2
The judge presiding at the hearing was not the same judge who presided over Borders’s
subsequent trial.
2
1-18-2605
Borders did not let the CPD or anyone else inside the gate or doors. Borders did not open the
door to his unit or give consent to the CPD or anyone else to enter or search his apartment.
¶8 On cross-examination, Borders testified he was friends with Watts but not with
Stokes. On the date of his arrest, his phone number was (312) 287-5361, and when the police
came into his apartment, Borders was sitting on a couch by himself. Asked whether the phone
with the 312 area code “was right next to you on the floor,” he responded, “[i]t was *** that
phone was there, but it wasn’t next to me, but it was there. It was there.” The State then asked
him, “When you say the phone was there, where do you mean, Mr. Borders[?]” He responded,
“What I mean is I doesn’t—I don’t remember.” Asked whether there was duct tape in his
apartment or a piece of paper directing Watts to take control of a car belonging to Hassan
Borders, who was his uncle, Borders testified he did not remember.
¶9 Chicago police detective Greg Swiderek testified for the State that on December 11,
2010, Chicago police sergeant Gusman told him that Favela and Robles were rehabbing a
building at 2237 South Keeler when two men entered. Swiderek testified that Robles told
Gusman that Robles was struck with a gun, tied up with duct tape, and put in a bathtub. Robles
believed Favela had been beaten based on the sounds he heard. Eventually, Robles did not hear
anything and was able to free himself, after which he contacted the police. Swiderek testified that
some officers went to the location of the kidnapping to determine if it was a “bona fide
kidnapping,” and those officers told Swiderek that there was “quite a lot of blood.” At that time,
the police did not have any information about Favela’s location.
¶ 10 Swiderek testified that the police conducted a “mudds and tolls” search on Favela’s
phone, which was a record of incoming and outgoing phone calls. He testified that Favela’s
phone records were important because Robles had informed the police that “prior to the
3
1-18-2605
kidnapping Mr. Favela had received two phone calls from a male black who was interested in
renting the property, said he was interested in renting the property at 2237 South Keeler.” The
police determined that the last cell phone tower Favela’s phone was “hitting off of” was at 3529
West Potomac in Chicago. The officers conducted a grid search of that area but did not find
Favela.
¶ 11 Favela’s wife received a ransom call from two men wanting $500,000 in two hours
for the safe return of Favela. The phone number that made the ransom call to Favela’s wife had a
219 area code (219 phone). In response to the question, “What city do you know that area code
to be associated with?” Swiderek responded Hammond, Indiana. Chicago police detective
Donald Hill obtained the phone records and location of the 219 phone from the phone’s carrier
due to “exigent circumstances.” The CPD and Federal Bureau of Investigation (FBI) investigated
a “series of patterns involving different phones.” Asked about whether a “pattern” was noted
about the 219 phone as it related to Favela’s phone, Swiderek testified that “calls were made
from that 219 prefix phone, cell phone, to Mr. Favela’s phone and to a 773 phone number that I
believed ended in maybe 1994.” The person using the 219 phone used *67 to block the number
so it would not show up on Favela’s phone. A mudds and tolls search allowed the police to see
the number even though it was blocked. The FBI determined the location of the 219 phone by
“pinging it off the cell tower that the cell phone was hitting off of,” and in the early morning
hours of December 12, 2010, the 219 phone was pinging at a location in Hammond, Indiana. The
police went to that address and found Stokes, who was with his nephew, Derrick Stidwell, in the
front of the residence with the 219 phone in his possession. Stokes was arrested and taken to the
police station with Stidwell. Stidwell informed the police that Stokes had picked him up and they
drove to Hammond, Indiana. On the way, Stokes threw a set of keys and his shoes out of the car
4
1-18-2605
window, which were eventually recovered on the shoulder of the Dan Ryan Expressway. He also
testified that Stidwell informed the police that Stokes also threw out of the window “the back of
a battery from a cell phone.” When they arrived at Stokes’s residence in Hammond, Stokes put
his clothes in a plastic bag and set them on fire in the backyard.
¶ 12 Swiderek testified that the second phone in the “phone pattern” with the 773 area
code (773 phone) “came back” to Watts. He testified that “The 219 or Mr. Stokes’[s] phone
would call the victim’s phone and then call—I don’t remember the exact order, but then call Mr.
Watts’[s] phone or Mr. Watts would then call Mr. Stokes after the victim was spoken with.”
Asked whether “So there would be phone calls inbetween [sic] Stokes’[s] phone, Watts’[s]
phone, and the victim’s phone, correct?” Swiderek responded, “Correct.” The 773 phone was
“pinging” in the area of 3336 West 19th Street in Chicago, and the police went to that address
and arrested Watts, who had the 773 phone in his possession. The police also found clothes in
the washing machine that had blood stains on them. In a duffel bag, the police found two semi-
automatic pistols and bloody duct tape and clothing, which were evidence of a kidnapping. The
next day, or later that day, pursuant to a search warrant for Watts’s apartment, the police found a
rental receipt with Favela’s name on it.
¶ 13 Swiderek further testified that around 7:30 p.m. on December 13, 2010, the FBI
developed a “third phone” number with a 312 area code (312 phone) in “this phone pattern
between Stokes’[s] phone and Watts’[s] phone.” Asked whether “in addition to this phone itself,
being in a pattern with Stokes’[s] phone and Watts’[s] phone, had the FBI through the use of the
technology on the phone ascertained the location of that phone at the time of the kidnapping of
Mr. Favela?” Swiderek responded, “Yes, they said it was in the vicinity of the kidnapping, at the
time Mr. Favela was kidnapped, time and location.” The police also made that same
5
1-18-2605
determination with Watts’s phone. Asked whether “[o]nce the FBI had identified this pattern and
the location of the (312) 287-5361 phone, was a plan made to act on that information?” Swiderek
testified “the plan was the phone was—the subscriber information for the [312] phone was to a
Mr. Jeremy Borders, and the FBI’s information was to an address of 503 North LeClaire on the
second floor.” Swiderek along with Chicago police detective Patrick Deenihan and “several
other members” of the CPD and FBI went to that location. Borders’s name was on the mailbox
or the bell on the second floor. The main entrance to the building was open, so the police went to
the second floor, which had only one unit, and announced their office. No one answered the
door. The door was closed and unlocked, so the officers opened the door and walked in. Borders
was alone on the sofa near the front door and there was a cell phone “in the immediate area of”
him, “I believe on the floor.” FBI Agent Sean Burke picked up the phone and asked Borders if it
belonged to him, and Borders admitted it was his phone. Burke called that number, and Burke’s
number showed up on the caller ID of that phone. Swiderek also testified that when the police
first entered Borders’s apartment, they first looked for Favela and did not find him, after which
the police continued to search the apartment. The police found duct tape and a letter with Watts’s
name on it. Borders was kept at the apartment for about one hour.
¶ 14 On cross-examination, Swiderek stated that the two calls that he had previously
testified about that were made to Favela’s phone, and the call that was made to Favela’s wife’s
phone after the kidnapping, were not made from the 312 phone associated with Borders. He
testified that he and his police officers met with the FBI before they went to Borders’s residence,
and the “FBI agents, told us that the phone—I can’t say the word—subscriber information came
to 503 Leclaire on the second floor of Jeremy Borders,” which was information that the FBI
provided to him. Asked whether he was told by someone from the FBI that the 312 phone was
6
1-18-2605
“tied to Jeremy Borders and that he was the subscriber to that number,” he answered, “[t]hat’s
correct.” The address associated with that account was the 503 North LeClaire address. When
Swiderek went to Borders’s apartment, he was with Chicago police detective Deenihan, four
other CPD officers, and six FBI agents, for a total of 12 officers. The officers did not ring the
doorbell to Borders’s unit before proceeding to the stairwell to the second floor. They said
“police” a “couple” of times and then entered the apartment. The police did not have a search
warrant for his apartment nor an arrest or search warrant for his person. When the police entered
the apartment, Borders was sitting on the sofa. Borders was not breaking any laws at the time,
and was immediately placed under arrest. He was handcuffed and not free to leave. The parties
stipulated that when Swiderek testified at Watts’s trial on January 13, 2014, he testified that
“while [Borders] was being detained, one of the officers or FBI agents, *** they handcuffed him,
they went through his pockets, his pants pockets, found a phone, handed it to me.” Swiderek also
testified that the document with Watts’s name that was recovered also had the name of Borders’s
uncle on it.
¶ 15 In closing, defense counsel argued that there was no probable cause, and it was
uncontested that there was no warrant for Borders’s arrest. Counsel argued that Borders did not
give consent to the CPD or FBI to enter his residence, and at the time the officers entered, he was
not committing any crimes. Counsel asserted that Swiderek testified that the two calls made to
Favela before the incident and the ransom call made to Favela’s wife were not made from
Borders’s phone. Counsel stated that Swiderek testified that based on “some cell phone
technology,” Borders’s cell phone was in the “area of where this transpired, but that is not
something that can be pinpointed to that specific address.” Defense counsel argued that basically
7
1-18-2605
anyone within the circumference of the relevant cell phone towers could be a suspect, which was
not reasonable.
¶ 16 In response, the State argued that when the police entered Borders’s home, Favela
was still missing, they were looking for anything that could help find him, and they were in an
“emergency situation.” The State argued that the police worked on a phone pattern “not because
of calls Borders has placed to Favela, but because of the ongoing calls between Stokes, Borders
and Watts.” The police saw a “pattern develop between the Borders’s phone and Stokes[’] and
Watts’ phone[s],” and Borders was “at the location of the kidnapping at the time and place of the
kidnapping.”
¶ 17 In reply, defense counsel noted that most of the evidence and arguments presented
were about Stokes and Watts. Defense counsel stated that at the time the police entered Borders’s
apartment, they only knew that he lived there, his phone had been in the area, and his phone had
been in contact with one or both of the codefendants. Anyone on the list of phone records related
to Watts and Stokes would possibly be involved in the kidnapping.
¶ 18 The court denied Borders’s motion to quash arrest and suppress evidence and found
there was probable cause to arrest him. The court noted that it was an “emergency situation,”
“the time for the ransom to be paid had expired,” the “kidnapped victim, Mr. Favela had not been
located,” and “[t]wo persons had already been taken into custody.” The trial court then stated
that “[t]heir phone numbers, the three of them, including Borders, the other two persons, their
phone numbers at the time of this kidnapping and this battery of the other gentleman, all of them
were tied in about the same time of this offense.” The court concluded, “I believe it was stated
that Mr. Borders—that his phone number was on the premises, was at that location, had been
tracked by technology to being on the scene of the kidnapping.” The court then stated, “Now
8
1-18-2605
they have developed information from the other two and the tie-in with the other two persons,
and this is as if defendant here, Mr. Borders, is in—they are in hot pursuit of this defendant right
to his location, this emergency situation trying to locate that victim.” The court further concluded
that “under the circumstances it was lawful, being at his arrest, being at his place of address, that
his number, that it had tied to the time of the offense, is in the very address where Mr. Borders is
located. It is as if they were in hot pursuit of him from all that they had learned about his
involvement in this offense.”
¶ 19 Motion to Suppress Statements
¶ 20 Before trial, Borders also filed a motion to suppress statements, in which he requested
the court suppress all statements made by him because he was not given his Miranda rights
before being interrogated by law enforcement officials. He asserted that he continued to be
interrogated even after he invoked his right to consult with a lawyer. Borders also argued that he
was interrogated in violation of Section 103-2.1(b)(1) of the Code of Criminal Procedure of 1963
(725 ILCS 5/103-2.1(b)(1) (West 2010)) because he was initially interrogated without electronic
recording.
¶ 21 At a court date before trial, the State informed the court it was not going to use any
statements that were obtained before the electronic recording device was turned on. On the day
of trial, defense counsel informed the court that Borders was withdrawing the motion to suppress
statements, noting that the State would not be using the electronically recorded statement unless
Borders testified.
¶ 22 Trial
¶ 23 As previously noted, the trial judge who presided over the trial was different from the
judge who presided over the motion on the hearing to quash arrest and suppress evidence. At
9
1-18-2605
trial, the State proceeded on one count of first degree murder in that, without lawful justification,
Borders killed Favela during the commission of a forcible felony, the kidnapping of Favela (720
ILCS 5/9-1(a)(3) (West 2010)). The State nol-prossed all other charges.
¶ 24 Favela’s wife, Estella Favela, testified that on December 11, 2010, she received a call
from her sister, who was very upset, after which Estella went to the police station with her son,
Frankie.3 On the way to the station, Estella, who did not speak English, received a call from a
man, and she gave the phone to her son. Frankie spoke with the person and returned the phone to
her. At that point, Favela was on the phone and said, “I’m okay,” and then hung up. Frankie
testified that on December 11, 2010, he was with his mother when she received a call, after
which she became anxious, and they went to the police station. On the way, she received another
phone call and gave the phone to him. The caller ID showed Favela’s phone number, and a man
told him he wanted $500,000 in two hours. The person immediately put Favela on the phone.
Frankie passed the phone to his mother and heard Favela say, “I’m fine.”
¶ 25 Robles testified that on December 11, 2010, he was working with Favela to remodel
an apartment located at 2237 South Keeler in Chicago (Keeler location). At about 1 p.m., Favela
called Robles from a store and informed him that someone was stopping by to see the apartment.
At about 2 p.m., Robles was working in the kitchen pantry when Favela returned. Robles heard
Favela receive a phone call, after which Favela opened the front door. Robles heard about three
male voices and one female voice. Favela said in a scared voice, “[H]ey, hey, hey.” Robles
testified that “it seem[ed] like they started attacking him.” Robles tried to get up but was hit in
the back of his head with a gun and kicked in his ribs. Robles did not see what hit him and
assumed it was a gun. A man then tied Robles’s hands, mouth, and feet with duct tape. Robles
3
Estella and Frankie share the same last name as Favela, so we will refer to them by their first
names.
10
1-18-2605
heard someone ask Favela for “$50,000,” and Favela responded that “if he could give him
$1,000, to go to the bank with him.” The person responded, “[D]o you think I’m stupid” and
stated that he wanted $500,000.
¶ 26 After Robles testified that he did not see the man who was in the kitchen pantry in
court, the State asked Robles to look around the whole courtroom and gave him permission to
walk to the well of the courtroom. Robles then identified Borders in court and stated, “I think it’s
him, but he’s shaved. He is shaven today. That’s him.” The State then asked Robles what was
different from the day he first saw Borders on December 11, 2010, and Robles responded,
“There’s a big difference because he doesn’t have any hair.” Robles never saw Borders with
Favela. Robles testified that Borders hit him in the head with a gun, kicked him, and dragged him
from the kitchen to the bathroom tub. Robles kept his knees and head down and “could hear that
he was jumping from the tub to the hallway.” Asked how he could tell, Robles responded that he
“could hear it” and could see the light from the gun that Borders had, which he first saw when he
was in the panty. For about 20 or 40 minutes, Robles heard “a lot of noises,” “hitting,” and
moaning from Favela. At some point, the noises stopped, and Robles was able to free himself.
He went to Favela’s brother-in-law’s house about six blocks away and then to the police station.
He learned a few days later that Favela had been found and “within a day or so,” Robles returned
to the police station and identified Borders in a lineup. He told the police how he recognized
Borders and told them what he had done.
¶ 27 Stokes’s nephew, Stidwell, testified that in December 2010, Stokes was living with
his aunt in Indiana. On December 11, 2010, Stidwell planned to attend a birthday party in
Hammond, Indiana at Stokes’s residence. Stokes picked up Stidwell in Chicago and drove him to
the party. On the way, Stokes threw a set of keys out the window on Lavergne Avenue, and
11
1-18-2605
while on the Dan Ryan Expressway, he took his shoes off and threw them out the window. When
they arrived in Hammond, Stokes walked in the snow barefoot to the house, after which he put
his clothes on the grill and set them on fire. In the early morning hours of December 12, 2010,
police officers and FBI agents searched the house. Stokes was placed in custody, and Stidwell
went to the police station for questioning. On cross-examination, Stidwell stated that when he
was in the car with Stokes, he did not see Stokes throw the back of a cell phone out the window.
He did not remember whether he had previously testified at the grand jury proceeding on
December 14, 2010, that when he got in the car with Stokes, as soon as they pulled off and were
driving for 30 seconds, Stokes threw some keys and the back to a cell phone out of the window.
¶ 28 Chicago police sergeant David Grant and detective James DeCicco testified that
during the investigation, they recovered a set of keys near 1007 North Lavergne from underneath
a parked car. DeCicco met a lieutenant at 2 a.m. on December 14, 2010, on the Dan Ryan
Expressway, where two matching shoes were recovered from the shoulder. Chicago police
officers testified about the various pieces of evidence found in the Keeler location, including
blood, duct tape, and bloody footwear impressions.
¶ 29 Swiderek testified that on December 11, 2010, the investigation involved obtaining
the phone records and “mudds and tolls” for Favela’s phone, including incoming and outgoing
calls and the duration of the calls. He testified when a cell phone is used, “it hits off the closest
tower,” which can determine the location of the phone. A “pattern relative to phone numbers”
was developed and the FBI, who had the proper technology and equipment, assisted the
investigation. One of the phone numbers that “developed in this phone pattern” was the 219
phone that was associated with Hammond, Indiana. The 219 phone had been in contact with
Favela’s phone and was pinging or “hitting off of” a cell tower in Hammond. Swiderek went to
12
1-18-2605
that address in Hammond, and Stokes, who had the 219 phone in his pocket, was standing in
front of the house with Stidwell. Stokes was detained and Stokes and Stidwell were transported
to the police station.
¶ 30 Swiderek also testified that the FBI “was also pinging the 773 phone that had been
developed in this phone pattern,” and “pinging the phone” led to an address on West 19th Street,
where Watts was later arrested. Swiderek testified that during the investigation, another phone
number “had been developed in this phone pattern.” He testified that the FBI informed Detective
Donald Hill that the 312 phone “was in contact with the other two phones, and had also pinged in
the vicinity of the suspected kidnapping,” with the other two phones being the 219 and 773
phones. An FBI agent told his team “that the 312 number came back to a Mr. Jeremy Porters
[sic] at 503 North LeClaire on the second floor.” The agent also said “[t]hat phone had been in
contact with the 219 phone that Mr. Stokes was using; and the 773 number that Mr. Watts was
using.” Also, the “phone pinged off a cell tower, near the area of the suspected kidnapping, when
the suspected kidnapping occurred.”
¶ 31 Swiderek testified that he went with FBI agents and other police officers to 503 North
LeClaire. The second floor apartment door was shut, and FBI Agent Sean Burke announced
“police” several times. There was no answer, after which the FBI agents opened the unlocked
door and “we all ran in.” Borders was on a couch in the front room and was detained by FBI
agents. Once Borders was detained, Swiderek started looking for Favela. Burke recovered a cell
phone “from the area or from Mr.—Mr. Borders. I can’t recall exactly where.” Burke asked
Borders whether the phone was his, and Borders said it was. Borders stated his number was 312-
287-5361. Burke called that number and Burke’s number showed up on the phone. Swiderek also
recovered duct tape and a letter giving power of attorney to Watts over Hassan Borders’s vehicle.
13
1-18-2605
At that time, Watts was in custody. Borders was kept at the apartment for about one hour before
being transported to the police station.
¶ 32 On cross-examination, Swiderek testified that the 312 phone number never made a
call to Favela’s phone. There were six Chicago police officers and six FBI agents who went to
Borders’s residence. When Swiderek walked in, Borders was on the sofa alone in the living
room. Counsel then asked, “At that point in time, Mr. Borders was placed under arrest?” and he
responded, “He was—he was—excuse me, he was detained. He was not free to leave.” Asked
whether it was fair to say that Borders “was not free to leave, detained, arrested immediately
upon you and your fellow Officers gaining entry to his apartment?” Swiderek responded, “I think
it would be fair to say, he was detained, and then placed under arrest after we determined that the
phone was in fact his.” Swiderek acknowledged that when he previously testified at a hearing on
this case on April 28, 2015, he had testified that Borders was immediately placed under arrest.
Swiderek admitted that the duct tape recovered from Borders’s apartment did not have blood on
it, and the piece of paper with Watts’s name on it was a document related to a vehicle that
belonged to Hassan Borders.
¶ 33 Hill testified that on December 11, 2010, he reviewed Favela’s phone records and
developed an interest in the 219 phone because Robles had informed another detective that a
potential renter had contacted Favela at the time of the kidnapping. The 219 phone used star 67
to block the number from showing up on Favela’s phone, but the number still appeared in the
phone records. The FBI “[pinged]” the 219 phone to determine the closest tower the phone was
“hitting off,” and it was located in Hammond, Indiana. In reviewing the 219 phone records, he
developed an interest in the 773 phone, which had been located at an address on 19th Street in
14
1-18-2605
Chicago. Hill went to that address and found Watts inside the apartment. The 773 phone was
recovered from the back bedroom, and a loaded handgun was found in the bathroom.
¶ 34 On cross-examination, Hill testified that Stokes owned the 219 phone, which was the
number that showed up in Favela’s phone records. The 312 phone associated with Borders did
not appear in Favela’s phone records, and he did not call Favela. On December 11, 2010, there
were nine calls made between Borders and Watts at various times throughout the day, and there
were no calls between Borders and Stokes. There were 50 calls between Stokes and Watts that
day. Hill testified that the kidnapping took place between 1:45 p.m. and 2:45 p.m. On that day,
the phone records showed phone calls between Borders and Watts at 1:22 a.m., 10:16 a.m., 11:34
a.m., 12:41 p.m., 12:49 p.m., 1:44 p.m. 1:47 p.m., 3:51 p.m., and 4:23 p.m. On re-cross, Hill
testified that Watts’s phone records showed that “there were a lot of other numbers that were
going back and forth with Watts’s number” during that timeframe.
¶ 35 Forensic investigator David Ryan testified that a search warrant had been obtained for
Watts’s residence on West 19th Street. There, the washing machine had shoes in it and was filled
with water that had a “reddish” color. He recovered two loaded handguns, a “slightly
bloodstained” roll of duct tape, a sweatshirt with blood stains, and a receipt with Favela’s name
on it.
¶ 36 Chicago police officer Joseph Lopez testified that he was present when the FBI
revealed that “another phone had been located as part of this investigation into the phones on the
case.” The FBI determined that this phone was located at 503 North LeClaire, in Chicago. The
CPD and FBI went to that location and entered the second floor apartment. Swiderek arrested
defendant. The officers did not have a conversation with Borders about Favela before he was
arrested.
15
1-18-2605
¶ 37 Lopez and his two other partners were directed to transport Borders to the police
station. Officer Todd Mueller was the driver, Lopez sat in the front seat, and Borders sat in the
back seat next to Officer Will Johnson. On the way, Borders said, “I’m going to tell you where
the victim’s at.” No one had asked Borders about the location of the victim before he made the
statement. Lopez alerted another detective through radio transmission about Borders’s statement.
Lopez testified that when they were driving, Borders “gave us a location, an area first of where
the victim was going to be at,” which was the “Augusta and Springfield area.” Mueller began
driving in that direction and Borders directed their path and told them they were looking for a
garage. Borders directed the officers to an alley at 1100 North Springfield Avenue, and then
directed them to stop by a garage located at 1136 North Springfield Avenue (Springfield Avenue
location). Lopez testified that Borders said, “it’s the red garage, red door.” It was about a 15 to
20 minute drive from Borders’s home to the Springfield Avenue location, and Borders directed
the officers the entire time. The officers found Favela’s deceased body in the back of a car in the
garage.
¶ 38 FBI Agent Joseph Raschke, a member of the FBI’s cellular analysis survey team
(CAST), qualified as an expert in cell site analysis. As part of a cellular phone investigation, the
phone company provides a spreadsheet, which contains information about the date and time of
the call, the numbers involved, the duration, and which cell towers were utilized. Raschke uses
that information and depicts on a map where and when the cell towers were being utilized. A
phone usually uses the closest tower and the one with the best signal, though that is not always
the case, as there are obstructions that could affect it. He testified that “nothing about this and
nothing you will hear me say today puts a phone at a specific address.”
16
1-18-2605
¶ 39 Raschke testified that he analyzed the phone records of Stokes, Watts, and Borders.
He presented a PowerPoint presentation showing the activity of each phone on the day of the
incident. Raschke testified that for Borders’s phone, “[t]here wasn’t as much activity on this
phone as we’ve seen on some of the other phones.” Borders’s phone showed activity between 10
a.m. and 12:30 p.m. on three different towers north of the Keeler location and south of the
Springfield Avenue location. At 12:49 p.m., 1:44 p.m., and 1:46 p.m., there was activity on the
tower “near the Keeler location.” At 2:14 p.m. and 2:15 p.m., there was activity “down on the
tower near the Keeler location.” At 3:51 p.m., there was activity “on the tower south of the
Springfield location, so movement by the phone north from the previous location during that
time period.” Between 5 p.m. and 8:05 p.m., there were five calls made using three different
towers and then no activity until about 8:04 p.m. “south and east” of the Springfield Avenue and
Keeler locations. On cross-examination, Raschke testified he could not determine whether the
towers that were being used by the phones were the closest towers. He could not pinpoint where
Borders’s phone was located at any given time, and he was giving a general area based on the
location of the cell towers. Raschke offered additional testimony on the activity that occurred on
the phones of Watts and Stokes on the day of the incident.
¶ 40 Forensic scientist Ryan Paulson, who qualified as an expert in forensic biology and
forensic DNA analysis, testified that he tested 23 different pieces of evidence and generated a
DNA profile for Borders. Among the many items tested included a steering wheel, Favela’s
fingernails, and blood stains from various recovered items. The DNA profile on the items did not
match Borders.
¶ 41 Forensic investigator Zbigniew Niewdach testified that he went to the garage at 1136
North Springfield Avenue, where he saw a vehicle with a deceased man in the back. At the
17
1-18-2605
scene, he found two latex gloves, a city of Chicago garbage can with the address 2240 South
Keeler, and an electric cord tied to the front handle of the garbage can. He observed that electric
portions were removed from the overhead garage door to render it inoperable, and the metal
“draw bar arm” attached to the garage door and mechanism that opens the door had been
disconnected. He took DNA swabs from the garage’s service door and steering wheel of the
vehicle.
¶ 42 Dr. Steven White, a forensic pathologist who performed an autopsy on Favela,
testified that it was his opinion that the manner of death was homicide.
¶ 43 The State introduced several stipulations entered between the parties, which included
that the keeper of the records from Sprint Nextel would have testified that the records for the
phone numbers 773-225-1994, 219-433-2728, and 312-287-5361 were true and accurate and
kept in the regular course of business and “there was no subscriber information attached to those
numbers.”
¶ 44 Defense counsel presented a stipulation that an assistant state’s attorney would have
testified that on December 14, 2010, when Stidwell testified at a grand jury proceeding, he
testified that about 30 seconds after he got in Stokes’s car, Stokes threw keys and the back to a
cell phone out of the window.
¶ 45 Following closing arguments, the jury found Borders guilty of first degree murder.
Borders filed a motion and amended motion for a new trial, in which he asserted that the court
erred when it denied his pretrial motions. The trial court sentenced Borders to 55 years in prison.
The court denied Borders’s motion to reconsider sentence. This appeal follows.
¶ 46 II. ARGUMENT
18
1-18-2605
¶ 47 On appeal, Borders contends that the trial court erred when it denied his motion to
quash arrest and suppress evidence because the State failed to establish probable cause and he
was arrested without a warrant. He argues that all the evidence recovered as a result should be
suppressed, including all statements he made before he arrived at the police station, the evidence
recovered from his apartment, and Robles’s lineup identification of him.
¶ 48 When we review a trial court’s ruling on a motion to suppress evidence, we apply a
two-part standard of review. People v. Craine, 2020 IL App (1st) 163403, ¶ 27. Under this
standard, we will defer to the trial court’s factual findings and disregard those findings only
where they are against the manifest weight of the evidence. People v. Johnson, 237 Ill. 2d 81, 88
(2010). However, we review de novo the trial court’s “ultimate ruling as to whether suppression
is warranted.” Craine, 2020 IL App (1st) 163403, ¶ 27. The burden of proof is on the defendant
when he files a motion to suppress evidence. People v. Brooks, 2017 IL 121413, ¶ 22. “If the
defendant makes a prima facie showing that the evidence was obtained in an illegal search or
seizure, the burden shifts to the State to provide evidence to counter the defendant’s prima facie
case.” People v. Cregan, 2014 IL 113600, ¶ 23. However, “the ultimate burden of proof remains
with the defendant.” Id. Further, “[w]hen reviewing a lower court’s ruling following a
suppression hearing, the appellate court may consider both the evidence produced at the hearing
and the evidence presented at the subsequent trial.” In re K.M., 2019 IL App (1st) 172322, ¶ 18.
¶ 49 The fourth amendment of the United States Constitution and article I, section 6, of the
Illinois Constitution guarantee citizens the right to be free from unreasonable searches and
seizures. U.S. Const., amend. IV; Const. 1970, art. I, § 6; People v. Williams, 2020 IL App (3d)
180024, ¶ 30. The “essential purpose” of the fourth amendment is to establish a standard of
“reasonableness” on the exercise of discretion by government and law enforcement officers “ ‘to
19
1-18-2605
safeguard the privacy and security of individuals against arbitrary invasions.’ ” (Internal
quotation marks omitted.) Delaware v. Prouse, 440 U.S. 648, 653-54 (1979) (quoting Marshall
v. Barlow’s, Inc., 436 U.S. 307, 312 (1978) (quoting Camara v. Municipal Court, 387 U.S. 523,
528 (1967))). The reasonableness requirement under the fourth amendment “generally requires a
warrant supported by probable cause.” People v. Thornton, 2020 IL App (1st) 170753, ¶ 25.
Thus, “the police need either a warrant or probable cause coupled with exigent circumstances to
lawfully enter a private residence and effectuate an arrest.” People v. Shanklin, 367 Ill. App. 3d
569, 574 (2006). An arrest made without probable cause violates the prohibition against
unreasonable searches and seizures set forth in the United States and Illinois constitutions.
People v. Bloxton, 2020 IL App (1st) 181216, ¶ 18.
¶ 50 As an initial matter, we must determine whether Borders was arrested when the
officers entered his apartment. “To determine whether an individual has been unlawfully seized,
the relevant inquiry is whether a reasonable person, innocent of any crime, would conclude that
he was not free to leave under the circumstances.” People v. Soto, 2017 IL App (1st) 140893, ¶
49. Here, the record shows that Borders was immediately detained and arrested when the officers
entered his apartment. At the suppression hearing, Swiderek testified that there were a total of 12
officers and FBI agents who went to Borders’s apartment. The officers announced their office
and opened the door to his apartment, and Borders was sitting on the couch and not doing
anything wrong. Swiderek testified that Borders was immediately arrested, handcuffed, and not
free to leave. Under these circumstances, a reasonable person would conclude that he was not
free to leave. Borders was immediately placed under arrest when the officers entered his
apartment. See People v. Vasquez, 388 Ill. App. 3d 532, 549 (2009) (“A person is arrested when
his freedom of movement is restrained by physical force or a show of authority.”). The parties do
20
1-18-2605
not dispute that the police did not have a warrant to enter Borders’s apartment and arrest him.
Thus, the officers needed probable cause coupled with exigent circumstances to enter and arrest
him.
¶ 51 Probable Cause
¶ 52 “Probable cause exists where the facts and circumstances, considered as a whole, are
sufficient to justify a belief by a reasonably cautious person that the defendant is or has been
involved in a crime.” Thornton, 2020 IL App (1st) 170753, ¶ 25. “The substance of all of the
definitions of probable cause is a reasonable ground for belief of guilt, and that the belief of guilt
must be particularized with respect to the person to be searched or seized.” People v. Jones, 215
Ill. 2d 261, 274 (2005). “Where the standard is probable cause, a search or seizure of the person
must be supported by probable cause particularized with respect to that person, and this
requirement cannot be undercut or avoided simply by showing that there exits probable cause to
search or seize another person who is nearby.” People v. Drake, 288 Ill. App. 3d 963, 964
(1997). Further, a police officer’s determination of whether probable cause exists focuses on the
facts known to the police at the time of the arrest (Bloxton, 2020 IL App (1st) 181216, ¶ 18) and
is “an objective determination that must be made on a case-by-case basis and depends upon the
totality of the circumstances at the time of the arrest” (Craine, 2020 IL App (1st) 163403, ¶ 29).
¶ 53 The facts and circumstances known to the officers at the time of Borders’s arrest were
not sufficient to justify to a reasonably cautious person that Borders had committed or was
committing a crime. At the suppression hearing, Swiderek testified about the facts the officers
knew before the 12 officers and FBI agents entered Borders’s home and arrested him. The FBI
developed the 312 phone in the “phone pattern between Stokes’[s] phone and Watts’[s] phone,”
and “through the use of the phone technology on the phone,” the officers learned that the 312
21
1-18-2605
phone was “in the vicinity of the kidnapping, at the time Mr. Favela was kidnapped, time and
location.” Swiderek also testified that the “subscriber information for the [312] phone was to a
Mr. Jeremy Borders, and the FBI’s information was to an address of 503 North LeClaire on the
second floor.”
¶ 54 As previously noted, for probable cause to exist, the officers’ “belief of guilt must be
particularized with respect to the person to be searched or seized” (Jones, 215 Ill. 2d at 274) and
“the officer[s] must reasonably believe that a crime occurred and that the defendant committed
it” (emphasis in original) (Craine, 2020 IL App (1st) 163403, ¶ 32). Although Swiderek testified
at the suppression hearing that the FBI developed the 312 phone in “this phone pattern between
Stokes’[s] phone and Watts’[s] phone,” he did not explain the pattern or how the 312 phone was
connected to any phone patterns with the phones of Stokes, Favela, and Watts. As for Stokes’s
and Watts’s phones, Swiderek testified that Stokes’s phone called Favela and Favela’s wife and
that Stokes’s phone “would call the victim’s phone and then call—I don’t remember the exact
order, but then call Mr. Watt’s[s] phone or Mr. Watts would then call Mr. Stokes after the victim
was spoken with.” He also agreed with the State’s question that “there would be phone calls
inbetween [sic] Stokes’[s] phone, Watts’[s] phone, and the victim’s phone.” However, as for the
312 phone, Swiderek testified that the calls made to Favela’s phone and to Favela’s wife’s phone
were not made from the 312 phone and he did not explain how the 312 phone was connected to
or in a pattern with any other phones.
¶ 55 In addition, Swiderek’s testimony at the suppression hearing that the 312 phone was
“in the vicinity of the kidnapping” was insufficient to establish probable cause, as “it is well
settled that an individual’s presence in an area of expected criminal activity, standing alone, is
insufficient to establish probable cause.” Id. Further, Swiderek testified at the suppression
22
1-18-2605
hearing that “subscriber information for the [312] phone was to a Mr. Jeremy Borders, and the
FBI’s information was to an address of 503 North LeClaire on the second floor.” However,
where there was no testimony showing how the 312 phone was connected to the other phones or
showing of how Borders, in particular, was tied to the 312 phone more than just being the
subscriber, we cannot find that the testimony relating to Borders being the subscriber for the 312
phone was sufficient to show that at the time the officers entered Borders’s apartment, they
reasonably believed that Borders had committed a crime.
¶ 56 Also, we note that Swiderek’s testimony at the suppression hearing about Borders
being the subscriber to the 312 phone was inconsistent with the evidence at trial. At trial, the
parties entered a stipulation that the keeper of the records from the phone company would have
testified that there was no subscriber information attached to the 312 phone. For this additional
reason, Swiderek’s testimony at the suppression hearing relating to Borders being the subscriber
for the 312 phone was questionable to support a finding that Borders, in particular, was tied to
the 312 phone. We also note that, at trial, Detective Hill testified that on the date of the incident,
there were nine calls between Watts and Borders, and no calls between Borders and Stokes.
There were 50 calls between Stokes and Watts.
¶ 57 In addition, when the trial court denied Borders’s motion, it stated that all three phone
numbers were “tied in about the same time of this offense” and “I believe it was stated that Mr.
Borders—that his phone number was on the premises, was at that location, had been tracked by
technology to being on the scene of the kidnapping.” However, Swiderek testified that the
officers discovered that the 312 phone was “in the vicinity of the kidnapping at the time Mr.
Favela was kidnapped, time and location” and never testified that his phone was on the premises
or at the location of the kidnapping. And, as previously noted, there was no testimony about how
23
1-18-2605
Borders’s phone fit into any “pattern” with the phones of Stokes, Watts, or Favela. Thus, the trial
court’s findings that Borders was “tied” to the other phones and that his phone was at the
location of the incident are against the manifest weight of the evidence.
¶ 58 Based on this record, we cannot find that the facts and circumstances as a whole are
sufficient to justify a reasonable belief that Borders had committed or was involved in a crime
when the officers entered his apartment and immediately arrested him. Thus, the trial court erred
in denying Borders’s motion to quash arrest and suppress where the officers did not have
probable cause to enter his apartment and immediately arrest him. We reverse the trial court’s
ruling that denied Borders’s motion to quash arrest and suppress evidence.
¶ 59 Given our disposition that the police did not have probable cause, we need not
analyze the parties’ arguments regarding whether exigent circumstances existed, as the police
needed both probable cause and exigent circumstances to lawfully enter Borders’s residence and
arrest him. See People v. Foskey, 136 Ill. 2d 66, 75-76 (1990) (the police need probable cause
and exigent circumstances to enter a home and arrest without a warrant, noting that “[t]hat
probable cause existed, however, is not alone sufficient to justify a warrantless entry into a
suspect’s home to effect an arrest”); see also Shanklin, 367 Ill. App. 3d at 574 (“the police need
either a warrant or probable cause coupled with exigent circumstances to lawfully enter a private
residence and effectuate an arrest”).
¶ 60 Suppression of Evidence
¶ 61 Borders next argues that the court should suppress certain statements and evidence.
We first consider his argument that his admission that the phone belonging to him should be
suppressed because it was the result of a custodial interrogation in violation of Miranda. The
24
1-18-2605
State does not dispute that Borders was not given Miranda warnings when the officers entered
his apartment.
¶ 62 Under the fifth amendment to the United States Constitution, no person “ ‘shall be
compelled in any criminal case to be a witness against himself.’ ” People v. Martin, 2020 IL App
(1st) 181217, ¶ 14 (quoting U.S. Const., amend. V). “To safeguard this right, any person
subjected to custodial interrogation ‘must be warned that he has a right to remain silent, that any
statement he does make may be used as evidence against him, and that he has a right to the
presence of an attorney, either retained or appointed.’ ” Martin, 2020 IL App (1st) 181217, ¶ 14
(quoting Miranda v. Arizona, 384 U.S. 436, 444 (1966)). When an individual is subject to a
custodial interrogation without the benefit of Miranda warnings, the State may not use that
person’s inculpatory or exculpatory statements at trial. People v. Garza, 2018 IL App (3d)
170525, ¶ 12.
¶ 63 Under Miranda, “custodial interrogation” means “ ‘questioning initiated by law
enforcement officers after a person has been taken into custody or otherwise deprived of his
freedom of action in any significant way.’ ” Id. ¶ 13 (quoting Miranda, 384 U.S. at 444). There
are two elements: “(1) whether an individual was subject to interrogation and (2) whether the
interrogation occurred in a custodial situation.” Id.
¶ 64 As for the first element, an “interrogation” is considered “any practice that police
should know is reasonably likely to evoke an incriminating response from a suspect.” People v.
Tayborn, 2016 IL App (3d) 130594, ¶ 18. In Miranda, the Supreme Court noted that “[g]eneral
on-the-scene questioning as to facts surrounding a crime or other general questioning of citizens
in the fact-finding process is not affected by our holding.” Garza, 2018 IL App (3d) 170525, ¶
15 (quoting Miranda, 384 U.S. at 477-78). “The ‘[g]eneral on-the-scene questioning’ exception
25
1-18-2605
will apply only when police pose general questions in a noncustodial environment to nonsuspects
regarding the facts that surround a crime.” Id.
¶ 65 As for whether a person is “in custody” for purposes of Miranda, “a court examines
the circumstances surrounding the interrogation to determine whether, given those
circumstances, a reasonable person, innocent of any crime, would have felt that he was not at
liberty to terminate the interrogation and leave.” Tayborn, 2016 IL App (3d) 130594, ¶ 19.
Factors that are determinative regarding whether a person is considered to be in a custodial
setting include “the location, time, length, mood, and mode of interrogation; the number of
police officers present; the presence or absence of the family and friends of the accused; any
indication of formal arrest; and the age, intelligence, and mental makeup of the accused.” Garza,
2018 IL App (3d) 170525, ¶ 16.
¶ 66 Here, Borders’s admission that the phone belonged to him was the result of a
custodial interrogation. The question about whether the phone belonged to Borders was intended
to elicit an incriminating response. At the time the officers entered Borders’s apartment without a
warrant, the officers were using phone technology with the help of the FBI, and the investigation
had focused on phone records to identify and locate the suspects. The officers were specifically
looking for the 312 phone that was in a “phone pattern between Stokes’[s] phone and Watts’[s]
phone.” Under these circumstances, which involved the presence of 12 officers, the question to
Borders about the ownership of the phone found next to him was reasonably likely to elicit an
incriminating response from him. See id. ¶ 15 (finding that the “general on-the-scene
questioning” exception did not apply, noting that the defendant “was subject to the compelling
pressures of police custody”); see also People v. Fort, 2014 IL App (1st) 120037, ¶ 17 (“a
question at the scene counts as impermissible interrogation if it is reasonably likely to elicit an
26
1-18-2605
incriminating response”); People v. Barnett, 393 Ill. App. 3d 556, 559 (2009) (where the
defendant was arrested for being intoxicated and then was asked by an officer whom the vehicle
belonged to and if it should be towed, the questions were likely to produce an incriminating
response because the officer knew the answer to the question and the ownership question had
been previously answered by the officer’s computer check of the vehicle’s registration number).
¶ 67 Further, as previously discussed, the record shows that Borders was placed under
arrest when the officers entered his apartment. Swiderek testified at the suppression hearing that
there were 12 officers and FBI agents who entered Borders’s apartment without a warrant. When
they entered his apartment, he was on the couch and was “immediately” arrested, handcuffed,
and not free to leave. There was a cell phone in Borders’s “immediate area,” and FBI Agent
Burke asked him if it belonged to him. Borders then admitted it was his phone. At trial, Swiderek
similarly testified that Borders was immediately detained and not free to leave after the officers
entered his apartment, as he testified that the FBI agents opened the door and “we all ran in.”
After Swiderek entered the apartment, Borders was on the couch being detained and handcuffed
by FBI agents. See Garza, 2018 IL App (3d) 170525, ¶ 18 (the defendant was not free to leave,
where the police presence grew to outnumber the other people present and “their overwhelming
presence would cause a reasonable person to question their ability to merely walk away without
permission”). Thus, under these circumstances, we find that no reasonable person would have
felt free to leave or refuse to answer the question about whether the phone belonged to him.
Borders was in a custodial situation when he was asked whether the 312 phone belonged to him.
Accordingly, Borders’s statement that the phone belonged to him was the product of custodial
interrogation and in violation of Miranda. The trial court should have suppressed Borders’s
response that the 312 phone belonged to him.
27
1-18-2605
¶ 68 The State contends that the failure to provide Borders with Miranda warnings before
asking if the phone belonged to him was excused by the rescue doctrine. It argues that the
circumstances of the case, which involved the rescue of a known individual where time was of
the essence, were sufficiently exigent to place the initial questioning outside the scope of
Miranda. However, the State also acknowledges that the rescue doctrine “has yet to be
recognized or applied in Illinois.” We decline to apply the rescue doctrine where we have no
authority to do so. See People v. Laliberte, 246 Ill. App. 3d 159, 164 (1993) (where the State
requested the court to recognize the validity of the rescue doctrine, the court declined to
recognize the exception).
¶ 69 Borders next argues that the court should suppress all statements and evidence
obtained as a result of his illegal arrest, including the evidence found at this apartment, his
admission that he owned the 312 phone, his statements that he would show the police where the
body was located, physical evidence recovered from the Springfield Avenue location, and
Robles’s lineup identification of him. Borders argues that his statements that led to both Favela’s
body and the physical evidence recovered from the garage at the Springfield Avenue location as
a result of his statements were inadmissible because the statements were not attenuated from
Borders’s admission regarding ownership of the 312 phone. As for Robles’s lineup identification
of Borders, he asserts that it should be suppressed because it was obtained as a result of his
warrantless arrest.
¶ 70 Under the exclusionary rule, evidence obtained by law enforcement in violation of the
fourth amendment cannot be admitted into evidence. In re K.M., 2019 IL App (1st) 172322, ¶ 35.
An outgrowth of the exclusionary rule is the fruit of the poisonous tree doctrine, under which a
violation of the fourth amendment is deemed the “poisonous tree,” “and any evidence obtained
28
1-18-2605
by exploiting that violation is subject to suppression as the ‘fruit’ of that poisonous tree.” People
v. Henderson, 2013 IL 114040, ¶ 33. The exclusionary rule applies to physical evidence seized in
an illegal search, items observed, or words overheard in the course of the unlawful activity, or
admissions or statements obtained during an illegal arrest and detention. People v. Lopez, 2018
IL App (1st) 153331, ¶ 29.
¶ 71 Courts have recognized several exceptions to the exclusionary rule, including the
attenuation doctrine. In re K.M., 2019 IL App (1st) 172322, ¶ 36. Under this doctrine, “evidence
challenged for a fourth amendment violation is admissible if the connection between the
unconstitutional police conduct and the evidence is remote or has been interrupted by some
intervening circumstances.” Id. ¶ 37. “ ‘The attenuation doctrine evaluates the causal link
between the government’s unlawful act and the discovery of evidence, which often has nothing
to do with a defendant’s actions.’ ” Id. (quoting Utah v. Strieff, 579 U.S. 232, 238 (2016)). The
question is whether the evidence was obtained by exploiting the illegality of the arrest. See
People v. Foskey, 136 Ill. 2d 66, 85 (1990) (citing Brown v. Illinois, 422 U.S. 590, 95 (1975)).
“Evidence obtained after an illegal entry need not be suppressed if such evidence was obtained
by means sufficiently distinguishable to be purged of the primary taint of the illegality.” (Internal
quotation marks omitted.) People v. White, 117 Ill. 2d 194, 222 (1987) (quoting Wong Sun v.
United States, 371 U.S. 471, 487-88 (1963)).
¶ 72 To determine whether lineup identifications and other evidence were sufficiently
attenuated from the illegal arrest, we consider the “temporal proximity” between the
unconstitutional conduct and the discovery of evidence to determine how closely the discovery
of evidence followed the unconstitutional conduct, the presence of intervening circumstances,
and the purpose and flagrancy of the police officers’ conduct. In re K.M., 2019 IL App (1st)
29
1-18-2605
172322, ¶ 37; see also People v. Smith, 232 Ill. App. 3d 121, 129 (1992). As for admissions, in
addition to considering these three factors, we also review whether Miranda warnings were
given. Gutierrez, 2019 IL App (3d) 180405, ¶ 17. Generally, two key factors in determining
whether the police exploited the illegal arrest to obtain an admission from a defendant are
intervening circumstances and flagrancy of police misconduct. People v. Klimawicze, 352 Ill.
App. 3d 13, 19 (2004). It is the State’s burden to prove attenuation. People v. Jackson, 374 Ill.
App. 3d 93, 102 (2007). “The State must show by clear and convincing evidence that the
challenged evidence was obtained by means sufficiently distinguishable to be purged of the
primary taint.” Jackson, 374 Ill. App. 3d at 102.
¶ 73 Here, Borders asserts that his statements leading the police to Favela’s body and any
physical evidence recovered from the garage at the Springfield Avenue location were
inadmissible because these statements were not attenuated from his prior admission regarding
ownership of the 312 phone. The State responds that Borders’s statements about the location of
Favela’s body were admissible because they were voluntary, and Borders without prompting or
questioning, told the officers that he would tell them where the victim was located. However,
even if we assume that Borders’s statements that led the police to the Springfield Avenue
location were voluntary, an attenuation analysis would still be necessary because he was arrested
without probable cause in violation of the fourth amendment. See People v. Gempel, 2016 IL
App (3d) 140833, ¶ 89 (“where the defendant gave a voluntary statement under the fifth
amendment, we conduct attenuation analysis to determine whether police obtained the statement
by exploiting an illegal arrest under the fourth amendment”); see also People v. Bowen, 164 Ill.
App. 3d 164, 176 (1987) (“Even if the statements in this case were found to be voluntary under
the fifth amendment of the Federal Constitution, the fourth amendment issue remains.”).
30
1-18-2605
¶ 74 The State asserts in its brief that because the trial court concluded that the police had
probable cause to arrest Borders, the record was not developed to answer the attenuation
question, and if we determine that Borders’s statements were the product of an illegal arrest, we
should remand for an attenuation hearing. The State also asserts that “[i]f this Court finds that his
arrest was unlawful, then the proper remedy is to remand this case for an attenuation hearing
because the record was not developed for the purpose of determining whether the identification
was sufficiently attenuated from the arrest.” (State’s Brief pg. 37). In Borders’s reply brief, he
states that the police lacked probable cause for his arrest and his statements were not sufficiently
attenuated to be admissible, “[b]ut Borders has no quarrel with the State’s assertion that if this
Court finds that the statements were the result of an illegal arrest, remand for attenuation hearing
would be a proper remedy.” We also note that in Borders’s prayer for relief, he requests, in the
alternative, that we “remand for an attenuation hearing pursuant to Issue I.”
¶ 75 We agree with the parties and remand this case for an attenuation hearing for the trial
court to determine whether evidence obtained after the officers unlawfully arrested him—
evidence in Borders’s apartment, Borders’s statements in the police car that led to Favela’s body
and the evidence in the garage at the Springfield Avenue location, and Robles’s identification of
him—were sufficiently attenuated to purge the taint of the unlawful arrest such that some or all
of the evidence is admissible. See People v. Schreiner, 2021 IL App (1st) 190191, ¶ 72 (the court
found that the search of the defendant’s property was unreasonable, and then vacated his
conviction and remanded for an attenuation hearing, noting that “there might be arguments that
sufficient attenuation existed to purge the taint of the unlawful entry and render some or all of
that evidence admissible,” and “the State never had the opportunity to shoulder that burden to
establish attenuation as to some or all of the evidence that resulted from the search”). Because
31
1-18-2605
the trial court found that there was probable cause for Borders’s arrest, it did not consider the
attenuation issue. Neither party had the opportunity to develop the record as to the attenuation of
this evidence. We remand this case for an attention hearing as to the evidence obtained after
Borders’s illegal arrest. See People v. Wallace, 299 Ill. App. 3d 9, 19, (1998) (where the
reviewing court found the defendant was illegally arrested, it reversed his conviction and
remanded, stating “[i]n light of its ruling on defendant’s motion to quash his arrest, the trial court
never considered the attenuation issue. Remandment for an attenuation hearing is appropriate
where the record is not clear enough to allow a reviewing court to make an independent ruling on
the matter.”); see also People v. Bates, 218 Ill. App. 3d 288, 298 (1991) (remanding to the trial
court to determine whether sufficient attenuation existed to purge the defendant’s statements
from the taint of his illegal arrest, noting that “the trial court was not presented with the
attenuation issue”).
¶ 76 Remaining Issues
¶ 77 The State and Borders both raise additional arguments that we do not consider at this
time. The State contends that even if the trial court erred when it denied Borders’s motion to
quash arrest and suppress evidence, the error was harmless. Meanwhile, Borders contends that
trial counsel was ineffective for failing to file a motion to quash arrest and suppress evidence
based on the State’s use of cellular phone data and location information that was obtained
without a warrant and used to establish probable cause of his arrest and evidence of guilt at trial.
Given our conclusion that the court erred when it denied Borders’s motion to quash arrest and
suppress evidence, and because we are remanding this cause for an attenuation hearing, we will
not address these arguments.
¶ 78 III. CONCLUSION
32
1-18-2605
¶ 79 For the foregoing reasons, we reverse the trial court’s decision to deny defendant’s
motion to quash arrest and suppress evidence. We reverse defendant’s conviction and remand the
matter to the trial court to conduct an attenuation hearing as to the evidence obtained after the
unlawful arrest, and then, if necessary, a new trial. The trial court should have suppressed
Borders’s statement that the 312 phone belonged to him because it was obtained in violation of
Miranda.
¶ 80 We note that in remanding this case to the trial court to hold an attenuation hearing,
we have reviewed the evidence presented, including the evidence that may be subject to
suppression, and conclude that the evidence was sufficient to support defendant’s conviction. See
People v. Schreiner, 2021 IL App (1st) 190191, ¶ 78. Thus, double jeopardy does not serve as a
bar to a possible retrial, if necessary, following the attenuation hearing. See id.; see also People
v. Gutierrez, 2019 IL App (3d) 180405, ¶ 23; People v. Hernandez, 2017 IL App (1st) 150575,
¶¶ 150, 165.
¶ 81 Reversed and remanded with directions.
¶ 82 JUSTICE MITCHELL, specially concurring:
¶ 83 I agree with much of the majority’s analysis and concur in the judgment that the
warrantless arrest of Jeremy Borders lacked probable cause. Where we part company is over the
propriety of using trial evidence to reverse a trial court’s pretrial ruling in a suppression hearing
absent a defense objection at trial and the defendant having argued that new evidence to the trial
court.
¶ 84 On this question, we do not write on a clean slate. Our supreme court has held that
“[b]y not asking the court to reconsider its ruling on the motion to suppress when that evidence
was introduced at trial, defendant has waived his right to argue it on appeal.” People v. Brooks,
33
1-18-2605
187 Ill. 2d 91, 128 (1999). The court explained further: “Defendant cites no authority for the
proposition that a court can consider evidence argued for the first time on appeal in considering a
trial court’s ruling on a motion to suppress.” Id.
¶ 85 The rationale for this rule is straightforward. The trial court and the State are entitled
to notice in the form of a contemporaneous objection so that they have a fair opportunity to
respond to the evidentiary point while the witness is still on the stand. This is particularly
significant in suppression rulings, which frequently turn on a trial court’s credibility finding.
Indeed, in no area of the law do we permit an aggrieved party to simply lie in the weeds and then
raise on appeal a point not first presented to the trial court. And yet that is precisely what the
majority has permitted here by entertaining Borders’s arguments related to the trial stipulation
and other minor inconsistencies in the trial evidence. These arguments were never presented to
the trial court, and in my judgment, are forfeited.
¶ 86 In reaching a contrary conclusion, the majority relies on In re K.M., 2019 IL App
(1st) 172322, ¶ 18, which in turn relied on People v. Kidd, 175 Ill. 2d 1, 25 (1996). The Brooks
court distinguished Kidd, noting that there, the court relied “on trial testimony to affirm the trial
court’s denial of a motion to suppress.” (Emphasis in original.) Brooks, 187 Ill. 2d at 127 (“The
reviewing court is essentially saying that whether the court’s decision was supported by
sufficient evidence at the suppression hearing becomes irrelevant when evidence to support the
trial court’s decision is introduced at trial.”). It is axiomatic that a reviewing court can affirm on
any basis in the record. To argue for reversal, however, always requires a timely objection in the
trial court.
¶ 87 Some of our decisions have reversed suppression rulings while relying on trial
evidence without any explicit consideration of whether the inconsistent trial evidence was argued
34
1-18-2605
first to the trial court (see, e.g., People v. Rhinehart, 2011 IL App (1st) 100683, ¶ 9), but one
published opinion (astonishingly) purports to modify the supreme court’s holding in Brooks
(People v. Horton, 2019 IL App (1st) 142019-B). In Horton, the majority eliminated the need to
challenge the suppression ruling when the new evidence is introduced at trial, and instead held it
is sufficient to argue the point in the posttrial motion. Id. ¶ 60; contra Yakich v. Aulds, 2019 IL
123667, ¶ 13 (quoting Blumenthal v. Brewer, 2016 IL 118781, ¶ 61) (When the Illinois Supreme
Court “has declared the law on any point, it alone can overrule and modify its previous opinion,
and the lower judicial tribunals are bound by such decision and it is the duty of such lower
tribunals to follow such decision in similar cases.” (Emphasis in original.)). It is hard to square
the Horton holding with time-honored decisions from our supreme court that require both an
objection at trial and a written post-trial motion. See, e.g., People v. Mudd, 2022 IL 126830, ¶
21; People v. Enoch, 122 Ill. 2d 176, 186 (1988).
¶ 88 Even if Horton could legitimately announce a new rule, the defendant’s post-trial
motion here was woefully inadequate to preserve a complicated evidentiary challenge potentially
requiring the trial court to reweigh credibility. The posttrial motion simply stated: “That the trial
court erred when it denied Defendant[’s] Pre-trial Motions.” That generic statement lacks the
necessary specificity to put the trial court and the State on notice as to the suppression issue
being renewed in light of putatively inconsistent trial evidence. See 725 ILCS 5/116-1(c) (West
2018) (“The motion for a new trial shall specify the grounds therefor.”); People v. Thomas, 278
Ill. App. 3d 276, 283 (1996) (“[I]t is insufficient to merely refer to a cited error in a post-trial
motion without factual detail.”).
¶ 89 For all these reasons, I confine my analysis to the evidence introduced at the
suppression hearing.
35
1-18-2605
36 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488019/ | NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except
in the limited circumstances allowed under Rule 23(e)(1).
2022 IL App (3d) 210106-U
Order filed November 18, 2022
____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
2022
THE PEOPLE OF THE STATE OF ) Appeal from the Circuit Court
ILLINOIS, ) of the 21st Judicial Circuit,
) Kankakee County, Illinois,
Plaintiff-Appellee, )
) Appeal No. 3-21-0106
v. ) Circuit No. 14-CF-546
)
TRAVIEN K. MOORE, ) Honorable
) Clark E. Erickson,
Defendant-Appellant. ) Judge, Presiding.
____________________________________________________________________________
JUSTICE PETERSON delivered the judgment of the court.
Justices Daugherity and Hettel concurred in the judgment.
____________________________________________________________________________
ORDER
¶1 Held: The court did not err by dismissing defendant’s postconviction petition at the first
stage.
¶2 Defendant, Travien K. Moore, appeals from the first-stage dismissal of his postconviction
petition. Defendant argues that he stated the gist of a claim for ineffective assistance of counsel
due to the failure to call his mother, Twilla Thomas, as an alibi witness. We affirm.
¶3 I. BACKGROUND
¶4 The State charged defendant by way of a 15-count indictment with, as relevant here,
multiple counts of aggravated criminal sexual assault (720 ILCS 5/11-1.30(a)(2), (3), (5) (West
2014)) and one count each of aggravated unlawful restraint (id. § 10-3.1) and aggravated battery
(id. § 12-3.05(a)(5)). Defendant was appointed counsel to represent him. The case proceeded to a
jury trial.
¶5 The victim testified that she was visiting a relative and left at approximately 4:30 p.m. to
return home. When she arrived home, she encountered a man in her house. The victim described
the man as wearing dark brown gloves, black pants, a black hooded sweatshirt, and a black
stocking cap with makeshift eye slits. She stated the man was black and estimated he was
approximately five feet, eleven inches tall and weighed 210 pounds. The man placed his penis in
her mouth and vagina. When the man left, the victim was lying on the ground, bound with duct
tape. She screamed for her neighbor.
¶6 Between 5:30 and 5:45 p.m., the victim’s neighbor heard her screaming. He went to her
residence and found the victim lying on the floor undressed, with her hands and ankles bound
with duct tape.
¶7 A sexual assault examination was conducted, and semen was recovered from the vaginal
swab. DNA analysis of the swab indicated the presence of a female DNA profile, which matched
the victim, and a male DNA profile. The male profile was compared with DNA in a database of
known profiles and led to a preliminary match with defendant. A buccal swab from defendant
was also analyzed. The DNA profile resulting from the buccal swab matched the male DNA
profile from the vaginal swab at all 15 loci tested. The DNA evaluation indicated that the male
DNA profile identified in the vaginal swab “would be expected to occur in approximately 1 in 25
2
quintillion black [individuals], one in 21 sextillion southwest Hispanic [individuals], [and] one in
780 quintillion white unrelated individuals.” The victim testified that prior to the attack, she was
not in a sexual relationship with defendant and had never seen him before.
¶8 The police searched a residence where they believed defendant was staying, which was
approximately 3½ blocks from the victim’s residence. Defendant was present at the address
when they entered and they found mail addressed to him at that residence. An officer testified
that, as they were escorting defendant from the residence, he asked them to retrieve money from
a jacket. In that jacket, they located a black stocking cap with makeshift eye slits and gloves. The
officers also recovered a black hooded sweatshirt and two pairs of black pants. The victim
testified that the stocking cap was the same one her assailant wore and that the rest of the
clothing looked the same as what her assailant wore at the time of the attack.
¶9 An officer testified that the arrest sheet for defendant listed his height as five feet, eleven
inches tall and his weight as 220 pounds. It also listed the searched address as defendant’s home
address. That information was supplied by defendant.
¶ 10 The jury found defendant guilty of aggravated criminal sexual assault, unlawful restraint,
and aggravated battery. The court sentenced defendant to a total of 105 years’ imprisonment.
¶ 11 Defendant filed a motion for new trial arguing his counsel was ineffective which was
denied after a preliminary Krankel hearing. Defendant then filed a motion for reconsideration
asserting additional allegations of ineffective assistance of counsel. The additional allegations
included an argument that counsel was ineffective for failing to call witnesses to testify that the
clothing admitted into evidence was not defendant’s and for failing to call his “most important
witness” as an alibi witness. Defendant did not name the witness. The court conducted another
3
preliminary Krankel hearing. Counsel told the court that she spoke with Thomas on more than
one occasion,
“but basically it was to get her—it was more for an alibi situation because of
when [defendant] had gotten home that night, what she did that night, and what
her husband, [defendant’s] stepfather, had done that night *** or afternoon.
Those were the *** focus of my conversations with *** Thomas was to
determine if she could be used and whether the stepfather could be used as an
alibi witness. I actually did not have either of them lined up specifically for the
clothing issue.”
The court did not find that defendant raised an issue that would merit the appointment of
independent counsel.
¶ 12 Defendant appealed, arguing the court erred by denying his request for a continuance,
raising issues of prosecutorial misconduct, and challenging his sentence. He did not challenge
the court’s ineffective assistance of counsel decision. This court affirmed. People v. Moore, 2019
IL App (3d) 160355-U.
¶ 13 Defendant, as a self-represented litigant, filed a postconviction petition. He argued,
among other things, that counsel provided ineffective assistance by failing to call his alibi
witness, Thomas, who saw him at home at the time the attack occurred. He attached an affidavit
from Thomas indicating various times on the day of the attack that she witnessed defendant at
home, including 4:40 and 5:45 p.m. Thomas further attested that counsel told her she would call
her to testify, but she did not. The court dismissed the petition at the first stage. Defendant
appeals.
4
¶ 14 II. ANALYSIS
¶ 15 Defendant argues that his postconviction petition stated the gist of a claim for ineffective
assistance of counsel based on counsel’s failure to call Thomas as an alibi witness.
¶ 16 The Post-Conviction Hearing Act (725 ILCS 5/122-1 et seq. (West 2018)) provides a
process for a criminal defendant to assert that his conviction resulted from a substantial denial of
his rights under the United States Constitution, the Illinois Constitution, or both. People v.
Hodges, 234 Ill. 2d 1, 9 (2009). Defendant need only state the “gist” of a constitutional claim at
the first stage. Id. The petition may be summarily dismissed at the first stage of proceedings if it
is frivolous or patently without merit, such that it “has no arguable basis either in law or in fact.”
Id. at 16. But the petition must “clearly set forth the respects in which petitioner’s constitutional
rights were violated.” 725 ILCS 5/122-2 (West 2018). “A petition which lacks an arguable basis
either in law or in fact is one which is based on an indisputably meritless legal theory or a
fanciful factual allegation.” Hodges, 234 Ill. 2d at 16. “Meritless legal theories include those
theories that are completely contradicted by the record.” People v. Boykins, 2017 IL 121365, ¶ 9.
Additionally, “where res judicata and forfeiture preclude a defendant from obtaining relief, such
a claim is necessarily ‘frivolous’ or ‘patently without merit.’ ” People v. Blair, 215 Ill. 2d 427,
445 (2005).
¶ 17 Initially, we note that defendant raised a claim of ineffective assistance of counsel due to
the failure to call an alibi witness in his motion for new trial. The court heard the claim at a
preliminary Krankel hearing and deemed it meritless. Defendant failed to challenge that ruling
on direct appeal and this claim is forfeited. See People v. English, 2013 IL 112890, ¶ 22 (stating
that “issues that could have been raised on direct appeal, but were not, are forfeited”).
5
¶ 18 Even if the claim is not forfeited because defendant did not explicitly argue Thomas was
his alibi witness or have an affidavit from her in his motion for new trial, the court’s dismissal
was proper. For an ineffective assistance of counsel claim to survive first-stage dismissal,
defendant must show that “(i) it is arguable that counsel’s performance fell below an objective
standard of reasonableness and (ii) it is arguable that the defendant was prejudiced.” Hodges, 234
Ill. 2d at 17. “[I]f the ineffective-assistance claim can be disposed of on the ground that the
defendant did not suffer prejudice, a court need not decide whether counsel’s performance was
constitutionally deficient.” People v. Evans, 186 Ill. 2d 83, 94 (1999).
¶ 19 Here, it is not arguable that defendant was prejudiced by the failure to call Thomas as an
alibi witness. The victim was sexually assaulted and testified that her assailant placed his penis in
her vagina. Defendant’s semen was found in the victim’s vagina. The victim testified she had
never seen defendant previously and did not have a sexual relationship with him. There was no
evidence contradicting her testimony or providing any explanation of how defendant’s semen
could have been located in her vagina if defendant was not the assailant. Moreover, clothing
fitting the description of what the assailant wore was found in defendant’s residence, including
the black stocking cap with makeshift eye slits. Additionally, defendant matched the height,
weight, and race description of the assailant. Further, the time given by the victim was not exact,
Thomas’s affidavit does not explicitly state defendant was home the entire time frame of the
attack, rather it states he was there at 4:40 and 5:45 p.m., and defendant only lived 3½ blocks
from the victim. Even accepting the allegations in Thomas’s affidavit as true, it would not
necessarily provide defendant an alibi.
6
¶ 20 In sum, the court did not err in dismissing defendant’s postconviction petition because
defendant failed to make an arguable showing of prejudice. That is, it is not arguable that had
counsel called Thomas as an alibi witness the outcome of the trial would have been different.
¶ 21 III. CONCLUSION
¶ 22 The judgment of the circuit court of Kankakee County is affirmed.
¶ 23 Affirmed.
7 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488020/ | 2022 IL App (1st) 1210748-U
FIFTH DIVISION
November 18, 2022
No. 1-21-0748
NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent
by any party except in the limited circumstances allowed under Rule 23(e)(1).
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
THE PEOPLE OF THE STATE OF ILLINOIS, )
) Appeal from the
Plaintiff-Appellee, ) Circuit Court of Cook County.
)
v. ) 00 CR 8715
)
KENDALE MCCOY, ) Honorable Thomas Joseph Hennelly,
) Judge Presiding.
Petitioner-Appellant. )
PRESIDING JUSTICE CONNORS delivered the judgment of the court.
Justices Cunningham and Delort concurred in the judgment.
ORDER
¶1 Held: The circuit court’s denial of defendant’s motion for leave to file a
successive postconviction petition is affirmed, where he cannot establish
cause for his claim that his 40-year sentence violated the proportionate
penalties clause of the Illinois Constitution.
¶2 Defendant, Kendale McCoy, appeals from the circuit court’s order that denied him
leave to file a successive postconviction petition under the Post-Conviction Hearing Act (Act)
(725 ILCS 5/122-1(a)(1) (West 2020)). Following a jury trial, McCoy was convicted of first-
degree murder (720 ILCS 5/9-1(a)(1) (West 2000)) and two counts of armed robbery (720 ILCS
5/18-2(a) (West 2000)). McCoy, who was 20 years old at the time of the offenses, was sentenced
to 40 years in prison for first-degree murder and 15 years for each count of armed robbery, to be
No. 1-21-0748
served concurrently. On appeal, McCoy contends that the circuit court erred when it denied his
motion for leave to file his successive postconviction petition because he established cause and
prejudice for his claim that his 40-year sentence is unconstitutional as applied to him, as it was
imposed without the trial court’s understanding of the lessened culpability and greater
rehabilitative potential of youthful offenders. We affirm.
¶3 I. BACKGROUND
¶4 Following a 2001 jury trial, McCoy was found guilty of two counts of armed robbery
and one count of first-degree murder. At the time of the offenses, McCoy was 20 years old. The
trial court sentenced him to 40 years in prison for first-degree murder and 15 years for each
count of armed robbery, to be served concurrently. On direct appeal, this court affirmed the trial
court’s judgment and set forth a summary of the trial evidence. See People v. McCoy, 1-02-0033
(2003) (unpublished order pursuant to Supreme Court Rule 23).
¶5 As the trial evidence is not at issue, we summarize and repeat from our prior order
those facts necessary to an understanding of the issues raised in this appeal.1 See id. At trial,
Theon Dudley Jones testified that on September 13, 1999, he was with Delano Reese at a
Chicago Housing Authority (CHA) building visiting a friend. While they were waiting for the
elevator, Jones saw McCoy and codefendant, Calvin Clay,2 enter the building with guns. McCoy
and Clay told Jones and Reese to “empty their pockets,” and Jones and Reese took paper and
money out of their pockets. McCoy pointed his gun and threatened Reese, and Clay walked to
the front of the building and looked around to see if anyone was in the area. Clay then walked
back inside the building and shot at Reese three times. While Reese was falling down, McCoy
1
McCoy states in his opening brief that the “trial proceedings are not in dispute, and were adequately summarized
by this Court on direct appeal. See People v. McCoy, No. 1-02-0033 (Apr. 16, 2003).”
2
Clay and McCoy had separate trials and Clay is not a party to this appeal.
2
No. 1-21-0748
fired his gun at him two times. McCoy and Clay then ran out of the building. Later that day,
Jones identified McCoy and Clay in photographs, and about two weeks later he identified
McCoy in a police lineup. Lorenzo Thomas testified that he was at the CHA building on
September 13, 1999, and heard gunshots, after which he looked out of the window and saw
McCoy and Clay run out of the building with guns.
¶6 The State presented McCoy’s videotaped statement. The Rule 23 order summarized
the statement as follows:
“Defendant stated that Clay gave him a ‘long .38 revolver’ and he walked with Clay
to 2222 South State. Inside the building, Clay told Reese and Jones to empty their
pockets and they placed money and papers on the floor. Defendant checked to see if
Reese and Jones had any weapons, while Clay looked out the front of the building to see
if anyone was nearby. Defendant waved his gun at Reese and Jones, who had their hands
above their heads. Clay returned and picked up the money that was on the floor. When
defendant turned to leave the building, he heard a gunshot. When he turned back around,
defendant saw Clay shoot four or five times at Reese and Reese fall to the ground.
Defendant and Clay ran out of the building, and defendant fired his gun three times in the
air to make sure that no one was following them.”
¶7 The jury found McCoy guilty of first-degree murder and two counts of armed
robbery.
¶8 Sentencing
Presentence Investigation Report (PSI)
¶9 The PSI included information about McCoy’s social history, marital status, education,
employment, health history, drug and alcohol use, community involvement, and economic status.
3
No. 1-21-0748
It provided that McCoy stated, among other things, that his parents never married, and he lived
with his mother in Chicago until he was seven years old, at which time he moved to Minnesota
to live with his father and stepmother. In 1996, he returned to Chicago to live with his mother.
Both of his parents had abused drugs and alcohol. His childhood was “sometimes bad,
sometimes good” and he denied any history of child abuse. McCoy attended two elementary
schools, one in Chicago and one in Minnesota. He attended middle school in Minnesota and then
after one year of high school there, he moved back to Chicago, where he attended some high
school. He then moved back to Minnesota and enrolled in another high school before he left
school in the eleventh grade. McCoy participated in “special education classes for slower
learners” in elementary school and did not participate in any school activities. He failed the GED
test but hoped to retake the test.
¶ 10 McCoy supported himself by working “odd jobs.” He started experimenting with
alcohol and marijuana when he was 14 years old and had on average a half of a pint of hard
liquor daily and about two to three “blunts” of marijuana each day. When he was 15 years old, he
joined a gang, which he quit when he was arrested for the charges in this case. The PSI provided
that McCoy denied any history of mental health or a need for mental health treatment, and he
denied any problems with drugs or alcohol. The PSI stated that McCoy did not have any juvenile
adjudications and he received a boot camp sentence in 1997 for a drug offense. McCoy had a
three-year-old child, whom he saw daily, and did not pay child support.
¶ 11 Sentencing Hearing
¶ 12 At McCoy’s sentencing hearing, the court entered into evidence a certified copy of
his conviction for delivery of a controlled substance from 1997. In aggravation, the State read a
victim impact statement from the victim’s grandfather, in which he stated that the victim “was a
4
No. 1-21-0748
whimpy little guy who was 17 years old,” had recently helped his grandfather paint a large
apartment, and always washed the dishes for his aunt, brother, and cousins with whom he lived.
The State stated that this was a tragic case, there was no provocation, and the unarmed victims
were in “the wrong place at the wrong time, being there when the defendant and his buddies
decide to go look for rival gangs.” The State asserted that McCoy was charged in this case within
one year after he was released from a boot camp sentence that he received for a drug conviction.
The State requested the court give him an “appropriate sentence.”
¶ 13 In mitigation, McCoy’s mother, Patricia White, testified that McCoy lived with her
until he was eight years old when he moved to Minnesota with his father. He returned to live
with White when he was 17 years old. She testified that McCoy was a “good son,” a “good kid,”
and “just hangs with the wrong crowd at times.” She moved out of the CHA Harold Ickes
building and tried to make a better home for her children. She testified that “I would try to tell
my son all the time please, whatever you do stay away from those Ickes, it’s going to be the
cause of your death and the cause of you going to jail.” She testified she tried to teach her son “to
do the right things, I raised them in the best way that I can as a parent” and “one time I know he
was living with his dad, his dad was on drugs, I don’t know what kind of life he led at that time,
but when he came back to me, I used to be on drugs.” She also testified that McCoy had a son
whom she now had to raise.
¶ 14 Defense counsel argued that McCoy attended special education classes, worked odd
jobs, and tried to support himself. Counsel stated that McCoy tried to finish high school and get
his GED, but was unsuccessful, and this was his first conviction for a violent crime. Counsel
noted that the court had read about McCoy’s use of drugs and alcohol and heard evidence about
the alcohol abuse in the home. Counsel argued that she believed the jury found McCoy guilty
5
No. 1-21-0748
based on an accountability theory while he was armed, that the physical evidence did not support
that he “fired at anyone credible,” and that Clay was the person who did the shooting that killed
the victim. Counsel argued that even a 20-year minimum sentence was substantial and requested
a sentence “closer to the minimum than the maximum.”
¶ 15 Following counsel’s argument, McCoy stated that “[t]here’s not a day that goes by
that I don’t think of the tragedy that has happened to my life and also Delano Reese’s life, both
taken away” and that “[n]ow both of our families has lost two young men.” He stated, “I wish I
could take back the hands of time and change that in life.”
¶ 16 The trial court sentenced McCoy to 40 years in prison for first-degree murder and 15
years for each armed robbery count, to be served concurrently. In doing so, the trial court stated
that it reviewed its notes from trial, the statutory factors in aggravation and mitigation, the
information contained in the PSI, the victim impact statement, the testimony from McCoy’s
mother, the arguments in aggravation and mitigation, and McCoy’s statement.
¶ 17 The court discussed the evidence relating to whether McCoy was the shooter who
shot the victim:
“And, I suppose, addressing one issue that counsel has addressed with regard to the
physical evidence, the testimony with regards to whether the defendant was shooting,
clearly several of the witnesses testified the defendant was shooting as he left the building
into the air in an attempt, I suppose, to scare away some of the potential witnesses, but, of
course, the Court is mindful that Mr. Jones, who came in to testify, did indicate that after
Calvin Clay began shooting and as the victim was falling in this case, that Mr. McCoy
shot two times at him as well as he was falling. Counsel’s correct about the physical
evidence that was recovered. Most of the physical evidence recovered in this case would
6
No. 1-21-0748
suggest that Mr. Clay, that at least more accurate in his aim which resulted in the injuries,
and that there was instruction with regard to the theory of accountability, reasonable fact-
finder could have found either way that the defendant clearly was accountable for the
actions, but because there was evidence that he also participated in the shooting that
caused the death of Mr. Reese.”
The court also noted that McCoy did not have a “significant prior criminal history.” The court
stated that McCoy had previously received a boot camp sentence and that within one year of
being released from boot camp, this offense occurred, the “most serious charge that one human
being can be charged with, and that is, I suppose, cold-blooded murder of another individual.”
¶ 18 As for mitigation, the court stated:
“I do note in terms of mitigation***as [defense counsel] has argued that with regard
to your education***it does indicate that you were in classes for slow learners, and, quite
frankly, I probably might have not necessarily, being a slow learner, but from the
evidence that was presented and the description of your participation in this particular
crime as relayed by other witnesses, it has become clear to this Court that Mr. Clay was
clearly more of the motivating force, I suppose, to put it in another way, an inspiration for
you to accompany him, to arm yourself, and do the things that resulted in this particular
case.”
The court stated that “[t]hat is not an excuse” but “offer[ed] some mitigation.” the court
concluded:
“But there does come a point in your life, and as your mother apparently has
repeatedly told you, you’re 22 years old, you’re a man in the eyes of the law, and you
7
No. 1-21-0748
have to make decisions, and you have to live by the decision you make and consensus
[sic] to follow.”
¶ 19 The court stated that it accepted McCoy’s “statement of regret as being a sincere one”
and that “it is probably a good thing that you feel that within yourself.” The court stated that it
indicated to the court that “there is a spark of good in you that if directed and channeled the
proper way, that will cause you when you come out of the penitentiary system to be a productive
and loving member of your community, church, family and part of your child’s life, but those
will be things that you will have to decide on your own.”
¶ 20 McCoy filed a motion to reconsider sentence, in which he argued, among other
things, that the sentence was excessive in view of his background and the nature of his
participation in the offense. The court denied the motion to reconsider sentence.
¶ 21 Direct Appeal
¶ 22 As previously noted, McCoy appealed his conviction and sentence to this court. See
People v. McCoy, 1-02-0033 (2003) (unpublished order pursuant to Supreme Court Rule 23). On
appeal, McCoy argued that the trial court abused its discretion because it imposed an excessive
sentence where the “evidence demonstrated a lower level of culpability” and the court did not
consider his rehabilitative potential. This court stated that the trial court had rejected McCoy’s
argument that the physical evidence did not support the determination that he actually shot at the
victim, noting that Jones testified that after Clay shot the victim, McCoy fired the gun at him two
times. This court also concluded that McCoy’s claim that the trial court did not adequately
consider the mitigating factors as evidence of his rehabilitative potential was without merit. The
court noted that all mitigating factors were presented and given “due consideration” and that the
trial court considered the PSI, the testimony by McCoy’s mother, and defense counsel’s
8
No. 1-21-0748
statements in mitigation. This court also stated that the trial court considered other relevant
factors, including the seriousness of the crime and the protection of society. This court affirmed
the trial court’s judgment.
¶ 23 Post-Conviction Petitions
¶ 24 In 2004, McCoy filed a petition for postconviction relief under the Act, in which he
argued he was denied his constitutional right to counsel while at the police station, he was denied
his right to a fair trial and to testify, the State’s witnesses committed perjury, his videotaped
statement was coerced and should have been suppressed, and his trial counsel provided
ineffective assistance of counsel in numerous ways. In a written order, the circuit court denied
McCoy’s petition for relief and dismissed his petition, concluding that the claims raised were
frivolous and patently without merit. On appeal, this court affirmed the circuit court’s judgment.
See People v. McCoy, No. 1-13-1184 (2015) (unpublished summary order under Illinois
Supreme Court Rule 23(c)) (citing People v. McCoy, No. 1-04-3320 (2006) (unpublished
summary order under Illinois Supreme Court Rule 23(c)).
¶ 25 In 2011, McCoy filed a motion for leave to file a successive postconviction petition
for relief. He alleged that his due process rights were violated because the State withheld certain
evidence, including the criminal histories of the State’s witnesses, and that he received
ineffective assistance of counsel. The circuit court denied McCoy’s motion and then
subsequently denied his motion to reconsider. On appeal, this court affirmed the circuit court’s
judgment. People v. McCoy, No. 1-13-1184 (2015) (unpublished summary order under Illinois
Supreme Court Rule 23(c)).
¶ 26 In October 2020, McCoy filed the motion for leave to file a successive postconviction
petition at issue here. He contended that his sentence violated the eighth amendment to the
9
No. 1-21-0748
United States Constitution and the proportionate penalties clause of the Illinois Constitution. He
asserted his 40-year sentence was a de facto life sentence and was imposed without adequately
considering his youth.
¶ 27 McCoy attached to his petition an affidavit, in which he averred, among other things,
as follows. His parents were never married, and he was raised in a small apartment in a CHA
building with other relatives. When he was two years old, he observed an argument between his
parents where his mother threw his father’s belongings out of their apartment, after which his
parents’ relationship ended. His mother received public aid and relied on free food programs as
well as family members and friends for basic essentials. His mother used crack cocaine and when
he was eight years old, she tried to commit suicide. Shortly thereafter, one of his cousins, who
was like a brother to him, tragically died. As a result, he started acting out and was expelled from
school and sent to Minnesota to live with his father. His behavior problems escalated, and he was
placed in classes for slow learners until he finished eighth grade. He had to depend on his
stepmother to take care of him because his father would go missing for days or sometime weeks
“at time out on a bender to his crack cocaine addiction.”
¶ 28 McCoy further averred that when he was 13 years old, he started using marijuana and
drinking alcohol. When he was 15 years old, his grades were failing due to his low attendance,
and he became involved with gangs and drugs. He never saw a psychologist, therapist, or
counselor. Between the ages of 13 and 16, he moved back and forth between Chicago and
Minnesota and, at age 16, he permanently moved back to Chicago. He attended four high schools
until he dropped out in eleventh grade. By the time he was 18 years old, he suffered the tragic
deaths of several of his childhood friends. McCoy also stated in his affidavit that during his 21
years of incarceration, he “obtain[ed] educational progress, spiritual development, vocational
10
No. 1-21-0748
development, and psychological maturity.” On several different occasions, he was approved by
the prison’s administration for assignments relating to janitorial, laundry, and food and he has
substantial support available for post-release living.
¶ 29 To his petition, McCoy attached a prison disciplinary record as well as various
certificates from programs, including programs in lifestyle redirection, anger management, and
domestic violence. McCoy also attached to his petition various articles relating to emerging
adulthood and criminology, including articles entitled “Emerging Adulthood: A Theory of
Development from the Late Teens through the Twenties”; “Emerging Adulthood, a Pre-adult
Life-History Stage”; “The Emerging Adult Gap: Integrating Emerging Adulthood into Life-
Course Criminology”; and “Less Guilty by Reason of Adolescence.”
¶ 30 The circuit court denied McCoy’s motion for leave to file a successive postconviction
petition. The circuit court subsequently denied his motion to reconsider. This appeal follows.
¶ 31 II. ANALYSIS
¶ 32 On appeal, McCoy contends that he established cause and prejudice for his claim that
his 40-year sentence was unconstitutional as applied to him, as it was imposed without the
current understanding of the lessened culpability and greater rehabilitative potential of youthful
offenders. He argues he established cause for failing to raise his claim in an earlier petition
because the developing case law on juvenile and young-adult offenders, including the United
State Supreme Court decision in Miller v. Alabama, 576 U.S. 460 (2012), as well as the cases
applying Miller, were unavailable to him when he filed his initial postconviction petition in
2004. McCoy argues that he established prejudice for his claim because the record shows that the
trial court did not consider the Miller factors when it imposed his sentence, and his petition as
11
No. 1-21-0748
well as supporting affidavit adequately pled that due to his unique circumstances, he was not
fully mature when he committed the offenses.
¶ 33 Post-Conviction Hearing Act
¶ 34 The Post-Conviction Hearing Act (Act) (725 ILCS 5/122-1 et seq. (West 2020))
provides a remedy by which those under criminal sentence can assert that their convictions were
the result of a substantial denial of their constitutional rights. People v. Peacock, 2022 IL App
(1st) 170308-B, ¶ 4. A postconviction proceeding is a collateral attack on a prior conviction and
is therefore “limited to constitutional matters that were not and could not have been previously
adjudicated.” People v. Morris, 236 Ill. 2d 345, 354 (2010). Thus, “issues that were raised and
decided on direct appeal are barred from consideration by the doctrine of res judicata; issues that
could have been raised, but were not, are considered forfeited.” People v. Davis, 2014 IL
115595, ¶ 13.
¶ 35 The Act contemplates the filing of only one postconviction petition. People v.
Edwards, 2012 IL 111711, ¶ 22. As such, “a defendant faces immense procedural default hurdles
when bringing a successive postconviction petition” and “these hurdles are lowered only in very
limited circumstances.” Davis, 2014 IL 115595, ¶ 14. A petitioner seeking to file a successive
postconviction petition must first obtain leave of court. Peacock, 2022 IL App (1st) 170308-B, ¶
4. For a petitioner to obtain leave of court, he or she “must demonstrate ‘cause’ for the failure to
raise the claim in the initial petition and that ‘prejudice’ resulted from that failure.” People v.
Dorsey, 2021 IL 123010, ¶ 32. Under the Act, a defendant shows cause by “identifying an
objective factor that impeded the ability to raise a specific claim during the initial postconviction
proceeding.” Id. (citing 725 ILCS 5/22-1(f) (West 2020)). A defendant shows prejudice by
showing that “the claim not raised during the initial proceeding so infected the trial that the
12
No. 1-21-0748
resulting conviction or sentence violated due process.” Id. (citing 725 ILCS 5/22-1(f) (West
2020)).
¶ 36 At the leave to file stage, a petitioner “is not required to make the ‘substantial
showing’ that will later be required at a second-stage hearing after counsel is appointed.” People
v. Walker, 2022 IL App (1st) 201151, ¶ 20. Rather, the court should only deny a petitioner leave
to file a successive postconviction petition “when it is clear, from a review of the successive
petition and the documentation submitted by the petitioner, that the claims alleged by the
petitioner fail as a matter of law or where the successive petition with supporting documentation
is insufficient to justify further proceedings.” People v. Smith, 2014 IL 115946, ¶ 35. Our review
of a circuit court’s denial of leave to file a successive postconviction petition is de novo. People
v. Wimberly, 2022 IL App (1st) 211464, ¶ 5.
¶ 37 As previously noted, McCoy asserted in his motion for leave to file a successive
petition that his sentence violates the eighth amendment to the United States Constitution as well
as the proportionate penalties clause of the Illinois Constitution. On appeal, McCoy contends that
his 40-year sentence is unconstitutional as applied to him under the proportionate penalties
clause of the Illinois Constitution. To support this argument, McCoy relies on Miller and the
evolving federal and Illinois case law relating to sentencing of juvenile and young-adult
offenders. McCoy’s claim under the proportionate penalties clause of the Illinois Constitution is
based on Miller, so we will first briefly address the eighth amendment and Miller. See People v.
Walsh, 2022 IL App (1st) 210786, ¶ 25 (stating that the defendant’s claim under the Illinois
proportionate penalties clause has “its roots in the eighth amendment to the United States
Constitution.”).
¶ 38 Eighth Amendment
13
No. 1-21-0748
¶ 39 “The Eighth Amendment’s prohibition of cruel and unusual punishment ‘guarantees
individuals the right not to be subjected to excessive sanctions.’ ” Miller v. Alabama, 567 U.S.
460, 469 (2012) (quoting Roper v. Simmons, 543 U.S. 551, 560 (2005)). In Miller, 567 U.S. at
465, the United States Supreme Court found that mandatory life without parole for offenders
under 18 years old violated the eighth amendment. The court explained that “children are
constitutionally different from adults for purposes of sentencing” and “juveniles have diminished
culpability and greater prospects for reform.” Miller, 567 U.S. at 471. The court recognized
several factors regarding significant characteristics of juveniles that a sentencing court must
consider in mitigation before imposing a mandatory life sentence on a juvenile. Miller, 567 U.S.
at 477; see also People v. Holman, 2017 IL 120655, ¶ 46.
¶ 40 The Illinois Supreme Court has applied the reasoning and factors of Miller to
discretionary sentences of life without parole for juvenile defendants (Holman, 2017 IL 120655,
¶ 40) as well as “de facto life sentences, which it defined as a sentence of over 40 years”
(Walker, 2022 IL App (1st) 201151, ¶ 23). “To prevail on a claim based on Miller and its
progeny, a defendant sentenced to an offense committed while a juvenile must show that (1) the
defendant was subject to a life sentence, mandatory or discretionary, natural or de facto, and (2)
the sentencing court failed to consider youth and its attendant characteristics in imposing the
sentence.” People v. Buffer, 2019 IL 122327, ¶ 27 (citing Holman, 2017 IL 120655, ¶ 40).
Further, “it is well established that offenders who are 18 years old and older cannot raise a facial
challenge to their sentences under the eighth amendment and the Miller line of cases.” People v.
Glinsey, 2021 IL App (1st) 191145, ¶ 38.
¶ 41 Here, we note that McCoy was 20 years old at the time he committed the offenses
and, thus, not a juvenile offender. Thus, to the extent defendant is arguing that his sentence
14
No. 1-21-0748
violates the eighth amendment to the United States Constitution, since he was 20 years old at the
time of the offenses, he cannot avail himself of the eighth amendment. See People v. Harris,
2018 IL 121932, ¶ 61 (concluding that “the age of 18 marks the present line between juveniles
and adults,” and noting that “claims for extending Miller to offenders 18 years of age or older
have been repeatedly rejected”); see also People v. Carrion, 2020 IL App (1st) 171001, ¶ 28
(concluding that “[s]ince defendant was age 19 at the time of his crime, he cannot avail himself
of the eighth amendment,” noting that “it is clear that the categorical findings made
by Miller and its progeny under the federal eighth amendment apply only to juveniles”).
¶ 42 Proportionate Penalties Clause of the Illinois Constitution
¶ 43 McCoy contends that he adequately raised a claim that his 40-year sentence for
offenses committed when he was 20 years old is unconstitutional as applied to him under the
proportionate penalties clause of the Illinois Constitution. As previously noted, McCoy’s claim is
based on Miller and the evolving federal and Illinois law on sentencing of juvenile and young
adult offenders. In response, the State argues, among other things, that McCoy cannot establish
cause because he had the ability to argue an as-applied proportionate penalties clause claim when
he filed his direct appeal in 2002, initial postconviction petition in 2004, and his successive
petition in 2011. The State asserts that at the time he filed his earlier petitions, the proportionate
penalties clause existed, and it was well established that his youth was relevant at sentencing.
¶ 44 The proportionate penalties clause of the Illinois Constitution states that “[a]ll
penalties shall be determined both according to the seriousness of the offense and with the
objective of restoring the offender to useful citizenship.” Ill. Const. 1970, art. 1, § 11. The
proportionate penalties clause prohibits punishments that are “cruel, degrading, or so wholly
disproportionate to the offense as to shock the moral sense of the community.” People v.
15
No. 1-21-0748
Ruddock, 2022 IL App (1st) 173023, ¶ 70. “[T]he proportionate penalties clause goes further
than the eighth amendment in offering protection against oppressive penalties.” People v.
Savage, 2020 IL App (1st) 173135, ¶ 65. Further, “our supreme court has acknowledged that
young adults—at least those who were 20 years of age or younger at the time of their crimes—
may rely on the evolving neuroscience and societal standards underlying the rule in Miller to
support as-applied challenges to life sentences brought pursuant to the Illinois proportionate
penalties clause.” People v. Wilson, 2022 IL App (1st) 192048, ¶ 87 (citing Ill. Const. 1970, art.
I, § 11).
¶ 45 Before the court can reach the merits of a defendant’s claim that his or her sentence
violates the proportionate penalties clause, a defendant first must establish cause for the failure to
raise the claim in the initial petition. Wimberly, 2022 IL App (1st) 211464, ¶ 7. Thus, before we
can reach the merits of McCoy’s claim, we first must determine whether he established cause for
his failure to raise the proportionate penalties claim in an earlier petition.
¶ 46 As previously noted, McCoy’s claim is based on Miller and the sentencing law that
continues to develop relating to the developmental and neurological differences between adults
and young adult offenders. McCoy argues that he established cause for not raising his claim
earlier because Miller and its progeny were unavailable when he filed his initial post-conviction
petition in 2004. However, in People v. Dorsey, 2021 IL 123010, ¶ 74, the Illinois Supreme
Court has concluded that “Miller’s announcement of a new substantive rule under the eighth
amendment does not provide cause for a defendant to raise a claim under the proportionate
penalties clause.” The court further stated: “Illinois courts have long recognized the differences
between persons of mature age and those who are minors for purposes of sentencing. Thus,
Miller’s unavailability prior to 2012 at best deprived defendant of ‘some helpful support’ for his
16
No. 1-21-0748
state constitutional law claim, which is insufficient to establish ‘cause.’ ” Dorsey, 2021 IL
123010, ¶ 74.
¶ 47 McCoy asserts that the overwhelming balance of authority supports his contention
that he established cause to raise his claim based on the proportionate penalties clause in a
successive petition because the legal basis and the applicable science were not sufficiently
developed when he filed his initial petition. However, this court has concluded that “the
possibility of such a claim has since been foreclosed by the supreme court’s decision in Dorsey.”
Wimberly, 2022 IL App (1st) 211464, ¶ 9; see also Peacock, 2022 IL App (1st) 170308-B, ¶ 20
(“Following Dorsey, reviewing courts have repeatedly concluded that Miller and its progeny do
not provide petitioners seeking leave to file successive petitions with the requisite cause for
challenging their sentences on proportionate penalties grounds.”). In Peacock, where the
defendant, who was 17 years old at the time of the offense, filed his initial postconviction
petition in 2001, this court found he could not establish cause for his claim that his sentence
violated the proportionate penalties clause, stating “the idea that sentencing youthful offenders
requires consideration of their emotional maturity was recognized in Illinois far before defendant
was sentenced and long before he filed his initial postconviction petition.” Id. ¶ 22. The court
concluded: “Although Miller and its progeny may provide additional support for a proportionate
penalties argument, the emergence of such support for a claim that was already raisable does not
constitute cause.” Id.
¶ 48 Here, following Dorsey, McCoy’s reliance on Miller and the evolving developments
in sentencing law relating to juvenile and young adult offenders as the reason for failing to bring
his proportionate penalties clause claim in his initial petition is insufficient to establish cause.
See Wimberly, 2022 IL App (1st) 211464, ¶ 9 (“In light of the court’s pronouncement in Dorsey,
17
No. 1-21-0748
the defendant’s reliance on Miller and related developments in juvenile-sentencing case law as
the reason for his failure to bring his proportionate-penalties-clause claim in his initial petition is
insufficient to establish cause.”). Thus, McCoy did not establish cause for his claim that his
sentence as applied to him violates the proportionate penalties clause of the Illinois Constitution.
Because McCoy must establish both cause and prejudice to file a successive post-conviction
petition, the circuit court properly denied him leave to file the successive petition.
¶ 49 Moreover, we note that in People v. Buffer, 2019 IL 122327, ¶ 41, our supreme court
stated that a “prison sentence of 40 years or less imposed on a juvenile offender does not
constitute a de facto life sentence in violation of the eighth amendment.” Thus, McCoy’s
sentence of 40 years as a 20 year old does not constitute a de facto life sentence. See People v.
Hemphill, 2022 IL App (1st) 201112, ¶ 26 (“Since, under Buffer, a sentence of 40 years is not a
de facto life sentence for a juvenile, it follows that defendant’s 40-year sentence as a 21-year-old
likewise falls outside of Miller and its protections.”).
¶ 50 III. CONCLUSION
¶ 51 For the foregoing reasons, we affirm the circuit court’s denial of McCoy’s motion for
leave to file a successive postconviction petition.
¶ 52 Affirmed.
18 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488025/ | NOTICE
2022 IL App (5th) 200423-U
NOTICE
Decision filed 11/18/22. The
This order was filed under
text of this decision may be NO. 5-20-0423 Supreme Court Rule 23 and is
changed or corrected prior to
not precedent except in the
the filing of a Petition for IN THE limited circumstances allowed
Rehearing or the disposition of
under Rule 23(e)(1).
the same.
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
______________________________________________________________________________
THE PEOPLE OF THE STATE OF ILLINOIS, ) Appeal from the
) Circuit Court of
Plaintiff-Appellee, ) St. Clair County.
)
v. ) No. 15-CF-154
)
ROBERT BILLUPS, ) Honorable
) John J. O’Gara,
Defendant-Appellant. ) Judge, presiding.
______________________________________________________________________________
JUSTICE MOORE delivered the judgment of the court.
Justices Welch and Barberis concurred in the judgment.
ORDER
¶1 Held: Where the defendant failed to make a substantial showing of a constitutional
violation, and any argument to the contrary would lack merit, the defendant’s
appointed appellate counsel is granted leave to withdraw, and the judgment of the
circuit court, dismissing the postconviction petition at the second stage of
postconviction proceedings, is affirmed.
¶2 The defendant, Robert Billups, appeals from an order of the circuit court of St. Clair County
that granted the State’s motion to dismiss his amended petition for postconviction relief. The
defendant’s appointed attorney on appeal, the Office of the State Appellate Defender (OSAD), has
concluded that the instant appeal lacks substantial merit, and on that basis, it has filed with this
court a motion for leave to withdraw as counsel, along with a memorandum of law in support
thereof. See Pennsylvania v. Finley, 481 U.S. 551 (1987). OSAD gave the defendant proper notice
of its motion, and this court provided him with ample opportunity to file a pro se brief,
1
memorandum, or other document explaining why OSAD should not be allowed to withdraw as
counsel, or why this appeal has merit. The defendant has not taken advantage of that opportunity.
Having examined OSAD’s Finley motion and memorandum of law, as well as the entire record on
appeal, this court has concluded that this appeal does indeed lack merit. Accordingly, OSAD is
granted leave to withdraw as counsel, and the judgment of the circuit court is affirmed.
¶3 I. BACKGROUND
¶4 In February 2015, the defendant was charged with 11 felony counts. Specifically, he was
charged with criminal sexual assault (720 ILCS 5/11-1.20(a)(1) (West 2014)) (count 1),
aggravated domestic battery (id. § 12-3.3(a-5)) (count 2), kidnapping (id. § 10-1(a)(2)) (count 3),
unlawful restraint (id. § 10-3(a)) (count 4), and seven counts of domestic battery with a prior
domestic-battery conviction (one count under id. § 12-3.2(a)(1)) and six counts under id. § 12-
3.2(a)(2)) (counts 5 through 11). In each of the 11 counts, the complaining witness was the
defendant’s former girlfriend, Tomara Bolden.
¶5 Criminal sexual assault was a Class 1 felony. Id. § 11-1.20(b)(1). A prison sentence for
criminal sexual assault would be mandatory consecutive to any other charges. 730 ILCS 5/5-8-
4(d)(2) (West 2014). Aggravated domestic battery was a Class 2 felony, but because the defendant
had a prior conviction for aggravated domestic battery, prison was mandatory, and he was eligible
for an extended-term sentence of 7 to 14 years. 720 ILCS 5/12-3.3(b) (West 2014). Kidnapping
was a Class 2 felony. Id. § 10-1(c). Unlawful restraint was a Class 4 felony. Id. § 10-3(b). Domestic
battery with a prior domestic-battery conviction was a Class 4 felony. Id. § 12-3.2(b). Due to the
defendant’s criminal history, he was eligible for an extended-term sentence of three to six years.
730 ILCS 5/5-4.5-45(a) (West 2014).
2
¶6 The defendant had a prior conviction for domestic battery, subsequent offense, in case No.
13-CF-291. He had a prior conviction for aggravated domestic battery in case No. 12-CF-68. The
victims in those two earlier cases were persons other than Tomara Bolden.
¶7 In June 2015, defense counsel informed the court that he had a bona fide doubt about the
defendant’s fitness for trial, and he moved for a fitness evaluation. The court granted the motion,
and appointed Dr. Daniel Cuneo to perform it.
¶8 In July 2015, Dr. Cuneo filed his report. He stated that the defendant was mildly
intellectually disabled and mentally ill (“dysthymic disorder,” etc.), and that he abused substances
(cocaine, etc.). However, he was fit to stand trial. In September 2015, Dr. Cuneo filed another
report in the instant case. He opined that the defendant was “legally sane at the time of the alleged
offenses,” but qualified for a plea of guilty but mentally ill.
¶9 In January 2016, the defendant, his attorney, and an assistant state’s attorney appeared
before the circuit court. In response to the court’s questions, the defendant indicated that he had
spoken with his attorney, that he understood what he was doing, and that his best interests would
be served by waiving his right to a jury trial. He also indicated his understanding that by waiving
a jury trial, he was agreeing that all the evidence at a trial would be presented to a judge, who alone
would “determine *** guilt or innocence.” The defendant did not have any questions. When the
judge asked him, a final time, if he wanted to waive his right to a jury trial, he answered, “Yes,
sir.” The court accepted the waiver of jury trial and scheduled the case for a bench trial. A written
“waiver of jury trial,” which included an election to be tried by the court, was signed by the
defendant. The written jury waiver is part of the record on appeal.
¶ 10 In March 2016, the defendant, defense counsel, and an assistant state’s attorney appeared
before the circuit court. The assistant state’s attorney announced that the parties had negotiated a
3
partial plea agreement covering the instant case and case Nos. 12-CF-68 and 13-CF-291, two older
cases in which petitions to revoke probation (PTRPs) had been filed by the State. More
specifically, in exchange for the defendant’s pleading guilty to aggravated domestic battery (count
2) and seven counts of domestic battery (counts 5 through 11) in the instant case, and his admitting
to the PTRPs in the two older cases, the State would agree to cap his prison sentence at 18 years
with a minimum sentence of 6 years, and would move to dismiss the instant case’s charges of
criminal sexual assault (count 1), kidnapping (count 3), and unlawful restraint (count 4). The
defendant and defense counsel indicated that the agreement’s terms had been stated accurately.
¶ 11 In answer to the court’s queries, the defendant stated that he was 34 years old and had a
ninth-grade education. He indicated that he did not have any mental or physical disability that
would make it difficult for him to understand what he was doing, and that he had not taken any
drugs or alcohol that could affect his understanding. He also indicated that all the paperwork in his
case had been explained to him, and that he did not have any difficulty in understanding
discussions with his attorney. He indicated that he did not have difficulty understanding anything
that already had happened in court that day. He also indicated that he had plenty of opportunity to
talk to his attorney and was satisfied with the attorney’s services. Further, he indicated his
understanding that the court was not bound by the sentencing range in the parties’ agreement, that
the court alone would decide his sentencing, and that the court could sentence him to more than
the 18-year maximum, or less than the 6-year minimum, that were included in the agreement.
¶ 12 The court admonished the defendant as to the nature of the charge of aggravated domestic
battery and informed him that it was a Class 2 felony, and because of his criminal history, it was
not a probation eligible offense, and he was subject to imprisonment from 3 to 14 years (extendable
due to his criminal history). The court admonished him as to the nature of the charges in the seven
4
counts of domestic battery, a Class 4 felony, and advised him that each count was punishable by
one to six years’ incarceration (extendable due to his criminal history). The defendant indicated
his understanding of the charges and penalties. The court stated that in all eight counts, sentencing
could be consecutive (“one after the other”) or concurrent, or some counts could be concurrent and
others consecutive, and the defendant indicated his understanding. The court also admonished the
defendant about the two older cases, case Nos. 12-CF-68 and 13-CF-291, in which PTRPs were
pending. The court admonished the defendant, in the instant case, about his right to plead not
guilty; the State’s burden of proving him guilty beyond a reasonable doubt; his right to a trial by
jury or by the court alone; his right to confront and cross-examine, through counsel, the State’s
witnesses; his right to call witnesses in his defense; and his right to testify or not testify. The
defendant indicated his understanding of those admonishments. The court asked the defendant
whether he understood that by pleading guilty in the instant case, he would be waiving all those
rights, and the defendant answered in the affirmative.
¶ 13 Next, the State presented a factual basis for the defendant’s eight guilty pleas. Essentially,
the State described how the defendant brutally pulled the hair of Tomara Bolden and forced her to
leave her home and to go to his home, where he repeatedly struck her with his hands, a baseball
bat, and a metal pipe, and threw her to the floor, repeatedly kicking her, and held a chair to her
throat, impeding her breathing. Defense counsel stipulated that the State’s witnesses would testify
substantially as stated. The court noted a report written by Dr. Daniel Cuneo, in which he opined
that the defendant would qualify for a plea of guilty but mentally ill, and the court found that he
would qualify.
¶ 14 The court asked the defendant whether anyone had threatened him, or had promised him
anything, to persuade him to plead guilty, and the defendant answered in the negative. The court
5
asked him whether he was pleading guilty “freely and voluntarily, without any pressure or force,”
and he answered in the affirmative. Asking about the eight counts individually, the defendant
pleaded “[g]uilty” to count 2, aggravated domestic battery, and to counts 5 through 11, domestic
battery. The court accepted the pleas, finding that they were “knowingly, understandingly and
voluntarily” entered. The court showed similar thoroughness in the two older cases, Nos. 12-CF-
68 and 13-CF-291, wherein it accepted the defendant’s admissions to the PTRPs as knowingly and
voluntarily made. The court ordered the preparation of a presentence investigation report and set
the cause for sentencing.
¶ 15 In April 2016, the cause was called for a sentencing hearing in the instant case and in the
two older cases, Nos. 12-CF-68 and 13-CF-291. Again, the defendant indicated, in response to the
court’s queries, that he was not suffering from any type of mental or physical disability, and had
not consumed any drugs or alcohol, that affected his ability to understand the proceedings, and he
indicated that he had had ample opportunity to prepare for sentencing and was satisfied with his
counsel’s services. Referring to the defendant’s guilty-plea hearing, the court stated that it had
announced that the defendant had entered a plea of guilty, “but it was a plea of guilty but mentally
ill.” Both the assistant state’s attorney and defense counsel confirmed that that was the exact nature
of the plea.
¶ 16 In aggravation, the State called the victim in the instant case, Tomara Bolden, and presented
her written victim impact statement. Essentially, she said that she lives in fear and has difficulty
sleeping as a result of the defendant’s attack. The State also presented a certified copy of the
defendant’s juvenile offense for aggravated criminal sexual assault. In mitigation, defense counsel
asked only that the court consider the contents of Dr. Cuneo’s written reports, which, he said, made
clear that “we are dealing with a mentally ill substance abuser,” a fact that should be considered
6
when fashioning a sentence. The defendant presented a statement in allocution, in writing, which
is not included in the record on appeal. The State argued for the maximum aggregate sentence
allowed under the terms of the plea agreement—18 years in prison, with 14 years for aggravated
domestic battery (count 2), and sentences for the other crimes to fill the remainder. The defense
argued for the minimum aggregate sentence under the plea agreement, six years.
¶ 17 The court sentenced the defendant, in the instant case, to 12 years of imprisonment for the
one count of aggravated domestic battery (count 2), and 6 years of imprisonment for each of the
seven counts of domestic battery (counts 5 through 11), with all eight sentences to run
concurrently, followed by 4 years of mandatory supervised release (MSR). As for the two older
cases—case Nos. 12-CF-68 and 13-CF-291, in which the defendant had admitted the allegations
in PTRPs—the court sentenced the defendant to imprisonment for three years in each case, with
the sentences to run concurrently with one another, but consecutive to the sentences in the instant
case, followed by four years of MSR. The total aggregate prison sentence, therefore, was 15 years,
3 years fewer than the parties’ agreed maximum. After imposing these sentences, the court
admonished the defendant as to his appeal rights, and he indicated his understanding.
¶ 18 In August 2016, the defendant filed an untimely pro se motion to reconsider sentence. In
December 2016, the circuit court entered a written order noting that the motion was filed more
than 30 days after sentencing; the court “denied” the motion based on a lack of jurisdiction. The
defendant filed a pro se notice of appeal. The circuit court appointed OSAD to represent him, and
OSAD filed a motion to dismiss the appeal, stating that the defendant had decided to dismiss it.
In May 2017, this court granted the motion and dismissed the appeal. People v. Billups, No. 5-17-
0002.
7
¶ 19 In November 2017, the defendant filed, in the instant case, a pro se petition for
postconviction relief. He claimed that plea counsel had provided constitutionally ineffective
assistance, and that the sentencing court had abused its discretion, and he sought vacatur of his
sentence. Accompanying the postconviction petition was an affidavit from the defendant, who
swore to the factual allegations of the petition, and an affidavit from a fellow prison inmate, who
had conceived of the petition’s legal reasoning and who had written the petition. In December
2017, the defendant filed pro se a “supplementary motion” to his postconviction petition. The
defendant sought to supplement his petition with an affidavit from his sister, Tamekia Washington,
who wrote that plea counsel had made various promises about what he was going to do for the
defendant, but in the end he did not do anything.
¶ 20 The circuit court found that the defendant had stated the gist of a constitutional claim. It
advanced the postconviction proceedings to the second stage and appointed postconviction counsel
for the defendant. Substitute postconviction counsel was later appointed.
¶ 21 In December 2018, Dr. Cuneo filed another report—his third—in the instant case. He found
that the defendant was fit at the time of his sentencing.
¶ 22 In August 2020, the defendant filed, by substitute postconviction counsel, an amended
postconviction petition in the instant case. The defendant claimed that plea counsel had provided
constitutionally ineffective assistance by telling him, before the guilty-plea hearing, that “the plea
agreement was for a term of three to eight years of incarceration,” and that he should not disagree
with anything that the judge told him during the guilty-plea hearing, “or he would risk making his
situation worse.” Because of his lawyer’s advice, and the defendant’s own very low intelligence,
the defendant did not express his disagreement when the court informed him, at the hearing, that
he would serve 6 to 18 years in prison. The defendant “did not fully understand the sentencing
8
range and felt compelled to answer as if he understood.” Sometime after the hearing, the defendant
asked plea counsel to file a postsentencing motion. Sometime after the 30-day filing deadline had
passed, the defendant learned that his attorney had not filed the requested motion. The defendant
filed a pro se motion, but it was too late, and the defendant lost his right to appeal. As for relief,
the defendant sought vacatur of the plea and sentence, and a trial by jury. The next month, the
State filed a motion to dismiss the amended postconviction petition.
¶ 23 In November 2020, the circuit court called the cause for a hearing on the State’s motion to
dismiss the amended postconviction petition. Defense counsel began by seeking to amend the
petition so that it would apply not just to the instant case, but also to case Nos. 12-CF-68 and 13-
CF-291. The assistant state’s attorney did not object, and the court granted the motion. The parties
argued briefly for or against the motion. The court said that it wanted to review the transcripts, Dr.
Cuneo’s reports, prior motions, etc., and it took the matter under advisement.
¶ 24 On December 8, 2020, the court entered an order granting the State’s motion to dismiss.
The court found that the record refuted the allegations that plea counsel misrepresented the plea
agreement, and that the defendant did not understand the sentence he faced under the agreement.
Both the guilty-plea transcript and the sentencing transcript, said the court, showed that the
defendant “had ample opportunities to register an objection to the stated terms if those ran counter
to what he intended to agree to.” Also, the court stated that even if plea counsel had erred as
described in the petition, the defendant failed to show that he was prejudiced by counsel’s error.
¶ 25 The defendant filed a timely pro se notice of appeal, thus perfecting the instant appeal. The
circuit court appointed OSAD to represent him.
9
¶ 26 II. ANALYSIS
¶ 27 The defendant appeals from the circuit court’s second-stage dismissal of his amended
petition for relief under the Post-Conviction Hearing Act (Act) (725 ILCS 5/122-1 et seq. (West
2020)). Appellate review of the dismissal is de novo. People v. Dupree, 2018 IL 122307, ¶ 29. As
previously mentioned, the defendant’s appointed attorney on appeal, OSAD, has concluded that
this appeal lacks merit, and has filed a Finley motion to withdraw as counsel, along with a legal
memorandum in support of the motion. The defendant has not filed a reply. This court agrees with
OSAD’s assessment of this appeal.
¶ 28 The Act provides a method by which any person imprisoned in the penitentiary may assert
that his conviction resulted from a substantial violation of his federal or state constitutional rights.
725 ILCS 5/122-1(a)(1) (West 2020); People v. Smith, 2015 IL 116572, ¶ 9. A proceeding under
the Act is a collateral proceeding, not an appeal from the judgment of conviction. People v.
English, 2013 IL 112890, ¶ 21. A criminal defendant initiates a postconviction proceeding by filing
a petition in the circuit court. 725 ILCS 5/122-1(b) (West 2020). If the petition is not dismissed at
the first stage as frivolous or patently without merit, it advances to the second stage. Id. § 122-5.
At the second stage, the State may either answer the petition or move to dismiss it. People v.
Domagala, 2013 IL 113688, ¶ 33. If the State moves for dismissal, the circuit court must decide
whether to grant the State’s motion or advance the petition to the third stage for an evidentiary
hearing. People v. Edwards, 197 Ill. 2d 239, 246 (2001). A petitioner is entitled to an evidentiary
hearing only if the petition’s allegations—supported by “affidavits, records, or other evidence”
(725 ILCS 5/122-2 (West 2020))—make “a substantial showing of a constitutional violation.”
Edwards, 197 Ill. 2d at 246.
10
¶ 29 At the second stage, the inquiry into whether a postconviction petition contains sufficient
allegations of constitutional violations “does not require the circuit court to engage in any fact-
finding or credibility determinations.” People v. Coleman, 183 Ill. 2d 366, 385 (1998). Such
determinations are made at the litigation’s evidentiary stage, not at the dismissal stage. Id. Also,
at the second stage, the circuit court examines a postconviction petition to determine its legal
sufficiency, and any allegations not affirmatively refuted by the record must be taken as true.
Domagala, 2013 IL 113688, ¶ 35. Thus, the substantial showing of a constitutional violation that
must be made at the second stage is a measure of the legal sufficiency of the petition’s well-pleaded
allegations of a constitutional violation, which, if proven at an evidentiary hearing, would entitle
the postconviction petitioner to relief. Id. The dismissal of a postconviction petition at the second
stage is warranted only if “the allegations in the petition, liberally construed in light of the trial
record, fail to make a substantial showing of a constitutional violation.” People v. Hall, 217 Ill. 2d
324, 334 (2005).
¶ 30 In the instant case, the defendant claimed in his amended petition that plea counsel had
provided constitutionally ineffective assistance by telling him, before the guilty-plea hearing, that
“the plea agreement was for a term of three to eight years of incarceration,” and that he should not
disagree with anything that the judge told him during the guilty-plea hearing, “or he would risk
making his situation worse.” Because of his lawyer’s advice, and the defendant’s own very low
intelligence, the defendant did not express his disagreement when the court informed him, at the
hearing, that he would serve 6 to 18 years in prison. The defendant continued that he “did not fully
understand the sentencing range and felt compelled to answer as if he understood.” OSAD, in the
memorandum that accompanies its Finley motion, raises one potential issue—whether the
defendant’s allegations made a substantial showing of ineffective assistance by plea counsel.
11
¶ 31 A claim that a defendant was denied his constitutional right to the effective assistance of
counsel is governed by the two-pronged test established in Strickland v. Washington, 466 U.S. 668
(1984). Under that test, a defendant must show both (1) that his attorney’s performance fell below
an objective standard of reasonableness, as measured by reference to prevailing professional
norms, and (2) that the substandard representation so prejudiced the defendant that there is a
reasonable probability that, absent the errors, the outcome would have been different. Id. at 687-
88. A defendant must satisfy both prongs of Strickland; failure to satisfy either prong precludes a
finding of ineffective assistance. People v. Clendenin, 238 Ill. 2d 302, 317-18 (2010). Strickland
applies to claims arising out of the plea process. Missouri v. Frye, 566 U.S. 134, 140 (2012); Hill
v. Lockhart, 474 U.S. 52, 57 (1985).
¶ 32 However, at the defendant’s guilty-plea hearing, the circuit court exhaustively admonished
and questioned the defendant in compliance with Illinois Supreme Court Rule 402 (eff. July 1,
2012) (“substantial compliance” with the rule is all that is required). Rule 402 was designed to
ensure that a guilty plea is not accepted unless the record affirmatively indicates that the plea was
both knowing and voluntary. That is, it was designed to ensure that a guilty plea satisfies due
process. People v. Fuller, 205 Ill. 2d 308, 323 (2002). “If a plea of guilty is to have any binding
effect or is to be given any subsequent weight,” a circuit court’s “extensive and exhaustive
admonitions,” acknowledged by the defendant, must be held to “overwhelm [a defendant’s]
current assertion that he entered his plea involuntarily.” People v. Robinson, 157 Ill. App. 3d 622,
629 (1987). “A guilty plea made in reliance on the incorrect advice of counsel as to the anticipated
term of a sentence is still a voluntary plea.” Id.
¶ 33 Here, this court’s recapitulation of the defendant’s guilty-plea hearing, supra, makes clear
that the circuit court admonished the defendant as to the nature of each and every one of the charges
12
to which he would plead guilty—aggravated domestic battery, and seven counts of domestic
battery with a prior domestic-battery conviction. The defendant indicated his understanding of
them. The court then admonished him on the possible sentences for each of those charges,
including extended-term sentences and consecutive sentencing. He indicated his understanding.
When reviewing the terms of the parties’ plea agreement, the court explained that the State could
seek a maximum aggregate sentence of 18 years in prison, and that the defendant had agreed to a
minimum of 6 years, but the court then added that it alone would have the final say as to his
sentences. The defendant indicated his understanding of all that.
¶ 34 As the court noted in the written order that dismissed the amended postconviction petition,
both the guilty-plea transcript and the sentencing transcript showed that the defendant “had ample
opportunities to register an objection to the stated terms if those ran counter to what he intended
to agree to.” He did not register an objection at either of those two hearings. Despite any
misinformation or misrepresentations that plea counsel may have provided to the defendant prior
to the guilty-plea hearing, the court at the guilty-plea hearing thoroughly admonished him as to the
nature of the charges, the possible penalties, the plea terms, and matters relating to voluntariness
(force, promises, etc.). The knowing and voluntary nature of the defendant’s guilty pleas cannot
be doubted.
¶ 35 III. CONCLUSION
¶ 36 The defendant failed to make a substantial showing of a constitutional violation. He
claimed in his amended postconviction petition that plea counsel had misrepresented the terms of
the plea agreement, particularly in regard to the sentences. However, the circuit court thoroughly
admonished him about all aspects of the plea agreement, satisfying Rule 402, and ensuring that
the defendant received due process. The court did not err in dismissing the defendant’s amended
13
petition at the second stage, and no contrary argument would have merit. Accordingly, OSAD is
granted leave to withdraw as counsel, and the judgment of the circuit court is affirmed.
¶ 37 Motion granted; judgment affirmed.
14 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488017/ | Cite as 2022 Ark. App. 464
ARKANSAS COURT OF APPEALS
DIVISION II
No. CR-22-182
JAMES TAYLOR Opinion Delivered November 16, 2022
APPELLANT
APPEAL FROM THE MILLER
COUNTY CIRCUIT COURT
V. [NO. 46CR-21-13]
STATE OF ARKANSAS HONORABLE CARLTON D. JONES,
APPELLEE JUDGE
AFFIRMED
BRANDON J. HARRISON, Chief Judge
James Taylor was convicted after a Miller County jury decided that, as a prior felon,
he unlawfully possessed a firearm. It was his ninth felony conviction, and second felon-in-
possession conviction. Taylor was sentenced to 360 months for possessing the firearm as a
habitual offender. He argues here that there was insufficient evidence of constructive
possession. Taylor also argues that the circuit court should have allowed him to introduce
text messages of the more personal kind that a sheriff’s deputy for nearby Nevada County
sent to his (Taylor’s) girlfriend Brandi Johnson. We affirm.
I. Background
Since Appellant Taylor’s February 2000 conviction for felonious possession of
methamphetamine paraphernalia, it has been illegal for him to “own or possess any firearm.”
Ark. Code Ann. § 5-73-103(a)(1). He learned about that law no later than 19 July 2018,
when he pleaded guilty to breaking it. Taylor was on parole, and under a 72-month
suspended sentence for three convictions that day, on 4 January 2021, when more trouble
knocked on Taylor’s door. Specifically, January 4 is the day when Adam Wilson and
Brandon Emerson with the Special Response Team for Arkansas Community Correction
arrived at a house on Miller County Road 105 (near Texarkana) to serve appellant Taylor
with an arrest warrant. There begins this story in earnest.
Taylor lived at the home where the officers went to serve the warrant. Law
enforcement knew to look for Taylor at the County Road 105 house because Taylor had
reported it as his residence to his parole officer since April 2019. Taylor did not, however,
own the house. Intent on serving the warrant, Officers Wilson and Emerson pulled up to
the house just behind another car. The driver of that car was named Nicky. She told the
officers that she was at the house to get a debit card from her mother, Brandi Johnson. At
the time, Ms. Johnson was Taylor’s girlfriend. Officer Wilson asked Nicky to tell Ms.
Johnson that law enforcement was outside. Ms. Johnson didn’t respond to her daughter
Nicky’s calls or texts. About this time, Officer Wilson heard movement inside the home,
but no one responded to knocks or requests to answer the door. So the officers entered
through an unlocked door.
Once inside the house, officers found Taylor and Ms. Johnson inside a bedroom that
had been padlocked from the inside; it was the only room in the home that appeared lived-
in. Taylor came out, at the officers’ request, and was arrested. Officer Wilson would
eventually find in that room a loaded .22 magnum rifle with a sawed-off stock and nine live
.22 magnum rounds. But he did not find the contraband when Taylor was first taken into
2
custody. The record reveals that the officers took a “quick look” around when they first
seized Taylor but did not search the room until later.
We know that Taylor was serving a suspended sentence when the officers engaged
Taylor at the County Road 105 home, but why did law enforcement serve a warrant on
Taylor on January 4? The pretrial proceedings disclose that Taylor was suspected of
committing Rape, Ark. Code Ann. § 5-14-103, and Introduction of Controlled Substance
Into Body of Another Person, Ark. Code Ann. § 5-13-210. That appears to be why law
enforcement went to the house where Taylor lived. And Miller County detective Cody
Hensley had learned from a forensic interviewer that an alleged victim said that Taylor had
possessed a gun—specifically, a shotgun.
Returning to post-arrest activities, as Officer Wilson was en route to the jail with
Taylor in custody, he called Detective Hensley to inform him of Taylor’s arrest. Detective
Hensley told Officer Wilson to go back to the house where Taylor was seized and look for
a firearm. Officer Wilson turned around (with Taylor still in the backseat) and went back
to the house.
Enter Bill Varner, who leased the house where Taylor lived when he was arrested.
Varner had also employed Taylor on a neighboring farm. At some point during these events,
Varner sent three other farmhands to retrieve a farm-owned Suburban that was parked at
the scene. The farmhands arrived at the home as Officer Wilson and company left the first
time. And the farmhands were still there when Officer Wilson returned with Taylor to
look for a gun at Detective Hensley’s behest. When Officer Wilson asked Taylor if he
3
would find a gun in the home, Taylor said no. Officer Wilson left Taylor in the car with
Officer Emerson while he went back into the house.
Away from prying ears, Officer Wilson asked Ms. Johnson, who had remained at the
home, the same question. Based on information from her, the officer found a loaded .22
magnum rifle with a sawed-off stock in the room Ms. Johnson and Taylor were in when
law enforcement arrived to serve the warrant and entered the house. The rifle was in a
closet-like area of that room, “hidden” and “disguised” in a box whose bottom you couldn’t
see, with men’s clothes pulled over it. In a drawer, Officer Wilson found “a large mass” of
ammunition of various calibers, including nine .22 magnum rounds. He brought the rifle
and ammunition back to the truck where Taylor and Officer Emerson were waiting and
secured them in the cab.
In a post-arrest interview, Detective Hensley asked Taylor about the gun. Taylor
admitted he had known about the gun, and “stated it had been there for umpteen years.”
Michael Cheatham, one of the farmhands who retrieved Varner’s Suburban, an event
we mentioned already, testified at trial. Cheatham had worked for Varner, and known
Taylor, for six years. He confirmed that Taylor had lived at the house on County Road
105. Cheatham also testified that he had seen Taylor with the gun Officer Wilson retrieved
from the house on nights when Taylor would go hog hunting on the neighboring farm.
Cheatham recalled the gun as a sawed off or pump shotgun. Sometimes, though, he said
Taylor would come over with a gun that looked like a .22 with a scope on it.1
1
Whether a shotgun, another .22 rifle, or this .22 rifle, it would have been unlawful
for Taylor to possess a firearm in the time Cheatham testified he had known him.
4
Taylor moved for a directed verdict at the close of the State’s evidence, arguing there
was insufficient evidence that he constructively possessed a firearm. The circuit court noted
the potential discrepancy in Cheatham’s testimony about the gun he had seen Taylor possess,
but ruled that “whether he is talking about the firearm that is presently in evidence” was a
question for the jury.
Taylor called one witness in defense: his girlfriend, Ms. Johnson, who said that,
within five minutes of Taylor’s arrest, she received a call on her cell phone from Steve
Otwell, a deputy with the Nevada (not Miller) County Sheriff’s Department. Ms. Johnson,
who lives in Nevada County, knew Deputy Otwell and had reached out to him shortly
before these events for help with a personal matter. Since then, she testified, Deputy Otwell
had been reaching out regularly, entreating her to come to his house for dinner, drinks, or
sex. Taylor’s counsel questioned Ms. Johnson about what she testified were screenshots
from her phone of text messages since November 2020 between Deputy Otwell and her.
She testified they fairly and accurately depicted what was said. When counsel moved to
introduce them, the State objected:
PROSECUTOR: Your Honor, they appear to be photocopies of text
messages between her and Steve Otwell. They are
irrelevant. They are hearsay. They have not been
authenticated and therefore I object to their
introduction.
DEFENSE COUNSEL: Your Honor, they are relevant and we are working on
hooking, connecting that up. They have been identified
as screen shots taken from her phone. They are, been
identified as a fair and accurate representation of screen
shots taken from her phone. Now the jury can give
whatever weight they want to that evidence, but that
does not exclude them as hearsay.
5
After the circuit court excused the jury and the witness, Taylor’s counsel explained
that the text messages were not being offered to prove the truth of the contents, and that
continued examination of Brandi Johnson would show that Nevada County Deputy Otwell
had engaged Miller County Deputy Hensley in a conspiracy to subject Taylor to a felon-
in-possession charge. The circuit court allowed counsel to voir dire Ms. Johnson about the
messages and the anticipated context her testimony would provide to demonstrate their
relevance and value to the jury.
Outside the jury’s presence, Ms. Johnson identified the seized rifle as her
grandfather’s. She produced what she testified was the original stock, which had broken off
because she dropped the gun. She took the gun to Taylor’s house the night before his
arrest, she said, because Deputy Otwell had advised that “there was going to be a series of
events taking place,” but Taylor wouldn’t get in any serious trouble. Ms. Johnson said she
had put the gun in the top of the closet, but panicked when officers were handcuffing Taylor
and moved it to the bottom of the closet, hoping they wouldn’t find it.
The court excluded the text messages:
Okay. All right. The text messages are out for any number of reasons. Number
one, I don’t find them to be relevant. Number two, there’s no date which tells
whether they are within the period relevant to this proceeding. Number three, they
don’t go directly to the defense of this matter. Number four, as to what I stated
earlier, the date, you know, that goes to whether or not they are authenticated.
The Court has also looked at them and actually appears that some of the copies
are two different shades. So that gives this Court, you know, significant concerns
about those messages, so they are out.
If you wish to inquire and I think there’s been testimony regarding a
relationship with Mr. Otwell before the jury, but that would be the extent of where
we are on this.
6
After the jury returned, Ms. Johnson repeated her testimony on the points from voir
dire, and two more. By this we mean she also testified that Deputy Otwell had some
leverage over her because she was in trouble in Nevada County. And when Deputy Otwell
called shortly after Taylor’s arrest, he asked why she hadn’t given officers the gun, and told
her they were coming back to get it.
On cross-examination, Ms. Johnson admitted that she loved Taylor, although she
was married to someone else. She denied being in a sexual relationship with Deputy Otwell.
She admitted she had told the prosecutor’s office a different story: farmhand Cheatham had
taken the gun from her car the day of Taylor’s arrest and put it in the house. And she
admitted that, on the day Taylor was arrested, she had told Officer Wilson (who found the
rifle) that she had seen a gun in Taylor’s closet before. Between the State’s objections,
Taylor’s counsel elicited on redirect that Ms. Johnson had been afraid Deputy Otwell would
have her thrown in jail if she did not plant the gun in the house.
At the end, the jury convicted Taylor of unlawfully possessing a firearm, and the
circuit entered the judgment and sentencing order that Taylor has appealed.
II. Discussion
A. Sufficiency of Evidence
Taylor argues first that the circumstantial evidence he possessed the rifle did not
“exclude every other reasonable hypothesis than guilt of the accused,” Gill v. State, 2015
Ark. 421, at 3, 474 S.W.3d 77, 79, because he did not own the home, Ms. Johnson was
with him in the room where the gun was found, and the gun was discovered outside his
7
immediate proximity after he was removed from the home. Further, Taylor notes, Ms.
Johnson told the jury that she moved the gun without his knowledge.
Constructive possession—the control or right to control contraband—is sufficient to
prove possession of a firearm. Davis v. State, 2019 Ark. App. 463, at 3, 586 S.W.3d 229,
231. The record must include “substantial evidence”, which is evidence “forceful enough
to compel a conclusion one way or the other without resorting to speculation or
conjecture.” Knauls v. State, 2020 Ark. App. 48, 4, 593 S.W.3d 58, 61. Circumstantial
evidence will support a conviction if it is consistent with the defendant’s guilt and
inconsistent with any other reasonable conclusion. Id. Our supreme court has stated:
Whether [circumstantial] evidence excludes every other hypothesis [than
guilt] is left to the jury to decide. The credibility of witnesses is an issue for
the jury and not the court. The trier of fact is free to believe all or part of any
witness’s testimony and may resolve questions of conflicting testimony and …
inconsistent evidence.
Morgan v. State, 2009 Ark. 257, 7, 308 S.W.3d 147, 152 (citations omitted). Accordingly,
when we review the evidence supporting a conviction, we look only at the evidence that
supports the jury’s verdict, and view it in the light most favorable to the State. E.g., Cluck
v. State, 365 Ark. 166, 170, 226 S.W.3d 780, 783 (2006).
There is sufficient evidence to support the jury’s verdict. When law enforcement
arrived at the house where Taylor resided, he and Ms. Johnson were inside a room that was
padlocked from the inside. After Taylor and Ms. Johnson emerged from the small room, it
was (eventually) searched and a loaded rifle was found in a closet-like area inside the room
from which Taylor and Ms. Johnson had reluctantly emerged on law enforcement’s repeated
commands.
8
On the rifle that Taylor could not have lawfully possessed as a prior felon, it was
“hidden” and “disguised” in a box whose bottom you couldn’t see, with men’s clothes
pulled over it. In a drawer housed in the same small room, Officer Wilson found “a large
mass” of ammunition including nine rounds that fit the rifle. Farmhand Cheatham testified,
remember, that he had seen Taylor with the gun Officer Wilson retrieved from the house.
Officer Wilson secured that gun in the cab of the truck with Taylor. And although Taylor
had told Officer Wilson before the search that there would be no gun in the house, he
admitted to Detective Hensley in a post-arrest interview that he had known about the gun;
it had been there for “umpteen years,” said Taylor. What’s more, the rifle was loaded when
Wilson found it, and Detective Hensley later confirmed it was functional by firing one of
the rounds Officer Wilson recovered from the same room.
The main thrust here is that the jury was free to disregard Ms. Johnson’s testimony
that she had put the rifle in Taylor’s closet before his arrest or that she moved it afterward.
Coger v. State, 2017 Ark. App. 466, at 11, 529 S.W.3d 640, 648 (holding that jury was free
to disbelieve girlfriend’s testimony that a vial containing drug residue was hers). Ms.
Johnson did not claim to have brought the matching ammunition, which tended to tie
Taylor to the gun. She admitted having previously told an investigator for the State that
someone else (Cheatham) had planted the rifle at a different time.
Construed favorably to the State, the remaining evidence supported scenarios
inconsistent with any reasonable hypothesis but Taylor’s guilt. Taylor admitted that he
knew about the rifle, which was found in a way that could be fairly called “hidden” or
“disguised.” There was also Taylor’s ammunition collection, within the room he occupied
9
when officers from Arkansas Community Correction had announced their presence and
knocked and knocked on his door. Whether the rifle was concealed soon before opening
the bedroom door for Officer Wilson or long before January 4 arrived, the point is that
Taylor’s 2018 felon-in-possession conviction should have brought home that the closeted
gun was illegal contraband. We affirm the circuit court’s decision to deny Taylor’s
sufficiency challenge at trial.
B. Text Messages
Taylor also challenges the circuit court’s exclusion of a five-page collection of text
message screenshots between Ms. Johnson and Deputy Otwell. The circuit courts have
broad discretion in deciding evidentiary issues, and a circuit court’s ruling will not be
disturbed on appeal without a demonstration that the appellant has been prejudiced by an
abuse of that discretion. E.g., Armstrong v. State, 2020 Ark. 309, at 11, 607 S.W.3d 491, 499.
The circuit court’s stated reasons for excluding the messages boil down to doubts about their
authentication and relevance. We conclude that excluding the text messages was an abuse
of the circuit court’s discretion albeit, as we will relate, not a prejudicial one in the
circumstances. Therefore, no reversible error is presented.
First, authentication of the text messages. The general requirements of
authentication and identification under Rule 901 “are satisfied where the trial judge in his
discretion is satisfied that the physical evidence presented is genuine and in reasonable
probability has not been tampered with.” Davis v. State, 350 Ark. 22, 39, 86 S.W.3d 872,
883 (2002). People seldom communicate by text message in circumstances that would allow
a witness to testify from direct evidence that the purported sender or intended recipient sent
10
or received a particular message. Message contents often are not retained by the mobile
carrier. That is one reason why “screenshots” are increasingly presented to courts as
evidence of communication on this point or that. E.g., Rodriguez v. State, 2014 Ark. App.
660, 449 S.W.3d 306 (rejecting best-evidence challenge to screenshots of since-deleted text
messages where AT&T representative testified the company did not retain message contents
and recipient testified the screenshots accurately reflected the messages she received). Both
this court and the Supreme Court have addressed the requirements for authenticating
screenshots, which is a “developing (and important) area of the law in this electronic age[,]”
Duvall v. State, 2018 Ark. App. 155, at 13, 544 S.W.3d 106, 114. In the typical case, the
messages are alleged to have been sent or received by a criminal defendant with a privilege
not to testify.
For example, in Duvall, we discussed authenticity objections to photographs of a
phone screen showing text messages that were purportedly exchanged between a defendant
and a daughter he was accused of sexually abusing. Id. at 10, 544 S.W.3d at 112–13. The
circuit court excluded the messages, on defendant’s authenticity objection, when the State
sought to introduce them through an investigator who “admitted that she ‘believed’ but did
not ‘know’ [the defendant] had sent the text messages and had ‘no proof’ that he did.” Id.
at 11, 544 S.W.3d at 113. The exchanges were admitted later, however, after the daughter
described the following:
She said that before she reported her father, she tried to talk to him by text
messaging. She “wanted him to understand what he did” but still wanted a
relationship with him. She agreed that the texts were sent to a number she knew to
be his; she had labeled the number as “Padre.” [She] said that she did not believe
Duvall let other people use his phone. She agreed that when she was texting these
messages to the phone number that she knew to be her dad, someone was replying
11
to her messages. She also said that State’s exhibits one through seven were accurate
pictures of the text messages that she sent to her father’s number.
Id. at 11–12, 544 S.W.3d at 113. We affirmed the circuit court’s ruling that the photographs
should be admitted, observing that the messages’ content “suggested that Duvall did [send]
(or could have) sent them” and “no direct proof in this case undermined the messages’
authenticity.” Id. at 14, 544 S.W.3d at 115.
In Gulley v. State, the supreme court addressed the authentication of three text
messages that had been sent from a prepaid phone, whose contents the State had subpoenaed
from the provider. 2012 Ark. 368, at 2–3, 423 S.W.3d at 572–73. Citing Arkansas Rule of
Evidence 901, the court discussed each of the screenshots in turn, tying the messages to
other testimony that tended to demonstrate that the messages were sent by the defendant
himself, the phone’s registered owner. Id. at 13–15, 423 S.W.3d at 578–79. Even when text
messages are harvested from a phone forensically, however, they are not authenticated as
messages by the person named in the contact entry if there is no evidence of who had stored
the contact or owned the phone, and no other evidence links the name to the stored phone
number. Armstrong, 2020 Ark. 309, at 13–14, 607 S.W.3d at 500.
Although the point is a close one, the messages in this case were sufficiently
authenticated. Ms. Johnson testified that Deputy Otwell, like herself, lived in Nevada
County; she had known him from years past and communicated with him about other
matters. She had reached out to him in November 2020 “for some assistance with a personal
matter,” and after that he tried to get her to come to his house. Recall that Deputy Otwell
had called Ms. Johnson within five minutes of Taylor’s arrest. Why this happened is not
clear in the record. Still, Ms. Johnson testified directly that the text-message
12
communications presented to the circuit court as evidence were fair and accurate depictions
of her cell phone-based messages with Deputy Otwell.
One screenshot from the proffered-but-excluded collection is in a different format
than the others and displays a phone number with an (870) area code beneath the name
“Steve Otwell.” The messages in that screenshot do not bear a date or time. The other
screenshots display the name “Steve Otwell” but no phone number. Three of the pages
detail messages (mostly from Deputy Otwell) timestamped on 4 & 5 May 2021. The other
two pages list communications over a few hours “Saturday.” Which Saturday is anyone’s
guess.
True, when voir dired, what Ms. Johnson said about the messages’ context did not
cleanly tie off the connections between the telephone number, the stored contact, and the
Steve Otwell she knew. But a couple of messages include legal questions a layperson might
ask a law enforcement officer. Deputy Otwell asks in an undated message if Ms. Johnson
will be “followed” if she comes over. In another message dated “Saturday,” the deputy
identifies a sexual desire and indicates Ms. Johnson needs “to figure out how to make it
happen without anybody knowing!!” Although some of the deputy’s messages seem to
respond to intervening messages we don’t have, the collected messages share a tone and
content such that Brandi Johnson’s testimony that Steve Otwell sent them sufficiently
authenticated them.
Second, relevancy. The circuit court concluded that the text messages were
irrelevant to Taylor’s defense because they were not dated, did not appear confined to the
period surrounding the arrest, or both. But Taylor’s defense was that he did not have
13
“control or the right to control” the rifle that was found inside the closet of a room from
which he emerged when confronted by law enforcement. Investigators did not fingerprint
the rifle or trace its ownership, and Ms. Johnson was in the room where the rifle was found
before, and perhaps after, Taylor’s arrest. Ms. Johnson also said on the stand that she had
put the rifle in the closet on Deputy Otwell’s instructions. So documentation that she had
exchanged intimate communications with the deputy—who had known within minutes of
Taylor’s arrest that no gun had been found—was relevant to that defense.
Although the circuit court abused its discretion by excluding the exhibit, we
conclude that the error is slight and therefore harmless. House v. State, 2020 Ark. App. 452,
at 5, 611 S.W.3d 197, 201. For the reasons set out in the sufficiency analysis above, there
was ample evidence that Taylor had constructively possessed the rifle. Recall one piece of
that evidence is Taylor’s statement to Detective Hensley that he (Taylor) had known about
the rifle. And there was Farmhand Cheatham’s testimony that he saw Taylor with that rifle.
Although the circuit court erroneously concluded that the text messages between
Deputy Otwell and Ms. Johnson were unauthenticated and irrelevant, we agree, for many
of the same reasons that gave that court pause, that introducing the messages would not
have changed the outcome here. The messages confirm that Deputy Otwell had a personal
interest in Ms. Johnson. She testified to the deputy’s sexual interest in her, and the
prosecution did not attempt to discredit her on that point. None of the messages mention
Taylor or his arrest. None mention anything about planting a gun where Taylor might be
found with it. No other witness tied Deputy Otwell to the relevant events. And the only
dated messages between the deputy and Johnson are dated months after Taylor’s arrest.
14
Finally, Taylor’s and Cheatham’s recorded testimony and statements support the State’s case.
We therefore hold that excluding the messages at issue was harmless error.
Affirmed.
ABRAMSON and HIXSON, JJ., agree.
Lassiter & Cassinelli, by: Michael Kiel Kaiser, for appellant.
Leslie Rutledge, Att’y Gen., by: Pamela Rumpz, Sr. Ass’t Att’y Gen., for appellee.
15 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488028/ | Wagner v Wagner (2022 NY Slip Op 06600)
Wagner v Wagner
2022 NY Slip Op 06600
Decided on November 18, 2022
Appellate Division, Fourth 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 18, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: SMITH, J.P., PERADOTTO, CURRAN, WINSLOW, AND MONTOUR, JJ.
866 CA 22-00246
[*1]GARRETT J. WAGNER, PLAINTIFF-APPELLANT,
vCASSIE C. WAGNER, DEFENDANT-RESPONDENT.
LAW OFFICE OF DAVID TENNANT PLLC, ROCHESTER (DAVID H. TENNANT OF COUNSEL), FOR PLAINTIFF-APPELLANT.
MICHAEL STEINBERG, ROCHESTER, FOR DEFENDANT-RESPONDENT.
Appeal from an order of the Supreme Court, Monroe County (Edward C. Gangarosa, R.), entered January 6, 2022. The order denied plaintiff's motion for a reconstruction hearing.
It is hereby ORDERED that the order so appealed from is unanimously reversed on the law without costs, the motion is granted, and the matter is remitted to Supreme Court, Monroe County, for further proceedings in accordance with the following memorandum: In this matrimonial action, plaintiff appeals from an order denying his motion for a reconstruction hearing. Initially, contrary to the parties' contentions, we conclude that, despite some inartful phrasing, plaintiff's motion sought only a reconstruction hearing to reconstruct portions of the testimony of plaintiff and defendant that could not be transcribed due to malfunctions of the audio recording system. We agree with plaintiff that Supreme Court abused its discretion in denying the motion.
"Parties to an appeal are entitled to have that record show the facts as they really happened at trial, and should not be prejudiced by an error or omission of the stenographer" or the audio recording device (People v Bethune, 29 NY3d 539, 541 [2017]; see People v Henderson, 140 AD3d 1761, 1761 [4th Dept 2016]; Matter of Jordal v Jordal, 193 AD2d 1102, 1102 [4th Dept 1993]). Here, contrary to the court's determination, the record establishes that significant portions of the testimony of plaintiff and defendant, including testimony related to child custody and certain other issues, could not be transcribed due to malfunctions of the audio recording system, which would preclude meaningful appellate review of those issues (see Matter of Trejo v Pavon, 184 AD3d 760, 761 [2d Dept 2020]; Henderson, 140 AD3d at 1761; Matter of Naquan L.G. [Carolyn C.], 119 AD3d 567, 568 [2d Dept 2014]). To the extent that they are properly before us, we have considered and rejected the parties' remaining contentions. We therefore reverse the order, grant the motion, and remit the matter to Supreme Court to hold a reconstruction hearing with the parties and any witnesses or evidence the court deems helpful in reconstructing, if possible, those portions of the testimony of plaintiff and defendant that could not be transcribed (see Bethune, 29 NY3d at 541; Trejo, 184 AD3d at 761; Henderson, 140 AD3d at 1761; see generally CPLR 5525; Monaco v New York City Tr. Auth., 153 AD3d 705, 706-707 [2d Dept 2017]).
Entered: November 18, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488032/ | People v Wright (2022 NY Slip Op 06585)
People v Wright
2022 NY Slip Op 06585
Decided on November 18, 2022
Appellate Division, Fourth 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 18, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: PERADOTTO, J.P., LINDLEY, CURRAN, WINSLOW, AND BANNISTER, JJ.
722 KA 22-00400
[*1]THE PEOPLE OF THE STATE OF NEW YORK, RESPONDENT,
vRODERICK WRIGHT, DEFENDANT-APPELLANT.
JEREMY D. SCHWARTZ, LACKAWANNA, FOR DEFENDANT-APPELLANT.
JOHN J. FLYNN, DISTRICT ATTORNEY, BUFFALO (JERRY MARTI OF COUNSEL), FOR RESPONDENT.
Appeal from a judgment of the Erie County Court (Susan M. Eagan, J.), rendered October 13, 2021. The judgment convicted defendant, upon his plea of guilty, of criminal possession of a weapon in the second degree.
It is hereby ORDERED that the judgment so appealed from is unanimously affirmed.
Memorandum: On appeal from a judgment convicting him, upon his plea of guilty, of criminal possession of a weapon in the second degree (Penal Law § 265.03 [3]), defendant contends that County Court erred in refusing to suppress physical evidence and his statements as the fruit of an unlawful search and seizure. We reject that contention.
According to the evidence presented at the suppression hearing, a police officer (officer) with the Lancaster Police Department (LPD) was dispatched on an afternoon in late November 2020 to a motel in the Town of Lancaster (Lancaster) in response to a 911 call. In particular, the complainant had reported that a coworker—described as a black male with gold teeth operating a silver Ford SUV with out-of-state license plates—had threatened the complainant with a handgun. The information provided to the officer indicated that, while the complainant had not actually seen the handgun, the complainant believed the suspect had a handgun because the complainant heard a slide rack and the suspect tapping on a closed door with what sounded like a handgun while threatening to kill the complainant.
The officer was provided further information from the complainant that the suspect was staying at an inn located in Cheektowaga. Although the location of the inn was not along the officer's typical patrol route for the LPD, the officer was familiar with that area and noted that the inn was about one mile beyond the border with Lancaster. The officer proceeded in his patrol vehicle to the inn and pulled into the parking lot approximately 15 minutes after receiving the initial complaint. The officer immediately observed a silver Ford SUV with out-of-state license plates parked adjacent to the entrance of the parking lot. The officer parked directly in front of the SUV about 20 feet away and, as soon as he parked, he noticed that a black male with gold teeth—later identified as defendant—exited the SUV from the driver's door.
The officer exited his patrol vehicle and, from about midway between his patrol vehicle and the SUV, a distance of approximately 10 feet, the officer noticed a very strong odor of burnt marihuana. The officer confirmed that he was familiar with that smell from his extensive professional experience. The officer repeatedly insisted that the strong scent of marihuana was emanating from the vicinity of both defendant's person and the SUV. When pressed further on cross-examination, however, the officer agreed that it was "fair to say" that, when he was positioned 10 feet away as defendant stepped out of the SUV, he did not know whether the source of the marihuana scent was something in the SUV or something on defendant's person because defendant and the SUV were right next to each other at that point.
Given the possibility of a gun being involved and the odor of marihuana, the officer immediately directed defendant to the rear of the patrol vehicle and instructed defendant to place his hands on the trunk. Defendant ignored the instruction and, instead, continued to walk toward the inn as if conveying that the officer was wrongly hassling him. The officer attempted to physically place defendant's hands on the patrol vehicle, defendant began to resist by pulling his hands away, and the officer then forcibly handcuffed defendant. By that time, three other police officers from the LPD were on the scene, one of whom assisted the officer with defendant. After defendant was handcuffed, the officer frisked defendant's pockets. According to the officer, defendant was detained based on the strong odor of marihuana and the fact that he matched the description of the suspect who had reportedly threatened the complainant with a gun at the motel in Lancaster.
Two of the other police officers searched the SUV and discovered a handgun. As the officer was placing defendant, who was handcuffed, in the back of his patrol vehicle, one of the other police officers announced aloud that he had found a loaded handgun, and defendant spontaneously responded by saying "hey, that's my gun" as though questioning why the police were taking the handgun that belonged to him. Neither the officer nor any of the other police officers had their service weapons drawn during the interaction. Defendant did not produce a permit for the handgun.
Contrary to defendant's initial contention on appeal that the officer immediately initiated a level four intrusion, i.e., an arrest, without probable cause, we agree with the People that the officer engaged in a forcible nonarrest detention supported by reasonable suspicion. "It is well established that not every forcible detention constitutes an arrest" (People v Drake, 93 AD3d 1158, 1159 [4th Dept 2012], lv denied 19 NY3d 1102 [2012]; see People v Hicks, 68 NY2d 234, 239 [1986]), and that an officer may handcuff a detainee out of concern for officer safety (see People v Allen, 73 NY2d 378, 379-380 [1989]; People v Pruitt, 158 AD3d 1138, 1139 [4th Dept 2018], lv denied 31 NY3d 1120 [2018]; People v Wiggins, 126 AD3d 1369, 1370 [4th Dept 2015]). "A corollary of the statutory right to temporarily detain for questioning is the authority to frisk if the officer reasonably suspects that he is in danger of physical injury by virtue of the detainee being armed" (People v De Bour, 40 NY2d 210, 215, 223 [1976]; see Wiggins, 126 AD3d at 1370).
Here, based on the evidence adduced at the suppression hearing, we conclude that the court properly found that the encounter, from its outset, constituted a forcible stop and nonarrest detention of defendant (see People v Hough, 151 AD3d 1591, 1592 [4th Dept 2017], lv denied 30 NY3d 950 [2017]). In particular, contrary to defendant's contention, he was "not subjected to an unlawful de facto arrest when, after exiting his patrol vehicle and approaching defendant on foot, the officer [ultimately] handcuffed [defendant], conducted a pat frisk, and [started to] place[ him] in the back of the patrol vehicle" prior to discovery of the handgun (Pruitt, 158 AD3d at 1139; see People v Griffin, 188 AD3d 1701, 1703 [4th Dept 2020], lv denied 36 NY3d 1050 [2021], cert denied — US &mdash, 141 S Ct 2538 [2021]; People v Harmon, 170 AD3d 1674, 1675 [4th Dept 2019], lv denied 34 NY3d 932 [2019]; People v McCoy, 46 AD3d 1348, 1349 [4th Dept 2007], lv denied 10 NY3d 813 [2008]). Instead, given the detailed description by the known complainant that a person matching defendant's characteristics and location was in possession of and had threatened to use a handgun, along with the strong odor of marihuana emanating from defendant's vicinity and his evasive and resistant behavior when first confronted, the officer effectuated a forcible nonarrest detention—including through the use of handcuffs—to facilitate the investigation before the handgun was located (see Harmon, 170 AD3d at 1675; Pruitt, 158 AD3d at 1139; see also People v McKee, 174 AD3d 1444, 1445 [4th Dept 2019], lv denied 34 NY3d 982 [2019]; People v McDonald, 173 AD3d 1633, 1634 [4th Dept 2019], lv denied 34 NY3d 934 [2019]; see generally Allen, 73 NY2d at 379-380). In sum, "the police action fell short of the level of intrusion upon defendant's liberty and privacy that constitutes an arrest" (Hicks, 68 NY2d at 240; see People v Howard, 129 AD3d 1654, 1655-1656 [4th Dept 2015], lv denied 27 NY3d 999 [2016]; see generally People v Yukl, 25 NY2d 585, 589 [1969], cert denied 400 US 851 [1970]).
We further agree with the People that the forcible nonarrest detention was supported by the requisite reasonable suspicion (see generally People v Cooper, 196 AD3d 855, 857 [3d Dept 2021], lv denied 37 NY3d 1160 [2022]). A nonarrest investigative detention must be "justified by reasonable suspicion that a crime [had] been, [was] being or [was] about to be committed" [*2](People v Roque, 99 NY2d 50, 54 [2002]), i.e., "that quantum of knowledge sufficient to induce an ordinarily prudent and cautious [person] under the circumstances to believe criminal activity is at hand" (People v Woods, 98 NY2d 627, 628 [2002] [internal quotation marks omitted]; see Howard, 129 AD3d at 1656).
Here, we conclude that, "[b]ased upon the totality of the circumstances, including the short period of time between the 911 call [by the known complainant] reporting [that a specifically described male had] a handgun and the arrival of the police officer at the reported location [where the suspect was known to be staying], defendant's presence at that location, and the officer's observations that defendant's physical characteristics and [the vehicle he was exiting] matched the description of the suspect [and his SUV], the officer was justified in forcibly detaining defendant in order to quickly confirm or dispel [his] reasonable suspicion of defendant's possible [possession of a weapon]" (Pruitt, 158 AD3d at 1139 [internal quotation marks omitted]). To the extent that defendant contends that the information conveyed to the officer was insufficient to establish the requisite reasonable suspicion because the complainant only heard what sounded like a handgun behind a closed door and provided a name that the People did not prove was associated with defendant, we reject that contention. The information provided by the complainant, an identified person, was based upon his personal knowledge, included precise descriptions of particular sounds associated with named parts of a firearm, and accused defendant of committing a specific crime by threatening to kill him with a gun (see Penal Law § 265.03 [1] [b]). That information thus "provided the [police] with at least a reasonable suspicion that a crime had been, or was being, committed, [thereby] authorizing the detention" (People v Whorley, 125 AD3d 1484, 1485 [4th Dept 2015], lv denied 25 NY3d 1173 [2015]; see People v Clark, 191 AD3d 1485, 1486 [4th Dept 2021], lv denied 37 NY3d 954 [2021]). The fact that the People never proved that the name of the suspect provided by the complainant was associated with defendant is of no moment inasmuch as every other piece of detailed information provided by the complainant was confirmed by the officer's observations (see Whorley, 125 AD3d at 1485; see generally People v Argyris, 24 NY3d 1138, 1140-1141 [2014], rearg denied 24 NY3d 1211 [2015], cert denied 577 US 1069 [2016]).
Furthermore, at the time of the encounter, the officer's "detection of the odor of burning marihuana emanating from the vicinity of defendant . . . supplied the officer[] with [additional] reasonable suspicion of criminal activity sufficient to warrant stopping [and detaining defendant]" (Hough, 151 AD3d at 1592).
The next issue is whether, as defendant was being detained, the police lawfully searched the SUV where the handgun was located. The court decided that issue solely on the ground that the police had probable cause to search the vehicle based on the strong odor of marihuana emanating from both defendant and the SUV, and our review is therefore limited to that ground (see People v Clark, 171 AD3d 1530, 1532 [4th Dept 2019]; see generally People v Ingram, 18 NY3d 948, 949 [2012]; People v Concepcion, 17 NY3d 192, 195 [2011]).
As applicable to this case, "[t]he odor of marihuana emanating from a vehicle, when detected by an officer qualified by training and experience to recognize it, is sufficient to constitute probable cause to search a vehicle and its occupants" (People v Cuffie, 109 AD3d 1200, 1201 [4th Dept 2013], lv denied 22 NY3d 1087 [2014] [internal quotation marks omitted]; see People v Chestnut, 43 AD2d 260, 261 [1974], affd 36 NY2d 971 [1975]; People v Boswell, 197 AD3d 950, 951 [4th Dept 2021], lv denied 37 NY3d 1095 [2021]). Here, the officer testified that he was a 12½-year veteran police officer who was familiar with the smell of marihuana based on his extensive professional experience, and that he detected the strong odor of burnt marihuana emanating from both defendant and the SUV as he approached from about 10 feet away after defendant had exited the SUV. Defendant does not challenge the officer's testimony with respect to his training and experience (see People v Walker, 128 AD3d 1499, 1500 [4th Dept 2015], lv denied 26 NY3d 936 [2015]); instead, defendant contends that the proof was insufficient to establish probable cause to search the SUV because the officer could say only that the scent was emanating from defendant's person but not necessarily from the SUV.
We conclude that defendant's restrictive reading of the officer's testimony is not supported by the record, nor does the law support the conclusion that the police lacked probable cause here. The officer repeatedly insisted that he detected the scent of marihuana emanating from both defendant's person and the SUV (see People v Rasul, 121 AD3d 1413, 1416 [3d Dept [*3]2014]; cf. People v Smith, 98 AD3d 590, 591-592 [2d Dept 2012]) and, although he ultimately agreed on cross-examination that he could not know the precise location of the source of that scent, "[p]robable cause does not require proof sufficient to warrant a conviction beyond a reasonable doubt but merely information sufficient to support a reasonable belief that an offense has been or is being committed or that evidence of a crime may be found in a certain place" (People v Bigelow, 66 NY2d 417, 423 [1985] [emphasis added]). Contrary to defendant's contention, the officer's admission that, while the strength of the scent led him to conclude that the odor was coming from both defendant and the SUV, he could not olfactorily pinpoint the location of the source of the odor is materially different from testimony admitting that no scent whatsoever had been detected coming from the vehicle itself (cf. Smith, 98 AD3d at 591-592). Here, the fact that the scent was so strong, and permeated the area of both defendant and the SUV, was sufficient to support a reasonable belief that evidence of a crime may be found in the SUV (see People v Wright, 158 AD3d 1125, 1126-1127 [4th Dept 2018], lv denied 31 NY3d 1089 [2018]).
Inasmuch as the police had probable cause to search the SUV, the seizure of the handgun therein was lawful, and the police had probable cause to arrest defendant for criminal possession of a weapon (see Wiggins, 126 AD3d at 1370). Finally, contrary to defendant's contention, the officers from the LPD were authorized to arrest defendant in Cheektowaga outside the geographical area of their employment because they had probable cause to believe that defendant had committed the crime of criminal possession of a weapon (see CPL 140.10 [1] [b]; [3]; People v Nenni, 269 AD2d 785, 785 [4th Dept 2000], lv denied 95 NY2d 801 [2000]).
Entered: November 18, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494262/ | MEMORANDUM DECISION
PETER H. CARROLL, Bankruptcy Judge.
Valley Health System, a California Local Health Care District (“District”) seeks an order finding that appointment of a patient care ombudsman is unnecessary for the protection of patients under the specific facts and circumstances of this case. The United States trustee (“UST”) opposes the request on the grounds that the appointment of a patient care ombudsman is mandated by Congress under § 333(a)(1) of the Code1 whenever a health care business declares bankruptcy. At the hearing, Gary E. Klausner and H. Alexander Fisch appeared for the District; Christian L. Raisner appeared for SEIU-United Healthcare Workers West, and Timothy J. Farris appeared for the UST. The court, having considered the District’s motion and the UST’s opposition thereto, the evi-dentiary record, and arguments of counsel, makes the following findings of fact and conclusions of law2 pursuant to Fed. R.Civ.P. 52, as incorporated into Fed. R. Bankr.P. 7052 and made applicable to contested matters by Fed. R. Bankr.P. 9014(c).
I. STATEMENT OF FACTS
The District is a public agency formed in 1946 under the State of California Local Healthcare District Law.3 The District encompasses 882 square miles in the San Jacinto Valley in Riverside County, California, and serves a population within the District of nearly 360,000. At its inception, the District operated only an 18-bed hospital purchased from the city of Hemet, California. It now owns and operates the Hemet Valley Healthcare Center (the “Nursing Facility”), a 113-bed skilled nursing facility in Hemet, California, together with three acute hospitals-Hemet Valley Medical Center (“Hemet Hospital”), a 340-bed facility in Hemet, California; Menifee Valley Medical Center (“Menifee Hospital”), an 84-bed facility in Sun City, California; and Moreno Valley Community Hospital (“Moreno Valley Hospital”), a 95-bed facility in Moreno Valley, California. *759The Moreno Valley Hospital and its primary service area are situated outside the District’s boundaries. Each of the hospitals provides comprehensive health services and 24-hour emergency medical services.4
The cost of the District’s comprehensive health care system was financed, in large part, by two series of bonds issued by the District (collectively, the “Bonds”): (1) the 1996 series A hospital revenue bond, and (2) the series 1993 certificates of participation. There was approximately $84 million in principal and interest outstanding on the bonds as of the date of the petition.
On December 13, 2007, the District filed a voluntary petition under chapter 9 in this case disclosing not more than 5,000 creditors holding claims in excess of $100 million. On December 28, 2007, the District filed a motion seeking an order that the appointment of a patient care ombudsman under § 330(a)(1) was not necessary for the protection of patients under the specific facts of this case. On January 7, 2008, the UST filed a response opposing the District’s motion and urging the immediate appointment of a patient care ombudsman under § 330(a)(1). On January 8, 2008, the court conducted a hearing on the District’s motion.5 At the conclusion of the hearing, the matter was taken under submission.
II. DISCUSSION
This court has jurisdiction over this contested matter pursuant to 28 U.S.C. §§ 157(a) and 1334(b). This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O). Venue is appropriate in this court. 28 U.S.C. § 1409(a).
If the debtor in a case under chapter 7, 9, or 11 is a health care business,6 the *760appointment of a patient care ombudsman is mandated by § 333(a)(1), not later than 30 days after commencement of the case, to monitor the quality of patient care and to represent the interests of the debtor’s patients “unless the court finds that appointment of such ombudsman is not necessary for the protection of patients under the specific facts of the case.”7 An ombudsman appointed under § 333(a)(1) must be a disinterested person,8 and must:
(1) monitor the quality of patient care provided to patients of the debtor, to the extent necessary under the circumstances, including interviewing patients and physicians;
(2) not later than 60 days after the date of appointment, and not less frequently than at 60-day intervals thereafter, report to the court after notice to the parties in interest, at a hearing or in writing, regarding the quality of patient care provided to patients of the debtor; and
(3)if such ombudsman determines that the quality of patient care provided to patients of the debtor is declining significantly or is otherwise being materially compromised, file with the court a motion or a written report, with notice to • the parties in interest immediately upon making such determination.
11 U.S.C. § 333(b).
A. The District is a Health Care Business
Neither party disputes the fact that the District meets the definition of a “health care business” under § 101(27A). The District is a public entity. It is engaged primarily in offering to the general public facilities and services, which include services at three hospitals and a skilled nursing facility. The District’s facilities and services are offered to the public for the diagnosis or treatment of injury, deformity, or disease, and the District’s facilities and services are offered to the public for surgical care, drug treatment, psychiat*761ric care, or obstetric care. See, e.g., In re William L. Saber, M.D., P.C., 369 B.R. 631, 637 (Bankr.D.Colo.2007) (holding that a chapter 11 debtor, who was in the business of providing plastic and reconstructive surgery to the general public, met the definition of a “health care business” under § 101(27A)); In re Medical Assocs. of Pinellas, 360 B.R. 356, 359 (Bankr.M.D.Fla.2007) (holding that a chapter 11 debtor, which provided services to the public only ancillary to its primary function of administrative support to a physicians group, was not a health care business within the scope of § 101(27A)); In re 7-Hills Radiology, LLC, 350 B.R. 902, 904 (Bankr.D.Nev.2006) (finding that § 101(27A)’s definition of a “health care business” did not include a chapter 11 debtor that rendered radiology and X-ray services to patients only at the request of referring physicians, not to the general public). The UST disagrees with the District’s argument that, notwithstanding the District’s status as a “health care business,” the appointment of an ombudsman that would otherwise be required under § 333(a)(1) is not necessary due to the particular facts and circumstances of this case.
B. The Necessity of a Patient Care Ombudsman.
To determine whether the appointment of a patient care ombudsman is necessary under the specific facts of this case, the court must examine the operations of the debtor in light of the following nine non-exclusive factors:
1. The cause of the bankruptcy;
2. The presence and role of licensing or supervising entities;
3. Debtor’s past history of patient care;
4. The ability of the patients to protect their rights;
5. The level of dependency of the patients on the facility;
6. The likelihood of tension between the interests of the patients and the debtor;
7. The potential injury to the patients if the debtor drastically reduced its level of patient care;
8. The presence and sufficiency of internal safeguards to ensure appropriate level of care; and
9. The impact of the cost of an ombudsman on the likelihood of a successful reorganization.
In re Alternate Family Care, 377 B.R. 754, 758 (Bankr.S.D.Fla.2007). The weight to be accorded to each of the Alternate Family Care factors in making a determination whether to appoint a patient care ombudsman is left to the sound discretion of the court. Other factors to be considered by the court include: (1) the high quality of the debtor’s existing patient care; (2) the debtor’s financial ability to maintain high quality patient care; (3) the existence of an internal ombudsman program to protect the rights of patients, and/or (4) the level of monitoring and oversight by federal, state, local, or professional association programs which renders the services of an ombudsman redundant. See 3 Collier on Bankruptcy ¶ 333.02, at 333-4 (Alan N. Resnick & Henry J. Sommer eds., 15th ed.2007).
Factor 1: Cause of the Bankruptcy. The District sought relief under chapter 9 primarily due to the burden of servicing the Bonds and problems stemming from “certain limitations inherent in the District’s contractual capitation relationships.” There is no evidence that the bankruptcy was precipitated by allegations of deficient patient care or privacy concerns.
Factor 2: Presence and Role of Licensing or Supervising Entities. The District is subject to substantial monitoring by a variety of federal and state regulatory *762agencies and independent accreditation associations. The District must undergo a triennial certification by the Joint Committee on Accreditation for Hospital Organizations (“JCAHO”), a national accreditation organization, to confirm that its hospitals are in compliance with JCAHO’s standards and elements of performance.9 The District’s next JCAHO inspection will occur during the next 12 months. The District is also subject to monitoring and inspection by several state and county regulatory agencies, including frequent and unannounced inspections by the California Department of Public Health (“CDPH”) (formerly the Department of Health Services) to verify compliance with title 22 of the California Code of Regulations. The CDPH also conducts a formal triennial inspection of the hospitals, often coinciding with the JCAHO evaluation and certification. The California Department of Mental Health (“DMH”) reviews annually each hospital’s policies and procedures for treating psychiatric patients. Each hospital is required to self-report to the DMH any unusual occurrence involving a psychiatric patient. Finally, the District’s hospitals are fully accredited by the JCAHO and in substantial compliance with all applicable federal and state regulations.
Factor 3: Debtor’s Past History of Patient Care. The District has served the residents of San Jacinto Valley for the past 60 years. There is no evidence of action taken by any federal, state, or local regulatory authority against the District due to deficiencies in patient care, either prior to or after the petition date. More importantly, the District has adopted extensive and redundant internal procedures to ensure the highest level of patient care and to resolve expeditiously complaints that may arise concerning patient care.
Factors 4, 6 & 8: Ability of the Patients to Protect Their Rights; The Likelihood of Tension Between the Interests of the Patients and the Debtor; and the Presence and Sufficiency of Internal Safeguards to Ensure Appropriate Level of Care. The District has implemented extensive internal quality controls and procedures for monitoring patient care at its facilities. Each of the hospitals has internal procedures for processing and resolving complaints concerning patient care. Patients may report concerns directly to the CDPH, the Centers for Medicare and Medicaid Services (the “CMS,” formerly known as HCFA), and the JCAHO. Complaints directed to the nursing staff that cannot be resolved immediately to the satisfaction of the patient are referred to the nurse manager for the department involved, or ultimately to the House Supervisor or Hospital Administrator. Complaints by patients after discharge are processed by Hospital Administration, which must review each complaint and respond in writing. When a patient tenders a complaint directly to the CDPH, the CDPH investigates the matter, visits the hospital in question, and evaluates the merits of the complaint. In the rare instance a deficiency is found, the CDPH *763issues a non-compliance letter and the hospital submits a formal plan to correct the deficiency followed by implementation.
As part of a proactive regulatory compliance program, the District has implemented periodic Tracers (mini mock-surveys) to identify and correct areas of potential regulatory non-compliance. Compliance issues are identified before a problem arises and reported to the responsible department head, who must formulate and implement a corrective action plan under the supervision of the Hospital Administrator.
Each hospital also monitors the quality of patient care through a structure of committees that evaluate performance. Each medical staff department in a hospital that provides clinical services is required meet regularly to discuss issues related to quality of care, and to make improvement recommendations to promote best practices. Quality controls implemented by the department are monitored by the department head to ensure that services are provided in accordance with the hospital’s procedures.
Reports concerning the quality of patient care and recommendations are made by each department to the hospital’s Performance Improvement Committee, an interdisciplinary committee of physicians, administration, nursing, and other department leaders, which focuses on improving the quality and safety of patient care by identifying areas to reduce risk related to patient care. Each hospital’s Performance Improvement Committee is responsible for implementing the National Patient Safety Goals formulated by the JCAHO. The Performance Improvement Committee also (a) compares each hospital’s performance with the performance of the District’s other hospitals in the same categories and takes action to correct any disparity; (b) analyzes patient satisfaction rates, as well as patient complaints, and the resolution thereof, to improve customer service; and (c) adjusts the hospital’s safety and quality goals annually to coincide with patient expectations, internal policies, best practices, and recommendations by professional organizations on quality such as the Institute of Healthcare Improvement and the National Quality Forum.
The Performance Improvement Committee’s actions are then reviewed by the hospital’s Medical Executive Committee, which has approval authority for patient care-related policies and is composed of the chairs of each medical staff department in the hospital, hospital administrators, and nursing leaders. The Medical Executive Committee’s recommendations for policy approval and the credentialing and privileging of licensed independent practitioners are made to the District’s Board of Directors for final approval. The District’s Board of Directors, through its own Performance Improvement Subcommittee, oversees all quality of care issues, manages the various safety and quality programs, and receives reports from each hospital. The Board’s Performance Improvement Subcommittee also receives direct reports from the Director of Risk Management and Performance Improvement, who is charged with the responsibility of monitoring all quality of care issues, reporting major incidents directly to the Board’s subcommittee, and working as a liaison between the District and the various external regulatory agencies charged with reviewing patient care issues. The District’s existing procedures and safeguards are comprehensive and redundant, and weigh heavily against the appointment of an ombudsman.
Factor 5: Level of Dependency of Patients on the Facility. The District’s facilities include the Nursing Facility (113-bed skilled nursing facility), Hemet Hospital (a 340-bed facility), Menifee Hospital (an 84-*764bed facility), and Moreno Valley Hospital (a 95-bed facility). Given the range of services offered by the hospitals and skilled nursing facility, the patients under the District’s care and supervision are highly dependent on the District for their health, safety and welfare.
Factor 7: Potential Injury to Patients if the Debtor Drastically Reduced its Level of Patient Care. The Hemet Hospital offers cancer treatment; cardiac care services; and inpatient and outpatient surgical services. The Menifee Hospital provides, among other things, inpatient and outpatient surgery; critical care; and cataract and retina specialty surgeries. The Moreno Valley Hospital offers inpatient medical, surgical and pediatric services; critical care; post-critical care; obstetrics; and inpatient and outpatient surgery. Due to the nature of these services, a drastic reduction in the quality of care creates a significant risk for patients. Moreover, a cessation of operations at any one of the District’s hospitals would require a transfer of patients to another facility. Because the potential risk to patients if the District reduced its level of care is high, this factor weighs heavily in favor of the appointment of an ombudsman.
Factor 9: Impact of the Cost of an Ombudsman on the Likelihood of a Successful Reorganization. The appointment of a patient care ombudsman may result in substantial administrative expense to the estate.10 The UST reasons that “if patients within the [District’s] operations are truly safe, the ombudsman’s duties will be facilitated and costs against the estate will be minimal.” However, § 333 would require that a court-appointed ombudsman, at a minimum, interview patients and physicians at the District’s four facilities, and report to the court at intervals not less frequently than every 60-days regarding the continuing quality of patient care. Given the level of internal controls and oversight by federal, state, local, and professional organizations, the services of a patient care ombudsman would be redundant. Appointment of an ombudsman at *765this time would largely duplicate the efforts of the District’s hospitals, the CDPH, JCAHO and others, at the expense of the District and its creditors, and “would merely add another layer of bureaucracy to an already heavily regulated and supervised” entity. See Alternate Family Care, 377 B.R. at 761.
While two factors tip in favor of an ombudsman, the balance of the Alternate Family Care factors weigh against the immediate appointment of a patient care ombudsman pursuant to § 333(a)(1) under the specific facts and circumstances of this case.
In its response in opposition to the motion, the UST argues that “an independent ombudsman is required not only to monitor the quality of patient care and to report to the Court, but to warn the Court if patient care is declining or being compromised” and that “[t]here is no other party in this case that can fill this role.” (emphasis in original). The UST reasons that internal controls and external oversight common to all sophisticated health care businesses are insufficient to protect patients’ rights upon bankruptcy, and that the District, having filed a chapter 9 petition, must be subject to additional scrutiny under § 333(a)(1) “precisely because its financial situation is one which required a bankruptcy filing and therefore puts patients at greater risk.” According to the UST, an inherent tension exists between a health care business and its patients rising to the level of a conflict of interest when the health care business slips into bankruptcy; and if left to its own devices, a health care business in bankruptcy may not provide comprehensive, safe, and effective care to its patients absent the oversight of an ombudsman appointed pursuant to § 333(a)(1). “However well-qualified the Debtor’s in-house monitors may be” argues the UST, “[ejmployees of the Debtor do not have an undivided loyalty to patient interests and are plainly not ‘disinterested’ under the Bankruptcy Code’s definition.”
The UST has not offered any evidence to suggest that the quality of patient care or preservation of patient privacy is an issue at any of the District’s facilities, or that the District will be unable to maintain the highest quality of patient care given its extensive and redundant internal policies and procedures and the current level of oversight by federal, state, local, and private entities. Nor has the UST submitted evidence of any existing tension between the interests of the patients and the District or actual conflicting interests of the Districts’ employees resulting in a reduced level of patient care. Finally, there is nothing in the language of § 333(a)(1) that requires the court to make a preliminary finding that the debtor’s existing internal controls are administered by one or more individuals who meet the definition of a “disinterested person” under § 101(14) before it can find that appointment of an ombudsman is not necessary for the protection of patients under the specific facts and circumstances of a case.
III. CONCLUSION
Although the District is a “health care business” as that term is defined in § 101(27A), the appointment of a patient care ombudsman pursuant to § 333(a)(1) is not necessary at this time under the specific facts of this case. Notwithstanding the foregoing, the court, on motion of the UST or any party in interest, may order the appointment of a patient care ombudsman at any time during the pendency of this case if the court finds a change in circumstances or newly discovered evidence that demonstrates the necessity of an ombudsman to monitor the quality of *766patient care and protect the interests of patients.11
A separate order will be entered consistent with this opinion.
.Unless otherwise indicated, all “Code,” "chapter” and “section” references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330 after its amendment by the Bankruptcy Abuse and Consumer Prevention Act of 2005, Pub.L. 109-8, 119 Stat. 23 (2005). “Rule” references are to the Federal Rules of Bankruptcy Procedure ("Fed. R. Bankr.P.”), which make applicable certain Federal Rules of Civil Procedure ("Fed. R. Civ.P.”).
. To the extent that any finding of fact is construed to be a conclusion of law, it is hereby adopted as such. To the extent that any conclusion of law is construed to be a finding of fact, it is hereby adopted as such. The court reserves the right to make additional findings and conclusions as necessary or as may be requested by any party.
. Cal. Health & Safety Code § 32000, et. seq.
. Services offered at the Hemet Hospital include the Emory J. Cripe Radiation Therapy Treatment Center for cancer treatment; cardiac care services; inpatient and outpatient surgical services; behavioral health services; speech, physical, and occupational therapy services; and CT imaging and magnetic resonance imaging. The Menifee Hospital provides inpatient and outpatient X-ray services, including mammography, CT scan, and MRI; a critical care unit; inpatient and outpatient surgery; inpatient and outpatient laboratory services; respiratory services; physical therapy services; a joint replacement center; and cataract and retina specialty surgeries. The Moreno Valley Hospital offers inpatient medical, surgical and pediatric services; critical care, post-critical care, and telemetry units; maternity and women's services; obstetrics; inpatient and outpatient surgery; the Spine Center of Excellence program; cardiopulmonary services; and physical rehabilitation services.
. No creditor or other party in interest, including SEIU-United Healthcare Workers West, filed a written response to the District's motion or appeared at the hearing in opposition to the motion.
.The term "health care business”—
(A) means any public or private entity (without regard to whether that entity is organized for profit or not for profit) that is primarily engaged in offering to the general public facilities and services for—
(i) the diagnosis or treatment of injury, deformity, or disease; and
(ii) surgical, drug treatment, psychiatric, or obstetric care; and
(B) includes—
(i) any—
(I) general or specialized hospital;
(II) ancillary ambulatory, emergency, or surgical treatment facility;
(III) hospice;
(IV) home health agency; and
(V) other health care institution that is similar to an entity referred to in sub-clause (I), (II), (III), or (IV); and
(ii) any long-term care facility, including any—
(I) skilled nursing facility;
(II) intermediate care facility;
(III) assisted living facility;
(IV) home for the aged;
(V) domiciliary care facility; and
(VI) health care institution that is related to a facility referred to in subclause (I), *760(II), (III), (IV), or (V), if that institution is primarily engaged in offering room, board, laundry, or personal assistance with activities of daily living and incidentals to activities of daily living.
11 U.S.C. § 101 (27A).
. Section 333(a)(1) states:
If the debtor in a case under chapter 7, 9, or 11 is a health care business, the court shall order, not later than 30 days after the commencement of the case, the appointment of an ombudsman to monitor the quality of patient care and to represent the interests of the patients of the health care business unless the court finds that the appointment of such ombudsman is not necessary for the protection of patients under the specific facts of the case.
11 U.S.C. § 333(a)(1). Section 333 was added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. 109-8, § 1104(a)(1), 119 Stat. 23, 191 (2005), effective for all cases filed on or after October 17, 2005. Rule 2007.2(a) further provides, in pertinent part, that "the court shall order the appointment of a patient care ombudsman under § 333 of the Code, unless the court, on motion of the United States trustee or a party in interest filed not later than 20 days after the commencement of the case or within another time fixed by the court, finds that the appointment of a patient care ombudsman is not necessary for the protection of patients under the specific circumstances of the case.” Fed. R. Bankr.P.2007.2(a).
. 11 U.S.C. § 333(a)(2)(A). The term "disinterested person” means a person that—
(A) is not a creditor, an equity security holder, or an insider;
(B) is not and was not, within 2 years before the date of the filing of the petition, a director, officer, or employee of the debtor; and
(C) does not have an interest materially adverse to the interest of the estate or of any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the debtor, or for any other reason.
11 U.S.C. § 101(14).
. Every aspect of a hospital’s operations are evaluated under the JCAHO’s standards, which include: (1) Ethics, Rights, and Responsibilities; (2) Provision of Care, Treatment, and Services; (3) Medication Management; (4) Surveillance, Prevention, and Control of Infection; (5) Improving Organization Performance; (6) Leadership; (7) Management of the Environment of Care; (8) Management of Human Resources; (9) Management of Information; (10) Medical Staff; and (11) Nursing. Hospitals accredited by the JCAHO as having met their standards and elements of performance are deemed to be in compliance with Medicare Conditions of Participation under title 42 of the Code of Federal Regulations. If a hospital is not in compliance with Medicare Conditions of Participation, it loses Medicare and Medicaid funding.
. Section 330(a)(1) authorizes the court, after notice and a hearing and subject to §§ 326, 328 and 329, to award an ombudsman appointed under § 333 reasonable compensation for actual, necessary services rendered by the ombudsman and reimbursement for actual, necessary expenses. 11 U.S.C. § 330(a)(1). Compensation and reimbursement awarded under § 330(a) is an administrative expense under § 503(b)(2) entitled to second priority under § 507(a)(2). 11 U.S.C. §§ 503(b)(2) & 507(a)(2). Sections 503 and 507(a)(2) are incorporated into chapter 9 by virtue of § 901(a), but § 901(a) does not incorporate either § 330 or § 333. 11 U.S.C. § 901; see, e.g., In re E. Shoshone Hosp. Dist., 226 B.R. 430, 431 (Bankr.D.Idaho 1998) (holding that a chapter 9 debtor was not required to obtain court approval for the employment of counsel because §§ 327, 328, 330, and 331 are not incorporated into § 901); In re County of Orange, 179 B.R. 195, 200 (Bankr.C.D.Cal.1995) (holding that the court had no authority to order the payment of interim compensation to professionals without the chapter 9 debtor's consent because § 331, which governs interim payments to professionals, is not incorporated into chapter 9). But see In re Castle Pines N. Metro. Dist., 129 B.R. 233, 234 (Bankr.D.Colo.1991) (“Congress, by specifically referring to § 507(a)(1) in § 943(a)(5), has necessarily included § 503(b), which, in turn, includes § 330(a). The symmetry is complete by the specific inclusion of §§ 1102, 1103 and 503 in § 901(a). Thus, by reason of § 901(b), the District’s argument [that § 330 is inapplicable to chapter 9] fails”). Chapter 9 contemplates payment of professional fees and expenses at the end of the case. 11 U.S.C. § 943(b)(3) & (5); see County of Orange, 179 B.R. at 199. Arguably, an ombudsman’s fees and expenses could accrue through confirmation of a chapter 9 plan, but ultimately not be subject to the standards governing the allowance of fees and expenses set forth in § 330(a).
. Rule 2007.2(b) provides, in pertinent part, that "[i]f the court has ordered that the appointment of an ombudsman is not necessary ... the court, on motion of the United States trustee or a party in interest, may order the appointment at any time during the case if the court finds that the appointment of an ombudsman has become necessary to protect patients.” Fed. R. Bankr.P.2007.2(b). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494263/ | ORDER
ARTHUR B. BRISKMAN, Bankruptcy Judge.
This matter came before the Court on the Motion for Turnover of Assets of the Estate (Doc. No. 17) (“Motion”) filed by Scott R. Fransen, the Chapter 7 Trustee herein (“Trustee”), and the Response (Doc. No. 19) filed by Laura Kirk, the Debtor herein (“Debtor”). The Trustee seeks turnover of the Debtor’s alleged interest in a 2006 Mazda 3 (“Vehicle”).1 Evidentiary hearings were held on October 15, 2007 and November 28, 2007 at which the Trustee, the Debtor, her counsel, daughter, and father were present. The parties filed post-hearing briefs (Doc. Nos. 23, 26).
The facts are not in dispute. The legal issue for determination is whether the Debtor, who is named a joint owner on the Vehicle’s title, holds an interest in the Vehicle which is subject to turnover and administration by the Trustee.
The Debtor filed the above-captioned individual Chapter 7 bankruptcy case on July 16, 2007. The Vehicle was purchased in March 2006 for the Debtor’s then fifteen-year old daughter with funds provided by the Debtor’s father, Dean H. Neer-iemer (“Neeriemer”). The Vehicle was purchased as a gift for the daughter and at all times was intended by Neeriemer and the Debtor to be the daughter’s car.
The purchase price of the Vehicle was $20,000.00. The Debtor paid $1,000.00 of her own funds to the dealership to hold the Vehicle while Neeriemer liquidated some personal assets. He issued check number 203794 dated March 29, 2006 in the amount of $20,000.00 to himself and endorsed the check to the Debtor (Doc. No. 25). The Debtor deposited Neeriemer’s check into her account and used the funds to pay the balance of the Vehicle’s purchase price.
The Vehicle is titled and registered in the State of Florida jointly in the Debtor’s and the daughter’s names. The Certificate of Title lists the registered owners as “Laura N Kirk or Bethany M Kirk.” The Vehicle is unencumbered by liens and has an approximate value of $19,000.00. The Debtor and her daughter reside at 3618 Pompano Court, Gotha, Florida 34734, which is the registered address of the Vehicle. The Vehicle is used exclusively by the daughter. The Debtor has only driven the Vehicle twice.
The Debtor obtained insurance coverage for the Vehicle and pays the insurance *802premiums. The insurance premium invoices are issued to the Debtor and her daughter jointly. The Debtor pays the Vehicle’s maintenance costs. The daughter is currently a junior in high school and has no source of income.
The Debtor asserts she has no beneficial or equitable interest in the Vehicle, but only bare legal title. She explained the Vehicle is jointly titled because her daughter, a minor, could not legally contract for the purchase of the car and insurance for the daughter as a sole owner would have been prohibitively expensive. They did not consider titling the Vehicle as custodial property or creating a trust. The joint titling of the Vehicle was not done for asset protection or creditor avoidance purposes.
The Debtor’s bankruptcy papers are consistent with the stated intention the Vehicle was to be the daughter’s property. The Debtor did not list the Vehicle as an asset in her Schedules nor did she claim an exemption in the Vehicle.2 She stated in her Statement of Financial Affairs (Question No. 14) she is holding or controlling the Vehicle for the benefit of her daughter: “in daughter’s possession — title in debtor’s name for insurance purposes. Car fully paid for by grandfather.”
Florida statutory and case law govern the determination of the Debtor’s interest in the Vehicle. Butner v. U.S., 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979) (“Property interests are created and defined by state law.”). If the Debtor is determined to have an interest in the Vehicle, bankruptcy law governs whether the interest becomes property of the estate. In re Daugherty, 261 B.R. 735, 738 (Bankr.M.D.Fla.2000).
A certificate of title is not necessary for ownership of a vehicle in Florida. In re Kalter, 292 F.3d 1350, 1358 (11th Cir.2002). Where a certificate of title exists, it is not conclusive proof of ownership, but “invariably establishes presumptive ownership.... ” Nash Miami Motors, Inc. v. Bandel, 47 So.2d 701, 703 (Fla.1950); see also, Cannova v. Carran, 92 So.2d 614, 619 (Fla.1957) (stating a person is presumed to own all property that is titled in her name). “[S]uch presumption may be overcome by competent evidence.” Nash at 703; see also, In re Forfeiture of 1989 Isuzu Pickup Truck, 612 So.2d 695, 697 (Fla. 1st DCA 1993) (“The presumption of coownership of a motor vehicle can be overcome only by clear and convincing proof.”).
The Debtor’s assertion she has merely a non-beneficial or custodial interest in the Vehicle is contradictory to the plain and unambiguous language of Fla. Stat. Section 319.22(2)(a)(l), which is determinative in establishing the nature of a party’s ownership intent. In re Daugherty at 740. Section 319.22(2)(a)(l) provides: “When a motor vehicle or mobile home is registered in the names of two or more persons as coowners in the alternative by the word ‘or,’ such vehicle shall be hold in joint tenancy.” The Debtor and her daughter, by the ownership designation “Laura N Kirk or Bethany M Kirk,” own the Vehicle as joint tenants. Fla. Stat. § 319.22(2)(a)(l); In re Daugherty at 740.3
*803The Debtor’s position is contradictory to Fla. Stat. Section 710.111(l)(f), which specifically allows for the titling of tangible personal property as custodial property. The statute provides custodial property is created and a transfer is made whenever:
(f) A certificate of title issued by a department or agency of a state or of the United States which evidences title to tangible personal property is either:
1. Issued in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: ‘as custodian for {name of minor) under the Florida Uniform Transfers to Minors Act....’4
The Certificate of Title does not reflect the Vehicle was intended to be held as custodial property pursuant to Section 710.111(l)(f).
The Debtor presented no trust agreement or other evidence establishing the Vehicle is being held in trust for the benefit of the daughter. The burden of establishing the existence of a trust relationship is on the party claiming the benefit of such a relationship. Georgia Pacific Corp. v. Sigma Serv. Corp., 712 F.2d 962, 969 (5th Cir.1983). The Debtor presented no evidence establishing she holds an equitable lien in the Vehicle. In re Coburn, 250 B.R. 401, 404 (Bankr.M.D.Fla.1999) (holding “If a party does not follow the requirements of [Fla. Stat.] Chapter 319, the party cannot later assert any ownership or lien interest in the car.”).
The Debtor’s obtaining insurance coverage for the Vehicle, payment of the premiums, and payment of the maintenance costs is inconsistent with her assertion she has no beneficial or equitable interest in the Vehicle. Payment of such costs evidences beneficial ownership. J.R. Brooks & Son, Inc. v. Quiroz, 707 So.2d 861, 862 (Fla. 3d DCA 1998); Carlton v. Johns, 194 So.2d 670, 673 (Fla. 4th DCA 1967); Register v. Redding, 126 So.2d 289, 293 (Fla. 1st DCA 1961).
The Debtor has not presented competent, clear, and compelling evidence she does not hold a beneficial interest in the Vehicle. She holds both legal and equitable ownership interests in the Vehicle. Section 541(a) of the Bankruptcy Code broadly defines property of the estate to include “all legal or equitable interests of the debtor in property as of the commencement of the case.” The Debtor’s interest in the Vehicle constitutes non-exempt property of the estate pursuant to Section 541(a)(1). The Vehicle is subject to turnover and administration by the Trustee pursuant to Sections 542(a), 704(a), and 363(f) of the Bankruptcy Code.
The Trustee is authorized to sell the Vehicle pursuant to Section 363(h) and, after deducting all ordinary and necessary costs and expenses of sale, shall divide the remaining proceeds into two equal shares. 11 U.S.C. § 363(h); Beal Bank, SSB v. Almand and Assocs., 780 So.2d 45, 53 (Fla.2001) (holding each share in a joint tenancy is “presumed to be equal for purposes of alienation.”); In re Daniels, 309 B.R. 54, 56-7 (Bankr.M.D.Fla.2004). The estate is entitled to a fifty-percent share of the sale proceeds and the Debtor’s daughter is entitled to the other fifty-percent share. The Debtor shall have fourteen days to deliver the Vehicle to the Trustee.
The Court would entertain a motion by the Debtor to amend her exemptions or dismiss or convert the case to Chapter 13.
*804Accordingly, it is
ORDERED, ADJUDGED and DECREED that Trustee’s Motion (Doc. No. 17) is hereby GRANTED and the Debtor’s interest in the Vehicle constitutes property of the estate pursuant to 11 U.S.C. Section 541(a) and is subject to turnover and administration by the Trustee pursuant to 11 U.S.C. Sections 363(f) and 363(h); and it is further
ORDERED, ADJUDGED and DECREED that the Debtor is hereby directed to deliver the Vehicle to the Trustee within fourteen (14) days of the date of entry of this Order; and it is further
ORDERED, ADJUDGED and DECREED that Bethany M. Kirk, the joint owner of the Vehicle, is entitled to a distribution, after deducting all ordinary and necessary costs and expenses of sale, of one half of the proceeds of sale of the Vehicle.
. The Vehicle has Vehicle Identification Number JM1BK123661487742. The Trustee seeks turnover of other alleged assets including a 2006 tax refund, funds paid to Mezey & Associates, funds paid to the Debtor’s father, a bank account, and a 2004 Honda Pilot. Only the Vehicle was addressed at the hearing. Presumably, the parties have resolved the issues relating to these other alleged assets. This Order is without prejudice to the Trustee’s right to pursue such assets to the extent any unresolved issues remain.
. The Debtor lists a “2006 Accord LX” with a value of $15,950.00 as an asset (Schedule B) in which SunTrust Consumer Loan Payments holds a purchase money security interest of $23,093.00 (Schedule D). No exemption is claimed in Schedule C for the Accord.
. The Bankruptcy Court in Daugherty rejected the debtor's argument she had only bare legal title in a vehicle her husband purchased which was titled jointly in their names using the disjunctive "or.”
. A transfer made pursuant to Section 710.111 is irrevocable and the custodial property is indefeasibly vested in the minor. Fla. Stat. § 710.113(2). A "minor” is "an individual who has not attained the age of 21 years.” Fla. Stat. § 710.103(11). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494264/ | ORDER
ARTHUR B. BRISKMAN, Bankruptcy Judge.
This matter came before the Court on the Motions To Compel Production of Documents (Doc. Nos.418, 645, 838) (collectively, the “Motions to Compel”) filed by So-neet R. Kapila, the Chapter 11 Trustee (“Trustee”) for the jointly administered bankruptcy estates of Louis J. Pearlman (“Pearlman”), Louis J. Pearlman Enterprises, Inc. (“LJPE”), Trans Continental Airlines, Inc. (“TCA”), Trans Continental Records, Inc. (“TCR”), and Trans Continental Studios, Inc. (“TCS”), seeking to compel the production of documents from attorney Robert Leventhal (“Leventhal”), the law firm of Leventhal and Slaughter, P.A. (“L & S”), and the law firm of Gray-Robinson, P.A. (“GR”). L & S filed a response to the Motion to Compel (Doc. No. 856).
A hearing was held on November 8, 2007 at which the Trustee, counsel for the Trustee, Leventhal, counsel for GR, counsel for the Official Unsecured Creditors Committee, and other parties in interest appeared.1 The Court makes the following Findings of Fact and Conclusions of Law after reviewing the pleadings, hearing live argument, and being otherwise fully advised in the premises.
FINDINGS OF FACT
Background
Tatonka Capital Corporation, Integra Bank, N.A., American Bank of St. Paul, and First National Bank & Trust Company of Williston (collectively, the “Petitioning Creditors”) filed involuntary Chapter 11 petitions against Pearlman and TCA (Case No. 6:07-bk-00762-ABB) on March 1, 2007. An involuntary Chapter 7 case was instituted against TCR on March 7, 2007 by Roberta D. Jordan, David D. Mathis, and Beverly Mathis (Case No. 6:07-bk-00832-ABB).2 The involuntary petitions were not contested and Orders for relief were entered in the involuntary cases.
Gerald A. McHale, Jr., the Florida State Court Receiver3 of LJPE, TCS, and several other Pearlman-related entities, filed *906voluntary Chapter 11 petitions for LJPE (Case No. 6:07-bk-01505-ABB), TCS (Case No. 6:07-bk-01507-ABB), and Louis J. Pearlman Enterprises, LLC (Case No. 6:07-bk-01779-ABB). George Mills, as the Sole Director, filed voluntary Chapter 11 petitions for other Pearlman-related entities including Trans Continental Television Productions, Inc. (Case No. 6:07-bk-01856-ABB), Trans Continental Aviation, Inc. (Case No. 6:07-bk-02431-ABB), and Trans Continental Management, Inc. (Case No. 6:07-bk-02432-ABB).
Motions seeking the appointment of a Chapter 11 trustee were filed in the Pearl-man and several Pearlman-related entity cases. The Trustee is the duly appointed Chapter 11 Trustee of the Pearlman, LJPE, TCA, TCR, TCS, Louis J. Pearl-man, LLC, Trans Continental Television Productions, Inc., Trans Continental Aviation, Inc., and Trans Continental Management, Inc. bankruptcy estates (collectively, the “Debtors” and the debtor entities shall be referred to collectively hereinafter as the “Pearlman Entities”). The Debtors’ bankruptcy cases have been consolidated for procedural purposes and joint administration as captioned In re Louis J. Pearlman, Case No. 6:07-bk-00761-ABB.
Pearlman was indicted by a federal grand jury in the United States District Court for the Middle District of Florida, Orlando Division (“District Court”), and is being held by federal authorities. He was the principal of and/or had an interest in the Pearlman Entities and other various entities. He has made no appearance in the Debtors’ cases or any of the other related cases.4 He did not appear for a Rule 2004 examination duly scheduled by the Trustee. He, to date, has not assisted the Trustee in locating and pursuing assets of the Debtors’ estates.
Discovery
The Trustee’s Motion for an Order Authorizing Rule 2004 Examinations and Discovery was granted by the Order entered on April 19, 2007 (Doc. No. 100) (“Discovery Order”), which authorizes the Trustee “to engage in any discovery that he deems necessary and appropriate to carry out his *907statutory duties, including, without limitation, ... issuing subpoenas to, third parties ... without the need for further orders of this Court.”
The Trustee discovered Leventhal and various attorneys associated with GR performed legal services for certain Pearl-man-related entities and Pearlman, individually and jointly with certain entities, on various matters and may possess documents related thereto. The Trustee, in order to obtain all records related to the Debtors’ affairs and to fully investigate all potential assets and claims of the various bankruptcy estates, served the following subpoenas (collectively, the “Subpoenas”) pursuant to the Discovery Order: (i) Subpoenas Duces Tecum on L & S on June 28, 2007 in the Pearlman, LJPE, TCA, TCR, and TCS cases; and (ii) a Subpoena Duces Tecum on GR on August 31, 2007 in the Pearlman case.
Pearlman was involved in extensive business dealings conducted through numerous entities. Substantial assets are unaccounted for and the Debtors’ financial records are incomplete or missing. Pearlman has not assisted the Trustee in locating, protecting, and pursuing assets of the Debtors’ estates, nor is he likely to be in a position to do so due to his incarceration.
The information sought in the Subpoenas is vital to the Trustee’s fulfillment of his fiduciary duties including: locating, and pursuing assets of the Debtors’ estates for the benefit of their creditors; investigating the acts, conduct, assets, liabilities and financial condition of the Debtors, the operation of the Debtors’ businesses, and any other matters relevant to these cases; and preparing and filing the lists, schedules and statements for the Debtors’ estates. The Trustee is required to compile the information necessary to perform his fiduciary duties from other sources, such as attorneys who previously represented Pearlman and/or Pearlman-related entities.
L & S and GR produced some documents responsive to the Subpoenas and provided privilege logs detailing the documents they withheld, asserting the documents are protected by the attorney-client privilege. L & S and GR seek direction from the Court as to their production obligations.
Attorney-Client Privilege — Entities
The Trustee, pursuant to the United States Supreme Court case law, is the successor to and holds the attorney-client privilege of each of the Pearlman Entities. He holds the privilege with respect to all documents and information in the possession, custody, or control of L & S and GR pertaining to any matter in which either L & S or GR represented the Pearlman Entities. The Trustee, as the holder of the Pearlman Entities’ attorney-client privileges, has the power to waive the privilege for each of the Pearlman Entities.
The Trustee maintains any risk of harm in granting control of the Debtors’ attorney-client privileges can be overcome by the Trustee’s non-waiver of the privileges. The Trustee asserts he, as the holder of the privileges, is entitled to turnover of the documents and information sought in the Subpoenas, but “does not intend to further waive the attorney-client privilege absent authorization by Court order.”5
Turnover requires the exercise of control of the privilege through waiver. The documents and information related to the Pearlman Entities are not subject to turnover unless and until the attorney client privileges are waived by the Trustee as to the Pearlman Entities. The documents and information sought in the Subpoenas *908relating to the Pearlman Entities will be subject to turnover when the Trustee waives the privilege as to each of the Pearlman Entities.6
Attorney-Client Privilege — Individual and Joint Representation
The Trustee seeks turnover of documents and information relating to L & S’ and GR’s representations of Pearlman individually and where either firm jointly represented Pearlman individually with Pearlman Entities. Leventhal stated L & S jointly represented Pearlman individually and some Pearlman-related entities on interrelated legal matters. The Trustee contends he controls Pearlman’s individual attorney-client privilege and the attorney-client privilege relating to any matter in which L & S or GR jointly represented the Pearlman Entities with Pearlman individually.
The documents and information sought in the Subpoenas relating to the representation of Pearlman individually may be protected by the attorney-client privilege. The party asserting the attorney-client privilege carries the burden of establishing each element of the privilege has been satisfied. To the extent L & S or GR jointly represented Pearlman individually and Pearlman Entities on matters of common legal interest, their communications with counsel relating to the subject matter of the joint representation may be protected by the attorney-client privilege. The party asserting the joint client privilege carries the burden of establishing the existence of a joint representation and the applicability of the attorney-client privilege to the communications between the joint clients and the attorney.
Once the applicability of the attorney-client privilege is established, the issue for determination is who controls the privilege. The issue of whether a bankruptcy trustee controls the attorney-client privilege as to an individual debtor has been addressed by various federal courts. The majority of courts employ a balancing test whereby the specific facts of a case are evaluated and the benefits of granting access to the privilege are balanced against the risk of harm to the debtor. The Court adopts the balancing test.
CONCLUSIONS OF LAW
The Trustee is the representative of the Debtors’ bankruptcy estates pursuant to Section 323(a) of the Bankruptcy Code. He is required “... investigate the acts, conduct, assets, liabilities, and financial condition of the debtor, the operation of the debtor’s business and the desirability of the continuance of such business, and any other matter relevant to the case or to the formulation of a plan.” 11 U.S.C. § 1106(a)(3) (2006). The Trustee is required, pursuant to Section 1106(a)(2), to file the Section 521(1) lists, schedules, and statements for the Debtors’ cases since the Debtors have not filed such documents.
The documents and information sought in the Subpoenas relate to the Debtors’ assets, liabilities, financial conditions, and business affairs. The documents and information are important to the administration of the Debtors’ cases and the preparation of the Section 521(1) filings for each of the Debtors’ estates.
Attorney-Client Privilege — Entities
The documents and information sought by the Trustee from L & S and GR *909may be subject to an attorney-client privilege between either L & S and/or GR and the Pearlman Entities to the extent an attorney-client relationship existed between them. The privilege passed to, is controlled by, and may be waived by the Trustee to the extent an attorney-client privilege exists with respect to any of the Pearlman Entities. Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. 343, 358, 105 S.Ct. 1986, 85 L.Ed.2d 372 (1985) (holding “the trustee of a corporation in bankruptcy has the power to waive the corporation’s attorney-client privilege with respect to prebankruptcy communications.”).
The Trustee, pursuant to Weintraub, holds and controls, and has the power to waive, the attorney-client privilege with respect to the pre-bankruptcy communications between the Pearlman Entities and the L & S and GR attorneys.
The Trustee, as held in the July 16, 2007 Order, waived the attorney-client privilege as to TCA, but has not waived the privilege as to the other Pearlman Entities. Waiver of the privilege is the prerequisite to turnover. See, Weintraub, 471 U.S. at 350, 358, 105 S.Ct. 1986 (“Indeed, a privilege that has been properly waived is not an ‘applicable’ privilege for the purposes of § 542(e) ... the trustee of a corporation in bankruptcy has the power to waive the corporation’s attorney-client privilege with respect to prebankruptcy communications.”); In re Courtney, 372 B.R. 519, 521 (Bankr.M.D.Fla.2007) (granting the trustee’s Motion to Waive Privilege and Compel Turnover where the trustee was “not looking to waive the attorney-client privilege in order to go after Debtor personally ... it is important to recognize that this is not a general waiver, but a limited waiver....”); In re Lentek Intern., Inc., Case No. 6:03-bk-08035-KSJ, Adv. Pro. No. 6:05-ap-190-KSJ, 2006 WL 2987001, at *2, *3 (Bankr.M.D.Fla. Sept.12, 2006) (holding liquidating trustee had right to waive attorney-client privilege and granting (in part) his motion for turnover of documents); In re Barrie, 251 B.R. 367, 377, 379 (Bankr.D.Minn.2000) (finding “by waiving the privilege, the Trustee may benefit the estate by recovery of assets” and ordering law firm to appear at deposition where trustee “waived any attorney-client privilege that may apply.”); In re Fairbanks, 135 B.R. 717, 734 (Bankr.D.N.H.1991) (requiring the turnover of documents where “the attorney-client privilege asserted by the respondent law firm has been waived by the person presently holding that privilege.”).
The documents and information related to the Pearlman Entities are not subject to turnover pursuant to 11 U.S.C. Section 542(e) unless and until the attorney-client privileges relating to them are waived by the Trustee. The Trustee has not waived the privilege as to each of the Pearlman Entities. The documents and information pertaining to matters in which either L & S or GR attorneys represented the Pearl-man Entities will be subject to production upon the Trustee’s waiver of the attorney-client privileges as to the Pearlman Entities.
Attorney-Client Privilege — Individual and Joint Representation
The documents and information sought in the Subpoenas relating to the representation of Pearlman individually and Pearlman jointly with Pearlman Entities may be protected by the attorney-client privilege. The party asserting the individual attorney-client privilege must establish each element of the privilege to invoke it:
(1) The asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is (the) member of a bar of a *910court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (in) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client.
U.S. v. Kelly, 569 F.2d 928, 938 (5th Cir.1978). “The burden of proof is on the individual asserting the privilege to demonstrate an attorney-client relationship.” Id.
A joint client privilege is recognized when one attorney simultaneously represents two or more clients on a matter of common legal interest and their communications relate to the subject matter of the joint representation. 1 Paul R. Rice, Attorney-Client Privilege In The U.S. § 4:30 (2d ed. 2007) (“On matters of common legal interest, each may be privy to the other’s communications with the attorney without the attorney-client privilege protection being waived by that breach of confidentiality.”) The party asserting the joint representation privilege carries the burden of establishing the existence of a joint representation and each element of the attorney-client privilege has been satisfied. Id. § 4.31 (explaining the determination of whether a joint representation existed requires factual analysis and turns upon “the unique circumstances of each case”); Id. § 4:37 (“As with any privilege, the one who claims it must assert it with some particularity and bear the burden of persuasion on the factual issues upon which the application of the rule turns.”).
If it is determined the attorney-client privilege applies to pre-bankruptcy communications between Pearlman individually, or as a joint client with Pearlman Entities, and L & S and/or GR, the issue for determination is who controls the privilege. The Supreme Court did not address in Weintraub whether a bankruptcy trustee controls the attorney-privilege as to an individual debtor. Weintraub, 471 U.S. at 356, 105 S.Ct. 1986 (“But our holding today has no bearing on the problem of individual bankruptcy, which we have no reason to address in this case.”) Various approaches have been employed by federal courts addressing the issue of who controls the individual attorney-client privilege in bankruptcy.
One court applied a blanket rule holding the privilege always passes from the individual debtor to the trustee “by operation of law.” In re Smith, 24 B.R. 3, 5 (Bankr.S.D.Fla.1982). The blanket rule approach is inadequate because it does not take into consideration the potential harm an individual debtor may suffer in granting a trustee access to the privilege. Granting the Trustee control of the individual privilege carries a risk of potential harm to Pearlman. The information sought in the Subpoenas may contain information affecting Pearlman’s criminal charges.
The majority of courts employ a balancing test whereby the specific facts of a case are evaluated and balanced, including the risk of harm to the debtor versus the benefit to the estate. Foster v. Hill (In re Foster), 188 F.3d 1259, 1268-69 (10th Cir.1999); In re Courtney, 372 B.R. at 521; In re Bame, 251 B.R. at 377; In re Bazemore, 216 B.R. 1020, 1024 (Bankr.S.D.Ga.1998). The Court, based upon the weight of the case law and the facts and circumstances of this case, adopts the balancing test.
The Trustee’s Motions to Compel are due to be granted in part.
Accordingly, it is
*911ORDERED, ADJUDGED AND DECREED that the Trustee’s Motions to Compel are GRANTED IN PART. The Trustee is the holder of and controls, and has the power to waive, any attorney-client privilege that may have existed prepetition with respect to any matter in which L & S or GR counsel represented the Pearlman Entities. The documents and information sought in the Subpoenas pertaining to any matter in which either L & S or GR counsel represented the Pearlman Entities shall be subject to production when the Trustee waives the Pearlman Entities’ attorney-client privileges; and it is further
ORDERED, ADJUDGED AND DECREED that, if it is established the attorney-client privilege applies to prepetition communications between Pearlman individually, or as a joint client with Pearlman Entities, and L & S or GR counsel, the balancing test will be utilized to determine who controls such privilege; and it is further
ORDERED, ADJUDGED AND DECREED that the Trustee’s request for attorneys’ fees and costs is hereby DENIED.
. The Motions to Compel were served via mail on Pearlman in care of R. Fletcher Peacock, Pearlman’s Federal Public Defender, at 201 S. Orange Avenue, Suite 300, Orlando, Florida 32801. Leventhal stated his firm notified Attorney Peacock of the hearing on the Trustee’s Motions to Compel. No counsel from the Federal Public Defender’s office filed a response to Motions to Compel or appeared at the hearing.
. The case was converted to Chapter 11 on May 9, 2007.
. Mr. McHale was appointed as a state court receiver of all the assets and properties of TCA, Trans Continental Airlines Travel Service, Inc., Trans Continental Enterprises, LLC a/k/a Trans Continental Enterprises, LLC and Louis J. Pearlman Enterprises, LLC on February 2, 2007 in a proceeding in the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida Civil Division, Case No. 48-2006-CA-0111136-0. The Receivership Order was entered in response to the Verified Motion and Verified Complaint filed by the State of Florida, Office of Financial Regulation in the State Court Action. The Receivership Order includes a provision specifically granting Mr. McHale the authority to file voluntary petitions under Title 11 of the United States Code for the receivership entities. On February 22, 2007, the State Court expanded the scope of the Receivership Order, the related injunctions and the Receiver's powers over additional defendants, including, but not limited to, LJPE and TCS.
. The Court made the following findings and conclusions in the July 16, 2007 Order in the TCA case (Doc. No. 158):
The Court received via facsimile on May 22, 2007 an Objection to Trustee's Motion to Compel and Assertion of 5th Amendment Rights and Assertion of Attorney Client Privilege (Doc. No. 104) (‘'Objection”), purportedly sent by "Louis J. Pearlman, pro se." No contact information for Pearlman was provided. No coversheet or cover letter was included with the facsimile transmission and the "from” notation at the top of each page, which normally reflects the sender’s facsimile number, is blank. The transmission bears the date and time stamp "05-22-07 01:02am.” The Objection asserts Pearlman has a right to maintain the attorney-client privilege "with ALL attorneys who have represented me, past, present and future” and "I assert my right not to incriminate myself .... ”
The Objection does not constitute a pleading or paper filed with the Court. Submission of the Objection by facsimile did not constitute a proper filing of a paper pursuant to the Court’s Local Rules. The Objection, in violation of the governing rules, fails to set forth the signer’s address and telephone number. The signature purporting to be Pearlman's is unauthenticated. The Objection shall not be considered.
The Objection does not constitute a pleading or paper filed with the Court and shall not be considered. Submission of the Objection by facsimile did not constitute a proper filing of a paper pursuant to Local Rule 9001-1. The Objection does not comply with Federal Rule of Bankruptcy Procedure 9011, which requires all papers shall state the signer’s address and telephone number. The signature purporting to be Pearlman’s is unauthenticated.
July 16, 2007 Order at pp. 3, 5-6 (internal citation and footnote omitted).
. Trustee’s Affidavit (Doc. No. 838).
. An Order was entered on July 16, 2007 (Doc. No. 158) in the TCA case holding to the extent an attorney-client relationship existed between Attorney Rene Chamberlain and TCA, it is waiveable by the Trustee and that the Trustee had waived the privilege as to TCA. Attorney Chamberlain was directed to turnover the documents and information sought by the Trustee. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494265/ | *182MEMORANDUM ORDER ON MOTION SEEKING PROCEDURES FOR MONTHLY COMPENSATION OF PROFESSIONALS AND OTHERS
ALBERT S. DABROWSKI, Chief Judge.
I. INTRODUCTION & BACKGROUND.
Before the Court at this time is the Debtors’ Motion for Entry of an Order ... Establishing Procedures for Monthly Compensation and Reimbursement of Expenses of Professionals and Committee Members (Doc. I.D. No. 350) (hereafter, the “Motion”). The Motion was originally objected to by McKesson Medical-Surgical, Inc. (hereafter, “McKesson”) (Doc. I.D. No. 419) and Springfield Food Service Corp. d/b/a PFG-Springfield (hereafter, “Springfield”) (Doc. I.D. No. 424). At the tine of the hearing on the Motion on January 30, 2008, the Debtors’ counsel announced that McKesson was not prosecuting its objection, but that Springfield was maintaining its objection, and standing on its papers.
Through the Motion, the Debtors seek to establish a procedure under which “professionals” and others—including, inter alia, “committee members”—(hereafter collectively, the “Professionals”) may be compensated from estate assets on a monthly basis prior to court approval of their fees and/or expenses. More specifically, the Motion and proposed order submitted in connection therewith seek approval of a procedure under which, inter alia, the Professionals can be paid monthly for 80% of accrued fees and 100% of accrued expenses that are not objected to by any of a group of parties entitled to notice,2 which fees and expenses must ultimately by allowed and approved by this Court every 90-150 days under Code Section 331, and which fees are subject to disgorgement to the extent they are not so allowed and approved by the Court (hereafter, the “Monthly Payment Procedure”).
II. DISCUSSION.
Section 331 plainly allows the Court some flexibility in determining the frequency of compensation of certain professionals and others—namely, it permits a specific subset of entities who are entitled to compensation awarded under Section *183330 to have that compensation also awarded on an interim basis “not more than once every 120 days ... or more often if the court permits”. Unfortunately for the Debtors, they have failed to meet their burden of persuading the Court that the Monthly Payment Procedure is consistent with the limited authorization of Section 331. Specifically, the Monthly Payment Procedure runs afoul of Section 331 by (i) including as participants entities not eligible for interim compensation and (ii) providing payment to the Professionals in advance of court approval without any showing of individualized hardship and the ability of such Professionals to respond to any order of disgorgement.
A. Ineligible Participants.
The Motion does not clearly define the universe of individuals or other entities that would be entitled to utilize the Monthly Payment Procedure. The Motion and its accompanying proposed order use the capitalized term, “Professional”, without providing a description of what specific entities fall into that class.3 Interim awards of compensation under Section 331 are available to a limited and specific universe of entities, namely “[a] trustee, an examiner, a debtor’s attorney, or any professional person employed under section 327 or 1103”. Despite this statutory limitation, the Motion requests monthly payment for entities outside the ambit of Section 331, to wit:
1. Committee members. The actual and necessary expenses of the lay members of the official unsecured creditors’ committee (heretofore and hereafter, the “Committee”)—as opposed to Committee professionals—are entitled to treatment as administrative priority claims under Section 503(b)(3)(F). However the Bankruptcy Code does not contemplate that these Committee members will have compensation awarded under Section 330 or, for that matter, on an interim basis under Section 331.
2. Patient care ombudsman. A patient care ombudsman appointed under Section 333 (heretofore and hereafter, “Ombudsman”) is entitled to have compensation awarded under Section 330(a)(1), but is conspicuously absent from the universe of individuals entitled to interim compensation under Section 331.
3. Ombudsman’s attorneys and “medical operations advisor”. The Bankruptcy Code does not appear to provide for direct estate compensation for attorneys and/or others employed by an Ombudsman. Rather, the Code seems to contemplate that in the first instance the compensation of such entities should be the responsibility of an Ombudsman, who may then seek to have such expenses reimbursed under Section 330(a)(1)(B). However, even such indirect compensation *184is not provided for on an interim basis under the terms of Section 331.
B. Payment in Advance of Court Approval.
Although Section 331 permits a Court to award compensation on a time interval more frequent than every 120 days, there exists no statutory authority permitting compensation to be “advanced” without court approval. Nonetheless, several courts have permitted such advanced payment in particular Chapter 11 cases.
The leading reported case allowing such a fee advance procedure seems to be United States v. Knudsen Corp. (In re Knudsen Corp.) 84 B.R. 668 (9th Cir. BAP 1988). That decision and its progeny have little influence on this Court in the instant cases for the reasons stated in detail below. However, Knudsen does provide a framework for analysis of the issue at ban a four-factored template for determining whether a given case qualifies as one of the “rare” cases in which an advance payment scheme may be implemented, to wit—
1. the case is an unusually large one in which an exceptionally large amount of fees accrue each month;
2. the court is convinced that waiting an extended period for payment would place an undue hardship on the professional(s);
3. the court is satisfied that the professional(s) can respond to any reassessment; and
4. the retainer procedure is, itself, the subject of a noticed hearing prior to payment thereunder.
See 84 B.R. at 672-73. The following discussion examines each of these factors in greater detail.
1. The Magnitude of the Cases and Fees.
At present, the record in these jointly-administered cases does not support a finding that any of the individual cases for which the Monthly Payment Procedure is sought are “unusually large”;4 nor is it likely that the amount of professional fees to be allocated to any one of the individual Debtors’ estates would be “exceptionally large”.
Even assuming that it would be appropriate to assess the magnitude of these jointly-administered cases, or the professional fees/expenses generated within them, on an aggregate basis, this Court does not view the mere magnitude of a case or its professional fees as particularly germane to the question of the appropriateness of the Monthly Payment Procedure. What is potentially relevant to that question is the relative hardship that would be visited upon a particular professional in a particular case, regardless of the absolute size of the subject case or fees. That concept is embraced by the second Knudsen factor, discussed immediately below.
2. The Hardship Imposed upon the Parties.
This Court acknowledges, and the Bankruptcy Code contemplates, that there may be instances in which the rate and magnitude of accrual of professional fees in a given case could present an undue hardship for a particular professional if compensation is not considered by the Court and paid on a schedule that is more frequent than the presumptive 120-day interim fee schedule provided by Code Section 331. This may be true, for instance, *185where (i) the resources dedicated to a given ease represent a particularly large proportion of a professional’s total resources, and (ii) the professional’s usual receipt of payment for services is materially more prompt that that available under the 120-day compensation scheme contemplated by Section 331.
The record before the Court at this time is insufficient to permit the Court to conclude that a 120-day. compensation schedule would present a hardship to any5 of the Professionals that are proposed to be participants in the proposed Monthly Payment Procedure.
3. Ability to Respond to Reassessment or Adjustment.
A prerequisite to any professional compensation scheme that permits interim fee payment to be made in advance of allowance is an assurance that the subject professional will be able to respond to any disgorgement order a rising from a court’s subsequent disallowance of fees previously paid (hereafter, “Reassessment”).6
As in Knudsen, the Monthly Payment Procedure’s proponents here suggest that Reassessment risk is addressed and ameliorated by that procedure’s provision of a 20% “holdback” in the monthly payment of fees not objected to by any of the Notice Parties. In the Court’s opinion, a 20% fee “holdback”, alone, is insufficient to assure the Court that a given Professional can respond to a disgorgement order in the event of Reassessment.7 The unstated premise of such a “holdback” is that the Court will never disallow more than 20% of fees that are not subject to objection by the parties. However, this Court has an independent duty to scrutinize thoroughly all professional fees, not just those objected to by parties-in-interest.
Because the risk of Reassessment is real, this Court must assure itself that under all circumstances each of the subject Professionals will be able to satisfy a disgorgement order in full on a timely basis. Unfortunately for the Debtors there is nothing on the record of these jointly administered cases which serves to inform the Court of the financial wherewithal of any of the Professionals proposed to participate in the proposed Monthly Payment Procedure. Likewise, none of the Professionals have offered to provide any alternative method of assurance, such as, e.g., the posting of a bond or, in the case of attorneys, the placing of fee/expense payments in a trust account until such time as they are finally allowed.
4. Approval of the Monthly Payment Procedure.
This factor does not present an independent impediment to implementation of the Monthly Payment Procedure. This matter *186has been fully heard on due and fair notice. Nonetheless, the Court concludes, on the current record, that the Monthly Payment Procedure is inappropriate for implementation in any of these jointly administered cases.
III. CONCLUSION.
For the foregoing reasons, the Motion (Doc. I.D. No. 350) is DENIED without prejudice.
IT IS SO ORDERED.
. Those parties include the Debtors, the Debtors' counsel, the United States Trustee, counsel to Capital Source, counsel to Omega Healthcare Investors, Inc., counsel to General Electric Capital Corporation, counsel to Nationwide Health Properties, Inc., Conway, Del Genio, Gries, & Co., LLC and counsel to the official unsecured creditors’ committee (hereafter collectively, the "Notice Parties”).
. Although it does not explicitly describe a class of “Professionals”, the Motion does, in various places, allude to certain entities connected with these cases which the Court presumes are the intended participants in the Monthly Payment Procedure, to wit: (i) the Debtors' general bankruptcy counsel (Moses & Singer, LLP); (ii) the Debtors' Connecticut/special counsel (Wiggin & Dana LLP); (iii) he Debtors’ regulatory counsel (Murtha Cullina LLP); (iv) the Debtors' investment banker and financial advisor (Houlihan Lokey Howard & Zukin Capital, Inc.); (v) the Patient Care Ombudsman (R. Brent Martin); (vi) the Ombudsman’s counsel (Schotter stein, Zox & Dunn, Co., LPA and Coan, Lewendon, Gulliver & Miltenberger, LLC); (vii) the Ombudsman's "medical operations advisor" (MCR Martin, LLC d/b/a Healthcare, MCR); (viii) the unsecured creditors’ committee's general counsel (Pepper Hamilton LLP); (ix) the Committee's Connecticut counsel (Neu-bert, Pepe & Montéith, P.C.); and (x) individual members of the Committee.
. It is not appropriate for this Court to engage, sua sponte, a legal fiction by treating these jointly administered cases as if they had been substantively consolidated.
. It is necessary that hardship be established individually for each Professional that desires to participate in the proposed Monthly Payment Procedure.
. Likewise, the Court is legitimately concerned with the ability of a given Professional to respond to an order that it disgorge monthly fees even if allowed, in the event that a given Debtor's estate proves to be administratively insolvent (hereafter, “Adjustment”). This Court recognizes that the mere presence of Adjustment risk is not salient in the present discussion since that risk is present even under the 120-day scheme of Section 331. However, Adjustment risk is relevant to an assessment of the Monthly Payment Procedure by virtue of degree—i.e. he Adjustment risk that is always present for interim fee awards is arguably four times as acute under a monthly, as opposed to a 120-day, payment procedure.
.These concerns are equally applicable to the risk that the Court may deny reimbursement of expenses, which are not subject to any "holdback”. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494267/ | BENCH DECISION ON MOTIONS TO STRIKE LAY WITNESS TRIAL TESTIMONY
ROBERT E. GERBER, Bankruptcy Judge.
In this adversary proceeding under the umbrella of the confirmed chapter 11 case of Debtor Perry Koplik & Sons, the plaintiff Litigation Trustee charges former insiders of the Debtor with breach of fiduciary duty. In the trial of the action, the Litigation Trustee has submitted the direct testimony affidavit1 of Barry Kasoff, a Certified Turnaround Professional and Certified Public Accountant, who studied the Debtor’s affairs, including, inter alia, the insiders’ activities. In his direct affidavit, Mr. Kasoff has described his perceptions of the defendants’ acts and, in more than a few instances, his subjective views with respect to those acts, based on a combination of his review of the acts and his training and experience in business and accounting matters. But he hasn’t been offered as an expert under Fed.R.Evid. 702, nor has the plaintiff complied with Fed.R.Civ.P. 26 requirements for expert disclosures.
The defendants move to strike portions of the direct testimony as impermissible lay witness opinion testimony. Their motion is granted in part and denied in part, as described in the accompanying table. My conclusions of law and bases for the exercise of my discretion follow.
Fed.R.Evid. 701(a) provides, in relevant part:
If the witness is not testifying as an expert, the witness’ testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness, (b) helpful to a clear understanding of the witness’ testimony or the determination of a fact in issue, and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.
As usual, I start with textual analysis. Under Fed.R.Evid. 701, lay opinion testimony is permissible if, but only if, the three subsections of Rule 701(a) are satisfied. I note in that connection, however, that while subsections (a) and (b) are stated affirmatively, subsection (c) is articulated in the negative.2 That means, as a practical matter, that lay opinion testimony is permissible if subsections (a) and (b) are satisfied, and if the testimony isn’t then excluded by reason of the effect of subsection (c).
The Second Circuit has twice spoken to this issue, in Bank of China v. NBM LLC, 359 F.3d 171 (2d Cir.2004), and United States v. Rigas, 490 F.3d 208 (2d Cir.2007), in each case involving a fact pattern similar to that here, where an individual con*601ducted an investigation of matters that preceded his arrival on the scene, and then testified about what he found.
In Bank of China, the Circuit held that the admission of lay opinion testimony that was based on a combination of a lay witness’s observations and his knowledge of business custom and the business community’s understanding of certain kinds of transactions and business concepts was an abuse of discretion. Admission of that testimony was held to be error because it wasn’t based entirely on the witness’s perceptions. The district court abused its discretion to the extent it admitted the testimony based on the witness’s experience and specialized knowledge in international banking. See 359 F.3d at 181.
The Bank of China court explained that “Subsection (c) of Rule 701, which was amended in 2000, explicitly bars the admission of lay opinions that are ‘based on scientific, technical, or other specialized knowledge within the scope of Rule 702.’ ” Id., quoting Fed.R.Evid. 701(c). Testimony admitted pursuant to Rule 701 must be “rationally based on the perception of the witness.” Id., quoting Fed.R.Evid. 701(a).
Thus, to the extent that the testimony was based on the perceptions of the witness, it was admissible, but to the extent that it was based on specialized knowledge, as contrasted to personal observation, it was inadmissible. See id. The Circuit clarified:
To some extent, [the investigating witness] Huang’s testimony was based on his perceptions. As a Bank of China employee, Huang was assigned to investigate defendants’ activities at the tail-end of their scheme and after Bank of China stopped doing business with them. Huang’s senior role at the Bank and his years of experience in international banking made him particularly well-suited to undertake such an investigation and was likely a factor in the Bank’s decision to assign the task to him. The fact that Huang has specialized knowledge, or that he carried out the investigation because of that knowledge, did not preclude him from testifying pursuant to Rule 701, so long as the testimony was based on the investigation and reflected his investigatory findings and conclusions, and was not rooted exclusively in his expertise in international banking. “Such opinion testimony is admitted not because of experience, training or specialized knowledge within the realm of an expert, but because of the particularized knowledge that the witness has by virtue of his [ ] position in the business.”
Id., quoting Fed.R.Evid. 701 advisory committee’s note (emphasis added).3
Thus, to the extent the investigating witness Huang’s testimony was grounded in *602the investigation he undertook in his role as a Bank of China employee, it was admissible pursuant to Rule 701 of the Federal Rules of Evidence because it was based on his perceptions. But to the extent that the testimony was not based on his perceptions, it was inadmissible.
Similarly, in Rigas, the Circuit affirmed criminal convictions after a trial in which Judge Sand of the district court had permitted the introduction of testimony by Robert DiBella, a forensic accountant retained by Adelphia’s new management to examine Adelphia’s books and records, and to investigate transactions that had been entered into while Adelphia was operating under the Rigases’ watch. Citing Bank of China, the Rigas court found the testimony admissible, as it was based on witness perception, and did not materially involve specialized knowledge with respect to the particular issues on which he was testifying. That was so even though the Second Circuit’s decision at least implied (and this Court from its firsthand knowledge knows) that Mr. DiBella’s witness perception—ie., his ability to observe—was materially assisted by his accounting expertise.4
Each of Bank of China and Rigas involved circumstances, like those here, where an individual wasn’t personally involved in the events that were the principal focus of his testimony, and instead involved the testimony based on participation in an investigation of events that predated the witness’s appearance on the scene. Rigas is particularly relevant, because it involved a situation, very similar to the one we have here, where a skilled accounting professional studied what happened before he arrived, and explained in testimony what he had discovered. That was permissible, as reflecting witness perception.
Significantly, however, in neither Bank of China nor Rigas did the Circuit endorse the admission of testimony as to the witness’s views as to whether what the witness had perceived was wrongful, or as to what should have been done under the circumstances.
In support of contentions that all of the challenged testimony should be stricken, the defendants cite three other cases, all from outside the Second Circuit. See JGR, Inc. v. Thomasville Furniture Indus., 370 F.3d 519 (6th Cir.2004); DIJO, Inc. v. Hilton Hotels Corp., 351 F.3d 679 (5th Cir.2003); Autoforge, Inc. v. Am. Axle & Mfg., Inc., 2008 WL 65603, 2008 U.S. Dist. LEXIS 755 (W.D.Pa. Jan. 4, 2008). None of these, of course, could trump a Second Circuit decision on point. And in any event, they are nowhere as closely similar to the facts we have here, and to the extent they are relevant at all, they support the nuanced standard articulated by the Second Circuit in Bank of China and Rigas. None involved the testimony of a trained financial professional who had studied financial transactions and reported on what he saw.
Instead, each involved testimony on lost profits and/or the value of a business— areas where an outsider’s personal perception would often be modest at best, and *603that traditionally would involve testimony of bona fide experts, except in cases where the actual owner of the business might have the requisite personal perception. See JGR, 370 F.3d at 524, 526 (CPA and lawyer testifying about lost profits and business value relied on information primarily obtained from plaintiffs principal); DIJO, 351 F.3d at 685 (testifying financial consultant “had little significant actual knowledge about DUO and its operations;” contrasting ability of “business owners or officers to testify based on particularized knowledge derived from their position”) (emphasis in original); Autoforge, 2008 WL 65603, at *6-7, 2008 U.S. Dist. LEXIS 755 at *19-20 (relying on circuit court holdings that “persons outside of a business, including attorneys and financial consultants,” who were not able to establish the requisite foundation of personal knowledge, “may not offer a lay opinion as to value or project lost profits of a business”) (citing JGR and DUO).
With those principles in mind, the Court will permit lay opinion testimony that reflects the perceptions of the witness Mr. Kasoff as to what happened (including, inter alia, what the defendants did)—even if Mr. Kasoff was aided in forming his perceptions by an ability, aided by his training and experience, to understand what he saw. But to the extent Mr. Ka-soff seeks to testify not with respect to his perceptions, but rather with respect to views as to (a) whether what he perceived was right or wrong; (b) what should have been done; (c) what is customary in business practice; or (d) what his training and experience tell him about appropriate conduct in these cases, the testimony will be excluded.
My rulings with respect to the particular aspects of the Kasoff testimony that were the subject of the lay opinion evidence objections appear on the attached Table A to this Decision.
SO ORDERED.
Table A Rulings on Testimony In Issue
[[Image here]]
*604[[Image here]]
*605[[Image here]]
*606[[Image here]]
*607[[Image here]]
*608[[Image here]]
*609[[Image here]]
. Under the Court’s case management order, direct testimony in the trial has been submitted by affidavit, with cross-examination and subsequent testimony to proceed live.
. Rule 701 was amended in 2000, at which time the original language was divided by the lettered subdivisions that now appear in the Rule, and the material that is now in subdivision (c) was added. See Mueller and Kirkpatrick, Federal Evidence, § 7:1 (2007). Thus it now explicitly bars the admission of lay opinions that are “based on scientific, technical, or other specialized knowledge within the scope of Rule 702.” Rule 701(c).
. I'm aware that the Bank of China court stated that testimony involving personal perception with the benefit of professional expertise was permissible so long as it wasn't “rooted exclusively” in the witness’s professional expertise (there, in international banking). That could be read as suggesting that a peppercorn of personal perception would permit a great deal of lay opinion testimony, circumventing the safeguards of Fed.R.Evid. 702 and Fed.R.Civ.P. 26. I think it is truer to the language and spirit of Bank of China to try to separate the testimony based on perception from that based on opinion on an answer-by-answer basis (and individually within each answer, to the extent necessary), and in the exercise of my discretion, I will be permitting testimony only to the extent that any aspect of a larger body of testimony embodies, in material part, witness perception. See Bank of China, 359 F.3d at 181 (noting purpose of Rule 701(c) “to eliminate the risk that the reliability requirements set forth in Rule 702 will be evaded through the simple expedient of proffering an expert in lay witness clothing”).
. My understanding of the Second Circuit's ruling in Rigas is assisted by my personal knowledge, as a consequence of Adelphia's bankruptcy case having been before me, and matters as to which I can take judicial notice. I know that Mr. DiBella had accounting expertise, because I heard testimony by Mr. DiBella, on distinct, but related, issues, myself. But Mr. DiBella’s testimony in the criminal case was in material respects based on what he observed, and did not go to issues where his accounting expertise, other than his ability to explain what he saw, was material to the issues on which he was testifying. Mr. DiBella testified on matters invoking his accounting expertise to a considerably greater degree in the Adelphia bankruptcy case, without objection by any party. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494268/ | *745
MEMORANDUM OPINION AND ORDER ON OBJECTION OF TRUSTEE TO EXEMPTION CLAIM IN DEBTOR’S QDRO ACCOUNT
C. KATHRYN PRESTON, Bankruptcy Judge.
I. Introduction
This cause came on for hearing on December 18, 2007 to consider: (i) the Objection of Trustee to Exemption Claim in Debtor’s QDRO Account (Doc. # 13) (“Objection”) filed by Larry J. McClatchey, Chapter 7 Trustee (“Trustee”), and (ii) the Debtor’s Memorandum Contra (Doc. # 15) the Objection. The Trustee also filed a post-hearing memorandum in support of the Objection (Doc. # 19). Present at the hearing were the Debtor Tammy L. Carter-Bland (“Debtor”) and her counsel, Lee C. Mittman, and counsel to the Trustee, Stewart H. Cupps.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B) and (0).
This matter involves the Debtor’s interest in her former husband’s employee stock ownership plan. The Trustee argues that the Debtor does not have an interest in the plan because her interest arises solely from a qualified domestic relations order. The Trustee also argues that, because the Debtor does not have an interest in the plan, she does not have an interest in the plan trust, which is the only interest that the Bankruptcy Code would exclude from the estate. In response, the Debtor argues that she has an interest in the plan and plan trust under ERISA and that, under § 541(c)(2) of the Bankruptcy Code, her interest does not constitute property of her estate.
The Court agrees with the Debtor that her interest in the Plan is not property of her bankruptcy estate. The Court, therefore, overrules the Trustee’s Objection.1
II. Facts
Based on the evidence adduced at the hearing, the Court finds as follows:
A. The Plan and Circumstances Giving Rise to the QDRO
In 1997, the Debtor and Michael Andrew Bland (“Mr.Bland”) were married. During the marriage, Mr. Bland had an interest in the Amsted Industries Incorporated Employees’ Stock Ownership Plan (“Plan”), as amended and restated effective October 1, 2004 (the “Effective Date”). Plan assets are held by a trustee in a trust. In this regard, § 1.3 of the Plan, which is entitled “Trustee; Trust Agreement” provides as follows:
Amounts contributed under the Plan are held and invested, until distributed, by the trustee (the “Trustee ”) appointed by the Company through its Board of Directors. The Trustee acts in accordance with the terms of a trust agreement between the Company and the Trustee, which trust agreement is known as the Amsted Industries Incorporated Employees’ Stock Ownership Trust (the “Trust ”). The Trust implements and forms a part of the Plan. The provisions of and benefits under the Plan are subject to the terms and provi*746sions of the Trust. In the event of any conflict between the Plan and the Trust, the terms of the Trust shall control.
Plan § 1.3. In addition, “[a]ll contributions hereunder will be paid into and credited to the Trust and all benefits hereunder and expenses chargeable thereto not paid directly by the Company will be paid from the Trust and charged thereto.... ” See Plan § 15.1.
To be a “Participant” under the Plan, a person must either: (a) have been a Participant in the Plan immediately prior to the Effective Date; or (b) be employed by Amsted Industries Incorporated, or by certain of its control group members or related companies. See Plan § 2.1(a). Mr. Bland is a Participant as defined by the Plan, but the Debtor is not. In general, distributions from the Plan are made to Participants after they retire. See Plan §§ 9, 11. The Plan, however, provides for distributions to “alternate payees” prior to a Participant’s retirement:
The Administrator shall direct distribution of the amount of a Participant’s Account balances assigned to an alternate payee under a qualified domestic relations order (“QDRO”) (as defined in [Internal Revenue] Code Section 414(p)) approved pursuant to procedures established by the Plan Administrator. Distribution to an alternate payee shall commence no earlier than on the date the alternate payee reaches 65, or the fifth anniversary of the order, if sooner, irrespective of whether the Participant has then attained his “earliest retirement age” within the meaning of Section 206(d)(3)(E) of ERISA and Section 414(p)(4)(B).
Plan § 11.6.
Section 14.1 of the Plan, entitled “Interests Not Transferable,” imposes a restriction on the transfer of interests of Participants and their beneficiaries:
The interests of Participants and their beneficiaries under the Plan are not in any way subject to their debts or other obligations and, except as may be required by the tax withholding provisions of the [Internal Revenue] Code or any state’s income tax act, may not be voluntarily or involuntarily sold, transferred, alienated or assigned. Notwithstanding the foregoing, the Plan shall comply with any domestic relations order that, in accordance with procedures established by the Administrator, is determined to be a qualified domestic relations order (as defined in [Internal Revenue] Code Section 414(p)(l)(A)), and shall comply with any judgment or settlement to the extent required by [Internal Revenue] Code Section 401(a)(13).
Plan § 14.1 (emphasis added).2
B. The QDRO
On October 17, 2006 (the “Marriage Dissolution Date”), the Fairfield County Court of Common Pleas, Division of Domestic Relations (“State Court”) dissolved the Debtor’s marriage to Mr. Bland and entered a qualified domestic relations order (the “QDRO”). In the QDRO, the State Court assigned to the Debtor (who is referred to in the QDRO as the “Alternate Payee”) a portion of Mr. Bland’s interest in the Plan (which is referred to as the “ESOP”). In this regard, Section A of the *747QDRO provides in pertinent part as follows:
7. Assignment of ESOP Beneñts to Alternate Payee
The Alternate Payee is hereby assigned 728.413478 SHARES of the Participant’s vested accrued benefit under the ESOP as of the Marriage Dissolution Date.
10. Payment of Assigned Beneñts
The ESOP benefits assigned hereunder shall be distributed to the Alternate Payee in accordance with the timing provisions and benefit distribution procedures applicable under the ESOP’s plan document in effect when the QDRO is executed.
QDRO §§ A.7, A.10.
The QDRO does not mandate the timing of the payment of benefits to the Debtor or require the administrator of the Plan (“Administrator”) to do anything not permitted by the Plan. In this regard, Section B of the QDRO provides:
3. Restrictions. The terms and provisions of this Order are not to be construed to:
(a) require a Plan to provide any type or form of benefits, or any option (with the exception of payment to the Alternate Payee after the Participant attains his Earliest Retirement Age or as of some earlier permissible date) not otherwise provided for under the Plan;
(b) require a Plan to provide benefits greater than that which would otherwise be payable under the Plan with respect to the Participant;
(c) ... or require the payment of such benefits in any manner ... that would cause this Order to fail to qualify as a Qualified Domestic Relations Order.
QDRO §§ B.3.
C. Events Following the Entry of the QDRO
By a letter dated November 3, 2006, the Administrator advised the Debtor and Mr. Bland that he had “made a determination that [the QDRO] is ‘qualified’ within the meaning of Section 206 of [ERISA] and the corresponding provisions of Section 414(p) of the Internal Revenue Code ...” The Administrator also stated that, because the Debtor “was not age 65 when this QDRO was approved, she will be eligible to receive a payment of her account five (5) years after the QDRO was approved.”
Prior to March 31, 2007, the Debtor, pursuant to § 6.2 of the Plan, diversified her investment, resulting in small cash payments to her and a reduction of the number of shares she owned. As of March 31, 2007, the value of her shares was $48,978.21.
On August 10, 2007 (“Petition Date”), the Debtor filed a Petition for Relief under Chapter 7 of the Bankruptcy Code. Larry McClatchey is the duly appointed Chapter 7 Trustee. On her Schedule B—PERSONAL PROPERTY, Debtor disclosed the interest in her former husband’s pension plan, but assigned a value of only $1.00, inasmuch as she has no current right to take possession of or spend the asset. Although she believes that her interest is not property of the bankruptcy estate pursuant to § 541(c) of the Bankruptcy Code, on her Schedule C—PROPERTY CLAIMED EXEMPT, the Debtor claimed her interest in the Plan exempt under Ohio Rev.Code § 2329.66(A)(10)(a), noting in the description of the asset that current value of the asset was $1.00; but under the column titled “Value of Claimed Exemp*748tion” she inserted “100%”. On October 18, 2007, the Trustee filed the Objection.
III. Discussion
This case implicates both the Bankruptcy Code and the Employee Retirement Income Security Act of 1974 (“ERISA”). A “qualified domestic relations order,” is recognized by ERISA as an order of a state domestic relations court that assigns to a former spouse or other alternate payee a right to receive all or a portion of benefits payable under a retirement plan to the retirement plan participant. 29 U.S.C. § 1056(d)(3)(B). “By definition, a QDRO is a means to convey a property interest in a retirement plan to a person other than the plan participant.” In re Hageman, 260 B.R. 852, 857 (Bankr.S.D.Ohio 2001).
A. Under ERISA, the Debtor Has an Interest in the Plan.
The Trustee does not dispute that the Plan and the QDRO’s effect on it are governed by ERISA. In pertinent part, ERISA provides as follows:
(1) Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated.
(3) (A) Paragraph (1) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a domestic relations order, except that paragraph (1) shall not apply if the order is determined to be a qualified domestic relations order. Each pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order.
(J) A person who is an alternate payee under a qualified domestic relations order shall be considered for purposes of any provision of this chapter a beneficiary under the plan....
(K) The term “alternate payee” means any spouse, former spouse, child, or other dependent of a participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under a plan with respect to such participant.
29 U.S.C. § 1056(d).
The principal goal of ERISA is to “protect plan participants and [their] beneficiaries.” See Boggs v. Boggs, 520 U.S. 833, 845, 117 S.Ct. 1754, 138 L.Ed.2d 45 (1997).3 Accordingly, ERISA’s prohibition on the assignment or alienation of pension plan benefits articulated in 29 U.S.C. 1056(d)(1) does not apply to an assignment pursuant to a qualified domestic relations order. See 29 U.S.C. § 1056(d)(3). The Trustee does not dispute that the QDRO is a quali*749fied domestic relations order. Instead, the Trustee argues that the Debtor does not have an interest in the Plan because her interest arises from the QDRO, not as a participant in the Plan. However, to the contrary, “[i]n creating the QDRO mechanism Congress was careful to provide that the alternate payee ... is to be considered a plan beneficiary.” Boggs, 520 U.S. at 847, 117 S.Ct. 1754. Under ERISA, “[a] person who is an alternate payee under a qualified domestic relations order shall be considered for purposes of any provision of this chapter a beneficiary under the plan.” 29 U.S.C. § 1056(d)(3)(J). This provision is designed “to give enhanced protection to the spouse and dependent children in the event of divorce or separation.” Boggs, 520 U.S. at 847, 117 S.Ct. 1754. Indeed, many courts which have addressed the question, have found that a qualified domestic relations order creates a property interest in the plan separate and distinct from the interest of the plan participant, rather than creating a mere claim. In re Wilson, 158 B.R. 709 (Bankr.S.D.Ohio 1993); In re Debolt, 177 B.R. 31, 36 (Bankr.W.D.Pa.1994); In re Brown, 168 B.R. 331, 334-335 (Bankr.N.D.Ill.1994); Brown v. Pitzer (In re Brown), 249 B.R. 303, 308-310 (S.D.In.2000).
Given the Debtor’s status as an alternate payee and thus Plan beneficiary, the Trustee’s argument that the Debtor has no interest in the Plan is without merit. The Debtor has an interest in the Plan, and the fact that her interest arose via the QDRO rather than as a participant in the Plan is of no moment. As such, the provisions of the Plan and ERISA protect her interest therein. The question then becomes whether her interest is property of the bankruptcy estate.
B. The Bankruptcy Code Also Protects the Debtor’s Interest.
If the Bankruptcy Code required the Debtor to turn over her interest in the
Plan to the Trustee, bankruptcy law, like the state law at issue in Boggs, would be in conflict with ERISA. The Bankruptcy Code, however, does not require—and in fact protects the Debtor against—liquidation of the Debtor’s interest by the Trustee. See Nelson v. Ramette (In re Nelson), 322 F.3d 541, 544-45 (8th Cir.2003) (holding that the debtor’s interest in former spouse’s retirement plan arising from qualified domestic relations order was excluded from property of the estate); Ostrander v. Lalchandani (In re Lalchandani), 279 B.R. 880, 885-86 (1st Cir. BAP 2002) (same); In re Farmer, 295 B.R. 322, 324-25 (Bankr.W.D.Wis.2003) (same); In re Hthiy, 283 B.R. 447, 450-51 (Bankr.E.D.Mich.2002) (same).
The relevant provision of the Bankruptcy Code, § 541(c), provides as follows:
(c)(1) Except as provided in paragraph (2) of this subsection, an interest of the debtor in property becomes property of the estate under subsection (a)(1), (a)(2), or (a)(5) of this section notwithstanding any provision in an agreement, transfer instrument, or applicable nonbankruptcy law—
(A) that restricts or conditions transfer of such interest by the debtor; or
(B) that is conditioned on the insolvency or financial condition of the debt- or, on the commencement of a case under this title, or on the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement, and that effects or gives an option to effect a forfeiture, modification, or termination of the debtor’s interest in property.
(2) A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applica*750ble nonbankruptcy law is enforceable in a case under this title.
11 U.S.C. § 541(c).
The Sixth Circuit has adopted a three-part test for determining whether a debtor’s interest in property is excluded from property of the estate under § 541(c)(2): “First, does the debtor have a beneficial interest in a trust? Second, is there a restriction on the transfer of that interest? Third, is the restriction enforceable under nonbankruptcy law?” See Taunt v. Gen. Ret. Sys. of Detroit (In re Wilcox), 233 F.3d 899, 904 (6th Cir.2000); see also Rhiel v. OhioHealth Corp. (In re Hunter), 380 B.R. 753, 757 (Bankr.S.D.Ohio 2008). The Debtor bears the burden of proof on each of these elements. See, e.g., Rhiel v. Adams (In re Adams), 302 B.R. 535, 540 (6th Cir. BAP 2003) (“The Debtors bear the burden of demonstrating that all the requirements of § 541(c)(2) have been met before the property in question can be effectively excluded from the estate.”).
1.The Debtor Has a Beneficial Interest In a Trust.
The Trustee does not dispute that the Plan assets are held in the Trust or that the Trust is a trust for purposes of § 541(c). Instead, the Trustee contends that the Debtor does not have an interest in the Trust because her interest is derived from the QDRO, not from the Plan. As discussed above, although the Debtor obtained her interest in the Plan by means of the QDRO, she nonetheless has an interest in the Plan. Indeed, under ERISA, as an alternate payee she is a Plan beneficiary. See 29 U.S.C. § 1056(d)(3)(J); Boggs, 520 U.S. at 847, 117 S.Ct. 1754. As a Plan beneficiary, she has an interest in the Trust. See, e.g., Hthiy, 283 B.R. at 451 (“[T]here is nothing in [§ 541(c)(2)] restricting its application based on the source of the debtor’s interest in the trust....”). The fact that the Debtor’s interest in the Plan arose as a consequence of the QDRO is immaterial. Section 541(c)(2) requires only that the Debtor have an interest in the Plan, without distinction as to how the interest is acquired.
2. There Is a Restriction on the Transfer of the Debtor’s Interest.
The second prong of the Wilcox test is whether there is a restriction on the transfer of the Debtor’s interest. The Plan imposes a transfer restriction on the Debt- or’s interest:
The interests of Participants and their beneficiaries under the Plan are not in any way subject to their debts or other obligations and, except as may be required by the tax withholding provisions of the [Internal Revenue] Code or any state’s income tax act, may not be voluntarily or involuntarily sold, transferred, alienated or assigned.
Plan § 14.1 (emphasis added).
Accordingly, the Court finds that the second prong is met.
3. The Transfer Restriction Is Enforceable.
The third prong of the Wilcox test is whether the transfer restriction is enforceable under applicable nonbankruptcy law. The restriction set forth in § 14.1 of the Plan is enforceable under the applicable nonbankruptcy law of Title I of ERISA. See Patterson, 504 U.S. at 759, 112 S.Ct. 2242 (“ERISA, which states that ‘[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated,’ 29 U.S.C. § 1056(d)(1), clearly imposes a ‘restriction on the transfer’ of a debtor’s ‘beneficial interest’ in the trust.”). Under Patterson, therefore, the Plan’s transfer restriction is *751enforceable under applicable law for purposes of § 541(c)(2).
ERISA’s anti-alienation provision does not apply to qualified domestic relations orders; there is, however, nothing in ERISA or other applicable law that makes the anti-alienation provision inapplicable to an interest in an ERISA plan created as a consequence of a qualified domestic relations order. In fact, quite to the contrary: in Nelson, the Bankruptcy Appellate Panel for the Eighth Circuit recognized that Congress intended that:
[A]ll persons conferred beneficiary status via a QDRO be given the same protections ERISA affords to plan participants. Those protections include ERISA’s anti-alienation provisions. Therefore, a person who acquires an interest in an ERISA plan via a QDRO can exclude that interest from a bankruptcy estate in the same way that the plan participant herself could have excluded it.
Nelson, 322 F.3d at 545; see also Lalchandani, 279 B.R. at 886; Farmer, 295 B.R. at 324; Hthiy, 283 B.R. at 451.4
In the end, the “plain language of the Bankruptcy Code and ERISA is [the] determinant.” Patterson v. Shumate, 504 U.S. 753, 757, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992). Both statutes lead to the same result. The Court’s decision “ensures that the treatment of pension benefits will not vary based on the beneficiary s bankruptcy status,” and “gives full and appropriate effect to ERISA’s goal of protecting pension benefits.” Patterson, 504 U.S. at 764, 112 S.Ct. 2242.
IV. Conclusion
In light of the foregoing, the Court finds that: (i) the Debtor’s interest in the Plan is a beneficial interest in a trust: (ii) her interest is subject to a transfer restriction under the Plan; and (iii) the restriction is enforceable under ERISA. As a result, the Debtor’s interest in the Plan is not property of her estate. Accordingly, the Court overrules the Objection.
IT IS SO ORDERED.
. The Trustee also argues that the Debtor’s interest in the Plan is exempt, if at all, only to the extent of $1, as set forth in her Schedule C listing exempt assets, with the remaining value subject to the Trustees’ administration. The Debtor counters that if the Court finds the Debtor’s interest to be property of the estate, the full value of her interest in the Plan is exempt. In light of the Court's ruling that the Debtor's interest is not property of her estate, the Court need not reach this issue.
. Section 14.1 speaks of "beneficiaries.” In other sections, the Plan uses the capitalized term "Beneficiary,” which is defined as "the natural or legal person or persons designated by a Participant as the Participant’s beneficiary under the last effective beneficiary designation form filed with the Administrator under this Section and to whom the Participant's benefits would be payable under this Section.” Plan § 11.7
. In Boggs, the children of a deceased participant in a pension plan argued that they were entitled to the undistributed pension plan benefits by virtue of Louisiana state law and a testamentary instrument executed by their mother, the deceased first wife of the participant. By the testamentary instrument, the first wife purported to transfer her interest in the plan benefits to her children pursuant to state law even though she was neither a participant nor a beneficiary under the plan. The surviving second wife of the participant, who was a "beneficiary” of the plan by virtue of ERISA, argued that only she was entitled to the plan benefits. The Supreme Court held in favor of the surviving second wife:
The axis around which ERISA's protections revolve is the concepts of participant and beneficiary. When Congress has chosen to depart from this framework, it has done so in a careful and limited manner. Respondents’ claims, if allowed to succeed, would depart from this framework, upsetting the deliberate balance central to ERISA.... Their state-law claims are pre-empted.
Boggs, 520 U.S. at 854, 117 S.Ct. 1754.
. In Hageman, the court held that the debtor's interest in her former spouse's retirement plan could not be excluded from her bankruptcy estate. Unlike the QDRO, however, the domestic relations order at issue in Hage-man gave the debtor "the unfettered ability to obtain immediate payment without regard to the terms of the plan.” Hageman, 260 B.R. at 858. It appears, therefore, that the order at issue in Hageman might not have truly been a qualified domestic relations order even though it was denominated as such. See 29 U.S.C. § 1056(d)(3)(D)(i) (providing that domestic relations order is a qualified domestic relations order only if such order “does not require a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan.”). If the domestic relations order in Hageman was not truly a qualified domestic relations order, then the debtor would not have been a beneficiary under the plan. In addition, it is not clear that the retirement plan assets in Hageman were held in a trust, as are the Plan assets in the instant case. To the extent, therefore, that Hageman is limited to its facts, the decision of this Court and the other decisions cited above are not necessarily in conflict with it. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494269/ | JUDGMENT ON DECISION
ROBERT E. NUGENT, Chief Judge.
The trustee brought this adversary proceeding to recover as a preferential transfer $3,400 paid by Capital One Credit to defendant Boeing Wichita Credit Union by use of a “balance transfer.”
This Court concludes that the debtors’ use of available credit from Capital One to pay down their credit debt to Boeing Wichita Credit Union constitutes a “transfer of an interest of the debtor in property” that may be avoided as a preference under § 547(b).
JUDGMENT on the trustee’s complaint is entered in favor of the trustee. The transaction at bar constituted an avoidable transfer which may be recovered from the credit union by the trustee and preserved for the benefit of the estate. JUDGMENT IS ENTERED against Boeing Wichita Credit Union in the amount of $3,400, plus costs.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494270/ | KORNREICH, Bankruptcy Judge.
In this case from the United States Bankruptcy Court for the District of Puer-to Rico, Doral Financial Corporation (“Doral”) appeals (1) the grant of summary judgment in favor of the Chapter 7 trustee in an avoidance action under 11 U.S.C. § 549; and (2) the order overruling Dor-áis objection to the Chapter 7 trustee’s notice of intent to sell real property. For the reasons set forth below, we affirm.
BACKGROUND
Maria Bonilla Marrero (the “Debtor”) filed a Chapter 13 petition in August, 2001. Her schedules show her to have been the owner of a residence with a market value of $225,000. The schedules also show Doral to have been the holder of first and second mortgages on her residence upon the commencement of the case. Doral filed two proofs of claim, one in the amount of $186,132.11, and another in the amount of $20,541.69, secured by first and second mortgages on the residence.1
On May 30, 2002, Doral moved for relief from stay to foreclose on the Debtor’s residence. Neither the Debtor nor the Chapter 13 trustee filed an objection. Instead, the Debtor chose to convert her case to Chapter 7 by filing a notice of conversion on June 13, 2002. Relief from stay was granted to Doral on June 27, 2002, after the conversion and before the appointment of a Chapter 7 trustee. Wilfred Segarra Miranda became the Chapter 7 trustee (the “Trustee”) on July 18, 2002.
Following relief from stay, the Debtor averted foreclosure by refinancing her indebtedness. Under her arrangement with Doral the balances due on both pre-filing notes were consolidated. The existing first and second mortgages were cancelled and replaced with a new first mortgage on the residence. The new note was in the amount of $243,000, an amount larger than the sum of the two original notes and greater than the scheduled value of the property. The new note and mortgage are dated September 20, 2002. Although it is difficult to ascertain from the record on appeal whether or not the original mortgages were discharged, it is very clear Doral intended that they be cancelled.2 The refinancing was accomplished without notice to the Trustee, creditors or bankruptcy court approval. Shortly thereafter, on October 22, 2002, the Debtor received her discharge.
*864The Trustee did not abandon the residence. Instead, he gave notice of his intention to sell it at public auction. The Debtor objected, contending that it was no longer part of the bankruptcy estate and that its entire value was subject to the new mortgage. After hearing the parties on the Debtor’s objection, the bankruptcy court gave the Trustee an opportunity to bring an avoidance action.
The Trustee commenced an adversary proceeding under several avoidance theories including the avoidance of the new mortgage as a post-petition transfer under 11 U.S.C. § 549(a).3 His complaint also sought authority to sell the Debtor’s residence at public auction free and clear of all liens and an order compelling Doral to discharge the pre-petition mortgages. Doral’s central defense under § 549(a) was that, when the new mortgage was granted, the Debtor’s residence was no longer property of the bankruptcy estate.
The Trustee moved for summary judgment on the undisputed facts. In response, among other things, Doral amplified its § 549(a) defense by asserting that there was no denial of due process in the Trustee’s failure to receive notice and an opportunity to be heard on the relief from stay motion.
The bankruptcy court granted the Trustee’s motion for summary judgment. In its opinion and order dated December 27, 2006, the court rejected Doral’s arguments and concluded that the Trustee was enti-tied to challenge the refinancing because he had not received notice of the request for relief from stay; that the residence could not be deemed abandoned in the absence of clear and unequivocal abandonment by the Trustee; and that Doral had “failed to meet its burden of showing that the refinancing of the mortgage loan did not involve estate property subject to avoidance under 11 U.S.C. § 549.” No separate judgment was entered in the avoidance action at that time.
On March 7, 2007, the Trustee filed a notice of his intention to sell the residence at private sale for $250,000. Doral objected, stating that, as a consequence of the avoidance, it should be treated as a secured creditor on the basis of its original mortgages. In an endorsement order dated April 3, 2007, the bankruptcy court overruled Doral’s objection and declared its claims to be unsecured. Doral filed a notice of appeal from this order on April 12, 2007.
On April 20, 2007, the bankruptcy court entered a judgment in the avoidance action incorporating the terms of its earlier opinion and order on the summary judgment motion. Doral filed a timely notice of appeal on April 27, 2007. The appeals have been consolidated.
JURISDICTION
A bankruptcy appellate panel must determine its jurisdiction before proceeding to the merits even if it goes un*865challenged by the litigants. See In re George E. Bumpus, Jr. Constr. Co., 226 B.R. 724 (1st Cir. BAP 1998). A panel has jurisdiction to hear appeals from “final judgments, orders and decrees.... ” 28 U.S.C. § 158(a). “A decision is final if it ‘ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.’ ” Fleet Data Processing Corp. v. Branch (In re Bank of New England Corp.), 218 B.R. 643, 646 (1st Cir. BAP 1998).
An order granting summary judgment is a final order. See Burrell v. Town of Marion (In re Burrell), 346 B.R. 561, 566 (1st Cir. BAP 2006) (“An order granting a motion for summary judgment is a final order that ends the litigation on the merits of the complaint.”). An order approving a sale of property is also final. See Jeremiah v. Richardson, 148 F.3d 17, 23 (1st Cir.1998). Thus, both orders on appeal in this case are final and subject to review.
STANDARD OF REVIEW
Appellate courts generally apply the clearly erroneous standard to findings of fact and de novo review to conclusions of law. See TI Fed. Credit Union v. Del-Bonis, 72 F.3d 921, 928 (1st Cir.1995); Western Auto Supply Co. v. Savage Arms, Inc. (In re Savage Indus., Inc.), 43 F.3d 714, 719-20 n. 8 (1st Cir.1994). A bankruptcy court’s determination that a party is entitled to summary judgment is a legal conclusion subject to de novo review. See Burrell, 346 B.R. at 566-67 (citing Razzaboni v. Schifano (In re Schifano), 378 F.3d 60, 66 (1st Cir.2004); Desmond v. Varrasso (In re Varrasso), 37 F.3d 760, 763 (1st Cir.1994)). Moreover, a bankruptcy court’s order with respect to a motion to sell property under § 363(b) may only be overturned on appeal if the bankruptcy court abused its discretion. See White v. Official Comm. of Unsecured Creditors (In re Cadkey Corp.), 317 B.R. 19, 22 (D.Mass.2004) (citing In re Montgomery Ward Holding Corp., 242 B.R. 147, 153 (D.Del.1999)).
ISSUES ON APPEAL
Doral raises many issues on appeal. They all boil down to two questions:
A. Did the bankruptcy court err in granting summary judgment to the Trustee and in avoiding the mortgage under § 549(a)?
B. Did the avoidance of the Doral mortgage violate the “single satisfaction rule” under § 550?
DISCUSSION
The purpose of summary judgment “is to pierce the boilerplate of the pleadings and assay the parties’ proof in order to determine whether trial is actually required.” Rojas-Ithier v. Sociedad Espanola de Auxilio Mutuo y Beneficiencia de Puerto Rico, 394 F.3d 40, 42 (1st Cir.2005) (quoting Wynne v. Tufts Univ. Sch. of Med., 976 F.2d 791, 794 (1st Cir.1992)).
Doral does not challenge the bankruptcy court’s findings of fact on summary judgment. It readily concedes all of the pertinent facts and acknowledges that the delivery of the post-petition mortgage was a transfer within the meaning § 549(a). Doral also concedes that there was no error of law in the bankruptcy court’s conclusion that it failed to meet its burden of showing that the delivery of the new mortgage was not a transfer of estate property subject to avoidance under § 549(a). See Fed. R. Bankr.P. 6001. The undisputed facts establish all four of the necessary elements for avoiding Doral’s post-petition mortgage under § 549(a): (1) There was a transfer (2) of property of the estate (3) after the commencement of the case (4) that was not authorized under the Bank*866ruptcy Code or by the bankruptcy court. See Riley v. Tougas (In re Tongas), 338 B.R. 164, 177-78 (Bankr.D.Mass.2006) (citations omitted). On this platform, Doral has raised abuse of discretion as grounds for reversal.
A. Abuse of Discretion.
Doral argues that the exercise of the avoidance power by a trustee under § 549(a) is a matter of discretion for the court. According to Doral, the phrase “the trustee may avoid a transfer of property of the estate” in the first sentence § 549(a) requires the bankruptcy court to review a trustee’s exercise of the power under a benefit to the estate test as a condition of avoidance.4 See 11 U.S.C. § 549(a) (emphasis supplied). Doral contends that the court’s failure to review the Trustee’s exercise of the avoidance power under that standard was an abuse of discretion.
Doral misapprehends the grant of discretion under § 549(a). It is the trustee who is invested with the discretion to pursue or not pursue avoidance in a given instance; and it is the trustee who must weigh the relative costs and benefits of avoidance. The grant of discretion under § 549(a) is an executive power akin to prosecutorial discretion. Like other executive powers, it would be subject to judicial review for cause (e.g. fraud, self dealing, or other breach of duty) upon a proper and timely challenge. But apart from that, when exercised, the avoidance power given to a trustee under § 549(a) must be evaluated on the merits of the complaint and the evidence adduced. When all of the elements of avoidance have been met, as they were in this case, judgment must enter for the trustee. Further, a bankruptcy court may not apply its general equitable powers to disregard or contravene the Code’s unambiguous provisions; or, as Doral would have it in this case, to save a defendant creditor from its own improvident actions. See AFCO Credit Corp. v. Baxco Corp. (In re Baxco Corp.), 148 B.R. 855, 859 (Bankr.N.D.Ill.1992) (where the court refused to “deviate from the plain language of the Code ... and apply equitable considerations to uphold an otherwise avoidable transfer” under § 549).
There was no abuse of discretion. Moreover, the benefit to the estate is apparent.
B. Single Satisfaction Rule
The judgment avoiding the new mortgage without the reinstatement of the original mortgages left Doral holding unsecured debt. This result was sustained in the bankruptcy court’s declaration of unsecured status in the order approving the Trustee’s sale motion. Doral views this outcome to be an award of double damages in violation of the single satisfaction rule stated in § 550(d). Doral’s view reflects a misunderstanding of the interplay of subsections (a) and (d) of § 550.
Subsection (a) provides that a “trustee may recover, for the benefit of the estate, the property transferred, or, if the *867court so orders, the value of such property....”5 Under the Bankruptcy Code’s rules of construction, “or” is not exclusive. See 11 U.S.C. § 102(5). With that rule in mind, one could take subsection (a) to mean that upon avoidance a trustee could recover more than one satisfaction by obtaining the property transferred and the value of such property from one or more transferees. Subsection (d) eliminates that possibility by stating that “[t]he trustee is entitled to only a single satisfaction under subsection (a) from a transferee that is not an insider.” See 11 U.S.C. § 550(d).
The Trustee’s avoidance of the post-petition mortgage was, in effect, a recovery, for the benefit of the estate, of the property transferred-the Debtor’s residence. That recovery was clearly a single satisfaction within the meaning of § 550(d). The order approving the sale of the residence, with its declaration of Doral’s unsecured status, was in no way an award of a second satisfaction. It simply allowed the Trustee to convert property of the estate into cash for distribution free and clear of the lien that had been avoided under § 549(a) and the liens that Doral, itself, had cancelled.
Relying upon Fleet Nat’l Bank v. Gray (In re BankVest Capital Corp.), 2003 WL 1700978 (D.Mass.2003), Doral argues that when a post-petition transfer is avoided under § 549, the pre-transfer status quo must be restored. But Doral’s reliance upon BankVest is misplaced. Unlike the present case, the secured status of the creditor’s claim was not challenged in BankVest. The transfers in that case were payments made to a secured creditor during the gap period following the filing of an involuntary case. Thus, in vacating the bankruptcy court’s avoidance judgment, the district court observed that recovery of those payments “would be futile because [the secured creditor] would be returned to its status as a secured creditor, the status it was in when the gap period payments were made.” Id. at *7. The situation in this case is very different. The claim arising upon the avoidance of Doral’s post-petition mortgage was an unsecured claim because Doral had can-celled its pre-petition mortgages.
CONCLUSION
There was no abuse of discretion under § 549(a) and no violation of the single satisfaction rule under § 550(d). The judgment of avoidance and the sale order are AFFIRMED.
. Doral's proof of claim on the smaller second mortgage indicates that this loan was originated by Sana Investment Bankers, Inc.
. Any ambiguity on this point is resolved with the statement in Doral’s brief that the replacement note and mortgage were given “in exchange for the cancellation of the [original] notes and mortgages....”
. Unless otherwise noted, all statutory references by section are to sections of the Bankruptcy Code, 11 U.S.C. § 101, et seq, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Section 549(a) provides:
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.
The exception in § 549(b) relates to involuntary cases. The exception in § 549(c) involves the transfer of real property to a good faith purchaser without knowledge of the commencement of the case. Neither exception is implicated in this case.
. Doral cites several cases in support of its position. See Adams v. Hartconn Assocs., Inc. (In re Adams), 212 B.R. 703 (Bankr.D.Mass. 1997); Weiss v. People Sav. Bank (In re Three Partners, Inc.), 199 B.R. 230, 237 (Bankr. D.Mass.1995); Fleet Nat'l Bank v. Gray (In re BankVest Capital Corp.), 2003 WL 1700978 (D.Mass.2003). These cases are not on point. The Adams and Three Partners cases involve unauthorized post-petition payments on established pre-petition secured obligations. In each instance the court determined that there was no reason to avoid such payments because the creditor did not enhance its secured status with property of the estate. The BankVest case concerned payments made during the gap period between the filing of an involuntary petition and entry of an order for relief, and is not relevant to this case.
. Section 550(a) states:
Except as otherwise provided in this section, to the extent that a transfer is avoided under section ... 549 ... 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—
il) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or
(2) any immediate or mediate transferee of such initial transfer. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494271/ | MEMORANDUM
JOAN N. FEENEY, Bankruptcy Judge.
I. INTRODUCTION
The matter before the Court is the Motion of United States Trustee (“UST”) for Order Dismissing Case under 11 U.S.C. § 707(b)(1) Based on Presumption of Abuse Arising under 11 U.S.C. § 707(b)(2). Anthony and Maria Guerriero (the “Debtors”) oppose the Motion.
The Court conducted a hearing on the Motion and the Debtors’ opposition on November 21, 2007 at which counsel to the parties represented that the facts were undisputed. On December 6, 2007, the parties filed a “Stipulation of Facts.” The legal issue presented is whether, in applying the means test and determining whether the presumption of abuse arises, the Debtors are entitled to reduce their “current monthly income” (“CMI”) by payments to their mortgagee pursuant to 11 U.S.C. § 707(b)(2)(A)(iii) where they have indicated their intention to surrender the real property subject to the mortgage.1 The issue before the Court is not new and is representative of the interpretative challenges engendered by passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). See generally, Hon. Thomas F. Waldron and Neil M. Berman, Principled Principles of Statutory Interpretation: A Judicial Perspective after Two Years of BAPCPA, 81 Amer. Bankr.L.J. 195 (2007). Bankruptcy courts are divided on the issue, and it remains unresolved. Within the First Circuit, two bankruptcy judges have answered the question presented in the affirmative. See In re Hayes, 376 B.R. 55 (Bankr.D.Mass.2007), and In re Hartwick, 359 B.R. 16 (Bankr.D.N.H.2007), but courts in other jurisdictions have concluded that debtors may not deduct payments for secured debt if the collateral securing the debt has been or will be surrendered. See, e.g., In re Skaggs, 349 B.R. 594 (Bankr.D.Mo.2006).
*842II. STIPULATED FACTS
The Debtors, a married couple, filed a Chapter 7 petition on July 27, 2007. Mr. Guerriero is a driver for Kamco Services, and Mrs. Guerriero is an office manager for Burnham Associates. The Debtors’ CMI, the definition of which is set forth at 101 U.S.C. § 101(10A), exceeds the applicable median income for a household size of two in the Commonwealth of Massachusetts. Moreover, the debts owed by the Debtors are primarily consumer obligations. Because the Debtors’ income is above the median income for their family size and location, they were required to calculate and deduct their expenses pursuant to 11 U.S.C. § 707(b)(2)(A)(i)-(iv) and to complete Part V of Form 22A.
The Debtors reside in an apartment located at 1304 Village Road East, Norwood, Massachusetts. They moved there prior to filing their bankruptcy petition. At the time they filed their Chapter 7 petition, the Debtors held an interest in residential real property located at 25 Cross Street, Salem, Massachusetts (“the Cross Street property”). On Schedule A-Real Property, they listed the current value of the Cross Street property as $250,000, subject to a secured claim in the sum of $358,706 held by Saxon Mortgage Services, Inc. (“Saxon”). On Schedule A, they noted that the “property is being surrendered.”2
The Debtors have two mortgages with Saxon which encumber the Cross Street property. They testified at their section 341(a) meeting of creditors that they had not made a mortgage payment on either the first or second mortgage since the Spring of 2007. In their Statement of Financial Affairs, they disclosed that Saxon had commenced a foreclosure proceeding.
The Debtors occupied the Cross Street property through June 15, 2007, at which time they entered into a one-year residential lease for an apartment at Windsor Gardens and moved to Norwood, Massachusetts. Their monthly rental expense, as listed on Schedule J-Current Expenditures of Individual Debtor(s) is $1,510. On their Amended Official Form 22A in Part V, “Calculation of Deduction allowed under § 707(b)(2),” Subpart C, “Deductions for Debt Payments,” on line 42, the Debtors listed “[fluture payments on secured claims” totaling $2,442, although they have made no post-petition payments to Saxon.3 They did not deduct any expense on line 20B under the IRS Local Standards for “housing and utilities; mortgage/rent expense.”
Saxon filed a Motion for Relief from the Automatic Stay on August 22, 2007 seeking authority to foreclose its first mortgage on the Cross Street property. On September 5, 2007, in the absence of objections, this Court granted Saxon’s Motion. As of December 6, 2007, when the parties filed their Stipulation of Facts, Saxon had not conducted a foreclosure sale and a mortgage discharge had not been recorded in the Essex County Registry of Deeds.
The section 341(a) meeting of creditors was held on August 23, 2007 and continued *843to September 19, 2007. On August 31, 2007, the UST filed a Statement that she was currently unable to determine whether the Debtors’ case would be presumed to abusive. On October 1, 2007, the UST filed the Motion to Dismiss now before the Court. See 11 U.S.C. § 704(b).
III. THE STATUTE
Section 707(b) provides in relevant part the following:
(b) (1) After noticé and a hearing, the court, on its own motion or on a motion by the United States trustee, trustee (or bankruptcy administrator, if any), or any party in interest, may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts, or, with the debtor’s consent, convert such a case to a case under chapter 11 or 13 of this title, if it finds that the granting of relief would be an abuse of the provisions of this chapter. In making a determination whether to dismiss a case under this section, the court may not take into consideration whether a debtor has made, or continues to make, charitable contributions (that meet the definition of “charitable contribution” under section 548(d)(3)) to any qualified religious or charitable entity or organization (as that term is defined in section 548(d)(4)).
(2) (A)(i) In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter, the court shall presume abuse exists if the debtor’s current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv), and multiplied by 60 is not less than the lesser of—
(I)25 percent of the debtor’s nonp-riority unsecured claims in the case, or $6,575, whichever is greater; or
$10,950.
(ii)(I) The debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debt- or’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides, as in effect on the date of the order for relief, for the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case, if the spouse is not otherwise a dependent. Such expenses shall include reasonably necessary health insurance, disability insurance, and health savings account expenses for the debtor, the spouse of the debt- or, or the dependents of the debtor. Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts....
(II) In addition, the debtor’s monthly expenses may include, if applicable, the continuation of actual expenses paid by the debtor that are reasonable and necessary for care and support of an elderly, chronically ill, or disabled household member or member of the debtor’s immediate family (including parents, grandparents, siblings, children, and grandchildren of the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case who is not a dependent) and who is unable to pay for such reasonable and necessary expenses.
(III) In addition, for a debtor eligible for chapter 13, the debtor’s monthly expenses may include the actual administrative expenses of administering a chapter 13 plan for the district in which the debtor resides, up to an *844amount of 10 percent of the projected plan payments, as determined under schedules issued by the Executive Office for United States Trustees.
(IV) In addition, the debtor’s monthly expenses may include the actual expenses for each dependent child less than 18 years of age, not to exceed $1,650 per year per child, to attend a private or public elementary or secondary school if the debtor provides documentation of such expenses and a detailed explanation of why such expenses are reasonable and necessary, and why such expenses are not already accounted for in the National Standards, Local Standards, or Other Necessary Expenses referred to in subclause (I).
(V) In addition, the debtor’s monthly expenses may include an allowance for housing and utilities, in excess of the allowance specified by the Local Standards for housing and utilities issued by the Internal Revenue Service, based on the actual expenses for home energy costs if the debtor provides documentation of such actual expenses and demonstrates that such actual expenses are reasonable and necessary, (iii) The debtor’s average monthly payments on account of secured debts shall be calculated as the sum of—
(I) the total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the petition; and
(II) any additional payments to secured creditors necessary for the debtor, in filing a plan under chapter 13 of this title, to maintain possession of the debtor’s primary residence, motor vehicle, or other property necessary for the support of the debtor and the debtor’s dependents, that serves as collateral for secured debts;
divided by 60.
(iv) The debtor’s expenses for payment of all priority claims (including priority child support and alimony claims) shall be calculated as the total amount of debts entitled to priority, divided by 60.
11 U.S.C. § 707(b)(2)(A) (emphasis supplied).
The UST explains the mathematics governing when the presumption of abuse arises under section 707(b):
[I]f after deducting all allowable expenses from a debtor’s current monthly income, the debtor has less than $109.58 per month in monthly net income (ie., less than $6,575 to fund a 60 month plan), the filing is not presumed abusive. If a debtor has monthly net income of $182.50 or more {i.e., at least $10,950 to fund a 60 month plan), the filing is presumed abusive. Finally, if a debtor’s monthly income is more than $109.58 but less than $182.50, the case will be presumed abusive if that sum, when multiplied by 60 months will pay 25% or more of the debtor’s non-priority unsecured debts.
UST’s Motion to Dismiss at p. 2, ¶ 4. See also In re Hayes, 376 B.R. at 58. Debtors may rebut the presumption of abuse with reference to “special circumstances, such as a serious medical condition or a call or order to active duty in the Armed Forces.” See 11 U.S.C. § 707(b)(2)(B). If the presumption of abuse does not arise, or is rebutted, the Court may still dismiss a Chapter 7 case if the debtor filed the petition in bad faith or the totality of the circumstances establishes abuse. See 11 U.S.C. 707(b)(3).
*845IV. POSITIONS OF THE PARTIES
A. The UST
Consistent with her duties, the UST reviewed all materials filed and provided by the Debtors, including the Debtors’ Schedules, Statement of Financial Affairs, payment advices, and amended Form 22A in order to determine whether granting them relief under Chapter 7 would be presumptively abusive. See 11 U.S.C. § 704(b)(1)(A). After reviewing the documentation submitted by the Debtors, the UST concluded that the presumption of abuse arose. To reach her conclusion, she recalculated the Debtors’ allowable expenses and deductions and prepared an adjusted Form 22A. In sum, the UST increased the Debtors’ allowable deduction from $-0- to $1,225 for rental expenses on line 20B using the IRS Local Standards for “housing and utilities; mortgage/rent expense” in Part V, Subpart A, “Deductions under Standards of the Internal Revenue Service (IRS)” of Form 22A. Additionally, she increased the Debtors’ allowable deductions from $393 to $782 on line 22 using the IRS Local Standards for “transportation; vehicle operation/public transportation expense.” Finally, she eliminated the Debtors’ $2,440 deduction for the payment of secured debt (Saxon’s first and second mortgages) on line 42 of Subpart C. The following chart summarizes the disparity in the treatment of the Debtors’ expenses and deductions as set forth in the Debtors’ amended Form 22A and the adjusted Form 22A created by the UST._
Part VI. DETERMINATION OF § 707(B)(2) PRESUMPTION_Debtors UST
Current monthly income for § 707(b)(2)_$ 6,458 $ 6,458
Total of all deductions allowed under § 707(b)(2)_$ 6,738 $ 5,966.60
Monthly disposable income under § 707(b)_($ 280) $ 491.40
60-month disposable income under § 707(b) ($16,800) $29,484
The UST based her decision to recalculate the Debtors’ deductions based upon cases such as In re Ray, 362 B.R. 680 (Bankr.D.S.C.2007), In re Harris, 353 B.R. 304 (Bankr.E.D.Okla.2006), and In re Skaggs, 349 B.R. 594 (Bankr.E.D.Mo.2006), which hold that debtors who indicate their intention to surrender collateral are not entitled to take an expense deduction for payments on secured debts pursuant to section 707(b)(2)(A)(iii). Because the Debtors’ actual monthly disposable income based upon the UST’s adjusted Form 22A shows disposable income of $491.40, an amount which exceeds the $182.50 threshold for the presumption of abuse, the UST seeks dismissal of the Debtors’ bankruptcy case.
B. The Debtors
The Debtors rely upon the decisions in In re Hayes, 376 B.R. 55 (Bankr.D.Mass.2007), and In re Hartwick, 359 B.R. 16 (Bankr.D.N.H.2007), in support of their position that the UST’s Motion to Dismiss lacks merits and must be denied. They emphasize use of the term “shall” in section 707(b) (2) (A) (iii) and maintain that the Court lacks discretion in interpreting the plain meaning of the statute.
V. DISCUSSION
In Hayes, Chief Judge Boroff ably articulated the different interpretations of section 707(b)(2)(A)(iii)(I), which governs the outcome of this case, specifically the meaning of the phrase “scheduled as contractually due.” After the obligatory nod to the Supreme Court’s command to enforce a statute according to its terms if the language is plain and does not produce an absurd result, see United States v. Ron Pair Enter., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989), Chief Judge Boroff discussed whether the word “scheduled” refers to the debtor’s bank*846ruptcy schedules, or whether it should be given its common, dictionary definition. Compare In re Skaggs, 849 B.R. at 599 (“the Debtors’ schedules and statements form the basis from which the Court should determine whether a debt is ‘scheduled as contractually due.’ ”); In re Harris, 353 B.R. 304 (Bankr.E.D.Okla.2006) (same) with In re Walker, No. 05-15010-WHD, 2006 WL 1314125 at *4 (Bankr.N.D.Ga. May 1, 2006)(“[T]he plain language of the statute permits a reduction from CMI for payments on secured debts that have not been reaffirmed. Congress’ [sic] choice of the phrase, ‘scheduled as contractually due,’ suggests that, in determining which payments should be averaged for the deduction, the Court should determine how many payments are owed under the contract for each secured debt at the time of filing.”) In re Longo, 364 B.R. 161 (Bankr.D.Conn.2007)(same), In re Randle, 358 B.R. 360 (Bankr.N.D.Ill.2006), affd, Randle v. Neary (In re Randle), No. 07C631, 2007 WL 2668727 (N.D.Ill. July 20, 2007) (same); In re Sorrell, 359 B.R. 167 (Bankr.S.D.Ohio 2007)(same); In re Harbwick, 359 B.R. 16 (Bankr.D.N.H.2007); In re Nockerts, 357 B.R. 497 (Bankr.E.D.Wis.2006) (same)4 As noted by the court in In re Chang, No. 07-50484, 2007 WL 3034679 (Bankr.N.D.Cal. Oct.16, 2007), the majority of courts holds that debtors are authorized to deduct monthly payments on secured debts where the debtor intends to surrender the collateral securing the debt.
In Hayes, Chief Judge Boroff observed:
[E]ven if this Court were to conclude that the Trustee’s interpretation of the statute is the appropriate one-i.e., that “scheduled as” refers to the debtor’s bankruptcy schedules-this would “really be a distinction without a difference.” In re Hoar, 360 B.R. at 766; see also In re Randle, 358 B.R. at 365. The “scheduling” of a secured debt on the debtor’s bankruptcy petition does not change the fact that the payments are “contractually due.” In re Hoar, 360 B.R. at 764, 765; In re Sorrell, 359 B.R. at 184; In re Randle, 358 B.R. at 365; In re Sin-gletary, 354 B.R. at 468. Nor does declaring an intention to ultimately surrender property to the creditor abrogate a debtor’s contractual obligations. In re Longo, 364 B.R. at 165-66; In re Haar, 360 B.R. at 764; In re Sorrell, 359 B.R. at 184; In re Singletary, 354 B.R. at 467 n. 11, 468; In re Walker, 2006 WL 1314125 at *4, 2006 Bankr.LEXIS 845 at *13-14.
*847Hayes, 376 B.R. at 62-63. Turning to the phrase, “in each of the 60 months following the date of the petition,” the Hayes court further observed that “the term ‘following’ denotes a look forward, specifically, a look sixty months into the debtor’ future.” Id. at 63. Chief Judge Boroff concluded, however, that
[a]part from the obvious practical difficulties the Court would encounter in trying to determine which debtors will actually make all payments required under their contracts with secured creditors during each of the sixty months following the petition, it is equally clear that the plain language of the statute does not contemplate the Court assuming this kind of predictive role.
Id. Chief Judge Boroff added: “Nothing in the phrase ‘following the date of the petition’ suggests that the calculation must include only those payments actually made. Instead, the phrase modifies the preceding portion of the statute which refers to those payments that are ‘scheduled as contractually due.’ ” Id. at 64.
The court in Hayes also considered the legislative history of BAPCPA, although it implied that reference to it was unnecessary because it found that the statute was not ambiguous and did not produce an absurd result. Id. at 64-65. Recognizing that Congress may have intended to identify debtors capable of paying a percentage of their unsecured debts in creating the means test under section 707(b)(2) and to deny them a discharge or push them into Chapter 13, Chief Judge Boroff determined that Congress intended for the means test to be mechanical and to reduce judicial discretion. Citing Randle, 358 B.R. at 364, one of only two pertinent decisions that appears to have been the subject of appellate review,5 Chief Judge Boroff concluded:
The deduction of secured payments due at the time of the petition filing-even if the debtor intends to eventually surrender the property-is consistent with the mechanical, discretion-void nature of the means test. See In re Kogler, 368 B.R. [785]at 790-91 [(Bankr.W.D.Wis.2007)]; Walker, 2006 WL 1314125 at *6, 2006 Bankr.LEXIS 845 at *18-19. To read into § 707(b)(2)(A)(iii)(I) a requirement that the court inquire into possible future outcomes in each debtor’s case “is completely contrary to Congress’ intent because it requires the kind of case-by-case adjustment based on a debtor’s individual circumstances for the presumption of abuse that Congress rejected.” In re Randle, 358 B.R. at 364.
Hayes, 376 B.R. at 65-66 (footnotes omitted).
YI. CONCLUSION
This Court has reviewed the decisions cited by the parties and by the court in Hayes. Courts on all sides of the issue make valid points. The language of the statute, which is simultaneously backward and forward looking, invites debate. This Court concludes that decisions, such as Chief Judge Boroffs decision in Hayes, and the cases upon which he relied, are the better reasoned. In addition, adopting the holding in Hayes avoids inconsistency within the district of Massachusetts, and, in view of Judge Deasy’s decision in Hartwick, 359 B.R. 16 (Bankr.D.N.H.2007), inconsistency within the circuit as well.
In view of the foregoing, the Court shall enter an order denying the UST’s Motion *848to Dismiss without prejudice to the filing of a motion under 11 U.S.C. § 707(b)(3).
. The Debtors pose the issue as follows: "Whether 11 U.S.C. § 707(b)(2)(A)(iii), providing for deduction of payments due to secured creditor from current monthly income should be judicially rewritten to contain an implied condition that the payment of the secured debt is being made at the time of the filing of the petition.”
. The Debtors also indicated their intention to surrender the property on their "Chapter 7 Individual Debtor's Statement of Intention.”
. Official Form 22A in effect at the time the Debtors filed their petition, at line 42, provides:
Future payments on secured claims. For each of your debts that is secured by an interest in property that you own, list the name of the creditor, identify the properly securing the debt, and state the Average Monthly Payment. The Average Monthly Payment is the total of all amounts contractually due to each Secured Creditor in the 60 months following the filing of the bankruptcy case, divided by 60. Mortgage debts should include payments of taxes and insurance required by the mortgage....
. A third line of cases hold that
[T]he mere act of declaring an intent to surrender collateral on a Statement of Intention does not extinguish the Debtors’ right to deduct those payments under § 707(b)(2)(A)(iii). However, for purposes of a motion to dismiss based on the presumption of abuse formula found in § 707(b)(2)(A) (Presumption of Abuse Motion), the relevant date on which calculations should be based is the date of the .filing of the motion, not the date of the filing of the petition. Therefore, any events occurring post-petition and up to the date of the filing of the motion must be taken into account in applying the means test. Thus, if a debtor has carried through with his intent to surrender the collateral and relief from stay has been granted before the filing of the Presumption of Abuse Motion, the payments on that debt would not be counted under § 707(b)(2)(A)(iii).
In re Ray, 362 B.R. at 683-84 (citing In re Singletary, 354 B.R. 455, 458 (Bankr.D.Tex.2006)). The court in In re Chang, No. 07-50484-ASW, 2007 WL 3034679 (Bankr.N.D.Cal. Oct.16, 2007), observed that the court in Singletary was constrained by Fifth Circuit precedent, namely In re Cortez, 457 F.3d 448 (5th Cir.2006). Noting that it was not constrained by that precedent, the court in Chang concluded that “taking post-petition events into account ... contravenes the purpose of the means test as an objective analysis, to be performed at the time the petition is filed.” 2007 WL 3034679 at *3.
. See Randle v. Neary (In re Randle), No. 07C631, 2007 WL 2668727 (N.D.Ill. July 20, 2007); Fokkena v. Hartwick, 373 B.R. 645 (D.Minn.2007), relying on both the bankruptcy court and district court decisions in Randle and reaching the same conclusion with respect to section 707(b)(2)(A)(iii). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494272/ | MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
STEPHEN D. GERLING, Chief Judge.
The Court has before it a motion filed by the Office of the United States Trustee (“UST”) on July 9, 2007, in the above-referenced jointly administered cases seeking to review fees pursuant to § 329 of the U.S. Bankruptcy Code, 11 U.S.C. §§ 101-1532 (“Code”) and for disallowance and disgorgement of fees already paid to Berk-man, Henoch, Peterson and Peddy (“BHPP”) as former counsel to the Official Committee of Unsecured Creditors (“Committee”).1 On July 26, 2007, the Committee filed a Response in support of the UST’s motion. On the same date, BHPP *850filed its opposition to the motion. On July 30th the UST filed a reply in further support of the motion.
The motion was argued before the Court at Utica on July 31, 2007. Following oral argument, the Court gave all parties until August 24, 2007, to file any additional memoranda of law. On August 24, 2007, both the UST and BHPP filed supplemental papers addressing the motion. The contested matter was submitted for decision as of that date.2
JURISDICTIONAL STATEMENT
The Court has core jurisdiction over the parties and subject matter of this contested matter pursuant to 28 U.S.C. §§ 1334(b), 157(a), (b)(1) and (b)(2)(A).
FACTS
On February 13, 2002, the Chapter 11 cases of the above-referenced jointly administered Debtors were commenced by the filing of involuntary petitions. On March 18, 2002, the Court entered an Order for Relief effective March 11, 2002. On March 27, 2002 the UST appointed the Committee. Jaco Electronics, Inc. (“Jaco”), one of the petitioning creditors, was named as a member of the Committee.
On April 2, 2002, the Court signed an Order appointing BHPP as counsel to the Committee, retroactive to March 26, 2002. In support of its Application for Retention of BHPP, dated March 29, 2002, the Committee submitted the Affidavit of Ronald M. Terenzi, Esq. (“Terenzi”), who was identified in the Application as “the attorney who will be primarily responsible for this case and a partner with Berkman Henoch.... ” In paragraph 7 of the Ter-enzi Affidavit, in disclosing the firm’s potential conflicts of interest, he asserts, “Member(s) and/or employees of Berkman Henoch may from time to time maintain di minimus [sic] stock holdings in creditors(s) of the Debtors, which stock is publicly traded on national markets and an attorney is related to and [sic] officer and shareholder of one of the general unsecured creditors of the Debtors.” In subsequent developments in these cases, it has been learned that the “attorney” referred to in paragraph 7 of the Terenzi Affidavit was Douglas Spelfogel, Esq. (“Spelfogel”) who, at the time of the execution of the Terenzi Affidavit, was the son-in-law of Joel Girsky, the Chief Executive Officer and President of Jaco, the holder of a significant claim against the Debtors, as well as a petitioning creditor and an active member of the Committee. In addition, at some point thereafter, though the date appears to be in some dispute, Spelfogel’s wife, Wendy, became the in-house counsel to Jaco.3
During BHPP’s tenure as counsel to the Committee, it submitted one Application for a Final Allowance of Attorneys Fees and Expenses (“Fee Application”) on July 16, 2003. On October 29, 2003, the Court entered an Order awarding BHPP fees of $494,320 and reimbursement of expenses in the amount of $38,424.50 (“Fee Order”). In the Fee Order, the Court, in consideration of certain objections to the Application and notwithstanding its styling as a “Final Application,” directed that 30% of the approved fees and 10% of the approved *851expenses be held back “pending final applications pursuant to § 330 of the Bankruptcy Code.” 4
ARGUMENTS
The UST maintains that BHPP’s Application for Retention was purposely vague with regard to Spelfogel’s relationship to Jaco, thereby depriving the Court and other parties in interest of the opportunity to fully consider that relationship in deciding whether or not to appoint BHPP as counsel to the Committee. The UST relies primarily on the requirements of Rule 2014 of the Federal Rules of Bankruptcy Procedure (“Fed.R.Bankr.P.”), noting that the Rule is intended to provide the Court with sufficient information to allow it to determine whether or not a professional’s appointment is in the best interest of creditors. The UST contends that it is not within the judgment of the professional to determine what facts should be disclosed as being relevant to its appointment. Rather, the UST argues that all facts that in any way bear on the issue of disinterestedness must be fully disclosed. Failure to make such disclosure, the UST asserts, warrants denial of all compensation for postpetition services. Here, the UST argues that BHPP’s vague and incomplete disclosure of Spelfogel’s relationship to the CEO of Jaco was intended to, and did in fact, cause the UST and the Court to overlook an otherwise disqualifying factor. The UST contends that BHPP’s non-disclosure was not the result of mistake or inadvertence but was rather a deliberate attempt to avoid scrutiny of the Spelfo-gel/Jaeo relationship and is of such a serious nature as to warrant denial of all compensation to BHPP, as well disgorgement of all compensation already paid. Further the UST asserts that whether or not actual harm resulted from BHPP’s failure to adequately disclose the relationship is irrelevant on the question of denial and disgorgement of fees. The UST points to the voluntary withdrawal from representation of the Committee and waiver of all fees by Nixon, BHPP’s successor, following the later disclosure by Spelfogel that not only was his father-in-law the CEO of Jaco, but that his wife was its in house counsel.5 The UST notes that BHPP still has not amended its Fed. R.Bankr.P.2014 Statement to disclose Spelfogel’s specific relationship with Jaco, notwithstanding a continuing obligation to do so. Finally, the UST argues that an award of fees to BHPP will adversely impact on the holders of other administrative claims in cases that are dangerously close to being administratively insolvent.
In response, BHPP seeks to draw a distinction between its representation of the Committee and that of Nixon, opining that the circumstances surrounding its representation were vastly different. First, it asserts that during Nixon’s representation of the Committee, Spelfogel was the attorney primarily responsible for handling the representation, whereas in BHPP’s representation of the Committee, Terenzi was the lead attorney, notwithstanding the fact that when Spelfogel left BHPP he took the representation of the Committee with him to Nixon.6 Second, *852BHPP notes that while Nixon admitted to representing Jaco in other matters while simultaneously representing the Committee, BHPP at no time represented Jaco in any matter. Third, BHPP points out that it was only during Nixon’s representation of the Committee, utilizing Spelfogel as its lead attorney, that Spelfogel’s wife began working for Jaco as in-house counsel. Finally, BHPP points to Code § 1103(b), which it contends does not disqualify a law firm from representing a creditors committee simply because an attorney in the firm is related by marriage to one of the committee members.
The UST is critical of BHPP’s response, suggesting that it misses entirely the issue before the Court, that being BHPP’s failure to disclose a potential conflict of interest in compliance with Fed.R.Bankr.P. 2014. The UST reiterates its contention that the duty to disclose is broad in scope and that BHPP’s veiled reference to Spel-fogel’s relationship to Jaco was intended to minimize and mislead any party in interest, as well as the Court. It also disputes Terenzi’s assertion that he, not Spelfogel, was the attorney primarily responsible for representation of the Committee, noting numerous pleadings and correspondence filed over Spelfogel’s signature during BHPP’s tenure as Committee counsel. The UST also takes issue with Terenzi’s assertion that it was general knowledge that it was Jaco that introduced BHPP to the creditor group which ultimately became the Committee, noting that it had no such information until BHPP responded to this motion. In its final submission to the Court, the UST emphasizes that in order to comply with Fed.R.Bankr.P.2014, a professional must disclose its “connections” with the debtor, creditors and any other party in interest, and it is that precise obligation that BHPP purposely evaded in seeking appointment as Committee counsel.
In its Supplemental Brief, BHPP argues one final time that the disclosure made in its Application for Retention regarding Spelfogel’s relationship to Jaco fully complied with the mandate of Fed.R.BankrJP. 2014, especially given the fact that at the time the Application was submitted the only known creditors in the cases were the petitioning creditors who later made up the Committee. Therefore, BHPP opines, it was obvious to those creditors that, “one of the general unsecured creditors” referred to in paragraph 7 of the Terenzi Affidavit was Jaco.7 BHPP asserts that at no point did any party interest, including the UST, ever request any further information regarding the specific disclosure made in the Terenzi Affidavit submitted in support of the Application for Retention.
DISCUSSION
It is abundantly clear that Fed. R.Bankr.P.2014(a) requires a significant level of disclosure of the proposed professional’s “connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States trustee, or any person employed in the office of the United States trustee.” It is equally clear that the level of disclosure outlined in the Rule is mandatory, whether or not that disclosure would unearth a conflict of interest. See In re Condor Systems, Inc., 302 B.R. 55, 70 (Bankr.N.D.Cal.2003); In re Granite Partners L.P., 219 B.R. 22, 35 (Bankr.*853S.D.N.Y.1998), citing In re The Leslie Fay Companies, Inc., 175 B.R. 525, 536 (Bankr.S.D.N.Y.1994). It is also apparent that the obligation to disclose is not a subjective one, whereby the professional discloses only those “connections” that he/ she/it concludes are relevant. See In re Fibermark, Inc., Case No. 04-10463, 2006 WL 723495 at *8 (Bankr.D.Vt. March 11, 2006); In re WorldCom, Inc., 311 B.R. 151, 164 (Bankr.S.D.N.Y.2004); In re Mercury, 280 B.R. 35, 56 (Bankr.S.D.N.Y.2002), aff'd 122 Fed.Appx. 528 (2d Cir.2004), citing 1 COLLIER ON BANKRUPTCY ¶ 8.05, at 8-60 (Lawrence P. King et al. eds., 15th ed. Rev.2001) (“professionals may not make unilateral determinations regarding the relevance of particular connections, or that certain connections to the debtor are too insignificant to disclose. All connections must be disclosed”).
As indicated, the existence of a conflict of interest is not the quid pro quo for whether or not disclosure must be made. Sanctions are imposed for the failure to disclose, regardless of the consequences of the non-disclosure. See Condor Systems, 302 B.R. at 70, n. 28, citing In re C.F. Holding Corp., 164 B.R. 799, 806 (Bankr.D.Conn.1994) for the view that “in the Second Circuit a violation of the disclosure rule alone is sufficient to deny compensation regardless of whether the undisclosed connection was materially adverse to the estate;” see also In re EWC, Inc., 138 B.R. 276, 280 (Bankr.W.D.Okla.1992) (indicating that “[violation of the disclosure rules alone is enough to disqualify a professional and deny compensation, regardless of whether the undisclosed connections or fee arrangements were materially adverse to the interests of the estate or were de minimis ”).
In the instant contested matter, it is beyond dispute that BHPP initially disclosed that, “an attorney is related to and [sic] officer and shareholder of one of the general unsecured creditors of the Debtors.” in the Terenzi Affidavit. The question that this Court must answer is whether that disclosure was a sufficient compliance with the requirements of Fed. R.Bankr.P.2014 in light of facts which were known only to BHPP at the time the disclosure was made. If the Court concludes that the disclosure was inadequate or worse, purposefully vague and misleading, then the Court must consider the appropriate sanctions. WorldCom, 311 B.R. at 164; Condor Systems, 302 B.R. at 73; see also In re Fretter, Inc., 219 B.R. 769, 776 (Bankr.N.D.Ohio 1998) (recognizing the variety of sanctions imposed as a result of the failure to make the required disclosures, ranging from a denial of all fees to a reduction in fees). BHPP appears to acknowledge as much when it notes that, “[t]he real issue in the instant case is the sufficiency of the disclosure made by BHPP.” See Supplemental Brief in Support of Opposition to Motion of the United States Trustee to Review Fees, dated August 24, 2007, at 14. In an effort to convince the Court that its disclosure was adequate, BHPP draws a distinction between Spelfogel’s relationship to Jaco while affiliated with it and the expansion of that relationship when he moved to Nixon, as well as Nixon’s alleged direct representation of Jaco in other matters.
In an effort to analyze the central issue of adequacy of disclosure, the Court must first address some arguments raised by BHPP that would appear to have no relevance. The first is that somehow the adequacy of the disclosure here should be judged by the failure of any party in interest to request additional information from BHPP beyond the statement set out in the Terenzi Affidavit. Fed.R.Bankr.P.2014 is not intended to condone a game of cat and mouse where the professional seeking appointment provides only enough disclosure *854to whet the appetite of the UST, the court or other parties interest, and then the burden shifts to those entities to make inquiry in an effort to expand the disclosure. Fibermark, 2006 WL 723495 at *9; see also In re Filene’s Basement, Inc., 239 B.R. 850, 856 (Bankr.D.Mass.1999), (indicating that “ ‘coy or incomplete disclosures which leave the court to ferret out pertinent information from other sources are not sufficient,’” quoting In re Saturley, 131 B.R. 509, 517 (Bankr.D.Me.1991)).
Next, BHPP contends that at the time it sought appointment as counsel to the Committee, the only known creditors were those on the Committee and they were well aware of the relationship between Jaco and BHPP, the former having introduced BHPP to the creditor group that ultimately became the Committee. The UST disputes BHPP’s contention that there were only a limited number of known creditors at the time of its disclosure, noting that on March 29, 2002, some four days before BHPP filed its Application for Retention, the Debtors filed a “Verification of Creditor Matrix, which certified the Matrix of Creditors consisting of fifty five pages.” See UST Reply in Further Support of Motion to Review Fees, dated July 30, 2007 at ¶8. Again, BHPP seems to misinterpret the requirements of Fed. R.Bankr.P.2014 by suggesting that its obligation under the Rule was somehow defined by what knowledge may already have been possessed by those parties to whom disclosure must be provided. Such an interpretation would stand the Rule on its head, making its application purely subjective and virtually impossible to enforce.
While Spelfogel’s relationship to Jaco may not have created a per se conflict of interest at the time of BHPP’s appointment, subsequent developments in these cases suggest that it may have created an atmosphere of hostility between the Committee and the Debtors that ultimately led to another member of the Committee, namely, Avnet Inc., moving on two occasions for an order removing Spelfogel and Nixon as Committee counsel, in response to a lawsuit commenced in the New York State Supreme Court, Broome County, by American Manufacturing Services (“AMS”), a non-debtor affiliate of the Debtors, against the Committee, as well as its individual members, alleging serious transgressions by Spelfogel and Nixon in their representation of the Committee. In addition, the Court notes the extremely litigious nature of the adversary proceeding (Adv.Pro.02-80095) commenced by the Committee against the Debtors, AMS and others in April 2002, which defied resolution by way of extensive mediation instituted in January of 2005 but was ultimately settled by an Order, dated September 28, 2006, only six months after Nixon voluntarily withdrew from its representation of the Committee and Bond was substituted as its counsel. While the Court cannot speculate on the reasons for the sheer length of the adversary proceeding and the often acrimonious relationship between the attorneys involved, it does find significance in the relative ease with which the litigation was resolved after the Nixon firm and Spelfogel exited. Had a more detailed disclosure of Spelfogel’s relationship to Jaco been made in the Terenzi Affidavit in 2002, rather than some three years later, the Court may have been reluctant to appoint BHPP in order to avoid the very dilemma that subsequently developed. Indeed, that is precisely why Fed.R.Bankr.P. 2014 must be construed broadly and objectively.
BHPP is quick to point out that Code § 1103, which governs the appointment of an attorney as counsel to a committee, is less stringent than Code § 327, which governs the appointment of professionals to represent the trustee or debtor-in-possession on behalf of the estate. Once again, *855however, BHPP is focusing its attention on the issue of conflict of interest, whereas Fed.R.Bankr.P.2014 focuses on disclosure.
BHPP also contends that while Fed. R.Bankr.P.2014 has been carried to untenable extremes by some courts, most notably by U.S. Bankruptcy Court for the District of Vermont in Fibermark, even those courts backed off when it came time to impose any significant sanctions on the targeted professionals.
In Fibermark the UST argued that the obligation to disclose “all connections” encompassed “an obligation on the part of the professional to disclose all cases in which it was involved, regardless of whether there was any pecuniary or attorney-client or adversarial relationship.” Fiber-mark, 2006 WL 723495 at *7. The court ultimately found that the professionals were not on notice that “failure to comply with this very high level of disclosure could result in sanctions.” Id. at *11. Accordingly, the court declined to impose sanctions “for a rule violation against a party who did not have notice of the rule’s requirements. Sanctions imposed by that sort of ambush serve no legitimate purpose.” Id. The court declined to drastically reduce the professional’s fees as requested by the UST and deferred making a final determination concerning fees until it had an opportunity to consider all the evidence.
While BHPP may be generally correct in its analysis, the Court believes that each case must be judged on its own facts. As concluded by the court in Fibermark,
the extent and format of such disclosures may vary from case to case, as the circumstances of each case will define the “connections” that must be disclosed to provide the Court and parties in interest with sufficient information to determine whether the applicant is disinterested. Moreover, any determination of the sufficiency of the disclosures produced pursuant to Rule 2014 should be made by balancing the plain language of the rule’s mandate that applicants disclose “all connections,” in order to maintain integrity of the professional appointment process in bankruptcy cases, against the common sense analysis of what connections are reasonably defined as pertinent to the ultimate question of disinterestedness, so that competent professionals do not find the requirements of representing parties in bankruptcy cases so burdensome as to deter them from doing so.
Id.
A review of all of the facts presented in this contested matter leads the Court to the conclusion that the disclosure made in the Terenzi Affidavit in 2002 regarding Spelfogel’s relationship to Jaco appears to have been purposefully vague. The Court reaches that conclusion based on the significance of the roles taken on in the cases by both Spelfogel and Jaco, roles that had to have been known, or at the very least anticipated, by BHPP. It freely admits that it was Jaco that introduced BHPP to “the creditor group in the case.” See Terenzi Affidavit, sworn to on July 25, 2007, at ¶ 6. Jaco was one of the original petitioning creditors that forced the Debtors into bankruptcy. Spelfogel was the son-in-law of the CEO of Jaco. Spelfogel apparently specialized in bankruptcy matters, as evidenced by the significant amount of time he devoted to these Chapter 11 cases. As reflected in BHPP’s Fee Application, Spelfogel expended some 704 hours during the period March through December 2002. During the same period, Terenzi, though asserting he was the lead attorney on behalf of the Committee, consumed some 300 hours less. While it is possible that at the outset it was not envisioned that Spelfogel would play such a prominent role in the *856representation of the Committee, such a possibility would seem to stretch credulity.
Professional retention “must be free of any personal interests or connections that are at odds with the interests of the entities they intend to represent.” In re National Liquidators, Inc., 171 B.R. 819, 826 (Bankr.S.D.Ohio 1994), affd in part, rev’d in part, 182 B.R. 186 (S.D.Ohio 1995); Leslie Fay Companies, 175 B.R. at 533; see also In re Codesco, Inc., 18 B.R. 997, 999 (Bankr.S.D.N.Y.1982) (noting that a “ ‘disinterested’ person should be divested of any scintilla of personal interest which might be reflected in his decision concerning estate matters”). It is the opinion of this Court that whether the reference to Spelfogel’s personal relationship to an officer of Jaco in the Terenzi Affidavit was at best a careless disregard for the mandate of Fed.R.Bankr.P.2014 or, at worst, an intentional effort to frustrate that mandate, the appropriate remedy is fee disallowance. See EWC, Inc., 138 B.R. at 281; see also In re Kings River Resorts, Inc., 342 B.R. 76, 86 (Bankr.E.D.Cal.2006) (pointing out that if a lack of disclosure is discovered after employment has been approved, the appropriate remedy is denial and disgorgement of compensation). The Court notes that in its Fee Order, it directed a 30% holdback on fees and a 10% holdback on expenses. The Court does not suggest that it was somehow clairvoyant in crafting a holdback in October of 2003 when full disclosure of Spelfogel’s relationship to Jaco did not occur until some two plus years later in December 2005, but the holdback does provide a vehicle whereby the Court will approve a final fee award to BHPP of one half of the fee holdback or $74,148, together with the entire balance of the expense holdback or $3,842.45. The balance of the fees requested by BHPP in its Fee Application is denied as a direct result of its failure to fully and fairly comply with the disclosure requirements of Fed.R.Bankr.P.2014. The Court will not consider any further fee applications by BHPP in connection with its representation of the Committee.
IT IS SO ORDERED.
. By order dated December 16, 2002, BHPP's representation of the Committee was terminated and the firm of Nixon Peabody, LLP ("Nixon”) was substituted as Committee counsel. However, in response to a renewed motion filed by Avnet, Inc., a member and co-chair of the Committee, which was later joined in by the UST, on March 23, 2006, Nixon voluntarily consented to the substitution of Bond. Schoeneck & King, PLLC (“Bond”) as attorneys for the Committee.
. On August 27, 2007, BHPP filed a Sur-Reply Supplemental Submission Brief in Opposition to Motion. By letter, dated September 5, 2007, the UST objected to the untimely filing of the Sur-Reply. Via an e-mail to BHPP and the UST, dated September 6th, the Court advised that it would not consider the untimely Sur-Reply.
. On December 27, 2005, some three plus years after the appointment of BHPP, Spelfo-gel, no longer affiliated with BHPP and then a member of Nixon, filed a Supplemental Affidavit in which he disclosed in paragraph 2, "In addition, my wife and her father are employed by Jaco as in-house counsel and CEO, respectively.”
. BHPP received a retainer of $27,000 which it presumably applied to the compensation awarded by the Order of October 29, 2003.
. The UST asserts, “the gravity of the circumstances now before the Court is demonstrated by Nixon Peabody's voluntary withdrawal as counsel to the Committee and subsequent waiver of fees, totaling more than One Million dollars.'' See UST’s Memorandum of Law, dated July 9, 2007 at 16.
.It is also noted that a review of the Fee Application reveals that during the time period covered by the Application, BHPP billed a total of 704.60 hours on behalf of Spelfogel ($225,472) while billing a total of 409.8 hours on behalf of Terenzi ($143,430). (See ¶ 17 of the Fee Application)
. The UST disputes BHPP's contention that at the time it submitted the Application for Retention, the only known creditors in the cases were the members of the Committee but argues that even if that were true, "the choice of language in the Terenzi Affidavit, nonetheless, appears misleading”. See UST's Reply in Further Support of Motion, dated July 30, 2007 at ¶ 9. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494273/ | MEMORANDUM DECISION
MICHAEL B. KAPLAN, Bankruptcy Judge.
I. INTRODUCTION:
This matter comes before the Court upon the motion filed by John Denaro (“Debtor”) seeking to expunge Shore Community Bank’s (“Shore”) proof of claim. A hearing on the Debtor’s motion was held on November 27, 2007, at which time the Court asked the parties to file additional briefs with respect to the application of the Rooker-Feldman doctrine, as well as the appropriateness of applying a fair market credit. Shore and the Debtor filed their supplemental briefs on December 17, 2007 and December 27, 2007, respectively. As set forth below, the Court finds that the Debtor is entitled to a fair market credit equal to the sale price obtained through the foreclosure process.
II. JURISDICTION
The court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and 157(a) and the Standing Order of the United States District Court dated July 10, 1984 referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(B). Venue is proper in this Court pursuant to 28 U.S.C. § 1409(a). The following constitutes the Court’s findings of fact and conclusions of law as required by Fed. R. Bankr.P. 7052.
III. FACTS AND PROCEDURAL HISTORY:
Relevant to the instant motion, the facts are summarized as follows:
1. On April 5, 2007, the Debtor filed a voluntary petition under Chapter 13 of the Bankruptcy Code.
*8822. On April 10, 2007, Shore filed a general unsecured claim (“Claim Number 2” or “Claim”) in the amount of $124,137.87.
3. Shore’s claim is based upon a State Court judgment (“State Court Judgment”) in the amount of $493,115.13, plus per diem interest in the amount of $113.22, against the Debtor on a promissory note and commercial guaranty, Shore Community Bank v. Triumph Homes, et al., Superior Court of New Jersey, Law Division, Ocean County, Docket No. OCN-L-969-06.
4. The underlying State Court action (“State Court Action”) between Shore and the Debtor is based upon a promissory note obligating Triumph Homes, LLC (“Triumph”) to repay a loan from Shore, which the Debtor and another party personally guaranteed the repayment of. The property secured in the loan transaction is a 4.83 acre parcel of real estate owned by Triumph at the time of the loan and is located at 25 Crystal Court, Freehold, New Jersey (the “Property”). The Property included a partially constructed residence.
5. The State Court ruled in favor of Shore on September 15, 2006 and entered an Order for Judgment on November 27, 2006.
6. On or about November 29, 2006, Shore served an information subpoena upon John Denaro in order to locate assets that may be subject to levy.
7. On or about January 4, 2007, Shore filed a motion in the State Court requesting an order to enforce litigant’s rights.
8. On January 30, 2007, the Debtor requested that an appraisal be obtained on the Property. An appraisal report prepared by Michael White, MAI, State Certified General Appraiser No. RG 00351 found that the “as is” value of the Property including the partially complete structure was $750,000 as of January 30, 2007.
9. On March 16, 2007, the State Court granted Shore’s motion to enforce litigant’s rights. A final Order with respect to that motion was entered on March 20, 2007.
10. While the State Court Action was pending with respect to the promissory note, Shore was also pursuing a foreclosure action against Triumph in Chancery Division, Monmouth County, Docket No. F-5102-06. On November 6, 2006, the Property was eventually sold at Sheriffs Sale to Shore for a credit bid of $401,000.
11. On November 7, 2007, the Debtor filed this motion to expunge Shore’s claim arguing that based on the appraisal report a fair market value credit of $750,000 should be applied to the State Court Judgment, thus satisfying Shore in full. Shore, however, calculates its Claim after adding certain costs and providing a purported fair market credit of $401,000 in favor of the Debtor based on the foreclosure sale of the property.
IV. DISCUSSION:
First and foremost, the Court must determine whether the issue presented—the availability of a fair market value credit—is barred by the Rooker-Feldman doctrine. In Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005), the United States Supreme Court re-examined the doctrine and held the following:
The Rooker-Feldman doctrine, we hold today, is confined to cases of the kind from which the doctrine acquired its name: cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments. Rooker-Feldman does not otherwise override or supplant preclusion doctrine *883or augment the circumscribed doctrines that allow federal courts to stay or dismiss proceedings in deference to state-court actions.
Exxon Mobil Corp., 544 U.S. at 284, 125 S.Ct. 1517. “Under the Rooker-Feldman doctrine, a district court is precluded from entertaining an action, that is, the federal court lacks subject matter jurisdiction, if the relief requested effectively would reverse a state court decision or void its ruling.” Taliaferro v. Darby Township Zoning Bd., 458 F.3d 181, 192 (3d Cir.2006). “[A] federal action is inextricably intertwined with a state adjudication, and thus barred in federal court under Feldman, ‘[wjhere federal relief can only be predicated upon a conviction that the state court was wrong.’ ” Parkview Assoc. P’ship v. City of Lebanon, 225 F.3d 321, 325 (3d Cir.2000)(quoting Centifanti v. Nix, 865 F.2d 1422, 1430 (3d Cir.1989)).
In the case at bar, Shore argues that Rooker-Feldman, or in the alternative, res judicata and/or collateral estoppel, should apply to the Debtor’s argument to expunge Shore’s Claim. Shore argues that the Debtor is asserting the very same issue in this Court that it litigated in the State Court Action-—that the Debtor may receive an appropriate credit for the fair market value of the Property regardless of the price obtained at Sheriffs Sale. As such, and in light of the State Court Judgment, Shore maintains that the Debtor is now a State Court loser seeking review of alleged inequities caused by the State Court Judgment before the commencement of proceedings in this Court.
While the Court agrees that the general concept of fair market credit was brought before the State Court, the Court finds that it has before it a significantly different set of facts in that the foreclosure and the resultant acquisition of the Property by Shore did not occur until well after the State Court issued its ruling on September 15, 2006. Accordingly, the Debtor’s entitlement to a fair market credit had not yet matured at the time of the State Court ruling and did not mature until the Property was acquired by Shore at Sheriffs Sale on November 6, 2006. As the Debtor correctly notes, therefore, there has been no ruling in any forum concerning the applicability of the fair market credit in favor of the Debtor based upon the completion of the State Court foreclosure. As such, the Court finds that the Rooker-Feldman doctrine is inapplicable to the Debtor’s motion to expunge.
Furthermore, “[b]oth New Jersey and Federal Law apply res judicata or claim preclusion when three circumstances are present: (1) the judgment in the prior action must be valid, final, and on the merits; (2) the parties in the later action must be identical to or in privity with those in the prior action; and (3) the claim in the later action must grow out of the same transaction or occurrence as the claim in the earlier one.” Mattson v. Hawkins (In re Hawkins), 231 B.R. 222, 229 (D.N.J.1999); Hulmes v. Honda Motor Co., 924 F.Supp. 673, 682 n. 12 (D.N.J.1996) (quoting Watkins v. Resorts Int’l Hotel and Casino, Inc., 124 N.J. 398, 412, 591 A.2d 592 (1991)). To determine whether the claim or defense in the subsequent proceeding derives from the same transaction as the claim or defense in the prior proceeding as required by the third prong of the above test, New Jersey courts consider the following four factors:
(1) whether the acts complained of and the demand for relief are the same (that is, whether the wrong for which redress is sought is the same in both actions) ...; (2) whether the theory of recovery is the same; (3) whether the witnesses and documents necessary at trial are the same (that is, whether the same evidence necessary to maintain the second *884action would have been sufficient to support the first) ...; and (4) whether the material facts alleged are the same.
Culver v. Insurance Co. of North America, 115 N.J. 451, 461-62, 559 A.2d 400(1989) (citations omitted).
Similarly, “[ijssue preclusion, [or collateral estoppel], generally refers to the effect of a prior judgment in foreclosing successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment, whether or not the issue arises on the same or a different claim.” See Restatement (Second) of Judgments §§ 17, 27, pp. 148, 250 (1980); D. Shapiro, Civil Procedure: Preclusion in Civil Actions 32, 46 (2001). As the Third Circuit explained:
The elements for collateral estoppel are satisfied when: “(1) the issue sought to be precluded [is] the same as that involved in the prior action; (2) that issue [was] actually litigated; (3) it [was] determined by a final and valid judgment; and (4) the determination [was] essential to the prior judgment.” [citations omitted]
Amtrak v. Pa. PUC, 342 F.3d 242, 252 (3d Cir.2003).
As previously discussed, because the Debtor’s right to a fair market credit had not matured until the completion of the Sheriffs Sale, the facts and circumstances before this Court differ dramatically from what was before the State Court when it issued its September 15, 2006 ruling. Furthermore, while the Court is aware that Shore’s motion to enforce litigant’s rights was filed and heard after the subject Property was sold to Shore at Sheriffs Sale and, therefore, the Debtor’s right to a fair market credit had in fact matured, a judgment was already in place and the sole issue before the State Court at that time was whether the Debtor had violated Shore’s rights by not complying with Shore’s information subpoena. Clearly, it was not essential for the State Court to take into consideration the availability of a fair market credit when it issued its ruling on Shore’s motion to enforce litigant’s rights:
THE- COURT: Well all I’m doing is determining whether your client is in viola—is in contempt of court for not answering the informational subpoena. That’s all I’m doing here.
THE COURT: Well, whatever. Let’s just round it off, 500,000. You proceed—I’m going to order, by the way, your client to answer the subpoena. That’s all this is all about, is to answer an informational subpoena.
See Supplemental Certification of Douglas S. Crawford, Exhibit R, Transcript at pp. 9 and 12. Accordingly, the Court is not barred from deciding whether a fair market credit applies based on either principles of res judicata or collateral estoppel.
Finding that the Court is not es-topped from deciding the issue at hand, the Court now turns to whether a fair market credit is applicable in this case. In that regard, the Court finds the case Resolution Trust Corp. v. Berman Industries, Inc., 271 N.J.Super. 56, 637 A.2d 1297 (1993) to be instructive:
[A] statutory right to a fair market value credit to be given to certain obli-gors upon notes whose properties are lost through foreclosure. See N.J.S.A. 2A:50-3. Plaintiff also recognizes that, notwithstanding the provisions of N.J.S.A. 2A:50-2.3(a), (rendering the fair market value credit inapplicable to debts secured for commercial or business purposes), case law, nevertheless, has extended this credit to primary obli-gors [or guarantors] in commercial transactions. See Citibank, N.A. v. Er-*885rico, 251 N.J.Super. 236, 247, 597 A.2d 1091 (App.Div.1991).
The equitable right to a fair market value credit to prevent a windfall in a deficiency proceeding is well recognized. In 79-83 Thirteenth Avenue Ltd. v. De Marco, 44 N.J. 525, 210 A.2d 401 (1965), our Supreme Court held that a note mortgagor, although precluded from automatic application of the fair value deduction statute with reference to a deficiency, may nonetheless obtain review and relief, including a reduction of the difference between the mortgage debt and the amount realized from the foreclosure sale, on an equitable basis. Id. at 535, 210 A.2d 401. In 79-83 Thirteenth Avenue Ltd., the inapplicability of the statutory fair value deduction was due to the then existing statutory distinction between bonds and notes. Id. at 529-30, 210 A.2d 401.
In Citibank, N.A. v. Errico, supra, 251 N.J.Super. at 247, 597 A.2d 1091, the Appellate Division ruled that “(although N.J.S.A 2A:50-2.3 was amended to exempt mortgages secured by notes for business and commercial properties from the fair market credit provision, [there is] nothing which precludes a court from applying equitable principles to impose a fair market value credit to prevent a windfall where circumstances require equitable relief in the interests of justice.”
Resolution Trust Corp., 271 N.J.Super. at 63-64, 637 A.2d 1297 (Emphasis added).
In a subsequent case before the federal district court, Connecticut Gen. Life Ins. Co. v. Punia, 884 F.Supp. 148 (D.N.J.1995), the issue was whether a fair market credit should be applied when the plaintiff, who provided financing for the defendant guarantor’s numerous real estate investments, successfully bid on the property at issue for $100 at foreclosure sale. Id. Holding that a fair market credit was applicable under equitable principles, the court considered the appraisals submitted by both the guarantor’s and the lender’s appraisers in making a determination as to what value should be applied. Id. In light of the foregoing, the Court is satisfied that, based on equitable principles, it is not foreclosed from applying a fair market credit in favor of a defendant when a plaintiff sues on a guaranty and forecloses on the property securing a loan.
In determining that a fair market credit is indeed available to the Debtor, the Court must now address what value should be applied. Here, the Debtor argues that the proper credit to be applied is the fair market value of the subject Property, $750,000, which was determined by the Debtor’s appraiser. What the Debtor fails to recognize, however, is that “Market value cannot be the criterion of equivalence in the foreclosure-sale context.” BFP v. Resolution Trust Corp., 511 U.S. 531, 538, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994). As the United States Supreme Court noted in BFP:
“The market value of ... a piece of property is the price which it might be expected to bring if offered for sale in a fair market; not the price which might be obtained on a sale at public auction or a sale forced by the necessities of the owner, but such a price as would be fixed by negotiation and mutual agreement, after ample time to find a purchaser, as between a vendor who is willing (but not compelled) to sell and a purchaser who desires to buy but is not compelled to take the particular ... piece of property.” Black’s Law Dictionary 971 (6th ed.1990). In short, “fair market value” presumes market condi*886tions that, by definition, simply do not obtain in the context of a forced sale, [citations omitted]
BFP, 511 U.S. at 538-39, 114 S.Ct. 1757. At issue before the Supreme Court in BFP was whether “reasonably equivalent value,” in the context of fraudulent transfer litigation brought pursuant to 11 U.S.C. Section 548(a)(1)(B) to recover the value of property transferred by means of a foreclosure sale conducted pursuant to state statute, can mean something less than “actual value.” Id. The Petitioner, in BFP, contended that a foreclosure sale conducted in accordance with all state law procedures could be avoided as a fraudulent transfer if the sale produced proceeds which were less than the “actual value” of the property at issue. Id. In contrast, Respondents argued that a prevailing bid at such a sale could constitute “reasonably equivalent value” as long as the sale was non-collusive and conducted in conformance with state law. Id. Ultimately, the Court agreed with Respondents and held that “a fair and proper price, or a ‘reasonably equivalent value,’ for foreclosed property, is the price in fact received at the foreclosure sale, so long as all the requirements of the State’s foreclosure law have been complied with.” BFP, 511 U.S. at 546, 114 S.Ct. 1757.
Similar to the U.S. Supreme Court’s determination that “reasonably equivalent value” need not be the same as “actual value,” this Court concludes that “fair market value” need not be the same as “actual value” for purposes of fixing a fair market credit. The New Jersey Supreme Court, in establishing an equitable right to a fair market credit, intended only to ensure that a foreclosing mortgagee would not receive a windfall by purchasing the property at a foreclosure sale with a minimal credit-bid of $100, while also enjoying the right to pursue the mortgagor/obligor or a third party guarantor for the balance of the indebtedness.
This Court holds that in employing its equitable powers to grant a fair value credit, the Court may take into account the circumstances of the sale, e.g., the existence of fraud and/or collusion, as well as the adherence to state law rules and procedures. Indeed, probably the most significant factor in this analysis is whether there has been competitive bidding at the foreclosure sale. For instance, in Connecticut Gen., supra, the successful offer at the foreclosure sale was a $100 credit bid by the mortgagee, and thus clearly the market forces were not acting efficiently to create a fair value for the property at issue. Accordingly, the Connecticut Gen. court was compelled to utilize other methods of valuation—the competing appraisal reports—in order to determine a fair and proper credit. By contrast, and as noted by Shore’s counsel, there was in fact active bidding at Sheriffs Sale in this case, thus creating a fair and proper process by which other third party bidders actively sought to purchase the Property:
MR. OSTRO WITZ: We received—we had—our client had this up to $401,000. There were other bidders at the sale. Obviously, we did not get it for $100, as in these other cases that were cited.
See Supplemental Certification of Douglas S. Crawford, Exhibit R, Transcript at p. 13. In light of Connecticut Gen. and Resolution Trust Corp., therefore, the Court finds that equitable principles dictate that a fair market credit based on the foreclosure auction process is warranted.
In assessing the appropriateness of a fair market value credit, the Court observes that the term “fair” modifies “market value,” thus confirming the importance of the process underlying the sale transaction. In this case, the Court is satisfied that a fair and proper price was achieved through the regularly conducted public *887foreclosure auction and will not thrust itself into the valuation process. There is no evidence to suggest that the foreclosure proceedings were conducted in violation of New Jersey state law. Rather, Shore lawfully submitted its credit bid at the Sheriffs Sale, topping the prices offered by competing bidders, and obtained title to the Property. Simply put, “after-the-fact” judicial re-creation of a market sale, through appraisal testimony and analysis, is not warranted where the circumstances of the sale reveal adherence to state law procedures and competitive third party bidding. Neither the Errico nor Resolution Trust Corp. decisions, considered supra, mandate that the fair market credit reflect a value for the property as if it had been marketed under such circumstances and length of time so as to secure the highest and best price. Indeed, the Debt- or had such an opportunity for the entire length of time Triumph Homes owned the property prior to the foreclosure sale. Under the circumstances presented herein, with competitive bidding after advertising consistent with state law, the Sheriffs Sale constituted a market, in and of itself, sufficient to establish a fair market valuation for the Property.
V. CONCLUSION
In light of the foregoing, the Court finds that the Debtor is entitled to a fair market credit equivalent to the sale price obtained at Sheriffs Sale. Therefore, the Debtor’s motion to expunge Shore’s Claim is denied. An appropriate order will be entered by the Court. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494274/ | MEMORANDUM OPINION
LETITIA Z. CLARK, Bankruptcy Judge.
The court has held a trial on the “Objection of Robert M. Hytken, Creditor to Claim of Richard D. Johnston, Receiver” (Docket No. 222), together with the “Supplement to Robert Hytken’s Objection to the Claim of Richard D. Johnston” (Docket No. 262). The following are the Findings of Fact and Conclusions of Law of the court. A separate conforming Judgment will be entered. To the extent any of the Findings of Fact are considered Conclusions of Law, they are adopted as such. To the extent any of the Conclusions of Law are considered Findings of Fact, they are adopted as such.
Findings of Fact
Beach Development, LP (“Debtor”) filed a voluntary petition under Chapter 11 of the Bankruptcy Code on March 4, 2003. On January 28, 2004, the court ordered appointment of a Chapter 11 Trustee. On February 2, 2004, Randy W. Williams was appointed as Chapter 11 Trustee. On August 27, 2004, the case was converted to Chapter 7. Randy W. Williams is the Chapter 7 Trustee.
In the instant claim objection, Joy S. Weinberg, the administrator of Robert Hytken’s probate estate (whom the court has previously determined to have an equity security interest which Kent Hytken held as Robert Hytken’s nominee) objects to the claim filed in the instant case by Richard D. Johnston, the receiver appointed by the 312th Judicial District Court of Harris County, Texas to take possession of Kent Hytken’s interest in Debtor. Johnston was removed as receiver, and William B. Carroll was appointed in his place.
The proof of claim filed by the receiver asserts an unsecured nonpriority claim, in an unspecified amount. Attached to the proof of claim is a document, titled “Re-, ceiver’s Claim,” specifying that the receiver claims 98% of the equity interest in Debtor, based on the state court judgment establishing the receivership. The receiver asserts that, as a result of amounts owed by Kent Hytken to Marisa Gayne, the receivership has a monetary claim against the bankruptcy estate.
*889In the instant claim objection, Weinberg raises three arguments: 1) that the amounts stated in the proof of claim have been paid in full; 2) that the receiver was fraudulently paid funds from a sale of real property; and 3) that the receiver owes money to Robert Hytken.
This court has previously determined that Weinberg may assert Robert Hyt-ken’s equity security interest in Debtor against the receivership estate in the 312th Judicial District Court of Harris County, Texas.
Conclusions of Law
Section 502(b)(1) of the Bankruptcy Code provides that, if objection to a claim is made, the court:
shall determine the amount of such claim in lawful currency of the United States as of the date of filing of the petition, and shall allow such claim in such amount, except to the extent that—
(1) such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or un-matured.
11 U.S.C. § 502(b)(1).
When a proof of claim in bankruptcy is filed, the party filing the claim is presumed to have made a prima facie case against the debtor’s assets. The objecting party must produce evidence rebutting the presumption raised by the proof of claim. If such evidence is produced, the party filing the claim must then prove by a preponderance of the evidence the validity of the claim. The claiming party, through this process, bears the ultimate burden of proof. In re Fidelity Holding Company, Ltd., 837 F.2d 696, 698 (5th Cir.1988).
The Bankruptcy Code defines a “claim” as:
(A)right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or
(B)right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured
11 U.S.C. § 101(5).
The term “claim” does not include an equity security interest. See Carrieri v. Jobs.com Inc., 393 F.3d 508 (5th Cir.2004). The term “equity security” is defined in the Bankruptcy Code as:
(A) share in a corporation, whether or not transferable or denominated “stock”, or similar security;
(B) interest of a limited partner in a limited partnership; or
(C) warrant or right, other than a right to convert, to purchase, sell, or subscribe to a share, security, or interest of a kind specified in subparagraph (A) or (B) of this paragraph.
11 U.S.C. § 101(16).
The determination of whether a particular document gives rise to a claim depends on whether it gives rise to a right to payment independent of the equity security. Carrieri v. Jobs.com Inc., 393 F.3d 508 (5th Cir.2004).
In the instant case, although styled as a claim, what the receiver asserts is an interest in the equity of the Debtor. Nothing in the proof of claim asserts a right of payment against Debtor independent of the equity security. The court concludes that the receiver holds an equity security interest in the Debtor. This court notes, however, that at least a portion of the equity security interest is held by the re*890ceiver as a nominee for Robert Hytken. This court leaves to the state court the determination of the values of the respective interests of Robert Hytken and other parties holding an interest in the receivership estate.
Based on the foregoing, a separate conforming Judgment will be entered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494275/ | AMENDED TRIAL OPINION
THOMAS J. TUCKER, Bankruptcy Judge.
In this adversary proceeding, Plaintiff R & D Contracting, L.L.C. (“R & D”) seeks to recover from Defendant Jenkins Construction, Inc. (“Jenkins”) a total of $157,408.87 for work, materials, and the rental of certain equipment by R & D relating to two construction projects. R & D is the debtor in the related chapter 11 bankruptcy case (No. 02-43540). It brings this adversary proceeding under authority granted to it by the confirmed plan of liquidation in the Chapter 11 case.1 The Court conducted a five and one-half day bench trial. This opinion states the Court’s findings of fact and conclusions of law.
For the reasons stated in this Opinion, the Court finds for R & D in part, and *893against R & D in part, on its claims, and will enter judgment for R & D in the total amount of $92,264.37 plus interest.
1. Jurisdiction and venue
The Court has subject matter jurisdiction under 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(a), and the United States District Court’s Local Rule 83.50(a) (E.D.M.). The parties correctly agree that, at a minimum, this proceeding is “related to” the R & D Chapter 11 bankruptcy case within the meaning of 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(a). It is unnecessary to determine whether this is a core proceeding under 28 U.S.C. §§ 157(b) and 157(c). To the extent this is not a core proceeding, the parties have consented to the bankruptcy judge entering final judgment under 28 U.S.C. § 157(c)(2).2
Venue is proper under 28 U.S.C. § 1409(a), and is not disputed.
II. Discussion
R & D’s claims relate to two construction projects, which this opinion will refer to as the “MDOT” project and the “Greater Grace” project.3
A. R & D’s claims relating to the MDOT project
The MDOT project involved the construction of two buildings for the Michigan Department of Transportation (“MDOT”) on Interstate 94 in Port Huron Township, Michigan. Defendant Jenkins was the general contractor hired by MDOT for the project, which included construction of a salt storage building and another building to house an office and a garage/maintenance facility, as well as installation of on/off ramps, a parking lot, and related landscaping.4 Jenkins hired a number of subcontractors to work on the project, including R & D.
The subcontract between Jenkins and R & D was a written contract entitled “Subcontract Agreement” dated September 19, 2000.5 The Subcontract stated that R & D was to “perform certain labor and furnish certain material for the erection and completion of Sitework [i]n accordance with specifications prepared by: D.L.Z. [of South Bend, Indiana, the “Architect”].” The Subcontract further described the “Sitework” to be done as:
1. Complete all earthwork, grading and balancing in strict accordance to Drawings and Specifications.
2. Work is to include all cut and fill necessary to meet subgrade elevations noted and required at all areas.
3. Complete all erosion control as required.
4. Provide all equipment and labor necessary to complete work.
5. Clean up and remove all debris caused by your work.6
The Subcontract incorporated certain “Contract Documents” and further defined the scope of R & D’s work by reference to *894specific drawings and specifications, including:
M.D.O.T. Drawings Sheets 1-5 dated May 5, 2000
D.L.Z. Drawings dated June 13, 2000 Specifications dated for Bid August 4, 20007
Jenkins agreed to pay R & D the sum of $85,000.00 for its work under the Subcontract.8
The parties stipulated that during the course of the MDOT project, “Jenkins requested R & D perform additional work which included providing and installing all stone required for a temporary road on the project, including grading. A change order was issued for this work in the amount of $26,541.42.”9 The change order brought the total Subcontract price to $111,541.42. The parties stipulated that of this amount, Jenkins paid R & D a total of $98,839.85,10 leaving an unpaid amount of $12,701.57.11
R & D makes four different claims for sums owing by Jenkins relating to the MDOT project. These are (1) the unpaid $12,701.57 contract balance just described; (2) $29,760.00 to compensate R & D for certain “equipment stand down time” that R & D suffered during the project; (3) $17,463.50 for extra work R & D claims it did, outside the scope of the Subcontract, on an agreed time-and-material basis, for moving topsoil, and doing certain grading and installation of certain “swales” on the job site; and (4) $40,500.00 for removal by R & D of excess topsoil.
This opinion will discuss each of these claims separately.
1. R & D’s claim for the $12,701.57 unpaid balance under the Subcontract
As noted above, and as the parties stipulated, Jenkins issued a written change order amending the Subcontract, for R & D to perform additional work, including providing and installing stone required for a temporary road and related grading. The change order increased the total Subcontract price from $85,000.00 to $111,541.42.
This change order was dated June 18, 2001,12 and was the only written change order Jenkins issued for R & D under the Subcontract. The change order states that the work added was “as required and directed by Bryan Ritter.” Ritter was the project superintendent for R & D on the MDOT project until December 2000, when he left the project.13 The extra work added by this change order was actually done by R & D several months before the change order was issued.
Because the parties also stipulated that Jenkins paid R & D a total of $98,839.85 for the MDOT project, it is undisputed that there is an unpaid balance of $12,701.57 under the Subcontract. The only defense that Jenkins asserts to this claim is that R & D did not properly complete all of its work under the Subcontract. Jenkins presented some evidence of this through the testimony of Michael Sko-mial, who was Jenkins’s project superintendent on the MDOT project from December 2000 forward.
Skomial testified that R & D removed too much topsoil from the area of one of the buildings to be constructed, then filled *895this “undercut area” with material that R & D failed to properly compact. After the fill material got wet from rain and snow, it had to be removed and replaced with suitable fill material. According to Skomial, Jenkins had to hire one of its other subcontractors, Raymond Excavating, to remove the unsuitable fill material and place compacted stone in its place.14 According to Skomial, Jenkins issued a change order to Raymond Excavating to perform this work.
Skomial was vague in estimating the extra cost incurred by Jenkins in hiring Raymond Excavating to do this work. Skomial speculated that this extra cost “could have been” as much as $18,000-$20,000. Jenkins did not present any change order or other documentation to back up Skomial’s testimony that Jenkins hired Raymond Excavating to do this work. Nor did Jenkins produce any documentation to demonstrate the actual amount it incurred to Raymond Excavating for this work. And Skomial, who left Jenkins’s employment in 2004, did not know whether Jenkins ever actually paid Raymond Excavating anything for this work. Nor did Jenkins present any evidence that it paid Raymond Excavating for this work, or prove how much it paid. And Jenkins presented no evidence that it ever issued any back-charge against R & D’s Subcontract due to the cost of this work, even though the Subcontract would have authorized that.15
Skomial also testified, even more vaguely, that R & D did not complete all of its work under the Subcontract because there were some areas where R & D should have cut drainage swales,16 but did not do so. Again, Skomial testified that Jenkins hired Raymond Excavating to do this work, and gave Raymond Excavating a change order for it. Skomial testified that the extra cost of hiring Raymond Excavating to do this work was $7,500.00, but he did not know if Jenkins ever paid Raymond Excavating for the work. Jenkins presented no change order to Raymond Excavating, no documentation indicating that any change order was issued to Raymond Excavating for this work, and no evidence that Jenkins ever paid Raymond Excavating anything for this work.
By contrast, R & D presented evidence, which the Court credits, that R & D fully performed its work as required by the Subcontract.17
The Court concludes that Jenkins has failed to meet its burden of proving its defense. Under Michigan law, which the parties agree applies, the defense is in the nature of recoupment—that Jenkins incurred and paid additional costs to Raymond Excavating because of a failure by R & D to complete its required work under the Subcontract. See Mudge v. Macomb County, 458 Mich. 87, 106, 580 N.W.2d 845, 855 (1998)(“[t]he defense of recoupment refers to a defendant’s right, in the same action, ‘to cut down the plaintiffs demand, either because the plaintiff has not complied with some cross obligation of the contract on which he or she *896sues or because the plaintiff has violated some legal duty in the making or performance of that contract’ ”) (citations omitted). Jenkins had the burden of proving this affirmative defense. See Truax v. Heartt, 135 Mich. 150, 154, 97 N.W. 394, 396 (1903). Jenkins did not meet that burden. Moreover, the Court finds that R & D did fully perform its work as required by the Subcontract.
■ For these reasons, the Court finds for R & D and against Jenkins on this claim for $12,701.57, and will enter judgment accordingly.
2. R & D’s $29,760.00 claim for equipment stand-down time
R & D claims that Jenkins owes it $29,760.00 for so-called equipment stand-down time during the period October 23, 2000 through November 1, 2000. R & D billed Jenkins for this amount, in an invoice dated November 1, 2000,18 and the parties agree that Jenkins never paid this invoice.
The issue over equipment stand-down time arose after R & D brought its own heavy equipment onto the job site and was working on the project. During the time period covered by R & D’s invoice, R & D was unable to do its excavating and related work because of delays caused by another of Jenkins’s subcontractors, Dan’s Excavating. As R & D’s project superintendent at the time, Bryan Ritter, testified, the question arose whether R & D should move its equipment offsite during the stand-down time, so that R & D could use the equipment on other jobs, or whether R & D should leave its equipment on the MDOT project job site, sitting idle, during the stand-down time.
Ritter discussed the issue with R & D’s Robert DeGeorge. At the time, the parties did not know how long the stand-down time would be, but Ritter wanted the R & D equipment left on site so that as soon as the stand-down delay ended, R & D could get back to work immediately. Ritter was concerned that if R & D moved its equipment off site to another job, it might not be able to bring the equipment back immediately after the stand-down time ended.19 As Ritter and DeGeorge discussed, R & D wanted compensation for leaving its equipment idle on the MDOT job site rather than taking the equipment to another job and earning money with it there. As R & D’s Robert Pasek testified, R & D did have other job opportunities at the time. This included an opportunity to rent the equipment to a contractor in Canton Township who was building a new subdivision and needed more equipment.20
R & D’s Ritter discussed this issue with his superior, Steve Muhn. Muhn was the project manager for Jenkins on the MDOT project. Both Ritter and James Jenkins, the President and co-owner of Jenkins, testified that as project manager, Steve Muhn had full authority to approve and agree to any additional work and additional costs on behalf of Jenkins, and to authorize and approve change orders on behalf of Jenkins. Ritter kept Muhn fully informed, and Muhn’s direction to Ritter was to consider all of the information and make a decision.21 In this way, Muhn expressly delegated his authority to Bryan Ritter to decide what to do about the equipment stand-down issue.
With full authority delegated to him by Muhn, Ritter made an oral agreement on behalf of Jenkins with R & D (through Robert DeGeorge) for R & D to leave its *897equipment on the MDOT project job site for the duration of the stand-down time. In exchange for R & D doing this, Ritter agreed, on behalf of Jenkins, to pay R & D for eight hours per day for each item of equipment listed on the R & D invoice (PX-4) at the hourly rates listed on that invoice, for each day of the standdown.22 As confirmed by the invoice, the stand-down time covered the days of October 23-27, 2000, October 30 and 31, 2000 and November 1, 2000.23 The total charge, as reflected on the invoice, is $29,760.00. The parties, through Ritter and DeGeorge, agreed that R & D would invoice Jenkins for this charge and Jenkins would pay it. The parties understood that Jenkins would submit the invoice to MDOT and seek payment from MDOT for this extra cost. But Jenkins orally agreed to pay R & D for this charge regardless of whether Jenkins ultimately obtained reimbursement from MDOT.24
Jenkins contends that Bryan Ritter had no authority to bind Jenkins to the oral agreement he made with R & D. The Court has found otherwise, however, in finding that the project manager for Jenkins, Steve Muhn, who did have such authority to bind Jenkins, authorized Bryan Ritter to make such an oral agreement with R & D on behalf of Jenkins.
Jenkins also contends that R & D’s claim is barred by several of the written Subcontract provisions, because (1) Jenkins never issued a written change order for this additional charge; (2) R & D did not invoice Jenkins for this charge using the proper “A.I.A.” forms; (3) R & D did not give written notice of this extra charge within fourteen days after it was incurred; and (4) Jenkins was never paid by MDOT for this charges. The Subcontract provisions relevant to Jenkins’s arguments are described below.
First, Jenkins argues that R & D’s claim had to be made in writing to Jenkins within fourteen days, under Article VII of the Subcontract. Jenkins claims that R & D did not give written notice of its claim, and did not do so within fourteen days. As a result, Jenkins argues, the claim is expressly waived under Article VII of the Subcontract. Article VII states, in part:
ARTICLE VII-CLAIMS FOR ADDITIONAL COMPENSATION OR EXTENSION OF TIME
If the Subcontractor shall have any claims for additional Work, extension of time, damage for delays or otherwise he shall make all such claims promptly to the Contractor in accordance with the Contract Documents. Claims must be made within H days or such lesser time stipulated in the Contract Documents after occurrence of the event giving rise to the claim or within 14 days or such lesser time stipulated in the Contract Documents after Subcontractor first recognizes the condition giving rise to the claim, which ever is later. Claims must be made by written notice. ... Subcontractor waives any claim which is not made as provided in this Article.25
Second, Jenkins contends that the Subcontract bars R & D’s claim because it was not authorized by a written change order amending the Subcontract, signed by Jenkins. The Subcontract states the following:
9. No monies are to be invoiced without a signed Jenkins Construction, Inc. Subcontract Purchase Order or Change Order....
*89810. Change Orders must be approved by the Project Coordinator before they can be added to subcontractor invoices. The contract amount cannot be altered without authorization and payment will not be made for unauthorized work.26
Third, Jenkins argues that the Subcontract required that any request for payment by R & D be made on specific standard “A.I.A.” forms,27 submitted to Jenkins no later than the 20th of the month following R & D’s provision of materials and/or services. R & D’s claim is barred, according to Jenkins, because R & D did not follow these requirements. Jenkins claims that the only request for payment in writing from R & D was an R & D invoice issued months after the equipment stand-down charges were incurred. Article IV-B of the Subcontract states, in part, that:
Application and Certificate for Payment must be a standard A.I.A. Document— G702 and G703 Forms, and must be in the General Contractor’s office on or before the 20th of the month for materials and/or services furnished during that month.28
Fourth, Jenkins argues that the R & D claim is barred because the Subcontract provides that Jenkins (the “General Contractor”) had no duty to pay R & D (the “Subcontractor”) for any claim or charge until seven days after Jenkins received payment from MDOT (the “Owner”). Because Jenkins was never paid by MDOT for the R & D charge at issue, Jenkins contends, no duty to pay R & D ever arose under the Subcontract. Article IV-B of the Subcontract states:
The General Contractor shall pay the Subcontractor the approved net monthly estimate payment due the Subcontractor within seven (7) days after Contractor’s receipt of monthly estimate payment from the Owner. Final payment shall be made to Subcontractor within seven (7) days from General Contractor’s receipt of final from Owner.29
Under Michigan law, a non-modification provision in a written contract, stating that the contract may be modified only by a writing signed by the parties, can itself be modified by subsequent oral agreement of the parties. Such a non-modification clause also can be waived, either expressly or impliedly. In that respect, such a contractual non-modification clause is on the same footing with every other provision in a written contract. The party claiming such an oral modification or waiver bears the burden of proving it.
The United States Court of Appeals for the Sixth Circuit, applying Michigan law, recognized these principles in Cloverdale Equipment Co. v. Simon Aerials, Inc., 869 F.2d 934, 939 (6th Cir.1989):
It is indeed, as Cloverdale claims, well-established that subsequent oral modifications of a written contract may be valid notwithstanding a contract provision indicating that only written modifications are effective (see Morley Brothers, Inc. v. F.R. Patterson Construction Co., 266 Mich. 52, 253 N.W. 213 (1934)) Michigan assigns the burden of proof of subsequent oral modification to the alleging party, Rasch v. National Steel Corp., 22 Mich.App. 257, 177 N.W.2d 428, 429 (1970), and in light of a written-modification-only provision, vague asser*899tions of an oral modification fail to raise a genuine factual issue sufficient to defeat a summary judgment motion. Bushwick-Decatur Motors v. Ford Motor Co., 116 F.2d 675, 678 (2d Cir.1940).
Many Michigan cases dealing specifically with construction contracts apply these principles. In Morley Bros., Inc. v. F.R. Patterson Construction Co., 266 Mich. 52, 253 N.W. 213, 214 (1934), for example, the Michigan Supreme Court held that a written contract may be amended by subsequent oral agreement, despite- a provision in the original contract precluding amendment except by written agreement. The court found in that case that an enforceable, separate agreement was made when a general contractor ordered additional hardware from a subcontractor. In Klas v. Pearce Hardware & Furniture Co., 202 Mich. 334, 168 N.W. 425, 426, 427 (1918), the court held that a construction contract provision requiring that any extra work be ordered by the owner’s architect in writing may be waived, either expressly by the parties, or impliedly by statements or by “a course of acts and conduct which amounts to an estoppel,” or “by so neglecting and failing to act as to induce a belief that there is an intention or purpose to waive.” The Hayman Co. v. Brady Mechanical, Inc., 139 Mich.App. 185, 362 N.W.2d 243, 244, 246-47 (1985) involved a construction contract that required all changes to be authorized by a written change order signed by the owner or architect. The court held that where the owners were aware of and authorized extra work, they could be deemed to have waived the written change order requirement, “because they knew about and verbally ordered the changes.” The court also held that where such extra-work changes were authorized orally, but without an agreement as to price, the owners could be held liable on a quantum meruit theory. See also Cascade Electric Co. v. Rice, 70 Mich.App. 420, 245 N.W.2d 774, 775, 776 (1976)(construction contract provision prohibiting any alterations in the work except by written change order “may be waived by the person benefitted by such provision”); Jarosz v. Caesar Realty, Inc., 53 Mich.App. 402, 220 N.W.2d 191, 193 (1974)(commercial construction contract required written change orders; court held that (1) this did not bar quantum meruit relief where contracting owners “were aware of and authorized changes and were benefitted by” the extra services; and (2) contracting owners also held to have waived written change order requirement “because they knew about and verbally ordered the changes”); G.O. Lewis Co. v. Erving, 4 Mich.App. 589, 145 N.W.2d 368, 370, 371 (1966)(court found enforceable implied promise by contracting owner to pay for extra work under construction contract despite clause requiring that any extra work be authorized in writing before being done; owner waived such provision because its architect had submitted changes in the plans and specifications, and owner had knowledge of the work as it progressed).
The Court finds that Jenkins waived the written Subcontract provisions at issue, and orally modified its written Subcontract with R & D to add this additional charge for the equipment stand-down time, by making the oral agreement described above. The oral agreement is enforceable.
For these reasons, the Court finds for R & D and against Jenkins on this claim for $29,760.00, and will enter judgment accordingly.
3. R & D’s $17,463.50 claim for additional work done during March through May 2001
R & D claims that Jenkins owes $17,463.50 for extra work that R & D did on eleven different days during the period March 23, 2001 through May 11, 2001. R & D billed Jenkins for this amount in an *900invoice dated May 11, 2001, and the parties agree that Jenkins never paid the invoice.30
As shown by the testimony of R & D’s Robert Pasek and Jenkins’s Mike Skomial, and on the invoice, the work at issue involved moving and spreading topsoil in certain areas of the job site; performing certain grading work, and cutting swales. R & D’s Pasek testified that none of this work was covered by the Subcontract. Rather, it was all extra work for which R & D should be paid extra. Pasek further testified that R & D’s project superintendent Mike Skomial agreed that this work was extra work, requested R & D to do this work, and said that Jenkins would pay for the work on a time-and-material basis. R & D presented no documentation or other evidence to support these assertions.
Jenkins’s Mike Skomial disputed Pasek’s testimony. He testified that this work was part of the scope of the work covered by the written Subcontract, not additional work. He testified that this work was part of the “Sitework” described at item 1 on page 2 of the Subcontract, namely, “[Complete all earthwork, grading and balancing in strict accordance with the Drawings and Specifications.”31 Skomial further testified that the swales at issue were part of the original drawings.32 Skomial further testified that R & D never requested a change order for this work and that R & D’s invoice for this work (PX-5) was never submitted to him.
The Court concludes that R & D did not meet its burden of proving, by a preponderance of the evidence, that (1) any of the work covered by this claim and reflected in its May 11, 2001 invoice (PX-5) was extra work, i.e., work not already required of R & D by the written Subcontract; or that (2) Jenkins (through Mike Skomial or anyone else) ever agreed that any of this work was extra work not covered by the Subcontract; or (3) that Jenkins agreed to pay R & D extra for this work. As a result, R & D’s claim based on this work must fail, and the Court will enter judgment for Jenkins in this respect.
4. R & D’s $40,500.00 claim for removal of excess topsoil
R & D claims that Jenkins owes an additional $40,500.00 because the amount of topsoil that R & D had to excavate and remove as part of its work under the Subcontract was approximately 18,000 cubic yards more than the amount indicated by the Subcontract. R & D claims that soil boring data on the project drawings, which are part of the Subcontract and which R & D relied on in making its bid for the project, indicated about 18,000 cubic yards less of topsoil than R & D actually encoun- ■ tered.
R & D admits that it never invoiced Jenkins for this extra work, claiming that its failure to invoice this $40,500.00 item was an oversight.33 Nor was this claim pled by R & D in either its original Complaint (Docket # 1) or its First Amended Complaint (Docket # 11). The First Amended Complaint states four counts, each presenting a different legal theory in support of its claim against Jenkins for the unpaid invoices itemized on Exhibit A to the Complaint. As R & D admitted during trial, that itemization does not include this $40,500.00 claim for removal of excess topsoil.34 Further, R & D’s attorney swore, in the “Affidavit of Account Stated” attached as Exhibit B to R & D’s First Amended Complaint, that the statement of account owing from Jenkins to R & D *901attached as Exhibit A to the complaint (which does not include this $40,500.00 item) was accurate and correct.35
R & D’s claim that it had to excavate extra topsoil was discussed in at least eight different meetings between Jenkins and Hubbell, Roth & Clark (“HRC”), the project consultant for MDOT. These meetings occurred during the time period October 3, 2000 through April 11, 2001.36 During the early meetings and while he was involved as project superintendent on the MDOT project, Bryan Ritter of Jenkins supported R & D’s contention that it had to excavate significantly more topsoil than the amount indicated by the drawings. Ritter further supported this claim in his testimony at trial.
Neither party presented any evidence at trial indicating that anyone measured the depth of the topsoil that R & D was excavating before R & D had already removed it. R & D placed the topsoil in a designated berm on the job site. Jenkins’s Ritter and HRC’s Larry Ancypa each testified at trial about measurements that were taken of the amount of soil in the berm.
Ritter testified that unnamed certified engineers measured the berm and found that it contained 28,000 cubic yards of soil. Ritter testified that this calculation is reflected in engineering drawings and written calculations presented to HRC in meetings. But no such documents were presented as evidence at trial. Nor did any such certified engineers testify at trial about this. Nor were any such certified engineers even identified during trial. Ritter testified that based on the drawings, he anticipated that there would only be about 12,000 cubic yards of soil in this berm from R & D’s excavations, not 28,000 cubic yards. But Ritter acknowledged that another Jenkins subcontractor, Dan’s Excavating, was also permitted to dispose of soil in this same berm, and Ritter did not know how many cubic yards Dan’s Excavating put in the berm.
HRC’s Larry Ancypa, by contrast, testified that his firm measured the amount of soil in the berm and found it to be approximately 20,000-21,000 cubic yards. Ancypa testified that Dan’s Excavating put approximately 9,000 cubic yards of soil into the berm, leaving about 12,000 cubic yards of soil that was put into the berm by R & D. This indicated that R & D had not been required to excavate more topsoil than indicated by the Subcontract drawings.
In part because of this, HRC took the position during the meetings with Jenkins, including a meeting on March 29, 2001 attended by R & D’s Robert DeGeorge,37 that Jenkins and R & D had not adequately proven R & D’s claim of excess topsoil.38 HRC, through Larry Ancypa, repeatedly asked Jenkins and R & D for further and revised calculations to support the claim of extra topsoil, including requests made in meetings on November 1, 2000, February 27, 2001, March 29, 2001, and April 11, 2001.39 Neither Jenkins nor R & D ever submitted such calculations.’40 Nor were any presented at trial.
The Court concludes that R & D has failed to meet its burden of proving, by a preponderance of the evidence, its claim that it removed excess topsoil, above and beyond the amount that was expected based on the soil boring and other data in *902the project drawings and specifications. For this reason, R & D’s claim for this $40,500.00 in additional compensation fails, and the Court will enter judgment accordingly.
5. Summary regarding the MDOT project
With respect to R & D’s claims relating to the MDOT project, therefore, the Court will enter judgment in favor of R & D in a total amount of $42,461.57, reflecting the claims on which R & D has prevailed.
B. R & D’s claims relating to the Greater Grace project
The Greater Grace project involved the construction of the Greater Grace Temple Church in Detroit, Michigan. Jenkins served as,the “Construction Manager” for this project, rather than as a general contractor. Nonetheless, Jenkins made contracts in its own name with various subcontractors working on the project, including R & D.41 The contract between Jenkins and R & D was entitled “Subcontract Agreement” and was dated March 17, 2000.42 It described the work to be performed by R & D as “the erection and completion of: Drain Tile in accordance with specifications prepared by: Fusco [Sjhaffer & Pappas, Inc .... the Architect.” The Subcontract further described this work as:
Drain Tile:
1.Provide and install 4" and 6" drain tile including all connections as shown and specified (also see Bulletin # 1, dated December 21, 1999).
2. Provide and install crushed concrete 8" below and above drain tile.
3. Complete all excavating for your work.
4. Complete all loading and hauling surface material.
5. Clean up all debris from your work.43
The Subcontract incorporated certain “Contract Documents” and further defined the scope of R & D’s work by reference to eight listed sets of specifications and drawings.44 For this work, Jenkins agreed to pay R & D the sum of $43,500.00.45
The parties stipulated that during the course of the Greater Grace project, “Jenkins requested R & D perform certain additional work on the project. The work was reduced to change orders amounting to $13,652.00.” As a result, “[t]he total contract price for the work performed by R & D for the Greater Grace Project was $57,152.00.”46 The parties also stipulated that Jenkins paid R & D this total amount—$57,152.00—for the Greater Grace project.47
In addition to the Subcontract price, R & D claims that Jenkins owes a total of $56,983.80 for extra items of labor, materials, and equipment relating to the Greater Grace project. R & D claims that these extra items were not part of the work covered by the Subcontract, but rather were covered by separate, oral agreements between R & D and Jenkins. These claimed extra items are itemized in twelve separate invoices,48 which the Court will discuss in several groups.
*903With the exception of two of these invoices, which Jenkins contends were part of the written change orders and paid by Jenkins as part of the $57,152.00 Subcontract price, Jenkins argues that R & D’s claims regarding these alleged “extra” items are barred by several provisions of the Subcontract. These contract provisions are identical to the ones argued by Jenkins with respect to the MDOT project. In this respect, the Greater Grace Subcontract between R & D and Jenkins had the same contract terms as those in the MDOT project Subcontract, described in Part II-A-2 of this opinion.49 Based on the Court’s findings stated below, however, these Subcontract terms do not bar R & D’s claims.
1. R & D invoice nos. 1074 and 1075 (PX-10G and PX-10H)
These two invoices, each dated February 22, 2000, are for work done and equipment rented by R & D to Jenkins on February 7, 8, and 10, 2000. The invoice amounts are $3,993.50 (invoice no. 1074, PX-10G) and $3,187.50 (invoice no. 1075, PX-10H). Although R & D’s Robert Pasek testified at trial that these two invoices were not paid by Jenkins, the Court finds otherwise. Based on the testimony of Daryl Greer, Jenkins’s project manager on the Greater Grace project, the Court finds that R & D’s charges for these items were incorporated into two written change orders issued by Jenkins, and were paid as part of Jenkins’s total payment to R & D of $57,152.00. These are Jenkins change order nos. 9824-09a (revised) dated June 1, 2000 in the amount of $3,993.00 (DX-17) and change order no. 9824-07a, dated April 14, 2000 in the amount of $3,188.00 (DX-3). Thus, R & D’s claims as to these two invoices fail.
2. R & D invoice nos. 1903 and 1974 (PX-10A and PX-10B)
R & D claims that it made an oral agreement to rent to Jenkins a 245 Excavator backhoe for the months of October and November, 2000, at the rate of $16,500.00 per month. These rental charges are reflected in R & D invoice nos. 1903 and 1974 (PX-10A and 10B), dated November 1, 2000 and November 30, 2000, respectively.
Carl Donato, who was Jenkins’s project superintendent for the Greater Grace project until he left in the Fall of 2000, testified at trial by deposition. He testified that Jenkins made an oral agreement with R & D to rent this 245 Excavator, so that a subsidiary of Jenkins, named Jenkins Excavating, could install a deep sewer line on the project. This line was supposed to have been installed by another Jenkins subcontractor, M & S Construction, but M & S failed to perform. Donato testified that the rental of this equipment from R & D was not part of the written Subcontract, but rather a separate agreement. Donato testified that he made the agreement on behalf of Jenkins, that it was approved by both Daryl Greer, the project manager for Jenkins, and by James Jenkins, the President of Jenkins. Jenkins also told Donato that he had agreed on a price with R & D. Donato further testified that although Jenkins Excavating was going to use this equipment, James Jenkins authorized the rental agreement for both Defendant Jenkins Construction and its subsidiary, Jenkins Excavating. Donato further testified that he was privy to a conversation in which James Jenkins made this agreement with R & D’s Robert DeGeorge, with Daryl Greer present.50
*904R & D’s Robert Pasek testified to this oral rental agreement as well, and said that he was present when Carl Donato of Jenkins agreed to a rental rate of $16,500.00 per month.
On the other hand, James Jenkins and Daryl Greer of Jenkins each denied agreeing to pay for the use of R & D’s equipment. James Jenkins testified that he made an oral agreement with Robert De-George of R & D to use R & D’s equipment for no charge, as a “tradeoff’ for R & D having left the equipment on the job site in a disassembled condition for months.
The Court finds that Jenkins did make the oral equipment rental agreement as described in the testimony of Carl Donato and Robert Pasek, and as further evidenced and reflected in the two invoices at issue. The Court further finds that this equipment rental agreement was not part of the scope of the work to be done by R & D under the Subcontract, but rather was a separate agreement from the Subcontract. As a result, none of the Subcontract-based defenses asserted by Jenkins apply to or bar these claims by R & D.
For these reasons, the Court finds in favor of R & D and against Jenkins on R & D’s claims relating to these two invoices, in the total amount of $33,000.00, and will enter judgment on these claims accordingly.
3. The remaining eight R & D invoices
R & D’s remaining claims are described on eight R & D invoices admitted into evidence.
(a)R & D invoice nos. 1251, 1289, and 1341 (PX-10L, 10C, 10D)
These three invoices, dated April 25, April 28, and May 17, 2000, are time and material-based invoices for the labor of R & D personnel and the use of R & D Loader and Excavator equipment to remove dirt from the Greater Grace project job site on April 12, 13, 14, and May 12, 2000. The Court finds, based on the testimony of the Jenkins project superintendent, Carl Donato, that (1) this hauling of dirt away from the job site by R & D was not part of R & D’s required work under the written Subcontract, but rather additional work not covered by that contract; (2) Carl Donato requested that R & D do this work; (3) Carl Donato had authority, on behalf of Jenkins, to request that R & D do this work and thereby to bind Jenkins to pay for this work; (4) by requesting this work, Donato bound Jenkins to pay for the work; (5) Jenkins did agree to pay the amounts listed on these invoices for this work; (6) Donato discussed these invoices with Daryl Greer, the Jenkins project manager, who had authority to agree to a price for the work on behalf of Jenkins, and Greer approved these invoices; and (7) Jenkins never paid these invoices.51
For these reasons, the Court finds for R & D with respect to its claims under these invoices, which total $10,800.00.
(b) R & D invoice no. 1149 (PX-10E)
This invoice, dated March 28, 2000, is for Jenkins’s rental from R & D of a 544 John Deere Loader for five hours, for a total amount of $425.00.
(c) R & D invoice nos. 1138 and 1288 (PX-10I and PX-10F)
These two invoices, dated March 27, 2000, and April 28, 2000, are for R & D’s labor, equipment, and material for installing and compacting stone for a “mud mat” *905in the sanctuary area of the Greater Grace project, to support the steel erectors’ crane and keep it out of the mud.52 These invoices total $3,417.80.
(d) R & D invoice no. 1157 (PX-IOJ)
This invoice, dated February 22, 2000, is R & D’s charge for removing and disposing of an underground fuel tank that was discovered on the job site, in the amount of $160.00.53
(e) R & D invoice no. 99-1363 (PX-IOK)
This invoice, dated December 6, 1999, three months before the date of the written Subcontract between R & D and Jenkins (March 17, 2000), is for R & D’s pre-contract work in installing drain tile under the stage area of the sanctuary on the Greater Grace project. This was needed for drainage. This invoice is for $2,000.00.54
The Court finds, based upon the testimony of Carl Donato and Robert Pasek, that: (1) none of the work, materials, and equipment charges covered by these invoices was part of R & D’s required work under the written Subcontract, but rather additional work not covered by that contract; (2) Carl Donato requested all of these things from R & D; (3) Carl Donato had authority, on behalf of Jenkins, to request all of these things from R & D and thereby to bind Jenkins to pay for them; (4) by requesting these items and inducing R & D to provide them, Donato bound Jenkins to pay for these items; (5) Jenkins did agree to pay the amounts listed on these invoices for these items; (6) Donato discussed these invoices with Daryl Greer, the Jenkins project manager, and Greer approved these invoices; and (7) Jenkins never paid these invoices.55
The Court therefore finds for R & D with respect to the claims covered by these eight invoices, which total $16, 802, 80.
Jenkins argues that R & D waived all of its claims for extras relating to the Greater Grace project. R & D’s Robert DeGeorge signed a document entitled “Full Unconditional Waiver” on May 8, 2001.56 Jenkins argues that this document says that R & D has been fully paid for all of its work relating to the Greater Grace project, and that R & D waived any further claims. The actual document, however, does not say or mean these things. It states the following:
FULL UNCONDITIONAL WAIVER
I/we have a contract with Jenkins Construction, Inc. to provide Drain Tile/Site Work for the improvement to the property described as Greater Grace Temple having been fully paid and satisfied, all my/our construction lien rights against such property are hereby waived and released.
STATEMENT OF ACCOUNT
Previous payments $ 41,112.90
This payment $ 16,039.10 CK# 548
Total paid to date $ 57,152.10
Balance due $
The Court concludes that the “contract” referred to in this document, which the document describes as “having been fully paid and satisfied,” was only the written Subcontract between R & D and Jenkins, which totaled $56,152.00 after the written change orders. This waiver document does not refer to any of the oral agreements for additional work, materials, or equipment, which were separate agree*906ments not encompassed within the written Subcontract. Robert DeGeorge’s signature on this waiver document, therefore, does not acknowledge that any of those oral agreements had been fully paid and satisfied. Similarly, the statement in the waiver document that “all my/our construction lien rights against such property are hereby waived and released” is no more than the waiver of any lien R & D might have claimed against the Greater Grace project property. It is not a waiver or release of R & D’s claims against Jenkins under the oral agreements between the parties.
4. Summary regarding the Greater Grace project
For these reasons, the Court finds for R & D with respect to its claims relating to the Greater Grace project to the extent of $49,802.80 and finds against R & D with respect to the balance it claims. The Court will enter judgment accordingly.
C. Prejudgment interest, attorney fees, and costs
R & D requests prejudgment interest, attorney fees, and costs. The request for attorney fees must be denied. R & D has presented no valid basis, and no authority, that would permit the Court to award it attorney fees.
R & D bases its claim to prejudgment interest on Michigan law. It requests prejudgment interest “at a legal rate from the date on which money should have been paid by Jenkins,” ie., “the date the affixed amount is due.”57 R & D has not specified what that “legal rate” is that it is requesting. Further, the Court finds that while R & D did meet its burden of proving that Jenkins owes it money, as to the claims on which R & D has prevailed, R & D did not prove exactly when any of these amounts became due or should have been paid by Jenkins. The evidence presented permits the Court to find only that at least by the time R & D filed its complaint in this adversary proceeding, Jenkins owed R & D the sums on which the Court is entering judgment.
Given this, the Court will award prejudgment interest to R & D only from the date of R & D’s complaint, under Mich. Comp. Laws Ann. § 600.6013(8).58 The amount of prejudgment interest will be calculated using interest rates established under Michigan law, which are adjusted at 6-month intervals, § 600.6013(8). Prejudgment interest will run from the filing date of R & D’s complaint to the date on which the judgment is entered, and prejudgment interest will be compounded annually.
R & D also will be entitled to post-judgment interest, to run from the date on which judgment is entered, calculated under 28 U.S.C. § 1961.
Finally, the Court will award costs to R & D under Fed.R.Bankr.P. 7054(b).
III. Conclusion
For the reasons stated in this opinion, the Court will enter judgment, by separate *907document, in favor of Plaintiff R & D Contracting, L.L.C. and against Defendant Jenkins Construction, Inc., in the total amount of $92,264.37 plus interest. Judgment for this relief will be entered on Count I of R & D’s First Amended Complaint (breach of oral contract). The Court will dismiss the other counts in R & D’s complaint, as moot to the extent of the monetary claims on which R & D has prevailed, and with prejudice to the extent of the monetary claims on which Jenkins has prevailed.
. Order Confirming Plan (Docket #302); Combined Plan and Disclosure Statement (Docket # 187).
. See Stipulation and Order Consenting to Reference to Bankruptcy Court (Docket # 56).
. R & D’s operative complaint is its "First Amended Complaint” filed at Docket # 11, a copy of which, minus its Exhibit B, was admitted into evidence at trial as Defendant's Exhibit 16.
. Testimony of Bryan Ritter; testimony of Larry Ancypa; Plaintiff’s Exhibit 13. This opinion will cite testimony of trial witnesses by simply giving their name, after the initial citation which gives the witness’s full name. For example, a citation to the testimony of Bryan Ritter henceforth will be slated as "Rit-ter.” Trial exhibits will be cited in abbreviated form as "PX(5)6D” and "DX(5)6D” for Plaintiff's exhibits and Defendant’s exhibits respectively.
. PX-2.
. PX-2 atpp. 1, 2.
. PX-2 at p. 2, Article II.
. Id. at Article III-B.
. Joint Final Pretrial Order (part of Docket # 120) atp. 6, Stipulation of Fact #11.
. Id. at Stipulation of Fact # 12.
. See also DX-8.
. PX-11.
. Ritter; testimony of Michael Skomial.
. Skomial described this problem in a letter he sent to R & D’s Robert DeGeorge dated February 19, 2001. DeGeorge was one of the owners of R & D, and is now deceased. An unsigned copy of Skomial's letter was admitted into evidence as DX-21.
. PX-2 at p. 3, Article VI.
. A swale, according to the testimony of R & D’s Robert Pasek, is a depression or indentation in the ground smaller than a ditch, through which water can flow to a catch basin. It is used for drainage. A swale can be as small as a 4-6 inch indentation, or smaller.
.Testimony of Robert Pasek (a co-owner of R&D).
. PX-4.
. Ritter.
. Pasek.
. Ritter.
. Ritter.
. PX-4; Ritter.
. PX-4; Ritter.
. PX-2 at p. 3, Article VII (emphasis added).
. Id. atp. 8 ¶¶ 9, 10.
. "A.I.A.” means the American Institute of Architects. See DX-4, p. 1.
. Id. at p. 2, Article IV-B; see also id. at p. 8, ¶ 3.
. Id. at p. 2, Article IV-B; see also id. at p. 8, ¶ 11.
. PX-5.
. Skomial; PX-2 at p. 2, Article 11(B).
. Skomial; PX-13 at p. C2.1.
. Pasek.
. Pasek; DX-16.
. See First Amended Complaint (Docket #11), Exhibit B, at ¶¶ 3, 4.
. PX-22 through PX-26; DX-12; DX-15; and DX-20.
. DX-15.
. Ancypa.
. Ancypa; PX-26 at pp. 1-2, § 1.10; DX-12 at p. 3; DX-15 at p. 5; DX-20 at p. 1.
.Ancypa.
. Jenkins; PX-3.
. PX-3 atp. 1.
. PX-3 atpp. 1, 2.
. Id. atpp. 1,2.
. Id. at p. 2.
. Joint Final Pretrial Order (Docket # 120) at p. 6, Stipulation of Fact Nos. 4, 5. The three change orders were admitted into evidence as DX-3, DX-17, and DX-19.
. Stipulation of Fact No. 6.
.PX-10A through PX-1 OL.
. PX-3 at p. 3, Article VII; p. 7 ¶¶ 9, 10; p. 2, Article IV-B.
. Carl Donato Dep. at 29-39, 45-49.
. Donato Dep. at pp. 9-10, 52, 55, 56-60, 62-63, 72, 103, 106; Pasek.
. Donato Dep. at pp. 26-29.
. Donato Dep. at pp. 21-22.
. Donato Dep. at pp. 22-23.
. Donato Dep. at pp. 9-10, 52, 55, 56-60, 62-63, 72, 103, 106; Pasek.
. DX-5.
. See Plaintiffs Trial Brief (Docket # 125) at p. 6.
. That statute provides, with exceptions not applicable here, that:
for complaints filed on or after January 1, 1987, interest on a money judgment recovered in a civil action is calculated at 6-month intervals from the date of filing the complaint at a rate of interest equal to 1% plus the average interest rate paid at auctions of 5-year United States treasury notes during the 6 months immediately preceding July 1 and January 1, as certified by the state treasurer, and compounded annually, according to this section. Interest under this subsection is calculated on the entire amount of the money judgment, including attorney fees and other costs. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494276/ | MEMORANDUM OPINION AND DECISION
RICHARD L. SPEER, Bankruptcy Judge.
This cause comes before the Court after a Trial on the Plaintiffs Complaint to Determine Dischargeability, of Debt. The Plaintiffs action is brought pursuant to the statutory exception to dischargeability set forth in 11 U.S.C. § 523(a)(2). At the conclusion of the Trial, the Court deferred ruling on the matter so as to afford the time to thoroughly consider the evidence as well as the arguments made by the Parties. The Court has now had this opportunity and finds, for the reasons set forth herein, that the Plaintiffs Complaint should be Dismissed.
FACTS
On September 7, 2006, the Debtors filed a petition in this Court for relief under Chapter 7 of the United States Bankruptcy Code. At the time of their filing, the Debtor, Carley Brumbaugh, maintained a crediUcard account with the Plaintiff, Chase Bank USA. The Plaintiff, through the instant action, seeks a determination that all amounts due and owing on this account should be held to be a nondis-chargeable debt. The relevant facts giving rise to this matter are now set forth.
The Debtors, Kevin and Carley Brum-baugh, are former husband and wife. They separated in May of 2006 and, according to their testimony, decided to get a divorce in the first week of July of 2006. On July 31, 2006, the Debtors went to see an attorney regarding the termination of their marriage. The Debtors testified that at this meeting the subject of bankruptcy was first broached.
On August 9, 2006, the Debtors sought out legal counsel for the specific purpose of filing for bankruptcy. On September 7, 2006, the Debtors then filed a petition in this Court for relief under Chapter 7 of the United States Bankruptcy Code. In their petition, the Debtors made these relevant financial disclosures.
First, the Debtors set forth that they had a combined net monthly income of $3,954.68. This income was derived solely from the Debtors’ respective places of employment: Mr. Brumbaugh, as a sales representative, with a gross monthly salary of $2,277.00, netting $1,711.77 per month; Ms. Brumbaugh, as a salon manager, with a gross monthly salary of $2,462.51, netting $2,242.91 per month. Against their income, the Debtors, who were living apart at the time of the filing of their bankruptcy petition, set forth $4,017.37 in necessary monthly expenditures to support their separate households.
*911For liabilities, the Debtors disclosed $142,968.54 of secured debt and $71,745.18 in unsecured obligations. The secured debt stems primarily from a mortgage held against the Debtors’ former marital residence, which the Debtors have since surrendered through the bankruptcy process. With the exception of a student-loan obligation owed by Ms. Brumbaugh in the amount of $26,143.00, the Debtors’ unsecured obligations are comprised almost exclusively of credit-card balances including that owed to the Plaintiff.
At the time they filed their bankruptcy petition, the balance owed by Ms. Brum-baugh on her credit-card account with the Plaintiff stood at $17,686.70. This account was opened by Ms. Brumbaugh on June 17, 2006, 82 days prior to the Debtors’ bankruptcy filing, after she received a solicitation from the Plaintiff through the mail. To open the account, Ms. Brum-baugh was required to fill out an application, which she did over the internet. In this application, Ms. Brumbaugh disclosed that she had a yearly income of $60,000.00. (Joint Ex. 1).
Immediately after opening the account, Ms. Brumbaugh made charges totaling $17,889.70. These charges consisted of three balance transfers, aggregating $ 17,-171.98, and various retail-credit transactions, totaling $810.77. The first balance transfer, for $9,671.98, occurred on June 24, 2006, 75 days before the filing of the Debtors’ bankruptcy. The second and third balance transfers, totaling $7,500.00, both occurred six days later, on June 30, 2006.
The $727.72 in retail-credit transactions took place between June 25, 2006 and August 1, 2006. Included among these transactions were purchases at restaurants, as well as these particular transactions: (1) a charge of $192.15 from “Corey’s Mulch and More”; and (2) a $145.00 purchase of services on August 2, 2006, at “Anthony Wayne Dental.” Between July 31, 2006 and August 10, 2006, Ms. Brumbaugh made three small payments, in the amount of $357.00, on the Plaintiffs account. (PI. Ex. A; Joint Ex. 2).
LAW
§ 523. Exceptions to discharge
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title [11 USCS § 727, 1141, 1228(a), 1228(b), or 1328(b)] 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;
(C)(i) for purposes of subparagraph (Al-
ii) consumer debts owed to a single creditor and aggregating more than $550 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and
(II) cash advances aggregating more than $825 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable;
DISCUSSION
The Plaintiff brings this cause to determine the dischargeability of a debt owed by the Debtor, Carley Brumbaugh. Proceedings brought to determine the dis-chargeability of a particular debt are deemed to be core proceedings pursuant to 28 U.S.C. § 157(b)(2)(I). As a core pro*912ceeding, this Court has been conferred with the jurisdictional authority to enter a final order in this matter. 28 U.S.C. § 157(b)(1).
The Plaintiffs complaint to determine dischargeability is brought pursuant to 11 U.S.C. § 523(a)(2)(A). In overall terms, this section excepts from discharge any debt which arises as the result of the fraudulent acts of the debtor. The function of this provision is to assist in implementing one of the fundamental pillars of bankruptcy jurisprudence: that bankruptcy relief should only be afforded to the honest, but unfortunate debtor. Cohen v. de la Cruz, 523 U.S. 213, 217, 118 S.Ct. 1212, 1216, 140 L.Ed.2d 341 (1998).
In order to sustain a finding of nondischargeability under § 523(a)(2)(A), these four elements must exist: (1) a material misrepresentation which the debtor knew, at the time, to be false or which was made with gross recklessness as to its truth; (2) the debtor intended to deceive the creditor; (3) the creditor justifiably relied on the false representation; and (4) the creditor’s reliance was the proximate cause of its loss. Rembert v. AT & T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277, 280-81 (6th Cir.1998); Citibank v. Stephens (In re Stephens), 302 B.R. 227, 230 (Bankr.N.D.Ohio 2003). As is often the case in an action brought under § 523(a)(2)(A), the only material issue presented to the Court at the Trial held in this matter concerned the existence of the first and second elements: whether, with the intent to deceive, the Debtor, Ms. Brumbaugh, knowingly or with reckless disregard as to its truth made a materially false representation to the Plaintiff.
In In re Rembert, the Sixth Circuit set forth that a “finding that a debt is non-dischargeable under 523(a)(2)(A) requires a showing of actual or positive fraud, not merely fraud implied by law.” 141 F.3d at 281, citing Anastas v. American Savings Bank (In re Anastas), 94 F.3d 1280, 1285-86 (9th Cir.1996). The first and second elements of § 523(a)(2)(A) go to the essence of actual fraud: that a person, acting with a culpable state of mind, deceives another. Blaok’s Law DICTIONARY 660 (6th ed.1990). For this, the Court in In re Rembert further held that, for purposes of § 523(a)(2)(A), the proper inquiry is a subjective one. 141 F.3d at 281. Specifically, the question is whether, at the time the debt is incurred, “the debt- or subjectively intended to repay the debt.” Id.
A subjective approach,—as opposed to an objective, reasonable person standard—requires that the trier-of-fact focus solely on the individual characteristics of the debtor, meaning that traits such as ignorance, incompetency and ineptness may, if established, serve as a valid defense to a § 523(a)(2)(A) action. Mack v. Mills (In re Mills), 345 B.R. 598, 604 (Bankr.N.D.Ohio 2006). Thus, of utmost importance in any fraudulent intent analysis is the credibility the Court attaches to the testimony of the debtor and any other witnesses called to testify. Yet, like with an objective approach, a subjective approach still permits, and practicably speaking will require the use of circumstantial evidence to ascertain a debtor’s intentions because rarely, if ever, will a debtor actually admit to acting in a fraudulent manner. EDM Machine Sales Inc. v. Harrison (In re Harrison), 301 B.R. 849, 855 (Bankr.N.D.Ohio 2003).
For purposes of § 523(a)(2)(A), the character of the circumstantial evidence will often focus on those traditional indicia, known as badges of fraud, used to determine intent e.g., suspicious timing of events. Id. Where, as here, the use of a credit card is at issue, the Court in In re Rembert provided that the following badges could be helpful: (1) the length of *913time between the charges made and the filing of bankruptcy; (2) whether or not an attorney has been consulted concerning the filing of bankruptcy before the charges were made; (3) the number of charges made; (4) the amount of the charges; (5) the financial condition of the debtor at the time the charges are made; (6) whether the charges were above the credit limit of the account; (7) whether the debtor made multiple charges on the same day, (8) whether or not the debtor was employed; (9) the debtor’s prospects for employment; (10) financial sophistication of the debtor; (11) whether there was a sudden change in the debtor’s buying habits; and (12) whether the purchases were made for luxuries or necessities. 141 F.3d at 282, fn. 3.
Looking now at the evidence in this case as a whole, it is impossible not to see strong inferences of fraud, with there existing a number of the badges of fraud as set forth in In re Rembert. To begin with, even a cursory observer could not help but notice that Ms. Brumbaugh wasted no time in incurring a substantial amount of debt in the time period immediately leading up to her bankruptcy filing. Just 82 days passed between the time she opened her account with the Plaintiff and the time she fried her petition for bankruptcy relief. Furthermore, this window of time is compressed even further, thereby becoming even more suspect, when other events are considered.
First, the great majority of the credit extended to Ms. Brumbaugh—specifically, the $17,889.70 in cash advances—took place over only six days and as close to 69 days before she sought bankruptcy relief. Additionally, Ms. Brumbaugh continued to use the Plaintiffs credit card for retail transactions up until August 2, 2006, just 36 days before she filed her bankruptcy petition. Other disconcerting aspects to this case also exist.
Of particular note, it did not go unnoticed to the Court that some of Ms. Brumbaugh’s retail charges were made for nonessentials such as eating out at restaurants. It also did not go unnoticed that, while using the Plaintiffs credit card, Ms. Brumbaugh readily admitted that her financial situation was anything but solid. What makes this especially troublesome is that Ms. Brumbaugh, being in a managerial position, cannot be viewed as a completely unsophisticated debtor.1 Hence, Ms. Brumbaugh could not have completely blind to the risks she was taking by seeking an extension of credit from the Plaintiff.
But as it again regards the timing of events, what particularly stands out for the Court is the existence of the second badge of fraud set forth in In re Rembert: whether or not an attorney has been consulted concerning the filing of bankruptcy before the charges were made. In this matter, Ms. Brumbaugh, by her own admission, first became aware of bankruptcy as a possibility on July 31, 2006, when she and her now ex-husband first saw an attorney regarding their marriage and financial situation. Yet, despite this knowledge, *914Ms. Brumbaugh continued thereafter to use the Plaintiffs credit card, in particular, making a $145.00 purchase of services on August 2, 2006 to “Anthony Wayne Dental.”
In response, Ms. Brumbaugh explained that this charge was made out of necessity because she needed to see the dentist. However, while this statement may very well be true, it misses the mark. The use to which one puts a debt, although potentially bearing on matters concerning morality and ethics, does not alter the foundational issue upon which fraud under § 523(a)(2)(A) is based: whether the debt- or, at the time the debt is incurred, subjectively intended to repay the debt. For example, when a debtor uses a credit card with no intention of honoring the obligation, it may be less morally reprehensible when such transactions are made for necessities, such as for food, as opposed for luxury items, such as jewelry. Yet, it is still fraud nonetheless. Robin Hood may have stolen from the rich, but it was still stealing.
The suspect timing of events in this case also raises an issue as to the applicability of § 523(a)(2)(C) upon which the Plaintiff strongly relies for a finding of nondis-chargeability. Section 523(a)(2)(C) creates a statutory presumption of fraud for two types of transactions conducted in the time immediately preceding the petition date. First, nondischargeability is to be presumed in any case in which a debtor, within 90 days of filing for bankruptcy relief, incurs consumer debts in excess of $500.00 to a single creditor for “luxury goods or services.” 11 U.S.C. § 523(a)(2)(C)(i)(I). Similarly, nondischargeability is also to be presumed in any case in which a debtor, within 70 days prior to filing for bankruptcy relief, took “cash advances” aggregating more than $750.00. 11 U.S.C. § 523(a)(2)(C)(i)(II).
Arguably, as the Plaintiff puts forth, some of those transactions made by Ms. Brumbaugh on the Plaintiffs credit card could fall within the scope of § 523(a)(2)(C)’s nondischargeability presumption. For example, the second and third balance transfers made by Ms. Brumbaugh, totaling $7,500.00, were both made 69 days before Ms. Brumbaugh filed for bankruptcy, thus falling within the 70-day period applicable for “cash advances” in § 523(a)(2)(C)(i)(H). Furthermore, all of those charges made by Ms. Brumbaugh, whether the balance transfers or the retail credit transactions, occurred within the 90-day period applicable for “luxury goods and services” in § 523(a)(2)(C)(i)(I). Nevertheless, the applicability of either of these provisions cannot be assumed.
For example, insofar as the Court can tell, case law has been universal in holding that balance transfers on a credit card, such as that made by the Plaintiff, do not qualify as “cash advances” for purposes of § 523(a)(2)(C)(i)(II).2 Additionally, many of those charges made by Ms. Brum-baugh,—such as at “Corey’s Mulch and More” which she explained involved purchases for minor home improvements— would not appear to qualify as “luxury goods and services” for purposes of § 523(a)(2)(C)(i)(I). Luxury goods and services are defined by the Bankruptcy Code in the negative, as not including “goods or services reasonably necessary for the support or the maintenance of .the debtor.” 11 U.S.C. § 523(a)(2)(C)(ii)(II). *915Regardless, as now explained, whether any, some, or all of Ms. Brumbaugh’s transactions on the Plaintiffs credit card fall within the scope of § 523(a)(2)(C) is not really an issue that must be decided.
As a basic evidentiary matter, the party asserting a claim carries the burden of proof. 29 Am. JuR. 2D Evidence § 158 (2006). A creditor, thus, seeking to hold a debt nondischargeable for fraud under § 523(a)(2)(A) is charged with establishing the existence of those elements necessary to establish a claim thereunder. Grogan v. Garner, 498 U.S. 279, 287-88, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). This burden is comprised of two components: (1) the “burden of persuasion” which is the necessity of establishing a fact and which generally remains fixed upon the movant for the duration of the action; and (2) the “burden of production” which is the necessity of making a prima facie showing and which may shift throughout the course of the action. Virginia v. Black, 538 U.S. 343, 395, 123 S.Ct. 1536, 155 L.Ed.2d 535 (2003).
Under this evidentiary framework, an action brought under § 523(a)(2) will proceed as follows: If a creditor is able to present a prima facie case on all of the § 523(a)(2)(A) elements of fraud, the burden of production will shift to the debt- or to establish a defense to the creditor’s claim. If the debtor is unable to establish a viable defense, the creditor will prevail on its action. Gore v. Kressner (In re Kressner), 206 B.R. 303, 309 (Bankr.D.N.Y.1997). If, however, a viable defense is forthcoming, it remains the creditor’s overall burden to persuade the trier-of-fact, by at least a preponderance of the evidence, as to the sufficiency of its claim.
While the statutory presumption of fraud set forth in § 523(a)(2)(C) alters this evidentiary framework, it does so only as it concerns the creditor’s initial burden of production. Fed.R. Evid. 301.3 If applicable, § 523(a)(2)(C) will shift the burden of production to the debtor, but the overall burden of persuasion will still remain upon the creditor. J.C. Penney Co. v. Leaird (In re Leaird), 106 B.R. 177, 179 (Bankr.W.D.Wis.1989). However, the Plaintiffs case-in-chief in this proceeding need not rely on this statutory reallocation as to the burden of production. Based upon those points discussed already, whereby strong indicia of fraud have come to light, it can only be concluded that the Plaintiff has sufficiently established a prima facie case for fraud under § 523(a)(2)(A). Hence, irrespective as to the application of 523(a)(2)(C), the burden of production has shifted to Ms. Brumbaugh to set forth a valid defense to the Plaintiffs allegations of fraud.
To rebut a prima facie case of fraud under § 523(a)(2)(A), a debtor must come forward with evidence which raises in the Court a credible doubt as to the existence of fraudulent intent. This may be accomplished, for example, by showing a sudden change in circumstances or that the debtor did. not contemplate filing a bankruptcy petition until after the allegedly fraudulent transaction took place. 4 Collier on Bankruptcy ¶ 523.08[5], In this respect, it is Ms. Brumbaugh’s position that her transactions with the Plaintiff, *916particularly the balance transfers totaling $17,171.98, were done not in anticipation of bankruptcy, but rather in “an attempt to realign” her finances due to her upcoming divorce. (Doc. No. 22, at pg. 1).
Despite the inferences of fraud that exist in this matter, Ms. Brumbaugh’s explanation, regarding the realignment of her financial situation, does find support. At its most basic level, there is no dispute that Ms. Brumbaugh and her now ex-husband, Mr. Brumbaugh, were having marital difficulties at the time the charges in question were being made. Similarly, there is no real disagreement that, during their marriage, the Debtors experienced financial difficulties. But especially mitigating against the existence of any fraudulent intent, and lending strong credibility to Ms. Brumbaugh’s account of events, are the types of transactions which are at largely issue: balance transfers.
Balance transfers, such as the three transacted by Ms. Brumbaugh, do not increase a person’s overall debt; they merely substitute one debt for another. Resultantly, unlike with a cash advance or the purchase of goods or services, a debtor transacting a balance transfer receives no immediate pecuniary gain. And it goes without saying that, in the absence of an immediate pecuniary gain, a debtor’s motive to fraudulently engage in a transaction involving a balance transfer is dampened. Chase Manhattan Bank v. Poor (In re Poor), 219 B.R. 332, 337-38 (Bankr.D.Me.1998) (listing cases whereby courts have found balance transfers not to be indicative of fraudulent intent).
The usual motive, instead, for conducting a balance transfer is to reorganize one’s financial affairs, commonly through better terms offered by the new lender— for example, a lower interest rate. Mirroring this function, Ms. Brumbaugh testified to the effect that she made the balance transfers to the Plaintiffs account for the reason that they were offering 0% interest. However, the reorganization of one’s financial affairs goes completely in-apposite to the function served by a Chapter 7 bankruptcy: an immediate discharge of one’s debts in exchange for the liquidation of their nonexempt assets. As such, the existence of the balance transfers in this matter weakens a key component of Plaintiffs case: that the balance transfers made by Ms. Brumbaugh were done in anticipation of bankruptcy.
Also mitigating against the existence of any fraudulent intent is an often utilized indicator on the subject: whether any subsequent payments were made on the obligation, with the evidence showing that Ms. Brumbaugh made three payments totaling $357.00.4 In Mack v. Mills (In re Mills), this Court explained the importance of this consideration:
Alone, a broken promise will not establish the existence of any intent to deceive. Rather, the existence of fraudulent intent under § 523(a)(2)(A) hinges on whether the debtor, at the time the debt is incurred, intended to honor the obligation. Although the intent to defraud must arise in conjuncture with the debt, a debtor’s subsequent conduct will often help to shed light on the debtor’s state of mind at the time of the transaction.
Of significance, a debtor acting with the intent to defraud will not generally undertake measures to perform their obligation. And logically, the opposite also holds true; where a debtor undertakes *917significant steps to perform as promised, any inference of fraud is muted. On whole then, a type of an inverse relationship exists when weighing a debtor’s intentions: the further the extent of performance, the less likely there exists fraud. To use a simple credit transaction as an example, it is the highly unusual situation where a person taking extensions of credit—e.g., cash advances—with the present intention of converting the funds will make any meaningful attempt to repay the obligation.
345 B.R. 598, 604-05 (Bankr.N.D.Ohio 2006) (internal quotations and citations omitted).
In weighing the evidence in a case brought under § 523(a)(2)(A) for fraud, the Court in In re Rembert held that a court should not engage in “factor-counting.” 141 F.3d at 282. Instead, In re Rembert the Court explained that what “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. In accord with this directive, it is the conclusion of this Court that, based upon those mitigating considerations just discussed, not only has Ms. Brumbaugh rebutted the Plaintiffs prima facie case for fraud, but that the weight of the evidence in this matter is equally balanced. However, what finally tips, ever so slightly, this balance in favor of Ms. Brumbaugh is the credibility the Court attaches to her testimony.
After having had the opportunity to observe her demeanor, the Court found Ms. Brumbaugh’s explanation for the suspicious timing of events to be genuine and sincere. She explained that, before considering bankruptcy as an option, she was attempting to get a handle on her financial predicament, which was only being exacerbated by the breakdown of her marriage. According to her, the “balance transfers” to the Plaintiffs credit card, to receive a lower interest rate, simply constituted one facet of this attempt to get a handle on her financial situation.
The credibility of Ms. Brumbaugh’s account of events is only reinforced when it is considered that, while incurring most, if not all, of the charges on the Plaintiffs credit card, Ms. Brumbaugh was making a good faith effort to sell her residence. This begs the question: if Ms. Brumbaugh had been intending all along to forego her legal obligations to the Plaintiff by filing for bankruptcy then why, when incurring the debt, was she going through a concerted effort to sell her residence? She could have simply surrendered it through' the bankruptcy process. In this way, it appears that bankruptcy only became a serious option for Ms. Brumbaugh once it was realized that her residence, a major source of financial strain for the Debtors, would not sell quickly thereby making it nearly impossible for the Debtors, who were living apart and intending to divorce, to service the debt on the property.
In summation, while there exists very strong indications of fraud in this case, there exist slightly stronger indications that Ms. Brumbaugh did not intend to defraud the Plaintiff. As such, the Court cannot find that, as applied to § 523(a)(2)(A), Ms. Brumbaugh, with the intent to deceive, knowingly or with reckless disregard as to its truth made a materially false representation to the Plaintiff. 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 Opinion.
Accordingly, it is
ORDERED that the credit-card obligation owed by the Defendant/Debtor, Carley Brumbaugh, to the Plaintiff, Chase *918Bank USA, be, and is hereby, determined to be a DISCHARGEABLE DEBT.
It is FURTHER ORDERED that the Plaintiffs Complaint to Determine Dis-chargeability of Debt pursuant to 11 U.S.C. § 523(a)(2), be, and is hereby, DISMISSED.
. Evidence in this case was also introduced that on her credit application with the Plaintiff, Ms. Brumbaugh made a misrepresentation regarding her income. Specifically, Ms. Brumbaugh represented that she, alone, had a gross annual salary of $60,000.00, when in truth this figure included both her income and that of her now ex-husband, the Debtor, Kevin Brumbaugh. However, insofar as it concerns an action under § 523(a)(2)(A), consideration of this misrepresentation, which concerns Ms. Brumbaugh’s financial condition, is expressly forbidden.’ Rembert v. AT & T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277, 281 (6th Cir.1998) ("the language of § 523(a)(2)(A) expressly prohibits using a 'statement respecting the debtor’s or an insider’s financial condition’ as a basis for fraud.”).
. Chase Manhattan Bank USA, N.A. v. Poor (In re Poor), 219 B.R. 332, 336-39 (Bankr.D.Maine 1998); First Deposit National Bank v. Cameron (In re Cameron), 219 B.R. 531, 536-37 (Bankr.W.D.Mo.1998); Norwest Bank of Iowa, N.A. v. Orndorff (In re Orndorff), 162 B.R. 886, 888 fn. 2 (Bankr.N.D.Okla.1994). National City Bank v. Manning (In re Manning), 280 B.R. 171, 178-85 (Bankr.S.D.Ohio 2002).
. Rule 301 of the Federal Rules of Evidences provides:
In all civil actions and proceedings not otherwise provided for by Act of Congress or by these rules, a presumption imposes on the party against whom it is directed the burden of going forward with evidence to rebut or meet the presumption, but does not shift to such party the burden of proof in the sense of the risk of nonpersuasion, which remains throughout the trial upon the party on whom it was originally cast.
This Rule is incorporated into bankruptcy procedure by Bankruptcy Rule 9017.
. Although two of the payments were made after the issue of bankruptcy had been raised by legal counsel, thereby raising an inference that such payments were only made on the advice of counsel so as to deflect any inferences of fraud, the Court has nothing by which to substantiate this. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494277/ | OPINION
KENNETH J. MEYERS, Bankruptcy Judge.
This case presents the issue of whether the priority, unsecured creditors of a chapter 13 debtor are entitled to benefit from the increase in estate value realized when encumbered property is released from a hen through an avoidance action, or whether the value recovered through the hen avoidance action is required to be distributed solely to a debtor’s general, unsecured creditors. The chapter 13 trustee in this case objects to plan modification on the basis that this Court’s decision in McRoberts v. Transouth Financial (In re Bell), 194 B.R. 192 (Bankr.S.D.Ill.1996), mandates that all recovered value must be directed to the exclusive benefit of the general unsecured creditors even when priority unsecured creditors have not been paid 100 percent of their allowed claims. *920The debtor takes the countervailing position that the priority unsecured claims must be paid in full before the general unsecured creditors may receive any distribution as a result of the recovered value. As a corollary argument, the debtor contends that the “best interests of creditors test” found in 11 U.S.C. § 1325(a)(4) applies when a chapter 13 plan is modified following lien avoidance and caps the amount that the debtor is required to pay to fund the plan. The trustee takes the position that liquidation analysis is irrelevant to the issue at hand because the Bell decision demands that the recovered value be paid entirely to the general, unsecured creditors, with the plan base increased proportionately.
The following facts are not in dispute. The debtor filed a petition for relief under chapter 13 of the Bankruptcy Code on September 29, 2003. On February 9, 2004, the chapter 13 trustee in this case, using his powers under 11 U.S.C. § 544(a)(1), avoided the lien of General Motors Acceptance Corporation (GMAC) on the debtor’s 2001 Chevrolet Cavalier, releasing previously encumbered value of $5,700.00. The debtor continued to retain the vehicle following the lien avoidance. Prior to the lien avoidance action, GMAC had been the only secured creditor in this case and the debtor had priority unsecured debts totaling $4,912.251 when he filed the case. There are administrative claims in the case totaling $3, 386.98.2 The plan proposed by the debtor has a base of $7,930.78, and the debtor had paid the sum of $7,360.78 into the plan as of March 29, 2007, with two payments of $285.00 remaining to complete the 44 month proposed plan. The value created by the release of the lien on the vehicle is the sole non-exempt asset in this bankruptcy estate.
For reasons that remain unclear, the issue of the proper distribution of the recovered value did not surface, despite several post-lien-avoidance plan modifications first increasing and later decreasing the plan base,3 until the debtor in this case filed a modified plan on April 5, 2007. The modified plan proposed to extend the plan *921duration from 39 months to 44 months with plan payments remaining static at $285.00 per month. This plan, like previous plans, conformed to the standard plan required in this District for cases filed prior to October 17, 2005, by proposing to pay the priority unsecured claims in full before distributing any funds to the general, unsecured creditors. This resulted in a proposed plan that made no distribution to the general unsecured creditors.4 The chapter 13 trustee then objected to approval of the modified plan on the basis that this Court’s decision in In re Bell, 194 B.R. 192, mandated that the unencumbered equity created by avoiding GMAC’s lien must be distributed only to the general, unsecured creditors in order to prevent a windfall to the debtor who would be retaining the vehicle while no longer having to pay for it as a secured debt.5 Under his reading of Bell, the trustee insists that the plan base must be increased to $13,999.23.6 The debtor counters that since he has already paid a substantial portion of the priority unsecured claims, and, in fact, more than the liquidation value of the vehicle, the trustee’s interpretation of Bell would force him to pay twice for the liquidated value of the vehicle. The trustee does not oppose the proposed plan modification on any ground other than that described above.
Before reaching the central question raised by the parties, the Court must dispose of another matter. Both parties have devoted substantial effort to a recitation of the history of the changing plan base as the plan went through a series of post-confirmation modifications. However, counsel have presented no evidence to explain why the debtor increased the plan base to $16,380.00 effective September 9, 2004,7 only to lower it to $7,765.78 on October 13, 2006, without objection from the trustee for nearly six more months.8 The arguments of counsel do not constitute *922evidence. Nonetheless, the Court finds the plan’s history to be irrelevant to the question of whether the current modification should be approved. That question must be determined by examining whether th'e current version of the plan stands or falls on its own merits when measured against the standards for post-confirmation plan modification found in 11 U.S.C. § 1329 (2000) (prior to 2005 amendment).9
Section 1329 of the Bankruptcy Code provides, in pertinent part:
(a) At any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified, upon request of the debtor ... to—
(2) extend or reduce the time for such payments.... 10
(b)(1) Sections 1322(a), 1322(b), and 1323(c) of this title and the requirements of section 1325(a) of this title apply to any modification under subsection (a) of this section.
(2) The plan as modified becomes the plan unless, after notice and a hearing, such modification is disapproved.
11 U.S.C. § 1329. Of the sections referenced in § 1329(b)(1), only §§ 1322(a)(2) and 1325(a)(4) are directly applicable to the arguments in the instant case.
Section 1322(a)(2) requires a modified plan to provide that all priority unsecured claims will be paid in full, unless the holder of a particular claim agrees to a different treatment. The section states:
(a) The plan shall—
(2) provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 of this title, unless the holder of a particular claim agrees to a different treatment of such claim....
11 U.S.C. § 1322(a)(2) (emphasis added). The modified plan at issue in the instant case is the standard plan required to be used in this District for eases filed prior to October 17, 2005.11 The modified plan, following the provisions of the standard plan, complies with § 1322(a)(2) by providing that the trustee “will pay 100% of all claims entitled to priority under 11 U.S.C. Sec. 507....”12 Here, the trustee has not *923disputed that the two tax claims are entitled to priority treatment under 11 U.S.C. § 507(a)(8). Thus, without more, the modified plan meets the requirements of § 1322(a)(2) and cannot be defeated on this basis.
However, the modified plan does say more about the treatment of priority unsecured claims. In conformity with the standard plan, it provides that priority unsecured claims are to be paid prior to general unsecured claims.13 Although the Bankruptcy Code, 11 U.S.C. § 1322(b)(4),14 does not require that priority claims, other than fees and administrative expenses, 11 U.S.C. § 1326(b), “be paid temporally in the prescribed order of priority or in advance of unsecured claims generally,” 8 Collier on Bankruptcy, supra, at ¶ 1322.03[2], at 1322-12 to 13, such treatment is mandated by the standard plan and is not prohibited under the Bankruptcy Code. See id. at 1322-13 (“debtors usually wish to pay priority claims in advance of other unsecured claims”). When read in concert, the standard plan filed by the debtor, and § 1322(a)(2), demand that the priority unsecured creditors be paid in full before the general unsecured creditors receive any distribution under the plan. However, since the chapter 13 trustee’s fees in this ease exceed what the debtor has allotted for them in the modified plan, the claims of the priority unsecured creditors will not be paid in full under the plan as proposed. This is because the proposed plan base of $7,930.78 is insufficient to cover in full the administrative expenses of $3,386.98 and the priority unsecured claims of $4,912.25. Therefore, were the Court to accede to the trustee’s argument—by allowing exclusive payment to the general unsecured creditors from the vehicle’s unencumbered value while the priority creditors remain partially unpaid—this would violate § 1322(a)(2) and the terms of the standard plan, which the debtor was required to use in modifying his plan. The trustee’s notion that this problem can be eliminated by the requirement that debtor fully fund all administrative and priority claims and then pay $5700.00 to the general unsecured creditors, is dispelled by the liquidation analysis to follow. The debtor, nonetheless, must propose a modified plan that pays the priority unsecured creditors in full.
The other referenced section applicable to the arguments raised by the parties is § 1325(a)(4), commonly known as the “best interests of creditors test,” which states that:
(a) [e]xcept as provided in subsection (b), the court shall confirm a plan if—
(4) the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the *924debtor were liquidated under chapter 7 of this title on such date.
11 U.S.C. § 1325(a)(4). Assuming all other criteria for plan modification are met, pursuant to this section the Court is required to approve a modified plan if it provides a distribution to the general unsecured creditors that is not less than they would have received had the case been liquidated under chapter 7. To arrive at a liquidation value to be paid the general unsecured creditors, the Court is to calculate the value of all nonexempt property of the estate, reduced by the administrative expenses that would be incurred in a chapter 7 case,15 by the amount of all lien claims that would be enforceable against the property under chapter 7,16 and by the amount attributable to priority unsecured claims allowed under chapter 7. E.g., In re Wilheim, 29 B.R. at 913; 8 Collier on Bankruptcy, supra, ¶ 1325.05[2][d], at 1325-21 to 22; 9D Am. Jur.2d Bankruptcy, supra, at § 3119. See also 11 U.S.C. § 726(a) (property of a chapter 7 estate is distributed first in payment of administrative and priority claims of the kind specified in, and in the order specified in, § 507, and thereafter in payment of other allowed unsecured claims).
Calculation of liquidation value in this case is a simple matter. Were the estate to be liquidated under chapter 7, it is agreed that the sole non-exempt asset would be the equity of $5,700.00 realized through the lien avoidance action. However, the general unsecured creditors would not receive this amount in a chapter 7 case. The value of the asset would be reduced by the sum of $684.00 to account for the 12 percent costs of liquidation incurred by a chapter 7 trustee, by the $150.00 adversary filing fee paid by a chapter 7 trustee to avoid GMAC’s lien, and by the sum of $4,912.25 that a chapter 7 trustee would pay to the priority unsecured creditors. Based on this calculation,17 demonstrating that the debtor’s general unsecured creditors in a hypothetical chapter 7 case would receive no distribution, the modified chapter 13 plan proposed by the debtor satisfies the best interests of creditors test. Although it pays nothing to the general unsecured creditors, it cannot be disapproved on this basis.
However, the chapter 13 trustee is dissatisfied with such a result. He believes that the sum of $5,700.00 must be added to the existing plan base and distributed exclusively to the general unsecured creditors. The crux of his argument is based on the following passage from the Bell decision:
[Although the debtors in these Chapter 13 cases will retain the subject vehicles following bankruptcy, they will have ‘purchased’ them by paying into the plan an amount of money equal to their value *925as of the effective date of the plan. This amount will be distributed among unsecured creditors of the estate, including the defendant creditors who will receive a substantial portion of their now unsecured claims. While the creditors in these cases, by not perfecting their liens, have forfeited their preferred position in the distribution of plan payments, no windfall results to the debtors, who must pay into the plan as much as if the subject vehicles were liquidated for the benefit of estate creditors in a Chapter 7 case.
In re Bell, 194 B.R. at 198. The trustee interprets this language to mean that only general, unsecured creditors are entitled to benefit when an asset becomes unencumbered through a lien avoidance action. In addition, the trustee contends that the plan base must be increased by the value of the asset without reference to the constraints that the best interests of creditors test places on what may be expected of a debtor. The Court finds neither argument to be of merit.
In the first instance, the Bell decision did not examine competition between groups of unsecured creditors18 over entitlement to funds of the estate. There was no discussion whatsoever in the opinion about the rights of priority unsecured creditors and, in fact, there is no evidence before the Court showing that priority claims were present in the cases consolidated in the Bell decision. Since Bell never addressed the issue at hand, it is of little persuasion in advancing the trustee’s argument. Nonetheless, the trustee has relied exclusively on the cited passage to support his position and has provided the Court with no other authority to bolster his argument. Nor has the Court found any authority to support the trustee’s notion that priority unsecured creditors may not share in any distribution realized when an asset becomes unencumbered through a lien avoidance action. As the Court explained in Bell, when a lien is avoided, the former lienholder’s interest in the debtor’s property becomes estate property and merges with any residual interest held by the debtor which passed to the estate upon commencement of the case. In re Bell, 194 B.R. at 197-8. If a debtor wishes to retain the previously encumbered asset, he must “purchase” it from the estate by paying the value of the asset into the plan where it will be distributed in accordance with the terms of the Bankruptcy Code and the standard plan. In this case, the $5,700.00 value released by the lien avoidance is the sole non-exempt asset of the estate and the debtor has already paid more than this sum into the plan. The fact that, in this case, the funds have been exhausted in paying the administrative and priority claims simply is a sad reality for the general unsecured creditors based on the mathematics of the case.
In addition, the trustee has been able to discount the relevance of liquidation analysis to the issue at hand, only by taking the cited passage from Bell out of context. The Bell decision was concerned with the ability of a chapter 18 trustee to avoid an unperfected security interest in a vehicle despite acts of a debt- or that had contributed to the unperfected status of the hen creditor. The decision further detailed the aftermath of lien avoidance: “the avoided lien ... is preserved for the benefit of the estate,” 194 B.R. at 197, “[t]he former lienholder’s interest in the debtor’s property automati*926cally becomes property of the estate,” id. at 197-98, and, upon confirmation, the debtor “acquires his previously encumbered asset free and clear of the avoided lien—subject only to reinstatement of the lien if the case is dismissed prior to the debtor’s discharge.” Id. at 198. In conveying to the aggrieved lien creditors that all was not lost as a result of application of these principles—and as a preamble to the passage cited by the trustee—the Court in Bell explained: ■
Application of these principles in each of the present cases results in the debt- or obtaining a vehicle free of the lien granted to secure its purchase price, while paying the creditor only a portion of its claim as an unsecured creditor under the debtor’s Chapter 13 plan. The creditors term this result an ‘abuse’ of the bankruptcy process.... Nevertheless, the Bankruptcy Code does not leave these creditors without protection. Rather, as one of the provisions designed to safeguard the rights of chapter 13 creditors, the Code assures that unsecured creditors in a Chapter 13 case will receive at least as much as they would have received if the estate were liquidated under chapter 7. This provision, known as the ‘best interests of creditors’ test, essentially requires the debtor to pay for his non-exempt assets over the term of the plan.
Id. (citations and footnote omitted). When read in context—with the passage cited by the trustee directly following the quoted preamble to that passage—the Bell decision expressly states that the best interests of creditors test applies in determining the amount that the unsecured creditors are entitled to receive following lien avoidance. Id. See also In re Hearn, 337 B.R. 603, 615-16 (Bankr.E.D.Mich.2006) (creditors have right to insist that the value of an avoided lien be made available to them under the debtor’s plan to satisfy the best interests of creditors test). Therefore, contrary to the trustee’s seeming notion that Bell fashioned a unique remedy, unbounded by the limitations of liquidation analysis, for those situations in which the errant conduct of a debtor contributed to the unperfected status of a lien, the decision merely reiterates what is provided by statute. 11 U.S.C. § 1325(a)(4). The Court agrees that the debtor would be subject to “double payment” were he required to pay the value of the vehicle into the plan without crediting amounts being paid to administrative and priority unsecured claims. To hold otherwise would violate 11 U.S.C. § 1325(a)(4) by enabling the general unsecured creditors to receive far more than they would have received had the lien been avoided and the vehicle liquidated by a chapter 7 trustee. While it may appear that the debtor in this chapter 13 case is reaping a windfall because, in contrast to a chapter 7 debtor, he is able to retain the vehicle free of the lien, this is not the case. The debtor has “purchased” the vehicle by paying more than its $5,700.00 value into the plan. See In re Brennan, 208 B.R. 448, 450 (Bankr.S.D.Ill.1997); In re Bell, 194 B.R. at 198. Indeed, while the trustee zealously strives to protect the interests of the general unsecured creditors, the detriment in this case falls not on the general unsecured creditors en masse, but only on the former lienholder, GMAC. The general unsecured creditors received no benefit from the vehicle when it was subject to GMAC’s lien and, upon lien avoidance, are receiving as much as if the vehicle had been liquidated.
Based on the foregoing, the trustee’s objection to the modified plan is overruled.19 However, the debtor will be or*927dered to further modify the plan in order to pay the priority unsecured claims in full.
SEE WRITTEN ORDER.
. These were debts for taxes granted priority pursuant to 11 U.S.C. § 507(a)(8) and owed to the Illinois Department of Revenue in the amount of $890.00 (claim # 6-1) and to the Internal Revenue Service in the amount of $4,022.25 (claim # 10-1).
. The administrative claims consist of attorney’s fees of $2,200.00, the adversary filing fee of $150.00, and, according to the trustee, his chapter 13 trustee's fees of $1,036.98. The debtor estimates the chapter 13 trustee’s fees to be $653.60 but admits that the trustee has a better grasp of the amount.
. The debtor’s original plan, confirmed on October 31, 2003, paid a minimal distribution to the general, unsecured creditors due to the Court, at that time, requiring that general unsecured creditors receive, at minimum, ten percent of their allowed claims. After GMAC’s lien was avoided on February 9, 2004, it was not until August 11, 2004, that the trustee moved to increase the plan payments due to insufficient funding based on the claims that had been filed. This resulted in the debtor modifying the plan to increase its base to pay general unsecured creditors a substantial dividend totaling approximately $7,617.74. See Order of September 9, 2004 approving plan modification. Two further plan modifications, approved on June 1, 2005, and on March 29, 2006, respectively, decreased the plan base slightly. However, each modified plan still distributed more than $6,000.00 to the general unsecured creditors. This situation changed when the debtor filed another plan modification on October 13, 2006, decreasing the plan base substantially and making no distribution to the general unsecured creditors. This modification was approved on November 3, 2006, without objection from the trustee or any creditor. The debtor filed yet another modified plan on March 1, 2007, again providing no distribution to the general, unsecured creditors. The trustee was the sole objector to this plan, and his objection was based on internal inconsistencies in the plan with respect to its duration. The debtor agreed to modify the plan *921again to cure this problem, resulting in the motion to modify that is now before the Court.
. Since the plan proposed to pay $3,003.60 in administrative claims and $4,912.25 to the priority unsecured creditors before the general unsecured creditors would be paid anything, the proposed plan base of $7,930.78 would be nearly exhausted in paying the administrative claims and priority debts totaling $7,915.85, leaving only $14.93 remaining. As explained in note 2, supra, there is a discrepancy of $383.38 between the amount of the chapter 13 trustee's fees proposed to be paid in the plan and the amount that the trustee claims he is owed. The debtor states that the $14.93 was intended as a cushion due to fluctuations in the chapter 13 trustee's fees. Therefore, the $14.93 would be used to pay the trustee's higher than expected fees and the general unsecured creditors would receive no distribution under the proposed plan.
. The trustee’s objection, filed on April 10, 2007, stated:
On February 9, 2004, an Order was entered avoiding the lien on debtor's 2001 Chevy, with a value of $5,700.00. Therefore, this amount must be paid to unsecured creditors. Plan payments must increase from $285.00 per month to $3,320.00 per month.
. The trustee arrives at this figure by adding the $5,700.00 value of the unencumbered vehicle to the administrative costs of $3,386.98 and the priority claims of $4,912.25. The Court notes that a plan base of $13,999.23 would be substantially more than twice the value of the unencumbered vehicle.
. It is not evident that the base increase was linked to the lien avoidance action since there is a gap of over six months between the February 9, 2004 lien avoidance and the trustee’s efforts in August 2004 to obtain an increase in plan payments. See supra note 3.
. The trustee states that "[d]ue to inadvertence and/or oversight,” he failed to raise the issue at hand with respect to the plans filed October 13, 2006, and March 1, 2007, both of which decreased the plan base substantially and offered no distribution to the general unsecured creditors. The Court is troubled that the trustee now raises this issue which *922should have been raised as an objection to the October 13, 2006 plan modification. However, since the debtor has not argued issue preclusion, the Court will not examine the impact of the trustee's failure to object to this issue when it first arose. See, e.g., 8 Collier on Bankruptcy ¶ 1329.02, at 1329-5 (15th ed. rev.2007).
. Because this case was filed on September 29, 2003, the amendments enacted by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 are not applicable. Hereafter, all references to the Bankruptcy Code, 11 U.S.C. § 101 et seq., will be to the version of the statute in effect when the instant bankruptcy case was filed.
. As noted previously, the proposed modification increases the plan duration but does not change the monthly payment amount.
. The instructions for use of the standard plan state that "[cjonsumer debtors are expected to use this standard plan unless a motion is filed to show cause why the use of another plan should be allowed.... Additional provisions not provided for in the form may be added where circumstances warrant, except that, unless otherwise provided in these instructions, such additional provisions may modify existing provisions only if the debtor first obtains leave of court.” See Chapter 13 Plan Instructions for cases filed before October 17, 2005, http://www.ilsb.uscourts.gov/ procforms.shtm.
. Section III(H) of the modified plan enumerates the priority claims as those of the Internal Revenue Service and the Illinois Department of Revenue. See supra note 1.
. The introductory paragraph to section III of the modified plan, like the standard plan, states that "[flrom the payments received from debtor(s), the Trustee shall make disbursements in the following order....” That order places priority claims ahead of general unsecured claims for payment and provides that general unsecured creditors will "share in pro-rata distribution of all remaining funds.” Compare section III (introduction, H, and J) of modified plan filed on April 5, 2007 with the same provisions of the Chapter 13 plan for use in cases filed before October 17, 2005, http://www.ilsb.uscourts.gov/procforms. shtm.
. This section provides in pertinent part that “the plan may ... provide for payments on any unsecured claim to be made concurrently with payments on any secured claim or any other unsecured claim.” 11 U.S.C. § 1322(b)(4). See also 8 Collier on Bankruptcy, supra, ¶ 1322.08, at 1322-33 (footnote omitted) ("priority claims are not entitled to payment in advance of other unsecured claims as a matter of right”).
. 8 Collier on Bankruptcy, supra, ¶ 1325.05[2][d], at 1325-21. These expenses would include costs of sale by the chapter 7 trustee, trustee's fees and other expenses that would be incurred in a chapter 7 liquidation of the property. Id. at 1325-21 & n. 27; 5 Norton Bankr.L. & Prac.2d § 122:7 (2007); 9D Am.Jur.2d Bankruptcy § 3119 (2007) The chapter 13 trustees in this District subtract 12 percent of an asset's value to account for the hypothetical chapter 7 trustee’s costs in selling the item and for the chapter 7 trustee's statutory fees. The debtor has not contested using this methodology.
. E.g., In re Wilheim, 29 B.R. 912, 913 (Bankr.D.N.J.1983); 8 Collier on Bankruptcy, supra, ¶ 1325.05[2][d], at 1325-21 to 22; 9D Am.Jur.2d Bankruptcy, supra, at § 3119. As noted earlier, there are no lien claims to be paid in this case other than the GMAC lien, which would be avoided by a chapter 7 trustee.
. The calculation is as follows; $5,700.00-($684.00 + $150.00 + $4,912.25) =-$46.25.
. The reference to "unsecured creditors" in the passage cited by the trustee does not necessarily exclude priority unsecured creditors since, with the exception of administrative claimants, all claimants entitled to priority treatment under § 507 are unsecured creditors. 11 U.S.C. § 507.
. Because the debtor has prevailed on the merits, the Court need not address the debt- or’s argument that the trustee lacked standing to avoid GMAC's lien. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494280/ | ORDER ON HEARTSTONE DEVELOPERS, LLC’S MOTION TO REMAND ANDIOR FOR MANDATORY ABSTENTION (Doc. No. 26)
ALEXANDER L. PASKAY, Bankruptcy Judge.
THE MATTER under consideration is a Motion to Remand and/or for Mandatory Abstention filed by Heartstone Developers, LLC (Heartstone) (Doc. No. 26). The *340lawsuit between the parties originally began when Talisman Marina, Inc. (the Debtor) filed a relief action against Heart-stone, Dominick Caceavella, Louis Castel-lanos, and Vito Lochiatto in the Circuit Court for the Twentieth Judicial Circuit in and for Charlotte County, Florida (State Law Action).
In Count I of its State Law Action, the Debtor in its Complaint sought damages based on alleged Slander of Title. Count II is an action against the Defendant for declaratory relief, pursuant to Florida Statutes, Chapter 86. The Debtor in its Complaint is seeking that an order be entered on Count II naming the Debtor as the owner of the disputed tract; that the disputed tract was never owned by any of the Defendants; that the Defendants possess no interest in the disputed tract; and the Debtor is entitled to an unfettered access to the disputed tract. The Debtor in Count III of the State Law Action sought Injunctive Relief prohibiting the Defendants from asserting any interest in the disputed tract.
The Debtor filed its Petition for Relief under Chapter 11 of the Bankruptcy Code on September 14, 2007. On October 3, 2007, the Debtor filed a Notice of Removal of the State Law Action to the United States District Court for the Middle District of Florida, Fort Myers Division (District Court). On October 15, 2007, Heart-stone filed its Motion and Response in the District Court. On November 5, 2007, the District Court transferred the State Law Action and all pending motions to the Bankruptcy Court’s Fort Myers Division.
EVENTS PRECEDING THE REMOVAL
On February 12, 2006, the Debtor filed its State Law Action against Heartstone and its principals, seeking declaratory and injunctive relief. Specifically, the Debtor as owner of submerged lands, alleged that Heartstone, as owner of adjoining uplands, was infringing on its property rights by erecting docks over its submerged land. In response to the Debtor’s State Law Action, Heartstone asserted that in 1994, its riparian rights to erect, repair, maintain, and use the docks were established by the entry of a Final Judgment entered by the State Court in a litigation between Heartstone and the Debtor’s predecessors in title.
Prior to the hearing scheduled on Heart-stone’s Motion for Summary Judgment, the Debtor sought leave to file an Amended Complaint. The Debtor’s motion was granted. The Debtor’s Amended Complaint sought a declaratory judgment in Count I, damages for slander of title in Count II, and injunctive relief in Count III. All of these claims presented a different factual basis and apparently different legal allegations to support its amended claims based on the contention that Heart-stone was infringing on its property rights by erecting docks in its water over the submerged land owned by the Debtor.
On September 14, 2007, just a month before the case was set for trial, the Debtor filed its Petition for Relief under Chapter 11, Case No. 9:07-bk-08435. On October 3, 2007, after the Debtor filed its Petition, it removed the State Law Action to the United States District Court for the Middle District of Florida, Fort Myers Division. Heartstone originally filed the Motion to Remand in the Middle District of Florida on October 15, 2007. On November 5, 2007, the Middle District transferred the State Law Action to this Court and ordered that all pending motions shall be terminated. On November 31, 2007, Heartstone filed a Motion to Remand and/or for Mandatory Abstention pursuant to Fed. R. Bankr.P. 9027(e)(3) pursuant to 28 U.S.C. 1334(c)(2).
*341These are the facts which according to Heartstone, mandate the remand back to the State Court for the following reasons: 1)none of the claims filed by the Debtor present a federal question of jurisdiction, and no diversity exists between the parties to support diversity jurisdiction in the federal court; 2) the State Law Action was filed before bankruptcy in the State Court; 3) the issue in the State Law Action does not arise under Chapter 11 or under Title 11. In addition, Heartstone points out that the resolution of the issues involved would not have any material effect on the resolution of the issues in the State Law Action.
It is the Debtor’s contention that the dispute involves property of the estate over which the Bankruptcy Court has exclusive jurisdiction, and therefore, a mandatory abstention is not applicable.
LEGAL ANALYSIS
Mandatory abstention is based on 28 U.S.C. 1334(c)(2) which provides as follows:
Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such a proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction.
It cannot be gainsaid that the controversy was not commenced and pending at the time of the filing of the bankruptcy case. It is equally apparent that the dispute in the State Law Action can be resolved without any undue delay, and therefore, the mandatory abstention provision should apply. The subject matter is at most “related” to Chapter 11 and the characterization of the dispute by the Debtor that the same is a “core” proceeding is not supported by the record. It is well established that the matter is not a “core” proceeding merely because the resolution of the action may result in more or less assets in the estate. In re J. Baranello & Sons, Inc., 149 B.R. 19 (Bankr.E.D.N.Y.1992); Matter of U.S. Brass Corp., 110 F.3d 1261, 1268-69 (7th Cir. 1997). In Matter of U.S. Brass Corp., the court held that the proceeding for a determination of insurance coverage was a “non-core” proceeding because the issue of whether the coverage existed under a $5 million insurance policy would be determined in suit for breach of contract in state court if insureds were not in bankruptcy. In the alternative, the Debtor also seeks a remand of the removed case on equitable grounds pursuant to 28 U.S.C. 1452(b).
This Section authorizes a remand of a removed claim or cause of action on any equitable grounds. In determining whether or not the remand of an action is proper on an equitable ground, the courts would consider as relevant the following factors:
1) the effect remand would have on the efficient and economic administration of the estate,
2) efficient uses of judicial resources,
3) the nature of the claim or claims and the extent to which issues of state law predominate,
4) the existence of prejudice to unre-moved parties,
5) comity considerations,
6) whether remand lessens the possibility of inconsistent results,
*3427) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case,
8) the presence of non-debtor parties,
9) the existence of the right to a jury trial,
10) the burden of the bankruptcy court’s docket,
11) the prejudice to involuntarily removed parties,
12) the plaintiffs choice of forum.
See In re Grace Community, Inc., 262 B.R. 625, 629 n. 6 (Bankr.E.D.Pa.2001); In re Hotel Mt. Lassen, Inc., 207 B.R. 935, 942 (Bankr.E.D.Cal.1997); In re Black & White Cab Co., Inc., 202 B.R. 977, 978-79 (Bankr.E.D.Ark.1996); In re S. Technical Coll., Inc., 144 B.R. 421, 422 (Bankr.E.D.Ark.1992); Drexel Burnham Lambert Group v. Vigilant Ins. Co., 130 B.R. 405, 407 (S.D.N.Y.1991). The application of the foregoing factors in the present instance supports the conclusion that the State Law Action should be remanded to the State Court where it was originally filed. The dispute is clearly a State Law Action and not a “core” proceeding. The remand will not adversely impact the administration of the estate. Concerning judicial efficiency, the State Law Action was ready for trial before it was removed. The State Court judge is intimately familiar with claims and issues involved in the case. The fact of the matter is that the State Court judge presided over a similar case in which Heart-stone contended has a binding effect on the doctrine of res judicata with regard to the current matter. Moreover, Heart-stone did not consent to the entry of a final judgment by this Court. Therefore, this court’s power would be limited to submitting a recommended findings of fact and conclusion of law to the District Court, who will then review any findings and conclusions of this court de novo, pursuant to 28 U.S.C. § 157(c)(1) and F.R.B.P. 9033.
In sum, based on the record, this Court is satisfied that the Motion for Mandatory Abstention under 28 U.S.C. 1334(c)(2) is appropriate. This Court shall abstain to consider the Amended Complaint filed by the Debtor pursuant to 28 U.S.C. 1452(b) and remand the same back to the original court where the action was commenced on equitable grounds.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that Heartstone Developers, LLC’s Motion to Remand and/or for Mandatory Abstention (Doc. No. 26) be, and the same is hereby, granted. It is further
ORDERED, ADJUDGED AND DECREED that the Complaint filed by Talisman Marina, Inc., in the above-captioned adversary proceeding be, and the same is hereby, remanded to the Circuit Court of the Twentieth Judicial Circuit in and for Charlotte County, Florida. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494282/ | MEMORANDUM OPINION
JEFF BOHM, Bankruptcy Judge.
I. Introduction
Michael Ruggiero, D.O. (Defendant) entered into a lease with VGM Financial Services (Plaintiff); thereafter, Defendant became unable to fulfill his payment obligations under the lease. As a result, Defendant eventually became liable to Plaintiff in the amount of $230,000, which Defendant seeks to discharge under Chapter 7. Plaintiff contests the dis-chargeability of that debt, arguing that: (1) under § 523(a)(2)(A), Defendant obtained money by false pretenses, false representations, or actual fraud; (2) un*788der § 523(a)(4), Defendant obtained money by larceny; or (3) under § 523(a)(6), Defendant willfully and maliciously injured Plaintiff.1 The issue presented to this Court is whether Defendant possessed the requisite intent necessary to deny the dischargeability of his $230,000 debt under these sections of § 523(a). For the reasons set forth below, this Court finds that Defendant’s debt to Plaintiff does not warrant nondischarge-ability under 11 U.S.C. §§ 523(a)(2)(A), (a)(4), or (a)(6).
II. Credibility of Witnesses
Five witnesses testified: Defendant, Edward Mann (a business broker), Brian Schmadeke (the Plaintiffs representative), Lisa Nimocks (a former employee of a company in which the Defendant had an interest), and George West (another former employee of a company in which the Defendant had an interest). The Court finds all five witnesses to be credible.
III. Findings of Fact
The facts, as stipulated to or admitted by the parties, or as adduced from testimony of various witnesses, or as established by the introduction of exhibits, are as follows:
1. Defendant is the sole shareholder, officer, and director of Michael Ruggiero, D.O., P.A. He has been practicing medicine since 1983.
2. MMCi, Inc. (MMCi) was a company which was in the business of purchasing medical equipment to lease to small, rural hospitals.
3. Defendant initially met Robert Sta-bell (Stabell) when Stabell was his patient. Defendant thereafter entered into various business transactions with Stabell, including joining him as a shareholder, officer, and director of MMCi. Defendant trusted Stabell and firmly believed that Stabell was an honest individual.
4. Defendant’s trust in Stabell was evidenced by loans and capital contributions that Defendant made to MMCi, totaling $113,000, prior to the transaction that is the subject of this adversary proceeding.
5. Defendant made these loans to MMCi, at the express request of Stabell.
6. Defendant complied because he trusted Stabell and relied upon his judgment.
7. Defendant owned 250 shares of stock in MMCi.
8. Defendant was elected to the position of Vice-President of MMCi and served on its board of directors.
9. Stabell owned 550 shares of stock in MMCi. He served as President and CEO of the company and served on its board of directors. Stabell was the individual responsible for the daily operations of MMCi. He made all of the key decisions for this company and was the only signatory on the company’s bank accounts.
10. Stabell told Ruggiero that he (i.e.Stabell) had put together a transaction involving the purchase of certain ultrasound equipment (the Equipment) that Stabell represented would be placed at Swisher Memorial Hospital in Tulia, Texas (the Hospital).
11. Stabell told Defendant that he (i.e.Defendant) needed to sign a lease with the Plaintiff (the Lease) because Stabell’s credit rating was *789too low, and in order for funds to be remitted to MMCi so that it could purchase the Equipment for the Hospital, Defendant would need to use his good credit rating to execute the Lease.
12. On February 8, 2006, Defendant signed a Master Agreement with Plaintiff. In the Master Agreement, Defendant represented that the Equipment would be located, and remain located, at the address indicated on the Lease — which was Defendant’s medical office address in Bryan, Texas as opposed to the Hospital’s address in Tuba, Texas. [Plaintiff’s Exhibit No. 4]
13. On February 8, 2006, Defendant signed the Lease with Plaintiff covering the Equipment. [Plaintiffs Exhibit No. 5.] By signing the Lease, Defendant made representations to Plaintiff as described in paragraphs 14, 15, and 16 below:
14. In the Lease, the address where the Equipment would be delivered and remain was Defendant’s business address, not at the Hospital’s address in Tulia, Texas. [Plaintiffs Exhibit No. 5.].
15. In the Lease, Defendant represented that “... Customer [Defendant] warrants (a) delivery and acceptance of the equipment and of any supporting documentation; and, (b) that the equipment is satisfactory for purposes of the lease.” [Plaintiffs Exhibit No. 5.]
16. In the Lease, Defendant represented that “Customer’s [i.e. Defendant’s] acceptance shall be conclusive and irrevocable ...” [Plaintiffs Exhibit No. 5]
17. Defendant did not believe that he was making false representations to Plaintiff at the time he executed the Master Agreement and Lease. At trial, Defendant conceded that the aforementioned provisions within the Master Agreement and Lease turned out to be false.
18. At trial, Defendant testified that he never read the Lease or Master Agreement, but just signed where the signature block appeared. Defendant stated that he did not read the documents because he assumed that “the rest” was “dealt with by the people who were managing all of this.” The Court infers from this statement that Defendant was referring, at a minimum, to Stabell and other employees at MMCi whom Stabell supervised.
19. After February 2006, Eddie Mann (Mann) of RC Leasing & Consulting, LLC, telephoned Defendant, on behalf of Plaintiff, and asked him the following question: “I am calling to confirm that you received the Equipment and that it’s in good working order?” Defendant responded in the affirmative.
20. At trial, Defendant testified that he represented to Mann that the Equipment had been delivered because: “I believed that [the Equipment] was placed at Swisher Memorial Hospital” because “that was the original plan” and “Mr. Stabell told me that it was placed.” At trial, Defendant conceded that what he represented to Mann turned out to be false.
21. After Defendant informed Mann that MMCi had received the Equipment and that it was in good working order, Mann testified that Defendant explicitly told him to pay the vendor. Defendant did so because, having been assured by Sta-bell that MMCi had taken delivery *790of the Equipment and that it was in good working order, Defendant honestly believed that the transaction should be concluded.
22. Mann notified Plaintiff that Defendant had confirmed delivery of the Equipment.
23. Defendant had no reason to know or believe that Stabell, as President of MMCi, had not purchased the Equipment just as he had represented to Defendant.
24. On February 9, 2005, Plaintiff wired the sum of $76,356.50 to MMCi’s checking account so that MMCi could pay for the Equipment. On February 15, 2006, Plaintiff wired once again the sum of $76,356.50 to MMCi’s checking account so that MMCi could pay for the Equipment.
25. But for the execution of the Lease with Defendant’s representations, Plaintiff would not have wired money to MMCi.
26. Defendant never notified Plaintiff that MMCi did not order the Equipment.
27. On October 23, 2006, after Defendant did not make the payments due under the Lease, the Plaintiff filed suit in Iowa state court. The state court entered judgment that Defendant, Stabell, and entities owned by these two individuals were jointly and severally liable to Plaintiff, in the amount of $177,916.71, plus additional fees and expenses of $404.50, and court costs of $150, together with interest at the rate of 18% per annum until the judgment is paid. As of the trial date, the total balance owed under the judgment had risen to approximately $230,000.
28. On or about November 6, 2006, Defendant discovered that MMCi had never ordered the Equipment.
29. At trial, Defendant admitted that the Equipment was never delivered to his office, and that he never had any intention to take possession himself of the Equipment.
30. Defendant expected the Equipment to be delivered to the Hospital and he expected to make a profit from the transaction.
31. Plaintiff relied on the representations in the Lease as assurances that the Equipment was delivered to Defendant’s office and was satisfactory for the purposes of the Lease.
32. Defendant did not have knowledge of Stabell’s bad conduct while Sta-bell served as President and CEO of MMCi. Defendant did not have knowledge that MMCi failed to purchase the Equipment. Rather, Defendant believed that Stabell had acted as promised, and that he, as President of MMCi, had seen to it that the Equipment had been purchased and delivered to the Hospital.
33. Throughout the course of the transaction with Plaintiff, all representations relating to the Equipment made by Defendant were based upon information provided by Sta-bell, which Defendant honestly believed to be true and accurate.
34. On March 31, 2008, Stabell was convicted for Misapplication of Fiduciary Property greater than $20,000 and less than $100,000 and was sentenced to 10 years of con-finemen. Two witnesses, Lisa Ni-mocks and George West, testified that they quit MMCi because they *791did not like Stabell’s business practices.
IV. Conclusions of Law
A. Jurisdiction and Venue
This Court has subject matter jurisdiction over this suit pursuant to 28 U.S.C. §§ 1334(a) and (b). Since the Complaint seeks to determine dischargeability of a debt under 11 U.S.C. § 523(a), this is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (I) and (0). Venue is proper under 28 U.S.C. § 1409.
B. Plaintiffs burden of proof under 11 U.S.C. § 523 is a preponderance of the evidence.
The United States Supreme Court held in Grogan v. Garner that preponderance of the evidence is the appropriate standard of proof for establishing dis-chargeability exceptions under § 523. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
C. Five elements must be met for a debt to be nondischargeable under § 523(a)(2)(A).
Section 523(a)(2)(A) provides that a debt will not be discharged if it is “for money, property, services, or an extension, renewal, or refinancing of credit, to the extent [that it was] obtained by false pretenses, a false representation, or actual fraud.” To prevail under § 523(a)(2)(A), the Fifth Circuit has held that the creditor must show that: (1) the debtor made a representation; (2) the debtor knew the representation was false; (3) the representation was made with the intent to deceive the creditor; (4) the creditor actually and justifiably relied on the representation; and (5) the creditor sustained a loss as a proximate result of its reliance. In re Mercer, 246 F.3d 391, 403 (5th Cir.2001); In re Quinlivan, 434 F.3d 314, 317 (5th Cir.2005) (citing RecoverEdge v. Pentecost, 44 F.3d 1284, 1293 (5th Cir.1995)). Therefore, Plaintiff has the burden to establish each of these elements, by a preponderance of the evidence, in order to prevail.
D.Plaintiff did not meet its burden of establishing, by a preponderance of the evidence, that Defendant’s debt is nondischargeable under § 523(a)(2)(A).
Plaintiff established the first, fourth, and fifth elements. Regarding the first element, Defendant made a representation by signing the Master Agreement expressly stating that the Equipment would be delivered and located at his office. [Plaintiffs Exhibit No. 4, FOF Nos. 12.] Additionally, by signing the Lease, Defendant represented that: (1) the Equipment was satisfactory for purposes of the Lease; (2) the Equipment would be delivered to Defendant’s business address; (3) Defendant’s acceptance was conclusive and irrevocable; and (4) Defendant authorized Plaintiff to pay the equipment manufacturer/supplier. [Plaintiffs Exhibit No. 5, FOF Nos. 13, 14, 15, 16.] Indeed, Defendant conceded during cross-examination he made representations to Plaintiff through Mann and the Lease. [FOF Nos. 19, 20, 21, 22, 23.] Therefore, Plaintiff easily established the first element.
In regard to the fourth element, that the creditor justifiably relied on debt- or’s representations, courts have found that justifiable reliance is a lower standard than reasonable reliance. In re Jacobson, 2007 WL 2141961, *2, 2007 U.S.App. LEXIS 17844, *5 (5th Cir.2007) (citing Field v. Mans, 516 U.S. 59, 74-75, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995)). In the suit at bar, Plaintiff established that it wired $152,713.00 to MMCi only after it received the signed Lease and Master Agreement from Defendant and Eddie Mann con*792firmed delivery of the Equipment with Defendant. [FOF Nos. 21, 22, 24, 25.] At trial, Plaintiffs representative, Brian Schmadeke, gave uncontroverted and unequivocal testimony that but for Defendant’s representations contained in the Lease, Plaintiff would not have wired the money. [FOF No. 25.] Therefore, Plaintiff established that in extending the financing of $152,713.00, it justifiably relied on Defendant’s representations.
Plaintiff also established the fifth element, that it sustained a loss as a result of its justifiable reliance on Defendant’s representations. Plaintiff, in relying on the Lease signed by the Defendant, provided funds of $152,713.00, which were not repaid and eventually reduced to a judgment, the balance of which is approximately $230,000.00. [FOF Nos. 24, 25, 27, 31.] Thus, Plaintiff has incurred a loss of $230,000.00, thereby satisfying the fifth element.
However, even though Plaintiff met its burden of establishing the first, fourth, and fifth elements by a preponderance of the evidence, it failed to establish the second and third elements. These elements require, respectively, that at the time Defendant signed the Master Agreement and the Lease, he knew the representations contained therein were false, and that he made the representations with the intent to deceive Plaintiff. Additionally, the Plaintiff must prove that at the time Defendant made the oral representations to Mann, he knew they were false and that he made these representations with the intent to deceive Plaintiff.
The Court’s duty, as a finder of fact, is to determine the credibility of a witness. Fed. R. Civ.P. 52(a); Pigrenet v. Boland Marine & Mfg. Co., 631 F.2d 1190, 1192 (5th Cir.1980). After listening to Defendant’s testimony, the Court finds that he is a truthful and credible witness who honestly believed that the Equipment had been delivered and was located at the Hospital. [FOF Nos. 20, 21, 23, 28, 30, 32, 33.] Plaintiff failed to estabbsh that at the time Defendant signed the Master Agreement and the Lease, he knew that his representations about the Equipment were false, or that he was trying to deceive Plaintiff in order to receive money from them. Plaintiff further failed to estabbsh that when Defendant made oral representations to Mann, Defendant knew his representations were false.
It is important to note that the Fifth Circuit has held that:
An intent to deceive may be inferred from “reckless disregard for the truth or falsity of a statement combined with the sheer magnitude of the resultant misrepresentation.” In re Norris, 70 F.3d 27, 30 n. 12 (5th Cir.1995), (citing In re Miller, 39 F.3d 301, 305 (11th Cir.1994)). Nevertheless, an honest bebef, even if unreasonable, that a representation is true and that the speaker has information to justify it does not amount to an intent to deceive. Palmacci v. Umpier-rez, 121 F.3d 781, 788 (1st Cir.1997). Thus, a “dumb but honest” defendant does not have scienter. Id., (citing 2 F. Harper, et al, Law of Torts § 7.3, at 393 (2d Ed.1986)).
In re Acosta, 406 F.3d 367, 372 (5th Cir.2005).
Application of Acosta to the suit at bar lends support to this conclusion: even though Defendant may have been acting carelessly in not checking to confirm that the Equipment was at the Hospital and was in good working order, his honest bebef that it was — even if unreasonable— does not rise to the level of intending to deceive Plaintiff. Indeed, Defendant’s concession that he had not read the Lease, but just blindly signed his name in the *793indicated location. [FOF No. 18] supports the Court’s finding that Defendant was merely acting carelessly, without the requisite intent of deception. Additionally, the Court finds that Defendant, who lent money to MMCi and had business interactions with Stabell for several years, clearly trusted Stabell. [FOF Nos. 3, 4, 5, 8.] Defendant honestly relied on Stabell’s representations and used this information in his dealings with Plaintiff. [FOF No. 33, 32, 23, 18, 20, 21.] Therefore, given that Defendant was a truthful and credible witness who honestly believed that he was making accurate representations to Plaintiff at the time he executed the Lease and at the time he spoke to Mann, the Court finds that Plaintiff failed to establish the second and third elements by a preponderance of the evidence.
Because Plaintiff did not meet its burden of proving, by a preponderance of the evidence, all five elements required to make a debt nondischargeable under § 523(a)(2)(A), the Court concludes that Plaintiff cannot prevail under this provision.
E. Plaintiff did not commit larceny or embezzlement under § 523(a)(4) of the Bankruptcy Code.
Section 523(a)(4) provides for the nondischargeability of any debt incurred by larceny or embezzlement. In re Davenport, 353 B.R. 150, 195 (Bankr.S.D.Tex. 2006). Larceny is “the fraudulent and wrongful taking and carrying away of the property of another with the intent to convert it to the taker’s use and with intent to permanently deprive the owner of such property.” In re Hayden, 248 B.R. 519, 527 (Bankr.N.D.Tex.2000). Embezzlement is “the fraudulent appropriation of property by a person to whom such property has been entrusted, or into whose hands it has lawfully come.” Moore v. United States, 160 U.S. 268, 269, 16 S.Ct. 294, 40 L.Ed. 422 (1895). Larceny is not the equivalent of embezzlement. This Court previously described the distinction between larceny and embezzlement: “Both larceny and embezzlement involve the fraudulent appropriation of another’s property; they only differ in timing. Larceny applies when the debtor unlawfully appropriates the property at the outset, whereas embezzlement applies when a debtor unlawfully appropriates property after it has been entrusted to the debtor’s care.” Davenport, 353 B.R. at 199.
Furthermore, in regard to larceny, § 523(a)(4) requires that the actor carry away the property with the intent to convert it to his own use and with the intent to permanently deprive the owner of such property. Hayden, 248 B.R. at 526. Absent this specific intent, a party cannot commit larceny under § 523(a)(4). Id.
In the suit at bar, the Plaintiff asserts that the Defendant’s debt is nondis-chargeable because the Defendant committed larceny. This Court disagrees. MMCi lawfully received the funds from Plaintiff, even though the lease agreement executed by Defendant contained false misrepresentations. [FOF No. 6] Larceny requires that a person unlawfully appropriate the property from the outset. At the outset, Plaintiff purposely remitted to MMCi funds in the amount of $152,713.00, as set forth in the lease agreement. [FOF No. 24] Because the funds were lawfully remitted to MMCi at the inception of the transaction, the contested transaction does not fall under the category of larceny.
Furthermore, Defendant lacked the necessary intent for larceny as required by § 523(a)(4). Defendant testified that when he executed the Lease agreement with Plaintiff so that MMCi could receive the funds, he did so honestly, absent any in*794tent to cause harm to Plaintiff. [FOF No. 11, 13] Though Defendant conceded that he did not read the Lease, Defendant signed and bound himself to the representations of the Lease because he trusted Stabell and relied upon his judgment. [FOF Nos. 4, 13] Defendant testified that he merely wished for MMCi to obtain the funds so that MMCi could purchase the Equipment and deliver it to the Hospital. [FOF No. 10] Even though Defendant, by signing the Lease, intended for Plaintiff to wire to funds to MMCi, he did not intend for MMCi to never purchase the Equipment. Defendant was adamant that the harmful consequences suffered by Plaintiff were completely unintended. [FOF No. 23] Because the Court finds Defendant’s testimony credible, the Court finds that Defendant lacked the requisite intent to commit larceny. Therefore, because Defendant did not commit larceny, he cannot be denied the discharge of this debt under § 523(a)(4).
F. Defendant did not commit willful and malicious injury to Plaintiff under § 523(a)(6) of the Bankruptcy Code.
Section 523(a)(6) of the Bankruptcy Code denies the discharge of any debt for willful and malicious injury by the debtor to another entity or to the property of another entity. In order for conduct to be willful and malicious, the debtor must have acted with the actual intent to cause injury. Kawaauhau v. Geiger, 523 U.S. 57, 57, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998); In re Williams, 337 F.3d 504, 509 (5th Cir.2003). The test for willful and malicious injury is whether there exists “either an objective substantial certainty of harm or a subjective motive to cause harm on the part of the debtor.” Williams, 337 F.3d at 509. The debtor must have intended to cause specific injury to the creditor, not just have intended to do the act which caused injury to the creditor. Kawaauhau, 523 U.S. at 57, 118 S.Ct. 974.
In this suit, Defendant lacked the necessary intent to cause injury to Plaintiff. It is uncontested that the Defendant intended for Plaintiff to remit the funds to MMCi. [FOF No. 11] However, in order for the Defendant to be denied a discharge of this debt under § 523(6), he must have caused Plaintiff to remit the funds to MMCi with the intent that the monies would never be repaid. In his testimony, Defendant stated that he did not intend to inflict any injury upon Plaintiff. [FOF No. 29] Rather, Defendant intended for MMCi to have use of the funds for an honest purpose — to purchase the Equipment. [FOF Nos. 10, 11]; with such purchase, Defendant expected to generate income himself from MMCi’s placement of the Equipment, thereby allowing Defendant to make payments under the Lease. [FOF No. 30.] Because this Court finds the Defendant’s testimony credible, this Court concludes that Defendant’s discharge of this debt may not be denied under § 523(a)(6).
G. Defendant’s subsequent discovery that MMCi had not ordered the Equipment, and his failure to make disclosure of this fact to Plaintiff, does not, in itself, establish any intent by the Defendant to harm Plaintiff.
Finally, Plaintiff suggested that Defendant’s intent to harm Plaintiff was demonstrated by the fact that once the Defendant discovered on November 6, 2006 that the Equipment had in fact never been purchased and delivered [FOF No. 28], Defendant failed to disclose this information. [FOF 26] Plaintiff argues that his failure to disclose constitutes a cover-up evidencing Defendant’s intention to defraud Plaintiff. This Court disagrees. Defendant testified that once he discover*795ed this important information, he became very concerned and retained counsel. From the Defendant’s testimony, the Court concludes that Defendant’s counsel recommended that he make no statements about this information, and Defendant followed this advice. While Defendant’s failure to disclose may reflect poorly on Defendant, this fact alone — and this is the only fact impugning the Defendant’s integrity — is insufficient to cause this Court to conclude that Defendant intended to harm Plaintiff. Accordingly, Plaintiffs argument on this point must fail.
V. Conclusion
The dischargeability exceptions of § 523 are to be narrowly construed in order to give effect to the fresh start policy of the Bankruptcy Code. In re Walker, 48 F.3d 1161, 1164-65 (11th Cir.1995). Thus, exceptions to discharge-ability “should be limited to those clearly expressed in the statute.” Matter of Boyle, 819 F.2d 583, 588 (5th Cir.1987). Additionally, under 11 U.S.C. § 523, the plaintiff bears the burden of proving the nondisehargeability of a debt by a preponderance of evidence. Garner, 498 U.S. at 297, 279, 111 S.Ct. 654. In the suit at bar, the Court finds that Defendant should not be denied discharge under 11 U.S.C. § 523(a)(2)(A), (a)(4), or (a)(6).
Plaintiffs claim that Defendant’s debt should be nondischargeable under § 523(a)(2)(A) fails because Plaintiff did not establish all five essential elements, as required by the Fifth Circuit. Mercer, 246 F.3d at 403; Quinlivan 434 F.3d at 317 (citing Pentecost, 44 F.3d at 1293). Specifically, Plaintiff did not meet its burden of proving that Defendant knew his representations were false at the time he signed the Master Agreement and Lease, or that Defendant made representations to Mann with the intent to deceive Plaintiff. Therefore, Plaintiff cannot prevail under § 523(a)(2)(A).
Furthermore, the Court finds that Defendant has not committed larceny under § 523(a)(4). When Defendant signed the Lease with Plaintiff, he did not intend to deprive Plaintiff of his property; rather, Defendant intended to initiate a profitable business deal that would benefit both Defendant and Plaintiff. Therefore, because Defendant lacked the requisite intent to deprive the Plaintiff of his property, Plaintiffs claim under § 523(a)(4) fails.
Additionally, Plaintiffs § 523(a)(6) claim fails because Defendant did not intend to willfully and maliciously injure the Plaintiff. Defendant’s motive in signing the Lease was simple: to make money from what he believed to be a lawful transaction, based upon his reliance on Stabell’s representations. Therefore, § 523(a)(6) does bar the discharge of this debt.
In sum, this Court concludes that the Plaintiff has failed to establish any of its claims. Accordingly, judgment will be entered simultaneously with the of this memorandum opinion.
. Unless otherwise noted, all section references hereinafter shall refer to 11 U.S.C., and all references to the "Code” or the "Bankruptcy Code” shall refer to the United States Bankruptcy Code. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8494283/ | *565
MEMORANDUM OPINION ON DEBTORS’ OBJECTION TO CLAIM OF KATHY ANTUNOVICH
JACQUELINE P. COX, Bankruptcy Judge.
This matter concerns the Objection of the Debtors, J.S. II, L.L.C., River Village I, L.L.C., River Village West, L.L.C., and KND Investments, LLC (collectively, the “Debtors”) to the claims of Kathy Antunovich (“Antunovich”), Claim No. 24-2 in the amount of $72,500.00, Claim No. 87 in the amount of $1,044,063.91, and Antunovich’s Motion for Leave to Amend Claim No. 24-2 as Claim No. 24-3 in the amount of $145,000.00. The Debtors seek to disallow the claims, to expunge Antunovich’s claims, and ask that the motion to amend be denied.
I. Jurisdiction
The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This matter is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A),(B) and (O).
II. Background
In March 2006, Antunovich purchased a home at 1300 West 33rd Place, Chicago, Illinois, located in Bridgeport Village, a real estate venture developed by the Debtors. Antunovich purchased this property from a third-party, the original purchaser of the property, not the Debtors. On March 5, 2007, the Debtors filed petitions for relief under chapter 11 of the Bankruptcy Code. As the case progressed, June 5, 2007 was fixed as the claims bar date for non-governmental creditors and interest holders to file their claims. Acting pro se, on May 5, 2007, Antunovich timely filed a claim, Claim No. 24, asserting an unsecured priority claim in the amount of $40,000.00 against the Debtors for “[hjouse repairs required (building code violations)” for her home and referenced enclosures submitted with the claim. The enclosures consisted of several items of correspondence, including a letter between Antuno-vich and John Kinsella (“Kinsella”), a managing partner for the Debtors, regarding an alleged roof leak on Antunovich’s home. Also attached to the claim are various third-party letters, the first of which is a letter dated March 6, 2006 from Kinsella to Corine O’Hara, Antunovich’s attorney for the purchase of her home. The letter stated in pertinent part that “Bridgeport Village is responsible for fixing any City of Chicago code violations at 1300 West 33rd Place.” Also included are letters from Brickcraft, Inc., a sub-contractor for the Bridgeport Project; one to one of the Debtors, River Village LLC, and another to Bank of America, a lender to the Bridgeport Village Project. Both Brick-craft letters reference alleged structural deficiencies. On June 1, 2007, Antunovich filed a timely amendment to her claim, docketed as Claim No. 24-2, asserting an unsecured priority claim for “[hjouse repairs promised (to correct building violations)” in the amount of $72,500.00, attaching the same documents submitted with her original claim. The Debtors filed an objection to Claim No. 24 on January 3, 2008, after the claims bar date expired. Subsequent to the Debtors’ objection, An-tunovich filed another claim on February 19, 2008 alleging an unsecured priority claim for $1,044,063.91 for “[djeceit/mis-representation of condition of house to buyer and bank.” Although Antunovich checked the “amends” box of the claim form, the clerk mistakenly filed this as a new claim, Claim No. 87. Attached to this claim was a single page titled “Summary of Amended Claim,” containing an itemization of her loan amount and down pay*566ment, monthly payments for twenty-three months, property taxes, homeowner’s insurance and attorney’s fees, all totaling the amount of her new claim. Simultaneously with the filing of this claim, Antunovich filed a second response to the Debtors’ claim objection alleging fraud by Kinsella in connection with the purchase of her home. On March 20, 2008, Antunovich filed a motion for “Leave to Amend Claim 24-2 of Kathy Antunovich” and filed Claim No. 24-3, as an amendment to Claim No. 24-2, with the clerk in the amount of $145,000.00, based on fraud. She asserts her last two claim amendments, Claim No. 87 and Claim No. 24-3, were filed because she came across new information that she concedes had been available to the public before the claims bar date.
Included in the claims for various Chicago Building Code violations is a claim for a “gate” designed to correct a structural issue which is not included in the objection. However, based on her pleadings and claims, her claims, in part, are undecipherable.
III. Discussion
The Debtors object to Antunovich’s claims on several grounds. They contend that Claim No. 87 and Claim No. 24-3 should be disallowed because they were filed after the claims bar date. They disagree with Antunovich’s contention that they amend her prior timely-filed claim. Instead, the Debtors argue that Claim Nos. 87 and 24-3 do not relate back to Antunovich’s original claim because they assert claims that are wholly different than the timely-filed claims. Further, the Debtors object to Claim No. 24-2 because all applicable warranty repair items were previously addressed and any current defects are outside the one-year warranty period on the home.
A. Antunovich’s Amended Claims Filed After the Claims Bar Date
Antunovich argues that Claim No. 87 and/or Claim 24-3 amend timely filed Claim No. 24-2 and should be allowed. The Debtors contend Claim Nos. 87 and 24-3 are separate claims filed after the claims bar date and should be disallowed.
In chapter 11 bankruptcy cases, the court sets bar dates for creditors to file proofs of claims. In re Nat’l Steel Corp., 316 B.R. 510, 514 (Bankr.N.D.Ill.2004). These dates are integral to the bankruptcy case, allowing efficient administration of the case and effective resolution of disputes. Id. (citing In re Stavriotis, 977 F.2d 1202, 1206 (7th Cir.1992)). Claims filed after the bar date disrupt the orderly administration of the estate and are generally disallowed. Matter of Unroe, 937 F.2d 346, 351 (7th Cir.1991). However, a creditor may, in certain instances, amend a timely filed claim. Stavriotis, 977 F.2d 1202, 1206 (7th Cir.1992). However, the right to amend a claim after the bar date is not unqualified. Id. “[Otherwise, a party could effectively help itself to automatic extensions of the bar date without seeking leave of the court” allowing any “creditor ... [to] file grossly misleading proofs of claim and later amend those claims as of right at their leisure, whenever they decided to calculate the extent of the actual debt claimed to be owed.” Id. Amendments filed after the bar date are carefully scrutinized to ensure that a new claim is not filed under the guise of an amendment. In re AM Int'l, Inc., 67 B.R. 79, 81 (N.D.Ill.1986). Therefore, amendments “are allowed, where the purpose is to cure a defect in the claim as originally filed, to describe the [original] claim with greater particularity or to plead a new theory of recovery on the facts set forth in the original claim.” In re Enron Corp., 298 B.R. 513, 520 (Bankr.S.D.N.Y. *5672003) (quoting In re W.T. Grant Co., 53 B.R. 417, 420 (Bankr.S.D.N.Y.1985)).
A two-pronged test must be satisfied in order to determine whether a claim amended after the claims bar date is a proper amendment or a completely new claim. The first prong is met when the purported amended claim “relates” back to the original claim under Federal Rule of Bankruptcy Procedure 7015(c) while the second prong relies on equitable considerations determined by the court. See, e.g., In re Plunkett, 82 F.3d 738, 740-41 (7th Cir.1996); Unroe, 937 F.2d at 349-50 (7th Cir.1991); Enron Corp., 298 B.R. at 520-21 (Bankr.S.D.N.Y.2003); In re Marineland Ocean Resorts, Inc., 242 B.R. 748, 753-56 (Bankr.M.D.Fla.1999); In re Lehman Financial Group, LLC, 2006 WL 2640210 at *1 (Bankr.N.D.Ill.2006).
Addressing the first prong, Rule 70151 applies Federal Rule of Civil Procedure 15 to adversary proceedings. Fed. R.Bankr.P. 7015; see also Unroe, 937 F.2d at 349. Although a claims proceeding is not explicitly an adversary proceeding, Rule 9014 extends Rule 7015 to contested matters including claim disputes. Unroe, 937 F.2d at 349; see also Stavriotis, 977 F.2d at 1204 (7th Cir.1992). A claim may be properly amended after the claims bar date if it “arose out of the conduct, transaction, or occurrence set out — or attempted to be set out — in the original [claim].” Fed.R.Civ.P. 15(c)(1)(B); see also Unroe, 937 F.2d at 349.
In this case, the purported amendments do not arise from the same transaction or occurrence as the original claim and timely filed amendment. In her timely filed amended claim, Antunovich asserted a claim for $72,500.00 for home repairs allegedly owed to her. However, once her claim became contested after the bar date, her claim, Claim No. 87, increased approximately fourteen times in amount to $1,044,063.91, creating an enormous disparity between the claims. She asserts that this claim was based upon misrepresentation and sought the entire value of her home and costs associated therewith, including financing and attorney’s fees. Further, Claim No. 87 and its attached document make no mention of purported home repairs promised to Antunovich. Based upon this information, Claim No. 87 is an entirely new claim filed after the bar date and will not be allowed.
In Claim No. 24-3, Antunovich seeks $145,000.00, or two times the amount of her timely amended filed claim. She based this claim on fraud and amended it due to new information. This information includes correspondence between John George, an attorney for Kinsella and Lori T. Healey, Commissioner for the Department of Planning and Development for the City of Chicago. In these letters, George acknowledges several building code violations and sought variances on many of the properties located within Bridgeport Village, including the property Antunovich would eventually own. These variances were subsequently approved by Healy. This exchange was prompted after the City retained Wiss, Janney, Elster Associates, Inc. to review design plans of Bridgeport Village that outlined the various building code violations. Antunovich acknowledges that this was public information but states she was unaware of it before the bar date passed.
Claim No. 24-3 likewise does not appear to arise from the same transaction or occurrence. In it, Antunovich seeks twice as much as her timely filed claim and offers no explanation why. Although she offers a new theory for relief, she bases this claim *568on'information she became aware of after the claims bar date. She concedes this information was available to the public before the bar date passed. Also, it is not even apparent what she is specifically seeking in this claim. Her original claim seeks repairs promised to her. However, even in her original claim, she does not clearly state what these repairs entail, except for a possible leak in her roof and any damage associated with that. In Claim No. 24-3, she does not clarify this claim nor does she explain why this claim is now double the amount of her timely filed claim. There is little, if any, indication that Claim No. 24-3 relates back to Claim No. 24-2. Therefore, Claim No. 24-3 will be disallowed as untimely filed.
Further, Claim Nos. 87 and 24-3 cannot withstand the equitable determination prong of the test. The leading method for making the equitable determination is balancing the factors as explained in In re Miss Glamour Coat Co., 46 A.F.T.R.2d 80-6083, 1980 WL 1668 at *5 (S.D.N.Y.1980).2 However, the Miss Glamour Coat factors have been rejected by the Seventh Circuit. See Plunkett, 82 F.3d at 741. Instead, a claimant properly amending a claim after the claims bar date has passed must show the claim was not timely amended due to “excusable neglect.” Id. at 742. To satisfy “excusable neglect,” the creditor bears the burden of meeting a two-part test. Id.; see also Pioneer Inv. Services Co. v. Brunswick Assoc. L.P., 507 U.S. 380, 395, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993); Nat’l Steel Corp., 316 B.R. at 515. To establish the first part of the test, the claimant must show “neglect,” which is accomplished by a showing that the amendment was not timely filed due to circumstances beyond the claimant’s control or that the amendment was filed late because of the claimant’s inadvertence, mistake, or carelessness. Nat’l Steel Corp., 316 B.R. at 515. Once “neglect” is shown, the claimant must show that it was “excusable” using the following factors: “(1) the danger of prejudice to the debtor; (2) the length of the delay and its potential impact on judicial proceedings; (3) the reason for the delay, including whether it was within the reasonable control of the [claimant]; and (4) whether the [claimant] acted in good faith.” Id. These factors are nonexclusive and require “an equitable determination of all relevant circumstances surrounding the party’s omission.” Id. (quoting Pioneer, 507 U.S. at 395, 113 S.Ct. 1489).
Antunovich’s delay in amending her claim after the bar date was the result of “neglect,” establishing the first part of the test. The Debtors do not dispute this. However, the Debtors contend that Antu-novich’s “neglect” was not “excusable” under the Pioneer test.
The first factor of the Pioneer test, danger of prejudice against the Debtors, weighs heavily against allowing Claim No. 87 and/or 24-3. As stated earlier, Antuno-vich made a claim for $72,500.00 in her timely filed amended claim. However, in *569Claim Nos. 87 and 24-3, the amount of the claim increased to $1,044,063.91 and $145,000.00 respectively. Claim No. 87 increased over fourteen times the amount of the timely filed claim and Claim No. 24-3 seeks to increase the claim by twice as much. If the Debtors were required to pay on either amended claim instead of the timely filed Claim No. 24-2, there would be less money for the estate and the other creditors.
The second factor, length of the delay and its impact on the administration of the case also weighs against Antunovich. The general claims bar date expired June 5, 2007. Antunovich filed Claim No. 87 over eight months later in February 2008 and seeks to file Claim No. 24-3 even later, in March 2008. There are several cases where shorter time periods were determined to be acceptable. See, e.g., Pioneer, 507 U.S. at 384, 113 S.Ct. 1489 (twenty days after bar date); In re Dartmoor Homes, Inc., 175 B.R. 659, 662 (Bankr.N.D.Ill.1994) (two weeks after bar date); In re O’Shaughnessy, 252 B.R. 722, 729 (Bankr.N.D.Ill.2000) (three months after confirmation); cf. In re Kmart Corp., 881 F.3d 709, 714-15 (7th Cir.2004). In the present case, Antunovich’s amendments come well beyond the acceptable time periods. In the eight months between the general claims bar date and Claim No. 87, much has progressed in this complex chapter 11 case. Allowing Claim No. 87 and/or Claim No. 24-3 would certainly disrupt the progress made in the case in the eight months since the bar date.
The third factor, the reason for delay, does not help Antunovich either. Antuno-vich states that her claim was amended late due to her coming “into new information in the form of copies of public documents and records” that she states the existence of which she was unaware of “at the time.” (Response to Debtors’ Obj. to Claim 87 (Claim 24-2 Amended) of Kathy Antunovich, p. 2, ¶¶4-5). By this response, Antunovich admits these documents were available to the public. Id. However, she does not contend that these are documents that were somehow concealed from her or that access to them was impeded. Conversely, the Debtors did all that was required of them regarding Antu-novich’s claim by sending her notice of the bar date which she complied with by filing her timely filed amended claim.
The last factor to be considered is whether Antunovich acted in good faith in amending her claim after the claims bar date. The Debtors do not allege that An-tunovich acted with had faith, but it may be worth observing that Antunovich filed an amended claim in an amount fourteen times greater than her timely filed amended claim approximately a month after her claim was objected to. However, this factor does not affect this analysis.
Since Claims No. 87 and/or 24-3 cannot relate back to her timely filed claim under Rule 7015, they must be denied as untimely. Further, Antunovich cannot show “excusable neglect” to establish the second prong of whether to allow Claim No. 87 and/or 24-3 as a proper amendments. Therefore, the Debtors’ Objection to Claim No. 87 of Kathy Antunovich is sustained. Claim No. 87 is disallowed. Further, An-tunovich’s motion for leave to amend Claim No. 24-2 as Claim No. 24-3 is denied.
B. Antunovich’s Timely Filed Claim (Claim No. 24-2)
After disposing of Claim No. 87, Claim No. 24-2 remains. Claim No. 24-2 is for “[hjouse repairs promised (to correct building violations)” in the amount of $72,500.00. To support this claim, Antuno-vich attached the same attachments she submitted with her original claim consisting of the letter dated March 6, 2006 from *570Kinsella to Antunovich and the various third-party correspondence.
A properly filed proof of claim along with accompanying documents is “prima facie evidence of the validity and amount of the claim.” In re Salem, 465 F.3d 767, 779 (7th Cir.2006) (quoting Rule 3001(f)); see also 11 U.S.C. § 502(a). The party objecting to a valid proof of claim carries the burden of rebutting the proof of claim. See In re Grabill Corp., 121 B.R. 983, 992 (Bankr.N.D.Ill.1990).
In looking at Claim No. 24-2, it is doubtful that Antunovich met her burden of filing a prima facie valid claim against the Debtors. There is nothing in the claim or the accompanying documents supporting the amount she claimed. She does not attach evidence of any type of obligation nor any evidence that her home was actually cited for any building code violations. Also, she did not own the property during the one-year warranty period or offer any testimony from prior owners regarding any rights under any warranty. Instead, she provided various correspondence, most of which was between third parties who did not testify or submit affidavits. This record fails to support her claim.
Assuming arguendo Antunovich met her burden of establishing a valid claim, the Debtors successfully met their burden objecting to this claim. Supporting their objection, the Debtors submitted the affidavit of John J. Vondran (‘Vondran”), special transactional counsel for the Debtors, appointed by the Court. In the affidavit, Vondran stated that it was his task to investigate the claims of the homeowners in the Bridgeport Village development. Vondran further stated that he investigated Antunovich’s claims and found they were all previously addressed. Additionally, even though the Debtors contend they were under no obligation to do so, Vondran stated the Debtors expended $4,577.74 to address Antunovich’s concerns about potential building code violations. Conversely, Antunovich does not provide any specifies regarding her claims. Based on this evidence, Antunovich cannot successfully assert her claim against the Debtors.
TV. Conclusion
The Objection of J.S. II, L.L.C., River Village I, L.L.C., River Village West, L.L.C., and KND Investments, LLC to Claim No. 24 amended as Claim No. 24-2 is sustained because she failed to establish a valid claim since all claims were addressed during the applicable warranty period. Claim No. 24-3 and Claim No. 87 are disallowed as untimely filed. The Motion for Leave to Amend Claim 24-2 is denied.
. Unless otherwise stated, "Rule” will refer to the Federal Rules of Bankruptcy Procedure.
. See, e.g., In re Tanaka Bros. Farms, Inc., 36 F.3d 996, 998 (10th Cir.1994); In re Int'l Horizons, Inc., 751 F.2d 1213, 1216 (11th Cir.1985); Enron, 298 B.R. at 521; In re Oasis Petroleum Corp., 130 B.R. 89, 93-94 (Bankr.C.D.Cal.1991); Marineland Ocean Resorts, 242 B.R. at 755. These factors are: "(1) whether the debtor and creditors relied upon the earlier proof of claim or had reason to know that a subsequent proof of claim would be filed; (2) whether other creditors would receive a windfall if the court refused to allow the amendment; (3) whether the claimant intentionally or negligently delayed in filing the amendment; (4) the justification for the failure to file for an extension to the bar date; [and] (5) whether other equitable considerations exist which compel amendment.” Marineland Ocean Resorts, 242 B.R. at 755. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8488027/ | 11/18/2022
IN THE SUPREME COURT FOR THE STATE OF MONTANA Case Number: DA 22-0292
No. DA 22-0292
IN THE MATTER OF:
P.G.,
A Youth In Need Of Care.
ORDER
Upon consideration of the Motion to Withdraw as Counsel of Record, and
with good cause appearing therefore,
IT IS HEREBY ORDERED that Father and Appellant in this matter,
D.C.G., shall file a response to this motion within thirty (30) days of the date of
this Order. The response must be served upon all counsel of record, including the
Attorney General, the County Attorney, and the Appellate Defender’s Office.
IT IS FURTHER ORDERED that the Clerk of this Court shall give notice of
this Order by mail to all counsel of record and to Father and appellant, D.C.G. at
that person’s last known address.
Electronically signed by:
Mike McGrath
Chief Justice, Montana Supreme Court
November 18 2022 | 01-04-2023 | 11-18-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/9350257/ | Garden Vil. Apts., LLC v CSC Serviceworks, Inc. (2022 NY Slip Op 07400)
Garden Vil. Apts., LLC v CSC Serviceworks, Inc.
2022 NY Slip Op 07400
Decided on December 23, 2022
Appellate Division, Fourth 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 December 23, 2022
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
PRESENT: WHALEN, P.J., SMITH, LINDLEY, BANNISTER, AND MONTOUR, JJ.
1012 CA 22-00010
[*1]GARDEN VILLAGE APARTMENTS, LLC, WILLIAMSTOWNE VILLAGE, LLC, AND VILLAGES AT FAIRWAYS, LLC, PLAINTIFFS-APPELLANTS,
vCSC SERVICEWORKS, INC., DEFENDANT-RESPONDENT.
DUKE, HOLZMAN, PHOTIADIS & GRESENS LLP, BUFFALO (CHRISTOPHER M. BERLOTH OF COUNSEL), FOR PLAINTIFFS-APPELLANTS.
BARCLAY DAMON LLP, BUFFALO (JAMES P. MILBRAND OF COUNSEL), FOR DEFENDANT-RESPONDENT.
Appeal from an order of the Supreme Court, Erie County (Timothy J. Walker, A.J.), entered December 27, 2021. The order granted the motion of defendant to dismiss the complaint and dismissed the complaint.
Now, upon reading and filing the stipulation of discontinuance signed by the attorneys for the parties on December 1, 2022,
It is hereby ORDERED that said appeal is unanimously dismissed without costs upon stipulation.
Entered: December 23, 2022
Ann Dillon Flynn
Clerk of the Court | 01-04-2023 | 12-23-2022 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.