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https://www.courtlistener.com/api/rest/v3/opinions/8491398/ | ORDER
HELEN S. BALICK, Bankruptcy Judge.
The Court having considered the ILGWU National Retirement Fund’s “Motion for Relief in the Alternative Under Fed.R.Bankr.P. 9024 and Fed.R.Civ.P. 60(b), Fed.R.Bankr.P. 8002(c) or Fed.R.Bankr.P. 3008” (the “Fund’s Motion”), and all papers filed in connection therewith, including the Fund’s supporting memorandum of law and the opposition memorandum of the Debtor United Merchants and Manufacturers, Inc. (“UM & M”), and having heard argument on the Fund’s Motion on October 15, 1991, issues the following findings of fact and conclusions of law:
The Court finds as follows:
A. On May 15,1991 the ILGWU National Retirement Fund (the “Fund”) filed a document entitled “Proof of Claim” in this case. The document explained that certain of the debtors were under continuing employer obligations to contribute to the Fund pursuant to collective bargaining agreements and the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Although the Fund did not believe it had any claim against the debtors, it stated that a claim could arise under various scenarios involving the cessation of employer contributions to the Fund.
B. On August 1, 1991, UM & M filed its “Motion for an Order Approving Sale of Rose Marie Reid Division to A1 Steiner Free and Clear of Liens” and its “Motion for an Order Approving Sale of Imerman Division to David Kane Free and Clear of Liens” (collectively, the “Sale Motions”). Neither of the Sale Motions contained a proposed form of order. The prayer for relief in the Rose Marie Reid motion stated,
WHEREFORE, the Debtor respectfully requests that the Court, after a hearing and consideration, enter an order approving the sale of Rose Marie Reid to Steiner, pursuant to the terms of the Asset Purchase Agreement, substantially in the form attached hereto as Annex I; and granting the Debtor such other and further relief as the Court deems just and proper.
The prayer for relief in the Imerman motion stated,
WHEREFORE, the Debtor respectfully requests that the Court, after a hearing and consideration, enter an order approving the sale of Imerman to Kane, pursuant to the terms of the Asset Purchase Agreement, substantially in the form attached hereto as Annex I; and granting the Debtor such other and further relief as the Court deems just and proper.
C. Jeffrey S. Bromme, Esquire, representing the Fund, received a copy of the Sale Motions on August 7, 1991.
*98D. On August 15, 1991, this Court confirmed the Debtors’ Third Amended Joint Plan of Reorganization (the “Plan”). The Effective Date of the Plan was August 26, 1991.
E. On August 23,1991 the Fund appealed the Court’s August 15, 1991 Confirmation Order.
F. A hearing on the Sale Motions was held on August 23,1991. James L. Patton, Esquire, represented UM & M. Mr. Bromme attended the hearing, but did not participate in it. He received a copy of the “Memorandum in Support of Debtor’s Motions Under Section 363 of Bankruptcy Code for Authority to Sell Rose Marie Reid and Immerman [sic] Divisions” shortly before the commencement of the hearing. At the hearing, Sidney Margolis, Executive Vice President for UM & M, testified in support of the Sale Motions. In each proposed sale, the purchaser would assume responsibility for employer contributions to the Fund. The respective purchasers needed to satisfy several contingencies prior to the sale, including obtaining cash financing and a bond to absorb the retirement fund related liability. If the purchaser defaulted on its employer contributions, the bond would partly satisfy the obligation. UM & M would remain secondarily liable on the remainder of the obligation. The Asset Purchase Agreement governing sale of the Imerman division set a closing deadline of November 5, 1991. The Asset Purchase Agreement governing the sale of the Rose Marie Reid division set a closing deadline of November 12, 1991.
G. Neither the Sale Motions, nor the memorandum of law in support of the Sale Motions, stated that UM & M was seeking an order from the Court that UM & M’s potential and as yet unincurred liability to the Fund would be discharged under the Plan.
H. After presentation of the Sale Motions, Mr. Patton handed up two correlative orders, which the Court signed (the “Sale Orders”). Paragraph 7 of each Sale Order stated,
Upon the sale of Rose Marie Reid and Imerman, the Debtor will incur liabilities for withdrawal under the multiemployer pension plan in which it participates. Such withdrawal liability triggered hereby shall constitute a contingent unliqui-dated Class VIII claim under the Debt- or’s Third Amended Joint Plan of Reorganization (the “Plan”), which was confirmed pursuant to an Order of this Court dated August 15, 1991. Such claim may be estimated for purposes of allowance and treatment under the Debtors’ Plan and the Debtors’ liability on such claim will be discharged upon the Debtors’ emergence from Chapter 11.
The Sale Orders were never formally served upon the Fund.
I. The Fund did not see the Sale Orders, and in particular Paragraph 7 of the Sale Orders, until September 4, 1991.
J. On September 9, 1991 the Fund filed its Motion for relief, seeking to strike Paragraph 7 from the Sale Orders, and in the alternative to extend the time for filing of an appeal from the Sale Orders.
K. On September 9, 1991, Judge Far-nan, for the United States District of Delaware, issued an order staying only that part of the Plan authorizing distribution of New Common Stock and Preferred Stock to Class VIII claimants for 25 days, pending appeal of the Plan.
From these facts the Court concludes as follows:
L. This Court had subject-matter jurisdiction to enter Paragraph 7 of the Sale Orders pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a), and In re Referral of Title 11 Proceedings to the United States Bankruptcy Judge for this District (order entered in the District of Delaware on July 23, 1984).
M. If UM & M proceeds with the Court approved sales of the Imerman and Rose Marie Reid divisions and a purchaser defaults on its employer pension contribution obligations, then the Fund may have a claim against UM & M. In re Computerized Steel Fabricators, 40 B.R. 344 (Bankr.S.D.N.Y.1984).
N. Paragraph 7 purports to affect this potential claim of the Fund against UM & *99M. Indeed, Paragraph 7 treats the Fund as an unsecured creditor and discharges the Fund’s claim. Thus, Paragraph 7 deals not with the approval of UM & M’s proposed sale, but with the treatment of post-discharge liability.
O. The Fund did not receive adequate notice that UM & M would be seeking a ruling on the treatment of the Fund’s potential claim, and that UM & M would be seeking to classify the Fund as a Class VIII claimant. As a result, the Fund’s due process rights were violated.
P. Under these circumstances, Fed.R.Civ.P. 60(b) allows this Court to relieve the Fund from the effect of Paragraph 7 of the Sale Orders. Because the Fund’s due process rights were violated, that paragraph is void. Under Fed.R.Civ.P. 60(b)(4), Paragraph 7 is stricken from both Sale Orders.
Q. In light of this ruling, it is not necessary to discuss the Fund’s motion for an extension of the time to appeal the Sale Orders or the other issues the Fund raises.
SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491399/ | MEMORANDUM OF OPINION AND DECISION
WILLIAM J. O’NEILL, Bankruptcy Judge.
Before the Court are cross-motions for summary judgment filed by Plaintiff-Trustee, Marvin A. Sicherman, and Defendant, Ohio Public Employees Deferred Compensation Program (Ohio Program), on Trustee’s complaint for turnover of money and determination of claims and interests thereto. Specifically requested is turnover of Defendant-Debtor, Duane Alan Martuc-ci’s deferred compensation fund as a nonexempt asset of the Chapter 7 estate. The parties submitted briefs and stipulations.
This matter is a core proceeding within the jurisdiction of this Court. 28 U.S.C. §§ 1334(a), (b), 157(b)(2)(A), (E), (O). Also, see stipulation No. 1. Decision herein was held in abeyance pending a ruling by the Sixth Circuit in the appeal of In re Leadbetter, 111 B.R. 640 (Bankr.N.D.Ohio 1990), aff’d. 1:90 CV 0731 (N.D.Ohio, Nov. 30, 1990, amended Dec. 5, 1990). The Le-adbetter decision was affirmed by the Sixth Circuit in an opinion and order entered on October 21, 1991. Sicherman v. Ohio Public Employees Deferred Compensation Program, 946 F.2d 895. A subsequent petition for rehearing was denied by order of December 19, 1991. In view of that decision and the absence of genuine issues of material fact, summary judgment is appropriate. Federal Rule of Bankruptcy Procedure 7056.
Stipulated are the following:—
“1. Jurisdiction of the within matter is vested in this Court by virtue of the provisions of 28 U.S.C. § 157(b)(2)(A), (E) and (O), and 11 U.S.C. § 542.
2. Duane Allen (sic) Martucci, SSN 299-40-7421, is the Debtor in this Bankruptcy Case, commenced under Chapter 7 of the Bankruptcy Code on April 11, 1990.
3. Marvin A. Sicherman, is the Trustee in Bankruptcy in this case, and the Plaintiff in this Adversary Proceeding.
4. The Ohio Program and Duane Allen (sic) Martucci are the Defendants in this Adversary Proceeding.
5. The Ohio Program was established, and is operated in accordance with the provisions of Ohio Revised Code §§ 145.71 through 145.74 and 26 U.S.C. § 457 and the regulations promulgated thereunder, as a non-qualified, unfunded, deferred compensation plan for public employees. The Ohio Program has received approval as such from the United States Internal Revenue Service. Such approval is evidenced by a letter ruling which is attached hereto and is incorporated herein by reference (Exhibit #1).
6. The participation in the Ohio Program of an “eligible employee” and “participating employee” as those terms are defined by Ohio Revised Code § 145.71 is governed by the Plan Agreement. The Plan Agreement that was in effect at the time of the commencement of the Debtor’s case under Chapter 7 of title 11 of the U.S.Code is attached and incorporated herein by reference (Exhibit #2); and is the same Plan Agreement that was discussed in another bankruptcy case, In re Leadbetter, 111 B.R. 640 (B.N.D.Ohio, E.D., 1990).
7. Between December 1, 1987 and September 30, 1989, the Ohio Program was administered by the Copeland Companies. From October 1, 1989 through the present, the Ohio Program has been self-administered.
8. The Debtor at all pertinent times has been an “eligible employee” and a “participating employee” in the Ohio Program as those, terms are defined by Ohio Revised Code § 145.71.
9. In accordance with the Plan Agreement, and the Debtor’s request and agree*155ment, Debtor’s employer had agreed to, and did, defer an undetermined amount, but in no event less than $2,289.08, of what would otherwise have been the Debtor’s compensation (See Exhibit “A” attached to the Complaint and incorporated herein by reference.); which sums were deposited to and credited to the account of the Debtor with the Ohio Program.
10. As of April 11,1990, the Debtor had not requested the distribution of all or any part of the amount described above as an emergency hardship withdrawal in accordance with the provisions of Article 4.04 of the Plan Agreement.
11. The Ohio Program is separate and distinct from the Ohio Public Employees Retirement System (“PERS”), and PERS was created under Ohio Revised Code §§ 145.01 through 145.59.
12. The Debtor has not claimed an exemption for all or any part of the amount described above.”
In addition, examination of the exhibits reflects the following:—
13. Pursuant to Article III, Section 3.04 of the plan agreement the plan assets remain the property of the employer. A participant’s interest in the plan is defined as “that of a general creditor of the employer.” (EXH. 2)
14. Article III, Sections 3.01 and 3.02 require that an account be maintained for each plan participant. Article II, Section 1.01 defines an account as “reflecting the interest of a participant under the plan.” (EXH. 2)
15. Pursuant to Article IV of the plan agreement a participant may receive distribution of his account only upon the occurrence of the following: (1) reaching the age of 70V2; (2) termination of employment; (3) incurrence of an unforeseeable emergency. (EXH. 2, Article IV, Sections 4.01-4.08). Pursuant to Article I, Section 1.24 of the plan agreement:—
“Unforeseeable Emergency means severe financial hardship resulting from a sudden and unexpected illness or accident of a Participant or of a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, which hardship cannot be relieved by reimbursement or compensation (by insurance or otherwise), liquidation of the Participant’s assets (to the extent the liquidation would not itself cause severe financial hardship), or cessation of deferrals under the Plan. An Unforeseeable Emergency shall not include the need to send the Participant’s child to college or the desire to purchase a home. The decision by the Plan Administrator as to whether an Unforeseeable Emergency exists shall be final and conclusive.”
DISCUSSION
Trustee seeks turnover of Debtor’s pre-petition account in the plan plus interest and earnings thereon as an asset of the bankruptcy estate. Ohio Program maintains the funds are not estate property because title is vested in the Ohio Program in compliance with federal tax law. In addition, it asserts Trustee possesses no greater right to the fund than Debtor who was not entitled to receive a distribution on the date the bankruptcy case was filed.
The Sixth Circuit discussed the same plan agreement under a virtually identical factual situation in In re Leadbetter. In its opinion that Court accepted and affirmed decision requiring turnover of the debtor’s deferred funds as property of the bankruptcy estate pursuant to Section 541(a)(1) of the Bankruptcy Code. 11 U.S.C. § 541(a)(1). It found no tension between the tax code, 26 U.S.C. § 457, and the Bankruptcy Code. This Court is bound by the Leadbetter decision and concludes the debtor’s deferred compensation fund is an asset of the bankruptcy estate pursuant to Section 541(a)(1) of the Bankruptcy Code for reasons stated by the Bankruptcy Court and affirmed by the District Court and Sixth Circuit on appeal in Leadbetter. Moreover, as the Courts concluded in Lead-better, the funds are subject to an order for turnover. 11 U.S.C. § 542.
*156CONCLUSION
Defendant-Debtor’s deferred compensation fund, plus interest accrued thereon, is a non-exempt asset of the bankruptcy estate pursuant to Section 541(a)(1) of Title 11 of the United States Code. Plaintiff-Trustee’s motion for summary judgment on his complaint for turnover of money and determination of claims and interests thereto is, therefore, granted. Defendant-Ohio Program’s motion for summary judgment is denied in accordance with this determination. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483709/ | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
JABARI BRUTON-BARRETT, )
)
Plaintiff, )
v. ) Civil Action No. 21-1860 (RBW)
)
)
GILEAD SCIENCES, INC.,
)
Defendant. )
)
MEMORANDUM OPINION
The plaintiff, Jabari Bruton-Barrett, brings this civil action against the defendant, Gilead
Sciences, Inc., asserting claims of (1) discrimination based upon his race and sexual orientation,
in violation of the District of Columbia Human Rights Act, D.C. Code § 2-1402.11 (“DCHRA”)
(the “DCHRA claims”); (2) discrimination based upon his race, in violation of Title VII of the
Civil Rights Act, 42 U.S.C. § 2000e-2 (“Title VII”) (the “Title VII claim”); and
(3) discrimination based upon his race, in violation of 42 U.S.C. § 1981. See Complaint for
Damages and Equitable Relief (“Compl.”) ¶¶ 41, 52, 64, ECF No. 1. Currently pending before
the Court is the defendant’s partial motion to dismiss the plaintiff’s DCHRA claims and Title VII
claim. See Defendant Gilead Sciences, Inc.’s Motion for Partial Dismissal (“Def.’s Mot.”) at 1,
ECF No. 6. Upon careful consideration of the parties’ submissions,1 the Court concludes for the
following reasons that it must grant in part and deny without prejudice in part the defendant’s
motion.
1
In addition to the filings already identified, the Court considered the following submissions in rendering its
decision: (1) the Memorandum of Law in Support of Defendant Gilead Sciences, Inc.’s Motion for Partial Dismissal
(“Def.’s Mem.”), ECF No. 6-1; (2) the Plaintiff’s Opposition to Defendant’s Motion for Partial Dismissal (“Pl.’s
Opp’n”), ECF No. 12; and (3) the Reply Brief in Support of Defendant Gilead Sciences, Inc.’s Motion for Partial
Dismissal (“Def.’s Reply”), ECF No. 13.
I. BACKGROUND
A. Factual Background
The following allegations are taken from the plaintiff’s Complaint, unless otherwise
specified. The “plaintiff is African American[,] and he is openly gay.” Compl. ¶ 6. The
plaintiff has been employed by the defendant, “a biopharmaceutical company committed to
advancing innovative medicines to prevent and treat life-threatening diseases,” Def.’s Mem. at 3,
since December 13, 2013, see Compl. ¶ 10, “as a Community Liaison in the [defendant’s]
Commercial Division[,]” id. ¶ 2. “In or around June 2018, [the p]laintiff expressed interest in
applying for a newly created position with [the d]efendant as Director of Corporate
Contributions that had not yet been posted for applications.” Id. ¶ 11. “In or around January
2019, [the p]laintiff learned that selecting official Patrick McGovern[,]” who is white, had
“selected another individual[,]” who is Asian and heterosexual, “for the position without posting
the position for others to apply.” Id. ¶ 13.
On January 29, 2019, the plaintiff “sent an email to [the d]efendant’s Human Resources
Group, complaining that he was not selected for the position because of his race[.]” Id. ¶ 14.
Subsequently, on March 25, 2019, the “[d]efendant concluded an internal investigation into [ ]
McGovern’s [alleged] discriminatory practices.” Id. ¶ 16. On March 28, 2019, the plaintiff
“learned from his supervisor that [ ] McGovern stated that he believed [the p]laintiff was ‘too
gay’ and an ‘embarrassment[,]’[] and that he wanted a ‘non-black[,] non-gay’ person for the role
in question[.]” Id. ¶ 17. The plaintiff states that “[t]his was the first time [he] learned that the
real reason he was not selected for the promotion was due to his sexual preference and his race,
and not in any way related to his qualifications.” Id. ¶ 18. Thus, the plaintiff alleges that, despite
being “highly qualified for the position,” he “was not provided the opportunity to apply for, or be
2
considered for[,] the promotion[,]” id. ¶ 20, and was “unfairly denied the promotion due to his
race and sexual orientation[,]” id. ¶ 21. “As a result of this non-selection,” the plaintiff claims
that “[the d]efendant discriminated against [him] with respect to his compensation, terms,
conditions, and privileges of employment.” Id. ¶ 22.
On February 20, 2020, the plaintiff “submitted a [c]harge of [d]iscrimination with the
[District of Columbia] Office of Human Rights [(‘DCOHR’),] alleging race and sexual
preference discrimination.” Id. ¶ 26. The DCOHR “interviewed [the p]laintiff to determine the
relevant facts and dates for his [c]harge of discrimination” and “[a] formal [c]harge was then
drafted based on the interview.” Id. ¶ 27. On August 5, 2020, the DCOHR “issued a notice,
stating [that] the parties must attend mandatory mediation on September 24, 2020.” Id. ¶ 28.
However, on September 4, 2020, the defendant “filed a motion to dismiss the [c]harge of
[d]iscrimination on the basis that the [c]harge was untimely.” Id. ¶ 29.
B. Procedural History
On July 12, 2021, the plaintiff filed his Complaint, alleging that his “non-selection” for
promotion to the Director of Corporate Contributions position in January 2019 was
discriminatory under (1) the DCHRA, (2) Title VII, and (3) 42 U.S.C. § 1981. See id. ¶¶ 22–23,
41, 52, 64. On September 30, 2021, the defendant filed its partial motion to dismiss the
plaintiff’s DCHRA claims and Title VII claim pursuant to Federal Rule of Civil Procedure
12(b)(6). See Def.’s Mot. at 1. The plaintiff then filed his opposition on December 20, 2021, see
Pl.’s Opp’n at 1, and the defendant filed its reply on January 10, 2022, see Def.’s Reply at 1.
II. STANDARD OF REVIEW
A motion to dismiss under Rule 12(b)(6) tests whether a complaint has properly “state[d]
a claim upon which relief can be granted[.]” Fed. R. Civ. P. 12(b)(6). “To survive a motion to
3
dismiss [under Rule 12(b)(6)], a complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially
plausible “when the plaintiff pleads factual content that allows the court to draw [a] reasonable
inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S.
at 556).
In evaluating a motion to dismiss under Rule 12(b)(6), “the Court must construe the
complaint in favor of the plaintiff, who must be granted the benefit of all inferences that can be
derived from the facts alleged.” Hettinga v. United States, 677 F.3d 471, 476 (D.C. Cir. 2012)
(internal quotation marks omitted). While the Court must “assume [the] veracity” of any
“well-pleaded factual allegations” in a complaint, conclusory allegations “are not entitled to the
assumption of truth.” Iqbal, 556 U.S. at 679. Thus, “[t]hreadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678 (citing
Twombly, 550 U.S. at 555). Also, the Court need not “accept legal conclusions cast as factual
allegations[,]” or “inferences drawn by [the] plaintiff if those inferences are not supported by the
facts set out in the complaint[.]” Hettinga, 677 F.3d at 476. The Court “may consider only the
facts alleged in the complaint, any documents either attached to or incorporated in the
complaint[,] and matters of which [the Court] may take judicial notice.” Equal Emp.
Opportunity Comm’n v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997).
“Finally, a court in this District, at least when the plaintiff is represented by counsel, may
consider as conceded any arguments raised by a defendant’s Rule 12(b)(6) motion that are not
addressed in a plaintiff’s opposition.” Toms v. Off. of the Architect of the Capitol, 650 F. Supp.
2d 11, 18 (D.D.C. 2009) (Walton, J.); see also Tnaib v. Document Tech., Inc., 450 F. Supp. 2d
4
87, 91 (D.D.C. 2006) (“When a plaintiff files a response to a motion to dismiss but fails to
address certain arguments made by the defendant, the court may treat those arguments as
conceded.” (quoting Fox v. Am. Airlines, Inc., No. 02-2069, 2003 WL 21854800, at *2 (D.D.C.
Aug. 5, 2003), aff’d, 389 F.3d 1291 (D.C. Cir. 2004))); Stephenson v. Cox, 223 F. Supp. 2d 119,
122 (D.D.C. 2002) (dismissing various counts of the complaint as conceded, noting that “[t]he
court’s role is not to act as an advocate for the plaintiff and construct legal arguments on his
behalf in order to counter those in the motion to dismiss”).
III. ANALYSIS
The defendant argues that the plaintiff’s DCHRA and Title VII claims should be
dismissed “[p]ursuant to Federal Rule of Civil Procedure 12(b)(6)” “for failure to state a claim
upon which relief can be granted.” Def.’s Mot. at 1. In response, the plaintiff contends that his
“claim of sexual orientation discrimination pursuant to the [DCHRA]” should survive because it
“was timely made[,]” Pl.’s Opp’n at 1, but the plaintiff does not respond to the defendant’s
arguments regarding his race discrimination claim under the DCHRA or his Title VII claim, see
generally id. The Court will first address the defendant’s challenge to the plaintiff’s DCHRA
claims, before proceeding to the defendant’s challenge to the plaintiff’s Title VII claim.
A. The Plaintiff’s DCHRA Claims
The defendant asserts that the “[p]laintiff’s [DCHRA] claims for race and
sexual-orientation discrimination . . . fail as untimely under the governing statute of limitations
because [the p]laintiff failed to file his administrative complaint with [the] DCOHR within one
year of his discovery of the challenged act[,]” Def.’s Mem. at 6, which the defendant alleges was
5
the plaintiff’s “non-selection for the Director of Corporate Contributions position[,]” id. at 7.2 In
response, the plaintiff argues that his “claim of sexual orientation discrimination pursuant to
the [DCHRA] was timely made[,]” Pl.’s Opp’n at 1, because, “[a]lthough [he] was vocal in his
opinion that [the d]efendant’s selecting officials were motivated by racist animus [on January 29,
2019], he did not suspect that the selection decision was also based on his sexual preference until
March 28, 2019[,]” id. at 5. Before the Court may consider the defendant’s argument for
dismissal of the plaintiff’s DCHRA claims as time-barred, the Court must address its authority to
exercise jurisdiction over these claims. See NetworkIP, LLC v. Fed. Commc’ns Comm’n, 548
F.3d 116, 120 (D.C. Cir. 2008) (“It is axiomatic that subject[-]matter jurisdiction may not be
waived, and that courts may raise the issue sua sponte.” (internal quotation marks omitted)). For
the following reasons, the Court concludes that, “at this time[, it] cannot determine whether it has
subject[-]matter jurisdiction over [the plaintiff’s] DCHRA claim[s].” Peart v. Latham &
Watkins, 985 F. Supp. 2d 72, 88 (D.D.C. 2013).
The DCHRA “requires an election of remedies.” Jones v. District of Columbia,
41 F. Supp. 3d 74, 79 (D.D.C. 2014). Under the DCHRA, “[a]ny person claiming to be
aggrieved by an unlawful discriminatory practice shall have a cause of action in any court of
competent jurisdiction for damages and such other remedies as may be appropriate, unless such
person has filed a complaint” with the DCOHR. D.C. Code § 2-1403.16(a). “Individuals
alleging violations of the DCHRA [ ] thus . . . may file a complaint either in court or with [the
DC]OHR[,]” but “they cannot do both[,]” Elzeneiny v. District of Columbia, 125 F. Supp. 3d 18,
2
In his opposition, the plaintiff contests the defendant’s characterization of the discriminatory act, arguing that “the
injury in this case was not simply [the p]laintiff’s non-selection, but rather [the p]laintiff’s disparate treatment with
regards to the non-competitive selection decision on the basis of his sexual preference, as well as the ongoing
disparate impact of . . . McGovern’s policy of not promoting gay black men.” Pl.’s Opp’n at 5 (emphasis in
original).
6
32 (D.D.C. 2015), because “the jurisdiction of the court and [the DC]OHR are mutually
exclusive in the first instance[,]” Carter v. District of Columbia, 980 A.2d 1217, 1223
(D.C. 2009) (quoting Brown v. Capitol Hill Club, 425 A.2d 1309, 1311 (D.C. 1981)). Therefore,
“once a plaintiff files a complaint with [the DC]OHR, [he or] she may only file an independent
suit in two narrow instances: [(1)] if [the DC]OHR dismissed the case on administrative
convenience [grounds,] or [(2)] if the individual withdrew [his or] her [DC]OHR complaint
before a probable-cause determination was rendered.” Elzeneiny, 125 F. Supp. 3d at 33; see also
D.C. Code § 2-1403.16(a) (stating that “where the [DCOHR] has dismissed [a] complaint on the
grounds of administrative convenience, or where the complainant has withdrawn a complaint,
such person shall maintain all rights to bring suit as if no complaint has been filed”).
Here, the plaintiff represents that he “submitted a [c]harge of [d]iscrimination with the
[DCOHR.]” Compl. ¶ 26. Accordingly, the Court may only exercise jurisdiction over this case
if either “(1) [the DC]OHR dismiss[ed] the complaint for ‘administrative convenience’ or (2) the
[plaintiff] withdr[ew] [his] [DC]OHR complaint before [the DC]OHR [ ] decided it.” Carter,
980 A.2d at 1223 (citing D.C. Code § 2-1403.16(a)). However, the plaintiff’s Complaint only
provides two updates as to the status of his DCOHR discrimination charge: (1) on August 5,
2020, the DCOHR “issued a notice, stating that the parties must attend mandatory mediation on
September 24, 2020[,]” id. ¶ 28; and (2) on September 4, 2020, “[the d]efendant filed a motion to
dismiss the [c]harge of [d]iscrimination on the basis that the [c]harge was untimely[,]” id. ¶ 29.
The Complaint provides no further information about the status of the plaintiff’s case before the
DCOHR. See generally Compl.
Therefore, the plaintiff’s Complaint lacks any allegations that would enable the Court to
conclude that “[the DC]OHR dismissed the case on administrative convenience [grounds]” or the
7
plaintiff “withdrew [his DC]OHR complaint before a probable-cause determination was
rendered.” Elzeneiny, 125 F. Supp. 3d at 33; see generally Compl. Accordingly, to determine
whether it can exercise jurisdiction over the plaintiff’s DCHRA claims, the Court will require the
submission of supplemental briefing regarding the plaintiff’s election of remedies and, in the
interim, deny the defendant’s motion for partial dismissal without prejudice as to the DCHRA
claims in Count I. See Peart, 985 F. Supp. 2d at 90 n.3 (declining to reach the defendant’s
argument for dismissal of a DCHRA claim because “[d]etermining whether [the plaintiff’s]
DCHRA claim is untimely would constitute an exercise of the Court’s subject[-]matter
jurisdiction” and “the Court [could not] determine at th[at] time whether it ha[d] jurisdiction over
[the] DCHRA claim”).
B. The Plaintiff’s Title VII Claim
The Court now turns to the defendant’s challenge to the plaintiff’s Title VII claim. The
defendant contends that the “[p]laintiff’s Title VII claim in Count II is [ ] deficient because [the
p]laintiff does not allege that he exhausted his administrative remedies with the Equal
Employment Opportunity Commission (‘EEOC’)[.]” Def.’s Mem. at 3. Specifically, the
defendant argues that the plaintiff does not allege “that he filed any charge with the EEOC (or
that his DCOHR charge was cross-filed with the EEOC)[,]” “that he received a right-to-sue
notice from the EEOC before filing this action[,]” or “even [ ] the sort of conclusory
statement . . . that he ‘exhausted his administrative remedies.’” Id. at 8. The plaintiff has not
responded to the defendant’s argument, see generally Pl.’s Opp’n, and for the following reasons,
the Court concludes that the plaintiff has conceded this argument.
“Prior to filing a Title VII suit, a plaintiff must exhaust his [or her] administrative
remedies by filing an EEOC charge outlining his [or her] allegations.” Duberry v. Inter-Con Sec.
8
Sys., Inc., 898 F. Supp. 2d 294, 298 (D.D.C. 2012) (citing 42 U.S.C. § 2000e-5(e)). Since “Title
VII’s exhaustion requirements are not jurisdictional[,]” Artis v. Bernake, 630 F.3d 1031,
1034 n.4 (D.C. Cir. 2011), “a 12(b)(6) motion . . . is the appropriate vehicle to challenge an
alleged failure to exhaust administrative remedies under Title VII[,]” Mahoney v. Donovan,
824 F. Supp. 2d 49, 58 (D.D.C. 2011) (internal quotation marks omitted); see also Hicklin v.
McDonald, 110 F. Supp. 3d 16, 18 (D.D.C. 2015) (“A motion to dismiss for failure to exhaust
administrative remedies is properly addressed under [ ] Rule . . . 12(b)(6).”) (citing Marcelus v.
Corr. Corp. of Am./Corr. Treatment Facility, 540 F. Supp. 2d 231, 234–35 (D.D.C. 2008)).
However, “failure to exhaust is an affirmative defense that must be pleaded and
established by the defendant, and the plaintiff therefore need not plead exhaustion in the
complaint.” Briscoe v. Costco Wholesale Corp., 61 F. Supp. 3d 78, 85 (D.D.C. 2014). Thus,
“the defendant ‘bears the burden of proving by a preponderance of the evidence that the plaintiff
has failed to exhaust administrative remedies.’” Id. at 84–85 (quoting Ndondji v. InterPark Inc.,
768 F. Supp. 2d 263, 276 (D.D.C. 2011) (citing Bowden v. United States, 106 F.3d 433, 437
(D.C. Cir. 1997)). “This burden requires more than ‘[m]eager, conclusory allegations that the
plaintiff failed to exhaust his [or her] administrative remedies.’” Id. at 85 (quoting Dobbs v.
Roche, 329 F. Supp. 2d 33, 38 (D.D.C. 2004)). “If the defendant meets its burden, the burden
shifts to the plaintiff to demonstrate that dismissal is not warranted.” Id. “When a plaintiff fails
to meet his [or her] burden by showing that he [or she] exhausted the administrative remedies,
dismissal is appropriate.” Id.
Here, although the plaintiff was not required to plead exhaustion in his Complaint, see
id., the plaintiff’s opposition “does not mention [the p]laintiff’s Title VII claim,” Def.’s Reply at
3, and does not respond to the argument that “the claim is subject to dismissal based on [the
9
p]laintiff’s failure to exhaust the administrative prerequisites with the EEOC[,]” id. See
generally Pl.’s Opp’n. Accordingly, without reaching the merits of the defendant’s affirmative
defense, the Court concludes that the plaintiff has “conceded [the] argument[] raised by [the]
defendant’s Rule 12(b)(6) motion” as to the exhaustion of administrative remedies because “the
plaintiff is represented by counsel” and the defendant’s arguments “are not addressed in [the]
plaintiff’s opposition.” Toms, 650 F. Supp. 2d at 18; see also Tnaib, 450 F. Supp. 2d at 91
(“When a plaintiff files a response to a motion to dismiss but fails to address certain arguments
made by the defendant, the court may treat those arguments as conceded.” (quoting Fox,
2003 WL 21854800, at *2)). Thus, the Court will grant the defendant’s motion with respect to
the Title VII claim in Count II of the plaintiff’s Complaint.
IV. CONCLUSION
For the foregoing reasons, the Court concludes that it must grant in part and deny without
prejudice in part the defendant’s motion.
SO ORDERED this 14th day of November, 2022.3
REGGIE B. WALTON
United States District Judge
3
The Court will contemporaneously issue an Order consistent with this Memorandum Opinion.
10 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483718/ | Case: 22-30002 Document: 00516543930 Page: 1 Date Filed: 11/14/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 14, 2022
No. 22-30002
Lyle W. Cayce
Clerk
Gail Dominick,
Plaintiff—Appellant,
versus
United States Department of Homeland Security,
Alejandro Mayorkas, Secretary,
Defendant—Appellee.
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:20-CV-2713
Before Higginbotham, Southwick, and Higginson, Circuit
Judges.
Patrick E. Higginbotham, Circuit Judge:
Gail Dominick was dismissed from her role as a Cadre On-Call
Response Employee (CORE) for the Federal Emergency Management
Agency (FEMA) in 2017. Dominick claimed that her dismissal resulted from
race-based discrimination in violation of Title VII of the Civil Rights Act of
1964.1 Following administrative proceedings in which an administrative law
1
42 U.S.C. § 2000e et seq.
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No. 22-30002
judge rejected her complaint, Dominick filed suit in federal district court.
Dominick appeals the district court’s order granting FEMA summary
judgment and denying her motion for additional time to conduct discovery,
arguing that the court abused its discretion by declining to grant a
continuance under Rule 56(d) as required by Chandler v. Roudebush.2 We
AFFIRM.
I.
Dominick worked for FEMA as a CORE, an at-will employee hired
pursuant to the Stafford Act to support long-term disaster relief projects in
the lasting wake of Hurricane Katrina.3 She occupied the position from 2006
until her dismissal in 2017. FEMA calls the process of reducing staff as
disaster relief operations wind down “rightsizing,” and it also laid off one of
Dominick’s two coworkers while retaining the other. Dominick claimed that
racial animus motivated her supervisors’ decisions regarding which staff
member to keep.
Dominick filed an Equal Employment Opportunity complaint in July
of 2017, and she requested a hearing before an Equal Employment
Opportunity Commission administrative law judge in early 2018. Discovery
proceeded from March 25 until June 21, 2019, during which time Dominick
deposed three FEMA managers and acquired written evidence. The
administrative judge granted FEMA’s motion for a decision without a
hearing, denying her claim. FEMA then issued a final order on the matter.
Having made use of her administrative remedies, Dominick filed a
complaint in district court under 42 U.S.C. § 2000e-16(c), which allows
2
425 U.S. 840 (1976).
3
See 42 U.S.C. § 5149(b).
2
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No. 22-30002
federal employees claiming discriminatory treatment to bring their cases to
district court after an agency takes final action. FEMA moved for summary
judgment alongside its answer. Dominick sought a 30-day continuance to
engage in further discovery, but FEMA’s counsel suggested that 60 days
would be more appropriate to facilitate the three additional depositions and
written inquiries Dominick requested. The district court granted the
continuance on May 6, 2021, providing that Dominick’s opposition to the
motion for summary judgment would be due no later than July 6.
Dominick, and her counsel, took no further action until July 2, when
her counsel emailed FEMA’s counsel seeking to organize discovery and
suggesting deposition dates in mid-August. After receiving no response from
the FEMA attorney over the holiday weekend, Dominick timely filed her
opposition to the motion for summary judgment, which included a Rule 56(d)
motion to provide more time for discovery because she could not adequately
respond with the available information.
The district court granted FEMA’s motion for summary judgment
and denied Dominick’s Rule 56(d) motion. The district court reasoned that
she failed to explain how any additional facts might influence the outcome of
the summary judgment motion, as required to merit further time.4 The court
also noted that Dominick’s counsel offered no explanation for the delay in
contacting FEMA’s counsel to negotiate and schedule discovery. Dominick
timely appealed.
II.
Dominick argues that the district court erred by granting FEMA’s
motion for summary judgment without the benefit of additional discovery,
4
See Raby v. Livingston, 600 F.3d 552, 561 (5th Cir. 2010).
3
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No. 22-30002
and that the district court should have instead granted her Rule 56(d) motion.
We review a district court’s denial of a Rule 56(d) motion for abuse of
discretion.5 The district court “has broad discretion in all discovery matters,
and such discretion will not be disturbed ordinarily unless there are unusual
circumstances showing a clear abuse.”6 To provide litigants time to develop
facts necessary to defend their claims, Rule 56(d) motions are “broadly
favored and should be liberally granted.”7 In addition, “a continuance of a
motion for summary judgment for purposes of discovery should be granted
almost as a matter of course” when “the party opposing the summary
judgment informs the court that its diligent efforts to obtain evidence from
the moving party have been unsuccessful.”8
In this case, the district court did not abuse its discretion in finding
that Dominick failed to diligently pursue further discovery during the two-
month continuance the district court provided.9 She admits that she took no
action to engage in discovery between May 6—the date the district court
granted the continuance—and July 2—just four days before her opposition
to the motion for summary judgment came due. Dominick declined to explain
the 57-day delay in her Rule 56(d) declaration accompanying the opposition.
5
Am. Family Life Assurance Co. of Columbus v. Biles, 714 F.3d 887, 894 (5th Cir.
2013).
6
Kelly v. Syria Shell Petroleum Dev. B.V., 213 F.3d 841, 855 (5th Cir.2000) (internal
quotation marks omitted).
7
Raby, 600 F.3d at 561 (5th Cir. 2010).
8
Int’l Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1267 (5th Cir. 1991) (internal
quotations and citations omitted).
9
See Beattie v. Madison Cnty. Sch. Dist., 254 F.3d 595, 606 (5th Cir. 2001) (“If [the
requesting party] has not diligently pursued discovery, however, she is not entitled to
relief”); Baker v. Am. Airlines, 430 F.3d 750, 756 (5th Cir. 2005).
4
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No. 22-30002
A “party suspends discovery at [her] own risk,” and Dominick’s arguments
to excuse this fault are not availing.10
Dominick first takes issue with the district court for allowing FEMA
to move for summary judgment prior to a Rule 26(f) conference and formal
discovery. Yet “Rule 56 does not require that any discovery take place before
summary judgment can be granted; if a party cannot adequately defend such
a motion, Rule [56(d)] is his remedy.”11 If the federal rules do not require
discovery prior to summary judgment, then it stands to reason that they do
not require a Rule 26(f) conference. She further faults FEMA for failing to
hold the discovery conference. Yet, as Dominick points out, counsel are
“jointly responsible” for seeking this conference, which places the onus back
on her and her counsel’s own shoulders, particularly given that FEMA
planned to conduct no further discovery.12 In granting a continuance until
mid-July, the district court provided Dominick with the tools to mount a
defense against the motion for summary judgment. She simply failed to use
them.
Furthermore, Dominick was not deprived discovery. She had the
benefit of nearly 1,000 pages of deposition testimony and records with which
to create a genuine issue of material fact. She collected these documents
during a three-month period before the administrative law judge. That she
sought only “frugal discovery” belies any contention that she was unable to
10
Beattie, 254 F.3d at 606.
11
Leatherman v. Tarrant Cnty. Narcotics Intel. & Coordination Unit, 28 F.3d 1388,
1396 (5th Cir. 1994) (citations omitted). See also Washington v. Allstate Ins. Co., 901 F.2d
1281, 1285 (5th Cir. 1990) (“This court has long recognized that a plaintiff’s entitlement to
discovery prior to a ruling on a motion for summary judgment is not unlimited.”).
12
Rule 26(f)(2). See also USA Gymnastics v. Liberty Ins. Underwriters, Inc., 27 F.4th
499, 514 (7th Cir. 2022).
5
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No. 22-30002
diligently pursue what information remained during the allotted time. And
that Dominick’s counsel expressed no qualms initially about the 60-day
continuance only further emphasizes this conclusion.
Dominick also berates opposing counsel for failing to respond
promptly to an email sent on Friday, July 2, seeking to depose one individual,
re-depose two others, engage in further written discovery, and continue for
another two months. It was unreasonable for Dominick’s counsel, having
delayed 57 days, to rely on opposing counsel’s availability over the Fourth of
July weekend.
Because Dominick failed to diligently pursue her limited discovery
needs during the two-month continuance, the district court did not abuse its
discretion in denying her Rule 56(d) motion.
III.
Dominick contends that federal law compels the district court to here
allow a wider scope of discovery under de novo review by virtue of Chandler
v. Roudebush.13 She posits that this means discovery should have taken place
as if the underlying administrative proceedings never occurred. Chandler,
Dominick argues, prevents a federal employer-defendant from prevailing in
a motion for summary judgment based solely on the administrative
proceedings without de novo discovery. Dominick reads too much into
Chandler’s guidance to federal courts.
In Chandler, the Supreme Court resolved disagreement among
circuits about how to approach lawsuits under § 2000e-16(c). Some circuits
determined that a de novo trial was not necessary in these circumstances, and
that district courts could simply review the administrative record to
13
425 U.S. 840 (1976).
6
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No. 22-30002
determine whether the clear weight of the evidence supported the agency’s
conclusion in accordance with traditional principles of administrative law.14
Other circuits concluded that the statute provided for a de novo trial that
extended beyond the administrative record.15 The Supreme Court reviewed
the statute’s text and legislative history, determining that when choosing
“between record review of agency action based on traditional appellate
standards and trial de novo,” Congress selected de novo.16 Chandler dictates
that public employees seeking redress under Title VII should be afforded all
the trappings of the civil action, “treat[ing] private- and federal-sector
employees alike,” and expressing no deference to the administrative
proceedings below.17
Yet Chandler does not support Dominick’s position that evidence
produced during discovery in administrative proceedings is immaterial. The
Supreme Court noted that “[p]rior administrative findings made with
respect to an employment discrimination claim may, of course, be admitted
as evidence at a federal-sector trial de novo.”18 Nothing in the opinion
indicates that a district court must allow litigants to engage in discovery
deemed duplicative or unnecessary, and nothing bars the district court from
considering evidence unearthed during administrative proceedings when
14
Chandler, 425 U.S. at 843. See, e.g., Salone v. United States, 511 F.2d 902, 904
(10th Cir. 1975) (vacated by Chandler).
15
Chandler, 425 U.S. at 843 n.4. See, e.g., Abrams v. Johnson, 534 F.2d 1226, 1228
(6th Cir. 1976).
16
Chandler, 425 U.S. at 861. See also Payne v. Salazar, 619 F.3d 56, 62 (D.C. Cir.
2010) (“[W]hat the Court meant by ‘trial de novo’ was the traditional federal trial of a civil
action—in contrast to the limited, deferential review of agency decisionmaking afforded,
for example, under the Administrative Procedure Act.”)
17
Chandler, 425 U.S. at 861.
18
Id. at 863 n.39.
7
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evaluating a Rule 56(d) motion. And Chandler cannot be construed as
demanding further discovery where, as here, the government acquiesces, but
the employee fails to diligently pursue it.19 Dominick received a de novo trial
and treatment equal to that afforded to a private sector employee. The
district court did not contravene Chandler by denying further discovery and
granting the summary judgment motion.20
****
We AFFIRM the judgment of the district court.
19
In Chandler, “[t]he [government] moved for an order prohibiting discovery on
the ground that the judicial action authorized by [§ 2000e-16(c)] is limited to a review of
the administrative record.” Id. at 842. Not so in Dominick’s case.
20
Dominick does not provide substantive arguments on the merits of the district
court’s summary judgment order, such as asserting that there existed a genuine issue of
material fact. Although FEMA’s response addressed the issue, it is deemed waived. See
Quick Techs., Inc. v. Sage Grp. PLC, 313 F.3d 338, 343 n.3 (5th Cir. 2002).
8 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483717/ | Case: 22-50882 Document: 00516544612 Page: 1 Date Filed: 11/14/2022
United States Court of Appeals
for the Fifth Circuit
No. 22-50882
In re Ken Paxton,
Petitioner.
Petition for a Writ of Mandamus
to the United States District Court
for the Western District of Texas
USDC No. 1:22-CV-859
Before Higginbotham, Duncan, and Wilson, Circuit Judges.
Stuart Kyle Duncan, Circuit Judge:
Believing Texas intends to enforce its abortion laws to penalize their
out-of-state actions, Plaintiffs sued Texas Attorney General Ken Paxton.
Paxton moved to dismiss the suit for lack of subject matter jurisdiction.
Plaintiffs then issued subpoenas to obtain Paxton’s testimony. Paxton moved
to quash the subpoenas, which the district court initially granted. On
reconsideration, however, the district court changed course, denied the
motion, and ordered Paxton to testify either at a deposition or evidentiary
hearing. Paxton petitioned our court for a writ of mandamus to shield him
from the district court’s order. We conclude the district court clearly erred
by not first ensuring its own jurisdiction and also by declining to quash the
subpoenas. We therefore grant the writ.
Case: 22-50882 Document: 00516544612 Page: 2 Date Filed: 11/14/2022
No. 22-50882
I.
Plaintiffs are organizations that pay for abortions and an abortion
provider (collectively, “Plaintiffs”). They sued Paxton and other officials,
claiming the anticipated enforcement of Texas’s abortion laws violates their
First Amendment rights and their right to interstate travel.1 Primarily, they
seek to enjoin the enforcement of these laws “for any behavior undertaken
by Plaintiffs in connection with any abortion that occurs outside the state of
Texas[.]” Paxton promptly moved to dismiss the suit for lack of subject
matter jurisdiction, arguing that he is entitled to sovereign immunity and that
Plaintiffs lack standing.
Before the district court ruled on Paxton’s motion to dismiss,
Plaintiffs separately subpoenaed Paxton in his official and individual
capacities. They contended they were entitled to examine Paxton personally
to clarify his power to enforce the challenged laws because his public
statements—including official advisories, campaign statements, and
tweets—allegedly contradicted his court filings on that point. Paxton moved
to quash the subpoenas, and the district court granted the motion. Plaintiffs
then moved for reconsideration.
On reconsideration, the district court changed course and ruled
Plaintiffs had shown the “exceptional circumstances” necessary to subpoena
a high-level official like Paxton. The court thought Paxton’s testimony was
necessary because he “possesses unique, first-hand knowledge” about his
intentions to enforce the challenged laws. His intentions were relevant, the
1
Plaintiffs challenge both Texas’s pre-Roe prohibition on abortion, see Tex. Rev. Civ.
Stat. art. 4512–.2, .6, as well as the Human Life Protection Act (HLPA), Tex. Health &
Safety Code ch. 170A, which was enacted in 2021 and became effective upon the overruling of
Roe v. Wade, 410 U.S. 113 (1973). See Dobbs v. Jackson Women’s Health Org., 142 S. Ct. 2228, 2242
(2022) (overruling Roe).
2
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No. 22-50882
court continued, because Paxton had simultaneously publicly promised to
enforce the laws while arguing in court that he lacked the authority to do so.
Having “inserted himself into this dispute by repeatedly tweeting and giving
interviews about [the challenged laws],” the court concluded that “Paxton
alone is capable of explaining his thoughts and statements.”
The court also determined that testifying would not unduly burden
Paxton. While recognizing that high-level officials have significant duties, the
court stated: “It is challenging to square the idea that Paxton has time to give
interviews threatening prosecutions but would be unduly burdened by
explaining what he means to the very parties affected by his statements.”
Paxton’s “many public statements and interviews,” the court thought,
belied the notion that testifying would burden his time.
Accordingly, the district court reversed its initial decision, denied the
motion to quash, and ordered Paxton “to meaningfully confer on or before
October 11, 2022 to agree on the particulars of Paxton’s testimony, whether
by deposition or evidentiary hearing.” The court also stayed Plaintiffs’
deadline to respond to Paxton’s motion to dismiss “pending Paxton’s
testimony.” That motion remains pending.
Paxton then petitioned us for a writ of mandamus and a stay of the
district court’s order. He separately filed an interlocutory appeal, arguing
that the order constructively denied him sovereign immunity. We granted a
temporary administrative stay to consider the petition. We now grant it.
II.
Federal courts “may issue all writs necessary or appropriate in aid of
their respective jurisdictions and agreeable to the usages and principles of
law.” 28 U.S.C. § 1651(a). One such writ is mandamus, an extraordinary
remedy used to correct “a judicial usurpation of power” or a “clear abuse of
discretion.” Cheney v. U.S. Dist. Ct. for D.C., 542 U.S. 367, 380 (2004)
3
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No. 22-50882
(citations and internal quotation marks omitted). Typically, the writ serves
as a means of “confining the inferior court to a lawful exercise of its
prescribed jurisdiction, or of compelling it to exercise its authority when it is
its duty to do so.” In re Gee, 941 F.3d 153, 158 (5th Cir. 2019) (per curiam)
(quoting Ex parte Republic of Peru, 318 U.S. 578, 583 (1943)).
Before the writ can issue, three conditions must be met: (1) the
petitioner must show his right to the writ is clear and indisputable; (2) the
petitioner must have no other adequate means of obtaining relief; and (3) the
issuing court must be satisfied in its own discretion that the writ is
appropriate under the circumstances. Cheney, 542 U.S. at 380–81; In re Gee,
941 F.3d at 157. Those stringent standards are satisfied here.
A.
We turn first to Paxton’s asserted right to relief from the order to
testify. Our mandamus cases distinguish a court’s discretionary and non-
discretionary duties. In re Gee, 941 F.3d at 158. For discretionary duties, “a
clear and indisputable right to the issuance of the writ of mandamus will arise
only if the district court has clearly abused its discretion, such that it amounts
to a judicial usurpation of power.” Id. at 158–59 (quoting In re First S. Sav.
Ass’n, 820 F.2d 700, 707 (5th Cir. 1987)). By contrast, violating a non-
discretionary duty necessarily creates a clear right to relief because the court
lacked authority to deviate from that duty. Ibid.
Paxton argues he has a right to relief under each basis. He contends
the district court violated a non-discretionary duty to ensure its own
jurisdiction by failing to rule first on his motion to dismiss. Paxton also argues
the court abused its discretion by denying his motion to quash. We address
argument each in turn.
4
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No. 22-50882
1.
“A district court’s obligation to consider a challenge to its jurisdiction
is non-discretionary.” In re Gee, 941 F.3d at 159. An appropriate jurisdictional
challenge triggers a “duty of making further inquiry as to [the court’s] own
jurisdiction.” Ibid. (quoting Opelika Nursing Home, Inc. v. Richardson, 448
F.2d 658, 666 (5th Cir. 1971)). Paxton raised such a challenge by moving to
dismiss for lack of jurisdiction on both standing and sovereign immunity
grounds, well before Plaintiffs subpoenaed him. The district court failed to
rule on that motion before refusing to quash the subpoenas. Indeed, in the
same order compelling Paxton to testify, the court stayed Plaintiffs’ deadline
to respond to the motion to dismiss “pending Paxton’s testimony.”
A court has a fundamental duty to examine its jurisdiction. The
district court’s failure to do so here extends beyond a “mere jurisdictional
error” or “mere failure to spot a jurisdictional issue.” Id. at 159. Indeed, the
district court’s order explicitly postpones Paxton’s assertion of sovereign
immunity pending his deposition. But sovereign immunity provides
immunity from suit, not mere immunity from damages. Russell v. Jones, 49
F.4th 507, 512 (5th Cir. 2022); see also Ex Parte Ayers, 123 U.S. 443, 505
(1887) (“The very object and purpose of the eleventh amendment were to
prevent the indignity of subjecting a state to the coercive process of judicial
tribunals at the instance of private parties.”). As such, we have vacated the
perfunctory denial of a motion to dismiss predicated on sovereign immunity
and remanded for consideration of the motion before any further litigation,
even though the district court preferred to put off the motion until “other
legal issues were resolved and further discovery was conducted.” Texas v.
Caremark, Inc., 584 F.3d 655, 657 (5th Cir. 2009); see also Russell, 49 F.4th at
514 (“Where sovereign immunity applies, it applies totally. Plaintiffs stop at
the Rule 12(b)(1) stage and don’t get discovery. They don’t pass go.”).
5
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No. 22-50882
Our recent decision in Carswell v. Camp, 37 F.4th 1062 (5th Cir.
2022), confirms the district court should have first ruled on Paxton’s
assertion of immunity.2 There, the plaintiff sought to depose defendants who
had asserted qualified immunity, relying on the district court’s scheduling
order that allowed limited discovery “if the plaintiff believes discovery is
necessary to resolve the [qualified immunity] defense” or if discovery was in
the defendant’s capacity as a “witness.” Id. at 1064–65. While some of our
cases had previously allowed “narrow” and “careful” discovery prior to
ruling on immunity “if further factual development is necessary to ascertain
the availability of [the] defense,” Carswell overruled those precedents. Id. at
1066 (citations and internal quotation marks omitted). We explained that
“[t]he Supreme Court has now made clear that a plaintiff asserting
constitutional claims against an officer must survive the motion to dismiss
(and the qualified immunity defense) without any discovery.” Ibid. (emphasis
in original). In so doing, we emphasized that a defendant’s entitlement to
immunity “should be determined at the earliest possible stage of the
litigation,” a principle that “admits of no exceptions.” Id. at 1067 (citations
and internal quotation marks omitted). Accordingly, we held that the district
court’s scheduling order, which allowed discovery against defendants while
deferring resolution of their asserted immunity, was an abuse of discretion.
Id. at 1066.
Plaintiffs insist Carswell is inapposite because their subpoenas are “to
obtain hearing testimony,” not discovery, and because Paxton is being called
as a “witness” with relevant knowledge, not as a party. We disagree. Even
2
Carswell addressed qualified immunity but is pertinent here because, like sovereign
immunity, qualified immunity provides “immunity from suit rather than a mere defense to liability.”
Pearson v. Callahan, 555 U.S. 223, 237 (2009) (quoting Mitchell v. Forsyth, 472 U.S. 511, 526 (1985)).
6
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No. 22-50882
assuming such distinctions make any difference,3 Paxton is a defendant, not
a third party, and to the extent his statements are relevant to Plaintiffs’
claims, it is because of his status as a defendant. Moreover, Carswell already
rejected similar arguments. The plaintiff there brought two sets of claims:
§ 1983 claims against the individual defendants and a Monell claim against the
county. The plaintiff tried to couch deposing the immunity-asserting
defendants as obtaining their testimony as “witnesses” for the Monell claim,
not as defendants for the § 1983 claim. Carswell, 37 F.4th at 1068. We rejected
this gambit, explaining that it “turn[ed] qualified immunity on its head” by
opening the defendants to deposition before adjudication of their immunity
defense. Ibid. So too here.
Finally, we reject Plaintiffs’ argument that Paxton’s testimony is
somehow necessary to decide jurisdiction. Whether Paxton may be sued
under the Ex parte Young exception to sovereign immunity does not turn on
Paxton’s campaign statements or tweets. Rather, it turns principally on
whether Paxton “is statutorily tasked with enforcing the challenged law.”
City of Austin v. Paxton, 943 F.3d 993, 998 (5th Cir. 2019). The same inquiry
also informs the standing question. See id. at 1002. In other words, Paxton’s
jurisdictional defenses can be assessed by reference to Texas law. His
personal deposition answers are irrelevant.
The district court had a non-discretionary duty to ascertain its
jurisdiction by ruling on Paxton’s motion to dismiss before allowing Paxton
to be subpoenaed. See In re Gee, 941 F.3d at 159. Because the district court
failed to do so, Paxton has a clear right to relief.
3
But see Russell, 49 F.4th at 515 (holding sovereign immunity barred subpoenas even against
third-party judges because subpoenas are a “coercive judicial process” that “issue under the court’s
authority and are enforced by court order”).
7
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No. 22-50882
2.
Apart from the jurisdictional question, the district court also clearly
abused its discretion by refusing to quash the subpoenas. “[E]xceptional
circumstances must exist before the involuntary depositions of high agency
officials are permitted.” In re Off. of Inspector Gen., R.R. Ret. Bd., 933 F.2d
276, 278 (5th Cir. 1991) (per curiam). Before requiring such “apex”
testimony, courts must consider: (1) the deponent’s high-ranking status;
(2) the substantive reasons for the deposition; and (3) the potential burden
the deposition would impose on the deponent. In re FDIC, 58 F.3d 1055, 1060
(5th Cir. 1995); see also In re Bryant, 745 F. App’x 215, 218 n.2 (5th Cir. 2018)
(per curiam). A district court commits a “clear abuse of discretion” when it
compels apex testimony absent extraordinary circumstances. In re FDIC, 58
F.3d. at 1062. No such circumstances exist here.
Only the second and third factors are disputed. As for the second
factor, substantive need, the district court found Paxton’s testimony was
necessary to clarify his enforcement policy due to purported contradictions
between his court filings and public statements. It concluded testimony was
needed from Paxton himself because he had “unique, first-hand knowledge”
from “ha[ving] inserted himself into this dispute by repeatedly tweeting and
giving interviews about the [challenged law].” “Paxton alone,” the district
court thought, could “explain[] his thoughts and statements.” We disagree.
The district court ignored the rationale for limiting apex testimony to
exceptional circumstances. High-ranking officials—state attorneys general
being the paradigm case—are often drawn into lawsuits. They cannot
perform their duties if they are not personally shielded from the burdens of
litigation. In re Bryant, 745 F. App’x at 220–21; see also In re Stone, 986 F.2d
898, 904 (5th Cir. 1993) (per curiam) (“Obviously, high-ranking officials of
cabinet agencies could never do their jobs if they could be subpoenaed for
8
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No. 22-50882
every case involving their agency.”). Accordingly, a “key aspect” of the
analysis “is whether the [sought after] information . . . can be obtained from
other witnesses.” In re Bryant, 745 F. App’x at 221. Where it can, apex
testimony is justified only in the “rarest of cases.” In re FDIC, 58 F.3d at
1062. This is not one of those rare cases.
The district court conceded the “plain fact that lawyers at the
Attorney General’s Office may articulate the Office’s [enforcement]
policies.” So, by the court’s own admission, if there is a need to clarify the
office’s enforcement policy, a representative can do so on the Attorney
General’s behalf. The court nonetheless treated Paxton as having unique
information merely because he made public statements about a matter that
later became the subject of litigation. That does not follow. Paxton’s personal
“thoughts and statements” have no bearing on his office’s legal authority to
enforce Texas’s abortion laws or any other law. To accept the district court’s
position would undermine the exceptional circumstances test. It is entirely
unexceptional for a public official to comment publicly about a matter of
public concern. If doing so imparts unique knowledge, high-level officials will
routinely have to testify.
Similarly, the district court erred in holding that compelling Paxton’s
testimony would not unduly burden him. The court reasoned that if Paxton
has time to give public statements, he has time to testify: “It is challenging to
square the idea that Paxton has time to give interviews threatening
prosecutions but would be unduly burdened by explaining what he means to
the very parties affected by his statements.” Again, this reasoning would
eviscerate the exceptional circumstances test. “High ranking government
officials have greater duties and time constraints than other witnesses.” In re
United States, 985 F.2d 510, 512 (11th Cir. 1993) (per curiam). Those duties
often involve communicating with the public on matters of public interest.
9
Case: 22-50882 Document: 00516544612 Page: 10 Date Filed: 11/14/2022
No. 22-50882
The fact that a high-ranking official talks to his constituents does not ipso facto
mean he also has ample free time for depositions.
In sum, the district court committed a “clear abuse of discretion” by
finding that exceptional circumstances justified ordering Paxton to testify. In
re FDIC, 58 F.3d. at 1062. Paxton has therefore shown a clear and
indisputable right to relief.
B.
Because mandamus is a remedy of last resort, the writ cannot issue
unless the petitioner has no other adequate means of obtaining the relief he
seeks. Cheney, 542 U.S. at 380. Here, not only has Paxton sought the writ, he
has also filed a separate interlocutory appeal. Plaintiffs argue that this appeal
is an adequate alternative avenue for relief, making the writ inappropriate.
Our precedent forecloses that argument. We have held that an
interlocutory appeal does not constitute adequate relief where the party
opposing the writ also challenges the jurisdictional basis for the appeal. In In
re FDIC, we issued the writ to quash notices of deposition issued to members
of the Board of Directors of the Federal Deposit Insurance Corporation
(“FDIC”). 58 F.3d at 1057. The officials filed an interlocutory appeal while
simultaneously seeking the writ. Id. at 1060 n.7. Notwithstanding the appeal,
we held that that the officials had no other adequate means of obtaining relief
because the opposing party had moved to dismiss the appeal for lack of
jurisdiction. Ibid. As we explained, “[w]e do not think [the opposing party]
can at once move to dismiss the appeal and urge that the FDIC has an
adequate means of obtaining relief.” Ibid. We issued the writ and dismissed
the appeal as moot. Id. at 1063 n.10.
In re FDIC controls here because Plaintiffs have moved to dismiss
Paxton’s appeal for lack of jurisdiction. On the one hand, they argue that
Paxton should not receive the writ because he can receive relief via his appeal.
10
Case: 22-50882 Document: 00516544612 Page: 11 Date Filed: 11/14/2022
No. 22-50882
On the other, they seek to prevent the appeal’s resolution on the merits by
challenging our jurisdiction. Under In Re FDIC, they cannot do both.
Paxton’s appeal is thus not an adequate alternative.
Paxton’s only remaining source of relief is the writ. Without it, he will
be compelled either to submit to testifying or risk contempt charges for
violating the court’s order.
C.
Finally, we exercise our discretion to decide whether to issue the writ.
The writ is always discretionary: “Discretion is involved in defining both the
circumstances that justify exercise of writ power and also the reasons that
may justify denial of a writ even though the circumstances might justify a
grant.” 16 Alan Wright, Arthur Miller, & Edward H.
Cooper, Fed. Prac. and Proc. § 3933 (3d ed. 2012); see also Duncan
Townsite Co. v. Lane, 245 U.S. 308, 311 (1917) (“Mandamus is an
extraordinary remedial process which is awarded, not as a matter of right, but
in the exercise of a sound judicial discretion.”). We are satisfied that the writ
should issue.
We sometimes deny the writ as a matter of prudence even when the
district court erred, see In re Depuy Orthopaedics, Inc., 870 F.3d 345, 347 n.4
(5th Cir. 2017) (collecting cases), but we typically do so when two conditions
are met, neither of which is present here. First, our prudential denials involve
a district court’s mistaken resolution of a novel or thorny question of law.
See, e.g., In re JPMorgan Chase & Co., 916 F.3d 494, 504 (5th Cir. 2019)
(denying the writ where the district court “followed numerous others in
errantly applying” the relevant legal standard); In re Dean, 527 F.3d 391, 394
(5th Cir. 2008) (per curiam) (denying the writ where “the district court, with
the best of intentions, misapplied the law” on a legal question involving a
circuit split); In re Kleberg Cnty., 86 F. App'x 29, 34 (5th Cir. 2004) (denying
11
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No. 22-50882
the writ where the district court “handled a delicate and novel legal issue but
nevertheless [ran] afoul of controlling law”); In re Stone, 986 F.2d at 901
(denying the writ where the district court erred as to an “important,
undecided issue”); Landmark Land Co. v. Off. of Thrift Supervision, 948 F.2d
910, 911 (5th Cir. 1991) (denying the writ after the erroneous interpretation
of a “question of first impression”). These types of mistakes, made under
difficult circumstances, may not rise to the level of a clear and indisputable
error, as required for mandamus relief. See In Re JPMorgan Chase, 916 F.3d
at 504.
Our prudential denials also involve the kind of errors that the district
court can correct once we have clarified the proper legal standard. For
instance, we declined to issue the writ when the district court improperly
delayed crime victims from exercising their statutory right to participate in
the offender’s plea agreement process. In Re Dean, 527 F.3d at 396. Despite
this error, we were “confident . . . that the conscientious district court will
fully consider the victims’ objections and concerns in deciding whether the
plea agreement should be accepted.” Ibid. Similarly, we denied the writ
where the district court erroneously required a representative of the
government with settlement authority to be present at all settlement
conferences without considering more tailored measures. In re Stone, 986
F.2d at 905. In denying the writ, we noted that “[t]he able district judge has
indicated that he welcomes this court’s exposition of this issue, and we are
confident that he will abide by our decision and adjust his directives
accordingly.” Ibid.; see also In re Kleberg Cnty., 86 F. App’x at 34 (denying
writ where the district court would have the opportunity to “reconsider its
[error] in light of the standards we have articulated”).
Neither circumstance is present here. The district court’s twin errors
occurred in areas of the law governed by well-settled standards. See In re
Volkswagen of Am., Inc., 545 F.3d 304, 319 (5th Cir. 2008) (en banc)
12
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No. 22-50882
(suggesting that discretion counsels issuing the writ where the court reached
a “patently erroneous result”). Moreover, the errors are ones that cannot be
rectified as the case progresses. Paxton’s compelled testimony cannot be
undone or corrected by the district court or a reviewing court once it occurs.
We are therefore satisfied that, under the circumstances, we should exercise
our discretion to issue the writ.
III.
The petition for writ of mandamus is GRANTED, directing the
district court to vacate its October 4, 2022 order and grant Paxton’s motion
to quash. Paxton’s interlocutory appeal, No. 22-50889, and motion for stay
are DISMISSED as MOOT. Finally, our temporary stay of October 10,
2022, is LIFTED.
13
Case: 22-50882 Document: 00516544612 Page: 14 Date Filed: 11/14/2022
No. 22-50882
Patrick E. Higginbotham, Circuit Judge, concurring:
I agree that the district court must resolve the question of whether the
parties before it have standing and join in the remand for further proceedings.
The energy driving this case is generated by its subject—not its
complexity. Plaintiffs proceeding under § 1983 seek injunctive and
declaratory relief—a declaration that Texas’s Human Life Protection Act
(HLPA), among other anti-abortion statutes, cannot be enforced against
persons assisting Texans to obtain abortion healthcare in states where
abortion is permitted.
1
HLPA makes abortion a felony unless a woman’s pregnancy creates
a “life-threatening physical condition.”2 The statute grants inter alia the
Attorney General the power to enforce its terms by imposing a fine of “no[]
less than $100,000.”3 Plaintiffs fear that Attorney General Ken Paxton will
pursue civil liability for assisting Texans to obtain abortion healthcare in
states not prohibiting abortion, chilling their exercise of free speech and their
constitutional right to interstate travel. On the extant record, these assertions
are not fanciful. Plaintiffs’ briefs cite to statements assertedly made by
Attorney General Paxton in media interviews, press releases, and twitter
posts promising, among other things, “to make people pay if they’re going to
do abortions;”4 that Attorney General Paxton clarified in his briefings that
1
As detailed in their original complaint, Plaintiffs “seek to enjoin Defendants from applying
Texas’s anti-abortion laws to Plaintiffs for the legal exercise of their rights.” They “also seek a
declaratory judgment declaring unconstitutional, null and void the retroactive application of the Pre-
Roe Statutes and to enjoin Defendants from applying them against Plaintiffs, their staff, volunteers,
and/or donors for conduct that preceded the Dobbs decision.”
2
Tex. Health & Safety Code Ann. § 170A.002.
3
Id. § 170A.005.
4
Several witnesses stated that they understood these statements to cover out-of-state
abortion care but could not be sure because the statements were unclear.
14
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No. 22-50882
the State’s interest in protecting unborn Texans “continues whether the
Texan mother seeks an abortion in Denver or Dallas, in Las Cruces or
Lamesa.” Plaintiffs also point to statements by other state officials, who
while lacking specific enforcement authority under state law nonetheless fuel
a climate of fear of suit or prosecution.5
While it appears on the face of the complaint that Plaintiffs may have
an adequate stake in providing out-of-state abortion access, their standing—
injury and redressability—here is not self-evident, and as a threshold matter
jurisdiction must be addressed. This is rote. My colleagues go further,
applying Carswell v. Camp’s complete ban on discovery prior to the
determination of qualified immunity to the determination of sovereign
immunity.6 That any obligation of Attorney General Paxton to testify is fully
resolved by the Apex doctrine aside, the mandate has not yet issued in
Carswell, but even if it is proffered as a decision of this panel, now informed
but not controlled by precedent, I cannot agree. It is at best “unsettled
jurisprudence.” The Apex doctrine does all the work here and it is not
apparent that discovery from the Attorney General is essential to this case.
“Exceptional circumstances” do not exist to justify deposing a high-ranking
official when the information desired from testimony can be obtained
elsewhere.7 Plaintiffs seek testimony from Attorney General Paxton while at
the same time urging that his statements—their content and inconsistency,
including in these proceedings—chill their constitutionally protected rights.
It signifies that these inferences are drawn from the present record: Indeed,
5
Plaintiffs cite, for example, a letter sent by a group of State legislators who threatened an
organization with criminal liability for “reimburs[ing] the travel costs of employees who leave Texas
to murder their unborn children.”
6
Cf. Carswell v. Camp, 37 F.4th 1062, 1066 (5th Cir. 2022) (addressing district courts’
rulings on “qualified immunity” questions).
7
In re Bryant, 745 F. App’x 215, 221 (5th Cir. 2018) (unpublished per curiam).
15
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No. 22-50882
Attorney General Paxton argues to this Court that the potential liability
Plaintiffs fear is “nonexistent,” while at the same time he argues that when
“procurement takes the form of a bus ticket for the pregnant Texan to an
abortion clinic, or the paying from Texas of the cost of a pregnant Texan’s
hotel room adjacent to that clinic, it does not matter if the travel and hotel
are in Albuquerque or Austin” for the State to have an interested in
protecting the unborn.
The point is that, on the record at hand, a trier of fact, which we are
not, could find there is sufficient evidence of an unsettling and chilling want
of clarity in statements by officials with enforcement authority made against
a chorus of state officials without enforcement power to allow this case to
proceed. Those issues and the jurisdictional issue of Plaintiffs’ standing,
including any discovery they may entail, remain for the district court.
As for mandamus, we need only remind that Plaintiffs cannot move to
dismiss the interlocutory appeal while also arguing that it affords the
Attorney General another adequate means of obtaining relief,8 as they do in
this case. I would end the mandamus inquiry here.
8
See In re FDIC, 58 F.3d 1055, 1060 n.7 (5th Cir. 1995).
16 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483712/ | Case: 22-10446 Document: 00516544025 Page: 1 Date Filed: 11/14/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
No. 22-10446
Summary Calendar FILED
November 14, 2022
Lyle W. Cayce
United States of America, Clerk
Plaintiff—Appellee,
versus
Judith Sandra Flores,
Defendant—Appellant.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:20-CR-415-1
Before Davis, Smith, and Dennis, Circuit Judges.
Per Curiam:*
The attorney appointed to represent Judith Sandra Flores has moved
for leave to withdraw and has filed a brief in accordance with Anders v.
California, 386 U.S. 738 (1967), and United States v. Flores, 632 F.3d 229 (5th
Cir. 2011). Flores has filed a response. The record is not sufficiently
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 22-10446 Document: 00516544025 Page: 2 Date Filed: 11/14/2022
No. 22-10446
developed to allow us to make a fair evaluation of Flores’s claims of
ineffective assistance of counsel; we therefore decline to consider the claims
without prejudice to collateral review. See United States v. Isgar, 739 F.3d
829, 841 (5th Cir. 2014).
We have reviewed counsel’s brief and the relevant portions of the
record reflected therein, as well as Flores’s response. We concur with
counsel’s assessment that the appeal presents no nonfrivolous issue for
appellate review. Accordingly, the motion for leave to withdraw is
GRANTED, counsel is excused from further responsibilities herein, and
the APPEAL IS DISMISSED. See 5th Cir. R. 42.2.
2 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483711/ | Case: 21-11163 Document: 00516544077 Page: 1 Date Filed: 11/14/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 14, 2022
No. 21-11163 Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee,
versus
Brandon O'Neill Lott,
Defendant—Appellant.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:18-CR-353-2
Before Higginbotham, Southwick, and Higginson, Circuit
Judges.
Patrick E. Higginbotham, Circuit Judge:
A district court convicted Brandon Lott of kidnapping and
racketeering following a bench trial. Lott now appeals his sentence and
racketeering conviction, arguing that the district court lacked substantial
evidence to convict him and clearly erred by failing to apply a mitigating role
adjustment. Lott fails to show that the district court lacked evidence to
conclude that he committed a crime of violence with intent to further a drug
trafficking enterprise, and he does not demonstrate that the district court
erred in its sentencing calculation for kidnapping. We AFFIRM.
Case: 21-11163 Document: 00516544077 Page: 2 Date Filed: 11/14/2022
No. 21-11163
I.
The government’s evidence indicates that in December of 2017, Lott
found Anthony Harper on the street at the request of Chester Ray
Henderson, a known drug dealer in the Dallas area, and picked him up.
Harper had previously performed odd jobs for Henderson, such as working
on his car, moving furniture, and spraying graffiti. Lott drove Harper to an
apartment complex, where Henderson and others were waiting for them.
Henderson asked Harper to examine the wall for a stud, and when Harper
turned his back the group proceeded to beat him, brandish firearms, and
threaten to kill him, apparently over a security camera system missing from
the apartment. When Harper escaped, the group gave chase, pursuing him
through the neighborhood until he found refuge in an apartment and
contacted police.
In addition to bringing Harper in, Lott participated in the beating,
hitting Harper with a hammer and putting a rope around his neck. Lott also
chased Harper after his escape from the apartment, fleeing after failing to
catch up. Evidence introduced at trial indicated that Lott knew Henderson,
knew that he was involved in drug trafficking, and had even referred to
Henderson in a phone call as his partner. He was also seen in and around a
house Henderson used to traffic drugs. The government presented these
facts through testimony, hospital records, surveillance video, and four taped
911 calls, among other pieces of evidence.
A federal grand jury indicted Henderson, Lott, and another co-
conspirator on kidnapping charges, as well as use of a facility in interstate
commerce in aid of racketeering. The indictment alleged that the defendants
committed the kidnapping to further a drug trafficking enterprise, and the
district court found Lott guilty on both counts following a bench trial. At the
sentencing stage, Lott objected to the Pre-Sentence Report (PSR) because it
2
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No. 21-11163
did not include a mitigating role reduction, with Lott citing lack of evidence
that he participated directly in drug distribution activities. The court rejected
Lott’s argument, adopting the PSR without change. The district court opted
to sentence Lott to 120 months in prison, less than the 188 to 235 months the
Sentencing Guidelines indicated. This ensured that he received a sentence
proportionate to those of his co-conspirators who pled guilty. Lott timely
appealed.
II.
Lott first argues that the district court lacked evidence to convict him
of committing a crime of violence in aid of racketeering under 18 U.S.C.
§ 1952(a)(2). The statute required the government to prove (1) that Lott
traveled in interstate commerce; (2) with the specific intent to commit any
crime of violence to further unlawful activity; and (3) that Lott committed
the crime of violence subsequent to the act of travel in interstate commerce. 1
The statute defines “unlawful activity,” to include “any business enterprise
involving . . . narcotics or controlled substances,” a category that covers the
government’s drug trafficking allegations here. 2 Lott argues that there was
insufficient evidence to prove the second element, that he had specific intent
to further a drug trafficking enterprise.
When a defendant challenges the outcome of a bench-trial on
sufficiency-of-the-evidence grounds, we review the district court’s findings
of fact for substantial evidence. 3 To affirm, we must find “evidence sufficient
to justify the trial judge, as the trier of fact, in concluding beyond a reasonable
1
See United States v. Tovar, 719 F.3d 376, 389–90 (5th Cir. 2013).
2
18 U.S.C. § 1952(b).
3
United States v. Cardenas, 9 F.3d 1139, 1156 (5th Cir. 1993).
3
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No. 21-11163
doubt that the defendant is guilty.” 4 In reviewing, “it is not our task to weigh
the evidence or determine the credibility of witnesses.” 5 We “view all
evidence in the light most favorable to the government and defer to all
reasonable inferences drawn by the trial court.” 6
Lott asserts that the government presented no evidence showing his
involvement or participation in drug distribution activities. Lott does not
argue that the activity furthered—conspiracy to distribute controlled
substances in violation of 21 U.S.C. § 846—would not be “unlawful activity”
under the statute’s definition, but rather that he played no part in that
activity. Yet § 1952(a)(2) does not require any participation in the unlawful
activity the defendant seeks to further. 7 The statute’s plain text requires only
that the defendant commit a crime of violence with the “intent to . . . further
any unlawful activity.” 8 Section 1952(a)(2) thus demands only that the
government prove Lott’s state of mind regarding the unlawful activity, not
that he engaged in it.
Viewing the evidence in the light most favorable to the government,
there are sufficient facts to justify the trial judge’s conclusion that Lott
4
Tovar, 719 F.3d at 388 (5th Cir. 2013) (internal quotation marks and citations
omitted).
5
United States v. Ybarra, 70 F.3d 362, 364 (5th Cir. 1995).
6
United States v. Mathes, 151 F.3d 251, 252 (5th Cir. 1998).
7
Cf. United States v. Conway, 507 F.2d 1047, 1051 (5th Cir. 1975) (upholding a
conviction under § 1952(a)(3) where the district court did not specifically define arson, the
crime furthered, under state law); United States v. Monu, 782 F.2d 1209, 1211 (4th Cir.
1986) (upholding § 1952(a)(2) conviction with no finding that the defendant distributed
narcotics); United States v. Rizzo, 418 F.2d 71, 80 (7th Cir. 1969) (“Proof that a state law
has actually been violated is not a necessary element of the offense defined in Section
1952.”).
8
18 U.S.C. § 1952(a)(2).
4
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No. 21-11163
committed the kidnapping with the intent to further drug trafficking activity.
Lott’s reference to a partnership with Henderson, his proximity to locations
known for drug dealing, and his actions on behalf of Henderson during the
kidnapping support reasonable inferences that Lott acted to further
Henderson’s drug dealing activities. Further evidence supports reasonable
inferences that Lott understood the purpose of the kidnapping, which
included recovery of security cameras for the apartment where drug
distribution occurred. This evidence was sufficient for the trial court to
conclude that Lott acted to further the drug trafficking enterprise, regardless
of whether he was an active participant in that operation.
III.
Second, Lott argues that the district court erred by declining to apply
a mitigating role adjustment to his total offense level in accordance with
U.S.S.G. § 3B1.2. A two-level downward adjustment for minor role is
warranted when a defendant is a minor participant in the criminal activity,
such that his role “makes him substantially less culpable than the average
participant,”9 although his role “could not be described as minimal.” 10 A
four-level adjustment for minimal role applies when the defendant is “plainly
among the least culpable of those involved in the conduct of a group.” 11 A
defendant plays a minimal role when the defendant lacks “knowledge or
understanding of the scope and structure of the enterprise and of the
activities of others.” 12 Application of a mitigating role adjustment is “based
9
U.S.S.G. § 3B1.2 cmt. n.3. See also United States v. Villanueva, 408 F.3d 193, 204
(5th Cir. 2005).
10
U.S.S.G. § 3B1.2 cmt. n.5.
11
U.S.S.G. § 3B1.2 cmt. n.4.
12
Id.
5
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No. 21-11163
on the totality of the circumstances and involves a determination that is
heavily dependent upon the facts of the particular case.” 13 The defendant
bears the burden of showing that an adjustment is appropriate. 14
On appeal, “[w]hether [a defendant] was a minor or minimal
participant is a factual determination that we review for clear error.” 15 We
determine that “[a] factual finding is not clearly erroneous if it is plausible in
light of the record read as a whole.” 16
Lott contends that the district court committed clear error in failing
to apply a mitigating role adjustment because the government presented no
evidence indicating his involvement in drug trafficking. Lott misunderstands
how the Sentencing Guidelines operate. The PSR, which the district court
adopted, correctly grouped the two offenses together because Lott
committed the crimes against a single victim, 17 and it then applied the
guidelines for the crime that would result in the highest offense level—
kidnapping. 18 The PSR calculated Lott’s offense level based on his
involvement in kidnapping Harper, not commission of a crime of violence in
aid of racketeering. Lott’s argument that he was not involved in drug-related
activities is irrelevant to the probation officer’s calculation of the offense
13
U.S.S.G. § 3B1.2 cmt. n.3.
14
United States v. Torres-Hernandez, 843 F.3d 203, 207 (5th Cir. 2016).
15
Villanueva, 408 F.3d at 203 (5th Cir. 2005). Lott argues incorrectly that an abuse
of discretion standard should apply. See United States v. Bello-Sanchez, 872 F.3d 260, 263
(5th Cir. 2017); United States v. Gomez–Valle, 828 F.3d 324, 327 (5th Cir. 2016); United
States v. Torres-Hernandez, 843 F.3d 203, 207 (5th Cir. 2016); United States v. Alaniz, 726
F.3d 586, 626 (5th Cir. 2013).
16
Villanueva, 408 F.3d at 203.
17
U.S.S.G. § 3D1.2(a).
18
U.S.S.G. § 3D1.3(a). See United States v. Martinez, 263 F.3d 436, 439 (5th Cir.
2001).
6
Case: 21-11163 Document: 00516544077 Page: 7 Date Filed: 11/14/2022
No. 21-11163
level for kidnapping. Furthermore, the government’s evidence provides little
basis for Lott to argue that he was “substantially less culpable than the
average participant” in the kidnapping given that he picked the victim up
from the street, transported him to the apartment, took part in the violence,
and pursued him afterwards. The district court did not err by declining to
apply the mitigating role adjustment. 19
****
We AFFIRM the district court’s conviction and sentence.
19
It is unclear that Lott would fare better on resentencing, even if he were
otherwise entitled to it. The district court assigned him 120 months’ imprisonment despite
an offense level of 36. A decrease to an offense level of 32 resulting from a minimal role
adjustment would have garnered a Sentencing Guidelines range of 121 to 151 months
imprisonment. The government further argues that the district court tied Lott’s sentence
to those of his co-conspirators, and that he would have received the same sentence
regardless. Because we do not find that the district court erred, we need not consider
whether any error was harmless. See United States v. Stanford, 823 F.3d 814, 845 (5th Cir.
2016).
7 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483714/ | Case: 22-50168 Document: 00516543887 Page: 1 Date Filed: 11/14/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
No. 22-50168
Summary Calendar FILED
November 14, 2022
Lyle W. Cayce
United States of America, Clerk
Plaintiff—Appellee,
versus
Pascual Agustin-Basilio,
Defendant—Appellant.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 4:21-CR-882-1
Before Smith, Dennis, and Southwick, Circuit Judges.
Per Curiam:*
Pascual Agustin-Basilio appeals his conviction and sentence for illegal
reentry after removal in violation of 8 U.S.C. § 1326(a) and (b)(1). He con-
tends that the recidivism enhancement in § 1326(b) is unconstitutional
because it permits a sentence above the otherwise-applicable statutory maxi-
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited circum-
stances set forth in 5th Circuit Rule 47.5.4.
Case: 22-50168 Document: 00516543887 Page: 2 Date Filed: 11/14/2022
No. 22-50168
mum in § 1326(a), based on facts that are neither alleged in the indictment
nor found by a jury beyond a reasonable doubt. Agustin-Basilio acknowledges
that his argument is foreclosed by Almendarez-Torres v. United States,
523 U.S. 224 (1998), but he seeks to preserve it for possible Supreme Court
review. Accordingly, he has filed an unopposed motion for summary
disposition.
Subsequent decisions such as Alleyne v. United States, 570 U.S. 99
(2013), and Apprendi v. New Jersey, 530 U.S. 466 (2000), did not overrule
Almendarez-Torres. See United States v. Pervis, 937 F.3d 546, 553–54 (5th Cir.
2019). Agustin-Basilio therefore is correct that his theory is foreclosed.
Because his position “is clearly right as a matter of law so that there can be
no substantial question as to the outcome of the case,” summary disposition
is proper. Groendyke Transp., Inc. v. Davis, 406 F.2d 1158, 1162 (5th Cir.
1969).
Accordingly, the motion for summary disposition is GRANTED,
and the judgment is AFFIRMED.
2 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483713/ | Case: 21-30416 Document: 00516543981 Page: 1 Date Filed: 11/14/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 14, 2022
No. 21-30416 Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee,
versus
Carlos Mario Cantu-Cox,
Defendant—Appellant,
consolidated with
_____________
No. 21-30419
_____________
United States of America,
Plaintiff—Appellee,
versus
Christopher Cantu-Cox,
Defendant—Appellant.
Case: 21-30416 Document: 00516543981 Page: 2 Date Filed: 11/14/2022
No. 21-30416
Cons. w/ No. 21-30419
Appeals from the United States District Court
for the Eastern District of Louisiana
USDC Nos. 2:16-CR-162-1 & 2:16-CR-162-2
Before Clement, Duncan, and Wilson, Circuit Judges.
Edith Brown Clement, Circuit Judge:
Carlos and Christopher Cantu-Cox pleaded guilty to a federal drug
crime. At sentencing, the district court used information regarding a separate
kidnapping to enhance the Cantu-Coxes’ sentences. The Cantu-Coxes now
appeal, arguing that the use of information about the kidnapping is barred by
the Sentencing Guidelines. We AFFIRM.
I
A
Back in 2016, the Cantu-Coxes ran a methamphetamine operation in
Houston. In doing so, the couple distributed methamphetamine to New
Orleans. After a months-long investigation, the federal government arrested
and charged them with a litany of drug crimes. 1
After their arrests, the two signed proffer agreements with the
government. Per the proffers, the Cantu-Coxes were to “fully disclose any
criminal activity of which [they had] knowledge or in which [they had] been
involved.” They also needed to be “completely truthful during the proffer”
and to “make no material misstatements or omissions of fact.” In return, the
government agreed “not to use any statements made during the proffer . . . at
sentencing, or in its case-in-chief in this or any other criminal action brought
1
Those crimes included: conspiracy to distribute methamphetamine; multiple
counts of distribution of methamphetamine; multiple counts of attempted distribution of
methamphetamine; and multiple counts of possession with intention to distribute
methamphetamine.
2
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No. 21-30416
Cons. w/ No. 21-30419
against [the Cantu-Coxes].” Specifically exempted, however, were “crimes
of violence”: the Cantu-Coxes were under no obligation to disclose
information about those crimes, and the government made clear that “all
statements made by [the Cantu-Coxes] during the proffer concerning [their]
role in crimes of violence may be used against [them].” The proffers kicked
off months of fruitful discussion and fruitful arrests of the Cantu-Coxes’
drug-dealing colleagues.
B
But in November 2017 (roughly a year after the Cantu-Coxes’ arrests
and their first proffer sessions), the government asked the couple to come
back in to discuss a different matter.
Twenty months before, law enforcement had found in a Houston
bayou the body of 18-year-old Vincent Stolese. The federal government’s
investigation led it to William Farris, an associate of the Cantu-Coxes who,
in February 2017, informed the government of the couple’s role in Stolese’s
death.
When they came back in, the Cantu-Coxes corroborated Farris’ tale
and painted a fuller picture of what transpired. Stolese and the Cantu-Coxes
had been friends for some time, and the teenager frequently partook in the
Cantu-Coxes’ wares. But once, while visiting the Cantu-Coxes in Houston in
November 2015, Stolese was arrested. The Cantu-Coxes posted some of his
bond.
The relationship soured from there. Stolese began missing court
appearances, so Texas issued a warrant for his arrest. Stolese’s erratic
behavior led the Cantu-Coxes to conclude that they faced losing their bond
commitment. They decided to avoid that possibility through self-help:
offering to give methamphetamine to anyone who helped them find Stolese
3
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No. 21-30416
Cons. w/ No. 21-30419
and get him back to Texas. Farris, a New Orleans dealer they supplied,
answered the call. His ex-girlfriend, Kacie Doucet, was connected to Stolese
on Facebook. At Farris’ direction, she repeatedly messaged Stolese, inviting
him to meet up for sex. He agreed.
It was, of course, a ruse. Doucet recruited yet another friend and,
before the two went to meet with Stolese, the Cantu-Coxes provided them
with drugs—ketamine and 1,4-butanediol—to slip into Stolese’s drinks.
They did so and Stolese eventually passed out. The women handed
him off to the Cantu-Coxes, who began the long haul back to Texas.
Sometime during that drive, however, the pair realized that Stolese had died.
The two drove him to their home to await nightfall. When darkness fell, the
Cantu-Coxes drove him to a bridge in Houston and dumped his body in a
bayou.
C
Confessing to the Stolese affair did not end the Cantu-Coxes’
cooperation—indeed, the two continued to meet with the government for
two more years. That cooperation led them to testify before a grand jury,
resulting in the indictment, arrests, and guilty pleas of those involved. In
exchange for this cooperation, the government agreed not to charge the pair
in the affair.
The Cantu-Coxes eventually pleaded guilty to single-count
superseding informations charging them with conspiracy to possess and
distribute methamphetamine in violation of 21 U.S.C. §§ 841(a)(1),
841(b)(1)(C), and 846. The plea was supplemented by a new cooperation
agreement as well as promises by the government not to add any additional
charges so long as the Cantu-Coxes had truthfully shared details of their
previous crimes. The plea agreement made clear that the government
4
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No. 21-30416
Cons. w/ No. 21-30419
“agreed not to bring any other charges . . . from the [defendants’]
involvement in a series of events leading to the death of Vincent Stolese,”
but that such promise did “not apply to any other crimes of violence that the
[defendants] may have committed.”
At sentencing, the district court sentenced both to the statutory
maximum of 240 months, to be followed by five years of supervised release.
In doing so, the court agreed with the government and found that because the
Cantu-Coxes failed to share details of Stolese’s death in their original proffer
sessions, they breached their proffer agreement, and so information about the
incident could be considered in sentencing. It also found that Stolese’s death
was “relevant conduct” to the Cantu-Coxes’ drug conspiracy sufficient to
enhance their sentences. The Cantu-Coxes now appeal (in a consolidated
case). 2
II
We review the district court’s application and interpretation of the
Guidelines de novo and its factual findings for clear error. United States v.
Barfield, 941 F.3d 757, 761 (5th Cir. 2019). But as to whether the use of
information to enhance a sentence was a violation of a plea or proffer
agreement, our standard of review is “not entirely clear.” United States v.
Ramirez, 799 F. App’x 293, 294 (5th Cir. 2020) (per curiam) (comparing
United States v. Charon, 442 F.3d 881, 889 (5th Cir. 2006) (de novo), with
United States v. Gibson, 48 F.3d 876, 878 (5th Cir. 1995) (per curiam) (clear
error)). We need not clarify that standard here, because as we explain, the
Cantu-Coxes’ arguments fail under de novo review. See United States v.
2
The Cantu-Coxes’ plea agreements had waivers of appeal rights. The
government chose not to enforce that waiver.
5
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No. 21-30416
Cons. w/ No. 21-30419
Rodriguez, 602 F.3d 346, 361 (5th Cir. 2010) (declining to decide between two
standards because the claim fails under the more lenient review standard).
A
First, we turn to whether information about the Stolese affair was
protected by the proffer.
The Sentencing Guidelines restrict the use in sentencing of
information the government only gleaned pursuant to a cooperation
agreement. See U.S.S.G. § 1B1.8. If the agreement stipulates that information
“will not be used against the defendant, then such information shall not be
used in determining the applicable guideline range, except to the extent
provided in the agreement.” Id. § 1B1.8(a).
Both defendants had a cooperation agreement with the government,
one that traded “full[] disclos[ure of] any criminal activity of which [they
had] knowledge or in which [they had] been involved” for a promise to not
“use any statements made during the proffer by [the defendants] at
sentencing.” That promise places the proffer under § 1B1.8 and means the
terms of the agreement control the use of information unless one of § 1B1.8’s
exceptions apply. 3
3
Below, the government argued—and the district court accepted—that an
exception did apply: namely, that the Cantu-Coxes breached the agreement by failing to
disclose the affair during their initial proffer sessions. See U.S.S.G. § 1B1.8(b)(4). Now, on
appeal, the government argues that the affair was exempted from disclosure as a crime of
violence. Therefore, says the government, the Cantu-Coxes did not breach the agreement
by failing to disclose it, and the government is not barred from using it in sentencing. The
Cantu-Coxes argue that we should not consider this new argument. They are right, of
course, that the general rule is we “do not ordinarily consider issues that are forfeited
because they are raised for the first time on appeal.” Rollins v. Home Depot USA, 8 F.4th
393, 398 (5th Cir. 2021). But what the government says the proffer means doesn’t control—
the language of the proffer itself does. The government’s shifting interpretation does not
change our ability to read the proffer for ourselves.
6
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No. 21-30416
Cons. w/ No. 21-30419
“Nonprosecution agreements [like proffers or pleas deals] are
contractual in nature” and are thus interpreted “in accordance with general
principles of contract law.” United States v. Cantu, 185 F.3d 298, 302 (5th
Cir. 1999). When doing so, the court “looks to the language of the contract,
unless ambiguous, to determine the intention of the parties.” United States v.
Long, 722 F.3d 257, 262 (5th Cir. 2013) (quotations and citation omitted).
Even if circumstances surrounding the agreement “might indicate the intent
of the parties, parol evidence is inadmissible to prove the meaning of an
unambiguous [proffer] agreement.” Id. (quotations and citation omitted). So
if the agreement is unambiguous, the court should “not look beyond the four
corners of the document.” Id.
A contract is ambiguous when it “is fairly susceptible to more than
one interpretation.” See United States v. Powell, 574 F. App’x 390, 395 (5th
Cir. 2014) (per curiam) (citing United States v. Harris, 434 F.3d 767, 770 (5th
Cir. 2005)). The court should seek to determine the defendant’s “reasonable
understanding of the agreement and [construe] ambiguity against the
Government.” United States v. Farias, 469 F.3d 393, 397 (5th Cir. 2006)
(quotations and citation omitted).
How the proffer handles information regarding “crimes of violence”
is unambiguous. First, the agreement directs:
2. Truthfulness: Your client acknowledges he must be
completely truthful during the proffer and agrees to make no
material misstatements or omissions of fact. He understands
that he is obligated to fully disclose any criminal activity of
which he has knowledge or in which he has been involved.
In the abstract, this provision clearly applies to the Stolese affair: drugging,
kidnapping, and then disposing of someone is clearly “criminal activity” the
Cantu-Coxes knew of and were involved in.
7
Case: 21-30416 Document: 00516543981 Page: 8 Date Filed: 11/14/2022
No. 21-30416
Cons. w/ No. 21-30419
The proffer then states:
5. Use of the information provided during the proffer: The
government agrees not to use any statements made during the
proffer by your client at sentencing, . . . unless such action is for
the offense of perjury, false statements, or obstruction of
justice based upon statements made during the proffer.
It goes on to clarify:
9. Sentencing Information: . . . Pursuant to U.S.S.G.
§ 1B1.8 . . . the proffer may not be used to determine the
appropriate guideline sentence, except as stated in the
Impeachment paragraph above.
That impeachment paragraph carves out an exception to the use of disclosed
information:
6. Impeachment: The government reserves the right to use
any statement made by your client during the proffer on cross-
examination of him, should he appear as a defendant or witness
in any judicial proceeding, and on cross-examination of any
witness he may call in any judicial proceeding. The government
also reserves the right to use these statements in a rebuttal case
against your client regardless of whether he testifies in his own
defense.
Read together, then, the Cantu-Coxes had to share any crimes they knew of
or participated in, and in exchange, the government wouldn’t use that
information against them at sentencing (or in a criminal case), except to
either impeach them or their witnesses, use in a rebuttal case, or bring
separate charges for perjury or obstruction of justice.
But the proffer also says:
7. Crimes of Violence: The terms of this agreement do not
apply to any crimes of violence committed by your client, and
all statements made by your client during the proffer concerning
his role in crimes of violence may be used against him.
8
Case: 21-30416 Document: 00516543981 Page: 9 Date Filed: 11/14/2022
No. 21-30416
Cons. w/ No. 21-30419
This paragraph leaves no doubt that the proffer’s terms (including the
requirement to be truthful, the promise of use immunity, and the carve-out
for impeachment) are not applicable to crimes of violence. They are wholly
exempted from the proffer’s general scheme (i.e., tell the truth and we won’t
use it against you except to prove you’re lying). No other requirement of the
proffer, for either party, applies to information about a crime of violence.
The Cantu-Coxes suggest a different reading. They say that
paragraph 9 makes explicit that the only way anything can be used against
them in sentencing is pursuant to the impeachment paragraph. According to
them, then, the crimes of violence exception “does not apply to the
determination of the appropriate sentencing guideline, but that the
impeachment exception does.”
We find that reading unreasonable. The crime-of-violence paragraph
explicitly exempts it from any other requirement in the proffer. While the
impeachment paragraph is an exception to the promise not to use information
against the Cantu-Coxes, so is the crimes-of-violence paragraph. It explains
that anything that they say regarding a crime of violence can be used against
them. The Cantu-Coxes’ reading instead exempts crimes-of-violence
information from some terms but not others. Implicitly, they suggest that
crimes of violence are exempted from the requirement of disclosure and from
the promise to not bring future charges, but not from the promise to not use
the information in sentencing. The Cantu-Coxes do not explain why the
provisions should be inconsistently applied, especially when the paragraph
itself makes clear that no other term applies to that sort of information.
The proffer is clear: information about crimes of violence can be used
against the Cantu-Coxes. So, does information about the Stolese affair
concern a “crime of violence”? Indeed, it does.
9
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No. 21-30416
Cons. w/ No. 21-30419
“Crime of violence” is not defined in the proffer. But “whether the
language is contractual, as here, or statutory, we give words their ordinary,
natural meaning.” Weaver v. Metro. Life Ins. Co., 939 F.3d 618, 626 (5th Cir.
2019). It is painfully obvious that kidnapping someone is a crime. Here, it is
also a violent one. In ordinary parlance, “violence” means the “deliberate
exercise of physical force against a person.” Violence, Oxford English
Dictionary (2014). Stolese’s kidnapping fits the bill: the Cantu-Coxes
orchestrated Stolese’s fatal drugging, whereby his body was loaded into a car,
driven across state lines, and then thrown off a bridge. It is difficult to imagine
how one could drug and kidnap another without physical force. Therefore,
under the natural meaning of the phrase, Stolese’s kidnapping was a crime of
violence. 4
In sum, the proffer is clear: statements regarding crimes of violence
can be used against the Cantu-Coxes. And the Stolese affair involved a crime
of violence. Thus, its use in sentencing was not barred by the proffer, and so
the district court did not err in considering it.
B
Because we conclude that the information regarding the Stolese affair
was not protected by the proffer, we must determine whether it involves
“relevant conduct.”
4
The government also briefly discusses a prior case where we concluded that
kidnapping that results in death (as here) was a crime of violence allowing sentencing
enhancement under 18 U.S.C. § 924(c). See generally In re Hall, 979 F.3d 339 (5th Cir.
2020). Notwithstanding the shaky foundation In re Hall stands on after Borden v. United
States, 141 S. Ct. 1817 (2021), there is no indication that the parties intended “crime of
violence” in the proffer to import the statutory term of art, complete with its categorical-
approach baggage. We decline to import it ourselves, even if doing so would further
underline our conclusion here.
10
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No. 21-30416
Cons. w/ No. 21-30419
When calculating the appropriate guideline range, the district court
may consider acts outside those underlying the offense of conviction only
when those acts constitute “relevant conduct.” U.S.S.G. § 1B1.3. The
district court’s determination of relevant conduct is a factual finding
reviewed for clear error. Barfield, 941 F.3d at 761. This court should only
overturn the district court’s factual findings “if a review of all the evidence
leaves [it] with the definite and firm conviction that a mistake has been
committed.” Id. at 761–62 (quotations and citation omitted). If instead, the
finding is plausible considering the record, it is not clearly erroneous. Id.
What matters, at base, is that “[c]ourts are to consider more than the offense
of conviction itself in fitting the sentence to the crime and the criminal.”
United States v. Levario-Quiroz, 161 F.3d 903, 906 (5th Cir. 1998).
The Guidelines “provide[] different definitions of relevant conduct
based on the defendant’s offense of conviction.” United States v. Deckert, 993
F.3d 399, 401 (5th Cir. 2021). Several different provisions are at play here.
First, relevant conduct includes any act “committed, . . . commanded,
induced, procured, or willfully caused by the defendant” “during the
commission of the offense of conviction,” or “in preparation for that
offense . . . .” U.S.S.G. § 1B1.3(a)(1)(A). 5 Second, with respect to any
“jointly undertaken criminal activity” relevant conduct includes any act “of
others that were within the scope of the jointly undertaken criminal activity,
in furtherance of that criminal activity, and reasonably foreseeable in
5
The second half of this definition (and of § 1B1.3(a)(1)(B))—“that occurred
during the commission of the offense of conviction, in preparation for that offense, or in
the course of attempting to avoid detection or responsibility for that offense”—is what is
often called the “trailing clause” of subsection (a)(1). Deckert, 993 F.3d at 402. It is not
directly a part of either (a)(1)(A)’s or (a)(1)(B)’s text but has been held to be incorporated
into both. Id. The trailing clause is not incorporated, however, into the requirements of
§ 1B1.3(a)(2). Id. at 404.
11
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Cons. w/ No. 21-30419
connection with that criminal activity; that occurred during the commission
of the offense of conviction, in preparation for that offense . . . .” Id.
§ 1B1.3(a)(1)(B). Third, with respect to groupable offenses under § 3D1.2(d),
relevant conduct includes “all acts and omissions described in subdivisions
(1)(A) and (1)(B) above that were part of the same course of conduct or
common scheme or plan as the offense of conviction[.]” Id. § 1B1.3(a)(2).
Section 3D1.2(d) requires grouping of “[a]ll counts involving substantially
the same harm . . . [w]hen the offense level is determined largely on the basis
of the total amount of harm or loss, the quantity of a substance involved, or
some other measure of aggregate harm, . . . .”
Regardless of which definition applies, “all harm that resulted from
the acts and omissions . . . and all harm that was the object of such acts and
omissions” is considered relevant. Id. § 1B1.3(a)(3).
As noted, the Cantu-Coxes pleaded guilty to a single count of
conspiring to possess and distribute a quantity of methamphetamine. 6 The
base offense level for that crime is set by U.S.S.G. § 2D1.1. Section 2D1.1, a
groupable offense, includes a cross reference provision. That provision
directs that “[i]f a victim was killed under circumstances that would
constitute murder . . . , apply § 2A1.1 (First Degree Murder) or § 2A1.2
(Second Degree Murder), as appropriate” if that results in a greater offense
level than under § 2D1.1 itself. Id. § 2D1.1(d)(1).
In calculating the Cantu-Coxes’ guideline range, the district court first
determined that because they “committed, aided, abetted, counseled,
commanded, induced, procured, or willfully caused” the Stolese affair, it
constituted relevant conduct under section (a)(1)(A). It also found that
6
It bears repeating that the facts of this case are not in dispute. The court adopted
the undisputed findings of the factual basis.
12
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No. 21-30416
Cons. w/ No. 21-30419
because it was “is in furtherance of the jointly undertaken criminal activity,”
(seemingly under section (a)(1)(B)(ii), though that was not made explicit), it
also constituted relevant conduct. The court noted that the Stolese affair
occurred during the same time period as the drug conspiracy, and involved
the same drug (i.e., methamphetamine, which the Cantu-Coxes used to pay
their co-conspirators for their help). All told, the district court concluded it
could consider the Stolese affair, which then invoked the cross-reference
provision in § 2D1.1 and set the appropriate offense level pursuant to § 2A1.1
(first degree murder)—ending at a calculation of 43.
Our stage is now set. The Cantu-Coxes argue that the court erred in
considering the Stolese affair relevant conduct to their drug conspiracy. First,
they argue that the court applied an erroneous understanding of § 1B1.3(a),
conflating the two definitions under section (a)(1) and failing to make the
requisite factual findings under either. They claim the court merely found
that they committed and induced the event (per section (a)(1)(A)) and that it
was in furtherance of their conspiracy (per section (a)(1)(B)(ii)), but made no
finding about the other prongs of section (a)(1)(B) or any finding that the
affair “occurred during the commission of the offense of conviction, in
preparation for that offense, or in the course of attempting to avoid detection
or responsibility for that offense.”
We need not address those arguments, however, because the Stolese
affair is properly considered relevant conduct under section (a)(2). See United
States v. Hankton, 875 F.3d 786, 793 (5th Cir. 2017) (noting that the court, in
its discretion, can affirm on an alternative basis supported by the record). As
mentioned, relevant conduct under section (a)(2) includes “all acts and
omissions described in subdivisions (1)(A) and (1)(B) above that were part of
the same course of conduct or common scheme or plan as the offense of
conviction[.]” That “includes acts that were part of the common drug-
13
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trafficking scheme.” Deckert, 993 F.3d at 404. “Conduct is part of a common
scheme or plan if it is substantially connected to the offense of conviction by
at least one common factor, such as common victims, common accomplices,
common purpose, or similar modus operandi.” Id. (alterations adopted)
(quotations and citation omitted). And in drug cases, “this circuit has broadly
defined what constitutes ‘the same course of conduct’ or ‘common scheme
or plan.’” Barfield, 941 F.3d at 763 (citation omitted).
The Cantu-Coxes clearly committed, induced, and counseled on the
exchange of methamphetamine for Stolese’s kidnapping and return. See
§ 1B1.3(a)(1)(A). We must decide, then, if doing so was “part of the same
course of conduct or common scheme or plan as the offense of conviction.”
We hold that it is.
First, the two overlap in time. The Cantu-Coxes’ factual basis
indicates that their drug conspiracy ran from sometime before January 1,
2016, until at least August 2016. The Stolese affair occurred during February
of that year. Next, the two share a common accomplice. Farris was a New
Orleans drug dealer supplied by the Cantu-Coxes during their conspiracy.
They again supplied him with methamphetamine in payment for his help
capturing Stolese. 7 Thus, the Cantu-Coxes possessed methamphetamine
(just like their offense of conviction), offered it in personal quantities to a
dealer in New Orleans they’d previously supplied (just like their offense of
conviction), and distributed it to that dealer in exchange for payment—
Stolese himself—(just like their offense of conviction).
7
The Cantu-Coxes argue that Farris was not an indicted co-conspirator to their
conspiracy, and so was not a common accomplice. But the district court nevertheless found
(by adopting the Cantu-Coxes’ signed factual basis) that they were Farris’
methamphetamine supplier. Just because Farris was never indicted does not mean he was
not, factually, a common accomplice.
14
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Cons. w/ No. 21-30419
Nothing the Cantu-Coxes cite convinces us otherwise. They point to
United States v. Wall, 180 F.3d 641 (5th Cir. 1999), for the proposition that
using a drug as a personal currency is not relevant conduct to distribution.
Wall involved nothing of the sort. Instead, Wall concludes that a drug crime,
occurring five years after the offense of conviction, and lacking a common
supplier, destination, or modus operandi, could not be considered relevant
conduct. Id. at 645–46. The only thing the two offenses had in common, said
the court, was that they involved marijuana. Id. at 646. Here, however, the
drug is the same, the destination (either New Orleans generally or Farris
specifically) is the same, and the general modus operandi is the same. See also
United States v. Rhine, 583 F.3d 878 (5th Cir. 2009) (finding dissimilar a large-
scale distribution ring from possession with intent to distribute a small
amount of cocaine when the two acts—unlike here—did not share a common
accomplice or timeline).
Similarly distinguishable are the Cantu-Coxes’ cases indicating
possession of a drug is not necessarily relevant conduct to distribution. See, e.g.,
Jansen v. United States, 369 F.3d 237, 247 (3d Cir. 2004); United States v.
Williams, 247 F.3d 353, 358 (2d Cir. 2001). The Cantu-Coxes did not merely
possess methamphetamine here. They distributed it to Farris in return for
help in drugging and kidnapping Stolese.
The Cantu-Coxes also argue that their objective in the Stolese affair—
to get Stolese back to Texas to turn him in to the authorities—differed from
the objective of their methamphetamine conspiracy. But a common purpose
is only one factor courts consider. That the two differed in their ultimate
objective is not fatal to a finding of relevant conduct. See United States v.
Bethley, 973 F.2d 396, 401 (5th Cir. 1992).
They further argue that giving methamphetamine to Farris was
harmful to their conspiracy because it removed from their possession meth
15
Case: 21-30416 Document: 00516543981 Page: 16 Date Filed: 11/14/2022
No. 21-30416
Cons. w/ No. 21-30419
they would have otherwise distributed. But the methamphetamine left their
possession because they distributed it to Farris. The actual conduct is the
same: they had methamphetamine in their possession and gave it to someone
else in return for something of value (either money, or Stolese).
All told, we conclude the Stolese affair involved conduct induced and
committed by the Cantu-Coxes as part of their common drug-trafficking
scheme. The harm that resulted from that conduct—Stolese’s death—was
properly considered relevant by the district court. See § 1B1.3(a)(3). 8
III
The Cantu-Coxes’ sentences are AFFIRMED.
8
The Cantu-Coxes argue that murder cannot be considered a “groupable
offense.” That is true, but the Cantu-Coxes’ distribution of methamphetamine to Farris—
and any attendant harm from that distribution—is groupable.
16 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483732/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
ARCHIE WILSON ERVIN, No. 85424
vs.
Appellant,
FILED
THE STATE OF NEVADA,
NOV 0 2U22
Respondent.
FaIZABE d
OF ' PREMEi COUR'
ORDER DISMISSING APPEAL DEP CLERK
This is a direct appeal from a judgrnent of conviction. Third
Judicial District Court, Lyon County; John Schlegehnilch, Judge.
Appellant's counsel has filed a notice of voluntary withdrawal
of this appeal. Counsel advises this court that he has informed appellant of
the legal effects and consequences of voluntarily withdrawing this appeal,
including that appellant cannot hereafter seek to reinstate this appeal, and
that any issues that were or could have been brought in this appeal are
forever waived. Having been so informed, appellant consents to a voluntary
dismissal of this appeal. Cause appearing, this court
ORDERS this appeal DISMISSED.'
(42,
Cadish
AekiA. v J. , S.J.
Pickering Gib
'Because no remittitur will issue in this rnatter, see NRAP 42(b), the
one-year period for filing a postconviction habeas corpus petition under NRS
34.726(1) shall commence to run from the date of this order.
The Honorable Mark Gibbons, Senior Justice, participated in this
matter under a general order of assignment.
SUPREME COURT
OF
NEVADA
(0) 1W7A
cc: Hon. John Schlegelmilch, District Judge
Brock Law, Ltd.
Walther Law Offices, PLLC
Attorney General/Carson City
Lyon County District Attorney
Third District Court Clerk
SUPREME COUFtT
OF
NEVADA
2
(J) I947A .6gMt. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483856/ | 2022 IL App (1st) 210261
No. 1-21-0261
Second Division
November 15, 2022
____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
____________________________________________________________________________
) Appeal from the
THE PEOPLE OF THE STATE OF ) Circuit Court of
ILLINOIS, ) Cook County.
)
Plaintiff-Appellee, )
) No. 18 CR 8763
v. )
)
ALFONZO CARTER, ) Honorable
) Stanley Sacks,
Defendant-Appellant. ) Judge, presiding.
____________________________________________________________________________
JUSTICE COBBS delivered the judgment of the court, with opinion.
Presiding Justice Fitzgerald Smith and Justice Ellis concurred in the judgment
and opinion.
OPINION
¶1 Following a jury trial, defendant-appellant Alfonzo Carter was found guilty of two counts
of criminal sexual assault (720 ILCS 5/11-1.20(a)(4) (West 2016)) and sentenced to 11 years’
imprisonment. On direct appeal, he argues that the evidence was insufficient to find him guilty
beyond a reasonable doubt; the trial court erred in denying his motion in limine and allowing the
State to elicit testimony in violation of the rape shield statute (725 ILCS 5/115-7(a) (West 2020));
the trial court improperly denied his motions for a directed verdict, a new trial, and for judgment
No. 1-21-0261
notwithstanding the verdict; the criminal sexual assault statute under which he was convicted is
facially unconstitutional; and he was entitled to additional presentence custody credit for his time
spent on electronic home monitoring (EHM). For the reasons that follow, we affirm.
¶2 I. BACKGROUND
¶3 As a preliminary matter, we note that the record on appeal is incomplete in violation of
Illinois Supreme Court Rule 321 (eff. Oct. 1, 2021), which provides for the filing of the record on
appeal. It is the appellant’s burden “to present a sufficiently complete record of the proceedings at
trial to support a claim of error.” Foutch v. O’Bryant, 99 Ill. 2d 389, 391 (1984). Defendant was
made aware of the incompleteness of the record via the State’s brief and, after briefing was
completed, filed a motion to supplement the record, which this court granted. The supplemental
record contains copies of defendant’s missing motions, to wit, his motion in limine, motion to
dismiss, posttrial motion, and post sentencing motion. However, the record is still missing the
State’s response to defendant’s motion to dismiss, the State’s motion in limine regarding the rape
shield statute, transcripts prior to July 5, 2018, and the trial exhibits. We provide the following
background based on the record before us, noting any gaps in the record.
¶4 A. Pretrial Proceedings
¶5 On June 26, 2018, defendant was indicted on two counts of criminal sexual assault (720
ILCS 5/11-1.20(a)(4) (West 2016)). Count I of the indictment alleged that, on or about April 20,
2018, he knowingly committed an act of sexual penetration upon J.K. when J.K. was at least 13
years of age but under 18 years of age and defendant was 17 years of age or over and held a position
of trust, authority, or supervision in relation to J.K. Count II was substantially the same, differing
only with respect to the date, i.e., on or about April 27, 2018.
-2-
No. 1-21-0261
¶6 On August 8, 2018, the trial court permitted defendant to go to work from 7 a.m. to 7 p.m.
while on EHM. The court noted at that time that, if defendant was found guilty and sentenced to a
term of imprisonment, he would not receive credit for the time spent on EHM with work release.
On October 15, 2018, the court reiterated the same to defendant but stated that “[f]rom this day
forward” he would not receive credit for time spent on EHM.
¶7 On January 17, 2020, a hearing was held on defendant’s motion to dismiss the indictment.
His motion alleged that the statute at issue (720 ILCS 5/11-1.20(a)(4) (West 2018)), was
unconstitutional on its face. Specifically, he argued that, because the age of consent in Illinois is
17 years old, the statute infringed upon the fundamental rights of 17-year-olds by proscribing
sexual relations between those older than 17 years old and individuals over 18 years of age who
are in a position of trust, authority, or supervision. The motion was denied.
¶8 On January 21, 2020, the court conducted a hearing on defendant’s motion in limine. In
that motion, defendant requested that he be permitted (1) to present evidence and cross-examine
J.K. on her drug use and addiction, specifically related to Xanax, and (2) to introduce evidence
that J.K. had been treated for a sexually transmitted disease (STD) a year prior to the allegations
against defendant, which contradicted her statements that she had never had sex previously.
Attached to the motion were photographs of a female with a pill-shaped capsule on her tongue, as
well as a fact sheet from the Drug Enforcement Administration on benzodiazepines (which include
Xanax).
¶9 As to the drug use, the State argued before the court that there is no evidence that the pill
in the photo is Xanax, no evidence that the pill shown was not prescribed to J.K., and no evidence
that J.K is a drug addict. As to the STD treatment, the State argued that evidence showing that J.K.
had been untruthful when she stated that she had not had sex prior to these incidents would be
-3-
No. 1-21-0261
impeachment on a collateral issue and should not be permitted at trial. The State further argued
that the evidence that she had been treated for an STD in the past would violate the rape shield
statute.
¶ 10 The court denied defendant’s motion as to both issues. In ruling, the court stated that the
photograph “merely shows a girl with a tongue sticking out with something on her tongue, that’s
all it shows,” and that it would not be a “good faith question” to ask J.K. if that pill was Xanax.
Further, the court stated that “whether [J.K.] had sex before or not is really irrelevant” as well as
collateral and any questioning on that would violate the rape shield statute.
¶ 11 B. Jury Trial
¶ 12 The case proceeded to a jury trial, at which the following evidence was presented.
¶ 13 J.K. testified that, in 2018, at the time of these offenses, she was 16 years old and she lived
in Berwyn, Illinois with her parents and her brother. In 2018, she attended -the church that her and
her family, including her grandmother, aunts, and great-grandmother, attended her entire life. She
attended service at the church every Sunday. She identified defendant as a family friend and the
assistant pastor at the church. She stated she had known defendant her entire life and would see
him every Sunday. She testified that defendant taught Sunday school, sang in the choir, and
occasionally preached when the main pastor, Pastor Thomas Evans, who was defendant’s cousin,
was not available. She attended Sunday school most Sundays. She later testified that she trusted
defendant.
¶ 14 In April 2018, she began to have more contact with defendant. She testified that on Sunday,
April 15, 2018, after the service, he gave her a hug and touched her thigh. She stated that she did
not think much of him touching her thigh at the time because it had never happened before. Around
this time, she began communicating with defendant via Facebook messenger. J.K. stated that she
-4-
No. 1-21-0261
was having some difficulties at school, her best friend had recently died, and she “looked to him
as a mentor to help [her] with those problems.” She testified that they would also communicate
through phone calls. At some point, after the incident where he touched her thigh, defendant asked
her if she was sexually active, and she responded, “No.” He then told her that he would teach her.
¶ 15 The calls became more frequent after that conversation, and a few days later, J.K. agreed
to meet with defendant at 3 a.m. in the alley near her grandmother’s house. At that time, she left
the house and walked to the alley, where defendant’s car, a gray sports car, was parked. J.K.
testified that it had already been agreed that they were going to have sex in his car. J.K. entered
the front passenger’s side door. Defendant was in the driver’s seat. Defendant removed one of the
legs of her leggings and leaned the passenger seat back. Defendant then inserted his penis into
J.K.’s vagina three times. She testified that a condom was not used. Defendant stopped, remarking
that J.K. looked scared. J.K. testified that she was upset at having agreed to have sex with
defendant. She then put her leggings back on and went back into the house. That night, she was
unable to fall asleep because she was thinking about what had just happened with defendant. She
testified that she did not know the exact date of this incident but that it was after April 15.
¶ 16 After that incident, J.K. went to a water park resort with Pastor Evans and the pastor’s
cousins. While on this trip, she continued to communicate with defendant via cell phone at night.
¶ 17 The following week, on Thursday, April 26, J.K. stayed the night at her grandmother’s
house. On this night, she again met defendant in the alley around 3 a.m. on April 27. This
arrangement was made through messages with defendant on her cell phone. Prior to the meeting,
they had discussed what was going to happen. J.K. testified that she knew they were going to have
sex and that defendant asked her to give him oral sex and she declined. She also told defendant
that he had to use a condom this time because she did not want to get pregnant. She again entered
-5-
No. 1-21-0261
into the passenger’s seat of defendant’s car. He told her to get into the back seat. Defendant took
one of her pants legs off and put a condom on his penis. He inserted his penis into her vagina for
three minutes. J.K. testified that, as this was happening, she was thinking that she was being taken
advantage of. Afterwards, she walked back to her grandmother’s house. She was unable to fall
asleep because she felt bad about what happened and she knew it was wrong. She did not tell
anyone what happened with defendant immediately after or in the next couple days.
¶ 18 J.K. testified that defendant wanted to meet her again on May 5, which was a Saturday. On
that day, J.K. was at her grandmother’s house. Defendant wanted to meet her earlier, and her
brother and grandmother were present in the house. Defendant insisted on coming to the house.
J.K. snuck him in through the back door and let him into the back bedroom. Defendant instructed
J.K. to delete all of their messages and phone calls from her phone, which she did in his presence.
They then spoke about having sex, and J.K. agreed. J.K. stated that she heard her grandmother
moving in the house and she quickly left the room and exited out the front door of the house. Her
grandmother entered the room as J.K. was leaving. J.K. said “bye” to her brother who has outside
with his friends and walked to her school. She was gone for a few hours until her aunts found her
and brought her back to her grandmother’s house. While she was at the school, she thought about
how she was going to be in trouble.
¶ 19 When she returned to the house, her parents, her brother, and her aunts were there. J.K.
told her mother what happened with defendant. Her mother called Pastor Evans. The next day,
Sunday, Pastor Evans brought J.K. to church, and she stayed in his office during the service
because she did not want to see defendant. She then went to a meeting with Pastor Evans,
defendant, her parents, and two of her uncles. After that day, she and her family did not attend that
church again. On May 9, her mother called the police, and later her parents took her to Lurie’s
-6-
No. 1-21-0261
Children’s Hospital to be examined. J.K. testified that they waited until May 9 to go to the police
because they “didn’t know how [they] were going to go forward about the situation.”
¶ 20 J.K. testified that the clothes she was wearing during each of the incidents with defendant
were washed prior to May 5. She identified a screenshot from her phone of defendant’s Facebook
profile, which showed him with his wife and also him preaching at the church. She also identified
a screenshot of a conversation on Facebook messenger between herself and defendant. The
conversation, for which the date was unknown, showed that at 6:34 p.m. defendant messaged J.K.,
“nope, I’m about to call you,” to which J.K. replied, “my phone gonna die.” Another screenshot
from J.K.’s phone showed a since deleted Facebook post from defendant, which read: “Sometimes
it’s good to just stop by and check on friends, family and loved ones, got a chance to see Sister
[J.K.’s grandmother] today only to find out she wasn’t feeling too well, but we got a chance to sit
down and talk, talk out—talk about the Lord and even talk about a little basketball with [J.K.’s
brother] and friends. Thanks, [J.K.] for *** setting up the surprise with, but not the disappearing
you pulled on us ***.” J.K. testified that she did not set up a surprise for defendant to come visit
her grandmother. Finally, she identified photographs of defendant’s car, the meeting location in
the alley, and the basketball court near where defendant parked. 1
¶ 21 During cross-examination, J.K. stated that her mother suggested that the first incident
occurred on April 20. J.K. was not certain that was the correct date, but she knew it was around
that time. She also initially confirmed that on April 19, she stayed at her grandmother’s house but
later corrected herself and stated that she went to the water park with Pastor Evans on that day.
She explained that she gave the date of April 20 to the police, even though she was out of town on
1
The exhibits accompanying this testimony were not included in the record on appeal.
-7-
No. 1-21-0261
that date, because her mother suggested it and she was in distress at that time. She later stated that
she generally stayed at her grandmother’s house on Thursdays, but she could stay on any day.
When questioned as to why she agreed to meet defendant a second time if she had felt so bad after
the first incident, she answered that she “did not know how to say no.” J.K. stated that she did not
remember telling the police officer that she did not have the clothes she was wearing during those
incidents. She stated that she told the police that the clothes had been washed.
¶ 22 On redirect examination, she testified that she stayed at her grandmother’s house the night
before she went to the water park with Pastor Evans and that Pastor Evans picked her up from her
grandmother’s house on April 19.
¶ 23 J.K.’s grandmother testified that in 2018 she would see J.K. about twice per month. J.K.
would come to stay at her house some days, although they were never any particular day of the
week. She had attended the church where defendant was serving as assistant pastor for 40 years,
and J.K. had attended for her entire life until these events. In addition to serving as the assistant
pastor, defendant taught Sunday school and bible study, and he would take over as pastor when
Pastor Evans was not available.
¶ 24 On the evening of May 5, 2018, J.K.’s grandmother was at her home with J.K. and her
brother. She heard the back door open and asked J.K. what she was doing. J.K. responded that she
was taking out the trash, but J.K.’s grandmother saw the trash in the kitchen. She went to
investigate and passed J.K. exiting the back bedroom. When J.K.’s grandmother entered the
bedroom, she saw a person standing in the closet. She stated to the person, “[B]ring your a** out
of there.” She discovered it was defendant, and she asked what he was doing there. He responded
that he heard she was sick and he wanted to surprise her. J.K.’s grandmother testified that she was
not sick that day and defendant had never visited her before when she was sick. She and defendant
-8-
No. 1-21-0261
went into the living room, and defendant stayed to watch a basketball game with J.K.’s brother
and his friends. She did not know where J.K. had gone. J.K.’s mother arrived at the house about
30 minutes later. J.K.'s grandmother told her mother that J.K. left the house and she did not know
where she was. They left the house to look for J.K., and at that time, defendant also left the house
and walked away. J.K. was eventually found around 1 a.m. at the high school.
¶ 25 J.K.'s brother, who was 19 years old at the time of trial, testified that he lived with his
grandmother and that he had attended the church every Sunday for his entire life. He testified that
he would see defendant at church every Sunday. On May 5, 2018, he was outside of his
grandmother’s house with his friends, and he saw J.K. run out of the house. She hugged him, told
him she loved him, and ran away. Because of this interaction, which was not typical of her, he
believed that something was wrong. He then went inside and told his grandmother that J.K. had
run away somewhere. He noticed that defendant was also in the house, although he did not see
him enter the house at any point. J.K.’s brother testified that he spoke with defendant that evening
about the basketball game they were watching, and defendant stayed for about 30 minutes. He
further testified that he had never known defendant to visit his grandmother previously and he
found it unusual that defendant was at the house.
¶ 26 J.K.’s mother testified that she had attended the church where defendant was serving as
assistant pastor her entire life, along with most of her family, and she knew defendant her entire
life. She testified that, in addition to serving as assistant pastor, defendant sang in the choir and
taught Sunday school and sometimes bible study. He would also preach on Sunday when Pastor
Evans was not present. She testified that she trusted defendant because “[h]e was a man of God,
[they] grew up together, [they] were in the same church.” She stated that J.K. typically stayed at
her grandmother’s house on Thursday nights because J.K. attended a youth group on Thursdays
-9-
No. 1-21-0261
that was closer to her grandmother’s house. On May 5, she had left J.K.’s grandmother’s house to
pick up food from TGI Friday’s. When she returned around 5 p.m., J.K.’s brother, his friends,
J.K.’s grandmother, and defendant were inside watching a basketball game. She testified that she
was surprised to see defendant there because he had never before visited her or J.K.’s grandmother.
J.K.’s brother told her that J.K. was gone, which she found unusual because it was after dark. At
some point, defendant left the house. J.K.’s grandmother informed her mother of how defendant
was found in the house, and she discovered that J.K. had left her phone at the house. Several family
members went out to look for J.K. J.K.’s mother testified that, when she was found, J.K. was
“crying and shaken, upset.” J.K. informed her that she had run away because she and defendant
had had sex and that is why he was at the house that day, but it did not happen because J.K.’s
grandmother found them. At this point, J.K.’s mother contacted Pastor Evans, and he came to the
house on Sunday before church. Later that day, at the church, there was a meeting with defendant,
Pastor Evans, and J.K. J.K.’s mother stated that she was not satisfied with the results of the
meeting. A couple days later, she called the police and subsequently took J.K. to the Children’s
Advocacy Center and Lurie Children’s Hospital.
¶ 27 Pastor Evans testified that he has served as a pastor at the church for the past 20 years. He
has known J.K. and her brother their entire lives and had an excellent relationship with their family,
who attended the church every Sunday. He stated that he took J.K. to a water park from April 19
to April 21, 2018. He picked up J.K. from her grandmother’s house on April 19. Early on Sunday,
May 6, he received a text message from J.K.’s mother and called her. He took J.K. to church, but
J.K. stayed in his office during the service. After the service, he facilitated a meeting with
defendant, J.K., and her mother. Pastor Evans further testified that defendant did not return to the
- 10 -
No. 1-21-0261
church after that Sunday. Finally, Pastor Evans stated that defendant only taught the adult Sunday
school class and J.K. was never defendant’s student.
¶ 28 Sarah Monaco, a nurse practitioner at Lurie, testified that she treated J.K. on May 10. Over
defendant’s objection, she testified that she took a patient history, and her records indicated the
following: “patient reports to me that the offender would call her a lot, that he would ask her
questions about if she was sexually active. When the patient told the offender she was not sexually
active, patient told me the offender asked her if could show her or teach her about sex. Patient
reports she had unprotected vaginal to penile sex with the offender in his car on April 20. She also
reports she had protected vaginal to penile sex with a condom on 4/27 in his car. The last sexual
encounter was on 4/27.” Nurse Monaco did not conduct an internal exam because J.K. was not
complaining of any symptoms and she would not have been able to confirm whether J.K. had had
sexual intercourse on April 27. J.K.’s physical exam was normal. On cross-examination, Nurse
Monaco confirmed that she could not present any scientific or medical evidence corroborating
J.K.’s report of the incidents.
¶ 29 Chicago police officer Sarah Lacino testified that, on May 8, 2018, she was assigned to
take a report of a sexual assault. She went to J.K.’s grandmother’s house and met with J.K., her
parents, her grandmother, and one of J.K.’s aunts. She spoke to J.K. and her mother and generated
a report based on that conversation. On cross-examination, Office Lacino testified that she believed
that J.K. informed her that she did not have the clothes she was wearing during either of the
incidents.
¶ 30 Chicago police detective Marina Makropoulos testified that she was assigned to investigate
J.K.’s allegations of sexual assault. During her investigation, she reported the alleged sexual
assault to DCFS, and she was unable to locate defendant’s Facebook profile. She interviewed
- 11 -
No. 1-21-0261
J.K.’s mother and grandmother. She did not personally interview J.K. but reviewed the interview
conducted at the Children’s Advocacy Center. After that interview, Detective Makropoulos
directed J.K.’s mother to take her to the hospital for an examination. She obtained surveillance
video recordings from a garage near J.K.’s grandmother’s house from May 5, but she was unable
to obtain video recordings from April 20 or April 27. According to Makropoulos, the video on
May 5 showed a gray Dodge Charger or Challenger with two doors driving down the alley near
J.K.’s grandmother’s house, and she confirmed that the car in the video was registered to
defendant. 2 Detective Makropoulos also acquired J.K.’s cellphone, which was sent to the forensic
lab to retrieve the cellular data. On cross-examination, she confirmed that no one informed her that
J.K. had been out of town from April 19 to April 21.
¶ 31 John Clisham testified that he is employed by the Chicago Regional Computer Forensic
Laboratory. He testified that he examined defendant’s cell phone and there was no information
recovered prior to May 23. Clisham attributed this to a factory reset, manual deletion of the
information, or the purchase of a new phone. He confirmed that between May 23 and May 29,
2018, there were no phone calls or text messages between defendant and J.K. He also testified that
he was unable to recover any deleted call logs or text messages from J.K.’s phone. He was able to
gather data from April 14 to May 10, 2018, but not further back, which could have been due to
memory storage on her phone or manual deletion. The data showed that 18 calls were exchanged
between J.K. and defendant’s phones between April 24 and May 6, 2018. 3
2
This surveillance video and the still photographs taken from the video recording were not
included in the record on appeal.
3
The exhibits accompanying Clisham’s testimony were not included in the record on appeal.
- 12 -
No. 1-21-0261
¶ 32 Finally, the parties stipulated as to the Sprint cell phone number registered to defendant
and the cell phone number registered to J.K. during the relevant time period. The State introduced
evidence showing the phone calls provided by Sprint between the two phone numbers for
defendant’s billing period spanning March 28 to April 27, 2018. The log showed 19 calls between
the two phone numbers on several dates between April 4 and April 26, 2018, with the calls
spanning in length from one minute to one hour.
¶ 33 The State rested. Defendant filed a motion for a directed verdict, which the court denied.
¶ 34 There was a stipulation that Kalonee Bullock would testify if called as a witness that she
was 18 years old and both she and her mother were members of the same church attended by
defendant, J.K., and her family. Bullock would testify that on April 19, 2018, she went on a trip to
a water park resort and J.K. was also on the trip. She would further testify that they stayed at the
resort for two nights and returned home on April 21. The defense rested.
¶ 35 The jury found defendant guilty of both counts of criminal sexual assault.
¶ 36 C. Posttrial Motions and Sentencing
¶ 37 Defendant filed a motion for a new trial, arguing that (1) the court erred in denying his
motions in limine, (2) the evidence was insufficient to find defendant guilty, (3) the State made
improper statements during its closing argument, and (4) the court erred in denying his motion to
dismiss. After hearing arguments from the parties, the trial court denied the motion.
¶ 38 A sentencing hearing was held, after which the trial court sentenced defendant to
consecutive terms of 66 months on each count, for a total of 11 years’ imprisonment. Defendant
was given 338 days of custody credit, over defendant’s objection that he was entitled to more credit
for the entire EHM period. He also filed a motion to correct his sentence, arguing that he was
entitled to 604 days for the time spent on electronic monitoring. On January 29, 2021, the trial
- 13 -
No. 1-21-0261
court denied this motion. In so ruling, the court noted that, pursuant to section 5-4.5-100 of the
Unified Code of Corrections (Pub. Act 101-652, § 10-281 (eff. July 1, 2021) (amending 730 ILCS
5/5-4.5-100)), sentencing credit for EHM is proscribed for defendants sentenced to a term of
imprisonment for the offense of criminal sexual assault. The court acknowledged the sentencing
credit previously awarded to defendant was in error, but the court would not revoke that credit. As
such, defendant’s postsentencing motion was denied, and defendant’s credit remained at 338 days.
¶ 39 This appeal followed.
¶ 40 II. ANALYSIS
¶ 41 Defendant asserts the following claims of error: the evidence was insufficient to prove him
guilty beyond a reasonable doubt; the trial court erred in denying his motions in limine regarding
J.K.’s alleged drug usage and sexual activity; the trial court erred by admitting evidence in
violation of the rape shield statute; the trial court erred in denying his motions for a directed verdict,
for judgment notwithstanding the verdict, and for a new trial; the statute for criminal sexual assault
is unconstitutional on its face; and defendant is entitled to 602 days of presentencing custody credit.
¶ 42 At the outset, we once again point out that the record before us is incomplete. Pursuant to
Illinois Supreme Court Rule 321 (eff. Oct. 1, 2021), the entire common-law record means “every
document filed, judgment, and order entered, and any exhibit offered and filed by any party.” The
appellant bears the burden of presenting an adequate record on appeal to support his claim of error.
People v. Hunt, 234 Ill. 2d 49, 58 (2009). In the absence of a complete record, we will presume
that the trial court’s order was in conformity with the law and had a sufficient factual basis. Foutch,
99 Ill. 2d at 391-92. Any doubts that may arise from the partial record are resolved against the
appellant. Id. at 392.
¶ 43 A. Sufficiency of the Evidence
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¶ 44 We begin with defendant’s claim that the evidence was insufficient to find him guilty
beyond a reasonable doubt as to both counts of criminal sexual assault. To that end, he argues that
(1) J.K. was not a credible witness; (2) it was factually impossible for defendant to have committed
criminal sexual assault on April 20, 2018, based on the trial testimony; (3) there was no physical
evidence of sexual activity between defendant and J.K.; and (4) the evidence failed to prove that
defendant was in a position of supervision, authority, or trust in relation to J.K.
¶ 45 When a defendant challenges the sufficiency of the evidence against him, this court must
determine “ ‘whether, after viewing the evidence in the light most favorable to the prosecution,
any rational trier of fact could have found the essential elements of the crime beyond a reasonable
doubt.’ ” (Emphasis in original.) People v. Collins, 106 Ill. 2d 237, 261 (1985) (quoting Jackson
v. Virginia, 443 U.S. 307, 319 (1979)). A reviewing court will not retry the defendant or substitute
its judgment for that of the trier of fact with regard to the credibility of witnesses or the weight to
be given to each witness’s testimony. People v. Jackson, 232 Ill. 2d 246, 281 (2009). A defendant’s
conviction will be reversed only when the evidence is so unreasonable, improbable, or
unsatisfactory that it creates a reasonable doubt of his guilt. People v. Newton, 2018 IL 122958,
¶ 24.
¶ 46 The State has the burden of proving beyond a reasonable doubt each element of an offense.
People v. Gray, 2017 IL 120958, ¶ 35. As charged here, a defendant commits criminal sexual
assault if he or she “commits an act of sexual penetration and *** is 17 years of age or over and
holds a position of trust, authority, or supervision in relation to the victim and the victim is at least
13 years of age but under 18 years of age.” 720 ILCS 5/11-1.20(a)(4) (West 2018). There is no
dispute that J.K. was between the ages of 13 and 18 or that defendant was 17 years of age or older.
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¶ 47 However, defendant can hardly be heard to complain regarding the sufficiency of the
evidence, where, by his own omission, the trial exhibits have not been provided to this court in
violation of Illinois Supreme Court Rule 321 (eff. Oct. 1, 2021). Without the trial exhibits, we
cannot review all of the evidence the jury relied upon in finding defendant guilty. We note that
any doubts arising from the incompleteness of the record must be resolved against defendant. Id.;
see also People v. Fernandez, 344 Ill. App. 3d 152, 161 (2003). Further, we presume that the trial
court and, by extension in this case, the jury acted in conformity with the law and had a sufficient
factual basis for finding the defendant guilty. See Foutch, 99 Ill. 2d at 392. However, even
reviewing the partial record before us, we find defendant’s contentions regarding the sufficiency
of the evidence are meritless. 4
¶ 48 Defendant first challenges J.K.’s credibility. In support of this contention, he enumerates a
the following discrepancies in her testimony: (1) she told the police that the first incident took
place on April 19, but she was out of town on that day; (2) she testified that she had washed the
clothes she wore on the two incidents, and the police did not ask her about the clothes, but a police
officer testified that she told him that she no longer had any of the clothes; (3) she testified that
she told her brother goodbye when she left her grandmother’s home, but her brother testified that
she never used those words; (4) she lied to her grandmother about taking out the trash; (5) J.K.’s
mother did not take her to the police or the hospital immediately because she wanted to find out
the truth. According to defendant, the evidence showed that J.K. lied multiple times and “her
Notwithstanding our decision to review defendant’s claims on appeal, the failure to file a
4
complete record, especially the trial exhibits, is no small matter and counsel’s misstep in this regard
should not be taken lightly.
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No. 1-21-0261
testimony was so fraught with inconsistencies and contradictions that her testimony was so lacking
in credibility that a reasonable doubt of defendant’s guilt remains.”
¶ 49 The jury heard the evidence in this case, and each of the weaknesses that defendant points
out before this court were presented to, and apparently rejected by, the jury. We afford great
deference to the factfinder’s assessment of a witness’s credibility because the factfinder is in a
better position “to determine the credibility of witnesses, to weigh evidence and draw reasonable
inferences therefrom, and to resolve any conflicts in the evidence.” People v. Siguenza-Brito, 235
Ill. 2d 213, 228 (2009). Nonetheless, “that deference does not extend to testimony that is ‘so
lacking in credibility that a reasonable doubt of defendant’s guilt remains.’ ” People v. Parker,
2016 IL App (1st) 141597, ¶ 29 (quoting People v. Schott, 145 Ill. 2d 188, 207 (1991)).
¶ 50 We find that none of the inconsistencies pointed out by defendant render J.K.’s testimony
wholly unbelievable. People v. Corral, 2019 IL App (1st) 171501, ¶ 85 (“Minor inconsistencies
in the testimony between witnesses or within one witness’s testimony may affect the weight of the
evidence but do not automatically create a reasonable doubt of guilt.”). The discrepancies
involving the date of the first incident, the words she said to her brother, and what happened with
her clothing are all minor issues. J.K.’s lie to her grandmother regarding taking the trash out is also
of no moment. Lastly, we decline to read her mother’s hesitancy to call the police before speaking
to Pastor Evans and defendant as an affirmative indication that she believes her daughter lied about
the sexual assault. Further, testimony need not be rejected merely because of a delay in reporting.
Id.; see also Parker, 2016 IL App (1st) 141597, ¶ 33 (finding that a month-long delay in reporting
sexual assault did not render the victim’s testimony unbelievable).
¶ 51 Moreover, J.K.’s testimony regarding May 5 was largely corroborated by the testimony of
her mother, grandmother, and brother. The record also suggests that evidence was submitted in the
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No. 1-21-0261
form of phone records and photographs of defendant’s vehicle that would tend to corroborate
portions of J.K.’s testimony regarding the circumstances of these incidents. Of course, because we
do not have these exhibits before us and we cannot attest to their contents, we must construe their
absence against defendant. See Foutch, 99 Ill. 2d at 392. Thus, viewed in the light most favorable
to the State, J.K.’s testimony is not so improbable, unconvincing, or contrary to human experience
that no reasonable factfinder could have found her credible. See People v. Cunningham, 212 Ill.
2d 274, 284 (2004) (finding that nothing in the record demonstrated that the entirety of the
witnesses’ testimony as unworthy of belief).
¶ 52 Defendant next contends that it was impossible for a jury to find him guilty of criminal
sexual assault occurring on April 20, 2018, because the testimony at trial affirmatively showed
that J.K. was out of town that night at a water park resort. We reject this argument for the reasons
that follow.
¶ 53 Generally, the State is “not required to prove that a crime was committed on a particular
date, unless the allegation of a particular time is an essential ingredient of the offense, or a statute
of limitations question is involved.” People v. Suter, 292 Ill. App. 3d 358, 363 (1997). The State
is only required to “at least give some indication in the indictment as to when the offenses
occurred.” People v. Guerrero, 356 Ill. App. 3d 22, 27 (2005); see also 725 ILCS 5/111-3(a)(4)
(West 2020). Additionally, “[t]he date of the offense is not an essential factor in child sex
offenses.” Guerrero, 356 Ill. App. 3d at 27 (citing People v. Burton, 201 Ill. App. 3d 116, 123
(1990)).
¶ 54 Further, the jury in this case was given the appropriate jury instruction, Illinois Pattern Jury
Instruction, Criminal, No. 3.01 (approved Oct. 17, 2014) (hereinafter IPI Criminal No. 3.01),
stating as much. See People v. Sims, 2019 IL App (3d) 170417, ¶ 38 (“When proof at trial suggests
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No. 1-21-0261
the offense occurred on a date other than the one charged, IPI Criminal No. 3.01 serves to inform
the jury that the difference in dates is not material.”). In particular, this instruction stated: “The
indictment states that the offense charged was committed on or about April 20, 2018 and April 27,
2018. If you find the offense charged was committed, the State is not required to prove that it was
committed on the particular date charged.”
¶ 55 Here, there was sufficient evidence presented at trial that two separate acts of criminal
sexual assault occurred based on J.K.’s testimony. Moreover, she testified credibly that the first
incident occurred sometime after April 15 (when defendant touched her thigh) and before she went
to the water park resort on April 19. J.K. later clarified that she had stayed at her grandmother’s
house the night before the trip to the water park resort. There was also testimony that J.K. generally
stayed at her grandmother’s house on Thursdays but that she could stay there any day of the week.
Finally, the testimony showed that Pastor Evans picked up J.K. from her grandmother’s house on
April 19, 2022. From this and the reasonable inferences flowing therefrom, the jury could conclude
that the first incident occurred close in time to April 20, 2018. See Jackson, 232 Ill. 2d at 281
(stating that it is the responsibility of the jury to draw reasonable inferences from basic facts to
ultimate facts). As such, we find this argument to be without merit.
¶ 56 Next, we reject defendant’s assertion that the lack of physical evidence created a reasonable
doubt as to his guilt. Physical evidence is unnecessary to corroborate a victim’s testimony. Schott,
145 Ill. 2d at 202-03. The testimony of a single witness, if positive and credible, is sufficient to
sustain a conviction. Siguenza-Brito, 235 Ill. 2d at 228. We have already concluded that there is
no basis for disturbing the factfinder’s determination that J.K.’s testimony was credible and that
there was corroborating evidence from her family members’ testimony at trial. As such, the jury
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could have found defendant guilty beyond a reasonable doubt despite the lack of physical evidence.
See People v. Garcia, 2012 IL App (1st) 103590, ¶ 89.
¶ 57 Finally, defendant contends that the State failed to prove that he held a position of trust,
supervision, or authority over J.K., as is required by the statute.
¶ 58 Section 11-1.20(a)(4) does not define the terms trust, authority, and supervision. 720 ILCS
5/11-1.20(a)(4) (West 2020). However, this court has previously construed these terms in
accordance with their common dictionary definitions as follows:
“ ‘[T]rust’ is defined as ‘[c]onfidence in the integrity, ability, character, and truth of a
person ***[;] [s]omething committed into the care of another.’ [Citation.] ‘Authority’ is
‘[t]he power to command, enforce laws, exact obedience, determine, or judge.’ [Citation.]
‘Supervise’ or ‘supervision’ means ‘[t]o direct and inspect the performance of’ [citation];
the act of overseeing or inspection [citation]; to superintend or oversee [citation].” People
v. Secor, 279 Ill. App. 3d 389, 396 (1996).
¶ 59 Further, “[t]he language of the statute does not suggest that the position of trust, authority,
or supervision may result from the role of the offender alone, but that it must exist ‘in relation to
the victim.’ ” People v. Reynolds, 294 Ill. App. 3d 58, 66 (1997) (quoting 720 ILCS 5/12-13(a)(4)
(West 1994)).
¶ 60 In the case before us, there was ample evidence in the record that would support a finding
that defendant was in a position of trust and authority in relation to J.K. Her entire family had
attended the same church, where defendant served as assistant pastor, for decades. Defendant
attended church on Sundays, sang in the choir, taught Sunday school classes, and sometimes
preached during Pastor Evans’s absence. J.K. testified that she had known defendant her entire life
and she trusted him. She further testified that she viewed defendant as someone she could turn to
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No. 1-21-0261
for counseling and guidance, such as when she lost a close friend and when she was having
difficulty at school. J.K.’s mother also testified that she trusted defendant, whom she had known
her entire life, because he was a “man of God, we grew up together, we were in the same church.”
See Secor, 279 Ill. App. 3d at 394 (finding that the fact that the families of the defendant and the
victim had been friends for 10 years likely generated mutual trust); Wisniewski v. Diocese of
Belleville, 406 Ill. App. 3d 1119, 1128 (2011) (diocese and priests were in a position of “trust and
confidence” over alleged victim where victim grew up attending church every Sunday and was
taught “to respect the priests, to believe what they said was true, and to obey them”).
¶ 61 This evidence suggests that defendant was a friend of the family whom J.K. trusted and
respected, as she turned to him for guidance. His position as assistant pastor at the church also
suggested some level of authority and trust with the attendees, especially where J.K. testified that
she often attended his Sunday school class. See People v. Grocesley, 384 Ill. App. 3d 682, 687
(2008) (finding that an assistant coach is “a position of trust that our society imposes upon those
who undertake to teach and mentor our children”). Such authority was further evidenced by J.K.’s
testimony that she did not know how to say no to defendant’s requests for sex.
¶ 62 It was within the province of the jury to determine whether defendant was in a position of
trust, supervision, or authority in relation to J.K. Based on the evidence presented, it would be
reasonable to conclude that defendant was in a position of trust or authority in relation to J.K.
within the meaning of section 12-13(a)(4) of the Criminal Code. Therefore, there is no basis for a
reversal of the guilty verdicts as to this issue.
¶ 63 Accordingly, even based on the partial record before us, we find each of defendant’s
contentions unavailing and conclude that the State presented sufficient evidence to prove
defendant guilty beyond a reasonable doubt of two counts of criminal sexual assault.
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¶ 64 B. Constitutionality of the Criminal Sexual Assault Statute
¶ 65 Defendant also argues that the trial court erred in denying his motion to dismiss the
indictment based on the unconstitutionality of the criminal sexual assault statute (720 ILCS 5/11-
1.20(a)(4) (West 2018)). Specifically, he contends that the statute is unconstitutional on its face
because it infringes upon the fundamental privacy rights of 17-year-olds, as the age of consent in
Illinois is 17 years old.
¶ 66 Before addressing the merits of this constitutional claim, we must first address the State’s
position that defendant lacks standing to challenge the constitutionality of the criminal sexual
assault statute at issue. The State contends that defendant lacks standing because he cannot assert
the rights of other individuals not before the court. Defendant cites People v. Aguilar, 2013 IL
112116, modified by People v. Burns, 2015 IL 117387, in rebuttal.
¶ 67 The purpose of the standing doctrine is “to insure that issues are raised and argued only by
those parties with a real interest in the outcome of the controversy.” People v. Greco, 204 Ill. 2d
400, 409 (2003). “Generally, a party may not raise, and a court will not consider, a constitutional
challenge to a statutory provision that does not affect the party.” People v. Ashley, 2020 IL 123989,
¶ 94. To have standing, an individual “must have sustained or be in immediate danger of sustaining
a direct injury as a result of enforcement of the challenged statute.” Chicago Teachers Union,
Local 1 v. Board of Education of Chicago, 189 Ill. 2d 200, 206 (2000). The injury must be “(1)
distinct and palpable; (2) fairly traceable to defendant’s actions; and (3) substantially likely to be
prevented or redressed by the grant of the requested relief.” Id. at 207.
¶ 68 Here, the statute at issue was enforced against defendant and resulted in two criminal
convictions and an 11-year sentence. Defendant therefore suffered a direct injury as a result of the
statute’s application to his alleged actions toward J.K. Significantly, because defendant has
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No. 1-21-0261
mounted a facial challenge to the statute, rather than an as-applied challenge, we do not look at
defendant’s precise circumstances. In particular, defendant is arguing that this statute itself facially
violates the fundamental right to privacy and that consequently the statute cannot be enforced
against anyone, including defendant. See Aquilar, 2013 IL 112116, ¶ 12.
¶ 69 Where a statute is found to be facially unconstitutional, meaning unconstitutional in all its
applications, the statute is said to be void ab initio. People v. Mosley, 2015 IL 115872, ¶ 55; People
v. Blair, 2013 IL 114122, ¶ 28. If this court was to grant defendant the requested relief, i.e., find
the statute to be facially unconstitutional, defendant’s injury would be redressed in that his
conviction would necessarily be vacated. See People v. Zeisler, 125 Ill. 2d 42, 48 (1988) (noting
that the doctrine of void ab initio declares an unconstitutional statute null and void as of the date
of its enactment, “which results in the court’s vacating a conviction based upon such statute”). As
such, defendant has demonstrated that he sustained a direct injury from application of the criminal
sexual assault statute.
¶ 70 In seeking to defeat standing, the State appears to have overlooked Aguilar, the landmark
case that is directly applicable here. Notably, the cases that the State does cite for support were
issued prior to Aguilar.
¶ 71 Briefly, in Aguilar, our supreme court determined whether the statute that defined the
offense of aggravated unlawful use of a weapon was unconstitutional on its face under the second
amendment of the United States Constitution. 2013 IL 112116, ¶ 22. However, before reaching
the constitutional question, the court addressed whether the defendant there had standing to
challenge the statute. Id. ¶ 12. Our supreme court first rejected the State’s invocation of the
principle that, “in order to have standing to contest the constitutionality of a statutory provision,
the party bringing that challenge must show that he falls within the class of persons aggrieved by
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No. 1-21-0261
the alleged unconstitutionality.” Id. (citing People v. Bombacino, 51 Ill. 2d 17, 20 (1972)). The
court noted that the defendant was asserting a facial challenge to the statute and held that he
possessed standing because, although the conduct involved did not enjoy second amendment
protection, the challenged statutes were enforced against the defendant and resulted in two felony
convictions and 24 months’ probation. Id. ¶12. To sum up its holding, the court stated that, “if
[the] defendant does not have standing to challenge the validity of these sections, then no one
does.” (Emphasis in original.) Id.
¶ 72 Here, defendant claims that the statute is unconstitutional because it violates the
fundamental privacy rights of 17-year-olds. Just as the defendant in Aguilar was not a member of
the class of persons who would be aggrieved by the unconstitutionality because his conduct was
not protected by the second amendment, defendant here is not a member of the class of persons
who would be aggrieved by the alleged violation of the right to privacy. Nonetheless, those 17-
year-olds whose rights are allegedly violated by the statute would never have standing to challenge
the statute. This is so because the statute does not target conduct of the 17-year-olds but rather the
individuals who have sexual relations with 17-year-olds and who have a position of trust, authority,
or supervision. Stated another way, the 17-year-olds would never have a direct injury from
application of the statute because it will never be enforced directly against them and result in a
conviction. Akin to Aguilar, if defendant does not have standing to assert this facial challenge,
then no one does. Thus, the State’s assertion that defendant lacks standing is rejected.
¶ 73 We now turn to the merits of defendant’s facial challenge to the constitutionality of the
criminal sexual assault statute.
¶ 74 We presume the constitutionality of a statute. In re A.C., 2016 IL App (1st) 153047, ¶ 27.
“To overcome this presumption, the party challenging the statute must clearly establish its
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No. 1-21-0261
invalidity.” Mosley, 2015 IL 115872, ¶ 22. We review the constitutionality of a statute de novo.
Id.
¶ 75 A facial challenge, which is presented here, is “the most difficult challenge to mount
successfully.” In re M.A., 2015 IL 118049, ¶ 39. “To hold that a statute is facially unconstitutional
means that the conduct it proscribed was beyond the power of the state to punish.” In re N.G., 2018
IL 121939, ¶ 36. “A statute is facially invalid only if there is no set of circumstances under which
the statute would be valid.” In re M.A., 2015 IL 118049, ¶ 39.
¶ 76 When determining whether a statute violates due process, a reviewing court must first
determine the nature of the right upon which the statute allegedly infringes. Where the right
infringed upon is a fundamental right, the statute is subject to strict scrutiny analysis. Id. ¶ 36.
“Strict scrutiny requires a showing that the statute is narrowly tailored to serve a compelling state
interest.” Id. Where a statute does not affect a fundamental right, it is subject to the rational basis
test. Id. Under this test, a statute must only bear a rational relationship to the purpose the legislature
sought to accomplish in enacting the statute, and the means adopted must be reasonable method
of accomplishing the desired objective. People v. Hollins, 2012 IL 112754, ¶ 15. We first
determine whether a fundamental right is implicated here.
¶ 77 Defendant contends that 17-year-olds have a fundamental right to privacy, which includes
the right to engage in sexual intercourse with anyone over 17 years of age or older, including those
who hold a position of trust, authority, and supervision in relation to them. We disagree.
¶ 78 A fundamental right is one that is “deeply rooted” in our nation’s history and legal
traditions. (Internal quotation marks omitted.) People v. Avila-Briones, 2015 IL App (1st) 132221,
¶ 72 (citing Washington v. Glucksberg, 521 U.S. 702, 721 (1997)). The privacy clause of the
Illinois Constitution forbids unreasonable invasions of privacy. Ill. Const. 1970, art. I, § 6; Kunkel
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No. 1-21-0261
v. Walton, 179 Ill. 2d 519, 538 (1977). “Minors, as well as adults, are protected by the Constitution
and possess constitutional rights.” Planned Parenthood of Central Missouri v. Danforth, 428 U.S.
52, 74 (1976). However, at the same time, “the power of the state to control the conduct of children
reaches beyond the scope of its authority over adults.” Prince v. Massachusetts, 321 U.S. 158, 170
(1944).
¶ 79 The right to privacy has been held to be implicit in the fourteenth amendment’s due process
clause. Zablocki v. Redhail, 434 U.S. 374, 384 (1978). Although the parameters of the right to
privacy have not been explicitly delineated, “it is clear that among the [Court’s] decisions that an
individual may make without unjustified government interference are personal decisions relating
to” marriage, procreation, contraception, family relationships, and child rearing and education.
(Internal quotation marks omitted.) Id. at 385. However, this court knows of no case marking
minors’ decisions regarding their sexual partners to be a constitutionally protected privacy right.
Instead, our courts have historically recognized that “[j]uveniles are a vulnerable population,” and
“ ‘[o]ur history is replete with laws and judicial recognition that minors, especially in their earlier
years, generally are less mature and responsible than adults.’ ” In re J.T., 221 Ill. 2d 338, 380
(2006) (Freeman, J., dissenting) (quoting Eddings v. Oklahoma, 455 U.S. 104, 115-16 (1982)).
Particularly “ ‘during the formative years of childhood and adolescence, minors often lack the
experience, perspective, and judgment’ ” expected of adults. Hope Clinic for Women, Ltd. v.
Flores, 2013 IL 112673, ¶ 86 (quoting Bellotti v. Baird, 443 U.S. 622, 635 (1979) (plurality
opinion)); see also Roper v. Simmons, 543 U.S. 551 (2005) (noting that scientific and sociological
studies tend to confirm a lack of maturity and an undeveloped sense of responsibility are found in
youth more than in adults).
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¶ 80 Nonetheless, defendant contends that, by setting the age of consent at 17 years of age, the
legislature “created a right of personal privacy or guarantee of certain areas or zones of privacy to
those 17 years old and above.” However, “[s]tatutes do not confer constitutional rights.” In re
M.A., 2015 IL 118049, ¶ 68. Moreover, we would note that there is not an explicit statute stating
that the age of consent is 17. Our supreme court implicitly acknowledged this in reviewing the
sexual offenses statutory framework. See People v. Lloyd, 2013 IL 113510, ¶ 30 (“[T]he prescribed
age of consent in Illinois in 17, although in a few instances where the accused is a family member
or a person in a position of trust or authority, the age of consent is 18 [citation].”). Therefore, we
reject this contention.
¶ 81 Defendant also argues that the United States Supreme Court in Lawrence v. Texas, 539
U.S. 558 (2003), upheld the right to engage in consensual sexual activity in the home without the
intervention of the government. However, defendant fails to either notice or address that Lawrence
involved consenting adults and the Court was explicitly reluctant to apply its holding to cases
involving minors, injured or coerced individuals, or those who are in a relationship “where consent
might not be easily refused.” Id. at 578; see also People v. Downins, 357 Ill. App. 3d 193, 200
(2005) (recognizing that Lawrence applied only to the private, consensual activity of adults, and
not to minors). Defendant cites no precedential case even suggesting that 17-year-olds have a
fundamental right to have sexual relations with anyone over 18 who is in a position of trust,
authority, or supervision. We certainly will not recognize that a minor has a fundamental right here
where, not only is there is no history or legal tradition to support such a right, but, given our
understanding of juvenile brain science, to do so would offend our sense of common decency.
Because we find that no fundamental right is implicated, we apply the rational basis test to the
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No. 1-21-0261
statute. See People v. Reed, 148 Ill. 2d 1, 7-8 (1992) (laws that do not infringe upon fundamental
rights are subject to rational basis review).
¶ 82 Rational basis analysis gives great deference to the legislature. People v. Pepitone, 2018
IL 122034, ¶ 17. Where there is “any conceivable set of facts to justify the statute, it must be
upheld.” Id. Courts first must ascertain “the statute’s public purpose in order to test whether its
provisions reasonably implement that purpose.” Hollins, 2012 IL 112754, ¶ 18. “[T]he court may
consider arguments in support of finding a rational basis for the statute even if those arguments
were not part of the original legislative discussion at the time of enactment.” Id.
¶ 83 The legislature intentionally fixes the age of consent for certain sexual conduct in
recognition of the maturity of minors, or lack thereof. Lloyd, 2013 IL 113510, ¶ 27. “Age of
consent laws primarily serve to protect juveniles from the exploitation of older, more experienced
sexual predators, and also serve to protect juveniles from themselves because they lack a sufficient
understanding and appreciation of the risks and harms of intercourse.” Id. Moreover, our supreme
court and the United States Supreme Court have made clear: “ ‘The prevention of sexual
exploitation and abuse of children constitutes a government objective of surpassing importance.’ ”
People v. Minnis, 2016 IL 119563, ¶ 37 (quoting New York v. Ferber, 458 U.S. 747, 757 (1982)).
Our supreme court has further recognized that children may suffer both physical and psychological
injuries as a result of sexual assault and, “[b]ecause of their emotional immaturity, children are
particularly vulnerable to the effects of sexual assault.” People v. Huddleston, 212 Ill. 2d 107, 135
(2004). In regard to this particular statute, the legislature “sought to prevent sex offenses by those
whom a child would tend to obey, such as a teacher or coach, as well as those in whom the child
has placed his trust, such as the defendant.” Secor, 279 Ill. App. 3d at 396.
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¶ 84 Here, the statute was clearly intended to protect juveniles from sexual exploitation from
those in positions of trust and power, and the statute implements that purpose by specifically
criminalizing such behavior. We agree with the State’s assertion that 17-year-olds are reasonably
included in this particular category of sex offense because they are likely still in high school and
may have jobs, which are places where sexual exploitation can often occur. See id. (“It is the trust
that makes the child particularly vulnerable, and it is the betrayal of that trust that makes the offense
particularly devastating.”). We do not find anything arbitrary or unreasonable about the statute,
and the statute reasonably serves the purpose of protecting minors against sexual exploitation and
abuse from those in positions of power.
¶ 85 Finally, we note that defendant suggests that “trust, authority, and supervision” are
“vaguely defined relationships.” To the extent that defendant asserts a vagueness challenge, we
must also reject that argument. A vagueness challenge to this statute has already been considered
and rejected by this court in Secor. The court there held that the terms are “sufficiently definite to
both warn defendants of the type of conduct that is prohibited and to channel the discretion of
police, judges and juries.” Id. We find no reason to depart from the holding in Secor. Defendant
contends that Secor is inapplicable because it was decided before the age of consent was lowered.
Defendant’s argument is unpersuasive, where the age of consent is irrelevant to the vagueness of
the terms in the statute.
¶ 86 Accordingly, we reject defendant’s facial challenge to the constitutionality of the criminal
sexual assault statute at issue here and find that the trial court properly denied defendant’s motion
to dismiss the indictment.
¶ 87 C. Motion in Limine
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No. 1-21-0261
¶ 88 Defendant next argues that the trial court improperly denied his motion in limine regarding
J.K.’s alleged drug usage and treatment for an STD.
¶ 89 “A motion in limine is addressed to a court’s inherent power to admit or exclude evidence.”
People v. Zimmerman, 2018 IL App (4th) 170695, ¶ 134. The purpose of such motions is to bring
to the trial court’s attention, prior to trial, evidence that is potentially irrelevant, inadmissible, or
prejudicial, and to obtain a pretrial ruling on whether the evidence may be admitted or excluded.
Id. We review a trial court’s evidentiary rulings for abuse of discretion. People v. Becker, 239 Ill.
2d 215, 234 (2010); see also People v. Santos, 211 Ill. 2d 395, 401 (2004) (applying this standard
of review to an evidentiary ruling involving the rape shield statute). A trial court abuses its
discretion when a ruling is “arbitrary, fanciful, unreasonable, or when no reasonable person would
adopt the trial court’s view.” People v. Ward, 2011 IL 108690, ¶ 21.
¶ 90 1. Drug Usage
¶ 91 Defendant asserts that the court should have granted his motion in limine and permitted
him to introduce evidence of J.K.’s drug usage. He argues that her drug usage is relevant to her
perception of events, mental status, and ability to recollect the events. The evidence he sought to
admit comprised two photographs taken from J.K.’s Facebook that, according to defendant,
showed J.K. “promoting, glorifying, consuming, and in possession of Alprazolam, commonly
known as Xanax.”
¶ 92 The trial court, in its discretion, must decide whether evidence is relevant and admissible.
People v. Morgan, 197 Ill. 2d 404, 455 (2001). “Evidence is considered relevant if it has any
tendency to make the existence of any fact that is of consequence to the determination of an action
either more or less probable than it would be without the evidence.” Id. at 455-56. Nonetheless, a
trial court may reject evidence if it is “remote, uncertain or speculative.” Id. at 456. “Evidence is
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considered speculative if an insufficient nexus exists to connect the offered evidence to the crime.”
People v. Kraybill, 2014 IL App (1st) 120232, ¶ 41.
¶ 93 Here, the photographs defendant sought to admit show a white capsule on J.K.’s tongue.
Defendant attached to his motion a Drug Enforcement Administration fact sheet regarding Xanax.
In denying defendant’s motion, the trial court ruled that the photographs were irrelevant, remote,
uncertain, and speculative. The court also stated that the photographs show “a girl with a tongue
sticking out with something on her tongue, that’s all it shows.”
¶ 94 We cannot conclude that the trial court’s decision to bar this evidence from trial was a clear
abuse of discretion. First, it is entirely uncertain and speculative whether the photographs show
J.K. with a Xanax on her tongue. Even accepting that the photo was of Xanax, such does not prove
that J.K. had a drug addiction or that she was under the influence of Xanax during the time of the
charged incidents. There is simply no nexus between the photographs and the sexual assault. As
such, the evidence defendant sought to introduce was irrelevant and, thus, inadmissible.
¶ 95 Defendant argues that the court’s ruling was in contravention of his constitutional right to
confront witnesses against him, including his right to conduct a reasonable cross-examination. He
further cites the proposition espoused in People v. Foster, 322 Ill. App. 3d 780, 789 (2000), that
“[p]arties must be allowed to cross-examine witnesses regarding drug use.”
¶ 96 We agree with defendant that a witness’s drug use can be a proper subject for cross-
examination. “It is well settled that narcotics addiction has an important bearing upon the
credibility of a witness, and counsel may use legitimate methods to attack the credibility of such a
witness.” People v. Crisp, 242 Ill. App. 3d 652, 659 (1992) (citing People v. Lewis, 25 Ill. 2d 396
(1962)); see also People v. Armstrong, 183 Ill. 2d 130, 146 (1998). Even so, “[t]he right to cross-
examination is not absolute ***.” People v. Price, 404 Ill. App. 3d 324, 330 (2010). “ ‘[T]he
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Confrontation Clause guarantees an opportunity for effective cross-examination, not cross-
examination that is effective in whatever way, and to whatever extent, the defense might wish.’ ”
(Emphasis in original.) People v. Kliner, 185 Ill. 2d 81, 134 (1998) (quoting Delaware v. Fensterer,
474 U.S. 15, 20 (1985)). As such, the latitude allowed during cross-examination is likewise a
matter within the sound discretion of the trial judge. People v. Kitchen, 159 Ill. 2d 1, 37 (1994).
“A judge may limit the scope of cross-examination, and unless the defendant can show his or her
inquiry is not based on a remote or uncertain theory, a court’s ruling limiting the scope of
examination will be affirmed.” People v. Tabb, 374 Ill. App. 3d 680, 689 (2007).
¶ 97 In Kliner, 185 Ill. 2d 81 at 130, our supreme court found that the trial court did not abuse
its discretion in precluding cross-examination of a witness regarding his alleged use of
tranquilizers because the defendant did not provide an adequate foundation to support his claim
that the witness was on tranquilizers at the time of his testimony. See also Crisp, 242 Ill. App. 3d
at 660 (holding that the trial court properly excluded evidence of a witness’s alleged drug addiction
because the defendant failed to provide an adequate foundation for the line of questioning).
Moreover, “where there is no evidence of addiction, the attempt to impeach a witness on that basis
has been held to be ‘improper unless the examiner is prepared to make a showing to support the
intended questions.’ ” People v. DeSavieu, 120 Ill. App. 3d 420, 430 (1983) (quoting People v.
Brown, 76 Ill. App. 2d 362, 373 (1966)); see also People v. Adams, 259 Ill. App. 3d 995, 1004
(1993) (“Before such cross-examination may be pursued, however, counsel is required to lay a
proper foundation wherein he shows that the witness is a narcotics addict.”).
¶ 98 Defendant did not present a sufficient foundation or showing to support a line of inquiry
on cross-examination regarding J.K.’s drug usage. As stated, there was no affirmative evidence of
J.K. ever having ingested illegal, nonprescription drugs, and there was no nexus between any
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alleged drug use and the crimes at issue. The trial court therefore did not abuse its discretion in
excluding such evidence and denying defendant’s motion in limine, and there was no violation of
defendant’s constitutional right to confront witnesses against him.
¶ 99 We also find that the cases that defendant cites are distinguishable. First, in Foster, the
witness testified to her habitual drug usage and was subject to cross-examination regarding her
addiction. 322 Ill. App. 3d at 789. However, the issue on appeal in Foster was whether the trial
court erred in denying the defendant’s drug addiction jury instruction. Id. at 788. This court did
not consider any exclusion or admission of testimony related to drug usage. As such, we find
Foster does not support defendant’s argument here. Likewise, Armstrong and People v. Reed also
involved witnesses who had testified as to their drug addiction and the trial court’s denial of the
defendants’ requests for a jury instruction on drug addiction. Armstrong, 183 Ill. 2d at 146-47;
People v. Reed, 405 Ill. App. 3d 279, 288 (2010). We find these cases inapposite as well.
¶ 100 As a final aside, the case from which the proposition that parties must be allowed to cross-
examine witnesses regarding drug usage originates, People v. Strother, 53 Ill. 2d 95, 99 (1972), is
also distinguishable. There, the witness had admitted to his heroin addiction, but the defendant
wanted to further question the witness as to his most recent usage of heroin and inspect the
witness’s arm for needle marks. The trial court rejected defendant’s request for further cross-
examination, and the supreme court concluded that this was an abuse of discretion because the
evidence of any recent use of narcotics would affect the credibility of the witness. Id. In contrast,
here, J.K. had not already admitted to a drug addiction, and there was no reliable evidence of any
drug use.
¶ 101 2. Rape Shield Statute
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¶ 102 Defendant also asserts that the trial court erred in barring evidence showing that J.K. had
been treated for an STD prior to these charges against defendant. We consider simultaneously
defendant’s claim that the trial court erred in allowing certain testimony in violation of the rape
shield statute. Specifically, he contends that the trial court improperly allowed J.K. and Nurse
Monaco to testify as to J.K.’s response to defendant’s question regarding whether J.K. was
sexually active.
¶ 103 Both of these issues are governed by the same standard of review set forth above and
involve the rape shield statute The rape shield statute bars, in sex offense prosecutions, the
admission of evidence of “the prior sexual activity or the reputation of the alleged victim.” 725
ILCS 5/115-7(a) (West 2018). One of the purposes for this statute is to “prevent the defendant
from harassing and humiliating the complaining witness with evidence of either her reputation for
chastity or specific acts of sexual conduct with persons other than [the] defendant.” (Internal
quotation marks omitted.) People v. Sandifer, 2016 IL App (1st) 133397, ¶ 21. “Further, exclusion
of such evidence keeps the jury’s attention focused only on issues relevant to [sexual relations with
the defendant].” (Internal quotation marks omitted.) People v. Sandoval, 135 Ill. 2d 159, 180
(1990).
¶ 104 The statute provides only two exceptions to this bar. Evidence of a victim’s prior sexual
history may be admissible where (1) consent is an issue and the defendant seeks to introduce prior
sexual activity between himself and the victim (consent) or (2) the evidence is constitutionally
required to be admitted (constitutionally required). 725 ILCS 5/115-7(a) (West 2018); Santos, 211
Ill. 2d at 402.
¶ 105 Further, and as relevant here, “even when admissible under the rape shield statute, the
determination of whether the details of the sexual activity were admissible remain[s] subject to the
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standards of relevancy.” (Internal quotation marks omitted.) Sandifer, 2016 IL App (1st) 133397,
¶ 29. The exception for evidence that is constitutionally required allows a defendant to enter
evidence that is directly relevant to matters at issue in his case and “would make a meaningful
contribution to the fact-finding enterprise.” (Internal quotation marks omitted.) Id. ¶ 32.
¶ 106 We first turn to defendant’s assertion that the trial court abused its discretion in excluding
evidence that J.K. was treated for an STD a year prior to these allegations. He claims that this
evidence was offered for the purpose of impeaching J.K. The State responds that the evidence of
J.K.’s treatment for an STD was properly excluded as it was irrelevant and did nothing to disprove
the allegations against defendant. The State argues that this court should also reject defendant’s
argument that evidence of an STD is not evidence of sexual activity and therefore does not fall
within the purview of the rape shield statute. We agree with the State.
¶ 107 Preliminarily, we note defendant’s assertion that J.K. admitted to being sexually active and
being treated for an STD in a video recorded interview with the police. However, defendant cites
no portion of the record to support this statement, and this court’s review of the record does not
reveal any support either. As such, we will give neither credence nor consideration to unsupported
allegations of a recorded admission in reviewing defendant’s claim.
¶ 108 We first address People v. Grano, 286 Ill. App. 3d 278, 288 (1996), which defendant cites
for the proposition that verbal accusations do not constitute sexual activity within the meaning of
the rape shield statute. In Grano, the defendant argued that the trial court improperly barred
evidence that the victim had made prior allegations of sexual activity with other men but that such
activity in fact never occurred. Id. at 287. In construing the rape shield statute, this court stated
that “the legislature intended to exclude the actual sexual history of the complainant, not prior
accusations of the complainant.” (Emphasis in original.) Id. at 288. The court continued, stating
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that “[l]anguage or conversation does not constitute sexual activity.” Id. In conclusion, the court
held that the defendant “should have been allowed to introduce the evidence in order to attack the
credibility of the complainant.” Id.
¶ 109 Significantly, our supreme court in Santos explicitly rejected this court’s holding in Grano.
In assigning error, our supreme court expressed its disagreement that the trial court misapplied the
rape shield statute as a basis for excluding the evidence of the victim’s inconsistent statements.
Santos, 211 Ill. 2d at 402-03. At issue in Santos was whether the trial court properly barred the
defendant from cross-examining the victim about her inconsistent statements regarding whether
she had engaged in sexual activities with anyone else during the 72 hours preceding the sexual
assault. Id. at 401. The supreme court found that, although the evidence at issue was merely the
victim’s statements, those statements revealed the victim’s sexual activity and thus the rape shield
statute was invoked. Id. at 402-03. The court continued that “the statute makes no exception based
on the purpose for which the evidence is offered.” Id. at 403.
¶ 110 Santos is directly applicable here where defendant sought the admission of evidence of
J.K.’s prior sexual activity, i.e., prior treatment for an STD, for purposes of impeachment. This
evidence was not outside the purview of the rape shield statute simply because it was offered to
impeach J.K.’s credibility, where there was testimony that she informed defendant that she was
not sexually active. See 725 ILCS 5/115-7(a)(1) (West 2020).
¶ 111 We next consider whether the proffered evidence falls within either of the two exceptions.
As to the first exception (consent), we find that it does not apply because the evidence of sexual
activity was not related to prior sexual relations between J.K. and defendant.
¶ 112 As to the second exception (constitutionally required) (see 725 ILCS 5/115-7(a)(2) (West
2020)), we are again guided by our supreme court’s decision in Santos. The supreme court held
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that there was “no constitutional necessity for the impeachment,” which consisted of “two out-of-
court statements which were inconsistent with each other, but not with any statement made by the
witness on direct examination.” Santos, 211 Ill. 2d at 403-08; see also Sandoval, 135 Ill. 2d at 176-
81 (concluding that the defendant was not entitled to present evidence rebutting the victim’s direct
testimony that she had never had anal sex with a man other than defendant because it was irrelevant
and had no impact on the issue of consent). The court in Santos proceeded to construe the
impeachment evidence as collateral and as “specific-act impeachment,” which the court noted is
prohibited in Illinois. Santos, 211 Ill. 2d at 404 (citing cases barring cross-examination regarding
specific instances of untruthfulness because it is overly prejudicial in relation to its probative
value).
¶ 113 Here, we are faced with evidence of treatment for an STD, which was inconsistent with an
out-of-court statement to defendant that J.K. was not sexually active. Defendant did not seek to
contradict any in-court statement made by J.K. on direct examination, only a statement made to
defendant just prior to the first sexual assault. Consistent with Santos, this evidence constitutes
collateral and specific-act impeachment. Additionally, we find that this evidence is not directly
related to the offenses involved and would potentially distract the jury from the issues at hand. See
People v. Bates, 2018 IL App (4th) 160255, ¶ 59 (evidence that is “marginally relevant or which
poses an undue risk of harassment, prejudice, or confusion of the issues” is not constitutionally
required to be admitted). Accordingly, the trial court did not abuse its discretion in barring
defendant from introducing evidence of J.K.’s prior STD treatment. See also People v. Lewis, 2017
IL App (1st) 150070, ¶ 24 (citing cases and noting that the trial court’s decision to exclude STD
test results was “in line with the great weight of authority from our jurisdiction and others regarding
the introduction of evidence of [an STD] under various rape shield statutes”).
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¶ 114 We next address defendant’s claim that the trial court abused its discretion in allowing the
State to elicit the statement from J.K. and Nurse Monaco that J.K. had told defendant that she was
not sexually active because the testimony violated the rape shield statute. In response, the State
asserts that the admission of this conversation was not offered for the truth of the matter asserted
and did not violate the rape shield statute. We agree.
¶ 115 Here, the State elicited testimony from J.K. regarding the events and communication
leading up to the instances of sexual assault. J.K. testified that she spoke with defendant, via her
cell phone, and he asked her if she was sexually active. She responded that she was not, and he
stated that he would “teach” her. Similarly, Nurse Monaco testified that her patient history for J.K.
indicated that J.K. relayed this same conversation to her.
¶ 116 We find People v. Harris, which the State cited, analogous here. 297 Ill. App. 3d 1073
(1998). There, both victims testified that, prior to the sexual assault, the defendant asked them
whether they were virgins, to which they each replied, “ ‘yes.’ ” Id. at 1088. This court found that
this was not evidence of the victims’ past sexual activity, particularly where they were not asked
whether they had told defendant the truth. Id. The court further stated that the evidence was offered
to show the circumstances of the assault as well as the motivations of the defendant. Id. at 1088-
89.
¶ 117 Likewise, in this case, the testimony did not put into evidence J.K.’s prior sexual activity
where she responded “no” to defendant’s question, and she was not questioned on the veracity of
her response. As such, the rape shield statute was not implicated through this testimony nor through
the State’s reference to this testimony during closing argument.
¶ 118 Rather, the evidence was elicited for the purpose of understanding the circumstances and
communications leading up to the sexual assault. It also revealed defendant’s motivations and state
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of mind just prior to the first sexual assault where he expressed that he wanted to teach J.K. about
sex. Nurse Monaco’s testimony bolstered J.K.’s credibility by showing that J.K. relayed the same
conversation to other individuals. These are all relevant purposes for the admission of this
evidence. As such, we do not find that the trial court abused its discretion in allowing this testimony
at trial and for its use during the State’s closing argument.
¶ 119 D. Motions for a Directed Verdict and for Judgment Notwithstanding the Verdict
¶ 120 Next, defendant argues that the trial court erred in denying his motions for a directed verdict
and for judgment notwithstanding the verdict (JNOV). Specifically, he contends that no reasonable
mind could fairly conclude defendant’s guilt where it was impossible for him to have committed
the sexual assault alleged in count I because J.K. was out of town on April 20, 2018. He also
contends that, due to the lack of corroborating evidence and the extreme credibility issues, no
reasonable mind could fairly conclude defendant’s guilt in regard to count II because the evidence
suffered from extreme credibility issues.
¶ 121 “A motion for a directed verdict asserts only that as a matter of law the evidence is
insufficient to support a finding or verdict of guilty.” People v. Withers, 87 Ill. 2d 224, 230 (1981).
As such, we review the trial court’s denial of the motion for a directed verdict de novo. People v.
Ward, 2021 IL App (2d) 190243, ¶ 46. A trial court’s ruling on a motion for JNOV is also subject
to de novo review. Lawlor v. North American Corp. of Illinois, 2012 IL 112530, ¶ 37.
¶ 122 We first address the motion for JNOV. Nowhere in the transcript, common-law record, nor
supplemental record do we find such a motion. The citations of the record in both defendant’s and
the State’s briefs do not point us to a specific motion for JNOV or the court’s ruling on such a
motion. There is a brief mention in defendant’s “post-trial motions” that “the judgment must be
vacated despite the jury’s verdict in that it is not supported by competent evidence or otherwise
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Defendant must be given a new trial.” Notably, that motion states that it is presented pursuant to
section 116-1 of the Code of Criminal Procedure of 1963 (725 ILCS 5/116-1 (West 2020)), which
specifically provides for a motion for a new trial and not a motion for JNOV. Despite similarities
between these motions, they are distinct and cannot be simply lumped together. As an express
motion for JNOV was not made before the trial court, there is nothing for this court to review.
¶ 123 In regard to the motion for directed verdict, the State contends that defendant has forfeited
that claim of error for failure to renew his motion at the close of all evidence. It is well settled that
a defendant who chooses to present evidence after the denial of his motion for a directed verdict
at the close of the State’s case waives any error in the trial court’s ruling on the motion unless he
renews the motion at the close of all the evidence. People v. Cazacu, 373 Ill. App. 3d 465, 473
(2007); see also People v. Washington, 23 Ill. 2d 546, 548 (1962) (applying the waiver rule from
civil cases to criminal cases).
¶ 124 Defendant asserts that, pursuant to People v. Kelley, 338 Ill. App. 3d 273, 277 (2003), he
had effectively renewed his motion for a directed verdict because he referred “to factual arguments
made in support of the original motion” during his closing argument. We disagree and find the
circumstances before us distinguishable from those in Kelley. There, during a bench trial, the
defendant filed two written motions for a directed verdict at the close of the State’s case-in-chief,
and after the defense presented evidence, defense counsel orally moved for a directed verdict. Id.
Accordingly, this court concluded that defense counsel’s “brief oral argument adequately renewed
the motions to preserve the issues on appeal.” Id.
¶ 125 Here, defendant may have made arguments during his closing argument similar to those
made in his motion for a directed verdict, but at no point did he expressly refer to that motion, nor
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did the trial court ever acknowledge a renewal of that motion. As such, Kelley is inapplicable, and
we deem the claimed error forfeited.
¶ 126 Forfeiture aside, we have already rejected defendant’s arguments and concluded that the
State presented sufficient evidence for a rational trier of fact to find defendant guilty beyond a
reasonable doubt of criminal sexual assault, as to both dates. As such, defendant’s arguments in
regard to these two motions fail.
¶ 127 E. Motion for a New Trial
¶ 128 Defendant also argues that the trial court erred in denying his motion for a new trial. He
specifically contends that the jury’s verdict was not supported by the evidence and several of his
rights were violated because of the court’s denial of his motion in limine and the admission of
evidence in violation of the rape shield statute during the State’s case-in-chief and closing
argument. Notably, defendant’s written motion for a new trial does not contain any reference to
the State’s violation of the rape shield statute. Rather, the motion objects to the State’s closing
argument where the State referenced J.K.’s testimony that the clothing she had been wearing on
the two occasions had been washed by the time the police became involved. In any case, we do
not find that the trial court erred in denying defendant’s motion for a new trial.
¶ 129 Following a verdict or finding of guilt, a court may grant a defendant a new trial, and the
motion for a new trial “shall specify the grounds therefor.” 725 ILCS 5/116-1(a), (c) (West 2020).
Whether to grant a motion for a new trial is within the sound discretion of the trial court, and a
reviewing court will not disturb that decision absent a clear abuse of discretion. People v. Gibson,
304 Ill. App. 3d 923, 930 (1999). To make that determination, “ ‘the reviewing court will consider
whether the jury’s verdict was supported by the evidence and whether the losing party was denied
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a fair trial.’ ” People v. Dixon, 256 Ill. App. 3d 771, 778 (1993) (quoting Reidelberger v. Highland
Body Shop, Inc., 83 Ill. 2d 545, 549 (1981)).
¶ 130 We have previously addressed each of these contentions and found no error as to any of
them. Moreover, we have determined that the evidence presented at trial was sufficient to prove
defendant guilty beyond a reasonable doubt of both counts of criminal sexual assault. Finally, as
stated, two of defendant’s contentions, that the admission of evidence during the State’s case-in-
chief and closing argument violated the rape shield statute, were not included in his motion for a
new trial, and thus, we will not consider them here. See People v. Estrada, 394 Ill. App. 3d 611,
626 (2009) (“It is axiomatic that arguments may not be raised for the first time on appeal.”). As
such, we find that the trial court did not abuse its discretion in denying defendant’s motion for a
new trial.
¶ 131 F. Plain Error
¶ 132 As to any unpreserved claims of error, defendant requests that this court review those
claims under the plain error doctrine. Specifically, defendant contends that the trial court’s errors
in denying his motions in limine and allowing the State to introduce evidence in violation of the
rape shield statute during its case-in-chief and closing argument constituted plain error and thus
his convictions must be reversed and remanded for further proceedings. Additionally, in his reply
brief, defendant asserts that the trial court’s denial of his motion for a directed verdict was plain
error.
¶ 133 Under the plain error doctrine, it is well established that “a reviewing court may consider
an unpreserved error if (1) 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) a clear or obvious error occurred and that error is so serious that it
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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. Birge, 2021 IL 125644, ¶ 24 (citing People
v. Piatkowski, 225 Ill. 2d 551, 564-65 (2007)). “Under either prong, the defendant bears the burden
of persuasion.” Id. The first step in any plain error analysis is to determine if an error actually
occurred. Piatkowski, 225 Ill. 2d at 565.
¶ 134 As we have previously concluded, the court did not err in regard to any of defendant’s
contentions. For that reason, to the extent that any of these claims were not preserved, we find that
there has been no plain error and this argument is without merit.
¶ 135 G. Presentencing Custody Credit
¶ 136 Finally, defendant contends that he is entitled to 602 days of presentencing custody credit
for the time he spent on EHM. He argues that there was a change in the law while this matter was
pending on appeal, and that change should be applied here.
¶ 137 According to defendant, he spent a total of 602 days on EHM. He requested that the trial
court include those 602 days in his custody credit; however, the court denied defendant’s request
due to a restriction on granting such credit to defendants who have been convicted of criminal
sexual assault. 5 While his appeal was pending, the legislature amended section 5-4.5-100 of the
Unified Code of Corrections (Code of Corrections) (Pub. Act 101-652, § 10-281 (eff. July 1, 2021)
(amending 730 ILCS 5/5-4.5-100)), which provides for the calculation of sentencing credit.
5
As explained in the background section, the trial court discovered when considering defendant’s
post sentencing motion that, pursuant to section 5-4.5-100(d) of the Code of Corrections (730 ILCS 5/5-
4.5-100(d) (West 2020)), defendant should not have been given any custody credit for time spent on EHM
because he was found guilty of criminal sexual assault. Nonetheless, after noting its error, the court did
not retract the previously awarded 338 days of credit.
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¶ 138 At the time defendant was sentenced, the statute mandated: “An offender sentenced to a
term of imprisonment for an offense listed in paragraph (2) of subsection (c) of Section 5-5-3 ***
shall not receive credit for time spent in home detention.” 730 ILCS 5/5-4.5-100(d) (West 2020).
Criminal sexual assault is one of the offenses listed.
¶ 139 The amendment to section 5-4.5-100, which became effective on July 21, 2021 (Pub. Act
101-652, § 10-281 (eff. July 1, 2021) (amending 730 ILCS 5/5-4.5-100)), removed the restriction
from granting credit to a defendant for time spent in home detention based on one of the listed
offenses, including criminal sexual assault. Id.
¶ 140 Clearly, there was no trial court error where the trial court applied the relevant statute at
the time of defendant’s sentencing. Rather, defendant now requests that the 2021 amendment be
applied retroactively and that this court grant him additional custody credit, essentially for the
entire duration that he was on EHM. The State argues that defendant is not entitled to additional
sentencing credit where the amendment is substantive and can only be applied prospectively.
¶ 141 The issue before us then is one of statutory construction, specifically determining whether
the amendment should be applied retroactively.
¶ 142 The court’s “primary objective when construing the meaning of a statute is to ascertain and
give effect to the intent of the legislature.” People v. Williams, 239 Ill. 2d 503, 506 (2011). Where
the language of the statute is clear and unambiguous, the statute should be applied without any
further aids of statutory construction. Id. Additionally, courts may not read into the statute
limitations, exceptions, or other conditions not expressed by the legislature. People v. Glisson, 202
Ill. 2d 499, 505 (2002). “The court should evaluate the statute as a whole rather than reading
phrases in isolation,” and no part of the statute should be rendered superfluous. Id. Lastly, courts
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may assume that “the legislature did not intend absurdity, inconvenience or injustice to result from
legislation.” Id.
¶ 143 Illinois courts utilize a retroactivity analysis that couples the procedure set forth in the
United States Supreme Court’s Landgraf v. USI Film Products, 511 U.S. 244 (1994), with section
4 of our legislature’s Statute on Statutes (5 ILCS 70/4 (West 2020)), which is a general savings
clause providing instruction on the temporal reach of statutory amendments. Caveney v. Bower,
207 Ill. 2d 82, 92 (2003); see also People v. Hunter, 2017 IL 121306, ¶ 36 (“[O]ur retroactivity
jurisprudence, though flowing from Landgraf, was tempered by our construction of section 4 of
the Statute on Statutes ***.”).
¶ 144 Under Landgraf, we first determine whether the legislature has “expressly prescribed” the
statute’s temporal reach. 511 U.S. at 280. If the legislature has included such language, the
legislature’s intent will be given effect. People ex rel. Alvarez v. Howard, 2016 IL 120729, ¶ 19.
If the temporal reach of the statute is not clearly indicated in the text of the statute, then we look
to section 4. Hunter, 2017 IL 121306, ¶ 22. Our supreme court has interpreted section 4 to mean
that procedural changes to statutes will be applied retroactively, whereas substantive changes are
prospective only. Howard, 2016 IL 120729, ¶ 20.
¶ 145 Our review of the statutory amendment to section 5-4.5-100 does not reveal any language
suggestive of a specific temporal reach for the changes. We presume that the legislature adopted
this amendment with knowledge of section 4 and this court’s interpretation thereof. Hunter, 2017
IL 121306, ¶ 36. As such, the statute’s temporal reach is provided by default according to section
4 of the Statute on Statutes. See Howard, 2016 IL 120729, ¶ 20.
¶ 146 The next step in the retroactivity analysis pursuant to section 4 is to determine whether the
statutory amendment effected a procedural or substantive change in the law. However, we need
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not decide that issue because the second sentence of section 4 controls our result here. See Hunter,
2017 IL 121306, ¶ 52 (bypassing the second step where the statutory amendment mitigated
punishment and therefore was subject to the second sentence of section 4). That sentence provides:
“If any penalty, forfeiture or punishment be mitigated by any provisions of a new law, such
provision may, by the consent of the party affected, be applied to any judgment pronounced after
the new law takes effect.” 5 ILCS 70/4 (West 2020). Our supreme court has interpreted this to
mean that “a punishment mitigated by a new law is applicable only to judgments after the new law
takes effect.” People v. Hansen, 28 Ill. 2d 322, 341 (1963).
¶ 147 Here, the statutory amendment to section 5-4.5-100 has a mitigating effect on the
punishment for defendants imprisoned for criminal sexual assault by allowing for custody credit
for time spent on home detention, including EHM, where they previously could not receive such
credit. As such, because defendant was sentenced before the amendment became effective, the
amendment is not applicable, and defendant is not entitled to additional sentencing credit. 6 See
People v. Bradford, 106 Ill. 2d 492 (1985) (holding that the defendant was not eligible to be
sentenced under a statutory amendment that became effective while his appeal was pending).
¶ 148 III. CONCLUSION
¶ 149 For the reasons stated, we affirm the judgment of the circuit court.
¶ 150 Affirmed.
6
As a final aside, we reject defendant’s reliance on People v. Othman, 2019 IL App (1st) 150823,
¶¶ 88-89, in which this court determined that a change to the sentencing procedures for juveniles was
procedural and thus retroactive. Our supreme court issued a supervisory order in that appeal instructing
this court to vacate portions of the order ruling on the constitutionality of the defendant’s sentence. This
court vacated that order and issued People v. Othman, 2020 IL App (1st) 150823-B, which no longer
contains the portions to which defendant cited for support.
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No. 1-21-0261
People v. Carter, 2022 IL App (1st) 210261
Decision Under Review: Appeal from the Circuit Court of Cook County, No. 18-CR-
8763; the Hon. Stanley J. Sacks, Judge, presiding.
Attorneys Ilia Usharovich and Sheldon Sorosky, both of Wheeling, for
for appellant.
Appellant:
Attorneys Kimberly M. Foxx, State’s Attorney, of Chicago (Enrique
for Abraham, Mary L. Boland, and Lisanne P. Pugliese, Assistant
Appellee: State’s Attorneys, of counsel), for the People.
- 47 - | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483716/ | Case: 21-40055 Document: 00516544178 Page: 1 Date Filed: 11/14/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
No. 21-40055 November 14, 2022
Summary Calendar Lyle W. Cayce
Clerk
Rosendo Padilla, Jr.,
Plaintiff—Appellant,
versus
Thomas Quintero,
Defendant—Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 1:19-CV-119
Before Davis, Smith, and Dennis, Circuit Judges.
Per Curiam:*
Rosendo Padilla, Jr., federal prisoner # 89203-179, appeals the
dismissal of his civil rights complaint and the denial of his motion to alter or
amend the judgment. He argues that the district court considered extraneous
documents and matters outside of the complaint, thereby triggering Federal
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 21-40055 Document: 00516544178 Page: 2 Date Filed: 11/14/2022
No. 21-40055
Rule of Civil Procedure 12(d) and requiring the defendant’s Federal Rule of
Civil Procedure 12(c) motion for judgment on the pleadings to be treated as
one for summary judgment. Accordingly, he maintains that the district court
erred by granting the defendant’s motion without an evidentiary hearing
because there were still contestable issues of fact. Padilla further argues that
the district court erred by determining that the notice of appeal divested it of
jurisdiction to consider his Federal Rule of Civil Procedure 59(e) motion.
Where, as here, a litigant files a timely Rule 59(e) motion and a notice
of appeal, the notice of appeal does not become effective until the entry of
the order disposing of the motion. Fed. R. App. P. 4(a)(4)(A)(iv), (B)(i);
Burt v. Ware, 14 F.3d 256, 260-61 (5th Cir. 1994). Thus, the district court
retained jurisdiction to dispose of Padilla’s Rule 59(e) motion. See Simmons
v. Reliance Standard Life Ins. Co. of Tex., 310 F.3d 865, 868-70 (5th Cir. 2002);
Burt, 14 F.3d at 261. Accordingly, the district court erred in denying Padilla’s
Rule 59(e) motion for lack of jurisdiction.
The order of the district court denying the Rule 59(e) motion is
REVERSED, and the matter is REMANDED for proper consideration.
Padilla’s motion to remand is DENIED as moot.
2 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483720/ | Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/15/2022 01:04 AM CST
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STATE V. DAVIS
Cite as 31 Neb. App. 445
State of Nebraska, appellee, v.
Durelle J. Davis, appellant.
___ N.W.2d ___
Filed November 8, 2022. No. A-22-056.
1. Right to Counsel: Appeal and Error. A trial court’s decision to sus-
tain or overrule a defendant’s motion to dismiss appointed counsel and
appoint substitute counsel is reviewed for an abuse of discretion.
2. Effectiveness of Counsel: Pleas: Waiver. A voluntary guilty plea or
plea of no contest generally waives all defenses to a criminal charge;
thus, when a defendant pleads guilty or no contest, he or she is lim-
ited to challenging whether the plea was understandingly and volun-
tarily made and whether it was the result of ineffective assistance of
counsel.
3. Sentences: Appeal and Error. A sentence imposed within the statutory
limits will not be disturbed on appeal in the absence of an abuse of dis-
cretion by the trial court.
4. Effectiveness of Counsel: Constitutional Law: Statutes: Records:
Appeal and Error. Whether a claim of ineffective assistance of trial
counsel can be determined on direct appeal presents a question of law,
which turns upon the sufficiency of the record to address the claim
without an evidentiary hearing or whether the claim rests solely on the
interpretation of a statute or constitutional requirement.
5. Effectiveness of Counsel: Appeal and Error. In reviewing claims of
ineffective assistance of counsel on direct appeal, an appellate court
decides only whether the undisputed facts contained within the record
are sufficient to conclusively determine whether counsel did or did
not provide effective assistance and whether the defendant was or
was not prejudiced by counsel’s alleged deficient performance.
6. Pleas: Waiver. A voluntary guilty plea or plea of no contest waives all
defenses to a criminal charge.
7. Effectiveness of Counsel: Pleas. When a defendant pleads guilty or no
contest, the defendant is limited to challenging whether the plea was
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understandingly and voluntarily made and whether it was the result of
ineffective assistance of counsel.
8. Sentences: Appeal and Error. When sentences imposed within statu-
tory limits are alleged on appeal to be excessive, the appellate court
must determine whether the sentencing court abused its discretion in
considering well-established factors and any applicable legal principles.
9. Sentences. When imposing a sentence, a sentencing judge should con-
sider the defendant’s (1) age, (2) mentality, (3) education and experi-
ence, (4) social and cultural background, (5) past criminal record or
record of law-abiding conduct, and (6) motivation for the offense, as
well as (7) the nature of the offense and (8) the violence involved in the
commission of the crime.
10. ____. The appropriateness of a sentence is necessarily a subjective judg-
ment and includes the sentencing judge’s observation of the defendant’s
demeanor and attitude and all the facts and circumstances surrounding
the defendant’s life.
11. Effectiveness of Counsel: Appeal and Error. When a defendant’s trial
counsel is different from his or her counsel on direct appeal, the defend
ant must raise on direct appeal any issue of trial counsel’s ineffective
performance which is known to the defendant or is apparent from the
record; otherwise, the ineffective assistance of trial counsel issue will
be procedurally barred.
12. Effectiveness of Counsel: Records: Appeal and Error. Once raised,
an appellate court will determine whether the record on appeal is suf-
ficient to review the merits of the ineffective performance claims. The
record is sufficient if it establishes either that trial counsel’s perform
ance was not deficient, that the appellant will not be able to establish
prejudice as a matter of law, or that trial counsel’s actions could not be
justified as a part of any plausible trial strategy. Conversely, an ineffec-
tive assistance of counsel claim will not be addressed on direct appeal if
it requires an evidentiary hearing.
13. Effectiveness of Counsel: Postconviction: Appeal and Error. The
necessary specificity of allegations of ineffective assistance of trial
counsel on direct appeal for purposes of avoiding waiver requires, at a
minimum, allegations of deficient performance described with enough
particularity for an appellate court to make a determination of whether
the claim can be decided upon the trial record and also for a district
court later reviewing a potential petition for postconviction relief to
be able to recognize whether the claim was brought before the appel-
late court.
14. Effectiveness of Counsel: Appeal and Error. Assignments of error
on direct appeal regarding ineffective assistance of trial counsel must
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STATE V. DAVIS
Cite as 31 Neb. App. 445
specifically allege deficient performance, and an appellate court will not
scour the remainder of the brief in search of such specificity.
15. Effectiveness of Counsel: Proof: Appeal and Error. When a claim
of ineffective assistance of trial counsel is raised in a direct appeal, the
appellant is not required to allege prejudice; however, an appellant must
make specific allegations of the conduct that he or she claims constitutes
deficient performance by trial counsel.
16. ____: ____: ____. General allegations that trial counsel performed defi-
ciently or that trial counsel was ineffective are insufficient to raise an
ineffective assistance claim on direct appeal.
17. Effectiveness of Counsel: Postconviction: Records: Appeal and
Error. In order to know whether the record is insufficient to address
assertions on direct appeal that trial counsel was ineffective, appellate
counsel must assign and argue deficiency with enough particularity (1)
for an appellate court to make a determination of whether the claim can
be decided upon the trial record and (2) for a district court later review-
ing a petition for postconviction relief to be able to recognize whether
the claim was brought before the appellate court.
18. Effectiveness of Counsel: Records: Appeal and Error. An ineffective
assistance of counsel claim made on direct appeal can be found to be
without merit if the record establishes that trial counsel’s performance
was not deficient or that the appellant could not establish prejudice.
19. Effectiveness of Counsel: Speedy Trial. When a defendant alleges he
or she was prejudiced by trial counsel’s failure to properly assert the
defendant’s speedy trial rights, the court must consider the merits of the
defendant’s speedy trial rights under Strickland v. Washington, 466 U.S.
668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984).
20. Speedy Trial. To calculate the deadline for trial for speedy trial pur-
poses, a court must exclude the day the State filed the information,
count forward 6 months, back up 1 day, and then add any time excluded
under Neb. Rev. Stat. § 29-1207(4) (Reissue 2016).
Appeal from the District Court for Lancaster County: Darla
S. Ideus, Judge. Affirmed.
Joe Nigro, Lancaster County Public Defender, and Brittani
E. Lewit for appellant.
Douglas J. Peterson, Attorney General, and George C. Welch
for appellee.
Pirtle, Chief Judge, and Bishop and Welch, Judges.
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Cite as 31 Neb. App. 445
Welch, Judge.
I. INTRODUCTION
Durelle J. Davis appeals his plea-based convictions of third
degree domestic assault on a pregnant woman and second
degree domestic assault. On appeal, Davis contends that the
district court erred in overruling his requests for the appoint-
ment of new counsel due to the deterioration of the attorney-
client relationship; that the sentences imposed were exces-
sive; and that his trial counsel was ineffective for failing to
effectively communicate with him, for withholding from the
court mitigating information which may have helped secure
his release or dismissal of the case, for requesting a continu-
ance over Davis’ objection, and for filing a pretrial motion on
Davis’ behalf which delayed his right to a speedy trial. For
the reasons set forth herein, we affirm.
II. STATEMENT OF FACTS
In June 2021, Davis was charged with third degree domestic
assault on a pregnant woman, second degree assault, use of a
deadly weapon to commit a felony, and tampering with a wit-
ness or informant. Pursuant to a plea agreement, Davis pled no
contest to third degree domestic assault on a pregnant woman
and second degree domestic assault, both Class IIIA felonies.
Also as part of the plea agreement, the State agreed not to
charge Davis as a habitual criminal.
The State provided the following factual basis: On March
19, 2021, police officers responded to a hospital based upon
the report of the assault of a female victim. Upon arrival, offi-
cers observed significant bruising on the victim’s face near
both of her eyes. The victim reported she was 27 weeks preg-
nant and had been staying at a local hotel to hide from Davis,
whom she identified as her boyfriend. The victim indicated
that on March 18, into the early morning hours of March 19,
Davis was staying with her when he became upset and struck
her eye and cheek with his fist. The victim reported that
Davis then used the handle of a metal baseball bat and hit her
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Cite as 31 Neb. App. 445
in the right forearm, right elbow, right hip, and lower right leg
area. Officers observed bruising and swelling consistent with
the victim’s report. The victim also had an older-appearing
bruise on her right eye, which bruise the victim reported
occurred during a prior incident, and a large bruise on the left
side of her forehead, which bruise she reported occurred dur-
ing an incident on March 6.
On March 6, 2021, officers had been dispatched after receiv-
ing a report that a pregnant woman was being assaulted. The
reporting witness stated that he heard the victim screaming,
heard Davis making threats to kill the victim, observed Davis
stomping on the victim’s head while the victim was on the
ground, and observed Davis pick up the victim and slam her
head into the side of a vehicle. The witness gave officers a
description of the victim, who had left the area prior to the
officers’ arrival, and the witness reported overhearing the vic-
tim and Davis making comments about the victim’s being
pregnant. Thereafter, when officers contacted Davis regarding
the incident, he stated that the victim had been assaulted by
another party.
After accepting Davis’ pleas on the facts set out above, the
matter was set for sentencing. During the sentencing hearing,
following the court’s statement that it had reviewed the presen-
tence investigation report and statements by counsel and Davis,
the district court stated:
So, you have a lengthy criminal history for somebody
your age.
Your [level of service/case management inventory]
score is 39, which is probably the highest that I have seen.
The underlying assaults in this case, as they were
described, are vicious. It isn’t just the victim’s statement.
The attack was corroborated by at least . . . two eye
witnesses.
You don’t show any remorse at all, sir, for this behavior.
You did receive the benefit of a very favorable plea
agreement.
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Cite as 31 Neb. App. 445
I do think that a period of incarceration is necessary.
Probation is not an option.
Having regard for the nature and circumstances of the
crime and the history, character and condition of [Davis],
imprisonment is necessary for the protection of the pub-
lic because I think the risk is substantial that during any
period of probation . . . Davis would engage in addi-
tional criminal conduct. A lesser sentence would depreci-
ate the seriousness of the crime and promote disrespect
for the law.
The court sentenced Davis to 3 years’ imprisonment and 18
months’ post-release supervision on each conviction, ordered
the sentences to run consecutively, and awarded Davis credit
for 275 days served. Davis now appeals from his convictions
and sentences.
III. ASSIGNMENTS OF ERROR
Davis contends that (1) the district court erred in overrul-
ing his requests for new appointed counsel despite the dete-
rioration of the attorney-client relationship; (2) the sentences
imposed were excessive; and (3) he received ineffective assist
ance of counsel when trial counsel (a) did not effectively com-
municate with him, (b) withheld information from the court
that may have helped secure Davis’ release from custody or
dismissal of the case, (c) requested a continuance of the jury
trial despite Davis’ objection, and (d) filed pretrial motions
that Davis did not request and did not want filed, delaying his
right to a speedy trial.
IV. STANDARD OF REVIEW
[1] A trial court’s decision to sustain or overrule a defend
ant’s motion to dismiss appointed counsel and appoint sub-
stitute counsel is reviewed for an abuse of discretion. State v.
Weathers, 304 Neb. 402, 935 N.W.2d 185 (2019).
[2] A voluntary guilty plea or plea of no contest gener-
ally waives all defenses to a criminal charge; thus, when a
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Cite as 31 Neb. App. 445
defendant pleads guilty or no contest, he or she is limited to
challenging whether the plea was understandingly and volun-
tarily made and whether it was the result of ineffective assist
ance of counsel. State v. Blake, 310 Neb. 769, 969 N.W.2d
399 (2022).
[3] A sentence imposed within the statutory limits will not
be disturbed on appeal in the absence of an abuse of discretion
by the trial court. State v. Morton, 310 Neb. 355, 966 N.W.2d
57 (2021).
[4,5] Whether a claim of ineffective assistance of trial coun-
sel can be determined on direct appeal presents a question of
law, which turns upon the sufficiency of the record to address
the claim without an evidentiary hearing or whether the claim
rests solely on the interpretation of a statute or constitutional
requirement. State v. Drake, 311 Neb. 219, 971 N.W.2d 759
(2022). In reviewing claims of ineffective assistance of counsel
on direct appeal, an appellate court decides only whether the
undisputed facts contained within the record are sufficient to
conclusively determine whether counsel did or did not provide
effective assistance and whether the defendant was or was not
prejudiced by counsel’s alleged deficient performance. Id.
V. ANALYSIS
1. Failure to Appoint Replacement Counsel
First, Davis alleges that he “was denied the right to effective
assistance of counsel . . . [b]ecause the District Court erred
in overruling [his] requests for new court appointed counsel
despite the deterioration of the attorney-client relationship.”
Although Davis frames his argument as an ineffective assist
ance of counsel claim, given the specific language of the
assignment of error, we consider this alleged error as a chal-
lenge to the court’s denial of Davis’ request to dismiss counsel
and appoint replacement counsel.
[6,7] However, as the Nebraska Supreme Court noted in
State v. Thomas, 311 Neb. 989, 996, 977 N.W.2d 258, 266
(2022):
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STATE V. DAVIS
Cite as 31 Neb. App. 445
A voluntary guilty plea or plea of no contest waives all
defenses to a criminal charge. State v. Jaeger[, 311 Neb.]
69, 970 N.W.2d 751 (2022). When a defendant pleads
guilty or no contest, the defendant is limited to challeng-
ing whether the plea was understandingly and volun-
tarily made and whether it was the result of ineffective
assistance of counsel Id. [The defendant’s] challenges to
the district court’s rulings with respect to his motions to
discharge his trial counsel do not fall into these limited
categories. They have therefore been waived, and we will
not address their merits.
Here, Davis entered pleas of no contest, and in doing so, he
has waived any challenges to the district court’s rulings regard-
ing his requests to dismiss trial counsel and appoint replace-
ment counsel. Accordingly, this assigned error has been waived
and we decline to consider it.
2. Excessive Sentences
Davis next contends that the district court abused its discre-
tion in imposing excessive sentences.
Here, Davis was convicted of third degree domestic assault
on a pregnant woman and second degree domestic assault,
both Class IIIA felonies. See, Neb. Rev. Stat. § 28-115 (Cum.
Supp. 2020) (criminal offense against a pregnant woman;
enhanced penalty); Neb. Rev. Stat. § 28-323 (Reissue 2016)
(domestic assault; penalties). Class IIIA felonies are punish-
able by a minimum of no imprisonment and a maximum of 3
years’ imprisonment followed by 9 to 18 months’ post-release
supervision and/or a $10,000 fine. Neb. Rev. Stat. § 28-105
(Cum. Supp. 2020). Davis was sentenced to 3 years’ impris-
onment followed by 18 months’ post-release supervision on
each count.
[8-10] When sentences imposed within statutory limits are
alleged on appeal to be excessive, the appellate court must
determine whether the sentencing court abused its discretion
in considering well-established factors and any applicable
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legal principles. State v. Blake, 310 Neb. 769, 969 N.W.2d
399 (2022). When imposing a sentence, a sentencing judge
should consider the defendant’s (1) age, (2) mentality, (3)
education and experience, (4) social and cultural background,
(5) past criminal record or record of law-abiding conduct, and
(6) motivation for the offense, as well as (7) the nature of
the offense and (8) the violence involved in the commission
of the crime. State v. Lierman, 305 Neb. 289, 940 N.W.2d
529 (2020). The appropriateness of a sentence is necessarily
a subjective judgment and includes the sentencing judge’s
observation of the defendant’s demeanor and attitude and
all the facts and circumstances surrounding the defendant’s
life. Id.
At the time the presentence investigation report was pre-
pared, Davis was 35 years old with a 10th-grade education,
was unemployed, and had two dependents. Davis had an exten-
sive criminal history, including seven convictions for failing
to appear, three convictions each for third degree domestic
assault and violation of a protection order, and two convic-
tions each of providing false information and possession of a
controlled substance. He also had convictions for assault and
battery, domestic violence assault, felony terroristic threats,
operating during suspension, destruction of property under
$100, disorderly conduct, disturbing the peace, making false
statements to police, possession of methamphetamine with
intent to distribute (less than 10 grams), carrying a concealed
weapon, disturbing the peace by fighting, possession of mari-
juana less than 1 ounce, and numerous traffic and other minor
violations. One of Davis’ convictions resulted in Davis’ being
placed on probation, which was later revoked.
The level of service/case management inventory assessed
that Davis was in the very high risk range to reoffend, that no
areas of strength were identified during the assessment, and
that Davis’ score on the “Domestic Violence Matrix” assess-
ment indicated he was a high risk due to the nature of the pres-
ent assault.
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Based upon the record, the district court considered the
appropriate sentencing factors. Further, as it relates to those
factors, including that the sentences imposed were within the
relevant statutory sentencing ranges, the benefit Davis received
from his plea agreement, Davis’ criminal history, and Davis’
being in the very high or high risk range to reoffend, we find
the district court did not abuse its discretion in considering the
relevant factors and imposing the sentences. This assignment
of error fails.
3. Ineffective Assistance
of Counsel
Davis’ final assignment of error is that his trial counsel
was ineffective. Specifically, Davis asserts that he was denied
effective assistance of counsel when trial counsel (a) did not
effectively communicate with him, (b) withheld information
from the court that may have helped secure Davis’ release from
custody or dismissal of the case, (c) requested a continuance
of the jury trial despite Davis’ objection, and (d) filed pretrial
motions that Davis did not request and did not want filed,
delaying his right to a speedy trial.
[11-14] Recently, in State v. Drake, 311 Neb. 219, 236-37,
971 N.W.2d 759, 774 (2022), the Nebraska Supreme Court set
forth the directives that must be followed when addressing an
ineffective assistance of counsel on direct appeal:
When a defendant’s trial counsel is different from his
or her counsel on direct appeal, the defendant must raise
on direct appeal any issue of trial counsel’s ineffective
performance which is known to the defendant or is appar-
ent from the record; otherwise, the ineffective assistance
of trial counsel issue will be procedurally barred.
Once raised, an appellate court will determine whether
the record on appeal is sufficient to review the merits of
the ineffective performance claims. The record is suffi-
cient if it establishes either that trial counsel’s perform
ance was not deficient, that the appellant will not be able
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to establish prejudice as a matter of law, or that trial coun-
sel’s actions could not be justified as a part of any plau-
sible trial strategy. Conversely, an ineffective assistance
of counsel claim will not be addressed on direct appeal if
it requires an evidentiary hearing.
The necessary specificity of allegations of ineffective
assistance of trial counsel on direct appeal for purposes
of avoiding waiver requires, at a minimum, allegations
of deficient performance described with enough particu-
larity for an appellate court to make a determination of
whether the claim can be decided upon the trial record
and also for a district court later reviewing a potential
petition for postconviction relief to be able to recog-
nize whether the claim was brought before an appellate
court. Assignments of error on direct appeal regard-
ing ineffective assistance of trial counsel must specifi-
cally allege deficient performance, and an appellate court
will not scour the remainder of the brief in search of
such specificity.
[15-18] When a claim of ineffective assistance of trial coun-
sel is raised in a direct appeal, the appellant is not required
to allege prejudice; however, an appellant must make specific
allegations of the conduct that he or she claims constitutes
deficient performance by trial counsel. State v. Devers, 306
Neb. 429, 945 N.W.2d 470 (2020). General allegations that
trial counsel performed deficiently or that trial counsel was
ineffective are insufficient to raise an ineffective assistance
claim on direct appeal. State v. Weathers, 304 Neb. 402, 935
N.W.2d 185 (2019). In order to know whether the record is
insufficient to address assertions on direct appeal that trial
counsel was ineffective, appellate counsel must assign and
argue deficiency with enough particularity (1) for an appel-
late court to make a determination of whether the claim
can be decided upon the trial record and (2) for a district
court later reviewing a petition for postconviction relief to be
able to recognize whether the claim was brought before the
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appellate court. State v. Devers, supra. An ineffective assist
ance of counsel claim made on direct appeal can be found to
be without merit if the record establishes that trial counsel’s
performance was not deficient or that the appellant could not
establish prejudice. State v. Weathers, supra.
(a) Failure to Communicate Effectively
Davis assigns as error that trial counsel was ineffective
because she “did not effectively communicate with him.”
Davis expounds on this claim in the argument section of his
brief by specifically arguing that his trial counsel failed to
disclose the victim’s contact with trial counsel’s office during
which the victim disclosed that she was not going to cooperate
with the State and was not going to attend court.
However, as this court noted in State v. Santos Romero, ante
p. 14, 19-20, 974 N.W.2d 624, 628-29 (2022):
Assignments of error on direct appeal regarding inef-
fective assistance of trial counsel must specifically
allege deficient performance, and an appellate court will
not scour the remainder of the brief in search of such
specificity. State v. Mrza, 302 Neb. 931, 926 N.W.2d
79 (2019). The Supreme Court has found that an error
assigning that trial counsel was ineffective in “‘fail[ing]
to adequately investigate [the defendant’s] defenses’”
lacked the specificity we demand on direct appeal. Id.
at 935, 926 N.W.2d at 86. Likewise, the Supreme Court
recently held that an error assigning that trial counsel was
ineffective in “‘Failing to Investigate the Case Fully’”
lacked the requisite specificity as to what component of
investigation counsel was allegedly deficient in failing to
conduct. State v. Wood, 310 Neb. 391, 436, 966 N.W.2d
825, 858 (2021).
Similarly, here, Davis’ assignment of error lacks sufficient
specificity regarding how trial counsel “did not effectively
communicate with him.” Accordingly, this assigned error has
not been sufficiently pled.
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(b) Withholding Information
Davis next alleges that he was denied effective assistance
of counsel because trial counsel “withheld information from
the Court that may have helped secure his release from cus-
tody or dismissal of the case.” Again, Davis expounds upon
this assigned error in his argument by specifically arguing
that his trial counsel failed to disclose the victim’s commu-
nication to counsel’s office. However, similar to his claim
raised in the preceding section of this opinion, Davis’ assigned
error lacks sufficient specificity regarding what information
Davis contends counsel should have provided to the court.
Accordingly, this assignment of error has not been pled with
sufficient specificity.
(c) Continuance and Pretrial Motions
We consolidate the analysis of Davis’ final two claims of
ineffective assistance of counsel, i.e., that his trial counsel
was ineffective because trial counsel “requested that [Davis’]
jury trial be continued despite [Davis’] objection” and “filed
pretrial motions [Davis] did not request and did not want filed,
thus delaying his right to a speedy trial.”
[19,20] When a defendant alleges that he or she was
prejudiced by trial counsel’s failure to properly assert the
defendant’s speedy trial rights, the court must consider the
merits of the defendant’s speedy trial rights under Strickland
v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d
674 (1984). State v. Collins, 299 Neb. 160, 907 N.W.2d 721
(2018). To calculate the deadline for trial for speedy trial
purposes, a court must exclude the day the State filed the
information, count forward 6 months, back up 1 day, and then
add any time excluded under Neb. Rev. Stat. § 29-1207(4)
(Reissue 2016). See State v. Collins, supra.
Here, the information was filed on June 10, 2021. Therefore,
the speedy trial deadline, before adding any excluded time, was
December 10. Thus, at the time Davis entered his pleas of no
contest on September 29, the State still had just over 2 months
- 458 -
Nebraska Court of Appeals Advance Sheets
31 Nebraska Appellate Reports
STATE V. DAVIS
Cite as 31 Neb. App. 445
to bring Davis to trial, even excluding any continuances or
motions filed by trial counsel that would have extended that
time. Accordingly, since Davis entered his pleas of no con-
test prior to the expiration of the speedy trial clock excluding
any continuances for motions or requests by trial counsel, the
record refutes his claims and trial counsel was not ineffective
in filing the complained of motions and requests to continue
the trial. Cf. State v. Collins, supra (in appeal of denial of post-
conviction relief, Nebraska Supreme Court held that because
deadline for speedy trial purposes had not run, defense counsel
could not have been ineffective for failing to file motion to
discharge on speedy trial grounds). These claims of ineffective
assistance of trial counsel fail.
VI. CONCLUSION
Having considered and found that Davis’ assigned errors
fail, we affirm his convictions and sentences.
Affirmed.
Bishop, Judge, concurring.
Other than the majority’s handling of two of Davis’ ineffec-
tive assistance of trial counsel claims—failing to communicate
effectively and withholding information from the trial court—
I concur in all other respects with the opinion. However, the
majority’s application of State v. Mrza, 302 Neb. 931, 926
N.W.2d 79 (2019), to find these two assignments of error to
be insufficiently stated for this court to address the claims is
construing Mrza to place more emphasis on form over sub-
stance than I read Mrza to intend. The majority’s decision
simply pushes these claims down the road for consideration
under an ineffective assistance of appellate counsel claim
potentially raised in a postconviction action. I would dispose
of them here.
The majority concludes that two of Davis’ claims of ineffec-
tive assistance of trial counsel were not sufficiently expounded
upon in the assignment of errors section of the brief: that trial
counsel “did not effectively communicate with [Davis],” and
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Nebraska Court of Appeals Advance Sheets
31 Nebraska Appellate Reports
STATE V. DAVIS
Cite as 31 Neb. App. 445
that trial counsel “withheld information from the Court that
may have helped secure [Davis’] release from custody or dis-
missal of the case.”
Regarding the claim related to trial counsel not effectively
communicating with Davis, the majority acknowledges:
Davis expounds on this claim in the argument section
of his brief by specifically arguing that his trial counsel
failed to disclose the victim’s contact with trial counsel’s
office during which the victim disclosed that she was not
going to cooperate with the State and was not going to
attend court.
Although not addressed by the majority, Davis further argues
in his brief that trial counsel “‘acted as if that never happened
before, like I made it up,’” and then trial counsel sent him a
letter indicating that trial counsel’s staff “‘didn’t remember
such a thing.’” Brief for appellant at 21. Davis further suggests
that “whether the alleged victim will be called to testify and to
what [he or she] will testify is an important factor for criminal
defendants to consider when deciding how to proceed.” Id. at
22. Davis argues that “[l]ack of faith in his counsel made it
difficult for [Davis] to fully weigh his options and make fully
informed decisions as to how to proceed, thus prejudicing
him.” Id.
Regarding the assignment of error that “trial counsel with-
held information from the Court that may have helped secure
his release from custody or dismissal of the case,” the major-
ity again concludes that this “assigned error lacks sufficient
specificity regarding what information Davis contends counsel
should have provided to the court.” The majority acknowl-
edges that “Davis expounds upon this assigned error . . . by
specifically arguing that his trial counsel failed to disclose the
victim’s communication to counsel’s office.” However, Davis
further argues that in addition to informing the court about the
victim’s contact with trial counsel, trial counsel should have
informed the court that the victim, “on her own,” came to the
decision to write the letter and statement admitting that Davis
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Nebraska Court of Appeals Advance Sheets
31 Nebraska Appellate Reports
STATE V. DAVIS
Cite as 31 Neb. App. 445
did not assault her, and that his contact with the victim was
before he made his first court appearance or “before [he] had a
bond or before there was any no contact order in place.” Id. at
22. Davis argues that he was “harmed by counsel not provid-
ing this information to the lower courts as it may have helped
persuade the Court to either dismiss the charges following
the preliminary hearing or led it to release him from custody
while the matter was pending.” Id. at 23.
In making the above arguments, Davis supplied headings
in the argument section of his brief which correlated exactly
with his assigned errors. Then, he further argued trial counsel’s
alleged deficiency with enough particularity for this court to
make a determination of whether the claims could be decided
upon the trial record and for a district court later reviewing
a petition for postconviction relief to be able to recognize
whether the claim was previously brought before an appellate
court. See State v. Devers, 306 Neb. 429, 945 N.W.2d 470
(2020). Even the State found the presentation of the assigned
errors and corresponding arguments sufficient to respond to
them in its brief, concluding in both instances that the claims
lacked merit. I would have done the same.
It is true that State v. Mrza, 302 Neb. 931, 935, 926 N.W.2d
79, 86 (2019), states that “assignments of error on direct
appeal regarding ineffective assistance of trial counsel must
specifically allege deficient performance, and an appellate
court will not scour the remainder of the brief in search of
such specificity.” However, I do not read that admonition to
mean that assignments of error must allege all the necessary
details about the claimed deficiency in the assignments of
error section of the brief and then be restated again later in the
argument section. In my opinion, when the deficient conduct
alleged in the assignments of error section can be directly cor-
related with a specific heading and a detailed discussion in the
argument section, as was done here, then no scouring of the
brief is necessary and the assigned claim of ineffective assist
ance of counsel should be addressed. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483721/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
FEDERAL HOUSING FINANCE No. 84573
AGENCY, IN ITS CAPACITY AS
CONSERVATOR FOR THE FEDERAL
NATIONAL MORTGAGE ASSOCIATION;
AND FEDERAL NATIONAL MORTGAGE FILE
ASSOCIATION,
NOV 111 '2072
Petitioners,
vs.
THE EIGHTH JUDICIAL DISTRICT
COURT OF THE STATE OF NEVADA, IN
AND FOR THE COUNTY OF CLARK;
AND THE HONORABLE MARK R.
DENTON, DISTRICT JUDGE,
Respondents,
and
WESTLAND LIBERTY VILLAGE, LLC;
WESTLAND VILLAGE SQUARE, LLC;
AMUSEMENT INDUSTRY, INC.;
WESTLAND CORONA LLC; WESTLAND
AMBER RIDGE LLC; WESTLAND
HACIENDA HILLS LLC; 1097 NORTH
STATE, LLC; WESTLAND TROPICANA
ROYALE LLC; VELLAGIO APTS OF
WESTLAND LLC; THE ALEVY FAMILY
PROTECTION TRUST; WESTLAND
AMT, LLC; AFT INDUSTRY NV, LLC;
AND A&D DYNASTY TRUST,
Real Parties in Interest.
ORDER DENYING PETITION
This original petition for a writ of mandamus challenges a
district court order denying a motion to dismiss. Having considered the
petition, answer, reply, and record, we conclude that our extraordinary and
discretionary intervention is not warranted. See NRS 34.160; NRS 34.170;
Int'l Game Tech., Inc. v. Second Judicial Dist. Cou,rt, 124 Nev. 193, 197, 179
P.3d 556, 559 (2008); Pan v. Eighth Judicial Dist. Court, 120 Nev. 222, 228,
SUPREME COURT
OF 88 P.3d 840, 844 (2004); Smith v. Eighth Judicial Dist. Court, 107 Nev. 674,
NEVADA
(0) 1947A
22- 55pLk
677, 679, 818 P.2d 849, 851, 853 (1991). In particular, interlocutory writ
relief is generally not available because the district court's order may be
challenged on appeal from final judgment, providing an adequate legal
remedy. See Int'l Game Tech., 124 Nev. at 197, 179 P.3d at 559. And we
conclude that petitioners have not shown that we should consider the
petition on the grounds that either (1) there's no factual dispute and the
district court was clearly obligated to dismiss pursuant to a statute or rule
or (2) an important legal issue requires clarification and judicial economy
favors entertaining the petition. See id. at 197-98, 179 P.3d at 559.
Accordingly, we
ORDER the petition DENIED.'
p ,,1.6.•44.10' :.N
Parraguirre ',,,,i
C.J. / Act, x
Hardesty
J.
J.
Stiglich Cadish
Ada,. J.
Pickering Herndon
cc: Hon. Mark R. Denton, District Judge
Fennemore Craig P.C./Reno
Snell & Wilmer, LLP/Las Vegas
Snell & Wilmer, LLP/Reno
Arnold & Porter Kaye Scholer LLP/Washington DC
Cooper & Kirk PLLC/Wash DC
Campbell & Williams
Law Offices of John Benedict
John W. Hofsaess
Eighth District Court Clerk
'The Honorable Abbi Silver having retired, this matter was decided
SUPREME COURT by a six-justice court.
OF
NEVADA
2
(0) I947A | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483726/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
ROY DANIELS MORAGA, No. 85481
Appellant,
vs. FILE
THE STATE OF NEVADA,
Respondent. NOV 1 0 2022
ORDER DISMISSING APPEAL
This is a pro se appeal from an "Order Denying Defendant's
Motion for Production of Documents Under the Freedom of Information Act
5 USCA 512." Eighth Judicial District Court, Clark County; Carolyn
Ellsworth, Judge.
Because no statute or court rule permits an appeal from the
aforementioned order, we lack jurisdiction. Castillo u. State, 106 Nev. 349,
352, 792 P.2d 1133, 1135 (1990). Accordingly, we
ORDER this appeal DISMISSED.
, J.
Hardesty
44;4_5Cm....0 J. , J.
Stiglich Herndon
cc: Hon. Carolyn Ellsworth, Senior Judge
Roy Daniels Moraga
Attorney General/Carson City
Clark County District Attorney
Eighth District Court Clerk
SUPREME COURT
OF
NEVADA
(0) 1947,1 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483810/ | NOTICE: This opinion is subject to motions for rehearing under Rule 22 as
well as formal revision before publication in the New Hampshire Reports.
Readers are requested to notify the Reporter, Supreme Court of New
Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any
editorial errors in order that corrections may be made before the opinion goes
to press. Errors may be reported by email at the following address:
reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00
a.m. on the morning of their release. The direct address of the court’s home
page is: https://www.courts.nh.gov/our-courts/supreme-court
THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Retirement System
No. 2021-0308
PETITION OF LOUIS L. LAFASCIANO
(New Hampshire Retirement System)
Submitted: June 14, 2022
Opinion Issued: November 15, 2022
Louis L. Lafasciano, self-represented party, on the brief.
Foley Law Office, of Concord (Peter T. Foley on the brief), for the
respondent.
Margaret Emily Murray, self-represented party, on the brief.
HICKS, J. The petitioner, Louis L. Lafasciano, seeks review of a decision
of the respondent, New Hampshire Retirement System Board of Trustees
(Board), rescinding a previously-granted termination of the survivorship benefit
of his former spouse, the intervenor Margaret Emily Murray, in his state
pension. We affirm.
The following facts were recited in the Board’s decisions or relate the
contents of documents in the record. The petitioner is a retired member of the
New Hampshire Retirement System (NHRS). At the time he retired, the
petitioner named the intervenor, then his spouse, as his survivor beneficiary,
thereby reducing the amount of the retirement benefit he received during his
lifetime. See RSA 100-A:13, I (2013) (amended 2022), III (2013). Under the law
then in effect, a retired member who designated his or her spouse as survivor
beneficiary could terminate that designation during the spouse’s lifetime only if
the parties divorced and the spouse remarried. See RSA 100-A:13, II(a)(1)
(2013) (amended 2016). The petitioner and the intervenor divorced in 2014.
In 2016, the legislature amended RSA 100-A:13 to provide an additional
circumstance under which a retired member could terminate a previously-
elected spousal survivorship benefit. See Laws 2016, 292:2. As amended, the
law provides that the retired member can “[t]erminate such elected option . . .
in accordance with the terms of the final divorce decree or final settlement
agreement which provides that the former spouse shall renounce any claim to
a retirement allowance under RSA 100-A.” RSA 100-A:13, II(a)(I) (Supp. 2021).
“Upon termination, the allowance received under the elected option shall be
converted to the retirement allowance that would have been payable in the
absence of such election.” Id.
In November 2016, the petitioner requested that the intervenor be
removed as his primary death beneficiary, stating that the two had been
“divorced for two years now, and since the change in state legislation this past
August [he] believe[d] that [his] request [could] now be honored.” NHRS
processed the termination and informed the petitioner that his new benefit
would be effective December 1.
In July 2020, NHRS informed the petitioner that his 2016 request for
termination of his survivor benefit option had been processed in error. It
further informed him that NHRS would be “rescinding that termination and
reinstituting the 100% joint and survivor option you originally selected for your
former spouse” and would be “instituting recoupment proceedings to recover
the cumulative pop-up amount that has been paid to you since December
2016.”
The petitioner filed an administrative appeal, in which his former spouse
was permitted to intervene. Following a non-evidentiary hearing, the hearing
examiner recommended upholding NHRS staff’s decision to reinstate the
intervenor as survivor beneficiary. The Board accepted the hearing examiner’s
recommendation on March 9, and, on June 8, denied the petitioner’s request
for reconsideration. The petitioner then filed a petition for writ of certiorari
with this court.
“Because RSA chapter 100-A does not provide for judicial review, a writ
of certiorari is the sole remedy available to a party aggrieved by a decision of
the NHRS.” Petition of Malisos, 166 N.H. 726, 728 (2014) (quotation omitted).
“Our standard of review is whether the board acted illegally with respect to
jurisdiction, authority or observance of the law, whereby it arrived at a
2
conclusion which cannot legally or reasonably be made, or abused its
discretion or acted arbitrarily, unreasonably, or capriciously.” Id. (quotation
omitted). “We exercise our power to grant such writs sparingly and only where
to do otherwise would result in substantial injustice.” Petition of Chase Home
for Children, 155 N.H. 528, 532 (2007).
The petitioner first challenges the Board’s authority to correct errors in
the absence of fraud. Counsel for NHRS made clear at the non-evidentiary
hearing that there was “no allegation of fraud of any kind” in this case.
The Board found that it has the authority, under RSA 100-A:27, “to
correct an error in the record regardless of how the error occurred, and without
any allegation of fraud on the part of the member/retiree.” That statute
provides:
Protection Against Fraud.
Any person who shall knowingly make any false statement or
shall falsify or permit to be falsified any record or records of this
retirement system in any attempt to defraud the system as a result
of such act, shall be guilty of a class B felony if a natural person,
or guilty of a felony if any other person. Should any change or
error in the records result in any member or beneficiary receiving
from the system more or less than he would have been entitled to
receive had the records been correct, the board of trustees shall
have the power to correct such error, and to adjust as far as
practicable the payments in such a manner that the actuarial
equivalent of the benefit to which such member or beneficiary was
correctly entitled shall be paid.
RSA 100-A:27 (2013).
The petitioner asserts that the intent of the statute, correctly interpreted,
“is to address the issue of fraud as the law is titled.” The Board counters that
“[t]he title of a statute is not conclusive of its interpretation, and where the
statutory language is clear and unambiguous this court will not consider the
title in determining the meaning of the statute.” State v. Kilgus, 125 N.H. 739,
742 (1984). It argues that “the mere fact that the statute is entitled ‘Protection
Against Fraud’ does not impose a fraud requirement where one is not
mandated by the text of the statute.” Indeed, we have held:
If we find within the body of the act an express and unequivocal
grant of powers and rights not mentioned in the title or preamble,
we cannot restrict the grant of those rights merely because the
terms of such grant are more extensive than the terms of the title
and preamble.
3
Vera Co. v. State, 78 N.H. 473, 475 (1917) (quotation omitted). Thus, our first
task is to determine whether the language of RSA 100-A:27 is “clear and
unambiguous.” Kilgus, 125 N.H. at 742. Accordingly, we engage in statutory
interpretation, and, therefore, our review is de novo. See Merrimack Premium
Outlets v. Town of Merrimack, 174 N.H. 481, 484 (2021).
When interpreting statutes, “[w]e first look to the language of the statute
itself, and, if possible, construe that language according to its plain and
ordinary meaning.” Petition of Eskeland, 166 N.H. 554, 558 (2014). “We
interpret legislative intent from the statute as written and will not consider
what the legislature might have said or add language that the legislature did
not see fit to include.” Id. (quotation omitted). “We construe all parts of a
statute together to effectuate its overall purpose and avoid an absurd or unjust
result.” Id. (quotation omitted). “Moreover, we do not consider words and
phrases in isolation, but rather within the context of the statute as a whole.”
Id. (quotation omitted). “This enables us to better discern the legislature’s
intent and to interpret statutory language in light of the policy or purpose
sought to be advanced by the statutory scheme.” Id. (quotation omitted).
The Board contends that “[t]he text of RSA 100-A:27 is not ambiguous”
and “clearly provides the Board . . . with the authority to correct an error” in
NHRS records when the error results in a member or beneficiary receiving more
or less from NHRS than the member or beneficiary would receive if the records
did not contain the error. This argument follows the hearing examiner’s
reasoning that “[t]he second sentence [in RSA 100-A:27] does not refer to the
previous sentence, nor does it include any requirement that the error in the
record be the result of fraud.” We find the Board’s interpretation reasonable.
The petitioner’s interpretation, on the other hand, reads the first and
second sentences together, such that application of the second sentence is
limited by the first. Under that interpretation, the “change or error in the
records” discussed in the second sentence refers to a change or error resulting
from a false statement or falsification of records declared to be criminal in the
first sentence. We find this interpretation also reasonable. See Petition of
State of N.H. (State v. Milner), 159 N.H. 456, 458-59 (2009) (finding two
differing interpretations of successive sentences of statute reasonable).
“[B]ecause there is more than one reasonable interpretation of its
language,” RSA 100-A:27 is ambiguous. Bovaird v. N.H. Dep’t of Admin.
Servs., 166 N.H. 755, 761 (2014). Under such circumstances, we will, as the
petitioner urges, consider “[t]he statute’s title . . . [as] additional evidence of the
legislature’s intent.” Rix v. Kinderworks Corp., 136 N.H. 548, 551 (1992); see
Appeal of Weaver, 150 N.H. 254, 256 (2003) (“The title of a statute is significant
when considered in connection with ambiguities inherent in its language.”
(quotation and ellipsis omitted)). Nevertheless, in this case, the statute’s title
4
does not persuade us to adopt the petitioner’s interpretation, as other
interpretive tools lead us to conclude that the Board’s construction is the
correct one.
In support of its interpretation of RSA 100-A:27, the Board invokes “the
longstanding practice of NHRS without any legislative intervention to the
contrary.” See New Hampshire Retail Grocers Ass’n v. State Tax Comm’n, 113
N.H. 511, 514 (1973). The hearing examiner found:
The Board of Trustees has consistently read the second sentence
in RSA 100-A:27 as granting it the authority to correct an error in
the record regardless of how the error occurred, and without any
allegation of fraud on the part of the member/retiree. The Board
has previously rejected the argument that the statute applies only
when the error resulted from fraud.
The petitioner does not challenge this finding. See Bovaird, 166 N.H. at 762
(noting that petitioner did not dispute agency’s allegation that it had always
interpreted a statutory provision in a particular way).
“It is a well established principle of statutory construction that a
longstanding practical and plausible interpretation given a statute of doubtful
meaning by those responsible for its implementation without any interference
by the legislature is evidence that such a construction conforms to the
legislative intent.” New Hampshire Retail Grocers Ass’n, 113 N.H. at 514.
Thus, the Board’s longstanding interpretation of RSA 100-A:27 in the manner
it advances here, without legislative interference, is evidence that its
interpretation is correct. See Bovaird, 166 N.H. at 761-62.
The Board’s interpretation is also supported when we construe all parts
of the statute together and read RSA 100-A:27 within the context of RSA
chapter 100-A as a whole. See Petition of Eskeland, 166 N.H. at 558. “Under
RSA chapter 100-A, [NHRS] provides benefits for service retirement, disability
retirement and accidental death to eligible members and beneficiaries.” N.H.
Retirement System v. Sununu, 126 N.H. 104, 107 (1985). NHRS’ funds “are
held in trust for the purpose of paying these benefits.” Id. (quotation omitted);
see RSA 100-A:2 (2013). “Under the common law of trusts, the [Board] owes
[NHRS’] members and beneficiaries a fiduciary obligation to manage [NHRS] for
the benefit of its members and beneficiaries.” N.H. Retirement System v.
Sununu, 126 N.H. at 109. We have recognized that the Board “has an
important interest in properly administering RSA chapter 100-A and faithfully
discharging its fiduciary duties in the interest of all participants and
beneficiaries.” Petition of Concord Teachers, 158 N.H. 529, 538-39 (2009)
(emphasis added) (citation omitted) (addressing equal protection challenge).
5
Overpayment to a beneficiary implicates the Board’s fiduciary duties,
regardless of whether the overpayment is the result of fraud or an innocent
mistake. In Reynolds v. Bethlehem Steel Corp., 619 F. Supp. 919 (D. Md.
1984), for instance, the court rejected a retiree’s argument that the plan
administrator’s “unilateral rescission of its initial, erroneous approval of the
lump sum payments [to the retiree] was per se arbitrary and capricious” when
the original approval was a “clerical error” and contrary to the terms of the
plan. Reynolds, 619 F. Supp. at 924. The court noted that “[f]ailure to correct
the error would have been a breach of the General Pension Board’s fiduciary
duty to administer The Plan according to its terms.” Id. at 924-25.
Accordingly, construing RSA 100-A:27 together with provisions in the statute
imposing fiduciary duties on the Board supports the Board’s interpretation of
RSA 100-A:27. See, e.g., RSA 100-A:2, :15, I (2013).
For the reasons stated above, we conclude that the interpretation of RSA
100-A:27 advanced by the Board is correct: the second sentence in RSA 100-
A:27 authorizes the Board to correct any error in its records that would “result
in any member or beneficiary receiving from the system more or less than he
would have been entitled to receive had the records been correct,” regardless of
whether the error resulted from an act punishable under the first sentence of
the statute. RSA 100-A:27. Accordingly, we uphold the Board’s determination
on this issue.
To the extent that the petitioner contends the original termination of the
survivorship benefit in 2016 was correct, we disagree. Under RSA 100-A:13,
II(a)(1), as amended in 2016, a retired member who had previously elected one
of the optional allowances under RSA 100-A:13, III and named as the
beneficiary “the retiree’s spouse at the time of such election” may later
terminate that election “upon the issuance of a divorce decree and subsequent
remarriage of the former spouse, or in accordance with the terms of the final
divorce decree or final settlement agreement which provides that the former
spouse shall renounce any claim to a retirement allowance under RSA 100-A.”
RSA 100-A:13, II(a)(1). The hearings examiner found, and the petitioner does
not dispute, that there was no allegation that the intervenor had remarried.
Accordingly, the validity of the petitioner’s 2016 termination turns upon
whether the petitioner’s and intervenor’s final divorce decree provides that the
intervenor “shall renounce any claim to a retirement allowance under RSA 100-
A.” Id.
Subparagraph 14.a of the divorce decree provides that the petitioner “is
awarded . . . [certain retirement accounts] and his New Hampshire pension,
free and clear of any claim of [the intervenor].” Subparagraph 14.b is a parallel
provision awarding the intervenor her pension and retirement accounts free
and clear of any claims of the petitioner. Subparagraph 14.c clarifies, however:
6
Nothing in this paragraph shall be construed to be a
voluntary surrender by either party of any rights, including any
survivorship benefits, which he or she may have under the terms
or elections of either party’s pension plan(s). Further, nothing in
this paragraph shall be construed to constrain either party from
exercising any rights, including the revocation of any survivorship
benefit elections, which he or she may have under the terms or
elections of either party’s pension plan(s).
“The interpretation of the language of a divorce decree, like the
interpretation of other written documents, is a question of law, reviewed by this
court de novo.” Estate of Frederick v. Frederick, 141 N.H. 530, 531 (1996).
Under subparagraphs 14.a and 14.b, the petitioner and the intervenor each
retain all rights to their pensions, free and clear of any claims of the other,
during their lives, but, under subparagraph 14.c, neither voluntarily renounces
his or her survivorship benefits in the other’s pension. Subparagraph 14.c also
allows either former spouse to exercise a right to revoke “any survivorship
benefit elections, which he or she may have under the terms or elections of
either party’s pension plan(s).” As the Board argues, however, this latter right
“is inapplicable to Petitioner’s appeal.” RSA 100-A:13, II(a)(1) does not give the
petitioner a unilateral right to revoke his election of a spousal survivorship
benefit; absent his former spouse’s remarriage, he may terminate such an
election only if his divorce decree “provides that the former spouse shall
renounce any claim to a retirement allowance under RSA 100-A.” RSA 100-
A:13, II(a)(1) (emphasis added). Paragraph 14 of the divorce decree does not
require the intervenor to renounce her claim to a survivorship benefit.
Accordingly, the petitioner cannot terminate that benefit under RSA 100-A:13,
II(a)(1) and the 2016 termination by NHRS staff was therefore erroneous.
Finally, in his petition for writ of certiorari, the petitioner challenged the
denial of “his right to an evidentiary hearing by the NHRS Hearings Officer.” In
his brief, however, the petitioner states that “[a]n evidentiary hearing is a moot
point now that Petitioner’s appeal has reached the level of the New Hampshire
Supreme Court” and he does not otherwise brief the issue. Under these
circumstances, we deem this issue waived. See In re Estate of King, 149 N.H.
226, 230 (2003).
Affirmed.
MACDONALD, C.J., and BASSETT, HANTZ MARCONI, and DONOVAN,
JJ., concurred.
7 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483858/ | MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2022 ME 55
Docket: Pis-21-378
Argued: September 8, 2022
Decided: November 10, 2022
Panel: MEAD, JABAR, HORTON, CONNORS, and LAWRENCE, JJ.
STATE OF MAINE
v.
CHRISTOPHER HALLOWELL
MEAD, J.
[¶1] Christopher Hallowell appeals from a judgment of conviction for
attempted murder (Class A), 17-A M.R.S. §§ 152(1)(A), 201 (2018);1 aggravated
assault (Class B), 17-A M.R.S. § 208(1)(B) (2022); criminal threatening with a
dangerous weapon (Class C), 17-A M.R.S. § 209(1) (2022); 17-A M.R.S.
§ 1252(4) (2018);2 three counts of reckless conduct with a dangerous weapon
(Class C), 17-A M.R.S. § 211(1) (2018); 17-A M.R.S. § 1252(4); eluding an officer
(Class C), 29-A M.R.S. § 2414(3) (2022); and criminal mischief with a dangerous
1 Title 17-A M.R.S. § 201 has since been amended. See P.L. 2019, ch. 113, § B-9 (effective
Sept. 19, 2019); P.L. 2019, ch. 271, § 2 (effective Sept. 19. 2019); P.L. 2019, ch. 462, § 3 (effective
Sept. 19, 2019) (codified at 17-A M.R.S. § 201 (2022)).
2 Title 17-A M.R.S. § 1252(4) was repealed and replaced with a new section 1604 by P.L. 2019,
ch. 113, §§ A-1, A-2 (effective May 16, 2019) (codified at 17-A M.R.S. § 1604(5)(A) (2022)).
2
weapon (Class C), 17-A M.R.S. § 806(1)(A) (2022); 17-A M.R.S. § 1252(4),
entered by the trial court (Piscataquis County, Anderson, J.) following a nonjury
trial.
[¶2] Hallowell contends that the court failed to adequately consider the
evidence that he was suffering from a serious mental abnormality that “made it
impossible for him to form the requisite intent to kill,” and that because
evidence was presented at trial that he suffered from an abnormal condition of
the mind, there was insufficient evidence to prove intent beyond a reasonable
doubt. See 17-A M.R.S. § 38 (2018).3 Hallowell also contends that his
“long-standing mental health problems” and the “conflicting version of events”
he described to different evaluators constituted “compelling evidence” that the
court improperly ignored in its “cursory treatment” of his affirmative defense
of insanity. We affirm the judgment.
I. BACKGROUND
[¶3] “Viewed in the light most favorable to the State, the evidence
admitted at trial establishes the following facts.” State v. Graham, 2015 ME 35,
¶ 2, 113 A.3d 1102. Hallowell and the victim are distant relatives; Hallowell’s
great-grandmother is the victim’s husband’s grandmother. The victim and her
3Title 17-A M.R.S. § 38 has since been amended, though the amendment is not relevant in the
present case. See P.L. 2019, ch. 462, § 1 (effective Sept. 19, 2019) (codified at 17-A M.R.S. § 38 (2022)).
3
husband live in Shirley, Maine, and house their animals in a barn located on land
owned by Hallowell’s great-grandmother. On July 8, 2019, after spending
multiple days holed up in his bedroom, Hallowell decided to confront his
relatives about what he believed to be their mistreatment of his
great-grandmother.4 In the early hours of the morning, Hallowell packed
multiple weapons into a “go-bag” and walked approximately ten minutes to the
barn where his relatives kept their animals because he knew that they went to
the barn every day to care for the animals. He entered the barn and spent
multiple hours waiting for them to arrive. At one point while he was pacing
inside the barn, he fed the horses hay because they became restless. At
approximately 6:00 a.m., the victim arrived at the barn, entering through the
grain room. As she went to feed the first animal, Hallowell “jumped up” and
shot her in the hip with a handgun, knocking her to the ground. The victim had
been unaware that Hallowell was inside the barn, and Hallowell did not say
anything to the victim before shooting her.
4 There was no evidence admitted at trial specifying the nature of what Hallowell considered to
be the mistreatment of his great-grandmother. Hallowell referred to the alleged mistreatment as
“basic human rights that were not being respected,” potentially during the time that the
great-grandmother resided with the victim and her husband in their home. The court made explicit
findings regarding the intensity of Hallowell’s feelings about his great-grandmother’s alleged
mistreatment that were supported by evidence admitted at trial.
4
[¶4] After being shot, the victim turned toward the sound of the gunshot
and saw that Hallowell was holding a handgun and had a rifle strapped to his
chest. Hallowell raised the handgun, and the victim got up and ran to a sliding
door at the opposite end of the barn. After failing to open the door,5 the victim
ran the length of the barn, past Hallowell as he fired at her, and left the barn
through the grain room door she had entered through. Hallowell fired at least
four more times as the victim tried to escape the barn, although no additional
bullets hit the victim.
[¶5] Hallowell chased after the victim with the rifle when she exited the
barn. Hallowell tased the victim and she eventually stumbled to the ground.
While the victim was on the ground, Hallowell hit her on the head with his rifle.
As the two struggled and wrestled with the weapon, the rifle broke. Several
rounds of live ammunition fell on the ground, indicating that the rifle had been
loaded. Hallowell spoke to the victim for the first time while they were
wrestling over the rifle on the ground, stating: “I hate you for what you did to
my grandmother.” The victim pleaded with Hallowell to stop the attack.
[¶6] The victim was able to get away from Hallowell and ran toward the
road. A pickup truck towing a trailer was traveling on the road in front of the
5The court found there was a “fairly strong inference” that Hallowell caused the sliding door to
malfunction.
5
property, and the victim was able to wave the truck down and get in. At that
point, Hallowell had followed the victim down to the road and was running
toward the truck with a handgun. The truck was unable to back up due to its
trailer, so the driver sped past Hallowell with the victim lying on the floor of the
rear seat. As the truck sped past him, Hallowell aimed at the truck and fired
three shots, two of which hit the rim and tire on the rear passenger wheel of the
truck. At some point after the pickup truck drove past him, Hallowell returned
to his mother’s house, spoke to his parents, gathered some items, and left in a
vehicle.
[¶7] After law enforcement was notified of the incident, an alert was
issued for Hallowell and the vehicle he was suspected to be traveling in.
A Maine State Police lieutenant, who was patrolling in an unmarked cruiser,
located the suspect vehicle in the town of Clinton. The lieutenant turned on his
emergency lights and siren, but the vehicle did not stop. The lieutenant
estimated that he pursued the vehicle at speeds up to ninety-five miles per hour
over three and a half miles for a total duration of two and a half to three
minutes. Eventually the vehicle failed to negotiate a left-hand turn and left the
road, landing in a field. After the crash, the driver of the vehicle reported that
6
he was uninjured, identified himself as Christopher Hallowell, complied with
law enforcement directives, and allowed himself to be taken into custody.
[¶8] On July 9, 2019, the state charged Hallowell with various crimes in
a twelve-count complaint. The court (Stitham, J.) ordered a mental
examination. Dr. April O’Grady conducted the initial evaluation, which included
competency and criminal responsibility evaluations, on August 8, 2019, and
filed her report with the court. During the evaluation, Hallowell reported that
he had a “goal,” and that even though he did not intend to hurt anyone, “he was
prepared for violence.” Hallowell also informed O’Grady that he could
“absolutely see” that society would view his behavior as wrong but he “had
decided to take justice into his own hands,” that “he had considered that type
of aggression for years,” that “it took a lot for him to consider that type of
aggression,” and that he thought that if his relatives were “out of the picture,
then they [could] not harm [his great-grandmother] anymore.” O’Grady
reported that in her professional opinion, Hallowell was in contact with reality
during the time leading up to the incident in the barn and during his time in the
barn.
[¶9] On March 2, 2020, the State filed a superseding indictment.
Hallowell entered not guilty pleas on all twelve counts. Hallowell subsequently
7
underwent additional mental health examinations. The court (Anderson, J.)
held a competency hearing on December 28, 2020, and found Hallowell
incompetent to stand trial. Hallowell was examined again in 2021 and,
following a second competency hearing on August 8, 2021, was found
competent to stand trial. On August 20, 2021, Hallowell entered a plea of not
criminally responsible by reason of insanity. The trial court held a bench trial
on August 20 and 23, 2021.
[¶10] At trial, Hallowell raised the defense of mental abnormality,
see 17-A M.R.S. § 38, and the affirmative defense of insanity, see 17-A M.R.S. § 39
(2022). In support of his defenses, Hallowell called Dr. Geoffrey Thorpe, who
had evaluated Hallowell approximately two years after the incident. Thorpe
testified that Hallowell had been diagnosed with autism spectrum disorder,
post-traumatic stress disorder, attention deficit hyperactivity disorder, and
various substance abuse disorders. Thorpe also testified that a possible nodule
might have been found on Hallowell’s thyroid gland, although whether the
nodule actually existed or had any effect on Hallowell was unknown.
[¶11] Thorpe testified that Hallowell reported that he had lied to O’Grady
during her evaluation and that he experienced delusions, hallucinations, and
dissociated states of consciousness. Thorpe testified that Hallowell stated that
8
he carried loaded firearms with him because “he felt the need to defend himself
against snakes” in the area, that he injected a homemade concoction of drugs
and alcohol before the incident in a suicide attempt, that he heard voices that
told him to go to the barn, and that he believed that if he shot one of his relatives,
he would be able to seek asylum in Germany. Thorpe also testified, however,
that Hallowell subsequently reported that his hallucinations did not begin until
he was incarcerated after the incident and that the thoughts Hallowell reported
to him “sounded quite improbable and highly unlikely.” Thorpe conducted
testing of Hallowell and found that the validity of Hallowell’s answers raised
questions about possible overreporting of symptoms and that the results “could
be interpreted but with caution.”
[¶12] Ultimately, Thorpe opined that at the time of the crime, Hallowell
was “impaired by mental disorders.” Thorpe and O’Grady, who was called as a
rebuttal witness, both testified that Hallowell might have been malingering
when he was questioned about the inconsistencies in his reports to different
evaluators as well as in his answers to testing. After a brief deliberation, the
court found Hallowell guilty on eight of the charges.6
6 The court found Hallowell not guilty on three of the charges, and another charge was dismissed.
9
[¶13] In announcing its verdict from the bench, the court stated, with
respect to Hallowell’s defenses of mental abnormality and insanity:
So, I come away from analyzing [the] evidence with the
belief that the State has proved beyond a reasonable doubt
that when he at least took that first shot he was intending to
kill her. And that might have been a momentary belief in his
mind at the time, but . . . I believe the State has proved that it
existed.
....
[M]y findings on the insanity defense are very easily
explained. . . . [T]he insanity defense would depend on
whether the version of events that he gave to Dr. Thorpe was
accurate, that he had not been telling the truth to . . .
Dr. O’Grady, that he was only really telling what happened to
Dr. Thorpe, and I just don’t believe that. I just do not believe
that at all. I believe, consistent with the finding that I’ve
already made, that what he said to Dr. O’Grady was what was
going through his mind at the time and not what he said to
Dr. Thorpe. And if you—if you don’t have the version that he
told to Dr. Thorpe, then you don’t have a serious mental
illness at all. So, that’s why I’m rejecting the insanity defense.
. . . Abnormal condition of mind is nothing more than proving
the intent, and I have already found that the State did prove
the intent. So, although abnormal condition of mind in some
quarters is thought of as like a separate—it’s not really a
separate defense. It’s just whether the State can prove the
appropriate mens rea or not, and I have found that they
proved that when he shot [the victim] he intended to kill her,
and all the other elements of recklessness and things like that
are sort of a lesser—lesser form of intent or knowing, so I
think it’s been proved easily.
10
[¶14] For the Class A count of attempted murder (Count 3), the court
sentenced Hallowell to thirty years in prison with all but twenty-five years
suspended, and four years of probation. The court imposed concurrent
sentences of ten years for the Class B count of aggravated assault; five years for
the Class C count of criminal threatening with a dangerous weapon, the three
counts of Class C reckless conduct with a dangerous weapon, and the Class C
count of eluding an officer; and one year for the Class C count of criminal
mischief with a dangerous weapon. Hallowell timely appealed from the
judgment of conviction.
II. DISCUSSION
A. Mental Abnormality
[¶15] Hallowell argues the court failed to adequately consider the
evidence that he was suffering from a serious mental abnormality and that
because evidence was presented at trial that he suffered from an abnormal
condition of the mind, there was insufficient evidence to prove intent beyond a
reasonable doubt. See 17-A M.R.S. § 38.
[¶16] “Evidence of an abnormal condition of the mind may raise a
reasonable doubt as to the existence of a required culpable state of mind.” Id.
“The trial court’s application of a statutory defense is an issue of law that we
11
review de novo.” Graham, 2015 ME 35, ¶ 15, 113 A.3d 1102. “When evidence
of an abnormal condition of the mind is presented, the court is called upon to
determine whether the State has proved beyond a reasonable doubt that the
accused acted with the culpable state of mind necessary to commit the crime
charged.” State v. Weyland, 2020 ME 129, ¶ 25, 240 A.3d 841 (alterations and
quotation marks omitted).
[¶17] “A person is guilty of [Class A] criminal attempt if, acting with the
kind of culpability required for the commission of the crime, and with the intent
to complete the commission of the crime, the person engages in conduct that in
fact constitutes a substantial step toward its commission and the crime is . . .
[m]urder.” 17-A M.R.S. § 152(1)(A). “A person acts intentionally with respect
to a result of the person’s conduct when it is the person’s conscious object to
cause such a result.” 17-A M.R.S. § 35(1)(A) (2022). “The statutory definition
of intentional conduct focuses on the purposeful nature of the conduct and the
actor’s awareness of its consequences. Thus, in evaluating whether evidence of
the defendant’s abnormal mental state raises doubt as to the intentional quality
of the defendant’s actions, the fact-finder should consider the relationship
between the defendant’s mental state and evidence that the defendant in fact
acted purposefully and appreciated the consequences of his or her actions.”
12
Graham, 2015 ME 35, ¶ 23, 113 A.3d 1102. “Evidence that a defendant may
have been suffering from mental or emotional difficulties does not necessarily
suggest that [the] defendant’s conduct was not intentional as that term is
defined in the criminal code.” Id. ¶ 22 (alterations and quotation marks
omitted).
[¶18] Contrary to Hallowell’s contentions, the court properly considered
the evidence presented that Hallowell was purportedly suffering from serious
abnormalities that made it impossible for him to form the requisite intent for
criminal attempt. Although Thorpe testified that he believed Hallowell’s
capacity was “impaired by mental disorders” and “wasn’t at a hundred
percent,” the State presented the opposite opinion in O’Grady’s rebuttal
testimony. Furthermore, in a phone call made from the Piscataquis County Jail
on October 23, 2019—more than three months after the incident—Hallowell
contended that he “had every respect” [sic] to shoot his great-grandmother’s
“abuser,” that it was his constitutional right, and that just because the other
speaker “don’t like it, doesn’t mean it’s bad.”7
7 The call included the following exchange:
Hallowell: [The guards] have no respect for the 4th amendment, Lynn.
Called Party: Ummm, Chris you had no respect and that’s why you’re there.
13
[¶19] “In making its factual findings, the court was permitted to draw all
reasonable inferences from the evidence, and decide the weight to be given to
the evidence and the credibility to be afforded to the witnesses.” State v.
Mackin, 2020 ME 78, ¶ 7, 234 A.3d 1232 (quotation marks omitted). When
announcing its findings, the court stated that (1) it did not believe Hallowell’s
version of events as reported to Thorpe approximately two years after the
incident; (2) it believed that Hallowell’s report to O’Grady was “what was going
through [Hallowell’s] mind at the time”; and (3) the State proved beyond a
reasonable doubt that, at least in the moment when Hallowell fired the first shot
that hit the victim, he intended to kill her.8 Thus, the court considered the
Hallowell: I had no respect? I had every respect. That’s the whole point. When the state
government refused to protect a ninety-year-old woman, I shot her abuser. That is just plain simple.
That is my constitutional right as much as it is [interrupted by Called Party]
Called Party: No, it isn’t [interrupted by Hallowell]
Hallowell: Yes, it is, Lynn. The second amendment exists for a reason, Lynn. I’m not gonna argue
about it with you.
Called Party: Alright.
Hallowell: She has basic human rights that were not being respected by this [. . .] government. So
somebody does have to take care of her regardless.
Called Party: [pause] M’kay. [pause]
Hallowell: You don’t like it, doesn’t mean it’s bad.
8 The court did not make factual findings regarding Hallowell’s intent as he beat the tased victim
on the head with his rifle.
14
relationship between Hallowell’s mental state and the evidence that Hallowell
acted purposefully and appreciated the wrongfulness of his goal-oriented
conduct. See Graham, 2015 ME 35, ¶ 23, 113 A.3d 1102. In so doing, the court
properly placed the burden on the State to prove all elements of the offense,
including intent, beyond a reasonable doubt. See id. ¶ 26. The evidence
supports the court’s finding that Hallowell was not suffering from an abnormal
condition of the mind that raised a reasonable doubt as to whether he acted
intentionally when he shot the victim. See State v. Norris, 2016 ME 37, ¶ 19,
134 A.3d 319.
B. Insanity
[¶20] Hallowell also contends that his “long-standing mental health
problems” and the “conflicting version of events” that he described to different
evaluators was “compelling evidence” that the court improperly ignored in its
“cursory treatment” of his affirmative defense of insanity.
[¶21] “A defendant is not criminally responsible by reason of insanity if,
at the time of the criminal conduct, as a result of mental disease or defect, the
defendant lacked substantial capacity to appreciate the wrongfulness of the
criminal conduct.” 17-A M.R.S. § 39(1). As used in section 39(1), “‘mental
disease or defect’ means only those severely abnormal mental conditions that
15
grossly and demonstrably impair a person’s perception or understanding of
reality.” Id. § 39(2). “The defense of insanity does not raise a reasonable doubt
as to an element of the crime, but instead excuses a defendant from criminal
responsibility even though the State can prove each element of the crime.”
State v. Griffin, 2017 ME 79, ¶ 9, 159 A.3d 1240. The insanity defense is an
affirmative defense that must be proved by the defendant by a preponderance
of the evidence. 17-A M.R.S. §§ 39(3), 101(2) (2022); see Norris, 2016 ME 37,
¶ 14, 134 A.3d 319.
[¶22] Whether Hallowell met his burden of proof is a question of fact.
Norris, 2016 ME 37, ¶ 14, 134 A.3d 319. “[I]f the fact-finder decides that the
defendant has not met the burden of proof, we will disturb that finding only if
the record compels a contrary conclusion. We must review the evidence, and
any reasonable inferences that may be drawn from it, most favorably to the
result reached by the trial court.” Id. (citations and quotation marks omitted).
[¶23] It is undisputed that Hallowell has a range of mental health
diagnoses. The factual question before the court was whether Hallowell
sufficiently proved that he had a “mental disease or defect,” as those terms are
defined, that resulted in a lack of substantial capacity to appreciate the
wrongfulness of his criminal conduct. 17-A M.R.S. § 39(1)-(2). During the
16
defense’s closing, the court conducted a colloquy with defense counsel to clarify
what the alleged mental disease or defect was. The defense acknowledged its
burden and that the court as the fact-finder would need to “basically believe
one [expert] over the other—[Thorpe] as opposed to [O’Grady]”—in order to
find that Hallowell met his burden. Ultimately, the court did not believe the
version of events that Hallowell described to Thorpe over the version he
described to O’Grady, and it therefore rejected the insanity defense.
[¶24] Viewed in the light most favorable to the court’s decision, the
evidence admitted at the trial did not compel a contrary conclusion. In addition
to occurring years after the incident, during which time Hallowell had time to
evaluate previous reports, Hallowell’s statements about his purported
hallucinations and delusions were described even by Thorpe as “improbable”
and “highly unlikely.” Hallowell also reported to Thorpe that his hallucinations
began after he was incarcerated, contrary to his reports that the hallucinations
and delusions directed his actions on the morning of July 8, 2019. Although the
record might support a conclusion that Hallowell suffers from mental health
conditions, it did not compel a finding that he had a “severely abnormal mental
condition[] that grossly and demonstrably impair[ed] [his] perception or
understanding of reality.” 17-A M.R.S. § 39(2); see Norris, 2016 ME 37, ¶ 17,
17
134 A.3d 319. Even Thorpe’s testimony that Hallowell was “impaired by mental
disorders” at the time of the incident contained nothing further to support
Hallowell’s contention that those mental disorders were a “mental disease or
defect” as those terms are defined by and used within the statute. See
17-A M.R.S. § 39(2). The court did not err in finding that Hallowell failed to
meet his burden of proof on the affirmative insanity defense.
The entry is:
Judgment affirmed.
Maxwell Coolidge, Esq., Ellsworth, for appellant Christopher J. Hallowell
Marianne Lynch, District Attorney and Mark A. Rucci, Dept. Dist. Atty.,
Prosecutorial District V, Bangor, for appellee State of Maine
Piscataquis County Unified Criminal Docket docket number CR-2019-225
FOR CLERK REFERENCE ONLY | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483878/ | J-A18038-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: ESTATE OF PETER J. : IN THE SUPERIOR COURT OF
CARUSO, III : PENNSYLVANIA
:
GERALDINE CARUSO :
:
:
v. :
:
: No. 1406 WDA 2021
SANDRA CARUSO, EXECUTRIX OF :
THE ESTATE OF PETER J. CARUSO, :
III :
:
:
APPEAL OF: SANDRA A. CARUSO :
Appeal from the Order Entered October 28, 2021
In the Court of Common Pleas of Allegheny County Orphans' Court at
No(s): 3623 of 2015
BEFORE: STABILE, J., MURRAY, J., and McLAUGHLIN, J.
MEMORANDUM BY McLAUGHLIN, J.: FILED: NOVEMBER 15, 2022
Sandra Caruso, as executrix of the estate of Peter J. Caruso, III (“the
Estate”) appeals from the order directing specific performance of a buy-back
provision contained in a partnership agreement. We affirm.
This factually and procedurally complex case is before this Court for a
second time. We glean the facts and procedural history from the trial court’s
Pa.R.A.P. 1925(a) opinion and from the certified record. This case stems from
a general partnership known as the Hays Land Company (“HLC”) entered into
via a partnership agreement executed in 1983 by Mary Ann Caruso (“Mary
Ann”) and her two adult sons, John Caruso (“John”) and Peter Caruso (“Peter”)
J-A18038-22
(“1983 Partnership Agreement”). HLC is in the business of the purchase and
development of real estate and has owned several separate parcels in
Allegheny County.
Mary Ann sold her shares in HLC to John and Peter, in equal amounts,
prior to her death in 1997. In 2003, John passed away and was survived by
his Wife Geraldine Caruso (“Geraldine”). The 1983 Partnership Agreement
contains a buy-back provision in the event of the death of a partner:
If the partnership is dissolved by the death of a Partner, the
remaining partners shall have the obligation within 90 days from
the date of death of the deceased Partner to purchase the interest
of the deceased Partner in the partnership and to pay to the
personal representative of such deceased partner the value
thereof as provided in paragraph 13 of this Agreement. During
such 90-day period following the death of a Partner, the remaining
Partners may continue the business of the Partnership, but the
estate or personal representative of the deceased Partner shall
not be liable for any obligations incurred in the Partnership
business beyond the amount included in the estate of the
deceased Partner already invested or involved in the Partnership
on the date of the deceased Partner’s death. The estate of the
deceased Partner shall be obligated to sell as provided herein and
shall be entitled, at the election of the personal representative of
the deceased partner, to either [a calculation of profits or interest
from 90-day wind-up period]
1983 Partnership Agreement, ¶14.
After John’s death, Peter, the remaining original HLC partner, did not
exercise the buy-back provision. Instead, Peter and Geraldine continued to
operate the business under the HLC name until April 2015, when Peter
unilaterally drew up documents to merge HLC into a limited liability company,
Hays Land Company-Pittsburgh, LLC.
-2-
J-A18038-22
In May 2015 Peter died, survived by his wife Sondra, who serves as the
executrix of the Estate. Shortly thereafter, Geraldine attempted to execute
the buy-back provision and calculated that she would owe Peter’s estate
$117,762.50, based upon the book value of HLC, which is allegedly lower than
the actual value. Sondra, as executrix of the Estate, would not accept payment
and instead asserted that the 1983 Partnership Agreement was not in effect
at the time of Peter’s death because the partnership had ended with John’s
death in 2003.
Geraldine filed suit (“First Case”) claiming that the 1983 Partnership
Agreement, and thus the buy-back provision, was still in effect, and Peter’s
attempt to unilaterally form a limited liability company was invalid without her
written consent. The trial court ultimately granted the Estate’s summary
judgment motion, ruling that Geraldine could not prove her case due to the
Dead Man’s Act.1 Essentially, the trial court held that because Geraldine could
not testify about her dealings with Peter, she could not prove that she and
Peter intended to continue to be governed by the 1983 Partnership Agreement
nor could she show that she opposed the formation of a new limited liability
company. This Court, in a published opinion, reversed and remanded. See In
____________________________________________
1 See 42 Pa.C.S.A. § 5930 (“in any civil action or proceeding, where any party
to a thing or contract in action is dead, . . . and his right thereto or therein
has passed, either by his own act or by the act of the law, to a party on the
record who represents his interest in the subject in controversy, neither any
surviving or remaining party to such thing or contract, nor any other person
whose interest shall be adverse to the said right of such deceased . . . shall
be a competent witness to any matter occurring before the death of said
party”).
-3-
J-A18038-22
re Estate of Caruso, 176 A.3d 346 (Pa.Super. 2017). We held that the Estate
failed to prove that Peter successfully executed a merger of HLC into a limited
liability company. Id. at 351. Further, we concluded that there was ample
evidence, even without Geraldine’s testimony about conversations with Peter,
that Geraldine and Peter continued HLC after John’s death and knew they were
still governed by the 1983 Partnership Agreement. Significantly here, in the
First Case, this Court specifically concluded:
It is undisputed that the 1983 Partnership Agreement governed
the HLC partnership of John and Peter. Although Executrix
contends that the Partnership dissolved as a matter of law upon
John’s death, the language of the Agreement suggests the
contrary. The Agreement provided that the Partnership “shall
continue until dissolved by mutual agreement of the parties or
terminated as herein provided.” Partnership Agreement, at ¶ 3.
The financial documents do not reflect that there was a settlement
or liquidation of John’s interest as outlined in Paragraph fourteen
of the Partnership Agreement.
***
We find support in the record for Geraldine’s contention that
dissolution of the Partnership was not automatic upon John’s
death. The Partnership was not terminated in accordance with the
[1983 Partnership Agreement] following John’s death, i.e., there
was no buy-out of John’s share that would have been mandatory
following dissolution due to death of a partner. Partnership
Agreement, ¶ 14. Such a course of conduct is compelling evidence
that the parties intended to continue the partnership.
This inference is bolstered by the tax returns from 1998
through 2014, signed by Peter, that recite that HLC was formed
in 1979, and reflect the same employer identification number for
HLC for more than three decades. In addition, Peter’s admissions
-4-
J-A18038-22
in the prior case[2] that he and Geraldine were partners in the
Hays Land Company, a Pennsylvania General Partnership, formed
on or before December 12, 1983, which was the same partnership
formed by John, Peter, and Mary Ann, is powerful evidence that
the original partnership continued. While technically these are
extra-judicial admissions, rather than judicial admissions that
would eliminate the need for proof of these facts, they were
unequivocal and made in circumstances where they were legally
binding.
Id. at 353-55 (footnote omitted).
On remand, Geraldine sought an order holding, among other things,
that she was entitled to specific performance of the 1983 Partnership
Agreement’s buy-back provision. The Estate countered that the original
partnership had ceased and had been replaced by the limited liability
company. Following argument, the court on October 26, 2021 entered an
order in favor of Geraldine finding that the 1983 Partnership Agreement
governed and directing specific performance of the buy-back provision. The
Estate timely appealed, and both it and the trial court complied with Pa.R.A.P.
1925.
The Estate raises the following issues:
1. Whether the trial court erred in determining that Geraldine
Caruso had a clear right to enforce a written contract between her
late husband, John D. Caruso, and her brother-in-law, Peter J.
Caruso, III in the absence of clear evidence of fundamental
contractual precepts of mutual assent, consideration, and intent
by Peter J. Caruso, III to be bound to such an agreement with
Geraldine?
____________________________________________
2 Geraldine and Peter had been involved in previous litigation including the
referenced equity case Geraldine filed against Peter, HLC, and related
defendants.
-5-
J-A18038-22
2. Whether the trial court erred in concluding that Geraldine
Caruso became a partner in a general partnership between her
late husband, John D. Caruso, and her brother-in-law, Peter J.
Caruso, III and had a clear right to enforce a written partnership
agreement between her husband and her brother-in-law where
Geraldine had not signed the agreement and did not claim to be a
party or third party beneficiary thereunder, but instead claimed to
have “stepped into the shoes” of her late husband?
3. Whether the trial court erred in concluding that the partnership
between the decedent Peter J. Caruso, III and John D. Caruso did
not dissolve as a matter of law on the death of the penultimate
partner and, because the 1983 Partnership continued, the 1983
Partnership Agreement was enforceable by Geraldine?
4. Whether the trial court erred in granting specific performance
to Geraldine Caruso in the absence of evidence of (i) a clear right
to enforce a contract, including that she was party to a partnership
agreement or a third party beneficiary thereunder; (ii) that she
had no adequate remedy at law; and (iii) that justice so required?
5. Whether the trial court erred in finding that the Executrix had
the burden of disproving elements of Geraldine Caruso’s claims
that included the nonexistence of an enforceable contract, that
justice did not require specific performance, and the absence of
an adequate remedy at law?
Estate’s Br. at 5-6.
In its first two issues, the Estate argues that the trial court erroneously
determined that Geraldine’s partnership interests were governed by the 1983
Partnership Agreement because she never signed it. It further contends that
there was no evidence that Geraldine and Peter entered into an oral or written
agreement that she was to become a party to the 1983 Partnership
Agreement. The Estate maintains that there is no authority in Pennsylvania
law that one can “step into the shoes” of a signatory to a contract. Further,
the Estate avers that Geraldine offered no evidence of offer, mutual assent,
-6-
J-A18038-22
or any consideration between her and Peter to support her claim that she
became a de facto partner in HLC after her husband’s death.
“The findings of a judge of the orphans’ court division, sitting without a
jury, must be accorded the same weight and effect as the verdict of a jury,
and will not be reversed by an appellate court in the absence of an abuse of
discretion or a lack of evidentiary support.” In re Jackson, 174 A.3d 14, 23
(Pa.Super. 2017) (citation omitted). This Court’s “task is to ensure that the
record is free from legal error and to determine if the [o]rphans’ [c]ourt’s
findings are supported by competent and adequate evidence and are not
predicated upon capricious disbelief of competent and credible evidence.” Id.
(citation omitted). Regarding questions of law, our standard of review is de
novo, and the scope of review is plenary. In re Fiedler, 132 A.3d 1010, 1018
(Pa. Super. 2016) (en banc).
“For a contract to be enforceable, the nature and extent of the mutual
obligations must be certain, and the parties must have agreed on the material
and necessary details of their bargain.” Lackner v. Glosser, 892 A.2d 21, 30
(Pa.Super. 2006). Further, consideration is required. Id. at 31.
As this Court noted in the First Case:
Under the Uniform Partnership Act (“UPA”),[3] whether a
partnership exists depends upon whether the parties intended to
be partners. No formal or written agreement is required. Murphy
____________________________________________
3The Pennsylvania Uniform Partnership Act, 15 Pa.C.S. §§ 8301-8365, was in
effect at all relevant times herein but was repealed by the Act of Nov. 21,
2016, P.L. 1328, No. 170 § 24, effective February 21, 2017. The new Uniform
Partnership Act of 2016 is codified at 15 Pa.C.S. §§ 8411-8486.
-7-
J-A18038-22
v. Burke, 454 Pa. 391, 311 A.2d 904 (1973). A partnership may
be found to exist by implication from the circumstances and
manner in which the business was conducted. DeMarchis v.
D'Amico, 432 Pa.Super. 152, 637 A.2d 1029 (1994).
Furthermore, under Pennsylvania’s UPA, a partnership was not a
legal entity separate from its partners and had no residence or
domicile distinct from that of its partners. “It is rather a relation
or status between two or more persons who unite their labor or
property to carry on a business for profit.” Svetik v. Svetik, 377
Pa.Super. 496, 547 A.2d 794, 797–798, (1988) (quoting Tax
Review Board of the City of Philadelphia v. D.H. Shapiro Co.,
409 Pa. 253, 185 A.2d 529, 533 (1962)).
In re Caruso, 176 A.3d at 349-50 (footnote omitted).
Further, under the UPA, “a person admitted as a partner into an existing
partnership is liable for the obligations of the partnership arising before his
admission as though he had been a partner when the obligations were incurred
except that his liability shall be satisfied only out of partnership property.” 15
Pa.C.S.A. § 8329. (repealed).4 As noted by the trial court, a partnership may
continue, even upon the death of a partner, if an agreement exists between
the partners to continue. Underdown v. Underdown, 124 A. 159, 161-62
(Pa. 1924). An “agreement not to dissolve the partnership can be made by
the deceased partner’s legal representative.” 13 Summ. Pa. Jur. 2d Business
Relationships §16:14. (2d. ed.).
In this case, the trial court aptly concluded that the circumstances
around both Geraldine’s and Peter’s course of conduct, following John’s death,
established that Geraldine essentially “stepped into the shoes” of her Husband
John, in regards to HLC. The parties do not dispute that the partnership
____________________________________________
4 Section 8329 was in force at all relevant times.
-8-
J-A18038-22
between John and Peter was governed by the 1983 Partnership Agreement.
However, Peter did not exercise the 1983 Partnership’s buy-back provision
following John’s death. Instead, Peter and Geraldine continued to operate HLC
together. In addition, compelling evidence of the continuing existence of the
partnership would be HLC’s tax returns utilizing the same employer
identification number throughout, signed by Peter from 1998 through 2014,
which state that HLC was formed in 1979. Further, as this Court noted, Peter’s
admission in a prior case that he and Geraldine were partners in HLC, a
Pennsylvania General Partnership formed on or before December 12, 1983,
was unequivocal evidence that the parties believed that the 1983 Partnership
Agreement remained in effect. Indeed, the trial court specifically noted that
Geraldine testified credibly that she relied on Peter’s pattern of conduct to
believe that HLC and the 1983 Partnership Agreement endured. Tr. Ct. Rule
1925(a) Op., 1/26/22 at 7.
In light of the forgoing evidence, we conclude that the trial court did not
abuse its discretion when concluding that the Estate and Geraldine were
subject to the 1983 Partnership Agreement. See Jackson, 174 A.3d at 23.
Peter and Geraldine’s conduct, after John’s death, indicated that they intended
to continue HLC as partners, subject to the 1983 Partnership Agreement. See
Murphy, 311 A.2d at 906-07; DeMarchis, 637 A.2d at 1034-35; 15 Pa.C.S.A.
§ 8329. In addition, we also find the Estate’s argument regarding insufficient
contract formation between Geraldine and Peter to be of no moment. The
course of conduct of both Geraldine and Peter indicates that the parties
-9-
J-A18038-22
intended Geraldine to continue as a partner in HLC, subject to the 1983
Partnership Agreement. As such, no additional consideration was necessary.
Accordingly, the Estate’s first two issues do not warrant relief.
In its third issue, the Estate argues that after Peter died, the 1983
Partnership Agreement was no longer in effect as the “penultimate” or last
remaining partner had died. The Estate avers that Peter was the last remaining
partner of HLC and therefore the partnership ended with his death. However,
it cites no Pennsylvania precedent to this effect. In addition, the Estate cites
the concept of “delectus personarum” for the proposition that original partners
should be able to decide with whom they will associate and thus the death of
a partner does not allow for an interest to pass to heirs or beneficiaries. Thus,
the Estate maintains that HLC ended upon the death of John because Peter
did not elect to be partners with Geraldine. The Estate cites case law for this
concept dating from the late 1800s, as well as from other jurisdictions. See
Carter v. Producers’ Oil Co., 38 A. 571 (Pa. 1897)(delectus personarum
exists to allow partners to be associated only with partners of their choosing).
In addition, the Estate cites a Common Pleas Court decision for the proposition
that the trial court should have simply liquidated the assets of the partnership
upon the death of Peter. See Wisocki v. Howell, 37 Pa.D & C. 2d 666 (Pa.
Com. Pl. 1965).
The Estate’s arguments are once again unavailing. In Wisocki, one of
three partners in a restaurant business died. The trial court emphasized that
“[i]t is well known that a partnership is dissolved by the death of one of the
- 10 -
J-A18038-22
partners, unless there is an agreement among them to the contrary.” Id. at
670. Thus, the court in Wisocki concluded that because the partnership there
at issue was entirely silent on matters of dissolution, the death of a partner
required dissolution of the partnership. Conversely in the instant case, the
language of the 1983 Partnership Agreement speaks to the event of a death
of a partner by specifying that “if” the partnership was to be dissolved by the
death of a partner, then the buy-out provision would apply. Thus, the 1983
Partnership Agreement was not silent as to the effect of a death of a partner,
and dissolution was not required. See id; Underdown, 124 A. at 161-62.
Further, the Estate’s arguments regarding the legal precepts, most often
based on decisions of other jurisdictions, of the penultimate partner and
delectus personarum are not applicable here. In this case, as discussed above,
Peter and Geraldine, via their conduct in continuing the partnership after
John’s death, evinced their decision to continue HLC and thereby be governed
by 1983 Partnership Agreement. See 15 Pa.C.S.A. § 8329 (repealed). Thus,
Peter was not alone in HLC as the lone or “penultimate” partner after John’s
death nor was he forced to associate with Geraldine as a partner as the Estate
claims. If Peter did not wish to be partners with Geraldine, he could have
executed the buy-back provision to buy her share of HLC following John’s
death. Hence, the Estate’s third issue also lacks merit.
In its fourth and fifth issue, the Estate contends that the court erred by
ordering specific performance of the buy-back provision of the 1983
Partnership Agreement. The Estate asserts that Geraldine failed to establish
- 11 -
J-A18038-22
that there was no adequate remedy at law such that the court should not have
ordered specific performance of the buy-back provision. The Estate claims that
specific performance is additionally improper because it will cause injustice by
causing Peter’s widow Sondra to receive a reduced inheritance. Lastly, the
Estate claims that the trial court erroneously placed the burden of proof on
the Estate to disprove Geraldine’s claim for specific performance. It argues
that the court failed to make appropriate findings of fact and improperly
insisted that Geraldine should have presented any concerns in a post-trial
conference.
Specific performance is only appropriate where a plaintiff can establish
the right to enforce a contract, and justice demands specific performance of
the contract because there is no adequate remedy at law. Oliver v. Ball, 136
A.3d 162, 166 (Pa.Super. 2016). “An action for damages is an inadequate
remedy when there is no method by which the amount of damages can be
accurately computed or ascertained.” Clark v. Pa. State Police, 436 A.2d
1383, 1385 (Pa. 1981).
In this case, we conclude that the trial court properly ordered specific
performance of the buy-back provision. Having found the 1983 Partnership
Agreement enforceable, the trial court was well within its purview when
deciding that the only accurate assessment of damages could be obtained by
effectuating the buy-back provision. Oliver, 136 A.3d at 167; Clark, 436 A.2d
at 1385.
- 12 -
J-A18038-22
Moreover, a review of the record reveals that the trial court did not
erroneously place the burden of proof on the Estate to essentially disprove
Geraldine’s claim for specific performance. The Estate points to the trial court’s
statement in its Rule 1925(a) opinion that the Estate could “have presented
that concern [regarding Geraldine’s alleged failure to establish the need for
specific performance] by a request for post-trial conference or hearing.” Tr.
Ct. Rule 1925(a) Op. at 8. That statement alone does not establish that the
court erroneously put the burden on the Estate to establish that specific
performance was improper. Moreover, the Estate failed to include this burden
shifting claim within its Rule 1925(b) statement of matters complained of on
appeal and thus the claim is waived in any event. See Pa.R.A.P.
1925(b)(4)(vii). Therefore, the Estate’s last two issues also must fail.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/15/2022
- 13 - | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483728/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
DANNY LORA, No. 85515
Appellant,
vs.
THE STATE OF NEVADA,
Respondent.
FILE
NOV 1 0 2022
ORDER DISMISSING APPEAL
This is a pro se notice of appeal from a purported district court
order dismissing a postconviction petition for a writ of habeas corpus.
Seventh Judicial District Court, White Pine County; Steve L. Dobrescu,
Judge.
This court's review of this appeal reveals a jurisdictional defect.
Specifically, no decision had been made on the petition when appellant filed
the notice of appeal on October 11, 2022. Thus, the notice of appeal is
premature. See NRS 177.015(3) (stating that a defendant only may appeal
from a final judgment or verdict). Appellant may file an appeal from a final
order of the district court dismissing his petition. Accordingly, this court
ORDERS this appeal DISMISSED.
, J.
Hardesty
/4 0
J. , J.
Stiglich Herndon
SUPREME COURT
OF
NEVADA
(0) 1947A
cc: Hon. Steve L. Dobrescu, District Judge
Danny Lora
Attorney General/Carson City
White Pine County District Attorney
i Attorney General/Ely
White Pine County Clerk
,
SUPREME COURT
OF
NEVADA
2
(0) I 947A | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483729/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
IN THE MATTER OF THE PARENTAL No. 84949
RIGHTS AS TO: I. M. H., A MINOR.
ROCHELLE H.,
FILE
Appellant, NOV 1 0 2022
vs.
CLARK COUNTY DEPARTMENT OF
FAMILY SERVICES; AND I. M. H., A
MINOR,
Respondents.
ORDER DISMISSING APPEAL
This is a pro se appeal from a district court order terminating
appellant's parental rights. Eighth Judicial District Court, Clark County;
Cynthia N. Giuliani, Judge.
Since the docketing of this appeal on June 30, 2022, two notices
issued by the clerk of this court and one order entered by this court and
addressed to appellant have been returned by the postal service as
undeliverable.' The postal service noted that it was unable to forward any
of the documents. The opening brief was due to be filed by October 17, 2022.
Appellant has not filed the opening brief, or any other documents in this
matter, and has not otherwise communicated with this court. Under these
"A copy of one order entered by this court and addressed to appellant
was not returned as undeliverable.
SUPREME COURT
OF
NEVADA
10) I947A
22-r-Joc;(2_
circumstances, it appears that appellant has abandoned this appeal and
this court
ORDERS this appeal DISMISSED.
, J.
Hardesty
4.414,G4-0 J. , J.
Stiglich Herndon
cc: Hon. Cynthia N. Giuliani, District Judge
Rochelle H.
Clark County District Attorney/Juvenile Division
Legal Aid Center of Southern Nevada, Inc.
Eighth District Court Clerk
SUPREME COURT
OF
N E VAD A
2
1947A | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483725/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
CHARLES NOLAN, No. 85574
Appellant,
vs. FIL
THE STATE OF NEVADA,
NOV 1 ti 2022
Respondent.
EL1ZAB - A. f..37.7..VNN
CLE OF $ ENE COURT
ORDER DISMISSING APPEAL By
U CLERK
This is a pro se notice of appeal from a district court order
granting in part and denying in part a motion for credit for time served.
Because no statute or court rule permits an appeal from such an order, this
court lacks jurisdiction to consider this appeal.1 See Castillo v. State, 106
Nev. 349, 352, 792 P.2d 1133, 1135 (1990) (explaining that court has
jurisdiction only when statute or court rule provides for appeal).
Accordingly, this court
ORDERS this appeal DISMISSED.2
J.
Cadish
Pieiku Sr.J.
Pickering
1 A claim for additional presentence credit is a challenge to the validity
of the judgment of conviction and sentence and therefore must be raised in
a postconviction petition for a writ of habeas corpus. See Griffin v. State,
122 Nev. 737, 744, 137 P.3d 1165, 1169 (2006). This court expresses no
opinion as to whether appellant could meet the procedural requirements of
NRS Chapter 34.
2The Honorable Mark Gibbons, Senior Justice, participated in the
SUPREME COURT
OF
decision of this matter under a general order of assignment.
NEVADA
01) I947A
cc: Hon. James Todd Russell, District Judge
Charles Nolan
Attorney General/Carson City
Carson City District Attorney
Carson City Clerk
SUPREME COURT
OF
NEVADA
2
101 1947A | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491276/ | OPINION
Before VOLINN, OLLASON and JONES, Bankruptcy Judges.
VOLINN, Bankruptcy Judge:
Appellant/debtor Jack Friedman invested in Texas real estate over a period of five years with the assistance of appellee real estate brokers. Friedman became indebted to appellees on a debt secured by a deed of trust to Friedman’s real property. Appel-lees recorded the deed of trust five months after its execution. Appellant filed his Chapter 11 bankruptcy petition nine months after the recordation, and sought to avoid the trust deed lien as a preferential transfer to an insider. The trial court held that appellees were not insiders, and entered judgment in their favor. This appeal followed. We AFFIRM.
I. FACTUAL AND PROCEDURAL BACKGROUND
A detailed recitation of the events of this case is necessary in view of appellant’s allegation that appellees were insiders for purposes of the one-year preference period. The record and the findings, which are essentially uncontested by appellant, show the following:
Appellant Friedman, a real estate developer, formed and controlled a number of joint ventures investing in Texas real estate, initially in the Houston area. Appellant became interested in the investment possibilities in the Austin, Texas area, and to that end became involved with appellees Sheila Plotsky and Penny Barstow in 1981.
Ms. Plotsky and Ms. Barstow were real estate brokers licensed to practice in Texas. Ms. Plotsky was the sole shareholder, director, president and principal of Sheila Plotsky Realtors, Inc., and Sheila Plotsky Brokers, Inc., both of which are Texas corporations and appellees in this action. Ap-pellees were experienced brokers in the residential real estate market in and around Austin, and held a positive reputation as such in the community.
When Friedman first became acquainted with Ms. Plotsky, he had no business background in Austin, nor was he connected with any local bank or legal counsel. He relied considerably on appellees and ultimately provided them with so large a volume of business that by 1984 it was virtually all of their business.1 Between 1983 and 1986 Barstow devoted substantially all her time to Friedman’s business.
The findings entered below describe a relationship among the parties which displays or reflects the intensity of communication needed to effect the business Friedman developed. Friedman spoke to Bar-stow by telephone in excess of a thousand times each year from mid-1981 and mid-1986, and with Plotsky approximately a hundred times a year during that same period. The numerous contacts led to a certain amount of personal interchange. *65Friedman became a significant customer of BancFirst-Austin, of which Plotsky was a member of the board of directors. He developed a substantial banking relationship with the Texas Commerce Bank. Friedman also had checking accounts with six banks in the Austin area. He gave appellees signatory rights on these accounts, but these rights were limited to the writing of specific checks at Friedman’s direction and under his instructions. Appellees did not have any discretion to use any of the account’s funds other than as Friedman directed. They signed many checks on Friedman’s accounts but the checks were always for his business expenses, such as payment on mortgage debts, real property taxes, insurance and development charges.
Friedman also left with appellees pre-signed promissory notes in favor of various banks. The notes were left blank as to amounts and terms and were intended to allow appellees to quickly obtain loans for Friedman when an investment opportunity presented itself.2 Appellees also had in their files copies of Friedman’s personal financial statements during the time in question. The statements were signed in blank by Friedman for appellees to fill in when he supplied appellees with information in order that they could be delivered to banks as circumstances required.
The trial court’s findings detail a number of transactions wherein Friedman permitted Plotsky to acquire his interest in various properties without much, if any, profit to him. He also paid Plotsky referral fees for introducing him to persons who would later invest in his various ventures, including referral fees to Plotsky for investments by several of Plotsky’s children. These referral fees were voluntary and suggested by Friedman after the referrals had in fact been made. The trial court found that the payment of the referral fees was not in response to a calculated effort on the part of appellees to increase their compensation through the introduction of potential investors.
On at least fifteen occasions appellees deferred their sales commissions which came due on the acquisition or sale of investment of real property by Friedman. All the deferred commissions were ultimately paid except for $78,000 on one sales account and $82,000 on another. Appellees took notes in those amounts for the deferred commissions. The trial court found that the deferral of commissions was a common and ordinary practice in the Austin area during the time in question, 1981 to 1986, and that Plotsky made the decision to defer commissions on a case-by-case basis.
Eventually, Friedman’s business operations required more money, and on February 26, 1986 appellees loaned him $275,-000.3 Friedman combined the obligations evidenced by the deferred commission notes and the loan into a single real estate lien note in the amount of $435,000 in favor of Sheila Plotsky Brokers, Inc. The note was due on February 26, 1987 and was secured by a deed of trust delivered on March 3, 1986 encumbering certain of Friedman’s real estate. Appellees did not then record the trust deed.
At some point during the first half of 1986, Friedman began to experience a downturn in his business, generally as a consequence of adverse economic conditions in the southwestern part of the United States. In June, 1986 Friedman met with appellees in Austin, where he made them aware that his business was near collapse because of the continued slowdown in the local real estate market. In late July, 1986 Plotsky met with Friedman in California seeking payment of the $435,-000 note. Friedman paid Plotsky no portion of the note, nor did he give her any *66indication as to when it would be paid.4 At this point in time, the relationship of the parties was patently of an adversarial nature.
Upon Plotsky’s return to Austin, appel-lees visited several of Friedman’s banks and attempted to draw enough funds to pay the $435,000 debt. Plotsky was unsuccessful because the accounts at banks she contacted were either empty or blocked, but Barstow managed to obtain $24,000 in cash and cashier’s checks. However, concerned about the propriety of this action, Barstow within a matter of days returned the $24,000 to Friedman.5
Failing to find significant funds in Friedman’s bank accounts, Plotsky recorded the deed of trust on August 5, 1986 without any prior notice to or approval from Friedman. Friedman’s financial problems thereafter continued, resulting in his filing a petition under Chapter 11 of the Bankruptcy Code6 on April 24, 1987.
On November 17, 1987 appellees initiated this controversy by filing a complaint under § 523(a)(2) seeking to determine the dischargeability of Friedman’s debt to them.7 On February 29, 1988 Friedman answered and asserted a number of counterclaims, among them that (1) appellees’ recordation of the deed of trust constituted a preferential transfer; and (2) appellees’ claim should be equitably subordinated pursuant to § 510(c).8
Trial was originally set for April 17, 1989. A few days before that date, appel-lees’ counsel became suddenly and seriously ill, and as a result the trial was continued until July 21, 1989. At the close of appellees’ case, Friedman moved for and was granted a dismissal of appellees’ complaint under Bankr.Rule 7041, the trial court finding that appellees had failed to sustain their burden of proof under § 523.9
The court proceeded with Friedman’s counterclaims, and at the conclusion of trial made a number of findings relative to the nature of the relationship between Friedman and appellees. Specifically, the court found that appellees did not know with particularity the investors who participated in each of Friedman’s joint ventures, that appellees were not in control of any of Friedman’s business affairs, and that the bank accounts to which they had access were solely for Friedman’s use and benefit. The court also found that Friedman and appellees had no agreement to generally share profits and losses from Friedman’s business affairs. The court further found that the activities and relationships of ap-pellees respecting Friedman fell “squarely within the range of normal activities of a Texas real estate broker doing business in and around Austin, Texas between 1981 and 1986.” The court ultimately found that none of the appellees were insiders of Friedman within the meaning of 11 U.S.C. § 101(30), and that appellees did not obtain the trust deed lien by means of any acts or practices unfair or inequitable to other creditors of the estate.
The court concluded that the recordation of the deed of trust was not avoidable by Friedman as a preferential transfer because it occurred more than 90 days prior to bankruptcy, and was not made to or for *67the benefit of an insider of the debtor. The court also concluded that the liens created by the recordation should not be subordinated to the costs of administration or any other claims against the estate. Friedman timely appealed.
II. ISSUES
Friedman identifies five issues on appeal which may be stated as follows:
1. Whether appellees were “insiders” within the meaning of § 101(30), for purposes of application of the one-year preference period under § 547(b)(4)(B);
2. Whether equitable considerations dictate that appellees’ mortgage lien be subordinated to the interests of other creditors;
3. Whether the trial court abused its discretion:
(a) in allowing appellees’ counsel to use a previously excluded transcript as a cross examination aid;
(b) in denying Friedman’s motion to re-open the case;
(c) in refusing to allow appellant costs after the trial was continued for three months because of illness to appellees’ former counsel.
III. STANDARD OF REVIEW
The determination of insider status is a question of fact. Matter of Missionary Baptist Found., 712 F.2d 206, 210 (5th Cir.1983); In re UVAS Farming Corp., 89 B.R. 889, 892 (Bankr.D.N.M.1988); In re Taylor, 29 B.R. 5, 7 (Bankr.W.D.Ky.1983); 2 Collier on Bankruptcy 11101.30, at 101-72 (15th ed. 1990). We review the bankruptcy court’s findings of fact for clear error. In re Torrez, 63 B.R. 751, 753 (9th Cir.BAP 1986), affd 827 F.2d 1299 (9th Cir.1987). Where two permissible views of the evidence exist, the fact finder’s choice between them cannot be clearly erroneous. Anderson v. City of Bessemer, 470 U.S. 564, 573-74, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985).
Friedman contends that, because the facts herein are “largely undisputed,” we must review the trial court’s finding that appellees were not insiders de novo. In support of this argument, Friedman cites In re Schuman, 81 B.R. 583 (9th Cir. BAP 1987), which observes that in certain circumstances it may be more accurate to consider the determination of insider status as a mixed question of fact and law. In responding to the argument that summary judgment was improper because insider status is a factual determination, Schuman states:
The Panel agrees that the insider determination might be considered a ‘question of fact’ in the sense that it is made on a case-by-case basis, after the consideration of various factors. Nevertheless, where the underlying facts are undisputed, a trial court is free, on a motion for summary judgment, to determine whether the established facts satisfy the statutory standard. In this sense, it would be more accurate to consider the insider determination as a mixed question of law and fact.
Schuman, 81 B.R. at 586 n. 1.
Friedman is attempting to invoke both standards, de novo and clearly erroneous. However, Friedman does not appeal from a summary judgment, as did the appellant in Schuman, but from an adverse judgment following trial based on detailed findings of fact. While Friedman largely argues that the findings are undisputed, and that the court’s conclusions therefrom are erroneous, he hedges his bets with some contention that the trial court’s findings themselves were erroneous. Thus we are urged to review the findings on a de novo basis and also under the clearly erroneous standard. While appellant’s principal arguments are directed to de novo considerations, our determinations are based on considerations which are consistent with clearly erroneous standards insofar as they are applicable.10
*68IV. DISCUSSION
A. Record on appeal.
We are hampered in our effort to substantively review this case by the failure of both parties to fully comply with the Federal Rules of Appellate Procedure and the Bankruptcy Appellate Panel Rules. F.R. A.P. 10(b)(2) provides that:
If the appellant intends to urge on appeal that a finding or conclusion is unsupported by the evidence or is contrary to the evidence, the appellant shall include in the record a transcript of all evidence relevant to such finding or conclusion,
(emphasis supplied.) While we may, consistent with the clearly erroneous standard, affirm the trial court’s decision based upon any evidence appearing in the record, our task has been made difficult by the failure of either party to provide us with, and specifically .reference to, those portions of the record wherein support for their respective positions is asserted to be found.
In In re Burkhart, 84 B.R. 658 (9th Cir. BAP 1988), we were similarly faced with a record on appeal the scantness of which made review under the clearly erroneous standard difficult. The appellants there had failed in their brief to cite to the record in support of many of their assertions, and only supplied the Panel with a portion of the record on which the trial court relied. In an attempt to discourage this sort of practice by litigants appearing before us in the future, we observed that:
There is a trend in appellate courts to have the parties supply excerpts of the trial record for review on appeal. The practice is an attempt to improve efficiency by reducing the size of extraneous material the Panel must review. The Panel’s efforts at economy and efficiency are hindered, however, where parties indiscriminately omit important documents or include copies from the parties’ files instead of copies filed with the court which show the date a document was entered, or in the alternative fail to include a copy of the trial court’s docket. Appellants should know that an attempt to reverse the trial court’s findings of fact will require the entire record relied upon by the trial court be supplied for review.
Burkhart, 84 B.R. at 661.11
In this case, although Friedman supplied us with a substantial record amounting to some fourteen hundred pages, only selected portions of the trial transcript are provided. The trial court’s oral opinion, from which we might more specifically discern both the basis for its extensive findings, and the portions of the record on which it relied to arrive at those findings, is absent. As the record presently exists, we would be justified in affirming the decision below on the basis that Friedman has not made reference to nor supplied us with those portions of the record indicating the commission of clear error. Cf. Southwest Administrators, Inc. v. Lopez, 781 F.2d 1378 (9th Cir.1986) (appeal dismissed for appellant’s failure to provide trial transcript.). An appellate court is not *69obligated to search the record for error. McDowell v. Safeway Stores, Inc., 753 F.2d 716, 717 (8th Cir.1985). Nevertheless, we have reviewed the record provided to us in order to determine whether the trial court’s findings meet the clearly erroneous standard.12
B. Insider Status.
Friedman seeks to avoid appellees’ lien as a preferential transfer under § 547. One essential element of a preferential transfer is that the transfer must have occurred
(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 [the transferee] creditor at the time of such transfer was an insider ...
§ 547(b)(4)(A), (B). Here it is undisputed that the transfer complained of occurred when appellees recorded their lien on August 5, 1986, or greater than 90 days pre-petition. Friedman can thus only avoid the transfer as a preference if appellees were insiders.
Section 101(31) defines the term “insider,” and provides in pertinent part as follows:
In this title—
(31) “insider” includes—
(A) if the debtor is an individual—
(i) relative of the debtor or of a general partner of the debtor;
(ii) partnership in which the debtor is a general partner;
(iii) general partner of the debtor; or
(iv) corporation of which the debtor is a director, officer, or person in control ....
§ 101(31)(A). The Code similarly establishes which individuals or entities may be insiders in cases in which the debtor is a corporation,13 partnership14 or municipality.15 The use of the word “includes” is indicative of Congress’ intent not to limit the classification of insiders to the statutory definition. Schuman, 81 B.R. at 586; see also § 102(3) (“includes” and “including” are not limiting.).
While the respective insider definitions do not attempt or purport to be all inclusive, it may be fairly said that each definition is based on either one of two relational classifications. First, the Code assigns insider status to entities or relatives 16 of the debtor, or of persons in con-
*70trol of a related entity, whose affinity or consanguinity gives rise to a conclusive presumption that the individual or entity commands preferential treatment by the debtor. Second, insider status may be based on a professional or business relationship with the debtor, in addition to the Code’s per se classifications, where such relationship compels the conclusion that the individual or entity has a relationship with the debtor, close enough to gain an advantage attributable simply to affinity rather than to the course of business dealings between the parties.
These classifications find support in the legislative history of § 101(24) [now (31)], which provides that:
[a]n insider is one who has a sufficiently close relationship with the debtor that his conduct is made subject to closer scrutiny than those dealing at arms length with the debtor.
H.R.Rep. No. 95-595, 95th Cong., 2d Sess. 312 (1977) reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 6269. As indicated above, the determination of insider status is a question of fact. UVAS Farming Corp., 89 B.R. at 892.
The case law that has developed also indicates that not every creditor-debtor relationship attended by a degree of personal interaction between the parties rises to the level of an insider relationship. See In re Huizar, 71 B.R. 826 (Bankr.W.D.Tex.1987) (Despite defendant bank’s president having been a close personal friend of debtor, having solicited debtor’s business, having become debtor’s primary lender, and having taken at least one vacation with debtor, bank was not an insider given lack of evidence indicating that the transactions between the parties were anything other than properly negotiated loan transactions, nor that the bank held any form of actual or unreasonable control over the debtor); In re Hartley, 52 B.R. 679 (Bankr.N.D. Ohio1985) (trustee could not avoid as insider preference stock pledge made to bank despite the fact that bank frequently advanced monies to purchase the stocks); and In re Technology For Energy Corp., 56 B.R. 307 (Bankr.E.D.Tenn.1985) (court rejected contention that secured creditor-bank was insider of debtor, notwithstanding that bank had voting control over debt- or pursuant to a stock pledge).
A common basis for these rulings was the perception that, while a creditor may be in a strong bargaining position in dealing with the debtor, so long as the parties transact their business at arm’s length, such circumstances do not necessarily give rise to insider status even though there was some degree of personal relationship with the debtor. It is unlikely that Congress intended that complex business relationships existing over a period of time, attended by some personal involvement but without control by the creditor over the debtor’s business, would subject such creditor to insider status.
Here the record indicates that, while appellees performed a wide variety of tasks on Friedman’s behalf, these tasks were of a particularized nature and were performed for specific purposes unrelated to the overall direction or control of Friedman’s business. The trial court found that appellees were not in control of any of Friedman’s business affairs at any point during the relevant period, and that there was no agreement among the parties to share profits and losses from the real estate transactions. These findings are supported by the record.
The transaction that formed the basis for Friedman’s preference claim was appellees’ recordation of their trust deed. There is no indication that the parties negotiated and executed the trust deed and the underlying note at anything other than arm’s length. There is nothing in the record to suggest that appellees were without the right given any other creditor to record their deed at the time they did so. The long term and extensive relationship between the parties does not compel a conclusion that appellees were granted a security interest because of insider status. While the action taken by appellees when they recorded the security instrument for which they had furnished consideration may have been contrary to Friedman’s wishes, the die was cast when he gave them the deed of trust.
*71Friedman argues that appellees’ ability to withdraw money from his bank accounts, and their aborted attempt to exercise that ability to secure payment on their note, establishes that appellees were insiders. Friedman asserts that if appellees had been successful in finding and obtaining funds sufficient to pay off the note, there would be no question as to appellees’ insider status. At the post-trial hearing on Friedman’s motion for reconsideration,17 the trial court addressed this argument as follows:
If your argument were correct, then a bookkeeper who embezzled money would constitute somebody subject to this standard and I don’t think that’s what the law intends. Because the bookkeeper may have [the] actual ability to move funds from the debtor’s accounts into their own personal accounts to the detriment of the debtor and other creditors and that’s really the standard that you’re arguing: ability to cause the funds to be moved. It’s clear to me that they didn’t have the authority to do [so] under the circumstances, that it was all carefully circumscribed and they weren’t making the decisions about it, about when and where and how the money was to be moved, except under careful instructions from Mr. Friedman_
There is substantial support in the language above for the trial court’s finding that appellees were not insiders. Assuming that another fact finder could have found differently, where there are two permissible views of the evidence the fact finder’s choice between them cannot be clearly erroneous. Anderson, 470 U.S. at 574, 105 S.Ct. at 1511.
In the course of oral argument on appeal, Friedman also alluded to appellees having been given a general power of attorney. Again, we find there is nothing in the record which suggests that appellees functioned on a scale of such unlimited discretion as would invest them with an ability to order, organize or direct Friedman’s operations.
Friedman argues that In re EMB Associates, Inc., 92 B.R. 9 (Bankr.D.R.1.1988), is analogous to the present case and supports the proposition that appellees were insiders. There, however, the defendant’s principal used his position and the information gained as the debtor's accountant to arrange for a loan from defendant ABD to the debtor which the court found was both burdensome to the debtor and structured to make the debtor’s subsequent default a certainty. In this case, all indications are that the subject note and deed of trust were executed in an adversary atmosphere and at arm’s length. EMB therefore does not support Friedman’s position.
C. Equitable Subordination.
Section 510(c)(1) provides, in part, that the bankruptcy court may “under principles of equitable subordination, subordinate for purposes of distribution ... all or part of an allowed interest to all or part of another allowed interest_” Friedman argues that appellees conduct in this case dictates that their lien be subordinated to the claims of other estate creditors.
Equitable subordination requires that: (1) the claimant who is to be subordinated have engaged in some type of inequitable conduct; (2) the misconduct resulted in some type of injury to competing claimants or unfair advantage to the claimant; and (3) subordination is not inconsistent with bankruptcy law. In re Universal Farming Indus., 873 F.2d 1334, 1337 (9th Cir.1989); In re Pacific Express, Inc., 69 B.R. 112, 116 (9th Cir. BAP 1986). The burden of establishing all the elements of subordination by a preponderance of the evidence is on the objecting party. Pacific Express, 69 B.R. at 116. Where, as here, the claimant is not an insider, the objecting party “must prove that the claimant is guilty of gross misconduct tantamount to ‘fraud, overreaching or spoliation to the detriment of others.’ ” Id. (quoting Mat*72ter of Teltronics Services, Inc., 29 B.R. 139, 169 (Bankr.E.D.N.Y.1983) (citations omitted)).
There is no indication in the record here of any acts on the part of appellees which would rise to the level of gross misconduct and dictate that their claim be subordinated. The trial court found that appellees violated no fiduciary duty, or any other duty, owed Friedman, nor did appellees acquire and perfect the deed of trust by virtue of any practices unfair or inequitable to other creditors. These findings must be accepted unless clearly erroneous. Torrez, 63 B.R. at 753. The record supports the findings on which the trial court’s conclusion was based, and the court properly applied the correct standard in concluding that subordination was not warranted.
D. Miscellaneous Issues.
1. Use of excluded transcript.
Appellees’ counsel during the cross-examination of a witness made several references to the transcript of the witness’ earlier deposition testimony which the court had previously excluded. After approximately an hour of cross-examination, the court sua sponte repeated an earlier admonishment of appellees’ counsel for his use of the transcript. At the close of cross-examination, Friedman’s counsel moved to strike it in its entirety. The court denied the motion, stating that, “It does not appear to me that the questions at issue were terribly material or prejudicial of the character that justifies striking them.” Based on the record, it would appear that there was no demonstrable prejudice to Friedman from the use of the transcript.
2. Denial of motion re-open the case.
Following trial Friedman moved to reopen the case, alleging that after the trial he became aware of unspecified evidence which purportedly would have established that Plotsky had lied during her testimony and concealed evidence regarding her control over Friedman’s property. The trial court denied that motion by order dated January 19, 1990. Pleadings filed below indicate that the newly-discovered evidence consisted entirely of a statement Plotsky allegedly made to Friedman following trial to the effect that the only reason Friedman’s properties did not sell during 1986 was that Plotsky was angry with Friedman. At the hearing on Friedman’s motion, the court concluded that
The supposed new evidence asserted, in my view, is insufficient and untimely and does not warrant reopening of the trial and it appears to be speculative at best, denied by the other side; and at worst [it is] insufficient on its face to warrant a different result by itself.
The trial court clearly considered the value of the proffered new evidence on its merits and concluded that it provided an insufficient basis to merit the relief sought. Friedman has not presented any basis other than argument for us to conclude that the denial of the motion was an abuse of discretion.18
CONCLUSION
Appellees, primarily as brokers, facilitated appellant’s real estate investments for a period of five years. In the course of a large number of transactions, the interaction among the parties was necessarily accompanied by trust and personal regard. But nothing in the record shows that the basic relationship of broker and principal was transcended. The trial court found essentially that Friedman ran his own business and that appellees had a minimal role in the direction and operation of his investment enterprises. The only independent action they took was to perfect a transfer to them which had been made to secure a debt. The court, having rejected appellant’s contention that appellees became insiders of his business, concluded that the one-year preference period for avoiding the *73transfer was not available to the estate. Thus the transfer effected by the rec-ordation must stand. The court’s ruling that appellees’ claim should not be equitably subordinated is also supported by the record. We find no merit in appellants’ remaining arguments. The trial court is AFFIRMED in all respects.
. Friedman never executed written listing agreements with appellees, although he did sign a memorandum in 1986 identifying certain tracts which were then for sale, with stated prices and the commission figure payable for such sales of six percent.
. The record, however, does not indicate what, if any, discretion appellees had in connection with the use of these notes. Friedman has not argued that appellees were vested with any sort of discretion.
. Plotsky obtained the funds on behalf of Sheila Plotsky Brokers from BancFirst Austin by way of a personal loan under special provisions available only to bank directors. The record also makes reference to a |250,000 loan to Friedman in March, 1985, again using funds Plotsky obtained on behalf of Sheila Plotsky Brokers. There is no indication regarding if and when this loan was repaid.
. As indicated above, the note by its terms was not due until February 26, 1987.
. The trial court found that Friedman suffered no loss as a result of the withdrawal of funds from his account.
. Unless otherwise indicated, all chapter and section references herein are to the Bankruptcy Code, 11 U.S.C.A. §§ 101-1330 (West Supp. 1991).
. Appellees alleged that Friedman had fraudulently induced them to extend him the $275,000 loan based on false representations, false pretenses, or actual fraud.
. Section 510(c) provides that:
Notwithstanding subsections (a) and (b) of this section, after notice and hearing, the court may—
(1) under principles of equitable subordination, subordinate for purposes of distribution all or part of an allowed claim to all or part of another allowed claim or all or part of an allowed interest to all or part of another allowed interest; or
(2) order that any lien securing such a subordinated claim be transferred to the estate.
. Appellees have not appealed from the dismissal of their dischargeability action.
. Friedman similarly argues that the trial court’s "determinations" regarding equitable subordination should also be subject to de novo review. The court’s conclusion in this regard was based on its findings that appellees did not obtain their deed of trust in a manner unfair or inequitable to other creditors, and that they violated no duty owed Friedman. These find*68ings are also subject to the clearly erroneous standard.
. Following our decision in Burkhart B.A.P. Rule 4 was amended to address the concerns raised in that case. While the effective date of the amended rule, July 24, 1990, makes it strictly inapplicable to the present case, we note that Rule 4(c) currently provides that:
Pursuant to Bankruptcy Rule 8009(b)(9), the excerpts of record shall include the transcripts necessary for adequate review in light of the standard to be applied to the issues before the panel. The panel is required to consider only those portions of the transcript included in the excerpts of record.
The Explanatory Note to the amended rule indicates the intent of the amendment:
Subsection (c) ... was added to address the problem created by appellants who challenge the factual findings of the bankruptcy court, but who do not include sufficient transcripts in the excerpts of record to allow the panel to properly review the bankruptcy court’s decision for clear error. In order to review a factual finding for clear error, the record must include the entire transcript and all other relevant evidence considered by the bankruptcy court (citation omitted). You are also referred to Bankruptcy Rule 8010(a)(1)(D) which addresses the related problem created by appellants who do not make explicit references to the parts of the record that support their factual allegations and arguments. Opposing parties and the court are not obliged to search the entire record unaided for error....
. Although responsibility to file an adequate record rests with the appellant, see Burkhart, 84 B.R. at 660, appellees here are not without fault, having in no way supplemented the record supplied by Friedman. Appellees’ only citation to the record references particular findings, rather than those portions of the record which support each finding. Accordingly, we are left with the onerous task of searching through a voluminous, yet partial, record to discover whether there is support for the trial court’s findings. Even though the burden is on the appellant to show that a finding is clearly erroneous, id., it is a dubious practice for an appellee to solely rely on the appellant to supply an adequate record, unless satisfied it has done so, and in any event to abdicate its responsibility to direct the reviewing court to specific evidentiary support for the findings which are the subject matter of the appeal.
. See § 101(31)(B), which provides that insiders of a corporate debtor include:
(i) director of the debtor;
(ii) officer of the debtor;
(iii) person in control of the debtor;
(iv) partnership in which the debtor is a general partner;
(v) general partner of the debtor; or
(vi)relative of a general partner, director, officer, or person in control of the debtor....
. See § 101(31)(C), which provides that insiders of a partnership debtor include:
(i) general partner in the debtor;
(ii) relative of a general partner in, general partner of, or person in control of the debtor;
(iii) partnership in which the debtor is a general partner;
(iv) general partner of the debtor; or
(v) person in control of the debtor....
. Section 101(31)(D) provides that if the debtor is a municipality, insiders include "elected official[s] of the debtor or relative of an elected official of the debtor.”
. Section 101(45) defines a “relative” as follows:
[An] individual related by affinity or consanguinity within the third degree as determined by the common law, or individual in a step or adoptive relationship within such third degree.
. As indicated above, Friedman fáiled to supply us with a transcript of the trial court’s oral ruling at the conclusion of the trial.
. Appellant also sought to have costs imposed against appellees’ counsel as a result of the last-minute continuance of the trial due to counsel’s illness. Appellant has similarly presented no evidence to indicate that the trial court's refusal to impose costs was an abuse of discretion. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491277/ | MEMORANDUM OPINION
MARK B. McFEELEY, Chief Judge.
This matter came before the Court on the trustee’s objection to the debtors’ claim of exemptions. The parties agreed that there were no facts in dispute and that the Court could render a decision based solely on the briefs submitted by the parties. Having considered the briefs, the applicable law, and being otherwise fully informed and advised, the Court finds that the objec*109tion is well taken and should be sustained. An order denying the exemption will be entered.
FACTS
Joseph E. Bryan is a medical doctor who maintains an office for his practice. Patricia Bryan manages her husband’s office. Dr. Bryan claimed $1,500 worth of medical equipment as exempt pursuant to the New Mexico “tools of the trade” exemption statute. N.M.S.A. § 42-10-1 (Supp.1990). In addition to Dr. Bryan’s exemption for tools of the trade, Mrs. Bryan claimed $1,500 exempt pursuant to the same statute. The trustee objected on the grounds that Mrs. Bryan was not entitled to a tools of the trade exemption on medical equipment because she is not a medical doctor. In response, Mrs. Bryan claims that she is due the exemption because of her community property interest in “all medical and office equipment that is attributable to all of the profits and increases of the medical practice of which she is office manager.” Debtors’ brief, 2.
DISCUSSION
The New Mexico exemption statute for tools of the trade is entitled “Exemptions of married persons or heads of households” and provides:
Personal property in the amount of five hundred dollars ($500), tools of the trade in the amount of fifteen hundred dollars ($1,500), ... is exempt from receivers or trustees in bankruptcy or other insolvency proceedings, fines, attachment, execution or foreclosure by a judgment creditor.
N.M.S.A. § 42-10-1 (1990 Supp.). The statute does not include language which would permit a debtor to claim a tools of the trade exemption for tools of a spouse’s trade. Debtors’ counsel has cited no New Mexico authority which would allow such a claim of exemption. This Court has previously ruled that under the federal exemption statute, a wife’s tools of the trade exemption was improper where the tools were not used in her trade. In re Terry, No. 7-84-00185 MR (Aug. 20, 1984). The law simply does not allow both spouses to claim an exemption in tools of the trade where only one spouse engages in the trade.
Courts have made it clear that for both spouses to be allowed an exemption in tools of the trade, each spouse must show that they engage in the trade. In In re Jeffries, the court disallowed the exemption for the wife.
The creditor ... contends that the tool of the trade exemption may only be used by the artist debtor and not by both that debtor and his non-artist wife, with whom he filed bankruptcy. We agree. Only the debtor who uses the specified equipment in his trade can claim that exemption as a tool of the trade. The proposition is so obvious we need explain no further.
18 B.R. 682 (Bankr.W.D.Ky.1982). In In re Dillon, the court also disallowed an exemption in tools of the trade for the wife, finding that she had not shown that she actually had used or driven the cab-tractor in the trucking business. 18 B.R. 252, 255 (Bankr.E.D.Cal.1982). The husband was allowed the exemption. Where the debtors have shown that both spouses were engaged in the business, both spouses were entitled to the exemption. In re Schroeder, 62 B.R. 604 (Bankr.D.Kan.1986) (farming equipment). The line of cases is clear: both spouses must engage in the trade in order for each to claim the exemption.
The fact that New Mexico is a community property state does not alter what is required for each spouse to be entitled to the exemption. The debtors argue that because the medical practice was derived from the efforts of the husband during the marriage, it is community property in which the wife has an ownership interest and thus, both spouses should be able to claim an exemption in the office and medical equipment. The debtors’ community property argument attempts to substitute an ownership interest for entitlement to an exemption. Just because a spouse has an ownership interest by operation of community property laws does not mean that the *110spouse can claim exempt an item that is not provided for in the statute.
An exemption for tools of the trade should be allowed for the trade of the person claiming the exemption. To allow both spouses to claim an exemption in an item available for exemption by only one spouse would allow debtors to “stack” or double their exemptions. Such an interpretation would also unfairly discriminate against single debtors. This is not the intent of the statute. Therefore, Mrs. Bryan will not be allowed an exemption for medical equipment as tools of the trade because she is not engaged in the trade of medicine.
This memorandum opinion constitutes the Court’s findings of fact and conclusions of law. Bankruptcy Rule 7052. An appropriate order shall enter. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491278/ | ORDER ON MOTION TO DISMISS OR MOTION TO ABSTAIN
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a yet to be confirmed Chapter 11 case and the matters under consideration are two Motions filed by Sonora Associates, Ltd. (Sonora) in the above-captioned adversary proceeding. Sonora seeks a dismissal of the Complaint filed by Bicoastal Corporation, d/b/a Simuflite, f/k/a The Singer Company (Debtor) or, in the alternative, seeks an order of abstention pursuant to 28 U.S.C. Section 1334(c)(2).
The underlying dispute involves four leases of adjacent property with Sonora as the lessor and the Debtor as the lessee. The Debtor filed, and this Court granted, a Motion to assume those leases and assign them to Librascope. Thereafter, a dispute arose between Sonora and Librascope regarding whether certain lease renewal options were properly exercised, which resulted in the Debtor filing the above-styled adversary proceeding against Sonora. In Count I of the Complaint, the Debtor seeks a declaration from this Court that the lease renewal options were, in fact, properly exercised, and in Count II, the Debtor seeks an order from this Court enjoining Sonora from taking any action against Librascope based on its claim that the leases in question expired prior to the exercise of the renewal option by Librascope.
It is Sonora’s contention that this is basically a dispute between two non-debtors, i.e. Sonora and Librascope, and that this Court has no jurisdiction to consider the issues raised by the Complaint. In opposition, the Debtor contends that the leases in controversy were property of the estate by virtue of Section 541 of the Bankruptcy Code, and although by virtue of the approved assumption and assignment they are no longer property of the estate, this Court retains ancillary jurisdiction over the controversy. In addition, the Debtor also advances the contention that this Court has jurisdiction to undertake a “judicial construction” of certain things that occurred post-petition and involved an act by the debtor-in-possession.
In addition to seeking dismissal of this adversary proceeding for lack of jurisdiction, Sonora also urges that this is clearly a non-core proceeding involving an interpretation of California real estate law and, therefore, it is appropriate for this Court to abstain from considering this matter pursuant to 28 U.S.C. Section 1334(c)(2). It should be noted at the outset that inasmuch as there is no suit pending in any non-bankruptcy forum involving this same controversy, the mandatory abstention provision of the Judicial Code, 28 U.S.C. Section 1334(c)(2), is not applicable.
Considering first the Motion to Dismiss based on the contention that this Court lacks jurisdiction, this Court is satisfied that while it is true that the leases in question were properties of the estate, they are no longer properties of the estate, the same having been assumed and assigned and, therefore, this is strictly a controversy between two non-debtors and this Court should not entertain the complaint filed by the Debtor. It might be argued that because the leases were at one time property of the estate, a residual interest in this controversy which would support this Court’s jurisdiction remains. However, it is unnecessary to determine whether the Motion to Dismiss should be granted because it is clear that the Motion to Abstain should be granted, albeit not necessarily on one of the grounds urged by Sonora.
As previously noted, it is undisputed that there is no litigation pending in a non-bank-ruptey forum between Sonora and Libra-scope involving the same issues. For this reason, the mandatory abstention provision of the Judicial Code, 28 U.S.C. Section 1334(c)(2), is clearly not applicable. This *122leaves for consideration whether or not this Court should abstain to consider this controversy and the claims set forth in the Complaint filed by the Debtor pursuant to 28 U.S.C. Section 1334(c)(1), the so-called option abstention provision.
It is without dispute that the leases in question relate to real estate located in the state of California and involve the interpretation of California law and do not require the interpretation of any provision of the Bankruptcy Code. Moreover, both Sonora and Librascope are located in California, all witnesses with knowledge about the transaction are located in California and, lastly, it is represented to this Court that the matter could be speedily resolved in California. Thus, abstention of this matter would not have a detrimental affect on the progress of this Chapter 11 case which, at this time, is no where near the point of reorganization.
In sum, based on the foregoing, this Court is satisfied that it is appropriate to abstain to consider the claims set forth in the Complaint filed by the Debtor and, therefore, the Motion to Abstain should be granted pursuant to 28 U.S.C. Section 1334(c)(1). In light of the foregoing, it is unnecessary to rule on the Motion to Dismiss.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Motion to Abstain be, and the same is hereby, granted. It is further
ORDERED, ADJUDGED AND DECREED that the above-captioned adversary proceeding be, and the same is hereby, dismissed without prejudice to the right of the Debtor to assert whatever interest it has in the controversy between Sonora and Librascope in the proper California forum.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491279/ | OPINION
WILLIAM H. GINDIN, Chief Judge.
I. Introduction
At the hearing on this matter which took place on March 18, 1991, the court determined that the actual costs of the adction should be borne by the secured creditor, Banco Hispano Americano. Additionally, determination was reserved as to whether or not the auctioneer was entitled to a commission from the estate on the sale of shares of stock in an entity known as Phar-maMar. For the reasons set forth below, the auctioneer will be allowed the sum of $7500 to be paid by the estate.
II. Facts
The facts may be summarized briefly. Included in the property of the estate were 6,250 shares of stock in a Spanish corporation known as PharmaMar. This stock was subject to a security interest held by Banco Hispano Americano. Furthermore, the parties stipulated that there were restraints on alienation of the stock, and the attorney for the bank asserted that the stock was simply not salable and could not bring more than the bank’s lien.
On July 11, 1989, after a hearing, the court directed that the trustee dispose of the stock “in a commercially reasonable manner.” During a further telephone hearing held November 20, 1989, the court ruled that the bank would be permitted to bid up to the amount of its debt without any deposit or payment.
*448To implement the sale, the trustee retained a professional auctioneer whose appointment was approved by the court pursuant to the provisions of 11 U.S.C. § 327. Although the attorney for the bank argued that a sale would be an exercise in futility, the trustee determined that it was his fiduciary duty to find out if there was a market. The auctioneer appropriately advertised the sale and attempted to bring as many bidders to the sale as possible. The sale was eventually held on December 1, 1989. While a number of entities attended, the bank was the sole bidder and bid the amount of its lien, $525,000.00.
The auctioneer brought an application for expenses and commissions in accordance with Local Rule 7 M of the Local Rules of Bankruptcy Practice.1 After briefs were submitted and the matter argued before the court, the court ruled that pursuant to 11 U.S.C. § 506(c), the actual expenses incurred by the auctioneer were necessary for “preserving, or disposing of, such property” resulting in a “benefit to the holder” of the claim. Accordingly, the auctioneer was awarded actual expenses which were charged to the bank.
III. Discussion
The allowance of expenses to the auctioneer is specifically authorized under Local Rule 7 M. While an allowance for expenses is mandatory under the rule, an allowance for commissions is not. Consequently, what remains for determination is whether the auctioneer is entitled to any commissions, and, if so, in what amount. Local Rule 7 M provides for “commissions on net proceeds of sale” and reads in its entirety:
Auctioneers shall be allowed those expenses approved by the court and in addition, commissions on net proceeds of sale, not to exceed: 10% of the first $50,000; 7% of the next $50,000; 5% of the next $50,000; 3% of the next $100,-000; and 1% on all amounts above $250,-000. (Emphasis added).
The trustee argues that because the bank bid the full amount of its lien there were no net proceeds, and hence, the auctioneer is not entitled to any commission under the Local Rule.
The only authority discovered by this court which discusses the problem of proceeds in the context of a dispute over commissions is Bank of Silvis v. Boultinghouse Auction Co., 71 Ill.App.3d 98, 27 Ill.Dec. 455, 389 N.E.2d 267 (3d Dist.1979). In that case, a bidder paid 10% of the purchase price then defaulted on the balance. The auctioneer sought to retain 3% of the entire bid price, the agreed-upon commission. The court held that the language of the contract upon which the commission was based, while vague, had to be interpreted to mean that the term “proceeds usually indicates something actually received.” Bank of Silvis, 71 Ill.App.3d at 100-01, 27 Ill.Dec. at 457, 389 N.E.2d at 269. Accordingly, the court denied the auctioneer a commission based upon 3% of the bid price. See also In re Vandevender, 87 B.R. 59 (Bankr.S.D.Ill. 1988).
In the instant case, the use of the term “net” confirms a similar interpretation. Within the context of the rule, the term “net” clearly refers to the amount received by the trustee, or in appropriate cases, the debtor-in-possession. Thus, there were no net proceeds because the trustee received nothing. As a result this court cannot award fees under Local Rule 7 M.
While the language of the rule is clear, the inquiry must be carried one step further because the result called for in the instant case would be, from the standpoint of the auctioneer, draconian. The auctioneer did everything he was told to do. He served the court and he served the trustee. To deny him commissions in their entirety now would have a chilling effect upon the important role auctioneers play in the bankruptcy process. Furthermore, the elimination of commissions in a case where a secured creditor wishes to bid in its lien *449would inhibit the trustee from appropriately “testing the waters” to seek the best possible result.
Fortunately, the drafters of the Bankruptcy Code anticipated the possibility of this type of result and provided in 11 U.S.C. § 503(b)(1)(A) for the payment of:
[t]he actual, necessary costs and expenses of preserving the estate, including wages, salaries,’ or commissions for services rendered after the commencement of the case....
Thus, the court must make an inquiry into whether or not the actions of the auctioneer served to preserve the estate.
To the extent that the trustee would have been derelict in his duties had he failed to determine whether or not there was a market for the PharmaMar stock, and to the extent that the entire estate benefitted by the trustee’s making the ultimate decision concerning the sale of the stock, the auctioneer’s actions did serve to preserve the estate. I therefore find that the auctioneer is entitled to commissions pursuant to the provisions of 11 U.S.C. § 503(b)(1)(A).
While commissions on the net proceeds are easily calculable, a general benefit to the estate under § 503 may be awarded in the discretion of this court. Furthermore, the formula for calculation of commissions under § 503(b)(1)(A) requires the court to make a determination as to what was “necessary” rather than quantifying an absolute amount. That such a determination is to be made is clear from the Code itself and from the substantial authority which holds that decisions concerning administrative expenses are within the reasonable discretion of this court. See In re Dant & Russell, Inc., 853 F.2d 700 (9th Cir.1988); In re Baldwin-United Corp., 43 B.R. 443 (S.D. Ohio 1984); In re Woodstock Assoc. I, Inc., 120 B.R. 436 (Bankr.N.D.Ill.1990); In re Englewood Community Hosp. Corp., 117 B.R. 352 (Bankr.N.D.Ill.1990). Thus, this court will take into account the facts and circumstances of the auction in determining whether to grant a commission based upon the benefit to the estate, in addition to considering the actual services performed by the auctioneer.
Although the auctioneer has not submitted hourly time records, it must be pointed out that the subject auction was not excessively complex and did not require packaging, lotting, touring and many of the other time consuming events of a public auction of personal property. I, therefore, conclude that a reasonable fee for the benefit conferred upon the estate as a result of the actual and necessary services performed by this auctioneer is $7,500.00.
IV. Conclusion
For the reasons set forth above, the auctioneer is allowed the sum of $7500 to be paid by the estate. Counsel for the auctioneer shall submit an order within ten (10) days.
. The amount claimed from the auctioneer was $16,750.00 but that amount did not take into account a reduction from the total price for the actual costs as required under Local Rule 7 M. The actual price paid was $525,000.00 and the commission on proceeds as calculated by Rule 7 M would be $16,687.46. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491280/ | ORDER DENYING MOTION FOR EXAMINATION OF DEBTOR PURSUANT TO BANKRUPTCY RULE 2004, BUT ORDERING CERTAIN DOCUMENT PRODUCTION
BARBARA J. SELLERS, Bankruptcy Judge.
This matter is before the Court on a motion, filed by creditors David and Rebecca Ater (“Aters”), seeking to examine debt- or Douglas R. Merritt (“Debtor”) under the provisions of Bankruptcy Rule 2004. The debtor opposed the motion.
The debtor filed a petition under Chapter 7 of the Bankruptcy Code on July 26, 1990. The Aters were scheduled as creditors and as recipients of a recent payment to David Ater from the Debtor and as possible obli-gors to the bankruptcy estate for construction work performed by the Debtor.
The Aters wish to examine the Debtor to investigate any claim the estate may have against them, including any preference claim, and to obtain information to amend their proof of claim for breach of contract.
Under the language of the rule the grant or denial of a motion for the examination of a debtor is discretionary with the Court. Although Rule 2004 provides an easy way for parties to obtain information required to pursue potential actions or to administer the bankruptcy estate, its misuse can serve as a tool for harassment and can undermine both the fresh start and the automatic stay protections.
The Court finds that the Aters’ expressed desire for information relating to potential actions against them by the bank- ' ruptcy estate is pretextual. The estate has not asserted any claims against them. Pri- or to the date they filed their motion, the trustee in bankruptcy indicated he was ready to file a final report and conclude his administration of the estate. Should the trustee change his mind and assert a claim against the Aters, normal discovery measures would be available to them at that time to defend any such action.
Nor has any preference action been asserted against the Aters by the Debtor pursuant to 11 U.S.C. § 522(h). Nor does it appear that such an action could be asserted. Therefore, discovery relating to that matter is neither necessary nor appropriate.
With regard to the Aters’ possible need to amend their proof of claim, the Court finds that the Debtor should turn over to the Aters, through their respective attorneys, within ten (10) days of the entry of this order, any of the following items which are in the Debtor’s possession.
(1) All invoices for materials, supplies, fixtures, services and goods used in or incorporated into the dwelling and appurtenances constructed at 11474 Westfall Road, Frankfort, Ohio 45628 *528and all cancelled checks or other evidence of payment for such.
(2) The full name, residence address, and residence telephone number of each employee of (or independent contractor as to) Douglas R. Merritt who provided services in connection with the construction of the dwelling and appurtenances constructed at 11474 Westfall Road, Frankfort, Ohio 45628.
(3) Owners’ manuals, manufacturers’ warranties, installation instructions, use and care instructions, and other documents related to the following items used in or incorporated into the dwelling and appurtenances at 11474 Westfall Road, Frankfort, Ohio 45628:
(a) heat pump;
(b) siding and soffits;
(c) cabinetry;
(d) roofing shingles;
(e) garbage disposal;
(f) all other applicable items.
No other examination or production of documents shall be required.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491281/ | OPINION AND ORDER ON MOTION TO REOPEN CASE
R. GUY COLE, Jr., Bankruptcy Judge.
I. Introduction
This matter is before the Court upon the Motion to Reopen Case (“Motion”) filed by Steven Wayne and Vicki Jo Moore, the debtors in this closed Chapter 7 case. The Motion is opposed by Lucas Truck Sales and Hartman’s Truck Center. Following a hearing held on March 22, 1991, the Court took this matter under advisement.
*529The Court is vested with jurisdiction over this contested matter pursuant to 28 U.S.C. § 1334(b) and the General Order of Reference entered in this judicial district. This is a core proceeding which the Court may hear and determine pursuant to 28 U.S.C. § 157(b)(1) and (2)(A). The following opinion and order shall constitute the Court’s findings of fact and conclusions of law.
II. Findings of Fact
1. On July 5,1989, the debtors voluntarily filed a joint petition for relief under the provisions of Chapter 7 of the Bankruptcy Code.
2. In the schedules accompanying their petition, the debtors disclosed that a lawsuit, initiated by Lucas Truck Sales (“Lucas”), was pending against them at the time of the filing of the petition. The schedules also listed Credit Thrift as a creditor holding a secured claim in the amount of $18,000. The debtors’ schedules failed to reflect any outstanding obligations owing to Hartman’s Truck Center (“Hartman’s”).
3. Due to the debtors’ failure to list Hartman’s as a creditor, none of the notices or orders which were served upon parties-in-interest in this case by the bankruptcy clerk through the Bankruptcy Automated Noticing System (“BANS”) were served upon Hartman’s.
4. The Order for Meeting of Creditors, Combined with Notice Thereof and Automatic Stay, entered by the Court on July 13, 1989 — which, for the reason described in the foregoing paragraphs, obviously was not received by Hartman’s — contained the following language:
Special Notice It appears from the schedules of the debtor that there are no assets from which any dividend can be paid to creditors. It is unnecessary for any creditor to file his claim at this time in order to share in any distribution from the estate. If subsequently it appears that there are assets from which a dividend may be paid, creditors will be so notified and given an opportunity to file their claims.
The order also stated that agreements to reaffirm a debt pursuant to 11 U.S.C. § 523(c) had to be filed with the Court by October 16, 1989.
5. On December 5, 1989, an order was issued by the Court granting the debtors a discharge pursuant to 11 U.S.C. § 727.
6. The debtors filed the instant Motion seeking an order permitting the reopening of their bankruptcy case. The debtors’ request is premised upon the following grounds:
(1) To file an [sic] complaint against Lucas Truck Sales to determine the extent, priority and validity of a judicial lien upon the real estate of the debtors and for a Section 506 valuation in connection thereto;
(2) To file an amendment adding the unsecured, pre-petition debt of Hartman’s Truck Center, and have it discharged part of the bankruptcy;
(3) To file a re-negotiated and revised reaffirmation agreement on a secured debt between the debtors and Credit Thrift.
See Debtors’ Motion at 1.
7. Memoranda contra to the Motion were filed by Lucas and Hartman’s. Credit Thrift did not file a written objection to the Motion and, thus, apparently does not oppose the reopening of the case.1
8. At the hearing held on March 22, 1991, the debtors withdrew their request to reopen this case as to Lucas in light of the Sixth Circuit opinion in In re Dixon, 885 F.2d 327 (6th Cir.1989).
III. Conclusions of Law
This Motion is brought pursuant to 11 U.S.C. § 350(b), which provides as follows:
(b) A case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause.
*530The decision whether to grant requests seeking to reopen bankruptcy cases in order to allow for the amendment of schedules rests within the sound discretion of the court, and will not be set aside absent abuse of discretion. In re Jones, 490 F.2d 452 (5th Cir.1974); Rosinski v. Boyd (In re Rosinski), 759 F.2d 539, 540-41 (6th Cir.1985).
The controlling precedent relating to the issue of reopening a bankruptcy case is found in the Sixth Circuit’s decisions in Rosinski and Soult v. Maddox (In re Soult), 894 F.2d 815 (6th Cir.1990). Acknowledging that “harm to the debtor rather than notice is the key issue here,” the Sixth Circuit Court of Appeals articulated the following rule:
A debtor “may be prevented from [reopening to] amend ... her schedule only if her failure to include a creditor on the original schedule can be shown to have prejudiced ... [the creditor] in some way or to have been part of a scheme of fraud or intentional design.”
In re Rosinski, 759 F.2d at 541; Stark v. St. Mary’s Hospital (Matter of Stark), 717 F.2d 322 (7th Cir.1983); In re Meile, 36 B.R. 719, 720 (Bankr.S.D.Ill., 1984). Stated another way, in a case where the trustee has found there to be no assets available for distribution to creditors, no fraud is involved and the debtor omitted listing the creditor through mistake or inadvertence, the court has the equitable power to permit the reopening of the bankruptcy ease. See In re Soult, 894 F.2d 815 (6th Cir.1990); In re Rosinski, 759 F.2d 539 (6th Cir.1985); Robinson v. Mann, 339 F.2d 547 (5th Cir. 1964). The Sixth Circuit in Rosinski and Soult also required that there be no prejudice to the creditor. The predominant types of prejudice recognized by the appellate court as severe enough to mandate a refusal to reopen a case include “(1) loss by a creditor of his right to participate in a dividend; and (2) loss of the opportunity to obtain a determination of dischargeability.”
Having reviewed the arguments of the parties and the record made at the hearing, and having considered the legal principles outlined above, the Court concludes that reopening this Chapter 7 case would be appropriate. There are two separate and independent factors which support reopening this case. First, Hartman’s has not lost any meaningful right that it would have enjoyed if it had been properly listed in the debtors’ schedules. Given the fact that this case has been characterized as what is commonly referred to as a “no-asset” case, Hartman’s — even if it had filed a timely proof of claim — would not have received any distribution from the bankruptcy estate. Secondly, the record is devoid of any evidence which would indicate that the debtors acted willfully, recklessly, or fraudulently. See In re Soult, 894 F.2d 815 (6th Cir.1990); In re Rosinski, 759 F.2d 539 (6th Cir.1985). In fact, the uncontroverted testimony elicited at the hearing indicated that the debtors inadvertently omitted listing Hartman’s on their petition. Therefore, in light of Hartman’s failure to demonstrate any prejudice that has been or may be suffered by it, equity mandates that the Court reopen the debtors’ bankruptcy case.
Based upon the foregoing, the Motion hereby is GRANTED so as to permit the debtors to include Hartman’s in the list of creditors. The Motion is further GRANTED so as to allow the filing of an executed reaffirmation agreement; however, the enforceability of that agreement is questionable by virtue of 11 U.S.C. § 524(c)(1).
IT IS SO ORDERED.
. The Court notes that the basis upon which the debtors seek to reopen their case as to Credit Thrift appears to be unwarranted. Section 524(c)(1) of the Code provides that "[a]n agreement between a holder of a claim and the debt- or ... is enforceable only to any extent enforceable under applicable nonbankruptcy law whether or not discharge of such debt is waived, only if such agreement was made before the granting of the discharge_” | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491282/ | OPINION AND ORDER ON COMPLAINT TO DETERMINE DISCHARGEABILITY OF A DEBT
BARBARA J. SELLERS, Bankruptcy Judge.
I. PRELIMINARY CONSIDERATIONS
First Deposit National Bank (“First Deposit”) filed this adversary proceeding against James and Melinda Houfek on September 17, 1990. In its complaint, First Deposit asserts that its credit card obligation from Melinda Houfek is nondis-chargeable in the Houfeks’ Chapter 7 bankruptcy case pursuant to 11 U.S.C. § 523(a)(2)(A) because the debt was obtained by false pretenses, false representations or actual fraud. The Houfeks denied those allegations and the proceeding was tried to the Court on January 15, 1991. The attorney for the Houfeks also seeks an award of attorney fees under 11 U.S.C. § 523(d).
The Court has jurisdiction in this adversary action under 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I) which this bankruptcy judge may hear and determine.
II. STATEMENT AND FINDINGS OF FACTS
The following facts have been agreed to among the parties or are found by the Court from the testimony.
1. In March 1987 Melinda Houfek replied to a mail invitation from First Deposit for a First Select VISA credit card (“VISA”) with a cash advance feature.
2. In the cursory application returned to First Deposit, Melinda Houfek indicated she was an unemployed housewife in a family with annual income of $25,000 or above. Melinda Houfek also represented that she was a homeowner.
*5323. The VISA was issued to Melinda Houfek in her name only with a preap-proved credit limit of $3,000. Prior to the issuance, First Deposit requested checks of Melinda Houfek’s credit record.
4. On April 16, 1987 Melinda Houfek obtained a cash advance on the VISA account in the amount of $3,000. In December 1987 she took another ádvance in the amount of $1,000. Various small payments were made on those advances, mostly in the minimum amounts, until August 24, 1989 when the account was paid to a zero balance by the remittance of $3,569.25.
5. On November 20,1989 Melinda Houf-ek took a new cash advance against the VISA account in the amount of $4,100. No further payments were made on the account.
6. When the Houfeks filed their petition under Chapter 7 of the Bankruptcy Code on May 3, 1990, the balance owing to First Deposit on the VISA account was $4,523.12, representing both principal and interest.
7. During some or all of the period in question Melinda Houfek was suffering from undiagnosed insulin deficiency and was ill. Although she acknowledges her signature on the cash advance of November, 1989, she has no recollection of receiving or spending the $4,100. However, James Houfek handled all of the family’s financial affairs, including the payment of bills.
8. James Houfek is a lawyer who is now employed as general counsel for a real estate development construction company. Prior to that employment and during the period at issue in this proceeding, he was part owner of and received most of his income from a real estate development business. He also maintained a small law practice for related work.
9. In 1989 James Houfek’s real estate development business declined. After September or October of 1989 he took no draws from that business. His financial problems were severe from that time until the bankruptcy filing on May 3, 1990, al-. though in March of 1990 he obtained his current position.
10. During the period of October 1989 to May 1990, the Houfek family survived by using savings, reducing expenses, selling some assets, using gifts from family and not paying certain bills. James Houf-ek’s only income during that period was from his small law practice. He continued to hope that his real estate business would sell the houses it had already built and continued to market.
11. James Houfek also had little recollection of the $4,100 cash advance from First Deposit, although he indicated it was deposited to a joint account and used to pay bills. It appears that he requested his wife to obtain the cash advance for their household needs.
12. The Houfeks first met with bankruptcy counsel in late March or early April of 1990.
13. James Houfek has no contractual obligation to First Deposit, but directly benefited from the cash advance to his wife.
III.ISSUES TO BE DETERMINED
There are three issues to be determined by the Court.
A. Is there any factual or legal basis for finding a nondischargeable debt from James Houfek to First Deposit?
B. Do the facts show, at the time the cash advance was taken, that Melinda Houfek intended not to repay First Deposit?
C. If actual intent not to repay is not demonstrated, can false pretenses be shown under 11 U.S.C. § 523(a)(2) if Melinda Houfek knew or should have known, at the time the cash advance was taken, that it could not be repaid?
IV.DISCUSSION AND LEGAL CONCLUSIONS
The complaint in this adversary proceeding seeks to except a debt from discharge under 11 U.S.C. § 523(a)(2)(A). That section provides in pertinent part:
*533(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt—
(2) for money ..., to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud....
11 U.S.C. § 523(a)(2)(A).
A.Liability of James Houfek
The first requirement of § 523(a)(2) is that there be a “debt.” Melinda Houfek is the only party contractually obligated to First Deposit on the VISA account. However, First Deposit seeks to have its debt declared nondischargeable in James Houfek’s bankruptcy case also.
In support of this liability, First Deposit relies upon Republic Bank v. Vermont (In re Vermont), 98 B.R. 581 (Bankr.M.D.Fla.1989). The debtor in Vermont had submitted false financial statements to a lender to induce a loan to a corporation of which he was an officer and a shareholder. The debtor had also guaranteed repayment of that loan and, therefore, had a contingent obligation to the lender. Moreover, even though the debtor had not received the loan proceeds, as a literal reading of 11 U.S.C. § 523(a)(2)(B) would seem to require, he had benefitted by the loan to the corporate entity. Accordingly, the debt was held to be nondischargeable.
The facts in Vermont are significantly different from the facts now under consideration by this Court. There is no debt between James Houfek and First Deposit. Nor was there any representation from him to First Deposit. Melinda Houfek returned the account application and she signed the cash advance draft. It was drawn on an account issued only in her name and based upon only her credit record. That she apparently gave those proceeds to James Houfek for their joint needs does not make him legally responsible to First Deposit. Therefore, there is no “debt” between James Houfek and First Deposit which can be excepted from discharge. Nothing in Ohio law changes this result. See Tille v. Finley, 126 Ohio St. 578 (1933) and Surgical & Medical Neurology Associates, Inc. v. Levan, 7 Ohio Misc. 11, 454 N.E.2d 604 (Summit Cty.Munic.Ct.1982).
B. Actual Intent Not to Repay
No facts were established which would cause this Court to believe that Melinda Houfek intended not to repay First Deposit. Accordingly, actual fraudulent intent will not be found. Nor was there any evidence of misrepresentation in obtaining the credit card.
C. False Pretenses By Knowledge or Implied Knowledge That Repayment Was Unlikely
This case does not require extended discussion of the implied representation or assumption of the risk arguments which have been debated in the courts relating to credit card obligations generally. The particular obligation to First Deposit is a cash advance which is more analogous to a direct loan to the cardholder from the issuer, although the authorization preceded the loan by several years. No third party is involved.
The Sixth Circuit, however, has rejected the implied representation theory, at least where the creditor has not protected itself by credit checks or other easily verifiable information. Manufacturer’s Hanover Trust Co. v. Ward (In re Ward), 857 F.2d 1082 (6th Cir.1988). In Ward, the Sixth Circuit also observed that exceptions to discharge are to be narrowly construed in favor of the debtor. 857 F.2d at 1086.
Obviously, First Deposit could not have relied upon Melinda Houfek’s income and it had no legal recourse against James Houf-ek or his earnings. As to what recourse First Deposit may have expected upon nonpayment of the VISA account, the Court is uncertain. The information it received about the card holder points strongly to an assumption of the risk on First Deposit’s part.
The foregoing notwithstanding, the facts of this proceeding raise two somewhat unusual aspects of the false pretenses inquiry. First, false pretenses, like fraud, should require an awareness by the perpetrator that she is misleading another. If *534the only inquiry the Court must make is whether Melinda Houfek reasonably expected the future earnings of her husband to be sufficient to repay the $4,100 cash advance plus interest, then First Deposit must clearly fail. The Court believes that Melinda Houfek reasonably harbored such an expectation. If the Court is required, however, to more broadly consider whether Melinda Houfek knew or should have known at the time of the cash advance that the Houfeks were unable to meet the totality of their obligations, the inquiry is more difficult.
As evidenced by the bankruptcy schedules, by November 9, 1989, when the cash advance at issue was taken, the Houfeks had enormous financial problems. This cash advance pales when compared to their liquidated debts in excess of $1,000,000 and their potential guaranty obligations which could exceed $7,000,000. Assets, consisting primarily of liened real properties, were scheduled at only $364,000. Among the Houfeks’ obligations are many other credit card debts with cash advance features. All of those appear to have been heavily drawn upon prior to February, 1990.
Despite all of the above, Melinda Houfek knew very little about the family’s financial condition. This may have been due partially to her fairly serious illness during this period. It was also in part a conscious decision. Despite her educational level, she chose or was willing to permit her husband to handle all financial matters. She was used to that protection and remained largely unaware of household bills or the degree of her husband’s business difficulties. Her bills had always somehow been paid and she seems to have presumed that state of affairs would continue. Since the larger and more serious obligations arose from her husband’s business woes, her belief that matters would be straightened out once he had obtained a new position is not patently unreasonable. Her contribution to their joint expenses of a small line of credit drawn under those circumstances is not fraudulent to First Deposit. In other words, even if the analysis applies to the Houfeks’ total financial situation and requires a “reasonableness” test, that objective test must take into account the peculiar characteristics and handicaps of the person to whom the test is applied. It is not just whether a reasonable person would have believed all of the family’s obligations could be repaid; rather, the test is whether Melinda Houfek, with no past experience in handling the family finances and with no knowledge of the degree of her husband’s business debts, knew or should have known that all of the family debts would not be repaid. The Court did not hear evidence that would support an affirmative answer to that inquiry.
After study of this circuit's holding in Ward, 857 F.2d at 1082, the Court finds that the debt from Melinda Houfek to First Deposit is not the type of obligation which should be excepted from discharge on grounds of false pretenses. First Deposit never relied upon James Houfek’s income nor performed any credit checks of him. There was no debt between James Houfek and First Deposit. First Deposit knew Melinda Houfek had no independent income. Further, Melinda Houfek had handled her account responsibility with her prior cash advances. In hindsight, James Houfek should have realized earlier that his business was going to fail and Melinda Houfek should have accepted more responsibility for being informed about her own and her family’s finances. That Melinda Houfek asked too few questions is not equivalent to false pretenses or fraud, however. Her serious illness further supports this conclusion. Accordingly, the Court finds that Melinda Houfek neither knew nor, given her circumstances, should have been expected to know that First Deposit’s debt would not be repaid.
Y. CONCLUSION
Based upon the foregoing, the Court will enter judgment in favor of James and Melinda Houfek and against First Deposit. The request for an award of attorney fees to counsel for the defendants is denied.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491283/ | ORDER GRANTING MOTION TO DISQUALIFY COUNSEL
BARBARA J. SELLERS, Bankruptcy Judge.
This matter is before the Court on the debtor’s motion seeking to disqualify plain*541tiff’s counsel from representation in this adversary proceeding.
The Court has jurisdiction in this matter under 28 U.S.C. § 1334 and the - General Order of Reference previously entered in this district. This is a core proceeding objecting to the debtor’s discharge and to the dischargeability of plaintiff’s debt. 28 U.S.C. § 157(b)(2)(I) and (J).
Plaintiff’s counsel, Mary Jane McFadden, is a partner in the law firm of Casey, McFadden and Winner. Another partner in that firm is Joseph C. Winner. At a time when Winner was associated with another law firm, he represented defendant Robert G. Crabtree in a variety of legal matters. Crabtree now alleges that Winner obtained confidential information in that prior representation which would make it inappropriate for Winner’s partner now to counsel his adversary in this proceeding.
As a moving party seeking to disqualify an attorney for a conflict of interest, Crabtree must show:
1. the moving party is a former client of the adverse party’s counsel;
2. there is a substantial relationship between the subject matter of the counsel’s prior representation of the moving party and the issues in the present lawsuit;
3. the attorney whose disqualification is sought had access to, or was likely to have had access to, relevant privileged information in the course of his prior representation of the client.
Evans v. Artek Systems Corp., 715 F.2d 788 (2nd Cir.1983).
The primary purpose for disqualification, if all tests are met, is to protect the confidentiality of information received from the former client, even if such information is only potentially involved in the current action. In re Dayco Corp. Derivative Securities Litigation, 102 F.R.D. 624 (S.D.Ohio 1984). Another purpose is to protect the integrity of the adversarial process. Board of Educ. of New York City v. Nyquist, 590 F.2d 1241 (2nd Cir.1979). Those concerns are expressed in Canons 4, 5 and 9 of the Code of Professional Responsibility, applicable to attorneys practicing in this court by Order 81-1 of the District Court of the Southern District of Ohio. Rule IV(B) of Order 81 — 1 incorporates by reference the Code of Professional Responsibility, as adopted by the Supreme Court of Ohio.
The Court heard much factual testimony from Crabtree and Winner. That testimony established the fact of the prior representation, although that fact was not contested. The testimony also established a superficial relationship between the subject matter of some of Winner’s prior representation and the subject matter of this lawsuit. That relationship was not substantial nor did it appear that Winner had gained any privileged information from that representation which would be relevant or useful in this action.
The Court is convinced that the nature and extent of confidential information imparted to Winner during his representation of Crabtree is not such that McFadden’s representation of the plaintiff in this action would be a violation of the governing canons and disciplinary rules. If ethical violations were the only concern, the defendant’s motion would be denied.
Had this motion been filed only to deflect formidable representation of the opponent, it also would be denied. The Court was convinced at the hearing, however, that defendant Crabtree genuinely believes he will not get a fair trial if his former counsel’s partner represents the plaintiff in this action against him. He believes that counsel has information which can be used against him and he perceives that the legal system would be “stacked against him” if McFadden continues to represent the plaintiff. The.Court understands that the trial would be fair and that the representation would be within ethical guidelines. Those facts are not decisive, however.
The Court’s function in this circumstance is to protect the perception of the legal system and the adversarial process before it. Accordingly, the Court finds that the legal system, as practiced in this Court, would be best served if the plaintiff obtains substitute counsel who has no past rela*542tionship to the defendant for the prosecution of this adversary proceeding.
Based upon the foregoing, the plaintiff will be given 30 days to find new counsel and for a substitution of such counsel to be filed with the Court.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491284/ | OPINION
OLLASON, Bankruptcy Judge:
Mr. Fulkrod petitioned for relief under Chapter 12 of the Bankruptcy Code on June 2, 1988. His plan of reorganization provided that three impaired creditors would be paid directly by him and not by the trustee. In confirming the plan, the bankruptcy court held that payments to impaired creditors must be made by the trustee. Mr. Fulkrod appeals from that order, claiming that it improperly increases the statutory fee payable to the trustee. We affirm.
Whether payments to creditors who are impaired by a Chapter 12 plan of reorganization must be made by the trustee, and which payments should be used to compute the trustee’s fees, are questions of statutory construction which we review de novo. Three divergent views have emerged from substantial judicial contemplation of these issues.
The first holds that all payments to impaired creditors must be collected and disbursed by the trustee and that he is paid a fee based upon the aggregate of those collections and payments. The second holds that the trustee or the debtor may disburse the payments but that, regardless of who actually disburses, the trustee’s fee *586is computed as a percentage of the aggregate impaired claims. The third view holds that the trustee need not disburse payments on impaired claims, and is entitled to a fee only on the payments actually collected and disbursed.
The first view is exemplified by Matter of Finkbine, 94 B.R. 461, 463-64 (Bankr.S.D.Ohio 1988). Noting general agreement that certain claims may be paid directly by a reorganizing debtor, Finkbine cited Matter of Sutton, 91 B.R. 184 (Bankr.M.D.Ga.1988), Matter of Logemann, 88 B.R. 938 (Bankr.S.D.Iowa 1988), and In re Hagensick, 73 B.R. 710 (Bankr.N.D.Iowa 1987), for the proposition that only unimpaired claims fit that category. The Finkbine court reasoned that:
In the absence of a clear Congressional directive, it is inconsistent with a statutory scheme that offers debtors opportunities to eliminate substantial obligations, to authorize debtors to avoid the responsibility of paying the statutory trustee fee, since the trustee’s office is part of the Congressionally created system that enables Chapter 12 debtors to propose a reorganization.
94 B.R. at 466. Finkbine cautioned that routine payment of impaired claims outside a reorganization plan would shift Congres-sionally assigned administrative duties, and jeopardize the continuing operation of the trustee’s office. The court also observed that trustee’s fees, though apparently disproportionate in a given case, are reasonable in the aggregate when awarded in accordance with the code. See id.
The bankruptcy court appears to have followed Finkbine in the case before us. The court acknowledged that “[sjections 1225 and 1226 ... contemplate direct payments by Debtor” but found an implied restriction limiting such direct payments “to secured creditors whose claims are unaltered and consequently are unaffected by the Plan....”
The second view, exemplified by Matter of Sutton, 91 B.R. 184 (Bankr.M.D.Ga. 1988), reaches a similar conclusion without addressing whether the act of disbursement amounts to encroachment on the trustee’s administrative authority. Citing Matter of Logemann, 88 B.R. 938 (Bankr. S.D.Iowa 1988), the Sutton court held that “the standing Chapter 12 trustee is entitled to collect a percentage fee on all payments made under the plan on impaired claims.” 91 B.R. at 186. Logemann focused on 28 U.S.C. section 586(e)(l)(B)(ii)(I), which provides for trustee compensation in an amount not more than ten percent “of the payments made under the plan of such debtor,” and concluded that the language “under the plan” makes the trustee’s fee turn upon impairment rather than upon who makes the payment. 88 B.R. at 941.
In re Hagensick, 73 B.R. 710 (Bankr.N. D.Iowa 1987), arrived at the same conclusion from a survey of analogous Chapter 13 cases,1 noting that when a defaulted mortgage was to be cured, or when a claim was limited to the value of the security, all payments on such claims were “under the plan” for purposes of determining trustee compensation. Conversely, payments were not deemed “under the plan” where the rights of creditors were not impaired, where the mortgage payments were never delinquent and there was no default to cure, and where current, fully secured automobile payments were made by automatic wage deduction. Id. at 713.
The common inquiry among these cases regards impairment to creditors’ rights by operation of bankruptcy law. They do not consider the identity of the payor. This view thus concludes that the trustee’s fee is computed from the payments on all impaired claims, regardless of who writes the checks.
The third view focuses on yet another statutory subsection. In In re Erickson Partnership, 77 B.R. 738 (Bankr.D.S.D.1987), aff'd., 83 B.R. 725 (D.S.D.1988), re*587versed on other grounds, 856 F.2d 1068 (8th Cir.1988), the court directed attention to 28 U.S.C. section 586(e)(2), which provides in part that the trustee “shall collect such percentage fee from all payments received by such individual under plans in cases under chapter 12 or 13 of title 11 for which such individual serves as standing trustee.” See 77 B.R. at 749-751; 83 B.R. at 727-728. The Executive Office for United States Trustees has opined that section 586(e)(2) “clearly precludes the standing trustee from receiving the statutory percentage fee on payments not actually received by the standing trustee.” 77 B.R. at 751 n. 15. Erickson and other courts that follow this view allow impaired claims to be paid outside the plan with no fee payable to the trustee for such payments. Accord, In re Crum, 85 B.R. 878 (Bankr.N.D.Fla.1988); Matter of Pianowski, 92 B.R. 225 (Bankr.W.D.Mich.1988); In re Heller, 105 B.R. 434 (Bankr.N.D.I11.1989). The district court in Erickson, 83 B.R. 725, imposed no restriction upon the debtor’s election to pay all secured creditors outside the plan without compensating the trustee, while Heller required that the court exercise its discretion to require sufficient trustee disbursements as will assure adequate compensation. 105 B.R. at 437-38 and n. 1.
Resolution of the conflicting interpretations of the Code requires an examination of the various statutory provisions and the contexts of their application. Statutory provision for direct payment from the debt- or to the creditor under Chapter 12 derives from three separate provisions of Title 11. 11 U.S.C. § 1222(a) provides that:
(a) The plan shall—
(1) provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan;
11 U.S.C. § 1225(a) provides that:
(a) Except as provided in subsection (b), the court shall confirm a plan if—
Jji )jC 5|S Sfc * ‡
(5) with respect to each allowed secured claim provided for by the plan—
* * # * * 5f«
(B)(i) the plan provides that the holder of such claim retain the lien securing such claim; and
(ii) The value, as of the effective date of the plan, of property to be distributed by the trustee or the debtor under the plan on account of such claim is not less than the allowed amount of such claim; ....
11 U.S.C. § 1226(c) provides that “[e]xcept as otherwise provided in the plan or in the order confirming the plan, the trustee shall make payments to creditors under the plan.”
28 U.S.C. section 586, which controls the compensation of standing trustees under chapters 12 and 13, provides for trustee compensation of not more than ten percent “of the payments made under the plan ...” and for collection of “such percentage fee from all payments received by [the trustee] under plans_” Section 586(e)(1).
The divergent judicial interpretations evidence some degree of ambiguity in the relevant statutes. That the trustee is to be compensated at up to ten percent of the plan payments, and is to collect such percentage from the funds tendered by the debtor for that purpose, would indicate that the trustee should make disbursements “under the plan.” There appears to be no distinction, however, between impaired and unimpaired claims among the statutes authorizing the debtor to disburse payments.
It is plain that Congress intended for the Chapter 12 trustee to play' a vital role in the administration of these cases.2 Congress also intended for those who reap the benefits of Chapter 12 to pay a substantial portion of the cost of administering the trustee’s office. Which payments must be earmarked for that purpose turns upon an analysis of what constitutes a payment “under the plan.”
*588We believe that Congress intended to use the term “under the plan” to mean those payments which result from the operation of Chapter 12 bankruptcy law. Those payments should be made by the trustee, and the trustee’s fee should be assessed against the funds received from the debtor for that purpose. Typically, those payments will involve impaired claims which the debtor could not insist upon but for the protections of Chapter 12. To have those protections, the Chapter 12 debtor must support the trustee’s office which is so integral a part of the Chapter 12 statutory scheme. The reckoning of the bill may not be precise, but it is the congressional benchmark, and we are bound to apply the law as written. We are mindful of the various policies advanced by the courts in favor of one position or another on this issue. But we believe that Congress was also cognizant of these policies and drafted the law with them in mind.
Generally, a plan should be drafted to include trustee payment of obligations impaired by bankruptcy law, and to exclude obligations which are not. While we do not conclude that impaired claims must always be disbursed by the trustee, or that unimpaired claims must always be disbursed by the debtor, we hold that the statutory trustee’s fees should be assessed against all payments made by the trustee, and that the trustee should disburse all payments on impaired claims in the absence of a contrary plan provision.
A contrary provision in a plan or an order confirming a plan is permissible because the code contemplates flexibility in the payment of claims, and would allow direct payment of an impaired claim without trustee compensation in appropriate circumstances.3 Whether such a plan provision should be allowed is committed to the sound discretion of the bankruptcy court. The exercise of that discretion would ordinarily consider, without implying any limitations, the impact of the trustee’s fees on the ability of the debtor to reorganize and the adequacy of the trustee’s compensation. The bankruptcy court’s order requiring the trustee to make the disbursements on all impaired claims in the case before us is consistent with the general rule, and we can find no abuse of discretion in that determination.
Mr. Fulkrod contends that this result is unfair because the act of disbursing the checks is de minimis. We emphasize that the trustee is not compensated for writing checks, but for fulfilling each duty assigned by Congress.4
Affirmed.
. Analogy to cases decided under Chapter 13 is particularly appropriate, as that chapter served as a model for Chapter 12, In re Mann Farms, Inc., 917 F.2d 1210, 1214 (9th Cir.1990), and Congress has legislated like treatment of trustee’s fees in both Chapter 12 and Chapter 13 cases. See 28 U.S.C. section 586.
. The legislative history of section 1326(b) (now 1326(c)), which is similar to section 1226(c), indicates that typically the trustee should collect the money and distribute it to the creditors. Senate Report No. 95-989, 95th Cong., 2d Sess. 142 (1978), U.S.Code Cong. & Admin.News 1978, p. 5787 (cited in Matter of Logemann, 88 B.R. at 941).
. By the foregoing, we do not imply that these sorts of arrangements should be routinely permitted by the bankruptcy courts. In the first place, there is a preference for trustees to administer estates and not to divide the job. And notwithstanding that debtor and creditor can agree to payment of a claim wholly outside the plan and, with the court's permission, to payment of even an impaired claim directly, such agreements can have dire consequences for both debtor and other creditors, particularly if they contain automatic lift stay or similar provisions which are triggered upon default. See Loge-mann, 88 B.R. at 941-942. Moreover, it is not improper to consider the impact of such agreements on the operation of the trustee’s office. The Logemann court emphasized that "policy grounds would mandate the court frequently exercising its discretion to determine and to direct what payments are received by the trustee. Clearly, concern over providing reasonable compensation for standing trustees in order to attract qualified and dedicated individuals cannot be overemphasized.” Id. Accord In re Heller, 105 B.R. at 438 (direct payment of impaired claim by debtor should be permitted where trustee is adequately compensated and where additional trustee fees would defeat reorganization).
. Trustee’s fees in excess of a pre-determined maximum annual compensation must be paid over to the United States Trustee. 28 U.S.C. section 586(e)(1)(A) and (2). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491286/ | ORDER ON DEBTOR’S OBJECTION TO CLAIM OF IRS
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a yet-to-be confirmed Chapter 11 case involving Bridget Nichelle Sims (Debtor). The matter under consideration is an Objection filed by the Debtor to the claim of the United States of America filed on behalf of the Internal Revenue Service (Government) in the amount of $168,327.35. The claim of the Government is based on 26 U.S.C. Section 6672 which authorizes the imposition of a 100% penalty on the “responsible person” who fails to deduct and pay over the trust fund portion of the payroll taxes incurred by the prime obligor, the employer. The penalty imposed involves the third quarter of 1988 and the first and third quarters of 1989. At the final evidentiary hearing the facts which are relevant were established to be as follows:
Perry, Inc., is a Florida corporation and was incorporated in December 1983 by Leroy Sims, the father of the Debtor. The corporation was engaged as a subcontractor forming and installing concrete curb-ings on construction projects. The Debtor, who is 25 years old at this time, started to work for the corporation first as a laborer and later was promoted by her father to be corporate secretary and vice-president. She also functioned as office manager. Although she is a high school graduate and had some limited additional formal education in a junior college, she did not graduate and has no formal training in accounting or in bookkeeping. She had no authority to fire or hire employees or fix salaries of employees.
The accounting and bookkeeping system of Perry, Inc., is maintained by computer which also stores the payroll records and all records pertaining to the outstanding accounts payable. She had checkwriting authority, not only from the general corporate operating account, but also the payroll account maintained by the corporation. In fact, over 80% of the payroll checks were signed by the Debtor and 25-50% of all checks drawn on the operating accounts *620were also signed by the Debtor. It was the Debtor’s responsibility, among other things, to inform the president of the corporation, her father, how much money was needed to meet the payroll and how much money should be transferred from the general operating account to meet the payroll expense, including funds necessary to pay payroll taxes. It is without question that the Debtor was fully aware that she did not transfer sufficient monies from the general corporate account to the payroll account to meet the withholding tax obligations imposed on the corporation by Statute. In addition, the Debtor prepared and signed Form 941 tax returns, with one exception — the fourth quarter of 1988, for the periods under consideration. It was her obligation and responsibility to balance the bank statements of the corporation and she was responsible for maintaining books and records of the corporation although, con-cededly, these records were all maintained by a computer. Nevertheless, it is clear she had the benefit of computer printouts which clearly indicated and left no doubt that the trust fund portion of the payroll taxes were not turned over to the Government. It is equally clear that she was fully aware of that fact, and notwithstanding, she paid other corporate bills, wages to the employees, including to herself, at the same time when the corporation failed to remit to the Government the trust funds required to be withheld, including the employees’ share of FICA taxes.
It is now conceded that Leroy Sims, the Debtor’s father, is, in fact, the “responsible person” and, therefore, the 100% penalty assessed against him is appropriate although the amount assessed is not conceded. Leroy Sims has his own Chapter 11 pending at this time as does Perry, Inc.
This leaves for consideration whether or not under applicable law, the Debtor is also a “responsible person”, thus liable for the unpaid employee withholding taxes. 26 U.S.C. § 6672 provides as follows:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of such tax evaded, or not collected, or not accounted for and paid over.
Sections 3102(a) and 3402(a) of the Internal Revenue Code require an employer to withhold federal income taxes and the employee’s share of FICA taxes from the wages paid to its employees. The Statute also provides that the taxes withheld from each employee’s wages constitute a special fund held in trust under Section 7501 of the Code for the exclusive use of the United States, and these trust funds shall not be used to pay the employer’s expenses, including salaries, or for any other purpose. Newsome v. United States, 431 F.2d 742 (5th Cir.1970); United States v. Hill, 368 F.2d 617 (5th Cir.1966).
Whether or not the person against whom the Government seeks to assess the 100% penalty under the Statute is, in fact, the “responsible person”, always depends on the particular fact situation involved. The term “responsible” is not interpreted in a rigid, formalistic manner. The Court always recognizes the practical experience and the economic realities of the particular business involved. Generally speaking, the Court will consider the status of the person charged in a corporate structure, that is, whether the person charged was an officer and had the authority to sign corporate checks or corporate tax returns; whether or not the person had an ownership or an equity interest in the enterprise; and whether or not the person was aware that the trust fund portions of the taxes were remitted to the Government.
It is well established that exclusive control over the affairs of the employer is not necessary. Thus, more than one person may be held to be the “responsible person” under 26 U.S.C. § 6672. Roth v. United States, 779 F.2d 1567, 1571 (11th Cir.1986). On the other hand, the person who is held to be responsible must have had “effective power and the correspond*621ing duty to insure that the trust funds are remitted to the United States.” Brown v. United States, 464 F.2d 590, 591 (5th Cir.1972); First National Bank in Palm Beach v. United States, 591 F.2d 1143, 1149 (5th Cir.1979). Based on the foregoing, it is clear that the resolution of the issue must be resolved by considering two distinct facts. First, was the Debtor the “responsible person” within the contemplation of 26 U.S.C. § 6672; second, if so, did the Debtor willfully fail to comply with the legal requirement to collect and remit the trust funds to the Government? As noted, the responsibility is basically a matter of status, duty and authority. Mazo v. United States, 591 F.2d 1151, 1154 (5th Cir.1979). It is not necessary for all the factors to appear. The totality of the factors which are present must lead one to conclude that the individual in fact possessed substantial control over the corporate finances. In re Clate, 69 B.R. 506, 509 (Bankr.W.D.Pa.1987), citing, United States v. Davidson, 558 F.Supp. 1048, 1052 (W.D.Mich.1982).
Concerning the required element of willfulness, this simply is nothing more than the responsible person knowing that the trust fund taxes were not remitted to the Government and failing to rectify the situation. In re Mazo, supra. It is clearly not necessary to establish that the responsible person acted with bad motivation or actually had a specific intention to defraud the Government. Sherman v. United States, 490 F.Supp. 747, 754 (E.D.Mich.1980).
It is now well established that the burden of proof is initially placed on the Government to establish that the person to be charged was the “responsible person” under 26 U.S.C. § 6672. Thibodeau v. United States, 828 F.2d 1499, 1504 (11th Cir.1987). However, as stated in Thibodeau, once the Government establishes who the responsible person is, the burden then shifts to the Debtor to prove lack of willfulness. Id. at 1505.
Based on the Statute and the facts in this case, the Government must prevail, unless this Court accepts the proposition that the Debtor was merely “a checkwrit-ing machine” who had neither the power nor the authority over the handling of trust funds.
Judge Thomas E. Baynes, Jr., a member of this Court, was called upon to consider a strikingly similar situation in In the Matter of Hanshaw, 94 B.R. 753 (Bankr.M.D.Fla. 1988). In that instance the person was found to have been a responsible person, was not an officer, director or shareholder, but was merely an employee hired as comptroller to perform basic accounting functions for the corporation, unlike the Debtor in the present instance. In Hanshaw, the debtor was found to be significantly more than a “breathing equivalent of a check-writing machine” who had no authority to direct the disbursement of corporate funds. See also, In the Matter of Brahm, 52 B.R. 606, 608 (Bankr.M.D.Fla.1985).
In support of the proposition that this Debtor was, in fact, a mere “checkwriting machine” without authority to control the disbursement of corporate funds, counsel for the Debtor urges that the Debtor is basically a young, unsophisticated person with limited education, lacking any business acumen or savvy, who merely followed the instructions of her father who was ultimately the decision maker. While it is conceded that she did, in fact, sign the vast majority of the checks, balanced the corporate books and records and signed the 941 returns, counsel claims that she blindly followed instructions of her father and had she not done so, she would have lost her job for not obeying the command of her father, a proposition not without serious doubt.
The fact that the Debtor’s father is admittedly a “responsible person” under the statute does not preclude the finding that this Debtor was also a “responsible person” who knew very well that the trust fund taxes were not turned over to the Government and failed to rectify it. There is no evidence in this record that she attempted to rectify the problem, but was prohibited by her father under the threat of losing her job. A similar defense was raised and rejected in the case of Howard *622v. United States, 711 F.2d 729, 734 (5th Cir.1983), where the court held:
The fact that the debtor might have been fired does not make him any less responsible for the payment of the taxes.
In sum, this Court is satisfied that the Debtor was, in fact, the “responsible person” within the meaning of 26 U.S.C. § 6672 and, therefore, the 100% assessment imposed by the Government was proper and she is legally responsible for the same. Based on the foregoing, her objection to the claim asserted by the Government is overruled and the claim under consideration is allowed as filed.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Debtor’s Objection to Claim of IRS be, and the same is hereby, overruled, and the claim of the Government is allowed as filed.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491287/ | MEMORANDUM OF OPINION ON CLAIM OF PHILIP R. RUSS
JOHN C. AKARD, Bankruptcy Judge.
The Bankruptcy Trustees1 in the captioned cases objected to a secured claim filed by Philip R. Russ (Russ) for the following reasons:
A. That the applicable statute of limitations barred Russ from exercising his claim on a note and mortgage executed by the Debtors. The court finds that Russ may pursue his claim on the mortgage in this bankruptcy proceeding.
B. That a portion of the mortgage securing the promissory note forming the basis of Russ’ claim erroneously described the Debtors’ property and, therefore, was void as against the Trustees who occupy the position of a bona fide purchaser. The court concludes that Russ’ claim to the erroneously described tract should be denied.
C. That since the mortgage was signed by Lazy Le Cattle Company; G.M. Atkinson, partner; and E.D. Atkinson, partner, but the property was owned by G.M. Atkinson and E.D. Atkinson, as individuals, the conveyance was not effective notice to a subsequent bona fide purchaser. The court finds that a bona fide purchaser would have had constructive notice of the mortgage.
The Trustee’s objection to Russ’ claim under the mortgage is, therefore, overruled except as to the erroneously described tract.
FACTS
On May 2, 1984, G.M. Atkinson, E.D. Atkinson, and Vivian Atkinson executed a $400,000.00 promissory note payable to Russ for attorney’s fees and expenses for prosecution of claims against Anadarko *715National Bank. The note was secured by a mortgage on a number of tracts of land in Union County, New Mexico, commonly known as the McCarley Place and the Robinson Place. “Lazy Le Cattle Company, a/k/a Atkinson Cattle Company, a partnership composed of E.D. Atkinson and Gene Malcolm Atkinson” granted the mortgage. The mortgage was filed for record on May 4, 1984. E.D. Atkinson and G.M. Atkinson, individually, owned the land in question.
On October 6, 1986 the Atkinsons filed for protection under Chapter 11 of the Bankruptcy Code. Russ represented the Atkinsons in their bankruptcy proceedings. The Debtors’ schedules listed Russ’ claim as contingent and undetermined at time of filing. The bar date for claims was March 9, 1987. On September 1, 1988, the court ordered a trustee appointed in each bankruptcy estate. The Trustees filed a liquidating plan for each Debtor.
On August 9, 1989, Connie McCarley, the first lienholder on the McCarley Place, obtained relief from the Automatic Stay. The court later issued an “Order Clarifying Lift of Stay” which stated that both McCarley and Russ were authorized to foreclose their liens on the McCarley Place. Subsequently the McCarley mortgage was conveyed to Loren F. Leighton. In 1989, Leighton and Russ instituted judicial foreclosure proceedings in New Mexico against the Debtors and the McCarley Place. The Trustees were not parties to this suit. On July 30, 1990, the New Mexico court entered a judgment and decree of foreclosure against the Debtors and the property, and ordered the property sold with proceeds to be applied to the court costs and the mortgages. The McCarley Place sold on September 10, 1990.
On August 20, 1990, Russ filed a secured claim with the bankruptcy court for $440,-000.00, including $40,000.00 in interest, on the judgment and the mortgage. Russ amended his claim on December 26, 1990 to reflect a credit of $176,500.00 (which he received from the sale of the McCarley Place) reducing the balance of his claim to $263,500.00.
Pursuant to this court’s order the Trustees sold the 1120 acre Robinson Place for $100,800.00 ($90.00 per acre) on October 29, 1990. The Trustees paid $54,277.44 to satisfy the first lien on the property. Expenses of the sale totaled $13,665.48. Russ seeks to enforce his claim as a lien on the $32,857.08 balance of the proceeds of the Robinson Place sale. Russ does not seek to enforce any unsecured portion of his claim.
Discussion
Statute of Limitations
The Trustees argue that since the promissory note was payable on demand, the statute of limitations began to run on the date of the note and, therefore, the statute of limitations expired prior to Russ filing his claim or exercising any other right under the note or mortgage. Thus, he could no longer enforce the note and mortgage.
New Mexico provides a six year statute of limitations on prosecution of a promissory note. N.M.StatAnn. S37-1-3 (1978). New Mexico also subscribes to the majority rule that the statute of limitations on a promissory note payable on demand begins to run from the date of the note’s execution. Schoonover v. Caudill, 65 N.M. 335, 336, 337 P.2d 402, 403 (1959).
The Debtors executed the promissory note on May 2, 1984. The terms of the note required payment “on demand and if no demand is made then ... thirty days following the conclusion of Atkinson litigation. ...” Applying the New Mexico statute of limitations, Russ’ cause of action on the note expired on May 2,1990. Although Russ filed his claim on August 20, 1990, he began foreclosure action on the McCarley Place in 1989. The New Mexico court granted a judgment and decree of foreclosure as to the McCarley Place on July 30, 1990. Russ’ lift of stay under the August 3, 1989 order and authorization to proceed in this foreclosure action were clarified by this court’s order on October 31, 1990. Therefore, Russ commenced action on the note, or at least on the McCarley Place, prior to expiration of the statute of limitations on May 2, 1990.
*716Some confusion exists as to whether the New Mexico state court was authorized to render judgment in favor of Russ on the entire note. The relief from stay and clarifying order only authorized Leighton and Russ to accelerate the indebtedness owed and to foreclose on the McCarley Place. Consequently, the New Mexico court may not have been authorized to proceed to judgment on the entire balance of the note. Therefore, the New Mexico action may not have been sufficient to toll the statute of limitations on enforcing the entire balance of the note.
To the extent that the New Mexico order does not toll the statute of limitations, Bankruptcy Code § 108(c) applies to extend the statute of limitations.2 See In re Martin-Trigona, 763 F.2d 503, 506 (2nd Cir.1985). Section 108(c) states:
[I]f applicable nonbankruptcy law ... fixes a period for commencing ... a civil action in a court other than a bankruptcy court on a claim against the debtor-... and such period has not expired before the date of the filing of the petition, then such period does not expire until the later of—
(1) the end of such period ... or
(2) 30 days after notice of the termination or expiration of the stay under section 362
Section 362(c)(2) states that unless the stay is terminated by court order, the stay
... continues until the earliest of—
(A) the time the case is closed;
(B) the time the case is dismissed ...
The Debtors’ bankruptcy cases were not closed or dismissed. Russ did not seek relief from the stay with respect to the Robinson Place. Therefore, under § 108(c)(2), the statute of limitations on Russ’ enforcement of the note has not expired.
Since Russ’ right to enforce the note and the mortgage has not expired under either scenario, the Trustees’ objection to the proof of claim based on the expiration of the statute of limitations is overruled.
Erroneous Legal Description
The mortgage securing the promissory note payable to Russ conveyed a tract of land described as the:
South Half of the Northeast Quarter (S/2 NE/4) and South Half of the South Half (S/2 S/2) of Section Twenty-Seven (27), Township Twenty-five (25) North, Range Thirty-four (34) East, N.M.P.M., Union County, New Mexico, (emphasis added).
Supposedly this tract consisted of 240 acres out of the Robinson Place. The Trustees claimed that the mortgage on this tract is an invalid lien because the correct description of the property is “... Section Twenty-seven (27), Township Twenty-five (25) North, Range Thirty-five ■ (35) East_” (emphasis added).
New Mexico requires that a mortgage describe the land to be conveyed with such particularity as to render the land capable of identification. Komadina v. Edmondson, 81 N.M. 467, 469, 468 P.2d 632, 634 (1970). Otherwise the mortgage is absolutely ineffectual. Id.
An erroneous legal description may be reformed if there has been a mutual mistake or a mistake by one party accompanied by fraud or other inequitable conduct by the other party. Wright v. Brem, 81 N.M. 410, 411, 467 P.2d 736, 737 (1970); Morris v. Merchant, 77 N.M. 411, 415, 423 P.2d 606, 608 (1967). However, the reformation of a legal description in a mortgage will not be allowed as against a subsequent bona fide purchaser of the land. Kimberly, Inc. v. Hays, 88 N.M. 140, 144, 537 P.2d 1402, 1406 (1975).
Under § 544(a)(3), the Trustees have the rights and powers of a bona fide purchaser of real property as of the time of the commencement of the case. Consequently, these Trustees are treated as having the rights of a bona fide purchaser of *717the disputed tract and may avoid any subsequent attempts to reform the erroneous description. Therefore, Russ’ claim on the erroneously described 240 acres of the Robinson Place is denied.
Mortgage Effectiveness Against Bona Fide Purchaser
New Mexico is a notice recording state, and a recorded document is notice to “all the world” of the instrument and contents of the recorded document from the time of its recording. N.M.Stat.Ann. SS 14-9-1 and 14-9-2 (1978). Camino Real Enterprises, Inc. v. Ortega, 107 N.M. 387, 388, 758 P.2d 801, 802 (1988). These statutes are designed to protect persons who have subsequent dealings with the property and provide notice to those persons who are bound to search the record. Romero v. Sanchez, 83 N.M. 358, 362, 492 P.2d 140, 144 (1971). Those bound to search the record are placed on constructive notice of the facts contained within the recorded instrument, and subsequent purchasers are charged with such notice. Angle v. Slayton, 102 N.M. 521, 523, 697 P.2d 940, 942 (1985).
A subsequent purchaser is placed on constructive notice of the contents of a document if he should have inquired into the contents of the document. Camino Real Enterprises, Inc., supra, 107 N.M. at 388, 758 P.2d at 802. A person is placed on inquiry and charged with a knowledge of the facts contained within a document when “circumstances are such that a reasonably prudent person should make inquiries.” Germany v. Murdock, 99 N.M. 679, 681, 662 P.2d 1346, 1348 (1983).
Each partner’s name is stated on the mortgage and both signed the mortgage as a partner.3 The mortgage described the property the Atkinsons owned in their individual capacities, except for the one erroneously described tract. The court finds that the mortgage is sufficient to place a reasonably prudent purchaser on inquiry as to its contents. A subsequent bona fide purchaser would have constructive notice of the mortgage and would be bound by its contents. The court grants Russ’ claim under the mortgage except to the extent of the erroneously described tract.
Calculation of Amount Russ is to Receive From Sale of Robinson Place
The Trustees sold the 1120 acre Robinson Place for $100,800.00 and paid the first lien mortgage holder $54,277.44. The expenses of the sale were $13,665.48. Section 506(c) states “[t]he trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of ... disposing of, such property to the extent of any benefit to the holder of such claim.” Russ benefit-ted from the Trustee’s sale of the property. After subtracting the expenses of the sale the net proceeds available to satisfy inferi- or liens is $32,857.08 ($29.34 per acre). Since Russ is not entitled to the 240 acres due to the misdescription in the mortgage, he has a valid claim to only 880 acres. Therefore, Russ is entitled to receive $25,-819.20 (880 aeres X $29.34 per acre).
ORDER ACCORDINGLY.
. Jim Clements is the Trustee in the G.M. Atkinson and Vivian Atkinson case and Mary Frances Dorsey is the Trustee in the E.D. Atkinson case.
. The Bankruptcy Code is 11 U.S.C. § 101 etseq. References to section numbers are references to sections in the Bankruptcy Code.
. The signature and acknowledgment recite G.M. Atkinson, rather than Gene Malcolm Atkinson as shown in the body of the mortgage. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491288/ | DECISION AND ORDER ON MOTION OF PLAINTIFF TO STRIKE CROSS CLAIMS AND COUNTERCLAIMS
LEIF M. CLARK, Bankruptcy Judge.
CAME ON for consideration the joint motion of Bettina M. Whyte (“Fiscal Agent/Trustee”), Merlin Express Inc. (“Merlin”) and Fairchild Gen-Aero, Inc. (“Gen-Aero”) to strike or dismiss the Counterclaims filed by GMF Investments, Inc. (“GMF”), Metro Aviation, Inc. (“Metro”) and Morgan Spectrum, Inc. (“Morgan”) (collectively referred to as “Defendants”). Upon consideration of the evidence presented, the arguments of counsel and the pleadings in the matter, the court enters this its decision disposing of these matters.
*719JURISDICTION
This Court has original subject matter jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b) and may enter a final order with respect thereto. 28 U.S.C. § 157(e)(2). This matter is a core proceeding. 28 U.S.C. §§ 157(b)(2)(A), (0).
FACTUAL BACKGROUND
There are a number of related entities that comprise GMF Investments, Inc. (“consolidated group”). Fairchild Aircraft Corporation (“Debtor”), Merlin and Gen-Aero, former subsidiaries of Debtor, were all part of this consolidated group. Merlin and Gen-Aero are now subsidiaries of Fair-child Acquisitions, Inc. Bettina Whyte was the Chapter 11 Trustee for the Debtor, whose plan was confirmed in September 1990. Ms. Whyte was appointed the Fiscal Agent under that plan. The Defendants Morgan and Metro are related entities to Defendant GMF Investments. As the common parent corporation, GMF in prior years filed consolidated federal income tax returns on behalf of all related entities, as permitted by 26 U.S.C. § 1501. There was no prior explicit agreement or understanding among the Debtor and the other related entities regarding the disposition of any tax refunds or the allocation of any losses resulting from the filing of the consolidated return.
On August 30, 1990 the Chapter 11 Trustee filed this Complaint to Determine Title to Tax Refunds and Application for Preliminary and Permanent Injunction. The original purpose of the Complaint was to safeguard certain tax refunds received and expected to be received from dissipation by other non-debtor entities which might assert an entitlement to all or a portion of these refunds (such as GMFI) and to determine title to such refunds. The estate has so far received two refund checks from the I.R.S. aggregating $1,709,-867.00, both of which checks were made payable to “GMFI Investments, Inc. and Subs.” Roughly $2,600,000.00 in total expected tax refunds due to the consolidated group is at issue.
Defendants counterclaim that the Trustee somehow conspired to “gain control” over the tax refunds at issue. Defendants assert that the 1989 return, prepared at the direction of the Trustee, misallocated the losses and the income between the various components of the GMF consolidated group and that, as a result, Defendants’ entitlement to a share of the tax refunds was unfairly reduced.1 They further contend that the accounting for the various entities is incorrect and that such flaws will ultimately affect who gets the refund and may, in fact, result in I.R.S. penalties.2 The Defendants request that they get their rightful share of the present and future tax refunds and that they receive damages for the loss of interest income resulting from their not being able to immediately receive their portion of the tax refunds at issue.3 They further assert damages “suffered as a result of the Trustee’s calculated actions,” suggesting an intent on the part of the Trustee to harm other members of the consolidated group by the manner in which it prepared and filed the consolidated returns from which these refunds resulted. Defendants also request a determination “that [they have] no liability for any penalties and interest arising out of the 1988 and 1989 returns.”
Defendants also assert a number of crossclaims against Deloitte-Touche (formerly known as Touche-Ross) and T. Charles Parr, a tax accountant with De-loitte-Touche. Deloitte-Touche prepared the tax returns in issue. Defendant claims that Mr. Parr and Deloitte-Touche have violated their duty of loyalty to GMF and have subjected them to potential liability *720out of the 1988, 1989 and 1990 tax returns. The relief requested is that these accountants be held liable for any penalties and interest as a result of the 1988, 1989 and 1990 tax returns and damages for this breach of loyalty. Neither of Parr nor Deloitte-Touche filed a motion to dismiss the crossclaims asserted against them and, accordingly, such these claims will not be addressed here.
ANALYSIS
I. FORUM
A threshold issue is whether this court is the appropriate forum in which to determine the competing rights to this tax refund. Defendants charge that, because this is at bottom an action to recover money, this court lacks the subject matter jurisdiction to even entertain this action, or at the least, lacks the authority to enter final orders in this adversary proceeding. They also charge that this court lacks the authority to conduct the jury trial they have requested, because this is an action at law while this court is a court of equity which cannot conduct jury trials.4
A number of recent decisions have had little difficulty in finding that this court is indeed an appropriate forum in which to determine the competing rights of parties in a tax refund resulting from a consolidated return, where one of the parties is a debtor in bankruptcy. See In re Reveo D.S., Inc., Ill B.R. 631 (Bankr.N.D.Ohio 1990), rev’d on other grounds, 898 F.2d 498 (6th Cir.1990) (income tax refund resulting from carryback of net operating loss against taxable income attributable to former subsidiary in prior year when it was member of debtor’s consolidated tax group belonged to subsidiary); Matter of Florida Park Banks, Inc., 110 B.R. 986 (Bankr.M. D.Fla.1990) (declaratory judgment brought under 28 U.S.C. §§ 2201 and 2202 to determine whether income tax refund from Internal Revenue Service was property of bankruptcy estate holding that the filing of consolidated tax return by affiliated corporations does not per se affect the entitlement of tax refunds between those corporations); In re Prudential Lines, Inc., 107 B.R. 832 (Bankr.S.D.N.Y.1989) (net operating losses are property of the estate); see also 28 U.S.C. §§ 1334(b), (d), 157(b)(2)(A); 11 U.S.C. §§ 505, 541. The bankruptcy court clearly has subject matter jurisdiction over questions involving property of the estate, including jurisdiction to decide respective entitlements to a given fund in which the estate asserts an interest. 28 U.S.C. § 1334(b); 11 U.S.C. § 541(a)(1); see also Matter of Wood, 825 F.2d 90, 93 (5th Cir.1987) (bankruptcy court has subject matter jurisdiction over any matter which could conceivably affect the administration of the estate). The bankruptcy court might even have exclusive jurisdiction over the matter in question, because it involves control over property of a bankruptcy estate. See 28 U.S.C. § 1334(d). In all events, there can be little doubt that the courts which have so freely exercised their jurisdiction in cases such as this have been justified in doing so. Defendants’ jurisdictional arguments are accordingly rejected.
II. INTERPLEADER
The Fiscal Agent faces the potential of multiple liability. Each of the individual affiliates of GMF Investments, Inc. may assert competing and potentially inconsistent claims to the tax refunds in issue. Three affiliates, GMFI, Morgan Spectrum, and Metro Aviation, have done exactly that. One legitimate method for handling such situations is interpleader, to let a court determine the competing rights of the various parties.
The Fiscal Agent’s complaint is, in essence, an interpleader action, though it is denominated a complaint for declaratory and injunctive relief. In fact, in the Joint *721Motion to Strike or Dismiss Counterclaims and Crossclaims, the Fiscal Agent characterizes her complaint as an effort to “inter-plead the tax refunds before the court....” An interpleader action is designed to protect a stakeholder from the possibility of multiple claims upon a single fund. See generally, Wright & Miller, Federal Civil Practice & Procedure § 1704 (1972); Maryland Casualty Company v. Glassell Taylor & Robinson, 156 F.2d 519 (5th Cir.1946). The interpleader statute and rule are “liberally construed to protect the stakeholder from the expense of defending twice, as well as to protect him from double liability.” New York Life Insurance Company v. Welch, 297 F.2d 787, 790 (D.C.Cir. 1961). The only real prerequisites to inter-pleader are the existence of a specific fund or property, and stakeholder’s demonstrating present or potential subjection to adverse claims, Dunbar v. United States, 502 F.2d 506 (5th Cir.1974), resulting in exposure to double or multiple liability. Fulton v. Kaiser Steel Corp., 897 F.2d 580 (5th Cir.1968).
These conditions are met here.5 Because the basic goal of an interpleader action is to determine entitlements, it is functionally no different than an action for declaratory relief which asks the same question and seeks the same kind of answer. Morongo Band of Mission Indians v. California State Board of Equal., 849 F.2d 1197, 1203 (9th Cir.1988) (quoting Thomas v. Shelton, 740 F.2d 478, 485 (7th Cir.1984)) (the purpose of, and the procedural advantage provided by, an interpleader action may be the same as that of a declaratory judgment action — the actions “enabl[e] a defendant to precipitate a plaintiffs suit in order to avoid multiple liability or other inconven-ienee.”). Nor does the fact that the Fiscal Agent sought injunctive relief as part of her complaint disqualify the action, as in-terpleaders frequently operate in conjunction with the use of injunctions against efforts by competing claimants to assert a superior right in or collection upon a res once the interpleader action has been initiated. Ashton v. Josephine Bay & C. Michael Paul Foundat. Inc., 918 F.2d 1065, 1068 (2nd Cir.1990); see also U.S. Steel Corp. Plan for Emp. Ins. v. Musisko, 885 F.2d 1170, 1176 (3rd Cir.1989), cert. den.,-U.S.-, 110 S.Ct. 1121, 107 L.Ed.2d 1028 (1990).
It is true that the initial complaint contended that the monies in issue were the exclusive property of the Debtor’s estate, and that declaratory and injunctive relief are forms of relief beyond the general purview of interpleader. However, a stakeholder is not precluded from seeking interpleader relief merely because the stakeholder asserts an interest in the res. California v. Texas, 437 U.S. 601, 98 S.Ct. 3107, 3110, 57 L.Ed.2d 464 (1978); Lummis v. White, 629 F.2d 397, 400 (5th Cir.1980). Courts have held that interpleader may be appropriate even where the claimants assert the stakeholders independent liability. See Libby, McNeill, and Libby v. City Nat. Bank, 592 F.2d 504, 507 (9th Cir.1978) (the mere potentiality of independent stakeholder liability, separate from liability for the interpleaded fund, will not defeat inter-pleader jurisdiction); Treinies v. Sunshine Mining Co., 308 U.S. 66, 60 S.Ct. 44, 84 L.Ed. 85 (1939) (interpleader proceeding in which both claimants had previously secured judgments against the stakeholder); Olivier v. Humble Oil and Refining Co., *722225 F.Supp. 536 (E.D.La.1963); see also Walker v. Pritzker, 705 F.2d 942, 944 (7th Cir.1983) (waiver of a claim against the stakeholder, but not against the fund, does not affect jurisdiction under the interpleader action).
Trustees, of course, have standing to bring interpleader actions. First Nat. Bank v. Perfection Bedding Co., 631 F.2d 31 (5th Cir.1980); Palomas Land & Cattle Co. v. Baldwin, 189 F.2d 936 (9th Cir.1951).
The common fund here is comprised of the tax refunds received (and to be received) by the consolidated group. The threat of multiple liability is that the Fiscal Agent may be sued by each and every affiliated entity of GMF each claiming some type of interest in the tax refunds. The Fiscal Agent has no assurances that those claims might not be competing—what if the aggregate claims exceed 100% of the res? Counterclaims against the Fiscal Agent will not defeat interpleader as an appropriate remedy. Libby, McNeill, 592 F.2d at 507. Nor will claims by the stakeholder against the res. See California v. Texas, 437 U.S. 601, 98 S.Ct. 3107, 3110, 57 L.Ed.2d 464 (1978); Lummis v. White, 629 F.2d 397, 400 (5th Cir.1980). Accordingly, this court holds that an interpleader action is an appropriate method to handle the ultimate disposition of the tax refunds, and that this action qualifies as an interpleader.
Because the fundamental purpose of this litigation exercise is in the nature of inter-pleader, to determine the parties’ entitlements to the tax refunds, the counterclaims of the defendants do indeed appear to be redundant, as plaintiff contends. Defendants’ request nothing more than does the plaintiff, namely, a determination of their share of the tax refund, together with an award for damages arising from any wrongdoing on anyone’s part in assembling and promptly distributing the refund to the appropriate parties. Characterizing this action as in the nature of an interpleader highlights the superfluity of defendants’ counterclaim.
III. CONSOLIDATED TAX RETURNS
Defendants’ damage theories may be immaterial if the tax statutes impose no particular duty on the filing entity to make any particular distribution to the various affiliates participating in the consolidated return. Indeed, there is no such duty imposed.
Affiliated corporations are authorized to file a single, consolidated tax return, combining the tax attributes of all affiliates as though they were one entity. See 26 U.S.C. §§ 1501-1564; Treas.Reg. § 1.1502-75, 26 C.F.R. § 1.1502-75 (rev. 1989). However, although filing consolidated returns, each participating affiliate continues to be treated as a separate taxable unit, the consolidated returns operating only to unite them for the purpose of tax computation. Helvering v. Morgan’s, Inc., 293 U.S. 121, 55 S.Ct. 60, 79 L.Ed. 232 (1934).6 Affiliated corporations filing consolidated returns continue to retain their individual taxpayer identity. Beneficial Loan Soc. of Bethlehem v. United States, 71 Ct.Cl. 557, 48 F.2d 686, cert. den. 284 U.S. 633, 52 S.Ct. 17, 76 L.Ed. 539 (1931). Consolidated tax returns’ members’ incomes and losses are merely summed and reported as taxable income for the entire consolidated group. Treas.Reg. §§ 1.1502-2, 12.
This is not to say that filing a consolidated return is not without consequences. Under regulations promulgated pursuant to 26 U.S.C. § 1502, both a common parent and each subsidiary are severally liable for the entire tax for a consolidated period, including any deficiency; thus a parent corporation in whose name consolidated returns were filed is liable for the entire amount of tax due from the consolidated group, as is each affiliated entity. J & S Carburetor Co. v. Commissioner, 93 T.C. 166, 168 (1989); Turnbull Inc. v. Commissioner, 373 F.2d 91 (5th Cir.1967), cert. den. 389 U.S. 842, 88 S.Ct. 72, 19 L.Ed.2d *723105 (1967); Treas.Reg. § 1.1502-6(a) (individual members of the consolidated group remain severally liable for any unpaid income tax liability from the consolidated return).
What entity is entitled to ultimately receive the benefit of a consolidated tax refund is not addressed in the Internal Revenue Code. Jump v. Manchester Life & Cas. Management Corp., 579 F.2d 449, 452 (8th Cir.1978); In re Bob Richards Chrysler-Plymouth Corp., Inc., 473 F.2d 262, 265 (9th Cir.1973), cert. den. 412 U.S. 919, 93 S.Ct. 2735, 37 L.Ed.2d 145 (1973) (“absent any differing agreement we feel that a tax refund resulting solely from offsetting the losses of one member of a consolidated filing group against the income of that same member in a prior or subsequent year should inure to the benefit of that member. Allowing the parent to keep any refunds arising solely from a subsidiary’s losses simply because the parent and subsidiary chose a procedural device to facilitate their income tax reporting unjustly enriches the parent”); see also Western Pacific Railroad Corp. v. Western Pacific Rail Co., 197 F.2d 994, 1004 (9th Cir.1951), reh’g denied, 197 F.2d 1012, rev’d on other grounds, 345 U.S. 247, 73 S.Ct. 656, 97 L.Ed. 986, prior opinion aff'd, 206 F.2d 495, cert. denied, 346 U.S. 910, 74 S.Ct. 241, 98 L.Ed. 407 (1954) (“nothing in the [Internal Revenue] Code or Regulations ... compels the conclusion that a tax savings must or should inure to the benefit ... of the company which has sustained the loss that makes possible the tax saving”) (emphasis added).7
IV. THE LAW APPLIED TO DEFENDANTS’ COUNTERCLAIMS
Defendant’s claims are both immaterial and redundant when one views them in conjunction with the Internal Revenue Service regulations, case law and the general nature of interpleader. The assertions that the Fiscal Agent is attempting to maximize her portion of the refund presses the ultimate issue already presented in the Trustee’s complaint, namely, how is the tax refund to be apportioned. In fact, the assertion that the Trustee was “violating duties” when first obtaining actual possession of the tax refund is especially questionable when viewed in the context of the Internal Revenue Code provisions for tax refunds to certain fiduciaries (such as the Chapter 11 Trustee and her successor, the Fiscal Agent):
Refunds to certain fiduciaries of insolvent members of affiliated groups. Notwithstanding any other provision of law, in the case of an insolvent corporation which is a member of an affiliated group of corporations filing a consolidated return for any taxable year and which is subject to a statutory or court appointed fiduciary, the Secretary may by regulation provide that any refund for such taxable year may be paid on behalf of such insolvent corporation to such fiduciary to the extent that the Secretary determines that the refund is attributable to losses or credits of such insolvent corporation.
26 U.S.C. § 6402(i). The Trustee’s actions in initially receiving the refunds against the background of this section of the Tax Code are appropriate, or at the least not actionable. Add to this the fact that there was no agreement between the parties to the contrary, that the tax refunds were placed into the registry of the court pending the ultimate disposition of this declaratory action, and that there is no I.R.S. regulation allocating such refunds among consolidated members (see Jump v. Manchester Life & Cas. Management Corp., 579 F.2d at 452), and one finds it difficult to imagine just what other course of action a reasonable person in the position of the Chapter 11 trustee could have responsibly taken. The Trustee cannot, as a matter of law, incur liability for having filed the consolidated return or for having arranged for the estate to receive the tax refund checks, especially because she initiated this action to then promptly determine respective rights in the refunds.
The Defendant’s prayer for relief seeks a declaration as to how the tax refunds are *724to be distributed — exactly what the Trustee is requesting. Until there has been such a court determination, no party has a superi- or right to any of the tax refunds, regardless of pleading contentions to the contrary. Interpleader is designed to handle just such a controversy and no liability can attach to the Trustee’s actions in placing the tax refunds with this court for a declaration of respective entitlements consistent with interpleader relief. The request in Defendant’s counterclaim is merely redundant of the plaintiff’s request for declaratory relief.
Even if we were to take at face value Defendants’ contentions that they were somehow deprived of “immediate access” to the refund (by virtue of its having been obtained by the Trustee rather than by the parent entity of the consolidated group, GMFI), there is an inherent inconsistency in the logic of Defendants’ claim that they suffered “lost opportunity cost” damages. If the Defendants had in fact received what they are now saying they were deprived of, i.e., the tax refunds or their share, they would have had no choice but to follow a procedure similar to that which the Trustee here employed. Because the ownership of the monies would be in issue regardless of who received the check, Defendants would also have had to have sought a court determination as to how such refund would be apportioned. This is especially so here because one of the parties claiming a portion of the refund is a bankruptcy estate. Failure to account for property of a bankruptcy estate could result in violations of the automatic stay, liability under Section 549 for unauthorized post-petition transfers, or worse.8
Defendants are really arguing that they should have received the monies first so they could generate income, in essence, preserving any resulting opportunity cost for their own benefit. In fact, there was no opportunity cost to lose. Even had Defendants received the refund first, the monies would still have had to have been placed into an account awaiting judicial determination. The only conceivable way that Defendants could have derived any “opportunity cost” benefit from the refund would have been for them not to have disclosed that they had, in fact, received the monies in the first place. In short, all Defendants have lost is the opportunity to convert or expropriate the estate’s money. This court cannot award damages that could only have been obtained in violation of the law.
If the Defendants had any true conviction that the consolidated returns were improperly completed (as they broadly suggest), the most obvious (and perhaps only) remedy would be for them to file an amended consolidated return. Instead, the Defendants are expecting this court to determine that the consolidated returns were improperly completed (warranting an allocation of the refund different from that suggested by the figures used in the return), without making the Internal Revenue Service a party. In essence, the Defendants invite this court to permit the parties to present the IRS with one set of figures, and this court with another set. This court will not consider any different figures than those presented to the IRS, which means that the parties will be bound by the figures in the current return unless they elect to file an amended return. To adopt any other course is to issue an open invitation to the commission of tax fraud.
Given that the disputed monies are accumulating interest, whoever gets the refund, or portion thereof, will also be entitled to this interest. In essence, all parties will come out whole insofar as “lost interest” damages are concerned. This element of Defendants’ counterclaim is groundless.
Defendants claims are also immaterial. By the very nature of filing consolidated returns the individual entities lose the status of individuality to a degree. Income and expenses for the consolidated group are added in sum total. Treasury Regulation § 1.1502-2 and 12. It would not matter if there were internal inconsistencies, e.g. income understated for one entity and overstated for another, because only the *725overall effect is relevant for tax purposes. Any internal problems would “wash out.” Viewed in this context, Defendant’s claims are immaterial as it does not matter how the income and expenses are apportioned internally as it is the net effect of the consolidated group that is important for tax purposes.9 Defendants, are already free to present arguments as to how much of the refunds they are entitled to in response to plaintiffs original declaratory action, making that portion of the counterclaims seeking damages growing out of allocation of tax attributes and the like both redundant and immaterial.
Defendants also request that this court make a determination that “it [sic] has no liability for any penalties and interest arising out of the 1988 and 1989 returns.” Given that there is a split of authority over whether bankruptcy courts have jurisdiction over the determination of nondebtors’ tax liability, the court cannot justify striking this aspect of the Defendant’s counterclaim as a matter of law at this time. See Quattrone Accountants, Inc. v. I.R.S., 895 F.2d 921 (3rd Cir.1990). The court, however, must require the Defendants to show that resolution of this issue would conceivably affect the administration of the bankruptcy case. 28 U.S.C. § 1334(b); Matter of Wood, 825 F.2d 90, 93 (5th Cir.1987); Quattrone Accountants, 895 F.2d at 926 (“the outcome of [this] proceeding could conceivably have any effect on the estate being administered in bankruptcy”). Absent such a showing, this portion of the counterclaim would have be to stricken as well for lack of subject matter jurisdiction.
CONCLUSION
“[T]he court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f) (emphasis added). Defendants are requesting the identical relief the Fiscal Agent is requesting. Both parties want to know who gets how much of the tax refunds. The Fiscal Agent has promptly deposited the monies in controversy with the court. This court is an appropriate forum to determine such apportionment. Accordingly, Defendants’ counterclaims (except the request for a determination of their tax liability) against the Fiscal Agent, Merlin and Gen-Aero are hereby stricken, with prejudice to refiling, as the relief requested is redundant and immaterial.
So ORDERED.
. Behind the defendants’ theory is the presupposition that the parties’ respective share of the consolidated tax refund would be allocated based upon the tax attributes of each respective related entity.
. Defendant’s speculation as to what the I.R.S. may or may not do is premature at this stage. One can only conjecture whether the I.R.S. will levy penalties for inaccurate or incomplete tax returns.
.That is, from being forced to endure this action to determine entitlements to the tax refunds.
. See In re Kaiser Steel Corp., 911 F.2d 380 (10th Cir.1990). This court need not address this point at this stage in the proceedings, based upon the ultimate disposition of this motion. However, neither the Supreme Court nor the Fifth Circuit have definitively answered this question either way. This court presumes that it has the authority to conduct jury trials, all other things being equal. See M & E Contractors, Inc. v. Kugler-Morris General Contractors, 67 B.R. 260, 267 (N.D.Tex.1986).
. This court is justified in looking to the substance of the Fiscal Agent’s complaint, apart from any formal name that happens to be given to such complaint. Registration Control Systems, Inc. v. CompuSystems, Inc., 922 F.2d 805, 808 (Fed.Cir.1990) (quoting 2A Moore’s Federal Practice para. 7.05, at 7-17 (1990)) ("it is a motion's substance, and not merely its linguistic form, that determines its nature and legal effect.’’). In a similar context, although not directly on point, it is not necessary that the particular legal theory be pleaded in complaint if the plaintiff sets forth sufficient factual allegations to state a claim showing that he is entitled to relief under some legal theory. Fitzgerald v. Codex Corp., 882 F.2d 586 (1st Cir.1989); see Ghebreselassie v. Coleman Secur. Service, 829 F.2d 892 (9th Cir.1987) (properly pleaded claim in federal court need not specify under what law it arises, since complaint need only set forth short and plain statement of claim showing that pleader is entitled to relief); Bechtel v. Robinson, 886 F.2d 644 (3rd Cir.1989) (as long as issue is pled, party does not have to state exact theory of relief in order to obtain a remedy).
. Such returns might form the basis for the equitable apportionment among the affiliated entities of the tax thus computed, though neither the Tax Code nor the Treasury Regulations seem to mandate such a result. Id.
. Our case involves a refund as compared to a tax savings, however, the analogy is appropriate.
. See 18 U.S.C. § 152.
. Recall that an examination into internal inconsistencies is really nothing more than a call upon this court to "audit" the consolidated return. If the numbers are indeed incorrect, then, as pointed out above, the appropriate remedy is an amended return. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491290/ | MEMORANDUM OPINION
MARY D. SCOTT, Bankruptcy Judge.
Debtor, pursuant to 11 U.S.C. § 522, has filed a Complaint, Adversary Proceeding No. 90-4019, against the Bank of Cabot (Bank) and the Chapter 7 Trustee seeking to avoid a transfer. He seeks to set aside a state court Commissioner’s sale held September 25, 1989. He also seeks to avoid the Bank’s judicial lien on certain properties. Finally, he seeks possession of certain of the real property described in the Complaint. The Bank seeks dismissal of the Complaint. It has also filed a Motion for Relief from the Automatic Stay. Both the debtor’s Complaint and the Motion for Relief from Stay were combined for trial December 13, 1990.
At the conclusion of all evidence the parties were directed to submit post-trial briefs no later than January 18, 1991. The parties timely complied with the Court’s directive and the case was taken under submission January 19, 1991.
This Court has jurisdiction over the case pursuant to 28 U.S.C. § 1334. Moreover, the Court finds that the matter before it is a “core matter” within the meaning of 28 U.S.C. § 157(b)(1) as exemplified in 28 U.S.C. § 157(b)(2)(B).
Debtor specifically seeks to avoid a pre-petition judicial sale of certain of his property pursuant to 11 U.S.C. § 522(h)' and (i). The property sold at the judicial sale consisted of real estate and personalty. The debtor ultimately seeks to claim a homestead exemption in part of the real estate. Because sale of that property was included as part of a bulk sale, he argues that the entire sale must be set aside in order to free the 55-acre parcel he seeks to exempt.
The Bank contends the debtor, an unmarried person, is not entitled to a homestead exemption under the Arkansas Constitution and, hence cannot prevail. The Bank asserts that it is entitled to relief from the automatic stay to complete the state court proceedings. The Trustee appeared, but did not intervene and does not seek any relief.
The debtor correctly contends that he may assert what is generally the Trustee’s power to avoid a preferential transfer pursuant to section 547 of the Bankruptcy Code if the conditions outlined in section 522(h) are met: (1) the trustee does not seek to avoid the transfer; (2) the transfer the debtor wants to set aside was involuntary and not concealed by the debtor; (3) the trustee could have avoided the transfer under section 547; and (4) the property the debtor seeks to recover is exempt. The *25debtor acknowledges that he must meet all of these conditions and argues that he has done so. After hearing testimony, however, the Court finds that he has not established that he would be entitled to claim an exemption in a homestead if he recovered the property and the relief requested in the Complaint should be denied, and the Bank’s Motion for Relief from Stay granted.
Debtor argues, in support of his contention that the property he seeks to recover is exempt, that “at no point has Debtor’s right to a homestead exemption been challenged, and pursuant to 11 U.S.C. § 511(i), unless a party in interest objects, the property which the debtor claims as exempt is exempt.” (p. 6 of Debtor’s brief) Debtor’s argument is flawed. Property which cannot be claimed exempt as a matter of law does not become exempt just because no one filed a timely objection. See In re Stutterheim, 109 B.R. 1006, affirmed 109 B.R. 1010 (Bkrtcy.D.Ka.1988); In re Davis, 105 B.R. 288 (Bkrtcy.W.D.Pa. 1989); In re Frazier, 104 B.R. 255 (Bkrtcy.N.D.Cal.1989). This argument does not rise to the level of sufficient proof to support a conclusion, that as a matter of law, he is entitled to claim a homestead exemption. Rather, he must establish entitlement if he is to succeed in the pending action.
Article 9, § 3 of the Arkansas Constitution of 1874 provides as follows:
“The homestead of any resident of this State who is married or the head of a family shall not be subject to the lien of any judgment, or decree of any court, or to sale under execution or other process thereon, except such as may be rendered for the purchase money or for specific liens, laborers’ or mechanics’ liens for improving the same, or for taxes, or against executors, administrators, guardians, receivers, attorneys for moneys collected by them and other trustees of an express trust for moneys due from them in their fiduciary capacity.”
Debtor testified on cross examination that he is not married. No evidence was presented which would establish entitlement to the exemption as a head of a family. Monroe v. Monroe, 250 Ark. 434, 465 S.W.2d 347, 348 (1971). The protection of the family from dependence and want is the object of all homestead laws. Apart from his or her family, a debtor is entitled to no special consideration. Harbison v. Vaughn, 42 Ark. 539, 541 (1884). To constitute a family, within the meaning of the homestead laws, there must be an obligation upon the head of the house to support other individuals and, on their part, a corresponding state of dependence. Id. See, also Yadon v. Yadon, 202 Ark. 634, 151 S.W.2d 969 (1941).1
In summary, the debtor has not established entitlement to a homestead exemption and hence, cannot meet all the requirements outlined in section 522(h) in order to prevail.
Accordingly, it is hereby
ORDERED that the relief requested in the Complaint to avoid a preferential transfer is denied, and the Bank's Motion for Relief from Stay is granted. A judgment will be entered in accordance with the foregoing.
IT IS SO ORDERED.
. A good review of the Arkansas homestead exemption and burden of proof necessary to establish entitlement may be found In re Pate, 95 B.R. 102 (Bkrtcy.W.D.Ark.1988). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491293/ | MEMORANDUM OF OPINION ON OBJECTION TO THE CLAIM OF PACCOM LEASING
JOHN C. AKARD, Bankruptcy Judge.
Daniel D. McDaniel and Julia B. McDaniel (McDaniels) objected to the claim of Paccom Leasing Corporation (Paccom). The court allows Paccom’s claim for $160,-000.00.
FACTS
On January 4, 1990 the McDaniels filed for relief under Chapter 11 of the Bankruptcy Code. The court confirmed their plan of reorganization by order entered September 4,1990, and retained jurisdiction to determine objections to claims.
Paccom is an Oregon based equipment leasing company. Paccom’s claim is based upon the McDaniels’ guaranties of a lease under which Paccom leased equipment to Yoemen Enterprises of Colorado, Inc., d/b/a Quality Steaks (Quality Steaks). Quality Steaks used the equipment at its plant in Denver, Colorado. The McDaniels are Texas residents. They signed the guaranties in Texas. Mr. McDaniel was a director of Quality Steaks at the time the guaranties were signed. The “Master Equipment Lease Agreement” (Master Lease) dated August 20, 1986 concerned a Boldt column dumper with related equipment (Dumper), and other equipment. The *134lease was for a 72 month term at $2,443.08 per month. The McDaniels signed a personal guaranty of the lease on August 25, 1986 (Personal Guaranty). Subsequently, the parties entered into “Lease Schedule No. 1” (Schedule 1) dated October 28, 1986 which concerned a Kartridge Pack Chub Machine (Chub) and the monthly payments for that equipment. The McDaniels signed an “Addendum to Personal Guaranty” which described Schedule 1. Finally, the parties entered into “Lease Schedule No. II” (Schedule 2) dated April 13, 1987. It described additional equipment and the monthly payments for that equipment. The McDaniels signed an “Addendum to Personal Guaranty” describing Schedule 2.1
Quality Steaks defaulted on the lease and, in early May, 1989, Paccom took possession of the equipment. The Chub was sold in place on May 4, 1989 to a third party for $34,500.00. On the same date the Dumper was sold to a third party for $3,600.00. The balance of the equipment was moved to storage where it remains in spite of Paccom’s attempts to sell it at private sale.
Paccom did not give the McDaniels notice of Quality Steaks’ default, did not make demand upon the McDaniels to cure the default, and did not notify the McDaniels that Paccom intended to accelerate the obligation and retake possession of the equipment. The McDaniels received no prior notice of the May 4, 1989 sales. The first time the McDaniels heard of these actions was on receipt of a letter from Paccom dated June 7, 1989 entitled “Notice of Private Sale”. The notice described the equipment in the Master Lease, Schedule 1, and Schedule 2 (including the Dumper and the Chub). The notice stated that the items would be sold at private sale on or about June 28,1989. The only sales were the two made before the date of the notice.
The parties stipulated that Paccom’s claim is for $257,380.00 less credits for the sale of the equipment and the fair market value of the equipment on hand. Paccom agreed to give credits for $34,500.00 (the sale price of the Chub), $3,600.00 (the sale price of the Dumper) and $59,280.00 which is Paccom’s valuation of the equipment on hand, leaving a net claim of $160,000.00.
POSITIONS OF THE PARTIES
The parties agreed that the lease is a security agreement because Quality Steaks retained the right to purchase the equipment at the end of the lease for $1. The parties also agreed that the McDaniels are “debtors” as that term is used in the Uniform Commercial Code as adopted by both Texas and Oregon.
The McDaniels asserted that the Chub and the Dumper were sold for inadequate prices, that the equipment remaining has a substantially higher fair market value than Paccom’s asserted value, that the equipment was in Paccom’s possession for an unreasonable length of time resulting in Paccom’s accepting it in cancellation of the debt, and that they have no liability to Paccom because they were not given notice prior to the May 4, 1989 sales. As authority for their position, the Debtors cited Tannenbaum v. Economics Laboratory, Inc., 628 S.W.2d 769 (Tex.1982).
Paccom asserted that under Oregon law the sale without notice to the McDaniels resulted in a presumption that the equipment was worth the amount of the debt, which presumption could be rebutted, and that Paccom rebutted that presumption thereby allowing it to recover the balance due on the lease. Paccom cited All-States Leasing Co. v. Ochs, 42 Or.App. 319, 600 P.2d 899 (1979) to support its position.
The McDaniels averred that the lease transaction should be construed in accordance with Texas law since the McDaniels are Texas residents and they signed the guaranties in Texas. Paccom argued that Oregon law applied because both the Master Lease and the Personal Guaranty provided that the laws of the State of Oregon governed potential disputes. Neither party *135suggested that the court apply Colorado law.
DISCUSSION
Applicable Law
The Uniform Commercial Code (U.C.C.) was adopted in Oregon as § 71.1010 et seq. of the Oregon Revised Statutes. Or.Rev.Stat. § 71.1050 (1989) states:
[W]hen a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties.
Texas adopted the identical provision in § 1.105 of its version of the U.C.C.Tex.Bus. & Com.Code Ann. (Vernon 1968).
The Master Lease provided that its terms would be construed in accordance with Oregon law. Paccom's headquarters are in Oregon and the Master Lease was not effective until Paccom approved it at its office in Portland, Oregon. Disputes under the Master Lease (except for bankruptcy matters) were to be submitted to arbitration under Oregon law in Portland. The lease did not specify where the rental payments were to be made. Any notices under the lease were to go to Quality Steaks in Denver, Colorado, and to Paccom in Portland, Oregon.
The Personal Guaranty, subtitled “Absolute, Unconditional, and Continuing Guaranty Agreement”, gave Paccom’s address in Portland and called for any notices to be sent to the Debtors at P.O. Box 1138, Cameron, TX 76520. Pertinent provisions of the guaranty read:
1. Guaranty. Guarantors absolutely, unconditionally and irrevocably guarantee to Lessor the due and punctual payment, observance and performance by Lessee of all of the obligations and liabilities of Lessee under the Lease, both present and future, and any and all subsequent renewals, continuations, modifications, supplements and amendments. If Lessee fails duly and punctually to pay, observe and perform any or all of the Obligations, Guarantor shall, upon demand by Lessor, immediately pay, perform and observe such Obligations strictly in accordance with the terms of the Lease.
3. Waivers of Notice, Etc. Guarantors waive diligence, presentment, demand, protest or notice of any kind whatsoever with respect to this Guaranty or the Obligations, including without limitation ....
(iv) any notice of any sale, transfer or other disposition of any right, title to or interest in the Lease, the equipment or any collateral security, or any part thereof....
6. Guaranty of Performance, Etc. This Guaranty is a guaranty of payment and performance and not of collection ....
13. Miscellaneous Provisions. This Guaranty shall be governed by the laws of the State of Oregon. The Guarantors and Lessor hereby consent to the jurisdiction of the Supreme Court of the State of Oregon and of any Federal Court located in such State for a determination of any dispute, outside those that are resolved in arbitration, as to any matters whatsoever arising out of or in any way connected with this Guaranty and authorize service of process on the Guarantors by certified or registered mail sent to the Guarantors at the address for the Guarantors as set forth hereinbe-low.
The McDaniels focus on the - Personal Guaranty and assert that it does not bear a “reasonable relation” to Oregon, pointing out that they are residents of Texas, that they signed the guaranty in Texas, and that they filed their bankruptcy case in Texas. However, the Personal Guaranty is only one part of this transaction. The McDaniels guaranteed Quality Steaks’ payments and performance under the Master Lease. Thus, the court must look to both documents in order to determine whether *136the transaction bears a “reasonable relation” to Oregon law. After a thorough consideration of the provisions of the Master Lease described above, the court finds that Oregon law bears a “reasonable relation” to this transaction and that the choice of law provisions in the lease and guaranty should be honored. See Admiral Ins. Co. v. Brinkcraft Development, Ltd., 921 F.2d 591 (5th Cir.1991) (stating that it is permissible for parties to a multistate transaction to include choice of law provisions in their contracts so long as the law they choose bears some relation to the transaction).
Valuation
All witnesses agreed that the equipment in question was highly specialized and that there was no ready market for it. Mr. McDaniel was the only witness on valuation presented by the McDaniels. He stated that when he and “some other people” set up Quality Steaks they found that used equipment cost almost as much as new equipment. Therefore, he thought the equipment should have sold for a price somewhere near its original cost. He stated that the equipment was in good condition and in good working order. Quality Steaks purchased the Chub in 1986 for $50,000.00. It sold on May 4, 1989 for $34,500.00 (69% of its original cost). The testimony and evidence at hearing did not reveal the original cost of the Dumper.
The Denver auctioneer, who assisted Paccom in the repossession, sale and storage of this equipment, testified that in 1989 several meat processing plants closed. Thus, there was a very small market for this equipment in 1989. He testified that the prices received for the Dumper and Chub were reasonable considering the market. He made the sales after consultation with Paccom. Due to the specialized nature and small market for this equipment, he testified that an auction was not an appropriate method of selling the remaining equipment. Although he contacted brokers, dealers and prospective users of the remaining equipment, he was unable to sell any of it.
Paccom based its valuation of the remaining equipment on an appraisal by another independent auctioneer. He based his valuation on market research and an extended time to find buyers. He testified that if the equipment were to sell on a quick sale basis, it would bring approximately one-half of the amount at which it was valued.
Mr. McDaniel is understandably frustrated that the equipment did not sell for enough to pay this obligation in its entirety. However, the court finds that the sale prices achieved by Paccom and Paccom’s valuation of the remaining equipment are the fair market values of the items.
Effect of Lack of Notice
A critical issue in this case is the effect of Paccom’s failure to give the McDaniels notice of the proposed sale of the collateral. The pertinent portions of the Oregon Revised Statutes read as follows:
79.1050(d) “Debtor” means the person who owes payment or other performance of the obligation secured, whether or not the person owns or has rights in the collateral.
79.5040(3) [Ejvery aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable. [Reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the secured party to the debtor.
The McDaniels were “persons who owe payment” under Or.Rev.Stat. § 79.1050. Thus, they were entitled to notice of the proposed public or private sale under Or. Rev.Stat. § 79.5040. What is the effect of Paccom’s failure to give that notice? The question is resolved by the decision of the Oregon Court of Appeals in All-States Leasing Co. v. Ochs, 42 Or.App. 319, 600 P.2d 899 (1979). In Ochs the court was confronted with the argument that the sale was not conducted in a commercially reasonable manner and, for that reason, the *137secured party could not collect any deficiency from the debtor. The court considered three lines of authority on this issue and stated “We agree with those courts which have held that a secured party’s failure to comply with Or.Rev.Stat. § 79.5040 does not preclude a deficiency.” Id. 600 P.2d at 906. The court adopted the line of authority which holds:
Noncompliance with [Or.Rev.Stat. § 79.5040] gives rise to a presumption in favor of the debtor that the collateral was worth the amount of the outstanding debt at the time of default and the debtor is freed from any deficiency unless the creditor proves that the fair market value of the collateral was no greater than the sales price. Id. at 906.
Although the court in Ochs dealt with the contention that the sale was not conducted in a commercially reasonable manner, that requirement appears in the same subdivision of Or.Rev.Stat. § 79.5040 as the notice requirement. Also, the court did not limit its discussion to the commercial reasonableness requirement but rather referred generally to Or.Rev.Stat. § 79.5040. In the instant case, the parties did not cite any Oregon case dealing specifically with the notice requirement, but the Ochs rule, (which appears to have been consistently followed in Oregon) leads this court to conclude that it should be applied to the notice requirement as well. See also FDIC v. Tempest Fugat, 75 Or.App. 536, 707 P.2d 81 (1985). The court finds that Paccom overcame the presumption that the collateral was worth the amount of the outstanding debt at the time of default and that Oregon law entitles Paccom to a deficiency judgment.
Retention of the Collateral
The McDaniels argued that Paccom is deemed to have retained the collateral in full satisfaction of the debt. However, Or. Rev.Stat. § 79.5050(2) (1989) dictates a contrary result, stating:
[A] secured party in possession may, after default, propose to retain the collateral in satisfaction of the obligation. Written notice of such proposal shall be sent to the debtor if the debtor has not signed after default a statement renouncing or modifying the debtor’s rights under this subsection.
Paccom gave no written notice of proposed retention to the McDaniels or to Quality Steaks.
In Fugat, supra, the Oregon Court of Appeals considered whether a creditor’s election to retain collateral in satisfaction of the debt might be implied by conduct. In Fugat 22 months passed between repossession and sale of an airplane during which time the sales agent ran up 300 hours of unauthorized use of the airplane. The Fugat Court noted three lines of authority on this issue. One line holds that written notice to the debtor is required. “A second approach is that an election can be implied from an unreasonably long retention of the collateral by the secured party and that the determination of what constitutes an unreasonable period of time is a question for the trier of fact.” Id. 707 P.2d at 84. A third approach requires that the secured party manifest an intent to accept the collateral in satisfaction of the obligation by some conduct other than an undue delay in disposing of the collateral. The court found that it was unnecessary to resolve the lines of authority because “the evidence does not establish, as a matter of law, an implied retention”. Id. at 85. The trial court found as a matter of fact that the creditor did not manifest an intent to retain the collateral.
The unsold equipment has been stored in the auctioneer’s Colorado warehouse since it was repossessed in May, 1989. Paccom and the auctioneer made continuing efforts to try to sell the equipment by written solicitations for bids, one advertisement in a trade journal, as well as direct telephone marketing efforts. The court finds that Paccom has not evidenced, by its actions, any intent to retain the collateral in full satisfaction of the debt. Considering the specialized nature of the collateral, its limited market and depressed economic conditions in general, the court finds that Pac-com’s efforts to dispose of the remaining equipment were commercially reasonable, and that no undue delay in the disposition *138of the collateral occurred which would result in Paccom’s legal obligation to keep the collateral in full satisfaction of its debt.
CONCLUSIONS
The court concludes that Oregon law must be applied to this case and that under Oregon law Paccom’s deficiency claim of $160,000.00 must be allowed.
ORDER ACCORDINGLY.2
. References to the Master Lease include the lease schedules and references to the Personal Guaranty include the addendums.
. This Memorandum shall constitute Findings of Fact and Conclusions of Law pursuant to Bankruptcy Rule 7052 which is made applicable to Contested Matters by Bankruptcy Rule 9014. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491294/ | *253MEMORANDUM OF DECISION
ALFRED C. HAGAN, Chief Judge.
The debtors want their chapter 13 plan confirmed and the liens of Metropolitan Mortgage & Securities Company, Inc., and Steven and Sharon Fuhr avoided. The debtors also object to the Metropolitan claim.
Metropolitan Mortgage and the Fuhrs object to confirmation and the avoidance of their liens, claiming the liens are not avoidable under 11 U.S.C. § 522(f). Metropolitan also moves for stay relief, and objects to the debtors’ claim of homestead exemption.
FACTS
The real property in issue was sold by Julian S. Lovlyn and Lillian M. Lovlyn to Danielle C. Green and Stewart Salkin by a contract of sale in May of 1980. In January of 1983 the Lovlyns assigned their seller’s interest in the contract to Metropolitan. In August of 1983 Green and Salkin assigned their purchaser’s interest in the contract to the Fuhrs. Later, under date of November 7, 1986, an amendment to the contract of sale was entered into between Metropolitan and the Fuhrs whereby the Fuhrs assumed the obligation to pay Metropolitan the amount remaining due under the contract of sale. The Fuhrs assigned their interest in the property to the debtors in November of 1986.
When the debtors defaulted in the payments to Metropolitan, suit was filed by Metropolitan in the District Court of the State of Idaho to foreclose its seller’s interest under the contract of sale. The Fuhrs and the debtors, along with their predecessors in interest in the property, were named defendants. The Fuhrs cross-claimed against the debtors. Metropolitan obtained a judgment against the debtors for the remainder of the purchase price and an order directing the real property be sold at an execution sale to satisfy the judgment. No judgment was apparently entered against the other defendants, including the Fuhrs, but the Fuhrs obtained a judgment of indemnification against the debtors and a money judgment for $764.80, plus interest, as costs and attorney’s fees.
Prior to the execution sale, the debtors filed their chapter 13 petition in this Court. Apparently the Fuhrs judgment was recorded as a judgment lien under Idaho law, but the Metropolitan judgment was not, prior to the debtors’ filing.
The real property improvements consist of a duplex. The debtors live in one unit and rent the other.
CONTENTIONS
The debtors’ contend Metropolitan does not hold a secured claim since any security or ownership interest held by Metropolitan in the real property was merged into the judgment lien which is a voidable lien under the provisions of Section 522(f). Debtors also contend the failure to record the judgment is material to Metropolitan’s lack of a secured claim, as is the fact Metropolitan elected to sue to collect the unpaid purchase price as opposed to an action to foreclose, and thus, under Idaho’s “one action” rule, the security interest has been lost. Metropolitan obviously disagrees and claims it has a valid secured claim as a result of its sellers interest in the property under an unrecorded contract of sale of real property. The Fuhrs also claim a security interest in the real property as a result of their assignment of their purchasers interest to the debtors. They further claim a secured interest under the Idaho vendor’s lien statute, Idaho Code § 45-801. Further contentions are made by the parties, respectively, concerning the fact the real property improvements involve a duplex.
DISCUSSION
Under Idaho law, a seller under an executory contract of sale holds legal title to the real property while the purchaser holds an equitable ownership interest.1 *254As stated in the Idaho Supreme court case of Rush v. Anestos: “An installment land sale contract works an equitable conversion of the land. The land sale contract is said to place equitable ownership in the vendee with the vendor merely holding legal title as security for payment of the debt.”2 Thus, Metropolitan has a secured status, the extent of which is measured by the unpaid purchase price and the other exec-utory conditions of the land sales contract. The foreclosure effort in state court cannot affect the nature of this security interest by changing it to an avoidable judgment lien under Section 522(f). The Metropolitan lien is in the nature of a consensual lien. The lien retains its categorization as a statutory lien despite its merger into a secured interest obtained through a judgment.3 The claim of Metropolitan is a secured claim, not subject to avoidance under Section 522(f).
The situation is different with the Fuhrs. The Fuhrs never held legal title to the property, but only an equitable interest as purchasers under the real estate sales contract. They retained no interest in the property when they assigned their interest in the contract to the debtors. There was thus no “equitable conversion of the land” which afforded the Fuhrs a secured interest and the Fuhrs held no secured claim against the debtors until they obtained, and recorded, their judgment. Nor do the Fuhrs have a vendor’s lien under the provisions of Idaho Code § 45-8014. The Fuhrs hold no claim against the debtors as a result of the indemnity judgment since their claim at the time of the filing of the debtors’ chapter 13 petition was totally contingent upon the Fuhrs’ potential liability to Metropolitan. The claim is subject to the provisions of 11 U.S.C. § 502(e)(1)(B). According to that section, a claim for “reimbursement or contribution” is denied if such claim is contingent at the time of its allowance or disallowance5. The Fuhrs indemnity claim is for reimbursement or contribution contingent on the amount they are required to pay Metropolitan. The Fuhr indemnity claim will thus be denied.
The Fuhrs’ judgment, therefore, did not arise from any secured interest and is avoidable under Section 522(f) to the extent it impairs the debtors’ homestead exemption.
Metropolitan has not violated the Idaho “single action” rule.6 Judicial foreclosure of a seller’s interest in a land sales contract is an accepted form in Idaho.7
The state court judgment granted a money judgment and ordered foreclosure on the property through the form of an execution sale. Such is not prohibited by the statute.
Although the judicial lien of the Fuhrs against the homestead exemption must be avoided, the judicial lien cannot be avoided against the non-exempt property of the debtors.8 This raises the issue of the effect of the duplex character of the real property improvements. One-half of the duplex is exempt property but the other one-half, which is income producing, is not exempt property. The real property cannot easily be divided into exempt and non-exempt property, except through a partition procedure under state law. To the extent the real property is not exempt, the lien will not be avoided and the debtors may *255provide for payment of the Fuhrs’ allowed secured claim by providing for payment of the $764.80, plus interest, portion of the Fuhr judgment in their chapter 13 plan.
In accordance with the foregoing, a separate order will be entered granting the debtors’ motion to avoid the Fuhrs judgment lien except for the $764.80 plus interest judgment; denying the debtors’ motion to avoid the lien of Metropolitan; denying the Metropolitan objection to the debtors’ homestead exemption; denying confirmation of the debtors’ proposed chapter 13 plan but allowing thirty days for the filing of a new plan. Conditioned upon the debtors filing another plan which will treat the allowed secured claim of Metropolitan and the Fuhrs, the Metropolitan motion for stay relief will be denied. The debtors’ objection to the secured claim of Metropolitan will also be denied.
A separate order will be entered.
. Ellis v. Butterfield, 98 Idaho 644, 570 P.2d 1334 (1977); Rush v. Anestos, 104 Idaho 630, 661 P.2d 1229 (1983).
. Id. 104 Idaho at 633, 661 P.2d at 1231.
. See In re Wilson, 90 I.B.C.R. 425; In re Fritts, 88 I.B.C.R. 212.
. Idaho Code § 45-801. Vendor’s Lien. — One who sells real property has a vendor’s lien thereon, independent of possession, for so much of the price as remains unpaid and unsecured otherwise than by the personal obligation of the buyer.
. 11 U.S.C. § 502(e)(1)(B) states:
such claim for reimbursement or contribution is contingent as of the time of allowance or disallowance of such claim for reimbursement or contribution; or;
See, In re A & H, Inc., 122 B.R. 84 (Bankr.W.D.Wis.1990).
. I.C. § 6-101.
. See discussion of the election of remedies issue in the Idaho Court of Appeals decision of Keesee v. Fetzek, 106 Idaho 507, 681 P.2d 600 (1984).
. In re Clausen, 90 I.B.C.R. 154. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491296/ | MEMORANDUM DECISION ON TANDY CREDIT CORPORATION’S APPLICATION FOR ORDER DIRECTING TRUSTEE OR DEBTOR TO DELIVER POSSESSION OF CONSUMER GOODS
A. JAY CRISTOL, Bankruptcy Judge.
THIS CAUSE came on before the Court on April 29, 1991 upon Tandy Credit Corporation’s (hereinafter referred to as Tandy) Application for Order Directing Trustee or Debtor to Deliver Possession of Consumer Goods (hereinafter referred to as the Application). The Court having reviewed the Application and Exhibits attached thereto, considered the arguments of counsel, and being otherwise fully advised in the premises finds as follows:
The debtors filed for relief under Chapter 7 of the Bankruptcy Code on December 26, 1990 and listed their debt to Tandy in the amount of $3,204.70. Tandy claims a security interest in the consumer goods whose purchase gave rise to the debt and thereby seeks to recover possession of said goods.
Florida Statute § 679.303(1) provides that a security interest is perfected when it attaches and when all steps necessary for perfection have been taken. In the case of a purchase money security interest in consumer goods the filing of a financing statement is not required for perfection. Fla. Stat. § 679,302(l)(a).
There is no dispute that the goods whose possession is being sought by Tandy are consumer goods and that the security interest is a purchase money security interest. See Fla.Stat. § 679.107(1) and § 679.109(1). The issue is whether the security interest has attached and thereby become perfected under Florida Statute § 679.303(1).
Florida Statute § 679.203(l)(a) provides in part that a security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless the debtor has signed a security agreement which contains a description of the collateral. In order for a description of collateral in a security agreement to be sufficient it must “make possible the identification of the items in which a security interest is claimed". American Restaurant Supply Company v. Wilson, 371 So.2d 489, 490 (1st DCA 1979). See also In re S & J Holding Corp., Shazamm Enterprises Ltd., 42 B.R. 249 (S.D.Fla. 1984). The description of the collateral in a security agreement must be more specific than that required in a financing statement. The “security agreement should describe the collateral with details sufficient for third parties to be able to reasonably identify the particular assets covered”. American Restaurant, supra, at page 490.
“The cases interpreting the ‘reasonably identified’ provision have been fairly strict. Language such as ‘all property of the undersigned of every name and nature whatsoever’ and ‘all other personal property’ is clearly too broad.” In re S & J Holding, supra, at page 250. The security agreement in this case, attached as Exhibit A to Tandy’s Application, provides in paragraph 12 that a security interest is retained “in all merchandise charged to your Account”. This description does not reasonably identify the goods on which the securi*287ty interest is claimed. The description does not provide any details which would enable a third party to identify the assets which are covered by the security agreement.
The only conclusion possible is that the security agreement fails to comply with Florida Statute § 679.203(l)(a) since it does not contain a description of the collateral, that requirement has been interpreted Dy the courts. Hence, the security interest does not attach to the consumer goods and is unperfected under Florida Statute § 679.303(1). An unperfected security interest is subordinate to the rights of one becoming a lien creditor prior to perfection. Fla.Stat. § 679.301(l)(b). The bankruptcy trustee is a lien creditor from the date of the filing of the bankruptcy petition. Fla. Stat. § 679.301(3). Therefore, the trustee has priority over Tandy with respect to the consumer goods.
Additionally, the court should take notice that the security agreement fails to meet the requirement of the provision of Florida Statute § 679.203(l)(a) which requires that the security agreement be signed. The security agreement attached to Tandy’s Application as Exhibit A does not contain the debtors’ signature. This court in Roemelmeyer v. Sears, Roebuck & Company, 24 B.R. 1 (S.D.Fla.1982) specifically held that the requirements of Florida Statute § 679.203(l)(a) had not been satisfied where the security agreement itself had not been signed by the debtor. The fact that a credit application had been signed was not sufficient to satisfy the statute’s requirements.
The Motion of Tandy Credit Corporation is DENIED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491298/ | FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION
THOMAS E. BAYNES, Jr., Bankruptcy Judge.
THIS CAUSE came on for final eviden-tiary hearing upon Plaintiffs’, James H. Rion and Juanita Rion’s, Complaints Seeking Exception to Discharge. The Court reviewed the record, heard testimony and argument of counsel, and finds the relevant facts as follows:
In 1974 the Rions obtained a money judgment against Debtors/Defendants, Anita L. Springer and Gregg Achord Spivey, in state court (the “Spivey judgment”). On July 30, 1981, Debtors each filed separate individual voluntary petitions for relief under Chapter 7 of the Bankruptcy Code (11 U.S.C.). On their Schedules of Assets and Liabilities, Debtors each listed the Rions as creditors having unsecured claims without priority (Schedule A-3). Debtors listed the Rions’ address as Lot 97, Davis Avenue, Lakeland, Florida. This address appeared on a Motion to Withdraw as Attorney of Record filed by the Rions’ counsel in the state court case. This is the address to which the Clerk of the Bankruptcy Court sent the notices of the Section 341 meeting of creditors and fixing times for filing objections to discharge.
Each notice of the Section 341 meeting of creditors, which the Clerk of the Bankruptcy Court sent to creditors on August 21, 1981, contained the following language:
... it appears from the schedules of the Debtor(s) that there are no assets which can be liquidated by the Trustee from which dividends can be paid to creditors. It is unnecessary for any creditors to file a claim at this time. Creditors will be notified and will receive an opportunity to file claims if subsequently there appears that there is a possibility of paying dividends.
On April 24, 1984, the Clerk of the Bankruptcy Court sent an Order Fixing Time for Filing Claims in Gregg Spivey’s bankruptcy case. This Order provided:
*705Pursuant to Bankruptcy Rule 3002(c)(5), creditors are hereby notified that there may be a dividend paid in this case. Accordingly, it is
ORDERED AND NOTICE IS HEREBY GIVEN that claims may be filed on or before July 23, 1984, and not thereafter, in order to share in any distribution.
The Rions never received any of the notices sent to them by the Clerk of the Bankruptcy Court. James Rion never resided at Lot 97, Davis Avenue, Lakeland. During the 1970’s Mr. Rion lived in a number of different places, but in 1974 Mr. Rion lived in Kathleen, Florida, and Gregg Spivey visited him there.
Juanita Rion did reside at Lot 97, Davis Avenue, Lakeland, until the middle of 1975, at which time she moved to Ohio. After moving to Ohio, Ms. Rion made numerous trips to Lakeland. On one of these trips prior to 1981, Ms. Rion and her husband, Ronald Dimmock, ran into Gregg Spivey. Mr. Spivey either knew or learned during this brief encounter that Ms. Rion resided in Ohio.
Since Debtors supplied an incorrect address for the Rions, the notices of the bar date sent to the Rions were returned to the Clerk of the Bankruptcy Court. Debtors were asked by their bankruptcy counsel to find a correct address for the Rions. Gregg Spivey contacted the local post office, sheriffs department, and police department, as well as friends and employees. Bankruptcy counsel contacted the Rions’ former state court counsel who had had no contact with the Rions for a number of years. Neither of the Rions ever had actual knowledge of Debtors’ bankruptcies until 1988.
On March 21, 1988, Juanita Rion assigned her interest in the Spivey judgment to James Rion. On March 30, 1988, James Rion executed a Trust Agreement under which he conveyed the Spivey judgment to Mario Scarpa as Trustee. Scarpa’s sole duty under the Trust Agreement was to endeavor to collect and then distribute the Spivey judgment. Any amounts collected, less costs and expenses, would be divided equally between James Rion and Scarpa.
As a result of Scarpa’s investigations, the Rions first learned of Debtors’ bankruptcies. As a result of Scarpa’s efforts to collect the Spivey judgment, Debtors filed Notices of Discharge in Bankruptcy in state court and Motions to Reopen Case in this Court. This Court granted the Motions to Reopen Case for the limited purpose of allowing Debtors to amend their schedules of liabilities to include additional creditors. Each Debtor then amended his Schedule A-3 to include Juanita (Rion) Dimmock, James H. Rion, Mario Scarpa, and the other Debtor (for possible contingent liability) using their current addresses. The Rions filed their Replies to Motion to Reopen Case or in the Alternative Complaints Seeking Exception to Discharge.
The sole issue raised by the parties in these adversary proceedings is whether the Spivey judgment is excepted from discharge under Section 523(a)(3)(A) of the Bankruptcy Code.
As a threshold matter, however, we must deal with whether the Rions have standing to bring these adversary proceedings. Standing requires that the person seeking an adjudication be the proper party to request that adjudication. The party asserting standing must have a personal stake in the outcome of the controversy and suffer, or be threatened with, some actual injury. E.F. Hutton & Co., Inc. v. Hadley, 901 F.2d 979 (11th Cir.1990).
Analysis of standing requires the examination of both constitutional requirements and prudential considerations. To satisfy constitutional requirements, three factors must be present: (1) the party asserting standing must have suffered actual injury or been threatened with injury, (2) the injury must be traceable to the objectionable conduct, and (3) the relief requested must be likely to redress the injury. E.F. Hutton, 901 F.2d at 984. To satisfy prudential considerations, three additional factors must be met: (1) the party asserting standing must be asserting his own rights and not the rights of a third party, (2) the injury must be particular to the *706litigant and not just a generalized grievance, and (3) the injury must fall within the zone of interests the statute is designed to protect. E.F. Hutton, 901 F.2d at 985.
The Rions clearly satisfy the constitutional requirements of standing: (1) the Rions are threatened with the discharge of their claim against Debtors, (2) the Rions were unable to participate in Debtors’ bankruptcies because Debtors failed properly to schedule the Rions’ claim, and (3) the Rions are seeking to have their claim excepted from discharge which will redress their inability to participate in Debtors’ bankruptcies.
The Rions also satisfy the prudential considerations of standing: (1) James Rion is asserting his own rights — as beneficiary of the trust he is entitled to 50 per cent of any amount collected on the Spivey judgment, the very claim which Debtors wish to have discharged, (2) discharge of the Spivey judgment is an injury particular to the Rions and not a generalized grievance, and (3) dischargeability falls within the zone of interests the Bankruptcy Code is designed to protect. “[T]he question of standing is related only to whether the dispute sought to be adjudicated will be presented in an adversary context and in a form historically viewed as capable of judicial resolution.” Flast v. Cohen, 392 U.S. 83, 101, 88 S.Ct. 1942, 1953, 20 L.Ed.2d 947 (1968). Unquestionably, these cases have been presented in an adversary context in a form capable of judicial resolution. The Rions have standing to bring these adversary proceedings.
A more appropriate question is whether the Rions are real parties in interest. Bankruptcy Rule 7017 provides, in part, “Every action shall be prosecuted in the name of the real party in interest.” This is a proceeding to determine the dischargeability of a debt under Section 523 of the Bankruptcy Code. Section 523(a)(3)(A) provides:
A discharge under section 727 ... of this title does not discharge an individual debtor from any debt ... neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit ... timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing
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Rule 4007(a) of the Bankruptcy Rules provides, “A debtor or any creditor may file a complaint with the court to obtain a determination of the dischargeability of any debt.”
Clearly, in order to bring adversary proceedings to determine the dischargeability of a debt, the Rions must be creditors of Debtors. Through Juanita Rion’s assignment to James Rion, she is no longer a creditor of Debtors. Through James Rion’s transfer to Scarpa, he is no longer a creditor of Debtors. Scarpa, as Trustee holding the Spivey judgment, is a creditor of Debtors. The sole purpose of the trust is to collect the Spivey judgment. Trustee Mario Scarpa is the proper party to bring suit.
After the final evidentiary hearing in these proceedings, the Rions filed a Motion to Conform Pleadings to the Evidence seeking to substitute Mario Scarpa as party plaintiff. Bankruptcy Rule 7017 provides, in part:
No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.
This provision has been utilized to permit substitution of parties plaintiff in similar circumstances. In re Knobel, 54 B.R. 458 (Bankr.D.Colo.1985).
In the instant cases, Debtors have never objected to the Rions’ capacity to bring these adversary proceedings, nor have Debtors objected to the Rions’ Motion to Conform Pleadings to the Evidence by substituting Mario Scarpa as plaintiff. More*707over, there is no conceivable harm to Debtors in allowing the substitution. Therefore, the Rions’ Motion to Conform Pleadings to the Evidence is granted, and Mario Scarpa shall be substituted as party plaintiff.
The threshold issue having been disposed of, we now reach the merits. In order to take advantage of the benefits of bankruptcy, the debtor has a duty to list the names and addresses of each of his creditors. Lubeck v. Littlefield’s Restaurant Corporation (In re Fauchier), 71 B.R. 212 (9th Cir. BAP 1987); Patterson Dental Company v. Mendoza (In re Mendoza), 16 B.R. 990 (Bankr.S.D.Cal.1982); Haft v. Gelman (In re Gelman), 5 B.R. 230 (Bankr.S.D.Fla.1980). See 11 U.S.C. § 521(1), Bankruptcy Rule 1007(a)(1), and Official Bankruptcy Form 6. The burden is on the debtors to complete their schedules accurately. In re Mendoza, supra; In re Gelman, supra,
Under Section 523(a)(3) of the Bankruptcy Code, the primary test to determine if a debt is excepted from discharge is whether the debt was scheduled in time to permit the timely filing of a proof of claim. In re Fauchier, 71 B.R. at 215. The statute is quite clear: the creditor must either have notice of the bankruptcy or have actual knowledge of the bankruptcy in time to permit timely filing of a proof of claim.
The facts before the Court establish that neither of the Rions had actual knowledge of the bankruptcies until sometime in 1988. Neither of the Rions ever had notice of the bankruptcies either because all notices were sent to them at the incorrect address supplied by Debtors and, consequently, all notices were returned to the Bankruptcy Court as undeliverable. Since the Rions were neither listed nor scheduled in time to permit their timely filing of a proof of claim and they had no notice or actual knowledge of the bankruptcies in time for the timely filing of a proof of claim, their debt is excepted from discharge under Section 523(a)(3)(A).
Assuming, arguendo, the statute did not require strict compliance, but merely required debtors to employ reasonable diligence 1 in executing their schedules {In re Fauchier, 71 B.R. at 215), the Rions’ claim would still be excepted from discharge. With respect to Anita Springer, she took no part whatsoever in these reopened cases. She did not testify at the final evidentiary hearing nor did she submit any evidence she exercised reasonable diligence in completing her schedules. Ms. Springer simply failed to adduce any proof she had exercised reasonable diligence in completing her schedules.
With respect to Gregg Spivey, the evidence established that prior to his filing for bankruptcy he learned that Juanita Rion no longer lived in Lakeland, Florida, but had in fact moved to Ohio. Moreover, Mr. Spivey had visited James Rion at his home in Kathleen, Florida, not Lakeland, Florida. Despite his knowledge that Ms. Rion was out-of-state and Mr. Rion had lived in another town, Mr. Spivey inquired only locally in Lakeland as to any new addresses for the Rions. In the course of his local inquiries, he never even requested current addresses from the Post Office. In short, under even the most liberal theory of reasonable diligence, Mr. Spivey’s inquiries were insufficient.
Finally, Debtors argue these bankruptcy cases are no-asset cases and absent fraud or intentional design on the part of Debtors, the Rions’ claim was discharged upon the reopening of their cases and proper scheduling of the claim in bankruptcy. See Samuel v. Baitcher (In re Baitcher), 781 F.2d 1529 (11th Cir.1986); In re Anderson, 104 B.R. 427 (Bankr.N.D.Fla.1989); Kelly v. Stover (In re Stover), 98 B.R. 586 (Bankr.M.D.Fla.1989).
Failure to schedule a known debt in a no-asset case does not necessarily cause a debt to be nondischargeable. In re *708Baitcher, supra. In a no-asset case, if the debtor’s failure to schedule a known debt is for reasons of honest mistake and not due to fraud or intentional design, the debt is still discharged. The burden is on the debt- or, however, to demonstrate absence of fraud or intentional design. In re Baitcher, 781 F.2d at 1534.2
Applying the rule of Baitcher to the cases at hand, the Rions’ claim is not discharged with respect to either Debtor. With respect to Anita Springer, the Rions’ claim is excepted from discharge due simply to a lack of proof. She has presented no evidence establishing the Baitcher defense.
With respect to Gregg Spivey, the Rions’ claim is excepted from discharge because the Rions were clearly prejudiced by Mr. Spivey’s failure to schedule their claim. Baitcher makes perfectly clear that honest mistake in failing to schedule a known creditor in a no-asset case does not prejudice that creditor because no creditors get anything. There are simply no assets to distribute. Thus, omitting the creditor essentially causes no harm. Had the creditor originally been scheduled, he would have been in no different position.
In Gregg Spivey’s bankruptcy, however, it appears a dividend is available. The Clerk of the Bankruptcy Court notified scheduled creditors that claims were to be filed on or before July 23, 1984. As to Mr. Spivey’s bankruptcy, the Rions are clearly prejudiced by not having received the Order fixing July 23, 1984, as the latest date for filing claims. The establishment of a bar date for filing proofs of claim removes Mr. Spivey’s bankruptcy from the ameliorative effects of the Baitcher rule. The distinction between a no-asset case and a case with assets is critical. In re Green, 90 B.R. 560 (Bankr.S.D.Fla.1988). Unable to come within the application of the Baitcher rule, Mr. Spivey’s bankruptcy falls squarely within the exception to discharge embodied in Section 523(a)(3)(A) of the Code. Mr. Spivey failed to schedule the Rions in time to permit them timely to file a proof of claim and they had no notice or actual knowledge of Mr. Spivey’s bankruptcy in time for the timely filing of a proof of claim. The Rions’ claim against Mr. Spivey is excepted from discharge.
Based on the foregoing, the Rions’ claim against Debtors is excepted from discharge and is nondischargeable. Separate final judgments will be entered pursuant to Bankruptcy Rule 9021. In addition, it is
ORDERED, ADJUDGED AND DECREED that the Rions’ Motion to Conform Pleadings to the Evidence is granted.
DONE AND ORDERED.
. Under the facts in these cases, this Court does not recognize "reasonable diligence” as a defense to a Section 523(a)(3) action.
. Although Baitcher involved a debtor who completely failed to schedule a known creditor and not, as here, a debtor who scheduled a known creditor but listed an incorrect address, there is no reason not to apply Baitcher herein. To restrict Baitcher to cases where a creditor is completely omitted would place a debtor who completely fails to list a creditor in a better position than a debtor who supplies erroneous information about a creditor. There is simply no reason for so restricting the ameliorative effect of Baitcher. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491299/ | MEMORANDUM OPINION
JOHN D. SCHWARTZ, Chief Judge.
Daniel Murray, the Trustee for the Chicago, Missouri, and Western Railway Company (“CM & W” or “Debtor”), has moved for partial summary judgment against defendants Cushing Trucking, Inc. (“Cush-ing”) and TW Communication Corporation, named herein as TW ComCorp., (“TWC”) (collectively the Defendants). In his motion, the Trustee seeks to establish the *841existence of all of the elements necessary to establish a preferential transfer of funds under § 547 of the Bankruptcy Code1 as to each of the Defendants. According to the Trustee, a transfer by check, for purposes of § 547(b) of the Bankruptcy Code, is not effective until the bank accepts or honors the check. For the reasons set forth herein, the court, after considering the pleadings, exhibits, and memoranda filed, finds no reason to limit the Trustee’s motion to partial summary judgment and awards full summary judgment against the Defendants.2
JURISDICTION AND PROCEDURE
This matter arises under § 547(b) and, accordingly, this court has jurisdiction to entertain this motion pursuant to 28 U.S.C. § 1334 (1982 & Supp.1990). This motion constitutes a core proceeding under § 157(b)(2)(F) and is before the court for decision pursuant to local rule 2.33 of the Northern District of Illinois referring bankruptcy cases and proceedings to this court for hearing and determination.
FACTS AND BACKGROUND
The relevant facts herein are not in dispute.3 On January 30, 1987, Debtor issued its check No. 112506 in the amount of $1,261.46 payable to defendant TWC on an antecedent debt. Debtor’s bank honored this check on January 8, 1988. Debtor also issued two checks to defendant Cushing in payment on an antecedent debt. On January 8, 1988, Debtor issued its check No. 112609 in the amount of $5622.00 to Cush-ing which Debtor’s bank honored on January 15, 1988. On March 25, 1988, Debtor issued its check No. 114016 in the amount of $9,488.50 to Cushing which Debtor’s bank honored on March 30, 1988 (collectively, these checks amount to $14,866.50). Debtor subsequently filed its voluntary petition under Chapter 11 of the Bankruptcy Code on April 1, 1988. Thus, while the check to TWC was issued 92 days pre-petition and honored 82 days pre-petition, the checks to Cushing were both issued and honored within the 90 day pre-petition preference period.
STANDARD FOR SUMMARY JUDGMENT
In order to prevail on a motion for summary judgment, the movant must meet the statutory requirements as set forth in Rule 56 of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding by Bankruptcy Rule 7056. Rule 56(c) provides in relevant part:
[T]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c). Summary judgment is appropriate only if there remains no genuine issue of material fact for trial and the movant is entitled to judgment as a matter of law. Moore v. Marketplace Restaurant, Inc., 754 F.2d 1336, 1339 (7th Cir.1985). If a non-moving party fails to establish an element essential to the case on which the non-movant has the burden of proof, summary judgment is appropriate. Samuels v. Wilder, 871 F.2d 1346, 1349 (7th Cir.1989). The facts alleged by the movant must be such that the court can reasonably conclude on a preponderance of the evidence that the movant is entitled to a verdict. Anderson v. Liberty Lobby, *842Inc., 477 U.S. 242, 251, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986); In re Calisoff, 92 B.R. 346, 350-51 (Bankr.N.D.Ill.1988).
DISCUSSION
In order to establish a preference under § 547(b), the Trustee must prove by a preponderance of the evidence, each of six elements with respect to the transaction in question. Specifically, the Trustee must show 1) a transfer of an interest in the debtor’s property, 2) to or for the benefit of a creditor of the debtor, 3) for or on account of an antecedent debt of the debtor, 4) made while the debtor was insolvent, 5) on or within 90 days before the filing of the petition, and 6) that the transfer allowed the creditor to receive more than it would have in a Chapter 7 liquidation. The only issue in dispute is whether the Debtor's checks effected a transfer of Debtor’s funds on or within 90 days of the filing of Debtor’s Chapter 11 petition.
As courts in this district have previously determined, “the vast majority of courts that have considered this issue have held that a transfer for purposes of § 547(b) occurs on the date the debtor’s bank honors the check.” In re Almarc Mfg., Inc. (Chaitman v. Chicago Boiler Co.), 52 B.R. 582, 583 (Bankr.N.D.Ill.1985). See In re Global Distrib. Network (Global Distrib. Network v. Star Expansion Co.), 103 B.R. at 949, 952 (Bankr.N.D.Ill.1989). See also, In re St. Louis Globe Democrat, Inc., 99 B.R. 946 (Bankr.E.D.Mo.1989); In re All Am. of Ashburn, Inc. (Bonapfel v. La-Salle-Deitch Co.), 95 B.R. 251 (Bankr.N.D.Ga.1989); In re Sims Office Supply, Inc., 94 B.R. 744 (Bankr.M.D.Fla.1988); In re AMWC (AMWC v. General Elec.), 94 B.R. 428 (Bankr.N.D.Tex.1988); In re Nucorp Energy, Inc., 92 B.R. 416 (Bankr. 9th Cir.1988); In re Newman Cos. (Laird v. Bartolameolli), 83 B.R. 571 (Bankr.E.D.Wis.1988). However, this court notes the existence of authority to the contrary, most notably the recent Sixth Circuit decision in In re Belknap, Inc. (Official Unsecured Creditors’ Comm. of Belknap v. Shaler Corp.), 909 F.2d 879 (6th Cir.1990) (transfer of a check, for preference purposes, occurs upon delivery from debtor to creditor).
Notwithstanding these conflicting positions, the court need proceed no further with regard to the checks issued to defendant, Cushing. Regardless of whether the transfer upon honor rule or the transfer upon delivery rule applies, the result is the same. The application of either rule leads to the conclusion that the transfers to Cushing occurred within the 90 day preference period and, thus, were preferential transfers subject to the Trustee’s avoiding powers.
The check to defendant TWC, on the other hand, presents the type of situation in which the court is compelled to choose among the competing positions. The fact that the check to TWC was issued 92 days pre-petition, but not honored until 82 days pre-petition clearly renders either rule dis-positive. As previously stated, it is the view of the court that the transfer upon honor rule is consistent with the applicable state law regarding the operation of payments by check as well as the purposes and policies of § 547(b).
As the United States Supreme Court noted, the absence of any controlling federal statute allows the operation of the term “transfer” to be determined with reference to state law. McKenzie v. Irving Trust Co., 323 U.S. 365, 370, 65 S.Ct. 405, 408, 89 L.Ed. 305 (1945). Although § 101(50) of the Bankruptcy Code defines the term “transfer” as “every mode, direct or indirect, absolute or conditional, voluntary or involuntary of disposing of or parting with property,” it fails to list the requisite events which signal the completion of a transfer. Because the Code is silent on when a given transaction actually operates to cause a “disposing of or parting with property,” it is appropriate to consider the effect of state law on this issue. In re Almarc Mfg., 52 B.R. at 584.
“As a matter of state law, the issuance of a check does not operate as an assignment of funds held by the drawee bank, and the funds in the maker’s account are not transferred until the check is hon*843ored.” In re Global Distrib. Network, 103 B.R. at 952. Illinois statutes provide that the issuance and delivery of a check constitutes neither payment nor discharge of the underlying indebtedness, but rather, is contingent upon the drawee bank’s acceptance or honor of the instrument. Ill.Rev.Stat. eh. 26, pars. 2-511, 3-409, 3-802 (1985). See Tri-State Bank v. Blue Ribbon Saddle Shop, Inc., 76 Ill.App.3d 445, 32 Ill.Dec. 230, 395 N.E.2d 177 (1st Dist.1979); Leavitt v. Charles R. Hearn, Inc., 19 Ill.App.3d 980, 312 N.E.2d 806 (1st Dist.1974). Prior to honor of the check, a third party may acquire rights superior to those of the named payee and the debtor, as maker, retains the ability to stop payment of the check and prevent the transfer of its funds. In re Global Distrib. Network, 103 B.R. at 952; In re Foreman, 59 B.R. 145, 148 (Bankr.S.D.Ohio 1986). Thus, under the applicable Illinois law, the debtor does not truly “dispose of or part with” the funds the check represents until debtor’s bank honors the check.
Providing further support for the transfer upon honor rule are the purposes and policies underlying § 547(b). It is clearly the purpose of § 547(b) to achieve a distribution of the debtor’s assets among its creditors as provided by the Bankruptcy Code and to discourage creditors from pursuing their claims against a distressed debtor, thereby enabling the debtor “to work his way out of a difficult financial situation.” H.R.Rep. No. 595, 95th Cong., 1st Sess. 177-78 (1978), reprinted in, 1978 U.S.Code Cong. & Admin.News 5787, 6138. Under § 547(b), “[t]he key focus is the recovery of funds to the estate for the equitable distribution among creditors of equal priority.” In re Almarc Mfg. (Chaitman v. Paisano Automotive Liquids), 62 B.R. 684, 687 (Bankr.N.D.Ill.1986). It is in furtherance of this policy that the great majority of courts have found that, for purposes of § 547(b), no transfer occurs until the check is honored.
Those courts which have adopted the minority view of transfer upon delivery have done so under either of two equally untenable theories. The first theory contends that the transfer of debtor’s interest in property “relates back” to delivery of the check if the check is honored within ten days of its delivery. See In re Advance Indus., 63 B.R. 677, 678 (Bankr.N.D.Iowa 1986); In re Sider Ventures & Servs. Corp., 47 B.R. 406 (S.D.N.Y.1985). The reasoning is that honor of the check amounts to “perfection” of an interest in debtor’s property within the meaning of § 547(e)(1)(B) and serves to insulate the transaction from preference liability. However, the legislative history of § 547(e) clearly restricts its application to secured transactions, H.R.Rep. No. 595, 95th Cong., 1st Sess. 374-75 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 89 (1978), and a check is not a security interest. Ill.Rev.Stat. ch. 26, par. 1-201(37) (1985). See In re Arnett (Ray v. Security Mut. Fin. Corp.), 731 F.2d 358, 362 (6th Cir.1984).
The second theory, recently announced in In re Belknap, Inc., 909 F.2d 879 (6th Cir.1990), is simply an elevation of form over substance. The Belknap court addressed its argument to the majority view that a check is transferred on the date it is honored for § 547(b) purposes, while the same transfer, for purposes of § 547(c), is considered a transfer on the date it is received. Id. at 882-83. See, e.g., In re All Am. of Ashburn, Inc., 95 B.R. at 252-53; In re Nucorp Energy, 92 B.R. at 418; In re Almarc Mfg., 62 B.R. at 689 (citing broad survey of courts adopting majority view). In its rejection of this position, the Belknap court stated:
There is no persuasive reason for giving the word ‘transfer’ a different meaning under the two subparts of section 547. * * * * To give the word ‘transfer’ a different meaning in those complementary subparts seems inconsistent, unworkable, and confusing.
909 F.2d at 883. However attractive this reasoning may seem, it fails to recognize the separate and distinct purposes of these very different subsections of § 547. In re AMWC, 94 B.R. at 431; In re Newman Cos., 83 B.R. at 573 (“the legislative history of § 547(c) reflects totally different purposes and policies.”); In re Almarc Mfg., *84462 B.R. at 687 (§§ 547(b) and 547(c) have “entirely different purposes.”).
Although the general rule of transfer upon honor works to further the intended goals of the § 547(b) preference provisions, application of this same rule to the § 547(c) exception provisions would frustrate its purpose and policy. In re Almarc Mfg., 62 B.R. at 688. Unlike subsection (b), § 547(c) was intended to encourage creditors to deal with troubled businesses by providing shelters from preference liability. Id.; Leathers v. Prime Leather Finishes, 40 B.R. 248, 251 (D.Me.1984). See In re Newman Cos., 83 B.R. at 573. In holding that a transfer, for purposes of the § 547(c) exceptions, occurs upon delivery of the check to the creditor, the Almarc court stated:
[I]f creditors had to wait for checks to clear before being able to ship new goods to debtors in apparent financial difficulty, they would be discouraged from dealing with such debtors. At a minimum, the debtor’s normal business flow would be disrupted, with the natural deleterious results which would flow from that disruption ensuing, if suppliers waited for the debtor’s checks to clear before shipping.
62 B.R. at 689. Thus, while the general definition of transfer fulfills the goals of § 547(b), an exception to that definition is required to equally fulfill the separate and distinct purposes of the § 547(c) exceptions. Therefore, only the majority view of transfer upon honor, with its exception of transfer upon delivery for § 547(c) purposes, as adopted by this court, adequately satisfies the goals of both subsections under § 547.
CONCLUSION
The Trustee filed its motions for partial summary judgment against the Defendants, Cushing Trucking, Inc. and TW ComCorp., to recover the alleged preferences pursuant to § 547(b). While the court finds that the Trustee has met the summary judgment standards as to each element of § 547(b) with respect to each alleged preference, the court sees no reason to delay recovery on the proven preferential transfers given the failure of the Defendants to raise any § 547(c) defenses. Accordingly, the court grants the Trustee full summary judgment against each of the Defendants.
. 11 U.S.C. §§ 101-1330 (1982 & Supp.1990). All section references are to the Bankruptcy Code unless otherwise noted.
. Although the Trustee requested partial summary judgment, the failure of the Defendants herein to plead the existence of any affirmative defenses under § 547(c) entitles the Trustee to full summary judgment.
. Pursuant to local rule 12(/), the Debtor submitted statements of material facts as to which there is no genuine issue in each of the actions consolidated herein. Neither of the Defendants submitted a statement of genuine issue pursuant to local rule 12(m). Therefore, Debtor’s statements of material facts are deemed admitted as local rule 12(m) requires. See In re Global Distrib. Network (Global Distrib. Network v. Star Expansion Co.), 103 B.R. 949, 950 (Bankr.N.D.Ill.1989). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491300/ | ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
LEWIS M. KILLIAN, Jr., Bankruptcy Judge.
THIS MATTER came on for hearing on the cross-motions of the plaintiff, Mark Jay Kaufman, P.A. and the defendants, Howell, Milton & Liles, P.A. for summary judgment in this adversary proceeding. Having considered the evidence presented by way of affidavits and deposition transcripts, and having considered the memoranda of law filed by the parties and argument of counsel we find that there are no genuine disputes of material facts and that plaintiff in this action is entitled to judgment as a matter of law.
This case arises in connection with the Chapter 11 case of Mark Jay Kaufman, P.A. (Kaufman) who was a practicing attorney in Gainesville, Florida. Kaufman filed his voluntary petition for relief under Chapter 11, Title 11, United States Code, on November 5, 1986. The filing of the Chapter 11 was precipitated in large part by illness suffered by Mr. Kaufman which resulted in his inability to carry on his practice of law. At the time he filed Chapter 11, Kaufman’s law firm was handling approximately 480 cases, practically all of which were personal injury or wrongful death cases. In order to manage this large case load while Kaufman was incapacitated, the court appointed an attorney, Rodney D. McGalliard, Esq. as a consultant to review all of the cases in which Kaufman was involved at that time. Part of McGalli-ard’s duties included an evaluation of the pending cases and making decisions with regard to immediate settlement of such cases or their referral to other law firms for completion. In connection with those duties, Mr. McGalliard contacted defendant, a law firm located in Jacksonville, Florida with regard to transferring some 28 cases to that firm.
In connection with the transfer of the cases from Kaufman to the defendant firm, McGalliard prepared an agreement which provided that the two firms would split all fees generated in the referred cases on a 50-50 basis without the need for court approval of each and every settlement. The agreement was structured this way for several reasons. First of all, due to the large number of eases being referred to the defendant’s firm and to other firms, significant problems and delays would occur should the attorneys have been required to seek court approval of the fee allocations in each and every case. Secondly, virtually all of the eases which were transferred to the defendant firm were in some stage of litigation and it was felt that the 50-50 split would give the appropriate consideration to the Kaufman firm for the work done in those cases.
The defendant firm and Kaufman executed the agreement. Thereafter Kaufman’s attorneys prepared and circulated to all creditors of his Chapter 11 estate an application/notice of intent to transfer assets of the estate to Howell, Liles, Braddock and Milton. No objections were filed to the notice and on April 13, 1987, this court entered an order approving the agreement and authorizing the transfer of cases to the defendant law firm. A list of the specific cases transferred was attached to and made a part of the agreement.
*900Among the cases which were transferred by Kaufman to the defendant firm was that of Lori Bishop. However, Lori Bishop’s name was inadvertently not included on the list of cases which was appended to the agreement. Following the execution of the agreement and transfer of the case files to the defendant firm, all cases on the list with the exception of that of Lori Bishop were settled and the fees distributed in accordance with the agreement, that is, 50% to each law firm. With respect to the Lori Bishop case, Robert Wilhelm, the partner of the defendant firm handling the cases referred from Kaufman successfully prosecuted and obtained a jury verdict in the amount of $4,000,000 against the State of Florida. However, due the sovereign immunity cap in the State of Florida, a judgment in the amount of $100,000 was obtained with a 25% attorney’s fees cap. This $25,000 fee was split 50-50 with Kaufman in accordance with the agreement and consistent with all of the previous cases which had been settled. Thereafter, Mr. Wilhelm lobbied the Florida Legislature for a special claims bill on behalf of Lori Bishop and therein obtained $1,050,000 including a $262,500 attorney fee. The defendant law firm refused to pay to Kaufman the 50% gross fees called for in the agreement with respect to this recovery and this action followed.
In his complaint, plaintiff seeks a reformation of the contract so as to include Lori Bishop’s name on the list of cases transferred and to specifically enforce the agreement or recover damages for its breach. Plaintiff further seeks to have defendant enjoined from making any distribution of the fees in dispute pending resolution of this action.
While in its answer to the complaint defendant denies that the Lori Bishop case was ever intended to be a part of the agreement transferring the cases, the deposition of Mr. Wilhelm makes it clear that on behalf of the defendant firm he understood at the time of the transfer of cases that Lori Bishop was to be one of the cases subject to agreement. Therefore there is no genuine issue as to that fact raised in this proceeding. The sole issue raised by the defendants is that the agreement itself is illegal and is therefore unenforceable. Therefore, they argue that the contract is not subject to reformation and it cannot be enforced by this court.
The central issue to this case is whether the contract between Kaufman and the defendant law firm is illegal and void as against public policy. In general, a court of equity may reform a contract to reflect the true agreement between the parties to the documents. Hardaway Timber Co. v. Hansford, 245 So.2d 911, 913 (Fla. 1st DCA 1971). However, when the proposed reformation would result in an invalid or illegal contract, the court will not reform the instrument since equity cannot accomplish an illegal act. Hedges v. Dixon County, 150 U.S. 182, 192, 14 S.Ct. 71, 74, 37 L.Ed 1044 (1983). The issue of whether a contract is valid must be determined by the law of the place where the contract is made, therefore the law of Florida applies in this case. Sturiano v. Brooks, 523 So.2d 1126 (Fla.1988). Under Florida law, the right to contract is subject to the general rule that the agreement must be legal. Thomas v. Ratiner, 462 So.2d 1157, 1159 (Fla. 3rd DCA 1984), rev. den. 472 So.2d 1182 (Fla.1985). If a contract or bargain is criminal, tortious or otherwise opposed to public policy in its formation or in its performance, the contract or bargain is illegal and unenforceable. Citizens Bank and Trust Co. v. Mabry, 102 Fla. 1084, 136 So. 714 (Fla.1931).
In the instant case, defendants assert that the agreement which Kaufman seeks to reform and enforce violates the Florida Bar Code of Professional Responsibility. Defendants cites specifically to the Code of Responsibility Rule 4-1.5 which at the time the agreement was executed provided in pertinent part:
(E) A division of fees between lawyers who are not of the same firm may be made only if:
1) The division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation;
*9012) The client is advised of and does not object to the participation of all the lawyers involved;
3) The total fee is reasonable.
Florida Bar Code Prof.Resp., D.R. 4-1.5(E) promulgated in rules regulating the Florida Bar, 494 So.2d 977, 1030 (Fla.1986).
Plaintiff asserts that in this case the agreement does not satisfy the requirements of the Bar rule because it does not divide the fees in proportion to the work performed on the case, there being no dispute that Kaufman performed no more than 10% of work on the Lori Bishop case. Additionally, in connection with these motions for summary judgment, defendants have submitted an affidavit signed by Lori Bishop in which she objects to any distribution of attorney’s fees to Kaufman that are not in proportion to the work he actually performed and further stating that she never knowingly consented to or agreed that Mark Kaufman should receive any attorney’s fees greater than those in proportion to the work he or his associates actually performed. However, there is no evidence suggesting that at the time the cases were transferred from Kaufman to the defendant firm, Lori Bishop or any of the other clients whose cases were transferred were not advised of the terms of the transfer. Furthermore, the record shows that when the first distribution of attorney’s fees was made following the $100,000 judgment against the State of Florida, Lori Bishop approved and signed the trust account disbursal statement reflecting payment of the proceeds of that judgment and which reflected the 50-50 fee split between Kaufman and the defendant firm.
In further support of their position, defendants have submitted the affidavit of Joseph W. Little, a professor of law at the University of Florida College of Law and a former member of the professional ethics committee of the Florida Bar from 1979 to 1988. Mr. Little has reviewed the contract and gives his opinion that “any contract that called for a 50-50 division of a fee irrespective of the proportion of the services performed by each lawyer and irrespective of whether each lawyer was capable of providing services would be contrary to the public policy of Florida, void an application, and unenforceable.” (Affidavit of Joseph W. Little at p. 3).
In arguing in support of this action, plaintiff first asserts that this court should not be ruling on alleged violations of the disciplinary rules of the Florida Bar. Plaintiff points to the preamble to those rules which provides under the heading “scope” the following discussion.
Violation of a rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached. The rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability. Furthermore, the purpose of the rules could be subverted when they are invoked by opposing parties as procedural weapons. The fact that a rule is a just basis for a lawyer’s self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not apply an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the rule. Accordingly, nothing in the rules should be deemed to augment any substantive legal duty of lawyers or the extra disciplinary consequences of violating such duty.
Plaintiff thus argues that the use by defendants of the provisions of the disciplinary rules has a substantive defense to an action on a contract is the type of thing that is expressly precluded under the preamble to those rules.
Next, plaintiff argues that the instant situation is not controlled by Rule 4-1.5(E). Rather, this case involves administration and disposition of assets which were part of a bankruptcy estate. At the time Kaufman filed his petition for Chapter 11, Kaufman had an interest in all of his cases by virtue of the contracts with the clients which entitled him to recovery of attorney’s fees in those cases. Thus, that right to future payments in each of those cases represented property of the bankruptcy es*902tate under 11 U.S.C. § 541(a)(1). The transfer of the cases to the defendant firm constituted a disposition of assets for the benefit of Kaufman’s estate with a consideration to be received 50% of the fees generated in those cases. Rather than merely being a referral of cases from one lawyer to another, this transaction involve the transfer of cases from a debtor-in-possession reorganizing under the provisions of Chapter 11 of the Bankruptcy Code to another law firm. Thus, as plaintiff argues, these circumstances make the transfer of the cases much more than a mere “division of fees between lawyers” thus taking the transaction beyond the confines of Rule 4-1.5(E).
Had the agreement which is the subject of this action been entered into outside of the context of a Chapter 11 reorganization proceeding it may very well to be considered to be violative of the Code of Professional Responsibility. The evils to be guarded against in this type of arrangement involve the “brokering” of personal injury cases by attorneys who aggressively solicit the representation of injured persons for a contingency fee but who entertain absolutely no intent to handle the cases themselves. Instead, once they have been engaged by the client, they then refer the case to a competent trial attorney in exchange for a referral fee. Thus, those attorneys can make substantial sums of money without burdening themselves of the responsibility of the cases or of having to actively practice law. In the instant case, this evil is not present. Kaufman, prior to his becoming incapacitated and filing for Chapter 11, performed work in all of the cases referred to the defendant law firm. In some cases, the work performed by Kaufman was significant and in all likelihood constituted more than 50% of the work performed on those files. However, in all cases up to and including the trial court case involving Lori Bishop, fees were split 50-50 regardless of whether Kaufman did the majority of work or the defendant law firm did the majority of work. It was only when the amount of the fee involved became $262,500 and the defendant law firm broke up that defendants decided the contract was illegal and that they should keep the lion’s share of the final fee.
While the public policy of the State of Florida as expressed in the Code of Professional Responsibility with respect to lawyers must be considered in this action, there is another policy which must also be given consideration. The plaintiff was at the time of the transfers of these cases a debtor-in-possession under Chapter 11 of the Bankruptcy Code. As such, he stood as a fiduciary for the benefit of the creditors of his estate. He had the obligation under the provisions of the Bankruptcy Code to maximize the value of his estate for the benefit of his creditors. This court, vested with the jurisdiction granted it under the provisions of 28 U.S.C. § 1334(a), approved the instant agreement as one being in the best interest of the creditors of Kaufman’s estate. The goal of the maximum distribution of a debtor’s estate to his or her creditors is one of the basic policy considerations behind the bankruptcy code. It was in furtherance of this policy that the agreement was brought to this court and approved.
What this case ultimately boils down to is a balancing of both public policy and the equities of the situation. Unless an agreement is clearly a violation of public policy or is clearly illegal, it should be enforced. Here, the preamble to the disciplinary rules reflects on its face that these rules should not be used as a basis for civil liability. Here they are being used in an effort to avoid the burdens of a contract entered into freely and, we assume, intelligently by the parties. They are being utilized in an effort to deny to a reorganizing Chapter 11 debtor the benefits of a bargain which was intended to inure to the benefit of the creditors of his estate. Finally, it is clear that the defendants have reaped all of the benefits they bargained for when they entered into the agreement, but now when the amount became very significant, they want to keep it all. Equity should not countenance such conduct.
Accordingly, we find that the agreement between Mark J. Kaufman, P.A. as debtor-in-possession and the defendants, Howell, *903Liles & Milton is a valid and binding agreement, that it should be reformed in accordance with the original intent of the parties to include the Lori Bishop case, and that plaintiff is entitled to have the contract specifically performed by the payment of the 50% gross attorney’s fees received through the claims bill on behalf of Lori Bishop together with pre-judgment interest from the date of receipt of those funds.
There being no genuine issues of material fact and this court having found that plaintiff is entitled to judgment as matter of law, the plaintiffs Motion for Summary Judgment be and same is hereby granted and defendants’ Cross-Motion for Summary Judgment be and same is hereby denied. A separate final judgment will be entered in accordance herewith.
DONE AND ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491301/ | MEMORANDUM OF DECISION SUSTAINING TRUSTEE’S OBJECTION TO CLAIM
JAMES B. HAINES, Jr., Bankruptcy Judge.
The court has before it the trustee’s objection to the secured claim of the Internal Revenue Service (“IRS”). The IRS asserts that by virtue of notices of federal tax liens filed in the Penobscot County Registry of Deeds on June 16, 1983; December 31, 1984; August 22, 1985; and July 16, 1979 (refiled March 6, 1985), its claims for taxes, interest and penalties are secured by liens on the debtor’s real and personal property. The trustee contends that the IRS has not perfected its liens against the debtor’s personalty and, therefore, that, by virtue of his § 544 strong arm powers, he may avoid the liens.
Resolution of the trustee’s objection requires application of the federal tax lien filing statute, 26 U.S.C. § 6321, in conjunction with state law.
For the reasons set forth below, the court concludes that the IRS did not properly perfect its tax lien on the debtor’s personal property.
Discussion
The trustee holds only personal property, consisting principally of collected accounts receivable. The IRS does not contest his assertion that “no real estate was ever an asset of this estate....”
An IRS tax lien attaches to all of a tax debtor’s property and rights to property, real or personal. 26 U.S.C. § 6321. Without question, the lien extends to accounts receivable. U.S. v. Bank of Celina, 721 F.2d 163, 167 (6th Cir.1983). However, to be enforceable against, inter alia, a judgment lien creditor, a notice of tax lien must be properly filed. 26 U.S.C. § 6323(a).
The required method of filing the tax lien notice is prescribed by 26 U.S.C. § 6323(f). That statute provides that, in the case of personal property, the lien notice is to be filed in:
one office within the State (or the county, or other governmental subdivision), as designated by the laws of such State, in which the property subject to the lien is situated, except that State law merely conforming to or reenacting Federal law establishing a national filing system does not constitute a second office for filing as designated by the laws of such State....
26 U.S.C. § 6323(f)(l)(A)(ii). The notice of tax lien is to be filed in the office of the Clerk of the United States District Court for the judicial district in which the property subject to lien is situated whenever the state “has not by law designated one office” which meets the requirements quoted above. 26 U.S.C. § 6323(f)(1)(B). Mr. Aiken was a resident of Lincoln, Penobscot County, Maine, when the lien notices were filed. Under the statute, his personal property is deemed to have been situated there. 26 U.S.C. § 6323(f)(2)(B).
The IRS contends that recording its notices of federal tax liens in the Penobscot County Registry of Deeds satisfied the statutory filing requirements and, therefore, that its liens on accounts receivable withstand the trustee’s attack. Citing 33 M.R.S.A. § 664, it asserts that, at the time, *6Maine law “specifically designated” the Registry of Deeds for the county in which property subject to the lien was located as the office for the filing of the federal tax lien notice.1 The trustee contends that 33 M.R.S.A. § 664 did not constitute a specific designation of an office where federal tax lien notices were to be filed as to personalty. He argues that, read in context, 33 M.R.S.A. § 664 was but one provision within many addressing real property records and recordings in the registry of deeds. As such it constituted a specific designation for recording federal tax liens as to real property only.
The First Circuit’s decision in United States v. Flores, 535 F.2d 135 (1st Cir.1976), is instructive. In Flores the court considered Puerto Rico’s filing statutes and concluded that, although the statutory provision before it “read alone could be said to encompass all federal tax liens on both real and personal property,” it considered that, in context, the provision relied upon by the government operated as a “specific designation” for the filing of tax liens as to real property only. Id., 535 F.2d at 139. It noted that Puerto Rico required chattel mortgages to be filed in two locations, rather than in just the registry, and concluded that, given differing provisions with respect to recording mortgages for real and personal property, the section which indicated that registrars of real property records were to keep a tax lien index could not be considered to be a specific designation of the office for recording liens to perfect them as against both real and personal property. Id., 535 F.2d at 139.
Not unlike the Puerto Rico statute considered by the First Circuit in Flores, 33 M.R.S.A. § 664, read alone, might appear to be a specific designation of the place to record federal tax liens to perfect them against competing claims to a tax debtor’s real and personal property. It speaks of “property” generally, without further designation of its “real” or “personal” character. However, § 664 appeared within the statutory subchapter that provides for recording a variety of deeds, instruments and orders affecting real property, exclusively.2 If § 664 were found to have been a designation of the recording office for tax liens as to personalty, it would be the only section of the lengthy subchapter providing for recording instruments affecting person*7al property rights in the registry of deeds. In contrast, during the time period in which the IRS recorded its liens against Aiken, Maine statutes set forth distinct methods for recording a variety of orders and instruments affecting rights and interests in personal property.3
CONCLUSION
The court must conclude that, prior to 1989,4 Maine had not specifically designated one office for the filing of federal tax lien notices with regard to personal property. Accordingly, to withstand the challenge of a bankruptcy trustee, the notice of lien must have been filed with the Clerk of the United States District Court.5
The trustee’s objection to the secured status of the IRS claim is sustained. A separate order will be entered forthwith.
. 33 M.R.S.A. § 664, which was enacted in 1954 and was repealed in 1988, subsequent to the last lien notice filing against Aiken, provided:
Notice of liens for internal revenue taxes payable to the United States of America and certificates discharging such liens, prepared in accordance with the laws of the United States pertaining thereto, may be filed in any county in this State in the registry of deeds for that county or counties within which the property subjected to such lien is situated.
Registers of deeds shall receive, record and index such notices and discharges in the same manner as similar instruments are recorded and indexed.
The fee to be paid by the United States to registers of deeds for recording each such notice or discharge if $5, which need not be prepaid.
. The section appeared in Subchapter II— Records and Recording — of Chapter 11 of Title 33 — Register of Deeds. Subchapter II calls for each county registry to establish a record and index. The records, inter alia, disclose "the name of the city, town or unincorporated place where the land conveyed is situated.” (33 M.R. S.A. § 651) (emphasis supplied); include a grantor/grantee index (33 M.R.S.A. § 651-A); provide books for recording plans that can be reproduced in keeping with "accepted engineering and survey practices” (33 M.R.S.A. § 652); and certify the time of recordation and the location of affected property (33 M.R.S.A. § 653).
Other sections of the subchapter deal with, e.g., filing subdivision plats (33 M.R.S.A. § 657); recording releases of conditions on land use (33 M.R.S.A. § 658); filing plans resolving real property disputes (33 M.R.S.A. § 659); retaining township plans (33 M.R.S.A. § 660); recording plans of land allotments within towns or cities (33 M.R.S.A. § 662); and naming and transferring farm lands (33 M.R.S.A. §§ 665, 666).
Most tellingly, 33 M.R.S.A. § 654, which was enacted in 1954, contemporaneously with § 664, requires that registers of deeds receive and record “all certificates in equitable proceedings, copies of judgments and decrees" and other miscellaneous instruments, including seizures on attachments and execution “of real property situate in their respective counties_” (Emphasis added.)
A more recent addition to the subchapter, 33 M.R.S.A. § 669, enacted in 1971, provides for recording certified copies of bankruptcy petitions in an county or district “wherein the bankrupt owns or has an interest in any land." (Emphasis added.)
.See, e.g., 14 M.R.S.A. § 3131(9)(C) (turnover orders against judgment debtors to be filed with the Secretary of State with regard to personal property, in the registry of deeds with regard to real property); 19 M.R.S.A. § 503(1) (liens for collection of support debts to be filed in the registry of deeds for real property and in "any office appropriate for a notice with respect to personal property”); 36 M.R.S.A. § 612 (tax liens on personal property filed with Secretary of State); 11 M.R.S.A. § 9-403 (filing with Secretary of State to perfect security interests in personalty).
. Effective June 30, 1989, Maine enacted the Uniform Federal Lien Registry Act, which specifically designated the office of the Secretary of State for filing tax lien notices against personal property. 33 M.R.S.A. § 1903(3). The Uniform Act retained the county registry of deeds as the designated office for recordation of federal tax liens against real property. 33 M.R.S.A. § 1903(2).
. 26 U.S.C. § 6323(f)(1)(B). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491302/ | OPINION REGARDING MOTIONS TO CONVERT THE ABOVE CASES TO ONES UNDER CHAPTER 11 AND FOR APPOINTMENT OF A CHAPTER 11 TRUSTEE
RANDOLPH F. WHELESS, Jr., Chief Judge.
On January 15, 1990, five and one-half years after the above cases were filed as chapter 7 cases, Halliburton Company and other creditors filed a motion to convert the above cases to ones under chapter 11 and to appoint Gary Knostman (the chapter 7 Trustee) as chapter 11 Trustee. The chapter 7 Trustee responded. He argued that before conversion was ordered a clear showing should be made that such conversion is (at the time of conversion) in the best interest of the estate and would expedite resolution of remaining issues.
In addition, there were substantial objections and issues to the conversion raised by THE BANK GROUP, including the question of standing of the moving creditors to request conversion of the Republic Refining Company (“RRC”) case. Other creditors also urged that the cases not be converted at that point.
At this point, now that the settlement with THE BANK GROUP has closed, these issues now appear to be moot. However, prior to April 26, 1991, an appeal of any order of conversion of RRC could have caused substantial additional delay, expense, and uncertainty to this proceeding and of any Plan of Arrangement confirmed before any such appeal had concluded satisfactorily.
On May 17, 1990, there was held a hearing in this Court on the Halliburton motions. At the conclusion of the hearing, this Court considered that it was likely that the cases should be converted to chapter 11 at some point but that the timing of the such conversion would have to be further considered by the Court so as to be consistent with the best interest of the estate as a whole. The matter has been kept in that posture since that time in order that the Court be satisfied that such a conversion would not be disruptive to the management of the company or to critical ongoing disputes with Bonnet Resources Corp. and the banks which it represented (“THE BANK GROUP”) and with Transcontinental Gas Pipeline Company, Inc. (“TRANSCO”). This Court determined that it was important to resolve those disputes prior to any conversion of these cases, for several reasons. At a minimum, conversion in May, 1990 would have resulted in an additional layer of administrative expenses — for professionals of a creditors committee — in connection with these disputes.
At one point, when it appeared that settlement negotiations with THE BANK GROUP and also with TRANSCO appeared to be bogged down, the Court considered that conversion of the cases at that point might enhance the effort at an agreeable resolution of those disputes, due to the intervention of a creditors committee, but certain objections of THE BANK GROUP caused the Court to reconsider, as it then became apparent that further delay and confusion might result instead. The Court then determined to hold the issue of conversion in an “under advisement” posture rather than deny it without prejudice to re-urging it after resolution of the issues referred to above.
Those disputes have now been resolved by compromise agreements authorized on or about April 15, 1991. Those compromises were concluded or put into effect on April 26, 1991. It is now in the best interest of these estates that the cases be converted to ones under chapter 11.
In the meantime, on April 17, 1991, the acting United States Trustee for Region 7 *183also moved the Court for an order converting these cases to ones under chapter 11 and for the appointment of a chapter 11 trustee. No hearing was previously held on these motions since the Court already had “under advice” the motion of the creditors and had already determined to convert to chapter 11, as noted above. However, it had not determined the exact date when the conversion should take place.
These cases are the most unusual I have ever been involved in. On June 4, 1984, Tomlinson Interests, Inc. (“TII”) and other subsidiaries of Tomlinson Interests, Inc., including Republic Refining Co. (“RRC”), filed these cases as chapter 7 cases (except Tomlinson Petroleum, Inc. in 84-05312, which came later). This event, of course, is not what has made the cases unique. That they are still pending as operating chapter 7 cases is only part of what has made these cases different from any others. Among other things, TII has a substantial interest in a sour gas field (the Johns Field) in Rankin County, Mississippi. RRC was managing general partner of a limited partnership owning the gas processing plant which processed the gas from the Johns Field. The interest of Republic Refining Co. in the limited partnership was a substantial (the majority) interest. Neither asset, the field or the plant, had substantial value without the other. It appeared necessary to operate the field in order to prevent the possible loss of leases and loss of existing wells due to physical deterioration and damage resulting in inactivity. In addition, without operating the field, the plant had no value and it too would have suffered significant damage from inoperation, as this Court understood it. Therefore, there appeared to be no acceptable alternative but to authorize the chapter 7 Trustee (selected at random by the Clerk’s office) to operate the business of these Debtors. The luck of the draw (of the Trustee) turned out to be a fortuitous one.
At the time of the appointment of the chapter 7 Trustee in these jointly administered cases (Mr. Gary Knostman), the plant and field had significant problems, both legal and physical. It was impossible to sell the assets at that time, due to these twin complications. Further, there appeared to be little or no hope for any recovery by unsecured creditors. MBANK, later BANK ONE, now Bonnet Resources, represented the group of banks (THE BANK GROUP) holding substantial loans of TII (and/or the Tomlinson Group) secured by Til’s interest in the field. There was also a significant ($50 million) debt on the plant. At a later time, if not from inception, THE BANK GROUP was the only creditor of RRC, a major source of income to the Debtor Group. THE BANK GROUP’S claim exceeded $100,000,000.00 (although this amount was in issue). At filing, prospects for the unsecured creditors group in the TII et al cases could not have been at a lower ebb.
During the course of these chapter 7 proceedings there have been disputes with an individual claimant and the State of Mississippi over the title to the Johns Field (a substantial portion thereof), the drilling of an expensive well with non-assignable insurance benefits that were not themselves available for creditors (directly), a blowout of a gas well, disputes over insurance coverage relating to the blowout, disputes with partners in the field and the plant, a dispute with royalty owners over royalties, issues regarding the plant processing fee, and a dispute with TRANSCO over the “take or pay” contract. The significance of this latter dispute is that TRANSCO buys the gas from the processing plant. The “take or pay” contract provided for a price substantially higher than market price, at material times. To say the least, it was difficult, if not impossible in a practical sense, to sell either the Johns Field or the plant without having a firm agreement on the price to be paid for the gas by TRANSCO or any other buyer.
Another major dispute was the Trustee’s action to substantively consolidate the TII subsidiaries [including RRC but excluding Tomlinson Petroleum, Inc. (“TPI”)] into TII. In addition, there was and is an ongoing dispute over the claim of the Department of Energy (“DOE”) against TII. This claim is for $130,000,000.00, approximately. *184The claim arises from the crude oil trading activities of TPI.
Many of these problems have served to inhibit a sale of the Til et al assets and have extended this proceeding far beyond the norm. However, in this Court’s opinion, what has been done by the Trustee has been necessary and effective and in the overall best interest of creditors, including both secured and unsecured creditors. All significant actions of Trustee were undertaken only after notice to the unsecured creditor group (and other interested parties) who are sophisticated parties who are well represented by knowledgeable and effective counsel.
The Trustee’s operation of these Debtors’ business has been in the best interest of these estates and was necessary to and consistent with readying the assets of these Debtors for orderly liquidation under chapter 7 or utilized for purposes of a plan of arrangement in a chapter 11. Any liquidation of the assets of these Debtors prior to this time would have not been in the best interest of these estates, and, in this Court’s opinion, no Plan of Arrangement (even if confirmed) could be effectively implemented prior to the resolution of the substantive consolidation issues with THE BANK GROUP. In addition, no effective projection of future income could be made (in order to value the assets for sale) until the “take or pay” dispute with TRANSCO was resolved.
Despite the odds and the problems that have confronted the Trustee, both legal and operational, the Trustee has turned this case from one without realistic hope of recovery for unsecured creditors into one where projections indicate upwards of $30,-000,000.00 in recovery for unsecured creditors. The secured debt on the plant has or will be paid and THE BANK GROUP has received a substantial recovery out of the April 26, 1991 settlement.
Mr. Gary Knostman is one of the best chapter 7 trustees in the Southern District of Texas. He has done an exemplary job in managing the Debtors and their assets in these cases. It is doubtful that any other trustee would have had the patience and fortitude to have done the job that he has done in this case. He is to be congratulated for the persistent effort he has made; all in addition to his success on behalf of both secured and unsecured creditors. It is that persistence that has caused the assets of these Debtors to have the current and future benefit for the creditors.
Considering the problems that have confronted the Trustee in these cases, this has been the singularly most successful bankruptcy case that this judge has ever been associated with in the nine years he has served on this bench and including the twenty one years of practice in this field of law prior thereto. This is true taking into consideration major, complex chapter 11 and chapter 7 cases (as well as the thousands of others) handled by this Court.
It is considered by this Court to be significant that no interested party requested that the cases be converted to chapter 11 until over five and one-half years into the process.
Since the hearing May 17, 1990, it has been the intention of this Court to convert these cases to ones under chapter 11 provided this could be done without disruption of the Debtor and its operations and without disruption of the disputes relating to substantive consolidation (which could have had a substantial impact on the “priority” of THE BANK GROUP’S claim against RRC) and the serious issues relating to the TRANSCO “take or pay” litigation. Fortunately, these critical issues have now been resolved by agreement in a manner most favorable to the Til unsecured creditor group, in this Court’s opinion. The resolution of these disputes concluded April 26, 1991, according to this Court’s understanding. However, at that date there was then and there set for trial the Trustee’s objection to the Department of Energy’s proof of claim in the TII case. This matter had previously (for months) been set for trial for 9 a.m. May 20, 1991. This trial date had been selected prior to the conclusion of the settlements with THE BANK GROUP and with TRANSCO. At that point, the Court did not want to convert these cases to chapter 11 before con-*185elusion of the trial of the Trustee’s objection to the proof of claim of the Department of Energy for fear that such conversion would (1) be disruptive to the trial and thus cause delay in bringing this case to a conclusion and (2) precipitate unnecessary expense to the estate.
Trial of that matter (Adversary 84-1326) concluded on May 21, 1991 at approximately 6:00 p.m.; although the Trustee and the Department of Energy have asked for time to submit post-trial memorandum and proposed findings of fact and conclusions of law. The last of these is due July 26,1991.
As a result of the foregoing, it is the conclusion of this Court that the above named cases should be converted to ones under chapter 11 but that such conversion not be effective until August 1, 1991 (a date after the period for filing of the memorandum and proposed findings of fact in the DOE case). If the U.S. Trustee’s office would work with the Court and the creditors to avoid disruption of pending litigation (including the DOE matter) during the interim period between conversion to chapter 11 and confirmation of the creditors plan of arrangement, the Court would move the conversion date up and would convert the cases effective immediately.
The Court would respectfully request the U.S. Trustee to give an affirmative signal concerning this issue, in order to accommodate the interest of the unsecured creditors who have requested that Mr. Gary Knost-man be appointed chapter 11 Trustee and to avoid disruption, delay, and additional (unnecessary) expense to the cases.
THE ISSUE OF A CHAPTER 11 TRUSTEE
As noted above, in connection with their motion to convert, Halliburton Co. and the other moving creditors have requested that (upon conversion to chapter 11) a chapter 11 Trustee be appointed “for cause” under 11 U.S.C. § 1104. They have also requested that Gary Knostman be appointed the chapter 11 Trustee. Also as noted above, on April 17, 1991, the U.S. Trustee filed his motion to appoint a chapter 11 trustee, as part of his motion to convert.
Also as noted above, these cases were filed as chapter 7 cases. They are not chapter 11 cases which have been converted to chapter 7. This is an important consideration. There has been no determination that the Debtors themselves are not capable of being debtors-in-possession. There has been no finding of misfeasance or malfeasance on behalf of the Debtors or their officers or shareholders or any of them.
There was no persuasive evidence offered at the hearing on the creditors motions to convince the Court that the Debtor and its management could not or should not be debtors-in-possession, except for the fact that Gary Knostman has managed these Debtors and their operations for the last seven years. The recently filed (April 17, 1991) motion of the U.S. Trustee to appoint a chapter 11 trustee merely alleges as follows: “The cases have been administered by a chapter 7 trustee for the past seven (7) years and the former management of the Debtors are unavailable. Appointment of a chapter 7 trustee would be necessary to administer these estates through the approval of a disclosure statement and confirmation of a plan of reorganization.” At the hearing on this motion, held June 10, 1991, the U.S. Trustee offered no evidence of any other reason for appointing a chapter 11 trustee and rested after urging the above reason for such an appointment.
The allegation of the U.S. Trustee that former management is unavailable is incorrect. Prentis Tomlinson is a successful businessman who operates an oil company in Houston, Texas. He is the sole shareholder of Til, the parent company to the other debtors. More to the point, existing management is available and is well qualified.
A hearing has also now been held on the motion to appoint chapter 11 trustee filed by the U.S. Trustee. The U.S. Trustee has refused to advise this Court whether he will or will not appoint Gary Knostman as chapter 11 Trustee, although the only basis *186for a chapter 11 trustee alleged and shown by the U.S. Trustee is the fact that Gary Knostman, as chapter 7 Trustee, rather than former (pre-petition) management, has managed the Debtors operations and these cases over the past seven years. The position of the U.S. Trustee is that this Court cannot compel him to divulge this information; notwithstanding that it affects the ruling of this Court; i.e. exactly when the conversion is to take place. The Court does not want conversion to be unnecessarily disruptive.
If the U.S. Trustee is to disrupt the existing management of these Debtors (by appointment of a third party trustee), in this Court’s opinion, prior or former management is in a better position to resume control of these Debtors than a brand new individual having no previous experience in the management of these Debtors.
It should be kept in mind that the involved period here is a short period between conversion of these cases and confirmation of a Plan of Arrangement intended to be filed by and on behalf of the unsecured creditors in this case. This Court intends to shorten the time within which the Debtor has the exclusive right to file a plan of arrangement, assuming an appropriate motion to that effect is filed. The period of responsibility of a chapter 11 trustee should not last longer than from three to six months (at the longest).
As a result, there is no basis for the appointment of a chapter 11 trustee, except one. And that is to continue (and therefor not to disrupt) the current management of the Debtor’s operations and of the handling of these bankruptcy cases. In other words, it is only because Gary Knostman has managed the operation of these Debtors for seven years, is there any basis for not turning this management back to Pren-tis Tomlinson, the owner of 100% of Tom-linson Interests, Inc.
For any person to be selected as chapter 11 trustee other than Gary Knostman would be disruptive to the Debtor, would create unnecessary expense, would cause loss of efficiency in professionals and in the operation of the Debtor and in the expeditious conclusion of pending litigation vitally important to the interest of the estates. Any “new” chapter 11 trustee (one other than Mr. Knostman) would have never had the experience of full authority to manage these Debtors. At least Prentis Tomlinson has had that experience and his management would be less disruptive to the Debtor and the efficient handling of these cases than a third party. In addition, the unsecured creditors have requested that Gary Knostman be appointed chapter 11 Trustee.
Gary Knostman is an experienced and extremely capable Trustee. The Court has faith in his integrity and his ability. He is thoroughly familiar with these Debtors and their operations. He has assembled a team of outstanding professionals to manage the difficulties encountered in the John’s Field and in the gas processing plant. He has competent attorneys knowledgeable of the issues in this case and who already have an “investment” in the remaining legal disputes in this case (in the sense of knowledge and preparedness). To make changes in this team during the short interim period prior to confirmation would cause serious disruption to the Debtors as well as significantly magnify its administrative costs and would, in this Court’s opinion, only serve to delay the successful resolution of this case; all without real justification. In short, it would not be in the best interest of this estate or its creditors to make changes in the management and control over these Debtors and the remaining legal disputes for this short gap period of three or six months (less if possible).
Ordinarily, this Court should not be involved directly in the selection of a trustee (either in chapter 7 or chapter 11). This is the function of the U.S. Trustee’s office. Bankruptcy Rule X-1005(a)(2). The Court’s involvement is only in the approval of the chapter 11 trustee selected by the U.S. Trustee; except where actions of the U.S. Trustee are challenged by a party in interest under Bankruptcy Rule 9014. In this case, however, due to the unique circumstances herein, the ruling of the Court on the motion(s) to appoint a chapter 11 *187trustee is affected by the chapter 11 trustee selected by the U.S. Trustee. This is because of the circumstance that, here, appointment of a third party as chapter 11 trustee will be disruptive of the Debtors, their estates, their business operation and ongoing litigation that has various scheduled hearings and deadlines now pending in this Court. This is in addition to causing unnecessary expense and potential delay in the efficient closing of these cases. While the U.S. Trustee has the primary responsibility for the administration of estates this does not mean that this court must turn its back on the interests of the creditors and allow needless waste and harm to these estates. Were the U.S. Trustee to select a third party trustee or decline to appoint Gary Knostman as chapter 11 Trustee, this would cause the Court to consider that there is some hidden agenda of the U.S. Trustee’s office that would bear further scrutiny and investigation. In any event, in this Court’s opinion, for the U.S. Trustee to select a third party Chapter 11 trustee would be an abuse of the U.S. Trustee’s discretion, considering the unique circumstances of these cases.
This Court is hopeful that the U.S. Trustee will agree with the wisdom of the unsecured creditors’ request on this point and will appoint Gary Knostman as Chapter 11 Trustee. If he does not, the appointment of a third party trustee would defeat the purpose of the authorization for such a trustee. In such event, the Court would prefer to authorize Prentis Tomlinson to reassume control over these Debtors and to engage Gary Knostman as manager of these businesses during the interim period prior to confirmation of the creditors plan of arrangement, if he should choose to do so. Were he to choose not to do so, this Court would have to consider the possibility of invoking its authority under 11 U.S.C. § 105 to protect the interests of the creditors in these cases, if requested to do so.
Therefore, it is the conclusion of this Court that if the U.S. Trustee determines not to abide the wishes of the unsecured creditors in this case and does not appoint Gary Knostman as chapter 11 Trustee, no valid legal reason has been shown to exist why Prentis Tomlinson should not resume control of these Debtors. Therefore, the Court will authorize the appointment of a chapter 11 trustee for the above styled cases (upon their conversion to chapter 11) provided the U.S. Trustee selects Gary Knostman as the chapter 11 Trustee. If the U.S. Trustee chooses to ignore the request of the unsecured creditors and their obvious best interest and declines to approve Gary Knostman as U.S. Trustee, then, in that event, no chapter 11 trustee is authorized by this Court, as no legal basis would exist therefor and the very purpose of this authorization would be thwarted by the U.S. Trustee.
In the opinion of this Court, the foregoing constitutes sufficient and compelling reasons for the acting U.S. Trustee for this region (Region 7) to appoint Gary Knost-man Chapter 11 Trustee for these cases. However, there is an additional persuasive reason for such action. That reason is the concern of this Court over certain actions in this case taken by Mr. Wesley Huisinga, the U.S. Trustee from Minnesota (now acting as U.S. Trustee for this region) and Assistant U.S. Trustee Edward Kandler from California, now acting as Assistant U.S. Trustee to Mr. Huisinga. This concern was engendered by the actions of Kandler and Huisinga in taking action in this case designed to benefit another agency of the executive branch of government to establish its disputed claim against TII.
The U.S. Trustee is part of the Department of Justice. It is not part of the judicial branch of government but rather is part of the executive branch. Nevertheless the U.S. Trustee has been given the power to supervise the administration of bankruptcy cases and the trustees under chapter 7, 11, and 13. The U.S. Trustee is also to supervise and oversee debtors in possession who are serving in chapter 11 cases. The purpose of the U.S. Trustee’s office is to take the administrative load off of the Judiciary so that it can more effectively be a neutral adjudicator of disputes arising in and under Title 11 and those related to cases pending under Title II.
*188Notwithstanding that the U.S. Trustee’s office is part of the Department of Justice, it is imperative to the proper disposition of bankruptcy cases and disputes connected therewith that the U.S. Trustee in each region be absolutely impartial in the selection and supervision of Trustees in the various Bankruptcy cases. If a U.S. Trustee or his representative (an assistant) endeavors to manipulate a trustee for purposes other than the best interest of the involved estate or select a trustee for such other purposes or to openly or surreptitiously attempt to maneuver a case to benefit one particular creditor or creditor group over another [even if (especially if) the favored creditor is another agency in the executive branch of government] such actions will eventually cause complete erosion of trust in the U.S. Trustee program and, indeed, in the entire bankruptcy system. Creditors in bankruptcy cases and the public in general could hardly have faith in the system when the “administrator” of the system, the one who wields power over the trustees, has a bias in favor of other governmental agencies. How can the creditors or the Bankruptcy Court itself place trust and confidence in trustees in the performance of their duties unless the U.S. Trustee (who selects these trustees and therefore holds vast power over them and their livelihood) is not only absolutely impartial but also at all times gives the appearance of absolute impartiality in the selection of trustees (especially chapter 11 trustees who do not come off of a rotating panel) and in the overall supervision of bankruptcy cases?
As noted by U.S. Bankruptcy Judge Alan Jaroslovsky in the case of In re Don and Elizabeth Johnson, 116 B.R. 186 (Bkcy.N. D.Calif., 1990) on page 188: “Since the U.S. Trustee has the sole power to name trustees, he has the power of economic life or death over every case trustee. A case trustee who fails to toe the U.S. Trustee’s line may well find himself out of work, blackballed from being assigned any future cases.”
“Moreover, the failure of the U.S. Trustee to strictly limit his role to administrative matters causes the spectre that bankruptcy cases can be controlled through the political process.”
Mr. Handler should be very familiar with this opinion and the injunction issued therein against the U.S. Trustee, as Mr. Handler is from that particular U.S. Trustee’s office.
Although Judge Jaroslovsky vacated his injunction order at a later time based upon stipulations of all parties and an undertaking by the U.S. Trustee, (see 123 B.R. 622), the comments quoted above appear to be worthy of remembrance. They should caution a U.S. Trustee against improper use of his authority or abuse of his discretion in the selection of trustees.
The April 2, 1990 Report of the Federal Courts Study Committee, Judge Joseph F. Weis, Jr., Chairman, recommended that Congress should reconstitute United States Trustees as independent statutory officers in the judicial branch. As reported, the basis for this recommendation was that the June 1989 oversight hearings on the United States Trustee Program before the House Judiciary Subcommittee on Economic and Commercial Laws revealed conflicts of interest, interference with case management efforts, improper political influence on the selection of United States Trustees and in the administration of estates, among other things, in the U.S. Trustee Program.
Here the U.S. Trustee and his assistant have openly acted in concert with the Department of Energy (“DOE”) in an apparent effort to maneuver the case to (in their opinion) best assist the DOE to sustain its disputed $130,000,000 claim in the TII case. The U.S. Trustee and his attorneys conferred with the DOE attorneys about filing the motion to withdraw reference two or three weeks1 before the U.S. Trustee filed a motion to withdraw the reference in this case. Such motion was filed May 17, 1991, the Friday before the Trustee’s objections to the DOE’s claim went to trial on the following Monday (May 20). The DOE joined in such motion in a separate written pleading filed the same day the U.S. Trust*189ee’s motion was filed and within hours thereafter. It could hardly be denied that these two executive agencies are acting in concert with respect to such motion.
The U.S. Trustee for whom Mr. Kandler works in California was formerly with the Federal Energy Regulatory Commission in Washington prior to becoming the U.S. Trustee for Region 17.
Indeed, the U.S. Trustee’s motion and brief argue extensively that the reference should be withdrawn by the District Court in order that the Bankruptcy Court not hear the trustee’s objection to the claim of the DOE. At a minimum this could have disrupted the trial setting and caused delay and additional expense to the estate. However, the real abuse by the U.S. Trustee Huisinga and his assistant Edward Kandler was to openly ally with a disputed creditor in this case. This appears to be a clear breach of the duty of the U.S. Trustee to be impartial and to always give the appearance of impartiality.
Perhaps one motivation for the effort by the U.S. Trustee was merely an overzealous effort of the U.S. Trustee’s office to correct what may have appeared to them to be a seven year old operating chapter 7 case going nowhere. This is not the case and never has been but this particular U.S. Trustee and his assistant are new to the region and are therefore handicapped by a lack of direct knowledge of the history of and the problems encountered in this unusual and highly complex case. However, on the other hand, when this apparent open bias of the acting U.S. Trustee’s office is coupled with its (almost) simultaneous request to convert the cases to chapter 11 and to authorize the U.S. Trustee to select a chapter 11 trustee for this case sends chills down this Court’s back. The opportunity exists for a biased U.S. Trustee (or his assistant) to pre-condition a proposed chapter 11 trustee to the idea that such trustee should not vigorously oppose the disputed claim of another executive agency. Under the circumstances that exist here, the creditors and this Court would be placed in the position of not knowing whether to have complete confidence in any third party (stranger) chapter 11 trustee selected by this U.S. Trustee.
This Court doesn’t quarrel with U.S., Trustee’s standing or right to file a motion to withdraw reference if the U.S. Trustee truly believes that such is in the best interest of the estate. In addition, for the Department of Energy to file a motion to withdraw reference is a (semi) legitimate effort at forum shopping (although here it was untimely, to say the least). Let there be no mistake here, for these parties to (separately) file motions to withdraw reference is not the problem. The problem comes solely from the U.S. Trustee openly doing so to benefit a disputed creditor in this case. This open exhibition of bias in favor of the DOE is the use of the U.S. Trustee’s power that concerns this Court here. The tension created by this misguided action would be alleviated considerably by the appointment of the chapter 11 trustee requested by the creditors. It would remove all suspicion concerning the motives of the U.S. Trustee. In addition, the conversion will be able to occur at an earlier date. This would provide an additional benefit to all interested parties.
The Attorney for the informal creditors committee is requested to prepare and present orders consistent with this opinion.
. According to the DOE’s attorneys. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491303/ | MEMORANDUM OPINION
STEPHEN J. COVEY, Bankruptcy Judge.
This matter comes on to be heard upon the objections to the dischargeability of debts due and owing First Heritage National Bank (“Bank”) and The Ohio Casualty Insurance Company (“Ohio”) by Larry D. Fagan (“Debtor”).
STATEMENT OF FACT
Debtor began his employment for Bank in July of 1986. Prior to that time he was employed by an affiliated bank. He was the Executive Vice President and second in command. His duties were to make loans, solicit business, supervise employees, approve customer checks and generally manage the day-to-day business of Bank.
*298The Debtor, commencing in 1985 before he was employed by Bank and continuing until December 1988, borrowed money from the Bank on many occasions. These loans are evidenced by six notes. Each of these loans has a separate history and will be discussed individually below. All of the loans were originally approved by the Board of Directors of Bank or by the President of the Bank. The additional advances discussed below were made at the request of the Debtor and obtained without Board or a superior officer’s approval.
Some of the notes evidencing the loans provide for a “line of credit” and others are “single pay notes”. A “line of credit” note means a borrower can take advances up to the maximum amount of the note, pay the note down to a lower balance, and then obtain additional advances up to the maximum amount. This can continue until the note matures or expires by its own terms. A “single pay note” means the entire loan is due on a given date and once the maximum amount of the loan is reached, it cannot be paid down and then additional advances made up to the maximum amount. In short, a “line of credit” can go up and down, but a “single pay note” cannot.
Ohio issued a fidelity bond insuring the Bank against improper acts of its employees including the Debtor. Pursuant to this bond, Ohio has paid the Bank the sum of $26,989.39 and has a claim against the Debtor in this amount. The balance owing on these loans is due the Bank.
Debtor filed a Petition for Relief Under Chapter 7 of the Bankruptcy Code on the 14th day of September, 1990. On the 17th day of December, 1990, Ohio filed a Complaint asking that its debt against the Debt- or be held nondischargeable. On the 18th day of December, 1990, Bank filed a Complaint against the Debtor asking that its debt be held nondischargeable. These actions were later consolidated for trial, because they arose out of the same facts and circumstances and, therefore, had common questions of law and fact. The Plaintiffs allege their debts are nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A) and § 523(a)(4). These provisions generally except from a discharge, debts incurred by false pretenses, false representations, actual fraud, embezzlement or larceny.
Loan Number 1. On April 5, 1985, the Debtor, while working for an affiliated bank, executed a note payable to the Bank in the amount of $10,000.00, due and payable one year later, on April 5, 1986. This note, even though it contained the language “single payment note” also contained the language “line of credit” and the parties all agreed this created a $10,000.00 “line of credit”.
There were four deferrals or extensions of the due date entered into by the Debtor and officers of the Bank. The first deferral was entered into April 7, 1986, and extended the due date of the note to October 6, 1986. This Deferral Agreement was signed by Sharon Pagan, the Debtor’s wife, and Keith Mansfield, the President of the Bank. The due date was again extended on October 21, 1986, until April 6, 1987. This Deferral Agreement was signed by Judy Phillips (“Phillips”), Senior Vice President of the Bank, and the Debtor. Phillips had been with the Bank for thirty years and the Debtor was her immediate superi- or. The due date was again extended on April 10, 1987, until April 5, 1988. This agreement was signed by Phillips and the Debtor. Finally, on April 8, 1988, the due date was extended until April 5, 1989. During this period, many payments and additional advances were made on this note. On July 20, 1987, the Debtor tendered $6,836.26 to the Bank (the amount due on the note) and instructed the Bank’s tellers to apply all but $25.00 on the balance. The purpose of this was to keep the “line of credit” in effect so that he could borrow in the future up to the $10,000.00 limit. The tellers mistakenly applied the full amount on the note and marked it “Paid”. Immediately thereafter they discovered their error and crossed out the “Paid” stamp on the note and showed a balance due of $25.00. Subsequently, the Debtor continued to obtain new advances and, from time to time, make payments on the note. The Debtor was discharged from his employment on January 24, 1989, and, *299on this date, owed the Bank $9,554.30 on this note.
Loan Number 2. The Debtor executed an unsecured “single pay note” in the amount of $6,000.00 on December 17, 1987, which was due and payable on June 17, 1988. The purpose of this loan was to enable the Debtor to buy a car. The monies were advanced to the Debtor and on July 8, 1988, the Debtor paid the loan down to $333.09. On July 11, 1988, the Debtor entered into a Deferral Agreement with Phillips whereby the balance due under the note ($333.09) was extended to December 14,1988. On December 6,1988, the Debtor borrowed an additional amount of $5,650.00 on this note. On January 6, 1989, approximately three weeks after the second maturity date, Phillips and the Debtor again entered into a Deferral Agreement extending the due date until June 14, 1989. The balance due on this note as of January 24, 1989 was $5,983.09.
Loan Number 3. This loan is no longer in dispute and is held to be dischargeable by agreement of the parties.
Loan Number 4. On June 16, 1988, the Debtor executed a “single pay note” in the amount of $3,425.00 with a due date of December 16, 1988. This note was secured by a 1985 Ford Pick Up Truck and the Certificate of Title, showing the lien of the Bank, was placed in the loan file. Thereafter the Debtor, who had purchased the truck with the proceeds of the loan, sold the truck, released the Bank’s lien on the Certificate of Title and delivered the truck and Certificate of Title to the buyer. The Debtor then made several payments on the note and on October 11, 1988, the balance due was $1.00. On December 12, 1988, Phillips and Debtor entered into a Deferral Agreement, at the Debtor’s request, and the due date for the $1.00 balance was extended until March 31, 1989. On December 14, 1988, two days after the extension of the maturity date, the Debtor obtained additional advances of $3,400.00 on this note. On January 24, 1989, the balance due was $3,401.00, which was now unsecured.
Loan Number 5. On July 11, 1988, the Debtor executed a “single pay note” in the amount of $2,700.00 due on January 11, 1989. The Debtor used the proceeds to purchase a 1984 Buick, which secured the loan. The Certificate of Title, showing the Bank’s lien, was placed in the loan file. On or about September 22, 1988, prior to the expiration of the original due date, the Buick was sold, the lien released from the Certificate of Title, and the loan paid down to $1.00. Thereafter, on December 14, 1988, a new advance of $2,650.00 was made, which was unsecured. The balance due was $2,650.00 on January 24, 1989.
Loan Number 6. On September 15, 1988, the Debtor executed an unsecured “single pay note” in the amount of $14,-000.00. Advances were made in this amount to the Debtor and he made no payments on this note. The balance due was $14,000.00 on January 24, 1989.
At the time of all these transactions, there was in full force and effect, the following statutes and regulations of the United States of America.
Title 12, Section 375(a) of the United States Code provides as follows:
§ 375(a). Loans to executive officers of banks
(1) General prohibition; authorization for extension of credit; conditions for credit
Except as authorized under this section, no member bank may extend credit in any manner to any of its own executive officers. No executive officer of any member bank may become indebted to that member bank except by means of an extension of credit which the bank is authorized to make under this section. Any extension of credit under this section shall be promptly reported to the board of directors of the bank, and may be made only if—
(A) the bank would be authorized to make it to borrowers other than its officers;
(B) it is on terms not more favorable than those afforded other borrowers;
(C) the officer has submitted a detailed current financial statement; and ...
*300Regulation 0 of the Board of Governors of the Federal Reserve System in regard to loans to executive officers contains the same provisions as the statute cited above.
The only financial statement submitted by the Debtor to the Bank was in 1986 when he commenced his employment.
Regular customers of the Bank would not be allowed to receive additional advances on “single pay notes” once the balance had been reduced, would not have been allowed to take additional advances on secured notes once the collateral had been released, and would not be allowed to obtain loans without a current financial statement on file.
CONCLUSIONS OF LAW
Section 523(a)(2)(A) of the Bankruptcy Code provides in part as follows:
(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt— ...
(2) for money ... to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, ...
Section 523(a)(4) of the Bankruptcy Code provides as follows:
(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt—
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;
Actual fraud is defined in Volume 3 COLLIER ON BANKRUPTCY, page 532-52 as follows:
— What Constitutes Actual Fraud.
Section 523(a)(2) added to the false pretenses and representation exception to discharge, the words “or actual fraud.”
Actual fraud, by definition, consists of any deceit, artifice, trick, or design involving direct and active operation of the mind, used to circumvent and cheat another — something said, done or omitted with the design of perpetrating what is known to be a cheat or deception, (n. omitted)
Embezzlement is defined in In re Wallace, 840 F.2d 762 (10th Cir.1988) as follows:
As noted above, a debt for embezzlement is nondischargeable under section 523(a)(4). For purposes of establishing nondischargeability under section 523(a)(4), embezzlement is defined under federal common law as “the fraudulent appropriation of property by a person to whom such property has been entrusted or into whose hands it has lawfully come.” ...
See also In re Graziano, 35 B.R. 589 (Bankr.E.D.N.Y.1983), In re Choisnard, 98 B.R. 37 (Bankr.N.D.Okl.1989), Matter of Burgess, 106 B.R. 612 (Bankr.D.Neb.1989).
Loan Number 1. Loan Number 1 is nondischargeable because the Debtor obtained these funds in knowing violation of federal law and regulations. Obtaining the money in this manner amounts to obtaining money by actual fraud and embezzlement. The Debtor had not submitted a current financial statement when he obtained additional advances in 1987 and 1988 after he had paid the balance down to $25.00. This violated the federal laws and regulations stated above. The Court finds the Debtor, as an experienced banker, had knowledge of these laws and regulations and knowingly violated them. The Court also finds that similar advances would not have been made to regular bank customers; therefore, the Debtor, because of his position as Executive Vice President, received special treatment. This is also prohibited by said federal laws and regulations.
A bank can only make loans to its officers in compliance with the law. As the Bank’s Executive Vice President, the Debt- or was entrusted with and had control over the funds of the Bank. He took advantage of this position and obtained unlawful advances from the Bank. Knowingly obtaining money in this manner comes within the definition of embezzlement as stated in the Wallace case, supra.
Loan Number 2. This debt is also non-dischargeable because the Debtor received special treatment, because no current financial statement was on file, and because *301Loan Number 2 was a “single pay note”. The Debtor knew he could not obtain additional advances on a “single pay note” after paying the balance down to $333.09. The Debtor knew he was violating federal law and knew he was not allowed to obtain these additional advances on a “single pay note”. Therefore, his obtaining the advances in this manner amounts to actual fraud and embezzlement.
Loan Number h. The Debtor again obtained additional advances after paying down a “single pay note”. Again, no current financial statement was on file and the Debtor received special treatment. Additionally, when the note was paid down to $1.00, the Debtor released the collateral for the loan and then obtained the new advances. In effect, the Debtor turned a secured note into an unsecured one. The new unsecured advances on a previously secured note were not approved by the Board of Directors or any superior. The Debtor’s actions in regard to Loan Number 4 amount to obtaining money under actual fraud and embezzlement.
Loan Number 5. This debt is also non-dischargeable for the same reasons stated under Loan Number 4. This note was a “single pay note” that was paid down to $1.00, the collateral released and new advances made.
Loan Number 6. Loan Number 6 is the most recent loan and it would be discharge-able except for the fact the Debtor had no current financial statement in the file; therefore, the Bank’s loan to him was prohibited. The Debtor knew of these regulations and laws and obtained an unlawful loan; therefore, the amount of this debt is nondischargeable for the reasons stated above.
It should be noted that all of the unlawful advances in this case obtained by the Debtor from the Bank occurred in December 1988 at approximately the same time. These advances were obtained about six weeks prior to the Debtor’s termination at the Bank and the Court infers the Debtor was borrowing as much on these notes as he could prior to being found out and his source of credit being shut down. The Court will enter a separate order finding the debts to the Bank and Ohio nondis-chargeable. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491304/ | DECISION DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT
HAROLD L. MAI, Bankruptcy Judge.
THIS MATTER is before the court on the debtor/plaintiff’s Motion for Partial Summary Judgment.
The issue before the court today is whether a debtor’s claim of exemption in a vehicle under W.S.1977, § l-20-106(a)(iv) (July 1990 Cum.Supp.) is superior to a non-purchase money security interest in that vehicle.
UNDISPUTED FACTS
The facts, as necessary for determination of this Motion for Partial Summary Judgment, are not in dispute. On July 12,1989, the plaintiff borrowed $3,406.57 from defendant. To secure this loan, the plaintiff gave defendant a security interest in a 1982 Ford Pickup, Y.I.N. 1FTEX14G3CKA 195 19. The plaintiff did not use the proceeds of the loan to purchase the pickup truck. Defendant has a valid and properly perfected security interest in the pickup truck. On July 23, 1990, the debtor/plaintiff filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code. On her B-4 Schedule of property claimed as exempt, the plaintiff claimed a $2,000 exemption in the pickup pursuant to W.S. 1977, § l-20-106(a)(iv) (July 1990 Cum. Supp.). There was no objection filed to this claim of exemption, and the time for filing such objection has now expired. The value of the pickup truck, was approximately $2,000 at the time of the confirmation hearing.
DISCUSSION AND CONCLUSIONS
The Wyoming Statutes provide for an exemption from judicial process for a vehicle:
(a) The following property, when owned by any person, is exempt from levy or sale upon execution, writ of attachment of any process issuing out of any court in this state and shall continue to be exempt while the person or the family of the person is moving from one (1) place of residence to another in this state:
* * * * * *
(iv) A motor vehicle not exceeding in value two thousand dollars ($2,000.00). * * * * * *
W.S.1977, § l-20-106(a)(iv) (1990 Cum. Supp.).
In this adversary proceeding, the debt- or/plaintiff seeks to use § 506 of the Bankruptcy Code to avoid $2,000 worth of the consensual lien she granted to the defendant. Section 506 of the Bankruptcy Code provides, in part:
(a) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, ... is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, ... and is an unsecured claim to the extent that the value of such creditor’s interest ... is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest. ******
(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless—
(1) such claim was disallowed only under section 502(b)(5) or 502(e) of this title; or
*581(2) such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under section 501 of this title.
11 U.S.C. §§ 506(a) and (d).
A debtor in a Chapter 7 case may not use § 506(d) as a lien avoidance section for property not administered by the trustee. In re Dewsnup, 908 F.2d 588 (10th Cir.1990). In this jurisdiction, a debtor in a Chapter 13 case may use § 506(d) to avoid the unsecured portion of an undersecured lien. In re Hart, 923 F.2d 1410 (10th Cir.1991), reh’g denied.
It is the plaintiff's position that the amount of her $2,000 vehicle exemption must be subtracted first from the value of the vehicle. If so, then there is no remaining value to secure defendant’s loan. Therefore, the plaintiff argues the lien should be declared entirely void pursuant to § 506(d).
In other words, the plaintiff believes that a non-purchase money consensual lien does not attach to the first $2,000 of value of a vehicle belonging to an individual in Wyoming.
Wyoming case law does not answer the question of whether or not the plaintiff’s $2,000 exemption in a vehicle is superior to a previously granted consensual lien.
A review of Federal case law on this issue yields two (2) cases decided under the former Bankruptcy Act, in which the Tenth Circuit Court of Appeals held that the Oklahoma vehicle exemption applied only to the debtor’s equity in the vehicle, In re McCoy, 643 F.2d 684 (10th Cir.1981), and that the Colorado household goods exemption applied only to the debtors’ equity. In re Cummings, 413 F.2d 1281 (10th Cir.1969).
Although these decisions are persuasive, neither of the statutes construed in these two (2) cases are exactly identical to the Wyoming vehicle exemption statute at issue here. The Colorado household goods exemption statute construed in the Cummings case defined “value,” as net of consensual liens. 413 F.2d at 1284. Similarly, the McCoy case was construing an Oklahoma statute providing an exemption for “[o]ne (1) motor vehicle having an equity value not to exceed One Thousand Five Hundred Dollars.” 643 F.2d at 687 (emphasis added); see also In re Pebsworth, 121 B.R. 600 (Bankr.N.D.Okla.1990) (Oklahoma homestead exemption applies only to the debtor’s equity in mobile home).
Unlike the statutes construed in Cummings and McCoy, the Wyoming exemption statutes do not define or specify whether or not “value” is limited to equity value.
Upon careful reading of § l-20-106(a), this court concludes that under Wyoming law, a consensual lien still attaches and is valid even though it encumbers a debtor’s exempt personal property. This is because the protection afforded by § l-20-106(a) is limited to protection from involuntary transfer by a creditor’s use of legal process, such as forced sale upon attachment or execution. The statute specifies that the exemption is from “levy or sale upon execution, writ of attachment or any process issuing out of any court in this state.” Thus, a consensual lien encumbering exempt property may still be enforced if the debtor sells, or otherwise attempts to voluntarily transfer, an interest in the property.
Plaintiff cites In re Eldridge, 22 B.R. 218 (Bankr.D.Maine 1982), in support of her position. Eldridge is clearly distinguishable because it involved a Maine statute with very different language than the one at issue in this case. That Maine statute and its legislative history made it clear that the first $1,200 value of an automobile was exempt from any security interest. Id. at 221. In contrast to the Maine statutes at issue in Eldridge, the Wyoming statutes do not contain any similar provision for exemption “from claims secured by security interests in the property.” Id. Wyoming Statute Section 1-20-106 contains no reference whatsoever to security interests. Thus, under the ordinary meaning of the language of the statute, the Wyoming vehicle exemption is limited to involuntary transfer by means of legal process.
*582The plaintiff also argues that the Wyoming vehicle exemption and the Wyoming homestead exemption should be construed in a like manner. However, such a construction ignores the differences in the statutes establishing these two (2) different exemptions. The Wyoming Constitution provides for a homestead right.
A homestead as provided by law shall be exempt from forced sale under any process of law, and shall not be alienated without the joint consent of husband and wife, when that relation exists; but no property shall be exempt from sale for taxes, or for the payment of obligations contracted for the purchase of said premises, or for the erection of improvements thereon.
Wyo. Const, art. 19, § 9.
Although the Wyoming Constitution only requires a homestead exemption against “forced sale,” the Wyoming Statutes provide additional protection. Section 34-2-121 provides,
Every owner or occupant of a homestead as established herein may voluntarily sell, mortgage, or otherwise dispose of or encumber the same; provided the instrument of writing conveying, mortgaging, disposing of or encumbering such homestead shall contain in substance the following words: “Hereby releasing and waiving all rights under and by virtue of the homestead exemption laws of this state”, and shall be freely and voluntarily signed and acknowledged by the owner and the spouse of the owner of said homestead. The foregoing provisions shall not be applicable to nor shall compliance therewith be required for full legal effectiveness of any conveyance of property directly from husband to wife.
(Emphasis added.)
Under this section, a voluntary conveyance of a homestead is not effective unless accompanied by a waiver of homestead. Id.; Geist v. Converse County Bank, 79 B.R. 939 (D.Wyo.1987). Thus, a consensual, but non-purchase money, lien does not attach to the first $10,000 in value of a debtor’s homestead unless it is accompanied by an informed, voluntary, and specific waiver of the homestead exemption provided by article 9 of the Wyoming Constitution and §§ 1-20-101, 102, 103, 104, 107, and 108 of the Wyoming Statutes.
In contrast, there is no requirement of a waiver of exemption necessary to voluntarily convey an interest in other exempt property. Therefore, like a homestead, other exempt property enjoys protection from involuntary sale or process of law. However, unlike the homestead, other exempt property does not enjoy the extra protection from voluntary alienation without a specific waiver in writing. Therefore, this court concludes that the exemption from forced sale, and process of law does not mean that the creditor’s lien did not attach to the first $2,000 in value of the automobile. Instead all it means is that the first $2,000 in value is exempt from involuntary alienation by any process of law.
Section 522 of the Bankruptcy Code clearly states that a lien on exempt property remains enforceable under four (4) specific conditions:
$ $ H< * * *
(c) Unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under section 502 of this title as if such debt had arisen, before the commencement of the case, except—
(1) a debt of a kind specified in section 523(a)(1) or 523(a)(5) of this title;
(2) a debt secured by a lien that is—
(A)(i) not avoided under subsection (f) or (g) of this section or under section 544, 545, 547, 548, 549, or 724(a) of this title; and
(ii) not void under section 506(d) of this title; or
(B) a tax lien, notice of which is properly filed; or
(3) a debt of a kind specified in section 523(a)(4) or 523(a)(6) of this title owed by an institution-affiliated party of an insured depository institution to a Federal depository institutions regu*583latory agency acting in its capacity as conservator, receiver, or liquidating agent for such institution.
11 U.S.C. § 522(c) (emphasis added).
In order to apply § 522, it is necessary to specify what this case does not involve. It does not involve a “judicial lien” within the meaning of the Bankruptcy Code. 11 U.S.C. § 101(32). It does not involve a purchase money security interest. This issue would not arise if this were a purchase money security interest because, pursuant to W.S.1977, § l-20-108(a), the exemptions set forth in W.S.1977, §§ 1-20-101 through 109 do not apply to purchase money security interests. This case does not involve a lien on the debtor’s household furnishings, household goods, wearing apparel, appliances, books, animals, crops, musical instruments, jewelry, tools of the trade, or professionally prescribed health aids. Thus, this case does not involve the lien avoidance provisions set forth in 11 U.S.C. § 522(f).1 This case does not involve a debt for taxes or for child support or alimony. This case does not involve property that the trustee recovered from a third party pursuant to any of the trustee’s “avoiding powers” under the Bankruptcy Code.
As noted above, defendant’s lien is not one which may be avoided under subsection (f) or (g) of § 522. Similarly, this case does not involve any of the other circumstances set forth in § 522(c)(1); (c)(2)(A)(i); or (c)(3).
Under plaintiff’s position, the only condition that is arguably applicable is § 522(e)(2)(A)(ii), namely to the extent that the lien “is not void under § 506(d).” Under the plaintiff’s theory, the defendant’s lien did not attach to the first $2,000 in value of the vehicle. Therefore, she argues that under § 506(d), the lien would be void because the entire amount of the lien exceeded the non-exempt value of the vehicle.
However, only if the lien is first considered void as to the amount of the $2,000 exemption, would the lien be entirely void as to § 506(d).2 In this case, the consensual lien does attach to the first $2,000 in value and, therefore, the lien is “not void” pursuant to § 506(d).
It is exactly such “exempt” property as is at issue today which subsection (c) of § 522 addresses. Under subsection (c), it is very clear that if the exempt property in question is one for which a lien cannot be avoided, under another subsection of 522 or another section of the Bankruptcy Code, then the property remains subject to such lien by virtue of § 522(c).
In contrast, subsection (f) of § 522, allows avoidance “to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b).” (emphasis added). Thus, it applies even if the debtor has no equity in the property. In re Leonard, 866 F.2d 335 (10th Cir.1989). Therefore § 522(f) may be used to avoid the lien on household goods and other specified categories of property that are fully encumbered with liens up to the value of the property. Id.
If this vehicle was the plaintiff’s tool of the trade, then she would be able to do exactly what she seeks herein. The lien would be avoided, pursuant to § 522(f), to the extent that she “would have been entitled” to an exemption. Then the underse-cured portion of the lien, in this case the entire debt, would be avoided under § 506(d).
As the interplay between subsections (f) and (c) of § 522 make clear, there is a very important distinction between the effect of general exemptions under Wyoming State law and the right to avoid liens on certain categories of exempt property under the Bankruptcy Code. Pursuant to § 522(c), all unavoided liens on otherwise exempt *584property travel through the bankruptcy estate unaffected. 3 COLLIER ON BANKRUPTCY ¶ 522.27 at 522-85 through 87 (15th ed. 1991).
Under this court’s ruling today, the plaintiff retains the protection afforded under Wyoming law, to $2,000 in value of a vehicle, from forced sale or other involuntary transfer by legal process. This gives the plaintiff the same exemption rights that any other Wyoming resident who did not file bankruptcy in Wyoming would enjoy.3
However, by filing this adversary the plaintiff is seeking something more. By means of this bankruptcy case, what the plaintiff attempts to do is to voluntarily retain the property and reduce the amount of the lien that must be paid by the amount of the $2,000 exemption. Under her interpretation, the plaintiff would own the vehicle free and clear of any encumbrance and, upon confirmation of her plan, would then be free to sell or otherwise voluntarily transfer it without payment of any amount on the lien. This is a very different thing than the protection against forced sale or use of process afforded under W.S.1977, § 1-20-106 (1990 Cum.Supp.). Under the Bankruptcy Code, such lien avoidance treatment is permissible only for the very specifically named and limited categories of property and categories of liens as set forth in § 522(f)(2). This special treatment under Federal law is an important part of the debtor’s fresh start. However, to grant the plaintiff’s motion would be to rewrite the Bankruptcy Code to extend § 522(f)(2) to all exempt property. This would give this debtor/plaintiff rights in consensually encumbered property greater than those she is afforded under either the Bankruptcy Code or under the Wyoming exemption statutes.
The plaintiff’s claim of exemption was not objected to and she retains her exemption for a $2,000 value against forced sale or involuntary transfer by use of legal process. Because of the distinction between exemptions and lien avoidance, the decision today has little practice effect unless and until the plaintiff attempts to transfer the vehicle or encumber it with another lien. Until that time, $2,000 worth of equity in the vehicle remains exempt from execution or forced sale either in or out of bankruptcy.
Thus, it appears that even though the exempt portion of the lien is not avoided, the creditor may not be able to execute or foreclose on the vehicle after the bankruptcy because the $2,000 value will still be “exempt from levy or sale upon execution, writ of attachment or any process issuing out of any court in this State.” However, that matter is not before the court today.
What is clear, is that at the end of the term of this plan, if the plaintiff has made all of the payments required by the plan, she will be discharged from any personal liability remaining for the loan secured by the vehicle. Accordingly, the debt may not be enforced against her personally. The vehicle, however, will remain subject to whatever portion of the allowed secured claim that is not paid. 11 U.S.C. § 522(c).
The amount of that allowed secured claim will be the value of the vehicle. Although the amount of the allowed secured claim is not before the court today as part of the Motion for Partial Summary Judgment, if the value of the vehicle is $2,000, the amount of the allowed secured claim is $2,000. 11 U.S.C. § 506(a). Thus, the plaintiff eventually may use § 506(d) to void the lien in excess of that amount. Therefore, the amount of defendant’s lien will, by operation of § 506(d), eventually be reduced to the value of the vehicle.
The court will enter an appropriate order.
. The United States Supreme Court recently accepted certiorari in a case involving the interplay of the state law and lien avoidance on exempt property pursuant to section 522(f) of the Bankruptcy Code. Owen v. Owen, 877 F.2d 44 (11th Cir.1989), cert. granted, May 14, 1990. However, because it involves only the type of exempt property to which section 522(f) applies, it will likely shed little light on the problem before the court today.
. This court does not decide today the very different question of whether a judgment lien can attach to the first $2,000 in value of a vehicle under Wyoming law.
. It should be remembered that the Wyoming Legislature exercised its right to “opt-out" of the Federal list of exemptions, thereby evidencing its intent to limit its citizens filing for bankruptcy relief to the same exemptions that its non-filing citizens may assert. W.S.1977, § 1-20-109 (June 1988 Supp.); 11 U.S.C. § 522(b)(1). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483735/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
CARL DEAN EDWARDS, No. 85487
Appellant,
vs.
THE STATE OF NEVADA FILE
DEPARTMENT OF CORRECTIONS, NOV 08 2022
Respondent.
ORDEI? DISMISSING APPEAL
This appeal was docketed on October 12, 2022, without
payment of the requisite filing fee. See NRAP 3(e). That same day, this
court issued a notice directing appellant to pay the required filing fee or
demonstrate compliance with NRAP 24 within 14 days. The notice advised
that failure to comply would result in the dismissal of this appeal. To date,
appellant has not paid the filing fee or otherwise responded to this court's
notice. Accordingly, this appeal is dismissed. See NRAP 3(a)(2).
It is so ORDERED.
CLERK OF THE SUPREME COURT
ELIZABETH A. BROWN
BY:
cc: Hon. Steve L. •Dobrescu, District Judge
Carl Dean Edwards
Attorney General/Carson City
White Pine County Clerk
SUPREME COURT
OF
NEVADA
CLERK'S ORDER
(01, 1,147
22- 3514S-- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483734/ | IN THE SUP7EME COURT OF THE STATE OF NEVADA
REPUBLICAN NAT'ONAL No. 85604
COMMITTEE,
Petitioner,
VS.
THE EIGHTH JUDITIAL DISTRICT
COURT OF THE STATE OF NEVADA,
IN AND FOR THE COUNTY OF
CLARK; AND THE HONORABLE
TIMOTHY C. WILLIAMS, DISTRICT
JUDGE,
Respondents,
and
CLARK COUNTY; CLARK COUNTY
ELECTION DEPARTMENT; JOE P.
GLORIA, IN HIS OffICIAL CAPACITY
AS THE CLARK COUNTY REGISTRAR
OF VOTERS; DSCC; AND DCCC,
R.eal Parties in Interest.
ORDER DENYING PETITION FOR WRIT OF MANDAMUS
This emergency, original petition for a writ of mandamus
challenges a district court decision, reflected in November 3, 2022, minutes,
denying petitioner's request for mandamus or injunctive relief related to the
political composition of the persons verifying signatures used for mail
ballots in Clark County.' Respondents timely filed a response, as directed.
The Clark County Registrar, real party in interest Joe P. Gloria,
initially hired 64 temporary workers from employment agencies to verify
'Restoring Integrity and Trust in Elections, Inc. (RITE) has filed a
motion for leave to file an amicus curiae brief in support of petitioner. The
motion is granted; the amicus brief was filed on November 8, 2022.
SUPREME COURT
OF
NEVADA
(CI) I 947A ADD
33-1,43
the signatures on returned mail ballots; of these, 23 are Democrats, 8 are
Republicans, and 33 are Nonpartisans. An additional 6 Republican workers
were later hired to verify signatures. Nevertheless, given these figures,
petitioner Republican National Committee (RNC) asserts that the
signature verifiers' composition disproportionately excludes Republicans
and, consequently, the Registrar has violated his duty under NRS
293B.360(2) to ensure that the "members of each [special election] board
must represent all political parties as equally as possible."
RNC sought relief from the district court, and the district court
denied RNC's petition but has not yet entered a written order reflecting its
decision. Consequently, RNC has sought emergency writ relief from this
court, which petition we will consider, given the urgent mid-election
circumstances and lack of a written order. Las Vegas Review-Journal v.
Eighth Judicial Dist. Court, 134 Nev. 40, 43, 412 P.3d 23, 26 (2018)
(entertaining a petition for writ relief from the district court's oral
preliminary injunction, because the oral pronouncement could not be
immediately appealed and a later appeal could not afford adequate relief).
Although the Registrar explained that the make-up of the team varies
significantly each day due to personal employee reasons, RNC seeks an
order mandating immediate compliance with NRC 293B.360(2) going
forward because, it claims, signature verification is currently ongoing and
there is no assurance that the Registrar will continue to hire and schedule
signature verifiers in a manner that effectuates NRS 293B.360(2)'s equal
representation requirement.
As petitioner, it is RNC's burden to demonstrate a clear legal
right to the relief requested. Halverson v. Sec'y of State, 124 Nev. 484, 487,
186 P.3d 893, 896 (2008) ("A petition will only be granted when the
SUPREME COURT
OF
NEVADA
2
(0) I947A .alryr?
petitioner has a clear right to the relief requested."); Pan v. Eighth Judicial
Dist. Court, 120 Nev. 222, 228, 88 P.3d 840, 844 (2004) ("Petitioners carry
the burden of demonstrating that extraordinary relief is warranted."). We
review issues of statutory interpretation de novo, even in the context of a
writ petition. Intl Game Tech., Inc. v. Second Judicial Dist. Court, 124 Nev.
193, 198, 179 P.3d 556, 559 (2008).
NRS 293B.360(1) provides that the Registrar "shall create" a
computer program and processing accuracy board and "may create" other
boards, including a "mail ballot inspection board" and "[s]uch additional
boards . . . as the [Registrar] deems necessary for the expeditious processing
of ballots."2 (Emphasis added.) With respect to such boards, the Registrar
must ensure that the members "represent all political parties as equally as
possible." Nothing in NRS 293B.360 fashions or addresses any board for
signature verification purposes or requires the Registrar to create a board
of signature verifiers. See also NRS 293B.365 & NRS 293B.370 (repealed)
(defining the duties of the central ballot inspection board and the absent
ballot mailing precinct inspection board, respectively, neither of which
mention signature verification).
Rather, a different statute, NRS 293.269927, specifically
governs the procedures for verifying the signatures used for mail ballots.
When mail ballots are returned, "the clerk or an employee in the office of
the clerk" is charged with verifying the voter's signature on the return
envelope. NRS 293.269927(1). In Clark County, the signatures on mail
ballot return envelopes are initially checked by electronic means. If the
electronic device is unable to match the voter's signature against the voter
2"Clerk" and "Registrar" are used interchangeably. See NRS 293.044.
SUPREME COURT
OF
NEVADA
3
10) 11/47A
application signatures on file with the county clerk, the signature must be
verified manually. See NRS 293.269927(2). To do this, "[t]he clerk or
employee" reviews the signature used for the ballot against all the
signatures available in the clerk's records, and "[i]f at least two employees
in the office of the clerk" discern a reasonable question as to whether the
signatures match, the clerk must contact the voter for confirmation that the
signature belongs to the voter. NRS 293.269927(3). Thus, NRS 293.269927
provides that the Registrar and his employees will conduct the signature
verification process, and it appears that this is the process being followed
by the Registrar. The statute contains no requirement that a board verify
the signatures, nor is there any requirement therein that signature
verification on mail ballot returns is done by persons of different political
parties. Cf. NRS 293.277 (signature verification at polling places to be
conducted by election board officers); NRS 293.217 (requiring merely that
election boards at polling places "must not all be of the same political
party"). The Legislature has placed such express requirements in other
statutes governing the election process, and it is for the Legislature, not this
court, to determine whether similar requirements are warranted for
signature verification of mail ballots.
Nevertheless, RNC insists that, even if the creation of a board
was not required, the Registrar necessarily created a board when he hired
a group of temporary workers to assist him with conducting the election
based on NRS 293B.027, which defines "election board": "Election board'
means the persons appointed by each county or city clerk to assist in the
conduct of an election." Essentially, RNC appears to argue that anyone
assisting the Registrar in election efforts is necessarily an election board to
which NRS 293B.360(2) applies. We decline to read such a substantive
SUPREME COURT
OF
NEVADA
4
10; 11-17A
requirement into a definitional statute in this manner, without
consideration of the statutory scheme specifically governing elections and
the verification of mail ballot signatures discussed above. See generally
Williams v. State Dep't of Corr., 133 Nev. 594, 601, 402 P.3d 1260, 1265
(2017) (explaining that "the more specific statute will take precedence" over
a general statute). Although an election board is comprised of persons
appointed to assist with an election, the definitional statute does not impose
a requirement that all persons verifying mail ballot signatures constitute a
board that must comply with NRS 293B.360(2). Accordingly, RNC has not
dernonstrated a clear legal right to the relief requested, and we
ORDER the petition DENIED.
o -4.7.11
Parraguirr i"
/ Aer....A. , J. Al4G4-4 , J.
Hardesty Stiglich
, J. J
Cadish Pickering
Herndon
SUPREME COURT
OF
NEVADA
5
I()) I947A c4Wra
cc: Hon. Timothy C. Williams, District Judge
Pisanelli Bice, PLLC
Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP/Las Vegas
Elias Law Group LLP/Wash DC
Clark County District Attorney/Civil Division
Snell & Wilmer/Phoenix
Snell & Wilmer, LLP/Las Vegas
Eighth District Court Clerk
SUPREME COURT
OF
NEVADA | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483740/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
JUDGMENT RENDERED NOVEMBER 10, 2022
NO. 03-21-00498-CV
Sterling Hampton, Appellant
v.
GDS Associates, Inc. and Hi-Line Engineering, Appellees
APPEAL FROM THE 53RD DISTRICT COURT OF TRAVIS COUNTY
BEFORE JUSTICES GOODWIN, BAKER, TRIANA
DISMISSED ON JOINT MOTION -- OPINION BY JUSTICE GOODWIN
This is an appeal from the judgment signed by the trial court on August 31, 2021. The parties
have filed a motion to dismiss the appeal, and having considered the motion, the Court agrees
that the motion should be granted. Therefore, the Court grants the motion and dismisses the
appeal. Each party shall bear their own costs relating to this appeal, both in this Court and in the
court below. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483736/ | IN TFIE SUPREME COURT OF THE STATE OF NEVADA
LTMC PHYSICIANS' BARGAINING UNIT No. 85446
OF NEVADA SERVICE EMPLOYEES
UNION, SEIU LOCAL 1107, AFL-CIO,
CLC, AN EMPLOYEE ORGANIZATION;
DEBORAH BOLAND, M.D.; JOEL
CANGA, M.D.; EDGAR L. COX, M.D.;
ANDREA FONG, D.O.; NEIL W.
FLEI
GOODSELL, M.D.; DEBORAH NOV 0 7 2022
GOODWIN, M.D.; MARIA MARTINEZ,
M.D.; JOHN NEPOMUCENO, M.D.;
GEORGE OEHLSEN, D.O.; ARDESHIR
ROHANI, M.D.; ERNESTO RUBIO, M.D.;
TIMOTHY SCHRADER, M.D.; RONALD
TAYLOR, M.D.; BRADLEY WALKER,
M.D.; AND MICHAEL S. TANNER AS
SPECIAL ADMINISTRATOR OF THE
ESTATE OF STERLING TANNER, M.D.,
AS INDIVIDUAL LOCAL GOVERNMENT
EMPLOYEES AND MEMBERS OF THE
UMC PHYSCIANS' BARGAINING UNIT
OF NEVADA SERVICE EMPLOYEES
UNION, SEIU LOCAL 1107, AFL-CIO,
CLC,
Appellants,
vs.
NEVADA SERVICE EMPLOYEES
UNION, SEIU LOCAL 1107, AFL-CIO, A
NONPROFIT COOPERATIVE
CORPORATION,
Res ondent.
ORDER DISMISSING APPEAL
This is an appeal from a district court order granting a motion for
summary judgment. Eighth Judicial District Court, Clark County; Ronald J.
Israel, Judge.
On October 7, 2022, respondent filed a motion to dismiss this
appeal for lack of jurisdiction. Respondent asserts that the appeal is
SUPREME COURT
OF premature because appellants timely filed a motion for reconsideration that
NEVADA
7A
5Lf' D
sought relief under NRCP 52(b) and NRCP 59 and the district court has not
yet resolved the motion. Appellants oppose the !notion, arguing that the notice
of appeal is not premature because they filed the notice of appeal after the
written judgment was entered. Appellants argue that even if their motion for
reconsideration is considered a tolling motion, under NRAP 4(a)(6), upon entry
of the district court order resolving the motion for reconsideration, jurisdiction
will be properly vested in this court.
The record before this court demonstrates appellants filed the
notice of appeal after filing the motion for reconsideration. The motion for
reconsideration was a timely filed tolling motion under NRAP 4(a)(4). See AA
Primo Builders v. Washington, 126 Nev. 578, 245 P.3d 1190 (2010) (a motion
for reconsideration rnay be considered a tolling motion to alter or amend). The
tolling motion has not yet been resolved. A timely tolling motion tolls the 30-
day appeal period, and a notice of appeal is of no effect if it is filed after such a
tolling motion is filed and before the district court enters a written order finally
resolving the motion. See NRAP 4(a)(4). Further, "[t]his court may dismiss as
premature a notice of appeal filed after the oral pronouncement of a decision
or order but . . . before entry of the written disposition of the last-remaining
timely motion listed in Rule 4(a)(4)." NRAP 4(a)(6). Accordingly, we conclude
this court lacks jurisdiction. The motion to dismiss is granted and we
ORDER this appeal DISMISSED.1
, J.
Piaeu P
Pickering
1TheHonorable Mark Gibbons, Senior Justice, participated in this
SUPREME COURT matter under a general order of assignment.
OF
NEVADA
(01 1947A
2
cc: Hon. Ronald J. Israel, District Judge
Stephen E. Haberfeld, Settlement Judge
Rodriguez Law Offices, P.C.
Christensen James & Martin
Eighth District Court Clerk
SUPREME COURT
OF
NEVADA
(0) IR-17A
3 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483747/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-21-00374-CV
City of Pflugerville, Texas, Appellant
v.
735 Henna, LLC, Appellee
FROM THE 345TH DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-GN-18-001908, THE HONORABLE CATHERINE MAUZY, JUDGE PRESIDING
MEMORANDUM OPINION
The City of Pflugerville, Texas (the City) sued 735 Henna, LLC (Henna) for
damages to compensate it for the cost of condemning property owned by Henna. The City
alleged that it was forced to condemn the property because Henna had illegally subdivided a
larger tract of land (the Henna Tract) that contained the condemned property. See Tex. Local
Gov’t Code § 212.018 (providing that municipality may file action to recover damages from
owner of tract of land in amount adequate for municipality to undertake activity necessary to
bring about compliance with requirement regarding tract established or adopted by
municipality’s governing body). The City filed a motion for summary judgment asserting that,
as a matter of law, it was entitled to its claimed damages and attorney’s fees. Henna filed a
competing motion for summary judgment asserting that the City had released its claims against
Henna when the parties executed a settlement agreement to resolve the separate condemnation
proceeding the City had filed against Henna. The trial court denied the City’s motion for
summary judgment and granted Henna’s. In this appeal, the City challenges the trial court’s
summary-judgment rulings as well as its rulings on the City’s objections to Henna’s summary-
judgment evidence. We will affirm.
BACKGROUND
In November 2017, the City petitioned a Travis County court at law to condemn a
portion of the Henna Tract for roadway improvements, specifically to widen a road adjacent to
the Henna Tract.1 See Tex. Prop. Code § 21.012 (entity with eminent domain authority may
begin condemnation proceeding to acquire real property for public use if unable to agree with
owner on amount of damages). The court appointed three special commissioners to determine
the value of the land that the City sought to condemn. Id. § 21.014. Following a hearing, the
commissioners awarded Henna $365,000. The City objected to the award as excessive, and
the court set the case for trial. See id. § 21.018 (if party files objection to findings of special
commissioners, court shall cite adverse party and try case in same manner as other civil causes).
In April 2018, while the First Lawsuit was still pending, the City sued Henna,
alleging that Henna had illegally subdivided the Henna Tract.2 The City asserted that, had
Henna subdivided the Henna Tract legally, Henna would have been required to dedicate to the
City the property the City sought to condemn in the First Lawsuit. The City alleged that Henna
“engaged in a conspiracy to illegally subdivide the property in order to maximize the price that
the City would have to pay to obtain the right of way.” The City brought a cause of action
pursuant to Texas Local Government Code section 212.018, which provides:
1
We will refer to this litigation as “the First Lawsuit.”
2
We will refer to this litigation as “the Second Lawsuit.”
2
(a) At the request of the governing body of the municipality, the municipal
attorney or any other attorney representing the municipality may file an action in
a court of competent jurisdiction to:
....
(2) recover damages from the owner of a tract of land in an amount
adequate for the municipality to undertake any construction or other activity
necessary to bring about compliance with a requirement regarding the tract and
established by, or adopted by the governing body under, this subchapter.
The City sought as damages the cost of condemning the portion of the Henna Tract it needed to
make the intended road improvements.
In April 2019, while both the First Lawsuit and the Second Lawsuit were pending,
Henna and the City participated in a full-day mediation. Following the mediation, Henna and the
City entered into a Rule 11 Agreement, which stated that the City and Henna “agree that all
claims and controversies between them regarding the condemnation matter are hereby settled on
this the 3rd day of April 2019 in accordance with [certain listed] terms and conditions.” One of
the Rule 11 Agreement’s terms recited that the “agreed amount of settlement for the property
at issue is Three Hundred Sixty Thousand Dollars ($360,000).” Thereafter, the court in the
First Lawsuit signed an Agreed Judgment awarding Henna $360,000 in exchange for the City’s
receiving a fee simple title to the property it had sought to condemn. The Agreed Judgment
stated that the settlement amount—an amount $5,000 less than the valuation assigned by the
appointed commissioners—constituted “full compensation for the condemnation of the [portion
of the Henna Tract] and any and all claims which have been made or which could have been
made in this litigation or as a result of the events giving rise to this litigation.”
After the Agreed Judgment was signed in the First Lawsuit, the City filed a
motion for summary judgment in the Second Lawsuit asserting that, as a matter of law, it was
3
entitled to recover from Henna the full settlement amount of $360,000, along with attorneys’ fees
and costs, as compensation for its having to institute condemnation proceedings instead of
receiving a dedication of a right of way it alleged it would have been entitled to had Henna
not illegally subdivided the Henna Tract. Henna filed a cross-motion for summary judgment
asserting that the City’s claim for damages in the Second Lawsuit had been released by the
Rule 11 Agreement and, additionally, was barred by the trial court’s Agreed Judgment in the
First Lawsuit based on the doctrine of res judicata. The trial court denied the City’s motion for
summary judgment and granted Henna’s. The City then perfected this appeal.
DISCUSSION
Under the general standard applicable to both summary-judgment motions, a
party moving for traditional summary judgment must establish there is no genuine issue of
material fact and he is entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a(c);
Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215-16 (Tex. 2003). If the movant
establishes its right to summary judgment, the burden shifts to the nonmovant to raise a genuine
issue of material fact. See Centeq Realty, Inc. v. Siegler, 899 S.W.2d 196, 197 (Tex. 1995).
When, as in this case, both parties move for summary judgment and the trial court grants one
motion and denies the other, we must review both parties’ summary-judgment evidence,
determine all issues presented, and render the judgment that the trial court should have rendered.
FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). We review a
summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.
2005). We take all evidence favorable to the nonmovant as true and indulge every reasonable
inference and resolve any doubts in its favor. Id.
4
In five issues, the City argues that the trial court erred by granting Henna’s
motion for summary judgment and by denying its motion for summary judgment. The City also
challenges the trial court’s rulings on its and Henna’s objections to evidence submitted in support
of each party’s motion for summary judgment. Because it is dispositive, we first consider
whether the trial court properly concluded that, as part of the City’s settlement of the First
Lawsuit, the City released the claims it brought in the Second Lawsuit.
“In general, a release surrenders legal rights or obligations between the parties to
an agreement.” Dresser Indus., Inc. v. Page Petrol., Inc., 853 S.W.2d 505, 508 (Tex. 1993)
(citing Cox v. Robison, 150 S.W. 1149, 1155 (Tex. 1912). It operates to extinguish claims or
causes of action between the parties and is an absolute bar to any right of action on the released
matter. See id. (citing Hart v. Traders & General Ins. Co., 189 S.W.2d 493, 494 (Tex. 1945). A
release is expressly designated as an affirmative defense. See Tex. R. Civ. P. 94. Like any other
agreement, a release is subject to the rules of construction governing contracts. Baty v. ProTech
Ins. Agency, 63 S.W.3d 841, 848 (Tex. App.—Houston [14th Dist.] 2001, pet. denied). When, as
here, neither party has alleged that the release was induced by fraud, and, as here, the language
of the release is unambiguous, the interpretation of the release is “to be decided by the court as a
question of law.” Memorial Med. Ctr. of E. Tex. v. Keszler, 943 S.W.2d 433, 434 (Tex. 1997)
(per curiam).
To effectively release a claim, the releasing instrument must “mention” the
claim to be released. Victoria Bank & Tr. v. Brady, 811 S.W.2d 931, 938 (Tex. 1991). Any
claims not within the subject matter of the release are not discharged, even if those claims exist
when the release is executed. Id. It is not necessary, however, for the parties to specifically
enumerate all released claims, and the Texas Supreme Court has expressly recognized the
5
validity of “broad-form releases.” See Keck, Mahin & Cate v. National Union Fire Ins. Co. of
Pittsburgh, Pa., 20 S.W.3d 692, 698 (Tex. 2000). The parties need not identify every potential
cause of action relating to the subject matter of the release for that claim to be within the scope
of the release. Id.
The Rule 11 Agreement at issue here states that “all claims and controversies
between [Henna and the City] regarding the condemnation matter are hereby settled.” (Emphasis
added). Thus, the question before us is whether the Second Lawsuit, in which the City sought to
recover the costs of condemning the section of the Henna Tract needed for its road improvement
project, is a controversy between Henna and the City “regarding the condemnation matter.”
We conclude that it is. Moreover, the Agreed Judgment recites that the parties agreed that
the amount awarded Henna pursuant to the terms of the Rule 11 Agreement constituted full
compensation for “any and all claims which have been made . . . as a result of the events giving
rise to” the litigation; i.e., the need for the City to condemn a portion of the Henna Tract.
The City maintains that the Rule 11 Agreement could not have released the claims
made in the Second Lawsuit because those claims were already the subject of pending litigation
and the Rule 11 Agreement does not specifically mention the Second Lawsuit. The City further
urges that if the Rule 11 Agreement had been intended to address the claims made in the Second
Lawsuit, it would have referenced the Second Lawsuit and included a requirement that that case
be dismissed. But, as previously noted, the Texas Supreme Court has expressly stated that a
claim need not be specifically enumerated to fall within the scope of a broad form release. See
Keck, Mahin & Cate, 20 S.W.3d at 698. The City also asserts that the claims made in the Second
Lawsuit are not within the scope of the release because the First Lawsuit was an “administrative
proceeding” limited to condemnation of private property. This does not, however, serve to limit
6
the type or nature of claims released in the Rule 11 Agreement. A release is a contract and is
interpreted as such, not by reference to whether a particular claim was or could have been
asserted in the specific litigation the release resolves. In fact, the Texas Supreme Court has
repeatedly recognized that a release may often “encompass unknown claims and damages that
develop in the future.” See id. In the present case, the Rule 11 Agreement releases any and all
claims between the parties “regarding the condemnation matter,” which encompasses the City’s
claim seeking to recover the costs of condemning Henna’s property as damages in a separate
lawsuit. The trial court properly concluded that the City had released the claims asserted in the
Second Lawsuit and did not err by granting summary judgment in Henna’s favor on that ground.
Because the City’s claims in the Second Lawsuit had been released, the trial court also properly
denied the City’s motion for summary judgment.3
CONCLUSION
For the reasons stated in this opinion, we affirm the trial court’s orders granting
Henna’s motion for summary judgment and denying the City’s.
__________________________________________
Thomas J. Baker, Justice
Before Justices Goodwin, Baker, and Triana
Affirmed
Filed: November 10, 2022
3
Because the disposition of this appeal does not depend on any of the summary-
judgment evidence the City objected to, we need not address its appellate issues challenging the
trial court’s rulings on its evidentiary objections.
7 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483742/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-22-00522-CV
Indago, Inc., Appellant
v.
CLPF-Perry Brooks, LP, Appellee
FROM THE 459TH DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-GN-21-005252, THE HONORABLE MADELEINE CONNOR, JUDGE PRESIDING
MEMORANDUM OPINION
Appellant Indago, Inc. has filed an unopposed motion to dismiss this appeal. We
grant appellant’s motion and dismiss the appeal. See Tex. R. App. P. 42.1(a).
__________________________________________
Gisela D. Triana, Justice
Before Chief Justice Byrne, Justices Triana and Smith
Dismissed on Appellant’s Motion
Filed: November 10, 2022 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483743/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
JUDGMENT RENDERED NOVEMBER 10, 2022
NO. 03-22-00522-CV
Indago, Inc., Appellant
v.
CLPF-Perry Brooks, LP, Appellee
APPEAL FROM THE 459TH DISTRICT COURT OF TRAVIS COUNTY
BEFORE CHIEF JUSTICE BYRNE, JUSTICES TRIANA AND SMITH
DISMISSED ON APPELLANT’S MOTION -- OPINION BY JUSTICE TRIANA
This is an appeal from the order signed by the trial court on May 24, 2022. Appellant has filed
an unopposed motion to dismiss the appeal, and having considered the motion, the Court agrees
that the motion should be granted. Therefore, the Court grants the motion and dismisses the
appeal. Each party shall bear its own costs relating to this appeal, both in this Court and in the
court below. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483744/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
JUDGMENT RENDERED NOVEMBER 10, 2022
NO. 03-18-00573-CV
Appellants, Glenn Hegar, Comptroller of Public Accounts of the State of Texas; and
Ken Paxton, Attorney General of the State of Texas// Cross-Appellant, Sirius XM Radio, Inc.
v.
Appellee, Sirius XM Radio, Inc.// Cross-Appellees, Glenn Hegar, Comptroller of Public
Accounts of the State of Texas; and Ken Paxton, Attorney General of the State of Texas
APPEAL FROM THE 261ST DISTRICT COURT OF TRAVIS COUNTY
BEFORE JUSTICES GOODWIN, BAKER, AND KELLY
AFFIRMED ON REMAND -- OPINION BY JUSTICE KELLY
This is an appeal from the judgment signed by the trial court on August 14, 2018. Having
reviewed the record and the parties’ arguments, the Court holds that there was no reversible error
in the judgment. Therefore, the Court affirms the trial court’s judgment. Appellant shall pay all
costs relating to this appeal, both in this Court and in the court below. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483752/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-22-00279-CV
B. S. and M. S., Appellants
v.
Texas Department of Family and Protective Services, Appellee
FROM THE 146TH DISTRICT COURT OF BELL COUNTY
NO. 315625, THE HONORABLE JACK WELDON JONES, JUDGE PRESIDING
MEMORANDUM OPINION
B.S. (Father) and M.S. (Mother) appeal from the trial court’s decree terminating
their parental rights to their sons “Kevin,” who was eleven at the time of trial, and “Kenneth,”
who was six. 1 See Tex. Fam. Code § 161.001(b). Both parents challenge the sufficiency finding
that termination is in the children’s best interest and the finding of factually sufficient evidence
supporting termination under predicate statutory grounds. Father also challenges the finding of
legally sufficient evidence supporting termination under statutory grounds, the “endanger”
definition included in the jury charge, the admission of expert testimony by a licensed counselor,
and the failure to strike several jurors for cause. We affirm the trial court’s termination decree.
1 For the children’s privacy, we will refer to them by aliases and to their family members
by their relationships to them or by aliases. See Tex. R. App. P. 9.8.
EVIDENTARY AND PROCEDURAL SUMMARY
Between November 2019 and January 2020, the Texas Department of Family and
Protective Services (Department) received several reports alleging physical and sexual abuse by
Father 2 against Kevin, the boys’ then-eight-year-old sister, and Kenneth. Those allegations
included that Father had physically and/or sexually abused each of his three children; that the
sister was making sexually inappropriate comments and acts toward her brothers; that Mother
and Father had instructed Kevin to not disclose information to the investigator and that Mother
told Kevin to say that his sister hit herself; and that Kevin was “terrified” and “extremely”
concerned that his interview was being recorded. Mother and Father denied physically
disciplining their children, reported that the sister hits herself, and refused services for
the children.
On February 12, 2020, the Department filed a petition to be appointed the
children’s temporary managing conservator and to terminate Father’s and Mother’s parental
rights as to Kevin, the sister, and Kenneth. The trial court entered emergency removal orders the
same day. Kevin and Kenneth were placed in foster care, where they remained throughout the
case. Their sister was separately placed in a shelter and then with her grandmother. 3
A four-day jury trial took place between March 22 and March 25, 2022. During
the course of trial, the jury heard testimony from Iwalani Caines, the Department’s
representative; Louis Rishkofski, Kevin’s and Kenneth’s counselor; Ashley Lomas, the lead
2 Father is a registered sex offender who in 2015 pleaded no contest to and was
convicted of attempted forcible sexual abuse in Utah.
3 The sister’s case was severed into its own cause number and is not part of this appeal.
2
forensic interviewer at the Children’s Advocacy Center (CAC); Father; Mother; the parents’
counselors; and the boys’ foster mother, grandmother, and guardian ad litem.
Relevant here, the cross-examination of Rishkofski by Father’s counsel was
paused to allow for Lomas to testify out of order because of a pending scheduling conflict.
During Lomas’s testimony, Rishkofski remained in the courtroom. Lomas testified regarding her
initial forensic interviews of all three children, their outcries and red flags for physical and sexual
abuse, and her documentation of the interviews. The cross-examination of Rishkofski was
restarted and completed immediately after Lomas finished testifying. During the latter
cross-examination, Rishkofski testified at one point that Kevin did not get into specific details
about observing his parents having sex “[j]ust as he didn’t go there with the CAC person.”
On March 25, 2022, the jury rendered a verdict for termination of Father’s and
Mother’s parental rights under Family Code subsections 161.001(b)(1)(D) and (E), that
termination of their parental rights was in the children’s best interest, and that the Department
should be appointed managing conservator of Kevin and Kenneth. The trial court signed the
Decree of Termination in accordance with the jury verdict on April 26, 2022. 4 Neither Father
nor Mother moved for instructed verdict, to disregard the jury’s answer, for judgment
notwithstanding the verdict, or for a new trial. Father and Mother filed notices of appeal, and
this appeal followed.
4 The trial court subsequently signed an Order Nunc Pro Tunc on June 15, 2022, which
corrected a scrivener’s error in the original Decree of Termination listing the trial start date as
“March 22, 2002.”
3
STANDARD OF REVIEW
To terminate the parent-child relationship, a court must find by clear and
convincing evidence that: (1) the parent has committed one of the enumerated statutory grounds
for termination and (2) it is in the child’s best interest to terminate the parent’s rights. Tex. Fam.
Code § 161.001(b). Clear and convincing evidence is “the measure or degree of proof that will
produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations
sought to be established.” Id. § 101.007. “The distinction between legal and factual sufficiency
lies in the extent to which disputed evidence contrary to a finding may be considered.” In re
A.C., 560 S.W.3d 624, 630 (Tex. 2018). When determining legal sufficiency, we consider
whether “a reasonable factfinder could form a firm belief or conviction that the finding was true”
when the evidence is viewed in the light most favorable to the factfinder’s determination and
undisputed contrary evidence is considered. Id. at 631. When determining factual sufficiency,
we consider whether “in light of the entire record, the disputed evidence a reasonable factfinder
could not have credited in favor of a finding is so significant that the factfinder could not have
formed a firm belief or conviction that the finding was true.” Id. We must “provide due
deference to the decisions of the factfinder, who, having full opportunity to observe witness
testimony first-hand, is the sole arbiter when assessing the credibility and demeanor of
witnesses.” In re A.B., 437 S.W.3d 498, 503 (Tex. 2014); see also In re J.P.B., 180 S.W.3d 570,
573 (Tex. 2005).
DISCUSSION
Both parents challenge the finding that termination is in the children’s best
interest and that there was factually sufficient evidence supporting termination under Subsections
4
(D) and (E). Father also challenges the finding that there was legally sufficient evidence
supporting termination under Subsections (D) and (E), as well as the definition of “endanger” in
the jury charge, admission of expert testimony by a licensed counselor, and the failure to strike
several jurors for cause. We address each in turn.
Statutory Grounds and Best Interest Findings
Father’s first issue and Mother’s sole issue challenge the finding that termination
is in the children’s best interest and the trial court’s finding that factually sufficient evidence
supported termination of their parental rights under Subsections (D) and (E). Father also
challenges the finding that legally sufficient evidence supported termination of his parental rights
under Subsections (D) and (E). The Department contends that the parents have failed to preserve
these legal and factual sufficiency challenges.
To preserve a challenge to the legal sufficiency of evidence in a jury trial, a party
must take one of the following actions: (1) file a motion for instructed verdict, (2) file a motion
for judgment notwithstanding the verdict, (3) object to the submission of the issue to the jury,
(4) file a motion to disregard the jury’s answer to a vital fact issue, or (5) file a motion for new
trial. See A.W. v. Texas Dep’t of Fam. & Protective Servs, No. 03-17-00048-CV,
2017 WL 3044243, at *2 (Tex. App.—Austin July 14, 2017, no pet.) (mem. op.) (concluding
parent waived both factual and legal sufficiency challenges to termination by failing to preserve
them); In re E.M., 494 S.W.3d 209, 225 (Tex. App.—Waco 2015, pet. denied) (concluding father
waived legal sufficiency challenge to best interest finding); see also Cecil v. Smith, 804 S.W.2d 509,
511 (Tex. 1991). Similarly, the party must file a motion for new trial to preserve a challenge to
factual sufficiency. See E.N. v. Texas Dep’t of Fam. & Protective Servs., No. 03-21-00014-CV,
2021 WL 2460625, at *6 (Tex. App.—Austin June 17, 2021, no pet.) (mem. op.) (concluding
5
father failed to preserve challenge to factual sufficiency of the evidence supporting termination);
see also In re J.M.S., 43 S.W.3d 60, 62 (Tex. App.—Houston [1st Dist.] 2001, no pet.)
(concluding both parents waived their factual and legal sufficiency challenges by failing to
preserve them for review). Nothing in the record reflects that Father or Mother took any of the
requisite actions to preserve their legal or factual sufficiency challenges to the statutory grounds
or best interest findings, and neither Appellant disputes the Department’s assertion that the
parents did not take any of those actions to preserve this issue for appellate review.
Rather, Father argues that they are not required to preserve a legal or factual
sufficiency challenge so long as the parents “present the issue” to the court of appeals by raising
it in their briefing. He relies on In re N.G., 577 S.W.3d 230 (Tex. 2019), to argue that allowing
findings under Subsections (D) or (E) to go unreviewed on appeal violates the parents’ due
process rights. But Father overreads In re N.G. In that termination appeal, the Texas Supreme
Court held that due process requires courts of appeals to review the sufficiency of evidence
supporting findings under Subsections (D) and (E), even if another predicate finding is sufficient
to uphold the judgment. See Id. at 237. In re N.G. requires such a review when the parents have
“presented the issue on appeal,” but that decision did not involve any challenge that the parents
had failed to preserve their challenge. Id. at 235. The Supreme Court did not address
preservation nor exclude predicate statutory ground challenges from the “long-established
requirement of error preservation of legal and factual sufficiency issues in parental-rights
terminations cases decided by a jury.” In re D.T., 593 S.W.3d 437, 439 n.3 (Tex. App.—
Texarkana 2019), aff’d, 625 S.W.3d 62 (Tex. 2021); see also In re A.R.S., No. 05-21-00655-CV,
2022 WL 224812, at *2 n.1 (Tex. App.—Dallas Jan. 26, 2022, no pet.) (mem. op.); In re M.X.R.,
No. 04-20-00042-CV, 2020 WL 2736465, at *2–3 (Tex. App.—San Antonio May 27, 2020, no
6
pet.) (mem. op.). At most, the ruling in In re N.G. “presupposes that the appellant has preserved
the issues for appeal in the first instance.” In re D.T., 593 S.W.3d at 439 n.3. We therefore
decline to except factual and legal sufficiency challenges in parental-rights termination cases
decided by a jury from the longstanding requirement of error preservation for appellate review.
See E.N., 2021 WL 2460625, at *6 n.7; see also In re D.T., 593 S.W.3d at 439 n.3.
Accordingly, Father and Mother have failed to preserve their legal and factual
sufficiency challenges to the statutory grounds and best interest findings and have waived those
arguments. 5 We overrule Father’s first issue and Mother’s sole issue.
“Endanger” Definition in Jury Charge
As his second issue, Father contends the trial court erred by submitting an
incomplete definition of “endanger” to the jury as part of the jury instructions.
We review the trial court’s decision to refuse a particular instruction for an abuse
of discretion. Thota v. Young, 366 S.W.3d 678, 687 (Tex. 2012). “A trial court has considerably
more discretion in submitting instructions than it has in submitting questions.” V.C. v. Texas
5 A different panel of this Court recently handed down an opinion where the Court chose
to review the predicate statutory ground findings because of “the interest of justice and because
of the importance of the rights involved.” A.K. & T.A. v. Texas Dep’t of Fam. & Protective
Servs., No. 03-22-00285-CV, 2022 WL 14989625, at *5 (Tex. App.—Austin Oct. 27, 2022, no
pet. h.) (mem. op.). Even though our approach is consistent with the prior decisions of this
Court, see E.N., 2021 WL 2460625, at *6 n.7 (“We do not interpret the supreme court's holding
in In re N.G. as requiring us to address Father's unpreserved factual-sufficiency argument.”),
Tex. R. App. P. 47.1 (directing that opinions be “as brief as practical” and address issues
“necessary” to final disposition), A.K. & T.A. is also readily distinguishable; in that appeal, one
parent properly preserved her legal sufficiency challenge, and this Court therefore was already
required to undertake a review of the endangerment findings as to the mother. See A.K. & T.A.,
2022 WL 14989625, at *5 (stating mother challenged the legal sufficiency of the evidence
supporting the findings under Subsection (D) and (E)); see also In re N.G., 577 S.W.3d at 237
(requiring Subsection (D) and (E) findings to be reviewed on appeal when those issues have been
properly presented to the court).
7
Dep’t of Fam. & Protective Servs., No. 03-17-00889-CV, 2018 WL 3078099, at *12 (Tex.
App.—Austin June 22, 2018, pet. denied) (mem. op.). A jury instruction is proper if it
“(1) assists the jury, (2) accurately states the law, and (3) finds support in the pleadings and
evidence.” Thota, 366 S.W.3d at 687 (quoting Columbia Rio Grande Healthcare, L.P.
v. Hawley, 284 S.W.3d 851, 855–56 (Tex. 2009)). Even if a jury instruction was improper, we
will not reverse a judgment for a charge error unless the error “probably caused the rendition of
an improper judgment.” Id.
The trial court submitted the following “Endanger” definition to the jury:
To “Endanger” means to expose to loss or injury, to jeopardize. It is not
necessary that the conduct be directed at the child or that the child actually suffers
injury. This means that the conduct of the parent, or the conditions or
surroundings in which the children lived, exposed the children to loss or injury or
jeopardized the emotional or physical health of the children. The parental course
of conduct includes both the parent’s actions and the parent’s omissions or
failures to act. Acts by the parents both before and after the child’s birth may be
considered. The conduct of the parent did not have to be directed at the child;
nor must the child actually have suffered injury from the parents conduct. The
specific danger to the well-being of the children need not be established as an
independent proposition, but may be inferred from the parent's misconduct alone.
(emphasis added). Father objected and sought to replace the bolded language with the following:
To endanger means more than a threat of metaphysical injury or the possible ill
effects of a less than ideal family environment, but it is not necessary that the
conduct be directed at a child or that the child actually suffers injury.
The trial court overruled the objection.
Father has failed to demonstrate that failing to use his preferred language for that
specific sentence fails to accurately state the law so as to render the definition legally incorrect
and improper. See In re K.H., No. 12-05-00077-CV, 2006 WL 3211299, at *2 (Tex. App.—
Tyler Nov. 8, 2006, no pet.) (mem. op.) (rejecting similar challenge to “endanger” definition as
8
unnecessary for jury to render a proper verdict even though “the requested definitions are more
detailed than those in the jury charge”). Moreover, Father has not demonstrated how his
requested instruction was necessary to enable the jury to render a proper verdict when
considering the definition as a whole that was submitted to the jury. V.C., 2018 WL 3078099, at
*13. We therefore conclude that Father has failed to show that the district court abused its
discretion in denying his requested instruction. We overrule his second issue.
Expert Testimony Challenge
In his third and fourth issues, Father contends the trial court erred by failing to
strike the testimony of Rishkofski, the children’s counselor, on multiple grounds.
Father contends that Rishkofski’s testimony should have been stricken because
the Department failed to disclose monthly counseling notes pursuant to the local standing order.
We review the admission or exclusion of evidence for an abuse of discretion. See In re J.P.B.,
180 S.W.3d 570, 575 (Tex. 2005) (per curiam). “We uphold a trial court’s admission or
exclusion of evidence unless (1) there was no legitimate basis for the court’s ruling, and (2) the
error probably caused the rendition of an improper judgment.” S.C. v. Texas Dep’t of Fam. &
Protective Servs., No. 03-20-00039-CV, 2020 WL 3892796, at *10 (Tex. App.—Austin July 10,
2020, no pet.) (mem. op.). “A party who fails to disclose information concerning a nonparty
witness in response to discovery requests may not offer that witness’s testimony unless” there
was either (1) good cause for the failure or (2) the failure did not unfairly surprise or unfairly
prejudice the other parties. See Van Heerden v. Van Heerden, 321 S.W.3d 869, 875–76 (Tex.
App.—Houston [14th Dist.] 2010, no pet.) (citing Tex. R. Civ. P. 193.6(a)). We will review the
entire record to determine if the admission or exclusion of the challenged evidence resulted in
9
the rendition of an improper judgment. In re E.A.G., 373 S.W.3d 129, 145 (Tex. App.—San
Antonio 2012, pet. denied). Even if the challenged evidence was improperly admitted, we may
not reverse if the evidence is harmless because it is cumulative of other unchallenged, admitted
evidence. S.C., 2020 WL 3892796, at *10.
Without deciding whether monthly counseling notes must be disclosed as part of
the complete case file under the local standing order, the record does not demonstrate the notes
were in the Department’s possession, custody, or control. See Tex. R. Civ. P. 192.3(b) (“A
person is required to produce a document or tangible thing that is within the person’s possession,
custody, or control.”). Rishkofski initially testified that he took notes every month and turned
those notes over to the Department, but then corrected his testimony on re-direct, stating that his
previous statement “was incorrect.” Rishkofski clarified that he sent his monthly notes “to the
foster care agency” but that he was not aware what the agency did with his notes. Caines
testified that the foster care agency provided the Department with “some” notes and that she
believed notes other than from July 2020 were provided “[i]f I remember correctly,” but she did
not identify the specific notes, if any, that were provided to the Department. The Department
also stated that it produced the case record—including any counseling notes in its possession—to
the parents, and that the only two files not produced were two files containing attorney
work product.
Although there was some conflicting testimony, the trial court is the “sole arbiter”
in assessing and weighing the credibility of the witnesses and their testimony. See In re A.B.,
437 S.W.3d at 503; In re J.P.B., 180 S.W.3d at 573. Based on the entire record, the trial court
reasonably could have determined that the Department had produced all of the monthly
counseling notes in its possession. See S.C., 2020 WL 3892796, at *10; see also In re R.V., Jr.,
10
977 S.W.2d 777, 783 (Tex. App.—Fort Worth 1998, no pet.) (concluding no abuse of discretion
because parent “failed to rebut the State’s assertion that it never received or knew about the more
detailed notes”). The trial court therefore did not abuse its discretion in denying the motion to
strike Riskhofski’s testimony on this ground. See In re J.P.B., 180 S.W.3d at 575. We overrule
Father’s third issue.
Father also argues that the trial court erred by allowing Rishkofski to remain in
the courtroom during the testimony of Ashley Lomas, the CAC forensic interviewer. However,
Father has failed to preserve this issue. “To preserve a complaint for appellate review, a party
must present to the trial court a timely request, objection, or motion, and state the specific
grounds for the ruling sought.” In re A.N., No. 10-16-00394-CV, 2017 WL 4080100, at *2 (Tex.
App.—Waco Sept. 13, 2017, no pet.) (mem. op.) (citing Tex. R. App. P. 33.1(a)(1)). As the
Department began its direct examination of Lomas, the following exchange occurred between
the trial court and Father’s counsel:
[Father’s Counsel]: Your Honor, I’m sorry we had invoked the Rule, and it looks
like Mr. Rishkofski is still in the courtroom.
THE COURT: And he may remain. He is an expert, and experts are
exempt from the Rule.
[Father’s Counsel]: I’m not sure that they are, Your Honor.
THE COURT: I am. I’m the Judge. Sit down.
[Department’s Counsel]: May I proceed, Judge?
THE COURT: You may.
Father did not raise any request or objection when Rishkofski returned to the stand, nor did
Father raise any objection or request when Rishkofski made a single reference to “the CAC
person” in response to a question by Father’s counsel. The exchange between the trial court and
11
Father’s counsel did not contain any statement sufficiently specific to make the trial court aware
of the specific grounds for an objection or request raised by Father, nor are the specific grounds
“apparent from the context.” Tex. R. App. 33.1(a)(1). Accordingly, any error by the district
court in exempting Rishkofski from the Rule has been waived. See C.G. v. Texas Dep’t of Fam.
& Protective Servs., No. 03-22-00019-CV, 2022 WL 2069128, at *4 (Tex. App.—Austin June 9,
2022, no pet. h.); Tex. R. App. P. 33.1(a)(1)(A).
Even if the Rule was violated by Rishkofski’s presence in the courtroom during
Lomas’s testimony, the trial court still had discretion to allow his testimony after considering all
the circumstances. See Drilex Sys., Inc. v. Flores, 1 S.W.3d 112, 117 (Tex. 1999) (“When the
Rule is violated, the trial court may, taking into consideration all of the circumstances, allow the
testimony of the potential witness, exclude the testimony, or hold the violator in contempt.”);
accord In re K.M.B., 91 S.W.3d 18, 28 (Tex. App.—Fort Worth 2002, no pet.). Lomas’s
testimony was cumulative of the removal affidavit, which had already been admitted as an
exhibit and had been previously provided to Rishkofski. Furthermore, Father has failed to
demonstrate how admission of Rishkofski’s additional testimony during his cross-examination—
which included a reference to “the CAC person” in response to a single question on a topic not
explicitly discussed by Lomas in her testimony—probably resulted in an improper judgment.
See In re K.M.B., 91 S.W.3d at 28. We overrule Father’s fourth issue.
Voir Dire Challenge
Father also reserved his right to challenge purported errors by the trial court in
denying several motions to strike potential jurors for cause. However, Father has failed to
submit any briefing or arguments on this issue. We therefore hold that Father has waived this
12
challenge. See Tex. R. App. P. 38.1(i) (requiring briefs to contain “clear and concise argument
for the contentions made, with appropriate citations to authorities and to the record”); see also
In re R.H.W. III, 542 S.W.3d 724, 742 (Tex. App.—Houston [14th Dist.] 2018, no pet.) (“Father
failed to adequately brief any argument in support of this issue, and so has waived the
complaint.”); Liberty Mut. Ins. Co. v. Griesing, 150 S.W.3d 640, 648 (Tex. App.—Austin 2004,
pet. dism’d w.o.j.) (“Bare assertions of error without argument or authority waive error.”). We
overrule Father’s fifth issue on appeal.
CONCLUSION
Having concluded Father and Mother waived their challenges to the findings of
predicate statutory grounds and best interest and overruling Father’s other issues, we affirm the
trial court’s final decree terminating Father’s and Mother’s parental rights to Kevin and Kenneth.
__________________________________________
Darlene Byrne, Chief Justice
Before Chief Justice Byrne, Justices Triana and Smith
Concurring Opinion by Justice Triana
Affirmed
Filed: November 10, 2022
13 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483749/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
JUDGMENT RENDERED NOVEMBER 10, 2022
NO. 03-22-00523-CV
Capitol Sprinkler and Fire Systems, LLC, Appellant
v.
Security Equipment Supply, Appellee
APPEAL FROM COUNTY COURT AT LAW NO. 1 OF TRAVIS COUNTY
BEFORE JUSTICES GOODWIN, BAKER, AND KELLY
DISMISSED ON APPELLANT’S MOTION -- OPINION BY JUSTICE KELLY
This is an appeal from the judgment signed by the trial court on February 15, 2022. Appellant
has filed an unopposed motion to dismiss the appeal, and having considered the motion, the
Court agrees that the motion should be granted. Therefore, the Court grants the motion and
dismisses the appeal. Appellant shall pay all costs relating to this appeal, both in this Court and
in the court below. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483750/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
JUDGMENT RENDERED NOVEMBER 10, 2022
NO. 03-22-00279-CV
B. S. and M. S., Appellants
v.
Texas Department of Family and Protective Services, Appellee
APPEAL FROM THE 146TH DISTRICT COURT OF BELL COUNTY
BEFORE CHIEF JUSTICE BYRNE, JUSTICES TRIANA AND SMITH
AFFIRMED -- OPINION BY CHIEF JUSTICE BYRNE
CONCURRING OPINION BY JUSTICE TRIANA
This is an appeal from the order signed by the trial court on April 26, 2022. Having reviewed the
record and the parties’ arguments, the Court holds that there was no reversible error in the trial
court’s order. Therefore, the Court affirms the trial court’s order. Because appellants are
indigent and unable to pay costs, no adjudication of costs is made. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483754/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
JUDGMENT RENDERED NOVEMBER 9, 2022
NO. 03-21-00530-CR
The State of Texas, Appellant
v.
Devon Lovegrove, Appellee
APPEAL FROM THE 331ST DISTRICT COURT OF TRAVIS COUNTY
BEFORE CHIEF JUSTICE BYRNE, JUSTICES KELLY AND SMITH
AFFIRMED -- OPINION BY CHIEF JUSTICE BYRNE
This is an appeal from the order entered by the trial court. Having reviewed the record and the
parties’ arguments, the Court holds that there was no reversible error in the trial court’s order.
Therefore, the Court affirms the trial court’s order. The appellant shall pay all costs relating to
this appeal, both in this Court and in the court below. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483751/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-22-00279-CV
B. S. and M. S., Appellants
v.
Texas Department of Family and Protective Services, Appellee
FROM THE 146TH DISTRICT COURT OF BELL COUNTY
NO. 315625, THE HONORABLE JACK WELDON JONES, JUDGE PRESIDING
CONCURRING OPINION
I concur in the Court’s judgment affirming the termination of Father’s and
Mother’s parental rights. However, I would address the merits of Father’s and Mother’s
challenges to the sufficiency of the evidence supporting the district court’s endangerment
findings. See Tex. Fam. Code § 161.001(b)(1)(D), (E). Because the Court declines to review
those findings, I cannot join its opinion.
Ordinarily, to raise a challenge on appeal to the legal or factual sufficiency of the
evidence in a civil jury trial, a party must preserve error by first raising the challenge in the trial
court. See T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 220–21 (Tex. 1992);
Cecil v. Smith, 804 S.W.2d 509, 510–11 (Tex. 1991). However, the Texas Supreme Court has
cautioned that “error preservation in the trial court, which is a threshold to appellate review,
necessarily must be viewed through the due process prism.” In re M.S., 115 S.W.3d 534, 547
(Tex. 2003).
“The phrase ‘due process,’ although incapable of precise definition, expresses the
requirement of fundamental fairness.” In re B.L.D., 113 S.W.3d 340, 352 (Tex. 2003) (citing
Lassiter v. Dep’t of Social Servs., 452 U.S. 18, 24 (1981)). “What fundamental fairness requires
in a particular situation is determined by ‘considering any relevant precedents and then . . .
assessing the several interests that are at stake.’” Id. (quoting Lassiter, 452 U.S. at 25).
Although courts “presume that our rules governing preservation of error in civil cases comport
with due process,” that presumption can be overcome when “assess[ing] the interests that are
affected by our procedures for preservation of error.” Id. (citing Lassiter, 452 U.S. at 27). “[I]n
the context of parental termination, ‘due process turns on the balancing of three distinct factors’:
(1) ‘the private interests affected by the proceeding’; (2) ‘the risk of error created by the [s]tate’s
chosen procedure’; and (3) ‘the countervailing governmental interest supporting use of the
challenged procedure.’” In re N.G., 577 S.W.3d 230, 236 (Tex. 2019) (per curiam) (quoting
In re J.F.C., 96 S.W.3d 256, 273 (Tex. 2002)).
“The private interest affected by a termination case is a parent’s fundamental
liberty interest in the care, custody, and control of his or her children.” B.L.D., 113 S.W.3d at
352 (citing Troxel v. Granville, 530 U.S. 57, 65–66 (2000)). This is “an interest far more
precious than any property right.” Santosky v. Kramer, 455 U.S. 745, 758–59 (1982). “If the
Department succeeds in terminating a parent’s rights, the State will have ‘worked a unique kind
of deprivation . . . . A parent’s interest in the accuracy and justice of the decision to terminate his
or her parental status is . . . a commanding one.’” B.L.D., 113 S.W.3d at 352 (quoting Lassiter,
452 U.S. at 27). “Thus, the parent’s interests generally will favor reviewing unpreserved error
2
that might result in reversal of a judgment to terminate.” Id. Additionally, “until the State
proves parental unfitness, the child and his parents share a vital interest in preventing erroneous
termination of their natural relationship.” Santosky, 455 U.S. at 760.
The second factor, the risk of error, also weighs in favor of reviewing unpreserved
sufficiency challenges to section 161.001(b)(1)(D) and (E) findings. “[W]hen parental rights
have been terminated under either section 161.001(b)(1)(D) or (E), that ground becomes a basis
to terminate that parent’s rights to other children” under section 161.001(b)(1)(M). N.G.,
577 S.W.3d at 234. “Because only one ground is required to terminate parental rights—and
therefore a section 161.001(b)(1)(M) ground based on a prior termination would be sufficient to
terminate parental rights to another child in another termination proceeding—the collateral
consequences of terminating parental rights under section 161.001(b)(1)(D) or (E) are
significant.” Id. Declining to review the sufficiency of the evidence supporting (D) or (E)
grounds “creates the risk that a parent will be automatically denied the right to parent other
children even if the evidence supporting the section 161.001(b)(1)(D) or (E) finding were
insufficient.” Id.
The third factor weighs in favor of the State, which “has a strong interest in
ensuring that our trial courts have an opportunity to correct errors as a matter of judicial
economy.” B.L.D., 113 S.W.3d at 353. “Appellate review of potentially reversible error never
presented to a trial court would undermine the Legislature’s dual intent to ensure finality in these
cases and expedite their resolution.” Id. On the other hand, “[t]he State’s foremost interest in
suits affecting the parent-child relationship is the best interest of the child” and therefore, the
State “shares the parent’s interest in an accurate and just decision.” Id. “In that regard, the
State’s interest favors reviewing unpreserved error that bears on the accuracy of the verdict.” Id.
3
Overall, however, “the State’s interests weigh heavily toward applying our procedural rules to
bar review of unpreserved error.” Id.
Balancing the three factors, I would conclude that when a parent argues on appeal
that there is insufficient evidence to support endangerment findings under either section
161.001(D) or (E), due process demands that the appellate court review that claim, even if it was
not preserved in the court below. The Texas Supreme Court reached a similar conclusion when
addressing “whether a parent, whose parental rights were terminated by the trial court under
multiple grounds, is entitled to appellate review of the section 161.001(D) and (E) grounds
because of the consequences these grounds could have on their parental rights to other
children—even if another ground alone is sufficient to uphold termination.” N.G., 577 S.W.3d at
233. The court concluded that a parent is entitled to appellate review of those grounds as a
matter of due process. It explained:
The state has a substantial, legitimate interest in protecting children and looking
out for their best interests, but parents also have a fundamental liberty interest in
the right to parent—particularly, a right to parent other children not involved in
the termination proceeding at hand. In any parental termination proceeding, the
state is immediately concerned with the child in that case, but the state’s interest
in allowing certain grounds to remain unreviewed on appeal should not outweigh
the parent’s interest in parental rights to another child. . . .
Balancing these factors, and considering that the risk of error has significant
consequences for future parental rights, we conclude that the parent’s
fundamental liberty interest at stake outweighs the state’s interest in deciding only
what is necessary for final disposition of the appeal. Allowing section
161.001(b)(1)(D) or (E) findings to go unreviewed on appeal when the parent has
presented the issue to the court thus violates the parent’s due process and due
course of law rights.
Id. at 236–37 (internal citations omitted).
4
Although N.G. did not address error preservation, I believe the court’s reasoning
in that case is applicable here. The State undoubtedly has an interest in resolving termination
appeals expeditiously, and appellate courts declining to review unpreserved sufficiency
challenges furthers that interest. However, parents have a fundamental liberty interest in the
care, custody, and control of their children, and declining to review unpreserved sufficiency
challenges to endangerment findings under (D) and (E) grounds, when the parents have raised
the issue on appeal, risks wrongfully depriving parents of their rights to future children in future
termination proceedings. That is a risk I am unwilling to take. As the Texas Supreme Court
explained in N.G.:
A parent may be denied the fundamental liberty interest in parenting only after
they have been provided due process and due course of law, and terminating
parental rights based on a challenged, unreviewed section 161.0001(b)(1)(D) or
(E) finding runs afoul of this principle. When a parent has presented the issue on
appeal, an appellate court that denies review of a section 161.001(b)(1)(D) or (E)
finding deprives the parent of a meaningful appeal and eliminates the parent’s
only chance for review of a finding that will be binding as to parental rights to
other children.
Id. at 235 (internal citations omitted).
Finally, I am troubled that our Court does not appear to be consistent on
this issue. Recently, a different panel of this Court handed down its opinion in A.K. and T.A.
v. Texas Department of Family and Protective Services, No. 03-22-00285-CV,
2022 WL 14989625 (Tex. App.—Austin Oct. 27, 2022, no pet. h.) (mem. op.), a case that also
involved a parent’s unpreserved legal and factual sufficiency challenges to endangerment
findings under (D) and (E). “In the interest of justice and because of the importance of the rights
involved,” this Court chose to review the findings. See id. at *5 n.3. I do not believe that it is
5
prudent for our Court to review unpreserved sufficiency challenges in some cases but not in
others. We should consistently review those challenges or consistently decline to review them. I
would choose to consistently review them.
For these reasons, I concur in the judgment only.
__________________________________________
Gisela D. Triana, Justice
Before Chief Justice Byrne, Justices Triana and Smith
Filed: November 10, 2022
6 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483755/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
JUDGMENT RENDERED NOVEMBER 9, 2022
NO. 03-21-00046-CV
Pools Unlimited, Inc.; Randy Lee Morrow; and Rhonda Jean Morrow, Appellants
v.
John Houchens and Brenda Houchens, Appellees
APPEAL FROM THE 207TH DISTRICT COURT OF COMAL COUNTY
BEFORE CHIEF JUSTICE BYRNE, JUSTICES TRIANA AND KELLY
AFFIRMED IN PART; REVERSED AND REMANDED IN PART
ON MOTION FOR REHEARING –
OPINION BY JUSTICE KELLY
This is an appeal from the judgment signed by the trial court on January 14, 2021. We withdraw
our June 3, 2022 opinion and judgment and substitute the following opinion and judgment in
their place. Having reviewed the record and the parties’ arguments, the Court holds that there
was reversible error in the trial court’s judgment Therefore, the Court reverses the trial court’s
judgment as to appellees’ fraudulent-lien claim and breach-of-contract claim, including the trial
court’s award of actual damages, exemplary damages, attorney’s fees, and expenses. The Court
remands appellees’ fraudulent-lien claim and breach-of-contract claim for a new jury trial. The
Court affirms that portion of the judgment ordering that appellants take nothing on their breach-
of-contract claim. Each party shall pay the costs of appeal incurred by that party, both in this
Court and in the court below. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483758/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-22-00664-CV
In re Billie O. Stone
ORIGINAL PROCEEDING FROM COMAL COUNTY
MEMORANDUM OPINION
Relator Billie O. Stone concurrently filed this and another identically styled
petition for writ of mandamus, both of which complain of an allegedly fraudulent lien.1 Each
indicates that it is related to an appeal already pending before this Court.2 We conclude that
the record before us is insufficient to allow us to consider Stone’s petition. See Tex. R. App.
P. 52.7(a)(1), (2). The rules of appellate procedure require a relator to file a certified or sworn
copy of every document that is material to the relator’s claim for relief and that was filed in
the underlying proceeding and a properly authenticated transcript of any relevant testimony from
any underlying proceeding (including any exhibits offered in evidence) or a statement that no
testimony was adduced in connection with the matter. Id. The filings in this case do not comply
1
The companion petition is In re Billie O. Stone, No. 03-22-00664-CV (Tex. App.—
Austin filed Oct. 18, 2022). Both petitions were filed as In re To a Fraudulent Purported
Lien or Claim Against, Billie O. Stone and Patricia A. Stone but have been modified to conform
to Rule 52.1 of the Texas Rules of Appellate Procedure regarding the captioning of an original
proceeding.
2
Billie O. Stone d/b/a Stobil Enterprise v. Randolph-Brooks Federal Credit Union,
No. 03-21-00422-CV (Tex. App.—Austin filed Aug. 26, 2021).
with the requirements of rule 52.7 and, most notably, do not include a copy of a district court
order from which relief is sought.
Having reviewed the petition and the materials provided, we deny the petition for
writ of mandamus. See Tex. R. App. P. 52.8(a).
__________________________________________
Thomas J. Baker, Justice
Before Justices Goodwin, Baker, and Kelly
Filed: November 8, 2022
2 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483757/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-22-00075-CR
Enoch David Castillo-Quiroz, Appellant
v.
The State of Texas, Appellee
FROM THE 207TH DISTRICT COURT OF COMAL COUNTY
NO. CR2019-329, THE HONORABLE DIB WALDRIP, JUDGE PRESIDING
ORDER AND MEMORANDUM OPINION
PER CURIAM
Appellant’s brief was originally due May 4, 2022. After this Court granted
multiple motions requesting an extension of time to file his brief, appellant’s brief was due
October 4, 2022. In granting the most recent extension, this Court advised counsel that no
further extensions would be granted and that his failure to file a brief would result in the referral
of the case to the trial court for a hearing under Rule 38.8(b) of the Texas Rules of Appellate
Procedure. To date, the brief has not been tendered for filing and is overdue.
The appeal is abated and remanded to the trial court. The trial court shall conduct
a hearing to determine whether appellant desires to prosecute this appeal and, if so, whether
counsel has abandoned this appeal. See Tex. R. App. P. 38.8(b)(2), (3). The court shall make
appropriate written findings and recommendations. See id. R. 38.8(b)(2), (3). If necessary, the
court shall appoint substitute counsel who will effectively represent appellant in this appeal.
Following the hearing, which shall be transcribed, the trial court shall order the appropriate
supplemental clerk’s and reporter’s records—including all findings and orders—to be prepared
and forwarded to this Court no later than December 9, 2022. See id. R. 38.8(b)(3).
It is so ordered November 9, 2022.
Before Justices Goodwin, Baker, and Kelly
Abated and Remanded
Filed: November 9, 2022
Do Not Publish
2 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483756/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
ON MOTION FOR REHEARING
NO. 03-21-00046-CV
Pools Unlimited, Inc.; Randy Lee Morrow; and Rhonda Jean Morrow, Appellants
v.
John Houchens and Brenda Houchens, Appellees
FROM THE 207TH DISTRICT COURT OF COMAL COUNTY
NO. C2017-2079B, THE HONORABLE DIB WALDRIP, JUDGE PRESIDING
MEMORANDUM OPINION
After considering the motion for rehearing filed by John and Brenda Houchens,
we deny the motion for rehearing but withdraw our June 3, 2022 opinion and judgment and
substitute the following opinion and judgment in their place.
The suit underlying this appeal concerns a dispute over residential pool
construction and includes competing claims for breach of contract between the pool builder,
Pools Unlimited, Inc., and the homeowners, John Houchens and Brenda Houchens. Before trial,
the trial court granted a partial summary judgment in favor of the Houchenses on their claim
that Pools Unlimited filed a fraudulent mechanic’s lien. During trial, the trial court dismissed
Pools Unlimited’s breach-of-contract claim against the Houchenses on directed verdict. Finally,
after trial, the trial court disregarded the jury’s finding that the Houchenses sustained zero
damages as a result of Pools Unlimited’s breach and, instead, awarded the Houchenses $58,500
in actual damages on their breach-of-contract claim and $20,000 in statutory damages on their
fraudulent-lien claim.
On appeal, we affirm the trial court’s directed verdict and dismissal of Pools
Unlimited’s breach-of-contract claim. However, because we conclude that the trial court erred in
granting summary judgment on the Houchenses’ fraudulent-lien claim and in awarding damages
on their breach-of-contract counterclaim, we will reverse the trial court’s judgment and remand
for a new trial on those claims.
BACKGROUND
In May 2017, Pools Unlimited contracted with John for the construction of a
swimming pool at his home in Comal County, which he shares with his wife, Brenda.1 In
October 2017, after John failed to pay what Pools Unlimited claimed was the remaining balance
owed on the contract, Pools Unlimited filed a mechanic’s lien pursuant to Chapter 53 of the
Texas Property Code. See Tex. Prop. Code §§ 53.251-.260 (procedures for perfecting lien on
residential construction projects). In December 2017, Pools Unlimited sued John for breach of
contract, seeking to recover the unpaid balance. John then countersued Pools Unlimited for
breach of contract, alleging that the construction by Pools Unlimited was deficient, and for
fraudulently filing a mechanic’s lien.2 See Tex. Civ. Prac. & Rem. Code § 12.002(a) (prohibiting
1
Because many of the parties share the same last name, for clarity we will refer to the
parties by their first name when referring to them individually.
2
The parties brought other claims for affirmative relief. Pools Unlimited brought claims
for quantum meruit, fraud, and fraudulent inducement, which the trial court dismissed on
summary judgment. The Houchenses sued Pools Unlimited and the Morrows for violations of
the Texas Deceptive Trade Practices Act but failed to obtain jury findings in their favor as to
2
filing of fraudulent lien). Pools Unlimited later added Brenda as an involuntary counter-plaintiff;
the Houchenses added Randy “Ryan” Morrow and Rhonda Morrow, the owners of Pools
Unlimited, as third-party defendants.3
In February 2018, the Houchenses moved for partial summary judgment on their
fraudulent-lien claim. After sustaining the Houchenses’ objections to evidence submitted by
Pools Unlimited in response, the trial court granted the motion for summary judgment as to
Pools Unlimited’s liability but withheld ruling on the issue of fraudulent-lien damages. See id.
§ 12.002(b) (providing that liability for filing of fraudulent lien includes “greater of:
(A) $10,000; or (B) actual damages caused by violation”).
The parties’ competing breach-of-contract claims were tried to a jury in October
2020. At trial, the parties presented conflicting testimony as to the agreed price for the
contracted work. Ryan testified that he and John first discussed the scope of the project in
April 2017 and that while the initial proposal totaled $58,711, John later selected options
not included in the initial proposal, including the construction of a “custom rock grotto
waterfall” with a slide. According to Ryan, the final contract price with these selected options
was $69,151, payable over six draws. Ryan also testified that John requested additional work
after construction commenced (concrete coating, additional rock work, and a ladder), which
brought the total cost to approximately $74,000, of which $31,900 remained unpaid.
these alleged violations. Because no party has appealed the trial court’s judgment with respect to
these other claims, we will limit our discussion of the underlying facts and procedural history to
that which is relevant to the claims that are the subject of this appeal.
3
In this opinion, we will refer to the claims brought by John as being brought by
the Houchenses. In addition, any reference to Pools Unlimited includes the Morrows, unless
otherwise noted.
3
Conversely, John testified that the “proposal” for $58,711 was the only contract
that he ever signed with Pools Unlimited. Although he acknowledged that he had agreed to the
selected options (including the custom rock grotto waterfall and slide), he explained that this
work was included in the contract price of $58,711. John also testified that although on May 16,
2017, Ryan sent him an updated contract for $69,151, he refused to sign it because they had
already “agreed on a price.”
The undisputed evidence at trial showed that the pool was constructed over the
summer of 2017 and filled with water on August 18 and that the Houchenses began using the
pool soon after. In addition, while the parties disagreed as to the exact amount, at least some
amount on the contract remained unpaid. In his testimony, John explained that he stopped
paying Pools Unlimited in August 2017 because the work performed, primarily construction of
the custom rock grotto waterfall and the spa, was defective and because automation of the pool’s
heater and chiller failed to operate properly, due to the installation of incompatible equipment.
John refused to make further payments on the contract until the defective work was corrected by
Pools Unlimited.
In his testimony, Ryan did not dispute that at least some complained-of issues
existed and that repairs were necessary, including on the custom rock grotto waterfall. Ryan
considered the needed repairs to be “warranty work,” however, and informed John that Pools
Unlimited would perform whatever work was necessary to correct the issues upon receipt of
payment. As of trial, no additional payments had been tendered, and no repairs had been made.
At the close of Pools Unlimited’s case in chief, the Houchenses moved for a
directed verdict on Pools Unlimited’s breach-of-contract claim. Upon considering the arguments
of counsel, the trial court determined that Pools Unlimited had breached the construction contract
4
and granted the directed verdict in favor of the Houchenses, effectively rendering judgment that
Pools Unlimited take nothing on its breach-of-contract claim.
At the close of trial, the Houchenses’ counterclaim for breach of contract was
submitted to the jury. In its charge, the trial court instructed the jury that “Pools Unlimited, Inc.
and the Houchens[es] did have an agreement” and that “Pools Unlimited, Inc. failed to comply
with that agreement.” The jury returned a verdict in favor of Pools Unlimited, finding that the
Houchenses had sustained zero damages as a result of Pools Unlimited’s conduct.
The Houchenses later filed a motion to disregard the jury findings and to enter a
judgment notwithstanding the verdict, “awarding them damages in the uncontroverted amount
of $58,500.” The trial court granted the Houchenses’ motion and signed a final judgment
awarding the Houchenses $78,500 in actual damages, including $20,000 in statutory damages
on their fraudulent-lien claim; $1,000 in exemplary damages; $151,000 in attorney’s fees,
through the date of judgment; $38,500 in expenses; and $16,000 in pre-judgment interest. This
appeal followed.
DISCUSSION
In six issues, Pools Unlimited challenges the trial court’s (1) summary judgment
and award of damages in favor of the Houchenses on their fraudulent-lien claim; (2) directed
verdict in favor of the Houchenses, dismissing Pools Unlimited’s breach-of-contract claim;
(3) decision to disregard the jury’s zero-damages finding and, instead, award the Houchenses
relief on their breach-of-contract claim against Pools Unlimited, including attorney’s fees
and expenses.
5
Fraudulent-lien claim
We first consider Pools Unlimited’s challenge to the trial court’s grant of
summary judgment in favor of the Houchenses on their fraudulent-lien claim against
Pools Unlimited.
To prevail on a summary-judgment motion, the movant must demonstrate that
there are no genuine issues of material fact and that it is entitled to judgment as a matter of law.
Tex. R. Civ. P. 166a(c); Tarr v. Timberwood Park Owners Ass’n, Inc., 556 S.W.3d 274, 278
(Tex. 2018). When, as in this case, a movant seeks a traditional summary judgment on its own
cause of action, the movant has the initial burden of establishing its entitlement to judgment as a
matter of law by conclusively establishing each element of its cause of action. Texas Ass’n of
Acupuncture & Oriental Med. v. Texas Bd. of Chiropractic Exam’rs, 524 S.W.3d 734, 738
(Tex. App.—Austin 2017, no pet.). Evidence is conclusive only if reasonable people could not
differ in their conclusions. City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005). Once the
movant meets this burden, the burden shifts to the non-movant to present evidence creating a
genuine issue of material fact precluding summary judgment. Trudy’s Tex. Star, Inc. v. City of
Austin, 307 S.W.3d 894, 905 (Tex. App.—Austin 2010, no pet.). We review a trial court’s
decision to grant summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d
656, 661 (Tex. 2005). When reviewing the decision, we consider the evidence in the light
most favorable to the nonmovant, and we indulge every reasonable inference and resolve all
doubts in the nonmovant’s favor. Id.; Provident Life & Acc. Ins. v. Knott, 128 S.W.3d 211,
215 (Tex. 2003).
To obtain summary judgment on their fraudulent-lien claim, the Houchenses were
required to present evidence conclusively establishing that Pools Unlimited (1) made, presented,
6
or used a document with knowledge that it was a fraudulent lien; (2) intended the document to be
given legal effect as a court document evidencing a valid lien; and (3) intended to cause injury or
distress. See Tex. Civ. Prac. & Rem. Code § 12.002(a); Serafine v. Blunt, 466 S.W.3d 352, 363
(Tex. App.—Austin 2015, no pet.) (listing elements). Because Pools Unlimited filed its lien
pursuant to Chapter 53 of the Texas Property Code, the Houchenses also were required to show
that Pools Unlimited intended to defraud them. See Tex. Civ. Prac. & Rem. Code § 12.002(c).
In support of their motion for summary judgment, the Houchenses submitted
John’s affidavit, which included as attachments (1) a copy of the Texas Homestead Designation
that he and Brenda had filed in the Comal County real property records; (2) a copy of the
lien filed by Pools Unlimited; and (3) a letter dated October 13, 2017, from Pools Unlimited’s
attorney, transmitting a copy of the lien to the Houchenses. In his affidavit, John states that he
and Brenda have been married since 2002 and have owned the Property since 2007 and that
the Property has been continuously designated as their homestead. Further, according to John’s
affidavit, when he initially met with Ryan in April 2017, he informed Ryan that he and his wife
resided at the Property. John introduced Ryan to Brenda, but “[a]t no time did [Brenda] ever
sign a contract with Pools Unlimited.” In addition, John states, neither he nor Brenda ever
received the version of the contract attached to the Pools Unlimited’s lien (reflecting a total price
of $69,151), and he never executed a contract with Pools Unlimited that included a provision
informing him of his right to rescind. The Houchenses also submitted an affidavit from their
attorney, Bryan Woods, in support of their motion for summary judgment. In his affidavit,
Woods states, and attached supporting documentation showing, that Pools Unlimited’s corporate
charter with the Secretary of State had been forfeited prior to its filing of the lien. The
Houchenses argue that the trial court did not err in granting their motion for summary judgment
7
because this evidence establishes that Pools Unlimited knew that the lien was invalid when
it was filed.
We agree that the Houchenses’ summary-judgment evidence suggests that Pools
Unlimited’s lien was invalid and unenforceable because Texas law required both John and
Brenda to sign the contract on which the lien was based, see Tex. Prop. Code §§ 41.007(b),
53.254(a), (c), and because the contract failed to include certain statutorily mandated language,
informing them of their rights to rescind, see id. § 41.007(a). We cannot agree, however, that
the evidence conclusively establishes that the lien filed by Pools Unlimited was fraudulent.
This Court has recognized that in the context of Section 12.002(a) of the Civil Practice and
Remedies Code, “fraudulent” means “a knowing misrepresentation of the truth or concealment
of a material fact to induce another to act to his or her detriment.” MFG Fin., Inc. v. Hamlin,
No. 03-19-007160-CV, 2021 Tex. App. LEXIS 4331, at *12 (Tex. App.—Austin June 3, 2021,
pet. denied) (mem. op.) (citing state and federal cases, including Walker & Assocs. Surveying,
Inc. v. Roberts, 306 S.W.3d 839, 849 (Tex. App.—Texarkana 2010, no pet.)). Consequently, we
explained, “an important distinction may be drawn between a document that ‘is factually
inaccurate in some respect and one that is attempting to perpetrate a fraud’—in other words,
a lien may be invalid and unenforceable but not necessarily fraudulent.’” Id. at *13 (quoting
Walker & Assocs., 306 S.W.3d at 849). Moreover, “[i]ntent is a fact question uniquely within
the realm of the trier of fact because it so depends upon the credibility of the witnesses and the
weight to be given to their testimony.” Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434
(Tex. 1986). Therefore, whether a lien filer intended to defraud is ordinarily a question of fact.
See Hahn v. Love, 321 S.W.3d 517, 525 (Tex. App.—Houston [1st Dist.] 2009, pet. denied)
8
(noting that question of whether debtor conveyed property with intent to defraud is ordinarily
question of fact).
In this case, the summary-judgment evidence submitted by the Houchenses fails
to conclusively establish that Pools Unlimited actually knew that the lien was invalid and
unenforceable at the time it was filed and that they filed it with the intent to harm or defraud.
See Walker & Assocs., 306 S.W.3d at 847-50 (concluding that trial court erred in granting
summary judgment on fraudulent-lien claim because although there was evidence that lien was
invalid, fact issues existed as to knowledge and intent); Aland v. Martin, 271 S.W.3d 424,
431-32 (Tex. App.—Dallas 2008, no pet.) (concluding that even if there was evidence of
knowledge by defendant “that a valid lien could not be placed on community property without
consent of both parties,” it was legally insufficient to prove “intent to cause injury”). While the
lien filed by Pools Unlimited may be invalid and unenforceable, we conclude that there is a fact
issue as to whether it is fraudulent.4 See Walker & Assocs., 306 S.W.3d at 849; see also Tex.
Prop. Code §§ 53.160-.162 (providing summary procedure to remove invalid or unenforceable
mechanic’s lien). The trial court erred in granting summary judgment in favor of the Houchenses
4
On appeal, the Houchenses also point to evidence presented at trial that, they contend,
shows that Pools Unlimited knew that the amount claimed in the lien was incorrect because “it
did not account for credits owed to the Houchenses.” See Progressive Cnty. Mut. Ins. v. Boyd,
177 S.W.3d 919, 921 (Tex. 2005) (“[A] trial court’s erroneous decision on summary judgment
can be rendered harmless by subsequent events in the trial court.”). Assuming that we may
consider this later-presented evidence, we disagree that it is sufficient, either alone or in totality,
to establish the Houchenses’ fraudulent-lien claim as a matter of law. See Gray v. Entis Mech.
Servs., L.L.C., 343 S.W.3d 527, 530 (Tex. App.—Houston [14th Dist.] 2011, no pet.)
(concluding that evidence of refusal to remove lien for disputed amount did not establish intent
to cause harm as a matter of law).
9
on their fraudulent-lien claim against Pools Unlimited. We sustain Pools Unlimited’s second
appellate issue.5
Pools Unlimited’s breach-of-contract claim
In its fifth issue, Pools Unlimited asserts that the trial court erred in granting
the Houchenses’ motion for directed verdict on its claim for breach of contract against the
Houchenses.
A directed verdict is warranted when the evidence is such that no other verdict
can be reached, and the moving party is entitled to a judgment as a matter of law. Byrd v.
Delasacha, 195 S.W.3d 834, 836 (Tex. App.—Dallas 2006, no pet.). Consequently, in
reviewing a directed verdict, we apply a legal-sufficiency standard of review. City of Keller,
168 S.W.3d at 827. When a party moves for directed verdict on an issue on which it does not
have the burden of proof, we examine the evidence in the light most favorable to the nonmovant
and decide whether there is any evidence of probative value to raise an issue of material fact
on the question presented. Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 217 (Tex.
2011). “If the evidence . . . would enable reasonable and fair-minded people to differ in their
conclusions, the jurors must be allowed to do so.” City of Keller, 168 S.W.3d at 822.
The Houchenses moved for a directed verdict on Pools Unlimited’s breach-of-
contract claim on the ground that Pools Unlimited had failed to present legally sufficient
evidence as to the element of damages. See Elness Swenson Graham Architects, Inc. v. RLJ II-C
5
Because we conclude that the Houchenses failed to meet their initial burden on
summary judgment to present evidence conclusively establishing each element of their
fraudulent-lien claim, we need not decide Pools Unlimited’s first issue on appeal, that is, whether
the trial court erred in striking its responsive summary-judgment evidence. See Tex. R. App.
P. 47.1.
10
Austin Air, LP, 520 S.W.3d 145, 166 (Tex. App.—Austin 2017, pet. denied) (noting that “an
essential element of breach-of-contract claim is the existence and amount of damages resulting
from the alleged breach”). Specifically, the Houchenses argued that the evidence presented
established that Pools Unlimited breached the contract by failing to fully perform and that it
could not recover under the doctrine of substantial performance because it had failed to present
any evidence as to the cost of remedying its incomplete or deficient performance.
As a general rule, a contracting party who is in breach cannot maintain a suit for
breach. Dobbins v. Redden, 785 S.W.2d 377, 378 (Tex. 1990); see Mustang Pipeline Co. v.
Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004) (noting that it is “a fundamental principle
of contract law that when one party commits a material breach of that contract, the other party
is discharged or excused from further performance”). In the context of construction disputes,
however, the doctrine of substantial performance provides that a contractor who has
substantially, although not fully, performed may still sue to enforce an agreement. See Vance v.
My Apartment Steak House of San Antonio, Inc., 677 S.W.2d 480, 481 (Tex. 1984); 4922
Holdings, LLC v. Rivera, 625 S.W.3d 316, 329 (Tex. App.—Houston [14th Dist.] 2021, pet.
denied). Because the doctrine of substantial performance, by definition, recognizes that the
contractor has breached his obligations under the contract, although not materially, “[t]he
doctrine does not permit the contractor to recover full consideration provided in the contract.”
4922 Holdings, 625 S.W.3d at 329. Instead, the contractor’s recovery is decreased by the cost of
remedying the defects or omissions for which he responsible. Id. Therefore, to prevail on a
theory of substantial performance, the contractor has the burden to prove (1) that he did
substantially perform, (2) the unpaid amount due to him under the contract, and (3) the cost of
remedying his incomplete or deficient performance. Vance, 677 S.W.2d at 483.
11
In support of their motion for directed verdict, the Houchenses argued that Pools
Unlimited could not recover for breach of contract based on substantial performance because
Pools Unlimited had breached the contract and had not presented any evidence as to the cost of
repairing its defective work. In response, Pools Unlimited did not deny that it had not presented
evidence as to the cost of repairing any of the complained-of defects. Instead, Pools Unlimited
explained that it was seeking to recover the full amount of the unpaid invoices under “a straight
contract theory,” not a substantial-performance theory. In other words, Pools Unlimited argued
that it was not required to present evidence as to the cost of remedying any incomplete or
deficient work because it fully performed its obligations under the contract. Based on the record
before us, we disagree.
A party breaches a contract when it fails to perform an act that it has contractually
promised to perform.6 Greene v. Farmers Ins. Exch., 446 S.W.3d 761, 765 (Tex. 2014). In this
case, although there was conflicting evidence as to the agreed price for the construction, both
parties presented evidence establishing that Pools Unlimited had agreed to construct a custom
rock grotto waterfall with a slide and a spa. The jury was also presented with evidence,
including John’s testimony and video evidence presented by the Houchenses’ expert, showing
that the pool was leaking from inside the grotto and in the area between the spa and the pool.
John also testified that although he and his family have been using the pool, they have not been
able to use the slide because the plaster on the slide was “cracking” and “too rough.” In addition,
the updated proposal for $69,151 (which Pools Unlimited contends constitutes the parties’
6
The question of what duties exist under a contract is usually a question of law, but any
dispute concerning the failure of a party to comply with its duties is a fact question for the jury.
Vast Constr., LLC v. CTC Contractors, LLC, 526 S.W.3d 709, 718 (Tex. App.—Houston
[14th Dist.] 2017, no pet.); Trinity Materials, Inc. v. Sansom, No. 03-11-00483-CV, 2014 Tex.
App. LEXIS 13884 (Tex. App.—Austin Dec. 31, 2014, pet. denied) (mem. op.).
12
contract) shows that Pools Unlimited agreed to install a separate Pentair heater and chiller,
operational by an “Easy Touch 8 wireless controller.” According to John, because a Pentair
brand of chiller was not installed, the pool’s electrical and automation systems failed to integrate
with the Easy Touch wireless controller, as promised. Pools Unlimited did not present any
evidence to contradict the Houchenses’ claims as to the existence of incomplete or deficient
work. We conclude that the record conclusively demonstrates that Pools Unlimited failed to
deliver certain contracted-for pool features to the Houchenses and therefore as a matter of law
breached at least some of its obligations under the contract.
On appeal, Pools Unlimited argues that the trial court erred to the extent that it
relied on evidence of leaks or similar defective construction to conclude Pools Unlimited failed
to fully perform under the contract. Pools Unlimited asserts that any remaining work on the pool
was “warranty work” and that Pools Unlimited was excused from performing this work as a
result of John’s failure to pay the outstanding invoices. Ryan testified that when John informed
him of the issues, he told John that Pools Unlimited was willing to make any repairs needed after
he paid the balance of the contract. According to his testimony, Ryan could have repaired the
leaks using sealants and corrected the appearance of the waterfall by adding additional rocks.
Further, Ryan told the jury, he could have resolved the issue with the automation system and the
EasyTouch remote by “add[ing] a relay to turn the unit off and on” after manually setting the
temperature. Ryan did not make these repairs, however, because John refused to make any
additional payment.
Although its argument is not entirely clear, Pools Unlimited seems to contend
that, despite its incomplete or deficient construction, it fully performed under the contract
because any further obligation it had to complete or correct its construction was excused by
13
the Houchenses’ breach by non-payment. The doctrine of excuse by prior material breach
provides a theory of recovery, separate from the doctrine of substantial performance, upon which
a contractor who has failed to fully perform under a construction contract may rely. Another
Attic, Ltd. v. Plains Builders, Inc., No. 07-08-0312-CV, 2010 Tex. App. LEXIS 9620, at *8 (Tex.
App.—Amarillo Dec. 6, 2010, no pet.) (mem. op.). Under this doctrine, a contractor’s failure to
complete full performance is excused when the other party to the contract has materially
breached the contract. See id. (citing Mustang Pipeline Co., 134 S.W.3d at 196). Nevertheless,
“[i]n cases where a contractor has not fully performed his obligations under the contract, neither
the doctrine of substantial performance nor the doctrine of excused performance permits the
breaching contractor to recover the full consideration provided for in the contract.” Id. at *9.
Like the doctrine of substantial performance, when a contractor seeks to recover based on a
theory that his full performance was excused by the other party’s prior material breach, the
contractor’s recovery is limited to the unpaid amount owed on the contract less the cost of
remedying the incomplete or deficient performance. Emerson Constr. Co. v. Ranger Fire, Inc.,
No 03-09-00567-CV, 2013 Tex. App. LEXIS 10913, *20 (Tex. App.—Austin Aug. 29, 2013,
no pet.) (mem. op.). Therefore, to the extent Pools Unlimited sought to recover for breach of
contract based on a theory that its incomplete or deficient performance was excused, it was
required to present evidence of remediation or repair costs.
Pools Unlimited sought to recover the full amount of the unpaid invoices, i.e.,
without any deduction for costs of remedying any incomplete or deficient performance, by
proceeding on a theory that it fully performed all of its obligations under the construction
14
contract or, alternatively, that its performance was excused.7 The undisputed evidence, however,
conclusively established that Pools Unlimited did not fully perform, but instead provided
incomplete or deficient performance as to at least some of its contractual obligations. As a
result, to defeat the Houchenses’ motion for directed verdict, Pools Unlimited was required to
present at least some probative evidence as to the cost of remedying these defects. Because it
did not meet this burden, the trial court did not err by granting a directed verdict on Pools
Unlimited’s breach-of-contract claim. We overrule Pools Unlimited’s fifth issue on appeal.
The Houchenses breach of contract claim
In its sixth issue on appeal, Pools Unlimited argues that the trial court erred by
granting the Houchenses’ motion to disregard the jury’s finding that they sustained zero damages
and, instead, rendering a judgment notwithstanding the verdict on their breach-of-contract claim
for $58,500.
A trial court may disregard a jury finding if the evidence is legally insufficient to
support it or if a directed verdict would have been proper because a legal principle precludes
recovery. Ginn v. NCI Bldg. Sys., 472 S.W.3d 802, 843 (Tex. App.—Houston [1st Dist.] 2015,
no pet.) (citing Tex. R. Civ. P. 301). In this case, the Houchenses moved to disregard the jury’s
finding on damages, an issue on which they had the burden of proof at trial, on the ground
7
In its third issue, Pools Unlimited asserts that the trial court erred in imposing a
sanction that prohibited Pools Unlimited from presenting any evidence at trial demonstrating that
it had commercial general liability (CGL) insurance. Pools Unlimited further argues that the trial
court erred to the extent its decision to grant the directed verdict was based on Pools Unlimited’s
failure to maintain CGL insurance during construction of the pool, a requirement under the
contract. See Tex. R. App. P. 44.1(a). Because we have concluded that other evidence—
unrelated to whether Pools Unlimited maintained CGL insurance—establishes as a matter of law
that Pools Unlimited failed to fully perform under the contract, we need not decide this issue.
See id. R. 47.1.
15
that there was legally insufficient evidence to support the finding. Consequently, to succeed
on their motion to disregard, the Houchenses were required to show that there was no evidence
to support the jury’s zero-damages finding and that the evidence conclusively established the
damages which they sought, $58,500. See AZZ Inc. v. Morgan, 462 S.W.3d 284, 291 (Tex.
App.—Fort Worth 2015, no pet.) (citing Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241
(Tex. 2001)); Ginn, 472 S.W.3d at 843 (“Specifically, in regard to damages, a trial court
may render a judgment notwithstanding the verdict and substitute its own judgment only if the
evidence conclusively proves the damages sought by the movant.” (citing State v. Huffstutler,
871 S.W.2d 955, 906-61 (Tex. App.—Austin 1994, no writ))). On review, we employ this
same legal-sufficiency standard. Republic Petrol., LLC v. Dynamic Offshore Res. NS, LLC,
474 S.W.3d 424, 429 (Tex. App.—Houston [1st Dist.] 2015, pet. denied).
We begin our analysis of the evidence with the charge as submitted to the jury.8
In Question No. 3 of the court’s charge, the jury was asked to determine:
What sum of money, if any, if paid now in cash would fairly and reasonably
compensate the Houchenses for their damage, if any, which resulted from any
such conduct? Consider the following elements of damage, if any, and none
other.
8
Because the Houchenses sought to recover remedial damages, they were required to
prove the cost to complete or repair the construction less the unpaid balance on the contract
price. McGinty v. Hennen, 372 S.W.3d 625, 627 (Tex. 2012) (explaining that one measure of
damages for “breach of a construction contract [is] remedial damages, which is the cost to
complete or repair less the unpaid balance on the contract price”). In addition, the Houchenses
were required to prove that the damages sought were reasonable and necessary. Id. (citing
Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 200 (Tex. 2004)). Although there
was evidence of an unpaid balance on the contract, and the jury charge failed to properly instruct
the jury to deduct any unpaid balance on the contract price, no party objected to the omission.
See, e.g., Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000) (absent preserved meritorious
complaint of charge error, challenges to sufficiency of evidence supporting jury findings are
evaluated in light of charge as submitted).
16
...
1. The reasonable and necessary cost to repair the pool and its related
features? $___
The jury answered this question: “$0.”
In support of their claim for cost-to-repair damages, the Houchenses presented
testimony from Michael Jentsch, whom they had designated as an expert in pool-repair
methodology and costs. After explaining his qualifications in pool-construction repair, Jentsch
discussed the various deficiencies he observed with the Houchenses’ pool. In part, he testified
that he examined the chiller installed by Pools Unlimited and that he called the manufacturer of
the automation-system controller. According to Jentsch’s testimony, the manufacturer informed
him that the brand of chiller installed by Pools Unlimited would not integrate with the
automation system. Jentsch told the jury that, in his opinion, the only way to correct this issue
would be to remove the chiller installed by Pools Unlimited and replace it with a Pentair chiller,
which in his opinion would cost $7,000.
In addition, Jentsch testified that he observed “water leaking underneath the
spillway of the spa,” “calcium deposits on the face of the rock [grotto],” and “calcium
deposits . . . and minor cracking” on the slide. Jentsch detailed his observations using
photographs of the leaks in the spa and the rock grotto. As to the slide, he testified that it was
dangerous due to “separation of the exterior veneer where the plaster met that veneer.” Jentsch
told the jury that proper repair of the “spa to spillway leak” would include removing the coping
and exterior stone and installing supplemental steel and that the reasonable and necessary cost to
make these repairs was $9,000. Similarly, according to Jentsch, repair of the leaks in the rock
grotto would require removing the stones, slide, and veneers, demolishing a portion of the
17
grotto to make “more of a round bowl,” and then rebuilding the grotto. Jentsch testified that, in
his opinion, the reasonable and necessary cost to repair the custom rock grotto and waterfall
was $25,000 to $30,000. Finally, Jentsch testified that there would be about $10,000 in
miscellaneous costs associated with the repair work, such as clean up and teaching the
homeowners how to “run the pool, how to run the equipment.” In summary, Jentsch testified
that the reasonable and necessary cost to repair the pool, in total, was $58,500.
In their motion to disregard, and now on appeal, the Houchenses contend that
Jentsch’s testimony constitutes uncontradicted and conclusive evidence on the issue of damages.
As a general rule, opinion testimony is not conclusive or binding on the factfinder. McGalliard
v. Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986). Instead, the jury as the trier of fact is the sole
judge of the credibility of the witnesses and the weight to be given their testimony. Id. at 696.
Moreover, a jury is generally afforded considerable discretion in evaluating evidence on the issue
of damages. Id. at 697.
Expert testimony is permitted when the expert’s scientific, technical, or other
specialized knowledge will assist the trier of fact to understand the evidence or to determine a
fact in issue. Tex. R. Evid. 702. However, uncontroverted expert testimony is only conclusive
on an issue if the nature of the subject matter requires the factfinder to be guided solely by the
opinion of experts and the evidence is otherwise credible and free from contradictions. Uniroyal
Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 338 (Tex. 1998); Liberty Mut. Ins. v. Burk, 295
S.W.3d 771, 797 (Tex. App.—Fort Worth 2009, no pet.); Flores v. Cuellar, 269 S.W.3d 657,
660 (Tex. App.—San Antonio 2008, no pet.). Whether expert testimony is necessary on a
contested issue is a question of law which courts review de novo. Mack Trucks, Inc. v. Tamez,
206 S.W.3d 572, 583 (Tex. 2004).
18
This Court has previously recognized that in some cases, the reasonable cost to
repair real property, including residential pool construction, may be established through lay
testimony. See Seasha Pools, Inc. v. Hardister, 391 S.W.3d 635, 641 (Tex. App.—Austin 2012,
no pet.) (concluding that contractor’s bids and lay testimony from property owner that bids to
repair pool and light fixture were reasonable “were competent evidence from which factfinder
could determine the reasonable cost of repairing the pool and light fixture”); see also
McGalliard, 722 S.W.2d at 697 (“We do not believe the subject of house repairs to be one for
experts or skilled witnesses alone.”). In addition, the record in this case does not suggest that
the proposed repairs of the Houchenses’ pool were so technical or complex that the issue of
reasonable cost of repair required expert testimony.9 While Jentsch’s “scientific, technical, or
9
The Houchenses contend that expert testimony was required in this case because “[the]
repairs require technical knowledge and skills if performed correctly.” In support of their
argument, the Houchenses rely on a case from this Court, Paschal v. Engle, in which we stated,
“The necessity and reasonableness of repair costs are issues that require specialized or technical
knowledge falling within the exclusive domain of an expert.” No. 03-16-00043-CV, 2016 Tex.
App. LEXIS 9161, *5 (Tex. App.—Austin Aug. 23, 2016, no pet.) (mem. op.). However,
whether expert testimony was required was not at issue in Paschal, and this Court did not
establish a bright-line rule that expert testimony is required to prove reasonableness of repair
costs in every case. See id. at *6 (noting that “the parties do not dispute that the Paschals were
required to adduce expert witness testimony to prove the amount of the reasonable and necessary
cost to repair damages to their buildings and piano caused by Engle’s alleged negligence”).
Instead, expert testimony may only be required when the issue of cost of repair is especially
technical or complex, which depends on the unique circumstances of each case. See McGalliard
v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986) (noting that “the subject of house repairs [is not]
one for experts or skilled witnesses alone”); see also Stevens v. Avent, No. 07-20-00265-CV,
2022 Tex. App. LEXIS 961, *14 (Tex. App.—Amarillo Feb. 9, 2022, no pet.) (mem. op.)
(declining to establish a “bright-line rule that expert testimony is required to support an award of
remedial damages” and concluding that non-expert testimony and exhibits were sufficient to
support award of repair costs in dispute over home renovations); Seasha Pools, Inc. v. Hardister,
391 S.W.3d 635, 641 n. 8 (Tex. App.—Austin 2012, no pet.) (concluding that expert testimony
was not required to establish cost to repair plaintiff’s pool because “[t]here is nothing in the
record to indicate that the cost associated with replastering a pool is so technical or complex that
it required expert testimony”). But see Pjetrovic v. Home Depot, 411 S.W.3d 639, 649 (Tex.
App.—Texarkana 2013, no pet.) (determining that reasonableness of cost to perform major home
19
specialized knowledge” may have been helpful to the jury and thus admissible under Rule 702,
the Houchenses were not required to rely on expert testimony to prove the necessary and
reasonable cost to repair their pool. Consequently, the jury was not bound to accept Jentsch’s
opinion as conclusive. See McGalliard, 722 S.W.2d at 697 (“[T]he judgments and inferences of
experts or skilled witnesses, even when uncontroverted, are not conclusive on the jury or trier of
fact, unless the subject is one for experts or skilled witnesses alone . . . .”). The jury could
instead consider all of the testimony and evidence presented to assess the credibility and weight
to be given to Jentsch’s opinion. See id. at 696.
Prior to Jentsch’s testimony, the jury was presented with evidence showing that
the price to construct the entire pool, including the spa and custom rock grotto, was $69,151,
according to Pools Unlimited, or $58,711, according to the Houchenses. In light of this
evidence, the jury could have discredited Jentsch’s opinion that $58,500 constitutes a reasonable
cost to repair the rock grotto waterfall, slide, spa, and automation system. In addition, Jentsch
acknowledged on cross examination that although the leaks were first observed when the pool
was filled with water in 2017, the repairs still had not been made, more than three years later.
Although Jentsch did not concede that the cost of repairs would have been less had the repairs
been made earlier, he acknowledged that the delay may have resulted in the need for additional
repairs. Id. at 697 (expert’s testimony that he had not seen house until almost two years after
leaking began and, therefore, could not testify as to cost of repairs at time, “raised a question
concerning [his] credibility”).
renovations required expert testimony). We conclude that the reasonableness of the costs at
issue in this case, which largely concern repair of a rock-grotto feature and the purchase of
equipment, is not so specialized or technical that expert testimony was required.
20
Viewing the evidence in the light most favorable to the jury’s finding, we
conclude that Jentsch’s testimony does not conclusively establish that the reasonable and
necessary cost to repair the Houchenses’ pool is $58,500. See Dow Chem., 46 S.W.3d at 241.
As a result, the trial court erred in awarding $58,500 in damages to the Houchenses on their
breach-of-contract claim. We sustain Pools Unlimited’s sixth appellate issue.10
By conditional cross-point, the Houchenses assert that even if we conclude that
the trial court erred in granting the judgment notwithstanding the verdict, we cannot render
judgment on the verdict because the evidence is factually insufficient to support the jury’s
finding that the Houchenses suffered zero damages.11 When a party challenges the factual
sufficiency of an adverse finding on which it had the burden of proof, the party must demonstrate
that the adverse finding is against the great weight and preponderance of the evidence. Id.
at 242. In assessing whether this burden has been met, we consider all evidence presented to
the jury, including evidence in favor of and contrary to the challenged finding. Cain v. Bain,
709 S.W.2d 175, 176 (Tex. 1986). Because it is the jury’s role to evaluate the credibility of the
witnesses and reconcile any inconsistencies, Anderson v. Durant, 550 S.W.3d 605, 616 (Tex.
2018), we must not substitute our judgment for the jury’s merely because we would have
10
In its fourth appellate issue, Pools Unlimited contends that the trial court erred in
allowing Jentsch to testify as to the cost of repairs and that the testimony resulted in an
improper judgment. Because we conclude that the trial court erred in rendering a judgment
notwithstanding the verdict based on the evidence before it, including Jentsch’s testimony, we
need not decide this issue. See Tex. R. App. P. 47.1.
11
Ordinarily, when we determine on review that the trial court erred in granting a
judgment notwithstanding the verdict, the proper remedy is to reverse and render a judgment on
the jury’s verdict. Dudley Constr., Ltd. v. ACT Pipe & Supply, Inc., 545 S.W.3d 532, 537-38
(Tex. 2018). However, when the appellee presents by cross-point sufficient grounds, including
factual sufficiency, to vitiate the verdict or prevent an affirmance of the judgment had one been
entered on the verdict, the cause should instead be remanded for further proceedings. Id. (citing
Tex. R. App. P. 38.2(b)).
21
weighed the evidence differently or reached a differed conclusion, Golden Eagle Archery, Inc. v.
Jackson, 116 S.W.3d 757, 761 (Tex. 2003).
As previously discussed, the jury was presented with evidence, including
testimony from John and Jentsch, demonstrating that (1) the pool was leaking from inside the
custom rock grotto and between the spa and the pool; (2) the plaster on the slide was “cracking”
and “too rough” to use; and (3) the automation system was not fully compatible with the chiller
installed by Pools Unlimited. Although the evidence is not conclusive as to the necessity of the
repair methods proposed by Jentsch or as to the reasonableness of the cost of repairs as sought by
the Houchenses, there is nothing in the record contradicting the existence of the defects, Pools
Unlimited’s construction as the cause of the defects, or the need for repairs. As a result, the
jury’s finding that “the reasonable and necessary cost to repair the pool and its related features”
is zero is against the great weight and preponderance of the evidence. See Seasha Pools,
391 S.W.3d at 642 (concluding that evidence was factually insufficient to support finding of zero
damages on cost-of-repair damages because nothing contradicted written bids and testimony that
those bids represented reasonable cost of repair). We sustain the Houchenses’ cross-point.
CONCLUSION
Having concluded that the trial court did not err in granting a directed verdict on
Pools Unlimited’s claim for breach of contract, we affirm the trial court’s judgment that Pools
Unlimited take nothing on this claim. Because the trial court erred by granting summary
judgment in favor of the Houchenses on their fraudulent-lien claim and by rendering a judgment
notwithstanding the verdict on their breach-of-contract claim, we reverse the trial court’s
judgment as to these claims, including the trial court’s award of actual damages, exemplary
22
damages, attorney’s fees, and expenses, all which were predicated on these claims. See Tex.
Civ. Prac. & Rem. Code § 12.002 (actual damages, attorney’s fees, exemplary damages for
fraudulent lien), § 38.001 (attorney’s fees for breach of contract); Seasha Pools, 391 S.W.3d.
at 643 (reversing for further proceedings on issue of damages and for further consideration of
attorney’s fees).
Because there is a fact issue as to whether Pools Unlimited’s mechanic’s lien was
fraudulent, we remand the Houchenses’ fraudulent-lien claim for a new trial. Also, because the
evidence is factually insufficient to support the jury’s finding of zero damages, we remand the
Houchenses’ breach-of-contract claim for a new jury trial. See Tex. R. App. P. 44.1(b); Rancho
La Valencia, Inc. v. Aquaplex, Inc., 383 S.W.3d 150, 152 (Tex. 2012) (per curiam) (explaining
that appellate court could not remand for new trial on damages only; under Rule 44.1(b), “it must
remand for a new trial on both liability and damages”).
__________________________________________
Chari L. Kelly, Justice
Before Chief Justice Byrne, Justices Triana and Kelly
Affirmed in Part; Reversed and Remanded in Part on Motion for Rehearing
Filed: November 9, 2022
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https://www.courtlistener.com/api/rest/v3/opinions/8483823/ | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
Vv. Civil Action No. 21-2886-F YP
BERTELSMANN SE & CO. KGaA,
PENGUIN RANDOM HOUSE, LLC,
VIACOMCBS, INC., and
SIMON & SCHUSTER, INC.,
Defendants.
AMENDED MEMORANDUM OPINION
John Steinbeck famously said, “I guess there are never enough books.” He apparently
meant that in the figurative sense, as a comment on the power of books to educate, to enrich, and
to explore. But today, his statement also rings true in the economic sense: The retail market for
books in the United States was over $11.5 billion in 2019 and has only continued to expand.
People want to read. And book publishers have the enormous power and responsibility to decide
which books — and therefore which ideas and stories — will be made broadly available to the
public. A publishers’ marketplace of ideas is also a marketplace of book sales, production costs,
and market share. It is this commercial market, so inextricably intertwined with the intellectual
life of our nation, that the Court examines in this case.
Penguin Random House (“PRH”) is by far the largest book publisher in the United States.
Owned by Bertelsmann SE & Co. KGaA (“Bertelsmann”), an international media and services
company, PRH annually publishes over 2,000 new books in the U.S. and generates nearly $2.5
billion in revenue. Simon & Schuster, Inc. (“S&S”), owned by the media giant Paramount
Global (formerly ViacomCBS), is the third-largest publisher in the U.S. S&S publishes about
1,000 new titles yearly and reported over $760 million in net sales in 2020.
In March 2020, ViacomCBS announced that it planned to sell S&S. Following a multi-
round bidding process, Bertelsmann and PRH signed an agreement with ViacomCBS and S&S in
November 2020 to purchase S&S for $2.175 billion. The acquisition of S&S would cement
PRH’s position as the “number one” publisher in the United States, increasing its retail market
share to almost three times that of its closest competitor.' Trial Tr. at 741:17-742:4 (Dohle).
In November 2021, the Antitrust Division of the United States Department of Justice
(“the government”) brought this action against PRH, S&S, and their parent companies (“the
defendants”), seeking to block the merger of PRH and S&S under Section 7 of the Clayton Act.
The government’s case sounds in “monopsony,” a market condition where a buyer with too
much market power can lower prices or otherwise harm sellers. Essentially, the government
alleges that the merger will increase market concentration in the publishing industry, which will
allow publishing companies to pay certain authors less money for the rights to publish their
books.
The case proceeded to trial on August 1, 2022. For twelve days, the Court heard
evidence and argument about how PRH’s acquisition of S&S would affect competition in the
“upstream” market for publishing rights. The Court heard testimony from authors, publishers,
1 In 2019, PRH had a percent share of the market for U.S. book sales and S&S had al percent share.
See ECF No, 177 (United States’ Sealed Corrected Proposed Findings of Fact and Conclusions of Law (“Govt.
PFOF-PCOL”)) ¥ 13 (citing Defendants’ Exhibit No. DX”) 105 at 64); see also ECF No. 184 (government’s
redacted post-trial brief). Thus, the combined entity would have a market share of approximately percent. The
merged company’s next closest competitor would >: iii i which had an percent share of
the market for book sales in 2019. See Govt. PFOF-PCOL 4 13 (citing DX 105 at 64).
literary agents, and industry executives, and admitted over 230 exhibits.” After a thorough
review of the record and careful consideration of the parties’ arguments, the Court concludes that
PRH’s acquisition of S&S is likely to substantially lessen competition to acquire “the publishing
rights to anticipated top-selling books,” which comprise the relevant market in this case. The
Court therefore will enjoin the proposed merger of PRH and S&S.
I. BACKGROUND
A. The Industry
The book industry is dominated by five major publishing houses — PRH, HarperCollins
Publishers, S&S, Hachette Book Group, and Macmillan Publishing Group, LLC — which are
known as the “Big Five.” Together, the Big Five held nearly 60 percent of the market for the
sale of trade books in 2021 (i.e., books intended for general readership, as opposed to specialized
books like textbooks or manuals). See DX 382; PX 663 at 92.
2 The Court appreciated hearing the testimony of many dedicated professionals who work in the publishing
industry. The Court heard from authors Charles Duhigg, Stephen King, and Andrew Solomon. Publisher witnesses
included: Jennifer Bergstrom, Senior Vice President and Publisher of the S&S imprint Gallery Books Group
(“Gallery”); Sally Kim, Senior Vice President and Publisher of the PRH imprint G.P. Putnam’s Sons (“Putnam”);
Liate Stehlik, President and Publisher of Morrow Group, HarperCollins Publishers; and Brian Tart, President and
Publisher of the PRH imprint Viking Penguin (“Viking”). The following literary agents testified: Elyse Cheney,
Christy Fletcher, Ayesha Pande, Gail Ross, Jennifer Rudolph Walsh (expert witness), and Andrew Wylie. The
Court also heard from top industry executives, including Markus Dohle, CEO of PRH; Dennis Eulau, Executive
Vice President and COO of S&S; John Glusman, Vice President and Editor in Chief of W.W. Norton & Company
(“Norton”); Michael Jacobs, President and CEO of Abrams Books; Jonathan Karp, President and CEO of S&S;
Madeline McIntosh, CEO of PRH in the U.S.; Brian Murray, CEO of Harper Collins Publishers; Michael Pietsch,
CEO of Hachette Book Group; Don Weisberg, CEO of Macmillan Publishers; and Steven Zacharius, CEO of
Kensington Books. The government’s economic expert was Dr. Nicholas Hill, and the defendants’ economic expert
was Professor Edward Snyder. Finally, Adriana Porro, a statistician for U.S. Department of Justice, Antitrust
Division, also testified.
The following witnesses testified by video: Christy Fletcher, John Glusman, Michael Jacobs, Andrew
Solomon, Liate Stehlik, and Steven Zacharius. See Government’s Exhibit No. (“PX”) 2008 (Fletcher Dep.); Trial
Tr. at 1740:16-17 (noting that video of Fletcher’s deposition was played at trial); DX 422 (Glusman Dep.); DX 423
(Glusman sealed); Trial Tr. at 1880:4 (noting that video of Glusman’s deposition was played at trial); PX 2005
(Jacobs Dep.); Trial Tr. at at 701:13—23 (noting that video of Jacobs’s deposition was played at trial); PX 2004
(Solomon Dep.); Trial Tr. at 689:7-8 (noting that video of Solomon’s deposition was played at trial). PX 2002
(Stehlik Dep.) at 64-65; Trial Tr. at 628:23 (noting that video of Stehlik’s deposition was played at trial); PX 2000
(Zacharius Dep.); Trial Tr. at 385:11 (noting that video of Zacharius’s deposition was played at trial),
3
The Big Five have achieved their market dominance in part by acquiring other publishers,
contributing to a trend toward consolidation in the industry. Bertelsmann entered the U.S.
publishing market by acquiring Bantam Books in 1977, which merged with Doubleday Dell in
1986 and with Random House in 1998. PRH itself was formed in 2013 when Random House
acquired Penguin Books. Since 2013, PRH has continued to acquire other publishers, including
Sasquatch Books, Rodale, Little Tiger, F& W Media, and Sourcebooks. Meanwhile, Hachette
has acquired several independent publishers in the last decade, such as Workman Publishing,
Worthy, Perseus, and Black Dog & Leventhal. See Trial Tr. at 102:13-103:4 (Pietsch), 204:3-
19 (Pietsch). In 2021, HarperCollins acquired Houghton Mifflin Harcourt, which previously was
one of the largest among the mid-size, independent publishers. See Trial Tr. at 1386:12-17
(Murray), 192:6—-193:15 (Pietsch). The remaining Big Five publisher, Macmillan, has pursued
organic growth. See Trial Tr. at 1079:23—1080:18 (Weisberg).
Some smaller publishers are well respected in the industry and compete against the Big
Five — in both the upstream market for acquiring books for publication and in the downstream
market for selling books to consumers. For instance, Scholastic is one of the largest children’s
book publishers and works with some of the same authors as the Big Five, see Trial Tr. at
118:20—22 (Pietsch), 545:10—547:2 (Karp); while Kensington, one of the largest remaining
independent publishers, is a prominent purveyor of romance novels. See PX 2000 (Zacharius) at
8; PX 2002 (Stehlik) at 64-65. In addition, Norton is a prestigious publishing house specializing
in narrative nonfiction and is favored by some best-selling authors like Michael Lewis. See Trial
Tr. at 540:24-541:24 (Karp), 544:17—25 (Karp), 550:22—551:4 (Karp); DX 422 at 7. Other
players in the industry include well capitalized, mid-sized publishers like Amazon and Disney,
which each bring in over $100 million in annual revenues from publishing. See Trial Tr. at
737:22—738:11 (Dohle).
Each publishing company is organized as an umbrella organization that houses various
“imprints.” An imprint is a trade name or brand name for an editorial group. Imprints specialize
in publishing certain types of books and thus develop reputations for success in particular genres.
See PX 530 at 2. The editors within each imprint select and acquire manuscripts for publication;
and then collaborate with authors to develop and finalize their books. See Trial Tr. at 97:1-6
(Pietsch), 1915:10-25 (Duhigg), 1919:8-1920:3 (Duhigg). PRH has close to 100 U.S.
publishing imprints within six publishing divisions. See Trial Tr. at 812:5—11 (Dohle); Govt.
Demo. | (PRH organizational chart). Its best-known imprints include Viking, Penguin Press,
Doubleday, Riverhead, Random House, and Putnam. S&S operates three publishing groups with
around 50 imprints, including Simon and Schuster, Atria Books, Scribner, and Gallery Books.
See PX 663 (materials for prospective S&S buyers) at 91, 101.
All publishers and editors are highly motivated to secure the rights to publish new books;
indeed, identifying and acquiring books that people want to read is the essence of the business.
Yet only 35 out of 100 books turn a profit, and breakout titles drive revenues — the top 4 percent
of profitable titles generate 60 percent of profitability. See PX 151 (presentation by PRH
executives on publishing industry) at 11; Trial Tr. at 747:16-18 (Dohle), 2289:2—10 (McIntosh)
(“Where the Crawdads Sing is a great current example. Fifty Shades of Grey, Gone Girl, Girl on
the Train... . [their] sales performance so outstrips our expectation, that they deliver most of the
profit to the company.”). Publishing has therefore been described by insiders as a “portfolio
business”: The business model is to acquire a large number of high-quality books, knowing that
a substantial percentage of the titles will not be profitable. See Trial Tr. at 747:5—-9 (Dohle). As
PRH CEO Markus Dohle put it, publishers are “angel investors” that “invest every year in
thousands of ideas and dreams, and only a few make it to the top.” Jd. at 747:5-9, The books
that do “make it to the top” and sell well, especially over a number of years, allow the companies
to take risks in acquiring new books and enable publishers to manage the uncertainty inherent in
“betting” on new titles. See id. at 747:5—7 (Dohle); PX 151 at 11. Books that continue to sell
after the first year of publication comprise a publisher’s “back list,” which can provide an
important source of stable revenue. Back lists allow publishers to play the “long game” because
some books take a while to become profitable. See PX 2004 at 55. By contrast, the “front list,”
which consists of books not yet released or on the market for under a year, is risky and has
poorer margins, due to the expenses of marketing and roll-out associated with the new titles. See
Trial Tr. at 118:15—119:11 (Pietsch).
B. Acquiring Books for Publication
Books begin, of course, with authors. Authors often spend years developing their ideas,
conducting research, and refining their manuscripts or proposals before submitting them for
publication. A project that is acquired may still take months or years of work before it becomes
a completed book that is ready for distribution. See, e.g., id. at 1916:14-21 (Duhigg). To
support themselves, authors often rely on “advances” from their publishers. See id. at 1925:15—
22 (Duhigg), 1941:9-1943:] (Duhigg) (advance allowed him to take time off from his job to
write, support his newborn child, buy a house, and pay living expenses). An advance is an
upfront payment against the royalties that an author may earn in the future. The advance is the
3 Royalties are payments made to the author based on a book’s sales. See Trial Tr. at 106:20—-107:25
(Pietsch). For example, authors earn 7.5 percent of sales for paperback books. See id, at 255:24-256:20 (Pande),
2011:9-10 (Kim). An advance is an upfront payment of those anticipated royalties; the author is not required to pay
back the advance even if the book’s actual royalties never exceed the amount of the advance. See id. at 106:20—
107:25 (Pietsch). Advances are paid in installments, typically in quarters. Generally, the first installment is paid
upon the signing of the book contract; the second payment is made upon delivery and acceptance of the manuscript;
“single most important” term in a contract for publishing rights because in a “large number of
cases, it may be the only compensation that the author will receive for their work.” Jd. at
254:18-24 (Pande); see also PX 2002 (Stehlik) at 67. Indeed, most authors do not “earn out”
4 In
their advances, i.e., ultimately earn royalties that exceed the amount of their advances.
addition to the advance, authors care about working with editors who share their vision for the
book and who can help them to “bring the book into the world.” Trial Tr. at 97:2-6 (Pietsch);
see also id. at 1918:5-24 (Duhigg), 1943:13-17 (Duhigg) (editor is “the reason I’m there” at
PRH), 2055:10-2056:9 (Cheney), 2063:5—17 (Cheney).
Authors generally are represented by literary agents, who use their judgment and
experience to find the best home for publishing a book. They typically begin the process by
submitting the book (which might be a full or partial manuscript, or just a proposal) to multiple
imprints or editors on a preliminary basis, to gauge the level of interest in the project. See id. at
246:11-22 (Pande), 2105:22— 25(Wylie); PX 151 at 5. Agents use their expertise to determine
which imprints and editors to target, based on factors such as the kinds of books the imprint
previously has published, how effectively they have published those kinds of books, and the
ability of the company to pay appropriate compensation. See Trial Tr. at 246:9-22 (Pande),
2117:8-2118:25 (Ross). Agents prioritize submitting manuscripts and proposals to Big Five
imprints because of their ability to pay; an agent might send out a second round of submissions
that includes more smaller publishers if interest among the Big Five is not strong. See id. at
246:17-22 (Pande), 248:15—249:10 (Pande). Given the size of PRH and S&S, and the number of
the third installment is paid upon publication; and the fourth payment is made twelve months later. See id. at 777:1—
19 (Dohle), 1829:11~15 (Walsh), 255:1-25 (Pande). It can take three to four years for an entire advance to be paid
to an author. See id. at 255:15—18 (Pande), 777:1-19 (Dohle).
4 See Trial Tr. at 108:2-12 (Pietsch) (“Roughly half the time. About half the books we [Hachette] publish
earn out their advances.”), 254:20—24 (Pande) (20% of authors represented by Pande’s agency earned out advance),
1239:25—1240:8 (Hill) (more than 85% of author contracts for anticipated top-selling books never earn out their
advance), 2101:3-5 (Wylie) (6% of books he represents earn out their advances),
7
imprints they represent, some agents “always” submit to multiple PRH imprints and to S&S. See
id, at 250:10—251:3 (Pande), 260:16—21 (Pande).
Agents try to maximize the advances paid to authors: They not only have a fiduciary
duty to achieve the best deal, see 7d. at 494:7-17 (Karp), 1748:21—23 (Walsh), but they also are
paid on commission (typically 15 percent of the advance), See id. at 245:18~25 (Pande); PX 151
at 5. Indeed, one prominent agent has stated that it is his job to “get an advance that an author
doesn’t earn out,” Trial Tr. at 2100:5—25 (Wylie); while a publisher explained that “typically the
most important thing for an agent representing authors [is] to get the most amount of money up
front,” see PX 2002 (Stehlik) at 67.
Other common terms in a book contract include royalty rates, audio rights, and payment
structure (i.e., the number and timing of the installments in which an advance is paid). See Trial
Tr. at 255:11-17 (Pande), 255:24—256:20 (Pande). Yet many of those other terms have become
standardized across the industry, making advance levels even more important. For instance, each
book format has a standard royalty rate that is rarely altered. See id. at 106:20—107:13
(Pietsch).° Audio rights are now always included in book contracts and may not be sold
separately. See id. at 257:14—258:6 (Pande), 622:17—25 (Karp); PX 328 (internal PRH email) at
1-2 (“We have to get those [audio] rights.”). Finally, even though authors prefer to receive
“frontloaded” advances —- payments that are made sooner, and in fewer installments — the
industry norm has shifted in the opposite direction, from payouts in thirds to payouts in quarters.
See Trial Tr. at 254:25—255:3 (Pande), 256:22—25 (Pande), 1829:11—18 (Walsh); ae at 19—
20.
5 Generally, paperback books receive a 7.5-percent royalty rate; e-books and audio or digital downloads
receive 25 percent of net sales; and hardcover books get a 10-percent rate for the first 5,000 copies sold, 12.5 percent
for copies 5,000 to 10,000, and 15 percent of sales exceeding 10,000 copies. See Trial Tr. at 255:24—256:20
(Pande), 2011:4-15 (Kim).
The Court is unconvinced by the testimony of certain defense witnesses who stated that
advance levels are not the most important factor in book acquisitions, and that the author’s “fit”
and comfort level with the editor are more significant. See Trial Tr. at 1756:2—1757:8 (Walsh),
1836:5—1837:2 (Walsh), 1935:14—-20 (Duhigg), 2055:5—2056:9 (Cheney), 2063:4—17 (Cheney).
While that may be true in a small number of cases, books generally are sold to the highest bidder.
See id, at 2395:2-10 (McIntosh) (underbidder winning an auction is “rare’”), 2090:20—23 (Wylie)
(“[W]e are picking one that we feel presents the strongest combination of financial terms plus
editorial engagement and context for the author.”), 2106:1—7 (Wylie) (sold books to the highest
bidder about 93% of the time). While the choice of an editor is undoubtedly significant, the
agent typically has submitted the book only to a pre-screened list of suitable editors and thus may
choose the highest bid from among those editors. See id. at 246:1—22 (Pande). The
overwhelming weight of the evidence supports the conclusion that advance levels are the
primary focus of book acquisitions.
Most books are sold in exclusive negotiations between the agent and a single editor or
imprint.° Such negotiations come about because (1) a publisher has an “option” from a prior
contract with the author, which allows the publisher to take the first look at the author’s next
project and submit an exclusive bid within a limited period; (2) a publisher is willing to pay a
premium to “preempt” the book from being offered to others; (3) an agent approaches a single
editor that is a particularly good fit for a book and enters negotiations with that editor and their
imprint; or (4) only one imprint is interested after the agent has completed a round of
8 More than half of books are sold through negotiations. See Trial Tr. at 1608:20—1609:1 (Hill) (explaining
that 60% of books with advances over $250,000 involve negotiations, with the remaining 40% being auctions); see
also id, at 478:15~-479:1 (Karp) (explaining that less than half of acquisitions are auctions because S&S has “so
many repeat authors), 771:11—14 (Dohle) (auctions are “small sliver of the overall deals we do, especially the
expensive deals we do”), 1963:20—1964:18 (Kim) (explaining that Putnam imprint buys 80% of books through one-
on-one negotiations and attributing the higher percentage to its number of “franchise” authors).
9
submissions. See id. at 475:13-476:10 (Karp), 954:18-955:7 (Tart). Alternatively, an agent
might decide to utilize an auction format, which requires imprints to bid against each other to
acquire the book. Auctions may be organized in (1) a “round robin” format, where the agent
accepts competing bids in several “rounds,” eliminates the lowest bidders before proceeding to
the next round, and continues until only one bidder remains; (2) a “best bids” format, where all
bidders submit their highest bid in a single round; or (3) a hybrid format, such as “better best,”
where the bidding starts as a “round robin” and then shifts to a final round of “best bids.” See id.
at 111:8-113:4 (Pietsch), 2049:1-19 (Cheney), 2116:10-—2117:9 (Ross).
A publisher that hopes to acquire a desirable book must offer a competitive advance to be
in the running. Editors and publishers determine how much their imprint is willing to pay for a
given book. See id. at 97:16 (Pietsch). To make that determination, they estimate the
profitability of the book by generating a profit and loss statement (“P&L”). Such a statement
suggests an appropriate advance after considering (1) the anticipated sales of the book and its
expected list price (in various formats); and (2) predicted production and marketing costs. See
DX 414 (P&L Sheet); Trial Tr. at 915:5-918:21 (Tart). The most important input in a P&L —
and the driving force behind the advance offered — is the publisher’s estimate of book sales.
See Trial Tr. at 917:13-16 (Tart) (“the higher . . . sales equate to a higher advance in the P&L”),
110:19-111:1 (Pietsch) (relationship between the level of advance and projected sales is
“extremely close”). The sales prediction is based on the demand for comparable titles (referred
to as “comp titles” or “comps”), which have similar characteristics to the proposed book in terms
of subject matter, literary merit, or author background. Publishers also often confer with their
sales, publicity, and marketing teams about expected demand for a book. See id. at 842:15—
843:10 (Dohle), 914:11-18 (Tart), 1036:13-16 (Tart). But publishers do not rely only on the
10
P&L to determine an appropriate advance. They also consider factors like the editor’s
enthusiasm, their relationship with the author, whether the book might win an award, and
whether the book is in a growing category ——- if they really want a book, they will “stretch”
beyond what a P&L suggests would be profitable. Jd. at 969:4—970:14 (Tart), 967:3—10 (Tart).
Publishers’ sales estimates, broadly speaking, are reasonably reliable. Ultimately, there
is a correlation between high advances and high book sales. Books that sell well tend to have
garnered high advances, and books that receive high advances tend to sell well. See id. at 749:4—
22 (Dohle); PX 151 at 11.
C. The Competition for Books
Regardless of the method used to acquire a book’s publishing rights, the amount that is
paid is inexorably determined by competition. In an auction, a skillful agent can capitalize on
enthusiasm for a book and play bidders off against one another, knowing that a publisher will
“bid what .. . [it] need[s] to buy that book” because “it [only] takes one passionate editor at
another imprint to win that book away.” Trial Tr. at 1965:21—25 (Kim). Although the perceived
value of a book is subjective and may vary among editors, there is often a consensus among
industry players about which books will be successful. See id. at 2108:14—24 (Wylie) (“I think
there are recognizable qualities in — in books that people who have been in the business for a
long time would easily recognize.”), 310:12—24 (Pande) (agent explaining that she treats an
anticipated strong seller differently, such as by “sending it out as widely as I possibly can”).
It is not uncommon for editors and publishers to experience a “kind of auction fever,” in
which they change their sales expectations for a book and increase what they are willing to pay
for it during a competitive round-robin auction. /d. at 180:20—181:11 (Pietsch). “[T]he interest
of other parties validates [a publisher’s] own sense of what a book is worth.” /d. The record
1]
contains numerous examples of books that sold for unexpectedly high advances and achieved
other favorable terms for their authors due to the bidding frenzy incited by competitive auctions.
For instance, in a hybrid auction of rounds followed by best bids, Sa
Pee initially received bids of between $150,000 and $400,000 from four publishers.
See PX 944-B (Porro bidding summary); Trial Tr. at 923:16—930:18 (Tart) (discussing book’s
acquisition); PX 320 (emails). After six rounds of bidding, PRH’s Viking imprint more than
doubled its initial bid and won the book for $775,000 “over stiff competition.” PX 39 (email
from Tart); see also PX 944-B (Porro bidding summary); Trial Tr. at 923:16—930:18 (Tart). At
the best-bids stage, Viking decided to “stretch” from its initial bid clearance of $700,000 because
“there just is literally no telling what the opponents hold in their hands.” PX 326 at 1 (emails
between Tart and Viking editor Wendy Wolf). Another example is i
a which also benefitted from a rounds auction. See PX 948-B (Porro bidding
summary). In the first round, there were three bids, ranging from $200,000 to $300,000. See id.
Yet after five rounds, im received $535,000 plus a $100,000 bonus. See id.; Trial Tr. at
433:24-435:17 (Karp) (discussing bidding process); PX 632 (emails discussing auction). The
record contains at least 11 other examples that illustrate the sharp increase in prices engendered
by competitive auctions, with advances increasing at least $100,000 by the end of the auction.’
7 See PX 937-B (one-round and best-bid auction with beginning high bid of $375,000 and winning bid of
$550,000); PX 938-B (four-round and best-bid auction with beginning high bid of $250,000 and winning bid of
$750,000); PX 716 (addressing auction summarized in PX 938-B); Trial Tr. at 435:21-437:19 (Karp) (same); PX
939-B (seven-round auction with beginning high bid of $300,000 and winning bid of $1.5 million); PX 940-B (five-
round and best-bid auction with beginning high bid of $400,000 and winning bid of $1.1 million for two books); PX
941-B (eight-round auction with beginning high bid of $550,000 and winning bid of $825,000); PX 947-B (two-
round and opportunity-to-improve auction with beginning high bid of $500,000 and winning bid of $600,000 and
bonuses for two books); PX 950-B (three-round and best-bid auction with a chance to improve, with beginning high
bid of $250,000 and winning bid of $700,000); PX 951-B (best-bid and opportunity-to-improve auction with initial
preempt offer of $750,000 and winning bid of $1.1 million); PX 954-B (three-round and best-bid auction with
beginning high bid of $750,000 and winning bid of $1.05 million); PX 955-B (one-round auction with opportunity
to improve, with beginning high bid of $800,000 and winning bid of $1.5 million); PX 729 (book initially received
$750,000 preemptive offer from S&S, went to auction, and then S&S made an offer 10% higher than final auction
bid, for offer of $1.1 million); Trial Tr, at 445:5-448:11 (Karp) (addressing book in PX 729).
12
Competition is also a key factor in one-on-one negotiations, where publishers must offer
high advances because they know that the agent always has the option of breaking off
negotiations and selling the book on the market. See Trial Tr. at 955:11—20 (Tart) (explaining
that in one-on-one negotiations “you know there’s competition out there”), 1847:1-6
(Bergstorm) (“I assume I am negotiating exclusively, but I always have my competition in my
rearview mirror. But it’s one on one. And sometimes we don’t come to terms, and sometimes
they will go to someone else.”), 1966:17—24 (Sim) (“[E]ven if it’s a one-on-one negotiation .. .
we’re constantly aware that there’s competition ... .”), 114:21-115:6 (Pietsch). Some
publishers consider individual negotiations to be the most challenging way to acquire a book,
because “you are basically bidding against the author’s expectations and the agent’s
expectations,” and there are “no other market inputs [but] you know there’s competition out
there.” Jd. at 955:11—20 (Tart). In such situations, agents have bargaining leverage because the
threat of taking the book to other publishers always lurks in the background. This is particularly
true where a publisher is attempting to preempt the auction process. See, e.g., id. at 115:21—
116:5 (Pietsch) (“When we’re calculating a preempt, we want to bring an advance that we
believe the agent will consider a good advance; that they will think, yes, there’s a chance that if I
take this to auction, I might not get this much or this is the range that it might end up at. And so
we try to offer a high advance that we think will be compelling to — to the agent... .”); 303:13-
15 (Pande) (“So preemptive offers tend to be quite high because it has to incentivize us to be
willing to take the book off the table and not offer it in a competitive situation.”). As agent Gail
Ross stated: “[I]n this business, there’s always the other competitor. Whether . . . they’re
bidding or not, they’re always there.” Jd. at 2127:11-13.
13
Agents often submit a book to more than one imprint within a publishing company, see
id. at 250:10-—251:3 (Pande), and publishers sometimes allow their imprints to bid against one
another in auctions. For example, PRH allows competitive bidding between its divisions, so
long as there also is an external bidder; but for imprints within the same division, PRH requires
the division to submit a “house bid.” See id. at 769:2—20 (Dohle), 935:20-—-936:1 (Tart), 943 :3—
24 (Tart); PX 332 (email from PRH staff to agent explaining imprint bidding rules). A house bid
is a single bid made on behalf of more than one imprint from a particular publisher; the house bid
allows the agent to choose which imprint to work with, and each imprint might also submit a
“pitch,” ie., a letter or memo describing its editorial and other services. See PX 2002 (Stehlik) at
75-76. Hachette also allows its imprints to bid against one another if there is an external bidder,
see Trial Tr. at 239:11—23 (Pietsch), and Macmillan appears to allow some imprint competition,
compare PX 938-B (showing separate bids from two Macmillan imprints), with PX 941-B
(showing house bid from Macmillan imprints), and PX 954-B (showing one bid from Macmillan
imprints). S&S and HarperCollins, however, do not allow competitive bidding among their own
imprints but instead require their imprints to submit house bids. See Trial Tr. at 463:11—13
(Karp), 600:8-10 (Karp), 2119:11-—24 (Ross); PX 2002 (Stehlik) at 75-76. Allowing sibling
imprints to compete against each other increases the publisher’s chances of winning a title; gives
the editors from each imprint the freedom to pursue their desired projects, and allows authors
more choice in finding the most “comfortable home” and best editorial match for their books.
Trial Tr. at 839:11—840:4 (Dohle).
Although internal competition may yield benefits to publishers and authors, it is not in a
publisher’s economic interest to allow its own imprints to drive up the price of an acquisition,
and publishers therefore take steps to limit internal competition. See PX 411 (presentation by
i4
Madeline McIntosh to PRH Board) at 4 (explaining that McIntosh had “[i]ncreased background
coordination in auctions to leverage internal demand information better and avoid internal
upbidding”); Trial Tr. at 239:11—23 (Pietsch) (“Once we have only Hachette imprints bidding,
then .. . continuing to bid each other up would hurt the company’s collective P&L.”). Ample
evidence in the record demonstrates that PRH imprints often coordinate their bids within the
same auction, artificially suppressing advances. See id. at 2341:9-2345:7 (McIntosh), 2373:9—
2382:8 (McIntosh); PX 107 (email from McIntosh) (“I feel we should coordinate — shouldn’t be
forced into bidding against each other for existing authors”); PX 121 (emails between McIntosh
and PRH executive Nina von Moltke) (coordinating imprint bids). For example, PRH imprints
sometimes agree to submit the same bid. See PX 107 (“We are coordinated. Bill [Knopf
Doubleday] and Kara [Random House] will agree to a number and both offer same.”). They also
sometimes arrange to start their bidding from a lower number. See PX 116 (emails between von
Moltke and McIntosh) (deciding that PRH imprints “go in a bit lower in round 1”). Finally, PRH |
imprints sometimes decide to collectively “move up slowly” in their bidding, particularly if PRH
is the “main driver of value.” PX 336 (email from PRH executive to Tart). PRH appears to take
pride in its successful program of bid coordination. See PX 421 (email from von Moltke to
Mclntosh) (discussing auction where three top bids at $600,000 were from PRH imprints and
noting she was “[g|lad we didn’t go higher (this one definitely benefitted from the
coordination!)’). This type of behavior from independent companies would be illegal. Cf
United States v. Apple, Inc., 791 F.3d 290, 339 (2d Cir. 2015).
In competing for the most attractive new books, the Big Five have significant advantages
over smaller publishers. Most critically, the Big Five have the capital to take chances and place
bigger bets on a book’s success; that is, they can offer higher advances for more books. Indeed,
iS
agents and authors choose the Big Five because “they are most likely to pay an appropriate
advance,” see Trial Tr. at 246:19—22 (Pande); and at least one mid-size competitor observes that
the Big Five often “overpay” for books. See DX 422 (Glusman) at 76. The Big Five can afford
to take on more risk by paying higher advances because they have the most substantial back lists,
which are highly profitable. A book that does not sufficiently earn out its advance is a “loss” for
the publisher,® but a publisher that has a steady income stream from its back list has a higher
tolerance for absorbing such losses, See Trial Tr. at 156:5-158:10 (Pietsch), 160:7-161:7
(Pietsch), 1066:22—25 (Weisberg) (“It[] . .. obviously has an impact on the bottom line if [your]
unearned advances are too large.”). PRH has the largest back list in the industry, and its back list
is the most significant source of its revenue. See id. at 2358:2—7 (McIntosh).
The Big Five also offer significant advantages in ensuring a book’s presence in the media
and visibility to its target audience. The Big Five publishers and their individual imprints have
teams dedicated solely to selling, marketing, and publicizing books, which have built critical
relationships with booksellers and the media. See PX 2004 (Solomon) at 64 (“There’s just a
whole industry that responds better to Big Five publishers.”); Trial Tr. at 259:13—260:4 (Pande),
840:5—841:12 (Dohle), 983:12—25 (Tart). Big Five publicity teams “engage with the media to
promote the book.” Trial Tr. at 1047:16~20 (Tart). Those teams can secure author interviews
on prominent programs like the Today Show, Good Morning America, or NPR, and can
persuade senior book reviewers to closely read and review the book. See PX 2004 (Solomon) at
63-64.”
8 A book need not earn out its entire advance for a publisher to profit; publishers begin to profit “at around
70 percent of earnout for most books.” See Trial Tr. at 1240:9-12 (Hill), 2258:21—25 (McIntosh).
° See PX 2004 (Solomon) at 63-64. (“You know, your book comes out and what do you want; you want to
be on NPR, you want to be on Good Morning America or the Today Show, you want to... do a radio interview
with Terry Gross. ... The publishers at the Big Five houses have more ready access to all of that. And. .. if there is
a new book that [S&5 imprint] Scribner said is a really major title, it will at least be closely read by the editors of
16
The Big Five’s sales teams can help ensure that stores not only buy books but place them
in prominent displays. See Trial Tr. at 174:19-175:5 (Pietsch), 1372:11—25 (Murray), 1378:4—
1379:9 (Murray); PX 2002 (Stehlik) at 112 (“I would say generally the Big Five seem to have
more visibility in stores .. . than other smaller publishers.”). The Big Five edge extends to the
virtual marketplace; for instance, PRH hires data scientists to study Amazon’s search algorithms
and spends money to get books better positioned in Amazon’s search results. See Trial Tr. at
893:6-16 (Dohle); PX 2002 (Stehlik) at 112.
Meanwhile, marketing teams are responsible for paid advertising and use “every device
possible to find that [book’s] audience.” See Trial Tr. at 1067:17—1068:14 (Weisberg). In
service of that goal, they produce market research and data analytics, as well as send marketing
materials to traditional outlets or social media influencers. See id. at 983:12—25 (Tart), 1849:13—
25 (Bergstrom), 1938:5—12 (Duhigg). The Big Five can even ensure that books look better when
they reach an audience, providing multiple versions of cover art for an author to choose from.
See PX 2001 Zacharus) «$7 (a
NS 101 2: 1920-415 Dri)
(“[Random House] came up with something like 13 or 15 different mockup book jackets to try
and figure out like which one is going to attract the reader’s eyes when it’s sitting there on a
shelf and get them to pick it up.”).
book reviews in a way that a book coming from a more obscure press is likely to go to a junior reader”); Trial Tr. at
1047:16—20 (Tart), 167:17—168:9 (Pietsch) (“And so to get [the media] to pay attention to your emails or return your
phone calls or come out to lunch or come to your pitch event, it takes a long time in developing a lot of
credibility.”), 1372:11-25 (Murray) (“And then we have publicists who have relationships with television and radio
producers.’”).
17
By contrast, smaller publishers might have a handful of staff doing all the editing,
marketing, publicity, and sales work on a book. See id. at 259:13—260:4 (Pande). Although
some of their books do well, that success is harder won and less frequent. See PX 2004
(Solomon) at 64 (“[T]here’s some fabulous books that are published by other houses and some of
them end up being successful. But it’s harder when you have fewer resources. It’s easier when
you have more resources.”). Authors want the easy advantages offered by the Big Five’s strong
publicity, marketing, and sales teams.'? Authors know that “when a publisher really gets behind
a book, particularly a big publisher, the chances are that that book is going to probably succeed
on some level.” See Trial Tr. at 335:23-336:1 (King).
Successful authors who first publish with smaller publishers often prefer to publish their
next book with a Big Five publisher. See id. at 291:10—292:25 (Pande). Along with their
substantial resources, Big Five publishers have developed a valuable reputation for having strong
editorial staff with experience working with the best books and authors. See PX 530 at 2
(opining that Big Five “are known for their strong editorial . . . skills”).!! Thus, a second book
with a Big Five publisher gives the author a better chance of an even bigger success. See Trial
Tr. at 291:10—-292:25 (Pande). The Big Five view the smaller publishers as a “farm team” for
spotting writing talent, and routinely lure authors away from the non-Big Five publishers with
higher advances and the promise of superior marketing, distribution, and even cover design. See
10 See PX 2002 (Stehlik) at 101 (‘Most authors want to have their books in as many locations as possible.”),
112 (suggesting that visibility is one reason “why many agents and authors prefer to go with bigger publishers”).
u See also Trial Tr. at 353:8—25 (Eulau) (acknowledging that “reputation is important” for attracting authors),
454:11-22 (Karp) (agreeing that S&S’s decades of credibility and success attracts authors), 535:7-20 (Karp) (noting
that a Macmillan imprint has “a long reputation, so they can claim that when they publish a writer, that writer will be
following in the tradition of other great award-winning Nobel laureates”), 1375:24-1376:23 (Murray) (“[To acquire
top authors,] [y]ou have to have... expertise and a reputation. It helps if you have published authors that are
publishing to the similar readers, you know, so you can point to similar books that maybe you published one, two, or
three years ago that were successful.”), 2005:15-2006:18 (kim) (“[A]uthors want to be published by publishers with
good reputations, good standing, you know, with booksellers and media. They want to be a part of a list that they
can be proud to say they’re a part of.”).
18
PX 530 at 2 (explaining that small publishers “become farm teams for authors who then want to
move to a larger, more financially stable major publisher’); Trial Tr. at 291:10-292:25 (Pande),
335:412 (King) (describing smaller publishers as the “minor leagues for writers”). The trial
record contains many examples of authors who moved from non-Big Five publishers to the Big
Five after establishing a track record of success. See Trial Tr. at 292:6--12 (Pande) (“I have had
several authors who have moved from small publishers to larger publishers. One of the authors’
name is Lad[ee] Hubbard. Her first book was published by Melville House. And for her second
book, she moved to [HarperCollins]. My author Lisa Ko moved from Algonquin to Penguin
Random House.”); DX 423 (Glusman) at 15-19
Re Of course, there are exceptions, as the defendants point out.
See, e.g., ECF No. 178 (Defendants’ Sealed Proposed Findings of Fact) 70 (citing PX 2001
(Zac)
Pe see also ECF No. 182 (Defendants’ Redacted Proposed Conclusions of
Law) ff] 9-10).
Self-publishing is not a significant factor in the publishing industry. Self-published
books are rarely published in print and are typically limited to online distribution. See Trial Tr.
at 173:13—23 (Pietsch), 1108:2—9 (Weisberg). The authors of self-published books cannot pay
themselves an advance. See id. at 173:8-15 (Pietsch) (remarking that for advances above
$100,000, “I do not consider [self-publishing] a threat at all because .. . [s]elf-published authors
Vv Defendants proposed conclusions of fact and law are contained in the same document (ECF No. 178) but
are separately enumerated. The Court will refer to the proposed conclusions of fact as “Defs. PFOF” and proposed
conclusions of law as “Defs. PCOL.”
19
can’t pay themselves an advance against royalties”). Moreover, individual authors generally do
not have relationships with media or distributors necessary to ensure that their books are visible
to a potential audience. See id. at 173:13-23 (Pietsch) (“Self-published authors . . . don’t have
the ability to attract the attention of media. ... Imagine how hard it is . . . for one person who has
a book they published entirely on their own to say: Give me your attention. Review my book.
Promote my book. And so they simply don’t have access to the general-interest market that we
and the other Big 5 publishers address routinely. That’s our business.”). In short, self-
publishing cannot compete with the experience and resources of publishing companies. See id.
at 173:13-174:2 (Pietsch); PX 2004 (Solomon) at 52-53 (“I think a commercial publisher sells
more books, garners more reviews, gains more attention, does all kinds of things... . [ [as an
author] don’t have all of those business competencies that are involved.”); see also Trial Tr. at
2898:8—18 (Snyder) (positing that “self-publishing is not a relevant constraint”).
Il. LEGAL STANDARDS
Section 7 of the Clayton Act prohibits mergers and acquisitions “where in any line of
commerce or in any activity affecting commerce in any section of the country, the effect of such
acquisition may be substantially to lessen competition.” 15 U.S.C. § 18. The “fundamental
purpose” of Section 7 is “to arrest the trend toward concentration, the tendency to [monopoly or
monopsony], before the [buyer’s or seller’s] alternatives disappear[] through merger... .”
United States v. Phila. Nat’l Bank, 374 U.S. 321, 367 (1963). Thus, Congress “sought to assure
._,. the courts the power to brake this force at its outset and before it gathered momentum.”
20
Brown Shoe Co. v. United States, 370 U.S. 294, 317-18 (1962).
To this end, “Congress used the words may be substantially to lessen competition to
indicate that its concern was with probabilities, not certainties.” FTC v. HJ. Heinz Co., 246 F.3d
708, 713 (D.C. Cir. 2001) (emphasis in original) (cleaned up) (quoting Brown Shoe, 370 U.S. at
323). The government “must prove the alleged Clayton Act violation by a preponderance of the
evidence,” i.e., that the merger would more likely than not violate the statute; but “‘[S]ection 7
does not require proof that a merger or other acquisition will cause higher prices [or
anticompetitive effects] in the affected market. All that is necessary is that the merger create an
appreciable danger of such consequences in the future.”” United States v. Anthem, Inc., 236 F.
Supp. 3d 171, 192 (D.D.C. 2017) (first quoting United States v. SunGard Data Sys., Inc., 172 F.
Supp. 2d 172, 180 (D.D.C. 2001); and then quoting Hosp. Corp. of Am. v. FTC, 807 F.2d 1381,
1389 (7th Cir. 1986)). '4 Section 7’s probabilistic standard “creates a relatively expansive
definition of antitrust liability” and “subjects mergers to searching scrutiny.” California v. Am.
Stores Co., 495 U.S. 271, 284 (1990).°
B The government’s theory is that the combined defendants would exercise market power on the buy-side of
the publishing market, i.e., monopsony. Although most antitrust law has developed under sell-side theories of harm,
ie., monopoly, monopsony analysis relies on similar principles. Under the Horizontal Merger Guidelines, discussed
infra at n.15, “to evaluate whether a merger is likely to enhance market power on the buying side of the market, the
Agencies employ essentially the framework described ... for evaluating whether a merger is likely to enhance
market power on the selling side of the market.” U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger
Guidelines § 12 (2010), https://www.justice.gov/sites/default/files/atr/legacy/20 10/08/1 9/hmg-2010.pdf (“Merger
Guidelines”). “The kinship between monopoly and monopsony suggests that similar legal standards should apply to
claims of monopolization and to claims of monopsonization.” Weyerhaeuser Co. v. Ross-Simmons Hardwood
Lumber Co., 549 U.S, 312, 321-22 (2007). “Monopsony and monopsony power are the equivalent on the buying
side of monopoly and monopoly power on the selling side.” United States v. Syufy Enters. 903 F.2d 659, 663 n.4
(9th Cir. 1990) (quotations omitted).
4 Although defendants quote United States vy. Marine Bancorporation, 418 U.S. 602, 623 n.22 (1974), for the
proposition that a merger’s anticompetitive effects must also be “imminent” to violate the Clayton Act, see Defs.
PCOL 4 1, the full quotation from that case is that “the loss of competition ‘which is sufficiently probable and
imminent’ is the concern of § 7,” Marine Bancorp., 418 U.S, at 623 n.22 (emphasis added) (citation omitted). The
Court understands that description of the standard to be functionally indistinguishable from the D.C. Circuit’s
formulation of the Section 7 standard, as described above.
15 In United States v. AT&T, Inc., the D.C. Circuit described the Section 7 standard of proof as follows:
“[T]he government must show that the proposed merger is likely to substantially lessen competition, which
21
Although “Congress neither adopted nor rejected specifically any particular tests for
measuring the relevant markets [where commerce is affected] .. . [nJor [defined] . . . the word
‘substantially,’ Brown Shoe, 370 U.S. at 320-21, the D.C. Circuit has taken a burden-shifting
approach to Section 7 cases. See AT&T, Inc., 916 F.3d at 1032; Heinz, 246 F.3d at 715; United
States vy. Baker Hughes Inc., 908 F.2d 981, 982-83 (D.C. 1990). The Baker Hughes test, as it
has come to be known, has a preliminary requirement and three steps. At the threshold, the
government must demonstrate the existence of a relevant market. See Marine Bancorp., 418
U.S. 602, 618 (1974); FTC v. RAG-Stiftung, 436 F. Supp. 3d 278, 291-92 (D.D.C. 2020). Once
it has done so, the first step of the test allows the government to establish a prima facie case and
a presumption of anticompetitive effects by demonstrating undue concentration within that
relevant market. See Anthem, 855 F.3d at 349; Heinz, 246 F.3d at 715. The second step shifts
the burden to the defendants, who must demonstrate in rebuttal that real-world conditions make
market concentration alone an unreliable predictor of the merger’s anticompetitive effects. See
Anthem, 855 F.3d at 349-50; Heinz, 246 F.3d at 715. Ifthe defendants successfully rebut the
prima facie case, the burden shifts back to the government in the third step “and merges with the
eficompasses a concept of ‘reasonable probability.”” 916 F.3d 1029, 1032 (D.C. Cir. 2019) (emphasis deleted)
(quoting Brown Shoe, 370 U.S. at 323 n.39). The parties dispute the meaning of this language. The defendants
argue that AT&T “require[s the government] to prove that a merger is ‘likely’ to cause substantial harm to
competition, [not] only that harm ‘may’ occur.” Defs. PCOL § 2. The government points to AT&T's explanation
“that this standard encompasses a concept of ‘reasonable probability,’” arguing that AT&T requires something less
than what the defendants propose. See Govt. PFOF-PCOL ff 38, 40; see also id. 7 38 (arguing for an “appreciable
danger” standard). The root of these competing formulations may be uncertainty over how the government’s
preponderance-of-the-evidence burden interacts with Section 7’s already probabilistic standard; combined, the two
standards require the government to prove “by a preponderance of the evidence” that the effect of a challenged
merger or acquisition “may be substantially to lessen competition.” Anthem, 236 F. Supp. 3d at 192. Like the
district court in AT&T, this Court “need not further toil over discerning or articulating the daylight, if any, between
‘appreciable danger,’ ‘probable,’ ‘reasonably probable,’ and ‘likely’ as used in the Section 7 context.” United States
v. AT&T, 310 F. Supp. 3d 161, 189 n.16 (D.D.C. 2018). The selection of any of the competing permutations is not
outcome-determinative in this case.
22
ultimate burden of persuasion, which remains with the government at all times.” Baker Hughes,
908 F.2d at 983; accord Anthem, 855 F.3d at 350.
IH. ANALYSIS
The government contends that the merger of PRH and S&S would harm competition to
acquire the publishing rights to “anticipated top-selling books,” resulting in lower advances for
the authors of such books and less favorable contract terms. The defendants do not dispute that
if advances are significantly decreased, some authors will not be able to write, resulting in fewer
books being published, less variety in the marketplace of ideas, and an inevitable loss of
intellectual and creative output. See Trial Tr. at 772:8—25 (Dohle). The defendants vigorously
contest, however, whether advances would decrease after the merger: They contend that
competition would not be harmed and that advances would actually rise.
A. Market Definition
The first step in merger analysis is the identification of a relevant market. See Marine
Bancorp., 418 U.S. at 618. Market definition “helps specify the line of commerce and section of
the country in which the competitive concern arises”; and allows the Court to evaluate any
anticompetitive effects by “identify[ing] market participants and measur[ing] market shares and
market concentration.” Merger Guidelines § 4.'° “Determination of the relevant market is a
necessary predicate to a finding of a violation of the Clayton Act because the threatened
monop[sony] must be one which will substantially lessen competition ‘within the area of
effective competition.’” United States v. EI. du Pont de Nemours & Co., 353 U.S. 586, 593
16 The Merger Guidelines “outline the principal analytical techniques, practices, and the enforcement policy
of the Department of Justice and the Federal Trade Commission” for merging competitors under federal antitrust
laws. Merger Guidelines § 1, They “describe the principal analytical techniques and the main types of evidence on
which the Agencies usually rely to predict whether a horizontal merger may substantially lessen competition.” /d.
Although the Merger Guidelines are not binding, courts have consistently looked to them for guidance in merger
cases. See, eg., FTC v. Sysco Corp., 113 F. Supp. 3d 1, 38 (D.D.C. 2015).
23
(1957) (quoting Standard Oil Co. of Cal. v. United States, 337 U.S. 293, 299 n.5 (1949)). But
defining a relevant market is not an end unto itself; rather, it is an analytical tool used to
ascertain the “locus of competition.” Brown Shoe, 370 U.S. at 320-21; see also Merger
Guidelines § 4.1.1 (“[T]he purpose of defining the market and measuring market shares is to
illuminate the evaluation of competitive effects.”). Accordingly, the Supreme Court has
emphasized that market definition under the Clayton Act was intended by Congress to be “a
pragmatic, factual” analysis and “not a formal, legalistic one.” Brown Shoe, 370 U.S. at 336.
Market definition has two components: the relevant geographic market and the relevant
product market. See Brown Shoe, 370 U.S. at 324; Anthem, 236 F. Supp. 3d at 193. Here, the
parties agree that the relevant geographic market is the global market for the acquisition of U.S.
publishing rights. See Govt. PFOF-PCOL 4 125; ECF No. 1 (Complaint) { 40; ECF No. 56
(Amended Answer) § 40 (agreeing “that Penguin Random House and Simon & Schuster compete
with each other and with many other publishers to acquire rights to publish books in the United
States and that authors who sell U.S. publishing rights can reside anywhere in the world.”). The
parties strenuously dispute, however, the boundaries of the appropriate product market.
The government defines the relevant product market as the one for publishing rights to
anticipated top-selling books. See Govt. PFOF-PCOL {ff 15, 63. Anticipated top-selling books
are those that are expected to yield significant sales, and for which authors therefore receive
higher advances. See id. | 15. The government contends that such books have distinctive
characteristics, including the need for extra marketing, publicity, and sales support to allow them
to reach broader audiences. See id. {J 15, 64-68, 87, 93-119.
The proposed market for anticipated top-selling books is a submarket of the broader
publishing market for all trade books. See id. J 124; see also Defs. PCOL {[] 9-10 (explaining
24
that the “market for the acquisition of a// U.S. trade books” is an appropriate, broader market).
Under the government’s monopsony theory, the authors of anticipated top-selling books are
“targeted sellers” against whom the merged defendants might lower the prices paid for the
authors’ wares, See Govt. PFOF-PCOL {ff 55-58, 69-76; see also Merger Guidelines § 4.1.4 (If
a monopsonist could “profitably target a subset of [sellers] for price [de]creases, the
[government] may identify relevant markets defined around those targeted [sellers].”); cf FTC v.
Wilh. Wilhelmsen Holding ASA, 341 F. Supp. 3d 27, 46-47 (D.D.C. 2018) (“[A Jntitrust markets
can be based on targeted customers”); Sysco, 113 F. Supp. 3d at 38-40 (discussing definition of
markets based on targeted customers). In the monopsony context, “[a] submarket exists when
[buyers] can profitably [cut] prices to certain targeted [sellers] but not to others, in which case
regulators may evaluate competitive effects separately by type of [seller].” Anthem, 236 F. Supp.
3d at 195 (cleaned up).
Courts evaluate relevant product markets in the monopsony context in two ways: by
considering qualitative, “practical indicia” as described by the Supreme Court in the Brown Shoe
case, 370 U.S. at 325; and by examining “supply substitution” and applying the “hypothetical
monopsonist test,” which are discussed in detail, infra. The parties in this case focus their
arguments on whether “practical indicia” support the finding of a market to publish “anticipated
top-selling books.” Because the parties choose to fight on the battlefield of “practical indicia,”
that is where the Court begins its analysis.
1, Practical Indicia
“TWlithin [a] broad market, well-defined submarkets may exist which, in themselves,
constitute product markets for antitrust purposes. The boundaries of such a submarket may be
determined by examining such practical indicia as industry or public recognition of the
25
submarket as a separate economic entity, the product’s peculiar characteristics and uses, unique
production facilities, distinct [sellers], distinct prices, sensitivity to price changes, and
specialized vendors.” Brown Shoe, 370 U.S. at 325, These indicia are “practical aids” as
opposed to “talismanic” criteria “to be rigidly applied,” FTC v. Swedish Match, 131 F. Supp. 2d
151, 159 (D.D.C. 2000) (cleaned up); thus, “submarkets can exist even if only some of these
factors are present.” TC v. Staples, Inc., 970 F. Supp. 1066, 1075 (D.D.C. 1997) (“Staples I’).
Brown Shoe’s practical indicia also may help identify a market of targeted sellers. See
FTC v. Whole Foods Market, Inc., 548 F.3d 1028, 1038-39 (D.C. Cir. 2008) (citing Brown Shoe,
370 U.S. at 325). For example, a market of “distinct [sellers],” as posited by the government,
may find “a particular [set of buyers] ‘uniquely attractive’” and “the only realistic choice” for
their products. /d. (first citing Brown Shoe, 370 U.S. at 325; then quoting Nat’! Collegiate
Athletic Ass'n vy. Bd. of Regents of the Univ. of Okla., 468 U.S. 85, 111 (1984); and then quoting
SuperTurf, Inc. v. Monsanto Co., 660 F.2d 1275, 1278 (8th Cir. 1981)).
i. The $250,000 Threshold
To identify the books that are anticipated to sell well, the government focuses on the
criterion of “distinct pricing”: For analytical purposes, it defines anticipated top-selling books as
those for which publishers pay an advance of at least $250,000. See Govt. PFOF-PCOL § 64;
Brown Shoe, 370 U.S. at 325 (explaining that “distinct prices” are probative in market
definition); see also Whole Foods, 548 F.3d at 1038-39 (explaining distinct prices paid by
targeted group of customers “indicate[] the existence of a submarket of core customers”); Syufy
Enters. v. Am. Multicinema, Inc., 793 F.2d 990, 995 (9th Cir. 1986) (considering “lucrative terms
offered for the pictures by exhibitors” to define relevant market). Books that meet the $250,000-
advance threshold comprise only 2 percent of all book acquisitions, but they account for 70
26
percent of all advance spending, amounting to $1 billion annually. See Govt. PFOF-PCOL 4]
15, 68 (citing Trial Tr. at 1239:10—24 (Hill), 2904:17—2905:3 (Snyder)). Government’s Exhibit -
963 shows that the market shares of industry participants in the proposed publishing market for
anticipated top-selling books are far more concentrated than in the market for publishing books
at lower advance levels:
@Non-Big 5 =Penguin Random House eeiiree|
100% +
® Simon & Schuster ae ae
ee . cee
90% +------ §--n--~-noa- > Prey ennren ater.
0% Te ll ee
70% 4------
60%
50% enone
40% dunnne-
Share of contracts (count)
30% jllmaiamenaat
20% fo----
10% +----++--
5% onnnennnnnn tentnnnpn re
Anticipated Top Sellers Non-Anticipated Top Sellers
Source: Snyder Advance Data.
In the publishing market for anticipated top-selling books, the Big Five publishers hold 91
percent of the market share, while smaller publishers collectively hold only 9 percent. PX 963.
By contrast, in the publishing market for books that earn advances below $250,000, the non-Big
Five publishers have a much more substantial market share of 45 percent. Jd.
As an initial matter, the government’s use of high advances as a proxy for anticipated
book sales is logical and supported by market realities. In publishing, advances are correlated
with expected sales because books that are expected to sell well receive higher advances. See
supra Section IB. In fact, advance levels are set by using P&L’s, and the defining feature of a
P&L is the sales estimate. See id.; Trial Tr. at 917:13—16 (Tart) (“[T]he higher ... sales equate
to a higher advance in the P&L.”). Moreover, industry practices indicate that $250,000 is a
reasonable place to draw the line: S&S and two of the three PRH adult divisions require
approval from senior publishers or executives for advance offers of $250,000 or more: and
Publishers Marketplace, a major industry publication, categorizes deals for $250,000 or more as
“significant.”!’ See Trial Tr. at 1233:5—-135 (Hill), 459:5—8 (Karp), 1993:1—3 (Kim), 914:22—
915:2 (Tart), 2261:12-2262:5 (McIntosh); PX 989 as
public recognition” of a distinct category of books that receive advances at or above the
$250,000 level. Brown Shoe, 370 U.S. at 325.
The defendants take aim at the $250,000 threshold that the government has chosen to
bound the market. See Defs. PCOL %¥ 23-25, 28-41. Most significantly, they argue that the
$250,000 threshold is either too high or too low to define a submarket for anticipated top selling
books. Jd. {¥ 28-41; Defs. PFOF §§ 33-43. Specifically, the defendants rely on their Exhibit
438 to argue that the advance threshold should be set at $50,000 to capture the point at which the
Big Five begin to dominate the market for acquiring books:
my As for other Big Five publishers, Hachette does not have a company-wide approval policy, but its different
imprints require approval for offers from above $100,000 to above $250.000. See Trial Tr. at 232:21—-233:5
(Pietsch) (“All our publishers have advance approval levels and they are clustered right around [$250,000].”).
Hachette also tracks the books it lost for advances of $500,000 or more. See PX 790.
. See Trial Tr. at 1438:8—11 (Murray).
See id. at 1101:7—
1102:13 (Weisberg): DX 408.
Dr. Hill’s Revised Reply Report Figure 1 (2019-2021)
($0 - $49,999, $50,000 - $999,999, $1,000,000+)
mNon-Big § @ Penguin Random House #&
a Simon & Schuster oe a
Share of Contracts (Count)
$0 - $49,999 $50, 000 - $999,999 $1,000,000+
See Defs. PFOF § 37 (“[T]he data establish that j/competitive conditions differ based on market
shares and author preferences, the difference begins with books acquired for advances of
$50,000 or more,” where the market share of non-Big Five publishers is reduced from 58% to
17%.); Defs. PCOL ff 31-34. Araadets. the defendants contend that the threshold should be
set at $1 million to identify the books by celebrity, franchise, or connote authors that are
most clearly destined for success. See Defs. PFOF §] 37-40: Defs. PCOL {§ 35-41. Ifthe
relevant market were properly defined at the lower ($50,000) or higher ($1 million) advance
level, the defendants urge, the government could not show a sufficient decrease to competition or
harm to authors. See Defs. PFOF {ff 38, 42-43.
The defendants’ excessive concern over the specific dollar threshold betrays a
misunderstanding of why the threshold was chosen. The market that the government seeks to
define is the one for anticipated top-selling books, and the $250,000 demarcation was adopted
only as an analytical tool to help it group together the books in question. The govermment’s
economic expert, Dr. Nicholas Hill, also conducted his analyses at other numerical thresholds
(including $150,000, $250,000, $500,000, and $1 million) and observed consistent outcomes at
those various high-dollar amounts. See PX 960: Trial Tr. at 1254:7—25 (Hill), 1259:2-12 (Hill),
1233:14-20 (Hill). Thus, the $250,000 cutoff is merely useful; it is not intended to be a rigid
bright line, but rather is helpful “[flor analytical purposes” to facilitate the assessment of anti-
competitive effects. FTC v. Staples, Inc., 190 F. Supp. 3d 100, 118 & n.10 (D.D.C. 2016)
(“Staples IT’) (“[T]here is no ‘magic place that’s the right place’ to draw the line.” (quoting
government expert’s testimony)). Accordingly, the Court rejects this argument against the
government’s defined market.
The Court is unswayed by the defendants’ tactic of enumerating other markets or
submarkets in which competition would not be harmed by the merger. In addition to proposing
submarkets at the $50,000- and $1 million- advance levels, the defendants also declare that the
government could not prove anticompetitive effects from the merger in the broad market of
publishing rights for all U.S. trade books, or in the downstream market for retail book sales. See
Defs. PFOF 9 29-31. Those protestations are beside the point because the Clayton Act
prohibits mergers that may substantially lessen competition “in any line of commerce or in any
activity affecting commerce.” 15 U.S.C. § 18 (emphasis added). Thus, even if alternative
submarkets exist at other advance levels, or if there are broader markets that might be analyzed,
the viability of such additional markets does not render the one identified by the government
unusable. See United States v. Cont’l Can Co., 378 U.S. 441, 456-58 (1964) (validating a
relevant product market of glass and metal containers, even though “there may be a broader
product market made up of metal, glass and other competing containers”); United States v.
Aluminum Co. of Am., 377 U.S. 271, 275 (1964) (explaining that even though insulated
aluminum conductor and insulated copper conductor could both be in “a single product market,”
that “does not preclude their division for purposes of [Section] 7 into separate submarkets’); see
also Brown Shoe, 370 U.S. at 325; Anthem, 236 F. Supp. 3d at 201-02 .
30
Ample precedent supports the government’s use of a numerical cutoff to identify a
submarket. It is common for courts to use seemingly arbitrary criteria to home in on a segment
of a broader industry. See Wilhelmsen, 341 F. Supp. 3d at 51 (market of customers with fleets of
10 or more global maritime vessels); Anthem, 236 F. Supp. 3d at 195 (market of companies with
5,000 or more employees); Staples IT, 190 F. Supp. 3d at 118 (market of customers who spend
$500,000 or more annually on office supplies). In Wilhelmsen, Judge Chutkan approved a
relevant market “defined around the FTC’s preferred set of targeted customers” — “Global
Fleets.” 341 F. Supp. 3d at 48, 58. The government characterized “Global Fleets” as “fleets of
10 or more globally trading vessels.” fd. at 51. Although the defendants argued “that the Global
Fleets construct is premised on arbitrary thresholds,” the court found that such fleets “are a
distinct group with distinct needs,” even though the “choice of ten globally trading vessels was
arbitrary in the sense that the number ten is not compelled by a specific market reality.” Jd. at
51-54. Judge Chutkan explained that the government’s expert “chose ten as a starting point for
developing a series of statistical estimates, the non-statistical implications of which support the
appropriateness of regarding Global Fleets as a distinct customer group.” /d. at 55. In other
words, the cutoff of ten ships to define “Global Fleets” was an appropriate analytical tool, just as
the choice of a $250,000-minimum advance level to define “anticipated top-selling books” is
appropriate for analytical purposes. At bottom, such “construct[s]” provide a “useful way to
discuss and predict economic conditions” because their “key aspects correspond to elements of
the existing marketplace that would make it possible to profitably target a subset of customers
[or sellers] for price increases [or decreases] post-merger.” Jd. at 52 (quoting Sysco, 113 F.
Supp. 3d at 38).
31
The government’s focus on anticipated top-selling books also is consistent with cases in
which courts have recognized the “high end” of other broad markets as distinct submarkets for
antitrust purposes. See, ¢.g., Int'l Boxing Club of N.Y., Inc. v. United States, 358 U.S. 242, 251
(1959) (affirming district court’s conclusion “that nonchampionship fights are not ‘reasonably
interchangeable for the same purpose’ as championship contests” and explaining that defining
the relevant market “involves distinction in degree as well as distinctions in kind”); Whole
Foods, 548 F.3d at 1032 (recognizing relevant submarket of “premium, natural, and organic
supermarkets” that “generally target affluent and well educated customers”); O’Bannon v. Nat'l
Collegiate Athletic Ass'n, 7 F. Supp. 3d 955, 986-88 (N.D. Cal. 2014) (recognizing relevant
submarket of “elite football and basketball recruits”), rev’d in part on other grounds, 802 F.3d
1049 (9th Cir. 2015), Thus, the relevant market defined here falls comfortably within the
parameters set by numerous applicable precedents.
The defendants nevertheless fault the government for defining its submarket by “price
alone,” contending that any correlation between advance level and expected sales shows only
that books “are valued along a continuum.” See Defs. PCOL ff 12, 24—25 (emphasis in
original). They argue that the existence of “a spectrum of price or value” is insufficient to
establish a submarket and, accordingly, that the government’s market is not appropriately
defined. Id.'* Once again, such arguments overlook the purpose of the $250,000 threshold as an
18 In support, the defendants primarily rely on Jn re Super Premium Ice Cream Distribution Antitrust Litig.
691 F. Supp. 1262 (N.D. Cal. 1988), aff'd sub nom. Haagen-Dazs Co. v. Double Rainbow Gourmet Ice Creams,
Inc., 895 F.2d 1417 (9th Cir. 1990), and United States v. Oracle Corp., 331 F. Supp. 2d 1098 (N.D. Cal. 2004). The
Court finds both In re Super Premium Ice Cream and Oracle inapposite. Neither case concerns a market of targeted
sellers or buyers, as relevant to this case. Further, in Jn re Super Premium Ice Cream, the evidence showed that
consumers who bought higher-priced “super premium” ice cream could and would buy lower-quality ice cream as a
substitute. See 691 F. Supp. at 1268. Here, authors of anticipated top-selling books have no alternative to selling
their books to a publisher because, as addressed in Section L.C, self-publishing is not a realistic alternative. Because
they have no reasonable substitute, authors can be targeted for and impacted by a decrease in prices, in a manner that
ice-cream customers could not have been targeted by a price increase. As for Oracle, there, the government
32
analytical tool that facilitates the examination of market shares and anticompetitive effects. The
threshold number need not represent an exact point at which the market begins to distinguish a
product. See Wilhelmsen, 341 F. Supp. 3d at 54-55; Anthem, Inc., 236 F. Supp. 3d at 200
(accepting a 5,000-employee threshold to define “national accounts” even though the “threshold
may exclude some products that would meet the needs of smaller employers”); Staples IT, 190 F.
Supp. 3d at 118 & n.10 (“[T]here is no ‘magic place that’s the right place’ to draw the line.”
(quoting government expert’s testimony)). Rather, a threshold will necessarily represent a
“starting point” for “statistical estimates, the non-statistical implications of which support the
appropriateness of regarding” anticipated top-selling authors as a “distinct [seller] group” that
buyers can target. Wilhelmsen, 341 F. Supp. 3d at 55.
ii. The Remaining Brown Shoe Factors
Aside from distinct pricing, the government argues that the remaining Brown Shoe
factors demonstrate that there is a relevant submarket for the publishing rights to anticipated top-
selling books. See Govt. PFOF-PCOL 4 87-114, 117-121. The government contends that such
books have “peculiar characteristics and uses,” in that they require stronger marketing, publicity,
and sales support, which allow them to reach a broader audience of readers. Id. {ff 87 (quoting
Brown Shoe, 370 U.S. at 325), 93-95. In addition, authors of anticipated top-selling books are
“distinct sellers,” in that they (1) care more about their publishers’ reputation and services, which
ensure wider distribution of their books; (2) may receive more favorable contract terms than
other authors; and (3) face different competitive conditions, as demonstrated by the dominant
attempted to define a market of “high function” software and tried to use a minimum sale price of $500,000 to
identify such software. See 331 F. Supp. 2d at 1158. Yet there were several flaws in the data analyzed and
presented by the government’s expert. See id. at 1158-59. Nor did the government offer any other qualitative or
quantitative evidence to define the market. See id. Here, Dr. Hill’s data suffers from no similar flaws and the
government has marshalled evidence beyond the advance price to show practical indicia of a submarket for the
publishing rights to anticipated top-selling books.
33
market share of the Big Five (91%) in publishing anticipated top sellers. See id. {| 66, 93-114,
117-119. For all those reasons, the government argues, anticipated top-selling books are in a
different category from books that are expected to sell relatively few copies, and publishers can
target their authors for price decreases.
The defendants, however, insist that all books are in the same market. They argue that
books at all advance levels go through an identical editing, marketing, and distribution process;
that there is no difference in the personnel who handle such books; that the contracts for all
books are negotiated in the same way; and that any special terms in the contracts for some books
simply result from an agent’s leverage. See Defs. PFOF {{ 47-67; Defs. PCOL 4 21. Further,
they contend that publishers cannot predict which books will be top sellers. See Defs. PFOF $
78 (“[P]ublishers generally have no objective criteria for reaching in advance a consensus on
whether a book is likely to be a top selling book.”), 79 (arguing that publishers “cannot easily
predict top sellers,” other than books by celebrity, franchise, or prize-winning authors), 75
(asserting that every book is individual and author atypical) (citing Trial Tr. at 1068:12—13
(Weisberg), 1952:20-25 (Duhigg)); Defs. PCOL 4 21.
The Court has no trouble recognizing that anticipated top-selling books are distinct from
the vast majority of books that do not carry the same expectations for success. Obviously, the
entire publishing industry is dedicated to selling books; and all editors and publishers naturally
are very focused on discovering and acquiring the books that they believe will drive sales.
Evidence strongly supports the conclusion that, from the perspective of editors and publishers,
not all books are created equal. Beyond advances, contracts for books that are expected to sell
well are more likely to include favorable terms like higher royalty rates, higher levels of
marketing support, “glam” packages (e.g., for hair, makeup, and wardrobe services), and airfare
34
for authors,'? See Trial Tr. at 988:2-8 (Dohle) (“Very rarely, if ever, will I negotiate the other
royalty rates, but if it were to happen, it would be at that very, very top tier advance level.”),
1132:17-23 (Weisberg) (“top end” authors can negotiate terms such as payment schedules,
bonuses, and glam budgets), 1819:9—1820:2 (Walsh) (customization of contract terms is
generally correlated with higher advances), 1828:8—18 (Walsh) (higher marketing commitments
are expected for higher advance books); DX 21 at 5 (agent demanding “a publisher ready to
commit incredible energy and resources”). Publishers print more of the books they think will do
well; circulate more advance copies of such books to reviewers or influencers to create
excitement; push for interviews with more media outlets; and schedule book-tour appearances in
more locations.”” See Trial Tr. at 1373:12-1374:3 (Murray); PX 986. Anticipated top-selling
books also get more attention from marketing and sales teams.”! For example, Dr. Hill
determined that S&S and PRH spend, on average, under $10,000 on marketing for books with
advances under $250,000, and between $40,000 and $90,000 on marketing for books with
advances over $250,000:
19 For example, Crown, a former publishing division of PRH that later merged with the Random House
division, produced guidelines for marketing support based on expected sales and advance levels. See PX 986; Trial
Tr, at 2275:19-2278:1 (McIntosh). Under those guidelines, books with expected sales of more than 25,000 units or
advances of more than $150,000 were to receive a dedicated publicist, book tours with stops in 5 to 15 markets,
extensive national media engagement, prominent placement on PRH and partner websites, and targeted social media
pushes. See PX 986 at 2~4. By contrast, books with advances and sales under those thresholds were to have only a
contact in the publicity department, smaller book tours (if any), and limited media engagement. See id. at 5-9.
20 Some of the defendants’ witnesses testified that all books are anticipated to sell well. See Trial Tr, at
576:17-24 (“[A] good editor worries about every book that he or she acquires, making every book profitable.”),
1810:17-1812:4 (Walsh) (“T would say I always anticipate that what I am working on is going to be a best seller.”).
That assertion is not credible. Although an agent, author, or publisher may “hope” every book will be a hit, that is
not the same as anticipating or expecting that a book will do well. See id at 1813:4—6 (The Court: “You don’t
expect every single book you work on to be a best seller or top seller?” Walsh: “Right. I hope.”); see also id. at
328:2—10 (King) (explaining that he chose a smaller publisher for a book that “wasn’t a crafted best seller”),
593:21—-594:8 (Karp) (recognizing that some books are “midlist” books that publishers are “hoping,” but not
anticipating, will be hits).
2 See Trial Tr. at 258:14—21 (Pande) (“I would say that there’s a pretty clear relationship between the level of
the advance and the amount of resources that the publisher invests in the marketing and publicity of the book.”),
490:13-492:4 (Karp) (“[T]he big obvious books that we spent a lot of money for, they definitely have to be
marketed and publicized aggressively.”), 1373:1—I1 (Murray), 2001:12-2002:4 (Kim); PX 989 (Putnam post-
publication P&L sheet) (showing general correlation between advance level and marketing spending),
35
$100,000
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
0 - $250K $250K - $500K $500K - $750K $750K - $1M
Advance bins
See PX 972.
The fact that the Big Five publish 91 percent of anticipated top sellers also supports a
finding that the authors of such books have unique needs and preferences. See PX 963.
Although smaller publishers can sometimes put out an anticipated top-selling book, it is the Big
Five who have the back lists and the marketing, publicity, and sales advantages necessary to
consistently provide the high advances and unique services that top-selling authors need. See
supra Section I.C (discussing Big Five’s publishing advantages). It is precisely those specialized
needs that make the authors of anticipated top-selling books vulnerable to targeting for price
reductions. Publishers of anticipated top-selling books know that such authors are not able to
find adequate substitutes for publishing their books because of their unique needs and
preferences. See id. Those publishers therefore can target authors of anticipated top-selling
books for a decrease in advances (prices) because it is not as likely that such a price decrease will
cause the publishers to lose a book. See Wilhelmsen, 341 F. Supp. 3d at 56—57 (finding targeted
buyer market where market was characterized by individual negotiations and customers had
unique needs and preferences); Staples I, 190 F. Supp. 3d at 127 (finding targeted buyer market
where industry recognized customers as a distinct group that needed specific prices and
services); see also Merger Guidelines § 4.1.4.
36
Although the defendants proclaim that no one in the industry uses the term “anticipated
top seller,” Defs. PFOF {jf 87-88, that does not mean that such books do not exist. See
Wilhelmsen, 341 F. Supp. 3d at 51-52 (rejecting defendant’s argument “that the definition of
Global Fleets does not accord with commercial reality, given that [defendants do not] use the
FTC’s definition of that term... .”); see also Le v. Zuffa, LLC, 216 F. Supp. 3d 1154, 1159,
1165-66 (D. Nev. 2016) (denying motion to dismiss that was based in part on defendant’s
argument that “Elite Professional MMA fighters” is not a term used in the industry). In fact,
market participants have other names for expected top sellers, such as “lead titles” or “priority
titles.”*? Regardless of nomenclature, clear evidence demonstrates that the practice of
identifying and giving special support to the books that will drive sales is common. The
government’s defined market thus reflects “commercial realities” in the publishing industry.
United States v. Grinnell Corp., 384 U.S. 563, 572 (1966). hte
The defendants’ position that individual publishers are unable to anticipate which books
will be top sellers is unsupportable. That contention is contradicted by the universal industry
practice of making a sales estimate for every single book before offering an advance, and
credible testimony that there is often consensus among editors and publishers about which books
will be popular with readers. See supra Section I.C; Trial Tr. at 2108:14-24 (Wylie) (“But I
think there are recognizable qualities in — in books that people who have been in the business
22 “Lead titles” or “priority titles” are expected to sell well and receive more significant marketing, publicity,
and sales support. See PX 986 (Crown intemal guidance identifying “lead titles” as books with a sales goal of
75,000 units or advances of $500,000, and advising increased marketing, sales, and publicity support for those
titles); PX 2005 at 24-27; Trial Tr. at 1071:4-1072:15 (Weisberg) (defining lead title as “top of the list”), 1988:19-
25 (Kim) (“So every season, we have two or three titles that we really designate as lead titles, titles that we feel we
really want the sales team to really love and read, books that we feel we want to put a lot of attention on and
marketing support for.”). They also generally receive high advances. See Trial Tr. 1071:4-1072:15 (Weisberg)
(“[I]f we spend a lot of money on a book and it’s a book that everybody loves, it becomes a lead title.”), 2268:9-
2269:22 (McIntosh) (“[I]f we had a really high sales expectation at time of acquisition and then by the time we’re
ready to publish the book, we still have a sales — a high sales expectation, then it would seem logical to me that —
that there could be a high advance attached to that.”).
37
for a long time would easily recognize.””). The defendants’ high share of the book-acquisition
market and their substantial profit margins strongly indicate that they are successfully choosing
books that people want to read. See PX 994; Trial Tr. at 781:3-5 (Dohle), 1492:2—3 (Hill). To
be sure, editors often offer a range of advances for any given book, and the defendants correctly
note that there are many examples of books that were unexpected best sellers, such as Stephen
King’s Carrie, or Marie Kondo’s The Life-Changing Magic of Tidying Up. See Defs. PFOF
74 79, 81. But it is commonplace for multiple editors to gravitate to the same book, as evidenced
by the routine occurrence of competitive auctions; and the defendants do not dispute that there is
a general correlation between author advances and book sales, see Trial Tr. at 749:4—22 (Dohle);
PX 151 at 11. That is strong evidence that the book-acquisition process is not random. Indeed,
whenever a publisher submits a bid of $250,000 or more for a book, that publisher has
determined that the book is likely to be a top seller and knows that the competitors for the book
are likely to be limited to the Big Five. See Trial Tr. at 153:10—-13 (Pietsch) (other Big Five
publishers are Hachette’s main competitors for books with advances over $250,000); PX 530 at 2
(Big Five publishers are S&S’s “biggest competitors . . . since they are the most likely to come
up with high advance payments required ....”), These practical indicia in the publishing
industry strongly support the existence of the identified relevant market.
One high-end submarket case that the Court finds highly relevant is Syufy Enterprises v.
American Multicinema, Inc. In Syufy, the Ninth Circuit upheld a relevant submarket “for [the]
exhibition of industry anticipated top-grossing motion pictures in the San Jose area.” 793 F.2d at
994, Anticipated blockbusters, the court explained, “are identifiable . . . on the basis of such
criteria as national advertising support, longer playtimes, guaranteed rentals, famous stars,
directors and producers, booking in first class theatres, and lucrative terms offered for the
38
pictures by exhibitors.” Jd. at 994-95. Those indicia are analogous to some of the features of
anticipated top-selling books, such as: more substantial marketing, publicity, and sales support;
authors who are prominent or have a track record of success; and higher advances. Moreover,
the appellant in Syufy challenged the existence of the market for “anticipated top-grossing
motion pictures” by making arguments similar to those pressed by the defendants here, insisting
that the market was “ex post facto and ad hoc,” that “all first run films are in substantial
competition with each other,” and that such films “possess no special characteristics that
differentiate them from less successful films from an ex ante perspective.” Jd. at 994. This
Court joins the Ninth Circuit in rejecting such arguments. As discussed, distinctive
characteristics set anticipated top-selling books apart from the rest of the pack.
In sum, this case demonstrates that “[w]hatever the market urged by the [government],
the other party can usually contend plausibly that something relevant was left out, that too much
was included, or that dividing lines between inclusion and exclusion were arbitrary.” FTC v.
Tronox Ltd., 332 F. Supp. 3d 187, 202 (D.D.C. 2018) (quoting 2B Phillip E. Areeda & Herbert
Hovenkamp, Antitrust Law § 530d (4th ed. 2014) [hereinafter Areeda, Antitrust Law]). Yet
“It]he Supreme Court has wisely recognized there is ‘some artificiality’ in any boundaries, but
that ‘such fuzziness’ is inherent in bounding any market.” Jd. (quoting Areeda, Antitrust Law
{ 530d); Anthem, 236 F. Supp. 3d at 193 (“The ‘market,’ as most concepts in law or economics,
cannot be measured by metes and bounds.” (quoting Times-Picayune Publ’g Co. v. United
States, 345 U.S. 594, 611 (1953)). Market definition is more art than science, see RAG-Stiftung,
436 F. Supp. 3d at 312-13, and it is critical to remember that the goal of the exercise is to enable
and facilitate the examination of competitive effects. See Brown Shoe, 370 U.S. at 320-22;
39
Cont’l Can , 378 U.S. at 452-55. In this Court’s view, the government has easily cleared the
bar.”?
2. Supply Substitution
The traditional way to define a relevant market in the monopsony context would be to
examine “the commonality and interchangeability of the buyers” of a certain good. Todd v.
Exxon Corp., 275 F.3d 191, 202 (2d Cir. 2001). Indeed, “‘the outer boundaries of a product
market are determined by the reasonable interchangeability of use or the cross-elasticity of
[supply] between the product[’s buyers, in the case of monopsony,] and the substitutes for [such
buyers].’ Accordingly, the touchstone is [supply] substitution ....” See Wilhelmsen, 341 F.
Supp. 3d at 45 (quoting Brown Shoe, 370 USS. at 325).
To test the proposed market boundaries, courts commonly turn to the “hypothetical
[monopsonist] test.” Sysco, 113 F. Supp. 3d at 38. The hypothetical monopsonist test “ensures
that markets are not defined too narrowly,” on the theory that if the test identifies substitute
buyers for the product in question, such buyers should be included in the market. See Merger
Guidelines § 4.1.1 (describing hypothetical monopolist test). The hypothetical monopsonist test
assumes that there is only one buyer in the proposed market and asks whether that hypothetical
buyer, freed from price regulation, “could profitably target a subset of [sellers] for price
[decreases].” Sysco, 113 F. Supp. 3d at 38 (quoting Merger Guidelines § 4.1.4). If such a
hypothetical monopsonist could profitably impose what economists call a “small but significant
33 To define a market around a targeted seller, sellers must not only be identifiable by buyers for differential
pricing but also must be unable to engage in arbitrage or opportunistic re-selling. See Staples I, 190 F. Supp. 3d at
117-118; Merger Guidelines § 3. The foregoing discussion establishes that anticipated top-selling books are subject
to differential pricing. Authors of those books also cannot realistically engage in arbitrage by selling their books to
a third party who would then sell the books to publishers for a better price. See Trial Tr. at 1230:7-23 (Hill). As Dr.
Hill testified, publishers would still need to read the book or proposal and value it in the same manner as if the book
were submitted directly by the author. See id.
40
and non-transitory [decrease] in price” of at least five percent in the proposed market, that
indicates the existence of a relevant market. Jd. at 33-34 (quoting Merger Guidelines § 4.1.4).
Here, the government includes all publishing firms in the market to acquire the
publishing rights for anticipated top-selling books. See Govt. PFOF-PCOL {| 79. Applying
Judge Mehta’s explanation of the test to the instant facts, we arrive at the following analysis:
If enough [authors] are able to substitute away from [selling their books to]
the hypothetical [publisher monopsonist] to another [way of distributing
their books] and thereby make a [decrease in advances] unprofitable, then
the relevant market cannot include only the [publisher monopsonist] and
must also include the substitute [method of distribution]. On the other hand,
if the hypothetical [publisher monopsonist] could profitably [lower
advances to authors] by a small amount, even with the loss of some
[authors], then economists consider the [publishers] to constitute the
relevant market.
See Sysco, 113 F. Supp. 3d at 33; see also Merger Guidelines § 12 (“In defining relevant markets
[in buy-side cases], the Agencies focus on the alternatives available to sellers in the face of a
decrease in the price paid for by a hypothetical monopsonist. Market power on the buying side
of the market is not a significant concern if suppliers have numerous attractive outlets for their
goods or services.”).
The government’s expert, Dr. Hill, estimated what “actual diversions” would be for the
defined market, i.¢., the percentage of authors who would switch to self-publishing in the face of
a “small but significant and non-transitory [de]crease” in advances paid for anticipated top-
selling books. He found that even if some small number of authors switched to self-publishing,
it would be profitable for publishers to decrease advances — that is, the defection of authors in
response to the lowered advances would be far less than what would be necessary to make the
decrease unprofitable. See Trial Tr. at 1245:14—-1246:9 (Hill).
41
The defendants do not dispute that the relevant market of “publishing rights to anticipated
top-selling books” passes the hypothetical monopsonist test. See Trial Tr. at 2897:18-2898:18
(Snyder). They instead argue that the test is inapposite here because it does not address the
alleged arbitrariness of the $250,000 threshold for bounding the market, see id.; Defs. PFOF
{ 44; indeed, submarkets at all but the lowest advance thresholds should pass the hypothetical
monopsonist test because self-publishing generally is a poor substitute for the services of an
established publisher. See Trial Tr. at 2898:8-18 (Snyder) (“[S]elf-publishing is not a relevant
constraint.”); supra Section I.C (further detailing inadequacy of self-publishing). The
incongruence of the hypothetical monopsonist test here is not surprising because it examines
substitutes for the buyers in the market, while the government’s proposed market is one of
“targeted sellers”: In this case, the test and the market-definition dispute are focusing on
different sides of the market.2* Although the Court agrees that the hypothetical monopsonist test
sheds no light on the contested issues in this case, it is sufficient to note for present purposes that
the test is a standard analytical tool in merger cases; and that it concededly supports the
government’s definition of the relevant market. Defendant’s other objections to the relevant
market have been addressed supra.
24 For this reason, the defendants’ argument that the government has not defined the “narrowest market,” as
required by some case law, lacks merit. See Defs. PCOL §] 35-41 (citing Merger Guidelines § 4.1.1; RAG-Stiftung,
436 F. Supp. 3d at 292; Sysco, 113 F. Supp. 3d at 26-27; United States v. H & R Block, Inc., 833 F. Supp. 2d 36,
58-60 (D.D.C. 2011); FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109, 120 (D.D.C. 2004)). The cases relied upon by
the defendants focus on defining the market by reference to demand substitution and applying the hypothetical
monopolist test, while the instant case concerns a market defined by targeted sellers as articulated by the Merger
Guidelines. See Merger Guidelines § 4.1.4 (“If prices are negotiated individually with customers, the hypothetical
monopolist test may suggest relevant markets that are as narrow as individual customers... . Nonetheless, the
Agencies often define markets for groups of targeted customers, i.e., by type of customer, rather than by individual
customer. By so doing, the Agencies are able to rely on aggregated market shares that can be more helpful in
predicting the competitive effects of the merger.”).
42
B. Prima Facie Case
1, Market Concentration
Once the relevant market has been established, the next step is straightforward: “[T]he
government must show that the merger would produce ‘a firm controlling an undue percentage
share of the relevant market, and would result in a significant increase in the concentration of
firms in that market.’” See Heinz, 246 F.3d at 715 (quoting Phila. Nat'l Bank, 374 U.S. at 363
(alterations omitted)). Market concentration is fundamental to merger analysis. “That
competition is likely to be greatest when there are many sellers, none of which has any
significant market share, is common ground among most economists, and was undoubtedly a
premise of congressional reasoning about the antimerger statute.” Phila. Nat’ Bank, 374 U.S. at
363 (cleaned up); see also Heinz, 246 F.3d at 715 (“[W]here rivals are few, firms will be able to
coordinate their behavior, either by overt collusion or implicit understanding, in order to restrict
output and achieve profits above competitive levels.” (cleaned up)). Thus, demonstrating post-
merger “‘undue’” market concentration “establishes a ‘presumption’ that the merger will
substantially lessen competition.” Heinz, 246 F.3d at 715 (first quoting Phila. Nat’l Bank, 374
U.S. at 363; and then quoting Baker Hughes, 908 F.2d at 982). In Philadelphia National Bank,
the Supreme Court held that a significant change in concentration that results in a combined
market share of at least 30 percent is sufficient to establish the legal presumption that a merger
violates Section 7, 374 U.S. at 331, 364 (merger to a 36% market share with the top four banks
controlling a combined 78%); see also Hosp. Corp., 807 F.2d at 1384 (determining that FTC’s
finding that transaction was unlawful was supported by substantial evidence where defendant's
market share was raised from 14% to 26% and the market share of the four largest firms from
79% to 91%); of, Heinz, 246 F.3d at 711, 715~17 (holding FTC established presumption through
43
statistics about the change in market concentration where defendants would have a combined
market share of 32.8%).
The government’s expert, Dr. Hill, calculated market shares based on a comprehensive
set of data from more than sixty publishers. See Trial Tr. at 1251:12—1252:3 (Hill). According
to his calculations, the merging firms account for nearly half (49 percent) of the publishing
market for anticipated top-selling books, and the newly constituted “Big Four” that would
emerge after the deal would control approximately 91 percent. Trial Tr. at 1254:3—6 (Hill).
Government’s Exhibit 959 graphically depicts the post-merger market shares:
60%
ON ss see ES ERS RSME SS ERS SS ER SS Higronesepesoneencewonncnns
40% }- ween cnet eee c ene eet e tn ee ce een nee tea ne een ate nae en eee enna eee eee nn ene n ee anea nee neetee ne eeeee ned
30% | --PRMMMM -- 222 anne nec n ec cnnnenecccecennnnnennennenen ane een ence enn tence ee cece ne ne nn enterenetaaneneneesnsa ny
20% }- === II ~~ == == 2 none nee cen cence enn nena cnet ne nee enter cece nnn e nee neeeeeed
10% |} - ~--""pppgagg <= ----2neneneee anos eeeeee nec e cece cee ene cee e cece eee nnn nee een cece nnentnen anne ened
0% ~~, oe
ro
Random House
The second-largest market participant post-merger would oo as with 24 percent of
the market, while ees and i would have 10 percent and 9 percent, respectively.
See PX 959. The non-Big Four would have the remaining 9 percent. See id. Dr. Hill also
calculated market shares using different advance thresholds to bound the relevant market and
found similar results. See PX 960. The post-merger market shares undoubtedly portray a highly
concentrated market dominated by four main players, with the leading, merged company holding
an “undue percentage share.” The 49-percent share that the post-merger PRH would hold is far
above the levels deemed too high in other cases. See, e.g., Phila. Nat'l Bank, 374 U.S. at 364
(36%); of. Heinz, 246 F.3d at 711, 715-17 (32.8%). The substantial market share of the
proposed combined entity justifies a strong presumption of anticompetitive effects. See Baker
Hughes, 908 F.2d at 991 (“The more compelling the prima facie case, the more evidence the
defendant must present to rebut it successfully.”). Moreover, the high concentration must be
considered in the context of an undeniable trend in consolidation in the publishing industry. See
United States y. Pabst Brewing Co., 384 U.S. 546, 552-53 (1966) (“[A] trend toward
concentration in an industry, whatever its causes, is a highly relevant factor in deciding how
substantial the anti-competitive effect of a merger may be.”).
The post-merger market also would be unduly concentrated under the Herfindahl-
Hirschman Index (“HHT”), a measure commonly used to evaluate market concentration. See
RAG-Stiftung, 436 F. Supp. 3d at 310 n.26 (explaining calculation of HHI). The HHI is a
formula “used to estimate the competitiveness of the market on the basis of the number and size
of the firms.” Areeda, Antitrust Law J 930a. It provides a “short cut to establish a presumption
of anticompetitive effect through statistics about the change in market concentration.” AT&T,
Inc., 916 F.3d at 1032. “The HHI estimates market concentration by summing the squares of the
market share of every firm in the market... . When one assesses the competitive impact ofa
merger, the important numbers are (1) the post-merger HHI; and (2) the amount the merger
increases the HHI.” Areeda, Antitrust Law J 930a (emphasis in original). An increase in the
45
index above certain levels “establish[es] the [government’s] prima facie case that a merger is
anti-competitive.” Heinz, 246 F.3d at 716. Under the Merger Guidelines, if an acquisition (1)
increases the HHI of a relevant market by more than 200 points and (2) results in a post-
acquisition HHI exceeding 2500, it is presumptively anticompetitive. See Merger Guidelines
§ 5.3; see also Staples H, 190 F. Supp. 3d at 128; H& R Block, 833 F. Supp. 2d at 71-72
(enjoining transaction that would have given the combined firm only a 28.4 percent market share
because the transaction would have resulted in an increase in the HHI of more than 200 and a
post-acquisition HHI that would have exceeded 2500), Here, the post-merger HHI would be
3,111, with an increase of 891, well above the thresholds required to trigger the presumption
under the Guidelines. Trial Tr. at 1256:24-1258:11 (Hill), 1259:4-12 (Hill).”°
Based on the market-share analysis and the HHI analysis, the government has met its
burden to establish that the proposed merger between PRH and S&S would produce “a firm
controlling an undue percentage share of the relevant market, and [would] result[] in a significant
increase in the concentration of firms in that market.” Phila. Nat’! Bank, 374 U.S. at 363. That
showing alone is sufficient to establish a prima facie case. Heinz, 246 F.3d at 716 (“Sufficiently
large HHI figures establish the FTC’s prima facie case that a merger is anti-competitive.” (citing
Baker Hughes, 908 F.2d at 982-83 & n.3)). Notably, the defendants do not question the
accuracy of Dr. Hill’s market-share calculations, nor his application of the HHI.
The government further notes that the market shares reflect the actual competitive
dynamics in the market. See Govt. PFOF-PCOL § 135-97. Dr. Hill compiled several different
data sets to evaluate how frequently the merging parties compete against each other and against
35 Moreover, post-merger HHIs (and the post-merger increase) also are above the presumption thresholds if
the relevant market is defined using a variety of other advance cutoffs (e.g., $150,000, $350,000, $500,000, or $1
million). Trial Tr. at 1254:7-25 (Hill); see also PX 960.
46
other publishers. As discussed in more detail below, see infra, Section ILB.2.i, the data tracks
the instances where the merging parties lost books to one another, and where they were “runners-
up” to each other in book acquisitions. Dr. Hill’s analysis of the data reveals that, as market
shares would predict, the Big Five in fact dominate book acquisitions in the relevant market.
Consistent with their market shares, when S&S loses a book, it most often loses to PRH; and
when S&S wins a book, its most likely runner-up is PRH. See Trial Tr. at 1282:15—-24 (Hill)
(indicating that for books acquired by S&S, PRH was the runner-up approximately 60% of the
time); PX 970 (showing diversion ratios); see also Trial Tr. at 2927:17-2928:4 (Snyder) (PRH is
also the most frequent runner up to S&S according to Professor Snyder’s data set). Moreover, an
independent deal tracker maintained by Hachette for acquisitions above $500,000 also depicts
results consistent with market shares: Roughly 90 to 95 percent of Hachette’s losses in that
advance range were to other Big Five publishers. See PX 790 (tracking Hachette’s losses to
these publishers); Trial Tr. at 191:16-194:24 (Pietsch).
Also significant is the stability of the market shares held by the primary market
participants over time. Based on Dr. Hill’s comprehensive data set, which included information
from approximately 1,200 book contracts per year, the market shares of the Big Five in acquiring
anticipated top-selling books has remained stable for the past three years. See PX 967.
Furthermore, the Big Five’s market shares versus the non-Big Five have also been consistent:
The data demonstrate that the aggregate market share of non-Big Five publishers has been
“essentially flat.” Trial Tr. at 1482:15-25. This stability suggests that more weight should be
assigned to market shares, see Merger Guidelines § 5.3 (“The Agencies give more weight to
market concentration when market shares have been stable over time . . . .”), and thus reinforces
the presumption of anticompetitive effects based on market concentration.
AT
2. Other Evidence
The government does not rely solely on the high degree of market concentration that
would result from the merger, and the attendant presumption of anti-competitive harm; instead,
the government also “bolster[s] its prima facie case by offering additional evidence.”
Withelmsen, 341 F. Supp. 3d at 59. The government presents evidence that (1) the merger will
cause anticompetitive effects from the elimination of competition between PRH and S&S, and
(2) the higher concentration in the post-merger market will increase the risk of coordinated
anticompetitive conduct by the largest publishers. See Govt. PFOF-PCOL {J 135-97.
i. Unilateral Effects
Mergers necessarily eliminate the competition between the merging companies.
See Heinz, 246 F.3d at 717. The government contends that PRH and S&S currently compete
“fiercely” to publish anticipated top-selling books, and that eliminating direct competition
between them is likely to harm authors. Govt. PFOF-PCOL § 244. Indeed, “[c]ourts have
recognized that a merger that eliminates head-to-head competition between close competitors
can result in a substantial lessening of competition.” Sysco, 113 F. Supp. 3d at 61; see also
Wilhelmsen, 341 F. Supp. 3d at 59. “Unilateral effects” are those that result directly from the
elimination of competition between the merging parties. Anthem, 236 F. Supp. 3d at 216. As
explained by the Merger Guidelines, “[a] merger can enhance market power simply by
eliminating competition between the merging parties. This effect can arise even if the merger
causes no changes in the way other firms behave.” Merger Guidelines § 1. Unilateral effects
may be especially acute in a “highly concentrated market.” Staples I, 970 F. Supp. at 1083.
48
a. Head-to-Head Competition
The analysis of unilateral effects focuses on how closely the merging firms currently
compete, in order to extrapolate the effects of eliminating that competition. See Merger
Guidelines § 6.2. Evidence in the record demonstrates that PRH and S&S are close competitors
for anticipated top-selling books. Specifically, PRH is the publisher against which S&S
competes the most frequently and to which S&S loses the most. See Trial Tr. at 595:23-25
(Karp) (agreeing that PRH is the “publisher [S&S] bid[s] against the most”), 1280:17—1281:17
(Hill) (reviewing win/loss data showing that S&S loses to PRH about 60% of the time).
Meanwhile, S&S is a significant competitor to PRH, see id. at 2360:20-23 (McIntosh), 1275:25—
1276:6 (Hill), and makes a particularly strong showing in biographies, memoirs, political
nonfiction, and books about current events, see id.. at 454:23-455:3 (Karp), 455:8-11 (Karp);
PX 326 at 2 (“S&S has political bestseller chops like no other right now.”).
The government’s expert, Dr. Hill, conducted a variety of economic analyses that assess
how closely PRH and S&S compete. Dr. Hill used four different methods to calculate “diversion
ratios,” which measure head-to head competition between the merging parties by asking the
following question: If one merging party lowered advance levels, what percentage of its authors
would “divert” their business to the other merging party, as opposed to diverting to other firms in
the industry? A higher diversion ratio indicates that the merging parties are close competitors
and that the merger is more likely to lead to harm. See Trial Tr. at 1274:2-12 (Hill); see also
Merger Guidelines § 6.1.
Dr. Hill calculated diversion ratios based on: (1) diversion proportional to market shares,
which is the largest data set; (2) win/loss data, which examines which publishers the merging
parties lose to the most often; (3) runner-up data, which shows how often the other party was the
49
“runner-up” when one of the merging parties won an acquisition; and (4) minutes from the
parties’ editorial meetings, which provide a window into how frequently one merging party bid
on a book and lost to the other party. Recognizing that each methodology has limitations, Dr.
Hill performed multiple tests “to get a holistic understanding of what diversion might look like.”
Trial Tr. at 1294:20-1295:4. All the methodologies employed by Dr. Hill pointed to the same
conclusion: that PRH is S&S’s closest competitor, and that S&S is a significant competitor to
PRH. Specifically, Dr. Hill’s diversion ratios indicate that if PRH lowered advances, between 19
and 27 percent of its authors would divert to S&S; and that if S&S lowered advances, between
42 and 59 percent of its authors would divert to PRH. The government summarized the results
of the four studies as follows:
Figure 7. Summary of Dr. Hill’s Diversion Estimates (PX-97 0)
Type of Analysis Diversion from Diversion from
PRH to S&S S&S to PRH
Diversion according to share 19% 42%
Win/loss data 19% 59%
Runner-up study 27% 59%
Editorial minutes 21% 54%
See Govt. PFOF-PCOL 4 274 (citing PX 970).
The defendants’ expert, Professor Snyder, calculated his own diversion ratios, using a
less reliable data set assembled from the records of eighteen agents who responded to subpoenas
(“agency data”).° Although Professor Snyder’s ratios were lower, he also found that PRH is
26 Professor Snyder’s agency data is less comprehensive than Dr. Hill’s data set. The eighteen literary
agencies that provided information in response to subpoenas are only a subset of the agents in the industry. See
Trial Tr. at 2657:7—25 (Snyder). Of the 973 contracts examined by Professor Snyder, from 2018 to 2021, only 360
earned advances per title of $250,000 or more. See id. Of those 360 contracts, Professor Snyder could not identify a
clear runner-up in 61 instances. See Trial Tr. at 2658:12-15 (Snyder). The remaining pool of data, relatively small
and unrepresentative as it was, see Trial Tr. at 1289:22—1292:12 (Hill), indicated that PRH and S&S were the winner
50
S&S’s closest competitor. Professor Snyder determined that the diversion ratio from PRH to
S&S is 20 percent, and the diversion ratio from S&S to PRH is 27 percent. Trial Tr. at 2927:4-
25 (Snyder).
The competition between PRH and S&S benefits authors by increasing advances paid for
their books, and industry participants predict that the loss of that competition would be harmful
to authors. Kensington’s CEO, Steven Zacharius, testified, “I personally would expect that
[advances] would go down since there will be less competition for those authors.” PX 2000 at 3.
Macmillan’s CEO Don Weisberg testified, “My guess is less competition will .. . long-term
probably bring the advance levels down.” See Trial Tr. at 1085:3-24. Agent Ayesha Pande
testified, “I think overall [the merger] will limit the choice, the number of editors and imprints
and publishing houses that would . . . be a good home for my clients... . And I believe overall
advances for my clients would be suppressed.” See id. at 295:3-16,7”
The merger would cause an inarguable loss of competition from the elimination of
situations where PRH and S&S would have been the top two or the only two bidders for an
anticipated top seller. Dr. Hill calculates that this should happen in approximately 12 percent of
and runner-up in only 7 percent of the cases, while market shares would have predicted that they would be winner
and runner-up in 12 percent of the cases. See Trial Tr. at 1588:7-19 (Hill), 2797:20-2798:6 (Snyder). Notably,
Professor Snyder’s estimate of diversion from S&S to PRH is based on a sample of only 22 books over four years,
the smallest sample of all the data sets used to estimate diversion. Trial Tr. at 1291:15-1292:12 (Hill), 1707:20—
1708:1 (Hil); PX 996 at 1.
27 Defendants presented testimony to the contrary, suggesting that the lost competition between PRH and
S&S would not harm authors or their advances; and that it instead might lead to an increase in advance levels. See
Defs. PFOF {ff 25-26 (suggesting that savings from the merger would allow the combined company to spend more
money to acquire books, which in turn would force competitors to offer higher advances), 115-116 (stressing that
PRH and competitors have no plans to lower advances). For example, S&S CEO Jonathan Karp testified that the
company has no plans to decrease author advances or reduce title count post-merger, see Trial Tr. at 583:13-19; and
PRH Head of Global Mergers & Acquisitions Manuel Sansigre did not consider the potential for reduced author
compensation when projecting the merger’s efficiencies for PRH, see id. at 2532:25-2533:12. In addition,
HarperCollins CEO Brian Murray stated that his company had not discussed author advances decreasing due to the
merger, see id. at 1407:24-1408:12; and that
, see id, at 1447:3-19, 1452:9-14. The Court finds testimony that the merger
will have either no effect or positive effects on advances incredible. The Court instead credits the much stronger
evidence that advances will decrease after the merger, based on the market-share data, economic analyses, and the
more credible testimony regarding market dynamics discussed supra.
51
book transactions based on market share, while Professor Snyder calculates that it happened only
6 to 7 percent of the time in his data set. See id. at 1588:7-19 (Hill), 2797:20-2798:6 (Snyder).
The government’s evidence included 27 summaries of competitive episodes, over three and a
half years, in which PRH and S&S drove up advances through direct, head-to-head competition.
See id. at 660:16—25 (Porro), 664:8-10 (Porro), 686:9-22 (Porro). For example, as the only two
bidders for one book, PRH and S&S drove the advance offered from $6 million to $8 million.
See PX 958-B, As the last two bidders for another book, PRH and S&S drove the advance
offered from $685,000 to $825,000. See PX 941-B. The loss of such head-to-head match-ups
undoubtedly would harm the authors whose advances would have been bid up by the direct
competition. See generally Merger Guidelines § 6.2. The defendants argue, however, that the
incidence of harm would be too infrequent to be considered substantial. See Defs. PCOL {J 58—
65.
Even when the merging parties were not the top two bidders, S&S’s participation
strengthened competition across all auction formats — round-robin, best-bid, and hybrid.
Hachette CEO Michael Pietsch testified that a larger number of bidders leads to “more upward
pressure” so that “in general . . . the price paid at auction can increase because of the number of
participants.” See Trial Tr. at 181:7—11 (Pietsch). Dr. Hill confirmed that when a large number
imprints participate in an auction, all of them understand that they need to be more aggressive in
their bidding to prevail. See id, at 1268:2-8 (Hill) (“So this is a correlation between when you
have a large number of bidders, you may need to be more aggressive in your bidding.”);*8 see
38 Dr. Hill gave two examples that demonstrate how the number of bidders influences a publisher’s bidding
strategy in best-bids auctions. In a 2019 best-bids auction for a young adult novel, an S&S editor wrote that,
because there were only three bidders, “I think we can be more guarded in our bidding.” See Trial Tr. at 1267:15—
22 (Hill). In a 2020 best-bids auction for a book by a musician, a PRH editor wrote, “Another editor and I discussed
bringing our offer significantly down yesterday based on the sense J got from the agent that she doesn’t have many
interested bidders.” See id, at 1267:23-1268:1 (Hill).
52
also Anthem, 236 F. Supp. 3d at 220-21 (“reducing the number of national carriers from four to
three is significant” because of its likely effect on bidding behavior). A higher number of
bidders also increases the chances that an author will receive an “outlier” high bid. A book’s
perceived value may vary significantly among different editors and publishers, and an unusually
high bid for a book is likelier when there are more bidders. See Trial Tr. at 601:20-25 (Karp),
1305:18-1306:3 (Hill), 2109:3-21 (Wylie). In one notable example, one bidder offered an
advance four times higher than the next closest bidder, reflecting the winner’s unique view of the
book’s potential. See id. at 2931:16-2933:19 (Snyder). The loss of S&S as an independent
bidder would weaken bidding incentives and reduce the frequency of events like these.
As previously noted, competition among publishers influences advances even in
individual negotiations between an agent and one publisher. See supra Section I.C. That is
because publishers know that agents can shop the book to other publishers if the publisher’s offer
is not high enough. See id. Therefore, the loss of PRH as an outside competitor would weaken
authors’ leverage in one-on-one negotiations with S&S, and the loss of S&S as an outside
competitor would weaken authors’ leverage in one-on-one negotiations with PRH. This
conclusion is consistent with Dr. Hill’s expert testimony, see Trial Tr. at 1270:13-1271:18 (Hill),
as well as the Merger Guidelines. See Merger Guidelines § 6.2 (“A merger between two
competing [buyers] prevents [sellers] from playing those [buyers] off against each other in
negotiations.”).
Finally, the evidence suggests that the acquisition of S&S would reduce PRH’s
motivation to compete for publishing rights. PRH CEO Markus Dohle testified that there are
two ways to increase market share in the industry: publish more successful books or acquire
other companies that publish successful books. See Trial Tr. at 801:18-23. PRH has most
53
recently pursued a strategy of bidding more aggressively and acquiring more “big books” to
organically increase its market share. See id. at 800:15—801:3 (Dohle), 2259:5—20 (McIntosh).
The acquisition of S&S would give PRH an alternative means of increasing its market share that
would remove the pressure on PRH to acquire more books. See id. at 802:11-18 (Dohle). Thus,
accomplishing its goal of increasing market share through the merger would cause PRH to bid
less aggressively for books than it otherwise would. See id. (Q: “After this merger, Penguin
Random House will not have as strong a need to grow its share?” Dohle: “Yes.”).
b. Economic Models
Dr. Hill used economic models to attempt to quantify the expected harm to authors from
the merger. He conceded that the models are imprecise and do not perfectly reflect the way
books are acquired in the publishing industry; but he performed the analyses to glean additional
information about the likelihood of anticompetitive harm. See id. at 1653:25—1654:9 (Hill). Dr.
Hill’s primary model predicts that the merger would cause advances for PRH authors to decrease
by about 4 percent (or $44,000); and would cause advances for S&S authors to decrease by 11.5
percent (or $105,000). See id. at 1312:10-20 (Hill); PX 964 at 1-2. Although the defendants
challenge the applicability of the models and some of the inputs used by Dr. Hill, they fail to
convince the Court that the models are worthless. The economic models generally corroborate
the other evidence in the record that author advances would decrease in the wake of the merger.
Dr. Hill primarily relied on a “second-score auction” model to quantify the merger’s
potential harm to authors. See id. at 1295:21-22 (Hill). The model assumed that all book rights
are allocated using auctions, see id. at 1298:13-1302:19 (Hill); and it used a market-share input
to estimate how often the merging parties would be the top two bidders in an auction, see id. at
1305:9-17 (Hill). The model used an input of variable-profit margins to estimate the variation
54
among the bids: Using higher variable-profit margins generally would cause the model to
predict greater harm, i.e., a bigger decrease in advance level? See id. at 1305:18-1306:3 (Hill).
To measure the effect of the merger, the model looked at the instances when the merging parties
would be the top two bidders and then eliminated the second-highest bid, thereby making the
third-place bid the one that would set the amount of the advance (on the theory that the winning
bid would now only need to beat the third-place bid). See id. at 1303:7-22 (Hill).
The defendants argue that Dr. Hill’s second-score auction model is flawed because (1) it
inaccurately assumes that all book transactions involve auctions, and (2) Dr. Hill used the wrong
input for variable-profit margins. See Defs. PFOF 215; Defs. PCOL {ff 106-121; ECF No. 183
(Defs. Objections to Govt. PFOF-PCOL) at 29-36. Although the defendants are correct that the
model does not precisely reflect how book contracts are allocated among publishers, its exclusive
reliance on auctions is a reasonable simplification. See Trial Tr. at 1296:16-21 (Hill) (explaining
why he interprets the model more broadly). The market-share data captures the rate at which the
parties are winning book contracts — through negotiations, auctions or otherwise, and market
shares also reasonably predict how often the merging parties would be the winner and runner-up.
Compare PX 970, with Trial Tr. at 2927:8-25 (Snyder) (diversion according to share produces
diversion ratios broadly consistent with Dr. Hill’s runner-up study and Professor Snyder’s
agency data). Moreover, as previously discussed, competition affects advance levels even in
one-on-one negotiations, so the model’s use of auctions to simulate the result of negotiations has
some basis in market reality. Finally, similar or identical models have been used in other
antitrust cases involving industries that feature negotiations. See Wilhelmsen, 341 F. Supp. 3d at
64-65; Anthem, 236 F. Supp. 3d at 217-20; Sysco, 113 F. Supp. 3d at 24, 66-67 (noting that
29 Variable-profit margin is equal to revenue minus variable costs. The metric does not account for, ie.,
subtract, fixed costs. See Trial Tr. at 1310:2—25 (Hill).
55
customers were awarded contracts through “a request for proposal or bilateral negotiations”).
The Court understands that the second-score auction model provides only a rough approximation
of expected harm but nevertheless finds it useful. As for Dr. Hill’s allegedly mistaken inclusion
of fixed costs in some of his variable-profit margins, that was the more conservative approach:
Including the extra costs lowered the margins and reduced the model’s prediction of harm. See
Trial Tr. at 1311:18-1312:6 (Hill). Although Professor Snyder also suggested that Dr. Hill
should have included fixed costs in all the variable-profit margins, see id. at 3027:5-3030:4
(Snyder), Dr. Hill explained that the model explicitly calls for the use of variable, not fixed,
costs.°
In response to Professor Snyder’s criticism that the second-score auction model was a
poor fit for the publishing industry, Dr. Hill also ran a series of models based on the “gross
upward pricing pressure index” (GUPPI). See id. at 1315:16-1316:10 (Hill). The GUPPI
models use diversion ratios and margins as inputs, with higher diversion ratios and higher
margins leading to a higher prediction of harm. See id. at 1318:2—7 (Hill); see also supra
Section III.B.2.i.a (explaining diversion ratios). But the GUPPI models used by Dr. Hill are
more difficult for the defendants to challenge because those models were originally adopted by
the defendants’ own economists during the pre-complaint investigation of the instant merger.
See Trial Tr. at 1633:15—23 (Hill). The GUPPI models also predict a reduction in author
advances due to the merger, across different auction formats and using various diversion ratios,
including those calculated by Professor Snyder. The government summarized Dr. Hill’s findings
as follows:
30 Both the second-score auction model and the GUPPI models, discussed infra, are “explicit” that one should
use firms’ variable, not fixed, costs to implement the models. Trial Tr. at 3092:23-3093:15 (Hill). This is because
the models assume that publishers ask whether the marginal profits of acquiring one more book exceed the marginal
costs. See id.
56
Figure 8. Dr. Hill’s Estimates From Second-Score Auction and GUPPI Models (PX-964)
% Reduction in Author
Model Diversion Assumption Compensation
PRH S&S
Second-score auction model Diversion according to share 4.3% 11.6%
Multi-round auction GUPPI Diversion according to share 7.3% 19.2%
Multi-round auction GUPPI Snyder diversion ratios TAM 12.8%
Single-round and hybrid GUPPI| Diversion according to share 3.7% | 5.6%
Single-round and hybrid GUPPI| Snyder diversion ratios 3.7% 6.4%
See Govt. PFOF-PCOL 4 288 (citing PX 964). There is ample precedent for using GUPPI and
similar models to predict harm in antitrust cases. See Wilhelmsen, 341 F. Supp. 3d at 64;
Anthem, 236 F. Supp. 3d at 212; see also FTC v. Sanford Health, No. 1:17-cv-133, 2017 WL
10810016, at *12—13 (D.N.D. Dec. 15, 2017), aff'd., 926 F.3d 959 (8th Cir. 2019).
iii. Coordinated Effects
Another avenue for the government to prove competitive harm is by showing a likelihood
of “coordinated effects,” which occur when market participants mutually decrease competition in
the relevant market. AT&T, 310 F. Supp. 3d at 246 (“A proposed merger may violate Section 7
by enabling or encouraging post-merger coordinated interaction among firms in the relevant
market that harms customers.” (cleaned up)); see also Merger Guidelines § 7 (“Coordinated
interaction involves conduct by multiple firms that is profitable for each of them only as a result
of the accommodating reactions of the others.”). Coordinated effects can arise from an express
or implied agreement among competitors, see CCC Holdings, 605 F. Supp. 2d at 60; or from
“parallel accommodating conduct” among competitors without a prior agreement, Merger
Guidelines § 7. Parallel accommodating conduct involves “situations in which each rival’s
response to competitive moves made by others is individually rational, and not motivated by
57
retaliation or deterrence nor intended to sustain an agreed-upon market outcome, but
nevertheless emboldens price [decreases] and weakens competitive incentives to [raise advances]
or offer [authors] better terms.” Jd.
Coordinated effects are likelier in concentrated markets; indeed, the idea that
concentration tends to produce anticompetitive coordination is central to merger law. See Heinz,
246 F.3d at 716 (“Merger law ‘rests upon the theory that, where rivals are few, firms will be able
to coordinate their behavior, either by overt collusion or implicit understanding, in order to
restrict output and achieve profits above competitive levels.’” (quoting FTC v. PPG Indus., 798
F.2d 1500, 1503 (D.C. Cir. 1986)). Therefore, when the government has shown that a merger
will substantially increase concentration in an already concentrated market — as it has done
here, see supra Section III.B.1 — “the burden is on the defendants to produce evidence of
“structural market barriers to collusion’ specific to this industry that would defeat the ‘ordinary
presumption of collusion’ that attaches to a merger in a highly concentrated market.” H&R
Block, 833 F. Supp. 2d at 77 (quoting Heinz, 246 F.3d at 725).
As an initial matter, a history of collusion or attempted collusion is highly probative of
likely harm from a merger. See Hosp. Corp., 807 F.2d at 1388; see also FTC v. Elders Grain,
Inc., 868 F.2d 901, 906 (7th Cir. 1989) (“[A]n acquisition which reduces the number of
significant sellers in a market already highly concentrated and prone to collusion by reason of its
history and circumstances is unlawful in the absence of special circumstances.”); H & R Block,
833 F. Supp. 2d at 78; Tronox, 332 F. Supp. 3d at 208-210; Merger Guidelines § 7.2. Thus, it is
significant that in United States v. Apple, Inc., the Second Circuit upheld a finding that between
2009 and 2012, all the “Big Six’?! publishers, except for Random House, participated in a
31 This was before Penguin Books and Random House merged, so there was a “Big Six” instead of a “Big
Five.”
58
“horizontal conspiracy . . . to raise e[-]book prices.” See 791 F.3d at 339, This coordination
9 66
involved “numerous exchanges between executives at different Big Six publishers,” “constant
communication” among the publishers “regarding their negotiations with both Apple and
Amazon,” and “frequent telephone calls among the Publisher Defendants.” Jd. at 302, 318.
“(T]he Big Six operated in a close-knit industry and had no qualms communicating about the
need to act together.” Jd. at 300. The Second Circuit concluded that the publishers engaged in
“express collusion” that was a per se violation of antitrust law. Jd. at 316, 321-29. Although
Random House did not participate in the conspiracy, Penguin Books and S&S both did, see id. at
308, and this “history of successful cooperation establishes a precondition to effective collusion
— mutual trust and forbearance.” See Hosp. Corp., 807 F.2d at 1388. The case portrays an
industry already “prone to collusion,” which may become “even more prone to collusion” after
the proposed merger of its largest and third-largest competitors. See Elders Grain, 868 F.2d at
905-06.
The Apple case provides the backdrop for trends in the industry that appear to
demonstrate that the Big Five are already engaging in tacit collusion or parallel accommodating
conduct when acquiring books. Recent years have seen the industry-wide standardization of
certain contract terms — involving payment structure, audio rights, and e-book royalties — in
ways that favor publishers over authors, suggesting that the top publishers have engaged in
coordinated conduct. Advances used to be paid to authors in two installments, but publishers
uniformly moved to paying them in three installments and then four installments, thereby
delaying authors’ compensation. See supra Section I.B. After audiobooks became a significant
source of revenue in the industry, publishers uniformly refused to acquire books without audio
rights included, thereby limiting authors’ ability to maximize their compensation and preventing
59
authors from diversifying their sources of income. See id. In addition, during the early years of
e-books, publishers uniformly shifted e-book royalty rates from 50 percent to 25 percent, thereby
reducing authors’ compensation. See Trial Tr. at 774:6-776:21 (Dohle). Thus, in an industry
where the competition to acquire anticipated top sellers is intense, the competing publishers
nevertheless choose, almost always, not to gain advantage by offering more favorable contract
terms. This phenomenon bespeaks a tacit agreement among the publishers to compete only on
the basis of advance level because it collectively benefits them not to yield on other contract
terms. Accord H & R Block, 833 F. Supp. 2d at 77-78 (“[A] highly persuasive historical act of
cooperation between [competitors]” supports the theory that “coordination would likely take the
form of mutual recognition that neither firm has an interest in an overall ‘race to free’... .”).
One example involving audio rights is illustrative. When selling the publishing rights to
a highly sought-after book, her agent attempted to hold an auction that excluded audio
rights. S&S wanted the book but refused to bid because “[t]he only way to prevent agents from
breaking off audio rights like this is to hold firm to our policy of no deals without audio rights.”
PX 652 at 2. An S&S editor ruminated, “It will be very interesting to see whether PRH,
Hachette, Harper or Macmillan participate. M[y] understanding is that they too have the ‘no
audio, no deal’ rule.” Jd. The agent was forced to restart the auction with audio rights included,
see PX 568 at 3, presumably because the book received insufficient offers or only received offers
that included audio. See PX 320 at 1 (in the first round, PRH bid for bundled audio rights in
violation of the auction’s initial rules). In the renewed auction that included audio rights, the
bidding was fervid and reflected vigorous competition.” This episode starkly demonstrates that
32 As previously discussed, there were six rounds of bidding between four bidders, with a high bid of
$400,000 in the first round and a winning bid of $775,000 from PRH’s Viking imprint, which was $75,000 more
than Viking’s initial bid clearance. See supra Section 1.C.
60
the publishers, despite their great enthusiasm for the book, initially engaged in parallel conduct
to deny the author the ability to exclude audio rights from the auction. The parallel conduct was
effective and mutually beneficial, as the publishers all retained the opportunity to acquire the
book, with their preferred contract term concerning audio rights. Based on this evidence, the
Court finds that the Big Five publishers have engaged in tacit coordination that is profitable for
those involved.
Finally, it is significant that in a market already prone to collusion, where coordinated
conduct already appears to be rampant, PRH’s acquisition of S&S would reinforce the market’s
oligopsonistic structure and create a behemoth industry leader that other market participants
could easily follow. See PX 80E (translation of PX 80, materials for Bertelsmann board
presentation) at 13 (describing publishing industry as an oligopoly). The Big Five publishers
already control 91 percent of the relevant market. See PX 963. The merger would distill the Big
Five to a Big Four, with an overwhelmingly dominant top firm, PRH-S&S, controlling 49
percent of the market and dwarfing its nearest competitors. In the newly reconfigured market,
the top two firms, the merged entity and a would have a 74-percent market share.
See id. Under such circumstances, coordinated effects are likely through “sheer market power”
because the “post-merger market would feature two firms that control roughly three quarters” of
the market. Tronox, 332 F. Supp. 3d at 209; see also Heinz, 246 F.3d at 724 n.23 (recognizing
that “price leadership” is “a danger” in a “duopoly” market), The merger would thus increase
the market’s already high susceptibility to coordination. See Trial Tr. at 1329:18-21 (Hill).”?
33 Other factors that courts have found relevant to an evaluation of the likelihood of coordinated effects
include: differentiated products, transparent competitive outcomes, punishment mechanisms, and frequent purchases
for small amounts. See H & R Block, 833 F. Supp. 2d at 77-79; CCC Holdings, 605 F. Supp. 2d at 62; Arch Coal,
329 F, Supp. 2d at 144-45 . The Court sees no need to march through a discussion of those factors. Merger analysis
is industry-specific and fact-intensive. See Brown Shoe, 370 U.S, at 321-22 (“Congress indicated plainly that a
merger had to be functionally viewed, in the context of its particular industry.” (footnote omitted)). Where, as here,
61
C. Rebuttal
The government is entitled to a presumption of anticompetitive effects and has also met
its burden to establish a prima facie case. The defendants, therefore, now have the burden to
rebut the government’s case by “show[ing] that the prima facie case inaccurately predicts the
relevant transaction’s probable effect on future competition.” See Baker Hughes, 908 F.2d at
981. It is the defendants’ task to demonstrate that the market shares and the associated
presumption of illegality inaccurately reflect competitive reality. See id.; see also Heinz, 246
F.3d at 715 (“To rebut the presumption, the defendants must produce evidence that shows that
the market-share statistics give an inaccurate account of the merger’s probable effects on
competition in the relevant market.” (cleaned up)).
“There is no science to weighing the factors at play in an antitrust analysis,” and the
defendants may rebut the government’s prima facie case with any relevant “real-world
evidence.” RAG-Stiftung, 436 F. Supp. 3d at 312. For example, the defendants may meet their
burden of rebuttal by demonstrating low barriers to entry in the relevant market, see, e.g.,
Wilhelmsen, 341 F. Supp. 3d at 68; Staples I, 190 F. Supp. 3d at 133; or sophisticated
counterparts (here, authors and agents) who can blunt the impact of consolidation, see, e.g.,
RAG-Stifiung, 436 F. Supp. 3d at 315.
“Because the burden of persuasion ultimately lies with the plaintiff, the burden to rebut
must not be ‘unduly onerous.’” United States v. Anthem, Inc. (“Anthem IP’), 855 F.3d 345, 350
(D.C. Cir. 2017) (quoting Baker Hughes, 908 F.2d at 981, 991). However, “[t]he more
compelling the prima facie case, the more evidence the defendant must present to rebut it
there is a strong risk of collusion based on history, current practices, and extreme market concentration, the Court
finds it unnecessary to explore peripheral issues.
62
successfully.” See Baker Hughes, 908 F.2d at 991. Here, the government has “made out a
strong prima facie case” based on the highly concentrated market and affirmative evidence of
likely anticompetitive effects. See Wilhelmsen, 341 F. Supp. 3d at 66. The defendants,
therefore, “must make out a correspondingly strong rebuttal showing.” See id.
I. Existing Competition
The defendants assert that existing competition can and will constrain the merged
company more than market shares or the government’s evidence would suggest. See, e.g., Sysco,
113 F. Supp. 3d at 78. The defendants point to competition from other publishers, competition
from self-publishing, and internal competition within publishing houses. See Defs. PFOF
q§ 115-23, 164-85, 198-213; Defs. PCOL J] 74-79.
i. Other Publishers
The defendants argue that a combined PRH and S&S would be constrained by other
publishers, who do not plan to lower their advance offers or change their bidding strategies. See
Defs. PFOF §§ 115-23; Defs. PCOL J 74-76. For example, HarperCollins’s CEO Brian
Murray testified that his company would not “hold back” in competing with the merged entity.
See Trial Tr. at 1385:9-15 (Murray). Consistent with that testimony, HarperCollins did not
project a decrease in its title count or its advance spending after the PRH-S&S merger was
announced. See DX 279 (HarperCollins strategy presentation for 2022) at 25. The CEOs of
other competitors, including Hachette an also stated that they would not change
their bidding strategies in response to the merger. See Trial Tr. at 211:9-13 (Hachette CEO
Michael Pietsch); Poe ee at 31. Therefore, the defendants
argue, other existing publishers stand ready to prevent any unilateral anticompetitive effects from
the merger.
63
The defendants’ reliance on such assurances from their competitors is insufficient. It is
not necessary for other publishers to change their maximum advances or bidding strategies for
anticompetitive unilateral effects to occur. First, and most obviously, with respect to book
acquisitions where PRH and S&S would have been the winner and runner-up, the merged entity
will acquire such books for lower advances regardless of the other publishers’ bids. See supra
Section III.B.1, Section ITI.B.2.1.
Second, in situations where PRH or S&S would have won a book, regardless of the
runner-up, the merged entity might submit a lower bid due to its decreased motivation to achieve
organic growth. See supra Section IIL.B.2. In such a case, another publisher could win the book
instead, for a lower advance than what PRH or S&S would have offered as standalone entities.
Third, publishers do not immediately offer their maximum advance when attempting to
acquire books; moreover, they initially offer higher advances when they think there is more
competition, and lower advances if they think there is less competition. See supra Section
IIL.B.2.i.a:; see also Trial Tr. at 499:6-500:12 (Karp), 1267:13—-1268:8 (Hill). The general
softening of competition with the elimination of S&S as a standalone bidder, leading to the
perception of less competition in book acquisitions, would likely lead publishers to make lower
initial advance offers. See supra Section III.B.2. If subsequent bids that would have come from
PRH or S&S as separate entities are not forthcoming, or are lower than they otherwise would
have been, the other publishers could acquire books for lower advances simply by following
their existing bidding strategy.
Fourth and finally, it is not necessary for advances to decline in absolute terms for
authors to be harmed. The relevant market has been growing rapidly in recent years in response
to strong consumer demand, and advances have been rising, consistent with that growth. See PX
64
2002 (Stehlik) at 16-17; DX 422 (Glusman) at 37-38; Trial Tr. at 991:5-19 (Tart), 1990:4—-9
(Kim). If the merger goes through, the rate of growth might be offset by competitive harm,
allowing publishers to acquire books for more than they do now but for less than they would
have absent the merger. That would result in harm to authors even if there were no decline in
advances, or even if there was some (slowed) growth in the total advances paid.
The defendants also argue that non-Big Five publishers would be a significant
competitive constraint on a combined PRH and S&S. See Defs. PFOF J 164-80; Defs. PCOL
{| 74-76. The evidence shows, however, that the smaller publishers lack the resources to
compete regularly in the market for anticipated top-selling books. See supra Section I.C; Trial
Tr. at 2047:13-18 (Cheney). Individual publishers outside the Big Five rarely acquire books for
advances at or above $250,000. See PX 963.
The defendants take the novel approach of aggregating all the non-Big Five publishers
and characterizing them as a single force with a 9-percent market share — which allegedly
makes their collective power to constrain the merged company comparable to that of a Big Five
publisher. See Defs. PFOF § 164 (“When aggregated, the non-Big-Five publishers are as likely
to win as a ....”); Defs. PCOL ¥ 64 (arguing that an “effective 6-5 merger
(based on market shares) [is] at issue here”); see also Trial Tr. at 2906:10-2907:14 (Snyder 4
The defendants offer no precedent to support this economic sleight of hand, and the methodology
appears dubious. If market shares can be so readily manipulated by aggregating unaffiliated
companies, why not aggregate all the publishers that are not PRH and S&S into a single, massive
counterweight with a 51 percent market share? The defendants’ approach appears incompatible
with the way antitrust law approaches market concentration and its presumed effects on
34 Although Dr, Hill combined the non-Big Five’s market shares in his economic models as a reasonable
simplification, see Trial Tr. at 3081:12—23 (Hill), he did not treat them as one competitor in his overall analysis.
65
competition. See supra Section I11.B.1. Generally, a firm with lower market share is assumed to
wield less market power, and market concentration would be considered low in an industry with
many individual firms with small market shares. See Merger Guidelines § 5.3 (“The Agencies
may measure market concentration using the number of significant competitors in the market.
This measure is most useful when there is a gap in market share between significant competitors
and smaller rivals ....”). For example, applying a HHI analysis shows that 100 firms that each
have a 1-percent market share (which would produce an HHI of 100) do not represent the same
competitive landscape as two firms that each have a 50-percent market share (which would
produce an HHI of 5000).*° Indeed, the government points out that aggregating the non-Big
Five publishers does not help the defendants’ case because it yields a higher HHI and depicts a
more concentrated market. See Govt. PFOF-PCOL 4 134.
Professor Snyder gave counterintuitive and apparently erroneous testimony about the
significance of non-Big Five bidders in competitive auctions. He claimed that the non-Big Five
publishers, with a combined market share of 9 percent, are nevertheless the winner or runner-up
in 23 percent of auctions for anticipated top-selling books; while PRH and S&S, with a
combined market share of 49 percent, are the winner and runner-up only seven percent of the
time. See Trial Tr. at 2689:22—-2690:5 (Snyder), 2827:13—23 (Snyder). The Court finds the 23-
percent figure unreliable because it was the subject of much contradictory testimony at trial,
including the credible assertion by Dr. Hill that the number should be halved. See id. at
3051:16—3053:17 (Hill). And overall, Professor Snyder’s reliance on the limited and
unrepresentative “agency data” weakened the credibility of his analyses. See supra Section
38 Summing the squares of each firm’s market share, the first HHI is calculated as 100 x 1? = 100, and the
second HHI is calculated as 2 x 50? = 5000. See supra Section IM.A.2.
66
III.B.2 (note 26). Thus, the defendants’ expert fails to cast doubt on the reliability of the market-
share statistics presented by the government. See Heinz, 246 F.3d at 715.
ii. Internal Competition
The defendants argue that internal imprint competition increases competition in the
market beyond that represented in market shares. See Defs. PFOF 9 198-213; Defs. PCOL
{{ 77-79. That argument is undermined by the presumption that “[c]ompanies with multiple
divisions must be viewed as a single actor, and each division will act to pursue the common
interests of the whole corporation.” AT&T, 916 F.3d at 1043. This presumption “was adopted as
a principle of antitrust law,” id., in Copperweld Corp. v. Independence Tube Corp., 467 U.S.
752, 771 (1984) (“[T]he coordinated activity of a parent and its wholly owned subsidiary must be
viewed as that of a single enterprise .... A parent and its wholly owned subsidiary have a
complete unity of interest.”). Consistent with economic principles and common sense, internal
imprint competition should be considered only to the extent that it maximizes the profits of the
publishing house. See Areeda, Antitrust Law § 964b (“Antitrust law generally presumes that a
firm maximizes its profits in the environment in which it finds itself... .”).
Although internal competition among imprints is currently permitted by some publishers
in round-robin auctions, such competition is far from unrestrained. To the extent imprints
compete internally within the confines of a house bid, they can provide more editorial choices to
authors, but there is no price competition that allows authors to achieve the highest possible
advance level. See supra Section I.C. Even this non-price competition is discouraged. See DX
71 at 2 (email from S&S CEO Karp regarding editor guidelines) (“Duplicating work is not a
productive expenditure of one of our most valuable resources — time. You can acquire more
books if you aren’t all chasing the same ones... . Try to bail out on submission in which there
67
are more than two imprints in the building pursuing the project.”). In cases where internal
imprints do compete financially, such competition is confined to situations where there is an
external bidder. Moreover, as previously discussed, there are numerous examples in the record
of PRH using “background coordination in auctions to .. . avoid internal up-bidding.” PX 411 at
4: see also Trial Tr, 2372:17-2373:8 (McIntosh); supra Section L.C. Thus, internal competition
would have a very limited impact in mitigating anticompetitive effects in the industry. To
achieve the highest advances for authors, internal imprint competition is no substitute for
competition among independent publishers.
The defendants assert that the merged company would go even farther in permitting
internal competition than current policies allow. See Defs. PFOF § 210; DX 236. They note that
PRH CEO Dohle has promised, in a letter to agents, that S&S legacy imprints will bid against
PRH imprints even when there are no external bidders. See Defs. PFOF {] 210; DX 236. The
Court gives no weight to this unenforceable promise. Indeed, the promise calls to mind the
criminal-law concept of “consciousness of guilt”: Mr. Dohle’s extraordinary pledge appears to
reflect his awareness of how threatening the combined entity would be to authors and agents.
The promise lacks credibility for three reasons:
First, the proposed policy would not be profit-maximizing and is thus unreliable evidence
of future conduct. See Areeda, Antitrust Law § 964b. It is unclear how the new feature of the
policy — allowing internal competition even without an external bidder — would financially
benefit the combined entity. Instead, it appears that the promise was made just to get the deal
done, and once the merger is executed, there will be no economic incentive to maintain the
policy.
68
Second, the promise can be broken at will. Mr. Dohle, his successor, or his superiors
could legally change or rescind the new policy at any time. The defendants argue that such
behavior would harm the merged entity because of backlash from agents, see Defs. PFOF { 210,
but evidence shows that agents have limited power over the large publishing houses, see infra
Section III.C.3.i. A unilateral promise by PRH that it will not use its market power if it acquires
S&S cannot rebut the government’s prima facie case. See H & R Block, 833 F. Supp. 2d at 82
(Even if “the Court has no reason to doubt that defendants would honor their promise [to
maintain the acquired firm’s current prices for three years post-merger], this type of guarantee
cannot rebut a likelihood of anticompetitive effects in this case.”).
Third, the promise would not prevent the merged entity from reducing internal imprint
competition. Despite the promise, PRH could coordinate bids with legacy S&S imprints in the
same way that PRH currently does among its own imprints. See supra Section I.C. The promise
also would not stop the merged company from consolidating PRH and legacy S&S imprints, as
PRH did when it reorganized the divisions within Random House in 2019, so that “there [would]
be less internal competition with[in] the focused editorial profiles in [its] divisions.” See
PX 241. Finally, the merged entity could direct its imprints to focus on non-competing genres,
thereby preventing the imprints from pursuing the same books. See id. For all the foregoing
reasons, Mr. Dohle’s promise does little to rebut the government’s prima facie case or the
presumption of anticompetitive effects.
69
iii. Self-Publishing
The defendants argue that self-publishing is a competitive constraint on the market,
particularly for celebrity and romance authors.°° See Defs. PFOF §§ 181-85; see also Trial Tr. at
566:1-11 (Karp). But, as previously discussed, self-publishing is not a reasonable substitute for
traditional publishers in the market for anticipated top-selling books. See supra Section LC,
Section I.A.2. Anecdotes about author Brandon Sanderson raising $40 million on Kickstarter,
or author Colleen Hoover having success with self-publishing, do not change the overall picture
29:66
of the industry. Sanderson’s success with self-publishing was “rare,” “a feat,” and “so
incredible.” Trial Tr. at 1076:4-10 (Weisberg), 1077:4-7 (Weisberg). Similarly, Hoover is “a
cultural phenomenon” and “the hottest author in the country.” Jd, at 524:18-25 (Karp), 560:5—
10 (Karp). Sanderson and Hoover are exceptions that prove the rule: For the overwhelming
majority of authors in the relevant market, self-publishing is no real substitute for using a
publishing house, and self-publishing therefore does little to constrain anticompetitive effects.
2. Barriers to Entry and Expansion
The defendants argue that there are few barriers to entry that would prevent new or
existing publishers from competing effectively with the merged company. See Defs. PFOF
49 69, 124-48; Defs. PCOL §§ 80-83. New entrants to the market would presumably give
authors alternative outlets to publish their books, thereby preventing the merged entity from
lowering advances. “The existence and significance of barriers to entry are frequently . .. crucial
considerations in a rebuttal analysis. In the absence of significant barriers, a company probably
cannot maintain [sub]competitive pricing for any length of time.” Baker Hughes, 908 F.2d at
36 Defendants admitted in their closing argument that self-publishing was not a true option for authors. See
Trial Tr. at 3272:17~25 (arguing that hypothetical monopsonist test is “utterly meaningless other than addressing
whether there’s an outside option in the form of self-publishing, which nobody was arguing in this case”). In their
post-trial briefing, however, they surprisingly assert that self-publishing is a competitive threat.
70
987. To constrain the new entity, “entry [by new competitors] must be timely, likely, and
sufficient in its magnitude, character, and scope to deter or counteract the competitive effects of
concern.” Wilhelmsen, 341 F. Supp. 3d at 66-67 (quotations omitted). “The expansion of
current competitors is regarded as essentially equivalent to new entry, and is therefore evaluated
according to the same criteria.” /d. at 66 (quotations omitted).
Contrary to the defendants’ contentions, the evidence demonstrates that there are
substantial barriers to entry and expansion in the publishing market for anticipated top-selling
books. Established publishers have many advantages that are not easily replicated, including: (1)
back lists that generate substantial and consistent revenue, which in turn supports risky
acquisitions of high-advance books, see Trial Tr. at 156:5—157:14 (Pietsch); (2) large and
effective marketing, sales, and distribution teams that have relationships with media and
retailers, at 6-7; (3) excellent reputations and track records of success
that attract authors, see Trial Tr. at 454:11—22 (Karp); and (4) lower variable costs due to
economies of scale, see id. at 2047:16—-18 (Cheney); see also Section I.C. In addition, numerous
publisher witnesses expressed concern about a lack of access to sufficient printing capacity,
which limits the number of books that publishers can physically produce and thus limits
opportunity for expansion. See id, at 758:3-5 (Dohle), 121:8-19 (Pietsch), 364:1—9 (Eulau); a
eee at 3. Industry insiders, including PRH executives,
candidly acknowledged in trial testimony and ordinary-course documents that barriers to entry
are high in the publishing business. See Trial Tr. at 168:9-169:1 (Pietsch), 755:4-15 (Dohle),
1380:12-1381:8 (Murray); PX 80-E at 13; PX 79 (presentation by PRH executives on publishing
industry) at 8.
71
The best proof that would-be new competitors face formidable barriers to entry is the
stability of market shares in the industry: No publisher has entered the market and become a
strong competitor against the Big Five in the past thirty years. See Trial Tr. at 163:2-6 (Pietsch).
Moreover, the Big Five’s market share in acquiring anticipated top-selling books has remained
stable for the past three years. See PX 967. Thus, there is little evidence that new or existing
publishers will grow at a pace and magnitude that would allow them to discipline a merged PRH
and S&S. See Wilhelmsen, 341 F. Supp. 3d at 68 (“The fact that the merging parties have been
able to maintain high margins and market shares without witnessing notable entry and expansion
suggests that... the market .. . is characterized by significant barriers to entry.” (cleaned up)),
Merger Guidelines § 5.3 (“The Agencies give more weight to market concentration when market
shares have been stable over time... .”). The Big Five’s market shares are built on “decades of
credibility and success,” Trial Tr. at 454:11-22 (Karp), and they cannot be easily challenged by
less-established publishers.
Although the defendants argue that social media like “BookTok”?? and Amazon’s online
bookstore level the playing field for smaller publishers, those platforms are not new and are far
from “game-changing.” See id. at 1069:1-4 (Weisberg) (“[T]his is the business of one-to-one
word of mouth. It’s never been anything else and it’s still not, just the devices have changed.”).
Despite the current availability of “BookTok” and virtual storefronts, the Big Five still
consistently acquire the publishing rights for 91 percent of anticipated top-selling books,
demonstrating that the playing field has not been leveled in any meaningful way. See PX 994.
For example, PRH utilizes its superior resources to maximize sales even on Amazon. See supra
37 BookTok refers to activity on the social media platform TikTok where users review and promote books to
one another. See Trial Tr. at 1414:12-16 (Weisberg).
72
Section L.C (PRH hires data scientists to study Amazon’s search algorithms and spends money to
get books better positioned in Amazon’s search results.).
The defendants nevertheless point to new entrants like Zando, Spiegel & Grau, and Astra
House, which have had some success in acquiring publishing rights to anticipated top-selling
books. See Defs. PFOF §§ 129-32, 144, 147. Although those publishing houses are associated
with successful and well-respected editors, they lack many of the other advantages enjoyed by
the Big Five: big back lists; extensive marketing, sales, and distribution teams; and scale. As a
result, those new entrants have barely made a dent in the relevant market — their collective share
is less than one percent, see PX 968, and no one in the industry views them as substantial
competitors to the Big Five. See Trial Tr. at 249:20-250:90 (Pande), 552:21-557:3 (Karp).
Moreover, the growth of those new competitors was accompanied by a countervailing shrinkage
in the market shares of other non-Big Five publishers: The stability of the overall market share
of non-Big Five publishers indicates that the new entrants have done little to change the
competitive landscape, and that barriers to entry and expansion remain high. See id. at 1482:15—
1483:17 (Hill); PX 977.
The defendants contend that Big Five rivals like HarperCollins and well-funded
companies like Disney are poised to expand in the relevant market. See Defs. PFOF {| 124-48;
Defs. PCOL ff 81-83. To be sure, Big Five rivals face low barriers to expansion because they
have many of the same advantages that PRH and S&S have. But there is no evidence that
HarperCollins, Hachette, or Macmillan could or would compete more aggressively with the
merged company. See Trial Tr. at 177:1-15 (Pietsch), 1088:8-14 (Weisberg), 1385:9-1386:11
(Murray). The distribution of market shares among PRH, S&S, and the other Big Five
publishers, has remained relatively constant in recent years. See PX 994. The Court has every
73
reason to believe that all the industry players are already doing their best to compete; it is
therefore unlikely that the non-merging Big Five publishers could suddenly expand sufficiently
to prevent the anticipated competitive harm.
Two well-funded companies outside the Big Five highlighted by the defendants are
Amazon and Disney. Amazon acquired several high-priced books when it first started its
publishing business about a decade ago, but it has failed to make significant headway in the
industry. See Trial Tr. at 172:17-25 (Pietsch). From 2019 to 2021, Amazon’s share in acquiring
the publishing rights to anticipated top-selling books declined from under i to under ff
ii. See PX 968 at 2. Amazon also struggles with selling its books outside of its own
platform. See Trial Tr. at 171:17—23 (Pietsch), The Court therefore is not convinced that
Amazon is a significant competitive constraint in the relevant market. The defendants argue that
a
a. See Defs. PFOF {| 126. While Disney may have the motivation and financial resources to
execute the alleged plan, it will still face many of the previously discussed barriers to entry.
There is no evidence to suggest that Disney is better equipped than Amazon to succeed in the
relevant market, In addition, it is a strain to characterize Disney’s five-year aspirational plan as
evidence of “timely” market entry. See Staples II, 190 F. Supp. 3d at 133 (“The relevant time
frame for consideration in this forward looking exercise is two to three years.”).
3. Additional Arguments
The defendants raise a medley of other arguments based on (1) the power of literary
agents to constrain anticompetitive behavior by publishers; (2) efficiencies from the merger that
will offset anticompetitive effects; (3) the lack of negative effects from the last major merger in
74
the publishing industry; and (4) the parties’ interest in finding the “best home” for S&S. The
Court will consider each of these in turn.
i. Power of Agents
The defendants argue in post-trial briefing that the market-share data used by the
government does not account for the control that agents wield over acquisition formats, which
renders the data unreliable. See Defs. PCOL {ff 71-73 (“Market concentration statistics also
ignore the competitive effect of agents’ control over the bargaining process.”). To the contrary,
the market-share data necessarily reflects agents’ existing practices with respect to acquisition
formats. The market-share numbers aggregate individual book deals, each of which was
presumably subject to an acquisition format that was determined by an agent.
The defendants also have argued that agents can constrain the competitive harm of the
merger through their control over acquisition formats. The defendants have suggested that even
if some imprints are eliminated or consolidated after the merger, agents can readily find
substitutes for the missing imprints in any given auction. See Trial Tr. at 3276:8-3277:21 (Defs.
Closing) (“[T]here probably are hundreds, hundreds of these imprints spread around the various
publishing houses. . . . [If the merger did functionally eliminate one potential participant, it will
not necessarily change the dynamic of any given auction . . . because the agent can readily
replace that publisher with another bidder.”). Indeed, the defendants seem to treat agents as the
buy-side analogue to “power buyers.” “Courts have . . . noted that the existence of power
buyers—sophisticated customers who retain strategies post-merger that may constrain the ability
of the merging parties to raise prices — is a factor that can serve to rebut a prima facie case of
anti-competitiveness.” Wilhelmsen, 341 F. Supp. 3d at 70 (quotations omitted),
75
But agents cannot create competition where it does not exist, and competition is what
ultimately increases authors’ advances. See Trial Tr. at 114:25-115:6 (Pietsch), 596:5-597:4
(Karp), 251:4-251:20 (Pande). The proposed merger would reduce the number of imprints
available to bid independently for any given book, so agents’ ability to play prospective
publishers against one another would weaken. See Merger Guidelines § 6.2 (“A merger between
two competing [buyers] prevents [sellers] from playing those [buyers] off against each other in
negotiations. This alone can significantly enhance the ability and incentive of the merged entity
to obtain a result more favorable to it, and less favorable to the [seller], than the merging firms
would have offered separately absent the merger.”).
In any event, as a general matter, agents do not have the power to effectively discipline
large publishers. Time after time, when agents have attempted to curb the Big Five’s exercise of
market power, the agents have failed. For example, agents were unsuccessful in attempts (1) to
increase e-book royalties, see Trial Tr. at 2101:12—2105:5 (Wylie) (boycott of Wylie by Random
House ended his attempt to secure higher e-book royalties for authors); (2) to unlink audio rights
from publishing rights, PX 328 at 2-3 (“Remember when Amazon was offering seven figures on
Audio before books were sold to publishers? We turned down big book after big book until
agents realized we would not play in an auction without Audio. And now they always sell us
Audio.”); and (3) to prevent publishers from changing payment structures, see Trial Tr. at
1828:19—1829:18 (Walsh) (describing publishers’ shift from paying out advances in halves to
paying them out in quarters); PX 2008 (Fletcher) at 19-20 eee
ee All those contract terms were important to authors and agents, but they
were forced to back down in response to pressure from the Big Five.
76
ii. Efficiencies
The defendants argued at trial that efficiencies would limit the merger’s anticipated
competitive harm. Efficiencies alone might not suffice to rebut a prima facie case, but they “may
nevertheless be relevant to the competitive effects analysis on the market required to determine
whether the proposed transaction will substantially lessen competition.” Sysco, 113 F. Supp. 3d
at 82 (quotations omitted). The Court, however, precluded the defendants’ evidence of
efficiencies, after determining that the defendants had failed to verify the evidence, as required
by law. See Trial Tr. at 2749:12-2772:24. Efficiencies therefore play no role in the instant
analysis.
iii. The 2013 Penguin-Random House Merger
The defendants argue that the 2013 Penguin-Random House merger was a “natural
experiment” that did not cause a decrease in advances paid for anticipated top-selling books. See
Defs. PCOL 4 84 (quoting Merger Guidelines § 2.1.2); see also Defs. PFOF § 226. They are
correct that analogous historical events are useful for considering the likely effects of a merger.
See Merger Guidelines § 2.1.2.
But the parties hotly dispute how the 2013 merger affected author advances. The
defendants assert that advances for anticipated top-selling books did not decrease due to the
merger, because they were already declining before the merger and continued to do so afterward.
See Defs. PFOF { 227; Trial Tr. at 2841:4-8 (Snyder), 2638:25—2639:14 (Snyder). The
government counters that advances paid for anticipated top-selling books decreased more
relative to other books’ advances after the 2013 merger. See Govt. PFOF-PCOL {ff 238-42;
Trial Tr. at 3066:2—10 (Hill); PX 966. Ultimately, the Court finds the evidence about the 2013
merger inconclusive. The contraction in mass-market paperbacks around 2013 muddies the
77
analysis, and the intervening nine years have brought important shifts in the industry, such as
continued consolidation. See Trial Tr. at 169:2—170:20 (Pietsch). Thus, the aftermath of the
2013 merger does not affect the Court’s analysis.
iv. A “Good Home” for S&S
Defendants have argued that PRH is the best home for the authors, editors, and staff of
S&S. See Defs. PFOF {ff 22-24, Witnesses have noted that S&S authors would gain many
advantages from working with the combined entity, including access to PRH’s distribution
network. See, e.g., Defs. PFOF § 25 (PRH could bring its “industry-leading supply chain to bear
on S&S8’s books, enabling S&S to obtain more retail shelf space, enjoy higher sales, and reach
more readers.” (citing Trial Tr. at 878:1-22 (Dohle))). Moreover, the defendants have suggested
that if the sale to PRH is enjoined, Paramount Global might sell S&S to a private equity firm that
would take on debt and “gut” the company. See Defs. PFOF J 23-24; see also Trial Tr. at
2094:20-2095:2 (Wylie) (“So if it were, for instance, to go to private equity ..., the private
equity company wouldn’t understand the business it was in; would, say, load it with debt as
Blackstone did to Houghton Mifflin, basically destroying the publishing house so that it was sold
at a discount later to one of the Big 5.”), 1938:18-23 (Duhigg) (“And if [the merger] doesn’t
happen, it will be disastrous for Simon & Schuster, because they will get acquired by private
equity... [a]nd they will gut that company.”).
Those arguments are not relevant to the Court’s analysis of the government’s claim under
the Clayton Act. The Court is required to assess the anticompetitive effects of the merger under
the applicable statute and case law, which do not contemplate consideration of the preferences of
the merging parties’ employees and stakeholders, or their distaste for other potential buyers of
the assets in question. The focus of the Court’s inquiry is harm to competition in the relevant
78
market. See, e.g., E. £ du Pont de Nemours, 353 U.S. at 589, 592. Nevertheless, the Court notes
that the expressed concerns about a private-equity acquisition are highly speculative. Other
potential buyers from the publishing industry have shown interest in acquiring S&S, and it is just
as likely that another publishing company will prevail in a future sale. See Trial Tr. at 2185:2-
15 (Berkett). Nor is the Court moved by the desire of S&S and its employees to be acquired by
PRH. It comes as no surprise that S&S would like to benefit from the extraordinary market
power and other advantages that the combined entity would enjoy. The Court, however, must
focus on harm to competition in the relevant market.
CONCLUSION
The government has presented a compelling case that predicts substantial harm to
competition as a result of the proposed merger of PRH and S&S. It has properly defined a
relevant market — focused on publishing rights for anticipated top-selling books —— that
encompasses 70 percent of the advances that publishers pay to authors. The post-merger
concentration of the relevant market would be concerningly high: The merged entity would have
a 49-percent market share, more than twice that of its closest competitor. Moreover, the top two
competitors would hold 74 percent of the market; and the top four market participants would
control 91 percent, The government has buttressed its market-share analysis with strong
evidence of likely unilateral effects and coordinated effects that would hurt competition.
The defendants have failed to show that the relevant market is not well defined; have
failed to establish that the market-share data inaccurately reflects market conditions; and have
failed to rebut the government’s affirmative evidence of anticompetitive harm. Contrary to the
defendants’ contentions, the relevant market appropriately identifies a submarket of targeted
sellers — the authors of anticipated top-selling books. Those authors have unique needs and
79
preferences, have fewer outlets that can satisfy their requirements, and therefore are vulnerable
to anticompetitive behavior. The Court is unpersuaded by the defendants’ arguments that the
market-share data does not accurately reflect conditions in the relevant market because it does
not account for constraints that would be imposed by existing and new competitors, literary
agents, and internal imprint competition. Nor have the defendants presented admissible evidence
of efficiencies or any other evidence that changes the Court’s view of the competitive landscape.
Accordingly, the Court finds that the proposed merger of PRH and S&S violates
Section 7 of the Clayton Act because it is likely to substantially lessen competition in the market
for the publishing rights to anticipated top-selling books. The Court therefore will enjoin the
merger. A separate order issued on October 31, 2022.
FLORENCE Y. PAN
United States Circuit Judge
(Sitting by designation in the United States
District Court for the District of Columbia)
Dated: November 14, 2022
80 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483825/ | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
PAUL C. CLARK,
Plaintiff,
v. No. 21-cv-1007 (DLF)
DOCUSIGN, INC.,
Defendant.
MEMORANDUM OPINION
Before the Court is the defendant’s Renewed Motion to Dismiss for Improper Venue, Dkt.
27. Because venue is not proper in this District, the Court will grant the defendant’s motion in
part and transfer this case to the Northern District of California.
I. BACKGROUND
On April 12, 2021, Paul Clark brought this action against DocuSign, Inc. alleging willful
infringement by DocuSign of three of his patents related to electronic signatures. Compl., Dkt. 1;
Am. Compl. §§ 1, 11-44, Dkt. 5. DocuSign is incorporated in Delaware and headquartered in San
Francisco, California. Am. Compl. ¥ 4. It maintains offices in California, Illinois, New York, and
Washington state, Lewis Decl. 43, Dkt. 6-2, but it does not have an office in the District of
Columbia, id.; Lewis Decl. 4 4, Dkt. 13-1.
DocuSign filed an initial motion to dismiss for improper venue, Dkt. 6, and the Court
granted Clark’s motion for venue discovery, Dkt. 8. Order, Dkt. 20. The Court permitted
discovery as to the number of DocuSign’s employees who work remotely, the type of business
conducted by DocuSign’s D.C.-based employees, and DocuSign’s recruitment of employees to
work in D.C. Order at 3-4. Now before the Court is DocuSign’s Renewed Motion to Dismiss for
Improper Venue, Dkt. 27.
I. LEGAL STANDARDS
When a plaintiff brings suit in an improper venue, the district court “shall dismiss [the
case], or if it be in the interest of justice, transfer such case to any district or division in which it
could have been brought.” 28 U.S.C. § 1406(a); see also Fed. R. Civ. P. 12(b)(3). “In considering
a Rule 12(b)(3) motion, the Court accepts the plaintiff's well-pled factual allegations regarding
venue as true, draws all reasonable inferences from those allegations in the plaintiff's favor, and
resolves any factual conflicts in the plaintiff's favor.” Tower Lab’ys, Ltd. v. Lush Cosmetics Ltd.,
285 F. Supp. 3d 321, 323 (D.D.C. 2018) (citation and internal quotation marks omitted). The
Court need not “accept the plaintiff's legal conclusions as true,” and it “may consider material
outside of the pleadings.” Jd.
In patent infringement cases, 28 U.S.C. § 1400(b) governs venue, see TC Heartland LLC
v. Kraft Foods Grp. Brands LLC, 137 8. Ct. 1514, 1519 (2017), and Federal Circuit precedent is
controlling, see In re ZTE (USA) Inc., 890 F.3d 1008, 1012 (Fed. Cir. 2018). The plaintiff bears
the burden of establishing that venue is proper, id. at 1013, and § 1400(b) “is intended to be
restrictive of venue in patent cases compared with the broad general venue provision,” id. at 1014.
Patent venue must be proper at the time that the complaint was filed—here, in April 2021. In re
EMC Corp., 501 F. App’x 973, 976 (Fed. Cir. 2013).
II. ANALYSIS
A. Improper Venue
Under 28 U.S.C. § 1400(b), a plaintiff may bring civil patent infringement actions “in the
judicial district where the defendant resides, or where the defendant has committed acts of
infringement and has a regular and established place of business.” A defendant “resides” only in
its state of incorporation. See TC Heartland, 137 S. Ct. at 1521. DocuSign does not reside in the
District of Columbia because it is not incorporated in this district. Am. Compl. § 4. Thus, for
venue to be proper in this district, DocuSign must “ha[ve] a regular and established place of
business” here. 28 U.S.C. § 1400(b); see TC Heartland, 137 S. Ct. at 1521.
To establish venue under this prong, a plaintiff must show that: “(1) there [is] a physical
place in the district; (2) it [is] a regular and established place of business; and (3) it [is] the place
of the defendant.” In re Cray Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017). Venue is improper in
the District of Columbia because Clark has not established that Docusign has a physical place of
business in the District, that any physical place is a regular and established place of business, or
that any such place is the place of DocuSign.
Mr. Physical place of business
First, a plaintiff must establish that there is a physical place of business in the district,
namely “a physical, geographical location in the district from which the business of the defendant
is carried out.” Cray, 871 F.3d at 1362. The place “need not be a fixed physical presence in the
sense of a formal office or store,” but neither a “virtual space” nor “electronic communications
from one person to another” suffice. Jd. (citation and internal quotation marks omitted). DocuSign
does not maintain offices, co-working space, or any physical systems in the District. Lewis Decl.
{4 4-5, Dkt. 13-1. And the home offices of DocuSign’s nine to twenty employees who lived in
the District in 2021, see Pl.’s Opp. at 5, Dkt. 32, do not satisfy the “physical place” requirement.
Although home offices may in certain circumstances constitute a physical place of business, such
as when a defendant’s business model is built on employees who all work from home, see, e.g.,
RegenLab USA LLC v. Estar Techs. Ltd., 335 F. Supp. 3d 526, 549 (S.D.N.Y. 2018), this is not
a. SSE
is Further, the DocuSign employees residing in the District did not store any materials
to sell and distribute on behalf of DocuSign, nor did they perform any “live demonstrations,
evaluations, trainings, and/or presentations” from their homes. Lewis Decl. 4 6. Given that
pocuSien’s in
ee is, standing alone,
insufficient to convert the employees’ homes into physical places of business. See Rosco, Inc. v.
Safety Vision LLC, No. 19-cv-8933, 2020 WL 5603794, at *3 (S.D.N.Y. Sept. 18, 2020)
(distinguishing RegenLab and finding employee home did not constitute physical place of business
because the only employees in the district were “remote sales associates or installation
technicians”); C.R. Bard, Inc. v. Smiths Med. ASD, Inc., No. 12-cv-36, 20202 WL 6710425, at *8,
*12 (D. Utah Nov. 16, 2020) (finding no physical place of business because the defendant’s
“business model does not contemplate all employees working from home, and for those who do,
... does not treat their home offices as places of business”). Clark therefore has not established
that DocuSign has a physical place of business in the District.
2. Regular and established place of business
Even if the homes of DocuSign’s employees could constitute a physical place in the District
of Columbia, they would not be regular and established places of business. A regular and
established place of business “must for a meaningful time period be stable, established.” Cray,
871 F.3d at 1363. “In other words, sporadic activity cannot create venue.” Jd. at 1362. Further,
“if an employee can move his or her home out of the district at his or her own instigation, without
the approval of the defendant, that would cut against the employee’s home being considered a
place of business of the defendant.” /d. at 1363.
Under this test, Clark has not established that the employees conduct regular and
established business from their homes in the District. That DocuSign is registered to do business
in the District and “provid{es] computer system design services in the District,” see Pl.’s Opp. at
7-8; is irrelevant. It is the place of business that must be regular and established in the District,
not merely some unrelated business presence in the District. See JngenioShare, LLC v. Epic
Games, Inc., No. 21-cv-663, 2022 WL 827808, at *3 (W.D. Tex. Mar. 18, 2022) (“Focus on the
place is directly tied to the [patent venue] statute and cannot be sidestepped.”); cf RegenLab, 335
F. Supp. 3d at 550 (finding New York regular and established place of business because the
defendant’s “employees have not merely worked out of New York offices by happenstance”). To
satisfy this test, Clark needs to establish that the DocuSign business conducted from the employees’
homes is stable and established in the District, or, in other words, that this business cannot freely
be moved in and out of the District. See Cray, 871 F.3d at 1365 (finding venue improper where
there was “no evidence that the employees’ location in the Eastern District of Texas was material
to [the defendant],” or that employees in the district served customers there). Clark has not done
Da
NS 105007, 2022 WL
827808, at *4 (the defendant’s restrictions on locations for remote employees did not create a
regular and established place of business in employees’ homes because “those restrictions are not
svi pci"
DocuSign also
does not incentivize or condition employment on residence in the District.
C | Clark therefore has not established that the homes of DocuSign’s employees in the District
are regular and established places of business, as he has not shown that the work done by these
employees in their homes is “fixed permanently” to the District. Cray, 871 F.3d at 1363 (cleaned
up).
3. Place of the defendant
Finally, even if the Court were to consider the employees’ homes regular and established
physical places of business, they would not be places of DocuSign. Proper venues lies where there
is “a place of the defendant, not solely a place of the defendant’s employees”; “the defendant must
establish or ratify the place of business” as its own. Cray, 871 F.3d at 1363. Put another way,
“It]he statute clearly requires that venue be laid where the defendant has a regular and established
place of business, not where the defendant’s employee owns a home in which he carries on some
of the work that he does for the defendant.” Jd. at 1365 (cleaned up). Relevant factors include:
“whether the defendant owns or leases the place, or exercises other attributes of possession or
control over the place”; “whether the defendant conditioned employment on an employee’s
continued residence in the district or the storing of materials at a place in the district so that they
can be distributed or sold from that place”; and “the extent [marketing or advertisements] indicate
that the defendant itself holds out a place for its business.” Jd. at 1363.
For many of the reasons already discussed above, these factors all weigh in favor of finding
that the employees’ homes in the District do not constitute a place of DocuSign. See Cray, 871
F.3d at 1365-66; GreatGigz Sols., LLC v. ZipRecruiter, Inc., No. 21-cv-172, 2022 WL 432558, at
*5 (W.D. Tex. Feb. 11, 2022) (no place of business in employees’ Austin homes despite
advertising about availability of remote positions in Austin because none of the “listings claim the
alleged place of business (the employees’ homes) is ZipRecruiter’s own place of business or that
these remote-employee[s] . . . must live in the Austin area”); Bausch Health Ir. Ltd. v. Mylan
Lab’ys Ltd., No. 21-10403, 2022 WL 683084, at *7 (D.N.J. Mar. 8, 2022) (finding no place of
business of defendant in employees’ homes based on similar factors); BillingNetwork Pat., Inc. v.
Modernizing Med., Inc., No. 17 C 5636, 2017 WL 5146008, at *3 (N.D. Ill. Nov. 6, 2017) (same).
Clark has not shown that DocuSign owns, leases, or otherwise controls the homes of its remote-
designated employees in the District. See Pl.’s Opp. at 10-12. As explained above, DocuSign
neither conditions employment on residence in the District nor adds District-specific conditions
on moving out of the District. Indeed, employees have moved out of the District in the past.
DocuSign employees in the District do not store materials in the District for distribution or sale.
Further, aside from job postings that list the D.C. area as a preferred location, Clark has not
identified any DocuSign advertising that shows that it has an office or place of business in the
District. See id. To the extent that the D.C. area preferred listings constitute relevant advertising,
those positions were not filled by employees located in the District.
Viewed as a whole, the record does not establish that the homes of DocuSign’s employees
in the District could be considered places of business of DocuSign. Clark has not established any
of the requirements for patent venue. Thus, venue in this District is improper.’
B. Dismissal or Transfer
“The district court of a district in which is filed a case laying venue in the wrong division or
district shall dismiss, or if it be in the interest of justice, transfer such case to any district or
division in which it could have been brought.” 28 U.S.C. § 1406(a). “The decision whether a
transfer or a dismissal is in the interest of justice ... rests within the sound discretion of the district
court.” Naartex Consulting Corp. v. Watt, 722 F.2d 779, 789 (D.C. Cir. 1983). The “standard
remedy for improper venue is to transfer the case to the proper court rather than dismissing it—
thus preserving a [plaintiffs] ability to obtain review.” Nat’l Wildlife Fed’n v. Browner, 237 F.3d
670, 674 (D.C. Cir. 2001). However, dismissal may be appropriate in circumstances where the
complaint contains “obvious substantive defects.” Fam vy. Bank of Am. NA (USA), 236 F. Supp.
3d 397, 409-10 (D.D.C. 2017); see also Smith v. FBI, No. 19-cv-2765, 2020 WL 5411142, at *2
(D.D.C. Sept. 9, 2020).
Because DocuSign has not identified any serious substantive problems that would merit
dismissal, see Def.’s Reply at 12, Dkt. 35, the Court will transfer the case. “Courts may transfer a
case to any jurisdiction [that] would have personal jurisdiction over the defendants and in which
venue is proper.” Fam, 236 F. Supp. 3d at 410. Here, the Court may transfer the case either to the
District of Delaware, where DocuSign is incorporated, or to the Northern District of California,
' Because the Court finds that DocuSign does not have a regular and established place of business
in the District, it need not consider whether DocuSign has committed acts of infringement in the
District.
where DocuSign is headquartered. In both districts, personal jurisdiction exists and patent venue
is proper. See Def.’s Reply at 12-13; PI.’s Opp. at 14; TC Heartland, 137 S. Ct. at 1521.
In assessing venue, the Court is guided by the factors enumerated in 28 U.S.C. § 1404(a).
Melnattur v. U.S. Citizenship & Immigr. Servs., No. 20-cv-3013, 2021 WL 3722732, at *3 n.4
(D.D.C. Aug. 23, 2021) (suggesting that “the framework for assessing a transfer under § 1406(a)
is essentially identical to that under § 1404(a)”). These include “the plaintiff's choice of forum,”
“the defendant’s choice of forum,” “where the claim arose,” “the convenience of the parties . . .
and the witnesses,” and “the ease of access to sources of proof.” Jd. at *4. On balance, these
factors favor transferring this case to the Northern District of California. DocuSign is
headquartered in the Northern District of California, so most of the witnesses and sources of proof
are likely located there. Def.’s Reply at 13-14. Further, DocuSign does not have an office close
to Delaware. Jd, Although Clark argues that he would be inconvenienced by the need to travel to
California, see Pl.’s Opp. at 14, he frequently travels to the Northern District of California to testify
as an expert witness, see Def.’s Reply at 14 & n.2 (listing cases in which Clark has testified there).
Clark and DocuSign are also already involved in related, pending litigation with each other in the
Northern District of California. Def.’s Notice of Supp. Authority at 1-2, Dkt. 36. Accordingly,
weighing the relevant factors, the Court will transfer this action to the Northern District of
California.
CONCLUSION
For the foregoing reasons, the Court will grant the defendant’s motion to transfer. Venue
is improper in this District, and the Court will transfer this action to the Northern District of
California. A separate order consistent with this decision accompanies this memorandum opinion.
(Vol. SL Facil.
DABNEY L. FRIEDRICH
November 4, 2022 United States District Judge
10 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483826/ | Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/15/2022 09:05 AM CST
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Nebraska Court of Appeals Advance Sheets
31 Nebraska Appellate Reports
SPARKS V. MACH
Cite as 31 Neb. App. 461
Kayleen Sparks, appellant, v. David Mach,
Special Administrator of the Estate
of Leo Mach, deceased, appellee.
___ N.W.2d ___
Filed November 15, 2022. No. A-21-1041.
1. Judgments: Appeal and Error. When reviewing questions of law, an
appellate court resolves the questions independently of the lower court’s
conclusion.
2. Summary Judgment: Appeal and Error. An appellate court will affirm
a lower court’s grant of summary judgment if the pleadings and admit-
ted evidence show that there is no genuine issue as to any material facts
or as to the ultimate inferences that may be drawn from the facts and
that the moving party is entitled to judgment as a matter of law.
3. ____: ____. In reviewing the grant of a motion for summary judgment,
an appellate court views the evidence in the light most favorable to the
party against whom the judgment was granted, giving that party the
benefit of all reasonable inferences deducible from the evidence.
4. Decedents’ Estates: Statutes. The Nebraska Probate Code provides the
procedure for bringing a claim against a decedent’s estate.
5. Decedents’ Estates: Claims. Under Neb. Rev. Stat. § 30-2404 (Reissue
2016), a claim against a decedent’s estate cannot be commenced before
the county court has appointed a personal representative.
6. Statutes: Appeal and Error. Statutory language is to be given its plain
and ordinary meaning, and an appellate court will not resort to inter-
pretation to ascertain the meaning of statutory words which are plain,
direct, and unambiguous.
7. Decedents’ Estates: Executors and Administrators: Statutes. Because
a personal representative is not a natural person, but, rather, an entity
created by statute through a court order of appointment, when an estate
is closed and the personal representative discharged, there is no viable
entity or person to sue.
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8. Limitations of Actions. Under certain situations as set forth in Neb.
Rev. Stat. § 25-201.02 (Reissue 2016), an amended complaint may
relate back to the commencement date of an earlier complaint.
Appeal from the District Court for Douglas County: Todd
O. Engleman, Judge. Affirmed.
William J. Pfeffer, of Pfeffer Law Offices, for appellant.
Kyle Wallor, of Lamson, Dugan & Murray, L.L.P., for
appellee.
Moore, Riedmann, and Welch, Judges.
Moore, Judge.
INTRODUCTION
Kayleen Sparks filed this negligence action against David
Mach, as special administrator of the estate of the decedent,
Leo Mach (Mach). At the time of Sparks’ original complaint,
Mach’s estate was closed and David had been discharged as
special administrator. Sparks’ motion to reopen the estate and
reappoint David was granted, and she subsequently filed an
amended complaint, which she sought to relate back to her
original pleadings. The district court found Sparks’ complaint
to be a legal nullity and granted David’s motion for summary
judgment. We affirm.
STATEMENT OF FACTS
Sparks and Mach were involved in a motor vehicle accident
in Douglas County, Nebraska, on March 3, 2017. Mach died
on September 6, apparently of causes unrelated to the accident
with Sparks.
Mach’s death prompted the opening of his estate. On
November 20, 2018, Mach’s son, David, was appointed special
administrator of the estate. The estate was closed on December
11, 2019, and David was discharged as special administrator.
On February 24, 2021, Sparks filed a complaint against
“DAVID MACH, Special Administrator for THE ESTATE OF
LEO MACH,” which alleged Mach’s negligence in the March
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SPARKS V. MACH
Cite as 31 Neb. App. 461
3, 2017, accident. Upon learning that the estate had previously
closed, Sparks filed a motion on March 4, 2021, in Douglas
County Court to reopen the estate and reappoint David as spe-
cial administrator. The motion was granted the following day.
David was served with the original complaint on March 8.
On April 7, 2021, David filed a motion to dismiss, alleging
a lack of jurisdiction, insufficiency of process, and a failure by
Sparks to state a claim upon which relief could be granted.
Sparks filed an amended complaint on April 21, 2021. The
amended complaint added the assertion that although David
had been discharged as special administrator in December
2019, Mach’s estate had been reopened and David reappointed
as special administrator on March 5. The amended complaint
was again filed against David as the special administrator of
Mach’s estate. On April 23, Sparks filed a motion requesting
leave to again amend her complaint. David was served with the
amended complaint the same day.
A hearing on David’s motion to dismiss was held on May
14, 2021. Both parties agreed that David was not the special
administrator of Mach’s estate at the time Sparks filed her
original negligence complaint. However, Sparks argued that
because David was reappointed as special administrator of
Mach’s reopened estate between the filing and service of the
original complaint, and because Sparks’ amended complaint
related back to her original complaint, any alleged defect in
the original complaint was cured. David argued that based
on Nebraska case law, an estate must first be opened and a
personal representative or special administrator appointed in
order for there to be an entity to sue. Because David had been
discharged as the special administrator from Mach’s closed
estate at the time Sparks filed her original complaint, David
argued that the suit was a legal nullity and could not be related
back to the original complaint. The court took the matter
under advisement.
In a detailed order entered on May 27, 2021, the district
court denied David’s motion to dismiss. The court first noted
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SPARKS V. MACH
Cite as 31 Neb. App. 461
that, because David had been reappointed as special adminis-
trator and was served by certified mail on March 8, the allega-
tions in his motion to dismiss related to jurisdiction and service
failed. Turning to David’s allegation that Sparks had failed to
state a claim upon which relief could be granted, the court
observed that Nebraska appellate courts have not previously
addressed whether a plaintiff may cure an improperly filed
claim against a former special administrator of a closed estate
or whether such a filing is a legal nullity and thus incurable.
The court distinguished the facts of the present case with those
cited by David. Because the court found the case involved
a novel question of law, it declined to decide it on a motion
to dismiss.
The court also granted Sparks’ motion for leave to amend
and assumed, without deciding, that Sparks’ amended com-
plaint stated a claim for relief.
On June 1, 2021, Sparks filed a second amended complaint.
The second amended complaint added a paragraph related to
Sparks’ age and life expectancy. David was served with the
second amended complaint on June 3.
On July 2, 2021, David filed an answer to Sparks’ second
amended complaint and a motion for summary judgment. In
his answer, David noted that he was not reappointed as special
administrator, and Mach’s estate not reopened, until March
5—2 days after the statute of limitations for negligence had
run. On July 15, Sparks filed responses to David’s affirmative
defenses and motion for summary judgment.
A hearing was held on David’s motion for summary judg-
ment on August 3, 2021. A bill of exceptions from this hear-
ing is not included in our record. In an order entered on
September 16, the district court granted David’s motion for
summary judgment and dismissed Spark’s complaint with
prejudice. Specifically, the court found that Spark’s origi-
nal complaint was an attempt to assert a claim against a
closed estate and its discharged representative, and thus was
a legal nullity. The court determined that neither the amended
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SPARKS V. MACH
Cite as 31 Neb. App. 461
complaint nor the second amended complaint related back to
the original complaint to cure the alleged defects because the
original complaint was a nullity. The court further found that
because Sparks failed to properly commence her claim against
David as the special administrator of Mach’s estate, she there-
fore failed to comply with the applicable 4-year statute of
limitations, which ran on March 3.
On September 24, 2021, Sparks filed a motion to reconsider
and vacate. While that motion was pending, Sparks appealed
the district court’s grant of summary judgment to this court.
On October 25, we dismissed Sparks’ appeal in case No.
A-21-828 for lack of jurisdiction. On December 9, the district
court entered an order denying Sparks’ motion to reconsider
and vacate.
Sparks appeals.
ASSIGNMENTS OF ERROR
Sparks assigns, reordered, that the district court erred in (1)
finding that Sparks’ original complaint was a legal nullity, (2)
finding that Sparks’ amended complaint did not relate back
to the original complaint, and (3) granting Mach’s motion for
summary judgment.
STANDARD OF REVIEW
[1] When reviewing questions of law, an appellate court
resolves the questions independently of the lower court’s con-
clusion. Kozal v. Snyder, 312 Neb. 208, 978 N.W.2d 174
(2022).
[2] An appellate court will affirm a lower court’s grant of
summary judgment if the pleadings and admitted evidence
show that there is no genuine issue as to any material facts or
as to the ultimate inferences that may be drawn from the facts
and that the moving party is entitled to judgment as a matter
of law. Id.
[3] In reviewing the grant of a motion for summary judg-
ment, an appellate court views the evidence in the light
most favorable to the party against whom the judgment was
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SPARKS V. MACH
Cite as 31 Neb. App. 461
granted, giving that party the benefit of all reasonable infer-
ences deducible from the evidence. Id.
ANALYSIS
The pertinent facts are undisputed, and we see this appeal as
purely a question of law.
Legal Nullity.
Sparks alleges that the district court erred in finding her
original complaint to be a legal nullity. She asserts that her
corrective actions, namely moving to reopen Mach’s estate and
reappoint David, are specifically addressed in Nebraska case
law, but were ignored by the court.
[4-6] The Nebraska Probate Code provides the procedure
for bringing a claim against a decedent’s estate. Babbitt v.
Hronik, 261 Neb. 513, 623 N.W.2d 700 (2001). Neb. Rev.
Stat. § 30-2404 (Reissue 2016) states in part that “[n]o pro-
ceeding to enforce a claim against the estate of a decedent
or his successors may be revived or commenced before the
appointment of a personal representative.” An action is com-
menced on the date the complaint is filed with the court. Neb.
Rev. Stat. § 25-217 (Cum. Supp. 2020). Statutory language is
to be given its plain and ordinary meaning, and an appellate
court will not resort to interpretation to ascertain the mean-
ing of statutory words which are plain, direct, and unam-
biguous. In re Estate of Severson, 310 Neb. 982, 970 N.W.2d
94 (2022).
[7] Nebraska appellate courts have long held that a per-
sonal representative is not a natural person, but, rather, an
entity created by statute through a court order of appoint-
ment. See Pilger v. State, 120 Neb. 584, 585, 234 N.W. 403,
404 (1931) (“[e]xecutors and administrators in Nebraska are
creatures of statute”). Thus, when an estate is closed and the
personal representative discharged, there is no viable entity
or person to sue. See, Correa v. Estate of Hascall, 288 Neb.
662, 850 N.W.2d 770 (2014); Estate of Hansen v. Bergmeier,
20 Neb. App. 458, 825 N.W.2d 224 (2013). We turn to the
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Cite as 31 Neb. App. 461
Nebraska appellate cases which discuss suits initiated against
closed estates.
Neb. Rev. Stat. § 30-2457 (Reissue 2016) permits a special
administrator to be appointed after notice when a personal
representative cannot or should not act and also permits the
appointment of a special administrator without notice when an
emergency exists. A special administrator appointed by order
of the court in any formal proceeding has the power of a per-
sonal representative except as limited in the appointment and
duties as prescribed in the order. Neb. Rev. Stat. § 30-2460
(Reissue 2016). In 2018, the county court appointed David as
special administrator of Mach’s estate for the purpose of exe-
cuting “any and all documents” and assisting creditors in their
claims against Mach’s estate “with the power of a Personal
Representative.” Thus, we find that the case law describing
the personal representative’s role in managing a claim against
a decedent’s estate to be applicable to David’s role as spe-
cial administrator.
Babbitt v. Hronik, 261 Neb. 515, 623 N.W.2d 700 (2001),
involved a suit by Barbara A. Babbitt against Blanche M.
Hronik for damages caused by a motor vehicle accident. The
action was filed after Hronik was deceased, her estate had been
closed, and her personal representative discharged. At Babbitt’s
request, the personal representative was reappointed for the
sole purpose of being served with process. The personal repre-
sentative was then served with the suit, which named Hronik
personally. The personal representative moved for summary
judgment. The district court granted summary judgment and
determined that the cause of action had not been properly com-
menced, because Babbitt had failed to file a petition against the
personal representative.
On appeal, Babbitt argued that she was unaware Hronik
was deceased until after she had filed her petition and the
summons was returned unserved. Once she received this infor-
mation, however, she complied with the correct statutory pro-
cedures for bringing a claim against a decedent. The Nebraska
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Supreme Court found that Babbitt’s claim against Hronik’s
estate could not have commenced before the county court
reappointed the personal representative. Id. Further, because
Babbitt’s suit was directed against Hronik individually, rather
than against the personal representative acting in her repre
sentative capacity, the action was a nullity. See id.
In Estate of Hansen v. Bergmeier, 20 Neb. App. 458, 825
N.W.2d 224 (2013), a claimant filed a negligence action related
to a motor vehicle accident against a discharged personal rep-
resentative of a closed estate. In his answer to the complaint,
the former personal representative alleged that the claimant
had failed to state a claim upon which relief could be granted
and filed a motion for summary judgment. The district court
granted summary judgment, finding that an action could not
be initiated against a former personal representative while the
estate remained closed.
This court affirmed the district court’s grant of summary
judgment. We reasoned that
a personal representative is not a natural person, but,
rather, an entity created by statute through a court order
of appointment. . . . Thus, it naturally follows that when
the estate is closed and the personal representative is
discharged, there is no viable entity or person to sue,
because the tort-feasor is deceased, his or her estate is
closed, and there is no longer a personal representative.
Id. at 466, 825 N.W.2d at 231. We further found that the
attempt to assert a claim against a closed estate and its dis-
charged representative constituted a legal nullity. Estate of
Hansen v. Bergmeier, supra.
Correa v. Estate of Hascall, 288 Neb. 662, 850 N.W.2d
770 (2014), involved a negligence action arising out of a
motor vehicle accident, filed against the estate and the estate’s
personal representative. Prior to Gloria Correa’s filing her
action, E. Dean Hascall’s estate had been closed and the per-
sonal representative discharged. Several months into the suit,
the estate and its former personal representative moved for
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summary judgment and Correa filed a motion for an emer-
gency order to reopen the estate, which was granted by the
probate court. The district court granted the estate’s motion
for summary judgment.
The Supreme Court, citing our reasoning in Estate of
Hansen v. Bergmeier, supra, affirmed the district court’s grant
of summary judgment and found that Correa had failed to
properly commence her suit against the estate or the personal
representative, because the estate had been closed and the
personal representative had been discharged. Correa v. Estate
of Hascall, supra. Although Correa argued on appeal that her
motion to reopen the estate related back to her original neg-
ligence action, the Supreme Court noted that Correa’s suit
had been dismissed by operation of law because the newly
appointed personal representative was not served within 6
months after the suit’s filing. Id.
Sparks points to Mach v. Schmer, 4 Neb. App. 819, 550
N.W.2d 385 (1996), in which a claimant filed an action against
a former personal representative for injuries sustained in a
motor vehicle accident. In that case, this court held that the
former personal representative was entitled to summary judg-
ment because she had been discharged and the estate remained
closed. See Mach v. Schmer, supra. Sparks argues that the
present case is distinguishable, because the claimant had not
at any time moved to reopen the estate and have the personal
representative reappointed. Id. We disagree that such distinc-
tion changes the outcome here.
We find that the plain and ordinary meaning of § 30-2404
prohibits the commencement of a claim against an estate prior
to the appointment of a special administrator. In this case,
Sparks’ original complaint failed to comply with § 30-2404,
because it was filed against David as special administrator
of Mach’s estate on February 24, 2021. On that date, David
had been discharged as special administrator and was not
reappointed until March 5. Although Sparks argues that she
“quickly rectified the fact that the estate had been closed,”
- 470 -
Nebraska Court of Appeals Advance Sheets
31 Nebraska Appellate Reports
SPARKS V. MACH
Cite as 31 Neb. App. 461
brief for appellant at 17, the fact remains that there was no
estate open or special administrator appointed at the time
the complaint was filed. Nor are we persuaded by the fact
that David was served with the original complaint after he
was reappointed as special administrator. The controlling fact
remains that Sparks filed her original complaint, and thus com-
menced a proceeding to enforce a claim against Mach’s estate,
before the estate was reopened and David was reappointed.
Sparks’ actions to rectify the situation occurred after the statute
of limitations had run.
Sparks’ attempt to assert a claim against a closed estate and
its discharged special administrator was a nullity. See Estate
of Hansen v. Bergmeier, 20 Neb. App. 458, 825 N.W.2d 224
(2013). This assignment of error fails.
Relation-Back Doctrine.
Next, Sparks asserts that the district court erred in finding
that the relation-back doctrine did not apply. She argues that
her amended pleadings comply with the relevant statutory
language because she did not change the name of the party
against whom her original claim was asserted, nor the sub-
stance of the claim. Further, the claim asserted in all of Sparks’
pleadings was related to the same motor vehicle accident in
March 2017. Sparks contends that because she obtained an
order reappointing David special administrator before filing
her amended complaint, the relation-back doctrine applies and
allows her original complaint to reach Mach’s estate.
[9] Sparks is generally correct that her pleadings com-
ply with the relation-back doctrine found in Neb. Rev. Stat.
§ 25-201.02(1) (Reissue 2016). Under certain situations as
set forth in § 25-201.02, an amended complaint may relate
back to the commencement date of an earlier complaint.
Correa v. Estate of Hascall, 288 Neb. 662, 850 N.W.2d 770
(2014). However, the Nebraska Supreme Court has held that
an amended complaint does not relate back to the original
complaint under § 25-201.02 when the original complaint was
- 471 -
Nebraska Court of Appeals Advance Sheets
31 Nebraska Appellate Reports
SPARKS V. MACH
Cite as 31 Neb. App. 461
a nullity. See, Kelly v. Saint Francis Med. Ctr., 295 Neb. 650,
889 N.W.2d 613 (2017); Reid v. Evans, 273 Neb. 714, 733
N.W.2d 186 (2007).
In Reid v. Evans, supra, Monica Reid filed a negligence
action related to a motor vehicle accident against Donald
Evans, who had died prior to the filing. A copy of the com-
plaint naming Evans as the sole defendant was served on
the personal representative of Evans’ estate. The personal
representative filed a motion to dismiss, and Reid sought to
amend her complaint to add the personal representative under
the relation-back doctrine. The county court determined that
because Reid’s complaint naming Evans as the sole defend
ant had not been served on the only-named party defendant
within the 6-month service of process period, Reid’s action
stood dismissed by operation of law. The county court also
denied relief to Reid on her motion to amend. On appeal, the
Supreme Court agreed that Reid’s complaint was properly
dismissed by operation of law and that once the case stood
dismissed, Reid’s subsequent motion to amend and relate back
was a nullity. As recognized in a concurrence, there must
be an action pending at the time in order for § 25-201.02 to
allow relation back. Reis v. Evans, supra (Miller-Lerman, J.,
concurring).
Kelly v. Saint Francis Med. Ctr., supra, involved a pro se
wrongful death action against a medical center, among other
defendants. Ann Kelly later filed, through counsel, a motion
for leave to file an amended complaint. The district court
concluded that an amended complaint could not relate back
to the date of the original filing and dismissed the action as
untimely.
On appeal, the Supreme Court found Kelly’s complaint
to be a legal nullity because Kelly was a nonattorney at the
time she filed her original complaint. Id. Relying on Reid v.
Evans, supra, the Supreme Court observed that the relation-
back doctrine was inapplicable when the original complaint is
a nullity. The court concluded that “a nonexistent complaint
- 472 -
Nebraska Court of Appeals Advance Sheets
31 Nebraska Appellate Reports
SPARKS V. MACH
Cite as 31 Neb. App. 461
. . . cannot be corrected.” Kelly v. Saint Francis Med. Ctr.,
295 Neb. at 666, 889 N.W.2d at 624.
Based upon the foregoing authority, we conclude that
§ 25-201.02 does not allow for relation back to cure the defect
which rendered the original complaint in this action a legal
nullity. See Kelly v. Saint Francis Med. Ctr., supra. Because
Mach’s estate was closed and the special administrator dis-
charged, there was no action pending at the time of Sparks’
original complaint and nothing for the amended complaint to
relate back to. This assignment of error fails.
Summary Judgment.
Finally, Sparks asserts that the district court erred in grant-
ing David’s motion for summary judgment.
We determined above that Sparks’ original complaint was
a nullity and that the relation-back doctrine did not apply to
Sparks’ amended complaint. Thus, there is no genuine issue
as to any material facts and David is entitled to judgment as a
matter of law. See Kozal v. Snyder, 312 Neb. 208, 978 N.W.2d
174 (2022).
CONCLUSION
Because the estate was not reopened and David was not
reappointed as special administrator prior to Sparks’ filing
her original complaint, the complaint was a legal nullity. The
relation-back doctrine did not apply, and Sparks’ amended
complaint did not cure defects which rendered the original
complaint a nullity. Thus, no genuine issue of material fact
existed and David’s motion for summary judgment was prop-
erly granted by the district court.
Affirmed. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483824/ | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
K.J., et al.,
Plaintiffs,
v. Civil Action No. 22-180 (JEB)
UNITED STATES OF AMERICA,
Defendant.
MEMORANDUM OPINION
Pseudonymous Plaintiffs K.J. and J.S. were female contract employees at the United
States Department of Veterans Affairs. During their time there, a VA employee surreptitiously
recorded them and other women using two cameras hidden in a women’s restroom. Plaintiffs
thus bring the present action against the United States under the Federal Tort Claims Act for
what they contend was the Government’s negligent failure to discover the second camera or to
warn Plaintiffs that it might exist.
Defendant moves to dismiss, arguing both that the discretionary-function exception to the
FTCA’s waiver of sovereign immunity bars the suit and that Plaintiffs’ claim depends upon an
untenable theory of premises liability. Because the Court is persuaded that the Government is
correct, it will grant the Motion.
I. Background
In setting forth the background here, the Court accepts as true at this stage all factual
assertions alleged in Plaintiffs’ Complaint and draws all reasonable inferences in their favor. See
Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011).
1
In January 2019, Plaintiffs were employed by contractors for the VA, and they worked at
the VA headquarters building. See ECF No. 4 (Compl.), ¶ 9. That month, then-VA employee
Alex Greenlee installed two hidden micro-video cameras in the stalls of the twelfth-floor female
restrooms in order to secretly record women using the facilities. Id., ¶ 13. A woman working in
the building discovered one of these cameras on January 25, 2019, and reported its presence to
the Federal Protective Service, the law-enforcement agency responsible for federal facilities like
the VA. Id., ¶¶ 14–15.
Upon receiving that report, FPS seized the camera and identified Greenlee as the person
likely responsible for its placement the same day. Id., ¶¶ 16–17. The VA immediately fired him
and barred him from the premises, id., ¶ 17, and he was subsequently arrested and pled guilty to
counts related to the recordings. Id., ¶ 19.
Plaintiffs allege that they were assured that the restroom was safe to use after the first
camera was discovered. Id., ¶ 16. Despite these assurances and allegedly because of FPS’s
failure to conduct a thorough initial search for more cameras, Plaintiff J.S. discovered a second
camera three days later beneath a different stall in the same restroom. Id., ¶¶ 18, 20. Subsequent
analysis revealed that the cameras captured images of Plaintiffs and other victims using the
restroom and that some of this footage was recorded by the second camera after the first had
been discovered. Id., ¶ 21.
Plaintiffs filed this suit against the Government under the FTCA on January 23, 2022,
seeking to recover for the “significant emotional distress, suffering, shame, physical injuries, . . .
medical expenses[,] and other damages,” id., that they suffered by way of the FPS’s and the
VA’s alleged negligence. Id., ¶¶ 22–25. They allege in their sole count that the United States is
vicariously liable for its failure to maintain its premises in a reasonably safe condition and to
2
warn Plaintiffs of the danger of voyeuristic recording in light of the first camera’s discovery. Id.,
¶¶ 22, 25. Defendant now moves to dismiss. See ECF No. 12 (Def. MTD).
II. Legal Standard
Defendant’s Motion invokes Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).
When a defendant files a Rule 12(b)(1) motion to dismiss for lack of subject-matter jurisdiction,
the plaintiff generally “bears the burden of establishing jurisdiction by a preponderance of the
evidence.” Bagherian v. Pompeo, 442 F. Supp. 3d 87, 91–92 (D.D.C. 2020) (quoting Didban v.
Pompeo, 435 F. Supp. 3d 168, 172–73 (D.D.C. 2020)); see Lujan v. Defenders of Wildlife, 504
U.S. 555, 561 (1992). The Court “assume[s] the truth of all material factual allegations in the
complaint and ‘construe[s] the complaint liberally, granting plaintiff the benefit of all inferences
that can be derived from the facts alleged.’” Am. Nat’l Ins. Co., 642 F.3d at 1139 (quoting
Thomas v. Principi, 394 F.3d 970, 972 (D.C. Cir. 2005)).
To survive a motion to dismiss under Rule 12(b)(6), conversely, a complaint must “state
a claim upon which relief can be granted.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 552
(2007). Although “detailed factual allegations” are not necessary to withstand a Rule 12(b)(6)
motion, id. at 555, “a complaint must contain sufficient factual matter, [if] accepted as true, to
‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Twombly, 550 U.S. at 570). While a plaintiff may survive a Rule 12(b)(6) motion even
if “‘recovery is very remote and unlikely,’” the facts alleged in the complaint “must be enough to
raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555–56 (quoting
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
3
III. Analysis
To properly set the stage, it is important to note that Plaintiffs seek to hold the United
States liable only with regard to the second camera. They do not allege any negligence prior to
the discovery of the first. In seeking dismissal here, the Government makes two independent
arguments. It first contends that the Court lacks subject-matter jurisdiction under the
discretionary-function exception to the FTCA’s waiver of sovereign immunity. It further
maintains that, as a matter of District of Columbia law, Plaintiffs have failed to state a claim for
premises liability. The Court discusses each in turn.
A. Subject-Matter Jurisdiction
Plaintiffs’ suit invokes the FTCA, which waives the Government’s sovereign immunity
from tort claims when “the United States, if a private person, would be liable to the claimant in
accordance with the law of the place where the act or omission occurred.” 28 U.S.C.
§ 1346(b)(1). An exception to this waiver, however, bars claims against the Government “based
upon the exercise or performance or the failure to exercise or perform a discretionary function or
duty on the part of a federal agency or an employee of the Government.” 28 U.S.C. § 2680(a).
An analysis of this discretionary-function exception involves two prongs, each of which
the Government must satisfy to prevail. The first assesses “whether the challenged actions were
discretionary, or whether they were instead controlled by mandatory statutes or regulations.”
United States v. Gaubert, 499 U.S. 315, 328 (1991). Where a “federal statute, regulation, or
policy specifically prescribes a course of action for an employee to follow,” id. at 322 (internal
quotation marks omitted), “the employee has no rightful option but to adhere to the directive”
and “[f]ailure to abide by such directives opens the United States to suit.” Loughlin v. United
4
States, 393 F.3d 155, 163 (D.C. Cir. 2004) (quoting Berkovitz v. United States, 486 U.S. 531,
536 (1988)).
For those acts that “involve[] an element of judgment,” id., and are thus discretionary, the
Court next looks at whether they are “of the nature and quality that Congress intended to shield
from tort liability.” Id. (quoting United States v. S.A. Empresa de Viacao Aerea Rio Grandense,
467 U.S. 797, 813 (1984)). “The exception protects only those actions ‘based on considerations
of public policy’ because its purpose ‘is to prevent judicial second-guessing of legislative and
administrative decisions grounded in social, economic, and political policy through the medium
of an action in tort.’” Bryant v. United States, No. 20-4, 2022 WL 2713269, at *2 (D.D.C. July
13, 2022) (quoting Gaubert, 499 U.S. at 323).
Even assuming that Plaintiffs’ premises-liability count encompasses a negligent-
investigation theory, the Court finds under the first prong of the Gaubert test that the procedures
that the VA and FPS followed upon discovery of the first camera were discretionary. Courts
generally treat the scope of security measures and criminal investigations as areas involving
discretion. Singh v. S. Asian Soc’y of The George Wash. Univ., No. 06-574, 2007 WL 1521050,
at *4 (D.D.C. May 21, 2007) (“The United States is correct that courts — both in this Circuit and
elsewhere — generally treat decisions regarding security measures at government buildings as
matters of discretion that cannot form the basis for a claim under the FTCA.”); Haygan v. United
States, 627 F. Supp. 749, 750 (D.D.C. 1986) (“[C]ourts have found providing building security a
discretionary function.”); Turner v. United States, 473 F. Supp. 317, 320 (D.D.C. 1979) (“The
responsibility for determining and providing protective service in a GSA-maintained building” is
a matter of discretion to be “made by GSA on a case-by-case basis”). This is because “the
sifting of evidence, the weighing of its significance, and the myriad other decisions made during
5
investigations plainly involve elements of judgment and choice.” Donahue v. United States, 870
F. Supp. 2d 97, 107 (D.D.C. 2012) (holding SEC investigation into Bernie Madoff barred by
discretionary-function exception).
In order to rebut this general rule, Plaintiffs must be able to point to some “regulation or
policies that prescribed a nondiscretionary duty,” Bryant, 2022 WL 2713269, at *3, to
thoroughly investigate the area where the camera was found for more recording devices. Yet
they cite only provisions of the FPS training manual requiring officers to document crime scenes
as necessary and to conduct accurate investigations. See ECF No. 18-1 (Pl. Opp.) at 17–20.
That is insufficient to establish that FPS — and hence the VA — was under any such binding
mandate. The decision not to search for more cameras was therefore a discretionary one.
So finding, the Court next turns to the question of whether decisions about the scope of
an investigation like the one here are “based on considerations of public policy.” Loughlin, 393
F.3d at 163. While “[d]etermining whether a decision is [based on considerations of public
policy] is admittedly difficult, since nearly every government action is, at least to some extent,
subject to ‘policy analysis,’” Cope v. Scott, 45 F.3d 445, 448 (D.C. Cir. 1995), “[c]ourts have,
nonetheless, generally found decisions that involve ‘political, social, and economic judgments’ to
fit the bill.” Bryant, 2022 WL 2713269, at *3 (quoting Berkovitz, 486 U.S. at 539). As the
Government notes, “[E]ach FPS investigation is subject to policy considerations involving
limited manpower, time, and funding.” ECF No. 20 (Def. Reply) at 5. These are exactly the
kinds of considerations that satisfy the second step of the Gaubert test. The Court accordingly
concludes that it lacks subject-matter jurisdiction over Plaintiffs’ suit, which is barred by the
discretionary-function exception. See Bryant, 2022 WL 2713269, at *4 (dismissing failure-to-
warn claim under discretionary-function exception).
6
B. Premises Liability
There is an independent reason why dismissal is warranted. Plaintiffs’ theory is that the
VA “should have known of the existence of the second invasive micro-camera in the twelfth-
floor female restroom and eliminated and warned of the dangerous condition before Plaintiffs
and other women were injured by it.” Compl., ¶ 22. Yet this is insufficient to establish a cause
of action for premises liability.
“To make out a prima facie case of liability predicated upon the existence of a dangerous
condition it is necessary to show that the party against whom negligence is claimed had actual
notice of the dangerous condition or that the condition had existed for such length of time that, in
the exercise of reasonable care, its existence should have become known and corrected.”
Sullivan v. AboveNet Commc’ns, Inc., 112 A.3d 347, 356 (D.C. 2015) (quoting Anderson v.
Woodward & Lothrop, 244 A.2d 918, 918–19 (D.C. 1968)). The problem for Plaintiffs is that
their pleadings contain no allegation that the VA knew that there was a second camera. Nor does
the Complaint plausibly allege that the Government was put on the required notice by the
discovery of the first camera. In other words, in light of the perpetrator’s removal from the
building on the same day that the first camera was discovered, as well as the declaration from
law enforcement that the restroom was safe to use, Plaintiffs plead no facts sufficient to imply
that the VA should have foreseen the existence of a second camera. As a matter of District of
Columbia law, therefore, Plaintiffs have not plausibly pled premises liability.
* * *
There can be no doubt that Plaintiffs here have suffered harm. What Alex Greenlee did
to them was a violation of their dignity and an invasion of their privacy. The question before the
Court, though, is whether the Government can be held liable for that harm. Because Plaintiffs’
7
claims both cannot overcome sovereign immunity and do not establish premises liability, the
Court must dismiss the case.
IV. Conclusion
For the foregoing reasons, the Court will grant Defendants’ Motion to Dismiss. A
separate Order so stating will issue this day.
s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: November 15, 2022
8 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483759/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-22-00660-CV
In re Billie O. Stone
ORIGINAL PROCEEDING FROM COMAL COUNTY
MEMORANDUM OPINION
Relator Billie O. Stone concurrently filed this and another identically styled
petition for writ of mandamus, both of which complain of an allegedly fraudulent lien.1 Each
indicates that it is related to an appeal already pending before this Court.2 We conclude that
the record before us is insufficient to allow us to consider Stone’s petition. See Tex. R. App.
P. 52.7(a)(1), (2). The rules of appellate procedure require a relator to file a certified or sworn
copy of every document that is material to the relator’s claim for relief and that was filed in
the underlying proceeding and a properly authenticated transcript of any relevant testimony from
any underlying proceeding (including any exhibits offered in evidence) or a statement that no
testimony was adduced in connection with the matter. Id. The filings in this case do not comply
1
The companion petition is In re Billie O. Stone, No. 03-22-00664-CV (Tex. App.—
Austin filed Oct. 18, 2022). Both petitions were filed as In re To a Fraudulent Purported
Lien or Claim Against, Billie O. Stone and Patricia A. Stone but have been modified to conform
to Rule 52.1 of the Texas Rules of Appellate Procedure regarding the captioning of an original
proceeding.
2
Billie O. Stone d/b/a Stobil Enterprise v. Randolph-Brooks Federal Credit Union,
No. 03-21-00422-CV (Tex. App.—Austin filed Aug. 26, 2021).
with the requirements of rule 52.7 and, most notably, do not include a copy of a district court
order from which relief is sought.
Having reviewed the petition and the materials provided, we deny the petition for
writ of mandamus. See Tex. R. App. P. 52.8(a).
__________________________________________
Thomas J. Baker, Justice
Before Justices Goodwin, Baker, and Kelly
Filed: November 8, 2022
2 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483722/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
ISAAC ZIMMERMAN, No. 85584
Appellant,
vs. FILE
SPORTS CHALET, L.L.C.,
Respondent. NOV 1 0 2U22
ELIV .Til A. BROWN
CLERK 0' EUPREMC COURT
ORDER DISMISSING APPEAL
D UTY CLERK
This is a pro se appeal from a district court order denying
appellant's application for a default judgment. Eighth Judicial District
Court, Clark County; Crystal Eller, Judge.
Review of the notice of appeal and documents before this court
reveals a jurisdictional defect. This court "may only consider appeals
authorized by statute or court rule." Brown v. MHC Stagecoach, LLC, 129
Nev. 343, 345, 301 P.3d 850, 851 (2013). No statute or court rule allows an
appeal from a district court order denying an application for a default
judgment. Accordingly, this court lacks jurisdiction to consider this appeal
and
ORDERS this appeal DISMISSED.'
• , J.
---v r
Cadish
, Sr. J.
Pickering
'The Honorable Mark Gibbons, Senior Justice, participated in this
matter under a general order of assignment.
SUPREME COURT
OF
NEVADA
10) 1947A caar-,
cc: Hon. Crystal Eller, District Judge
Isaac Zirnmerman
Rogers, Mastrangelo, Carvalho & Mitchell, Ltd.
Eighth District Court Clerk
SUPREME COURT
OF
NEVADA
2
(01 1947A ailDp | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483731/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
IN THE MATTER OF DISCIPLINE OF No. 85192
ANDRAS F. BABERO, BAR NO. 1658
FILED
NOV 1 0 202
CLE Frr
ORDER OF SUSPENSION BY
H1EF DEPUlY CLERK
This is an automatic review of a Southe'rn Nevada Disciplinary
Board hearing panel's recommendation that attorney Andras F. Babero be
suspended from the practice of law for four years based on violations of RPC
1.1 (competence), RPC 1.3 (diligence), RPC 1.4 (communication), RPC 1.15
(safekeeping property), RPC 1.16 (declining or terminating representation),
RPC 3.2 (expediting litigation), RPC 5.5 (unauthorized practice of law), and
RPC 8.4 (misconduct). Because no briefs have been filed, this matter stands
submitted for decision based on the record. SCR 105(3)(b).
The State Bar has the burden of showing by clear and
convincing evidence that Babero committed the violations charged. See In
re Discipline of Drakulich, 111 Nev. 1556, 1566, 908 P.2d 709, 715 (1995).
We defer to the panel's factual findings that Babero violated the above-
referenced rules as those findings are supported by substantial evidence
and are not clearly erroneous. See SCR 105(3)(b); In re Discipline of Colin,
135 Nev. 325, 330, 448 P.3d 556, 560 (2019). In particular, the record shows
that, in representing a client and the client's business in two cases, Babero
failed to diligently work on the cases and to keep the client informed as to
their status. Babero also worked on one case while administratively
suspended for not filing the required CLE report. Ultimately, Babero
stopped working on the cases, resulting in the dismissal .of the client's
SUPREME COURT
claims in one case and a substantial adverse default judgment of $10 million
OF
NEVADA
(0) 1947A
22 • us-3,0
($2.5 million in compensatory damages and $7.5 million in punitive
damages) in the other.
Turning to the appropriate discipline, we review the hearing
panel's recommendation de novo. SCR 105(3)(b). Although we
"must . . . exercise independent judgment," the panel's recommendation is
persuasive. In re Discipline of Schaefer, 117 Nev. 496, 515, 25 P.3d 191, 204
(2001). In determining the appropriate discipline, we weigh four factors:
"the duty violated, the lawyer's mental state, the potential or actual injury
caused by the lawyer's misconduct, and the existence of aggravating or
mitigating factors." In re Discipline of Lerner, 124 Nev. 1232, 1246, 197
P.3d 1067, 1077 (2008).
The above actions violated the duties Babero owed to his client
and the legal system. His mental state was knowing and his actions caused
serious actual injury to his client, with the potential for further injury. The
baseline sanction for Babero's misconduct, before considering aggravating
and mitigating circumstances, is suspension. See Standards for Imposing
Lawyer Sanctions, Compendium of Professional Responsibility Rules and
Standards, Standards 4.42(a) (Am. Bar Ass'n 2017) (recommending
suspension when "a lawyer knowingly fails to perform services for a client
and causes injury or potential injury to a client"). The panel found, and the
record supports, one aggravating circumstance (substantial experience in
the practice of law) and three mitigating circumstances (absence of a recent
prior disciplinary record, absence of a dishonest or selfish motive, and
personal or emotional problems). Considering all the factors, we conclude
that a three-year suspension is sufficient to serve the purpose of attorney
discipline, see State Bar of Nev. v. Claiborne, 104 Nev. 115, 213, 756 P.2d
464, 527-28 (1988) (observing the purpose of attorney discipline is to protect
SUPREME COUFtT
OF
NEVADA
2
(0) I 947A (446D.
the public, the courts, and the legal profession), rather than the four-year
suspension recommended by the hearing panel.
Accordingly, we hereby suspend attorney Andras F. Babero
from the practice of law in Nevada for a period of three years commencing
from the date of this order. Babero shall also pay the costs of the
disciplinary proceedings, including $2,500 under SCR 120, within 30 days
from the date of this order. The parties shall comply with SCR 115 and SCR
121.1.
It is so ORDERED.1
Parraguirre Hardesty
Stiglich
J. J.
Pickering
cc: Chair, Southern Nevada Disciplinary Board
Andras F. Babero
Bar Counsel, State Bar of Nevada
Executive Director, State Bar of Nevada
Admissions Office, U.S. Supreme Court
1The Honorable Abbi Silver having retired, this matter was decided
SUPREME COURT by a six-justice court.
OF
NEVADA
3
(0) I947A | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483727/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
CHAD WINDHAM MITCHELL, No. 85489
Appellant,
vs.
CARSON CITY SHERIFF'S OFFICE,
Respondent. FILE
NOV 10 2022
ORDER DISMISSING APPEAL
This is a pro se notice of appeal from a district court "order
denying pretrial petition for a writ of habeas corpus." This court's review
of this appeal reveals a jurisdictional defect. Specifically, no appeal lies
from an order denying a presentence petition for a writ of habeas corpus.'
See NRS 34.724(1) (stating that a person convicted of a crime and under
sentence of death or imprisonment may file a postconviction petition for a
writ of habeas corpus); see also State v. Lewis, 124 Nev. 132, 178 P.3d 146
(2008) (stating that an order entered before judgment of conviction is
intermediate and not generally a final, appealable determination),
overruled on other grounds by State v. Harris, 131 Nev. 551, 355 P.3d 791
(2015). The right to appeal is statutory; where no statute or court rule
provides for an appeal, no right to appeal exists. See Castillo v. State, 106
"It appears that appellant has not yet been sentenced in district court
case number 21-CR002221B.
SUPREME COURT
OF
NEVADA
(0) 1947A 434141D
Nev. 349, 352, 792 P.2d 1133,1135 (1990). Accordingly, this court lacks
jurisdiction to consider this appeal, and
ORDERS this appeal DISMISSED.2
, J.
Hardesty
Ale.abat..0 J. J.
Stiglich Herndon
cc: Hon. James E. Wilson, District Judge
Chad Windham Mitchell
Attorney General/Carson City
Carson City District Attorney
Carson City Clerk
2 Giventhis order, this court takes no action on the pro se motions filed
on October 26, 2022, and November 7, 2022.
SUPREME COURT
OF
NEVADA
2
1.0) 1947A 434,5 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483745/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
ON REMAND
NO. 03-18-00573-CV
Appellants, Glenn Hegar, Comptroller of Public Accounts of the State of Texas; and
Ken Paxton, Attorney General of the State of Texas// Cross-Appellant, Sirius XM Radio, Inc.
v.
Appellee, Sirius XM Radio, Inc.// Cross-Appellees, Glenn Hegar, Comptroller of Public
Accounts of the State of Texas; and Ken Paxton, Attorney General of the State of Texas
FROM THE 261ST DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-GN-16-000739, THE HONORABLE SCOTT H. JENKINS, JUDGE PRESIDING
OPINION
This appeal arises from a suit filed by Sirius XM Radio, Inc. to recover franchise
taxes paid under protest to Glenn Hegar, Comptroller of Public Accounts of the State of Texas.
See Tex. Tax Code § 112.052. The matter appears before this Court on remand from the Texas
Supreme Court. See Sirius XM Radio, Inc. v. Hegar, 643 S.W.3d 402, 413 (Tex. 2022). In light
of the supreme court’s holding as to the location of Sirius XM’s performance of its services, we
now consider whether the evidence is legally sufficient to support the trial court’s conclusion that
Sirius XM properly apportioned its receipts for services performed in Texas for tax years 2010
and 2011. See Tex. Tax Code § 171.106(a). For the reasons that follow, we affirm the district
court’s judgment.
BACKGROUND
Franchise Tax
Texas imposes a franchise tax on each taxable entity that does business in this
state or that is chartered or organized in this state. See id. § 171.001(a). A taxable entity’s
franchise-tax obligation is determined by multiplying the “taxable margin” by the applicable
tax rate. See id. § 171.002 (“Rates; Computation of Tax”). Determining an entity’s “taxable
margin” is a three-step process. See id. § 171.101(a)(1)-(3) (“Determination of Taxable
Margin”). First, the taxable entity’s “margin” is calculated, which is generally a percentage of
total revenue. See id. § 171.101(a)(1). Next, the taxable entity’s margin is apportioned to its
business done in Texas. See id. § 171.101(a)(2). Finally, allowable deductions are subtracted
from the apportioned margin to yield the entity’s “taxable margin.” See id. § 171.101(a)(3).
Here, the parties’ dispute centers on the apportionment step in determining Sirius
XM’s taxable margin for the tax years 2010 and 2011. Apportionment is accomplished by
“multiplying a business’s total margin by an apportionment factor.” See Hallmark Mktg. Co. v.
Hegar, 488 S.W.3d 795, 796 (Tex. 2016). In its simplest terms, an apportionment factor
represents the percentage or fractional proportion of an entity’s gross receipts from its business
done in Texas relative to its gross receipts from its business everywhere, including in Texas.
See Tex. Tax Code § 171.106(a) (“Apportionment of Margin to this State”); Hallmark Mktg.,
488 S.W.3d at 796 (explaining that apportionment-factor numerator “consists of receipts from
business done in Texas and the denominator consists of receipts from all business”). Under this
formula, doing more business in Texas results in higher franchise taxes. OGCI Training, Inc. v.
Hegar, No. 03-16-00704-CV, 2017 Tex. App. LEXIS 10096, at *3-4 (Tex. App.—Austin
Oct. 27, 2017, no pet.) (mem. op.). Therefore, critical to the apportionment step is a
2
determination of the taxable entity’s gross receipts from its business done in Texas, which
includes receipts from “each service performed in this state.” Tex. Tax Code § 171.103(a)(2)
(“Determination of Gross Receipts from Business Done in This State for Margin”).
Sirius XM’s Franchise-Tax Dispute
Sirius XM is a foreign corporation that provides a subscription-based satellite
radio service, consisting of more than 150 channels of music, sports, news, talk, entertainment,
traffic, and weather channels to subscribers throughout the United States. During the 2010 and
2011 tax years, over 70 percent of Sirius XM’s programming consisted of original content
produced by Sirius XM specifically for its subscribers and could be obtained only by subscribing
to Sirius XM’s services. This original content was produced from multiple studios owned and
operated by Sirius XM, primarily in New York City and Washington, D.C., and in smaller remote
studios. Sirius XM had no permanent studios in Texas but transmitted a small radio show called
“Willie’s Place” from Hillsboro, Texas, and later from Fort Worth, Texas, for some portion of
2010 and 2011.
In its franchise-tax returns for tax years 2010 and 2011, Sirius XM calculated its
margin from the total revenue generated by its subscriptions. See id. § 171.101(a)(1). Sirius XM
then apportioned its reported subscription receipts for each year based on the locations where it
produced and transmitted its programming, a portion of which was in Texas. To calculate the
apportionment factor for these receipts, Sirius XM compared the cost of performing these
activities inside Texas to the cost of performing these activities everywhere, including Texas.
See id. § 171.103.
3
The Comptroller subsequently audited Sirius XM’s 2010 and 2011 returns and
disagreed with the methodology employed by Sirius XM in apportioning its subscription
receipts. In the Comptroller’s view, Sirius XM performs its services “at the radio receiver,”
where its signal is unscrambled, and as a result, a subscription receipt for a Sirius XM customer
in Texas is a receipt from “a service performed in this state.” See id. § 171.103(a)(2).
Consequently, at the conclusion of the audit, the Comptroller adjusted Sirius XM’s
apportionment factor to reflect the percentage of Sirius XM subscribers located in Texas. Sirius
XM paid, under protest, the additional tax and interest calculated as a result of the audit and then
filed suit in district court to obtain a refund. See id. § 112.052. Following a bench trial, the
district court concluded that the Comptroller’s adjustment to Sirius XM’s apportionment factor
was incorrect, rendered a judgment in favor of Sirius XM, and issued findings of fact and
conclusions of law.
The Comptroller’s Appeal
The Comptroller then appealed the district court’s decision to this Court,
challenging the district court’s conclusions as to where Sirius XM’s services were performed and
how the apportionment of those services in Texas should be calculated. See Hegar v. Sirius XM
Radio, Inc., 604 S.W.3d 125, 126 (Tex. App.—Austin 2020), rev’d, 643 S.W.3d 402, 413 (Tex.
2022). We determined that for the purpose of apportionment, (1) “service performed in this
state” means that the “receipt-producing, end-product act” occurs in Texas, and (2) the evidence
was insufficient to support the district court’s fact finding that Sirius XM’s “receipt-producing,
end-product” was the “production and distribution” of Sirius XM programming. Id. at 132-33.
In short, we concluded that the contracted-for service, from the standpoint of the subscriber, was
4
the delivery of Sirius XM programming and that under the “receipt-producing, end-product act”
standard, this occurred at the point of decryption, at the chip set in the subscriber’s radio. Id.
at 135. Because Sirius XM apportioned its subscriber receipts by comparing the cost of its
production and distribution in Texas with the cost of its production and distribution everywhere,
we similarly concluded that the trial court’s finding as to the apportionment of its services in
Texas was not supported by the evidence. Id. As a result, we did not consider the issue of
whether the comparative cost-of-performance method employed by Sirius XM to calculate its
apportionment factor for its services was proper under the Tax Code and the Commissioner’s
administrative rules.1
On petition for review, the Texas Supreme Court rejected the Comptroller’s
“receipts-producing, end-product act” standard for determining where a service is performed.
See Sirius XM, 643 S.W.3d at 410. The court held that “service performed in this state,” as that
phrase is used in Section 171.103(a)(2) of the Tax Code, “requires looking to the physical
location of the taxpayer’s personnel or equipment that performs the service for which the
customer pays.” Id. Applying that standard, the supreme court rejected the Comptroller’s
contention that Sirius XM performs its service where its transmission is decrypted. Id. at 411.
The supreme court concluded, instead, that the relevant service provided by Sirius XM is radio
production and broadcasting and that “Sirius has little personnel or equipment in Texas that
performs the radio production and transmission services for which its customers pay monthly
subscription fees.” Id. at 412.
1
Sirius XM, by cross-appeal, asserted that the trial court erred in concluding that it was
not allowed to include certain expenses (revenue share and hardware subsidies) in its cost-of-
goods-sold deduction. See Tex. Tax Code § 171.1012 (“Determination of Cost of Goods Sold”).
We overruled Sirius’s XM cross-appeal on this issue, and on petition for review, Sirius XM did
not challenge that portion of our decision.
5
Consequently, the supreme court reversed our judgment and remanded the case so
that we could consider the issue that we did not address in our previous opinion. Id. at 413. That
is, the court remanded for us to examine—in light of its holding on the predicate question of
where Sirius XM’s services are performed—whether the evidence presented by Sirius XM
concerning its comparative cost of performance is sufficient to support the district court’s
judgment and, specifically, its conclusion that Sirius XM correctly apportioned its receipts for
its services performed in Texas in tax years 2010 and 2011. Id. at 412; see Tex. Tax Code
§§ 171.101(a)(2), .106(a).
DISCUSSION
Fair Value of Services
As previously discussed, once a taxable entity determines that it has performed at
least some services in Texas during the relevant tax year, it must include its receipts from those
services in calculating its apportionment factor. OCGI Training, 2017 Tex. App. LEXIS 10096,
at *4. In other words, the taxable entity must tabulate the sum of its receipts attributable to its
services performed in Texas and include those receipts in tabulating its gross receipts from
“business done in Texas.” See Tex. Tax Code § 171.103(a)(2) (providing that “in apportioning
margin, the [taxable entity’s] gross receipts . . . from its business done in this state” includes
“receipts from . . . each service performed in this state”). The gross receipts from business done
in Texas then serves as the numerator in calculating the apportionment factor. Id. § 171.106(a)
(providing that “numerator . . . is the taxable entity’s gross receipts from business done in this
state”; “the denominator . . . is the taxable entity’s gross receipts from its entire business”).
6
Former Rule 3.591(e)(26) of the Comptroller’s rules provided that receipts
from sales of a service “are apportioned to the location where the service is performed.”2 See
former 34 Tex. Admin. Code § 3.591(e)(26) (Tex. Comptroller of Pub. Accounts, Margin:
Apportionment). Further, as is specifically relevant to this dispute, when services are performed
in multiple states, the receipts from these services are apportioned as Texas receipts based on the
“fair value of the services that are rendered in Texas.” Id. Consequently, under the Rule, service
receipts from multi-state services are apportioned using the following formula:
Apportionment factor for services = fair value of services performed in Texas /
fair value of services performed everywhere
OGCI Training, 2017 Tex. App. LEXIS 10096, at *4 (citing former 34 Tex. Admin. Code
§ 3.591(e)(26)).
In this case, there is no dispute that in tax years 2010 and 2011, Sirius XM
performed its broadcasting and transmission services in and outside of Texas and that under
Rule 3.591(e)(26), it was required to apportion the receipts for these services as Texas receipts
based on the fair value of the services. Instead, the parties’ dispute on remand centers on the
methodology used by Sirius XM to apportion the fair value of its service performed in Texas.
At trial, Sirius XM presented expert testimony to establish what it contends is the
proper apportionment factor for the fair value of its services in Texas during 2010 and 2011 tax
years. Michael Starkey, an expert in quantitative business modeling, testified that in analyzing
2
Rule 3.591(e)(26) was amended effective January 24, 2021. See 46 Tex. Reg. 460
(2021). Unless otherwise noted, all references to Rule 3.591(e)(26) in this opinion are to the
former version of the rule, which is the version applicable to this case. See 32 Tex. Reg. 10044
(2007), amended in part by 34 Tex. Reg. 9472 (2009).
7
the fair value of Sirius XM’s services rendered in Texas, he and his business associates obtained
“an enormous amount of data” from Sirius XM and management, including Sirius XM’s filings
with the Securities and Exchange Commission, to “build a model that helped us evaluate the
activities, functions, and other operations of Sirius XM wherever they are performed, and then
specifically what was performed in Texas versus everywhere else.” The results of this analysis
were summarized in an expert report, which was admitted as an exhibit. Starkey testified that he
used cost data because it was “systematic and reliable” in representing where Sirius XM
performed its activities. Starkey also testified that his analysis “focus[ed] on the unique aspect of
[Sirius XM’s] business that consumers actively seek out and ultimately, contract to receive.”
As a result, he did not include expenses for general support functions, such as administration
and sales, but he instead included expenses from value-producing activities, such as content
production and transmission. The only production and broadcasting services costs associated
with Texas during the 2010 and 2011 tax year was a radio program called “Willie’s Place,”
which transmitted from a truck stop for four hours each day and was operated by one employee.
According to Starkey, once adjusted to remove expenses associated with satellites, the portion of
fair value of Sirius XM services performed in Texas was 0.47% for tax year 2010 and 0.26%
in tax year 2011. In its findings of fact and conclusions of law, the district court found
“Mr. Starkey’s analysis is a credible method for determining fair value” and adopted, as fact
findings, his opinions regarding the percentage of the fair value of Sirius XM’s services
performed in Texas.3
3
Relevant to this apportionment calculation, the district court made the following
findings and conclusions:
8
The Comptroller asserts that the evidence presented by Sirius XM to establish fair
value is legally insufficient to support that trial court’s judgment for two reasons: (1) as a matter
of law, a taxable entity cannot rely on cost-of-performance data to apportion the fair value of
its services, and (2) in the alternative, Sirius XM failed to “meet its burden of proving the costs
that represent the fair value of services performed in Texas.” We will consider each of these
arguments in turn.
Standard of Review
When a party challenges the legal sufficiency of the evidence, we review the
evidence in the light most favorable to the judgment, crediting favorable evidence if a reasonable
fact finder could, and disregarding contrary evidence unless a reasonable fact finder could not.
City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex. 2005). We sustain a legal sufficiency
challenge if the record reveals: (1) the complete absence of evidence of a vital fact; (2) the court
is barred by rules of law or evidence from giving weight to the only evidence offered to prove a
[1.] Sirius XM’s headquarters, transmission equipment, and production studios
were located almost exclusively outside of Texas.
[2.] Additionally, Sirius XM produced, recorded, edited, and transmitted its
audio entertainment almost exclusively outside of Texas.
[3.] Sirius XM performed its satellite radio subscription services both inside
and outside Texas. Sirius XM’s subscription receipts are therefore apportioned to
Texas based upon the “fair value” of the service performed in Texas.
[4.] The fair value of Sirius XM’s service performed in Texas was .47% in
Report Year 2010 and 0.26% in Report Year 2011. These amounts exclude the
value of Sirius XM’s satellites in orbit.
[5.] The apportionment factors reported by Sirius XM “were consistent with
the fair value of Sirius XM’s service performed in Texas.”
9
vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the
evidence conclusively establishes the opposite of a vital fact. Id. at 810.
To the extent resolution of the Comptroller’s challenge turns on construction of
former Rule 3.591(e)(26) and its use of the phrase “fair value,” we review these issues de novo.
See Texas Mun. Power Agency v. Public Util. Comm’n of Tex., 253 S.W.3d 184, 192 (Tex.
2007). We construe administrative rules, which have the same force and effect as statutes, in
the same manner as statutes. Rodriguez v. Service Lloyds Ins. Co., 997 S.W.2d 248, 254 (Tex.
1999). Our primary objective in both statutory and rule construction is to ascertain and give
effect to the drafter’s intent. AEP Tex. Commercial & Indus. Retail Ltd P’ship v. Public Util.
Comm’n, 436 S.W.3d 890, 906 (Tex. App.—Austin 2014, no pet.). “We thus construe the
text according to its plain and common meaning unless a contrary intention is apparent from
the context or such a construction leads to absurd results.” Presidio Indep. Sch. Dist. v. Scott,
309 S.W.3d 927, 930 (Tex. 2010). Unless the rule is ambiguous, we follow its clear language.
Rodriguez, 997 S.W.2d at 254. Where there is vagueness, ambiguity, or room for policy
determination, we defer to the agency’s interpretation unless it is unreasonable, plainly
erroneous, or inconsistent with the language of the rule. TGS-NOPEC Geophysical Co. v.
Combs, 340 S.W.3d 432, 438 (Tex. 2011); Gulf Chem. Metallurgical Corp. v. Hegar,
460 S.W.3d 743, 747 (Tex. App.—Austin 2015, no pet.).
Analysis
We first consider the Comptroller’s argument that the evidence is legally
insufficient to support the trial court’s findings as to the fair value of Sirius XM’s services
performed in Texas because, as a matter of law, cost-of-performance data cannot be used to
10
establish fair value under former Rule 3.591(e)(26), and no other evidence as to the fair value of
services was presented by Sirius XM. See City of Keller, 168 S.W.3d at 810 (explaining that
legal-sufficiency challenge must be sustained “if the court is barred by rules of law or evidence
from giving weight to the only evidence offered to prove a vital fact”).
The phrase “fair value” is not defined in the Comptroller’s rules and does not
appear in any Tax Code provisions describing apportionment or discussing “business done in this
state” or “each service performed in this state.” See TGS-NOPEC, 340 S.W.3d at 439 (noting
that undefined terms are typically given their ordinary meaning unless a “different or more
precise definition is apparent from the term’s use in the context of the statute”); see also Tex.
Tax Code §§ 171.101, .103, .106. The dictionary definition of “fair,” when used as an adjective,
includes “being a sufficient, equitable, or adequate basis for judgment or evaluation.” Fair,
Webster’s Third New Int’l Dictionary (2002). “Value” is defined as “the monetary worth of
something,” Id., Value. Finally, “fair value” is defined as “a reasonable value (as set by
courts and regulatory commissions) for property.” Id., Fair Value. Based on these dictionary
definitions and the plain meaning of the terms, we conclude that the phrase “fair value,” as used
in former Rule 3.591(e)(26), means the monetary worth of the services at issue, based on an
objectively reasonable assessment. See Molinet v. Kimbrell, 356 S.W.3d 407, 411 (Tex. 2011)
(“The plain meaning of the text is the best expression of legislative intent unless a different
meaning is apparent from the context or the plain meaning leads to absurd or nonsensical
results.”).
In this appeal, the Comptroller has not offered any alternative interpretation of the
term “fair value” in former Rule 3.591(e)(26). Nevertheless, in support of his contention that
Sirius XM cannot rely on cost-of-performance data, the Comptroller argues that nothing in the
11
plain language of Rule 3.591(e)(26) suggests that “fair value” means “cost of performance.”4
According to the Comptroller, when former Rule 3.591(e)(26) was adopted in 2007, the term
“cost of performance” was a term of art used in the Uniform Division of Income for Tax
Purposes and adopted by other states, and the Comptroller was aware of this use of the
term “cost of performance.” See 32 Tex. Reg. 10044, 10047 (2007) (adopting Rule 3.591).
Therefore, the Comptroller reasons, the “use of the term ‘fair value’ [in the Rule] indicates that
something other than ‘cost of performance’ was intended.” See, e.g., In re M.N., 262 S.W.3d
799, 802 (Tex. 2008) (explaining that courts assume that drafter “included each word for a
purpose and that words not included were purposefully omitted”). While we do not disagree that
the rule drafters purposefully chose to use the term “fair value” and not the term “cost of
performance,” to the extent that the Comptroller suggests that this choice indicates that the terms
are necessarily exclusive, we cannot agree. Although the terms may have different meanings,
nothing in the plain language of the Rule dictates a specific method for calculating fair value
or excludes cost of performance as a reasonable means of assessing fair value for purposes of
apportionment.
Moreover, in previous guidance, the Comptroller has indicated that cost of
performance is an appropriate method for calculating fair value of services, at least in some
circumstances. In a 2008 letter ruling, the Comptroller considered how a fixed fee received by a
4
The Comptroller also points out that “when the legislature adopted the margin tax in
2006 without substantially changing the wording of the apportionment sections, it approved the
‘fair value’ standard [which the Comptroller had first adopted by rule in 1992] by legislative
acceptance.” See Reynolds Metals Co. v. Combs, No. 03-07-00709-CV, 2009 Tex. App. LEXIS
2466, at *12-13 (Tex. App.—Austin, Apr. 8, 2009, pet. denied) (mem. op.) (discussing
legislative-acceptance doctrine based on administrative interpretation of statute). Neither party,
however, has challenged the validity of Rule 3.291(e)(36) or suggested that its requirement that
taxable entities use “fair value” to apportion receipts for services is ambiguous, unreasonable, or
contrary to the plain language of the Tax Code.
12
brokerage-services company for accepting, executing, and clearing trades initiated over the
internet should be sourced in its franchise-tax reporting. See Tex. Comp. Pub. Accounts, Letter
No. 200807139L (July 24, 2008). In deciding this question, the Comptroller cited former Rule
3.591(e)(26) and then noted that because the services involved work done inside and outside of
Texas, “Texas receipts should be determined based on the fair value of the services performed in
Texas.” Id. The Comptroller then stated, “The costs attributed to the services in Texas relative
to the costs attributed to the out-of-state processing may be the best means of determining the
fair value of the services performed in Texas.” Id. Although the Comptroller did not elaborate
on the meaning of the term “fair value” in his letter ruling, we conclude that this interpretation of
Rule 3.591(e)(26)—that the relative fair value of services may be determined using cost-of-
performance data—is not plainly erroneous or inconsistent with the language of the Rule or the
Tax Code.5 We disagree with the Comptroller’s contrary assertion in this appeal that as a matter
of law former Rule 3.591(e)(26) prohibits Sirius XM from relying on cost-of-performance data
to apportion its receipts for services performed in Texas.
Next, we consider the Comptroller’s alternative argument that, even if
comparative cost-of-performance evidence may be used to establish fair value of services and to
5
Although not evidence of the Comptroller’s intent as to the meaning of the term “fair value”
in former Rule 3.591(e)(26), we note that the Comptroller subsequently amended the Rule to
state:
In determining fair value, the relative value of each service provided on a stand-
alone basis may be considered. Units of service, such as hours worked, may also
be considered. The costs of performing a service does not necessarily represent
its value. If costs are considered, cost should be limited to costs directly related
to the service.
46 Tex. Reg. 460 (2021) (emphasis added); but see Strayhorn v. Willow Creek Res., Inc.,
161 S.W.3d 716, 722 (Tex. App.—Austin 2005, no pet.) (noting that recent amendments to
statute by legislature “offer no insight into the intent to previous legislatures”).
13
apportion service receipts in certain circumstances, the cost-of-performance evidence presented
by Sirius XM in this case is legally insufficient to support the district court’s judgment. See City
of Keller, 168 S.W.3d at 807 (explaining a legal-sufficiency challenge must be sustained if “the
evidence offered to prove a vital fact is no more than a mere scintilla”). In response to this
argument, Sirius XM asserts, as a preliminary matter, that the Comptroller has failed to preserve
this challenge for appeal.
To preserve a complaint that expert testimony is legally insufficient because the
offered basis is unreliable, an objection must be timely made to the trial court. See Coastal
Transp. Co. v. Crown Centr. Petro. Corp., 136 S.W.3d 227, 233 (Tex. 2004). Requiring an
objection to the reliability of expert testimony gives the proponent a fair opportunity to cure
any deficiencies and prevents trial and appeal by ambush. City of San Antonio v. Pollock,
284 S.W.3d 809, 816-17 (Tex. 2009). In other words, if the challenge requires the court to
evaluate the underlying methodology, technique, or foundational data used by the expert, the trial
court must be given the opportunity to conduct this analysis first. Coastal Transp., 136 S.W.3d
at 233. Therefore, when expert opinion “is admitted in evidence without objection, it may
be considered probative evidence even if the basis of the opinion is unreliable.” Pollock,
284 S.W.3d at 818. Conversely, when opinion testimony is conclusory or speculative, it is not
relevant and will not support a judgment even when no objection to its admissibility was made at
trial. Id. Expert testimony is conclusory “if no basis for the opinion is offered” or if “the basis
offered provides no support for the opinion.” See Pike v. Texas EMC Mgmt., 610 S.W.3d 763,
787 (Tex. 2020) (quoting Pollock, 284 S.W.3d at 818).
Here, the Comptroller asserts that Starkey’s opinion testimony as to cost-of-
performance lacks probative value because he failed to include certain costs and exclude other
14
costs in his calculations. Specifically, the Comptroller complains that Starkey failed to include
as costs “performance royalties it paid for content it did not produce or own” and “hundreds of
millions of dollars it spent to subsidize the installation of the equipment necessary to hear Sirius
XM’s programming in Texas.” In addition, the Comptroller contends that Starkey should not
have included costs for research and development because it does not provide a benefit to the
customer. In sum, the Comptroller asserts that “[r]easonable minds could not conclude that
Sirius XM’s cost study represented the fair value of Sirius XM’s services in Texas when the
cost study excluded significant costs and it assigned no fair value to what was by far the most
valuable asset that Sirius XM used to produce its service.”
The Comptroller’s complaint is, in effect, that the underlying data relied on and
the methodology employed by Starkey to tabulate and compare Sirius XM’s cost of performance
are flawed and that, as a result, his opinion is unreliable and no evidence of fair value. Because
the Comptroller did not object to the admission of Starkey’s expert testimony at trial, and
because his challenge would require an evaluation of the foundational data and underlying
methodology that Starkey relied on to draw his opinions, the Comptroller cannot bring this
challenge now. See Pike, 610 S.W.3d at 787 (concluding that challenge to expert’s failure
to deduct certain costs when calculating “earnings before interest, taxes, depreciation, and
amortization” valuation concerned underlying methodology and technique and could not be
raised for first time on appeal). As a result, Starkey’s testimony as to comparative cost of
performance and his opinion of the fair value of Sirius XM’s services performed in Texas
relative to its services performed everywhere is considered probative evidence and thus legally
sufficient to support the district court’s judgment. See Pollock, 284 S.W.3d at 818.
15
In summary, we conclude that Sirius XM is not prohibited from relying on cost-
of-performance data to apportion its subscription receipts for services performed in Texas, and
that the evidence is legally sufficient to support the trial court’s findings as to Sirius XM’s
apportionment of its services performed in Texas. The Comptroller’s sole appellate issue on
remand is overruled.6
CONCLUSION
Consistent with the Texas Supreme Court’s decision deciding the issue of where
services are performed, and for the reasons described above on remand, we affirm the district
court’s judgment.
__________________________________________
Chari L. Kelly, Justice
Before Justices Goodwin, Baker, and Kelly
Affirmed on Remand
Filed: November 10, 2022
6
In the alternative, the Comptroller argues that the case should be remanded “in the
interest of justice” because the parties tried the case based on an unsettled legal theory as to
where services are performed. See Tex. R. App. P. 43.3 (rendition appropriate upon reversing
judgment unless remand is necessary). The Comptroller asserts that he “should have the
opportunity to present the trial court with evidence concerning fair value based on the new
guidance provided by the Supreme Court regarding the nature of Sirius XM’s service.”
Although the parties at trial took contrary positions as to how to apportion Sirius XM’s services,
nothing prevented the Comptroller from presenting contrary evidence or cross-examining Sirius
XM’s witnesses on Sirius XM’s proposed methodology. We disagree that the circumstances
warrant remanding this case.
16 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483724/ | IN THE SUPREME COURT OF THE STATE OF NEVADA
BRIAN KERRY O'KEEFE, No. 85492
Appellant,
vs.
THE STATE OF NEVADA, FILE
Respondent.
NOV 1 0 21122
arzioe iPREME
A. nr.,,owN
COUR1
OF
Bs
DEPU CLERK
ORDER DISMISSING APPEAL
This is a pro se notice of appeal from "the ORDER granting,
nine days subsequent the directed response of 9/13/2023." Because no
statute or court rule permits an appeal from such an order, this court lacks
jurisdiction to consider this appeal. Castillo v. State, 106 Nev. 349, 352, 792
P.2d 1133, 1135 (1990) (explaining that court has jurisdiction only when
statute or court rule provides for appeal). Accordingly, this court
ORDERS this appeal DISMISSED.'
J.
Cadish
, J. Sr.J.
Pickering
1The Honorable Mark Gibbons, Senior Justice, participated in the
decision of this matter under a general order of assignment.
SUPREME COURT
Of
NEVADA
1.)1 I947A cc: Hon. Jacqueline M. Bluth, District Judge
Brian Kerry O'Keefe
Attorney General/Carson City
Clark County District Attorney
Eighth District Court Clerk
SUPREME COURT
OF
NEVAOA
2
0)1 1947A .4D., | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483830/ | Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/15/2022 09:05 AM CST
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STATE V. DAVIS
Cite as 31 Neb. App. 445
State of Nebraska, appellee, v.
Durelle J. Davis, appellant.
___ N.W.2d ___
Filed November 8, 2022. No. A-22-056.
1. Right to Counsel: Appeal and Error. A trial court’s decision to sus-
tain or overrule a defendant’s motion to dismiss appointed counsel and
appoint substitute counsel is reviewed for an abuse of discretion.
2. Effectiveness of Counsel: Pleas: Waiver. A voluntary guilty plea or
plea of no contest generally waives all defenses to a criminal charge;
thus, when a defendant pleads guilty or no contest, he or she is lim-
ited to challenging whether the plea was understandingly and volun-
tarily made and whether it was the result of ineffective assistance of
counsel.
3. Sentences: Appeal and Error. A sentence imposed within the statutory
limits will not be disturbed on appeal in the absence of an abuse of dis-
cretion by the trial court.
4. Effectiveness of Counsel: Constitutional Law: Statutes: Records:
Appeal and Error. Whether a claim of ineffective assistance of trial
counsel can be determined on direct appeal presents a question of law,
which turns upon the sufficiency of the record to address the claim
without an evidentiary hearing or whether the claim rests solely on the
interpretation of a statute or constitutional requirement.
5. Effectiveness of Counsel: Appeal and Error. In reviewing claims of
ineffective assistance of counsel on direct appeal, an appellate court
decides only whether the undisputed facts contained within the record
are sufficient to conclusively determine whether counsel did or did
not provide effective assistance and whether the defendant was or
was not prejudiced by counsel’s alleged deficient performance.
6. Pleas: Waiver. A voluntary guilty plea or plea of no contest waives all
defenses to a criminal charge.
7. Effectiveness of Counsel: Pleas. When a defendant pleads guilty or no
contest, the defendant is limited to challenging whether the plea was
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understandingly and voluntarily made and whether it was the result of
ineffective assistance of counsel.
8. Sentences: Appeal and Error. When sentences imposed within statu-
tory limits are alleged on appeal to be excessive, the appellate court
must determine whether the sentencing court abused its discretion in
considering well-established factors and any applicable legal principles.
9. Sentences. When imposing a sentence, a sentencing judge should con-
sider the defendant’s (1) age, (2) mentality, (3) education and experi-
ence, (4) social and cultural background, (5) past criminal record or
record of law-abiding conduct, and (6) motivation for the offense, as
well as (7) the nature of the offense and (8) the violence involved in the
commission of the crime.
10. ____. The appropriateness of a sentence is necessarily a subjective judg-
ment and includes the sentencing judge’s observation of the defendant’s
demeanor and attitude and all the facts and circumstances surrounding
the defendant’s life.
11. Effectiveness of Counsel: Appeal and Error. When a defendant’s trial
counsel is different from his or her counsel on direct appeal, the defend
ant must raise on direct appeal any issue of trial counsel’s ineffective
performance which is known to the defendant or is apparent from the
record; otherwise, the ineffective assistance of trial counsel issue will
be procedurally barred.
12. Effectiveness of Counsel: Records: Appeal and Error. Once raised,
an appellate court will determine whether the record on appeal is suf-
ficient to review the merits of the ineffective performance claims. The
record is sufficient if it establishes either that trial counsel’s perform
ance was not deficient, that the appellant will not be able to establish
prejudice as a matter of law, or that trial counsel’s actions could not be
justified as a part of any plausible trial strategy. Conversely, an ineffec-
tive assistance of counsel claim will not be addressed on direct appeal if
it requires an evidentiary hearing.
13. Effectiveness of Counsel: Postconviction: Appeal and Error. The
necessary specificity of allegations of ineffective assistance of trial
counsel on direct appeal for purposes of avoiding waiver requires, at a
minimum, allegations of deficient performance described with enough
particularity for an appellate court to make a determination of whether
the claim can be decided upon the trial record and also for a district
court later reviewing a potential petition for postconviction relief to
be able to recognize whether the claim was brought before the appel-
late court.
14. Effectiveness of Counsel: Appeal and Error. Assignments of error
on direct appeal regarding ineffective assistance of trial counsel must
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STATE V. DAVIS
Cite as 31 Neb. App. 445
specifically allege deficient performance, and an appellate court will not
scour the remainder of the brief in search of such specificity.
15. Effectiveness of Counsel: Proof: Appeal and Error. When a claim
of ineffective assistance of trial counsel is raised in a direct appeal, the
appellant is not required to allege prejudice; however, an appellant must
make specific allegations of the conduct that he or she claims constitutes
deficient performance by trial counsel.
16. ____: ____: ____. General allegations that trial counsel performed defi-
ciently or that trial counsel was ineffective are insufficient to raise an
ineffective assistance claim on direct appeal.
17. Effectiveness of Counsel: Postconviction: Records: Appeal and
Error. In order to know whether the record is insufficient to address
assertions on direct appeal that trial counsel was ineffective, appellate
counsel must assign and argue deficiency with enough particularity (1)
for an appellate court to make a determination of whether the claim can
be decided upon the trial record and (2) for a district court later review-
ing a petition for postconviction relief to be able to recognize whether
the claim was brought before the appellate court.
18. Effectiveness of Counsel: Records: Appeal and Error. An ineffective
assistance of counsel claim made on direct appeal can be found to be
without merit if the record establishes that trial counsel’s performance
was not deficient or that the appellant could not establish prejudice.
19. Effectiveness of Counsel: Speedy Trial. When a defendant alleges he
or she was prejudiced by trial counsel’s failure to properly assert the
defendant’s speedy trial rights, the court must consider the merits of the
defendant’s speedy trial rights under Strickland v. Washington, 466 U.S.
668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984).
20. Speedy Trial. To calculate the deadline for trial for speedy trial pur-
poses, a court must exclude the day the State filed the information,
count forward 6 months, back up 1 day, and then add any time excluded
under Neb. Rev. Stat. § 29-1207(4) (Reissue 2016).
Appeal from the District Court for Lancaster County: Darla
S. Ideus, Judge. Affirmed.
Joe Nigro, Lancaster County Public Defender, and Brittani
E. Lewit for appellant.
Douglas J. Peterson, Attorney General, and George C. Welch
for appellee.
Pirtle, Chief Judge, and Bishop and Welch, Judges.
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Welch, Judge.
I. INTRODUCTION
Durelle J. Davis appeals his plea-based convictions of third
degree domestic assault on a pregnant woman and second
degree domestic assault. On appeal, Davis contends that the
district court erred in overruling his requests for the appoint-
ment of new counsel due to the deterioration of the attorney-
client relationship; that the sentences imposed were exces-
sive; and that his trial counsel was ineffective for failing to
effectively communicate with him, for withholding from the
court mitigating information which may have helped secure
his release or dismissal of the case, for requesting a continu-
ance over Davis’ objection, and for filing a pretrial motion on
Davis’ behalf which delayed his right to a speedy trial. For
the reasons set forth herein, we affirm.
II. STATEMENT OF FACTS
In June 2021, Davis was charged with third degree domestic
assault on a pregnant woman, second degree assault, use of a
deadly weapon to commit a felony, and tampering with a wit-
ness or informant. Pursuant to a plea agreement, Davis pled no
contest to third degree domestic assault on a pregnant woman
and second degree domestic assault, both Class IIIA felonies.
Also as part of the plea agreement, the State agreed not to
charge Davis as a habitual criminal.
The State provided the following factual basis: On March
19, 2021, police officers responded to a hospital based upon
the report of the assault of a female victim. Upon arrival, offi-
cers observed significant bruising on the victim’s face near
both of her eyes. The victim reported she was 27 weeks preg-
nant and had been staying at a local hotel to hide from Davis,
whom she identified as her boyfriend. The victim indicated
that on March 18, into the early morning hours of March 19,
Davis was staying with her when he became upset and struck
her eye and cheek with his fist. The victim reported that
Davis then used the handle of a metal baseball bat and hit her
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in the right forearm, right elbow, right hip, and lower right leg
area. Officers observed bruising and swelling consistent with
the victim’s report. The victim also had an older-appearing
bruise on her right eye, which bruise the victim reported
occurred during a prior incident, and a large bruise on the left
side of her forehead, which bruise she reported occurred dur-
ing an incident on March 6.
On March 6, 2021, officers had been dispatched after receiv-
ing a report that a pregnant woman was being assaulted. The
reporting witness stated that he heard the victim screaming,
heard Davis making threats to kill the victim, observed Davis
stomping on the victim’s head while the victim was on the
ground, and observed Davis pick up the victim and slam her
head into the side of a vehicle. The witness gave officers a
description of the victim, who had left the area prior to the
officers’ arrival, and the witness reported overhearing the vic-
tim and Davis making comments about the victim’s being
pregnant. Thereafter, when officers contacted Davis regarding
the incident, he stated that the victim had been assaulted by
another party.
After accepting Davis’ pleas on the facts set out above, the
matter was set for sentencing. During the sentencing hearing,
following the court’s statement that it had reviewed the presen-
tence investigation report and statements by counsel and Davis,
the district court stated:
So, you have a lengthy criminal history for somebody
your age.
Your [level of service/case management inventory]
score is 39, which is probably the highest that I have seen.
The underlying assaults in this case, as they were
described, are vicious. It isn’t just the victim’s statement.
The attack was corroborated by at least . . . two eye
witnesses.
You don’t show any remorse at all, sir, for this behavior.
You did receive the benefit of a very favorable plea
agreement.
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I do think that a period of incarceration is necessary.
Probation is not an option.
Having regard for the nature and circumstances of the
crime and the history, character and condition of [Davis],
imprisonment is necessary for the protection of the pub-
lic because I think the risk is substantial that during any
period of probation . . . Davis would engage in addi-
tional criminal conduct. A lesser sentence would depreci-
ate the seriousness of the crime and promote disrespect
for the law.
The court sentenced Davis to 3 years’ imprisonment and 18
months’ post-release supervision on each conviction, ordered
the sentences to run consecutively, and awarded Davis credit
for 275 days served. Davis now appeals from his convictions
and sentences.
III. ASSIGNMENTS OF ERROR
Davis contends that (1) the district court erred in overrul-
ing his requests for new appointed counsel despite the dete-
rioration of the attorney-client relationship; (2) the sentences
imposed were excessive; and (3) he received ineffective assist
ance of counsel when trial counsel (a) did not effectively com-
municate with him, (b) withheld information from the court
that may have helped secure Davis’ release from custody or
dismissal of the case, (c) requested a continuance of the jury
trial despite Davis’ objection, and (d) filed pretrial motions
that Davis did not request and did not want filed, delaying his
right to a speedy trial.
IV. STANDARD OF REVIEW
[1] A trial court’s decision to sustain or overrule a defend
ant’s motion to dismiss appointed counsel and appoint sub-
stitute counsel is reviewed for an abuse of discretion. State v.
Weathers, 304 Neb. 402, 935 N.W.2d 185 (2019).
[2] A voluntary guilty plea or plea of no contest gener-
ally waives all defenses to a criminal charge; thus, when a
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defendant pleads guilty or no contest, he or she is limited to
challenging whether the plea was understandingly and volun-
tarily made and whether it was the result of ineffective assist
ance of counsel. State v. Blake, 310 Neb. 769, 969 N.W.2d
399 (2022).
[3] A sentence imposed within the statutory limits will not
be disturbed on appeal in the absence of an abuse of discretion
by the trial court. State v. Morton, 310 Neb. 355, 966 N.W.2d
57 (2021).
[4,5] Whether a claim of ineffective assistance of trial coun-
sel can be determined on direct appeal presents a question of
law, which turns upon the sufficiency of the record to address
the claim without an evidentiary hearing or whether the claim
rests solely on the interpretation of a statute or constitutional
requirement. State v. Drake, 311 Neb. 219, 971 N.W.2d 759
(2022). In reviewing claims of ineffective assistance of counsel
on direct appeal, an appellate court decides only whether the
undisputed facts contained within the record are sufficient to
conclusively determine whether counsel did or did not provide
effective assistance and whether the defendant was or was not
prejudiced by counsel’s alleged deficient performance. Id.
V. ANALYSIS
1. Failure to Appoint Replacement Counsel
First, Davis alleges that he “was denied the right to effective
assistance of counsel . . . [b]ecause the District Court erred
in overruling [his] requests for new court appointed counsel
despite the deterioration of the attorney-client relationship.”
Although Davis frames his argument as an ineffective assist
ance of counsel claim, given the specific language of the
assignment of error, we consider this alleged error as a chal-
lenge to the court’s denial of Davis’ request to dismiss counsel
and appoint replacement counsel.
[6,7] However, as the Nebraska Supreme Court noted in
State v. Thomas, 311 Neb. 989, 996, 977 N.W.2d 258, 266
(2022):
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STATE V. DAVIS
Cite as 31 Neb. App. 445
A voluntary guilty plea or plea of no contest waives all
defenses to a criminal charge. State v. Jaeger[, 311 Neb.]
69, 970 N.W.2d 751 (2022). When a defendant pleads
guilty or no contest, the defendant is limited to challeng-
ing whether the plea was understandingly and volun-
tarily made and whether it was the result of ineffective
assistance of counsel Id. [The defendant’s] challenges to
the district court’s rulings with respect to his motions to
discharge his trial counsel do not fall into these limited
categories. They have therefore been waived, and we will
not address their merits.
Here, Davis entered pleas of no contest, and in doing so, he
has waived any challenges to the district court’s rulings regard-
ing his requests to dismiss trial counsel and appoint replace-
ment counsel. Accordingly, this assigned error has been waived
and we decline to consider it.
2. Excessive Sentences
Davis next contends that the district court abused its discre-
tion in imposing excessive sentences.
Here, Davis was convicted of third degree domestic assault
on a pregnant woman and second degree domestic assault,
both Class IIIA felonies. See, Neb. Rev. Stat. § 28-115 (Cum.
Supp. 2020) (criminal offense against a pregnant woman;
enhanced penalty); Neb. Rev. Stat. § 28-323 (Reissue 2016)
(domestic assault; penalties). Class IIIA felonies are punish-
able by a minimum of no imprisonment and a maximum of 3
years’ imprisonment followed by 9 to 18 months’ post-release
supervision and/or a $10,000 fine. Neb. Rev. Stat. § 28-105
(Cum. Supp. 2020). Davis was sentenced to 3 years’ impris-
onment followed by 18 months’ post-release supervision on
each count.
[8-10] When sentences imposed within statutory limits are
alleged on appeal to be excessive, the appellate court must
determine whether the sentencing court abused its discretion
in considering well-established factors and any applicable
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legal principles. State v. Blake, 310 Neb. 769, 969 N.W.2d
399 (2022). When imposing a sentence, a sentencing judge
should consider the defendant’s (1) age, (2) mentality, (3)
education and experience, (4) social and cultural background,
(5) past criminal record or record of law-abiding conduct, and
(6) motivation for the offense, as well as (7) the nature of
the offense and (8) the violence involved in the commission
of the crime. State v. Lierman, 305 Neb. 289, 940 N.W.2d
529 (2020). The appropriateness of a sentence is necessarily
a subjective judgment and includes the sentencing judge’s
observation of the defendant’s demeanor and attitude and
all the facts and circumstances surrounding the defendant’s
life. Id.
At the time the presentence investigation report was pre-
pared, Davis was 35 years old with a 10th-grade education,
was unemployed, and had two dependents. Davis had an exten-
sive criminal history, including seven convictions for failing
to appear, three convictions each for third degree domestic
assault and violation of a protection order, and two convic-
tions each of providing false information and possession of a
controlled substance. He also had convictions for assault and
battery, domestic violence assault, felony terroristic threats,
operating during suspension, destruction of property under
$100, disorderly conduct, disturbing the peace, making false
statements to police, possession of methamphetamine with
intent to distribute (less than 10 grams), carrying a concealed
weapon, disturbing the peace by fighting, possession of mari-
juana less than 1 ounce, and numerous traffic and other minor
violations. One of Davis’ convictions resulted in Davis’ being
placed on probation, which was later revoked.
The level of service/case management inventory assessed
that Davis was in the very high risk range to reoffend, that no
areas of strength were identified during the assessment, and
that Davis’ score on the “Domestic Violence Matrix” assess-
ment indicated he was a high risk due to the nature of the pres-
ent assault.
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Based upon the record, the district court considered the
appropriate sentencing factors. Further, as it relates to those
factors, including that the sentences imposed were within the
relevant statutory sentencing ranges, the benefit Davis received
from his plea agreement, Davis’ criminal history, and Davis’
being in the very high or high risk range to reoffend, we find
the district court did not abuse its discretion in considering the
relevant factors and imposing the sentences. This assignment
of error fails.
3. Ineffective Assistance
of Counsel
Davis’ final assignment of error is that his trial counsel
was ineffective. Specifically, Davis asserts that he was denied
effective assistance of counsel when trial counsel (a) did not
effectively communicate with him, (b) withheld information
from the court that may have helped secure Davis’ release from
custody or dismissal of the case, (c) requested a continuance
of the jury trial despite Davis’ objection, and (d) filed pretrial
motions that Davis did not request and did not want filed,
delaying his right to a speedy trial.
[11-14] Recently, in State v. Drake, 311 Neb. 219, 236-37,
971 N.W.2d 759, 774 (2022), the Nebraska Supreme Court set
forth the directives that must be followed when addressing an
ineffective assistance of counsel on direct appeal:
When a defendant’s trial counsel is different from his
or her counsel on direct appeal, the defendant must raise
on direct appeal any issue of trial counsel’s ineffective
performance which is known to the defendant or is appar-
ent from the record; otherwise, the ineffective assistance
of trial counsel issue will be procedurally barred.
Once raised, an appellate court will determine whether
the record on appeal is sufficient to review the merits of
the ineffective performance claims. The record is suffi-
cient if it establishes either that trial counsel’s perform
ance was not deficient, that the appellant will not be able
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to establish prejudice as a matter of law, or that trial coun-
sel’s actions could not be justified as a part of any plau-
sible trial strategy. Conversely, an ineffective assistance
of counsel claim will not be addressed on direct appeal if
it requires an evidentiary hearing.
The necessary specificity of allegations of ineffective
assistance of trial counsel on direct appeal for purposes
of avoiding waiver requires, at a minimum, allegations
of deficient performance described with enough particu-
larity for an appellate court to make a determination of
whether the claim can be decided upon the trial record
and also for a district court later reviewing a potential
petition for postconviction relief to be able to recog-
nize whether the claim was brought before an appellate
court. Assignments of error on direct appeal regard-
ing ineffective assistance of trial counsel must specifi-
cally allege deficient performance, and an appellate court
will not scour the remainder of the brief in search of
such specificity.
[15-18] When a claim of ineffective assistance of trial coun-
sel is raised in a direct appeal, the appellant is not required
to allege prejudice; however, an appellant must make specific
allegations of the conduct that he or she claims constitutes
deficient performance by trial counsel. State v. Devers, 306
Neb. 429, 945 N.W.2d 470 (2020). General allegations that
trial counsel performed deficiently or that trial counsel was
ineffective are insufficient to raise an ineffective assistance
claim on direct appeal. State v. Weathers, 304 Neb. 402, 935
N.W.2d 185 (2019). In order to know whether the record is
insufficient to address assertions on direct appeal that trial
counsel was ineffective, appellate counsel must assign and
argue deficiency with enough particularity (1) for an appel-
late court to make a determination of whether the claim
can be decided upon the trial record and (2) for a district
court later reviewing a petition for postconviction relief to be
able to recognize whether the claim was brought before the
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appellate court. State v. Devers, supra. An ineffective assist
ance of counsel claim made on direct appeal can be found to
be without merit if the record establishes that trial counsel’s
performance was not deficient or that the appellant could not
establish prejudice. State v. Weathers, supra.
(a) Failure to Communicate Effectively
Davis assigns as error that trial counsel was ineffective
because she “did not effectively communicate with him.”
Davis expounds on this claim in the argument section of his
brief by specifically arguing that his trial counsel failed to
disclose the victim’s contact with trial counsel’s office during
which the victim disclosed that she was not going to cooperate
with the State and was not going to attend court.
However, as this court noted in State v. Santos Romero, ante
p. 14, 19-20, 974 N.W.2d 624, 628-29 (2022):
Assignments of error on direct appeal regarding inef-
fective assistance of trial counsel must specifically
allege deficient performance, and an appellate court will
not scour the remainder of the brief in search of such
specificity. State v. Mrza, 302 Neb. 931, 926 N.W.2d
79 (2019). The Supreme Court has found that an error
assigning that trial counsel was ineffective in “‘fail[ing]
to adequately investigate [the defendant’s] defenses’”
lacked the specificity we demand on direct appeal. Id.
at 935, 926 N.W.2d at 86. Likewise, the Supreme Court
recently held that an error assigning that trial counsel was
ineffective in “‘Failing to Investigate the Case Fully’”
lacked the requisite specificity as to what component of
investigation counsel was allegedly deficient in failing to
conduct. State v. Wood, 310 Neb. 391, 436, 966 N.W.2d
825, 858 (2021).
Similarly, here, Davis’ assignment of error lacks sufficient
specificity regarding how trial counsel “did not effectively
communicate with him.” Accordingly, this assigned error has
not been sufficiently pled.
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(b) Withholding Information
Davis next alleges that he was denied effective assistance
of counsel because trial counsel “withheld information from
the Court that may have helped secure his release from cus-
tody or dismissal of the case.” Again, Davis expounds upon
this assigned error in his argument by specifically arguing
that his trial counsel failed to disclose the victim’s commu-
nication to counsel’s office. However, similar to his claim
raised in the preceding section of this opinion, Davis’ assigned
error lacks sufficient specificity regarding what information
Davis contends counsel should have provided to the court.
Accordingly, this assignment of error has not been pled with
sufficient specificity.
(c) Continuance and Pretrial Motions
We consolidate the analysis of Davis’ final two claims of
ineffective assistance of counsel, i.e., that his trial counsel
was ineffective because trial counsel “requested that [Davis’]
jury trial be continued despite [Davis’] objection” and “filed
pretrial motions [Davis] did not request and did not want filed,
thus delaying his right to a speedy trial.”
[19,20] When a defendant alleges that he or she was
prejudiced by trial counsel’s failure to properly assert the
defendant’s speedy trial rights, the court must consider the
merits of the defendant’s speedy trial rights under Strickland
v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d
674 (1984). State v. Collins, 299 Neb. 160, 907 N.W.2d 721
(2018). To calculate the deadline for trial for speedy trial
purposes, a court must exclude the day the State filed the
information, count forward 6 months, back up 1 day, and then
add any time excluded under Neb. Rev. Stat. § 29-1207(4)
(Reissue 2016). See State v. Collins, supra.
Here, the information was filed on June 10, 2021. Therefore,
the speedy trial deadline, before adding any excluded time, was
December 10. Thus, at the time Davis entered his pleas of no
contest on September 29, the State still had just over 2 months
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to bring Davis to trial, even excluding any continuances or
motions filed by trial counsel that would have extended that
time. Accordingly, since Davis entered his pleas of no con-
test prior to the expiration of the speedy trial clock excluding
any continuances for motions or requests by trial counsel, the
record refutes his claims and trial counsel was not ineffective
in filing the complained of motions and requests to continue
the trial. Cf. State v. Collins, supra (in appeal of denial of post-
conviction relief, Nebraska Supreme Court held that because
deadline for speedy trial purposes had not run, defense counsel
could not have been ineffective for failing to file motion to
discharge on speedy trial grounds). These claims of ineffective
assistance of trial counsel fail.
VI. CONCLUSION
Having considered and found that Davis’ assigned errors
fail, we affirm his convictions and sentences.
Affirmed.
Bishop, Judge, concurring.
Other than the majority’s handling of two of Davis’ ineffec-
tive assistance of trial counsel claims—failing to communicate
effectively and withholding information from the trial court—
I concur in all other respects with the opinion. However, the
majority’s application of State v. Mrza, 302 Neb. 931, 926
N.W.2d 79 (2019), to find these two assignments of error to
be insufficiently stated for this court to address the claims is
construing Mrza to place more emphasis on form over sub-
stance than I read Mrza to intend. The majority’s decision
simply pushes these claims down the road for consideration
under an ineffective assistance of appellate counsel claim
potentially raised in a postconviction action. I would dispose
of them here.
The majority concludes that two of Davis’ claims of ineffec-
tive assistance of trial counsel were not sufficiently expounded
upon in the assignment of errors section of the brief: that trial
counsel “did not effectively communicate with [Davis],” and
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that trial counsel “withheld information from the Court that
may have helped secure [Davis’] release from custody or dis-
missal of the case.”
Regarding the claim related to trial counsel not effectively
communicating with Davis, the majority acknowledges:
Davis expounds on this claim in the argument section
of his brief by specifically arguing that his trial counsel
failed to disclose the victim’s contact with trial counsel’s
office during which the victim disclosed that she was not
going to cooperate with the State and was not going to
attend court.
Although not addressed by the majority, Davis further argues
in his brief that trial counsel “‘acted as if that never happened
before, like I made it up,’” and then trial counsel sent him a
letter indicating that trial counsel’s staff “‘didn’t remember
such a thing.’” Brief for appellant at 21. Davis further suggests
that “whether the alleged victim will be called to testify and to
what [he or she] will testify is an important factor for criminal
defendants to consider when deciding how to proceed.” Id. at
22. Davis argues that “[l]ack of faith in his counsel made it
difficult for [Davis] to fully weigh his options and make fully
informed decisions as to how to proceed, thus prejudicing
him.” Id.
Regarding the assignment of error that “trial counsel with-
held information from the Court that may have helped secure
his release from custody or dismissal of the case,” the major-
ity again concludes that this “assigned error lacks sufficient
specificity regarding what information Davis contends counsel
should have provided to the court.” The majority acknowl-
edges that “Davis expounds upon this assigned error . . . by
specifically arguing that his trial counsel failed to disclose the
victim’s communication to counsel’s office.” However, Davis
further argues that in addition to informing the court about the
victim’s contact with trial counsel, trial counsel should have
informed the court that the victim, “on her own,” came to the
decision to write the letter and statement admitting that Davis
- 460 -
Nebraska Court of Appeals Advance Sheets
31 Nebraska Appellate Reports
STATE V. DAVIS
Cite as 31 Neb. App. 445
did not assault her, and that his contact with the victim was
before he made his first court appearance or “before [he] had a
bond or before there was any no contact order in place.” Id. at
22. Davis argues that he was “harmed by counsel not provid-
ing this information to the lower courts as it may have helped
persuade the Court to either dismiss the charges following
the preliminary hearing or led it to release him from custody
while the matter was pending.” Id. at 23.
In making the above arguments, Davis supplied headings
in the argument section of his brief which correlated exactly
with his assigned errors. Then, he further argued trial counsel’s
alleged deficiency with enough particularity for this court to
make a determination of whether the claims could be decided
upon the trial record and for a district court later reviewing
a petition for postconviction relief to be able to recognize
whether the claim was previously brought before an appellate
court. See State v. Devers, 306 Neb. 429, 945 N.W.2d 470
(2020). Even the State found the presentation of the assigned
errors and corresponding arguments sufficient to respond to
them in its brief, concluding in both instances that the claims
lacked merit. I would have done the same.
It is true that State v. Mrza, 302 Neb. 931, 935, 926 N.W.2d
79, 86 (2019), states that “assignments of error on direct
appeal regarding ineffective assistance of trial counsel must
specifically allege deficient performance, and an appellate
court will not scour the remainder of the brief in search of
such specificity.” However, I do not read that admonition to
mean that assignments of error must allege all the necessary
details about the claimed deficiency in the assignments of
error section of the brief and then be restated again later in the
argument section. In my opinion, when the deficient conduct
alleged in the assignments of error section can be directly cor-
related with a specific heading and a detailed discussion in the
argument section, as was done here, then no scouring of the
brief is necessary and the assigned claim of ineffective assist
ance of counsel should be addressed. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483829/ | IN THE NEBRASKA COURT OF APPEALS
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
(Memorandum Web Opinion)
GLOVER V. GLOVER
NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
SARAH K. GLOVER, APPELLANT,
V.
PAUL G. GLOVER, APPELLEE.
Filed November 15, 2022. No. A-21-958.
Appeal from the District Court for Sarpy County: STEFANIE A. MARTINEZ, Judge. Reversed
and remanded with instructions.
Brent M. Kuhn and Haley L. Cannon, of Brent Kuhn Law, for appellant.
Caitlin R. Lovell, of Johnson & Mock, P.C., L.L.O., for appellee.
MOORE, RIEDMANN, and WELCH, Judges.
MOORE, Judge.
I. INTRODUCTION
Sarah K. Glover and Paul G. Glover were divorced in 2020, and Sarah was awarded sole
legal and physical custody of the parties’ minor child. Sarah subsequently filed a request in the
district court for Sarpy County, seeking to remove the child from Nebraska. Sarah appeals from
the court’s denial of her request. In our de novo review of the record, we find that the district court
abused its discretion in denying the request. We reverse the order of the district court and remand
with instructions to grant Sarah’s complaint for removal.
II. STATEMENT OF FACTS
The parties were married in May 2015. They have one child, Julietta, born in November
2017. Paul is not Julietta’s biological father. The parties used a sperm donor, and Paul signed all
the paperwork to be Julietta’s legal father.
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In June 2020, Sarah filed an amended complaint for dissolution of marriage. Sarah’s
pleading included a request for removal of Julietta to Oregon.
Prior to dissolution of the parties’ marriage, Paul was charged with and pled guilty to a
federal crime involving child pornography. Paul received a sentence of 42 months’ incarceration,
and he began his incarceration at a federal facility in Minnesota on January 20, 2021.
The divorce trial was held before the district court on November 13, 2020. Although Sarah
attempted to introduce evidence at trial regarding removing Julietta from Nebraska, as a discovery
sanction, the court refused to hear such evidence.
On November 25, 2020, the district court entered a decree of dissolution, awarding Sarah
sole legal and physical custody of Julietta. The court awarded Paul certain supervised parenting
time with Julietta, as well as certain phone contact, prior to the start of his incarceration. While
incarcerated, Paul was to have up to three video communication visits with Julietta per week (or
three telephone calls of up to 15 minutes each if video communication was not available). Paul
was also allowed to send letters and cards to Julietta, and Sarah was to keep Paul informed of her
address to facilitate such communication. The court specified that Paul’s release from incarceration
would be considered a material change in circumstances, and it denied without prejudice Sarah’s
request to remove Julietta to Oregon, stating that Sarah shall continue to reside with Julietta in
Nebraska until further order of the court. The court ordered Paul to pay child support of $50 per
month beginning January 1, 2021, and specified Sarah’s responsibility for work-related childcare,
preschool, and school expenses for Julietta; and it set forth Sarah’s responsibility to maintain health
insurance for Julietta and pay for her nonreimbursed health care costs (although Paul was to pay a
certain portion of these costs prior to January 20, 2021).
On December 3, 2020, Sarah filed a motion to alter or amend the decree, alleging, among
other things, that having up to three video visits per week with Paul while he was incarcerated was
contrary to Julietta’s best interests and that phone calls of 5 to 10 minutes, rather than 15 minutes,
was reasonable and in Julietta’s best interests, considering her age and the evidence offered at trial.
On February 1, 2021, the district court entered an amended decree of dissolution, partially
amending the decree in several regards. As relevant to the present appeal, it amended the start date
for Paul’s child support obligation and Sarah’s sole responsibility for work-related childcare and
preschool and school expenses to February 1, but it did not amend any of the above-referenced
parenting time provisions set forth in the original decree. The court entered an order nunc pro tunc
on February 5 in order to correct a scrivener’s error in the amended decree.
On March 22, 2021, Sarah filed a complaint for removal, seeking to remove Julietta from
Nebraska to “the Vancouver area of Washington State and Oregon.” She alleged that she had a
legitimate reason for her request and that removal to the Washington and Oregon area was in
Julietta’s best interests. She also stated that she sought a modification of the decree to provide for
Julietta’s removal.
Subsequently, Paul filed a motion to dismiss, which the district court denied. The court
noted its dismissal of Sarah’s prior request for removal at the time of the dissolution proceedings,
but it observed that such a decision based on a discovery sanction should not prevent Sarah from
filing a separate action for removal. The court also noted its intent at the time of the dissolution
proceedings to allow such a future pleading by Sarah. However, the court found that Sarah’s
pleading was clearly a complaint to modify, and it stated, “[a]s such, [Sarah] must follow standard
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procedure and identify what the change in circumstances are in order to provide [Paul] with proper
notice in which to defend himself.” The court gave Sarah 5 days to file an amended pleading.
On May 11, 2021, Sarah filed an “Amended Complaint to Modify Decree for Removal.”
She again sought removal of Julietta from Nebraska to the Vancouver area. Additionally, she
alleged that since entry of the decree there had been a material change of circumstances warranting
modification of the decree; that her legitimate reasons for removal included opportunities for her
career and financial advancement, the emotional and financial support of local family not available
in Nebraska, and removal to a new jurisdiction to avoid stigmatizing Julietta as a result of Paul’s
wrongful conduct in Nebraska; and that removal was in Julietta’s best interests. In connection with
her best interests allegations, Sarah noted the factors to be considered by the court and alleged that
these factors weighed in favor of removal. Beyond requesting permission to remove Julietta to the
Vancouver area of Washington and Oregon, Sarah did not request any other modification to the
decree.
Paul filed an answer to Sarah’s amended complaint, denying the allegations, and
affirmatively alleging that the allegations were known to Sarah at the time of the dissolution trial,
that there was no material change in circumstances justifying removal, and that removal of Julietta
from Nebraska would frustrate his parenting time.
In June 2021, Sarah filed a motion seeking an expedited trial, alleging that she had a job
offer as a registered nurse in the neonatal intensive care unit (NICU) at a particular hospital in
Washington. She stated that she wanted to accept the job offer and relocate to the Vancouver area
of Washington and Oregon in a reasonable time for her career and financial advancement, which
was in Julietta’s best interests. The district court granted her motion and trial was scheduled for
September 29. On September 16, Paul filed a motion to continue trial for additional time to conduct
discovery, which the district court denied. However, at the hearing on Paul’s motion to continue,
his attorney informed the court of her scheduled test due to symptoms of COVID-19, and the
relocation trial was subsequently rescheduled for October 6.
The removal trial was held before the district court on October 6 and 7, 2021. The court
heard testimony from the parties, as well as Paul’s mother, and received various documentary
exhibits into evidence.
Sarah was born in the Vancouver area and lived there until 2011 (excluding a period of a
couple of years when she lived in Minnesota as a young child). At the time of the parties’ divorce,
Sarah was employed as a registered nurse working at a children’s hospital in Omaha. She worked
40 hours per week, Monday through Friday from 8 a.m. to 4:30 p.m., and earned approximately
$30 per hour. By the time of the relocation trial, she was earning around $35 per hour. Her benefits
included health and life insurance. An exhibit detailing the compensation and benefits for her
present job was received into evidence.
Sarah testified about her search for job opportunities in both Vancouver, Washington, and
Portland, Oregon, where she would have “additional family support” for longer work shifts. In
particular, she was interested in NICU nursing positions. Around June 4, 2021, Sarah received a
job offer for a NICU position at a hospital in Vancouver. According to Sarah, the offered job would
require her to work approximately 60 hours every 2 weeks (alternating between two and three
12-hour shifts weekly) and she would earn approximately $59 per hour. The work shifts would be
from 6:30 p.m. to 7 a.m. The offered job also included health insurance, and she thought the cost
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for her contribution toward health insurance would be about $50 less per paycheck than what she
was required to pay in Nebraska. An exhibit with details about Sarah’s job offer and its benefits
was received into evidence. The initial anticipated start date for the offered job was August 2, but
due to the “situation in this case,” the offer had been extended to October 25. Sarah intended to
accept the job if allowed to move.
Sarah had not looked for different employment in Nebraska since the dissolution trial, and
she had not received any offers of employment that were comparable to the offered job in
Vancouver. She knew that there were about 300 open positions with her current employer, but she
did not know what the pay was for any of those positions. Before working in her current nursing
position, Sarah had a night shift NICU position at a Nebraska hospital. She did not know what the
current pay was for a NICU nurse at that hospital, although she had spoken to one of her coworkers
and learned that the current pay “was pretty comparable” to what she “was making previously.”
She also testified that with her current support system in Nebraska, she did not have the ability to
work 12-hour overnight shifts. Another advantage noted by Sarah was that there was no state
income tax in Washington. Sarah’s 2020 income tax return received into evidence shows that she
paid $1,242 in Nebraska state income tax.
Additionally, Sarah has a side business, decorating and selling sugar cookies, for which
she receives some compensation. Sarah thought that the work schedule for the offered job would
allow her to further develop that business. She offered an exhibit that included information about
costs and sales associated with her cookie business, but the district court did not receive that
portion of the exhibit into evidence.
At the time of trial, Sarah lived in a one-bedroom apartment in Omaha, paying rent of
$1,020 per month. Sarah investigated the cost of apartments in the Vancouver area, by researching
online, and she also visited a few apartment locations when she and Julietta were in the Vancouver
area in July 2021. If allowed to move, she intended to rent a two-bedroom apartment so that Julietta
could have her own room, and she testified that the “going rate” for two-bedroom apartments in
the Vancouver area was about $1,500 to $1,800 a month. Sarah had not signed a lease for an
apartment in the Vancouver area as of the time of trial, but she testified that she had submitted an
application and had been told that there would be an opening in early December in the apartment
complex in which she was most interested.
At the time of the relocation trial, Julietta was in daycare from about 7:15 a.m. to 5 or 5:30
p.m. on weekdays. On occasions when Sarah has to work overtime, she has her mother pick Julietta
up because the daycare facility closes at 6 p.m. Sarah pays $235 a week in work-related daycare
expenses. According to Sarah, since her offered job was for night shifts, Julietta would be sleeping
the majority of the time Sarah would be working, and Sarah would have “a lot more . . . nonsleeping
hours with her.” Sarah testified that if allowed to move, Julietta would be cared for by her parents
or other family members, when not in age-appropriate schooling, which would be “a help”
financially. Sarah also testified that “more time with family versus in a day care setting,” would
benefit Julietta both developmentally and emotionally. She had submitted a deposit to hold a place
for Julietta in a daycare facility.
At the time of trial, Julietta had not yet turned 4 years old and was not yet in preschool, but
Sarah testified that if allowed to move, she would enroll Julietta in preschool. During their July
2021 visit to the Vancouver area, Sarah and Julietta toured three different preschools. Sarah’s
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exhibit showing the cost for two of those preschools as well as her testimony as to the cost was
excluded from evidence based on Paul’s objections, but her attorney made an offer of proof, during
which Sarah testified that the cost for the “top frontrunner” of the preschools she looked at would
be about $1,200 per month.
There was evidence at trial about Sarah’s extended family both in Nebraska and the
Vancouver area. Sarah’s parents lived in Nebraska at the time of the relocation trial, but she
testified that they were planning to move back to the Vancouver area soon. Sarah testified that she
has about 35 family members who are living in Portland, Oregon, which is across the river from
Vancouver, and within an hour and a half of the Washington area. Sarah believed that one reason
removal to the Vancouver area was in Julietta’s best interests was because Sarah would have the
support of multiple family members. Sarah testified that although Julietta has only had the
opportunity to visit her extended family in the Vancouver area twice (once when she was a baby
and again for 10 days in July 2021), Julietta has formed relationships with all of these family
members via video communication calls. Some of Sarah’s family members have also visited
Nebraska several times. According to Sarah, Julietta has formed really close relationships with
these family members, is comfortable around them, and enjoys her time with them.
Sarah testified about her concern that Julietta would be stigmatized in Nebraska due to
Paul’s criminal actions, but she admitted that an internet search for information about Paul could
be conducted just as easily outside of Nebraska. Sarah denied filing the removal request in order
to deny Paul’s parenting time with Julietta or to punish Paul. If allowed to move, Sarah was willing
to discuss with Paul possible solutions to ensure he received his parenting time with Julietta as
“allowed under his stipulations” upon his release from prison.
At the time of the relocation trial, Paul was incarcerated at a federal facility in Minnesota,
serving a sentence of 42 months. He testified that “with good time” his expected release date was
January 10, 2024, but that he would be eligible for “home confinement” around September 9, 2023.
He did not yet know what home confinement would require, but he planned to spend his home
confinement at his mother’s residence in Omaha. As a result of his conviction for a federal crime
involving child pornography, Paul will be required to register as a sex offender for 25 years. He
will also have a period of 5 years of supervised release through federal probation. He did not know
what the terms of his supervised release would be, but he anticipated needing permission to travel
outside of Nebraska and possibly being required to check in with law enforcement at any travel
destinations. Prior to Paul’s incarceration, he was employed at a bakery, and he testified that the
owners were willing to rehire him upon his release.
The facility where Paul is incarcerated does not provide video communications, so all of
Paul’s contact with Julietta since his incarceration has been by phone. The record shows that
although the parties had some initial difficulties in scheduling the phone calls, they were able to
communicate and reach a better schedule. Paul initiates the phone calls, and he expressed
frustration about the “numerous” times Sarah has not answered the phone, and he has to call back
more than once to reach her. If Sarah does not answer the phone, Paul may have to wait in line to
call back. Sarah admitted there are occasional times when she does not hear the phone or is not
able to answer it. And, if she and Julietta are running errands and are not yet home when the call
time arrives, Sarah does not like to answer calls from Paul in public “when it says very loudly the
call is coming from a federal prison.”
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Sarah testified that Paul has received his three calls per week since his incarceration, that
any missed calls have been rescheduled and “made up,” and that she undertakes reasonable efforts
to ensure she is available for each of their scheduled call times. Paul agreed that, at the time of his
testimony, he was receiving three calls per week. He estimated that more than five calls were
“missed completely,” although he agreed that some of those had been rescheduled. The court
received into evidence Sarah’s log of calls between Paul from the prison to her phone.
Due to Julietta’s age, it is difficult for her to concentrate during calls, and Sarah testified
that Julietta still resists participating in the calls at least once a week. The record shows that while
certain times of day might work better for Paul or Julietta, those are not necessarily times that work
well for Sarah. Sarah indicated that scheduling phone calls for an earlier time is difficult given her
present work schedule, but that the time difference between Nebraska and the Vancouver area and
the schedule for the offered job would facilitate having earlier calls.
Paul and Julietta enjoy reading a book together during their phone calls. Paul’s mother
purchased both Paul and Julietta copies of certain books that they could read together during calls.
When Paul wants to read a particular book during a call with Julietta, he arranges that ahead of
time. He expressed frustration that Sarah does not always have the prearranged book readily
available at the time of a call. He also expressed frustration about times Sarah has scheduled
activities (visits to the park or pool, playtime with Paul’s nephews) during calls so that Julietta
ends up being upset or distracted during the call. Sometimes his calls occur during times when
Julietta is visiting Paul’s mother, and Paul and his mother both testified that Julietta responds
positively when this happens.
Sarah agreed that the parties “for the most part” have been able to communicate about
parenting issues, but she expressed frustration that Paul wants all communication to go through
his mother and has not provided Sarah with his email address so that she can send him updates
about Julietta rather than discussing issues during his parenting time phone calls. According to
Paul, however, he and Sarah occasionally talk when Julietta is doing things like retrieving a book.
Paul testified that he has a good relationship with Julietta. He described Julietta as
“amazing,” “energetic,” “a joy to be around,” and “[his] everything.” Paul has sent one card for
Julietta to Sarah’s address since his incarceration and had sent approximately five or six cards and
letters for her to his mother’s address. Before his incarceration, he took Julietta to a business where
they “built a teddy bear for her with a recording of [his] voice.” Paul also purchased gifts for his
mother to give Julietta during his incarceration. Paul was current on his child support at the time
of the relocation trial.
Paul’s mother and sister (married with two children) live in Omaha, and Sarah takes Julietta
to spend time with them. Paul’s mother sees Julietta once or twice a month and has a good
relationship with her. She described Julietta as “extremely friendly” and “self-confident.” She
described Julietta’s relationship with her cousins (children of Paul’s sister) as a “close” one of
“[m]utual adoration.” Paul’s mother also described Sarah’s relationship with Paul’s extended
family as “good.” She agreed that Sarah is a “good mom” and “does a good job of caring for
Julietta.” Sarah testified that she would support a continued relationship between Julietta and
Paul’s family if allowed to move.
On November 4, 2021, the district court entered an order of modification, denying Sarah’s
request for removal with prejudice. In denying her request, the court stated:
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[Sarah] has failed to show a material change of circumstances that warrants a
modification. [Paul’s] incarceration and lack of physical contact with Julietta are not a
material change in circumstances. On its own, [Sarah’s] job offer is not a material change
in circumstances-any material change must be in the best interests of the child. [Sarah] has
not demonstrated an out-of-state job is in Julietta’s best interests.
[Sarah] has also failed to meet her burden of proof regarding removal. Any
evidence adduced by [Sarah] regarding potential employment or financial benefits of
moving to Washington is speculative. Further, [Paul] adduced evidence of [Sarah’s]
ulterior motive in interfering with [Paul’s] parenting rights. [Sarah] also failed to show
relocating to Washington is in Julietta’s best interests.
We have set forth further details of the court’s analysis of the removal factors below.
III. ASSIGNMENTS OF ERROR
Sarah asserts that the district court erred in (1) failing to find that Sarah had demonstrated
the necessary material change in circumstances required to warrant a modification of the decree,
(2) finding that Sarah had failed to show a legitimate reason for her request for removal, (3) failing
to find that removal from Nebraska was in Julietta’s best interests, and (4) dismissing Sarah’s
complaint to modify with prejudice.
IV. STANDARD OF REVIEW
Relocation and child custody determinations are matters initially entrusted to the discretion
of the trial court, and although reviewed de novo on the record, the trial court’s determination will
normally be affirmed absent an abuse of discretion. Vyhlidal v. Vyhlidal, 309 Neb. 376, 960
N.W.2d 309 (2021). A judicial abuse of discretion exists if the reasons or rulings of a trial judge
are clearly untenable, unfairly depriving a litigant of a substantial right and denying just results in
matters submitted for disposition. Simons v. Simons, 312 Neb. 136, 978 N.W.2d 121 (2022).
V. ANALYSIS
1. MATERIAL CHANGE IN CIRCUMSTANCES
Sarah first asserts that the district court erred in failing to find that she had demonstrated
the necessary material change in circumstances required to warrant a modification of the decree.
Although she does not challenge the court’s requirement that she prove a material change in
circumstances in addition to the requirements for removal discussed further below, we find plain
error in that regard. See North Star Mut. Ins. Co. v. Miller, 311 Neb. 941, 977 N.W.2d 195 (2022)
(plain error is error plainly evident from record and of such nature that to leave it uncorrected
would result in damage to integrity, reputation, or fairness of judicial process).
In its May 2021 denial of Paul’s motion to dismiss, the district court characterized Sarah’s
initial post-dissolution removal request as a complaint to modify the decree and stated that she
would be required to identify the change in circumstances warranting such modification. Sarah
filed an amended complaint. In its order denying Sarah’s amended request for removal, describing
the procedural background of this case, the court made the following statements about Sarah’s
amended request: “While [Sarah] globally alleged a material change in circumstances, this Court
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will note the procedural defect in [her] pleading. Despite the Court’s May 6, 2021 order, [Sarah]
did not identify any material change in circumstances in her [a]mended [c]omplaint.” The court
noted the reasons for removal alleged by Sarah in her amended request and stated that her
allegations were “identified as legitimate reasons to relocate, not as a material change in
circumstances.” In its analysis, the court observed that “[t]he party seeking modification of child
custody - here, [Sarah] - has the burden of showing a material change in circumstances.” The court
went on to conclude that Sarah had failed to show a material change in circumstances warranting
a modification of the decree.
Pursuant to the decree, Sarah was awarded sole legal and physical custody of Julietta.
Contrary to the district court’s findings, Sarah’s post-dissolution requests for removal did not ask
to modify the parties’ custody of Julietta. Sarah’s original post-dissolution request was captioned
as a complaint for removal, and although she stated in the body of the pleading that she was seeking
modification of the decree to provide for removal, she did not state anywhere in the pleading that
she was seeking to modify Julietta’s custody or Paul’s parenting time with her. Likewise, her
amended pleading was captioned as an amended complaint to modify decree for removal, and as
required by the court, she stated that since entry of the decree there had been a material change in
circumstances warranting a modification of the decree. But, nowhere in the amended pleading did
she request a change in Julietta’s custody or Paul’s parenting time. The only relief she sought in
either post-dissolution request was permission to remove Julietta from Nebraska to the Vancouver
area of Washington and Oregon. See, Gerber v. P & L Finance Co., 301 Neb. 463, 919 N.W.2d
116 (2018) (when title of filing does not reflect its substance, it is proper for court to treat pleading
or motion based on its substance rather than its title); Lisec v. Lisec, 24 Neb. App. 572, 894 N.W.2d
350 (2017) (character of pleading is determined by its content, not by its caption). Here, the court
should have treated Sarah’s post-dissolution pleading simply as a request by a custodial parent to
remove a child from Nebraska.
We also disagree with the district court’s assertion that Sarah needed to prove a material
change in circumstances absent any request by either party to modify custody or parenting time.
Ordinarily, custody and parenting time of a minor child will not be modified unless there has been
a material change in circumstances showing that the best interests of the child require modification.
Lindblad v. Lindblad, 309 Neb. 776, 962 N.W.2d 545 (2021). However, in connection with
requests by custodial parents to remove a child to another jurisdiction, Nebraska case law does not
impose such a requirement.
Before a custodial parent can remove a child from the state, permission of the court is
required. See Schrag v. Spear, 290 Neb. 98, 858 N.W.2d 865 (2015). In order to prevail on a
motion to remove a minor child to another jurisdiction, the custodial parent must first satisfy the
court that he or she has a legitimate reason for leaving the state. State on behalf of Ryley G. v. Ryan
G., 306 Neb. 63, 943 N.W.2d 709 (2020). After clearing that threshold, the custodial parent must
next demonstrate that it is in the child’s best interests to continue living with him or her. Id.
In contrast, in cases where a noncustodial parent is seeking sole custody of a minor child
while simultaneously seeking to remove the child from the jurisdiction, a court should first
consider whether a material change in circumstances has occurred and, if so, whether a change in
custody is in the child’s best interests. Taylor-Couchman v. DeWitt-Couchman, 29 Neb. App. 950,
964 N.W.2d 320 (2021). If this burden is met, then the court must make a determination of whether
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removal from the jurisdiction is appropriate. Id. And, when a parent sharing joint legal and physical
custody seeks to modify custody and relocate, that parent must first prove a material change in
circumstances affecting the best interests of a child by evidence of a legitimate reason to leave the
state, together with an expressed intention to do so. Speers v. Johns, 26 Neb. App. 889, 923 N.W.2d
777 (2019), disapproved on other grounds, Fichtl v. Fichtl, 28 Neb. App. 380, 944 N.W.2d 516
(2020). Once the party seeking modification has met the threshold burden of showing an expressed
intention to leave the state, the separate analyses of whether custody should be modified and
whether removal should be permitted necessarily become intertwined. Id.
Here, we simply have a request by a sole custodial parent to remove a child from Nebraska
to another state. As the custodial parent making such a request, Sarah pled that she had a legitimate
reason for leaving the state and that removal was in Julietta’s best interests. Neither party sought
a modification in custody or parenting time. And, under the circumstances of this case, Sarah’s
request for removal, at the time it was made, did not necessitate a change in custody or parenting
time.
The district court erred in finding that this case involved a request by a party to modify
custody and in requiring Sarah to plead a material change in circumstances in addition to the
removal requirements (legitimate reason for removal/best interests), which Sarah did plead. We
need not further address the court’s finding that Sarah did not prove such a material change in
circumstances and turn to Sarah’s remaining assignments of error relating to her request for
removal.
2. REMOVAL FROM JURISDICTION
The Nebraska Supreme Court has observed that custody cases involving parental relocation
are among the most difficult and troubling for courts to decide. Korth v. Korth, 309 Neb. 115, 958
N.W.2d 683 (2021). Because the parent proposing the move in a parental relocation has
constitutional rights to travel between states and to migrate, resettle, find a new job, and start a
new life, an award of custody is not and should not be a sentence of immobilization. Id. Yet, a
custody order should also heed both parents’ constitutional rights to the care, custody, and control
of their child, as well as the child’s need for a stable, healthy environment. Id.
To aid in settling parental relocation matters, appellate courts have devised a two-part
framework that trial courts should use to evaluate whether to grant a request for removal. Id. Under
the two-part framework that trial courts should use to evaluate whether to grant a request for
removal to another jurisdiction, the custodial parent proposing to move the child must first satisfy
the court that he or she has a legitimate reason for leaving the state. Id. After clearing that threshold,
the custodial parent must next demonstrate that it is in the child’s best interests to continue living
with him or her after the proposed move. Id. While both of these prongs must be shown to support
a removal request, the second prong is of paramount concern. Id.
(a) Legitimate Reason to Leave State
Sarah’s stated reasons for seeking to move Julietta to the Vancouver area were
opportunities for career and financial advancement, the emotional and financial support of family
in the Vancouver area, and the desire to avoid stigmatizing Julietta due to Paul’s wrongful conduct
in Nebraska. Paul argues Sarah’s ulterior motive to frustrate his parenting time is an aggravating
-9-
factor that negates any legitimate reason to leave Nebraska. In our de novo review, we find Sarah’s
motivations to move Julietta are legitimate.
While living in Nebraska, Sarah has worked as a registered nurse earning around $35 per
hour for a 40-hour week. She and Julietta live in a one-bedroom apartment. Sarah was interested
in returning to a NICU nursing position, but she did not search for other nursing jobs in Nebraska,
testifying that with her limited support system in Nebraska, she would not be able to work longer
12-hour shifts. She wants to move to the Vancouver area where she has a large family support
system. She had a verified job offer as a NICU nurse with a particular hospital in Vancouver,
which would provide her with higher pay while working fewer hours. At the time of the removal
trial, her job offer was set to expire on October 25, 2021. Paul was incarcerated in an out-of-state
federal facility until January 2024 and was not eligible for home confinement until September
2023, which he expected to spend in Nebraska.
In finding that Sarah had not met her burden of proving a legitimate reason to leave
Nebraska, the district court stated that “[w]hile [Sarah] may have been offered a higher-paying
job, she presented no evidence whatsoever that she even attempted to find a better-paying job in
Nebraska.” (Emphasis in original.) However, a custodial parent is not required to exhaust all
possible job leads locally before securing a better position in another state. Dragon v. Dragon, 21
Neb. App. 228, 838 N.W.2d 56 (2013).
In Kalkowski v. Kalkowski, 258 Neb. 1035, 607 N.W.2d 517 (2000), the Nebraska Supreme
Court discussed the issue of exploring job opportunities locally before seeking employment in
another state. In that case, the custodial mother had not made any attempts to secure employment
locally. The Court stated:
While it is true that [the custodial mother] did not investigate educational opportunities in
Nebraska and conducted only a limited investigation of employment opportunities in this
state, we have never required a custodial parent to exhaust all possible job leads locally
before securing a better position in another state. Farnsworth v. Farnsworth, [257 Neb.
242, 597 N.W.2d 592 (1999)]. We have also stated that absent some aggravating
circumstance such as an ulterior motive to frustrate the noncustodial parent’s visitation
rights, significant career enrichment is a legitimate reason for relocation in and of itself.
Kalkowski, 258 Neb. at 1046, 607 N.W.2d at 526.
The Court in Kalkowski concluded that the custodial mother’s firm offer of employment
with a flexible schedule in close proximity to her extended family constituted a legitimate reason
for her proposed relocation to Canada. Id. See, also, Brown v. Brown, 260 Neb. 954, 621 N.W.2d
70 (2000) (custodial parent’s firm offer of employment with flexible schedule in close proximity
to custodial parent’s extended family constitutes legitimate reason to leave state in removal case).
Similarly, in the present case, Sarah presented evidence of a firm offer of employment, with higher
wages and a more advantageous schedule, in close proximity to her extended family who could
assist with daycare for Julietta.
The district court also found that Sarah failed to present evidence of cost-of-living
differences between Nebraska and the Vancouver area, that she had not yet chosen a daycare for
Julietta and did not know what school district she would live in, and that she presented no evidence
regarding beneficial differences in various necessaries of life such as rent, utilities, and groceries.
- 10 -
The court cited Wild v. Wild, 13 Neb. App. 495, 696 N.W.2d 886 (2005), where this court found
that a parent had not shown a legitimate reason to leave the state.
In Wild, the evidence did not show that the parent’s new job offered any opportunity for
career or salary advancement. Although there was evidence of an increase in the parent’s salary,
the parent did not present evidence about cost-of-living differences between Nebraska and Ohio,
and the evidence showed that the salary increase would be consumed simply by the increased
transportation costs in bringing the child back to Nebraska for parenting time with the noncustodial
parent. The parent’s new job was an entry-level position from which she could be terminated at
any time, and she did not testify as to any benefits or advantageous schedule provided by the new
job. Finally, the parent seeking removal in that case did not have any extended family living in
Ohio.
We find the present case is distinguishable from Wild. Here, Sarah presented evidence
about the financial advantages of her job offer, the benefits presented by its schedule, the present
circumstances of the parties’ parenting time, and the fact that Sarah has extended family living in
the Vancouver area.
The district court also found evidence of aggravating factors that it considered indicative
of Sarah’s ulterior motive to frustrate Paul’s parenting time with Julietta. The court noted Paul’s
limited phone access while incarcerated and his testimony that he has not received all of his
parenting time phone calls, which the court found to be more credible than Sarah’s testimony on
that issue. The court noted other difficulties, including Julietta’s distraction on the phone due to
her young age, the fact that Sarah sometimes schedules activities during Paul’s parenting time, and
the fact that she sometimes does not provide a previously specified book for Paul and Julietta to
read together. The court also emphasized the fact that removal from Nebraska would not
necessarily protect Julietta from any stigma associated with Paul’s wrongdoing.
We acknowledge that the district court found Paul’s evidence concerning Sarah’s lack of
cooperation in facilitating the telephone visits to be credible. However, in our de novo review, we
do not find this evidence amounts to an aggravating circumstance sufficient to negate or outweigh
the persuasive evidence of Sarah’s legitimate reasons for requesting to move from Nebraska. In
reaching this conclusion, we find nothing in the record to suggest that the move to the Vancouver
area will negatively affect or increase the difficulties inherent in achieving Paul’s parenting
telephone time. We also note that Paul ultimately agreed that he has received most of his parenting
telephone time.
In conclusion, Sarah presented evidence of a firm offer of employment at a hospital in the
Vancouver area at a higher rate of compensation than her job in Nebraska, in a type of nursing that
Sarah was particularly interested in, and evidence that her extended family lived in the Vancouver
area, thus meeting her burden of showing a legitimate reason to leave the state. In our de novo
review, we conclude that Sarah’s reasons for removal do not reflect an ulterior motive to frustrate
Paul’s parenting time with Julietta or amount to an aggravating circumstance sufficient to
overcome Sarah’s legitimate reason to move. Some of the concerns raised by the district court in
its analysis of Sarah’s reasons for leaving Nebraska relate to whether removal is in Julietta’s best
interests, and we have addressed those concerns below.
- 11 -
(b) Best Interests of Child
To determine whether removal to another jurisdiction is in the child’s best interests, a trial
court should consider (1) each parent’s motive for seeking or opposing the move, (2) the potential
that the move holds for enhancing the quality of life for the child and the custodial parent, and (3)
the impact such a move will have on contact between the child and noncustodial parent when
viewed in the light of reasonable visitation. Korth v. Korth, 309 Neb. 115, 958 N.W.2d 683 (2021).
(i) Each Parent’s Motive
Although the relocating parent’s motive is already examined during the threshold prong in
a removal analysis, an appellate court recognizes the wisdom of also weighing the parents’ motives
in the second prong insofar as they relate to the child’s best interests. Id. At this stage of analysis,
both parents’ motives are assessed to determine if one is more compelling than the other. Id. The
ultimate question in a removal analysis is whether one parent’s aim in supporting or opposing the
proposed removal is to frustrate or manipulate the other parent. Id.
The district court found it evident that Sarah’s motive for seeking removal was to frustrate
Paul’s parenting time with Julietta. In doing so, it stressed the timing of the motion to alter or
amend the decree filed by Sarah (8 days after the decree and prior to Paul’s surrender to federal
custody), as well as the timing of Sarah’s present request for removal (within 2 months of the
denial of her motion to alter or amend). We disagree that these filings reflect a motive by Sarah to
frustrate or manipulate Paul. Sarah’s motion to alter or amend sought a substantive alteration of
certain provisions of the decree, and the timing of such motions is governed by statute. See Neb.
Rev. Stat. § 25-1329 (Reissue 2016) (motion to alter or amend judgment shall be filed no later
than 10 days after entry of judgment). We do not find the fact that Sarah’s motion to alter or amend
the decree was filed before Paul’s federal incarceration indicative of an improper motive on
Sarah’s part. Nor do we attribute an improper motive to the timing of her filing the present request
for removal. Sarah was precluded from pursuing her request at the time of the dissolution trial due
to a discovery sanction, and a future such request by Sarah was clearly contemplated by the court
at the time of the dissolution proceedings.
In general, the evidence shows that both parties care about Julietta’s well-being and have
legitimate reasons for seeking and opposing her removal to the Vancouver area. Sarah wants to
pursue an offer of employment in a location where she will have a lot of family support, both
emotional and financial. Paul, who anticipates returning to Nebraska upon his release from prison,
wants to preserve his relationship with Julietta, which he contends will be easier in Nebraska in
light of various possible restrictions on him following his release. We find no evidence that either
parent’s motive in requesting or opposing removal was adverse to Julietta’s best interests.
(ii) Enhanced Quality of Life
There are nine components that may be involved in a trial court’s consideration as to
whether removal to another jurisdiction would enhance the quality of life of the child and custodial
parent: (1) the emotional, physical, and developmental needs of the child; (2) the child’s opinion
or preference as to where to live; (3) the extent to which the custodial parent’s income or
employment will be enhanced; (4) the degree to which housing or living conditions would be
improved; (5) the existence of educational advantages; (6) the quality of the relationship between
- 12 -
the child and each parent; (7) the strength of the child’s ties to the present community and extended
family there; (8) the likelihood that allowing or denying the move would antagonize hostilities
between the two parents; and (9) the living conditions and employment opportunities for the
custodial parent, because the best interests of the child are interwoven with the well-being of the
custodial parent. Korth v. Korth, 309 Neb. 115, 958 N.W.2d 683 (2021). This list should not be
misconstrued as setting out a hierarchy of factors. See Welch v. Peery, 26 Neb. App. 966, 925
N.W.2d 375 (2019).
a. Emotional, Physical, and Developmental Needs of Child
The district court found the evidence reflected that Julietta is in good physical health and
has no special needs. The court found that the parties did not present evidence of any
developmental benefit or detriment for Julietta in either staying in Nebraska or relocating to the
Vancouver area and found this factor to weigh neither for nor against removal. Sarah points to
enhancements provided by the pay and schedule of the job she has been offered, which
enhancements she argues will benefit Julietta’s development. We agree with the district court that
this factor is neutral.
b. Child’s Opinion or Preference
The district court found that this factor weighed neither for nor against removal because,
due to Julietta’s young age, her opinion was not offered for the court’s consideration. We agree
that this factor is neutral.
c. Enhancement of Income or Employment
The district court acknowledged Sarah’s testimony about the extent to which her income
may be enhanced by the offered job in the Vancouver area, but it found that this factor weighed
against removal, noting that Sarah had not conducted any job search in Nebraska and did not know
if any comparable jobs were available in Nebraska. The court also noted that Sarah did not offer
evidence of whether any increase in income would be offset by higher cost of living, such as rent
or daycare.
We disagree that this factor requires a parent to show that “a similar job was not reasonably
available in Nebraska.” See Dragon v. Dragon, 21 Neb. App. 228, 838 N.W.2d 56 (2013)
(custodial parent is not required to exhaust all possible job leads locally before securing better
position in another state). Sarah presented evidence of enhanced income, some evidence of
potential apartment rental costs compared to her rent in Nebraska, and testified that her need for
daycare would be greatly reduced. This factor weighs in favor of removal.
d. Housing or Living Conditions
The district court found no evidence as to whether Sarah’s housing or living conditions
would be enhanced by the move. It noted that Sarah had not yet signed a lease at the time of trial,
and it expressed concern that Sarah planned to move in with a relative prior to securing her own
housing. At the time of the removal trial, Sarah was living in a one-bedroom apartment in Omaha
and paying rent of $1,020 per month. She intended to rent a two-bedroom apartment in the
Vancouver area, which would cost between $1,500 and $1,800 per month. She had submitted an
application for one apartment complex and had information about when an opening would be
- 13 -
available. Although Sarah did not present evidence about other living costs, either in Nebraska or
in the Vancouver area, in light of the increased income of her offered job and the benefit to Julietta
in having her own room, we find this factor weighs at least slightly in favor of removal.
e. Educational Advantages
The district court noted that Sarah presented no evidence regarding educational advantages
in Washington. The court observed that Sarah had not yet chosen a daycare or preschool for
Julietta, and it expressed concern that she was not even aware of which school district she would
be in if allowed to move. We disagree somewhat with the court’s assessment of the evidence.
Julietta was not yet old enough to attend school at the time of the relocation trial. Sarah had
investigated preschool options, touring several with Julietta in July 2021. She testified that her
need for daycare would be minimal given the schedule of her offered job and the availability of
family support, although she had placed a deposit to hold a spot for Julietta in a daycare facility.
Nonetheless, we agree that this factor is neutral or weighs only slightly in favor of removal.
f. Relationship Between Child and Each Parent
The district court noted evidence of Sarah’s bond with and full-time care for Julietta and
Paul’s testimony that his relationship with Julietta was somewhat strained. The court also noted
evidence of Julietta’s demeanor during calls with Paul’s mother. The court observed that some of
Julietta’s differences in demeanor during those calls, as opposed to during calls where Sarah is
present, may be due to the limits of Paul’s incarceration or due to Sarah’s hostility toward Paul,
but it found that this factor weighed in favor of removal. We agree.
g. Child’s Ties to Present Community and Extended Family
The district court discussed at length the evidence of Julietta’s ties to Paul’s family in her
present community as well as to those with Sarah’s family in the Vancouver area. It concluded
that the extent of any relationship Julietta may have with family in Vancouver is speculative. While
we do not discount Julietta’s relationship with Sarah’s family in Vancouver, we agree that she
currently has stronger ties to Nebraska and agree that this factor weighs against removal.
h. Hostilities Between Parents
The district court found evidence of “serious hostilities” between the parties, noting
testimony by Sarah that she believed Paul more likely to abuse Julietta because she was conceived
through a sperm donor. The court also stated that since entry of the decree, Sarah “has repeatedly
petitioned [the court] to interfere with [Paul’s] parenting time,” has refused to ensure Paul’s
parenting time by ignoring phone calls and failing to reschedule missed visits, and interferes with
parenting time by scheduling activities during phone calls and refusing to provide books. We
disagree that the evidence cited by the court shows serious hostilities between the parties,
particularly in light of Paul’s acknowledgement that at the time of the relocation trial he was
receiving his three weekly phone visits and had only missed one phone visit that was not
rescheduled. We view the evidence as indicative of the inherent difficulties in successfully
scheduling parenting time under the circumstances presented in this case. And, as discussed above,
we do not see Sarah’s motion to alter or amend the decree or her filing of the request for removal
as evidence of an intent to interfere with Paul’s parenting time. In our review, we find that any
- 14 -
hostilities that are present will not be exacerbated by allowing Sarah to move to the Vancouver
area. This factor is neutral.
i. Child’s Best Interests Are Interwoven With Well-Being of Custodial Parent
In connection with this factor, the district court referenced its analysis of whether Sarah
had a legitimate reason to leave Nebraska, stated that her evidence regarding living conditions and
employment opportunities was speculative, and found that this factor weighs neither for nor
against removal. We disagree. Sarah has a legitimate reason for leaving the state. We also note her
testimony that staying in Nebraska “feels very much like [she is] being imprisoned [herself].” She
testified further that Paul “destroyed our life” and that she “just want[ed] to go home to [her] family
and get supported by them.” Sarah believes that she would benefit greatly from having the amount
of family support available to her in the Vancouver area. She also felt there were more
opportunities for her in her profession there, that she would have more opportunity to grow her
cookie business, and that if she was “happy and healthy,” that would be best for Julietta as well.
An award of custody is not and should not be a sentence of immobilization for the custodial
parent. See, Daniels v. Maldonado-Morin, 288 Neb. 240, 847 N.W.2d 79 (2014); Harder v.
Harder, 246 Neb. 945, 524 N.W.2d 325 (1994); Little v. Little, 221 Neb. 870, 381 N.W.2d 161
(1986); and Boll v. Boll, 219 Neb. 486, 363 N.W.2d 542 (1985).
This factor favors removal.
j. Summary of Quality of Life Factors
The district court concluded that Sarah did not establish that removal would enhance
Julietta’s quality of life. In our de novo review, we find that overall, the quality of life factors
weigh in favor of removal.
(iii) Impact on Noncustodial Parent’s Visitation
The final consideration in assessing the best interests of the child is what impact removal
to another jurisdiction would have on the contact between the child and the noncustodial parent.
Korth v. Korth, 309 Neb. 115, 958 N.W.2d 683 (2021). While every move will have some impact,
the impact of removal to another jurisdiction is chiefly concerned with the ability of the parent
opposing the move to maintain a meaningful parent-child relationship after the move. Id. Such
assessment must be undertaken in the light of the potential to establish and maintain a reasonable
visitation schedule, meaning one that provides a satisfactory basis for preserving and fostering a
child’s relationship with the nonmoving parent. Id. Indications of the custodial parent’s willingness
to comply with a modified visitation schedule also have a place in a removal analysis. Id.
The district court determined that this factor weighed against removal. It noted the unique
circumstances in that Paul’s parenting time with Julietta will be limited to phone contact until
September 2023 at the earliest. It also noted that his release from prison is already considered a
material change in circumstances per the decree. The court stated that Sarah’s actions as outlined
in its opinion cast “serious doubt” on her ability to encourage a meaningful relationship between
Julietta and Paul. It also noted Paul’s testimony about the financial burden of traveling to the
Vancouver area and the possibility of other limits on his ability to travel, which would negatively
impact his relationship with Julietta.
- 15 -
In our de novo review, we conclude that this factor does not weigh against removal. Until
Paul is released from prison and chooses to seek modification of parenting time, the outcome of
which is certainly speculative, the move to the Vancouver area will not affect his telephone
parenting time.
(c) Did District Court Abuse Its Discretion?
The district court erred in finding that Sarah did not prove a legitimate reason for seeking
removal of Julietta from Nebraska to the Vancouver area. In our de novo review, we have found
that Julietta’s quality of life would be enhanced by the move and the impact on Paul’s future
parenting time will not be negatively impacted. Overall, we conclude that the district court abused
its discretion in denying Sarah’s request for removal.
3. DISMISSAL WITH PREJUDICE
Sarah asserts that the district court erred in dismissing her amended request for removal
with prejudice. Given our resolution of the above assignments of error, we need not address
Sarah’s final assigned error. An appellate court is not obligated to engage in an analysis that is not
needed to adjudicate the controversy before it. Kozal v. Snyder, 312 Neb. 208, 978 N.W.2d 174
(2022).
VI. CONCLUSION
The district court erred in finding that this case involved a request by a party to modify
custody and in requiring Sarah to plead a material change in circumstances in addition to the
removal requirements. We further conclude that the record supports finding that Sarah had a
legitimate reason for her request for removal and that such would be in the child’s best interest.
As such, based upon our de novo review of the record, we find that the court abused its discretion
in denying Sarah’s request for removal. Accordingly, we reverse the order of the district court and
remand with instructions to grant Sarah’s request for removal.
REVERSED AND REMANDED WITH INSTRUCTIONS.
- 16 - | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483737/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-22-00308-CR
Edgar Caballero, Appellant
v.
The State of Texas, Appellee
FROM THE 21ST DISTRICT COURT OF BASTROP COUNTY
NO. 17057, THE HONORABLE CHRISTOPHER DARROW DUGGAN, JUDGE PRESIDING
ORDER FOR CLERK TO PROVIDE
A P P E L L A T E R E C O R D TO A P P E L L A N T
PER CURIAM
Appellant’s court-appointed counsel has filed a motion to withdraw supported by
a brief concluding that the instant appeal is frivolous and without merit. See Anders
v. California, 386 U.S. 738, 744 (1967). Appellant’s counsel has certified to the Court that he
provided copies of the motion and brief to appellant, advised appellant of his right to examine
the appellate record and file a pro se response, and supplied appellant with a form motion for
pro se access to the appellate record. See Kelly v. State, 436 S.W.3d 313, 319-20 (Tex. Crim.
App. 2014). Appellant has timely filed the motion requesting access to the appellate record with
this Court.
Appellant’s pro se motion is granted. We hereby direct the clerk of the trial
court to provide a copy of the reporter’s record and clerk’s record to appellant, and to provide
written verification to this Court of the date and manner in which the appellate record was
provided, on or before November 28, 2022. See id. at 321.
It is ordered on November 14, 2022.
Before Justices Baker, Triana, and Kelly
Do Not Publish
2 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483753/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-21-00530-CR
The State of Texas, Appellant
v.
Devon Lovegrove, Appellee
FROM THE 331ST DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-DC-21-300936, HONORABLE CHANTAL ELDRIDGE, JUDGE PRESIDING
MEMORANDUM OPINION
The State of Texas filed this interlocutory appeal from the district court’s order
granting Devon Lovegrove’s pretrial motion to suppress evidence of statements that he made to
police. See Tex. Code Crim. Proc. art. 44.01(a)(5). On appeal, the State contends that the
district court erred by concluding that: (1) Lovegrove’s statements to police after invoking his
rights were not made voluntarily and (2) police unlawfully reinitiated Lovegrove’s interrogation.
We will affirm the district court’s order granting the motion to suppress.
BACKGROUND
Lovegrove flagged down a police officer who was driving to the controlled-access
gate of the police-station garage. The police officer got out of his patrol car, and Lovegrove
walked to him, stating that he “got mixed up in some trouble,” wanted to go back home to
Georgia, and wanted to check whether he was in “lawful trouble.” 1 When the police officer
asked what happened, Lovegrove replied, “I helped someone escape from their home, and I
panicked because a person in charge of them had found out, and then told me that they were a
different age than they said they were. So I freaked out, and I bolted.” Lovegrove confirmed
that these events involved “J.S.,” an underage girl. Another police officer walked out to the gate,
minutes after Lovegrove flagged down the first officer.
Lovegrove’s additional statements to police in the ensuing investigation led to his
arrest for human trafficking. See Tex. Penal Code § 20A.02(a)(7). Lovegrove later moved to
suppress statements that he made to police after receiving Miranda warnings and invoking his
right to remain silent and his right to counsel. See Miranda v. Arizona, 384 U.S. 436, 478-79
(1966) (requiring that before custodial interrogation, law-enforcement officers must advise
accused of certain constitutionally protected rights to secure accused’s Fifth Amendment
privilege against self-incrimination). Lovegrove’s motion to suppress argued that the police:
(1) conducted a custodial interrogation of him when he invoked his Miranda rights; (2) did not
“scrupulously honor” his right to remain silent; (3) violated his right to counsel by reinitiating
conversation with him after he asserted his right to counsel; and (4) intentionally employed a
prohibited two-step interrogation tactic—“question first, warn later”—in violation of Missouri
v. Seibert, 542 U.S. 600 (2004) (prohibiting officers from using two-step, “question first, warn
later” interrogation technique to circumvent suspect’s Miranda protections).
Neither party presented any witness testimony during the September 20, 2021
hearing on Lovegrove’s motion to suppress. Lovegrove offered as exhibits videos from the body
cameras worn by Austin Police Officers Gustave Gallenkamp (Exhibit DX1) and Phillip Zolli
1 The officer understood this as a request for a warrants check.
2
(Exhibit DX2) on the date of Lovegrove’s arrest. 2 The parties stipulated to the authenticity of
the videos from those cameras, which were admitted without redaction. Lovegrove argued that
after he had received his Miranda warnings and invoked his right to remain silent and his right to
counsel, police improperly reinitiated their interrogation of him. The State agreed that some of
Lovegrove’s statements to police should be suppressed and redacted them from the
video evidence.
However, the State contended that Lovegrove’s statements on two other portions
of the videos were admissible: (1) Lovegrove’s statements made after he was handcuffed and
received Miranda warnings the first time but before he invoked his right to remain silent and
(2) Lovegrove’s statements made after he was informed that his charge had been changed from
harboring a runaway to human trafficking and received Miranda warnings a third time. 3 After
the hearing, the district court granted the motion to suppress, ultimately prohibiting the State
“from introducing statements made by Lovegrove after he was placed in handcuffs.” The
suppression of these portions of the videos are the focus of this appeal.
Lovegrove Approaches Police
The video evidence admitted during the suppression hearing shows that before
police provided Miranda warnings to Lovegrove, he voluntarily discussed his situation with
them for approximately twenty-four minutes. The unusual circumstances of Lovegrove’s
2 Lovegrove acknowledges that the footage from the officers’ bodycam videos is
essentially duplicative. As the trial court’s Order Granting Defendant’s Motion to Suppress
refers almost exclusively to Exhibit DX1, we will follow suit except where information is better
displayed on Exhibit DX2.
3
The State also identified by timestamps the portions of Exhibit DX1 that it contended
were admissible and should not be suppressed: statements from 28:41 to 31:14 and statements
made after 1:33:26.
3
encounter with police led them to inquire whether he had any mental illness or medical condition
or took any medications, all of which Lovegrove denied. He reported that he drove from his
home in Georgia to Tennessee about ten days earlier to pick up two girls, J.S. and another girl
known only as “E” whom he had met on Omegle, “a web site where you can talk to strangers.”
According to Lovegrove, E “was looking for other people who might be looking
to run away, too,” and found J.S. After Lovegrove picked up the girls and took them to Georgia,
he “was contacted by [J.S.’s] aunt,” and he knew that “logically what [he] should’ve done was
just taken her back to her aunt,” but he said that J.S. told him that she was suicidal. At some
point, E went her own way, Lovegrove left his car in Georgia, and he and J.S. hitchhiked and
rode with someone who drove them 500 miles to Houston. He and J.S. eventually arrived in
Austin. Lovegrove and J.S. had gotten into an argument, and he thought she had been picked up
by police in Austin because he saw her talking to them the night before within walking distance
of Austin police headquarters. He claimed that J.S. said that she would talk to her aunt and that
he should wait until morning to talk to the police so that he would not get in trouble.
Meanwhile, the officers were running warrants checks in Texas, Georgia, and
Tennessee and searching for information on J.S. based on Lovegrove’s physical description of
her. The trial court found that, while Officer Zolli questioned Lovegrove, Officer Gallenkamp
read a police report that J.S. reported that an individual named “Alex” had involuntarily
transported her to Texas, placed a dog collar on her, and choked her. Lovegrove denied having
any identification or a phone on him. Officer Gallenkamp asked Lovegrove if he went by
“Alex” on social media, which Lovegrove confirmed. While they were still standing outside the
4
gate to the police-headquarters garage where Lovegrove first flagged down Officer Gallenkamp,
the officers handcuffed him and stated that they were detaining him. 4
After handcuffing Lovegrove, Officer Gallenkamp said that he was going to
question him and asked him to tell the truth. Because Lovegrove was detained but had not yet
received Miranda warnings, the State agrees that his statements in response to police questioning
should be redacted from the evidence presented to the factfinder from time he was handcuffed
until he first received Miranda warnings. 5
Disputed Admissibility of Statements After Handcuffing and Miranda Warnings
After Lovegrove was handcuffed and Officer Gallenkamp had been questioning
him for about two minutes, Officer Zolli pulled a notebook from his pocket with a small blue
card containing the Miranda warnings. Officer Zolli held the card in his hand at his side for two
more minutes—while Officer Gallenkamp continued questioning Lovegrove—before reading the
Miranda warnings to Lovegrove for the first time. 6 Lovegrove answered, “Yes, sir,” each time
he was asked whether he understood the specific right that had been read to him. Lovegrove said
that he and J.S. had been staying on the street while in Austin.
4 Lovegrove’s statements to police before he was handcuffed were not suppressed by the
district court’s order, which applies only to “statements made by Lovegrove after he was placed
in handcuffs.” He was placed in handcuffs and told he was detained on Exhibit DX1 beginning
at timestamp 24:30.
5 The State agrees that Lovegrove’s statements made when he was handcuffed and
detained but had not yet received Miranda warnings are inadmissible and should be redacted
from the video. These statements are on Exhibit DX1 from timestamp 24:20 through 28:41.
6
Exhibit DX1 shows Officer Zolli pulling the Miranda card from a notebook at
timestamp 26:30 and then reading the Miranda warnings to Lovegrove for the first time at 28:41.
5
Officer Zolli and Lovegrove then walked to an area just inside the police-station
garage gate, and Officer Gallenkamp moved his patrol car so that it was no longer blocking the
entry-gate sensor and other vehicles would not have to wait for him to wave them through.
After Officer Gallenkamp parked the car, Officer Zolli asked Lovegrove if there
was a reason he came to Texas; Lovegrove responded that “the original goal was to go to
California.” Officer Gallenkamp resumed his questioning, during which Lovegrove admitted
that he came to Texas from Georgia because he knew that he had a thirteen-year-old girl with
him that he should not have, and he was trying to get away; stated that he was not sure where his
vehicle was and that he had left it at a rest stop in Georgia or Alabama; and admitted that J.S.
wanted to leave.
Officer Gallenkamp then asked Lovegrove, “You didn’t let [J.S.] leave, right?”
and Lovegrove said, “I’d like to remain silent.” Officer Gallenkamp confirmed, “Okay. Are you
not wanting to answer any more questions?” and Lovegrove said, “I would like—I would prefer
to have a lawyer present.” 7 Questioning ceased. Officer Gallenkamp told Lovegrove that he
was not free to go and that a detective would be contacted. Officer Gallenkamp then walked to
his patrol car, where he called for a detective. Lovegrove sat down while the officers conferred
at a distance by the patrol car.
Lovegrove Asks About Charges Against Him
Officer Gallenkamp told Officer Zolli about another police officer’s report stating
that J.S. had escaped from Lovegrove, who did not want her to leave and tried to choke her when
7Lovegrove’s invocation of these rights is in Exhibit DX1 at timestamps 31:11 (silence)
and 31:17 (attorney present).
6
she did. Officer Gallenkamp also related that there was an “endangered missing child” report in
Tennessee listing Lovegrove as the person who was with J.S. and describing his vehicle.
Officer Zolli walked over to Lovegrove and advised him that they were waiting
on a call from a detective. Officer Gallenkamp also walked over and told Lovegrove that
because he “invoked [his] right,” they would not be asking him any questions, but if Lovegrove
changed his mind and wanted to talk to them or allow further questioning from them, they would
have to reread the little blue card to him (containing the Miranda warnings). Lovegrove nodded
and stated, “Yes sir.”
No communication occurred between the officers and Lovegrove until he stated,
“I do have a question.” 8 Officer Gallenkamp replied, “We gotta read you the Miranda card.”
Officer Gallenkamp then received a call from the detective and stepped away to speak with him.
Officer Zolli stayed with Lovegrove and provided Miranda warnings to him but did not ask him
any questions. After receiving the warnings, Lovegrove asked when he would be able to see the
charges against him. Officer Zolli stated that there were no charges against him “right now.”
Lovegrove then asked why he was being detained. Officer Zolli said, “So we can conduct our
investigation.” Lovegrove replied, “Okay, fair enough.” Officer Zolli explained that the officers
had to “do [their] due diligence” given the information that Lovegrove provided to them.
Lovegrove then reinvoked his right to remain silent. 9
8 Lovegrove told police that he has a question in Exhibit DX1 at timestamp 39:11; that
event occurs in Exhibit DX2 at timestamp 37:22.
9 The trial court found that Lovegrove reinvoked his right to remain silent in Exhibit
DX2 at 39:14. That is the only citation to Exhibit DX2 in the trial court’s Order Granting
Defendant’s Motion to Suppress. Exhibit DX1 does not contain this reinvocation because
Officer Gallenkamp was on a telephone call away from Lovegrove at that moment.
7
Lovegrove’s Inadmissible Statements During Search Incident to Arrest
The officers conferred with the detective, a sergeant, and another police officer
about the possible charges against Lovegrove. There was also discussion that the detective was
en route to speak with J.S. at a child advocacy center. When Officer Gallenkamp walked back to
Lovegrove, he told him, “So, you’re under arrest, okay? For harboring a runaway, okay? Do
you need me to explain what that means, or—.” Lovegrove replied, “If you don’t mind.”
Officer Gallenkamp summarized the charged offense while putting on gloves and asked
Lovegrove whether he had any guns or knives on him before conducting a search incident
to arrest.
When the officer found a wallet in the pocket of Lovegrove’s pants, Lovegrove
began describing the wallet’s contents, which did not include any identification. Officer
Gallenkamp said, “I gotta ask man, and you don’t have to answer if you don’t want to, but it is
not normal to not have your ID or anything, like why’d you [unintelligible] all that?” Because
these statements occurred after Lovegrove invoked his rights to remain silent and to counsel, the
State initially agreed that his statements responding to police during the search incident to arrest
should be redacted from the video. 10
10 On appeal, the State retracts its agreement and disputes whether Lovegrove clearly
invoked his right to counsel. However, in an appeal from a ruling on a motion to suppress, the
State may not rely on a theory that it failed to present to the trial court. See State v. Steelman,
93 S.W.3d 102, 106-07 (Tex. Crim. App. 2002). Because the State failed to complain below that
Lovegrove inadequately invoked his right to counsel, that complaint is not preserved for our
review, and we need not reach it. See Tex. R. App. P. 33.1(a); Martinez v. State, 91 S.W.3d 331,
336 (Tex. Crim. App. 2002) (“This ‘raise it or waive it’ forfeiture rule applies equally to goose
and gander, State and defendant.”).
The statements during the search incident to arrest that the State told the district court
were inadmissible and should be redacted from the video are those on Exhibit DX1 from
timestamp 1:19:30 through 1:22:47.
8
Disputed Admissibility of Statements After Charges Were Changed
After completing the search incident to arrest, Officer Gallenkamp walked
Lovegrove to the patrol car and seated him inside. As they were leaving the garage, Officer
Gallenkamp received a phone call from the detective and got out of the patrol car to take it.
During the call, Officer Gallenkamp learned about the existence of a video and stated, “That’s
what he confirmed, he watched them from a distance.” There was also discussion during the call
about changing the charge against Lovegrove to “trafficking of persons.”
Officer Gallenkamp returned to the patrol car and informed Lovegrove that the
charges were changed. When Lovegrove asked about the charges, Officer Gallenkamp gave his
paraphrased summary of the offense. Although Lovegrove said he “understood,” Officer
Gallenkamp asked if Lovegrove had any comment:
Officer Gallenkamp: I just got off the phone with the detective—can you hear
me—I’ll roll up the window so you can hear me better. The charge has been
changed from harboring a runaway to trafficking of persons, okay?
Lovegrove: Wait, what does ‘trafficking’ mean?
Officer Gallenkamp: [Summarized the offense.]
Lovegrove: Understood.
Officer Gallenkamp: Anything you wanna comment or are you just gonna—
Lovegrove: I didn’t traffic her, that’s—I mean, I know you’re all ‘yes’ or ‘no,’
but I’m not sure if you need to read me my rights.
Officer Gallenkamp: All right, if I read you the rights are you gonna answer some
questions, or no? ‘Cause I can only read you the rights if you’re willing to ask me
questions [sic], or answer questions, okay?
Lovegrove: Yeah, I’ll answer the questions—
9
Officer Gallenkamp: Hold on, hold on, hold on. I mean you’ll—so you want me
to read you the rights, right? So, if I get out of the car, I’m going to read you the
Miranda rights one more—another time and you’re willing to answer some
questions?
Lovegrove: No, I was just gonna finish what I was saying before I asked if you’d
like, ‘cause you asked me about the—
Officer Gallenkamp: All right, hold on. Let me just—just for—let me just read it
to you, okay? 11
Officer Zolli brought the Miranda warnings card, and Officer Gallenkamp
provided the Miranda warnings to Lovegrove for the third time. 12 Afterward, Officer
Gallenkamp asked whether Lovegrove had sex with J.S. anytime during the ten-to-twelve days
when they went from Georgia to Tennessee, back to Georgia, and then to Austin. Lovegrove
stated, “I’d like to not respond.” Officer Gallenkamp confirmed, “Okay, so you said you just
don’t wanna respond to that question.” Lovegrove verbally agreed and nodded.
Officer Gallenkamp then asked, “Do you have any questions about what you’re
being charged with?” Lovegrove responded, “I was wondering if I could make a statement?”
Officer Gallenkamp replied, “Yeah, go ahead.” Lovegrove proceeded to give a statement
incriminating himself as to the human-trafficking charge, recounting events from the time that he
met J.S. and E to the time that they arrived in Texas and answering Officer Gallenkamp’s
11This quoted exchange is on Exhibit DX1 from timestamp 1:30:10 to 1:31:46.
12 Officer Gallenkamp finished reading the Miranda warnings to Lovegrove and asked
Lovegrove whether he understood, and Lovegrove responded, “Yes, sir” on Exhibit DX1 at
timestamp 1:33:53.
10
questions for the next forty-two minutes. The State contends that this set of statements is
admissible because Lovegrove reinitiated the conversation by asking about making a statement. 13
District Court’s Ruling
At the conclusion of the suppression hearing, the district court granted
Lovegrove’s motion, explaining that “the totality of the circumstances, starting with the
voluntary encounter with the police all the way through the third Miranda rights, . . . indicates
that his statements were not voluntarily made.” The State requested findings of fact and
conclusions of law from the district court and filed a notice of appeal. On October 18, 2021, the
district court signed a written order memorializing its oral ruling granting the motion to suppress.
The order contained the district court’s findings and conclusions. 14 It referenced
the parties’ dispute about the admissibility of two sets of statements: (1) those Lovegrove made
after he was initially read his Miranda rights and before he invoked those rights and (2) those
Lovegrove made after Officer Gallenkamp explained the human trafficking charge and asked
Lovegrove, “Anything you want to comment on or are you just gonna—?” As to the first set, the
district court concluded that the State offered no evidence or argument regarding either officer’s
intent in delaying the Miranda warnings; that midstream Miranda warnings were not effective to
establish a knowing, intelligent, and voluntary waiver of Lovegrove’s rights; and that
Lovegrove’s statements were inadmissible under Missouri v. Seibert, 542 U.S. 600 (2004). As to
13 The portions of the video that the State contended were admissible and should not be
suppressed were the statements after the third set of Miranda warnings. This is on Exhibit DX1
from approximately timestamp 1:35:24 (after Lovegrove asked if he could make a statement)
through 2:17:37 (when Lovegrove denied having anything else he wanted to add to his
statements).
14 The State filed objections to the district court’s findings and conclusions, and
Lovegrove filed a reply to those objections, but the record contains no ruling on them.
11
the second set of statements, the district court concluded that the officers failed to respect
Lovegrove’s invocation of his rights by questioning him during the search and that initial
violation was never remedied, rendering any of Lovegrove’s subsequent statements inadmissible
under Michigan v. Mosley, 423 U.S. 96 (1975) and Edwards v. Arizona, 451 U.S. 477 (1981).
Additionally, the district court concluded that the officers unlawfully reinitiated
interrogation of Lovegrove when Officer Gallenkamp explained the charge and asked, “Anything
you want to comment on or are you just gonna—?” Independent of Mosley and Edwards, the
district court also concluded that the second set of statements were inadmissible under Seibert
because throughout their interaction with Lovegrove, the officers intentionally elicited numerous
incriminating statements in violation of Miranda. Finally, the district court concluded that
Lovegrove’s purported waiver of his Miranda rights was not made intentionally, knowingly,
and voluntarily.
In sum, the district court’s order prohibited the State “from introducing statements
made by Lovegrove after he was placed in handcuffs.”
DISCUSSION
Standard of Review
Before turning to the State’s issues, we address the parties’ dispute as to the
applicable standard of review. We review a trial court’s ruling on a motion to suppress evidence
under a bifurcated standard, Martin v. State, 620 S.W.3d 749, 759 (Tex. Crim. App. 2021),
giving almost total deference to the trial court’s findings of fact and reviewing de novo the
application of the law to the facts, State v. Ruiz, 577 S.W.3d 543, 545 (Tex. Crim. App. 2019).
That same deferential standard applies to the trial court’s determination of historical facts, even
12
if that determination is based on a video recording admitted into evidence at a suppression
hearing. State v. Duran, 396 S.W.3d 563, 570 (Tex. Crim. App. 2013); see State v. Garcia,
569 S.W.3d 142, 149 (Tex. Crim. App. 2018) (noting that on matters of historical fact, trial judge
is in better position than appellate court to settle disputes). Thus, an appellate court may review
de novo “indisputable visual evidence” contained in a videotape but must defer to the trial
judge’s factual finding on whether a witness actually saw what was depicted on a videotape or
heard what was said during a recorded conversation. Duran, 396 S.W.3d at 570-71; see
Montanez v. State, 195 S.W.3d 101, 109 (Tex. Crim. App. 2006) (quoting Anderson v. Bessemer
City, 470 U.S. 564, 573-74 (1985) and noting that parties to appeal have already focused on
persuading trial judge that “their account of the facts is the correct one,” which they need not do
again at appellate level).
Here, the facts surrounding Lovegrove’s questioning were captured on video and
the parties stipulated to the authenticity of that video, which the district court admitted into
evidence without redaction. The parties did not dispute whose account of the facts was correct,
no witnesses testified at the suppression hearing, and no trial-court findings were made as to
credibility and demeanor. Consequently, there were no fact findings on “whether a witness
actually saw what was depicted on a videotape or heard what was said during a recorded
conversation.” Cf. Duran, 396 S.W.3d at 570-71.
In cases like this, where no witness testimony is presented at the suppression
hearing, the custodial questioning was videotaped, and the underlying events are not in dispute,
the trial court’s ruling is merely an application of the law to uncontested facts. See Mayes
v. State, 8 S.W.3d 354, 358 (Tex. App.—Amarillo 1999, no pet.). The Court of Criminal
Appeals has concluded that a court of appeals errs by applying a deferential standard to a trial
13
court’s ruling on a motion to suppress when that ruling was not based on any witness testimony
or finding of historical fact and did not turn on an evaluation of credibility and demeanor. See
State v. Stevens, 235 S.W.3d 736, 740 (Tex. Crim. App. 2007); see also Carmouche v. State,
10 S.W.3d 323, 332 (Tex. Crim. App. 2000) (noting that nature of evidence presented in
videotape did not pivot on evaluation of credibility and demeanor). Rather, we review de novo a
trial court’s ruling on a motion to suppress when the application of law to facts does not involve
determinations of credibility and demeanor. See Stevens, 235 S.W.3d at 740; Maestas v. State,
987 S.W.2d 59, 60 (Tex. Crim. App. 1999) (“Because the facts of this case do not involve an
evaluation of credibility of any witness by the trial judge, we will conduct our own de novo
review.”); Mayes, 8 S.W.3d at 358 (“We review de novo a trial court’s ruling on a motion to
suppress if that ruling merely involved an application of law to undisputed fact.”); see also State
v. Kerwick, 393 S.W.3d 270, 273 (Tex. Crim. App. 2013) (“[W]hen mixed questions of law and
fact do not depend on the evaluation of credibility and demeanor, the appellate court reviews the
trial judge’s ruling de novo.”); Garcia v. State, 15 S.W.3d 533, 535 (Tex. Crim. App. 2000)
(concluding that in appeal of ruling on motion to suppress “[t]he determination of whether a
statement is voluntary is a mixed question of law and fact, i.e., an application of law to a fact
question”). Accordingly, we review de novo the district court’s ruling on the motion to suppress.
Voluntariness of Statements After Miranda Warnings and Lovegrove’s Seibert Complaint
On appeal, the State contends that Lovegrove’s statements to police after the
Miranda warnings were first provided to him and before he invoked those rights were voluntary
statements and are admissible. Lovegrove counters that those statements are inadmissible
because the officers intentionally used a “question first, warn later” technique in violation of
14
Seibert. See 542 U.S. at 613 (noting that “if the interrogators employ the technique of
withholding warnings until after interrogation succeeds in eliciting a confession, the warnings
will be ineffective in preparing the suspect for successive interrogation, close in time and similar
in content”).
The Fifth Amendment prohibits the government from compelling a criminal
suspect to bear witness against himself. U.S. Const. amend. V; Pecina v. State, 361 S.W.3d 68,
74-75 (Tex. Crim. App. 2012). In Miranda, the Supreme Court established safeguards to protect
the privilege against self-incrimination in the inherently coercive atmosphere of custodial
interrogations. Pecina, 361 S.W.3d at 75. Consistent with those safeguards, police officers must
give Miranda warnings to one who is in custody before questioning him. Id. The warnings
advise “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.” Miranda, 384 U.S. at 444. “The defendant may waive effectuation of these rights,
provided the waiver is made voluntarily, knowingly and intelligently.” Id. Only if the person
voluntarily and intelligently waives his Miranda rights may his statement be introduced into
evidence against him at trial. Pecina, 361 S.W.3d at 75.
The implications of Miranda regarding a suspect’s post-warning statements were
addressed in Seibert. See 542 U.S. at 604-05. In that case, police officers deliberately failed to
provide Miranda warnings to a suspect before questioning, conducted their interrogation and
obtained incriminating statements, provided “midstream” Miranda warnings to the suspect after
the initial interrogation, and then obtained another statement from the suspect. See id. This type
of “question first, warn later” strategy “is based on the assumption that Miranda warnings will
tend to mean less when recited mid-interrogation, after inculpatory statements have already been
15
obtained.” Id. at 620 (Kennedy, J., concurring). The Supreme Court held that the suspect’s
post-warning statements in Seibert were inadmissible because: (1) the question-first tactic
threatened to thwart Miranda’s purpose of reducing the risk of a coerced confession, and
(2) there was no showing that midstream Miranda warnings given to the suspect could have
served their purpose. See id. at 617.
When an initial Miranda violation is inadvertent rather than deliberate, a second
statement made after the required warnings is admissible if the post-warning statement was given
voluntarily. See id. at 620 (Kennedy, J., concurring) (citing Oregon v. Elstad, 470 U.S. 298, 309
(1985)); see also Carter v. State, 309 S.W.3d 31, 38 (Tex. Crim. App. 2010) (adopting
J. Kennedy’s concurring opinion in Seibert). We consider whether there was a Seibert violation
before determining whether post-warning statements to police were made voluntarily. See
Carter, 309 S.W.3d at 41 (“Once a determination has been made that the pre-warning
questioning was not part of a deliberate plan to undermine a suspect’s Miranda protections, it is
still necessary to determine if [defendant]’s post-warning statements were voluntarily made.”);
Foster v. State, 579 S.W.3d 606, 612 (Tex. App.—Houston [14th Dist.] 2019, no pet.) (noting
that when defendant receives midstream Miranda warnings and moves to suppress his
post-Miranda statements, threshold determination is whether two-step, “question first, warn
later” strategy was deliberately employed, and if it was not, next determination is whether
defendant waived his Miranda rights voluntarily).
The pivotal question in determining the admissibility of post-Miranda statements
is whether the evidence shows that the officers deliberately employed a two-step, “question first,
warn later” interrogation technique to circumvent the suspect’s Miranda protections. See Carter,
309 S.W.3d at 38. Whether the “question first, warn later” strategy was deliberate hinges on the
16
interrogating officer’s subjective intent. See id. at 39; Foster, 579 S.W.3d at 612. The State has
the “burden of disproving the deliberate employment of a two-step interrogation technique once
a defendant objects to the admission of his statement on two-step interrogation grounds.”
Vasquez v. State, 483 S.W.3d 550, 554 (Tex. Crim. App. 2016).
Here, Lovegrove raised his Seibert complaint in his written motion and during the
suppression hearing. There were no exhibits or testimony admitted at the suppression hearing as
to the officers’ subjective intent in questioning Lovegrove while he was handcuffed and before
providing any Miranda warnings. However, the trial court found that, while Officer Zolli
questioned Lovegrove, Officer Gallenkamp read a police report that J.S. reported that an
individual named “Alex” had involuntarily transported her to Texas, placed a dog collar on her,
and choked her; Officer Gallenkamp then asked Lovegrove if he sometimes went by the name
“Alex” and Lovegrove said he did. The officers immediately placed Lovegrove in handcuffs.
Moreover, the video shows that a couple of minutes after Lovegrove was handcuffed and while
being questioned by Officer Gallenkamp, Officer Zolli pulled out a Miranda warnings card,
indicating that he expected Miranda warnings were needed. Officer Zolli stood by as
Lovegrove’s questioning proceeded and delayed providing the Miranda warnings to him. The
State provided no evidence of Officer Zolli’s subjective intent in delaying the Miranda warnings
while holding the card in his hand. See Carter, 309 S.W.3d at 39. And the State provided no
evidence of Officer Gallenkamp’s subjective intent in omitting those warnings before
questioning Lovegrove after he was handcuffed. See id.; see also Martinez v. State, 272 S.W.3d
615, 619 (Tex. Crim. App. 2008) (noting that “failure to give timely [Miranda] warnings
generally results in the state being required to forfeit the use of any statement obtained during
that interrogation during its case-in-chief”).
17
On this record, we conclude that the State did not meet its burden of disproving
the deliberate employment of a two-step interrogation technique once Lovegrove raised a Seibert
complaint about the admissibility of his statements to police. See Vasquez, 483 S.W.3d at 554.
Accordingly, suppression of Lovegrove’s first set of statements on Seibert grounds was proper. 15
Reinitiation of Interrogation After Invocation of Right to Remain Silent
The State also contends that Lovegrove initiated conversation with Officer
Gallenkamp, after receiving Miranda warnings for the third time, by asking if he “could make a
statement.” Lovegrove contends that before that point, Officer Gallenkamp unlawfully
reinitiated his interrogation, despite Lovegrove’s invocation of his right to remain silent and his
right to counsel, by asking Lovegrove for comment on the new charges against him.
To safeguard a person’s Fifth Amendment right to not be a witness against
himself, law-enforcement officials must inform a person in custody before questioning him that
he has the right to remain silent and that any statement he makes may be used against him in
court. Miranda, 384 U.S. at 444; Ramos v. State, 245 S.W.3d 410, 418 (Tex. Crim. App. 2008).
Once a person in custody invokes his right to silence, his interrogation must immediately cease,
and police officers must scrupulously honor that invocation. Ramos, 245 S.W.3d at 418 (citing
Mosley, 423 U.S. at 104). Police officers may resume questioning a person who has previously
invoked his right to remain silent if the person himself initiates further discussion about the
investigation. See Trevino v. State, 815 S.W.2d 592, 618-19 (Tex. Crim. App. 1991), rev’d on
15 We have determined that the State did not meet its burden of disproving a Seibert
violation, an inquiry that precedes the determination of whether post-warning statements to
police were made voluntarily. See Carter v. State, 309 S.W.3d 31, 41 (Tex. Crim. App. 2010);
Foster v. State, 579 S.W.3d 606, 612 (Tex. App.—Houston [14th Dist.] 2019, no pet.). Given
that failure of proof, we need not address whether Lovegrove’s statements after being handcuffed
but before receiving Miranda warnings were made voluntarily.
18
other grounds, 503 U.S. 561 (1992). That is, a suspect may affirmatively demonstrate his wish
to waive his right to remain silent by reinitiating a dialogue with a law-enforcement officer that
is “unprompted by further interrogation.” See United States v. Rieves, 584 F.2d 740, 745 (5th
Cir. 1978).
“[T]he term ‘interrogation’ under Miranda refers not only to express questioning,
but also to any words or actions on the part of the police (other than those normally attendant to
arrest and custody) that the police should know are reasonably likely to elicit an incriminating
response.” Rhode Island v. Innis, 446 U.S. 291, 301 (1980). “When police questioning is
actually ‘designed to elicit an incriminating response from the accused, it is unlikely that the
practice will not also be one which the police should have known was reasonably likely to have
that effect.’” State v. Cruz, 461 S.W.3d 531, 540 (Tex. Crim. App. 2015) (quoting Innis,
446 U.S. at 301 n.7).
Here, the video shows that Officer Gallenkamp reinitiated Lovegrove’s
interrogation after Lovegrove had invoked his right to remain silent and the prior interrogation
had ceased. Officer Gallenkamp went back to the patrol car and informed Lovegrove about the
change to the charges against him. Lovegrove responded by asking about the meaning of
“trafficking.” Officer Gallenkamp provided his paraphrased summary of the offense, and
Lovegrove replied, “Understood.” But the conversation did not cease at that point. Officer
Gallenkamp further asked Lovegrove for his comment on the charges. We conclude that asking
a suspect who has just been arrested for comment on the charges he faces is “reasonably likely to
elicit an incriminating response.” See Innis, 446 U.S. at 301. We further conclude that Officer
Gallenkamp should have known that requesting Lovegrove’s commentary on the charges “was
reasonably likely to have that effect.” See id. at 301 & n.7; Cruz, 461 S.W.3d at 540.
19
The State focuses on a later portion of the video, characterizing Lovegrove’s
request to “make a statement” as evidence that he was reinitiating conversation with the police.
However, “the critical inquiry is whether the suspect was further interrogated before he
reinitiated conversation with law enforcement officials.” See Cross v. State, 144 S.W.3d 521,
529 (Tex. Crim. App. 2004). The video reflects that Lovegrove’s request to make a statement
was not “unprompted by further interrogation.” Cf. Rieves, 584 F.2d at 745. Rather, his request
occurred only after Officer Gallenkamp had asked him to comment on the new charges. Because
Lovegrove was interrogated before he said that he “was wondering if [he] could make a
statement,” he did not reinitiate conversation with the police. See Cross, 144 S.W.3d at 529.
On this record, we conclude that the State did not show that Lovegrove’s
reinitiation of conversation with police justified the continuation of his questioning after he
invoked his right to remain silent. See Trevino, 815 S.W.2d at 618-19. Accordingly,
suppression of Lovegrove’s second set of statements, which were made without waiver of his
prior invocation of his Miranda rights was proper
We overrule the State’s appellate issues.
CONCLUSION
We affirm the district court’s order.
__________________________________________
Darlene Byrne, Chief Justice
Before Chief Justice Byrne, Justices Kelly and Smith
Affirmed
Filed: November 9, 2022
Do Not Publish
20 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483764/ | IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-743
No. COA22-441
Filed 15 November 2022
Burke County, No. 21 SPC 50223
IN THE MATTER OF:
B.S.
Appeal by Respondent from order entered 5 November 2021 by Judge Andrea
C. Plyler in Burke County District Court. Heard in the Court of Appeals 5 October
2022.
Attorney General Joshua H. Stein, by Assistant Attorney General Hilary R.
Ventura, for the State of North Carolina.
Appellate Defender Glenn Gerding, by Assistant Appellate Defender David W.
Andrews, for Respondent-Appellant.
JACKSON, Judge.
¶1 Respondent B.S.1 (“Respondent”) appeals from the trial court’s order re-
committing him to a 120-day term of involuntary inpatient commitment. After
careful review, we vacate and remand back to the trial court.
I. Background
1 We use initials to protect Respondent’s privacy. See N.C. R. App. P. 42(b).
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
¶2 On 23 November 2020, Respondent was indicted on one count of first-degree
arson and one count of attempted first-degree arson. On 3 March 2021, the Honorable
Louis Trosch entered an Involuntary Commitment Custody Order finding that
Respondent was incapable of proceeding with the criminal action and ordering that
he be taken temporarily into the custody of a 24-hour treatment facility for
examination and treatment pending a district court hearing.
¶3 At an initial commitment hearing on 18 June 2021, the trial court found that
Respondent had a mental illness and was a danger to himself and ordered a
commitment period of 60 days. Respondent was re-committed for a period of 90 days
by order on 13 August 2021.
¶4 On 5 November 2021, Respondent’s case was heard again in Burke County
District Court after a recommendation by Respondent’s physician at the inpatient
facility that he be commitment for a further 180 days. The trial court heard testimony
from a psychiatrist at the inpatient facility. During the psychiatrist’s testimony,
Respondent, then represented by counsel, interrupted several times. After the first
interruption the trial court directed Respondent to talk to his attorney, who in turn
asked Respondent if he wanted to proceed pro se. Respondent said no.
¶5 A few moments later while the psychiatrist was still testifying, Respondent’s
attorney told the trial court that Respondent wished to represent himself. The trial
court had Respondent sign a waiver of counsel form and he then proceeded pro se.
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
¶6 After the close of testimony and arguments, the trial court orally found that
Respondent was mentally ill and a danger to himself or others. The same day, the
trial court issued a written order committing Respondent to 120 days at the inpatient
facility. The trial court checked the boxes on the commitment order form that
Respondent was mentally ill and a danger to himself or others. The trial court also
wrote as further facts supporting commitment: “poor insight into mental illness and
poor judgment. Patient is refusing to take medication.”
¶7 Respondent entered written notice of appeal of the 5 November 2021 order on
18 November 2021.
II. Analysis
¶8 Respondent raises three arguments on appeal: (1) the trial court erred by
allowing Respondent to represent himself at the involuntary commitment hearing;
(2) the trial court’s findings of fact did not establish that Respondent was mentally ill
or dangerous to himself or others; and (3) the proper remedy is to reverse the
commitment order without remand to the trial court for a new hearing.
¶9 As an initial matter, though not challenged by the State, we note that while a
term for involuntary commitment may necessarily be over by the time it reaches our
Court, it is well established that “a prior discharge will not render questions
challenging the involuntary commitment proceeding moot.” In re Booker, 193 N.C.
App. 433, 436, 667 S.E.2d 302, 304 (2008) (internal quotations omitted). This is
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
because “the challenged order may form the basis for future commitment or may
cause other collateral legal consequences for the respondent.” In re Webber, 201 N.C.
App. 212, 217, 689 S.E.2d 468, 472-73 (2009).
¶ 10 “We review the trial court’s commitment order to determine whether the
ultimate finding concerning the respondent’s danger to self or others is supported by
the court’s underlying findings, and whether those underlying findings, in turn, are
supported by competent evidence.” In re W.R.D., 248 N.C. App. 512, 515, 790 S.E.2d
344, 347 (2016).
A. Waiver of Counsel
¶ 11 Respondent first contends that the trial court erred in allowing Respondent to
represent himself at the commitment hearing. We agree.
¶ 12 North Carolina General Statute § 122C-268 governs the district court hearing
procedures for inpatient commitment. Under this statutory scheme, a respondent
“shall be represented by counsel of his choice; or if he is indigent within the meaning
of G.S. 7A-450 or refuses to retain counsel if financially able to do so, he shall be
represented by counsel appointed in accordance with the rules adopted by the Office
of Indigent Defense Services.” N.C. Gen. Stat. § 122C-268(d) (2021).
¶ 13 Rule 1.6 of the Office of Indigent Services (“IDS”) provides:
An indigent person who has been informed of his or her
right to be represented by counsel at any in-court-
proceeding may, in writing, waive the right to in-court
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
representation by counsel. Any such waiver of counsel
shall be effective only if the court finds of record that at the
time of waiver the indigent person acted with full
awareness of his or her rights and of the consequences of
the waiver. In making such a finding, the court shall follow
the requirements of G.S. 15A–1242 and shall consider,
among other things, such matters as the person’s age,
education, familiarity with the English language, mental
condition, and the complexity of the matter.
IDS Rule 1.6(a) (2015) (emphasis added).
¶ 14 North Carolina General Statute § 15A-1242 requires that a judge make a
thorough inquiry and be satisfied that the defendant:
(1) Has been clearly advised of his right to the
assistance of counsel, including his right to the assignment
of counsel when he is so entitled;
(2) Understands and appreciates the consequences of
this decision; and
(3) Comprehends the nature of the charges and
proceedings and the range of permissible punishments.
¶ 15 Together, N.C. Gen. Stat. § 122C-268(d), IDS Rule 1.6, and N.C. Gen. Stat.
§ 15A-1242 form the mandatory framework under which a trial court must act when
a respondent at an involuntary commitment proceeding chooses to represent himself,
and the failure to follow this framework is prejudicial error. In re Watson, 209 N.C.
App. 507, 518, 706 S.E.2d 296, 303 (2011).
¶ 16 In Watson, we vacated the trial court’s commitment order where the trial court
allowed the respondent to represent himself without inquiring about or considering
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
the respondent’s “age, education, mental condition, or the complexity of the
proceeding.” Id. We held that perfunctory questioning by the trial court is
insufficient. Id.
¶ 17 Here, the following initial exchange took place at the commitment hearing:
Q: Okay. How long ago did the refusals start?
[Witness]: Well, I think he refused yesterday both doses.
I think, I’m not sure about this morning, but I know
yesterday he refused. And, you know, he says that it makes
him nauseous—
B.S.: Your Honor, I’d like to accuse the witness of perjury
at this moment.
The Court: Okay, talk to your attorney.
B.S.: The witness—I took my medication yesterday. I
refused two times the day before, and she said I refused
several times. I would like to accuse her of perjury.
The Court: All right. I’m going to let you talk to your
attorney. I’m going to let the witness continue to testify.
You’ll have your opportunity to speak.
[B.S.’s attorney]: Do you want to be pro se?
B.S.: Okay.
[B.S.’s attorney]: Do you want to be pro se?
B.S.: No, I wouldn’t like to be pro se.
¶ 18 A short time later, the following further exchange occurred:
[B.S.’s attorney]: Excuse me, Your Honor. My client has
just informed me he would like to be pro se in this matter.
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
The Court: Sir, you wish to represent yourself here
today—
B.S.: Yes, thank you.
The Court: —and you don’t wish to have any help from an
attorney?
B.S.: Um, no, thank you.
The Court: All right. At this time, raise your right hand,
and listen to Madam Clerk that you wish to represent
yourself.
The Clerk: [Indiscernible].
The Court: Okay. We’re going to be at ease for just a
moment. Just sit still for me.
B.S.: Thank you very much, madam.
The Court: You’re welcome.
...
The Court: All right, sir. Raise your right hand and listen
to Madam Clerk.
[B.S. affirms that he waives his right to an attorney at 9:46
a.m.]
The Court: Okay. We’re going to have you sign this
waiver.
B.S.: May I approach to sign, or what, is the bailiff gonna—
The Court: Nope. They’ll bring it to you.
B.S.: Appreciate it, señor.
The Court: All right. You may proceed.
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
¶ 19 The trial court did not conduct any specific inquiry into Respondent’s age,
mental condition, or education, nor about whether he understood the complexity of
the case or the full ramifications of choosing to represent himself.
¶ 20 Further, the waiver form signed by Respondent is a form designed for criminal
cases, as evidenced by the certification section signed by the trial court that “the
above named defendant has been fully informed of the charges against him/her, the
nature of the statutory punishment for each charge, and the nature of the proceeding
against the defendant[.]” The acknowledgement portion signed by Respondent
contained no colloquy language and stated:
As the undersigned party in this action, I freely and
voluntarily declare that I have been fully informed of the
charges against me, the nature of the statutory
punishment for each such charge, and the nature of the
proceeding against me; that I have been advised of my right
to have counsel assigned to assist me and my right to have
the assistance of counsel in defending against these
charges or in handling these proceedings, and that I fully
understand and appreciate the consequences of my
decision to waive the right to assigned counsel and the
right to assistance of counsel.
¶ 21 The State argues that because Respondent signed the waiver and proceeded to
represent himself, engaging in cross-examination of witnesses, testimony on his own
behalf, and argument to the court, he demonstrated informed waiver of counsel. We
are unpersuaded.
¶ 22 The written waiver Respondent signed cannot serve on its own to satisfy the
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
requirements of N.C. Gen. Stat. § 15A-1242. It contains no substantive inquiry into
Respondent’s ability to represent himself. Even more importantly, it is clearly not
intended to advise respondents in involuntary commitment hearings of their right to
counsel and includes potentially misleading language about charges and prospective
punishment faced by those who sign the form.
¶ 23 While it is true that the rationales of waiver of counsel from criminal cases also
apply to cases of involuntary commitment, Watson, 209 N.C. App. at 516, 706 S.E.2d
at 302, the signing of a criminal waiver of counsel form does not absolve the trial
court of its statutory obligations to perform an independent inquiry about a
respondent’s ability to represent themselves at a commitment hearing, and neither
does the subsequent conduct of Respondent in his self-representation. See IDS Rule
1.6 (waiver of counsel is only effective if the court makes findings that “shall follow
the requirements of G.S. 15A–1242 and shall consider, among other things, such
matters as the person's age, education, familiarity with the English language, mental
condition, and the complexity of the matter”); Watson, 209 N.C. App. at 513, 706
S.E.2d at 300 (the use of the word “shall” is mandatory language for our trial court).2
2 We also note that even in those criminal cases where the criminal waiver of counsel
form is appropriate to use, we have held that “a written waiver of counsel is no substitute for
actual compliance by the trial court with G.S. § 15A-1242.” State v. Wells, 78 N.C. App. 769,
773, 338 S.E.2d 573, 575 (1986). Our Supreme Court considers the written waiver to be a
supplement to the required inquiry in N.C. Gen. Stat. § 15A-1242, not an alternative to it.
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
¶ 24 Despite having Respondent sign a waiver of counsel and proceed pro se, the
trial court found in its 5 November 2021 order that Respondent was represented by
counsel. This finding is not supported by the evidence.
¶ 25 Because the trial court allowed Respondent to represent himself without
conducting the statutorily mandated inquiry, the commitment order must be vacated.
See Watson, 209 N.C. App. at 522, 706 S.E.2d at 305.
B. The Trial Court’s Commitment Order
¶ 26 Respondent next contends that the trial court’s findings of fact do not support
its conclusion of law that Respondent was mentally ill or a danger to himself or others.
Because we have already determined that the commitment order should be vacated,
we do not address this argument.
C. Appropriate Remedy
¶ 27 Respondent finally contends that the appropriate remedy in this case is to
reverse the commitment order without remand to the trial court. Respondent asserts
that there is a divergence in how this Court has disposed of cases where we have
found that the trial court failed to record sufficient findings of fact. An earlier line of
cases simply reversed with no remand back to the trial court, while a separate, later
See State v. Thomas, 331 N.C. 671, 674-75, 417 S.E.2d 473, 476 (1992) (“As a further
safeguard, the trial court must obtain a written waiver of the right to counsel.” (emphasis
added)).
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
line reversed and remanded. Because our opinion this case is not analogous to those
cited by Respondent, we do not address this apparent conflict in our precedent.
¶ 28 Respondent is correct that there appears to be a split in our judicial history in
how we have disposed of cases where we have found that the trial court made
insufficient findings of fact in involuntary commitment cases. See, e.g., In re Crouch,
28 N.C. App. 354, 355, 221 S.E.2d 74, 75 (1976) (reversed with no remand); In re
Neatherly, 28 N.C. App. 659, 661, 222 S.E.2d 486, 487 (1976) (reversed with no
remand); In re Hogan, 32 N.C. App. 429, 434, 232 S.E.2d 492, 495 (1977) (reversed
with no remand); In re Koyi, 34 N.C. App. 320, 321, 238 S.E.2d 153, 154 (1977)
(reversed with no remand); In re Jacobs, 38 N.C. App. 573, 576, 248 S.E.2d 448, 450
(1978) (reversed with no remand); In re Bartley, 40 N.C. App. 218, 220, 252 S.E.2d
553, 554 (1979) (reversed with no remand); In re Caver, 40 N.C. App. 264, 266, 252
S.E.2d 284, 286 (1979) (vacated and remanded); In re Allison, 216 N.C. App. 297, 300,
715 S.E.2d 912, 915 (2011) (reversed and remanded); In re Whatley, 224 N.C. App.
267, 274, 736 S.E.2d 527, 532 (2012) (reversed and remanded); In re J.C.D., 265 N.C.
App. 441, 453, 828 S.E.2d 186, 194 (2019) (vacated and remanded). However, none
of the cases identified by Respondent or by us as simply reversing with no remand
also addressed the question of adequate waiver of counsel. As discussed supra,
waiver of counsel is the only issue we reach in this opinion.
¶ 29 Where we have held that the trial court failed to follow the statutory mandates
IN RE B.S.
2022-NCCOA-743
Opinion of the Court
for waiver of counsel, we have vacated the order and remanded for a new hearing.
See, e.g., Watson, 209 N.C. App. at 522, 706 S.E.2d at 305; In re B.J.G., 237 N.C. App.
398, 767 S.E.2d 152, 2014 WL 6434492 (2014) (unpublished); In re V.O., 264 N.C.
App. 249, 823 S.E.2d 694, 2019 WL 1040369 (2019) (unpublished); In re T.R.K., 255
N.C. App. 857, 805 S.E.2d 541, 2017 WL 4365151 (2017) (unpublished). We are bound
by our precedent on this matter. See In re Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d
30, 37 (1989).
III. Conclusion
¶ 30 For the foregoing reasons, we hold that the trial court failed to conduct the
required statutory inquiry before allowing Respondent to represent himself at the 5
November 2021 involuntary commitment hearing. We therefore vacate the
involuntary commitment order and remand for further proceedings.
VACATED AND REMANDED.
Judges WOOD and GRIFFIN concur. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483765/ | IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-742
No. COA22-543
Filed 15 November 2022
Durham County, No. 22 CVD 1915
CHARLOTTE HAIDAR, Plaintiff,
v.
DARWIN MOORE, Defendant.
Appeal by Plaintiff from order entered 19 April 2022 by Judge Pat Evans in
Durham County District Court. Heard in the Court of Appeals 2 November 2022.
Kerstin Walker Sutton PLLC, by Kerstin Walker Sutton, for Plaintiff-Appellant.
Thomas, Ferguson & Beskind, LLP, by Kellie Mannette, for Defendant-
Appellee.
GRIFFIN, Judge.
¶1 Plaintiff Charlotte Haidar appeals from the trial court’s order dismissing her
complaint for a N.C. Gen. Stat. § 50C no-contact order. Plaintiff primarily argues
that the trial court erred because it made no written findings of fact in the order
dismissing her complaint. Plaintiff also asserts, if the order is sufficient for our
review, that the trial court abused its discretion because its decision was not based
upon competent evidence. Because the trial court’s order contains no written findings
of fact, we are unable to conduct meaningful appellate review. Therefore, we vacate
HAIDAR V. MOORE
2022-NCCOA-742
Opinion of the Court
and remand the trial court’s order for written findings of fact.
I. Factual and Procedural Background
¶2 Plaintiff and Defendant first met on the evening of 2 October 2021, as both
were part of a group of students staying on Duke University’s campus during fall
break. During the following days, Plaintiff and Defendant engaged in sexual conduct
in Defendant’s dorm room that Plaintiff asserts was, at least in part, nonconsensual.
After these encounters, Plaintiff became very emotional, felt that she had been
harmed, and suffered mental anguish and anxiety whenever she saw Defendant at
events on campus. On 14 February 2022, Duke University administration issued a
mutual no-contact order upon Plaintiff’s request.
¶3 On 1 April 2022, Plaintiff filed a complaint requesting a no-contact order for
stalking or nonconsensual sexual conduct against Defendant. On 19 April 2022,
Defendant filed a motion to dismiss Plaintiff’s complaint for failure to state a claim,
pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. Following
a hearing on the matter, the trial court issued an oral statement in open court
explaining that, after weighing the evidence in a “very difficult” case where a “young
lady [was] obviously in distress,” the court “ha[d] to find that [P]laintiff has failed to
prove grounds for issuance of a no-contact order.”
¶4 The trial court then issued a written order denying and dismissing Plaintiff’s
complaint. The written order contained no findings of fact supporting its conclusion,
HAIDAR V. MOORE
2022-NCCOA-742
Opinion of the Court
stating only that “[t]he plaintiff has failed to prove grounds for issuance of a no-
contact order.”
¶5 Plaintiff timely appeals.1
II. Analysis
¶6 Plaintiff argues the trial court’s order dismissing her complaint is facially
defective because the trial court failed to make written findings of fact supported by
competent evidence supporting its conclusions of law. We agree, and therefore
remand the trial court’s order for written findings of fact.
¶7 “The standard of review on appeal from a judgment entered after a non-jury
trial is ‘whether there is competent evidence to support the trial court’s findings of
fact and whether the findings support the conclusions of law and ensuing judgment.”
Cartin v. Harrison, 151 N.C. App. 697, 699, 567 S.E.2d 174, 176 (2002) (citation
omitted). Rule 52(a)(1) of the North Carolina Rules of Civil Procedure states:
In all actions tried upon the facts without a jury or with an
1 During the pendency of this appeal, Defendant filed a motion to seal all filings and
a motion to refer to Defendant by a pseudonym for the remainder of the proceedings. Each
of these motions has been denied.
Plaintiff has filed a motion for sanctions under Rule 34(a) of the North Carolina Rules
of Appellate Procedure, arguing that Defendant’s motions were frivolous, not grounded in
existing law, and not made in good faith. See N.C. R. App. P. 34(a)(3) (stating this Court may
sanction a party if it files a motion “grossly lacking in the requirements of propriety, grossly
violat[ing] appellate court rules, or grossly disregard[ing] the requirements of a fair
presentation of the issues to the appellate court”). Though his motions did not have merit
found in any existing case law, we do not believe Defendant’s motions were made in bad faith
or were otherwise so grossly improper to warrant sanctions. We therefore deny Plaintiff’s
motion for sanctions.
HAIDAR V. MOORE
2022-NCCOA-742
Opinion of the Court
advisory jury, the court shall find the facts specially and
state separately its conclusions of law thereon and direct
the entry of the appropriate judgment.
N.C. R. Civ. P. 52(a)(1). When the trial judge acts as the trier of fact, the trial court
must: “(1) find the facts on all issues joined in the pleadings; (2) declare the
conclusions of law arising on the facts found; and (3) enter judgment accordingly.”
Gilbert Eng’g Co. v. City of Asheville, 74 N.C. App. 350, 364, 328 S.E.2d 849, 857
(1985).
¶8 In D.C. v. D.C., this Court recently held that, when the trial court does not
make findings of fact as required under Rule 52, this Court is unable to conduct
meaningful review of the resulting order:
[T]he trial court failed to make any findings of fact, much
less specific findings, in the Orders. It was required to
enter findings of fact supporting its conclusions of law that
each [p]laintiff “failed to prove grounds for issuance of a
[DVPO].” Such failure to make findings of fact prevents us
from conducting meaningful appellate review, and we must
vacate the Orders and remand to the trial court for the
entry of orders that comply with the North Carolina Rules
of Civil Procedure and our caselaw.
D.C. v. D.C., 279 N.C. App. 371, 2021-NCCOA-493, ¶ 12. When the trial court
properly makes findings of fact to support its conclusions of law, it allows this Court
to review whether its determinations are appropriately based upon the record.
Absent the required findings of fact, this Court is unable to conduct a proper review
on appeal. In that instance, as the Court in D.C. held, our Court “must vacate the
HAIDAR V. MOORE
2022-NCCOA-742
Opinion of the Court
orders and remand to the trial court for the entry of orders that comply with the North
Carolina Rules of Civil Procedure and our caselaw.” Id.
¶9 In the case before us, the trial court made no written findings of fact in its order
denying and dismissing Plaintiff’s complaint. Because the trial court failed to make
any findings of fact supporting its conclusions of law, we are unable to conduct
meaningful appellate review of the order. We therefore must vacate and remand the
trial court’s order.
¶ 10 We note that, in D.C., the trial court failed to make the required findings of
fact on an order denying a domestic violence protective order under N.C. Gen. Stat. §
50B. Here, the trial court failed to make the required findings of fact on an order
denying an N.C. Gen. Stat. § 50C no-contact order for stalking or nonconsensual
sexual conduct. Although the statutory requirements needed to grant each type of
order differ, the trial court is still required by Rule 52(a) to make findings of fact in
its order that support its conclusions of law. Regardless of the type of order,
“[e]vidence must support findings; findings must support conclusions; conclusions
must support the judgment” and “each link in the chain of reasoning must appear in
the order itself.” Coble v. Coble, 300 N.C. 708, 714, 268 S.E.2d 185, 190 (1980).
“Where there is a gap, it cannot be determined on appeal whether the trial court
correctly exercised its functions to find the facts and apply the law thereto.” Id.
Therefore, following our precedent in D.C. and Coble, we vacate and remand back to
HAIDAR V. MOORE
2022-NCCOA-742
Opinion of the Court
the trial court to make the required findings of fact.
¶ 11 Because we vacate and remand on this issue, we decline to address Plaintiff’s
remaining arguments at this time.
III. Conclusion
¶ 12 For the foregoing reasons, we hold that the trial court erred by not making
required findings of fact in its order. We vacate the order and remand to the trial
court.
VACATED AND REMANDED.
Judges ZACHARY and ARROWOOD concur. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483768/ | Fourth Court of Appeals
San Antonio, Texas
November 14, 2022
No. 04-22-00582-CV
IN THE INTEREST OF T.J.B.
From the 408th Judicial District Court, Bexar County, Texas
Trial Court No. 2016CI19887
Honorable Antonia Arteaga, Judge Presiding
ORDER
On October 25, 2022, we ordered appellant to provide written proof stating he either paid
the district clerk’s fee or made arrangements satisfactory to the district clerk to pay the fee. On
October 27, 2022, we further ordered appellant to provide written proof showing he properly
requested the correct court reporter to prepare the reporter’s record. We also required appellant’s
response to show he either paid the court reporter’s fee or made arrangements with the court
reporter to pay the fee. On November 2, appellant filed sufficient responses to our orders, and on
November 9, 2022, the district clerk filed the clerk’s record. We therefore order the court
reporter, Herminia Torres, to file the reporter’s record by December 14, 2022.
_________________________________
Luz Elena D. Chapa, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 14th day of November, 2022.
_________________________________
Michael A. Cruz,
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483769/ | Fourth Court of Appeals
San Antonio, Texas
November 14, 2022
No. 04-22-00647-CV
IN RE Denise Marie RAMOS
Original Mandamus Proceeding1
ORDER
Sitting: Luz Elena D. Chapa, Justice
Beth Watkins, Justice
Lori I. Valenzuela, Justice
On September 30, 2022, relator Denise Ramos filed a petition for writ of mandamus.
Believing a serious question concerning the mandamus relief sought required further
consideration, we requested respondent and real party in interest Reynaldo Esparza Jr. file a
response in this court on or before November 2, 2022.2 No responses were filed.
On November 7, 2022, attorney Denise Martinez filed a motion to withdraw as counsel
for Esparza.3 The motion does not satisfy the requirements of Texas Rule of Appellate Procedure
6.5. See TEX. R. APP. P. 6.5(a), (b). Specifically, the motion lists the response deadline as
pending when, in fact, the time for Esparza to file a response, absent extension, has expired.
Likewise, the motion represents a hearing is set and Esparza may appear to contest the
withdrawal at the hearing. No such hearing is set for this matter in this court. Accordingly, we
DENY WITHOUT PREJUDICE attorney Denise Martinez’s motion to withdraw.
We ORDER attorney Denise Martinez to file a motion that fully satisfies Texas Rule of
Appellate Procedure 6.5 November 21, 2022.
We further ORDER the clerk of this court to send a copy of Denise Martinez’s motion to
withdraw, Ramos’s reply and objection to the motion, and this order to Reynaldo Esparza Jr. at
1
This proceeding arises out of Cause No. 2018-CI-21009, styled In the Matter of the Marriage of Denise Marie
Ramos and Reynaldo Esparza Jr, pending in the 166th Judicial District Court, Bexar County, Texas, the Honorable
Laura Salinas presiding.
2
Responses were due 15 days beginning on the date Ramos filed a supplemental appendix, which was filed on
October 18, 2022.
3
On November 9, 2022, Ramos filed a response and objection to attorney Denise Martinez’s withdrawal arguing,
among other things, that the motion did not satisfy the requirements of Texas Rule of Appellate Procedure 6.5. See
TEX. R. APP. P. 6.5(a), (b).
6230 Dove Hill Drive, San Antonio Texas 78238; PO Box 1443 Lytle, Texas 78052; and
rayesparza77@gmail.com.
It is so ORDERED on November 14, 2022.
PER CURIAM
ATTESTED TO: ________________________
MICHAEL A. CRUZ,
CLERK OF COURT | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483762/ | IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-745
No. COA22-260
Filed 15 November 2022
Guilford County, Nos. 17CRS72674, 23276
STATE OF NORTH CAROLINA
v.
TIMOTHY GERARD WALKER, Defendant.
Appeal by Defendant from judgments entered 27 August 2021 by Judge
Michael D. Duncan in Guilford County Superior Court. Heard in the Court of Appeals
20 September 2022.
Attorney General Joshua H. Stein, by Special Deputy Attorney General Michael
Bulleri, for the State.
William D. Spence for Defendant-Appellant.
INMAN, Judge.
¶1 Defendant Timothy Gerard Walker (“Defendant”) appeals from two judgments
entered following jury verdicts convicting him of first-degree murder and possession
of a firearm by a felon. After careful review, we hold Defendant received a fair trial,
free from error.
STATE V. WALKER
2022-NCCOA-745
Opinion of the Court
I. FACTUAL AND PROCEDURAL HISTORY
¶2 On 9 April 2017, Defendant and two other men, Michael Watts and James
Christopher Brooks, were relaxing at Mr. Brooks’ house in High Point, North
Carolina. Defendant and Mr. Brooks were sitting on a couch watching television and
drinking alcohol when Marcus Boyce entered Mr. Brooks’ house and began arguing
with Defendant. Mr. Brooks told the men he did not want any trouble in his house,
and Mr. Boyce said he would respect Mr. Brooks’ request. He then asked Defendant
to go outside so that they could have a “fair fight.” Defendant remained seated and
the verbal altercation continued, with Mr. Boyce telling Defendant “when I see you
again I’m going to lay you where you stand” and “[w]herever I see you at, I’m gonna
kill you. I don’t care if it’s with your son, at your grandma’s house, at the store[.]” Mr.
Boyce also put his finger in Defendant’s face and spit on him as he yelled. Mr. Boyce
never put a hand on Defendant and, although he threatened to kill Defendant at a
later time, he expressly stated he would not do so in Mr. Brooks’ home.
¶3 After Mr. Boyce—who was unarmed—made these statements, Defendant
removed a pistol from his waistband and shot Mr. Boyce at least six times. After the
first few bullets struck Mr. Boyce in the back, pelvis, arm, leg, and chest, Mr. Boyce
bent over and two bullets struck him in the head. Defendant had purchased the gun
after a prior argument with Mr. Boyce and in anticipation of a future confrontation.
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2022-NCCOA-745
Opinion of the Court
¶4 Defendant left Mr. Brooks’ house with the firearm. Mr. Brooks called 9-1-1
and emergency officials arrived at the scene to confirm the death of Mr. Boyce. Law
enforcement issued a warrant for Defendant’s arrest, and Defendant turned himself
in to the police 18 days later. Defendant spoke to his girlfriend while out of police
custody, telling her that he intended to deny being at the scene rather than claim
self-defense.
¶5 Defendant was indicted for first-degree murder and possession of a firearm by
a felon on 10 October 2017. Defendant provided notice of his intent to plead self-
defense on 26 March 2019. Defendant’s case went to trial on 23 August 2021 in
Guilford County. Defendant twice moved to dismiss the charges against him—once
at the close of the State’s evidence and once at the close of all the evidence—and both
motions were denied. Defendant then requested a “stand your ground” instruction
during the charge conference, which the trial court also denied.
¶6 On 27 August 2021, the jury found Defendant guilty on both charges.
Defendant was sentenced to life imprisonment without parole on the conviction of
first-degree murder and a concurrent sentence of 17-30 months on the conviction of
possession of a firearm by a felon. Defendant gave oral notice of appeal.
II. ANALYSIS
¶7 Defendant asserts the trial court erred in: (1) denying his motions to dismiss
the first-degree murder charge for lack of premeditation and deliberation; (2) giving
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Opinion of the Court
the pattern jury instruction on deliberation in light of the particular facts of the case;
and (3) refusing to give a “stand your ground” instruction as requested by Defendant.
We hold that Defendant has failed to demonstrate error or prejudice under any
theory.
1. Standards of Review
¶8 This Court reviews the trial court’s denial of a motion to dismiss de novo. State
v. Smith, 186 N.C. App. 57, 62, 650 S.E.2d 29, 33 (2007). After a defendant’s motion
to dismiss, the court must decide “whether there is substantial evidence (1) of each
essential element of the offense charged, or of a lesser offense included therein, and
(2) of defendant’s being the perpetrator of such offense. If so, the motion is properly
denied.” State v. Fritsch, 351 N.C. 373, 378, 526 S.E.2d 451, 455 (2000) (citation and
quotation marks omitted). Substantial evidence is defined as “such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion.” State v.
Blake, 319 N.C. 599, 604, 356 S.E.2d 352, 255 (1987) (citations omitted). We must
consider the evidence in the light most favorable to the State and with the benefit of
all reasonable inferences. Fritsch, 351 N.C. at 378-79, 526 S.E.2d at 455.
¶9 Alleged errors in the trial court’s jury instruction are reviewed under different
standards, depending on whether such errors were preserved. If a defendant failed
to preserve his challenge to the trial court’s instruction, we review the issue for plain
error when explicitly asserted in the defendant’s brief. State v. Foye, 220 N.C. App.
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Opinion of the Court
37, 44, 725 S.E.2d 73, 79 (2012); see also N.C. R. App. P. 10(a)(4) (2022). “Under the
plain error rule, defendant must convince this Court not only that there was error,
but that absent the error, the jury probably would have reached a different result.”
State v. Jordan, 333 N.C. 431, 440, 426 S.E.2d 692, 697 (1993).
¶ 10 Preserved challenges to jury instructions are reviewed de novo. State v.
Richardson, 270 N.C. App. 149, 152, 838 S.E.2d 470, 473 (2020). In determining
whether the requested instruction is warranted, we view the evidence in the light
most favorable to the defendant. State v. Debiase, 211 N.C. App. 497, 504, 711 S.E.2d
436, 441 (2011). To prevail on appeal, the defendant must show that there is a
“reasonable possibility” that the jury would have reached a different result had the
requested instruction been given. See State v. Brewington, 343 N.C. 448, 454, 471
S.E.2d 398, 402 (1996).
2. Motions to Dismiss
¶ 11 Defendant first contends that the trial court erred in denying his motions to
dismiss the charge of first-degree murder, asserting that the shooting was in the heat
of passion and without premeditation and deliberation. The State disagrees,
highlighting the evidence showing: (1) the number of times the deceased was shot; (2)
Defendant shot Mr. Boyce twice in the head after shooting him in the body several
times; (3) Defendant’s departure from the scene without rendering aid, evading police
for 18 days, and telling his girlfriend he intended to deny being at the scene rather
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Opinion of the Court
than proclaim self-defense; and (4) Defendant’s testimony that he had bought the gun
in anticipation of a violent confrontation with Mr. Boyce. We agree with the State
that there was sufficient evidence of premeditation and deliberation to send the first-
degree murder charge to the jury.
¶ 12 First-degree murder is defined in part as a “willful, deliberate, and
premeditated killing[.]” N.C. Gen. Stat. § 14-17(a) (2021). Courts consider different
factors to determine if a killing occurred with premeditation and deliberation. State
v. Pittman, 332 N.C. 244, 255, 420 S.E.2d 437, 443 (1992). These factors include:
(1) want of provocation on the part of the deceased; (2) the
conduct and statements of the defendant before and after
the killing; (3) threats and declarations of the defendant
before and during the occurrence giving rise to the victim's
death; (4) ill-will or previous difficulty between the parties;
(5) evidence that the killing was done in a brutal manner;
and (6) the nature and number of the victim's wounds.
Id.
¶ 13 The number of gunshot wounds inflicted is probative on the issue, as there is
“some amount of time, however brief, for thought and deliberation . . . between each
pull of the trigger.” State v. Austin, 320 N.C. 276, 296, 357 S.E.2d 641, 653 (1987).
Also relevant is whether the defendant “left the deceased to die without attempting
to obtain assistance for the deceased.” State v. Hunt, 330 N.C. 425, 428, 410 S.E.2d
478, 481 (1991). In analyzing premeditation and deliberation, courts look to the
“totality of the circumstances” rather than a single factor. State v. Hager, 320 N.C.
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Opinion of the Court
77, 82, 357 S.E.2d 615, 618 (1987) (citing State v. Corn, 303 N.C. 293, 278 S.E.2d 221
(1981)).
¶ 14 Defendant rightly notes that there are circumstances in which a verbal
altercation is so provocative as to foreclose a finding of premeditation. Under that
precedent, “words or conduct not amounting to an assault or threatened assault, may
be enough to arouse a sudden and sufficient passion in the perpetrator to negate
deliberation and reduce a homicide to murder in the second degree.” State v. Watson,
338 N.C. 168, 177, 449 S.E.2d 694, 700 (1994). However, “Defendant’s mere anger at
the victim is not alone sufficient to negate deliberation. . . . What is required to negate
deliberation . . . is a sudden arousal of passion, brought on by sufficient provocation
during which the killing immediately takes place.” Id. at 178, 499 S.E.2d at 700.
Evidence of a heated argument does not, however, foreclose a finding of premeditation
and deliberation, as “[a perpetrator] may deliberate, may premeditate, and may
intend to kill after premeditation and deliberation, although prompted and to a large
extent controlled by passion at the time.” State v. Vause, 328 N.C. 231, 238, 400
S.E.2d 57, 62 (1991). It is only when all the evidence shows a lack of premeditation
and deliberation that this element is negated, Watson, 338 N.C. at 177, 499 S.E.2d at
700, and “evidence of [a] quarrel . . . is not enough to negate deliberation as a matter
of law.” Id. at 178, 499 S.E.2d at 700; see also State v. Misenheimer, 304 N.C. 108,
114, 282 S.E.2d 791, 796 (1981) (holding the State submitted sufficient evidence of
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Opinion of the Court
premeditation and deliberation notwithstanding the fact that “all the evidence
showed that the killing occurred after defendant and his father had engaged in a
struggle and his father had twice ‘grabbed’ defendant”).
¶ 15 These precedents establish that evidence of a verbal altercation does not serve
to negate a charge of first-degree murder when “there was other evidence sufficient
to support the jury’s finding of both deliberation and premeditation.” Watson, 338
N.C. at 178, 499 S.E.2d at 700-01. Other such evidence exists here. Indeed, the Court
in Watson rejected a defendant’s claim that premeditation was negated in part
because—as in this case—there was existing ill will between the defendant and
victim, the defendant had bought a gun in anticipation of an altercation with the
victim, and such evidence “tend[ed] to show preparedness on the part of defendant to
kill the victim before the argument between them ensued.” Id. at 177, 499 S.E.2d at
700. The Supreme Court also pointed out that the victim was shot multiple times—
again, as occurred here—and that the number of shots supported a finding of
premeditation and deliberation. Id. at 179, 499 S.E.2d at 701.
¶ 16 Defendant attempts to analogize this case to State v. Corn and State v.
Williams, both of which vacated first-degree murder convictions on the basis that
there was insufficient evidence of premeditation and deliberation when a defendant
shot the victim following a verbal altercation. Corn, 303 N.C. at 298, 278 S.E.2d at
224; State v. Williams, 144 N.C. App. 526, 530-31, 548 S.E.2d 802, 805-06 (2001).
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Opinion of the Court
However, the facts of those cases are materially different; the defendant in Corn fired
his gun at two men who were “bigger than him . . . and with a history of violence—
who were charging at him while he was on the couch in his home,” State v. Dennison,
171 N.C. App. 504, 509, 615 S.E.2d 404, 408 (2005) (describing Corn), while the
defendant in Williams fired his weapon after being struck in the jaw by the victim.
Williams, 144 N.C. App. at 527, 548 S.E.2dat 804. Neither defendant bought their
firearms in anticipation of a violent confrontation with their victims, and both
cooperated with the respective investigations within 24 hours of each shooting. Corn,
303 N.C. at 295, 278 S.E.2d at 222; Williams, 144 N.C. App. at 530-31, 548 S.E.2d at
805-06. Nor was there any evidence of prior arguments or ill will between the victims
and the defendants in those cases. Corn, 303 N.C. at 298, 278 S.E.2d at 224;
Williams, 144 N.C. App. at 530-31, 548 S.E.2d at 805. And, in Williams, the
defendant fired only a single shot. 144 N.C. App. at 531, 548 S.E.2d at 805.
¶ 17 None of the dispositive facts in Corn or Williams is present here. The
unequivocal evidence shows Defendant had previously quarreled with the victim and
shot the victim at least six times in the back, pelvis, and head. After several shots
struck the victim’s torso, Defendant shot the victim in the head. Defendant himself
testified that he left the victim at the scene of the crime without trying to render aid.
He also took the murder weapon, which he had purchased in anticipation of a violent
confrontation with the victim, when he fled. Defendant then remained on the lam for
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Opinion of the Court
18 days with knowledge that there was a warrant out for his arrest. He informed his
girlfriend he intended to deny shooting the victim rather than admit doing so in self-
defense. Based on the evidence presented, the jury could rationally infer that
Defendant killed Mr. Boyce with premeditation and deliberation notwithstanding the
verbal argument between the two men. The trial court did not err in denying
Defendant’s motions to dismiss the first-degree murder charge.
3. Pattern Instruction on Deliberation
¶ 18 Defendant next argues that the trial court erred in giving the pattern jury
instruction on premeditation and deliberation, conceding that trial counsel did not
object to the instruction during the charge conference. Defendant specifically and
distinctly contends the trial court’s instruction amounted to plain error,1 and we
therefore review this unpreserved issue under that standard.
¶ 19 Defendant does not dispute that the court followed Pattern Jury Instruction
206.1 for first-degree murder, which includes a definition and explanation of
1 Defendant argues in the alternative that this error was preserved as a matter of law,
as a trial judge is obligated to instruct the jury on all essential features of the case arising
from the evidence. State v. Harris, 306 N.C. 724, 727, 295 S.E.2d 391, 393 (1982).
Defendant’s automatic preservation argument fails because our Supreme Court has
elsewhere made clear that failure to object to a jury instruction waives harmless error review
and subjects the issue to plain error review only. See, e.g., State v. Lawrence, 365 N.C. 506,
514, 723 S.E.2d 326, 332 (2012) (holding plain error review was the proper standard
applicable to a defendant’s claim that the trial court erred in omitting an instruction on a
necessary element of the crime when defendant did not lodge any objection to the jury
charge).
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Opinion of the Court
deliberation as an element of the crime. Rather, Defendant believes the facts in this
case required the following additional instruction on deliberation: “If you find that
defendant shot Mr. Boyce during a passion suddenly aroused by Mr. Boyce’s assault
or threatened assault upon defendant, or by his aggressive conduct toward defendant,
then defendant would not be guilty of first degree murder.”
¶ 20 Defendant’s argument relies entirely on a dissenting opinion in State v.
Patterson, 288 N.C. 553, 574, 220 S.E.2d 600, 615 (1975) (Exum, J., dissenting), which
has no force of law. See Georgia v. Public.Resource.Org, Inc., ___ U.S. ___, ___, 206 L.
Ed. 2d 732, 748 (2020) (“As every judge learns the hard way, comments in a dissenting
opinion about legal principles and precedents are just that: comments in a dissenting
opinion.” (cleaned up) (quotation marks and citation omitted)). Further, the dissent
in Patterson was based on a “bare bones definition of deliberation” given in that case,
288 N.C. at 575, 220 S.E.2d at 616, and the pattern jury instruction used here was
substantially more detailed in its definition and examples. See State v. Cagle, 266
N.C. App. 193, 202, 830 S.E.2d 893, 900 (2019) (rejecting a similar argument that the
pattern instruction was insufficient to describe premeditation and deliberation after
noting that the pattern instruction, also used in this case, “defined and provided
examples of deliberation”).
¶ 21 The pattern instruction used here also encompassed the law and meaning
provided by the Defendant’s proposed instruction, as it stated premeditation is shown
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Opinion of the Court
“[i]f the intent to kill was formed with a fixed purpose not under the influence of some
suddenly aroused violent passion.” (emphasis added). The trial court gave an
instruction that accurately reflected the law and evidence, and it was “not required
to frame . . . instructions with any greater particularity than is necessary to enable
the jury to understand and apply the law to the evidence bearing upon the elements
of the crime charged.” State v. Lewis, 346 N.C. 141, 145, 484 S.E.2d 379, 381 (1997)
(quotation marks and citation omitted). Defendant has thus failed to show plain
error.
4. “Stand Your Ground” Instruction
¶ 22 In his final argument, Defendant contends that the trial court prejudicially
erred in refusing to give the following “stand your ground” instruction requested
during the charge conference:
If the defendant was not the aggressor and the defendant
was at a place where the defendant had a lawful right to
be, the defendant could stand the defendant’s ground and
repel force with force regardless of the character of the
assault being made upon the defendant. However, the
defendant would not be excused if the defendant used
excessive force.
Defendant specifically argues that the failure to instruct the jury that he could “repel
force with force regardless of the character of the assault being made upon the
defendant” was prejudicial, as the jury was not informed that “defendant had the
right to use deadly force even if it had not been wielded against him.”
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Opinion of the Court
¶ 23 Instead of Defendant’s requested instruction, the trial court charged the jury
as follows:
The defendant would be excused of . . . murder on the
ground of self-defense if, first, the defendant believed it
was necessary to kill the victim or to use deadly force
against the victim in order to save the defendant from
death or great bodily harm.
And, second, the circumstances, as they appeared to the
defendant at the time, were sufficient to create such a
belief in the mind of a person of ordinary fitness.
In determining the reasonableness of the defendant’s belief
you should consider the circumstances as you find them to
have existed from the evidence including
....
[t]he fierceness of the assault, if any, upon the defendant
....
The defendant would not be guilty of murder or
manslaughter if the defendant acted in self-defense and if
the defendant did not use excessive force under the
circumstances.
Notably, the trial court expressly told the jury Defendant was not guilty if he acted
proportionally to the threat posed. Ultimately, Defendant’s argument fails because
proportionality is still a pre-requisite to asserting self-defense even when a defendant
had no duty to retreat.
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Opinion of the Court
¶ 24 Defendant’s argument is foreclosed by our Supreme Court’s recent decision in
State v. Benner, where a defendant shot and killed a victim in the defendant’s home.
380 N.C. 621, 2022-NCSC-28, ¶ 13. That decision makes clear that the use of deadly
force cannot be excessive and must still be proportional even when the defendant has
no duty to retreat and is entitled to stand his ground:
[T]he proportionality rule inherent in the requirement that
the defendant not use excessive force continues to exist
even in instances in which a defendant is entitled to stand
his or her ground. For that reason, a trial court need not
use the expression “regardless of the character of the
assault” in the absence of a concern that the jury would
believe that the nature of the assault that the victim had
made upon the defendant had some bearing upon the
extent to which a defendant attacked in his own home has
a duty to retreat before exercising the right of self-defense.
In view of the fact that the trial court made no distinction
between a simple and a felonious assault in its instructions
to the jury concerning the extent to which defendant was
entitled to exercise the right of self-defense without making
an effort to retreat and did not tell the jury that defendant
was not entitled to use a firearm or any other form of
deadly force in the course of defending himself from [the
victim’s] attack as long as he actually and reasonably
believed that he needed to use deadly force to protect
himself from death or great bodily injury, the trial court
did not need to further clarify that defendant was entitled
to exercise the right of self-defense “regardless of the
character of the assault.”
Id. ¶ 29 (quotation marks and citations omitted). Because the trial court in that case
instructed the jury that the defendant had no duty to retreat and could use deadly
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Opinion of the Court
force if proportional to the threat posed by the victim, the trial court did not err in
declining to give a special “stand your ground” instruction. Id.
¶ 25 Defendant asserts Benner does not apply in this case because the right to stand
one’s ground in the home arises under common law, while Defendant’s right to stand
his ground outside the home arose under statute. See id. ¶ 21 (noting that N.C. Gen.
Stat. §§ 14-51.2 and 14-51.3 (2021) extended the common law right to stand one’s
ground in self-defense to places outside the home under certain circumstances).
However, the language Defendant claims was prejudicially omitted—that he could
respond to force with force regardless of the nature of the assault—was deemed in
Benner to be “rooted in common, rather than statutory, law.” Id. ¶ 25. The Supreme
Court also held in Benner that a distinction between common and statutory law was
immaterial when the trial court’s instruction adequately conveyed the proportionality
requirement to the jury. Id. ¶ 26. Here, the instruction given by the trial court
effectively conveyed the proportionality concept to the jury, as it told the jury
Defendant could respond with deadly force if it was not excessive. The instruction
requested by Defendant does not state that he could respond to force with deadly force
regardless of the character of the assault. Instead, it provides that Defendant could
reply to “force with force regardless of the character of the assault being made upon
the defendant. However, the defendant would not be excused if the defendant used
excessive force.” The trial court therefore did not err in its instruction, as its charge
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Opinion of the Court
effectively conveyed the concept that Defendant incorrectly claims was prejudicially
omitted. Benner, ¶ 29.
¶ 26 Even if Benner does not apply, the “stand your ground” statute on which
Defendant relies imposes the same requirement that any use of deadly force be
proportional to that threatened against Defendant. Subsection 14-51.3(a) provides
that a person in a place he has a legal right to be may use deadly force without
retreating if either of the following apply: “(1) He . . . reasonably believes that such
force is necessary to prevent imminent death or great bodily harm to himself or . . .
another,” or “(2) Under the circumstances permitted pursuant to [Section] 14-51.2.”
N.C. Gen. Stat. § 14-51.3(a) (2021). Section 14-51.2, the “castle doctrine” statute,
simply provides that a lawful occupant of a home, workplace, or motor vehicle is
entitled to a rebuttable presumption that deadly force is reasonable when used
against someone who had or was unlawfully breaking into that location or kidnapping
someone from that location. N.C. Gen. Stat. § 14-51.2; see also State v. Austin, 279
N.C. App. 377, 2021-NCCOA-494, ¶¶ 24-25 (describing the presumption created by
the castle doctrine statute and the circumstances in which it applies). In other words,
the castle doctrine statute does not obviate the proportionality requirement inherent
to lethal self-defense; instead, it simply presumes that the proportionality
requirement is satisfied under specific circumstances.
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Opinion of the Court
¶ 27 Here, Defendant was not the owner of the home where the victim was shot,
and the homeowner, Mr. Brooks, testified that the victim was “more than welcome”
in the house and was never told to leave. Because the castle doctrine statute does not
apply to this circumstance, Defendant could use deadly force against the victim under
Subsection 14-51.3(a) only if it was necessary to prevent imminent death or great
bodily harm, i.e., if it was proportional. N.C. Gen. Stat. § 15-51.1(a)(1). The jury was
given exactly this instruction and was told Defendant was not guilty “if the defendant
acted in self-defense and if the defendant did not use excessive force under the
circumstances.”
¶ 28 Lastly, even if the trial court did err in declining to give the requested
instruction, Defendant cannot show prejudice. As Defendant’s own requested
instruction recognized, he could not use lethal self-defense if doing so amounted to
“excessive force,” and the evidence overwhelmingly demonstrates that Defendant’s
force was excessive. Defendant was under no threat of imminent harm: while Mr.
Boyce threatened to kill Defendant at some unknown time in the future, he was clear
that he had no intention of killing Defendant in Mr. Brooks’ home at the time of the
altercation. The only actual physical “assault” in evidence was the victim spitting on
Defendant as he shouted. Lethal force is not a proportional response to being spit on.
Because the overwhelming evidence shows that the lethal force used was excessive
and precluded any “stand your ground” defense, Defendant cannot show prejudicial
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Opinion of the Court
error. See Benner, ¶ 30 (holding no prejudice in failure to give an identical requested
instruction because “the record contains more than sufficient evidence from which a
reasonably jury could have determined that defendant used excessive force when he
killed [the victim]”).
III. CONCLUSION
¶ 29 The trial court properly denied Defendant’s motions to dismiss, did not plainly
err in its deliberation jury instruction, and did not err in denying Defendant’s request
for a specific “stand your ground” instruction. For the foregoing reasons, we hold that
Defendant received a fair trial, free from error.
NO ERROR.
Judges DIETZ and JACKSON concur. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483766/ | IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-741
No. COA21-373
Filed 15 November 2022
Forsyth County, No. 17 CVD 941
KRISTI C. EIDSON, Plaintiff,
v.
THEOFANIS K. KAKOURAS, Defendant.
Appeal by defendant from orders entered 6 June 2019, 9 December 2019, 20
January 2021, and 26 March 2021 by Judge Lisa V. L. Menefee in District Court,
Forsyth County. Heard in the Court of Appeals 8 February 2022.
Connell & Gelb PLLC, by Michelle D. Connell, and Fox Rothschild LLP, by Kip
D. Nelson, for plaintiff-appellee.
Carolyn J. Woodruff, Jessica Snowberger Bullock, and Y. Michael Yin, for
defendant-appellant.
STROUD, Chief Judge.
¶1 This appeal arises from an extraordinarily protracted and contentious child
support case. After trying for ten years to obtain an order establishing Father’s child
support obligation, the parties managed to secure several orders including a 2021
Child Support Order, but for the reasons addressed below, we must vacate that order
and several others and remand for additional proceedings and entry of a new order.
Most unfortunately, both children have now attained the age of 18, so the child
EIDSON V. KAKOURAS
2022-NCCOA-741
Opinion of the Court
support order on remand will be entirely for past support.
¶2 Defendant-Appellant (“Father”) appeals from the 20 January 2021 Child
Support Order (“Child Support Order”) establishing permanent child support, the 26
March 2021 Amended Child Support Order (“Amended Order”) correcting clerical
mistakes as to the January Child Support Order, the 26 March 2021 order allowing
Mother’s Rule 59 motion to amend the January Child Support Order, the
interlocutory 6 June 2019 Order (“2019 Order”) establishing Father’s income, and two
orally rendered orders from 6 December 2019 denying Father’s motion to change
venue to Surry County and motion for reconsideration under Rules of Civil Procedure
59 and 60. Father argues the trial court erred in calculating each parent’s income,
erred in finding a substantial change in circumstances warranting modification of the
2011 Temporary Order establishing child support after it was deemed to have become
permanent in 2014, and that the “delays in hearings and entry of an order made this
case prejudicial to Appellant-Father and confused the trial court.” (Capitalization
altered.) We hold the trial court erred by relying on an undocumented stipulation to
calculate child support based upon the parties’ incomes in 2014 and 2016 instead of
using the most current income information; erred in the calculation of the parties’
incomes; and did not err in finding a substantial change of circumstances justifying
modification of child support from both 2014 and 2016. We also hold the delays
between the evidentiary hearings and the entry of the 2021 Child Support Order did
EIDSON V. KAKOURAS
2022-NCCOA-741
Opinion of the Court
prejudice Father. We vacate the trial court’s Child Support Order, Amended Order,
and 2019 Order and remand for further proceedings.
I. Background
¶3 The parties were married in 1997; their two children were born in 1998 and
2003. The parties separated in January 2011 and divorced in 2012. By the time of
this appeal, both children had reached the age of majority.
¶4 Litigation regarding establishment of child support began in February 2011.
Both parties resided in Surry County. Mother filed a complaint in Surry County
seeking child custody, child support, an interim equitable distribution, and equitable
distribution. Father counterclaimed for child custody and moved to dismiss the
equitable distribution claim based upon the parties’ premarital agreement. On 23
February 2011, the trial court in Surry County entered a Temporary Order, without
prejudice, establishing temporary custody and child support. Father was ordered to
pay child support of $1300 per month, beginning 1 March 2011, with Father to be
reimbursed for any overpayment if the permanent child support obligation ended up
being set at less than $1300 per month. The Temporary Order also required Father
to continue paying the mortgage on the family home, as well as related maintenance
expenses such as insurance and taxes, so Father was paying a total of $2600 to $3000
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2022-NCCOA-741
Opinion of the Court
per month under the Temporary Order.1 The Temporary Order did not include
detailed findings of fact but did include a child support calculation on Worksheet A,
attached to the order. The Worksheet only contains minimal information. Worksheet
A noted “Plaintiff (F)” had a gross income of $5,833 per month and “Defendant (M)”
had no income; the Basic Child Support Obligation was $1,296 per month. All other
fields of the Worksheet, including “adjustments,” contain a “0” or “0.00%.”2 Thus, the
Worksheet showed Father’s child support obligation as $1,296 per month.
¶5 Later in 2011 and 2012, Mother filed motions regarding custody and visitation,
alleging a dispute between the parties about Father’s plans to take the children on a
summer trip to visit family in Greece. On 11 February 2013, the Surry County
District Court began a hearing on the issue of child custody. Following a five-day
trial, the trial court entered an order 16 May 2013 establishing permanent child
custody. The 2013 Child Custody Order granted joint custody to the parties, with
primary physical custody with Mother, and it set out detailed provisions regarding
the parties’ time with the children during summers, including allowing Father to take
the children to Greece for four weeks during summers in even-numbered years. The
1 Father’s obligation to pay the mortgage and home-related expenses was stated in
the Temporary Order. These numbers are based upon evidence from Father’s amended
Financial Standing Affidavits and arguments in our record.
2 The Worksheet erroneously listed Father as Plaintiff and Mother as Defendant but
it did clearly identify the parties by their first names and as “Mother” and “Father.” The
parties are correctly identified on the Temporary Order itself.
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Opinion of the Court
Child Custody Order also decreed that:
all other provisions of the prior Temporary Order in
regards to the possession of real and/or personal properties,
the payment of expenses, and the issue of child support, are
not modified by the entry of this Order and are reserved by
the Court for future hearing upon the scheduling of either
party.
¶6 In September 2014, the parties entered into a Memorandum of Judgment
resolving their claims regarding division of their property. In December 2014, Mother
filed a “Motion to Establish Child Support” or in the alternative “Motion to Modify
Child Support.” She alleged the parties were still under the Temporary Order from
2011 and the Permanent Child Custody Order had been entered in 2013. She also
alleged changes in circumstances since 2011, including changes in the parties’
incomes, the change in the custodial schedule, and the fact that over three years had
passed since the Temporary Order was entered. In addition, Father had purchased
Mother’s interest in the former marital home, so Father was no longer paying the
mortgage and other household expenses under the 2011 Temporary Order for the
benefit of Mother and the minor children.
¶7 In October 2015, Father filed a Motion for Judicial Appointment, requesting
that the Administrative Office of the Courts appoint a judge to preside over the case
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due to conflicts of interest with judges in District 17B.3 In December 2015, Father
filed a Motion for Deviation from the child support guidelines, alleging Mother had
been receiving substantial income from gifts or contributions and free use of credit
cards. In October 2016, Father filed a motion to modify child support alleging the
oldest child had attained the age of 18 and graduated from high school in 2016.
¶8 In January 2017, Wife filed a motion to change venue of the case to Forsyth
County. She alleged the case had been pending for five years, and despite many
calendar requests and notices of hearing, only a few issues had been resolved. She
also noted the existence of “conflicts” regarding the judges and parties in Surry
County and alleged the parties consented to a change of venue to Forsyth County.
On 30 January 2017, the trial court entered a Consent Order changing venue of the
case to Forsyth County.
¶9 On 13 February 2017, the trial court in Forsyth County held a hearing to
determine if the 2011 Temporary Order should be considered as a temporary order or
a permanent order. On 21 February 2017, the trial court entered an order concluding
that the 2011 Temporary Order had become a permanent order (“2017 Order”), so a
3 The Forsyth County trial court’s order of 21 February 2017 found two judges in the
Stokes/Surry Judicial District had been “conflicted out of hearing this case;” one judge was a
neighbor of Mother and another had a conflict arising from his 2014 campaign. These
conflicts left only two other District Court judges in District 17B available to hear the case,
with only two weeks of civil court per month in the district, so the unavailability of two judges
and limited court time made the case difficult to schedule.
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Opinion of the Court
party must demonstrate a substantial change of circumstances from the date the
order became “permanent” to modify the order. Specifically, the trial court concluded
that:
3. By the time [Mother] filed her Motion to Establish
and/or Modify Child Support on December 8th, 2014,
enough time had passed such that the prior Order entered
by Judge Neaves on February 23rd, 2011, had become
permanent.
4. By the time [Father] filed his Motion to Modify Child
Support on October 21st, 2016, enough time had passed
such that the prior Order entered by Judge Neaves on
February 23rd, 2011, had become permanent.
Neither party has noticed appeal from the 2017 Order, so we must review the orders
on appeal in light of the 2017 Order. The trial court and parties have treated the issue
of modification of child support as being modification from the 2011 Temporary Order
(“the prior Order entered by Judge Neaves on February 23rd, 2011”) based upon both
dates, 2014 and 2016. It is not clear how, or why, the Temporary Order could become
a permanent order twice, but that is what the 2017 Order says. Another possible
interpretation of the Temporary Order becoming permanent twice, in both 2014 and
2016, would be that it became permanent in 2014; it was “modified” in 2016 and thus
became permanent again; and then it would be modifiable thereafter using 2016 as
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the baseline “permanent” order.4 But that is not the interpretation of the dates of the
order becoming “permanent” twice the parties and trial court used in the hearings,
so we will treat the modification as being from the 2011 baseline in both 2014 and
2016, only because the 2017 Order was not appealed and that was the approach taken
before the trial court.
¶ 10 In late 2017 and early 2018, both parties filed various motions regarding the
child support matter and both filed updated financial affidavits. On 24 January and
11 April 2018, the trial court held hearings to determine Father’s income for 2014
and 2016. Apparently, the purpose for holding a hearing to establish his income for
only these particular years was to establish the baseline for consideration of the
motions to modify child support, based upon the trial court’s February 2017 Order
which held the 2011 Temporary Order became a permanent child support order in
both 2014 and 2016.5 On 6 June 2019, the trial court entered an order establishing
4 We suggest that entering an order to declare one prior temporary child support order
as “permanent” on two different dates without making the findings as to the relevant
circumstances as of the dates of both the newly-declared “permanent” orders fails to simplify
the case; here, the declaration of permanency—twice—has made our review incredibly
complex. And since a modification of child support can relate back to the date of the motion
to modify—unlike a child custody modification—it is not clear to us why there would ever be
any need for a declaration of permanency. But neither party appealed this order, and we
must proceed accordingly.
5 If the 2011 Temporary Order became a permanent order in 2016, the holding in the
21 February 2017 Order that the Temporary Order became permanent in 2014 would
normally be irrelevant to our analysis. We would consider only 2016 as the baseline for
modification going forward. But as noted above, we are bound by the trial court’s order
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Opinion of the Court
the parties’ incomes from 2014 and 2016 (“2019 Order”). The primary focus of the
2019 Order is Father’s income so it includes detailed findings of fact regarding
Father’s businesses, restaurants, rental properties, transfers of funds to Greece,
foreign bank accounts, and other matters. In short, Father’s sources of income are
complex and the amounts of income vary year to year. The trial court found Father’s
income for 2014 as $297,618, and his income for 2016 as $345,098.
¶ 11 On 17 June 2019, Father filed a motion to change venue of the case back to
Surry County and a motion for reconsideration under Rules 59 and 60. In November
2019, Mother filed a new financial affidavit. In December 2019, Father filed
“Objections and Defenses” alleging discrimination based upon his national origin, as
he was from Greece; he alleged that “[i]n the time-honored tradition of immigrants,
Defendant Father has remitted funds to his family in Greece and thee [sic] funds
have never been available for the child’s accustomed standard of living.” He also
alleged, as to “Due Process and Notice” that “[t]o say that the Temporary Child
Support Order of Judge Neaves became permanent before its declaration as a
permanent order by Judge Sipprell on February 21, 2017, constitutes a lack of notice
to Defendant Father that the order had become permanent” and “[t]here should be
no retroactivity prior to February 21, 2017.”
establishing both 2014 and 2016 as the points when the 2011 Temporary Order became
permanent.
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¶ 12 The trial court held another hearing regarding child support on 9 and 10
December 2019. At the start of the hearing, the trial court noted there had been a
“chambers meeting” with counsel and the hearing “is a continuation of child support
hearing” and the “first part of the hearing” was in 2018, referring to the hearing to
establish Father’s income for 2014 and 2016. Counsel for each party addressed
various pending motions, including Father’s motions for change of venue and Father’s
Motion under Rule 59 and 60; the trial court orally denied the motions for change of
venue and the Rule 59 and 60 motion, although no written order was ever entered.
Both parties then presented evidence regarding their incomes and expenses and the
expenses of the children. The trial court took the matter under advisement and did
not render a ruling at the close of the trial.
¶ 13 Before the order was entered, the COVID-19 pandemic began, and Governor
Roy Cooper issued various executive orders restricting activities. Some of the
executive orders affected the operations of restaurants. One of the initial executive
orders related to COVID-19 on 17 March 2020, Executive Order No. 118, limited the
operations of restaurants to “Carry-Out, Drive-Through, and Delivery Only.” Office
of Governor Roy Cooper, Executive Order No. 118 (March 17, 2020),
https://governor.nc.gov/media/1760/open.
¶ 14 On 5 May 2020, Father filed another Motion to Change Venue back to Surry
County, alleging that neither party resides, works, or owns property in Forsyth
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County. He also alleged that “[d]ue to the outbreak of COVID-19, a statewide Stay
at Home Order has been issued that severely limits unnecessary travel,”
(capitalization altered), and that the change of venue back to Surry County would
reduce unnecessary travel for both parties. Father also filed a Motion to Modify Child
Support. He alleged modification of child support was necessary based on substantial
changes in circumstances “since the entry of said Order6 and since the last set of
hearings[.]” Father alleged specifically that the Temporary Order was entered in
2011, and “[a]n Order was entered on February 21, 2017, whereby the Temporary
Order of 2011 was decreed to be permanent and modifiable.” He further alleged that
his income was “significantly reduced” since the entry of the Temporary Order and
the prior hearings based upon COVID-19. He alleged he had to close one of his
restaurants and his other restaurant was limited to only “take-out/curbside” orders.
He alleged it was uncertain when his restaurants would be allowed to re-open or
operate at full capacity, or if the restaurants would be able to operate at the previous
capacities after the pandemic. He therefore requested the trial court to “[r]eview and
re-calculate Defendant Father’s child support obligations based upon the current
circumstances of the parties.”
6 He does not clearly identify “said order” but earlier in the motion he asks to modify
“a prior Order of this Court for child support.” The only “prior order” is the 2011 Temporary
Order, which was later deemed to be “permanent” as of 2014 and 2016.
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¶ 15 On 23 December 2020, Father filed a Motion to Re-Open Evidence for
Defendant’s Current Income, “or in the alternative, grant a mistrial under Rule 59 .
. . , or in the alternative, dismiss [Mother]’s Motion under Rule 41 for failure to
prosecute.” He alleged that the motion for modification of child support “being heard”
was filed in 2014, a motion to modify was filed in 2016, and neither motion had yet
been ruled upon. He alleged the hearing regarding child support started on 24
January 2018; the last day of testimony in the child support hearings was 10
December 2019. He alleged:
Since December 10, 2019 (the last hearing date), the world
has been engulfed in a GLOBAL PANDEMIC, to which the
world has not experienced in a hundred years.
Restaurants have particularly been devastated. This
GLOBAL PANDEMIC WAS NOT PREDICTABLE OR
KNOWN TO THE [FATHER] OR THE UNDERSIGNED
ON December 10, 2019.
(Emphasis in original.)
¶ 16 Father then made detailed allegations regarding the effects of the COVID-19
closures on restaurants in general and his restaurants in particular, including his
loss of income, increases in business expenses, lack of business interruption
insurance, and reductions in profits.
¶ 17 On 20 January 2021, the trial court entered its Child Support Order. The Child
Support Order notes that it is based upon the hearing held on 9 and 10 December
2019, addressing the various motions regarding child support filed by both parties,
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and noted that “a portion of which has already been heard on January 24 and 25,
2018 and April 11, 12 and 13, 2018.” The Child Support Order includes extensive
findings of fact addressing the procedural oddities of this case as well as the incomes
and expenses of the parties and children. The findings of fact address primarily
income and expenses as of 2014 and 2016; none of the findings address income or
expenses as of 2019. And since no evidence was taken after the December 2019
hearing dates, none of the findings address income or expenses for 2020 or 2021,
including any effects of the COVID-19 pandemic closures of Father’s restaurants—
the restaurants the trial court found were a substantial source of Father’s income
based upon the evidence presented as to 2014 and 2016. Of particular note, the trial
court also found:
18. Counsel for both parties stipulated on the
record that the first calculation of child support should be
effective in 2014, using 2014 income figures and that the
second calculation of child support should be effective in
2016, using 2016 income figures.
(Emphasis added.) However, we have been unable to find any such stipulation in any
part of the Record on Appeal or transcripts.
¶ 18 Mother then filed a motion for reconsideration pursuant to Rules 59 and 60 on
1 February 2021 alleging clerical errors. On 3 February 2021, Father filed his first
notice of appeal, and gave notice of appeal from:
(1) the Child Support Order signed on January 20, 2021
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and entered on January 20, 2021 by the Honorable Lisa
V.L. Menefee;
(2) The Order signed on June 6, 2019 and entered on June
6, 2019 by the Honorable Lisa V.L. Menefee;
(3) The Order of the District Court in Forsyth County
orally rendered on December 9, 2019 by the Honorable
Lisa V.L. Menefee denying [Father’s] Motion to Change
Venue filed June 17, 2019. There is no written Order
entered on this Motion, nor did the Court direct one be
prepared; and
(4) The Order of the District Court in Forsyth County
orally rendered on December 9, 2019 by the Honorable
Lisa V.L. Menefee denying [Father’s] Motion Pursuant
to Rule 59 (1) (4) (7) (8) (9) and Rule 60(b)(1) (2) (6) filed
June 17, 2019. There is no written Order entered on
this motion, nor did the Court direct one be prepared.
The trial court then granted Mother’s motion for reconsideration and entered an
Amended Child Support Order on 26 March 2021.7 Father filed a second notice of
appeal from the Amended Order and the order allowing Mother’s motion for
reconsideration on 31 March 2021; the second notice of appeal also restated his first
notice of appeal “for purposes of protecting the original appeal notice filed February
3, 2021[.]”
7 In the Amended Order, the trial court changed two provisions in the decretal portion
of the original Child Support Order. The trial court (1) added a deadline of 20 May 2021 for
payment of past-due child support payments due from 16 December 2014 through 20 October
2016 and (2) added a 240-day time frame, including a deadline of 20 September 2021, for
child support payments due after 21 October 2016. The Amended Order did not address any
of Father’s motions filed after the December 2019 hearing. The Amended Order also made
formatting changes, but no substantive changes.
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II. Jurisdiction
¶ 19 Father filed two timely Notices of Appeal, the first on 3 February 2021 and the
second on 31 March 2021. The Amended Order is a final order establishing
permanent child support. We recognize additional motions were filed prior to the
trial court’s January and March 2021 orders that were not ruled upon, including
Father’s 5 May 2020 motion to change venue to Surry County, Father’s 5 May 2020
motion to modify child support based upon the pandemic restrictions on his
restaurants, and Father’s 23 December 2020 “Motion to Re-Open Evidence for
Defendant’s Current Income.” But these pending motions or any other motions which
may have been filed after appeal of the March 2021 Amended Child Support Order
do not change the status of that Order as a final appealable order.
¶ 20 The 2019 Order was an interlocutory order, and Father properly preserved his
right to appeal the 2019 Order after entry of the final Amended Order. This Court
has jurisdiction under North Carolina General Statute § 7A-27(b)(2) to address the
merits of Father’s appeals. N.C. Gen. Stat. § 7A-27(b)(2) (2021) (effective 1 January
2019 to 30 June 2021).
III. Analysis
¶ 21 On appeal, the parties present various arguments regarding whether the trial
court erred by establishing child support based upon the parties’ incomes and
expenses and the children’s expenses as of 2014 and 2016—five and seven years,
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respectively, before the effective date of the Amended Order. Father notes child
support is supposed to be based upon the income and expenses as of the time the
order is effective. He notes the last evidence was taken in December 2019, prior to
the COVID-19 pandemic, and his child support obligation was erroneously based
upon his 2014 and 2016 incomes, while his income was reduced by the closures and
limitations of operation of his restaurants in 2020 and 2021.
¶ 22 At the outset, we will clarify what this appeal addresses and what it cannot
address. This Court cannot address a motion which has not been heard and upon
which the trial court has not entered an order. N.C. R. App. P. 10(a)(1). The Amended
Order on appeal was entered on 26 March 2021, based upon evidence up to December
2019. On 5 May 2020, after completion of the hearings but before entry of the Child
Support Order, Father filed a “Verified Motion to Modify Child Support” and on 23
December 2020 filed a “Motion to Re-open Evidence for Defendant’s Current Income,”
(capitalization altered), due to the impact of the COVID-19 pandemic closures on his
restaurants, but these motions have not been heard. Since Father filed his motion to
modify child support on 5 May 2020, he still has the opportunity for the trial court to
consider modification effective as of 5 May 2020. See Chused v. Chused, 131 N.C. App.
668, 672, 508 S.E.2d 559, 562 (1998) (quotation and citations omitted) (“A supporting
parent ‘has no authority to unilaterally modify the amount of the [court ordered] child
support payment. The supporting parent must [first] apply to the trial court for
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Opinion of the Court
modification.’ The trial court then has the authority to enter a modification of court
ordered child support, retroactive to the filing of the petition of modification.”). This
appeal does not address or eliminate Father’s pending motion for modification or any
other motions filed after this appeal was taken. Thus, we will consider Father’s
appeal based on what is in the record before us: the evidence and status of the case
as of the 26 March 2021 Amended Child Support Order, in turn based upon evidence
of income and circumstances existing as of December 2019. Our analysis does not
address any of the alleged changes in income or other circumstances wrought by the
COVID-19 pandemic closures; those remain for the trial court to address, if properly
presented to the trial court, after this appeal is concluded.
¶ 23 For purposes of determining a substantial change in circumstances, the
Temporary Order was deemed to have “become permanent” as of 8 December 2014
and as of 21 October 2016, because no party has appealed the trial court’s 21 February
2017 Order establishing the permanency of the 2011 Temporary Order. 8 Thus, the
2014 and 2016 circumstances and determinations of income and child support—based
upon the 2017 Order holding the 2011 Temporary Order became “permanent” as of
2014 and 2016—forms the baseline for consideration of modification based upon a
8 There is no evidence of the parties’ actual incomes or expenses in 2011 when the
Temporary Order was entered and no order ever addressed the circumstances of the parties
or children in 2011.
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substantial change of circumstances thereafter, up to and including calculations of
child support for each year from 2014 through 2019, as the trial court received
evidence only up to December 2019.
A. Standard of Review
¶ 24 “Child support orders entered by a trial court are accorded substantial
deference by appellate courts and our review is limited to a determination of whether
there was a clear abuse of discretion.” Simms v. Bolger, 264 N.C. App. 442, 447, 826
S.E.2d 522, 527 (2019) (quoting Leary v. Leary, 152 N.C. App. 438, 441, 567 S.E.2d
834, 837 (2002)). “Abuse of discretion results where the court’s ruling is manifestly
unsupported by reason or is so arbitrary that it could not have been the result of a
reasoned decision.” State v. Hennis, 323 N.C. 279, 285, 372 S.E.2d 523, 527 (1988);
see also White v. White, 312 N.C. 770, 777, 324 S.E.2d 829, 833 (1985) (“A trial court
may be reversed for abuse of discretion only upon a showing that its actions are
manifestly unsupported by reason . . . [or] upon a showing that [the trial court’s
decision] was so arbitrary that it could not have been the result of a reasoned
decision.”).
¶ 25 “In a case for child support, the trial court must make specific findings and
conclusions. The purpose of this requirement is to allow a reviewing court to
determine from the record whether a judgment, and the legal conclusions which
underlie it, represent a correct application of the law.” Simms, 264 N.C. App. at 447,
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826 S.E.2d at 527 (quoting Leary, 152 N.C. App. at 441-42, 567 S.E.2d at 837).
Findings of fact must be supported by competent evidence. Atwell v. Atwell, 74 N.C.
App. 231, 234, 328 S.E.2d 47, 49 (1985). Findings are “deemed to be supported by
competent evidence and are binding on appeal” unless specifically challenged by an
appellant. Ward v. Halprin, 274 N.C. App. 494, 498, 853 S.E.2d 7, 10 (2020). “In
short, the evidence must support the findings, the findings must support the
conclusions, and the conclusions must support the judgment . . . .” Atwell, 74 N.C.
App. at 234, 328 S.E.2d at 49.
B. Income Determinations
¶ 26 Father asserts the trial court made multiple errors when calculating the
parties’ incomes and challenges specific findings of fact. Father argues the trial court
erred by not using his current income, by relying upon a non-existent stipulation
limiting the parties’ incomes for the purposes of calculating child support, by
incorrectly calculating his 2014 and 2016 income, and by incorrectly calculating
Mother’s income. For the reasons below, we vacate the trial court’s Child Support
Order, Amended Order, and 2019 Order establishing Father’s income.
1. Stipulation regarding use of incomes from 2014 and 2016
¶ 27 We first address Father’s arguments about the stipulation limiting both
parties’ incomes to 2014 and 2016 for purposes of calculating child support. Father
also specifically challenges the findings in the trial court’s January and March 2021
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child support orders regarding the income stipulation as unsupported by competent
evidence. Finding 18 in both child support orders states:
Counsel for both parties stipulated on the record that the
first calculation of child support should be effective in 2014,
using 2014 income figures and that the second calculation
of child support should be effective in 2016, using 2016
income figures.
(Emphasis added.)
¶ 28 Throughout the record and transcripts of the 2018 evidentiary hearings, it is
apparent that counsel for both parties were limiting their inquiry into the parties’
incomes to the years 2014 and 2016 according to an agreement between counsel.
Presumably, the parties and court limited the income inquiry to 2014 and 2016
because these are the years Mother and Father respectively made their motions to
modify child support and the court intended to calculate past-due, prospective child
support, or to establish a baseline for “current income” and a child support obligation
for the purposes of considering the motions to modify for the first hearings in January
2018. 2014 and 2016 are also the years the trial court deemed the 2011 Temporary
Order to have “become permanent.” But despite Finding 18’s claim the parties had
stipulated “on the record,” we have searched the transcripts and record in vain for a
clear stipulation of any sort. Nowhere in the record before us is there evidence of a
stipulation to establish child support based only upon income figures from 2014 and
2016. We can glean the existence of an off-the-record agreement to limit the evidence
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presented at the 2018 hearing for the purpose of establishing Father’s income as of
2014 and 2016, because these were the dates the 2011 Temporary Order became
“permanent,” by references made by counsel as to an agreement. But nowhere can
we find terms of a stipulation to calculate child support entirely based upon the 2014
and 2016 numbers, let alone in 2021—five to seven years after each respective motion
to modify child support.
¶ 29 Stipulations are favored, but any stipulation must be clearly shown in the
record and each party must agree to its terms:
[C]ourts look with favor on stipulations designed to
simplify, shorten, or settle litigation and save cost to the
parties, and such practice will be encouraged. While a
stipulation need not follow any particular form, its terms
must be definite and certain in order to afford a basis for
judicial decision, and it is essential that they be assented to
by the parties or those representing them. Once a
stipulation is made, a party is bound by it and he may not
hereafter take an inconsistent position.
Stovall v. Stovall, 205 N.C. App. 405, 409, 698 S.E.2d 680, 683 (2010) (emphasis
added) (quotation omitted). Oral stipulations must be reduced to writing, and if not
reduced to writing the stipulation “must affirmatively appear in the record that the
trial court made contemporaneous inquiries of the parties at the time the stipulations
were entered into.” McIntosh v. McIntosh, 74 N.C. App. 554, 556, 328 S.E.2d 600, 602
(1985) (discussing the procedure regarding stipulations as applied to an equitable
distribution proceeding). Upon review, the record must show the trial court “read the
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terms of the stipulations to the parties; that the parties understood the legal effects
of their agreement and the terms of the agreement, and agreed to abide by those
terms of their own free will.” Id.
¶ 30 An example of appropriate reliance on a stipulation may be found in Estate of
Carlsen v. Carlsen. 165 N.C. App. 674, 599 S.E.2d 581 (2004). In Carlsen, the parties
had stipulated that the decedent lacked the testamentary capacity to execute a will,
trust revocation, and promissory note. Id. at 676, 599 S.E.2d at 583. The stipulation
also stated each document was invalid, null, and void. Id. The trial court entered a
judgment based on the stipulation invalidating the documents. Id. However, unlike
here, the trial court’s order included “the exact language of the stipulation in its
entirety.” Id. at 679, 599 S.E.2d at 585. This Court concluded “the language of the
stipulation was sufficiently definite and certain to form a basis for a judicial decision.”
Id. “In such a case where the testimony is in agreement, the stipulation is clear as to
its impact, and the parties were present and aware of their actions, the stipulation is
valid.” Id.
¶ 31 This case is not like Carlsen. There is simply no specific stipulation in the
transcripts or record on appeal. We can determine, from representations by counsel
for both parties in the transcripts, at some point prior to the trial court’s hearings on
this matter in 2018 counsel for both parties agreed to limit the court’s inquiry at these
evidentiary hearings to the parties’ incomes in the years 2014 and 2016. As best we
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can tell the parties agreed to limit their presentation of evidence on the pending
motions to modify the Temporary Order to address the parties’ incomes in 2014 and
2016. Since the 2011 Temporary Order had been declared permanent by 2014,
Mother’s 2014 motion to modify would have required an analysis into each party’s
“current” income and expenses and the children’s needs in 2014. If the 2014 motion
to modify had been timely resolved, the trial court would have been engaging in the
same analysis again in 2016 after Father filed his motion to modify, so evidence
regarding income, expenses, and needs as of 2016 would be required.
¶ 32 The record is replete with references to an agreement to limit the presentation
of evidence at the 2018 hearings to address income in 2014 and 2016. The parties
apparently agreed not to present evidence regarding the period from 2011 to 2014,
after entry of the Temporary Order until the Temporary Order was declared
“permanent.” There are numerous statements within the transcript of the various
hearings that substantially confirm the existence of an agreement. One example is:
[MOTHER’S TRIAL COUNSEL]: Your Honor, I could be
wrong, the Court has a copy of the -- we stipulated, for the
purposes of this proceeding, that we are going to move
forward with evidence related to 2014 and 2016 income
information for these folks. . . . I completed my evidence as
it relates to demonstration of what the income was for 2014
and 2016. When I even tried to present any evidence about
anything that occurred prior to 2014, I received heavy
objections from [Father’s Trial Counsel] that it was outside
of the timeframe of the evidence that the Court asked us to
present. . . . I believe that the direction that we’ve received
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from this Court and that we stipulated and agreed to, as
professionals, was that we’re going to limit our evidence to
2014 and 2016 income.
(Emphasis added.) Another is:
[MOTHER’S TRIAL COUNSEL]: Your Honor, we’ve been
living with this case a whole lot longer than [Father’s Third
Trial Counsel and Appellate Counsel] has. And I would
submit to the Court that in response to her motion to
dismiss, with all due respect, we were here for five days
presenting detailed evidence with regard to the financial
circumstances of these parties for two different time frames,
by consent, by stipulation.
(Emphasis added.) A third example is a statement by the trial court that: “Court had
to determine the actual income of the [Father]. The attorneys representing both the
[Father] and the [Mother], selected two different years that they wished [the] Court
to focus on. It was 2014 and, I believe, 2016.”
¶ 33 But nowhere within the transcript of the proceedings or within the Record on
Appeal do we have before us the actual terms of any stipulation on how to use the
income numbers from 2014 and 2016. No oral stipulation affirmatively appears in
the record, nor has it been reduced to a writing. See McIntosh, 74 N.C. App. at 556,
328 S.E.2d at 602. We can easily infer that some agreement existed to limit the
presentation of evidence at the 2018 hearing, but there is no indication the parties
stipulated Father’s income in 2014 or 2016 would be used as the basis for a child
support order entered years later. On the record before us, it appears the trial court
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had no factual or legal basis upon which to enter an order in 2021 which set the child
support obligation based upon the incomes of the parties five to seven years earlier.9
Thus, Finding 18 is not supported by the evidence; there was no stipulation
sufficiently stated in the record.
¶ 34 “It is well established that child support obligations are ordinarily determined
by a party’s actual income at the time the order is made or modified.” Ellis v. Ellis,
126 N.C. App. 362, 364, 485 S.E.2d 82, 83 (1997) (citing Greer v. Greer, 101 N.C. App.
351, 355, 399 S.E.2d 399, 402 (1991)) (other citations omitted). The trial court erred
by entering an order in 2021 basing child support on income determinations from
2014 and 2016 because no stipulation existed on the record to calculate child support
based only upon income from those years. Although the trial court would have to
address child support for each year from 2014 through 2019, the child support
obligations may be different for various time periods. Here, based on the parties’
motions to modify, these time periods may be from 2014 until 2016 and then from
2017 until the date of entry of the order. Based upon evidence of income and
9Even the parties are unable to point to a location in the record where the stipulation
may be referenced. Mother argues “[t]his [stipulation] was referenced time and time again
throughout the trial tribunal proceedings.” However, Mother fails to cite anywhere in the
record that any stipulation may be found. As noted above, any stipulation “must
affirmatively appear in the record” and the trial court must have “made contemporaneous
inquiries of the parties at the time the stipulations were entered into.” McIntosh, 74 N.C.
App. at 556, 328 S.E.2d at 602.
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circumstances during this time period, there may be other periods for child support
calculations if incomes, expenses, and needs are different in other years. As one
obvious example of a change involving the needs of the children, the oldest child
attained the age of 18 in 2016, and the younger child attained the age of 18 in 2021.
In any event, the trial court should have used the parties’ current incomes to establish
child support. Even without a stipulation, it would be appropriate to use the income
determinations from 2014 and 2016 as baselines for modification and to calculate
child support for 2014 and 2016, but these income numbers cannot be the basis of a
child support order in 2021 without a clear stipulation to use these income numbers
instead of current income.
¶ 35 There are some circumstances where the trial court can use prior income to
calculate current income for the purposes of child support, but specific findings of fact
are required to allow use of income from prior years:
Again, “ ‘[i]t is well established that child support
obligations are ordinarily determined by a party’s actual
income at the time the order is made or modified.’ ” Kaiser
v. Kaiser, [259] N.C. App. [499], [505], 816 S.E.2d 223, 228
(2018) (quoting Ellis [v. Ellis], 126 N.C. App. [362, ] 364,
485 S.E.2d [82, ] 83 [(1997)]). “Although this means the
trial court must focus on the parties’ current income, past
income often is relevant in determining current
income.” Id. Under certain circumstances, “ ‘a trial court
may permissibly utilize a parent’s income from prior years
to calculate the parent’s gross monthly income for child
support purposes.’ ” Id. (quoting Midgett v. Midgett, 199
N.C. App. 202, 208, 680 S.E.2d 876, 880 (2009)). For
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example, this Court has recognized such an approach is
permissible where the income is highly variable or
seasonal, or where the evidence of income is
unreliable. Id. “What matters in these circumstances is the
reason why the trial court examines past income; the
court’s findings must show that the court used this
evidence to accurately assess current monthly gross
income.” Id.
Simms, 264 N.C. App. at 453, 826 S.E.2d at 530 (emphasis in original). The trial
court must make specific findings to support the use of prior income in calculating
current income. See id.; see also Kaiser, 259 N.C. App. at 504-505, 816 S.E.2d at 228.
¶ 36 Here, the trial court did not make findings justifying the use of Father’s income
five and seven years prior to entry of the Amended Order. The trial court appears
instead to have relied upon an undocumented stipulation and entered an order
relying upon the parties’ past incomes. The trial court is permitted to determine a
support obligation based on prior income only if it makes specific findings of fact
justifying the use of prior income to calculate Father’s past child support obligations.
See id.; see also Zurosky v. Shaffer, 236 N.C. App. 219, 245, 763 S.E.2d 755, 771
(2014). These specific findings are also required to calculate past-due, prospective
child support. See Simms, 264 N.C. App. at 453, 826 S.E.2d at 530-31 (“The use of
Defendant’s historical income to calculate prospective child support in the form of
arrears dating back to the filing of Mother’s Motion without any finding to support
the use of this method was error. . . . On remand, the trial court should . . . make
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findings to support its use of Defendant’s historical income to calculate arrearages.”).
¶ 37 The trial court erred by entering the 2021 Child Support Order and Amended
Order relying on 2014 and 2016 income determinations. No stipulation exists in the
record to support the trial court’s use of income from only these years. The 2021 child
support orders are vacated and remanded for entry of a new order.
2. 2019 Order
¶ 38 In addition to the failure of the alleged stipulation as a basis for calculating
income and child support in the 2021 orders, Father challenges aspects of the 2019
Order. This Order did not establish child support or address the motions to modify
but only addressed the parties’ incomes for 2014 and 2016. Father also challenges
specific findings from the 2019 Order and alleges the trial court made mathematical
errors in calculating his and Mother’s incomes. “In child support cases,
determinations of gross income are conclusions of law reviewed de novo, rather than
findings of fact.” Thomas v. Burgett, 265 N.C. App. 364, 367, 852 S.E.2d 353, 356
(2019) (citing Lawrence v. Tise, 107 N.C. App. 140, 145 n.1, 419 S.E.2d 176, 179 n.1
(1992)). “If the trial court labels a conclusion of law as a finding of fact, the appellate
court still employs de novo review.” Id. (citing Carpenter v. Brooks, 139 N.C. App.
745, 752, 534 S.E.2d 641, 646 (2000); Eakes v. Eakes, 194 N.C. App. 303, 311, 669
S.E.2d 891, 897 (2008)).
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a. Father’s Rental Income
¶ 39 The trial court’s findings state that it calculated Father’s income “pursuant to
the North Carolina [C]hild [S]upport [G]uidelines.” Father argues the trial court
erroneously omitted rental expenses when calculating Father’s rental income, and
“Findings 34 and 35 use the erroneous rental income figures were [sic] to determine
[Father]’s total annual and monthly income in 2014 and 2016.” In the 2019 Order,
the trial court found Father’s rental income to be $64,800 in 2014 and $90,804 in
2016. Father notes that these numbers are equal to the aggregate “Gross Rent” from
his properties as reflected on Schedule E of his 2014 and 2016 tax returns. Father
also notes his tax returns list a number of expenses, and “the trial court failed to
deduct any ‘repairs, property management and leasing fees, real estate taxes,
insurance, and mortgage interest’ from the gross rents received.” After deduction for
these expenses, Father argues his rental income should have been $7,990 for 2014
and $28,272 for 2016. He contends any commingling of funds should not result in
these expenses being omitted, because “the rental expenses are no less legitimate
because they are paid with a source other than rental income.”
¶ 40 Father cites the 2019 revision of the North Carolina Child Support Guidelines
and asserts “gross income from rent is defined as gross receipts minus ordinary and
necessary expenses required for self-employment or business operation.” (Emphasis
and ellipses omitted.) Notably, the Guidelines tend to support Father’s calculation,
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but the Guidelines also state “[o]rdinary and necessary business expenses do not
include amounts allowable by the Internal Revenue Service for the accelerated
component of depreciation expenses, investment tax credits, or any other business
expenses determined by the court to be inappropriate for determining gross income.”
North Carolina Child Support Guidelines p. 3 (2019) (emphasis added). The
Guidelines also state “[e]xpense reimbursements or in-kind payments . . . received by
a parent in the course of employment, self-employment, or operation of a business are
counted as income if they are significant and reduce personal living expenses.” Id.
(emphasis added).
¶ 41 At the 2018 evidentiary hearings, a great amount of evidence detailed Father’s
commingling of his personal and business finances, including income and expenses
from his rental properties. The trial court also found, when calculating Father’s
income, that “[w]ith only a few minor exceptions expenses in connection with
[Father’s] rental properties were in the form of loans to shareholder from [Father’s
businesses] to [Father]. The Court did not credit [Father] for these expenses against
his gross monthly income . . . in determining his gross income.” The trial court elected
not to credit Father for the expenses connected to his rentals after finding a
significant commingling of Father’s finances and that many of Father’s personal
expenses were in fact paid for by Father’s businesses. For example, the trial court
found “[Father] does not report cash received from rental properties. [Father’s
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Accountant] does not break down expenditures paid with a business check to
determine which portion of the payment was business related and which portion was
for personal expenses if not notated by [Father].” The trial court also found:
At times there were receipts for taxes paid from a county
tax office saying “cash” but with no information as to what
property taxes were being paid. For the year 2014 property
taxes for [Father]’s commercial property in South Carolina
were paid by KA because [Father] could not pay them from
his personal account. [Father’s Accountant] did not know
who held the rental mortgages or how they were paid. For
2014 he never saw a receipt for insurance expenses for
[Father]’s rental properties.
The trial court also found:
What is abundantly clear is there has been a pattern of
[Father] using one or both of his businesses for cash
withdrawals and/or checks to pay for many of these
obligations without any documentation to identify these as
personal. There was a commingling of business and
personal expenses when it came time to pay invoices/bills
whether paid by cash or check.
The court found that Father’s businesses paid for various personal and rental
expenses for Father, including “lawn care for personal and rental properties” and
Father’s property taxes. The court also found that one of Father’s businesses pays its
rent directly to Father, the payment is “charged as loan to shareholder,” and the rent
payment is “then reversed out of loan to shareholder and treated as a rental expense.”
The court also found “[t]hese payments have been consistent over time, are
reoccurring, are significant and reduce [Father]’s personal living expenses.”
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¶ 42 However, the trial court’s findings do not show the trial court clearly intended
to omit all rental expenses when calculating Father’s net rental income. “[T]he trial
court was required to explain its decision relative to the evidence of such expenses
submitted by [Father]. Without any evidence indicating the trial court’s
contemplation of those expenses, we do not have enough findings to conduct adequate
review.” Thomas, 265 N.C. App. at 368, 852 S.E.2d at 357. Instead, the trial court
omitted all rental expenses, including expenses like mortgage interest; this was not
discussed in the court’s findings yet omitted anyway. Upon remand, the trial court
should include more specific findings showing “that due regard was taken of the
requisite factors[,]” and why the trial court chose not to credit Father with any rental
expenses when determining his net rental income under the Guidelines. See id.
(quoting Burnett v. Wheeler, 128 N.C. App. 174, 176, 493 S.E.2d 804, 806 (1997) (in
turn citing Coble v. Coble, 300 N.C. 708, 712, 268 S.E.2d 185, 189 (1980))).
b. Father’s “Loan to Shareholder” Income
¶ 43 Father also argues his income was incorrectly calculated because shareholder
loans made to Father from his businesses were double counted in the trial court’s
calculations as a stand-alone source of income and within the businesses’ profits.
Father argues “[a] loan is a borrowing from some pot of money, and in this case is
from the ‘Profits’ of the businesses.” Father argues the trial court made a
mathematical error by not realizing that the loans were “just a portion of the profits
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which were borrowed upon.”
¶ 44 At the evidentiary hearings, the court heard testimony from Father’s
accountant, Mr. Logeman, as to how Father removes money from his businesses to
pay for his personal expenses. Mr. Logeman testified money removed from Father’s
businesses to pay Father’s personal expenses is treated as “loans to shareholder,”
and Mr. Logeman determines the value of these loans by compiling receipts handed
to Mr. Logeman “in a plastic grocery bag every month by [Father] along with a
handwritten log of cash out prepared by [Father] every month for KA/Theo’s[,]”
“handwritten sales receipts for KA[,]” receipts for various personal purchases Father
reimburses himself for by removing cash from his businesses’ registers, discrepancies
between “gross sales and taxes payable and the bank statements” for the businesses,
and other sources. Father’s finances are complex, and considering his use of cash and
hand-written logs, it is not clear how the sum of these “loans” was calculated; the trial
court’s order does not clearly state how it arrived at the final values in Findings 34
and 35 of the 2019 Order.10
¶ 45 The trial court found that income categorized as “loans to shareholder”
included generally all funds available to Father that he could withdraw from his
businesses to pay personal expenses, and that Father “has never reimbursed the
10 However, Mr. Logeman also testified as to these practices, and the court found
“[t]his behavior is not unusual in this industry but makes tracking ‘income’ difficult.”
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business for his loans nor has he paid any interest on” the “loans to shareholder.”
Father notes Finding 8(c) in the 2019 Order clearly shows the relationship between
profits and shareholder loans:
c. . . . Profit is the amount of money on IRS Form K-1
of the tax returns. “Profit” for an S Corporation is taxed on
the periodic return. Once taxed it goes into a “retained
earnings account.” The shareholder, [Father] in this case,
can take money out of that account by taking a distribution
check or paying personal expenses and not get taxed again
on the funds.
(Emphasis added.) Father asserts this finding shows that the trial court “was close”
but “what the trial court does not accurately understand is that money is not
additional income.” The trial court’s ultimate findings of fact included separate
categories for both “Profit” and “‘Loan to shareholder’ income.” The trial court
appears to have characterized the payment of Father’s personal expenses through
business income as shareholder loans, and also found that Father can claim the
entirety of his businesses’ profits as income.
¶ 46 Additionally, the court appears to have found two different values for these
loans for both 2014 and 2016. In the 2019 Order the trial court’s ultimate findings of
fact found Father’s total income to include $98,196 from business profit and $44,870
in “loan to shareholder” income for 2014; in 2016 Father’s total income included
$110,244 from business profit and $54,298 from “loan to shareholder” income. But
the trial court also found:
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18. The total of confirmed and documented loans to
[Father] shareholder in 2014 was $51,231.00 from
KA/Theos. The figure represents money paid by KA for
[Father] based on information given to Mr. Logeman. The
total of confirmed and documented loans to [Father]
shareholder in 2016 was $69,681.00 based on the check
ledgers and information given to Mr. Logeman. . . .
The trial court does not make clear how it calculated any of the totals cited above. It
generally lists some expenses as loans, but then provides two different aggregate
totals for the loans for each year. None of the trial court’s other findings clarify this
discrepancy.
¶ 47 We are unable to tell how the evidence presented in the 2018 hearings supports
the court’s findings. See Atwell, 74 N.C. App. at 234, 328 S.E.2d at 49. Because of
the inconsistency in the trial court’s findings and the difficulty in following the trial
court’s calculations, we vacate and remand for additional findings on how precisely
the trial court calculated “profit” and “loan to shareholder income” and the exact
interplay between these two categories of Father’s income.
c. Mother’s Income
¶ 48 Father argues the trial court also erred in determining Mother’s income for
2014. Aside from Father’s argument that the trial court also used the wrong years
for Mother’s income, he argues that Mother’s income was erroneously inflated by
approximately $3,900 per month between the 2019 and 2021 Orders. It is unclear
why Father finds issue with this determination because, as Mother argues, “if it was
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error it only raised [Mother’s] income.” (Emphasis removed.)
¶ 49 In the 2019 Order, the trial court found Mother’s monthly income to be
$3,833.34, comprised of $3,466.67 in monthly wages and an average monthly bonus
of $416.67. In the 2021 Orders, Mother’s recurring monthly income in 2014 from
employment remained $3,833.34, but the court elected to add “approximately $3,900
per month” in recurring payments from her current husband. The court does not
explain or identify where this sum originates. Upon a review of the record, it appears
the figure may have been argued by Mother’s counsel at the December 2019 hearing.
Mother’s counsel argued that Mother’s current husband actually pays Mother’s and
the minor children’s expenses, and Mother’s recurring income of $3,833.34 should be
regularly added to “Mother’s” household expenses for Mother and the children in
order to calculate the total amount of money Mother has access to month-to-month
both earned by herself and given to her by her husband—Mother’s total income.
¶ 50 The trial court’s findings do not make clear, however, how or why it added
$3,900 in recurring payments to Mother’s monthly income or why these payments
were only added to Mother’s income in the 2021 Orders. Because we can only
speculate as to the source of these payments, the trial court’s findings as to Mother’s
income are unsupported by competent evidence. See Atwell, 74 N.C. App. at 234, 328
S.E.2d at 49. On remand, the trial court should make additional findings clarifying
Mother’s income.
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C. Substantial Change of Circumstances
¶ 51 Father next asserts “the trial court erred when determining that there existed
a substantial change in circumstances that warranted modification.” (Capitalization
altered.) Father argues the trial court misapplied the standard for determining a
substantial change in circumstances because the trial court called this case a “non-
Guideline child support case” yet applied a Guidelines-based presumption of a
substantial change of circumstances. Father also argues the trial court erred by
failing to set a monetary baseline as to the children’s expenses and standard of living
in 2011 against which to compare their expenses and standard of living in 2014 and
2016 when the motions to modify were filed. Mother argues the Guidelines
presumption can be analogized to a non-Guidelines case, and a substantial change of
circumstances can be found because “[t]he landscape was simply not the same as it
had been in 2011” when the Temporary Order was entered. For the reasons below,
we hold there was sufficient evidence of a substantial change of circumstances
warranting modification in both 2014 and 2016. However, we will limit our
discussion of the details of the modification since we have already determined we
must vacate the orders and remand for additional findings of fact regarding all the
relevant facts and circumstances, without limitation to evidence of circumstances in
2014 and 2016. But we will address some of the arguments to the extent this may be
useful on remand.
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¶ 52 In the Amended Order, the court made the following findings of fact:
16. At the time [Mother] filed her 2014 Motion,
almost four years had passed since the entry of the
Temporary Order. [Father]’s child support obligation
accordingly changed by more than 15% in that he no longer
paid the mortgage at the former marital residence
($1370.70/m) for the benefit of [Mother] and the minor
children, as part of his support. Further, the minor
children had moved from primarily living in the former
marital residence with their [Mother] to the residence of
[Mother] and [Mother]’s husband . . . .
17. [Father]’s income was significantly higher
than the base salary figures represented by him at the
temporary hearing. . . . .11
¶ 53 Since we must remand for the trial court to make additional findings regarding
the parties’ incomes, expenses, and the children’s needs, we will not address the
parties’ arguments regarding the changes in circumstances in detail. That sort of
detail would require actual findings regarding the parties’ incomes and expenses and
the children’s needs over the relevant time periods; without knowing the parties’
incomes, we cannot say whether the case falls within the Guidelines or not.
¶ 54 At the time of each party’s motion, the North Carolina Child Support
Guidelines created a presumption of a substantial change in circumstances when
11 Considering that the limited information on Worksheet A attached to the 2011
Temporary Order was not specifically incorporated as a finding of fact, and we have no
transcript of the 2011 hearing, we cannot definitively state what Father’s income was
represented as in 2011.
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more than three years has elapsed between entry of an order establishing support
and a motion to modify, and there is greater than a 15% disparity between the
standing support obligation and the recalculated obligation under the Guidelines.12
But in the 26 March 2021 Amended Child Support Order the trial court concluded
the parties’ combined gross incomes for both 2014 and 2016 exceeded the limit set by
the Guidelines and therefore “[t]he North Carolina Child Support Guidelines are not
applicable in this action . . . .” Regardless, the trial court also found:
150. There has been a substantial change in
circumstances as of the filing of the [Mother’s] Motion to
Modify on December 16, 2014 as it had been more than
three years since the entry of the last Order and that Order
is more than three years old and there is a 15% disparity
between the support Ordered and the current support
obligation.
151. There has been a substantial change in
circumstances as of the filing of [Father’s] Motion to Modify
on October 21, 2016 as the minor child, [G.K.], had turned
18 on October 21, 2016 and graduated for high school.
¶ 55 We first note that both parties filed motions alleging substantial changes in
12 The North Carolina Child Support Guidelines are established pursuant to North
Carolina General Statute § 50-13.4 by the Conference of Chief District Judges. The
Guidelines are promulgated by the North Carolina Administrative Office of the Courts, and
the 2011 Guidelines in effect at the time Mother filed her motion may be found at:
https://www.nccourts.gov/assets/documents/publications/guidelines_2011.pdf?VersionId=vT
qhbVaIbGVBsfdM8YXPpyiWx3t3qsS7. The 2015 Guidelines in effect at the time Father filed
his motion may be found at:
https://www.nccourts.gov/assets/documents/publications/guidelines_2015.pdf?VersionId=Ro
o8e43y0k2RCzLZZsrUvVBUL6D7Bt74. The presumption was the same at the time both
parties filed their motions.
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circumstances requiring modification of the child support obligation established in
the 2011 Temporary Order. Father’s motion to modify, filed in 2016, alleged “there
[had] been substantial and material changes in circumstances in that” his eldest
daughter had “graduated from high school and turned 18 years of age.” Thus, Father
is apparently not arguing there has been no change in circumstances justifying
modification of child support since 2011; he just argues the trial court should not have
used the language of the Child Support Guidelines to find a substantial change in
circumstances. As a practical matter, this is a distinction without a difference. There
is simply no question that many substantial changes in circumstances relevant to
child support occurred in the period of time from 2011 to the close of evidence in
December 2019, to name a few obvious ones: the parties resolved their property
distribution in 2014; Mother and the children moved out of the marital home in 2014
and Father bought Mother’s interest in the residence, thus eliminating Father’s
obligation under the 2011 Order to pay the mortgage and maintenance expenses for
the benefit of Mother and the children; and the older child attained the age of 18 in
2016. The question is not whether the trial court erred in using language based on
the Guidelines definition of a presumption of a substantial change in circumstances
in a non-Guideline case. The question is whether the trial court should establish
child support based upon the Guidelines or if the parties’ incomes place them outside
the Guidelines, so the trial court must “determine the child support obligation . . .
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[by] considering the needs of the child[ren] and the relative ability of each parent to
provide support.” Since we must remand for the trial court to find all these numbers,
we will not address this argument further.
¶ 56 As to Father’s motion to modify, there is no doubt that there was a substantial
change of circumstances in 2016 when the parties’ older child turned 18 years old and
had graduated from high school. Father filed the 2016 motion seeking modification
due to a substantial change in circumstances, namely that his eldest daughter
“graduated from high school and turned 18 years of age on” the day the motion was
filed. He cannot complain that the court found a substantial change of circumstances
resulting from his oldest daughter reaching age 18 when he was the party who sought
modification on that basis. See, e.g., Frugard v. Pritchard, 338 N.C. 508, 512, 450
S.E.2d 744, 746 (1994) (citations omitted) (“A party may not complain of action which
he induced.”).
¶ 57 As discussed above, we have vacated the 2019 Order and remanded for entry
of a new order as to the 2014 and 2016 incomes, and we have already discussed the
need for findings as to the income, expenses, and needs of the children (assuming the
child support calculation is not based upon the Child Support Guidelines) as of the
time of calculation of any child support obligation prior to entry of the order and upon
entry of the child support order. We need not address Father’s remaining arguments
regarding the trial court’s findings and conclusions of law since we must vacate and
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remand for entry of new orders.
D. Delay in Hearings and Entry of Orders
¶ 58 Father’s final argument in his brief is the delay between the final Amended
Child Support Order on 26 March 2021 and the evidentiary hearings in 2018 and
2019 resulted in prejudice to Father and confused the trial court. Mother argues
Father “cannot show prejudice from the delay in entering the final order” because he
merely alleges a delay, and that Father actually benefited from the delay because “he
was allowed to pay only $1,300 in child support for years while the parties’ motions
to modify worked their way through” the trial court. Since we have already
determined we must vacate the Child Support Order, Amended Order, and 2019
Order, we will not address the issue as to delay between the hearing and entry of the
order. We also note that much of Father’s argument focuses on the effects of the
COVID-19 restrictions on operations on his restaurants, but we cannot address that
issue as Father’s motion to modify on that basis has not yet been decided by the trial
court. Even though the final child support orders were entered in 2021, after the
pandemic, the last evidentiary hearing ended in December 2019, before the start of
the pandemic in March 2020, and we can address only the issues presented and
decided based on the evidence addressed by the 2021 Amended Order on appeal.
IV. CONCLUSION
¶ 59 We vacate the 2019 Order, the Child Support Order, and the Amended Child
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Support Order and remand for entry of new orders. On remand, the trial court may
rely on the evidence presented in prior evidentiary hearings for the time periods
addressed at those hearings to make new findings of fact as discussed above but must
also hold a hearing to receive additional evidence needed to establish child support.
The trial court shall enter a new order setting the child support obligation for the
entire time period from 2014 until the children both attained age 18 and graduated
from high school, addressing all of the necessary factors including each party’s income
and expenses, the children’s needs, and Father’s ability to pay, and setting out the
manner of payment of the child support. Since the children have now both attained
the age of 18, Father will have no current ongoing child support obligation and the
trial court’s order will establish only past child support, the total amounts owed, how
Father is to pay the child support, and any other related issues properly presented
by the parties. Considering the complexity of the financial evidence already
presented in this case and the need for additional evidence to address the issues of
child support over many years, we suggest, but do not mandate, that the trial court
may in its discretion consider whether an order of reference under North Carolina
General Statute § 1A-1, Rule 53(2) may be appropriate on remand. “The ordering of
a reference is within the sound discretion of the court.” Livermon v. Bridgett, 77 N.C.
App. 533, 536, 335 S.E.2d 753, 755 (1985) (citing Long v. Honeycutt, 268 N.C. 33, 149
S.E.2d 579 (1966)).
EIDSON V. KAKOURAS
2022-NCCOA-741
Opinion of the Court
VACATED AND REMANDED.
Judges GORE and JACKSON concur. | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483763/ | IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-744
No. COA22-97
Filed 15 November 2022
Wake County, No. 19CRS219702
STATE OF NORTH CAROLINA
v.
KWAIN HAWKINS
Appeal by defendant from judgment entered 25 June 2021 by
Judge Paul C. Ridgeway in Wake County Superior Court. Heard in the Court of
Appeals 19 October 2022.
Attorney General Joshua H. Stein, by Special Deputy Attorney General Sherri
Horner Lawrence, for the State.
Mark Montgomery, for the defendant-appellant.
TYSON, Judge.
¶1 Kwain Hawkins (“Defendant”) appeals from the judgment entered upon a
jury’s verdict for one count of statutory rape of a child fifteen years or younger and
two counts of taking indecent liberties with a child. Defendant’s appeal is dismissed.
I. Background
¶2 Fifteen-year-old “Anna” walked from the bus stop to her house on 17 October
2019. (Pseudonym used to protect identity of minor, per N.C. R. App. P. 41(b)). She
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2022-NCCOA-744
Opinion of the Court
rode to and from school every day on the bus, which dropped her off about five minutes
from her home. Anna had been diagnosed with autism and experienced social
anxiety, but is a well-behaved child, who always arrived home promptly between 4:00
and 4:30 p.m.
¶3 On 17 October 2019, Anna noticed an older man standing across the street
from the bus stop. The man, who was later identified as Defendant, made eye contact
with her. Anna attempted to ignore him when crossing the street, and she continued
to listen to music through her headphones while walking home.
¶4 Defendant approached Anna and walked alongside her. He asked her: how old
she was; if she had a boyfriend; if she found him attractive; if she had ever had sex
before; and if she smoked. Anna attempted to ignore Defendant and contemplated
whether to answer his questions truthfully.
¶5 Defendant asked Anna to walk with him to the park. Anna misheard
Defendant because of the music playing on her headphones. She thought Defendant
had said “parking lot,” which was near her home. Anna agreed, hoping Defendant
would leave her alone and rationalizing that she could quickly walk home from the
parking lot. Defendant then asked to hold her hand. Anna said “no” three times
before finally giving in. Anna’s mother would later explain to an investigating officer
that Anna’s social anxiety causes her to avoid “push[ing] back at people because she
hates to be mean and prefers to be a people pleaser.”
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2022-NCCOA-744
Opinion of the Court
¶6 Defendant led Anna to an open area, situated between two apartment
buildings, that did not look like a park. Anna and Defendant sat together on a bench
for a few minutes before she told Defendant she was going home. Defendant
repeatedly asked Anna for a hug before she left, and he refused to accept “no” as an
answer.
¶7 While hugging her, Defendant instructed Anna to remove her backpack and
give him a “proper” hug. Anna complied out of fear. Defendant starting kissing Anna
on the lips and demanded for her to return the kiss. Defendant moved his hands
towards Anna’s pants and “grabbed [her] bottom.” He put his hands inside of Anna’s
pants and “put his fingers inside [her] vagina.”
¶8 Defendant directed Anna to follow him to a “more private” wooded area behind
the apartment buildings. Once they reached the wooded area, Defendant told Anna
“to turn around and pull down [her] pants.” When Anna asked “why,” he repeatedly
told her to “bend” over. Anna asked whether Defendant would hurt her if she refused
to comply. Eventually, Anna complied with Defendant’s demands. Defendant stood
behind Anna and penetrated her vagina with his penis. This rape continued until
Defendant was startled by a white van that pulled in behind the apartment complex
and parked.
¶9 Defendant told Anna to follow him, so Anna pulled up her pants and grabbed
her backpack. Anna walked behind Defendant because she “felt safer.” Defendant
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2022-NCCOA-744
Opinion of the Court
asked Anna for her name and where she lived. Anna gave Defendant a false name
because she did not “want him to ever come back.” She also pointed in the opposite
location of where her house was located because she “wanted to keep [her] family
safe.”
¶ 10 Anna’s grandmother testified Anna had arrived home late and started crying
uncontrollably after admitting she had been raped. Anna’s grandmother took Anna
to Wake Med North Hospital, while Anna’s mother contacted law enforcement. Wake
Med North transferred Anna to Wake Med’s main hospital campus to collect a rape
kit.
¶ 11 A scientist in the forensic biology section of the North Carolina Crime Lab later
analyzed the rape kit. She determined the male DNA identified on Anna’s vaginal
swabs matched Defendant’s DNA.
¶ 12 While examining Anna’s clothing and undergarments, a City-County Bureau
of Identification agent observed white residue in the groin area of Anna’s underwear.
He noticed “brownish colored stains on the inside of the legs of [Anna’s] leggings.”
¶ 13 Video surveillance from a nearby middle school showed two individuals,
matching Anna and Anna’s description of her assailant, walking from the bus stop
towards Anna’s home around 4:00 p.m. on 17 October 2019. One of the investigating
officers used this surveillance footage to capture a photograph of Defendant. The
officer posted the photograph on an internal Raleigh Police Department website,
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2022-NCCOA-744
Opinion of the Court
which is accessible to all officers and detectives, and instructed officers to “Be On The
Lookout” (“BOLO”) for the individual shown in the photo.
¶ 14 Two officers, unrelated to the investigation, recognized Defendant from the
BOLO post and contacted the officer who had posted the image. Those officers
explained they were “about 85 percent [sure] that the suspect [pictured] is Kwain
Hawkins” and included Defendant’s date of birth.
¶ 15 A Wake County grand jury indicted Defendant with one count of statutory rape
of a child fifteen years old or younger and two counts of taking indecent liberties with
a child on 9 March 2020. Anna’s mother and grandmother corroborated Anna’s
testimony. The State entered all of the physical and testimonial evidence outlined
above at trial.
¶ 16 Defendant attempted to elicit expert testimony from a nurse, Caron Jones
(“Jones”), during his case-in-chief. Jones, a registered nurse, was previously
specialized as a “family nurse practitioner and a certified nurse midwife,” although
her certification to practice as a registered nurse and midwife had expired. Jones
was not certified as a Sexual Assault Nurse Examiner (“SANE”), and she had not
conducted an examination on a rape trauma victim in over twenty years. Before trial,
Defendant had sent emails to the State indicating Jones was prepared to testify “with
100 percent certainty [ ] the victim in this case had not been penetrated based on the
amount of DNA that was found on her vaginal swabs.”
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2022-NCCOA-744
Opinion of the Court
¶ 17 The State filed a motion in limine to exclude this testimony because Jones
intended to draw a legal conclusion about whether a sexual “penetration” occurred.
N.C. Gen. Stat. § 8C-1, Rule 704 (2021). The State conceded at a pre-trial hearing
Jones “could testify that there was nothing in the medical examination consistent
with sexual abuse,” if tendered as an expert witness.
¶ 18 After the voir dire of Jones, the trial court found and concluded Jones was only
“qualified to describe female anatomy.” The trial court would have allowed Jones to
testify there were “no findings of physical trauma in the medical records from the
examination of [Anna],” but would not allow Jones to link her opinion “to any
conjecture as to whether a sexual assault occurred because she d[id] not have a
scientific basis for that linkage.” Defendant chose not to call Jones to testify
purportedly because of the limitations regarding her testimony.
¶ 19 The jury’s verdict found Defendant to be guilty on all three charges. Defendant
was sentenced as a prior record level IV offender. He received an aggravated sentence
of 456 to 607 months. Defendant filed a timely notice of appeal.
II. Jurisdiction
¶ 20 Defendant filed a petition for writ of certiorari. He realized after filing his brief
that a certificate of service evidencing service of his notice of appeal was missing from
the record on appeal. Defendant also realized his notice of appeal omitted the trial
court’s rulings, both the pretrial ruling on the State’s motion in limine and the ruling
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2022-NCCOA-744
Opinion of the Court
following the voir dire of Jones during trial, regarding the limitations of Jones’ expert
witness testimony.
¶ 21 Defendant’s notice of appeal only discussed the court’s ruling on the motion in
limine regarding the use of the word “rape,” along with five other issues, none of
which were discussed in neither Defendant’s nor the State’s briefs. In his list of
proposed issues on appeal, Defendant included the “exclusion of testimony from the
defendant’s expert witness.”
¶ 22 Whether a party adheres to the rules governing appellate procedure is a
jurisdictional issue. Dogwood Dev. & Mgmt. Co., LLC v. White Oak Transp. Co., 362
N.C. 191, 197, 657 S.E.2d 361, 364-65 (2008) (“The appellant’s compliance with the
jurisdictional rules governing the taking of an appeal is the linchpin that connects
the appellate division with the trial division and confers upon the appellate court the
authority to act in a particular case.”).
¶ 23 “The North Carolina Rules of Appellate Procedure are mandatory and failure
to follow these rules will subject an appeal to dismissal.” Viar v. N.C. Dep’t of Transp.,
359 N.C. 400, 401, 610 S.E.2d 360, 360 (2005) (citation and quotation marks omitted).
¶ 24 A criminal defendant may appeal “from a judgment or order of a superior or
district court” by:
(1) giving oral notice of appeal at trial, or
(2) filing notice of appeal with the clerk of superior court
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2022-NCCOA-744
Opinion of the Court
and serving copies thereof upon all adverse parties
within fourteen days after entry of the judgment or
order or within fourteen days after a ruling on a motion
for appropriate relief made during the fourteen-day
period following entry of the judgment or order.
N.C. R. App. P. 4(a) (emphasis supplied).
¶ 25 When a Defendant provides a written notice of appeal, the notice must also
“designate the judgment or order from which appeal is taken and the court to which
appeal is taken.” N.C. R. App. P. 4(b).
¶ 26 To preserve an issue for appeal, “a party must have presented to the trial court
a timely request, objection, or motion, stating the specific grounds for the ruling the
party desired the court to make if the specific grounds were not apparent from the
context.” N.C. R. App. P. 10(a)(1).
¶ 27 The party invoking appellate jurisdiction must also prepare a list of “[p]roposed
issues that the appellant intends to present on appeal . . . without argument at the
conclusion of the printed record in a numbered list.” N.C. R. App. P. 10(b). This list
of proposed issues on appeal “shall not limit the scope of the issues presented on appeal
in an appellant’s brief.” Id. (emphasis supplied).
¶ 28 Rule 21 of the North Carolina Rules of Appellate Procedure provides an
alternative, although a discretionary and extraordinary basis for parties to obtain
appellate jurisdiction. State v. Grundler, 251 N.C. 177, 189, 111 S.E.2d 1, 9 (1959)
(citations omitted) (explaining a petition for writ of certiorari “must show merit or
STATE V. HAWKINS
2022-NCCOA-744
Opinion of the Court
that error was probably committed below” and “is a discretionary writ, to be issued
only for good and sufficient cause shown”). If a party petitions this court for a writ of
certiorari, this Court, wholly within its discretion, may “suspend or vary the
requirements or provisions of any of these rules in a case pending before it upon
application of a party.” N.C. R. App. P. 2.
A. Certificate of Service Requirement per Rule 4(a) of North Carolina
Rules of Appellate Procedure
¶ 29 This Court may issue a writ of certiorari “in appropriate circumstances . . .
when the right to prosecute an appeal has been lost by failure to take timely action.”
N.C. R. App. P. 21(a)(1) (emphasis supplied). “Rule 21(a)(1) gives an appellate court
the [jurisdictional] authority to review the merits of an appeal by certiorari even if
the party has failed to file notice of appeal in a timely manner.” Anderson v.
Hollifield, 345 N.C. 480, 482, 480 S.E.2d 661, 663 (1997).
¶ 30 In Hale v. Afro-Am. Arts Int’l., Inc., this Court “dismissed defendants’ appeal
after the record on appeal had been served on the appellee and docketed without
objection in the Court of Appeals and after all briefs had been duly filed.” 335 N.C.
231, 232, 436 S.E.2d 588, 589 (1993) (per curiam) (emphasis supplied). Our state
Supreme Court disagreed with this Court’s decision.
¶ 31 “[A] party upon whom service of notice of appeal is required may waive the
failure of service by not raising the issue by motion or otherwise and by participating
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2022-NCCOA-744
Opinion of the Court
without objection in the appeal, as did the plaintiff here.” Id. (reversing and
remanding the case back to this Court “for consideration on the merits”).
¶ 32 Here, the facts are similar to those in Hale. While Defendant failed to include
a copy of the certificate of service in the record on appeal, the State nevertheless
responded to Defendant’s brief and filed responsive arguments without objection.
Hale, 335 N.C. at 232, 436 S.E.2d at 589. The State only noticed the defect in the
record after Defendant had raised the issue in his petition for writ of certiorari, which
was filed over a month after the State submitted its reply brief.
¶ 33 The State has waived their opportunity to raise the failure of service objection
“by not raising the issue by motion or otherwise and by participating without
objection in the appeal.” Id. If Defendant’s failure to include the certificate of service
in the record on appeal was the only jurisdictional defect in his appeal, this Court
could review Defendant’s appeal per Hale. 335 N.C. at 232, 436 S.E.2d at 589.
B. The “Designate the Judgment or Order” Requirement under Rule 4(b)
of North Carolina Rules of Appellate Procedure
¶ 34 Our Supreme Court recently re-affirmed: “A writ of certiorari is not intended
as a substitute for a notice of appeal because such a practice would render
meaningless the rules governing the time and manner of noticing appeals.” State v.
Ricks, 2021-NCSC-116, ¶ 6, 378 N.C. 737, 741, 862 S.E.2d 835, 839 (2021) (citation
and quotation marks omitted).
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2022-NCCOA-744
Opinion of the Court
¶ 35 The Court in State v. Ricks reviewed a claim with jurisdictional defects due to
a defendant’s failure to comply with the North Carolina Rules of Appellate Procedure.
Id., ¶ 3-4, 378 N.C. at 739, 862 S.E.2d at 837-38 (citing the reasoning adopted by the
dissent in State v. Ricks, 271 N.C. App. 348, 843 S.E.2d 652 (2020) (Tyson, J.,
concurring in the result in part and dissenting in part)).
¶ 36 The defendant in Ricks “gave oral notice of appeal from his criminal
convictions,” but “he made no objection to the imposition of SBM [at trial] and never
filed a written notice of appeal of the SBM orders.” Id., ¶ 3, 378 N.C. at 739, 862
S.E.2d at 837. The defendant filed “a petition for writ of certiorari seeking review of
the SBM orders” after filing the record of appeal. Id.
¶ 37 Our Supreme Court held this Court abused its discretion in Ricks by invoking
Rule 2 to review a constitutional argument the defendant had failed to preserve at
trial, which is required by Rule 10. Id., ¶ 5-6, 378 N.C. at 740-41, 862 S.E.2d at 838-
39 (noting the defendant also had failed to comply with Rule 3, which is the civil
equivalent of Rule 4, by failing to file a written notice of appeal of the SBM issue);
N.C. R. App. P. 2, 3, 4, and 10.
¶ 38 “Though the Court of Appeals may issue a writ of certiorari to review a trial
court’s order ‘when the right to prosecute an appeal has been lost by failure to take
timely action,’ N.C. R. App. P. 21(a)(1), the petition must show ‘merit or that error
was probably committed below.’” Id., ¶ 6, 378 N.C. at 741, 862 S.E.2d at 839 (citing
STATE V. HAWKINS
2022-NCCOA-744
Opinion of the Court
Grundler, 251 N.C. at 189, 111 S.E.2d at 9).
¶ 39 Here, Defendant’s procedural defects differ from the defects present in Ricks
because Defendant complied with Rule 10. Id., ¶ 5-6, 378 N.C. at 740-41, 862 S.E.2d
at 838-39. The issue Defendant asks this Court to review on appeal was preserved
at trial in accordance with Rule 10(a)(1). N.C. R. App. P. 10(a)(1) (noting, to preserve
an issue on appeal, “a party must have presented to the trial court a timely request,
objection, or motion, stating the specific grounds for the ruling the party desired the
court to make” and the party must have “obtain[ed] a ruling”).
¶ 40 The trial court ruled on the State’s motion in limine and its Rule 702 objection
at trial. Defendant also included the exclusion of Jones’ expert witness testimony in
his list of proposed issues on appeal, which is also required by Rule 10(b). N.C. R.
App. P. 10(b).
¶ 41 Although Defendant complied with Rule 10, Defendant’s appeal still possesses
jurisdictional defects because of his failure to comply with Rule 4. Ricks, ¶ 6, 378
N.C. at 741, 862 S.E.2d at 839 (citing Grundler, 251 N.C. at 189, 111 S.E.2d at 9);
N.C. R. App. P. 4 and 10. Defendant’s petition for writ of certiorari must assert a
showing of “merit or that error was probably committed below.” Id.
III. Restricting Expert Testimony
¶ 42 Defendant purports to raise one issue on appeal: whether the trial court erred
by restricting Jones’ expert testimony. Defendant argues an expert witness is not
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2022-NCCOA-744
Opinion of the Court
required to cite specific scientific studies to support their opinions when testifying to
the characteristics of alleged rape victims.
A. Standard of Review
¶ 43 “In reviewing trial court decisions relating to the admissibility of expert
testimony evidence, this Court has long applied the deferential standard of abuse of
discretion. Trial courts enjoy wide latitude and discretion when making a
determination about the admissibility of [expert] testimony.” State v. King, 366 N.C.
68, 75, 733 S.E.2d 535, 539-40 (2012) (citation omitted).
B. Analysis
¶ 44 Rule 702 of the North Carolina Rules of Evidence governs the admissibility of
expert testimony, which provides:
If scientific, technical or other specialized knowledge will
assist the trier of fact to understand the evidence or to
determine a fact in issue, a witness qualified as an expert
by knowledge, skill, experience, training, or education, may
testify thereto in the form of an opinion, or otherwise, if all
of the following apply:
(1) The testimony is based upon sufficient facts or
data.
(2) The testimony is the product of reliable principles
and methods.
(3) The witness has applied the principles and
methods reliably to the facts of the case.
N.C. Gen. Stat. § 8C-1, Rule 702 (2021).
STATE V. HAWKINS
2022-NCCOA-744
Opinion of the Court
¶ 45 The trial court reviews and determines preliminary questions regarding the
qualifications of a witness to testify as an expert witness and the admissibility of
evidence. N.C. Gen. Stat. § 8C-1, Rule 104(a) (2021); State v. Goode, 341 N.C. 513,
527, 461 S.E.2d 631, 639 (1995) (explaining Rule 702 and Rule 104(a) read
conjunctively mean that when “a trial court is faced with a proffer of expert testimony,
it must determine whether the expert is proposing to testify to scientific, technical,
or other specialized knowledge that will assist the trier of fact to determine a fact in
issue”).
¶ 46 The first prong of Rule 702 focuses on the principles and methodologies an
expert utilized or relied upon when reaching their conclusions.
The subject of an expert’s testimony must be “scientific . . .
knowledge.” The adjective “scientific” implies a grounding
in the methods and procedures of science. Similarly, the
word “knowledge” connotes more than subjective belief or
unsupported speculation.
...
[I]n order to qualify as “scientific knowledge,” an inference
or assertion must be derived by the scientific method.
Proposed testimony must be supported by appropriate
validation—i.e., “good grounds,” based on what is known.
In short, the requirement that an expert’s testimony
pertain to “scientific knowledge” establishes a standard of
evidentiary reliability.
Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589-90, 125 L.Ed.2d 469, 480-81
(1993); see also Pope v. Bridge Broom, Inc., 240 N.C. App. 365, 376, 770 S.E.2d 702,
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2022-NCCOA-744
Opinion of the Court
711 (2015) (citations and quotation marks omitted) (“The requirement that expert
testimony must be based on scientific knowledge, means that the principles and
methods used to form that testimony must be grounded in the scientific method. In
other words, the principles and methods must be capable of generating testable
hypotheses that are then subjected to the real world crucible of experimentation,
falsification/validation, and replication.”).
¶ 47 Here, Defendant has failed to show the trial court did not act and rule within
the allowable scope of its discretion. The trial court first applied the factors outlined
in Daubert when determining whether Jones was qualified as an expert, focusing on
the absence of reliable principles and methods.
THE COURT: Okay. I think we’re here just simply – I
have not really – my question was what studies did she rely
on because one of the – you know, three criteria under
Daubert is the underlying scientific theory must be valid,
the technique applying the theory must be valid, and the
technique must have been properly applied upon the
occasion in question. . . . I was trying to understand what
scientific theories was she relying upon in making these
conclusions about the lack of physical trauma is
inconsistent with a report of a 15-year-old being statutorily
raped. And that’s – that is the – I was simply asking what
scientific data she was relying on.
¶ 48 The trial court also contemplated how to balance Jones’ lack of credentials and
training with Defendant’s right to present a defense.
THE COURT: All right. This would put the Court in
somewhat of a dilemma because, clearly, I have a
STATE V. HAWKINS
2022-NCCOA-744
Opinion of the Court
gatekeeping function under Rule 702 of the Rules of
Evidence to exclude unqualified expert testimony, and I’ll
candidly say much of what I heard falls into that category.
What I am balancing that against – and normally that’s a
discretionary call on my part[,] and I would simply exercise
my discretion and make that ruling.
What I’m balancing here is there is a constitutional right
of the defendant to present a defense, and that’s the
challenge that I have here is that, in spite of my – in spite
of what I’ve heard regarding the scientific basis or
application of that scientific theory to this case, there is a
higher burden on making a decision here. What I am – and
there’s no doubt that Ms. Jones has extensive experience
as a nurse-practitioner, a registered nurse, as an
administrator in the health field. And certainly not
diminishing that, but this case relates to sexual assault
examinations in 2019, and that is where the expertise
needs to be.
I would permit two opinions. Well, one, yes, I agree with
the State that she is qualified to describe female anatomy.
The second thing that I would allow her to testify to – and
this is a very narrow opinion that she may render. She may
tell the jury, if she so believes, that there are – there is –
are no findings of physical trauma in the medical records
from the examination of the alleged victim in this case.
However, she cannot link that opinion to any conjecture as
to whether a sexual assault occurred because she does not
have a scientific basis for that linkage.
¶ 49 Defendant has failed to demonstrate anywhere in the record that the trial
court was not correctly analyzing and exercising its discretion to answer the
preliminary question of whether Jones was qualified to testify as an expert witness,
and to determine the allowable range and scope of her testimony. Goode, 341 N.C. at
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Opinion of the Court
527, 461 S.E.2d at 639. Defendant’s argument is without merit.
IV. Conclusion
¶ 50 Defendant has failed to show merit or prejudice in his petition for writ of
certiorari. Defendant’s explanations of his jurisdictional and procedural defects, in
the exercise of our discretion, do not warrant this Court’s issuance of the writ without
a showing of merit or that prejudicial error was probably committed by the trial court.
Ricks, ¶ 6, 378 N.C. at 741, 862 S.E.2d at 839 (citing Grundler, 251 N.C. at 189, 111
S.E.2d at 9).
¶ 51 Defendant has failed to demonstrate anything tending to show the trial court
abused its discretion by limiting the expert opinion testimony of Jones. Although
Defendant was allowed to call Jones to testify, he failed to call and preserve her
testimony or to make a voir dire proffer of what scientific evidence her testimony
would have relied on. Defendant has failed to show he did not receive a fair trial, free
from prejudicial errors he preserved and argued on appeal.
¶ 52 Defendant’s petition is denied, and the appeal is dismissed. It is so ordered.
DISMISSED
¶ Judges ZACHARY and HAMPSON CONCUR | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483803/ | Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-22-00636-CR
EX PARTE Stephen Wayne RICHARDSON
From the 399th Judicial District Court, Bexar County, Texas
Trial Court No. 2010-CR-10629
Honorable Juanita A. Vasquez-Gardner, Judge Presiding
PER CURIAM
Sitting: Beth Watkins, Justice
Liza A. Rodriguez, Justice
Lori I. Valenzuela, Justice
Delivered and Filed: November 9, 2022
DISMISSED FOR WANT OF JURISDICTION
On June 11, 2012, appellant Stephen Wayne Richardson was convicted of manslaughter, a
second-degree felony. See TEX. PEN. CODE ANN. § 19.04; Richardson v. State, No. 04-12-00379-
CV, 2013 WL 5653400, at *1 (Tex. App.—San Antonio Oct. 16, 2013, no pet.) (mem. op., not
designated for publication). Appellant timely appealed the trial court’s judgment, and we affirmed
his conviction in 2013. See Richardson, 2013 WL 5653400, at *1–3. Appellant’s conviction is
final. See In re Richardson, No. 04-22-00065-CR, 2022 WL 465405, at *1 (Tex. App.—San
Antonio Feb. 16, 2022, orig. proceeding) (mem. op., not designated for publication).
On September 26, 2022, appellant filed a pro se “Motion for Appeal” that appears to
challenge “the State’s response to Applicant’s[/]Relator’s Petition for Applicant’s for Habeas
Corpus (No Indictment & No 180 day Trial).” The clerk’s record, which was filed on October 4,
04-22-00636-CR
2022, contains the judgment of conviction signed on June 11, 2012, but it does not contain any
other judgments. The record also does not contain a document entitled “Applicant’s[/]Relator’s
Petition for Applicant’s for Habeas Corpus (No Indictment & No 180 day Trial)” or any response
to or ruling on such a document.
In general, we have jurisdiction to consider an appeal in a criminal case only when the trial
court has signed a judgment of conviction or other appealable order. See TEX. R. APP. P. 25.2(a)(2);
Apolinar v. State, 820 S.W.2d 792, 794 (Tex. Crim. App. 1991). A defendant’s notice of appeal
must be filed within thirty days after an appealable order has been signed when a motion for new
trial has not been filed, or within ninety days if a motion for new trial has been filed. TEX. R. APP.
P. 26.2. Additionally, under the exclusive procedure outlined in article 11.07, only the convicting
trial court and the Texas Court of Criminal Appeals have jurisdiction to review the merits of a
post-conviction habeas petition; there is no role for the intermediate courts of appeals in the
statutory scheme. TEX. CODE CRIM. PROC. ANN. art. 11.07, § 5 (providing “[a]fter conviction the
procedure outlined in this Act shall be exclusive and any other proceeding shall be void and of no
force and effect in discharging the prisoner”). Only the Texas Court of Criminal Appeals has
jurisdiction to grant post-conviction release from confinement for persons with a felony
conviction. TEX. CODE CRIM. PROC. ANN. art. 11.07, § 3; Hoang v. State, 872 S.W.2d 694, 697
(Tex. Crim. App. 1993); In re Stone, 26 S.W.3d 568, 569 (Tex. App.—Waco 2000, orig.
proceeding). The intermediate courts of appeals have no jurisdiction over post-conviction writs of
habeas corpus in felony cases. Bd. of Pardons & Paroles ex rel. Keene v. Court of Appeals for the
Eighth District, 910 S.W.2d 481, 483 (Tex. Crim. App. 1995) (orig. proceeding); see In re
Coronado, 980 S.W.2d 691, 692 (Tex. App.—San Antonio 1998, orig. proceeding); Ex parte Ngo,
No. 02-16-00425-CR, 2016 WL 7405836, at *1 (Tex. App.—Fort Worth Dec. 22, 2016) (mem.
op., not designated for publication) (appeal dismissed for lack of jurisdiction).
-2-
04-22-00636-CR
On October 6, 2022, we issued an order explaining that the clerk’s record did not appear
to contain an appealable order for which appellant may timely file a notice of appeal in this court.
We therefore ordered appellant to file a response showing why this appeal should not be dismissed
for want of jurisdiction by November 7, 2022. In our order, we stated that if appellant failed to
satisfactorily respond within the time provided, we would dismiss the appeal for want of
jurisdiction. See TEX. R. APP. P. 42.3(c).
On October 28, 2022, appellant’s appointed counsel filed a letter stating that he had
reviewed the record and “cannot locate any appealable order for which Appellant may timely file
a notice of appeal in this court.” We therefore dismiss this appeal for want of jurisdiction.
PER CURIAM
DO NOT PUBLISH
-3- | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491400/ | MEMORANDUM OF OPINION AND ORDER
RANDOLPH BAXTER, Bankruptcy Judge.
The Plaintiff, Cowen & Company (Cowan) filed this adversary proceeding to have the Court determine the discharge-ability of certain debts under provisions of § 523(a)(2)(A), (a)(4), and (a)(6) of the Bankruptcy Code [11 U.S.C. 523(a)(2)(A), (a)(4) and (a)(6)]. Following a trial proceeding and a review of the record, generally, the subject debts are hereby determined to be nondischargeable.
The relevant facts are generally not in dispute and the foregoing constitutes the Court’s findings and conclusions. Cowan is a national securities brokerage firm with local offices in Cleveland, Ohio. The Defendant-Debtor Louis Zagar (Debtor) was employed as an account salesman by Co-wan’s Cleveland office from 1983 until his resignation in 1989. Following his resignation from Cowan in 1989, the Debtor revealed to Cowan officials that he had caused a series of unauthorized transactions in Cowan customer accounts between October 1987 and early 1989. (Liebowitz, Direct Exam.). This revelation was addressed through the testimony of Lawrence Liebowitz, Cowan’s general counsel. The testimony of Liebowitz was both credible and was unrefuted. He testified, unequivocally, that the Debtor told him that he (the Debtor) issued letters of transfer authorizations regarding certain customer accounts. Regarding the letters of authorization exhibited, (Ex. 13), Liebowitz testified that the Debtor told him that he forged the signatures on those letters of authorization. Raymond J. Timko, a Co-wan customer and father-in-law of the Debtor, was in attendance at a meeting in Liebowitz’s office when the Debtor acknowledged these forgeries. This testimony was unrefuted.
Customer accounts which are the subject of this action involve the Ball Chemical Company account, the Polk account, the Timko accounts and the Satallos account. Regarding the Ball and Timko accounts, the unrefuted testimony of Liebowitz revealed that the Debtor admitted taking about $25,000.00 from the Ball/Timko accounts and that Timko, trustee of the Ball Chemical account and owner of his personal account, did not authorize the transactions in Exhibit 13 prior to the trades being made. Regarding the Sattalos account, Liebowitz again testified that the Debtor admitted that certain transactions (See, Ex. 13) made by the Debtor on their account were unauthorized. On the Polk account, Liebowitz testified that the Debtor told him during the meeting in his office on March 22, 1989 that he handled the Polk account and that he forged documents pertaining to this account and had transferred money from the Polk account for his personal use through forged letters of authorization. (Liebowitz, Id.). Again, this testimony of Liebowitz was unrefuted. During the March 22,1989 meeting with Liebowitz, the Debtor implicated no other person regarding his commission of the subject unauthorized activities.
Following his March 22, 1989 meeting with the Debtor, Liebowitz reviewed the subject accounts and related documents including copies of certain checks drawn on those accounts, in addition to the letters of authorization (LOA’s). (See Exs. 13 and 21). Liebowitz testified that those checks and LOA’s were examined and supported the unauthorized activities which were described to him and committed by the Debt- or. The checks were written either to the Debtor’s personal bank account or to certain of the Debtor’s customers. Liebowitz concluded that the Debtor had used the Ball/Timko accounts as his personal bank. (Liebowitz, Direct Exam.).
*158The Debtor, personally, was not in attendance during any of the trial proceedings. Upon inquiry, the Court was informed by the Debtor’s counsel that said counsel had instructed the Debtor not to appear during the trial proceeding. No other explanation was offered regarding the Debtor’s absence from the trial. As a result, the Debtor has presented no evidence to refute the testimony of Liebowitz which clearly stated that the Debtor admitted forging the LOA’s in Exhibit 13 and otherwise engaged in unauthorized conduct respecting the subject accounts. Raymond J. Timko, who also was in attendance at the March 22, 1989 meeting in Liebowitz’s office where the Debtor reportedly acknowledged the forged authorizations, did not refute the testimony of Liebowitz relative to the forgeries and unauthorized acts. By written stipulation, the parties hereto have stipulated that a nondischargeable judgment, pursuant to § 523 of the Code is to be entered against the Debtor regarding the criminal charges on which he entered a guilty plea in the amount of $2,886.88 in the state court.
Prepetition, the claims of the affected account holders against Cowan and others were submitted to arbitration. During the course of those proceedings, Cowan settled the Ball/Timko claims in an amount of $109,500.00 (Exs. 20 and 24(A)). Cowan settled the Polk claim for $20,000.00 (Exs. 20) and obtained a release (Ex. 12). Following arbitration proceedings, Cowan was unsuccessful on its claim against the Satal-los but prevailed on its third party counterclaim against the Debtor (Ex. 24-A) Cowan paid $7,450.05 to the Sattalos. On that award to Cowan, the Debtor has not paid. (Liebowitz, Direct).
During the Debtor’s case-in-chief, Raymond J. Timko testified on behalf of the Debtor. His testimony was credible, generally. Mr. Timko is the owner of Ball Chemical Company (Ball Chemical) and two other companies. He is the Debtor’s father-in-law and has known the Debtor for eight years. Regarding the present matter, Timko testified that he had been a customer of Cowan since 1985, opening a personal account, as well as a trustee account on behalf of Ball Chemical. Other family members also had accounts with Cowan. The Debtor was his account broker at Cowan. In late 1986, he was informed by Cowan that one Martin Winnick would, from that point in time, be primarily responsible for handling his account and that the Debtor would assist Mr. Winnick. Prior to this change, he testified that he had experienced no problems with his account at Cowan. In March of 1989, the Debtor informed him that certain problems existed regarding his accounts. In pursuance of that concern, he travelled to New York where he met with Liebowitz, the Debtor, and other Cowan officials. The purpose for his visit was to see what could be done to rectify the problems with his accounts. (Timko, Direct Exam.). His testimony further revealed that he later learned that unauthorized transactions had been made on his accounts.
Upon cross-examination, Mr. Timko acknowledged that the Statement of Account for Ball Chemical (Ex. 1T4), with a statement period of January 1, 1987 through January 30, 1987, revealed that the Debtor was listed as the account executive for that account. The same was true for other Ball Chemical statements of account demonstrated as Exs. 14, U, W, X, Y, Z, AA, BB, CC, DD, EE, FF and GG. Win-nick was listed as the account executive on Ex. 14 HH for the period January 1, 1988 through January 29, 1988. With that demonstration, Mr. Timko testified that he was unaware that the Debtor had handled his accounts in 1987. He further testified that, on his personal account, he mostly dealt with the Debtor. On the Ball Chemical account, he was the trustee for the Company’s pension and benefit plan account, but he did not read the documents regarding that account due to his inability to understand the documents. In order to prevail in this matter, the burden of proof is upon the party contesting* the discharge, and the burden must be carried by a preponderance of the evidence. In re Grogan, — U.S.-, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). Cowan, as the complainant is obliged to meet that burden.
*159In this matter, nondischargeability is sought on the accounts paid to account holders by Cowan due to the alleged unauthorized activities of the Debtor. Reportedly, those amounts paid to the subject account holders was in excess of $130,-000.00. Under § 523(a)(2)(A) of the Bankruptcy Code the discharge of a debt is to be denied under § 727 where the debt pertains to money, property or services, etc., to the extent that it was obtained by false pretenses, a false representation, or actual fraud. (See 11 U.S.C. 523(a)(2)(A)). At bar, the testimony is unrefuted that the Debtor forged LOA’s (Ex. 13) to cause an unauthorized transfer of customer account funds for unauthorized uses. As a direct result of such improper conduct, Cowan paid in excess of $130,000.00 on customer claims. The Debtor’s conduct in this regard, by his admitted forgery of the exhibited LOA’s not only was a false representation but, also, constituted a fraudulent act. In re Cerar, 97 B.R. 447 (C.D.Ill.1989); In re Rudicil, 123 B.R. 778 (Bankr.N.D.Ohio 1991). Accordingly, the amounts paid by Cowan to its customers on account of the Debtor’s misconduct is hereby determined to be nondischargeable under § 523(a)(2)(A).
Cowan also seeks a ruling of nondis-chargeability under § 523(a)(4) of the Code. Thereunder, § 523(a)(4) precludes a discharge of a debt which was created as a result of fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny. In the present matter, the Debt- or, while in the employ of Cowan, worked as an account salesman. In that capacity, he accepted account orders for his customers on behalf of Cowan and processed the investments and other transfers on the accounts. As such, he served in a fiduciary capacity respecting the funds he received from his customers. As determined above, the transactions addressed under Ex. 13 were unauthorized, as admitted by the Debtor to Liebowitz. That reported admission was unrefuted. Further, the Debtor admitted to Liebowitz that he forged the signatures on those documents. Again, that testimony was unrefuted. Accordingly, the payments made by Cowan on account of that unlawful activity by the Debt- or are hereby determined to be nondis-chargeable. Such activity was fraudulent, and to the extent that certain of the checks under Ex. 21 indicated payments to National City Bank and were subsequently cashed by the Debtor for his personal use, such constituted embezzlement. See, Matter of Michel, 74 B.R. 80 (Bankr.N.D.Ohio 1985), aff'd., 74 B.R. 88 (N.D.Ohio 1986).
Lastly, Cowan seeks a nondis-chargeability ruling based upon provisions of § 523(a)(6) of the Code. Therein, a debt is nondischargeable where it was created as a result of willful and malicious injury by the debtor to another entity or to the property of another entity. Clearly, the Debtor’s conduct in this regard was willful. He admitted the acts complained of and the reported admission was not controverted. The Plaintiff, Cowan, sufficiently established a prima facie case under each allegation under § 523, whereupon the burden of going forward with sufficient evidence to refute the changes shifted to the Debtor. In re Decker, 36 B.R. 452 (D.C.N.D.1983); In re Gans, 75 B.R. 474 (Bankr.S.D.N.Y.1987). No evidence demonstrated by the Debtor adequately met that shifted burden. Accordingly, the Debtor’s conduct was willful and malicious as he intended the actions committed. Discharge of the amounts paid by Cowan on account of Debtor’s conduct is denied under § 523(a)(6).
Accordingly, judgment is hereby rendered for the Plaintiff, Cowan, in the amount of $136,950.35, reflecting the amounts Cowan paid on the Ball/Timko accounts, the Polk account, and the Sattal-los account. That amount is nondischargeable.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491401/ | MEMORANDUM OPINION DENYING APPROVAL OF FIRST AMENDED DISCLOSURE STATEMENT
BARBARA J. SELLERS, Bankruptcy Judge.
Before the Court is the requested approval of a first amended disclosure statement (“Disclosure Statement”) filed by Chapter 11 debtor Georgetown South Apartments of Tuscarawas County, II, Ltd. (“Georgetown”). Although no parties filed objections to the adequacy of this Disclosure Statement, the Court, through its independent review, notes certain problems.
The Court has jurisdiction in this matter under 28 U.S.C. § 1334(b) and the General Order of Reference entered in this district. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) which this bankruptcy judge may hear and determine.
Georgetown is a syndicated limited partnership with twenty limited partners. It is one of approximately 300 debtors in Chapter 11 before this Court in which Cardinal Industries, Inc. or one of its affiliates is a general partner (“Cardinal Partnership”). Because of the large number of disclosure statements filed in these related Cardinal Partnership cases, this Disclosure Statement is an appropriate one in which to address several recurring problems.
The syndicated Cardinal Partnership plans and disclosure statements the Court has reviewed generally call for the partnership to seek additional capital contributions from its existing limited partners. In this regard, Georgetown will seek an additional contribution from its limited partners in the amount of $2,000 for each unit the limited partner now holds. Georgetown has also added a provision to its plan which permits it, under certain circumstances, to offer new limited partnership units to unrelated third party investors.
In its disclosure relating to this potential new offering, Georgetown has added the following language to its Disclosure Statement:
(a) The Debtor shall not offer to sell or solicit offers to buy Class A Units unless such offers to sell and solicitations of offers to buy Class A Units shall be made pursuant to the Securities Act of 1933 (15 U.S.C. Section 77(a), et seq.) (the “Securities Act”), the rules and regulations promulgated thereunder and any applicable State securities laws;
(b) Unless the Court approves the Disclosure Statement, the Debtor shall not use the Disclosure Statement or any other materials to sell Class A Units and to solicit offers to buy Class A Units; the Debtor may supplement the copies of the Disclosure Statement provided to potential New Investors with the materials that are attached to the Disclosure Statement as Exhibit “H”; the Debtor may not use any materials other than those described in this paragraph to sell Class A Units or to solicit offers to buy Class A Units;
(c) The Debtor may permit any potential New Investor to conduct his own due diligence review of the Property and the Debtor’s books and records;
(d) The agreement of sale with a New Investor (i) must include the representations by the Debtor that (A) the sale of the Class A Units is exempt from the registration and prospectus delivery requirements of the Securities Act, (B) no form of general solicitation or general advertising was used by the Debtor in connection with each offer or sale of Class A Units and (C) no fact is known to the Debtor that has not been disclosed in the Disclosure Statement, as supplemented, that materially adversely affects, or that the Debtor can reasonably foresee shall materially affect, the Property, business, prospects, operations, earnings, assets, liabilities or condition (financial or otherwise) of the Debtor and (ii) must *162include the representation of the New Investor that (A) such New Investor is an “accredited investor” as defined in Rule 501(a) of the regulations promulgated under the Securities Act and (B) such New Investor is purchasing the Class A Units for his own account and with no intention of distributing or reselling such Class A Units in any transaction that would be in violation of the securities laws of the United States of America or of any State thereof;
(e) The price for any Class A Unit sold to a New Investor under the Plan will be Two Thousand Dollars ($2,000.00) per unit, and any sale to a New Investor shall be conditioned upon confirmation of the Plan;
(f) The expenses incurred in connection with a possible sale of Class A Units to New Investors shall be borne by the Debtor; and
(g) The proceeds of any sale of a Class A Unit to a New Investor will be received by the Debtor as a new capital contribution in respect of the Class A Unit sold.
Amended Disclosure Statement at pages 41-42. (Exhibit “H” is titled “Private Placement Memorandum.”)
The Court finds that the majority of this language is inappropriate in the context of this Chapter 11 debtor’s disclosure statement. Indeed, much of the language appears to be a thinly disguised effort to have this Court approve solicitation materials to be offered to investors if existing limited partners do not contribute in amounts sufficient to recapitalize the debt- or. The fact that such additional capital will be sought will apparently not be known until the date of the hearing on confirmation. Therefore, the new investors to be sought will not be voting on the plan and the amount or fact of their contributions cannot be part of what other parties will consider when deciding whether to vote for or against the plan. Consequently, the details of that solicitation are also irrelevant.
A disclosure statement should “contain all pertinent information bearing on the success or failure of the proposals in the plan of reorganization.” In re Cardinal Congregate I, an Ohio Limited Partnership, 121 B.R. 760, 765 (Bankr.S.D.Ohio 1990). The correlative of this is that non-pertinent information should not be included to avoid potential confusion. In re Waterville Timeshare Group, 67 B.R. 412, 413 (Bankr.D.N.H.1986).
This court agrees with the following succinct statement:
A disclosure statement must be meaningful to be understood, and it must be understood to be effective. Thus, what lawyers regard as useful information based upon their experience might be meaningless verbiage in the hands of a “typical” investor. Accordingly, by overburdening a proponent's disclosure statement with information significant and meaningful to lawyers alone may result ultimately in reducing the disclosure statement to an overlong, incomprehensible, ineffective collection of words to those whose interests are to be served by disclosure. Thus, compounding a disclosure statement for the sake of a lawyer’s notion of completeness, or becausé some additional information might enhance one’s understanding, may not always be necessary or desirable, and the length of a document should not be the test of its effectiveness.
In re Stanley Hotel, Inc., 13 B.R. 926, 933-934 (Bankr.D.Co.1981).
If Georgetown or any other Cardinal Partnership debtor wants to offer limited partnership units to new investors after confirmation, the only information which should be in the disclosure statement is a statement that the debtor may offer those units and that in doing so it will comply with any and all applicable securities law. This Court, however, will not determine whether the language in the disclosure statement or its exhibits complies with the securities laws.
Since the solicitation of new investors will apparently be done post-confirmation, if at all, the details of such solicitation need not be treated so extensively in a *163disclosure statement. Accordingly, such language added to an already lengthy disclosure statement is superfluous and will not be approved by the Court. If the solicitation is to be done pre-confirmation because the plan’s feasibility depends upon that new capital, such investment should be in place and part of what is disclosed to parties being asked to vote on the plan. If some other sequence of events is contemplated, that should be much more explicitly stated. As the Disclosure Statement presently exists, the last two paragraphs on page 40 are inconsistent and confusing.
Georgetown’s Disclosure Statement has a further specific problem regarding the purported assumption of “Partnership Administration Contract.” The Disclosure Statement contains conflicting provisions about this contract throughout (pp. 13, 36 and 33). Georgetown’s second amended disclosure statement should clarify these provisions and make them consistent.
CONCLUSION
Based upon the foregoing, approval of the Disclosure Statement, as proposed, is denied. Georgetown is given twenty (20) days from the entry of this Memorandum Opinion to file a second amended disclosure statement which supplements the current statement to accommodate the Court’s concerns. If such second amended disclosure statement is adequate, no further hearings will be necessary.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491402/ | ORDER DENYING MOTION FOR RECONSIDERATION
LEIF M. CLARK, Bankruptcy Judge.
CAME ON for consideration the Chapter 7 Trustee’s Motion for Reconsideration, wherein this court is urged to reconsider its decision of January 14, 1991, 124 BR 239, overruling the Trustee’s objection to the Debtors’ claim of exemption in the proceeds of an uninsured/underinsured motorists insurance claim.
The Trustee raises only one issue in his motion: whether the Debtors’ claim against their own liability carrier for under-insured motorist benefits is exempt from seizure, pursuant to Article 21.22(1) of the Texas Insurance Code. The Trustee contends that because Article 21.22(1) exempts only proceeds paid by a life, health, or accident insurance company, a claim for underinsured motorist benefits necessarily falls outside the scope of the exemption. In support of this argument, the Trustee relies chiefly upon various observations regarding the structure and organization of the Insurance Code itself; some general rules of statutory construction; and In re Powers, 112 B.R. 178 (Bankr.S.D.Tex.1989), which this court distinguished in its prior opinion on the issue. Each of these points will be considered, in turn.
I. The Structure of the Texas Insur-anee Code
The Trustee maintains that because the three-volume Texas Insurance Code is divided into twenty-five separate chapters, most of which focus upon particular types of insurance companies, provisions from one chapter should not be construed with provisions from another chapter. Specifically, the Trustee asserts that Chapter 3, titled “Life, Health, and Accident Insurance,” and Chapter 5(A), titled “Motor Vehicle or Automobile Insurance,” are mutually exclusive. Moreover, since Chapter 5(A) does not specifically refer to life, health, or accident insurance, the Trustee concludes that Article 21.22(1) applies only to the life, health, or accident insurance companies regulated by Chapter 3.
The Trustee’s reliance upon the structure of the Insurance Code in his effort to delineate the scope of Article 21.-22(1) disregards several important principles, however. First, while the codification process is part of the legislature’s power to revise the laws, the primary purpose of codification is to rearrange separate statutes into a convenient, integrated system of statutory law regarding a particular subject. Carbide Int’l Ltd. v. State, 695 S.W.2d 653, 656 n. 3 (Tex.App.—Austin 1985, no writ). The codification process entrusted to the Legislative Council cannot, and does not, confer substantive meaning to a statute. See Tex.Govt.Code Ann. § 323.007(b) (Vernon 1988); see also Minton v. Perez, 783 S.W.2d 803, 805 (Tex.App.—San Antonio 1990, no writ). Furthermore, the Code Construction Act expressly provides: “The heading of a title, subtitle, chapter, subchapter, or section does not limit or expand the meaning of a statute.” Tex.Govt.Code Ann. § 311.024 (Vernon 1988). Therefore, while the headings and divisions of the Insurance Code might prove useful to the researcher seeking a particular statute, any inferences about the substantive limitations of a statute must be founded upon more than the mere placement or labeling of the provision within the Code.
*674In addition, even if the Trustee’s reliance upon the structure and headings of the Insurance Code were not misplaced, he totally ignores the heading of Chapter 21, which is called “General Provisions.” Presumably, following the Trustee’s own reasoning, a chapter setting forth general provisions would apply to all other chapters of the Code, not just to Chapter 3.
II. Statutory Construction
The Trustee further argues that certain basic rules of statutory construction, particularly the importance of ascertaining legislative intent, require reconsideration of this court’s prior decision. Again, he points to the separation of underinsured motorist coverage provisions from those pertaining to life, health, and accident insurance companies as evidence that the legislature intended Article 21.22(1) to apply only to Chapter 3 companies. Again, however, the Trustee’s analysis falls short.
Issues of statutory construction are questions of law for the court to decide. Johnson v. Fort Worth, 774 S.W.2d 653, 656 (Tex.1989). One of the most basic rules of statutory construction is that unless a statute is ambiguous, the court should find legislative intent in the plain, common meaning of the words and terms. Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 352 (Tex.1990); Cail v. Service Motors, Inc., 660 S.W.2d 814, 815 (Tex.1983). Examination of the particular wording of Article 21.22(1) proves instructive:
No money or benefits of any kind to be paid or rendered to the insured or any beneficiary under any policy of insurance issued by a life, health or accident insurance company, including mutual and fraternal insurance, or under any plan or program of annuities and benefits in use by any employer, shall be liable to execution, attachment, garnishment or other process or be seized, taken or appropriated or applied by any legal or equitable process or operation of law to pay any debt or liability of the insured or of any beneficiary, either before or after said money or benefits is or are paid or rendered, except for premiums payable on such policy or a debt of the insured secured by a pledge thereof.
Tex.Ins.Code Ann. art. 21.22(1) (Vernon Supp.1991) (emphasis added). The plain, ordinary language of the statute says that it applies to “any policy of insurance,” as long as it is issued by an “life, health or accident insurance company.” The statute does not say “any benefit paid under a life, health or accident policy.”
Of course, this “plain, ordinary meaning” rule does not apply when the legislature specifically defines a term. See Hopkins v. Spring Indep. School Dist., 736 S.W.2d 617, 619 (Tex.1987); Big H Auto Auction, Inc. v. Saenz Motors, 665 S.W.2d 756, 758 (Tex.1984). Here, as the Trustee correctly observes, the legislature has provided a statutory definition of “accident insurance company.” See Tex.Ins. Code Ann. art. 3.01(2) (Vernon 1981). The Trustee, however, fails to include the whole definition in his brief. In its entirety, Article 3.01(2) says: “An accident insurance company shall be deemed to be a corporation doing business under any charter involving the payment, of money or other thing of value, conditioned upon the injury, disablement or death of persons resulting from traveling or general accidents by land or water.” Id. (emphasis added). Thus, neither the plain, ordinary meaning of Article 21.22(1), nor the statutory definition of the phrase “accident insurance company” necessarily indicates legislative intent to exclude the proceeds of underin-sured motorist coverage.
Further credence to this conclusion is offered by the all-embracing language of the most recent amendment to Article 21.-22(1), effective September 1, 1991:
Art. 21.22. UNLIMITED EXEMPTION OF INSURANCE BENEFITS FROM SEIZURE UNDER PROCESS
Sec. 1. Notwithstanding, any provision of this code other than this article, all money or benefits of any kind, including policy proceeds and cash values, to be paid or rendered to the insured or any beneficiary under any policy of insurance issued by a life, health or accident insurance company, including mutual and fra*675ternal insurance, or under any plan or program of annuities and benefits in use by any employer shall:
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(4) be fully exempt from all demands in any bankruptcy proceeding of the insured or beneficiary.
Act approved June 15, 1991, 72nd Leg., R.S., ch. 609, § 1, 1991 Tex.Sess.Law Serv. 2218 (Vernon) (to be codified as an amendment to Tex.Ins.Code Ann. art. 21.22(1)).
III. In re Powers
In his brief, the Trustee insists that In re Powers, 112 B.R. 178 (Bankr.S.D.Tex.1989) supports his argument that Article 21.22(1) does not apply to underinsured motorist coverage. In its January 1991 decision, this court observed that the holding in the Powers case does not conflict with the ruling on the present matter. While the Trustee seizes upon the language of this court’s Footnote # 4, wherein it is acknowledged that the scope of Article 21.22(1) is “restricted to life, health, and accident insurance companies,” he misses the thrust of the argument. The distinguishing issue of both the Powers case and the import of this court’s footnote turns on the contractual and beneficiary elements of life, health, and accident insurance. These elements inhere in the statutory definitions of “insured” and “policyholder” in Article 3.01(8) of the Insurance Code, cited by the Powers court. For purposes of life, health, and accident insurance, the “insured” or “policyholder” is “the person on whose life a policy of insurance is effected.” Tex.Ins. Code Ann. art. 3.01(8) (Vernon 1981); Powers, 112 B.R. at 181. In Powers, the policyholder was a corporation, not a living person. See Powers, 112 B.R. at 181. Furthermore, in Powers, the insurance policy in question did not contract to insure any particular named person or persons, nor was the debtor the beneficiary of the policy at issue, as the term “beneficiary” is defined in Article 3.01(9) of the Insurance Code. See id. By contrast, in the instant case, the Debtors/policyholders are living persons, “on whose li[ves] a policy of insurance is effected,” and they are also the beneficiaries of the policy at issue. While the court in Powers ruled appropriately, given the facts of that case, the Powers case is inapposite to the issue raised by the Trustee in his Motion for Reconsideration and is, therefore, unpersuasive in determining the matter at hand.
In light of the foregoing discussion, the Chapter 7 Trustee’s Motion for Reconsideration is hereby DENIED.
SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8491403/ | MEMORANDUM
JOHN C. MINAHAN, Bankruptcy Judge.
THIS MATTER comes before the court upon Debtors’ Notice of Lien Avoidance (Fil. # 20). Geo Virus, Inc. and Superior-Deshler Co. have filed Objections to Lien Avoidance (Fil. # 37 and Fil. # 38). Parties have filed a stipulation of facts (Fil. # 64).
Debtors seek to avoid liens in approximately 2,400 bushels of corn and 520 bushels of wheat under 11 U.S.C. § 522(f). The debtors claim the corn as exempt under Neb.Rev.Stat. § 25-1556 (1989) as provisions for debtors and their family necessary for six months support. Debtors claim the wheat as exempt under Neb.Rev. Stat. § 25-1552 (1989), the in lieu of homestead exemption. Debtors assert that the creditors’ liens impair these exemptions and that the liens may be avoided under § 522(f). The creditors assert that the wheat and corn are not exempt under Nebraska law and that the liens are not avoidable under § 522(f). The Objections to Lien Avoidance are sustained.
The first question is whether the exemption , under Neb.Rev.Stat. § 25-1556, for “provisions necessary for six months,” permits an exemption for growing crops. The issue of whether the § 25-1556 exemption for provisions necessary for six months includes growing crops was decided by the District Court in First National Bank of Wahoo v. Plihal, 136 B.R. 810 (D.Neb. June 30, 1989). For the reasons stated in First National Bank of Wahoo v. Plihal, the debtors are not entitled to an exemption for the corn under Neb.Rev. Stat. § 25-1556 as provisions necessary for six months support. Since the corn cannot be exempt under § 25-1556, it follows, that the debtors cannot avoid the lien in the corn under 11 U.S.C. § 522(f) because the lien does not impair an exemption. Furthermore, the lien in the corn is enforceable according to its terms.
The next issue is whether the debtors can avoid the lien in the wheat under 11 U.S.C. § 522(f). The in lieu of homestead exemption under Neb.Rev.Stat. § 25-1552 (1989) may apply to any personal property of the debtors. Because the wheat is personal property it may be claimed as exempt under this provision. The fact that the wheat may be exempt under Nebraska law does not end our inquiry. The question remains as to whether the lien in the wheat may be avoided under 11 U.S.C. § 522(f).
The lien on the wheat may be avoided only if the requirements of 11 U.S.C. § 522(f)(2) are satisfied. Under that section a nonpossessory nonpurchase-mon-ey security interest in crops that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor may be avoided. Debtors are engaged in the business of farming. Since, there has been no suggestion that the wheat is primarily for the personal family or household use of the debtors the conditions of § 522(f) are not satisfied. In In re Simmons, 86 B.R. 160 (Bankr.S.D.Iowa 1988), the court allowed the debtors to avoid a lien in cattle under § 522(f) only to the extent the debtors were able to show that the family would actually consume the meat within one year. Id. at 164. See also In re Thompson, 750 F.2d 628 (8th Cir.1984), holding that a nonpurchase-money security interest in pigs is not avoidable. Debtors have not shown that they will consume any part of the 520 bushels of wheat *815within one year or otherwise. Accordingly, I conclude that even though the 520 bushels of wheat are exempt under Nebraska law, the lien is not avoidable because § 522(f) only applies to items which will actually be used or consumed in kind. A debtor may not avoid a lien under § 522(f) in items that the debtor intends to sell, even if the proceeds are primarily for the personal, family, or household use of the debtor. Similarly, if the 2400 bushels of corn had been exempt under Nebraska law, the lien would not be avoidable under § 522(f). Since the lien in the wheat is not avoidable, the lien is enforceable. A consensual lien may be enforced against exempt property.
The creditors have also objected to lien avoidance on the grounds that their liens are purchase money liens that cannot be avoided by 11 U.S.C. § 522(f). Because the objection to lien avoidance is sustained on other grounds, it is unnecessary to consider this issue.
A separate order in conformity herewith shall be issued contemporaneously with this journal entry. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483770/ | Fourth Court of Appeals
San Antonio, Texas
November 14, 2022
No. 04-21-00115-CV
UNIVERSITY OF THE INCARNATE WORD,
Appellant
v.
Valerie REDUS, Individually, and Robert M. Redus, Individually, and as Administrator of the
Estate of Robert Cameron Redus,
Appellees
From the 150th Judicial District Court, Bexar County, Texas
Trial Court No. 2014-CI-07249
Honorable Cathleen M. Stryker, Judge Presiding
ORDER
Sitting: Rebeca C. Martinez, Chief Justice
Patricia O. Alvarez, Justice
Liza A. Rodriguez, Justice
This court issued its opinion and judgment in this appeal on July 29, 2022. The parties
did not file a motion for rehearing or a motion for en banc reconsideration. Therefore, this
court’s plenary power over its judgment expired on September 27, 2022. See TEX. R. APP. P.
19.1(a) (“A court of appeals’ plenary power over its judgment expires: (a) 60 days after
judgment if no timely filed motion for rehearing or en banc reconsideration, or timely filed
motion to extend time to file such a motion, is then pending . . . .”). On November 7, 2022, after
this court’s plenary power expired, appellant filed a motion to dismiss this appeal. Appellant’s
motion is DENIED FOR LACK OF JURISDICTION.
We DIRECT the clerk of this court to immediately issue the mandate in this appeal. See
TEX. R. APP. P. 18.1(a).
_________________________________
Liza A. Rodriguez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 14th day of November, 2022.
_________________________________
Michael A. Cruz,
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483771/ | Fourth Court of Appeals
San Antonio, Texas
November 14, 2022
No. 04-22-00682-CR
Michael David KNOVICKA,
Appellant
v.
The STATE of Texas,
Appellee
From the 198th Judicial District Court, Bandera County, Texas
Trial Court No. CR-XX-XXXXXXX
Honorable M. Rex Emerson, Judge Presiding
ORDER
On October 28, 2022, we ordered appellant to provide written proof to this court by
November 7, 2022 indicating he properly requested the court reporter to prepare the reporter’s
record. See TEX. R. APP. P. 34.6(b)(1). On November 1, 2022, appellant filed a motion
explaining he requested the record. We construe appellant’s motion as a sufficient response, and
we order the court reporter to file the reporter’s record by December 14, 2022.
_________________________________
Luz Elena D. Chapa, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 14th day of November, 2022.
___________________________________
Michael A. Cruz,
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483772/ | Fourth Court of Appeals
San Antonio, Texas
November 14, 2022
No. 04-22-00364-CR
Kenneth WILLIAMS,
Appellant
v.
The STATE of Texas,
Appellee
From the 187th Judicial District Court, Bexar County, Texas
Trial Court No. 2022CR4751
Honorable Stephanie R. Boyd, Judge Presiding
ORDER
Appellant’s brief was originally due by September 7, 2022, and on September 6, 2022,
appellant requested a thirty-day extension of time. We granted appellant’s motion and ordered
his brief due by October 7, 2022. On October 6, 2022, appellant filed a second motion
requesting an additional thirty-day extension of time. We granted appellant’s motion, ordered
his brief due by November 7, 2022, and advised counsel further extensions of time would be
disfavored absent extraordinary circumstances. On November 7, 2022, appellant filed a third
motion requesting a thirty-day extension of time. After consideration, we grant the motion and
order appellant to file his brief by December 7, 2022. Counsel is advised if he fails to file a
brief by the date ordered, we will abate this appeal and remand the case to the trial court for a
hearing to determine whether appellant or counsel has abandoned the appeal. Counsel may
further be ordered to appear before this court to show cause why he should not be held in
contempt or otherwise sanctioned for failing to comply with this court’s order.
_________________________________
Luz Elena D. Chapa, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 14th day of November, 2022.
_________________________________
Michael A. Cruz,
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483867/ | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA :
:
v. : Criminal Action No.: 22-110 (RC)
:
MATTHEW THOMAS KROL, : Re Document Nos.: 24, 25
:
Defendant. :
MEMORANDUM OPINION
DENYING DEFENDANT’S MOTIONS TO REVOKE DETENTION ORDER AND REOPEN DETENTION
HEARING
I. INTRODUCTION
Defendant Matthew Thomas Krol was one of the hundreds of people who stormed the
Capitol to stop Congress from certifying the results of the 2020 presidential election. On January
6, 2021, Krol allegedly pushed through to the front of the crowd fighting with law enforcement
officers near the steps of the Capitol, wrested a police baton away from a Metropolitan Police
Department officer, then assaulted at least two other police officers. Krol was arrested on
February 22, 2022. Following a detention hearing before Magistrate Judge Curtis Ivy, Jr. of the
U.S. District Court for the Eastern District of Michigan, Krol was ordered detained pending trial
and transferred to his current facility, the Central Virginia Regional Jail in Orange, Virginia.
Krol now asks the Court to revoke that detention order and reopen the detention hearing. For the
reasons described below, the Court will deny the motions.
II. BACKGROUND 1
On January 6, 2021, Krol participated in the riot at the U.S. Capitol, assaulting at least
three law enforcement officers. Mot. Supp. Pretrial Det. at 1, 8, 24, ECF No. 26-1. Multiple
videos from January 6 show that, while on the Capitol grounds, Krol wore blue jeans, a dark
jacket, and a light red hood pulled over a baseball cap; he also carried a green backpack that had
a large blue flag draped across the front and a small American flag affixed to the backpack
behind Krol’s right shoulder. Id. at 9; Gov’t Ex. 3 at 00:01. 2
As rioters began fighting with law enforcement officers attempting to maintain the police
line near the steps of the Capitol building, Krol pushed toward the front of the crowd. See Gov’t
Ex. 1 at 00:00–00:33. Although Krol threw a water bottle toward the officers as he made his
way through the crowd, the bottle appeared to instead hit another rioter. Id. at 00:26–00:27.
Upon arriving at the front of the crowd, Krol grabbed Metropolitan Police Department (“MPD”)
Officer D.P. and swung Officer D.P. around as they struggled over Officer D.P.’s police baton.
Id. at 00:36–00:45. After wresting Officer D.P.’s baton away from him, Krol held the baton up
towards the crowd. Id. at 00:46. Krol then turned around and struck another officer, MPD
Officer J.M., using that baton. Mot. Supp. Pretrial Det. at 11. In addition, U.S. Capitol Police
Sergeant A.G. subsequently identified an individual, later identified as Krol, as having struck
Sergeant A.G. with a baton, injuring Sergeant A.G.’s hand. Id. at 19.
A tipster who knew Krol personally subsequently identified Krol to the Federal Bureau of
Investigation (“FBI”) based on the FBI’s Most Wanted images from January 6. Id. at 5–6.
1
This background is drawn from the Government’s charging instruments, the parties’
briefing, and the exhibits tendered to the Court in support of each party’s filings. It does not
represent the Court’s findings of fact on the merits of the case.
2
Exhibits labeled “Gov’t Ex. __” are located in an electronic folder that the Government
shared with the Court.
2
According to public sources, Krol has served in a leadership position with the Genesee County
Volunteer Militia. Id. at 20. During an interview with U.S. Customs and Border Protection
(“CBP”) in October 2021, when asked if he was an activist in Michigan, Krol “admitted he
attends rallies, and having strapped an AR on his shoulder to go guard the recruiting offices in
Chattanooga, TN.” Def.’s Mots. to Revoke Det. Order and Reopen Det. Hr’g (“Def.’s Mots.”)
Ex. R at 2, ECF No. 24. 3 Krol further stated during the CBP interview that “there is a lying
fucking thief in the Office, and he needs to go,” and “the bitch in Michigan, the governor, she
needs to be arrested.” Id.
On February 22, 2022, Krol was arrested. Mot. Supp. Pretrial Det. at 24. During an
interview with the FBI, Krol stated that, on January 6, he had walked—including walking “over
a . . . wall”—from former President Trump’s speech to the Capitol. Id.; Def.’s Mots. Ex. Q (FBI
Interview, Part 2) at 27:55–27:59. Krol also admitted during the interview that he had associated
with individuals charged in the alleged plot to kidnap the Governor of Michigan, Gretchen
Whitmer. Mot. Supp. Pretrial Det. at 24. Krol has been charged with: (1) civil disorder, in
violation of 18 U.S.C. § 231(a)(3); (2) assaulting, resisting, or impeding certain officers, in
violation of 18 U.S.C. § 111(a)(1); (3) assaulting, resisting, or impeding certain officers using a
dangerous weapon, in violation of 18 U.S.C. § 111(a)(1) and (b); (4) robbery, in violation of 18
U.S.C. § 2111; (5) entering and remaining in a restricted building or grounds with a deadly or
dangerous weapon, in violation of 18 U.S.C. § 1752(a)(1) and (b)(1)(A); (6) engaging in physical
violence in a restricted building or grounds with a dangerous weapon, in violation of 18 U.S.C. §
1752(a)(4) and (b)(1)(A); and (7) act of physical violence in the Capitol grounds or buildings, in
violation of 40 U.S.C. § 5104(e)(2)(F). See Indictment, ECF No. 11.
3
Exhibits labeled “Def.’s Mots. Ex. __” were provided to the Court on a USB flash drive.
3
After Krol’s arrest, the Government moved for his detention. On February 28, 2022,
Magistrate Judge Curtis Ivy, Jr. of the U.S. District Court for the Eastern District of Michigan
conducted a detention hearing. See U.S. Mem. Opp’n at 2, ECF No. 26. Magistrate Judge Ivy
ordered Krol detained, concluding that the information submitted at the detention hearing
established by clear and convincing evidence that Krol was a danger to the community. Order
Granting Mot. Pretrial Det. at 1, ECF No. 26-2. Krol was then transferred to his current facility,
the Central Virginia Regional Jail in Orange, Virginia. Def.’s Mots. at 9. Krol now moves to
revoke the detention order and reopen the detention hearing. See generally id. The Government
opposes his release. See U.S. Mem. Opp’n. The Court held a hearing on the matter. See Min.
Entry (Oct. 6, 2022).
Following the hearing, the Government submitted a supplemental response containing the
transcripts of social media chats between Krol and individuals convicted of or on trial for being
involved in the alleged plot to kidnap Governor Whitmer. U.S. Suppl. Resp. at 1–2, ECF No. 27.
In one chat, Krol wrote that he “spoke on the Michigan Capital [sic] steps last fall that I would
rather apprehend Tyrants at the Capital [sic], hang them on those beautiful oak trees then kill
citizens in a civil war.” U.S. Suppl. Resp. Ex. 1 at 2, ECF No. 27-1. Krol also filed a
supplement attaching incident reports from the Central Virginia Regional Jail describing an event
where Krol was found lying face down in his cell. Def.’s Suppl. Def.’s Mots. at 1, ECF No. 29.
Krol’s motions are ripe for decision. For the reasons explained below, the Court denies
Krol’s motions to revoke the detention order and reopen the detention hearing.
4
III. LEGAL STANDARD
A. Pretrial Detention Under the Bail Reform Act
Where a person has been ordered detained by a magistrate judge pending trial, “the
person may file, with the court having original jurisdiction over the offense, a motion for
revocation or amendment of the order.” 18 U.S.C. § 3145(b). The D.C. Circuit has “not
squarely decided” what the standard of review should be for such proceedings. See United States
v. Munchel, 991 F.3d 1273, 1280 (D.C. Cir. 2021). But, as of 2021, every circuit to address the
issue had held that a district court’s review of a magistrate’s detention order is de novo. See
United States v. Chrestman, 525 F. Supp. 3d 14, 23 & n.5 (D.D.C. 2021) (collecting cases).
Neither party argues otherwise. Accordingly, the Court will review the detention order de novo.
The Bail Reform Act permits the detention of a defendant awaiting trial only in “carefully
defined circumstances.” United States v. Simpkins, 826 F.2d 94, 96 (D.C. Cir. 1987). First, a
defendant qualifies for pretrial detention if his case “involves” (1) an offense that falls into one
of five enumerated categories that include “a crime of violence,” 18 U.S.C. § 3142(f)(1), or (2) a
serious risk that the defendant will flee, obstruct (or attempt to obstruct) justice, or threaten,
injure, or intimidate a witness or juror (or attempt to do so), id. § 3142(f)(2)(A)–(B). Second,
where the Bail Reform Act authorizes pretrial detention, the court “shall order the detention” of a
qualifying defendant if it “finds that no condition or combination of conditions will reasonably
assure the appearance of the person as required and the safety of any other person and the
community.” Id. § 3142(e)(1). In other words, “the relevant inquiry is whether the defendant is
a ‘flight risk’ or a ‘danger to the community.’” United States v. Vasquez-Benitez, 919 F.3d 546,
550 (D.C. Cir. 2019). Moreover, a finding that no condition or combination of conditions will
5
reasonably assure the safety of any other person and the community must be supported by clear
and convincing evidence. 18 U.S.C. § 3142(f)(2).
B. Reopening a Detention Hearing
The Bail Reform Act further provides that a detention hearing
may be reopened . . . at any time before trial if the judicial officer finds that
information exists that was not known to the movant at the time of the hearing
and that has a material bearing on the issue whether there are conditions of release
that will reasonably assure the appearance of such person as required and the
safety of any other person and the community.
18 U.S.C. § 3142(f)(2). Although the statute does not define “material bearing,” it has been
defined to “refer to information that actually affects the Court’s decision whether to detain the
defendant pending trial.” United States v. Chansley, No. 21-cr-3, 2021 WL 2809436, at *3
(D.D.C. July 6, 2021). “Thus, in addition to ‘bearing’ on—having a logical relation to—
detention, the sort of new information capable of reopening a detention hearing must also ‘bear’
materially—it must relate in some significant or essential way to the decision whether to detain.”
United States v. Worrell, No. 21-cr-292, 2021 WL 2366934 at *9 (D.D.C. June 9, 2021). In
addition, “[n]ew and material information . . . consists of something other than a defendant’s
own evaluation of his character or the strength of the case against him; instead, it must consist of
truly changed circumstances, something unexpected, or a significant event.” United States v.
Caldwell, No. 21-cr-181, 2022 WL 168343, at *6 (D.D.C. Jan. 19, 2022) (quoting United States
v. Lee, 451 F. Supp. 3d 1, 5 (D.D.C. 2020)).
IV. ANALYSIS
Based on the evidence currently available to the Court, the Court will deny Krol’s
motions to revoke the detention order and reopen the detention hearing. Krol’s violent rhetoric,
association with individuals alleged to have been involved with the plot to kidnap Governor
6
Whitmer, historical leadership of a militia group, and ownership of approximately ten guns lead
the Court to conclude that Krol poses a concrete, prospective threat to public safety. Defense
counsel avers that Krol suffers from serious cardiac conditions that predated his arrest but that
have worsened during his detention. During the hearing on Krol’s motions on October 6, the
Court urged defense counsel to provide Krol’s medical records for the Court’s consideration.
Rather than submitting medical records documenting a formal diagnosis of Krol’s purported
cardiac conditions, however, Krol has thus far only submitted to the Court readings from his
personal defibrillator and certain Central Virginia Regional Jail incident reports describing an
event where Krol was found lying face down in his cell. These documents do not clearly
establish that Krol suffers from the cardiac conditions described in his motions.
Without more concrete evidence of Krol’s medical conditions as diagnosed by a doctor,
the Court does not find sufficient support for Krol’s request that he be released. Further, without
the purported developments in Krol’s medical conditions, Krol offers only letters of support and
claims about his disaster relief efforts and work to provide Flint, Michigan residents with bottled
water. This information does not constitute new and material information sufficient to merit
reopening the detention hearing. Krol also contends that detention in his current facility, which
does not allow inmates access to electronics, prevents him from reviewing video evidence and
participating fully in his defense. But because Krol does not aver that his defense counsel is
unable to bring electronics to the facility to show him the evidence, and the Court has requested
that the Government investigate further to see if the jail can accommodate Krol’s access to
relevant evidence, the Court does not now conclude that it would be necessary to release Krol for
this reason or that transfer to a different facility would be the more appropriate remedy.
Accordingly, the Court will deny Krol’s motion to revoke the detention order and deny the
7
motion to reopen the detention hearing. Should Krol submit to the Court medical records
evincing a formal diagnosis of his purported medical conditions, Krol may refile his motion to
reopen the detention hearing for the Court’s consideration.
A. Revocation of Detention Order
Krol qualifies for pretrial detention under the Bail Reform Act. As previously noted, a
case that involves a crime of violence—which includes “an offense that has as an element of the
offense the use, attempted use, or threatened use of physical force against the person or property
of another,” 18 U.S.C. § 3156(a)(4)(A)—will qualify a defendant for pretrial detention, 18
U.S.C. § 3142(f)(1)(A). Among other offenses, Krol has been charged with assaulting, resisting,
or impeding certain officers using a dangerous weapon, in violation of 18 U.S.C. § 111(a)(1) and
(b). See Indictment. Because that offense is “categorically a crime of violence,” Krol is eligible
for pretrial detention. See United States v. Quaglin, 851 F. App’x 218, 218 (D.C. Cir. 2021); see
also United States v. Klein, 533 F. Supp. 3d 1, 8–9 (D.D.C. 2021).
Thus, the Court turns to whether any “condition or combination of conditions will
reasonably assure the appearance of the person as required and the safety of any other person and
the community.” 18 U.S.C. § 3142(e)(1). The Government focuses on arguing that Krol poses a
danger to the community. See, e.g., U.S. Mem. Opp’n at 4; Mot. Supp. Pretrial Det. at 1. The
question for this Court, then, is whether Krol should be detained based on dangerousness. “To
justify detention on the basis of dangerousness, the Government must prove by ‘clear and
convincing evidence’ that ‘no condition or combination of conditions will reasonably assure the
safety of any other person and the community.’” Munchel, 991 F.3d at 1279–80 (quoting 18
U.S.C. § 3142(f)). “Thus, a defendant’s detention based on dangerousness accords with due
process only insofar as the district court determines that the defendant’s history, characteristics,
8
and alleged criminal conduct make clear that he or she poses a concrete, prospective threat to
public safety.” Id. at 1280. The “dangerousness inquiry” is a “forward-looking determination.”
United States v. Languerand, No. 21-cr-353, 2021 WL 3674731, at *4 (D.D.C. Aug. 19, 2021)
(quoting United States v. Hale-Cusanelli, 3 F.4th 449, 456 (D.C. Cir. 2021)).
Assessing whether the Government has made this showing requires consideration of four
factors: (1) “the nature and circumstances of the offense charged,” (2) “the weight of the
evidence against the person,” (3) “the history and characteristics of the person,” and (4) “the
nature and seriousness of the danger to any person or the community that would be posed by the
person’s release.” 18 U.S.C. § 3142(g). The Court will address each in turn.
a. Nature and Circumstances of Krol’s Charged Offenses
Chief Judge Howell’s six considerations for assessing the relative severity of a Capitol
rioter’s conduct provide a helpful framework for the Court’s analysis of this first factor. See
Chrestman, 525 F. Supp. 3d at 26–27. Those considerations include whether a defendant:
(1) “has been charged with felony or misdemeanor offenses,” (2) “engaged in prior planning
before arriving at the Capitol,” (3) carried or used a dangerous weapon during the riot,
(4) “coordinat[ed] with other participants before, during, or after the riot,” or (5) “assumed either
a formal or a de facto leadership role in the assault by encouraging other rioters’ misconduct,”
and (6) the nature of the “defendant’s words and movements during the riot,” including whether
he “threatened or confronted federal officials or law enforcement.” Id.
Four of the six Chrestman factors illustrate Krol’s higher “comparative culpability . . . in
relation to fellow rioters.” Id. at 26. First, the first and third Chrestman factors are related here.
The Government argues that Krol has been “charged with a felony and crime of violence,” and
“using a dangerous weapon against law enforcement is an extremely serious offense.” Mot.
9
Supp. Pretrial Det. at 29–30. Krol concedes that he has been indicted on felony charges but
submits that the first Chrestman factor should not weigh in favor of either party and the
Government should not be “reward[ed]” simply for charging him with felonies. Def.’s Mots. at
27. Additionally, in relation to the third Chrestman factor, Krol does not contest that he “was
briefly in possession of” and “handled” a baton, but puts forward that one might determine that
Krol was or believed he was “coming to the aid” of other rioters. Id. at 28.
As Krol states correctly, “[n]othing in the Bail Reform Act ‘shall be construed as
modifying or limiting the presumption of innocence.’” Id. at 27 (quoting 18 U.S.C. § 3142(j)).
Contrary to Krol’s arguments otherwise, however, the Court is not making any findings here as
to his guilt or innocence of the charges laid against him. In considering the level of the charges
against Krol, the Court is merely using the information “evident on the face of a criminal
complaint, information, or indictment” to “inform [its] assessment” of the nature and
circumstances of the offense charged, as mandated by the Bail Reform Act. Chrestman, 525 F.
Supp. 3d at 26.
The overarching goal of the § 3142(g) analysis—to ensure that the pretrial release
of a defendant will not imperil “the safety of any other person and the
community”—and § 3142(g)(1)’s mandate that judges consider certain offense
characteristics that might be probative of danger to the community suggest that a
reviewing court should give weight to any particulars of the offense that indicate
the defendant continues to pose a threat to public safety.
Id. (citation omitted). “Felony charges are by definition more serious than misdemeanor
charges,” and the “dangerousness inherent in a defendant’s conduct on January 6” is
relevant to the Court’s assessment of whether a defendant would remain a danger to the
community should he be released. Id. Thus, the first Chrestman factor weighs in favor
of detention.
10
So too does the third Chrestman factor weigh in favor of detention. Like the defendant in
United States v. Sabol, 534 F. Supp. 3d 58 (D.D.C. 2021), Krol is alleged to have “[taken] the
[baton] from a vulnerable MPD officer and subsequently wielded it” against others. Id. at 74.
Video footage shows the individual identified as Krol striking at least one other officer with that
same baton, Mot. Supp. Pretrial Det. at 11, and it is alleged that Krol struck another officer with
either a short pole or baton, id. at 19. As in Sabol, Krol’s alleged “willingness to strip a
vulnerable law enforcement officer of his weapon” and his use of it in assaulting others “speak[]
to the gravity of the offenses with which he has been charged as well as the danger he poses not
just to his community, but to the American public as a whole.” 534 F. Supp. 3d at 74. 4
The fifth and sixth Chrestman factors weigh further in favor of detention. The D.C.
Circuit has stated that “those who actually assaulted police officers and broke through windows,
doors, and barricades . . . are in a different category of dangerousness than those who cheered on
the violence or entered the Capitol after others cleared the way.” Munchel, 991 F.3d at 1284.
Krol states that he did not enter the Capitol or destroy barricades. Def.’s Mots. at 29. But as
previously discussed, video footage shows the individual identified as Krol pushing through to
the front of the crowd just as rioters began fighting with police officers guarding the Capitol.
Gov’t Ex. 1 at 00:13–00:33. He was among the first wave of rioters who contributed to breaking
through the police line, and he pushed Officer D.P. back from the line as he swung Officer D.P.
around for the baton. Id. at 00:36–00:38. After stealing the baton, he then held it up towards the
crowd of rioters, as though in victory. Id. at 00:46. By allegedly helping to break the police line
4
The Court addresses Krol’s arguments about coming to the aid of other rioters below in
relation to the sixth Chrestman factor.
11
and holding the baton up to the crowd as if to celebrate, Krol encouraged other rioters to
follow—if not necessarily to assault the officers, then at least to advance forward on the Capitol.
Krol attempts to diminish the potential seriousness of his alleged actions by casting doubt
on whether he may have injured Sergeant A.G., stating in part that Sergeant A.G. suffered
“serious injuries at the hands of others far more violent” and that Sergeant A.G. “made a less
than affirmative statement regarding Mr. Krol in his interview.” Def.’s Mots. at 29–30. Krol
also contends that the government has shown a mere “36 seconds of controversial behavior”
during the totality of the time Krol spent at the Capitol on January 6. Id. at 29. That other rioters
may have done worse to Sergeant A.G. that day, however, does not absolve Krol of his alleged
actions. See United States v. Brockhoff, 590 F. Supp. 3d 295, 304 (D.D.C. 2022) (“That the
means may have been less violent than, for example, bashing an officer with a flagpole, is
immaterial. [Defendant’s] actions were deliberate, and deliberately aimed at breaking police
resistance. These actions show a blatant disrespect for the role of law enforcement and their
efforts to maintain the safety of the Capitol and the lawmakers inside.”). Nor does the short
duration of Krol’s alleged conduct vindicate him; what matters is the havoc that the Government
contends Krol wreaked in that time by assaulting officers and potentially encouraging others to
do the same.
Further, Krol argues that the Court might interpret his actions in a more charitable light—
that, as “someone who is inclined to assist people who need help,” Krol may have been “coming
to the aid” of rioters who “were helpless and in need of assistance.” Def.’s Mots. at 28, 30–31;
see also id. at 30 (“Right or wrong, he was responding to what he believed was excessive use of
force by the police.”). The Court declines to weigh in at this stage on whether Krol may
ultimately claim that he was acting in defense of others on January 6. For its purposes here, the
12
Court need only observe that it appears that Krol took “‘offensive action’ directed toward law
enforcement officers . . . ; his actions were deliberate and dangerous; and any attempts to render
aid to another rioter . . . do not negate the dangerousness he poses to the community in view of
the conduct he displayed on that day.” United States v. McAbee, No. CR 21-35-7, 2021 WL
6049909, at *11 (D.D.C. Dec. 21, 2021). Krol has not presented any statement of his state of
mind at the time; he has not claimed that Officer D.P. was applying excessive force against
anyone, that the officers he allegedly attacked with the baton were applying excessive force
against anyone, that he did anything in aid of the protester reflected in the video who was being
forcefully subdued by officers, or that the officers were not acting reasonably in arresting a
protester who penetrated deep behind the police line.
The two remaining factors—the second and fourth Chrestman factors—do not weigh
against Krol. With respect to the second factor, the Government in the detention hearing before
Magistrate Judge Ivy referred to Krol planning to “travel with the people he went with,” Audio
R. Det. Hr’g at 33:07–33:09, and Krol alludes in his motions to “his right to plan with two others
to attend the rally together,” Def.’s Mots. at 28. Krol contends that this second factor should not
be held against him since he “arrived in D.C. weaponless.” Id. at 27. Although courts have, in
relation to this factor, taken into consideration a defendant’s coordination of his trip with
associates, see, e.g., McAbee, 2021 WL 6049909, at *9, the briefing provides little more than
passing reference to Krol traveling with others and does not otherwise indicate that Krol engaged
in any planning beyond this travel. Relatedly, aside from Krol’s travel with others before the
riot, the record does not show that, per the fourth Chrestman factor, Krol coordinated with other
participants during or after the riot. Based on the video evidence submitted, Krol appears to have
been moving in the crowd and acting on his own at the Capitol. While Krol’s actions may have
13
encouraged other rioters that day, he does not appear from the footage to have been coordinating
with anyone. Accordingly, the second and fourth Chrestman factors do not weigh against Krol.
On balance, four of the six Chrestman factors demonstrate the severity of Krol’s conduct
on January 6 and “evince a clear disregard for the law” as well as “deliberate efforts to
undermine law enforcement,” which together “indicate that he poses a danger to the
community.” Chrestman, 525 F. Supp. 3d at 28. The nature and circumstances of Krol’s
charged offenses therefore weigh heavily in favor of detention.
b. The Weight of the Evidence Against Krol
The weight of the evidence against Krol tends to favor detention. During his interview
with the FBI, Krol denied multiple times that he was the individual in the video footage shown to
him. See, e.g., Def.’s Mots. Ex. Q (FBI Interview, Part 1) at 08:08, 37:50. But Krol admitted to
being present on the Capitol grounds on January 6. See Def.’s Mots. Ex. Q (FBI Interview, Part
2) at 27:36. Phone records for Krol’s phone number show that he was in or around the Capitol
between 1:42 p.m. and 3:01 p.m. on January 6, which aligns with the time when Krol allegedly
assaulted Officers D.P. and J.M. Mot. Supp. Pretrial Det. at 23; Compl. at 19. The Government
has submitted several videos from different angles, including close-ups from body camera
footage, capturing the actions, face, and attire of the person later identified as Krol. See, e.g.,
Gov’t Ex. 1 at 00:00–00:33; Gov’t Ex. 3 at 00:00; Gov’t Ex. 4 at 00:02. And notably, a tipster
who knew Krol personally identified him based on the FBI’s Most Wanted images from January
6. Mot. Supp. Pretrial Det. at 6. This tipster then provided a photograph of an individual, whom
this tipster identified as Krol, attending a protest at the Michigan Capitol Building while wearing
a small American flag affixed behind his right shoulder. Id. Taken together, these pieces of
evidence against Krol move this factor toward detention.
14
B. Krol’s Personal History and Characteristics
Although certain aspects of Krol’s personal history and characteristics weigh against
detention, others—described in Section IV.A.d. below—reinforce that he would pose a danger to
his community should he be released. In evaluating a defendant’s personal history and
characteristics, a court considers the defendant’s “character, physical and mental condition,
family ties, employment, financial resources, length of residence in the community, community
ties, past conduct, history relating to drug or alcohol abuse, criminal history, and record
concerning appearance at court proceedings.” 18 U.S.C. § 3142(g)(3)(A).
The Court recognizes that Krol has certain commendable qualities. Family members and
friends wrote to the Court in support of his release and described his community ties, attesting
consistently to Krol’s devotion to his family and his willingness to help others in need. See
Def.’s Mots. Exs. B–M. Krol has been married to his wife since 1984 and is the father of three
children and grandfather of two grandchildren. Def.’s Mots. at 6. Krol states that he has
participated in disaster relief efforts and delivered bottled water to residents of Flint, Michigan. 5
Id. at 4–6. Although Krol acknowledges that he at one point “struggle[d] with drugs and alcohol,
which led to spending 40 days in the Oakland County Jail” many years ago, id. at 16, the
Government states that Krol “has no criminal history,” Mot. Supp. Pretrial Det. at 25. 6
5
Krol does not mention, however, that he may have delivered the water to Flint residents
in connection with his participation in the Genesee County Volunteer Militia. See U.S. Mem.
Opp’n at 20–21.
6
The Court notes that, during the pretrial detention hearing before Magistrate Judge Ivy,
the Government indicated that it was seeking additional information about an “incident” dating
from 2014 at the Michigan State Capitol in Lansing, Michigan. Audio R. Det. Hr’g at 26:19–
27:07. The Government represented that there existed a record describing Krol as having been
arrested and having had a gun taken from (and later returned to) him, though this incident did not
appear in Krol’s criminal history. Id. But the Court has not received any updates as to what, if
anything, of note resulted from the Government’s efforts. Accordingly, the Court continues to
rely on the Government’s statement that Krol has no criminal history.
15
Of most concern to the Court here, Krol avers that he suffers from serious, potentially
life-threatening cardiac conditions. Def.’s Mots. at 7–8. According to Krol, his “diagnostic
history consists of atrial fibrillation, coronary artery disease (CAD), congestive health failure
(CHF), and hypertension.” Id. at 7. After Krol was “diagnosed with heart failure” in September
2021 and “found to have atrial fibrillation (AF) and left bundle branch block (LBBB) on an
echocardiogram” in October 2021, Krol wore a personal defibrillator that showed “that Mr. Krol
flatlined on numerous occasions.” Id. As an exhibit to his motions, Krol includes readings from
this defibrillator. Def.’s Mots. Ex. A. Krol further recounts two instances in which he was
admitted to the University of Virginia (“UVA”) University Hospital, the second of which
resulted in Krol having a pacemaker implanted. Def.’s Mots. at 8.
During the hearing on Krol’s motions on October 6, the Court urged defense counsel to
provide Krol’s medical records for the Court’s consideration. Rather than submitting medical
records documenting a formal diagnosis of Krol’s purported cardiac conditions, however, Krol
instead supplemented his motions with certain Central Virginia Regional Jail incident reports
describing an event on April 20, 2022, where Krol was found lying face down in his cell. Def.’s
Suppl. Def.’s Mots. at 1. These reports detail how Krol explained that he fell after “his Life Vest
alarm was going off,” Def.’s Suppl. Def.’s Mots. Ex. A at 1, ECF No. 29-1, and that Krol saw
“light flashes prior to his LifeVest defibrillator alarm going off,” Def.’s Suppl. Def.’s Mots. Ex.
D at 2, ECF No. 29-4.
The documentation that Krol has provided does not contain proof that Krol has received a
formal diagnosis of the cardiac conditions that he lists in his motions, that these conditions pose
a threat to Krol’s life, or that he cannot receive adequate treatment if detained. Somewhat to the
contrary, the documentation indicates that his vital signs after the incident on April 20, 2022
16
appeared to be normal. See Def.’s Mots. Ex. D at 1–2 (incident report from licensed practical
nurse stating that “[f]ollowing incident [Krol] was transported via wheelchair to Booking where
vital signs were obtained and were within normal limits”). And in stark contrast to his claims of
these potentially debilitating conditions, Krol admitted to the FBI that he walked from former
President Trump’s speech, including walking “over a . . . wall,” to get to the Capitol. Def.’s
Mots. Ex. Q (FBI Interview, Part 2) at 27:55. The video footage purportedly of Krol also shows
an individual still capable of vigorous, aggressive action that might cause injury to others. 7
Further, as the Court stated on October 6, it appears that UVA has provided Krol with good
medical care while he has been incarcerated.
Given Krol’s claims of an extensive medical history, it is puzzling to the Court why Krol
has not been willing or able to submit actual medical records in support of his motions. In fact,
the recording of his detention hearing before Magistrate Judge Ivy suggests that Krol’s previous
counsel submitted certain documents about Krol’s medical history to Magistrate Judge Ivy.
Audio R. Det. Hr’g at 28:10–28:33. The Court does not have access to those documents
furnished to Magistrate Judge Ivy, and Krol’s current counsel has not provided those documents
here. Without more, Krol has not provided sufficient, concrete support for his claim that he
should be released for this medical need. 8 Should Krol submit to the Court medical records
7
Indeed, when presented with footage during his FBI interview, Krol exclaimed,
“Amazing how much gump that guy has for all the ailments I have.” Def.’s Mots. Ex. Q (FBI
Interview, Part 1) at 14:58–15:02. The Court presumes that Krol meant to suggest that the
individual in the footage had gumption or energy, as opposed to calling the individual a “gump,”
as the term “gump” is typically defined as a “foolish person, a dolt.” Gump, Oxford English
Dictionary (Mar. 2022 ed.).
8
In a footnote to its Opposition, the Government has conceded that a serious medical
condition that cannot be adequately treated in custody may provide a basis for home detention
with strict restrictions. U.S. Mem. Opp’n at 2 n. 1.
17
evincing a formal diagnosis of his purported medical conditions, however, Krol may refile his
motion to reopen the detention hearing for the Court’s consideration.
D. The Nature and Seriousness of the Danger Krol’s Release Poses
Weighing strongest against release are the Court’s serious reservations about Krol’s
statements evoking the use of violence to achieve his political aims, association with individuals
charged in the alleged plot to kidnap Governor Whitmer, historical leadership of a militia group,
and ownership of a cache of guns.
The Government has submitted in support of its opposition several of Krol’s Facebook
messages and posts, in which Krol evoked the use of violence against politicians and open
hostility toward Governor Whitmer, in addition to sharing pictures of himself carrying weaponry.
In one message chain from June 2020, an individual identified as Adam Fox 9 asked,
“Hypothetically if we had to storm the Capitol and charge politicians and the Governor with their
crimes, who would honestly commit to this??” U.S. Suppl. Resp. Ex. 1 at 1. Krol responded:
“That particular issue: ME… the reason I state that particular issue, I’m willing to kill or die for
Liberty. 24–25 years ago, I had a militia leader ask me to gun fight the police over a dilapidated
boat the [sic] was owned by his estranged daughter and court ordered to allow them access to his
property over it… I refused that request!” U.S. Suppl. Resp. Ex. 1 at 2. Fox replied,
“Everything said on here is hypothetical but it’s time to move past the rally’s [sic] and pointless
bullshit that doesn’t work.” Id. Krol then wrote that he “spoke on the Michigan Capital [sic]
9
Adam Fox was convicted in August 2022 by a federal jury of conspiracy to kidnap
Governor Whitmer and conspiracy to use weapons of mass destruction against persons or
property. See U.S. Suppl. Resp. at 1 (citing United States v. Fox, No. 20-cr-00183 (W.D. Mich.
Aug. 23, 2022)); Remaining Defendants Convicted in Conspiracy to Kidnap Michigan Governor
Gretchen Whitmer, U.S. Dep’t of Justice (Aug. 23, 2022), https://www.justice.gov/usao-
wdmi/pr/2022_0823_Fox_et_al.
18
steps last fall that I would rather apprehend Tyrants at the Capital [sic], hang them on those
beautiful oak trees then kill citizens in a civil war…. just saying.” Id.
In April 2020, an individual named Joe Morrison 10 sent a Facebook message to Krol,
asking, “[W]hat are the guidelines for the rally armed??” U.S. Suppl. Resp. Ex. 2 at 1, ECF No.
27-2. Krol then replied, “Michigan law… Open carry and concealed if you have a permit or
want to just take that chance. . . . NO RESTRICTIONS ON OUR PART!” Id. Krol
subsequently sent pictures of himself dressed in tactical gear and carrying weaponry to Morrison.
Id. at 2–4. He also sent Morrison a picture showing an individual, whom Krol identified in a
later message as himself, who appeared to be open carrying a handgun and to have been detained
by a law enforcement officer. Id. at 6. In another Facebook group chat dating from April 2020
that included Morrison, Krol referred to Governor Whitmer as “Whitmer the Hunn [sic].” U.S.
Suppl. Resp. Ex. 3 at 1, ECF No. 27-3.
In another Facebook post, Krol wrote: “Looks like a BOOGALOO PARTY… love their
attire! . . . Me thinks [sic] we need a BOOGALOO DRESS UP PARTY in Lansing once the
weather breaks! Bring some grills and beverages (soft because of where) and lot of GUNS!
Every one [sic] would be required to wear boogaloo vibe clothing.” 11 U.S. Suppl. Resp. Ex. 2 at
10
Joseph Morrison has been convicted, in connection with the plot to kidnap Governor
Whitmer, of gang membership, providing material support for terrorist acts, and carrying or
possessing a firearm during the commission of a felony. Press Release, Mich. Dep’t of Att’y
Gen., Members of Wolverine Watchmen Convicted on All Charges (Oct. 26, 2022),
https://www.michigan.gov/ag/news/press-releases/2022/10/26/members-of-wolverine-
watchmen-convicted-on-all-charges.
11
According to the Southern Poverty Law Center, “[t]he thread that binds boogaloo
adherents is their belief that the country is headed toward a civil war—and that mass civil
conflict of this kind is the only way for the country to right its path. . . . All boogaloo adherents
share antigovernment beliefs and hold especially deep animus for members of law enforcement. .
. . Boogaloo adherents support civil war and revolution against the current democratic system—
something they often discuss sparking by forcing violent confrontations with members of law
enforcement.” Southern Poverty Law Center, Who Are Boogaloos, Who Were Visible at the
19
11. Morrison also sent a Facebook message to Krol in January 2020, in which Morrison wrote,
“So boogaloo party is when we bring the tar and feather??” Id. at 9.
The Government rightly emphasizes Krol’s statement about “apprehend[ing]” and
“hang[ing]” politicians from oak trees. This is a plainly grotesque statement. In his response,
Krol argues that the statement was “nothing more than a hyperbolic hypothetical answer to an
imaginary event.” Def.’s Reply to U.S. Suppl. Resp. at 3, ECF No. 28; see also Def.’s Mots. Ex.
Q (FBI Interview, Part 1) at 33:12 (saying in FBI interview that his statement was
“hypothetical”). But Krol’s statement, hyperbolic or hypothetical or not, is informative of his
potential willingness to inflict violence himself or encourage others to inflict violence on
perceived political enemies. It suggests that, contrary to Krol’s insistence otherwise, his alleged
actions on January 6 may not be anomalous, but may instead be consistent with extremist views
about using violence to achieve political aims. 12 See Def.’s Mots. at 30.
Krol also objects to the Government’s portrayal of his association with Adam Fox and
Joseph Morrison, stating that, “while he may have met them in passing at a peaceful protest, he
has no personal relationship with either Adam Fox or Joe Morrison.” Def.’s Reply to U.S.
Suppl. Resp. at 2. But according to Krol himself, he has had a personal relationship with two
additional individuals alleged to have been involved with the plot to kidnap Governor Whitmer,
Capitol and Later Rallies? (Jan. 27, 2021),
https://www.splcenter.org/hatewatch/2021/01/27/who-are-boogaloos-who-were-visible-capitol-
and-later-rallies.
12
Krol’s language about hanging politicians from trees is also reminiscent of the violent
imagery of the gallows erected in front of the Capitol on January 6. Catie Edmonson, “So the
Traitors Know the Stakes”: The Meaning of the Jan. 6 Gallows, N.Y. Times (June 16, 2022),
https://www.nytimes.com/2022/06/16/us/politics/jan-6-gallows.html. That “imagery [of the
gallows], said experts who study domestic extremism, evokes the early practice of hanging
traitors; the nation’s dark history of lynchings and violent attempts to terrorize Black Americans;
and a novel favored by white supremacists that culminates in the mass hangings of political
enemies.” Id.
20
see Def.’s Mots. Ex. Q (FBI Interview, Part 1) at 17:37–17:44, 19:42–19:49: William and
Michael Null, who have been charged, in connection with that plot, with providing material
support for terrorist acts and carrying or possessing a firearm during the commission of a felony,
AG Nessel Charges 7 Under Michigan’s Anti-Terrorism Act as Part of Massive Joint Law
Enforcement Investigation, State of Michigan Attorney General Dana Nessel (Oct. 8, 2020),
https://content.govdelivery.com/accounts/MIAG/bulletins/2a4e649. During Krol’s interview
with the FBI, he—despite indicating that he was aware that the Null brothers had been charged
in the plot to kidnap Governor Whitmer, see Def.’s Mots. Ex. Q (FBI Interview, Part 1) at 17:48
(asking why the Null brothers had not yet been to court)—attested to the Null brothers’
characters, stating: “They’re good guys. I’d trust them with my kids and my grandkids,” id. at
19:53–19:55. The Court understands, and notes with particular concern given its purposes here,
that a Michigan court has lifted the house arrest and curfew restriction for the Null brothers,
though they remain on electronic monitoring. Frank Whitsil, 2 Whitmer Plot Suspects, Twin
Brothers, Released from House Arrest, but Must Wear Tethers, Detroit Free Press (Apr. 14,
2021), https://www.freep.com/story/news/local/michigan/2021/04/14/michael-null-william-null-
whitmer-kidnapping-suspects-house-arrest/7222609002/. Even if Krol did not himself
participate in the plot to kidnap Governor Whitmer, his associations with these individuals raise
alarms for the Court, given that Krol has also made statements demonstrating hostile feelings
toward the governor. See U.S. Suppl. Resp. Ex. 3 at 1; Def.’s Mots. Ex. R at 2.
Krol’s statements against his perceived political enemies are especially disquieting when
the Court considers Krol’s historical participation in a militia group and his cache of guns.
During his interview with the FBI, Krol stated that, while he was once second in command and
spokesperson for Genesee County Volunteer Militia, he had not been involved with the group for
21
approximately three years. Def.’s Mots. Ex. Q (FBI Interview, Part 1) at 25:57–26:53. But Krol
indicated that he would have remained with the militia if not for an internal disagreement. See
id. at 26:42–26:52. In addition, when confronted with his chat exchange with Adam Fox during
the FBI interview, Krol asked the FBI agent, “I took an oath. Did you?” Id. at 34:58. Krol then
asked further, “Foreign and domestic, right? So what is, what is an enemy of the state?” Id. at
35:16–35:22. Later, Krol also said: “Because tyranny, listen, I don’t care who you are, I don’t
care what you want to tell me, but that same thing that’s happening in Canada is nigh and high
on our doorsteps today. So where’s your oath? You gonna let it happen?” Id. at 36:20–36:37.
Whether Krol remains involved in an organized militia or not, he continues to believe that he has
taken an oath to protect the United States from those whom he perceives to be enemies of the
state and to prevent any perceived “tyranny” from taking hold in the United States. See also
Def.’s Mots. Ex. R at 3 (“KROL’s tattoos resemble his firm beliefs and patriotism. They include
cattle brand logos on his upper left shoulder referencing the Bundy brothers’ victory over
oppression and Robert LaVoy Finnicum [sic], who [was] killed in the occupation of the Malheur
National Wildlife Refuge.”). That is all the more concerning when Krol “has a concealed carry
license” and owns a cache of “approximately ten guns,” providing him the means to act on his
evinced willingness to harm his perceived political enemies. Def.’s Mots. at 27.
In sum, this final factor in assessing dangerousness weighs strongly in favor of detention.
“Because this factor substantially overlaps with the ultimate question whether any conditions of
release ‘will reasonably assure . . . the safety of any other person and the community,’ it bears
heavily on the Court’s analysis.” United States v. Cua, No. 21-cr-107, 2021 WL 918255, at *5
(D.D.C. Mar. 10, 2021) (quoting 18 U.S.C. § 3142(e)).
22
Based on its consideration of the above factors, the Court agrees with Magistrate Judge
Ivy in concluding that Krol should be detained. See U.S. Mem. Opp’n Ex. 2 at 6. The Court
finds by clear and convincing evidence that “no condition or combination of conditions will
reasonably assure . . . the safety of any other person and the community” should Krol be released
pending trial. 18 U.S.C. § 3142(e). The Court thus denies Krol’s motion to revoke his detention
order.
C. Reopening Detention Hearing
For the same reasons that Krol offers for revoking his detention order, he also requests
that his detention hearing be reopened. For the Court to reopen the detention hearing, it must
find that Krol has offered information “that was not known to the movant at the time of the
hearing and that has a material bearing on the issue whether there are conditions of release that
will reasonably assure the appearance of such person as required and the safety of any other
person and the community.” 18 U.S.C. § 3142(f)(2).
Krol argues in support of both of his motions that the Central Virginia Regional Jail’s bar
to inmates’ access to electronic devices has hampered his ability to lend reasonable assistance to
counsel in preparation of his case. Because this argument does not fit neatly under any of the
factors relevant to the Court’s considerations as to the detention order, the Court instead analyzes
this argument here and finds that Krol’s lack of access to electronic devices does not suffice to
either revoke the detention order or reopen the detention hearing. The restrictions imposed by
the jail constitute information not known to Krol at the time of his detention hearing, but they do
not have material bearing on the Court’s assessment above of whether there are conditions of
release that would reasonably assure the safety of the community.
23
Though defense counsel does not specifically cite to this authority, the Court also
considers the possibility of temporary release under 18 U.S.C. § 3142(i), which provides that a
“judicial officer may, by subsequent order, permit the temporary release of the person . . . to the
extent that the judicial officer determines such release to be necessary for preparation of the
person’s defense or for another compelling reason.” Id. This section “provides a distinct
mechanism for temporarily releasing a detained defendant, in a manner that has nothing to do
with a revisiting of the initial detention determination.” United States v. Worrell, No. 21-cr-292,
2021 WL 2366934, at *9 (D.D.C. June 9, 2021) (quoting United States v. Lee, No. 19-cr-298,
2020 WL 1541049, at *3 (D.D.C. Mar. 30, 2020)). As the Sixth Circuit has observed, there is
“limited authority governing what conditions require release for defense preparation.” United
States v. Bothra, No. 20-1364, 2020 WL 2611545, at *2 (6th Cir. May 21, 2020). “Courts
considering whether pretrial release is ‘necessary’ under § 3142(i) have considered: (1) the time
and opportunity the defendant had to prepare for the trial and participate in his defense, (2) the
complexity of the case and volume of information, and (3) the expense and inconvenience
associated with preparing while incarcerated.” Id. “Regardless of the basis for a § 3142(i)
motion, the defendant bears the burden of demonstrating that his temporary release is
warranted.” United States v. Thomas, 456 F. Supp. 3d 69, 72 (D.D.C. 2020).
In this case, Krol has had several months to participate in his defense and a trial date has
yet to be set. His defense counsel has had access to the electronic discovery in this case and has
visited Krol at the jail on several occasions. Def.’s Mots. at 9. Although Krol himself may not
be allowed access to electronic devices, his defense counsel has not averred that counsel is
barred from bringing electronics into the jail to show Krol the relevant video evidence. The
limitation on Krol’s access, while inconvenient, does not lead the Court to conclude that release
24
would be necessary for Krol to participate in his defense. See United States v. Diaz Guillen, No.
18-cr-80160, 2022 WL 4119741, at *1, *5 (S.D. Fla. Sept. 9, 2022) (denying temporary release
despite difficulties with reviewing discovery due to conditions and quarantine process due to
COVID-19); United States v. Persico, No. S 84 CR 809, 1986 WL 3793, at *2 (S.D.N.Y. Mar.
27, 1986) (denying temporary release because defendant “has had ample time to prepare his
defense, even given the practical limitations on his access to telephones and the Attorney
Conference Room”). Further, during its October 6 hearing, the Court asked that the Government
inquire whether the Central Virginia Regional Jail might be able to better facilitate Krol’s access
to evidence as needed. Until the Government reports that the jail cannot make any such
accommodations, and defense counsel has demonstrated with sufficient specificity that other
means of providing Krol access to relevant evidence are wholly inadequate or that any such
problems cannot be remedied with a transfer of facility, the Court will decline to release Krol
under 18 U.S.C. § 3142(i). See United States v. Jeffries, No. 10-cr-100, 2011 WL 182867, at *4
(E.D. Tenn. Jan. 20, 2011).
Absent the submission of medical records demonstrating the alleged deterioration of
Krol’s health since his hearing before Magistrate Judge Ivy, Krol offers only letters of support
and claims about his disaster relief efforts and work to provide Flint, Michigan residents with
bottled water. This is not “new and material information” showing “truly changed
circumstances, something unexpected, or a significant event.” Caldwell, 2022 WL 168343, at *6
(quoting Lee, 451 F. Supp. 3d at 5). Thus, the Court will deny Krol’s motion to reopen the
detention hearing.
25
V. CONCLUSION
For the foregoing reasons, Defendant’s motions (ECF Nos. 24, 25) are DENIED. Should
Krol submit to the Court medical records evincing a formal diagnosis of his purported medical
conditions, Krol may refile his motion to reopen the detention hearing for the Court’s
consideration.
SO ORDERED.
Dated: November 15, 2022 RUDOLPH CONTRERAS
United States District Judge
26 | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483866/ | Case: 22-2019 Document: 10 Page: 1 Filed: 11/15/2022
NOTE: This order is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
SISTER E. JONES-BEY,
Plaintiff-Appellant
v.
PAMELA K. CHEN, MERRICK B. GARLAND, Attor-
ney General, LETITIA JAMES, LOUIS L. STANTON,
UNITED STATES, STATE OF NEW YORK,
ADMINISTRATION FOR CHILDREN’S SERVICES,
NEW YORK CITY POLICE DEPARTMENT,
DEPARTMENT OF FINANCE, JOSEPHINE
ANTOINE, GRISEL CABAN, (NFN) ANWANA, (NFN)
EMMANUEL, DANA LACASSE, BRENDA RAMIREZ,
BARBARA DANIELY, JAQUELINE D. WILLIAMS,
ELIZABETH BARNETT, VANESSA WILLIAMS,
RONNA GORDON-GLACHUS, ANDREA AMOA,
PAUL M. HENSLEY, JOE MORGANO, DEANNA
FLAHERTY, KELLI MUSE, ANDREW LEE,
TIMOTHY MARSH, ABENA DARKEH, ALICIA
FRISH, MICHAEL MANCILLA, MICHELLE GIGLIO,
(NFN) TODDMAN, (NFN) GELLINEAU, (NFN)
QUINTERO, (NFN) EPTISTEIN, SANDRINA
OSBORN, (NFN) FITZGERALD, (NFN) SANTOS,
(NFN) FERACEA, (NFN) RUSSELL, (NFN) ROKE,
(NFN) BECKETT, (NFN) HILDALGO, (NFN)
ALMONTE, (NFN) SOLOMON, (NFN) CANALES,
(NFN) SHEA, JOSEPH SCHWARCZ, dba All Year
Management, NATHAN SCHWARZ, dba All Year
Management, ENRIQUE ‘RENE’ RIVERA, YOEL
GOLDMAN, dba All Year Management, VICKNELL
Case: 22-2019 Document: 10 Page: 2 Filed: 11/15/2022
2 JONES-BEY v. CHEN
POWELL, JANE POWELL, WILLIAM PIERCE,
SHANTA PIERCE,
Defendants-Appellees
______________________
2022-2019
______________________
Appeal from the United States District Court for the
Southern District of New York in No. 1:21-cv-06142-LTS,
Judge Laura Taylor Swain.
______________________
PER CURIAM.
ORDER
In response to this court’s August 29, 2022, show cause
order, the United States urges dismissal of this appeal ra-
ther than transfer. Sister E. Jones-Bey moves for leave to
proceed in forma pauperis and responds in favor of this
court’s jurisdiction and consolidation with Appeal No.
2022-1965 *, or, failing that, requests transfer to the Su-
preme Court of the United States.
Ms. Jones-Bey’s complaint alleged various claims
against 57 defendants, including civil rights violations, vi-
olation of her constitutional rights, and conspiracy. She
sought injunctive relief and over $250 million in damages.
On September 17, 2021, the United States District Court
for the Southern District of New York dismissed the com-
plaint but allowed Ms. Jones-Bey the opportunity to re-
plead certain claims. Ms. Jones-Bey appealed to the
United States Court of Appeals for the Second Circuit,
* Appeal No. 2022-1965 was transferred on October
18, 2022, to the United States Court of Appeals for the Sec-
ond Circuit.
Case: 22-2019 Document: 10 Page: 3 Filed: 11/15/2022
JONES-BEY v. CHEN 3
which dismissed. Following the Second Circuit’s mandate,
the district court entered final judgment dismissing the
case after Ms. Jones-Bey failed to timely file an amended
complaint. This appeal followed.
Although this court possesses jurisdiction to review
certain decisions of federal district courts, that jurisdiction
is limited in a way that applies here: this court has juris-
diction only over cases arising under the patent laws, see
28 U.S.C. § 1295(a)(1); civil actions on review to the district
court from the United States Patent and Trademark Office,
see § 1295(a)(4)(C); or certain damages claims against the
United States “not exceeding $10,000 in amount,” 28
U.S.C. § 1346(a)(2), see 28 U.S.C.§ 1295(a)(2). Ms. Jones-
Bey’s case falls outside of that limited jurisdiction.
Although the government urges dismissal, we deem it
the better course to transfer for the appropriate court to
consider the issues raised in this appeal. That court would
be the Second Circuit, not the Supreme Court. See 28
U.S.C. § 1251 et seq.
Accordingly,
IT IS ORDERED THAT:
The appeal and all its filings are transferred to the
United States Court of Appeals for the Second Circuit pur-
suant to 28 U.S.C. § 1631.
FOR THE COURT
November 15, 2022 /s/ Peter R. Marksteiner
Date Peter R. Marksteiner
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483775/ | Fourth Court of Appeals
San Antonio, Texas
November 14, 2022
No. 04-22-00496-CR
Jamila Rene CORTES,
Appellant
v.
The STATE of Texas,
Appellee
From the 227th Judicial District Court, Bexar County, Texas
Trial Court No. 2018CR7659
Honorable Maria Teresa Herr, Judge Presiding
ORDER
The reporter’s record was originally due September 13, 2022, but was not filed. On
September 19, 2022, this court notified the court reporter by letter that the reporter’s record was
late and instructed the court reporter to file the reporter’s record by October 19, 2022. As of
October 25, 2022, the court reporter had not filed the reporter’s record. Accordingly, we ordered
the court reporter to file the reporter’s record by November 4, 2022.
On November 8, 2022, the court reporter filed a notification of late record, stating that the
reporter’s record has not been filed because appellant had failed to pay or make arrangements to
pay the court reporter’s fee for preparing the record and that appellant was not entitled to appeal
without paying the fee.
We therefore ORDER that appellant provide written proof to this court that either: (1)
the reporter’s fee has been paid or arrangements have been made to pay the reporter’s fee; or (2)
appellant is entitled to appeal without paying the reporter’s fee by November 28, 2022. If
appellant fails to respond within the time provided, appellant’s brief will be due within thirty
(30) days from the date of this order, and the court will consider only those issues or points
raised in appellant’s brief that do not require a reporter’s record for a decision. See TEX. R. APP.
P. 37.3(c).
_________________________________
Beth Watkins, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 14th day of November, 2022.
_________________________________
Michael A. Cruz,
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483776/ | Fourth Court of Appeals
San Antonio, Texas
November 14, 2022
No. 04-22-00502-CV
Higinio IBARRA,
Appellant
v.
Edna Gabriela IBARRA,
Appellee
From the County Court At Law No 1, Webb County, Texas
Trial Court No. 2021FLA001566C1
Honorable Hugo Martinez, Judge Presiding
ORDER
Appellee’s motion for extension of time to file her brief is GRANTED. Appellee’s brief
is due December 29, 2022.
_________________________________
Liza A. Rodriguez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 14th day of November, 2022.
_________________________________
Michael A. Cruz,
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483778/ | Fourth Court of Appeals
San Antonio, Texas
November 10, 2022
No. 04-22-00104-CV
IN THE INTEREST OF J.M.T.
From the 408th Judicial District Court, Bexar County, Texas
Trial Court No. 2019PA00140
Honorable Charles E. Montemayor, Judge Presiding
ORDER
Intervenors N.S. and G.F.’s motion for immediate issuance of mandate is GRANTED.
The mandate in this appeal was issued on November 9, 2022.
_________________________________
Liza A. Rodriguez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 10th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483779/ | Fourth Court of Appeals
San Antonio, Texas
November 10, 2022
No. 04-22-00618-CV
IN THE INTEREST OF J.M.E., C.J.V., T.A.W., R.A.C., AND S.S.H.
From the 166th Judicial District Court, Bexar County, Texas
Trial Court No. 2021-PA-00277
Honorable Kimberly Burley, Judge Presiding
ORDER
This is an accelerated appeal of an order terminating the appellant’s parental rights,
which must be disposed of by this Court within 180 days of the date the notice of appeal is filed.
TEX. R. JUD. ADMIN. 6.2. Appellant L.W. and Appellant C.V. have both filed motions for
extension of time to file their respective briefs. Their motions are GRANTED. Their respective
appellant’s briefs are due on November 28, 2022.
Given the time constraints governing the disposition of this appeal, further requests for
extensions of time will be disfavored.
Entered this 10th day of November, 2022.
PER CURIAM
ATTESTED TO: _______________________________
Michael A. Cruz,
Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483782/ | Fourth Court of Appeals
San Antonio, Texas
November 10, 2022
No. 04-22-00729-CR
James Joshua GRIFFIN,
Appellant
v.
The STATE of Texas,
Appellee
From the 290th Judicial District Court, Bexar County, Texas
Trial Court No. 2019CR11589
Honorable Jennifer Pena, Judge Presiding
ORDER
The reporter’s record was originally due November 7, 2022, but was not filed. On
November 8, 2022, the court reporter filed a notification of late record, requesting an extension
until March 8, 2023 to file the record. After consideration, we GRANT the request in part and
ORDER the court reporter to file the record by January 6, 2023. This order is without prejudice
to the court reporter requesting additional extensions of time, if required.
_________________________________
Beth Watkins, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 10th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483783/ | Fourth Court of Appeals
San Antonio, Texas
November 10, 2022
No. 04-22-00629-CR
EX PARTE Luis Alexis GONZALES-MORALES
From the County Court, Webb County, Texas
Trial Court No. 2022CRB000722L1
Honorable Leticia Martinez, Judge Presiding
ORDER
Appellant’s brief is currently due November 17, 2022. On November 9, 2022, appellant
filed a motion requesting a 45-day extension of time to file the brief. After consideration, we
GRANT the motion and ORDER appellant to file his brief by January 2, 2023. Further requests
for extension of time will be disfavored.
_________________________________
Beth Watkins, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 10th day of November, 2022.
___________________________________
MICHAEL A. CRUZ, Clerk of Court | 01-04-2023 | 11-15-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8483780/ | Fourth Court of Appeals
San Antonio, Texas
November 10, 2022
No. 04-22-00726-CV
IN RE Maria GONZALEZ, Eliseo Gonzalez, Lucy Harvest, Scott Grice, Miriam Grice and
Democrats Abroad
Original Mandamus Proceeding 1
ORDER
Sitting: Rebeca C. Martinez, Chief Justice
Beth Watkins, Justice
Liza A. Rodriguez, Justice
On October 31, 2022, relators filed a petition for writ of mandamus containing a request
for immediate emergency relief. After considering the petition and the record, this court
concluded relators did not show they were entitled to the relief sought and denied relators’
petition for writ of mandamus on November 1, 2022. 2
On November 2, 2022, relators filed a motion for reconsideration and rehearing
requesting this court reconsider our November 1, 2022 order. After consideration, relators’
motion for reconsideration and rehearing is DENIED.
It is so ORDERED on November 10, 2022.
PER CURIAM
Attested to: ____________________________
MICHAEL A. CRUZ,
Clerk of Court
1
This proceeding arises out of relators’ federal postcard application complaint against Bexar County Election
Officials. See Tex. Elec. Code Ann. § 273.061(a) (“[A] court of appeals may issue a writ of mandamus to compel
the performance of any duty imposed by law in connection with the holding of an election or a political party
convention, regardless of whether the person responsible for performing the duty is a public officer.”).
2
Additionally, we denied relators’ request for immediate emergency relief as moot. | 01-04-2023 | 11-15-2022 |
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